I

103D CONGRESS

2D SESSION H. R. 3955

To increase the availability and continuity of health coverage for employees

and their families, to prevent fraud and abuse in the health care delivery

system, to reform medical malpractice liability standards, to reduce paperwork and simplify administration of health care claims, to promote

preventive care, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 3, 1994

Mr. ROWLAND (for himself, Mr. BILIRAKIS, Mr. SPRATT, Mr. BLILEY, Mr.

TAUZIN, Mr. DUNCAN, Mr. PARKER, Mr. HASTERT, Mr. MONTGOMERY,

Mr. BARTON of Texas, Mr. PETE GEREN of Texas, Mr. UPTON, Mr. SISISKY, Mr. MOORHEAD, Mr. TANNER, Mrs. VUCANOVICH, Mr. LAUGHLIN,

Mr. GOSS, Mr. PICKETT, Mr. CRAPO, Mr. LANCASTER, Mr. GOODLATTE,

Mr. HAYES, Mr. ZELIFF, Mrs. LLOYD, Mr. LINDER, Mr. BROWDER, Mr.

CASTLE, Mr. ORTON, and Mr. YOUNG of Florida) introduced the following bill; which was referred jointly to the Committees on Energy and

Commerce, Education and Labor, the Judiciary, and Ways and Means

APRIL 5, 1994

Additional sponsors: Mr. BREWSTER, Mr. LEWIS of Florida, Mr. DARDEN, Mr.

FIELDS of Texas, Mr. NEAL of North Carolina, Mr. GREENWOOD, Mr.

MORAN, Mr. KYL, Mr. CLEMENT, Mr. EWING, Mr. GLICKMAN, Mr.

BALLENGER, Mr. STENHOLM, and Mr. CANADY

JULY 20, 1994

Additional sponsors: Mr. BISHOP, Mr. BUNNING, Mr. PENNY, Mr. PAXON, Mr.

HEFNER, Mr. LIVINGSTON, Mr. BARLOW, Mr. BOEHNER, Mr. VALENTINE, Mr. COLLINS of Georgia, Mr. CRAMER, Mr. THOMAS of Wyoming,

Mr. JOHNSON of Georgia, Mr. SUNDQUIST, Mr. PETERSON of Minnesota,

Mr. STEARNS, Mr. DEAL, Mr. HERGER, Mr. MURPHY, Mr. HUTCHINSON,

Mr. HUTTO, Mr. GILLMOR, Mr. ORTIZ, Mrs. FOWLER, Mr. JACOBS, Mr.

GILCHREST, Mr. BAESLER, and Mr. DICKEY
2

•HR 3955 SC2

A BILL

To increase the availability and continuity of health coverage

for employees and their families, to prevent fraud and

abuse in the health care delivery system, to reform medical malpractice liability standards, to reduce paperwork

and simplify administration of health care claims, to

promote preventive care, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Reform Consensus Act of 1994’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—INSURANCE REFORM

Subtitle A—Increased Availability and Continuity of Health Coverage for

Employees and Their Families

PART 1—REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES,

SPOUSES, AND DEPENDENTS

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

PART 2—ASSURING PORTABILITY OF HEALTH COVERAGE

Sec. 1011. Limitation on preexisting condition clauses.

Sec. 1012. Assurance of continuity of coverage through previous satisfaction of

preexisting condition requirement.

Sec. 1013. Requirements relating to renewability generally.

PART 3—ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

Sec. 1021. Enforcement.

Sec. 1022. Effective dates.

Sec. 1023. Definitions and special rules.

Subtitle B—Reform of Health Insurance Marketplace for Small Business
3

•HR 3955 SC2

Sec. 1101. Requirement for insurers to offer standard and catastrophic plans.

Sec. 1102. Health plan, standard plan, and catastrophic plan defined.

Sec. 1103. Establishment of health plan standards.

Sec. 1104. Limits on premiums and miscellaneous consumer protections.

Sec. 1105. Limitation on variation in annual premium increases among covered

small employers.

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

high risk individuals in marketplace for small business.

Sec. 1107. Definitions.

Sec. 1108. Office of Private Health Care Coverage; annual reports on evaluation of health care coverage reform.

Sec. 1109. Research and demonstration projects; development of a health risk

pooling model.

Subtitle C—Preemption

PART 1—SCOPE OF STATE REGULATION

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

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

Sec. 1203. Restrictions on managed care.

Sec. 1204. Definitions.

PART 2—MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

Sec. 1211. Limited exemption under preemption rules for multiple employer

plans providing health benefits subject to certain Federal

standards.

‘‘Part 7—Multiple Employer Health Plans

‘‘Sec. 701. Definitions.

‘‘Sec. 702. Exempted multiple employer plans providing benefits in the

form of medical care relieved of certain restrictions on

preemption of State law and treated as employee welfare

benefit plans.

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

‘‘Sec. 705. Additional requirements applicable to exempted arrangements.

‘‘Sec. 706. Disclosure to participating employers by arrangements providing medical care.

‘‘Sec. 707. Maintenance of reserves.

‘‘Sec. 708. Corrective actions.

‘‘Sec. 709. Expiration, suspension, or revocation of exemption.

‘‘Sec. 710. Review of actions of the secretary.’’

Sec. 1212. Clarification of scope of preemption rules.

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

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

Sec. 1215. Employee leasing health care arrangements.

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

Sec. 1217. Filing requirements for health benefit multiple employer welfare arrangements.

Sec. 1218. Cooperation between Federal and State authorities.

Sec. 1219. Effective date; transitional rules.
4

•HR 3955 SC2

PART 3—ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS

PROVIDING BASIC HEALTH BENEFITS

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

PART 4—SIMPLIFYING FILING OF REPORTS FOR EMPLOYERS COVERED

UNDER INSURED MULTIPLE EMPLOYER HEALTH PLANS

Sec. 1231. Single annual filing for all employers covered under an insured multiple employer health plan.

PART 5—COMPLIANCE WITH COVERAGE OPTION REQUIREMENTS

Sec. 1241. Compliance with coverage requirements through multiple employer

health arrangements.

Subtitle D—Health Deduction Fairness

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

for self-employed individuals.

TITLE II—PREVENTING FRAUD AND ABUSE

Subtitle A—Establishment of All-Payer Health Care Fraud and Abuse

Control Program

Sec. 2001. All-payer health care fraud and abuse control program.

Sec. 2002. Authorization of additional appropriations for investigators and

other personnel.

Sec. 2003. Establishment of Anti-fraud and Abuse Trust Fund.

Subtitle B—Revisions to Current Sanctions for Fraud and Abuse

Sec. 2101. Mandatory exclusion from participation in medicare and State

health care programs.

Sec. 2102. Establishment of minimum period of exclusion for certain individuals and entities subject to permissive exclusion from medicare

and State health care programs.

Sec. 2103. Civil monetary penalties.

Sec. 2104. Intermediate sanctions for medicare health maintenance organizations.

Sec. 2105. Effective date.

Subtitle C—Administrative and Miscellaneous Provisions

Sec. 2201. Establishment of the health care fraud and abuse data collection

program.

Sec. 2202. Quarterly publication of final adverse actions taken.

Subtitle D—Amendments to Criminal Law

Sec. 2301. Penalties for health care fraud.

Sec. 2302. Rewards for information leading to prosecution and conviction.

TITLE III—MALPRACTICE REFORM

Subtitle A—Findings; Purpose; Definitions

Sec. 3001. Findings; purpose.
5

•HR 3955 SC2

Sec. 3002. Definitions.

Subtitle B—Uniform Standards for Malpractice Claims

Sec. 3101. Applicability.

Sec. 3102. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 3103. Procedural requirements for filing of actions.

Sec. 3104. Treatment of noneconomic and punitive damages.

Sec. 3105. Periodic payments for future losses.

Sec. 3106. Treatment of attorney’s fees and other costs.

Sec. 3107. Uniform statute of limitations.

Sec. 3108. Special provision for certain obstetric services.

Sec. 3109. Application of medical practice parameters in malpractice liability

actions.

Sec. 3110. Jurisdiction of Federal courts.

Sec. 3111. Preemption.

Subtitle C—Requirements for State Alternative Dispute Resolution Systems

(ADR)

Sec. 3201. Basic requirements.

Sec. 3202. Alternative Dispute Resolution Advisory Board.

Sec. 3203. Certification of State systems; applicability of alternative Federal

system.

Sec. 3204. Reports on implementation and effectiveness of alternative dispute

resolution systems.

TITLE IV—PAPERWORK REDUCTION AND ADMINISTRATIVE

SIMPLIFICATION

Sec. 4001. Preemption of State quill pen laws.

Sec. 4002. Confidentiality of electronic health care information.

Sec. 4003. Standardization for the electronic receipt and transmission of health

plan information.

Sec. 4004. Use of uniform health claims forms and identification numbers.

Sec. 4005. Priority among insurers.

Sec. 4006. Furnishing of information among health plans.

Sec. 4007. Definitions.

TITLE V—EXPANDING ACCESS/PREVENTIVE CARE

Subtitle A—Expanding Access Through Community Health Authorities

Sec. 5001. Community health authorities demonstration projects.

Sec. 5002. Health center program amendments.

Subtitle B—Expansion of Public Health Programs on Preventive Health

Sec. 5101. Immunizations against vaccine-preventable diseases.

Sec. 5102. Prevention, control, and elimination of tuberculosis.

Sec. 5103. Lead poisoning prevention.–

Sec. 5104. Preventive health measures with respect to breast and cervical cancers.

Sec. 5105. Office of Disease Prevention and Health Promotion.

Sec. 5106. Preventive health and health services block grant.

TITLE VI—ANTITRUST PROVISIONS
6

•HR 3955 SC2

Sec. 6001. Publication of antitrust guidelines on activities of health plans.

Sec. 6002. Issuance of health care certificates of public advantage.

TITLE VII—PREFUNDING GOVERNMENT HEALTH BENEFITS FOR

CERTAIN ANNUITANTS

Sec. 7001. Requirement that certain agencies prefund government health benefits contributions for their annuitants.

1 TITLE I—INSURANCE REFORM

2 Subtitle A—Increased Availability

3 and Continuity of Health Cov4 erage for Employees and Their

5 Families

6 PART 1—REQUIRED COVERAGE OPTIONS

7 FOR ELIGIBLE EMPLOYEES, SPOUSES,

8 AND DEPENDENTS

9 SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF

10 COVERAGE FOR ELIGIBLE INDIVIDUALS.

11 (a) IN GENERAL.—Each employer shall make avail12 able with respect to each eligible employee a group health

13 plan under which—

14 (1) coverage of each eligible individual with re15 spect to such an eligible employee may be elected on

16 an annual basis for each plan year,

17 (2) subject to subsection (d), coverage is pro18 vided for at least the required coverage specified in

19 subsection (c), and

20 (3) each eligible employee electing such cov21 erage may elect to have any premiums owed by the

22 employee collected through payroll deduction.
7

•HR 3955 SC2

1 An employer is not required under this subsection to make

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

3 (b) SPECIAL RULES.—

4 (1) EXCLUSION OF NEW EMPLOYERS AND CER5 TAIN SMALL EMPLOYERS.—Subsection (a) shall not

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

7 beginning of such plan year—

8 (A) such employer (including any prede9 cessor thereof) has been an employer for less

10 than 2 years,

11 (B) such employer has no more than 2 eli12 gible employees, or

13 (C) no more than 2 eligible employees are

14 not covered under any group health plan.

15 (2) EXCLUSION OF FAMILY MEMBERS.—Under

16 such procedures as the Secretary may prescribe, any

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

18 employer, excluded from consideration as an eligible

19 employee for purposes of applying the requirements

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

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

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

23 the Internal Revenue Code of 1986) of the employer

24 may, at the election of the key employee, be consid25 ered a relative excludable under this paragraph.
8

•HR 3955 SC2

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

3 failing to meet the requirements of subsection (a)

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

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

8 (c) REQUIRED COVERAGE.—

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

11 subsection is standard coverage (consistent with sec12 tion 1102(b)).

13 (2) SPECIAL TREATMENT OF SMALL EMPLOY14 ERS NOT CONTRIBUTING TO EMPLOYEE COV15 ERAGE.—In the case of a small employer (as defined

16 in section 1107(9)) that has not contributed during

17 the previous plan year to the cost of coverage for

18 any eligible employee under any group health plan,

19 the required coverage specified in this subsection for

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

21 is—

22 (A) coverage under a standard plan, and

23 (B) coverage under a catastrophic plan,

24 as such terms are defined in section 1102(a)(2).
9

•HR 3955 SC2

1 (3) CONSTRUCTION.—Nothing in this section

2 shall be construed as limiting the group health

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

4 an employer may offer to an employee.

5 (d) 5-YEAR TRANSITION FOR EXISTING GROUP

6 HEALTH PLANS.—

7 (1) IN GENERAL.—The requirement of sub8 section (a)(2), and section 1002(c)(2), shall not

9 apply to a group health plan for a plan year if—

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

11 the plan year in which September 1, 1993, oc12 curs, and

13 (B) the employer makes (or offers to

14 make), in such plan year and the plan year in15 volved, a contribution to the plan on behalf of

16 each employee who is eligible to participate in

17 the plan.

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

19 a group health plan for each of the 5 plan years be20 ginning with the first plan year to which the require21 ment of subsection (a) applies.
10

•HR 3955 SC2

1 PART 2—ASSURING PORTABILITY OF

2 HEALTH COVERAGE

3 SEC. 1011. LIMITATION ON PREEXISTING CONDITION

4 CLAUSES.

5 (a) IN GENERAL.—A group health plan may not im6 pose (and an insurer may not require an employer under

7 a group health plan to impose through a waiting period

8 for coverage under a plan or similar requirement) a limita9 tion or exclusion of benefits relating to treatment of a con10 dition based on the fact that the condition preexisted the

11 effective date of the plan with respect to an individual if—

12 (1) the condition relates to a condition that was

13 not diagnosed or treated within 3 months before the

14 date of coverage under the plan;

15 (2) the limitation or exclusion extends over

16 more than 6 months after the date of coverage

17 under the plan;

18 (3) the limitation or exclusion applies to an in19 dividual who, as of the date of birth, was covered

20 under the plan; or

21 (4) the limitation or exclusion relates to preg22 nancy.

23 (b) TREATMENT OF WAITING PERIODS.—In the case

24 of an individual who is eligible for coverage under a plan

25 but for a waiting period imposed by the employer, in ap-
11

•HR 3955 SC2

1 plying paragraphs (1) and (2) of subsection (a), the indi2 vidual shall be treated as having been covered under the

3 plan as of the earliest date of the beginning of the waiting

4 period.

5 SEC. 1012. ASSURANCE OF CONTINUITY OF COVERAGE

6 THROUGH PREVIOUS SATISFACTION OF PRE7 EXISTING CONDITION REQUIREMENT.

8 (a) IN GENERAL.—Each group health plan shall

9 waive any period applicable to a preexisting condition for

10 similar benefits with respect to an individual to the extent

11 that the individual, prior to the date of such individual’s

12 enrollment in such plan, was covered for the condition

13 under any other health plan that was in effect before such

14 date.

15 (b) CONTINUOUS COVERAGE REQUIRED.—

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

17 longer apply if there is a continuous period of more

18 than 60 days (or, in the case of an individual de19 scribed in paragraph (3), 6 months) on which the in20 dividual was not covered under a group health plan.

21 (2) TREATMENT OF WAITING PERIODS.—In ap22 plying paragraph (1), any waiting period imposed by

23 an employer before an employee is eligible to be cov24 ered under a plan shall be treated as a period in
12

•HR 3955 SC2

1 which the employee was covered under a group

2 health plan.

3 (3) JOB TERMINATION.—An individual is de4 scribed in this paragraph if the individual loses cov5 erage under a group health plan due to termination

6 of employment.

7 (4) EXCLUSION OF CASH-ONLY AND DREAD

8 DISEASE PLANS.—In this subsection, the term

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

10 health plan which is offered primarily to provide—

11 (A) coverage for a specified disease or ill12 ness, or

13 (B) a hospital or fixed indemnity policy,

14 unless the Secretary determines that such a

15 plan provides sufficiently comprehensive cov16 erage of a benefit so that it should be treated

17 as a group health plan under this subsection.

18 SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY

19 GENERALLY.

20 (a) MULTIEMPLOYER PLANS AND EXEMPTED MUL21 TIPLE EMPLOYER HEALTH PLANS.—A multiemployer

22 plan and an exempted multiple employer health plan may

23 not cancel coverage or deny renewal of coverage under

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

25 (1) for nonpayment of contributions,
13

•HR 3955 SC2

1 (2) for fraud or other misrepresentation by the

2 employer,

3 (3) for noncompliance with plan provisions,

4 (4) for misuse of a provider network provision,

5 or

6 (5) because the plan is ceasing to provide any

7 coverage in a geographic area.

8 (b) INSURERS.—

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

10 health insurance plan or deny renewal of coverage

11 under such a plan other than—

12 (A) for nonpayment of premiums,

13 (B) for fraud or other misrepresentation

14 by the insured,

15 (C) for noncompliance with plan provi16 sions,

17 (D) in the case of a plan issued to a small

18 employer, for failure to maintain minimum par19 ticipation rates (consistent with paragraph (3)),

20 (E) for misuse of a provider network provi21 sion, or

22 (F) because the insurer is ceasing to pro23 vide any health insurance plan in a State, or,

24 in the case of a health maintenance organiza25 tion, in a geographic area.
14

•HR 3955 SC2

1 (2) LIMITATION ON MARKET REENTRY.—If an

2 insurer terminates the offering of health insurance

3 plans in an area, the insurer may not offer such a

4 health insurance plan to any employer in the area

5 until 5 years after the date of the termination.

6 (3) MINIMUM PARTICIPATION RATES.—An in7 surer may require, with respect to a health insur8 ance plan issued to a small employer, that a mini9 mum percentage of eligible employees who do not

10 otherwise have health insurance are enrolled in such

11 plan if such percentage is applied uniformly to all

12 plans offered to employers of comparable size.

13 PART 3—ENFORCEMENT; EFFECTIVE

14 DATES; DEFINITIONS

15 SEC. 1021. ENFORCEMENT.

16 (a) ENFORCEMENT BY DEPARTMENT OF LABOR FOR

17 EMPLOYERS AND GROUP HEALTH PLANS.—

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

19 subtitle B of title I of the Employee Retirement In20 come Security Act of 1974, the provisions of parts

21 1 and 2 of this subtitle shall be deemed to be provi22 sions of title I of such Act irrespective of exclusions

23 under section 4(b) of such Act.

24 (2) REGULATORY AUTHORITY.—With respect to

25 the regulatory authority of the Secretary of Labor
15

•HR 3955 SC2

1 under this subtitle pursuant to subsection (a), sec2 tion 505 of the Employee Retirement Income Secu3 rity Act of 1974 (29 U.S.C. 1135) shall apply.

4 (b) ENFORCEMENT THROUGH CIVIL MONEY PEN5 ALTIES FOR INSURERS.—

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

7 insurer that fails to comply with the requirements

8 applicable to the insurer under part 2 of this subtitle

9 is subject to a civil money penalty under this sub10 section.

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

12 apply to a failure by an insurer in a State if the Sec13 retary determines that the State has in effect a reg14 ulatory enforcement mechanism that provides ade15 quate sanctions with respect to such a failure by

16 such an insurer.

17 (3) AMOUNT OF PENALTY.—

18 (A) IN GENERAL.—Subject to subpara19 graph (B), the amount of the civil money pen20 alty imposed under this subsection shall be

21 $100 for each day during which such failure

22 persists for each individual to which such fail23 ure relates.

24 (B) LIMITATION.—The amount of the pen25 alty imposed by this subsection for an insurer
16

•HR 3955 SC2

1 with respect to a health insurance plan shall

2 not exceed 25 percent of the amounts received

3 under the plan for coverage during the period

4 such failure persists.

5 (4) EXCEPTIONS.—

6 (A) CORRECTIONS WITHIN 30 DAYS.—No

7 civil money penalty be imposed under this sub8 section by reason of any failure if—

9 (i) such failure was due to reasonable

10 cause and not to willful neglect, and

11 (ii) such failure is corrected within the

12 30-day period beginning on the earliest

13 date the insurer knew, or exercising rea14 sonable diligence would have known, that

15 such failure existed.

16 (B) WAIVER BY SECRETARY.—In the case

17 of a failure which is due to reasonable cause

18 and not to willful neglect, the Secretary may

19 waive part or all of the penalty imposed by this

20 subsection to the extent that payment of such

21 penalty would be excessive relative to the failure

22 involved.

23 (5) PROCEDURES.—The Secretary by regulation

24 shall provide for procedures for the imposition of

25 civil money penalties under this subsection. Such
17

•HR 3955 SC2

1 procedures shall assure written notice and oppor2 tunity for a determination to be made on the record

3 after a hearing at which the insurer is entitled to be

4 represented by counsel, to present witnesses, and to

5 cross-examine witnesses against the insurer.The pro6 visions of subsections (e), (f), (j), and (k) of section

7 1128A of the Social Security Act shall apply to de8 terminations and civil money penalties under this

9 section in the same manner as they apply to deter10 minations and civil money penalties under such

11 section.

12 SEC. 1022. EFFECTIVE DATES.

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

14 to plans years beginning after December 31, 1996.

15 (b) PART 2.—The requirements of part 2 with re16 spect to—

17 (1) group health plans and employers shall

18 apply to plans years beginning after December 31,

19 1996, and

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

21 1997.

22 SEC. 1023. DEFINITIONS AND SPECIAL RULES.

23 (a) IN GENERAL.—For purposes of this subtitle:
18

•HR 3955 SC2

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

2 means, with respect to any individual, any person

3 who is—

4 (A) the spouse or surviving spouse of the

5 individual, or

6 (B) under regulations of the Secretary, a

7 child (including an adopted child) of such indi8 vidual and—

9 (i) under 19 years of age, or

10 (ii) under 25 years of age and a full11 time student.

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

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

14 employee who normally performs on a monthly basis

15 at least 30 hours of service per week for that

16 employer.

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

18 individual’’ means, with respect to an eligible em19 ployee, such employee, and any dependent of such

20 employee.

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

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

23 the Employee Retirement Income Security Act of

24 1974.
19

•HR 3955 SC2

1 (5) EXEMPTED MULTIPLE EMPLOYER HEALTH

2 PLAN.—The term ‘‘exempted multiple employer

3 health plan’’ means a multiple employer welfare ar4 rangement treated as an employee welfare benefit

5 plan by reason of an exemption under part 7 of sub6 title B of title I of the Employee Retirement Income

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

8 C of this title).

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

10 term ‘‘group health plan’’ means an employee wel11 fare benefit plan providing medical care (as defined

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

13 1986) to participants or beneficiaries directly or

14 through insurance, reimbursement, or otherwise, but

15 does not include any type of coverage excluded from

16 the definition of a health insurance plan under sec17 tion 1107(4)(B).

18 (B) The term ‘‘plan’’ means, unless used with

19 a modifying term or the context specifically indicates

20 otherwise, a group health plan (including any such

21 plan which is a multiemployer plan), an exempted

22 multiple employer health plan, or an insured mul23 tiple employer health plan.
20

•HR 3955 SC2

1 (7) HEALTH INSURANCE PLAN.—The term

2 ‘‘health insurance plan’’ has the meaning given such

3 term in section 1107(4).

4 (8) INSURED MULTIPLE EMPLOYER HEALTH

5 PLAN.—The term ‘‘insured multiple employer health

6 plan’’ has the meaning given such term in section

7 701(11) of Employee Retirement Income Security

8 Act of 1974 (as added by section 1211 of this title).

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

10 meaning given such term in section 1107(6).

11 (b) SPECIAL RULES.—

12 (1) GENERAL RULE.—Except as otherwise pro13 vided in this subtitle, for definitions of terms used

14 in this subtitle, see section 3 of the Employee Re15 tirement Income Security Act of 1974 (29 U.S.C.

16 1002).

17 (2) SECRETARY.—Except with respect to ref18 erences specifically to the Secretary of Labor, the

19 term ‘‘Secretary’’ means the Secretary of Health

20 and Human Services.
21

•HR 3955 SC2

1 Subtitle B—Reform of Health In2 surance Marketplace for Small

3 Business

4 SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER

5 STANDARD AND CATASTROPHIC PLANS.

6 (a) REQUIREMENT.—

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

8 section 1107(6)) that makes available any health in9 surance plan (as defined in section 1107(4)) to a

10 small employer (as defined in section 1107(9)) in a

11 State shall make available to each small employer in

12 the State—

13 (A) a standard plan (as defined in section

14 1102(a)(2)), and

15 (B) a catastrophic plan (as defined in such

16 section).

17 (2) SPECIAL RULE FOR HEALTH MAINTENANCE

18 ORGANIZATIONS.—The requirements of paragraph

19 (1)(B) shall not apply with respect to a health insur20 ance plan that—

21 (A) is a federally qualified health mainte22 nance organization (as defined in section

23 1301(a) of the Public Health Service Act), or

24 (B) is not such an organization but is rec25 ognized under State law as a health mainte-
22

•HR 3955 SC2

1 nance organization or managed care organiza2 tion or a similar organization regulated under

3 State law for solvency.

4 (3) EXCEPTION IF STATE PROVIDES FOR GUAR5 ANTEED AVAILABILITY (RATHER THAN GUARANTEED

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

7 in a State if the State is providing—

8 (A) access to each small employer in the

9 State to a standard plan and to a catastrophic

10 plan, and

11 (B) a risk allocation mechanism described

12 in subsection (c).

13 (b) GUARANTEED ISSUE OF STANDARD AND CATA14 STROPHIC PLANS.—Subject to subsection (c)—

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

16 each insurer that offers a standard or catastrophic

17 plan to a small employer in a State—

18 (A) must accept every small employer in

19 the State that applies for coverage under the

20 plan; and

21 (B) must accept for enrollment under the

22 plan every eligible individual (as defined in

23 paragraph (4)) who applies for enrollment on a

24 timely basis (consistent with paragraph (3))

25 and may not place any restriction on the eligi-
23

•HR 3955 SC2

1 bility of an individual to enroll so long as such

2 individual is an eligible individual.

3 (2) SPECIAL RULES FOR HEALTH MAINTE4 NANCE ORGANIZATIONS.—In the case of a plan of5 fered by a health maintenance organization, the plan

6 may—

7 (A) limit the employers that may apply for

8 coverage to those with eligible individuals resid9 ing in the service area of the plan;

10 (B) limit the individuals who may be en11 rolled under the plan to those who reside in the

12 service area of the plan; and

13 (C) within the service area of the plan,

14 deny coverage to such employers if the plan

15 demonstrates that—

16 (i) it will not have the capacity to de17 liver services adequately to enrollees of any

18 additional groups because of its obligations

19 to existing group contract holders and en20 rollees, and

21 (ii) it is applying this subparagraph

22 uniformly to all employers without regard

23 to the health status, claims experience, or

24 duration of coverage of those employers

25 and their employees.
24

•HR 3955 SC2

1 In this paragraph, the term ‘‘health maintenance or2 ganization’’ includes an organization recognized

3 under State law as a health maintenance organiza4 tion or managed care organization or a similar orga5 nization regulated under State law for solvency.

6 (3) CLARIFICATION OF TIMELY ENROLL7 MENT.—

8 (A) GENERAL INITIAL ENROLLMENT RE9 QUIREMENT.—Except as provided in this para10 graph, a standard or catastrophic plan may

11 consider enrollment of an eligible individual not

12 to be timely if the eligible employee or depend13 ent fails to enroll in the plan during an initial

14 enrollment period, if such period is at least 30

15 days long.

16 (B) ENROLLMENT DUE TO LOSS OF PRE17 VIOUS EMPLOYER COVERAGE.—Enrollment in a

18 standard or catastrophic plan is considered to

19 be timely in the case of an eligible individual

20 who—

21 (i) was covered under another health

22 insurance plan or group health plan at the

23 time of the individual’s initial enrollment

24 period,
25

•HR 3955 SC2

1 (ii) stated at the time of the initial en2 rollment period that coverage under a

3 health insurance plan or a group health

4 plan was the reason for declining enroll5 ment,

6 (iii) lost coverage under another

7 health insurance plan or group health plan

8 (as a result of the termination of the other

9 plan’s coverage, termination or reduction

10 of employment, or other reason), and

11 (iv) requests enrollment within 30

12 days after termination of such coverage.

13 (C) REQUIREMENT APPLIES DURING OPEN

14 ENROLLMENT PERIODS.—Each standard or cat15 astrophic plan shall provide for at least one pe16 riod (of not less than 30 days) each year during

17 which enrollment under the plan shall be con18 sidered to be timely.

19 (D) EXCEPTION FOR COURT ORDERS.—

20 Enrollment of a spouse or minor child of an

21 employee shall be considered to be timely if—

22 (i) a court has ordered that coverage

23 be provided for the spouse or child under

24 a covered employee’s group health plan,

25 and
26

•HR 3955 SC2

1 (ii) a request for enrollment is made

2 within 30 days after the date the court is3 sues the order.

4 (E) ENROLLMENT OF SPOUSES AND DE5 PENDENTS.—

6 (i) IN GENERAL.—Enrollment of the

7 spouse (including a child of the spouse)

8 and any dependent child of an eligible em9 ployee shall be considered to be timely if a

10 request for enrollment is made either—

11 (I) within 30 days of the date of

12 the marriage or of the date of the

13 birth or adoption of a child, if family

14 coverage is available as of such date,

15 or

16 (II) within 30 days of the date

17 family coverage is first made avail18 able.

19 (ii) COVERAGE.—If a plan makes

20 family coverage available and enrollment is

21 made under the plan on a timely basis

22 under clause (i)(I), the coverage shall be23 come effective not later than the first day

24 of the first month beginning after the date
27

•HR 3955 SC2

1 of the marriage or the date of birth or

2 adoption of the child (as the case may be).

3 (4) DEFINITIONS.—In this subsection, the

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

5 have the meanings given such terms in section

6 1023(a).

7 (c) STATE OPTION OF GUARANTEED AVAILABILITY

8 THROUGH ALLOCATION OF RISK (RATHER THAN

9 THROUGH GUARANTEED ISSUE).—The requirements of

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

11 provided (in accordance with standards established under

12 this subtitle) a mechanism under which—

13 (1) each insurer offering a health insurance

14 plan to a small employer in the State must partici15 pate in a program for assigning high-risk small em16 ployer groups (or individuals within such a group)

17 among some or all such insurers, and

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

19 employer groups or individuals are so assigned com20 ply with the requirements of subsection (b).

21 SEC. 1102. HEALTH PLAN, STANDARD PLAN, AND CATA22 STROPHIC PLAN DEFINED.

23 (a) HEALTH PLAN DEFINED.—In this subtitle:

24 (1) IN GENERAL.—The term ‘‘health plan’’

25 means a health insurance plan (whether a managed-
28

•HR 3955 SC2

1 care plan, indemnity plan, or other plan) that meets

2 the following requirements:

3 (A) The plan—

4 (i) is designed to provide standard

5 coverage (consistent with subsection (b) or

6 (d)) with substantial cost-sharing, or

7 (ii) is designed to provide only cata8 strophic coverage (consistent with sub9 section (c) or (d)).

10 (B) The plan meets the applicable require11 ments of section 1101(b) (relating to guaran12 teed issue).

13 (C) The plan meets the consumer protec14 tion standards established under section

15 1103(a)(1)(B).

16 (D) The plan meets any participation re17 quirements with respect to an applicable rein18 surance or allocation of risk mechanism estab19 lished by a State or the Secretary under section

20 1106.

21 (2) STANDARD AND CATASTROPHIC PLANS.—

22 The terms ‘‘standard plan’’ and ‘‘catastrophic plan’’

23 mean a health plan that provides for at least stand24 ard coverage (referred to in paragraph (1)(A)(i)) or
29

•HR 3955 SC2

1 for only catastrophic coverage (referred to in para2 graph (1)(A)(ii)), respectively.

3 (b) STANDARD BENEFIT PACKAGE.—

4 (1) IN GENERAL.—Subject to the succeeding

5 provisions of this subsection, subsection (d) (permit6 ting variation of benefits among actuarially equiva7 lent plans), and subsection (e) (permitting plans not

8 to cover specific treatments, procedures, or classes),

9 a health insurance plan is considered to provide

10 standard coverage consistent with this subsection if

11 the benefits are limited to payment for—

12 (A) inpatient and outpatient hospital care,

13 except that treatment for a mental disorder is

14 subject to the special limitations described in

15 subparagraph (E)(i);

16 (B) inpatient and outpatient physicians’

17 services, except that psychotherapy or counsel18 ing for a mental disorder is subject to the spe19 cial limitations described in subparagraph

20 (E)(ii);

21 (C) diagnostic tests;

22 (D) preventive services limited to—

23 (i) prenatal care and well-baby care

24 provided to children who are 1 year of age

25 or younger;
30

•HR 3955 SC2

1 (ii) well child care;

2 (iii) Pap smears;

3 (iv) mammograms; and

4 (v) colorectal screening services; and

5 (E)(i) inpatient hospital care for a mental

6 disorder for not less than 45 days per year, ex7 cept that days of partial hospitalization or resi8 dential care may be substituted for days of in9 patient care; and

10 (ii) outpatient psychotherapy and counsel11 ing for a mental disorder for not less than 20

12 visits per year provided by a provider who is

13 acting within the scope of State law and who—

14 (I) is a physician; or

15 (II) is a duly licensed or certified clin16 ical psychologist or a duly licensed or cer17 tified clinical social worker, a duly licensed

18 or certified equivalent mental health pro19 fessional, or a clinic or center providing

20 duly licensed or certified mental health

21 services.

22 (2) AMOUNT, SCOPE, AND DURATION OF CER23 TAIN BENEFITS.—

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

25 subparagraph (B) and in paragraph (3), a
31

•HR 3955 SC2

1 health insurance plan providing for standard

2 coverage shall place no limits on the amount,

3 scope, or duration of benefits described in sub4 paragraphs (A) through (C) of paragraph (1).

5 (B) PREVENTIVE SERVICES.—A health in6 surance plan providing for standard coverage

7 may limit the amount, scope, and duration of

8 preventive services described in subparagraph

9 (D) of paragraph (1) provided that the amount,

10 scope, and duration of such services are reason11 ably consistent with recommendations and peri12 odicity schedules developed by appropriate med13 ical experts.

14 (3) EXCEPTIONS.—Paragraph (1) shall not be

15 construed as requiring a plan to include payment

16 for—

17 (A) items and services that are not essen18 tial and medically necessary;

19 (B) routine physical examinations or pre20 ventive care (other than care and services de21 scribed in subparagraph (D) of paragraph (1));

22 or

23 (C) experimental services and procedures.

24 (4) LIMITATION ON DEDUCTIBLES.—
32

•HR 3955 SC2

1 (A) IN GENERAL.—Except as permitted

2 under subparagraph (B), a health insurance

3 plan providing standard coverage shall not pro4 vide a deductible amount for benefits provided

5 in any plan year that exceeds—

6 (i) with respect to benefits payable for

7 items and services furnished to any em8 ployee with no family member enrolled

9 under the plan, for a plan year beginning

10 in—

11 (I) a calendar year prior to 1996,

12 $450; or

13 (II) for a subsequent calendar

14 year, the limitation specified in this

15 clause for the previous calendar year

16 increased by the percentage increase

17 in the consumer price index for all

18 urban consumers (United States city

19 average, as published by the Bureau

20 of Labor Statistics) for the 12-month

21 period ending on September 30 of the

22 preceding calendar year; and

23 (ii) with respect to benefits payable

24 for items and services furnished to any em25 ployee with a family member enrolled
33

•HR 3955 SC2

1 under the standard benefit package plan,

2 for a plan year beginning in—

3 (I) a calendar year prior to 1996,

4 $450 per family member and $780

5 per family; or

6 (II) for a subsequent calendar

7 year, the limitation specified in this

8 clause for the previous calendar year

9 increased by the percentage increase

10 in the consumer price index for all

11 urban consumers (United States city

12 average, as published by the Bureau

13 of Labor Statistics) for the 12-month

14 period ending on September 30 of the

15 preceding calendar year.

16 If the limitation computed under clause (i)(II)

17 or (ii)(II) is not a multiple of $10, it shall be

18 rounded to the next highest multiple of $10.

19 (B) WAGE-RELATED DEDUCTIBLE.—A

20 health insurance plan may provide for any other

21 deductible amount instead of the limitations

22 under—

23 (i) subparagraph (A)(i), if such

24 amount does not exceed (on an annualized
34

•HR 3955 SC2

1 basis) 1 percent of the total wages paid to

2 the employee in the plan year; or

3 (ii) subparagraph (A)(ii), if such

4 amount does not exceed (on an annualized

5 basis) 1 percent per family member or 2

6 percent per family of the total wages paid

7 to the employee in the plan year.

8 (5) LIMITATION ON COPAYMENTS AND COIN9 SURANCE.—

10 (A) IN GENERAL.—Subject to subpara11 graphs (B) through (D), a health insurance

12 plan providing standard coverage may not re13 quire the payment of any copayment or coinsur14 ance for an item or service for which coverage

15 is required under this section—

16 (i) in an amount that exceeds 20 per17 cent of the amount payable for the item or

18 service under the plan; or

19 (ii) after an employee and family cov20 ered under the plan have incurred out-of21 pocket expenses under the plan that are

22 equal to the out-of-pocket limit (as defined

23 in subparagraph (E)(ii)) for a plan year.

24 (B) EXCEPTION FOR MANAGED CARE

25 PLANS.—A health insurance plan that is a man-
35

•HR 3955 SC2

1 aged care plan may require payments in excess

2 of the amount permitted under subparagraph

3 (A) in the case of items and services furnished

4 by nonparticipating providers.

5 (C) EXCEPTION FOR IMPROPER UTILIZA6 TION.—A health insurance plan may provide for

7 copayment or coinsurance in excess of the

8 amount permitted under subparagraph (A) for

9 any item or service that an individual obtains

10 without complying with procedures established

11 by a managed care plan or under a utilization

12 program to ensure the efficient and appropriate

13 utilization of covered services.

14 (D) EXCEPTIONS FOR MENTAL HEALTH

15 CARE.—In the case of care described in para16 graph (1)(E)(ii), a health insurance plan shall

17 not require payment of any copayment or coin18 surance for an item or service for which cov19 erage is required by this subtitle in an amount

20 that exceeds 50 percent of the amount payable

21 for the item or service.

22 (6) LIMIT ON OUT-OF-POCKET EXPENSES.—

23 (A) OUT-OF-POCKET EXPENSES DE24 FINED.—As used in this section, the term ‘‘out25 of-pocket expenses’’ means, with respect to an
36

•HR 3955 SC2

1 employee in a plan year, amounts payable under

2 the plan as deductibles and coinsurance with re3 spect to items and services provided under the

4 plan and furnished in the plan year on behalf

5 of the employee and family covered under the

6 plan.

7 (B) OUT-OF-POCKET LIMIT DEFINED.—As

8 used in this section and except as provided in

9 subparagraph (C), the term ‘‘out-of-pocket

10 limit’’ means for a plan year beginning in—

11 (i) a calendar year prior to 1996,

12 $3,400; or

13 (ii) for a subsequent calendar year,

14 the limit specified in this subparagraph for

15 the previous calendar year increased by the

16 percentage increase in the consumer price

17 index for all urban consumers (United

18 States city average, as published by the

19 Bureau of Labor Statistics) for the 12-

20 month period ending on September 30 of

21 the preceding calendar year.

22 If the limit computed under clause (ii) is not a

23 multiple of $10, it shall be rounded to the next

24 highest multiple of $10.
37

•HR 3955 SC2

1 (C) ALTERNATIVE OUT-OF-POCKET

2 LIMIT.—A health insurance plan may provide

3 for an out-of-pocket limit other than that de4 fined in subparagraph (B) if, for a plan year

5 with respect to an employee and the family of

6 the employee, the limit does not exceed (on an

7 annualized basis) 10 percent of the total wages

8 paid to the employee in the plan year.

9 (7) LIMITED PREEMPTION OF STATE MAN10 DATED BENEFITS.—No State law or regulation in

11 effect in a State that requires health insurance plans

12 offered to small employers in the State to include

13 specified items and services other than those speci14 fied by this subsection shall apply with respect to a

15 health insurance plan providing standard coverage

16 offered by an insurer to a small employer.

17 (c) CATASTROPHIC BENEFITS PACKAGE.—

18 (1) IN GENERAL.—Subject to the succeeding

19 provisions of this subsection, subsection (d) (permit20 ting variation of benefits among actuarially equiva21 lent plans), and subsection (e) (permitting plans not

22 to cover specific treatments, procedures, or classes),

23 a health insurance plan is considered to provide cat24 astrophic coverage consistent with this subsection if

25 benefits are limited to payment for—
38

•HR 3955 SC2

1 (A) inpatient and outpatient hospital care,

2 including emergency services;

3 (B) inpatient and outpatient physicians’

4 services;

5 (C) diagnostic tests; and

6 (D) preventive services (which may include

7 one or more of the following services)—

8 (i) prenatal care and well-baby care

9 provided to children who are 1 year of age

10 or younger;

11 (ii) well-child care;

12 (iii) Pap smears;

13 (iv) mammograms; and

14 (v) colorectal screening services.

15 (2) COST-SHARING.—Each health insurance

16 plan providing catastrophic coverage issued to a

17 small employer by an insurer may impose premiums,

18 deductibles, copayments, or other cost-sharing on en19 rollees of such plan.

20 (3) OUT-OF-POCKET LIMIT.—Each health insur21 ance plan providing catastrophic coverage shall pro22 vide for a limit on out-of-pocket expenses.

23 (4) LIMITED PREEMPTION OF STATE MAN24 DATED BENEFITS.—No State law or regulation in

25 effect in a State that requires health insurance plans
39

•HR 3955 SC2

1 offered to small employers in the State to include

2 specified items and services other than those de3 scribed in this subsection shall apply with respect to

4 a health insurance plan providing catastrophic cov5 erage offered by an insurer to a small employer.

6 (d) ACTUARIAL EQUIVALENCE IN BENEFITS PER7 MITTED.—

8 (1) STANDARD BENEFIT PACKAGE.—A health

9 insurance plan also is considered to provide standard

10 coverage consistent with subsection (b) if the bene11 fits are determined, in accordance with the set of ac12 tuarial equivalence rules certified under paragraph

13 (3), to have a value that is within 5 percentage

14 points of the target actuarial value for standard cov15 erage established under paragraph (4).

16 (2) CATASTROPHIC BENEFIT PACKAGE.—A

17 health insurance plan also is considered to provide

18 catastrophic coverage consistent with subsection (c)

19 if the benefits are determined, in accordance with

20 the set of actuarial equivalence rules certified under

21 paragraph (3), to have a value that is within 5 per22 centage points of the target actuarial value for cata23 strophic coverage established under paragraph (5).

24 (3) RULES OF ACTUARIAL EQUIVALENCE.—
40

•HR 3955 SC2

1 (A) INITIAL DETERMINATION.—The NAIC

2 is requested to submit to the Secretary, within

3 6 months after the date of the enactment of

4 this Act, a set of rules which the NAIC deter5 mines is sufficient for determining, in the case

6 of any health insurance plan and for purposes

7 of this subsection, the actuarial value of the

8 coverage offered by the plan.

9 (B) CERTIFICATION.—If the Secretary de10 termines that the NAIC has submitted a set of

11 rules that comply with the requirements of sub12 paragraph (A), the Secretary shall certify such

13 set of rules for use under this subsection. If the

14 Secretary determines that such a set of rules

15 has not been submitted or does not comply with

16 such requirements, the Secretary shall promptly

17 establish a set of rules that meets such require18 ments.

19 (4) DETERMINATION OF TARGET ACTUARIAL

20 VALUE FOR STANDARD COVERAGE.—

21 (A) INITIAL DETERMINATION.—The NAIC

22 is requested to submit to the Secretary, within

23 6 months after the date of the enactment of

24 this Act, a target actuarial value for standard

25 coverage equal to the average actuarial value of
41

•HR 3955 SC2

1 the standard coverage described in subsection

2 (b). No specific procedure or treatment, or

3 classes thereof, is required to be considered in

4 such determination by this Act or through regu5 lations. The determination of such value shall

6 be based on a representative distribution of the

7 population of eligible employees to be offered

8 standard coverage and a single set of standard9 ized utilization and cost factors.

10 (B) CERTIFICATION.—If the Secretary de11 termines that the NAIC has submitted a target

12 actuarial value for standard coverage that com13 plies with the requirements of subparagraph

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

15 use under this subsection. If the Secretary de16 termines that such a value has not been submit17 ted or does not comply with such requirements,

18 the Secretary shall promptly determine such a

19 target actuarial value that meets such require20 ments.

21 (5) DETERMINATION OF TARGET ACTUARIAL

22 VALUE FOR CATASTROPHIC COVERAGE.—

23 (A) INITIAL DETERMINATION.—The NAIC

24 is requested to submit to the Secretary, within

25 6 months after the date of the enactment of
42

•HR 3955 SC2

1 this Act, a target actuarial value for cata2 strophic coverage equal to the average actuarial

3 value of the catastrophic coverage described in

4 subsection (c). No specific procedure or treat5 ment, or classes thereof, is required to be con6 sidered in such determination by this Act or

7 through regulations. The determination of such

8 value shall be based on a representative dis9 tribution of the population of eligible employees

10 to be offered catastrophic coverage and a single

11 set of standardized utilization and cost factors.

12 (B) CERTIFICATION.—If the Secretary de13 termines that the NAIC has submitted a target

14 actuarial value for catastrophic coverage that

15 complies with the requirements of subparagraph

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

17 use under this subsection. If the Secretary de18 termines that such a value has not been submit19 ted or does not comply with such requirements,

20 the Secretary shall promptly determine such a

21 target actuarial value that meets such require22 ments.

23 (6) SUBSEQUENT REVISIONS OF RULES AND

24 TARGET VALUES.—
43

•HR 3955 SC2

1 (A) NAIC.—The NAIC may submit from

2 time to time to the Secretary revisions of the

3 set of rules of actuarial equivalence and target

4 actuarial values previously established or deter5 mined under this subsection if the NAIC deter6 mines such revision necessary to take into ac7 count changes in the relevant types of health

8 benefits provisions, in deductible levels for cata9 strophic coverage, or in demographic conditions

10 which form the basis for such set of rules or

11 values. The provisions of paragraph (3)(B) shall

12 apply to such a revision in the same manner as

13 they apply to the initial determination of the set

14 of rules.

15 (B) SECRETARY.—The Secretary may by

16 regulation revise such set or rules and values

17 from time to time if the Secretary determines

18 such revision necessary to take into account

19 changes described in subparagraph (A).

20 (e) NO COVERAGE OF SPECIFIC TREATMENT, PRO21 CEDURES, OR CLASSES REQUIRED.—Nothing in this sec22 tion may be construed to require the coverage of any spe23 cific procedure, treatment, or class of service in a health

24 plan under this Act or through regulations.
44

•HR 3955 SC2

1 SEC. 1103. ESTABLISHMENT OF HEALTH PLAN STANDARDS.

2 (a) ESTABLISHMENT OF GENERAL STANDARDS.—

3 (1) ROLE OF NAIC.—The Secretary shall re4 quest the NAIC to develop, within 9 months after

5 the date of the enactment of this Act, model regula6 tions that specify standards with respect to each of

7 the following:

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

9 1101(a), that insurers make available health

10 plans.

11 (ii) The requirements of guaranteed avail12 ability of health plans to small employers under

13 section 1101(b).

14 (iii) The requirements for standard and

15 catastrophic coverage under subsections (b) and

16 (c) of section 1102.

17 (B)(i) The requirements of section 1104

18 (relating to limits on premiums and miscellane19 ous consumer protections).

20 (ii) The requirement of section 1105 (re21 lating to limitation on annual premium in22 creases).

23 If the NAIC develops recommended regulations

24 specifying such standards within such period, the

25 Secretary shall review the standards. Such review

26 shall be completed within 60 days after the date the
45

•HR 3955 SC2

1 regulations are developed. Unless the Secretary de2 termines within such period that the standards do

3 not meet the requirements, such standards shall

4 serve as the standards under this section, with such

5 amendments as the Secretary deems necessary.

6 (2) CONTINGENCY.—If the NAIC does not de7 velop such model regulations within such period or

8 the Secretary determines that such regulations do

9 not specify standards that meet the requirements de10 scribed in paragraph (1), the Secretary shall specify,

11 within 15 months after the date of the enactment of

12 this Act, standards to carry out those requirements.

13 (3) EFFECTIVE DATE.—The health plan stand14 ards and consumer protection standards (as defined

15 in paragraph (5)) shall apply to health plans and

16 health insurance plans in a State on or after the re17 spective date the standards are implemented in the

18 State under subsections (b) and (c).

19 (4) DEFINITIONS.—In this section:

20 (A) CONSUMER PROTECTION STAND21 ARDS.—The term ‘‘consumer protection stand22 ards’’ means the standards established under

23 paragraph (1)(B).

24 (B) HEALTH PLAN STANDARDS.—The

25 term ‘‘health plan standards’’ means the stand-
46

•HR 3955 SC2

1 ards established under paragraph (1)(A) (relat2 ing to the requirements of sections 1101 and

3 1102), and includes the consumer protection

4 standards insofar as they relate to health plans.

5 (b) APPLICATION OF STANDARDS THROUGH

6 STATES.—

7 (1) APPLICATION OF HEALTH PLAN STAND8 ARDS.—

9 (A) IN GENERAL.—Each State shall sub10 mit to the Secretary, by the deadline specified

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

12 State is taking to implement and enforce the

13 consumer protection standards with respect to

14 insurers, and health plans offered, not later

15 than such deadline.

16 (B) DEADLINE FOR REPORT.—

17 (i) 1 YEAR AFTER STANDARDS ESTAB18 LISHED.—Subject to clause (ii), the dead19 line under this subparagraph is 1 year

20 after the date the health plan standards

21 are established under subsection (a).

22 (ii) EXCEPTION FOR LEGISLATION.—

23 In the case of a State which the Secretary

24 identifies, in consultation with the NAIC,

25 as—
47

•HR 3955 SC2

1 (I) requiring State legislation

2 (other than legislation appropriating

3 funds) in order for insurers and

4 health plans offered to meet the

5 health plan standards established

6 under subsection (a), but

7 (II) having a legislature which is

8 not scheduled to meet in 1995 in a

9 legislative session in which such legis10 lation may be considered,

11 the date specified in this subparagraph is

12 the first day of the first calendar quarter

13 beginning after the close of the first legis14 lative session of the State legislature that

15 begins on or after January 1, 1997. For

16 purposes of the previous sentence, in the

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

18 session, each year of such session shall be

19 deemed to be a separate regular session of

20 the State legislature.

21 (2) FEDERAL ROLE.—If the Secretary deter22 mines that a State has failed to submit a report by

23 the deadline specified under paragraph (1) or finds

24 that the State has not implemented and provided

25 adequate enforcement of the health plan standards
48

•HR 3955 SC2

1 under such paragraph, the Secretary shall notify the

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

3 which to submit such report or to implement and en4 force such standards under such paragraph. If, after

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

6 failure has not been corrected, the Secretary shall

7 provide for such mechanism for the implementation

8 and enforcement of such standards in the State as

9 the Secretary determines to be appropriate. Such

10 implementation and enforcement shall take effect

11 with respect to insurers, and health plans offered or

12 renewed, on or after 3 months after the date of the

13 Secretary’s finding under the previous sentence, and

14 until the date the Secretary finds that such a failure

15 has been corrected. In exercising authority under

16 this subparagraph, the Secretary shall determine

17 whether the use of a risk-allocation mechanism, de18 scribed in section 1101(c), would be more consistent

19 with the small employer group health coverage mar20 ket in the State than the guaranteed availability pro21 visions of section 1101(b).

22 (3) APPLICATION OF CONSUMER PROTECTION

23 STANDARDS.—

24 (A) IN GENERAL.—Each State shall sub25 mit to the Secretary, by the deadline specified
49

•HR 3955 SC2

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

2 State is taking to implement and enforce the

3 health plan standards with respect to insurers,

4 and health insurance plans (other than health

5 plans) offered, not later than such deadline.

6 (B) DEADLINE FOR REPORT.—

7 (i) 1 YEAR AFTER STANDARDS ESTAB8 LISHED.—Subject to clause (ii), the dead9 line under this subparagraph is 1 year

10 after the date the consumer protection

11 standards are established under subsection

12 (a).

13 (ii) EXCEPTION FOR LEGISLATION.—

14 In the case of a State which the Secretary

15 identifies, in consultation with the NAIC,

16 as—

17 (I) requiring State legislation

18 (other than legislation appropriating

19 funds) in order for insurers and

20 health insurance plans offered to meet

21 the consumer protection standards es22 tablished under subsection (a), but

23 (II) having a legislature which is

24 not scheduled to meet in 1994 in a
50

•HR 3955 SC2

1 legislative session in which such legis2 lation may be considered,

3 the date specified in this subparagraph is

4 the first day of the first calendar quarter

5 beginning after the close of the first legis6 lative session of the State legislature that

7 begins on or after January 1, 1996. For

8 purposes of the previous sentence, in the

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

10 session, each year of such session shall be

11 deemed to be a separate regular session of

12 the State legislature.

13 (4) FEDERAL ROLE.—If the Secretary deter14 mines that a State has failed to submit a report by

15 the deadline specified under paragraph (1) or finds

16 that the State has not implemented and provided

17 adequate enforcement of the consumer protection

18 standards under such paragraph, the Secretary shall

19 notify the State and provide the State a period of

20 60 days in which to submit such report or to imple21 ment and enforce such standards under such para22 graph. If, after such 60-day period, the Secretary

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

24 Secretary shall provide for such mechanism for the

25 implementation and enforcement of such standards
51

•HR 3955 SC2

1 in the State as the Secretary determines to be ap2 propriate. Such implementation and enforcement

3 shall take effect with respect to insurers, and health

4 insurance plans (other than health plans) offered or

5 renewed, on or after 3 months after the date of the

6 Secretary’s finding under the previous sentence, and

7 until the date the Secretary finds that such a failure

8 has been corrected.

9 SEC. 1104. LIMITS ON PREMIUMS AND MISCELLANEOUS

10 CONSUMER PROTECTIONS.

11 (a) LIMITS ON PREMIUMS.—

12 (1) LIMIT ON VARIATION OF INDEX RATES BE13 TWEEN CLASSES OF BUSINESS.—

14 (A) IN GENERAL.—As a standard under

15 section 1103(a)(1)(B)(i), the index rate for a

16 rating period for any class of business of an in17 surer may not exceed by more than 20 percent

18 the index rate for any other class of business.

19 (B) EXCEPTION.—The limitation of sub20 paragraph (A) shall not apply to a class of busi21 ness if—

22 (i) the class is one for which the in23 surer does not reject, and never has re24 jected, small employers included within the

25 definition of employers eligible for the class
52

•HR 3955 SC2

1 of business or otherwise eligible employees

2 and dependents who enroll on a timely

3 basis, based upon their claim experience or

4 health status,

5 (ii) the insurer does not involuntarily

6 transfer, and never has involuntarily trans7 ferred, a health insurance plan into or out

8 of the class of business, and

9 (iii) the class of business is currently

10 available for purchase.

11 (2) LIMIT ON VARIATION OF PREMIUM RATES

12 WITHIN A CLASS OF BUSINESS.—For a class of busi13 ness of an insurer, as a standard under section

14 1103(a)(1)(B)(i), the highest premium rates charged

15 during a rating period to small employers with simi16 lar demographic and other similar objective charac17 teristics (and not relating to claims experience,

18 health status, industry, occupation, or duration of

19 coverage since issue) for the same or similar cov20 erage, or the highest rates which could be charged

21 to such employers under the rating system for that

22 class of business, shall not exceed an amount that is

23 1.5 times the base premium rate for the class of

24 business for a rating period (or portion thereof) that

25 occurs in the first 3 years in which this section is
53

•HR 3955 SC2

1 in effect, and 1.35 times the base premium rate

2 thereafter.

3 (3) OBJECTIVE BASIS FOR DIFFERENCES IN

4 PREMIUMS FOR STANDARD AND CATASTROPHIC

5 PLANS.—The difference between the index rates for

6 catastrophic plans and the index rates for standard

7 plans shall be reasonable and shall reflect the dif8 ference in plan design and shall not take into ac9 count differences due to the nature of the groups as10 sumed to select particular health plans.

11 (4) LIMIT ON TRANSFER OF EMPLOYERS

12 AMONG CLASSES OF BUSINESS.—As a standard

13 under section 1103(a)(1)(B)(i), an insurer may not

14 involuntarily transfer a small employer into or out of

15 a class of business. An insurer may not offer to

16 transfer a small employer into or out of a class of

17 business unless such offer is made to transfer all

18 small employers in the class of business without re19 gard to demographic characteristics, claim experi20 ence, health status, industry, occupation, or duration

21 since issue.

22 (5) DEFINITIONS.—In this subsection:

23 (A) BASE PREMIUM RATE.—The term

24 ‘‘base premium rate’’ means, for each class of

25 business for each rating period, the lowest pre-
54

•HR 3955 SC2

1 mium rate charged or which could have been

2 charged under a rating system for that class of

3 business by the insurer to small employers with

4 similar demographic characteristics and other

5 similar objective characteristics (not relating to

6 claims experience, health status, industry, occu7 pation, or duration of coverage since issue) for

8 health insurance plans with the same or similar

9 coverage.

10 (B) CLASS OF BUSINESS.—The term

11 ‘‘class of business’’ means, with respect to an

12 insurer, all (or a distinct group of) small em13 ployers as shown on the records of the insurer.

14 (C) RULES FOR ESTABLISHING CLASSES

15 OF BUSINESS.—For purposes of subparagraph

16 (B)—

17 (i) an insurer may establish, subject

18 to clause (ii), a distinct group of small em19 ployers on the basis that the applicable

20 health insurance plans either—

21 (I) are marketed and sold

22 through individuals and organizations

23 which are not participating in the

24 marketing or sale of other distinct
55

•HR 3955 SC2

1 groups of small employers for the in2 surer,

3 (II) have been acquired from an4 other insurer as a distinct group, or

5 (III) are provided through an as6 sociation that has a membership of

7 not less than 100 small employers and

8 that has been formed for purposes

9 other than obtaining health coverage;

10 (ii) an insurer may not establish more

11 than 2 groupings under each class of busi12 ness based on the insurer’s use of man13 aged-care techniques if the techniques are

14 expected to produce substantial variation

15 in health care costs; and

16 (iii) notwithstanding clauses (i) and

17 (ii), a State commissioner of insurance,

18 upon application and if authorized under

19 State law, may approve additional distinct

20 groups upon a finding that such approval

21 would enhance the efficiency and fairness

22 of the small employer marketplace.

23 (D) INDEX RATE.—The term ‘‘index rate’’

24 means, with respect to a class of business, the

25 arithmetic average of the applicable base pre-
56

•HR 3955 SC2

1 mium rate and the corresponding highest pre2 mium rate for the class.

3 (E) DEMOGRAPHIC CHARACTERISTICS.—

4 Except as otherwise permitted under the stand5 ard under section 1103(b)(1)(B)(i), the term

6 ‘‘demographic characteristics’’ means age, gen7 der, geographic area, family composition, and

8 group size.

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

10 the time an insurer offers a health insurance plan to a

11 small employer, the insurer shall fully disclose to the em12 ployer rating practices for health insurance plans, includ13 ing rating practices for different populations and benefit

14 designs.

15 (c) ACTUARIAL CERTIFICATION.—Each insurer that

16 offers a health insurance plan to a small employer in a

17 State shall file annually with the State commissioner of

18 insurance a written statement by a member of the Amer19 ican Academy of Actuaries (or other individual acceptable

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

21 the individual which includes a review of the appropriate

22 records and of the actuarial assumptions of the insurer

23 and methods used by the insurer in establishing premium

24 rates for applicable health insurance plans—
57

•HR 3955 SC2

1 (1) the insurer is in compliance with the appli2 cable provisions of this section, and

3 (2) the rating methods are actuarially sound.

4 Each such insurer shall retain a copy of such statement

5 for examination at its principal place of business.

6 (d) REGISTRATION AND REPORTING.—Each insurer

7 that issues any health insurance plan to a small employer

8 in a State shall be registered or licensed with the State

9 commissioner of insurance and shall comply with any re10 porting requirements of the commissioner relating to such

11 a plan.

12 SEC. 1105. LIMITATION ON VARIATION IN ANNUAL PRE13 MIUM INCREASES AMONG COVERED SMALL

14 EMPLOYERS.

15 An insurer may not provide for an increase in the

16 premium charged a small employer for a health insurance

17 plan in a percentage that exceeds the percentage change

18 in the premium charged under the plan for a newly cov19 ered small employer within the same class of business rate

20 plus 10 percentage points.

21 SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCA22 TION OF RISK MECHANISMS FOR HIGH RISK

23 INDIVIDUALS IN MARKETPLACE FOR SMALL

24 BUSINESS.

25 (a) ESTABLISHMENT OF STANDARDS.—
58

•HR 3955 SC2

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

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

5 this section referred to as a ‘‘reinsurance or alloca6 tion of risk mechanism’’) for health insurance plans

7 made available to small employers and for whom an

8 insurer is at risk of incurring high costs under the

9 plan. If the NAIC develops such models within such

10 period, the Secretary shall review such models to de11 termine if they provide for an effective reinsurance

12 or allocation of risk mechanism. Such review shall be

13 completed within 30 days after the date the models

14 are developed. Unless the Secretary determines with15 in such period that such a model is not an effective

16 reinsurance or allocation of risk mechanism, such re17 maining models shall serve as the models under this

18 section, with such amendments as the Secretary

19 deems necessary.

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

24 mechanism, the Secretary shall specify, within 15
59

•HR 3955 SC2

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

2 models to carry out this section.

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

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

6 and maintain one or more reinsurance or allocation

7 of risk mechanisms that are consistent with a model

8 established under subsection (a) by not later than

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

10 State may establish and maintain such a mechanism

11 jointly with one or more other States.

12 (2) FEDERAL ROLE.—

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

15 maintain a reinsurance or allocation of risk

16 mechanism in accordance with paragraph (1),

17 the Secretary shall establish and maintain such

18 a reinsurance or allocation of risk mechanism

19 meeting the requirements of this paragraph.

20 (B) REINSURANCE MECHANISM.—Unless

21 the Secretary determines under subparagraph

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

23 appropriate mechanism to use in a State under

24 this paragraph, the Secretary shall establish

25 and maintain for use under this section for
60

•HR 3955 SC2

1 each State an appropriate reinsurance mecha2 nism. Such mechanism may require insurers to

3 make contributions in proportion to the

4 amounts received by the insurers for providing

5 health insurance plans in the State.

6 (C) ALLOCATION OF RISK MECHANISM.—If

7 the Secretary determines that, due to the na8 ture of the health coverage market in the State

9 (including a relatively small number of health

10 insurance plans offered or a relatively small

11 number of uninsurable small employers), an al12 location of risk mechanism would be a better

13 mechanism than a reinsurance mechanism, the

14 Secretary shall establish and maintain for use

15 under this section for a State an allocation of

16 risk mechanism under which uninsurable small

17 employers would be equitably assigned among

18 insurers offering health insurance plans to

19 small employers.

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

21 construed to prohibit reinsurance or allocation of risk ar22 rangements relating to health insurance plans, whether on

23 a State or multi-State basis, not required under this

24 section.
61

•HR 3955 SC2

1 SEC. 1107. DEFINITIONS.

2 Except as otherwise specifically provided, for pur3 poses of this subtitle:

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

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

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

7 student and under 25 years of age.

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

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

10 employee who normally performs on a monthly basis

11 at least 30 hours of service per week for that

12 employer.

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

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

15 the Employee Retirement Income Security Act of

16 1974.

17 (4) HEALTH INSURANCE PLAN.—

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

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

20 plan’’ means any hospital or medical service

21 policy or certificate, hospital or medical service

22 plan contract, or health maintenance organiza23 tion group contract offered by an insurer.

24 (B) EXCEPTION.—Such term does not in25 clude any of the following—
62

•HR 3955 SC2

1 (i) coverage only for accident, dental,

2 vision, disability income, or long-term care

3 insurance, or any combination thereof,

4 (ii) medicare supplemental health in5 surance,

6 (iii) coverage issued as a supplement

7 to liability insurance,

8 (iv) worker’s compensation or similar

9 insurance, or

10 (v) automobile medical-payment insur11 ance,

12 or any combination thereof.

13 (5) HEALTH MAINTENANCE ORGANIZATION.—

14 The term ‘‘health maintenance organization’’ in15 cludes, as defined in standards established under

16 section 1103, a health insurance plan that meets

17 specified standards and that offers to provide health

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

19 a defined set of providers.

20 (6) INSURER.—The term ‘‘insurer’’ means a li21 censed insurance company, a prepaid hospital or

22 medical service plan, and a health maintenance orga23 nization offering such a plan to an employer, and in24 cludes a similar organization regulated under State

25 law for solvency.
63

•HR 3955 SC2

1 (7) NAIC.—The term ‘‘NAIC’’ means the Na2 tional Association of Insurance Commissioners.

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

4 the Secretary of Health and Human Services.

5 (9) SMALL EMPLOYER.—The term ‘‘small em6 ployer’’ means, with respect to a calendar year, an

7 employer that normally employs more than 1 but

8 less than 51 eligible employees on a typical business

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

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

11 purposes of determining if an employer is a small

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

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

14 of 1986 shall apply.

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

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

17 Virgin Islands, Guam, and American Samoa.

18 (11) STATE COMMISSIONER OF INSURANCE.—

19 The term ‘‘State commissioner of insurance’’ in20 cludes a State superintendent of insurance.

21 SEC. 1108. OFFICE OF PRIVATE HEALTH CARE COVERAGE;

22 ANNUAL REPORTS ON EVALUATION OF

23 HEALTH CARE COVERAGE REFORM.

24 (a) IN GENERAL.—In order to carry out the respon25 sibilities of the Secretary under this subtitle, the Secretary
64

•HR 3955 SC2

1 shall establish an Office of Private Health Care Coverage,

2 to be headed by a Director (in this section and section

3 1109 referred to as the ‘‘Director’’) appointed by the Sec4 retary.

5 (b) ANNUAL REPORT.—

6 (1) IN GENERAL.—The Director shall submit to

7 Congress an annual report on the implementation of

8 this subtitle.

9 (2) INFORMATION TO BE INCLUDED.—Each an10 nual report shall include information concerning at

11 least the following:

12 (A) Implementation and enforcement of

13 the applicable health plan standards and

14 consumer protection standards under this sub15 title by the States and by the Secretary.

16 (B) An evaluation of the impact of the re17 forms under this subtitle on the availability of

18 affordable health coverage for small employers

19 that purchase group health coverage and for

20 their employees, and, in particular, the impact

21 of—

22 (i) guaranteed availability of health

23 coverage,

24 (ii) limitations of restrictions from

25 coverage of preexisting conditions,
65

•HR 3955 SC2

1 (iii) requirement for continuity of cov2 erage,

3 (iv) risk-management mechanisms for

4 health coverage,

5 (v) limits on premium variations,

6 (vi) limits on annual premium in7 creases, and

8 (vii) preemption of State benefit man9 dates.

10 In performing such evaluation, the Secretary

11 shall seek to discount the effect of the insur12 ance cycle on health insurance premiums.

13 (C) An assessment of the implications of

14 the reforms on adverse selection among health

15 insurance plans and the distribution of risk

16 among health insurance plans.

17 (c) ADVISORY COMMITTEE.—The Secretary shall pro18 vide for appointment of an advisory committee to advise

19 the Director concerning activities of the Office under this

20 subtitle. Membership on the committee shall consist of 17

21 individuals and shall include individuals from the general

22 public, small and large business, labor, insurance and

23 other group health plans, and health care providers, and

24 shall include individuals who are experts in the fields of

25 the actuarial science, health economics, and health services
66

•HR 3955 SC2

1 research. The Secretary may include, as additional, ex

2 officio members of the committee, such representatives of

3 government agencies as the Secretary deems appropriate.

4 The chairperson of the committee shall not be a health

5 care provider or receive any direct or indirect compensa6 tion from an insurer, health insurance plan, or a health

7 care provider.

8 SEC. 1109. RESEARCH AND DEMONSTRATION PROJECTS;

9 DEVELOPMENT OF A HEALTH RISK POOLING

10 MODEL.

11 (a) RESEARCH AND DEMONSTRATIONS.—The Direc12 tor is authorized, directly, by contract, and through grants

13 and cooperative agreements within the Department of

14 Health and Human Services and outside the Depart15 ment—

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

17 subtitle on the availability of affordable health cov18 erage for employees and dependents in the small em19 ployers group health care coverage market and other

20 topics described in section 1108(b), and

21 (2) to conduct demonstration projects relating

22 to such topics.

23 (b) DEVELOPMENT OF METHODS OF MEASURING

24 RELATIVE HEALTH RISK.—
67

•HR 3955 SC2

1 (1) IN GENERAL.—The Director shall develop

2 methods for measuring, in terms of the expected

3 costs of providing benefits under health insurance

4 plans and, in particular, health plans, the relative

5 health risks of eligible individuals.

6 (2) METHODOLOGY.—The methods—

7 (A) shall rely on diagnosis or other health8 related information that is predictive of individ9 ual health care needs,

10 (B) may rely upon information routinely

11 collected in the process of making payments

12 under group health plans, and

13 (C) may provide for such random, sample

14 audits of records as may be necessary to verify

15 the accuracy of measurements.

16 (c) DEVELOPMENT OF A HEALTH RISK POOLING

17 MODEL.—

18 (1) IN GENERAL.—The Director shall develop a

19 model, based on the methods of measuring risks

20 under subsection (b), for equitably distributing

21 health risks among insurers in the small employer

22 health care coverage market.

23 (2) REDISTRIBUTION OF RISK.—Under such

24 model, insurers with below average health risks

25 would be required to contribute to a common fund
68

•HR 3955 SC2

1 for payment to insurers with above average health

2 risks, each in relation to the degree of their favor3 able or adverse risk selection.

4 (3) INCENTIVES.—Such model shall include in5 centives to encourage continuous coverage of eligible

6 individuals and small employers.

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

8 this section shall be developed in consultation with the

9 NAIC and the advisory committee established under sec10 tion 1108(c).

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

12 the Director shall submit to Congress a report on the

13 methods and model developed under this section (as well

14 as on research and demonstration projects conducted

15 under subsection (a)). The Director shall include in the

16 report such recommendations respecting the application of

17 the model to insurers (and, in particular, to health plans)

18 under this subtitle as the Director deems appropriate.

19 (f) AUTHORIZATION OF APPROPRIATIONS.—There

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

21 such sums as may be necessary in each of fiscal years

22 1995 through 1999.
69

•HR 3955 SC2

1 Subtitle C—Preemption

2 PART 1—SCOPE OF STATE REGULATION

3 SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES

4 FOR GROUP HEALTH PLANS.

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

6 State or local law shall apply that requires the coverage

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

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

9 of health care.

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

12 HEALTH INSURANCE.

13 No provision of State or local law shall apply that

14 prohibits 2 or more employers from obtaining coverage

15 under an insured multiple employer health plan.

16 SEC. 1203. RESTRICTIONS ON MANAGED CARE.

17 (a) PREEMPTION OF STATE LAW PROVISIONS.—Sub18 ject to subsection (c), the following provisions of State law

19 are preempted and may not be enforced:

20 (1) RESTRICTIONS ON REIMBURSEMENT RATES

21 OR SELECTIVE CONTRACTING.—Any law that re22 stricts the ability of a group health plan to negotiate

23 reimbursement rates with providers or to contract

24 selectively with one provider or a limited number of

25 providers.
70

•HR 3955 SC2

1 (2) RESTRICTIONS ON DIFFERENTIAL FINAN2 CIAL INCENTIVES.—Any law that limits the financial

3 incentives that a group health plan may require a

4 beneficiary to pay when a non-plan provider is used

5 on a non-emergency basis.

6 (3) RESTRICTIONS ON UTILIZATION REVIEW

7 METHODS.—Any law that—

8 (A) prohibits utilization review of any or

9 all treatments and conditions,

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

11 by a resident of the State in which the treat12 ment is to be offered or by an individual li13 censed in such State, or (ii) by a physician in

14 any particular specialty or with any board cer15 tified specialty of the same medical specialty as

16 the provider whose services are being reviewed,

17 (C) requires the use of specified standards

18 of health care practice in such reviews or re19 quires the disclosure of the specific criteria used

20 in such reviews,

21 (D) requires payments to providers for the

22 expenses of responding to utilization review re23 quests, or

24 (E) imposes liability for delays in perform25 ing such review.
71

•HR 3955 SC2

1 Nothing in subparagraph (B) shall be construed as

2 prohibiting a State from (i) requiring a licensed phy3 sician or other health care professional be available

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

5 requiring that any decision in an appeal from such

6 a review be made by a licensed physician.

7 (b) GAO STUDY.—

8 (1) IN GENERAL.—The Comptroller General

9 shall conduct a study of the benefits and cost effec10 tiveness of the use of managed care in the delivery

11 of health services.

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

13 the date of the enactment of this Act, the Comptrol14 ler General shall submit a report to Congress on the

15 study conducted under paragraph (1) and shall in16 clude in the report such recommendations (including

17 whether the provisions of subsection (a) should be

18 extended) as may be appropriate.

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

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

21 of this Act.

22 SEC. 1204. DEFINITIONS.

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

24 ‘‘employee’’, ‘‘employer’’, ‘‘group health plan’’, ‘‘health in25 surance plan’’, ‘‘insured multiple employer health plan’’,
72

•HR 3955 SC2

1 and ‘‘State’’ have the meanings given such terms in sec2 tion 1023(a).

3 PART 2—MULTIPLE EMPLOYER HEALTH

4 BENEFITS PROTECTIONS

5 SEC. 1211. LIMITED EXEMPTION UNDER PREEMPTION

6 RULES FOR MULTIPLE EMPLOYER PLANS

7 PROVIDING HEALTH BENEFITS SUBJECT TO

8 CERTAIN FEDERAL STANDARDS.

9 (a) IN GENERAL.—Subtitle B of title I of the Em10 ployee Retirement Income Security Act of 1974 is amend11 ed by adding at the end the following new part:

12 ‘‘Part 7—Multiple Employer Health Plans

13 ‘‘SEC. 701. DEFINITIONS.

14 ‘‘For purposes of this part—

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

16 insurance company, insurance service, or insurance

17 organization, licensed to engage in the business of

18 insurance by a State.

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

20 ‘participating employer’ means, in connection with a

21 multiple employer welfare arrangement, any em22 ployer if any of its employees, or any of the depend23 ents of its employees, are or were covered under

24 such arrangement in connection with the employ25 ment of the employees.
73

•HR 3955 SC2

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

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

3 a multiple employer welfare arrangement, a contract

4 under which an insurer provides for payment with

5 respect to claims under the arrangement, relating to

6 participants or beneficiaries individually or other7 wise, in excess of an amount or amounts specified in

8 such contract.

9 ‘‘(4) QUALIFIED ACTUARY.—The term ‘quali10 fied actuary’ means an individual who is a member

11 of the American Academy of Actuaries or meets

12 such reasonable standards and qualifications as the

13 Secretary may provide by regulation.

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

15 connection with a multiple employer welfare arrange16 ment, the association or other entity which estab17 lishes or maintains the arrangement.

18 ‘‘(6) STATE LOCATION OF COVERED INDIVID19 UALS.—

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

21 welfare arrangement shall be treated as cover22 ing individuals located in a State only if the

23 minimum required number of individuals who

24 are covered under the arrangement are located

25 in such State, except that if the minimum re-
74

•HR 3955 SC2

1 quired number of individuals are not located in

2 any State, such arrangement shall be treated as

3 covering individuals in any State in which any

4 covered individual is located.

5 ‘‘(B) MINIMUM REQUIRED NUMBER.—For

6 purposes of subparagraph (A), the minimum re7 quired number is the greater of—

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

9 individuals described in subparagraph (A),

10 or

11 ‘‘(ii) 50.

12 ‘‘(C) LOCATION OF INDIVIDUALS IN

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

14 individual shall be treated as located in a State

15 if such individual is employed in such State or

16 the address of such individual last known by

17 the arrangement is located in such State.

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

19 term ‘State insurance commissioner’ means the in20 surance commissioner (or similar official) of a State.

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

22 State’ means, in connection with a multiple employer

23 welfare arrangement, the State in which, according

24 to the application for an exemption under this part,

25 most individuals to be covered under the arrange-
75

•HR 3955 SC2

1 ment are located, except that, in any case in which

2 information contained in the latest annual report of

3 the arrangement filed under this part indicates that

4 most individuals covered under the arrangement are

5 located in a different State, such term means such

6 different State.

7 ‘‘(9) FULLY INSURED ARRANGEMENT.—A mul8 tiple employer welfare arrangement shall be treated

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

10 maintenance organizations, similar organizations

11 regulated under State law for solvency, or any com12 bination thereof are liable under one or more insur13 ance policies or contracts for all benefits under the

14 arrangement (irrespective of any recourse they may

15 have against other parties).

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

17 The term ‘multiple employer health plan’ means a

18 multiple employer welfare arrangement treated as an

19 employee welfare benefit plan by reason of an

20 exemption under this part.

21 ‘‘(11) INSURED MULTIPLE EMPLOYER HEALTH

22 PLAN.—The term ‘insured multiple employer health

23 plan’ means a fully insured multiple employer wel24 fare arrangement under which benefits consist solely

25 of medical care described in section 607(1) (dis-
76

•HR 3955 SC2

1 regarding such incidental benefits as the Secretary

2 shall specify by regulations).

3 ‘‘(12) PREPAID HEALTH CARE ARRANGE4 MENT.—The term ‘prepaid health care arrangement’

5 means a nonprofit entity which—

6 ‘‘(A) offers benefits consisting of medical

7 care described in section 607(1) on a prepaid

8 basis, and

9 ‘‘(B) is established and controlled by a

10 group medical practice or similar group, by a

11 hospital, or by such a practice (or group) and

12 a hospital.

13 ‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PRO14 VIDING BENEFITS IN THE FORM OF MEDICAL

15 CARE RELIEVED OF CERTAIN RESTRICTIONS

16 ON PREEMPTION OF STATE LAW AND TREAT17 ED AS EMPLOYEE WELFARE BENEFIT PLANS.

18 ‘‘(a) IN GENERAL.—Subject to subsection (b), a mul19 tiple employer welfare arrangement which is not fully in20 sured and with respect to which there is in effect an ex21 emption granted by the Secretary under this part (or with

22 respect to which there is pending a complete application

23 for such an exemption and the Secretary determines that

24 provisional protection under this part is appropriate)—
77

•HR 3955 SC2

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

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

4 such arrangement is an employee welfare benefit

5 plan, and

6 ‘‘(2) shall be exempt from section

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

8 ‘‘(b) BENEFITS MUST CONSIST OF MEDICAL

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

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

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

13 Secretary shall specify by regulation).

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

16 providing benefits which consist of medical care described

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

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

19 exemption granted to the arrangement under this part is

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

22 the Secretary determines that provisional protection under

23 this part is appropriate).
78

•HR 3955 SC2

1 ‘‘SEC. 703. EXEMPTION PROCEDURE.

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

4 welfare arrangement if—

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

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

8 the Secretary in accordance with this part,

9 ‘‘(2) such application demonstrates compliance

10 with the requirements of section 704 with respect to

11 such arrangement, and

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

13 is—

14 ‘‘(A) administratively feasible,

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

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

18 of the individuals covered under the arrange19 ment.

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

25 of each State in which covered individuals under the ar26 rangement are, or are expected to be, located, and shall
79

•HR 3955 SC2

1 afford interested persons opportunity to present views.

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

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

6 Secretary shall, to the maximum extent practicable, make

7 a final determination with respect to any application filed

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

11 is filed in complete form.

12 ‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.

13 ‘‘(a) APPLICATION FOR EXEMPTION.—

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

15 granted by the Secretary under this part only on the

16 basis of an application filed with the Secretary in

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

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

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

22 to the Secretary at the time of filing an application

23 under this section a filing fee in the amount of

24 $5,000, which shall be available, to the extent pro25 vided in appropriation Acts, to the Secretary for the
80

•HR 3955 SC2

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

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

4 filed under this section shall include, in a manner

5 and form prescribed in regulations of the Secretary,

6 at least the following information:

7 ‘‘(A) IDENTIFYING INFORMATION.—The

8 names and addresses of—

9 ‘‘(i) the sponsor, and

10 ‘‘(ii) the members of the operating

11 committee of the arrangement.

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

14 individuals covered under the arrangement are

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

17 ‘‘(C) BONDING REQUIREMENTS.—Evidence

18 provided by the operating committee that the

19 bonding requirements of section 412 will be met

20 as of the date of the application.

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

22 documents governing the arrangement (includ23 ing any bylaws and trust agreements), the sum24 mary plan description, and other material de25 scribing the benefits and coverage that will be
81

•HR 3955 SC2

1 provided to individuals covered under the ar2 rangement.

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

5 arrangement and contract administrators and

6 other service providers.

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

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

10 the application, including the following:

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

14 opinion, signed by a qualified actuary, that

15 all applicable requirements of section 707

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

18 ‘‘(ii) ADEQUACY OF CONTRIBUTION

19 RATES.—A statement of actuarial opinion,

20 signed by a qualified actuary, which sets

21 forth a description of the extent to which

22 contribution rates are adequate to provide

23 for the payment of all obligations and the

24 maintenance of required reserves under the

25 arrangement for the 12-month period be-
82

•HR 3955 SC2

1 ginning with such date within such 120-

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

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

7 which the rates are inadequate and the

8 changes needed to ensure adequacy.

9 ‘‘(iii) CURRENT AND PROJECTED

10 VALUE OF ASSETS AND LIABILITIES.—A

11 statement of actuarial opinion signed by a

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

16 and expenses of the arrangement for the

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

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

21 ‘‘(iv) COSTS OF COVERAGE TO BE

22 CHARGED AND OTHER EXPENSES.—A

23 statement of the costs of coverage to be

24 charged, including an itemization of

25 amounts for administration, reserves, and
83

•HR 3955 SC2

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

3 ‘‘(v) OTHER INFORMATION.—Any

4 other information which may be prescribed

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

7 part.

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

11 accurate and sufficient to demonstrate that the following

12 requirements are met with respect to the arrangement:

13 ‘‘(1) SPONSOR.—

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

15 subparagraph (B), the sponsor is, and has been

16 (together with its immediate predecessor, if

17 any) for a continuous period of not less than 3

18 years before the date of the application, orga19 nized and maintained in good faith, with a con20 stitution and bylaws specifically stating its pur21 pose, as a trade association, an industry asso22 ciation, a professional association, or a chamber

23 of commerce or other business group, for sub24 stantial purposes other than that of obtaining

25 or providing medical care described in section
84

•HR 3955 SC2

1 607(1), and the applicant demonstrates to the

2 satisfaction of the Secretary that the sponsor is

3 established as a permanent entity which re4 ceives the active support of its members.

5 ‘‘(B) SPECIAL RULE FOR PREPAID HEALTH

6 CARE ARRANGEMENTS.—In the case of an ar7 rangement that is a prepaid health care ar8 rangement (as defined in section 701(12)), the

9 sponsor is the operating committee of the ar10 rangement.

11 ‘‘(2) OPERATING COMMITTEE.—

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

13 subparagraph (B), the arrangement is operated,

14 pursuant to a trust agreement, by an operating

15 committee which has complete fiscal control

16 over the arrangement and which is responsible

17 for all operations of the arrangement, and the

18 operating committee has in effect rules of oper19 ation and financial controls, based on a 3-year

20 plan of operation, adequate to carry out the

21 terms of the arrangement and to meet all re22 quirements of this title applicable to the ar23 rangement. The members of the committee are

24 individuals selected from individuals who are

25 the owners, officers, directors, or employees of
85

•HR 3955 SC2

1 the participating employers or who are partners

2 in the participating employers and actively par3 ticipate in the business. No such member is an

4 owner, officer, director, or employee of, or part5 ner in, a contract administrator or other service

6 provider to the arrangement, except that offi7 cers or employees of a sponsor which is a serv8 ice provider (other than a contract adminis9 trator) to the arrangement may be members of

10 the committee if they constitute not more than

11 25 percent of the membership of the committee

12 and they do not provide services to the arrange13 ment other than on behalf of the sponsor. The

14 committee has sole authority to approve appli15 cations for participation in the arrangement

16 and to contract with a service provider to ad17 minister the day-to-day affairs of the arrange18 ment.

19 ‘‘(B) SPECIAL RULE FOR PREPAID HEALTH

20 CARE ARRANGEMENTS.—In the case of an ar21 rangement that is a prepaid health care ar22 rangement (as defined in section 701(12)), the

23 operating committee is the board of the entity

24 that is the arrangement.
86

•HR 3955 SC2

1 ‘‘(3) CONTENTS OF GOVERNING INSTRU2 MENTS.—The instruments governing the arrange3 ment include a written instrument, meeting the re4 quirements of an instrument required under section

5 1212(a)(1), which—

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

7 the named fiduciary required for plans under

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

9 a plan administrator (referred to in section

10 3(16)(A)),

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

12 as plan sponsor (referred to in section

13 3(16)(B)),

14 ‘‘(C) incorporates the requirements of sec15 tion 707, and

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

17 granting of an exemption under this part—

18 ‘‘(i) all participating employers must

19 be members or affiliated members of the

20 sponsor, except that, in the case of a spon21 sor which is a professional association or

22 other individual-based association, if at

23 least one of the officers, directors, or em24 ployees of an employer, or at least one of

25 the individuals who are partners in an em-
87

•HR 3955 SC2

1 ployer and who actively participates in the

2 business, is a member or affiliated member

3 of the sponsor, participating employers

4 may also include such employer, and

5 ‘‘(ii) all individuals thereafter com6 mencing coverage under the arrangement

7 must be—

8 ‘‘(I) active or retired owners, offi9 cers, directors, or employees of, or

10 partners in, participating employers,

11 or

12 ‘‘(II) the beneficiaries of individ13 uals described in subclause (I).

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

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

16 adequate.

17 ‘‘(5) REGULATORY REQUIREMENTS.—Such

18 other requirements as the Secretary may prescribe

19 by regulation as necessary to carry out the purposes

20 of this part.

21 ‘‘(c) TREATMENT OF PARTY SEEKING EXEMPTION

22 WHERE PARTY IS SUBJECT TO DISQUALIFICATION.—

23 ‘‘(1) IN GENERAL.—In the case of any applica24 tion for an exemption under this part with respect

25 to a multiple employer welfare arrangement, if the
88

•HR 3955 SC2

1 Secretary determines that the sponsor of the ar2 rangement or any other person associated with the

3 arrangement is subject to disqualification under

4 paragraph (2), the Secretary may deny the exemp5 tion with respect to such arrangement.

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

7 to disqualification under this paragraph if such per8 son—

9 ‘‘(A) has intentionally made a material

10 misstatement in the application for exemption;

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

12 an exemption under this part through misrepre13 sentation or fraud;

14 ‘‘(C) has misappropriated or converted to

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

16 money held under a plan or any multiple

17 employer welfare arrangement;

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

19 if the arrangement were a plan) from serving in

20 any capacity in connection with the arrange21 ment under section 411;

22 ‘‘(E) has failed to appear without reason23 able cause or excuse in response to a subpoena,

24 examination, warrant, or any other order law-
89

•HR 3955 SC2

1 fully issued by the Secretary compelling such

2 response;

3 ‘‘(F) has previously been subject to a de4 termination under this part resulting in the de5 nial, suspension, or revocation of an exemption

6 under this part on similar grounds; or

7 ‘‘(G) has otherwise violated any provision

8 of this title with respect to a matter which the

9 Secretary determines of sufficient consequence

10 to merit disqualification for purposes of this

11 part.

12 ‘‘(d) FRANCHISE NETWORKS.—In the case of a mul13 tiple employer welfare arrangement established and main14 tained by a franchisor for a franchise network consisting

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

16 sponsor referred to in the preceding provisions of this sec17 tion, such network shall be treated as an association re18 ferred to in such provisions, and each franchisee shall be

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

20 referred to in such provisions, if all participating employ21 ers are such franchisees and the requirements of sub22 section (b)(1) with respect to a sponsor are met with

23 respect to the network.

24 ‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE25 MENTS.—In applying the preceding provisions of this sec-
90

•HR 3955 SC2

1 tion in the case of a multiple employer welfare arrange2 ment which would be described in section 3(40)(A)(i) but

3 for the failure to meet any requirement of section

4 3(40)(C)—

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

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

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

8 ‘‘(2) the joint board of trustees shall be consid9 ered the operating committee of the arrangement.

10 ‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN11 GLE EMPLOYER REQUIREMENT.—

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

13 majority of the employees covered under a multiple

14 employer welfare arrangement are employees of a

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

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

17 covered under the arrangement are employed by em18 ployers who are related to such single employer, sub19 section (b)(3)(D) shall be disregarded.

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

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

22 among all such employers a common ownership in23 terest or a substantial commonality of business oper24 ations based on common suppliers or customers.
91

•HR 3955 SC2

1 ‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO

2 EXEMPTED ARRANGEMENTS.

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

4 of any multiple employer welfare arrangement with respect

5 to which there is in effect an exemption granted under

6 this part, descriptions of material changes in any informa7 tion which was required to be submitted with the applica8 tion for the exemption shall be filed in such form and man9 ner as shall be prescribed in regulations of the Secretary.

10 The Secretary may require by regulation prior notice of

11 material changes with respect to specified matters which

12 might serve as the basis for suspension or revocation of

13 the exemption.

14 ‘‘(b) REPORTING REQUIREMENTS.—Under regula15 tions of the Secretary, the requirements of sections 102,

16 103, and 104 shall apply with respect to any multiple em17 ployer welfare arrangement with respect to which there is

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

19 in the same manner and to the same extent as such re20 quirements apply to employee welfare benefit plans, irre21 spective of whether such exemption continues in effect.

22 The annual report required under section 103 for any plan

23 year in the case of any such multiple employer welfare ar24 rangement shall also include information described in sec25 tion 704(a)(3)(F) with respect to the plan year and, not-
92

•HR 3955 SC2

1 withstanding section 104(a)(1)(A), shall be filed not later

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

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

4 operating committee of each multiple employer welfare ar5 rangement with respect to which there is or has been in

6 effect an exemption granted under this part shall engage,

7 on behalf of all covered individuals, a qualified actuary

8 who shall be responsible for the preparation of the mate9 rials comprising information necessary to be submitted by

10 a qualified actuary under this part. The qualified actuary

11 shall utilize such assumptions and techniques as are nec12 essary to enable such actuary to form an opinion as to

13 whether the contents of the matters reported under this

14 part—

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

16 the experience of the arrangement and to reasonable

17 expectations, and

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

19 anticipated experience under the arrangement.

20 The opinion by the qualified actuary shall be made with

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

22 ‘‘(d) FILING NOTICE OF EXEMPTION WITH

23 STATES.—An exemption granted to a multiple employer

24 welfare arrangement under this part shall not be effective

25 unless written notice of such exemption is filed with the
93

•HR 3955 SC2

1 State insurance commissioner of each State in which at

2 least 5 percent of the individuals covered under the ar3 rangement are located. For purposes of this paragraph,

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

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

6 in which such individual is employed. The Secretary may

7 by regulation provide in specified cases for the application

8 of the preceding sentence with lesser percentages in lieu

9 of such 5 percent amount.

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

11 ARRANGEMENTS PROVIDING MEDICAL CARE.

12 ‘‘(a) IN GENERAL.—A multiple employer welfare ar13 rangement providing benefits consisting of medical care

14 described in section 607(1) shall issue to each participat15 ing employer—

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

17 plan description required of plans under part 1,

18 ‘‘(2) information describing the contribution

19 rates applicable to participating employers, and

20 ‘‘(3) a statement indicating—

21 ‘‘(A) whether or not the arrangement is

22 fully insured,

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

24 respect to the arrangement an exemption grant25 ed under this part and, if there is in effect such
94

•HR 3955 SC2

1 an exemption, that the arrangement is (or is

2 treated as) an employee welfare benefit plan

3 under this title, and

4 ‘‘(C) that the arrangement is not a li5 censed insurer under the laws of any State.

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

7 shall be issued to employers within such reasonable period

8 of time before becoming participating employers as may

9 be prescribed in regulations of the Secretary.

10 ‘‘SEC. 707. MAINTENANCE OF RESERVES.

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

12 arrangement with respect to which there is or has been

13 in effect an exemption granted under this part and which

14 is not fully insured shall establish and maintain reserves,

15 consisting of—

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

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

18 and not yet paid and claims incurred but not yet re19 ported, and for expected administrative costs with

20 respect to such claims, and

21 ‘‘(3) a reserve, in an amount recommended by

22 the qualified actuary, for any other obligations of

23 the arrangement.

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

25 The total of the reserves described in subsection (a)(2)
95

•HR 3955 SC2

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

2 expected incurred claims and expenses for the plan year.

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

4 amounts of reserves required under this section in connec5 tion with any multiple employer welfare arrangement, the

6 qualified actuary shall include a margin for error and

7 other fluctuations taking into account the specific

8 circumstances of such arrangement.

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

10 may provide such additional requirements relating to re11 serves and excess/stop loss coverage as the Secretary con12 siders appropriate. Such requirements may be provided,

13 by regulation or otherwise, with respect to any arrange14 ment or any class of arrangements.

15 ‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV16 ERAGE.—The Secretary may provide for adjustments to

17 the levels of reserves otherwise required under subsections

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

19 arrangements to take into account excess/stop loss cov20 erage provided with respect to such arrangement or ar21 rangements.

22 ‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The

23 Secretary may permit an arrangement (including a pre24 paid health care arrangement) to substitute, for all or part

25 of the reserves required under subsection (a), such secu-
96

•HR 3955 SC2

1 rity, guarantee, or other financial arrangement as the Sec2 retary determines to be adequate to enable the arrange3 ment to fully meet all its financial obligations on a timely

4 basis.

5 ‘‘SEC. 708. CORRECTIVE ACTIONS.

6 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE7 SERVES.—A multiple employer welfare arrangement with

8 respect to which there is or has been in effect an exemp9 tion granted under this part shall continue to meet the

10 requirements of section 707, irrespective of whether such

11 exemption continues in effect. The operating committee of

12 such arrangement shall determine semiannually whether

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

14 which the committee determines that there is reason to

15 believe that there is or will be a failure to meet such re16 quirements, or the Secretary makes such a determination

17 and so notifies the committee, the committee shall imme18 diately notify the qualified actuary engaged by the ar19 rangement, and such actuary shall, not later than the end

20 of the next following month, make such recommendations

21 to the committee for corrective action as the actuary deter22 mines necessary to ensure compliance with section 707.

23 Not later than 10 days after receiving from the actuary

24 recommendations for corrective actions, the committee

25 shall notify the Secretary (in such form and manner as
97

•HR 3955 SC2

1 the Secretary may prescribe by regulation) of such rec2 ommendations of the actuary for corrective action, to3 gether with a description of the actions (if any) that the

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

5 recommendations. The committee shall thereafter report

6 to the Secretary, in such form and frequency as the Sec7 retary may specify to the committee, regarding corrective

8 action taken by the committee until the requirements of

9 section 707 are met.

10 ‘‘(b) TERMINATION.—

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

12 which the operating committee of a multiple em13 ployer welfare arrangement with respect to which

14 there is or has been in effect an exemption granted

15 under this part determines that there is reason to

16 believe that the arrangement will terminate, the

17 committee shall so inform the Secretary, shall de18 velop a plan for winding up the affairs of the ar19 rangement in connection with such termination in a

20 manner which will result in timely payment of all

21 benefits for which the arrangement is obligated, and

22 shall submit such plan in writing to the Secretary.

23 Actions required under this paragraph shall be taken

24 in such form and manner as may be prescribed in

25 regulations of the Secretary.
98

•HR 3955 SC2

1 ‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH

2 TERMINATION.—In any case in which—

3 ‘‘(A) the Secretary has been notified under

4 subsection (a) of a failure of a multiple em5 ployer welfare arrangement with respect to

6 which there is or has been in effect an exemp7 tion granted under this part to meet the re8 quirements of section 707 and has not been no9 tified by the operating committee of the ar10 rangement that corrective action has restored

11 compliance with such requirements, and

12 ‘‘(B) the Secretary determines that the

13 continuing failure to meet the requirements of

14 section 707 can be reasonably expected to result

15 in a continuing failure to pay benefits for which

16 the arrangement is obligated,

17 the operating committee of the arrangement shall, at

18 the direction of the Secretary, terminate the ar19 rangement and, in the course of the termination,

20 take such actions as the Secretary may require as

21 necessary to ensure that the affairs of the arrange22 ment will be, to the maximum extent possible, wound

23 up in a manner which will result in timely payment

24 of all benefits for which the arrangement is

25 obligated.
99

•HR 3955 SC2

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

2 EXEMPTION.

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

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

6 date on which the exemption is granted. An exemption

7 which has expired may be renewed by means of application

8 for an exemption in accordance with section 704.

9 ‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION

10 BY SECRETARY.—The Secretary may suspend or revoke

11 an exemption granted to a multiple employer welfare

12 arrangement under this part—

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

14 for the denial of an initial application for such an

15 exemption under section 704, or

16 ‘‘(2) if the Secretary finds that—

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

18 thereof, in the transaction of business while

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

22 financial irresponsibility,

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

24 thereof, is using such methods or practices in

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

26 further transaction of operations hazardous or
100

•HR 3955 SC2

1 injurious to participating employers, or covered

2 individuals,

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

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

6 records, and files for examination in accordance

7 with this part, or

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

10 give information with respect to the affairs of

11 the arrangement or the sponsor or to perform

12 any other legal obligation relating to such an

13 examination when required by the Secretary in

14 accordance with this part.

15 Any such suspension or revocation under this subsection

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

18 is provided in accordance with section 710.

19 ‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION

20 UNDER COURT PROCEEDINGS.—An exemption granted to

21 a multiple employer welfare arrangement under this part

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

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

25 the suspension or revocation under this subsection shall
101

•HR 3955 SC2

1 be effective only upon notification of the Secretary of such

2 suspension or revocation.

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

5 welfare arrangement shall be notified of the expiration,

6 suspension, or revocation of an exemption granted to such

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

8 form and manner as shall be prescribed in regulations of

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

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

11 suspension or revocation.

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

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

15 exemptions granted under this part.

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

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

18 which involves the denial of an application by a multiple

19 employer welfare arrangement for an exemption under this

20 part or the suspension or revocation of such an exemption

21 shall contain a statement of the specific reason or reasons

22 supporting the Secretary’s action, including reference to

23 the specific terms of the exemption and the statutory pro24 vision or provisions relevant to the determination.
102

•HR 3955 SC2

1 ‘‘(b) DENIALS OF APPLICATIONS.—In the case of the

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

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

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

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

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

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

12 by certified or registered mail to the arrangement or party

13 that filed the appeal.

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

16 exemption granted under this part, the Secretary shall

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

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

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

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

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

25 requesting such hearing. Such notice shall set forth—
103

•HR 3955 SC2

1 ‘‘(1) a specific date and time for the hearing,

2 which shall be within the 10-day period commencing

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

4 and

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

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

7 county thereof (or parish or other similar political

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

10 The decision as affirmed or modified in such hearing shall

11 constitute the final decision of the Secretary, unless such

12 decision is reversed in such hearing.’’.

13 (b) CONFORMING AMENDMENT TO DEFINITION OF

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

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

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

18 welfare arrangement, or a multiple employer health plan

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

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

21 part 7.’’.

22 (c) ALTERNATIVE MEANS OF DISTRIBUTION OF

23 SUMMARY PLAN DESCRIPTIONS.—Section 110 of such

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

25 the following new subsection:
104

•HR 3955 SC2

1 ‘‘(c) The Secretary shall prescribe, as an alternative

2 method for distributing summary plan descriptions in

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

4 case of multiple employer welfare arrangements providing

5 benefits consisting of medical care described in section

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

7 participating employers.’’.

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

9 in section 1 of the Employee Retirement Income Security

10 Act of 1974 is amended by inserting after the item relat11 ing to section 608 the following new items:

‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

‘‘Sec. 701. Definitions.

‘‘Sec. 702. Exempted multiple employer welfare arrangements treated as employee welfare benefit plans and exempt from certain restrictions on preemption.

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

‘‘Sec. 705. Additional requirements applicable to exempted arrangements.

‘‘Sec. 706. Disclosure to participating employers by arrangements providing

medical care.

‘‘Sec. 707. Maintenance of reserves.

‘‘Sec. 708. Corrective actions.

‘‘Sec. 709. Expiration, suspension, or revocation of exemption.

‘‘Sec. 710. Review of actions of the Secretary.’’.

12 SEC. 1212. CLARIFICATION OF SCOPE OF PREEMPTION

13 RULES.

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

15 Employee Retirement Income Security Act of 1974 (29

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

17 only, in the case of an arrangement which provides medi18 cal care described in section 607(1) and with respect to
105

•HR 3955 SC2

1 which an exemption under part 7 is not in effect,’’ before

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

3 of this title’’.

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

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

6 end the following new subparagraph:

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

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

10 SEC. 1213. CLARIFICATION OF TREATMENT OF SINGLE EM11 PLOYER ARRANGEMENTS.

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

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

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

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

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

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

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

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

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

24 percent may not be required as the minimum inter-
106

•HR 3955 SC2

1 est necessary for common control’’, and by striking

2 ‘‘and’’ at the end,

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

4 and

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

6 new clause:

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

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

10 be treated as having only 1 participating employer

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

12 made, the number of individuals who are employees

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

15 is greater than 95 percent of the aggregate number

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

18 covered under the arrangement.’’.

19 SEC. 1214. CLARIFICATION OF TREATMENT OF CERTAIN

20 COLLECTIVELY BARGAINED ARRANGE21 MENTS.

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

24 U.S.C. 1002(40)(A)(i)) is amended to read as follows:
107

•HR 3955 SC2

1 ‘‘(i) under or pursuant to one or more collective

2 bargaining agreements,’’.

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

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

5 following new subparagraphs:

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

7 apply only if—

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

9 and the employee organization or any other

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

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

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

16 covered individuals under the plan or

17 other arrangement, or

18 ‘‘(II) pay a commission or any

19 other type of compensation to a per20 son that is related either to the vol21 ume or number of employers or indi22 viduals solicited or enrolled as partici23 pating employers or covered individ24 uals under the plan or other arrange25 ment, or to the dollar amount or size
108

•HR 3955 SC2

1 of the contributions made by partici2 pating employers or covered individ3 uals to the plan or other arrangement,

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

5 covered individuals under the plan or other

6 arrangement are individuals who—

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

9 the collective bargaining agreements

10 with a participating employer (or are

11 covered on the basis of an individual’s

12 employment in such a bargaining

13 unit), or

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

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

19 the plan or other arrangement or a

20 related plan or arrangement (or are

21 covered on the basis of such present

22 or former employment),

23 ‘‘(iii) the plan or other arrangement

24 does not provide benefits to individuals

25 (other than individuals described in clause
109

•HR 3955 SC2

1 (ii)(II)) who work outside the standard

2 metropolitan statistical area in which the

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

5 than individuals described in clause

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

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

11 clause shall be applied by reference to the

12 State in which the sponsoring organization

13 represents employees,

14 ‘‘(iv) the employee organization or

15 other entity sponsoring the plan or other

16 arrangement certifies to the Secretary each

17 year, in a form and manner which shall be

18 prescribed in regulations of the Sec19 retary—

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

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

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

24 or more of the covered individuals

25 under the plan are individuals not de-
110

•HR 3955 SC2

1 scribed in subclause (I) or (II) of

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

4 of covered individuals not so de5 scribed.

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

7 shall not apply to a plan or other arrangement

8 that is established or maintained pursuant to

9 one or more collective bargaining agreements

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

12 agreed to in a manner or through conduct

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

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

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

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

20 Labor Relations Board for a determination

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

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

25 other than other petitions under subclause (I)
111

•HR 3955 SC2

1 or cases given priority under section 10 of the

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

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

4 the petition and any response, whether, on the

5 facts before it, the plan or other arrangement

6 was negotiated, created, or otherwise agreed to

7 in a manner or through conduct which violates

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

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

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

12 in all Federal or State actions with respect to

13 the status of the plan or other arrangement

14 under this subparagraph.

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

17 may obtain review of the determination in any

18 United States court of appeals in the circuit in

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

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

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

25 other arrangement, except that in no case may
112

•HR 3955 SC2

1 the court stay, before the completion of the re2 view, an order which prohibits the enrollment of

3 new individuals into coverage under a plan or

4 arrangement.’’.

5 SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGE6 MENTS.

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

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

10 by adding at the end the following new paragraph:

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

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

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

16 leasing arrangement, extended employee staffing or

17 supply arrangement, or other arrangement under

18 which—

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

24 as the ‘lessor’), receives from the lessor the
113

•HR 3955 SC2

1 services of individuals to be performed under

2 such lease or other arrangement, and

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

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

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

8 an arrangement described in subparagraph (A) if,

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

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

13 lease or other arrangement, and such individuals

14 perform a specified function for the lessee which is

15 separate and divisible from the primary business or

16 operations of the lessee.’’.

17 (b) TREATMENT OF EMPLOYEE LEASING

18 HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER

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

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

22 end the following new subparagraph:

23 ‘‘(E) The term ‘multiple employer welfare arrange24 ment’ includes any employee leasing healthcare arrange25 ment, except that such term does not include any employee
114

•HR 3955 SC2

1 leasing healthcare arrangement which is a multiple em2 ployer health plan (as defined in section 701(10)).’’.

3 (c) SPECIAL RULES FOR EMPLOYEE LEASING

4 HEALTHCARE ARRANGEMENTS.—

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

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

7 of this Act) is amended by adding at the end the fol8 lowing new section:

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

10 HEALTHCARE ARRANGEMENTS.

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

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

15 if the application for exemption includes information

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

18 requirements are met with respect to the arrangement:

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

20 operation for not less than 3 years.

21 ‘‘(2) SOLICITATION RESTRICTIONS.—Employee

22 leasing services provided under the arrangement are

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

25 capacity.
115

•HR 3955 SC2

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

3 ‘‘(A) DISCLOSURE STATEMENT.—Written

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

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

10 ‘‘(B) INFORMED CONSENT.—Each such

11 applicant signs a written statement consenting

12 to the employment relationship with the lessor.

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

15 lessor offers employment to an employee of a

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

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

20 deemed to be resignation from or abandonment

21 of current employment.

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

25 the lessor—
116

•HR 3955 SC2

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

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

7 the lessee to the lessor for its services,

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

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

12 the lessee’s responsibility for its product or

13 service,

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

15 the Labor Management Relations Act, 1947 (29

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

18 agreement, the right to enter into arbitration

19 and to decide employee grievances, and

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

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

22 and not more than 10 percent of the individuals

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

25 such a lessee (or any combination thereof).
117

•HR 3955 SC2

1 ‘‘(b) DEFINITIONS.—For purposes of this section—

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

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

5 healthcare arrangement.

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

9 healthcare arrangement.’’.

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

12 preceding provisions of this title) is further amended

13 by inserting after the item relating to section 710

14 the following new item:

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

15 SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MUL16 TIPLE EMPLOYER WELFARE ARRANGEMENTS

17 AND EMPLOYEE LEASING HEALTHCARE AR18 RANGEMENTS.

19 (a) ENFORCEMENT OF FILING REQUIREMENTS.—

20 Section 502 of the Employee Retirement Income Security

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

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

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

24 (4) of subsection (c) or subsection (i) or (l)’’; and
118

•HR 3955 SC2

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

2 following new paragraph:

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

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

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

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

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

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

10 end;

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

12 inserting ‘‘, or’’; and

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

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

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

16 State regulating insurance, to enjoin any act or

17 practice which violates any provision of part 7 which

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

19 (c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of such Act (29

21 U.S.C. 1131) is amended—

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

23 (2) by adding at the end the following new sub24 section:
119

•HR 3955 SC2

1 ‘‘(b) Any person who, either willfully or with willful

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

4 an arrangement established or maintained for the purpose

5 of offering or providing any benefit described in section

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

7 employer welfare arrangement granted an exemption

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

10 established or maintained under or pursuant to a collective

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

13 United States Code, or both.’’.

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

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

16 end the following new subsection:

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

18 by the Secretary showing the operation, promotion, or

19 marketing of a multiple employer welfare arrangement

20 providing benefits consisting of medical care described in

21 section 607(1) that—

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

24 which the arrangement offers or provides benefits, or
120

•HR 3955 SC2

1 ‘‘(B) is not operating in accordance with the

2 terms of an exemption granted by the Secretary

3 under part 7,

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

5 requiring that the arrangement cease activities.

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

7 multiple employer welfare arrangement if the arrangement

8 shows that it—

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

10 section 701(9),

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

13 benefits, except to the extent that such State does

14 not require licensing, registration, or approval of

15 fully insured multiple employer welfare arrange16 ments, and

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

19 laws that are not superseded under section 514.

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

21 or remedial relief, including any relief available under this

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

23 public and of persons having claims for benefits against

24 the arrangement.’’.
121

•HR 3955 SC2

1 (e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

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

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

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

9 that the requirements of this section are met in connection

10 with claims filed under the arrangement.’’.

11 SEC. 1217. FILING REQUIREMENTS FOR HEALTH BENEFIT

12 MULTIPLE EMPLOYER WELFARE ARRANGE13 MENTS.

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

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

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

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

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

24 operations on or after January 1, 1995) and no later than

25 February 15 of each year (in the case of an arrangement
122

•HR 3955 SC2

1 in operation since the beginning of such year), unless, as

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

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

5 ‘‘(2) Each registration statement—

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

7 such information concerning the multiple employer

8 welfare arrangement and any persons involved in its

9 operation (including whether the arrangement is

10 fully insured), as shall be provided in regulations

11 which shall be prescribed by the Secretary, and

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

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

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

18 effect, the State insurance commissioner of the

19 domicile State of such arrangement, or

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

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

23 is located.

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

25 annual registration statement are—
123

•HR 3955 SC2

1 ‘‘(A) the trustee or trustees so designated by

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

4 maintained, or

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

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

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

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

11 property of the arrangement, irrespective of whether

12 such acquisition, disposition, control, or management

13 is exercised directly by such person or persons or

14 through an agent designated by such person or

15 persons.

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

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

18 respect to any multiple employer welfare arrangement

19 shall provide for simultaneous filings of reports required

20 under this subsection with the Secretary and with the

21 State insurance commissioner of such State.’’.
124

•HR 3955 SC2

1 SEC. 1218. COOPERATION BETWEEN FEDERAL AND STATE

2 AUTHORITIES.

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

5 at the end the following new subsection:

6 ‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE

7 EMPLOYER WELFARE ARRANGEMENTS.—

8 ‘‘(1) STATE ENFORCEMENT.—

9 ‘‘(A) AGREEMENTS WITH STATES.—A

10 State may enter into an agreement with the

11 Secretary for delegation to the State of some or

12 all of the Secretary’s authority under sections

13 502 and 504 to enforce the provisions of this

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

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

19 for therein would not result in a lower level or

20 quality of enforcement of the provisions of this

21 title.

22 ‘‘(B) DELEGATIONS.—Any department,

23 agency, or instrumentality of a State to which

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

26 authorized under State law and to the extent
125

•HR 3955 SC2

1 consistent with such agreement, exercise the

2 powers of the Secretary under this title which

3 relate to such authority.

4 ‘‘(C) CONCURRENT AUTHORITY OF THE

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

7 under subparagraph (A), the Secretary may

8 continue to exercise such authority concurrently

9 with the State.

10 ‘‘(D) RECOGNITION OF PRIMARY DOMICILE

11 STATE.—In entering into any agreement with a

12 State under subparagraph (A), the Secretary

13 shall ensure that, as a result of such agreement

14 and all other agreements entered into under

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

17 employer welfare arrangement, as the primary

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

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

21 shall—

22 ‘‘(A) provide enforcement assistance to the

23 States with respect to multiple employer welfare

24 arrangements, including, but not limited to, co25 ordinating Federal and State efforts through
126

•HR 3955 SC2

1 the establishment of cooperative agreements

2 with appropriate State agencies under which

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

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

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

10 and this Act,

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

12 the Office of Regulations and Interpretations

13 timely and complete responses to requests for

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

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

18 insurance commissioner of each State.’’.

19 SEC. 1219. EFFECTIVE DATE; TRANSITIONAL RULES.

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

21 this part shall take effect January 1, 1995, except that

22 the Secretary of Labor may issue regulations before such

23 date under such amendments. The Secretary shall issue

24 all regulations necessary to carry out the amendments

25 made by this title before the effective date thereof.
127

•HR 3955 SC2

1 (b) TRANSITIONAL RULES.—If the sponsor of a mul2 tiple employer welfare arrangement which, as of January

3 1, 1995, provides benefits consisting of medical care de4 scribed in section 607(1) of the Employee Retirement In5 come Security Act of 1974 (29 U.S.C. 1167(1)) files with

6 the Secretary of Labor an application for an exemption

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

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

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

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

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

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

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

15 such exclusion from coverage under the provisions of such

16 section 514(b)(6)(A) of such Act of a multiple employer

17 welfare arrangement would be detrimental to the interests

18 of individuals covered under such arrangement, such ex19 clusion shall cease as of the date of the determination.

20 Any determination made by the Secretary under this sub21 section shall be in the Secretary’s sole discretion.
128

•HR 3955 SC2

1 PART 3—ENCOURAGEMENT OF MULTIPLE EM2 PLOYER ARRANGEMENTS PROVIDING BASIC

3 HEALTH BENEFITS

4 SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR

5 GEOGRAPHIC LOCATION REQUIREMENT FOR

6 TAX EXEMPT TRUST STATUS.

7 (a) IN GENERAL.—Paragraph (9) of section 501(c)

8 of the Internal Revenue Code of 1986 (relating to exempt

9 organizations) is amended—

10 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

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

12 ‘‘(B) Any determination of whether a multiple

13 employer health plan (as defined in section 701(10)

14 of the Employee Retirement Income Security Act of

15 1974) or an insured multiple employer health plan

16 (as defined in section 701(11) of such Act) is a vol17 untary employees’ beneficiary association meeting

18 the requirements of this paragraph shall be made

19 without regard to any determination of commonality

20 of interest or geographic location if—

21 ‘‘(i) such plan provides at least standard

22 coverage (consistent with section 1102(b) of the

23 Health Reform Consensus Act of 1994), and

24 ‘‘(ii) in the case of an insured multiple em25 ployer health plan, it meets the requirements

26 enforceable under section 514(b)(6)(B)(i) of the
129

•HR 3955 SC2

1 Employee Retirement Income Security Act of

2 1974 to the extent not preempted by section

3 1202 of the Health Reform Consensus Act of

4 1994.’’.

5 (b) EFFECTIVE DATE.—The amendments made by

6 subsection (a) shall apply with respect to determinations

7 made on or after January 1, 1995.

8 PART 4—SIMPLIFYING FILING OF REPORTS FOR

9 EMPLOYERS COVERED UNDER INSURED

10 MULTIPLE EMPLOYER HEALTH PLANS

11 SEC. 1231. SINGLE ANNUAL FILING FOR ALL EMPLOYERS

12 COVERED UNDER AN INSURED MULTIPLE

13 EMPLOYER HEALTH PLAN.

14 (a) IN GENERAL.—Section 110 of the Employee Re15 tirement Income Security Act of 1974 (29 U.S.C. 1030),

16 as amended by section 1211(c) of this subtitle, is amended

17 by adding at the end the following new subsection:

18 ‘‘(d) The Secretary shall prescribe by regulation or

19 otherwise an alternative method providing for the filing

20 of a single annual report (as referred to in section

21 104(a)(1)(A)) with respect to all employers who are cov22 ered under the same insured multiple employer health plan

23 (as defined in section 701(11)).’’

24 (b) EFFECTIVE DATE.—The amendment made by

25 subsection (a) shall take effect on the date of the enact-
130

•HR 3955 SC2

1 ment of this Act. The Secretary of Labor shall prescribe

2 the alternative method referred to in section 110(d) of the

3 Employee Retirement Income Security Act of 1974, as

4 added by such amendment, within 90 days after the date

5 of the enactment of this Act.

6 PART 5—COMPLIANCE WITH COVERAGE OPTION

7 REQUIREMENTS

8 SEC. 1241. COMPLIANCE WITH COVERAGE REQUIREMENTS

9 THROUGH MULTIPLE EMPLOYER HEALTH AR10 RANGEMENTS.

11 (a) COMPLIANCE WITH APPLICABLE REQUIREMENTS

12 THROUGH MULTIEMPLOYER PLANS.—In any case in

13 which an eligible employee is, for any plan year, a partici14 pant in a group health plan which is a multiemployer plan,

15 the requirements of section 1001(a) shall be deemed to

16 be met with respect to such employee for such plan year

17 if the employer requirements of subsection (c) are met

18 with respect to the eligible employee, irrespective of wheth19 er, or to what extent, the employer makes employer con20 tributions on behalf of the eligible employee.

21 (b) COMPLIANCE WITH APPLICABLE REQUIREMENTS

22 THROUGH OTHER MULTIPLE EMPLOYER HEALTH AR23 RANGEMENTS.—

24 (1) IN GENERAL.—In any case in which an em25 ployer is, for any plan year, a participating employer
131

•HR 3955 SC2

1 (as defined in paragraph (3)) in an exempted mul2 tiple employer health plan or an insured multiple

3 employer health plan, the requirements of section

4 1001(a) shall be deemed to be met (and the ERISA

5 requirements of paragraph (2) shall be deemed to be

6 met by the employer) with respect to an eligible em7 ployee of the employer if—

8 (A) the employer requirements of sub9 section (c) are met with respect to the eligible

10 employee, and

11 (B) the applicable ERISA requirements of

12 paragraph (2) are met by the plan with respect

13 to the plan,

14 irrespective of whether, or to what extent, the em15 ployer makes employer contributions on behalf of the

16 eligible employee.

17 (2) APPLICABLE ERISA REQUIREMENTS.—The

18 applicable ERISA requirements of this paragraph

19 are the requirements of—

20 (A) part 1 of subtitle B of title I of the

21 Employee Retirement Income Security Act of

22 1974 (relating to reporting and disclosure),

23 (B) section 503 of such Act (relating to

24 claims procedure), and
132

•HR 3955 SC2

1 (C) part 6 of subtitle B of such title I (re2 lating to group health plans),

3 to the extent that such requirements relate to em4 ployers as plan sponsors or plan administrators.

5 (3) PARTICIPATING EMPLOYER.—In this sub6 section, the term ‘‘participating employer’’ means, in

7 connection with an exempted multiple employer

8 health plan or an insured multiple employer health

9 plan, any employer if any of its employees, or any

10 of the dependents of its employees, are or were cov11 ered under such plan in connection with the employ12 ment of the employees.

13 (c) EMPLOYER REQUIREMENTS.—The employer re14 quirements of this subsection are met under a plan with

15 respect to an eligible employee if—

16 (1) the employee is eligible under the plan to

17 elect coverage on an annual basis and is provided a

18 reasonable opportunity to make the election in such

19 form and manner and at such times as are provided

20 by the plan,

21 (2) subject to section 1001(c), such coverage in22 cludes at least the standard coverage (consistent

23 with section 1102(c)),

24 (3) the employer facilitates collection of any

25 employee contributions under the plan and permits
133

•HR 3955 SC2

1 the employee to elect to have employee contributions

2 under the plan collected through payroll deduction,

3 and

4 (4) in the case of a plan to which part 1 of sub5 title B of title I of the Employee Retirement Income

6 Security Act of 1974 does not otherwise apply, the

7 employer provides to the employee a summary plan

8 description described in section 102(a)(1) of such

9 Act in the form and manner and at such times as

10 are required under such part 1 with respect to em11 ployee welfare benefit plans.

12 Subtitle D—Health Deduction

13 Fairness

14 SEC. 1301. PERMANENT EXTENSION AND INCREASE IN

15 HEALTH INSURANCE TAX DEDUCTION FOR

16 SELF-EMPLOYED INDIVIDUALS.

17 (a) PERMANENT EXTENSION OF DEDUCTION.—

18 (1) IN GENERAL.—Subsection (l) of section 162

19 of the Internal Revenue Code of 1986 (relating to

20 special rules for health insurance costs of self-em21 ployed individuals) is amended by striking paragraph

22 (6).

23 (2) EFFECTIVE DATE.—The amendment made

24 by this subsection shall apply to taxable years begin25 ning after December 31, 1995.
134

•HR 3955 SC2

1 (b) INCREASE IN AMOUNT OF DEDUCTION.—

2 (1) IN GENERAL.—Paragraph (1) of section

3 162(l) of such Code is amended by striking ‘‘25 per4 cent of’’ and inserting ‘‘100 percent (50 percent in

5 the case of taxable years beginning in 1996 or 1997)

6 of’’.

7 (2) EFFECTIVE DATE.—The amendment made

8 by this subsection shall apply to taxable years begin9 ning after December 31, 1995.

10 TITLE II—PREVENTING FRAUD

11 AND ABUSE

12 Subtitle A—Establishment of All13 Payer Health Care Fraud and

14 Abuse Control Program

15 SEC. 2001. ALL-PAYER HEALTH CARE FRAUD AND ABUSE

16 CONTROL PROGRAM.

17 (a) IN GENERAL.—Not later than January 1, 1996,

18 the Attorney General shall establish a program—

19 (1) to coordinate Federal, State, and local law

20 enforcement programs to control fraud and abuse

21 with respect to the delivery of and payment for

22 health care in the United States,

23 (2) to conduct investigations, audits, evalua24 tions, and inspections relating to the delivery of and

25 payment for health care in the United States, and
135

•HR 3955 SC2

1 (3) in consultation with the Inspector General

2 of the Department of Health and Human Services,

3 to facilitate the enforcement of the provisions of sec4 tions 1128, 1128A, and 1128B of the Social Secu5 rity Act and other statutes applicable to health care

6 fraud and abuse.

7 (b) COORDINATION WITH LAW ENFORCEMENT

8 AGENCIES.—In carrying out the program under sub9 section (a), the Attorney General shall consult with, and

10 arrange for the sharing of data and resources with Fed11 eral, State and local law enforcement agencies, State Med12 icaid Fraud Control Units, and State agencies responsible

13 for the licensing and certification of health care providers.

14 (c) COORDINATION WITH THIRD PARTY INSUR15 ERS.—In carrying out the program established under sub16 section (a), the Attorney General shall consult with, and

17 arrange for the sharing of data with representatives of pri18 vate sponsors of health benefit plans and other providers

19 of health insurance.

20 (d) REGULATIONS.—

21 (1) IN GENERAL.—The Attorney General shall

22 by regulation establish standards to carry out the

23 program under subsection (a).

24 (2) INFORMATION STANDARDS.—
136

•HR 3955 SC2

1 (A) IN GENERAL.—Such standards shall

2 include standards relating to the furnishing of

3 information by health insurers (including self4 insured health benefit plans), providers, and

5 others to enable the Attorney General to carry

6 out the program (including coordination with

7 law enforcement agencies under subsection (b)

8 and third party insurers under subsection (c)).

9 (B) CONFIDENTIALITY.—Such standards

10 shall include procedures to assure that such in11 formation is provided and utilized in a manner

12 that protects the confidentiality of the informa13 tion and the privacy of individuals receiving

14 health care services.

15 (C) QUALIFIED IMMUNITY FOR PROVIDING

16 INFORMATION.—The provisions of section

17 1157(a) of the Social Security Act (relating to

18 limitation on liability) shall apply to a person

19 providing information to the Attorney General

20 under the program under this section, with re21 spect to the Attorney General’s performance of

22 duties under the program, in the same manner

23 as such section applies to information provided

24 to organizations with a contract under part B
137

•HR 3955 SC2

1 of title XI of such Act, with respect to the per2 formance of such a contract.

3 SEC. 2002. AUTHORIZATION OF ADDITIONAL APPROPRIA4 TIONS FOR INVESTIGATORS AND OTHER PER5 SONNEL.

6 In addition to any other amounts authorized to be

7 appropriated to the Attorney General for health care anti8 fraud and abuse activities for a fiscal year, there are au9 thorized to be appropriated such sums as may be nec10 essary to enable the Attorney General to conduct inves11 tigations of allegations of health care fraud and otherwise

12 carry out the program established under section 2001 in

13 a fiscal year.

14 SEC. 2003. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

15 TRUST FUND.

16 (a) ESTABLISHMENT.—There is hereby created on

17 the books of the Treasury of the United States a trust

18 fund to be known as the ‘‘Anti-Fraud and Abuse Trust

19 Fund’’ (in this section referred to as the ‘‘Trust Fund’’).

20 The Trust Fund shall consist of such amounts as may be

21 deposited in, or appropriated to, such Trust Fund as pro22 vided in this subtitle and section 1128A(f)(3) of the Social

23 Security Act.

24 (b) MANAGEMENT.—
138

•HR 3955 SC2

1 (1) IN GENERAL.—The Trust Fund shall be

2 managed by the Attorney General through a Manag3 ing Trustee designated by the Attorney General.

4 (2) INVESTMENT OF FUNDS.—It shall be the

5 duty of the Managing Trustee to invest such portion

6 of the Trust Fund as is not, in the trustee’s judg7 ment, required to meet current withdrawals. Such

8 investments may be made only in interest-bearing

9 obligations of the United States or in obligations

10 guaranteed as to both principal and interest by the

11 United States. For such purpose such obligations

12 may be acquired on original issue at the issue price,

13 or by purchase of outstanding obligations at market

14 price. The purposes for which obligations of the

15 United States may be issued under chapter 31 of

16 title 31, United States Code, are hereby extended to

17 authorize the issuance at par of public-debt obliga18 tions for purchase by the Trust Fund. Such obliga19 tions issued for purchase by the Trust Fund shall

20 have maturities fixed with due regard for the needs

21 of the Trust Fund and shall bear interest at a rate

22 equal to the average market yield (computed by the

23 Managing Trustee on the basis of market quotations

24 as of the end of the calendar month next preceding

25 the date of such issue) on all marketable interest-
139

•HR 3955 SC2

1 bearing obligations of the United States then form2 ing a part of the public debt which are not due or

3 callable until after the expiration of 4 years from the

4 end of such calendar month, except that where such

average is not a multiple of 1 5 ⁄8 of 1 percent, the rate

6 of interest on such obligations shall be the multiple

of 1 7 ⁄8 of 1 percent nearest such market yield. The

8 Managing Trustee may purchase other interest-bear9 ing obligations of the United States or obligations

10 guaranteed as to both principal and interest by the

11 United States, on original issue or at the market

12 price, only where the Trustee determines that the

13 purchase of such other obligations is in the public

14 interest.

15 (3) Any obligations acquired by the Trust Fund

16 (except public-debt obligations issued exclusively to

17 the Trust Fund) may be sold by the Managing

18 Trustee at the market price, and such public-debt

19 obligations may be redeemed at par plus accrued in20 terest.

21 (4) The interest on, and the proceeds from the

22 sale or redemption of, any obligations held in the

23 Trust Fund shall be credited to and form a part of

24 the Trust Fund.
140

•HR 3955 SC2

1 (5) The receipts and disbursements of the At2 torney General in the discharge of the functions of

3 the Attorney General shall not be included in the to4 tals of the budget of the United States Government.

5 For purposes of part C of the Balanced Budget and

6 Emergency Deficit Control Act of 1985, the Attor7 ney General and the Trust Fund shall be treated in

8 the same manner as the Federal Retirement Thrift

9 Investment Board and the Thrift Savings Fund, re10 spectively. The United States is not liable for any

11 obligation or liability incurred by the Trust Fund.

12 (c) USE OF FUNDS.—Amounts in the Trust Fund

13 shall be used to assist the Attorney General in carrying

14 out the all-payor fraud and abuse control program estab15 lished under section 2001(a) in the fiscal year involved.

16 (d) DEPOSIT OF FEDERAL HEALTH ANTI-FRAUD

17 AND ABUSE PENALTIES INTO TRUST FUND.—Section

18 1128A(f)(3) of the Social Security Act (42 U.S.C. 1320a–

19 7a(f)(3)) is amended by striking ‘‘as miscellaneous re20 ceipts of the Treasury of the United States’’ and inserting

21 ‘‘in the Anti-Fraud and Abuse Trust Fund established

22 under section 2003(a) of the Health Reform Consensus

23 Act of 1994’’.

24 (e) USE OF FEDERAL HEALTH ANTI-FRAUD AND

25 ABUSE PENALTIES TO REPAY BENEFICIARIES FOR COST-
141

•HR 3955 SC2

1 SHARING.—Section 1128A(f) of the Social Security Act

2 (42 U.S.C. 1320a–7a(f)) is amended in the matter preced3 ing paragraph (1) by striking ‘‘Secretary and disposed of

4 as follows:’’ and inserting the following: ‘‘Secretary. If the

5 person against whom such a penalty or assessment was

6 assessed collected a payment from an individual for pro7 viding to the individual the service that is the subject of

8 the penalty or assessment, the Secretary shall pay a por9 tion of the amount recovered to the individual in the na10 ture of restitution in an amount equal to the payment so

11 collected. The Secretary shall dispose of any remaining

12 amounts recovered under this section as follows:’’.

13 Subtitle B—Revisions to Current

14 Sanctions for Fraud and Abuse

15 SEC. 2101. MANDATORY EXCLUSION FROM PARTICIPATION

16 IN MEDICARE AND STATE HEALTH CARE PRO17 GRAMS.

18 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

19 TO FRAUD.—

20 (1) IN GENERAL.—Section 1128(a) of the So21 cial Security Act (42 U.S.C. 1320a–7(a)) is amend22 ed by adding at the end the following new para23 graph:

24 ‘‘(3) FELONY CONVICTION RELATING TO

25 FRAUD.—Any individual or entity that has been con-
142

•HR 3955 SC2

1 victed, under Federal or State law, in connection

2 with the delivery of a health care item or service or

3 with respect to any act or omission in a program

4 (other than those specifically described in paragraph

5 (1)) operated by or financed in whole or in part by

6 any Federal, State, or local government agency, of

7 a criminal offense consisting of a felony relating to

8 fraud, theft, embezzlement, breach of fiduciary re9 sponsibility, or other financial misconduct.’’.

10 (2) CONFORMING AMENDMENT.—Section

11 1128(b)(1) of such Act (42 U.S.C. 1320a–7(b)(1))

12 is amended—

13 (A) in the heading, by striking ‘‘CONVIC14 TION’’ and inserting ‘‘MISDEMEANOR CONVIC15 TION’’; and

16 (B) by striking ‘‘criminal offense’’ and in17 serting ‘‘criminal offense consisting of a mis18 demeanor’’.

19 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

20 TO CONTROLLED SUBSTANCE.—

21 (1) IN GENERAL.—Section 1128(a) of the So22 cial Security Act (42 U.S.C. 1320a–7(a)), as amend23 ed by subsection (a), is amended by adding at the

24 end the following new paragraph:
143

•HR 3955 SC2

1 ‘‘(4) FELONY CONVICTION RELATING TO CON2 TROLLED SUBSTANCE.—Any individual or entity

3 that has been convicted, under Federal or State law,

4 of a criminal offense consisting of a felony relating

5 to the unlawful manufacture, distribution, prescrip6 tion, or dispensing of a controlled substance.’’.

7 (2) CONFORMING AMENDMENT.—Section

8 1128(b)(3) of such Act (42 U.S.C. 1320a–7(b)(3))

9 is amended—

10 (A) in the heading, by striking ‘‘CONVIC11 TION’’ and inserting ‘‘MISDEMEANOR CONVIC12 TION’’; and

13 (B) by striking ‘‘criminal offense’’ and in14 serting ‘‘criminal offense consisting of a mis15 demeanor’’.

16 SEC. 2102. ESTABLISHMENT OF MINIMUM PERIOD OF EX17 CLUSION FOR CERTAIN INDIVIDUALS AND

18 ENTITIES SUBJECT TO PERMISSIVE EXCLU19 SION FROM MEDICARE AND STATE HEALTH

20 CARE PROGRAMS.

21 Section 1128(c)(3) of the Social Security Act (42

22 U.S.C. 1320a–7(c)(3)) is amended by adding at the end

23 the following new subparagraphs:

24 ‘‘(D) In the case of an exclusion of an individual or

25 entity under paragraph (1), (2), or (3) of subsection (b),
144

•HR 3955 SC2

1 the period of the exclusion shall be 3 years, unless the

2 Secretary determines in accordance with published regula3 tions that a shorter period is appropriate because of miti4 gating circumstances or that a longer period is appro5 priate because of aggravating circumstances.

6 ‘‘(E) In the case of an exclusion of an individual or

7 entity under subsection (b)(4) or (b)(5), the period of the

8 exclusion shall not be less than the period during which

9 the individual’s or entity’s license to provide health care

10 is revoked, suspended, or surrendered, or the individual

11 or the entity is excluded or suspended from a Federal or

12 State health care program.

13 ‘‘(F) In the case of an exclusion of an individual or

14 entity under subsection (b)(6)(B), the period of the exclu15 sion shall be not less than 1 year.’’.

16 SEC. 2103. CIVIL MONETARY PENALTIES.

17 (a) PROHIBITION AGAINST OFFERING INDUCEMENTS

18 TO INDIVIDUALS ENROLLED UNDER OR EMPLOYED BY

19 PROGRAMS OR PLANS.—

20 (1) INDUCEMENTS TO INDIVIDUALS ENROLLED

21 UNDER MEDICARE.—

22 (A) OFFER OF REMUNERATION.—Section

23 1128A(a) of the Social Security Act (42 U.S.C.

24 1320a–7a(a)) is amended—
145

•HR 3955 SC2

1 (i) by striking ‘‘or’’ at the end of

2 paragraph (1)(D);

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

4 paragraph (2) and inserting a semicolon;

5 (iii) by striking the semicolon at the

6 end of paragraph (3) and inserting ‘‘; or’’;

7 and

8 (iv) by inserting after paragraph (3)

9 the following new paragraph:

10 ‘‘(4) offers to or transfers remuneration to any

11 individual eligible for benefits under title XVIII of

12 this Act, or under a State health care program (as

13 defined in section 1128(h)) that such person knows

14 or should know is likely to significantly influence

15 such individual to order or receive from a particular

16 provider, practitioner, or supplier any item or service

17 for which payment may be made, in whole or in

18 part, under title XVIII, or a State health care pro19 gram;’’.

20 (B) REMUNERATION DEFINED.—Section

21 1128A(i) is amended by adding the following

22 new paragraph:

23 ‘‘(6) The term ‘remuneration’ includes the waiv24 er of coinsurance and deductible amounts (or any

25 part thereof), and transfers of items or services for
146

•HR 3955 SC2

1 free or for other than fair market value. The term

2 ‘remuneration’ does not include the waiver of coin3 surance and deductible amounts by a person, if—

4 ‘‘(A) the waiver is not offered as part of

5 any advertisement or solicitation;

6 ‘‘(B) the person does not routinely waive

7 coinsurance or deductible amounts; and

8 ‘‘(C) the person—

9 ‘‘(i) waives the coinsurance and de10 ductible amounts after determining in good

11 faith that the individual is in financial

12 need;

13 ‘‘(ii) fails to collect coinsurance or de14 ductible amounts after making reasonable

15 collection efforts; or

16 ‘‘(iii) provides for any permissible

17 waiver as specified in section 1128B(b)(3)

18 or in regulations issued by the Secretary.’’.

19 (2) INDUCEMENTS TO EMPLOYEES.—Section

20 1128A(a) of such Act (42 U.S.C. 1320a–7a(a)), as

21 amended by paragraph (1), is further amended—

22 (A) by striking ‘‘or’’ at the end of para23 graph (3);

24 (B) by striking the semicolon at the end of

25 paragraph (4) and inserting ‘‘; or’’; and
147

•HR 3955 SC2

1 (C) by inserting after paragraph (4) the

2 following new paragraph:

3 ‘‘(5) pays a bonus, reward, or any other remu4 neration, directly or indirectly, to an employee to in5 duce the employee to encourage individuals to seek

6 or obtain covered items or services for which pay7 ment may be made under the medicare program, or

8 a State health care program where the amount of

9 the remuneration is determined in a manner that

10 takes into account (directly or indirectly) the value

11 or volume of any referrals by the employee to the

12 employer for covered items or services;’’.

13 (b) CLAIM FOR ITEM OR SERVICE BASED ON INCOR14 RECT CODING.—Section 1128A(a)(1)(A) of such Act (42

15 U.S.C. 1320a–7a(a)(1)) is amended by striking

16 ‘‘claimed,’’ and inserting the following: ‘‘claimed, including

17 any person who presents or causes to be presented a claim

18 for an item or service that is based on a code that the

19 person knows or should know will result in a greater pay20 ment to the person than the code the person knows or

21 should know is applicable to the item or service actually

22 provided,’’.
148

•HR 3955 SC2

1 SEC. 2104. INTERMEDIATE SANCTIONS FOR MEDICARE

2 HEALTH MAINTENANCE ORGANIZATIONS.

3 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

4 ANY PROGRAM VIOLATIONS.—

5 (1) IN GENERAL.—Section 1876(i)(1) of the

6 Social Security Act (42 U.S.C. 1395mm(i)(1)) is

7 amended by striking ‘‘the Secretary may terminate’’

8 and all that follows and inserting the following: ‘‘in

9 accordance with procedures established under para10 graph (9), the Secretary may at any time terminate

11 any such contract or may impose the intermediate

12 sanctions described in paragraph (6)(B) or (6)(C)

13 (whichever is applicable) on the eligible organization

14 if the Secretary determines that the organization—

15 (A) has failed substantially to carry out

16 the contract;

17 (B) is carrying out the contract in a man18 ner inconsistent with the efficient and effective

19 administration of this section;

20 (C) is operating in a manner that is not in

21 the best interests of the individuals covered

22 under the contract; or

23 (D) no longer substantially meets the ap24 plicable conditions of subsections (b), (c), (e),

25 and (f).’’
149

•HR 3955 SC2

1 (2) OTHER INTERMEDIATE SANCTIONS FOR

2 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

3 1876(i)(6) of such Act (42 U.S.C. 1395mm(i)(6)) is

4 amended by adding at the end the following new

5 subparagraph:

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

7 the Secretary makes a determination under paragraph (1)

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

9 the Secretary may apply the following intermediate sanc10 tions:

11 ‘‘(i) Civil money penalties of not more than

12 $25,000 for each determination under paragraph (1)

13 if the deficiency that is the basis of the determina14 tion has directly adversely affected (or has the sub15 stantial likelihood of adversely affecting) an individ16 ual covered under the organization’s contract.

17 ‘‘(ii) Civil money penalties of not more than

18 $10,000 for each week beginning after the initiation

19 of procedures by the Secretary under paragraph (9)

20 during which the deficiency that is the basis of a de21 termination under paragraph (1) exists.

22 ‘‘(iii) Suspension of enrollment of individuals

23 under this section after the date the Secretary noti24 fies the organization of a determination under para25 graph (1) and until the Secretary is satisfied that
150

•HR 3955 SC2

1 the deficiency that is the basis for the determination

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

3 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

4 Section 1876(i) of such Act (42 U.S.C. 1395mm(i))

5 is amended by adding at the end the following new

6 paragraph:

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

8 eligible organization under this section or may impose the

9 intermediate sanctions described in paragraph (6) on the

10 organization in accordance with formal investigation and

11 compliance procedures established by the Secretary under

12 which—

13 ‘‘(A) the Secretary provides the organization

14 with the opportunity to develop and implement a

15 corrective action plan to correct the deficiencies that

16 were the basis of the Secretary’s determination

17 under paragraph (1);

18 ‘‘(B) in deciding whether to impose sanctions,

19 the Secretary considers aggravating factors such as

20 whether an entity has a history of deficiencies or has

21 not taken action to correct deficiencies the Secretary

22 has brought to their attention;

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

24 delays between the finding of a deficiency and the

25 imposition of sanctions; and
151

•HR 3955 SC2

1 ‘‘(D) the Secretary provides the organization

2 with reasonable notice and opportunity for hearing

3 (including the right to appeal an initial decision) be4 fore imposing any sanction or terminating the con5 tract.’’.

6 (4) CONFORMING AMENDMENTS.—

7 (A) IN GENERAL.—Section 1876(i)(6)(B)

8 of such Act (42 U.S.C. 1395mm(i)(6)(B)) is

9 amended by striking the second sentence.

10 (B) PROCEDURAL PROVISIONS.—Section

11 1876(i)(6) of such Act (42 U.S.C.

12 1395mm(i)(6)) is further amended by adding at

13 the end the following new subparagraph:

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

15 subsections (a) and (b)) shall apply to a civil money pen16 alty under subparagraph (A) or (B) in the same manner

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

18 section 1128A(a).’’.

19 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA20 TIONS.—

21 (1) REQUIREMENT FOR WRITTEN AGREE22 MENT.—Section 1876(i)(7)(A) of the Social Security

23 Act (42 U.S.C. 1395mm(i)(7)(A)) is amended by

24 striking ‘‘an agreement’’ and inserting ‘‘a written

25 agreement’’.
152

•HR 3955 SC2

1 (2) DEVELOPMENT OF MODEL AGREEMENT.—

2 Not later than July 1, 1995, the Secretary shall de3 velop a model of the agreement that an eligible orga4 nization with a risk-sharing contract under section

5 1876 of the Social Security Act must enter into with

6 an entity providing peer review services with respect

7 to services provided by the organization under sec8 tion 1876(i)(7)(A) of such Act.

9 (3) REPORT BY GAO.—

10 (A) STUDY.—The Comptroller General

11 shall conduct a study of the costs incurred by

12 eligible organizations with risk-sharing con13 tracts under section 1876(b) of such Act of

14 complying with the requirement of entering into

15 a written agreement with an entity providing

16 peer review services with respect to services pro17 vided by the organization, together with an

18 analysis of how information generated by such

19 entities is used by the Secretary to assess the

20 quality of services provided by such eligible or21 ganizations.

22 (B) REPORT TO CONGRESS.—Not later

23 than July 1, 1997, the Comptroller General

24 shall submit a report to the Committee on

25 Ways and Means and the Committee on Energy
153

•HR 3955 SC2

1 and Commerce of the House of Representatives

2 and the Committee on Finance and the Special

3 Committee on Aging of the Senate on the study

4 conducted under subparagraph (A).

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

6 this section shall apply with respect to contract years be7 ginning on or after January 1, 1995.

8 SEC. 2105. EFFECTIVE DATE.

9 The amendments made by this subtitle shall take ef10 fect January 1, 1996.

11 Subtitle C—Administrative and

12 Miscellaneous Provisions

13 SEC. 2201. ESTABLISHMENT OF THE HEALTH CARE FRAUD

14 AND ABUSE DATA COLLECTION PROGRAM.

15 (a) FINDINGS.—The Congress finds the following:

16 (1) Fraud and abuse with respect to the deliv17 ery of and payment for health care services is a sig18 nificant contributor to the growing costs of the

19 Nation’s health care.

20 (2) Control of fraud and abuse in health care

21 services warrants greater efforts of coordination

22 than those that can be undertaken by individual

23 States or the various Federal, State, and local law

24 enforcement programs.
154

•HR 3955 SC2

1 (3) There is a national need to coordinate infor2 mation about health care providers and entities that

3 have engaged in fraud and abuse in the delivery of

4 and payment for health care services.

5 (4) There is no comprehensive national data

6 collection program for the reporting of public infor7 mation about final adverse actions against health

8 care providers, suppliers, or licensed health care

9 practitioners that have engaged in fraud and abuse

10 in the deliver of and payment for health care

11 services.

12 (5) A comprehensive national data collection

13 program for the reporting of public information

14 about final adverse actions will facilitate the enforce15 ment of the provisions of the Social Security Act and

16 other statutes applicable to health care fraud and

17 abuse.

18 (b) GENERAL PURPOSE.—Not later than January 1,

19 1995, the Secretary shall establish a national health care

20 fraud and abuse data collection program for the reporting

21 of final adverse actions (not including settlements where

22 no finding of liability has been made) against health care

23 providers, suppliers, or practitioners as required by sub24 section (c), with access as set forth in subsection (d).

25 (c) REPORTING OF INFORMATION.—
155

•HR 3955 SC2

1 (1) IN GENERAL.—Each government agency

2 and health care plan shall report any final adverse

3 action (not including settlements where no finding of

4 liability has been made) taken against a health care

5 provider, supplier, or practitioner.

6 (2) INFORMATION TO BE REPORTED.—The in7 formation to be reported under paragraph (1)

8 includes:

9 (A) The name of any health care provider,

10 supplier, or practitioner who is the subject of a

11 final adverse action.

12 (B) The name (if known) of any health

13 care entity with which a health care provider,

14 supplier, or practitioner is affiliated or associ15 ated.

16 (C) The nature of the final adverse action.

17 (D) A description of the acts or omissions

18 and injuries upon which the final adverse action

19 was based, and such other information as the

20 Secretary determines by regulation is required

21 for appropriate interpretation of information re22 ported under this section.

23 (3) CONFIDENTIALITY.—In determining what

24 information is required, the Secretary shall include

25 procedures to assure that the information is pro-
156

•HR 3955 SC2

1 vided and utilized in a manner that protects the con2 fidentiality of the information and the privacy of in3 dividuals receiving health care services.

4 (4) TIMING AND FORM OF REPORTING.—The

5 information required to be reported under this sub6 section shall be reported regularly (but not less often

7 than monthly) and in such form and manner as the

8 Secretary prescribes. Such information shall first be

9 required to be reported on a date specified by the

10 Secretary.

11 (5) TO WHOM REPORTED.—The information re12 quired to be reported under this subsection shall be

13 reported to the Secretary.

14 (d) DISCLOSURE AND CORRECTION OF INFORMA15 TION.—

16 (1) DISCLOSURE.—With respect to the informa17 tion about final adverse actions (not including settle18 ments where no findings of liability has been made)

19 reported to the Secretary under this section respect20 ing a health care provider, supplier, or practitioner,

21 the Secretary shall, by regulation, provide for—

22 (A) disclosure of the information, upon re23 quest, to the health care provider, supplier, or

24 licensed practitioner, and
157

•HR 3955 SC2

1 (B) procedures in the case of disputed ac2 curacy of the information.

3 (2) CORRECTIONS.—Each Government agency

4 and health care plan shall report corrections of in5 formation already reported about any final adverse

6 action taken against a health care provider, supplier,

7 or practitioner, in such form and manner that the

8 Secretary prescribes by regulation.

9 (e) ACCESS TO REPORTED INFORMATION.—

10 (1) AVAILABILITY.—The information in this

11 database shall be available to the public, Federal

12 and State government agencies, and health care

13 plans pursuant to procedures that the Secretary

14 shall provide by regulation.

15 (2) FEES FOR DISCLOSURE.—The Secretary

16 may establish or approve reasonable fees for the dis17 closure of information in this database. The amount

18 of such a fee may not exceed the costs of processing

19 the requests for disclosure and of providing such in20 formation. Such fees shall be available to the Sec21 retary or, in the Secretary’s discretion to the agency

22 designated under this section to cover such costs.

23 (f) PROTECTION FROM LIABILITY FOR REPORT24 ING.—No person or entity, including the agency des25 ignated by the Secretary in subsection (c)(5) shall be held
158

•HR 3955 SC2

1 liable in any civil action with respect to any report made

2 as required by this section, without knowledge of the fal3 sity of the information contained in the report.

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

6 (1) The term ‘‘final adverse action’’ includes:

7 (A) Civil judgments against a health care

8 provider in Federal or State court related to the

9 delivery of a health care item or service.

10 (B) Federal or State criminal convictions

11 related to the delivery of a health care item or

12 service, as determined in accordance with sec13 tion 1128(j) of the Social Security Act.

14 (C) Actions by State or Federal agencies

15 responsible for the licensing and certification of

16 health care providers, suppliers, and licensed

17 health care practitioners, including—

18 (i) formal or official actions, such as

19 revocation or suspension of a license (and

20 the length of any such suspension), rep21 rimand, censure or probation, or

22 (ii) any other loss of license of the

23 provider, supplier, or practitioner, by oper24 ation of law.
159

•HR 3955 SC2

1 (D) Exclusion from participation in Fed2 eral or State health care programs.

3 (2) The term ‘‘Government agency’’ includes:

4 (A) The Department of Justice.

5 (B) The Department of Health and

6 Human Services.

7 (C) Any other Federal agency that either

8 administers or provides payment for the deliv9 ery of health care services, including, but not

10 limited to the Department of Defense and the

11 Department of Veterans Affairs.

12 (D) State law enforcement agencies.

13 (E) State medicaid fraud and abuse units.

14 (F) State or Federal agencies responsible

15 for the licensing and certification of health care

16 providers and licensed health care practitioners.

17 (3) The term ‘‘health care plan’’ means a public

18 or private program for the delivery of or payment

19 for health care services other than the medicare pro20 gram or a State health care program described in

21 section 1128(h) of the Social Security Act.

22 (4) The term ‘‘health care provider’’ means a

23 provider of services as defined in section 1861(u) of

24 the Social Security Act, and any entity, including a

25 health maintenance organization, group medical
160

•HR 3955 SC2

1 practice, or any other entity listed by the Secretary

2 in regulation, that provides health care services.

3 (5) The terms ‘‘licensed health care practi4 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

5 mean, with respect to a State, an individual who is

6 licensed or otherwise authorized by the State to pro7 vide health care services (or any individual who,

8 without authority holds himself or herself out to be

9 so licensed or authorized).

10 (6) The term ‘‘supplier’’ means a supplier of

11 health care items and services described in sections

12 1819 (a) and (b), and section 1861 of the Social

13 Security Act.

14 (h) CONFORMING AMENDMENT.—Section 1921(d) of

15 the Social Security Act is amended by inserting ‘‘and sec16 tion 2201 of the Health Reform Consensus Act of 1994’’

17 after ‘‘section 422 of the Health Care Quality Improve18 ment Act of 1986’’.

19 SEC. 2202. QUARTERLY PUBLICATION OF FINAL ADVERSE

20 ACTIONS TAKEN.

21 (a) IN GENERAL.—Part A of title XI of the Social

22 Security Act (42 U.S.C. 1301 et seq.) is amended by

23 adding at the end the following new section:
161

•HR 3955 SC2

1 ‘‘QUARTERLY PUBLICATION OF FINAL ADVERSE ACTIONS

2 TAKEN

3 ‘‘SEC. 1144. (a) IN GENERAL.—Not later than 30

4 days after the end of each calendar quarter, the Secretary

5 shall publish in the Federal Register a listing of all final

6 adverse actions taken during the quarter under this part

7 (including penalties imposed under section 1107, exclu8 sions under section 1128, the imposition of civil monetary

9 penalties under section 1128A, and the imposition of

10 criminal penalties under section 1128B) and under section

11 1156.

12 ‘‘(b) FINAL ADVERSE ACTION DEFINED.—In sub13 section (a), the term ‘final adverse action’ has the meaning

14 given such term under section 2201(g)(1) of the Health

15 Reform Consensus Act of 1994.’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 subsection (a) shall apply to calendar quarters beginning

18 on or after January 1, 1996.

19 Subtitle D—Amendments to

20 Criminal Law

21 SEC. 2301. PENALTIES FOR HEALTH CARE FRAUD.

22 (a) IN GENERAL.—

23 (1) FINES AND IMPRISONMENT FOR HEALTH

24 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,
162

•HR 3955 SC2

1 United States Code, is amended by adding at the

2 end the following:

3 ‘‘§ 1347. Health care fraud

4 ‘‘(a) Whoever knowingly executes, or attempts to exe5 cute, a scheme or artifice—

6 ‘‘(1) to defraud any health care plan or other

7 person, in connection with the delivery of or pay8 ment for health care benefits, items, or services; or

9 ‘‘(2) to obtain, by means of false or fraudulent

10 pretenses, representations, or promises, any of the

11 money or property owned by, or under the custody

12 or control of, any health care plan, or person in con13 nection with the delivery of or payment for health

14 care benefits, items, or services;

15 shall be guilty of a felony, and fined under this title or

16 imprisoned not more than 5 years, or both.

17 ‘‘(b) In determining the amount or scope of any pen18 alty or assessment, the court shall take into account:

19 ‘‘(1) the nature of the false or fraudulent

20 claims and the circumstances under which they are

21 presented;

22 ‘‘(2) the degree of culpability and history of

23 prior offenses by the convicted health care provider;

24 ‘‘(3) the extent to which restitution is paid; and

25 ‘‘(4) such other matters as justice may require.
163

•HR 3955 SC2

1 ‘‘(c) A principal is liable for penalties and assess2 ments under this section for the acts of the principal’s

3 agents acting within the scope of the agency.

4 ‘‘(d) For purposes of this section, the term ‘health

5 care plan’ means a Federally-funded public program or

6 private program for the delivery of or payment for health

7 care items or services.’’.

8 (2) CLERICAL AMENDMENT.—The table of sec9 tions at the beginning of chapter 63 of title 18,

10 United States Code, is amended by adding at the

11 end the following:

‘‘1347. Health care fraud.’’.

12 SEC. 2302. REWARDS FOR INFORMATION LEADING TO

13 PROSECUTION AND CONVICTION.

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

15 amended by adding at the end the following new sub16 section:

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

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

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

20 information unknown to the Government relating to a pos21 sible prosecution under section 1347.

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

23 paragraph (1) if—

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

25 or employee of a Federal or State government agen-
164

•HR 3955 SC2

1 cy or instrumentality who furnishes information dis2 covered or gathered in the course of government em3 ployment.

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

5 offense;

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

7 consists of allegations or transactions that have been

8 disclosed to the public—

9 ‘‘(i) in a criminal, civil, or administrative

10 proceeding;

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

12 General Accounting Office report, hearing,

13 audit or investigation; or

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

15 is the original source of the information; or

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

17 General, it appears that a person whose illegal ac18 tivities are being prosecuted or investigated could

19 benefit from the award.

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

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

22 independent knowledge of the information that is fur23 nished and has voluntarily provided the information to the

24 Government prior to disclosure by the news media.
165

•HR 3955 SC2

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

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

3 authorized shall be subject to judicial review.’’.

4 TITLE III—MALPRACTICE

5 REFORM

6 Subtitle A—Findings; Purpose;

7 Definitions

8 SEC. 3001. FINDINGS; PURPOSE.

9 (a) FINDINGS.—Congress finds that—

10 (1) the costs of health care consume more than

11 14 percent of the Gross Domestic Product of the

12 United States, significantly affecting interstate com13 merce and the budget of the Federal Government;

14 (2) claims for medical malpractice are a signifi15 cant factor in the cost of health care and cause phy16 sicians, hospitals, and other health care providers to

17 undertake diagnostic tests and procedures partly as

18 defensive measures against the possibility of mal19 practice claims;

20 (3) the health care and insurance industries are

21 industries affecting interstate commerce and the

22 medical malpractice litigation systems existing

23 throughout the United States affect interstate com24 merce by contributing to the high cost of health care
166

•HR 3955 SC2

1 and premiums for malpractice insurance purchased

2 by health care providers; and

3 (4) the Federal Government has a major inter4 est in health care as a direct provider of health care

5 and as a source of payment for health care, and has

6 a demonstrated interest in assessing the quality of

7 care, access to care, and the costs of care through

8 the evaluative activities of several Federal agencies.

9 (b) PURPOSE.—It is the purpose of this title to—

10 (1) provide grants to States to develop alter11 native dispute resolution procedures to attain a more

12 efficient, expeditious, and equitable resolution of

13 health care malpractice disputes;

14 (2) enhance general knowledge concerning the

15 benefits of different forms of alternative dispute res16 olution mechanisms; and

17 (3) establish uniformity and curb excesses in

18 the State-based medical liability systems through

19 Federally mandated reforms.

20 SEC. 3002. DEFINITIONS.

21 As used in this title:

22 (1) ADR ADVISORY BOARD.—The term ‘‘ADR

23 Advisory Board’’ means the Alternative Dispute

24 Resolution Advisory Board established by the Sec-
167

•HR 3955 SC2

1 retary of Health and Human Services under section

2 3202(a).

3 (2) ALTERNATIVE DISPUTE RESOLUTION SYS4 TEM.—The term ‘‘alternative dispute resolution sys5 tem’’ means a system that is enacted or adopted by

6 a State to resolve medical malpractice claims other

7 than through a medical malpractice liability action.

8 (3) CLAIMANT.—The term ‘‘claimant’’ means

9 any person who brings a medical malpractice liability

10 claim and, in the case of an individual who is de11 ceased, incompetent, or a minor, the person on

12 whose behalf such a claim is brought.

13 (4) CLEAR AND CONVINCING EVIDENCE.—The

14 term ‘‘clear and convincing evidence’’ is that meas15 ure or degree of proof that will produce in the mind

16 of the trier of fact a firm belief or conviction as to

17 the truth of the allegations sought to be established,

18 except that such measure or degree of proof is more

19 than that required under preponderance of the evi20 dence, but less than that required for proof beyond

21 a reasonable doubt.

22 (5) ECONOMIC DAMAGES.—The term ‘‘economic

23 damages’’ means damages paid to compensate an in24 dividual for losses for hospital and other medical ex-
168

•HR 3955 SC2

1 penses, lost wages, lost employment, and other pecu2 niary losses.

3 (6) HEALTH CARE PROFESSIONAL.—The term

4 ‘‘health care professional’’ means any individual who

5 provides health care services in a State and who is

6 required by State law or regulation to be licensed or

7 certified by the State to provide such services in the

8 State.

9 (7) HEALTH CARE PROVIDER.—The term

10 ‘‘health care provider’’ means any organization or

11 institution that is engaged in the delivery of health

12 care services in a State that is required by State law

13 or regulation to be licensed or certified by the State

14 to engage in the delivery of such services in the

15 State.

16 (8) INJURY.—The term ‘‘injury’’ means any ill17 ness, disease, or other harm that is the subject of

18 a medical malpractice claim.

19 (9) MEDICAL MALPRACTICE LIABILITY AC20 TION.—The term ‘‘medical malpractice liability ac21 tion’’ means any civil action brought pursuant to

22 State law in which a plaintiff alleges a medical mal23 practice claim against a health care provider or

24 health care professional, but does not include any
169

•HR 3955 SC2

1 action in which the plaintiff’s sole allegation is an al2 legation of an intentional tort.

3 (10) MEDICAL MALPRACTICE CLAIM.—The term

4 ‘‘medical malpractice claim’’ means any claim relat5 ing to the provision of (or the failure to provide)

6 health care services or the use of a medical product,

7 without regard to the theory of liability asserted,

8 and includes any third-party claim, cross-claim,

9 counterclaim, or contribution claim in a medical

10 malpractice liability action.

11 (11) MEDICAL PRODUCT.—

12 (A) IN GENERAL.—The term ‘‘medical

13 product’’ means, with respect to the allegation

14 of a claimant, a drug (as defined in section

15 201(g)(1) of the Federal Food, Drug, and Cos16 metic Act (21 U.S.C. 321(g)(1)) or a medical

17 device (as defined in section 201(h) of the Fed18 eral Food, Drug, and Cosmetic Act (21 U.S.C.

19 321(h))) if—

20 (i) such drug or device was subject to

21 premarket approval under section 505,

22 507, or 515 of the Federal Food, Drug,

23 and Cosmetic Act (21 U.S.C. 355, 357, or

24 360e) or section 351 of the Public Health

25 Service Act (42 U.S.C. 262) with respect
170

•HR 3955 SC2

1 to the safety of the formulation or per2 formance of the aspect of such drug or de3 vice which is the subject of the claimant’s

4 allegation or the adequacy of the packag5 ing or labeling of such drug or device, and

6 such drug or device is approved by the

7 Food and Drug Administration; or

8 (ii) the drug or device is generally rec9 ognized as safe and effective under regula10 tions issued by the Secretary of Health

11 and Human Services under section 201(p)

12 of the Federal Food, Drug, and Cosmetic

13 Act (21 U.S.C. 321(p)).

14 (B) EXCEPTION IN CASE OF MISREPRE15 SENTATION OR FRAUD.—Notwithstanding sub16 paragraph (A), the term ‘‘medical product’’

17 shall not include any product described in such

18 subparagraph if the claimant shows that the

19 product is approved by the Food and Drug Ad20 ministration for marketing as a result of with21 held information, misrepresentation, or an ille22 gal payment by manufacturer of the product.

23 (12) NONECONOMIC DAMAGES.—The term

24 ‘‘noneconomic damages’’ means damages paid to

25 compensate an individual for losses for physical and
171

•HR 3955 SC2

1 emotional pain, suffering, inconvenience, physical

2 impairment, mental anguish, disfigurement, loss of

3 enjoyment of life, loss of consortium, and other

4 nonpecuniary losses, but does not include punitive

5 damages.

6 (13) PUNITIVE DAMAGES.—The term ‘‘punitive

7 damages’’ means compensation, in addition to com8 pensation for actual harm suffered, that is awarded

9 for the purpose of punishing a person for conduct

10 deemed to be malicious, wanton, willful, or exces11 sively reckless.

12 (14) SECRETARY.—The term ‘‘Secretary’’

13 means the Secretary of Health and Human Services.

14 (15) STATE.—The term ‘‘State’’ means each of

15 the several States, the District of Columbia, the

16 Commonwealth of Puerto Rico, the Virgin Islands,

17 and Guam.

18 Subtitle B—Uniform Standards for

19 Malpractice Claims

20 SEC. 3101. APPLICABILITY.

21 Except as provided in section 3111, this subtitle shall

22 apply to any medical malpractice liability action brought

23 in a Federal or State court, and to any medical mal24 practice claim subject to an alternative dispute resolution

25 system, that is initiated on or after January 1, 1996.
172

•HR 3955 SC2

1 SEC. 3102. REQUIREMENT FOR INITIAL RESOLUTION OF AC2 TION THROUGH ALTERNATIVE DISPUTE RES3 OLUTION.

4 (a) IN GENERAL.—

5 (1) STATE CASES.—A medical malpractice li6 ability action may not be brought in any State court

7 during a calendar year unless the medical mal8 practice liability claim that is the subject of the ac9 tion has been initially resolved under an alternative

10 dispute resolution system certified for the year by

11 the Secretary under section 3202(a), or, in the case

12 of a State in which such a system is not in effect

13 for the year, under the alternative Federal system

14 established under section 3202(b).

15 (2) FEDERAL DIVERSITY ACTIONS.—A medical

16 malpractice liability action may not be brought in

17 any Federal court under section 1332 of title 28,

18 United States Code, during a calendar year unless

19 the medical malpractice liability claim that is the

20 subject of the action has been initially resolved

21 under the alternative dispute resolution system re22 ferred to in paragraph (1) that applied in the State

23 whose law applies in such action.

24 (3) CLAIMS AGAINST UNITED STATES.—

25 (A) ESTABLISHMENT OF PROCESS FOR

26 CLAIMS.—The Attorney General shall establish
173

•HR 3955 SC2

1 an alternative dispute resolution process for the

2 resolution of tort claims consisting of medical

3 malpractice liability claims brought against the

4 United States under chapter 171 of title 28,

5 United States Code. Under such process, the

6 resolution of a claim shall occur after the com7 pletion of the administrative claim process ap8 plicable to the claim under section 2675 of such

9 title.

10 (B) REQUIREMENT FOR INITIAL RESOLU11 TION UNDER PROCESS.—A medical malpractice

12 liability action based on a medical malpractice

13 liability claim described in subparagraph (A)

14 may not be brought in any Federal court unless

15 the claim has been initially resolved under the

16 alternative dispute resolution process estab17 lished by the Attorney General under such sub18 paragraph.

19 (b) INITIAL RESOLUTION OF CLAIMS UNDER

20 ADR.—For purposes of subsection (a), an action is ‘‘ini21 tially resolved’’ under an alternative dispute resolution

22 system if—

23 (1) the ADR reaches a decision on whether the

24 defendant is liable to the plaintiff for damages; and
174

•HR 3955 SC2

1 (2) if the ADR determines that the defendant

2 is liable, the ADR reaches a decision on the amount

3 of damages assessed against the defendant.

4 (c) LEGAL EFFECT OF UNCONTESTED ADR DECI5 SION.—If no party files a notice of intent to contest a deci6 sion reached under an alternative dispute resolution sys7 tem pursuant to section 3103(a)(1), the decision shall be

8 enforced by a court of competent jurisdiction in the same

9 manner as the verdict of a medical malpractice liability

10 action adjudicated in a State or Federal trial court.

11 SEC. 3103. PROCEDURAL REQUIREMENTS FOR FILING OF

12 ACTIONS.

13 (a) PROCEDURES FOR FILING ACTIONS AFTER DECI14 SION.—

15 (1) NOTICE OF INTENT TO CONTEST DECI16 SION.—Not later than 60 days after a decision is is17 sued with respect to a medical malpractice liability

18 claim under an alternative dispute resolution system,

19 each party affected by the decision shall submit a

20 sealed statement to a court of competent jurisdiction

21 indicating whether or not the party intends to con22 test the decision.

23 (2) DEADLINE FOR FILING ACTION.—A medical

24 malpractice liability action may not be brought with

25 respect to a medical malpractice liability claim that
175

•HR 3955 SC2

1 is the subject of a decision under an alternative dis2 pute resolution system unless—

3 (A) a party has filed a notice of intent to

4 contest the decision under the alternative dis5 pute resolution system pursuant to paragraph

6 (1); and

7 (B) the party files the action in a court of

8 competent jurisdiction not later than 60 days

9 after the notice of intent is filed pursuant to

10 paragraph (1) (or, if such notice of intent is

11 filed by a party other than the claimant, not

12 later than 90 days after such notice is filed).

13 (3) COURT OF COMPETENT JURISDICTION.—

14 For purposes of this subsection, the term ‘‘court of

15 competent jurisdiction’’ means—

16 (A) with respect to actions filed in a State

17 court, the appropriate State trial court; and

18 (B) with respect to actions filed in a Fed19 eral court, the appropriate United States dis20 trict court.

21 (b) CERTIFICATE OF MERIT.—

22 (1) IN GENERAL.—Each individual who files a

23 notice of intent to contest a decision under the alter24 native dispute resolution system pursuant to sub25 section (a)(1) shall, not later than 90 days after the
176

•HR 3955 SC2

1 applicable medical malpractice liability action is

2 filed—

3 (A) submit a certificate of merit described

4 in subsection (b); or

5 (B) post a surety (or equivalent security)

6 bond of $4,000 (or, during the 45-day period

7 that begins on the date the action is filed, a

8 cost bond of $2,000) with the court.

9 (2) EXTENSION OF DEADLINE.—On the motion

10 of any party to the action or upon a written agree11 ment of the parties filed with the court, the court

12 may extend the deadline specified in paragraph (1)

13 for a period not to exceed 30 days.

14 (3) WAIVER FOR GOOD CAUSE.—The court may

15 waive the application of paragraph (1) to a plaintiff

16 if the plaintiff shows good cause that such para17 graph should not apply.

18 (4) CERTIFICATE OF MERIT DESCRIBED.—In

19 this subsection, a ‘‘certificate of merit’’ means—

20 (A) with respect to a plaintiff, an affidavit

21 declaring that the individual (or the individual’s

22 attorney) has obtained a written opinion from a

23 medical expert who is knowledgeable of the rel24 evant medical issues involved in the action that

25 the defendant was negligent and the defend-
177

•HR 3955 SC2

1 ant’s conduct was a proximate cause of the al2 leged injury that is the subject of the action;

3 and

4 (B) with respect to a defendant, an affida5 vit declaring that the individual (or the individ6 ual’s attorney) has obtained a written opinion

7 from a medical expert who is knowledgeable of

8 the relevant medical issues involved in the ac9 tion that the defendant followed the appropriate

10 standards or procedures and exercised due care,

11 and that the defendant’s conduct was not the

12 proximate cause of the alleged injury that is the

13 subject of the action.

14 (c) EFFECT OF FAILURE TO MEET REQUIREMENT

15 TO FILE CERTIFICATE.—If an individual fails to file a cer16 tificate of merit with respect to a medical malpractice li17 ability action under subsection (b)—

18 (1) if the individual is a plaintiff, the court

19 shall dismiss the action without prejudice to the

20 refiling of the action by the individual;

21 (2) if the individual is a defendant, the court

22 shall award judgment to the plaintiff based on the

23 plaintiff’s pleadings; and
178

•HR 3955 SC2

1 (3) the court shall require the individual to pay

2 any court costs incurred by the opposing parties as

3 a result of the filing of the action.

4 (d) JUDICIAL NOTICE OF DECISION UNDER ADR

5 SYSTEM.—A medical malpractice liability action brought

6 after a decision on the claim that is the subject of the

7 action has been reached under an alternative dispute reso8 lution system shall be tried de novo, except that the court

9 shall take judicial notice of such decision and (in the case

10 of an action tried by a jury) shall read the decision to

11 the jury prior to any opening statements and make the

12 decision available to the jury during the trial.

13 SEC. 3104. TREATMENT OF NONECONOMIC AND PUNITIVE

14 DAMAGES.

15 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

16 total amount of noneconomic damages that may be award17 ed to a claimant and the members of the claimant’s family

18 for losses resulting from the injury which is the subject

19 of a medical malpractice liability action may not exceed

20 $250,000, regardless of the number of parties against

21 whom the action is brought or the number of actions

22 brought with respect to the injury.

23 (b) TREATMENT OF PUNITIVE DAMAGES AWARDED

24 AGAINST MANUFACTURER OF MEDICAL PRODUCT.—
179

•HR 3955 SC2

1 (1) LIMITATION ON AMOUNT OF AWARD.—The

2 total amount of punitive or exemplary damages that

3 may be awarded with respect to an injury which is

4 the subject of a medical malpractice liability action

5 may not exceed twice the total amount of other dam6 ages awarded with respect to the injury.

7 (2) DISTRIBUTION OF AWARD.—Of the total

8 amount of any punitive damages awarded in a medi9 cal malpractice liability action, 50 percent shall be

10 paid to the claimant and 50 percent shall be paid to

11 the State in which the action is brought (or, in a

12 case brought in Federal court, in the State in which

13 the health care services that caused the injury that

14 is the subject of the action were provided) for the

15 purposes of carrying out the activities described in

16 paragraph (3).

17 (3) ACTIVITIES DESCRIBED.—A State shall use

18 amounts paid pursuant to paragraph (2) to carry

19 out activities to assure the safety and quality of

20 health care services provided in the State, including

21 (but not limited to)—

22 (A) implementing health care quality as23 surance programs;

24 (B) carrying out programs to reduce mal25 practice-related costs for providers volunteering
180

•HR 3955 SC2

1 to provide services in medically underserved

2 areas; and

3 (C) implementing and operating a State al4 ternative dispute resolution system certified by

5 the Secretary under section 3203.

6 (4) MAINTENANCE OF EFFORT.—A State shall

7 use any amounts paid pursuant to paragraph (2) to

8 supplement and not to replace amounts spent by the

9 State for the activities described in paragraph (3).

10 (c) SEVERAL LIABILITY FOR NONECONOMIC DAM11 AGES.—The liability of each defendant for noneconomic

12 damages shall be several only and shall not be joint, and

13 each defendant shall be liable only for the amount of non14 economic damages allocated to the defendant in direct pro15 portion to the defendant’s percentage of responsibility (as

16 determined by the trier of fact).

17 SEC. 3105. PERIODIC PAYMENTS FOR FUTURE LOSSES.

18 (a) PERIODIC PAYMENTS PERMITTED.—

19 (1) IN GENERAL.—In any medical malpractice

20 liability action in which the damages awarded for fu21 ture economic loss exceeds $100,000, a defendant

22 may not be required to pay such damages in a sin23 gle, lump-sum payment, but may be permitted to

24 make such payments on a periodic basis if the

25 court—
181

•HR 3955 SC2

1 (A) determines that economic damages in2 curred through the date of the award shall be

3 paid;

4 (B) bases the periods for such payments

5 upon projections of when such expenses are

6 likely to be incurred; and

7 (C) determines that the periodic payments

8 are adequately secured.

9 (b) WAIVER.—A court may waive the application of

10 subsection (a) with respect to a defendant if the court de11 termines that it is not in the best interests of the plaintiff

12 to receive payments for damages on such a periodic basis.

13 SEC. 3106. TREATMENT OF ATTORNEY’S FEES AND OTHER

14 COSTS.

15 (a) LIMITATION ON AMOUNT OF CONTINGENCY

16 FEES.—

17 (1) IN GENERAL.—An attorney who represents,

18 on a contingency fee basis, a claimant in a medical

19 malpractice liability claim may not charge, demand,

20 receive, or collect for services rendered in connection

21 with such claim in excess of the following amount re22 covered by judgment or settlement under such claim:

23 (A) 25 percent of the first $100,000 (or

24 portion thereof) recovered.
182

•HR 3955 SC2

1 (B) 20 percent of the next $150,000 (or

2 portion thereof) recovered.

3 (C) 15 percent of the next $250,000 (or

4 portion thereof) recovered.

5 (D) 10 percent of any amount in excess of

6 $500,000 recovered.

7 (2) CALCULATION OF PERIODIC PAYMENTS.—In

8 the event that a judgment or settlement includes

9 periodic or future payments of damages, the amount

10 recovered for purposes of computing the limitation

11 on the contingency fee under paragraph (1) shall be

12 based on the cost of the annuity or trust established

13 to make the payments. In any case in which an an14 nuity or trust is not established to make such pay15 ments, such amount shall be based on the present

16 value of the payments.

17 (b) CONTINGENCY FEE DEFINED.—As used in this

18 section, the term ‘‘contingency fee’’ means any fee for pro19 fessional legal services which is, in whole or in part, con20 tingent upon the recovery of any amount of damages,

21 whether through judgment or settlement.

22 SEC. 3107. UNIFORM STATUTE OF LIMITATIONS.

23 (a) IN GENERAL.—No medical malpractice claim

24 may be initiated after the expiration of the 2-year period

25 that begins on the date on which the alleged injury that
183

•HR 3955 SC2

1 is the subject of such claim was discovered or the date

2 on which such injury should reasonably have been discov3 ered, whichever is earlier.

4 (b) EXCEPTION FOR MINORS.—In the case of an al5 leged injury suffered by a minor who has not attained 6

6 years of age, a medical malpractice claim may be initiated

7 after the expiration of the period described in subsection

8 (a) if the claim is initiated before the minor attains 8

9 years of age.

10 SEC. 3108. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

11 SERVICES.

12 (a) IN GENERAL.—In the case of a medical mal13 practice claim relating to services provided during labor

14 or the delivery of a baby, if the health care professional

15 or health care provider against whom the claim is brought

16 did not previously treat the claimant for the pregnancy,

17 the trier of fact may not find that such professional or

18 provider committed malpractice and may not assess dam19 ages against such professional or provider unless the mal20 practice is proven by clear and convincing evidence.

21 (b) APPLICABILITY TO GROUP PRACTICES OR

22 AGREEMENTS AMONG PROVIDERS.—For purposes of sub23 section (a), a health care professional shall be considered

24 to have previously treated an individual for a pregnancy

25 if the professional is a member of a group practice whose
184

•HR 3955 SC2

1 members previously treated the individual for the preg2 nancy or is providing services to the individual during

3 labor or the delivery of a baby pursuant to an agreement

4 with another professional.

5 SEC. 3109. APPLICATION OF MEDICAL PRACTICE PARAM6 ETERS IN MALPRACTICE LIABILITY ACTIONS.

7 (a) USE OF PARAMETERS AS AFFIRMATIVE DE8 FENSE.—In any medical malpractice liability action, it

9 shall be a complete defense to any allegation that the de10 fendant was negligent that, in the provision of (or the fail11 ure to provide) the services that are the subject of the

12 action, the defendant followed the appropriate practice pa13 rameter.

14 (b) RESTRICTION ON PARAMETERS CONSIDERED AP15 PROPRIATE.—

16 (1) PARAMETERS SANCTIONED BY SEC17 RETARY.—For purposes of subsection (a), a practice

18 parameter may not be considered appropriate with

19 respect to actions brought during a year unless the

20 Secretary has sanctioned the use of the parameter

21 for purposes of an affirmative defense to medical

22 malpractice liability actions brought during the year

23 in accordance with paragraph (2) or (3).

24 (2) PROCESS FOR SANCTIONING PARAM25 ETERS.—Not less frequently than October 1 of each
185

•HR 3955 SC2

1 year (beginning with 1995), the Secretary shall re2 view the practice guidelines and standards developed

3 by the Administrator for Health Care Policy and Re4 search pursuant to section 1142 of the Social Secu5 rity Act, and shall sanction those guidelines which

6 the Secretary considers appropriate for purposes of

7 an affirmative defense to medical malpractice liabil8 ity actions brought during the next calendar year as

9 appropriate practice parameters for purposes of sub10 section (a).

11 (3) USE OF STATE PARAMETERS.—Upon the

12 application of a State, the Secretary may sanction

13 practice parameters selected by the State for pur14 poses of an affirmative defense to medical mal15 practice liability actions brought in the State as ap16 propriate practice parameters for purposes of sub17 section (a) if the parameters meet such requirements

18 as the Secretary may impose.

19 (c) PROHIBITING APPLICATION OF FAILURE TO FOL20 LOW PARAMETERS AS PRIMA FACIE EVIDENCE OF NEG21 LIGENCE.—No plaintiff in a medical malpractice liability

22 action may be deemed to have presented prima facie evi23 dence that a defendant was negligent solely by showing

24 that the defendant failed to follow the appropriate practice

25 parameter.
186

•HR 3955 SC2

1 SEC. 3110. JURISDICTION OF FEDERAL COURTS.

2 Nothing in this subtitle shall be construed to estab3 lish jurisdiction over any medical malpractice liability ac4 tion in the district courts of the United States on the basis

5 of sections 1331 or 1337 of title 28, United States Code.

6 SEC. 3111. PREEMPTION.

7 (a) IN GENERAL.—This subtitle supersedes any State

8 law only to the extent that the State law permits the recov9 ery by a claimant or the assessment against a defendant

10 of a greater amount of damages or establishes a less strict

11 standard of proof for determining whether a defendant has

12 committed malpractice, than the provisions of this sub13 title.

14 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

15 OF LAW OR VENUE.—Nothing in this subtitle shall be con16 strued to—

17 (1) waive or affect any defense of sovereign im18 munity asserted by any State under any provision of

19 law;

20 (2) waive or affect any defense of sovereign im21 munity asserted by the United States;

22 (3) affect the applicability of any provision of

23 the Foreign Sovereign Immunities Act of 1976;

24 (4) preempt State choice-of-law rules with re25 spect to claims brought by a foreign nation or a citi26 zen of a foreign nation; or
187

•HR 3955 SC2

1 (5) affect the right of any court to transfer

2 venue or to apply the law of a foreign nation or to

3 dismiss a claim of a foreign nation or of a citizen

4 of a foreign nation on the ground in inconvenient

5 forum.

6 Subtitle C—Requirements for State

7 Alternative Dispute Resolution

8 Systems (ADR)

9 SEC. 3201. BASIC REQUIREMENTS.

10 (a) IN GENERAL.—A State’s alternative dispute reso11 lution system meets the requirements of this section if the

12 system—

13 (1) applies to all medical malpractice liability

14 claims under the jurisdiction of the courts of that

15 State;

16 (2) requires that a written opinion resolving the

17 dispute be issued not later than 6 months after the

18 date by which each party against whom the claim is

19 filed has received notice of the claim (other than in

20 exceptional cases for which a longer period is re21 quired for the issuance of such an opinion), and that

22 the opinion contain—

23 (A) findings of fact relating to the dispute,

24 and
188

•HR 3955 SC2

1 (B) a description of the costs incurred in

2 resolving the dispute under the system (includ3 ing any fees paid to the individuals hearing and

4 resolving the claim), together with an appro5 priate assessment of the costs against any of

6 the parties;

7 (3) requires individuals who hear and resolve

8 claims under the system to meet such qualifications

9 as the State may require (in accordance with regula10 tions of the Secretary);

11 (4) is approved by the State or by local govern12 ments in the State;

13 (5) with respect to a State system that consists

14 of multiple dispute resolution procedures—

15 (A) permits the parties to a dispute to se16 lect the procedure to be used for the resolution

17 of the dispute under the system, and

18 (B) if the parties do not agree on the pro19 cedure to be used for the resolution of the dis20 pute, assigns a particular procedure to the par21 ties;

22 (6) provides for the transmittal to the State

23 agency responsible for monitoring or disciplining

24 health care professionals and health care providers

25 of any findings made under the system that such a
189

•HR 3955 SC2

1 professional or provider committed malpractice, un2 less, during the 90-day period beginning on the date

3 the system resolves the claim against the profes4 sional or provider, the professional or provider

5 brings an action contesting the decision made under

6 the system; and

7 (7) provides for the regular transmittal to the

8 Administrator for Health Care Policy and Research

9 of information on disputes resolved under the sys10 tem, in a manner that assures that the identity of

11 the parties to a dispute shall not be revealed.

12 (b) APPLICATION OF MALPRACTICE LIABILITY

13 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

14 The provisions of subtitle B (other than sections 3102 and

15 3103) shall apply with respect to claims brought under

16 a State alternative dispute resolution system or the alter17 native Federal system in the same manner as such provi18 sions apply with respect to medical malpractice liability

19 actions brought in the State.

20 SEC. 3202. ALTERNATIVE DISPUTE RESOLUTION ADVISORY

21 BOARD.

22 (a) ESTABLISHMENT.—Not later than 1 year after

23 the date of the enactment of this Act, the Secretary shall

24 establish an Alternative Dispute Resolution Advisory

25 Board to advise the Secretary regarding the establishment
190

•HR 3955 SC2

1 of alternative dispute resolution systems at the State and

2 Federal levels.

3 (b) COMPOSITION.—The ADR Advisory Board shall

4 be composed of members appointed by the Secretary from

5 among representatives of the following:

6 (1) Physicians.

7 (2) Hospitals.

8 (3) Patient advocacy groups.

9 (4) State governments.

10 (5) Academic experts from applicable disciplines

11 (including medicine, law, public health, and econom12 ics) and specialists in arbitration and dispute resolu13 tion.

14 (6) Health insurers and medical malpractice in15 surers.

16 (7) Medical product manufacturers.

17 (8) Pharmaceutical companies.

18 (9) Other professions and groups determined

19 appropriate by the Secretary.

20 (c) DUTIES.—The ADR Advisory Board shall—

21 (1) examine various dispute resolution systems

22 and provide advice and assistance to States regard23 ing the establishment of such systems;

24 (2) not later than 1 year after the appointment

25 of its members, submit to the Secretary—
191

•HR 3955 SC2

1 (A) a model alternative dispute resolution

2 system that may be used by a State for pur3 poses of this subtitle, and

4 (B) a model alternative Federal system

5 that may be used by the Secretary pursuant to

6 section 3203(b)(1); and

7 (3) review the applications of States for certifi8 cation of State alternative dispute resolution systems

9 and make recommendations to the Secretary regard10 ing whether the systems should be certified under

11 section 3203.

12 SEC. 3203. CERTIFICATION OF STATE SYSTEMS; APPLICA13 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

14 (a) CERTIFICATION.—

15 (1) APPLICATION BY STATE.—Each State shall

16 submit an application to the ADR Advisory Board

17 describing its alternative dispute resolution system

18 and containing such information as the ADR Advi19 sory Board may require to make a recommendation

20 regarding whether the system meets the require21 ments of this subtitle.

22 (2) BASIS FOR CERTIFICATION.—Not later than

23 October 1 of each year (beginning with 1995), the

24 Secretary, taking into consideration the rec25 ommendations of the ADR Advisory Board, shall
192

•HR 3955 SC2

1 certify a State’s alternative dispute resolution sys2 tem under this subsection for the following calendar

3 year if the Secretary determines that the system

4 meets the requirements of section 3201.

5 (b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS6 TEM.—

7 (1) ESTABLISHMENT AND APPLICABILITY.—

8 Not later than October 1, 1995, the Secretary, tak9 ing into consideration the model alternative Federal

10 system submitted by the ADR Advisory Board under

11 section 3202(c)(2)(B), shall establish by rule an al12 ternative Federal ADR system for the resolution of

13 medical malpractice liability claims during a cal14 endar year in States that do not have in effect an

15 alternative dispute resolution system certified under

16 subsection (a) for the year.

17 (2) REQUIREMENTS FOR SYSTEM.—Under the

18 alternative Federal ADR system established under

19 paragraph (1)—

20 (A) paragraphs (1), (2), (6), and (7) of

21 section 3201(a) shall apply to claims brought

22 under the system;

23 (B) if the system provides for the resolu24 tion of claims through arbitration, the claims

25 brought under the system shall be heard and
193

•HR 3955 SC2

1 resolved by arbitrators appointed by the Sec2 retary in consultation with the Attorney Gen3 eral; and

4 (C) with respect to a State in which the

5 system is in effect, the Secretary may (at the

6 State’s request) modify the system to take into

7 account the existence of dispute resolution pro8 cedures in the State that affect the resolution

9 of medical malpractice liability claims.

10 (3) TREATMENT OF STATES WITH ALTER11 NATIVE SYSTEM IN EFFECT.—If the alternative Fed12 eral ADR system established under this subsection is

13 applied with respect to a State for a calendar year,

14 the State shall make a payment to the United States

15 (at such time and in such manner as the Secretary

16 may require) in an amount equal to 110 percent of

17 the costs incurred by the United States during the

18 year as a result of the application of the system with

19 respect to the State.

20 SEC. 3204. REPORTS ON IMPLEMENTATION AND EFFEC21 TIVENESS OF ALTERNATIVE DISPUTE RESO22 LUTION SYSTEMS.

23 (a) IN GENERAL.—Not later than 5 years after the

24 date of the enactment of this Act, the Secretary shall pre25 pare and submit to the Congress a report describing and
194

•HR 3955 SC2

1 evaluating State alternative dispute resolution systems op2 erated pursuant to this subtitle and the alternative Fed3 eral system established under section 3203(b).

4 (b) CONTENTS OF REPORT.—The Secretary shall in5 clude in the report prepared and submitted under sub6 section (a)—

7 (1) information on—

8 (A) the effect of the alternative dispute

9 resolution systems on the cost of health care

10 within each State,

11 (B) the impact of such systems on the ac12 cess of individuals to health care within the

13 State, and

14 (C) the effect of such systems on the qual15 ity of health care provided within the State; and

16 (2) to the extent that such report does not pro17 vide information on no-fault systems operated by

18 States as alternative dispute resolution systems pur19 suant to this part, an analysis of the feasibility and

20 desirability of establishing a system under which

21 medical malpractice liability claims shall be resolved

22 on a no-fault basis.
195

•HR 3955 SC2

1 TITLE IV—PAPERWORK REDUC2 TION AND ADMINISTRATIVE

3 SIMPLIFICATION

4 SEC. 4001. PREEMPTION OF STATE QUILL PEN LAWS.

5 After 1995, no effect shall be given to any provision

6 of State law that requires medical or health insurance

7 records (including billing information) to be maintained

8 in written, rather than electronic, form.

9 SEC. 4002. CONFIDENTIALITY OF ELECTRONIC HEALTH

10 CARE INFORMATION.

11 (a) PROMULGATION OF REQUIREMENTS.—

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

13 Human Services shall promulgate, and may modify

14 from time to time, requirements to facilitate and en15 sure the uniform, confidential treatment of individ16 ually identifiable health care information in elec17 tronic environments.

18 (2) ITEMS TO BE INCLUDED.—The require19 ments under this subsection shall—

20 (A) provide for the preservation of con21 fidentiality and privacy rights in electronic

22 health care claims processing and payment;

23 (B) apply to the collection, storage, han24 dling, and transmission of individually identifi25 able health care data (including initial and sub-
196

•HR 3955 SC2

1 sequent disclosures) in electronic form by all ac2 countable health plans, public and private third3 party payers, providers of health care, and all

4 other entities involved in the transactions;

5 (C) not apply to public health reporting re6 quired under State or Federal law;

7 (D) delineate protocols for securing elec8 tronic storage, processing, and transmission of

9 health care data;

10 (E) specify fair information practices that

11 assure a proper balance between required dis12 closures and use of data, including—

13 (i) creating a proper balance between

14 what an individual is expected to divulge to

15 a record-keeping organization and what the

16 individual seeks in return,

17 (ii) minimizing the extent to which in18 formation concerning an individual is itself

19 a source of unfairness in any decision

20 made on the basis of such information, and

21 (iii) creating and defining obligations

22 respecting the uses and disclosures that

23 will be made of recorded information about

24 an individual;
197

•HR 3955 SC2

1 (F) require publication of the existence of

2 health care data banks;

3 (G) establish appropriate protections for

4 highly sensitive data (such as data concerning

5 mental health, substance abuse, and commu6 nicable and genetic diseases);

7 (H) encourage the use of alternative dis8 pute resolution mechanisms (where appro9 priate); and

10 (I) provide for the deletion of information

11 that is no longer needed to carry out the pur12 pose for which it was collected.

13 (3) CONSULTATION WITH WORKING GROUP.—In

14 promulgating and modifying requirements under this

15 subsection, the Secretary shall consult with a work16 ing group of knowledgeable individuals representing

17 all interested parties (including third-party payers,

18 providers, consumers, employers, information man19 agers, and technical experts).

20 (4) DEADLINE.—The Secretary shall first pro21 mulgate requirements under this subsection by not

22 later than six months after the date of the enact23 ment of this Act.

24 (b) APPLICATION OF REQUIREMENTS.—
198

•HR 3955 SC2

1 (1) STATE ENFORCEMENT OF SIMILAR RE2 QUIREMENTS.—The requirements promulgated

3 under subsection (a) shall not apply to health care

4 information in a State if—

5 (A) the State has applied to the Secretary

6 for a determination that the State has in effect

7 a law that provides for the application of re8 quirements with respect to such information

9 (and enforcement provisions with respect to

10 such requirements) consistent with such re11 quirements (and with the enforcement provi12 sions of subsection (c)), and

13 (B) the Secretary determines that the

14 State has such a law in effect.

15 (2) APPLICATION TO CURRENT INFORMA16 TION.—The Secretary shall specify the extent to

17 which (and manner in which) the requirements pro18 mulgated under subsection (a) apply to information

19 collected before the effective date of the require20 ments.

21 (c) DEFENSE FOR PROPER DISCLOSURES.—An en22 tity that establishes that it has disclosed health care infor23 mation in accordance with the requirements promulgated

24 under subsection (a) has established a defense in an action

25 brought for improper disclosure of such information.
199

•HR 3955 SC2

1 (d) PENALTIES FOR VIOLATIONS.—An entity that

2 collects, stores, handles, transmits, or discloses health care

3 information in violation of the requirements promulgated

4 under subsection (a) is liable for civil damages, equitable

5 remedies, and attorneys’ fees (if appropriate), in accord6 ance with regulations of the Secretary.

7 SEC. 4003. STANDARDIZATION FOR THE ELECTRONIC RE8 CEIPT AND TRANSMISSION OF HEALTH PLAN

9 INFORMATION.

10 (a) GOALS.—The Secretary shall establish national

11 goals, and time frameworks, respecting the progress to be

12 made by the health care industry in eliminating unneces13 sary paperwork and achieving appropriate standardization

14 in the areas of electronic receipt and transmission of

15 health care claims and health plan information and eligi16 bility verification (consistent with the requirements pro17 mulgated under section 4002(a)).

18 (b) CONTINGENT REQUIREMENTS.—If the Secretary

19 determines that the health care industry has failed to meet

20 the goals established under subsection (a) by the deadlines

21 established by the Secretary under such subsection, the

22 Secretary shall promulgate (and may, from time to time,

23 modify) standards and requirements concerning the elec24 tronic receipt and transmission of health plan claims

25 forms and other health plan information.
200

•HR 3955 SC2

1 (c) COMPLIANCE.—

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

3 civil money penalty on any health plan (other than

4 a health plan described in paragraph (2)) that fails

5 to comply with standards and requirements promul6 gated under subsection (b) in an amount not to ex7 ceed $100 for each such failure. The provisions of

8 section 1128A of the Social Security Act (other than

9 the first sentence of subsection (a) and other than

10 subsection (b)) shall apply to a civil money penalty

11 under this paragraph in the same manner as such

12 provisions apply to a penalty or proceeding under

13 section 1128A(a) of such Act.

14 (2) PLANS SUBJECT TO EFFECTIVE STATE REG15 ULATION.—A plan described in this paragraph is a

16 health plan that is subject to regulation by a State,

17 if the Secretary finds that—

18 (A) the State provides for application of

19 the standards and requirements promulgated

20 under subsection (b), and

21 (B) the State regulatory program provides

22 for the appropriate and effective enforcement of

23 such standards and requirements with respect

24 to such plans.
201

•HR 3955 SC2

1 (d) CONSULTATION.—The Secretary shall conduct

2 activities under this section in consultation with the Ac3 credited Standards Committee X–12 of the American Na4 tional Standards Institute, insurers, providers, and others.

5 SEC. 4004. USE OF UNIFORM HEALTH CLAIMS FORMS AND

6 IDENTIFICATION NUMBERS.

7 (a) GOALS.—The Secretary shall establish national

8 goals, and time frameworks, respecting the progress to be

9 made by the health care industry in achieving uniform10 ity—

11 (1) in the format and content of basic claims

12 forms under health plans, and

13 (2) in the use of common identification num14 bers for beneficiaries and providers of health care

15 items or services under health plans.

16 (b) CONTINGENT REQUIREMENTS.—If the Secretary

17 determines that the health care industry has failed to meet

18 the goals established under subsection (a) by the deadlines

19 established by the Secretary under such subsection, the

20 Secretary shall promulgate (and may, from time to time,

21 modify) standards and requirements concerning—

22 (1) the format and content of basic claims

23 forms under health plans, and
202

•HR 3955 SC2

1 (2) the common identification numbers to be

2 used by health plans to identify health plan bene3 ficiaries and health care providers.

4 (c) COMPLIANCE.—

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

6 civil money penalty on any health plan (other than

7 a health plan described in paragraph (2)) that fails

8 to comply with standards and requirements promul9 gated under subsection (b) in an amount not to ex10 ceed $100 for each such failure. The provisions of

11 section 1128A of the Social Security Act (other than

12 the first sentence of subsection (a) and other than

13 subsection (b)) shall apply to a civil money penalty

14 under this paragraph in the same manner as such

15 provisions apply to a penalty or proceeding under

16 section 1128A(a) of such Act.

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

19 health plan that is subject to regulation by a State,

20 if the Secretary finds that—

21 (A) the State provides for application of

22 the standards and requirements promulgated

23 under subsection (b), and

24 (B) the State regulatory program provides

25 for the appropriate and effective enforcement of
203

•HR 3955 SC2

1 such standards and requirements with respect

2 to such plans.

3 (d) CONSULTATION.—The Secretary shall conduct

4 activities under this section in consultation with the

5 Workgroup for Electronic Data Interchange and with in6 surers, providers, and others.

7 SEC. 4005. PRIORITY AMONG INSURERS.

8 (a) GOALS.—The Secretary shall establish national

9 goals, and time frameworks, respecting the progress to be

10 made by the health care industry in achieving uniformity

11 in the rules for determining the liability of insurers when

12 benefits are payable under two or more health plans.

13 (b) CONTINGENT REQUIREMENTS.—If the Secretary

14 determines that the health care industry has failed to meet

15 the goals established under subsection (a) by the deadlines

16 established by the Secretary under such subsection, the

17 Secretary shall promulgate (and may, from time to time,

18 modify) rules for determining the liability of health plans

19 when benefits are payable under two or more health plans.

20 (c) COMPLIANCE.—

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

22 civil money penalty on any health plan (other than

23 a health plan described in paragraph (2)) that fails

24 to comply with rules promulgated under subsection

25 (b) in an amount not to exceed $100 for each such
204

•HR 3955 SC2

1 failure. The provisions of section 1128A of the So2 cial Security Act (other than the first sentence of

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

4 apply to a civil money penalty under this paragraph

5 in the same manner as such provisions apply to a

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

7 such Act.

8 (2) PLANS SUBJECT TO EFFECTIVE STATE REG9 ULATION.—A plan described in this paragraph is a

10 health plan that is subject to regulation by a State,

11 if the Secretary finds that—

12 (A) the State provides for application of

13 the rules established under subsection (b), and

14 (B) the State regulatory program provides

15 for the appropriate and effective enforcement of

16 such rules with respect to such plans.

17 (d) CONSULTATION.—The Secretary shall conduct

18 activities under this section in consultation with health

19 plans.

20 SEC. 4006. FURNISHING OF INFORMATION AMONG HEALTH

21 PLANS.

22 (a) GOALS.—The Secretary shall establish national

23 goals, and time frameworks, respecting the progress to be

24 made by the health care industry in achieving uniformity
205

•HR 3955 SC2

1 in the availability of information among health plans when

2 benefits are payable under two or more health plans.

3 (b) CONTINGENT REQUIREMENTS.—If the Secretary

4 determines that the health care industry has failed to meet

5 the goals established under subsection (a) by the deadlines

6 established by the Secretary under such subsection, the

7 Secretary shall promulgate (and may, from time to time,

8 modify) requirements concerning the transfer among

9 health plans (and annual updating) of appropriate infor10 mation (which may include requirements for the use of

11 unique identifiers, and for the listing of all individuals cov12 ered under a health plan).

13 (c) COMPLIANCE.—

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

15 civil money penalty on any health plan (other than

16 a health plan described in paragraph (2)) that fails

17 to comply with requirements promulgated under sub18 section (b) in an amount not to exceed $100 for

19 each such failure. The provisions of section 1128A

20 of the Social Security Act (other than the first sen21 tence of subsection (a) and other than subsection

22 (b)) shall apply to a civil money penalty under this

23 paragraph in the same manner as such provisions

24 apply to a penalty or proceeding under section

25 1128A(a) of such Act.
206

•HR 3955 SC2

1 (2) PLANS SUBJECT TO EFFECTIVE STATE REG2 ULATION.—A plan described in this paragraph is a

3 health plan that is subject to regulation by a State,

4 if the Secretary finds that—

5 (A) the State provides for application of

6 the requirements promulgated under subsection

7 (b), and

8 (B) the State regulatory program provides

9 for the appropriate and effective enforcement of

10 such requirements with respect to such plans.

11 (d) CONSULTATION.—The Secretary shall conduct

12 activities under this section in consultation with health

13 plans.

14 SEC. 4007. DEFINITIONS.

15 For purposes of this title—

16 (1) The term ‘‘health plan’’ means any contract

17 or arrangement under which an entity bears all or

18 part of the cost of providing health care items and

19 services, including a hospital or medical expense in20 curred policy or certificate, hospital or medical serv21 ice plan contract, or health maintenance subscriber

22 contract (including any closed accountable health

23 plan), but does not include (except for purposes of

24 sections 4005 and 4006)—
207

•HR 3955 SC2

1 (A) coverage only for accident, dental, vi2 sion, disability, or long term care, medicare

3 supplemental health insurance, or any combina4 tion thereof,

5 (B) coverage issued as a supplement to li6 ability insurance,

7 (C) workers’ compensation or similar in8 surance, or

9 (D) automobile medical-payment insur10 ance.

11 (2) The term ‘‘provider’’ means a physician,

12 hospital, pharmacy, laboratory, or other person li13 censed or otherwise authorized under applicable

14 State laws to furnish health care items or services.

15 (3) The term ‘‘Secretary’’ means the Secretary

16 of Health and Human Services.
208

•HR 3955 SC2

1 TITLE V—EXPANDING ACCESS/

2 PREVENTIVE CARE

3 Subtitle A—Expanding Access

4 Through Community Health Au5 thorities

6 SEC. 5001. COMMUNITY HEALTH AUTHORITIES DEM7 ONSTRATION PROJECTS.

8 (a) IN GENERAL.—Title XIX of the Social Security

9 Act, as amended by section 13631(b) of the Omnibus

10 Budget Reconciliation Act of 1993, is amended—

11 (1) by redesignating section 1931 as section

12 1932; and

13 (2) by inserting after section 1930 the following

14 new section:

15 ‘‘COMMUNITY HEALTH AUTHORITIES DEMONSTRATION

16 PROJECTS

17 ‘‘SEC. 1931. (a) IN GENERAL.—In order to test the

18 effectiveness of various innovative health care delivery ap19 proaches through the operation of community health au20 thorities, the Secretary shall operate a program under

21 which States establish projects to demonstrate the effec22 tiveness of such approaches in providing access to cost23 effective preventive and primary care and related services

24 for various areas and populations, including low-income

25 residents of medically underserved areas or for medically
209

•HR 3955 SC2

1 underserved populations. A State may operate more than

2 one such project.

3 ‘‘(b) SELECTION OF STATE PROJECTS.—

4 ‘‘(1) IN GENERAL.—A State is eligible to par5 ticipate in the program, and establish a demonstra6 tion project, under this section only if—

7 ‘‘(A) the State submits to the Secretary an

8 application, at such time and in such form as

9 the Secretary may require, for participation in

10 the program; and

11 ‘‘(B) the Secretary finds that—

12 ‘‘(i) the application contains assur13 ances that the State will support the devel14 opment of a community health authority

15 that meets the requirements of this sec16 tion,

17 ‘‘(ii) the community health authority

18 will meet the requirements for such an au19 thority under subsection (c),

20 ‘‘(iii) the State provides sufficient as21 surances that the demonstration project of

22 a community health authority meets (or,

23 when operational, will meet) the require24 ments of subsection (d), and
210

•HR 3955 SC2

1 ‘‘(iv) the State will comply with the

2 requirements of subsections (g) and (h).

3 ‘‘(2) CONTENTS OF APPLICATION.—Each appli4 cation submitted under paragraph (1) for a dem5 onstration project shall include at least the follow6 ing:

7 ‘‘(A) A description of the proposed commu8 nity health authority and of the area or popu9 lation that the authority will serve.

10 ‘‘(B) A demonstration that the CHA will

11 serve at least one geographic area or population

12 group that is designated as medically under13 served under section 330 of the Public Health

14 Service Act or as having a shortage of health

15 professionals under section 332 of such Act.

16 ‘‘(C) An assessment of the area’s or popu17 lation’s need for services and an assurance that

18 the services of the CHA will be responsive to

19 those needs.

20 ‘‘(D) A list of the items and services to be

21 furnished by the CHA under the project, bro22 ken down by those items and services that are

23 treated as medical assistance under the State

24 plan under this title and other items and serv25 ices that will be provided by the CHA (either
211

•HR 3955 SC2

1 directly or through coordination with other enti2 ties).

3 ‘‘(E) An assurance that the CHA has en4 tered into (or plans to enter into) written par5 ticipation agreements with a sufficient number

6 of providers to enable the CHA to furnish all of

7 such items and services to enrolled individuals.

8 ‘‘(F) An assurance that the State plan

9 under this title will provide payment to the au10 thority in accordance with subsection (e).

11 ‘‘(G) Evidence of support and assistance

12 from other State agencies with responsibility for

13 providing or supporting the provision of preven14 tive and primary care services to underserved

15 and at-risk populations.

16 ‘‘(H) A proposed budget for the CHA.

17 ‘‘(3) PRIORITY.—The Secretary shall give prior18 ity to those applications proposing to support a

19 CHA that includes as participating providers all

20 Federally-qualified health centers serving the area or

21 population or (in areas for which there are no Fed22 erally-qualified health centers) all entities that would

23 be Federally-qualified health centers but for the fail24 ure to meet the requirement described in section

25 329(f)(2)(G)(i) of the Public Health Service Act or
212

•HR 3955 SC2

1 the requirement described in section 330(e)(3)(G)(i)

2 of such Act (relating to the composition of the enti3 ty’s governing board).

4 ‘‘(4) PERIOD OF APPROVAL.—Each project ap5 proved under this section shall be approved for a pe6 riod of not less than 5 years, subject to renewal for

7 subsequent periods unless such approval is with8 drawn for cause by the Secretary or at the request

9 of the State.

10 ‘‘(c) COMMUNITY HEALTH AUTHORITY (CHA) DE11 FINED.—In this section, the terms ‘community health au12 thority’ and ‘CHA’ mean a nonprofit entity that meets the

13 following requirements:

14 ‘‘(1) The entity serves (or will serve at the time

15 it becomes operational under a project) a geographic

16 area or population group that includes those des17 ignated—

18 ‘‘(A) under section 330 of the Public

19 Health Service Act as medically underserved, or

20 ‘‘(B) under section 332 of such Act as a

21 health professions shortage area.

22 ‘‘(2) The entity enrolls—

23 ‘‘(A) individuals and families who are med24 icaid-eligible;
213

•HR 3955 SC2

1 ‘‘(B) within the limits of its available re2 sources and capacity, other individuals who

3 have incomes below 200 percent of the Federal

4 official poverty level; and

5 ‘‘(C) within the limits of its available re6 sources and capacity, other individuals and

7 families who are able to pay the costs of enroll8 ment.

9 ‘‘(3) Through its participating providers, the

10 entity provides or, through contracts, arranges for

11 the provision of (or, by the time it become oper12 ational, will so provide or arrange for the provision

13 of) at least preventive services, primary care serv14 ices, inpatient and outpatient hospital services, and

15 any other service provided by a participating pro16 vider for which payment may be made under the

17 State plan under this title to enrolled individuals.

18 ‘‘(4) The entity must include (to the maximum

19 extent practicable) as participating providers any of

20 the following providers that furnish services provided

21 by (or arranged by) the entity that are located in or

22 serve the area or population to be covered:

23 ‘‘(A) Federally-qualified health centers.

24 ‘‘(B) Rural health clinics.
214

•HR 3955 SC2

1 ‘‘(C) Local public health agencies that fur2 nish such services.

3 ‘‘(D) A hospital (or other provider of inpa4 tient or outpatient hospital services) which has

5 a participation agreement in effect with the

6 State under its plan under this title, which is

7 located in or serving the area or population to

8 be served.

9 ‘‘(5) The entity may include as participating

10 providers other providers (which may include private

11 physicians or group practice offices, other commu12 nity clinics, limited service providers (such as pre13 natal clinics), and health professionals teaching pro14 grams (such as area health educational centers))

15 and take other appropriate steps, to the extent need16 ed to assure that the network is reasonable in size

17 and able to provide (or arrange for the provision of)

18 the services it proposes to furnish to its enrollees.

19 ‘‘(6) The entity must maintain written agree20 ments with each participating provider under which

21 the provider agrees to participate in the CHA and

22 agrees to accept payment from the CHA as payment

23 in full for services furnished to individuals enrolled

24 with the CHA (subject to the requirements of sub25 section (g)(4), in the case of services furnished by a
215

•HR 3955 SC2

1 provider that are described in subparagraph (B) or

2 (C) of section 1905(a)(2)).

3 ‘‘(7) Under the written agreements described in

4 paragraph (6), if a majority of the board of directors

5 of the entity has determined that a participating

6 provider is failing to meet any of the requirements

7 of the participation agreement, the board may termi8 nate the provider’s participation agreement in ac9 cordance with the following requirements:

10 ‘‘(A) Subject to subparagraph (B), prior to

11 any termination of a provider’s participation

12 agreement, the provider shall be entitled to 30

13 days prior notice, a reasonable opportunity to

14 correct any deficiencies, and an opportunity for

15 a full and fair hearing conducted by the entity

16 to dispute the reasons for termination. The pro17 vider shall be entitled to appeal the board of di18 rectors’ decision directly to a committee consist19 ing of representatives of all of the entity’s par20 ticipating providers.

21 ‘‘(B) If a majority of the board of directors

22 of the entity determines that the continued par23 ticipation of a provider presents an immediate

24 threat to the health and safety of patients or a

25 substantial risk of improper diversion of funds,
216

•HR 3955 SC2

1 the board may suspend the provider’s participa2 tion agreement (including the receipt of funds

3 under the agreement) for a period of up to 60

4 days. During this period, the entity shall take

5 steps to ensure that patients who were assigned

6 to or cared for by the suspended provider are

7 appropriately assigned or referred to alternative

8 participating providers. The suspended provider

9 shall be entitled to a hearing within the period

10 of the suspension to show cause why the sus11 pension should be lifted and its participation

12 agreement restored. If dissatisfied with the

13 board’s decision, the provider shall be entitled

14 to appeal the decision directly to a committee

15 consisting of representatives of all of the enti16 ty’s participating providers.

17 ‘‘(C) For all other disputes between the en18 tity and its participating providers (including

19 disputes over the amounts due or interim rates

20 to be paid to a provider), the entity shall pro21 vide an opportunity for a full and fair hearing.

22 ‘‘(8) The entity must be governed by a board of

23 directors that includes representatives of the partici24 pating providers and, as appropriate, other health

25 professionals, civic or business leaders, elected offi-
217

•HR 3955 SC2

1 cials, and residents of the area or population served.

2 Not less than 51 percent of such board shall be com3 posed of individuals who are enrolled in the CHA

4 and who are representatives of the community

5 served.

6 ‘‘(d) DEMONSTRATION PROJECT REQUIREMENTS.—

7 The requirements of this subsection, with respect to a

8 demonstration project of a CHA under this section, are

9 as follows:

10 ‘‘(1)(A) All services furnished by the CHA

11 under the project shall be available and accessible to

12 all enrolled individuals and, except as provided in

13 subparagraph (B), must be available without regard

14 to an individual’s ability to pay for such services.

15 ‘‘(B) A CHA shall prepare a schedule of dis16 counts to be applied to the payment of premiums by

17 individuals who are not medicaid-eligible individuals

18 which shall be adjusted on the basis of the individ19 ual’s ability to pay.

20 ‘‘(2) The CHA shall take appropriate steps to

21 emphasize the provision of preventive and primary

22 care services, and shall ensure that each enrolled in23 dividual is assigned to a primary care physician (to

24 the greatest extent appropriate and feasible), except

25 that the CHA shall establish a process through
218

•HR 3955 SC2

1 which an enrolled individual may be assigned to an2 other primary care physician for good cause shown.

3 ‘‘(3) The CHA must make reasonable efforts to

4 reduce the unnecessary or inappropriate use of hos5 pital or other high-cost services through an emphasis

6 on preventive and primary care services, the imple7 mentation of utilization review or other appropriate

8 methods.

9 ‘‘(4) The State must regularly provide the CHA

10 with information on other medical, health, and relat11 ed benefits that may be available to individuals en12 rolled with the CHA under programs other than the

13 State plan under this title, and the CHA must pro14 vide its enrolled individuals with enrollment informa15 tion and other assistance to assist them in obtaining

16 such benefits.

17 ‘‘(5) The State and the CHA must meet such

18 financial standards and requirements and reporting

19 requirements as the Secretary specifies and must

20 prepare and submit to the Secretary an annual inde21 pendent financial audit conducted in accordance with

22 requirements specified by the Secretary.

23 ‘‘(6) In collaboration with the State, the CHA

24 must adopt and use community-oriented, patient-re25 sponsive quality assurance and control systems in
219

•HR 3955 SC2

1 accordance with requirements specified by the Sec2 retary. Such systems must include at least an ongo3 ing quality assurance program that measures

4 consumer satisfaction with the care provided under

5 the network, stresses improved health outcomes, and

6 operates a community health status improvement

7 process that identifies and investigates community

8 health problems and implements measures designed

9 to remedy them.

10 ‘‘(e) CAPITATION PAYMENTS.—

11 ‘‘(1) IN GENERAL.—Under a demonstration

12 project under this section, the State shall enter into

13 an annual contract with the CHA under which the

14 State shall make monthly payments to the CHA for

15 covered services furnished through the CHA to indi16 viduals entitled to medical assistance under this title

17 in the amount specified in paragraph (2). Payment

18 shall be made at the beginning of each month on the

19 basis of estimates of the amounts payable and

20 amounts subsequently paid are subject to adjust21 ment to reflect the amounts by which previous pay22 ments were greater or less than the amount of pay23 ments that should have been made.

24 ‘‘(2) AMOUNT OF CAPITATION PAYMENT.—The

25 amount of a monthly payment under paragraph (1)
220

•HR 3955 SC2

during a contract year, shall be not less than 1 1 ⁄12 of

2 the product of—

3 ‘‘(A)(i) the average per capita amounts ex4 pended under this title under the State plan for

5 covered services to be furnished under the dem6 onstration project for similar Medicaid-eligible

7 individuals for the most recent 12-month period

8 ending before the date of the enactment of this

9 section, increased by (ii) the percentage change

10 in the consumer price index for all urban con11 sumers (all items; U.S. city average) during the

12 period that begins upon the expiration of such

13 12-month period and ends upon the expiration

14 of the most recent 12-month period ending be15 fore the first month of the contract year for

16 which complete financial data on such index is

17 available, and

18 ‘‘(B) the number of Medicaid-eligible indi19 viduals enrolled under the project as of the

20 15th day of the month prior to the first month

21 of the contract year (or, in the case of the first

22 year for which a contract is in effect under this

23 subsection, the CHA’s reasonable estimate of

24 the number of such individuals who will be en-
221

•HR 3955 SC2

1 rolled in the project as of the 15th day of such

2 month).

3 ‘‘(f) ADDITIONAL STATE ASSISTANCE FOR PLAN4 NING, DEVELOPMENT, AND OPERATIONS.—

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

6 in addition to the payments under subsection (e),

7 demonstration projects approved under this section

8 are eligible to have approved expenditures described

9 in paragraph (3) treated, for purposes of section

10 1903(a)(7), as expenditures found necessary by the

11 Secretary for the proper and efficient administration

12 of the State plan under this title.

13 ‘‘(2) SPECIAL RULES.—

14 ‘‘(A) LIMITATION WITH RESPECT TO ANY

15 COMMUNITY HEALTH AUTHORITY.—The total

16 amount of expenditures with respect to any

17 CHA that may be treated as expenditures for

18 medical assistance under paragraph (1) for any

19 12-month period shall not exceed $250,000.

20 ‘‘(B) LIMITATION ON NUMBER OF

21 YEARS.—The number of 12-month periods for

22 which expenditures are treated as expenditures

23 for medical assistance under paragraph (1) for

24 a CHA shall not exceed—
222

•HR 3955 SC2

1 ‘‘(i) 2 for expenditures for planning

2 and development assistance, described in

3 paragraph (3)(A), and

4 ‘‘(ii) 2 for expenditures for oper5 ational assistance, described in paragraph

6 (3)(B).

7 ‘‘(C) NO RESULTING REDUCTION IN

8 AMOUNTS PROVIDED UNDER PHSA GRANTS.—

9 No grant to a CHA or one of its participating

10 providers under the Public Health Service Act

11 or this Act may be reduced on the ground that

12 activities of the CHA that are considered ap13 proved expenditures under paragraph (3) are

14 activities for which the CHA or the participat15 ing providers received funds under such Act.

16 ‘‘(3) APPROVED EXPENDITURES.—The ap17 proved expenditures described in this paragraph are

18 as follows:

19 ‘‘(A) PLANNING AND DEVELOPMENT.—Ex20 penditures for planning and development with

21 respect to a CHA, including—

22 ‘‘(i) developing internal management,

23 legal and financial and clinical, informa24 tion, and reporting systems for the CHA,
223

•HR 3955 SC2

1 and carrying out other operating activities

2 of the CHA;

3 ‘‘(ii) recruiting, training and com4 pensating management staff of the CHA

5 and, as appropriate and necessary, man6 agement and clinical staff of any partici7 pating provider;

8 ‘‘(iii) purchasing essential equipment

9 and acquiring, modernizing, expanding, or

10 (if cost-effective) constructing facilities for

11 the CHA and for participating providers

12 (including amortization costs and payment

13 of interest on loans); and

14 ‘‘(iv) entering into arrangements to

15 obtain or participate in emerging medical

16 technologies, including telemedicine.

17 ‘‘(B) OPERATIONS.—Expenditures in sup18 port of the operations of a CHA, including—

19 ‘‘(i) the ongoing management of the

20 CHA, including daily program administra21 tion, recordkeeping and reporting, assur22 ance of proper financial management (in23 cluding billings and collections) and over24 sight of program quality;
224

•HR 3955 SC2

1 ‘‘(ii) developing and operating systems

2 to enroll eligible individuals in the CHA;

3 ‘‘(iii) data collection, in collaboration

4 with the State medicaid agency and the

5 State health department, designed to

6 measure changes in patient access to care,

7 the quality of care furnished, and patient

8 health status, and health care outcomes;

9 ‘‘(iv) ongoing community outreach

10 and community education to all residents

11 of the area or population served, to pro12 mote the enrollment of eligible individuals

13 and the appropriate utilization of health

14 services by such individuals;

15 ‘‘(v) the establishment of necessary

16 reserves or purchase of stop-loss coverage;

17 and

18 ‘‘(vi) activities relating to health pro19 fessions training, including residency train20 ing at participating provider sites.

21 ‘‘(g) ADDITIONAL REQUIREMENTS.—

22 ‘‘(1) MANDATORY ENROLLMENT OF MEDICAID23 ELIGIBLE INDIVIDUALS.—Notwithstanding any pro24 vision of section 1903(m), a State participating in a

25 demonstration project under this section may require
225

•HR 3955 SC2

1 that each medicaid-eligible resident in the service

2 area of a CHA operating under the project is not eli3 gible to receive any medical assistance under the

4 State plan that may be obtained through enrollment

5 with the CHA unless the individual receives such as6 sistance through enrollment with the CHA.

7 ‘‘(2) CONTINUED ENTITLEMENT TO ADDI8 TIONAL BENEFITS.—In the case of a medicaid-eligi9 ble individual enrolled with a CHA under a dem10 onstration project under this section, the individual

11 shall remain entitled to medical assistance for serv12 ices which are not covered services under the project.

13 ‘‘(3) HMO-RELATED REQUIREMENTS.—A CHA

14 under this section shall be deemed to meet the re15 quirements of section 1903(m) (subject to paragraph

16 (1)) in the same manner as an entity listed under

17 section 1903(m)(2)(G).

18 ‘‘(4) TREATMENT OF FEDERALLY-QUALIFIED

19 HEALTH CENTERS AND RURAL HEALTH CLINICS.—

20 Payments under a demonstration project under this

21 section to a Federally qualified health center or

22 rural health clinic which is a participating provider

23 shall be made consistent with section

24 1902(a)(13)(E) for all services offered by the CHA

25 which are provided by such a center or clinic.
226

•HR 3955 SC2

1 ‘‘(5) OUTSTATIONING ELIGIBILITY WORKERS.—

2 Under the project, the State may (in addition to

3 meeting the requirements of section 1902(a)(55))

4 provide for, or pay the reasonable costs of, station5 ing eligibility workers at appropriate service sites

6 under the project, and may permit medicaid-eligible

7 individuals to be enrolled under the State plan at

8 such a CHA or at such a site.

9 ‘‘(6) PURCHASE OF STOP-LOSS COVERAGE.—

10 The State shall ensure that the CHA has purchased

11 stop-loss coverage to protect against default on its

12 obligations under the project. If an entity otherwise

13 qualified to serve as a CHA is prohibited under

14 State law from purchasing such coverage, the State

15 shall waive the application of such law to the extent

16 necessary to permit the entity to purchase such cov17 erage.

18 ‘‘(h) EVALUATION AND REPORTING.—

19 ‘‘(1) CHA.—Each CHA in a State with a dem20 onstration project approved under this section shall

21 prepare and submit to the State an annual report on

22 its activities during the previous year.

23 ‘‘(2) STATE.—Taking into account the reports

24 submitted pursuant to paragraph (1), each State

25 with a demonstration project approved under this
227

•HR 3955 SC2

1 section shall prepare and submit to the Secretary an

2 annual evaluation of its activities and services under

3 this section. Such evaluation shall include an analy4 sis of the effectiveness of the project in providing

5 cost-effective health care to enrolled individuals.

6 ‘‘(3) REPORT TO CONGRESS.—Not later than 3

7 years after the date of the enactment of this section,

8 the Secretary shall submit to Congress a report on

9 the demonstration projects conducted under this sec10 tion. Such report shall include an analysis of the ef11 fectiveness of such projects in providing cost-effec12 tive health care for the areas or populations served.

13 ‘‘(i) COLLABORATION IN ADMINISTRATION.—In car14 rying out this section, the Secretary shall assure the high15 est possible level of collaboration between the Health Care

16 Financing Administration and the Public Health Service.

17 Such collaboration may include (if appropriate and fea18 sible) any of the following:

19 ‘‘(1) The provision by the Public Health Service

20 of new or increased grant support to eligible entities

21 participating in a CHA, in order to expand the avail22 ability of services (particularly preventive and pri23 mary care services).

24 ‘‘(2) The placement of health professionals at

25 eligible locations and collaboration with Federally-as-
228

•HR 3955 SC2

1 sisted health professions training programs located

2 in or near the areas served by community health au3 thorities.

4 ‘‘(3) The provision of technical and other non5 financial assistance.

6 ‘‘(j) DEFINITIONS.—In this section:

7 ‘‘(1) MEDICAID-ELIGIBLE INDIVIDUAL.—The

8 term ‘medicaid-eligible individual’ means an individ9 ual described in section 1902(a)(10)(A) and entitled

10 to medical assistance under the State plan.

11 ‘‘(2) PARTICIPATING PROVIDER.—The term

12 ‘participating provider’ means, with respect to a

13 CHA, a provider that has entered into an agreement

14 with the CHA for the provision of covered services

15 under a project under this section.

16 ‘‘(3) PREVENTIVE AND PRIMARY CARE SERV17 ICES.—‘Preventive’ and ‘primary’ services include

18 those services described in section 1905(l)(2)(A) and

19 included as Federally-qualified health center serv20 ices.’’.

21 (b) CONTINUED MEDICAID ELIGIBILITY FOR UP TO

22 1 YEAR.—Section 1902(e)(2) of such Act (42 U.S.C.

23 1396a(e)(2)) is amended—

24 (1) in subparagraph (A)—
229

•HR 3955 SC2

1 (A) by inserting ‘‘or with a community

2 health authority under a demonstration project

3 under section 1931’’ after ‘‘section 1876’’, and

4 (B) by striking ‘‘such organization or en5 tity’’ and inserting ‘‘such organization, entity,

6 or authority’’; and

7 (2) in subparagraph (B), by striking ‘‘effec8 tive.’’ and inserting the following: ‘‘effective (or, in

9 the case of an individual enrolled with a community

10 health authority under a demonstration project

11 under section 1931, of not more than 1 year begin12 ning on the date the individual’s enrollment with the

13 authority becomes effective).’’.

14 (c) EXCEPTION TO ANTI-KICKBACK LAW.—Section

15 1128B(b)(3) of such Act (42 U.S.C. 1320a–7b(b)(3)) is

16 amended—

17 (1) by striking ‘‘and’’ at the end of subpara18 graph (D),

19 (2) by striking the period at the end of sub20 paragraph (E) and inserting ‘‘; and’’, and

21 (3) by adding at the end the following new sub22 paragraph:

23 ‘‘(F) any remuneration paid, or received, by a

24 Federally qualified health center, rural health clinic,

25 or other entity which is a participating provider
230

•HR 3955 SC2

1 under a demonstration project under section 1931 as

2 part of an arrangement for the procurement of

3 goods or services or the referral of patients or the

4 lease or purchase of space or equipment.’’.

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

6 this section shall apply to calendar quarters beginning on

7 or after October 1, 1994.

8 SEC. 5002. HEALTH CENTER PROGRAM AMENDMENTS.

9 (a) AUTHORIZATION OF GRANTS FOR NETWORK DE10 VELOPMENT.—

11 (1) MIGRANT HEALTH CENTERS.—Section 329

12 of the Public Health Service Act (42 U.S.C. 254b)

13 is amended by adding at the end the following:

14 ‘‘(j)(1) The Secretary may make a grant, to an entity

15 receiving a grant under this section or to a group of such

16 entities, to support the planning and development of

17 health service networks (as defined in paragraph (3))

18 which will serve high impact areas, medically underserved

19 areas, or medically underserved populations within the

20 area they serve (or propose to serve).

21 ‘‘(2) A grant under this subsection for the planning

22 and development of a health service network may be used

23 for the following costs:
231

•HR 3955 SC2

1 ‘‘(A) The costs of developing the network cor2 porate entity, including planning and needs assess3 ment.

4 ‘‘(B) The costs of developing internal manage5 ment for the network, as well as costs of developing

6 legal, financial, clinical, information, billing, and re7 porting systems, and other costs necessary to

8 achieve operational status.

9 ‘‘(C) The costs of recruitment, training, and

10 compensation of management staff of the network

11 and, as appropriate and necessary, the management

12 and clinical staff of any participating provider.

13 ‘‘(D) The costs of developing additional primary

14 health and related service sites, including costs relat15 ed to purchase of essential equipment, acquisition,

16 modernization, expansion, or, if cost-effective, con17 struction of facilities.

18 ‘‘(3) In this subsection, the term ‘health service net19 work’ means a nonprofit private entity that—

20 ‘‘(A) through its participating providers (which

21 may provide services directly or through contract)

22 assures the provision of primary health and related

23 services and, as appropriate, supplemental health

24 services to residents of the high impact area or
232

•HR 3955 SC2

1 medically underserved area or members of the medi2 cally underserved population covered by the network,

3 ‘‘(B) includes, as participating providers, at

4 least all recipients of grants under this section or

5 section 330, 340, or 340A that provide primary

6 health and related services to the residents of the

7 area it serves (or proposes to serve), and that may

8 include, at the entity’s option, any other providers of

9 primary health or supplemental health services to

10 residents of the high impact area or medically un11 derserved area or members of the medically under12 served population covered by the network, but only

13 if such participating providers agree to provide serv14 ices without regard to an individual’s ability to pay,

15 and

16 ‘‘(C) is governed by individuals a majority of

17 whom are patients, employees, or board members of

18 its participating providers that receive grants under

19 this section or section 330, 340, or 340A.’’.

20 (2) COMMUNITY HEALTH CENTERS.—Section

21 330 of such Act (42 U.S.C. 254c) is amended by

22 adding at the end the following:

23 ‘‘(l)(1) The Secretary may make a grant, to an entity

24 receiving a grant under this section or to a group of such

25 entities, to support the planning and development of
233

•HR 3955 SC2

1 health service networks (as defined in section 329(j)(3))

2 which will serve high impact areas, medically underserved

3 areas, or medically underserved populations within the

4 area they serve (or propose to serve).

5 ‘‘(2) A grant under this subsection for the planning

6 and development of a health service network may be used

7 for the costs described in section 329(j)(2).’’.

8 (3) EFFECTIVE DATE.—The amendments made

9 by this subsection shall take effect on the date of the

10 enactment of this Act.

11 (b) EXTENSION OF AUTHORIZATION OF APPROPRIA12 TIONS.—

13 (1) MIGRANT HEALTH CENTERS.—Section

14 329(h)(1)(A) of such Act (42 U.S.C. 254b(h)(1)(A))

15 is amended—

16 (A) by inserting ‘‘and subsection (j)’’ after

17 ‘‘through (e)’’, and

18 (B) by striking ‘‘1994’’ and inserting

19 ‘‘1999’’.

20 (2) COMMUNITY HEALTH CENTERS.—Section

21 330(g)(1)(A) of such Act (42 U.S.C. 254c(g)(1)(A))

22 is amended by striking ‘‘1994’’ and inserting

23 ‘‘1999’’.
234

•HR 3955 SC2

1 Subtitle B—Expansion of Public

2 Health Programs on Preventive

3 Health

4 SEC. 5101. IMMUNIZATIONS AGAINST VACCINE-PREVENT5 ABLE DISEASES.

6 Section 317(j)(1) of the Public Health Service Act

7 (42 U.S.C. 247b(j)(1)), as redesignated by section

8 301(b)(1) of Public Law 103–183 (107 Stat. 2235), is

9 amended by striking ‘‘through 1995’’ and inserting

10 ‘‘through 1999’’.

11 SEC. 5102. PREVENTION, CONTROL, AND ELIMINATION OF

12 TUBERCULOSIS.

13 Section 317E(g) of the Public Health Service Act (42

14 U.S.C. 247b–6(g)), as added by section 301(a) of Public

15 Law 103–183 (107 Stat. 2234), is amended—

16 (1) in paragraph (1)(A), by striking ‘‘through

17 1998’’ and inserting ‘‘through 1999’’; and

18 (2) in paragraph (2), by striking ‘‘through

19 1998’’ and inserting ‘‘through 1999’’.

20 SEC. 5103. LEAD POISONING PREVENTION.–

21 Section 317A(l)(1) of the Public Health Service Act

22 (42 U.S.C. 247b–1(l)(1)) is amended by striking ‘‘through

23 1997’’ and inserting ‘‘through 1999’’.
235

•HR 3955 SC2

1 SEC. 5104. PREVENTIVE HEALTH MEASURES WITH RE2 SPECT TO BREAST AND CERVICAL CANCERS.

3 Section 1510(a) of the Public Health Service Act (42

4 U.S.C. 300n–5(a)), as redesignated by section 102(a)(1)

5 of Public Law 103–183 (107 Stat. 2229) and amended

6 by section 103 of such Public Law (107 Stat. 2230), is

7 amended by striking ‘‘through 1998’’ and inserting

8 ‘‘through 1999.’’.

9 SEC. 5105. OFFICE OF DISEASE PREVENTION AND HEALTH

10 PROMOTION.

11 (a) IN GENERAL.—Section 1701(b) of the Public

12 Health Service Act (42 U.S.C. 300u(b)) is amended by

13 striking ‘‘through 1996’’ and inserting ‘‘through 1999’’.

14 (b) PROMOTION OF INDIVIDUAL RESPONSIBILITY.—

15 Section 1701(a)(11) of such Act (42 U.S.C. 300u(a)(11))

16 is amended—

17 (1) by striking ‘‘and’’ at the end of subpara18 graph (C),

19 (2) by redesignating subparagraph (D) as sub20 paragraph (E), and

21 (3) by inserting after subparagraph (C) the fol22 lowing new subparagraph:

23 ‘‘(D) promote individual responsibility in

24 personal health care and in the use of valuable

25 health care resources; and’’.
236

•HR 3955 SC2

1 (c) MINORITY HEALTH.—Section 1707(f) of such Act

2 (42 U.S.C. 300u–6(f)) is amended by striking ‘‘1993.’’

3 and inserting ‘‘1993, $35,000,000 for each of the fiscal

4 years 1994 through 1996, and such sums as may be nec5 essary for each of the fiscal years 1997 through 1999.’’.

6 SEC. 5106. PREVENTIVE HEALTH AND HEALTH SERVICES

7 BLOCK GRANT.

8 Section 1901(a) of the Public Health Service Act (42

9 U.S.C. 300w(a)) is amended by striking ‘‘through 1997’’

10 and inserting ‘‘through 1999’’.

11 TITLE VI—ANTITRUST

12 PROVISIONS

13 SEC. 6001. PUBLICATION OF ANTITRUST GUIDELINES ON

14 ACTIVITIES OF HEALTH PLANS.

15 (a) IN GENERAL.—The Attorney General shall pro16 vide for the development and publication of explicit guide17 lines on the application of antitrust laws to the activities

18 of health plans. The guidelines shall be designed to facili19 tate the development and operation of plans, consistent

20 with the antitrust laws.

21 (b) REVIEW PROCESS.—The Attorney General shall

22 establish a review process under which the administrator

23 or sponsor of a health plan (or organization that proposes

24 to administer or sponsor a health plan) may submit a re25 quest to Attorney General to obtain a prompt opinion (but
237

•HR 3955 SC2

1 in no event later than 90 days after the Attorney General

2 receives the request) from the Department of Justice on

3 the plan’s conformity with the Federal antitrust laws.

4 (c) DEFINITIONS.—In this section—

5 (1) the term ‘‘antitrust laws’’—

6 (A) has the meaning given it in subsection

7 (a) of the first section of the Clayton Act (15

8 U.S.C. 12(a)), except that such term includes

9 section 5 of the Federal Trade Commission Act

10 (15 U.S.C. 45) to the extent such section ap11 plies to unfair methods of competition, and

12 (B) includes any State law similar to the

13 laws referred to in subparagraph (A); and

14 (2) the term ‘‘health plan’’ means any contract

15 or arrangement under which an entity bears all or

16 part of the cost of providing health care items and

17 services, including a hospital or medical expense in18 curred policy or certificate, hospital or medical serv19 ice plan contract, or health maintenance subscriber

20 contract, but does not include—

21 (A) coverage only for accident, dental, vi22 sion, disability, or long term care, medicare

23 supplemental health insurance, or any combina24 tion thereof,
238

•HR 3955 SC2

1 (B) coverage issued as a supplement to li2 ability insurance,

3 (C) workers’ compensation or similar in4 surance, or

5 (D) automobile medical-payment insur6 ance.

7 SEC. 6002. ISSUANCE OF HEALTH CARE CERTIFICATES OF

8 PUBLIC ADVANTAGE.

9 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

10 Attorney General, after consultation with the Secretary of

11 Health and Human Services, shall issue in accordance

12 with this section a certificate of public advantage to each

13 eligible health care collaborative activity that complies

14 with the requirements in effect under this section on or

15 after the expiration of the 1-year period that begins on

16 the date of the enactment of this Act (without regard to

17 whether or not the Attorney General has promulgated reg18 ulations to carry out this section by such date). Such ac19 tivity, and the parties to such activity, shall not be liable

20 under any of the antitrust laws for conduct described in

21 such certificate and engaged in by such activity if such

22 conduct occurs while such certificate is in effect.

23 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

24 CERTIFICATES.—
239

•HR 3955 SC2

1 (1) STANDARDS TO BE MET.—The Attorney

2 General shall issue a certificate to an eligible health

3 care collaborative activity if the Attorney General

4 finds that—

5 (A) the benefits that are likely to result

6 from carrying out the activity outweigh the re7 duction in competition (if any) that is likely to

8 result from the activity, and

9 (B) such reduction in competition is rea10 sonably necessary to obtain such benefits.

11 (2) FACTORS TO BE CONSIDERED.—

12 (A) WEIGHING OF BENEFITS AGAINST RE13 DUCTION IN COMPETITION.—For purposes of

14 making the finding described in paragraph

15 (1)(A), the Attorney General shall consider

16 whether the activity is likely—

17 (i) to maintain or to increase the

18 quality of health care,

19 (ii) to increase access to health care,

20 (iii) to achieve cost efficiencies that

21 will be passed on to health care consumers,

22 such as economies of scale, reduced trans23 action costs, and reduced administrative

24 costs,
240

•HR 3955 SC2

1 (iv) to preserve the operation of

2 health care facilities located in underserved

3 geographical areas,

4 (v) to improve utilization of health

5 care resources, and

6 (vi) to reduce inefficient health care

7 resource duplication.

8 (B) NECESSITY OF REDUCTION IN COM9 PETITION.—For purposes of making the finding

10 described in paragraph (1)(B), the Attorney

11 General shall consider—

12 (i) the ability of the providers of

13 health care services that are (or likely to

14 be) affected by the health care collabo15 rative activity and the entities responsible

16 for making payments to such providers to

17 negotiate societally optimal payment and

18 service arrangements,

19 (ii) the effects of the health care col20 laborative activity on premiums and other

21 charges imposed by the entities described

22 in clause (i), and

23 (iii) the availability of equally effi24 cient, less restrictive alternatives to achieve
241

•HR 3955 SC2

1 the benefits that are intended to be

2 achieved by carrying out the activity.

3 (c) ESTABLISHMENT OF CRITERIA AND PROCE4 DURES.—Subject to subsections (d) and (e), not later than

5 1 year after the date of the enactment of this Act, the

6 Attorney General and the Secretary shall establish jointly

7 by rule the criteria and procedures applicable to the issu8 ance of certificates under subsection (a). The rules shall

9 specify the form and content of the application to be sub10 mitted to the Attorney General to request a certificate,

11 the information required to be submitted in support of

12 such application, the procedures applicable to denying and

13 to revoking a certificate, and the procedures applicable to

14 the administrative appeal (if such appeal is authorized by

15 rule) of the denial and the revocation of a certificate. Such

16 information may include the terms of the health care col17 laborative activity (in the case of an activity in existence

18 as of the time of the application) and implementation plan

19 for the collaborative activity.

20 (d) ELIGIBLE HEALTH CARE COLLABORATIVE AC21 TIVITY.—To be an eligible health care collaborative activ22 ity for purposes of this section, a health care collaborative

23 activity shall submit to the Attorney General an applica24 tion that complies with the rules in effect under subsection

25 (c) and that includes—
242

•HR 3955 SC2

1 (1) an agreement by the parties to the activity

2 that the activity will not foreclose competition by en3 tering into contracts that prevent health care provid4 ers from providing health care in competition with

5 the activity,

6 (2) an agreement that the activity will submit

7 to the Attorney General annually a report that de8 scribes the operations of the activity and information

9 regarding the impact of the activity on health care

10 and on competition in health care, and

11 (3) an agreement that the parties to the activity

12 will notify the Attorney General and the Secretary of

13 the termination of the activity not later than 30

14 days after such termination occurs.

15 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

16 Not later than 30 days after an eligible health care col17 laborative activity submits to the Attorney General an ap18 plication that complies with the rules in effect under sub19 section (c) and with subsection (d), the Attorney General

20 shall issue or deny the issuance of such certificate. If, be21 fore the expiration of such 30-day period, the Attorney

22 General fails to issue or deny the issuance of such certifi23 cate, the Attorney General shall be deemed to have issued

24 such certificate.
243

•HR 3955 SC2

1 (f) REVOCATION OF CERTIFICATE.—Whenever the

2 Attorney General finds that a health care collaborative ac3 tivity with respect to which a certificate is in effect does

4 not meet the standards specified in subsection (b), the At5 torney General shall revoke such certificate.

6 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

7 (1) DENIAL AND REVOCATION OF CERTIFI8 CATES.—If the Attorney General denies an applica9 tion for a certificate or revokes a certificate, the At10 torney General shall include in the notice of denial

11 or revocation a statement of the reasons relied upon

12 for the denial or revocation of such certificate.

13 (2) JUDICIAL REVIEW.—

14 (A) AFTER ADMINISTRATIVE PROCEED15 ING.—(i) If the Attorney General denies an ap16 plication submitted or revokes a certificate is17 sued under this section after an opportunity for

18 hearing on the record, then any party to the

19 health care collaborative activity involved may

20 commence a civil action, not later than 60 days

21 after receiving notice of the denial or revoca22 tion, in an appropriate district court of the

23 United States for review of the record of such

24 denial or revocation.
244

•HR 3955 SC2

1 (ii) As part of the Attorney General’s an2 swer, the Attorney General shall file in such

3 court a certified copy of the record on which

4 such denial or revocation is based. The findings

5 of fact of the Attorney General may be set aside

6 only if found to be unsupported by substantial

7 evidence in such record taken as a whole.

8 (B) DENIAL OR REVOCATION WITHOUT AD9 MINISTRATIVE PROCEEDING.—If the Attorney

10 General denies an application submitted or re11 vokes a certificate issued under this section

12 without an opportunity for hearing on the

13 record, then any party to the health care col14 laborative activity involved may commence a

15 civil action, not later than 60 days after receiv16 ing notice of the denial or revocation, in an ap17 propriate district court of the United States for

18 de novo review of such denial or revocation.

19 (h) EXEMPTION.—A person shall not be liable under

20 any of the antitrust laws for conduct necessary—

21 (1) to prepare, agree to prepare, or attempt to

22 agree to prepare an application to request a certifi23 cate under this section, or
245

•HR 3955 SC2

1 (2) to attempt to enter into any health care col2 laborative activity with respect to which such a cer3 tificate is in effect.

4 (i) DEFINITIONS.—In this section:

5 (1) The term ‘‘antitrust laws’’ has the meaning

6 given it in section 6001(c)(1).

7 (2) The term ‘‘certificate’’ means a certificate

8 of public advantage authorized to be issued under

9 subsection (a).

10 (3) The term ‘‘health care collaborative activ11 ity’’ means an agreement (whether existing or pro12 posed) between 2 or more providers of health care

13 services that is entered into solely for the purpose of

14 sharing in the provision of health care services and

15 that involves substantial integration or financial

16 risk-sharing between the parties, but does not in17 clude the exchanging of information, the entering

18 into of any agreement, or the engagement in any

19 other conduct that is not reasonably required to

20 carry out such agreement.

21 (4) The term ‘‘health care services’’ includes

22 services related to the delivery or administration of

23 health care services.

24 (5) The term ‘‘liable’’ means liable for any civil

25 or criminal violation of the antitrust laws.
246

•HR 3955 SC2

1 (6) The term ‘‘provider of health care services’’

2 means any individual or entity that is engaged in the

3 delivery of health care services in a State and that

4 is required by State law or regulation to be licensed

5 or certified by the State to engage in the delivery of

6 such services in the State.

7 TITLE VII—PREFUNDING GOV8 ERNMENT HEALTH BENEFITS

9 FOR CERTAIN ANNUITANTS

10 SEC. 7001. REQUIREMENT THAT CERTAIN AGENCIES

11 PREFUND GOVERNMENT HEALTH BENEFITS

12 CONTRIBUTIONS FOR THEIR ANNUITANTS.

13 (a) DEFINITIONS.—For the purpose of this section—

14 (1) the term ‘‘agency’’ means any agency or

15 other instrumentality within the executive branch of

16 the Government, the receipts and disbursements of

17 which are not generally included in the totals of the

18 budget of the United States Government submitted

19 by the President;

20 (2) the term ‘‘health benefits plan’’ means, with

21 respect to an agency, a health benefits plan, estab22 lished by or under Federal law, in which employees

23 or annuitants of such agency may participate;

24 (3) the term ‘‘health-benefits coverage’’ means

25 coverage under a health benefits plan’’;
247

•HR 3955 SC2

1 (4) an individual shall be considered to be an

2 ‘‘annuitant of an agency’’ if such individual is enti3 tled to an annuity, under a retirement system estab4 lished by or under Federal law, by virtue of—

5 (A) such individual’s service with, and sep6 aration from, such agency; or

7 (B) being the survivor of an annuitant

8 under subparagraph (A) or of an individual who

9 died while employed by such agency; and

10 (5) the term ‘‘Office’’ means the Office of Per11 sonnel Management.

12 (b) PREFUNDING REQUIREMENT.—

13 (1) IN GENERAL.—Effective as of October 1,

14 1994, each agency (or February 1, 1995, in the case

15 of the agency with the greatest number of employ16 ees, as determined by the Office) shall be required

17 to prepay the Government contributions which are

18 or will be required in connection with providing

19 health-benefits coverage for annuitants of such

20 agency.

21 (2) REGULATIONS.—The Office shall prescribe

22 such regulations as may be necessary to carry out

23 this section. The regulations shall be designed to en24 sure at least the following:
248

•HR 3955 SC2

1 (A) Amounts paid by each agency shall be

2 sufficient to cover the amounts which would

3 otherwise be payable by such agency (on a

4 ‘‘pay-as-you-go’’ basis), on or after the applica5 ble effective date under paragraph (1), on be6 half of—

7 (i) individuals who are annuitants of

8 the agency as of such effective date; and

9 (ii) individuals who are employed by

10 the agency as of such effective date, or

11 who become employed by the agency after

12 such effective date, after such individuals

13 have become annuitants of the agency (in14 cluding their survivors).

15 (B)(i) For purposes of determining any

16 amounts payable by an agency—

17 (I) this section shall be treated as if

18 it had taken effect at the beginning of the

19 20-year period which ends on the effective

20 date applicable under paragraph (1) with

21 respect to such agency; and

22 (II) in addition to any amounts pay23 able under subparagraph (A), each agency

24 shall also be responsible for paying any

25 amounts for which it would have been re-
249

•HR 3955 SC2

1 sponsible, with respect to the 20-year pe2 riod described in subclause (I), in connec3 tion with any individuals who are annu4 itants or employees of the agency as of the

5 applicable effective date under paragraph

6 (1).

7 (ii) Any amounts payable under this sub8 paragraph for periods preceding the applicable

9 effective date under paragraph (1) shall be pay10 able in equal installments over the 20-year pe11 riod beginning on such effective date.

12 (c) FASB STANDARDS.—Regulations under sub13 section (b) shall be in conformance with the provisions of

14 Standard 106 of the Financial Accounting Standards

15 Board, issued in December 1990.

16 (d) CLARIFICATION.—Nothing in this section shall be

17 considered to permit or require duplicative payments on

18 behalf of any individuals.

19 (e) DRAFT LEGISLATION.—The Office shall prepare

20 and submit to Congress any draft legislation which may

21 be necessary in order to carry out this section.

Æ

HR 3955 SC2——2

HR 3955 SC2——3

HR 3955 SC2——4
250

•HR 3955 SC2

HR 3955 SC2——5

HR 3955 SC2——6

HR 3955 SC2——7

HR 3955 SC2——8

HR 3955 SC2——9

HR 3955 SC2——10

HR 3955 SC2——11

HR 3955 SC2——12

HR 3955 SC2——13

HR 3955 SC2——14

HR 3955 SC2——15

HR 3955 SC2——16

HR 3955 SC2——17