I

104TH CONGRESS

1ST SESSION H. R. 1707

To amend title XVIII of the Social Security Act to ensure access to services

and prevent fraud and abuse for enrollees of health maintenance organizations under the medicare program, to amend standards for medicare

supplemental policies, to modify the medicare select program, and for

other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 24, 1995

Mr. STARK (for himself, Mr. WAXMAN, Mr. ACKERMAN, Mr. COYNE, Mr. DELLUMS, Mr. FOGLIETTA, Mr. GONZALEZ, Mr. KENNEDY of Rhode Island,

Mr. MCDERMOTT, Mr. OLVER, Mr. PALLONE, Ms. PELOSI, Mr. RANGEL,

and Ms. WOOLSEY) introduced the following bill; which was referred to

the Committee on Commerce, and in addition to the Committee on Ways

and Means, for a period to be subsequently determined by the Speaker,

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To amend title XVIII of the Social Security Act to ensure

access to services and prevent fraud and abuse for enrollees of health maintenance organizations under the medicare program, to amend standards for medicare supplemental policies, to modify the medicare select program,

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,
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1 SECTION 1. SHORT TITLE.

2 This Act may be cited as the ‘‘Medicare Beneficiary

3 Protection Amendments of 1995’’.

4 SEC. 2. REFERENCES IN ACT; TABLE OF CONTENTS.

5 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex6 cept as otherwise specifically provided, whenever in this

7 Act an amendment is expressed in terms of an amendment

8 to or repeal of a section or other provision, the reference

9 shall be considered to be made to that section or other

10 provision of the Social Security Act.

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

12 this Act is as follows:

Sec. 1. Short title.

Sec. 2. References in act; table of contents.

TITLE I—PROTECTIONS FOR BENEFICIARIES ENROLLED IN

HEALTH MAINTENANCE ORGANIZATIONS

Subtitle A—Access to Services

Sec. 101. Requirements relating to providers of health services.

Sec. 102. Deadline for responding to requests for coverage of services.

Sec. 103. Requirements for organization service areas.

Sec. 104. Other enrollee protections.

Sec. 105. Requiring plans to provide expanded services.

Sec. 106. Outlier payments.

Sec. 107. Demonstration project on competitive rate setting.

Subtitle B—Protections Against Fraud and Abuse

Sec. 111. Intermediate sanctions for program violations.

Sec. 112. Treatment of health care prepayment plans.

Sec. 113. Providing enrollees with certain information on plans.

Sec. 114. Restrictions on commissions for agents.

Sec. 115. Restrictions on in-person enrollment.

Sec. 116. Application of peer review to cost-based health maintenance organizations and health care pre-payment plans.

Subtitle C—Effective Date

Sec. 121. Effective date.
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TITLE II—PROTECTIONS FOR BENEFICIARIES ENROLLED IN

MEDICARE SUPPLEMENTAL AND MEDICARE SELECT POLICIES

Sec. 201. Changes in requirements for medicare supplemental policies.

Sec. 202. Application of standards to medicare select policies.

TITLE III—COORDINATION OF ENROLLMENT AND TERMINATION

OF ENROLLMENT

Sec. 301. Uniform open enrollment periods.

Sec. 302. Enrollments for new medicare beneficiaries and those who move.

Sec. 303. Provision by Secretary of enrollment information and other information on eligible organizations and medicare supplemental policies.

Sec. 304. Effective date.

1 TITLE I—PROTECTIONS FOR

2 BENEFICIARIES ENROLLED

3 IN HEALTH MAINTENANCE

4 ORGANIZATIONS

5 Subtitle A—Access to Services

6 SEC. 101. REQUIREMENTS RELATING TO PROVIDERS OF

7 HEALTH SERVICES.

8 (a) DUE PROCESS PROTECTIONS FOR PROVIDERS.—

9 Section 1876(c) (42 U.S.C. 1395mm(c)) is amended by

10 adding at the end the following new paragraph:

11 ‘‘(9)(A) In consultation with providers of health care

12 services who are members of the organization’s provider

13 network, each eligible organization shall establish stand14 ards to be used by the organization for contracting with

15 providers, and shall make descriptive information regard16 ing these standards available to enrollees, providers who

17 are members of the network, and prospective enrollees and

18 prospective members of the network.
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1 ‘‘(B)(i) An eligible organization may not terminate or

2 refuse to renew an agreement with a provider of health

3 care services to participate in the organization’s provider

4 network unless the organization provides written notifica5 tion to the provider of the decision to terminate or refuse

6 to renew the agreement. The notification shall include a

7 statement of the reasons for the organization’s decision,

8 consistent with the standards established under subpara9 graph (A).

10 ‘‘(ii) The eligible organization shall provide the notifi11 cation required under clause (i) at least 45 days prior to

12 the effective date of the termination or expiration of the

13 agreement (whichever is applicable). The previous sen14 tence shall not apply if failure to terminate the agreement

15 prior to the deadline would adversely affect the health or

16 safety of an individual enrolled with the organization.

17 ‘‘(C)(i) Each eligible organization shall provide a

18 process under which a provider of health care services may

19 request a review of the organization’s decision to termi20 nate or refuse to renew the provider’s participation agree21 ment. Such review shall be conducted by a group of indi22 viduals the majority of whom are providers of health care

23 services who are members of the organization’s provider

24 network or employees of the organization, and who are
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1 members of the same profession as the provider who re2 quests the review.

3 ‘‘(ii) If the provider requests in advance, the eligible

4 organization shall permit an attorney representing the

5 provider to be present at the provider’s review.

6 ‘‘(iii) The findings and conclusions of a review under

7 this subparagraph shall be advisory and non-binding.

8 ‘‘(iv) Nothing in this subparagraph shall be construed

9 to affect any other provision of law that provides an ap10 peals process or other form of relief to a provider of health

11 care services.

12 ‘‘(D) The term ‘provider network’ means, with re13 spect to an eligible organization, providers of health care

14 services provided by or through the organization who have

15 entered into an agreement with the organization under

16 which the providers are obligated to provide such services

17 to individuals enrolled with the organization.’’.

18 (b) UTILIZATION REVIEW.—

19 (1) IN GENERAL.—Section 1876(c) (42 U.S.C.

20 1395mm(c)), as amended by subsection (a), is

21 amended by adding at the end the following new

22 paragraph:

23 ‘‘(10)(A) An eligible organization may not deny cov24 erage of or payment for items and services on the basis

25 of a utilization review program unless the program meets
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1 the standards established by the Secretary under this

2 paragraph.

3 ‘‘(B) The Secretary shall establish standards for utili4 zation review programs of eligible organizations, consist5 ent with subparagraph (C), and shall periodically review

6 and update such standards to reflect changes in the deliv7 ery of health care services. The Secretary shall establish

8 such standards in consultation with appropriate parties.

9 ‘‘(C) Under the standards established under subpara10 graph (B)—

11 ‘‘(i) individuals performing utilization review

12 may not receive financial compensation based upon

13 the number of denials of coverage;

14 ‘‘(ii) negative determinations of the medical ne15 cessity or appropriateness of services or the site at

16 which services are furnished may be made only by

17 clinically qualified personnel;

18 ‘‘(iii) the utilization review program shall pro19 vide for a process under which an enrollee or pro20 vider may obtain timely review of a denial of cov21 erage;

22 ‘‘(iv) utilization review shall be conducted in ac23 cordance with uniformly applied standards that are

24 based on the most currently available medical evi25 dence; and
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1 ‘‘(v) providers shall participate in the develop2 ment of the utilization review program.’’.

3 (2) PROVIDING ENROLLEES WITH DESCRIPTION

4 OF REQUIREMENTS.—Section 1876(c)(3)(E) (42

5 U.S.C. 1395mm(c)(3)(E)) is amended—

6 (A) by striking ‘‘and’’ at the end of clause

7 (iv);

8 (B) by striking the period at the end of

9 clause (v); and

10 (C) by adding at the end the following new

11 clause:

12 ‘‘(vi) the organization’s utilization review re13 quirements.’’.

14 (c) ACCESS TO CENTERS OF EXCELLENCE.—Section

15 1876(c) (42 U.S.C. 1395mm(c)), as amended by sub16 sections (a) and (b), is amended by adding at the end the

17 following new paragraph:

18 ‘‘(11)(A) Each eligible organization shall dem19 onstrate that individuals enrolled with the plan who have

20 chronic diseases or otherwise require specialized services

21 have access through the organization to specialized treat22 ment expertise of designated centers of excellence. The or23 ganization shall demonstrate such access according to

24 standards developed by the Secretary, including require-
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1 ments relating to arrangements with such centers and re2 ferral of enrollees to such centers.

3 ‘‘(B) The Secretary shall establish a process for the

4 designation of facilities as centers of excellence for pur5 poses of this paragraph. A facility may not be designated

6 unless the facility is determined—

7 ‘‘(i) to provide specialty care,

8 ‘‘(ii) to deliver care for complex cases requiring

9 specialized treatment and for individuals with chron10 ic diseases, and

11 ‘‘(iii) to meet other requirements that may be

12 established by the Secretary relating to specialized

13 education and training of health professionals, par14 ticipation in peer-reviewed research, or treatment of

15 patients from outside the geographic area of the fa16 cility.’’.

17 (d) RECOGNITION OF TRAUMA CENTERS.—Section

18 1876(c)(4) (42 U.S.C. 1395mm(c)(4)) is amended—

19 (1) in subparagraph (B), by inserting after ‘‘or20 ganization’’ the following: ‘‘(including trauma serv21 ices provided by designated trauma centers)’’; and

22 (2) by adding at the end the following sentence:

23 ‘‘In subparagraph (B), a ‘designated trauma center’

24 has the meaning given such term in section 1231 of

25 the Public Health Service Act, and includes a trau-
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1 ma center which the Secretary finds meets the

2 standards under section 1213 of such Act to be a

3 designated trauma center but is located in a State

4 that has not designated trauma centers under such

5 section.’’.

6 (e) NO REFERRAL REQUIRED FOR OBSTETRICS AND

7 GYNECOLOGY.—Section 1876(c) (42 U.S.C. 1395mm(c)),

8 as amended by subsections (a), (b), and (c), is amended

9 by adding at the end the following new paragraph:

10 ‘‘(12) An eligible organization may not require an in11 dividual to obtain a referral from a physician in order to

12 obtain covered items and services from a physician who

13 specializes in obstetrics and gynecology.’’.

14 (f) COVERAGE OF SERVICES OF ESSENTIAL COMMU15 NITY PROVIDERS.—Section 1876(c) (42 U.S.C.

16 1395mm(c)), as amended by subsections (a), (b), (c), and

17 (e), is amended by adding at the end the following new

18 paragraph:

19 ‘‘(13)(A) For purposes of paragraph (4)(A), the Sec20 retary may require an eligible organization to enter into

21 agreements with essential community providers serving

22 the organization’s service area to join the organization’s

23 provider network (as defined in paragraph (9)(D)) if the

24 Secretary finds that such agreements are necessary for the
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1 organization to meet the requirements of such subpara2 graph.

3 ‘‘(B) In subparagraph (A), an ‘essential community

4 provider’ means a rural health clinic (described in section

5 1861(aa)(2)), a Federally qualified health center (de6 scribed in section 1861(aa)(4)), and any other provider

7 meeting such standards as the Secretary may require.’’.

8 (g) ACCESS TO EMERGENCY CARE SERVICES.—Sec9 tion 1876(c)(4)(B) (42 U.S.C. 1395mm(c)(4)(B)), as

10 amended by subsection (d), is further amended—

11 (1) by inserting ‘‘emergency’’ before ‘‘services’’

12 the first place it appears;

13 (2) by striking ‘‘, if (i)’’ and all that follows

14 through ‘‘the organization’’; and

15 (3) by adding at the end the following new sen16 tence: ‘‘In such subparagraph, ‘emergency services’

17 are services provided to an individual after the sud18 den onset of a medical condition that manifests itself

19 by symptoms of sufficient severity (including severe

20 pain) such that the absence of immediate medical at21 tention could reasonably be expected by a prudent

22 layperson (possessing an average knowledge of

23 health and medicine) to result in placing the individ24 ual’s health in serious jeopardy, the serious impair25 ment of a bodily function, or the serious dysfunction
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1 of any bodily organ or part, and includes services

2 provided as a result of a call through the 911 emer3 gency system.’’.

4 SEC. 102. DEADLINE FOR RESPONDING TO REQUESTS FOR

5 COVERAGE OF SERVICES.

6 Section 1876(c)(5) (42 U.S.C. 1395mm(c)(5)) is

7 amended by adding at the end the following new subpara8 graph:

9 ‘‘(C) In addition to the procedures available pursuant

10 to subparagraph (A), in the case of the request of a mem11 ber enrolled with an eligible organization for health serv12 ices—

13 ‘‘(i) the eligible organization shall respond to

14 the request not later than 24 hours after the request

15 is made; and

16 ‘‘(ii) the organization shall hear and resolve a

17 member’s appeal of a denial of coverage of such

18 services in accordance with a process meeting stand19 ards established by the Secretary.’’.

20 SEC. 103. REQUIREMENTS FOR ORGANIZATION SERVICE

21 AREAS.

22 (a) IN GENERAL.—Section 1876 (42 U.S.C.

23 1395mm(c)) is amended by adding at the end the follow24 ing new subsection:
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1 ‘‘(k)(1) Except as provided in paragraph (2), for pur2 poses of this section, if an eligible organization’s service

3 area includes any part of a metropolitan statistical area,

4 the service area shall include the entire metropolitan sta5 tistical area (including any area designated by the Sec6 retary as a health professional shortage area under section

7 332(a)(1)(A) of the Public Health Service Act within such

8 metropolitan statistical area).

9 ‘‘(2) The Secretary may permit an organization’s

10 service area to exclude any portion of a metropolitan sta11 tistical area (other than the central county of such metro12 politan statistical area) if—

13 ‘‘(A) the organization demonstrates that it

14 lacks the financial or administrative capacity to

15 serve the entire metropolitan statistical area; and

16 ‘‘(B) the Secretary finds that the composition

17 of the organization’s service area does not reduce

18 the financial risk to the organization of providing

19 services to enrollees because of the health status or

20 other demographic characteristics of individuals re21 siding in the service area (as compared to the health

22 status or demographic characteristics of individuals

23 residing in the portion of the metropolitan statistical

24 area not included in the organization’s service

25 area).’’.
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1 (b) CONFORMING AMENDMENT.—Section

2 1876(c)(4)(A)(i) (42 U.S.C. 1395mm(c)(4)(A)(i)) is

3 amended by striking ‘‘the area served by the organization’’

4 and inserting ‘‘the organization’s service area’’.

5 SEC. 104. OTHER ENROLLEE PROTECTIONS.

6 (a) CLARIFICATION OF RESTRICTIONS ON CHARGES

7 FOR OUT-OF-PLAN SERVICES.—

8 (1) INPATIENT HOSPITAL AND EXTENDED CARE

9 SERVICES.—Section 1866(a)(1)(O) (42 U.S.C.

10 1395cc(a)(1)(O)) is amended in the matter preced11 ing clause (i) by inserting after ‘‘this title’’ the fol12 lowing: ‘‘(without regard to whether or not the serv13 ices are furnished on an emergency basis)’’.

14 (2) PHYSICIANS’ SERVICES AND RENAL DIALY15 SIS SERVICES.—Section 1876(f)(2) (42 U.S.C.

16 1395mm(f)(2)) is amended by striking ‘‘this sec17 tion’’ and inserting ‘‘this section (without regard to

18 whether or not the services are furnished on an

19 emergency basis)’’.

20 (b) ARRANGEMENTS FOR DIALYSIS SERVICES.—Sec21 tion 1876(c) (42 U.S.C. 1395mm(c)), as amended by sub22 sections (a), (b), (c), (e), and (f) of section 101, is amend23 ed by adding at the end the following new paragraph:

24 ‘‘(14) Each eligible organization shall assure that en25 rollees requiring renal dialysis services who are tempo-
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1 rarily outside of the organization’s service area (within the

2 United States) have reasonable access to such services

3 by—

4 ‘‘(A) making such arrangements with providers

5 of services or renal dialysis facilities outside the

6 service area for the coverage of and payment for

7 such services furnished to enrollees as the Secretary

8 determines necessary to assure reasonable access; or

9 ‘‘(B) providing for the reimbursement of any

10 provider of services or renal dialysis facility outside

11 the service area for the furnishing of such services

12 to enrollees.’’.

13 SEC. 105. REQUIRING PLANS TO PROVIDE EXPANDED SERV14 ICES.

15 (a) IN GENERAL.—The first sentence of section

16 1876(c)(2)(A) (42 U.S.C. 1395mm(c)(2)(A)) is amend17 ed—

18 (1) by striking ‘‘(I)’’ and inserting ‘‘(III)’’;

19 (2) by striking ‘‘and (II)’’ and inserting ‘‘(IV)’’;

20 (3) by inserting after ‘‘except that’’ the follow21 ing: ‘‘(I) the organization shall provide members en22 titled to benefits under part A with inpatient hos23 pital services under this title without regard to any

24 limitation on the number of days of coverage other25 wise applicable under section 1812 and with ex-
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1 tended care services under this title without regard

2 to whether or not such services are post-hospital ex3 tended care services, (II) the organization may not

4 impose any cost-sharing with respect to the services

5 it provides which are covered under this title or are

6 described in subclause (I) unless the amount im7 posed is nominal (in accordance with standards es8 tablished by the Secretary),’’; and

9 (4) by striking the period at the end and insert10 ing the following: ‘‘, and (V) the organization may

11 not discontinue coverage of any such additional

12 health care services unless the organization provides

13 enrollees with reasonable notice that the services are

14 to be discontinued.’’.

15 (b) PROVIDING ENROLLEES WITH INFORMATION ON

16 ADDITIONAL COVERED SERVICES.—Section

17 1876(c)(3)(E) (42 U.S.C. 1395mm(c)(3)(E)), as amended

18 by section 101(b)(2), is amended—

19 (1) by striking ‘‘and’’ at the end of clause (v);

20 (2) by striking the period at the end of clause

21 (vi) and inserting ‘‘, and’’; and

22 (3) by adding at the end the following new

23 clause:

24 ‘‘(vii) the services provided by the organization

25 which are not covered under this title, including any
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1 limits imposed by the organization on the provision

2 of such services.’’.

3 (c) CONFORMING CALCULATION OF ADJUSTED COM4 MUNITY RATE.—Section 1876(g)(2)(A) (42 U.S.C.

5 1395mm(g)(2)(A)) is amended by striking ‘‘parts)’’ and

6 inserting the following: ‘‘parts and taking into account the

7 expanded inpatient hospital services, extended care serv8 ices, and nominal cost-sharing the organization is required

9 to provide under subsection (c)(2)(A))’’.

10 SEC. 106. OUTLIER PAYMENTS.

11 (a) GENERAL RULE.—Section 1876(a)(1) (42 U.S.C.

12 1395mm(a)(1)) is amended by adding at the end the fol13 lowing:

14 ‘‘(G)(i) In the case of an eligible organization with

15 a risk-sharing contract, the Secretary may make addi16 tional payments to the organization equal to not more

17 than 50 percent of the imputed reasonable cost (or, if so

18 requested by the organization, the reasonable cost) above

19 the threshold amount of services covered under parts A

20 and B and provided (or paid for) in a year by the organi21 zation to any individual enrolled with the organization

22 under this section.

23 ‘‘(ii) For purposes of clause (i), the ‘imputed reason24 able cost’ is an amount determined by the Secretary on
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1 a national, regional, or other basis that is related to the

2 reasonable cost of services.

3 ‘‘(iii) For purposes of clause (i), the ‘threshold

4 amount’ is an amount determined by the Secretary from

5 time to time, adjusted by the geographic factor utilized

6 in determining payments to the organization under sub7 paragraph (C) and rounded to the nearest multiple of

8 $100, such that the total amount to be paid under this

9 subparagraph for a year is estimated to be 5 percent or

10 less of the total amount to be paid under risk-sharing con11 tracts for services furnished for that year.

12 ‘‘(iv) An eligible organization shall submit a claim for

13 additional payments under subsection (i) within such time

14 as the Secretary may specify.

15 ‘‘(v) To the extent that total payments under clause

16 (i) in a year—

17 ‘‘(I) exceed the payment set aside as a result of

18 the reduction under subparagraph (C) for the year,

19 the Secretary shall increase the percentage reduction

20 under such subparagraph for the following year by

21 such percentage as will result in an increase in the

22 reduction equal to such excess in previous payments,

23 or

24 ‘‘(II) are less than the payment set aside as a

25 result of the reduction under subparagraph (C) for
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1 the year, the amount of such difference shall remain

2 available in the succeeding years for additional pay3 ments under this subparagraph and the Secretary

4 may take such difference into account in establishing

5 the percentage reduction under subparagraph (C)

6 for the following year.’’.

7 (b) CONFORMING AMENDMENT.—Section

8 1876(a)(1)(C) (42 U.S.C. 1395mm(a)(1)(C)) is amended

9 by inserting ‘‘, reduced by a uniform percentage (deter10 mined by the Secretary for a year, subject to adjustment

11 under subparagraph (G)(v)) so that the total reduction is

12 estimated to equal the amount to be paid under subpara13 graph (G)’’ before the period.

14 SEC. 107. DEMONSTRATION PROJECT ON COMPETITIVE

15 RATE SETTING.

16 The Secretary of Health and Human Services shall

17 conduct a demonstration project in not more than 4 met18 ropolitan statistical areas under which—

19 (1) eligible organizations under section 1876 of

20 the Social Security Act with enrollees residing in

21 such areas shall participate in a competitive bidding

22 process established by the Secretary;

23 (2) the amount of payment made to such orga24 nizations under section 1876 of such Act shall be de-
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1 termined in accordance with a methodology which

2 takes such bids into account; and

3 (3) an eligible organization may not enter into

4 a risk-sharing contract under section 1876 of such

5 Act with respect to such enrollees unless the organi6 zation agrees to accept the payment amount deter7 mined pursuant to paragraph (1) as the amount

8 paid to the organization under such section.

9 Subtitle B—Protections Against

10 Fraud and Abuse

11 SEC. 111. INTERMEDIATE SANCTIONS FOR PROGRAM VIO12 LATIONS.

13 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

14 ANY PROGRAM VIOLATIONS.—

15 (1) IN GENERAL.—Section 1876(i)(1) (42

16 U.S.C. 1395mm(i)(1)) is amended by striking ‘‘the

17 Secretary may terminate’’ and all that follows and

18 inserting the following: ‘‘in accordance with proce19 dures established under paragraph (9), the Secretary

20 may at any time terminate any such contract or may

21 impose the intermediate sanctions described in para22 graph (6)(B) or (6)(C) (whichever is applicable) on

23 the eligible organization if the Secretary determines

24 that the organization—
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1 ‘‘(A) has failed substantially to carry out the

2 contract;

3 ‘‘(B) is carrying out the contract in a manner

4 inconsistent with the efficient and effective adminis5 tration of this section;

6 ‘‘(C) is operating in a manner that is not in the

7 best interests of the individuals covered under the

8 contract; or

9 ‘‘(D) no longer substantially meets the applica10 ble conditions of subsections (b), (c), (e), and (f).’’.

11 (2) OTHER INTERMEDIATE SANCTIONS FOR

12 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

13 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

14 adding at the end the following new subparagraph:

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

16 the Secretary makes a determination under paragraph (1)

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

18 the Secretary may apply the following intermediate sanc19 tions:

20 ‘‘(i) civil money penalties of not more than

21 $25,000 for each determination under paragraph (1)

22 if the deficiency that is the basis of the determina23 tion has directly adversely affected (or has the sub24 stantial likelihood of adversely affecting) an individ25 ual covered under the organization’s contract;
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1 ‘‘(ii) civil money penalties of not more than

2 $10,000 for each week beginning after the initiation

3 of procedures by the Secretary under paragraph (9)

4 during which the deficiency that is the basis of a de5 termination under paragraph (1) exists; and

6 ‘‘(iii) suspension of enrollment of individuals

7 under this section after the date the Secretary noti8 fies the organization of a determination under para9 graph (1) and until the Secretary is satisfied that

10 the deficiency that is the basis for the determination

11 has been corrected and is not likely to recur.’’.

12 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

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

14 by adding at the end the following new paragraph:

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

16 eligible organization under this section or may impose the

17 intermediate sanctions described in paragraph (6) on the

18 organization in accordance with formal investigation and

19 compliance procedures established by the Secretary under

20 which—

21 ‘‘(A) the Secretary provides the organization

22 with the opportunity to develop and implement a

23 corrective action plan to correct the deficiencies that

24 were the basis of the Secretary’s determination

25 under paragraph (1);
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1 ‘‘(B) the Secretary shall impose more severe

2 sanctions on organizations that have a history of de3 ficiencies or that have not taken steps to correct de4 ficiencies the Secretary has brought to their atten5 tion;

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

7 delays between the finding of a deficiency and the

8 imposition of sanctions; and

9 ‘‘(D) the Secretary provides the organization

10 with reasonable notice and opportunity for hearing

11 (including the right to appeal an initial decision) be12 fore imposing any sanction or terminating the con13 tract.’’.

14 (4) CONFORMING AMENDMENTS.—(A) Section

15 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

16 amended by striking the second sentence.

17 (B) Section 1876(i)(6) (42 U.S.C.

18 1395mm(i)(6)) is further amended by adding at the

19 end the following new subparagraph:

20 ‘‘(D) The provisions of section 1128A (other than

21 subsections (a) and (b)) shall apply to a civil money pen22 alty under subparagraph (A) or (B) in the same manner

23 as they apply to a civil money penalty or proceeding under

24 section 1128A(a).’’.
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1 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA2 TIONS.—

3 (1) REQUIREMENT FOR WRITTEN AGREE4 MENT.—Section 1876(i)(7)(A) (42 U.S.C.

5 1395mm(i)(7)(A)) is amended by striking ‘‘an agree6 ment’’ and inserting ‘‘a written agreement’’.

7 (2) DEVELOPMENT OF MODEL AGREEMENT.—

8 Not later than July 1, 1996, the Secretary of Health

9 and Human Services shall develop a model of the

10 agreement that an eligible organization with a risk11 sharing contract under section 1876 of the Social

12 Security Act must enter into with an entity provid13 ing peer review services with respect to services pro14 vided by the organization under section

15 1876(i)(7)(A) of such Act.

16 (3) REPORT BY GAO.—

17 (A) STUDY.—The Comptroller General

18 shall conduct a study of the costs incurred by

19 eligible organizations with risk-sharing con20 tracts under section 1876(b) of such Act of

21 complying with the requirement of entering into

22 a written agreement with an entity providing

23 peer review services with respect to services pro24 vided by the organization, together with an

25 analysis of how information generated by such
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1 entities is used by the Secretary of Health and

2 Human Services to assess the quality of

3 services provided by such eligible organizations.

4 (B) REPORT TO CONGRESS.—Not later

5 than July 1, 1996, the Comptroller General

6 shall submit a report to the Committee on

7 Ways and Means and the Committee on Com8 merce of the House of Representatives and the

9 Committee on Finance of the Senate on the

10 study conducted under subparagraph (A).

11 SEC. 112. TREATMENT OF HEALTH CARE PREPAYMENT

12 PLANS.

13 (a) APPLICABILITY OF REQUIREMENTS FOR

14 PLANS.—Section 1833(a)(1)(A) (42 U.S.C.

15 1395l(a)(1)(A)) is amended by inserting after ‘‘prepay16 ment basis’’ the following: ‘‘and which meets the require17 ments of subsection (t)’’.

18 (b) REQUIREMENTS DESCRIBED.—Section 1833 (42

19 U.S.C. 1395l), as amended by section 160(d)(1) of the So20 cial Security Act Amendments of 1994, is amended by

21 adding at the end the following new subsection:

22 ‘‘(t)(1) For purposes of subsection (a)(1)(A), an or23 ganization meets the requirements of this subsection for

24 a year if the organization—
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1 ‘‘(A) meets solvency standards established by

2 the Secretary’’;

3 ‘‘(B) meets requirements established by the

4 Secretary for the marketing of its plan to bene5 ficiaries; and

6 ‘‘(C) is not an eligible organization with a con7 tract in effect for the year under section 1876.

8 ‘‘(2) If the Secretary finds that an organization fails

9 to meet the requirements described in paragraph (1), the

10 Secretary may terminate the organization’s contract under

11 this section or impose any of the intermediate sanctions

12 or remedies described in section 1876(i)(6) on the organi13 zation in the same manner as the Secretary may terminate

14 a contract with an eligible organization under section

15 1876(i) or impose such sanctions or remedies on an eligi16 ble organization under section 1876(i)(6).’’.

17 (c) REPEAL OF APPLICATION OF MEDIGAP STAND18 ARDS.—Section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)), as

19 amended by section 171(f)(1) of the Social Security Act

20 Amendments of 1994, is amended by striking ‘‘, or, during

21 the period’’ and all that follows through ‘‘section

22 1833(a)(1)(A)’’.
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1 SEC. 113. PROVIDING ENROLLEES WITH CERTAIN INFOR2 MATION ON PLANS.

3 (a) INFORMATION ON PHYSICIAN INCENTIVE

4 PLANS.—

5 Section 1876(i)(8)(A) (42 U.S.C. 1395mm(i)(8)(A))

6 is amended by adding at the end the following new clause:

7 ‘‘(iv) Upon the request of an enrollee of the or8 ganization or an individual considering enrollment

9 with the organization, the organization shall provide

10 the enrollee with descriptive information regarding

11 the physician incentive plan.’’.

12 (b) INFORMATION ON PROVIDER CREDENTIALS.—

13 Section 1876(c)(3)(E) (42 U.S.C. 1395mm(c)(3)(E)), as

14 amended by section 101(b)(2) and section 105(b), is

15 amended—

16 (1) by striking ‘‘and’’ at the end of clause (vi);

17 (2) by striking the period at the end of clause

18 (vii) and inserting ‘‘, and’’; and

19 (3) by adding at the end the following new

20 clause:

21 ‘‘(viii) the credentials of the individuals and en22 tities providing services to enrollees.’’.

23 SEC. 114. RESTRICTIONS ON COMMISSIONS FOR AGENTS.

24 Section 1876(c) (42 U.S.C. 1395mm(c)), as amended

25 by paragraphs (1), (2), (3), (5), and (6) of subsection (a)
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1 and section 104(b), is amended by adding at the end the

2 following new paragraph:

3 ‘‘(15) In the case of an eligible organization which

4 employs agents to enroll individuals under this section and

5 which pays an agent a commission with respect to the en6 rollment of an individual—

7 ‘‘(A) such commissions may not constitute the

8 predominant source of the agent’s total compensa9 tion from the organization (in accordance with

10 standards established by the Secretary); and

11 ‘‘(B) if an agent receives a commission from the

12 organization with respect to an individual who en13 rolls with the organization and the individual termi14 nates enrollment with the organization during the

15 90-day period beginning on the date of the individ16 ual’s enrollment, the organization shall recoup the

17 commission from the agent.’’.

18 SEC. 115. RESTRICTIONS ON IN-PERSON ENROLLMENT.

19 Section 1876(c)(3) (42 U.S.C. 1395mm(c)(3)) is

20 amended by adding at the end the following new subpara21 graph:

22 ‘‘(H) Each eligible organization shall permit an indi23 vidual entitled to benefits under part A to obtain enroll24 ment forms and information and to enroll under this sec25 tion by mail, and no agent of an eligible organization may
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1 visit the residence of such an individual for purposes of

2 enrolling the individual under this section or providing en3 rollment information to the individual other than at the

4 individual’s request.’’.

5 SEC. 116. APPLICATION OF PEER REVIEW TO COST-BASED

6 HEALTH MAINTENANCE ORGANIZATIONS

7 AND HEALTH CARE PRE-PAYMENT PLANS.

8 Section 1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A))

9 is amended—

10 (1) by striking ‘‘risk-sharing’’;

11 (2) by inserting after ‘‘this section’’ the follow12 ing: ‘‘and each contract with an organization de13 scribed in section 1833(a)(1)(A)’’; and

14 (3) by striking ‘‘eligible’’ the second and third

15 place it appears.

16 Subtitle C—Effective Date

17 SEC. 121. EFFECTIVE DATE.

18 The amendments made by this title shall apply with

19 respect to contract years beginning on or after January

20 1, 1997.
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1 TITLE II—PROTECTIONS FOR

2 BENEFICIARIES ENROLLED

3 IN MEDICARE SUPPLE4 MENTAL AND MEDICARE SE5 LECT POLICIES

6 SEC. 201. CHANGES IN REQUIREMENTS FOR MEDICARE

7 SUPPLEMENTAL POLICIES.

8 (a) REQUIREMENT OF COMMUNITY RATING.—

9 (1) IN GENERAL.—Section 1882(s) (42 U.S.C.

10 1395ss(s)) is amended—

11 (A) in paragraph (3), by striking ‘‘and

12 (2)’’ and inserting ‘‘, (2), and (3)’’, and by re13 designating such paragraph as paragraph (4),

14 and

15 (B) by inserting after paragraph (2) the

16 following new paragraph:

17 ‘‘(3)(A) Except as provided in this paragraph, the is18 suer of a medicare supplemental policy may not vary the

19 premium among individuals who reside in the same com20 munity rating area.

21 ‘‘(B)(i) In the first year for which this paragraph ap22 plies to such an issuer in a State, the premium rate

23 charged by the issuer for such a policy in a community

24 may vary so long as the premium range percentage (as

defined in clause (iii)) does not exceed 2 25 ⁄3 of the premium
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1 range percentage of premium rates charged by the insurer

2 for such policies in the community rating area in the pre3 vious year.

4 ‘‘(ii) In the second year for which this paragraph ap5 plies to such an issuer in a State, the premium rate

6 charged by the issuer for such a policy in a community

7 may vary so long as the premium range percentage (as

defined in clause (iii)) does not exceed 1 8 ⁄2 of the maximum

9 premium range percentage permitted under clause (i) for

10 the previous year.

11 ‘‘(iii) In this paragraph, the term ‘premium range

12 percentage’ means—

13 ‘‘(I) the highest premium rate minus the lowest

14 premium rate, divided by

15 ‘‘(II) the lowest premium rate,

16 expressed as a percentage.

17 ‘‘(C) For purposes of this paragraph, each of the fol18 lowing is considered to be a separate ‘community rating

19 area’:

20 ‘‘(1) Each metropolitan statistical area.

21 ‘‘(2) The area of each State that is not within

22 a metropolitan statistical area.

23 (2) CONFORMING AMENDMENT.—Section

24 1882(s)(2)(A) (42 U.S.C. 1395ss(s)(2)(A)) is
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1 amended by striking ‘‘, or discriminate in the pricing

2 of the policy,’’.

3 (b) INCREASE IN LOSS RATIO.—Section

4 1882(r)(1)(A) (42 U.S.C. 1395ss(r)(1)(A)) is amended by

5 striking ‘‘75 percent’’ and all that follows through the

6 semicolon and inserting ‘‘85 percent;’’.

7 (c) EFFECTIVE DATE.—

8 (1) NAIC STANDARDS.—If, within 6 months

9 after the date of the enactment of this Act, the Na10 tional Association of Insurance Commissioners (in

11 this section referred to as the ‘‘NAIC’’) makes

12 changes in the 1991 NAIC Model Regulation (as de13 fined in section 1882(p)(1)(A) of the Social Security

14 Act) to incorporate the additional requirements im15 posed by the amendments made by this section, sec16 tion 1882(g)(2)(A) of such Act shall be applied in

17 each State, effective for policies issued to policy18 holders on and after the date specified in paragraph

19 (3), as if the reference to the Model Regulation

20 adopted on June 6, 1979, were a reference to the

21 1991 NAIC Model Regulation (as so defined) as

22 changed under this section (such changed Regula23 tion referred to in this section as the ‘‘1995 NAIC

24 Model Regulation’’).
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1 (2) SECRETARY STANDARDS.—If the NAIC

2 does not make changes in the 1991 NAIC Model

3 Regulation (as so defined) within the 6-month period

4 specified in paragraph (1), the Secretary of Health

5 and Human Services (in this subsection as the ‘‘Sec6 retary’’) shall promulgate a regulation and section

7 1882(g)(2)(A) of the Social Security Act shall be ap8 plied in each State, effective for policies issued to

9 policyholders on and after the date specified in para10 graph (3), as if the reference to the Model Regula11 tion adopted in June 6, 1979, were a reference to

12 the 1991 NAIC Model Regulation (as so defined) as

13 changed by the Secretary under this subsection

14 (such changed Regulation referred to in this sub15 section as the ‘‘1995 Federal Regulation’’).

16 (3) DATE SPECIFIED.—

17 (A) IN GENERAL.—Subject to subpara18 graph (B), the date specified in this paragraph

19 for a State is the earlier of—

20 (i) the date the State adopts the 1995

21 NAIC Model Regulation or the 1995 Fed22 eral Regulation; or

23 (ii) 1 year after the date the NAIC or

24 the Secretary first adopts such regulations.
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1 (B) ADDITIONAL LEGISLATIVE ACTION RE2 QUIRED.—In the case of a State which the Sec3 retary identifies, in consultation with the NAIC,

4 as—

5 (i) requiring State legislation (other

6 than legislation appropriating funds) in

7 order for medicare supplemental policies to

8 meet the 1995 NAIC Model Regulation or

9 the 1995 Federal Regulation, but

10 (ii) having a legislature which is not

11 scheduled to meet in 1996 in a legislative

12 session in which such legislation may be

13 considered,

14 the date specified in this paragraph is the first

15 day of the first calendar quarter beginning after

16 the close of the first legislative session of the

17 State legislature that begins on or after Janu18 ary 1, 1996. For purposes of the previous sen19 tence, in the case of a State that has a 2-year

20 legislative session, each year of such session

21 shall be deemed to be a separate regular session

22 of the State legislature.

23 SEC. 202. APPLICATION OF STANDARDS TO MEDICARE SE24 LECT POLICIES.

25 Section 1882(t) (42 U.S.C. 1395ss(t)) is amended—
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1 (1) in the matter in paragraph (1) before sub2 paragraph (A), by inserting ‘‘, under the standards

3 established under paragraph (4)’’ after ‘‘if’’;

4 (2) by striking ‘‘and’’ at the end of paragraph

5 (1)(E);

6 (3) by striking the period at the end of para7 graph (1)(F) and inserting a semicolon;

8 (4) by adding at the end of paragraph (1) the

9 following new subparagraphs:

10 ‘‘(G) notwithstanding any other provision

11 of this section to the contrary, if the issuer of

12 the policy meet the requirements of paragraph

13 (5).’’;

14 (5) by adding at the end of paragraph (2) the

15 following: ‘‘The intermediate sanctions described in

16 clauses (ii) and (iii) of section 1876(i)(6)(B) shall

17 apply to actions described in the first sentence of

18 this paragraph in the same manner as they apply to

19 violations described in section 1876(i)(6)(A).’’; and

20 (6) by adding at the end the following new

21 paragraphs:

22 ‘‘(4)(A) The Secretary shall establish by regulation

23 standards for policies in order to be provided special treat24 ment under paragraph (1). To the extent practicable, such

25 standards shall be the same as the standards established
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1 by the National Association of Insurance Commissioners

2 with respect to such policies. Any additional standards

3 shall be developed in consultation with such Association.

4 ‘‘(B) If the Secretary determines that a State has es5 tablished an effective program to enforce the standards

6 established under subparagraph (A), any policy that a

7 State determines under such program to meet such stand8 ards shall be deemed to meet such standards for purposes

9 of this section.

10 ‘‘(5) For purposes of paragraph (1), the requirements

11 of this paragraph, with respect to a policy are as follows:

12 ‘‘(A) If the issuer of the policy—

13 ‘‘(i) is an eligible organization (as defined

14 in section 1876(a)), the benefits under the pol15 icy (in coordination with benefits made available

16 under this title) are the same as the benefits re17 quired to be made available by such an organi18 zation with a risk-sharing contract under sec19 tion 1876, or

20 ‘‘(ii) is not such an organization, the bene21 fits under the policy shall be either—

22 ‘‘(I) the benefits required under the

23 Standardized Medicare supplement benefit

24 plan ‘E’ (as specified in section 9E(5) of

25 the 1991 NAIC Model Regulation), plus
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1 One Hundred Percent (100%) of the Medi2 care Part B Excess Charges (as defined in

3 section 8C(5) of such Regulation); or

4 ‘‘(II) the benefits required under the

5 Standardized Medicare supplement benefit

6 plan ‘J’ (as specified in section 9E(10) of

7 such Regulation).

8 ‘‘(B) The issuer of the policy (in relation to the

9 policy) meets the same requirements under section

10 1876 that would apply to an eligible organization

11 with a risk-sharing contract under that section (in12 cluding community rating of premiums and prior ap13 proval of marketing materials, but not including pro14 vision of benefits).’’.

15 TITLE III—COORDINATION OF

16 ENROLLMENT AND TERMI17 NATION OF ENROLLMENT

18 SEC. 301. UNIFORM OPEN ENROLLMENT PERIODS.

19 (a) FOR CAPITATED PLANS.—

20 (1) ESTABLISHMENT.—The first sentence of

21 section 1876(c)(3)(A)(i) (42 U.S.C.

22 1395mm(c)(3)(A)(i)) is amended by inserting

23 ‘‘(which shall be specified by the Secretary)’’ after

24 ‘‘open enrollment period’’.
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1 (2) PERIOD FOR TERMINATION OF ENROLL2 MENT.—Section 1876(c)(3)(B) (42 U.S.C.

3 1395mm(c)(3)(B)) is amended to read as follows:

4 ‘‘(B)(i) Except in the case of an individual terminat5 ing enrollment for cause, an individual may terminate en6 rollment with an eligible organization under this section

7 only during the open enrollment period described in sub8 paragraph (A)(i), except as follows:

9 ‘‘(I) For the first 12-month period during which

10 the individual is enrolled with the organization, the

11 individual may terminate enrollment during the final

12 month of each calendar quarter occurring during

13 such period.

14 ‘‘(II) For the second year in which the individ15 ual is enrolled with the organization, the individual

16 may terminate enrollment during the final month of

17 the second calendar quarter.

18 ‘‘(III) In the case of an eligible organization

19 with a reasonable cost reimbursement contract or an

20 organization which is financially insolvent, the indi21 vidual may terminate enrollment in accordance with

22 regulations prescribed by the Secretary.

23 ‘‘(ii) An individual’s termination of enrollment shall

24 be effective as of the beginning of the first calendar month

25 following the date on which the individual requests such
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1 termination (or, in the case of an organization with a rea2 sonable cost reimbursement contract or an organization

3 which is financially insolvent, as may be prescribed by the

4 Secretary in regulations).

5 ‘‘(iii) If an individual terminates enrollment with an

6 eligible organization, the organization shall provide the in7 dividual with a copy of the written request for termination

8 and a written explanation of the period (ending on the

9 effective date of the termination under clause (ii)) during

10 which the individual continues to be enrolled with the or11 ganization and may not receive benefits under this title

12 other than through the organization.’’.

13 (b) FOR MEDIGAP PLANS.—Section 1882(s) (42

14 U.S.C. 1395ss(s)), as amended by section 201(a)(1), is

15 amended—

16 (1) in paragraph (4), by striking ‘‘and (3)’’ and

17 inserting ‘‘, (3), and (4)’’, and by redesignating such

18 paragraph as paragraph (5), and

19 (2) by inserting after paragraph (3) the follow20 ing new paragraph:

21 ‘‘(4)(A) Each issuer of a medicare supplemental pol22 icy shall have an open enrollment period (which shall be

23 the period specified by the Secretary under section

24 1876(c)(3)(A)(i)), of at least 30 days duration every year,

25 during which the issuer may not deny or condition the is-
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1 suance or effectiveness of a medicare supplemental policy,

2 or discriminate in the pricing of the policy, because of age,

3 health status, claims experience, receipt of health care, or

4 medical condition. The policy may not provide any time

5 period applicable to pre-existing conditions, waiting peri6 ods, elimination periods, and probationary periods (except

7 as provided by paragraph (2)(B)). The Secretary may re8 quire enrollment through a third party designated under

9 section 1876(c)(3)(B).

10 ‘‘(B) The provisions of section 1876(c)(3)(B) shall

11 apply with respect to the termination of enrollment with

12 the issuer of a medicare supplemental policy in the same

13 manner as such provisions apply with respect to the termi14 nation of enrollment with an eligible organization under

15 section 1876.’’.

16 (c) FOR MEDICARE SELECT POLICIES.—Section

17 1882(t)(5) (42 U.S.C. 1395ss(t)(5)), as added by section

18 202(a)(6), is amended by adding at the end the following

19 new subparagraph:

20 ‘‘(C) The periods for enrollment and termi21 nation of enrollment applicable for the policy are the

22 same periods applicable to a medicare supplemental

23 policy under section 1882(s)(4).’’.
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1 SEC. 302. ENROLLMENTS FOR NEW MEDICARE BENE2 FICIARIES AND THOSE WHO MOVE.

3 Section 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A))

4 is amended—

5 (1) in clause (i), by striking ‘‘clause (ii)’’ and

6 inserting ‘‘clauses (ii) through (iv)’’, and

7 (2) by adding at the end the following:

8 ‘‘(iii) Each eligible organization shall have an open

9 enrollment period for each individual eligible to enroll

10 under subsection (d) during any enrollment period speci11 fied by section 1837 that applies to that individual. Enroll12 ment under this clause shall be effective as specified by

13 section 1838.

14 ‘‘(iv) Each eligible organization shall have an open

15 enrollment period for each individual eligible to enroll

16 under subsection (d) who has previously resided outside

17 the geographic area which the organization serves. The en18 rollment period shall begin with the beginning of the

19 month that precedes the month in which the individual

20 becomes a resident of that geographic area and shall end

21 at the end of the following month. Enrollment under this

22 clause shall be effective as of the first of the month follow23 ing the month in which the individual enrolls.’’.
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1 SEC. 303. PROVISION BY SECRETARY OF ENROLLMENT IN2 FORMATION AND OTHER INFORMATION ON

3 ELIGIBLE ORGANIZATIONS AND MEDICARE

4 SUPPLEMENTAL POLICIES.

5 (a) IN GENERAL.—Section 1804(b) (42 U.S.C.

6 1395b–2(b)), as added by section 171(j)(1)(C) of the So7 cial Security Act Amendments of 1994, is amended to

8 read as follows:

9 ‘‘(b) The Secretary shall provide information upon re10 quest (including through the mails and via a toll-free tele11 phone number) to any individual entitled to benefits under

12 this title on the programs under this title, including—

13 ‘‘(1) information to assist individuals in enroll14 ing with eligible organizations under section 1876

15 and in selecting among such organizations for enroll16 ment, including information on the premiums

17 charged by such organizations for enrollment; and

18 ‘‘(2) information on medicare supplemental

19 policies under section 1882, including the relation20 ship of State programs under title XIX to such poli21 cies and the premiums charged by such policies for

22 enrollment (to the extent information on such pre23 miums is available to the Secretary).’’.

24 (b) CONFORMING AMENDMENT.—Section 1882(f)

25 (42 U.S.C. 1395ss(f)), as added by section 171(j)(2) of

26 the Social Security Act Amendments of 1994, is repealed.
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1 SEC. 304. EFFECTIVE DATE.

2 The amendments made by this title apply to enroll3 ments and terminations of enrollments occurring after

4 1996 (but only after the Secretary of Health and Human

5 Services has prescribed the relevant annual period), except

6 that the amendments made by section 301(b) apply to en7 rollments for a medicare supplemental policy made after

8 1996.

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