I

104TH CONGRESS

1ST SESSION H. R. 1424

To provide Americans with secure, portable health insurance benefits through

tax credits, medical savings accounts, and greater choice of health insurance plans without mandates, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 6, 1995

Mr. STEARNS introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Commerce, the Judiciary, and Rules, 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 provide Americans with secure, portable health insurance

benefits through tax credits, medical savings accounts,

and greater choice of health insurance plans without

mandates, 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 AND TABLE OF CONTENTS.

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

5 ‘‘Consumer Choice Health Reform Act of 1995’’.

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

7 this Act is as follows:
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Sec. 1. Short title and table of contents.

Sec. 2. Purposes.

TITLE I—TAX AND INSURANCE PROVISIONS

Subtitle A—Tax Treatment of Health Care Expenses

Sec. 101. Refundable health care expenses tax credit.

Sec. 102. Medical savings accounts.

Sec. 103. Other tax provisions.

Subtitle B—Insurance Provisions

PART I—FEDERALLY QUALIFIED HEALTH INSURANCE PLAN

Sec. 111. Federally qualified health insurance plan.

Sec. 112. Family security benefits package.

Sec. 113. Rating practices.

Sec. 114. Guaranteed issue.

Sec. 115. Guaranteed renewability.

PART II—CERTIFICATION OF FEDERALLY QUALIFIED HEALTH INSURANCE

PLANS

Sec. 117. Establishment of regulatory program for certification of plans.

Sec. 118. Standards for regulatory programs.

Subtitle C—Employer Provisions

Sec. 121. General provisions relating to employers.

Sec. 122. Conversion of non-self-insured plans.

Sec. 123. Provisions relating to existing self-insured plans.

Sec. 124. Continuation of employer-provided health coverage required until effective date of new coverage under this act.

Sec. 125. Requirements with respect to cashing out employer-sponsored plans.

Sec. 126. Enforcement.

Subtitle D—Federal Preemption

Sec. 131. Federal preemption of certain State laws.

TITLE II—ADMINISTRATIVE COST SAVINGS

Subtitle A—Standardization of Claims Processing

Sec. 201. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 202. Application of standards.

Sec. 203. Periodic review and revision of standards.

Sec. 204. Health insurance plan defined.

Subtitle B—Electronic Medical Data Standards

Sec. 211. Medical data standards for hospitals and other providers.

Sec. 212. Application of electronic data standards to certain hospitals.

Sec. 213. Electronic transmission to Federal agencies.

Sec. 214. Limitation on data requirements where standards in effect.

Sec. 215. Advisory commission.
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Subtitle C—Development and Distribution of Comparative Value Information

Sec. 221. State comparative value information programs for health care purchasing.

Sec. 222. Federal implementation.

Sec. 223. Comparative value information concerning Federal programs.

Subtitle D—Preemption of State Quill Pen Laws

Sec. 231. Preemption of State quill pen laws.

TITLE III—ANTI-FRAUD

Subtitle A—Criminal Prosecution of Health Care Fraud

Sec. 301. Penalties for health care fraud.

Sec. 302. Rewards for information leading to prosecution and conviction.

Subtitle B—Coordination of Health Care Anti-Fraud and Abuse Activities

Sec. 311. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health insurance plan.

TITLE IV—ANTITRUST PROVISIONS

Sec. 401. Exemption from antitrust laws for certain competitive and collaborative activities.

Sec. 402. Safe harbors.

Sec. 403. Designation of additional safe harbors.

Sec. 404. Certificates of review.

Sec. 405. Notifications providing reduction in certain penalties under antitrust

law for health care cooperative ventures.

Sec. 406. Review and reports on safe harbors and certificates of review.

Sec. 407. Rules, regulations, and guidelines.

Sec. 408. Definitions.

1 SEC. 2. PURPOSES.

2 The purposes of this Act are to—

3 (1) provide Americans with secure, portable

4 health insurance benefits and greater choice of

5 health insurance plans,

6 (2) make the American health care system re7 sponsive to consumer needs and encourage the provi8 sion of quality medical care at reasonable prices

9 through enhanced competition,
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1 (3) provide more equitable tax treatment of

2 health insurance and medical care expenses, and

3 (4) assist low-income and uninsured Americans

4 in purchasing health insurance and receiving pri5 mary medical care.

6 TITLE I—TAX AND INSURANCE

7 PROVISIONS

8 Subtitle A—Tax Treatment of

9 Health Care Expenses

10 SEC. 101. REFUNDABLE HEALTH CARE EXPENSES TAX

11 CREDIT.

12 (a) IN GENERAL.—Subpart C of part IV of sub13 chapter A of chapter 1 of the Internal Revenue Code of

14 1986 (relating to refundable personal credits) is amended

15 by inserting after section 34 the following new section:

16 ‘‘SEC. 34A. HEALTH CARE EXPENSES.

17 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

18 qualified individual, there shall be allowed as a credit

19 against the tax imposed by this subtitle for the taxable

20 year an amount equal to the applicable percentage of the

21 sum of—

22 ‘‘(1) 22 percent of the sum of the qualified

23 health insurance premiums and the unreimbursed

24 expenses for medical care paid by such individual

25 during the taxable year which does not exceed 10
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1 percent of the adjusted gross income of such individ2 ual for such year, plus

3 ‘‘(2) 44 percent of the sum of such premiums

4 and such unreimbursed expenses so paid which ex5 ceeds 10 percent but does not exceed 20 percent of

6 such adjusted gross income, plus

7 ‘‘(3) 66 percent of the sum of such premiums

8 and such unreimbursed expenses so paid which ex9 ceeds 20 percent of such adjusted gross income.

10 ‘‘(b) QUALIFIED INDIVIDUALS.—For purposes of this

11 section:

12 ‘‘(1) IN GENERAL.—The term ‘qualified individ13 ual’ means the taxpayer, the spouse of the taxpayer,

14 and each dependent of the taxpayer (as defined in

15 section 152) who is enrolled in a federally qualified

16 health insurance plan.

17 ‘‘(2) FEDERALLY COVERED INDIVIDUALS.—The

18 term ‘qualified individual’ does not include any indi19 vidual whose medical care is covered under—

20 ‘‘(A) title XVIII or XIX of the Social Se21 curity Act,

22 ‘‘(B) chapter 55 of title 10, United States

23 Code,

24 ‘‘(C) chapter 17 of title 38, United States

25 Code, or
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1 ‘‘(D) the Indian Health Care Improvement

2 Act.

3 ‘‘(3) SPECIAL RULE IN THE CASE OF CHILD OF

4 DIVORCED PARENTS, ETC.—Any child to whom sec5 tion 152(e) applies shall be treated as a dependent

6 of both parents.

7 ‘‘(4) MARRIAGE RULES.—The determination of

8 whether an individual is married at any time during

9 the taxable year shall be made in accordance with

10 the provisions of section 6013(d) (relating to deter11 mination of status as husband and wife).

12 ‘‘(c) APPLICABLE PERCENTAGE.—For purposes of

13 subsection (a), the applicable percentage for any taxable

14 year is determined by the number of whole months in such

15 year in which the taxpayer is a qualified individual.

16 ‘‘(d) QUALIFIED HEALTH INSURANCE PREMIUMS.—

17 For purposes of this section, the term ‘qualified health in18 surance premiums’ means premiums for—

19 ‘‘(1) a federally qualified health insurance plan,

20 and

21 ‘‘(2) any other benefits or plans supplementary

22 to such a federally qualified health insurance plan.

23 ‘‘(e) FEDERALLY QUALIFIED HEALTH INSURANCE

24 PLAN.—For purposes of this section, the term ‘federally

25 qualified health insurance plan’ means a health insurance
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1 plan which is described in section 111 of the Consumer

2 Choice Health Reform Act of 1995.

3 ‘‘(f) MEDICAL CARE.—For purposes of this section:

4 ‘‘(1) IN GENERAL.—The term ‘medical care’

5 means amounts paid—

6 ‘‘(A) for the diagnosis, cure, mitigation,

7 treatment, or prevention of disease, or for the

8 purpose of affecting any structure or function

9 of the body, and

10 ‘‘(B) for transportation primarily for and

11 essential to medical care referred to in subpara12 graph (A).

13 ‘‘(2) AMOUNTS PAID FOR CERTAIN LODGING

14 AWAY FROM HOME TREATED AS PAID FOR MEDICAL

15 CARE.—Amounts paid for lodging (not lavish or ex16 travagant under the circumstances) while away from

17 home primarily for and essential to medical care re18 ferred to in paragraph (1)(A) shall be treated as

19 amounts paid for medical care if—

20 ‘‘(A) the medical care referred to in para21 graph (1)(A) is provided by a physician in a li22 censed hospital (or in a medical care facility

23 which is related to, or the equivalent of, a li24 censed hospital), and
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1 ‘‘(B) there is no significant element of per2 sonal pleasure, recreation, or vacation in the

3 travel away from home.

4 The amount taken into account under the preceding

5 sentence shall not exceed $50 for each night for each

6 individual.

7 ‘‘(3) COSMETIC SURGERY.—

8 ‘‘(A) IN GENERAL.—The term ‘medical

9 care’ does not include cosmetic surgery or other

10 similar procedures, unless the surgery or proce11 dure is necessary to ameliorate a deformity

12 arising from, or directly related to, a congenital

13 abnormality, a personal injury resulting from

14 an accident or trauma, or disfiguring disease.

15 ‘‘(B) COSMETIC SURGERY DEFINED.—For

16 purposes of this paragraph, the term ‘cosmetic

17 surgery’ means any procedure which is directed

18 at improving the patient’s appearance and does

19 not meaningfully promote the proper function

20 of the body or prevent or treat illness or dis21 ease.

22 ‘‘(4) PHYSICIAN.—The term ‘physician’ has the

23 meaning given to such term by section 1861(r) of

24 the Social Security Act (42 U.S.C. 1395x(r)).

25 ‘‘(g) SPECIAL RULES.—For purposes of this section:
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1 ‘‘(1) LIMITATION WITH RESPECT TO MEDICINE

2 AND DRUGS.—

3 ‘‘(A) IN GENERAL.—An amount paid dur4 ing the taxable year for medicine or a drug

5 shall be taken into account under subsection (a)

6 only if such medicine or drug is a prescribed

7 drug or is insulin.

8 ‘‘(B) PRESCRIBED DRUG.—The term ‘pre9 scribed drug’ means a drug or biological which

10 requires a prescription of a physician for its use

11 by an individual.

12 ‘‘(2) SPECIAL RULE FOR DECEDENTS.—

13 ‘‘(A) TREATMENT OF EXPENSES PAID

14 AFTER DEATH.—Expenses for the medical care

15 of the taxpayer which are paid out of the tax16 payer’s estate during the 1-year period begin17 ning with the day after the date of the tax18 payer’s death shall be treated as paid by the

19 taxpayer at the time incurred.

20 ‘‘(B) LIMITATION.—Subparagraph (A)

21 shall not apply if the amount paid is allowable

22 under section 2053 as a deduction in computing

23 the taxable estate of the decedent, but this sub24 paragraph shall not apply if (within the time
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1 and in the manner and form prescribed by the

2 Secretary) there is filed—

3 ‘‘(i) a statement that such amount

4 has not been allowed as a deduction under

5 section 2053, and

6 ‘‘(ii) a waiver of the right to have

7 such amount allowed at any time as a de8 duction under section 2053.

9 ‘‘(3) FORM OF INSURANCE CONTRACT.—In the

10 case of an insurance contract under which amounts

11 are payable for other than medical care—

12 ‘‘(A) no amount shall be treated as paid

13 for insurance to which subsection (a) applies

14 unless the charge for such insurance is either

15 separately stated in the contract, or furnished

16 to the policyholder by the insurance company in

17 a separate statement,

18 ‘‘(B) the amount taken into account as the

19 amount paid for such insurance shall not exceed

20 such charge, and

21 ‘‘(C) no amount shall be treated as paid

22 for such insurance if the amount specified in

23 the contract (or furnished to the policyholder by

24 the insurance company in a separate statement)

25 as the charge for such insurance is unreason-
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1 ably large in relation to the total charges under

2 the contract.

3 ‘‘(4) EXCLUSION OF AMOUNTS ALLOWED FOR

4 CARE OF CERTAIN DEPENDENTS.—Any expense al5 lowed as a credit under section 21 shall not be treat6 ed as an expense paid for medical care.

7 ‘‘(5) COORDINATION WITH ADVANCE PAYMENT

8 AND MINIMUM TAX.—Rules similar to the rules of

9 subsections (g) and (h) of section 32 shall apply to

10 any credit to which this section applies.

11 ‘‘(6) SUBSIDIZED EXPENSES.—No expense shall

12 be taken into account under subsection (a), if—

13 ‘‘(A) such expense is paid, reimbursed, or

14 subsidized (whether by being disregarded for

15 purposes of another program or otherwise) by

16 the Federal Government, a State or local gov17 ernment, or any agency or instrumentality

18 thereof, and

19 ‘‘(B) the payment, reimbursement, or sub20 sidy of such expense is not includable in the

21 gross income of the recipient.

22 ‘‘(7) COORDINATION WITH MEDICAL SAVINGS

23 ACCOUNTS.—The amount otherwise taken into ac24 count under subsection (a) shall be reduced by the

25 amount (if any) of the distributions from any medi-
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1 cal savings account of the taxpayer during the tax2 able year which is not includible in gross income by

3 reason of being used for qualified medical expenses

4 (as defined in section 25A(c)(2)).

5 ‘‘(h) INDEXING OF PERCENTAGES.—For each year

6 after 1998, the Secretary, in consultation with the Sec7 retary of Health and Human Services, shall adjust the ref8 erences to 10 percent and 20 percent in subsection (a)

9 by the ratio of—

10 ‘‘(1) the percentage increase in medical care in11 flation between 1997 and the year before the year

12 involved, to

13 ‘‘(2) the national average percentage increase in

14 adjusted gross income of individuals between such

15 years.

16 ‘‘(i) REGULATIONS.—The Secretary shall prescribe

17 such regulations as may be necessary to carry out the pur18 poses of this section.’’.

19 (b) ADVANCE PAYMENT OF CREDIT.—Chapter 25 of

20 the Internal Revenue Code of 1986 (relating to general

21 provisions relating to employment taxes) is amended by

22 inserting after section 3507 the following new section:
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1 ‘‘SEC. 3507A. ADVANCE PAYMENT OF HEALTH EXPENSES

2 CREDIT.

3 ‘‘(a) GENERAL RULE.—Except as otherwise provided

4 in this section, every employer making payment of wages

5 with respect to whom a health care expenses eligibility cer6 tificate is in effect shall, at the time of paying such wages,

7 make an additional payment equal to such employee’s

8 health care expenses advance amount.

9 ‘‘(b) HEALTH CARE EXPENSES ELIGIBILITY CER10 TIFICATE.—For purposes of this title, a health care ex11 penses eligibility certificate is a statement furnished by an

12 employee to the employer which—

13 ‘‘(1) certifies that the employee will be eligible

14 to receive the credit provided by section 34A for the

15 taxable year,

16 ‘‘(2) certifies that the employee does not have

17 a health care expenses eligibility certificate in effect

18 for the calendar year with respect to the payment of

19 wages by another employer,

20 ‘‘(3) states whether or not the employee’s

21 spouse has a health care expenses eligibility certifi22 cate in effect, and

23 ‘‘(4) estimates the amount of premiums for a

24 federally qualified health insurance plan and unreim25 bursed expenses for medical care (as defined in sec26 tion 34A) for the calendar year.
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1 For purposes of this section, a certificate shall be treated

2 as being in effect with respect to a spouse if such a certifi3 cate will be in effect on the first status determination date

4 following the date on which the employee furnishes the

5 statement in question.

6 ‘‘(c) HEALTH CARE EXPENSES ADVANCE

7 AMOUNT.—

8 ‘‘(1) IN GENERAL.—For purposes of this title,

9 the term ‘health expenses advance amount’ means,

10 with respect to any payroll period, the amount deter11 mined—

12 ‘‘(A) on the basis of the employee’s wages

13 from the employer for such period,

14 ‘‘(B) on the basis of the employee’s esti15 mated premiums for a federally qualified health

16 insurance plan and unreimbursed expenses for

17 medical care included in the health care ex18 penses eligibility certificate, and

19 ‘‘(C) in accordance with tables provided by

20 the Secretary.

21 ‘‘(2) ADVANCE AMOUNT TABLES.—The tables

22 referred to in paragraph (1)(C) shall be similar in

23 form to the tables prescribed under section 3402

24 and, to the maximum extent feasible, shall be coordi-
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1 nated with such tables and the tables prescribed

2 under section 3507(c).

3 ‘‘(d) OTHER RULES.—For purposes of this section,

4 rules similar to the rules of subsections (d) and (e) of sec5 tion 3507 shall apply.

6 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

7 such regulations as may be necessary to carry out the pur8 poses of this section.’’.

9 (c) CLERICAL AMENDMENTS.—

10 (1) The table of sections for subpart A of part

11 IV of subchapter A of chapter 1 of the Internal Rev12 enue Code of 1986 is amended by inserting after the

13 item relating to section 34 the following new item:

‘‘Sec. 34A. Health care expenses.’’.

14 (2) The table of sections for chapter 25 of such

15 Code is amended by adding after the item relating

16 to section 3507 the following new item:

‘‘Sec. 3507A. Advance payment of health care expenses credit.’’.

17 (d) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to taxable years beginning after

19 December 31, 1998.

20 SEC. 102. MEDICAL SAVINGS ACCOUNTS.

21 (a) IN GENERAL.—Subpart A of part IV of sub22 chapter A of chapter 1 of the Internal Revenue Code of

23 1986 (relating to nonrefundable personal credits) is
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1 amended by inserting after section 25 the following new

2 section:

3 ‘‘SEC. 25A. MEDICAL SAVINGS ACCOUNTS.

4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in5 dividual, there shall be allowed as a credit against the tax

6 imposed by this subtitle for the taxable year an amount

7 equal to 25 percent of the amount paid in cash during

8 such year by or on behalf of such individual to a medical

9 savings account.

10 ‘‘(b) LIMITATIONS.—For purposes of this section:

11 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—No credit

12 shall be allowed under subsection (a) for amounts

13 paid to any medical savings account for the benefit

14 of an individual, such individual’s spouse, or any de15 pendent (as defined in section 152) of such individ16 ual if such individual, spouse, or dependent is a ben17 eficiary of any other medical savings account.

18 ‘‘(2) DOLLAR LIMITATION.—The aggregate

19 amount of contributions which may be taken into ac20 count under subsection (a) with respect to any indi21 vidual for any taxable year shall not exceed the sum

22 of—

23 ‘‘(A) $3,000, plus
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1 ‘‘(B) $500 for each individual who is a de2 pendent (as so defined) of the individual for

3 whose benefit the account is established.

4 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur5 poses of this section:

6 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

7 ‘‘(A) IN GENERAL.—The term ‘medical

8 savings account’ means a trust created or orga9 nized in the United States exclusively for the

10 purpose of paying the qualified medical ex11 penses of the individual for whose benefit the

12 trust is established, but only if the written gov13 erning instrument creating the trust meets the

14 following requirements:

15 ‘‘(i) Except in the case of a rollover

16 contribution described in subsection (d)(4),

17 no contribution will be accepted unless it is

18 in cash and contributions will not be ac19 cepted for any taxable year in excess of the

20 amount determined under subsection

21 (b)(1).

22 ‘‘(ii) The trustee is a bank (as defined

23 in section 408(n)) or another person who

24 demonstrates to the satisfaction of the Sec25 retary that the manner in which such per-
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1 son will administer the trust will be con2 sistent with the requirements of this sec3 tion.

4 ‘‘(iii) No part of the trust assets will

5 be invested in life insurance contracts.

6 ‘‘(iv) The assets of the trust will not

7 be commingled with other property except

8 in a common trust fund or common invest9 ment fund.

10 ‘‘(v) The interest of an individual in

11 the balance in such individual’s account is

12 nonforfeitable.

13 ‘‘(vi) Under regulations prescribed by

14 the Secretary, rules similar to the rules of

15 section 401(a)(9) shall apply to the dis16 tribution of the entire interest of bene17 ficiaries of such trust.

18 ‘‘(B) TREATMENT OF COMPARABLE AC19 COUNTS HELD BY INSURANCE COMPANIES.—An

20 account held by an insurance company in the

21 United States shall be treated as a medical sav22 ings account (and such company shall be treat23 ed as a bank) if—
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1 ‘‘(i) such account is part of a federally

2 qualified health insurance plan (as defined

3 in section 34A(e)),

4 ‘‘(ii) such account is exclusively for

5 the purpose of paying the medical expenses

6 of the beneficiaries of such account who

7 are covered under such health insurance

8 plan, and

9 ‘‘(iii) the written instrument govern10 ing the account meets the requirements of

11 clauses (i), (v), and (vi) of subparagraph

12 (A).

13 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—The

14 term ‘qualified medical expenses’ means amounts

15 paid by the individual for whose benefit the account

16 was established for premiums for a federally quali17 fied health insurance plan (as so defined) and the

18 unreimbursed expenses for medical care (as deter19 mined under section 34A) of such individual, the

20 spouse of such individual, and any dependent (as so

21 defined) of such individual.

22 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

23 MADE.—A contribution shall be deemed to be made

24 on the last day of the preceding taxable year if the

25 contribution is made on account of such taxable year
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1 and is made not later than the time prescribed by

2 law for filing the return for such taxable year (not

3 including extensions thereof).

4 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided in this subsection, any amount paid or distrib7 uted out of a medical savings account shall be in8 cluded in the gross income of the individual for

9 whose benefit such account was established unless

10 such amount is used exclusively to pay the qualified

11 medical expenses of such individual.

12 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE13 FORE DUE DATE OF RETURN.—Paragraph (1) shall

14 not apply to the distribution of any contribution paid

15 during a taxable year to a medical savings account

16 to the extent that such contribution exceeds the

17 amount allowable under subsection (b) if—

18 ‘‘(A) such distribution is received on or be19 fore the day prescribed by law (including exten20 sions of time) for filing such individual’s return

21 for such taxable year,

22 ‘‘(B) no credit is allowed under subsection

23 (a) with respect to such excess contribution,

24 and
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1 ‘‘(C) such distribution is accompanied by

2 the amount of net income attributable to such

3 excess contribution.

4 Any net income described in subparagraph (C) shall

5 be included in the gross income of the individual for

6 the taxable year in which it is received.

7 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

8 FOR MEDICAL EXPENSES.—The tax imposed by this

9 chapter for any taxable year in which there is a pay10 ment or distribution from a medical savings account

11 which is not used to pay the medical expenses of the

12 individual for whose benefit the account was estab13 lished, shall be increased by 10 percent of the

14 amount of such payment or distribution which is in15 cludible in gross income under paragraph (1).

16 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

17 apply to any amount paid or distributed out of a

18 medical savings account to the individual for whose

19 benefit the account is maintained, if the entire

20 amount received (including money and any other

21 property) is paid into another medical savings ac22 count for the benefit of such individual not later

23 than the 60th day after the day on which the indi24 vidual received the payment or distribution.

25 ‘‘(e) TAX TREATMENT OF ACCOUNTS.—
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1 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav2 ings account is exempt from taxation under this sub3 title unless such account has ceased to be a medical

4 savings account by reason of paragraph (2) or (3).

5 Notwithstanding the preceding sentence, any such

6 account shall be subject to the taxes imposed by sec7 tion 511 (relating to imposition of tax on unrelated

8 business income of charitable, etc. organizations).

9 ‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE

10 INDIVIDUAL ENGAGES IN PROHIBITED TRANS11 ACTION.—

12 ‘‘(A) IN GENERAL.—If, during any taxable

13 year of the individual for whose benefit the

14 medical savings account was established, such

15 individual engages in any transaction prohibited

16 by section 4975 with respect to the account, the

17 account ceases to be a medical savings account

18 as of the first day of that taxable year.

19 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

20 ALL ITS ASSETS.—In any case in which any ac21 count ceases to be a medical savings account by

22 reason of subparagraph (A) on the first day of

23 any taxable year, paragraph (1) of subsection

24 (d) applies as if there were a distribution on

25 such first day in an amount equal to the fair
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1 market value (on such first day) of all assets in

2 the account (on such first day) and no portion

3 of such distribution were used to pay qualified

4 medical expenses.

5 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU6 RITY.—If, during any taxable year, the individual for

7 whose benefit a medical savings account was estab8 lished uses the account or any portion thereof as se9 curity for a loan, the portion so used is treated as

10 distributed to that individual and not used to pay

11 qualified medical expenses.

12 ‘‘(f) CUSTODIAL ACCOUNTS.—For purposes of this

13 section, a custodial account shall be treated as a trust if—

14 ‘‘(1) the assets of such account are held by a

15 bank (as defined in section 408(n)) or another per16 son who demonstrates to the satisfaction of the Sec17 retary that the manner in which he will administer

18 the account will be consistent with the requirements

19 of this section, and

20 ‘‘(2) the custodial account would, except for the

21 fact that it is not a trust, constitute a medical sav22 ings account described in subsection (c).

23 For purposes of this title, in the case of a custodial ac24 count treated as a trust by reason of the preceding sen-
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1 tence, the custodian of such account shall be treated as

2 the trustee thereof.

3 ‘‘(g) INFLATION ADJUSTMENT.—

4 ‘‘(1) IN GENERAL.—In the case of any taxable

5 year beginning in a calendar year after 1999, each

6 applicable dollar amount shall be increased by an

7 amount equal to—

8 ‘‘(A) such dollar amount, multiplied by

9 ‘‘(B) the cost-of-living adjustment for the

10 calendar year in which the taxable year begins.

11 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur12 poses of paragraph (1), the cost-of-living adjustment

13 for any calendar year is the percentage (if any) by

14 which—

15 ‘‘(A) the deemed average total wages (as

16 defined in section 209(k) of the Social Security

17 Act) for the preceding calendar year, exceeds

18 ‘‘(B) the deemed average total wages (as

19 so defined) for calendar year 1997.

20 ‘‘(3) APPLICABLE DOLLAR AMOUNT.—For pur21 poses of paragraph (1), the term ‘applicable dollar

22 amount’ means the $3,000 and $500 amounts in

23 subsection (b)(2).

24 ‘‘(4) ROUNDING.—If any amount as adjusted

25 under paragraph (1) is not a multiple of $10, such
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1 amount shall be rounded to the nearest multiple of

2 $10 (or, if such amount is a multiple of $5 and not

3 of $10, such amount shall be rounded to the next

4 highest multiple of $10).

5 ‘‘(h) REPORTS.—The trustee of a medical savings ac6 count shall make such reports regarding such account to

7 the Secretary and to the individual for whose benefit the

8 account is maintained with respect to contributions, dis9 tributions, and such other matters as the Secretary may

10 require under regulations. The reports required by this

11 subsection shall be filed at such time and in such manner

12 and furnished to such individuals at such time and in such

13 manner as may be required by those regulations.’’.

14 (b) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

15 of the Internal Revenue Code of 1986 (relating to tax on

16 excess contributions to individual retirement accounts, cer17 tain section 403(b) contracts, and certain individual re18 tirement annuities) is amended—

19 (1) by inserting ‘‘MEDICAL SAVINGS AC20 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

21 such section,

22 (2) by redesignating paragraph (2) of sub23 section (a) as paragraph (3) and by inserting after

24 paragraph (1) the following:
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1 ‘‘(2) a medical savings account (within the

2 meaning of section 25A(c)(1)),’’,

3 (3) by striking ‘‘or’’ at the end of paragraph

4 (1) of subsection (a), and

5 (4) by adding at the end thereof the following

6 new subsection:

7 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

8 ACCOUNTS.—For purposes of this section, in the case of

9 a medical savings account (within the meaning of section

10 25A(c)(1)), the term ‘excess contributions’ means the

11 amount by which the amount contributed for the taxable

12 year to the account exceeds the amount allowable under

13 section 25A(b)(2) for such taxable year. For purposes of

14 this subsection, any contribution which is distributed out

15 of the medical savings account and a distribution to which

16 section 25A(d)(2) applies shall be treated as an amount

17 not contributed.’’.

18 (c) TAX ON PROHIBITED TRANSACTIONS.—Section

19 4975 of the Internal Revenue Code of 1986 (relating to

20 prohibited transactions) is amended—

21 (1) by adding at the end of subsection (c) the

22 following new paragraph:

23 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC24 COUNTS.—An individual for whose benefit a medical

25 savings account (within the meaning of section
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1 25A(c)(1)) is established shall be exempt from the

2 tax imposed by this section with respect to any

3 transaction concerning such account (which would

4 otherwise be taxable under this section) if, with re5 spect to such transaction, the account ceases to be

6 a medical savings account by reason of the applica7 tion of section 25A(e)(2)(A) to such account.’’, and

8 (2) by inserting ‘‘or a medical savings account

9 described in section 25A(c)(1)’’ in subsection (e)(1)

10 after ‘‘described in section 408(a)’’.

11 (d) FAILURE TO PROVIDE REPORTS ON MEDICAL

12 SAVINGS ACCOUNTS.—Section 6693 of the Internal Reve13 nue Code of 1986 (relating to failure to provide reports

14 on individual retirement account or annuities) is amend15 ed—

16 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

17 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

18 such section, and

19 (2) by adding at the end of subsection (a) the

20 following: ‘‘The person required by section 25A(h) to

21 file a report regarding a medical savings account at

22 the time and in the manner required by such section

23 shall pay a penalty of $50 for each failure unless it

24 is shown that such failure is due to reasonable

25 cause.’’.
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1 (e) CLERICAL AMENDMENTS.—

2 (1) The table of sections for subpart A of part

3 IV of subchapter A of chapter 1 of the Internal Rev4 enue Code of 1986 is amended by inserting after the

5 item relating to section 25 the following:

‘‘Sec. 25A. Medical savings accounts.’’.

6 (2) The table of sections for chapter 43 of such

7 Code is amended by striking the item relating to sec8 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.’’.

9 (3) The table of sections for subchapter B of

10 chapter 68 of such Code is amended by inserting ‘‘or

11 on medical savings accounts’’ after ‘‘annuities’’ in

12 the item relating to section 6693.

13 (f) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to taxable years beginning after

15 December 31, 1998.

16 SEC. 103. OTHER TAX PROVISIONS.

17 (a) TERMINATION OF MEDICAL EXPENSE DEDUC18 TION.—Section 213 of the Internal Revenue Code of 1986

19 (relating to medical, dental, etc., expenses) is amended by

20 adding at the end thereof the following new subsection:
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1 ‘‘(g) TERMINATION.—No amount paid after Decem2 ber 31, 1998, shall be treated as an expense paid for medi3 cal care.’’.

4 (b) TERMINATION OF DEDUCTION FOR HEALTH IN5 SURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.—

6 (1) IN GENERAL.—Section 162(l) of the Inter7 nal Revenue Code of 1986 (relating to special rules

8 for health insurance costs of self-employed individ9 uals) is amended by striking paragraph (6).

10 (2) EFFECTIVE DATE.—The amendment made

11 by paragraph (1) shall apply to taxable years begin12 ning after December 31, 1998.

13 (c) TERMINATION OF EXCLUSION FOR EMPLOYER14 PROVIDED HEALTH INSURANCE.—Section 106 of the In15 ternal Revenue Code of 1986 (relating to contributions by

16 employer to accident and health plans) is amended by add17 ing at the end the following new sentence: ‘‘The preceding

18 sentence shall not apply to any amount paid after Decem19 ber 31, 1998.’’.
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1 Subtitle B—Insurance Provisions

2 PART I—FEDERALLY QUALIFIED HEALTH

3 INSURANCE PLAN

4 SEC. 111. FEDERALLY QUALIFIED HEALTH INSURANCE

5 PLAN.

6 (a) IN GENERAL.—A federally qualified health insur7 ance plan is a health insurance plan offered, issued, or

8 renewed on or after January 1, 1999, which is certified

9 by the applicable regulatory authority as meeting, at a

10 minimum, the requirements of sections 112, 113, 114, and

11 115, and the regulatory program described in section 117.

12 (b) GENERAL DEFINITIONS.—As used in this Act:

13 (1) HEALTH INSURANCE PLAN.—The term

14 ‘‘health insurance plan’’ means any hospital or medi15 cal service policy or certificate, hospital or medical

16 service plan contract, or health maintenance organi17 zation group contract and, in States which have dis18 tinct licensure requirements, a multiple employer

19 welfare arrangement, but does not include any of the

20 following offered by an insurer:

21 (A) Accident only, dental only, disability

22 only, or long-term care only insurance.

23 (B) Coverage issued as a supplement to li24 ability insurance.
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1 (C) Workers’ compensation or similar in2 surance.

3 (D) Automobile medical-payment insur4 ance.

5 (2) APPLICABLE REGULATORY AUTHORITY.—

6 The term ‘‘applicable regulatory authority’’ means—

7 (A) in the case of a State with a program

8 described in section 117, the State commis9 sioner or superintendent of insurance or other

10 State authority responsible for regulation of

11 health insurance; or

12 (B) if the State has not established such a

13 program or such program has been decertified

14 under section 117(b), the Secretary.

15 (3) SECRETARY.—The term ‘‘Secretary’’ means

16 the Secretary of Health and Human Services.

17 (4) STATE.—The term ‘‘State’’ means each of

18 the several States of the United States, the District

19 of Columbia, the Commonwealth of Puerto Rico, the

20 United States Virgin Islands, Guam, America

21 Samoa, and the Commonwealth of the Northern

22 Mariana Islands.

23 SEC. 112. FAMILY SECURITY BENEFITS PACKAGE.

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

2 the requirements of this section are met, if the

3 health insurance plan—

4 (A) provides coverage for all medically nec5 essary acute medical care described in sub6 section (b),

7 (B) does not exclude coverage for selected

8 illnesses or selected treatments if consistent

9 with medically accepted practices, and

10 (C) meets the patient cost sharing require11 ments of subsection (c).

12 (2) ACTUARIAL EQUIVALENTS ALLOWED.—The

13 requirements of this section also are met with re14 spect to a plan if the plan covers medically necessary

15 acute medical care and has an actuarial value at

16 least equivalent to the actuarial value of the benefits

17 otherwise required under paragraph (1).

18 (b) ACUTE MEDICAL CARE.—Coverage for all medi19 cally necessary acute medical care is described in this sub20 section if such coverage includes—

21 (1) physician services,

22 (2) inpatient, outpatient, and emergency hos23 pital services and appropriate alternatives to hos24 pitalization, and

25 (3) inpatient prescription drugs.
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1 Nothing in this subsection may be construed to require

2 the inclusion of abortion services.

3 (c) LIMITATION ON COST SHARING.—

4 (1) IN GENERAL.—A health insurance plan may

5 not require the payment of any deductible,

6 copayment, or coinsurance for an item or service for

7 which coverage is required under this section after

8 an individual or a family covered under the plan has

9 incurred out-of-pocket expenses under the plan that

10 are equal to the out-of-pocket limit for a plan year.

11 (2) LIMIT ON OUT-OF-POCKET EXPENSES.—As

12 used in this paragraph:

13 (A) OUT-OF-POCKET EXPENSES DE14 FINED.—The term ‘‘out-of-pocket expenses’’

15 means, with respect to an individual or a family

16 in a plan year, amounts payable under the plan

17 as deductibles, coinsurance, and copayments

18 with respect to items and services provided

19 under the plan and furnished in the plan year

20 on behalf of the individual or the family covered

21 under the plan.

22 (B) OUT-OF-POCKET LIMIT DEFINED.—

23 (i) IN GENERAL.—The term ‘‘out-of24 pocket limit’’ means—
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1 (I) the amount specified under

2 clause (ii), or

3 (II) 10 percent of the adjusted

4 gross income of the family involved,

5 whichever is greater.

6 (ii) MINIMUM AMOUNT.—The amount

7 specified in this clause for a plan year be8 ginning in—

9 (I) a calendar year prior to 1999,

10 is $5,000; or

11 (II) for a subsequent calendar

12 year, is the amount specified in this

13 clause for the previous calendar year

14 increased by the percentage increase

15 in the consumer price index for all

16 urban consumers (United States city

17 average, as published by the Bureau

18 of Labor Statistics) for the 12-month

19 period ending on September 30 of the

20 preceding calendar year.

21 If the amount computed under subclause

22 (II) is not a multiple of $10, it shall be

23 rounded to the next highest multiple of

24 $10.
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1 SEC. 113. RATING PRACTICES.

2 (a) IN GENERAL.—The requirements of this section

3 are met, if, except as provided in subsection (b), the health

4 insurance plan provides for—

5 (1) a variation in premium rates only on the

6 basis of age, sex, and geography, and

7 (2) a charge of the same premium rates to new

8 applicants and existing policyholders with the same

9 age, sex, and geographic characteristics.

10 (b) INCENTIVE DISCOUNTS.—A plan may discount

11 an individual’s premium rate as an incentive for partici12 pating in a program, approved by the applicable regulatory

13 authority to be offered in conjunction with the coverage,

14 which has as its objective, 1 or more of the following:

15 (1) To promote healthy behavior.

16 (2) To prevent or delay the onset of illness.

17 (3) To provide for screening or early detection

18 of illness.

19 SEC. 114. GUARANTEED ISSUE.

20 (a) IN GENERAL.—Except as provided in paragraph

21 (2), in the case of applications made on and after January

22 1, 2000, the following rules apply:

23 (1) IN GENERAL.—The requirements of this

24 section are met, if, except as provided in paragraph

25 (2), the health insurance plan—
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1 (A) provides guaranteed issue at standard

2 rates to all applicants, and

3 (B) does not exclude from coverage, or

4 limit coverage for, any preexisting medical con5 dition of any applicant who, on the date the ap6 plication is made, has been continuously insured

7 for a period of at least 1 year prior to the date

8 of the application under 1 or more of the fol9 lowing health insurance plans or programs:

10 (i) Another federally qualified health

11 insurance plan.

12 (ii) An employer-sponsored group

13 health insurance plan in effect before the

14 date of the enactment of this Act.

15 (iii) An individual health insurance

16 plan in effect before such date.

17 (iv) A program described in—

18 (I) title XVIII or XIX of the So19 cial Security Act,

20 (II) chapter 55 of title 10,

21 United States Code,

22 (III) chapter 17 of title 38,

23 United States Code,

24 (IV) chapter 89 of title 5, United

25 States Code, or
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1 (V) the Indian Health Care Im2 provement Act.

3 (2) BREAK IN COVERAGE.—In the case of an

4 applicant who has not been continuously insured for

5 a period of 1 year prior to the date the application

6 is made, the health insurance plan may exclude from

7 coverage, or limit coverage for, any preexisting medi8 cal condition for a period no greater than the lesser

9 of—

10 (A) the number of months immediately

11 prior to the date of the application during

12 which the individual was not insured since the

13 illness or condition in question was first diag14 nosed, or

15 (B) 1 year.

16 (b) TRANSITION RULE.—In the case of applications

17 made in 1999, the requirements of this section are met,

18 if the health insurance plan—

19 (1) provides guaranteed issue at standard rates

20 to all applicants, and

21 (2) does not exclude from coverage, or limit

22 coverage for, any preexisting medical condition of

23 any applicant.
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1 SEC. 115. GUARANTEED RENEWABILITY.

2 The requirements of this section are met, if the

3 health insurance plan provides the policyholder with a con4 tractual right to renew the coverage which stipulates that

5 the insurer cannot cancel or refuse to renew the coverage

6 except for cases of—

7 (1) nonpayment of premiums by the policy8 holder, or

9 (2) fraud or misrepresentation by the policy10 holder.

11 PART II—CERTIFICATION OF FEDERALLY

12 QUALIFIED HEALTH INSURANCE PLANS

13 SEC. 117. ESTABLISHMENT OF REGULATORY PROGRAM

14 FOR CERTIFICATION OF PLANS.

15 (a) IN GENERAL.—Each State shall establish no later

16 than January 1, 1999, a regulatory program which meets

17 the standards referred to in section 118.

18 (b) PERIODIC SECRETARIAL REVIEW OF STATE REG19 ULATORY PROGRAM.—The Secretary periodically shall re20 view each State regulatory program to determine if such

21 program continues to meet and enforce the standards re22 ferred to in section 118. If the Secretary initially deter23 mines that a State regulatory program no longer meets

24 and enforces such standards, the Secretary shall provide

25 the State an opportunity to adopt a plan of correction that

26 would bring such program into compliance with such
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1 standards. If the Secretary makes a final determination

2 that the State regulatory program fails to meet and en3 force such standards after such an opportunity, the Sec4 retary shall decertify such program and assume respon5 sibility with respect to health insurance plans in the State.

6 SEC. 118. STANDARDS FOR REGULATORY PROGRAMS.

7 (a) IN GENERAL.—The Secretary, in consultation

8 with the National Association of Insurance Commissioners

9 (hereafter in this section referred to as ‘‘NAIC’’) shall de10 velop by not later than 1 year after the date of the enact11 ment of this Act, in the form of model Acts and model

12 regulations, State regulatory program standards which in13 clude—

14 (1) procedures for certifying that the require15 ments of part I of this subtitle have been met by a

16 health insurance plan applying for certification as a

17 federally qualified health insurance plan,

18 (2) the requirements described in subsections

19 (b), (c), and (d),

20 (3) requirements with respect to solvency stand21 ards and guaranty funds for carriers of federally

22 qualified health insurance plans, and

23 (4) reporting requirements under which carriers

24 report to the Internal Revenue Service regarding the

25 acquisition and termination by individuals of cov-
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1 erage under federally qualified health insurance

2 plans.

3 (b) PASSBACK OF CLAIMS AND PREMIUMS.—The re4 quirements of this subsection are met, if, in the case of

5 an applicant who has been continuously insured, as de6 scribed in section 114(b)(1)(B), and is at the time of the

7 application receiving treatment for a preexisting medical

8 condition—

9 (1) the federally qualified health insurance plan

10 is allowed to pass back to the applicant’s previous

11 plan any claims relating to such condition, together

12 with a portion of the premium, and

13 (2) such previous plan is required to pay such

14 claims and premium incurred during the lesser of—

15 (A) the duration of the course of the treat16 ment or spell of illness, or

17 (B) 2 years from the date at which cov18 erage commenced under the federally qualified

19 health insurance plan.

20 (c) MARKETING PRACTICES.—The requirements of

21 this subsection are met, if the carrier offering the federally

22 qualified health insurance plan retains the right to select

23 agents with whom such plan contracts and to determine

24 the amount and form of compensation to such agents, ex25 cept that—
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1 (1) if the carrier chooses to contract with an

2 agent, the carrier may not terminate or refuse to

3 renew the agency contract for any reason related to

4 the age, sex, health status, claims experience, occu5 pation, or geographic location of the insureds placed

6 by the agent with such plan, and

7 (2) the carrier may not, directly or indirectly,

8 enter into any contract, agreement, or arrangement

9 with an agent that provides for, or results in, any

10 consideration provided to such agent for the issu11 ance or renewal of such a plan to vary on account

12 of the age, sex, health status, claims experience, oc13 cupation, or geographic location of the insureds

14 placed by the agent with such plan.

15 (d) RISK ADJUSTMENT OR REINSURANCE PRO16 GRAMS.—The requirements of this subsection are met, if

17 the carrier offering the federally qualified health insurance

18 plan participates in a State-administered risk adjustment

19 program (or, at the option of the State, a reinsurance pro20 gram) designed to compensate for the potential occurrence

21 of grossly disproportionate distributions of above-standard

22 or below-standard insured risks among federally qualified

23 health insurance plans.

24 (e) NONBINDING STANDARDS.—The Secretary, in

25 consultation with NAIC, shall also develop within the 1-
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1 year period described in subsection (a), nonbinding stand2 ards for premium rating practices and guaranteed renew3 ability of coverage which, if the insurer so elects, is more

4 generous (additional benefits or lower cost sharing or

5 both) than the requirements under part I of this subtitle

6 for federally qualified health insurance plans.

7 Subtitle C—Employer Provisions

8 SEC. 121. GENERAL PROVISIONS RELATING TO EMPLOY9 ERS.

10 (a) PREMIUMS WITHHELD.—Each employer shall—

11 (1) withhold from each employee’s wages the

12 amount of the employee’s health insurance premium

13 and remit, directly or indirectly, such premium to

14 the insurance plan of the employee’s choice accord15 ing to an agreed upon schedule, and

16 (2) within the first 30 days of any calendar

17 year or the date of the hire of an employee, notify

18 each employee of the employee’s right to claim an

19 advance refundable tax credit for such premium

20 under section 34A of the Internal Revenue Code of

21 1986.

22 (b) EFFECTIVE DATE.—The requirements under

23 subsection (a) shall apply with respect to calendar year

24 1999 and thereafter.
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1 SEC. 122. CONVERSION OF NON-SELF-INSURED PLANS.

2 In the case of an employer-sponsored health insur3 ance plan in force on the date of the enactment of this

4 Act, and which is not a self-insured plan, the insurer from

5 whom the plan was purchased (or, in the event such in6 surer refuses, any new subsidiary, corporation, insurer,

7 union, cooperative, or association willing to become the

8 new sponsor of the plan) shall—

9 (1) notify, not later than October 1, 1998, all

10 of the primary insured beneficiaries of the employer11 sponsored plan of their rights to convert their insur12 ance coverage to a federally qualified health insur13 ance plan (as defined in section 111) offered by the

14 insurer with benefits identical to, or actuarially

15 equivalent to, those of the employer-sponsored plan

16 and the rates of that coverage, and provide such

17 beneficiaries 60 additional days to decline or accept

18 the new coverage, and

19 (2) offer such coverage beginning January 1,

20 1999, at premium rates which vary only by age, sex,

21 and geography, except that the combined total of the

22 new rates charged separately to the various bene23 ficiaries may not exceed the total group rate paid by

24 the employer or employees or both under the em25 ployer-sponsored plan on the last day it is, or was,

26 in force.
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1 SEC. 123. PROVISIONS RELATING TO EXISTING SELF-IN2 SURED PLANS.

3 (a) IN GENERAL.—In the case of an employer-spon4 sored health insurance plan in force on the date of the

5 enactment of this Act, and which is a self-insured plan,

6 the employer sponsoring the plan may, at anytime follow7 ing such date sell, transfer, or assign the plan to any exist8 ing or new, subsidiary, corporation, insurer, union, cooper9 ative or association, willing to become the new sponsor of

10 the plan, except that—

11 (1) such sale, transfer, or assignment may not

12 take effect unless first approved by a two-thirds ma13 jority vote of all the primary-insured beneficiaries of

14 the plan, and

15 (2) the terms or conditions and benefits or cov16 erage of the plan, and the eligibility criteria for par17 ticipation in the plan, may not be altered before

18 such date.

19 (b) PROVISIONS GOVERNING PLAN.—As of the date

20 of the enactment of this Act, the sponsor of the plan de21 scribed in subsection (a) becomes subject to all laws gov22 erning the operation of a corporation selling health insur23 ance in the applicable State or States and to the provisions

24 of section 122.
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1 SEC. 124. CONTINUATION OF EMPLOYER-PROVIDED

2 HEALTH COVERAGE REQUIRED UNTIL EF3 FECTIVE DATE OF NEW COVERAGE UNDER

4 THIS ACT.

5 (a) IN GENERAL.—Clause (i) of section

6 4980B(f)(2)(B) of the Internal Revenue Code of 1986 (re7 lating to period of coverage) is amended by inserting after

8 subclause (V) the following new subclause:

9 ‘‘(VI) QUALIFYING EVENT IN10 VOLVING END OF PLAN.—In the case

11 of an event described in paragraph

12 (3)(G), December 31, 1998.’’.

13 (b) QUALIFYING EVENT INVOLVING END OF

14 PLAN.—Paragraph (3) of section 4980B(f) of the Internal

15 Revenue Code of 1986 (defining qualifying event) is

16 amended by inserting after subparagraph (F) the follow17 ing new subparagraph:

18 ‘‘(G) The termination by the employer of

19 the group health plan after the date of the en20 actment of the Consumer Choice Health Re21 form Act of 1995.’’.

22 (c) CONFORMING AMENDMENT.—Clause (ii) of sec23 tion 4980B(f)(2)(B) of the Internal Revenue Code of 1986

24 is amended by striking ‘‘The date’’ and inserting ‘‘Except

25 in the case of a qualifying event described in paragraph

26 (3)(G), the date’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to qualifying events occurring after

3 the date of the enactment of this Act.

4 SEC. 125. REQUIREMENTS WITH RESPECT TO CASHING OUT

5 EMPLOYER-SPONSORED PLANS.

6 (a) NON-FEDERAL EMPLOYERS.—

7 (1) IN GENERAL.—Each employer contributing

8 in whole or in part to an employer-sponsored health

9 insurance plan on December 1, 1998, shall, within

10 30 days after such date—

11 (A) notify each employee participating in

12 the plan of the amount spent by the employer

13 on the employee’s health insurance, as deter14 mined under paragraph (2),

15 (B) add such amount to the cash wages of

16 the employee commencing with pay periods be17 ginning on and after January 1, 1999, and

18 (C) hold each employee harmless for the

19 employer’s share of any payroll taxes due under

20 chapter 31 of the Internal Revenue Code of

21 1986 on such amount.

22 (2) AMOUNT OF INCLUSION.—The amount de23 scribed in paragraph (1)(A) shall equal the actuarial

24 value of the employer’s contribution for group health

25 issuance coverage apportioned to the plan’s bene-
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1 ficiaries according to the new premiums for individ2 ual and family coverage determined by the insurer.

3 (3) PRIOR TERMINATION.—Any beneficiary of

4 an employer-sponsored health insurance plan who

5 voluntarily terminates coverage under such a plan

6 before December 1, 1998, forfeits the right to re7 ceive the value of the beneficiary’s coverage in cash.

8 (b) COMMISSION ON CASHING OUT FEHBP BENE9 FITS.—

10 (1) ESTABLISHMENT.—

11 (A) IN GENERAL.—There is established an

12 independent board to be known as the ‘‘Bene13 fits Cash Out Commission’’ (in this subtitle, re14 ferred to as the ‘‘Commission’’).

15 (B) DUTIES.—The Commission shall study

16 and propose a procedure under which individ17 uals may cash out health benefits under chapter

18 89 of title 5, United States Code, and pay

19 scales and retirement benefits would be ad20 justed accordingly. The Commission shall report

21 to Congress regarding such study and proposal

22 not later than 1 year after the date of the en23 actment of this Act.

24 (C) MEMBERSHIP.—
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1 (i) IN GENERAL.—The Commission

2 shall be composed of 13 members ap3 pointed by the President by and with the

4 advice and consent of the Senate.

5 (ii) CONSULTATION.—In selecting in6 dividuals for nominations for appointments

7 for the Commission, the President should

8 consult with—

9 (I) the Speaker of the House of

10 Representatives concerning the ap11 pointment of 3 members;

12 (II) the Majority Leader of the

13 Senate concerning the appointment of

14 3 members;

15 (III) the Minority Leader of the

16 House of Representatives concerning

17 the appointment of 3 members; and

18 (IV) the Minority Leader of the

19 Senate concerning the appointment of

20 3 members.

21 (iii) CHAIR.—The President shall des22 ignate 1 individual described in clause (ii)

23 who shall serve as Chair of the Commis24 sion.
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1 (iv) COMPOSITION OF COMMISSION.—

2 The membership of the Commission shall

3 include individuals with national recogni4 tion for expertise in the valuation of health

5 insurance benefits and of Federal civilian

6 pay and retirement benefits.

7 (D) ADMINISTRATIVE PROVISIONS.—

8 (i) MEETINGS.—Each meeting of the

9 Commission shall be open to the public.

10 (ii) PAY AND TRAVEL EXPENSES.—

11 (I) IN GENERAL.—Each member,

12 other than the Chair, shall be paid at

13 a rate equal to the daily equivalent of

14 the minimum annual rate of basic pay

15 payable for level IV of the Executive

16 Schedule under section 5315 of title

17 5, United States Code, for each day

18 (including travel time) during which

19 the member is engaged in the actual

20 performance of duties vested in the

21 Commission.

22 (II) CHAIR.—The Chair shall be

23 paid for each day referred to in

24 subclause (I) at a rate equal to the

25 daily equivalent of the minimum an-
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1 nual rate of basic pay payable for

2 level III of the Executive Schedule

3 under section 5314 of title 5, United

4 States Code.

5 (III) TRAVEL EXPENSES.—Mem6 bers shall receive travel expenses, in7 cluding per diem in lieu of subsist8 ence, in accordance with sections

9 5702 and 5703 of title 5, United

10 States Code.

11 (iii) STAFF.—

12 (I) IN GENERAL.—Subject to

13 subclauses (II) and (III), the Chair,

14 with the approval of the Commission,

15 may appoint and fix the pay of addi16 tional personnel.

17 (II) PAY.—The Chair may make

18 such appointments without regard to

19 the provisions of title 5, United States

20 Code, governing appointments in the

21 competitive service, and any personnel

22 so appointed may be paid without re23 gard to the provisions of chapter 51

24 and subchapter III of chapter 53 of

25 such title, relating to classification
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1 and General Schedule pay rates, ex2 cept that an individual so appointed

3 may not receive pay in excess of 120

4 percent of the annual rate of basic

5 pay payable for GS–15 of the General

6 Schedule.

7 (III) DETAILED PERSONNEL.—

8 Upon request of the Chair, the head

9 of any Federal department or agency

10 may detail any of the personnel of

11 that department or agency to the

12 Commission to assist the Commission

13 in carrying out its duties under this

14 Act.

15 (iv) OTHER AUTHORITY.—

16 (I) CONTRACT SERVICES.—The

17 Commission may procure by contract,

18 to the extent funds are available, the

19 temporary or intermittent services of

20 experts or consultants pursuant to

21 section 3109 of title 5, United States

22 Code.

23 (II) LEASES, ETC.—The Com24 mission may lease space and acquire
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1 personal property to the extent funds

2 are available.

3 (2) CONSIDERATION.—

4 (A) IN GENERAL.—The proposal described

5 in paragraph (1)(B) shall be considered by the

6 Congress under the procedures for consider7 ation of an ‘‘approval resolution’’ as described

8 in subparagraph (D).

9 (B) EFFECTIVE DATE OF IMPLEMENTA10 TION.—The provisions of the proposal shall be11 come effective on January 1, 1998.

12 (C) PERIOD FOR RESUBMISSION OF PRO13 POSAL IN CASE OF NONAPPROVAL.—If the pro14 posal of the Commission described in subpara15 graph (A) is not approved by Congress, the

16 Commission shall by not later than January 1,

17 1997, submit a new proposal to Congress.

18 (D) RULES GOVERNING CONGRESSIONAL

19 CONSIDERATION.—

20 (i) RULES OF HOUSE OF REPRESENT21 ATIVES AND SENATE.—This subparagraph

22 is enacted by the Congress—

23 (I) as an exercise of the rule24 making power of the House of Rep25 resentatives and the Senate, respec-
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•HR 1424 IH

1 tively, and as such is deemed a part

2 of the rules of each House, respec3 tively, but applicable only with respect

4 to the procedure to be followed in that

5 House in the case of approval resolu6 tions described in clause (ii), and su7 persedes other rules only to the extent

8 that such rules are inconsistent there9 with; and

10 (II) with full recognition of the

11 constitutional right of either House to

12 change the rules (so far as relating to

13 the procedure of that House) at any

14 time, in the same manner and to the

15 same extent as in the case of any

16 other rule of that House.

17 (ii) TERMS OF THE RESOLUTION.—

18 For purposes of subparagraph (A), the

19 term ‘‘approval resolution’’ means only a

20 joint resolution of the 2 Houses of the

21 Congress, providing in—

22 (I) the matter after the resolving

23 clause of which is as follows: ‘‘That

24 the Congress approves the rec25 ommendations of the Benefits Cash
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•HR 1424 IH

1 Out Commission as submitted by the

2 Commission on lllllll’’, the

3 blank space being filled in with the

4 appropriate date; and

5 (II) the title of which is as fol6 lows: ‘‘Joint Resolution approving the

7 recommendation of the Benefits Cash

8 Out Commission’’.

9 (iii) INTRODUCTION AND REFER10 RAL.—On the day on which the rec11 ommendation of the Commission is trans12 mitted to the House of Representatives

13 and the Senate, an approval resolution

14 with respect to such recommendation shall

15 be introduced (by request) in the House of

16 Representatives by the Majority Leader of

17 the House, for himself or herself and the

18 Minority Leader of the House, or by Mem19 bers of the House designated by the Ma20 jority Leader and Minority Leader of the

21 House; and shall be introduced (by re22 quest) in the Senate by the Majority Lead23 er of the Senate, for himself or herself and

24 the Minority Leader of the Senate, or by

25 Members of the Senate designated by the
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•HR 1424 IH

1 Majority Leader and Minority Leader of

2 the Senate. If either House is not in ses3 sion on the day on which such rec4 ommendation is transmitted, the approval

5 resolution with respect to such rec6 ommendation shall be introduced in the

7 House, as provided in the preceding sen8 tence, on the first day thereafter on which

9 the House is in session. The approval reso10 lution introduced in the House of Rep11 resentatives and the Senate shall be re12 ferred to the appropriate committees of

13 each House.

14 (iv) AMENDMENTS PROHIBITED.—No

15 amendment to an approval resolution shall

16 be in order in either the House of Rep17 resentatives or the Senate; and no motion

18 to suspend the application of this clause

19 shall be in order in either House, nor shall

20 it be in order in either House for the Pre21 siding Officer to entertain a request to sus22 pend the application of this clause by

23 unanimous consent.

24 (v) PERIOD FOR COMMITTEE AND

25 FLOOR CONSIDERATION.—
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1 (I) IN GENERAL.—Except as pro2 vided in subclause (II), if the commit3 tee or committees of either House to

4 which an approval resolution has been

5 referred have not reported it at the

6 close of the 30th day after its intro7 duction, such committee or commit8 tees shall be automatically discharged

9 from further consideration of the ap10 proval resolution and it shall be

11 placed on the appropriation calendar.

12 A vote on final passage of the ap13 proval resolution shall be taken in

14 each House on or before the close of

15 the 30th day after the approval reso16 lution is reported by the committees

17 or committee of that House to which

18 it was referred, or after such commit19 tee or committees have been dis20 charged from further consideration of

21 the approval resolution. If prior to the

22 passage by 1 House of an approval

23 resolution of that House, that House

24 receives the same approval resolution

25 from the other House then the proce-
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1 dure in that House shall be the same

2 as if no approval resolution had been

3 received from the other House, but

4 the vote on final passage shall be on

5 the approval resolution of the other

6 House.

7 (II) COMPUTATION OF DAYS.—

8 For purposes of subclause (I), in com9 puting a number of days in either

10 House, there shall be excluded any

11 day on which the House is not in ses12 sion.

13 (vi) FLOOR CONSIDERATION IN THE

14 HOUSE OF REPRESENTATIVES.—

15 (I) MOTION TO PROCEED.—A

16 motion in the House of Representa17 tives to proceed to the consideration

18 of an approval resolution shall be

19 highly privileged and not debatable.

20 An amendment to the motion shall

21 not be in order, nor shall it be in

22 order to move to reconsider the vote

23 by which the motion is agreed to or

24 disagreed to.
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1 (II) DEBATE.—Debate in the

2 House of Representatives on an ap3 proval resolution shall be limited to

4 not more than 20 hours, which shall

5 be divided equally between those fa6 voring and those opposing the bill or

7 resolution. A motion further to limit

8 debate shall not be debatable. It shall

9 not be in order to move to recommit

10 an approval resolution or to move to

11 reconsider the vote by which an ap12 proval resolution is agreed to or dis13 agreed to.

14 (III) MOTION TO POSTPONE.—

15 Motions to postpone, made in the

16 House of Representatives with respect

17 to the consideration of an approval

18 resolution, and motions to proceed to

19 the consideration of other business,

20 shall be decided without debate.

21 (IV) APPEALS.—All appeals from

22 the decisions of the Chair relating to

23 the application of the Rules of the

24 House of Representatives to the pro-
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1 cedure relating to an approval resolu2 tion shall be decided without debate.

3 (V) GENERAL RULES APPLY.—

4 Except to the extent specifically pro5 vided in the preceding provisions of

6 this clause, consideration of an ap7 proval resolution shall be governed by

8 the Rules of the House of Representa9 tives applicable to other bills and reso10 lutions in similar circumstances.

11 (vii) FLOOR CONSIDERATION IN THE

12 SENATE.—

13 (I) MOTION TO PROCEED.—A

14 motion in the Senate to proceed to the

15 consideration of an approval resolu16 tion shall be privileged and not debat17 able. An amendment to the motion

18 shall not be in order, nor shall it be

19 in order to move to reconsider the

20 vote by which the motion is agreed to

21 or disagreed to.

22 (II) GENERAL DEBATE.—Debate

23 in the Senate on an approval resolu24 tion, and all debatable motions and

25 appeals in connection therewith, shall
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1 be limited to not more than 20 hours.

2 The time shall be equally divided be3 tween, and controlled by, the Majority

4 Leader and the Minority Leader or

5 their designees.

6 (III) DEBATE OF MOTIONS AND

7 APPEALS.—Debate in the Senate on

8 any debatable motion or appeal in

9 connection with an approval resolution

10 shall be limited to not more than 1

11 hour, to be equally divided between,

12 and controlled by, the mover and the

13 manager of the approval resolution,

14 except that in the event the manager

15 of the approval resolution is in favor

16 of any such motion or appeal, the

17 time in opposition thereto, shall be

18 controlled by the Minority Leader or

19 his designee. Such leaders, or either of

20 them, may, from time under their

21 control on the passage of an approval

22 resolution, allot additional time to any

23 Senator during the consideration of

24 any debatable motion or appeal.
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1 (IV) OTHER MOTIONS.—A mo2 tion in the Senate to further limit de3 bate is not debatable. A motion to re4 commit an approval resolution is not

5 in order.

6 SEC. 126. ENFORCEMENT.

7 (a) IN GENERAL.—Chapter 47 of the Internal Reve8 nue Code of 1986 (relating to excise taxes on qualified

9 pension, etc. plans) is amended by inserting after section

10 5000 the following new sections:

11 ‘‘SEC. 5000A. FAILURE OF EMPLOYERS WITH RESPECT TO

12 HEALTH INSURANCE.

13 ‘‘(a) GENERAL RULE.—There is hereby imposed a

14 tax on the failure of any person to comply with the re15 quirements of sections 121 and 125(a) of the Consumer

16 Choice Health Reform Act of 1995 with respect to any

17 employee of the person.

18 ‘‘(b) AMOUNT OF TAX.—

19 ‘‘(1) IN GENERAL.—The amount of the tax im20 posed by subsection (a) on any failure with respect

21 to an employee shall be $50 for each day in the non22 compliance period with respect to such failure.

23 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

24 of this section, the term ‘noncompliance period’

25 means, with respect to any failure, the period—
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1 ‘‘(A) beginning on the date such failure

2 first occurs, and

3 ‘‘(B) ending on the date such failure is

4 corrected.

5 ‘‘(3) CORRECTION.—A failure of a person to

6 comply with the requirements of section 121 or

7 125(a) of the Consumer Choice Health Reform Act

8 of 1995 with respect to any employee of the person

9 shall be treated as corrected if—

10 ‘‘(A) such failure is retroactively undone to

11 the extent possible, and

12 ‘‘(B) the employee is placed in a financial

13 position which is as good as such employee

14 would have been in had such failure not oc15 curred.

16 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

17 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

18 DISCOVERED EXERCISING REASONABLE DILI19 GENCE.—No tax shall be imposed by subsection (a)

20 on any failure during any period for which it is es21 tablished to the satisfaction of the Secretary that

22 none of the persons referred to in subsection (d)

23 knew, or exercising reasonable diligence would have

24 known, that such failure existed.
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1 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR2 RECTED WITHIN 30 DAYS.—No tax shall be imposed

3 by subsection (a) on any failure if—

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

5 cause and not to willful neglect, and

6 ‘‘(B) such failure is corrected during the

7 30-day period beginning on the first date any of

8 the persons referred to in subsection (d) knew,

9 or exercising reasonable diligence would have

10 known, that such failure existed.

11 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

12 failure which is due to reasonable cause and not to

13 willful neglect, the Secretary may waive part or all

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

15 that the payment of such tax would be excessive rel16 ative to the failure involved.

17 ‘‘(d) LIABILITY FOR TAX.—

18 ‘‘(1) IN GENERAL.—Except as otherwise pro19 vided in this subsection, the following shall be liable

20 for the tax imposed by subsection (a) on a failure:

21 ‘‘(A) In the case of a health insurance plan

22 other than a multiemployer plan, the employer.

23 ‘‘(B) In the case of a multiemployer plan,

24 the plan.
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1 ‘‘(C) Each person who is responsible (other

2 than in a capacity as an employee) for admin3 istering or providing benefits under the health

4 insurance plan and whose act or failure to act

5 caused (in whole or in part) the failure.

6 ‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED

7 IN PARAGRAPH (1)(C).—A person described in sub8 paragraph (C) (and not in subparagraphs (A) and

9 (B)) of paragraph (1) shall be liable for the tax im10 posed by subsection (a) on any failure only if such

11 person assumed (under a legally enforceable written

12 agreement) responsibility for the performance of the

13 act to which the failure relates.

14 ‘‘SEC. 5000B. FAILURE OF CARRIERS WITH RESPECT TO

15 HEALTH INSURANCE.

16 ‘‘(a) GENERAL RULE.—There is hereby imposed a

17 tax on the failure of any carrier offering any health insur18 ance plan to comply with the requirements of sections 122

19 and 123 of the Consumer Choice Health Reform Act of

20 1995.

21 ‘‘(b) AMOUNT OF TAX.—

22 ‘‘(1) IN GENERAL.—The amount of tax imposed

23 by subsection (a) by reason of 1 or more failures

24 during a taxable year shall be equal to 50 percent

25 of the gross premiums received during such taxable
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1 year with respect to all health insurance plans issued

2 by the carrier on whom such tax is imposed.

3 ‘‘(2) GROSS PREMIUMS.—For purposes of para4 graph (1), gross premiums shall include any consid5 eration received with respect to any health insurance

6 contract.

7 ‘‘(3) CONTROLLED GROUPS.—For purposes of

8 paragraph (1)—

9 ‘‘(A) CONTROLLED GROUP OF CORPORA10 TIONS.—All corporations which are members of

11 the same controlled group of corporations shall

12 be treated as 1 carrier. For purposes of the pre13 ceding sentence, the term ‘controlled group of

14 corporations’ has the meaning given to such

15 term by section 1563(a), except that—

16 ‘‘(i) ‘more than 50 percent’ shall be

17 substituted for ‘at least 80 percent’ each

18 place it appears in section 1563(a)(1), and

19 ‘‘(ii) the determination shall be made

20 without regard to subsections (a)(4) and

21 (e)(3)(C) of section 1563.

22 ‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,

23 ETC., WHICH ARE UNDER COMMON CONTROL.—

24 Under regulations prescribed by the Secretary,

25 all trades or business (whether or not incor-
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1 porated) which are under common control shall

2 be treated as 1 carrier. The regulations pre3 scribed under this subparagraph shall be based

4 on principles similar to the principles which

5 apply in the case of subparagraph (A).

6 ‘‘(c) LIMITATION ON TAX.—

7 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

8 DISCOVERED EXERCISING REASONABLE DILI9 GENCE.—No tax shall be imposed by subsection (a)

10 with respect to any failure for which it is established

11 to the satisfaction of the Secretary that the carrier

12 on whom the tax is imposed did not know, and exer13 cising reasonable diligence would not have known,

14 that such failure existed.

15 ‘‘(2) TAX NOT TO APPLY WHERE FAILURES

16 CORRECTED WITHIN 30 DAYS.—No tax shall be im17 posed by subsection (a) with respect to any failure

18 if—

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

20 cause and not to willful neglect, and

21 ‘‘(B) such failure is corrected during the

22 30-day period beginning on the 1st date any of

23 the carriers on whom the tax is imposed knew,

24 or exercising reasonable diligence would have

25 known, that such failure existed.
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1 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

2 failure which is due to reasonable cause and not to

3 willful neglect, the Secretary may waive part or all

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

5 that the payment of such tax would be excessive rel6 ative to the failure involved.’’.

7 (b) CLERICAL AMENDMENTS.—The table of sections

8 for such chapter 47 is amended by adding at the end

9 thereof the following new items:

‘‘Sec. 5000A. Failure of employers with respect to health insurance.

‘‘Sec. 5000B. Failure of carriers with respect to health insurance.’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall take effect on January 1, 1998.

12 Subtitle D—Federal Preemption

13 SEC. 131. FEDERAL PREEMPTION OF CERTAIN STATE LAWS.

14 All State laws in existence on January 1, 1999, in

15 the following areas are preempted:

16 (1) MANDATED INSURANCE BENEFIT LAWS.—

17 Laws requiring health insurance policies to cover

18 specific diseases, services, or providers.

19 (2) ANTI-MANAGED CARE LAWS.—Laws re20 stricting the ability of managed care plans to selec21 tively contract with providers of their choice.

22 (3) MANDATED COST-SHARING LAWS.—Laws

23 restricting the extent to which insurers may require
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1 enrollee cost sharing as part of their plans, or re2 stricting the extent to which managed care plans

3 may impose different levels of cost sharing on en4 rollee claims for treatment by providers not partici5 pating in the plan.

6 TITLE II—ADMINISTRATIVE

7 COST SAVINGS

8 Subtitle A—Standardization of

9 Claims Processing

10 SEC. 201. ADOPTION OF DATA ELEMENTS, UNIFORM

11 CLAIMS, AND UNIFORM ELECTRONIC TRANS12 MISSION STANDARDS.

13 (a) IN GENERAL.—The Secretary shall adopt stand14 ards relating to each of the following:

15 (1) Data elements for use in paper and elec16 tronic claims processing under health insurance

17 plans, as well as for use in utilization review and

18 management of care (including data fields, formats,

19 and medical nomenclature, and including plan bene20 fit and insurance information).

21 (2) Uniform claims forms (including uniform

22 procedure and billing codes for uses with such forms

23 and including information on other health insurance

24 plans that may be liable for benefits).
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1 (3) Uniform electronic transmission of the data

2 elements (for purposes of billing and utilization re3 view).

4 Standards under paragraph (3) relating to electronic

5 transmission of data elements for claims for services shall

6 supersede (to the extent specified in such standards) the

7 standards adopted under paragraph (2) relating to the

8 submission of paper claims for such services. Standards

9 under paragraph (3) shall include protections to assure

10 the confidentiality of patient-specific information and to

11 protect against the unauthorized use and disclosure of in12 formation.

13 (b) USE OF TASK FORCES.—In adopting standards

14 under this section—

15 (1) the Secretary shall take into account the

16 recommendations of current task forces, including at

17 least the Workgroup on Electronic Data Inter18 change, National Uniform Billing Committee, the

19 Uniform Claim Task Force, and the Computer-based

20 Patient Record Institute;

21 (2) the Secretary shall consult with the Na22 tional Association of Insurance Commissioners (and,

23 with respect to standards under subsection (a)(3),

24 the American National Standards Institute); and
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1 (3) the Secretary shall, to the maximum extent

2 practicable, seek to make the standards consistent

3 with any uniform clinical data sets which have been

4 adopted and are widely recognized.

5 (c) DEADLINES FOR PROMULGATION.—The Sec6 retary shall promulgate the standards under—

7 (1) subsection (a)(1) relating to claims process8 ing data, by not later than 12 months after the date

9 of the enactment of this Act;

10 (2) subsection (a)(2) (relating to uniform

11 claims forms) by not later than 12 months after the

12 date of the enactment of this Act; and

13 (3)(A) subsection (a)(3) relating to trans14 mission of information concerning hospital and phy15 sicians services, by not later than 24 months after

16 the date of the enactment of this Act, and

17 (B) subsection (a)(3) relating to transmission

18 of information on other services, by such later date

19 as the Secretary may determine it to be feasible.

20 (d) REPORT TO CONGRESS.—Not later than 3 years

21 after the date of the enactment of this Act, the Secretary

22 shall report to Congress recommendations regarding re23 structuring the medicare peer review quality assurance

24 program given the availability of hospital data in elec25 tronic form.
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1 SEC. 202. APPLICATION OF STANDARDS.

2 (a) IN GENERAL.—If the Secretary determines, at

3 the end of the 2-year period beginning on the date that

4 standards are adopted under section 201 with respect to

5 classes of services, that a significant number of claims for

6 benefits for such services under health insurance plans are

7 not being submitted in accordance with such standards,

8 the Secretary may require, after notice in the Federal

9 Register of not less than 6 months, that all providers of

10 such services must submit claims to health insurance plans

11 in accordance with such standards. The Secretary may

12 waive the application of such a requirement in such cases

13 as the Secretary finds that the imposition of the require14 ment would not be economically practicable.

15 (b) SIGNIFICANT NUMBER.—The Secretary shall

16 make an affirmative determination described in subsection

17 (a) for a class of services only if the Secretary finds that

18 there would be a significant, measurable additional gain

19 in efficiencies in the health care system that would be ob20 tained by imposing the requirement described in such

21 paragraph with respect to such services.

22 (c) APPLICATION OF REQUIREMENT.—

23 (1) IN GENERAL.—If the Secretary imposes the

24 requirement under subsection (a)—

25 (A) in the case of a requirement that im26 poses the standards relating to electronic trans-
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1 mission of claims for a class of services, each

2 health care provider that furnishes such services

3 for which benefits are payable under a health

4 insurance plan shall transmit electronically and

5 directly to the plan on behalf of the beneficiary

6 involved a claim for such services in accordance

7 with such standards;

8 (B) any health insurance plan may reject

9 any claim subject to the standards adopted

10 under section 201 but which is not submitted in

11 accordance with such standards;

12 (C) it is unlawful for a health insurance

13 plan (i) to reject any such claim on the basis

14 of the form in which it is submitted if it is sub15 mitted in accordance with such standards or (ii)

16 to require, for the purpose of utilization review

17 or as a condition of providing benefits under

18 the plan, a provider to transmit medical data

19 elements that are inconsistent with the stand20 ards established under section 201(a)(1); and

21 (D) the Secretary may impose a civil

22 money penalty on any provider that knowingly

23 and repeatedly submits claims in violation of

24 such standards or on any health insurance plan

25 (other than a health insurance plan described in
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1 paragraph (2)) that knowingly and repeatedly

2 rejects claims in violation of subparagraph (B),

3 in an amount not to exceed $100 for each such

4 claim.

5 The provisions of section 1128A of the Social Secu6 rity Act (other than the first sentence of subsection

7 (a) and other than subsection (b)) shall apply to a

8 civil money penalty under subparagraph (D) in the

9 same manner as such provisions apply to a penalty

10 or proceeding under section 1128A(a) of such Act.

11 (2) PLANS SUBJECT TO EFFECTIVE STATE REG12 ULATION.—A plan described in this paragraph is a

13 health insurance plan—

14 (A) that is subject to regulation by a

15 State, and

16 (B) with respect to which the Secretary

17 finds that—

18 (i) the State provides for application

19 of the standards established under section

20 201, and

21 (ii) the State regulatory program pro22 vides for the appropriate and effective en23 forcement of such standards.

24 (d) TREATMENT OF REJECTIONS.—If a plan rejects

25 a claim pursuant to subsection (c)(1), the plan shall per-
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1 mit the person submitting the claim a reasonable oppor2 tunity to resubmit the claim on a form or in an electronic

3 manner that meets the requirements for acceptance of the

4 claim under such subsection.

5 SEC. 203. PERIODIC REVIEW AND REVISION OF STAND6 ARDS.

7 (a) IN GENERAL.—The Secretary shall—

8 (1) provide for the ongoing receipt and review

9 of comments and suggestions for changes in the

10 standards adopted and promulgated under section

11 201;

12 (2) establish a schedule for the periodic review

13 of such standards; and

14 (3) based upon such comments, suggestions,

15 and review, revise such standards and promulgate

16 such revisions.

17 (b) APPLICATION OF REVISED STANDARDS.—If the

18 Secretary under subsection (a) revises the standards de19 scribed in 201, then, in the case of any claim for benefits

20 submitted under a health insurance plan more than the

21 minimum period (of not less than 6 months specified by

22 the Secretary) after the date the revision is promulgated

23 under subsection (a)(3), such standards shall apply under

24 section 202 instead of the standards previously promul25 gated.
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1 SEC. 204. HEALTH INSURANCE PLAN DEFINED.

2 In this title, the term ‘‘health insurance plan’’ has

3 the meaning given such term in section 111(b) and in4 cludes—

5 (1) the medicare program (under title XVIII of

6 the Social Security Act) and medicare supplemental

7 health insurance, and

8 (2) a State medicaid plan (approved under title

9 XIX of such Act).

10 Subtitle B—Electronic Medical

11 Data Standards

12 SEC. 211. MEDICAL DATA STANDARDS FOR HOSPITALS AND

13 OTHER PROVIDERS.

14 (a) PROMULGATION OF HOSPITAL DATA STAND15 ARDS.—

16 (1) IN GENERAL.—Between July 1, 1995, and

17 January 1, 1996, the Secretary shall promulgate

18 standards described in subsection (b) for hospitals

19 concerning electronic medical data.

20 (2) REVISION.—The Secretary may from time

21 to time revise the standards promulgated under this

22 subsection.

23 (b) CONTENTS OF DATA STANDARDS.—The stand24 ards promulgated under subsection (a) shall include at

25 least the following:
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1 (1) A definition of a standard set of data ele2 ments for use by utilization and quality control peer

3 review organizations.

4 (2) A definition of the set of comprehensive

5 data elements, which set shall include for hospitals

6 the standard set of data elements defined under

7 paragraph (1).

8 (3) Standards for an electronic patient care in9 formation system with data obtained at the point of

10 care, including standards to protect against the un11 authorized use and disclosure of information.

12 (4) A specification of, and manner of presen13 tation of, the individual data elements of the sets

14 and system under this subsection.

15 (5) Standards concerning the transmission of

16 electronic medical data.

17 (6) Standards relating to confidentiality of pa18 tient-specific information.

19 The standards under this section shall be consistent with

20 standards for data elements established under section 201.

21 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO22 VIDERS.—

23 (1) IN GENERAL.—The Secretary may promul24 gate standards described in paragraph (2) concern25 ing electronic medical data for providers that are not
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1 hospitals. The Secretary may from time to time re2 vise the standards promulgated under this sub3 section.

4 (2) CONTENTS OF DATA STANDARDS.—The

5 standards promulgated under paragraph (1) for non6 hospital providers may include standards comparable

7 to the standards described in paragraphs (2), (4),

8 and (5) of subsection (b) for hospitals.

9 (d) CONSULTATION.—In promulgating and revising

10 standards under this section, the Secretary shall—

11 (1) consult with the American National Stand12 ards Institute, hospitals, with the advisory commis13 sion established under section 215, and with other

14 affected providers, health insurance plans, and other

15 interested parties, and

16 (2) take into consideration, in developing stand17 ards under subsection (b)(1), the data set used by

18 the utilization and quality control peer review pro19 gram under part B of title XI of the Social Security

20 Act.

21 SEC. 212. APPLICATION OF ELECTRONIC DATA STANDARDS

22 TO CERTAIN HOSPITALS.

23 (a) MEDICARE REQUIREMENT FOR SHARING OF

24 HOSPITAL INFORMATION.—As of January 1, 1996, sub25 ject to paragraph (2), each hospital, as a requirement of
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1 each participation agreement under section 1866 of the

2 Social Security Act, shall—

3 (1) maintain clinical data included in the set of

4 comprehensive data elements under section

5 211(b)(2) in electronic form on all inpatients,

6 (2) upon request of the Secretary or of a utili7 zation and quality control peer review organization

8 (with which the Secretary has entered into a con9 tract under part B of title XI of such Act), transmit

10 electronically the data set, and

11 (3) upon request of the Secretary, or of a fiscal

12 intermediary or carrier, transmit electronically any

13 data (with respect to a claim) from such data set,

14 in accordance with the standards promulgated under sec15 tion 211(a).

16 (b) WAIVER AUTHORITY.—Until January 1, 2000:

17 (1) The Secretary may waive the application of

18 the requirements of subsection (a) for a hospital

19 that is a small rural hospital, for such period as the

20 hospital demonstrates compliance with such require21 ments would constitute an undue financial hardship.

22 (2) The Secretary may waive the application of

23 the requirements of subsection (a) for a hospital

24 that is in the process of developing a system to pro25 vide the required data set and executes agreements
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1 with its fiscal intermediary and its utilization and

2 quality control peer review organization that the hos3 pital will meet the requirements of subsection (a) by

4 a specified date (not later than January 1, 2000).

5 (3) The Secretary may waive the application of

6 the requirement of subsection (a)(1) for a hospital

7 that agrees to obtain from its records the data ele8 ments that are needed to meet the requirements of

9 paragraphs (2) and (3) of subsection (a) and agrees

10 to subject its data transfer process to a quality as11 surance program specified by the Secretary.

12 (c) APPLICATION TO HOSPITALS OF THE DEPART13 MENT OF VETERANS AFFAIRS.—

14 (1) IN GENERAL.—The Secretary of Veterans

15 Affairs shall provide that each hospital of the De16 partment of Veterans Affairs shall comply with the

17 requirements of subsection (a) in the same manner

18 as such requirements would apply to the hospital if

19 it were participating in the Medicare program.

20 (2) WAIVER.—The Secretary of Veterans Af21 fairs may waive the application of such requirements

22 to a hospital in the same manner as the Secretary

23 of Health and Human Services may waive under

24 subsection (b) the application of the requirements of

25 subsection (a).
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1 SEC. 213. ELECTRONIC TRANSMISSION TO FEDERAL AGEN2 CIES.

3 (a) IN GENERAL.—Effective January 1, 2000, if a

4 provider is required under a Federal program to transmit

5 a data element that is subject to a presentation or trans6 mission standard (as defined in subsection (b)), the head

7 of the Federal agency responsible for such program (if not

8 otherwise authorized) is authorized to require the provider

9 to present and transmit the data element electronically in

10 accordance with such a standard.

11 (b) PRESENTATION OR TRANSMISSION STANDARD

12 DEFINED.—In subsection (a), the term ‘‘presentation or

13 transmission standard’’ means a standard, promulgated

14 under subsection (b) or (c) of section 211, described in

15 paragraph (4) or (5) of section 211(b).

16 SEC. 214. LIMITATION ON DATA REQUIREMENTS WHERE

17 STANDARDS IN EFFECT.

18 (a) IN GENERAL.—If standards with respect to data

19 elements are promulgated under section 211 with respect

20 to a class of provider, a health insurance plan may not

21 require, for the purpose of utilization review or as a condi22 tion of providing benefits under the plan, that a provider

23 in the class—

24 (1) provide any data element not in the set of

25 comprehensive data elements specified under such

26 standards, or
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1 (2) transmit or present any such data element

2 in a manner inconsistent with the applicable stand3 ards for such transmission or presentation.

4 (b) COMPLIANCE.—

5 (1) IN GENERAL.—The Secretary may impose a

6 civil money penalty on any health insurance plan

7 (other than a health insurance plan described in

8 paragraph (2)) that fails to comply with subsection

9 (a) in an amount not to exceed $100 for each such

10 failure. The provisions of section 1128A of the So11 cial Security Act (other than the first sentence of

12 subsection (a) and other than subsection (b)) shall

13 apply to a civil money penalty under this paragraph

14 in the same manner as such provisions apply to a

15 penalty or proceeding under section 1128A(a) of

16 such Act.

17 (2) PLANS SUBJECT TO EFFECTIVE STATE REG18 ULATION.—A plan described in this paragraph is a

19 health insurance plan that is subject to regulation by

20 a State, if the Secretary finds that—

21 (A) the State provides for application of

22 the requirement of subsection (a), and

23 (B) the State regulatory program provides

24 for the appropriate and effective enforcement of

25 such requirement with respect to such plans.
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1 SEC. 215. ADVISORY COMMISSION.

2 (a) IN GENERAL.—The Secretary shall establish an

3 advisory commission including hospital executives, hospital

4 data base managers, physicians, health services research5 ers, and technical experts in collection and use of data

6 and operation of data systems. Such commission shall in7 clude, as ex officio members, a representative of the Direc8 tor of the National Institutes of Health, the Administrator

9 for Health Care Policy and Research, the Secretary of

10 Veterans Affairs, and the Director of the Centers for Dis11 ease Control.

12 (b) FUNCTIONS.—The advisory commission shall

13 monitor and advise the Secretary concerning—

14 (1) the standards established under this sub15 title, and

16 (2) operational concerns about the implementa17 tion of such standards under this subtitle.

18 (c) STAFF.—From the amounts appropriated under

19 subsection (d), the Secretary shall provide sufficient staff

20 to assist the advisory commission in its activities under

21 this section.

22 (d) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated $2,000,000 for each of

24 fiscal years 1995 through 2000 to carry out this section.
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1 Subtitle C—Development and Dis2 tribution of Comparative Value

3 Information

4 SEC. 221. STATE COMPARATIVE VALUE INFORMATION PRO5 GRAMS FOR HEALTH CARE PURCHASING.

6 (a) PURPOSE.—In order to assure the availability of

7 comparative value information to purchasers of health

8 care in each State, the Secretary shall determine whether

9 each State is developing and implementing a health care

10 value information program that meets the criteria and

11 schedule set forth in subsection (b).

12 (b) CRITERIA AND SCHEDULE FOR STATE PRO13 GRAMS.—The criteria and schedule for a State health care

14 value information program in this subsection shall be spec15 ified by the Secretary as follows:

16 (1) The State begins promptly after enactment

17 of this Act to develop (directly or through contrac18 tual or other arrangements with 1 or more States,

19 coalitions of health insurance purchasers, other enti20 ties, or any combination of such arrangements) in21 formation systems regarding comparative health val22 ues.

23 (2) The information contained in such systems

24 covers at least the average prices of common health

25 care services (as defined in subsection (d)) and
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1 health insurance plans, and, where available, meas2 ures of the variability of these prices within a State

3 or other market areas.

4 (3) The information described in paragraph (2)

5 is made available within the State beginning not

6 later than 1 year after the date of the enactment of

7 this Act, and is revised as frequently as reasonably

8 necessary, but at intervals of no greater than 1 year.

9 (4) Not later than 6 years after the date of the

10 enactment of this Act the State has developed infor11 mation systems that provide comparative costs, qual12 ity, and outcomes data with respect to health insur13 ance plans and hospitals and made the information

14 broadly available within the relevant market areas.

15 Nothing in this section shall preclude a State from provid16 ing additional information, such as information on prices

17 and benefits of different health insurance plans available.

18 (c) GRANTS TO STATES FOR THE DEVELOPMENT OF

19 STATE PROGRAMS.—

20 (1) GRANT AUTHORITY.—The Secretary may

21 make grants to each State to enable such State to

22 plan the development of its health care value infor23 mation program and, if necessary, to initiate the im24 plementation of such program. Each State seeking

25 such a grant shall submit an application therefor,
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1 containing such information as the Secretary finds

2 necessary to assure that the State is likely to de3 velop and implement a program in accordance with

4 the criteria and schedule in subsection (b).

5 (2) OFFSET AUTHORITY.—If, at any time with6 in the 3-year period following the receipt by a State

7 of a grant under this subsection, the Secretary is re8 quired by section 222 to implement a health care in9 formation program in the State, the Secretary may

10 recover the amount of the grant under this sub11 section by offset against any other amount payable

12 to the State under the Social Security Act. The

13 amount of the offset shall be made available (from

14 the appropriation account with respect to which the

15 offset was taken) to the Secretary to carry out such

16 section.

17 (3) AUTHORIZATION OF APPROPRIATIONS.—

18 There are authorized to be appropriated such sums

19 as are necessary to make grants under this sub20 section, to remain available until expended.

21 (d) COMMON HEALTH CARE SERVICES DEFINED.—

22 In this section, the term ‘‘common health care services’’

23 includes such procedures as the Secretary may specify and

24 any additional health care services which a State may wish

25 to include in its comparative value information program.
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1 (e) STATE DEFINED.—In this title, the term ‘‘State’’

2 includes the District of Columbia, Puerto Rico, the Virgin

3 Islands, Guam, and American Samoa.

4 SEC. 222. FEDERAL IMPLEMENTATION.

5 (a) IN GENERAL.—If the Secretary finds, at any

6 time, that a State has failed to develop or to continue to

7 implement a health care value information program in ac8 cordance with the criteria and schedule in section 221(b),

9 the Secretary shall take the actions necessary, directly or

10 through grants or contract, to implement a comparable

11 program in the State.

12 (b) FEES.—Fees may be charged by the Secretary

13 for the information materials provided pursuant to a pro14 gram under this section. Any amounts so collected shall

15 be deposited in the appropriation account from which the

16 Secretary’s costs of providing such materials were met,

17 and shall remain available for such purposes until ex18 pended.

19 SEC. 223. COMPARATIVE VALUE INFORMATION CONCERN20 ING FEDERAL PROGRAMS.

21 (a) DEVELOPMENT.—The head of each Federal agen22 cy with responsibility for the provision of health insurance

23 or of health care services to individuals shall promptly de24 velop health care value information relating to each pro25 gram that such head administers and covering the same
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1 types of data that a State program meeting the criteria

2 of section 221(b) would provide.

3 (b) DISSEMINATION OF INFORMATION.—Such infor4 mation shall be made generally available to States and to

5 providers and consumers of health care services.

6 Subtitle D—Preemption of State

7 Quill Pen Laws

8 SEC. 231. PREEMPTION OF STATE QUILL PEN LAWS.

9 (a) IN GENERAL.—Effective January 1, 1996, no ef10 fect shall be given to any provision of State law that re11 quires medical or health insurance records (including bill12 ing information) to be maintained in written, rather than

13 electronic form.

14 (b) SECRETARIAL AUTHORITY.—The Secretary may

15 issue regulations to carry out subsection (a). Such regula16 tions may provide for such exceptions to subsection (a)

17 as the Secretary determines to be necessary to prevent

18 fraud and abuse, with respect to controlled substances,

19 and in such other cases as the Secretary deems appro20 priate.
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1 TITLE III—ANTI-FRAUD

2 Subtitle A—Criminal Prosecution

3 of Health Care Fraud

4 SEC. 301. PENALTIES FOR HEALTH CARE FRAUD.

5 (a) IN GENERAL.—Chapter 63 of title 18, United

6 States Code, is amended by adding at the end the follow7 ing:

8 ‘‘§ 1347. Health care fraud

9 ‘‘(a) OFFENSE.—Whoever, being a health care pro10 vider, knowingly engages in any scheme or artifice to de11 fraud any person in connection with the provision of

12 health care shall be fined under this title or imprisoned

13 not more than 5 years, or both.

14 ‘‘(b) DEFINITION.—In this section, the term ‘health

15 care provider’ means—

16 ‘‘(1) a physician, nurse, dentist, therapist, phar17 macist, or other professional provider of health care;

18 and

19 ‘‘(2) a hospital, health maintenance organiza20 tion, pharmacy, laboratory, clinic, or other health

21 care facility or a provider of medical services, medi22 cal devices, medical equipment, or other medical sup23 plies.

24 (b) CLERICAL AMENDMENT.—The table of sections

25 at the beginning of chapter 63 of title 18, United States
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1 Code, is amended by adding at the end the following new

2 item:

‘‘1347. Health care fraud.’’.

3 SEC. 302. REWARDS FOR INFORMATION LEADING TO PROS4 ECUTION AND CONVICTION.

5 Section 3059 of title 18, United States Code, is

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

8 ‘‘(c)(1) In special circumstances and in the Attorney

9 General’s sole discretion, the Attorney General may make

10 a payment of up to $10,000 to a person who furnishes

11 information unknown to the Government relating to a pos12 sible prosecution under section 1101.

13 ‘‘(2) A person is not eligible for a payment under

14 paragraph (1) if—

15 ‘‘(A) the person is a current or former officer

16 or employee of a Federal or State government agen17 cy or instrumentality who furnishes information dis18 covered or gathered in the course of government em19 ployment;

20 ‘‘(B) the person knowingly participated in the

21 offense;

22 ‘‘(C) the information furnished by the person

23 consists of allegations or transactions that have been

24 disclosed to the public—
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1 ‘‘(i) in a criminal, civil, or administrative

2 proceeding;

3 ‘‘(ii) in a congressional, administrative or

4 General Accounting Office report, hearing,

5 audit, or investigation; or

6 ‘‘(iii) by the news media, unless the person

7 is the original source of the information; or

8 ‘‘(D) when, in the judgment of the Attorney

9 General, it appears that a person whose illegal ac10 tivities are being prosecuted or investigated could

11 benefit from the award.

12 ‘‘(3) For the purposes of paragraph (2)(C)(iii), the

13 term ‘original source’ means a person who has direct and

14 independent knowledge of the information that is fur15 nished and has voluntarily provided the information to the

16 Government prior to disclosure by the news media.

17 ‘‘(4) Neither the failure of the Attorney General to

18 authorize a payment under paragraph (1) nor the amount

19 authorized shall be subject to judicial review.’’.
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1 Subtitle B—Coordination of Health

2 Care Anti-Fraud and Abuse Ac3 tivities

4 SEC. 311. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

5 AND ABUSE SANCTIONS TO ALL FRAUD AND

6 ABUSE AGAINST ANY HEALTH INSURANCE

7 PLAN.

8 (a) CIVIL MONETARY PENALTIES.—Section 1128A

9 of the Social Security Act (42 U.S.C. 1320a–7a) is amend10 ed as follows:

11 (1) In subsection (a)(1), in the matter before

12 subparagraph (A), by inserting ‘‘or of any health in13 surance plan,’’ after ‘‘subsection (i)(1)),’’.

14 (2) In subsection (b)(1)(A), by inserting ‘‘or

15 under a health insurance plan’’ after ‘‘title XIX’’.

16 (3) In subsection (f)—

17 (A) by redesignating paragraph (3) as

18 paragraph (4); and

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

20 following new paragraph:

21 ‘‘(3) With respect to amounts recovered arising

22 out of a claim under a health insurance plan, the

23 portion of such amounts as is determined to have

24 been paid by the plan shall be repaid to the plan.’’.

25 (4) In subsection (i)—
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1 (A) in paragraph (2), by inserting ‘‘or

2 under a health insurance plan’’ before the pe3 riod at the end, and

4 (B) in paragraph (5), by inserting ‘‘or

5 under a health insurance plan’’ after ‘‘or XX’’.

6 (b) CRIMES.—

7 (1) SOCIAL SECURITY ACT.—Section 1128B of

8 such Act (42 U.S.C. 1320a–7b) is amended as fol9 lows:

10 (A) In the heading, by adding at the end

11 the following: ‘‘OR HEALTH INSURANCE PLANS’’.

12 (B) In subsection (a)(1)—

13 (i) by striking ‘‘title XVIII or’’ and

14 inserting ‘‘title XVIII,’’, and

15 (ii) by adding at the end the follow16 ing: ‘‘or a health insurance plan (as de17 fined in section 1128(i)),’’.

18 (C) In subsection (a)(5), by striking ‘‘title

19 XVIII or a State health care program’’ and in20 serting ‘‘title XVIII, a State health care pro21 gram, or a health insurance plan’’.

22 (D) In the second sentence of subsection

23 (a)—
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1 (i) by inserting after ‘‘title XIX’’ the

2 following: ‘‘or a health insurance plan’’,

3 and

4 (ii) by inserting after ‘‘the State’’ the

5 following: ‘‘or the plan’’.

6 (E) In subsection (b)(1), by striking ‘‘title

7 XVIII or a State health care program’’ each

8 place it appears and inserting ‘‘title XVIII, a

9 State health care program, or a health insur10 ance plan’’.

11 (F) In subsection (b)(2), by striking ‘‘title

12 XVIII or a State health care program’’ each

13 place it appears and inserting ‘‘title XVIII, a

14 State health care program, or a health insur15 ance plan’’.

16 (G) In subsection (b)(3), by striking ‘‘title

17 XVIII or a State health care program’’ each

18 place it appears in subparagraphs (A) and (C)

19 and inserting ‘‘title XVIII, a State health care

20 program, or a health insurance plan’’.

21 (H) In subsection (d)(2)—

22 (i) by striking ‘‘title XIX,’’ and insert23 ing ‘‘title XIX or under a health insurance

24 plan,’’, and
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1 (ii) by striking ‘‘State plan,’’ and in2 serting ‘‘State plan or the health insurance

3 plan,’’.

4 (2) TREBLE DAMAGES FOR CRIMINAL SANC5 TIONS.—Section 1128B of such Act (42 U.S.C.

6 1320a–7b) is amended by adding at the end the fol7 lowing new subsection:

8 ‘‘(f) In addition to the fines that may be imposed

9 under subsection (a), (b), or (c), any individual found to

10 have violated the provisions of any of such subsections

11 may be subject to treble damages.’’.

12 (3) IDENTIFICATION OF COMMUNITY SERVICE

13 OPPORTUNITIES.—Section 1128B of such Act (42

14 U.S.C. 1320a–7b) is further amended by adding at

15 the end the following new subsection:

16 ‘‘(g) The Secretary shall—

17 ‘‘(1) in consultation with State and local health

18 care officials, identify opportunities for the satisfac19 tion of community service obligations that a court

20 may impose upon the conviction of an offense under

21 this section, and

22 ‘‘(2) make information concerning such oppor23 tunities available to Federal and State law enforce24 ment officers and State and local health care offi25 cials.’’.
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1 (c) HEALTH INSURANCE PLAN DEFINED.—Section

2 1128 of such Act (42 U.S.C. 1320a–7) is amended by re3 designating subsection (i) as subsection (j) and by insert4 ing after subsection (h) the following new subsection:

5 ‘‘(i) HEALTH INSURANCE PLAN DEFINED.—For pur6 poses of sections 1128A and 1128B, the term ‘health in7 surance plan’ means a health insurance program other

8 than the medicare program, the medicaid program, or a

9 State health care program.’’.

10 (d) CONFORMING AMENDMENT.—Section

11 1128(b)(8)(B)(ii) of such Act (42 U.S.C. 1320a–

12 7(b)(8)(B)(ii)) is amended by striking ‘‘1128A’’ and in13 serting ‘‘1128A (other than a penalty arising from a

14 health insurance plan, as defined in subsection (i))’’.

15 (e) EFFECTIVE DATE.—The amendments made by

16 this section shall take effect January 1, 1995.

17 TITLE IV—ANTITRUST

18 PROVISIONS

19 SEC. 401. EXEMPTION FROM ANTITRUST LAWS FOR CER20 TAIN COMPETITIVE AND COLLABORATIVE

21 ACTIVITIES.

22 (a) EXEMPTION DESCRIBED.—An activity relating to

23 the provision of health care services shall be exempt from

24 the antitrust laws if—
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1 (1) the activity is within one of the categories

2 of safe harbors described in section 402;

3 (2) the activity is within an additional safe har4 bor designated by the Attorney General under sec5 tion 403; or

6 (3) the activity is specified in and in compliance

7 with the terms of a certificate of review issued by

8 the Attorney General under section 404 and the ac9 tivity occurs—

10 (A) while the certificate is in effect, or

11 (B) in the case of a certificate issued dur12 ing the 2-year period beginning on the date of

13 the enactment of this Act, at any time on or

14 after the first day of the 2-year period that

15 ends on the date the certificate takes effect.

16 (b) AWARD OF ATTORNEY’S FEES AND COSTS OF

17 SUIT.—

18 (1) IN GENERAL.—If any person brings an ac19 tion alleging a claim under the antitrust laws and

20 the activity on which the claim is based is found by

21 the court to be exempt from such laws under sub22 section (a), the court shall, at the conclusion of the

23 action—
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1 (A) award to a substantially prevailing

2 claimant the cost of suit attributable to such

3 claim, including a reasonable attorney’s fee, or

4 (B) award to a substantially prevailing

5 party defending against such claim the cost of

6 such suit attributable to such claim, including

7 reasonable attorney’s fee, if the claim, or the

8 claimant’s conduct during litigation of the

9 claim, was frivolous, unreasonable, without

10 foundation, or in bad faith.

11 (2) OFFSET IN CASES OF BAD FAITH.—The

12 court may reduce an award made pursuant to para13 graph (1) in whole or in part by an award in favor

14 of another party for any part of the cost of suit (in15 cluding a reasonable attorney’s fee) attributable to

16 conduct during the litigation by any prevailing party

17 that the court finds to be frivolous, unreasonable,

18 without foundation, or in bad faith.

19 SEC. 402. SAFE HARBORS.

20 The following activities are safe harbors for purposes

21 of section 401(a)(1):

22 (1) COMBINATIONS WITH MARKET SHARE

23 BELOW THRESHOLD.—Activities relating to health

24 care services of any combination of health care pro25 viders if the number of each type or specialty of pro-
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1 vider in question does not exceed 20 percent of the

2 total number of such type or specialty of provider in

3 the relevant market area.

4 (2) ACTIVITIES OF MEDICAL SELF-REGULATORY

5 ENTITIES.—

6 (A) IN GENERAL.—Subject to subpara7 graph (B), any activity of a medical self-regu8 latory entity relating to standard setting or

9 standard enforcement activities that are de10 signed to promote the quality of health care

11 provided to patients.

12 (B) EXCEPTION.—No activity of a medical

13 self-regulatory entity may be deemed to fall

14 under the safe harbor established under this

15 paragraph if the activity is conducted for pur16 poses of financial gain.

17 (3) PARTICIPATION IN SURVEYS.—The partici18 pation of a provider of health care services in a writ19 ten survey of the prices of services, reimbursement

20 levels, or the compensation and benefits of employ21 ees and personnel, but only if—

22 (A) the survey is conducted by a third

23 party, such as a purchaser of health care serv24 ices, governmental entity, institution of higher

25 education, or trade association;
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1 (B) the information provided by partici2 pants in the survey is based on prices charged,

3 reimbursements received, or compensation and

4 benefits paid prior to the third month preceding

5 the month in which the information is provided;

6 and

7 (C) if the results of the survey are dissemi8 nated, the results are aggregated in a manner

9 that ensures that no recipient of the results

10 may identify the prices charged, reimbursement

11 received, or compensation and benefits paid by

12 any particular provider.

13 (4) JOINT VENTURES FOR HIGH TECHNOLOGY

14 AND COSTLY EQUIPMENT AND SERVICES.—Any ac15 tivity of a health care cooperative venture relating to

16 the purchase, operation, or marketing of high tech17 nology or other expensive medical equipment, or the

18 provision of high cost or complex services, but only

19 if the number of participants in the venture does not

20 exceed the lowest number needed to support the ven21 ture. Other providers may be included in the ven22 ture, but only if such other providers could not pur23 chase, operate, or market such equipment or provide

24 a competing service either alone or through the for25 mation of a competing venture.
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1 (5) HOSPITAL MERGERS.—Activities relating to

2 a merger of 2 hospitals if, during the 3-year period

3 preceding the merger, one of the hospitals had an

4 average of 150 or fewer operational beds and an av5 erage daily inpatient census of less than 50 percent

6 of such beds.

7 (6) JOINT PURCHASING ARRANGEMENTS.—Any

8 joint purchasing arrangement among health care

9 providers if—

10 (A) the purchases under the arrangement

11 represent less than 35 percent of the total sales

12 of the product or service purchased in the rel13 evant market; and

14 (B) the cost of the products and services

15 purchased jointly accounts for less than 20 per16 cent of the total revenues from all products or

17 services sold by each participant in the joint

18 purchasing arrangement.

19 (7) NEGOTIATIONS.—Activities consisting of

20 good faith negotiations to carry out any activity—

21 (A) described in this section,

22 (B) within an additional safe harbor des23 ignated by the Attorney General under section

24 403,
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1 (C) that is the subject of an application for

2 a certificate of review under section 404, or

3 (D) that is deemed a submission of a noti4 fication under section 405(a)(2)(B),

5 without regard to whether such an activity is carried

6 out.

7 SEC. 403. DESIGNATION OF ADDITIONAL SAFE HARBORS.

8 (a) IN GENERAL.—

9 (1) SOLICITATION OF PROPOSALS.—Not later

10 than 30 days after the date of the enactment of this

11 Act, the Attorney General shall publish a notice in

12 the Federal Register soliciting proposals for addi13 tional safe harbors.

14 (2) REVIEW AND REPORT ON PROPOSED SAFE

15 HARBORS.—Not later than 180 days after the date

16 of the enactment of this Act, the Attorney General

17 (in consultation with the Secretary of Health and

18 Human Services and the Chair of the Federal Trade

19 Commission) shall—

20 (A) review the proposed safe harbors sub21 mitted under paragraph (1); and

22 (B) submit a report to Congress describing

23 the proposals to be included in the publication

24 of additional safe harbors described in para-
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1 graph (3) and the proposals that are not to be

2 so included, together with explanations therefor.

3 (3) PUBLICATION OF ADDITIONAL SAFE HAR4 BORS.—Not later than 180 days after the date of

5 the enactment of this Act, the Attorney General (in

6 consultation with the Secretary of Health and

7 Human Services and the Chair of the Federal Trade

8 Commission) shall publish in the Federal Register

9 proposed additional safe harbors for purposes of sec10 tion 401(a)(2) for providers of health care services.

11 Not later than 180 days after publishing such pro12 posed safe harbors in the Federal Register, the At13 torney General shall issue final rules establishing

14 such safe harbors.

15 (b) CRITERIA FOR SAFE HARBORS.—In establishing

16 safe harbors under subsection (a), the Attorney General

17 shall take into account the following:

18 (1) The extent to which a competitive or col19 laborative activity will accomplish any of the follow20 ing:

21 (A) An increase in access to health care

22 services.

23 (B) The enhancement of the quality of

24 health care services.
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1 (C) The establishment of cost efficiencies

2 that will be passed on to consumers, including

3 economies of scale and reduced transaction and

4 administrative costs.

5 (D) An increase in the ability of health

6 care facilities to provide services in medically

7 underserved areas or to medically underserved

8 populations.

9 (E) An improvement in the utilization of

10 health care resources or the reduction in the in11 efficient duplication of the use of such re12 sources.

13 (2) Whether the designation of an activity as a

14 safe harbor under subsection (a) will result in the

15 following outcomes:

16 (A) Health plans and other health care in17 surers, consumers of health care services, and

18 health care providers will be better able to ne19 gotiate payment and service arrangements

20 which will reduce costs to consumers.

21 (B) Taking into consideration the charac22 teristics of the particular purchasers and pro23 viders involved, competition will not be unduly

24 restricted.
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1 (C) Equally efficient and less restrictive al2 ternatives do not exist to meet the criteria de3 scribed in paragraph (1).

4 (D) The activity will not unreasonably

5 foreclose competition by denying competitors a

6 necessary element of competition.

7 SEC. 404. CERTIFICATES OF REVIEW.

8 (a) ESTABLISHMENT OF PROGRAM.—In consultation

9 with the Secretary and the Chair, the Attorney General

10 shall (not later than 180 days after the date of the enact11 ment of this Act) issue certificates of review in accordance

12 with this section for providers of health care services and

13 advise and assist any person with respect to applying for

14 such a certificate of review.

15 (b) PROCEDURES FOR APPLICATION FOR CERTIFI16 CATE.—

17 (1) FORM; CONTENT.—To apply for a certifi18 cate of review, a person shall submit to the Attorney

19 General a written application which—

20 (A) specifies the activities relating to the

21 provision of health care services which satisfy

22 the criteria described in section 403(b) and

23 which will be included in the certificate; and

24 (B) is in a form and contains any informa25 tion, including information pertaining to the
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1 overall market in which the applicant operates,

2 required by rule or regulation promulgated

3 under section 407.

4 (2) PUBLICATION OF NOTICE IN FEDERAL REG5 ISTER.—Within 10 days after an application submit6 ted under paragraph (1) is received by the Attorney

7 General, the Attorney General shall publish in the

8 Federal Register a notice that announces that an

9 application for a certificate of review has been sub10 mitted, identifies each person submitting the appli11 cation, and describes the conduct for which the ap12 plication is submitted.

13 (3) ESTABLISHMENT OF PROCEDURES FOR IS14 SUANCE OF CERTIFICATE.—In consultation with the

15 Chair and the Secretary, the Attorney General shall

16 establish procedures to be used in applying for and

17 in determining whether to approve an application for

18 a certificate of review under this title. Under such

19 procedures the Attorney General shall approve an

20 application if the Attorney General determines that

21 the activities to be covered under the certificate will

22 satisfy the criteria described in section 403(b) for

23 additional safe harbors designated under such sec24 tion and that the benefits of the issuance of the cer-
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1 tificate will outweigh any disadvantages that may re2 sult from reduced competition.

3 (4) TIMING FOR DECISION ON APPLICATION.—

4 (A) IN GENERAL.—Within 90 days after

5 the Attorney General receives an application for

6 a certificate of review, the Attorney General

7 shall determine whether the applicant’s health

8 care market activities are in accordance with

9 the procedures described in paragraph (3). If

10 the Attorney General, with the concurrence of

11 the Secretary, determines that such procedures

12 are met, the Attorney General shall issue to the

13 applicant a certificate of review. The certificate

14 of review shall specify—

15 (i) the health care market activities to

16 which the certificate applies,

17 (ii) the person to whom the certificate

18 of review is issued, and

19 (iii) any terms and conditions the At20 torney General or the Secretary deems nec21 essary to assure compliance with the appli22 cable procedures described in paragraph

23 (3).

24 (B) APPLICATIONS DEEMED APPROVED.—

25 If the Attorney General does not reject an ap-
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1 plication before the expiration of the 90-day pe2 riod beginning on the date the Attorney General

3 receives the application, the Attorney General

4 shall be deemed to have approved the applica5 tion and to have issued a certificate of review

6 relating to the applicant’s health care market

7 activities covered under the application.

8 (5) EXPEDITED ACTION.—If the applicant indi9 cates a special need for prompt disposition, the At10 torney General and the Secretary may expedite ac11 tion on the application, except that no certificate of

12 review may be issued within 30 days of publication

13 of notice in the Federal Register under subsection

14 (b)(2).

15 (6) ACTIONS UPON DENIAL.—

16 (A) NOTIFICATION.—If the Attorney Gen17 eral denies in whole or in part an application

18 for a certificate, the Attorney General shall no19 tify the applicant of the Attorney General’s de20 termination and the reasons for it.

21 (B) REQUEST FOR RECONSIDERATION.—

22 An applicant may, within 30 days of receipt of

23 notification that the application has been denied

24 in whole or in part, request the Attorney Gen25 eral to reconsider the determination. The Attor-
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1 ney General, with the concurrence of the Sec2 retary, shall notify the applicant of the deter3 mination upon reconsideration within 30 days

4 of receipt of the request.

5 (C) RETURN OF DOCUMENTS.—If the At6 torney General denies an application for the is7 suance of a certificate of review and thereafter

8 receives from the applicant a request for the re9 turn of documents submitted by the applicant

10 in connection with the application for the cer11 tificate, the Attorney General and the Secretary

12 shall return to the applicant, not later than 30

13 days after receipt of the request, the documents

14 and all copies of the documents available to the

15 Attorney General and the Secretary, except to

16 the extent that the information has been made

17 public under an exception to the rule against

18 public disclosure described in subsection

19 (g)(2)(B).

20 (7) FRAUDULENT PROCUREMENT.—A certifi21 cate of review shall be void ab initio with respect to

22 any health care market activities for which the cer23 tificate was procured by fraud.

24 (c) AMENDMENT AND REVOCATION OF CERTIFI25 CATES.—
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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 submitted to the Attorney General.

16 (3) REVOCATION.—

17 (A) GROUNDS FOR REVOCATION.—In ac18 cordance with this paragraph, the Attorney

19 General may revoke in whole or in part a cer20 tificate of review issued under this section. The

21 following shall be considered grounds for the

22 revocation of a certificate:

23 (i) After the expiration of the 2-year

24 period beginning on the date a person’s

25 certificate is issued, the activities of the
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1 person have not substantially accomplished

2 the purposes for the issuance of the certifi3 cate.

4 (ii) The person has failed to comply

5 with any of the terms or conditions im6 posed under the certificate by the Attorney

7 General or the Secretary under subsection

8 (b)(4).

9 (iii) The activities covered under the

10 certificate no longer satisfy the criteria set

11 forth in section 403(b).

12 (B) REQUEST FOR COMPLIANCE INFORMA13 TION.—If the Attorney General or Secretary

14 has reason to believe that any of the grounds

15 for revocation of a certificate of review de16 scribed in subparagraph (A) may apply to a

17 person holding the certificate, the Attorney

18 General shall request such information from

19 such person as the Attorney General or the Sec20 retary deems necessary to resolve the matter of

21 compliance. Failure to comply with such request

22 shall be grounds for revocation of the certificate

23 under this paragraph.

24 (C) PROCEDURES FOR REVOCATION.—If

25 the Attorney General or the Secretary deter-
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1 mines that any of the grounds for revocation of

2 a certificate of review described in subpara3 graph (A) apply to a person holding the certifi4 cate, or that such person has failed to comply

5 with a request made under subparagraph (B),

6 the Attorney General shall give written notice of

7 the determination to such person. The notice

8 shall include a statement of the circumstances

9 underlying, and the reasons in support of, the

10 determination. In the 60-day period beginning

11 30 days after the notice is given, the Attorney

12 General shall revoke the certificate or modify it

13 as the Attorney General or the Secretary deems

14 necessary to cause the certificate to apply only

15 to activities that meet the procedures for the is16 suance of certificates described in subsection

17 (b)(2).

18 (D) INVESTIGATION AUTHORITY.—For

19 purposes of carrying out this paragraph, the

20 Attorney General may conduct investigations in

21 the same manner as the Attorney General con22 ducts investigations under section 3 of the Anti23 trust Civil Process Act, except that no civil in24 vestigative demand may be issued to a person
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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 any appropriate district court of

12 the United States to set aside the determination on

13 the ground that such determination is erroneous

14 based on the preponderance of the evidence.

15 (2) NO OTHER REVIEW PERMITTED.—Except

16 as provided in paragraph (1), no action by the At17 torney General or the Secretary pursuant to this

18 title 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-
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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.
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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 and 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
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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 that a person is entitled to the protection

22 provided by such a certificate.
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1 SEC. 405. NOTIFICATIONS PROVIDING REDUCTION IN CER2 TAIN PENALTIES UNDER ANTITRUST LAW

3 FOR HEALTH CARE COOPERATIVE VEN4 TURES.

5 (a) NOTIFICATIONS DESCRIBED.—

6 (1) SUBMISSION OF NOTIFICATION BY VEN7 TURE.—Any party to a health care cooperative ven8 ture, acting on such venture’s behalf, may, not later

9 than 90 days after entering into a written agreement

10 to form such venture or not later than 90 days after

11 the date of the enactment of this Act, whichever is

12 later, file with the Attorney General a written notifi13 cation disclosing—

14 (A) the identities of the parties to such

15 venture,

16 (B) the nature and objectives of such ven17 ture, and

18 (C) such additional information as the At19 torney General may require by regulation.

20 (2) ACTIVITIES DEEMED SUBMISSION OF NOTI21 FICATION.—The following health care cooperative

22 ventures shall be deemed to have filed a written noti23 fication with respect to the venture under paragraph

24 (1):

25 (A) SUBMISSION OF APPLICATION FOR

26 CERTIFICATE OF REVIEW.—Any health care co-
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1 operative venture for which an application for a

2 certificate of review is filed with the Attorney

3 General under section 403.

4 (B) CERTAIN VENTURES.—Any health care

5 cooperative venture meeting the following re6 quirements:

7 (i) The venture consists of a network

8 of non-institutional providers not greater

9 than—

10 (I) in the case of a nonexclusive

11 network in which the participating

12 members are permitted to create or

13 join other competing networks, 50

14 percent of the providers of health care

15 services in the relevant geographic

16 area and 50 percent of the members

17 of the provider specialty group in the

18 relevant market; or

19 (II) in the case of an exclusive

20 network in which the participating

21 members are not permitted to create

22 or join other competing networks, 35

23 percent of the providers of health care

24 services in the relevant geographic

25 area and 35 percent of the members
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1 of the provider specialty group in the

2 relevant market.

3 (ii) Each member of the venture as4 sumes substantial financial risk for the op5 eration of the venture through risk-sharing

6 arrangements, including (but not limited

7 to)—

8 (I) the acceptance of capitation

9 contracts;

10 (II) the acceptance of contracts

11 with fee withholding mechanisms re12 lating to the ability to meet estab13 lished goals for utilization review and

14 management; and

15 (III) the holding by members of

16 significant ownership or equity inter17 ests in the venture, where the capital

18 contributed by the members is used to

19 fund the operational costs of the ven20 ture such as administration, market21 ing, and computer-operated medical

22 information, if the venture develops

23 and operates comprehensive programs

24 for utilization management and qual25 ity assurance that include controls
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1 over the use of institutional, special2 ized, and ancillary medical services.

3 (3) SUBMISSION OF ADDITIONAL INFORMA4 TION.—

5 (A) REQUEST OF ATTORNEY GENERAL.—

6 At any time after receiving a notification filed

7 under paragraph (1), the Attorney General may

8 require the submission of additional information

9 or documentary material relevant to the pro10 posed health care cooperative venture.

11 (B) PARTIES TO VENTURE.—Any party to

12 a health care cooperative venture may submit

13 such additional information on the venture’s be14 half as may be appropriate to ensure that the

15 venture will receive the protections provided

16 under subsection (b).

17 (C) REQUIRED SUBMISSION OF INFORMA18 TION ON CHANGES TO VENTURE.—A health

19 care cooperative venture for which a notification

20 is in effect under this section shall submit infor21 mation on any change in the membership of the

22 venture not later than 90 days after such

23 change occurs.

24 (4) PUBLICATION OF NOTIFICATION.—
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1 (A) INFORMATION MADE PUBLICLY AVAIL2 ABLE.—Not later than 30 days after receiving

3 a notification with respect to a venture under

4 paragraph (1), the Attorney General shall pub5 lish in the Federal Register a notice with re6 spect to the venture that identifies the parties

7 to the venture and generally describes the pur8 pose and planned activity of the venture. Prior

9 to its publication, the contents of the notice

10 shall be made available to the parties to the

11 venture.

12 (B) RESTRICTION ON DISCLOSURE OF

13 OTHER INFORMATION.—All information and

14 documentary material submitted pursuant to

15 this section and all information obtained by the

16 Attorney General in the course of any investiga17 tion or case with respect to a potential violation

18 of the antitrust laws by the health care coopera19 tive venture (other than information and mate20 rial described in subparagraph (A)) shall be ex21 empt from disclosure under section 552 of title

22 5, United States Code, and shall not be made

23 publicly available by any agency of the United

24 States to which such section applies except in
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1 a judicial proceeding in which such information

2 and material is subject to any protective order.

3 (5) WITHDRAWAL OF NOTIFICATION.—Any per4 son who files a notification pursuant to this section

5 may withdraw such notification before a publication

6 by the Attorney General pursuant to paragraph (4).

7 Any person who is deemed to have filed a notifica8 tion under paragraph (2)(A) shall be deemed to have

9 withdrawn the notification if the certificate of review

10 in question is revoked or withdrawn under section

11 404.

12 (6) NO JUDICIAL REVIEW PERMITTED.—Any

13 action taken or not taken by the Attorney General

14 with respect to notifications filed pursuant to this

15 subsection shall not be subject to judicial review.

16 (b) PROTECTIONS FOR VENTURES SUBJECT TO NO17 TIFICATION.—

18 (1) IN GENERAL.—

19 (A) PROTECTIONS DESCRIBED.—The pro20 visions of paragraphs (2), (3), (4), and (5) shall

21 apply with respect to any action under the anti22 trust laws challenging conduct within the scope

23 of a notification which is in effect pursuant to

24 subsection (a)(1).
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1 (B) TIMING OF PROTECTIONS.—The pro2 tections described in this subsection shall apply

3 to the venture that is the subject of a notifica4 tion under subsection (a)(1) as of the earlier

5 of—

6 (i) the date of the publication in the

7 Federal Register of the notice published

8 with respect to the notification; or

9 (ii) if such notice is not published dur10 ing the period required under subsection

11 (a)(4), the expiration of the 30-day period

12 that begins on the date the Attorney Gen13 eral receives any necessary information re14 quired to be submitted under subsection

15 (a)(1) or any additional information re16 quired by the Attorney General under sub17 section (a)(3)(A).

18 (2) APPLICABILITY OF RULE OF REASON

19 STANDARD.—In any action under the antitrust laws,

20 the conduct of any person which is within the scope

21 of a notification filed under subsection (a) shall not

22 be deemed illegal per se, but shall be judged on the

23 basis of its reasonableness, taking into account all

24 relevant factors affecting competition, including, but
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1 not limited to, effects on competition in relevant

2 markets.

3 (3) LIMITATION ON RECOVERY TO ACTUAL

4 DAMAGES AND INTEREST.—Notwithstanding section

5 4 of the Clayton Act, any person who is entitled to

6 recovery under the antitrust laws for conduct that is

7 within the scope of a notification filed under sub8 section (a) shall recover the actual damages sus9 tained by such person and interest calculated at the

10 rate specified in section 1961 of title 28, United

11 States Code, for the period beginning on the earliest

12 date for which injury can be established and ending

13 on the date of judgment, unless the court finds that

14 the award of all or part of such interest is unjust

15 under the circumstances.

16 (4) AWARD OF ATTORNEY’S FEES AND COSTS

17 OF SUIT.—

18 (A) IN GENERAL.—In any action under the

19 antitrust laws brought against a health care co20 operative venture for conduct that is within the

21 scope of a notification filed under subsection

22 (a), the court shall, at the conclusion of the ac23 tion—

24 (i) award to a substantially prevailing

25 claimant the cost of suit attributable to
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1 such claim, including a reasonable attor2 ney’s fee, or

3 (ii) award to a substantially prevailing

4 party defending against such claim the

5 cost of such suit attributable to such claim,

6 including reasonable attorney’s fee, if the

7 claim, or the claimant’s conduct during

8 litigation of the claim, was frivolous, un9 reasonable, without foundation, or in bad

10 faith.

11 (B) OFFSET IN CASES OF BAD FAITH.—

12 The court may reduce an award made pursuant

13 to subparagraph (A) in whole or in part by an

14 award in favor of another party for any part of

15 the cost of suit (including a reasonable attor16 ney’s fee) attributable to conduct during the

17 litigation by any prevailing party that the court

18 finds to be frivolous, unreasonable, without

19 foundation, or in bad faith.

20 (5) RESTRICTIONS ON ADMISSIBILITY OF IN21 FORMATION.—

22 (A) IN GENERAL.—Any information dis23 closed in a notification submitted under sub24 section (a)(1) and the fact of the publication of

25 a notification by the Attorney General under
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1 subsection (a)(4) shall only be admissible into

2 evidence in a judicial or administrative proceed3 ing for the sole purpose of establishing that a

4 party to a health care cooperative venture is en5 titled to the protections described in this sub6 section.

7 (B) ACTIONS OF ATTORNEY GENERAL.—

8 No action taken by the Attorney General pursu9 ant to this section shall be admissible into evi10 dence in any judicial or administrative proceed11 ing for the purpose of supporting or answering

12 any claim under the antitrust laws.

13 SEC. 406. REVIEW AND REPORTS ON SAFE HARBORS AND

14 CERTIFICATES OF REVIEW.

15 (a) IN GENERAL.—The Attorney General (in con16 sultation with the Secretary and the Chair) shall periodi17 cally review the safe harbors described in section 402, the

18 additional safe harbors designated under section 403, and

19 the certificates of review issued under section 404, and—

20 (1) with respect to the safe harbors described in

21 section 402, submit such recommendations to Con22 gress as the Attorney General considers appropriate

23 for modifications of such safe harbors;

24 (2) with respect to the additional safe harbors

25 designated under section 403, issue proposed revi-
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1 sions to such activities and publish the revisions in

2 the Federal Register; and

3 (3) with respect to the certificates of review,

4 submit a report to Congress on the issuance of such

5 certificates, and shall include in the report a descrip6 tion of the effect of such certificates on increasing

7 access to high quality health care services at reduced

8 costs.

9 (b) RECOMMENDATIONS FOR LEGISLATION.—The

10 Attorney General shall include in the reports submitted

11 under subsection (a)(3) any recommendations of the At12 torney General for legislation to improve the program for

13 the issuance of certificates of review established under this

14 title.

15 SEC. 407. RULES, REGULATIONS, AND GUIDELINES.

16 (a) SAFE HARBORS, CERTIFICATES, AND NOTIFICA17 TIONS.—The Attorney General, with the concurrence of

18 the Secretary, shall promulgate such rules, regulations,

19 and guidelines as are necessary to carry out sections 402,

20 403, 404, and 405, including guidelines defining or relat21 ing to relevant geographic and product markets for health

22 care services and providers of health care services.

23 (b) GUIDANCE FOR PROVIDERS.—

24 (1) IN GENERAL.—To promote greater cer25 tainty regarding the application of the antitrust laws
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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 additional safe harbors

6 under section 403 and grant certificates of review

7 under section 404, publish guidelines—

8 (A) to assist providers of health care serv9 ices in analyzing whether the activities of such

10 providers may be subject to a safe harbor under

11 sections 402 or 403; and

12 (B) describing specific types of activities

13 which would meet the requirements for a cer14 tificate of review under section 404, and sum15 marizing the factual and legal bases on which

16 the activities would meet the requirements.

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).
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1 SEC. 408. DEFINITIONS.

2 In this title, the following definitions shall apply:

3 (1) The term ‘‘antitrust laws’’—

4 (A) has the meaning given it in subsection

5 (a) of the first section of the Clayton Act (15

6 U.S.C. 12(a)), except that such term includes

7 section 5 of the Federal Trade Commission Act

8 (15 U.S.C. 45) to the extent such section ap9 plies to unfair methods of competition; and

10 (B) includes any State law similar to the

11 laws referred to in subparagraph (A).

12 (2) The term ‘‘Chair’’ means the Chair of the

13 Federal Trade Commission.

14 (3) The term ‘‘health insurance plan’’ has the

15 meaning given such term in section 111(b).

16 (4) The term ‘‘health care cooperative venture’’

17 means any activities, including attempts to enter

18 into or perform a contract or agreement, carried out

19 by 2 or more persons for the purpose of providing

20 health care services.

21 (5) The term ‘‘health care services’’ means any

22 services for which payment may be made under a

23 health insurance plan, including services related to

24 the delivery or administration of such services.

25 (6) The term ‘‘medical self-regulatory entity’’

26 means a medical society or association, a specialty
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1 board, a recognized accrediting agency, or a hospital

2 medical staff, and includes the members, officers,

3 employees, consultants, and volunteers or commit4 tees of such an entity.

5 (7) The term ‘‘person’’ includes a State or unit

6 of local government.

7 (8) The term ‘‘provider of health care services’’

8 means any individual or entity that is engaged in the

9 delivery of health care services in a State and that

10 is required by State law or regulation to be licensed

11 or certified by the State to engage in the delivery of

12 such services in the State.

13 (9) The term ‘‘specialty group’’ means a medi14 cal specialty or subspecialty in which a provider of

15 health care services may be licensed to practice by

16 a State (as determined by the Secretary in consulta17 tion with the certification boards for such specialties

18 and subspecialties).

19 (10) The term ‘‘standard setting and enforce20 ment activities’’ means—

21 (A) accreditation of health care practition22 ers, health care providers, medical education in23 stitutions, or medical education programs,

24 (B) technology assessment and risk man25 agement activities,
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1 (C) the development and implementation of

2 practice guidelines or practice parameters, or

3 (D) official peer review proceedings under4 taken by a hospital medical staff (or committee

5 thereof) or a medical society or association for

6 purposes of evaluating the professional conduct

7 or quality of health care provided by a medical

8 professional.

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