I

103D CONGRESS

1ST SESSION H. R. 3652

To improve the competitiveness, efficiency, and fairness of health coverage

for individuals and small employers through promoting the development

of voluntary Health Plan Purchasing Cooperatives.

IN THE HOUSE OF REPRESENTATIVES

NOVEMBER 22, 1993

Mrs. JOHNSON of Connecticut (for herself, Mr. THOMAS of California, Mr.

MCMILLAN, and Mr. GUNDERSON) introduced the following bill; which

was referred jointly to the Committees on Energy and Commerce and

Ways and Means

A BILL

To improve the competitiveness, efficiency, and fairness of

health coverage for individuals and small employers

through promoting the development of voluntary Health

Plan Purchasing Cooperatives.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Plan Purchasing Cooperative Act of 1993’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.
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Sec. 2. Establishment of standards; application in States.

Sec. 3. Specification of health plan purchasing cooperative areas.

Sec. 4. Establishment of health plan purchasing cooperatives.

Sec. 5. Functions of health plan purchasing cooperatives.

Sec. 6. Accountable Health Plans.

Sec. 7. Qualifications for qualified health insurance plans.

Sec. 8. Marketing qualified health benefit plans.

Sec. 9. Collection and submission of data.

Sec. 10. Risk adjustment mechanism.

Sec. 11. Role of State; oversight; evaluation.

Sec. 12. Description of medisave coverage.

Sec. 13. Tax treatment of medisave coverage.

Sec. 14. Definitions.

1 SEC. 2. ESTABLISHMENT OF STANDARDS; APPLICATION IN

2 STATES.

3 (a) ESTABLISHMENT OF STANDARDS.—

4 (1) IN GENERAL.—The Secretary of Health and

5 Human Services shall establish standards under this

6 Act to carry out the requirements of this Act, in7 cluding standards relating to—

8 (A) the establishment of Health Plan Pur9 chasing Cooperatives,

10 (B) qualifications for Accountable Health

11 Plans,

12 (C) the roles of States under this Act, and

13 (D) standard benefit package for small

14 employers.

15 (2) DEADLINE.—The Secretary shall establish

16 and publish such standards by not later than 6

17 months after the date of the enactment of this Act.

18 (3) REVISION.—The Secretary from time to

19 time may revise standards established under this
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1 subsection. Such revisions shall only become effective

2 in a manner that permits States sufficient time to

3 change laws and regulations in order to implement

4 such revisions.

5 (b) APPLICATION OF STANDARDS THROUGH

6 STATES.—

7 (1) APPLICATION OF STANDARDS.—

8 (A) IN GENERAL.—Subject to subsection

9 (c), each State shall submit to the Secretary, by

10 the deadline specified in subparagraph (B), a

11 report on steps the State is taking to establish

12 and operate Health Plan Purchasing Coopera13 tives in accordance with the standards estab14 lished under subsection (a) in all parts of the

15 State, and to conform its insurance laws to

16 meet the requirements of this Act, not later

17 than such deadline.

18 (B) DEADLINE FOR REPORT.—

19 (i) 1 YEAR AFTER STANDARDS ESTAB20 LISHED.—Subject to clause (ii), the dead21 line under this subparagraph is 1 year

22 after the date the standards are estab23 lished under subsection (a).

24 (ii) EXCEPTION FOR LEGISLATION.—

25 In the case of a State which the Secretary
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1 identifies, in consultation with the National

2 Association of Insurance Commissioners,

3 as—

4 (I) requiring State legislation

5 (other than legislation appropriating

6 funds) in order for insurers and

7 health plans offered to meet the

8 standards established under sub9 section (a), but

10 (II) having a legislature which is

11 not scheduled to meet in 1995 in a

12 legislative session in which such legis13 lation may be considered,

14 the date specified in this subparagraph is

15 the first day of the first calendar quarter

16 beginning after the close of the first legis17 lative session of the State legislature that

18 begins on or after January 1, 1996. For

19 purposes of the previous sentence, in the

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

21 session, each year of such session shall be

22 deemed to be a separate regular session of

23 the State legislature.

24 (2) FEDERAL ROLE.—If the Secretary deter25 mines that a State has failed to submit a report by
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1 the deadline specified under paragraph (1) or finds

2 that the State has not established and have in oper3 ation Health Plan Purchasing Cooperatives in ac4 cordance with the standards established under sub5 section (a), the Secretary shall notify the State and

6 provide the State a period of 60 days in which to

7 submit such report or to comply with such standards

8 under such paragraph. If, after such 60-day period,

9 the Secretary finds that such a failure has not been

10 corrected, the Secretary shall provide for such mech11 anism for the establishment and operation of Health

12 Plan Purchasing Cooperatives in accordance with

13 such standards in the State as the Secretary deter14 mines to be appropriate. Such implementation shall

15 take effect with respect to insurers, and health plans

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

17 date of the Secretary’s finding under the previous

18 sentence, and until the date the Secretary finds that

19 such a failure has been corrected.

20 (c) WAIVER OF APPLICATION IN A STATE.—Sub21 section (b) shall not apply in a State if the State dem22 onstrates to the satisfaction of the Secretary that the

23 State has established an alternative method for assuring

24 access of every eligible individual and eligible employee to

25 health coverage.
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1 (d) IMPLEMENTATION.—The report under subsection

2 (b) shall specify the State official (or officials), or State

3 board, commission, or department, responsible for carry4 ing out the standards under subsection (a).

5 SEC. 3. SPECIFICATION OF HEALTH PLAN PURCHASING

6 COOPERATIVE AREAS.

7 (a) IN GENERAL.—Each State shall establish bound8 aries for health plan purchasing cooperative areas in the

9 State.

10 (b) STANDARDS.—Each part of the State shall be in

11 one, and only one, health plan purchasing cooperative

12 area. Each such area shall include a sufficient number of

13 potential enrollees, health care providers, and Accountable

14 Health Plans to carry out the purposes of this Act.

15 (c) REVISIONS.—A State may revise the boundaries

16 of health plan purchasing cooperative areas not more fre17 quently than annually.

18 SEC. 4. ESTABLISHMENT OF HEALTH PLAN PURCHASING

19 COOPERATIVES.

20 (a) IN GENERAL.—Each State shall establish in ac21 cordance with this section one or more State-chartered,

22 nonprofit private organizations to serve as the Health

23 Plan Purchasing Cooperatives for each health plan pur24 chasing cooperative area specified under section 3 for the
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1 benefit of small employers and eligible individuals in the

2 area.

3 (b) BYLAWS AND BOARD OF DIRECTORS.—

4 (1) BYLAWS.—Each Health Plan Purchasing

5 Cooperative shall establish bylaws, consistent with

6 this section, for its operation, including the election

7 of members of its board of directors.

8 (2) BOARD OF DIRECTORS.—

9 (A) IN GENERAL.—Each Health Plan Pur10 chasing Cooperative shall operate under the su11 pervision of a board of directors. A majority of

12 the members of the board shall be small em13 ployers or eligible individuals that participate in

14 the Cooperative.

15 (B) APPOINTMENT AND ELECTION.—The

16 State shall provide for the appointment of ini17 tial members to the board of directors of each

18 Health Plan Purchasing Cooperative. Subse19 quent members of the board of directors of a

20 Health Plan Purchasing Cooperative shall be

21 elected by small employer members and individ22 ual members of the Cooperative in accordance

23 with bylaws of the Cooperative. Such elections

24 shall occur not less frequently than once every

25 2 years.
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1 (3) LIMITATION ON LIABILITY.—There shall be

2 no liability on the part of, and no cause of action of

3 any nature shall arise against, any member of the

4 board of directors of a Health Plan Purchasing Co5 operative, or its employees or agent, for any action

6 taken in good faith by them in the performance of

7 duties of plan purchasing cooperatives specified in

8 this Act.

9 (c) OFFICERS AND EMPLOYEES.—Each Health Plan

10 Purchasing Cooperative shall provide, consistent with its

11 bylaws, for—

12 (1) the appointment of officers from among its

13 members, and

14 (2) the appointment of an executive director to

15 serve as the chief operating officer of the Coopera16 tive.

17 (d) ADVISORY COMMITTEES.—Each Health Plan

18 Purchasing Cooperative shall establish such advisory com19 mittees as may be necessary to assist in carrying out its

20 duties under this Act. Such an advisory committee may

21 include representation from Accountable Health Plans,

22 agents, and health care providers.

23 (e) ANNUAL REPORT; RECORDS; AUDIT.—Each

24 Health Plan Purchasing Cooperative shall—
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1 (1) prepare, and submit to the State and the

2 Secretary, an annual report on its operations, in3 cluding its program and financial operations;

4 (2) conduct such annual internal and independ5 ent audits as it determines to be appropriate; and

6 (3) maintain records on its operations.

7 (f) GENERAL AUTHORITIES; LIMITATIONS ON AU8 THORITY.—

9 (1) IN GENERAL.—A Health Plan Purchasing

10 Cooperative may—

11 (A) sue (or be sued), and

12 (B) subject to paragraph (2), accept and

13 expend grants or funds from any public or pri14 vate agency.

15 (2) LIMITATIONS.—A Health Plan Purchasing

16 Cooperative may not—

17 (A) purchase health care services;

18 (B) assume risk for the cost or provision

19 of health care services;

20 (C) contract directly with health care pro21 viders (other than with Accountable Health

22 Plans under section 5) for the provision of

23 health care services for members; or

24 (D) accept any funds from any private

25 agency that is (or is affiliated with) an Ac-
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1 countable Health Plan or other party that

2 would pose a conflict of interest (as specified by

3 the Secretary).

4 SEC. 5. FUNCTIONS OF HEALTH PLAN PURCHASING CO5 OPERATIVES.

6 (a) CONTRACTS WITH ACCOUNTABLE HEALTH

7 PLANS; ENROLLMENT IN PLANS.—

8 (1) CONTRACTS WITH PLANS.—Each Health

9 Plan Purchasing Cooperative shall enter into con10 tracts and hold policies with Accountable Health

11 Plans which elect to offer qualified health benefit

12 benefits to members, in accordance with subsection

13 (d).

14 (2) ENROLLMENT.—

15 (A) IN GENERAL.—Each Health Plan Pur16 chasing Cooperative shall provide for the enroll17 ment of eligible employees of small employers

18 and eligible individuals in qualified health bene19 fit plans of Accountable Health Plans offered

20 by the Cooperative.

21 (B) OPEN ENROLLMENT PERIODS.—Each

22 Health Plan Purchasing Cooperative shall pro23 vide for an annual open enrollment period of 30

24 days to be available within 60 days before the
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1 anniversary date of each member’s coverage

2 under a qualified health benefit plan.

3 (3) PROVISION OF INFORMATION.—Each

4 Health Plan Purchasing Cooperative shall provide to

5 its members and eligible employees of small em6 ployer members comparison sheets, in accordance

7 with standards established by the Secretary, which

8 provide clear standardized information on each Ac9 countable Health Plan and each qualified health

10 benefit plan offered by an Accountable Health Plan,

11 including information on price, consumer satisfac12 tion, and (if feasible) health outcomes and enroll13 ment and enrollee responsibilities and obligations.

14 (b) MEMBERSHIP REQUIREMENTS.—

15 (1) IN GENERAL.—Each Health Plan Purchas16 ing Cooperative shall establish requirements for par17 ticipation of small employers and eligible individuals

18 as members of the Cooperative consistent with any

19 standards the Secretary establishes consistent with

20 this subsection. Each Cooperative shall maintain eli21 gibility records to carry out its functions.

22 (2) SMALL EMPLOYER STANDARDS.—Under

23 such standards—
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1 (A) each small employer in the area that

2 meets requirements for membership is per3 mitted to become a member;

4 (B) a small employer that is not a valid

5 small employer group and was formed for the

6 purpose of securing health benefits coverage

7 shall be denied membership;

8 (C) each small employer member shall

9 offer to eligible employees a choice of at least

10 3 different health insurance plans, of which—

11 (i) at least one provides medisave cov12 erage consistent with section 12,

13 (ii) at least one is a fee-for-service

14 plan, and

15 (iii) at least one is a managed care

16 plan;

17 (D) no small employer is required, as a

18 condition of membership, to make any contribu19 tion towards the premium for coverage of any

20 eligible employee; and

21 (E) if a small employer member terminates

22 coverage purchased through the Health Plan

23 Purchasing Cooperative, the former member

24 shall be ineligible to purchase a health insur-
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1 ance plan through the Cooperative for a period

2 of 12 months.

3 (3) INDIVIDUAL MEMBERS.—Under such stand4 ards, eligible individuals residing in a health plan

5 purchasing cooperative area may become individual

6 members of the Health Plan Purchasing Cooperative

7 for the area.

8 (4) PAYMENT OF PREMIUMS.—

9 (A) IN GENERAL.—A Health Plan Pur10 chasing Cooperative may condition membership

11 upon prepayment of a monthly premium (or

12 compliance with other mechanisms) to assure

13 that payment will be made for coverage of

14 members on a timely basis.

15 (B) NOTIFICATION OF FAILURE TO RE16 CEIVE PREMIUM.—If a Health Plan Purchasing

17 Cooperative fails to receive payment on a pre18 mium due with respect to an individual covered

19 under an Accountable Health Plan offered by

20 the Cooperative, the Cooperative shall provide

21 notice of such failure to the individual within

22 the 20-day period after the date on which such

23 premium payment was due.

24 (C) DIRECT PAYMENT ALLOWED IN CASE

25 OF EMPLOYER NONPAYMENT.—In the case a
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1 small employer member of a Cooperative fails to

2 make payment of premiums due with respect to

3 an eligible employee covered under an Account4 able Health Plan offered through the Coopera5 tive, the Cooperative shall notify such employee

6 of such nonpayment and shall allow the em7 ployee to make direct payments to the Coopera8 tive effective with the next succeeding payment

9 period.

10 (5) DISPUTE RESOLUTION PROCEDURES.—Each

11 Health Plan Purchasing Cooperative shall establish,

12 in accordance with standards established under this

13 Act dispute resolution procedures to resolve disputes

14 between the Cooperative and its members and dis15 putes between the Cooperative and Accountable

16 Health Plans. Under such procedures, a member or

17 Cooperative may appeal the proposed resolution of

18 such a dispute to the State.

19 (c) CONTRACTS WITH MEMBERS.—

20 (1) PREMIUM PAYMENTS.—

21 (A) IN GENERAL.—Each contract between

22 a member and a Health Plan Purchasing Coop23 erative shall provide that payment of all pre24 miums shall be transmitted by the member

25 (which in the case of a small employer member
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1 shall be on behalf of eligible employees) to (or

2 on behalf of) the Cooperative for the benefit of

3 the Accountable Health Plan in which the eligi4 ble employee or individual is enrolled. The Co5 operative shall provide for procedures for the

6 collection of premiums from members (includ7 ing, in the case of a small employer member, el8 igible employees).

9 (B) AT LEAST BIMONTHLY.—Such pre10 miums are payable not less often than bi11 monthly.

12 (C) LATE CHARGES.—A Health Plan Pur13 chasing Cooperative may provide for penalties

14 for late payment.

15 (D) NONPAYMENT.—Nonpayment of pre16 miums by a member shall constitute a breach of

17 the contract, a breach of the health care policy,

18 and a default on the member’s obligation.

19 (2) CONTRACT HOLDER.—Such a contract shall

20 provide that the Health Plan Purchasing Coopera21 tive may be the contract holder of the health benefit

22 policy on behalf of the member (including eligible

23 employees). Any such contract shall provide that all

24 eligible employees who obtain coverage under the

25 health benefit plan offered by a small employer must
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1 obtain such coverage through any qualified health

2 benefit plan offered by an Accountable Health Plan

3 through the Cooperative.

4 (3) PREMIUM AMOUNTS.—The amount of pre5 miums imposed shall include an amount that in6 cludes the fixed overhead allowance percentage es7 tablished by the Health Plan Purchasing Coopera8 tive under subsection (e).

9 (d) CONTRACTS WITH PLANS.—

10 (1) IN GENERAL.—Each contract between an

11 Accountable Health Plan and a Health Plan Pur12 chasing Cooperative shall provide—

13 (A) that premiums of members shall be

14 forwarded to the plan in which they are en15 rolled, subject to any adjustment under section

16 10, on the effective date of coverage (if that oc17 curs more than once a month), on a monthly

18 basis, or as agreed in the contract (but in no

19 event less frequently than monthly); and

20 (B) that the Cooperative shall transmit en21 rollment and eligibility information to the plan

22 on a timely basis.

23 (2) TERMINATION.—An Accountable Health

24 Plan may not terminate such a contract unless the

25 plan—
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1 (A) provides advance notice to the Health

2 Plan Purchasing Cooperative, and

3 (B) provides notice at least 180 days be4 fore the nonrenewal of any qualified health ben5 efit plan to enrollees.

6 In the case of such a termination, the Accountable

7 Health Plan shall not write new business with the

8 Health Plan Purchasing Cooperative for a period of

9 3 years from the date of the notice of termination.

10 (e) OVERHEAD ALLOWANCE.—Each Health Plan

11 Purchasing Cooperative shall establish a fixed overhead al12 lowance percentage that shall be—

13 (1) applied as addition to the premiums

14 charged for enrollment in an Accountable Health

15 Plan offered through the Cooperative to its mem16 bers, and

17 (2) used to cover administrative costs of the Co18 operative, as well as defaults by members of pre19 mium payments.

20 (f) UNIFORM ADMINISTRATIVE AND ACCOUNTING

21 PROCEDURES.—Each Health Plan Purchasing Coopera22 tive shall establish with such uniform administrative and

23 accounting procedures as needed to conform with applica24 ble national standards identified by the Secretary.

25 (g) CONTRACTS FOR ADMINISTRATIVE SERVICES.—
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1 (1) IN GENERAL.—Each Health Plan Purchas2 ing Cooperative shall contract with a qualified, inde3 pendent third party for any service necessary to

4 carry out its duties under this Act. Such contracts

5 shall include—

6 (A) contracts with agents to assist in con7 tracting with Accountable Health Plans and

8 small employer members, and

9 (B) contracts to market and publicize the

10 availability of qualified health benefit plans

11 through the Cooperative.

12 (2) INFORMATION.—Unless permission is spe13 cifically granted by the Cooperative, such a third

14 party may not release, publish, or otherwise use any

15 information to which the party has access under its

16 contract.

17 (g) CONSTRUCTION.—Nothing in this Act shall be

18 construed as requiring a small employer or eligible individ19 ual to obtain coverage from or through a Health Plan Pur20 chasing Cooperative.

21 SEC. 6. ACCOUNTABLE HEALTH PLANS.

22 (a) DESIGNATION.—Each State shall establish a

23 process whereby a carrier that demonstrates to the satis24 faction of the State insurance commissioner that it has

25 the capability to fulfill the following requirements (directly
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1 or through subcontracts) is designated as an Accountable

2 Health Plan for purposes of this Act:

3 (1) LICENSURE.—The carrier is licensed and in

4 good standing with the State insurance commis5 sioner (or other comparable official for a State).

6 (2) ADMINISTRATIVE CAPACITY.—The carrier

7 has the capacity to administer qualified health bene8 fit plans.

9 (3) ACCESS.—In the case of a carrier with a

10 contractual obligation to provide or arrange for

11 health services included in the qualified health bene12 fit plan, the ability to provide enrollees with ade13 quate access to these covered services within the car14 rier’s service area.

15 (4) GRIEVANCE PROCEDURES.—The carrier has

16 grievance procedures, including the ability to re17 spond to enrollees’ calls, questions, and complaints.

18 (5) UTILIZATION MANAGEMENT PROCE19 DURES.—The carrier has established utilization

20 management procedures.

21 (6) QUALITY.—The carrier has the ability to

22 monitor and evaluate the quality and cost-effective23 ness of care.

24 (7) INFORMATION.—The carrier has the ability

25 to provide information on enrollee satisfaction
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1 (based on standard surveys described in section

2 9(b)(4)).

3 (8) DATA.—The carrier has the ability to pro4 vide standard data elements (identified under section

5 9(b)).

6 (b) FUNCTIONS OF ACCOUNTABLE HEALTH

7 PLANS.—

8 (1) IN GENERAL.—In every Health Plan Pur9 chasing Cooperative with which it has a contract

10 under section 5(d), each Accountable Health Plan

11 shall provide for activities described in this sub12 section.

13 (2) OFFERING PLAN.—Each such Accountable

14 Health Plan shall offer qualified health benefit

15 plans. If such a Plan offers a managed care plan in

16 a State (or geographic area) to employers that are

17 not small employers, the Plan shall offer a similar

18 managed care plan to small employers in that State

19 or geographic area.

20 (3) PERFORMANCE INFORMATION.—Each such

21 Accountable Health Plan shall provide for the collec22 tion and reporting to the State and to the appro23 priate Health Plan Purchasing Cooperative of infor24 mation on the performance of the plan regarding the
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1 effectiveness in providing services, identified under

2 section 9(b).

3 (4) USE OF ADJUSTED COMMUNITY RATING.—

4 Each such Accountable Health Plan shall—

5 (A) establish premium rates for each quali6 fied health benefit plan pursuant to a method

7 that spreads financial risk across a large popu8 lation and allows adjustments only for benefit

9 design and the following demographic charac10 teristics: age, gender, number of family mem11 bers, and the health plan purchasing coopera12 tive area in which coverage is provided; and

13 (B) file on a quarterly basis with the

14 Health Plan Purchasing Cooperative in which it

15 is participating the premium rates for qualified

16 health benefit plans offered by the Plan.

17 (5) RATING, UNDERWRITING, ETC.—Each such

18 Accountable Health Plan shall comply with all rules

19 regarding rating, underwriting, claims handling,

20 sales, solicitation, licensing, unfair trade practices,

21 and other provision in this Act and under the appli22 cable insurance laws of the State.

23 (6) GUARANTEED ISSUE AND REISSUE.—Each

24 such Accountable Health Plan shall issue coverage

25 under a qualified health benefit plan to any eligible
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1 individual and any eligible employee (of a small em2 ployer member) who elects to be covered under a

3 qualified health benefit plan offered by the plan in

4 the manner required under this Act.

5 (7) RENEWAL.—Each such Accountable Health

6 Plan shall renew each qualified health benefit plan

7 with respect to any member (and any eligible em8 ployee of such a member) except in the case of—

9 (A) nonpayment of the required premium,

10 (B) fraud or material misrepresentation of

11 the member (or employee) or the member’s or

12 employee’s dependents, and

13 (C) repeated misuse of a provider network

14 provision (including unreasonable refusal of the

15 enrollee to follow a prescribed course of treat16 ment, excessive use of emergency services for

17 non-emergencies, or violation of contractual

18 provisions), as specified by the State in which

19 the plan is offered.

20 (8) NOTICE OF TERMINATION OF COOPERATIVE

21 CONTRACT.—Each such Accountable Health Plan

22 may only terminate its contract with the Cooperative

23 in accordance with section 5(d)(2).

24 (9) GRIEVANCE PROCEDURES.—Each such Ac25 countable Health Plan shall provide a procedure for
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1 addressing grievances that arise between the plan

2 and the Health Plan Purchasing Cooperative, mem3 bers of the Health Plan Purchasing Cooperative

4 (and, in the case of small employer members, their

5 eligible employees) that requires both parties to fully

6 exhaust the remedies provided under the procedure

7 to resolve grievance before seeking any relief other

8 than as provided in the procedure.

9 (10) USE OF UNIFORM CLAIMS FORMS.—Each

10 Accountable Health Plan shall use standardized

11 forms, including uniform claims forms, identified by

12 the Secretary.

13 (c) COVERAGE.—

14 (1) IN GENERAL.—Coverage under a qualified

15 health benefit plan offered by an Accountable Health

16 Plan shall be available to any member at the anni17 versary date of each member’s coverage under a

18 qualified health benefit plan (or in the case of an

19 employer or individual who has applied to become a

20 member of a Health Plan Purchasing Cooperative

21 when the member first joins the Cooperative).

22 (2) EXCEPTION.—An Accountable Health Plan

23 is not required to offer coverage or accept enroll24 ment if—
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1 (A) the eligible individual or employee (or

2 dependent) does not reside within the plan’s

3 service area (as approved by the State insur4 ance commissioner);

5 (B) the plan provides 90 days prior notice

6 that it will not have the capacity to deliver serv7 ices adequately in the health plan purchasing

8 cooperative area to additional enrollees because

9 of its obligations to existing groups and enroll10 ees; or

11 (C) the State insurance commissioner de12 termines that the acceptance of an application

13 or applications would place the plan in a finan14 cially impaired condition.

15 (3) CONDITIONS.—

16 (A) INSUFFICIENT CAPACITY.—An Ac17 countable Health Plan that cannot offer cov18 erage under paragraph (2)(B) may not offer

19 coverage to the employees of a new employer

20 group until the later of 90 days following such

21 refusal or the date on which the plan notifies

22 the Health Plan Purchasing Cooperative and

23 the State insurance commissioner that it has

24 regained capacity to deliver services to eligible
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1 employees and their dependents in the service

2 area.

3 (B) FINANCIAL IMPAIRMENT.—An Ac4 countable Health Plan that cannot offer cov5 erage under paragraph (2)(C) may not offer

6 coverage or accept applications for any individ7 ual or employer group until a determination by

8 the State insurance commissioner that accept9 ance of an application will not put the plan in

10 a financially impaired condition.

11 (d) CONSTRUCTION.—Nothing in this Act (or in

12 State law) shall—

13 (1) prohibit an Accountable Health Plan from

14 providing a qualified health benefit plan in a Health

15 Plan Purchasing Cooperative through a managed

16 care system, and from contracting with particular

17 health care providers or types, classes, or categories

18 of health care providers;

19 (2) prohibit such a plan from establishing its

20 own levels of payment and financial incentives for

21 reimbursing health care providers providing health

22 care services to enrollees; or

23 (3)(A) prohibit such a plan from performing

24 utilization review of any or all treatments and condi25 tions, (B) require the use of specified standards of
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1 health care practice in such review, (C) impose resi2 dency or specialty restrictions on the entities con3 ducting such a review, or (D) require the disclosure

4 of the specific criteria used in such reviews.

5 State law is preempted to the extent it is inconsistent with

6 the previous sentence.

7 (e) DEEMED COMPLIANCE.—Carriers which comply

8 with any of the requirements of a paragraph of subsection

9 (a) through a requirement of State law shall be deemed

10 to be in compliance with the corresponding paragraph of

11 such subsection. Carriers receiving accreditation by na12 tionally recognized, health related accreditation organiza13 tions (including the National Committee on Quality Assur14 ance, the Utilization Review Accreditation Commission,

15 the Joint Commission on Accreditation of Health Care Or16 ganizations), or qualification by Federal agencies, shall be

17 deemed in compliance with the requirements of subsection

18 (a) as they pertain to the relevant accreditation activities

19 of such organizations.

20 (f) DETERMINATIONS.—Each State shall provide for

21 a determination of whether a carrier is an Accountable

22 Health Plan within 30 days of a completed application

23 being submitted to the State.

24 (g) TERMINATION.—After notice and hearing, a

25 State may suspend or revoke the designation as an Ac-
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1 countable Health Plan of a carrier that files to maintain

2 compliance with the requirements in subsections (a), (b),

3 and (c).

4 SEC. 7. QUALIFICATIONS FOR QUALIFIED HEALTH INSUR5 ANCE PLANS.

6 (a) IN GENERAL.—A health plan is not a qualified

7 health benefit plan for purposes of this Act unless the

8 plan—

9 (1) meets applicable financial requirements es10 tablished under State law;

11 (2) is marketed only in accordance with section

12 8; and

13 (3) submits to the Health Plan Purchasing Co14 operative data in accordance with standards estab15 lished under section 9.

16 (b) MARKETING MATERIAL; AGENT COMPENSA17 TION.—

18 (1) IN GENERAL.—An Accountable Health Plan

19 may provide, directly or through an agent, broker,

20 contractor, or producer, marketing materials ap21 proved by the State insurance commissioner. Such a

22 plan does not require authorization by a Health Plan

23 Purchasing Cooperative for advertisement to the

24 public at large through the means of mass media.
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1 (2) AGENT COMPENSATION.—An Accountable

2 Health Plan may not vary compensation or commis3 sions to such an agent, broker, contractor, or pro4 ducer based, directly or indirectly, on the anticipated

5 or actual claims experience or health status associ6 ated with particular small employers or eligible indi7 viduals to which each plan is sold.

8 (3) LIMITATIONS ON BROKER ACTIVITIES.—No

9 Accountable Health Plan (or agent, broker, contrac10 tor, or producer for such a plan) shall engage, di11 rectly, or indirectly, in any activity or marketing

12 practice that would encourage small employers or el13 igible individuals to refrain from enrolling in the

14 plan, or seek coverage from another Accountable

15 Health Plan, because of the health status or claims

16 experience of the employer or individual.

17 SEC. 8. MARKETING QUALIFIED HEALTH BENEFIT PLANS.

18 (a) IN GENERAL.—Each Health Plan Purchasing Co19 operative shall use efficient and standardized means to no20 tify small employers of the availability of health coverage

21 through the Cooperative.

22 (b) MARKETING MATERIALS.—Each Health Plan

23 Purchasing Cooperative shall make available to small em24 ployer and individual members marketing materials that

25 accurately summarizes the benefit plans, cost and other
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1 relevant information concerning Accountable Health Plans

2 offered by the Cooperative.

3 (c) USE OF BROKERS.—Nothing in this Act shall be

4 construed to prohibit a Health Plan Purchasing Coopera5 tive or Accountable Health Plan from using the services

6 of an agent, broker, contractor, or producer in order to

7 assist in marketing.

8 (d) MONITORING.—Each Health Plan Purchasing

9 Cooperative shall notify the State insurance commissioner

10 (or other official identified by the State) of any marking

11 practices or materials that it finds contrary to the fair

12 and affirmative marketing of Accountable Health Plans

13 under this Act.

14 (e) STATE ROLE.—Each State insurance commis15 sioner shall monitor compliance with the marketing re16 quirements of this Act, including the conduct of agents,

17 brokers, contractors, and producers and investigate com18 plaints of violations of such requirements.

19 SEC. 9. COLLECTION AND SUBMISSION OF DATA.

20 (a) FROM HEALTH PLAN PURCHASING COOPERA21 TIVES TO STATES.—Each Health Plan Purchasing Coop22 erative shall submit such data to the State, on a quarterly

23 basis, as the Secretary may specify. Such data shall in24 clude the following:

25 (1) With respect to small employer members—
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1 (A) employer enrollment by employer size,

2 industry sector, previous insurance status, and

3 number of eligible employees within each small

4 employer, and

5 (B) number of total eligible employers in

6 the health plan purchasing cooperative area.

7 (2) With respect to eligible individuals, the de8 mographic characteristics of such individuals, includ9 ing age, gender, employment status and employment

10 sector, and previous insurance status.

11 (3) Premium ranges for each qualified health

12 benefit plan for Health Plan Purchasing Cooperative

13 member categories.

14 (4) Cooperative overhead charges.

15 (5) Cooperative financial statements.

16 (b) COLLECTION OF DATA BY HEALTH PLAN PUR17 CHASING COOPERATIVES.—

18 (1) IN GENERAL.—The Secretary shall establish

19 uniform standards for data that a Health Plan Pur20 chasing Cooperative collects from Accountable

21 Health Plans and providers and disseminates.

22 (2) COLLECTION.—Under such standards, each

23 Health Plan Purchasing Cooperative shall collect

24 only such data as are necessary for evaluation of the

25 performance of Accountable Health Plans and their
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1 provider networks by consumers and providers. The

2 Secretary shall establish such standards consistent

3 with the method of operation of Accountable Health

4 Plans, consistent with national health care data col5 lection initiatives, consistent with not imposing an

6 unreasonable cost of compliance on Accountable

7 Health Plans, and only after a study of the feasibil8 ity and cost-effectiveness.

9 (3) DISSEMINATION.—Under such standards,

10 each Health Plan Purchasing Cooperative shall re11 lease such data in a uniform and standardized for12 mat which compares all Accountable Health Plans or

13 providers (as the case may be).

14 (4) ENROLLEE SATISFACTION SURVEYS.—All

15 enrollee satisfaction surveys used by Accountable

16 Health Plans in reporting to Health Plan Purchas17 ing Cooperatives shall be in a standardized format

18 promulgated by the Secretary.

19 SEC. 10. RISK ADJUSTMENT MECHANISM.

20 (a) MONITORING NEED.—Each State shall designate

21 an entity to monitor adverse selection in enrollment among

22 qualified health benefit plans offered through Health Plan

23 Purchasing Cooperatives and the need for risk adjustment

24 mechanisms to assure proper payment incentives to Ac25 countable Health Plans.
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1 (b) ESTABLISHMENT.—If there is a need, a State

2 shall provide for the use of risk adjustment mechanisms

3 (consistent with a model among the models identified

4 under standards established under section 2) to adjust

5 payment amounts among Accountable Health Plans to re6 flect the risk covered by each qualified health benefit plan

7 offered by such a plan. A State shall also apply such a

8 mechanism to health benefit plans sold to small employers

9 and eligible individuals, other than through a Health Plan

10 Purchasing Cooperative, if necessary.

11 SEC. 11. ROLE OF STATE; OVERSIGHT; EVALUATION.

12 (a) OVERSIGHT.—Each State shall—

13 (1) assure compliance of Health Plan Purchas14 ing Cooperatives, small employers, and eligible em15 ployees and individuals with the requirements of this

16 Act, and

17 (2) conduct reviews, not less frequently than

18 annually, on the performance of each Health Plan

19 Purchasing Cooperative in assuring access to health

20 coverage to small employer and eligible individuals in

21 the health plan purchasing cooperative area in ac22 cordance with this Act.

23 (b) DISPUTE RESOLUTION.—Each State shall re24 ceive, review, and act on appeals of disputes, between a
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1 Health Plan Purchasing Cooperative and a member, not

2 resolved by the Cooperative under section 5(b)(5).

3 (c) ASSURING AVAILABILITY OF COVERAGE TO ELI4 GIBLE INDIVIDUALS AND COMPARABLE TREATMENT IN

5 AND OUT OF COOPERATIVES.—Each State shall provide

6 by law that no qualified health benefit plan may be offered

7 with respect to a small employer, or to individuals, in the

8 State unless—

9 (1) it is offered to all small employers or eligi10 ble individuals (as the case may be) who are located

11 or reside in the State in the service area of the plan;

12 (2) it meets standards relating to guaranteed

13 renewability and limitations on the application of

14 pre-existing condition limitations; and

15 (3) it—

16 (A) meets standards relating to rating

17 practices, consistent with section 6(b)(4)(A),

18 and

19 (B) is offered to all small employers or eli20 gible individuals (as the case may be) at a pre21 mium rate that is the same (regardless of

22 whether offered inside or outside a Health Plan

23 Purchasing Cooperative), not taking into ac24 count any broker’s fees or commissions.
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1 (d) ANALYSIS OF INFORMATION.—Each State shall

2 analyze information collected from Accountable Health

3 Plans and other sources and report findings that assist

4 consumers, Health Plan Purchasing Cooperatives, Ac5 countable Health Plans, or health care providers in im6 proving the delivery or purchase of cost-effective health

7 care.

8 (e) DISSEMINATION OF INFORMATION.—Each State

9 shall prepare and make available to Health Plan Purchas10 ing Cooperatives and employers located in the State (and

11 to eligible individuals upon request) information, in com12 parative form, concerning the qualified health benefit

13 plans in such State and Health Plan Purchasing Coopera14 tives operating in the State. Such information shall in15 clude a description of the following:

16 (1) Such Cooperatives in the State and the

17 qualified health benefit plans of Accountable Health

18 Plans available with respect to each Cooperative.

19 (2) The existence of Health Plan Purchasing

20 Cooperatives within each health plan purchasing co21 operative area.

22 (3) Any other information determined appro23 priate by the State.

24 (f) ANNUAL REPORT.—Each State shall report to the

25 Secretary, at such frequency (not more often than annu-
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1 ally) as the Secretary may specify, on the impact of the

2 reforms under this Act in expanding the availability and

3 affordability of health coverage to eligible employees and

4 eligible individuals.

5 (g) ANTITRUST PROTECTION.—Each State shall ac6 tively supervise Health Plan Purchasing Cooperatives to

7 ensure that actions that affect market competition accom8 plish the objectives of this Act, so as to provide State and

9 Federal protection to such Cooperatives and the board of

10 directors of such Cooperatives against Federal and State

11 laws intended to protect commerce from unlawful re12 straints, monopolies, and unfair business practices.

13 SEC. 12. DESCRIPTION OF MEDISAVE COVERAGE.

14 (a) IN GENERAL.—For purposes of this Act, a health

15 insurance plan is considered to provide medisave coverage

16 consistent with this section if such plan consists of—

17 (1) a qualified catastrophic health plan (as de18 fined in subsection (b)(1)), and

19 (2)(A) there is a fixed dollar amount (in the

20 form of a cash-value annuity) of additional benefits

21 under such plan which does not exceed the plan’s

22 qualified catastrophic deductible (as defined in sub23 section (b)(2));
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1 (B) the plan specifies the range of benefits to

2 which the beneficiary may elect to have the amount

3 applied, which—

4 (i) includes, at a minimum, payment of ex5 penses countable towards the qualified cata6 strophic deductible and payment of premiums

7 towards a long-term care insurance plan, and

8 (ii) does not include the purchase of any

9 supplemental insurance for acute care benefits;

10 (C) any such amount of benefits not used shall

11 be accumulated (with a rate of return specified in

12 the plan), shall remain available to be applied

13 against such range of benefits, shall be nonforfeit14 able, and, upon the death of all beneficiaries under

15 the account, shall be payable in cash to the estate

16 of the beneficiary who dies last; and

17 (D) the plan meets the portability rules estab18 lished under subsection (c).

19 (b) QUALIFIED CATASTROPHIC HEALTH PLAN DE20 FINED.—In this section—

21 (1) QUALIFIED CATASTROPHIC HEALTH PLAN

22 DEFINED.—The term ‘‘qualified catastrophic health

23 plan’’ means any health plan provided to an em24 ployee which is certified by the Secretary of Health

25 and Human Services as a plan—
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1 (A) which provides no compensation for

2 medical expenses not exceeding the qualified

3 catastrophic deductible (as defined in para4 graph (2)) in any year, and

5 (B) which provides full reimbursement for

6 medical expenses exceeding the qualified cata7 strophic deductible during any year.

8 (2) QUALIFIED CATASTROPHIC DEDUCTIBLE

9 DEFINED.—The term ‘‘qualified catastrophic deduct10 ible’’ means—

11 (A) $2,000, or

12 (B) $4,000 if the qualified catastrophic

13 health plan provides coverage for more than one

14 individual.

15 In the case of any calendar year after 1994, the dol16 lar amounts in subparagraphs (A) and (B) shall be

17 increased by an amount equal to such dollar

18 amount, multiplied by the cost-of-living adjustment

19 determined under section 1(f)(3) of the Internal

20 Revenue Code of 1986 for such calendar year. If any

21 increase under the preceding sentence is not a mul22 tiple of $50, such increase shall be rounded to the

23 nearest multiple of $50.

24 (3) QUALIFIED MEDICAL EXPENSES DE25 FINED.—
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1 (A) IN GENERAL.—The term ‘‘qualified

2 medical expenses’’ means medical expenses of

3 an employee other than amounts paid for insur4 ance or for a health plan.

5 (B) MEDICAL EXPENSES DEFINED.—The

6 term ‘‘medical expenses’’ means amounts paid

7 by the employee for medical care (as defined in

8 section 213 of the Internal Revenue Code of

9 1986) of such individual, the spouse of such in10 dividual, and any dependent (as defined in sec11 tion 152 of such Code) of such individual, but

12 only to the extent such amounts are not com13 pensated for by insurance or otherwise.

14 (c) PORTABILITY RULES.—In the case of an individ15 ual who has medisave coverage described in subsection

16 (a)(2) under a health insurance plan in a year, who termi17 nates enrollment under the plan or terminates cata18 strophic coverage under the plan, and who has accumu19 lated an amount of benefits under such coverage, the plan

20 shall permit the individual (as elected by the individual)

21 and in accordance with standards established under sec22 tion 2—

23 (1) to have the plan pay an amount equal to all

24 or some of the amount of benefits accumulated
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1 under such coverage towards the payment of pre2 miums under—

3 (A) any health insurance plan,

4 (B) any employee welfare benefit plan pro5 viding medical care (as defined in section

6 213(d) of the Internal Revenue Code of 1986)

7 to participants or beneficiaries directly or

8 through insurance, reimbursement, or other9 wise, (other than such a plan described in sec10 tion 13(10)(B)), or

11 (C) a long-term care insurance plan,

12 providing coverage for the individual; and

13 (2) to have the plan transfer an amount equal

14 to all or some of the remaining balance to another

15 health insurance plan that will provide medisave cov16 erage for that individual in accordance with the re17 quirements of this subsection (and such other plan

18 shall credit such amount transferred towards

19 medisave coverage under that plan).

20 SEC. 13. TAX TREATMENT OF MEDISAVE COVERAGE.

21 (a) GENERAL RULE.—For purposes of the Internal

22 Revenue Code of 1986—

23 (1) any health insurance plan which provides

24 Medisave coverage consistent with section 12 of this
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1 Act shall be treated as an accident and health insur2 ance contract,

3 (2) amounts (other than policyholder dividends,

4 premium refunds, or amounts payable under section

5 12(a)(2)(C) of this Act) received under such cov6 erage shall be treated as amounts received for per7 sonal injuries and sicknesses and shall be treated as

8 reimbursement for expenses actually incurred for

9 medical care (as defined in section 213(d) of such

10 Code),

11 (3) any plan of an employer providing Medisave

12 coverage consistent with section 12 of this Act shall

13 be treated as an accident and health plan, and

14 (4) amounts paid for Medisave coverage consist15 ent with section 12 of this Act shall be treated as

16 medical expenses for purposes of section 213 of such

17 Code.

18 (b) USE OF FLEXIBLE SPENDING ACCOUNTS.—The

19 Secretary of the Treasury or his delegate shall revise the

20 regulations prescribed under section 125 of the Internal

21 Revenue Code of 1986 so as to permit the use of health22 related flexible spending accounts under such section in

23 a manner similar to that provided in subsection (a)(2) of

24 section 12 of this Act.
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1 SEC. 14. DEFINITIONS.

2 In this Act:

3 (1) ACCOUNTABLE HEALTH PLAN.—The term

4 ‘‘Accountable Health Plan’’ means a carrier is des5 ignated under section 6(a) by a State insurance

6 commissioner.

7 (2) CARRIER.—The term ‘‘carrier’’ means a li8 censed insurance company, a prepaid hospital or

9 medical service plan, and a health maintenance orga10 nization offering such a plan, and includes a similar

11 organization regulated under State law for solvency.

12 (3) DEPENDENT.—The term ‘‘dependent’’

13 means, with respect to a person—

14 (A) the spouse of the person, and

15 (B) a child (including an adopted child) of

16 the person who—

17 (i) is under 19 years of age,

18 (ii) is under 25 years of age and a

19 full-time student, or

20 (iii) regardless of age is incapable of

21 self-support because of mental or physical

22 disability.

23 (4) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

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

25 employee who normally performs on a monthly basis
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1 at least 30 hours of service per week for that

2 employer.

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

4 individual’’ means an individual residing in the Unit5 ed States who is a citizen or national of the United

6 States or an alien lawfully residing permanently in

7 the United States, if the individual is not an eligible

8 employee or otherwise eligible for health insurance

9 coverage under an employment-based health insur10 ance or under a Federal or State health program.

11 (6) EMPLOYER.—The term ‘‘employer’’ shall

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

13 the Employee Retirement Income Security Act of

14 1974.

15 (7) HEALTH PLAN PURCHASING COOPERA16 TIVE.—The term ‘‘Health Plan Purchasing Coopera17 tive’’ means a State-chartered, nonprofit organiza18 tion that provides health coverage purchasing serv19 ices to members in a health plan purchasing cooper20 ative area regarding qualified health benefit plans

21 offered by Accountable Health Plans and that is es22 tablished under section 4.

23 (8) HEALTH PLAN PURCHASING COOPERATIVE

24 AREA.—The term ‘‘health plan purchasing coopera-
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1 tive area’’ means an area designated under section

2 3.

3 (9) HEALTH PLAN PURCHASING COOPERATIVE

4 BOARD.—The term ‘‘Health Plan Purchasing Coop5 erative board’’ means the board of directors of a

6 Health Plan Purchasing Cooperative.

7 (10) HEALTH INSURANCE PLAN.—

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

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

10 plan’’ means any hospital or medical service

11 policy or certificate, hospital or medical service

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

14 insurer.

15 (B) EXCEPTION.—Such term does not in16 clude any of the following—

17 (i) coverage only for accident, dental,

18 vision, disability income, or long-term care

19 insurance, or any combination thereof,

20 (ii) medicare supplemental health in21 surance,

22 (iii) coverage issued as a supplement

23 to liability insurance,

24 (iv) worker’s compensation or similar

25 insurance, or
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1 (v) automobile medical-payment insur2 ance,

3 or any combination thereof.

4 (11) HEALTH MAINTENANCE ORGANIZATION.—

5 The term ‘‘health maintenance organization’’ in6 cludes, as determined under standards established

7 by the Secretary, a health insurance plan that meets

8 specified standards and that offers to provide health

9 services on a prepaid, at-risk basis primarily through

10 a defined set of providers.

11 (12) MEMBER.—The term ‘‘member’’ means,

12 with respect to a Health Care Purchasing Coopera13 tive, a small employer or eligible individual that

14 meets membership requirements for the Cooperative

15 under section 5(b).

16 (13) SECRETARY.—The term ‘‘Secretary’’

17 means the Secretary of Health and Human Services.

18 (14) SERVICE AREA.—The term ‘‘service area’’

19 means a geographic region in which a carrier is li20 censed to operate.

21 (15) SMALL EMPLOYER.—The term ‘‘small em22 ployer’’ means, with respect to a calendar year, an

23 employer that normally employs more than 1 but

24 less than 101 eligible employees on a typical busi25 ness day in any 3-consecutive-month-period in the
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1 year. For the purposes of this paragraph, the term

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

3 purposes of determining if an employer is a small

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

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

6 of 1986 shall apply.

7 (16) SMALL EMPLOYER MEMBER.—The term

8 ‘‘small employer member’’ means, with respect to a

9 Health Plan Purchasing Cooperative, a small em10 ployer that is a member of the Cooperative.

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

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

13 Virgin Islands, Guam, and American Samoa.

14 (18) STATE INSURANCE COMMISSIONER.—The

15 term ‘‘State insurance commissioner’’ includes a

16 State superintendent of insurance and includes, with

17 respect to a health maintenance organization or

18 other carrier not regulated by such an official, such

19 State official as is responsible for regulation of the

20 organization or carrier.

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