I

103D CONGRESS

2D SESSION H. R. 5300

To improve access to health insurance and contain health care costs, and

for other purposes.

IN THE HOUSE OF REPRESENTATIVES

NOVEMBER 29, 1994

Mr. MICHEL introduced the following bill; which was referred jointly to the

Committees on Energy and Commerce, Ways and Means, Education and

Labor, and the Judiciary

A BILL

To improve access to health insurance and contain health

care costs, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Affordable Health Care Now Act of 1994’’.

6 (b) TABLE OF CONTENTS OF TITLES AND SUB7 TITLES IN ACT.—The following are the titles and subtitles

8 contained in this Act:
2

Title I

•HR 5300 IH

TITLE I—IMPROVED ACCESS TO AFFORDABLE HEALTH

CARE

Subtitle A—Increased Availability and Continuity of Health Coverage for Individuals and Their Families

Subtitle B—Reform of Health Insurance

Subtitle C—Preemption

Subtitle D—Health Deduction Fairness

Subtitle E—Improved Access to Community Health Services

Subtitle F—Improved Access to Rural Health Services

Subtitle G—Assistance in Enrolling Uninsured Children in Health Insurance

Subtitle H—Medicaid Reform

Subtitle I—Remedies and Enforcement with Respect to Group Health Plans

Subtitle J—Delivery of Health Care Services to Illegal Immigrants

TITLE II—HEALTH CARE COST CONTAINMENT AND

QUALITY ENHANCEMENT

Subtitle A—Medical Malpractice Liability Reform

Subtitle B—Administrative Cost Savings and Fair Health Information Practices

Subtitle C—Deduction for Cost of Catastrophic Health Plan; Medical Savings

Accounts

Subtitle D—Anti-Fraud

Subtitle E—Increased Medicare Beneficiary Choice; Additional Medicare

Reforms

Subtitle F—Health Care Antitrust Improvements

Subtitle G—Encouraging Enforcement Activities of Medical Self-Regulatory

Entities

Subtitle H—Reform of Clinical Laboratory Requirements for Simple Tests

Subtitle I—Miscellaneous Provisions

TITLE III—LONG-TERM CARE

Subtitle A—Tax Treatment of Long-term Care Insurance

Subtitle B—Establishment of Federal Standards for Long-term Care Insurance

Subtitle C—Protection of Assets Under Medicaid Through Use of Qualified

Long-term Care Insurance

Subtitle D—Studies

Subtitle E—Volunteer Service Credit Demonstration Projects

1 TITLE I—IMPROVED ACCESS TO

2 AFFORDABLE HEALTH CARE

TABLE OF CONTENTS OF TITLE

TITLE I—IMPROVED ACCESS TO AFFORDABLE HEALTH

CARE

Subtitle A—Increased Availability and Continuity of Health

Coverage for Individuals and Their Families

PART 1—REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES,

SPOUSES, AND DEPENDENTS

Sec. 1001. Requiring employers to offer option of coverage for eligible

individuals.
3

Title I

•HR 5300 IH

PART 2—PORTABILITY AND NONDISCRIMINATION

Sec. 1011. Nondiscrimination based on health status.

Sec. 1012. Portability.

Sec. 1013. Requirements relating to renewability generally.

PART 3—STANDARDS FOR MANAGED CARE ARRANGEMENTS

Sec. 1021. Standards for managed care arrangements.

Sec. 1022. Utilization review.

PART 4—ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

Sec. 1031. Enforcement.

Sec. 1032. Effective dates.

Sec. 1033. Definitions and special rules.

Subtitle B—Reform of Health Insurance

PART 1—MARKETPLACE FOR SMALL BUSINESS

Sec. 1101. Requirement for insurers to offer MedAccess coverage.

Sec. 1102. MedAccess coverage defined.

Sec. 1103. Establishment of other MedAccess standards.

Sec. 1104. Use of modified community rating, uniform marketing materials,

and miscellaneous consumer protections.

Sec. 1105. Monitoring and response to adverse selection; risk adjustment

programs.

Sec. 1106. Establishment of reinsurance or allocation of risk mechanisms for

high risk individuals in marketplace for small business and

marketplace for individuals.

PART 2—MARKETPLACE FOR INDIVIDUALS

Sec. 1111. Application of similar requirements.

PART 3—VOLUNTARY HEALTH PURCHASING ARRANGEMENTS

Sec. 1121. Establishment and organization.

Sec. 1122. Agreements with insurers.

Sec. 1123. Provision of information.

Sec. 1124. Enrolling eligible employees and eligible individuals through a purchasing arrangement.

Sec. 1125. Restriction on charges.

PART 4—DEFINITIONS AND MISCELLANEOUS PROVISIONS

Sec. 1131. Definitions.

Sec. 1132. Prohibition of improper incentives.

Sec. 1133. Enforcement.

Sec. 1134. Annual reports.

Sec. 1135. Research and demonstration projects; development of a health risk

pooling model.

Subtitle C—Preemption

PART 1—SCOPE OF STATE REGULATION

Sec. 1201. Prohibition of State benefit mandates for group health plans.
4

Title I

•HR 5300 IH

Sec. 1202. Prohibition of provisions prohibiting employer groups from purchasing health insurance.

Sec. 1203. Preemption of State anti-managed care laws.

Sec. 1204. Definitions.

PART 2—MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

Sec. 1211. Limited exemption from certain restrictions on ERISA preemption

of State law for health plans maintained by multiple employers

subject to certain Federal standards.

‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

‘‘Sec. 701. Definitions.

‘‘Sec. 702. Exempted multiple employer health plans relieved of certain restrictions on preemption of State law and treated as employee welfare benefit plans.

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

‘‘Sec. 705. Additional requirements applicable to exempted multiple employer health plans.

‘‘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. 1212. Clarification of scope of preemption rules.

Sec. 1213. Clarification of treatment of single employer arrangements.

Sec. 1214. Clarification of treatment of certain collectively bargained arrangements.

Sec. 1215. Employee leasing healthcare arrangements.

Sec. 1216. Enforcement provisions relating to multiple employer welfare arrangements and employee leasing healthcare arrangements.

Sec. 1217. Solvency requirements for certain self-insured group health plans.

Sec. 1218. Filing requirements for multiple employer welfare arrangements providing health benefits.

Sec. 1219. Cooperation between Federal and State authorities.

Sec. 1220. Effective date; transitional rules.

PART 3—ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS

PROVIDING BASIC HEALTH BENEFITS

Sec. 1221. Eliminating commonality of interest or geographic location requirement for tax exempt trust status.

Sec. 1222. Single annual filing for all participating employers.

Sec. 1223. Compliance with coverage requirements through multiple employer

health arrangements.

Subtitle D—Health Deduction Fairness

Sec. 1301. Permanent extension and increase in health insurance tax deduction

for self-employed individuals.

Sec. 1302. Deduction of health insurance premiums for certain previously uninsured individuals.

Subtitle E—Improved Access to Community Health Services
5

Title I

•HR 5300 IH

PART 1—INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT

HEALTH CENTERS

Sec. 1401. Grant program to promote primary health care services for underserved populations.

PART 2—GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF

SERVICES

Sec. 1411. Projects for coordinating delivery of outpatient primary health

services.

PART 3—COMMUNITY HEALTH NETWORKS

Sec. 1421. Qualifications for community health networks.

Subtitle F—Improved Access to Rural Health Services

PART 1—ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS

UNDER MEDICARE

Sec. 1501. Rural emergency access care hospitals described.

Sec. 1502. Coverage of and payment for services.

Sec. 1503. Effective date.

PART 2—RURAL MEDICAL EMERGENCIES AIR TRANSPORT

Sec. 1511. Grants to States regarding aircraft for transporting rural victims of

medical emergencies.

PART 3—EMERGENCY MEDICAL SERVICES AMENDMENTS

Sec. 1521. Establishment of Office of Emergency Medical Services.

Sec. 1522. State offices of emergency medical services.

Sec. 1523. Programs for rural areas.

Sec. 1524. Funding.

Sec. 1525. Conforming amendments.

Sec. 1526. Effective date.

PART 4—ADDITIONAL RURAL HEALTH CARE PROVISIONS

Sec. 1531. Development of community-operated health plans in rural and frontier areas.

Sec. 1532. Primary health care for medically underserved rural communities;

increased capacity of hospitals and outpatient facilities.

Sec. 1533. Innovative approaches to delivery of health services in rural areas.

Sec. 1534. Training of rural health professionals other than physicians.

Sec. 1535. General provisions.

Subtitle G—Assistance in Enrolling Uninsured Children in

Health Insurance

Sec. 1601. Establishment of State programs.

Subtitle H—Medicaid Reform

PART 1—STATE FLEXIBILITY IN THE MEDICAID PROGRAM: THE MEDICAL

HEALTH ALLOWANCE PROGRAM

Sec. 1701. Establishment of program.
6

Title I

•HR 5300 IH

Sec. 1702. Optional use of program to offer coverage to some or all State

residents.

PART 2—MEDICAID PROGRAM FLEXIBILITY

Sec. 1711. Modification of Federal requirements to allow States more flexibility

in contracting for coordinated care services under medicaid.

Sec. 1712. Period of certain waivers.

Sec. 1713. Elimination of duplicative pediatric immunization program.

PART 3—MEDICAID DISPROPORTIONATE SHARE ADJUSTMENT

Sec. 1721. 25 percent reduction in amount of payment adjustments for disproportionate share hospitals.

Subtitle I—Remedies and Enforcement With Respect to Group

Health Plans

Sec. 1801. Claims procedure for group health plans.

Sec. 1802. Mediation of group health plan claims.

‘‘Subpart B—Mediation of Group Health Plan Claims

‘‘Sec. 521. Eligibility for submission to mediation.

‘‘Sec. 522. Facilitators.

‘‘Sec. 523. Role of attorneys.

‘‘Sec. 524. Initiation of mediation.

‘‘Sec. 525. Mediation procedure.

‘‘Sec. 526. Mediation time limit.

‘‘Sec. 527. Cost of mediation.

‘‘Sec. 528. Legal effect of participation in mediation program.

‘‘Sec. 529. Confidentiality and admissibility’’.

Sec. 1803. Available court remedies.

Sec. 1804. Effective date.

Subtitle J—Delivery of Health Care Services to Illegal

Immigrants

Sec. 1901. Study on the delivery of health care services to illegal immigrants.

Sec. 1902. Report.
7

Title I, Subtitle A

•HR 5300 IH

1 Subtitle A—Increased Availability

2 and Continuity of Health Cov3 erage for Individuals and Their

4 Families

5 PART 1—REQUIRED COVERAGE OPTIONS FOR EL6 IGIBLE EMPLOYEES, SPOUSES, AND DEPEND7 ENTS

8 SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF

9 COVERAGE FOR ELIGIBLE INDIVIDUALS.

10 (a) IN GENERAL.—Each employer shall make avail11 able with respect to each eligible employee a group health

12 plan under which—

13 (1) coverage of each eligible individual with re14 spect to such an eligible employee may be elected on

15 an annual basis for each plan year,

16 (2) subject to subsection (d), coverage is pro17 vided for at least the required coverage specified in

18 subsection (c), and

19 (3) each eligible employee electing such cov20 erage may elect to have any premiums owed by the

21 employee collected through payroll deduction.

22 An employer is not required under this subsection to make

23 any contribution to the cost of coverage under such a plan.

24 (b) SPECIAL RULES.—
8

Title I, Subtitle A

•HR 5300 IH

1 (1) EXCLUSION OF NEW EMPLOYERS AND CER2 TAIN SMALL EMPLOYERS.—Subsection (a) shall not

3 apply to any employer for any plan year if, as of the

4 beginning of such plan year—

5 (A) such employer (including any prede6 cessor thereof) has been an employer for less

7 than 2 years,

8 (B) such employer has no more than 2 eli9 gible full-time employees, or

10 (C) there are no more than 2 full-time eli11 gible employees who both are not covered under

12 any group health plan and do not have health

13 insurance coverage.

14 (2) EXCLUSION OF FAMILY MEMBERS.—Under

15 such procedures as the Secretary may prescribe, any

16 relative of an employer may be, at the election of the

17 employer, excluded from consideration as an eligible

18 employee for purposes of applying the requirements

19 of subsection (a). In the case of an employer that is

20 not an individual, an employee who is a relative of

21 a key employee (as defined in section 416(i)(1) of

22 the Internal Revenue Code of 1986) of the employer

23 may, at the election of the key employee, be consid24 ered a relative excludable under this paragraph.
9

Title I, Subtitle A

•HR 5300 IH

1 (3) OPTIONAL APPLICATION OF WAITING PE2 RIOD.—A group health plan shall not be treated as

3 failing to meet the requirements of subsection (a)

4 solely because a period of service by an eligible em5 ployee of not more than 60 days is required under

6 the plan for coverage under the plan of eligible indi7 viduals with respect to such employee.

8 (c) REQUIRED COVERAGE.—

9 (1) IN GENERAL.—Except as provided in para10 graph (2), the required coverage specified in this

11 subsection is standard coverage (consistent with sec12 tion 1102(c)), including at least one option (either

13 a fee-for-service option or a point-of-service option)

14 that permits covered individuals an unlimited choice

15 of the lawful providers for which covered benefits are

16 made available.

17 (2) SPECIAL TREATMENT OF SMALL EMPLOY18 ERS NOT CONTRIBUTING TO EMPLOYEE COV19 ERAGE.—In the case of a small employer (as defined

20 in section 1131(9)) that has not contributed during

21 the previous plan year to the cost of coverage for

22 any eligible employee under any group health plan,

23 the required coverage specified in this subsection for

24 the plan year (with respect to each eligible employee)

25 is—
10

Title I, Subtitle A

•HR 5300 IH

1 (A) MedAccess standard coverage, with a

2 fee-for-service option and, if available, a point3 of-service option and a managed care option (as

4 defined in section 1033);

5 (B) MedAccess catastrophic coverage; and

6 (C) if available, MedAccess medisave cov7 erage,

8 as such terms are defined in section 1102(a)(2).

9 (3) CONSTRUCTION.—Nothing in this section

10 shall be construed as limiting the group health

11 plans, or types of coverage under such a plan, that

12 an employer may offer to an employee.

13 (d) 5-YEAR TRANSITION FOR EXISTING GROUP

14 HEALTH PLANS.—

15 (1) IN GENERAL.—The requirement of sub16 section (a)(2) shall not apply to a group health plan

17 for a plan year if—

18 (A) the group health plan is in effect in

19 the plan year in which July 1, 1994, occurs,

20 and

21 (B) the employer makes (or offers to

22 make), in such plan year and each subsequent

23 plan year through the plan year involved, a con24 tribution to the plan on behalf of each employee

25 who is eligible to participate in the plan.
11

Title I, Subtitle A

•HR 5300 IH

1 (2) SUNSET.—Paragraph (1) shall only apply to

2 a group health plan until the expiration of a con3 tract in effect on the date of the enactment of this

4 Act or, if earlier, January 1, 2000.

5 PART 2—PORTABILITY AND

6 NONDISCRIMINATION

7 SEC. 1011. NONDISCRIMINATION BASED ON HEALTH

8 STATUS.

9 (a) IN GENERAL.—A group health plan and an in10 surer providing health insurance coverage may not deny

11 or impose (and an insurer may not require an employer

12 under a group health plan to impose or otherwise to im13 pose through a waiting period for coverage under a plan

14 or similar requirement) a limitation or exclusion of bene15 fits relating to treatment of a condition based on health

16 status or based on the fact that the condition preexisted

17 the effective date of coverage of the individual under the

18 plan if—

19 (1) in the case of any individual eligible for

20 such coverage, such individual has such coverage at

21 the time at which such individual first becomes eligi22 ble;

23 (2) the limitation or exclusion applies to an in24 dividual who, as of the date of birth, was covered

25 under the plan;
12

Title I, Subtitle A

•HR 5300 IH

1 (3) the limitation or exclusion relates to preg2 nancy;

3 (4) the condition relates to a condition that was

4 not diagnosed or treated within 3 months (or 6

5 months in the case of coverage not under a group

6 health plan) before the date of such coverage; or

7 (5) the limitation or exclusion extends over

8 more than 6 months (or 12 months in the case of

9 coverage not under a group health plan) after the

10 date of such coverage.

11 In the case of an individual who is eligible for coverage

12 but for a waiting period imposed by the employer, in ap13 plying paragraphs (4) and (5), the individual shall be

14 treated as having had such coverage as of the earliest date

15 of the beginning of the waiting period.

16 (b) ONE-TIME AMNESTY PERIOD.—

17 (1) IN GENERAL.—In the case of an individual

18 who, as of the first date of the amnesty period is—

19 (A) covered under a group health plan or

20 has health insurance coverage, such coverage

21 shall not be subject to pre-existing condition ex22 clusions on and after such date; or

23 (B) not so covered, if the individual ob24 tains coverage under a group health plan or

25 health insurance coverage during the next avail-
13

Title I, Subtitle A

•HR 5300 IH

1 able open enrollment period with respect to the

2 individual, coverage so obtained shall not be

3 subject to pre-existing condition exclusions on

4 and after the effective date of such coverage.

5 (2) AMNESTY PERIOD.—The amnesty period de6 scribed in this paragraph, with respect to an individ7 ual who is a resident of a State, is the 45-calendar8 day period beginning on the effective date of this

9 part (under section 1032(b)).

10 (3) ESTABLISHMENT OF SPECIAL ALLOCATION

11 OF RISK POOL FOR AMNESTY.—Each State shall es12 tablish rules and requirements relating to the alloca13 tion of risk among insurers with respect to addi14 tional risks assumed as a result of the amnesty pe15 riod under this subsection (including individuals pre16 viously covered for whom a preexisting condition ex17 clusion will be no longer applicable).

18 (c) APPLICATION OF RULES BY CERTAIN HEALTH

19 MAINTENANCE ORGANIZATIONS.—A health maintenance

20 organization that provides health insurance coverage shall

21 not be considered as failing to meet the requirements of

22 section 1301 of the Public Health Service Act notwith23 standing that it provides for an exclusion of the coverage

24 based on a preexisting condition consistent with the provi-
14

Title I, Subtitle A

•HR 5300 IH

1 sions of this part so long as such exclusion is applied con2 sistent with the provisions of this part.

3 SEC. 1012. PORTABILITY.

4 (a) IN GENERAL.—Each group health plan and an

5 insurer providing health insurance coverage shall waive

6 any period applicable to a preexisting condition for similar

7 benefits with respect to an individual to the extent that

8 the individual, immediately prior to the date of such indi9 vidual’s enrollment in such plan, had health insurance cov10 erage for the condition, or was covered for the condition

11 under a group health plan, that was in effect before such

12 date.

13 (b) CONTINUOUS COVERAGE REQUIRED.—

14 (1) IN GENERAL.—Subsection (a) shall no

15 longer apply if there is a continuous period of more

16 than 60 days (or, in the case of an individual de17 scribed in paragraph (2), 6 months) for which the

18 individual did not have health insurance coverage for

19 the condition or was not covered under a group

20 health plan for the condition.

21 (2) JOB TERMINATION.—An individual is de22 scribed in this paragraph if the individual loses cov23 erage under a group health plan due to termination

24 of employment.
15

Title I, Subtitle A

•HR 5300 IH

1 (3) EXCLUSION OF CASH-ONLY AND DREAD

2 DISEASE PLANS.—In this subsection, the term

3 ‘‘group health plan’’ does not include any group

4 health plan which is offered primarily to provide—

5 (A) coverage for a specified disease or ill6 ness, or

7 (B) a hospital or fixed indemnity policy,

8 unless the Secretary determines that such a

9 plan provides sufficiently comprehensive cov10 erage of a benefit so that it should be treated

11 as a group health plan under this subsection.

12 (c) TRANSITION FOR NON-CONFORMING POLICIES.—

13 Notwithstanding State law or the provision of any agree14 ment to the contrary, effective January 1, 1997, an in15 surer may cancel or refuse to renew health insurance cov16 erage in a State prior to the application of this subtitle

17 to health insurance coverage issued in the State if the cov18 erage does not provide for either standard or catastrophic

19 coverage, but only if the insurer offers the covered individ20 ual affected the opportunity to obtain health insurance

21 coverage that meets the applicable requirements of this

22 title.

23 (d) APPLICABILITY OF COVERAGE UNDER PUBLIC

24 INSURANCE.—In this section, an individual shall be con25 sidered to have health insurance coverage for a condition
16

Title I, Subtitle A

•HR 5300 IH

1 without regard to whether such coverage is under a private

2 or public plan.

3 SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY

4 GENERALLY.

5 (a) MULTIEMPLOYER PLANS AND EXEMPTED MUL6 TIPLE EMPLOYER HEALTH PLANS.—A multiemployer

7 plan and an exempted multiple employer health plan may

8 not cancel coverage or deny renewal of coverage under

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

10 (1) for nonpayment of contributions,

11 (2) for fraud or other misrepresentation by the

12 employer,

13 (3) for noncompliance with plan provisions, or

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

15 coverage in a geographic area.

16 (b) INSURERS.—

17 (1) IN GENERAL.—An insurer may not cancel

18 health insurance coverage or deny renewal of such

19 coverage other than—

20 (A) for nonpayment of premiums,

21 (B) for fraud or other misrepresentation

22 by the insured,

23 (C) for noncompliance with plan provi24 sions, or
17

Title I, Subtitle A

•HR 5300 IH

1 (D) subject to paragraph (2), because the

2 insurer is ceasing to provide any health insur3 ance coverage (or the same type of health insur4 ance coverage in the same individual or small

5 employer insurance market) in a State, or, in

6 the case of a health maintenance organization

7 or other network plan, in a geographic area.

8 (2) NOTICE REQUIREMENT FOR MARKET

9 EXIT.—Paragraph (1)(D) shall not apply to an in10 surer ceasing to provide coverage unless the insurer

11 provides notice of such termination to employers and

12 individuals covered at least 180 days before the date

13 of termination of coverage.

14 (3) LIMITATION ON REENTRY IN EMPLOYER

15 AND INDIVIDUAL MARKETS.—If an insurer ceases to

16 offer or provide health insurance coverage (or a type

17 of insurance coverage) in an area with respect to the

18 individual or small group market, the insurer may

19 not offer such health insurance coverage (or type of

20 coverage) in the area in such market until 5 years

21 after the date of the termination.

22 (4) TYPE OF COVERAGE AND INSURANCE MAR23 KET DEFINED.—In this subsection—

24 (A) MedAccess standard coverage,

25 MedAccess catastrophic coverage, and
18

Title I, Subtitle A

•HR 5300 IH

1 MedAccess medisave coverage shall each be con2 sidered to be separate types of health insurance

3 coverage; and

4 (B) the term ‘‘small group market’’ means

5 the insurance market offered to individuals

6 seeking health care coverage on behalf of them7 selves (and their dependents) on the basis of

8 employment or other relationship with respect

9 to an employer or an association.

10 PART 3—STANDARDS FOR MANAGED CARE

11 ARRANGEMENTS

12 SEC. 1021. STANDARDS FOR MANAGED CARE ARRANGE13 MENTS.

14 (a) REQUIREMENT.—

15 (1) IN GENERAL.—Each group health plan, and

16 each insurer providing health insurance coverage, for

17 health care through a managed care arrangement

18 shall comply with the applicable requirements of this

19 section.

20 (2) DEFINITIONS.—In this section:

21 (A) MANAGED CARE ARRANGEMENT DE22 FINED.—The term ‘‘managed care arrange23 ment’’ means, with respect to an arrangement

24 under a group health plan or under health in25 surance coverage, providers who have entered
19

Title I, Subtitle A

•HR 5300 IH

1 into an agreement under the arrangement

2 under which such providers are obligated to

3 provide items and services covered under the ar4 rangement to individuals covered under the

5 plan or who have such coverage.

6 (B) PROVIDER NETWORK.—The term

7 ‘‘provider network’’ means, with respect to a

8 group health plan or health insurance coverage,

9 providers who have entered into an agreement

10 described in subparagraph (A) under a man11 aged care arrangement.

12 (b) SCOPE OF ARRANGEMENTS WITH PROVIDERS.—

13 (1) IN GENERAL.—The entity providing for a

14 managed care arrangement on behalf of a group

15 health plan or under health insurance coverage shall

16 enter into such agreements with health care provid17 ers (including primary and specialty providers for

18 children) or have such other arrangements as may

19 be necessary to assure that covered individuals have

20 reasonably prompt access through the entity’s pro21 vider network to all items and services contained in

22 the package of benefits for which coverage is pro23 vided (including access to emergency services on a

24 24-hour basis where medically necessary), in a man-
20

Title I, Subtitle A

•HR 5300 IH

1 ner that assures the continuity of the provision of

2 such items and services.

3 (2) ACCESS TO CENTERS OF EXCELLENCE.—

4 (A) IN GENERAL.—The entity providing

5 for a managed care arrangement on behalf of a

6 group health plan or under health insurance

7 coverage shall demonstrate that covered individ8 uals (including individuals with chronic dis9 eases) have access through the entity’s provider

10 network to specialized treatment expertise of

11 designated centers of excellence. Such entity

12 shall demonstrate such access according to

13 standards developed by the Secretary, including

14 requirements relating to arrangements with

15 such centers and referral of patients to such

16 centers.

17 (B) DESIGNATION OF CENTERS OF EXCEL18 LENCE.—The Secretary shall establish a proc19 ess for the designation of facilities, including

20 children’s hospitals and other pediatric facili21 ties, as centers of excellence for purposes of this

22 paragraph. A facility may not be designated un23 less the facility is determined—

24 (i) to provide specialty care,
21

Title I, Subtitle A

•HR 5300 IH

1 (ii) to deliver care for complex cases

2 requiring specialized treatment and for in3 dividuals with chronic diseases, and

4 (iii) to meet other requirements that

5 may be established by the Secretary relat6 ing to specialized education and training of

7 health professionals, participation in peer8 reviewed research, or treatment of patients

9 from outside the geographic area of the fa10 cility.

11 (3) NO REFERRAL REQUIRED FOR OBSTETRICS

12 AND GYNECOLOGY.—An entity providing for a man13 aged care arrangement may not require an individ14 ual to obtain a referral from a physician in order to

15 obtain covered items and services within the network

16 of the arrangement from a physician who specializes

17 in obstetrics and gynecology.

18 (c) PROVISION OF EMERGENCY AND URGENT CARE

19 SERVICES.—

20 (1) IN GENERAL.—The entity providing for a

21 managed care arrangement on behalf of a group

22 health plan or under health insurance coverage must

23 cover medically necessary emergency and urgent

24 care services provided to covered individuals (includ25 ing trauma services provided by designated trauma
22

Title I, Subtitle A

•HR 5300 IH

1 centers), without regard to whether or not the pro2 vider furnishing such services has a contractual (or

3 other) arrangement with the entity to provide items

4 or services to covered individuals and, in the case of

5 services furnished for the treatment of an emergency

6 medical condition (as defined in section 1867(e)(1)

7 of the Social Security Act), without regard to prior

8 authorization.

9 (2) DESIGNATED TRAUMA CENTERS DE10 FINED.—In paragraph (1), the term ‘‘designated

11 trauma center’’—

12 (A) has the meaning given such term in

13 section 1231 of the Public Health Service Act,

14 and

15 (B) includes (for years prior to 2001) a

16 trauma center that—

17 (i) is located in a State that has not

18 designated trauma centers under section

19 1213 of such Act, and

20 (ii) the Secretary finds meets the

21 standards under such section to be a des22 ignated trauma center.

23 (d) DUE PROCESS STANDARDS RELATING TO PRO24 VIDER NETWORKS.—
23

Title I, Subtitle A

•HR 5300 IH

1 (1) STANDARDS FOR SELECTION OF PROVIDERS

2 FOR NETWORK.—

3 (A) ESTABLISHMENT.—The entity provid4 ing for a managed care arrangement on behalf

5 of a group health plan or under health insur6 ance coverage shall establish standards to be

7 used by the entity for contracting with health

8 care providers with respect the entity’s provider

9 network. Such standards shall be established in

10 consultation with providers who are members of

11 the network.

12 (B) DISTRIBUTION OF INFORMATION.—

13 Descriptive information regarding these stand14 ards shall be made available upon request to en15 rollees, providers who are members of the net16 work, and prospective enrollees and prospective

17 participating providers.

18 (2) NOTICE REQUIREMENT.—

19 (A) IN GENERAL.—The entity may not ter20 minate or refuse to renew an agreement with a

21 provider to participate in the entity’s provider

22 network unless the entity provides written noti23 fication to the provider of the entity’s decision

24 to terminate or to refuse to renew the agree25 ment. The notification shall include a statement
24

Title I, Subtitle A

•HR 5300 IH

1 of the reasons for the entity’s decision, consist2 ent with the standards established under para3 graph (1).

4 (B) TIMING OF NOTIFICATION.—The en5 tity shall provide the notification required under

6 subparagraph (A) at least 45 days prior to the

7 effective date of the termination or expiration of

8 the agreement (whichever is applicable). The

9 previous sentence shall not apply if failure to

10 terminate the agreement prior to the deadline

11 would adversely affect the health or safety of a

12 covered individual.

13 (3) REVIEW PROCESS.—

14 (A) IN GENERAL.—The entity shall provide

15 a process under which the provider may request

16 a review of the entity’s decision to terminate or

17 refuse to renew the provider’s participation

18 agreement. Such review shall be conducted by a

19 group of individuals the majority of whom are

20 health care providers who are members of the

21 entity’s provider network or employees of the

22 entity, and who are members of the same pro23 fession as the provider who requests the review.

24 (B) COUNSEL.—If the provider requests in

25 advance, the entity shall permit an attorney
25

Title I, Subtitle A

•HR 5300 IH

1 representing the provider to be present at the

2 provider’s review.

3 (C) REVIEW ADVISORY.—The findings and

4 conclusions of a review under this paragraph

5 shall be advisory and non-binding.

6 (4) CONSTRUCTION.—Nothing in this sub7 section shall be construed to affect any other provi8 sion of law that provides an appeals process or other

9 form of relief to a provider of health care services.

10 SEC. 1022. UTILIZATION REVIEW.

11 (a) REQUIRING REVIEW TO MEET STANDARDS.—A

12 group health plan or insurer providing health insurance

13 coverage may not deny coverage of or payment for items

14 and services on the basis of a utilization review program

15 unless the program meets the standards established by the

16 Secretary under this section.

17 (b) ESTABLISHMENT OF STANDARDS BY SEC18 RETARY.—The Secretary shall establish standards for uti19 lization review programs, consistent with subsection (c),

20 and shall periodically review and update such standards

21 to reflect changes in the delivery of health care services.

22 The Secretary shall establish such standards in consulta23 tion with appropriate parties, including representatives of

24 health care providers, specialists, insurers, plan adminis25 trators, and other experts.
26

Title I, Subtitle A

•HR 5300 IH

1 (c) REQUIREMENTS FOR STANDARDS.—Under the

2 standards established under subsection (a)—

3 (1) individuals performing utilization review

4 may not receive financial compensation based upon

5 the number of denials of coverage;

6 (2) negative determinations of the medical ne7 cessity or appropriateness of services or the site at

8 which services are furnished may be made only by

9 clinically qualified personnel;

10 (3) the utilization review program shall provide

11 for a process under which an enrollee or provider

12 may obtain timely review of a denial of coverage;

13 (4) utilization review shall be conducted in ac14 cordance with uniformly applied standards that are

15 based on the most currently available medical evi16 dence; and

17 (5) providers shall participate in the develop18 ment of the utilization review program.

19 (d) PREEMPTION.—For provision preempting State

20 laws relating to utilization review, see section 1203(a)(3).

21 PART 4—ENFORCEMENT; EFFECTIVE DATES;

22 DEFINITIONS

23 SEC. 1031. ENFORCEMENT.

24 (a) ENFORCEMENT BY DEPARTMENT OF LABOR FOR

25 EMPLOYERS AND GROUP HEALTH PLANS.—
27

Title I, Subtitle A

•HR 5300 IH

1 (1) IN GENERAL.—For purposes of part 5 of

2 subtitle B of title I of the Employee Retirement In3 come Security Act of 1974, the provisions of parts

4 1 and 2 of this subtitle and part 1 of subtitle B

5 shall be deemed to be provisions of title I of such

6 Act irrespective of exclusions under section 4(b) of

7 such Act.

8 (2) REGULATORY AUTHORITY.—With respect to

9 the regulatory authority of the Secretary of Labor

10 under this subtitle pursuant to subsection (a), sec11 tion 505 of the Employee Retirement Income Secu12 rity Act of 1974 (29 U.S.C. 1135) shall apply.

13 (b) ENFORCEMENT BY PENALTY FOR INSURERS.—

14 (1) IN GENERAL.—Chapter 43 of the Internal

15 Revenue Code of 1986 (relating to qualified pension,

16 etc., plans) is amended by adding at the end thereof

17 the following new section:

18 ‘‘SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH

19 HEALTH INSURANCE STANDARDS.

20 ‘‘(a) IMPOSITION OF PENALTY.—

21 ‘‘(1) IN GENERAL.—There is hereby imposed a

22 tax on the failure of an insurer to comply with the

23 requirements applicable to the insurer under parts 2

24 and 3 of subtitle A of title I and subtitle B of the

25 Affordable Health Care Now Act of 1994.
28

Title I, Subtitle A

•HR 5300 IH

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

2 apply to a failure by an insurer in a State if the Sec3 retary of Health and Human Services determines

4 that the State has in effect a regulatory enforcement

5 mechanism that provides adequate sanctions with re6 spect to such a failure by such an insurer.

7 ‘‘(b) AMOUNT OF PENALTY.—

8 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

9 the amount of the tax imposed by subsection (a)

10 shall be $100 for each day during which such failure

11 persists for each individual to which such failure re12 lates. A rule similar to the rule of section

13 4980B(b)(3) shall apply for purposes of this section.

14 ‘‘(2) LIMITATION.—The amount of the tax im15 posed by subsection (a) for an insurer with respect

16 to health insurance coverage shall not exceed 25 per17 cent of the amounts received for such coverage dur18 ing the period such failure persists.

19 ‘‘(c) LIABILITY FOR PENALTY.—The penalty imposed

20 by this section shall be paid by the insurer.

21 ‘‘(d) EXCEPTIONS.—

22 ‘‘(1) CORRECTIONS WITHIN 30 DAYS.—No tax

23 shall be imposed by subsection (a) by reason of any

24 failure if—
29

Title I, Subtitle A

•HR 5300 IH

1 ‘‘(A) such failure was due to reasonable

2 cause and not to willful neglect, and

3 ‘‘(B) such failure is corrected within the

4 30-day period beginning on the earliest date the

5 insurer knew, or exercising reasonable diligence

6 would have known, that such failure existed.

7 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

8 failure which is due to reasonable cause and not to

9 willful neglect, the Secretary may waive part or all

10 of the tax imposed by subsection (a) to the extent

11 that payment of such tax would be excessive relative

12 to the failure involved.

13 ‘‘(e) DEFINITIONS.—For purposes of this section, the

14 terms ‘health insurance coverage’ and ‘insurer’ have the

15 respective meanings given such terms in section 1033 of

16 the Affordable Health Care Now Act of 1994.’’.

17 (2) CLERICAL AMENDMENT.—The table of sec18 tions for chapter 43 of such Code is amended by

19 adding at the end thereof the following new items:

‘‘Sec. 4980C. Failure of insurer to comply with health insurance

standards.’’

20 SEC. 1032. EFFECTIVE DATES.

21 (a) PART 1.—The requirements of part 1 shall apply

22 to plans years beginning after December 31, 1996.

23 (b) PARTS 2 AND 3.—The requirements of parts 2

24 and 3 shall apply with respect to—
30

Title I, Subtitle A

•HR 5300 IH

1 (1) group health plans and employers shall

2 apply to plans years beginning after December 31,

3 1996, and

4 (2) insurers shall take effect on January 1,

5 1997.

6 SEC. 1033. DEFINITIONS AND SPECIAL RULES.

7 (a) IN GENERAL.—For purposes of this subtitle:

8 (1) DEPENDENT.—The term ‘‘dependent’’

9 means, with respect to any individual, any person

10 who is—

11 (A) the spouse or surviving spouse of the

12 individual, or

13 (B) under regulations of the Secretary, a

14 child (including an adopted child) of such indi15 vidual and—

16 (i) under 19 years of age, or

17 (ii) under 25 years of age and a full18 time student.

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

20 employee’’ means, with respect to an employer, an

21 employee who normally performs on a monthly basis

22 at least 10 hours of service per week for that em23 ployer. Such term shall not include any employee

24 who is not reasonably expected as of the 1st day of

25 a month to be employed by the employer for a period
31

Title I, Subtitle A

•HR 5300 IH

1 of 120 consecutive days during any 365-day period

2 that includes such 1st day.

3 (3) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible

4 individual’’ means, with respect to an eligible em5 ployee, such employee, and any dependent of such

6 employee.

7 (4) EMPLOYER.—The term ‘‘employer’’ shall

8 have the meaning applicable under section 3(5) of

9 the Employee Retirement Income Security Act of

10 1974.

11 (5) EXEMPTED MULTIPLE EMPLOYER HEALTH

12 PLAN.—The term ‘‘exempted multiple employer

13 health plan’’ means a multiple employer welfare ar14 rangement treated as an employee welfare benefit

15 plan by reason of an exemption under part 7 of sub16 title B of title I of the Employee Retirement Income

17 Security Act of 1974 (as added by part 2 of subtitle

18 C of this title).

19 (6) GROUP HEALTH PLAN; PLAN.—(A) The

20 term ‘‘group health plan’’ means an employee wel21 fare benefit plan providing medical care (as defined

22 in section 213(d) of the Internal Revenue Code of

23 1986) to participants or beneficiaries directly or

24 through insurance, reimbursement, or otherwise, but

25 does not include any type of coverage excluded from
32

Title I, Subtitle A

•HR 5300 IH

1 the definition of a health insurance coverage under

2 section 1131(4)(B).

3 (B) The term ‘‘plan’’ means a group health

4 plan (including any such plan which is a multiem5 ployer plan) and an exempted multiple employer

6 health plan.

7 (7) HEALTH INSURANCE COVERAGE.—The term

8 ‘‘health insurance coverage’’ shall have the meaning

9 applicable under section 1131(4).

10 (8) FULLY INSURED.—The term ‘‘fully in11 sured’’ shall have the meaning applicable under sec12 tion 701(9) of Employee Retirement Income Secu13 rity Act of 1974 (as added by section 1211 of this

14 title).

15 (9) INSURER.—The term ‘‘insurer’’ has the

16 meaning given such term in section 1131(6).

17 (10) MULTIPLE EMPLOYER WELFARE AR18 RANGEMENT.—The term ‘‘multiple employer welfare

19 arrangement’’ shall have the meaning applicable

20 under section 3(40) of the Employee Retirement In21 come Security Act of 1974.

22 (11) OPTIONS.—

23 (A) FEE-FOR-SERVICE OPTION.—Standard

24 coverage is considered to provide a ‘‘fee-for25 service option’’ if benefits with respect to the
33

Title I, Subtitle A

•HR 5300 IH

1 covered items and services in the coverage are

2 made available for such items and services pro3 vided through any lawful provider of such cov4 ered items and services.

5 (B) MANAGED CARE OPTION.—Standard

6 coverage is considered to provide a ‘‘managed

7 care option’’ if benefits with respect to the cov8 ered items and services in the coverage are

9 made available exclusively through a managed

10 care arrangement (as defined in section

11 1021(a)(2)), except in the case of emergency

12 and urgent services and as otherwise required

13 under law.

14 (C) POINT-OF-SERVICE OPTION.—Standard

15 coverage is considered to provide a ‘‘point-of16 service option’’ if the benefits with respect to

17 covered items and services in the coverage are

18 made available principally through a managed

19 care arrangement, with the choice of the en20 rollee to obtain such benefits for items and

21 services provided through any lawful provider of

22 such covered items and services. The coverage

23 may provide for different cost sharing schedules

24 based on whether the items and services are
34

Title I, Subtitle B

•HR 5300 IH

1 provided through such an arrangement or out2 side such an arrangement.

3 (b) APPLICATION OF ERISA DEFINITIONS.—Except

4 as otherwise provided in this subtitle, terms used in this

5 subtitle shall have the meanings applicable to such terms

6 under section 3 of the Employee Retirement Income Secu7 rity Act of 1974 (29 U.S.C. 1002).

8 (c) SECRETARY.—Except with respect to references

9 specifically to the Secretary of Labor, the term ‘‘Sec10 retary’’ means the Secretary of Health and Human

11 Services.

12 Subtitle B—Reform of Health

13 Insurance

14 PART 1—MARKETPLACE FOR SMALL BUSINESS

15 SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER

16 MEDACCESS COVERAGE.

17 (a) REQUIREMENT.—

18 (1) IN GENERAL.—Each insurer (as defined in

19 section 1131(6)) that makes available any health in20 surance coverage (as defined in section 1131(4)) to

21 a small employer (as defined in section 1131(9)) in

22 a State—

23 (A) shall make available to each small em24 ployer in the State MedAccess standard cov25 erage (as defined in section 1102(a)(2)), with a
35

Title I, Subtitle B

•HR 5300 IH

1 fee-for-service option and, if available, a point2 of-service option and a managed care option (as

3 defined in section 1033),

4 (B) shall make available to each small em5 ployer in the State MedAccess catastrophic cov6 erage (as defined in section 1102(a)(2)), and

7 (C) may make available to each small em8 ployer in the State MedAccess medisave cov9 erage (as defined in section 1102(a)(2)).

10 (2) SPECIAL RULE FOR HEALTH MAINTENANCE

11 ORGANIZATIONS.—The requirements of paragraph

12 (1)(A) (with regard to requiring a fee-for-service op13 tion), and paragraphs (1)(B) and (1)(C) shall not

14 apply with respect to a health insurance coverage

15 that—

16 (A) is provided by a Federally qualified

17 health maintenance organization (as defined in

18 section 1301(a) of the Public Health Service

19 Act), or

20 (B) is not provided by such an organiza21 tion but is provided by an organization recog22 nized under State law as a health maintenance

23 organization or managed care organization or a

24 similar organization regulated under State law

25 for solvency.
36

Title I, Subtitle B

•HR 5300 IH

1 (3) EXCEPTION IF STATE PROVIDES FOR GUAR2 ANTEED AVAILABILITY (RATHER THAN GUARANTEED

3 ISSUE).—Paragraph (1) shall not apply to an insurer

4 in a State if the State is providing—

5 (A) access to each small employer in the

6 State to MedAccess standard coverage, to

7 MedAccess catastrophic coverage, and to a

8 MedAccess medisave coverage, and

9 (B) a risk allocation mechanism described

10 in subsection (c).

11 (b) GUARANTEED ISSUE OF MEDACCESS COV12 ERAGE.—Subject to subsection (c)—

13 (1) IN GENERAL.—Subject to paragraphs (2)

14 and (3), each insurer that offers MedAccess cov15 erage to a small employer in a State—

16 (A) must accept every small employer in

17 the State that applies for such coverage; and

18 (B) must accept for enrollment under such

19 coverage every eligible individual (as defined in

20 paragraph (5)) who applies for enrollment on a

21 timely basis (consistent with paragraph (4))

22 and may not place any restriction on the eligi23 bility of an individual to enroll so long as such

24 individual is an eligible individual.
37

Title I, Subtitle B

•HR 5300 IH

1 (2) SPECIAL RULES FOR HEALTH MAINTE2 NANCE ORGANIZATIONS.—In the case of coverage of3 fered by a health maintenance organization or other

4 network plan, the organization may—

5 (A) limit the employers that may apply for

6 such coverage to those with eligible individuals

7 residing in the service area of the plan;

8 (B) limit the individuals who may be en9 rolled under such coverage to those who reside

10 in the service area for such organization; and

11 (C) within the service area of such organi12 zation, deny such coverage to such employers if

13 the organization demonstrates that—

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

16 additional groups because of its obligations

17 to existing group contract holders and en18 rollees,

19 (ii) it is applying this subparagraph

20 uniformly to all employers without regard

21 to the health status, claims experience, or

22 duration of coverage of those employers

23 and their employees, and

24 (iii) it will not offer coverage to such

25 employers within such service area for a
38

Title I, Subtitle B

•HR 5300 IH

1 period of at least 180 days after such cov2 erage is denied.

3 In this paragraph, the term ‘‘health maintenance or4 ganization’’ includes an organization recognized

5 under State law as a health maintenance organiza6 tion or managed care organization or a similar orga7 nization regulated under State law for solvency.

8 (3) SPECIAL RULE FOR FINANCIAL CAPACITY

9 LIMITS.—In the case of coverage offered by an in10 surer other than a health maintenance organization

11 or network plan, the insurer may deny such coverage

12 to small employers if the organization demonstrates

13 that—

14 (A) it does not have the financial reserves

15 necessary to underwrite additional coverage,

16 (B) it is applying this paragraph uniformly

17 to all employers without regard to the health

18 status, claims experience, or duration of cov19 erage of those employers and their employees,

20 and

21 (C) it shall not offer coverage to such em22 ployers within such service area for a period of

23 at least 180 days after such coverage is denied.

24 (4) CLARIFICATION OF TIMELY ENROLL25 MENT.—
39

Title I, Subtitle B

•HR 5300 IH

1 (A) GENERAL INITIAL ENROLLMENT RE2 QUIREMENT.—Except as provided in this para3 graph, enrollment of an eligible individual for

4 MedAccess coverage may be considered not to

5 be timely if the eligible employee or dependent

6 fails to enroll under such coverage during an

7 initial enrollment period, if such period is at

8 least 30 days long.

9 (B) ENROLLMENT DUE TO LOSS OF PRE10 VIOUS COVERAGE.—Enrollment under

11 MedAccess coverage is considered to be timely

12 in the case of an eligible individual who—

13 (i) was covered under a group health

14 plan or had other health insurance cov15 erage at the time of the individual’s initial

16 enrollment period,

17 (ii) stated at the time of the initial en18 rollment period that coverage under a

19 group health plan or other health insur20 ance coverage was the reason for declining

21 enrollment,

22 (iii) lost coverage under a group

23 health plan or other health insurance cov24 erage (as a result of the termination of the
40

Title I, Subtitle B

•HR 5300 IH

1 coverage, termination or reduction of em2 ployment, or other reason), and

3 (iv) requests enrollment within 30

4 days after termination of the coverage.

5 (C) REQUIREMENT APPLIES DURING OPEN

6 ENROLLMENT PERIODS.—Each insurer and

7 each group health plan providing MedAccess

8 coverage shall provide for at least one period (of

9 not less than 30 days) each year during which

10 enrollment under such coverage shall be consid11 ered to be timely.

12 (D) EXCEPTION FOR COURT ORDERS.—

13 Enrollment of a spouse or minor child of an

14 employee shall be considered to be timely if—

15 (i) a court has ordered that coverage

16 be provided for the spouse or child under

17 a covered employee’s group health plan,

18 and

19 (ii) a request for enrollment is made

20 within 30 days after the date the court is21 sues the order.

22 (E) ENROLLMENT OF SPOUSES AND DE23 PENDENTS.—

24 (i) IN GENERAL.—Enrollment of the

25 spouse (including a child of the spouse)
41

Title I, Subtitle B

•HR 5300 IH

1 and any dependent child of an eligible em2 ployee shall be considered to be timely if a

3 request for enrollment is made either—

4 (I) within 30 days of the date of

5 the marriage or of the date of the

6 birth or adoption of a child, if family

7 coverage is available as of such date,

8 or

9 (II) within 30 days of the date

10 family coverage is first made avail11 able.

12 (ii) COVERAGE.—If available coverage

13 includes family coverage and enrollment is

14 made under such coverage on a timely

15 basis under clause (i)(I), the coverage shall

16 become effective not later than the first

17 day of the first month beginning after the

18 date of the marriage or the date of birth

19 or adoption of the child (as the case may

20 be).

21 (5) DEFINITIONS.—In this subsection, the

22 terms ‘‘eligible individual’’ and ‘‘group health plan’’

23 have the meanings given such terms in section

24 1023(a).
42

Title I, Subtitle B

•HR 5300 IH

1 (c) STATE OPTION OF GUARANTEED AVAILABILITY

2 THROUGH ALLOCATION OF RISK (RATHER THAN

3 THROUGH GUARANTEED ISSUE).—The requirements of

4 subsection (b) shall not apply in a State if the State has

5 provided (in accordance with standards established under

6 this part) a mechanism under which—

7 (1) each insurer offering health insurance cov8 erage to a small employer in the State must partici9 pate in a program for assigning high-risk small em10 ployer groups (or individuals within such a group)

11 among some or all such insurers, and

12 (2) the insurers to which such high-risk small

13 employer groups or individuals are so assigned com14 ply with the requirements of subsection (b).

15 SEC. 1102. MEDACCESS COVERAGE DEFINED.

16 (a) MEDACCESS COVERAGE DEFINED.—In this sub17 title:

18 (1) IN GENERAL.—The term ‘‘MedAccess cov19 erage’’ means a health insurance coverage (whether

20 under a managed-care plan, indemnity plan, or other

21 plan) that meets the following requirements:

22 (A) The coverage—

23 (i) is designed to provide standard

24 coverage (consistent with subsection (c))

25 with substantial cost-sharing,
43

Title I, Subtitle B

•HR 5300 IH

1 (ii) is designed to provide only cata2 strophic coverage (consistent with sub3 section (d)), or

4 (iii) is designed to provide medisave

5 coverage (consistent with subsection (e)).

6 (B) The coverage includes only services, in7 cluding (but not limited to) medical, surgical,

8 hospital, and preventive services, which are es9 sential and medically necessary; except that no

10 specific procedure or treatment, or classes

11 thereof, is required to be included in such cov12 erage, by this Act or through regulations.

13 (C) The coverage meets the applicable re14 quirements of section 1101(b) (relating to guar15 anteed issue).

16 (D) The coverage meets the consumer pro17 tection standards established under section

18 1103(a)(1)(B).

19 (2) MEDACCESS STANDARD, CATASTROPHIC,

20 AND MEDISAVE COVERAGE.—The terms ‘‘MedAccess

21 standard coverage’’, ‘‘MedAccess catastrophic cov22 erage’’, ‘‘MedAccess medisave coverage’’ mean

23 MedAccess coverage that provides for at least stand24 ard coverage (referred to in paragraph (1)(A)(i)),

25 for only catastrophic coverage (referred to in para-
44

Title I, Subtitle B

•HR 5300 IH

1 graph (1)(A)(ii)), or medisave coverage (referred to

2 in paragraph (1)(A)(iii)), respectively.

3 (b) SET OF RULES OF ACTUARIAL EQUIVALENCE.—

4 (1) INITIAL DETERMINATION.—The NAIC is

5 requested to submit to the Secretary, within 6

6 months after the date of the enactment of this Act,

7 a set of rules, including an appropriate set of safe8 harbors, which the NAIC determines is sufficient for

9 determining, in the case of any health insurance cov10 erage and for purposes of this section, the actuarial

11 value of the coverage offered.

12 (2) CERTIFICATION.—If the Secretary deter13 mines that the NAIC has submitted a set of rules

14 that comply with the requirements of paragraph (1),

15 the Secretary shall certify such set of rules for use

16 under this part. If the Secretary determines that

17 such a set of rules has not been submitted or does

18 not comply with such requirements, the Secretary

19 shall promptly establish a set of rules that meets

20 such requirements.

21 (c) STANDARD COVERAGE.—

22 (1) IN GENERAL.—For purposes of this Act,

23 health insurance coverage is considered to provide

24 standard coverage consistent with this subsection if

25 the benefits are specified in a written instrument
45

Title I, Subtitle B

•HR 5300 IH

1 providing for such coverage as essential and medi2 cally necessary services described in subsection

3 (a)(1)(B) and determined, in accordance with the set

4 of actuarial equivalence rules certified under sub5 section (b), to have a value that is within 5 percent6 age points of the applicable target actuarial value

7 for standard coverage established under paragraph

8 (2).

9 (2) INITIAL DETERMINATION OF APPLICABLE

10 TARGET ACTUARIAL VALUE FOR STANDARD COV11 ERAGE.—

12 (A) INITIAL DETERMINATION.—The NAIC

13 is requested to submit to the Secretary, within

14 6 months after the date of the enactment of

15 this Act, a procedure for determining the appli16 cable target actuarial value for standard cov17 erage (which may vary by geographic area).

18 Such value shall be equal to the average actuar19 ial value of a representative range of the dif20 ferent types of health benefits provisions (which

21 include cost-sharing) typically offered as stand22 ard coverage in the small employer health cov23 erage market. In determining the actuarial

24 value, the benefits considered should be suffi25 cient to cover only services, including (but not
46

Title I, Subtitle B

•HR 5300 IH

1 limited to) medical, surgical, hospital, and pre2 ventive services, which are essential and medi3 cally necessary; except that no specific proce4 dure or treatment, or classes thereof, is re5 quired to be considered in such determination

6 by this Act or through regulations. The deter7 mination of such value shall be based on a rep8 resentative distribution of the population of eli9 gible employees offered such coverage and a

10 single set of standardized utilization and cost

11 factors (which may vary by geographic area).

12 (B) CERTIFICATION.—If the Secretary de13 termines that the NAIC has submitted a proce14 dure for determining the applicable target actu15 arial value for standard coverage that complies

16 with the requirements of subparagraph (A), the

17 Secretary shall certify such procedure for use

18 under this part. If the Secretary determines

19 that such a procedure has not been submitted

20 or does not comply with such requirements, the

21 Secretary shall promptly prescribe such a proce22 dure that meets such requirements.

23 (d) CATASTROPHIC COVERAGE.—

24 (1) IN GENERAL.—For purposes of subsection

25 (a)(1)(B), health insurance coverage is considered to
47

Title I, Subtitle B

•HR 5300 IH

1 provide catastrophic coverage consistent with this

2 subsection if—

3 (A) benefits are available under such cov4 erage for a year only to the extent that ex5 penses for covered services in a year exceed a

6 deductible amount that is consistent with the

7 dollar amounts specified in section 220(c)(2)(A)

8 of the Internal Revenue Code of 1986, as added

9 by section 2202, and

10 (B) the benefits are determined, in accord11 ance with the set of actuarial equivalence rules

12 certified under subsection (b), to have a value

13 that is within 5 percentage points of the target

14 actuarial value for catastrophic coverage estab15 lished under paragraph (2).

16 (2) INITIAL DETERMINATION OF TARGET ACTU17 ARIAL VALUE FOR CATASTROPHIC COVERAGE.—

18 (A) INITIAL DETERMINATION.—The NAIC

19 is requested to submit to the Secretary, within

20 6 months after the date of the enactment of

21 this Act, a target actuarial value for cata22 strophic coverage equal to the actuarial value

23 that would have been computed under sub24 section (c)(2)(A) if a deductible that represents

25 the midpoint of the range of deductibles per-
48

Title I, Subtitle B

•HR 5300 IH

1 mitted consistent with subsections (b)(2) and

2 (c)(2)(A) of section 220 of the Internal Reve3 nue Code of 1986 were used in place of any

4 deductible that otherwise would be applicable.

5 (B) CERTIFICATION.—If the Secretary de6 termines that the NAIC has submitted a target

7 actuarial value for catastrophic coverage that

8 comply with the requirements of subparagraph

9 (A), the Secretary shall certify such value for

10 use under this part. If the Secretary determines

11 that such a value has not been submitted or

12 does not comply with such requirements, the

13 Secretary shall promptly determine such a tar14 get actuarial value that meets such require15 ments.

16 (e) MEDISAVE COVERAGE.—

17 (1) IN GENERAL.—For purposes of subsection

18 (a)(1)(C), health insurance coverage is considered to

19 provide medisave coverage consistent with this sub20 section if such coverage consists of—

21 (A) coverage under a catastrophic health

22 plan (within the meaning of section 220(c)(2)

23 of the Internal Revenue Code of 1986, as in24 serted by section 2202 of this Act), and
49

Title I, Subtitle B

•HR 5300 IH

1 (B) a medical savings account described in

2 section 220(d)(1)(B) of such Code.

3 (f) SUBSEQUENT REVISIONS.—

4 (1) NAIC.—The NAIC may submit from time

5 to time to the Secretary revisions of the set of rules

6 of actuarial equivalence previously established or de7 termined under this section if the NAIC determines

8 such revision necessary to take into account changes

9 in the relevant types of health benefits provisions, in

10 deductible levels for catastrophic coverage, or in de11 mographic conditions which form the basis for such

12 set of rules. The provisions of subsection (b)(2) shall

13 apply to such a revision in the same manner as they

14 apply to the initial determination of the set of rules.

15 (2) SECRETARY.—The Secretary may by regu16 lation revise such set or rules and values from time

17 to time if the Secretary determines such revision

18 necessary to take into account changes described in

19 paragraph (1).

20 SEC. 1103. ESTABLISHMENT OF OTHER MEDACCESS STAND21 ARDS.

22 (a) ESTABLISHMENT OF GENERAL STANDARDS.—

23 (1) ROLE OF NAIC.—The Secretary shall re24 quest the NAIC to develop, within 9 months after

25 the date of the enactment of this Act, model regula-
50

Title I, Subtitle B

•HR 5300 IH

1 tions that specify standards with respect to each of

2 the following:

3 (A)(i) The requirement, under section

4 1101(a), that insurers make available

5 MedAccess coverage.

6 (ii) The requirements of guaranteed avail7 ability of MedAccess coverage to small employ8 ers under section 1101(b).

9 (B) The requirements of section 1104 (re10 lating to use of modified community rating, uni11 form marketing materials, and miscellaneous

12 consumer protections).

13 If the NAIC develops recommended regulations

14 specifying such standards within such period, the

15 Secretary shall review the standards. Such review

16 shall be completed within 60 days after the date the

17 regulations are developed. Unless the Secretary de18 termines within such period that the standards do

19 not meet the requirements, such standards shall

20 serve as the standards under this section, with such

21 amendments as the Secretary deems necessary.

22 (2) CONTINGENCY.—If the NAIC does not de23 velop such model regulations within such period or

24 the Secretary determines that such regulations do

25 not specify standards that meet the requirements de-
51

Title I, Subtitle B

•HR 5300 IH

1 scribed in paragraph (1), the Secretary shall specify,

2 within 15 months after the date of the enactment of

3 this Act, standards to carry out those requirements.

4 (3) EFFECTIVE DATE.—The MedAccess stand5 ards and consumer protection standards (as defined

6 in paragraph (5)) shall apply to MedAccess coverage

7 and health insurance coverage provided in a State

8 on or after the respective date the standards are im9 plemented in the State under subsections (b) and

10 (c).

11 (4) PREEMPTION OF STATE LAW.—

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

13 subparagraph (B), a State may not establish or

14 enforce standards for health insurance coverage

15 made available to small employers and individ16 uals that are different from the standards es17 tablished under this part.

18 (B) GRANDFATHER.—In the case of a

19 State that, as of August 1, 1994, required that

20 premiums in the individual and small group

21 market sectors be community-rated and not

22 vary based on age, the State continue such

23 standards (and reasonable modifications there24 of) in force.

25 (5) DEFINITIONS.—In this section:
52

Title I, Subtitle B

•HR 5300 IH

1 (A) CONSUMER PROTECTION STAND2 ARDS.—The term ‘‘consumer protection stand3 ards’’ means the standards established under

4 paragraph (1)(B).

5 (B) MEDACCESS STANDARDS.—The term

6 ‘‘MedAccess standards’’ means the standards

7 established under paragraph (1)(A) (relating to

8 the requirements of section 1101), and includes

9 the consumer protection standards insofar as

10 they relate to MedAccess coverage.

11 (b) APPLICATION OF STANDARDS THROUGH

12 STATES.—

13 (1) APPLICATION OF MEDACCESS STAND14 ARDS.—

15 (A) IN GENERAL.—Each State shall sub16 mit to the Secretary, by the deadline specified

17 in subparagraph (B), a report on steps the

18 State is taking to implement and enforce the

19 consumer protection standards with respect to

20 insurers, and MedAccess coverage offered, not

21 later than such deadline.

22 (B) DEADLINE FOR REPORT.—

23 (i) 1 YEAR AFTER STANDARDS ESTAB24 LISHED.—Subject to clause (ii), the dead25 line under this subparagraph is 1 year
53

Title I, Subtitle B

•HR 5300 IH

1 after the date the MedAccess standards

2 are established under subsection (a).

3 (ii) EXCEPTION FOR LEGISLATION.—

4 In the case of a State which the Secretary

5 identifies, in consultation with the NAIC,

6 as—

7 (I) requiring State legislation

8 (other than legislation appropriating

9 funds) in order for insurers and plans

10 providing MedAccess coverage offered

11 to meet the MedAccess standards es12 tablished under subsection (a), but

13 (II) having a legislature which is

14 not scheduled to meet in 1995 in a

15 legislative session in which such legis16 lation may be considered,

17 the date specified in this subparagraph is

18 the first day of the first calendar quarter

19 beginning after the close of the first legis20 lative session of the State legislature that

21 begins on or after January 1, 1996. For

22 purposes of the previous sentence, in the

23 case of a State that has a 2-year legislative

24 session, each year of such session shall be
54

Title I, Subtitle B

•HR 5300 IH

1 deemed to be a separate regular session of

2 the State legislature.

3 (2) FEDERAL ROLE.—If the Secretary deter4 mines that a State has failed to submit a report by

5 the deadline specified under paragraph (1) or finds

6 that the State has not implemented and provided

7 adequate enforcement of the MedAccess standards

8 under such paragraph, the Secretary shall notify the

9 State and provide the State a period of 60 days in

10 which to submit such report or to implement and en11 force such standards under such paragraph. If, after

12 such 60-day period, the Secretary finds that such a

13 failure has not been corrected, the Secretary shall

14 provide for such mechanism for the implementation

15 and enforcement of such standards in the State as

16 the Secretary determines to be appropriate. Such

17 implementation and enforcement shall take effect

18 with respect to insurers, and plans providing

19 MedAccess coverage offered or renewed, on or after

20 3 months after the date of the Secretary’s finding

21 under the previous sentence, and until the date the

22 Secretary finds that such a failure has been cor23 rected. In exercising authority under this subpara24 graph, the Secretary shall determine whether the use

25 of a risk-allocation mechanism, described in section
55

Title I, Subtitle B

•HR 5300 IH

1 1101(c), would be more consistent with the small

2 employer group health coverage market in the State

3 than the guaranteed availability provisions of section

4 1101(b).

5 (3) APPLICATION OF CONSUMER PROTECTION

6 STANDARDS.—

7 (A) IN GENERAL.—Each State shall sub8 mit to the Secretary, by the deadline specified

9 in subparagraph (B), a report on steps the

10 State is taking to implement and enforce the

11 MedAccess standards with respect to insurers,

12 and health insurance coverage (other than

13 MedAccess coverage) offered, not later than

14 such deadline.

15 (B) DEADLINE FOR REPORT.—

16 (i) 1 YEAR AFTER STANDARDS ESTAB17 LISHED.—Subject to clause (ii), the dead18 line under this subparagraph is 1 year

19 after the date the consumer protection

20 standards are established under subsection

21 (a).

22 (ii) EXCEPTION FOR LEGISLATION.—

23 In the case of a State which the Secretary

24 identifies, in consultation with the NAIC,

25 as—
56

Title I, Subtitle B

•HR 5300 IH

1 (I) requiring State legislation

2 (other than legislation appropriating

3 funds) in order for insurers and plans

4 providing health insurance coverage

5 offered to meet the consumer protec6 tion standards established under sub7 section (a), but

8 (II) having a legislature which is

9 not scheduled to meet in 1995 in a

10 legislative session in which such legis11 lation may be considered,

12 the date specified in this subparagraph is

13 the first day of the first calendar quarter

14 beginning after the close of the first legis15 lative session of the State legislature that

16 begins on or after January 1, 1996. For

17 purposes of the previous sentence, in the

18 case of a State that has a 2-year legislative

19 session, each year of such session shall be

20 deemed to be a separate regular session of

21 the State legislature.

22 (4) FEDERAL ROLE.—If the Secretary deter23 mines that a State has failed to submit a report by

24 the deadline specified under paragraph (1) or finds

25 that the State has not implemented and provided
57

Title I, Subtitle B

•HR 5300 IH

1 adequate enforcement of the consumer protection

2 standards under such paragraph, the Secretary shall

3 notify the State and provide the State a period of

4 60 days in which to submit such report or to imple5 ment and enforce such standards under such para6 graph. If, after such 60-day period, the Secretary

7 finds that such a failure has not been corrected, the

8 Secretary shall provide for such mechanism for the

9 implementation and enforcement of such standards

10 in the State as the Secretary determines to be ap11 propriate. Such implementation and enforcement

12 shall take effect with respect to insurers, and health

13 insurance coverage (other than MedAccess coverage)

14 offered or renewed, on or after 3 months after the

15 date of the Secretary’s finding under the previous

16 sentence, and until the date the Secretary finds that

17 such a failure has been corrected.

18 SEC. 1104. USE OF MODIFIED COMMUNITY RATING, UNI19 FORM MARKETING MATERIALS, AND MIS20 CELLANEOUS CONSUMER PROTECTIONS.

21 (a) USE OF MODIFIED COMMUNITY RATING.—

22 (1) IN GENERAL.—As a standard under section

23 1103(a)(1)(B), subject to paragraph (2), the pre24 mium rate established by an insurer for coverage
58

Title I, Subtitle B

•HR 5300 IH

1 may not vary within a type of product except by the

2 following:

3 (A) AGE.—By age, based on classes of age

4 established by a State.

5 (B) GEOGRAPHIC AREA.—By geographic

6 area, based on 3-digit zip code or counties, as

7 identified by a State.

8 (C) FAMILY SIZE.—Family size, based on

9 a classification of individual, individual with one

10 or more children, married couple without chil11 dren, and married couple with children.

12 (2) DISCOUNT FOR EMPLOYER WELLNESS PRO13 GRAM.—An insurer may provide for a group dis14 count with respect to an employer that provides for

15 a wellness program for employees.

16 (b) FULL DISCLOSURE OF RATING PRACTICES.—At

17 the time an insurer offers health insurance coverage to

18 a small employer, the insurer shall fully disclose to the

19 employer rating practices for health insurance coverage,

20 including rating practices for different plan designs.

21 (c) ACTUARIAL CERTIFICATION.—Each insurer that

22 offers health insurance coverage to a small employer in

23 a State shall file annually with the State commissioner of

24 insurance a written statement by a member of the Amer25 ican Academy of Actuaries (or other individual acceptable
59

Title I, Subtitle B

•HR 5300 IH

1 to the commissioner) that, based upon an examination by

2 the individual which includes a review of the appropriate

3 records and of the actuarial assumptions of the insurer

4 and methods used by the insurer in establishing premium

5 rates for applicable health insurance coverage—

6 (1) the insurer is in compliance with the appli7 cable provisions of this section, and

8 (2) the rating methods are actuarially sound.

9 Each such insurer shall retain a copy of such statement

10 for examination at its principal place of business.

11 (d) REGISTRATION AND REPORTING.—Each insurer

12 that issues any health insurance coverage to a small em13 ployer in a State shall be registered or licensed with the

14 State commissioner of insurance and shall comply with

15 any reporting requirements of the commissioner relating

16 to such coverage.

17 (e) MARKETING MATERIAL.—Each insurer that is18 sues any health insurance coverage to a small employer

19 in a State shall file with the State those marketing mate20 rials relating to the offer and sale of health insurance cov21 erage to be used for distribution before the materials are

22 used. Such materials shall be in a uniform format speci23 fied under the standards established under section 1101.

24 Such materials (including information on plan designs of25 fered by different insurers) shall be distributed to employ-
60

Title I, Subtitle B

•HR 5300 IH

1 ers that do not contribute to health insurance coverage

2 for their employees, in order to distribute such informa3 tion to their employees as part of the offer of coverage

4 under section 1001(a).

5 SEC. 1105. MONITORING AND RESPONSE TO ADVERSE SE6 LECTION; RISK ADJUSTMENT PROGRAMS.

7 (a) MONITORING.—The Secretary of Labor shall

8 monitor the prevalence and impact of adverse risk selec9 tion in the fully insured plans made available to small em10 ployers resulting from the decision of small employers to

11 self insure. State insurance commissioners may submit to

12 the Secretary such information on such adverse risk selec13 tion as they determine to be appropriate.

14 (b) RESPONSE.—If the Secretary of Labor deter15 mines, on the basis of such information or otherwise, that,

16 due to decisions of small employers to self-insure, there

17 has been substantial or significant favorable selection with

18 respect to self-insured plans or unfavorable selection with

19 respect to fully insured plans in a State, the Secretary

20 shall develop a risk adjustment program under subsection

21 (c) that responds to such a pattern in the State. The Sec22 retary shall request the NAIC to submit to the Secretary

23 recommendations regarding the structure and operation of

24 such a program.
61

Title I, Subtitle B

•HR 5300 IH

1 (c) ESTABLISHMENT OF RISK ADJUSTMENT PRO2 GRAM.—The risk adjustment program applied in a State

3 under this subsection—

4 (1) shall be designed to be operated on a non5 governmental basis,

6 (2) shall require participation of each small em7 ployer in the State that is self-insured,

8 (3) shall require the imposition of such assess9 ments on self-insured plans offered by such employ10 ers as may be appropriate to prevent further adverse

11 or favorable selection, and

12 (4) shall provide for the distribution of such as13 sessments to the State involved for purposes of mak14 ing payments to insurers to stabilize the small group

15 insurance market.

16 The amounts of the assessments under paragraph (3) for

17 individual employers may take into account the number

18 of lives covered under the plans of such employers and

19 the area of residence of the lives covered.

20 SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCA21 TION OF RISK MECHANISMS FOR HIGH RISK

22 INDIVIDUALS IN MARKETPLACE FOR SMALL

23 BUSINESS AND MARKETPLACE FOR INDIVID24 UALS.

25 (a) ESTABLISHMENT OF STANDARDS.—
62

Title I, Subtitle B

•HR 5300 IH

1 (1) ROLE OF NAIC.—The Secretary shall re2 quest the NAIC to develop, within 9 months after

3 the date of the enactment of this Act, models for re4 insurance or allocation of risk mechanisms (each in

5 this section referred to as a ‘‘reinsurance or alloca6 tion of risk mechanism’’) for health insurance cov7 erage made available to small employers and for

8 whom an insurer is at risk of incurring high costs

9 in providing such coverage. If the NAIC develops

10 such models within such period, the Secretary shall

11 review such models to determine if they provide for

12 an effective reinsurance or allocation of risk mecha13 nism. Such review shall be completed within 30 days

14 after the date the models are developed. Unless the

15 Secretary determines within such period that such a

16 model is not an effective reinsurance or allocation of

17 risk mechanism, such remaining models shall serve

18 as the models under this section, with such amend19 ments as the Secretary deems necessary.

20 (2) CONTINGENCY.—If the NAIC does not de21 velop such models within such period or the Sec22 retary determines that all such models do not pro23 vide for an effective reinsurance or allocation of risk

24 mechanism, the Secretary shall specify, within 15
63

Title I, Subtitle B

•HR 5300 IH

1 months after the date of the enactment of this Act,

2 models to carry out this section.

3 (b) IMPLEMENTATION OF REINSURANCE OR ALLOCA4 TION OF RISK MECHANISMS.—

5 (1) BY STATES.—Each State shall establish

6 and maintain one or more reinsurance or allocation

7 of risk mechanisms that are consistent with a model

8 established under subsection (a) by not later than

9 the deadline specified in section 1103(b)(1)(B). A

10 State may establish and maintain such a mechanism

11 jointly with one or more other States.

12 (2) FEDERAL ROLE.—

13 (A) IN GENERAL.—If the Secretary deter14 mines that a State has failed to establish or

15 maintain a reinsurance or allocation of risk

16 mechanism in accordance with paragraph (1),

17 the Secretary shall establish and maintain such

18 a reinsurance or allocation of risk mechanism

19 meeting the requirements of this paragraph.

20 (B) REINSURANCE MECHANISM.—Unless

21 the Secretary determines under subparagraph

22 (C) that an allocation of risk mechanism is the

23 appropriate mechanism to use in a State under

24 this paragraph, the Secretary shall establish

25 and maintain for use under this section for
64

Title I, Subtitle B

•HR 5300 IH

1 each State an appropriate reinsurance mecha2 nism.

3 (C) ALLOCATION OF RISK MECHANISM.—If

4 the Secretary determines that, due to the na5 ture of the health coverage market in the State

6 (including a relatively small number of plans of7 fered providing health insurance coverage or a

8 relatively small number of uninsurable small

9 employers), an allocation of risk mechanism

10 would be a better mechanism than a reinsur11 ance mechanism, the Secretary shall establish

12 and maintain for use under this section for a

13 State an allocation of risk mechanism under

14 which small employers with employees who are

15 at higher risk of significantly higher claims

16 would be equitably assigned among insurers of17 fering health insurance coverage to small em18 ployers.

19 (c) CONSTRUCTION.—Nothing in this section shall be

20 construed to prohibit reinsurance or allocation of risk ar21 rangements relating to health insurance coverage, whether

22 on a State or multi-State basis, not required under this

23 section.
65

Title I, Subtitle B

•HR 5300 IH

1 PART 2—MARKETPLACE FOR INDIVIDUALS

2 SEC. 1111. APPLICATION OF SIMILAR REQUIREMENTS.

3 (a) IN GENERAL.—Except as provided in subsection

4 (c)—

5 (1) the provisions of part 1 of this subtitle shall

6 apply to insurers offering health insurance coverage

7 to individuals in the individual market (as defined in

8 subsection (b)) in the same manner as such provi9 sions apply to insurers offering health insurance cov10 erage to employers, and

11 (2) the standards established under section

12 1103 shall apply under this part in the same manner

13 as they apply under part 1.

14 For purposes of this subsection, any reference to an em15 ployee or eligible employee is deemed a reference to such

16 an individual.

17 (b) INDIVIDUAL MARKET DEFINED.—In subsection

18 (a), the term ‘‘individual market’’ means the insurance

19 market offered to individuals seeking health care coverage

20 on behalf of themselves (and their dependents) and not

21 seeking coverage on the basis of employment, membership

22 in a organization, or through another group purchasing

23 arrangement.

24 (c) EXCEPTION AND SPECIAL RULE.—
66

Title I, Subtitle B

•HR 5300 IH

1 (1) WELLNESS DISCOUNTS.—Section

2 1104(a)(2) (relating to discounts for employer

3 wellness programs) shall not apply under this part.

4 (2) SEPARATE APPLICATION OF RISK ADJUST5 MENT TO INDIVIDUAL MARKET SECTOR.—Section

6 1105 (relating to monitoring and response to ad7 verse selection; risk adjustment programs) shall be

8 applied under this part in a manner that is separate

9 from its application under part A.

10 (3) SEPARATE AGE RATING FACTOR FOR THE

11 INDIVIDUAL MARKET.—The provisions regarding age

12 under section 1104(a)(1)(A) shall be determined

13 separately for each year of age and not by the class14 es of age referred to in such section.

15 (4) CONVERSION OF PERMANENT HEALTH IN16 SURANCE POLICIES.—The provisions of section 1104

17 shall not apply in connection with a permanent pol18 icy of health insurance existing on the effective date,

19 if each individual covered under the policy is given

20 the option to convert the policy to a policy of health

21 insurance subject to this part.

22 (d) APPLICATION OF REQUIREMENTS.—Coverage of23 fered by an insurer shall not be treated as MedAccess cov24 erage under this part unless the insurer complies with the

25 requirements of part 3 of subtitle A (relating to standards
67

Title I, Subtitle B

•HR 5300 IH

1 for managed care arrangements and essential community

2 providers) in the same manner as such requirements apply

3 to a group health plan.

4 PART 3—VOLUNTARY HEALTH PURCHASING

5 ARRANGEMENTS

6 SEC. 1121. ESTABLISHMENT AND ORGANIZATION.

7 (a) IN GENERAL.—Voluntary health purchasing ar8 rangements (in this part referred to as ‘‘purchasing ar9 rangements’’) may be established in accordance with this

10 part. Each purchasing arrangement shall be chartered

11 under State law and operated as a not-for-profit corpora12 tion. An insurer may not form, underwrite, or possess a

13 majority vote of a purchasing arrangement, but may ad14 minister such an arrangement.

15 (b) BOARD OF DIRECTORS.—

16 (1) IN GENERAL.—Each purchasing arrange17 ment shall be governed by a Board of Directors.

18 Such Board shall initially be appointed under proce19 dures established by the State in which it operates.

20 Subsequently, the Board shall be elected by the

21 members of the arrangement in accordance with

22 paragraph (3). Such Board shall be composed of in23 dividuals who are small employers (or representa24 tives of small employers), eligible employees of small

25 employers (or representatives of such employees),
68

Title I, Subtitle B

•HR 5300 IH

1 and eligible individuals in the area in which the ar2 rangement operates.

3 (2) MEMBERSHIP.—A purchasing arrangement

4 shall accept all small employers, eligible employees,

5 and eligible individuals residing within the area

6 served by the arrangement as members if such em7 ployers, employees or individuals request such mem8 bership.

9 (3) VOTING.—Members of a purchasing ar10 rangement shall have voting rights consistent with

11 the rules established under the bylaws governing the

12 arrangement.

13 (c) DUTIES OF PURCHASING ARRANGEMENTS.—

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

15 each purchasing arrangement shall—

16 (A) market MedAccess coverage to mem17 bers throughout the entire area served by the

18 arrangement;

19 (B) enter into agreements with insurers of20 fering MedAccess coverage under section 1122;

21 (C) enter into agreements with small em22 ployers under section 1123;

23 (D) enroll individuals in MedAccess cov24 erage, only in accordance with section 1124;

25 and
69

Title I, Subtitle B

•HR 5300 IH

1 (E) carry out other functions provided for

2 under this part.

3 (2) LIMITATION ON ACTIVITIES.—A purchasing

4 arrangement shall not—

5 (A) perform any activity (including review,

6 approval, or enforcement) relating to payment

7 rates for providers;

8 (B) perform any activity (including certifi9 cation or enforcement) relating to compliance of

10 insurers or coverage with the requirements of

11 parts 1 or 2;

12 (C) assume financial risk in relation to any

13 such coverage; or

14 (D) perform other activities identified by

15 the State as being inconsistent with the per16 formance of its duties under paragraph (1).

17 (3) CHARACTERISTICS OF SERVICE AREA.—A

18 purchasing arrangement need not serve areas that

19 are contiguous, but the geographic boundaries of

20 such areas shall be consistent with the boundaries

21 established for geographic areas used in establishing

22 premium rates in the individual and small group

23 marketplace. If a purchasing arrangement serves a

24 part of a metropolitan statistical area the arrange25 ment shall serve the entire area.
70

Title I, Subtitle B

•HR 5300 IH

1 (d) ESTABLISHMENT NOT REQUIRED.—Nothing in

2 this section shall be construed as requiring—

3 (1) that a purchasing arrangement be estab4 lished in each area of a State in which it operates;

5 and

6 (2) that there be only one purchasing arrange7 ment established with respect to any area.

8 SEC. 1122. AGREEMENTS WITH INSURERS.

9 (a) AGREEMENTS.—

10 (1) IN GENERAL.—Except as provided in para11 graph (3), each purchasing arrangement for an area

12 shall enter into an agreement under this section with

13 each insurer that desires to make MedAccess cov14 erage available through the purchasing arrangement

15 (consistent with any procedures established by the

16 State).

17 (2) TERMINATION OF AGREEMENT.—An agree18 ment under paragraph (1) shall remain in effect for

19 a 12-month period, except that the purchasing ar20 rangement may terminate an agreement under para21 graph (1) if the insurer’s license or certification

22 under State law is terminated or for other good

23 cause shown.

24 (3) LIMITATION ON RENEWAL OF AGREE25 MENTS.—Subsequent to the 12-month period de-
71

Title I, Subtitle B

•HR 5300 IH

1 scribed in paragraph (2), a purchasing arrangement

2 may—

3 (A) refuse to enter into a subsequent

4 agreement with an insurer if the arrangement

5 determines that the enrollment or premium is

6 too low, and

7 (B) if a previous agreement with an in8 surer was terminated for good cause and the

9 arrangement determines appropriate actions

10 have not been taken to correct the problems,

11 refuse to enter into a subsequent agreement

12 with the insurer.

13 (4) NO PROHIBITION ON OFFERING OF COV14 ERAGE.—Nothing in this subsection shall be con15 strued as prohibiting an insurer that does not enter

16 into an agreement under paragraph (1) from offer17 ing health insurance coverage to small employers

18 and eligible individuals within any area, so long as

19 the premium rates charged outside such arrange20 ment are the same as those charged within the ar21 rangement (subject to reasonable differences in pre22 miums that only reflect savings in administrative

23 costs under such an arrangement).

24 (b) RECEIPT OF PREMIUMS ON BEHALF OF

25 PLANS.—
72

Title I, Subtitle B

•HR 5300 IH

1 (1) IN GENERAL.—Under an agreement under

2 this section between a purchasing arrangement and

3 an insurer—

4 (A) premiums shall be payable, and

5 (B) payment of premiums may be made by

6 individuals (or employers on their behalf) di7 rectly to the purchasing arrangement for the

8 benefit of the insurer.

9 (2) TIMING OF PAYMENT OF PREMIUMS.—Pre10 miums may be payable on a monthly basis (or, at

11 the option of an eligible employee or individual, on

12 a quarterly basis). The purchasing arrangement may

13 provide for reasonable penalties and grace periods

14 for late payment.

15 (3) QUALIFIED HEALTH PLANS RETAIN RISK OF

16 NONPAYMENT.—Nothing in this subsection shall be

17 construed as placing upon a purchasing arrangement

18 any risk associated with the failure of individuals

19 and employers to make prompt payment of pre20 miums to the purchasing arrangement (other than

21 the portion of the premium representing the pur22 chasing arrangement administrative fee under sec23 tion 1125). Each small employer and eligible individ24 ual who enrolls with an insurer through the purchas-
73

Title I, Subtitle B

•HR 5300 IH

1 ing arrangement is liable to the insurer for pre2 miums.

3 (c) FORWARDING OF PREMIUMS.—

4 (1) IN GENERAL.—If, under an agreement

5 under subsection (a), premium payments for an in6 surer are made to the purchasing arrangement, the

7 purchasing arrangement shall forward to the insurer

8 the amount of the premiums and the purchasing ar9 rangement (and not the employer or individual) shall

10 be liable for the premium payment collected under

11 such arrangement.

12 (2) PAYMENTS.—Payments shall be made by

13 the purchasing arrangement under this subsection

14 within a period of days (specified by the Secretary

15 and not to exceed 7 days) after receipt of the pre16 mium from the small employer of the eligible em17 ployee or the eligible individual, as the case may be.

18 SEC. 1123. PROVISION OF INFORMATION.

19 (a) IN GENERAL.—Each purchasing arrangement for

20 an area shall provide, upon request, to each small em21 ployer that employs individuals in the area and to each

22 eligible individual who resides in the area—

23 (1) information provided to the purchasing ar24 rangement by the State or insurers in accordance
74

Title I, Subtitle B

•HR 5300 IH

1 with rules by the State in which such arrangement

2 is located, and

3 (2) the opportunity to enter into an agreement

4 with the arrangement for the purchase of coverage

5 through the insurer.

6 (b) FORWARDING INFORMATION AND PAYROLL DE7 DUCTIONS.—As part of an agreement entered into under

8 this section, a small employer shall forward the informa9 tion and make the payroll deductions required under sec10 tion 1001.

11 SEC. 1124. ENROLLING ELIGIBLE EMPLOYEES AND ELIGI12 BLE INDIVIDUALS THROUGH A PURCHASING

13 ARRANGEMENT.

14 A purchasing arrangement shall offer, on behalf of

15 each insurer with which an agreement was entered into

16 under section 1122 and in accordance with the enrollment

17 procedures of such insurers, enrollment in health insur18 ance coverage only to—

19 (1) all eligible employees employed by small em20 ployers in the area served by the purchasing ar21 rangement; and

22 (2) all eligible individuals residing in such area.

23 SEC. 1125. RESTRICTION ON CHARGES.

24 (a) IN GENERAL.—A purchasing arrangement may

25 impose an administrative fee with respect to an eligible
75

Title I, Subtitle B

•HR 5300 IH

1 employee or eligible individual obtaining coverage through

2 the purchasing arrangement.

3 (b) FEE.—A purchasing arrangement that elects to

4 impose a fee under subsection (a) shall ensure that such

5 fee is set as a percentage of the premium for such coverage

6 and is imposed uniformly with respect to all coverage pro7 vided through the arrangement.

8 PART 4—DEFINITIONS AND MISCELLANEOUS

9 PROVISIONS

10 SEC. 1131. DEFINITIONS.

11 Except as otherwise specifically provided, for pur12 poses of this subtitle:

13 (1) DEPENDENT CHILD.—The term ‘‘dependent

14 child’’ means a child (including an adopted child)

15 who is under 19 years of age or who is a full-time

16 student and under 25 years of age.

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

18 employee’’ means, with respect to an employer, an

19 employee who—

20 (A) normally performs on a monthly basis

21 at least 10 hours of service per week for that

22 employer; or

23 (B) is reasonably expected as of the 1st

24 day of such month to be employed by the em25 ployer for a period of 120 consecutive days dur-
76

Title I, Subtitle B

•HR 5300 IH

1 ing any 365-day period that includes such 1st

2 day.

3 (3) EMPLOYER.—The term ‘‘employer’’ shall

4 have the meaning applicable under section 3(5) of

5 the Employee Retirement Income Security Act of

6 1974.

7 (4) HEALTH INSURANCE COVERAGE.—

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

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

10 coverage’’ means any hospital or medical service

11 policy or certificate, hospital or medical service

12 plan contract, or health maintenance organiza13 tion group contract offered by an insurer.

14 (B) EXCEPTION.—Such term does not in15 clude any of the following:

16 (i) Coverage only for accident, dental,

17 vision, disability income, or long-term care

18 insurance, or any combination thereof.

19 (ii) Medicare supplemental health in20 surance.

21 (iii) Coverage issued as a supplement

22 to liability insurance.

23 (iv) Liability insurance, including gen24 eral liability insurance and automobile li25 ability insurance.
77

Title I, Subtitle B

•HR 5300 IH

1 (v) Worker’s compensation or similar

2 insurance.

3 (vi) Automobile medical-payment in4 surance.

5 (vii) Coverage for a specified disease

6 or illness.

7 (viii) A hospital or fixed indemnity

8 policy.

9 (5) NETWORK PLAN.—The term ‘‘network

10 plan’’ includes, as defined in standards established

11 under section 1103, an organization that provides

12 health insurance coverage which meets specified

13 standards and under which health services are of14 fered to be provided on an at-risk basis primarily

15 through a defined set of providers.

16 (6) INSURER.—The term ‘‘insurer’’ means a li17 censed insurance company, an entity offering pre18 paid hospital or medical services, and a health main19 tenance organization offering such services to an

20 employer, and includes a similar organization regu21 lated under State law for solvency.

22 (7) NAIC.—The term ‘‘NAIC’’ means the Na23 tional Association of Insurance Commissioners.

24 (8) SECRETARY.—The term ‘‘Secretary’’ means

25 the Secretary of Health and Human Services.
78

Title I, Subtitle B

•HR 5300 IH

1 (9) SMALL EMPLOYER.—The term ‘‘small em2 ployer’’ means, with respect to a calendar year, an

3 employer that normally employs more than 1 but

4 less than 51 eligible employees on a typical business

5 day. For the purposes of this paragraph, the term

6 ‘‘employee’’ includes a self-employed individual. For

7 purposes of determining if an employer is a small

8 employer, rules similar to the rules of subsection (b)

9 and (c) of section 414 of the Internal Revenue Code

10 of 1986 shall apply.

11 (10) STATE.—The term ‘‘State’’ means the 50

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

13 Virgin Islands, Guam, and American Samoa.

14 (11) STATE COMMISSIONER OF INSURANCE.—

15 The term ‘‘State commissioner of insurance’’ in16 cludes a State superintendent of insurance.

17 SEC. 1132. ENFORCEMENT.

18 For enforcement of requirements of this subtitle, see

19 section 1031.

20 SEC. 1133. PROHIBITION OF IMPROPER INCENTIVES.

21 (a) LIMITATION ON FINANCIAL INCENTIVES.—No in22 surer that offers health insurance coverage may vary the

23 commission or financial or other remuneration to a person

24 based on the claims experience or health status of individ25 uals enrolled by or through the person.
79

Title I, Subtitle B

•HR 5300 IH

1 (b) PROHIBITION OF TIE-IN ARRANGEMENTS.—No

2 insurer that offers health insurance coverage may require

3 the purchase of any other insurance or product as a condi4 tion for the purchase of such coverage.

5 SEC. 1134. ANNUAL REPORTS.

6 (a) IN GENERAL.—The Secretary shall submit to

7 Congress an annual report on the implementation of this

8 subtitle and the need for additional reforms to assure and

9 expand coverage.

10 (b) INFORMATION REGARDING IMPACT OF RE11 FORMS.—Each annual report shall include information

12 concerning at least the following:

13 (1) Implementation and enforcement of the ap14 plicable MedAccess standards and consumer protec15 tion standards under this subtitle by the States and

16 by the Secretary.

17 (2) An evaluation of the impact of the reforms

18 under this subtitle on the availability of affordable

19 health coverage for individuals and for small employ20 ers that purchase group health coverage and for

21 their employees, and, in particular, the impact of—

22 (A) guaranteed availability of health cov23 erage,

24 (B) limitations of restrictions from cov25 erage of preexisting conditions,
80

Title I, Subtitle B

•HR 5300 IH

1 (C) requirement for continuity of coverage,

2 (D) risk-management mechanisms for

3 health coverage,

4 (E) limits on premium variations, and

5 (F) preemption of State benefit mandates.

6 In performing such evaluation, the Secretary shall

7 seek to discount the effect of the insurance cycle on

8 health insurance premiums.

9 (3) An assessment of the implications of the re10 forms on adverse selection among health insurance

11 plans and the distribution of risk among health in12 surance plans.

13 (c) INFORMATION REGARDING COVERAGE OF THE

14 UNINSURED.—The report submitted under this section 5

15 years after the date of the enactment of this Act also shall

16 include findings and recommendations regarding each of

17 the following:

18 (1) Characteristics of the insured and unin19 sured, including demographic characteristics, work20 ing status, health status, and geographic distribu21 tion.

22 (2) Steps which should be taken to improve ac23 cess to health care and increase health insurance

24 coverage of the chronically uninsured.
81

Title I, Subtitle B

•HR 5300 IH

1 (3) Effectiveness of efforts to measure and im2 prove health care outcomes in the public and private

3 sectors.

4 (4) Effectiveness of initiatives targeted to im5 proving access of underserved urban and rural popu6 lations to health care services.

7 (5) Effectiveness of new Federal subsidy pro8 grams, including recommendations to restrain future

9 growth of such programs.

10 SEC. 1135. RESEARCH AND DEMONSTRATION PROJECTS;

11 DEVELOPMENT OF A HEALTH RISK POOLING

12 MODEL.

13 (a) RESEARCH AND DEMONSTRATIONS.—The Sec14 retary is authorized, directly, by contract, and through

15 grants and cooperative agreements within the Department

16 of Health and Human Services and outside the Depart17 ment—

18 (1) to conduct research on the impact of this

19 subtitle on the availability of affordable health cov20 erage for employees and dependents in the small em21 ployers group and individual health care coverage

22 market and other topics described in section

23 1134(b), and

24 (2) to conduct demonstration projects relating

25 to such topics.
82

Title I, Subtitle B

•HR 5300 IH

1 (b) DEVELOPMENT OF METHODS OF MEASURING

2 RELATIVE HEALTH RISK.—

3 (1) IN GENERAL.—The Secretary shall develop

4 methods for measuring, in terms of the expected

5 costs of providing benefits under health insurance

6 plans and, in particular, MedAccess plans, the rel7 ative health risks of eligible individuals.

8 (2) METHODOLOGY.—The methods—

9 (A) shall rely on diagnosis or other health10 related information that is predictive of individ11 ual health care needs,

12 (B) may rely upon information routinely

13 collected in the process of making payments

14 under group health plans, and

15 (C) may provide for such random, sample

16 audits of records as may be necessary to verify

17 the accuracy of measurements.

18 (c) DEVELOPMENT OF A HEALTH RISK POOLING

19 MODEL.—

20 (1) IN GENERAL.—The Secretary shall develop

21 a model, based on the methods of measuring risks

22 under subsection (b), for equitably distributing

23 health risks among insurers and group health plans

24 in the small employer and individual health care cov25 erage market.
83

Title I, Subtitle B

•HR 5300 IH

1 (2) REDISTRIBUTION OF RISK.—Under such

2 model, insurers and group health plans with below

3 average health risks would be required to contribute

4 to a common fund for payment to insurers and

5 group health plans with above average health risks,

6 each in relation to the degree of their favorable or

7 adverse risk selection.

8 (3) INCENTIVES.—Such model shall include in9 centives to encourage continuous coverage of individ10 uals and eligible individuals and small employers.

11 (d) CONSULTATION.—The methods and model under

12 this section shall be developed in consultation with the

13 NAIC.

14 (e) REPORT.—By not later than January 1, 1996,

15 the Secretary shall submit to Congress a report on the

16 methods and model developed under this section (as well

17 as on research and demonstration projects conducted

18 under subsection (a)). The Secretary shall include in the

19 report such recommendations respecting the application of

20 the model to insurers and group health plans (and, in par21 ticular, to MedAccess plans) under this subtitle as the Sec22 retary deems appropriate.

23 (f) AUTHORIZATION OF APPROPRIATIONS.—There

24 are authorized to be appropriated to carry out this section,

25 $5,000,000 in each of fiscal years 1995 through 1999.
84

Title I, Subtitle C

•HR 5300 IH

1 Subtitle C—Preemption

2 PART 1—SCOPE OF STATE REGULATION

3 SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES

4 FOR GROUP HEALTH PLANS.

5 In the case of a group health plan, no provision of

6 State or local law shall apply that requires the coverage

7 of one or more specific benefits, services, or categories of

8 health care, or services of any class or type of provider

9 of health care.

10 SEC. 1202. PROHIBITION OF PROVISIONS PROHIBITING EM11 PLOYER GROUPS FROM PURCHASING

12 HEALTH INSURANCE.

13 No provision of State or local law shall apply that

14 prohibits 2 or more employers from obtaining coverage

15 under a multiple employer welfare arrangement under

16 which all coverage consists of medical care described in

17 section 607(1) of the Employee Retirement Income Secu18 rity Act of 1974 and is fully insured.

19 SEC. 1203. PREEMPTION OF STATE ANTI-MANAGED CARE

20 LAWS.

21 (a) PREEMPTION OF STATE LAW PROVISIONS.—Sub22 ject to subsection (c), the following provisions of State law

23 are preempted and may not be enforced:

24 (1) RESTRICTIONS ON REIMBURSEMENT RATES

25 OR SELECTIVE CONTRACTING.—Any law that re-
85

Title I, Subtitle C

•HR 5300 IH

1 stricts the ability of a group health plan or insurer

2 to negotiate reimbursement rates with providers or

3 to contract selectively with one provider or a limited

4 number of providers.

5 (2) RESTRICTIONS ON DIFFERENTIAL FINAN6 CIAL INCENTIVES.—Any law that limits the financial

7 incentives that a group health plan or insurer may

8 require a beneficiary to pay when a non-plan pro9 vider is used on a non-emergency basis.

10 (3) RESTRICTIONS ON UTILIZATION REVIEW

11 METHODS.—Any law that—

12 (A) prohibits utilization review of any or

13 all treatments and conditions,

14 (B) requires that such review be made (i)

15 by a resident of the State in which the treat16 ment is to be offered or by an individual li17 censed in such State, or (ii) by a physician in

18 any particular specialty or with any board cer19 tified specialty of the same medical specialty as

20 the provider whose services are being reviewed,

21 (C) requires the use of specified standards

22 of health care practice in such reviews or re23 quires the disclosure of the specific criteria used

24 in such reviews,
86

Title I, Subtitle C

•HR 5300 IH

1 (D) requires payments to providers for the

2 expenses of responding to utilization review re3 quests,

4 (E) imposes liability for delays in perform5 ing such review, or

6 (F) requires standards in addition to or in7 consistent with standards established under sec8 tion 1022(b).

9 Nothing in subparagraph (B) shall be construed as

10 prohibiting a State from (i) requiring a licensed phy11 sician or other health care professional be available

12 at some time in the review or appeal process, or (ii)

13 requiring that any decision in an appeal from such

14 a review be made by a licensed physician.

15 (b) GAO STUDY.—

16 (1) IN GENERAL.—The Comptroller General

17 shall conduct a study of the benefits and cost effec18 tiveness of the use of managed care in the delivery

19 of health services.

20 (2) REPORT.—By not later than 4 years after

21 the date of the enactment of this Act, the Comptrol22 ler General shall submit a report to Congress on the

23 study conducted under paragraph (1) and shall in24 clude in the report such recommendations (including
87

Title I, Subtitle C

•HR 5300 IH

1 whether the provisions of subsection (a) should be

2 extended) as may be appropriate.

3 (c) SUNSET.—Unless otherwise provided, subsection

4 (a) shall not apply 5 years after the date of the enactment

5 of this Act.

6 SEC. 1204. DEFINITIONS.

7 For purposes of this part, the terms ‘‘dependent’’,

8 ‘‘employee’’, ‘‘employer’’, ‘‘fully insured’’, ‘‘group health

9 plan’’, ‘‘health insurance plan’’, ‘‘multiple employer wel10 fare arrangement’’, and ‘‘State’’ have the meanings given

11 such terms in section 1023(a).

12 PART 2—MULTIPLE EMPLOYER HEALTH

13 BENEFITS PROTECTIONS

14 SEC. 1211. LIMITED EXEMPTION FROM CERTAIN RESTRIC15 TIONS ON ERISA PREEMPTION OF STATE LAW

16 FOR HEALTH PLANS MAINTAINED BY MUL17 TIPLE EMPLOYERS SUBJECT TO CERTAIN

18 FEDERAL STANDARDS.

19 (a) IN GENERAL.—Subtitle B of title I of the Em20 ployee Retirement Income Security Act of 1974 is amend21 ed by adding at the end the following new part:

22 ‘‘Part 7—Multiple Employer Health Plans

23 ‘‘SEC. 701. DEFINITIONS.

24 ‘‘For purposes of this part—
88

Title I, Subtitle C

•HR 5300 IH

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

2 insurance company, insurance service, or insurance

3 organization, licensed to engage in the business of

4 insurance by a State.

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

6 ‘participating employer’ means, in connection with a

7 multiple employer welfare arrangement, any em8 ployer if any of its employees, or any of the depend9 ents of its employees, are or were covered under

10 such arrangement in connection with the employ11 ment of the employees.

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

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

14 a multiple employer welfare arrangement, a contract

15 under which an insurer provides for payment with

16 respect to claims under the arrangement, relating to

17 participants or beneficiaries individually or other18 wise, in excess of an amount or amounts specified in

19 such contract.

20 ‘‘(4) QUALIFIED ACTUARY.—The term ‘quali21 fied actuary’ means an individual who is a member

22 of the American Academy of Actuaries or meets

23 such reasonable standards and qualifications as the

24 Secretary may provide by regulation.
89

Title I, Subtitle C

•HR 5300 IH

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

2 connection with a multiple employer welfare arrange3 ment, the association or other entity which estab4 lishes or maintains the arrangement.

5 ‘‘(6) STATE INSURANCE COMMISSIONER.—The

6 term ‘State insurance commissioner’ means the in7 surance commissioner (or similar official) of a State.

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

9 State’ means, in connection with a multiple employer

10 welfare arrangement, the State in which, according

11 to the application for an exemption under this part,

12 most individuals to be covered under the arrange13 ment are located, except that, in any case in which

14 information contained in the latest annual report of

15 the arrangement filed under this part indicates that

16 most individuals covered under the arrangement are

17 located in a different State, such term means such

18 different State.

19 ‘‘(8) FULLY INSURED.—Coverage under a mul20 tiple employer welfare arrangement is ‘fully insured’

21 if one or more insurers, health maintenance organi22 zations, similar organizations regulated under State

23 law for solvency, or any combination thereof are lia24 ble under one or more insurance policies or contracts

25 for all benefits under the arrangement (irrespective
90

Title I, Subtitle C

•HR 5300 IH

1 of any recourse they may have against other par2 ties).

3 ‘‘(9) EXEMPTED MULTIPLE EMPLOYER HEALTH

4 PLAN.—The term ‘exempted multiple employer

5 health plan’ means a multiple employer welfare ar6 rangement treated as an employee welfare benefit

7 plan by reason of an exemption under this part.

8 ‘‘(10) COMMUNITY HEALTH NETWORK.—The

9 term ‘community health network’ has the meaning

10 given such term in section 1421 of the Affordable

11 Health Care Now Act of 1994.

12 ‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER HEALTH

13 PLANS RELIEVED OF CERTAIN RESTRIC14 TIONS ON PREEMPTION OF STATE LAW AND

15 TREATED AS EMPLOYEE WELFARE BENEFIT

16 PLANS.

17 ‘‘(a) IN GENERAL.—Subject to subsection (b), a mul18 tiple employer welfare arrangement under which coverage

19 is not fully insured and with respect to which there is in

20 effect an exemption granted by the Secretary under this

21 part (or with respect to which there is pending a complete

22 application for such an exemption and the Secretary deter23 mines that provisional protection under this part is appro24 priate)—
91

Title I, Subtitle C

•HR 5300 IH

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

2 and the preceding parts of this subtitle as an em3 ployee welfare benefit plan, irrespective of whether

4 such arrangement is an employee welfare benefit

5 plan, and

6 ‘‘(2) shall be exempt from section

7 514(b)(6)(A)(ii).

8 ‘‘(b) BENEFITS MUST CONSIST OF MEDICAL

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

10 welfare arrangement only if the benefits provided there11 under consist solely of medical care described in section

12 607(1) (disregarding such incidental benefits as the

13 Secretary shall specify by regulation).

14 ‘‘(c) RESTRICTION ON COMMENCEMENT OF NEW AR15 RANGEMENTS.—A multiple employer welfare arrangement

16 providing benefits which consist of medical care described

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

18 of January 1, 1995, may commence operations only if an

19 exemption granted to the arrangement under this part is

20 in effect (or there is pending with respect to the arrange21 ment a complete application for such an exemption and

22 the Secretary determines that provisional protection under

23 this part is appropriate).
92

Title I, Subtitle C

•HR 5300 IH

1 ‘‘SEC. 703. EXEMPTION PROCEDURE.

2 ‘‘(a) IN GENERAL.—The Secretary shall grant an ex3 emption described in section 702(a) to a multiple employer

4 welfare arrangement if—

5 ‘‘(1) an application for such exemption with re6 spect to such arrangement, identified individually or

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

8 the Secretary in accordance with this part,

9 ‘‘(2) such application demonstrates compliance

10 with the requirements of section 704 with respect to

11 such arrangement, and

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

13 is—

14 ‘‘(A) administratively feasible,

15 ‘‘(B) not adverse to the interests of the in16 dividuals covered under the arrangement, and

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

18 of the individuals covered under the arrange19 ment.

20 ‘‘(b) NOTICE AND HEARING.—Before granting an ex21 emption under this section, the Secretary shall publish no22 tice in the Federal Register of the pendency of the exemp23 tion, shall require that adequate notice be given to inter24 ested persons, including the State insurance commissioner

25 of each State in which covered individuals under the ar26 rangement are, or are expected to be, located, and shall
93

Title I, Subtitle C

•HR 5300 IH

1 afford interested persons opportunity to present views.

2 The Secretary may not grant an exemption under this sec3 tion unless the Secretary affords an opportunity for a

4 hearing and makes a determination on the record with re5 spect to the findings required under subsection (a)(3). The

6 Secretary shall, to the maximum extent practicable, make

7 a final determination with respect to any application filed

8 under this section in the case of a newly established ar9 rangement within 90 days after the date which the Sec10 retary determines is the date on which such application

11 is filed in complete form.

12 ‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.

13 ‘‘(a) APPLICATION FOR EXEMPTION.—

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

15 granted by the Secretary under this part only on the

16 basis of an application filed with the Secretary in

17 such form and manner as shall be prescribed in reg18 ulations of the Secretary. Any such application shall

19 be signed by the operating committee and the spon20 sor of the arrangement.

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

22 to the Secretary at the time of filing an application

23 under this section a filing fee in the amount of

24 $5,000, which shall be available, to the extent pro25 vided in appropriation Acts, to the Secretary for the
94

Title I, Subtitle C

•HR 5300 IH

1 sole purpose of administering the exemption proce2 dures under this part.

3 ‘‘(3) INFORMATION INCLUDED.—An application

4 filed under this section shall include, in a manner

5 and form prescribed in regulations of the Secretary,

6 at least the following information:

7 ‘‘(A) IDENTIFYING INFORMATION.—The

8 names and addresses of—

9 ‘‘(i) the sponsor, and

10 ‘‘(ii) the members of the operating

11 committee of the arrangement.

12 ‘‘(B) STATES IN WHICH ARRANGEMENT IN13 TENDS TO DO BUSINESS.—The States in which

14 individuals covered under the arrangement are

15 to be located and the number of such individ16 uals expected to be located in each such State.

17 ‘‘(C) BONDING REQUIREMENTS.—Evidence

18 provided by the operating committee that the

19 bonding requirements of section 412 will be met

20 as of the date of the application.

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

22 documents governing the arrangement (includ23 ing any bylaws and trust agreements), the sum24 mary plan description, and other material de25 scribing the benefits and coverage that will be
95

Title I, Subtitle C

•HR 5300 IH

1 provided to individuals covered under the ar2 rangement.

3 ‘‘(E) AGREEMENTS WITH SERVICE PROVID4 ERS.—A copy of any agreements between the

5 arrangement and contract administrators and

6 other service providers.

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

8 forth information determined as of a date with9 in the 120-day period ending with the date of

10 the application, including the following:

11 ‘‘(i) RESERVES.—A statement, cer12 tified by the operating committee of the ar13 rangement, and a statement of actuarial

14 opinion, signed by a qualified actuary, that

15 all applicable requirements of section 707

16 are or will be met in accordance with regu17 lations which the Secretary shall prescribe.

18 ‘‘(ii) ADEQUACY OF CONTRIBUTION

19 RATES.—A statement of actuarial opinion,

20 signed by a qualified actuary, which sets

21 forth a description of the extent to which

22 contribution rates are adequate to provide

23 for the payment of all obligations and the

24 maintenance of required reserves under the

25 arrangement for the 12-month period be-
96

Title I, Subtitle C

•HR 5300 IH

1 ginning with such date within such 120-

2 day period, taking into account the ex3 pected coverage and experience of the ar4 rangement. If the contribution rates are

5 not fully adequate, the statement of actu6 arial opinion shall indicate the extent to

7 which the rates are inadequate and the

8 changes needed to ensure adequacy.

9 ‘‘(iii) CURRENT AND PROJECTED

10 VALUE OF ASSETS AND LIABILITIES.—A

11 statement of actuarial opinion signed by a

12 qualified actuary, which sets forth the cur13 rent value of the assets and liabilities accu14 mulated under the arrangement and a pro15 jection of the assets, liabilities, income,

16 and expenses of the arrangement for the

17 12-month period referred to in clause (ii).

18 The income statement shall identify sepa19 rately the arrangement’s administrative ex20 penses and claims.

21 ‘‘(iv) COSTS OF COVERAGE TO BE

22 CHARGED AND OTHER EXPENSES.—A

23 statement of the costs of coverage to be

24 charged, including an itemization of

25 amounts for administration, reserves, and
97

Title I, Subtitle C

•HR 5300 IH

1 other expenses associated with the oper2 ation of the arrangement.

3 ‘‘(v) OTHER INFORMATION.—Any

4 other information which may be prescribed

5 in regulations of the Secretary as nec6 essary to carry out the purposes of this

7 part.

8 ‘‘(b) OTHER REQUIREMENTS.—A complete applica9 tion for an exemption under this part shall include infor10 mation which the Secretary determines to be complete and

11 accurate and sufficient to demonstrate that the following

12 requirements are met with respect to the arrangement:

13 ‘‘(1) SPONSOR.—

14 ‘‘(A) IN GENERAL.—Except in a case to

15 which subparagraph (B) or (C) applies, the

16 sponsor is, and has been (together with its im17 mediate predecessor, if any) for a continuous

18 period of not less than 3 years before the date

19 of the application, organized and maintained in

20 good faith, with a constitution and bylaws spe21 cifically stating its purpose, as a trade associa22 tion, an industry association, a professional as23 sociation, or a chamber of commerce (or similar

24 business group), for substantial purposes other

25 than that of obtaining or providing medical care
98

Title I, Subtitle C

•HR 5300 IH

1 described in section 607(1), and the applicant

2 demonstrates to the satisfaction of the Sec3 retary that the sponsor is established as a per4 manent entity which receives the active support

5 of its members.

6 ‘‘(B) SPECIAL RULE FOR COMMUNITY

7 HEALTH NETWORKS.—In the case of an ar8 rangement that is a community health network

9 (as defined in section 701(11)), the sponsor is

10 the operating committee of the network.

11 ‘‘(C) SPECIAL RULE FOR EMPLOYERS IN

12 THE SAME TRADE OR BUSINESS.—In the case

13 of an arrangement under which all participating

14 employers are engaged in a common type of

15 trade or business, the sponsor is the operating

16 committee of the arrangement.

17 ‘‘(2) OPERATING COMMITTEE.—

18 ‘‘(A) IN GENERAL.—Except as provided in

19 subparagraph (B), the arrangement is operated,

20 pursuant to a trust agreement, by an operating

21 committee which has complete fiscal control

22 over the arrangement and which is responsible

23 for all operations of the arrangement, and the

24 operating committee has in effect rules of oper25 ation and financial controls, based on a 3-year
99

Title I, Subtitle C

•HR 5300 IH

1 plan of operation, adequate to carry out the

2 terms of the arrangement and to meet all re3 quirements of this title applicable to the ar4 rangement. The members of the committee are

5 individuals selected from individuals who are

6 the owners, officers, directors, or employees of

7 the participating employers or who are partners

8 in the participating employers and actively par9 ticipate in the business. No such member is an

10 owner, officer, director, or employee of, or part11 ner in, a contract administrator or other service

12 provider to the arrangement, except that offi13 cers or employees of a sponsor which is a serv14 ice provider (other than a contract adminis15 trator) to the arrangement may be members of

16 the committee if they constitute not more than

17 25 percent of the membership of the committee

18 and they do not provide services to the arrange19 ment other than on behalf of the sponsor. The

20 committee has sole authority to approve appli21 cations for participation in the arrangement

22 and to contract with a service provider to ad23 minister the day-to-day affairs of the arrange24 ment.
100

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(B) SPECIAL RULE FOR COMMUNITY

2 HEALTH NETWORKS.—In the case of an ar3 rangement that is a community health network

4 (as defined in section 701(11)), the operating

5 committee is the board of the entity that is the

6 network.

7 ‘‘(3) CONTENTS OF GOVERNING INSTRU8 MENTS.—The instruments governing the arrange9 ment include a written instrument, meeting the re10 quirements of an instrument required under section

11 1212(a)(1), which—

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

13 the named fiduciary required for plans under

14 section 1212(a)(1) and serves in the capacity of

15 a plan administrator (referred to in section

16 3(16)(A)),

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

18 as plan sponsor (referred to in section

19 3(16)(B)),

20 ‘‘(C) incorporates the requirements of sec21 tion 707, and

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

23 granting of an exemption under this part—

24 ‘‘(i) all participating employers must

25 be members or affiliated members of the
101

Title I, Subtitle C

•HR 5300 IH

1 sponsor, except that, in the case of a spon2 sor which is a professional association or

3 other individual-based association, if at

4 least one of the officers, directors, or em5 ployees of an employer, or at least one of

6 the individuals who are partners in an em7 ployer and who actively participates in the

8 business, is a member or affiliated member

9 of the sponsor, participating employers

10 may also include such employer, and

11 ‘‘(ii) all individuals thereafter com12 mencing coverage under the arrangement

13 must be—

14 ‘‘(I) active or retired owners, offi15 cers, directors, or employees of, or

16 partners in, participating employers,

17 or

18 ‘‘(II) the beneficiaries of individ19 uals described in subclause (I).

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

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

22 adequate.

23 ‘‘(5) REGULATORY REQUIREMENTS.—Such

24 other requirements as the Secretary may prescribe
102

Title I, Subtitle C

•HR 5300 IH

1 by regulation as necessary to carry out the purposes

2 of this part.

3 ‘‘(c) TREATMENT OF PARTY SEEKING EXEMPTION

4 WHERE PARTY IS SUBJECT TO DISQUALIFICATION.—

5 ‘‘(1) IN GENERAL.—In the case of any applica6 tion for an exemption under this part with respect

7 to a multiple employer welfare arrangement, if the

8 Secretary determines that the sponsor of the ar9 rangement or any other person associated with the

10 arrangement is subject to disqualification under

11 paragraph (2), the Secretary may deny the exemp12 tion with respect to such arrangement.

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

14 to disqualification under this paragraph if such per15 son—

16 ‘‘(A) has intentionally made a material

17 misstatement in the application for exemption;

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

19 an exemption under this part through misrepre20 sentation or fraud;

21 ‘‘(C) has misappropriated or converted to

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

23 money held under a plan or any multiple

24 employer welfare arrangement;
103

Title I, Subtitle C

•HR 5300 IH

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

2 if the arrangement were a plan) from serving in

3 any capacity in connection with the arrange4 ment under section 411,

5 ‘‘(E) has failed to appear without reason6 able cause or excuse in response to a subpoena,

7 examination, warrant, or any other order law8 fully issued by the Secretary compelling such

9 response,

10 ‘‘(F) has previously been subject to a de11 termination under this part resulting in the de12 nial, suspension, or revocation of an exemption

13 under this part on similar grounds, or

14 ‘‘(G) has otherwise violated any provision

15 of this title with respect to a matter which the

16 Secretary determines of sufficient consequence

17 to merit disqualification for purposes of this

18 part.

19 ‘‘(d) FRANCHISE NETWORKS.—In the case of a mul20 tiple employer welfare arrangement established and main21 tained by a franchisor for a franchise network consisting

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

23 sponsor referred to in the preceding provisions of this sec24 tion, such network shall be treated as an association re25 ferred to in such provisions, and each franchisee shall be
104

Title I, Subtitle C

•HR 5300 IH

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

2 referred to in such provisions, if all participating employ3 ers are such franchisees and the requirements of sub4 section (b)(1) with respect to a sponsor are met with

5 respect to the network.

6 ‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE7 MENTS.—In applying the preceding provisions of this sec8 tion in the case of a multiple employer welfare arrange9 ment which would be described in section 3(40)(A)(i) but

10 for the failure to meet any requirement of section

11 3(40)(C)—

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

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

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

15 ‘‘(2) the joint board of trustees shall be consid16 ered the operating committee of the arrangement.

17 ‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN18 GLE EMPLOYER REQUIREMENT.—

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

20 majority of the employees covered under a multiple

21 employer welfare arrangement are employees of a

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

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

24 covered under the arrangement are employed by em-
105

Title I, Subtitle C

•HR 5300 IH

1 ployers who are related to such single employer, sub2 section (b)(3)(D) shall be disregarded.

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

4 paragraph (1), employers are ‘related’ if there is

5 among all such employers a common ownership in6 terest or a substantial commonality of business oper7 ations based on common suppliers or customers.

8 ‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO

9 EXEMPTED MULTIPLE EMPLOYER HEALTH

10 PLANS.

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

12 of any exempted multiple employer health plan, descrip13 tions of material changes in any information which was

14 required to be submitted with the application for the ex15 emption granted under this part shall be filed in such form

16 and manner as shall be prescribed in regulations of the

17 Secretary. The Secretary may require by regulation prior

18 notice of material changes with respect to specified mat19 ters which might serve as the basis for suspension or rev20 ocation of the exemption.

21 ‘‘(b) REPORTING REQUIREMENTS.—Under regula22 tions of the Secretary, the requirements of sections 102,

23 103, and 104 shall apply with respect to any multiple em24 ployer welfare arrangement which is or has been an ex25 empted multiple employer health plan in the same manner
106

Title I, Subtitle C

•HR 5300 IH

1 and to the same extent as such requirements apply to em2 ployee welfare benefit plans, irrespective of whether such

3 exemption continues in effect. The annual report required

4 under section 103 for any plan year in the case of any

5 such multiple employer welfare arrangement shall also in6 clude information described in section 704(a)(3)(F) with

7 respect to the plan year and, notwithstanding section

8 104(a)(1)(A), shall be filed not later than 90 days after

9 the close of the plan year.

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

11 operating committee of each multiple employer welfare ar12 rangement which is or has been an exempted multiple em13 ployer health plan shall engage, on behalf of all covered

14 individuals, a qualified actuary who shall be responsible

15 for the preparation of the materials comprising informa16 tion necessary to be submitted by a qualified actuary

17 under this part. The qualified actuary shall utilize such

18 assumptions and techniques as are necessary to enable

19 such actuary to form an opinion as to whether the con20 tents of the matters reported under this part—

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

22 the experience of the arrangement and to reasonable

23 expectations, and

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

25 anticipated experience under the arrangement.
107

Title I, Subtitle C

•HR 5300 IH

1 The opinion by the qualified actuary shall be made with

2 respect to, and shall be made a part of, the annual report.

3 ‘‘(d) FILING NOTICE OF EXEMPTION WITH

4 STATES.—An exemption granted to a multiple employer

5 welfare arrangement under this part shall not be effective

6 unless written notice of such exemption is filed with the

7 State insurance commissioner of each State in which at

8 least 5 percent of the individuals covered under the ar9 rangement are located. For purposes of this paragraph,

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

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

12 in which such individual is employed. The Secretary may

13 by regulation provide in specified cases for the application

14 of the preceding sentence with lesser percentages in lieu

15 of such 5 percent amount.

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

17 ARRANGEMENTS PROVIDING MEDICAL CARE.

18 ‘‘(a) IN GENERAL.—A multiple employer welfare ar19 rangement providing benefits consisting of medical care

20 described in section 607(1) shall issue to each participat21 ing employer—

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

23 plan description required of plans under part 1,

24 ‘‘(2) information describing the contribution

25 rates applicable to participating employers, and
108

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(3) a statement indicating—

2 ‘‘(A) that the arrangement is not a li3 censed insurer under the laws of any State,

4 ‘‘(B) whether coverage under the arrange5 ment is fully insured, and

6 ‘‘(C) if coverage under the arrangement if

7 not fully insured, (i) whether the arrangement

8 is (or has ceased to be) an exempted multiple

9 employer health plan, and (ii) if such an ar10 rangement is an exempted multiple employer

11 health plan, that such arrangement is treated

12 as an employee welfare benefit plan under this

13 title.

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

15 shall be issued to employers within such reasonable period

16 of time before becoming participating employers as may

17 be prescribed in regulations of the Secretary.

18 ‘‘SEC. 707. MAINTENANCE OF RESERVES.

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

20 arrangement which is or has been an exempted multiple

21 employer health plan and under which coverage is not fully

22 insured shall establish and maintain reserves, consisting

23 of—

24 ‘‘(1) a reserve for unearned contributions,
109

Title I, Subtitle C

•HR 5300 IH

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

2 and not yet paid and claims incurred but not yet re3 ported, and for expected administrative costs with

4 respect to such claims, and

5 ‘‘(3) a reserve, in an amount recommended by

6 the qualified actuary, for any other obligations of

7 the arrangement.

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

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

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

11 expected incurred claims and expenses for the plan year.

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

13 amounts of reserves required under this section in connec14 tion with any multiple employer welfare arrangement, the

15 qualified actuary shall include a margin for error and

16 other fluctuations taking into account the specific

17 circumstances of such arrangement.

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

19 may provide such additional requirements relating to re20 serves and excess/stop loss coverage as the Secretary con21 siders appropriate. Such requirements may be provided,

22 by regulation or otherwise, with respect to any arrange23 ment or any class of arrangements.

24 ‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV25 ERAGE.—The Secretary may provide for adjustments to
110

Title I, Subtitle C

•HR 5300 IH

1 the levels of reserves otherwise required under subsections

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

3 arrangements to take into account excess/stop loss cov4 erage provided with respect to such arrangement or ar5 rangements.

6 ‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The

7 Secretary may permit an arrangement (including a com8 munity health network) to substitute, for all or part of

9 the reserves required under subsection (a), such security,

10 guarantee, or other financial arrangement as the Sec11 retary determines to be adequate to enable the arrange12 ment to fully meet all its financial obligations on a timely

13 basis.

14 ‘‘SEC. 708. CORRECTIVE ACTIONS.

15 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE16 SERVES.—A multiple employer welfare arrangement with

17 respect to which there is or has been in effect an exemp18 tion granted under this part shall continue to meet the

19 requirements of section 707, irrespective of whether such

20 exemption continues in effect. The operating committee of

21 such arrangement shall determine semiannually whether

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

23 which the committee determines that there is reason to

24 believe that there is or will be a failure to meet such re25 quirements, or the Secretary makes such a determination
111

Title I, Subtitle C

•HR 5300 IH

1 and so notifies the committee, the committee shall imme2 diately notify the qualified actuary engaged by the ar3 rangement, and such actuary shall, not later than the end

4 of the next following month, make such recommendations

5 to the committee for corrective action as the actuary deter6 mines necessary to ensure compliance with section 707.

7 Not later than 10 days after receiving from the actuary

8 recommendations for corrective actions, the committee

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

10 the Secretary may prescribe by regulation) of such rec11 ommendations of the actuary for corrective action, to12 gether with a description of the actions (if any) that the

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

14 recommendations. The committee shall thereafter report

15 to the Secretary, in such form and frequency as the Sec16 retary may specify to the committee, regarding corrective

17 action taken by the committee until the requirements of

18 section 707 are met.

19 ‘‘(b) TERMINATION.—

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

21 which the operating committee of a multiple em22 ployer welfare arrangement which is or has been an

23 exempted multiple employer health plan determines

24 that there is reason to believe that the arrangement

25 will terminate, the committee shall so inform the
112

Title I, Subtitle C

•HR 5300 IH

1 Secretary, shall develop a plan for winding up the

2 affairs of the arrangement in connection with such

3 termination in a manner which will result in timely

4 payment of all benefits for which the arrangement is

5 obligated, and shall submit such plan in writing to

6 the Secretary. Actions required under this paragraph

7 shall be taken in such form and manner as may be

8 prescribed in regulations of the Secretary.

9 ‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH

10 TERMINATION.—In any case in which—

11 ‘‘(A) the Secretary has been notified under

12 subsection (a) of a failure of a multiple em13 ployer welfare arrangement which is or has

14 been an exempted multiple employer health plan

15 to meet the requirements of section 707 and

16 has not been notified by the operating commit17 tee of the arrangement that corrective action

18 has restored compliance with such require19 ments, and

20 ‘‘(B) the Secretary determines that the

21 continuing failure to meet the requirements of

22 section 707 can be reasonably expected to result

23 in a continuing failure to pay benefits for which

24 the arrangement is obligated,
113

Title I, Subtitle C

•HR 5300 IH

1 the operating committee of the arrangement shall, at

2 the direction of the Secretary, terminate the ar3 rangement and, in the course of the termination,

4 take such actions as the Secretary may require as

5 necessary to ensure that the affairs of the arrange6 ment will be, to the maximum extent possible, wound

7 up in a manner which will result in timely payment

8 of all benefits for which the arrangement is

9 obligated.

10 ‘‘SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF

11 EXEMPTION.

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

13 An exemption granted to a multiple employer welfare ar14 rangement under this part shall expire 3 years after the

15 date on which the exemption is granted. An exemption

16 which has expired may be renewed by means of application

17 for an exemption in accordance with section 704.

18 ‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION

19 BY SECRETARY.—The Secretary may suspend or revoke

20 an exemption granted to a multiple employer welfare

21 arrangement under this part—

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

23 for the denial of an initial application for such an

24 exemption under section 704, or

25 ‘‘(2) if the Secretary finds that—
114

Title I, Subtitle C

•HR 5300 IH

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

2 thereof, in the transaction of business while

3 under the exemption, has used fraudulent, coer4 cive, or dishonest practices, or has dem5 onstrated incompetence, untrustworthiness, or

6 financial irresponsibility,

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

8 thereof, is using such methods or practices in

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

10 further transaction of operations hazardous or

11 injurious to participating employers, or covered

12 individuals,

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

14 thereof, has refused to be examined in accord15 ance with this part or to produce its accounts,

16 records, and files for examination in accordance

17 with this part, or

18 ‘‘(D) any of the officers of the arrange19 ment, or the sponsor thereof, has refused to

20 give information with respect to the affairs of

21 the arrangement or the sponsor or to perform

22 any other legal obligation relating to such an

23 examination when required by the Secretary in

24 accordance with this part.
115

Title I, Subtitle C

•HR 5300 IH

1 Any such suspension or revocation under this subsection

2 shall be effective only upon a final decision of the Sec3 retary made after notice and opportunity for a hearing

4 is provided in accordance with section 710.

5 ‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION

6 UNDER COURT PROCEEDINGS.—An exemption granted to

7 a multiple employer welfare arrangement under this part

8 may be suspended or revoked by a court of competent ju9 risdiction in an action by the Secretary brought under

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

11 the suspension or revocation under this subsection shall

12 be effective only upon notification of the Secretary of such

13 suspension or revocation.

14 ‘‘(d) NOTIFICATION OF PARTICIPATING EMPLOY15 ERS.—All participating employers in a multiple employer

16 welfare arrangement shall be notified of the expiration,

17 suspension, or revocation of an exemption granted to such

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

19 form and manner as shall be prescribed in regulations of

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

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

22 suspension or revocation.

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

24 AND REVOCATIONS.—The Secretary shall publish all expi-
116

Title I, Subtitle C

•HR 5300 IH

1 rations of, and all final decisions to suspend or revoke,

2 exemptions granted under this part.

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

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

5 which involves the denial of an application by a multiple

6 employer welfare arrangement for an exemption under this

7 part or the suspension or revocation of such an exemption

8 shall contain a statement of the specific reason or reasons

9 supporting the Secretary’s action, including reference to

10 the specific terms of the exemption and the statutory pro11 vision or provisions relevant to the determination.

12 ‘‘(b) DENIALS OF APPLICATIONS.—In the case of the

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

14 the Secretary shall send a copy of the decision to the appli15 cant by certified or registered mail at the address specified

16 in the records of the Secretary. Such decision shall con17 stitute the final decision of the Secretary unless the ar18 rangement, or any party that would be prejudiced by the

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

20 after the mailing of such decision. The Secretary may af21 firm, modify, or reverse the initial decision. The decision

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

23 by certified or registered mail to the arrangement or party

24 that filed the appeal.
117

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(c) SUSPENSIONS OR REVOCATIONS OF EXEMP2 TION.—In the case of the suspension or revocation of an

3 exemption granted under this part, the Secretary shall

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

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

6 records of the Secretary. Upon the request of the arrange7 ment, or any party that would be prejudiced by the sus8 pension or revocation, filed within 15 days of the mailing

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

10 a hearing on such decision by written notice, sent by cer11 tified or registered mail to the arrangement or party

12 requesting such hearing. Such notice shall set forth—

13 ‘‘(1) a specific date and time for the hearing,

14 which shall be within the 10-day period commencing

15 20 days after the date of the mailing of the notice,

16 and

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

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

19 county thereof (or parish or other similar political

20 subdivision thereof) in which is located the arrange21 ment’s principal place of business.

22 The decision as affirmed or modified in such hearing shall

23 constitute the final decision of the Secretary, unless such

24 decision is reversed in such hearing.’’.
118

Title I, Subtitle C

•HR 5300 IH

1 (b) CONFORMING AMENDMENT TO DEFINITION OF

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

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

4 following new sentence: ‘‘Such term also includes the spon5 sor (as defined in section 701(5)) of a multiple employer

6 welfare arrangement which is or has been an exempted

7 multiple employer health plan (as defined in section

8 701(10)).’’.

9 (c) ALTERNATIVE MEANS OF DISTRIBUTION OF

10 SUMMARY PLAN DESCRIPTIONS.—Section 110 of such

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

12 the following new subsection:

13 ‘‘(c) The Secretary shall prescribe, as an alternative

14 method for distributing summary plan descriptions in

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

16 case of multiple employer welfare arrangements providing

17 benefits consisting of medical care described in section

18 607(1), a means of distribution of such descriptions by

19 participating employers.’’.

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

21 in section 1 of the Employee Retirement Income Security

22 Act of 1974 is amended by inserting after the item relat23 ing to section 608 the following new items:

‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

‘‘Sec. 701. Definitions.
119

Title I, Subtitle C

•HR 5300 IH

‘‘Sec. 702. Exempted multiple employer health plans relieved of certain restrictions on preemption of State law and treated as employee welfare benefit plans.

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

‘‘Sec. 705. Additional requirements applicable to exempted multiple employer

health plans.

‘‘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.’’

1 SEC. 1212. CLARIFICATION OF SCOPE OF PREEMPTION

2 RULES.

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

4 Employee Retirement Income Security Act of 1974 (29

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

6 only, in the case of an arrangement which provides medi7 cal care described in section 607(1) and with respect to

8 which an exemption under part 7 is not in effect,’’ before

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

10 of this title’’.

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

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

13 end the following new subparagraph:

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

15 subparagraph (A)(ii) of multiple employer welfare ar16 rangements providing medical care, see part 7.’’.
120

Title I, Subtitle C

•HR 5300 IH

1 SEC. 1213. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS.

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

4 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is

5 amended—

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

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

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

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

10 the preceding 1-year period’’ after ‘‘common con11 trol’’;

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

13 shall not be based on an interest of less than 25 per14 cent’’ and inserting ‘‘an interest of greater than 25

15 percent may not be required as the minimum inter16 est necessary for common control’’, and by striking

17 ‘‘and’’ at the end,

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

19 and

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

21 new clause:

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

23 clause (i), whether benefits are provided to employ24 ees of two or more employers, the arrangement shall

25 be treated as having only 1 participating employer

26 if, at the time the determination under clause (i) is
121

Title I, Subtitle C

•HR 5300 IH

1 made, the number of individuals who are employees

2 and former employees of any one participating em3 ployer and who are covered under the arrangement

4 is greater than 95 percent of the aggregate number

5 of all individuals who are employees or former em6 ployees of participating employers and who are

7 covered under the arrangement.’’.

8 SEC. 1214. CLARIFICATION OF TREATMENT OF CERTAIN

9 COLLECTIVELY BARGAINED ARRANGE10 MENTS.

11 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em12 ployee Retirement Income Security Act of 1974 (29

13 U.S.C. 1002(40)(A)(i)) is amended to read as follows:

14 ‘‘(i) under or pursuant to one or more collective

15 bargaining agreements,’’.

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

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

18 following new subparagraphs:

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

20 apply only if—

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

22 and the employee organization or any other

23 entity sponsoring the plan or other ar24 rangement, do not—
122

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(I) utilize the services of any li2 censed insurance agent or broker for

3 soliciting or enrolling employers or in4 dividuals as participating employers or

5 covered individuals under the plan or

6 other arrangement, or

7 ‘‘(II) pay a commission or any

8 other type of compensation to a per9 son that is related either to the vol10 ume or number of employers or indi11 viduals solicited or enrolled as partici12 pating employers or covered individ13 uals under the plan or other arrange14 ment, or to the dollar amount or size

15 of the contributions made by partici16 pating employers or covered individ17 uals to the plan or other arrangement,

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

19 covered individuals under the plan or other

20 arrangement are individuals who—

21 ‘‘(I) are employed within a bar22 gaining unit covered by at least one of

23 the collective bargaining agreements

24 with a participating employer (or are

25 covered on the basis of an individual’s
123

Title I, Subtitle C

•HR 5300 IH

1 employment in such a bargaining

2 unit), or

3 ‘‘(II) are present or former em4 ployees of the sponsoring employee or5 ganization, of an employer who is or

6 was a party to at least one of the col7 lective bargaining agreements, or of

8 the plan or other arrangement or a

9 related plan or arrangement (or are

10 covered on the basis of such present

11 or former employment),

12 ‘‘(iii) the plan or other arrangement

13 does not provide benefits to individuals

14 (other than individuals described in clause

15 (ii)(II)) who work outside the standard

16 metropolitan statistical area in which the

17 sponsoring employee organization rep18 resents employees (or to individuals (other

19 than individuals described in clause

20 (ii)(II)) on the basis of such work by oth21 ers), except that in the case of a sponsor22 ing employee organization that represents

23 employees who work outside of any stand24 ard metropolitan statistical area, this

25 clause shall be applied by reference to the
124

Title I, Subtitle C

•HR 5300 IH

1 State in which the sponsoring organization

2 represents employees,

3 ‘‘(iv) the employee organization or

4 other entity sponsoring the plan or other

5 arrangement certifies to the Secretary each

6 year, in a form and manner which shall be

7 prescribed in regulations of the Sec8 retary—

9 ‘‘(I) that the plan or other ar10 rangement meets the requirements of

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

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

13 or more of the covered individuals

14 under the plan are individuals not de15 scribed in subclause (I) or (II) of

16 clause (ii), the total number of cov17 ered individuals and the total number

18 of covered individuals not so de19 scribed.

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

21 shall not apply to a plan or other arrangement

22 that is established or maintained pursuant to

23 one or more collective bargaining agreements

24 which the National Labor Relations Board de25 termines to have been negotiated or otherwise
125

Title I, Subtitle C

•HR 5300 IH

1 agreed to in a manner or through conduct

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

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

4 ‘‘(ii)(I) Whenever a State insurance com5 missioner has reason to believe that this sub6 paragraph is applicable to part or all of a plan

7 or other arrangement, the State insurance com8 missioner may file a petition with the National

9 Labor Relations Board for a determination

10 under clause (i), along with sworn written testi11 mony supporting the petition.

12 ‘‘(II) The Board shall give any such peti13 tion priority over all other petitions and cases,

14 other than other petitions under subclause (I)

15 or cases given priority under section 10 of the

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

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

18 the petition and any response, whether, on the

19 facts before it, the plan or other arrangement

20 was negotiated, created, or otherwise agreed to

21 in a manner or through conduct which violates

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

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

24 shall constitute a final determination for pur25 poses of this subparagraph and shall be binding
126

Title I, Subtitle C

•HR 5300 IH

1 in all Federal or State actions with respect to

2 the status of the plan or other arrangement

3 under this subparagraph.

4 ‘‘(IV) A person aggrieved by the deter5 mination of the Board under subclause (III)

6 may obtain review of the determination in any

7 United States court of appeals in the circuit in

8 which the collective bargaining at issue oc9 curred. Commencement of proceedings under

10 this subclause shall not, unless specifically or11 dered by the court, operate as a stay of any

12 State administrative or judicial action or pro13 ceeding related to the status of the plan or

14 other arrangement, except that in no case may

15 the court stay, before the completion of the re16 view, an order which prohibits the enrollment of

17 new individuals into coverage under a plan or

18 arrangement.’’.

19 SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGE20 MENTS.

21 (a) EMPLOYEE LEASING HEALTHCARE ARRANGE22 MENT DEFINED.—Section 3 of the Employee Retirement

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

24 by adding at the end the following new paragraph:
127

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(43) EMPLOYEE LEASING HEALTHCARE ARRANGE2 MENT.—

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

4 (B), the term ‘employee leasing healthcare arrange5 ment’ means any labor leasing arrangement, staff

6 leasing arrangement, extended employee staffing or

7 supply arrangement, or other arrangement under

8 which—

9 ‘‘(i) one business or other entity (herein10 after in this paragraph referred to as the ‘les11 see’), under a lease or other arrangement en12 tered into with any other business or other en13 tity (hereinafter in this paragraph referred to

14 as the ‘lessor’), receives from the lessor the

15 services of individuals to be performed under

16 such lease or other arrangement, and

17 ‘‘(ii) benefits consisting of medical care de18 scribed in section 607(1) are provided to such

19 individuals or such individuals and their de20 pendents as participants and beneficiaries.

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

22 an arrangement described in subparagraph (A) if,

23 under such arrangement, the lessor retains, both le24 gally and in fact, a complete right of direction and

25 control within the scope of employment over the in-
128

Title I, Subtitle C

•HR 5300 IH

1 dividuals whose services are supplied under such

2 lease or other arrangement, and such individuals

3 perform a specified function for the lessee which is

4 separate and divisible from the primary business or

5 operations of the lessee.’’.

6 (b) TREATMENT OF EMPLOYEE LEASING

7 HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER

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

9 (29 U.S.C. 1002(40)) (as amended by the preceding provi10 sions of this title) is further amended by adding at the

11 end the following new subparagraph:

12 ‘‘(E) The term ‘multiple employer welfare arrange13 ment’ includes any employee leasing healthcare arrange14 ment.’’.

15 (c) SPECIAL RULES FOR EMPLOYEE LEASING

16 HEALTHCARE ARRANGEMENTS.—

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

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

19 of this Act) is amended by adding at the end the fol20 lowing new section:

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

22 HEALTHCARE ARRANGEMENTS.

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

24 (1), (2), and (3) of section 704(b) shall be treated as satis25 fied in the case of a multiple employer welfare arrange-
129

Title I, Subtitle C

•HR 5300 IH

1 ment that is an employee leasing healthcare arrangement

2 if the application for exemption includes information

3 which the Secretary determines to be complete and accu4 rate and sufficient to demonstrate that the following

5 requirements are met with respect to the arrangement:

6 ‘‘(1) 3-YEAR TENURE.—The lessor has been in

7 operation for not less than 3 years.

8 ‘‘(2) SOLICITATION RESTRICTIONS.—Employee

9 leasing services provided under the arrangement are

10 not solicited, advertised, or marketed through li11 censed insurance agents or brokers acting in such

12 capacity.

13 ‘‘(3) CREATION OF EMPLOYMENT RELATION14 SHIP.—

15 ‘‘(A) DISCLOSURE STATEMENT.—Written

16 notice is provided to each applicant for employ17 ment subject to coverage under the arrange18 ment, at the time of application for employment

19 and before commencing coverage under the ar20 rangement, stating that the employer is the les21 sor under the arrangement.

22 ‘‘(B) INFORMED CONSENT.—Each such

23 applicant signs a written statement consenting

24 to the employment relationship with the lessor.
130

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(C) INFORMED RECRUITMENT OF LES2 SEE’S EMPLOYEES.—In any case in which the

3 lessor offers employment to an employee of a

4 lessee under the arrangement, the lessor in5 forms each employee in writing that his or her

6 acceptance of employment with the lessor is vol7 untary and that refusal of such offer will not be

8 deemed to be resignation from or abandonment

9 of current employment.

10 ‘‘(4) REQUISITE EMPLOYER-EMPLOYEE RELA11 TIONSHIP UNDER ARRANGEMENT.—Under the em12 ployer-employee relationship with the employees of

13 the lessor—

14 ‘‘(A) the lessor retains the ultimate author15 ity to hire, terminate, and reassign such em16 ployees,

17 ‘‘(B) the lessor is responsible for the pay18 ment of wages, payroll-related taxes, and em19 ployee benefits, without regard to payment by

20 the lessee to the lessor for its services,

21 ‘‘(C) the lessor maintains the right of di22 rection and control over its employees, except to

23 the extent that the lessee is responsible for su24 pervision of the work performed consistent with
131

Title I, Subtitle C

•HR 5300 IH

1 the lessee’s responsibility for its product or

2 service, and

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

4 the Labor Management Relations Act, 1947 (29

5 U.S.C. 185(a)), the lessor retains in the ab6 sence of an applicable collective bargaining

7 agreement, the right to enter into arbitration

8 and to decide employee grievances, and

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

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

11 and not more than 10 percent of the individuals

12 covered under the arrangement consist of own13 ers, officers, or directors of, or partners in,

14 such a lessee (or any combination thereof).

15 ‘‘(b) DEFINITIONS.—For purposes of this section—

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

17 business or other entity from which services of indi18 viduals are obtained under an employee leasing

19 healthcare arrangement.

20 ‘‘(2) LESSEE.—The term ‘lessee’ means a busi21 ness or other entity which receives the services of in22 dividuals provided under an employee leasing

23 healthcare arrangement.’’.

24 (2) CLERICAL AMENDMENT.—The table of con25 tents in section 1 of such Act (as amended by the
132

Title I, Subtitle C

•HR 5300 IH

1 preceding provisions of this title) is further amended

2 by inserting after the item relating to section 710

3 the following new item:

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

4 SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MUL5 TIPLE EMPLOYER WELFARE ARRANGEMENTS

6 AND EMPLOYEE LEASING HEALTHCARE AR7 RANGEMENTS.

8 (a) ENFORCEMENT OF FILING REQUIREMENTS.—

9 Section 502 of the Employee Retirement Income Security

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

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

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

13 (4) of subsection (c) or subsection (i) or (l)’’; and

14 (2) by adding at the end of subsection (c) the

15 following new paragraph:

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

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

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

19 to be filed with the Secretary under section 101(e).’’.

20 (b) ACTIONS BY STATES IN FEDERAL COURT.—Sec21 tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—

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

23 end;

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

25 inserting ‘‘, or’’; and
133

Title I, Subtitle C

•HR 5300 IH

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

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

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

4 State regulating insurance, to enjoin any act or

5 practice which violates any provision of part 7 which

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

7 (c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

8 MISREPRESENTATIONS.—Section 501 of such Act (29

9 U.S.C. 1131) is amended—

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

11 (2) by adding at the end the following new sub12 section:

13 ‘‘(b) Any person who, either willfully or with willful

14 blindness, falsely represents, to any employee, any employ15 ee’s beneficiary, any employer, the Secretary, or any State,

16 an arrangement established or maintained for the purpose

17 of offering or providing any benefit described in section

18 3(1) to employees or their beneficiaries as—

19 ‘‘(1) being an exempted multiple employer wel20 fare arrangement (as defined in section 701(10)),

21 ‘‘(2) being an employee leasing healthcare ar22 rangement under an exemption granted under part

23 7, or
134

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(3) having been established or maintained

2 under or pursuant to a collective bargaining agree3 ment,

4 shall, upon conviction, be imprisoned not more than five

5 years, be fined under title 18, United States Code, or

6 both.’’.

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

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

9 end the following new subsection:

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

11 by the Secretary showing the operation, promotion, or

12 marketing of a multiple employer welfare arrangement

13 providing benefits consisting of medical care described in

14 section 607(1) that—

15 ‘‘(A) is not licensed, registered, or otherwise ap16 proved under the insurance laws of the States in

17 which the arrangement offers or provides benefits, or

18 ‘‘(B) is not operating in accordance with the

19 terms of an exemption granted by the Secretary

20 under part 7,

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

22 requiring that the arrangement cease activities.

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

24 multiple employer welfare arrangement if the arrangement

25 shows that—
135

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(A) coverage under it is fully insured, within

2 the meaning of section 701(9),

3 ‘‘(B) it is licensed, registered, or otherwise ap4 proved in each State in which it offers or provides

5 benefits, except to the extent that such State does

6 not require licensing, registration, or approval of

7 multiple employer welfare arrangements under which

8 all coverage is fully insured, and

9 ‘‘(C) with respect to each such State, it is oper10 ating in accordance with applicable State insurance

11 laws that are not superseded under section 514.

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

13 or remedial relief, including any relief available under this

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

15 public and of persons having claims for benefits against

16 the arrangement.’’.

17 (e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

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

19 adding at the end (after and below paragraph (2)) the fol20 lowing new sentence: ‘‘The terms of each multiple em21 ployer welfare arrangement to which this section applies

22 and which provides benefits consisting of medical care de23 scribed in section 607(1) shall require the operating com24 mittee or the named fiduciary (as applicable) to ensure
136

Title I, Subtitle C

•HR 5300 IH

1 that the requirements of this section are met in connection

2 with claims filed under the arrangement.’’.

3 SEC. 1217. SOLVENCY REQUIREMENTS FOR CERTAIN SELF4 INSURED GROUP HEALTH PLANS.

5 (a) IN GENERAL.—The Secretary of Labor shall pre6 scribe by regulation provisions described in subsection (b)

7 applicable to group health plans which are not multiple

8 employer health plans, which offer coverage with respect

9 to employees of small employers (as defined in section

10 1131), and under which some or all coverage is not fully

11 insured (within the meaning of section 701(9) of the Em12 ployee Retirement Income Security Act of 1974)), for the

13 purpose of promoting adequate funding of such plans.

14 (b) REQUIREMENTS.—

15 (1) GENERAL RULE.—Except as provided in

16 paragraph (2), the provisions described in subsection

17 (a) shall require the group health plan to establish

18 and maintain reserves, consisting of—

19 (A) a reserve for unearned contributions,

20 and

21 (B) a reserve for payment of claims re22 ported and not yet paid and claims incurred but

23 not yet reported, and for expected administra24 tive costs with respect to such claims.
137

Title I, Subtitle C

•HR 5300 IH

1 (2) EXCEPTION.—The Secretary may in such

2 regulations permit a group health plan to substitute,

3 for all or part of the reserves required under para4 graph (1), such security, guarantee, or other finan5 cial arrangement as the Secretary determines to be

6 adequate to enable the plan to fully meet all its fi7 nancial obligations on a timely basis.

8 (c) CRITERIA FOR COMPLIANCE.—The criteria that

9 the Secretary shall take into account in determining com10 pliance with the requirements described in subsection (b)

11 shall include—

12 (1) the size of the employer involved;

13 (2) the benefit package provided under the

14 plan;

15 (3) whether the coverage provided under the

16 plan is in the form of a fee-for-service arrangement,

17 a health maintenance organization, or any other type

18 of coverage;

19 (4) the extent to which excess/stop loss coverage

20 is maintained for the plan; and

21 (5) the nature of any security, guarantee, or

22 other financial arrangement described in subsection

23 (b)(2) obtained for the plan.
138

Title I, Subtitle C

•HR 5300 IH

1 SEC. 1218. FILING REQUIREMENTS FOR MULTIPLE EM2 PLOYER WELFARE ARRANGEMENTS PROVID3 ING HEALTH BENEFITS.

4 Section 101 of the Employee Retirement Income Se5 curity Act of 1974 (29 U.S.C. 1021) is amended—

6 (1) by redesignating subsection (e) as sub7 section (f); and

8 (2) by inserting after subsection (d) the follow9 ing new subsection:

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

11 shall file with the Secretary a registration statement de12 scribed in paragraph (2) within 60 days before commenc13 ing operations (in the case of an arrangement commencing

14 operations on or after January 1, 1995) and no later than

15 February 15 of each year (in the case of an arrangement

16 in operation since the beginning of such year), unless, as

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

18 such arrangement provides no benefits consisting of medi19 cal care described in section 607(1).

20 ‘‘(2) Each registration statement—

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

22 such information concerning the multiple employer

23 welfare arrangement and any persons involved in its

24 operation (including whether coverage under the ar25 rangement is fully insured), as shall be provided in
139

Title I, Subtitle C

•HR 5300 IH

1 regulations which shall be prescribed by the Sec2 retary, and

3 ‘‘(B) if coverage under the arrangement is not

4 fully insured, shall contain a certification that copies

5 of such registration statement have been transmitted

6 by certified mail to—

7 ‘‘(i) in the case of an arrangement which

8 is an exempted multiple employer health plan

9 (as defined in section 701(10)), the State insur10 ance commissioner of the domicile State of such

11 arrangement, or

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

13 is not an exempted multiple employer health

14 plan, the State insurance commissioner of each

15 State in which the arrangement is located.

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

17 annual registration statement are—

18 ‘‘(A) the trustee or trustees so designated by

19 the terms of the instrument under which the mul20 tiple employer welfare arrangement is established or

21 maintained, or

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

23 arrangement for which the trustee or trustees can24 not be identified, or upon the failure of the trustee

25 or trustees of an arrangement to file, the person or
140

Title I, Subtitle C

•HR 5300 IH

1 persons actually responsible for the acquisition, dis2 position, control, or management of the cash or

3 property of the arrangement, irrespective of whether

4 such acquisition, disposition, control, or management

5 is exercised directly by such person or persons or

6 through an agent designated by such person or

7 persons.

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

9 506(c) with a State as the primary domicile State with

10 respect to any multiple employer welfare arrangement

11 shall provide for simultaneous filings of reports required

12 under this subsection with the Secretary and with the

13 State insurance commissioner of such State.’’.

14 SEC. 1219. COOPERATION BETWEEN FEDERAL AND STATE

15 AUTHORITIES.

16 Section 506 of the Employee Retirement Income Se17 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

18 at the end the following new subsection:

19 ‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE

20 EMPLOYER WELFARE ARRANGEMENTS.—

21 ‘‘(1) STATE ENFORCEMENT.—

22 ‘‘(A) AGREEMENTS WITH STATES.—A

23 State may enter into an agreement with the

24 Secretary for delegation to the State of some or

25 all of the Secretary’s authority under sections
141

Title I, Subtitle C

•HR 5300 IH

1 502 and 504 to enforce the provisions of this

2 title applicable to multiple employer welfare ar3 rangements which are or have been exempted

4 multiple employer health plans (as defined in

5 section 701(10)). The Secretary shall enter into

6 the agreement if the Secretary determines that

7 the delegation provided for therein would not

8 result in a lower level or quality of enforcement

9 of the provisions of this title.

10 ‘‘(B) DELEGATIONS.—Any department,

11 agency, or instrumentality of a State to which

12 authority is delegated pursuant to an agree13 ment entered into under this paragraph may, if

14 authorized under State law and to the extent

15 consistent with such agreement, exercise the

16 powers of the Secretary under this title which

17 relate to such authority.

18 ‘‘(C) CONCURRENT AUTHORITY OF THE

19 SECRETARY.—If the Secretary delegates author20 ity to a State in an agreement entered into

21 under subparagraph (A), the Secretary may

22 continue to exercise such authority concurrently

23 with the State.

24 ‘‘(D) RECOGNITION OF PRIMARY DOMICILE

25 STATE.—In entering into any agreement with a
142

Title I, Subtitle C

•HR 5300 IH

1 State under subparagraph (A), the Secretary

2 shall ensure that, as a result of such agreement

3 and all other agreements entered into under

4 subparagraph (A), only one State will be recog5 nized, with respect to any particular multiple

6 employer welfare arrangement, as the primary

7 domicile State to which authority has been dele8 gated pursuant to such agreements.

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

10 shall—

11 ‘‘(A) provide enforcement assistance to the

12 States with respect to multiple employer welfare

13 arrangements, including, but not limited to, co14 ordinating Federal and State efforts through

15 the establishment of cooperative agreements

16 with appropriate State agencies under which

17 the Pension and Welfare Benefits Administra18 tion keeps the States informed of the status of

19 its cases and makes available to the States in20 formation obtained by it,

21 ‘‘(B) provide continuing technical assist22 ance to the States with respect to issues involv23 ing multiple employer welfare arrangements

24 and this Act,
143

Title I, Subtitle C

•HR 5300 IH

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

2 the Office of Regulations and Interpretations

3 timely and complete responses to requests for

4 advisory opinions on issues described in sub5 paragraph (B), and

6 ‘‘(D) distribute copies of all advisory opin7 ions described in subparagraph (C) to the State

8 insurance commissioner of each State.’’.

9 SEC. 1220. EFFECTIVE DATE; TRANSITIONAL RULES.

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

11 this part shall take effect January 1, 1995, except that

12 the Secretary of Labor may issue regulations before such

13 date under such amendments. The Secretary shall issue

14 all regulations necessary to carry out the amendments

15 made by this title before the effective date thereof.

16 (b) TRANSITIONAL RULES.—If the sponsor of a mul17 tiple employer welfare arrangement which, as of January

18 1, 1995, provides benefits consisting of medical care de19 scribed in section 607(1) of the Employee Retirement In20 come Security Act of 1974 (29 U.S.C. 1167(1)) files with

21 the Secretary of Labor an application for an exemption

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

23 180 days after such date and the Secretary has not, as

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

25 application to be materially deficient, section 514(b)(6)(A)
144

Title I, Subtitle C

•HR 5300 IH

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

2 with respect to such arrangement during the 18-month pe3 riod following such date. If the Secretary determines, at

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

5 such exclusion from coverage under the provisions of such

6 section 514(b)(6)(A) of such Act of a multiple employer

7 welfare arrangement would be detrimental to the interests

8 of individuals covered under such arrangement, such ex9 clusion shall cease as of the date of the determination.

10 Any determination made by the Secretary under this sub11 section shall be in the Secretary’s sole discretion.

12 PART 3—ENCOURAGEMENT OF MULTIPLE EM13 PLOYER ARRANGEMENTS PROVIDING BASIC

14 HEALTH BENEFITS

15 SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR

16 GEOGRAPHIC LOCATION REQUIREMENT FOR

17 TAX EXEMPT TRUST STATUS.

18 (a) IN GENERAL.—Paragraph (9) of section 501(c)

19 of the Internal Revenue Code of 1986 (relating to exempt

20 organizations) is amended—

21 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

22 (2) by adding at the end the following:

23 ‘‘(B) Any determination of whether a multiple

24 employer health plan (as defined in section 701(10)

25 of the Employee Retirement Income Security Act of
145

Title I, Subtitle C

•HR 5300 IH

1 1974) or an insured multiple employer health plan

2 (as defined in section 701(11) of such Act) is a vol3 untary employees’ beneficiary association meeting

4 the requirements of this paragraph shall be made

5 without regard to any determination of commonality

6 of interest or geographic location if—

7 ‘‘(i) such plan provides at least standard

8 coverage (consistent with section 102(c) of the

9 Affordable Health Care Now Act of 1994), and

10 ‘‘(ii) in the case of an insured multiple em11 ployer health plan, it meets the requirements

12 enforceable under section 514(b)(6)(B)(i) of the

13 Employee Retirement Income Security Act of

14 1974 to the extent not preempted by section

15 1202 of the Affordable Health Care Now Act of

16 1994.’’.

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

18 subsection (a) shall apply with respect to determinations

19 made on or after January 1, 1995.

20 SEC. 1222. SINGLE ANNUAL FILING FOR ALL PARTICIPAT21 ING EMPLOYERS.

22 (a) IN GENERAL.—Section 110 of the Employee Re23 tirement Income Security Act of 1974 (29 U.S.C. 1030),

24 as amended by section 1211(c) of this subtitle, is amended

25 by adding at the end the following new subsection:
146

Title I, Subtitle C

•HR 5300 IH

1 ‘‘(d) The Secretary shall prescribe by regulation or

2 otherwise an alternative method providing for the filing

3 of a single annual report (as referred to in section

4 104(a)(1)(A)) with respect to all employers who are par5 ticipating employers under a multiple employer welfare ar6 rangement under which all coverage consists of medical

7 care (described in section 607(1)) and is fully insured (as

8 defined in section 701(9)).’’.

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

10 subsection (a) shall take effect on the date of the enact11 ment of this Act. The Secretary of Labor shall prescribe

12 the alternative method referred to in section 110(d) of the

13 Employee Retirement Income Security Act of 1974, as

14 added by such amendment, within 90 days after the date

15 of the enactment of this Act.

16 SEC. 1223. COMPLIANCE WITH COVERAGE REQUIREMENTS

17 THROUGH MULTIPLE EMPLOYER HEALTH AR18 RANGEMENTS.

19 (a) COMPLIANCE WITH APPLICABLE REQUIREMENTS

20 THROUGH MULTIEMPLOYER PLANS.—In any case in

21 which an eligible employee is, for any plan year, a partici22 pant in a group health plan which is a multiemployer plan,

23 the requirements of section 1001(a) shall be deemed to

24 be met with respect to such employee for such plan year

25 if the employer requirements of subsection (c) are met
147

Title I, Subtitle C

•HR 5300 IH

1 with respect to the eligible employee, irrespective of wheth2 er, or to what extent, the employer makes employer con3 tributions on behalf of the eligible employee.

4 (b) COMPLIANCE WITH APPLICABLE REQUIREMENTS

5 THROUGH OTHER MULTIPLE EMPLOYER HEALTH AR6 RANGEMENTS.—

7 (1) IN GENERAL.—In any case in which an em8 ployer is, for any plan year, a participating employer

9 (as defined in paragraph (3)) in an exempted mul10 tiple employer health plan or in a multiple employer

11 welfare arrangement under which all coverage con12 sists of medical care (described in section 607(1) of

13 the Employee Retirement Income Security Act of

14 1974) and is fully insured (as defined in section

15 701(9) of such Act), the requirements of section

16 1001(a) shall be deemed to be met (and the ERISA

17 requirements of paragraph (2) shall be deemed to be

18 met by the employer) with respect to an eligible em19 ployee of the employer if—

20 (A) the employer requirements of sub21 section (c) are met with respect to the eligible

22 employee, and

23 (B) the applicable ERISA requirements of

24 paragraph (2) are met by the plan or arrange25 ment with respect to the plan or arrangement,
148

Title I, Subtitle C

•HR 5300 IH

1 irrespective of whether, or to what extent, the em2 ployer makes employer contributions on behalf of the

3 eligible employee.

4 (2) APPLICABLE ERISA REQUIREMENTS.—The

5 applicable ERISA requirements of this paragraph

6 are the requirements of—

7 (A) part 1 of subtitle B of title I of the

8 Employee Retirement Income Security Act of

9 1974 (relating to reporting and disclosure),

10 (B) section 503 of such Act (relating to

11 claims procedure), and

12 (C) part 6 of subtitle B of such title I (re13 lating to group health plans),

14 to the extent that such requirements relate to em15 ployers as plan sponsors or plan administrators.

16 (3) PARTICIPATING EMPLOYER.—In this sub17 section, the term ‘‘participating employer’’ means, in

18 connection with an exempted multiple employer

19 health plan or a multiple employer welfare arrange20 ment under which all coverage consists of medical

21 care (described in section 607(1) of the Employee

22 Retirement Income Security Act of 1974) and is

23 fully insured (as defined in section 701(9) of such

24 Act), any employer if any of its employees, or any

25 of the dependents of its employees, are or were cov-
149

Title I, Subtitle C

•HR 5300 IH

1 ered under such plan or arrangement in connection

2 with the employment of the employees.

3 (c) EMPLOYER REQUIREMENTS.—The employer re4 quirements of this subsection are met under a plan or ar5 rangement with respect to an eligible employee if—

6 (1) the employee is eligible under the plan or

7 arrangement to elect coverage on an annual basis

8 and is provided a reasonable opportunity to make

9 the election in such form and manner and at such

10 times as are provided by the plan or arrangement,

11 (2) subject to section 1001(c), such coverage in12 cludes at least the standard coverage (consistent

13 with section 1102(c)),

14 (3) the employer facilitates collection of any

15 employee contributions under the plan or arrange16 ment and permits the employee to elect to have em17 ployee contributions under the plan or arrangement

18 collected through payroll deduction, and

19 (4) in the case of a plan or arrangement to

20 which part 1 of subtitle B of title I of the Employee

21 Retirement Income Security Act of 1974 does not

22 otherwise apply, the employer provides to the em23 ployee a summary plan description described in sec24 tion 102(a)(1) of such Act in the form and manner
150

Title I, Subtitle D

•HR 5300 IH

1 and at such times as are required under such part

2 1 with respect to employee welfare benefit plans.

3 Subtitle D—Health Deduction

4 Fairness

5 SEC. 1301. PERMANENT EXTENSION AND INCREASE IN

6 HEALTH INSURANCE TAX DEDUCTION FOR

7 SELF-EMPLOYED INDIVIDUALS.

8 (a) PERMANENT EXTENSION OF DEDUCTION.—

9 (1) IN GENERAL.—Subsection (l) of section 162

10 of the Internal Revenue Code of 1986 (relating to

11 special rules for health insurance costs of self-em12 ployed individuals) is amended by striking paragraph

13 (6).

14 (2) EFFECTIVE DATE.—The amendment made

15 by this subsection shall apply to taxable years begin16 ning after December 31, 1993.

17 (b) INCREASE IN AMOUNT OF DEDUCTION; INSUR18 ANCE PURCHASED MUST MEET CERTAIN STANDARDS.—

19 (1) INCREASE IN AMOUNT OF DEDUCTION.—

20 Paragraph (1) of section 162(l) of such Code is

21 amended by striking ‘‘25 percent of’’ and inserting

22 ‘‘100 percent (25 percent in the case of taxable

23 years beginning in 1994 or 1995 and 50 percent in

24 the case of taxable years beginning in 1996 or 1997)

25 of’’.
151

Title I, Subtitle D

•HR 5300 IH

1 (2) INSURANCE PURCHASED MUST MEET CER2 TAIN STANDARDS.—Paragraph (2) of section 162(l)

3 of such Code is amended by adding at the end there4 of the following new subparagraph:

5 ‘‘(C) TREATMENT OF GROUP HEALTH

6 PLANS.—For purposes of this subsection, an

7 amount paid into a multiple employer health

8 plan (as defined in section 701(10) of the Em9 ployee Retirement Income Security Act of

10 1974) shall be deemed to be an amount paid for

11 insurance which constitutes medical care.’’.

12 (3) EFFECTIVE DATE.—The amendments made

13 by this subsection shall apply to taxable years begin14 ning after December 31, 1994.

15 SEC. 1302. DEDUCTION OF HEALTH INSURANCE PREMIUMS

16 FOR CERTAIN PREVIOUSLY UNINSURED INDI17 VIDUALS.

18 (a) IN GENERAL.—Section 213 of the Internal Reve19 nue Code of 1986 (relating to medical, dental, etc., ex20 penses) is amended by adding at the end thereof the fol21 lowing new subsection:

22 ‘‘(f) DEDUCTION FOR CERTAIN HEALTH INSURANCE

23 COSTS DETERMINED WITHOUT REGARD TO ADJUSTED

24 GROSS INCOME THRESHOLD.—
152

Title I, Subtitle D

•HR 5300 IH

1 ‘‘(1) IN GENERAL.—Subsection (a) shall be ap2 plied without regard to the limitation based on ad3 justed gross income in the case of the applicable per4 centage of the amounts paid for insurance referred

5 to in section 162(l)(2)(C) (and including payments

6 referred to in section 162(l)(2)(D)).

7 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

8 of paragraph (1), the term ‘applicable percentage’

9 means—

10 ‘‘(A) 25 percent for taxable years begin11 ning in 1994 or 1995,

12 ‘‘(B) 50 percent for taxable years begin13 ning in 1996 or 1997, and

14 ‘‘(C) 100 percent for taxable years begin15 ning after 1997.

16 ‘‘(3) DEDUCTION NOT ALLOWED TO INDIVID17 UALS ELIGIBLE FOR EMPLOYER-SUBSIDIZED COV18 ERAGE.—

19 ‘‘(A) IN GENERAL.—Paragraph (1) shall

20 not apply to any individual—

21 ‘‘(i) who is eligible to participate in

22 any subsidized health plan maintained by

23 an employer of such individual or the

24 spouse of such individual, or
153

Title I, Subtitle D

•HR 5300 IH

1 ‘‘(ii) who is (or whose spouse is) a

2 member of a subsidized class of employees

3 of an employer of such individual or

4 spouse.

5 ‘‘(B) SUBSIDIZED CLASS.—For purposes of

6 subparagraph (A), an individual is a member of

7 a subsidized class of employees of an employer

8 if, at any time during the 3 calendar years end9 ing with or within the taxable year, any mem10 ber of such class was eligible to participate in

11 any subsidized health plan maintained by such

12 employer.

13 ‘‘(C) SPECIAL RULES.—

14 ‘‘(i) CONTROLLED GROUPS.—All per15 sons treated as a single employer under

16 subsection (a) or (b) of section 52 or sub17 section (m) or (o) of section 414 shall be

18 treated as a single employer for purposes

19 of subparagraph (B).

20 ‘‘(ii) CLASSES.—Classes of employees

21 shall be determined under regulations pre22 scribed by the Secretary based on such fac23 tors as the Secretary determines appro24 priate to carry out the purposes of this

25 subsection.
154

Title I, Subtitle D

•HR 5300 IH

1 ‘‘(4) COORDINATION WITH DEDUCTION FOR

2 OTHER AMOUNTS.—Amounts allowable as a deduc3 tion under subsection (a) by reason of this sub4 section shall not be taken into account in determin5 ing the deduction under subsection (a) for other

6 amounts.

7 ‘‘(5) SUBSECTION NOT TO APPLY TO INDIVID8 UALS ELIGIBLE FOR MEDICARE.—This subsection

9 shall not apply to amount paid for insurance cover10 ing an individual who is eligible for benefits under

11 title XVIII of the Social Security Act.’’.

12 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI13 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

14 of section 62 of such Code is amended by inserting after

15 paragraph (15) the following new paragraph:

16 ‘‘(16) COSTS OF CERTAIN HEALTH INSUR17 ANCE.—The deduction allowed by section 213 to the

18 extent allowable by reason of section 213(f).’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 1994.
155

Title I, Subtitle E

•HR 5300 IH

1 Subtitle E—Improved Access to

2 Community Health Services

3 PART 1—INCREASED AUTHORIZATION FOR

4 COMMUNITY AND MIGRANT HEALTH CENTERS

5 SEC. 1401. GRANT PROGRAM TO PROMOTE PRIMARY

6 HEALTH CARE SERVICES FOR UNDERSERVED

7 POPULATIONS.

8 (a) AUTHORIZATION.—The Secretary of Health and

9 Human Services shall provide for a program of grants to

10 migrant and community health centers (receiving grants

11 or contracts under section 329, 330, or 340 of the Public

12 Health Service Act) in order to promote the provision of

13 primary health care services for underserved individuals.

14 Such grants may be used—

15 (1) to promote the provision of off-site services

16 (through means such as mobile medical clinics);

17 (2) to improve birth outcomes in areas with

18 high infant mortality and morbidity;

19 (3) to establish primary care clinics in areas

20 identified as in need of such clinics; and

21 (4) for recruitment and training costs of nec22 essary providers and operating costs for unreim23 bursed services.
156

Title I, Subtitle E

•HR 5300 IH

1 (b) CONDITIONS.—(1) Grants under this subsection

2 shall only be made upon application, approved by the Sec3 retary.

4 (2) The amount of grants made under this section

5 shall be determined by the Secretary.

6 (c) AUTHORIZATION OF APPROPRIATIONS.—There

7 are authorized to be appropriated—

8 (1) in fiscal year 1995, $100,000,000,

9 (2) in fiscal year 1996, $200,000,000,

10 (3) in fiscal year 1997, $300,000,000,

11 (4) in fiscal year 1998, $400,000,000, and

12 (5) in fiscal year 1999, $500,000,000,

13 to carry out this section. Of the amounts appropriated

14 each fiscal year under this section, at least 10 percent

15 shall be used for grants described in subsection (a)(1) and

16 at least 10 percent shall be used for grants described in

17 subsection (a)(2). The Secretary may use not to exceed

18 50 percent of the amounts appropriated to carry out this

19 section for the purpose of making new grants or contracts

20 under sections 329, 330, and 340 of the Public Health

21 Service Act.

22 (d) STUDY AND REPORT.—The Secretary shall con23 duct a study of the impact of the grants made under this

24 section to migrant and community health centers on ac25 cess to health care, birth outcomes, and the use of emer-
157

Title I, Subtitle E

•HR 5300 IH

1 gency room services. Not later than 2 years after the date

2 of the enactment of this Act, the Secretary shall submit

3 to Congress a report on such study and on recommenda4 tions for changes in the programs under this section in

5 order to promote the appropriate use of cost-effective out6 patient services.

7 PART 2—GRANTS FOR PROJECTS FOR

8 COORDINATING DELIVERY OF SERVICES

9 SEC. 1411. PROJECTS FOR COORDINATING DELIVERY OF

10 OUTPATIENT PRIMARY HEALTH SERVICES.

11 Part D of title III of the Public Health Service Act

12 (42 U.S.C. 254b et seq.) is amended by adding at the end

13 the following new subpart:

14 ‘‘Subpart VII—Delivery of Services

15 ‘‘PROJECTS FOR COORDINATING DELIVERY OF SERVICES

16 ‘‘SEC. 340E. (a) AUTHORITY FOR GRANTS.—

17 ‘‘(1) IN GENERAL.—The Secretary may make

18 grants to public and nonprofit private entities to

19 carry out demonstration projects for the purpose of

20 increasing access to outpatient primary health serv21 ices in geographic areas described in subsection (b)

22 through coordinating the delivery of such services

23 under Federal, State, local, and private programs.
158

Title I, Subtitle E

•HR 5300 IH

1 ‘‘(2) REQUIREMENT REGARDING PLAN.—The

2 Secretary may make a grant under paragraph (1)

3 only if—

4 ‘‘(A) the applicant involved has received a

5 grant under subsection (l) and the Secretary

6 has approved the plan developed with such

7 grant; and

8 ‘‘(B) the applicant agrees to carry out the

9 project under paragraph (1) in accordance with

10 the plan.

11 ‘‘(b) QUALIFIED HEALTH SERVICE AREAS.—

12 ‘‘(1) IN GENERAL.—A geographic area de13 scribed in this subsection is a geographic area

14 that—

15 ‘‘(A) is a rational area for the delivery of

16 health services;

17 ‘‘(B) has a population of not more than

18 500,000 individuals; and

19 ‘‘(C)(i) has been designated by the Sec20 retary as an area with a shortage of personal

21 health services; or

22 ‘‘(ii) has a significant number of individ23 uals who have low incomes or who have insuffi24 cient insurance regarding health care.
159

Title I, Subtitle E

•HR 5300 IH

1 ‘‘(2) AUTHORITY REGARDING MULTIPLE POLIT2 ICAL SUBDIVISIONS.—The Secretary shall make a

3 determination of whether a geographic area is a geo4 graphic area described in paragraph (1) without re5 gard to whether the area is a political subdivision,

6 without regard to whether the area is located in 2

7 or more political subdivisions or States, and without

8 regard to whether the area encompasses 2 or more

9 political subdivisions.

10 ‘‘(c) PREFERENCES IN MAKING GRANTS.—In making

11 grants under subsection (a), the Secretary shall give pref12 erence to applicants demonstrating that, with respect to

13 the outpatient primary health services that will be the sub14 ject of the project conducted by the applicant under such

15 subsection—

16 ‘‘(1)(A) the project will result in the reduction

17 of administrative expenses associated with such serv18 ices by increasing the efficiency of the administrative

19 processes of the providers participating in the

20 project, and

21 ‘‘(B) the resulting savings will be expended for

22 the direct provision of such services for the des23 ignated population; or
160

Title I, Subtitle E

•HR 5300 IH

1 ‘‘(2) the services that will be the subject of the

2 project will be provided in facilities that are

3 underutilized.

4 ‘‘(d) ACTIVITIES OF PROJECT MUST SERVE DES5 IGNATED POPULATION.—The Secretary may make a

6 grant under subsection (a) to an applicant only if the ap7 plicant demonstrates that carrying out the project under

8 such subsection will increase access to outpatient primary

9 health services for a significant segment of the designated

10 population.

11 ‘‘(e) MATCHING FUNDS.—

12 ‘‘(1) IN GENERAL.—With respect to the costs of

13 the project to be carried out under subsection (a) by

14 an applicant, the Secretary may make a grant under

15 such subsection only if the applicant agrees to make

16 available (directly or through donations from public

17 or private entities) non-Federal contributions toward

18 such costs in an amount that is not less than 50

19 percent of such costs.

20 ‘‘(2) DETERMINATION OF AMOUNT CONTRIB21 UTED.—Non-Federal contributions required in para22 graph (1) may be in cash or in kind, fairly evalu23 ated, including plant, equipment, or services.

24 Amounts provided by the Federal Government, or

25 services assisted or subsidized to any significant ex-
161

Title I, Subtitle E

•HR 5300 IH

1 tent by the Federal Government, may not be in2 cluded in determining the amount of such non-Fed3 eral contributions.

4 ‘‘(f) CERTAIN LIMITATIONS REGARDING GRANTS.—

5 ‘‘(1) PROVISION OF HEALTH SERVICES; CON6 STRUCTION OF FACILITIES.—The Secretary may

7 make a grant under subsection (a) only if the appli8 cant involved agrees that the grant will not be ex9 pended for the direct provision of any health service

10 or for the construction or renovation of facilities.

11 ‘‘(2) DURATION AND AMOUNT OF GRANT.—The

12 period during which payments are made for a

13 project under subsection (a) may not exceed 4 years,

14 and the aggregate amount of such payments for the

15 period may not exceed $200,000. The provision of

16 such payments shall be subject to annual approval

17 by the Secretary of the payments and subject to the

18 availability of appropriations for the fiscal year in19 volved to make the payments.

20 ‘‘(3) FINANCIAL CAPACITY FOR CONTINUATION

21 OF PROJECT AFTER TERMINATION OF GRANT.—The

22 Secretary may make a grant under subsection (a)

23 only if the Secretary determines that there is a rea24 sonable basis for believing that, after termination of

25 payments under such subsection pursuant to para-
162

Title I, Subtitle E

•HR 5300 IH

1 graph (2), the project under such subsection will

2 have the financial capacity to continue operating.

3 ‘‘(g) AGREEMENTS AMONG PARTICIPANTS IN

4 PROJECTS.—

5 ‘‘(1) REQUIRED PARTICIPANTS.—The Secretary

6 may make a grant under subsection (a) only if the

7 applicant for the grant has, for purposes of carrying

8 out a project under such subsection, entered into

9 agreements with—

10 ‘‘(A) the chief public health officers, and

11 the chief health officers for the elementary and

12 secondary schools, of each of the political sub13 divisions of the qualified health service area in

14 which the project under such subsection is to be

15 carried out (or, in the case of a political sub16 division that does not have such an official,

17 with another appropriate official of such sub18 division);

19 ‘‘(B) each hospital in the qualified health

20 service area;

21 ‘‘(C) representatives of entities in such

22 area that provide outpatient primary health

23 services under Federal, State, local, or private

24 programs;
163

Title I, Subtitle E

•HR 5300 IH

1 ‘‘(D) representatives of businesses in such

2 area, including small businesses; and

3 ‘‘(E) representatives of nonprofit private

4 entities in such area.

5 ‘‘(2) OPTIONAL PARTICIPANTS.—With respect

6 to compliance with this section, a grantee under sub7 section (a) may, for purposes of carrying out a

8 project under such subsection, enter into such agree9 ments with public and private entities in the quali10 fied health service area involved (in addition to the

11 entities specified in paragraph (1)) as the grantee

12 may elect.

13 ‘‘(h) EXPENDITURES OF GRANT.—With respect to a

14 project under subsection (a), the purposes for which a

15 grant under such subsection may be expended include (but

16 are not limited to) expenditures to increase the efficiency

17 of the administrative processes of providers participating

18 in the project, paying the costs of hiring and compensating

19 staff, obtaining computers and other equipment (including

20 vehicles to transport individuals to programs providing

21 outpatient primary health services), and developing and

22 operating provider networks.

23 ‘‘(i) MAINTENANCE OF EFFORT.—In the case of serv24 ices and populations that are the subject of a project

25 under subsection (a), the Secretary may make such a
164

Title I, Subtitle E

•HR 5300 IH

1 grant for a fiscal year only if the applicant involved agrees

2 that the applicant, and each entity making an agreement

3 under subsection (g), will maintain expenditures of non4 Federal amounts for such services and populations at a

5 level that is not less than the level of such expenditures

6 maintained by the applicant and the entity, respectively,

7 for the fiscal year preceding the first fiscal year for which

8 the applicant receives such a grant.

9 ‘‘(j) REPORTS TO SECRETARY.—The Secretary may

10 make a grant under subsection (a) only if the applicant

11 involved agrees to submit to the Secretary such reports

12 on the project carried out under such subsection as the

13 Secretary may require.

14 ‘‘(k) EVALUATIONS AND DISSEMINATION OF INFOR15 MATION.—The Secretary shall provide for evaluations of

16 projects carried out under subsection (a), and for the col17 lection and dissemination of information developed as a

18 result of such projects and as a result of similar projects.

19 ‘‘(l) PLANNING GRANTS.—

20 ‘‘(1) IN GENERAL.—The Secretary may make

21 grants to public and nonprofit private entities for

22 the purpose of developing plans to carry out projects

23 under subsection (a). Such a grant may be made

24 only if the applicant involved submits to the Sec25 retary information—
165

Title I, Subtitle E

•HR 5300 IH

1 ‘‘(A) providing a detailed statement of the

2 proposal of the applicant for carrying out the

3 project;

4 ‘‘(B) identifying the geographic area in

5 which the project is to be carried out; and

6 ‘‘(C) demonstrating that the area is a

7 qualified health service area and that the pro8 posal otherwise is in accordance with the re9 quirements established in this section for the

10 receipt of a grant under subsection (a).

11 ‘‘(2) DURATION AND AMOUNT OF GRANT.—The

12 period during which payments are made under para13 graph (1) for the development of a plan under such

14 paragraph may not exceed 1 year, and the amount

15 of such payments may not exceed $100,000.

16 ‘‘(m) APPLICATION FOR GRANT.—The Secretary may

17 make a grant under subsection (a) or (l) only if the appli18 cant for the grant submits an application to the Secretary

19 that—

20 ‘‘(1) contains any agreements, assurances, and

21 information required in this section with respect to

22 the grant; and

23 ‘‘(2) is in such form, is made in such manner,

24 and contains such other agreements, assurances, and

25 information as the Secretary determines to be nec-
166

Title I, Subtitle E

•HR 5300 IH

1 essary to carry out the purpose for which the grant

2 is to be provided.

3 ‘‘(n) DEFINITIONS.—For purposes of this section:

4 ‘‘(1) The term ‘designated population’ means

5 individuals described in subsection (b)(1)(C)(ii).

6 ‘‘(2) The term ‘primary health services’ includes

7 preventive health services.

8 ‘‘(3) The term ‘qualified health service area’

9 means a geographic area described in subsection (b).

10 ‘‘(o) AUTHORIZATION OF APPROPRIATIONS.—

11 ‘‘(1) PLANNING FOR PROJECTS.—For the pur12 pose of grants under subsection (l), there is author13 ized to be appropriated $5,000,000 for fiscal year

14 1995, to remain available until expended.

15 ‘‘(2) OPERATION OF PROJECTS.—For the pur16 pose of grants under subsection (a), there is author17 ized to be appropriated an aggregate $10,000,000

18 for the fiscal years 1996 through 1999.’’.

19 PART 3—COMMUNITY HEALTH NETWORKS

20 SEC. 1421. QUALIFICATIONS FOR COMMUNITY HEALTH

21 NETWORKS.

22 (a) COMMUNITY HEALTH NETWORK DEFINED.—For

23 purposes of part 7 of subtitle B of title I of Employee

24 Retirement Income Security Act of 1974 and this Act,
167

Title I, Subtitle E

•HR 5300 IH

1 added by section 1211(a) of this title, the term ‘‘commu2 nity health network’’ means an arrangement that—

3 (1) is organized by health care providers (in4 cluding medical practitioners), community groups, or

5 both, and such other organizations as may be des6 ignated by the arrangement, to provide health care

7 services to an enrolled population in a service area,

8 (2) provides to its enrollees at least the benefits

9 included in standard coverage (consistent with sec10 tion 1102(c)),

11 (3) receives payment for such services on a pro12 spective capitated basis, which may vary only by

13 family composition, geographic area, and age,

14 (4) meets the requirements of subsection (b)

15 (relating to public accountability),

16 (5) meets the requirements of subsection (c)

17 (relating to coordination and integration of care),

18 (6) meets the requirements of subsection (d) to

19 the extent the arrangement is organized as a non20 profit entity, and

21 (7) meets the requirements of section 707 of

22 the Employee Retirement Income Security Act of

23 1974 (relating to maintenance of reserves), added by

24 section 1211.
168

Title I, Subtitle E

•HR 5300 IH

1 (b) PUBLIC ACCOUNTABILITY REQUIREMENTS.—The

2 public accountability requirements of this subsection, with

3 respect to a network, are as follows:

4 (1) PERFORMANCE MEASURES.—The network

5 must establish and implement procedures for devel6 oping, compiling, evaluating, and reporting perform7 ance measures, statistics, and other information

8 on—

9 (A) the cost and financial performance of

10 network operations,

11 (B) the service utilization patterns of en12 rollees,

13 (C) the availability, accessibility, and ac14 ceptability of health care services to enrollees,

15 (D) ownership and governance of the net16 work, and

17 (E) demographic characteristics of enroll18 ees.

19 Such information shall be published annually and

20 disseminated to enrollees and the public.

21 (2) QUALITY ASSURANCE PROGRAM.—The net22 work must have an organizational arrangement for

23 an ongoing quality assurance program for all health

24 services it provides which—

25 (A) stresses health outcomes,
169

Title I, Subtitle E

•HR 5300 IH

1 (B) to the maximum extent possible, relies

2 primarily on evaluating and comparing practice

3 patterns (rather than routine case-by-case re4 view) to identify problems,

5 (C) provides review by physicians and

6 other health professionals of the outcomes and

7 process followed in the provision of health serv8 ices, and

9 (D) makes the coverage and utilization re10 view requirements of the plan, and the stand11 ards applied for such review, available to pro12 viders and the public.

13 (3) ENROLLMENT.—The network does not expel

14 or refuse to enroll any applicant or limit coverage of

15 services included in standard coverage for any appli16 cant because of the health status or requirements for

17 health services.

18 (4) CREDENTIALING.—The network must de19 velop and implement a process for the credentialing

20 (and renewal of credentials) of network providers

21 (including practitioners).

22 (5) GRIEVANCE PROCESS.—The network must

23 have an enrollee complaint and grievance resolution

24 process which shall meet any requirements of appli25 cable law.
170

Title I, Subtitle E

•HR 5300 IH

1 (c) COORDINATION AND INTEGRATION OF CARE RE2 QUIREMENTS.—The coordination and integration of care

3 requirements of this subsection, with respect to a network,

4 are as follows:

5 (1) COORDINATION AND INTEGRATION OF

6 CARE.—The network must establish and implement

7 mechanisms for coordinating the delivery of care

8 across provider settings and over time, including at

9 least mechanisms for—

10 (A) linking patient registration and medi11 cal record information so that it is accessible to

12 all parts of the network and, consistent with

13 State law, assures the confidentiality of patient

14 information,

15 (B) assisting enrollees to obtain necessary

16 care, including preventive services, and

17 (C) coordinating the services furnished to

18 an enrollee when more than one practitioner or

19 provider is involved.

20 (2) OUT-OF-AREA COVERAGE.—The network

21 must provide care within a defined service area es22 tablished by the arrangement and must provide for

23 reimbursement for standard coverage (consistent

24 with section 1102(c)) for enrollees who are tempo25 rarily outside such area.
171

Title I, Subtitle E

•HR 5300 IH

1 (3) COMMON MALPRACTICE POLICY.—Providers

2 (including practitioners) that provide standard cov3 erage to network enrollees must be covered for mal4 practice in accordance with documented criteria es5 tablished by the arrangement.

6 (4) RECORD KEEPING.—The network must use

7 a unified patient registration system and medical

8 records system that is accessible to all parts of the

9 network and assures confidentiality of patient infor10 mation, consistent with State law.

11 (d) REQUIREMENTS FOR NETWORKS ORGANIZED AS

12 NONPROFIT ENTITIES.—The requirements of this sub13 section, with respect to a network, are as follows:

14 (1) COMMUNITY HEALTH STATUS IMPROVE15 MENT PROCESS.—The network develops and imple16 ments a community health status improvement proc17 ess, in cooperation with other existing networks and

18 community organizations from the same service

19 area, that—

20 (A) provides for an assessment of commu21 nity health status that identifies important

22 health status problems in such area,

23 (B) implements measures to address such

24 problems, and
172

Title I, Subtitle F

•HR 5300 IH

1 (C) evaluates the efficiency and effective2 ness of such measures in addressing such prob3 lems.

4 The results of evaluations made pursuant to sub5 paragraph (C) shall be made publicly available on at

6 least an annual basis.

7 (2) ENROLLMENT.—The network enrolls indi8 viduals who are broadly representative of the various

9 age, social, and income groups within the area it

10 serves.

11 Subtitle F—Improved Access to

12 Rural Health Services

13 PART 1—ESTABLISHMENT OF RURAL EMER14 GENCY ACCESS CARE HOSPITALS UNDER

15 MEDICARE

16 SEC. 1501. RURAL EMERGENCY ACCESS CARE HOSPITALS

17 DESCRIBED.

18 (a) IN GENERAL.—Section 1861 of the Social Secu19 rity Act (42 U.S.C. 1395x) is amended by adding at the

20 end the following new subsection:
173

Title I, Subtitle F

•HR 5300 IH

1 ‘‘Rural Emergency Access Care Hospital; Rural

2 Emergency Access Care Hospital Services

3 ‘‘(oo)(1) The term ‘rural emergency access care hos4 pital’ means, for a fiscal year, a facility with respect to

5 which the Secretary finds the following:

6 ‘‘(A) The facility is located in a rural area (as

7 defined in section 1886(d)(2)(D)).

8 ‘‘(B) The facility was a hospital under this title

9 at any time during the 5-year period that ends on

10 the date of the enactment of this subsection.

11 ‘‘(C) The facility is in danger of closing due to

12 low inpatient utilization rates and negative operating

13 losses, and the closure of the facility would limit the

14 access of individuals residing in the facility’s service

15 area to emergency services.

16 ‘‘(D) The facility has entered into (or plans to

17 enter into), with a hospital with a participation

18 agreement in effect under section 1866(a), and

19 under such agreement the hospital shall accept pa20 tients transferred to the hospital from the facility

21 and receives data from and transmits data to the fa22 cility.

23 ‘‘(E) There is a practitioner who is qualified to

24 provide advanced cardiac life support services (as de-
174

Title I, Subtitle F

•HR 5300 IH

1 termined by the State in which the facility is lo2 cated) on-site at the facility on a 24-hour basis.

3 ‘‘(F) A physician is available on-call to provide

4 emergency medical services on a 24-hour basis.

5 ‘‘(G) The facility meets such staffing require6 ments as would apply under section 1861(e) to a

7 hospital located in a rural area, except that—

8 ‘‘(i) the facility need not meet hospital

9 standards relating to the number of hours dur10 ing a day, or days during a week, in which the

11 facility must be open, except insofar as the fa12 cility is required to provide emergency care on

13 a 24-hour basis under subparagraphs (E) and

14 (F); and

15 ‘‘(ii) the facility may provide any services

16 otherwise required to be provided by a full-time,

17 on-site dietitian, pharmacist, laboratory techni18 cian, medical technologist, or radiological tech19 nologist on a part-time, off-site basis.

20 ‘‘(H) The facility meets the requirements appli21 cable to clinics and facilities under subparagraphs

22 (C) through (J) of paragraph (2) of section

23 1861(aa) and of clauses (ii) and (iv) of the second

24 sentence of such paragraph (or, in the case of the

25 requirements of subparagraph (E), (F), or (J) of
175

Title I, Subtitle F

•HR 5300 IH

1 such paragraph, would meet the requirements if any

2 reference in such subparagraph to a ‘nurse practi3 tioner’ or to ‘nurse practitioners’ was deemed to be

4 a reference to a ‘nurse practitioner or nurse’ or to

5 ‘nurse practitioners or nurses’), except that in deter6 mining whether a facility meets the requirements of

7 this subparagraph, subparagraphs (E) and (F) of

8 that paragraph shall be applied as if any reference

9 to a ‘physician’ is a reference to a physician as de10 fined in section 1861(r)(1).

11 ‘‘(2) The term ‘rural emergency access care hospital

12 services’ means the following services provided by a rural

13 emergency access care hospital:

14 ‘‘(A) An appropriate medical screening exam15 ination (as described in section 1867(a)).

16 ‘‘(B) Necessary stabilizing examination and

17 treatment services for an emergency medical condi18 tion and labor (as described in section 1867(b)).’’.

19 (b) REQUIRING RURAL EMERGENCY ACCESS CARE

20 HOSPITALS TO MEET HOSPITAL ANTI-DUMPING RE21 QUIREMENTS.—Section 1867(e)(5) of such Act (42 U.S.C.

22 1395dd(e)(5)) is amended by striking ‘‘1861(mm)(1))’’

23 and inserting ‘‘1861(mm)(1)) and a rural emergency ac24 cess care hospital (as defined in section 1861(oo)(1))’’.
176

Title I, Subtitle F

•HR 5300 IH

1 SEC. 1502. COVERAGE OF AND PAYMENT FOR SERVICES.

2 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

3 of the Social Security Act (42 U.S.C. 1395k(a)(2)) is

4 amended—

5 (1) by striking ‘‘and’’ at the end of subpara6 graph (I);

7 (2) by striking the period at the end of sub8 paragraph (J) and inserting ‘‘; and’’; and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(K) rural emergency access care hospital

12 services (as defined in section 1861(oo)(2)).’’.

13 (b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

14 RURAL PRIMARY CARE HOSPITAL SERVICES.—

15 (1) IN GENERAL.—Section 1833(a)(6) of the

16 Social Security Act (42 U.S.C. 1395l(a)(6)) is

17 amended by striking ‘‘services,’’ and inserting ‘‘serv18 ices and rural emergency access care hospital serv19 ices,’’.

20 (2) PAYMENT METHODOLOGY DESCRIBED.—

21 Section 1834(g) of such Act (42 U.S.C. 1395m(g))

22 is amended—

23 (A) in the heading, by striking ‘‘SERV24 ICES’’ and inserting ‘‘SERVICES AND RURAL

25 EMERGENCY ACCESS CARE HOSPITAL SERV26 ICES’’; and
177

Title I, Subtitle F

•HR 5300 IH

1 (B) in paragraph (1), by striking ‘‘during

2 a year before 1993’’ and inserting ‘‘during a

3 year before the prospective payment system de4 scribed in paragraph (2) is in effect’’;

5 (C) in paragraph (1), by adding at the end

6 the following:

7 ‘‘The amount of payment shall be determined under

8 either method without regard to the amount of the

9 customary or other charge.’’;

10 (D) in paragraph (2), by striking ‘‘Janu11 ary 1, 1993,’’ and inserting ‘‘January 1,

12 1996,’’; and

13 (E) by adding at the end the following new

14 paragraph:

15 ‘‘(3) APPLICATION OF METHODS TO PAYMENT

16 FOR RURAL EMERGENCY ACCESS CARE HOSPITAL

17 SERVICES.—The amount of payment for rural emer18 gency access care hospital services provided during

19 a year shall be determined using the applicable

20 method provided under this subsection for determin21 ing payment for outpatient rural primary care hos22 pital services during the year.’’.
178

Title I, Subtitle F

•HR 5300 IH

1 SEC. 1503. EFFECTIVE DATE.

2 The amendments made by sections 1501 and 1502

3 shall apply to fiscal years beginning on or after October

4 1, 1994.

5 PART 2—RURAL MEDICAL EMERGENCIES AIR

6 TRANSPORT

7 SEC. 1511. GRANTS TO STATES REGARDING AIRCRAFT FOR

8 TRANSPORTING RURAL VICTIMS OF MEDICAL

9 EMERGENCIES.

10 Part E of title XII of the Public Health Service Act

11 (42 U.S.C. 300d–51 et seq.) is amended by adding at the

12 end thereof the following new section:

13 ‘‘SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL

14 VICTIMS OF MEDICAL EMERGENCIES.

15 ‘‘(a) IN GENERAL.—The Secretary shall make grants

16 to States to assist such States in the creation or enhance17 ment of air medical transport systems that provide victims

18 of medical emergencies in rural areas with access to treat19 ments for the injuries or other conditions resulting from

20 such emergencies.

21 ‘‘(b) APPLICATION AND PLAN.—

22 ‘‘(1) APPLICATION.—To be eligible to receive a

23 grant under subsection (a), a State shall prepare

24 and submit to the Secretary an application in such

25 form, made in such manner, and containing such

26 agreements, assurances, and information, including
179

Title I, Subtitle F

•HR 5300 IH

1 a State plan as required in paragraph (2), as the

2 Secretary determines to be necessary to carry out

3 this section.

4 ‘‘(2) STATE PLAN.—An application submitted

5 under paragraph (1) shall contain a State plan that

6 shall—

7 ‘‘(A) describe the intended uses of the

8 grant proceeds and the geographic areas to be

9 served;

10 ‘‘(B) demonstrate that the geographic

11 areas to be served, as described under subpara12 graph (A), are rural in nature;

13 ‘‘(C) demonstrate that there is a lack of

14 facilities available and equipped to deliver ad15 vanced levels of medical care in the geographic

16 areas to be served;

17 ‘‘(D) demonstrate that in utilizing the

18 grant proceeds for the establishment or en19 hancement of air medical services the State

20 would be making a cost-effective improvement

21 to existing ground-based or air emergency medi22 cal service systems;

23 ‘‘(E) demonstrate that the State will not

24 utilize the grant proceeds to duplicate the capa25 bilities of existing air medical systems that are
180

Title I, Subtitle F

•HR 5300 IH

1 effectively meeting the emergency medical needs

2 of the populations they serve;

3 ‘‘(F) demonstrate that in utilizing the

4 grant proceeds the State is likely to achieve a

5 reduction in the morbidity and mortality rates

6 of the areas to be served, as determined by the

7 Secretary;

8 ‘‘(G) demonstrate that the State, in utiliz9 ing the grant proceeds, will—

10 ‘‘(i) maintain the expenditures of the

11 State for air and ground medical transport

12 systems at a level equal to not less than

13 the level of such expenditures maintained

14 by the State for the fiscal year preceding

15 the fiscal year for which the grant is re16 ceived; and

17 ‘‘(ii) ensure that recipients of direct

18 financial assistance from the State under

19 such grant will maintain expenditures of

20 such recipients for such systems at a level

21 at least equal to the level of such expendi22 tures maintained by such recipients for the

23 fiscal year preceding the fiscal year for

24 which the financial assistance is received;
181

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(H) demonstrate that persons experienced

2 in the field of air medical service delivery were

3 consulted in the preparation of the State plan;

4 and

5 ‘‘(I) contain such other information as the

6 Secretary may determine appropriate.

7 ‘‘(c) CONSIDERATIONS IN AWARDING GRANTS.—In

8 determining whether to award a grant to a State under

9 this section, the Secretary shall—

10 ‘‘(1) consider the rural nature of the areas to

11 be served with the grant proceeds and the services

12 to be provided with such proceeds, as identified in

13 the State plan submitted under subsection (b); and

14 ‘‘(2) give preference to States with State plans

15 that demonstrate an effective integration of the pro16 posed air medical transport systems into a com17 prehensive network or plan for regional or statewide

18 emergency medical service delivery.

19 ‘‘(d) STATE ADMINISTRATION AND USE OF

20 GRANT.—

21 ‘‘(1) IN GENERAL.—The Secretary may not

22 make a grant to a State under subsection (a) unless

23 the State agrees that such grant will be adminis24 tered by the State agency with principal responsibil25 ity for carrying out programs regarding the provi-
182

Title I, Subtitle F

•HR 5300 IH

1 sion of medical services to victims of medical emer2 gencies or trauma.

3 ‘‘(2) PERMITTED USES.—A State may use

4 amounts received under a grant awarded under this

5 section to award subgrants to public and private en6 tities operating within the State.

7 ‘‘(3) OPPORTUNITY FOR PUBLIC COMMENT.—

8 The Secretary may not make a grant to a State

9 under subsection (a) unless that State agrees that,

10 in developing and carrying out the State plan under

11 subsection (b)(2), the State will provide public notice

12 with respect to the plan (including any revisions

13 thereto) and facilitate comments from interested

14 persons.

15 ‘‘(e) NUMBER OF GRANTS.—The Secretary shall

16 award grants under this section to not less than 7 States.

17 ‘‘(f) REPORTS.—

18 ‘‘(1) REQUIREMENT.—A State that receives a

19 grant under this section shall annually (during each

20 year in which the grant proceeds are used) prepare

21 and submit to the Secretary a report that shall con22 tain—

23 ‘‘(A) a description of the manner in which

24 the grant proceeds were utilized;
183

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(B) a description of the effectiveness of

2 the air medical transport programs assisted

3 with grant proceeds; and

4 ‘‘(C) such other information as the Sec5 retary may require.

6 ‘‘(2) TERMINATION OF FUNDING.—In reviewing

7 reports submitted under paragraph (1), if the Sec8 retary determines that a State is not using amounts

9 provided under a grant awarded under this section

10 in accordance with the State plan submitted by the

11 State under subsection (b), the Secretary may termi12 nate the payment of amounts under such grant to

13 the State until such time as the Secretary deter14 mines that the State comes into compliance with

15 such plan.

16 ‘‘(g) DEFINITION.—As used in this section, the term

17 ‘rural areas’ means geographic areas that are located out18 side of standard metropolitan statistical areas, as identi19 fied by the Secretary.

20 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

21 are authorized to be appropriated to make grants under

22 this section, $15,000,000 for fiscal year 1994, and such

23 sums as may be necessary for each of the fiscal years 1996

24 and 1997.’’.
184

Title I, Subtitle F

•HR 5300 IH

1 PART 3—EMERGENCY MEDICAL SERVICES

2 AMENDMENTS

3 SEC. 1521. ESTABLISHMENT OF OFFICE OF EMERGENCY

4 MEDICAL SERVICES.

5 Title XII of the Public Health Service Act (42 U.S.C.

6 300d et seq.) is amended—

7 (1) in the heading for the title, by striking

8 ‘‘TRAUMA CARE’’ and inserting ‘‘EMERGENCY

9 MEDICAL SERVICES’’;

10 (2) in the heading for part A, by striking

11 ‘‘GENERAL’’ and all that follows and inserting

12 ‘‘GENERAL AUTHORITIES AND DUTIES’’; and

13 (3) by amending section 1201 to read as fol14 lows:

15 ‘‘SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY

16 MEDICAL SERVICES.

17 ‘‘(a) IN GENERAL.—The Secretary shall establish an

18 office to be known as the Office of Emergency Medical

19 Services, which shall be headed by a director appointed

20 by the Secretary. The Secretary shall carry out this title

21 acting through the Director of such Office.

22 ‘‘(b) GENERAL AUTHORITIES AND DUTIES.—With

23 respect to emergency medical services (including trauma

24 care), the Secretary shall—

25 ‘‘(1) conduct and support research, training,

26 evaluations, and demonstration projects;
185

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(2) foster the development of appropriate,

2 modern systems of such services through the sharing

3 of information among agencies and individuals in4 volved in the study and provision of such services;

5 ‘‘(3) sponsor workshops and conferences;

6 ‘‘(4) as appropriate, disseminate to public and

7 private entities information obtained in carrying out

8 paragraphs (1) through (4);

9 ‘‘(5) provide technical assistance to State and

10 local agencies;

11 ‘‘(6) coordinate activities of the Department of

12 Health and Human Services; and

13 ‘‘(7) as appropriate, coordinate activities of

14 such Department with activities of other Federal

15 agencies.

16 ‘‘(c) CERTAIN REQUIREMENTS.—With respect to

17 emergency medical services (including trauma care), the

18 Secretary shall ensure that activities under subsection (b)

19 are carried out regarding—

20 ‘‘(1) maintaining an adequate number of health

21 professionals with expertise in the provision of the

22 services, including hospital-based professionals and

23 prehospital-based professionals;

24 ‘‘(2) developing, periodically reviewing, and re25 vising as appropriate, in collaboration with appro-
186

Title I, Subtitle F

•HR 5300 IH

1 priate public and private entities, guidelines for the

2 provision of such services (including, for various typ3 ical circumstances, guidelines on the number and va4 riety of professionals, on equipment, and on train5 ing);

6 ‘‘(3) the appropriate use of available tech7 nologies, including communications technologies; and

8 ‘‘(4) the unique needs of underserved inner-city

9 areas and underserved rural areas.

10 ‘‘(d) GRANTS, COOPERATIVE AGREEMENTS, AND

11 CONTRACTS.—In carrying out subsections (b) and (c), the

12 Secretary may make grants and enter into cooperative

13 agreements and contracts.

14 ‘‘(e) DEFINITIONS.—For purposes of this part:

15 ‘‘(1) The term ‘hospital-based professional’

16 means a health professional (including an allied

17 health professional) who has expertise in providing

18 one or more emergency medical services and who

19 normally provides the services at a medical facility.

20 ‘‘(2) The term ‘prehospital-based professional’

21 means a health professional (including an allied

22 health professional) who has expertise in providing

23 one or more emergency medical services and who

24 normally provides the services at the site of the med-
187

Title I, Subtitle F

•HR 5300 IH

1 ical emergency or during transport to a medical fa2 cility.’’.

3 SEC. 1522. STATE OFFICES OF EMERGENCY MEDICAL SERV4 ICES.

5 (a) TECHNICAL AMENDMENTS TO FACILITATE ES6 TABLISHMENT OF PROGRAM.—

7 (1) IN GENERAL.—Title XII of the Public

8 Health Service Act (42 U.S.C. 300d et seq.) is

9 amended—

10 (A) by redesignating section 1239 as sec11 tion 1235;

12 (B) by redesignating sections 1231 and

13 1233 as sections 1236 and 1237, respectively;

14 and

15 (C) by redesignating sections 1211 through

16 1222 as sections 1221 through 1232, respec17 tively.

18 (2) MODIFICATIONS IN FORMAT OF TITLE

19 XII.—Title XII of the Public Health Service Act, as

20 amended by paragraph (1) of this subsection, is

21 amended—

22 (A) by striking ‘‘PART B’’ and all that fol23 low through ‘‘STATE PLANS’’ and inserting the

24 following:
188

Title I, Subtitle F

•HR 5300 IH

1 ‘‘Subpart II—Formula Grants With Respect to

2 Modifications of State Plans’’;

3 (B) by striking ‘‘PART C—GENERAL PRO4 VISIONS’’ and inserting the following:

5 ‘‘Subpart III—General Provisions’’;

6 (C) by redesignating sections 1202 and

7 1203 as sections 1211 and 1212, respectively;

8 and

9 (D) by inserting before section 1211 (as so

10 redesignated) the following:

11 ‘‘PART B—TRAUMA CARE

12 ‘‘Subpart I—Advisory Council; Clearinghouse’’.

13 (b) STATE OFFICES.—Title XII of the Public Health

14 Service Act, as amended by subsection (a) of this section,

15 is amended by inserting after section 1201 the following

16 new section:

17 ‘‘SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL

18 SERVICES.

19 ‘‘(a) PROGRAM OF GRANTS.—The Secretary may

20 make grants to States for the purpose of improving the

21 availability and quality of emergency medical services

22 through the operation of State offices of emergency medi23 cal services.

24 ‘‘(b) REQUIREMENT OF MATCHING FUNDS.—
189

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(1) IN GENERAL.—The Secretary may not

2 make a grant under subsection (a) unless the State

3 involved agrees, with respect to the costs to be in4 curred by the State in carrying out the purpose de5 scribed in such subsection, to provide non-Federal

6 contributions toward such costs in an amount that—

7 ‘‘(A) for the first fiscal year of payments

8 under the grant, is not less than $1 for each $3

9 of Federal funds provided in the grant;

10 ‘‘(B) for any second fiscal year of such

11 payments, is not less than $1 for each $1 of

12 Federal funds provided in the grant; and

13 ‘‘(C) for any third fiscal year of such pay14 ments, is not less than $3 for each $1 of Fed15 eral funds provided in the grant.

16 ‘‘(2) DETERMINATION OF AMOUNT OF NON17 FEDERAL CONTRIBUTION.—

18 ‘‘(A) Subject to subparagraph (B), non19 Federal contributions required in paragraph (1)

20 may be in cash or in kind, fairly evaluated, in21 cluding plant, equipment, or services. Amounts

22 provided by the Federal Government, or serv23 ices assisted or subsidized to any significant ex24 tent by the Federal Government, may not be in-
190

Title I, Subtitle F

•HR 5300 IH

1 cluded in determining the amount of such non2 Federal contributions.

3 ‘‘(B) The Secretary may not make a grant

4 under subsection (a) unless the State involved

5 agrees that—

6 ‘‘(i) for the first fiscal year of pay7 ments under the grant, 100 percent or less

8 of the non-Federal contributions required

9 in paragraph (1) will be provided in the

10 form of in-kind contributions;

11 ‘‘(ii) for any second fiscal year of such

12 payments, not more than 50 percent of

13 such non-Federal contributions will be pro14 vided in the form of in-kind contributions;

15 and

16 ‘‘(iii) for any third fiscal year of such

17 payments, such non-Federal contributions

18 will be provided solely in the form of cash.

19 ‘‘(c) CERTAIN REQUIRED ACTIVITIES.—The Sec20 retary may not make a grant under subsection (a) unless

21 the State involved agrees that activities carried out by an

22 office operated pursuant to such subsection will include—

23 ‘‘(1) coordinating the activities carried out in

24 the State that relate to emergency medical services;
191

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(2) activities regarding the matters described

2 in paragraphs (1) through (4) section 1201(b); and

3 ‘‘(3) identifying Federal and State programs re4 garding emergency medical services and providing

5 technical assistance to public and nonprofit private

6 entities regarding participation in such programs.

7 ‘‘(d) REQUIREMENT REGARDING ANNUAL BUDGET

8 FOR OFFICE.—The Secretary may not make a grant

9 under subsection (a) unless the State involved agrees that,

10 for any fiscal year for which the State receives such a

11 grant, the office operated pursuant to subsection (a) will

12 be provided with an annual budget of not less than

13 $50,000.

14 ‘‘(e) CERTAIN USES OF FUNDS.—

15 ‘‘(1) RESTRICTIONS.—The Secretary may not

16 make a grant under subsection (a) unless the State

17 involved agrees that—

18 ‘‘(A) if research with respect to emergency

19 medical services is conducted pursuant to the

20 grant, not more than 10 percent of the grant

21 will be expended for such research; and

22 ‘‘(B) the grant will not be expended to pro23 vide emergency medical services (including pro24 viding cash payments regarding such services).
192

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(2) ESTABLISHMENT OF OFFICE.—Activities

2 for which a State may expend a grant under sub3 section (a) include paying the costs of establishing

4 an office of emergency medical services for purposes

5 of such subsection.

6 ‘‘(f) REPORTS.—The Secretary may not make a

7 grant under subsection (a) unless the State involved

8 agrees to submit to the Secretary reports containing such

9 information as the Secretary may require regarding activi10 ties carried out under this section by the State.

11 ‘‘(g) REQUIREMENT OF APPLICATION.—The Sec12 retary may not make a grant under subsection (a) unless

13 an application for the grant is submitted to the Secretary

14 and the application is in such form, is made in such man15 ner, and contains such agreements, assurances, and infor16 mation as the Secretary determines to be necessary to

17 carry out this section.’’.

18 SEC. 1523. PROGRAMS FOR RURAL AREAS.

19 (a) IN GENERAL.—Title XII of the Public Health

20 Service Act, as amended by section 1522, is amended—

21 (1) by transferring section 1204 to part A;

22 (2) by redesignating such section as section

23 1203;

24 (3) by inserting such section after section 1202;

25 and
193

Title I, Subtitle F

•HR 5300 IH

1 (4) in section 1203 (as so redesignated)—

2 (A) by redesignating subsection (c) as sub3 section (d); and

4 (B) by inserting after subsection (b) the

5 following new subsection:

6 ‘‘(c) DEMONSTRATION PROGRAM REGARDING TELE7 COMMUNICATIONS.—

8 ‘‘(1) LINKAGES FOR RURAL FACILITIES.—

9 Projects under subsection (a)(1) shall include dem10 onstration projects to establish telecommunications

11 between rural medical facilities and medical facilities

12 that have expertise or equipment that can be utilized

13 by the rural facilities through the telecommuni14 cations.

15 ‘‘(2) MODES OF COMMUNICATION.—The Sec16 retary shall ensure that the telecommunications

17 technologies demonstrated under paragraph (1) in18 clude interactive video telecommunications, static

19 video imaging transmitted through the telephone

20 system, and facsimiles transmitted through such

21 system.’’.

22 (b) CONFORMING AMENDMENT.—Section 1203 of the

23 Public Health Service Act, as redesignated by subsection

24 (a)(2) of this section, is amended in the heading for the
194

Title I, Subtitle F

•HR 5300 IH

1 section by striking ‘‘ESTABLISHMENT’’ and all that fol2 lows and inserting ‘‘PROGRAMS FOR RURAL AREAS.’’.

3 SEC. 1524. FUNDING.

4 Title XII of the Public Health Service Act, as amend5 ed by the preceding provisions of this title, is amended—

6 (1) by redesignating parts C through F as parts

7 D through G, respectively;

8 (2) by inserting after subpart III of part B the

9 following:

10 ‘‘PART C—FUNDING’’;

11 (3) by transferring section 1239 to part C (as

12 so added); and

13 (4) in such section, by striking subsections (a)

14 and (b) and inserting the following:

15 ‘‘(a) EMERGENCY MEDICAL SERVICES GEN16 ERALLY.—

17 ‘‘(1) IN GENERAL.—For the purpose of carry18 ing out section 1201 other than with respect to trau19 ma care, there are authorized to be appropriated

20 $2,000,000 for fiscal year 1995, and such sums as

21 may be necessary for each of the fiscal years 1996

22 and 1997.

23 ‘‘(2) STATE OFFICES.—For the purpose of car24 rying out section 1202, there are authorized to be

25 appropriated $3,000,000 for fiscal year 1995, and
195

Title I, Subtitle F

•HR 5300 IH

1 such sums as may be necessary for each of the fiscal

2 years 1996 and 1997.

3 ‘‘(3) CERTAIN TELECOMMUNICATIONS DEM4 ONSTRATIONS.—For the purpose of carrying out sec5 tion 1203(c), there are authorized to be appro6 priated $10,000,000 for fiscal year 1995 and such

7 sums as may be necessary for each of the fiscal

8 years 1996 and 1997.

9 ‘‘(b) TRAUMA CARE AND CERTAIN OTHER ACTIVI10 TIES.—

11 ‘‘(1) IN GENERAL.—For the purpose of carry12 ing out part B, section 1201 with respect to trauma

13 care, and section 1203 (other than subsection (c) of

14 such section), there are authorized to be appro15 priated $60,000,000 for fiscal year 1995, and such

16 sums as may be necessary for each of the fiscal

17 years 1996 and 1997.

18 ‘‘(2) ALLOCATION OF FUNDS BY SECRETARY.—

19 ‘‘(A) For the purpose of carrying out sub20 part I of part B, section 1201 with respect to

21 trauma care, and section 1203 (other than sub22 section (c) of such section), the Secretary shall

23 make available 10 percent of the amounts ap24 propriated for a fiscal year under paragraph

25 (1).
196

Title I, Subtitle F

•HR 5300 IH

1 ‘‘(B) For the purpose of carrying out sec2 tion 1203 (other than subsection (c) of such

3 section), the Secretary shall make available 10

4 percent of the amounts appropriated for a fiscal

5 year under paragraph (1).

6 ‘‘(C)(i) For the purpose of making allot7 ments under section 1221(a), the Secretary

8 shall, subject to subsection (c), make available

9 80 percent of the amounts appropriated for a

10 fiscal year under paragraph (1).

11 ‘‘(ii) Amounts paid to a State under sec12 tion 1221(a) for a fiscal year shall, for the pur13 poses for which the amounts were paid, remain

14 available for obligation until the end of the fis15 cal year immediately following the fiscal year

16 for which the amounts were paid.’’.

17 SEC. 1525. CONFORMING AMENDMENTS.

18 Title XII of the Public Health Service Act, as amend19 ed by the preceding provisions of this title, is amended—

20 (1) in section 1203(b), by striking ‘‘1214(c)(1)’’

21 and inserting ‘‘1224(c)(1)’’;

22 (2) in section 1211(b)(3), by striking ‘‘1213(c)’’

23 and inserting ‘‘1223(c)’’;

24 (3) in section 1221—

25 (A) in subsection (a)—
197

Title I, Subtitle F

•HR 5300 IH

1 (i) by striking ‘‘1218’’ and inserting

2 ‘‘1228’’; and

3 (ii) by striking ‘‘1217’’ and inserting

4 ‘‘1227’’; and

5 (B) in subsection (b)—

6 (i) by striking ‘‘1233’’ and inserting

7 ‘‘1237’’; and

8 (ii) by striking ‘‘1213’’ and inserting

9 ‘‘1223’’;

10 (4) in section 1222—

11 (A) in subsection (a)—

12 (i) in paragraph (1), by striking

13 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

14 (ii) in paragraph (2)(A), by striking

15 ‘‘1211(c)’’ and inserting ‘‘1221(c)’’; and

16 (B) in subsection (b), by striking

17 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

18 (5) in section 1223—

19 (A) in subsection (a), by striking

20 ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

21 (B) in subsection (b)—

22 (i) in paragraph (1), by striking

23 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

24 (ii) in paragraph (3), by striking

25 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and
198

Title I, Subtitle F

•HR 5300 IH

1 (C) in subsection (d), by striking

2 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

3 (6) in section 1224—

4 (A) in each of subsections (a) through (c),

5 by striking ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

6 and

7 (B) in subsection (b), by striking

8 ‘‘1213(a)(7)’’ and inserting ‘‘1223(a)(7)’’;

9 (7) in section 1225—

10 (A) in subsection (a)—

11 (i) by striking ‘‘1211(a)’’ and insert12 ing ‘‘1221(a)’’; and

13 (ii) by striking ‘‘1233’’ and inserting

14 ‘‘1237’’; and

15 (B) in subsection (b), by striking

16 ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

17 (8) in section 1226, in each of subsections (a)

18 through (c), by striking ‘‘1211(a)’’ and inserting

19 ‘‘1221(a)’’;

20 (9) in section 1227—

21 (A) by striking ‘‘1211(a)’’ and inserting

22 ‘‘1221(a)’’; and

23 (B) by striking ‘‘1214’’ and inserting

24 ‘‘1224’’;

25 (10) in section 1228—
199

Title I, Subtitle F

•HR 5300 IH

1 (A) in each of subsections (a) through (c),

2 by striking ‘‘1211(a)’’ each place such term ap3 pears and inserting ‘‘1221(a)’’;

4 (B) in subsection (b), in each of para5 graphs (2)(A) and (3)(A), by striking

6 ‘‘1232(a)’’ and inserting ‘‘1239(a)’’; and

7 (C) in subsection (c)(2)—

8 (i) by striking ‘‘1232(b)(3)’’ and in9 serting ‘‘1239(b)(3)’’; and

10 (ii) by striking ‘‘1217’’ and inserting

11 ‘‘1227’’;

12 (11) in section 1229(a), by striking ‘‘1211(a)’’

13 each place such term appears and inserting

14 ‘‘1221(a)’’;

15 (12) in section 1230(a), by striking ‘‘1211(a)’’

16 each place such term appears and inserting

17 ‘‘1221(a)’’;

18 (13) in section 1231—

19 (A) in each of subsections (a) and (b), by

20 striking ‘‘1211(a)’’ each place such term ap21 pears and inserting ‘‘1221(a)’’; and

22 (B) in each of subsections (a) and (b), by

23 striking ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

24 (14) in section 1232, by striking ‘‘1211’’ and

25 inserting ‘‘1221’’;
200

Title I, Subtitle F

•HR 5300 IH

1 (15) in section 1236—

2 (A) in the matter preceding paragraph (1),

3 by striking ‘‘this title’’ and inserting ‘‘this

4 part’’; and

5 (B) in paragraph (1), by striking ‘‘1213’’

6 and inserting ‘‘1223’’;

7 (16) in section 1237—

8 (A) in each of subsections (a) and (b), by

9 striking ‘‘1211’’ each place such term appears

10 and inserting ‘‘1221’’;

11 (B) in subsection (b)—

12 (i) by striking ‘‘part B’’ and inserting

13 ‘‘subpart II’’; and

14 (ii) by striking ‘‘1214(c)(1)’’ and in15 serting ‘‘1224(c)(1)’’; and

16 (C) in subsection (c), by striking ‘‘1213’’

17 and inserting ‘‘1223’’; and

18 (17) in section 1239(c)(1)—

19 (A) by striking ‘‘1211(a)’’ and inserting

20 ‘‘1221(a)’’;

21 (B) by striking ‘‘1218(a)(2)’’ and inserting

22 ‘‘1228(a)(2)’’; and

23 (C) by striking ‘‘part B’’ and inserting

24 ‘‘subpart II’’.
201

Title I, Subtitle F

•HR 5300 IH

1 SEC. 1526. EFFECTIVE DATE.

2 The amendments made by this part shall take effect

3 October 1, 1994, or upon the date of the enactment of

4 this Act, whichever occurs later.

5 PART 4—ADDITIONAL RURAL HEALTH CARE

6 PROVISIONS

7 SEC. 1531. DEVELOPMENT OF COMMUNITY-OPERATED

8 HEALTH PLANS IN RURAL AND FRONTIER

9 AREAS.

10 (a) COMMUNITY-OPERATED HEALTH PLANS.—The

11 Secretary of Health and Human Services (in this part re12 ferred to as the ‘‘Secretary’’) may make grants to public

13 and nonprofit private entities for the purpose of carrying

14 out projects to develop health plans to provide services ex15 clusively in rural and frontier areas.

16 (b) COMMUNITY INVOLVEMENT.—The Secretary may

17 make a grant under subsection (a) only if the applicant

18 involved meets the following conditions:

19 (1) In developing the proposal of the applicant

20 for a project under such subsection, the applicant

21 has consulted with the local governments of the geo22 graphic area to be served by the health plan devel23 oped through the project, with individuals who reside

24 in the area, and with a reasonable number and vari25 ety of health professionals who provide services in

26 the area.
202

Title I, Subtitle F

•HR 5300 IH

1 (2) The applicant agrees that the principal legal

2 authority over the operation of the health plan will

3 be vested in individuals who reside in such geo4 graphic area.

5 (3) In the proposal the applicant specifies how

6 a full continuum of services will be provided.

7 (4) In the proposal the applicant specifies how

8 the proposed health plan will utilize existing health

9 care facilities in a manner that avoids unnecessary

10 duplication.

11 (c) USE OF FUNDS.—

12 (1) IN GENERAL.—Funds made available under

13 this section may be used for the following:

14 (A) To develop integrated health networks,

15 utilizing existing local providers and facilities

16 where appropriate, with community involve17 ment.

18 (B) For information systems, including

19 telecommunications.

20 (C) For transportation services.

21 (D) To develop rural emergency access

22 care hospitals (as defined in section

23 1861(oo)(1) of the Social Security Act, as

24 added by section 1501).
203

Title I, Subtitle F

•HR 5300 IH

1 (2) LIMITATIONS.—Funds made available under

2 this section shall not be used for the following:

3 (A) For a telecommunications system, un4 less the system is coordinated with, and does

5 not duplicate, such a system existing in the

6 area.

7 (B) For paying off existing debt.

8 (d) AUTHORIZATION OF APPROPRIATIONS.—There

9 are authorized to be appropriated $25,000,000 in each of

10 fiscal years 1996, 1997, and 1998 to carry out this

11 section.

12 SEC. 1532. PRIMARY HEALTH CARE FOR MEDICALLY UN13 DERSERVED RURAL COMMUNITIES; IN14 CREASED CAPACITY OF HOSPITALS AND OUT15 PATIENT FACILITIES.

16 (a) IN GENERAL.—The Secretary may make grants

17 to public and nonprofit private hospitals in medically un18 derserved rural communities, and to public and nonprofit

19 outpatient facilities in such communities, for the purpose

20 of carrying out projects to develop or increase the capacity

21 of the hospitals and facilities to provide primary health

22 services.

23 (b) MEDICALLY UNDERSERVED RURAL COMMU24 NITY.—For purposes of this section, the term ‘‘medically

25 underserved rural community’’ means—
204

Title I, Subtitle F

•HR 5300 IH

1 (1) a rural area that has a substantial number

2 of individuals who are members of a medically un3 derserved population, as defined in section 330 of

4 the Public Health Service Act; or

5 (2) a rural area a significant portion of which

6 is a health professional shortage area designated

7 under section 332 of such Act.

8 (c) CERTAIN EXPENDITURES.—The purposes for

9 which the Secretary may authorize a grant under sub10 section (a) to be expended include the renovation of facili11 ties, the purchase of equipment, and the training of per12 sonnel.

13 (d) AUTHORIZATION OF APPROPRIATIONS.—

14 (1) HOSPITALS.—There are authorized to be

15 appropriated $50,000,000 in each of fiscal years

16 1996, 1997, and 1998 for the purpose of making

17 grants to hospitals under subsection (a).

18 (2) OUTPATIENT FACILITIES.—There are au19 thorized to be appropriated $25,000,000 in each of

20 fiscal years 1996, 1997, and 1998 for the purpose

21 of making grants to outpatient facilities under sub22 section (a).
205

Title I, Subtitle F

•HR 5300 IH

1 SEC. 1533. INNOVATIVE APPROACHES TO DELIVERY OF

2 HEALTH SERVICES IN RURAL AREAS.

3 (a) IN GENERAL.—The Secretary, acting through the

4 Administrator for Health Care Policy and Research, may

5 make grants to public and nonprofit private entities for

6 the purposes of conducting research and carrying out dem7 onstration projects to develop innovative approaches to the

8 delivery of health care in rural areas, such as the use of

9 telemedicine and the use of mobile delivery units.

10 (b) AUTHORIZATION OF APPROPRIATIONS.—There

11 are authorized to be appropriated $15,000,000 in each of

12 fiscal years 1996 through 2000 to carry out this section.

13 SEC. 1534. TRAINING OF RURAL HEALTH PROFESSIONALS

14 OTHER THAN PHYSICIANS.

15 (a) FUNDING FOR PROGRAMS UNDER PUBLIC

16 HEALTH SERVICE ACT.—With respect to programs of

17 title VII or VIII of the Public Health Service Act that

18 provide for the training of individuals as health profes19 sionals other than physicians, there are authorized to be

20 appropriated, in addition to amounts otherwise authorized

21 to be appropriated, $50,000,000 in each of fiscal years

22 1996 through 2000 for the purpose of the Secretary carry23 ing out such programs through entities described in sub24 section (b).
206

Title I, Subtitle F

•HR 5300 IH

1 (b) ELIGIBILITY.—With respect to a program re2 ferred to in subsection (a), an entity described in this sub3 section is an entity—

4 (1) that is eligible to receive grants or contracts

5 under the program (as provided in the applicable

6 provisions of title VII or VIII of the Public Health

7 Service Act); and

8 (2) a substantial number of whose designated

9 graduates are providing health services in a rural

10 area.

11 (c) DEFINITION OF DESIGNATED GRADUATE.—For

12 purposes of this section, the term ‘‘designated graduate’’,

13 with respect to an entity, means an individual completing

14 the training involved during the 5-year period preceding

15 the fiscal year for which the entity is applying to receive

16 a grant or contract under the applicable program referred

17 to in subsection (a).

18 (d) RELATIONSHIP TO OTHER FUNDS.—The

19 amounts made available in subsection (a) for carrying out

20 programs referred to in such subsection are in addition

21 to any other amounts that are available for carrying out

22 the programs.

23 SEC. 1535. GENERAL PROVISIONS.

24 (a) APPLICATION FOR GRANT.—The Secretary may

25 make a grant under any section of this part only if an
207

Title I, Subtitle G

•HR 5300 IH

1 application for the grant is submitted to the Secretary and

2 the application is in such form, is made in such manner,

3 and contains such agreements, assurances, and informa4 tion as the Secretary determines to be necessary to carry

5 out the program involved.

6 (b) TECHNICAL ASSISTANCE.—The Secretary may

7 provide technical assistance to recipients of grants or con8 tracts under this part with respect to the planning, devel9 opment, and operation of activities under the grants or

10 contracts.

11 Subtitle G—Assistance in Enrolling

12 Uninsured Children in Health

13 Insurance

14 SEC. 1601. ESTABLISHMENT OF STATE PROGRAMS.

15 (a) MEDICAID STATE PLAN REQUIREMENT.—Section

16 1902(a) of the Social Security Act (42 U.S.C. 1396a(a))

17 is amended—

18 (1) by striking ‘‘and’’ at the end of paragraph

19 (61);

20 (2) by striking the period at the end of para21 graph (62) and inserting ‘‘; and’’; and

22 (3) by adding at the end the following new

23 paragraph:
208

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(63) provide for a State program furnishing

2 premium subsidies for needy children in accordance

3 with section 1931.’’.

4 (b) STATE PROGRAMS FOR PREMIUM SUBSIDIES FOR

5 NEEDY CHILDREN.—Title XIX of the Social Security Act

6 (42 U.S.C. 1396 et seq.) is amended by redesignating sec7 tion 1931 as section 1932 and by inserting after section

8 1930 the following new section:

9 ‘‘STATE PREMIUM SUBSIDY PROGRAMS FOR NEEDY

10 CHILDREN

11 ‘‘SEC. 1931. (a) REQUIREMENT TO OPERATE STATE

12 PROGRAM.—

13 ‘‘(1) IN GENERAL.—A State with a State plan

14 approved under this title shall have in effect a pre15 mium subsidy program for furnishing premium sub16 sidy under subsection (b) to premium subsidy eligi17 ble children in the State in fiscal years beginning

18 with fiscal year 1997.

19 ‘‘(2) DESIGNATION OF STATE AGENCY.—A

20 State may designate any appropriate State agency to

21 administer the program under this section.

22 ‘‘(b) ASSISTANCE WITH PREMIUMS FOR STANDARD

23 HEALTH COVERAGE.—

24 ‘‘(1) ELIGIBILITY.—An eligible individual who

25 has been determined by a State to be a premium

26 subsidy eligible child (as defined in paragraph (2))
209

Title I, Subtitle G

•HR 5300 IH

1 shall be entitled to premium subsidies in the amount

2 determined under subsection (c).

3 ‘‘(2) PREMIUM SUBSIDY ELIGIBLE CHILD.—For

4 purposes of this section, the term ‘premium subsidy

5 eligible child’ means an individual who is provided

6 certified standard health coverage (as defined in

7 subsection (j)(1)) and—

8 ‘‘(A) who is under 20 years of age,

9 ‘‘(B) whose family has a family income de10 termined under this section which does not ex11 ceed 240 percent (or such lesser percent as the

12 Secretary shall specify so that the total Federal

13 payments to States under this section for the

14 fiscal year do not exceed the amount specified

15 for the fiscal year under subsection (i)(1)) of

16 the poverty line, and

17 ‘‘(C) except as provided in paragraph (3),

18 who is not otherwise eligible for medical assist19 ance under the State plan (or would be eligible

20 for such assistance on the basis of the plan in

21 effect as of the date of the enactment of the Af22 fordable Health Care Now Act of 1994).

23 ‘‘(3) ELIGIBILITY OF CHILDREN BECOMING ELI24 GIBLE FOR MEDICAID.—At the option of the State,

25 a premium subsidy eligible child may include an in-
210

Title I, Subtitle G

•HR 5300 IH

1 dividual who meets the requirements of subpara2 graphs (A) and (B) of paragraph (2) and is eligible

3 for medical assistance under the State plan if the in4 dividual was formerly a premium subsidy eligible

5 child under paragraph (2). The exercise of such op6 tion shall not diminish the benefits to which such a

7 child is otherwise entitled under the State plan.

8 ‘‘(4) ADDITIONAL CHILDREN USING STATE9 ONLY FUNDS.—Nothing in this section shall be con10 strued as preventing a State, using its own funds

11 and without any Federal financial participation,

12 from covering additional children as premium sub13 sidy eligible children.

14 ‘‘(c) AMOUNT OF PREMIUM SUBSIDY.—

15 ‘‘(1) IN GENERAL.—

16 ‘‘(A) IN GENERAL.—The premium subsidy

17 amount determined under this paragraph is a

18 monthly amount equal to the subsidy percentage of 1 19 ⁄12th of the lesser of—

20 ‘‘(i) the annual premium for certified

21 standard health coverage provided the

22 child, or

23 ‘‘(ii) the actuarial value of the stand24 ard option, nationwide service benefit plan

25 (taking into account cost sharing) made
211

Title I, Subtitle G

•HR 5300 IH

1 available under chapter 89 of title, United

2 States Code for the year, adjusted to re3 flect a premium for a single child of the

4 age involved and adjusted to reflect the rel5 ative cost of premiums for health coverage

6 of premium subsidy eligible children in the

7 geographic area in which the child resides

8 compared to the national average and ad9 justed to reflect the reduction in cost-shar10 ing effected under subsection (j)(4).

11 ‘‘(B) SUBSIDY PERCENTAGE.—For pur12 poses of paragraph (1), an individual’s ‘subsidy

13 percentage’ means 100 percent reduced (but

14 not below zero percent) by 1.8 percentage

15 points for each percentage point (or portion

16 thereof) such individual’s income equals or ex17 ceeds 185 percent of the poverty line.

18 ‘‘(d) PAYMENTS.—

19 ‘‘(1) IN GENERAL.—The amount of the pre20 mium subsidy available to a premium subsidy eligi21 ble child under subsection (b) shall be paid by the

22 State in which the individual resides directly to the

23 insurer that provides the coverage for the premium

24 subsidy eligible child. Payments under the preceding

25 sentence shall commence in the first month during
212

Title I, Subtitle G

•HR 5300 IH

1 which the individual is provided coverage and deter2 mined under this section to be a premium subsidy

3 eligible child.

4 ‘‘(2) ADMINISTRATIVE ERRORS.—A State is fi5 nancially responsible for premium subsidy paid

6 based on an eligibility determination error to the ex7 tent the State’s error rate for eligibility determina8 tions exceeds a maximum permissible error rate to

9 be specified by the Secretary.

10 ‘‘(e) ELIGIBILITY DETERMINATIONS.—

11 ‘‘(1) IN GENERAL.—The Secretary shall pro12 mulgate regulations specifying requirements for

13 State programs under this section with respect to

14 determining eligibility for premium subsidy, includ15 ing requirements with respect to—

16 ‘‘(A) application procedures;

17 ‘‘(B) information verification procedures;

18 ‘‘(C) timeliness of eligibility determina19 tions;

20 ‘‘(D) procedures for applicants to appeal

21 adverse decisions; and

22 ‘‘(E) any other matters determined appro23 priate by the Secretary.

24 ‘‘(2) SPECIFICATIONS FOR REGULATIONS.—The

25 regulations promulgated by the Secretary under
213

Title I, Subtitle G

•HR 5300 IH

1 paragraph (1) shall include the following require2 ments:

3 ‘‘(A) FREQUENCY OF APPLICATIONS.—A

4 State program shall provide that an individual

5 may file an application for assistance with an

6 agency designated by the State at any time, in

7 person or by mail.

8 ‘‘(B) APPLICATION FORM.—A State pro9 gram shall provide for the use of an application

10 form developed by the Secretary under this sec11 tion.

12 ‘‘(C) DISTRIBUTION OF APPLICATIONS.—A

13 State program shall distribute applications for

14 assistance through employers and appropriate

15 public agencies.

16 ‘‘(D) REQUIREMENT TO SUBMIT REVISED

17 APPLICATION.—A State program shall, in ac18 cordance with regulations promulgated by the

19 Secretary, require individuals to submit revised

20 applications during a year to reflect changes in

21 estimated family incomes, including changes in

22 employment status of family members, during

23 the year. The State shall revise the amount of

24 any premium subsidy based on such a revised

25 application.
214

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(E) VERIFICATION.—A State program

2 shall provide for verification of the information

3 supplied in applications under this section.

4 Such verification may include examining return

5 information disclosed to the State for such pur6 pose under section 6103(l)(15) of the Internal

7 Revenue Code of 1986.

8 ‘‘(f) ADMINISTRATION OF STATE PROGRAMS.—

9 ‘‘(1) IN GENERAL.—The Secretary shall estab10 lish standards for States operating programs under

11 this section which ensure that such programs are op12 erated in a uniform manner with respect to applica13 tion procedures, data processing systems, and such

14 other administrative activities as the Secretary de15 termines to be necessary.

16 ‘‘(2) APPLICATION FORMS.—The Secretary

17 shall develop an application form for assistance

18 which shall—

19 ‘‘(A) be simple in form and understandable

20 to the average individual;

21 ‘‘(B) require the provision of information

22 necessary to make a determination as to wheth23 er an individual is a premium subsidy eligible

24 child including a declaration of estimated in-
215

Title I, Subtitle G

•HR 5300 IH

1 come by the individual based, at the election of

2 the individual—

3 ‘‘(i) on multiplying by a factor of 4

4 the individual’s family income for the 3-

5 month period immediately preceding the

6 month in which the application is made, or

7 ‘‘(ii) on estimated income for the en8 tire year for which the application is sub9 mitted; and

10 ‘‘(C) require attachment of such docu11 mentation as deemed necessary by the Sec12 retary in order to ensure eligibility for assist13 ance.

14 ‘‘(3) OUTREACH ACTIVITIES.—A State operat15 ing a program under this section shall conduct such

16 outreach activities as the Secretary determines ap17 propriate.

18 ‘‘(4) EFFECTIVENESS OF ELIGIBILITY FOR PRE19 MIUM SUBSIDIES.—A determination by a State that

20 an individual is a premium subsidy eligible child

21 shall be effective for the calendar year for which

22 such determination is made unless a revised applica23 tion submitted under paragraph (2) indicates that

24 an individual is no longer eligible for premium sub25 sidies.
216

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(5) PENALTIES FOR MATERIAL MISREPRESEN2 TATIONS.—

3 ‘‘(A) IN GENERAL.—Any individual who

4 knowingly makes a material misrepresentation

5 of information in an application for assistance

6 under this section shall be liable to the Federal

7 Government for the amount of any premium

8 subsidy received by individual on the basis of a

9 misrepresentation and interest on such amount

10 at a rate specified by the Secretary, and shall,

11 in addition, be liable to the Federal Government

12 for $2,000 or, if greater, 3 times the amount

13 any premium subsidy received by individual on

14 the basis of a misrepresentation.

15 ‘‘(B) COLLECTION OF PENALTY

16 AMOUNTS.—A State which receives an applica17 tion for assistance with respect to which a ma18 terial misrepresentation has been made shall

19 collect the penalty amount required under sub20 paragraph (A) and submit 50 percent of such

21 amount to the Secretary in a timely manner.

22 ‘‘(g) END-OF-YEAR RECONCILIATION FOR PREMIUM

23 SUBSIDY.—

24 ‘‘(1) IN GENERAL.—
217

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(A) REQUIREMENT TO FILE STATE2 MENT.—An individual who received premium

3 subsidies under this section from a State for

4 any month in a calendar year shall file with the

5 State an income reconciliation statement to ver6 ify the individual’s family income for the year.

7 Such a statement shall be filed at such time,

8 and contain such information, as the State may

9 specify in accordance with regulations promul10 gated by the Secretary.

11 ‘‘(B) NOTICE OF REQUIREMENT.—A State

12 shall provide a written notice of the require13 ment under subparagraph (A) at the end of the

14 year to an individual who received premium

15 subsidies under this part from such State in

16 any month during the year.

17 ‘‘(2) RECONCILIATION OF PREMIUM SUBSIDY

18 BASED ON ACTUAL INCOME.—

19 ‘‘(A) IN GENERAL.—Based on and using

20 the income reported in the reconciliation state21 ment filed under paragraph (1) with respect to

22 an individual, the State shall compute the

23 amount of premium subsidy that should have

24 been provided under this section with respect to

25 the individual for the year involved.
218

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(B) OVERPAYMENT OF ASSISTANCE.—If

2 the total amount of the premium subsidy pro3 vided was greater than the amount computed

4 under subparagraph (A), the individual is liable

5 to the State to pay an amount equal to the

6 amount of the excess payment. Any amount col7 lected by a State under this subparagraph shall

8 be submitted to the Secretary in a timely man9 ner.

10 ‘‘(C) UNDERPAYMENT OF ASSISTANCE.—If

11 the total amount of the premium subsidy pro12 vided was less than the amount computed under

13 subparagraph (A), the State shall pay to the in14 dividual an amount equal to the amount of the

15 deficit.

16 ‘‘(D) STATE OPTION.—A State may, in ac17 cordance with regulations promulgated by the

18 Secretary, establish a procedure under which

19 any overpayments or underpayments of pre20 mium subsidy determined under subparagraphs

21 (A) and (B) with respect to an individual for a

22 year may be collected or paid, as appropriate,

23 through adjustments to the premium subsidy

24 furnished to such individual in the succeeding

25 year.
219

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(3) VERIFICATION.—Each State may use such

2 information as it has available to verify income of in3 dividuals with applications filed under this section,

4 including return information disclosed to the state

5 for such purpose under section 6103(l)(15) of the

6 internal revenue code of 1986.

7 ‘‘(4) PENALTIES FOR FAILURE TO FILE.—In

8 the case of an individual who is required to file a

9 statement under this subsection in a year who fails

10 to file such a statement by such date as the Sec11 retary shall specify in regulations, the entire amount

12 of the premium subsidy provided in such year shall

13 be considered an excess amount under paragraph

14 (2)(A) and such individual shall not be eligible for

15 premium subsidy assistance under this section until

16 such statement is filed. A State, using rules estab17 lished by the Secretary, shall waive the application

18 of this paragraph if the individual establishes, to the

19 satisfaction of the State under such rules, good

20 cause for the failure to file the statement on a timely

21 basis.

22 ‘‘(5) PENALTIES FOR FALSE INFORMATION.—

23 Any individual who provides false information in a

24 statement filed under paragraph (1) is subject to the

25 same penalties as are provided under subsection
220

Title I, Subtitle G

•HR 5300 IH

1 (f)(5) for a misrepresentation of material fact de2 scribed in such section.

3 ‘‘(h) SPECIAL RULES ON FEDERAL FINANCIAL PAR4 TICIPATION.—

5 ‘‘(1) PREMIUM SUBSIDY.—In applying section

6 1903(a)(1) with respect to expenditures for premium

7 subsidy (other than administrative expenses) under

8 this section—

9 ‘‘(A) such expenditures shall be considered

10 to be expenditures on medical assistance;

11 ‘‘(B) in the case of assistance for a pre12 mium subsidy eligible child not described in

13 subsection (b)(3), the Federal medical assist14 ance percentage is deemed to be 100 percent;

15 and

16 ‘‘(C) the total amount of Federal financial

17 participation with respect to any State for quar18 ters in any fiscal year (with respect to premium

19 subsidy eligible children not described in sub20 section (b)(3)) shall not exceed the State allot21 ment under subsection (i)(2) for that year.

22 ‘‘(2) ADMINISTRATION EXPENSES.—The

23 amount of expenditures that may be taken into ac24 count in computing amounts that are payable to a

25 State under section 1903(a) (other than paragraph
221

Title I, Subtitle G

•HR 5300 IH

1 (1)) with respect to the administration of the pro2 gram under this section may not exceed 3 percent of

3 the total expenditures.

4 ‘‘(i) TOTAL FEDERAL BUDGET FOR PROGRAM; AL5 LOTMENTS TO STATES.—

6 ‘‘(1) TOTAL FEDERAL BUDGET.—

7 ‘‘(A) FISCAL YEARS 1997 THROUGH 2004.—

8 Subject to subparagraph (E)(iii), for purposes

9 of this section, the total Federal payments to

10 States under this section may not exceed the

11 following:

12 ‘‘(i) For fiscal year 1997, $4.7 billion.

13 ‘‘(ii) For fiscal year 1998, $5.2 bil14 lion.

15 ‘‘(iii) For fiscal year 1999, $6.5 bil16 lion.

17 ‘‘(iv) For fiscal year 2000, $9.8 bil18 lion.

19 ‘‘(v) For fiscal year 2001, $12.3 bil20 lion.

21 ‘‘(vi) For fiscal year 2002, $15.3 bil22 lion.

23 ‘‘(vii) For fiscal year 2003, $20.0 bil24 lion.
222

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(viii) For fiscal year 2004, $24.4 bil2 lion.

3 ‘‘(B) SUBSEQUENT FISCAL YEARS.—For

4 purposes of this section, the total Federal budg5 et for State plans under this part for each fiscal

6 year after fiscal year 2004 is the total Federal

7 budget under this subsection for the preceding

8 fiscal year multiplied by the Secretary’s esti9 mate of the percentage increase in private sec10 tor health expenditures for the year.

11 ‘‘(2) ALLOTMENTS TO STATES.—

12 ‘‘(A) IN GENERAL.—The amount of a

13 State’s allotment under this section for a fiscal

14 year shall be equal to the product of—

15 ‘‘(i) the limit on the total amount of

16 Federal payments for the year under para17 graph (1)(A); and

18 ‘‘(ii) the State’s allotment percentage

19 under subparagraph (B).

20 ‘‘(B) STATE ALLOTMENT PERCENTAGE.—

21 In subparagraph (A), a State’s allotment per22 centage for a fiscal year is equal to the percent23 age of all premium subsidy eligible children in

24 the United States who are residents of the
223

Title I, Subtitle G

•HR 5300 IH

1 State (as estimated by the Secretary prior to

2 the beginning of the fiscal year).

3 ‘‘(3) LIMITATION ON PREMIUM PAYMENTS FOR

4 ABORTION SERVICES.—Notwithstanding any other

5 provision of this title or the Affordable Health Care

6 Now Act of 1994, none of the funds appropriated to

7 carry out this section shall be expended to assist in

8 the purchase, in whole or in part, of a health benefit

9 package that includes abortion except in cases (A)

10 where the life of the mother would be endangered if

11 the fetus were carried to term, or (B) where the

12 pregnancy is the result of rape or incest.

13 ‘‘(j) CERTIFIED STANDARD HEALTH COVERAGE DE14 FINED.—

15 ‘‘(1) IN GENERAL.—In this section, health in16 surance coverage is considered to provide certified

17 standard health coverage if—

18 ‘‘(A) benefits under such coverage are pro19 vided within at least each of the required cat20 egories of benefits described in subparagraph

21 (A) of paragraph (2) and consistent with such

22 paragraph;

23 ‘‘(B) the actuarial value of the benefits

24 meets the requirements of paragraph (3); and
224

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(C) the benefits comply with the mini2 mum requirements specified in paragraph (4).

3 ‘‘(2) REQUIRED CATEGORIES OF COVERED BEN4 EFITS.—

5 ‘‘(A) IN GENERAL.—The categories of cov6 ered benefits described in this subparagraph are

7 the types of benefits specified in subparagraphs

8 (A), (B), (C), (D), and (F) of paragraph (1),

9 and subparagraphs (E) and (F) of paragraph

10 (2), of section 8904(a) of title 5, United States

11 Code (relating to types of benefits required to

12 be in health insurance offered to Federal em13 ployees) and includes the category of preventive

14 benefits.

15 ‘‘(B) COVERAGE OF OFF-LABEL USE.—An

16 off-label use for a drug that has been found to

17 be safe and effective under section 505 of the

18 Federal Food, Drug, and Cosmetic Act shall be

19 covered if the medical indication for which it is

20 used is listed in one of the following 3 compen21 dia: the American Hospital Formulary Service22 Drug Information, the American Medical Asso23 ciation Drug Evaluations, and the United

24 States Pharmacopeia-Drug Information.
225

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(C) NO COVERAGE OF SPECIFIC TREAT2 MENT, PROCEDURES, OR CLASSES REQUIRED.—

3 Nothing in this subsection may be construed to

4 require the coverage of any specific procedure

5 or treatment or class of service in certified

6 standard health coverage under this Act or

7 through regulation.

8 ‘‘(3) STANDARD ACTUARIAL VALUE.—

9 ‘‘(A) IN GENERAL.—The actuarial value of

10 the benefits under standard coverage in a rat11 ing area meets the requirements of this para12 graph if such value is equivalent to the stand13 ard actuarial value described in subparagraph

14 (B) for the area, as adjusted for inflation under

15 subparagraph (D). The actuarial value of bene16 fits under standard coverage shall be deter17 mined using the standardized population and

18 set of standardized utilization and cost factors

19 described in subparagraph (C). Such actuarial

20 value shall be adjusted to reflect the reduction

21 in cost-sharing effected under paragraph (4).

22 ‘‘(B) STANDARD ACTUARIAL VALUE DE23 SCRIBED.—The standard actuarial value de24 scribed in this subparagraph for coverage in a

25 geographic area is the actuarial value of bench-
226

Title I, Subtitle G

•HR 5300 IH

1 mark coverage during 1994 in such area. Such

2 actuarial value shall be determined using the

3 standardized population and set of standardized

4 utilization and cost factors described in sub5 paragraph (C) and shall be adjusted to reflect

6 the age of the population of premium subsidy

7 eligible children under this section.

8 ‘‘(C) ADJUSTMENTS FOR STANDARDIZED

9 POPULATION, STANDARDIZED UTILIZATION AND

10 COST FACTORS, AND GEOGRAPHIC AREA.—The

11 adjustment under this subparagraph—

12 ‘‘(i) for a standardized population

13 shall be made by not taking into account

14 individuals 65 years of age or older, em15 ployees of the United States Postal Serv16 ice, and retirees; and

17 ‘‘(ii) for a geographic area shall be

18 made in a manner that reflects the ratio of

19 the actuarial value of benchmark coverage

20 in such geographic area (as adjusted under

21 clause (i)) to such actuarial value for such

22 benchmark coverage for the United States

23 as a whole, taking into account standard24 ized actuarial utilization and cost factors.

25 ‘‘(D) ADJUSTMENT FOR INFLATION.—
227

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(i) IN GENERAL.—The adjustment

2 under this paragraph for a year (beginning

3 with 1995) is the FEHBP national rolling

4 increase percentage for the year involved,

5 compounded by such increase for each pre6 ceding year after 1994.

7 ‘‘(ii) FEHBP NATIONAL ROLLING IN8 CREASE PERCENTAGE.—For purposes of

9 this paragraph, the term ‘FEHBP national

10 rolling increase percentage’ means, for a

11 year, the 5-year average of the annual na12 tional percentage increase in the premiums

13 for health plans offered under the Federal

14 Employees Health Benefits Program

15 (under chapter 89 of title 5, United States

16 Code) for the period ending with the pre17 vious year. Such increase shall be deter18 mined by the Secretary in consultation

19 with the Director of Office of Personnel

20 Management based on the best information

21 available.

22 ‘‘(4) MINIMUM REQUIREMENTS.—Benefits of23 fered under standard coverage within any category

24 shall be not less than the narrowest scope and short25 est duration of benefits within that category, in an
228

Title I, Subtitle G

•HR 5300 IH

1 approved health benefits plan under chapter 89 of

2 title 5, United States Code, except that under such

3 coverage—

4 ‘‘(A) no cost-sharing may be imposed for

5 preventive services (as specified by the Sec6 retary); and

7 ‘‘(B) with respect to individuals with fam8 ily income below 100 percent of the poverty

9 line, any cost-sharing imposed for other items

10 and services may only be nominal.

11 ‘‘(k) DEFINITIONS; DETERMINATIONS OF INCOME.—

12 For purposes of this part:

13 ‘‘(1) DETERMINATIONS OF INCOME.—

14 ‘‘(A) FAMILY INCOME.—The term ‘family

15 income’ means, with respect to an individual

16 who—

17 ‘‘(i) is not a dependent (as defined in

18 subparagraph (B)) of another individual,

19 the sum of the modified adjusted gross in20 comes (as defined in subparagraph (D))

21 for the individual, the individual’s spouse,

22 and dependents of the individual; or

23 ‘‘(ii) is a dependent of another indi24 vidual, the sum of the modified adjusted

25 gross incomes for the other individual, the
229

Title I, Subtitle G

•HR 5300 IH

1 other individual’s spouse, and dependents

2 of the other individual.

3 ‘‘(B) DEPENDENT.—The term ‘dependent’

4 shall have the meaning given such term under

5 paragraphs (1) or (2) of section 152(a) of the

6 Internal Revenue Code of 1986.

7 ‘‘(C) SPECIAL RULE FOR FOSTER CHIL8 DREN.—For purposes of subparagraph (A), a

9 child who is placed in foster care by a State

10 agency shall not be considered a dependent of

11 another individual.

12 ‘‘(D) MODIFIED ADJUSTED GROSS IN13 COME.—The term ‘modified adjusted gross in14 come’ means adjusted gross income (as defined

15 in section 62(a) of the Internal Revenue Code

16 of 1986)—

17 ‘‘(i) determined without regard to sec18 tions 135, 162(l), 911, 931, and 933 of

19 such Code, and

20 ‘‘(ii) increased by—

21 ‘‘(I) the amount of interest re22 ceived or accrued by the individual

23 during the taxable year which is ex24 empt from tax, and
230

Title I, Subtitle G

•HR 5300 IH

1 ‘‘(II) the amount of the social se2 curity benefits (as defined in section

3 86(d) of such Code) received during

4 the taxable year to the extent not in5 cluded in gross income under section

6 86 of such Code.

7 The determination under the preceding sen8 tence shall be made without regard to any car9 ryover or carryback.

10 ‘‘(2) ELIGIBLE INDIVIDUAL.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 subparagraph (B), the term ‘eligible individual’

13 means any individual who is residing in the

14 United States.

15 ‘‘(B) EXCLUSION.—The term ‘eligible indi16 vidual’ does not include—

17 ‘‘(i) an alien who is ineligible for as18 sistance under this title pursuant to sec19 tion 2802 of the Affordable Health Care

20 Now Act of 1994; or

21 ‘‘(ii) an individual who is an inmate of

22 a public institution (except as a patient of

23 a medical institution).

24 ‘‘(3) POVERTY LINE.—The term ‘poverty line’

25 means the income official poverty line (as defined by
231

Title I, Subtitle G

•HR 5300 IH

1 the Office of Management and Budget, and revised

2 annually in accordance with section 673(2) of the

3 Omnibus Budget Reconciliation Act of 1981) that—

4 ‘‘(A) in the case of a family of less than

5 five individuals, is applicable to a family of the

6 size involved; and

7 ‘‘(B) in the case of a family of more than

8 four individuals, is applicable to a family of

9 four persons.

10 ‘‘(4) PREMIUM.—Any reference to the term

11 ‘premium’ includes a reference to premium equiva12 lence for self-insured plans.

13 ‘‘(5) BENCHMARK COVERAGE.—The term

14 ‘benchmark coverage’ means the standard option of

15 the Blue Cross-Blue Shield plan offered under the

16 Federal Employees Health Benefits Program under

17 chapter 89 of title 5, United States Code, as in ef18 fect during 1994.’’.
232

Title I, Subtitle H

•HR 5300 IH

1 Subtitle H—Medicaid Reform

2 PART 1—STATE FLEXIBILITY IN THE MEDICAID

3 PROGRAM: THE MEDICAL HEALTH ALLOW4 ANCE PROGRAM

5 SEC. 1701. ESTABLISHMENT OF PROGRAM.

6 (a) IN GENERAL.—Title XIX of the Social Security

7 Act (42 U.S.C. 1396 et seq.), as amended by section 1601,

8 is further amended—

9 (1) by redesignating section 1932 as section

10 1933; and

11 (2) by inserting after section 1931 the following

12 new section:

13 ‘‘STATE HEALTH ALLOWANCE PROGRAMS

14 ‘‘SEC. 1932. (a) TREATMENT OF EXPENDITURES

15 UNDER HEALTH ALLOWANCE PROGRAMS AS MEDICAL

16 ASSISTANCE UNDER STATE PLAN.—

17 ‘‘(1) IN GENERAL.—Notwithstanding any other

18 provision of this title, for purposes of determining

19 the amount to be paid to a State under section

20 1903(a)(1) for quarters in any fiscal year, amounts

21 expended by an eligible State (as described in sub22 section (b)) during the fiscal year under a State

23 health allowance program (as described in subsection

24 (c)) shall be included in the total amount expended

25 during the fiscal year as medical assistance under
233

Title I, Subtitle H

•HR 5300 IH

1 the State plan (except as provided under paragraphs

2 (2) and (3) and under subsection (d)(1)(C)).

3 ‘‘(2) FEDERAL PAYMENT RESTRICTED TO

4 ACUTE CARE SERVICES.—No amounts expended

5 under a State health allowance program that are at6 tributable to medical assistance described in para7 graphs (4), (14), (15), (23), or (24) of section

8 1905(a) shall be included in the total amount ex9 pended as medical assistance under the State plan.

10 ‘‘(3) AMOUNT OF FEDERAL PAYMENT BASED

11 UPON UNUSED PREMIUM SUBSIDY PROGRAM ALLOT12 MENT.—In no case shall this subsection result in the

13 total Federal payments to the State under this title

14 (including payments attributable to this section and

15 section 1923) for quarters in a fiscal year exceeding

16 an amount equal to the difference between—

17 ‘‘(A) the State’s allotment for the premium

18 subsidy program for children under section

19 1931(i)(2) for such fiscal year; and

20 ‘‘(B) the amount paid to the State for such

21 program for such fiscal year.

22 ‘‘(4) LIMITATION ON PREMIUM PAYMENTS FOR

23 ABORTION SERVICES.—Notwithstanding any other

24 provision of this title or the Affordable Health Care

25 Now Act of 1994, none of the funds appropriated to
234

Title I, Subtitle H

•HR 5300 IH

1 carry out this section shall be expended to assist in

2 the purchase, in whole or in part, of a health benefit

3 package that includes abortion except in cases (A)

4 where the life of the mother would be endangered if

5 the fetus were carried to term, or (B) where the

6 pregnancy is the result of rape or incest.

7 ‘‘(b) ELIGIBILITY OF STATE.—A State is eligible for

8 purposes of subsection (a) if the State submits (at such

9 time and in such form as the Secretary may require) an

10 application to the Secretary containing such information

11 and assurances as the Secretary may require, including

12 assurances that the State has adopted and is enforcing

13 standards regarding quality assurance for group health

14 plans participating in the State health allowance program,

15 including standards regarding—

16 ‘‘(1) uniform reporting requirements for such

17 plans relating to a minimum set of clinical data, pa18 tient satisfaction data, and other information that

19 may be used by individuals to compare the quality

20 of various plans; and

21 ‘‘(2) the establishment or designation of an en22 tity of the State government to collect the data de23 scribed in subparagraph (A) and to regularly report

24 such data to the Secretary.
235

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(c) STATE HEALTH ALLOWANCE PROGRAM DE2 SCRIBED.—

3 ‘‘(1) ENROLLMENT OF PARTICIPATING INDIVID4 UALS IN APPROVED GROUP HEALTH PLANS.—In this

5 section, a State health allowance program is a pro6 gram in effect in all the political subdivisions of the

7 State (except as provided in (c)) under which the

8 State makes payments to a group health plan (ap9 proved under paragraph (2)) which provides cov10 erage to the individual as an allowance towards the

11 costs of providing the individual with benefits under

12 the plan.

13 ‘‘(2) APPROVED PLANS DESCRIBED.—For pur14 poses of paragraph (1), a State shall approve group

15 health plans in accordance with such standards as

16 the State may establish, except that—

17 ‘‘(A) the State may not approve a plan for

18 a year unless the plan provides certified stand19 ard health coverage described in section

20 1931(j);

21 ‘‘(B) at least one of the plans approved by

22 the State shall be a health maintenance organi23 zation or other plan under which payments are

24 otherwise made on a capitated basis for provid-
236

Title I, Subtitle H

•HR 5300 IH

1 ing medical assistance to individuals enrolled in

2 the State plan under this title; and

3 ‘‘(C) in the case of an individual who is en4 titled to benefits under the State plan under

5 this title as of the first month during which the

6 State health allowance program is in effect, an

7 approved plan may not require the individual to

8 contribute a greater amount of cost-sharing

9 than the individual would have been required to

10 contribute under the State plan (except as may

11 be imposed on an individual described in sub12 paragraph (B) or subparagraph (C) of sub13 section (d)(1)).

14 In applying subparagraph (A), in determining the

15 standard actuarial value, instead of adjustments

16 made to reflect the population under section 1931

17 there shall be adjustments made to reflect the popu18 lation covered under this section.

19 ‘‘(3) WAIVER OF STATEWIDENESS REQUIRE20 MENT.—At the request of a State, the Secretary

21 may waive for a period not to exceed 3 years (sub22 ject to one 3-year extension) the requirement under

23 paragraph (1) that the State health allowance pro24 gram be in effect in all political subdivisions of the

25 State.
237

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(d) ELIGIBILITY OF INDIVIDUALS TO PARTICIPATE

2 IN ALLOWANCE PROGRAM.—

3 ‘‘(1) AUTOMATIC ELIGIBILITY OF MEDICAID

4 CATEGORICALLY ELIGIBLE INDIVIDUALS.—Subject

5 to subsection (e), any individual to whom the State

6 makes medical assistance available under the State

7 plan under this title pursuant to clause (i) of section

8 1902(a)(10)(A) shall be eligible to participate in the

9 State health allowance program.

10 ‘‘(2) MANDATORY ELIGIBILITY OF PREGNANT

11 WOMEN WITH INCOME UNDER 150 PERCENT OF THE

12 POVERTY LEVEL.—

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

14 (e) and subparagraph (B), an individual law15 fully residing in the State shall be eligible to

16 participate in the program if the individual is a

17 pregnant woman and the income of the individ18 ual’s family is equal to or less than 240 percent

19 of the official poverty line (as defined by the

20 Office of Management and Budget, and revised

21 annually in accordance with section 673(2) of

22 the Omnibus Budget Reconciliation Act of

23 1991) applicable to a family of the size in24 volved.
238

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(B) EXCEPTION.—If the application of

2 subparagraph (A) would result in—

3 ‘‘(i) the total State expenditures for a

4 quarter under this title (including expendi5 tures attributable to this section and sec6 tion 1923, but not including expenditures

7 under section 1931), exceeding

8 ‘‘(ii) the total State expenditures that

9 the Secretary estimates would have been

10 made under this title for the quarter if the

11 State did not have a program under this

12 section,

13 then there shall be substituted for 150 percent

14 in subparagraph (A) such percent as would re15 sult in the amount described in clause (i) equal16 ing the amount described in clause (ii).

17 ‘‘(C) PHASING OUT PREMIUM SUBSIDY FOR

18 CERTAIN INDIVIDUALS.—

19 ‘‘(i) IN GENERAL.—In the case of an

20 individual eligible to participate in the pro21 gram pursuant to this paragraph who has

22 income equal to or greater than 185 per23 cent of the official poverty line applicable

24 to a family of the size involved, the amount

25 paid by the State under subsection (c)(1)
239

Title I, Subtitle H

•HR 5300 IH

1 with respect to the individual shall be

2 equal to the individual’s subsidy percent3 age of the amount that would otherwise be

4 paid under such subsection with respect to

5 the individual but for this subparagraph.

6 ‘‘(ii) SUBSIDY PERCENTAGE DE7 FINED.—In clause (i), an individual’s ‘sub8 sidy percentage’ means 100 percent re9 duced (but not below zero percent) by 1.8

10 percentage points for each percentage

11 point (or portion thereof) by which the in12 dividual’s income equals or exceeds 185

13 percent of the official poverty line.

14 ‘‘(3) OPTIONAL ELIGIBILITY OF OTHER INDI15 VIDUALS WITH INCOME UP TO 150 PERCENT OF POV16 ERTY LEVEL.—

17 ‘‘(A) IN GENERAL.—Subject to subsection

18 (e), a State operating a State health allowance

19 program under this section may make an indi20 vidual lawfully residing in the State who is not

21 described in paragraph (2) eligible to partici22 pate in the program if the income of the indi23 vidual’s family is not greater than 150 percent

24 of such official poverty line.
240

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(B) CONTRIBUTION MAY BE REQUIRED.—

2 In the case of an individual who is participating

3 in the program under this paragraph and whose

4 family income is greater than 100 percent of

5 the official poverty line, the program may re6 quire such an individual to contribute all (or a

7 portion) of the premiums for such a group

8 health plan if the amount of such contribution

9 is determined in accordance with a sliding scale

10 based on the individual’s family income.

11 ‘‘(4) RESTRICTION ON ELIGIBILITY OF OTHER

12 MEDICAID BENEFICIARIES.—An individual is not eli13 gible to participate in the program pursuant to para14 graph (2) or paragraph (3) if the individual is eligi15 ble for medical assistance under the State plan

16 under this title (or would be eligible for such assist17 ance on the basis of the plan in effect as of the date

18 of the enactment of the Affordable Health Care Now

19 Act of 1994).

20 ‘‘(e) EXCLUSION AND USE OF RESOURCE STAND21 ARD.—

22 ‘‘(1) EXCLUSION OF ELDERLY MEDICARE-ELIGI23 BLE INDIVIDUALS.—No individual shall be eligible to

24 participate in the program if the individual is enti-
241

Title I, Subtitle H

•HR 5300 IH

1 tled to benefits under title XVIII pursuant to section

2 226.

3 ‘‘(2) USE OF RESOURCE STANDARD.—A State

4 may require an individual to meet a resource stand5 ard as a condition of eligibility to participate in the

6 program only if the Secretary approves the State’s

7 use of such a standard.

8 ‘‘(f) CONSTRUCTION.—No provision of any Federal

9 law shall prevent a State from enrolling any employee or

10 other individual in accordance with this section. The pre11 vious sentence shall not be construed as permitting a State

12 to require the employer of an individual participating in

13 the program to contribute toward the individual’s pre14 mium required for such participation.

15 ‘‘(g) EVALUATIONS AND REPORTS.—

16 ‘‘(1) EVALUATIONS.—Not later than 3 years

17 after the date of the enactment of this section (and

18 at such subsequent intervals as the Secretary consid19 ers appropriate), the Secretary shall evaluate the ef20 fectiveness of the State health allowance programs

21 for which Federal financial participation is provided

22 under this section, and the impact of such programs

23 on increasing the number of individuals with health

24 insurance coverage in participating States and in

25 controlling the costs of health care in such States.
242

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(2) REPORTS.—Not later than 3 years after

2 the date of the enactment of this section (and at

3 such subsequent intervals as the Secretary considers

4 appropriate), the Secretary shall submit a report on

5 the program to Congress.’’.

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

7 this section shall apply to calendar quarters beginning on

8 or after October 1, 1996.

9 SEC. 1702. OPTIONAL USE OF PROGRAM TO OFFER COV10 ERAGE TO SOME OR ALL STATE RESIDENTS.

11 Section 1932 of the Social Security Act, as inserted

12 by section 1701(a)(2), is amended—

13 (1) in subsection (c)(2)(A), in the matter before

14 clause (i), by inserting ‘‘, except as provided in sub15 section (d)(4)(B)(iii),’’ after ‘‘unless’’, and

16 (2) by adding at the end of subsection (d) the

17 following new paragraphs:

18 ‘‘(4) OPTIONAL ENROLLMENT OF OTHER INDI19 VIDUALS.—

20 ‘‘(A) IN GENERAL.—Subject to subsection

21 (e), a State operating a State health allowance

22 program under this section may make any indi23 vidual (or class of individuals) who is not de24 scribed in paragraph (1), (2), or (3) and who

25 is not offered coverage under an employer
243

Title I, Subtitle H

•HR 5300 IH

1 group health plan eligible to participate in the

2 program.

3 ‘‘(B) SPECIAL RULES.—

4 ‘‘(i) CONTRIBUTION MAY BE RE5 QUIRED.—In the case of an individual who

6 is participating in the program under this

7 paragraph, the program may require such

8 an individual to contribute all (or a por9 tion) of the premiums and cost-sharing of

10 such a group health plan.

11 ‘‘(ii) NO FEDERAL MATCHING PAY12 MENTS.—For purposes of payment to

13 States under section 1903(a), no amounts

14 expended by the State under the program

15 during a fiscal year on behalf of an indi16 vidual enrolled under subparagraph (A)

17 may be included in the total amount ex18 pended during the fiscal year as medical

19 assistance under the State plan.

20 ‘‘(5) OFFERING OF COVERAGE THROUGH

21 OTHER PROGRAMS.—Nothing in this section shall be

22 construed as preventing a State which—

23 ‘‘(A) does not operate a State health allow24 ance program under this section from assuring

25 that individuals in the State who are not of-
244

Title I, Subtitle H

•HR 5300 IH

1 fered coverage under an employer group health

2 plan are offered coverage under a health plan,

3 or

4 ‘‘(B) does operate such a program from as5 suring that individuals in the State who are not

6 described in paragraph (1), (2), or (3) and who

7 are not offered coverage under an employer

8 group health plan are offered coverage under a

9 health plan other than through such program.’’.

10 PART 2—MEDICAID PROGRAM FLEXIBILITY

11 SEC. 1711. MODIFICATION OF FEDERAL REQUIREMENTS TO

12 ALLOW STATES MORE FLEXIBILITY IN CON13 TRACTING FOR COORDINATED CARE SERV14 ICES UNDER MEDICAID.

15 (a) IN GENERAL.—Section 1903(m) of the Social Se16 curity Act (42 U.S.C. 1396b(m)) is amended—

17 (1) by striking all that precedes paragraph (4)

18 and inserting the following:

19 ‘‘(m) COORDINATED CARE.—

20 ‘‘(1) PAYMENT CONDITIONED ON COMPLI21 ANCE.—

22 ‘‘(A) GENERAL RULE.—No payment shall

23 be made under this title to a State with respect

24 to expenditures incurred by it for payment to a

25 risk contracting entity or primary care case
245

Title I, Subtitle H

•HR 5300 IH

1 management entity (as defined in subparagraph

2 (B)), or with respect to an undertaking de3 scribed in paragraph (6), unless the State and

4 the entity or undertaking meet the applicable

5 requirements of this subsection. For purposes

6 of determining whether payment may be made

7 under this section, the Secretary may reject a

8 State’s determination of compliance with any

9 provision of this subsection.

10 ‘‘(B) GENERAL DEFINITIONS.—For pur11 poses of this title:

12 ‘‘(i) RISK CONTRACTING ENTITY.—

13 The term ‘risk contracting entity’ means

14 an entity that has a contract with the

15 State agency under which the entity—

16 ‘‘(I) provides or arranges for the

17 provision of health care items or serv18 ices to individuals eligible for medical

19 assistance under the State plan under

20 this title, and

21 ‘‘(II) is at risk (as defined in

22 clause (iv)) for part or all of the cost

23 of such items or services furnished to

24 such individuals.
246

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(ii) PRIMARY CARE CASE MANAGE2 MENT PROGRAM.—The term ‘primary care

3 case management program’ means a State

4 program under which individuals eligible

5 for medical assistance under the State plan

6 under this title are enrolled with primary

7 care case management entities, and are en8 titled to receive specified health care items

9 and services covered under such plan only

10 as arranged for and approved by such enti11 ties.

12 ‘‘(iii) AT RISK.—An entity is ‘at risk’,

13 for purposes of this subparagraph, if it has

14 a contract with the State agency under

15 which it is paid a fixed amount for provid16 ing or arranging for the provision of speci17 fied health care items or services to an in18 dividual eligible for medical assistance and

19 enrolled with the entity, regardless of

20 whether such items or services are fur21 nished to such individual, and is liable for

22 all or part of the cost of furnishing such

23 items or services, regardless of whether or

24 the extent to which such cost exceeds such

25 fixed payment.
247

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(iv) PRIMARY CARE CASE MANAGE2 MENT ENTITY.—The term ‘primary care

3 case management entity’ means a health

4 care provider (whether an individual or an

5 entity) that, under a State primary care

6 case management program meeting the re7 quirements of paragraph (7), has a con8 tract with the State agency under which

9 the entity arranges for or authorizes the

10 provision of health care items and services

11 to individuals eligible for medical assist12 ance under the State plan under this title,

13 but is not at risk (as defined in clause (iv))

14 for the cost of such items or services pro15 vided to such individuals.

16 ‘‘(2) GENERAL REQUIREMENTS FOR RISK CON17 TRACTING ENTITIES.—

18 ‘‘(A) FEDERAL OR STATE QUALIFICA19 TION.—Subject to paragraph (3), a risk con20 tracting entity meets the requirements of this

21 subsection only if it either—

22 ‘‘(i) is a qualified health maintenance

23 organization as defined in section 1310(d)

24 of the Public Health Service Act, as deter-
248

Title I, Subtitle H

•HR 5300 IH

1 mined by the Secretary pursuant to section

2 1312 of that Act, or

3 ‘‘(ii) is an entity which the State

4 agency has determined—

5 ‘‘(I) affords, to individuals eligi6 ble for medical assistance under the

7 State plan and enrolled with the en8 tity, access to health care items and

9 services furnished by the entity, with10 in the area served by the entity, at

11 least equivalent to the access such in12 dividuals would have to such health

13 care items and services in such area if

14 not enrolled with the entity, and

15 ‘‘(II) has made adequate provi16 sion against the risk of insolvency,

17 and assures that individuals eligible

18 for medical assistance under this title

19 are not held liable for the entity’s

20 debts in case of the entity’s insol21 vency.

22 ‘‘(B) INTERNAL QUALITY ASSURANCE.—

23 Subject to paragraph (3), a risk contracting en24 tity meets the requirements of this subsection

25 only if it has in effect an internal quality assur-
249

Title I, Subtitle H

•HR 5300 IH

1 ance program that meets the requirements of

2 paragraph (9).

3 ‘‘(C) CONTRACT WITH STATE AGENCY.—

4 Subject to paragraph (3), a risk contracting en5 tity meets the requirements of this subsection

6 only if the entity has a written contract with

7 the State agency that provides—

8 ‘‘(i) that the entity will comply with

9 all applicable provisions of this subsection;

10 ‘‘(ii) for a payment methodology based

11 on experience rating or another actuarially

12 sound methodology approved by the Sec13 retary, which guarantees (as demonstrated

14 by such models or formulas as the Sec15 retary may approve) that payments to the

16 entity under the contract shall not exceed

17 100 percent of expenditures that would

18 have been made by the State agency in the

19 absence of the contract;

20 ‘‘(iii) that the Secretary and the State

21 (or any person or organization designated

22 by either) shall have the right to audit and

23 inspect any books and records of the entity

24 (and of any subcontractor) that pertain—
250

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(I) to the ability of the entity to

2 bear the risk of potential financial

3 losses, or

4 ‘‘(II) to services performed or de5 terminations of amounts payable

6 under the contract;

7 ‘‘(iv) that in the entity’s enrollment,

8 reenrollment, or disenrollment of individ9 uals eligible for medical assistance under

10 this title and eligible to enroll, reenroll, or

11 disenroll with the entity pursuant to the

12 contract, the entity will not discriminate

13 among such individuals on the basis of

14 their health status or requirements for

15 health care services;

16 ‘‘(v)(I) that individuals eligible for

17 medical assistance under the State plan

18 who have enrolled with the entity are per19 mitted to terminate such enrollment with20 out cause as of the beginning of the first

21 calendar month following a full calendar

22 month after the request is made for such

23 termination (or at such times as required

24 pursuant to paragraph (8)), and
251

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(II) for notification of each such in2 dividual, at the time of the individual’s en3 rollment, of the right to terminate enroll4 ment;

5 ‘‘(vi) for reimbursement, either by the

6 entity or by the State agency, for medically

7 necessary services provided—

8 ‘‘(I) to an individual eligible for

9 medical assistance under the State

10 plan and enrolled with the entity, and

11 ‘‘(II) other than through the en12 tity because the services were imme13 diately required due to an unforeseen

14 illness, injury, or condition;

15 ‘‘(vii) for disclosure of information in

16 accordance with paragraph (4);

17 ‘‘(viii) in the case of an entity that

18 has entered into a contract with a Feder19 ally-qualified health center for the provi20 sion of services of such center—

21 ‘‘(I) that rates of prepayment

22 from the State are adjusted to reflect

23 fully the rates of payment specified in

24 section 1902(a)(13)(E), and
252

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(II) that, at the election of such

2 center, payments made by the entity

3 to such center for services described

4 in section 1905(a)(2)(C) are made at

5 the rates of payment specified in sec6 tion 1902(a)(13)(E);

7 ‘‘(ix) that any physician incentive plan

8 that the entity operates meets the require9 ments of section 1876(i)(8);

10 ‘‘(x) for maintenance of sufficient pa11 tient encounter data to identify the physi12 cian who delivers services to patients; and

13 ‘‘(xi) that the entity complies with the

14 requirement of section 1902(w) with re15 spect to each enrollee.

16 ‘‘(3) EXCEPTIONS TO REQUIREMENTS FOR RISK

17 CONTRACTING ENTITIES.—The requirements of

18 paragraph (2) (other than subparagraph (C)(viii))

19 do not apply to an entity that—

20 ‘‘(A)(i) received a grant of at least

21 $100,000 in the fiscal year ending June 30,

22 1976, under section 329(d)(1)(A) or 330(d)(1)

23 of the Public Health Service Act, and for the

24 period beginning July 1, 1976, and ending on

25 the expiration of the period for which payments
253

Title I, Subtitle H

•HR 5300 IH

1 are to be made under this title, has been the re2 cipient of a grant under either such section;

3 and

4 ‘‘(ii) provides to its enrollees, on a prepaid

5 capitation or other risk basis, all of the services

6 described in paragraphs (1), (2), (3), (4)(C),

7 and (5) of section 1905(a) and, to the extent

8 required by section 1902(a)(10)(D) to be pro9 vided under the State plan, the services de10 scribed in section 1905(a)(7);

11 ‘‘(B) is a nonprofit primary health care en12 tity located in a rural area (as defined by the

13 Appalachian Regional Commission)—

14 ‘‘(i) which received in the fiscal year

15 ending June 30, 1976, at least $100,000

16 (by grant, subgrant, or subcontract) under

17 the Appalachian Regional Development Act

18 of 1965), and

19 ‘‘(ii) for the period beginning July 1,

20 1976, and ending on the expiration of the

21 period for which payments are to be made

22 under this title either has been the recipi23 ent of a grant, subgrant, or subcontract

24 under such Act or has provided services

25 under a contract (initially entered into dur-
254

Title I, Subtitle H

•HR 5300 IH

1 ing a year in which the entity was the re2 cipient of such a grant, subgrant, or sub3 contract) with a State agency under this

4 title on a prepaid capitation or other risk

5 basis; or

6 ‘‘(C) which has contracted with the State

7 agency for the provision of services (but not in8 cluding inpatient hospital services) to persons

9 eligible for medical assistance under this title

10 on a prepaid risk basis prior to 1970.’’; and

11 (2) by adding after paragraph (6) the following

12 new paragraphs:

13 ‘‘(7) GENERAL REQUIREMENTS FOR PRIMARY

14 CARE CASE MANAGEMENT.—A State that elects in

15 its State plan under this title to implement a pri16 mary care case management program under this

17 subsection shall include in the plan methods for the

18 selection and monitoring of participating primary

19 care case management entities to ensure that—

20 ‘‘(A) the numbers, geographic locations,

21 hours of operation, and other relevant charac22 teristics of such entities are sufficient to afford

23 individuals eligible for medical assistance rea24 sonable access to and choice among such enti25 ties;
255

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(B) such entities and their professional

2 personnel are qualified to provide health care

3 case management services, through methods in4 cluding ongoing monitoring of compliance with

5 applicable requirements for licensing of health

6 care providers, providing training and certifi7 cation of primary care case managers, and pro8 viding information and technical assistance; and

9 ‘‘(C) such entities are making timely and

10 appropriate decisions with respect to enrollees’

11 need for health care items and services, and are

12 giving timely approval and referral to providers

13 of adequate quality where such items and serv14 ices are determined to be medically necessary.

15 ‘‘(8) STATE OPTIONS WITH RESPECT TO EN16 ROLLMENT AND DISENROLLMENT.—

17 ‘‘(A) MANDATORY ENROLLMENT OP18 TION.—A State plan may require an individual

19 eligible for medical assistance under the State

20 plan (other than a medicare qualified bene21 ficiary) to enroll with a risk contracting entity

22 or primary care case management entity, with23 out regard to the requirement of section

24 1902(a)(1) (concerning statewideness), the re25 quirements of section 1902(a)(10)(B) (concern-
256

Title I, Subtitle H

•HR 5300 IH

1 ing comparability of benefits), or the require2 ments of section 1902(a)(23) (concerning free3 dom of choice of provider), if the individual is

4 permitted a choice—

5 ‘‘(i) between or among two or more

6 risk contracting entities,

7 ‘‘(ii) between a risk contracting entity

8 and a primary care case management en9 tity, or

10 ‘‘(iii) between or among two or more

11 primary care case management entities.

12 ‘‘(B)(i) RESTRICTIONS ON DISEN13 ROLLMENT WITHOUT CAUSE.—A State plan

14 may restrict the period in which individuals en15 rolled with a qualifying risk contracting entity

16 (as defined in clause (ii)) may terminate such

17 enrollment without cause to the first month of

18 each period of enrollment (as defined in clause

19 (iii)), but only if the State provides notification,

20 at least once during each such enrollment pe21 riod, to individuals enrolled with such entity of

22 the right to terminate such enrollment and the

23 restriction on the exercise of this right. Such

24 restriction shall not apply to requests for termi25 nation of enrollment for cause.
257

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(ii) For purposes of this subparagraph,

2 the term ‘qualifying risk contracting entity’

3 means a risk contracting entity that is—

4 ‘‘(I) a qualified health maintenance

5 organization as defined in section 1310(d)

6 of the Public Health Service Act;

7 ‘‘(II) an eligible organization with a

8 contract under section 1876;

9 ‘‘(III) an entity that is receiving (and

10 has received during the previous 2 years)

11 a grant of at least $100,000 under section

12 329(d)(1)(A) or 330(d)(1) of the Public

13 Health Service Act;

14 ‘‘(IV) an entity that is receiving (and

15 has received during the previous 2 years)

16 at least $100,000 (by grant, subgrant, or

17 subcontract) under the Appalachian Re18 gional Development Act of 1965;

19 ‘‘(V) a program pursuant to an under20 taking described in paragraph (6) in which

21 at least 25 percent of the membership en22 rolled on a prepaid basis are individuals

23 who (I) are not insured for benefits under

24 part B of title XVIII or eligible for medical

25 assistance under this title, and (II) (in the
258

Title I, Subtitle H

•HR 5300 IH

1 case of such individuals whose prepay2 ments are made in whole or in part by any

3 government entity) had the opportunity at

4 the time of enrollment in the program to

5 elect other coverage of health care costs

6 that would have been paid in whole or in

7 part by any governmental entity; or

8 ‘‘(VI) an entity that, on the date of

9 enactment of this provision, had a contract

10 with the State agency under a waiver

11 under section 1115 or 1915(b) and was

12 not subject to a requirement under this

13 subsection to permit disenrollment without

14 cause.

15 ‘‘(iii) For purposes of this subparagraph,

16 the term ‘period of enrollment’ means—

17 ‘‘(I) a period not to exceed 6 months

18 in duration, or

19 ‘‘(II) a period not to exceed one year

20 in duration, in the case of a State that, on

21 the effective date of this subparagraph,

22 had in effect a waiver under section 1115

23 of requirements under this title under

24 which the State could establish a 1-year
259

Title I, Subtitle H

•HR 5300 IH

1 minimum period of enrollment with risk

2 contracting entities.

3 ‘‘(C) REENROLLMENT OF INDIVIDUALS

4 WHO REGAIN ELIGIBILITY.—In the case of an

5 individual who—

6 ‘‘(i) in a month is eligible for medical

7 assistance under the State plan and en8 rolled with a risk contracting entity with a

9 contract under this subsection,

10 ‘‘(ii) in the next month (or next 2

11 months) is not eligible for such medical as12 sistance, but

13 ‘‘(iii) in the succeeding month is again

14 eligible for such benefits,

15 the State plan may enroll the individual for

16 that succeeding month with such entity, if the

17 entity continues to have a contract with the

18 State agency under this subsection.

19 ‘‘(9) REQUIREMENTS FOR INTERNAL QUALITY

20 ASSURANCE PROGRAMS.—The requirements for an

21 internal quality assurance program of a risk con22 tracting entity are that program is written and the

23 program—

24 ‘‘(A) specifies a systematic process includ25 ing ongoing monitoring, corrective action, and
260

Title I, Subtitle H

•HR 5300 IH

1 other appropriate activities to achieve specified

2 and measurable goals and objectives for quality

3 of care, and including annual evaluation of the

4 program;

5 ‘‘(B) identifies the organizational units re6 sponsible for performing specific quality assur7 ance functions, and ensure that they are ac8 countable to the governing body of the entity

9 and that they have adequate supervision, staff,

10 and other necessary resources to perform these

11 functions effectively;

12 ‘‘(C) if any quality assistance functions are

13 delegated to other entities, ensures that the risk

14 contracting entity remains accountable for all

15 quality assurance functions, and has mecha16 nisms to ensure that all quality assurance ac17 tivities are carried out;

18 ‘‘(D) includes methods to ensure that phy19 sicians and other health care professionals

20 under contract with the entity are qualified to

21 perform the services they provide, and that

22 these qualifications are ensured through appro23 priate credentialing and recredentialing proce24 dures;
261

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(E) includes policies addressing enrollee

2 rights and responsibilities, including grievance

3 mechanisms and mechanisms to inform enroll4 ees about access to and use of services provided

5 by the entity;

6 ‘‘(F) provides for continuous monitoring of

7 the delivery of health care, including—

8 ‘‘(i) identification of clinical areas to

9 be monitored,

10 ‘‘(ii) use of quality indicators and

11 standards for assessing care delivered, in12 cluding availability and accessibility of

13 care,

14 ‘‘(iii) monitoring, through use of epi15 demiological data or chart review, the care

16 of individuals, as appropriate, and patterns

17 of care overall, and

18 ‘‘(iv) implementation of corrective ac19 tions; and

20 ‘‘(G) meets any other requirements pre21 scribed by the Secretary after consultation with

22 States.

23 ‘‘(10) INDEPENDENT REVIEW AND QUALITY AS24 SURANCE.—
262

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(A) STATE GRIEVANCE PROCEDURE.—A

2 State contracting with a risk contracting entity

3 or primary care case management entity under

4 this subsection shall provide for a grievance

5 procedure for enrollees of such entity with at

6 least the following elements:

7 ‘‘(i) A toll-free telephone number for

8 enrollee questions and grievances.

9 ‘‘(ii) A State-operated enrollee griev10 ance procedure.

11 ‘‘(iii) Periodic notification of enrollees

12 of their rights with respect to such entity

13 or program.

14 ‘‘(iv) Periodic sample reviews of griev15 ances registered with such entity or pro16 gram or with the State.

17 ‘‘(v) Periodic survey and analysis of

18 enrollee satisfaction with such entity or

19 program.

20 ‘‘(B) STATE MONITORING OF RISK CON21 TRACTING ENTITIES’ QUALITY ASSURANCE PRO22 GRAMS.—A State contracting with a risk con23 tracting entity under this subsection shall peri24 odically review such entity’s quality assurance
263

Title I, Subtitle H

•HR 5300 IH

1 program to ensure that it meets the require2 ments of paragraph (9).

3 ‘‘(C) EXTERNAL INDEPENDENT REVIEW

4 OF INTERNAL QUALITY ASSURANCE.—A State

5 contracting with a risk contracting entity under

6 this subsection shall provide for annual external

7 independent review (by a utilization control and

8 peer review organization with a contract under

9 section 1153, or another organization unaffili10 ated with the State government approved by the

11 Secretary) of such entity’s internal quality as12 surance activities. Such independent review

13 shall include—

14 ‘‘(i) review of the entity’s medical

15 care, through sampling of medical records

16 or other appropriate methods, for indica17 tions of inappropriate utilization and treat18 ment,

19 ‘‘(ii) review of enrollee inpatient and

20 ambulatory data, through sampling of

21 medical records or other appropriate meth22 ods, to determine quality trends,

23 ‘‘(iii) review of the entity’s internal

24 quality assurance activities, and
264

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(iv) notification of the entity and the

2 State, and appropriate followup activities,

3 when the review under this subparagraph

4 indicates inappropriate care or treat5 ment.’’.

6 (b) STATE OPTION TO GUARANTEE MEDICAID ELI7 GIBILITY.—Section 1902(e)(2) of such Act (42 U.S.C.

8 1396a(e)(2)) is amended—

9 (A) in subparagraph (A), by striking all

10 that precedes ‘‘(but for this paragraph)’’ and

11 inserting ‘‘In the case of an individual who is

12 enrolled—

13 ‘‘(i) with a risk contracting entity (as

14 defined in section 1903(m)(1)(B)(i)) re15 sponsible for the provision of inpatient hos16 pital services and any other service de17 scribed in paragraphs (2), (3), (4), (5),

18 and (7) of section 1905(a),

19 ‘‘(ii) with any risk contracting entity

20 (as so defined) in a State that, on the ef21 fective date of this provision, had in effect

22 a waiver under section 1115 of require23 ments under this title under which the

24 State could extend eligibility for medical

25 assistance for enrollees of such entity, or
265

Title I, Subtitle H

•HR 5300 IH

1 ‘‘(iii) with an eligible organization

2 with a contract under section 1876 and

3 who would’’, and

4 (B) in subparagraph (B), by striking ‘‘or5 ganization or’’ each place it appears.

6 (c) CONFORMING AMENDMENTS.—

7 (1) Section 1128(b)(6)(C)(i) of such Act (42

8 U.S.C. 1320a–7(b)(6)(C)(i)) is amended by striking

9 ‘‘health maintenance organization’’ and inserting

10 ‘‘risk contracting entity’’.

11 (2) Section 1902(a)(25)(A) of such Act (42

12 U.S.C. 1396a(a)(25)(A)), as amended by section

13 13622(a)(1) of the Omnibus Budget Reconciliation

14 Act of 1993, is amended by striking ‘‘health mainte15 nance organizations’’ and inserting ‘‘risk contracting

16 entities’’.

17 (3) Section 1902(a)(25)(H) of such Act (42

18 U.S.C. 1396a(a)(25)(H)), as added by section

19 13622(b)(3) of the Omnibus Budget Reconciliation

20 Act of 1993, is amended by striking ‘‘health mainte21 nance organization’’ and inserting ‘‘risk contracting

22 entity’’.

23 (4) Section 1902(a)(30)(C) of such Act (42

24 U.S.C. 1396a(a)(30)(C)) is amended by striking all

25 that precedes ‘‘with the results’’ and inserting ‘‘pro-
266

Title I, Subtitle H

•HR 5300 IH

1 vide for independent review and quality assurance of

2 entities with contracts under section 1903(m), in ac3 cordance with paragraph (10) of such section,’’.

4 (5) Section 1902(a)(57) of such Act (42 U.S.C.

5 1396a(a)(57)) is amended by striking ‘‘or health

6 maintenance organization’’ and inserting ‘‘or risk

7 contracting entity’’.

8 (6) Section 1902(a) of such Act (42 U.S.C.

9 1396a(a)), as amended by sections 13623(a),

10 13625(a), and 13631(a) of the Omnibus Budget

11 Reconciliation Act of 1993, is amended—

12 (A) by striking ‘‘and’’ at the end of para13 graph (61);

14 (B) by striking the period at the end of

15 paragraph (62) and inserting ‘‘; and’’; and

16 (C) by adding at the end the following new

17 paragraph:

18 ‘‘(63) at State option, provide for a primary

19 care case management program in accordance with

20 section 1903(m)(7).’’.

21 (7) Section 1902(p)(2) of such Act (42 U.S.C.

22 1396a(p)(2)) is amended by striking ‘‘health mainte23 nance organization’’ and inserting ‘‘risk contracting

24 entity’’.
267

Title I, Subtitle H

•HR 5300 IH

1 (8) Section 1902(w) of such Act (42 U.S.C.

2 1396a(w)) is amended—

3 (A) in paragraph (1), by striking ‘‘section

4 1903(m)(1)(A)’’ and inserting ‘‘section

5 1903(m)(2)(C)(xi)’’, and

6 (B) in paragraph (2)(E), by striking

7 ‘‘health maintenance organization’’ and ‘‘the or8 ganization’’ and inserting ‘‘risk contracting en9 tity’’ and ‘‘the entity’’, respectively.

10 (9) Section 1903(k) of such Act (42 U.S.C.

11 1396b(k)) is amended by striking ‘‘health mainte12 nance organization’’ and inserting ‘‘risk contracting

13 entity’’.

14 (10) Section 1903(m)(4)(A) of such Act (42

15 U.S.C. 1396b(m)(4)(A)) is amended—

16 (A) in the first sentence, by striking ‘‘Each

17 health maintenance organization’’ and inserting

18 ‘‘Each risk contracting entity’’,

19 (B) in the first sentence, by striking ‘‘the

20 organization’’ each place it appears and insert21 ing ‘‘the entity’’, and

22 (C) in the second sentence, by striking ‘‘an

23 organization’’ and ‘‘the organization’’ and in24 serting ‘‘a risk contracting entity’’ and ‘‘the

25 risk contracting entity’’, respectively.
268

Title I, Subtitle H

•HR 5300 IH

1 (11) Section 1903(m)(4)(B) of such Act (42

2 U.S.C. 1396b(m)(4)(B)) is amended by striking ‘‘or3 ganization’’ and inserting ‘‘risk contracting entity’’.

4 (12) Section 1903(m)(5) of such Act (42

5 U.S.C. 1396b(m)(5)) is amended in paragraphs

6 (A)(iii) and (B)(ii) by striking ‘‘organization’’ and

7 inserting ‘‘entity’’.

8 (13) Section 1903(o) (42 U.S.C. 1396b(o)), as

9 amended by section 13622(a)(2) of the Omnibus

10 Budget Reconciliation Act of 1993, is amended by

11 striking ‘‘health maintenance organization’’ and in12 serting ‘‘risk contracting entity’’.

13 (14) Section 1903(w)(7)(A)(viii) of such Act

14 (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended by

15 striking ‘‘health maintenance organizations (and

16 other organizations with contracts under section

17 1903(m))’’ and inserting ‘‘risk contracting entities

18 with contracts under section 1903(m)’’.

19 (15) Section 1905(a) of such Act (42 U.S.C.

20 1396d(a)) is amended, in the matter preceding

21 clause (i), by inserting ‘‘(which may be on a prepaid

22 capitation or other risk basis)’’ after ‘‘payment’’ the

23 first place it appears.

24 (16) Section 1908(b) of such Act, as added by

25 section 13623(b) of the Omnibus Budget Reconcili-
269

Title I, Subtitle H

•HR 5300 IH

1 ation Act of 1993, is amended by striking ‘‘health

2 maintenance organization’’ and inserting ‘‘risk con3 tracting entity’’.

4 (17) Section 1916(b)(2)(D) of such Act (42

5 U.S.C. 1396o(b)(2)(D)) is amended by striking

6 ‘‘health maintenance organization’’ and inserting

7 ‘‘risk contracting entity’’.

8 (18) Section 1925(b)(4)(D)(iv) of such Act (42

9 U.S.C. 1396r–6(b)(4)(D)(iv)) is amended—

10 (A) in the heading, by striking ‘‘HMO’’ and

11 inserting ‘‘RISK CONTRACTING ENTITY’’,

12 (B) by striking ‘‘health maintenance orga13 nization’’ and inserting ‘‘risk contracting en14 tity’’ each place it appears, and

15 (C) by striking ‘‘section 1903(m)(1)(A)’’

16 and inserting ‘‘section 1903(m)(1)(B)(i)’’.

17 (19) Paragraphs (1) and (2) of section 1926(a)

18 of such Act (42 U.S.C. 1396r–7(a)) are each amend19 ed by striking ‘‘health maintenance organizations’’

20 and inserting ‘‘risk contracting entities’’.

21 (20) Section 1927 of such Act (42 U.S.C.

22 1396s) is amended—

23 (A) in subsection (c)(1)(C)(i), as amended

24 by section 13602(a)(1) of the Omnibus Budget

25 Reconciliation Act of 1993, by striking ‘‘health
270

Title I, Subtitle H

•HR 5300 IH

1 maintenance organization’’ and inserting ‘‘risk

2 contracting entity’’, and

3 (B) in subsection (j)(1), by striking ‘‘***

4 Health Maintenance Organizations, including

5 those organizations’’ and inserting ‘‘risk con6 tracting entities’’.

7 (d) EFFECTIVE DATE.—The amendments made by

8 this section shall become effective with respect to calendar

9 quarters beginning on or after January 1, 1995.

10 SEC. 1712. PERIOD OF CERTAIN WAIVERS.

11 (a) IN GENERAL.—Section 1915(h) of the Social Se12 curity Act (42 U.S.C. 1396n(h)) is amended by striking

13 ‘‘No waiver’’ and all that follows through ‘‘unless the Sec14 retary’’ and inserting ‘‘A waiver under this section (other

15 than under subsection (c), (d), or (e)) shall be for an ini16 tial term of 3 years and, upon the request of a State, shall

17 be extended for additional 5 year periods unless the Sec18 retary’’.

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

20 subsection (a) shall apply to waivers pursuant to applica21 tions which are approved, and with respect to continu22 ations of waivers for which requests are made, later than

23 30 days after the date of the enactment of this Act.
271

Title I, Subtitle H

•HR 5300 IH

1 SEC. 1713. ELIMINATION OF DUPLICATIVE PEDIATRIC IM2 MUNIZATION PROGRAM.

3 Effective as if included in the enactment of the 13621

4 of the Omnibus Budget Reconciliation Act of 1993, title

5 XIX of the Social Security Act is amended as follows:

6 (1) Section 1902(a) is amended—

7 (A) by adding ‘‘and’’ at the end of para8 graph (60),

9 (B) by striking ‘‘; and’’ at the end of para10 graph (61) and inserting a period, and

11 (C) by striking paragraph (62).

12 (2) Section 1928 is repealed.

13 (3) Section 1903(i) is amended—

14 (A) by inserting ‘‘or’’ at the end of para15 graph (12),

16 (B) by striking the semicolon at the end of

17 paragraph (13) and inserting a period, and

18 (C) by striking paragraphs (14) and (15).

19 (4) Section 1902(a)(32)(D) is amended by

20 striking ‘‘before October 1, 1994’’.

21 (5) Section 1902(a) is amended—

22 (A) in paragraph (11)(B)—

23 (i) by inserting ‘‘and’’ before ‘‘(ii)’’,

24 and

25 (ii) by striking ‘‘to the individual

26 under section 1903, and
272

Title I, Subtitle H

•HR 5300 IH

1 (iii) providing for coordination of in2 formation and education on pediatric vac3 cinations and delivery of immunization

4 services’’ and inserting ‘‘to him under sec5 tion 1903’’;

6 (B) in paragraph (11)(C), by striking ‘‘,

7 including the provision of information and edu8 cation on pediatric vaccinations and the delivery

9 of immunization services,’’ and

10 (C) in paragraph (43)(A), by striking ‘‘and

11 the need for age-appropriate immunizations

12 against vaccine-preventable diseases’’.

13 (6) Section 1905(r)(1) is amended—

14 (A) in subparagraph (A)(i), by striking

15 ‘‘and, with respect to immunizations under sub16 paragraph (B)(iii), in accordance with the

17 schedule referred to in section 1928(c)(2)(B)(i)

18 for pediatric vaccines’’; and

19 (B) in subparagraph (B)(iii), by striking

20 ‘‘(according to the schedule referred to in sec21 tion 1928(c)(2)(B)(i) for pediatric vaccines)’’.
273

Title I, Subtitle H

•HR 5300 IH

1 PART 3—MEDICAID DISPROPORTIONATE SHARE

2 ADJUSTMENT

3 SEC. 1721. 25 PERCENT REDUCTION IN AMOUNT OF PAY4 MENT ADJUSTMENTS FOR DISPROPORTION5 ATE SHARE HOSPITALS.

6 (a) IN GENERAL.—Section 1923 of the Social Secu7 rity Act (42 U.S.C. 1396r–4) is amended by adding at

8 the end the following new subsection:

9 ‘‘(h) REDUCTION IN FEDERAL FINANCIAL PARTICI10 PATION FOR DISPROPORTIONATE SHARE ADJUST11 MENTS.—Notwithstanding any other provision of this sec12 tion, the amount of payments under section 1903(a) with

13 respect to any payment adjustment made under this sec14 tion for hospitals in a State for quarters in a fiscal year

15 shall not exceed—

16 ‘‘(1) for quarters in fiscal years 1995 and 1996,

17 88 percent of the amount otherwise determined

18 under subsection (f); and

19 ‘‘(2) for quarters in fiscal year 1997 and each

20 succeeding fiscal year, 75 percent of the amount oth21 erwise determined under subsection (f).’’.

22 (b) CONFORMING AMENDMENT.—Section 1923(c) of

23 such Act (42 U.S.C. 1396r–4(c)) is amended in the matter

24 preceding paragraph (1) by striking ‘‘(f) and (g)’’ and in25 serting ‘‘(f), (g), and (h)’’.
274

Title I, Subtitle I

•HR 5300 IH

1 (c) EFFECTIVE DATE.—The amendments made by

2 subsections (a) and (b) shall apply to quarters in fiscal

3 years beginning on or after October 1, 1996.

4 Subtitle I—Remedies and Enforce5 ment With Respect to Group

6 Health Plans

7 SEC. 1801. CLAIMS PROCEDURE FOR GROUP HEALTH

8 PLANS.

9 (a) IN GENERAL.—Section 503 of the Employee Re10 tirement Income Security Act of 1974 (29 U.S.C. 1133)

11 is amended—

12 (1) by inserting ‘‘(a) IN GENERAL.—’’ after

13 ‘‘SEC. 503.’’; and

14 (2) by adding at the end the following new sub15 section:

16 ‘‘(b) SPECIAL RULES FOR GROUP HEALTH PLANS.—

17 ‘‘(1) IN GENERAL.—In addition to meeting the

18 requirements of subsection (a), every group health

19 plan shall afford a reasonable opportunity to any

20 participant or beneficiary, whose request for a

21 preauthorization, an emergency preauthorization, a

22 utilization review determination, or an emergency

23 utilization review determination has been denied, for

24 a full and fair review by the appropriate fiduciary of

25 the decision denying the request.
275

Title I, Subtitle I

•HR 5300 IH

1 ‘‘(2) TIME LIMITS FOR DECIDING CLAIMS.—

2 ‘‘(A) INITIAL DECISIONS.—A group health

3 plan shall issue an initial approval or denial of

4 any claim for medical, surgical, or hospital ben5 efits not later than 30 days after its filing com6 pletion date. Failure to approve or deny such a

7 claim within such 30-day period shall be treated

8 as a denial of the claim.

9 ‘‘(B) REVIEWS OF INITIAL DECISIONS.—

10 Every review by a fiduciary required under

11 paragraph (1) of an initial denial under sub12 paragraph (A) shall be completed not later than

13 30 days after the review filing date. Failure to

14 issue a decision affirming, reversing, or modify15 ing the initial denial shall be treated as a final

16 decision denying the claim.

17 ‘‘(3) TIME LIMIT FOR DECIDING REQUESTS FOR

18 PREAUTHORIZATION.—

19 ‘‘(A) GENERAL RULE.—Except as provided

20 in subparagraph (B):

21 ‘‘(i) INITIAL DECISIONS.—If a request

22 for preauthorization is required under the

23 terms of a group health plan, the plan

24 shall approve or deny any such request not

25 later than 30 days after its filing comple-
276

Title I, Subtitle I

•HR 5300 IH

1 tion date. Failure to approve or deny such

2 a request within such 30-day period shall

3 be treated as a denial of the request.

4 ‘‘(ii) REVIEWS OF INITIAL DECI5 SIONS.—Every review by a fiduciary re6 quired under paragraph (1) of an initial

7 denial under clause (i) shall be completed

8 not later than 30 days after the review fil9 ing date. Failure to issue a decision affirm10 ing, reversing, or modifying the initial de11 nial within such 30-day period shall be

12 treated as a final decision denying the re13 quest.

14 ‘‘(B) REQUESTS FOR EMERGENCY

15 PREAUTHORIZATION.—

16 ‘‘(i) INITIAL DECISIONS.—In any case

17 in which a request for preauthorization re18 quired under the terms of a group health

19 plan is a request for emergency

20 preauthorization, the plan shall approve or

21 deny any such request not later than 10

22 days after its filing completion date (24

23 hours after such date in cases involving

24 emergency medical care). Failure to ap25 prove or deny such a request within such
277

Title I, Subtitle I

•HR 5300 IH

1 10-day period (or 24-hour period) shall be

2 treated as a denial of the request.

3 ‘‘(ii) REVIEWS OF INITIAL DECI4 SIONS.—Every review by a fiduciary re5 quired under paragraph (1) of an initial

6 denial under clause (i) shall be completed

7 not later than 10 days after the review fil8 ing date (24 hours after such date in cases

9 involving emergency medical care). Failure

10 to issue a decision affirming, reversing, or

11 modifying the initial denial within such 10-

12 day period (or 24-hour period) shall be

13 treated as a final decision denying the re14 quest.

15 ‘‘(4) TIME LIMIT FOR DECIDING REQUESTS FOR

16 UTILIZATION REVIEW DETERMINATIONS.—

17 ‘‘(A) GENERAL RULE.—Except as provided

18 in subparagraph (B):

19 ‘‘(i) INITIAL DECISIONS.—If a request

20 for a utilization review determination is re21 quired under the terms of a group health

22 plan, the plan shall approve or deny any

23 such request not later than 30 days after

24 its filing completion date. Failure to ap25 prove or deny such a request within such
278

Title I, Subtitle I

•HR 5300 IH

1 30-day period shall be treated as a denial

2 of the request.

3 ‘‘(ii) REVIEWS OF INITIAL DECI4 SIONS.—Every review by a fiduciary re5 quired under paragraph (1) of an initial

6 denial under clause (i) shall be completed

7 not later than 30 days after the review fil8 ing date. Failure to issue a decision affirm9 ing, reversing, or modifying the initial de10 nial within such 30-day period shall be

11 treated as a final decision denying the re12 quest.

13 ‘‘(B) REQUESTS FOR EMERGENCY UTILIZA14 TION REVIEW DETERMINATIONS.—

15 ‘‘(i) INITIAL DECISIONS.—In any case

16 in which a request for a utilization review

17 determination required under the terms of

18 a group health plan is a request for an

19 emergency utilization review determination,

20 the plan shall approve or deny any such re21 quest not later than 10 days after its filing

22 completion date (24 hours after such date

23 in cases involving emergency medical care).

24 Failure to approve or deny such a request

25 within such 10-day period (or 24-hour pe-
279

Title I, Subtitle I

•HR 5300 IH

1 riod) shall be treated as a denial of the re2 quest.

3 ‘‘(ii) REVIEWS OF INITIAL DECI4 SIONS.—Every review by a fiduciary re5 quired under paragraph (1) of an initial

6 denial under clause (i) shall be completed

7 not later than 10 days after the review fil8 ing date (24 hours after such date in cases

9 involving emergency medical care). Failure

10 to issue a decision affirming, reversing, or

11 modifying the initial denial within such 10-

12 day period (or 24-hour period) shall be

13 treated as a final decision denying the re14 quest.

15 ‘‘(5) DEFINITIONS.—For purposes of this sub16 section:

17 ‘‘(A) CLAIM FOR MEDICAL, SURGICAL, OR

18 HOSPITAL BENEFITS.—The term ‘claim for

19 medical, surgical, or hospital benefits’ means a

20 request for payment by a group health plan of

21 such benefits made by or on behalf of a partici22 pant or beneficiary after the expense for medi23 cal, surgical, or hospital care has been incurred.

24 ‘‘(B) UTILIZATION REVIEW DETERMINA25 TION.—The term ‘utilization review determina-
280

Title I, Subtitle I

•HR 5300 IH

1 tion’ means a determination under a group

2 health plan solely that proposed medical, sur3 gical, or hospital care is medically necessary (as

4 defined in section 1131(7) of the Health Secu5 rity Act). Unless otherwise expressly provided

6 under the terms of the plan, any such deter7 mination shall not by itself constitute a guaran8 tee that benefits under the plan will be pro9 vided.

10 ‘‘(C) PREAUTHORIZATION.—The term

11 ‘preauthorization’ means a determination under

12 a group health plan that proposed medical, sur13 gical, or hospital care meets the plan’s terms

14 and conditions of coverage. Such a determina15 tion shall constitute a guarantee that benefits

16 under the plan will be provided.

17 ‘‘(D) REQUEST FOR PREAUTHOR18 IZATION.—The term ‘request for

19 preauthorization’ means a request for

20 preauthorization by a group health plan of med21 ical, surgical, or hospital benefits made by or on

22 behalf of a participant or beneficiary before the

23 expense for such care has been incurred.

24 ‘‘(E) REQUEST FOR EMERGENCY

25 PREAUTHORIZATION.—The term ‘request for
281

Title I, Subtitle I

•HR 5300 IH

1 emergency preauthorization’ means a request

2 for preauthorization.0 by a group health plan in

3 any case in which the medical, surgical, or hos4 pital benefits for which the expense is to be in5 curred constitutes urgent medical care or emer6 gency medical care.

7 ‘‘(F) REQUEST FOR UTILIZATION REVIEW

8 DETERMINATION.—The term ‘request for a uti9 lization review determination’ means a request

10 by or on behalf of a participant or beneficiary,

11 made before an expense for medical, hospital, or

12 surgical care has been incurred, for a utilization

13 review determination by a plan.

14 ‘‘(G) REQUEST FOR EMERGENCY UTILIZA15 TION REVIEW DETERMINATION.—The term ‘re16 quest for an emergency utilization review deter17 mination’ means a request for a utilization re18 view determination in any case in which the

19 medical, hospital, or surgical care to be in20 curred constitutes urgent medical care or emer21 gency medical care.

22 ‘‘(H) URGENT MEDICAL CARE.—The term

23 ‘urgent medical care’ means medical, surgical,

24 or hospital care in any case in which a physi25 cian with appropriate expertise has certified in
282

Title I, Subtitle I

•HR 5300 IH

1 writing that failure to provide the participant or

2 beneficiary with such care within 45 days will

3 result in either—

4 ‘‘(i) the death of the participant or

5 beneficiary within 120 days, or

6 ‘‘(ii) the immediate, serious, and irre7 versible deterioration of the health of the

8 participant or beneficiary within 120 days

9 which will significantly increase the reason10 able likelihood of death of the participant

11 or beneficiary.

12 ‘‘(I) EMERGENCY MEDICAL CARE.—The

13 term ‘emergency medical care’ means medical,

14 surgical, or hospital care in any case in which

15 a physician with appropriate expertise has cer16 tified in writing—

17 ‘‘(i) that failure to immediately pro18 vide the care to the participant or bene19 ficiary could reasonably be expected to re20 sult in—

21 ‘‘(I) placing the health of such

22 participant or beneficiary (or, with re23 spect to such a participant or bene24 ficiary who is a pregnant woman, the
283

Title I, Subtitle I

•HR 5300 IH

1 health of the woman or her unborn

2 child) in serious jeopardy,

3 ‘‘(II) serious impairment to bod4 ily functions, or

5 ‘‘(III) serious dysfunction of any

6 bodily organ or part,

7 or

8 ‘‘(ii) that immediate provision of the

9 care is necessary because the participant

10 or beneficiary has made or is at serious

11 risk of making an attempt to harm himself

12 or herself or another individual.

13 ‘‘(J) FILING COMPLETION DATE.—The

14 term ‘filing completion date’ means, in connec15 tion with a group health plan, the date as of

16 which the plan is in receipt of all information

17 reasonably required to make an initial decision

18 to approve or deny a claim for medical, sur19 gical, or hospital benefits, a request for

20 preauthorization, a request for emergency

21 preauthorization, a request for a utilization re22 view determination or a request for an emer23 gency utilization review determination.

24 ‘‘(K) REVIEW FILING DATE.—The term

25 ‘review filing date’ means, in connection with a
284

Title I, Subtitle I

•HR 5300 IH

1 group health plan, the date as of which the ap2 propriate fiduciary is in receipt of all informa3 tion reasonably required to make a decision

4 upon a full and fair review of the denial, in

5 whole or in part, of a claim for medical, sur6 gical, or hospital benefits, a request for

7 preauthorization, a request for emergency

8 preauthorization, a request for a utilization re9 view determination or a request for an emer10 gency utilization review determination.

11 ‘‘(L) APPROPRIATE FIDUCIARY.—The term

12 ‘appropriate fiduciary’ means with respect to

13 any determination under a group health plan a

14 person designated by the plan to make such de15 termination. One or more appropriate fidu16 ciaries shall be designated under each group

17 health plan for making determinations under

18 the plan.’’.

19 (b) DEFINITION OF GROUP HEALTH PLAN.—

20 (1) IN GENERAL.—Section 3 of such Act (29

21 U.S.C. 1002) is amended by adding at the end the

22 following new paragraph:

23 ‘‘(42) The term ‘group health plan’ means an em24 ployee welfare benefit plan providing medical care (as de25 fined in section 213(d) of the Internal Revenue Code of
285

Title I, Subtitle I

•HR 5300 IH

1 1986) to participants or beneficiaries directly or through

2 insurance, reimbursement, or otherwise.’’.

3 (2) CONFORMING AMENDMENT.—Section 607

4 of such Act (29 U.S.C. 1167) is amended by striking

5 paragraph (1).

6 SEC. 1802. MEDIATION OF GROUP HEALTH PLAN CLAIMS.

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

8 the Employee Retirement Income Security Act of 1974 is

9 amended—

10 (1) by inserting below the heading for part 5

11 the following:

12 ‘‘Subpart A—In General’’;

13 and

14 (2) by adding at the end the following new sub15 part:

16 ‘‘Subpart B—Mediation of Group Health Plan Claims

17 ‘‘SEC. 521. ELIGIBILITY FOR SUBMISSION TO MEDIATION.

18 ‘‘(a) IN GENERAL.—The Secretary shall establish a

19 mediation program under this subpart (hereinafter in this

20 subpart referred to as the ‘mediation program’) for the

21 purpose of facilitating mediation of disputes meeting the

22 requirements specified in subsection (b). At the time no23 tice is provided to any participant or beneficiary of a

24 group health plan’s denial of any claim for benefits pursu25 ant to section 503, the plan shall provide reasonable notice
286

Title I, Subtitle I

•HR 5300 IH

1 in writing to the participant or beneficiary whose claim

2 for benefits under the plan has been denied of the avail3 ability of mediation under this subpart at the election of

4 either the claimant or the plan.

5 ‘‘(b) DISPUTE CRITERIA.—A dispute may be submit6 ted for mediation under the mediation program only if the

7 following requirements are met with respect to such dis8 pute:

9 ‘‘(1) PARTIES.—The dispute consists of an as10 sertion by a participant, a beneficiary, or the duly

11 authorized representative of a participant or bene12 ficiary (or, in the case of an assignment, the as13 signee) of one or more claims under a group health

14 plan, and a denial of such claims, or a denial of ap15 propriate reimbursement based on such claims, by

16 such plan or an appropriate fiduciary.

17 ‘‘(2) NATURE OF CLAIM.—The claim consists of

18 a claim for benefits for medical, surgical, or hospital

19 expenses under a group health plan which consist of

20 benefits described in section 3(1).

21 ‘‘(3) SUBMISSION AFTER EXHAUSTION OF PLAN

22 REMEDIES.—The claimant has received a final deter23 mination regarding the claim under the plans’ claims

24 procedure under section 503, or has otherwise ex-
287

Title I, Subtitle I

•HR 5300 IH

1 hausted all remedies under the plan provided pursu2 ant to section 503.

3 ‘‘(4) APPROPRIATE FIDUCIARY.—For purposes

4 of this subpart, the term ‘appropriate fiduciary’ has

5 the meaning provided in section 503(b)(5)(K).

6 ‘‘SEC. 522. FACILITATORS.

7 ‘‘(a) ROSTER.—The Secretary shall maintain a list

8 of individuals with appropriate expertise to serve as

9 facilitators in proceedings under the mediation program.

10 ‘‘(b) CRITERIA.—In identifying individuals to serve

11 as facilitators, the Secretary shall consider the following:

12 ‘‘(1) The individual’s experience in dispute reso13 lution.

14 ‘‘(2) The individual’s ability to act impartially.

15 ‘‘(3) The individual’s ability to perform evalua16 tions quickly and to present them in nontechnical

17 terms.

18 ‘‘(4) The individual’s experience in employee

19 medical, hospital, and surgical benefits.

20 ‘‘(c) APPOINTMENT OF FACILITATOR.—Within 15

21 days after either party files with the Secretary an election

22 of mediation with respect to a dispute, the Secretary shall

23 propose a facilitator, selected under a random selection

24 procedure prescribed in regulations, and notify the parties

25 of such selection. Within 10 days after receipt of the noti-
288

Title I, Subtitle I

•HR 5300 IH

1 fication of the selection of a facilitator, either party may

2 reject the proposed facilitator. If neither party objects to

3 the Secretary’s proposed facilitator within such 10-day pe4 riod, the appointment shall become final. If either party

5 objects to the Secretary’s proposed facilitator, the proce6 dure set forth in the preceding provisions of this sub7 section shall be repeated. Each party is limited to 1 objec8 tion to the Secretary’s proposed facilitator for each medi9 ation.

10 ‘‘SEC. 523. ROLE OF ATTORNEYS.

11 ‘‘Parties may represent themselves or be represented

12 by attorneys throughout the mediation process.

13 ‘‘SEC. 524. INITIATION OF MEDIATION.

14 ‘‘(a) CLAIMANT INITIATION.—A claimant may initi15 ate mediation of a dispute under this subpart only if no

16 action has been commenced by the claimant under section

17 502 with respect to any claim involved. To initiate medi18 ation, a claimant shall file an election for mediation with

19 the Secretary (and shall file a copy of the election with

20 the plan or the appropriate fiduciary) within 30 days after

21 a final determination regarding the claim pursuant to sec22 tion 503.

23 ‘‘(b) PLAN INITIATION.—A participant or beneficiary

24 may not commence an action under section 502 with re25 spect to any claim until the participant or beneficiary has
289

Title I, Subtitle I

•HR 5300 IH

1 provided to the plan or the appropriate fiduciary 10 days

2 advance notice of the filing of such action. Within the ear3 lier of (1) 25 days after receipt of such a notice with re4 spect to any claim or (2) the date preceding the date on

5 which such claim is filed in court, the plan or the appro6 priate fiduciary may elect mediation of a dispute under

7 this subpart involving such claim by filing an election for

8 mediation with the Secretary (and a copy of the election

9 with the claimant). Upon a timely election of mediation

10 by the plan or the appropriate fiduciary, the claimant’s

11 right to pursue the claim under section 502 shall be sus12 pended until the earlier of 75 days after the date of the

13 filing of the election of mediation or the termination of

14 the mediation proceedings.

15 ‘‘(c) ELECTION FOR MEDIATION.—An election by any

16 party for mediation under this subpart shall be in such

17 form and manner as the Secretary shall prescribe by regu18 lation.

19 ‘‘(d) PARTICIPATION.—The claimant and the plan

20 shall participate in the mediation. Each party shall provide

21 the facilitator a written summary of its position with re22 spect to the dispute accompanied by supporting docu23 mentation.

24 ‘‘(e) FILING FEE.—The party initiating mediation

25 under this section shall include with any election for medi-
290

Title I, Subtitle I

•HR 5300 IH

1 ation under this subpart a reasonable nonrefundable filing

2 fee payable to the Secretary. The filing fee shall be deter3 mined pursuant to regulations prescribed by the Sec4 retary.

5 ‘‘(f) TOLLING OF STATUTES OF LIMITATIONS.—The

6 applicable statute of limitations with respect to any claim

7 involved in a dispute subject to mediation proceedings

8 under this subpart shall be tolled for the period commenc9 ing with the 10-day notice period required under sub10 section (b) and ending with the termination of the medi11 ation proceedings with respect to such dispute. In no event

12 shall the applicable statute of limitations be tolled beyond

13 the 60-day-time limit for completion of mediation provided

14 under section 526.

15 ‘‘SEC. 525. MEDIATION PROCEDURE.

16 ‘‘(a) IN GENERAL.—Mediation proceedings under

17 this subpart shall be conducted, at locations convenient

18 to complainants, by facilitators recruited and assigned by

19 the Secretary under section 522.

20 ‘‘(b) DUTIES OF FACILITATOR.—The Secretary shall

21 prescribe by regulation the duties and role of the

22 facilitator during the mediation process. Such regulations

23 may require the facilitator to identify parties, establish a

24 schedule, request position papers from the parties, and

25 evaluate positions of the parties. Such regulations shall
291

Title I, Subtitle I

•HR 5300 IH

1 provide that the mediation will be informal, convenient,

2 inexpensive, and expeditious for all parties.

3 ‘‘(c) NEUTRALITY OF FACILITATOR.—The facilitator

4 shall maintain a neutral stance between the parties.

5 ‘‘SEC. 526. MEDIATION TIME LIMIT.

6 ‘‘Any mediation proceedings commenced under this

7 subpart shall be completed within 60 days from the final

8 appointment of a facilitator pursuant to section 522(c).

9 ‘‘SEC. 527. COST OF MEDIATION.

10 ‘‘All reasonable costs of the mediation process under

11 this subpart with respect to any dispute, including the cost

12 of the facilitator, shall be divided equally among the par13 ties. Facilitators shall be compensated at a rate estab14 lished by the Secretary by regulation. The Secretary shall

15 prescribe regulations specifying reasonable mediation costs

16 and alternative means of allocating the costs in cases of

17 hardship on the part of the claimant.

18 ‘‘SEC. 528. LEGAL EFFECT OF PARTICIPATION IN MEDI19 ATION PROGRAM.

20 ‘‘(a) NONBINDING MEDIATION.—The results of any

21 mediation under this subpart shall be treated as advisory

22 in nature and nonbinding. Except as provided in sub23 section (b), the rights of the parties shall not be affected

24 by participation in the mediation program.
292

Title I, Subtitle I

•HR 5300 IH

1 ‘‘(b) RESOLUTION THROUGH SETTLEMENT AGREE2 MENT.—If a dispute is settled through participation in the

3 mediation program, the facilitator shall, upon the request

4 of either party, assist the parties in drawing up a settle5 ment agreement between the parties.

6 ‘‘SEC. 529. CONFIDENTIALITY AND ADMISSIBILITY.

7 ‘‘(a) IN GENERAL.—All documents and communica8 tions made during or generated in connection with the me9 diation program, as well as any settlement offers or agree10 ments made or entered into under such program—

11 ‘‘(1) shall be privileged and confidential, and

12 ‘‘(2) shall not be admissible as evidence in any

13 Federal or State judicial proceeding unless all par14 ties to the mediation consent in writing.

15 ‘‘(b) EXECUTION OF PRIVILEGE.—Any individual or

16 entity involved in the mediation (including any party or

17 facilitator or other individual who acts on behalf of a party

18 or who provides information or an opinion in connection

19 with the mediation) receiving a subpoena or other lawful

20 process seeking disclosure of any information or docu21 ments rendered privileged and confidential under sub22 section (a) shall assert the privilege provided under sub23 section (a) and promptly notify all parties to the mediation

24 proceedings of the request for disclosure. The privilege

25 provided for in this section shall be in addition to any at-
293

Title I, Subtitle I

•HR 5300 IH

1 torney-client privilege or other privilege which may be as2 serted by a party and nothing in this section shall con3 stitute a waiver of such attorney-client privilege or other

4 privilege.’’.

5 (b) CLERICAL AMENDMENTS.—The table of contents

6 in section 1 of such Act is amended—

7 (1) by inserting after the item relating to the

8 heading for part 5 of subtitle B of title I the follow9 ing new item:

‘‘Subpart A—General Provisions’’;

10 and

11 (2) by inserting after the item relating to sec12 tion 514 the following new items:

‘‘Subpart B—Mediation of Group Health Plan Claims

‘‘Sec. 521. Eligibility for submission to mediation.

‘‘Sec. 522. Facilitators.

‘‘Sec. 523. Role of attorneys.

‘‘Sec. 524. Initiation of mediation.

‘‘Sec. 525. Mediation procedure.

‘‘Sec. 526. Mediation time limit.

‘‘Sec. 527. Cost of mediation.

‘‘Sec. 528. Legal effect of participation in mediation program.

‘‘Sec. 529. Confidentiality and admissibility.’’.

13 SEC. 1803. AVAILABLE COURT REMEDIES.

14 (a) IN GENERAL.—Section 502(c) of the Employee

15 Retirement Income Security Act of 1974 (29 U.S.C. 1132)

16 is amended by adding at the end the following new para17 graphs:

18 ‘‘(5) In any action commenced under subsection (a)

19 by a participant or beneficiary with respect to a group
294

Title I, Subtitle I

•HR 5300 IH

1 health plan in which the plaintiff alleges that a person,

2 in the capacity of a fiduciary and in violation of the terms

3 of the plan or this title, has taken an action resulting in

4 a failure to provide an item or service, or payment there5 for, or has failed to take an action for which such person

6 is responsible under the plan and which is necessary under

7 the plan for provision of such item or service, or payment

8 therefor, upon finding in favor of the plaintiff, the court

9 shall cause to be served on the defendant an order requir10 ing the defendant—

11 ‘‘(i) to cease and desist from the alleged action

12 or failure to act,

13 ‘‘(ii) to provide the item or service, or payment

14 therefor, and to otherwise comply with the terms of

15 the plan and the applicable requirements of this

16 title,

17 ‘‘(iii) to pay to the plaintiff prejudgment inter18 est on the actual costs incurred in obtaining any

19 item or service, or payment therefor, at issue in the

20 complaint, and

21 ‘‘(iv) to pay to the plaintiff a reasonable attor22 ney’s fee, reasonable expert witness fees, and other

23 reasonable costs relating to the action on the

24 charges on which the plaintiff prevails.
295

Title I, Subtitle I

•HR 5300 IH

1 The remedies provided under this paragraph shall be in

2 addition to remedies otherwise provided under this section.

3 ‘‘(6)(A) The Secretary may assess a civil penalty

4 against the plan administrator of, or the appropriate fidu5 ciary (as defined in section 503(b)(5)(K)) of, one or more

6 group health plans for any pattern or practice thereof of

7 repeated failures to provide benefits under the terms of

8 the plan or plans without any reasonable basis or repeated

9 violations thereby of the requirements of section 503 with

10 respect to such plan or plans. Such penalty shall be pay11 able only upon proof by clear and convincing evidence of

12 such pattern or practice.

13 ‘‘(B) Such penalty shall be in an amount not to ex14 ceed the lesser of—

15 ‘‘(i) 20 percent of the aggregate value of claims

16 shown by the Secretary to have been denied, or un17 lawfully delayed in violation of section 503, under

18 such pattern or practice, or

19 ‘‘(ii) $1,000,000.

20 ‘‘(C) The plan administrator or the appropriate fidu21 ciary of any group health plan or plans who has engaged

22 in any such pattern or practice with respect to such plans,

23 upon the petition of the Secretary, may be removed by

24 the court from that position, and from any other involve-
296

Title I, Subtitle I

•HR 5300 IH

1 ment, with respect to such plan or plans, for a period of

2 not less than 7 years.

3 ‘‘(D) For purposes of this paragraph, the phrase

4 ‘without any reasonable basis’ means, in connection with

5 any denial of claims for benefits under a group health

6 plan, that such denial does not have any reasonable basis,

7 support, or justification under—

8 ‘‘(i) the facts regarding such claim which were

9 reasonably available to the plan administrator or the

10 appropriate fiduciary at the time the claim was de11 nied, and

12 ‘‘(ii) the terms of the plan.’’.

13 (b) CONFORMING AMENDMENT.—Section 502(a)(6)

14 of such Act (29 U.S.C. 1132(a)(6)) is amended by insert15 ing ‘‘or (c)(6)’’ after ‘‘(c)(2)’’.

16 SEC. 1804. EFFECTIVE DATE.

17 The amendments made by this subtitle shall take ef18 fect January 1, 1995, except that the Secretary of Labor

19 may issue regulations before such date under such amend20 ments. The Secretary shall issue all regulations necessary

21 to carry out the amendments made by this subtitle before

22 the effective date thereof.
297

Title I, Subtitle J

•HR 5300 IH

1 Subtitle J—Delivery of Health Care

2 Services to Illegal Immigrants

3 SEC. 1901. STUDY ON THE DELIVERY OF HEALTH CARE

4 SERVICES TO ILLEGAL IMMIGRANTS.

5 (a) IN GENERAL.—As soon as practicable after the

6 date of the enactment of this Act, the Secretary of Health

7 and Human Services shall conduct a detailed study of

8 health care in the United States to populations of individ9 uals immigrating to the United States illegally, including

10 the effect of illegal immigration on levels of health costs

11 and the shifting of health costs.

12 (b) MATTERS TO BE ANALYZED.—In conducting the

13 study under this section, the Secretary shall analyze—

14 (1) the extent to which individuals illegally im15 migrating into the United States obtain health care

16 services in the United States,

17 (2) the costs of such services,

18 (3) the means currently used to finance such

19 costs,

20 (4) the means currently used for identifying,

21 evaluating, preventing, and resolving health prob22 lems of populations comprised of such individuals,

23 (5) the extent of efforts currently being under24 taken to prevent or resolve such health problems,
298

Title I, Subtitle J

•HR 5300 IH

1 (6) the extent of efforts currently being under2 taken to educate populations comprised of such indi3 viduals concerning such health problems and to co4 ordinate such efforts,

5 (7) the programs currently in place for carrying

6 out the activities described in paragraphs (3)

7 through (6), and

8 (8) the extent of intergovernmental cooperation

9 currently in place between the United States and

10 other countries in dealing with health problems de11 scribed in the preceding provisions of this sub12 section.

13 SEC. 1902. REPORT.

14 Not later than one year after the date of the enact15 ment of this Act, the Secretary of Health and Human

16 Services shall submit to each House of the Congress a

17 final report on the matters analyzed in the study con18 ducted under section 1801. The Secretary shall include in

19 such report any recommendations derived by the Secretary

20 regarding appropriate means of—

21 (1) alleviating the health problems peculiar to

22 populations of individuals who have immigrated to

23 the United States illegally,

24 (2) financing health care provided to such pop25 ulations, and
299

Title II

•HR 5300 IH

1 (3) increasing intergovernmental cooperation

2 and coordination of efforts between the United

3 States and other countries to alleviate such health

4 problems and to finance such efforts.

5 TITLE II—HEALTH CARE COST

6 CONTAINMENT AND QUALITY

7 ENHANCEMENT

TABLE OF CONTENTS OF SUBTITLE

Subtitle A—Medical Malpractice Liability Reform

PART 1—GENERAL PROVISIONS

Sec. 2001. Federal reform of medical malpractice liability actions.

Sec. 2002. Definitions.

Sec. 2003. Effective date.

PART 2—MEDICAL MALPRACTICE AND PRODUCT LIABILITY REFORM

Sec. 2011. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 2012. Calculation and payment of damages.

Sec. 2013. Treatment of attorney’s fees and other costs.

Sec. 2014. Joint and several liability.

Sec. 2015. Statute of limitations.

Sec. 2016. Uniform standard for determining negligence.

Sec. 2017. Special provision for certain obstetric services.

PART 3—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION

SYSTEMS (ADR)

Sec. 2031. Basic requirements.

Sec. 2032. Certification of State systems; applicability of alternative Federal

system.

Sec. 2033. Reports on implementation and effectiveness of alternative dispute

resolution systems.

PART 4—OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE

LIABILITY

Sec. 2041. Permitting State professional societies to participate in disciplinary

activities.

Sec. 2042. Study of incentives to encourage voluntary service by physicians.

Sec. 2043. Requirements for risk management programs.

Sec. 2044. Grants for medical safety promotion.

Subtitle B—Administrative Cost Savings and Fair Health

Information Practices
300

Title II

•HR 5300 IH

PART 1—ADMINISTRATIVE COST SAVINGS

Sec. 2100. Purpose.

Sec. 2101. Definitions.

SUBPART A—STANDARDS FOR DATA ELEMENTS AND TRANSACTIONS

Sec. 2103. General requirements on Secretary.

Sec. 2104. Standards for data elements of health information.

Sec. 2105. Information transaction standards.

Sec. 2106. Timetables for adoption of standards.

SUBPART B—REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND

INFORMATION

Sec. 2111. Standard transactions and information.

Sec. 2112. Accessing health information for authorized purposes.

Sec. 2113. Ensuring availability of information.

Sec. 2114. Timetables for compliance with requirements.

SUBPART C—MISCELLANEOUS PROVISIONS

Sec. 2121. Standards and certification for health information network services.

Sec. 2122. Imposition of additional requirements.

Sec. 2123. Effect on State law.

Sec. 2124. Grants for demonstration projects.

SUBPART D—ASSISTANCE TO THE SECRETARY

Sec. 2131. General requirement on Secretary.

Sec. 2132. Health Information Advisory Committee.

PART 2—FAIR HEALTH INFORMATION PRACTICES

Sec. 2140. Definitions.

SUBPART A—DUTIES OF HEALTH INFORMATION TRUSTEES

Sec. 2141. Inspection of protected health information.

Sec. 2142. Amendment of protected health information.

Sec. 2143. Notice of information practices.

Sec. 2144. Accounting for disclosures.

Sec. 2145. Security.

SUBPART B—USE AND DISCLOSURE OF PROTECTED HEALTH INFORMATION

Sec. 2151. General limitations on use and disclosure.

Sec. 2152. Authorizations for disclosure of protected health information.

Sec. 2153. Treatment, payment, and oversight.

Sec. 2154. Next of kin and directory information.

Sec. 2155. Public health.

Sec. 2156. Health research.

Sec. 2157. Emergency circumstances.

Sec. 2158. Judicial and administrative purposes.

Sec. 2159. Law enforcement.

Sec. 2160. Subpoenas, warrants, and search warrants.

Sec. 2161. Health information service organizations.
301

Title II

•HR 5300 IH

SUBPART C—ACCESS PROCEDURES AND CHALLENGE RIGHTS

Sec. 2171. Access procedures for law enforcement subpoenas, warrants, and

search warrants.

Sec. 2172. Challenge procedures for law enforcement subpoenas.

Sec. 2173. Access and challenge procedures for other subpoenas.

Sec. 2174. Construction of subpart; suspension of statute of limitations.

Sec. 2175. Responsibilities of Secretary.

SUBPART D—MISCELLANEOUS PROVISIONS

Sec. 2181. Payment card and electronic payment transactions.

Sec. 2182. Access to protected health information outside of the United States.

Sec. 2183. Standards for electronic documents and communications.

Sec. 2184. Duties and authorities of affiliated persons.

Sec. 2185. Agents and attorneys.

Sec. 2186. Minors.

Sec. 2187. Maintenance of certain protected health information.

SUBPART E—ENFORCEMENT

Sec. 2191. Civil actions.

Sec. 2192. Civil money penalties.

Sec. 2193. Alternative dispute resolution.

Sec. 2194. Amendments to criminal law.

SUBPART F—AMENDMENTS TO TITLE 5, UNITED STATES CODE

Sec. 2195. Amendments to title 5, United States Code.

SUBPART G—REGULATIONS, RESEARCH, AND EDUCATION; EFFECTIVE DATES;

APPLICABILITY; AND RELATIONSHIP TO OTHER LAWS

Sec. 2196. Regulations; research and education.

Sec. 2197. Effective dates.

Sec. 2198. Applicability.

Sec. 2199. Relationship to other laws.

Subtitle C—Deduction for Cost of Catastrophic Health Plan;

Medical Savings Accounts

Sec. 2201. Individuals allowed deduction from gross income for cost of catastrophic health plan.

Sec. 2202. Medical savings accounts.

Subtitle D—Anti-Fraud

PART 1—ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE

CONTROL PROGRAM

Sec. 2301. All-payer health care fraud and abuse control program.

Sec. 2302. Authorization of additional appropriations for investigators and

other personnel.

Sec. 2303. Establishment of anti-fraud and abuse trust fund.

PART 2—REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

Sec. 2311. Mandatory exclusion from participation in medicare and State

health care programs.
302

Title II

•HR 5300 IH

Sec. 2312. Establishment of minimum period of exclusion for certain individuals and entities subject to permissive exclusion from medicare

and State health care programs.

Sec. 2313. Revisions to criminal penalties.

Sec. 2314. Revisions to limitations on physician self-referral.

Sec. 2315. Medicare health maintenance organizations.

Sec. 2316. Effective date.

PART 3—AMENDMENTS TO CRIMINAL LAW

Sec. 2321. Penalties for health care fraud.

Sec. 2322. Rewards for information leading to prosecution and conviction.

Sec. 2323. Broadening application of mail fraud statute.

PART 4—ADVISORY OPINIONS

Sec. 2331. Authorizing the Secretary of Health and Human Services to issue

advisory opinions under title XI.

Sec. 2332. Authorizing the Secretary of Health and Human Services to issue

advisory opinions relating to physician ownership and referral.

Sec. 2333. Effective date.

Subtitle E—Increased Medicare Beneficiary Choice; Additional

Medicare Reforms

PART 1—INCREASED MEDICARE BENEFICIARY CHOICE

Sec. 2401. Requirements for health maintenance organizations under medicare.

Sec. 2402. Expansion and revision of medicare select policies.

Sec. 2403. Including notice of available health maintenance organizations in annual notice to beneficiaries.

Sec. 2404. Legislative proposal on enrolling medicare beneficiaries in qualified

health plans.

Sec. 2405. Optional interim enrollment of medicare beneficiaries in private

health plans.

PART 2—MEDICARE PART B PREMIUM; OTHER MEDICARE PAYMENT

CHANGES

Sec. 2411. Extension of current rules for computing medicare part B premium.

Sec. 2412. Increase in medicare part B premium for individuals with high income.

Sec. 2413. Improved efficiency through consolidation of administration of parts

A and B.

Sec. 2414. Extension of medicare secondary payment provisions.

Subtitle F—Health Care Antitrust Improvements

Sec. 2501. Protection from antitrust laws for certain competitive and collaborative activities.

Sec. 2502. Designation of safe harbors.

Sec. 2503. Certificates of review.

Sec. 2504. Notifications providing reduction in certain penalties under antitrust

law for health care joint ventures.

Sec. 2505. Review and reports on safe harbors, certificates of review, and notifications.

Sec. 2506. Rules, regulations, and guidelines.

Sec. 2507. Establishment of HHS Office of Health Care Competition Policy.
303

Title II, Subtitle A

•HR 5300 IH

Sec. 2508. Definitions.

Subtitle G—Encouraging Enforcement Activities of Medical

Self-Regulatory Entities

PART 1—APPLICATION OF THE CLAYTON ACT TO MEDICAL SELFREGULATORY ENTITIES

Sec. 2601. Antitrust exemption for medical self-regulatory entities.

Sec. 2602. Definitions.

PART 2—CONSULTATION BY FEDERAL AGENCIES

Sec. 2611. Consultation with medical self-regulatory entities respecting medical

professional guidelines and standards.

Subtitle H—Reform of Clinical Laboratory Requirements for

Simple Tests

Sec. 2701. Eliminating CLIA requirement for certificate of waiver for simple

laboratory examinations and procedures.

Sec. 2702. Amendment related to simple laboratory examinations.

Sec. 2703. Amendment related to study.

Sec. 2704. Amendments related to the Clinical Laboratory Improvement Advisory Committee.

Subtitle I—Miscellaneous Provisions

Sec. 2801. Requirement that certain agencies prefund government health benefits contributions for their annuitants.

Sec. 2802. Ineligibility of aliens for SSI and medicaid.

Sec. 2803. Limitation on SSI benefits for drug and alcohol addicts.

1 Subtitle A—Medical Malpractice

2 Liability Reform

PART 1—GENERAL PROVISIONS

SEC. 2001. FEDERAL REFORM OF MEDICAL MALPRACTICE

LIABILITY ACTIONS.

(a) APPLICABILITY.—This subtitle shall apply with

respect to any medical malpractice liability claim and to

any medical malpractice liability action brought in any

State or Federal court, except that this subtitle shall not

apply to a claim or action for damages arising from a

vaccine-related injury or death to the extent that title
304

Title II, Subtitle A

•HR 5300 IH

XXI of the Public Health Service Act applies to the claim

or action.

1 (b) PREEMPTION.—The provisions of this subtitle

2 shall preempt any State law to the extent such law is in3 consistent with the limitations contained in such provi4 sions. The provisions of this subtitle shall not preempt any

5 State law that provides for defenses or places limitations

6 on a person’s liability in addition to those contained in

7 this subtitle, places greater limitations on the amount of

8 attorneys’ fees that can be collected, or otherwise imposes

9 greater restrictions than those provided in this subtitle.

10 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

11 OF LAW OR VENUE.—Nothing in subsection (b) 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
305

Title II, Subtitle A

•HR 5300 IH

1 (5) affect the right of any court to transfer

2 venue or to apply the law of a foreign nation or to

3 dismiss a claim of a foreign nation or of a citizen

4 of a foreign nation on the ground of inconvenient

5 forum.

6 (d) FEDERAL COURT JURISDICTION NOT ESTAB7 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

8 this subtitle shall be construed to establish any jurisdiction

9 in the district courts of the United States over medical

10 malpractice liability actions on the basis of section 1331

11 or 1337 of title 28, United States Code.

12 SEC. 2002. DEFINITIONS.

13 As used in this subtitle:

14 (1) ALTERNATIVE DISPUTE RESOLUTION SYS15 TEM; ADR.—The term ‘‘alternative dispute resolution

16 system’’ or ‘‘ADR’’ means a system established

17 under this subtitle that provides for the resolution of

18 medical malpractice liability claims in a manner

19 other than through medical malpractice liability ac20 tions.

21 (2) CLAIMANT.—The term ‘‘claimant’’ means

22 any person who alleges a medical malpractice liabil23 ity claim, and any person on whose behalf such a

24 claim is alleged, including the decedent in the case
306

Title II, Subtitle A

•HR 5300 IH

1 of an action brought through or on behalf of an es2 tate.

3 (3) CLEAR AND CONVINCING EVIDENCE.—The

4 term ‘‘clear and convincing evidence’’ is that meas5 ure or degree of proof that will produce in the mind

6 of the trier of fact a firm belief or conviction as to

7 the truth of the allegations sought to be established,

8 except that such measure or degree of proof is more

9 than that required under preponderance of the evi10 dence, but less than that required for proof beyond

11 a reasonable doubt.

12 (4) ECONOMIC DAMAGES.—The term ‘‘economic

13 damages’’ means damages paid to compensate an in14 dividual for hospital and other medical expenses, lost

15 wages, lost employment, and other pecuniary losses.

16 (5) HEALTH CARE PROFESSIONAL.—The term

17 ‘‘health care professional’’ means any individual who

18 provides health care services in a State and who is

19 required by the laws or regulations of the State to

20 be licensed or certified by the State to provide such

21 services in the State.

22 (6) HEALTH CARE PROVIDER.—The term

23 ‘‘health care provider’’ means any organization or

24 institution that is engaged in the delivery of health

25 care services in a State and that is required by the
307

Title II, Subtitle A

•HR 5300 IH

1 laws or regulations of the State to be licensed or

2 certified by the State to engage in the delivery of

3 such services in the State.

4 (7) INJURY.—The term ‘‘injury’’ means any ill5 ness, disease, or other harm that is the subject of

6 a medical malpractice liability action or a medical

7 malpractice liability claim.

8 (8) MEDICAL MALPRACTICE LIABILITY AC9 TION.—The term ‘‘medical malpractice liability ac10 tion’’ means a civil action brought in a State or Fed11 eral court against a health care provider or health

12 care professional in which the plaintiff alleges a

13 medical malpractice liability claim, but does not in14 clude any action in which the plaintiff’s sole allega15 tion is an allegation of an intentional tort.

16 (9) MEDICAL MALPRACTICE LIABILITY

17 CLAIM.—The term ‘‘medical malpractice liability

18 claim’’ means a claim in which the claimant alleges

19 that injury was caused by the provision of (or the

20 failure to provide) health care services or the use of

21 a medical product.

22 (10) MEDICAL PRODUCT.—

23 (A) IN GENERAL.—The term ‘‘medical

24 product’’ means, with respect to the allegation

25 of a claimant, a drug (as defined in section
308

Title II, Subtitle A

•HR 5300 IH

1 201(g)(1) of the Federal Food, Drug, and Cos2 metic Act (21 U.S.C. 321(g)(1)) or a medical

3 device (as defined in section 201(h) of the Fed4 eral Food, Drug, and Cosmetic Act (21 U.S.C.

5 321(h)) if—

6 (i) such drug or device was subject to

7 premarket approval under section 505,

8 507, or 515 of the Federal Food, Drug,

9 and Cosmetic Act (21 U.S.C. 355, 357, or

10 360e) or section 351 of the Public Health

11 Service Act (42 U.S.C. 262) with respect

12 to the safety of the formulation or per13 formance of the aspect of such drug or de14 vice which is the subject of the claimant’s

15 allegation or the adequacy of the packag16 ing or labeling of such drug or device, and

17 such drug or device is approved by the

18 Food and Drug Administration; or

19 (ii) the drug or device is generally rec20 ognized as safe and effective under regula21 tions issued by the Secretary of Health

22 and Human Services under section 201(p)

23 of the Federal Food, Drug, and Cosmetic

24 Act (21 U.S.C. 321(p)).
309

Title II, Subtitle A

•HR 5300 IH

1 (B) EXCEPTION IN CASE OF MISREPRE2 SENTATION OR FRAUD.—Notwithstanding sub3 paragraph (A), the term ‘‘medical product’’

4 shall not include any product described in such

5 subparagraph if the claimant shows that the

6 product is approved by the Food and Drug Ad7 ministration for marketing as a result of with8 held information, misrepresentation, or an ille9 gal payment by manufacturer of the product.

10 (11) NONECONOMIC DAMAGES.—The term

11 ‘‘noneconomic damages’’ means damages paid to

12 compensate an individual for physical and emotional

13 pain, suffering, inconvenience, physical impairment,

14 mental anguish, disfigurement, loss of enjoyment of

15 life, loss of consortium, and other nonpecuniary

16 losses, but does not include punitive damages.

17 (12) PUNITIVE DAMAGES; EXEMPLARY DAM18 AGES.—The terms ‘‘punitive damages’’ and ‘‘exem19 plary damages’’ mean compensation, in addition to

20 compensation for actual harm suffered, that is

21 awarded for the purpose of punishing a person for

22 conduct deemed to be malicious, wanton, willful, or

23 excessively reckless.

24 (13) SECRETARY.—The term ‘‘Secretary’’

25 means the Secretary of Health and Human Services.
310

Title II, Subtitle A

•HR 5300 IH

1 (14) STATE.—The term ‘‘State’’ means each of

2 the several States, the District of Columbia, the

3 Commonwealth of Puerto Rico, the Virgin Islands,

4 Guam, and American Samoa.

5 SEC. 2003. EFFECTIVE DATE.

6 (a) IN GENERAL.—Except as provided in subsection

7 (b) and section 2017(c), this subtitle shall apply with re8 spect to claims accruing or actions brought on or after

9 the expiration of the 3-year period that begins on the date

10 of the enactment of this Act.

11 (b) EXCEPTION FOR STATES REQUESTING EARLIER

12 IMPLEMENTATION OF REFORMS.—

13 (1) APPLICATION.—A State may submit an ap14 plication to the Secretary requesting the early imple15 mentation of this subtitle with respect to claims or

16 actions brought in the State.

17 (2) DECISION BY SECRETARY.—The Secretary

18 shall issue a response to a State’s application under

19 paragraph (1) not later than 90 days after receiving

20 the application. If the Secretary determines that the

21 State meets the requirements of this subtitle at the

22 time of submitting its application, the Secretary

23 shall approve the State’s application, and this sub24 title shall apply with respect to actions brought in

25 the State on or after the expiration of the 90-day
311

Title II, Subtitle A

•HR 5300 IH

1 period that begins on the date the Secretary issues

2 the response. If the Secretary denies the State’s ap3 plication, the Secretary shall provide the State with

4 a written explanation of the grounds for the deci5 sion.

6 PART 2—MEDICAL MALPRACTICE AND PRODUCT

7 LIABILITY REFORM

8 SEC. 2011. REQUIREMENT FOR INITIAL RESOLUTION OF

9 ACTION THROUGH ALTERNATIVE DISPUTE

10 RESOLUTION.

11 (a) IN GENERAL.—

12 (1) STATE CASES.—A medical malpractice li13 ability action may not be brought in any State court

14 during a calendar year unless the medical mal15 practice liability claim that is the subject of the ac16 tion has been initially resolved under an alternative

17 dispute resolution system certified for the year by

18 the Secretary under section 2032(a), or, in the case

19 of a State in which such a system is not in effect

20 for the year, under the alternative Federal system

21 established under section 2032(b).

22 (2) FEDERAL DIVERSITY ACTIONS.—A medical

23 malpractice liability action may not be brought in

24 any Federal court under section 1332 of title 28,

25 United States Code, during a calendar year unless
312

Title II, Subtitle A

•HR 5300 IH

1 the medical malpractice liability claim that is the

2 subject of the action has been initially resolved

3 under the alternative dispute resolution system re4 ferred to in paragraph (1) that applied in the State

5 whose law applies in such action.

6 (3) CLAIMS AGAINST UNITED STATES.—

7 (A) ESTABLISHMENT OF PROCESS FOR

8 CLAIMS.—The Attorney General shall establish

9 an alternative dispute resolution process for the

10 resolution of tort claims consisting of medical

11 malpractice liability claims brought against the

12 United States under chapter 171 of title 28,

13 United States Code. Under such process, the

14 resolution of a claim shall occur after the com15 pletion of the administrative claim process ap16 plicable to the claim under section 2675 of such

17 title.

18 (B) REQUIREMENT FOR INITIAL RESOLU19 TION UNDER PROCESS.—A medical malpractice

20 liability action based on a medical malpractice

21 liability claim described in subparagraph (A)

22 may not be brought in any Federal court unless

23 the claim has been initially resolved under the

24 alternative dispute resolution process estab-
313

Title II, Subtitle A

•HR 5300 IH

1 lished by the Attorney General under such sub2 paragraph.

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 reaches a decision on the amount

11 of damages assessed against the defendant.

12 (c) PROCEDURES FOR FILING ACTIONS.—

13 (1) NOTICE OF INTENT TO CONTEST DECI14 SION.—Not later than 60 days after a decision is is15 sued with respect to a medical malpractice liability

16 claim under an alternative dispute resolution system,

17 each party affected by the decision shall submit a

18 sealed statement to a court of competent jurisdiction

19 indicating whether or not the party intends to con20 test the decision.

21 (2) DEADLINE FOR FILING ACTION.—A medical

22 malpractice liability action may not be brought by a

23 party unless—

24 (A) the party has filed the notice of intent

25 required by paragraph (1); and
314

Title II, Subtitle A

•HR 5300 IH

1 (B) the party files the action in a court of

2 competent jurisdiction not later than 90 days

3 after the decision resolving the medical mal4 practice liability claim that is the subject of the

5 action is issued under the applicable alternative

6 dispute resolution system.

7 (3) COURT OF COMPETENT JURISDICTION.—

8 For purposes of this subsection, the term ‘‘court of

9 competent jurisdiction’’ means—

10 (A) with respect to actions filed in a State

11 court, the appropriate State trial court; and

12 (B) with respect to actions filed in a Fed13 eral court, the appropriate United States dis14 trict court.

15 (d) LEGAL EFFECT OF UNCONTESTED ADR DECI16 SION.—The decision reached under an alternative dispute

17 resolution system shall, for purposes of enforcement by a

18 court of competent jurisdiction, have the same status in

19 the court as the verdict of a medical malpractice liability

20 action adjudicated in a State or Federal trial court. The

21 previous sentence shall not apply to a decision that is con22 tested by a party affected by the decision pursuant to sub23 section (c)(1).
315

Title II, Subtitle A

•HR 5300 IH

1 SEC. 2012. 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 claimant and the members of the claimant’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) BASIS FOR RECOVERY.—Punitive or exem12 plary damages shall not be awarded in a medical

13 malpractice liability action unless the claimant es14 tablishes by clear and convincing evidence that the

15 injury suffered was the direct result of conduct

16 manifesting a malicious, wanton, willful, or exces17 sively reckless disregard of the safety of others.

18 (2) NO AWARD AGAINST MANUFACTURER OF

19 MEDICAL PRODUCT.—In the case of a medical mal20 practice liability action in which the plaintiff alleges

21 a claim against the manufacturer of a medical prod22 uct, no punitive or exemplary damages may be

23 awarded against such manufacturer.

24 (3) PAYMENTS TO STATE FOR MEDICAL QUAL25 ITY ASSURANCE ACTIVITIES.—
316

Title II, Subtitle A

•HR 5300 IH

1 (A) IN GENERAL.—Any punitive or exem2 plary damages awarded in a medical mal3 practice liability action shall be paid to the

4 State in which the action is brought or, in a

5 case brought in Federal court, in the State in

6 which the health care services that caused the

7 injury that is the subject of the action were

8 provided.

9 (B) ACTIVITIES DESCRIBED.—A State

10 shall use amounts paid pursuant to subpara11 graph (A) to carry out activities to assure the

12 safety and quality of health care services pro13 vided in the State, including (but not limited

14 to)—

15 (i) licensing or certifying health care

16 professionals and health care providers in

17 the State;

18 (ii) operating alternative dispute reso19 lution systems;

20 (iii) carrying out public education pro21 grams relating to medical malpractice and

22 the availability of alternative dispute reso23 lution systems in the State; and

24 (iv) carrying out programs to reduce

25 malpractice-related costs for retired provid-
317

Title II, Subtitle A

•HR 5300 IH

1 ers or other providers volunteering to pro2 vide services in medically underserved

3 areas.

4 (C) MAINTENANCE OF EFFORT.—A State

5 shall use any amounts paid pursuant to sub6 paragraph (A) to supplement and not to replace

7 amounts spent by the State for the activities

8 described in subparagraph (B).

9 (c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—

10 (1) GENERAL RULE.—In any medical mal11 practice liability action in which the damages award12 ed for future economic loss exceeds $100,000, a de13 fendant may not be required to pay such damages

14 in a single, lump-sum payment, but shall be per15 mitted to make such payments periodically based on

16 when the damages are found likely to occur, as such

17 payments are determined by the court.

18 (2) WAIVER.—A court may waive the applica19 tion of paragraph (1) with respect to a defendant if

20 the court determines that it is not in the best inter21 ests of the plaintiff to receive payments for damages

22 on such a periodic basis.

23 (d) MANDATORY OFFSETS FOR DAMAGES PAID BY

24 A COLLATERAL SOURCE.—
318

Title II, Subtitle A

•HR 5300 IH

1 (1) IN GENERAL.—With respect to a medical

2 malpractice liability claim or action, the total

3 amount of damages received by an individual under

4 such claim or action shall be reduced, in accordance

5 with paragraph (2), by any other payment that has

6 been, or will be, made to an individual to com7 pensate such individual for the injury that was the

8 subject of such claim or action.

9 (2) AMOUNT OF REDUCTION.—The amount by

10 which an award of damages to an individual for an

11 injury shall be reduced under paragraph (1) shall

12 be—

13 (A) the total amount of any payments

14 (other than such award) that have been made

15 or that will be made to such individual to pay

16 costs of or compensate such individual for the

17 injury that was the subject of the claim or ac18 tion; minus

19 (B) the amount paid by such individual (or

20 by the spouse, parent, or legal guardian of such

21 individual) to secure the payments described in

22 subparagraph (A).
319

Title II, Subtitle A

•HR 5300 IH

1 SEC. 2013. TREATMENT OF ATTORNEY’S FEES AND OTHER

2 COSTS.

3 (a) LIMITATION ON AMOUNT OF CONTINGENCY

4 FEES.—

5 (1) IN GENERAL.—An attorney who represents,

6 on a contingency fee basis, a claimant in a medical

7 malpractice liability claim may not charge, demand,

8 receive, or collect for services rendered in connection

9 with such claim in excess of the following amount re10 covered by judgment or settlement under such claim:

11 (A) 25 percent of the first $150,000 (or

12 portion thereof) recovered, plus

13 (B) 10 percent of any amount in excess of

14 $150,000 recovered.

15 (2) CALCULATION OF PERIODIC PAYMENTS.—In

16 the event that a judgment or settlement includes

17 periodic or future payments of damages, the amount

18 recovered for purposes of computing the limitation

19 on the contingency fee under paragraph (1) shall be

20 based on the cost of the annuity or trust established

21 to make the payments. In any case in which an an22 nuity or trust is not established to make such pay23 ments, such amount shall be based on the present

24 value of the payments.

25 (b) REQUIRING PARTY CONTESTING ADR RULING

26 TO PAY ATTORNEY’S FEES AND OTHER COSTS.—
320

Title II, Subtitle A

•HR 5300 IH

1 (1) IN GENERAL.—The court in a medical mal2 practice liability action shall require the party that

3 (pursuant to section 2011(c)(1)) contested the ruling

4 of the alternative dispute resolution system with re5 spect to the medical malpractice liability claim that

6 is the subject of the action to pay to the opposing

7 party the costs incurred by the opposing party under

8 the action, including attorney’s fees, fees paid to ex9 pert witnesses, and other litigation expenses (but not

10 including court costs, filing fees, or other expenses

11 paid directly by the party to the court, or any fees

12 or costs associated with the resolution of the claim

13 under the alternative dispute resolution system), but

14 only if—

15 (A) in the case of an action in which the

16 party that contested the ruling is the claimant,

17 the amount of damages awarded to the party

18 under the action does not exceed the amount of

19 damages awarded to the party under the ADR

20 system by at least 10 percent; and

21 (B) in the case of an action in which the

22 party that contested the ruling is the defendant,

23 the amount of damages assessed against the

24 party under the action is not at least 10 per-
321

Title II, Subtitle A

•HR 5300 IH

1 cent less than the amount of damages assessed

2 under the ADR system.

3 (2) EXCEPTIONS.—Paragraph (1) shall not

4 apply if—

5 (A) the party contesting the ruling made

6 under the previous alternative dispute resolu7 tion system shows that—

8 (i) the ruling was procured by corrup9 tion, fraud, or undue means,

10 (ii) there was partiality or corruption

11 under the system,

12 (iii) there was other misconduct under

13 the system that materially prejudiced the

14 party’s rights, or

15 (iv) the ruling was based on an error

16 of law;

17 (B) the party contesting the ruling made

18 under the alternative dispute resolution system

19 presents new evidence before the trier of fact

20 that was not available for presentation under

21 the ADR system;

22 (C) the medical malpractice liability action

23 raised a novel issue of law; or

24 (D) the court finds that the application of

25 such paragraph to a party would constitute an
322

Title II, Subtitle A

•HR 5300 IH

1 undue hardship, and issues an order waiving or

2 modifying the application of such paragraph

3 that specifies the grounds for the court’s deci4 sion.

5 (3) REQUIREMENT FOR PERFORMANCE

6 BOND.—The court in a medical malpractice liability

7 action shall require the party that (pursuant to sec8 tion 2011(c)(1)) contested the ruling of the alter9 native dispute resolution system with respect to the

10 medical malpractice liability claim that is the subject

11 of the action to post a performance bond (in such

12 amount and consisting of such funds and assets as

13 the court determines to be appropriate), except that

14 the court may waive the application of such require15 ment to a party if the court determines that the

16 posting of such a bond is not necessary to ensure

17 that the party shall meet the requirements of this

18 subsection to pay the opposing party the costs in19 curred by the opposing party under the action.

20 (4) LIMIT ON ATTORNEY’S FEES PAID.—Attor21 neys’ fees that are required to be paid under para22 graph (1) by the contesting party shall not exceed

23 the amount of the attorneys’ fees incurred by the

24 contesting party in the action. If the attorneys’ fees

25 of the contesting party are based on a contingency
323

Title II, Subtitle A

•HR 5300 IH

1 fee agreement, the amount of attorneys’ fees for

2 purposes of the preceding sentence shall not exceed

3 the reasonable value of those services.

4 (5) RECORDS.—In order to receive attorneys’

5 fees under paragraph (1), counsel of record in the

6 medical malpractice liability action involved shall

7 maintain accurate, complete records of hours worked

8 on the action, regardless of the fee arrangement

9 with the client involved.

10 (c) CONTINGENCY FEE DEFINED.—As used in this

11 section, the term ‘‘contingency fee’’ means any fee for pro12 fessional legal services which is, in whole or in part, con13 tingent upon the recovery of any amount of damages,

14 whether through judgment or settlement.

15 SEC. 2014. JOINT AND SEVERAL LIABILITY.

16 A defendant may be held severally but not jointly lia17 ble in a medical malpractice action. A person found liable

18 for damages in any such action may be found liable, if

19 at all, only for those damages directly attributable to the

20 person’s proportionate share of fault or responsibility for

21 the injury, and may not be found liable for damages at22 tributable to the proportionate share of fault or respon23 sibility of any other person (without regard to whether

24 that person is a party to the action) for the injury, includ25 ing any person bringing the action.
324

Title II, Subtitle A

•HR 5300 IH

1 SEC. 2015. STATUTE OF LIMITATIONS.

2 A medical malpractice liability claim may not be

3 brought after the expiration of the 7-year period that be4 gins on the date the alleged injury that is the subject of

5 the claim occurred. If the commencement of such an ac6 tion is stayed or enjoined, the running of the statute of

7 limitations under this section shall be suspended for the

8 period of the stay or injunction.

9 SEC. 2016. UNIFORM STANDARD FOR DETERMINING NEG10 LIGENCE.

11 A defendant in a medical malpractice liability action

12 may not be found to have acted negligently unless the de13 fendant’s conduct at the time of providing the health care

14 services that are the subject of the action was not reason15 able.

16 SEC. 2017. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

17 SERVICES.

18 (a) IMPOSITION OF HIGHER STANDARD OF PROOF.—

19 In the case of a medical malpractice liability claim relating

20 to services provided during labor or the delivery of a baby,

21 if the health care professional against whom the claim is

22 brought did not previously treat the individual alleged to

23 have been injured for the pregnancy, the trier of fact may

24 not find that the defendant committed malpractice and

25 may not assess damages against the health care profes-
325

Title II, Subtitle A

•HR 5300 IH

1 sional unless the malpractice is proven by clear and con2 vincing evidence.

3 (b) APPLICABILITY TO GROUP PRACTICES OR

4 AGREEMENTS AMONG PROVIDERS.—For purposes of sub5 section (a), a health care professional shall be considered

6 to have previously treated an individual for a pregnancy

7 if the professional is a member of a group practice whose

8 members previously treated the individual for the preg9 nancy or is providing services to the individual during

10 labor or the delivery of a baby pursuant to an agreement

11 with another health care professional.

12 (c) EFFECTIVE DATE.—This section shall apply with

13 respect to claims accruing or actions brought on or after

14 the expiration of the 2-year period that begins on the date

15 of the enactment of this Act.

16 PART 3—REQUIREMENTS FOR STATE ALTER17 NATIVE DISPUTE RESOLUTION SYSTEMS

18 (ADR)

19 SEC. 2031. BASIC REQUIREMENTS.

20 (a) IN GENERAL.—A State’s alternative dispute reso21 lution system meets the requirements of this section if the

22 system—

23 (1) applies to all medical malpractice liability

24 claims under the jurisdiction of the courts of that

25 State;
326

Title II, Subtitle A

•HR 5300 IH

1 (2) requires that a written opinion resolving the

2 dispute be issued not later than 6 months after the

3 date by which each party against whom the claim is

4 filed has received notice of the claim (other than in

5 exceptional cases for which a longer period is re6 quired for the issuance of such an opinion), and that

7 the opinion contain—

8 (A) findings of fact relating to the dispute,

9 and

10 (B) a description of the costs incurred in

11 resolving the dispute under the system (includ12 ing any fees paid to the individuals hearing and

13 resolving the claim), together with an appro14 priate assessment of the costs against any of

15 the parties;

16 (3) requires individuals who hear and resolve

17 claims under the system to meet such qualifications

18 as the State may require (in accordance with regula19 tions of the Secretary);

20 (4) is approved by the State or by local govern21 ments in the State;

22 (5) with respect to a State system that consists

23 of multiple dispute resolution procedures—
327

Title II, Subtitle A

•HR 5300 IH

1 (A) permits the parties to a dispute to se2 lect the procedure to be used for the resolution

3 of the dispute under the system, and

4 (B) if the parties do not agree on the pro5 cedure to be used for the resolution of the dis6 pute, assigns a particular procedure to the par7 ties;

8 (6) provides for the transmittal to the State

9 agency responsible for monitoring or disciplining

10 health care professionals and health care providers

11 of any findings made under the system that such a

12 professional or provider committed malpractice, un13 less, during the 90-day period beginning on the date

14 the system resolves the claim against the profes15 sional or provider, the professional or provider

16 brings an action contesting the decision made under

17 the system; and

18 (7) provides for the regular transmittal to the

19 Administrator for Health Care Policy and Research

20 of information on disputes resolved under the sys21 tem, in a manner that assures that the identity of

22 the parties to a dispute shall not be revealed.

23 (b) APPLICATION OF MALPRACTICE LIABILITY

24 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

25 The provisions of part 2 shall apply with respect to claims
328

Title II, Subtitle A

•HR 5300 IH

1 brought under a State alternative dispute resolution sys2 tem or the alternative Federal system in the same manner

3 as such provisions apply with respect to medical mal4 practice liability actions brought in the State.

5 SEC. 2032. CERTIFICATION OF STATE SYSTEMS; APPLICA6 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

7 (a) CERTIFICATION.—

8 (1) IN GENERAL.—Not later than October 1 of

9 each year (beginning with 1995), the Secretary, in

10 consultation with the Attorney General, shall deter11 mine whether a State’s alternative dispute resolution

12 system meets the requirements of this part for the

13 following calendar year.

14 (2) BASIS FOR CERTIFICATION.—The Secretary

15 shall certify a State’s alternative dispute resolution

16 system under this subsection for a calendar year if

17 the Secretary determines under paragraph (1) that

18 the system meets the requirements of section 2031.

19 (b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS20 TEM.—

21 (1) ESTABLISHMENT AND APPLICABILITY.—

22 Not later than October 1, 1995, the Secretary, in

23 consultation with the Attorney General, shall estab24 lish by rule an alternative Federal ADR system for

25 the resolution of medical malpractice liability claims
329

Title II, Subtitle A

•HR 5300 IH

1 during a calendar year in States that do not have

2 in effect an alternative dispute resolution system

3 certified under subsection (a) for the year.

4 (2) REQUIREMENTS FOR SYSTEM.—Under the

5 alternative Federal ADR system established under

6 paragraph (1)—

7 (A) paragraphs (1), (2), (6), and (7) of

8 section 2031(a) shall apply to claims brought

9 under the system;

10 (B) if the system provides for the resolu11 tion of claims through arbitration, the claims

12 brought under the system shall be heard and

13 resolved by arbitrators appointed by the Sec14 retary in consultation with the Attorney Gen15 eral; and

16 (C) with respect to a State in which the

17 system is in effect, the Secretary may (at the

18 State’s request) modify the system to take into

19 account the existence of dispute resolution pro20 cedures in the State that affect the resolution

21 of medical malpractice liability claims.

22 (3) TREATMENT OF STATES WITH ALTER23 NATIVE SYSTEM IN EFFECT.—If the alternative Fed24 eral ADR system established under this subsection is

25 applied with respect to a State for a calendar year—
330

Title II, Subtitle A

•HR 5300 IH

1 (A) the State shall reimburse the United

2 States (at such time and in such manner as the

3 Secretary may require) for the costs incurred

4 by the United States during the year as a result

5 of the application of the system with respect to

6 the State; and

7 (B) notwithstanding any other provision of

8 law, no funds may be paid to the State (or to

9 any unit of local government in the State) or to

10 any entity in the State pursuant to the Public

11 Health Service Act.

12 SEC. 2033. REPORTS ON IMPLEMENTATION AND EFFEC13 TIVENESS OF ALTERNATIVE DISPUTE RESO14 LUTION SYSTEMS.

15 (a) IN GENERAL.—Not later than 5 years after the

16 date of the enactment of this Act, the Secretary shall pre17 pare and submit to the Congress a report describing and

18 evaluating State alternative dispute resolution systems op19 erated pursuant to this part and the alternative Federal

20 system established under section 2032(b).

21 (b) CONTENTS OF REPORT.—The Secretary shall in22 clude in the report prepared and submitted under sub23 section (a)—

24 (1) information on—
331

Title II, Subtitle A

•HR 5300 IH

1 (A) the effect of the alternative dispute

2 resolution systems on the cost of health care

3 within each State,

4 (B) the impact of such systems on the ac5 cess of individuals to health care within the

6 State, and

7 (C) the effect of such systems on the qual8 ity of health care provided within the State; 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 PART 4—OTHER PROVISIONS RELATING TO

17 MEDICAL MALPRACTICE LIABILITY

18 SEC. 2041. PERMITTING STATE PROFESSIONAL SOCIETIES

19 TO PARTICIPATE IN DISCIPLINARY ACTIVI20 TIES.

21 (a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith22 standing any other provision of State or Federal law, a

23 State agency responsible for the conduct of disciplinary

24 actions for a type of health care practitioner may enter

25 into agreements with State or county professional societies
332

Title II, Subtitle A

•HR 5300 IH

1 of such type of health care practitioner to permit such so2 cieties to participate in the licensing of such health care

3 practitioner, and to review any health care malpractice ac4 tion, health care malpractice claim or allegation, or other

5 information concerning the practice patterns of any such

6 health care practitioner. Any such agreement shall comply

7 with subsection (b).

8 (b) REQUIREMENTS OF AGREEMENTS.—Any agree9 ment entered into under subsection (a) for licensing activi10 ties or the review of any health care malpractice action,

11 health care malpractice claim or allegation, or other infor12 mation concerning the practice patterns of a health care

13 practitioner shall provide that—

14 (1) the health care professional society conducts

15 such activities or review as expeditiously as possible;

16 (2) after the completion of such review, such so17 ciety shall report its findings to the State agency

18 with which it entered into such agreement;

19 (3) the conduct of such activities or review and

20 the reporting of such findings be conducted in a

21 manner which assures the preservation of confiden22 tiality of health care information and of the review

23 process; and

24 (4) no individual affiliated with such society is

25 liable for any damages or injury directly caused by
333

Title II, Subtitle A

•HR 5300 IH

1 the individual’s actions in conducting such activities

2 or review.

3 (c) AGREEMENTS NOT MANDATORY.—Nothing in

4 this section may be construed to require a State to enter

5 into agreements with societies described in subsection (a)

6 to conduct the activities described in such subsection.

7 (d) EFFECTIVE DATE.—This section shall take effect

8 2 years after the date of the enactment of this Act.

9 SEC. 2042. STUDY OF INCENTIVES TO ENCOURAGE VOL10 UNTARY SERVICE BY PHYSICIANS.

11 (a) STUDY.—The Secretary shall conduct a study

12 analyzing the existence and effectiveness of incentives

13 adopted by State and local governments, insurers, medical

14 societies, and other entities to encourage physicians

15 (whether practicing or retired) to volunteer to provide

16 health care services in medically underserved areas.

17 (b) REPORTS.—(1) Not later than 1 year after the

18 date of the enactment of this Act, the Secretary shall sub19 mit an interim report to Congress on the study conducted

20 under subsection (a), together with the Secretary’s rec21 ommendations for actions to increase the number of physi22 cians volunteering to provide health care services in medi23 cally underserved areas.

24 (2) Not later than 5 years after the date of the enact25 ment of this Act, the Secretary shall submit a final report
334

Title II, Subtitle A

•HR 5300 IH

1 to the Congress on the study conducted under subsection

2 (a) (taking into account the effects of this subtitle on the

3 incidence and costs of medical malpractice), together with

4 the Secretary’s recommendations for actions to increase

5 the number of physicians volunteering to provide health

6 care services in medically underserved areas.

7 SEC. 2043. REQUIREMENTS FOR RISK MANAGEMENT PRO8 GRAMS.

9 (a) REQUIREMENTS FOR PROVIDERS.—Each State

10 shall require each health care professional and health care

11 provider providing services in the State to participate in

12 a risk management program to prevent and provide early

13 warning of practices which may result in injuries to pa14 tients or which otherwise may endanger patient safety.

15 (b) REQUIREMENTS FOR INSURERS.—Each State

16 shall require each entity which provides health care profes17 sional or provider liability insurance to health care profes18 sionals and health care providers in the State to—

19 (1) establish risk management programs based

20 on data available to such entity or sanction pro21 grams of risk management for health care profes22 sionals and health care providers provided by other

23 entities; and

24 (2) require each such professional or provider,

25 as a condition of maintaining insurance, to partici-
335

Title II, Subtitle A

•HR 5300 IH

1 pate in one program described in paragraph (1) at

2 least once in each 3-year period.

3 (c) EFFECTIVE DATE.—This section shall take effect

4 2 years after the date of the enactment of this Act.

5 SEC. 2044. GRANTS FOR MEDICAL SAFETY PROMOTION.

6 (a) RESEARCH ON MEDICAL INJURY PREVENTION

7 AND COMPENSATION.

8 (1) IN GENERAL.—The Secretary shall make

9 grants for the conduct of basic research in the pre10 vention of and compensation for injuries resulting

11 from health care professional or health care provider

12 malpractice, and research of the outcomes of health

13 care procedures.

14 (2) PREFERENCE FOR RESEARCH ON CERTAIN

15 ACTIVITIES.—In making grants under paragraph

16 (1), the Secretary shall give preference to applica17 tions for grants to conduct research on the behavior

18 of health care providers and health care profes19 sionals in carrying out their professional duties and

20 of other participants in systems for compensating in21 dividuals injured by medical malpractice, the effects

22 of financial and other incentives on such behavior,

23 the determinants of compensation system outcomes,

24 and the costs and benefits of alternative compensa25 tion policy options.
336

Title II, Subtitle A

•HR 5300 IH

1 (3) APPLICATION.—The Secretary may not

2 make a grant under paragraph (1) unless an appli3 cant submits an application to the Secretary at such

4 time, in such form, in such manner, and containing

5 such information as the Secretary may require.

6 (b) GRANTS FOR LICENSING AND DISCIPLINARY AC7 TIVITIES.—

8 (1) IN GENERAL.—The Secretary shall make

9 grants to States to assist States in improving the

10 State’s ability to license and discipline health care

11 professionals.

12 (2) USES FOR GRANTS.—A State may use a

13 grant awarded under subsection (a) to develop and

14 implement improved mechanisms for monitoring the

15 practices of health care professionals or for conduct16 ing disciplinary activities.

17 (3) TECHNICAL ASSISTANCE.—The Secretary

18 shall provide technical assistance to States receiving

19 grants under paragraph (1) to assist them in evalu20 ating their medical practice acts and procedures and

21 to encourage the use of efficient and effective early

22 warning systems and other mechanisms for detecting

23 practices which endanger patient safety and for dis24 ciplining health care professionals.
337

Title II, Subtitle A

•HR 5300 IH

1 (4) APPLICATIONS.—The Secretary may not

2 make a grant under paragraph (1) unless the appli3 cant submits an application to the Secretary at such

4 time, in such form, in such manner, and containing

5 such information as the Secretary shall require.

6 (c) GRANTS FOR PUBLIC EDUCATION PROGRAMS.—

7 (1) IN GENERAL.—The Secretary shall make

8 grants to States and to local governments, private

9 nonprofit organizations, and health professional

10 schools (as defined in paragraph (3)) for—

11 (A) educating the general public about the

12 appropriate use of health care and realistic ex13 pectations of medical intervention;

14 (B) educating the public about the re15 sources and role of health care professional li16 censing and disciplinary boards in investigating

17 claims of incompetence or health care mal18 practice; and

19 (C) developing programs of faculty train20 ing and curricula for educating health care pro21 fessionals in quality assurance, risk manage22 ment, and medical injury prevention.

23 (2) APPLICATIONS.—The Secretary may not

24 make a grant under paragraph (1) unless the appli25 cant submits an application to the Secretary at such
338

Title II, Subtitle B

•HR 5300 IH

1 time, in such form, in such manner, and containing

2 such information as the Secretary shall require.

3 (3) HEALTH PROFESSIONAL SCHOOL DE4 FINED.—In paragraph (1), the term ‘‘health profes5 sional school’’ means a school of nursing (as defined

6 in section 853(2) of the Public Health Service Act)

7 or a school or program under section 799(1) of such

8 Act.

9 (d) AUTHORIZATION OF APPROPRIATIONS.—There

10 are authorized to be appropriated not more than

11 $15,000,000 for each of the first 5 fiscal years beginning

12 on or after the date of the enactment of this Act for grants

13 under this section.

14 Subtitle B—Administrative Cost

15 Savings and Fair Health Infor16 mation Practices

17 PART 1—ADMINISTRATIVE COST SAVINGS

18 SEC. 2100. PURPOSE.

19 It is the purpose of this part to improve the efficiency

20 and effectiveness of the health care system, including the

21 medicare program under title XVIII of the Social Security

22 Act and the medicaid program under title XIX of such

23 Act, by encouraging the development of a health informa24 tion network through the adoption of standards and the
339

Title II, Subtitle B

•HR 5300 IH

1 establishment of requirements for the electronic trans2 mission of certain health information.

3 SEC. 2101. DEFINITIONS.

4 For purposes of this part:

5 (1) CODE SET.—The term ‘‘code set’’ means

6 any set of codes used for encoding data elements,

7 such as tables of terms, medical concepts, medical

8 diagnostic codes, or medical procedure codes.

9 (2) COORDINATION OF BENEFITS.—The term

10 ‘‘coordination of benefits’’ means determining and

11 coordinating the financial obligations of plan spon12 sors when health care benefits are payable by more

13 than one such sponsor.

14 (3) EMPLOYER.—The term ‘‘employer’’ has the

15 meaning given such term in section 3(5) of the Em16 ployee Retirement Income Security Act of 1974.

17 (4) HEALTH INFORMATION.—The term ‘‘health

18 information’’ means any information that relates to

19 the past, present, or future physical or mental health

20 or condition or functional status of an individual,

21 the provision of health care to an individual, or pay22 ment for the provision of health care to an individ23 ual.

24 (5) HEALTH INFORMATION NETWORK.—The

25 term ‘‘health information network’’ means the health
340

Title II, Subtitle B

•HR 5300 IH

1 information system that is formed through the appli2 cation of the requirements and standards established

3 under this part.

4 (6) HEALTH INFORMATION NETWORK SERV5 ICE.—The term ‘‘health information network serv6 ice’’—

7 (A) means a private entity or an entity op8 erated by a State that enters into contracts—

9 (i) to process or facilitate the process10 ing of nonstandard data elements of health

11 information into standard data elements;

12 (ii) to provide the means by which

13 persons are connected to the health infor14 mation network for purposes of meeting

15 the requirements of this part, including the

16 holding of standard data elements of

17 health information;

18 (iii) to provide authorized access to

19 health information through the health in20 formation network; or

21 (iv) to provide specific information

22 processing services, such as automated co23 ordination of benefits and claims trans24 action routing; and
341

Title II, Subtitle B

•HR 5300 IH

1 (B) includes a health information protec2 tion service.

3 (7) HEALTH INFORMATION PROTECTION SERV4 ICE.—The term ‘‘health information protection serv5 ice’’ means a private entity or an entity operated by

6 a State that accesses standard data elements of

7 health information through the health information

8 network, processes such information into non-identi9 fiable health information, and may store such infor10 mation.

11 (8) HEALTH PROVIDER.—The term ‘‘health

12 provider’’ includes a provider of services (as defined

13 in section 1861(u) of the Social Security Act), a pro14 vider of medical or other health services (as defined

15 in section 1861(s) of such Act), and any other per16 son (other than a plan sponsor) furnishing health

17 care items or services.

18 (9) NON-IDENTIFIABLE HEALTH INFORMA19 TION.—The term ‘‘non-identifiable health informa20 tion’’ means health information that is not protected

21 health information (as defined in part 2).

22 (10) PLAN SPONSOR.—The term ‘‘plan spon23 sor’’ means—

24 (A) a plan (as defined in section

25 1033(6)(B));
342

Title II, Subtitle B

•HR 5300 IH

1 (B) an insurer (as defined in section

2 1131(6)) providing health insurance coverage

3 (as defined in section 1131(4)); and

4 (C) a State, or the Federal Government,

5 acting in a capacity as a provider of health ben6 efits to eligible individuals that is equivalent to

7 that of an insurer.

8 (11) PURCHASING ARRANGEMENT.—The term

9 ‘‘purchasing arrangement’’ means a voluntary health

10 purchasing arrangement described in part 3 of sub11 title B of title I.

12 (12) SECRETARY.—The term ‘‘Secretary’’

13 means the Secretary of Health and Human Services.

14 (13) STANDARD.—The term ‘‘standard’’, when

15 used with reference to a transaction or to data ele16 ments of health information, means that the trans17 action or data elements meet any standard adopted

18 by the Secretary under subpart A that applies to the

19 transaction or data elements.

20 Subpart A—Standards for Data Elements and

21 Transactions

22 SEC. 2103. GENERAL REQUIREMENTS ON SECRETARY.

23 (a) IN GENERAL.—The Secretary shall adopt stand24 ards and modifications to standards under this part that

25 are—
343

Title II, Subtitle B

•HR 5300 IH

1 (1) consistent with the objective of reducing the

2 costs of providing and paying for health care; and

3 (2) in use and generally accepted, developed, or

4 modified by the standard-setting organizations ac5 credited by the American National Standard Insti6 tute.

7 (b) INITIAL STANDARDS.—The Secretary may de8 velop an expedited process for the adoption of initial

9 standards under this subpart.

10 (c) PROTECTION OF COMMERCIAL INFORMATION.—

11 In adopting standards under this part, the Secretary may

12 not require disclosure of trade secrets and confidential

13 commercial information by any person.

14 SEC. 2104. STANDARDS FOR DATA ELEMENTS OF HEALTH

15 INFORMATION.

16 (a) IN GENERAL.—The Secretary shall adopt stand17 ards necessary to make uniform and compatible for elec18 tronic transmission through the health information net19 work the data elements of any health information that the

20 Secretary determines is appropriate for transmission in

21 connection with a transaction described in section 2111.

22 (b) ADDITIONS.—The Secretary may make additions

23 to any set of data elements adopted under subsection (a)

24 as the Secretary determines appropriate in a manner that
344

Title II, Subtitle B

•HR 5300 IH

1 minimizes the disruption and cost of compliance with such

2 additions.

3 (c) CERTAIN DATA ELEMENTS.—

4 (1) UNIQUE HEALTH IDENTIFIERS.—The Sec5 retary shall establish a system to provide for a

6 standard unique health identifier for each individual,

7 employer, plan sponsor, and health provider for use

8 in the health care system.

9 (2) CODE SETS.—

10 (A) IN GENERAL.—The Secretary, in con11 sultation with experts from the private sector

12 and Federal agencies, shall—

13 (i) select code sets for appropriate

14 data elements from among the code sets

15 that have been developed by private and

16 public entities; or

17 (ii) establish code sets for such data

18 elements if no code sets for the data ele19 ments have been developed.

20 (B) DISTRIBUTION.—The Secretary shall

21 establish efficient and low-cost procedures for

22 distribution of code sets and modifications to

23 code sets.
345

Title II, Subtitle B

•HR 5300 IH

1 SEC. 2105. INFORMATION TRANSACTION STANDARDS.

2 (a) IN GENERAL.—The Secretary shall adopt tech3 nical standards that are consistent with part 2 relating

4 to the method by which standard data elements of health

5 information may be transmitted electronically, including

6 standards with respect to the format in which such data

7 elements may be transmitted.

8 (b) SPECIAL RULE FOR COORDINATION OF BENE9 FITS.—Any standard adopted by the Secretary under

10 paragraph (1) that relates to coordination of benefits shall

11 provide that a claim for reimbursement for health services

12 furnished shall be tested, by an algorithm specified by the

13 Secretary, against all records of enrollment and eligibility

14 for the individual who received such services that are avail15 able to the recipient of the claim through the health infor16 mation network to determine any primary and secondary

17 obligors for payment.

18 (c) ELECTRONIC SIGNATURE.—The Secretary, in co19 ordination with the Secretary of Commerce, shall promul20 gate regulations specifying procedures for the electronic

21 transmission and authentication of signatures, compliance

22 with which shall be deemed to satisfy State and Federal

23 statutory requirements for written signatures with respect

24 to transactions described in section 2111 and written sig25 natures on health records and prescriptions.
346

Title II, Subtitle B

•HR 5300 IH

1 (d) STANDARDS FOR CLAIMS FOR CLINICAL LABORA2 TORY TESTS.—The standards under this section shall pro3 vide that claims for clinical laboratory tests for which ben4 efits are payable by a plan sponsor shall be submitted di5 rectly by the person or entity that performed (or super6 vised the performance of) the tests to the sponsor in a

7 manner consistent with (and subject to such exceptions

8 as are provided under) the requirement for direct submis9 sion of such claims under the medicare program.

10 SEC. 2106. TIMETABLES FOR ADOPTION OF STANDARDS.

11 (a) INITIAL STANDARDS FOR DATA ELEMENTS.—

12 The Secretary shall adopt standards relating to—

13 (1) the data elements for the information de14 scribed in section 2104(a) not later than 9 months

15 after the date of the enactment of this Act (except

16 in the case of standards with respect to data ele17 ments for claims attachments, which shall be adopt18 ed not later than 24 months after the date of the

19 enactment of this Act); and

20 (2) any addition to a set of data elements, in

21 conjunction with making such an addition.

22 (b) INITIAL STANDARDS FOR INFORMATION TRANS23 ACTIONS.—The Secretary shall adopt standards relating

24 to information transactions under section 2105 not later

25 than 9 months after the date of the enactment of this Act
347

Title II, Subtitle B

•HR 5300 IH

1 (except in the case of standards for claims attachments,

2 which shall be adopted not later than 24 months after the

3 date of the enactment of this Act).

4 (c) MODIFICATIONS TO STANDARDS.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the Secretary shall review the standards

7 adopted under this subpart and shall adopt modified

8 standards as determined appropriate, but not more

9 frequently than once every 6 months. Any modifica10 tion to standards shall be completed in a manner

11 which minimizes the disruption to, and costs of com12 pliance incurred by, a plan sponsor, health provider,

13 or purchasing arrangement that is required to com14 ply with subpart B.

15 (2) SPECIAL RULES.—

16 (A) MODIFICATIONS DURING FIRST 12-

17 MONTH PERIOD.—Except with respect to addi18 tions and modifications to code sets under sub19 paragraph (B), the Secretary may not adopt

20 any modification to a standard adopted under

21 this subpart during the 12-month period begin22 ning on the date the standard is adopted, un23 less the Secretary determines that the modifica24 tion is necessary in order to permit a plan spon-
348

Title II, Subtitle B

•HR 5300 IH

1 sor, a health provider, or a purchasing arrange2 ment to comply with subpart B.

3 (B) ADDITIONS AND MODIFICATIONS TO

4 CODE SETS.—

5 (i) IN GENERAL.—The Secretary shall

6 ensure that procedures exist for the rou7 tine maintenance, testing, enhancement,

8 and expansion of code sets.

9 (ii) ADDITIONAL RULES.—If a code

10 set is modified under this subsection, the

11 modified code set shall include instructions

12 on how data elements that were encoded

13 prior to the modification are to be con14 verted or translated so as to preserve the

15 value of the data elements. Any modifica16 tion to a code set under this subsection

17 shall be implemented in a manner that

18 minimizes the disruption to, and costs of

19 compliance incurred by, a plan sponsor,

20 health provider, or purchasing arrange21 ment that is required to comply with sub22 part B.

23 (d) EVALUATION OF STANDARDS.—The Secretary

24 may establish a process to measure or verify the consist25 ency of standards adopted or modified under this subpart.
349

Title II, Subtitle B

•HR 5300 IH

1 Such process may include demonstration projects and

2 analyses of the cost of implementing such standards and

3 modifications.

4 Subpart B—Requirements With Respect to Certain

5 Transactions and Information

6 SEC. 2111. STANDARD TRANSACTIONS AND INFORMATION.

7 (a) TRANSACTIONS BY SPONSORS.—

8 (1) TRANSACTIONS WITH PROVIDERS.—If a

9 plan sponsor conducts any of the transactions de10 scribed in paragraph (3) with a health provider—

11 (A) the transaction shall be a standard

12 transaction; and

13 (B) the health information transmitted by

14 the sponsor to the provider or by the provider

15 to the sponsor in connection with the trans16 action shall be in the form of standard data ele17 ments.

18 (2) TRANSACTIONS WITH SPONSORS.—If a plan

19 sponsor conducts any of the transactions described

20 in paragraph (3) with another plan sponsor—

21 (A) the transaction shall be a standard

22 transaction; and

23 (B) the health information transmitted by

24 either sponsor in connection with the trans-
350

Title II, Subtitle B

•HR 5300 IH

1 action shall be in the form of standard data ele2 ments.

3 (3) TRANSACTIONS.—The transactions referred

4 to in paragraphs (1) and (2) are the following:

5 (A) Verification of eligibility for benefits.

6 (B) Coordination of benefits.

7 (C) Claim submission.

8 (D) Claim attachment submission.

9 (E) Claim status notification.

10 (F) Claim status verification.

11 (G) Claim adjudication.

12 (H) Payment and remittance advice.

13 (I) Certification or authorization of a re14 ferral to a health provider who is not part of

15 the defined set of providers providing items and

16 services under a network plan (as defined in

17 section 1131(5)).

18 (b) TRANSACTIONS BY PURCHASING ARRANGE19 MENTS.—

20 (1) IN GENERAL.—If a purchasing arrangement

21 conducts any of the transactions described in para22 graph (2) with a plan sponsor—

23 (A) the transaction shall be a standard

24 transaction; and
351

Title II, Subtitle B

•HR 5300 IH

1 (B) the health information transmitted by

2 the arrangement to the sponsor or by the spon3 sor to the arrangement in connection with the

4 transaction shall be in the form of standard

5 data elements.

6 (2) TRANSACTIONS.—The transactions referred

7 to in paragraph (1) are the following:

8 (A) Enrollment and disenrollment.

9 (B) Premium payment.

10 (c) USE OF HEALTH INFORMATION NETWORK SERV11 ICES.—A plan sponsor, a health provider, or a purchasing

12 arrangement may comply with any provision of this sec13 tion by entering into an agreement or other arrangement

14 with a health information network service certified under

15 section 2121 pursuant to which the service undertakes the

16 duties applicable to the sponsor, provider, or arrangement

17 under the provision.

18 SEC. 2112. ACCESSING HEALTH INFORMATION FOR AU19 THORIZED PURPOSES.

20 (a) PROCUREMENT RULE FOR GOVERNMENT AGEN21 CIES.—

22 (1) IN GENERAL.—A health information protec23 tion service that is certified under section 2121 shall

24 make available to a Federal or State agency, pursu25 ant to a cost-type contract (as defined under the
352

Title II, Subtitle B

•HR 5300 IH

1 Federal Acquisition Regulation), any non-identifiable

2 health information, including non-identifiable health

3 information that is derived from protected health in4 formation, that—

5 (A) is held by the service or may be ob6 tained by the service under paragraph (2) or

7 subsection (b);

8 (B) consists of data elements that are sub9 ject to a standard under subpart A; and

10 (C) is requested by the agency to fulfill a

11 requirement under this Act.

12 (2) CERTAIN INFORMATION AVAILABLE AT LOW

13 COST.—If a health information protection service re14 quires health information consisting of data elements

15 that are subject to a standard under subpart A from

16 a plan sponsor or a health provider in order to com17 ply with a request made by a Federal or State agen18 cy under paragraph (1), the sponsor or provider

19 shall make such information available to such orga20 nization for a charge that does not exceed the rea21 sonable cost of transmitting the information.

22 (b) PROCUREMENT RULE FOR INFORMATION PRO23 TECTION SERVICES.—A health information protection

24 service that makes non-identifiable health information

25 available to a Federal or State agency under subsection
353

Title II, Subtitle B

•HR 5300 IH

1 (a) shall make such non-identifiable information available,

2 for a charge that does not exceed the reasonable cost of

3 transmitting the information, to any other health informa4 tion protection service that—

5 (A) is certified under section 2121; and

6 (B) requests the information.

7 SEC. 2113. ENSURING AVAILABILITY OF INFORMATION.

8 The Secretary shall establish a procedure under

9 which a plan sponsor or health provider that does not have

10 the ability to transmit standard data elements directly,

11 and does not have access to a health information network

12 service certified under section 2121, may comply with the

13 provisions of this subpart.

14 SEC. 2114. TIMETABLES FOR COMPLIANCE WITH REQUIRE15 MENTS.

16 (a) INITIAL COMPLIANCE.—

17 (1) IN GENERAL.—Not later than 12 months

18 after the date on which standards are adopted under

19 subpart A with respect to a type of transaction, or

20 data elements for a type of health information, a

21 plan sponsor, health provider, or purchasing ar22 rangement shall comply with the requirements of

23 this subpart with respect to such transaction or in24 formation.
354

Title II, Subtitle B

•HR 5300 IH

1 (2) ADDITIONAL DATA ELEMENTS.—Not later

2 than 12 months after the date on which the Sec3 retary adopts an addition to a set of data elements

4 for health information under section 2104, a plan

5 sponsor, health provider, or purchasing arrangement

6 shall comply with the requirements of this subpart

7 using such data elements.

8 (b) COMPLIANCE WITH MODIFIED STANDARDS.—

9 (1) IN GENERAL.—If the Secretary adopts a

10 modified standard under section 2106(c), a plan

11 sponsor, health provider, or purchasing arrangement

12 shall comply with the modified standard at such

13 time as the Secretary determines appropriate, taking

14 into account the time needed to comply due to the

15 nature and extent of the modification.

16 (2) SPECIAL RULE.—In the case of a modifica17 tion to a standard that does not occur within the 12-

18 month period beginning on the date the standard is

19 adopted, the time determined appropriate by the

20 Secretary under paragraph (1) may not be—

21 (A) earlier than the last day of the 90-day

22 period beginning on the date the modified

23 standard is adopted; or
355

Title II, Subtitle B

•HR 5300 IH

1 (B) later than the last day of the 12-

2 month period beginning on the date the modi3 fied standard is adopted.

4 Subpart C—Miscellaneous Provisions

5 SEC. 2121. STANDARDS AND CERTIFICATION FOR HEALTH

6 INFORMATION NETWORK SERVICES.

7 (a) STANDARDS FOR OPERATION.—The Secretary

8 shall establish standards with respect to the operation of

9 health information network services, including standards

10 ensuring that such services—

11 (1) develop, operate, and cooperate with one an12 other to form the health information network;

13 (2) meet all of the requirements under part 2

14 that are applicable to the services;

15 (3) make public information concerning their

16 performance, as measured by uniform indicators

17 such as accessibility, transaction responsiveness, ad18 ministrative efficiency, reliability, dependability, and

19 any other indicator determined appropriate by the

20 Secretary;

21 (4) have security procedures that are consistent

22 with the requirements under part 2, including secure

23 methods of accessing and transmitting data; and

24 (5) if they are part of a larger organization,

25 have policies and procedures in place which isolate
356

Title II, Subtitle B

•HR 5300 IH

1 their activities with respect to processing informa2 tion in a manner that prevents access to such infor3 mation by such larger organization.

4 (b) CERTIFICATION BY THE SECRETARY.—

5 (1) ESTABLISHMENT.—Not later than 12

6 months after the date of the enactment of this Act,

7 the Secretary shall establish a certification proce8 dure for health information network services which

9 ensures that certified services are qualified to meet

10 the requirements of this part and the standards es11 tablished by the Secretary under this section. Such

12 certification procedure shall be implemented in a

13 manner that minimizes the costs and delays of oper14 ations for such services.

15 (2) APPLICATION.—Each entity desiring to be

16 certified as a health information network service

17 shall apply to the Secretary for certification in a

18 form and manner determined appropriate by the

19 Secretary.

20 (3) AUDITS AND REPORTS.—The procedure es21 tablished under paragraph (1) shall provide for au22 dits by the Secretary and reports by an entity cer23 tified under this section as the Secretary determines

24 appropriate in order to monitor such entity’s compli25 ance with the requirements of this part, part 2, and
357

Title II, Subtitle B

•HR 5300 IH

1 the standards established by the Secretary under

2 this section.

3 (4) RECERTIFICATION.—A health information

4 network service shall be recertified under this sub5 section at least every 3 years.

6 (c) LOSS OF CERTIFICATION.—

7 (1) MANDATORY TERMINATION.—Except as

8 provided in paragraph (2), if a health information

9 network service violates a requirement imposed on

10 such service under part 2, its certification under this

11 section shall be terminated unless the Secretary de12 termines that appropriate corrective action has been

13 taken.

14 (2) CONDITIONAL CERTIFICATION.—The Sec15 retary may establish a procedure under which a

16 health information network service may remain cer17 tified on a conditional basis if the service is operat18 ing consistently with a plan intended to correct any

19 violations described in paragraph (1). Such proce20 dure may provide for the appointment of a trustee

21 to continue operation of the service until the require22 ments for full certification are met.

23 (d) CERTIFICATION BY PRIVATE ENTITIES.—The

24 Secretary may designate private entities to conduct the

25 certification procedures established by the Secretary under
358

Title II, Subtitle B

•HR 5300 IH

1 this section. A health information network service certified

2 by such an entity in accordance with such designation

3 shall be considered to be certified by the Secretary.

4 (e) INFORMATION HELD BY HEALTH INFORMATION

5 NETWORK SERVICES.—If a health information network

6 service certified under this section loses its certified status

7 or takes any action that would threaten the continued

8 availability of the standard data elements of health infor9 mation held by such service, such data elements shall be

10 transferred to another health information network service

11 certified under this section that has been designated by

12 the Secretary.

13 SEC. 2122. IMPOSITION OF ADDITIONAL REQUIREMENTS.

14 (a) IN GENERAL.—Except as provided in subsection

15 (c), after the Secretary has established standards under

16 section 2104 that are necessary to make uniform and com17 patible for electronic transmission the data elements that

18 the Secretary determines are appropriate for transmission

19 in connection with a transaction described in subpart B,

20 an individual or entity may not require an individual or

21 entity, to provide in any manner any additional data ele22 ment in connection with—

23 (1) the transaction; or

24 (2) an inquiry with respect to the transaction.
359

Title II, Subtitle B

•HR 5300 IH

1 (b) TRANSMISSION METHOD.—Except as provided in

2 subsection (c), after the Secretary has established stand3 ards under section 2105 relating to the method by which

4 data elements that the Secretary determines are appro5 priate for transmission in connection with a transaction

6 described in subpart B may be transmitted electronically,

7 an individual or entity may not require an individual or

8 entity to transmit any data element in a manner inconsist9 ent with the standards in connection with—

10 (1) the transaction; or

11 (2) an inquiry with respect to the transaction.

12 (c) EXCEPTION.—Subsections (a) and (b) do not

13 apply if—

14 (1) an individual or entity voluntarily agrees to

15 provide the additional data element; or

16 (2) a waiver is granted under subsection (d) to

17 permit the requirement.

18 (d) CONDITIONS FOR WAIVERS.—

19 (1) IN GENERAL.—An individual or entity may

20 request a waiver from the Secretary in order to im21 pose on an individual or entity a requirement other22 wise prohibited under subsection (a) or (b).

23 (2) CONSIDERATION OF WAIVER REQUESTS.—A

24 waiver may not be granted under this subsection to

25 impose an otherwise prohibited requirement unless
360

Title II, Subtitle B

•HR 5300 IH

1 the Secretary determines that the value of any addi2 tional information to be provided under the require3 ment for research or other purposes significantly

4 outweighs the administrative cost of the imposition

5 of the requirement, taking into account the burden

6 of the timing of the imposition of the requirement.

7 (3) ANONYMOUS REPORTING.—If an individual

8 or entity attempts to impose on an individual or en9 tity a requirement prohibited under subsection (a) or

10 (b), the individual or entity on whom the require11 ment is being imposed may contact the Secretary.

12 The Secretary shall develop a procedure under which

13 an individual or entity that contacts the Secretary

14 under the preceding sentence shall remain anony15 mous. The Secretary shall notify the individual or

16 entity imposing the requirement that the require17 ment may not be imposed unless the other individual

18 or entity voluntarily agrees to such requirement or

19 a waiver is obtained under this subsection.

20 SEC. 2123. EFFECT ON STATE LAW.

21 (a) IN GENERAL.—Except as otherwise provided in

22 this section, a provision, requirement, or standard under

23 this part shall supersede any contrary provision of State

24 law.
361

Title II, Subtitle B

•HR 5300 IH

1 (b) STATE ‘‘QUILL AND PEN’’ LAWS.—A State may

2 not establish, continue in effect, or enforce any provision

3 of State law that requires medical or health plan records

4 (including billing information) to be maintained or trans5 mitted in written rather than electronic form, except

6 where the Secretary determines that the provision is nec7 essary to prevent fraud and abuse, with respect to con8 trolled substances, or for other purposes.

9 (c) PUBLIC HEALTH REPORTING.—Nothing in this

10 part shall be construed to invalidate or limit the authority,

11 power, or procedures established under any law providing

12 for the reporting of disease or injury, child abuse, birth,

13 or death, public health surveillance, or public health inves14 tigation or intervention.

15 (d) PUBLIC USE FUNCTIONS.—Nothing in this part

16 shall be construed to limit the authority of a Federal or

17 State agency to make non-identifiable health information

18 available for public use.

19 (e) PAYMENT FOR HEALTH CARE SERVICES OR PRE20 MIUMS.—Nothing in this part shall be construed to pro21 hibit a consumer from paying for health care items or

22 services, or plan or health insurance coverage premiums,

23 by debit, credit, or other payment cards or numbers or

24 other electronic payment means.
362

Title II, Subtitle B

•HR 5300 IH

1 SEC. 2124. GRANTS FOR DEMONSTRATION PROJECTS.

2 (a) IN GENERAL.—The Secretary may make grants

3 for demonstration projects to promote the development

4 and use of electronically integrated community-based clini5 cal information systems and computerized patient medical

6 records.

7 (b) APPLICATIONS.—

8 (1) SUBMISSION.—To apply for a grant under

9 this section for any fiscal year, an applicant shall

10 submit an application to the Secretary in accordance

11 with the procedures established by the Secretary.

12 (2) CRITERIA FOR APPROVAL.—The Secretary

13 may not approve an application submitted under

14 paragraph (1) unless the application includes assur15 ances satisfactory to the Secretary regarding the fol16 lowing:

17 (A) USE OF EXISTING TECHNOLOGY.—

18 Funds received under this section will be used

19 to apply telecommunications and information

20 systems technology that is in existence on the

21 date the application is submitted in a manner

22 that improves the quality of health care, re23 duces the costs of such care, and protects the

24 privacy and confidentiality of information relat25 ing to the physical or mental condition of an in26 dividual.
363

Title II, Subtitle B

•HR 5300 IH

1 (B) USE OF EXISTING INFORMATION SYS2 TEMS.—Funds received under this section will

3 be used—

4 (i) to enhance telecommunications or

5 information systems that are operating on

6 the date the application is submitted;

7 (ii) to integrate telecommunications or

8 information systems that are operating on

9 the date the application is submitted; or

10 (iii) to connect additional users to

11 telecommunications or information net12 works or systems that are operating on the

13 date the application is submitted.

14 (C) MATCHING FUNDS.—The applicant

15 shall make available funds for the demonstra16 tion project in an amount that equals at least

17 20 percent of the cost of the project.

18 (c) GEOGRAPHIC DIVERSITY.—In making any grants

19 under this section, the Secretary shall, to the extent prac20 ticable, make grants to persons representing different geo21 graphic areas of the United States, including urban and

22 rural areas.

23 (d) REVIEW AND SANCTIONS.—The Secretary shall

24 review at least annually the compliance of a person receiv25 ing a grant under this section with the provisions of this
364

Title II, Subtitle B

•HR 5300 IH

1 section. The Secretary shall establish a procedure for de2 termining whether such a person has failed to comply sub3 stantially within the provisions of this section and the

4 sanctions to be imposed for any such noncompliance.

5 (e) ANNUAL REPORT.—The Secretary shall submit

6 an annual report to the President for transmittal to Con7 gress containing a description of the activities carried out

8 under this section.

9 Subpart D—Assistance to the Secretary

10 SEC. 2131. GENERAL REQUIREMENT ON SECRETARY.

11 In complying with any requirements imposed on the

12 Secretary under this part, the Secretary shall rely on rec13 ommendations of the Health Information Advisory Com14 mittee established under section 2132 and shall consult

15 with appropriate Federal agencies.

16 SEC. 2132. HEALTH INFORMATION ADVISORY COMMITTEE.

17 (a) ESTABLISHMENT.—There is established a com18 mittee to be known as the Health Care Information Advi19 sory Committee.

20 (b) DUTY.—

21 (1) IN GENERAL.—The committee shall—

22 (A) provide assistance to the Secretary in

23 complying with the requirements imposed on

24 the Secretary under this part and part 2;
365

Title II, Subtitle B

•HR 5300 IH

1 (B) be generally responsible for advising

2 the Secretary and the Congress on the status of

3 the health information network; and

4 (C) make recommendations to correct any

5 problems that may occur in the network’s im6 plementation and ongoing operations and to re7 fine and improve the network.

8 (2) TECHNICAL ASSISTANCE.—In performing

9 its duties under this subsection, the committee shall

10 receive technical assistance from appropriate Federal

11 agencies.

12 (c) MEMBERSHIP.—

13 (1) IN GENERAL.—The committee shall consist

14 of 15 members to be appointed by the President not

15 later than 60 days after the date of the enactment

16 of this part. The President shall designate 1 member

17 as the Chair.

18 (2) EXPERTISE.—The membership of the com19 mittee shall consist of individuals who are of recog20 nized standing and distinction and who possess the

21 demonstrated capacity to discharge the duties im22 posed on the committee.

23 (3) TERMS.—Each member of the committee

24 shall be appointed for a term of 5 years, except that

25 the members first appointed shall serve staggered
366

Title II, Subtitle B

•HR 5300 IH

1 terms such that the terms of no more than 3 mem2 bers expire at one time.

3 (4) VACANCIES.—

4 (A) IN GENERAL.—A vacancy on the com5 mittee shall be filled in the manner in which the

6 original appointment was made and shall be

7 subject to any conditions which applied with re8 spect to the original appointment.

9 (B) FILLING UNEXPIRED TERM.—An indi10 vidual chosen to fill a vacancy shall be ap11 pointed for the unexpired term of the member

12 replaced.

13 (C) EXPIRATION OF TERMS.—The term of

14 any member shall not expire before the date on

15 which the member’s successor takes office.

16 (5) CONFLICTS OF INTEREST.—Members of the

17 committee shall disclose upon appointment to the

18 committee or at any subsequent time that it may

19 occur, conflicts of interest.

20 (d) MEETINGS.—

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the committee shall meet at the call of

23 the Chair.

24 (2) INITIAL MEETING.—Not later than 30 days

25 after the date on which all members of the commit-
367

Title II, Subtitle B

•HR 5300 IH

1 tee have been appointed, the committee shall hold its

2 first meeting.

3 (3) QUORUM.—A majority of the members of

4 the committee shall constitute a quorum, but a less5 er number of members may hold hearings.

6 (e) POWER TO HOLD HEARINGS.—The committee

7 may hold such hearings, sit and act at such times and

8 places, take such testimony, and receive such evidence as

9 the committee considers advisable to carry out the pur10 poses of this section.

11 (f) OTHER ADMINISTRATIVE PROVISIONS.—Subpara12 graphs (C), (D), and (H) of section 1886(e)(6) of the So13 cial Security Act shall apply to the committee in the same

14 manner as they apply to the Prospective Payment Assess15 ment Commission.

16 (g) REPORTS.—

17 (1) IN GENERAL.—The committee shall annu18 ally prepare and submit to Congress and the Sec19 retary a report including at least an analysis of—

20 (A) the status of the health information

21 network established under this part, including

22 whether the network is fulfilling the purpose de23 scribed in section 2100;

24 (B) the savings and costs of the network;
368

Title II, Subtitle B

•HR 5300 IH

1 (C) the activities of health information net2 work services certified under section 2121,

3 health providers, and plan sponsors under this

4 part;

5 (D) the extent to which entities described

6 in subparagraph (C) are meeting the standards

7 adopted under this part and working together

8 to form an integrated network that meets the

9 needs of its users;

10 (E) the extent to which entities described

11 in subparagraph (C) are meeting the privacy

12 and security protections of part 2;

13 (F) whether the Federal Government and

14 State Governments are receiving information of

15 sufficient quality to meet their responsibilities

16 under this Act;

17 (G) any problems with respect to imple18 mentation of the network;

19 (H) the extent to which timetables under

20 this part for the adoption and implementation

21 of standards are being met; and

22 (I) any legislative recommendations related

23 to the health information network.

24 (2) AVAILABILITY TO THE PUBLIC.—Any infor25 mation in the report submitted to Congress under
369

Title II, Subtitle B

•HR 5300 IH

1 paragraph (1) shall be made available to the public,

2 unless such information may not be disclosed by law.

3 (h) DURATION.—Notwithstanding section 14(a) of

4 the Federal Advisory Committee Act, the committee shall

5 continue in existence until otherwise provided by law.

6 PART 2—FAIR HEALTH INFORMATION

7 PRACTICES

8 SEC. 2140. DEFINITIONS.

9 (a) DEFINITIONS RELATING TO PROTECTED

10 HEALTH INFORMATION.—For purposes of this part:

11 (1) DISCLOSE.—The term ‘‘disclose’’, when

12 used with respect to protected health information

13 that is held by a health information trustee, means

14 to provide access to the information, but only if such

15 access is provided by the trustee to a person other

16 than—

17 (A) the trustee or an officer or employee of

18 the trustee;

19 (B) an affiliated person of the trustee; or

20 (C) a protected individual who is a subject

21 of the information.

22 (2) DISCLOSURE.—The term ‘‘disclosure’’

23 means the act or an instance of disclosing.

24 (3) PROTECTED HEALTH INFORMATION.—The

25 term ‘‘protected health information’’ means any in-
370

Title II, Subtitle B

•HR 5300 IH

1 formation, whether oral or recorded in any form or

2 medium—

3 (A) that is created or received in a State

4 by—

5 (i) a health care provider;

6 (ii) a health benefit plan sponsor;

7 (iii) a health oversight agency;

8 (iv) a health information service orga9 nization; or

10 (v) a public health authority;

11 (B) that relates in any way to the past,

12 present, or future physical or mental health or

13 condition or functional status of a protected in14 dividual, the provision of health care to a pro15 tected individual, or payment for the provision

16 of health care to a protected individual; and

17 (C) that—

18 (i) identifies the individual; or

19 (ii) with respect to which there is a

20 reasonable basis to believe that the infor21 mation can be used to identify the individ22 ual.

23 (4) PROTECTED INDIVIDUAL.—The term ‘‘pro24 tected individual’’ means an individual who, with re25 spect to a date—
371

Title II, Subtitle B

•HR 5300 IH

1 (A) is living on the date; or

2 (B) has died within the 2-year period end3 ing on the date.

4 (5) USE.—The term ‘‘use’’, when used with re5 spect to protected health information that is held by

6 a health information trustee, means—

7 (A) to use, or provide access to, the infor8 mation in any manner that does not constitute

9 a disclosure; or

10 (B) any act or instance of using, or provid11 ing access, described in subparagraph (A).

12 (b) DEFINITIONS RELATING TO HEALTH INFORMA13 TION TRUSTEES.—For purposes of this part:

14 (1) CARRIER.—The term ‘‘carrier’’ means a li15 censed insurance company, a hospital or medical

16 service corporation (including an existing Blue Cross

17 or Blue Shield organization, within the meaning of

18 section 833(c)(2) of the Internal Revenue Code of

19 1986), a health maintenance organization, or other

20 entity licensed or certified by a State to provide

21 health insurance or health benefits.

22 (2) HEALTH BENEFIT PLAN.—The term

23 ‘‘health benefit plan’’ means—

24 (A) any contract of health insurance, in25 cluding any hospital or medical service policy or
372

Title II, Subtitle B

•HR 5300 IH

1 certificate, hospital or medical service plan con2 tract, or health maintenance organization group

3 contract, that is provided by a carrier; and

4 (B) an employee welfare benefit plan or

5 other arrangement insofar as the plan or ar6 rangement provides health benefits and is fund7 ed in a manner other than through the pur8 chase of one or more policies or contracts de9 scribed in subparagraph (A).

10 (3) HEALTH BENEFIT PLAN SPONSOR.—The

11 term ‘‘health benefit plan sponsor’’ means a person

12 who, with respect to a specific item of protected

13 health information, receives, creates, uses, main14 tains, or discloses the information while acting in

15 whole or in part in the capacity of—

16 (A) a carrier providing a health benefit

17 plan;

18 (B) any other provider of a health benefit

19 plan, including any public entity that provides

20 payments for health care items and services

21 under a health benefit plan that are equivalent

22 to payments provided by a private person under

23 such a plan; or

24 (C) an officer or employee of a person de25 scribed in subparagraph (A) or (B).
373

Title II, Subtitle B

•HR 5300 IH

1 (4) HEALTH CARE PROVIDER.—The term

2 ‘‘health care provider’’ means a person who, with re3 spect to a specific item of protected health informa4 tion, receives, creates, uses, maintains, or discloses

5 the information while acting in whole or in part in

6 the capacity of—

7 (A) a person who is licensed, certified, reg8 istered, or otherwise authorized by law to pro9 vide an item or service that constitutes health

10 care in the ordinary course of business or prac11 tice of a profession;

12 (B) a Federal or State program that di13 rectly provides items or services that constitute

14 health care to beneficiaries; or

15 (C) an officer or employee of a person de16 scribed in subparagraph (A) or (B).

17 (5) HEALTH INFORMATION SERVICE ORGANIZA18 TION.—The term ‘‘health information service organi19 zation’’ means a person who, with respect to a spe20 cific item of protected health information, receives,

21 creates, uses, maintains, or discloses the information

22 while acting in whole or in part in the capacity of—

23 (A) a person, other than an affiliated per24 son, who performs specific functions for which

25 the Secretary has authorized (by means of a
374

Title II, Subtitle B

•HR 5300 IH

1 designation or certification) the person to re2 ceive access to health care data in electronic or

3 magnetic form that are regulated by this Act;

4 or

5 (B) an officer or employee of a person de6 scribed in subparagraph (A).

7 (6) HEALTH INFORMATION TRUSTEE.—The

8 term ‘‘health information trustee’’ means—

9 (A) a health care provider;

10 (B) a health information service organiza11 tion;

12 (C) a health oversight agency;

13 (D) a health benefit plan sponsor;

14 (E) a public health authority;

15 (F) a health researcher;

16 (G) a person who, with respect to a spe17 cific item of protected health information, is not

18 described in subparagraphs (A) through (F) but

19 receives the information—

20 (i) pursuant to—

21 (I) section 2157 (relating to

22 emergency circumstances);

23 (II) section 2158 (relating to ju24 dicial and administrative purposes);
375

Title II, Subtitle B

•HR 5300 IH

1 (III) section 2159 (relating to

2 law enforcement); or

3 (IV) section 2160 (relating to

4 subpoenas, warrants, and search war5 rants); or

6 (ii) while acting in whole or in part in

7 the capacity of an officer or employee of a

8 person described in clause (i).

9 (7) HEALTH OVERSIGHT AGENCY.—The term

10 ‘‘health oversight agency’’ means a person who, with

11 respect to a specific item of protected health infor12 mation, receives, creates, uses, maintains, or dis13 closes the information while acting in whole or in

14 part in the capacity of—

15 (A) a person who performs or oversees the

16 performance of an assessment, evaluation, de17 termination, or investigation relating to the li18 censing, accreditation, or certification of health

19 care providers;

20 (B) a person who—

21 (i) performs or oversees the perform22 ance of an audit, assessment, evaluation,

23 determination, or investigation relating to

24 the effectiveness of, compliance with, or

25 applicability of, legal, fiscal, medical, or
376

Title II, Subtitle B

•HR 5300 IH

1 scientific standards or aspects of perform2 ance related to the delivery of, or payment

3 for, health care; and

4 (ii) is a public agency, acting on be5 half of a public agency, acting pursuant to

6 a requirement of a public agency, or carry7 ing out activities under a State or Federal

8 statute regulating the assessment, evalua9 tion, determination, or investigation; or

10 (C) an officer or employee of a person de11 scribed in subparagraph (A) or (B).

12 (8) HEALTH RESEARCHER.—The term ‘‘health

13 researcher’’ means a person who, with respect to a

14 specific item of protected health information, re15 ceives the information—

16 (A) pursuant to section 2156 (relating to

17 health research); or

18 (B) while acting in whole or in part in the

19 capacity of an officer or employee of a person

20 described in subparagraph (A).

21 (9) PUBLIC HEALTH AUTHORITY.—The term

22 ‘‘public health authority’’ means a person who, with

23 respect to a specific item of protected health infor24 mation, receives, creates, uses, maintains, or dis-
377

Title II, Subtitle B

•HR 5300 IH

1 closes the information while acting in whole or in

2 part in the capacity of—

3 (A) an authority of the United States, a

4 State, or a political subdivision of a State that

5 is responsible for public health matters;

6 (B) a person acting under the direction of

7 such an authority; or

8 (C) an officer or employee of a person de9 scribed in subparagraph (A) or (B).

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

11 (1) AFFILIATED PERSON.—The term ‘‘affiliated

12 person’’ means a person who—

13 (A) is not a health information trustee;

14 (B) is a contractor, subcontractor, associ15 ate, or subsidiary of a person who is a health

16 information trustee; and

17 (C) pursuant to an agreement or other re18 lationship with such trustee, receives, creates,

19 uses, maintains, or discloses protected health

20 information.

21 (2) APPROVED HEALTH RESEARCH PROJECT.—

22 The term ‘‘approved health research project’’ means

23 a biomedical, epidemiological, or health services re24 search or statistics project, or a research project on

25 behavioral and social factors affecting health, that
378

Title II, Subtitle B

•HR 5300 IH

1 has been approved by a certified institutional review

2 board.

3 (3) CERTIFIED INSTITUTIONAL REVIEW

4 BOARD.—The term ‘‘certified institutional review

5 board’’ means a board—

6 (A) established by an entity to review re7 search involving protected health information

8 and the rights of protected individuals con9 ducted at or supported by the entity;

10 (B) established in accordance with regula11 tions of the Secretary under section 2156(e)(1);

12 and

13 (C) certified by the Secretary under section

14 2156(e)(2).

15 (4) HEALTH CARE.—The term ‘‘health care’’—

16 (A) means—

17 (i) any preventive, diagnostic, thera18 peutic, rehabilitative, maintenance, or pal19 liative care, counseling, service, or proce20 dure—

21 (I) with respect to the physical or

22 mental condition, or functional status,

23 of an individual; or

24 (II) affecting the structure or

25 function of the human body or any
379

Title II, Subtitle B

•HR 5300 IH

1 part of the human body, including

2 banking of blood, sperm, organs, or

3 any other tissue; or

4 (ii) any sale or dispensing of a drug,

5 device, equipment, or other item to an indi6 vidual, or for the use of an individual, pur7 suant to a prescription; but

8 (B) does not include any item or service

9 that is not furnished for the purpose of main10 taining or improving the health of an individual.

11 (5) LAW ENFORCEMENT INQUIRY.—The term

12 ‘‘law enforcement inquiry’’ means a lawful investiga13 tion or official proceeding inquiring into a violation

14 of, or failure to comply with, any criminal or civil

15 statute or any regulation, rule, or order issued pur16 suant to such a statute.

17 (6) PERSON.—The term ‘‘person’’ includes an

18 authority of the United States, a State, or a political

19 subdivision of a State.

20 Subpart A—Duties of Health Information Trustees

21 SEC. 2141. INSPECTION OF PROTECTED HEALTH INFORMA22 TION.

23 (a) IN GENERAL.—Except as provided in subsection

24 (b), a health information trustee described in subsection

25 (g)—
380

Title II, Subtitle B

•HR 5300 IH

1 (1) shall permit a protected individual to in2 spect any protected health information about the in3 dividual that the trustee maintains, any accounting

4 with respect to such information required under sec5 tion 2144, and any copy of an authorization re6 quired under section 2152 that pertains to such in7 formation;

8 (2) shall provide the protected individual with a

9 copy of the information upon request by the individ10 ual and subject to any conditions imposed by the

11 trustee under subsection (d);

12 (3) shall permit a person who has been des13 ignated in writing by the protected individual to in14 spect the information on behalf of the individual or

15 to accompany the individual during the inspection;

16 and

17 (4) may offer to explain or interpret informa18 tion that is inspected or copied under this sub19 section.

20 (b) EXCEPTIONS.—A health information trustee is

21 not required by this section to permit inspection or copy22 ing of protected health information by a protected individ23 ual if any of the following conditions apply:

24 (1) MENTAL HEALTH TREATMENT NOTES.—

25 The information consists of psychiatric, psycho-
381

Title II, Subtitle B

•HR 5300 IH

1 logical, or mental health treatment notes about the

2 individual, the trustee determines in the exercise of

3 reasonable professional judgment that inspection or

4 copying of the notes would cause sufficient harm to

5 the protected individual so as to outweigh the desir6 ability of permitting access, and the trustee does not

7 disclose the notes to any person not directly engaged

8 in treating the individual, except with the authoriza9 tion of the individual or under compulsion of law.

10 (2) INFORMATION ABOUT OTHERS.—The infor11 mation relates to an individual, other than the pro12 tected individual or a health care provider, and the

13 trustee determines in the exercise of reasonable pro14 fessional judgment that inspection or copying of the

15 information would cause sufficient harm to one or

16 both of the individuals so as to outweigh the desir17 ability of permitting access.

18 (3) ENDANGERMENT TO LIFE OR SAFETY.—In19 spection or copying of the information could reason20 ably be expected to endanger the life or physical

21 safety of an individual.

22 (4) CONFIDENTIAL SOURCE.—The information

23 identifies or could reasonably lead to the identifica24 tion of an individual (other than a health care pro25 vider) who provided information under a promise of
382

Title II, Subtitle B

•HR 5300 IH

1 confidentiality to a health care provider concerning

2 a protected individual who is a subject of the infor3 mation.

4 (5) ADMINISTRATIVE PURPOSES.—The informa5 tion—

6 (A) is used by the trustee solely for admin7 istrative purposes and not in the provision of

8 health care to a protected individual who is a

9 subject of the information; and

10 (B) is not disclosed by the trustee to any

11 person.

12 (6) DUPLICATIVE INFORMATION.—The informa13 tion duplicates information available for inspection

14 under subsection (a).

15 (7) INFORMATION COMPILED IN ANTICIPATION

16 OF LITIGATION.—The information is compiled prin17 cipally—

18 (A) in anticipation of a civil, criminal, or

19 administrative action or proceeding; or

20 (B) for use in such an action or proceed21 ing.

22 (c) INSPECTION AND COPYING OF SEGREGABLE POR23 TION.—A health information trustee shall permit inspec24 tion and copying under subsection (a) of any reasonably
383

Title II, Subtitle B

•HR 5300 IH

1 segregable portion of a record after deletion of any portion

2 that is exempt under subsection (b).

3 (d) CONDITIONS.—A health information trustee

4 may—

5 (1) require a written request for the inspection

6 and copying of protected health information under

7 this section; and

8 (2) charge a reasonable cost-based fee for—

9 (A) permitting inspection of information

10 under this section; and

11 (B) providing a copy of protected health

12 information under this section.

13 (e) STATEMENT OF REASONS FOR DENIAL.—If a

14 health information trustee denies in whole or in part a

15 request for inspection or copying under this section, the

16 trustee shall provide the protected individual who made

17 the request with a written statement of the reasons for

18 the denial.

19 (f) DEADLINE.—A health information trustee shall

20 comply with or deny a request for inspection or copying

21 of protected health information under this section within

22 the 30-day period beginning on the date the trustee re23 ceives the request.

24 (g) APPLICABILITY.—This section applies to a health

25 information trustee who is—
384

Title II, Subtitle B

•HR 5300 IH

1 (1) a health benefit plan sponsor;

2 (2) a health care provider;

3 (3) a health information service organization;

4 (4) a health oversight agency; or

5 (5) a public health authority.

6 SEC. 2142. AMENDMENT OF PROTECTED HEALTH INFORMA7 TION.

8 (a) IN GENERAL.—A health information trustee de9 scribed in subsection (f) shall, within the 45-day period

10 beginning on the date the trustee receives from a protected

11 individual about whom the trustee maintains protected

12 health information a written request that the trustee cor13 rect or amend the information, complete the duties de14 scribed in one of the following paragraphs:

15 (1) CORRECTION OR AMENDMENT AND NOTIFI16 CATION.—The trustee shall—

17 (A) make the correction or amendment re18 quested;

19 (B) inform the protected individual of the

20 amendment or correction that has been made;

21 (C) make reasonable efforts to inform any

22 person who is identified by the protected indi23 vidual, who is not an employee of the trustee,

24 and to whom the uncorrected or unamended

25 portion of the information was previously dis-
385

Title II, Subtitle B

•HR 5300 IH

1 closed of the correction or amendment that has

2 been made; and

3 (D) at the request of the individual, make

4 reasonable efforts to inform any known source

5 of the uncorrected or unamended portion of the

6 information about the correction or amendment

7 that has been made.

8 (2) REASONS FOR REFUSAL AND REVIEW PRO9 CEDURES.—The trustee shall inform the protected

10 individual of—

11 (A) the reasons for the refusal of the trust12 ee to make the correction or amendment;

13 (B) any procedures for further review of

14 the refusal; and

15 (C) the individual’s right to file with the

16 trustee a concise statement setting forth the re17 quested correction or amendment and the indi18 vidual’s reasons for disagreeing with the refusal

19 of the trustee.

20 (b) STANDARDS FOR CORRECTION OR AMEND21 MENT.—A trustee shall correct or amend protected health

22 information in accordance with a request made under sub23 section (a) if the trustee determines that the information

24 is not accurate, relevant, timely, or complete for the pur-
386

Title II, Subtitle B

•HR 5300 IH

1 poses for which the information may be used or disclosed

2 by the trustee.

3 (c) STATEMENT OF DISAGREEMENT.—After a pro4 tected individual has filed a statement of disagreement

5 under subsection (a)(2)(C), the trustee, in any subsequent

6 disclosure of the disputed portion of the information, shall

7 include a copy of the individual’s statement and may in8 clude a concise statement of the trustee’s reasons for not

9 making the requested correction or amendment.

10 (d) CONSTRUCTION.—This section may not be con11 strued to require a health information trustee to conduct

12 a hearing or proceeding concerning a request for a correc13 tion or amendment to protected health information the

14 trustee maintains.

15 (e) CORRECTION.—For purposes of subsection (a), a

16 correction is deemed to have been made to protected

17 health information when—

18 (1) information that is not timely, accurate, rel19 evant, or complete is clearly marked as incorrect; or

20 (2) supplementary correct information is made

21 part of the information and adequately cross-ref22 erenced.

23 (f) APPLICABILITY.—This section applies to a health

24 information trustee who is—

25 (1) a health benefit plan sponsor;
387

Title II, Subtitle B

•HR 5300 IH

1 (2) a health care provider;

2 (3) a health information service organization;

3 (4) a health oversight agency; or

4 (5) a public health authority.

5 SEC. 2143. NOTICE OF INFORMATION PRACTICES.

6 (a) PREPARATION OF NOTICE.—A health information

7 trustee described in subsection (d) shall prepare a written

8 notice of information practices describing the following:

9 (1) The rights under this part of a protected in10 dividual who is the subject of protected health infor11 mation, including the right to inspect and copy such

12 information and the right to seek amendments to

13 such information, and the procedures for authorizing

14 disclosures of protected health information and for

15 revoking such authorizations.

16 (2) The procedures established by the trustee

17 for the exercise of such rights.

18 (3) The uses and disclosures of protected health

19 information that are authorized under this part.

20 (b) DISSEMINATION OF NOTICE.—A health informa21 tion trustee—

22 (1) shall, upon request, provide any person with

23 a copy of the trustee’s notice of information prac24 tices (described in subsection (a)); and
388

Title II, Subtitle B

•HR 5300 IH

1 (2) shall make reasonable efforts to inform per2 sons in a clear and conspicuous manner of the exist3 ence and availability of such notice.

4 (c) MODEL NOTICES.—Not later than July 1, 1996,

5 the Secretary, after notice and opportunity for public com6 ment, shall develop and disseminate model notices of infor7 mation practices for use by health information trustees

8 under this section.

9 (d) APPLICABILITY.—This section applies to a health

10 information trustee who is—

11 (1) a health benefit plan sponsor;

12 (2) a health care provider;

13 (3) a health information service organization; or

14 (4) a health oversight agency.

15 SEC. 2144. ACCOUNTING FOR DISCLOSURES.

16 (a) IN GENERAL.—Except as provided in subsection

17 (b) and section 2154, each health information trustee shall

18 create and maintain, with respect to any protected health

19 information the trustee discloses, a record of—

20 (1) the date and purpose of the disclosure;

21 (2) the name of the person to whom the disclo22 sure was made;

23 (3) the address of the person to whom the dis24 closure was made or the location to which the disclo25 sure was made; and
389

Title II, Subtitle B

•HR 5300 IH

1 (4) where practicable, a description of the infor2 mation disclosed.

3 (b) REGULATIONS.—Not later than July 1, 1996, the

4 Secretary shall promulgate regulations that exempt a

5 health information trustee from maintaining a record

6 under subsection (a) with respect to protected health in7 formation disclosed by the trustee for purposes of peer re8 view, licensing, certification, accreditation, and similar ac9 tivities.

10 SEC. 2145. SECURITY.

11 (a) IN GENERAL.—Each health information trustee

12 who receives or creates protected health information that

13 is subject to this part shall maintain reasonable and ap14 propriate administrative, technical, and physical safe15 guards—

16 (1) to ensure the integrity and confidentiality of

17 the information;

18 (2) to protect against any reasonably antici19 pated—

20 (A) threats or hazards to the security or

21 integrity of the information; and

22 (B) unauthorized uses or disclosures of the

23 information; and
390

Title II, Subtitle B

•HR 5300 IH

1 (3) otherwise ensure compliance with this part

2 by the trustee and the officers and employees of the

3 trustee.

4 (b) GUIDELINES.—Not later than July 1, 1996, the

5 Secretary, after notice and opportunity for public com6 ment, shall develop and disseminate guidelines for the im7 plementation of this section. The guidelines shall take into

8 account—

9 (1) the technical capabilities of record systems

10 used to maintain protected health information;

11 (2) the costs of security measures;

12 (3) the need for training persons who have ac13 cess to protected health information; and

14 (4) the value of audit trails in computerized

15 record systems.

16 Subpart B—Use and Disclosure of Protected Health

17 Information

18 SEC. 2151. GENERAL LIMITATIONS ON USE AND DISCLO19 SURE.

20 (a) USE.—Except as otherwise provided under this

21 part, a health information trustee may use protected

22 health information only for a purpose—

23 (1) that is compatible with and directly related

24 to the purpose for which the information—

25 (A) was collected; or
391

Title II, Subtitle B

•HR 5300 IH

1 (B) was received by the trustee; or

2 (2) for which the trustee is authorized to dis3 close the information under this part.

4 (b) DISCLOSURE.—A health information trustee may

5 disclose protected health information only as authorized

6 under this part.

7 (c) SCOPE OF USES AND DISCLOSURES.—

8 (1) IN GENERAL.—A use or disclosure of pro9 tected health information by a health information

10 trustee shall be limited, when practicable, to the

11 minimum amount of information necessary to ac12 complish the purpose for which the information is

13 used or disclosed.

14 (2) GUIDELINES.—Not later than July 1, 1996,

15 the Secretary, after notice and opportunity for pub16 lic comment, shall issue guidelines to implement

17 paragraph (1), which shall take into account the

18 technical capabilities of the record systems used to

19 maintain protected health information and the costs

20 of limiting use and disclosure.

21 (d) IDENTIFICATION OF DISCLOSED INFORMATION

22 AS PROTECTED INFORMATION.—Except with respect to

23 protected health information that is disclosed under sec24 tion 2154 (relating to next of kin and directory informa25 tion), a health information trustee may disclose protected
392

Title II, Subtitle B

•HR 5300 IH

1 health information only if the recipient has been notified

2 that the information is protected health information that

3 is subject to this part.

4 (e) AGREEMENT TO LIMIT USE OR DISCLOSURE.—

5 A health information trustee who receives protected health

6 information from any person pursuant to a written agree7 ment to restrict use or disclosure of the information to

8 a greater extent than otherwise would be required under

9 this part shall comply with the terms of the agreement,

10 except where use or disclosure of the information in viola11 tion of the agreement is required by law. A trustee who

12 fails to comply with the preceding sentence shall be subject

13 to section 2191 (relating to civil actions) with respect to

14 such failure.

15 (f) NO GENERAL REQUIREMENT TO DISCLOSE.—

16 Nothing in this part shall be construed to require a health

17 information trustee to disclose protected health informa18 tion not otherwise required to be disclosed by law.

19 SEC. 2152. AUTHORIZATIONS FOR DISCLOSURE OF PRO20 TECTED HEALTH INFORMATION.

21 (a) WRITTEN AUTHORIZATIONS.—A health informa22 tion trustee, other than a health information service orga23 nization, may disclose protected health information pursu24 ant to an authorization executed by the protected individ-
393

Title II, Subtitle B

•HR 5300 IH

1 ual who is the subject of the information, if each of the

2 following requirements is satisfied:

3 (1) WRITING.—The authorization is in writing,

4 signed by the individual, and dated on the date of

5 such signature.

6 (2) SEPARATE FORM.—The authorization is not

7 on a form used to authorize or facilitate the provi8 sion of, or payment for, health care.

9 (3) TRUSTEE DESCRIBED.—The trustee is spe10 cifically named or generically described in the au11 thorization as authorized to disclose such informa12 tion.

13 (4) RECIPIENT DESCRIBED.—The person to

14 whom the information is to be disclosed is specifi15 cally named or generically described in the author16 ization as a person to whom such information may

17 be disclosed.

18 (5) STATEMENT OF INTENDED USES AND DIS19 CLOSURES RECEIVED.—The authorization contains

20 an acknowledgment that the individual has received

21 a statement described in subsection (b) from such

22 person.

23 (6) INFORMATION DESCRIBED.—The informa24 tion to be disclosed is described in the authorization.
394

Title II, Subtitle B

•HR 5300 IH

1 (7) AUTHORIZATION TIMELY RECEIVED.—The

2 authorization is received by the trustee during a pe3 riod described in subsection (c)(1).

4 (8) DISCLOSURE TIMELY MADE.—The disclo5 sure occurs during a period described in subsection

6 (c)(2).

7 (b) STATEMENT OF INTENDED USES AND DISCLO8 SURES.—

9 (1) IN GENERAL.—A person who wishes to re10 ceive from a health information trustee protected

11 health information about a protected individual pur12 suant to an authorization executed by the individual

13 shall supply the individual, in writing and on a form

14 that is distinct from the authorization, with a state15 ment of the uses for which the person intends the

16 information and the disclosures the person intends

17 to make of the information. Such statement shall be

18 supplied before the authorization is executed.

19 (2) ENFORCEMENT.—If the person uses or dis20 closes the information in a manner that is inconsist21 ent with such statement, the person shall be subject

22 to section 2191 (relating to civil actions) with re23 spect to such failure, except where such use or dis24 closure is required by law.
395

Title II, Subtitle B

•HR 5300 IH

1 (3) MODEL STATEMENTS.—Not later than July

2 1, 1996, the Secretary, after notice and opportunity

3 for public comment, shall develop and disseminate

4 model statements of intended uses and disclosures of

5 the type described in paragraph (1).

6 (c) TIME LIMITATIONS ON AUTHORIZATIONS.—

7 (1) RECEIPT BY TRUSTEE.—For purposes of

8 subsection (a)(7), an authorization is timely received

9 if it is received by the trustee during—

10 (A) the 1-year period beginning on the

11 date that the authorization is signed under sub12 section (a)(1), if the authorization permits the

13 disclosure of protected health information to—

14 (i) a health benefit plan sponsor;

15 (ii) a health care provider;

16 (iii) a health oversight agency;

17 (iv) a public health authority;

18 (v) a health researcher; or

19 (vi) a person who provides counseling

20 or social services to individuals; or

21 (B) the 30-day period beginning on the

22 date that the authorization is signed under sub23 section (a)(1), if the authorization permits the

24 disclosure of protected health information to a
396

Title II, Subtitle B

•HR 5300 IH

1 person other than a person described in sub2 paragraph (A).

3 (2) DISCLOSURE BY TRUSTEE.—For purposes

4 of subsection (a)(8), a disclosure is timely made if

5 it occurs before—

6 (A) the date or event (if any) specified in

7 the authorization upon which the authorization

8 expires; and

9 (B) the expiration of the 6-month period

10 beginning on the date the trustee receives the

11 authorization.

12 (d) REVOCATION OR AMENDMENT OF AUTHORIZA13 TION.—

14 (1) IN GENERAL.—A protected individual in

15 writing may revoke or amend an authorization de16 scribed in subsection (a), in whole or in part, at any

17 time, except insofar as—

18 (A) disclosure of protected health informa19 tion has been authorized to permit validation of

20 expenditures based on health condition by a

21 government authority; or

22 (B) action has been taken in reliance on

23 the authorization.

24 (2) NOTICE OF REVOCATION.—A health infor25 mation trustee who discloses protected health infor-
397

Title II, Subtitle B

•HR 5300 IH

1 mation in reliance on an authorization that has been

2 revoked shall not be subject to any liability or pen3 alty under this part if—

4 (A) the reliance was in good faith;

5 (B) the trustee had no notice of the rev6 ocation; and

7 (C) the disclosure was otherwise in accord8 ance with the requirements of this section.

9 (e) ADDITIONAL REQUIREMENTS OF TRUSTEE.—A

10 health information trustee may impose requirements for

11 an authorization that are in addition to the requirements

12 in this section.

13 (f) COPY.—A health information trustee who dis14 closes protected health information pursuant to an author15 ization under this section shall maintain a copy of the au16 thorization.

17 (g) CONSTRUCTION.—This section may not be con18 strued—

19 (1) to require a health information trustee to

20 disclose protected health information; or

21 (2) to limit the right of a health information

22 trustee to charge a fee for the disclosure or repro23 duction of protected health information.

24 (h) SUBPOENAS, WARRANTS, AND SEARCH WAR25 RANTS.—If a health information trustee discloses pro-
398

Title II, Subtitle B

•HR 5300 IH

1 tected health information pursuant to an authorization in

2 order to comply with an administrative subpoena or war3 rant or a judicial subpoena or search warrant, the author4 ization—

5 (1) shall specifically authorize the disclosure for

6 the purpose of permitting the trustee to comply with

7 the subpoena, warrant, or search warrant; and

8 (2) shall otherwise meet the requirements in

9 this section.

10 SEC. 2153. TREATMENT, PAYMENT, AND OVERSIGHT.

11 (a) DISCLOSURES BY PLANS, PROVIDERS, AND

12 OVERSIGHT AGENCIES.—A health information trustee de13 scribed in subsection (d) may disclose protected health in14 formation to a health benefit plan sponsor, health care

15 provider, or health oversight agency if the disclosure is—

16 (1) for the purpose of providing health care and

17 a protected individual who is a subject of the infor18 mation has not previously objected to the disclosure

19 in writing;

20 (2) for the purpose of providing for the pay21 ment for health care furnished to an individual; or

22 (3) for use by a health oversight agency for a

23 purpose that is described in subparagraph (A) or

24 (B)(i) of section 2140(b)(7).
399

Title II, Subtitle B

•HR 5300 IH

1 (b) DISCLOSURES BY CERTAIN OTHER TRUSTEES.—

2 A health information trustee may disclose protected health

3 information to a health care provider if—

4 (1) the disclosure is for the purpose described

5 in subsection (a)(1); and

6 (2) the trustee—

7 (A) is a public health authority;

8 (B) received protected health information

9 pursuant to section 2157 (relating to emergency

10 circumstances); or

11 (C) is an officer or employee of a trustee

12 described in subsection (B).

13 (c) USE IN ACTION AGAINST INDIVIDUAL.—A person

14 who receives protected health information about a pro15 tected individual through a disclosure under this section

16 may not use or disclose the information in any administra17 tive, civil, or criminal action or investigation directed

18 against the individual, except an action or investigation

19 arising out of and related to receipt of health care or pay20 ment for health care.

21 (d) APPLICABILITY.—A health information trustee

22 referred to in subsection (a) is any of the following:

23 (1) A health benefit plan sponsor.

24 (2) A health care provider.

25 (3) A health oversight agency.
400

Title II, Subtitle B

•HR 5300 IH

1 (4) A health information service organization.

2 SEC. 2154. NEXT OF KIN AND DIRECTORY INFORMATION.

3 (a) NEXT OF KIN.—A health information trustee who

4 is a health care provider, who received protected health

5 information pursuant to section 2157 (relating to emer6 gency circumstances), or who is an officer or employee of

7 such a recipient may orally disclose protected health infor8 mation about a protected individual to the next of kin of

9 the individual (as defined under State law), or to a person

10 with whom the individual has a close personal relationship,

11 if—

12 (1) the trustee has no reason to believe that the

13 individual would consider the information especially

14 sensitive;

15 (2) the individual has not previously objected to

16 the disclosure;

17 (3) the disclosure is consistent with good medi18 cal or other professional practice; and

19 (4) the information disclosed is limited to infor20 mation about health care that is being provided to

21 the individual at or about the time of the disclosure.

22 (b) DIRECTORY INFORMATION.—

23 (1) IN GENERAL.—A health information trustee

24 who is a health care provider, who received protected

25 health information pursuant to section 2157 (relat-
401

Title II, Subtitle B

•HR 5300 IH

1 ing to emergency circumstances), or who is an offi2 cer or employee of a such a recipient may disclose

3 to any person the information described in para4 graph (2) if—

5 (A) a protected individual who is a subject

6 of the information has not objected in writing

7 to the disclosure;

8 (B) the disclosure is otherwise consistent

9 with good medical and other professional prac10 tice; and

11 (C) the information does not reveal specific

12 information about the physical or mental condi13 tion or functional status of a protected individ14 ual or about the health care provided to a pro15 tected individual.

16 (2) INFORMATION DESCRIBED.—The informa17 tion referred to in paragraph (1) is the following:

18 (A) The name of an individual receiving

19 health care from a health care provider on a

20 premises controlled by the provider.

21 (B) The location of the individual on such

22 premises.

23 (C) The general health status of the indi24 vidual, described in terms of critical, poor, fair,
402

Title II, Subtitle B

•HR 5300 IH

1 stable, satisfactory, or terms denoting similar

2 conditions.

3 (c) NO ACCOUNTING REQUIRED.—A health informa4 tion trustee who discloses protected health information

5 under this section is not required to maintain an account6 ing of the disclosure under section 2144.

7 (d) RECIPIENTS.—A person to whom protected

8 health information is disclosed under this section shall not,

9 by reason of such disclosure, be subject to any require10 ment under this part.

11 SEC. 2155. PUBLIC HEALTH.

12 (a) IN GENERAL.—A health information trustee who

13 is a health care provider or a public health authority may

14 disclose protected health information to—

15 (1) a public health authority for use in legally

16 authorized—

17 (A) disease or injury reporting;

18 (B) public health surveillance; or

19 (C) public health investigation or interven20 tion; or

21 (2) an individual who is authorized by law to

22 receive the information in a public health interven23 tion.

24 (b) USE IN ACTION AGAINST INDIVIDUAL.—A public

25 health authority who receives protected health information
403

Title II, Subtitle B

•HR 5300 IH

1 about a protected individual through a disclosure under

2 this section may not use or disclose the information in any

3 administrative, civil, or criminal action or investigation di4 rected against the individual, except where the use or dis5 closure is authorized by law for protection of the public

6 health.

7 (c) INDIVIDUAL RECIPIENTS.—An individual to

8 whom protected health information is disclosed under sub9 section (a)(2) shall not, by reason of such disclosure, be

10 subject to any requirement under this part.

11 SEC. 2156. HEALTH RESEARCH.

12 (a) IN GENERAL.—A health information trustee de13 scribed in subsection (d) may disclose protected health in14 formation to a person if—

15 (1) the person is conducting an approved health

16 research project;

17 (2) the information is to be used in the project;

18 and

19 (3) the project has been determined by a cer20 tified institutional review board to be—

21 (A) of sufficient importance so as to out22 weigh the intrusion into the privacy of the pro23 tected individual who is the subject of the infor24 mation that would result from the disclosure;

25 and
404

Title II, Subtitle B

•HR 5300 IH

1 (B) impracticable to conduct without the

2 information.

3 (b) DISCLOSURES BY HEALTH INFORMATION SERV4 ICE ORGANIZATIONS.—A health information service orga5 nization may disclose protected health information under

6 subsection (a) only if the certified institutional review

7 board referred to in subsection (a)(3) has been certified

8 as being qualified to make determinations under such sub9 section with respect to disclosures by such organizations.

10 (c) LIMITATIONS ON USE AND DISCLOSURE; OBLIGA11 TIONS OF RECIPIENT.—A health researcher who receives

12 protected health information about a protected individual

13 pursuant to subsection (a)—

14 (1) may use the information solely for purposes

15 of an approved health research project;

16 (2) may not use or disclose the information in

17 any administrative, civil, or criminal action or inves18 tigation directed against the individual; and

19 (3) shall remove or destroy, at the earliest op20 portunity consistent with the purposes of the ap21 proved health research project in connection with

22 which the disclosure was made, information that

23 would enable an individual to be identified, unless a

24 certified institutional review board has determined

25 that there is a health or research justification for re-
405

Title II, Subtitle B

•HR 5300 IH

1 tention of such identifiers and there is an adequate

2 plan to protect the identifiers from use and disclo3 sure that is inconsistent with this part.

4 (d) APPLICABILITY.—A health information trustee

5 referred to in subsection (a) is any health information

6 trustee other than a person who, with respect to the spe7 cific protected health information to be disclosed under

8 such subsection, received the information—

9 (1) pursuant to—

10 (A) section 2158 (relating to judicial and

11 administrative purposes);

12 (B) paragraph (1), (2), or (3) of section

13 2159(a) (relating to law enforcement); or

14 (C) section 2160 (relating to subpoenas,

15 warrants, and search warrants); or

16 (2) while acting in whole or in part in the ca17 pacity of an officer or employee of a person de18 scribed in paragraph (1).

19 (e) REQUIREMENTS FOR INSTITUTIONAL REVIEW

20 BOARDS.—

21 (1) REGULATIONS.—Not later than July 1,

22 1996, the Secretary, after opportunity for notice and

23 comment, shall promulgate regulations establishing

24 requirements for certified institutional review boards

25 under this part. The regulations shall be based on
406

Title II, Subtitle B

•HR 5300 IH

1 regulations promulgated under section 491(a) of the

2 Public Health Service Act and shall ensure that cer3 tified institutional review boards are qualified to as4 sess and protect the confidentiality of research sub5 jects. The regulations shall include specific require6 ments for certified institutional review boards that

7 make determinations under subsection (a)(3) with

8 respect to disclosures by health information service

9 organizations.

10 (2) CERTIFICATION.—The Secretary shall cer11 tify that an institutional review board satisfies the

12 requirements of the regulations promulgated under

13 paragraph (1).

14 SEC. 2157. EMERGENCY CIRCUMSTANCES.

15 (a) IN GENERAL.—A health information trustee may

16 disclose protected health information if the trustee be17 lieves, on reasonable grounds, that the disclosure is nec18 essary to prevent or lessen a serious and imminent threat

19 to the health or safety of an individual.

20 (b) USE IN ACTION AGAINST INDIVIDUAL.—A person

21 who receives protected health information about a pro22 tected individual through a disclosure under this section

23 may not use or disclose the information in any administra24 tive, civil, or criminal action or investigation directed

25 against the individual, except an action or investigation
407

Title II, Subtitle B

•HR 5300 IH

1 arising out of and related to receipt of health care or pay2 ment for health care.

3 SEC. 2158. JUDICIAL AND ADMINISTRATIVE PURPOSES.

4 (a) IN GENERAL.—A health information trustee de5 scribed in subsection (d) may disclose protected health in6 formation—

7 (1) pursuant to the Federal Rules of Civil Pro8 cedure, the Federal Rules of Criminal Procedure, or

9 comparable rules of other courts or administrative

10 agencies in connection with litigation or proceedings

11 to which a protected individual who is a subject of

12 the information is a party and in which the individ13 ual has placed the individual’s physical or mental

14 condition or functional status in issue;

15 (2) if directed by a court in connection with a

16 court-ordered examination of an individual; or

17 (3) to assist in the identification of a dead indi18 vidual.

19 (b) WRITTEN STATEMENT.—A person seeking pro20 tected health information about a protected individual held

21 by health information trustee under—

22 (1) subsection (a)(1)—

23 (A) shall notify the protected individual or

24 the attorney of the protected individual of the

25 request for the information;
408

Title II, Subtitle B

•HR 5300 IH

1 (B) shall provide the trustee with a signed

2 document attesting—

3 (i) that the protected individual is a

4 party to the litigation or proceedings for

5 which the information is sought;

6 (ii) that the individual has placed the

7 individual’s physical or mental condition or

8 functional status in issue; and

9 (iii) the date on which the protected

10 individual or the attorney of the protected

11 individual was notified under subparagraph

12 (A); and

13 (C) shall not accept any requested pro14 tected health information from the trustee until

15 the termination of the 10-day period beginning

16 on the date notice was given under subpara17 graph (A); or

18 (2) subsection (a)(3) shall provide the trustee

19 with a written statement that the information is

20 sought to assist in the identification of a dead indi21 vidual.

22 (c) USE AND DISCLOSURE.—A person to whom pro23 tected health information is disclosed under this section

24 may use and disclose the information only to accomplish

25 the purpose for which the disclosure was made.
409

Title II, Subtitle B

•HR 5300 IH

1 (d) APPLICABILITY.—A health information trustee

2 referred to in subsection (a) is any of the following:

3 (1) A health benefit plan sponsor.

4 (2) A health care provider.

5 (3) A health oversight agency.

6 (4) A person who, with respect to the specific

7 protected health information to be disclosed under

8 such subsection, received the information—

9 (A) pursuant to—

10 (i) section 2157 (relating to emer11 gency circumstances); or

12 (ii) section 2160 (relating to subpoe13 nas, warrants, and search warrants); or

14 (B) while acting in whole or in part in the

15 capacity of an officer or employee of a person

16 described in subparagraph (A).

17 SEC. 2159. LAW ENFORCEMENT.

18 (a) IN GENERAL.—A health information trustee,

19 other than a health information service organization, may

20 disclose protected health information to a law enforcement

21 agency, other than a health oversight agency—

22 (1) if the information is disclosed for use in an

23 investigation or prosecution of a health information

24 trustee;
410

Title II, Subtitle B

•HR 5300 IH

1 (2) in connection with criminal activity commit2 ted against the trustee or an affiliated person of the

3 trustee or on premises controlled by the trustee; or

4 (3) if the information is needed to determine

5 whether a crime has been committed and the nature

6 of any crime that may have been committed (other

7 than a crime that may have been committed by the

8 protected individual who is the subject of the infor9 mation).

10 (b) ADDITIONAL AUTHORITY OF CERTAIN TRUST11 EES.—A health information trustee who is not a health

12 information service organization, a public health author13 ity, or a health researcher may disclose protected health

14 information to a law enforcement agency (other than a

15 health oversight agency)—

16 (1) to assist in the identification or location of

17 a victim, fugitive, or witness in a law enforcement

18 inquiry;

19 (2) pursuant to a law requiring the reporting of

20 specific health care information to law enforcement

21 authorities; or

22 (3) if the information is specific health informa23 tion described in paragraph (2) and the trustee is

24 operated by a Federal agency;
411

Title II, Subtitle B

•HR 5300 IH

1 (c) CERTIFICATION.—Where a law enforcement agen2 cy requests a health information trustee to disclose pro3 tected health information under subsection (a) or (b)(1),

4 the agency shall provide the trustee with a written certifi5 cation that—

6 (1) is signed by a supervisory official of a rank

7 designated by the head of the agency;

8 (2) specifies the information requested; and

9 (3) states that the information is needed for a

10 lawful purpose under this section.

11 (d) RESTRICTIONS ON DISCLOSURE AND USE.—A

12 person who receives protected health information about a

13 protected individual through a disclosure under this sec14 tion may not use or disclose the information—

15 (1) in any administrative, civil, or criminal ac16 tion or investigation directed against the individual,

17 except an action or investigation arising out of and

18 directly related to the action or investigation for

19 which the information was obtained; and

20 (2) otherwise unless the use or disclosure is

21 necessary to fulfill the purpose for which the infor22 mation was obtained and is not prohibited by any

23 other provision of law.
412

Title II, Subtitle B

•HR 5300 IH

1 SEC. 2160. SUBPOENAS, WARRANTS, AND SEARCH WAR2 RANTS.

3 (a) IN GENERAL.—A health information trustee de4 scribed in subsection (g) may disclose protected health in5 formation if the disclosure is pursuant to any of the fol6 lowing:

7 (1) A subpoena issued under the authority of a

8 grand jury and the trustee is provided a written cer9 tification by the grand jury that the grand jury has

10 complied with the applicable access provisions of sec11 tion 2171.

12 (2) An administrative subpoena or warrant or

13 a judicial subpoena or search warrant and the trust14 ee is provided a written certification by the person

15 seeking the information that the person has com16 plied with the applicable access provisions of section

17 2171 or 2173(a).

18 (3) An administrative subpoena or warrant or

19 a judicial subpoena or search warrant and the dis20 closure otherwise meets the conditions of one of sec21 tions 2153 through 2159.

22 (b) AUTHORITY OF ALL TRUSTEES.—Any health in23 formation trustee may disclose protected health informa24 tion if the disclosure is pursuant to subsection (a)(3).
413

Title II, Subtitle B

•HR 5300 IH

1 (c) RESTRICTIONS ON USE AND DISCLOSURE.—Pro2 tected health information about a protected individual that

3 is disclosed by a health information trustee pursuant to—

4 (1) subsection (a)(2) may not be otherwise used

5 or disclosed by the recipient unless the use or disclo6 sure is necessary to fulfill the purpose for which the

7 information was obtained; and

8 (2) subsection (a)(3) may not be used or dis9 closed by the recipient unless the recipient complies

10 with the conditions and restrictions on use and dis11 closure with which the recipient would have been re12 quired to comply if the disclosure by the trustee had

13 been made under the section referred to in sub14 section (a)(3) the conditions of which were met by

15 the disclosure.

16 (d) RESTRICTIONS ON GRAND JURIES.—Protected

17 health information that is disclosed by a health informa18 tion trustee under subsection (a)(1)—

19 (1) shall be returnable on a date when the

20 grand jury is in session and actually presented to

21 the grand jury;

22 (2) shall be used only for the purpose of consid23 ering whether to issue an indictment or report by

24 that grand jury, or for the purpose of prosecuting a

25 crime for which that indictment or report is issued,
414

Title II, Subtitle B

•HR 5300 IH

1 or for a purpose authorized by rule 6(e) of the Fed2 eral Rules of Criminal Procedure or a comparable

3 State rule;

4 (3) shall be destroyed or returned to the trustee

5 if not used for one of the purposes specified in para6 graph (2); and

7 (4) shall not be maintained, or a description of

8 the contents of such information shall not be main9 tained, by any government authority other than in

10 the sealed records of the grand jury, unless such in11 formation has been used in the prosecution of a

12 crime for which the grand jury issued an indictment

13 or presentment or for a purpose authorized by rule

14 6(e) of the Federal Rules of Criminal Procedure or

15 a comparable State rule.

16 (e) USE IN ACTION AGAINST INDIVIDUAL.—A person

17 who receives protected health information about a pro18 tected individual through a disclosure under this section

19 may not use or disclose the information in any administra20 tive, civil, or criminal action or investigation directed

21 against the individual, except an action or investigation

22 arising out of and directly related to the inquiry for which

23 the information was obtained;

24 (f) CONSTRUCTION.—Nothing in this section shall be

25 construed as authority for a health information trustee to
415

Title II, Subtitle B

•HR 5300 IH

1 refuse to comply with a valid administrative subpoena or

2 warrant or a valid judicial subpoena or search warrant

3 that meets the requirements of this part.

4 (g) APPLICABILITY.—A health information trustee

5 referred to in subsection (a) is any trustee other than the

6 following:

7 (1) A health information service organization.

8 (2) A public health authority.

9 (3) A health researcher.

10 SEC. 2161. HEALTH INFORMATION SERVICE ORGANIZA11 TIONS.

12 A health information trustee may disclose protected

13 health information to a health information service organi14 zation for the purpose of permitting the organization to

15 perform a function for which the Secretary has authorized

16 (by means of a designation or certification) the organiza17 tion to receive access to health care data in electronic or

18 magnetic form that are regulated by this Act.

19 Subpart C—Access Procedures and Challenge Rights

20 SEC. 2171. ACCESS PROCEDURES FOR LAW ENFORCEMENT

21 SUBPOENAS, WARRANTS, AND SEARCH WAR22 RANTS.

23 (a) PROBABLE CAUSE REQUIREMENT.—A govern24 ment authority may not obtain protected health informa25 tion about a protected individual from a health informa-
416

Title II, Subtitle B

•HR 5300 IH

1 tion trustee under paragraph (1) or (2) of section 2160(a)

2 for use in a law enforcement inquiry unless there is prob3 able cause to believe that the information is relevant to

4 a legitimate law enforcement inquiry being conducted by

5 the government authority.

6 (b) WARRANTS AND SEARCH WARRANTS.—A govern7 ment authority that obtains protected health information

8 about a protected individual from a health information

9 trustee under circumstances described in subsection (a)

10 and pursuant to a warrant or search warrant shall, not

11 later than 30 days after the date the warrant was served

12 on the trustee, serve the individual with, or mail to the

13 last known address of the individual, a copy of the

14 warrant.

15 (c) SUBPOENAS.—Except as provided in subsection

16 (d), a government authority may not obtain protected

17 health information about a protected individual from a

18 health information trustee under circumstances described

19 in subsection (a) and pursuant to a subpoena unless a

20 copy of the subpoena has been served by hand delivery

21 upon the individual, or mailed to the last known address

22 of the individual, on or before the date on which the sub23 poena was served on the trustee, together with a notice

24 (published by the Secretary under section 2175(1)) of the
417

Title II, Subtitle B

•HR 5300 IH

1 individual’s right to challenge the subpoena in accordance

2 with section 2172, and—

3 (1) 30 days have passed from the date of serv4 ice, or 30 days have passed from the date of mailing,

5 and within such time period the individual has not

6 initiated a challenge in accordance with section

7 2172; or

8 (2) disclosure is ordered by a court under sec9 tion 2172.

10 (d) APPLICATION FOR DELAY.—

11 (1) IN GENERAL.—A government authority may

12 apply to an appropriate court to delay (for an initial

13 period of not longer than 90 days) serving a copy of

14 a subpoena and a notice otherwise required under

15 subsection (c) with respect to a law enforcement in16 quiry. The government authority may apply to the

17 court for extensions of the delay.

18 (2) REASONS FOR DELAY.—An application for

19 a delay, or extension of a delay, under this sub20 section shall state, with reasonable specificity, the

21 reasons why the delay or extension is being sought.

22 (3) EX PARTE ORDER.—The court shall enter

23 an ex parte order delaying, or extending the delay

24 of, the notice and an order prohibiting the trustee

25 from revealing the request for, or the disclosure of,
418

Title II, Subtitle B

•HR 5300 IH

1 the protected health information being sought if the

2 court finds that—

3 (A) the inquiry being conducted is within

4 the lawful jurisdiction of the government au5 thority seeking the protected health informa6 tion;

7 (B) there is probable cause to believe that

8 the protected health information being sought is

9 relevant to a legitimate law enforcement inquiry

10 being conducted by the government authority;

11 (C) the government authority’s need for

12 the information outweighs the privacy interest

13 of the protected individual who is the subject of

14 the information; and

15 (D) there are reasonable grounds to believe

16 that receipt of a notice by the individual will re17 sult in—

18 (i) endangering the life or physical

19 safety of any individual;

20 (ii) flight from prosecution;

21 (iii) destruction of or tampering with

22 evidence or the information being sought;

23 or

24 (iv) intimidation of potential wit25 nesses.
419

Title II, Subtitle B

•HR 5300 IH

1 (4) SERVICE OF APPLICATION ON INDIVID2 UAL.—Upon the expiration of a period of delay of

3 notice under this subsection, the government author4 ity shall serve upon the individual, with the service

5 of the subpoena and the notice, a copy of any appli6 cations filed and approved under this subsection.

7 SEC. 2172. CHALLENGE PROCEDURES FOR LAW ENFORCE8 MENT SUBPOENAS.

9 (a) MOTION TO QUASH SUBPOENA.—Within 30 days

10 of the date of service, or 30 days of the date of mailing,

11 of a subpoena of a government authority seeking protected

12 health information about a protected individual from a

13 health information trustee under paragraph (1) or (2) of

14 section 2160(a) (except a subpoena to which section 2173

15 applies), the individual may file (without filing fee) a mo16 tion to quash the subpoena—

17 (1) in the case of a State judicial subpoena, in

18 the court which issued the subpoena;

19 (2) in the case of a subpoena issued under the

20 authority of a State that is not a State judicial sub21 poena, in a court of competent jurisdiction;

22 (3) in the case of a subpoena issued under the

23 authority of a Federal court, in any court of the

24 United States of competent jurisdiction; or
420

Title II, Subtitle B

•HR 5300 IH

1 (4) in the case of any other subpoena issued

2 under the authority of the United States, in—

3 (A) the United States district court for the

4 district in which the individual resides or in

5 which the subpoena was issued; or

6 (B) another United States district court of

7 competent jurisdiction.

8 (b) COPY.—A copy of the motion shall be served by

9 the individual upon the government authority by delivery

10 of registered or certified mail.

11 (c) AFFIDAVITS AND SWORN DOCUMENTS.—The gov12 ernment authority may file with the court such affidavits

13 and other sworn documents as sustain the validity of the

14 subpoena. The individual may file with the court, within

15 5 days of the date of the authority’s filing, affidavits and

16 sworn documents in response to the authority’s filing. The

17 court, upon the request of the individual, the government

18 authority, or both, may proceed in camera.

19 (d) PROCEEDINGS AND DECISION ON MOTION.—The

20 court may conduct such proceedings as it deems appro21 priate to rule on the motion. All such proceedings shall

22 be completed, and the motion ruled on, within 10 calendar

23 days of the date of the government authority’s filing.

24 (e) EXTENSION OF TIME LIMITS FOR GOOD

25 CAUSE.—The court, for good cause shown, may at any
421

Title II, Subtitle B

•HR 5300 IH

1 time in its discretion enlarge the time limits established

2 by subsections (c) and (d).

3 (f) STANDARD FOR DECISION.—A court may deny a

4 motion under subsection (a) if it finds that there is prob5 able cause to believe that the protected health information

6 being sought is relevant to a legitimate law enforcement

7 inquiry being conducted by the government authority, un8 less the court finds that the individual’s privacy interest

9 outweighs the government authority’s need for the infor10 mation. The individual shall have the burden of dem11 onstrating that the individual’s privacy interest outweighs

12 the need established by the government authority for the

13 information.

14 (g) SPECIFIC CONSIDERATIONS WITH RESPECT TO

15 PRIVACY INTEREST.—In determining under subsection (f)

16 whether an individual’s privacy interest outweighs the gov17 ernment authority’s need for the information, the court

18 shall consider—

19 (1) the particular purpose for which the infor20 mation was collected by the trustee;

21 (2) the degree to which disclosure of the infor22 mation will embarrass, injure, or invade the privacy

23 of the individual;

24 (3) the effect of the disclosure on the individ25 ual’s future health care;
422

Title II, Subtitle B

•HR 5300 IH

1 (4) the importance of the inquiry being con2 ducted by the government authority, and the impor3 tance of the information to that inquiry; and

4 (5) any other factor deemed relevant by the

5 court.

6 (h) ATTORNEY’S FEES.—In the case of any motion

7 brought under subsection (a) in which the individual has

8 substantially prevailed, the court, in its discretion, may as9 sess against a government authority a reasonable attor10 ney’s fee and other litigation costs (including expert fees)

11 reasonably incurred.

12 (i) NO INTERLOCUTORY APPEAL.—A court ruling de13 nying a motion to quash under this section shall not be

14 deemed a final order and no interlocutory appeal may be

15 taken therefrom by the individual. An appeal of such a

16 ruling may be taken by the individual within such period

17 of time as is provided by law as part of any appeal from

18 a final order in any legal proceeding initiated against the

19 individual arising out of or based upon the protected

20 health information disclosed.

21 SEC. 2173. ACCESS AND CHALLENGE PROCEDURES FOR

22 OTHER SUBPOENAS.

23 (a) IN GENERAL.—A person (other than a govern24 ment authority seeking protected health information under

25 circumstances described in section 2171(a)) may not ob-
423

Title II, Subtitle B

•HR 5300 IH

1 tain protected health information about a protected indi2 vidual from a health information trustee pursuant to a

3 subpoena under section 2160(a)(2) unless—

4 (1) a copy of the subpoena has been served

5 upon the individual or mailed to the last known ad6 dress of the individual on or before the date on

7 which the subpoena was served on the trustee, to8 gether with a notice (published by the Secretary

9 under section 2175(2)) of the individual’s right to

10 challenge the subpoena, in accordance with sub11 section (b); and

12 (2) either—

13 (A) 30 days have passed from the date of

14 service or 30 days have passed from the date of

15 the mailing and within such time period the in16 dividual has not initiated a challenge in accord17 ance with subsection (b); or

18 (B) disclosure is ordered by a court under

19 such subsection.

20 (b) MOTION TO QUASH.—Within 30 days of the date

21 of service or 30 days of the date of mailing of a subpoena

22 seeking protected health information about a protected in23 dividual from a health information trustee under sub24 section (a), the individual may file (without filing fee) in

25 any court of competent jurisdiction, a motion to quash the
424

Title II, Subtitle B

•HR 5300 IH

1 subpoena, with a copy served on the person seeking the

2 information. The individual may oppose, or seek to limit,

3 the subpoena on any grounds that would otherwise be

4 available if the individual were in possession of the infor5 mation.

6 (c) STANDARD FOR DECISION.—The court shall

7 grant an individual’s motion under subsection (b) if the

8 person seeking the information has not sustained the bur9 den of demonstrating that—

10 (1) there are reasonable grounds to believe that

11 the information will be relevant to a lawsuit or other

12 judicial or administrative proceeding; and

13 (2) the need of the person for the information

14 outweighs the privacy interest of the individual.

15 (d) SPECIFIC CONSIDERATIONS WITH RESPECT TO

16 PRIVACY INTEREST.—In determining under subsection (c)

17 whether the need of the person for the information out18 weighs the privacy interest of the individual, the court

19 shall consider—

20 (1) the particular purpose for which the infor21 mation was collected by the trustee;

22 (2) the degree to which disclosure of the infor23 mation will embarrass, injure, or invade the privacy

24 of the individual;
425

Title II, Subtitle B

•HR 5300 IH

1 (3) the effect of the disclosure on the individ2 ual’s future health care;

3 (4) the importance of the information to the

4 lawsuit or proceeding; and

5 (5) any other factor deemed relevant by the

6 court.

7 (e) ATTORNEY’S FEES.—In the case of any motion

8 brought under subsection (b) by an individual against a

9 person in which the individual has substantially prevailed,

10 the court, in its discretion, may assess against the person

11 a reasonable attorney’s fee and other litigation costs (in12 cluding expert fees) reasonably incurred.

13 SEC. 2174. CONSTRUCTION OF SUBPART; SUSPENSION OF

14 STATUTE OF LIMITATIONS.

15 (a) IN GENERAL.—Nothing in this subpart shall af16 fect the right of a health information trustee to challenge

17 a request for protected health information. Nothing in this

18 subpart shall entitle a protected individual to assert the

19 rights of a health information trustee.

20 (b) EFFECT OF MOTION ON STATUTE OF LIMITA21 TIONS.—If an individual who is the subject of protected

22 health information files a motion under this subpart which

23 has the effect of delaying the access of a government au24 thority to such information, the period beginning on the

25 date such motion was filed and ending on the date on
426

Title II, Subtitle B

•HR 5300 IH

1 which the motion is decided shall be excluded in computing

2 any period of limitations within which the government au3 thority may commence any civil or criminal action in con4 nection with which the access is sought.

5 SEC. 2175. RESPONSIBILITIES OF SECRETARY.

6 Not later than July 1, 1996, the Secretary, after no7 tice and opportunity for public comment, shall develop and

8 disseminate brief, clear, and easily understood model

9 notices—

10 (1) for use under subsection (c) of section

11 2171, detailing the rights of a protected individual

12 who wishes to challenge, under section 2172, the dis13 closure of protected health information about the in14 dividual under such subsection; and

15 (2) for use under subsection (a) of section

16 2173, detailing the rights of a protected individual

17 who wishes to challenge, under subsection (b) of

18 such section, the disclosure of protected health infor19 mation about the individual under such section.

20 Subpart D—Miscellaneous Provisions

21 SEC. 2181. PAYMENT CARD AND ELECTRONIC PAYMENT

22 TRANSACTIONS.

23 (a) PAYMENT FOR HEALTH CARE THROUGH CARD

24 OR ELECTRONIC MEANS.—If a protected individual pays

25 a health information trustee for health care by presenting
427

Title II, Subtitle B

•HR 5300 IH

1 a debit, credit, or other payment card or account number,

2 or by any other electronic payment means, the trustee may

3 disclose to a person described in subsection (b) only such

4 protected health information about the individual as is

5 necessary for the processing of the payment transaction

6 or the billing or collection of amounts charged to, debited

7 from, or otherwise paid by, the individual using the card,

8 number, or other electronic payment means.

9 (b) TRANSACTION PROCESSING.—A person who is a

10 debit, credit, or other payment card issuer, is otherwise

11 directly involved in the processing of payment transactions

12 involving such cards or other electronic payment trans13 actions, or is otherwise directly involved in the billing or

14 collection of amounts paid through such means, may only

15 use or disclose protected health information about a pro16 tected individual that has been disclosed in accordance

17 with subsection (a) when necessary for—

18 (1) the authorization, settlement, billing or col19 lection of amounts charged to, debited from, or oth20 erwise paid by, the individual using a debit, credit,

21 or other payment card or account number, or by

22 other electronic payment means;

23 (2) the transfer of receivables, accounts, or in24 terest therein;
428

Title II, Subtitle B

•HR 5300 IH

1 (3) the audit of the credit, debit, or other pay2 ment card account information;

3 (4) compliance with Federal, State, or local law;

4 or

5 (5) a properly authorized civil, criminal, or reg6 ulatory investigation by Federal, State, or local

7 authorities.

8 SEC. 2182. ACCESS TO PROTECTED HEALTH INFORMATION

9 OUTSIDE OF THE UNITED STATES.

10 (a) IN GENERAL.—Notwithstanding the provisions of

11 subpart B, and except as provided in subsection (b), a

12 health information trustee may not permit any person who

13 is not in a State to have access to protected health infor14 mation about a protected individual unless one or more

15 of the following conditions exist:

16 (1) SPECIFIC AUTHORIZATION.—The individual

17 has specifically consented to the provision of such

18 access outside of the United States in an authoriza19 tion that meets the requirements of section 2152.

20 (2) EQUIVALENT PROTECTION.—The provision

21 of such access is authorized under this part and the

22 Secretary has determined that there are fair infor23 mation practices for protected health information in

24 the jurisdiction where the access will be provided

25 that provide protections for individuals and pro-
429

Title II, Subtitle B

•HR 5300 IH

1 tected health information that are equivalent to the

2 protections provided for by this part.

3 (3) ACCESS REQUIRED BY LAW.—The provision

4 of such access is required under—

5 (A) a Federal statute; or

6 (B) a treaty or other international agree7 ment applicable to the United States.

8 (b) EXCEPTIONS.—Subsection (a) does not apply

9 where the provision of access to protected health informa10 tion—

11 (1) is to a foreign public health authority;

12 (2) is authorized under section 2154 (relating

13 to next of kin and directory information), 2156 (re14 lating to health research), or 2157 (relating to emer15 gency circumstances); or

16 (3) is necessary for the purpose of providing for

17 payment for health care that has been provided to

18 an individual.

19 SEC. 2183. STANDARDS FOR ELECTRONIC DOCUMENTS AND

20 COMMUNICATIONS.

21 (a) STANDARDS.—Not later than July 1, 1996, the

22 Secretary, after notice and opportunity for public com23 ment and in consultation with appropriate private stand24 ard-setting organizations and other interested parties,

25 shall establish standards with respect to the creation,
430

Title II, Subtitle B

•HR 5300 IH

1 transmission, receipt, and maintenance, in electronic and

2 magnetic form, of each type of written document specifi3 cally required or authorized under this part. Where a sig4 nature is required under any other provision of this part,

5 such standards shall provide for an electronic or magnetic

6 substitute that serves the functional equivalent of a signa7 ture.

8 (b) TREATMENT OF COMPLYING DOCUMENTS AND

9 COMMUNICATIONS.—An electronic or magnetic document

10 or communication that satisfies the standards established

11 under subsection (a) with respect to such document or

12 communication shall be treated as satisfying the require13 ments of this part that apply to an equivalent written

14 document.

15 SEC. 2184. DUTIES AND AUTHORITIES OF AFFILIATED

16 PERSONS.

17 (a) REQUIREMENTS ON TRUSTEES.—

18 (1) PROVISION OF INFORMATION.—A health in19 formation trustee may provide protected health in20 formation to a person who, with respect to the trust21 ee, is an affiliated person and may permit the affili22 ated person to use such information, only for the

23 purpose of conducting, supporting, or facilitating an

24 activity that the trustee is authorized to undertake.
431

Title II, Subtitle B

•HR 5300 IH

1 (2) NOTICE TO AFFILIATED PERSON.—A health

2 information trustee shall notify a person who, with

3 respect to the trustee, is an affiliated person of any

4 duties under this part that the affiliated person is

5 required to fulfill and of any authorities under this

6 part that the affiliated person is authorized to

7 exercise.

8 (b) DUTIES OF AFFILIATED PERSONS.—

9 (1) IN GENERAL.—An affiliated person shall

10 fulfill any duty under this part that—

11 (A) the health information trustee with

12 whom the person has an agreement or relation13 ship described in section 2140(c)(1)(C) is re14 quired to fulfill; and

15 (B) the person has undertaken to fulfill

16 pursuant to such agreement or relationship.

17 (2) CONSTRUCTION OF OTHER SUBPARTS.—

18 With respect to a duty described in paragraph (1)

19 that an affiliated person is required to fulfill, the

20 person shall be considered a health information

21 trustee for purposes of this part. The person shall

22 be subject to subpart E (relating to enforcement)

23 with respect to any such duty that the person fails

24 to fulfill.
432

Title II, Subtitle B

•HR 5300 IH

1 (3) EFFECT ON TRUSTEE.—An agreement or

2 relationship with an affiliated person does not relieve

3 a health information trustee of any duty or liability

4 under this part.

5 (b) AUTHORITIES OF AFFILIATED PERSONS.—

6 (1) IN GENERAL.—An affiliated person may

7 only exercise an authority under this part that the

8 health information trustee with whom the person is

9 affiliated may exercise and that the person has been

10 given by the trustee pursuant to an agreement or re11 lationship described in section 2140(c)(1)(C). With

12 respect to any such authority, the person shall be

13 considered a health information trustee for purposes

14 of this part. The person shall be subject to subpart

15 E (relating to enforcement) with respect to any act

16 that exceeds such authority.

17 (2) EFFECT ON TRUSTEE.—An agreement or

18 relationship with an affiliated person does not affect

19 the authority of a health information trustee under

20 this part.

21 SEC. 2185. AGENTS AND ATTORNEYS.

22 (a) IN GENERAL.—Except as provided in subsections

23 (b) and (c), a person who is authorized by law (on grounds

24 other than an individual’s minority), or by an instrument

25 recognized under law, to act as an agent, attorney, proxy,
433

Title II, Subtitle B

•HR 5300 IH

1 or other legal representative for a protected individual or

2 the estate of a protected individual, or otherwise to exer3 cise the rights of the individual or estate, may, to the ex4 tent authorized, exercise and discharge the rights of the

5 individual or estate under this part.

6 (b) HEALTH CARE POWER OF ATTORNEY.—A person

7 who is authorized by law (on grounds other than an indi8 vidual’s minority), or by an instrument recognized under

9 law, to make decisions about the provision of health care

10 to an individual who is incapacitated may exercise and dis11 charge the rights of the individual under this part to the

12 extent necessary to effectuate the terms or purposes of

13 the grant of authority.

14 (c) NO COURT DECLARATION.—If a health care pro15 vider determines that an individual, who has not been de16 clared to be legally incompetent, suffers from a medical

17 condition that prevents the individual from acting know18 ingly or effectively on the individual’s own behalf, the right

19 of the individual to authorize disclosure under section

20 2152 may be exercised and discharged in the best interest

21 of the individual by—

22 (1) a person described in subsection (b) with re23 spect to the individual;

24 (2) a person described in subsection (a) with re25 spect to the individual, but only if a person de-
434

Title II, Subtitle B

•HR 5300 IH

1 scribed in paragraph (1) cannot be contacted after

2 a reasonable effort;

3 (3) the next of kin of the individual, but only

4 if a person described in paragraph (1) or (2) cannot

5 be contacted after a reasonable effort; or

6 (4) the health care provider, but only if a per7 son described in paragraph (1), (2), or (3) cannot be

8 contacted after a reasonable effort.

9 SEC. 2186. MINORS.

10 (a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA11 BLE.—In the case of an individual—

12 (1) who is 18 years of age or older, all rights

13 of the individual shall be exercised by the individual,

14 except as provided in section 2185; or

15 (2) who, acting alone, has the legal capacity to

16 apply for and obtain health care and has sought

17 such care, the individual shall exercise all rights of

18 an individual under this part with respect to pro19 tected health information relating to such care.

20 (b) INDIVIDUALS UNDER 18.—Except as provided in

21 subsection (a)(2), in the case of an individual who is—

22 (1) under 14 years of age, all the individual’s

23 rights under this part shall be exercised through the

24 parent or legal guardian of the individual; or
435

Title II, Subtitle B

•HR 5300 IH

1 (2) 14, 15, 16, or 17 years of age, the right of

2 inspection (under section 2141), the right of amend3 ment (under section 2142), and the right to author4 ize disclosure of protected health information (under

5 section 2152) of the individual may be exercised

6 either by the individual or by the parent or legal

7 guardian of the individual.

8 SEC. 2187. MAINTENANCE OF CERTAIN PROTECTED

9 HEALTH INFORMATION.

10 (a) IN GENERAL.—A State shall establish a process

11 under which the protected health information described in

12 subsection (b) that is maintained by a person described

13 in subsection (c) is delivered to, and maintained by, the

14 State or an individual or entity designated by the State.

15 (b) INFORMATION DESCRIBED.—The protected

16 health information referred to in subsection (a) is pro17 tected health information that—

18 (1) is recorded in any form or medium;

19 (2) is created by—

20 (A) a health care provider; or

21 (B) a health benefit plan sponsor that pro22 vides benefits in the form of items and services

23 to enrollees and not in the form of reimburse24 ment for items and services; and
436

Title II, Subtitle B

•HR 5300 IH

1 (3) relates in any way to the past, present, or

2 future physical or mental health or condition or

3 functional status of a protected individual or the

4 provision of health care to a protected individual.

5 (c) PERSONS DESCRIBED.—A person referred to in

6 subsection (a) is any of the following:

7 (A) A health care facility previously located

8 in the State that has closed.

9 (B) A professional practice previously op10 erated by a health care provider in the State

11 that has closed.

12 (C) A health benefit plan sponsor that—

13 (i) previously provided benefits in the

14 form of items and services to enrollees in

15 the State; and

16 (ii) has ceased to do business.

17 Subpart E—Enforcement

18 SEC. 2191. CIVIL ACTIONS.

19 (a) IN GENERAL.—Any individual whose right under

20 this part has been knowingly or negligently violated—

21 (1) by a health information trustee, or any

22 other person, who is not described in paragraph (2),

23 (3), (4), or (5) may maintain a civil action for actual

24 damages and for equitable relief against the health

25 information trustee or other person;
437

Title II, Subtitle B

•HR 5300 IH

1 (2) by an officer or employee of the United

2 States while the officer or employee was acting with3 in the scope of the office or employment may main4 tain a civil action for actual damages and for equi5 table relief against the United States;

6 (3) by an officer or employee of any government

7 authority of a State that has waived its sovereign

8 immunity to a claim for damages resulting from a

9 violation of this part while the officer or employee

10 was acting within the scope of the office or employ11 ment may maintain a civil action for actual damages

12 and for equitable relief against the State govern13 ment;

14 (4) by an officer or employee of a government

15 of a State that is not described in paragraph (3)

16 may maintain a civil action for actual damages and

17 for equitable relief against the officer or employee;

18 or

19 (5) by an officer or employee of a government

20 authority while the officer or employee was not act21 ing within the scope of the office or employment

22 may maintain a civil action for actual damages and

23 for equitable relief against the officer or employee.

24 (b) KNOWING VIOLATIONS.—Any individual entitled

25 to recover actual damages under this section because of
438

Title II, Subtitle B

•HR 5300 IH

1 a knowing violation of a provision of this part (other than

2 subsection (c) or (d) of section 2151) shall be entitled to

3 recover the amount of the actual damages demonstrated

4 or $5000, whichever is greater.

5 (c) ACTUAL DAMAGES.—For purposes of this section,

6 the term ‘‘actual damages’’ includes damages paid to com7 pensate an individual for nonpecuniary losses such as

8 physical and mental injury as well as damages paid to

9 compensate for pecuniary losses.

10 (d) PUNITIVE DAMAGES; ATTORNEY’S FEES.—In

11 any action brought under this section in which the com12 plainant has prevailed because of a knowing violation of

13 a provision of this part (other than subsection (c) or (d)

14 of section 2151), the court may, in addition to any relief

15 awarded under subsections (a) and (b), award such puni16 tive damages as may be warranted. In such an action, the

17 court, in its discretion, may allow the prevailing party a

18 reasonable attorney’s fee (including expert fees) as part

19 of the costs, and the United States shall be liable for costs

20 the same as a private person.

21 (e) LIMITATION.—A civil action under this section

22 may not be commenced more than 2 years after the date

23 on which the aggrieved individual discovered the violation

24 or the date on which the aggrieved individual had a rea-
439

Title II, Subtitle B

•HR 5300 IH

1 sonable opportunity to discover the violation, whichever oc2 curs first.

3 (f) INSPECTION AND AMENDMENT.—If a health in4 formation trustee has established a formal internal proce5 dure that allows an individual who has been denied inspec6 tion or amendment of protected health information to ap7 peal the denial, the individual may not maintain a civil

8 action in connection with the denial until the earlier of—

9 (1) the date the appeal procedure has been ex10 hausted; or

11 (2) the date that is 4 months after the date on

12 which the appeal procedure was initiated.

13 (g) NO LIABILITY FOR PERMISSIBLE DISCLO14 SURES.—A health information trustee who makes a disclo15 sure of protected health information about a protected in16 dividual that is permitted by this part and not otherwise

17 prohibited by State or Federal statute shall not be liable

18 to the individual for the disclosure under common law.

19 (h) NO LIABILITY FOR INSTITUTIONAL REVIEW

20 BOARD DETERMINATIONS.—If the members of a certified

21 institutional review board have in good faith determined

22 that an approved health research project is of sufficient

23 importance so as to outweigh the intrusion into the privacy

24 of an individual pursuant to section 2156(a)(1), the mem25 bers, the board, and the parent institution of the board
440

Title II, Subtitle B

•HR 5300 IH

1 shall not be liable to the individual as a result of such

2 determination.

3 (i) GOOD FAITH RELIANCE ON CERTIFICATION.—A

4 health information trustee who relies in good faith on a

5 certification by a government authority or other person

6 and discloses protected health information about an indi7 vidual in accordance with this part shall not be liable to

8 the individual for such disclosure.

9 SEC. 2192. CIVIL MONEY PENALTIES.

10 (a) VIOLATION.—Any health information trustee who

11 the Secretary determines has demonstrated a pattern or

12 practice of failure to comply with the provisions of this

13 part shall be subject, in addition to any other penalties

14 that may be prescribed by law, to a civil money penalty

15 of not more than $10,000 for each such failure. In deter16 mining the amount of any penalty to be assessed under

17 the procedures established under subsection (b), the Sec18 retary shall take into account the previous record of com19 pliance of the person being assessed with the applicable

20 requirements of this part and the gravity of the violation.

21 (b) PROCEDURES FOR IMPOSITION OF PENALTIES.—

22 The provisions of section 1128A of the Social Security Act

23 (other than subsections (a) and (b)) shall apply to the im24 position of a civil monetary penalty under this section in

25 the same manner as such provisions apply with respect
441

Title II, Subtitle B

•HR 5300 IH

1 to the imposition of a penalty under section 1128A of such

2 Act.

3 SEC. 2193. ALTERNATIVE DISPUTE RESOLUTION.

4 (a) IN GENERAL.—Not later than July 1, 1996, the

5 Secretary shall, by regulation, develop alternative dispute

6 resolution methods for use by individuals, health informa7 tion trustees, and other persons in resolving claims under

8 section 2191.

9 (b) EFFECT ON INITIATION OF CIVIL ACTIONS.—

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

11 the regulations established under subsection (a) may

12 provide that an individual alleging that a right of

13 the individual under this part has been violated shall

14 pursue at least one alternative dispute resolution

15 method developed under such subsection as a condi16 tion precedent to commencing a civil action under

17 section 2191.

18 (2) LIMITATION.—Such regulations may not re19 quire an individual to refrain from commencing a

20 civil action to pursue one or more alternative dispute

21 resolution method for a period that is greater than

22 6 months.

23 (3) SUSPENSION OF STATUTE OF LIMITA24 TIONS.—The regulations established by the Sec25 retary under subsection (a) may provide that a pe-
442

Title II, Subtitle B

•HR 5300 IH

1 riod in which an individual described in paragraph

2 (1) pursues (as defined by the Secretary) an alter3 native dispute resolution method under this section

4 shall be excluded in computing the period of limita5 tions under section 2191(e).

6 (c) METHODS.—The methods under subsection (a)

7 shall include at least the following:

8 (1) ARBITRATION.—The use of arbitration.

9 (2) MEDIATION.—The use of mediation.

10 (3) EARLY OFFERS OF SETTLEMENT.—The use

11 of a process under which parties make early offers

12 of settlement.

13 (d) STANDARDS FOR ESTABLISHING METHODS.—In

14 developing alternative dispute resolution methods under

15 subsection (a), the Secretary shall ensure that the meth16 ods promote the resolution of claims in a manner that—

17 (1) is affordable for the parties involved;

18 (2) provides for timely and fair resolution of

19 claims; and

20 (3) provides for reasonably convenient access to

21 dispute resolution for individuals.

22 SEC. 2194. AMENDMENTS TO CRIMINAL LAW.

23 (a) IN GENERAL.—Title 18, United States Code, is

24 amended by inserting after chapter 89 the following:
443

Title II, Subtitle B

•HR 5300 IH

1 ‘‘CHAPTER 90—PROTECTED HEALTH

2 INFORMATION

‘‘Sec.

‘‘1831. Definitions.

‘‘1832. Obtaining protected health information under false pretenses.

‘‘1833. Monetary gain from obtaining protected health information under false

pretenses.

‘‘1834. Knowing and unlawful obtaining of protected health information.

‘‘1835. Monetary gain from knowing and unlawful obtaining of protected health

information.

‘‘1836. Knowing and unlawful use or disclosure of protected health information.

‘‘1837. Monetary gain from knowing and unlawful sale, transfer, or use of protected health information.

3 ‘‘§ 1831. Definitions

4 ‘‘As used in this chapter—

5 ‘‘(1) the term ‘health information trustee’ has

6 the meaning given such term in section 2140(b)(6)

7 of the Affordable Health Care Now Act of 1994;

8 ‘‘(2) the term ‘protected health information’ has

9 the meaning given such term in section 2140(a)(3)

10 of such Act; and

11 ‘‘(3) the term ‘protected individual’ has the

12 meaning given such term in section 2140(a)(4) of

13 such Act.

14 ‘‘§ 1832. Obtaining protected health information

15 under false pretenses

16 ‘‘Whoever under false pretenses—

17 ‘‘(1) requests or obtains protected health infor18 mation from a health information trustee; or

19 ‘‘(2) obtains from a protected individual an au20 thorization for the disclosure of protected health in-
444

Title II, Subtitle B

•HR 5300 IH

1 formation about the individual maintained by a

2 health information trustee;

3 shall be fined under this title or imprisoned not more than

4 5 years, or both.

5 ‘‘§ 1833. Monetary gain from obtaining protected

6 health information under false pretenses

7 ‘‘Whoever under false pretenses—

8 ‘‘(1) requests or obtains protected health infor9 mation from a health information trustee with the

10 intent to sell, transfer, or use such information for

11 profit or monetary gain; or

12 ‘‘(2) obtains from a protected individual an au13 thorization for the disclosure of protected health in14 formation about the individual maintained by a

15 health information trustee with the intent to sell,

16 transfer, or use such authorization for profit or

17 monetary gain;

18 and knowingly sells, transfers, or uses such information

19 or authorization for profit or monetary gain shall be fined

20 under this title or imprisoned not more than 10 years, or

21 both.

22 ‘‘§ 1834. Knowing and unlawful obtaining of pro23 tected health information

24 ‘‘Whoever knowingly obtains protected health infor25 mation from a health information trustee in violation of
445

Title II, Subtitle B

•HR 5300 IH

1 part 2 of subtitle B of title II of the Affordable Health

2 Care Now Act of 1994, knowing that such obtaining is

3 unlawful, shall be fined under this title or imprisoned not

4 more than 5 years, or both.

5 ‘‘§ 1835. Monetary gain from knowing and unlawful

6 obtaining of protected health information

7 ‘‘Whoever knowingly—

8 ‘‘(1) obtains protected health information from

9 a health information trustee in violation of part 2 of

10 subtitle B of title II of the Affordable Health Care

11 Now Act of 1994, knowing that such obtaining is

12 unlawful and with the intent to sell, transfer, or use

13 such information for profit or monetary gain; and

14 ‘‘(2) knowingly sells, transfers, or uses such in15 formation for profit or monetary gain;

16 shall be fined under this title or imprisoned not more than

17 10 years, or both.

18 ‘‘§ 1836. Knowing and unlawful use or disclosure of

19 protected health information

20 ‘‘Whoever knowingly uses or discloses protected

21 health information in violation of part 2 of subtitle B of

22 title II of the Affordable Health Care Now Act of 1994,

23 knowing that such use or disclosure is unlawful, shall be

24 fined under this title or imprisoned not more than 5 years,

25 or both.
446

Title II, Subtitle B

•HR 5300 IH

1 ‘‘§ 1837. Monetary gain from knowing and unlawful

2 sale, transfer, or use of protected health

3 information

4 ‘‘Whoever knowingly sells, transfers, or uses pro5 tected health information in violation of part 2 of subtitle

6 B of title II of the Affordable Health Care Now Act of

7 1994, knowing that such sale, transfer, or use is unlawful,

8 shall be fined under this title or imprisoned not more than

9 10 years, or both.’’.

10 (b) CLERICAL AMENDMENT.—The table of chapters

11 for part I of title 18, United States Code, is amended by

12 inserting after the item relating to chapter 89 the

13 following:

‘‘90. Protected health information .............................................. 1831’’.

14 Subpart F—Amendments to Title 5, United States

15 Code

16 SEC. 2195. AMENDMENTS TO TITLE 5, UNITED STATES

17 CODE.

18 (a) NEW SUBSECTION.—Section 552a of title 5,

19 United States Code, is amended by adding at the end the

20 following:

21 ‘‘(w) MEDICAL EXEMPTIONS.—The head of an agen22 cy that is a health information trustee (as defined in sec23 tion 2140(b)(6) of the Affordable Health Care Now Act

24 of 1994) shall promulgate rules, in accordance with the

25 requirements (including general notice) of subsections
447

Title II, Subtitle B

•HR 5300 IH

1 (b)(1), (b)(2), (b)(3), (c), and (e) of section 553 of this

2 title, to exempt a system of records within the agency, to

3 the extent that the system of records contains protected

4 health information (as defined in section 2140(a)(3) of

5 such Act), from all provisions of this section except sub6 sections (e)(1), (e)(2), subparagraphs (A) through (C) and

7 (E) through (I) of subsection (e)(4), and subsections

8 (e)(5), (e)(6), (e)(9), (e)(12), (l), (n), (o), (p), (q), (r), and

9 (u).’’.

10 (b) REPEAL.—Section 552a(f)(3) of title 5, United

11 States Code, is amended by striking ‘‘pertaining to him,’’

12 and all that follows through the semicolon and inserting

13 ‘‘pertaining to the individual;’’.

14 Subpart G—Regulations, Research, and Education;

15 Effective Dates; Applicability; and Relationship

16 to Other Laws

17 SEC. 2196. REGULATIONS; RESEARCH AND EDUCATION.

18 (a) REGULATIONS.—Not later than July 1, 1996, the

19 Secretary shall prescribe regulations to carry out this part.

20 (b) RESEARCH AND TECHNICAL SUPPORT.—The

21 Secretary may sponsor—

22 (1) research relating to the privacy and security

23 of protected health information;

24 (2) the development of consent forms governing

25 disclosure of such information; and
448

Title II, Subtitle B

•HR 5300 IH

1 (3) the development of technology to implement

2 standards regarding such information.

3 (c) EDUCATION.—The Secretary shall establish edu4 cation and awareness programs—

5 (1) to foster adequate security practices by

6 health information trustees;

7 (2) to train personnel of health information

8 trustees respecting the duties of such personnel with

9 respect to protected health information; and

10 (3) to inform individuals and employers who

11 purchase health care respecting their rights with re12 spect to such information.

13 SEC. 2197. EFFECTIVE DATES.

14 (a) IN GENERAL.—Except as provided in subsection

15 (b), this part, and the amendments made by this part,

16 shall take effect on January 1, 1997.

17 (b) PROVISIONS EFFECTIVE IMMEDIATELY.—A pro18 vision of this part shall take effect on the date of the en19 actment of this Act if the provision—

20 (1) imposes a duty on the Secretary to develop,

21 establish, or promulgate regulations, guidelines, no22 tices, statements, or education and awareness pro23 grams; or

24 (2) authorizes the Secretary to sponsor research

25 or the development of forms or technology.
449

Title II, Subtitle B

•HR 5300 IH

1 SEC. 2198. APPLICABILITY.

2 (a) PROTECTED HEALTH INFORMATION.—Except as

3 provided in subsections (b) and (c), the provisions of this

4 part shall apply to any protected health information that

5 is received, created, used, maintained, or disclosed by a

6 health information trustee in a State on or after January

7 1, 1997, regardless of whether the information existed or

8 was disclosed prior to such date.

9 (b) EXCEPTION.—

10 (1) IN GENERAL.—The provisions of this part

11 shall not apply to a trustee described in paragraph

12 (2), except with respect to protected health informa13 tion that is received by the trustee on or after Janu14 ary 1, 1997.

15 (2) APPLICABILITY.—A trustee referred to in

16 paragraph (1) is—

17 (A) a health researcher; or

18 (B) a person who, with respect to specific

19 protected health information, received the infor20 mation—

21 (i) pursuant to—

22 (I) section 2157 (relating to

23 emergency circumstances);

24 (II) section 2158 (relating to ju25 dicial and administrative purposes);
450

Title II, Subtitle B

•HR 5300 IH

1 (III) section 2159 (relating to

2 law enforcement); or

3 (IV) section 2160 (relating to

4 subpoenas, warrants, and search war5 rants); or

6 (ii) while acting in whole or in part in

7 the capacity of an officer or employee of a

8 person described in clause (i).

9 (c) AUTHORIZATIONS FOR DISCLOSURES.—An au10 thorization for the disclosure of protected health informa11 tion about a protected individual that is executed by the

12 individual before January 1, 1997, and is recognized and

13 valid under State law on December 31, 1996, shall remain

14 valid and shall not be subject to the requirements of sec15 tion 2152 until January 1, 1998, or the occurrence of the

16 date or event (if any) specified in the authorization upon

17 which the authorization expires, whichever occurs earlier.

18 SEC. 2199. RELATIONSHIP TO OTHER LAWS.

19 (a) STATE LAW.—Except as otherwise provided in

20 subsections (b), (c), (d), and (f), a State may not estab21 lish, continue in effect, or enforce any State law to the

22 extent that the law is inconsistent with, or imposes addi23 tional requirements with respect to, any of the following:

24 (1) A duty of a health information trustee

25 under this part.
451

Title II, Subtitle B

•HR 5300 IH

1 (2) An authority of a health information trustee

2 under this part to disclose protected health informa3 tion.

4 (3) A provision of subpart C (relating to access

5 procedures and challenge rights), subpart D (mis6 cellaneous provisions), or subpart (E) (relating to

7 enforcement).

8 (b) LAWS RELATING TO PUBLIC HEALTH AND MEN9 TAL HEALTH.—This part does not preempt, supersede, or

10 modify the operation of any State law regarding public

11 health or mental health to the extent that the law prohibits

12 or regulates a disclosure of protected health information

13 that is permitted under this part.

14 (c) CRIMINAL PENALTIES.—A State may establish

15 and enforce criminal penalties with respect to a failure to

16 comply with a provision of this part.

17 (d) PRIVILEGES.—A privilege that a person has

18 under law in a court of a State or the United States or

19 under the rules of any agency of a State or the United

20 States may not be diminished, waived, or otherwise af21 fected by—

22 (1) the execution by a protected individual of an

23 authorization for disclosure of protected health in24 formation under this part, if the authorization is ex-
452

Title II, Subtitle B

•HR 5300 IH

1 ecuted for the purpose of receiving health care or

2 providing for the payment for health care; or

3 (2) any provision of this part that authorizes

4 the disclosure of protected health information for the

5 purpose of receiving health care or providing for the

6 payment for health care.

7 (e) DEPARTMENT OF VETERANS AFFAIRS.—The lim8 itations on use and disclosure of protected health informa9 tion under this part shall not be construed to prevent any

10 exchange of such information within and among compo11 nents of the Department of Veterans Affairs that deter12 mine eligibility for or entitlement to, or that provide, bene13 fits under laws administered by the Secretary of Veterans

14 Affairs.

15 (f) CERTAIN DUTIES UNDER STATE OR FEDERAL

16 LAW.—This part shall not be construed to preempt, super17 sede, or modify the operation of any of the following:

18 (1) Any law that provides for the reporting of

19 vital statistics such as birth or death information.

20 (2) Any law requiring the reporting of abuse or

21 neglect information about any individual.

22 (3) Subpart II of part E of title XXVI of the

23 Public Health Service Act (relating to notifications

24 of emergency response employees of possible expo25 sure to infectious diseases).
453

Title II, Subtitle B

•HR 5300 IH

1 (4) The Americans with Disabilities Act of

2 1990.

3 (5) Any Federal or State statute that estab4 lishes a privilege for records used in health profes5 sional peer review activities.

6 (g) SECRETARIAL AUTHORITY.—

7 (1) SECRETARY OF HEALTH AND HUMAN SERV8 ICES.—A provision of this part does not preempt,

9 supersede, or modify the operation of section 543 of

10 the Public Health Service Act, except to the extent

11 that the Secretary of Health and Human Services

12 determines through regulations promulgated by such

13 Secretary that the provision provides greater protec14 tion for protected health information, and the rights

15 of protected individuals, than is provided under such

16 section 543.

17 (2) SECRETARY OF VETERANS AFFAIRS.—A

18 provision of this part does not preempt, supersede,

19 or modify the operation of section 7332 of title 38,

20 United States Code, except to the extent that the

21 Secretary of Veterans Affairs determines through

22 regulations promulgated by such Secretary that the

23 provision provides greater protection for protected

24 health information, and the rights of protected indi25 viduals, than is provided under such section 7332.
454

Title II, Subtitle C

•HR 5300 IH

1 Subtitle C—Deduction for Cost of

2 Catastrophic Health Plan; Medi3 cal Savings Accounts

4 SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM

5 GROSS INCOME FOR COST OF CATASTROPHIC

6 HEALTH PLAN.

7 (a) IN GENERAL.—Subsection (a) of section 62 of the

8 Internal Revenue Code of 1986, as amended by title I,

9 is amended by inserting after paragraph (16) the following

10 new paragraph:

11 ‘‘(17) MEDICAL EXPENSES ATTRIBUTABLE TO

12 CATASTROPHIC HEALTH PLAN COVERAGE.—

13 ‘‘(A) IN GENERAL.—The deduction allowed

14 by section 213 to the extent attributable to cov15 erage under a catastrophic health plan (as de16 fined in section 220(c)(2)).

17 ‘‘(B) EXCEPTION.—Subparagraph (A)

18 shall not apply to coverage of an individual who

19 has coverage described in section

20 220(c)(1)(B)(i).’’.

21 (b) COORDINATION WITH DEDUCTION FOR OTHER

22 MEDICAL EXPENSES.—Subsection (a) of section 213 of

23 such Code is amended to read as follows:

24 ‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be

25 allowed as a deduction the expenses paid during the tax-
455

Title II, Subtitle C

•HR 5300 IH

1 able year, not compensated by insurance or otherwise, for

2 medical care of the taxpayer, his spouse, or a dependent

3 (as defined in section 152) in an amount equal to the sum

4 of—

5 ‘‘(1) the portion of such expenses attributable

6 to coverage under a catastrophic health plan (as de7 fined in section 220(c)(2)), and

8 ‘‘(2) the excess of such expenses (other than ex9 penses described in paragraph (1)) over 7.5 percent

10 of the adjusted gross income of the taxpayer.’’

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1993.

14 SEC. 2202. MEDICAL SAVINGS ACCOUNTS.

15 (a) IN GENERAL.—Part VII of subchapter B of chap16 ter 1 of the Internal Revenue Code of 1986 (relating to

17 additional itemized deductions for individuals) is amended

18 by redesignating section 220 as section 221 and by insert19 ing after section 219 the following new section:

20 ‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.

21 ‘‘(a) DEDUCTION ALLOWED.—

22 ‘‘(1) IN GENERAL.—In the case of an eligible

23 individual, there shall be allowed as a deduction the

24 applicable percentage of the amounts paid in cash

25 during the taxable year by or on behalf of such indi-
456

Title II, Subtitle C

•HR 5300 IH

1 vidual to a medical savings account for the benefit

2 of such individual and (if any) such individual’s

3 spouse and dependents if such spouse and depend4 ents are eligible individuals.

5 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

6 of paragraph (1), the term ‘applicable percentage’

7 means—

8 ‘‘(A) 25 percent for taxable years begin9 ning in 1994 or 1995,

10 ‘‘(B) 50 percent for taxable years begin11 ning in 1996 or 1997, and

12 ‘‘(C) 100 percent for taxable years begin13 ning after 1997.

14 ‘‘(b) LIMITATIONS.—

15 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as

16 provided in regulations prescribed by the Secretary,

17 no deduction shall be allowed under subsection (a)

18 for amounts paid to any medical savings account for

19 the benefit of an individual, such individual’s spouse,

20 or any dependent of such individual or spouse if

21 such individual, spouse, or dependent is a beneficiary

22 of any other medical savings account.

23 ‘‘(2) DOLLAR LIMITATION.—The amount allow24 able as a deduction under subsection (a) for the tax-
457

Title II, Subtitle C

•HR 5300 IH

1 able year shall not exceed whichever of the following

2 is the least:

3 ‘‘(A) The lowest deductible under any cata4 strophic health plan providing coverage to any

5 beneficiary of the medical savings account.

6 ‘‘(B) $2,500 ($5,000 if the catastrophic

7 health plan covering the taxpayer provides cov8 erage for more than 1 individual).

9 ‘‘(C) The excess of—

10 ‘‘(i) the applicable target actuarial

11 value for standard coverage established

12 under section 1102(c)(2) of the Affordable

13 Health Care Now Act of 1994, over

14 ‘‘(ii) the deduction allowed by section

15 213 for the taxable year to the extent at16 tributable to coverage under a catastrophic

17 health plan.

18 Under rules of the Secretary, the target actuar19 ial value under subparagraph (C)(i) shall be

20 made applicable to individual and family cov21 erage. A beneficiary of such account who has

22 attained age 65 before the close of the taxable

23 year shall not be taken into account in deter24 mining the limitation under the preceding sen25 tence.
458

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(c) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) ELIGIBLE INDIVIDUAL.—

3 ‘‘(A) IN GENERAL.—The term ‘eligible in4 dividual’ means any individual who is covered

5 under a catastrophic health plan throughout the

6 calendar year in which or with which the tax7 able year ends.

8 ‘‘(B) LIMITATIONS.—Such term does not

9 include—

10 ‘‘(i) an individual who is 65 years of

11 age or older, unless the individual is cov12 ered under a catastrophic health plan that

13 is a primary plan (within the meaning of

14 section 1862(b)(2)(A) of the Social Secu15 rity Act); and

16 ‘‘(ii) an individual who has coverage

17 under a group health plan or health insur18 ance plan (other than a plan described in

19 1131(4)(B) of the Affordable Health Care

20 Now Act of 1994) that has either a de21 ductible that is less than the minimum de22 ductible required under a catastrophic

23 health plan (as defined in paragraph (2))

24 or has an actuarial value that is greater

25 than the value for MedAccess catastrophic
459

Title II, Subtitle C

•HR 5300 IH

1 coverage (as provided in section 1102(d) of

2 such Act).

3 ‘‘(C) DEDUCTION NOT ALLOWED BEFORE

4 1999 TO INDIVIDUALS ELIGIBLE FOR EM5 PLOYER-SUBSIDIZED COVERAGE.—In the case

6 of any taxable year beginning before January 1,

7 1999, such term does not include an individ8 ual—

9 ‘‘(i) who is eligible to participate in

10 any subsidized health plan maintained by

11 an employer of such individual or the

12 spouse of such individual, or

13 ‘‘(ii) who is (or whose spouse is) a

14 member of a subsidized class of employees

15 of an employer.

16 The rules of subparagraphs (B) and (C) of sec17 tion 213(f)(3) shall apply for purposes of this

18 preceding sentence.

19 ‘‘(2) CATASTROPHIC HEALTH PLAN.—For pur20 poses of paragraph (1)—

21 ‘‘(A) IN GENERAL.—The term ‘cata22 strophic health plan’ means a health plan cover23 ing specified expenses incurred by an individual

24 for medical care for such individual and the

25 spouse and dependents (as defined in section
460

Title II, Subtitle C

•HR 5300 IH

1 152) of such individual only to the extent such

2 expenses covered by the plan for any calendar

3 year exceed $1,800 ($3,600 if the catastrophic

4 health plan covering the taxpayer provides cov5 erage for more than 1 individual) or such high6 er amounts as may be specified by the plan.

7 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—In

8 the case of any calendar year after 1994, each

9 dollar amount in subparagraph (A) shall be in10 creased by an amount equal to—

11 ‘‘(i) such dollar amount, multiplied by

12 ‘‘(ii) the cost-of-living adjustment de13 termined under section 1(f)(3) for such

14 calendar year.

15 If any increase under the preceding sentence is

16 not a multiple of $50, such increase shall be

17 rounded to the nearest multiple of $50.

18 ‘‘(d) MEDICAL SAVINGS ACCOUNTS.—For purposes

19 of this section—

20 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

21 ‘‘(A) IN GENERAL.—The term ‘medical

22 savings account’ means a trust created or orga23 nized in the United States exclusively for the

24 purpose of paying the medical expenses of the

25 beneficiaries of such trust, but only if the writ-
461

Title II, Subtitle C

•HR 5300 IH

1 ten governing instrument creating the trust

2 meets the following requirements:

3 ‘‘(i) Except in the case of a rollover

4 contribution described in subsection (e)(4),

5 no contribution will be accepted unless it is

6 in cash, and contributions will not be ac7 cepted in excess of the amount allowed as

8 a deduction under this section for the tax9 able year (or would be allowed as such a

10 deduction but for subsection (c)(1)(C)).

11 ‘‘(ii) The trustee is a bank (as defined

12 in section 408(n)) or another person who

13 demonstrates to the satisfaction of the Sec14 retary that the manner in which such per15 son will administer the trust will be con16 sistent with the requirements of this sec17 tion.

18 ‘‘(iii) No part of the trust assets will

19 be invested in life insurance contracts.

20 ‘‘(iv) The assets of the trust will not

21 be commingled with other property except

22 in a common trust fund or common invest23 ment fund.
462

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(v) The interest of an individual in

2 the balance in his account is nonforfeit3 able.

4 ‘‘(vi) Under regulations prescribed by

5 the Secretary, rules similar to the rules of

6 section 401(a)(9) shall apply to the dis7 tribution of the entire interest of bene8 ficiaries of such trust.

9 ‘‘(B) TREATMENT OF COMPARABLE AC10 COUNTS HELD BY INSURANCE COMPANIES.—

11 For purposes of this section, an account held by

12 an insurance company in the United States

13 shall be treated as a medical savings account

14 (and such company shall be treated as a bank)

15 if—

16 ‘‘(i) such account is part of a health

17 insurance plan that includes a catastrophic

18 health plan (as defined in subsection

19 (c)(2)),

20 ‘‘(ii) such account is exclusively for

21 the purpose of paying the medical expenses

22 of the beneficiaries of such account who

23 are covered under such catastrophic health

24 plan, and
463

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(iii) the written instrument govern2 ing the account meets the requirements of

3 clauses (i), (v), and (vi) of subparagraph

4 (A).

5 ‘‘(2) MEDICAL EXPENSES.—

6 ‘‘(A) IN GENERAL.—The term ‘medical ex7 penses’ means, with respect to an individual,

8 amounts paid or incurred by such individual

9 for—

10 ‘‘(i) medical care (as defined in sec11 tion 213), or

12 ‘‘(ii) long-term care (as defined in

13 paragraph (3)),

14 for such individual, the spouse of such individ15 ual, and any dependent (as defined in section

16 152) of such individual, but only to the extent

17 such amounts are not compensated for by in18 surance or otherwise.

19 ‘‘(B) HEALTH PLAN COVERAGE MAY NOT

20 BE PURCHASED FROM ACCOUNT.—

21 ‘‘(i) IN GENERAL.—Such term shall

22 not include any amount paid for coverage

23 under a health plan.

24 ‘‘(ii) EXCEPTION.—Clause (i) shall

25 not apply—
464

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(I) in the case of coverage of an

2 individual under 65 years of age

3 under a catastrophic health plan or

4 under a long-term care insurance

5 plan, or

6 ‘‘(II) in the case of coverage of

7 an individual 65 years of age or older

8 under a medicare supplemental policy

9 or under a long-term care insurance

10 plan or for payment of premiums

11 under part A or part B of title XVIII

12 of the Social Security Act.

13 ‘‘(3) LONG-TERM CARE.—

14 ‘‘(A) IN GENERAL.—The term ‘long-term

15 care’ means diagnostic, preventive, therapeutic,

16 rehabilitative, maintenance, or personal care

17 services which are required by, and provided to,

18 a chronically ill individual, which have as their

19 primary purpose the direct provision of needed

20 assistance with 1 or more activities of daily liv21 ing (or the alleviation of the conditions neces22 sitating such assistance) that the individual is

23 certified under subparagraph (B) as being un24 able to perform, and which are provided in a

25 setting other than an acute care unit of a hos-
465

Title II, Subtitle C

•HR 5300 IH

1 pital pursuant to a continuing plan of care pre2 scribed by a physician or registered professional

3 nurse. Such term does not include food or lodg4 ing provided in an institutional or other setting,

5 or basic living services associated with the

6 maintenance of a household or participation in

7 community life, such as case management,

8 transportation or legal services, or the perform9 ance of home maintenance or household chores.

10 ‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The

11 term ‘chronically ill individual’ means an indi12 vidual who is certified by a physician or reg13 istered professional nurse as being unable to

14 perform at least 3 activities of daily living with15 out substantial assistance from another individ16 ual. For purposes of this paragraph, the term

17 ‘activities of daily living’ means bathing, dress18 ing, eating, toileting, transferring, and walking.

19 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

20 MADE.—A contribution shall be deemed to be made

21 on the last day of the preceding taxable year if the

22 contribution is made on account of such taxable year

23 and is made not later than the time prescribed by

24 law for filing the return for such taxable year (not

25 including extensions thereof).
466

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—

2 ‘‘(1) IN GENERAL.—Any amount paid or dis3 tributed out of a medical savings account shall be in4 cluded in the gross income of the individual for

5 whose benefit such account was established unless

6 such amount is used exclusively to pay the medical

7 expenses of such individual.

8 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE9 FORE DUE DATE OF RETURN.—Paragraph (1) shall

10 not apply to the distribution of any contribution paid

11 during a taxable year to a medical savings account

12 to the extent that such contribution exceeds the

13 amount allowable as a deduction under subsection

14 (a) if—

15 ‘‘(A) such distribution is received by the

16 individual on or before the last day prescribed

17 by law (including extensions of time) for filing

18 such individual’s return for such taxable year,

19 and

20 ‘‘(B) such distribution is accompanied by

21 the amount of net income attributable to such

22 excess contribution.

23 Any net income described in subparagraph (B) shall

24 be included in the gross income of the individual for

25 the taxable year in which it is received.
467

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

2 FOR MEDICAL EXPENSES.—

3 ‘‘(A) IN GENERAL.—The tax imposed by

4 this chapter for any taxable year in which there

5 is a payment or distribution from a medical

6 savings account which is not used to pay the

7 medical expenses of the individual for whose

8 benefit the account was established shall be in9 creased by 10 percent of the amount of such

10 payment or distribution which is includible in

11 gross income under paragraph (1).

12 ‘‘(B) ACCOUNT BALANCE LIMITATION.—

13 If—

14 ‘‘(i) the tax imposed by this chapter is

15 required to be increased under subpara16 graph (A) by reason of a distribution, and

17 ‘‘(ii) after such distribution, the ag18 gregate balance of all medical savings ac19 counts established for the benefit of the in20 dividual, is less than the amount of the de21 ductible under the catastrophic health plan

22 covering such individual,

23 subparagraph (A) shall be applied by substitut24 ing ‘50 percent’ for ‘10 percent’.
468

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

2 apply to any amount paid or distributed out of a

3 medical savings account to the individual for whose

4 benefit the account is maintained if the entire

5 amount received (including money and any other

6 property) is paid into another medical savings ac7 count for the benefit of such individual not later

8 than the 60th day after the day on which he received

9 the payment or distribution.

10 ‘‘(5) PENALTY FOR MANDATORY DISTRIBU11 TIONS NOT MADE FROM ACCOUNT.—

12 ‘‘(A) IN GENERAL.—If during any taxable

13 year—

14 ‘‘(i) there is a payment of a manda15 tory distribution expense incurred by a

16 beneficiary of a medical savings account,

17 and

18 ‘‘(ii) the person making such payment

19 is not reimbursed for such payment with a

20 distribution from such account before the

21 60th day after such payment,

22 the taxpayer’s tax imposed by this chapter for

23 such taxable year shall be increased by 100 per24 cent of the excess of the amount of such pay-
469

Title II, Subtitle C

•HR 5300 IH

1 ment over the amount of reimbursement made

2 before such 60th day.

3 ‘‘(B) MANDATORY DISTRIBUTION EX4 PENSE.—For purposes of subparagraph (A),

5 the term ‘mandatory distribution expense’

6 means—

7 ‘‘(i) any expense incurred which may

8 be counted towards a deductible, or for a

9 copayment or coinsurance, under the cata10 strophic health plan covering such bene11 ficiary, and

12 ‘‘(ii) in the case of a beneficiary who

13 has attained age 65, any expense for cov14 erage described in subsection

15 (d)(2)(B)(ii)(II) and any expense incurred

16 which may be counted toward a deductible,

17 or for a copayment or coinsurance, under

18 title XVIII of the Social Security Act.

19 ‘‘(f) TAX TREATMENT OF ACCOUNTS.—

20 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav21 ings account is exempt from taxation under this sub22 title unless such account has ceased to be a medical

23 savings account by reason of paragraph (2) or (3).

24 Notwithstanding the preceding sentence, any such

25 account shall be subject to the taxes imposed by sec-
470

Title II, Subtitle C

•HR 5300 IH

1 tion 511 (relating to imposition of tax on unrelated

2 business income of charitable, etc. organizations).

3 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN4 GAGES IN PROHIBITED TRANSACTION.—

5 ‘‘(A) IN GENERAL.—If, during any taxable

6 year of the individual for whose benefit the

7 medical savings account was established, such

8 individual engages in any transaction prohibited

9 by section 4975 with respect to the account, the

10 account ceases to be a medical savings account

11 as of the first day of that taxable year.

12 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

13 ALL ITS ASSETS.—In any case in which any ac14 count ceases to be a medical savings account by

15 reason of subparagraph (A) on the first day of

16 any taxable year, paragraph (1) of subsection

17 (e) shall be applied as if there were a distribu18 tion on such first day in an amount equal to

19 the fair market value (on such first day) of all

20 assets in the account (on such first day) and no

21 portion of such distribution were used to pay

22 medical expenses.

23 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU24 RITY.—If, during any taxable year, the individual for

25 whose benefit a medical savings account was estab-
471

Title II, Subtitle C

•HR 5300 IH

1 lished uses the account or any portion thereof as se2 curity for a loan, the portion so used is treated as

3 distributed to that individual and not used to pay

4 medical expenses.

5 ‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this

6 section, a custodial account shall be treated as a trust if—

7 ‘‘(1) the assets of such account are held by a

8 bank (as defined in section 408(n)) or another per9 son who demonstrates to the satisfaction of the Sec10 retary that the manner in which he will administer

11 the account will be consistent with the requirements

12 of this section, and

13 ‘‘(2) the custodial account would, except for the

14 fact that it is not a trust, constitute a medical sav15 ings account described in subsection (d).

16 For purposes of this title, in the case of a custodial ac17 count treated as a trust by reason of the preceding sen18 tence, the custodian of such account shall be treated as

19 the trustee thereof.

20 ‘‘(h) REPORTS.—The trustee of a medical savings ac21 count shall make such reports regarding such account to

22 the Secretary and to the individual for whose benefit the

23 account is maintained with respect to contributions, dis24 tributions, and such other matters as the Secretary may

25 require under regulations. The reports required by this
472

Title II, Subtitle C

•HR 5300 IH

1 subsection shall be filed at such time and in such manner

2 and furnished to such individuals at such time and in such

3 manner as may be required by those regulations.’’

4 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI5 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

6 of section 62 of such Code is amended by inserting after

7 paragraph (17) the following new paragraph:

8 ‘‘(18) MEDICAL SAVINGS ACCOUNTS.—The de9 duction allowed by section 220.’’

10 (c) DISTRIBUTIONS FROM MEDICAL SAVINGS AC11 COUNTS NOT ALLOWED AS MEDICAL EXPENSE DEDUC12 TION.—Section 213 of such Code is amended by adding

13 at the end thereof the following new subsection:

14 ‘‘(g) COORDINATION WITH MEDICAL SAVINGS AC15 COUNTS.—The amount otherwise taken into account

16 under subsection (a) as expenses paid for medical care

17 shall be reduced by the amount (if any) of the distribu18 tions from any medical savings account of the taxpayer

19 during the taxable year which is not includible in gross

20 income by reason of being used for medical care.’’

21 (d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO

22 MEDICAL SAVINGS ACCOUNTS FROM EMPLOYMENT

23 TAXES.—

24 (1) SOCIAL SECURITY TAXES.—
473

Title II, Subtitle C

•HR 5300 IH

1 (A) Subsection (a) of section 3121 of such

2 Code is amended by striking ‘‘or’’ at the end of

3 paragraph (20), by striking the period at the

4 end of paragraph (21) and inserting ‘‘; or’’, and

5 by inserting after paragraph (21) the following

6 new paragraph:

7 ‘‘(22) remuneration paid to or on behalf of an

8 employee if (and to the extent that) at the time of

9 payment of such remuneration it is reasonable to be10 lieve that a corresponding deduction is allowable

11 under section 220.’’

12 (B) Subsection (a) of section 209 of the

13 Social Security Act is amended by striking ‘‘or’’

14 at the end of paragraph (17), by striking the

15 period at the end of paragraph (18) and insert16 ing ‘‘; or’’, and by inserting after paragraph

17 (18) the following new paragraph:

18 ‘‘(19) remuneration paid to or on behalf of an

19 employee if (and to the extent that) at the time of

20 payment of such remuneration it is reasonable to be21 lieve that a corresponding deduction is allowable

22 under section 220 of the Internal Revenue Code of

23 1986.’’
474

Title II, Subtitle C

•HR 5300 IH

1 (2) RAILROAD RETIREMENT TAX.—Subsection

2 (e) of section 3231 of such Code is amended by add3 ing at the end thereof the following new paragraph:

4 ‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL

5 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

6 not include any payment made to or on behalf of an

7 employee if (and to the extent that) at the time of

8 payment of such remuneration it is reasonable to be9 lieve that a corresponding deduction is allowable

10 under section 220.’’

11 (3) UNEMPLOYMENT TAX.—Subsection (b) of

12 section 3306 of such Code is amended by striking

13 ‘‘or’’ at the end of paragraph (15), by striking the

14 period at the end of paragraph (16) and inserting ‘‘;

15 or’’, and by inserting after paragraph (16) the fol16 lowing new paragraph:

17 ‘‘(17) remuneration paid to or on behalf of an

18 employee if (and to the extent that) at the time of

19 payment of such remuneration it is reasonable to be20 lieve that a corresponding deduction is allowable

21 under section 220.’’

22 (4) WITHHOLDING TAX.—Subsection (a) of sec23 tion 3401 of such Code is amended by striking ‘‘or’’

24 at the end of paragraph (19), by striking the period

25 at the end of paragraph (20) and inserting ‘‘; or’’,
475

Title II, Subtitle C

•HR 5300 IH

1 and by inserting after paragraph (20) the following

2 new paragraph:

3 ‘‘(21) remuneration paid to or on behalf of an

4 employee if (and to the extent that) at the time of

5 payment of such remuneration it is reasonable to be6 lieve that a corresponding deduction is allowable

7 under section 220.’’

8 (e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

9 of such Code (relating to tax on excess contributions to

10 individual retirement accounts, certain section 403(b) con11 tracts, and certain individual retirement annuities) is

12 amended—

13 (1) by inserting ‘‘MEDICAL SAVINGS AC14 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

15 such section,

16 (2) by redesignating paragraph (2) of sub17 section (a) as paragraph (3) and by inserting after

18 paragraph (1) the following:

19 ‘‘(2) a medical savings account (within the

20 meaning of section 220(d)),’’,

21 (3) by striking ‘‘or’’ at the end of paragraph

22 (1) of subsection (a), and

23 (4) by adding at the end thereof the following

24 new subsection:
476

Title II, Subtitle C

•HR 5300 IH

1 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

2 ACCOUNTS.—For purposes of this section, in the case of

3 a medical savings account (within the meaning of section

4 220(d)), the term ‘excess contributions’ means the amount

5 by which the amount contributed for the taxable year to

6 the account exceeds the amount excludable from gross in7 come under section 220 for such taxable year. For pur8 poses of this subsection, any contribution which is distrib9 uted out of the medical savings account in a distribution

10 to which section 220(e)(2) applies shall be treated as an

11 amount not contributed.’’

12 (f) TAX ON PROHIBITED TRANSACTIONS.—Section

13 4975 of such Code (relating to prohibited transactions)

14 is amended—

15 (1) by adding at the end of subsection (c) the

16 following new paragraph:

17 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC18 COUNTS.—An individual for whose benefit a medical

19 savings account (within the meaning of section

20 220(d)) is established shall be exempt from the tax

21 imposed by this section with respect to any trans22 action concerning such account (which would other23 wise be taxable under this section) if, with respect

24 to such transaction, the account ceases to be a medi-
477

Title II, Subtitle C

•HR 5300 IH

1 cal savings account by reason of the application of

2 section 220(e)(2)(A) to such account.’’, and

3 (2) by inserting ‘‘or a medical savings account

4 described in section 220(d)’’ in subsection (e)(1)

5 after ‘‘described in section 408(a)’’.

6 (g) FAILURE TO PROVIDE REPORTS ON MEDICAL

7 SAVINGS ACCOUNTS.—Section 6693 of such Code (relat8 ing to failure to provide reports on individual retirement

9 account or annuities) is amended—

10 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

11 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

12 such section, and

13 (2) by adding at the end of subsection (a) the

14 following: ‘‘The person required by section 220(h) to

15 file a report regarding a medical savings account at

16 the time and in the manner required by such section

17 shall pay a penalty of $50 for each failure unless it

18 is shown that such failure is due to reasonable

19 cause.’’

20 (h) CLERICAL AMENDMENTS.—

21 (1) The table of sections for part VII of sub22 chapter B of chapter 1 of such Code is amended by

23 striking the last item and inserting the following:

‘‘Sec. 220. Medical savings accounts.

‘‘Sec. 221. Cross reference.’’
478

Title II, Subtitle D

•HR 5300 IH

1 (2) The table of sections for chapter 43 of such

2 Code is amended by striking the item relating to sec3 tion 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

4 (3) The table of sections for subchapter B of

5 chapter 68 of such Code is amended by inserting ‘‘or

6 on medical savings accounts’’ after ‘‘annuities’’ in

7 the item relating to section 6693.

8 (i) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 1993.

11 Subtitle D—Anti-Fraud

12 PART 1—ESTABLISHMENT OF ALL-PAYER

13 HEALTH CARE FRAUD AND ABUSE CONTROL

14 PROGRAM

15 SEC. 2301. ALL-PAYER HEALTH CARE FRAUD AND ABUSE

16 CONTROL PROGRAM.

17 (a) IN GENERAL.—Not later than January 1, 1996,

18 the Attorney General shall establish a program—

19 (1) to coordinate Federal, State, and local law

20 enforcement programs to control fraud and abuse

21 with respect to the delivery of and payment for

22 health care in the United States,
479

Title II, Subtitle D

•HR 5300 IH

1 (2) to conduct investigations, audits, evalua2 tions, and inspections relating to the delivery of and

3 payment for health care in the United States, and

4 (3) in consultation with the Inspector General

5 of the Department of Health and Human Services,

6 to facilitate the enforcement of the provisions of sec7 tions 1128, 1128A, and 1128B of the Social Secu8 rity Act and other statutes applicable to health care

9 fraud and abuse.

10 (b) COORDINATION WITH LAW ENFORCEMENT

11 AGENCIES.—In carrying out the program under sub12 section (a), the Attorney General shall consult with, and

13 arrange for the sharing of data and resources with Fed14 eral, State and local law enforcement agencies, State Med15 icaid Fraud Control Units, and State agencies responsible

16 for the licensing and certification of health care providers.

17 (c) COORDINATION WITH THIRD PARTY INSUR18 ERS.—In carrying out the program established under sub19 section (a), the Attorney General shall consult with, and

20 arrange for the sharing of data with representatives of pri21 vate sponsors of health benefit plans and other providers

22 of health insurance.

23 (d) REGULATIONS.—
480

Title II, Subtitle D

•HR 5300 IH

1 (1) IN GENERAL.—The Attorney General shall

2 by regulation establish standards to carry out the

3 program under subsection (a).

4 (2) INFORMATION STANDARDS.—

5 (A) IN GENERAL.—Such standards shall

6 include standards relating to the furnishing of

7 information by health insurers (including self8 insured health benefit plans), providers, and

9 others to enable the Attorney General to carry

10 out the program (including coordination with

11 law enforcement agencies under subsection (b)

12 and third party insurers under subsection (c)).

13 (B) CONFIDENTIALITY.—Such standards

14 shall include procedures to assure that such in15 formation is provided and utilized in a manner

16 that protects the confidentiality of the informa17 tion and the privacy of individuals receiving

18 health care services.

19 (C) QUALIFIED IMMUNITY FOR PROVIDING

20 INFORMATION.—The provisions of section

21 1157(a) of the Social Security Act (relating to

22 limitation on liability) shall apply to a person

23 providing information to the Attorney General

24 under the program under this section, with re25 spect to the Attorney General’s performance of
481

Title II, Subtitle D

•HR 5300 IH

1 duties under the program, in the same manner

2 as such section applies to information provided

3 to organizations with a contract under part B

4 of title XI of such Act, with respect to the per5 formance of such a contract.

6 SEC. 2302. AUTHORIZATION OF ADDITIONAL APPROPRIA7 TIONS FOR INVESTIGATORS AND OTHER PER8 SONNEL.

9 In addition to any other amounts authorized to be

10 appropriated to the Attorney General for health care anti11 fraud and abuse activities for a fiscal year, there are au12 thorized to be appropriated such sums as may be nec13 essary to enable the Attorney General to conduct inves14 tigations of allegations of health care fraud and otherwise

15 carry out the program established under section 2301 in

16 a fiscal year.

17 SEC. 2303. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

18 TRUST FUND.

19 (a) ESTABLISHMENT.—There is hereby created on

20 the books of the Treasury of the United States a trust

21 fund to be known as the ‘‘Anti-Fraud and Abuse Trust

22 Fund’’ (in this section referred to as the ‘‘Trust Fund’’).

23 The Trust Fund shall consist of such amounts as may be

24 deposited in, or appropriated to, such Trust Fund as pro-
482

Title II, Subtitle D

•HR 5300 IH

1 vided in this part and section 1128A(f)(3) of the Social

2 Security Act.

3 (b) MANAGEMENT.—

4 (1) IN GENERAL.—The Trust Fund shall be

5 managed by the Attorney General through a Manag6 ing Trustee designated by the Attorney General.

7 (2) INVESTMENT OF FUNDS.—It shall be the

8 duty of the Managing Trustee to invest such portion

9 of the Trust Fund as is not, in the trustee’s judg10 ment, required to meet current withdrawals. Such

11 investments may be made only in interest-bearing

12 obligations of the United States or in obligations

13 guaranteed as to both principal and interest by the

14 United States. For such purpose such obligations

15 may be acquired on original issue at the issue price,

16 or by purchase of outstanding obligations at market

17 price. The purposes for which obligations of the

18 United States may be issued under chapter 31 of

19 title 31, United States Code, are hereby extended to

20 authorize the issuance at par of public-debt obliga21 tions for purchase by the Trust Fund. Such obliga22 tions issued for purchase by the Trust Fund shall

23 have maturities fixed with due regard for the needs

24 of the Trust Fund and shall bear interest at a rate

25 equal to the average market yield (computed by the
483

Title II, Subtitle D

•HR 5300 IH

1 Managing Trustee on the basis of market quotations

2 as of the end of the calendar month next preceding

3 the date of such issue) on all marketable interest4 bearing obligations of the United States then form5 ing a part of the public debt which are not due or

6 callable until after the expiration of 4 years from the

7 end of such calendar month, except that where such

average is not a multiple of 1 8 ⁄8 of 1 percent, the rate

9 of interest on such obligations shall be the multiple

of 1 10 ⁄8 of 1 percent nearest such market yield. The

11 Managing Trustee may purchase other interest-bear12 ing obligations of the United States or obligations

13 guaranteed as to both principal and interest by the

14 United States, on original issue or at the market

15 price, only where the Trustee determines that the

16 purchase of such other obligations is in the public

17 interest.

18 (3) Any obligations acquired by the Trust Fund

19 (except public-debt obligations issued exclusively to

20 the Trust Fund) may be sold by the Managing

21 Trustee at the market price, and such public-debt

22 obligations may be redeemed at par plus accrued in23 terest.

24 (4) The interest on, and the proceeds from the

25 sale or redemption of, any obligations held in the
484

Title II, Subtitle D

•HR 5300 IH

1 Trust Fund shall be credited to and form a part of

2 the Trust Fund.

3 (5) The receipts and disbursements of the At4 torney General in the discharge of the functions of

5 the Attorney General shall not be included in the to6 tals of the budget of the United States Government.

7 For purposes of part C of the Balanced Budget and

8 Emergency Deficit Control Act of 1985, the Attor9 ney General and the Trust Fund shall be treated in

10 the same manner as the Federal Retirement Thrift

11 Investment Board and the Thrift Savings Fund, re12 spectively. The United States is not liable for any

13 obligation or liability incurred by the Trust Fund.

14 (c) USE OF FUNDS.—Of the amounts in the Trust

15 Fund—

16 (1) not less than 60 percent shall be used to

17 support educational activities to prevent the occur18 rence of violations of anti-fraud and abuse laws, in19 cluding the issuance of advisory opinions under sec20 tion 1129 and 1877(i) of the Social Security Act (as

21 added by part 4) and fraud alerts, seminars for pro22 viders, and program updates; and

23 (2) any amounts remaining after use for activi24 ties under paragraph (1) shall be used to assist the

25 Attorney General in carrying out the all-payor fraud
485

Title II, Subtitle D

•HR 5300 IH

1 and abuse control program established under section

2 2301(a) in the fiscal year involved.

3 (d) DEPOSIT OF FEDERAL HEALTH ANTI-FRAUD

4 AND ABUSE PENALTIES INTO TRUST FUND.—Section

5 1128A(f)(3) of the Social Security Act (42 U.S.C. 1320a–

6 7a(f)(3)) is amended by striking ‘‘as miscellaneous re7 ceipts of the Treasury of the United States’’ and inserting

8 ‘‘in the Anti-Fraud and Abuse Trust Fund established

9 under section 2303(a) of the Affordable Health Care Now

10 Act of 1994’’.

11 (e) USE OF FEDERAL HEALTH ANTI-FRAUD AND

12 ABUSE PENALTIES TO REPAY BENEFICIARIES FOR COST13 SHARING.—Section 1128A(f) of the Social Security Act

14 (42 U.S.C. 1320a–7a(f)) is amended in the matter preced15 ing paragraph (1) by striking ‘‘Secretary and disposed of

16 as follows:’’ and inserting the following: ‘‘Secretary. If the

17 person against whom such a penalty or assessment was

18 assessed collected a payment from an individual for pro19 viding to the individual the service that is the subject of

20 the penalty or assessment, the Secretary shall pay a por21 tion of the amount recovered to the individual in the na22 ture of restitution in an amount equal to the payment so

23 collected. The Secretary shall dispose of any remaining

24 amounts recovered under this section as follows:’’.
486

Title II, Subtitle D

•HR 5300 IH

1 PART 2—REVISIONS TO CURRENT SANCTIONS

2 FOR FRAUD AND ABUSE

3 SEC. 2311. MANDATORY EXCLUSION FROM PARTICIPATION

4 IN MEDICARE AND STATE HEALTH CARE PRO5 GRAMS.

6 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

7 TO FRAUD.—

8 (1) IN GENERAL.—Section 1128(a) of the So9 cial Security Act (42 U.S.C. 1320a–7(a)) is amend10 ed by adding at the end the following new para11 graph:

12 ‘‘(3) FELONY CONVICTION RELATING TO

13 FRAUD.—Any individual or entity that has been con14 victed, under Federal or State law, in connection

15 with the delivery of a health care item or service on

16 or after the date of the enactment of this paragraph,

17 or with respect to any act or omission on or after

18 such date in a program (other than those specifically

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

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

21 government agency, of a criminal offense consisting

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

23 breach of fiduciary responsibility, or other financial

24 misconduct.’’.
487

Title II, Subtitle D

•HR 5300 IH

1 (2) CONFORMING AMENDMENT.—Section

2 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

3 is amended—

4 (A) in the heading, by striking ‘‘CONVIC5 TION’’ and inserting ‘‘MISDEMEANOR CONVIC6 TION’’; and

7 (B) by striking ‘‘criminal offense’’ and in8 serting ‘‘criminal offense consisting of a mis9 demeanor’’.

10 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

11 TO CONTROLLED SUBSTANCE.—

12 (1) IN GENERAL.—Section 1128(a) of the So13 cial Security Act (42 U.S.C. 1320a–7(a)), as amend14 ed by subsection (a), is amended by adding at the

15 end the following new paragraph:

16 ‘‘(4) FELONY CONVICTION RELATING TO CON17 TROLLED SUBSTANCE.—Any individual or entity

18 that has been convicted, under Federal or State law,

19 of a criminal offense consisting of a felony relating

20 to the unlawful manufacture, distribution, prescrip21 tion, or dispensing of a controlled substance.’’.

22 (2) CONFORMING AMENDMENT.—Section

23 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

24 is amended—
488

Title II, Subtitle D

•HR 5300 IH

1 (A) in the heading, by striking ‘‘CONVIC2 TION’’ and inserting ‘‘MISDEMEANOR CONVIC3 TION’’; and

4 (B) by striking ‘‘criminal offense’’ and in5 serting ‘‘criminal offense consisting of a mis6 demeanor’’.

7 SEC. 2312. ESTABLISHMENT OF MINIMUM PERIOD OF EX8 CLUSION FOR CERTAIN INDIVIDUALS AND

9 ENTITIES SUBJECT TO PERMISSIVE EXCLU10 SION FROM MEDICARE AND STATE HEALTH

11 CARE PROGRAMS.

12 Section 1128(c)(3) of the Social Security Act (42

13 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

14 the following new subparagraphs:

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

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

17 the period of the exclusion shall be 3 years, unless the

18 Secretary determines in accordance with published regula19 tions that a shorter period is appropriate because of miti20 gating circumstances or that a longer period is appro21 priate because of aggravating circumstances.

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

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

24 exclusion shall not be less than the period during which

25 the individual’s or entity’s license to provide health care
489

Title II, Subtitle D

•HR 5300 IH

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

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

3 State health care program.

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

5 entity under subsection (b)(6)(B), the period of the exclu6 sion shall be not less than 1 year.’’.

7 SEC. 2313. REVISIONS TO CRIMINAL PENALTIES.

8 (a) CLARIFICATION OF DISCOUNT EXCEPTION TO

9 ANTI-KICKBACK PROVISIONS.—Section 1128B(b)(3)(A)

10 of the Social Security Act (42 U.S.C. 1320a–7b(b)(3)(A))

11 is amended—

12 (1) by inserting ‘‘(regardless of its timing or

13 availability)’’ after ‘‘in price’’; and

14 (2) by striking ‘‘program;’’ and inserting ‘‘pro15 gram and is not paid in the form of currency or

16 coin;’’.

17 (b) EXEMPTION FROM ANTI-KICKBACK PENALTIES

18 FOR CERTAIN MANAGED CARE ARRANGEMENTS.—Section

19 1128B(b)(3) of such Act (42 U.S.C. 1320a–7b(b)(3)) is

20 amended—

21 (1) by striking ‘‘and’’ at the end of subpara22 graph (D);

23 (2) by striking the period at the end of sub24 paragraph (E) and inserting ‘‘; and’’; and
490

Title II, Subtitle D

•HR 5300 IH

1 (3) by adding at the end the following new sub2 paragraph:

3 ‘‘(F) any reduction in cost sharing or increased

4 benefits given to an individual, any amounts paid to

5 a provider for an item or service furnished to an in6 dividual, or any discount or reduction in price given

7 by the provider for such an item or service, if—

8 ‘‘(i) the item or service is provided through

9 an organization described in section 1877(b)(3),

10 or

11 ‘‘(ii) the item or service is provided

12 through such an organization on behalf of an13 other entity (including but not limited to a self14 insured employer or indemnity plan) that as15 sumes financial risk for the provision of the

16 item or service.’’.

17 (c) EXEMPTION FROM ANTI-KICKBACK PENALTIES

18 FOR CERTAIN PROTECTED FINANCIAL RELATIONSHIPS.—

19 Section 1128B(b)(3) of such Act (42 U.S.C. 1320a–

20 7b(b)(3)), as amended by subsection (b), is further amend21 ed—

22 (1) by striking ‘‘and’’ at the end of subpara23 graph (E);

24 (2) by striking the period at the end of sub25 paragraph (F) and inserting ‘‘; and’’; and
491

Title II, Subtitle D

•HR 5300 IH

1 (3) by adding at the end the following new sub2 paragraph:

3 ‘‘(G) any amount in a financial relationship of

4 a physician (or an immediate family member of such

5 physician) with an entity specified in section

6 1877(a)(2), if section 1877(a)(1) does not apply to

7 that amount or financial relationship.’’.

8 SEC. 2314. REVISIONS TO LIMITATIONS ON PHYSICIAN

9 SELF-REFERRAL.

10 (a) CLARIFICATION OF COVERAGE OF RADIOLOGY OR

11 DIAGNOSTIC SERVICES.—Section 1877(h)(6) of the Social

12 Security Act (42 U.S.C. 1395nn(h)(6)) is amended by

13 striking subparagraph (D).

14 (b) NEW EXCEPTION FOR SHARED FACILITY SERV15 ICES.—Section 1877(b) of such Act (42 U.S.C.

16 1395nn(b)) is amended—

17 (1) by redesignating paragraph (4) as para18 graph (5); and

19 (2) by inserting after paragraph (3) the follow20 ing new paragraph:

21 ‘‘(4) SHARED FACILITY SERVICES.—

22 ‘‘(A) IN GENERAL.—In the case of a

23 shared facility service of a shared facility—

24 ‘‘(i) that is furnished—
492

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(I) personally by the referring

2 physician who is a shared facility phy3 sician or personally by an individual

4 directly employed by such a physician,

5 ‘‘(II) by a shared facility in a

6 building in which the referring physi7 cian furnishes substantially all of the

8 services of the physician that are un9 related to the furnishing of shared fa10 cility services, and

11 ‘‘(III) to a patient of a shared fa12 cility physician; and

13 ‘‘(ii) that is billed by the referring

14 physician.

15 ‘‘(B) SHARED FACILITY RELATED DEFINI16 TIONS.—

17 ‘‘(i) SHARED FACILITY SERVICE.—

18 The term ‘shared facility service’ means,

19 with respect to a shared facility, a des20 ignated health service furnished by the fa21 cility to patients of shared facility physi22 cians.

23 ‘‘(ii) SHARED FACILITY.—The term

24 ‘shared facility’ means an entity that fur-
493

Title II, Subtitle D

•HR 5300 IH

1 nishes shared facility services under a

2 shared facility arrangement.

3 ‘‘(iii) SHARED FACILITY PHYSICIAN.—

4 The term ‘shared facility physician’ means,

5 with respect to a shared facility, a physi6 cian who has a financial relationship under

7 a shared facility arrangement with the fa8 cility.

9 ‘‘(iv) SHARED FACILITY ARRANGE10 MENT.—The term ‘shared facility arrange11 ment’ means, with respect to the provision

12 of shared facility services in a building, a

13 financial arrangement—

14 ‘‘(I) which is only between physi15 cians who are providing services (un16 related to shared facility services) in

17 the same building,

18 ‘‘(II) in which the overhead ex19 penses of the facility are shared, in

20 accordance with methods previously

21 determined by the physicians in the

22 arrangement, among the physicians in

23 the arrangement, and
494

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(III) which, in the case of a cor2 poration, is wholly owned and con3 trolled by shared facility physicians.’’.

4 (c) REVISION TO RURAL PROVIDER EXCEPTION.—

5 Section 1877(d)(2) of such Act (42 U.S.C. 1395nn(d)(2))

6 is amended by striking ‘‘substantially all’’ and inserting

7 ‘‘not less than 75 percent (as determined in accordance

8 with regulations of the Secretary)’’.

9 (d) CLARIFICATION OF REFERRALS BY

10 NEPHROLOGISTS.—Section 1877(h)(5)(C) of such Act (42

11 U.S.C. 1395nn(H)(5)(C)) is amended—

12 (1) by striking ‘‘and a request’’ and inserting

13 ‘‘a request’’;

14 (2) by inserting after ‘‘radiation therapy,’’ the

15 following: ‘‘and a request by a nephrologist for items

16 or services related to renal dialysis,’’; and

17 (3) by striking ‘‘or radiation oncologist’’ and in18 serting ‘‘radiation oncologist, or nephrologist’’.

19 (e) REVISION OF REPORTING REQUIREMENTS.—Sec20 tion 1877(f) of such Act (42 U.S.C. 1395nn(f)) is

21 amended—

22 (1) by striking ‘‘Each entity’’ and all that fol23 lows through paragraph (2) and inserting the follow24 ing: ‘‘The Secretary may require each entity (other

25 than a physician or physician group practice) provid-
495

Title II, Subtitle D

•HR 5300 IH

1 ing designated health services to provide the Sec2 retary with the following information concerning the

3 entity’s ownership, investment, and compensation ar4 rangements:

5 ‘‘(1) the designated health services provided by

6 the entity; and

7 ‘‘(2) the names and unique physician identifier

8 numbers of all physicians with an ownership or in9 vestment interest (as described in subsection

10 (a)(2)(A)) or with a compensation interest (as de11 scribed in subsection (a)(2)(B)) in the entity, or

12 whose immediate relatives have such an ownership,

13 investment, or compensation interest in the entity.’’;

14 and

15 (2) by striking the fifth sentence.

16 (f) EXCEPTION FOR CERTAIN MANAGED CARE AR17 RANGEMENTS.—Section 1877(b)(3) of such Act (42

18 U.S.C. 1395nn(b)(3)) is amended—

19 (1) by striking ‘‘or’’ at the end of subparagraph

20 (C);

21 (2) by striking the period at the end of sub22 paragraph (D) and inserting a comma; and

23 (3) by adding at the end the following new sub24 paragraphs:
496

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(E) with a contract with a State to pro2 vide services under the State plan under title

3 XIX (in accordance with section 1903(m)); or

4 ‘‘(F) which meets State regulatory require5 ments applicable to health maintenance organi6 zations and which—

7 ‘‘(i) provides designated health serv8 ices directly or through contractual ar9 rangements with providers;

10 ‘‘(ii) assumes financial risk for the

11 provision of services or provides services on

12 behalf of another individual or entity (in13 cluding but not limited to a self-insured

14 employer, indemnity plan, physician, or

15 physician group) that assumes financial

16 risk for the provision of the item or serv17 ice; and

18 ‘‘(iii) subjects the services to a pro19 gram of utilization review offered by an or20 ganization described in a preceding sub21 paragraph, an organization meeting State

22 regulatory requirements applicable to utili23 zation review, or an organization accred24 ited to perform utilization review consid25 ered appropriate by the Secretary.’’.
497

Title II, Subtitle D

•HR 5300 IH

1 (g) PREEMPTION OF STATE LAW.—Section 1877(g)

2 of such Act (42 U.S.C. 1395nn(g)) is amended by adding

3 at the end the following new paragraph:

4 ‘‘(6) PREEMPTION OF STATE LAW.—The provi5 sions of this section shall supersede any State law to

6 the extent State law prohibits a physician from mak7 ing a referral, or an entity from presenting a bill, for

8 the furnishing of a service which is not subject to

9 the restrictions applicable under paragraph (1).’’.

10 (h) REVISION OF EFFECTIVE DATE EXCEPTION PRO11 VISION.—Section 13562(b)(2) of the Omnibus Budget

12 Reconciliation Act of 1993 is amended by striking sub13 paragraphs (A) and (B) and inserting the following:

14 ‘‘(A) the second sentence of subsection

15 (a)(2), and subsections (b)(2)(B) and (d)(2), of

16 section 1877 of the Social Security Act (as in

17 effect on the day before the date of the enact18 ment of this Act) shall apply instead of the cor19 responding provisions in section 1877 (as

20 amended by this Act);

21 ‘‘(B) section 1877(b)(4) of the Social Se22 curity Act (as in effect on the day before the

23 date of the enactment of this Act) shall apply;

24 ‘‘(C) the requirements of section

25 1877(c)(2) of the Social Security Act (as
498

Title II, Subtitle D

•HR 5300 IH

1 amended by this Act) shall not apply to any se2 curities of a corporation that meets the require3 ments of section 1877(c)(2) of the Social Secu4 rity Act (as in effect on the day before the date

5 of the enactment of this Act);

6 ‘‘(D) section 1877(e)(3) of the Social Secu7 rity Act (as amended by this Act) shall apply,

8 except that it shall not apply to any arrange9 ment that meets the requirements of subsection

10 (e)(2) or subsection (e)(3) of section 1877 of

11 the Social Security Act (as in effect on the day

12 before the date of the enactment of this Act);

13 ‘‘(E) the requirements of clauses (iv) and

14 (v) of section 1877(h)(4)(A), and of clause (i)

15 of section 1877(h)(4)(B), of the Social Security

16 Act (as amended by this Act) shall not apply;

17 and

18 ‘‘(F) section 1877(h)(4)(B) of the Social

19 Security Act (as in effect on the day before the

20 date of the enactment of this Act) shall apply

21 instead of section 1877(h)(4)(A)(ii) of such Act

22 (as amended by this Act).’’.

23 (i) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to referrals made on or after Janu25 ary 1, 1995, except that the amendments made by sub-
499

Title II, Subtitle D

•HR 5300 IH

1 section (h) shall apply as if included in the enactment of

2 the Omnibus Budget Reconciliation Act of 1993.

3 SEC. 2315. MEDICARE HEALTH MAINTENANCE ORGANIZA4 TIONS.

5 (a) STUDY ON COSTS OF PEER REVIEW CONTRACTS

6 FOR MEDICARE HMOS.—The Comptroller General shall

7 conduct a study of the costs incurred by eligible organiza8 tions with risk-sharing contracts under section 1876(b) of

9 the Social Security Act of complying with the requirement

10 of entering into a written agreement with an entity provid11 ing peer review services with respect to services provided

12 by the organization, together with an analysis of how in13 formation generated by such entities is used by the Sec14 retary of Health and Human Services to assess the quality

15 of services provided by such eligible organizations.

16 (b) REPORT TO CONGRESS.—Not later than July 1,

17 1997, the Comptroller General shall submit a report to

18 the Committee on Ways and Means and the Committee

19 on Energy and Commerce of the House of Representatives

20 and the Committee on Finance and the Special Committee

21 on Aging of the Senate on the study conducted under sub22 section (a).

23 SEC. 2316. EFFECTIVE DATE.

24 Except as otherwise provided, the amendments made

25 by this part shall take effect January 1, 1996.
500

Title II, Subtitle D

•HR 5300 IH

1 PART 3—AMENDMENTS TO CRIMINAL LAW

2 SEC. 2321. PENALTIES FOR HEALTH CARE FRAUD.

3 (a) IN GENERAL.—

4 (1) FINES AND IMPRISONMENT FOR HEALTH

5 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

6 United States Code, is amended by adding at the

7 end the following:

8 ‘‘§ 1347. Health care fraud

9 ‘‘(a) Whoever knowingly executes, or attempts to exe10 cute, a scheme or artifice—

11 ‘‘(1) to defraud any health care plan or other

12 person, in connection with the delivery of or pay13 ment for health care benefits, items, or services; or

14 ‘‘(2) to obtain, by means of false or fraudulent

15 pretenses, representations, or promises, any of the

16 money or property owned by, or under the custody

17 or control of, any health care plan, or person in con18 nection with the delivery of or payment for health

19 care benefits, items, or services;

20 shall be guilty of a felony, and fined under this title or

21 imprisoned not more than 5 years, or both.

22 ‘‘(b) In determining the amount or scope of any pen23 alty or assessment, the court shall take into account—

24 ‘‘(1) the nature of the false or fraudulent

25 claims and the circumstances under which they are

26 presented;
501

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(2) the degree of culpability and history of

2 prior offenses by the convicted health care provider;

3 ‘‘(3) the extent to which restitution is paid; and

4 ‘‘(4) such other matters as justice may require.

5 ‘‘(c) A principal is liable for penalties and assess6 ments under this section for the acts of the principal’s

7 agents acting within the scope of the agency.

8 ‘‘(d) For purposes of this section, the term ‘health

9 care plan’ means a Federally-funded public program or

10 private program for the delivery of or payment for health

11 care items or services.’’.

12 (2) CLERICAL AMENDMENT.—The table of sec13 tions at the beginning of chapter 63 of title 18,

14 United States Code, is amended by adding at the

15 end the following:

‘‘1347. Health care fraud.’’.

16 SEC. 2322. REWARDS FOR INFORMATION LEADING TO

17 PROSECUTION AND CONVICTION.

18 Section 3059 of title 18, United States Code, is

19 amended by adding at the end the following new sub20 section:

21 ‘‘(c)(1) In special circumstances and in the Attorney

22 General’s sole discretion, the Attorney General may make

23 a payment of up to $10,000 to a person who furnishes

24 information unknown to the Government relating to a pos25 sible prosecution under section 1347.
502

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(2) A person is not eligible for a payment under

2 paragraph (1) if—

3 ‘‘(A) the person is a current or former officer

4 or employee of a Federal or State government agen5 cy or instrumentality who furnishes information dis6 covered or gathered in the course of government em7 ployment.

8 ‘‘(B) the person knowingly participated in the

9 offense;

10 ‘‘(C) the information furnished by the person

11 consists of allegations or transactions that have been

12 disclosed to the public—

13 ‘‘(i) in a criminal, civil, or administrative

14 proceeding;

15 ‘‘(ii) in a congressional, administrative or

16 General Accounting Office report, hearing,

17 audit or investigation; or

18 ‘‘(iii) by the news media, unless the person

19 is the original source of the information; or

20 ‘‘(D) when, in the judgment of the Attorney

21 General, it appears that a person whose illegal ac22 tivities are being prosecuted or investigated could

23 benefit from the award.

24 ‘‘(3) For the purposes of paragraph (2)(C)(iii), the

25 term ‘original source’ means a person who has direct and
503

Title II, Subtitle D

•HR 5300 IH

1 independent knowledge of the information that is fur2 nished and has voluntarily provided the information to the

3 Government prior to disclosure by the news media.

4 ‘‘(4) Neither the failure of the Attorney General to

5 authorize a payment under paragraph (1) nor the amount

6 authorized shall be subject to judicial review.’’.

7 SEC. 2323. BROADENING APPLICATION OF MAIL FRAUD

8 STATUTE.

9 Section 1341 of title 18, United States Code, is

10 amended—

11 (1) by inserting ‘‘or deposits or causes to be de12 posited any matter or thing whatever to be sent or

13 delivered by any private or commercial interstate

14 carrier,’’ after ‘‘Postal Service,’’; and

15 (2) by inserting ‘‘or such carrier’’ after ‘‘causes

16 to be delivered by mail’’.

17 PART 4—ADVISORY OPINIONS

18 SEC. 2331. AUTHORIZING THE SECRETARY OF HEALTH AND

19 HUMAN SERVICES TO ISSUE ADVISORY OPIN20 IONS UNDER TITLE XI.

21 Title XI of the Social Security Act (42 U.S.C. 1301

22 et seq.) is amended by inserting after section 1128B the

23 following new section:
504

Title II, Subtitle D

•HR 5300 IH

1 ‘‘ADVISORY OPINIONS

2 ‘‘SEC. 1129. (a) ISSUANCE OF ADVISORY OPIN3 IONS.—The Secretary shall issue advisory opinions as pro4 vided in this section.

5 ‘‘(b) MATTERS SUBJECT TO ADVISORY OPINIONS.—

6 The Secretary shall issue advisory opinions as to the fol7 lowing matters:

8 ‘‘(1) What constitutes prohibited remuneration

9 within the meaning of section 1128B(b).

10 ‘‘(2) Whether an arrangement or proposed ar11 rangement satisfies the criteria set forth in section

12 1128B(b)(3) for activities which do not result in

13 prohibited remuneration.

14 ‘‘(3) Whether an arrangement or proposed ar15 rangement satisfies the criteria which the Secretary

16 has established, or shall establish by regulation for

17 activities which do not result in prohibited remu18 neration.

19 ‘‘(4) What constitutes an inducement to reduce

20 or limit services to individuals entitled to benefits

21 under title XVIII or title XIX within the meaning

22 of section 1128B(b).

23 ‘‘(5) Whether an arrangement, activity or pro24 posed arrangement or proposed activity violates any

25 other provision of this Act.
505

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(c) MATTERS NOT SUBJECT TO ADVISORY OPIN2 IONS.—Such advisory opinions shall not address the fol3 lowing matters:

4 ‘‘(1) Whether the fair market value shall be, or

5 was paid or received for any goods, services or prop6 erty.

7 ‘‘(2) Whether an individual is a bona fide em8 ployee within the requirements of section 3121(d)(2)

9 of the Internal Revenue Code of 1986.

10 ‘‘(d) EFFECT OF ADVISORY OPINIONS.—

11 ‘‘(1) Each advisory opinion issued by the Sec12 retary shall be binding as to the Secretary and the

13 party or parties requesting the opinion.

14 ‘‘(2) The failure of a party to seek an advisory

15 opinion may not be introduced into evidence to prove

16 that the party intended to violate the provisions of

17 sections 1128, 1128A, or 1128B.

18 ‘‘(e) REGULATIONS.—The Secretary within 180 days

19 of the date of enactment, shall issue regulations establish20 ing a system for the issuance of advisory opinions. Such

21 regulations shall provide for—

22 ‘‘(1) the procedure to be followed by a party ap23 plying for an advisory opinion;
506

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(2) the procedure to be followed by the Sec2 retary in responding to a request for an advisory

3 opinion;

4 ‘‘(3) the interval in which the Secretary shall

5 respond;

6 ‘‘(4) the reasonable fee to be charged to the

7 party requesting an advisory opinion; and

8 ‘‘(5) the manner in which advisory opinions will

9 be made available to the public.

10 ‘‘(f) INTERVAL FOR ISSUANCE OF ADVISORY OPIN11 IONS.—Under no circumstances shall the interval in which

12 the Secretary shall respond to a party requesting an advi13 sory opinion exceed 30 days.’’.

14 SEC. 2332. AUTHORIZING THE SECRETARY OF HEALTH AND

15 HUMAN SERVICES TO ISSUE ADVISORY OPIN16 IONS RELATING TO PHYSICIAN OWNERSHIP

17 AND REFERRAL.

18 Section 1877 of the Social Security Act (42 U.S.C.

19 1395nn) is amended by the addition of the following new

20 subsection:

21 ‘‘(i) ADVISORY OPINIONS.—

22 ‘‘(1) IN GENERAL.—The Secretary shall issue

23 advisory opinions on whether an arrangement or

24 proposed arrangement will result in a prohibited re25 ferral within the meaning of this section.
507

Title II, Subtitle D

•HR 5300 IH

1 ‘‘(2) EFFECT OF ADVISORY OPINIONS.—

2 ‘‘(A) Each advisory opinion issued by the

3 Secretary shall be binding as to the Secretary

4 and the party or parties requesting the opinion.

5 ‘‘(B) The failure of a party to seek an ad6 visory opinion may not be introduced into evi7 dence to prove that the party intended to vio8 late the provisions of this section.

9 ‘‘(3) REGULATIONS.—The Secretary within one

10 hundred and eighty days of the date of enactment,

11 shall issue regulations establishing a system for the

12 issuance of advisory opinions. Such regulations shall

13 provide for—

14 ‘‘(A) the procedure to be followed by a

15 party applying for an advisory opinion;

16 ‘‘(B) the procedure to be followed by the

17 Secretary in responding to a request for an ad18 visory opinion;

19 ‘‘(C) the interval in which the Secretary

20 shall respond;

21 ‘‘(D) the reasonable fee to be charged to

22 the party requesting an advisory opinion; and

23 ‘‘(E) the manner in which advisory opin24 ions will be made available to the public.
508

Title II, Subtitle E

•HR 5300 IH

1 ‘‘(4) INTERVAL FOR ISSUANCE OF ADVISORY

2 OPINIONS.—Under no circumstances shall the inter3 val in which the Secretary shall respond to a party

4 requesting an advisory opinion exceed thirty days.’’.

5 SEC. 2333. EFFECTIVE DATE.

6 Unless otherwise specified, the amendments made by

7 this part shall be effective upon the enactment of this Act.

8 Subtitle E—Increased Medicare

9 Beneficiary Choice; Additional

10 Medicare Reforms

11 PART 1—INCREASED MEDICARE BENEFICIARY

12 CHOICE

13 SEC. 2401. REQUIREMENTS FOR HEALTH MAINTENANCE

14 ORGANIZATIONS UNDER MEDICARE.

15 (a) USE OF METROPOLITAN STATISTICAL AREAS TO

16 DETERMINE ADJUSTED AVERAGE PER CAPITA COST.—

17 Section 1876(a)(4) of such Act (42 U.S.C.

18 1395mm(a)(4)) is amended by striking ‘‘in a geographic

19 area served by an eligible organization or in a similar

20 area’’ and inserting ‘‘in the metropolitan statistical area

21 (as defined by the Office of Management and Budget) in

22 which the individual resides, or in the entire portion of

23 the State in which the individual resides which is not lo24 cated in a metropolitan statistical area in the case of an
509

Title II, Subtitle E

•HR 5300 IH

1 individual who does not reside in a metropolitan statistical

2 area’’.

3 (b) DETERMINATION OF MODEL ADDITIONAL

4 HEALTH BENEFIT PACKAGES.—Section 1876(g) of such

5 Act (42 U.S.C. 1395mm(g)) is amended by inserting after

6 paragraph (3) the following new paragraph:

7 ‘‘(4) The Secretary shall develop the following model

8 packages of additional health benefits (referred to in para9 graph (3)(B)) which an eligible organization may provide

10 (at its option) under paragraph (2):

11 ‘‘(A) Coverage for catastrophic illness (subject

12 to a limit on out-of-pocket expenditures).

13 ‘‘(B) Coverage for prescription drugs.

14 ‘‘(C) Coverage for preventive services.’’.

15 (c) REVISION OF MEMBERSHIP LIMITATION.—Sec16 tion 1876(f) of the Social Security Act (42 U.S.C.

17 1395mm(f)) is amended—

18 (1) in paragraph (1), by striking ‘‘one-half’’

19 and inserting ‘‘25 percent’’; and

20 (2) in paragraph (2)(A), by striking ‘‘50 per21 cent’’ and inserting ‘‘75 percent’’.

22 (d) ENROLLMENT PERIODS FOR MEDICARE HEALTH

23 MAINTENANCE ORGANIZATIONS.—

24 (1) UNIFORM OPEN ENROLLMENT PERIOD.—

25 Section 1876(c)(3)(A)(i) of such Act (42 U.S.C.
510

Title II, Subtitle E

•HR 5300 IH

1 1395mm(c)(3)(A)(i)) is amended by striking ‘‘must

2 have’’ and all that follows through ‘‘and including’’

3 and inserting the following: ‘‘shall have open enroll4 ment during an annual uniform open enrollment pe5 riod established by the Secretary for all eligible orga6 nizations, together with’’.

7 (2) OPEN ENROLLMENT FOR CERTAIN

8 DISENROLLED INDIVIDUALS.—Section

9 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C.

10 1395mm(c)(3)(A)(ii)(I)) is amended by adding at

11 the end the following: ‘‘Each eligible organization

12 with a risk-sharing contract under this section shall

13 have an open enrollment period for individuals resid14 ing in the organization’s service area who disenroll

15 from another eligible organization with a risk-shar16 ing contract under this section on the grounds that

17 the individual’s primary care physician is no longer

18 a member of the organization’s provider network or

19 for cause (in accordance with such standards, and as

20 demonstrated through an appeals process that meets

21 such requirements, as the Secretary may establish).

22 (e) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to contracts entered into on or

24 after the date of the enactment of this Act.
511

Title II, Subtitle E

•HR 5300 IH

1 SEC. 2402. EXPANSION AND REVISION OF MEDICARE SE2 LECT POLICIES.

3 (a) PERMITTING MEDICARE SELECT POLICIES IN

4 ALL STATES.—

5 (1) IN GENERAL.—Subsection (c) of section

6 4358 of the Omnibus Budget Reconciliation Act of

7 1990 (hereafter referred to as ‘‘OBRA–1990’’) is

8 hereby repealed.

9 (2) CONFORMING AMENDMENT.—Section 4358

10 of OBRA–1990 is amended by redesignating sub11 section (d) as subsection (c).

12 (b) REQUIREMENTS OF MEDICARE SELECT POLI13 CIES.—Section 1882(t)(1) of the Social Security Act (42

14 U.S.C. 1395ss(t)(1)) is amended to read as follows:

15 ‘‘(1)(A) If a medicare supplemental policy meets the

16 1991 NAIC Model Regulation or 1991 Federal Regulation

17 and otherwise complies with the requirements of this sec18 tion except that—

19 ‘‘(i) the benefits under such policy are re20 stricted to items and services furnished by certain

21 entities (or reduced benefits are provided when items

22 or services are furnished by other entities), and

23 ‘‘(ii) in the case of a policy described in sub24 paragraph (C)(i)—
512

Title II, Subtitle E

•HR 5300 IH

1 ‘‘(I) the benefits under such policy are not

2 one of the groups or packages of benefits de3 scribed in subsection (p)(2)(A),

4 ‘‘(II) except for nominal copayments im5 posed for services covered under part B of this

6 title, such benefits include at least the core

7 group of basic benefits described in subsection

8 (p)(2)(B), and

9 ‘‘(III) an enrollee’s liability under such pol10 icy for physician’s services covered under part

11 B of this title is limited to the nominal

12 copayments described in subclause (II),

13 the policy shall nevertheless be treated as meeting those

14 standards if the policy meets the requirements of subpara15 graph (B).

16 ‘‘(B) A policy meets the requirements of this sub17 paragraph if—

18 ‘‘(i) full benefits are provided for items and

19 services furnished through a network of entities

20 which have entered into contracts or agreements

21 with the issuer of the policy,

22 ‘‘(ii) full benefits are provided for items and

23 services furnished by other entities if the services are

24 medically necessary and immediately required be25 cause of an unforeseen illness, injury, or condition
513

Title II, Subtitle E

•HR 5300 IH

1 and it is not reasonable given the circumstances to

2 obtain the services through the network,

3 ‘‘(iii) the network offers sufficient access,

4 ‘‘(iv) the issuer of the policy has arrangements

5 for an ongoing quality assurance program for items

6 and services furnished through the network,

7 ‘‘(v)(I) the issuer of the policy provides to each

8 enrollee at the time of enrollment an explanation

9 of—

10 ‘‘(aa) the restrictions on payment under

11 the policy for services furnished other than by

12 or through the network,

13 ‘‘(bb) out of area coverage under the pol14 icy,

15 ‘‘(cc) the policy’s coverage of emergency

16 services and urgently needed care, and

17 ‘‘(dd) the availability of a policy through

18 the entity that meets the 1991 Model NAIC

19 Regulation or 1991 Federal Regulation without

20 regard to this subsection and the premium

21 charged for such policy, and

22 ‘‘(II) each enrollee prior to enrollment acknowl23 edges receipt of the explanation provided under

24 subclause (I), and
514

Title II, Subtitle E

•HR 5300 IH

1 ‘‘(vi) the issuer of the policy makes available to

2 individuals, in addition to the policy described in this

3 subsection, any policy (otherwise offered by the is4 suer to individuals in the State) that meets the 1991

5 Model NAIC Regulation or 1991 Federal Regulation

6 and other requirements of this section without re7 gard to this subsection.

8 ‘‘(C)(i) A policy described in this subparagraph—

9 ‘‘(I) is offered by an eligible organization (as

10 defined in section 1876(b)),

11 ‘‘(II) is not a policy or plan providing benefits

12 pursuant to a contract under section 1876 or an ap13 proved demonstration project described in section

14 603(c) of the Social Security Amendments of 1983,

15 section 2355 of the Deficit Reduction Act of 1984,

16 or section 9412(b) of the Omnibus Budget Reconcili17 ation Act of 1986, and

18 ‘‘(III) provides benefits which, when combined

19 with benefits which are available under this title, are

20 substantially similar to benefits under policies of21 fered to individuals who are not entitled to benefits

22 under this title.

23 ‘‘(ii) In making a determination under subclause (III)

24 of clause (i) as to whether certain benefits are substan25 tially similar, there shall not be taken into account, except
515

Title II, Subtitle E

•HR 5300 IH

1 in the case of preventive services, benefits provided under

2 policies offered to individuals who are not entitled to bene3 fits under this title which are in addition to the benefits

4 covered by this title and which are benefits an entity must

5 provide in order to meet the definition of an eligible orga6 nization under section 1876(b)(1).’’.

7 (c) RENEWABILITY OF MEDICARE SELECT POLI8 CIES.—Section 1882(q)(1) of the Social Security Act (42

9 U.S.C. 1395ss(q)(1)) is amended—

10 (1) by striking ‘‘(1) Each’’ and inserting

11 ‘‘(1)(A) Except as provided in subparagraph (B),

12 each’’;

13 (2) by redesignating subparagraphs (A) and

14 (B) as clauses (i) and (ii), respectively; and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(B)(i) Except as provided in clause (ii), in the

18 case of a policy that meets the requirements of sub19 section (t), an issuer may cancel or nonrenew such

20 policy with respect to an individual who leaves the

21 service area of such policy.

22 ‘‘(ii) If an individual described in clause (i)

23 moves to a geographic area where an issuer de24 scribed in clause (i), or where an affiliate of such is25 suer, is issuing medicare supplemental policies, such
516

Title II, Subtitle E

•HR 5300 IH

1 individual must be permitted to enroll in any medi2 care supplemental policy offered by such issuer or

3 affiliate that provides benefits comparable to or less

4 than the benefits provided in the policy being can5 celed or nonrenewed. An individual whose coverage

6 is canceled or nonrenewed under this subparagraph

7 shall, as part of the notice of termination or

8 nonrenewal, be notified of the right to enroll in other

9 medicare supplemental policies offered by the issuer

10 or its affiliates.

11 ‘‘(iii) For purposes of this subparagraph, the

12 term ‘affiliate’ shall have the meaning given such

13 term by the 1991 NAIC Model Regulation.’’.

14 (d) CIVIL MONEY PENALTY.—Section 1882(t)(2) of

15 the Social Security Act (42 U.S.C. 1395ss(t)(2)) is

16 amended—

17 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;

18 (2) by redesignating subparagraphs (A), (B),

19 (C), and (D) as clauses (i), (ii), (iii), and (iv), re20 spectively;

21 (3) in clause (iv), as so redesignated—

22 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

23 inserting ‘‘paragraph (1)(B)(v)(I), and

24 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

25 inserting ‘‘paragraph (1)(B)(v)(II)’’;
517

Title II, Subtitle E

•HR 5300 IH

1 (4) by striking ‘‘the previous sentence’’ and in2 serting ‘‘this subparagraph’’; and

3 (5) by adding at the end the following new sub4 paragraph:

5 ‘‘(B) If the Secretary determines that an issuer of

6 a policy approved under paragraph (1) has made a mis7 representation to the Secretary or has provided the Sec8 retary with false information regarding such policy, the

9 issuer is subject to a civil money penalty in an amount

10 not to exceed $100,000 for each such determination. The

11 provisions of section 1128A (other than the first sentence

12 of subsection (a) and other than subsection (b)) shall

13 apply to a civil money penalty under this subparagraph

14 in the same manner as such provisions apply to a penalty

15 or proceeding under section 1128A(a).’’.

16 (e) EFFECTIVE DATES.—

17 (1) NAIC STANDARDS.—If, within 6 months

18 after the date of the enactment of this Act, the Na19 tional Association of Insurance Commissioners

20 (hereafter in this subsection referred to as the

21 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

22 Regulation (as defined in section 1882(p)(1)(A) of

23 the Social Security Act) to incorporate the additional

24 requirements imposed by the amendments made by

25 this section, section 1882(g)(2)(A) of such Act shall
518

Title II, Subtitle E

•HR 5300 IH

1 be applied in each State, effective for policies issued

2 to policyholders on and after the date specified in

3 paragraph (3), as if the reference to the Model Reg4 ulation adopted on June 6, 1979, were a reference

5 to the 1991 NAIC Model Regulation (as so defined)

6 as changed under this paragraph (such changed

7 Regulation referred to in this subsection as the

8 ‘‘1994 NAIC Model Regulation’’).

9 (2) SECRETARY STANDARDS.—If the NAIC

10 does not make changes in the 1991 NAIC Model

11 Regulation (as so defined) within the 6-month period

12 specified in paragraph (1), the Secretary of Health

13 and Human Services (in this subsection as the ‘‘Sec14 retary’’) shall promulgate a regulation and section

15 1882(g)(2)(A) of the Social Security Act shall be ap16 plied in each State, effective for policies issued to

17 policyholders on and after the date specified in para18 graph (3), as if the reference to the Model Regula19 tion adopted in June 6, 1979, were a reference to

20 the 1991 NAIC Model Regulation (as so defined) as

21 changed by the Secretary under this paragraph

22 (such changed Regulation referred to in this sub23 section as the ‘‘1994 Federal Regulation’’).

24 (3) DATE SPECIFIED.—
519

Title II, Subtitle E

•HR 5300 IH

1 (A) IN GENERAL.—Subject to subpara2 graph (B), the date specified in this paragraph

3 for a State is the earlier of—

4 (i) the date the State adopts the 1994

5 NAIC Model Regulation or the 1994 Fed6 eral Regulation; or

7 (ii) 1 year after the date the NAIC or

8 the Secretary first adopts such regulations.

9 (B) ADDITIONAL LEGISLATIVE ACTION RE10 QUIRED.—In the case of a State which the Sec11 retary identifies, in consultation with the NAIC,

12 as—

13 (i) requiring State legislation (other

14 than legislation appropriating funds) in

15 order for medicare supplemental policies to

16 meet the 1994 NAIC Model Regulation or

17 the 1994 Federal Regulation, but

18 (ii) having a legislature which is not

19 scheduled to meet in 1995 in a legislative

20 session in which such legislation may be

21 considered,

22 the date specified in this paragraph is the first

23 day of the first calendar quarter beginning after

24 the close of the first legislative session of the

25 State legislature that begins on or after Janu-
520

Title II, Subtitle E

•HR 5300 IH

1 ary 1, 1995. For purposes of the previous sen2 tence, in the case of a State that has a 2-year

3 legislative session, each year of such session

4 shall be deemed to be a separate regular session

5 of the State legislature.

6 SEC. 2403. INCLUDING NOTICE OF AVAILABLE HEALTH

7 MAINTENANCE ORGANIZATIONS IN ANNUAL

8 NOTICE TO BENEFICIARIES.

9 Section 1804 of the Social Security Act (42 U.S.C.

10 1395b–2) is amended—

11 (1) by striking ‘‘and’’ at the end of paragraph

12 (2);

13 (2) by striking the period at the end of para14 graph (3) and inserting ‘‘, and’’; and

15 (3) by inserting after paragraph (3) the follow16 ing new paragraph:

17 ‘‘(4) with respect to the area in which the indi18 vidual receiving the notice resides, a description of

19 the eligible organizations under section 1833(a)(1)

20 or section 1876 and the carriers offering a medicare

21 supplemental policy described in section 1882(t)(1)

22 which serve the area in which the individual receiv23 ing the notice resides.’’.
521

Title II, Subtitle E

•HR 5300 IH

1 SEC. 2404. LEGISLATIVE PROPOSAL ON ENROLLING MEDI2 CARE BENEFICIARIES IN QUALIFIED HEALTH

3 PLANS.

4 (a) IN GENERAL.—

5 (1) LEGISLATIVE PROPOSAL.—Not later than 1

6 year after the date of the enactment of this Act, the

7 Secretary shall develop and submit to Congress a

8 proposal for legislation which provides for the enroll9 ment of medicare beneficiaries in private health in10 surance plans (including medisave coverage de11 scribed in section 1102(e)).

12 (2) MEDICARE BENEFICIARY.—For purposes of

13 this section, the term ‘‘medicare beneficiary’’ means

14 an individual who is eligible for benefits under part

15 A of title XVIII of the Social Security Act and is en16 rolled under part B of such title.

17 (b) CONTENTS OF THE PROPOSAL.—A proposal for

18 legislation submitted under subsection (a) shall—

19 (1) provide for an appropriate methodology by

20 which the Secretary shall make payment to private

21 health insurance plans for the enrollment of medi22 care beneficiaries;

23 (2) provide individuals the opportunity to re24 main enrolled in such a plan without an interruption

25 in coverage upon becoming medicare beneficiaries;

26 and
522

Title II, Subtitle E

•HR 5300 IH

1 (3) provide medicare beneficiaries with the op2 portunity to enroll in a private health insurance

3 plan.

4 SEC. 2405. OPTIONAL INTERIM ENROLLMENT OF MEDICARE

5 BENEFICIARIES IN PRIVATE HEALTH PLANS.

6 (a) INTERIM ENROLLMENT OF MEDICARE BENE7 FICIARIES IN QUALIFIED HEALTH PLANS.—

8 (1) IN GENERAL.—Notwithstanding title XVIII

9 of the Social Security Act, the Secretary shall pro10 vide for a monthly payment as provided under sub11 section (b)(1) to a private health insurance plan on

12 behalf of enrolled medicare beneficiaries who choose

13 to enroll in such a plan.

14 (2) MEDICARE BENEFICIARY.—For purposes of

15 this section, the term ‘‘medicare beneficiary’’ means

16 an individual who is eligible for benefits under part

17 A of title XVIII of the Social Security Act and is en18 rolled under part B of such title.

19 (b) PAYMENT SPECIFIED.—

20 (1) FEDERAL PAYMENT.—

21 (A) IN GENERAL.—The amount of pay22 ment specified in this paragraph for an individ23 ual who is enrolled in a private health insurance

24 plan is the lesser of—
523

Title II, Subtitle E

•HR 5300 IH

1 (i) the applicable rate specified in sec2 tion 1876(a)(1)(C) of the Social Security

3 Act; or

4 (ii) the monthly premium charged the

5 individual for coverage under the private

6 health insurance plan.

7 (B) SOURCE OF PAYMENT.—The payment

8 to a private health insurance plan under this

9 paragraph for individuals entitled to benefits

10 under part A and enrolled under part B of title

11 XVIII of the Social Security Act shall be made

12 from the Federal Hospital Insurance Trust

13 Fund and the Federal Supplementary Medical

14 Insurance Trust Fund, with the allocation to be

15 determined by the Secretary.

16 (2) INDIVIDUAL’S SHARE.—If the monthly pre17 mium for the private plan in which the individual is

18 enrolled is greater than the amount specified under

19 paragraph (1)(A)(i), the individual shall be respon20 sible for paying to the plan the difference between

21 the monthly premium charged the individual for cov22 erage under the plan and the amount specified in

23 paragraph (1)(A)(i).

24 (3) BUDGET-NEUTRALITY.—The total amount

25 of payments made by the Secretary under this sec-
524

Title II, Subtitle E

•HR 5300 IH

1 tion with respect to a beneficiary for a year may not

2 exceed the amount of payment that would have been

3 made under title XVIII of the Social Security Act

4 during the year if the beneficiary did not choose to

5 enroll in a private health insurance plan during the

6 year.

7 (c) PAYMENTS UNDER THIS SECTION AS SOLE MEDI8 CARE BENEFITS.—Payments made under this section

9 shall be instead of the amounts that would otherwise be

10 payable, pursuant to sections 1814(b) and 1833(a) of the

11 Social Security Act, for services furnished to medicare

12 beneficiaries.

13 (d) INCLUSION IN ANNUAL NOTICE TO BENE14 FICIARIES.—Section 1804 of the Social Security Act (42

15 U.S.C. (42 U.S.C. 1395b–2), as amended by section 2403,

16 is amended

17 (1) by striking ‘‘and’’ at the end of paragraph

18 (3);

19 (2) by striking the period at the end of para20 graph (4) and inserting ‘‘, and’’; and

21 (3) by inserting after paragraph (4) the follow22 ing new paragraph:

23 ‘‘(5) a description of the option provided pursu24 ant to section 2405 of the Affordable Health Care

25 Now Act of 1994 for payment to be made by the
525

Title II, Subtitle E

•HR 5300 IH

1 Secretary on the individual’s behalf for enrollment in

2 a private health insurance plan.’’.

3 PART 2—MEDICARE PART B PREMIUM; OTHER

4 MEDICARE PAYMENT CHANGES

5 SEC. 2411. EXTENSION OF CURRENT RULES FOR COMPUT6 ING MEDICARE PART B PREMIUM.

7 Section 1839(e) of the Social Security Act (42 U.S.C.

8 1395r(e)) is amended—

9 (1) in paragraph (1)(A), by striking ‘‘January

10 1999’’ and inserting ‘‘January 2005’’; and

11 (2) in paragraph (2), by striking ‘‘January

12 1998’’ and inserting ‘‘January 2004’’.

13 SEC. 2412. INCREASE IN MEDICARE PART B PREMIUM FOR

14 INDIVIDUALS WITH HIGH INCOME.

15 (a) IN GENERAL.—Subchapter A of chapter 1 of the

16 Internal Revenue Code of 1986 is amended by adding at

17 the end thereof the following new part:

18 ‘‘PART VIII—MEDICARE PART B PREMIUMS FOR

19 HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Medicare part B premium tax.

20 ‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.

21 ‘‘(a) IMPOSITION OF TAX.—In the case of an individ22 ual to whom this section applies for the taxable year, there

23 is hereby imposed (in addition to any other tax imposed

24 by this subtitle) a tax for such taxable year equal to the
526

Title II, Subtitle E

•HR 5300 IH

1 aggregate of the Medicare part B premium taxes for each

2 of the months during such year that such individual is

3 covered by Medicare part B.

4 ‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—

5 This section shall apply to any individual for any taxable

6 year if—

7 ‘‘(1) such individual is covered under Medicare

8 part B for any month during such year, and

9 ‘‘(2) the modified adjusted gross income of the

10 taxpayer for such taxable year exceeds the threshold

11 amount.

12 ‘‘(c) MEDICARE PART B PREMIUM TAX FOR

13 MONTH.—

14 ‘‘(1) IN GENERAL.—The Medicare part B premium tax for any month is 2 15 ⁄3 the amount equal to

16 the excess of—

17 ‘‘(A) 150 percent of the monthly actuarial

18 rate for enrollees age 65 and over determined

19 for that calendar year under section 1839(b) of

20 the Social Security Act, over

21 ‘‘(B) the total monthly premium under sec22 tion 1839 of the Social Security Act (deter23 mined without regard to subsections (b) and (f)

24 of section 1839 of such Act).
527

Title II, Subtitle E

•HR 5300 IH

1 ‘‘(2) PHASEIN OF TAX.—If the modified ad2 justed gross income of the taxpayer for any taxable

3 years exceeds the threshold amount by less than

4 $50,000, the Medicare part B premium tax for any

5 month during such taxable year shall be an amount

6 which bears the same ratio to the amount deter7 mined under paragraph (1) (without regard to this

8 paragraph) as such excess bears to $50,000. The

9 preceding sentence shall not apply to any individual

10 whose threshold amount is zero.

11 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

12 For purposes of this section—

13 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh14 old amount’ means—

15 ‘‘(A) except as otherwise provided in this

16 paragraph, $100,000,

17 ‘‘(B) $125,000 in the case of a joint re18 turn, and

19 ‘‘(C) zero in the case of a taxpayer who—

20 ‘‘(i) is married at the close of the tax21 able year but does not file a joint return

22 for such year, and

23 ‘‘(ii) does not live apart from his

24 spouse at all times during the taxable year.
528

Title II, Subtitle E

•HR 5300 IH

1 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

2 The term ‘modified adjusted gross income’ means

3 adjusted gross income—

4 ‘‘(A) determined without regard to sections

5 135, 911, 931, and 933, and

6 ‘‘(B) increased by the amount of interest

7 received or accrued by the taxpayer during the

8 taxable year which is exempt from tax.

9 ‘‘(3) MEDICARE PART B COVERAGE.—An indi10 vidual shall be treated as covered under Medicare

11 part B for any month if a premium is paid under

12 part B of title XVIII of the Social Security Act for

13 the coverage of the individual under such part for

14 the month.

15 ‘‘(4) MARRIED INDIVIDUAL.—The determina16 tion of whether an individual is married shall be

17 made in accordance with section 7703.’’

18 (b) CLERICAL AMENDMENT.—The table of parts for

19 subchapter A of chapter 1 of such Code is amended by

20 adding at the end thereof the following new item:

‘‘Part VIII. Medicare Part B Premiums For High-Income Individuals.’’

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to months after December 1994

23 in taxable years ending after December 31, 1994.
529

Title II, Subtitle E

•HR 5300 IH

1 SEC. 2413. IMPROVED EFFICIENCY THROUGH CONSOLIDA2 TION OF ADMINISTRATION OF PARTS A AND

3 B.

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

5 Human Services shall take such steps as may be necessary

6 to consolidate the administration (including processing

7 systems) of parts A and B of the medicare program (under

8 title XVIII of the Social Security Act) including over a

9 5-year period.

10 (b) COMBINATION OF INTERMEDIARY AND CARRIER

11 FUNCTIONS.—In taking such steps, the Secretary shall

12 contract with a single entity that combines the fiscal

13 intermediary and carrier functions in each area except

14 where the Secretary finds that special regional or national

15 contracts are appropriate.

16 (c) SUPERSEDING CONFLICTING REQUIREMENTS.—

17 The provisions of sections 1816 and 1842 of the Social

18 Security Act (including provider nominating provisions in

19 such section 1816) are superseded to the extent required

20 to carry out this section.

21 SEC. 2414. EXTENSION OF MEDICARE SECONDARY PAY22 MENT PROVISIONS.

23 (a) EXTENSION OF DATA MATCH.—

24 (1) Section 1862(b)(5)(C)(iii) of the Social Se25 curity Act (42 U.S.C. 1395y(b)(5)(C)(iii)) is amend26 ed by striking ‘‘1998’’ and inserting ‘‘2004’’.
530

Title II, Subtitle F

•HR 5300 IH

1 (2) Section 6103(l)(12)(F) of the Internal Rev2 enue Code of 1986 is amended—

3 (A) in clause (i), by striking ‘‘1998’’ and

4 inserting ‘‘2004’’,

5 (B) in clause (ii)(I), by striking ‘‘1997’’

6 and inserting ‘‘2003’’, and

7 (C) in clause (ii)(II), by striking ‘‘1998’’

8 and inserting ‘‘2004’’.

9 (b) EXTENSION OF MEDICARE SECONDARY PAYER

10 TO DISABLED BENEFICIARIES.—Section

11 1862(b)(1)(B)(iii) of such Act (42 U.S.C.

12 1395y(b)(1)(B)(iii)) is amended by striking ‘‘1998’’ and

13 inserting ‘‘2004’’.

14 (c) EXTENSION OF PERIOD FOR END STAGE RENAL

15 DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) of such

16 Act (42 U.S.C. 1395y(b)(1)(C)) is amended in the second

17 sentence by striking ‘‘1998’’ and inserting ‘‘2004’’.

18 Subtitle F—Health Care Antitrust

19 Improvements

20 SEC. 2501. PROTECTION FROM ANTITRUST LAWS FOR CER21 TAIN COMPETITIVE AND COLLABORATIVE

22 ACTIVITIES.

23 (a) PROTECTIONS DESCRIBED.—An activity relating

24 to the provision of health care services shall receive the

25 following protection from the antitrust laws:
531

Title II, Subtitle F

•HR 5300 IH

1 (1) If the activity is within a safe harbor des2 ignated by the Attorney General under section 2502,

3 the safe harbor shall be a defense to all antitrust

4 claims, except for claims for injunctive relief as5 serted by the Attorney General or the Chair of the

6 Federal Trade Commission in extraordinary cir7 cumstances.

8 (2) If the activity is specified in and in compli9 ance with the terms of a certificate of review issued

10 by the Attorney General under section 2503 and the

11 activity occurs while the certificate is in effect, the

12 certificate shall be a defense to antitrust claims,

13 other than claims for injunctive relief.

14 (b) AWARD OF ATTORNEY’S FEES AND COSTS OF

15 SUIT.—

16 (1) IN GENERAL.—If any person brings an ac17 tion alleging a claim under the antitrust laws and

18 the activity on which the claim is based is found by

19 the court to be protected from such laws under sub20 section (a), the court shall, at the conclusion of the

21 action—

22 (A) award to a substantially prevailing

23 claimant the cost of suit attributable to such

24 claim, including a reasonable attorney’s fee, or
532

Title II, Subtitle F

•HR 5300 IH

1 (B) award to a substantially prevailing

2 party defending against such claim the cost of

3 such suit attributable to such claim, including

4 reasonable attorney’s fee, if the claim, or the

5 claimant’s conduct during litigation of the

6 claim, was frivolous, unreasonable, without

7 foundation, or in bad faith.

8 (2) OFFSET IN CASES OF BAD FAITH.—The

9 court may reduce an award made pursuant to para10 graph (1) in whole or in part by an award in favor

11 of another party for any part of the cost of suit (in12 cluding a reasonable attorney’s fee) attributable to

13 conduct during the litigation by any prevailing party

14 that the court finds to be frivolous, unreasonable,

15 without foundation, or in bad faith.

16 SEC. 2502. DESIGNATION OF SAFE HARBORS.

17 (a) IN GENERAL.—

18 (1) DESIGNATION BY ATTORNEY GENERAL.—

19 The Attorney General, in consultation with the Sec20 retary of Health and Human Services and the Chair,

21 shall develop and designate pursuant to paragraph

22 (C) safe harbors for purposes of section 2501(a)(1)

23 relating to—

24 (A) each category of activities referred to

25 in paragraph (2); and
533

Title II, Subtitle F

•HR 5300 IH

1 (B) such other categories of activities as

2 the Attorney General may designate in accord3 ance with the process described in this section.

4 (2) REQUIRED CATEGORIES OF ACTIVITIES SUB5 JECT TO SAFE HARBORS.—The categories of activi6 ties referred to in this paragraph are as follows:

7 (A) JOINT PURCHASING OF HEALTH CARE

8 SERVICES.—Providing the terms under which

9 consumers of health care services (patients or

10 others acting on their behalf) may jointly nego11 tiate and purchase health care services.

12 (B) SMALL HOSPITAL MERGERS.—Provid13 ing for small hospitals lawfully to merge under

14 the antitrust laws without undue delay or re15 view, taking into account the special needs and

16 circumstances of rural health care markets.

17 (C) NETWORK FORMATION AND OPER18 ATION.—Permitting activities related to the

19 startup and operation of collaborations between

20 State-licensed providers through partial or full

21 integration, including multi-provider networks,

22 hospital networks, physician-hospital organiza23 tions, and other efforts to provide health care

24 services more efficiently.
534

Title II, Subtitle F

•HR 5300 IH

1 (D) ACTIVITIES OF MEDICAL SELF-REGU2 LATORY ENTITIES.—Permitting standard set3 ting and enforcement activities by medical self4 regulatory entities (such as hospital boards and

5 medical societies) to promote health care qual6 ity, except that a safe harbor under this para7 graph may not provide protection for any activ8 ity undertaken for financial gain or for anti9 competitive reasons.

10 (E) PROVISION OF INFORMATION TO BUY11 ERS AND CONSUMERS.—Permitting health care

12 providers collectively to supply non-price medi13 cal information to buyers and consumers relat14 ing to the type, quality and efficiency of treat15 ment, including joint views on procedures that

16 should be covered by purchasers and medical

17 protocols, except that a safe harbor under this

18 subparagraph may not provide protection for

19 any collective refusals to deal or collective at20 tempts at coercion.

21 (F) PARTICIPATION IN SURVEYS.—Provid22 ing the terms under which health care providers

23 may lawfully participate in written surveys of

24 prices of services, reimbursements received, em25 ployee compensation, and other relevant areas.
535

Title II, Subtitle F

•HR 5300 IH

1 (G) HIGH-TECHNOLOGY AND TERTIARY

2 CARE JOINT VENTURES.—Permitting activities

3 of health care joint ventures to purchase or use

4 new or existing high technology or costly equip5 ment, or to provide advanced tertiary care

6 services.

7 (H) MARKET POWER SCREENS.—Providing

8 market power screens at appropriate levels

9 below which combinations of health care provid10 ers are too small to pose a realistic antitrust

11 threat. There may be different levels for dif12 ferent activities and markets, taking into ac13 count the special needs of rural health care

14 markets.

15 (I) JOINT PURCHASING ARRANGEMENTS.—

16 Providing the terms under which health care

17 providers may make joint purchases of products

18 and services.

19 (J) GOOD FAITH NEGOTIATIONS.—Provid20 ing the terms under which health care providers

21 may engage in discussions relating to legitimate

22 collaborative activities contemplated by the safe

23 harbors.

24 (b) PROCESS FOR DESIGNATION OF ADDITIONAL

25 CATEGORIES OF ACTIVITIES.—
536

Title II, Subtitle F

•HR 5300 IH

1 (1) SOLICITATION OF PROPOSALS.—Not later

2 than 30 days after the date of the enactment of this

3 Act, the Attorney General shall publish a notice in

4 the Federal Register soliciting proposals for safe

5 harbors.

6 (2) REVIEW OF PROPOSED SAFE HARBORS.—

7 Not later than 180 days after the date of the enact8 ment of this Act, the Attorney General (in consulta9 tion with the Secretary and the Chair) shall review

10 the proposed safe harbors submitted under para11 graph (1) and include a description of the safe har12 bors in the report under subsection (d).

13 (3) ADDITIONAL SAFE HARBORS.—After sub14 mitting the report under subsection (d), the Attor15 ney General (in consultation with the Secretary and

16 the Chair) may from time to time add additional

17 safe harbors in accordance with the procedures de18 scribed in this subsection.

19 (c) EFFECTIVE DATE OF SAFE HARBORS.—

20 (1) PUBLICATION.—Not later than 180 days

21 after the date of the enactment of this Act, the At22 torney General shall publish in the Federal Register

23 for public comment the safe harbors proposed for

24 designation under this section. Not later than 180

25 days after publishing such proposed safe harbors in
537

Title II, Subtitle F

•HR 5300 IH

1 the Federal Register, the Attorney General shall

2 issue final rules establishing such safe harbors.

3 (2) EFFECTIVE DATE.—The safe harbors estab4 lished under the final rules issued under paragraph

5 (1) shall take effect 90 days after issuance, unless

6 disapproved by the Congress.

7 (d) REPORT ON PROPOSED SAFE HARBORS.—Not

8 later than 180 days after the date of the enactment of

9 this Act, the Attorney General (in consultation with the

10 Secretary and the Chair) shall submit a report to Congress

11 describing the proposals from subsections (a) and (b)(1)

12 to be included in the publication of safe harbors described

13 in subsection (c)(1) and the proposals from subsection

14 (b)(1) that are not to be so included, together with expla15 nations therefor.

16 (e) MODIFICATION OR REMOVAL OF SAFE HAR17 BORS.—The Attorney General (in consultation with the

18 Secretary and the Chair) may modify or remove a safe

19 harbor following notice and comment upon a determina20 tion that the safe harbor does not meet the criteria of sub21 section (f).

22 (f) CRITERIA FOR SAFE HARBORS.—In establishing

23 safe harbors under this section, the Attorney General shall

24 take into account the following:
538

Title II, Subtitle F

•HR 5300 IH

1 (1) The extent to which a competitive or col2 laborative activity will accomplish any of the follow3 ing:

4 (A) An increase in access to health care

5 services.

6 (B) The enhancement of the quality of

7 health care services.

8 (C) The establishment of cost efficiencies

9 that will be passed on to consumers, including

10 economies of scale and reduced transaction and

11 administrative costs.

12 (D) An increase in the ability of health

13 care facilities to provide services in medically

14 underserved areas or to medically underserved

15 populations.

16 (E) An improvement in the utilization of

17 health care resources or the reduction in the in18 efficient duplication of the use of such re19 sources.

20 (2) Whether the designation of an activity as a

21 safe harbor will result in the following outcomes:

22 (A) Health plans and other health care in23 surers, consumers of health care services, and

24 health care providers will be better able to ne-
539

Title II, Subtitle F

•HR 5300 IH

1 gotiate payment and service arrangements

2 which will reduce costs to consumers.

3 (B) Taking into consideration the charac4 teristics of the particular purchasers and pro5 viders involved, competition will not be unduly

6 restricted.

7 (C) Equally efficient and less restrictive al8 ternatives do not exist to meet the criteria de9 scribed in paragraph (1).

10 (D) The activity will not unreasonably

11 foreclose competition by denying competitors a

12 necessary element of competition.

13 SEC. 2503. CERTIFICATES OF REVIEW.

14 (a) ESTABLISHMENT OF PROGRAM.—In consultation

15 with the Secretary, the Attorney General shall (not later

16 than 180 days after the date of the enactment of this Act)

17 issue certificates of review in accordance with this section

18 for providers of health care services and advise and assist

19 any person with respect to applying for such a certificate

20 of review.

21 (b) PROCEDURES FOR APPLICATION FOR CERTIFI22 CATE.—

23 (1) SUBMISSION OF APPLICATION.—
540

Title II, Subtitle F

•HR 5300 IH

1 (A) FORM; CONTENT.—To apply for a cer2 tificate of review, a person shall submit to the

3 Attorney General a written application which—

4 (i) specifies the activities relating to

5 the provision of health care services which

6 satisfy the criteria described in section

7 2502(e) and which will be included in the

8 certificate; and

9 (ii) is in a form and contains any in10 formation, including information pertain11 ing to the overall market in which the ap12 plicant operates, required by rule or regu13 lation promulgated under section 2506.

14 (B) FILING FEE.—The Attorney General

15 may require a filing fee to be submitted with

16 the application to cover the cost of publication

17 and the cost of review required by this section.

18 The amount of the filing fee shall be deter19 mined on a sliding scale established by the At20 torney General (based on the monetary size of

21 the transaction involved), except that such fee

22 may not exceed $5,000.

23 (2) PUBLICATION OF NOTICE IN FEDERAL REG24 ISTER.—Within 10 days after an application submit25 ted under paragraph (1) is received by the Attorney
541

Title II, Subtitle F

•HR 5300 IH

1 General, the Attorney General shall publish in the

2 Federal Register a notice that announces that an

3 application for a certificate of review has been sub4 mitted, identifies each person submitting the appli5 cation, and describes the conduct for which the ap6 plication is submitted.

7 (3) ESTABLISHMENT OF PROCEDURES FOR IS8 SUANCE OF CERTIFICATE.—In consultation with the

9 Chair and the Secretary, the Attorney General shall

10 establish procedures to be used in applying for and

11 in determining whether to approve an application for

12 a certificate of review under this title. Under such

13 procedures the Attorney General, in consultation

14 with the Secretary, shall approve an application if

15 the Attorney General determines that the activities

16 to be covered under the certificate will satisfy the

17 criteria described in section 2502(f) for safe harbors

18 designated under such section and that the benefits

19 of the issuance of the certificate will outweigh any

20 disadvantages that may result from reduced com21 petition. If the Attorney General, with the concur22 rence of the Secretary, determines that the require23 ments for a certificate are met, the Attorney General

24 shall issue to the applicant a certificate of review.

25 The certificate of review shall specify—
542

Title II, Subtitle F

•HR 5300 IH

1 (i) the health care market activities to

2 which the certificate applies,

3 (ii) the person to whom the certificate

4 of review is issued, and

5 (iii) any terms and conditions the At6 torney General or the Secretary deems nec7 essary to assure compliance with the appli8 cable procedures described in paragraph

9 (3).

10 (4) TIMING FOR DECISION ON APPLICATION.—

11 Within 90 days after the Attorney General receives

12 an application for a certificate of review, the Attor13 ney General shall determine whether to grant or

14 deny the certificate.

15 (5) NOTIFICATION OF DECISION.—The Attor16 ney General shall notify the applicant of the Attor17 ney General’s determination and if the application is

18 denied, the reasons for the denial.

19 (6) FRAUDULENT PROCUREMENT.—A certifi20 cate of review shall be void ab initio with respect to

21 any health care market activities for which the cer22 tificate was procured by fraud.

23 (c) AMENDMENT AND REVOCATION OF CERTIFI24 CATES.—
543

Title II, Subtitle F

•HR 5300 IH

1 (1) NOTIFICATION OF CHANGES.—Any appli2 cant who receives a certificate of review—

3 (A) shall promptly report to the Attorney

4 General any change relevant to the matters

5 specified in the certificate; and

6 (B) may submit to the Attorney General

7 an application to amend the certificate to re8 flect the effect of the change on the conduct

9 specified in the certificate.

10 (2) AMENDMENT TO CERTIFICATE.—An appli11 cation for an amendment to a certificate of review

12 shall be treated as an application for the issuance of

13 a certificate. The effective date of an amendment

14 shall be the date on which the application for the

15 amendment is received by the Attorney General.

16 (3) REVOCATION.—

17 (A) GROUNDS FOR REVOCATION.—In ac18 cordance with this paragraph, the Attorney

19 General, in consultation with the Secretary,

20 may revoke in whole or in part a certificate of

21 review issued under this section. There shall be

22 considered as grounds for the revocation of a

23 certificate the fact that—

24 (i) after the expiration of the 2-year

25 period beginning on the date a person’s
544

Title II, Subtitle F

•HR 5300 IH

1 certificate is issued, the activities of the

2 person have not substantially accomplished

3 the purposes for the issuance of the certifi4 cate;

5 (ii) the person has failed to comply

6 with any of the terms or conditions im7 posed under the certificate by the Attorney

8 General or the Secretary under subsection

9 (b)(4); or

10 (iii) the activities covered under the

11 certificate no longer satisfy the criteria set

12 forth in section 2502(f).

13 (B) REQUEST FOR COMPLIANCE INFORMA14 TION.—If the Attorney General or the Sec15 retary has reason to believe that any of the

16 grounds for revocation of a certificate of review

17 described in subparagraph (A) may apply to a

18 person holding the certificate, the Attorney

19 General shall request such information from

20 such person as the Attorney General or the Sec21 retary deems necessary to resolve the matter of

22 compliance. Failure to comply with such request

23 shall be grounds for revocation of the certificate

24 under this paragraph.
545

Title II, Subtitle F

•HR 5300 IH

1 (C) PROCEDURES FOR REVOCATION.—If

2 the Attorney General or the Secretary deter3 mines that any of the grounds for revocation of

4 a certificate of review described in subpara5 graph (A) apply to a person holding the certifi6 cate, or that such person has failed to comply

7 with a request made under subparagraph (B),

8 the Attorney General shall give written notice of

9 the determination to such person. The notice

10 shall include a statement of the circumstances

11 underlying, and the reasons in support of, the

12 determination. In the 60-day period beginning

13 30 days after the notice is given, the Attorney

14 General shall revoke the certificate or modify it

15 as the Attorney General or the Secretary deems

16 necessary to cause the certificate to apply only

17 to activities that meet the criteria set forth in

18 section 2502(f).

19 (D) INVESTIGATION AUTHORITY.—For

20 purposes of carrying out this paragraph, the

21 Attorney General may conduct investigations in

22 the same manner as the Attorney General con23 ducts investigations under section 3 of the Anti24 trust Civil Process Act, except that no civil in25 vestigative demand may be issued to a person
546

Title II, Subtitle F

•HR 5300 IH

1 to whom a certificate of review is issued if such

2 person is the target of such investigation.

3 (d) REVIEW OF DETERMINATIONS.—

4 (1) AVAILABILITY OF REVIEW FOR CERTAIN AC5 TIONS.—If the Attorney General denies, in whole or

6 in part, an application for a certificate of review or

7 for an amendment to a certificate, or revokes or

8 modifies a certificate pursuant to paragraph (3), the

9 applicant or certificate holder (as the case may be)

10 may, within 30 days of the denial or revocation,

11 bring an action in the United States District Court

12 for the District of Columbia to set aside the deter13 mination on the ground that such determination is

14 clearly erroneous.

15 (2) NO OTHER REVIEW PERMITTED.—Except

16 as provided in paragraph (1), no action by the At17 torney General, the Chair, or the Secretary pursuant

18 to this subtitle shall be subject to judicial review.

19 (3) EFFECT OF REJECTED APPLICATION.—If

20 the Attorney General denies, in whole or in part, an

21 application for a certificate of review or for an

22 amendment to a certificate, or revokes or amends a

23 certificate, neither the negative determination nor

24 the statement of reasons therefore shall be admissi25 ble in evidence, in any administrative or judicial pro-
547

Title II, Subtitle F

•HR 5300 IH

1 ceeding, concerning any claim under the antitrust

2 laws.

3 (e) PUBLICATION OF DECISIONS.—The Attorney

4 General shall publish a notice in the Federal Register on

5 a timely basis of each decision made with respect to an

6 application for a certificate of review under this section

7 or the amendment or revocation of such a certificate, in

8 a manner that protects the confidentiality of any propri9 etary information relating to the application.

10 (f) ANNUAL REPORTS.—Every person to whom a cer11 tificate of review is issued shall submit to the Attorney

12 General an annual report, in such form and at such time

13 as the Attorney General may require, that contains any

14 necessary updates to the information required under sub15 section (b) and a description of the activities of the holder

16 under the certificate during the preceding year.

17 (g) RESTRICTIONS ON DISCLOSURE OF INFORMA18 TION.—

19 (1) WAIVER OF DISCLOSURE REQUIREMENTS

20 UNDER ADMINISTRATIVE PROCEDURE ACT.—Infor21 mation submitted by any person in connection with

22 the issuance, amendment, or revocation of a certifi23 cate of review shall be exempt from disclosure under

24 section 552 of title 5, United States Code.
548

Title II, Subtitle F

•HR 5300 IH

1 (2) RESTRICTIONS ON DISCLOSURE OF COM2 MERCIAL OR FINANCIAL INFORMATION.—

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

4 subparagraph (B), no officer or employee of the

5 United States shall disclose commercial or fi6 nancial information submitted in connection

7 with the issuance, amendment, or revocation of

8 a certificate of review if the information is priv9 ileged or confidential or if disclosure of the in10 formation would cause harm to the person who

11 submitted the information.

12 (B) EXCEPTIONS.—Subparagraph (A)

13 shall not apply with respect to information dis14 closed—

15 (i) upon a request made by the Con16 gress or any committee of the Congress,

17 (ii) in a judicial or administrative pro18 ceeding, subject to appropriate protective

19 orders,

20 (iii) with the consent of the person

21 who submitted the information,

22 (iv) in the course of making a deter23 mination with respect to the issuance,

24 amendment, or revocation of a certificate

25 of review, if the Attorney General deems
549

Title II, Subtitle F

•HR 5300 IH

1 disclosure of the information to be nec2 essary in connection with making the de3 termination,

4 (v) in accordance with any require5 ment imposed by a statute of the United

6 States, or

7 (vi) in accordance with any rule or

8 regulation promulgated under subsection

9 (i) permitting the disclosure of the infor10 mation to an agency of the United States

11 or of a State on the condition that the

12 agency will disclose the information only

13 under the circumstances specified in

14 clauses (i) through (v).

15 (3) PROHIBITION AGAINST USE OF INFORMA16 TION TO SUPPORT OR ANSWER CLAIMS UNDER ANTI17 TRUST LAWS.—Any information disclosed in an ap18 plication for a certificate of review under this section

19 shall only be admissible into evidence in a judicial or

20 administrative proceeding for the sole purpose of es21 tablishing whether a person is entitled to the protec22 tions provided by such a certificate.
550

Title II, Subtitle F

•HR 5300 IH

1 SEC. 2504. NOTIFICATIONS PROVIDING REDUCTION IN CER2 TAIN PENALTIES UNDER ANTITRUST LAW

3 FOR HEALTH CARE JOINT VENTURES.

4 (a) NOTIFICATIONS DESCRIBED.—

5 (1) SUBMISSION OF NOTIFICATION BY VEN6 TURE.—Any party to a health care joint venture,

7 acting on such venture’s behalf, may, not later than

8 90 days after entering into a written agreement to

9 form such venture or not later than 90 days after

10 the date of the enactment of this Act, whichever is

11 later, file with the Attorney General a written notifi12 cation disclosing—

13 (A) the identities of the parties to such

14 venture,

15 (B) the nature and objectives of such ven16 ture, and

17 (C) such additional information as the At18 torney General may require by regulation.

19 (2) FILING FEE.—The Attorney General may

20 require a filing fee to be submitted with the notifica21 tion to cover the cost of publication and the cost of

22 administering this section, except that the amount of

23 such fee shall not exceed $250.

24 (3) SUBMISSION OF ADDITIONAL INFORMA25 TION.—
551

Title II, Subtitle F

•HR 5300 IH

1 (A) REQUEST OF ATTORNEY GENERAL.—

2 At any time after receiving a notification filed

3 under paragraph (1), the Attorney General may

4 require the submission of additional information

5 or documentary material relevant to the pro6 posed health care joint venture.

7 (B) PARTIES TO VENTURE.—Any party to

8 a health care joint venture may submit such ad9 ditional information on the venture’s behalf as

10 may be appropriate to ensure that the venture

11 will receive the protections provided under sub12 section (b).

13 (C) REQUIRED SUBMISSION OF INFORMA14 TION ON CHANGES TO VENTURE.—A health

15 care joint venture for which a notification is in

16 effect under this section shall submit informa17 tion on any change in the membership of the

18 venture not later than 90 days after such

19 change occurs.

20 (4) PUBLICATION OF NOTIFICATION.—

21 (A) INFORMATION MADE PUBLICLY AVAIL22 ABLE.—Not later than 30 days after receiving

23 a notification with respect to a venture under

24 paragraph (1), the Attorney General shall pub25 lish in the Federal Register a notice with re-
552

Title II, Subtitle F

•HR 5300 IH

1 spect to the venture that identifies the parties

2 to the venture and generally describes the pur3 pose and planned activity of the venture. Prior

4 to its publication, the contents of the notice

5 shall be made available to the parties to the

6 venture.

7 (B) RESTRICTION ON DISCLOSURE OF

8 OTHER INFORMATION.—All information and

9 documentary material submitted pursuant to

10 this section and all information obtained by the

11 Attorney General in the course of any investiga12 tion or case with respect to a potential violation

13 of the antitrust laws by the health care joint

14 venture (other than information and material

15 described in subparagraph (A)) shall be exempt

16 from disclosure under section 552 of title 5,

17 United States Code, and shall not be made pub18 licly available by any agency of the United

19 States to which such section applies except in

20 a judicial proceeding in which such information

21 and material is subject to any protective order.

22 (5) WITHDRAWAL OF NOTIFICATION.—Any per23 son who files a notification pursuant to this section

24 may withdraw such notification before a publication

25 by the Attorney General pursuant to paragraph (4).
553

Title II, Subtitle F

•HR 5300 IH

1 (6) NO JUDICIAL REVIEW PERMITTED.—Any

2 action taken or not taken by the Attorney General

3 with respect to notifications filed pursuant to this

4 subsection shall not be subject to judicial review.

5 (b) PROTECTIONS FOR VENTURES SUBJECT TO

6 NOTIFICATION.—

7 (1) IN GENERAL.—

8 (A) PROTECTIONS DESCRIBED.—Except as

9 provided in subsection (c), the provisions of

10 paragraphs (2), (3), (4), and (5) shall apply

11 with respect to any action under the antitrust

12 laws challenging conduct within the scope of a

13 notification which is in effect pursuant to sub14 section (a)(1).

15 (B) TIMING OF PROTECTIONS.—The pro16 tections described in this subsection shall apply

17 to the venture that is the subject of a notifica18 tion under subsection (a)(1) as of the earlier

19 of—

20 (i) the date of the publication in the

21 Federal Register of the notice published

22 with respect to the notification; or

23 (ii) if such notice is not published dur24 ing the period required under subsection

25 (a)(4), the expiration of the 30-day period
554

Title II, Subtitle F

•HR 5300 IH

1 that begins on the date the Attorney Gen2 eral receives any necessary information re3 quired to be submitted under subsection

4 (a)(1) or any additional information re5 quired by the Attorney General under sub6 section (a)(3)(A).

7 (2) APPLICABILITY OF RULE OF REASON

8 STANDARD.—In any action under the antitrust laws,

9 the conduct of any person which is within the scope

10 of a notification filed under subsection (a) shall not

11 be deemed illegal per se, but shall be judged on the

12 basis of its reasonableness, taking into account all

13 relevant factors affecting competition, including, but

14 not limited to, effects on competition in relevant

15 markets.

16 (3) LIMITATION ON RECOVERY TO ACTUAL

17 DAMAGES AND INTEREST.—Notwithstanding section

18 4 of the Clayton Act, any person who is entitled to

19 recovery under the antitrust laws for conduct that is

20 within the scope of a notification filed under sub21 section (a) shall recover the actual damages sus22 tained by such person and interest calculated at the

23 rate specified in section 1961 of title 28, United

24 States Code, for the period beginning on the earliest

25 date for which injury can be established and ending
555

Title II, Subtitle F

•HR 5300 IH

1 on the date of judgment, unless the court finds that

2 the award of all or part of such interest is unjust

3 under the circumstances.

4 (4) AWARD OF ATTORNEY’S FEES AND COSTS

5 OF SUIT.—

6 (A) IN GENERAL.—In any action under the

7 antitrust laws brought against a health care

8 joint venture for conduct that is within the

9 scope of a notification filed under subsection

10 (a), the court shall, at the conclusion of the ac11 tion—

12 (i) award to a substantially prevailing

13 claimant the cost of suit attributable to

14 such claim, including a reasonable attor15 ney’s fee, or

16 (ii) award to a substantially prevailing

17 party defending against such claim the

18 cost of such suit attributable to such claim,

19 including a reasonable attorney’s fee, if the

20 claim, or the claimant’s conduct during

21 litigation of the claim, was frivolous, un22 reasonable, without foundation, or in bad

23 faith.

24 (B) OFFSET IN CASES OF BAD FAITH.—

25 The court may reduce an award made pursuant
556

Title II, Subtitle F

•HR 5300 IH

1 to subparagraph (A) in whole or in part by an

2 award in favor of another party for any part of

3 the cost of suit (including a reasonable attor4 ney’s fee) attributable to conduct during the

5 litigation by any prevailing party that the court

6 finds to be frivolous, unreasonable, without

7 foundation, or in bad faith.

8 (5) RESTRICTIONS ON ADMISSIBILITY OF IN9 FORMATION.—

10 (A) IN GENERAL.—Any information dis11 closed in a notification submitted under sub12 section (a)(1) and the fact of the publication of

13 a notification by the Attorney General under

14 subsection (a)(4) shall only be admissible into

15 evidence in a judicial or administrative proceed16 ing for the sole purpose of establishing whether

17 a party to a health care joint venture is entitled

18 to the protections described in this subsection.

19 (B) ACTIONS OF ATTORNEY GENERAL.—

20 No action taken by the Attorney General pursu21 ant to this section shall be admissible into evi22 dence in any judicial or administrative proceed23 ing for the purpose of supporting or answering

24 any claim under the antitrust laws.

25 (c) EXCEPTION FOR CERTAIN ACTIVITIES.—
557

Title II, Subtitle F

•HR 5300 IH

1 (1) ACTIVITIES DESCRIBED.—The protections

2 described in subsection (b) shall not apply to con3 duct which constitutes price-fixing, bid-rigging, or

4 market allocation, unless such conduct is related to

5 procompetitive aspects of a health care joint venture

6 (as determined in accordance with the process de7 scribed in paragraph (2)).

8 (2) PROCESS.—If conduct of a health care joint

9 venture which is subject to a notification under sub10 section (a)(1) is challenged for price-fixing, bid-rig11 ging, or market allocation, any party to the joint

12 venture shall be entitled to show the procompetitive

13 aspects of such conduct. The protections described

14 in subsection (b) shall not apply to the conduct if

15 the party is unable to show that the conduct is not

16 mere price-fixing, bid-rigging, or market allocation.

17 SEC. 2505. REVIEW AND REPORTS ON SAFE HARBORS, CER18 TIFICATES OF REVIEW, AND NOTIFICATIONS.

19 (a) IN GENERAL.—The Attorney General, in con20 sultation with the Secretary and the Chair, shall periodi21 cally review the safe harbors designated under section

22 2502, the certificates of review issued under section 2503,

23 and notification received under section 2504, and—

24 (1) with respect to the safe harbors, issue modi25 fications to such safe harbors in such manner as the
558

Title II, Subtitle F

•HR 5300 IH

1 Attorney General considers appropriate in accord2 ance with the requirements of section 2502, which

3 modifications shall take effect 90 days after issu4 ance, unless disapproved by the Congress; and

5 (2) with respect to the certificates of review and

6 notifications, submit a report to Congress on the is7 suance of such certificates and receipt of notifica8 tions, including a description of the effect of such

9 certificates and notifications on increasing access to

10 high quality health care services at reduced costs.

11 (b) RECOMMENDATIONS FOR LEGISLATION.—The

12 Attorney General shall include in the reports submitted

13 under subsection (a)(2) any recommendations of the At14 torney General for legislation to improve the programs for

15 the issuance of certificates of review and receipt of notifi16 cations established under this subtitle.

17 SEC. 2506. RULES, REGULATIONS, AND GUIDELINES.

18 (a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA19 TIONS.—The Attorney General, in consultation with the

20 Secretary and the Chair, shall promulgate such rules, reg21 ulations, and guidelines as are necessary to carry out sec22 tions 2502, 2503, and 2504.

23 (b) GUIDANCE FOR PROVIDERS.—

24 (1) IN GENERAL.—To promote greater cer25 tainty regarding the application of the antitrust laws
559

Title II, Subtitle F

•HR 5300 IH

1 to activities in the health care market, the Attorney

2 General, in consultation with the Secretary and the

3 Chair, shall (not later than 1 year after the date of

4 the enactment of this Act), taking into account the

5 criteria used to designate safe harbors under section

6 2502 and grant certificates of review under section

7 2503, publish guidelines—

8 (A) to define or provide assistance in de9 termining relevant geographic and product mar10 kets for health care services and providers of

11 health care services;

12 (B) to further collaborative activities which

13 may be helpful to enhance services in under14 served and geographically disadvantaged areas

15 such as rural markets and inner cities;

16 (C) to assist collaboration between provid17 ers (such as hospital networks, physician-hos18 pital organizations, and other groups of provid19 ers) which will help provide health care services

20 more efficiently;

21 (D) to further activities by which public

22 health clinics (including community health cen23 ters and migrant health centers under title III

24 of the Public Health Service Act) may partici25 pate in networks and other collaborative activi-
560

Title II, Subtitle F

•HR 5300 IH

1 ties in order to enhance services in underserved

2 areas;

3 (E) to assist providers of health care serv4 ices in analyzing whether the activities of such

5 providers may be subject to a safe harbor under

6 section 2502;

7 (F) to provide clarification for activities in

8 the general subject matter areas described in

9 the safe harbors in section 2502, but which fall

10 outside the safe harbors; and

11 (G) to describe specific types of activities

12 which would meet the requirements for issuance

13 of a certificate of review under section 2503,

14 and summarizing the factual and legal bases on

15 which the activities would meet the require16 ments.

17 (2) PERIODIC UPDATE.—The Attorney General

18 shall periodically update the guidelines published

19 under paragraph (1) as the Attorney General consid20 ers appropriate.

21 (3) WAIVER OF ADMINISTRATIVE PROCEDURE

22 ACT.—Section 553 of title 5, United States Code,

23 shall not apply to the issuance of guidelines under

24 paragraph (1).
561

Title II, Subtitle F

•HR 5300 IH

1 SEC. 2507. ESTABLISHMENT OF HHS OFFICE OF HEALTH

2 CARE COMPETITION POLICY.

3 (a) IN GENERAL.—There is established within the

4 Department of Health and Human Services an Office to

5 be known as the Office of Health Care Competition Policy

6 (hereafter in this section referred to as the ‘‘Office’’). The

7 Office shall be headed by a director, who shall be ap8 pointed by the Secretary.

9 (b) DUTIES.—The Office shall coordinate the respon10 sibilities of the Secretary under this subtitle and otherwise

11 assist the Secretary in developing policies relating to the

12 competitive and collaborative activities of providers of

13 health care services.

14 SEC. 2508. DEFINITIONS.

15 In this subtitle:

16 (1) The term ‘‘antitrust laws’’—

17 (A) has the meaning given it in subsection

18 (a) of the first section of the Clayton Act (15

19 U.S.C. 12(a)), except that such term includes

20 section 5 of the Federal Trade Commission Act

21 (15 U.S.C. 45) to the extent such section ap22 plies to unfair methods of competition; and

23 (B) includes any State law similar to the

24 laws referred to in subparagraph (A).

25 (2) The term ‘‘Chair’’ means the Chair of the

26 Federal Trade Commission.
562

Title II, Subtitle F

•HR 5300 IH

1 (3) The term ‘‘health benefit plan’’ means any

2 hospital or medical expense incurred policy or certifi3 cate, hospital or medical service plan contract, or

4 health maintenance subscriber contract, or a mul5 tiple employer welfare arrangement or employee ben6 efit plan (as defined under the Employee Retirement

7 Income Security Act of 1974) which provides bene8 fits with respect to health care services.

9 (4) The term ‘‘health care joint venture’’ means

10 a joint venture of 2 or more persons formed for the

11 purpose of providing health care services, including

12 attempts to enter into or perform a contract or

13 agreement to provide such services.

14 (5) The term ‘‘health care services’’ means any

15 services for which payment may be made under a

16 health benefit plan, including services related to the

17 delivery or administration of such services.

18 (6) The term ‘‘medical self-regulatory entity’’

19 means a medical society or association, a specialty

20 board, a recognized accrediting agency, or a hospital

21 medical staff, and includes the members, officers,

22 employees, consultants, and volunteers or commit23 tees of such an entity.

24 (7) The term ‘‘person’’ includes a State or unit

25 of local government.
563

Title II, Subtitle F

•HR 5300 IH

1 (8) The term ‘‘provider of health care services’’

2 means any individual or entity that is engaged in the

3 delivery of health care services in a State and that

4 is required by State law or regulation to be licensed

5 or certified by the State to engage in the delivery of

6 such services in the State.

7 (9) The term ‘‘Secretary’’ means the Secretary

8 of Health and Human Services.

9 (10) The term ‘‘specialty group’’ means a medi10 cal specialty or subspecialty in which a provider of

11 health care services may be licensed to practice by

12 a State (as determined by the Secretary in consulta13 tion with the certification boards for such specialties

14 and subspecialties).

15 (11) The term ‘‘standard setting and enforce16 ment activities’’ means—

17 (A) accreditation of health care practition18 ers, health care providers, medical education in19 stitutions, or medical education programs,

20 (B) technology assessment and risk man21 agement activities,

22 (C) the development and implementation of

23 practice guidelines or practice parameters, or

24 (D) official peer review proceedings under25 taken by a hospital medical staff (or committee
564

Title II, Subtitle G

•HR 5300 IH

1 thereof) or a medical society or association for

2 purposes of evaluating the professional conduct

3 or quality of health care provided by a medical

4 professional.

5 Subtitle G—Encouraging Enforce6 ment Activities of Medical Self7 Regulatory Entities

8 PART 1—APPLICATION OF THE CLAYTON ACT TO

9 MEDICAL SELF-REGULATORY ENTITIES

10 SEC. 2601. ANTITRUST EXEMPTION FOR MEDICAL SELF11 REGULATORY ENTITIES.

12 (a) IN GENERAL.—(1) Except as provided in para13 graph (2), no damages, interest on damages, cost of suit,

14 or attorney’s fee may be recovered under section 4, 4A,

15 or 4C of the Clayton Act (15 U.S.C. 15, 15a, 15c), or

16 under any State law similar to such section, from any

17 medical self-regulatory entity (including its members, offi18 cers, employees, consultants, and volunteers or committees

19 thereof) as a result of engaging in standard setting or en20 forcement activities that are—

21 (A) designed to promote the quality of health

22 care provided to patients, and

23 (B) not conducted for purposes of financial

24 gain.
565

Title II, Subtitle G

•HR 5300 IH

1 (2) Paragraph (1) shall not prohibit the recovery of

2 actual damages, interest on damages, the cost of suit, or

3 a reasonable attorney’s fee under section 4 or 4A of the

4 Clayton Act (15 U.S.C. 15, 15a), or under any State law

5 similar to such section, by a State or the United States

6 from a medical self-regulatory entity (including its mem7 bers, officers, employees, consultants, and volunteers or

8 committees thereof) for injury sustained as a result of en9 gaging in the conduct described in such paragraph.

10 (b) FEES.—In any action under section 4, 4C, or 16

11 of the Clayton Act (15 U.S.C. 15, 15c, 26), or under a

12 similar State law, brought against any medical self-regu13 latory entity (including its members, officers, employees,

14 consultants, and volunteers or committees thereof) as a

15 result of engaging in conduct described in subsection

16 (a)(1), the court shall award the cost of suit, including

17 a reasonable attorney’s fee, to a substantially prevailing

18 defendant.

19 SEC. 2602. DEFINITIONS.

20 For purposes of this subtitle:

21 (1) The term ‘‘medical self-regulatory entity’’

22 means a medical society or association, a specialty

23 board, a recognized accrediting agency, or a hospital

24 medical staff.
566

Title II, Subtitle G

•HR 5300 IH

1 (2) The term ‘‘standard setting and enforce2 ment activities’’ means—

3 (A) accreditation of health care practition4 ers, health care providers, medical education in5 stitutions, or medical education programs,

6 (B) technology assessment and risk man7 agement activities,

8 (C) the development and implementation of

9 practice guidelines or practice parameters, or

10 (D) official peer review proceedings under11 taken by a hospital medical staff (or committee

12 thereof) or a medical society or association for

13 purposes of evaluating the quality of health care

14 provided by a medical professional.

15 PART 2—CONSULTATION BY FEDERAL AGENCIES

16 SEC. 2611. CONSULTATION WITH MEDICAL SELF-REGU17 LATORY ENTITIES RESPECTING MEDICAL

18 PROFESSIONAL GUIDELINES AND STAND19 ARDS.

20 Any Federal agency engaged in the establishment of

21 medical professional standards shall consult with appro22 priate medical societies or associations, specialty boards,

23 or recognized accrediting agencies, if available, in carrying

24 out medical professional standard setting and guidelines

25 or standards relating to the practice of medicine.
567

Title II, Subtitle H

•HR 5300 IH

1 Subtitle H—Reform of Clinical Lab2 oratory Requirements for Sim3 ple Tests

4 SEC. 2701. ELIMINATING CLIA REQUIREMENT FOR CERTIFI5 CATE OF WAIVER FOR SIMPLE LABORATORY

6 EXAMINATIONS AND PROCEDURES.

7 (a) IN GENERAL.—Section 353 of the Public Health

8 Service Act (42 U.S.C. 263a) is amended—

9 (1) in subsection (b), by inserting before the pe10 riod at the end the following: ‘‘or unless the labora11 tory is exempt from the certificate requirement

12 under subsection (d)(2)’’;

13 (2) by amending paragraph (2) of subsection

14 (d) to read as follows:

15 ‘‘(2) EXEMPTION FROM CERTIFICATE REQUIRE16 MENT FOR LABORATORIES PERFORMING ONLY SIM17 PLE EXAMINATIONS AND PROCEDURES.—A labora18 tory which performs only laboratory examinations

19 and procedures described in paragraph (3) is not re20 quired to have in effect a certificate under this sec21 tion.’’;

22 (3) by striking paragraph (4) of subsection (d);

23 and
568

Title II, Subtitle H

•HR 5300 IH

1 (4) in subsection (m)(1), by striking ‘‘, except

2 that the Secretary’’ and all that follows and insert3 ing a period.

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

5 this section shall take effect on the first day of the first

6 month beginning after the date of the enactment of this

7 Act.

8 SEC. 2702. AMENDMENT RELATED TO SIMPLE LABORATORY

9 EXAMINATIONS.

10 Section 353(d) of the Public Health Service Act (42

11 U.S.C. 263) is amended by striking paragraph (3) and

12 inserting the following:

13 ‘‘(3) EXAMINATIONS AND PROCEDURES.—The

14 examinations and procedures identified in paragraph

15 (2) are simple laboratory examinations and proce16 dures which have an insignificant risk of an erro17 neous result and include those which—

18 ‘‘(A) have been approved by the Food and

19 Drug Administration for home use,

20 ‘‘(B) employ methodologies that are so

21 simple and accurate as to render the likelihood

22 of erroneous results negligible,

23 ‘‘(C) the Secretary has determined pose no

24 reasonable risk of serious harm to the patient

25 if performed incorrectly, or
569

Title II, Subtitle H

•HR 5300 IH

1 ‘‘(D)(i) are performed by or under the di2 rection or supervision of or in collaboration with

3 a doctor of medicine or osteopathy licensed to

4 practice medicine or osteopathy in the State in

5 which the laboratory is located, or by an indi6 vidual qualified to direct, supervise, or perform

7 examinations and procedures under State laws

8 or such standards as the Secretary may estab9 lish; and

10 ‘‘(ii) the patient is available for clinical ob11 servation; and

12 ‘‘(iii) prompt results are needed to evalu13 ate, diagnose, and treat the patient or to avoid

14 additional burdens on the patient that could re15 sult from not performing the test.

16 ‘‘(4) DEFINITION.—As used in this section, the

17 term ‘simple laboratory examinations and proce18 dures’ includes dipstick tests for total and allergen19 specific IgE; microscopic examination of nasal

20 smears (for cells and bacteria); mono spot tests;

21 testing for theophylline using the Accu-Level meth22 od; microscopic urinalysis; vaginal wet mount; KOH

23 prep, scabies prep; rapid strep antigen;

24 nonautomated qualitative and quantitative semen

25 analysis; pin worm; prostate smears; synovial fluid
570

Title II, Subtitle H

•HR 5300 IH

1 analysis for inflammation and infection; post coital

2 test; fern test; occult blood; Gram stain; qualitative

3 drug screen; pulse oximetry; hemoglobin (by hand4 held hemoglobinometer); ASO, CRP, RF, and mono

5 screen; sickle cell screen; white blood cell count by

6 manual chamber count; peripheral blood smears;

7 sputum eosinophil; urine culture colony; urine sen8 sitivities; microscopic examination of hair morphol9 ogy; molluscum smear; fungal cultures, including

10 dermatophyte test medium; Tzank smear; Darkfield

11 examination; agglutination pregnancy test; urethral

12 gram stains, and centrifigal hematology, including

13 white blood cell count, hematocrit, differential, and

14 platelet count.’’.

15 SEC. 2703. AMENDMENT RELATED TO STUDY.

16 (a) STUDY.—The Secretary of Health and Human

17 Services, acting through the Centers for Disease Control

18 and Prevention, shall use existing appropriations to con19 duct the study required by section 4 of the Clinical Lab20 oratory Improvement Amendments of 1988 (42 U.S.C.

21 263a note). The Secretary shall report the results of such

22 study to the Committee on Ways and Means and the Com23 mittee on Energy and Commerce of the House of Rep24 resentatives and the Committee on Finance and the Com-
571

Title II, Subtitle H

•HR 5300 IH

1 mittee on Labor and Human Resources of the Senate not

2 later than May 1, 1996.

3 (b) SUNSET.—If the results of the study described

4 in subsection (a) are not reported to the committees of

5 Congress by May 1, 1996, section 353 of the Public

6 Health Service Act shall not be in effect after May 1,

7 1996.

8 SEC. 2704. AMENDMENTS RELATED TO THE CLINICAL LAB9 ORATORY IMPROVEMENT ADVISORY COM10 MITTEE.

11 The Secretary of Health and Human Services shall

12 revise the membership of the Clinical Laboratory Improve13 ment Advisory Committee established by the Secretary in

14 regulations to implement section 353 of the Public Health

15 Service Act (subpart T of part 493 of title 42 Code of

16 Federal Regulations) to contain, in the membership which

17 does not include ex-officio members or officers or employ18 ees of the Federal Government, a number of practicing

19 physicians which is proportionate to the number of physi20 cian laboratories regulated under such section 353. For

21 purposes of this section, the term ‘‘practicing physician’’

22 means a licensed doctor of medicine or osteopathy who

23 spends at least 80 percent of the physician’s professional

24 time in direct patient care and who directs an in-office

25 clinical laboratory for the physician’s patients.
572

Title II, Subtitle I

•HR 5300 IH

1 Subtitle I—Miscellaneous

2 Provisions

3 SEC. 2801. REQUIREMENT THAT CERTAIN AGENCIES

4 PREFUND GOVERNMENT HEALTH BENEFITS

5 CONTRIBUTIONS FOR THEIR ANNUITANTS.

6 (a) DEFINITIONS.—For the purpose of this section—

7 (1) the term ‘‘agency’’ means any agency or

8 other instrumentality within the executive branch of

9 the Government, the receipts and disbursements of

10 which are not generally included in the totals of the

11 budget of the United States Government submitted

12 by the President;

13 (2) the term ‘‘health benefits plan’’ means, with

14 respect to an agency, a health benefits plan, estab15 lished by or under Federal law, in which employees

16 or annuitants of such agency may participate;

17 (3) the term ‘‘health-benefits coverage’’ means

18 coverage under a health benefits plan;

19 (4) an individual shall be considered to be an

20 ‘‘annuitant of an agency’’ if such individual is enti21 tled to an annuity, under a retirement system estab22 lished by or under Federal law, by virtue of—

23 (A) such individual’s service with, and sep24 aration from, such agency; or
573

Title II, Subtitle I

•HR 5300 IH

1 (B) being the survivor of an annuitant

2 under subparagraph (A) or of an individual who

3 died while employed by such agency; and

4 (5) the term ‘‘Office’’ means the Office of Per5 sonnel Management.

6 (b) PREFUNDING REQUIREMENT.—

7 (1) IN GENERAL.—Effective as of October 1,

8 1994, each agency (or February 1, 1995, in the case

9 of the agency with the greatest number of employ10 ees, as determined by the Office) shall be required

11 to prepay the Government contributions which are

12 or will be required in connection with providing

13 health-benefits coverage for annuitants of such agen14 cy.

15 (2) REGULATIONS.—The Office shall prescribe

16 such regulations as may be necessary to carry out

17 this section. The regulations shall be designed to en18 sure at least the following:

19 (A) Amounts paid by each agency shall be

20 sufficient to cover the amounts which would

21 otherwise be payable by such agency (on a

22 ‘‘pay-as-you-go’’ basis), on or after the applica23 ble effective date under paragraph (1), on be24 half of—
574

Title II, Subtitle I

•HR 5300 IH

1 (i) individuals who are annuitants of

2 the agency as of such effective date; and

3 (ii) individuals who are employed by

4 the agency as of such effective date, or

5 who become employed by the agency after

6 such effective date, after such individuals

7 have become annuitants of the agency (in8 cluding their survivors).

9 (B)(i) For purposes of determining any

10 amounts payable by an agency—

11 (I) this section shall be treated as if

12 it had taken effect at the beginning of the

13 20-year period which ends on the effective

14 date applicable under paragraph (1) with

15 respect to such agency; and

16 (II) in addition to any amounts pay17 able under subparagraph (A), each agency

18 shall also be responsible for paying any

19 amounts for which it would have been re20 sponsible, with respect to the 20-year pe21 riod described in subclause (I), in connec22 tion with any individuals who are annu23 itants or employees of the agency as of the

24 applicable effective date under paragraph

25 (1).
575

Title II, Subtitle I

•HR 5300 IH

1 (ii) Any amounts payable under this sub2 paragraph for periods preceding the applicable

3 effective date under paragraph (1) shall be pay4 able in equal installments over the 20-year pe5 riod beginning on such effective date.

6 (c) FASB STANDARDS.—Regulations under sub7 section (b) shall be in conformance with the provisions of

8 standard 106 of the Financial Accounting Standards

9 Board, issued in December 1990.

10 (d) CLARIFICATION.—Nothing in this section shall be

11 considered to permit or require duplicative payments on

12 behalf of any individuals.

13 (e) DRAFT LEGISLATION.—The Office shall prepare

14 and submit to Congress any draft legislation which may

15 be necessary in order to carry out this section.

16 SEC. 2802. INELIGIBILITY OF ALIENS FOR SSI AND MEDIC17 AID.

18 (a) IN GENERAL.—Notwithstanding any other provi19 sion of law and except as provided in subsections (b) and

20 (c), no alien shall be eligible for any program referred to

21 in subsection (d).

22 (b) EXCEPTIONS.—

23 (1) REFUGEE EXCEPTION.—Subsection (a)

24 shall not apply to an alien admitted to the United

25 States as a refugee under section 207 of the Immi-
576

Title II, Subtitle I

•HR 5300 IH

1 gration and Nationality Act until 6 years after the

2 date of such alien’s arrival into the United States.

3 (2) AGED EXCEPTION.—Subsection (a) shall

4 not apply to an alien who—

5 (A) has been lawfully admitted to the

6 United States for permanent residence;

7 (B) is over 75 years of age; and

8 (C) has resided in the United States for at

9 least 5 years.

10 (3) CURRENT RESIDENT EXCEPTION.—Sub11 section (a) shall not apply to the eligibility of an

12 alien for a program referred to in subsection (d)

13 until 1 year after the date of the enactment of this

14 Act if, on such date of enactment, the alien is resid15 ing in the United States and is eligible for the pro16 gram.

17 (c) PROGRAMS FOR WHICH ALIENS MAY BE ELIGI18 BLE.—The limitation under subsection (a) shall not apply

19 to medical assistance with respect to emergency services

20 (as defined for purposes of section 1916(a)(2)(D) of the

21 Social Security Act).

22 (d) PROGRAMS FOR WHICH ALIENS ARE INELI23 GIBLE.—The programs referred to in this subsection are

24 the following:
577

Title II, Subtitle I

•HR 5300 IH

1 (1) The program of medical assistance under

2 title XIX of the Social Security Act, except emer3 gency services as provided in subsection (c).

4 (2) The supplemental security income program

5 under title XVI of the Social Security Act.

6 (e) NOTIFICATION OF ALIENS.—Any Federal agency

7 that administers a program referred to in subsection (d)

8 shall, directly or through the States, notify each alien re9 ceiving benefits under the program whose eligibility for the

10 program is or will be terminated by reason of this section.

11 SEC. 2803. LIMITATION ON SSI BENEFITS FOR DRUG AND

12 ALCOHOL ADDICTS.

13 (a) IN GENERAL.—

14 (1) LIMITATION DESCRIBED.—Section 1614(a)

15 of the Social Security Act (42 U.S.C. 1382c(a)) is

16 amended by adding at the end the following:

17 ‘‘(5)(A) The Secretary shall identify all recipients of

18 benefits under this title by reason of disability whose dis19 ability is a result of addiction to illegal drugs.

20 ‘‘(B) The Secretary shall periodically, on a random

21 basis, test each recipient identified under subparagraph

22 (A) to determine whether the recipient is using illegal

23 drugs.

24 ‘‘(C)(i) Notwithstanding any other provision of this

25 title, any individual who is determined under subpara-
578

Title II, Subtitle I

•HR 5300 IH

1 graph (B) to be using illegal drugs, or who refuses to sub2 mit to testing as provided for under subparagraph (B),

3 shall not be eligible for benefits under this title for a pe4 riod of at least 1 year.

5 ‘‘(ii) The period of ineligibility under clause (i) shall

6 terminate (after the last day of such 1-year period) if the

7 individual has 2 tests (at least 2 months apart and not

8 paid for through Federal funds) which establish that the

9 recipient is not using illegal drugs.’’.

10 (2) EFFECTIVE DATE.—The amendment made

11 by paragraph (1) shall apply to quarters beginning

12 after the expiration of the 6-month period that be13 gins on the date of the enactment of this Act.

14 (b) REPRESENTATIVE PAYEE REFORMS.—

15 (1) AUTHORITY OF GOVERNMENT AGENCIES TO

16 BECOME PAID REPRESENTATIVE PAYEES.—Section

17 1631(a)(2)(D)(ii) of such Act (42 U.S.C.

18 1383(a)(2)(D)(ii)) is amended by adding at the end

19 the following: ‘‘The term ‘qualified organization’ also

20 includes any government agency that meets the re21 quirements of items (aa) and (bb) of subclause

22 (II).’’.

23 (2) MAXIMUM FEE PAYABLE TO REPRESENTA24 TIVE PAYEES.—Section 1631(a)(2)(D)(i) of such Act

25 (42 U.S.C. 1383(a)(2)(D)(i)) is amended by striking
579

Title III

•HR 5300 IH

1 ‘‘the lesser of—’’ and all that follows and inserting

2 ‘‘10 percent of the monthly benefit involved.’’.

3 TITLE III—LONG-TERM CARE

TABLE OF CONTENTS OF TITLE

Subtitle A—Tax Treatment of Long-term Care Insurance

Sec. 3001. Treatment of long-term care insurance or plans.

Sec. 3002. Exclusion for benefits provided under long-term care insurance; inclusion of employer-provided coverage.

Sec. 3003. Qualified long-term services treated as medical care.

Sec. 3004. Effective date.

Subtitle B—Establishment of Federal Standards for Long-term

Care Insurance

Sec. 3101. Establishment of Federal standards for long-term care insurance.

‘‘TITLE XXVII—LONG-TERM CARE INSURANCE STANDARDS

‘‘PART A—PROMULGATION OF STANDARDS AND MODEL BENEFITS

‘‘Sec. 2701. Standards.

‘‘PART B—ESTABLISHMENT AND IMPLEMENTATION OF LONG-TERM CARE

INSURANCE POLICY STANDARDS

‘‘Sec. 2711. Implementation of policy standards.

‘‘Sec. 2712. Regulation of sales practices.

‘‘Sec. 2713. Additional responsibilities for carriers.

‘‘Sec. 2714. Renewability standards for issuance, and basis for cancellation

of policies.

‘‘Sec. 2715. Benefit standards.

‘‘Sec. 2716. Nonforfeiture.

‘‘Sec. 2717. Limit of period of contestability and right to return.

‘‘Sec. 2718. Civil money penalty.

‘‘PART C—LONG-TERM CARE INSURANCE POLICIES, DEFINITION AND

ENDORSEMENTS

‘‘Sec. 2721. Long-term care insurance policy defined.

‘‘Sec. 2722. Code of conduct with respect to endorsements.

‘‘PART D—MISCELLANEOUS PROVISIONS

‘‘Sec. 2731. Funding for long-term care insurance information, counseling,

and assistance.

‘‘Sec. 2732. Definitions.

Subtitle C—Protection of Assets Under Medicaid Through Use

of Qualified Long-term Care Insurance

Sec. 3201. Protection of assets through use of qualified long-term care insurance.
580

Title III, Subtitle A

•HR 5300 IH

Subtitle D—Studies

Sec. 3301. Feasibility of encouraging health care providers to donate services

to homebound patients.

Sec. 3302. Feasibility of tax credit for heads of households who care for elderly

family members in their homes.

Sec. 3303. Case management of current long-term care benefits.

Subtitle E—Volunteer Service Credit Demonstration Projects

Sec. 3401. Amendment to the Older Americans Act of 1965.

1 Subtitle A—Tax Treatment of Long2 term Care Insurance

3 SEC. 3001. TREATMENT OF LONG-TERM CARE INSURANCE

4 OR PLANS.

5 (a) GENERAL RULE.—Subpart E of part I of sub6 chapter L of chapter 1 of the Internal Revenue Code of

7 1986 is amended by inserting after section 818 the follow8 ing new section:

9 ‘‘SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE

10 OR PLANS.

11 ‘‘(a) GENERAL RULE.—For purposes of this part, a

12 long-term care insurance contract shall be treated as an

13 accident or health insurance contract.

14 ‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—

15 ‘‘(1) IN GENERAL.—For purposes of this part,

16 the term ‘long-term care insurance contract’ means

17 any insurance contract issued if—

18 ‘‘(A) the only insurance protection pro19 vided under such contract is coverage of quali-
581

Title III, Subtitle A

•HR 5300 IH

1 fied long-term care services and benefits inci2 dental to such coverage,

3 ‘‘(B) the maximum benefit under the pol4 icy for expenses incurred for any day does not

5 exceed $200,

6 ‘‘(C) such contract does not cover expenses

7 incurred for services or items to the extent that

8 such expenses are reimbursable under title

9 XVIII of the Social Security Act or would be so

10 reimbursable but for the application of a de11 ductible or coinsurance amount,

12 ‘‘(D) such contract is guaranteed renew13 able,

14 ‘‘(E) such contract does not have any cash

15 surrender value, and

16 ‘‘(F) all refunds of premiums, and all pol17 icyholder dividends or similar amounts, under

18 such contract are to be applied as a reduction

19 in future premiums or to increase future bene20 fits.

21 ‘‘(2) SPECIAL RULES.—

22 ‘‘(A) PER DIEM, ETC. PAYMENTS PER23 MITTED.—A contract shall not fail to be treated

24 as described in paragraph (1)(A) by reason of

25 payments being made on a per diem or other
582

Title III, Subtitle A

•HR 5300 IH

1 periodic basis without regard to the expenses

2 incurred during the period to which the pay3 ments relate.

4 ‘‘(B) CONTRACT MAY COVER MEDICARE

5 REIMBURSABLE EXPENSES WHERE MEDICARE

6 IS SECONDARY PAYOR.—Paragraph (1)(C) shall

7 not apply to expenses which are reimbursable

8 under title XVIII of the Social Security Act

9 only as a secondary payor.

10 ‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

11 (1)(F) shall not apply to any refund of pre12 miums on surrender or cancellation of the con13 tract.

14 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

15 purposes of this section—

16 ‘‘(1) IN GENERAL.—The term ‘qualified long17 term care services’ means necessary diagnostic, pre18 ventive, therapeutic, and rehabilitative services, and

19 maintenance or personal care services, which—

20 ‘‘(A) are required by a chronically ill indi21 vidual in a qualified facility, and

22 ‘‘(B) are provided pursuant to a plan of

23 care prescribed by a licensed health care practi24 tioner.

25 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—
583

Title III, Subtitle A

•HR 5300 IH

1 ‘‘(A) IN GENERAL.—The term ‘chronically

2 ill individual’ means any individual who has

3 been certified by a licensed health care practi4 tioner as—

5 ‘‘(i)(I) being unable to perform (with6 out substantial assistance from another in7 dividual) at least 2 activities of daily living

8 (as defined in subparagraph (B)) for a pe9 riod of at least 90 days due to a loss of

10 functional capacity, or

11 ‘‘(II) having a level of disability simi12 lar (as determined by the Secretary in con13 sultation with the Secretary of Health and

14 Human Services) to the level of disability

15 described in subclause (I), or

16 ‘‘(ii) having a similar level of disabil17 ity due to cognitive impairment.

18 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

19 purposes of subparagraph (A), each of the fol20 lowing is an activity of daily living:

21 ‘‘(i) MOBILITY.—The process of walk22 ing or wheeling on a level surface which

23 may include the use of an assistive device

24 such as a cane, walker, wheelchair, or

25 brace.
584

Title III, Subtitle A

•HR 5300 IH

1 ‘‘(ii) DRESSING.—The overall complex

2 behavior of getting clothes from closets

3 and drawers and then getting dressed.

4 ‘‘(iii) TOILETING.—The act of going

5 to the toilet room for bowel and bladder

6 function, transferring on and off the toilet,

7 cleaning after elimination, and arranging

8 clothes or the ability to voluntarily control

9 bowel and bladder function, or in the event

10 of incontinence, the ability to maintain a

11 reasonable level of personal hygiene.

12 ‘‘(iv) TRANSFER.—The process of get13 ting in and out of bed or in and out of a

14 chair or wheelchair.

15 ‘‘(v) EATING.—The process of getting

16 food from a plate or its equivalent into the

17 mouth.

18 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali19 fied facility’ means—

20 ‘‘(A) a nursing, rehabilitative, hospice, or

21 adult day care facility (including a hospital, re22 tirement home, nursing home, skilled nursing

23 facility, intermediate care facility, or similar in24 stitution)—
585

Title III, Subtitle A

•HR 5300 IH

1 ‘‘(i) which is licensed under State law,

2 or

3 ‘‘(ii) which is a certified facility for

4 purposes of title XVIII or XIX of the So5 cial Security Act, or

6 ‘‘(B) an individual’s home if a licensed

7 health care practitioner certifies that without

8 home care the individual would have to be cared

9 for in a facility described in subparagraph (A).

10 ‘‘(4) MAINTENANCE OR PERSONAL CARE SERV11 ICES.—The term ‘maintenance or personal care serv12 ices’ means any care the primary purpose of which

13 is to provide needed assistance with any of the ac14 tivities of daily living described in paragraph (2)(B).

15 ‘‘(5) LICENSED HEALTH CARE PRACTI16 TIONER.—The term ‘licensed health care practi17 tioner’ means any physician (as defined in section

18 1861(r) of the Social Security Act) and any reg19 istered professional nurse, licensed social worker, or

20 other individual who meets such requirements as

21 may be prescribed by the Secretary.

22 ‘‘(d) CONTINUATION COVERAGE EXCISE TAX NOT

23 TO APPLY.—This section shall not apply in determining

24 whether section 4980B (relating to failure to satisfy con-
586

Title III, Subtitle A

•HR 5300 IH

1 tinuation coverage requirements of group health plans) ap2 plies.

3 ‘‘(e) INFLATION ADJUSTMENT OF $200 BENEFIT

4 LIMIT.—

5 ‘‘(1) IN GENERAL.—In the case of a calendar

6 year after 1994, the $200 amount contained in sub7 section (b)(1)(B) shall be increased for such cal8 endar year by the medical care cost adjustment for

9 such calendar year. If any increase determined

10 under the preceding sentence is not a multiple of

11 $10, such increase shall be rounded to the nearest

12 multiple of $10.

13 ‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For

14 purposes of paragraph (1), the medical care cost ad15 justment for any calendar year is the percentage (if

16 any) by which—

17 ‘‘(A) the medical care component of the

18 Consumer Price Index (as defined in section

19 1(f)(5)) for August of the preceding calendar

20 year, exceeds

21 ‘‘(B) such component for August of 1993.’’

22 (b) RESERVES.—Clause (iii) of section 807(d)(3)(A)

23 is amended by inserting ‘‘(other than a long-term care in24 surance contract within the meaning of section 818A)’’

25 after ‘‘contract’’.
587

Title III, Subtitle A

•HR 5300 IH

1 (c) CLERICAL AMENDMENT.—The table of sections

2 for such subpart E is amended by inserting after the item

3 relating to section 818 the following new item:

‘‘Sec. 818A. Treatment of long-term care insurance or plans.’’

4 SEC. 3002. EXCLUSION FOR BENEFITS PROVIDED UNDER

5 LONG-TERM CARE INSURANCE; INCLUSION

6 OF EMPLOYER-PROVIDED COVERAGE.

7 (a) IN GENERAL.—Subsection (a) of section 104 of

8 the Internal Revenue Code of 1986 (relating to compensa9 tion for injuries or sickness) is amended by striking ‘‘and’’

10 at the end of paragraph (4), by striking the period at the

11 end of paragraph (5) and inserting ‘‘, and’’, and by insert12 ing after paragraph (4) the following new paragraph:

13 ‘‘(6) benefits under a long-term care insurance

14 contract (as defined in section 818A(b)).’’

15 (b) INCLUSION OF EMPLOYER-PROVIDED COV16 ERAGE.—Section 106 of such Code (relating to contribu17 tions by employer to accident and health plans) is amend18 ed by adding at the end thereof the following sentence:

19 ‘‘The preceding sentence shall not apply to any plan pro20 viding coverage for long-term care services.’’

21 SEC. 3003. QUALIFIED LONG-TERM SERVICES TREATED AS

22 MEDICAL CARE.

23 (a) GENERAL RULE.—Paragraph (1) of section

24 213(d) of the Internal Revenue Code of 1986 (defining

25 medical care) is amended by striking ‘‘or’’ at the end of
588

Title III, Subtitle A

•HR 5300 IH

1 subparagraph (B), by redesignating subparagraph (C) as

2 subparagraph (D), and by inserting after subparagraph

3 (B) the following new subparagraph:

4 ‘‘(C) for qualified long-term care services

5 (as defined in section 818A(c)), or’’.

6 (b) DEDUCTION FOR LONG-TERM CARE EXPENSES

7 FOR PARENT OR GRANDPARENT.—Section 213 of such

8 Code (relating to deduction for medical expenses) is

9 amended by adding at the end the following new sub10 section:

11 ‘‘(g) SPECIAL RULE FOR CERTAIN LONG-TERM CARE

12 EXPENSES.—For purposes of subsection (a), the term ‘de13 pendent’ shall include any parent or grandparent of the

14 taxpayer for whom the taxpayer has expenses for long15 term care services described in section 818A(c), but only

16 to the extent of such expenses.’’

17 (c) TECHNICAL AMENDMENTS.—

18 (1) Subparagraph (D) of section 213(d)(1) of

19 such Code (as redesignated by subsection (a)) is

20 amended by striking ‘‘subparagraphs (A) and (B)’’

21 and inserting ‘‘subparagraphs (A), (B), and (C)’’.

22 (2)(A) Paragraph (1) of section 213(d) of such

23 Code is amended by adding at the end thereof the

24 following new flush sentence:
589

Title III, Subtitle A

•HR 5300 IH

1 ‘‘In the case of a long-term care insurance contract

2 (as defined in section 818A), only eligible long-term

3 care premiums (as defined in paragraph (10)) shall

4 be taken into account under subparagraph (D).’’

5 (B) Subsection (d) of section 213 is amended

6 by adding at the end the following new paragraph:

7 ‘‘(10) ELIGIBLE LONG-TERM CARE PRE8 MIUMS.—

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

10 section, the term ‘eligible long-term care pre11 miums’ means the amount paid during a tax12 able year for any long-term care insurance con13 tract (as defined in section 818A) covering an

14 individual, to the extent such amount does not

15 exceed the limitation determined under the fol16 lowing table:

‘‘In the case of an individual

with an attained age before the The limitation

close of the taxable year of: is:

40 or less ................................................................... $200

More than 40 but not more than 50 ......................... 375

More than 50 but not more than 60 ......................... 750

More than 60 but not more than 70 ......................... 1,600

More than 70 ............................................................. 2,000.

17 ‘‘(B) INDEXING.—

18 ‘‘(i) IN GENERAL.—In the case of any

19 taxable year beginning in a calendar year

20 after 1993, each dollar amount contained

21 in paragraph (1) shall be increased by the
590

Title III, Subtitle A

•HR 5300 IH

1 medical care cost adjustment of such

2 amount for such calendar year. If any in3 crease determined under the preceding sen4 tence is not a multiple of $10, such in5 crease shall be rounded to the nearest mul6 tiple of $10.

7 ‘‘(ii) MEDICAL CARE COST ADJUST8 MENT.—For purposes of clause (i), the

9 medical care cost adjustment for any cal10 endar year is the percentage (if any) by

11 which—

12 ‘‘(I) the medical care component

13 of the Consumer Price Index (as de14 fined in section 1(f)(5)) for August of

15 the preceding calendar year, exceeds

16 ‘‘(II) such component for August

17 of 1991.’’

18 (3) Paragraph (6) of section 213(d) of such

19 Code is amended—

20 (A) by striking ‘‘subparagraphs (A) and

21 (B)’’ and inserting ‘‘subparagraphs (A), (B),

22 and (C)’’, and

23 (B) by striking ‘‘paragraph (1)(C)’’ in sub24 paragraph (A) and inserting ‘‘paragraph

25 (1)(D)’’.
591

Title III, Subtitle B

•HR 5300 IH

1 (4) Paragraph (7) of section 213(d) of such

2 Code is amended by striking ‘‘subparagraphs (A)

3 and (B)’’ and inserting ‘‘subparagraphs (A), (B),

4 and (C)’’.

5 SEC. 3004. EFFECTIVE DATE.

6 The amendments made by this subtitle shall apply to

7 taxable years beginning after December 31, 1994.

8 Subtitle B—Establishment of Fed9 eral Standards for Long-term

10 Care Insurance

11 SEC. 3101. ESTABLISHMENT OF FEDERAL STANDARDS FOR

12 LONG-TERM CARE INSURANCE.

13 (a) IN GENERAL.—The Public Health Service Act is

14 amended—

15 (1) by redesignating title XXVII (42 U.S.C.

16 300cc et seq.) as title XXVIII; and

17 (2) by inserting after title XXVI the following

18 new title:

19 ‘‘TITLE XXVII—LONG-TERM CARE

20 INSURANCE STANDARDS

21 ‘‘PART A—PROMULGATION OF STANDARDS AND MODEL

22 BENEFITS

23 ‘‘SEC. 2701. STANDARDS.

24 ‘‘(a) APPLICATION OF STANDARDS.—
592

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(1) NAIC.—The Secretary shall request that

2 the National Association of Insurance Commis3 sioners (hereinafter in this title referred to as the

4 ‘NAIC’)—

5 ‘‘(A) develop specific standards that incor6 porate the requirements of this title; and

7 ‘‘(B) report to the Secretary on such

8 standards,

9 by not later than 12 months after enactment of this

10 title. If the NAIC develops such model standards

11 that incorporate the requirements of this title within

12 such period and the Secretary finds that such stand13 ards implement the requirements of this title, such

14 standards shall be the standards applied under this

15 title.

16 ‘‘(2) DEFAULT.—If the NAIC does not promul17 gate the model standards under paragraph (1) by

18 the deadline established in that paragraph, the Sec19 retary shall promulgate, within 12 months after such

20 deadline, a regulation that provides standards that

21 incorporate the requirements of this title and such

22 standards shall apply as provided for in this title.

23 ‘‘(3) RELATION TO STATE LAW.—Nothing in

24 this title shall be construed as preventing a State

25 from applying standards that provide greater protec-
593

Title III, Subtitle B

•HR 5300 IH

1 tion to policyholders of long-term care insurance

2 policies than the standards promulgated under this

3 title, except that such State standards may not be

4 inconsistent or in conflict with any of the require5 ments of this title.

6 ‘‘(b) DEADLINE FOR APPLICATION OF STAND7 ARDS.—

8 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

9 the date specified in this subsection for a State is—

10 ‘‘(A) the date the State adopts the stand11 ards established under subsection (a)(1); or

12 ‘‘(B) the date that is 1 year after the first

13 day of the first regular legislative session that

14 begins after the date such standards are first

15 established under subsection (a)(2);

16 whichever is earlier.

17 ‘‘(2) STATE REQUIRING LEGISLATION.—In the

18 case of a State which the Secretary identifies, in

19 consultation with the NAIC, as—

20 ‘‘(A) requiring State legislation (other than

21 legislation appropriating funds) in order for the

22 standards established under subsection (a) to be

23 applied; but

24 ‘‘(B) having a legislature which is not

25 scheduled to meet within 1 year following the
594

Title III, Subtitle B

•HR 5300 IH

1 beginning of the next regular legislative session

2 in which such legislation may be considered;

3 the date specified in this subsection is the first day

4 of the first calendar quarter beginning after the

5 close of the first legislative session of the State legis6 lature that begins on or after January 1, 1994. For

7 purposes of the previous sentence, in the case of a

8 State that has a 2-year legislative session, each year

9 of such session shall be deemed to be a separate reg10 ular session of the State legislature.

11 ‘‘(c) ITEMS INCLUDED IN STANDARDS.—The stand12 ards promulgated under subsection (a) shall include—

13 ‘‘(1) minimum Federal standards for long-term

14 care insurance consistent with the provisions of this

15 title;

16 ‘‘(2) standards for the enhanced protection of

17 consumers with long-term care insurance;

18 ‘‘(3) procedures for the modification of the

19 standards established under paragraph (1) in a

20 manner consistent with future laws to expand exist21 ing Federal or State long-term care benefits or es22 tablish a comprehensive Federal or State long-term

23 care benefit program; and

24 ‘‘(4) other activities determined appropriate by

25 Congress.
595

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(d) CONSULTATION.—In establishing standards and

2 models of benefits under this section, the Secretary shall

3 provide for and consult with an advisory committee to be

4 chosen by the Secretary, and composed of—

5 ‘‘(1) three individuals who are representatives

6 of carriers;

7 ‘‘(2) three individuals who are representatives

8 of consumer groups;

9 ‘‘(3) three representatives who are representa10 tives of providers of long-term care services;

11 ‘‘(4) three other individuals who are not rep12 resentatives of carriers or of providers of long-term

13 care services and who have expertise in the delivery

14 and financing of such services; and

15 ‘‘(5) the Secretary of Veterans Affairs.

16 ‘‘(e) DUTIES.—The advisory committee established

17 under subsection (d) shall—

18 ‘‘(1) recommend the appropriate inflationary

19 index to be used with respect to the inflation protec20 tion benefit portion of the standards;

21 ‘‘(2) recommend the uniform needs assessment

22 mechanism to be used in determining the eligibility

23 of individuals for benefits under a policy;

24 ‘‘(3) recommend appropriate standards for ben25 efits under section 2715(c); and
596

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(4) perform such other activities as deter2 mined appropriate by the Secretary.

3 ‘‘(f) ADMINISTRATIVE PROVISIONS.—The following

4 provisions of section 1886(e)(6) of the Social Security Act

5 shall apply to the advisory committee chosen under sub6 section (d) in the same manner as such provisions apply

7 under such section:

8 ‘‘(1) Subparagraph (C) (relating to staffing and

9 administration).

10 ‘‘(2) Subparagraph (D) (relating to compensa11 tion of members).

12 ‘‘(3) Subparagraph (F) (relating to access to

13 information).

14 ‘‘(4) Subparagraph (G) (relating to use of

15 funds).

16 ‘‘(5) Subparagraph (H) (relating to periodic

17 GAO audits).

18 ‘‘(6) Subparagraph (J) (relating to requests for

19 appropriations).

20 ‘‘PART B—ESTABLISHMENT AND IMPLEMENTATION OF

21 LONG-TERM CARE INSURANCE POLICY STANDARDS

22 ‘‘SEC. 2711. IMPLEMENTATION OF POLICY STANDARDS.

23 ‘‘(a) IN GENERAL.—

24 ‘‘(1) REGULATORY PROGRAM.—No long-term

25 care policy (as defined in section (2721)) may be is-
597

Title III, Subtitle B

•HR 5300 IH

1 sued, sold, or offered for sale as a long-term care in2 surance policy in a State on or after the date speci3 fied in section 2701(b) unless—

4 ‘‘(A) the Secretary determines that the

5 State has established a regulatory program

6 that—

7 ‘‘(i) provides for the application and

8 enforcement of the standards established

9 under section 2701(a); and

10 ‘‘(ii) complies with the requirements

11 of subsection (b);

12 by the date specified in section 2701(b), and

13 the policy has been approved by the State com14 missioner or superintendent of insurance under

15 such program; or

16 ‘‘(B) if the State has not established such

17 a program, or if the State’s regulatory program

18 has been decertified, the policy has been cer19 tified by the Secretary (in accordance with such

20 procedures as the Secretary may establish) as

21 meeting the standards established under section

22 2701(a) by the date specified in section

23 2701(b).

24 For purposes of this subsection, the advertising or

25 soliciting with respect to a policy, directly or indi-
598

Title III, Subtitle B

•HR 5300 IH

1 rectly, shall be deemed the offering for sale of the

2 policy.

3 ‘‘(2) REVIEW OF STATE REGULATORY PRO4 GRAMS.—The Secretary periodically shall review reg5 ulatory programs described in paragraph (1)(A) to

6 determine if they continue to provide for the applica7 tion and enforcement of the standards and proce8 dures established under section 2701(a) and (b). If

9 the Secretary determines that a State regulatory

10 program no longer meets such standards and re11 quirements, before making a final determination, the

12 Secretary shall provide the State an opportunity to

13 adopt such a plan of correction as would permit the

14 program to continue to meet such standards and re15 quirements. If the Secretary makes a final deter16 mination that the State regulatory program, after

17 such an opportunity, fails to meet such standards

18 and requirements, the Secretary shall assume re19 sponsibility under paragraph (1)(B) with respect to

20 certifying policies in the State and shall exercise full

21 authority under section 2701 for carriers, agents, or

22 associations or its subsidiary in the State plans in

23 the State.

24 ‘‘(b) ADDITIONAL REQUIREMENTS FOR APPROVAL

25 OF STATE REGULATORY PROGRAMS.—For purposes of
599

Title III, Subtitle B

•HR 5300 IH

1 subsection (a)(1)(A)(ii), the requirements of this sub2 section for a State regulatory program are as follows:

3 ‘‘(1) ENFORCEMENT.—The enforcement under

4 the program—

5 ‘‘(A) shall be designed in a manner so as

6 to secure compliance with the standards within

7 30 days after the date of a finding of non8 compliance with such standards; and

9 ‘‘(B) shall provide for notice in the annual

10 report required under paragraph (5) to the Sec11 retary of cases where such compliance is not se12 cured within such 30-day period.

13 ‘‘(2) PROCESS.—The enforcement process

14 under each State regulatory program shall provide

15 for—

16 ‘‘(A) procedures for individuals and enti17 ties to file written, signed complaints respecting

18 alleged violations of the standards;

19 ‘‘(B) responding on a timely basis to such

20 complaints;

21 ‘‘(C) the investigation of—

22 ‘‘(i) those complaints which have a

23 reasonable probability of validity, and
600

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(ii) such other alleged violations of

2 the standards as the program finds appro3 priate; and

4 ‘‘(D) the imposition of appropriate sanc5 tions (which include, in appropriate cases, the

6 imposition of a civil money penalty as provided

7 for in section 2718) in the case of a carrier,

8 agent, or association or its subsidiary deter9 mined to have violated the standards.

10 ‘‘(3) CONSUMER ACCESS TO COMPLIANCE IN11 FORMATION.—

12 ‘‘(A) IN GENERAL.—A State regulatory

13 program must provide for consumer access to

14 complaints filed with the State commissioner or

15 superintendent of insurance with respect to

16 long-term care insurance policies.

17 ‘‘(B) CONFIDENTIALITY.—The access pro18 vided under subparagraph (A) shall be limited

19 to the extent required to protect the confiden20 tiality of the identity of individual policyholders.

21 ‘‘(4) PROCESS FOR APPROVAL OF PREMIUMS.—

22 ‘‘(A) IN GENERAL.—Each State regulatory

23 program shall—

24 ‘‘(i) provide for a process for approv25 ing or disapproving proposed premium in-
601

Title III, Subtitle B

•HR 5300 IH

1 creases or decreases with respect to long2 term care insurance policies; and

3 ‘‘(ii) establish a policy for receipt and

4 consideration of public comments before

5 approving such a premium increase or de6 crease.

7 ‘‘(B) CONDITIONS FOR APPROVAL.—No

8 premium increase shall be approved (or deemed

9 approved) under subparagraph (A) unless the

10 proposed increase is accompanied by an actuar11 ial memorandum which—

12 ‘‘(i) includes a description of the as13 sumptions that justify the increase;

14 ‘‘(ii) contains such information as

15 may be required under the Standards; and

16 ‘‘(iii) is made available to the public.

17 ‘‘(C) APPLICATION.—Except as provided in

18 subparagraph (D), this paragraph shall not

19 apply to a group long-term care insurance pol20 icy issued to a group described in section

21 4(E)(1) of the NAIC Long Term Care Insur22 ance Model Act (effective January 1991), ex23 cept that such group policy shall, pursuant to

24 guidelines developed by the NAIC, provide no-
602

Title III, Subtitle B

•HR 5300 IH

1 tice to policyholders and certificate holders of

2 any premium change under such group policy.

3 ‘‘(D) EXCEPTION.—Subparagraph (C)

4 shall not apply to—

5 ‘‘(i) group conversion policies;

6 ‘‘(ii) the group continuation feature of

7 a group policy if the insurer separately

8 rates employee and continuation coverages;

9 and

10 ‘‘(iii) group policies where the func11 tion of the employer is limited solely to col12 lecting premiums (through payroll deduc13 tions or dues checkoff) and remitting them

14 to the insurer.

15 ‘‘(E) CONSTRUCTION.—Nothing in this

16 paragraph shall be construed as preventing the

17 NAIC from promulgating standards, or a State

18 from enacting and enforcing laws, with respect

19 to premium rates or loss ratios for all, including

20 group, long-term care insurance policies.

21 ‘‘(5) ANNUAL REPORTS.—Each State regu22 latory program shall provide for annual reports to be

23 submitted to the Secretary on the implementation

24 and enforcement of the standards in the State, in-
603

Title III, Subtitle B

•HR 5300 IH

1 cluding information concerning violations in excess

2 of 30 days.

3 ‘‘(6) ACCESS TO OTHER INFORMATION.—The

4 State regulatory program must provide for consumer

5 access to actuarial memoranda provided under para6 graph (4).

7 ‘‘(7) DEFAULT.—In the case of a State without

8 a regulatory program approved under subsection (a),

9 the Secretary shall provide for the enforcement ac10 tivities described in subsection (c).

11 ‘‘(c) SECRETARIAL ENFORCEMENT AUTHORITY.—

12 ‘‘(1) IN GENERAL.—The Secretary shall exer13 cise authority under this section in the case of a

14 State that does not have a regulatory program ap15 proved under this section.

16 ‘‘(2) COMPLAINTS AND INVESTIGATIONS.—The

17 Secretary shall establish procedures—

18 ‘‘(A) for individuals and entities to file

19 written, signed complaints respecting alleged

20 violations of the requirements of this title;

21 ‘‘(B) for responding on a timely basis to

22 such complaints; and

23 ‘‘(C) for the investigation of—

24 ‘‘(i) those complaints that have a rea25 sonable probability of validity; and
604

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(ii) such other alleged violations of

2 the requirements of this title as the Sec3 retary determines to be appropriate.

4 In conducting investigations under this subsection,

5 agents of the Secretary shall have reasonable access

6 necessary to enable such agents to examine evidence

7 of any carrier, agent, or association or its subsidiary

8 being investigated.

9 ‘‘(3) HEARINGS.—

10 ‘‘(A) IN GENERAL.—Prior to imposing an

11 order described in paragraph (4) against a car12 rier, agent, or association or its subsidiary

13 under this section for a violation of the require14 ments of this title, the Secretary shall provide

15 the carrier, agent, association or subsidiary

16 with notice and, upon request made within a

17 reasonable time (of not less than 30 days, as

18 established by the Secretary by regulation) of

19 the date of the notice, a hearing respecting the

20 violation.

21 ‘‘(B) CONDUCT OF HEARING.—Any hear22 ing requested under subparagraph (A) shall be

23 conducted before an administrative law judge.

24 If no hearing is so requested, the Secretary’s
605

Title III, Subtitle B

•HR 5300 IH

1 imposition of the order shall constitute a final

2 and unappealable order.

3 ‘‘(C) AUTHORITY IN HEARINGS.—In con4 ducting hearings under this paragraph—

5 ‘‘(i) agents of the Secretary and ad6 ministrative law judges shall have reason7 able access necessary to enable such agents

8 and judges to examine evidence of any car9 rier, agent, or association or its subsidiary

10 being investigated; and

11 ‘‘(ii) administrative law judges, may,

12 if necessary, compel by subpoena the at13 tendance of witnesses and the production

14 of evidence at any designated place or

15 hearing.

16 In case of contumacy or refusal to obey a sub17 poena lawfully issued under this subparagraph

18 and upon application of the Secretary, an ap19 propriate district court of the United States

20 may issue an order requiring compliance with

21 such subpoena and any failure to obey such

22 order may be punished by such court as a con23 tempt thereof.

24 ‘‘(D) ISSUANCE OF ORDERS.—If an admin25 istrative law judge determines in a hearing
606

Title III, Subtitle B

•HR 5300 IH

1 under this paragraph, upon the preponderance

2 of the evidence received, that a carrier, agent,

3 or association or its subsidiary named in the

4 complaint has violated the requirements of this

5 title, the administrative law judge shall state

6 the findings of fact and issue and cause to be

7 served on such carrier, agent, association, or

8 subsidiary an order described in paragraph (4).

9 ‘‘(4) CEASE AND DESIST ORDER WITH CIVIL

10 MONEY PENALTY.—

11 ‘‘(A) IN GENERAL.—Subject to the provi12 sions of subparagraphs (B) through (F), an

13 order under this paragraph—

14 ‘‘(i) shall require the agent, associa15 tion or its subsidiary, or a carrier—

16 ‘‘(I) to cease and desist from

17 such violations; and

18 ‘‘(II) to pay a civil penalty in an

19 amount not to exceed $15,000 in the

20 case of each agent, and not to exceed

21 $25,000 for each association or its

22 subsidiary or a carrier for each such

23 violation; and

24 ‘‘(ii) may require the agent, associa25 tion or its subsidiary, or a carrier to take
607

Title III, Subtitle B

•HR 5300 IH

1 such other remedial action as is appro2 priate.

3 ‘‘(B) CORRECTIONS WITHIN 30 DAYS.—No

4 order shall be imposed under this paragraph by

5 reason of any violation if the carrier, agent, or

6 association or its subsidiary establishes to the

7 satisfaction of the Secretary that—

8 ‘‘(i) such violation was due to reason9 able cause and was not intentional and was

10 not due to willful neglect; and

11 ‘‘(ii) such violation is corrected within

12 the 30-day period beginning on the earliest

13 date the carrier, agent, association, or sub14 sidiary knew, or exercising reasonable dili15 gence could have known, that such a viola16 tion was occurring.

17 ‘‘(C) WAIVER BY SECRETARY.—In the case

18 of a violation under this title that is due to rea19 sonable cause and not to willful neglect, the

20 Secretary may waive part or all of the civil

21 money penalty imposed under subparagraph

22 (A)(i)(II) to the extent that payment of such

23 penalty would be grossly excessive relative to

24 the violation involved and to the need for deter25 rence of violations.
608

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(D) ADMINISTRATIVE APPELLATE RE2 VIEW.—The decision and order of an adminis3 trative law judge under this paragraph shall be4 come the final agency decision and order of the

5 Secretary unless, within 30 days, the Secretary

6 modifies or vacates the decision and order, in

7 which case the decision and order of the Sec8 retary shall become a final order under this

9 paragraph.

10 ‘‘(E) JUDICIAL REVIEW.—A carrier, agent,

11 or association or its subsidiary or any other in12 dividual adversely affected by a final order is13 sued under this paragraph may, within 45 days

14 after the date the final order is issued, file a pe15 tition in the Court of Appeals for the appro16 priate circuit for review of the order.

17 ‘‘(F) ENFORCEMENT OF ORDERS.—If a

18 carrier, agent, or association or its subsidiary

19 fails to comply with a final order issued under

20 this paragraph against the carrier, agent, asso21 ciation or subsidiary after opportunity for judi22 cial review under subparagraph (E), the Sec23 retary shall file a suit to seek compliance with

24 the order in any appropriate district court of

25 the United States. In any such suit, the validity
609

Title III, Subtitle B

•HR 5300 IH

1 and appropriateness of the final order shall not

2 be subject to review.

3 ‘‘(d) DEMONSTRATION GRANT PROGRAM.—

4 ‘‘(1) IN GENERAL.—The Secretary may award

5 grants to States for the establishment of demonstra6 tion programs to improve the enforcement within

7 such States of long-term care insurance standards

8 applicable under this title.

9 ‘‘(2) APPLICATION.—To be eligible to receive a

10 grant under paragraph (1), a State shall prepare

11 and submit to the Secretary an application at such

12 time, in such manner, and containing such informa13 tion as the Secretary may require, including a de14 scription of the program for which the State intends

15 to use the amounts provided under the grant.

16 ‘‘(3) MINIMUM AMOUNT OF GRANTS.—The

17 amount of a grant awarded under this subsection

18 shall not be less than $100,000.

19 ‘‘(4) EVALUATION.—A State that receives a

20 grant under this subsection shall comply with such

21 evaluation procedures as the Secretary shall by regu22 lation establish. The Secretary shall utilize such

23 evaluations to conduct an overall evaluation of the

24 results of the demonstration programs established

25 under this section.
610

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(5) AUTHORIZATION OF APPROPRIATIONS.—

2 There are authorized to be appropriated to carry out

3 this subsection, $5,000,000 for each of the fiscal

4 years 1996 through 2000.

5 ‘‘SEC. 2712. REGULATION OF SALES PRACTICES.

6 ‘‘(a) DUTY OF GOOD FAITH AND FAIR DEALING.—

7 ‘‘(1) IN GENERAL.—Each agent (as defined in

8 section 2733) or association that is selling or offer9 ing for sale a long-term care insurance policy has

10 the duty of good faith and fair dealing to the pur11 chaser or potential purchaser of such a policy.

12 ‘‘(2) PROHIBITED PRACTICES.—An agent or as13 sociation is considered to have violated paragraph

14 (1) if the agent or association engages in any of the

15 following practices:

16 ‘‘(A) TWISTING.—

17 ‘‘(i) IN GENERAL.—Knowingly making

18 any misleading representation (including

19 the inaccurate completion of medical his20 tories) or incomplete or fraudulent com21 parison of any long-term care insurance

22 policy or insurers for the purpose of induc23 ing, or tending to induce, any person to re24 tain or effect a change with respect to a

25 long-term care insurance policy.
611

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(ii) POLICY REPLACEMENT FORM.—

2 With respect to any person who elects to

3 replace or effect a change in a long-term

4 care insurance policy, the individual that is

5 selling such policy shall ensure that such

6 person completes a policy replacement

7 form developed by the NAIC. A copy of

8 such form shall be provided to such person

9 and additional copies shall be delivered by

10 the selling individual to the old policy is11 suer and the new issuer and kept on file

12 for inspection by the State regulatory

13 agency.

14 ‘‘(B) HIGH PRESSURE TACTICS.—Employ15 ing any method of marketing having the effect

16 of, or intending to, induce the purchase of long17 term care insurance policy through force, fright,

18 threat or undue pressure, whether explicit or

19 implicit.

20 ‘‘(C) COLD LEAD ADVERTISING.—Making

21 use directly or indirectly of any method of mar22 keting which fails to disclose in a conspicuous

23 manner that a purpose of the method of mar24 keting is solicitation of insurance and that con-
612

Title III, Subtitle B

•HR 5300 IH

1 tact will be made by an insurance agent or in2 surance company.

3 ‘‘(D) OTHERS.—Engaging in such other

4 practices determined inappropriate under guide5 lines issued by the NAIC.

6 ‘‘(b) FINANCIAL STANDARDS.—The NAIC shall de7 velop recommended financial minimum standards (includ8 ing both income and asset criteria) for the purpose of ad9 vising individuals considering the purchase of a long-term

10 care insurance policy.

11 ‘‘(c) PROHIBITION OF SALE OR ISSUANCE TO MEDIC12 AID BENEFICIARIES.—An agent, an association, or a car13 rier may not knowingly sell or issue a long-term care in14 surance policy to an individual who is eligible for medical

15 assistance under title XIX of the Social Security Act.

16 ‘‘(d) PROHIBITION OF SALE OR ISSUANCE OF DUPLI17 CATE SERVICE BENEFIT POLICIES.—An agent, associa18 tion or its subsidiary, or a carrier may not sell or issue

19 a service-benefit long-term care insurance policy to an in20 dividual—

21 ‘‘(1) knowing that the policy provides for cov22 erage that duplicates coverage already provided in

23 another service-benefit long-term care insurance pol24 icy held by such individual (unless the policy is in25 tended to replace such other policy); or
613

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(2) for the benefit of an individual unless the

2 individual (or a representative of the individual) pro3 vides a written statement to the effect that the cov4 erage—

5 ‘‘(A) does not duplicate other coverage in

6 effect under a service-benefit long-term care in7 surance policy; or

8 ‘‘(B) will replace another service-benefit

9 long-term care insurance policy.

10 In this subsection, the term ‘service-benefit long-term care

11 insurance policy’ means a long-term care insurance policy

12 which provides for benefits based on the type and amount

13 of services furnished.

14 ‘‘(e) PROHIBITION BASED ON ELIGIBILITY FOR

15 OTHER BENEFITS.—A carrier may not sell or issue a

16 long-term care insurance policy that reduces, limits or co17 ordinates the benefits provided under the policy on the

18 basis that the policyholder has or is eligible for other long19 term care insurance coverage or benefits.

20 ‘‘(f) PROVISION OF OUTLINE OF COVERAGE.—No

21 agent, association or its subsidiary, or carrier may sell or

22 offer for a sale a long-term care insurance policy (or for

23 a certificate under a group long-term care insurance pol24 icy) without providing to the purchaser or potential pur25 chaser (or representative) an outline of coverage that com-
614

Title III, Subtitle B

•HR 5300 IH

1 plies with the standards established under section

2 2701(a).

3 ‘‘(g) PENALTIES.—Any agent who sells, offers for

4 sale, or issues a long-term care insurance policy in viola5 tion of this section may be imprisoned not more than 5

6 years, or fined in accordance with title 18, United States

7 Code, and, in addition, is subject to a civil money penalty

8 of not to exceed $15,000 for each such violation. Any asso9 ciation or its subsidiary or carrier that sells, offers for

10 sale, or issues a long-term care insurance policy in viola11 tion of this section may be fined in accordance with title

12 18, United States Code, and in addition, is subject to a

13 civil money penalty of not to exceed $25,000 for each vio14 lation.

15 ‘‘(h) AGENT TRAINING AND CERTIFICATION RE16 QUIREMENTS.—The NAIC, shall establish requirements

17 for long-term care insurance agent training and certifi18 cation that—

19 ‘‘(1) specify requirements for training insurance

20 agents who desire to sell or offer for sale long-term

21 care insurance policies; and

22 ‘‘(2) specify procedures for certifying agents

23 who have completed such training and who are as

24 qualified to sell or offer for sale long-term care in25 surance policies.
615

Title III, Subtitle B

•HR 5300 IH

1 ‘‘SEC. 2713. ADDITIONAL RESPONSIBILITIES FOR CAR2 RIERS.

3 ‘‘(a) REFUND OF PREMIUMS.—If an application for

4 a long-term care insurance policy (or for a certificate

5 under a group long-term care insurance policy) is denied

6 or an applicant returns a policy or certificate within 30

7 days of the date of its issuance pursuant to subsection

8 2717, the carrier shall refund directly to the applicant,

9 or in the case of an employer to whomever remits the pre10 mium, and not by delivery by the agent, not later than

11 30 days after the date of the denial or return, any pre12 miums paid with respect to such a policy (or certificate).

13 ‘‘(b) MAILING OF POLICY.—If an application for a

14 long-term care insurance policy (or for a certificate under

15 a group long-term care insurance policy) is approved, the

16 carrier shall provide the applicant, or in the case of a

17 group plan the employer, the policy (or certificate) of in18 surance not later than 30 days after the date of the

19 approval.

20 ‘‘(c) INFORMATION ON DENIALS OF CLAIMS.—If a

21 claim under a long-term care insurance policy is denied,

22 the carrier shall, within 30 days of the date of a written

23 request by the policyholder or certificate holder (or rep24 resentative)—

25 ‘‘(1) provide a written explanation of the rea26 sons for the denial; and
616

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(2) make available all medical and patient

2 records directly relating to such denial.

3 Except as provided in subsection (e) of section 2715, no

4 claim under such a policy may be denied on the basis of

5 a failure to disclose a condition at the time of issuance

6 of the policy if the application for the policy failed to re7 quest information respecting the condition.

8 ‘‘(d) REPORTING OF INFORMATION.—A carrier that

9 issues one or more long-term care insurance policies shall

10 periodically (not less often than annually) report, in a

11 form and in a manner determined by the NAIC, to the

12 Commissioner, superintendent or director of insurance of

13 each State in which the policy is delivered, and shall make

14 available to the Secretary, upon request, information in

15 a form and manner determined by the NAIC concerning—

16 ‘‘(1) the long-term care insurance policies of the

17 carrier that are in force;

18 ‘‘(2) the most recent premiums for such policies

19 and the premiums imposed for such policies since

20 their initial issuance;

21 ‘‘(3) the lapse rate, replacement rate, and re22 scission rates by policy;

23 ‘‘(4) the names of that 10 percent of its agents

24 that—
617

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(A) have the greatest lapse and replace2 ment rate; and

3 ‘‘(B) have produced at least $50,000 of

4 long-term care insurance sales in the previous

5 year; and

6 ‘‘(5) the claims denied (expressed as a number

7 and as a percentage of claims submitted) by policy.

8 Information required under this subsection shall be re9 ported in a format specified in the standards established

10 under section 2701(a). For purposes of paragraph (3),

11 there shall be included (but reported separately) data con12 cerning lapses due to the death of the policyholder. For

13 purposes of paragraph (4), there shall not be included as

14 a claim any claim that is denied solely because of the fail15 ure to meet a deductible, waiting period, or exclusionary

16 period.

17 ‘‘(e) STANDARDS ON COMPENSATION FOR SALE OF

18 POLICIES.—

19 ‘‘(1) IN GENERAL.—A carrier that issues one or

20 more long-term care insurance policies may provide

21 a commission or other compensation to an agent or

22 other representative for the sale of such a policy only

23 if the first year commission or other first year com24 pensation to be paid does not exceed 200 percent of

25 the commission or other compensation paid for sell-
618

Title III, Subtitle B

•HR 5300 IH

1 ing or servicing the policy in the second year, or if

2 the first year commission or other compensation to

3 be paid does not exceed 50 percent of the premium

4 paid on the first year policy, until the NAIC promul5 gates mandatory standards concerning compensation

6 for the sale of such policies.

7 ‘‘(2) SUBSEQUENT YEARS.—The commission or

8 other compensation provided for the sale of long9 term care insurance policies in years subsequent to

10 the first year of the policy shall be the same as that

11 provided in the second subsequent year and shall be

12 provided for no fewer than 5 subsequent years.

13 ‘‘(3) LIMITATION.—No carrier shall provide

14 compensation to its agents for the sale of a long15 term care insurance policy and no agent shall receive

16 compensation greater than the renewal compensation

17 payable by the replacing carrier on renewal policies

18 if an existing policy is replaced.

19 ‘‘(4) COMPENSATION DEFINED.—As used in

20 this subsection, the term ‘compensation’ includes pe21 cuniary or nonpecuniary remuneration of any kind

22 relating to the sale or renewal of the policy, includ23 ing but not limited to deferred compensation, bo24 nuses, gifts, prizes, awards, and finders fees.
619

Title III, Subtitle B

•HR 5300 IH

1 ‘‘SEC. 2714. RENEWABILITY STANDARDS FOR ISSUANCE,

2 AND BASIS FOR CANCELLATION OF POLICIES.

3 ‘‘(a) IN GENERAL.—No long-term care insurance pol4 icy may be canceled or nonrenewed for any reason other

5 than nonpayment of premium, material misrepresentation

6 or fraud.

7 ‘‘(b) CONTINUATION AND CONVERSION RIGHTS FOR

8 GROUP POLICIES.—

9 ‘‘(1) IN GENERAL.—Each group long-term care

10 insurance policy shall provide covered individuals

11 with a basis for continuation or conversion in ac12 cordance with this subsection.

13 ‘‘(2) BASIS FOR CONTINUATION.—For purposes

14 of paragraph (1), a policy provides a basis for con15 tinuation of coverage if the policy maintains cov16 erage under the existing group policy when such cov17 erage would otherwise terminate and which is sub18 ject only to the continued timely payment of pre19 mium when due. A group policy which restricts pro20 vision of benefits and services to or contains incen21 tives to use certain providers or facility, may provide

22 continuation benefits which are substantially equiva23 lent to the benefits of the existing group policy.

24 ‘‘(3) BASIS FOR CONVERSION.—For purposes of

25 paragraph (1), a policy provides a basis for conver-
620

Title III, Subtitle B

•HR 5300 IH

1 sion of coverage if the policy entitles each

2 individual—

3 ‘‘(A) whose coverage under the group pol4 icy would otherwise be terminated for any rea5 son; and

6 ‘‘(B) who has been continuously insured

7 under the policy (or group policy which was re8 placed) for at least 6 months before the date of

9 the termination;

10 to issuance of a policy providing benefits identical to,

11 substantially equivalent to, or in excess of, those of

12 the policy being terminated, without evidence of in13 surability.

14 ‘‘(4) TREATMENT OF SUBSTANTIAL EQUIVA15 LENCE.—In determining under this subsection

16 whether benefits are substantially equivalent, consid17 eration should be given to the difference between

18 managed care and non-managed care plans.

19 ‘‘(5) GROUP REPLACEMENT OF POLICIES.—If a

20 group long-term care insurance policy is replaced by

21 another long-term care insurance policy purchased

22 by the same policyholder, the succeeding issuer shall

23 offer coverage to all persons covered under the old

24 group policy on its date of termination. Coverage

25 under the new group policy shall not result in any
621

Title III, Subtitle B

•HR 5300 IH

1 exclusion for preexisting conditions that would have

2 been covered under the group policy being replaced.

3 ‘‘(c) STANDARDS FOR ISSUANCE.—

4 ‘‘(1) IN GENERAL.—

5 ‘‘(A) GUARANTEE.—An agent, association

6 or carrier that sells or issues long-term care in7 surance policies shall guarantee that such poli8 cies shall be sold or issued to an individual, or

9 eligible individual in the case of a group plan,

10 if such individual meets the minimum medical

11 underwriting requirements of such policy.

12 ‘‘(B) PREMIUM FOR CONVERTED POL13 ICY.—If a group policy from which conversion

14 is made is a replacement for a previous group

15 policy, the premium for the converted policy

16 shall be calculated on the basis of the insured’s

17 age at the inception of coverage under the

18 group policy from which conversion is made.

19 Where the group policy from which conversion

20 is made replaced previous group coverage, the

21 premium for the converted policy shall be cal22 culated on the basis of the insured’s age at in23 ception of coverage under the group policy re24 placed.
622

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(2) UPGRADE FOR CURRENT POLICIES.—The

2 NAIC shall establish standards, including those pro3 viding guidance on medical underwriting and age

4 rating, with respect to the access of individuals to

5 policies offering upgraded benefits.

6 ‘‘(d) EFFECT OF INCAPACITATION.—

7 ‘‘(1) IN GENERAL.—

8 ‘‘(A) PROHIBITION.—Except as provided

9 in paragraph (2), a long-term care insurance

10 policy in effect as of the effective date of the

11 standards established under section 2701(a)

12 may not be canceled for nonpayment if the pol13 icy holder is determined by a long-term care

14 provider, physician or other health care pro15 vider, independent of the issuer of the policy, to

16 be cognitively or mentally incapacitated so as to

17 not make payments in a timely manner.

18 ‘‘(B) REINSTATEMENT.—A long-term care

19 policy shall include a provision that provides for

20 the reinstatement of such coverage, in the event

21 of lapse, if the insurer is provided with proof of

22 cognitive or mental incapacitation. Such rein23 statement option shall remain available for a

24 period of not less than 5 months after termi-
623

Title III, Subtitle B

•HR 5300 IH

1 nation and shall allow for the collection of past

2 due premium.

3 ‘‘(2) PERMITTED CANCELLATION.—A long-term

4 care insurance policy may be canceled under para5 graph (1) for nonpayment if—

6 ‘‘(A) the period of such nonpayment is in

7 excess of 30 days; and

8 ‘‘(B) notice of intent to cancel is provided

9 to the policyholder or designated representative

10 of the policy holder not less than 30 days prior

11 to such cancellation, except that notice may not

12 be provided until the expiration of 30 days after

13 a premium is due and unpaid.

14 Notice under this paragraph shall be deemed to have

15 been given as of 5 days after the mailing date.

16 ‘‘SEC. 2715. BENEFIT STANDARDS.

17 ‘‘(a) USE OF STANDARD DEFINITIONS AND TERMI18 NOLOGY, UNIFORM FORMAT, AND STANDARD BENE19 FITS.—Each long-term care insurance policy shall, with

20 respect to services, providers or facilities, pursuant to

21 standards established under section 2701(a)—

22 ‘‘(1) use uniform language and definitions, ex23 cept that such language and definitions may take

24 into account the differences between States with re-
624

Title III, Subtitle B

•HR 5300 IH

1 spect to definitions and terminology used for long2 term care services and providers;

3 ‘‘(2) use a uniform format for presenting the

4 outline of coverage under such a policy; and

5 ‘‘(3) provide coverage for at least one standard

6 benefits package (of those developed by the NAIC)

7 that shall include the limitations on the amount of

8 payments per day and the lengths of covered stays

9 for nursing facility and home health care services;

10 as prescribed under guidelines issued by the NAIC and

11 periodically updated.

12 ‘‘(b) DISCLOSURE.—

13 ‘‘(1) OUTLINE OF COVERAGE.—

14 ‘‘(A) REQUIREMENT.—Each carrier that

15 sells or offers for sale a long-term care insur16 ance policy shall provide an outline of coverage

17 under such policy that meets the applicable

18 standards established pursuant to section

19 2701(a), complies with the requirements of sub20 paragraph (B), and is in a uniform format as

21 prescribed in guidelines issued by the NAIC

22 and periodically updated.

23 ‘‘(B) CONTENTS.—The outline of coverage

24 for each long-term care insurance policy shall

25 include at least the following:
625

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(i) A description of the principal

2 benefits and coverage under the policy.

3 ‘‘(ii) A statement of the principal ex4 clusions, reductions, and limitations con5 tained in the policy.

6 ‘‘(iii) A statement of the terms under

7 which the policy (or certificate) may be

8 continued in force or discontinued, the

9 terms for continuation or conversion, and

10 any reservation in the policy of a right to

11 change premiums.

12 ‘‘(iv) A statement, in bold face type

13 on the face of the document in language

14 that is understandable to an average indi15 vidual, that the outline of coverage is a

16 summary only, not a contract of insurance,

17 and that the policy (or master policy) con18 tains the contractual provisions that gov19 ern, except that such summary shall sub20 stantially and accurately reflect the con21 tents of the policy or the master policy.

22 ‘‘(v) A description of the terms, speci23 fied in section 2717, under which a policy

24 or certificate may be returned and pre25 mium refunded.
626

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(vi) Information on national average

2 costs for nursing facility and home health

3 care and information (in graphic form) on

4 the relationship of the value of the benefits

5 provided under the policy to such national

6 average costs and State average costs,

7 where available.

8 ‘‘(vii) A statement of the percentage

9 limit on annual premium increases that is

10 provided under the policy pursuant to this

11 section.

12 ‘‘(2) CERTIFICATES.—A certificate issued pur13 suant to a group long-term care insurance policy

14 shall include—

15 ‘‘(A) a description of the principal benefits

16 and coverage provided in the policy;

17 ‘‘(B) a statement of the principal exclu18 sions, reductions, and limitations contained in

19 the policy; and

20 ‘‘(C) a statement that the group master

21 policy determines governing contractual provi22 sions.

23 ‘‘(3) LONG-TERM CARE AS PART OF LIFE IN24 SURANCE.—In the case of a long-term care insur25 ance policy issued as a part of, or a rider on, a life
627

Title III, Subtitle B

•HR 5300 IH

1 insurance policy, at the time of policy delivery there

2 shall be provided a policy summary that includes—

3 ‘‘(A) an explanation of how the long-term

4 care benefits interact with other components of

5 the policy (including deductions from death

6 benefits);

7 ‘‘(B) an illustration of the amount of bene8 fits, the length of benefit, and the guaranteed

9 lifetime benefits (if any) for each covered per10 son; and

11 ‘‘(C) any exclusions, reductions, and limi12 tations on benefits of long-term care.

13 ‘‘(4) ADDITIONAL INFORMATION.—The NAIC

14 shall develop recommendations with respect to in15 forming consumers of the long-term economic viabil16 ity of carriers issuing long-term care insurance

17 policies.

18 ‘‘(c) LIMITING CONDITIONS ON BENEFITS; MINIMUM

19 BENEFITS.—

20 ‘‘(1) IN GENERAL.—A long-term care insurance

21 policy may not condition or limit eligibility—

22 ‘‘(A) for benefits for a type of services to

23 the need for or receipt of any other services;

24 ‘‘(B) for any benefit on the medical neces25 sity for such benefit;
628

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(C) for benefits furnished by licensed or

2 certified providers in compliance with conditions

3 which are in addition to those required for li4 censure or certification under State law, except

5 that if no State licensure or certification laws

6 exists, in compliance with qualifications devel7 oped by the NAIC; or

8 ‘‘(D) for residential care (if covered under

9 the policy) only—

10 ‘‘(i) to care provided in facilities

11 which provide a higher level of care; or

12 ‘‘(ii) to care provided in facilities

13 which provide for 24-hour or other nursing

14 care not required in order to be licensed by

15 the State.

16 ‘‘(2) HOME HEALTH CARE OR COMMUNITY17 BASED SERVICES.—If a long-term care insurance

18 policy provides benefits for the payment of specified

19 home health care or community-based services, the

20 policy—

21 ‘‘(A) may not limit such benefits to serv22 ices provided by registered nurses or licensed

23 practical nurses;

24 ‘‘(B) may not require benefits for such

25 services to be provided by a nurse or therapist
629

Title III, Subtitle B

•HR 5300 IH

1 that can be provided by a home health aide or

2 licensed or certified home care worker, except

3 that if no State licensure or certification laws

4 exist, in compliance with qualifications devel5 oped by the NAIC;

6 ‘‘(C) may not limit such benefits to serv7 ices provided by agencies or providers certified

8 under title XVIII of the Social Security Act;

9 and

10 ‘‘(D) must provide, at a minimum, benefits

11 for personal care services (including home

12 health aide and home care worker services as

13 defined by the NAIC) home health services,

14 adult day care, and respite care in an individ15 ual’s home or in another setting in the commu16 nity, or any of these benefits on a respite care

17 basis.

18 ‘‘(3) NURSING FACILITY SERVICES.—If a long19 term care insurance policy provides benefits for the

20 payment of specified nursing facility services, the

21 policy must provide such benefits with respect to all

22 nursing facilities (as defined in section 1919(a) of

23 the Social Security Act or until such time as subse24 quently provided for by the NAIC in establishing
630

Title III, Subtitle B

•HR 5300 IH

1 uniform language and definitions under section

2 2715(a)(1)) in the State.

3 ‘‘(4) PER DIEM POLICIES.—

4 ‘‘(A) DEFINITION.—For purposes of this

5 title, the term ‘per diem long-term care insur6 ance policy’ means a long-term care insurance

7 policy (or certificate under a group long-term

8 care insurance policy) that provides for benefit

9 payments on a periodic basis due to cognitive

10 impairment or loss of functional capacity with11 out regard to the expenses incurred or services

12 rendered during the period to which the pay13 ments relate.

14 ‘‘(B) LIMITATION.—No per diem long-term

15 care insurance policy (or certificate) may condi16 tion or otherwise exclude benefit payments

17 based on the receipt of any type of nursing fa18 cility, home health care or community-based

19 services.

20 ‘‘(d) PROHIBITION OF DISCRIMINATION.—A long21 term care insurance policy may not treat benefits under

22 the policy in the case of an individual with Alzheimer’s

23 disease, with any related progressive degenerative demen24 tia of an organic origin, with any organic or inorganic

25 mental illness, or with mental retardation or any other
631

Title III, Subtitle B

•HR 5300 IH

1 cognitive or mental impairment differently from an indi2 vidual having another medical condition for which benefits

3 may be made available.

4 ‘‘(e) LIMITATION ON USE OF PREEXISTING CONDI5 TION LIMITS.—

6 ‘‘(1) INITIAL ISSUANCE.—

7 ‘‘(A) IN GENERAL.—Subject to subpara8 graph (B), a long-term care insurance policy

9 may not exclude or condition benefits based on

10 a medical condition for which the policyholder

11 received treatment or was otherwise diagnosed

12 before the issuance of the policy.

13 ‘‘(B) 6-MONTH LIMIT.—

14 ‘‘(i) IN GENERAL.—No long-term care

15 insurance policy or certificate issued under

16 this title shall utilize a definition of ‘pre17 existing condition’ that is more restrictive

18 than the following: The term ‘preexisting

19 condition’ means a condition for which

20 medical advice or treatment was rec21 ommended by, or received from a provider

22 of health care services, within 6 months

23 preceding the effective date of coverage of

24 an insured individual.
632

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(ii) PROHIBITION ON EXCLUSION OF

2 COVERAGE.—No long-term care insurance

3 policy or certificate may exclude coverage

4 for a loss or confinement that is the result

5 of a preexisting condition unless such loss

6 or confinement begins within 6 months fol7 lowing the effective date of the coverage of

8 the insured individual.

9 ‘‘(2) REPLACEMENT POLICIES.—If a long-term

10 care insurance policy replaces another long-term

11 care insurance policy, the issuer of the replacing pol12 icy shall waive any time periods applicable to pre13 existing conditions, waiting period, elimination peri14 ods and probationary periods in the new policy for

15 similar benefits to the extent such time was spent

16 under the original policy.

17 ‘‘(f) ELIGIBILITY FOR BENEFITS.—

18 ‘‘(1) LONG-TERM CARE POLICIES.—Each long19 term care insurance policy shall—

20 ‘‘(A) describe the level of benefits available

21 under the policy; and

22 ‘‘(B) specify in clear, understandable

23 terms, the level (or levels) of physical, cognitive,

24 or mental impairment required in order to re25 ceive benefits under the policy.
633

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(2) FUNCTIONAL ASSESSMENT.—In order to

2 submit a claim under any long-term care insurance

3 policy, each claimant shall have a professional func4 tional assessment of his or her physical, cognitive,

5 and mental abilities. Such initial assessment shall be

6 conducted by an individual or entity, meeting the

7 qualifications established by the NAIC to assure the

8 professional competence and credibility of such indi9 vidual or entity and that such individual meets any

10 applicable State licensure and certification require11 ments. The individual or entity conducting such as12 sessment may not control, or be controlled by, the

13 issuer of the policy. For purposes of this paragraph

14 and paragraph (4), the term ‘control’ means the di15 rect or indirect possession of the power to direct the

16 management and policies of a person. Control is pre17 sumed to exist, if any person directly or indirectly,

18 owns, controls, holds with the power to vote, or

19 holds proxies representing 10 percent of the voting

20 securities of another person.

21 ‘‘(3) CLAIMS REVIEW.—Except as provided in

22 paragraph (4), each long-term care insurance policy

23 shall be subject to final claims review by the carrier

24 pursuant to the terms of the long-term care insur25 ance policy.
634

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(4) APPEALS PROCESS.—

2 ‘‘(A) IN GENERAL.—Each long-term care

3 insurance policy shall provide for a timely and

4 independent appeals process, meeting standards

5 established by the NAIC, for individuals who

6 dispute the results of the claims review, con7 ducted under paragraph (3), of the claimant’s

8 functional assessment, conducted under para9 graph (2).

10 ‘‘(B) INDEPENDENT ASSESSMENT.—An

11 appeals process under this paragraph shall in12 clude, at the request of the claimant, an inde13 pendent assessment of the claimant’s physical,

14 cognitive or mental abilities.

15 ‘‘(C) CONDUCT.—An independent assess16 ment under subparagraph (B) shall be con17 ducted by an individual or entity meeting the

18 qualifications established by the NAIC to as19 sure the professional competence and credibility

20 of such individual or entity and any applicable

21 State licensure and certification requirements

22 and may not be conducted—

23 ‘‘(i) by an individual who has a direct

24 or indirect significant or controlling inter-
635

Title III, Subtitle B

•HR 5300 IH

1 est in, or direct affiliation or relationship

2 with, the issuer of the policy;

3 ‘‘(ii) by an entity that provides serv4 ices to the policyholder or certificateholder

5 for which benefits are available under the

6 long-term care insurance policy; or

7 ‘‘(iii) by an individual or entity in con8 trol of, or controlled by, the issuer of the

9 policy.

10 ‘‘(5) STANDARD ASSESSMENTS.—Not later than

11 2 years after the date of enactment of this title, the

12 advisory committee established under section

13 2701(d) shall recommend uniform needs assessment

14 mechanisms for the determination of eligibility for

15 benefits under such assessments.

16 ‘‘(g) INFLATION PROTECTION.—

17 ‘‘(1) OPTION TO PURCHASE.—A carrier may

18 not offer a long-term care insurance policy unless

19 the carrier also offers to the proposed policyholder,

20 including each group policyholder, the option to pur21 chase a policy that provides for increases in benefit

22 levels, with benefit maximums or reasonable dura23 tions that are meaningful, to account for reasonably

24 anticipated increases in the costs of long-term care

25 services covered by the policy. A carrier may not
636

Title III, Subtitle B

•HR 5300 IH

1 offer to a policyholder an inflation protection feature

2 that is less favorable to the policyholder than one of

3 the following:

4 ‘‘(A) With respect to policies that provide

5 for automatic periodic increases in benefits, the

6 policy provides for an annual increase in bene7 fits in a manner so that such increases are

8 computed annually at a rate of not less than 5

9 percent.

10 ‘‘(B) With respect to policies that provide

11 for periodic opportunities to elect an increase in

12 benefits, the policy guarantees that the insured

13 individual will have the right to periodically in14 crease the benefit levels under the policy with15 out providing evidence of insurability or health

16 status so long as the option for the previous pe17 riod was not declined. The amount of any such

18 additional benefit may not be less than the dif19 ference between—

20 ‘‘(i) the existing policy benefit; and

21 ‘‘(ii) such existing benefit compounded

22 annually at a rate of at least 5 percent for

23 the period beginning on the date on which

24 the existing benefit is purchased and ex-
637

Title III, Subtitle B

•HR 5300 IH

1 tending until the year in which the offer of

2 increase is made.

3 ‘‘(C) With respect to service benefit poli4 cies, the policy covers a specified percentage of

5 the actual or reasonable charges and does not

6 include a maximum specified indemnity amount

7 or limit.

8 ‘‘(2) EXCEPTION.—The requirements of para9 graph (1) shall not apply to life insurance policies or

10 riders containing accelerated long-term care benefits.

11 ‘‘(3) REQUIRED INFORMATION.—Carriers shall

12 include the following information in or together with

13 the outline of coverage provided under this title:

14 ‘‘(A) A graphic comparison of the benefit

15 levels of a policy that increases benefits over the

16 policy period with a policy that does not in17 crease benefits. Such comparison shall show

18 benefit levels over not less than a 20-year

19 period.

20 ‘‘(B) Any expected premium increases or

21 additional premiums required to pay for any

22 automatic or optional benefit increases, whether

23 the individual who purchases the policy obtains

24 the inflation protection initially or whether such
638

Title III, Subtitle B

•HR 5300 IH

1 individual delays purchasing such protection

2 until a future time.

3 ‘‘(4) CONTINUATION OF PROTECTION.—Infla4 tion protection benefit increases under this sub5 section under a policy that contains such protection

6 shall continue without regard to an insured’s age,

7 claim status or claim history, or the length of time

8 the individual has been insured under the policy.

9 ‘‘(5) CONSTANT PREMIUM.—An offer of infla10 tion protection under this subsection that provides

11 for automatic benefit increases shall include an offer

12 of a premium that the carrier expects to remain con13 stant. Such offer shall disclose in a conspicuous

14 manner that the premium may change in the future

15 unless the premium is guaranteed to remain con16 stant.

17 ‘‘(6) REJECTION.—Inflation protection under

18 this subsection shall be included in a long-term care

19 insurance policy unless a carrier obtains a written

20 rejection of such protection signed by the policy21 holder.

22 ‘‘SEC. 2716. NONFORFEITURE.

23 ‘‘(a) IN GENERAL.—Each long-term care insurance

24 policy (or certificate) shall provide that if the policy lapses

25 after the policy has been in effect for a minimum period
639

Title III, Subtitle B

•HR 5300 IH

1 (specified under the standards under section 2701(a)), the

2 policy will provide, without payment of any additional pre3 miums, nonforfeiture benefits as determined appropriate

4 by the NAIC.

5 ‘‘(b) ESTABLISHMENT OF STANDARDS.—The stand6 ards under section 2701(a) shall provide that the percent7 age or amount of benefits under subsection (a) must in8 crease based upon the policyholder’s equity in the policy.

9 ‘‘SEC. 2717. LIMIT OF PERIOD OF CONTESTABILITY AND

10 RIGHT TO RETURN.

11 ‘‘(a) CONTESTABILITY.—A carrier may not cancel or

12 renew a long-term care insurance policy or deny a claim

13 under the policy based on fraud or material misrepresenta14 tion relating to the issuance of the policy unless notice

15 of such fraud or material misrepresentation is provided

16 within a time period to be determined by the NAIC.

17 ‘‘(b) RIGHT TO RETURN.—Each applicant for a long18 term care insurance policy shall have the right to return

19 the policy (or certificates) within 30 days of the date of

20 its delivery (and to have the premium refunded) if, after

21 examination of the policy or certificate, the applicant is

22 not satisfied for any reason.
640

Title III, Subtitle B

•HR 5300 IH

1 ‘‘SEC. 2718. CIVIL MONEY PENALTY.

2 ‘‘(a) CARRIER.—Any carrier, association or its sub3 sidiary that sells or offers for sale a long-term care insur4 ance policy and that—

5 ‘‘(1) fails to make a refund in accordance with

6 section 2713(a);

7 ‘‘(2) fails to transmit a policy in accordance

8 with section 2713(b);

9 ‘‘(3) fails to provide, make available, or report

10 information in accordance with subsections (c) or (d)

11 of section 2713;

12 ‘‘(4) provides a commission or compensation in

13 violation of section 2713(e);

14 ‘‘(5) fails to provide an outline of coverage in

15 violation of section 2715(b)(1); or

16 ‘‘(6) issues a policy without obtaining certain

17 information in violation of section 2715(f);

18 is subject to a civil money penalty of not to exceed $25,000

19 for each such violation.

20 ‘‘(b) AGENTS.—Any agent that sells or offers for sale

21 a long-term care insurance policy and that—

22 ‘‘(1) fails to make a refund in accordance with

23 section 2713(a);

24 ‘‘(2) fails to transmit a policy in accordance

25 with section 2713(b);
641

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(3) fails to provide, make available, or report

2 information in accordance with subsections (c) or (d)

3 of section 2713;

4 ‘‘(4) fails to provide an outline of coverage in

5 violation of section 2715(b)(1); or

6 ‘‘(5) issues a policy without obtaining certain

7 information in violation of section 2715(f);

8 is subject to a civil money penalty of not to exceed $15,000

9 for each such violation.

10 ‘‘PART C—LONG-TERM CARE INSURANCE POLICIES,

11 DEFINITION AND ENDORSEMENTS

12 ‘‘SEC. 2721. LONG-TERM CARE INSURANCE POLICY DE13 FINED.

14 ‘‘(a) IN GENERAL.—As used in this section, the term

15 ‘long-term care insurance policy’ means any insurance pol16 icy, rider or certificate advertised, marketed, offered or de17 signed to provide coverage for not less than 12 consecutive

18 months for each covered person on an expense incurred,

19 indemnity prepaid or other basis, for one or more nec20 essary diagnostic, preventive, therapeutic, rehabilitative,

21 maintenance or personal care services, provided in a set22 ting other than an acute care unit of a hospital. Such term

23 includes—

24 ‘‘(1) group and individual annuities and life in25 surance policies, riders or certificates that provide
642

Title III, Subtitle B

•HR 5300 IH

1 directly, or that supplement long-term care insur2 ance; and

3 ‘‘(2) a policy, rider or certificates that provides

4 for payment of benefits based on cognitive impair5 ment or the loss of functional capacity.

6 ‘‘(b) ISSUANCE.—Long-term care insurance policies

7 may be issued by—

8 ‘‘(1) carriers;

9 ‘‘(2) fraternal benefit societies;

10 ‘‘(3) nonprofit health, hospital, and medical

11 service corporations;

12 ‘‘(4) prepaid health plans;

13 ‘‘(5) health maintenance organizations; or

14 ‘‘(6) any similar organization to the extent they

15 are otherwise authorized to issue life or health insur16 ance.

17 ‘‘(c) POLICIES EXCLUDED.—The term ‘long-term

18 care insurance policy’ shall not include any insurance pol19 icy, rider or certificate that is offered primarily to provide

20 basic Medicare supplement coverage, basic hospital ex21 pense coverage, basic medical-surgical expense coverage,

22 hospital confinement indemnity coverage, major medical

23 expense coverage, disability income or related asset-protec24 tion coverage, accident only coverage, specified disease or

25 specified accident coverage, or limited benefit health cov-
643

Title III, Subtitle B

•HR 5300 IH

1 erage. With respect to life insurance, such term shall not

2 include life insurance policies, riders or certificates that

3 accelerate the death benefit specifically for one or more

4 of the qualifying events of terminal illness, medical condi5 tions requiring extraordinary medical intervention, or per6 manent institutional confinement, and that provide the op7 tion of a lump-sum payment for those benefits and in

8 which neither the benefits nor the eligibility for the bene9 fits is conditioned upon the receipt of long-term care.

10 ‘‘(d) APPLICATIONS.—Notwithstanding any other

11 provision of this title, this title shall apply to any product

12 advertised, marketed or offered as a long-term insurance

13 policy, rider or certificate.

14 ‘‘SEC. 2722. CODE OF CONDUCT WITH RESPECT TO EN15 DORSEMENTS.

16 ‘‘Not later than 1 year after the date of enactment

17 of this title the NAIC shall issue guidelines that shall

18 apply to organizations and associations, other than em19 ployers and labor organizations that do not accept com20 pensation, and their subsidiaries that provide endorse21 ments of long-term care insurance policies, or that permit

22 such policies to be offered for sale through the organiza23 tion or association. Such guidelines shall include at mini24 mum the following:
644

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(1) In endorsing or selling long-term care in2 surance policies, the primary responsibility of an or3 ganization or association shall be to educate their

4 members concerning such policies and assist such

5 members in making informed decisions. Such organi6 zations and associations may not function primarily

7 as sales agents for insurance companies.

8 ‘‘(2) Organizations and associations shall pro9 vide objective information regarding long-term care

10 insurance policies sold or endorsed by such organiza11 tions and associations to ensure that members of

12 such organizations and associations have a balanced

13 and complete understanding of both the strengths

14 and weaknesses of the policies that are being en15 dorsed or sold.

16 ‘‘(3) Organizations and associations selling or

17 endorsing long-term care insurance policies shall dis18 close in marketing literature provided to their mem19 bers concerning such policies the manner in which

20 such policies and the insurance company issuing

21 such policies were selected. If the organization or as22 sociation and the insurance company have interlock23 ing directorates, the organization or association shall

24 disclose such fact to their members.
645

Title III, Subtitle B

•HR 5300 IH

1 ‘‘(4) Organizations and associations selling or

2 endorsing long-term care insurance policies shall dis3 close in marketing literature provided to their mem4 bers concerning such policies the nature and amount

5 of the compensation arrangements (including all

6 fees, commissions, administrative fees and other

7 forms of financial support that the organization or

8 association receives) from the endorsement or sale of

9 the policy to its members.

10 ‘‘(5) The Boards of Directors of organizations

11 and associations selling or endorsing long-term care

12 insurance policies, if such organizations and associa13 tions have a Board of Directors, shall review and ap14 prove such insurance policies, the compensation ar15 rangements and the marketing materials used to

16 promote sales of such policies.

17 ‘‘PART D—MISCELLANEOUS PROVISIONS

18 ‘‘SEC. 2731. FUNDING FOR LONG-TERM CARE INSURANCE

19 INFORMATION, COUNSELING, AND ASSIST20 ANCE.

21 ‘‘(a) IN GENERAL.—The Secretary, acting through

22 the Public Health Service, may award grants to States,

23 and national organizations with demonstrated experience

24 in long-term care insurance, for the establishment of pro25 grams to provide information, counseling, and assistance
646

Title III, Subtitle B

•HR 5300 IH

1 relating to the procurement of adequate and appropriate

2 long-term care insurance.

3 ‘‘(b) APPLICATION.—To be eligible to receive a grant

4 under subsection (a), a State or national organization

5 shall prepare and submit to the Secretary an application

6 at such time, in such manner, and containing such infor7 mation as the Secretary may require, including a descrip8 tion of the program for which the State or organization

9 intends to use the amounts provided under the grant.

10 ‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—

11 ‘‘(1) IN GENERAL.—There are authorized to be

12 appropriated for grants to States under subsection

13 (a), $10,000,000 for each of the fiscal years 1996

14 through 1998.

15 ‘‘(2) NATIONAL ORGANIZATIONS.—There are

16 authorized to be appropriated for grants to national

17 organizations under subsection (a), $1,000,000 for

18 each of the fiscal years 1996 through 1998.

19 ‘‘SEC. 2732. DEFINITIONS.

20 ‘‘As used in this title:

21 ‘‘(1) AGENT.—The term ‘agent’ means—

22 ‘‘(A) prior to 2 years after the date of en23 actment of this Act, an individual who sells or

24 offers for sale a long-term care insurance policy

25 subject to the requirements of this title and is
647

Title III, Subtitle B

•HR 5300 IH

1 licensed or required to be licensed under State

2 law for such purpose; and

3 ‘‘(B) after the date referred to in subpara4 graph (A), an individual who meets the training

5 and certification requirements established under

6 section 2712(f).

7 ‘‘(2) ASSOCIATION.—The term ‘association’ in8 cludes the association and its subsidiaries.

9 ‘‘(3) CARRIER.—The term ‘carrier’ means any

10 person that offers a health benefit plan, whether

11 through insurance or otherwise, including a licensed

12 insurance company, a prepaid hospital or medical

13 service plan, a health maintenance organization, a

14 self-insured carrier, a reinsurance carrier, and a

15 multiple employer welfare arrangement (a combina16 tion of employers associated for the purpose of pro17 viding health benefit plan coverage for their employ18 ees).’’.

19 (b) CONFORMING AMENDMENTS.—

20 (1) Sections 2701 through 2714 of the Public

21 Health Service Act (42 U.S.C. 300cc through

22 300cc–15) are redesignated as sections 2801

23 through 2814, respectively.

24 (2) Sections 465(f) and 497 of such Act (42

25 U.S.C. 286(f) and 289(f)) are amended by striking
648

Title III, Subtitle C

•HR 5300 IH

1 ‘‘2701’’ each place that such appears and inserting

2 ‘‘2801’’.

3 Subtitle C—Protection of Assets

4 Under Medicaid Through Use of

5 Qualified Long-term Care Insur6 ance

7 SEC. 3201. PROTECTION OF ASSETS THROUGH USE OF

8 QUALIFIED LONG-TERM CARE INSURANCE.

9 (a) IN GENERAL.—Title XIX of the Social Security

10 Act, as amended by sections 1601(a) and 1701(a), is

11 amended—

12 (1) by redesignating section 1933 as section

13 1934; and

14 (2) by inserting after section 1932 the following

15 new section:

16 ‘‘SPECIAL RULES FOR ASSET DISREGARD IN THE CASE OF

17 QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS

18 ‘‘SEC. 1933. (a) IN GENERAL.—Each State plan

19 under this title may provide, subject to subsection (d), that

20 in determining the eligibility of an individual for medical

21 assistance under the plan with respect to such services

22 there shall be disregarded some or all of the individual’s

23 assets which are attributable (as determined under sub24 section (c)(2)) to coverage under a qualified long-term

25 care insurance contract (as defined in subsection (b)).
649

Title III, Subtitle C

•HR 5300 IH

1 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE

2 CONTRACT DEFINED.—In this section, the term ‘qualified

3 long-term care insurance contract’ means, with respect to

4 a State, a long-term care insurance contract (as defined

5 in section 818A(b) of the Internal Revenue Code of 1986)

6 which—

7 ‘‘(1) provides such protection against the costs

8 of receiving long-term care services as the State may

9 require by law;

10 ‘‘(2) provides that benefits under the contract

11 shall be paid without regard to eligibility for medical

12 assistance under this title; and

13 ‘‘(3) meets such other requirements (such as re14 quirements relating to premiums, disclosure, mini15 mum benefits, rights of conversion, and standards

16 for claims processing) as the State may determine to

17 be appropriate.

18 ‘‘(c) OTHER DEFINITIONS.—In this section:

19 ‘‘(1) LONG-TERM CARE SERVICES.—The term

20 ‘long-term care services’ means nursing facility serv21 ices, home health care services, and home and com22 munity-based services, and includes such other simi23 lar items and services described in section 1905(a)

24 as a State may specify.
650

Title III, Subtitle C

•HR 5300 IH

1 ‘‘(2) ATTRIBUTION RULES.—An individual’s as2 sets are considered to be ‘attributable’ to a qualified

3 long-term care insurance contract to the extent spec4 ified under the State plan. Such a plan shall provide

5 for at least one of the following:

6 ‘‘(A) All assets are considered attributable

7 if the insurance contract provides coverage for

8 at least a specified period of coverage (of not

9 less than 3 years and of not more than 6 years)

10 for long-term care services.

11 ‘‘(B) An amount of assets, up to the dollar

12 limitation on benefits for long-term care serv13 ices under the contract, is considered attrib14 utable to the contract.

15 ‘‘(d) LIMITATION.—In no case shall this section re16 sult in (1) the total Federal payments to the State for

17 the quarter under this title (including payments attrib18 utable to this section), exceeding (2) the total Federal pay19 ments that the Secretary estimates would have been paid

20 under this title to the State for the quarter if the State

21 did not provide for the determination of eligibility in ac22 cordance with subsection (a).’’.

23 (b) CONFORMING AMENDMENT.—Section

24 1902(a)(17)(A) of such Act (42 U.S.C. 1396a(a)(17)(A))
651

Title III, Subtitle C

•HR 5300 IH

1 is amended by inserting ‘‘and section 1932’’ after ‘‘objec2 tives of this title’’.

3 (c) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply (except as provided under

6 paragraph (2)) to payments to States under title

7 XIX of the Social Security Act for calendar quarters

8 beginning on or after one year after the date of the

9 enactment of this Act, without regard to whether

10 regulations to implement such amendment are pro11 mulgated by such date.

12 (2) DELAY PERMITTED IF STATE LEGISLATION

13 REQUIRED.—In the case of a State plan for medical

14 assistance under title XIX of the Social Security Act

15 which the Secretary of Health and Human Services

16 determines requires State legislation (other than leg17 islation authorizing or appropriating funds) in order

18 for the plan to meet the additional requirements im19 posed by the amendments made by this section, the

20 State plan shall not be regarded as failing to comply

21 with the requirements of such title solely on the

22 basis of its failure to meet these additional require23 ments before the first day of the first calendar quar24 ter beginning after the close of the first regular ses25 sion of the State legislature that begins after the
652

Title III, Subtitle D

•HR 5300 IH

1 date of the enactment of this Act. For purposes of

2 the previous sentence, in the case of a State that

3 has a 2-year legislative session, each year of such

4 session shall be deemed to be a separate regular ses5 sion of the State legislature.

6 Subtitle D—Studies

7 SEC. 3301. FEASIBILITY OF ENCOURAGING HEALTH CARE

8 PROVIDERS TO DONATE SERVICES TO HOME9 BOUND PATIENTS.

10 The Comptroller General of the United States shall

11 conduct a study on the feasibility of encouraging health

12 care providers to donate their services to homebound pa13 tients. Such study shall include an examination of the ef14 fects of qualifying such services as a charitable contribu15 tion.

16 SEC. 3302. FEASIBILITY OF TAX CREDIT FOR HEADS OF

17 HOUSEHOLDS WHO CARE FOR ELDERLY FAM18 ILY MEMBERS IN THEIR HOMES.

19 The Comptroller General of the United States shall

20 conduct a study on the feasibility of providing heads of

21 households who care for elderly family members in their

22 homes with a tax credit. Such study shall estimate the

23 cost of such a tax credit which would apply to expenses

24 incurred in the custodial care of such an elderly family
653

Title III, Subtitle D

•HR 5300 IH

1 member to the extent such expenses exceed 5 percent of

2 adjusted gross income.

3 SEC. 3303. CASE MANAGEMENT OF CURRENT LONG-TERM

4 CARE BENEFITS.

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

6 Human Services shall conduct a study of the feasibility

7 of encouraging or requiring the use of a single designated

8 public or nonprofit agency (such as an area agency on

9 aging) to coordinate, through case management, the provi10 sion of long-term care benefits under current Federal,

11 State, and local programs in a geographic area.

12 (b) REPORT.—The Secretary shall submit to Con13 gress a report on the study conducted under subsection

14 (a) by not later than 1 year after the date of the enact15 ment of this Act. Such report shall include such rec16 ommendations regarding changes in legislation to encour17 age or require the use (described in subsection (a)) of an

18 agency to coordinate long-term care benefits as may be

19 appropriate.
654

Title III, Subtitle E

•HR 5300 IH

1 Subtitle E—Volunteer Service

2 Credit Demonstration Projects

3 SEC. 3401. AMENDMENT TO THE OLDER AMERICANS ACT

4 OF 1965.

5 (a) IN GENERAL.—Part B of title IV of the Older

6 Americans Act of 1965 (42 U.S.C. 3034–3035r) is amend7 ed by adding at the end the following:

8 ‘‘SEC. 429K. VOLUNTEER SERVICE CREDIT DEMONSTRA9 TION PROJECTS.

10 ‘‘(a) REQUIREMENTS.—The Commissioner shall—

11 ‘‘(1) establish and operate (directly, or through

12 the State agency on aging or one or more area agen13 cies on aging) a volunteer service credit demonstra14 tion project in all or part of each State;

15 ‘‘(2) establish criteria for selecting individuals

16 to whom volunteer services will be provided under

17 volunteer service credit demonstration projects oper18 ated under paragraph (1);

19 ‘‘(3) recruit and train (directly or through State

20 agencies on aging or area agencies on aging) individ21 uals who volunteer to provide services through such

22 projects;

23 ‘‘(4) establish a minimum standard for each

24 service to be provided by volunteers through such

25 projects;
655

Title III, Subtitle E

•HR 5300 IH

1 ‘‘(5) monitor services provided by volunteers

2 through such projects to ensure that standards es3 tablished under paragraph (4) are met; and

4 ‘‘(6) maintain (directly or through State agen5 cies on aging or area agencies on aging) with respect

6 to each individual who provides services through a

7 volunteer service credit demonstration project oper8 ated under paragraph (1) a separately identifiable

9 account showing the number of hours such individ10 ual provided such services.

11 ‘‘(b) DEFINITION.—For purposes of subsection (a),

12 the term ‘volunteer service credit demonstration project’

13 means a demonstration project through which homemaker

14 services, respite care for families, adult day care, and edu15 cational, transportation, and home-delivery services are

16 provided by—

17 ‘‘(1) volunteer older individuals for the benefit

18 of older individuals or low-income children; or

19 ‘‘(2) volunteer individuals of any age for the

20 benefit of older individuals;

21 in return for the receipt of similar services under any such

22 demonstration project (that is established under this sec23 tion) at a time at which such volunteers are older individ24 uals in need of such services.’’.
656

Title III, Subtitle E

•HR 5300 IH

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

2 subsection (a) shall take effect October 1, 1995.

Æ

HR 5300 IH——2

HR 5300 IH——3

HR 5300 IH——4

HR 5300 IH——5

HR 5300 IH——6

HR 5300 IH——7

HR 5300 IH——8

HR 5300 IH——9

HR 5300 IH——10

HR 5300 IH——11

HR 5300 IH——12

HR 5300 IH——13

HR 5300 IH——14

HR 5300 IH——15

HR 5300 IH——16

HR 5300 IH——17

HR 5300 IH——18

HR 5300 IH——19

HR 5300 IH——20

HR 5300 IH——21

HR 5300 IH——22

HR 5300 IH——23
657

Title III, Subtitle E

•HR 5300 IH

HR 5300 IH——24

HR 5300 IH——25

HR 5300 IH——26

HR 5300 IH——27

HR 5300 IH——28

HR 5300 IH——29

HR 5300 IH——30

HR 5300 IH——31

HR 5300 IH——32

HR 5300 IH——33

HR 5300 IH——34

HR 5300 IH——35

HR 5300 IH——36

HR 5300 IH——37

HR 5300 IH——38

HR 5300 IH——39

HR 5300 IH——40

HR 5300 IH——41

HR 5300 IH——42