II

104TH CONGRESS

1ST SESSION S. 168

To ensure individual and family security through health insurance coverage

for all Americans.

IN THE SENATE OF THE UNITED STATES

JANUARY 5, 1995

Mr. KENNEDY introduced the following bill; which was read twice and referred

to the Committee on Labor and Human Resources

A BILL

To ensure individual and family security through health

insurance coverage for all Americans.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Affordable Health Care for All Americans Act’’.

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

7 this Act is as follows:

TITLE I—HEALTH CARE SECURITY

Subtitle A—Universal Coverage and Individual Responsibility

PART 1—UNIVERSAL COVERAGE

Sec. 1001. Entitlement to health benefits.
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Sec. 1002. Individual responsibilities.

Sec. 1003. Protection of consumer choice.

Sec. 1004. Applicable health plan providing coverage.

Sec. 1005. Treatment of other nonimmigrants.

Sec. 1006. Effective date of entitlement.

PART 2—TREATMENT OF FAMILIES AND SPECIAL RULES

Sec. 1011. General rule of enrollment of family in same health plan.

Sec. 1012. Treatment of certain families.

Sec. 1013. Multiple employment situations.

Subtitle B—Benefits

Sec. 1101. Provision of comprehensive benefits by plans.

Sec. 1102. Provision of items or services contrary to religious belief or moral

conviction.

Sec. 1103. Balance billing.

Subtitle C—State Role in Reform

Sec. 1200. Participating State.

PART 1—STATE MARKET REFORM

Sec. 1201. Establishment of State market reform programs.

Sec. 1202. Certification of insured health plans.

Sec. 1203. Establishment of community rating areas.

Sec. 1204. Procedures for certification of purchasing cooperatives.

Sec. 1205. Coordination among purchasing cooperatives.

Sec. 1206. Preparation of information concerning plans and purchasing cooperatives.

Sec. 1207. Risk adjustment program.

Sec. 1208. Specification of annual general and initial enrollment periods.

Sec. 1209. Special rules regarding network plans.

Sec. 1210. Application of certain State laws.

Sec. 1211. Consumer advocate.

Sec. 1212. Election procedure for community-rated employers.

PART 2—REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

Sec. 1221. Single-payer system described.

Sec. 1222. General requirements for single-payer systems.

Sec. 1223. Additional rules for single-payer system.

Subtitle D—Expanded Access to Health Plans

PART 1—ACCESS THROUGH EMPLOYERS

Sec. 1301. Employer access and enrollment requirements.

Sec. 1302. Small employer requirements.

PART 2—ACCESS TO PURCHASING COOPERATIVES

Sec. 1311. Establishment of cooperatives.

Sec. 1312. Conflict of interest.

Sec. 1313. Membership.

Sec. 1314. Board of directors.

Sec. 1315. Choice of health plans.
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Sec. 1316. Limitation on activities.

Sec. 1317. Voluntary participation.

PART 3—ACCESS THROUGH ASSOCIATION PLANS

SUBPART A—CERTIFIED ASSOCIATION PLANS

Sec. 1321. Treatment of certified association plans.

Sec. 1322. Modifications of standards applicable to certified association plans.

Sec. 1323. Association plan defined.

Sec. 1324. Repeal of ERISA provisions.

SUBPART B—SPECIAL RULE FOR CHURCH AND MULTIEMPLOYER PLANS

Sec. 1325. Special rule for church and multiemployer plans.

PART 4—ACCESS THROUGH FEHBP

Sec. 1331. Access through FEHBP plans.

Subtitle E—Standards for Reform

PART 1—ESTABLISHMENT AND APPLICATION OF STANDARDS

Sec. 1401. Certified health plans.

Sec. 1402. General rules.

PART 2—STANDARDS APPLICABLE TO CERTIFIED INSURED HEALTH PLANS

Sec. 1411. Guaranteed issue and renewal.

Sec. 1412. Enrollment.

Sec. 1413. Rating limitations for community-rated market.

Sec. 1414. Nondiscrimination based on health status.

Sec. 1415. Benefits offered.

Sec. 1416. Requirements of supplementals.

Sec. 1417. Risk adjustment.

Sec. 1418. Financial requirements.

Sec. 1419. Collection and provision of standardized information.

Sec. 1420. Quality improvement and assurance.

Sec. 1421. Patient protections and provider selection.

Sec. 1422. Arrangements with essential community providers.

Sec. 1423. Access to specialized services.

Sec. 1424. Community rating area capacity.

Sec. 1425. Out-of-area coverage.

PART 3—STANDARDS APPLICABLE TO CERTIFIED SELF-INSURED HEALTH

PLANS

Sec. 1431. Standards applicable to certified self-insured health plans.

PART 4—PREEMPTION OF CERTAIN STATE LAWS

Sec. 1441. Preemption from State benefit mandates.

Sec. 1442. Preemption of State law restrictions on certified health plans.

PART 5—INTERIM STANDARDS

Sec. 1451. Application of interim standards.

Subtitle F—Federal Responsibilities
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PART 1—ESTABLISHMENT OF FEDERAL STANDARDS FOR CERTIFIED

INSURED HEALTH PLANS

Sec. 1500. Establishment.

PART 2—CERTIFICATION OF SELF-INSURED HEALTH PLANS

Sec. 1501. Establishment and certification of standards applicable to self-insured certified health plans.

Sec. 1502. Corrective actions for self-insured health plans.

Sec. 1503. ERISA applicability to self-insured health plans.

PART 3—OTHER RESPONSIBILITIES

Sec. 1521. Federal role in the case of a default by a State.

Sec. 1522. Rules determining separate employer status.

Sec. 1523. Workplace wellness program.

PART 4—COLLECTIVE BARGAINING DISPUTE RESOLUTION

Sec. 1531. Findings and purpose.

Sec. 1532. Application limited to transition period.

Sec. 1533. Request for appointment of board of inquiry.

Sec. 1534. Appointment of board of inquiry.

Sec. 1535. Public factfinding.

Sec. 1535A. Compensation of members of boards of inquiry.

Sec. 1535B. Maintenance of status quo.

Subtitle G—Miscellaneous Employer Requirements

Sec. 1601. Auditing of records.

Sec. 1602. Prohibition of certain employer discrimination.

Sec. 1603. Evasion of obligations.

Sec. 1604. Prohibition on self-funding of cost sharing benefits.

Sec. 1605. Enforcement.

Subtitle H—General Definitions; Miscellaneous Provisions

PART 1—GENERAL DEFINITIONS

Sec. 1700. Definitions and special rules relating to health plans.

Sec. 1701. Definitions relating to employment and income.

Sec. 1702. Other general definitions.

PART 2—MISCELLANEOUS PROVISIONS

Sec. 1711. Regulatory authority.

Sec. 1712. Neutrality concerning union organizing.

Sec. 1713. Social Security Act references.

Sec. 1714. Coverage of benefits under Affordable Health Care for All Americans Act.

Sec. 1715. Sense of the Committee concerning funding sources.

TITLE II—NEW BENEFITS

Subtitle A—Home and Community-Based Services

PART 1—HOME AND COMMUNITY-BASED SERVICES FOR INDIVIDUALS WITH

DISABILITIES
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Sec. 2101. State plans.

Sec. 2102. Individuals with disabilities defined.

Sec. 2103. Home and community-based services covered under State plan.

Sec. 2104. Cost sharing.

Sec. 2105. Quality assurance and safeguards.

Sec. 2106. Advisory groups.

Sec. 2107. Payments to States.

Sec. 2108. Appropriations; allotments to States.

Subtitle B—Life Care

Sec. 2201. Short title.

Sec. 2202. Life care: public insurance program for nursing home care.

Subtitle C—Sense of the Committee with Regard to Prescription Drugs

Sec. 2301. Sense of the Committee with regard to prescription drugs

TITLE III—PUBLIC HEALTH INITIATIVES

Subtitle A—Workforce Priorities Under Federal Payments

PART 1—INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION;

WORKFORCE PRIORITIES

SUBPART A—NATIONAL COUNCIL REGARDING WORKFORCE PRIORITIES

Sec. 3001. National Council on Graduate Medical Education.

SUBPART B—AUTHORIZED POSITIONS IN SPECIALTY TRAINING

Sec. 3011. Cooperation regarding approved physician training programs.

Sec. 3012. Annual authorization of number of specialty positions; requirements

regarding primary health care.

Sec. 3013. Allocations among specialities and programs.

CHAPTER 1—OPERATION OF APPROVED PHYSICIAN TRAINING PROGRAMS

Sec. 3031. Federal formula payments to qualified entities for the costs of the

operation of approved physician training programs.

Sec. 3032. Application for payments.

Sec. 3033. Availability of funds for payments; annual amount of payments.

CHAPTER 2—MEDICAL SCHOOL FUND ACCOUNT

Sec. 3041. Federal payments to the medical school fund.

Sec. 3042. Application for payments.

Sec. 3043. Availability of funds for payments; annual amount of payments.

CHAPTER 3—ACADEMIC HEALTH CENTERS

Sec. 3051. Federal formula payments to academic health centers.

Sec. 3052. Request for payments.

Sec. 3053. Availability of funds for payments; annual amount of payments.

SUBPART D—TRANSITIONAL PROVISIONS

Sec. 3061. Transitional payments to institutions.
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PART 2—INSTITUTIONAL COSTS OF GRADUATE NURSING EDUCATION;

WORKFORCE PRIORITIES

Sec. 3071. Authorized graduate nurse training positions; institutional costs.

Sec. 3072. Applicability of part 1 provisions.

Sec. 3073. Funding.

SUBPART B—TRANSITIONAL PROVISIONS FOR WORKFORCE STABILITY

Sec. 3081. Application.

Sec. 3082. Definitions.

Sec. 3083. Obligations of displacing employer and affiliated enterprises in event

of displacement.

Sec. 3084. Employment with successors.

Sec. 3085. Collective bargaining obligations during transition period.

Sec. 3086. General provisions.

Subtitle B—Health Research Initiatives

PART 1—PROGRAMS FOR CERTAIN AGENCIES

Sec. 3101. Biomedical and behavioral research.

Sec. 3102. Health services research.

PART 2—FUNDING FOR PROGRAM

Sec. 3111. Authorizations of appropriations.

Subtitle C—Health Services for Medically Underserved Populations

PART 1—INITIATIVES FOR ACCESS TO HEALTH CARE

SUBPART A—AUTHORIZATION OF APPROPRIATIONS

Sec. 3311. Authorizations of appropriations.

SUBPART B—DEVELOPMENT OF COMMUNITY HEALTH GROUPS AND HEALTH

CARE SITES AND SERVICES

Sec. 3321. Grants and contracts for development of plans and networks and the

expansion and development of health care sites and services.

Sec. 3322. Certain uses of awards.

Sec. 3323. Purposes and conditions.

SUBPART C—CAPITAL COST OF DEVELOPMENT OF COMMUNITY HEALTH

GROUPS AND OTHER PURPOSES

Sec. 3341. Direct loans and grants.

Sec. 3342. Certain requirements.

Sec. 3343. Defaults; right of recovery.

Sec. 3344. Application for assistance.

SUBPART D—ENABLING AND SUPPLEMENTAL SERVICES

Sec. 3361. Grants and contracts for enabling and supplemental services.

Sec. 3362. Authorizations of appropriations.

PART 2—NATIONAL HEALTH SERVICE CORPS

Sec. 3371. Authorizations of appropriations.
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Sec. 3372. Allocation for participation of nurses in scholarship and loan repayment programs.

Sec. 3373. Allocation for participation of psychiatrists, psychologists, and clinical social workers in scholarship and loan repayment programs.

PART 3—PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

Sec. 3381. Payments to hospitals.

Sec. 3382. Identification of eligible hospitals.

Sec. 3383. Amount of payments.

Sec. 3384. Base year.

PART 4—SENSE OF THE COMMITTEE

Sec. 3391. Sense of the Committee.

Subtitle D—Assistance For State Managed Mental Health And Substance

Abuse Programs

Sec. 3431. Availability of assistance.

Sec. 3432. Plan requirements.

Sec. 3433. Additional Federal responsibilities.

Sec. 3434. Authorization of appropriations.

Subtitle E—Comprehensive School Health Education; School-Related Health

Services

PART 1—HEALTHY STUDENTS-HEALTHY SCHOOLS GRANTS FOR SCHOOL

HEALTH EDUCATION

Sec. 3501. Purposes.

Sec. 3502. Healthy students-healthy schools grants.

Sec. 3503. Healthy students-healthy schools interagency task force.

Sec. 3504. Duties of the Secretary.

PART 5—SCHOOL-RELATED HEALTH SERVICES

SUBPART A—DEVELOPMENT AND OPERATION

Sec. 3581. Authorization of appropriations.

Sec. 3582. Eligibility for grants.

Sec. 3583. Preferences.

Sec. 3584. Planning and development grants.

Sec. 3585. Grants for operation of school health services.

Subtitle F—Public Health Service Initiative

Sec. 3601. Public Health Service initiative.

TITLE IV—MEDICAL MALPRACTICE

Subtitle A—Liability Reform

Sec. 4001. Federal tort reform.

Sec. 4002. State-based alternative dispute resolution mechanisms.

Sec. 4003. Limitation on amount of attorney’s contingency fees.

Sec. 4004. Reduction of awards for recovery from collateral sources.

Sec. 4005. Periodic payment of awards.

Sec. 4006. Construction.
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Subtitle B—Other Provisions Relating to Medical Malpractice Liability

Sec. 4101. State malpractice reform demonstration projects.

TITLE V—FALL-BACK PREMIUM LIMITS IN CASES OF INEFFECTIVE COMPETITION; PREMIUM-BASED FINANCING; ASSISTANCE

TO LOW INCOME INDIVIDUALS AND TO BUSINESSES

Sec. 5000. General definitions.

Subtitle A—Fall-Back Premium Limits

PART 1—HEALTH EXPENDITURES OF COMMUNITY RATING AREAS

SUBPART A—COMPUTATION OF TARGETS AND ACCEPTED BIDS

Sec. 5001. Computation of area inflation factors.

Sec. 5002. Establishment of baseline premiums.

Sec. 5003. Determination of area baseline premiums.

Sec. 5004. Initial rate filing and bid negotiation process.

Sec. 5005. State financial incentives.

SUBPART B—PLAN AND PROVIDER PAYMENT REDUCTIONS TO MAINTAIN

ADEQUATE FINANCING

Sec. 5011. Plan payment reduction.

Sec. 5012. Provider payment agreements.

PART 2—HEALTH EXPENDITURES OF LARGE EMPLOYERS

Sec. 5021. Calculation of premium equivalents.

Sec. 5022. Sanctions for large employer for excess increase in expenditures.

PART 3—TREATMENT OF SINGLE-PAYER STATES

Sec. 5031. Special rules for single-payer States.

Subtitle B—Premium-Related Financings

PART 1—FAMILY PREMIUM PAYMENTS

SUBPART A—FAMILY SHARE

Sec. 5101. Family share of premium.

Sec. 5102. Family credit.

Sec. 5103. Premium discount based on income.

SUBPART B—REPAYMENT OF FAMILY CREDIT BY CERTAIN FAMILIES

Sec. 5110. Repayment of family credit by certain families.

Sec. 5111. No liability for families employed full-time; reduction in liability for

part-time employment.

Sec. 5112. Limitation of liability based on income.

Sec. 5113. Payments by nonqualifying employees.

Sec. 5114. Special treatment of certain medicare beneficiaries.

PART 2—EMPLOYER PREMIUM PAYMENTS

SUBPART A—SMALL BUSINESS EXEMPTION

Sec. 5116. Exemption from coverage obligations.
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Sec. 5117. Exempt employer defined.

Sec. 5118. Election.

Sec. 5119. Treatment of exempt employers.

Sec. 5120. Nonelecting exempt employer.

SUBPART B—COMMUNITY-RATED EMPLOYERS

Sec. 5121. Employer premium payment required.

Sec. 5122. Computation of base employment monthly premium.

Sec. 5123. Premium discount for certain employers.

Sec. 5124. Payment adjustment for certain large employers.

Sec. 5125. Application to self-employed individuals.

SUBPART C—LARGE EMPLOYERS

Sec. 5131. Large employer premium payment required.

Subtitle C—Payments to Health Plans and Miscellaneous Provisions

Sec. 5201. Assistance to plans.

Sec. 5202. Computation of blended plan payment amount.

Sec. 5203. Adjustment to health plan revenues

Sec. 5204. Calculation and publication of general family share and general employer premium amounts.

Sec. 5205. Employer payment requirement.

Sec. 5206. Requirement for employer payment and reconciliation reporting.

Sec. 5207. Equal voluntary contribution requirement.

Sec. 5208. Payment arrangements.

Subtitle D—Cost-Sharing Assistance, Application for Assistance and Premium

Discounts, and Income Reconciliation

Sec. 5301. Reduction in cost sharing for low-income families.

Sec. 5302. Application process for cost-sharing reductions and premium discounts.

Sec. 5303. End-of-year reconciliation.

Sec. 5304. Eligibility error rates.

TITLE VI—AGGREGATE GOVERNMENT PAYMENTS

Subtitle A—Aggregate Federal Payments to Participating State

Sec. 6001. Capped Federal payments.

Subtitle B—Borrowing Authority to Cover Cash-flow Shortfalls

Sec. 6101. Borrowing authority to cover cash-flow shortfalls.

Sec. 6102. Contingencies.

Subtitle C—Miscellaneous Provisions

Sec. 6201. Sense of the Committee on Labor and Human Resources.
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1 TITLE I—HEALTH CARE

2 SECURITY

3 Subtitle A—Universal Coverage

4 and Individual Responsibility

5 PART 1—UNIVERSAL COVERAGE

6 SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS.

7 (a) IN GENERAL.—In accordance with this part, each

8 eligible individual is entitled to the benefits required under

9 subtitle B through the applicable health plan in which the

10 individual is enrolled consistent with this title.

11 (b) HEALTH SECURITY CARD.—Each eligible individ12 ual is entitled to a health security card to be issued in

13 accordance with this Act.

14 (c) ELIGIBLE INDIVIDUAL DEFINED.—In this Act,

15 the term ‘‘eligible individual’’ means an individual who is

16 residing in the United States and who is—

17 (1)(A) a citizen or national of the United

18 States;

19 (B) a citizen of another country legally residing

20 in the United States (as defined in section 1702(2));

21 or

22 (C) a long-term nonimmigrant (as defined in

23 section 1702(6)); and

24 (2) not an exempt individual (as defined in sec25 tion 1702(4)).
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1 (d) TREATMENT OF MEDICARE-ELIGIBLE INDIVID2 UALS.—Subject to section 1012(a), a medicare-eligible in3 dividual is entitled to health benefits under the medicare

4 program instead of the entitlement under subsection (a).

5 SEC. 1002. INDIVIDUAL RESPONSIBILITIES.

6 In accordance with this Act, each eligible individual

7 (other than a medicare-eligible individual)—

8 (1) must enroll in an applicable health plan for

9 the individual, and

10 (2) must pay any premium required, consistent

11 with this Act, with respect to such enrollment.

12 SEC. 1003. PROTECTION OF CONSUMER CHOICE.

13 Nothing in this Act shall be construed as prohibiting

14 the following:

15 (1) An individual from purchasing any health

16 care services.

17 (2) An individual from purchasing supplemental

18 insurance (offered consistent with this Act) to cover

19 health care services not required to be included in

20 the plan under subtitle B.

21 (3) An individual who is not an eligible individ22 ual from purchasing health insurance.

23 (4) Employers from providing coverage for ben24 efits in addition to the those described in subtitle B

25 (subject to section 1604).
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1 (5) An individual from obtaining (at the ex2 pense of such individual) health care from any

3 health care provider of such individual’s choice.

4 SEC. 1004. APPLICABLE HEALTH PLAN PROVIDING COV5 ERAGE.

6 Except as otherwise provided:

7 (1) GENERAL RULE: COMMUNITY-RATED

8 HEALTH PLANS.—Except as provided for in regula9 tions promulgated by the Secretary to further the

10 purposes of this Act, the applicable health plan for

11 a family is a community-rated health plan for the

12 community-rating area in which the family resides.

13 (2) EXPERIENCE-RATED HEALTH PLANS.—In

14 the case of a family member that is eligible to enroll

15 in an experienced-rated health plan under this title,

16 the applicable health plan for the family is such an

17 experienced-rated health plan.

18 (3) MULTIPLE CHOICE.—Eligible individuals

19 who are permitted to elect coverage under more than

20 one health plan or program referred to in this sub21 section may elect which of such plans or programs

22 will be the applicable health plan under this Act.

23 SEC. 1005. TREATMENT OF OTHER NONIMMIGRANTS.

24 (a) CERTAIN ALIENS INELIGIBLE FOR BENEFITS.—

25 An alien who is not an eligible individual or otherwise not
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1 made eligible under this Act for benefits is not eligible to

2 obtain the benefits required under subtitle B through en3 rollment in a health plan under this Act.

4 (b) RECIPROCAL TREATMENT OF OTHER

5 NONIMMIGRANTS.—With respect to those classes of indi6 viduals who are lawful nonimmigrants but who are not

7 long-term nonimmigrants (as defined in section 1702),

8 such individuals may obtain such benefits through enroll9 ment with community-rated health plans only in accord10 ance with such reciprocal agreements between the United

11 States and foreign states as may be entered into.

12 SEC. 1006. EFFECTIVE DATE OF ENTITLEMENT.

13 (a) IN GENERAL.—In the case of eligible individuals

14 residing in a State, the entitlement under this part (and

15 requirements under section 1002) shall not take effect

16 until the State becomes a participating State (as defined

17 in section 1200.

18 (b) GENERAL EFFECTIVE DATE DEFINED.—In this

19 Act, the term ‘‘general effective date’’ means January 1,

20 1999.
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1 PART 2—TREATMENT OF FAMILIES AND SPECIAL

2 RULES

3 SEC. 1011. GENERAL RULE OF ENROLLMENT OF FAMILY IN

4 SAME HEALTH PLAN.

5 (a) IN GENERAL.—Except as provided in this part

6 or otherwise in regulations promulgated by the Secretary

7 to further the purposes of this Act, all members of the

8 same family (as defined by the Secretary) shall be enrolled

9 in the same applicable health plan.

10 (b) CHILD DEFINED.—

11 (1) IN GENERAL.—In this Act, except as other12 wise provided, the term ‘‘child’’ means an eligible in13 dividual who (consistent with paragraph (3))—

14 (A) is under 25 years of age, and

15 (B) is a dependent of an eligible individual.

16 (2) APPLICATION OF STATE LAW.—Subject to

17 paragraph (3), determinations of whether a person

18 is the child of another person shall be made in ac19 cordance with applicable State law.

20 (3) NATIONAL RULES.—The Secretary may es21 tablish such national rules respecting individuals

22 who will be treated as children under this Act as the

23 Secretary determines to be necessary. Such rules

24 shall be consistent with the following principles:
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1 (A) STEP CHILD.—A child includes a step

2 child who is an eligible individual living with an

3 adult in a regular parent-child relationship.

4 (B) DISABLED CHILD.—A child includes

5 an unmarried dependent eligible individual re6 gardless of age who is incapable of self-support

7 because of mental or physical disability which

8 existed before age 21.

9 (C) CERTAIN INTERGENERATIONAL FAMI10 LIES.—A child includes the grandchild of an in11 dividual if—

12 (i) the parent of the grandchild is a

13 child and the parent and grandchild are

14 living with the grandparent; or

15 (ii) the grandparent has legal custody

16 of the grandchild.

17 (D) TREATMENT OF EMANCIPATED MI18 NORS AND MARRIED INDIVIDUALS.—An emanci19 pated minor or married individual shall not be

20 treated as a child.

21 (E) CHILDREN PLACED FOR ADOPTION.—

22 A child includes a child who is placed for adop23 tion with an eligible individual, except when the

24 child is a child in State supervised care.
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1 SEC. 1012. TREATMENT OF CERTAIN FAMILIES.

2 (a) TREATMENT OF MEDICARE-ELIGIBLE INDIVID3 UALS WHO ARE QUALIFYING EMPLOYEES OR SPOUSES OF

4 QUALIFYING EMPLOYEES.—

5 (1) IN GENERAL.—Except as specifically pro6 vided, in the case of an individual who is an individ7 ual described in paragraph (2) with respect to 2 con8 secutive months in a year (and it is anticipated

9 would be in the following month and in such follow10 ing month would be a medicare-eligible individual),

11 the individual shall be treated as an eligible individ12 ual under this Act during such following month and

13 the remainder of the year. Nothing in this section

14 shall be construed to affect any entitlement under

15 title XVII of the Social Security Act.

16 (2) INDIVIDUAL DESCRIBED.—An individual de17 scribed in this paragraph with respect to a month is

18 an individual who is a qualifying employee or the

19 spouse or family member of a qualifying employee in

20 the month.

21 (b) SEPARATE TREATMENT FOR CERTAIN GROUPS

22 OF INDIVIDUALS.—In the case of a family that includes

23 one or more individuals in a group described in subsection

24 (c)—
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1 (1) all the individuals in each such group within

2 the family shall be treated collectively as a separate

3 family, and

4 (2) all the individuals not described in any such

5 group shall be treated collectively as a separate

6 family.

7 (c) GROUPS OF INDIVIDUALS DESCRIBED.—Each of

8 the following is a group of individuals described in this

9 subsection:

10 (1) AFDC recipients.

11 (2) Disabled SSI recipients.

12 (3) SSI recipients who are not disabled SSI re13 cipients.

14 (d) QUALIFYING STUDENTS.—

15 (1) IN GENERAL.—In the case of a qualifying

16 student (described in paragraph (2)), the student

17 may elect to enroll in a community-rate health plan

18 offered for the health care coverage area in which

19 the school is located.

20 (2) QUALIFYING STUDENT.—In paragraph (1),

21 the term ‘‘qualifying student’’ means an individual

22 who—

23 (A) but for this subsection would receive

24 coverage under a health plan as a child of an25 other person, and
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1 (B) is a full-time student at a school in a

2 health care coverage area that is different from

3 the area (or, in the case of a large group spon4 sor, such coverage area as the Secretary may

5 specify) providing the coverage described in

6 subparagraph (A).

7 SEC. 1013. MULTIPLE EMPLOYMENT SITUATIONS.

8 In the case of an individual who is eligible as a quali9 fied employee, or a spouse of such an employee, for cov10 erage under more than one health plan, the individual and

11 the spouse of the individual shall elect the applicable

12 health plan.

13 Subtitle B—Benefits

14 SEC. 1101. PROVISION OF COMPREHENSIVE BENEFITS BY

15 PLANS.

16 (a) IN GENERAL.—A certified health plan shall pro17 vide benefits that are actuarially equivalent to the benefits

18 provided under the Blue Cross/Blue Shield standard op19 tion plan which is provided under the Federal Employees

20 Health Benefits Program on January 1, 1995.

21 (b) COVERAGE OF SERVICES.—A certified health plan

22 shall provide coverage under subsection (a) for at least

23 the following services:

24 (1) Hospital services.

25 (2) Services of health professionals.
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1 (3) Emergency and ambulatory medical and

2 surgical services.

3 (4) Clinical preventive services.

4 (5) Mental illness and substance abuse services.

5 (6) Family planning services and services for

6 pregnant women.

7 (7) Hospice care, home health care, extended

8 care services, outpatient rehabilitation services, and

9 ambulance services.

10 (8) Outpatient laboratory, radiology, and diag11 nostic services.

12 (9) Outpatient prescription drugs and

13 biologicals.

14 (10) Durable medical equipment, including

15 hearing aids for children, and prosthetic and orthotic

16 devices.

17 (11) Vision care and dental care for children.

18 (12) Patient care costs of qualified investiga19 tional treatments.

20 (c) MEDICAL NECESSITY.—

21 (1) IN GENERAL.—A certified health plan shall

22 not be required to provide services that are not

23 medically necessary or appropriate.

24 (2) SCOPE OR DURATION.—A certified health

25 plan may not impose any limitations on the scope or
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1 duration of any medically necessary or appropriate

2 services described in paragraphs (1), (2), (3), (6),

3 (8), (9), or (12). Such a plan may not apply a life4 time limit with respect to any such service and may

5 not exclude people with congenital conditions from

6 the same type of coverage as persons needing care

7 as a result of illness or injury.

8 (3) LIMITATIONS.—The following services shall

9 not be considered medically necessary or appro10 priate:

11 (A) In vitro fertilization services.

12 (B) Sex change surgery and related serv13 ices.

14 (C) Surgery and other procedures per15 formed solely for cosmetic purposes and hos16 pital or other services incident thereto, unless—

17 (i) required to correct a congenital

18 anomaly; or

19 (ii) required to restore or correct a

20 part of the body that has been altered as

21 a result of—

22 (I) accidental injury;

23 (II) disease; or

24 (III) surgery that is otherwise

25 covered under this subtitle.
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1 (d) PREVENTIVE AND PRENATAL SERVICES.—

2 (1) IN GENERAL.—The clinical preventive serv3 ices that are required under subsection (b)(4) are

4 those services specified by the Secretary. Such speci5 fications shall include the periodicity schedules for

6 such services and special coverage or periodicity

7 schedules for high risk populations, if appropriate.

8 In developing such specifications the Secretary shall

9 consult with—

10 (A) medical experts and insurers;

11 (B) the United States Preventive Service

12 Task Force;

13 (C) the American Academy of Pediatrics,

14 with respect to preventive services for children;

15 (D) the American College of Obstetricians

16 and Gynecologists, with respect to preventive

17 services for women.

18 (2) COST SHARING.—

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

20 subparagraph (B), a certified health plan may

21 not impose any cost-sharing requirements with

22 respect to clinical preventive services and pre

23 natal care services.

24 (B) NETWORK PLANS.—In the case of a

25 certified health plan that is a network plan, the
22

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1 requirement of subparagraph (A) shall not

2 apply if the services described in such subpara3 graph are obtained from an out-of-network pro4 vider.

5 (e) MENTAL ILLNESS AND SUBSTANCE ABUSE SERV6 ICES.—The mental illness and substance abuse services

7 that are required described under subsection (b)(5) are

8 those services that meet the minimum standards for cov9 erage of inpatient, residential, intensive nonresidential,

10 and outpatient services as specified by the Secretary. Such

11 standards shall ensure that effective beginning in 2001,

12 there will be parity in the coverage of mental health serv13 ices.

14 (f) HEALTH PROFESSIONAL SERVICES.—As used in

15 subsection (b)(2), the term ‘‘health professional services’’

16 means professional services that are lawfully provided by

17 a physician or professional services that could be lawfully

18 provided by a physician but are provided by another health

19 professional who is legally authorized to provide such serv20 ices in the State in which the services are provided.

21 (g) ACTUARIAL EQUIVALENCY.—In calculating actu22 arial equivalency under subsection (a), a certified health

23 plan shall exclude clinical preventive services and mental

24 illness and substance abuse services that are provided

25 under the plan or under the Blue Cross/Blue Shield stand-
23

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1 ard option plan under the Federal Employees Health Ben2 efits Program.

3 (h) MODEL PLANS.—The Secretary, in consultation

4 with the NAIC, insurers, employers, consumers, and medi5 cal experts shall establish three model certified health

6 plans for consideration by plan sponsors, of which—

7 (1) one plan shall have cost-sharing and scope

8 and duration limits that are appropriate for fee-for9 service plans that are actuarially equivalent to the

10 Blue Cross/Blue Shield standard option plan;

11 (2) one plan shall have cost-sharing and scope

12 and duration limits that are appropriate for pre13 ferred provider network plans that are actuarially

14 equivalent to the Blue Cross/Blue Shield standard

15 option plan; and

16 (3) one plan shall have cost-sharing and scope

17 and duration limits that are appropriate for health

18 maintenance organizations that are actuarially

19 equivalent to the Blue Cross/Blue Shield standard

20 option plan.

21 (i) QUALIFIED INVESTIGATIONAL TREATMENTS.—

22 (1) IN GENERAL.—As used in subsection

23 (b)(13), the term ‘‘qualified investigational treat24 ment’’ means an investigational treatment that is

25 part of a peer-reviewed and approved research pro-
24

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1 gram (as defined by the Secretary) or research trials

2 approved by the Secretary. A certified health plan

3 shall not be required to cover any patient care costs

4 associated with such treatments if such cost would

5 normally be covered by another party as determined

6 under regulations promulgated by the Secretary.

7 (2) APPROVAL OF RESEARCH TRIALS.—A re8 search trial is deemed to be approved for purposes

9 of this subsection if such trial is approved by one or

10 more of the following:

11 (A) The National Institutes of Health.

12 (B) The Food and Drug Administration

13 (through an investigational new drug exemption

14 pursuant to section 505 of the Federal Food,

15 Drug, and Cosmetic Act (21 U.S.C. 355) or an

16 investigational device exemption pursuant to

17 section 520(g) of such Act (21 U.S.C.

18 360j(g))).

19 (C) The Department of Veterans Affairs.

20 (D) The Department of Defense.

21 (E) A qualified nongovernmental research

22 entity as defined in guidelines issued by one or

23 more of the National Institutes of Health, in24 cluding guidelines for cancer center support
25

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1 grants designated by the National Cancer Insti2 tute.

3 (j) STUDY AND REPORT.—

4 (1) STUDY.—The Secretary shall conduct a

5 study concerning the provision and enrollment pat6 terns of certified health plans.

7 (2) REPORT.—Not later than 5 years after the

8 date of enactment of this Act, the Secretary shall

9 prepare and submit to the appropriate committees of

10 Congress a report concerning the study conducted

11 under paragraph (1). Such report shall include a de12 termination by the Secretary of whether the stand13 ardization of certified health plan offerings would be

14 appropriate to assist consumers in choosing among

15 such plans based on cost and quality or to avoid

16 plan design practices intended to attract better risks

17 and resulting in poorer availability of reasonably

18 priced coverage for individuals needing greater than

19 average utilization of health care services.

20 SEC. 1102. PROVISION OF ITEMS OR SERVICES CONTRARY

21 TO RELIGIOUS BELIEF OR MORAL CONVIC22 TION.

23 A health professional or a health facility may not be

24 required to provide an item or service under a certified
26

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1 health plan if the professional or facility objects to doing

2 so on the basis of a religious belief or moral conviction.

3 SEC. 1103. BALANCE BILLING.

4 The Secretary shall provide for methods to ensure the

5 prohibition of balance billing.

6 Subtitle C—State Role in Reform

7 SEC. 1200. PARTICIPATING STATE.

8 (a) IN GENERAL.—As used in this title, the term

9 ‘‘participating State’’ means a State that meets the appli10 cable requirements of this Act, including the requirement

11 for the establishment of a market reform program de12 scribed in this subtitle and the administration of subsidies

13 as provided for in title V.

14 (b) REFORM PLAN.—To become a participating State

15 under this section, a State shall submit to the Secretary

16 a reform plan describing a health care system meeting the

17 requirements of this Act that the State intends to estab18 lish (or has established), update such plan at time periods

19 and in a manner specified by the Secretary, and imple20 ment such plan.

21 (c) DEADLINE FOR PARTICIPATION.—If a State is

22 not a participating State by January 1, 1999, the provi23 sions of section 1521 (relating to the Federal govern24 ment’s role in the case of default by a State) shall apply
27

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1 to such State. A State may not be a participating State

2 prior to January 1, 1997.

3 PART 1—STATE MARKET REFORM

4 SEC. 1201. ESTABLISHMENT OF STATE MARKET REFORM

5 PROGRAMS.

6 (a) IN GENERAL.—Each State shall establish a State

7 market reform program that meets the requirements of

8 this title.

9 (b) DEADLINE.—Each State shall establish and have

10 in operation a State market reform program by not later

11 than January 1, 1997, to carry out this title. Such pro12 gram shall provide for the enrollment of individuals in cer13 tified health plans by not later than such date.

14 (c) PERIODIC SECRETARIAL REVIEW OF STATE PRO15 GRAMS.—

16 (1) IN GENERAL.—The Secretary may periodi17 cally review State programs established under sub18 section (a) to determine if such programs meet the

19 requirements of this subtitle.

20 (2) REPORTING REQUIREMENTS OF STATES.—

21 For purposes of paragraph (1), each State shall sub22 mit to the Secretary, at intervals established by the

23 Secretary, a report on the compliance of the State

24 with the requirements of this subtitle.
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1 SEC. 1202. CERTIFICATION OF INSURED HEALTH PLANS.

2 (a) IN GENERAL.—Each State market reform pro3 gram shall provide for the certification of insured health

4 plans as certified health plans if the appropriate certifying

5 authority finds that the plan meets the applicable require6 ments for certification under this title.

7 (b) NONDISCRIMINATION AGAINST OUT-OF-STATE

8 PLANS AND PROVIDERS.—A State—

9 (1) may not discriminate against any health

10 plan because such plan is domiciled in another

11 State; and

12 (2) may not limit the ability of any health plan

13 to contract with a health care provider because such

14 plan or such provider is located outside the bound15 aries of such State.

16 SEC. 1203. ESTABLISHMENT OF COMMUNITY RATING

17 AREAS.

18 (a) ESTABLISHMENT.—Each State program shall

19 provide, by not later than January 1, 1996, for the divi20 sion of the State into 1 or more community rating areas.

21 The program may revise the boundaries of such areas

22 from time to time consistent with this section.

23 (b) MULTIPLE AREAS.—With respect to a community

24 rating area—
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1 (1) no metropolitan statistical area in a State

2 may be incorporated into more than 1 community

3 rating area in such State;

4 (2) the number of individuals residing within a

5 community rating area may not be less than

6 250,000 (and shall respect the existing referral pat7 terns within market areas); and

8 (3) no area incorporated in a community rating

9 area may be incorporated into another community

10 rating area.

11 (c) INTERSTATE AREAS.—Two or more contiguous

12 States are encouraged to provide for the establishment of

13 a common community rating area that includes adjoining

14 portions of the States if the market area extends across

15 State lines, so long as all portions of any metropolitan sta16 tistical area within such States are within the same com17 munity rating area.

18 (d) SPECIAL OR UNDERSERVED POPULATIONS.—In

19 establishing community rating areas, the State shall take

20 into consideration the needs of special or underserved pop21 ulations.

22 (e) DISCRIMINATION.—A State may not establish

23 boundaries for community rating areas in a manner that

24 has the effect of discriminating on the basis of any cat25 egory described in section 1414.
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1 SEC. 1204. PROCEDURES FOR CERTIFICATION OF PUR2 CHASING COOPERATIVES.

3 Each State market reform program shall establish a

4 process for the certification of purchasing cooperatives

5 consistent with part 2 of subtitle D.

6 SEC. 1205. COORDINATION AMONG PURCHASING COOPERA7 TIVES.

8 Each State shall establish rules consistent with part

9 2 of subtitle D for the coordination among purchasing co10 operatives with respect to enrollment, payment of pre11 miums, and provision of out-of-area benefits and services.

12 SEC. 1206. PREPARATION OF INFORMATION CONCERNING

13 PLANS AND PURCHASING COOPERATIVES.

14 (a) IN GENERAL.—Each State market reform pro15 gram shall prepare and make available to purchasing co16 operatives, employers and to individuals located in the

17 State information, in standardized comparative form as

18 required under the program, concerning the health plans

19 certified by such State and purchasing cooperatives oper20 ating in the State.

21 (b) ACCESS TO PLANS AND COOPERATIVES.—Each

22 State shall provide information to employers and individ23 uals describing how to access each community-rated health

24 plan and purchasing cooperative in the area.
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1 SEC. 1207. RISK ADJUSTMENT PROGRAM.

2 Each State market reform program shall provide for

3 a risk adjustment program for community-rated and asso4 ciation health plans that meets the standards developed

5 by the Secretary under section 1417.

6 SEC. 1208. SPECIFICATION OF ANNUAL GENERAL AND INI7 TIAL ENROLLMENT PERIODS.

8 (a) ANNUAL GENERAL ENROLLMENT PERIOD.—

9 Each State market reform program shall specify an an10 nual period, of not less than 30 days, during which an

11 eligible individual in the State may enroll in a certified

12 health plan or change the certified health plan in which

13 the individual is enrolled.

14 (b) INITIAL ENROLLMENT PERIOD.—Each State

15 market reform program shall specify an initial enrollment

16 period in 1996 of not less than 45 days, during which indi17 viduals in the State may enroll in certified health plans

18 for coverage beginning as of January 1, 1997.

19 SEC. 1209. SPECIAL RULES REGARDING NETWORK PLANS.

20 A State market reform program may grant a network

21 plan a certification to operate in a service area which is

22 not identical to the borders of a community rating area

23 if the network plan has demonstrated to the satisfaction

24 of the State that the plan has met the requirements of

25 section 1411(a)(4).
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1 SEC. 1210. APPLICATION OF CERTAIN STATE LAWS.

2 Upon the application of a State, and the approval of

3 such application by the Secretary, the State may—

4 (1) tighten premium rate bands beyond the var5 iation permitted under section 1413;

6 (2) establish rules for association plans that are

7 more restrictive than those provided for under part

8 3 of subtitle D if, in the judgement of the Secretary,

9 such rules increase the viability of the community10 rated market; and

11 (3) establish financial solvency requirements

12 that exceed the requirements of section 1418.

13 SEC. 1211. CONSUMER ADVOCATE.

14 (a) IN GENERAL.—The Secretary shall establish (by

15 grant or contract) and oversee a National Center of

16 Consumer Advocacy to provide technical assistance, ade17 quate training and support to States and Offices of

18 Consumer Advocacy in each State (hereafter referred to

19 in this section as the ‘‘Office’’) to carry out the duties

20 of this section, including providing public education to

21 consumers concerning this Act. The National Center of

22 Consumer Advocacy shall be a national non-profit organi23 zation with public education and health policy expertise

24 and shall have sufficient staff to carry out its duties and

25 a demonstrated ability to represent and work with a broad

26 spectrum of consumers, including vulnerable and under
33

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1 served populations. The Office in each State shall perform

2 public outreach and provide education and assistance re3 garding consumer rights and responsibilities under this

4 Act, and assist consumers in dealing with problems that

5 arise with consumer purchasing cooperatives, experience6 rated employers, health plans, and health care providers

7 operating in such State.

8 (b) CONTRACTS.—

9 (1) SOLICITATION.—The Secretary shall solicit

10 contracts from private non-profit organizations to

11 fulfill the duties of the Office in the State. The Sec12 retary may develop such regulations and guidelines

13 as necessary to oversee the process of considering

14 and awarding competitive contracts under this sec15 tion. In awarding such contracts, the Secretary shall

16 consult with the State and National Center of

17 Consumer Advocacy, and shall, at a minimum, con18 sider the demonstrated ability of the organization to

19 represent and work with a broad spectrum of con20 sumers, including vulnerable and underserved popu21 lations.

22 (2) CONTRACT PERIOD.—The contract period

23 for the State Offices of Consumer Advocacy and the

24 National Center of Consumer Advocacy under this
34

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1 section shall be not less than 4 years and not more

2 than 7 years.

3 (c) FUNCTIONS AND RESPONSIBILITIES.—Each Of4 fice shall have sufficient staff, local offices throughout the

5 State, and a State-wide toll-free hotline to carry out the

6 duties of this section. Through direct contact and the hot7 line, the Office shall provide the following services in the

8 State, including appropriate assistance to individuals with

9 limited English language ability—

10 (1) outreach and education relating to

11 consumer rights and responsibilities under this Act,

12 including such rights and services available through

13 the Office;

14 (2) assistance with enrollment in health plans,

15 or obtaining services or reimbursement from health

16 plans;

17 (3) assistance with filing an application for pre18 mium or cost sharing subsidies;

19 (4) information to enrollees about existing

20 grievance procedures and coordination with other en21 tities to assist in identifying, investigating, and re22 solving enrollee grievances under this Act (including

23 grievances before State medical boards);

24 (5) regular and timely access in the area to the

25 services provided through the Office and its local of-
35

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1 fices and timely responses from representatives of

2 the Office to complaints;

3 (6) referrals to appropriate local providers of

4 legal assistance and to appropriate State and Fed5 eral agencies which may be of assistance to ag6 grieved individuals in the area; and

7 (7) conduct public hearings no less frequently

8 than once a year to identify and address community

9 health care needs.

10 (d) ACCESS TO INFORMATION.—The Secretary and

11 the States shall ensure that, for purposes of carrying out

12 the Office’s duties under this section, the Office (and offi13 cers and employees of the Office in local offices) have ap14 propriate access to relevant information subject to protec15 tions for confidentiality of enrollee information.

16 (e) EVALUATION AND REPORT.—The Secretary shall

17 have the right to evaluate the quality and effectiveness of

18 the organization in carrying out the functions specified in

19 the contract. The Office shall report to the Secretary and

20 the State annually on the nature and patterns of consumer

21 complaints received in the Office and its local offices dur22 ing each year and any policy, regulatory, and legislative

23 recommendations for needed improvements together with

24 a record of the activities of the Office.
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1 (f) CONFLICTS OF INTEREST.—The Secretary shall

2 ensure that no individual involved in the designation of

3 the Office, the Office itself, or of any delegate thereof is

4 subject to a conflict of interest, including affiliation with

5 (through ownership or common control) a health care fa6 cility, managed care organization, health insurance com7 pany or association of health care facilities or providers.

8 No grantee under this part may have a direct involvement

9 with the licensing, certification, or accreditation of a

10 health care facility, a health care plan, or a provider of

11 health care services.

12 (g) LEGAL COUNSEL.—The Secretary shall ensure

13 that adequate legal counsel is available, and is able, with14 out conflict of interest, to assist the Office, and the local

15 offices thereof in the performance of their official duties.

16 SEC. 1212. ELECTION PROCEDURE FOR COMMUNITY-RATED

17 EMPLOYERS.

18 (a) IN GENERAL.—Each participating State shall es19 tablish a procedure (consistent with rules established by

20 the Board) through which exempt employers, as defined

21 in section 6117, may make an election to be treated as

22 a community-rated employer. Such procedure shall set

23 forth the form and manner that such election shall be

24 made.
37

•S 168 IS

1 (b) NOTIFICATION.—The procedure shall require that

2 employees of a exempt employer are notified of an election

3 or a termination of an election under this section prior

4 to the first annual open enrollment period (as defined in

5 section 1660) following such election or termination.

6 (c) TERMINATION.—The procedures shall permit ex7 empt employers to terminate an election made under this

8 section. If an employer terminates an election, the termi9 nation shall be effective on the first date of the year fol10 lowing such termination.

11 PART 2—REQUIREMENTS FOR STATE SINGLE12 PAYER SYSTEMS

13 SEC. 1221. SINGLE-PAYER SYSTEM DESCRIBED.

14 The Secretary may approve an application of a State

15 to operate a single-payer system if the Secretary finds that

16 the system meets the requirements of sections 1222 and

17 1223.

18 SEC. 1222. GENERAL REQUIREMENTS FOR SINGLE-PAYER

19 SYSTEMS.

20 Each single-payer system shall meet the following re21 quirements:

22 (1) ESTABLISHMENT BY STATE.—The system is

23 established under State law, and State law provides

24 for mechanisms to enforce the requirements of the

25 system.
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1 (2) OPERATION BY STATE.—The system is op2 erated by the State or a designated agency of the

3 State.

4 (3) ENROLLMENT OF INDIVIDUALS.—

5 (A) MANDATORY ENROLLMENT.—The sys6 tem shall provide for the enrollment of all indi7 viduals residing in the State who are not medi8 care-eligible individuals, except that the Sec9 retary may through regulation except appro10 priate individuals from the requirements of this

11 subparagraph and such requirements shall not

12 apply to the individuals described in subpara13 graph (B).

14 (B) EXCLUSION OF CERTAIN INDIVID15 UALS.—A single-payer system may not require

16 the enrollment of veterans, active duty military

17 personnel, and American Indians.

18 (4) DIRECT PAYMENT TO PROVIDERS.—

19 (A) IN GENERAL.—With respect to provid20 ers who furnish items and services required

21 under subtitle B to individuals enrolled in the

22 system, the State shall make payments directly,

23 or through fiscal intermediaries, to such provid24 ers and assume (subject to subparagraph (B))
39

•S 168 IS

1 all financial risk associated with making such

2 payments.

3 (B) CAPITATED PAYMENTS PERMITTED.—

4 Nothing in subparagraph (A) shall be construed

5 to prohibit providers furnishing items and serv6 ices under the system from receiving payments

7 on a capitated, at-risk basis based on prospec8 tively determined rates.

9 (5) PROVISION OF BENEFITS.—

10 (A) IN GENERAL.—The system shall pro11 vide for coverage of items and services required

12 under subtitle B, including the cost-sharing

13 provided under the plan (subject to subpara14 graph (B)), to all individuals enrolled in the

15 system.

16 (B) IMPOSITION OF REDUCED COST-SHAR17 ING.—The system may decrease the cost-shar18 ing otherwise provided in under subtitle B with

19 respect to any individuals enrolled in the system

20 or any class of services included in the items

21 and services under such subtitle, so long as the

22 system does not increase the cost-sharing other23 wise imposed with respect to any other individ24 uals or services.
40

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1 (6) COST CONTAINMENT.—The system shall

2 provide for mechanisms to ensure, in a manner sat3 isfactory to the Secretary, that—

4 (A) the rate of growth in health care

5 spending will not be higher than the National

6 rate of growth;

7 (B) the expenditures described in subpara8 graph (A) are computed and effectively mon9 itored; and

10 (C) Federal payments to a single payer

11 State shall be limited to the payments that

12 would have been made in the absence of the im13 plementation of the single payer system.

14 (7) REQUIREMENTS GENERALLY APPLICABLE

15 TO CERTIFIED HEALTH PLANS.—The system shall

16 meet the appropriate requirements applicable to a

17 certified health plan, as determined by the Sec18 retary.

19 SEC. 1223. ADDITIONAL RULES FOR SINGLE-PAYER SYSTEM.

20 (a) IN GENERAL.—In the case of a State operating

21 a single-payer system—

22 (1) the State shall operate the system through23 out the State;
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1 (2) except as provided in subsection (b), the

2 State shall meet the requirements for participating

3 States under part 1; and

4 (3) the State shall not use any funds collected

5 pursuant to section 1221 and 1222 or any earnings

6 on such funds for any reason other than to pay

7 health care claims or provide health care benefits.

8 (b) EXCEPTIONS TO CERTAIN REQUIREMENTS FOR

9 PARTICIPATING STATES.—In the case of a State operating

10 a single-payer system, the State is not required to meet

11 any requirements that the Secretary determines are not

12 appropriate to apply to a State single-payer system.

13 (c) SINGLE-PAYER STATE DEFINED.—In this title,

14 the term ‘‘single-payer State’’ means a State with a single15 payer system in effect that has been approved by the Sec16 retary in accordance with this part.

17 Subtitle D—Expanded Access to

18 Health Plans

19 PART 1—ACCESS THROUGH EMPLOYERS

20 SEC. 1301. EMPLOYER ACCESS AND ENROLLMENT RE21 QUIREMENTS.

22 (a) IN GENERAL.—Each employer shall—

23 (1) make available to each employee of the em24 ployer the opportunity to enroll through the em25 ployer in one of at least three certified health plans,
42

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1 if available, including either a fee-for-service plan or

2 a health plan with a point-of-service option, and

3 (2) to provide payroll withholding of any re4 quired employee premiums.

5 If an employer desires to satisfy the requirement of para6 graph (1) by offering a point-of-service plan, cost-sharing

7 for out-of-network services shall not be substantially

8 greater than those applied by fee-for-service plans.

9 (b) SPECIAL RULES.—

10 (1) PURCHASING COOPERATIVE.—A small em11 ployer may meet the requirements of subsection

12 (a)(1) through a purchasing cooperative.

13 (2) LARGE EMPLOYER.—

14 (A) IN GENERAL.—A large employer shall

15 meet the requirements of subsection (a)(1) only

16 through offering experience-rated health plans.

17 (B) SINGLE INSURER.—Nothing in this

18 section shall be construed as preventing or re19 quiring a large employer from complying with

20 subsection (a)(1) through the offering of plans

21 by a single insurer.

22 SEC. 1302. SMALL EMPLOYER REQUIREMENTS.

23 (a) PAYROLL DEDUCTION.—Upon authorization

24 from an employee, a small employer shall deduct from the

25 employee’s wages the employee’s share of any premium
43

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1 due to a certified health plan or purchasing cooperative.

2 Except as provided in subsection (c), this subsection shall

3 only apply to plans made available, either directly or

4 through a purchasing cooperative, by the employer.

5 (b) NO REQUIREMENT TO ENROLL IN EMPLOYER6 PROVIDED PLAN.—A community-rated individual who is

7 an employee of a small employer may elect not to enroll

8 in a certified health plan offered by such employer under

9 this section. Such an employee may enroll in any certified

10 health plan offered in the community rating area in which

11 the employee works or in which the employee resides (in12 cluding certified health plans offered through purchasing

13 cooperatives serving such area).

14 (c) DEDUCTION AND CONTRIBUTION IN THE CASE

15 OF FEHBP PLANS.—In the case of an election described

16 in subsection (c) by an employee of a small employer to

17 enroll in an FEHBP plan made available under section

18 1331, the small employer shall make the payroll deduction

19 described in subsection (b) and shall forward the employ20 er’s contribution, if any, to such FEHBP plan. The em21 ployer may charge a reasonable adminstrative fee for such

22 activities.
44

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1 PART 2—ACCESS TO PURCHASING

2 COOPERATIVES

3 SEC. 1311. ESTABLISHMENT OF COOPERATIVES.

4 A State may establish or charter purchasing coopera5 tives in accordance with this subtitle for the purpose of

6 improving access to health plans, reducing the cost of

7 health insurance, and improving the quality of care. Each

8 purchasing cooperative established in a State shall be cer9 tified under State law.

10 SEC. 1312. CONFLICT OF INTEREST.

11 An insurer, agent, broker or any other individual or

12 entity otherwise engaged in the sale of health insurance

13 may not form or underwrite a purchasing cooperative or

14 hold or control any right to vote with respect to a purchas15 ing cooperative.

16 SEC. 1313. MEMBERSHIP.

17 A purchasing cooperative shall accept all small em18 ployers and individuals eligible for coverage in the commu19 nity-rated market and residing within the area served by

20 the cooperative if such employers or individuals request

21 such membership. A purchasing cooperative shall conduct

22 enrollment, outreach and marketing activities in a manner

23 that provides individuals and employers with ready access

24 and availability to cooperative health plans throughout the

25 community-rating area served by the cooperative.
45

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1 SEC. 1314. BOARD OF DIRECTORS.

2 A purchasing cooperative established under this part

3 shall be governed by a board of directors or receive active

4 input from an advisory board consisting of individuals and

5 businesses participating in the cooperative.

6 SEC. 1315. CHOICE OF HEALTH PLANS.

7 A purchasing cooperative shall enter into agreements

8 with at least three certified health plans (if available) pro9 viding the comprehensive benefits described in subtitle B,

10 including (if available) at least one fee-for-service plan or

11 point-of-service plan meeting the requirements described

12 in section 1301.

13 SEC. 1316. LIMITATION ON ACTIVITIES.

14 A purchasing cooperative shall not—

15 (1) perform any activity involving approval or

16 enforcement of payment rates for providers;

17 (2) perform any activity (other than the report18 ing of noncompliance) relating to compliance of cer19 tified health plans with the requirements of this Act;

20 (3) assume financial risk in relation to any such

21 health plan; or

22 (4) perform other activities identified by the

23 State as being inconsistent with the performance of

24 its duties under this Act.
46

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1 SEC. 1317. VOLUNTARY PARTICIPATION.

2 Nothing in this part shall be construed as requiring

3 any individual or small employer to purchase a certified

4 health plan exclusively through a purchasing cooperative.

5 PART 3—ACCESS THROUGH ASSOCIATION PLANS

6 Subpart A—Certified Association Plans

7 SEC. 1321. TREATMENT OF CERTIFIED ASSOCIATION

8 PLANS.

9 For purposes of this Act, in the case of a certified

10 association plan—

11 (1) except as otherwise provided in this sub12 part, the plan shall be required to meet all applicable

13 requirements of this Act for certified health plans

14 offered by large employers,

15 (2) if such plan is certified as meeting such re16 quirements, such plan shall be treated as a health

17 plan established and maintained by a large employer

18 and individuals enrolled in such plan shall be treated

19 as experience-rated individuals,

20 (3) any individual who is a member of the asso21 ciation not enrolling in the plan shall not be treated

22 as an experience-rated individual solely by reason of

23 membership in such association, and

24 (4) such plan shall cover at least 500 lives on

25 and after the date of enactment of this Act.
47

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1 SEC. 1322. MODIFICATIONS OF STANDARDS APPLICABLE TO

2 CERTIFIED ASSOCIATION PLANS.

3 (a) CERTIFYING AUTHORITY.—

4 (1) MULTISTATE CERTIFIED ASSOCIATION

5 SELF-INSURED PLANS.—For purposes of this Act,

6 the Secretary of Labor shall be the appropriate cer7 tifying authority with respect to a certified associa8 tion plan which is a multistate self-insured health

9 plan.

10 (2) SINGLE STATE CERTIFIED ASSOCIATION

11 SELF-INSURED PLANS.—For purposes of this Act,

12 the State shall be the appropriate certifying author13 ity with respect to a certified association plan which

14 is a single State self-insured health plan.

15 (b) RISK ADJUSTMENT.—The requirements of sec16 tion 1417 shall apply to a plan described in section 1321.

17 (c) CAPITAL REQUIREMENTS.—Not later than 9

18 months after the date of enactment of this Act, the Sec19 retary of Labor, in consultation with the NAIC, shall es20 tablish solvency standards for health plans described in

21 section 1321, and rules for monitoring and enforcing com22 pliance with such standards. Such requirements shall be

23 the applicable plan standards with respect to such plans

24 in lieu of the requirements of section 1418.

25 (d) AVAILABILITY.—A certified association plan may

26 only include in coverage any business or individual who
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1 is a member of the association establishing or maintaining

2 the plan, an employee of such member, or a spouse or de3 pendent of either.

4 SEC. 1323. ASSOCIATION PLAN DEFINED.

5 (a) IN GENERAL.—The term ‘‘association plan’’

6 means a health plan which—

7 (1) is (or is a continuation of) an existing plan,

8 and

9 (2) is established or maintained by a qualified

10 association.

11 (b) EXISTING PLAN.—For purposes of this section—

12 (1) IN GENERAL.—A health plan is an existing

13 plan if—

14 (A) on August 1, 1994, the plan was a

15 self-insured health plan which—

16 (i) had been in existence and operat17 ing at all times during the 18-month pe18 riod ending on such date as a multiple em19 ployer welfare arrangement,

20 (ii) had an application pending with,

21 or approved by, the State insurance com22 missioner for a certificate of operation as

23 a health plan, and

24 (iii) covered at least 1000 lives, or
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1 (B) on and after the date of enactment of

2 this Act, the plan was an experience-rated in3 sured health plan covering at least 1000 lives.

4 (2) DISQUALIFICATION OF CERTAIN ARRANGE5 MENTS.—A health plan shall not be treated as meet6 ing the requirements of paragraph (1)(A) if a State

7 demonstrates that—

8 (A) fraudulent or material misrepresenta9 tions have been made by the sponsor in the ap10 plication,

11 (B) the arrangement that is the subject of

12 the application, on its face, fails to meet the re13 quirements for a complete application, or

14 (C) a financial impairment exists with re15 spect to the applicant that is sufficient to dem16 onstrate the applicant’s inability to continue its

17 operations.

18 (c) QUALIFIED ASSOCIATION.—For purposes of this

19 section, the term ‘‘qualified association’’ means any orga20 nization (or wholly-owned subsidiary thereof) which—

21 (1) is organized and maintained in good faith

22 by a trade association, an industry association, a

23 professional association, a local chamber of com24 merce, or public entity association,
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1 (2) is organized and maintained for substantial

2 purposes other than to provide a health plan and a

3 substantial share of whose revenues do not come

4 from the sale of health plans,

5 (3) has a constitution, bylaws, or other similar

6 governing document which specifically states its pur7 pose,

8 (4) receives the active support of its members,

9 (5) does not have membership policies or prac10 tices which have the effect of screening members or

11 prospective members (or their dependents), and does

12 not otherwise limit access to any health plan main13 tained by it, on the basis of health status or evidence

14 (or lack of evidence) of insurability of an individual,

15 and

16 (6) has been in operation continuously during

17 the 3-year period ending August 1, 1994 and has

18 provided health coverage to its members over such

19 period.

20 (d) COORDINATION WITH SUBPART B.—The term

21 ‘‘certified association plan’’ shall not include a plan to

22 which subpart B applies.

23 (e) DEFINITIONS.—For purposes of this part, the

24 term ‘‘multiple employer welfare arrangement’’ has the

25 meaning given such term by section 3(40) of the Employee
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1 Retirement Income Security Act of 1974 (as in effect be2 fore the date of the enactment of the Health Reform Act).

3 SEC. 1324. REPEAL OF ERISA PROVISIONS.

4 (a) DEFINITION.—Paragraph (40) of section 3 of the

5 Employee Retirement Income Security Act of 1974 (29

6 U.S.C. 1002(40)) is repealed.

7 (b) PREEMPTION.—Paragraph (6) of section 514(b)

8 of such Act (29 U.S.C. 1144(b)(6)) is repealed.

9 Subpart B—Special Rule for Church and

10 Multiemployer Plans

11 SEC. 1325. SPECIAL RULE FOR CHURCH AND MULTIEM12 PLOYER PLANS.

13 (a) GENERAL RULE.—For purposes of this Act, in

14 the case of a health plan to which this section applies—

15 (1) except as otherwise provided in this part,

16 the plan shall be required to meet all applicable re17 quirements of this Act for certified health plans

18 which are offered by large employers,

19 (2) if such plan is certified as meeting such re20 quirements, such plan shall be treated as a health

21 plan established and maintained by a large employer

22 and individuals enrolled in such plan shall be treated

23 as experience-rated individuals, and

24 (3) any individual eligible to enroll in the plan

25 who does not enroll in the plan shall not be treated
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1 as an experience-rated individual solely by reason of

2 being eligible to enroll in the plan.

3 (b) MODIFIED STANDARDS.—

4 (1) CERTIFYING AUTHORITY.—For purposes of

5 this Act, the Secretary of Labor shall be the appro6 priate certifying authority with respect to a plan to

7 which this section applies.

8 (2) SOLVENCY, AND AVAILABILITY.—Rules

9 similar to the rules of subsections (c) and (d) of sec10 tion 1322 shall apply to a plan to which this section

11 applies.

12 (3) ACCESS.—An employer which, pursuant to

13 a collective bargaining agreement, offers an em14 ployee the opportunity to enroll in a plan described

15 in subsection (c)(2) shall not be required to make

16 any other plan available to the employee.

17 (c) PLANS TO WHICH SECTION APPLIES.—This sec18 tion shall apply to a health plan which—

19 (1) is a church plan (as defined in section

20 414(e) of the Internal Revenue Code of 1986) which

21 covers 100 or more lives in the United States, or

22 (2) is a multiemployer plan (as defined in sec23 tion 3(37) of the Employee Retirement Income Se24 curity Act of 1974) which is maintained by a health

25 plan sponsor described in section 3(16)(B)(iii) of
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1 such Act but only if such plan (or a predecessor

2 plan) as of August 1, 1994—

3 (A) offered health benefits, and

4 (B) covered at least 500 lives in the

5 United States.

6 Notwithstanding paragraph (2)(B), a multiemployer plan

7 sponsored by one or more affiliates of the same labor orga8 nization, or one or more affiliates of labor organizations

9 representing employees in the same industry, may be com10 bined to meet the threshold described in such subpara11 graph.

12 PART 4—ACCESS THROUGH FEHBP

13 SEC. 1331. ACCESS THROUGH FEHBP PLANS.

14 (a) IN GENERAL.—Any health plan participating in

15 the Federal Employees Health Benefits Program under

16 chapter 89 of title 5, United States Code (in this Act re17 ferred to as ‘‘FEHBP’’), shall offer such plan to commu18 nity-rated individuals and small employers in community

19 rating areas served by such plan at a premium established

20 in accordance with section 1413. In the case of a plan

21 described in section 8903(1) of title 5, United States

22 Code, the requirement of this subsection shall be deemed

23 to be a requirement on the local carriers providing cov24 erage pursuant to an agreement with a national plan.
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1 (b) LIMITATION.—A health plan may not be required

2 to offer enrollment under subsection (a) if the Director

3 of the Office of Personnel Management determines, based

4 on a petition submitted by the health plan, that—

5 (1) the plan is unable to make such offering be6 cause of a limitation in the capacity of the plan to

7 deliver services or assure financial solvency; or

8 (2) the plan is not sponsored by a carrier li9 censed under applicable State law.

10 The Director shall not make such a determination on the

11 basis of any difference in the health status of Federal Gov12 ernment employees and the community-rated population.

13 Subtitle E—Standards for Reform

14 PART 1—ESTABLISHMENT AND APPLICATION OF

15 STANDARDS

16 SEC. 1401. CERTIFIED HEALTH PLANS.

17 A certified health plan shall meet the applicable re18 form standards established under part 2 for insured health

19 plans and part 3 for self-insured health plans.

20 SEC. 1402. GENERAL RULES.

21 (a) CONSTRUCTION.—Whenever in this subtitle a re22 quirement or standard is imposed on a health plan, the

23 requirement or standard is deemed to have been imposed

24 on the insurer or sponsor of the plan in relation to that

25 plan.
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1 (b) USE OF INTERIM, FINAL REGULATIONS.—In

2 order to permit the timely implementation of the provi3 sions of this title, the Secretary and the Secretary of

4 Labor are each authorized to issue regulations under this

5 title on an interim basis that become final on the date

6 of publication, subject to change based on subsequent pub7 lic comment.

8 (c) REFERENCE TO REFORM STANDARDS.—For pur9 poses of this title, the term ‘‘reform standards’’ means the

10 standards established and applied under this subtitle.

11 PART 2—STANDARDS APPLICABLE TO CERTIFIED

12 INSURED HEALTH PLANS

13 SEC. 1411. GUARANTEED ISSUE AND RENEWAL.

14 (a) ISSUE.—

15 (1) IN GENERAL.—Except as otherwise pro16 vided in this section, a certified health plan spon17 sor—

18 (A) offering—

19 (i) a community-rated certified health

20 plan, shall offer such plan to any commu21 nity-rated individual applying for coverage,

22 and

23 (ii) an experience-rated certified

24 health plan, shall offer such plan to any
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1 experience-rated individual eligible for cov2 erage under the plan; and

3 (B) shall offer such plan for each

4 class of enrollment described in section

5 1413(b)(2)(B)(ii).

6 (2) AVAILABILITY.—Except as provided in

7 paragraph (4), a community-rated certified health

8 plan shall be made available throughout the entire

9 community rating area in which such plan is offered,

10 including through any purchasing cooperative choos11 ing to offer such plan.

12 (3) APPLICATION OF CAPACITY LIMITS.—

13 (A) IN GENERAL.—Subject to subpara14 graph (B), a certified health plan may cease en15 rolling individuals under the plan if—

16 (i) the plan ceases to enroll any new

17 individuals; and

18 (ii) the applicable certifying authority

19 determines that the plan’s financial or pro20 vider capacity to serve previously covered

21 groups or individuals (and additional indi22 viduals who will be expected to enroll be23 cause of affiliation with such previously

24 covered groups or individuals) will be im-
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1 paired if such plan is required to enroll

2 other individuals.

3 (B) FAIR ENROLLMENT.—A certified

4 health plan may exercise the limitations pro5 vided for in subparagraph (A) only if such plan

6 provides individuals with a fair opportunity to

7 enroll in the plan, regardless of the method by

8 which such individuals seek enrollment or the

9 time during the open enrollment period at

10 which enrollment is sought.

11 (4) NETWORK PLANS.—A network plan may be

12 made available only in a service area not identical to

13 the borders of a community rating area if the State

14 determines that—

15 (A)(i) the plan has not established its serv16 ice area in a manner that has the effect of dis17 criminating against an individual or groups of

18 individuals on the basis of categories described

19 in section 1414; and

20 (ii) the service area is not smaller than a

21 county, or 3-digit zip code area;

22 (B) the service area has been approved

23 pursuant to title XIII of the Public Health

24 Service Act; and
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1 (C) the network plan shall participate in

2 any risk adjustment program established for

3 each community rating area involved.

4 (b) RENEWAL.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), a certified health plan that is issued to

7 an individual shall be renewed at the option of the

8 individual.

9 (2) GROUNDS FOR REFUSAL TO RENEW.—

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

11 subparagraph (B), a certified health plan spon12 sor may under no circumstances refuse to

13 renew, or for any reason terminate, a certified

14 health plan with respect to any individual, fam15 ily, or employer under this title.

16 (B) EXCEPTION.—Subparagraph (A) shall

17 not apply in the case of—

18 (i) nonpayment of premiums;

19 (ii) fraud on the part of the individual

20 involved;

21 (iii) misrepresentation of material

22 facts on the part of the individual relating

23 to an application for coverage or claim for

24 benefits; or
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1 (iv) exit of the insurer from the mar2 ket if pursuant to rules established by the

3 Secretary.

4 (c) CERTAIN EXCLUDED PLANS.—The provisions of

5 this section (other than subsection (b)) and section 1451

6 (other than subsections (b)(1)(B), (b)(2), and (b)(3)),

7 shall not apply to any religious fraternal benefit society

8 in existence as of September 1993, which bears the risk

9 of providing insurance to its members, and which is an

10 organization described in section 501(c)(8) of the Internal

11 Revenue Code of 1986 which is exempt from taxation

12 under section 501(a) of such Code.

13 SEC. 1412. ENROLLMENT.

14 (a) IN GENERAL.—A certified health plan shall estab15 lish an enrollment process consistent rules established by

16 the Secretary.

17 (b) ENROLLMENT REQUIREMENTS.—The rules es18 tablished under subsection (a) shall provide for—

19 (1) general enrollment periods;

20 (2) special enrollment periods for individuals

21 who experience a change in their employment of

22 family situation or in their residence; and

23 (3) disenrollment for cause.
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1 SEC. 1413. RATING LIMITATIONS FOR COMMUNITY-RATED

2 MARKET.

3 (a) STANDARD PREMIUMS WITH RESPECT TO COM4 MUNITY-RATED ELIGIBLE INDIVIDUALS.—Each certified

5 health plan which covers community-rated individuals

6 shall establish within each community rating area in which

7 the plan is to be offered, a standard premium for individ8 ual enrollment.

9 (b) UNIFORM PREMIUMS WITHIN COMMUNITY RAT10 ING AREAS.—

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

12 and (3), the standard premium for each certified

13 health plan shall be the same, and shall not include

14 the administrative costs described in paragraph (3).

15 (2) APPLICATION TO ENROLLEES.—

16 (A) IN GENERAL.—The premium charged

17 for coverage in a certified health plan which

18 covers community-rated individuals shall be the

19 product of—

20 (i) the standard premium (established

21 under paragraph (1));

22 (ii) in the case of enrollment other

23 than individual enrollment, the family ad24 justment factor specified under subpara25 graph (B); and
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1 (iii) the age adjustment factor (speci2 fied under subparagraph (C)).

3 (B) FAMILY ADJUSTMENT FACTOR.—

4 (i) IN GENERAL.—The reform stand5 ards shall specify family adjustment fac6 tors that reflect the relative actuarial costs

7 of benefit packages based on family classes

8 of enrollment (as compared with such costs

9 for individual enrollment).

10 (ii) CLASSES OF ENROLLMENT.—

11 (I) IN GENERAL.—In this Act,

12 each of the following is a separate

13 class of family enrollment:

14 (aa) Coverage only of an in15 dividual (referred to in this Act

16 as the ‘‘individual’’ enrollment or

17 class of enrollment).

18 (bb) Coverage of a married

19 couple without children (referred

20 to in this Act as the ‘‘couple21 only’’ enrollment or class of en22 rollment).

23 (cc) Coverage of an unmar24 ried individual and one or more

25 children (referred to in this Act
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1 as the ‘‘single parent’’ enrollment

2 or class of enrollment).

3 (dd) Coverage of a married

4 couple and one or more children

5 (referred to in this Act as the

6 ‘‘dual parent’’ enrollment or class

7 of enrollment).

8 (II) REFERENCES TO FAMILY

9 AND COUPLE CLASSES OF ENROLL10 MENT.—In this Act:

11 (aa) FAMILY.—The terms

12 ‘‘family enrollment’’ and ‘‘family

13 class of enrollment’’, refer to en14 rollment in a class of enrollment

15 described in item (bb), (cc), or

16 (dd) of subclause (I).

17 (bb) COUPLE.—The term

18 ‘‘couple class of enrollment’’ re19 fers to enrollment in a class of

20 enrollment described in item (bb)

21 or (dd) of subclause (I).

22 (III) SPOUSE; MARRIED; COU23 PLE.—

24 (aa) IN GENERAL.—In this

25 Act, the terms ‘‘spouse’’ and
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1 ‘‘married’’ mean, with respect to

2 a person, another individual who

3 is the spouse of the person or

4 married to the person, as deter5 mined under applicable State

6 law.

7 (bb) COUPLE.—The term

8 ‘‘couple’’ means an individual

9 and the individual’s spouse.

10 (C) AGE ADJUSTMENT FACTOR.—

11 (i) IN GENERAL.—The Secretary, in

12 consultation with the NAIC, shall specify

13 uniform age categories and maximum rat14 ing increments for age adjustment factors

15 that reflect the relative actuarial costs of

16 benefit packages among enrollees. For in17 dividuals who have attained age 18 but not

18 age 65, the highest age adjustment factor

19 may not exceed twice the lowest age ad20 justment factor.

21 (ii) PHASE-IN PERIOD.—The Sec22 retary, in consultation with the NAIC,

23 shall establish a schedule for the phase-in

24 of age-adjusted community rates so as to
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1 minimize disruption of the insurance mar2 ket.

3 (3) ADMINISTRATIVE SAVINGS.—Nothing in

4 this section shall be construed as preventing a pur5 chasing cooperative from negotiating a unique pre6 mium with a certified health plan that reflects ad7 ministrative and other sources of savings.

8 SEC. 1414. NONDISCRIMINATION BASED ON HEALTH STA9 TUS.

10 Except as otherwise provided in this Act, a certified

11 health plan may not deny, limit, or condition the coverage

12 under (or benefits of) the plan for any reason, including

13 but not limited to, health status, medical condition, claims

14 experience, receipt of health care, medical history, antici15 pated need for health care, disability, or lack of evidence

16 of insurability, of an individual.

17 SEC. 1415. BENEFITS OFFERED.

18 A certified health plan shall offer to all enrollees in

19 the plan the comprehensive benefits established under sub20 title B.

21 SEC. 1416. REQUIREMENTS OF SUPPLEMENTALS.

22 A certified health plan sponsor may only offer bene23 fits that are not covered benefits, or a reduction in cost

24 sharing below the cost sharing specified under section

25 1101(h), if—
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1 (1) such additional coverage is offered and

2 priced separately from the comprehensive benefits

3 package offered by such plan;

4 (2) the purchase of the certified health plan is

5 not conditioned upon the purchase of such additional

6 coverage;

7 (3) coverage of such additional benefits is also

8 offered to individuals who are not enrolled in the

9 certified health plan; and

10 (4) the cost sharing reduction is offered only to

11 individuals enrolled in the certified health plan by

12 such plan for a price which includes any expected in13 crease in utilization resulting from the purchase of

14 such cost sharing reduction.

15 SEC. 1417. RISK ADJUSTMENT.

16 (a) IN GENERAL.—Each community-rated certified

17 health plan shall participate in a risk adjustment program

18 of the State in accordance with subsection (b).

19 (b) ESTABLISHMENT OF STANDARDS FOR RISK AD20 JUSTMENT PROGRAMS.—

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

22 standards under paragraph (2) for participating

23 States to provide risk adjustment programs under

24 section 1207 for participation by certified health

25 plans.
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1 (2) RISK ADJUSTMENT PROGRAM.—The stand2 ards developed by the Secretary under this para3 graph shall include a risk adjustment program

4 which—

5 (A) assures that payments to community6 rated certified health plans reflect the expected

7 relative utilization and expenditures for health

8 care services by each plan’s enrollees compared

9 to the average utilization and expenditures for

10 community-rated individuals; and

11 (B) protects plans that enroll a dispropor12 tionate share of such individuals with respect to

13 whom expected utilization of health care serv14 ices and expected health care expenditures for

15 such services are greater than the average utili16 zation and expenditures for such eligible indi17 viduals.

18 SEC. 1418. FINANCIAL REQUIREMENTS.

19 Each sponsor offering a community-rated certified

20 health plan shall meet financial solvency requirements to

21 assure protection of enrollees with respect to potential in22 solvency. The Secretary, in consultation with the NAIC,

23 shall establish such standards by regulation.
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1 SEC. 1419. COLLECTION AND PROVISION OF STANDARD2 IZED INFORMATION.

3 Each certified health plan that provides coverage for

4 individuals residing in a State shall submit to the State

5 and, upon request, to community-rated individuals, infor6 mation regarding—

7 (1) certification status of the plan;

8 (2) benefits offered under the plan;

9 (3) premiums, cost-sharing, and administrative

10 charges under the plan;

11 (4) risk and referral arrangements under the

12 plan;

13 (5) the number, distribution, and variety of

14 health care providers used under the plan and the

15 availability of such providers;

16 (6) the enrollee complaint and appeals process

17 used under the plan;

18 (7) the rights and responsibilities of plan enroll19 ees; and

20 (8) other information determined appropriate

21 by the Secretary or the State.

22 SEC. 1420. QUALITY IMPROVEMENT AND ASSURANCE.

23 (a) IN GENERAL.—Each certified health plan shall

24 establish procedures, including ongoing quality improve25 ment procedures, to ensure that the health care services

26 provided to enrollees under the plan will be provided under
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1 reasonable standards of quality of care consistent with

2 prevailing professionally recognized standards of medical

3 practice.

4 (b) INTERNAL QUALITY ASSURANCE PROGRAM.—

5 Each certified health plan shall establish, and commu6 nicate to its enrollees and its providers, an ongoing inter7 nal program, including periodic reporting, to monitor and

8 evaluate the quality and cost effectiveness of its health

9 care services, pursuant to standards established by the

10 Secretary.

11 (c) UTILIZATION MANAGEMENT PROTOCOLS.—The

12 utilization review and management activities of each cer13 tified health plan, provided either directly or through con14 tract, shall meet the following standards as defined by the

15 Secretary:

16 (1) PERSONNEL.—All review determinations

17 shall be made by licensed, certified, or otherwise

18 credentialed health professionals who are qualified to

19 review utilization of the treatment being sought.

20 (2) REVIEW PROCESS.—Each certified health

21 plan shall base utilization management on current

22 scientific knowledge, stress the efficient delivery of

23 health care and outcomes, rely primarily on evaluat24 ing and comparing practice patterns rather than

25 routine case-by-case review, be consistent and timely
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1 in application, and have a process for making review

2 determinations for urgent and emergency care 24

3 hours a day.

4 (3) NO FINANCIAL INCENTIVES.—Utilization

5 management by each certified health plan may not

6 create financial incentives for reviewers to reduce or

7 limit medically necessary or appropriate services.

8 (4) CONSUMER DISCLOSURE.—Each certified

9 health plan shall disclose, upon request, to enrollees

10 (and prospective enrollees) and to participating pro11 viders (and prospective providers) the utilization re12 view protocols and the type of financial arrange13 ments, if any, used by the plan for controlling utili14 zation and costs, while protecting proprietary busi15 ness information to the extent specified by the Sec16 retary.

17 (d) PHYSICIAN INCENTIVE PLANS.—A certified

18 health plan may not operate a physician incentive plan un19 less such incentive plan meets the requirements of section

20 1876(i)(8)(A) of the Social Security Act (42 U.S.C.

21 1395mm(i)(8)(A)).

22 (e) CREDENTIALING.—Each certified health plan

23 shall—

24 (1) verify the credentials of participating physi25 cians and practitioners; and
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1 (2) ensure that participating providers and fa2 cilities are appropriately accredited, certified, and li3 censed.

4 SEC. 1421. PATIENT PROTECTIONS AND PROVIDER SELEC5 TION.

6 (a) INFORMATION REGARDING A PATIENT’S RIGHT

7 TO SELF-DETERMINATION IN HEALTH CARE SERV8 ICES.—Each certified health plan shall be considered to

9 be an eligible organization under title XVIII of the Social

10 Security Act for purposes of applying the rules under sec11 tion 1866(f) of such Act (42 U.S.C. 1395cc(f)).

12 (b) GATEKEEPER.—With respect to each network

13 plan that utilizes a gatekeeper or similar process to ap14 prove network items and services, such plan shall ensure

15 that such gatekeeper or process does not create an undue

16 burden for enrollees with complex or chronic health condi17 tions and shall ensure access to relevant specialists for the

18 continued care of such enrollees when medically indicated.

19 In cases of a patient with a severe, complex, or chronic

20 health condition, such plan shall determine, in conjunction

21 with the enrollee and the enrollee’s primary care provider,

22 whether it is medically necessary or appropriate to use a

23 specialist or a care coordinator from an interdisciplinary

24 team as the gatekeeper or in the health care approval

25 process.
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1 (c) CONFIDENTIALITY OF PATIENT RECORDS.—Each

2 certified health plan shall have explicit procedures to pro3 tect the confidentiality of individual patient information.

4 (d) MARKETING.—A sponsor of a certified health

5 plan may not engage in selective marketing that would

6 have the effect of avoiding high-risk subscribers within a

7 community-rating area. Marketing materials may not con8 tain false or materially misleading information.

9 (e) NO PATIENT LIABILITY FOR UNPAID PLAN OBLI10 GATIONS.—An individual enrolled in a certified health

11 plan shall not be liable to any health care provider or prac12 titioner with respect to the provision of health services cov13 ered by the plan in excess of the amount for which the

14 individual would have been liable had the health plan made

15 payments to providers in a timely manner.

16 (f) REMEDIES AND ENFORCEMENT.—

17 (1) IN GENERAL.—Each certified health plan

18 shall comply with the applicable remedies and en19 forcement requirements.

20 (2) GRIEVANCE PROCESS.—Each certified

21 health plan shall establish a grievance process for

22 enrollees dissatisfied with matters other than the de23 nial of payment or provision of benefits by the plan.
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1 (g) ENROLLMENT.—A certified health plan may not

2 knowingly accept the enrollment of an individual who is

3 enrolled in another certified health plan.

4 (h) PROVIDER SELECTION.—

5 (1) IN GENERAL.—In selecting among providers

6 of health services for membership in a provider net7 work, or in establishing the terms and conditions of

8 such membership, a certified health plan may not

9 engage in any practice that discriminates against a

10 provider based on the actual or anticipated health

11 status of the patients of the provider.

12 (2) ADDITIONAL REQUIREMENTS.—No health

13 plan may discriminate on the basis of the provider’s

14 status as a member of a health care profession for

15 the purposes of selecting among providers of health

16 services for participation in a provider network, pro17 vided that the State authorizes members of that pro18 fession to render the services in question and that

19 such services are covered in the comprehensive bene20 fits package described in subtitle B.

21 (3) NUMBER AND TYPE.—Nothing in this sub22 section shall—

23 (A) prevent a certified health plan sponsor

24 from matching the number and type of health
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1 care providers to the needs of the plan mem2 bers; or

3 (B) establish any other measure designed

4 to maintain quality or to control costs.

5 (i) PHYSICIAN PARTICIPATION.—Each certified

6 health plan shall establish mechanisms through which phy7 sicians have input into matters affecting patient care and

8 through which patients have the ability to choose any pri9 mary care physician from among participating providers.

10 SEC. 1422. ARRANGEMENTS WITH ESSENTIAL COMMUNITY

11 PROVIDERS.

12 (a) CERTIFICATION.—The Secretary shall certify as

13 an essential community provider the following providers

14 and organizations:

15 (1) Covered entities as defined in section

16 340B(a)(4) of the Public Health Service Act (42

17 U.S.C. 256b(a)(4)), and comparable nonprofit hos18 pitals, except that subsections (a)(4)(L)(iii) and

19 (a)(7) of such section shall not apply.

20 (2) A Medicare dependent small rural hospital

21 under section 1886(d)(8)(iii) of the Social Security

22 Act.

23 (3) Children’s hospitals meeting comparable cri24 teria determined appropriate by the Secretary.
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1 (4) Public and private, nonprofit mental health

2 and substance abuse providers receiving funds under

3 title V or XIX of the Public Health Service Act.

4 (5) Runaway homeless youth centers or transi5 tional living programs for homeless youth providing

6 health services under the Runaway Homeless Youth

7 Act of 1974 (42 U.S.C. 5701 et seq.).

8 (6) Public or nonprofit maternal and child

9 health providers that receive funding under title V of

10 the Social Security Act.

11 (7) Rural health clinics as defined under section

12 1861(aa)(2) of the Social Security Act.

13 (8) School health services centers under title III

14 of this Act.

15 (9) Nonprofit hospitals with a minimum of 200

16 beds, located in urban areas where—

17 (A) the cumulative total of its services pro18 vided to individuals who are entitled to benefits

19 under title XVIII of the Social Security Act or

20 under a State plan under title XIX of such Act

21 equals a minimum of 65 percent; and

22 (B) a minimum of 20 percent of its serv23 ices are provided to individuals eligible for as24 sistance under such title XIX.
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1 (b) REQUIREMENTS RELATING TO ESSENTIAL COM2 MUNITY PROVIDERS.—

3 (1) IN GENERAL.—Each health plan shall, with

4 respect to each electing essential community pro5 vider (as defined in paragraph (5), other than a pro6 vider of school health services) located within the

7 plan’s service area, either—

8 (A) enter into a written provider participa9 tion agreement (described in paragraph (3))

10 with the provider; or

11 (B) enter into a written agreement under

12 which the plan shall make payment to the pro13 vider in accordance with paragraph (4).

14 The requirements of this paragraph shall not apply

15 to a health plan with respect to any essential com16 munity provider for which a demonstration is made

17 pursuant to paragraph (2).

18 (2) WAIVERS.—Effective one year after the

19 date on which a State becomes a participating State,

20 the Secretary shall grant a waiver of the require21 ments of paragraph (1) to any health plan that dem22 onstrates that it has the capacity to provide services

23 to plan enrollees residing in the area served by an

24 essential community provider that are reasonably

25 equivalent to the services provided by the essential
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1 community provider in terms of the scope of services

2 and convenience. Any such waiver shall not become

3 effective until the plan year following the succeeding

4 open enrollment period. Any health plan receiving

5 such a waiver shall notify the essential community

6 provider with respect to which such a waiver has

7 been granted and enrollees of the plan not less than

8 60 days prior to the commencement of such enroll9 ment period.

10 (3) PARTICIPATION AGREEMENT.—A participa11 tion agreement between a health plan and an elect12 ing essential community provider under this para13 graph shall provide that the health plan agrees to

14 treat the provider in accordance with terms and con15 ditions at least as favorable as those that are appli16 cable to other providers participating in the health

17 plan with respect to each of the following:

18 (A) The scope of services for which pay19 ment is made by the plan to the provider.

20 (B) The rate of payment for covered care

21 and services.

22 (C) The availability of financial incentives

23 to participating providers.

24 (D) Limitations on financial risk provided

25 to other participating providers.
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1 (E) Assignment of enrollees to participat2 ing providers.

3 (F) Access by the provider’s patients to

4 providers in medical specialties or subspecialties

5 participating in the plan.

6 (4) PAYMENTS FOR PROVIDERS WITHOUT PAR7 TICIPATION AGREEMENTS.—

8 (A) IN GENERAL.—Payment in accordance

9 with this paragraph is payment based on pay10 ment methodologies and rates used under the

11 applicable Medicare payment methodology and

12 rates (or the most closely applicable methodol13 ogy under such program as the Secretary of

14 Health and Human Services specifies in regula15 tions).

16 (B) NO APPLICATION OF GATE-KEEPER

17 LIMITATIONS.—Payment in accordance with

18 this paragraph may be subject to utilization re19 view, but may not be subject to otherwise appli20 cable gate-keeper requirements under the plan.

21 (5) ELECTION.—

22 (A) IN GENERAL.—In this section, the

23 term ‘‘electing essential community provider’’

24 means, with respect to a health plan, an essen-
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1 tial community provider that elects this section

2 to apply to the health plan.

3 (B) FORM OF ELECTION.—An election

4 under this paragraph shall be made in a form

5 and manner specified by the Secretary, and

6 shall include notice to the health plan involved.

7 Such an election may be made annually with re8 spect to a health plan, except that the plan and

9 provider may agree to make such an election on

10 a more frequent basis.

11 (c) RECOMMENDATION ON CONTINUATION OF RE12 QUIREMENT.—

13 (1) STUDIES.—In order to prepare rec14 ommendations under paragraph (2), the Secretary

15 shall conduct studies regarding essential community

16 providers, including studies that assess—

17 (A) the definition of essential community

18 provider,

19 (B) the sufficiency of the funding levels for

20 providers, including rules for federally qualified

21 health centers, for both covered and uncovered

22 benefits under this Act,

23 (C) the effects of contracting requirements

24 relating to such providers on such providers,

25 health plans, and enrollees,
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1 (D) the impact of the payment rules for

2 such providers, and

3 (E) the impact of national health reform

4 on such providers.

5 (2) RECOMMENDATIONS TO CONGRESS.—The

6 Secretary shall submit to Congress, by not later

7 than March 1, 2001, specific recommendations re8 specting whether, and to what extent, subsection (b)

9 should continue to apply to some or all essential

10 community providers. Such recommendations may

11 include a description of the particular types of such

12 providers and circumstances under which such sec13 tion should continue to apply.

14 SEC. 1423. ACCESS TO SPECIALIZED SERVICES.

15 (a) IN GENERAL.—Each certified health plan shall

16 have within the plan’s network, or have such other ar17 rangements with, a sufficient number, distribution, and

18 variety of providers of specialized services to assure that

19 such services are available and accessible to adults, in20 fants, children, and persons with disabilities. With respect

21 to children such specialized care shall be in pediatrics.

22 (b) ELIGIBLE CENTERS OF SPECIALIZED TREAT23 MENT EXPERTISE.—

24 (1) IN GENERAL.—Each network plan shall

25 demonstrate that adults, children, and individuals
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1 with disabilities have access to specialized treatment

2 expertise when medically indicated by meeting eval3 uation criteria established by the Secretary. In es4 tablishing such criteria, the Secretary may consider

5 a process by which a network plan could be deemed

6 to meet such evaluation criteria if such plan dem7 onstrates referrals to designated centers of special8 ized care when medically necessary or appropriate

9 and informs enrollees of the availability of referral

10 care.

11 (2) ELIGIBLE CENTERS.—The Secretary shall

12 establish criteria for designating centers of special13 ized care and shall designate eligible centers based

14 on such criteria. The criteria shall include require15 ments for staff credentials and experience, and re16 quirements for measured outcomes in the diagnosis

17 and treatment of patients. The Secretary shall de18 velop additional criteria for outcomes of specialized

19 treatment as research findings become available. To

20 be designated as a center of specialized care, a cen21 ter shall—

22 (A) attract patients from outside the cen23 ter’s local geographic region, from across the

24 State or the United States; and
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1 (B) either sponsor, participate in, or have

2 medical staff who participate in peer-reviewed

3 research.

4 (3) LIMITATION.—A State may not establish

5 rules or policies that require or encourage network

6 plans to give preference to centers of specialized

7 treatment expertise within the State or within the

8 community rating area. A health plan shall not pro9 hibit an academic health center, teaching hospital, or

10 other center for specialized care with which it con11 tracts from contracting with one or more other

12 plans.

13 (4) SPECIALIZED TREATMENT EXPERTISE.—

14 For purposes of this subsection, the term ‘‘special15 ized treatment expertise’’, with respect to the treat16 ment of a health condition by an eligible center,

17 means expertise in diagnosing and treating unusual

18 diseases or conditions, diagnosing and treating dis19 eases or conditions which are unusually difficult to

20 diagnose or treat, and providing other specialized

21 health care.

22 (c) EVALUATION CRITERIA FOR SPECIALIZED SERV23 ICES STANDARDS.—A certified health plan may choose to

24 provide specialized services within a provider network if

25 such provision meets the requirements of this section.
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1 SEC. 1424. COMMUNITY RATING AREA CAPACITY.

2 Each certified health plan shall have the capacity

3 within the plan’s network, or through arrangements with

4 a sufficient number, distribution, and variety of providers,

5 to deliver the comprehensive benefits required under sub6 title B throughout the community rating area (designated

7 under section 1203) in which such plan is offered. Services

8 shall be provided with reasonable promptness and acces9 sibility, in a manner which assures continuity, and in a

10 manner which appropriately serves the diverse needs of

11 the population.

12 SEC. 1425. OUT-OF-AREA COVERAGE.

13 Each certified health plan shall provide emergency

14 out-of-area and out-of-plan coverage for enrollees of the

15 plan and urgent out-of-area coverage.

16 PART 3—STANDARDS APPLICABLE TO CERTIFIED

17 SELF-INSURED HEALTH PLANS

18 SEC. 1431. STANDARDS APPLICABLE TO CERTIFIED SELF19 INSURED HEALTH PLANS.

20 (a) IN GENERAL.—Subject to subsection (b), the re21 quirements applicable to certified self-insured health plans

22 are the requirements specified in the following provisions

23 (as modified in regulations promulgated by the Secretary

24 of Labor to make such provisions applicable to self-insured

25 plans):
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1 (1) Section 1411, except that such subsections

2 (a) and (b) shall be applied (for purposes of this

3 subsection) only with respect to employees of the

4 employer sponsor or members of the family of such

5 employees.

6 (2) Sections 1412 through 1425, except that

7 sections 1413(a), 1416, 1417, and 1418 shall not

8 apply.

9 (b) COLLECTIVE BARGAINING EXCEPTION.—Para10 graph (1) of subsection (a) shall not apply to a certified

11 self-insured health plan sponsor that is providing benefits

12 pursuant to a collective bargaining agreement.

13 (c) FINANCIAL SOLVENCY.—Each certified self-in14 sured health plan shall meet the solvency, reserve, and

15 stop-loss requirements established by the Secretary of

16 Labor under section 1501.

17 (d) MANAGEMENT OF FUNDS.—

18 (1) MANAGEMENT OF FUNDS.—A certified self19 insured health plan sponsor shall, in the manage20 ment of the plan’s funds, be subject to the applicable

21 fiduciary requirements of part 4 of subtitle B of title

22 I of the Employee Retirement Income Security Act

23 of 1974, together with the applicable enforcement

24 provisions of part 5 of subtitle B of title I of such

25 Act.
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1 (2) MANAGEMENT OF FINANCES AND RECORDS;

2 ACCOUNTING SYSTEM.—A certified self-insured

3 health plan sponsor shall comply with standards re4 lating to the management of finances and records

5 and accounting systems as the Secretary of Labor

6 shall specify.

7 (e) ADDITIONAL STANDARDS.—In addition to the re8 quirements applicable to certified self-insured health plans

9 under subsection (a), the Secretary of Labor shall estab10 lish standards to ensure that such health plans and in11 sured, experience-rated health plans—

12 (1) do not vary premiums for any reason de13 scribed in section 1414(a);

14 (2) do not discriminate on a basis described in

15 section 1203(e) (relating to geographic discrimina16 tion); and

17 (3) provide information to employees of the em18 ployer sponsor of the plans offered.

19 PART 4—PREEMPTION OF CERTAIN STATE LAWS

20 SEC. 1441. PREEMPTION FROM STATE BENEFIT MANDATES.

21 Effective as of January 1, 1997, no State shall estab22 lish or enforce any law or regulation that—

23 (1) requires the offering, as part of a certified

24 health plan, of any services, category of care, or

25 services of any class or type of provider that is dif-
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1 ferent from the benefit categories specified under

2 this Act; or

3 (2) requires a right of conversion from a group

4 health plan that is a certified health plan to an indi5 vidual certified health plan.

6 SEC. 1442. PREEMPTION OF STATE LAW RESTRICTIONS ON

7 CERTIFIED HEALTH PLANS.

8 Effective as of January 1, 1997—

9 (1) a State may not prohibit or limit a certified

10 health plan from including incentives for enrollees to

11 use the services of participating providers;

12 (2) a State may not prohibit or limit such plans

13 from limiting coverage of services to those provided

14 by a participating provider;

15 (3) a State may not prohibit or limit the nego16 tiation of rates and forms of payments for providers

17 under such plans;

18 (4) a State may not prohibit or limit such plans

19 from limiting the number of participating providers;

20 (5) a State may not prohibit or limit such plans

21 from requiring that services be provided (or author22 ized) by a practitioner selected by the enrollee from

23 a list of available participating providers;

24 (6) a State may not prohibit or limit the cor25 porate practice of medicine;
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1 (7) a State may not regulate utilization man2 agement and review programs of any health plan to

3 the extent not provided by this title;

4 (8) a State may not prohibit or limit a health

5 plan from using single source suppliers for pharmacy

6 services, non-serviced medical equipment, and other

7 supplies and services; and

8 (9) a State may not prohibit a certified health

9 plan, including a Federally qualified health mainte10 nance organization, from offering a point of service

11 option.

12 PART 5—INTERIM STANDARDS

13 SEC. 1451. APPLICATION OF INTERIM STANDARDS.

14 (a) IN GENERAL.—During the interim standards ap15 plication period, a health plan sponsor may only offer a

16 health plan in a State if such plan meets the standards

17 specified in subsections (b) and (c).

18 (b) SPECIFIED STANDARDS.—

19 (1) GUARANTEED ISSUE AND NONDISCRIMINA20 TION.—The standards specified in—

21 (A) section 1411(a), and

22 (B) section 1414.

23 (2) RENEWAL.—The standards specified in sec24 tion 1411(b).
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1 (3) COVERAGE.—A self-insured health plan may

2 not reduce or limit coverage of any condition or

3 course of treatment that is expected to cost not less

4 than $5,000 during any 12-month period.

5 (c) TREATMENT OF PREEXISTING CONDITION EX6 CLUSIONS PRIOR TO UNIVERSAL COVERAGE.—

7 (1) IN GENERAL.—Notwithstanding section

8 1414, prior to the achievement of universal coverage,

9 a certified health plan may impose a limitation or

10 exclusion of benefits relating to treatment of a con11 dition based on the fact that the condition preexisted

12 the effective date of the plan with respect to an indi13 vidual only if—

14 (A) the condition was diagnosed or treated

15 during the 3-month period ending on the day

16 before the date of enrollment under the plan;

17 (B) the limitation or exclusion extends for

18 a period not more than 6 months after the date

19 of enrollment under the plan;

20 (C) the limitation or exclusion does not

21 apply to an individual who, as of the date of

22 birth, was covered under the plan; or

23 (D) the limitation or exclusion does not

24 apply to pregnancy.
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1 (2) CREDITING OF PREVIOUS COVERAGE.—A

2 certified health plan shall provide that if an individ3 ual under such plan is in a period of continuous cov4 erage as of the date of enrollment under such plan,

5 any period of exclusion of coverage with respect to

6 a preexisting condition shall be reduced by 1 month

7 for each month in the period of continuous coverage.

8 (3) DEFINITIONS.—As used in this subsection:

9 (A) PERIOD OF CONTINUOUS COVERAGE.—

10 The term ‘‘period of continuous coverage’’

11 means the period beginning on the date an indi12 vidual is enrolled under a health plan or health

13 care program which provides benefits similar to

14 those provided by the certified health plan in

15 which the individual is seeking to enroll with re16 spect to coverage of a preexisting condition and

17 ends on the date the individual is not so en18 rolled for a continuous period of more than 3

19 months.

20 (B) PREEXISTING CONDITION.—The term

21 ‘‘preexisting condition’’ means, with respect to

22 coverage under a certified health plan, a condi23 tion which was diagnosed, or which was treated,

24 within the 3-month period ending on the day
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1 before the date of enrollment (without regard to

2 any waiting period).

3 (d) INTERIM STANDARDS APPLICATION PERIODS.—

4 The interim standards application period is—

5 (1) in the case of the standard specified in sub6 section (b) and (c), on or after January 1, 1996,

7 and before the State becomes a participating State;

8 and

9 (2) in the case of the standard specified in sub10 section (b)(3), on or after the date of the enactment

11 of this Act, and before January 1, 1997.

12 (d) PREEMPTION.—The requirements of this section

13 do not preempt any State law unless State law directly

14 conflicts with such requirements. The provision of addi15 tional protections under State law shall not be considered

16 to directly conflict with such requirements. The Secretary

17 may issue letter determinations with respect to whether

18 this section preempts a provision of State law.

19 (e) CONSTRUCTION.—The provisions of this section

20 shall be construed in a manner that assures, to the great21 est extent practicable, continuity of health benefits under

22 health plans in effect on the effective date of this Act.

23 (f) SPECIAL RULES FOR ACQUISITIONS AND TRANS24 FERS.—The Secretary may issue regulations regarding the

25 application of this section in the case of health plans (or
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1 groups of such plans) which are transferred from one

2 health plan sponsor to another sponsor through assump3 tion, acquisition, or otherwise.

4 Subtitle F—Federal

5 Responsibilities

6 PART 1—ESTABLISHMENT OF FEDERAL STAND7 ARDS FOR CERTIFIED INSURED HEALTH

8 PLANS

9 SEC. 1500. ESTABLISHMENT.

10 The Secretary, in consultation with the NAIC and

11 other qualified experts, shall develop and publish the

12 standards specified in part 2 of subtitle E by not later

13 than June 1, 1996.

14 PART 2—CERTIFICATION OF SELF-INSURED

15 HEALTH PLANS

16 SEC. 1501. ESTABLISHMENT AND CERTIFICATION OF

17 STANDARDS APPLICABLE TO SELF-INSURED

18 CERTIFIED HEALTH PLANS.

19 (a) ESTABLISHMENT OF STANDARDS BY SECRETARY

20 OF LABOR.—The Secretary of Labor, in consultation with

21 the Secretary, shall develop and publish standards applica22 ble to certified self-insured health plans relating to the re23 quirements specified in part 3 of subtitle E. The Secretary

24 shall develop and publish such standards by not later than

25 June 1, 1996.
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1 (b) CERTIFICATION OF HEALTH PLANS.—In the case

2 of self-insured health plans, the Secretary of Labor shall

3 provide for the certification of self-insured health plans as

4 certified health plans.

5 (c) FINANCIAL STANDARDS.—The Secretary of

6 Labor shall develop, by not later than January 1, 1996,

7 standards for the solvency, reserve, and stop-loss require8 ments for certified self-insured health plans and for quali9 fied association plans.

10 SEC. 1502. CORRECTIVE ACTIONS FOR SELF-INSURED

11 HEALTH PLANS.

12 (a) IN GENERAL.—The Secretary of Labor shall by

13 regulation establish procedures for the filing and imple14 mentation of corrective action plans in any case in which

15 such Secretary or a self-insured plan sponsor determines

16 that a self-insured plan has failed to meet the require17 ments of this Act, or expects such a failure.

18 (b) DISQUALIFIED OR TERMINATION OF PLAN.—

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

20 plan sponsor of a self-insured health plan determines

21 that there is reason to believe that the plan will

22 cease to be a certified self-insured health plan or will

23 terminate, the plan sponsor shall so inform the Sec24 retary of Labor, shall develop a plan for winding up

25 the affairs of the plan in connection with such dis-
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1 qualification or termination in a manner which will

2 result in timely payment of all benefits for which the

3 plan is obligated, and shall submit such plan in writ4 ing to such Secretary. Actions required under this

5 subparagraph shall be taken in such form and man6 ner as may be prescribed in regulations by such Sec7 retary.

8 (2) ACTIONS REQUIRED IN CONNECTION WITH

9 DISQUALIFICATION OR TERMINATION.—

10 (A) ACTIONS BY PLAN SPONSOR.—Upon a

11 determination by the Secretary of Labor that a

12 corrective action plan has not been implemented

13 or that such a plan cannot reasonably be ex14 pected to bring the health plan into compliance

15 with this Act, the plan sponsor shall, at the di16 rection of such Secretary, terminate the plan

17 and, in the course of the termination, take such

18 actions as such Secretary may require as nec19 essary to ensure timely payment of all benefits

20 for which the plan is obligated.

21 (B) ACTIONS BY LARGE EMPLOYER.—

22 Upon a determination by the Secretary of

23 Labor under subparagraph (A), the large em24 ployer shall provide for such contingency cov25 erage for all employees of the employer in ac-
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1 cordance with regulations which shall be pre2 scribed in regulations of such Secretary.

3 SEC. 1503. ERISA APPLICABILITY TO SELF-INSURED

4 HEALTH PLANS.

5 (a) IN GENERAL.—Part 1 of subtitle B of title I of

6 the Employee Retirement Income Security Act of 1974 is

7 amended—

8 (1) in the heading for section 110, by adding

9 ‘‘BY PENSION PLANS’’ at the end;

10 (2) by redesignating section 111 as section 112;

11 and

12 (3) by inserting after section 110 the following

13 new section:

14 ‘‘SPECIAL RULES FOR GROUP HEALTH PLANS

15 ‘‘SEC. 111. (a) IN GENERAL.—The Secretary may by

16 regulation provide special rules for the application of this

17 part to group health plans which are consistent with the

18 purposes of the Affordable Health Care for All Americans

19 Act and which take into account the special needs of par20 ticipants, beneficiaries, and health care providers under

21 such plans.

22 ‘‘(b) ADDITIONAL REQUIREMENTS.—Such special

23 rules may include rules providing for reporting and disclo24 sure to the Secretary and to participants and beneficiaries

25 of additional information or at additional times with re26 spect to group health plans to which this part applies
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1 under section 4(c)(2), if such reporting and disclosure

2 would be comparable to and consistent with similar re3 quirements applicable under the Health Reform Act with

4 respect to community-rated health plans and applicable

5 regulations of the Secretary of Health and Human Serv6 ices prescribed thereunder.’’.

7 (b) CLERICAL AMENDMENT.—The table of contents

8 in section 1 of such Act is amended by striking the items

9 relating to sections 110 and 111 and inserting the follow10 ing new items:

‘‘Sec. 110. Alternative methods of compliance by pension plans.

‘‘Sec. 111. Special rules for group health plans.

‘‘Sec. 112. Repeal and effective date.’’.

11 PART 3—OTHER RESPONSIBILITIES

12 SEC. 1521. FEDERAL ROLE IN THE CASE OF A DEFAULT BY

13 A STATE.

14 If a State fails to become a participating State under

15 section 1200 or, having become a participating State, the

16 State fails to continue to meet the requirements of such

17 section, the Secretary shall, after notice and opportunity

18 for correction, impose intermediate sanctions, order cor19 rective actions, and may, if necessary to fulfill the pur20 poses of this Act, carry out activities under this Act in

21 the same manner as a participating State would carry out

22 such activities.
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1 SEC. 1522. RULES DETERMINING SEPARATE EMPLOYER

2 STATUS.

3 Under rules of the Secretary, employers that are re4 lated (as defined under such rules) shall be treated under

5 this Act as a single employer if a reason for their separa6 tion relates to the health risk characteristics of eligible em7 ployees of such employers.

8 SEC. 1523. WORKPLACE WELLNESS PROGRAM.

9 (a) IN GENERAL.—The Secretary shall develop cer10 tification criteria for workplace wellness programs.

11 (b) APPLICATION OF SECTION.—Any health plan

12 may offer a uniform premium discount, not to exceed 10

13 percent, to employers maintaining certified workplace

14 wellness programs.

15 PART 4—COLLECTIVE BARGAINING DISPUTE

16 RESOLUTION

17 SEC. 1531. FINDINGS AND PURPOSE.

18 (a) FINDING.—Congress finds that—

19 (1) consistent with the intention of this Act to

20 eliminate waste and inefficiency in the health care

21 industry, it is important to avoid costly and disrup22 tive labor disputes; and

23 (2) such disputes are particularly likely to take

24 place during the period of transition to a restruc25 tured health care delivery system because of disrup-
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1 tions to established employment relationships result2 ing from that restructuring.

3 (b) PURPOSE.—It is the purpose of this part to ex4 pand the role of the Federal Mediation and Conciliation

5 Service, acting through the Boards of Inquiry provided for

6 in limited terms under section 8(g) of the National Labor

7 Relations Act (29 U.S.C. 158(g)) and section 213 of the

8 Labor Management Relations Act of 1947 (29 U.S.C.

9 183), to avoid labor disputes by providing for public fact

10 finding in contract negotiations.

11 SEC. 1532. APPLICATION LIMITED TO TRANSITION PERIOD.

12 The provisions of this part are intended to avoid cost13 ly and disruptive labor disputes during the period of tran14 sition to a restructured health care delivery system, and

15 shall be repealed effective upon the end of calendar year

16 2000.

17 SEC. 1533. REQUEST FOR APPOINTMENT OF BOARD OF IN18 QUIRY.

19 (a) IN GENERAL.—A health care entity (as defined

20 in section 3082(a)) or a labor organization that has been

21 lawfully certified or recognized as the representative of the

22 employees of a health care entity for the purpose of engag23 ing in collective bargaining concerning wages, hours and

24 other terms and conditions of employment, may request

25 that the Director of the Federal Mediation and Concilia-
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1 tion Service (hereafter referred to in this part as the ‘‘Di2 rector’’) appoint an impartial Health Care Board of In3 quiry to investigate the issues involved in a collective bar4 gaining dispute between the entity and the labor organiza5 tion.

6 (b) TIME FOR REQUEST.—Such request may be made

7 no earlier than 60 days after notice of the existence of

8 a contract dispute has been provided to—

9 (1) the Federal Mediation and Conciliation

10 Service in accordance with clause (A) or (B) of the

11 last sentence of section 8(d) of the Labor Manage12 ment Relations Act (29 U.S.C. 158(d)); or

13 (2) where the health care entity is otherwise ex14 empt from coverage under such Act, any comparable

15 State or territorial agency established to mediate

16 and conciliate disputes to which notice is required to

17 be given under applicable State law.

18 SEC. 1534. APPOINTMENT OF BOARD OF INQUIRY.

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

20 (b), the Director shall appoint a Health Care Board of

21 Inquiry not later than 10 days after receipt of a request

22 under section 1532. Each such Board shall be composed

23 of such number of individuals as the Director may deem

24 desirable. No member appointed under this section shall

25 have any interest or involvement in the health care institu-
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1 tions or the employee organizations involved in the dis2 pute.

3 (b) LIMITATION.—With respect to the appointment

4 of a Health Care Board of Inquiry under paragraph (1),

5 if the Director determines that—

6 (1) the health care entity is—

7 (A) otherwise exempt from coverage under

8 the Labor Management Relations Act, as

9 amended (29 U.S.C. 141 et seq.); and

10 (B) subject to State laws containing proce11 dures for the resolution of impasses in collective

12 bargaining that are comparable to those that

13 would be followed by a Board of Inquiry under

14 this section; or

15 (2) the parties involved have agreed to proce16 dures for the resolution of the impasse in collective

17 bargaining that are comparable to those that would

18 be followed by a Board of Inquiry;

19 the Director may refuse the request for the appointment

20 of such a Board.

21 SEC. 1535. PUBLIC FACTFINDING.

22 A Health Care Board of Inquiry appointed under this

23 part shall investigate the issues involved in the dispute and

24 make a written report thereon to the parties and to the

25 Director within 30 days after the establishment of such
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1 a Board. The written report shall contain the findings of

2 fact together with the Board’s recommendations for set3 tling the dispute, with the objective of achieving a prompt,

4 peaceful and just settlement of the dispute. The Board

5 shall arrange for publication of such report within the

6 community served by the health care entity involved.

7 SEC. 1535A. COMPENSATION OF MEMBERS OF BOARDS OF

8 INQUIRY.

9 (a) EMPLOYEES IF FEDERAL GOVERNMENT.—Mem10 bers of any board established under this part who are oth11 erwise employed by the Federal Government shall serve

12 without compensation but shall be reimbursed for travel,

13 subsistence, and other necessary expenses incurred by

14 such members in carrying out its duties under this section.

15 (b) OTHER MEMBERS.—Members of any board estab16 lished under this section who are not subject to subsection

17 (a) shall receive compensation at a rate prescribed by the

18 Director but not to exceed the daily rate prescribed for

19 GS–12 of the General Schedule under section 5332 of title

20 5, United States Code, including travel for each day they

21 are engaged in the performance of their duties under this

22 section and shall be entitled to reimbursement for travel,

23 subsistence, and other necessary expenses incurred by

24 them in carrying out their duties under this part.
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1 SEC. 1535B. MAINTENANCE OF STATUS QUO.

2 After the establishment of a board under section

3 1533, and for 15 days after any such board has issued

4 its report, no change in the status quo in effect prior to

5 the expiration of the contract in the case of negotiations

6 for a contract renewal, or in effect prior to the time the

7 parties began their bargaining in the case of an initial be8 ginning negotiation, except by agreement, shall be made

9 by the parties to the controversy.

10 Subtitle G—Miscellaneous

11 Employer Requirements

12 SEC. 1601. AUDITING OF RECORDS.

13 Each community-rated employer shall maintain such

14 records, and provide the State for the area in which the

15 employer maintains the principal place of employment (as

16 specified by the Secretary of Labor) with access to such

17 records, as may be necessary to verify and audit the infor18 mation reported under this Act.

19 SEC. 1602. PROHIBITION OF CERTAIN EMPLOYER DISCRIMI20 NATION.

21 No employer may discriminate with respect to an em22 ployee on the basis of the family status of the employee

23 or on the basis of the class of family enrollment selected

24 with respect to the employee.
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1 SEC. 1603. EVASION OF OBLIGATIONS.

2 It shall be unlawful for any employer or other person

3 to discharge, fine, suspend, expel, discipline, discriminate

4 or otherwise take adverse action against any employee if

5 a purpose of such action is to interfere with the employee’s

6 attainment of status as a qualifying employee, as a full

7 time employee, or as a part-time employee, or if a purpose

8 of such action is to evade or avoid any obligation under

9 this Act.

10 SEC. 1604. PROHIBITION ON SELF-FUNDING OF COST SHAR11 ING BENEFITS.

12 (a) PROHIBITION.—A community-rated employer

13 (and an experience-rated employer with respect to employ14 ees who are community rated eligible individuals) may pro15 vide benefits to employees that consist of the benefits in16 cluded in a cost sharing policy only through a contribution

17 toward the purchase of a cost sharing policy which is fund18 ed primarily through insurance.

19 (b) INDIVIDUAL AND EMPLOYER RESPONSIBIL20 ITIES.—In the case of an individual who resides in a sin21 gle-payer State and an employer with respect to employees

22 who reside in such a State, the responsibilities of such in23 dividual and employer under such system shall supersede

24 the obligations of the individual and employer under this

25 subtitle.
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1 SEC. 1605. ENFORCEMENT.

2 In the case of a person that violates a requirement

3 of this subtitle, the Secretary of Labor may impose a civil

4 money penalty, in an amount not to exceed $10,000, for

5 each violation with respect to each individual.

6 Subtitle H—General Definitions;

7 Miscellaneous Provisions

8 PART 1—GENERAL DEFINITIONS

9 SEC. 1700. DEFINITIONS AND SPECIAL RULES RELATING TO

10 HEALTH PLANS.

11 For purposes of this Act—

12 (1) HEALTH PLAN.—

13 (A) IN GENERAL.—The term ‘‘health plan’’

14 means an insured health plan or a self-insured

15 health plan which provides, or pays the cost of,

16 health benefits. Such term does not include the

17 following, or any combination thereof:

18 (i) Coverage only for accidental death

19 or dismemberment.

20 (ii) Coverage providing wages or pay21 ments in lieu of wages for any period dur22 ing which the employee is absent from

23 work on account of sickness or injury.

24 (iii) A medicare supplemental policy

25 (as defined in section 1882(g)(1) of the

26 Social Security Act).
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1 (iv) Coverage issued as a supplement

2 to liability insurance.

3 (v) General liability insurance.

4 (vi) Worker’s compensation or similar

5 insurance.

6 (vii) Automobile or automobile medi7 cal-payment insurance.

8 (viii) A long-term care policy, includ9 ing a nursing home fixed indemnity policy

10 (unless the Secretary determines that such

11 a policy provides sufficiently comprehensive

12 coverage of a benefit so that it should be

13 treated as a health plan).

14 (ix) A specified disease or illness in15 surance policy.

16 (x) A hospital or fixed indemnity in17 come-protection policy.

18 (xi) A disability income policy.

19 (xii) Insurance with respect to acci20 dents.

21 (xiii) An equivalent health care pro22 gram.

23 (xiv) Such other plan or arrangement

24 as the Secretary determines is not a health

25 plan.
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1 (B) INSURED HEALTH PLAN.—

2 (i) IN GENERAL.—The term ‘‘insured

3 health plan’’ means any health plan which

4 is a hospital or medical service policy or

5 certificate, hospital or medical service plan

6 contract, or health maintenance organiza7 tion or preferred provider organization

8 group contract offered by an insurer.

9 (ii) INSURER.—The term ‘‘insurer’’

10 means—

11 (I) a licensed insurance company,

12 (II) a prepaid hospital or medical

13 service plan,

14 (III) a preferred provider organi15 zation,

16 (IV) a health maintenance orga17 nization, or

18 (V) any similar entity (other than

19 an entity described in subparagraph

20 (C)),

21 which is engaged in the business of provid22 ing a plan of health insurance or health

23 benefits.
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1 (C) SELF-INSURED HEALTH PLAN.—The

2 term ‘‘self-insured health plan’’ means a health

3 plan—

4 (i) which is established and main5 tained by a large employer, and

6 (ii) under which the large employer

7 retains a substantial risk for the providing

8 of health benefits under the plan.

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

10 plan’’ means a health plan with which providers

11 have entered into an agreement that obligates

12 such providers to provide items and services to

13 individuals enrolled in the plan, or an agree14 ment to provide items and services on a fee-for15 service basis.

16 (E) POINT-OF-SERVICE PLAN.—The term

17 ‘‘point-of-service plan’’ means a network plan

18 that provides reimbursement for items and serv19 ices provided out-of-network at increased cost20 sharing levels.

21 (F) FEE-FOR-SERVICE PLAN.—The term

22 ‘‘fee-for-service plan’’ means a health plan

23 that—

24 (i) provides coverage for all items and

25 services included in the comprehensive ben-
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1 efit package that are furnished by any law2 ful health care provider of the enrollee’s

3 choice, subject to reasonable restrictions,

4 as determined by the Secretary, and

5 (ii) makes payment to such a provider

6 without regard to whether or not there is

7 a contractual arrangement between the

8 plan and the provider.

9 (2) CERTIFIED HEALTH PLAN.—The term ‘‘cer10 tified health plan’’ means a health plan which is cer11 tified by the appropriate certifying authority as

12 meeting the applicable requirements of this Act, in13 cluding the offering of the comprehensive benefits

14 described in subtitle B. A health plan shall not fail

15 to be treated as a certified health plan if such plan

16 offers a medicare-eligible benefits package to medi17 care beneficiaries under—

18 (A) a contract entered into with the Sec19 retary under section 1876 of the Social Security

20 Act, or

21 (B) a plan of an organization providing

22 benefits pursuant to an agreement under sec23 tion 1833(a)(1)(A) of such Act.

24 (3) TERMS AND RULES RELATING TO COMMU25 NITY AND EXPERIENCE RATING.—
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1 (A) COMMUNITY-RATED HEALTH PLAN.—

2 The term ‘‘community-rated health plan’’

3 means a health plan which meets the require4 ments of section 1013.

5 (B) COMMUNITY-RATED INDIVIDUAL.—The

6 term ‘‘community-rated individual’’ means an

7 individual—

8 (i) who is not an experience-rated in9 dividual, or

10 (ii) who is an experience-rated individ11 ual (determined without regard to this sub12 paragraph) who is not a full-time employee

13 of a large employer and who does not en14 roll in a certified health plan offered by the

15 employer.

16 (C) SMALL EMPLOYER.—The term ‘‘small

17 employer’’ means, with respect to any calendar

18 year, any employer if, on each of 20 days dur19 ing the preceding calendar year (each day being

20 in a different week), such employer (or any

21 predecessor) employed less than 100 full-time

22 employees for the day.

23 (D) EXPERIENCE-RATED HEALTH PLAN.—

24 The term ‘‘experience-rated health plan’’ means
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1 an insured or self-insured health plan covering

2 only experience-rated individuals.

3 (E) EXPERIENCE-RATED INDIVIDUAL.—

4 The term ‘‘experience-rated individual’’ means

5 an individual who is—

6 (i) an employee (or the dependent of

7 an employee) of a large employer,

8 (ii) a member (or the dependent of a

9 member) of a qualified association plan (as

10 defined in section 1323), or

11 (iii) an individual enrolled in a plan to

12 which section 1325 applies.

13 (F) LARGE EMPLOYER.—

14 (i) IN GENERAL.—The term ‘‘large

15 employer’’ means, with respect to any cal16 endar year, any employer if, on each of 20

17 days during the preceding calendar year

18 (each day being in a different week), such

19 employer (or any predecessor) employed

20 100 or more full-time employees for the

21 day.

22 (ii) ELECTION NOT TO AGGREGATE.—

23 Any employer may elect not to aggregate

24 its employees across community rating

25 areas. Upon such election, the employer
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1 shall be treated as a small employer in any

2 community rating area in which it employs

3 less than 100 full-time employees and as a

4 large employer in any community rating

5 area in which it employs 100 or more full6 time employees. Such election shall remain

7 in effect for a period of not less than 5

8 years. An employer may revoke such elec9 tion after a 5-year period by notifying the

10 Secretary of Labor under rules prescribed

11 by the Secretary.

12 (G) SPECIAL RULE FOR SPOUSES AND DE13 PENDENTS.—If any individual is offered cov14 erage under a health plan as the spouse or a

15 dependent of a primary enrollee of such plan,

16 such individual shall have the status of such en17 rollee unless such individual is eligible to elect

18 other coverage and so elects.

19 SEC. 1701. DEFINITIONS RELATING TO EMPLOYMENT AND

20 INCOME.

21 (a) IN GENERAL.—Except as otherwise specifically

22 provided, in this Act the following definitions and rules

23 apply:
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1 (1) EMPLOYER, EMPLOYEE, EMPLOYMENT, AND

2 WAGES DEFINED.—Except as provided in this sec3 tion—

4 (A) the terms ‘‘wages’’ and ‘‘employment’’

5 have the meanings given such terms under sec6 tion 3121 of the Internal Revenue Code of

7 1986,

8 (B) the term ‘‘employee’’ has the meaning

9 given such term under section 3121 of such

10 Code, subject to the provisions of chapter 25 of

11 such Code, and

12 (C) the term ‘‘employer’’ has the same

13 meaning as the term ‘‘employer’’ as used in

14 such section 3121.

15 (2) EXCEPTIONS.—For purposes of paragraph

16 (1)—

17 (A) EMPLOYMENT.—

18 (i) EMPLOYMENT INCLUDED.—Para19 graphs (1), (2), (5), (7) (other than

20 clauses (i) through (iv) of subparagraph

21 (C) and clauses (i) through (v) of subpara22 graph (F)), (8), (9), (10), (11), (13), (15),

23 (18), and (19) of section 3121(b) of the

24 Internal Revenue Code of 1986 shall not

25 apply.
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1 (ii) EXCLUSION OF INMATES AS EM2 PLOYEES.—Employment shall not include

3 services performed in a penal institution by

4 an inmate thereof or in a hospital or other

5 health care institution by a patient thereof.

6 (B) WAGES.—

7 (i) IN GENERAL.—Paragraph (1) of

8 section 3121(a) of the Internal Revenue

9 Code of 1986 shall not apply.

10 (ii) TIPS NOT INCLUDED.—The term

11 ‘‘wages’’ does not include cash tips.

12 (C) EXCLUSION OF CERTAIN FOREIGN EM13 PLOYMENT.—The term ‘‘employee’’ does not in14 clude an individual with respect to service, if

15 the individual is not a citizen or resident of the

16 United States and the service is performed out17 side the United States.

18 (3) AGGREGATION RULES FOR EMPLOYERS.—

19 For purposes of this Act—

20 (A) all employers treated as a single em21 ployer under subsection (a) or (b) of section 52

22 of the Internal Revenue Code of 1986 shall be

23 treated as a single employer, and

24 (B) under regulations of the Secretary of

25 Labor, all employees of organizations which are
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1 under common control with one or more organi2 zations which are exempt from income tax

3 under subtitle A of the Internal Revenue Code

4 of 1986 shall be treated as employed by a single

5 employer.

6 The regulations prescribed under subparagraph (B)

7 shall be based on principles similar to the principles

8 which apply to taxable organizations under subpara9 graph (A).

10 (4) EMPLOYER PREMIUM.—The term ‘‘employer

11 premium’’ refers to the premium established and im12 posed under part 2 of subtitle B of title V.

13 (b) QUALIFYING EMPLOYEE; FULL-TIME EMPLOY14 MENT.—

15 (1) QUALIFYING EMPLOYEE.—

16 (A) IN GENERAL.—In this Act, the term

17 ‘‘qualifying employee’’ means, with respect to

18 an employer for a month, an employee (other

19 than a covered child, as defined in subpara20 graph (C)) who is employed by the employer for

21 at least 40 hours (as determined under para22 graph (3)) in the month, subject to the limita23 tion set forth in subparagraph (D).

24 (B) NO SPECIAL TREATMENT OF MEDI25 CARE BENEFICIARIES, SSI RECIPIENTS, AFDC
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1 RECIPIENTS, AND OTHERS.—Subparagraph (A)

2 shall apply regardless of whether or not the em3 ployee is a medicare-eligible individual, an SSI

4 recipient, an AFDC recipient, an eligible indi5 vidual or is authorized to be so employed.

6 (C) COVERED CHILD DEFINED.—In sub7 paragraph (A), the term ‘‘covered child’’ means

8 an eligible individual who is a child and is en9 rolled under a health plan as a family member

10 described in section 1011(b).

11 (D) QUALIFYING EMPLOYEES.—As used in

12 this Act—

13 (i) the term qualifying employee shall

14 not include, with respect to an employer

15 for a month, an employee of a nonelecting

16 small employer (as defined in section

17 6120); and

18 (ii) the term ‘‘qualifying employee’’

19 shall include, with respect to an employer

20 for a month, a part-time employee begin21 ning with the second month of such em22 ployee’s employment.

23 (2) FULL-TIME EQUIVALENT EMPLOYEES;

24 PART-TIME EMPLOYEES.—
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1 (A) IN GENERAL.—For purposes of this

2 Act, a qualifying employee who is employed by

3 an employer—

4 (i) for at least 120 hours in a month,

5 is counted as 1 full-time equivalent em6 ployee for the month and shall be deemed

7 to be employed on a full-time basis, or

8 (ii) for at least 40 hours, but less

9 than 120 hours, in a month, is counted as

10 a fraction of a full-time equivalent em11 ployee in the month equal to the full-time

12 employment ratio for the employee and

13 shall be deemed to be employed on a part14 time basis.

15 (B) FULL-TIME EMPLOYEE.—For purposes

16 of this Act, the term ‘‘full-time employee’’

17 means, with respect to an employer, an em18 ployee who is employed on a full-time basis (as

19 specified in subparagraph (A)) by the employer.

20 (C) PART-TIME EMPLOYEE.—For purposes

21 of this Act, the term ‘‘part-time employee’’

22 means, with respect to an employer, an em23 ployee who is employed on a part-time basis (as

24 specified in subparagraph (A)) by the employer.
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1 (D) CONSIDERATION OF INDUSTRY PRAC2 TICE.—As provided under rules established by

3 the Secretary, an employee who is not described

4 in subparagraph (B) or (C) shall be considered

5 to be employed on a full-time or part-time basis

6 by an employer (and to be a full-time or part7 time employee of an employer) for a month (or

8 for all months in a 12-month period) if the em9 ployee is employed by that employer on a con10 tinuing basis that, taking into account the

11 structure or nature of employment in the indus12 try, represents full or part-time employment in

13 that industry.

14 (E) INSTITUTIONS OF HIGHER EDU15 CATION.—Notwithstanding any other provision

16 in this section—

17 (i)(I) employees of an Institution of

18 higher education (as defined in section

19 1201(a) of the Higher Education Act of

20 1965), or of an elementary or secondary

21 school (as defined in section 1471 of the

22 Elementary and Secondary Education Act

23 of 1965), who are exempt under section 13

24 of the Fair Labor Standards Act, shall be

25 deemed to be full-time employees if they
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1 work the hours that constitute full-time

2 employment as defined at such institution;

3 (II) part-time employment shall be

4 considered proportional to such hours for

5 full-time employees; and

6 (III) part-time employees who work at

7 least one-third of the hours that constitute

8 full-time employment as defined at such in9 stitution shall be eligible for proportional

10 employer premium contributions; and

11 (ii) regular employees of institutions

12 of higher education or elementary and sec13 ondary schools who are not paid during the

14 summer months or other periods of the

15 year, but are assured employment at the

16 end of such periods, shall be eligible for

17 year-round employer premium contribu18 tions if such individuals are not eligible to

19 collect unemployment compensation for the

20 periods for which they would receive health

21 care premium contributions from the em22 ployer covered by this subsection.

23 (3) TREATMENT OF SALARIED EMPLOYEES AND

24 EMPLOYEES PAID ON CONTINGENT OR BONUS AR25 RANGEMENTS.—In the case of an employee who re-
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1 ceives compensation on a salaried basis or on the

2 basis of a commission (or other contingent or bonus

3 basis), rather than an hourly wage, the Secretary

4 shall establish rules for the conversion of the com5 pensation to hours of employment.

6 (c) DEFINITIONS RELATING TO SELF-EMPLOY7 MENT.—In this Act:

8 (1) NET EARNINGS FROM SELF-EMPLOY9 MENT.—The term ‘‘net earnings from self-employ10 ment’’ has the meaning given such term under sec11 tion 1402(a) of the Internal Revenue Code of 1986.

12 (2) SELF-EMPLOYED INDIVIDUAL.—The term

13 ‘‘self-employed individual’’ means, for a year, an in14 dividual who has net earnings from self-employment

15 for the year.

16 (d) CONSUMER PRICE INDEX; CPI.—The terms

17 ‘‘consumer price index’’ and ‘‘CPI’’ mean the Consumer

18 Price Index for all urban consumers (U.S. city average),

19 as published by the Bureau of Labor Statistics.

20 SEC. 1702. OTHER GENERAL DEFINITIONS.

21 Except as otherwise specifically provided, in this Act

22 the following definitions apply:

23 (1) APPLICABLE HEALTH PLAN.—The term

24 ‘‘applicable health plan’’ means, with respect to an
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1 eligible individual, the health plan specified pursuant

2 to section 1004 and part 2 of subtitle A.

3 (2) CITIZEN OF ANOTHER COUNTRY LEGALLY

4 RESIDING IN THE UNITED STATES.—The term ‘‘citi5 zen of another country legally residing in the United

6 States’’ means an alien lawfully admitted for perma7 nent residence, or otherwise permanentlty residing,

8 in the United States under color of law as included

9 in regulations in effect under title XIX of the Social

10 Security Act as of December 1, 1994.

11 (3) COVERED WAGES DEFINED.—In this sec12 tion, the term ‘‘covered wages’’ means wages paid an

13 employee of an employer during a month in which

14 the employee was a qualifying employee of the em15 ployer.

16 (4) EXEMPT INDIVIDUAL.—The term ‘‘exempt

17 individual’’ means an individual that has been grant18 ed an exemption from paying Social Security Taxes

19 under section 1402(g) of the Internal Revenue Code

20 of 1986, or an individual who would be eligible for

21 an exemption under such section if the individual

22 were self-employed.

23 (5) HEALTH PLAN SPONSOR.—The term

24 ‘‘health plan sponsor’’ means—
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1 (A) with respect to a community-rated

2 plan, the carrier providing the plan,

3 (B) with respect to an insured experience4 rated plan, the carrier providing the plan, and

5 (C) with respect to a self-funded experi6 ence-rated plan, the employer providing the

7 plan.

8 (6) LONG-TERM NONIMMIGRANT.—The term

9 ‘‘long-term nonimmigrant’’ means a nonimmigrant

10 described in subparagraph (E), (H), (I), (J), (K),

11 (L), (M), (N), (O), (Q), or (R) of section 101(a)(15)

12 of the Immigration and Nationality Act or an alien

13 within such other classification of nonimmigrant as

14 the Secretary may establish by regulation.

15 (7) POVERTY LEVEL.—The term ‘‘applicable

16 poverty level’’ means, for a family for a year, the of17 ficial poverty line (as defined by the Office of Man18 agement and Budget, and revised annually in ac19 cordance with section 673(2) of the Omnibus Budget

20 Reconciliation Act of 1981) applicable to a family of

21 the size involved for 1994.

22 (8) SECRETARY.—The term ‘‘Secretary’’ unless

23 expressly provided otherwise, means the Secretary of

24 Health and Human Services.
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1 PART 2—MISCELLANEOUS PROVISIONS

2 SEC. 1711. REGULATORY AUTHORITY.

3 The Secretary of Health and Human Services and the

4 Secretary of Labor are each authorized to issue regula5 tions as are necessary to implement this Act. In order to

6 permit the timely implementation of the provisions of this

7 Act, such regulations may be issued on an interim basis.

8 Such regulations shall become final on the date of publica9 tion, subject to change based on subsequent public com10 ment.

11 SEC. 1712. NEUTRALITY CONCERNING UNION ORGANIZING.

12 Amounts appropriated to carry out this Act may not

13 be utilized to assist, promote or deter union organizing.

14 SEC. 1713. SOCIAL SECURITY ACT REFERENCES.

15 Except as may otherwise be provided, any reference

16 in this title, or in title V, to a provision of the Social Secu17 rity Act shall be to that provision of the Social Security

18 Act as in effect on the date of the enactment of this Act.

19 SEC. 1714. COVERAGE OF BENEFITS UNDER AFFORDABLE

20 HEALTH CARE FOR ALL AMERICANS ACT.

21 (a) DAVIS-BACON ACT.—Subsection (b)(2) of the

22 first section of the Davis Bacon Act (40 U.S.C.

23 276a(b)(2)) is amended in the matter following subpara24 graph (B) by inserting after ‘‘local law’’ the following:

25 ‘‘(other than benefits provided pursuant to the Affordable

26 Health Care For all Americans Act)’’.
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1 (b) SERVICE CONTRACT ACT OF 1965.—The second

2 sentence of section 2(a)(2) of the Service Contract Act of

3 1965 (41 U.S.C. 351(a)(2)) is amended by inserting after

4 ‘‘local law’’ the following: ‘‘(other than benefits provided

5 pursuant to the Affordable Health Care for All Americans

6 Act)’’.

7 SEC. 1715. SENSE OF THE COMMITTEE CONCERNING FUND8 ING SOURCES.

9 It is the sense of the Committee on Labor and

10 Human Resources of the Senate that when the Affordable

11 Health Care for All Americans Act is enacted it should

12 include the following sources of financing not within the

13 jurisdiction of the Committee:

14 (1) The net savings and revenues included in

15 S.1757, the Health Security Act (as introduced in

16 the 103d Congress) which are outside the jurisdic17 tion of the Committee.

18 (2) An increase in the cigarette tax of 75 cents

19 per pack in excess of the amount specified in

20 S.1757, the Health Security Act.

21 (3) A phased-in premium assessment, not to ex22 ceed 1 percent, equal to the additional amount pro23 vided for biomedical research under title III of this

24 Act.
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1 (4) Such other savings or revenues as are nec2 essary, if any, to provide budget neutrality based on

3 estimates of the Congressional Budget Office.

4 (5) A one percent payroll assessment on exempt

5 employers with five or fewer workers and a two per6 cent payroll assessment on exempt employers with

7 six to 10 workers payable to the State to defray a

8 portion of the additional subsidy costs for employees

9 of such employers.

10 TITLE II—NEW BENEFITS

11 Subtitle A—Home and Community12 Based Services

13 PART 1—HOME AND COMMUNITY-BASED

14 SERVICES FOR INDIVIDUALS WITH DISABILITIES

15 SEC. 2101. STATE PLANS.

16 (a) PLAN REQUIREMENTS.—In order to be approved

17 under subsection (b), a State plan for home and commu18 nity-based services for individuals with disabilities must

19 meet the following requirements:

20 (1) STATE MAINTENANCE OF EFFORT.—

21 (A) IN GENERAL.—A State plan under this

22 subtitle shall provide that the State will, during

23 any fiscal year that the State is furnishing serv24 ices under this subtitle, make expenditures of

25 State funds in an amount equal to the State
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1 maintenance of effort amount for the year de2 termined under subparagraph (B) for furnish3 ing the services described in subparagraph (C)

4 under the State plan under this subtitle and the

5 State plan under title XIX of the Social Secu6 rity Act.

7 (B) STATE MAINTENANCE OF EFFORT

8 AMOUNT.—

9 (i) IN GENERAL.—The maintenance of

10 effort amount for a State for a fiscal year

11 is an amount equal to—

12 (I) for fiscal year 1999, the base

13 amount for the State (as determined

14 under clause (ii)) updated through the

15 midpoint of fiscal year 1998 by the

16 estimated percentage change in the

17 consumer price index during the pe18 riod beginning on October 1, 1994

19 and ending at that midpoint; and

20 (II) for succeeding fiscal years,

21 an amount equal to the amount deter22 mined under this clause for the pre23 vious fiscal year updated through the

24 midpoint of the year by the estimated

25 percentage change in the consumer
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•S 168 IS

1 price index during the 12-month pe2 riod ending at that midpoint, with ap3 propriate adjustments to reflect pre4 vious underestimations or overesti5 mations under this clause in the pro6 jected percentage change in the

7 consumer price index.

8 (ii) STATE BASE AMOUNT.—The base

9 amount for a State is an amount equal to

10 the total expenditures from State funds

11 made under the State plan under title XIX

12 of the Social Security Act during fiscal

13 year 1994 with respect to medical assist14 ance consisting of the services described in

15 subparagraph (C).

16 (C) MEDICAID SERVICES DESCRIBED.—

17 The services described in this subparagraph are

18 the following:

19 (i) Personal care services (as de20 scribed in section 1905(a)(24) of the Social

21 Security Act).

22 (ii) Home or community-based serv23 ices furnished under a waiver granted

24 under subsection (c), (d), or (e) of section

25 1915 of such Act.
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1 (iii) Home and community care fur2 nished to functionally disabled elderly indi3 viduals under section 1929 of such Act.

4 (iv) Community supported living ar5 rangements services under section 1930 of

6 such Act.

7 (2) ELIGIBILITY.—

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

9 subparagraph (B), within the amounts provided

10 by the State and under section 2107 for such

11 plan, the plan shall provide that services under

12 the plan will be available to individuals with dis13 abilities (as defined in section 2102(a)) in the

14 State.

15 (B) INITIAL SCREENING.—The plan shall

16 provide a process for the initial screening of an

17 individual who appears to have some reasonable

18 likelihood of being an individual with disabil19 ities. Any such process shall require the provi20 sion of assistance to individuals who wish to

21 apply but whose disability limits their ability to

22 apply. The initial screening and the determina23 tion of disability (as defined under section

24 2102(b)(1)) shall be conducted by a public

25 agency.
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1 (C) RESTRICTIONS.—The plan may not

2 limit the eligibility of individuals with disabil3 ities based on—

4 (i) income,

5 (ii) age,

6 (iii) residential setting (other than an

7 institutional setting), or

8 (iv) other grounds specified by the

9 Secretary.

10 (D) CONTINUATION OF SERVICES.—The

11 plan must provide assurances that, in the case

12 of an individual receiving medical assistance for

13 home and community-based services under the

14 State medicaid plan under title XIX of the So15 cial Security Act as of the date a State’s plan

16 is approved under this subtitle, the State will

17 continue to make available (either under this

18 plan, under the State medicaid plan, or other19 wise) to such individual an appropriate level of

20 assistance for home and community-based serv21 ices, taking into account the level of assistance

22 provided as of such date and the individual’s

23 need for home and community-based services.

24 (3) SERVICES.—
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1 (A) NEEDS ASSESSMENT.—Not later than

2 the end of the second year of implementation,

3 the plan or its amendments shall include the re4 sults of a statewide assessment of the needs of

5 individuals with disabilities in a format required

6 by the Secretary. The needs assessment shall

7 include demographic data concerning the num8 ber of individuals within each category of dis9 ability described in this subtitle, and the serv10 ices available to meet the needs of such individ11 uals.

12 (B) SPECIFICATION.—Consistent with sec13 tion 2103, the plan shall specify—

14 (i) the services made available under

15 the plan,

16 (ii) the extent and manner in which

17 such services are allocated and made avail18 able to individuals with disabilities, and

19 (iii) the manner in which services

20 under the plan are coordinated with each

21 other and with health and long-term care

22 services available outside the plan for indi23 viduals with disabilities.

24 (C) TAKING INTO ACCOUNT INFORMAL

25 CARE.—A State plan may take into account, in
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1 determining the amount and array of services

2 made available to covered individuals with dis3 abilities, the availability of informal care.

4 (D) ALLOCATION.—The State plan—

5 (i) shall specify how services under

6 the plan will be allocated among covered

7 individuals with disabilities,

8 (ii) shall attempt to meet the needs of

9 individuals with a variety of disabilities

10 within the limits of available funding,

11 (iii) shall include services that assist

12 all categories of individuals with disabil13 ities, regardless of their age or the nature

14 of their disabling conditions,

15 (iv) shall demonstrate that services

16 are allocated equitably, in accordance with

17 the needs assessment required under sub18 paragraph (A), and

19 (v) shall ensure that—

20 (I) the proportion of the popu21 lation of low-income individuals with

22 disabilities in the State that rep23 resents individuals with disabilities

24 who are provided home and commu25 nity-based services either under the
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1 plan, under the State medicaid plan,

2 or under both, is not less than,

3 (II) the proportion of the popu4 lation of the State that represents in5 dividuals who are low-income individ6 uals.

7 (E) LIMITATION ON LICENSURE OR CER8 TIFICATION.—The State may not subject

9 consumer-directed providers of personal assist10 ance services to licensure, certification, or other

11 requirements which the Secretary finds not to

12 be necessary for the health and safety of indi13 viduals with disabilities.

14 (F) CONSUMER CHOICE.—To the extent

15 feasible, the State shall follow the choice of an

16 individual with disabilities (or that individual’s

17 designated representative who may be a family

18 member) regarding which covered services to re19 ceive and the providers who will provide such

20 services.

21 (4) COST SHARING.—The plan shall impose cost

22 sharing with respect to covered services in accord23 ance with section 2104.

24 (5) TYPES OF PROVIDERS AND REQUIREMENTS

25 FOR PARTICIPATION.—The plan shall specify—
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1 (A) the types of service providers eligible

2 to participate in the program under the plan,

3 which shall include consumer-directed providers

4 of personal assistance services, except that the

5 plan—

6 (i) may not limit benefits to services

7 provided by registered nurses or licensed

8 practical nurses; and

9 (ii) may not limit benefits to services

10 provided by agencies or providers certified

11 under title XVIII; and

12 (B) any requirements for participation ap13 plicable to each type of service provider.

14 (6) PROVIDER REIMBURSEMENT.—

15 (A) PAYMENT METHODS.—The plan shall

16 specify the payment methods to be used to re17 imburse providers for services furnished under

18 the plan. In the case of payment to consumer19 directed providers of personal assistance serv20 ices, including payment through the use of cash

21 or vouchers, the plan shall specify how the plan

22 will assure compliance with applicable employ23 ment tax and health care coverage provisions.
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1 (B) PAYMENT RATES.—The plan shall

2 specify the methods and criteria to be used to

3 set payment rates.

4 (C) PLAN PAYMENT AS PAYMENT IN

5 FULL.—The plan shall restrict payment under

6 the plan for covered services to those providers

7 that agree to accept the payment under the

8 plan (at the rates established pursuant to sub9 paragraph (B)) and any cost sharing permitted

10 or provided for under section 2104 as payment

11 in full for services furnished under the plan.

12 (7) QUALITY ASSURANCE AND SAFEGUARDS.—

13 The State plan shall provide for quality assurance

14 and safeguards for applicants and beneficiaries in

15 accordance with section 2105.

16 (8) ADVISORY GROUP.—The State plan shall

17 assure the establishment and maintenance of an ad18 visory group under section 2106(b).

19 (9) ADMINISTRATION AND ACCESS.—

20 (A) STATE AGENCY.—The plan shall des21 ignate a State agency or agencies to administer

22 (or to supervise the administration of) the plan.

23 (B) COORDINATION.—The plan shall speci24 fy how it will—
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1 (i) coordinate services provided under

2 the plan, including eligibility prescreening,

3 service coordination, and referrals for indi4 viduals with disabilities who are ineligible

5 for services under this subtitle with other

6 Federal or State programs that provide

7 services or assistance targeted to individ8 uals with disabilities; and

9 (ii) coordinate with health plans.

10 (C) ADMINISTRATIVE EXPENDITURES.—

11 Effective beginning with fiscal year 2004, the

12 plan shall contain assurances that not more

13 than 10 percent of expenditures under the plan

14 for all quarters in any fiscal year shall be for

15 administrative costs.

16 (10) REPORTS AND INFORMATION TO SEC17 RETARY; AUDITS.—The plan shall provide that the

18 State will furnish to the Secretary such data and in19 formation as the Secretary may require in a uniform

20 format as specified by the Secretary.

21 (11) USE OF STATE FUNDS FOR MATCHING.—

22 The plan shall provide assurances that Federal

23 funds will not be used to provide for the State share

24 of expenditures under this subtitle.
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1 (12) HEALTH CARE WORKER REDEPLOY2 MENT.—The plan shall provide for the following:

3 (A) Before initiating the process of imple4 menting the State program under such plan,

5 negotiations will be commenced with labor

6 unions representing the employees of the af7 fected hospitals or other facilities.

8 (B) Negotiations under subparagraph (A)

9 will address the following:

10 (i) The impact of the implementation

11 of the program upon the workforce.

12 (ii) Methods to redeploy workers to

13 positions in the proposed system, in the

14 case of workers affected by the program.

15 (C) The plan will provide evidence that

16 there has been compliance with subparagraphs

17 (A) and (B), including a description of the re18 sults of the negotiations.

19 (13) TERMINOLOGY.—The plan shall adhere to

20 uniform definitions of terms, as specified by the Sec21 retary.

22 (b) APPROVAL OF PLANS.—The Secretary shall ap23 prove a plan submitted by a State if the Secretary deter24 mines that the plan—
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1 (1) was developed by the State after a public

2 comment period of not less than 30 days, and

3 (2) meets the requirements of subsection (a).

4 The approval of such a plan shall take effect as of the

5 first day of the first fiscal year beginning after the date

6 of such approval (except that any approval made before

7 January 1, 1998, shall be effective as of January 1, 1998).

8 In order to budget funds allotted under this subtitle, the

9 Secretary shall establish a deadline for the submission of

10 such a plan before the beginning of a fiscal year as a con11 dition of its approval effective with that fiscal year. Any

12 significant changes to the State plan shall be submitted

13 to the Secretary in the form of plan amendments and shall

14 be subject to approval by the Secretary.

15 (c) MONITORING.—The Secretary shall annually

16 monitor the compliance of State plans with the require17 ments of this subtitle according to specified performance

18 standards. In accordance with section 2107(e), States that

19 fail to comply with such requirements may be subject to

20 a reduction in the Federal matching rates available to the

21 State under section 2107(a) or the withholding of Federal

22 funds for services or administration until such time as

23 compliance is achieved.
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1 (d) REGULATIONS.—The Secretary shall issue such

2 regulations as may be appropriate to carry out this sub3 title on a timely basis.

4 SEC. 2102. INDIVIDUALS WITH DISABILITIES DEFINED.

5 (a) IN GENERAL.—For purposes of this subtitle, the

6 term ‘individual with disabilities’ means any individual

7 within one or more of the following categories of individ8 uals:

9 (1) INDIVIDUALS REQUIRING HELP WITH AC10 TIVITIES OF DAILY LIVING.—An individual of any

11 age who—

12 (A) requires hands-on or standby assist13 ance, supervision, or cueing (as defined in regu14 lations) to perform three or more activities of

15 daily living (as defined in subsection (d)), and

16 (B) is expected to require such assistance,

17 supervision, or cueing over a period of at least

18 90 days.

19 (2) INDIVIDUALS WITH SEVERE COGNITIVE OR

20 MENTAL IMPAIRMENT.—An individual of any age—

21 (A) whose score, on a standard mental sta22 tus protocol (or protocols) appropriate for

23 measuring the individual’s particular condition

24 specified by the Secretary, indicates either se-
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1 vere cognitive impairment or severe mental im2 pairment, or both;

3 (B) who—

4 (i) requires hands-on or standby as5 sistance, supervision, or cueing with one or

6 more activities of daily living;

7 (ii) requires hands-on or standby as8 sistance, supervision, or cueing with at

9 least such instrumental activity (or activi10 ties) of daily living related to cognitive or

11 mental impairment as the Secretary speci12 fies; or

13 (iii) displays symptoms of one or more

14 serious behavioral problems (that is on a

15 list of such problems specified by the Sec16 retary) which create a need for supervision

17 to prevent harm to self or others; and

18 (C) who is expected to meet the require19 ments of subparagraphs (A) and (B) over a pe20 riod of at least 90 days.

21 Not later than 2 years after the date of enactment

22 of this subtitle, the Secretary shall make rec23 ommendations regarding the most appropriate dura24 tion of disability under this paragraph.
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1 (3) INDIVIDUALS WITH SEVERE OR PROFOUND

2 MENTAL RETARDATION.—An individual of any age

3 who has severe or profound mental retardation (as

4 determined according to a protocol specified by the

5 Secretary).

6 (4) YOUNG CHILDREN WITH SEVERE DISABIL7 ITIES.—An individual under 6 years of age who—

8 (A) has a severe disability or chronic medi9 cal condition that limits functioning in a man10 ner that is comparable in severity to the stand11 ards established under paragraphs (1), (2), or

12 (3), and

13 (B) is expected to have such a disability or

14 condition and require such services over a pe15 riod of at least 90 days.

16 (b) DETERMINATION.—

17 (1) IN GENERAL.—In formulating eligibility cri18 teria under subsection (a), the Secretary shall estab19 lish criteria for assessing the functional level of dis20 ability among all categories of individuals with dis21 abilities that are comparable in severity, regardless

22 of the age or the nature of the disabling condition

23 of the individual. The determination of whether an

24 individual is an individual with disabilities shall be

25 made by a public or nonprofit agency that is speci-
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1 fied under the State plan and that is not a provider

2 of home and community-based services under this

3 subtitle and by using a uniform protocol consisting

4 of an initial screening and a determination of dis5 ability specified by the Secretary. A State may not

6 impose cost sharing with respect to a determination

7 of disability. A State may collect additional informa8 tion, at the time of obtaining information to make

9 such determination, in order to provide for the as10 sessment and plan described in section 2103(b) or

11 for other purposes.

12 (2) PERIODIC REASSESSMENT.—The determina13 tion that an individual is an individual with disabil14 ities shall be considered to be effective under the

15 State plan for a period of not more than 6 months

16 (or for such longer period in such cases as a signifi17 cant change in an individual’s condition that may af18 fect such determination is unlikely). A reassessment

19 shall be made if there is a significant change in an

20 individual’s condition that may affect such deter21 mination.

22 (c) ACTIVITY OF DAILY LIVING DEFINED.—For pur23 poses of this subtitle, the term ‘activity of daily living’

24 means any of the following: eating, toileting, dressing,

25 bathing, and transferring.
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1 SEC. 2103. HOME AND COMMUNITY-BASED SERVICES COV2 ERED UNDER STATE PLAN.

3 (a) SPECIFICATION.—

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

5 provisions of this section, the State plan under this

6 subtitle shall specify—

7 (A) the home and community-based serv8 ices available under the plan to individuals with

9 disabilities (or to such categories of such indi10 viduals), and

11 (B) any limits with respect to such serv12 ices.

13 (2) FLEXIBILITY IN MEETING INDIVIDUAL

14 NEEDS.—Subject to subsection (f)(2), such services

15 may be delivered in an individual’s home, a range of

16 community residential arrangements, or outside the

17 home.

18 (b) REQUIREMENT FOR NEEDS ASSESSMENT AND

19 PLAN OF CARE.—

20 (1) IN GENERAL.—The State plan shall provide

21 for home and community-based services to an indi22 vidual with disabilities only if the following require23 ments are met:

24 (A) COMPREHENSIVE ASSESSMENT.—A

25 comprehensive assessment of an individual’s

26 need for home and community-based services
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1 (regardless of whether all need services are

2 available under the plan) shall be made in ac3 cordance with a uniform, comprehensive assess4 ment tool that shall be used by a State under

5 this paragraph with the approval of the Sec6 retary. The Secretary shall provide guidance to

7 the States with regard to the appropriate quali8 fications for individuals who conduct com9 prehensive assessments.

10 (B) INDIVIDUALIZED PLAN OF CARE.—An

11 individualized plan of care based on the assess12 ment made under subparagraph (A) shall be de13 veloped. A plan of care under this subparagraph

14 shall—

15 (i) specify which services included

16 under the individual plan will be provided

17 under the State plan under this subtitle;

18 (ii) identify (to the extent possible)

19 how the individual will be provided any

20 services specified under the plan of care

21 and not provided under the State plan;

22 (iii) specify how the provision of serv23 ices to the individual under the plan will be

24 coordinated with the provision of other

25 health care services to the individual; and
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•S 168 IS

1 (iv) be reviewed and updated every 6

2 months (or more frequently if there is a

3 change in the individual’s condition).

4 The State shall make reasonable efforts to iden5 tify and arrange for services described in clause

6 (ii). Nothing in this subsection shall be con7 strued as requiring a State (under the State

8 plan or otherwise) to provide all the services

9 specified in such a plan.

10 (C) INVOLVEMENT OF INDIVIDUALS.—The

11 individualized plan of care under subparagraph

12 (B) for an individual with disabilities shall—

13 (i) be developed by qualified individ14 uals (specified under the State plan);

15 (ii) be developed and implemented in

16 close consultation with the individual (or

17 the individual’s designated representative);

18 and

19 (iii) be approved by the individual (or

20 the individual’s designated representative).

21 (c) REQUIREMENT FOR CARE MANAGEMENT.—

22 (1) IN GENERAL.—The State shall make avail23 able to each category of individuals with disabilities

24 care management services that at a minimum in25 clude—
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1 (A) arrangements for the provision of such

2 services, and

3 (B) monitoring of the delivery of services.

4 (2) CARE MANAGEMENT SERVICES.—

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

6 subparagraph (B), the care management serv7 ices described in paragraph (1) shall be pro8 vided by a public or private entity that is not

9 providing home and community-based services

10 under this subtitle.

11 (B) EXCEPTION.—A person who provides

12 home and community-based services under this

13 subtitle may provide care management services

14 if—

15 (i) the State determines that there is

16 an insufficient pool of entities willing to

17 provide such services in an area due to a

18 low population of individuals eligible for

19 home and community-based services under

20 this subtitle residing in such area; and

21 (ii) the State plan specifies procedures

22 that the State will implement in order to

23 avoid conflicts of interest.

24 (d) MANDATORY COVERAGE OF PERSONAL ASSIST25 ANCE SERVICES.—The State plan shall include, in the
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1 array of services made available to each category of indi2 viduals with disabilities, both agency-administered and

3 consumer-directed personal assistance services (as defined

4 in subsection (h)).

5 (e) ADDITIONAL SERVICES.—Subject to subsection

6 (f), services available under a State plan under this sub7 title may include any (or all) of the following:

8 (1) Homemaker and chore assistance.

9 (2) Home modifications.

10 (3) Respite services.

11 (4) Assistive devices, as defined in the Tech12 nology Related Assistance for Individuals with Dis13 abilities Act.

14 (5) Adult day services.

15 (6) Habilitation and rehabilitation.

16 (7) Supported employment.

17 (8) Home health services.

18 (9) Transportation.

19 (10) Any other care or assistive services speci20 fied by the State and approved by the Secretary that

21 will help individuals with disabilities to remain in

22 their homes and communities.

23 (f) EXCLUSIONS AND LIMITATIONS.—A State plan

24 may not provide for coverage of—

25 (1) room and board,
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•S 168 IS

1 (2) services furnished in a hospital, nursing fa2 cility, intermediate care facility for the mentally re3 tarded, or other institutional setting specified by the

4 Secretary, or

5 (3) items and services to the extent coverage is

6 provided for the individual under a health plan or

7 the medicare program.

8 (g) PAYMENT FOR SERVICES.—In order to pay for

9 covered services, a State plan may provide for the use of—

10 (1) vouchers,

11 (2) cash payments directly to individuals with

12 disabilities,

13 (3) capitation payments to health plans, and

14 (4) payment to providers.

15 (h) PERSONAL ASSISTANCE SERVICES.—

16 (1) IN GENERAL.—For purposes of this sub17 title, the term ‘‘personal assistance services’’ means

18 those services specified under the State plan as per19 sonal assistance services and shall include at least

20 hands-on and standby assistance, supervision, and

21 cueing with activities of daily living, whether agency22 administered or consumer-directed (as defined in

23 paragraph (2)).

24 (2) CONSUMER-DIRECTED.—For purposes of

25 this subtitle:
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1 (A) IN GENERAL.—The term ‘‘consumer2 directed’’ means, with reference to personal as3 sistance services or the provider of such serv4 ices, services that are provided by an individual

5 who is selected and managed (and, at the op6 tion of the service recipient, trained) by the in7 dividual receiving the services.

8 (B) STATE RESPONSIBILITIES.—A State

9 plan shall ensure that where services are pro10 vided in a consumer-directed manner, the State

11 shall create or contract with an entity, other

12 than the consumer or the individual provider,

13 to—

14 (i) inform both recipients and provid15 ers of rights and responsibilities under all

16 applicable Federal labor and tax law; and

17 (ii) assume responsibility for providing

18 effective billing, payments for services, tax

19 withholding, unemployment insurance, and

20 workers’ compensation coverage, and act

21 as the employer of the home care provider.

22 (C) RIGHT OF CONSUMERS.—Notwith23 standing the State responsibilities described in

24 subparagraph (B), service recipients, and,

25 where appropriate, their designated representa-
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•S 168 IS

1 tive, shall retain the right to independently se2 lect, hire, terminate, and direct (including man3 age, train, schedule, and verify services pro4 vided) the work of a home care provider.

5 (3) AGENCY ADMINISTERED.—For purposes of

6 this subtitle, the term ‘agency-administered’ means,

7 with respect to such services, services that are not

8 consumer-directed.

9 SEC. 2104. COST SHARING.

10 (a) NO COST SHARING FOR POOREST.—

11 (1) IN GENERAL.—The State plan may not im12 pose any cost sharing for individuals with income (as

13 determined under subsection (d)) less than 150 per14 cent of the official poverty level (referred to in para15 graph (2)) applicable to a family of the size involved.

16 (2) OFFICIAL POVERTY LEVEL.—The term ‘ap17 plicable poverty level’ means, for a family for a year,

18 the official poverty line (as defined by the Office of

19 Management and Budget, and revised annually in

20 accordance with section 673(2) of the Omnibus

21 Budget Reconciliation Act of 1981) applicable to a

22 family of the size involved.

23 (b) SLIDING SCALE FOR REMAINDER.—

24 (1) REQUIRED COINSURANCE.—The State plan

25 shall impose cost sharing in the form of coinsurance
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•S 168 IS

1 (based on the amount paid under the State plan for

2 a service)—

3 (A) at a rate of 10 percent for individuals

4 with disabilities with income not less than 150

5 percent, and less than 175 percent, of such offi6 cial poverty line (as so applied);

7 (B) at a rate of 15 percent for such indi8 viduals with income not less than 175 percent,

9 and less than 225 percent, of such official pov10 erty line (as so applied);

11 (C) at a rate of 25 percent for such indi12 viduals with income not less than 225 percent,

13 and less than 275 percent, of such official pov14 erty line (as so applied);

15 (D) at a rate of 30 percent for such indi16 viduals with income not less than 275 percent,

17 and less than 325 percent, of such official pov18 erty line (as so applied);

19 (E) at a rate of 35 percent for such indi20 viduals with income not less than 325 percent,

21 and less than 400 percent, of such official pov22 erty line (as so applied); and

23 (F) at a rate of 40 percent for such indi24 viduals with income equal to at least 400 per25 cent of such official poverty line (as so applied).
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1 (2) REQUIRED ANNUAL DEDUCTIBLE.—The

2 State plan shall impose cost sharing in the form of

3 an annual deductible—

4 (A) of $100 for individuals with disabilities

5 with income not less than 150 percent, and less

6 than 175 percent, of such official poverty line

7 (as so applied);

8 (B) of $200 for such individuals with in9 come not less than 175 percent, and less than

10 225 percent, of such official poverty line (as so

11 applied);

12 (C) of $300 for such individuals with in13 come not less than 225 percent, and less than

14 275 percent, of such official poverty line (as so

15 applied);

16 (D) of $400 for such individuals with in17 come not less than 275 percent, and less than

18 325 percent, of such official poverty line (as so

19 applied);

20 (E) of $500 for such individuals with in21 come not less than 325 percent, and less than

22 400 percent, of such official poverty line (as so

23 applied); and
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•S 168 IS

1 (F) of $600 for such individuals with in2 come equal to at least 400 percent of such offi3 cial poverty line (as so applied).

4 (c) RECOMMENDATION OF THE SECRETARY.—The

5 Secretary shall make recommendations to the States as

6 to how to reduce cost-sharing for individuals with extraor7 dinary out-of-pocket costs for whom the cost-sharing pro8 visions of this section could jeopardize their ability to take

9 advantage of the services offered under this subtitle. The

10 Secretary shall establish a methodology for reducing the

11 cost-sharing burden under this subtitle for individuals

12 with exceptionally high out-of-pocket costs.

13 (d) DETERMINATION OF INCOME FOR PURPOSES OF

14 COST SHARING.—The State plan shall specify the process

15 to be used to determine the income of an individual with

16 disabilities for purposes of this section. Such standards

17 shall include a uniform Federal definition of income and

18 any allowable deductions from income.

19 SEC. 2105. QUALITY ASSURANCE AND SAFEGUARDS.

20 (a) QUALITY ASSURANCE.—

21 (1) IN GENERAL.—The State plan shall specify

22 how the State will ensure and monitor the quality of

23 services.

24 (2) ISSUANCE OF REGULATIONS.—Not later

25 than 1 year after the date of enactment of this sub-
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1 title, the Secretary shall issue regulations imple2 menting the quality provisions of this subsection.

3 (b) FEDERAL STANDARDS.—The State plan shall ad4 here to Federal quality standards in the following areas:

5 (1) Case review of a specified sample of client

6 records.

7 (2) The mandatory reporting of abuse, neglect,

8 or exploitation.

9 (3) The development of a registry of provider

10 agencies or home care workers and consumer di11 rected providers of personal assistance services

12 against whom any complaints have been sustained,

13 which shall be available to the public.

14 (4) Sanctions to be imposed on States or pro15 viders, including disqualification from the program,

16 if minimum standards are not met.

17 (5) Surveys of client satisfaction.

18 (6) State optional training programs for infor19 mal caregivers.

20 (c) CLIENT ADVOCACY.—The State plan shall provide

21 that the State will expend the amount allocated under sec22 tion 2108(b)(2) for client advocacy activities. The State

23 may use such funds to augment the budgets of the long24 term care ombudsman (under the Older Americans Act of

25 1965) and the Protection and Advocacy Agency (under the
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•S 168 IS

1 Developmental Disabilities Assistance and Bill of Rights

2 Act) or may establish a separate and independent client

3 advocacy office to administer a new program designed to

4 advocate for client rights.

5 SEC. 2106. ADVISORY GROUPS.

6 (a) FEDERAL ADVISORY GROUP.—

7 (1) ESTABLISHMENT.—The Secretary shall es8 tablish an advisory group, to advise the Secretary

9 and States on all aspects of the program under this

10 subtitle.

11 (2) COMPOSITION.—The group shall be com12 posed of individuals with disabilities and their rep13 resentatives, providers, Federal and State officials,

14 and local community implementing agencies. A ma15 jority of its members shall be individuals with dis16 abilities and their representatives.

17 (b) STATE ADVISORY GROUPS.—

18 (1) IN GENERAL.—Each State plan shall pro19 vide for the establishment and maintenance of an

20 advisory group to advise the State on all aspects of

21 the State plan under this subtitle.

22 (2) COMPOSITION.—Members of each advisory

23 group shall be appointed by the Governor (or other

24 chief executive officer of the State) and shall include

25 individuals with disabilities and their representa-
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1 tives, providers, State officials, and local community

2 implementing agencies. A majority of its members

3 shall be individuals with disabilities and their rep4 resentatives. The members of the advisory group

5 shall be selected from those nominated as described

6 in paragraph (3).

7 SEC. 2107. PAYMENTS TO STATES.

8 (a) IN GENERAL.—Subject to section 2101(a)(9)(C)

9 (relating to limitation on payment for administrative

10 costs), the Secretary, in accordance with the Cash Man11 agement Improvement Act, shall authorize payment to

12 each State with a plan approved under this subtitle, for

13 each quarter (beginning on or after January 1, 1998),

14 from its allotment under section 2108(b), an amount equal

15 to—

16 (1)(A) if the amount demonstrated by State

17 claims to have been expended during the year for

18 home and community-based services under the plan

19 for individuals with disabilities does not exceed 20

20 percent of the amount allotted to the State under

21 section 2108(b), 100 percent of the amount dem22 onstrated by State claims to have been expended

23 during the quarter for such services for such individ24 uals; or
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1 (B) for the amount demonstrated by State

2 claims to have been expended during the year for

3 home and community-based services under the plan

4 for individuals with disabilities that exceeds 20 per5 cent of the amount allotted to the State under sec6 tion 2108(b), the Federal home and community7 based services matching percentage (as defined in

8 subsection (b)) of such amount; plus

9 (2) an amount equal to 90 percent of the

10 amount demonstrated by the State to have been ex11 pended during the quarter for quality assurance ac12 tivities under the plan; plus

13 (3) an amount equal to 90 percent of amount

14 expended during the quarter under the plan for ac15 tivities (including preliminary screening) relating to

16 determination of eligibility and performance of needs

17 assessment; plus

18 (4) an amount equal to 90 percent (or, begin19 ning with quarters in fiscal year 2004, 75 percent)

20 of the amount expended during the quarter for the

21 design, development, and installation of mechanical

22 claims processing systems and for information re23 trieval; plus

24 (5) an amount equal to 50 percent of the re25 mainder of the amounts expended during the quar-
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1 ter as found necessary by the Secretary for the prop2 er and efficient administration of the State plan.

3 (b) FEDERAL HOME AND COMMUNITY-BASED SERV4 ICES MATCHING PERCENTAGE.—In subsection (a), the

5 term ‘‘Federal home and community-based services

6 matching percentage’’ means, with respect to a State, the

7 State’s Federal medical assistance percentage (as defined

8 in section 1905(b) of the Social Security Act) increased

9 by 15 percentage points, except that the Federal home and

10 community-based services matching percentage shall in no

11 case be more than 95 percent.

12 (c) PAYMENTS ON ESTIMATES WITH RETROSPECTIVE

13 ADJUSTMENTS.—The method of computing and making

14 payments under this section shall be as follows:

15 (1) The Secretary shall, prior to the beginning

16 of each quarter, estimate the amount to be paid to

17 the State under subsection (a) for such quarter,

18 based on a report filed by the State containing its

19 estimate of the total sum to be expended in such

20 quarter, and such other information as the Secretary

21 may find necessary.

22 (2) From the allotment available therefore, the

23 Secretary shall provide for payment of the amount

24 so estimated, reduced or increased, as the case may

25 be, by any sum (not previously adjusted under this
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1 section) by which the Secretary finds that the esti2 mate of the amount to be paid the State for any

3 prior period under this section was greater or less

4 than the amount which should have been paid.

5 (d) APPLICATION OF RULES REGARDING LIMITA6 TIONS ON PROVIDER-RELATED DONATIONS AND HEALTH

7 CARE RELATED TAXES.—The provisions of section

8 1903(w) of the Social Security Act shall apply to pay9 ments to States under this section in the same manner

10 as they apply to payments to States under section 1903(a)

11 of such Act.

12 (e) FAILURE TO COMPLY WITH STATE PLAN.—If a

13 State furnishing home and community-based services

14 under this subtitle fails to comply with the State plan ap15 proved under this subtitle, the Secretary may either re16 duce the Federal matching rates available to the State

17 under subsection (a) or withhold an amount of funds de18 termined appropriate by the Secretary from any payment

19 to the State under this section.

20 SEC. 2108. APPROPRIATIONS; ALLOTMENTS TO STATES.

21 (a) APPROPRIATIONS.—

22 (1) FISCAL YEARS 1998 THROUGH 2003.—Sub23 ject to paragraph (5)(C), for purposes of this sub24 title, the appropriation authorized under this subtitle
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1 for each of fiscal years 1997 through 2004 is the

2 following:

3 (A) For fiscal year 1997, $3,900,000,000.

4 (B) For fiscal year 1998, $6,800,000,000.

5 (C) For fiscal year 1999, $9,600,000,000.

6 (D) For fiscal year 2000,

7 $12,900,000,000.

8 (E) For fiscal year 2001,

9 $16,400,000,000.

10 (F) For fiscal year 2002,

11 $23,400,000,000.

12 (G) For fiscal year 2003,

13 $31,100,000,000.

14 (H) For fiscal year 2004,

15 $33,600,000,000.

16 (2) SUBSEQUENT FISCAL YEARS.—For pur17 poses of this subtitle, the appropriation authorized

18 for State plans under this subtitle for each fiscal

19 year after fiscal year 2003 is the appropriation au20 thorized under this subsection for the preceding fis21 cal year multiplied by—

22 (A) a factor (described in paragraph (3))

23 reflecting the change in the consumer price

24 index for the fiscal year, and
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1 (B) a factor (described in paragraph (4))

2 reflecting the change in the number of individ3 uals with disabilities for the fiscal year.

4 (3) CPI INCREASE FACTOR.—For purposes of

5 paragraph (2)(A), the factor described in this para6 graph for a fiscal year is the ratio of—

7 (A) the annual average index of the

8 consumer price index for the preceding fiscal

9 year, to—

10 (B) such index, as so measured, for the

11 second preceding fiscal year.

12 (4) DISABLED POPULATION FACTOR.—For pur13 poses of paragraph (2)(B), the factor described in

14 this paragraph for a fiscal year is 100 percent plus

15 (or minus) the percentage increase (or decrease)

16 change in the disabled population of the United

17 States (as determined for purposes of the most re18 cent update under subsection (b)(3)(D)).

19 (5) ADDITIONAL FUNDS DUE TO MEDICAID

20 OFFSETS.—

21 (A) IN GENERAL.—Each participating

22 State must provide the Secretary with informa23 tion concerning offsets and reductions in the

24 medicaid program resulting from home and

25 community-based services provided disabled in-
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1 dividuals under this subtitle, that would have

2 been paid for such individuals under the State

3 medicaid plan but for the provision of similar

4 services under the program under this subtitle.

5 At the time a State first submits its plan under

6 this subtitle and before each subsequent fiscal

7 year (through fiscal year 2005), the State also

8 must provide the Secretary with such budgetary

9 information (for each fiscal year through fiscal

10 year 2005), as the Secretary determines to be

11 necessary to carry out this paragraph.

12 (B) REPORTS.—Each State with a pro13 gram under this subtitle shall submit such re14 ports to the Secretary as the Secretary may re15 quire in order to monitor compliance with sub16 paragraph (A). The Secretary shall specify the

17 format of such reports and establish uniform

18 data reporting elements.

19 (C) ADJUSTMENTS TO APPROPRIATION.—

20 (i) IN GENERAL.—For each fiscal year

21 (beginning with fiscal year 1998 and end22 ing with fiscal year 2004) and based on a

23 review of information submitted under sub24 paragraph (A), the Secretary shall deter25 mine the amount by which the appropria-
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1 tion authorized under subsection (a) will

2 increase. The amount of such increase for

3 a fiscal year shall be limited to the reduc4 tion in Federal expenditures of medical as5 sistance (as determined by Secretary) that

6 would have been made under part A of

7 title XIX for home and community based

8 services for disabled individuals but for the

9 provision of similar services under the pro10 gram under this subtitle.

11 (ii) ANNUAL PUBLICATION.—The Sec12 retary shall publish before the beginning of

13 such fiscal year, the revised appropriation

14 authorized under this subsection for such

15 fiscal year.

16 (D) CONSTRUCTION.—Nothing in this sub17 section shall be construed as requiring States to

18 determine eligibility for medical assistance

19 under the State medicaid plan on behalf of indi20 viduals receiving assistance under this subtitle.

21 (b) ALLOTMENTS TO STATES.—

22 (1) IN GENERAL.—The Secretary shall allot the

23 amounts available under the appropriation author24 ized for the fiscal year (specified in subsection (a))

25 to the States with plans approved under this subtitle
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1 in accordance with an allocation formula developed

2 by the Secretary which takes into account—

3 (A) the percentage of the total number of

4 individuals with disabilities in all States that re5 side in a particular State;

6 (B) the per capita costs of furnishing home

7 and community-based services to individuals

8 with disabilities in the State; and

9 (C) the percentage of all individuals with

10 incomes at or below 150 percent of the official

11 poverty line (as described in section 2104(a)(2))

12 in all States that reside in a particular State.

13 (2) ALLOCATION FOR CLIENT ADVOCACY AC14 TIVITIES.—Each State with a plan approved under

15 this subtitle shall allocate one-half of one percent of

16 the State’s total allotment under paragraph (1) for

17 client advocacy activities as described in section

18 2105(c).

19 (3) NO DUPLICATE PAYMENT.—No payment

20 may be made to a State under this section for any

21 services provided to an individual to the extent that

22 the State received payment for such services under

23 section 1903(a) of the Social Security Act.

24 (4) REALLOCATIONS.—Any amounts allotted to

25 States under this subsection for a year that are not
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1 expended in such year shall remain available for

2 State programs under this subtitle and may be re3 allocated to States as the Secretary determines ap4 propriate.

5 (c) STATE ENTITLEMENT.—This subtitle constitutes

6 budget authority in advance of appropriations Acts, and

7 represents the obligation of the Federal Government to

8 provide for the payment to States of amounts described

9 in subsection (a).

10 Subtitle B—Life Care

11 SEC. 2201. SHORT TITLE.

12 This subtitle may be cited as the ‘‘Life Care Act’’.

13 SEC. 2202. LIFE CARE: PUBLIC INSURANCE PROGRAM FOR

14 NURSING HOME CARE.

15 The Public Health Service Act is amended by adding

16 at the end thereof the following new title:

17 ‘‘TITLE XXVII—LIFE CARE: PUB18 LIC INSURANCE PROGRAM

19 FOR NURSING HOME CARE

20 ‘‘SEC. 2701. ESTABLISHMENT OF VOLUNTARY LONG-TERM

21 CARE INSURANCE PROGRAM.

22 ‘‘The Secretary shall establish a voluntary insurance

23 program for individuals 35 years of age and over to cover

24 the nursing home stays of such individuals. The Secretary
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1 shall establish a process for enrollment in the Life Care

2 program.

3 ‘‘SEC. 2702. BENEFITS.

4 ‘‘(a) IN GENERAL.—

5 ‘‘(1) ELIGIBILITY FOR COVERAGE.—Subject to

6 subsection (c), an individual who meets the eligibility

7 criteria prescribed in section 2703 shall be eligible

8 under the program established under this title for

9 coverage for necessary services described in sub10 section (b) (in the amounts described in subsection

11 (c)) that are provided to the individual by a nursing

12 facility while the individual is an inpatient of the

13 facility.

14 ‘‘(2) NONFORFEITURE.—The Secretary shall

15 establish standards to ensure the nonforfeiture of

16 benefits for which premiums have been paid.

17 ‘‘(b) TYPES.—Coverage may be provided under this

18 title for—

19 ‘‘(1) nursing care provided by or under the su20 pervision of a registered professional nurse;

21 ‘‘(2) physical, occupational, or speech therapy

22 furnished by a facility or by others under arrange23 ments with a facility;

24 ‘‘(3) medical social work services;
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1 ‘‘(4) drug, biological, supply, appliance, and

2 equipment for use in the facility, that is ordinarily

3 furnished by the facility for the care and treatment

4 of an inpatient;

5 ‘‘(5) such other services necessary to the func6 tioning of a patient, including personal care and as7 sistance with activities of daily living, as are gen8 erally provided by a nursing home facility; and

9 ‘‘(6) with respect to the initial 6 months of cov10 ered residence in a nursing facility, such room and

11 board costs as are not covered by beneficiary

12 copayment.

13 ‘‘(c) COVERAGE AMOUNT.—

14 ‘‘(1) IN GENERAL.—The amount of coverage

15 provided with respect to an eligible individual for the

16 services described in subsection (b) shall, based on

17 an election made by the individual, not exceed

18 $30,000, $60,000, or $90,000 over the lifetime of

19 the eligible individual. Such amounts shall be ad20 justed by the Secretary to reflect increases in the

21 Consumer Price Index.

22 ‘‘(2) ASSET PROTECTION.—An eligible individ23 ual shall be entitled to the asset protection provided

24 under section 2708.
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1 ‘‘(d) PAYMENT.—Amounts provided under this title

2 with respect to an eligible individual for the services de3 scribed in subsection (b) shall be paid from the general

4 fund of the Treasury of the United States.

5 ‘‘(e) RESIDENTIAL CARE FACILITIES.—The Sec6 retary shall consider the feasibility of making payments

7 under this title for services delivered in residential care

8 facilities. Not later than 2 years after the date of enact9 ment of this Act, the Secretary shall report the findings

10 of the Secretary to the Congress with respect to the fea11 sibility of making such payments.

12 ‘‘SEC. 2703. ELIGIBILITY.

13 ‘‘(a) IN GENERAL.—An individual shall be eligible for

14 benefits under this title if—

15 ‘‘(1) the individual—

16 ‘‘(A) is a legal resident of the United

17 States and has elected coverage under sub18 section (c); and

19 ‘‘(B) has been determined by a Screening

20 Agency through a screening process (conducted

21 in accordance with section 2707)—

22 ‘‘(i)(I) to require hands-on or standby

23 assistance, supervision, or cueing (as de24 fined in regulations) to perform three or

25 more activities of daily living; or
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1 ‘‘(II) to require hands-on or standby

2 assistance, supervision, or cueing with at

3 least such instrumental activity (or activi4 ties) of daily living related to cognitive or

5 mental impairment as the Secretary speci6 fies; or

7 ‘‘(III) to display symptoms of one or

8 more serious behavioral problems (that is

9 on a list of such problems specified by the

10 Secretary) which create a need for super11 vision to prevent harm to self or others; or

12 ‘‘(IV) has achieved a score, on a

13 standard mental status protocol (or proto14 cols) appropriate for measuring the indi15 vidual’s particular condition specified by

16 the Secretary, that indicates either severe

17 cognitive impairment or severe mental im18 pairment, or both; and

19 ‘‘(ii) to require such assistance, super20 vision, or cueing over a period of at least

21 90 days; and

22 ‘‘(2)(A) the individual has filed an application

23 for such benefits, and is in need of, benefits covered

24 under this title; or
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1 ‘‘(B) the legal guardian of the individual has

2 filed an application on behalf of an individual who

3 is in need of benefits covered under this title; or

4 ‘‘(C) the representative of an individual who is

5 cognitively impaired and who is in need of benefits

6 covered under this title has filed an application on

7 behalf of the individual.

8 ‘‘(b) CURRENT INDIVIDUALS.—An individual who is

9 in a hospital or nursing home on the date of the enroll10 ment of the individual in the program established under

11 this title shall be ineligible for coverage under this section

12 until the individual’s first spell of illness beginning after

13 such date.

14 ‘‘(c) ELECTION OF COVERAGE.—

15 ‘‘(1) IN GENERAL.—Subject to this subsection,

16 an individual shall have the option to purchase cov17 erage under this title when the individual is 35 years

18 of age, 45 years of age, 55 years of age, or 65 years

19 of age.

20 ‘‘(2) INITIAL YEAR.—During the 1-year period

21 beginning on the date on which final regulations

22 that implement this title are issued, an individual

23 who is 35 years of age or older shall be eligible to

24 purchase insurance under this title, except that such
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1 an individual shall not be eligible to purchase such

2 insurance—

3 ‘‘(A) while confined to a hospital or nurs4 ing home;

5 ‘‘(B) within the 6-month period after the

6 individual’s confinement in a nursing home; or

7 ‘‘(C) within the 90-day period after the in8 dividual’s confinement in a hospital.

9 Individuals described in the matter preceding sub10 paragraph (A) shall become eligible to receive bene11 fits under this title on the expiration of the 3-year

12 period beginning on the date such individuals pur13 chase insurance under this title.

14 ‘‘(3) EXTENSION BEYOND INITIAL YEAR.—If an

15 individual is confined to a nursing home or hospital

16 during a period that extends beyond the first year

17 after the effective date of this title, an individual

18 shall be eligible to enroll in the program established

19 by this title during the 60-day period beginning after

20 the individual’s spell of illness.

21 ‘‘(4) SUBSEQUENT YEARS.—During years sub22 sequent to the 1-year period referred to in para23 graph (2), an individual shall be eligible to purchase

24 insurance under this title within 6 months of the

25 35th, 45th, 55th, or 65th birthday of the individual.
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1 ‘‘(5) ACTIVATION OF BENEFITS.—To receive

2 coverage under the insurance program established by

3 this title, an individual shall have purchased such

4 coverage not later than 1 month prior to admission

5 to a nursing facility, unless the reason for the need

6 of services is a result of an accident or stroke subse7 quent to the date that such individual enrolled for

8 coverage under this title.

9 ‘‘(d) PUBLIC EDUCATION.—In the 12 months preced10 ing the initial enrollment period, the Secretary shall, either

11 directly or through grants and contracts, conduct a public

12 service and education campaign designed to inform poten13 tially eligible individuals as to the nature of the benefits

14 and the limited enrollment period. In conducting such

15 campaigns the Secretary shall make information available

16 to individuals through the open enrollment process for ob17 taining health care benefits under this Act.

18 ‘‘SEC. 2704. PREMIUM RATES.

19 ‘‘(a) IN GENERAL.—The Secretary shall determine

20 one premium rate for individuals electing to purchase cov21 erage under this title at age 35 (or between the ages of

22 35 and 44 during the initial enrollment period), a separate

23 rate for those individuals who elect coverage at age 45

24 (or between the ages of 45 and 54 during the initial enroll25 ment period), a separate rate for those individuals who
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1 elect such coverage at age 55 (or between that ages of

2 55 and 64 during the initial enrollment period), and a sep3 arate rate for those individuals who elect such coverage

4 at age 65 (or at age 65 and over during the initial enroll5 ment period). During the initial enrollment period, the

6 Secretary shall establish actuarily fair, age-rated pre7 miums for persons age 65 and over.

8 ‘‘(b) REVISION.—The Secretary shall revise premium

9 rates annually to increase such rates to reflect the amount

10 of the increase in the cost of living adjustment with re11 spect to benefits under title II of the Social Security Act.

12 ‘‘(c) RATES.—In developing premium rates under the

13 program established under this title, the Secretary shall

14 establish rates that are expected to cover 100 percent of

15 the reimbursement amount provided under this title for

16 nursing home stays for those individuals enrolled in the

17 program.

18 ‘‘(d) WAIVER.—An individual electing to purchase

19 coverage under this title shall not be required to pay pre20 miums during any period in which such individual is re21 ceiving benefits under this title.

22 ‘‘(e) PAYMENT.—Premiums shall be paid under this

23 section into the general fund of the Treasury of the United

24 States.
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1 ‘‘SEC. 2705. QUALIFIED SERVICE PROVIDERS.

2 ‘‘(a) IN GENERAL.—To be considered as a covered

3 nursing home service under this title, such service must

4 have been provided by a qualified service provider.

5 ‘‘(b) TYPES.—A provider shall be considered a quali6 fied service provider under this title if the provider is a

7 nursing facility that is certified by the State and meets

8 the requirements of this title and any other standards es9 tablished by the Secretary by regulation for the safe and

10 efficient provision of services covered under this title.

11 ‘‘SEC. 2706. REIMBURSEMENT.

12 ‘‘(a) AMOUNT.—Monthly reimbursement for nursing

13 facility services under this title shall equal 65 percent (or

14 during the initial 6 months of coverage, 80 percent) of

15 the amount the Secretary determines to be reasonable and

16 appropriate to cover the cost of care provided under this

17 title.

18 ‘‘(b) PROSPECTIVE PAYMENT.—To the extent fea19 sible, the Secretary shall establish a prospective payment

20 mechanism for payment for nursing home services under

21 this title that takes into account the expected resource uti22 lization of individual patients based on their degree of dis23 ability, the methodology recommended for reimbursement

24 of skilled nursing facilities under title XVIII of the Social

25 Security Act, and other factors determining service re26 quirements.
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1 ‘‘(c) ROOM AND BOARD PAYMENT.—An individual

2 receiving benefits under this program shall be responsible

3 for the payment of an amount for room and board that

4 is equal to—

5 ‘‘(1) with respect to the initial 6 months of resi6 dence in a nursing facility, 20 percent of the average

7 per diem rate paid by the Secretary to nursing facili8 ties receiving reimbursement under this title; and

9 ‘‘(2) with respect to subsequent periods of resi10 dence, 35 percent of the average per diem rate paid

11 by the Secretary to nursing facilities receiving reim12 bursement under this title. Payments under sub13 sections (a) and (c) shall be considered payment in

14 full for services received under this section.

15 ‘‘(d) PRIORITY PAYERS.—Notwithstanding any other

16 provision of this title, reimbursement for nursing facility

17 services provided under this title to an individual shall,

18 to the extent available, be made under the Medicare pro19 gram, under Department of Veterans Affairs’ programs,

20 or under private insurance policies prior to reimbursement

21 under this title.

22 ‘‘SEC. 2707. LONG-TERM CARE SCREENING AGENCY.

23 ‘‘(a) ESTABLISHMENT.—The Secretary shall contract

24 with entities to act as Long-Term Care Screening Agen25 cies (hereafter referred to in this title as the ‘Screening
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1 Agency’) for each designated area of a State. It shall be

2 the responsibility of such agency to assess the eligibility

3 of individuals residing in the geographic jurisdiction of the

4 Agency, for services provided under this title according to

5 the requirements of this title and regulations prescribed

6 by the Secretary. In entering into such contracts, the Sec7 retary shall give preference to State governmental entities

8 and private nonprofit agencies.

9 ‘‘(b) ELIGIBILITY.—The Screening Agency shall de10 termine the eligibility of an individual under this title

11 based on the results of a preliminary telephone interview

12 or written questionnaire (completed by the applicant, by

13 the caregiver of the applicant, or by the legal guardian

14 or representative of the applicant) that shall be validated

15 through the use of a screening tool administered in person

16 to each applicant determined eligible through initial tele17 phone or written questionnaire interviews not later than

18 15 days from the date on which such individual initially

19 applied for services under this title.

20 ‘‘(c) QUESTIONNAIRES AND SCREENING TOOLS.—

21 ‘‘(1) IN GENERAL.—The Secretary shall estab22 lish a telephone or written questionnaire and a

23 screening tool to be used by the Screening Agency

24 to determine the eligibility of an individual for serv25 ices under this title consistent with requirements of
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1 this title and the standards established by the Sec2 retary by regulation.

3 ‘‘(2) QUESTIONNAIRES.—The questionnaire

4 shall include questions about the functional impair5 ment and mental status of an individual and other

6 criteria that the Secretary shall prescribe by regula7 tion.

8 ‘‘(3) SCREENING TOOLS.—The screening tool

9 should measure functional impairment caused by

10 physical or cognitive conditions as well as informa11 tion concerning cognition disability, behavioral prob12 lems (such as wandering or abusive and aggressive

13 behavior), and any other criteria that the Secretary

14 shall prescribe by regulation. The screening tool

15 shall be administered in person.

16 ‘‘(d) NOTIFICATION.—Not later than 15 days after

17 the date on which an individual initially applied for serv18 ices under this title (by telephone or written question19 naire), the Screening Agency shall notify such individual

20 that such individual is not eligible for benefits, or that

21 such individuals must schedule an in-person screening to

22 determine final eligibility for benefits under this title. The

23 Screening Agency shall notify such individual of its final

24 decision not later than 2 working days after the in-person

25 screening.
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1 ‘‘(e) IN-PERSON SCREENING.—An individual (or the

2 legal guardian or representative of such individual) whose

3 application for benefits under this title is denied on the

4 basis of information provided through a telephone or writ5 ten questionnaire, shall be notified of such individual’s

6 right to an in-person screening by a nurse or appropriate

7 health care professionals.

8 ‘‘(f) APPEALS.—The Secretary shall establish a

9 mechanism for hearings and appeals in cases in which in10 dividuals contest the eligibility findings of the Screening

11 Agency.

12 ‘‘(g) PAYMENT.—

13 ‘‘(1) PAYMENT FOR SCREENING.—The Screen14 ing Agency may require payment from individuals

15 only in accordance with standards established by the

16 Secretary.

17 ‘‘(2) NO PAYMENT FOR POOREST.—The Screen18 ing Agency may not require payment for individuals

19 with incomes of less than 150 percent of the official

20 poverty line.

21 ‘‘SEC. 2708. ASSET PROTECTION.

22 ‘‘Notwithstanding any other provision of law, the as23 sets an eligible individual may retain and be determined

24 eligible for nursing facility benefits, including payments of

25 room and board under this title, under State Medicaid
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1 programs (in accordance with section 1902(a)(10)) shall

2 be increased by the amount of coverage ($30,000,

3 $60,000, or $90,000) elected under section 2702.

4 ‘‘SEC. 2709. RELATION TO PRIVATE INSURANCE.

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

6 (b), an insurer may not offer a long-term care insurance

7 policy to an individual who has purchased coverage under

8 this title if the coverage under such policy duplicates the

9 coverage provided under this title.

10 ‘‘(b) DEVELOPMENT OF STANDARD PACKAGES.—The

11 Secretary shall develop standard long-term care insurance

12 benefits packages that insurers may offer to insured indi13 viduals under this title. Such packages shall provide cov14 erage for benefits that compliment, but do not duplicate,

15 those covered under this title.

16 ‘‘SEC. 2710. DEFINITIONS.

17 ‘‘As used in this title:

18 ‘‘(1) NURSING FACILITY.—The term ‘nursing

19 facility’ means—

20 ‘‘(A) a skilled nursing facility (as defined

21 in section 1819(a) of the Social Security Act);

22 or

23 ‘‘(B) a facility that is a nursing fa24 cility (as defined in section 1919(a) of such

25 Act) which meets the requirements of section
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1 1819(b)(4)(C) of such Act (relating to nursing

2 care).

3 ‘‘(2) SPELL OF ILLNESS.—The term ‘spell of

4 illness’ means a period of consecutive days beginning

5 with the first day on which an individual is fur6 nished services as an inpatient in a hospital or nurs7 ing facility and ending with the close of the first 6

8 consecutive months thereafter during which the indi9 vidual is no longer an inpatient of a nursing facility,

10 or 90 days after the individual is no longer an inpa11 tient in a hospital.

12 ‘‘SEC. 2711. REPORTS.

13 ‘‘(a) IN GENERAL.—Prior to the promulgation of reg14 ulations implementing this title, the Secretary shall report

15 to Congress on—

16 ‘‘(1) the actuarially-sound premium rates to be

17 used in the implementation of this Act, including

18 whether the premiums and interest accrued thereon

19 will cover 100 percent of the benefits paid out, and

20 whether Federal funds will be required to support

21 the payment of benefits;

22 ‘‘(2) an assessment of the impact of such pre23 mium rates on the affordability of coverage under

24 this Act;
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1 ‘‘(3) a projected enrollment of individuals by

2 age category; and

3 ‘‘(4) an estimate of current and projected en4 rollment of individuals, by age category in coverage

5 under private long-term care insurance.

6 ‘‘(b) LIFE CARE REPORT.—Not later than 2 years

7 after the promulgation of regulations implementing this

8 title, the Secretary shall report to Congress on the follow9 ing aspects of the Life Care Act:

10 ‘‘(1) The current and projected premium rates.

11 ‘‘(2) The current and projected enrollment of

12 individuals, by age category and an estimate of cur13 rent and projected enrollment of individuals by age

14 category in private long-term care insurance.

15 ‘‘(3) The projected use of benefits and the im16 pact of use on premium rates.

17 ‘‘(4) An assessment of the impact of projected

18 premium rates on the affordability of coverage under

19 this Act.

20 ‘‘(c) RECOMMENDATIONS.—The Secretary shall make

21 recommendations to Congress regarding necessary revi22 sions to the Life Care Act as a result of the findings pro23 vided in the reports submitted under this section.’’.
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1 Subtitle C—Sense of the Committee

2 with Regard to Prescription Drugs

3 SEC. 2301. SENSE OF THE COMMITTEE WITH REGARD TO

4 PRESCRIPTION DRUGS.

5 It is the Sense of the Committee on Labor and

6 Human Resources of the Senate that when the Affordable

7 Health Care for All Americans Act is enacted it should

8 include a provision for coverage of outpatient prescription

9 drugs under the medicare program comparable to the pro10 vision included in S. 1757, the Health Security Act (as

11 introduced in the 103rd Congress) and providing for a

12 drug deductible of not more than $200, coinsurance of not

13 more than 20 percent, and an out-of-pocket limit of not

14 more than $1,000.
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1 TITLE III—PUBLIC HEALTH

2 INITIATIVES

3 Subtitle A—Workforce Priorities

4 Under Federal Payments

5 PART 1—INSTITUTIONAL COSTS OF GRADUATE

6 MEDICAL EDUCATION; WORKFORCE PRIORITIES

7 Subpart A—National Council Regarding Workforce

8 Priorities

9 SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL

10 EDUCATION.

11 (a) IN GENERAL.—There is established within the

12 Department of Health and Human Services a council to

13 be known as the National Council on Graduate Medical

14 Education.

15 (b) DUTIES.—The Secretary shall carry out subpart

16 B acting through the National Council.

17 (c) COMPOSITION.—

18 (1) IN GENERAL.—The membership of the Na19 tional Council shall include between 12 and 18 indi20 viduals who are appointed to the Council from

21 among individuals who are not officers or employees

22 of the United States. Such individuals shall be ap23 pointed by the Secretary, and shall include individ24 uals from each of the following categories:
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1 (A) Consumers of health care services, at

2 least one of whom resides in a rural area.

3 (B) Physicians who are faculty members of

4 medical schools.

5 (C) Physicians in private practice who are

6 not physicians described in subparagraph (B).

7 (D) Officers or employees of regional and

8 corporate health alliances.

9 (E) Officers or employees of health care

10 plans that participate in such alliances.

11 (F) Executives of teaching hospitals.

12 (G) Nurses.

13 (H) Primary care physicians, at least one

14 of whom practices in a rural area.

15 (I) Such other individuals as the Secretary

16 determines to be appropriate.

17 (2) EX OFFICIO MEMBERS; OTHER FEDERAL

18 OFFICERS OR EMPLOYEES.—The membership of the

19 National Council shall include individuals designated

20 by the Secretary to serve as members of the Council

21 from among Federal officers or employees who are

22 appointed by the President, or by the Secretary or

23 other Federal officers who are appointed by the

24 President with the advice and consent of the Senate.
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1 (d) CHAIR.—The Secretary shall, from among mem2 bers of the National Council appointed under subsection

3 (c)(1), designate an individual to serve as the Chair of

4 the Council.

5 (e) DEFINITIONS.—For purposes of this subtitle:

6 (1) The term ‘‘academic health center’’ means

7 an entity defined in section 3051(c)(1).

8 (2) The term ‘‘medical school’’ means a school

9 of medicine (as defined in section 799 of the Public

10 Health Service Act) or a school of osteopathic medi11 cine (as defined in such section).

12 (3) The term ‘‘National Council’’ means the

13 council established in subsection (a).

14 (f) CONFORMING AMENDMENT REPEALING THE

15 COUNCIL ON GRADUATE MEDICAL EDUCATION

16 (COGME).—Effective on the date of the first meeting of

17 the National Council, section 30 of the Health Professions

18 Education Extension Amendments of 1992 (Public Law

19 102–408) is repealed.

20 Subpart B—Authorized Positions in Specialty

21 Training

22 SEC. 3011. COOPERATION REGARDING APPROVED PHYSI23 CIAN TRAINING PROGRAMS.

24 (a) IN GENERAL.—With respect to an approved phy25 sician training program in a medical specialty, a funding
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1 agreement with a qualified applicant for payments under

2 section 3031 for a calendar year is that the qualified appli3 cant will ensure that the number of individuals enrolled

4 in the program in the subsequent academic year is in ac5 cordance with this subpart.

6 (b) DEFINITIONS.—

7 (1) APPROVED PROGRAM.—For purposes of this

8 subtitle:

9 (A) The term ‘‘approved physician training

10 program’’, with respect to the medical speciality

11 involved, means a residency or other post12 graduate program that trains physicians and

13 meets the following conditions:

14 (i) Participation in the program may

15 be counted toward certification in the med16 ical specialty.

17 (ii) The program is accredited by the

18 Accreditation Council on Graduate Medical

19 Education, or approved by the Council on

20 Postgraduate Training of the American

21 Osteopathic Association.

22 (B) The term ‘‘approved physician training

23 program’’ includes any postgraduate program

24 described in subparagraph (A) that provides

25 health services in an ambulatory setting, with-
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1 out regard to whether the program provides in2 patient hospital services.

3 (C) The term ‘‘approved physician training

4 program’’ includes any postgraduate program

5 described in subparagraph (A), whether oper6 ated by academic health centers, teaching hos7 pitals, multispecialty group practices, ambula8 tory care providers, prepaid health plans, or

9 other entities.

10 (D) The term ‘‘approved physician training

11 program’’ includes any postgraduate program

12 described in subparagraph (A) that provides fel13 lowship training in family medicine, general in14 ternal medicine or general pediatrics, and pro15 vides training for a faculty position in family

16 medicine, general medicine or general pediat17 rics.

18 (2) QUALIFIED APPLICANT; SUBPART DEFINI19 TION.—For purposes of this subpart, the term

20 ‘‘qualified applicant’’, with respect to an academic

21 year, means an entity that trains individuals in an

22 approved physician program that receives payments

23 under subpart C for the calendar year in which the

24 academic year begins.
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1 (3) OTHER DEFINITIONS.—For purposes of this

2 subtitle:

3 (A)(i) The term ‘‘academic year’’ means

4 the 1-year period beginning on July 1. The aca5 demic year beginning July 1, 1993, is academic

6 year 1993–94.

7 (ii) With respect to the funding agreement

8 described in subsection (a), the term ‘‘subse9 quent academic year’’ means the academic year

10 beginning July 1 of the calendar year for which

11 payments are to be made under the agreement.

12 (B) The term ‘‘funding agreement’’, with

13 respect to payments under section 3031 to a

14 qualified applicant, means that the Secretary

15 may make the payments only if the qualified

16 applicant makes the agreement involved.

17 (C) The term ‘‘medical specialty’’ includes

18 all medical, surgical, and other physician spe19 cialties and subspecialties.

20 SEC. 3012. ANNUAL AUTHORIZATION OF NUMBER OF SPE21 CIALTY POSITIONS; REQUIREMENTS REGARD22 ING PRIMARY HEALTH CARE.

23 (a) ANNUAL AUTHORIZATION OF NUMBER OF POSI24 TIONS.—In the case of each medical specialty, the Na25 tional Council shall designate for each academic year the
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1 number of individuals nationwide who are authorized to

2 be enrolled in eligible programs. The preceding sentence

3 is subject to subsection (c)(2).

4 (b) PRIMARY HEALTH CARE.—

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

6 carrying out subsection (a) for an academic year, the

7 National Council shall ensure that, of the class of

8 training participants entering eligible programs for

9 academic year 2001–2002 or any subsequent aca10 demic year, the percentage of such class that com11 pletes eligible programs in primary health care is not

12 less than 55 percent (without regard to the academic

13 year in which the members of the class complete the

14 programs).

15 (2) RULE OF CONSTRUCTION.—The require16 ment of paragraph (1) regarding a percentage ap17 plies in the aggregate to training participants enter18 ing eligible programs for the academic year involved,

19 and not individually to any eligible program.

20 (c) DESIGNATIONS REGARDING 3-YEAR PERIODS.—

21 (1) DESIGNATION PERIODS.—For each medical

22 specialty, the National Council shall make the an23 nual designations under subsection (a) for periods of

24 3 academic years.
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1 (2) INITIAL PERIOD.—The first designation pe2 riod established by the National Council after the

3 date of the enactment of this Act shall be the aca4 demic years 2001–2002 through 2003–2004.

5 (d) CERTAIN CONSIDERATIONS IN DESIGNATING AN6 NUAL NUMBERS.—

7 (1) IN GENERAL.—Factors considered by the

8 National Council in designating the annual number

9 of specialty positions for an academic year for a

10 medical specialty shall include the extent to which

11 there is a need for additional practitioners in the

12 speciality, as indicated by the following:

13 (A) The characteristics of diseases, dis14 orders, or health conditions treated, including—

15 (i) the incidence and prevalence (in

16 the general population and in various other

17 populations) of the diseases, disorders, or

18 other health conditions with which the spe19 cialty is concerned;

20 (ii) the intensity of care required for

21 each of these diseases, disorders, or health

22 conditions;

23 (iii) the relevant training received and

24 experience attained by primary care and

25 specialist physicians in caring for each of
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1 these diseases, disorders, or health condi2 tions; and

3 (iv) when sufficient data becomes

4 available, the extent to which individuals

5 with certain diseases, disorders, or health

6 conditions have better health outcomes

7 when treated by health specialists than by

8 primary care physicians.

9 (B) The number of physicians who will be

10 practicing in the specialty in the academic year.

11 (C) The number of physicians who will be

12 practicing in the specialty at the end of the 5-

13 year period beginning on the first day of the

14 academic year.

15 (2) RECOMMENDATIONS OF PRIVATE ORGANIZA16 TIONS.—In designating the annual number of spe17 cialty positions for an academic year for a medical

18 specialty, the National Council shall consider the

19 recommendations of organizations representing phy20 sicians in the specialty, organizations representing

21 academic medicine, and the recommendations of or22 ganizations representing consumers of the services of

23 such physicians.

24 (3) TOTAL OF RESPECTIVE ANNUAL NUM25 BERS.—
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1 (A) For academic year 2001–2002 and

2 subsequent academic years, the National Coun3 cil shall ensure that the total of the respective

4 annual numbers designated under subsection

5 (a) for an academic year is a total that—

6 (i) bears a relationship to the number

7 of individuals who graduated from medical

8 schools in the United States in the preced9 ing academic year; and

10 (ii) is consistent with the purposes of

11 this subpart.

12 (B) For each of the academic years 2001–

13 2002 through 2005–2006, the total determined

14 under subparagraph (A) shall be reduced by a

15 percentage determined by the National Council.

16 (e) INTERIM VOLUNTARY TARGETS.—

17 (1) ESTABLISHMENT.—Not later than July 1,

18 1998, the National Council shall establish targets

19 with respect to the aggregate number of individuals

20 enrolled in approved physician training programs for

21 each specialty to be achieved by the year 2001.

22 (2) VOLUNTARY COMPLIANCE.—Specialties that

23 meet and continue to be in compliance with the ag24 gregate targets established under paragraph (1), as

25 determined by the National Council, shall not be
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1 subject to the mandatory allocation system described

2 in section 3013.

3 (3) MEASURE OF COMPLIANCE.—To be consid4 ered in compliance with the targets under paragraph

5 (2), a specialty shall demonstrate, not later than

6 July 1, 2000, that the number of individuals en7 rolled in approved physician training programs of

8 the specialty is not less than the number of individ9 uals enrolled in such programs as of July 1, 1995,

10 increased or decreased, as the case may be, by 45

11 percent of the difference between such enrollment

12 and the target enrollment established under para13 graph (1) and, not later than January 1, 2001, have

14 increased or decreased by 90 percent of such dif15 ference, and, by January 1, 2002, are deemed by the

16 National Council to be in compliance with the

17 target.

18 (4) LOSS OF COMPLIANCE.—The National

19 Council may, at any time, determine that a specialty

20 is not in compliance with the targets established

21 under paragraph (1) and initiate, with respect to

22 that specialty, the system of allocations described

23 under section 3013.

24 (f) STUDY.—Not later than January 1, 2005, the

25 Secretary shall arrange for the completion, by the Insti-
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1 tute of Medicine or other similar entity, of an independent

2 study concerning the effect of medical workforce planning.

3 The results of such study together with recommendations

4 concerning the appropriateness of modifying or eliminat5 ing the planning program included in this Act shall be

6 compiled in a report and transmitted by the Secretary to

7 the President and the Congress.

8 (g) DEFINITIONS.—For purposes of this subtitle:

9 (1) The term ‘‘annual number of specialty posi10 tions’’, with respect to a medical specialty, means

11 the number designated by the National Council

12 under subsection (a) for eligible programs for the

13 academic year involved.

14 (2) The term ‘‘designation period’’ means a 3-

15 year period under subsection (c)(1) for which des16 ignations under subsection (a) are made by the Na17 tional Council.

18 (3) The term ‘‘primary health care’’ means the

19 following medical specialties: Family medicine, gen20 eral internal medicine, general pediatrics, geriatric

21 medicine, obstetrics and gynecology, and medical

22 specialties (including psychiatry), if any, that have

23 been designated to be medical shortage specialties or

24 protected medical specialties by the Council on

25 Graduate Medical Education, or other similar physi-
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1 cian advisory body authorized by Congress to pro2 vide an ongoing assessment of physician workforce

3 trends, and identify needs and be advisory to the

4 Secretary, the Committee on Labor and Human Re5 sources and the Committee on Finance of the Senate

6 and the Committee on Energy and Commerce and

7 the Committee on Ways and Means of the House of

8 Representatives. Only those participants in programs

9 with a significant primary care training emphasis

10 will be considered to have completed an eligible pro11 gram in primary care for the purposes of subsection

12 (b)(1). Determination of meeting the definition of a

13 ‘‘significant primary care training emphasis’’ will be

14 made by the National Board.

15 (4) The term ‘‘specialty position’’ means a posi16 tion as a training participant.

17 (5) The term ‘‘training participant’’ means an

18 individual who is enrolled in an approved physician

19 training program.

20 SEC. 3013. ALLOCATIONS AMONG SPECIALTIES AND PRO21 GRAMS.

22 (a) IN GENERAL.—For each academic year, the Na23 tional Council shall for each medical specialty make alloca24 tions among eligible programs of the annual number of

25 specialty positions that the Council has designated for
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1 such year. The preceding sentence is subject to subsection

2 (b)(3).

3 (b) ALLOCATIONS REGARDING 3-YEAR PERIOD.—

4 (1) IN GENERAL.—For each medical specialty,

5 the National Council shall make the annual alloca6 tions under subsection (a) for periods of 3 academic

7 years.

8 (2) ADVANCE NOTICE TO PROGRAMS.—With re9 spect to the first academic year of an allocation pe10 riod established by the National Council, the Na11 tional Council shall, not later than July 1 of the pre12 ceding academic year, notify each eligible program of

13 the allocations made for the program for each of the

14 academic years of the period.

15 (3) INITIAL PERIOD.—The first allocation pe16 riod established by the National Council after the

17 date of the enactment of this Act shall be the aca18 demic years 2001–2002 through 2003–2004.

19 (c) CERTAIN CONSIDERATIONS.—

20 (1) GEOGRAPHIC AREAS; QUALITY OF PRO21 GRAMS.—In making allocations under subsection (a)

22 for eligible programs of the various geographic

23 areas, the National Council shall include among the

24 factors considered the historical distribution among
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1 the areas of approved physician training programs,

2 and the quality of such programs.

3 (2) UNDERREPRESENTATION OF MINORITY

4 GROUPS AND WOMEN.—In making an allocation

5 under subsection (a) for an eligible program, the

6 National Council shall include among the factors

7 considered the following:

8 (A) The extent to which the population of

9 training participants in the program includes

10 training participants who are members of racial

11 or ethnic minority groups and women.

12 (B) With respect to a racial or ethnic

13 group or women represented among the train14 ing participants, the extent to which the group

15 is underrepresented in the field of medicine

16 generally and in the various medical specialities.

17 (3) UNDERSERVED RURAL AND INNER-CITY

18 COMMUNITIES.—In making allocations under sub19 section (a) for eligible programs, the National Coun20 cil shall consider the extent to which the population

21 of training participants in the program includes

22 training participants who have resided in rural or

23 inner-city communities and the proportion of past

24 participants in the program who are practicing in

25 rural or inner-city communities.
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1 (4) RECOMMENDATIONS OF PRIVATE ORGANIZA2 TIONS.—In making allocations under subsection (a)

3 for eligible programs, the National Council shall con4 sider the recommendations of organizations rep5 resenting physicians in the medical specialties, the

6 recommendations of organizations representing aca7 demic medicine and the recommendations of organi8 zations representing consumers of the services of

9 such physicians.

10 (d) DEFINITIONS.—For purposes of this subtitle, the

11 term ‘‘allocation period’’ means a 3-year period under sub12 section (b)(1) for which allocations under subsection (a)

13 are made by the National Council.

14 Subpart C—Costs of Graduate Medical Education

15 CHAPTER 1—OPERATION OF APPROVED

16 PHYSICIAN TRAINING PROGRAMS

17 SEC. 3031. FEDERAL FORMULA PAYMENTS TO QUALIFIED

18 ENTITIES FOR THE COSTS OF THE OPER19 ATION OF APPROVED PHYSICIAN TRAINING

20 PROGRAMS.

21 (a) IN GENERAL.—In the case of a qualified entity

22 that in accordance with section 3032 submits to the Sec23 retary an application for calendar year 1997 or any subse24 quent calendar year, the Secretary shall make payments

25 for such year to the qualified entity for the purpose speci-
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1 fied in subsection (b). The Secretary shall make the pay2 ments in an amount determined in accordance with section

3 3033, and may administer the payments as a contract,

4 grant, or cooperative agreement.

5 (b) PAYMENTS FOR OPERATION OF APPROVED PHY6 SICIAN TRAINING PROGRAMS.—The purpose of payments

7 under subsection (a) is to assist a qualified applicant with

8 the costs of operation of an approved physician training

9 program. A funding agreement for such payments is that

10 the qualified applicant involved will expend the payments

11 only for such purpose.

12 (c) QUALIFIED APPLICANT; SUBPART DEFINITION.—

13 (1) IN GENERAL.—For purposes of this sub14 part, the term ‘‘qualified applicant’’, with respect to

15 the calendar year involved, means an entity—

16 (A) that trains individuals in approved

17 physician training programs;

18 (B) that submits to the Secretary an appli19 cation for such year in accordance with section

20 3032; and

21 (C) if the entity has an approved physician

22 training program in primary health care, that

23 rotates individuals enrolled in the program to

24 health centers or other community programs in

25 underserved urban or rural areas.
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1 (2) ENTITIES INCLUDED.—The term ‘‘qualified

2 applicant’’ may include a teaching hospital, medical

3 school, group practice, an entity representing two or

4 more parties engaged in a formal association, a com5 munity health center or another entity operating an

6 approved physician training program.

7 (d) TREATMENT OF PODIATRIC AND DENTAL RESI8 DENCY PROGRAMS.—For the purposes of chapters 1 and

9 3 of subpart C, an approved physician training program

10 includes training programs approved by the Commission

11 on Dental Accreditation or the Council of Podiatric Medi12 cal Education of the American Podiatric Medical Associa13 tion. This subsection shall not apply for purposes of sub14 part B.

15 SEC. 3032. APPLICATION FOR PAYMENTS.

16 (a) IN GENERAL.—

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

18 3031(a), an application for payments under such

19 section for a calendar year is in accordance with this

20 section if—

21 (A) the eligible entity involved submits the

22 application not later than the date specified by

23 the Secretary;
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1 (B) the application demonstrates that the

2 condition described in subsection (b) is met

3 with respect to the program;

4 (C) the application contains each funding

5 agreement described in this part and the appli6 cation provides such assurances of compliance

7 with the agreements as the Secretary may re8 quire; and

9 (D) the application is in such form, is

10 made in such manner, and contains such agree11 ments, assurances, and information as the Sec12 retary determines to be necessary to carry out

13 this part.

14 (2) CERTAIN ENTITIES.—If an applicant under

15 paragraph (1) is an entity representing two or more

16 parties—

17 (A) the application shall contain a written

18 agreement, signed by all participants, in which

19 all of the participants agree as to the manner

20 in which the payments will be allocated; and

21 (B) the applicant shall agree to submit ad22 ditional documentation, if requested by the Na23 tional Council, that demonstrates that the

24 funds are distributed in the manner agreed

25 upon by all participants.
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1 (b) CERTAIN CONDITIONS.—An eligible entity meets

2 the condition described in this subsection for receiving

3 payments under section 3031 for a calendar year if—

4 (1) the entity agrees to use such funds only to

5 support an approved physician training program;

6 (2) with respect to—

7 (A) a specialty for which programs have

8 received allocations under section 3013, the en9 tity agrees that funds will only be used to sup10 port approved training programs for which the

11 number of specialists in training is consistent

12 with the allotment under section 3013; and

13 (B) a specialty for which a voluntary pro14 gram has received allocations under section

15 3012(e), the entity agrees that funds will only

16 be used to support approved training programs

17 for which the number of specialists in training

18 is consistent with the targets under section

19 3012(e); and

20 (3) the application of the entity contains a writ21 ten agreement, signed by all participants, in which

22 all participants agree to the manner in which the

23 payments will be allocated; and

24 (4) the entity agrees to submit additional docu25 mentation, if requested by the National Council, that
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1 demonstrates that the funds will be distributed in a

2 manner agreed upon by all participants.

3 SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; AN4 NUAL AMOUNT OF PAYMENTS.

5 (a) ANNUAL HEALTH PROFESSIONS WORKFORCE

6 ACCOUNT.—Subject to paragraph (2), the amount avail7 able for a calendar year for making payments under sec8 tions 3031 and 3061 (constituting an account to be known

9 as the annual health professions workforce account) is the

10 following, as applicable to the calendar year:

11 (1) In the case of calendar year 1997,

12 $3,550,000,000.

13 (2) In the case of each of the calendar years

14 1998, 1999, and 2000, $5,800,000,000.

15 (3) In the case of each subsequent calendar

16 year, the amount specified in paragraph (2) in17 creased by the product of such amount and the gen18 eral health care inflation factor for such year (as de19 fined in subsection (d)).

20 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI21 BLE ENTITIES.—

22 (1) IN GENERAL.—Payment amounts with re23 spect to any physician training program under this

24 section shall be equal to the product of the number

25 of full time equivalent training participants in the
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1 program, and the per resident amount for the train2 ing program.

3 (2) PER RESIDENT AMOUNT.—The per resident

4 amount for a training program shall be equal to—

5 (A) with respect to—

6 (i) the first calendar years during

7 which the program is in operation, 90 per8 cent;

9 (ii) the second calendar years during

10 which the program is in operation, 80 per11 cent;

12 (iii) the third calendar years during

13 which the program is in operation, 70 per14 cent;

15 (iv) the fourth calendar years during

16 which the program is in operation, 60 per17 cent; and

18 (v) the fifth and subsequent calendar

19 years during which the program is in oper20 ation, 50 percent;

21 of the all payer hospital per resident cost; and

22 (B) with respect to—

23 (i) the first calendar years during

24 which the program is in operation, 10 per25 cent;
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1 (ii) the second calendar years during

2 which the program is in operation, 20 per3 cent;

4 (iii) the third calendar years during

5 which the program is in operation, 30 per6 cent;

7 (iv) the fourth calendar years during

8 which the program is in operation, 40 per9 cent; and

10 (v) the fifth and subsequent calendar

11 years during which the program is in oper12 ation, 50 percent;

13 of the geographically adjusted national average

14 per resident amount.

15 (3) ADJUSTMENT FACTOR.—Payments under

16 this section shall be subject to an adjustment factor,

17 as determined by the Secretary, so that total pay18 ments in any year will not exceed the amounts speci19 fied in section 3033(a) and as provided in section

20 3033(c).

21 (4) ADDITIONAL PROVISIONS REGARDING NA22 TIONAL AVERAGE COST.—

23 (A) The Secretary shall in accordance with

24 paragraph (1)(B) determine, for academic year

25 1992–93, an amount equal to the national aver-
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1 age described in such paragraph with respect to

2 training a participant in an approved physician

3 training program in the medical specialty in4 volved. The national average applicable under

5 such paragraph for a calendar year for such

6 programs is, subject to subparagraph (B), the

7 amount determined under the preceding sen8 tence increased by the amount necessary to off9 set the effects of inflation occurring since aca10 demic year 1992–93, as determined through use

11 of the consumer price index.

12 (B) The national average determined

13 under subparagraph (A) and applicable to a cal14 endar year shall, in the case of the eligible en15 tity involved, be adjusted by a factor to reflect

16 regional differences in the applicable wage and

17 wage-related costs.

18 (5) FUNDING LEVEL AND ALLOCATION METH19 OD.—Not later than January 1, 2000, the Secretary

20 shall complete a study to determine the effect of the

21 funding level and allocation method described in sub22 section (a) and paragraphs (1) and (2) of this sub23 section on the operation of training programs and

24 shall compile the findings and recommendations de-
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1 rived from such study in a report to be submitted

2 to the President and the Congress.

3 (c) LIMITATION.—If, subject to subsection (a)(2), the

4 annual health professions workforce account available for

5 a calendar year is insufficient for providing each eligible

6 entity with the amount of payments determined under

7 subsection (b) for the entity for such year, the Secretary

8 shall make such pro rata reductions in the amounts so

9 determined as may be necessary to ensure that the total

10 of payments made under section 3031 for such year equals

11 the total of such account.

12 (d) DEFINITIONS.—For purposes of this subtitle:

13 (1) The term ‘‘annual health professions

14 workforce account’’ means the account established

15 pursuant to subsection (a)(1).

16 (2) The term ‘‘consumer price index’’ has the

17 meaning given such term in section 1702.

18 (3) The term ‘‘general health care inflation fac19 tor’’, with respect to a year, has the meaning given

20 such term in section 5001(a)(3) for such year.
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1 CHAPTER 2—MEDICAL SCHOOL FUND

2 ACCOUNT

3 SEC. 3041. FEDERAL PAYMENTS TO THE MEDICAL SCHOOL

4 FUND.

5 (a) IN GENERAL.—In the case of an eligible medical

6 school that in accordance with section 3042 submits to

7 the Secretary an application for academic year 1997, or

8 any subsequent academic year, the Secretary shall make

9 payments for such year to the school for the purpose speci10 fied in subsection (b). The Secretary shall make the pay11 ments in an amount determined in accordance with section

12 3043, and shall administer the payments as a grant.

13 (b) PAYMENTS FOR THE MEDICAL SCHOOL FUND.—

14 The purpose specified in this subsection is to assist an

15 eligible medical school with the direct costs of academic

16 programs, including the education of medical students (es17 pecially in ambulatory and preventive medicine), graduate

18 students in biomedical sciences, and otherwise unfunded

19 faculty research. A funding agreement for such payments

20 is that the medical school involved will expend the pay21 ments only for direct expenses determined as allowable by

22 the Secretary.

23 (c) ELIGIBLE MEDICAL SCHOOL; SUBPART DEFINI24 TION.—For purposes of this subpart, the term ‘‘eligible

25 medical school’’ with respect to the academic year in-
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1 volved, means an approved medical school that submits to

2 the Secretary an application for such year in accordance

3 with section 3043.

4 SEC. 3042. APPLICATION FOR PAYMENTS.

5 For purposes of section 3041(a), an application for

6 payments under such section for an academic year is in

7 accordance with this section if—

8 (1) the dean (or appropriate presiding official)

9 of the eligible medical school submits the application

10 not later than the date specified by the Secretary;

11 (2) the application contains each funding agree12 ment described in this subpart and provides such as13 surances of compliance with the agreements as the

14 Secretary may require; and

15 (3) the application is in such form, is made in

16 such manner, and contains such agreements, assur17 ances, and information as the Secretary determines

18 to be necessary to carry out this part.

19 SEC. 3043. AVAILABILITY OF FUNDS FOR PAYMENTS; AN20 NUAL AMOUNT OF PAYMENTS.

21 (a) ANNUAL MEDICAL SCHOOL FUND ACCOUNT.—

22 Subject to section 3043, the amount available for an aca23 demic year for making payments under section 3041 (con24 stituting an account to be known as the annual medical
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1 school fund account) shall be the following, as applicable

2 to the academic year:

3 (1) In the case of academic year 1997,

4 $200,000,000.

5 (2) In the case of academic year 1998,

6 $300,000,000.

7 (3) In the case of academic year 1999,

8 $400,000,000.

9 (4) In the case of academic year 2000,

10 $500,000,000.

11 (5) In the case of academic year 2001,

12 $600,000,000.

13 (6) In the case of each subsequent calendar

14 year, the amount specified in paragraph (5) in15 creased by the product of such amount and the gen16 eral health care inflation factor (as defined in sub17 section (d)).

18 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI19 BLE PROGRAMS.—Subject to the annual medical school

20 fund account available for an academic year, the amount

21 of payment required under section 3041 to be made to

22 an eligible medical school for the academic year is an

23 amount equal to the sum of—

(1) the product of 3 24 ⁄4 of the fund account avail25 able and the proportion of full-time equivalent stu-
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1 dents at the eligible medical school in academic year

2 1993–1994 compared to all full-time equivalent stu3 dents enrolled in eligible medical schools nationwide

4 in academic year 1993–1994; and

(2) the product of 1 5 ⁄4 of the fund account avail6 able and the proportion of research conducted by the

7 faculty at the eligible medical school compared to all

8 research conducted by the faculty at all eligible med9 ical schools nationwide.

10 The Secretary shall establish a method for measuring fac11 ulty research contributions.

12 (c) STUDIES.—

13 (1) FUNDING LEVEL AND ALLOCATION METH14 OD.—Not later than January 1, 1999, the Secretary

15 shall arrange for an independent study and report to

16 be completed, by the Institute of Medicine or other

17 similar entity, concerning the amount of and alloca18 tion method for medical school funding. Such report

19 shall be submitted to the President and the Con20 gress and shall include findings and recommendation

21 as to the appropriateness of modifying funding levels

22 or allocation.

23 (2) Not later than January 1, 2001, the Sec24 retary shall arrange for an independent study and

25 report to be completed, by the Institute of Medicine
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1 or other similar entity, concerning the impact of

2 health reform on undergraduate and graduate medi3 cal education. Such report shall be submitted to the

4 President and the Congress and shall include appro5 priate findings and recommendations.

6 (d) DEFINITIONS.—As used in this subtitle:

7 (1) The term ‘‘annual medical school fund ac8 count’’ means the account established under sub9 section (a).

10 (2) The term ‘‘general health care inflation fac11 tor’’ with respect to a year, has the meaning given

12 such term in section 5001(a)(3) for such year.

13 CHAPTER 3—ACADEMIC HEALTH

14 CENTERS

15 SEC. 3051. FEDERAL FORMULA PAYMENTS TO ACADEMIC

16 HEALTH CENTERS.

17 (a) IN GENERAL.—In the case of a qualified aca18 demic health center or qualified teaching hospital that in

19 accordance with section 3052 submits to the Secretary a

20 written request for calendar year 1997 or any subsequent

21 calendar year, the Secretary shall make payments for such

22 year to the center or hospital for the purpose specified

23 in subsection (b). The Secretary shall make the payments

24 in an amount determined in accordance with section 3053,
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1 and may administer the payments as a contract, grant,

2 or cooperative agreement.

3 (b) PAYMENTS FOR COSTS ATTRIBUTABLE TO ACA4 DEMIC NATURE OF INSTITUTIONS.—The purpose of pay5 ments under subsection (a) is to assist eligible institutions

6 with costs that are not routinely incurred by other entities

7 in providing health services, but are incurred by such insti8 tutions in providing health services by virtue of the aca9 demic nature of such institutions. Such costs include—

10 (1) with respect to productivity in the provision

11 of health services, costs resulting from the reduced

12 rate of productivity of faculty due to teaching re13 sponsibilities;

14 (2) the uncompensated costs of clinical re15 search; and

16 (3) exceptional costs associated with the treat17 ment of health conditions with respect to which an

18 eligible institution has specialized expertise (includ19 ing treatment of rare diseases, treatment of unusu20 ally severe conditions, and providing other special21 ized health care).

22 (c) DEFINITIONS.—

23 (1) ACADEMIC HEALTH CENTER.—For purposes

24 of this subtitle, the term ‘‘academic health center’’

25 means an entity that operates a teaching hospital
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1 that carries out an approved physician training pro2 gram.

3 (2) TEACHING HOSPITAL.—For purposes of this

4 subtitle, the term ‘‘teaching hospital’’ means a hos5 pital that operates an approved physician training

6 program (as defined in section 3011(b) or section

7 3031(d)).

8 (3) QUALIFIED CENTER OR HOSPITAL.—For

9 purposes of this subtitle:

10 (A) The term ‘‘qualified academic health

11 center’’ means an academic health center that

12 operates a teaching hospital.

13 (B) The term ‘‘qualified teaching hospital’’

14 means any teaching hospital other than a teach15 ing hospital that is operated by an academic

16 health center.

17 (4) ELIGIBLE INSTITUTION.—For purposes of

18 this subtitle, the term ‘‘eligible institution’’, with re19 spect to a calendar year, means a qualified academic

20 health center, or a qualified teaching hospital, that

21 submits to the Secretary a written request in accord22 ance with section 3052.

23 SEC. 3052. REQUEST FOR PAYMENTS.

24 (a) IN GENERAL.—For purposes of section 3051, a

25 written request for payments under such section is in ac-
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1 cordance with this section if the qualified academic health

2 center or qualified teaching hospital involved submits the

3 request not later than the date specified by the Secretary;

4 the request is accompanied by each funding agreement de5 scribed in this part; and the request is in such form, is

6 made in such manner, and contains such agreements, as7 surances, and information as the Secretary determines to

8 be necessary to carry out this part.

9 (b) CONTINUED STATUS AS ACADEMIC HEALTH

10 CENTER.—A funding agreement for payments under sec11 tion 3051 is that the qualified academic health center or

12 qualified teaching hospital involved will maintain status as

13 such a center or hospital, respectively. For purposes of

14 this subtitle, the term ‘‘funding agreement’’, with respect

15 to payments under section 3051 to such a center or hos16 pital, means that the Secretary may make the payments

17 only if the center or hospital makes the agreement in18 volved.

19 SEC. 3053. AVAILABILITY OF FUNDS FOR PAYMENTS; AN20 NUAL AMOUNT OF PAYMENTS.

21 (a) ANNUAL ACADEMIC HEALTH CENTER AC22 COUNT.—The amount available for a calendar year for

23 making payments under section 3051 (constituting an ac24 count to be known as the annual academic health center
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1 account) is the following, as applicable to the calendar

2 year:

3 (1) In the case of calendar year 1997,

4 $7,250,000,000.

5 (2) In the case of calendar year 1998,

6 $8,220,000,000.

7 (3) In the case of calendar year 1999,

8 $9,400,000,000.

9 (4) In the case of calendar year 2000,

10 $10,640,000,000.

11 (5) In the case of each subsequent calendar

12 year, the amount specified in paragraph (4) in13 creased by the product of such amount and the gen14 eral health care inflation factor (as defined in sub15 section (d)).

16 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI17 BLE INSTITUTIONS.—

18 (1) FORMULA.—The amount of payments re19 quired in section 3051 to be made to an eligible in20 stitution for a calendar year is an amount equal to

21 the product of—

22 (A) the annual academic health center ac23 count available for the calendar year; and

24 (B) the percentage constituted by the ratio

25 of—
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1 (i) the product of—

2 (I) the sum, for all discharges of

3 individuals, of the amounts otherwise

4 paid on behalf of such individuals;

5 and

6 (II) an adjustment factor equal

7 to 1.200 multiplied by (((1+r) to the

8 nth power) ¥ 1), where ‘‘r’’ equals

9 the ratio of the hospital’s full-time

10 equivalent interns and residents to

11 beds and ‘‘n’’ equals .405; and

12 (ii) the sum of the respective amounts

13 determined under clause (i) for eligible in14 stitutions.

15 (2) ADJUSTMENT FACTOR.—Payments under

16 this section shall be subject to an adjustment factor,

17 as determined by the Secretary, so that total pay18 ments in any year will not exceed the amounts speci19 fied in section 3053(a).

20 (c) REPORT REGARDING MODIFICATIONS IN FOR21 MULA.—Not later than July 1, 2001, the Secretary shall

22 submit to the Congress a report containing any rec23 ommendations of the Secretary for the modification of the

24 program of formula payments described in this chapter.

25 In preparing such report the Secretary shall consider—
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1 (1) the costs described in subsection (b) in2 curred by academic health centers;

3 (2) the adequacy of the formula payments es4 tablished in this chapter to cover such costs, taking

5 into account any additional revenues to cover such

6 costs paid by other payers, including private health

7 plans;

8 (3) the importance to the maintenance of a

9 quality national health care system of academic

10 health centers in providing for the training of health

11 professionals, in conducting clinical research, and in

12 providing innovative, technically advanced care; and

13 (4) the overall impact of the reformed health

14 care system on the ability of academic health centers

15 to perform such functions.

16 (d) DEFINITION.—For purposes of this subtitle:

17 (1) The term ‘‘annual academic health center

18 account’’ means the account established pursuant to

19 subsection (a).

20 (2) The term ‘‘general health care inflation fac21 tor’’, with respect to a year, has the meaning given

22 such term in section 5001(a)(3) for such year.
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1 Subpart D—Transitional Provisions

2 SEC. 3061. TRANSITIONAL PAYMENTS TO INSTITUTIONS.

3 (a) PAYMENTS REGARDING EFFECTS OF SUBPART B

4 ALLOCATIONS.—For each of the four calendar years speci5 fied in subsection (b)(2), in the case of an eligible entity

6 that submits to the Secretary an application for such year

7 in accordance with subsection (d), the Secretary shall

8 make payments for the year to the entity for the purpose

9 specified in subsection (c). The Secretary shall make the

10 payments in an amount determined in accordance with

11 subsection (e), and may administer the payments as a con12 tract, grant, or cooperative agreement.

13 (b) ELIGIBLE ENTITIES LOSING SPECIALTY POSI14 TIONS; RELEVANT YEARS REGARDING PAYMENTS.—

15 (1) ELIGIBLE ENTITIES LOSING SPECIALTY PO16 SITIONS.—The Secretary may make payments under

17 subsection (a) to an eligible entity only if, with re18 spect to the calendar year involved, the entity meets

19 the following conditions:

20 (A) The entity operates or operated in the

21 year preceding the initiation of transitional pay22 ments one or more programs that—

23 (i) are or were at the time they termi24 nated approved physician training pro25 grams; and
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1 (ii) are or were at the time they ter2 minated receiving payments under section

3 3031 for such year.

4 (B) The aggregate number of speciality po5 sitions in such programs (in the medical speci6 alities with respect to which such payments are

7 made) is below the aggregate number of such

8 positions at the entity for academic year 1993–

9 94 as a result of allocations under subpart B,

10 or as a result of voluntary changes under sec11 tion 3012(e) prior to January 1, 2001.

12 (2) RELEVANT YEARS.—The Secretary may

13 make payments under subsection (a) to an eligible

14 entity only for the first four calendar years after the

15 initial calendar year for which the entity meets the

16 conditions described in paragraph (1).

17 (3) ELIGIBLE ENTITY.—For purposes of this

18 section, the term ‘‘eligible entity’’ means an entity

19 that submits to the Secretary an application in ac20 cordance with subsection (d).

21 (c) PURPOSE OF PAYMENTS.—The purpose of pay22 ments under subsection (a) is to assist an eligible entity

23 with the costs of operation. A funding agreement for such

24 payments is that the entity involved will expend the pay25 ments only for such purpose.
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1 (d) APPLICATION FOR PAYMENTS.—For purposes of

2 subsection (a), an application for payments under such

3 subsection is in accordance with this subsection if—

4 (1) the eligible entity involved submits the ap5 plication not later than the date specified by the

6 Secretary;

7 (2) the application demonstrates that the entity

8 meets the conditions described in subsection (b)(1)

9 and that the entity has cooperated with the approved

10 physician training programs of the entity in meeting

11 the condition described in section 3032(b);

12 (3) the application contains each funding agree13 ment described in this subpart and the application

14 provides such assurances of compliance with the

15 agreements as the Secretary may require; and

16 (4) the application is in such form, is made in

17 such manner, and contains such agreements, assur18 ances, and information as the Secretary determines

19 to be necessary to carry out this subpart.

20 (e) AMOUNT OF PAYMENTS.—

21 (1) IN GENERAL.—Subject to the annual health

22 professions workforce account available for the cal23 endar year involved, the amount of payments re24 quired in subsection (a) to be made to an eligible en25 tity for such year is the product of the amount de-
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1 termined under paragraph (2) and the applicable

2 percentage specified in paragraph (3).

3 (2) NUMBER OF SPECIALTY POSITIONS LOST.—

4 For purposes of paragraph (1), the amount deter5 mined under this paragraph for an eligible entity for

6 the calendar year involved is the product of—

7 (A) an amount equal to the aggregate

8 number of full-time equivalent specialty posi9 tions lost; and

10 (B) the amount that would be received

11 under section 3033 for each speciality position

12 lost.

13 (3) APPLICABLE PERCENTAGE.—For purposes

14 of paragraph (1), the applicable percentage for a cal15 endar year is the following, as applicable to such

16 year:

17 (A) For the first calendar year after cal18 endar year 1997 for which the eligible entity in19 volved meets the conditions described in sub20 section (b)(1), 100 percent.

21 (B) For the second such year, 75 percent.

22 (C) For the third such year, 50 percent.

23 (D) For the fourth such year, 25 percent.

24 (4) DETERMINATION OF SPECIALTY POSITIONS

25 LOST.—
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1 (A) For purposes of this subsection, the

2 aggregate number of specialty positions lost,

3 with respect to a calendar year, is the difference

4 between—

5 (i) the aggregate number of specialty

6 positions described in subparagraph (B)

7 that are estimated for the eligible entity in8 volved for the academic year beginning in

9 such calendar year; and

10 (ii) the aggregate number of such spe11 cialty positions at the entity for academic

12 year 1993–94.

13 (B) For purposes of subparagraph (A), the

14 specialty positions described in this subpara15 graph are specialty positions in the medical spe16 cialities with respect to which payments under

17 section 3031 are made to the approved physi18 cian training programs of the eligible entities

19 involved.

20 (5) ADDITIONAL PROVISION REGARDING NA21 TIONAL AVERAGE SALARY.—

22 (A) The Secretary shall determine, for aca23 demic year 1992–93, an amount equal to the

24 national average described in paragraph (2)(B).

25 The national average applicable under such
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1 paragraph for a calendar year is, subject to

2 subparagraph (B), the amount determined

3 under the preceding sentence increased by an

4 amount necessary to offset the effects of infla5 tion occurring since academic year 1992–93, as

6 determined through use of the consumer price

7 index.

8 (B) The national average determined

9 under subparagraph (A) and applicable to a cal10 endar year shall, in the case of the eligible en11 tity involved, be adjusted by a factor to reflect

12 regional differences in the applicable wage and

13 wage-related costs.

14 PART 2—INSTITUTIONAL COSTS OF GRADUATE

15 NURSING EDUCATION; WORKFORCE PRIORITIES

16 SEC. 3071. AUTHORIZED GRADUATE NURSE TRAINING POSI17 TIONS; INSTITUTIONAL COSTS.

18 (a) PROGRAM REGARDING GRADUATE NURSE TRAIN19 ING PROGRAMS.—The Secretary shall, in accordance with

20 this part, carry out a program with respect to graduate

21 nurse training programs that is equivalent to the program

22 carried out under part 1 with respect to approved physi23 cian training programs.

24 (b) DEFINITIONS.—For purposes of this part:
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1 (1) The term ‘‘graduate nurse training pro2 grams’’ means programs for advanced nurse edu3 cation, programs for education as nurse practition4 ers, programs for education as nurse midwives, pro5 grams for education as nurse anesthetists, and such

6 other programs for training in clinical nurse special7 ties as are determined by the Secretary to require

8 advanced education.

9 (2) The term ‘‘graduate nurse training posi10 tion’’ means a position as an individual who is en11 rolled in a graduate nurse training program.

12 (3) The term ‘‘programs for advanced nurse

13 education’’ means programs meeting the conditions

14 to be programs for which awards of grants and con15 tracts may be made under section 821 of the Public

16 Health Service Act.

17 (4) The term ‘‘programs for education as nurse

18 practitioners’’ means programs meeting the condi19 tions to be programs for which awards of grants and

20 contracts may be made under section 822 of the

21 Public Health Service Act for education as a nurse

22 practitioners.

23 (5) The term ‘‘programs for education as nurse

24 midwives’’ means programs meeting the conditions

25 to be programs for which awards of grants and con-
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1 tracts may be made under section 822 of the Public

2 Health Service Act for education as nurse midwives.

3 (6) The term ‘‘programs for education as nurse

4 anesthetists’’ means programs meeting the condi5 tions to be programs for which awards of grants

6 may be made under section 831 of the Public Health

7 Service Act for education as nurse anesthetists.

8 SEC. 3072. APPLICABILITY OF PART 1 PROVISIONS.

9 (a) IN GENERAL.—The provisions of part 1 apply to

10 the program carried out under section 3071 to the same

11 extent and in the same manner as such provisions apply

12 to the program carried out under part 1, subject to the

13 subsequent provisions of this section. Section 3061 does

14 not apply for purposes of the preceding sentence.

15 (b) NATIONAL COUNCIL.—With respect to section

16 3001 as applied to this part, the council shall be known

17 as the National Council on Graduate Nurse Education (in

18 this part referred to as the ‘‘National Council’’). The pro19 visions of section 851 of the Public Health Service Act

20 regarding the composition of the council under such sec21 tion apply to the composition of the National Council to

22 the same extent and in the same manner as such provi23 sions apply to the council under such section 851.

24 (c) ALLOCATION OF GRADUATE NURSE TRAINING

25 POSITIONS; FORMULA PAYMENTS FOR OPERATING
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1 COSTS.—With respect to subparts B and C of part 1 as

2 applied to this part—

3 (1) the funding agreement described in section

4 3011 is to be made by graduate nurse training pro5 grams;

6 (2) the applicable accrediting bodies described

7 in section 3011 for graduate nurse training pro8 grams are the National League of Nursing and oth9 ers determined to be appropriate by the Secretary;

10 (3) designations under section 3012 and alloca11 tions under section 3013 apply to graduate nurse

12 training positions; and

13 (4) payments under section 3031 are to be

14 made to graduate nurse training programs, subject

15 to the requirements for such payments.

16 SEC. 3073. FUNDING.

17 (a) IN GENERAL.—With respect to section 3033 as

18 applied to this part, the provisions of this section apply.

19 (b) ANNUAL GRADUATE NURSE TRAINING AC20 COUNT.—The amount available for each of the calendar

21 years 1997 through 2000 for making payments pursuant

22 to section 3072(c)(4) to graduate nurse training programs

23 (constituting an account to be known as the annual grad24 uate nurse training account) is $200,000,000.
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1 Subpart B—Transitional Provisions for Workforce

2 Stability

3 SEC. 3081. APPLICATION.

4 (a) LIMITATION TO TRANSITION PERIOD.—The pro5 visions of this subpart are intended to minimize, to the

6 extent possible, disruptions in established employment re7 lationships during the period of transition to a restruc8 tured health care delivery system, and shall terminate De9 cember 31, 2000.

10 (b) HEALTH CARE ENTITIES COVERED BY SUB11 PART.—The provisions of this subpart, including ref12 erences to displacing employers, hiring employers, succes13 sors and contractors, apply only to health care entities

14 that employ more than 25 individuals.

15 SEC. 3082. DEFINITIONS.

16 (a) HEALTH CARE ENTITY.—As used in this sub17 part, the term ‘‘health care entity’’ includes individuals,

18 sole proprietorships, partnerships, associations, business

19 trusts, corporations, governmental institutions, and public

20 agencies (including state governments and political sub21 divisions thereof) that—

22 (1) provide health care services under title I

23 (including nonmandatory health care services under

24 title I) or under the amendments made or programs

25 referred to in titles IV and VIII; or
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1 (2) provide necessary related services, including

2 administrative, food service, janitorial or mainte3 nance services, to an entity that provides health care

4 services (as described in subparagraph (1));

5 except that an entity that solely manufactures or provides

6 goods or equipment to a health care entity shall not be

7 considered a health care entity.

8 (b) AFFILIATED ENTERPRISE.—As used in this sub9 part, the term ‘‘affiliated enterprise’’ means a health care

10 entity that, together with the displacing employer, is con11 sidered a single employer as defined under 414 of the In12 ternal Revenue Code of 1986.

13 (c) PREFERENCE ELIGIBLE EMPLOYEE.—As used in

14 this subpart, the term ‘‘preference eligible employee’’

15 means an employee who—

16 (1) has been employed for in excess of 1 year

17 by a health care entity; and

18 (2) has been displaced by or has received notice

19 of an impending displacement by such entity.

20 (d) DISPLACEMENT.—As used in this subpart, the

21 term ‘‘displacement’’ includes a layoff, termination, sig22 nificant cutback in paid work hours, or other loss of em23 ployment, except that a discharge for just cause shall not

24 constitute a displacement within the meaning of this para25 graph.
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1 SEC. 3083. OBLIGATIONS OF DISPLACING EMPLOYER AND

2 AFFILIATED ENTERPRISES IN EVENT OF DIS3 PLACEMENT.

4 (a) NOTICE.—A health care entity which displaces a

5 preference eligible employee shall provide such employee

6 with—

7 (1) written notice, no later than the date of dis8 placement, of employment rights under this subpart,

9 including employment rights with respect to affili10 ated enterprises of the displacing employer; and

11 (2) notice of any existing or subsequent vacan12 cies with the displacing employer or an affiliated en13 terprise, which notice may be given by posting of

14 such vacancies wherever notices to applicants for

15 employment are customarily posted, by listing such

16 vacancies with the local employment services agency,

17 or in such other manner as the Secretary of Labor,

18 by regulation, may hereafter specify.

19 Any such vacancy shall remain open for applications by

20 preference eligible employees for not less than 14 calendar

21 days from the date on which the initial notice is provided.

22 (b) HIRING PREFERENCE.—

23 (1) IN GENERAL.—A qualified preference eligi24 ble employee who applies during the notice period

25 described in subsection (a)(2) for a vacant position

26 with the displacing employer or an affiliated enter-
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1 prise, which position is in the employee’s occupa2 tional specialty and is located in the same State or

3 Standard Metropolitan Statistical Area in which the

4 employee was employed prior to the displacement,

5 shall be given the right to accept or decline the posi6 tion before the employer may offer the position to a

7 nonpreference eligible employee.

8 (2) MULTIPLE APPLICATIONS.—When consider9 ing applications from more than one qualified pref10 erence eligible employee, the hiring health care en11 tity shall have discretion as to which of such employ12 ees will be offered the position.

13 (3) EMPLOYMENT QUALIFICATIONS.—Nothing

14 in this subsection shall be construed to prohibit the

15 hiring health care entity from establishing reason16 able employment qualifications for a vacancy to

17 which this subpart applies, except that employees

18 who performed essentially the same work prior to

19 their displacement shall be deemed presumptively

20 qualified for comparable positions.

21 (c) TERMINATION OF PREFERENCE ELIGIBILITY.—

22 A displaced employee’s preference eligibility shall termi23 nate—
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1 (1) at such time as the displaced employee ob2 tains substantially equivalent employment with the

3 displacing employer; or

4 (2) if the employee does not obtain such em5 ployment—

6 (A) with respect to health care entities

7 other than the displacing employer, 2 years

8 after the date of the displacement; or

9 (B) with respect to the displacing em10 ployer, upon the termination of this subpart

11 pursuant to section 3081(a).

12 SEC. 3084. EMPLOYMENT WITH SUCCESSORS.

13 A health care entity that succeeds another health care

14 entity through merger, consolidation, acquisition, contract,

15 or other similar manner shall provide employees of the

16 previous health care entity who would otherwise be dis17 placed the right to continued employment in the job posi18 tions held by such employees prior thereto, unless the em19 ployer can establish that such positions no longer exist.

20 SEC. 3085. COLLECTIVE BARGAINING OBLIGATIONS DUR21 ING TRANSITION PERIOD.

22 (a) CONTINUATION OF PREVIOUSLY RECOGNIZED

23 BARGAINING REPRESENTATIVES AND AGREEMENTS.—If

24 a majority of the employees in an appropriate bargaining

25 unit consists of employees who were previously covered by
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1 a bargaining agreement or represented by an exclusive

2 representative with respect to terms and conditions of em3 ployment, and there has not been a substantial change in

4 the operations performed by the employees in that unit,

5 the employer shall recognize such representative as the ex6 clusive representative for the unit and shall assume the

7 bargaining agreement, except that where application of

8 this subsection would result in the recognition of more

9 than one bargaining representative for a single unit, the

10 question concerning which representative shall be recog11 nized as the exclusive representative for the unit shall be

12 resolved in accordance with applicable Federal or State

13 law.

14 (b) JOINT EMPLOYER STATUS.—If employees of a

15 contractor are assigned on a regular basis to perform work

16 on the premises of a contracting entity and the tasks per17 formed by these employees are functionally integrated with

18 the operations of the contracting entity on whose premises

19 such employees work, both the contractor and the con20 tracting entity shall be considered joint employers of the

21 employees with respect to work performed on those prem22 ises for purposes of determining compliance with labor re23 lations laws. Employees of such joint employers may not

24 be excluded from a bargaining unit within either entity

25 on the basis of such joint employer status.
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1 SEC. 3086. GENERAL PROVISIONS.

2 (a) REGULATIONS.—Not later than 120 days after

3 the date of enactment of this Act, the Secretary shall pro4 mulgate regulations to implement the requirements of sec5 tion 3083.

6 (b) OTHER LAWS.—The standards and requirements

7 of this subpart shall not preempt or excuse noncompliance

8 with any other applicable Federal or State law, regulation

9 or municipal ordinance that establishes additional notice

10 and preference standards or requirements concerning em11 ployee dislocation, employee representation, or collective

12 bargaining.

13 (c) RULES OF CONSTRUCTION.—Nothing in this sub14 part shall be construed—

15 (1) to excuse or otherwise limit the obligation

16 of an employer to comply with any collective bar17 gaining agreement or any employment benefit plan

18 that provides rights to employees in addition to

19 those provided under this subpart; or

20 (2) to require an employer to recognize or bar21 gain with a labor organization in violation of State

22 law.

23 (d) ENFORCEMENT.—Unless otherwise specifically

24 provided in this subpart, the enforcement provisions of

25 section 107 of the Family and Medical Leave Act of 1993

26 (29 U.S.C. 2617) shall apply with respect to the enforce-
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1 ment of the individual rights, including notice require2 ments, provided under section 3083. The collective bar3 gaining and contractual rights provided under sections

4 3084 and 3085 shall be enforced through administrative

5 and judicial procedures otherwise provided under Federal

6 or State law with respect to such rights.

7 Subtitle B—Health Research

8 Initiatives

9 PART 1—PROGRAMS FOR CERTAIN AGENCIES

10 SEC. 3101. BIOMEDICAL AND BEHAVIORAL RESEARCH.

11 (a) AVAILABILITY OF FUNDS.—

12 (1) IN GENERAL.—With respect to each cal13 endar year, the Secretary shall pay, from funds in

14 the Treasury not otherwise appropriated, for activi15 ties under this section in an amount equal to 0.25

16 percent in 1997, 0.50 percent in 1998, 0.75 percent

17 in 1999, and 1.0 percent in 2000 and subsequent

18 years, of all private premiums required to be paid

19 under this Act.

20 (2) For purposes of this subsection, the term

21 ‘‘private health premiums’’ means all premium relat22 ed payments made by employers, individuals, and

23 families for coverage under this Act.

24 (b) PURPOSES FOR EXPENDITURES.—Part A of title

25 IV of the Public Health Service Act (42 U.S.C. 281 et
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1 seq.) is amended by adding at the end thereof the follow2 ing new section:

3 ‘‘SEC. 404F. EXPENDITURES FOR HEALTH RESEARCH.

4 ‘‘(a) IN GENERAL.—From amounts made available

5 under section 3101 of the Affordable Health Care for All

6 Americans Act, the Secretary shall distribute—

7 ‘‘(1) 2 percent of such amounts during any fis8 cal year to the Office of the Director of the National

9 Institutes of Health to be allocated at the Director’s

10 discretion for the following activities:

11 ‘‘(A) for carrying out the responsibilities of

12 the Office of the Director, in including the Of13 fice of Research on Women’s Health and the

14 Office of Research on Minority Health, the Of15 fice of Alternative Medicine and the Office of

16 Rare Diseases Research; and

17 ‘‘(B) for construction and acquisition of

18 equipment for or facilities of or used by the Na19 tional Institutes of Health;

20 ‘‘(2) 2 percent of such amounts for transfer to

21 the National Center for Research Resources to carry

22 out section 1502 of the National Institutes of

23 Health Revitalization Act of 1993 concerning Bio24 medical and Behavioral Research Facilities;
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1 ‘‘(3) 1 percent of such amounts during any fis2 cal year for carrying out section 301 and part D of

3 title IV with respect to health information commu4 nications; and

5 ‘‘(4) the remainder of such amounts during any

6 fiscal year to member institutes of the National In7 stitutes of Health and Centers in the same propor8 tion to the total amount received under this section,

9 as the amount of annual appropriations under ap10 propriations Acts for each member institute and

11 Centers for the fiscal year bears to the total amount

12 of appropriations under appropriations Acts for all

13 member institutes and Centers of the National Insti14 tutes of Health for the fiscal year.

15 ‘‘(b) PLANS OF ALLOCATION.—The amounts trans16 ferred under subsection (a) shall be allocated by the Direc17 tor of NIH or the various directors of the institutes and

18 centers, as the case may be, pursuant to allocation plans

19 developed by the various advisory councils to such direc20 tors, after consultation with such directors.’’.

21 SEC. 3102. HEALTH SERVICES RESEARCH.

22 Section 902 of the Public Health Service Act (42

23 U.S.C. 299a), as amended by section 2(b) of Public Law

24 102–410 (106 Stat. 2094), is amended by adding at the

25 end the following subsection:
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1 ‘‘(f) RESEARCH ON HEALTH CARE REFORM.—

2 ‘‘(1) IN GENERAL.—In carrying out section

3 901(b), the Administrator shall conduct and support

4 research on the reform of the health care system of

5 the United States, as directed by the Secretary.

6 ‘‘(2) PRIORITIES.—In carrying out paragraph

7 (1), the Administrator shall give priority to the fol8 lowing:

9 ‘‘(A) Conducting and supporting research

10 on the appropriateness and effectiveness of al11 ternative clinical strategies (including commu12 nity-based programs and preventive services),

13 the quality and outcomes of care, and adminis14 trative simplification.

15 ‘‘(B) Conducting and supporting research

16 on the appropriateness and effectiveness of al17 ternative community-based and clinical strate18 gies including integrating preventive services

19 into primary care, the effectiveness of preven20 tive counseling and health education, and the

21 efficacy and cost-effectiveness of clinical preven22 tive services.

23 ‘‘(C) Conducting and supporting research

24 on consumer choice and information resources;

25 the effects of health care reform on health de-
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1 livery systems; workplace injury and illness pre2 vention; intentional and unintentional injury

3 prevention; methods for risk adjustment; fac4 tors influencing access to health care for vulner5 able populations, including children, persons

6 with low-income, persons with disabilities, or in7 dividuals with chronic or complex health condi8 tions, and primary care.

9 ‘‘(D) The development of clinical practice

10 guidelines consistent with section 913, the dis11 semination of such guidelines consistent with

12 section 903, and the assessment of the effec13 tiveness of such guidelines.’’.

14 PART 2—FUNDING FOR PROGRAM

15 SEC. 3111. AUTHORIZATIONS OF APPROPRIATIONS.

16 (a) HEALTH SERVICES RESEARCH.—For the purpose

17 of carrying out activities pursuant to the amendments

18 made by section 3102, there are authorized to be appro19 priated $150,000,000 for fiscal year 1996, $400,000,000

20 for fiscal year 1997, $500,000,000 for fiscal year 1998,

21 and $600,000,000 for each of the fiscal years 1999

22 through 2001.

23 (b) RELATION TO OTHER FUNDS.—The authoriza24 tion of appropriations established in subsection (a) are in

25 addition to any other authorizations of appropriations that
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1 are available for the purposes described in such sub2 section.

3 (c) TRIGGER AND RELEASE OF MONIES.—No ex4 penditure shall be made pursuant to section 3101(c) dur5 ing any fiscal year in which the annual amount appro6 priated for the National Institutes of Health is less than

7 the amount so appropriated for the prior fiscal year. With

8 respect to amounts available for expenditure pursuant to

9 section 3101(c) which, as a result of the application of

10 this subsection remain unexpended, such amounts shall be

11 obligated by the Secretary of Health and Human Services

12 under the public health initiative under subtitle F.

13 Subtitle C—Health Services for

14 Medically Underserved Popu15 lations

16 PART 1—INITIATIVES FOR ACCESS TO HEALTH

17 CARE

18 Subpart A—Authorization of Appropriations

19 SEC. 3311. AUTHORIZATIONS OF APPROPRIATIONS.

20 (a) IMPROVING ACCESS TO HEALTH SERVICES.—

21 (1) SUBPART B.—

22 (A) Except as provided in subparagraph

23 (B), for the purpose of carrying out subpart B,

24 there are authorized to be appropriated

25 $52,500,000 for fiscal year 1996, $122,500,000
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1 for fiscal year 1997, $192,500,000 for fiscal

2 year 1998, $157,500,000 for fiscal year 1999,

3 $122,500,000 for fiscal year 2000, and

4 $52,500,000 for fiscal year 2001.

5 (B) With respect to awards to federally

6 qualified health centers (as defined in section

7 1861(aa)(4) of the Social Security Act) under

8 subpart B, there are authorized to be appro9 priated $97,500,000 for fiscal year 1996,

10 $227,500,000 for fiscal year 1997,

11 $357,500,000 for fiscal year 1998,

12 $292,500,000 for fiscal year 1999,

13 $227,500,000 for fiscal year 2000, and

14 $97,500,000 for fiscal year 2001.

15 (2) SUBPART C.—

16 (A) For the purpose of providing loans

17 under subpart C, there are authorized to be ap18 propriated such sums as may be necessary to

19 support a loan level of $200,000,000 for each

20 of the fiscal years 1996 through 2001.

21 (B) For the purpose of making grants

22 under subpart C, there are authorized to be ap23 propriated $35,000,000 for each of the fiscal

24 year 1996 through 2001.
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1 (b) RELATION TO OTHER FUNDS.—The authoriza2 tions of appropriations established in subsection (a) are

3 in addition to any other authorizations of appropriations

4 that are available for the purpose described in such sub5 section.

6 (c) ELIGIBLE ENTITIES.—For purposes of this part,

7 the term ‘‘eligible entities’’ means—

8 (1) covered entities as defined in section

9 340B(a)(4) of the Public Health Service Act (42

10 U.S.C. 256b(a)(4)), except that subsection

11 (a)(4)(L)(iii) and (a)(7) of such section shall not

12 apply;

13 (2) nonprofit hospitals meeting the criteria for

14 public hospitals which are eligible entities under sec15 tion 340B of the Public Health Service Act, except

16 that subsection (a)(4)(L)(iii) of such section shall

17 not apply, and children’s hospitals meeting com18 parable criteria as determined appropriate by the

19 Secretary;

20 (3) public and private, nonprofit community

21 mental health centers and substance abuse treat22 ment providers receiving funds from the Substance

23 Abuse and Mental Health Services Administration;

24 (4) runaway homeless youth centers or transi25 tional living programs for homeless youth for the
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1 provision of health services under the Runaway

2 Homeless Youth Act of 1974 (42 U.S.C. 5701 et

3 seq.);

4 (5) rural referral centers under section

5 1886(d)(5)(C) of the Social Security Act, except

6 that such eligibility is restricted to the receipt of

7 grants under section 3341; and

8 (6) public or nonprofit entities in

9 nonmetropolitan areas (as defined by the Depart10 ment of Commerce) in a consortium of community11 based providers that includes at least three of the

12 following:

13 (A) community or migrant health centers;

14 (B) local health departments;

15 (C) community mental health centers;

16 (D) nonprofit hospitals;

17 (E) private practice health professionals,

18 including rural health clinics; or

19 (F) other publicly funded health or social

20 services agencies.

21 (d) PRIORITY.—In making awards from amounts ap22 propriated under subsection (a)(1)(B) and section 3362,

23 the Secretary shall give the highest priority to providing

24 adequate assistance to federally qualified health centers

25 in order to ensure the provision of comprehensive primary
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1 health care services, other covered services and benefits,

2 and enabling services to medically underserved populations

3 that were served by such centers prior to the date of enact4 ment of this Act, except that such federally qualified

5 health centers must continue to meet the requirements for

6 designation under section 1861(aa)(4) of the Social Secu7 rity Act.

8 (e) EQUITABLE DISTRIBUTION.—The Secretary

9 shall, in awarding grants, entering into contracts, and

10 making loans under this part, assure an equitable distribu11 tion of funds between rural and urban areas.

12 Subpart B—Development of Community Health

13 Groups and Health Care Sites and Services

14 SEC. 3321. GRANTS AND CONTRACTS FOR DEVELOPMENT

15 OF PLANS AND NETWORKS AND THE EXPAN16 SION AND DEVELOPMENT OF HEALTH CARE

17 SITES AND SERVICES.

18 (a) IN GENERAL.—The Secretary may make grants

19 to and enter into contracts with eligible entities described

20 in section 3311(c) for—

21 (1) the development of community health

22 groups whose principal purpose is to provide the

23 benefits required under subtitle B of title I in one

24 or more health professional shortage areas or to pro25 vide such items and services to a significant number
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1 of individuals who are members of a medically un2 derserved population; and

3 (2) the expansion of existing health delivery

4 sites and services and the development of new health

5 delivery sites and services.

6 (b) SERVICE AREA.—In making an award under sub7 section (a), the Secretary shall designate the geographic

8 area with respect to which the community health group

9 involved is to provide health services.

10 (c) PRIORITY.—In making awards under subsection

11 (a)(1), the Secretary shall give priority to proposals in

12 which a greater number of eligible entities and other

13 health care providers are participants in the community

14 health group, except in areas such as rural areas, where

15 providers are severely limited in number.

16 (d) LIMITATION ON AWARDS.—The Secretary may

17 not make awards under subsection (a)(1) for more than

18 5 years to the same community health group.

19 (e) DEFINITIONS.—For purposes of this subpart:

20 (1) The term ‘‘community health group’’

21 means—

22 (A) a community health network that—

23 (i) is a public or nonprofit private

24 consortium of health care providers that

25 principally provides some of the items and
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1 services of the basic benefit package to

2 medically underserved populations, and

3 residents of health professional shortage

4 areas; and

5 (ii) has a written agreement governing

6 the participation of health care providers

7 in the consortium to which each participat8 ing provider is a party; or

9 (B) a community health plan that—

10 (i) is a public or nonprofit private en11 tity that principally provides all of the

12 items and services of the basic benefit

13 package to medically underserved popu14 lations, and residents of health professional

15 shortage areas;

16 (ii) is a participant in one or more

17 health alliances; and

18 (iii) has a written agreement govern19 ing the participation of health care provid20 ers in the consortium to which each par21 ticipating provider is a party.

22 (2) The term ‘‘health professional shortage

23 areas’’ means health professional shortage areas des24 ignated under section 332 of the Public Health Serv25 ice Act.
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1 (3) The term ‘‘medically underserved popu2 lation’’ means a medically underserved population

3 designated under section 330(b)(3) of the Public

4 Health Service Act, populations residing in health

5 professional shortage areas under section 332 of the

6 Public Health Service Act, and populations eligible

7 for premium subsidies and cost sharing reductions

8 based on income under title I.

9 SEC. 3322. CERTAIN USES OF AWARDS.

10 (a) IN GENERAL.—Amounts awarded under section

11 3321 may be expended for—

12 (1) the development of a community health

13 group, including entering into contracts between the

14 recipient of the award and health care providers who

15 are to participate in the group;

16 (2) the expansion, development and on-going

17 operation of health delivery sites and services; and

18 (3) activities under paragraphs (1) and (2)

19 which include—

20 (A) the recruitment, compensation, and

21 training of health professionals and administra22 tive staff;

23 (B) the purchase and upgrading of equip24 ment, supplies, and information systems includ25 ing telemedicine systems; and
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1 (C) the establishment of reserves required

2 for furnishing services on a prepaid or capitated

3 basis, except that eligible entities may use non4 cash mechanisms (including bonds, letters of

5 credit and federally guaranteed reinsurance

6 pools) for establishing and maintaining finan7 cial reserves.

8 (b) LOANS AND GRANTS.—The Secretary may ex9 pend, in any fiscal year, not to exceed 10 percent of the

10 amounts appropriated to carry out this subpart to make

11 loans and grants to eligible entities to support the types

12 of activities described in section 3341, subject to the re13 quirements of subpart C, except that, with respect to

14 amounts available for non-federally qualified health center

15 activities, such funds may be used to convert facilities

16 from providers of acute care service to providers of pri17 mary, emergency or long-term care.

18 SEC. 3323. PURPOSES AND CONDITIONS.

19 Grants shall be made under this subpart for the pur20 poses and subject to all of the conditions under which eli21 gible entities otherwise receive funding to provide health

22 services to medically underserved populations under the

23 Public Health Service Act. The Secretary shall prescribe

24 comparable purposes and conditions for eligible entities

25 not receiving funding under the Public Health Service Act.
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1 Subpart C—Capital Cost of Development of

2 Community Health Groups and Other Purposes

3 SEC. 3341. DIRECT LOANS AND GRANTS.

4 (a) IN GENERAL.—The Secretary shall make grants

5 and loans to—

6 (1) eligible entities (as defined in section

7 3312(c));

8 (2) hospitals designated by the Secretary as es9 sential access community hospitals under section

10 1820(i)(1) of the Social Security Act; or

11 (3) rural primary care hospitals under section

12 1820(i)(2) of such Act;

13 for the capital costs of developing community health

14 groups (as defined in section 3321(e)) and expanding ex15 isting health delivery sites or developing new health deliv16 ery sites.

17 (b) USE OF ASSISTANCE.—

18 (1) IN GENERAL.—The capital costs for which

19 grants and loans made pursuant to subsection (a)

20 may be expended are, subject to paragraphs (2) and

21 (3), the following:

22 (A) The acquisition, modernization, expan23 sion or construction of facilities, or the conver24 sion of unneeded hospital facilities to facilities

25 that will assure or enhance the provision and
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1 accessibility of health care and enabling services

2 to medically underserved populations.

3 (B) The purchase of major equipment, in4 cluding equipment necessary for the support of

5 external and internal information systems.

6 (C) The establishment of reserves required

7 for furnishing services on a prepaid or capitated

8 basis.

9 (D) Such other capital costs as the Sec10 retary may determine are necessary to achieve

11 the objectives of this section.

12 (2) PRIORITIES REGARDING USE OF FUNDS.—

13 In providing grants and loans under subsection (a)

14 for an entity, the Secretary shall give priority to au15 thorizing the use of amounts for projects for the

16 renovation and modernization of medical facilities

17 necessary to prevent or eliminate safety hazards in18 cluding asbestos removal, avoid noncompliance with

19 licensure or accreditation standards, or projects to

20 replace obsolete facilities.

21 (3) LIMITATION.—The Secretary may authorize

22 the use of grants and loans under subsection (a) for

23 the construction of new buildings only if the Sec24 retary determines that appropriate facilities are not

25 available through acquiring, modernizing, expanding
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1 or converting existing buildings, or that construction

2 new buildings will cost less.

3 (c) AMOUNT OF ASSISTANCE.—

4 (1) IN GENERAL.—The principal amount of

5 loans under subsection (a) may cover up to 90 per6 cent of the costs involved.

7 (2) GRANTS.—Grants under this subsection

8 may not exceed 75 percent of the costs involved.

9 (d) INTEREST SUBSIDIES.—Amounts provided under

10 this section may be used to provide interest subsidies for

11 loans provided under this section where such subsidies are

12 necessary to make a project financial feasible.

13 SEC. 3342. CERTAIN REQUIREMENTS.

14 (a) IN GENERAL.—The Secretary may approve a loan

15 under section 3341 only if—

16 (1) the Secretary is reasonably satisfied that

17 the applicant for the project for which the loan

18 would be made will be able to make payments of

19 principal and interest thereon when due; and

20 (2) the applicant provides the Secretary with

21 reasonable assurances that there will be available to

22 it such additional funds as may be necessary to com23 plete the project or undertaking with respect to

24 which such loan is requested.
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1 (b) TERMS AND CONDITIONS.—Any loan made under

2 section 3341 shall, subject to the Federal Credit Reform

3 Act of 1990, meet such terms and conditions (including

4 provisions for recovery in case of default) as the Secretary,

5 in consultation with the Secretary of the Treasury, deter6 mines to be necessary to carry out the purposes of such

7 section while adequately protecting the financial interests

8 of the United States. Terms and conditions for such loans

9 shall include provisions regarding the following:

10 (1) Security.

11 (2) Maturity date.

12 (3) Amount and frequency of installments.

13 (4) Rate of interest, which shall be at a rate

14 comparable to the rate of interest prevailing on the

15 date the loan is made.

16 SEC. 3343. DEFAULTS; RIGHT OF RECOVERY.

17 (a) DEFAULTS.—The Secretary may take such action

18 as may be necessary to prevent a default on loans under

19 section 3341, including the waiver of regulatory condi20 tions, deferral of loan payments, renegotiation of loans,

21 and the expenditure of funds for technical and consultative

22 assistance, for the temporary payment of the interest and

23 principal on such a loan, and for other purposes.

24 (b) FORECLOSURE.—The Secretary may take such

25 action, consistent with State law respecting foreclosure
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1 procedures, as the Secretary deems appropriate to protect

2 the interest of the United States in the event of a default

3 on a loan made pursuant to section 3341, including selling

4 real property pledged as security for such a loan and for

5 a reasonable period of time taking possession of, holding,

6 and using real property pledged as security for such a

7 loan.

8 SEC. 3344. APPLICATION FOR ASSISTANCE.

9 The Secretary may provide loans under section 3341

10 only if an application for such assistance is submitted to

11 the Secretary, the application meets such requirements,

12 and the application is in such form, is made in such man13 ner, and contains such agreements, assurances, and infor14 mation as the Secretary determines to be necessary to

15 carry out this subpart.

16 Subpart D—Enabling and Supplemental Services

17 SEC. 3361. GRANTS AND CONTRACTS FOR ENABLING AND

18 SUPPLEMENTAL SERVICES.

19 (a) IN GENERAL.—The Secretary may make grants

20 to and enter into contracts with eligible entities to assist

21 such entities in providing the services described in sub22 sections (b) and (c) for the purpose of increasing the ca23 pacity of individuals to utilize the items and services in24 cluded in the benefits package required under title I, and

25 to provide access to essential supplemental services that
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1 are not fully reimbursable under title I prior to January

2 2002.

3 (b) ENABLING SERVICES.—Enabling services shall

4 include transportation, community and patient outreach,

5 patient and family education, translation services, case

6 management, home visiting, and such other services as the

7 Secretary determines to be appropriate in carrying out the

8 purpose described in such subsection.

9 (c) SUPPLEMENTAL SERVICES.—Supplemental serv10 ices shall include items or services described in section

11 1101 of this Act that would otherwise be excluded from

12 coverage.

13 (d) CERTAIN REQUIREMENTS REGARDING PROJECT

14 AREA.—The Secretary may make an award of a grant or

15 contract under subsection (a) only if the applicant in16 volved—

17 (1) submits to the Secretary—

18 (A) information demonstrating that the

19 medically underserved populations in the com20 munity to be served under the award have a

21 need for enabling services; and

22 (B) a proposed budget for providing such

23 services;

24 (2) the applicant for the award agrees that the

25 medically underserved residents of the community
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1 will be consulted with respect to the design and im2 plementation of the project carried out with the

3 award;

4 (3) agrees that the services will not be denied

5 because the individual is unable to pay for such serv6 ices; and

7 (4) agrees that the applicant will utilize existing

8 resources to the maximum extent practicable.

9 (e) APPLICATION FOR AWARDS OF ASSISTANCE.—

10 The Secretary may make an award of a grant or contract

11 under subsection (a) only if an application for the award

12 is submitted to the Secretary, the application contains

13 each agreement described in this subpart, and the applica14 tion is in such form, is made in such manner, and contains

15 such agreements, assurances, and information as the Sec16 retary determines to be necessary to carry out this sub17 part.

18 SEC. 3362. AUTHORIZATIONS OF APPROPRIATIONS.

19 (a) ENABLING SERVICES.—For the purpose of carry20 ing out section 3361(b), there are authorized to be appro21 priated $35,000,000 for fiscal year 1997, $140,000,000

22 for each of the fiscal years 1998 through 2000, and

23 $175,000,000 for fiscal year 2001.

24 (b) SUPPLEMENTAL SERVICES.—For the purpose of

25 carrying out section 3361(c), there are authorized to be
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1 appropriated $100,000,000 for fiscal year 1996,

2 $150,000,000 for fiscal year 1997, and $250,000,000 for

3 each of the fiscal years 1998 through 2001.

4 (c) FEDERALLY QUALIFIED HEALTH CENTERS.—

5 With respect to federally qualified health centers (as de6 fined in section 1861(aa)(4) of the Social Security Act),

7 for the purpose of carrying out section 3361(b), there are

8 authorized to be appropriated $65,000,000 for fiscal year

9 1997, $260,000,000 for each of the fiscal years 1998

10 through 2000, and $325,000,000 for fiscal year 2001.

11 (d) RELATION TO OTHER FUNDS.—The authoriza12 tions of appropriations established in subsection (a) are

13 in addition to any other authorizations of appropriations

14 that are available for the purpose described in such sub15 section.

16 PART 2—NATIONAL HEALTH SERVICE CORPS

17 SEC. 3371. AUTHORIZATIONS OF APPROPRIATIONS.

18 (a) ADDITIONAL FUNDING; GENERAL CORPS PRO19 GRAM; ALLOCATIONS REGARDING NURSES.—For the pur20 pose of carrying out subpart II of part D of title III of

21 the Public Health Service Act, and for the purpose of car22 rying out section 3372, there are authorized to be appro23 priated $150,000,000 for fiscal year 1997, $150,000,000

24 for fiscal year 1998, and $250,000,000 for each of the

25 fiscal years 1999 through 2001.
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1 (b) RELATION TO OTHER FUNDS.—The authoriza2 tions of appropriations established in subsection (a) are

3 in addition to any other authorizations of appropriations

4 that are available for the purpose described in such sub5 section.

6 SEC. 3372. ALLOCATION FOR PARTICIPATION OF NURSES

7 IN SCHOLARSHIP AND LOAN REPAYMENT

8 PROGRAMS.

9 Of the amounts appropriated under section 3371, the

10 Secretary shall reserve such amounts as may be necessary

11 to ensure that, of the aggregate number of individuals who

12 are participants in the Scholarship Program under section

13 338A of the Public Health Service Act, or in the Loan

14 Repayment Program under section 338B of such Act, the

15 total number who are being educated as nurse practition16 ers, nurse midwives, or nurse anesthetists or are serving

17 as nurse practitioners, nurse midwives, or nurse anes18 thetists, respectively, is increased to 20 percent.

19 SEC. 3373. ALLOCATION FOR PARTICIPATION OF PSYCHIA20 TRISTS, PSYCHOLOGISTS, AND CLINICAL SO21 CIAL WORKERS IN SCHOLARSHIP AND LOAN

22 REPAYMENT PROGRAMS.

23 Of the amounts appropriate under section 3371, the

24 Secretary shall reserve such amounts as may be necessary

25 to ensure that of the aggregate number of individuals who
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1 are participants in the scholarship program under section

2 338A of the Public Health Service Act, the number who

3 are being educated as psychiatrists, psychologists, and

4 clinical social workers or are serving as psychiatrists, psy5 chologists, and clinical social workers, respectively, is in6 creased to 15 percent.

7 PART 3—PAYMENTS TO HOSPITALS SERVING

8 VULNERABLE POPULATIONS

9 SEC. 3381. PAYMENTS TO HOSPITALS.

10 (a) ENTITLEMENT STATUS.—The Secretary shall

11 make payments in accordance with this part to eligible

12 hospitals described in section 3382. The preceding sen13 tence—

14 (1) is an entitlement in the Secretary on behalf

15 of such eligible hospitals (but is not an entitlement

16 in the State in which any such hospital is located or

17 in any individual receiving services from any such

18 hospital); and

19 (2) constitutes budget authority in advance of

20 appropriations Acts and represents the obligation of

21 the Federal Government to provide funding for such

22 payments in the amounts, and for the fiscal years,

23 specified in subsection (b).

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

2 (a)(2), the amounts and fiscal years specified in this

3 subsection are (in the aggregate for all eligible hos4 pitals) $1,300,000,000 for the fiscal year in which

5 the general effective date occurs and for each subse6 quent fiscal year.

7 (2) SPECIAL RULE FOR YEARS BEFORE GEN8 ERAL EFFECTIVE DATE.—

9 (A) IN GENERAL.—For each of the fiscal

10 years 1997 and 1998, the amount specified in

11 this subsection for purposes of subsection (a)(2)

12 shall be equal to the aggregate DSH percentage

13 of the amount otherwise determined under

14 paragraph (1).

15 (B) AGGREGATE DSH PERCENTAGE DE16 FINED.—In subparagraph (A), the ‘‘aggregate

17 DSH percentage’’ for a year is the amount (ex18 pressed as a percentage) equal to—

19 (i) the total amount of payment made

20 by the Secretary under section 1903(a) of

21 the Social Security Act during the base

22 year with respect to payment adjustments

23 made under section 1923(c) of such Act

24 for hospitals in the States in which eligible
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1 hospitals for the year are located; divided

2 by

3 (ii) the total amount of payment made

4 by the Secretary under section 1903(a) of

5 such Act during the base year with respect

6 to payment adjustments made under sec7 tion 1923(c) of such Act for hospitals in

8 all States.

9 (c) PAYMENTS MADE ON QUARTERLY BASIS.—Pay10 ments to an eligible hospital under this section for a year

11 shall be made on a quarterly basis during the year.

12 SEC. 3382. IDENTIFICATION OF ELIGIBLE HOSPITALS.

13 (a) STATE IDENTIFICATION.—In accordance with the

14 criteria described in subsection (b) and such procedures

15 as the Secretary may require, each State shall identify the

16 hospitals in the State that meet such criteria and provide

17 the Secretary with a list of such hospitals.

18 (b) CRITERIA FOR ELIGIBILITY.—A hospital meets

19 the criteria described in this subsection if the hospital’s

20 low-income utilization rate for the base year under section

21 1923(b)(3) of the Social Security Act (as such section is

22 in effect on the day before the date of the enactment of

23 this Act) is not less than 25 percent.
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1 SEC. 3383. AMOUNT OF PAYMENTS.

2 (a) DISTRIBUTION OF ALLOCATION FOR LOW-IN3 COME ASSISTANCE.—

4 (1) ALLOCATION FROM TOTAL AMOUNT.—Of

5 the total amount available for payments under this

6 section in a year, 66.66 percent shall be allocated to

7 hospitals for low-income assistance in accordance

8 with this subsection.

9 (2) DETERMINATION OF HOSPITAL PAYMENT

10 AMOUNT.—The amount of payment to an eligible

11 hospital from the allocation made under paragraph

12 (1) during a year shall be the equal to the hospital’s

13 low-income percentage of the allocation for the year.

14 (b) DISTRIBUTION OF ALLOCATION FOR ASSISTANCE

15 FOR UNCOVERED SERVICES.—

16 (1) ALLOCATION FROM TOTAL AMOUNT; DETER17 MINATION OF STATE-SPECIFIC PORTION OF ALLOCA18 TION.—Of the total amount available for payments

19 under this section in a year, 33.33 percent shall be

20 allocated to hospitals for assistance in furnishing

21 hospital services that are not covered services under

22 title I (in accordance with regulations of the Sec23 retary) or in furnishing hospital services to individ24 uals, including those residing in Southwestern bor25 der States, who are not eligible individuals under

26 title I, in accordance with this subsection. The
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1 amount available for payments to eligible hospitals

2 in a State shall be equal to an amount determined

3 in accordance with a methodology specified by the

4 Secretary that shall take into consideration the vol5 ume of such services provided by hospitals in the

6 State as compared to the volume of such services

7 provided by all eligible hospitals.

8 (2) DETERMINATION OF HOSPITAL PAYMENT

9 AMOUNT.—The amount of payment to an eligible

10 hospital in a State from the amount available for

11 payments to eligible hospitals in the State under

12 paragraph (1) during a year shall be the equal to

13 the hospital’s low-income percentage of such amount

14 for the year.

15 (c) LOW-INCOME PERCENTAGE DEFINED.—

16 (1) IN GENERAL.—In this subsection, an eligi17 ble hospital’s ‘‘low-income percentage’’ for a year is

18 equal to the amount (expressed as a percentage) of

19 the total low-income days for all eligible hospitals for

20 the year that are attributable to the hospital.

21 (2) LOW-INCOME DAYS DESCRIBED.—For pur22 poses of paragraph (1), an eligible hospital’s low-in23 come days for a year shall be equal to the product

24 of—
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1 (A) the total number of inpatient days for

2 the hospital for the year (as reported to the

3 Secretary by the State in which the hospital is

4 located, in accordance with a reporting schedule

5 and procedures established by the Secretary);

6 and

7 (B) the hospital’s low-income utilization

8 rate for the base year under section 1923(b)(3)

9 of the Social Security Act (as such section is in

10 effect on the day before the date of the enact11 ment of this Act).

12 SEC. 3384. BASE YEAR.

13 In this part, the ‘‘base year’’ is, with respect to a

14 State and hospitals in a State, the year immediately prior

15 to the year in which the general effective date occurs.

16 PART 4—SENSE OF THE COMMITTEE

17 SEC. 3391. SENSE OF THE COMMITTEE.

18 It is the sense of the Committee on Labor and

19 Human Resources of the Senate that when the Affordable

20 Health Care for All Americans Act is enacted, it and sub21 sequent appropriations Acts should appropriately recog22 nize the success of community and migrant health centers

23 as a proven, cost-effective model for the delivery of health

24 care services to those populations which are medically un-
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1 derserved because of economic, geographic, and cultural

2 barriers.

3 Subtitle D—Assistance For State

4 Managed Mental Health And

5 Substance Abuse Programs

6 SEC. 3431. AVAILABILITY OF ASSISTANCE.

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

8 to States for the development and operation of comprehen9 sive managed mental health and substance abuse pro10 grams that are integrated with the health delivery system

11 established under this Act. Such programs shall—

12 (1) promote the development of integrated de13 livery systems for the management of the mental

14 health and substance abuse services provided under

15 the comprehensive benefits package;

16 (2) give priority to providing services to low-in17 come adults with serious mental illness or substance

18 abuse disorders and children with serious emotional

19 disturbance or substance abuse disorders and pro20 vide for the phase-in of such services for all eligible

21 persons within 5 years;

22 (3) ensure that individuals participating in the

23 program have access to all medically necessary men24 tal health and substance abuse services;
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1 (4) promote the linkage of mental health and

2 substance abuse services with primary and preven3 tive health care services; and

4 (5) meet such other requirements as the Sec5 retary may impose.

6 (b) EXCEPTION.—Nothing in this subtitle shall be

7 construed as preventing States that have separate admin8 istrative entities for mental health and for substance abuse

9 services from establishing separate comprehensive man10 aged care programs for such services and receiving assist11 ance under this subtitle for either or both programs.

12 SEC. 3432. PLAN REQUIREMENTS.

13 In order to receive a grant under this subtitle, a State

14 must have a plan for a comprehensive managed mental

15 health and substance abuse program which is approved

16 by the Secretary. Such plan shall—

17 (1) describe the management, access, and refer18 ral structure that the State will use to promote and

19 achieve integration of mental health and substance

20 abuse services with the health delivery system estab21 lished under this Act for eligible individuals in the

22 State;

23 (2) describe how the State will ensure that pro24 viders of specialized services will meet appropriate

25 standards;
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1 (3) describe payment, utilization review, and

2 other mechanisms that the State will use to encour3 age appropriate service delivery and management of

4 costs;

5 (4) describe uniform patient placement criteria

6 that the State will use to ensure placement in appro7 priate substance abuse treatment programs;

8 (5) describe the processes the State will use to

9 ensure that individuals will continue to have access

10 to treatment through referrals from nonhealth public

11 entities, such as the juvenile or criminal justice sys12 tems, or social service systems;

13 (6) specify the methods the State will use to en14 sure that individuals receiving services under the

15 program have access to all medically necessary and

16 appropriate mental health and substance abuse serv17 ices;

18 (7) define terms that will be used by the State

19 in determining the eligibility of individuals for serv20 ices under the program;

21 (8) describe how health plans will use services

22 under the comprehensive managed mental health

23 and substance abuse programs established under

24 this subtitle;
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1 (9) describe the role of local government in fi2 nancing and managing the integrated mental illness

3 and substance abuse treatment system;

4 (10) describe the sources of funding, including

5 Medicaid and the block grants authorized by title

6 XIX of the Public Health Service Act, that will be

7 used by the State, other than the grant received

8 under this subtitle, to operate the program, and pro9 vide the status of any request for a Medicaid waiver

10 made by the State to the Secretary;

11 (11) describe how the State provided for broad12 based public input in the development of the plan,

13 and the mechanism that will be used for ongoing

14 public comment on and review of amendments to the

15 plan; and

16 (12) describe grievance procedures that will be

17 available for individuals dissatisfied with their health

18 plan’s participation in the comprehensive managed

19 mental health and substance abuse program, and

20 mechanisms that will be available to review the per21 formance of health plans and fee-for-service arrange22 ments to ensure against under treatment.

23 SEC. 3433. ADDITIONAL FEDERAL RESPONSIBILITIES.

24 The Secretary shall, upon the submission of a State’s

25 plan under section 3432, ensure the timely consideration
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1 of any Medicaid waiver requests submitted by the State,

2 affirm that [section 1504] has been implemented, and

3 ensure the timely implementation of [section

4 1641(b)(5)].

5 SEC. 3434. AUTHORIZATION OF APPROPRIATIONS.

6 There are authorized to be appropriated for grants

7 under this subtitle, $100,000,000 for each of the fiscal

8 years 1996 through 2001.

9 Subtitle E—Comprehensive School

10 Health Education; School-Relat11 ed Health Services

12 PART 1—HEALTHY STUDENTS-HEALTHY

13 SCHOOLS GRANTS FOR SCHOOL HEALTH

14 EDUCATION

15 SEC. 3501. PURPOSES.

16 It is the purpose of this part—

17 (1) to support the development and implemen18 tation of comprehensive age appropriate health edu19 cation programs in public schools for children and

20 youth kindergarten through grade 12; and

21 (2) to increase access to preventive and primary

22 health care services for children and youth through

23 school-based or school-linked health service sites in

24 accordance with locally determined needs.
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1 SEC. 3502. HEALTHY STUDENTS-HEALTHY SCHOOLS

2 GRANTS.

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

4 with the Secretary of Education, shall award grants to

5 State educational agencies in eligible States to integrate

6 comprehensive school health education in schools within

7 the State, with priority given within States to those com8 munities in greatest need as defined by section 3583(a).

9 (b) ELIGIBLE USES OF FUNDS.—Funds made avail10 able under this section shall be used—

11 (1) to implement comprehensive school health

12 education programs, as defined in subsection (f)(1)

13 through grants to local educational agencies;

14 (2) to provide staff development and technical

15 assistance to local educational agencies, schools,

16 local health agencies, and other community organiza17 tions involved in providing comprehensive school

18 health education programs;

19 (3) to evaluate and report to the Secretary on

20 the progress made towards attaining the goals and

21 objectives described under subsection (c)(1)(A); and

22 (4) to conduct such other activities to achieve

23 the objectives of this subpart as the Secretary may

24 require.

25 (c) APPLICATION.—An application for a grant under

26 subsection (a), shall be jointly developed by the State edu-
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1 cational agency and the State health agencies of the State

2 involved, and shall contain—

3 (1) a State plan for comprehensive school

4 health education programs, that outlines—

5 (A) the goals and objectives of the State

6 for school health education programs, and the

7 manner in which the State will allocate funds to

8 local educational agencies in order to achieve

9 these goals and objectives;

10 (B) the manner in which the State will co11 ordinate programs under this part with other

12 Federal, State and local health education pro13 grams and resources, and school health serv14 ices;

15 (C) the manner in which comprehensive

16 school health education programs will be coordi17 nated with other Federal, State and local edu18 cation programs (such as programs under titles

19 I, II, and IV of the Elementary and Secondary

20 Education Act of 1965), with the school im21 provement plan of the State, if any, under title

22 III of the Goals 2000: Educate America Act,

23 and with any similar programs;

24 (D) the manner in which the State shall

25 work with State and local educational agencies
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1 and with State and local health agencies to re2 duce barriers to implementing school health

3 education programs;

4 (E) the manner in which the State will

5 monitor the implementation of such programs

6 by local educational agencies and establish out7 come criteria by which to evaluate their effec8 tiveness in achieving progress towards the goals

9 and objectives described in subparagraph (A);

10 (F) the manner in which the State will

11 provide staff development and technical assist12 ance to local educational agencies, and build ca13 pacity for professional development of health

14 educators; and

15 (G) the manner in which such school

16 health education programs will be, to the extent

17 practicable, culturally competent and linguis18 tically appropriate and responsive to the diverse

19 needs of the students served;

20 (2) a description of the respective roles of the

21 State educational agency, local educational agencies,

22 the State health agency and local health agencies in

23 developing and implementing the State’s school

24 health education plan and resulting programs;
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1 (3) a description of the input of the local com2 munity (including students and parents) in the de3 velopment and operation of comprehensive school

4 health education programs;

5 (4) an assurance that communities identified in

6 section 3583 receive priority as locations for com7 prehensive school health education programs for all

8 grades to the extent that a State does not implement

9 a statewide program; and

10 (5) an assurance that grants to local edu11 cational agencies under subsection (b)(1) are contin12 gent upon submission by such agencies of a plan

13 consistent with the requirements for the State plan

14 as required under this subsection.

15 (d) WAIVERS OF STATUTORY AND REGULATORY RE16 QUIREMENTS.—

17 (1) WAIVERS.—Except as provided in para18 graph (4), upon the request of an entity and under

19 a relevant program described in paragraph (2), the

20 Secretary of Health and Human Services and the

21 Secretary of Education may grant to the entity a

22 waiver of any requirement of such program regard23 ing the use of funds, or of the regulations issued for

24 the program by the Secretary involved, if the follow25 ing conditions are met with respect to such program:
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1 (A) The Secretary involved determines that

2 the requirements of such program impede the

3 ability of the State educational agency to

4 achieve more effectively the purposes described

5 in section 3501.

6 (B) The Secretary involved determines

7 that, with respect to the use of funds under

8 such program, the requested use of the funds

9 by the entity would be consistent with the pur10 poses described in section 3501.

11 (C) The State educational agency provides

12 all interested local educational agencies in the

13 State with notice and an opportunity to com14 ment on the proposal and makes these com15 ments available to the Secretary.

16 (2) RELEVANT PROGRAMS.—For purposes of

17 paragraph (1), the programs described in this sub18 paragraph are the following:

19 (A) In the case of programs administered

20 by the Secretary of Health and Human Serv21 ices, the following:

22 (i) The program known as the Preven23 tion, Treatment, and Rehabilitation Model

24 Projects for High Risk Youth, carried out
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1 under section 517 of the Public Health

2 Service Act.

3 (ii) The program known as the State

4 and Local Comprehensive School Health

5 Programs to Prevent Important Health

6 Problems and Improve Educational Out7 comes, carried out under such Act.

8 (B) In the case of programs administered

9 by the Secretary of Education, any program

10 carried out under part B of the Drug-Free

11 Schools and Communities Act of 1986, except

12 that a component of such comprehensive school

13 health education must be consistent with the

14 statutory intent and purposes of such Act.

15 (3) WAIVER PERIOD.—A waiver under this

16 paragraph shall be for a period not to exceed 3

17 years, unless the Secretary involved determines

18 that—

19 (A) the waiver has been effective in ena20 bling the State to carry out the activities for

21 which it was requested and has contributed to

22 improved performance of comprehensive health

23 education programs; and

24 (B) such extension is in the public interest;
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1 (4) WAIVERS NOT AUTHORIZED.—The Sec2 retary involved under paragraph (1), may not waive,

3 under this section, any statutory or regulatory re4 quirements relating to—

5 (A) comparability of services;

6 (B) maintenance of effort;

7 (C) parental participation and involvement;

8 (D) the distribution of funds to States or

9 to local educational agencies or other recipients

10 of funds under the programs described in para11 graph (2);

12 (E) maintenance of records;

13 (F) applicable civil rights requirements; or

14 (G) the requirements of sections 438 and

15 439 of the General Education Provisions Act.

16 (5) TERMINATION OF WAIVER.—The Secretary

17 involved under paragraph (1) shall terminate a waiv18 er under this subsection if the Secretary determines

19 that the performance of the State affected by the

20 waiver has been inadequate to justify a continuation

21 of the waiver or if it is no longer necessary to

22 achieve its original purpose.

23 (e) DEFINITIONS.—As used in this section:

24 (1) COMPREHENSIVE SCHOOL HEALTH EDU25 CATION.—The term ‘‘comprehensive school health
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1 education’’ means a planned, sequential program of

2 health education that addresses the physical, emo3 tional and social dimensions of student health in

4 kindergarten through grade 12. Such program

5 shall—

6 (A) be designed to assist students in devel7 oping the knowledge and behavioral skills need8 ed to make positive health choices and maintain

9 and improve their health, prevent disease and

10 injuries, and reduce risk behaviors which ad11 versely impact health;

12 (B) be comprehensive and include a variety

13 of components addressing personal health, com14 munity and environmental health, injury pre15 vention and safety, nutritional health, the ef16 fects of substance use and abuse, consumer

17 health regarding the benefits and appropriate

18 use of medical services including immunizations

19 and other clinical preventive services, and other

20 components deemed appropriate by the local

21 educational agencies;

22 (C) be designed to be linguistically and cul23 turally competent and responsive to the needs

24 of the students served; and
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1 (D) address locally relevant priorities as

2 determined by parents, students, teachers, and

3 school administrators and health officials.

4 (2) ELIGIBLE STATE.—The term ‘‘eligible

5 State’’ means a State with a memorandum of under6 standing or a written cooperative agreement entered

7 into by the agencies responsible for health and edu8 cation concerning the planning and implementation

9 of comprehensive school health education programs.

10 Among these States a priority shall be given to

11 qualified States as defined in section 3582(c).

12 (3) STATE EDUCATIONAL AGENCY.—The term

13 ‘‘State educational agency’’ means the officer or

14 agency primarily responsible for the State super15 vision of public elementary and secondary schools.

16 (4) LOCAL EDUCATIONAL AGENCY.—The term

17 ‘‘local educational agency’’ means a public board of

18 education or other public authority legally con19 stituted within a State for either administrative con20 trol or direction of, or to perform a service function

21 for, public elementary or secondary schools in a city,

22 county, township, school district, or other political

23 subdivision of a State, or such combination of school

24 districts or counties as are recognized in a State as

25 an administrative agency for its public elementary or
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1 secondary schools. Such term includes any other

2 public institution or agency having administrative

3 control and direction of a public elementary or sec4 ondary school.

5 (f) AUTHORIZED FUNDING.—For the purpose of car6 rying out this section, out of the funds available under

7 section 3581, there are made available, not to exceed

8 $15,000,000 for fiscal year 1996, $20,000,000 for fiscal

9 year 1997, $25,000,000 for fiscal year 1998, $30,000,000

10 for fiscal year 1999, $40,000,000 for fiscal year 2000, and

11 $50,000,000 for fiscal year 2001.

12 SEC. 3503. HEALTHY STUDENTS-HEALTHY SCHOOLS INTER13 AGENCY TASK FORCE.

14 (a) ESTABLISHMENT.—Not later than 120 days after

15 the date of enactment of this Act, the Secretary shall es16 tablish a Healthy Students-Healthy Schools Interagency

17 Task Force to be composed of representatives of the Office

18 of Disease Prevention and Health Promotion, the National

19 Institutes of Health, the Centers for Disease Control and

20 Prevention, the Health Resources and Services Adminis21 tration, the Office of School Health Education within the

22 Department of Education, and other Federal agencies and

23 departments which have responsibility for components of

24 school health and education.
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1 (b) CO-CHAIRPERSONS.—The Assistant Secretary for

2 Health and the Assistant Secretary for Elementary and

3 Secondary Education shall serve as co-chairpersons of the

4 task force established under subsection (a).

5 (c) FUNCTIONS AND ACTIVITIES.—The task force es6 tablished under subsection (a) shall—

7 (1) review and coordinate all Federal efforts in

8 school health education and health services;

9 (2) provide scientific and technical advice con10 cerning the development and implementation of

11 model comprehensive school health education pro12 grams and curricula;

13 (3) develop model student learning objectives

14 and assessment instruments that shall be made

15 available to all States;

16 (4) develop a uniform grant application form (a

17 form that serves as the principal document contain18 ing the core information concerning a particular en19 tity) and procedures that may be used with respect

20 to all school health education-related programs (in21 cluding supplementary information procedures to be

22 implemented when an entity that has already sub23 mitted an application form is applying for additional

24 assistance) that require the submission of an appli25 cation; and
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1 (5) recommend to the Secretary, for inclusion

2 in the biennial report required by section 3504(2),

3 methods for effectively linking school health edu4 cation and health services research findings at the

5 Federal level with implementation at the State and

6 local levels.

7 (d) CONSOLIDATION OF INITIATIVES.—Not later

8 than 12 months after the date of enactment of this Act,

9 the task force established under subsection (a) shall pre10 pare and submit to the Congress a report containing the

11 recommendations of the task force for the consolidation

12 of Federal school health education initiatives.

13 SEC. 3504. DUTIES OF THE SECRETARY.

14 The Secretary shall—

15 (1) establish and maintain a national clearing16 house, using advanced technologies to the maximum

17 extent practicable, and mechanisms for the diverse

18 dissemination of school health education material,

19 including written, audio-visual, and electronically

20 conveyed information to educators, schools, health

21 care providers, and other individuals, organizations,

22 and governmental entities;

23 (2) submit a biennial report to the Committee

24 on Labor and Human Resources of the Senate and

25 the appropriate committees of the House of Rep-
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1 resentatives on the implementation and contribution

2 of comprehensive school health education programs

3 funded under this part toward achieving relevant

4 National Healthy People 2000 objectives established

5 by the Secretary; and

6 (3) encourage coordination among Federal

7 agencies, State and local governments, educators,

8 school health providers, community-based organiza9 tions, and private sector entities to support develop10 ment of comprehensive school health education pro11 grams and school health services.

12 PART 5—SCHOOL-RELATED HEALTH SERVICES

13 Subpart A—Development and Operation

14 SEC. 3581. AUTHORIZATION OF APPROPRIATIONS.

15 (a) FUNDING FOR SCHOOL-RELATED HEALTH SERV16 ICES.—For the purpose of carrying out this subpart, there

17 are authorized to be appropriated $100,000,000 for fiscal

18 year 1996, $200,000,000 for fiscal year 1997,

19 $325,000,000 for fiscal year 1998, $450,000,000 for fis20 cal year 1999, $575,000,000 for fiscal year 2000, and

21 $700,000,000 for fiscal year 2001.

22 (b) FUNDING FOR PLANNING AND DEVELOPMENT

23 GRANTS.—Of amounts made available under this section,

24 not to exceed $10,000,000 for each of fiscal years 1996

25 and 1997 may be utilized to carry out section 3584.
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1 SEC. 3582. ELIGIBILITY FOR GRANTS.

2 (a) IN GENERAL.—

3 (1) PLANNING AND DEVELOPMENT GRANTS.—

4 Entities eligible to apply for and receive grants

5 under section 3584 are—

6 (A) State health agencies that apply on be7 half of local community partnerships; or

8 (B) local community partnerships in States

9 in which health agencies have not successfully

10 applied.

11 (2) OPERATIONAL GRANTS.—Entities eligible to

12 apply for and receive grants under section 3585

13 are—

14 (A) a qualified State as designated under

15 subsection (c) that apply on behalf of local com16 munity partnerships; or

17 (B) local community partnerships in States

18 that are not designated under subparagraph

19 (A).

20 (b) LOCAL COMMUNITY PARTNERSHIPS.—

21 (1) IN GENERAL.—A local community partner22 ship under subsection (a)(1)(B) and (a)(2)(B) is an

23 entity that, at a minimum includes—

24 (A) a local health care provider, which may

25 be a local public health department, with expe-
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1 rience in delivering services to children and

2 youth or medically underserved populations;

3 (B) local educational agency on behalf of

4 one or more public schools; and

5 (C) one community-based organization lo6 cated in the community to be served that has

7 a history of providing services to at-risk chil8 dren and youth.

9 (2) RURAL COMMUNITIES.—In rural commu10 nities, local partnerships should seek to include, to

11 the fullest extent practicable, providers and commu12 nity-based organizations with experience in serving

13 the target population.

14 (3) PARENT AND COMMUNITY PARTICIPA15 TION.—An applicant described in subsection (a)

16 shall, to the maximum extent feasible, involve broad17 based community participation (including parents of

18 the youth to be served).

19 (c) QUALIFIED STATE.—A qualified State under sub20 section (a)(2)(A) is a State that, at a minimum—

21 (1) demonstrates an organizational commitment

22 (including a strategic plan) to providing a broad

23 range of health, health education and support serv24 ices to at-risk youth; and
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1 (2) has a memorandum of understanding or co2 operative agreement jointly entered into by the State

3 agencies responsible for health and education re4 garding the planned delivery of health and support

5 services in school-based or school-linked centers.

6 SEC. 3583. PREFERENCES.

7 In making grants under sections 3584 and 3585, the

8 Secretary shall give priority to applicants whose commu9 nities to be served show the most substantial level of need

10 for health services among children and youth.

11 SEC. 3584. PLANNING AND DEVELOPMENT GRANTS.

12 (a) IN GENERAL.—The Secretary may make grants

13 during fiscal years 1996 and 1997 to entities eligible

14 under section 3862 to develop school-based or school15 linked health service sites.

16 (b) USE OF FUNDS.—Amounts provided under a

17 grant under this section may be used for the following:

18 (1) Planning for the provision of school health

19 services, including—

20 (A) an assessment of the need for health

21 services among youth in the communities to be

22 served;

23 (B) the health services to be provided and

24 how new services will be integrated with exist25 ing services;
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1 (C) assessing and planning for the mod2 ernization and expansion of existing facilities

3 and equipment to accommodate such services;

4 and

5 (D) an affiliation with relevant health

6 plans.

7 (2) recruitment and training of staff for the ad8 ministration and delivery of school health services;

9 (3) the establishment of local community part10 nerships as described in section 3582 (b);

11 (4) in the case of States, the development of

12 memorandums of understanding or cooperative

13 agreements for the coordinated delivery of health

14 and support services through school health service

15 sites; and

16 (5) other activities necessary to assume oper17 ational status.

18 (c) APPLICATION FOR GRANTS.—To be eligible to re19 ceive a grant under this section an entity described in sec20 tion 3582(a) shall submit an application in a form and

21 manner prescribed by the Secretary.

22 (d) NUMBER OF GRANTS.—Not more than one plan23 ning grant may be made to a single applicant. A planning

24 grant may not exceed 2 years in duration.
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1 (e) AMOUNT AVAILABLE FOR DEVELOPMENT

2 GRANT.—The Secretary may award not to exceed—

3 (1) $150,000 to entities under section

4 3582(a)(1)(A) and to localities planning for a city5 wide or countywide school health services delivery

6 system; and

7 (2) $50,000 to entities under section

8 3582(a)(1)(B).

9 SEC. 3585. GRANTS FOR OPERATION OF SCHOOL HEALTH

10 SERVICES.

11 (a) IN GENERAL.—The Secretary may make grants

12 to eligible entities described in section 3582(a)(2) that

13 submit applications consistent with the requirements of

14 this section, to pay the cost of operating school-based or

15 school-linked health service sites.

16 (b) USE OF GRANT.—Amounts provided under a

17 grant under this section may be used for the following—

18 (1) health services, including diagnosis and

19 treatment of simple illnesses and minor injuries;

20 (2) preventive health services, including health

21 screenings, follow-up health care, mental health, and

22 preventive health education;

23 (3) enabling services, as defined in section

24 3361, and other necessary support services;
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1 (4) training, recruitment, and compensation of

2 health professionals and other staff necessary for the

3 administration and delivery of school health services;

4 and

5 (5) referral services, including the linkage of in6 dividuals to health plans, and community-based

7 health and social service providers.

8 (c) APPLICATION FOR GRANT.—To be eligible to re9 ceive a grant under this section an entity described in sec10 tion 3582(a)(2) shall submit an application in a form and

11 manner prescribed by the Secretary. In order to receive

12 a grant under this section, an applicant must include in

13 the application the following information—

14 (1) a description of the services to be furnished

15 by the applicant;

16 (2) the amounts and sources of funding that

17 the applicant will expend, including estimates of the

18 amount of payments the applicant will receive from

19 health plans and other sources;

20 (3) a description of local community partner21 ships, including parent and community participation;

22 (4) a description of the linkages with other

23 health and social service providers; and

24 (5) such other information as the Secretary de25 termines to be appropriate.
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1 (d) ASSURANCES.—In order to receive a grant under

2 this section, an applicant must meet the following condi3 tions—

4 (1) school health service sites will, directly or

5 indirectly, provide a broad range of health services,

6 in accordance with the determinations of the local

7 community partnership, that may include—

8 (A) diagnosis and treatment of simple ill9 nesses and minor injuries;

10 (B) preventive health services, including

11 health screenings and follow-up health care,

12 mental health and preventive health education;

13 (C) enabling services, as defined in section

14 3361;

15 (D) referrals (including referrals regarding

16 mental health and substance abuse) with follow17 up to ensure that needed services are received;

18 (2) the applicant provides services rec19 ommended by the health provider, in consultation

20 with the local community partnership, and with the

21 approval of the local education agency;

22 (3) the applicant provides the services under

23 this subsection to adolescents, and other school age

24 children and their families as deemed appropriate by

25 the local partnership;
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1 (4) the applicant maintains agreements with

2 community-based health care providers with a his3 tory of providing services to such populations for the

4 provision of health care services not otherwise pro5 vided directly or during the hours when school

6 health services are unavailable;

7 (5) the applicant establishes an affiliation with

8 relevant health plans and will establish reimburse9 ment procedures and will make every reasonable ef10 fort to collect appropriate reimbursement for serv11 ices provided; and

12 (6) the applicant agrees to supplement and not

13 supplant the level of State or local funds under the

14 direct control of the applying State or participating

15 local education or health authority expended for

16 school health services as defined by this Act;

17 (7) services funded under this Act will be co18 ordinated with existing school health services pro19 vided at a participating school; and

20 (8) for applicants in rural areas, the assurances

21 required under paragraph (4) shall be fulfilled to the

22 maximum extent possible.

23 (e) STATE LAWS.—Notwithstanding any other provi24 sion in this part, no school based health clinic may provide

25 services, to any minor, when to do so is a violation of State
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1 laws or regulations pertaining to informed consent for

2 medical services to minors.

3 (f) LIMITATION ON ADMINISTRATIVE FUNDS.—In

4 the case of a State applying on behalf of local educational

5 partnerships, the applicant may retain not more than 5

6 percent of grants awarded under this subpart for adminis7 trative costs.

8 (g) DURATION OF GRANT.—A grant under this sec9 tion shall be for a period determined appropriate by the

10 Secretary.

11 (h) AMOUNT OF GRANT.—The annual amount of a

12 grant awarded under this section shall not be more than

13 $200,000 per school-based or school-linked health service

14 site.

15 (i) FEDERAL SHARE.—

16 (1) IN GENERAL.—Subject to paragraph (3), a

17 grant for services awarded under this section may

18 not exceed—

19 (A) 90 percent of the non-reimbursed cost

20 of the activities to be funded under the program

21 for the first 2 fiscal years for which the pro22 gram receives assistance under this section; and

23 (B) 75 percent of the non-reimbursed cost

24 of such activities for subsequent years for which
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1 the program receives assistance under this sec2 tion.

3 The remainder of such costs shall be made available as

4 provided in paragraph (2).

5 (2) FORM OF NON-FEDERAL SHARE.—The non6 Federal share required by paragraph (1) may be in

7 cash or in-kind, fairly evaluated, including facilities,

8 equipment, personnel, or services, but may not in9 clude amounts provided by the Federal Government.

10 In-kind contributions may include space within a

11 school facilities, school personnel, program use of

12 school transportation systems, outposted health per13 sonnel, and extension of health provider medical li14 ability insurance.

15 (3) WAIVER.—The Secretary may waive the re16 quirements of paragraph (1) for any year in accord17 ance with criteria established by regulation. Such

18 criteria shall include a documented need for the

19 services provided under this section and an inability

20 of the grantee to meet the requirements of para21 graph (1) despite a good faith effort.

22 (j) TRAINING AND TECHNICAL ASSISTANCE.—Enti23 ties that receive assistance under this section may use not

24 to exceed 10 percent of the amount of such assistance to

25 provide staff training and to secure necessary technical as-
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1 sistance. To the maximum extent feasible, technical assist2 ance should be sought through local community-based en3 tities. The limitation contained in this subsection shall

4 apply to individuals employed to assist in obtaining funds

5 under this part. Staff training should include the training

6 of teachers and other school personnel necessary to ensure

7 appropriate referral and utilization of services, and appro8 priate linkages between class-room activities and services

9 offered.

10 (k) REPORT AND MONITORING.—The Secretary will

11 submit to the Committee on Labor and Human Resources

12 in the Senate and the Committee on Energy and Com13 merce in the House of Representatives a biennial report

14 on the activities funded under this Act, consistent with

15 the ongoing monitoring activities of the Department. Such

16 reports are intended to advise the relevant Committees of

17 the availability and utilization of services, and other rel18 evant information about program activities.

19 Subtitle F—Public Health Service

20 Initiative

21 SEC. 3601. PUBLIC HEALTH SERVICE INITIATIVE.

22 (a) IN GENERAL.—Subject to subsection (c), the Sec23 retary of Health and Human Services shall pay, from

24 funds in the Treasury not otherwise appropriated, individ25 uals and entities that are eligible to receive assistance pur-
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1 suant to the provisions referred to in paragraphs (1)

2 through (8) of subsection (b), to the extent of the amounts

3 specified under subsection (b).

4 (b) AMOUNTS SPECIFIED.—The amounts specified in

5 subsection (a) with respect to a fiscal year shall be—

6 (1) with respect to the health services research

7 activities authorized under the amendments made by

8 section 3102, $150,000,000 for fiscal year 1996,

9 $400,000,000 for fiscal year 1997, $500,000,000 for

10 fiscal year 1998, and $600,000,000 for each of the

11 fiscal years 1999 through 2001;

12 (2) with respect to activities for the develop13 ment of plans and networks under subpart B of part

14 1 of subtitle C of title III—

15 (A) $52,500,000 for fiscal year 1996,

16 $122,500,000 for fiscal year 1997,

17 $192,500,000 for fiscal year 1998,

18 $157,500,000 for fiscal year 1999,

19 $122,500,000 for fiscal year 2000, and

20 $52,500,000 for fiscal year 2001; and

21 (B) with respect to awards to federally

22 qualified health centers (as defined in section

23 1861(aa)(4) of the Social Security Act) under

24 such subpart, $97,500,000 for fiscal year 1996,

25 $227,500,000 for fiscal year 1997,
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1 $357,500,000 for fiscal year 1998,

2 $292,500,000 for fiscal year 1999,

3 $227,500,000 for fiscal year 2000, and

4 $97,500,000 for fiscal year 2001;

5 (3) with respect to capital costs under subpart

6 C of part 1 of subtitle C of title III, $50,000,000

7 for each of the fiscal years 1996 through 2001;

8 (4) with respect to enabling services under sub9 part D of part 1 of subtitle C of title III—

10 (A) $35,000,000 for fiscal year 1997,

11 $140,000,000 for each of the fiscal years 1998

12 through 2000, and $175,000,000 for fiscal year

13 2001; and

14 (B) with respect to awards to federally

15 qualified health centers (as defined in section

16 1861(aa)(4) of the Social Security Act) under

17 such subpart, $65,000,000 for fiscal year 1997,

18 $260,000,000 for each of the fiscal years 1998

19 through 2000, and $325,000,000 for fiscal year

20 2001;

21 (5) with respect to supplemental services under

22 subpart D of part 1 of subtitle C of title III,

23 $100,000,000 for fiscal year 1996, $150,000,000 for

24 fiscal year 1997, and $250,000,000 for each of the

25 fiscal years 1998 through 2001;
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1 (6) with respect to the National Health Service

2 Corps program referred to under section 3371,

3 $150,000,000 for each of the fiscal years 1997 and

4 1998, and $250,000,000 for each of the fiscal years

5 1999 through 2001;

6 (7) with respect to the development and oper7 ation of comprehensive managed mental health and

8 substance abuse programs under section 3434,

9 $100,000,000 for each of the fiscal years 1996

10 through 2001; and

11 (8) with respect to school-related health service

12 programs under subpart A of part 5 of subtitle E

13 of title III, $100,000,000 for fiscal year 1996,

14 $200,000,000 for fiscal year 1997, $325,000,000 for

15 fiscal year 1998, and $450,000,000 for fiscal year

16 1999, $575,000,000 for fiscal year 2000, and

17 $700,000,000 for fiscal year 2001.

18 (c) AUTHORITY TO TRANSFER FUNDS.—The Com19 mittee on Appropriations of the House of Representatives

20 and the Committee on Appropriations of the Senate, act21 ing through appropriations Acts, may transfer the

22 amounts specified under subsection (b) in each fiscal year

23 among the programs referred to in such subsection.
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1 TITLE IV—MEDICAL

2 MALPRACTICE

3 Subtitle A—Liability Reform

4 SEC. 4001. FEDERAL TORT REFORM.

5 (a) APPLICABILITY.—

6 (1) IN GENERAL.—Except as provided in sec7 tion 4002, this subtitle shall apply with respect to

8 any medical malpractice liability action brought in

9 any State or Federal court, except that this subtitle

10 shall not apply to a claim or action for damages

11 arising from a vaccine-related injury or death to the

12 extent that title XXI of the Public Health Service

13 Act applies to the claim or action.

14 (2) EFFECT ON SOVEREIGN IMMUNITY AND

15 CHOICE OF LAW OR VENUE.—Nothing in this sub16 title shall be construed to—

17 (A) waive or affect any defense of sov18 ereign immunity asserted by any State under

19 any provision of law;

20 (B) waive or affect any defense of sov21 ereign immunity asserted by the United States;

22 (C) affect the applicability of any provision

23 of the Foreign Sovereign Immunities Act of

24 1976;
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1 (D) preempt State choice-of-law rules with

2 respect to claims brought by a foreign nation or

3 a citizen of a foreign nation; or

4 (E) affect the right of any court to trans5 fer venue or to apply the law of a foreign nation

6 or to dismiss a claim of a foreign nation or of

7 a citizen of a foreign nation on the ground of

8 inconvenient forum.

9 (3) FEDERAL COURT JURISDICTION NOT ES10 TABLISHED ON FEDERAL QUESTION GROUNDS.—

11 Nothing in this subtitle shall be construed to estab12 lish any jurisdiction in the district courts of the

13 United States over medical malpractice liability ac14 tions on the basis of section 1331 or 1337 of title

15 28, United States Code.

16 (b) DEFINITIONS.—In this subtitle, the following

17 definitions apply:

18 (1) ALTERNATIVE DISPUTE RESOLUTION SYS19 TEM; ADR.—The term ‘‘alternative dispute resolu20 tion system’’ or ‘‘ADR’’ means a system that pro21 vides for the resolution of medical malpractice claims

22 in a manner other than through medical malpractice

23 liability actions.

24 (2) CLAIMANT.—The term ‘‘claimant’’ means

25 any person who alleges a medical malpractice claim,
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1 and any person on whose behalf such a claim is al2 leged, including the decedent in the case of an action

3 brought through or on behalf of an estate.

4 (3) HEALTH CARE PROFESSIONAL.—The term

5 ‘‘health care professional’’ means any individual who

6 provides health care services in a State and who is

7 required by the laws or regulations of the State to

8 be licensed or certified by the State to provide such

9 services in the State.

10 (4) HEALTH CARE PROVIDER.—The term

11 ‘‘health care provider’’ means any organization or

12 institution that is engaged in the delivery of health

13 care services in a State and that is required by the

14 laws or regulations of the State to be licensed or cer15 tified by the State to engage in the delivery of such

16 services in the State.

17 (5) INJURY.—The term ‘‘injury’’ means any ill18 ness, disease, or other harm that is the subject of

19 a medical malpractice liability action or a medical

20 malpractice claim.

21 (6) MEDICAL MALPRACTICE LIABILITY AC22 TION.—The term ‘‘medical malpractice liability ac23 tion’’ means a cause of action brought in a State or

24 Federal court against a health care provider or
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1 health care professional by which the plaintiff alleges

2 a medical malpractice claim.

3 (7) MEDICAL MALPRACTICE CLAIM.—The term

4 ‘‘medical malpractice claim’’ means a claim brought

5 against a health care provider or health care profes6 sional in which a claimant alleges that injury was

7 caused by the provision of (or the failure to provide)

8 health care services, except that such term does not

9 include—

10 (A) any claim based on an allegation of an

11 intentional tort; or

12 (B) any claim based on an allegation that

13 a product is defective that is brought against

14 any individual or entity that is not a health

15 care professional or health care provider.

16 SEC. 4002. STATE-BASED ALTERNATIVE DISPUTE RESOLU17 TION MECHANISMS.

18 (a) APPLICATION TO MALPRACTICE CLAIMS UNDER

19 PLANS.—Prior to or immediately following the commence20 ment of any medical malpractice action, the parties shall

21 participate in the alternative dispute resolution system ad22 ministered by the State under subsection (b). Such partici23 pation shall be in lieu of any other provision of Federal

24 or State law or any contractual agreement made by or on
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1 behalf of the parties prior to the commencement of the

2 medical malpractice action.

3 (b) ADOPTION OF MECHANISM BY STATE.—Each

4 State shall—

5 (1) maintain or adopt at least one of the alter6 native dispute resolution methods satisfying the re7 quirements specified under subsection (c) and (d) for

8 the resolution of medical malpractice claims arising

9 from the provision of (or failure to provide) health

10 care services to individuals enrolled in a health plan;

11 and

12 (2) clearly disclose to enrollees (and potential

13 enrollees) the availability and procedures for

14 consumer grievances, including a description of the

15 alternative dispute resolution method or methods

16 adopted under this subsection.

17 (c) SPECIFICATION OF PERMISSIBLE ALTERNATIVE

18 DISPUTE RESOLUTION METHODS.—

19 (1) IN GENERAL.—The Board shall, by regula20 tion, develop alternative dispute resolution methods

21 for the use by States in resolving medical mal22 practice claims under subsection (a). Such methods

23 shall include at least the following:

24 (A) ARBITRATION.—The use of arbitra25 tion, a nonjury adversarial dispute resolution
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1 process which may, subject to subsection (d),

2 result in a final decision as to facts, law, liabil3 ity or damages.

4 (B) CLAIMANT-REQUESTED BINDING ARBI5 TRATION.—For claims involving a sum of

6 money that falls below a threshold amount set

7 by the Board, the use of arbitration not subject

8 to subsection (d). Such binding arbitration shall

9 be at the sole discretion of the claimant.

10 (C) MEDIATION.—The use of mediation, a

11 settlement process coordinated by a neutral

12 third party without the ultimate rendering of a

13 formal opinion as to factual or legal findings.

14 (D) EARLY NEUTRAL EVALUATION.—The

15 use of early neutral evaluation, in which the

16 parties make a presentation to a neutral attor17 ney or other neutral evaluator for an assess18 ment of the merits, to encourage settlement. If

19 the parties do not settle as a result of assess20 ment and proceed to trial, the neutral eval21 uator’s opinion shall be kept confidential.

22 (E) CERTIFICATE OF MERIT.—The re23 quirement that a medical malpractice plaintiff

24 submit to the court before trial a written report

25 by a qualified specialist that includes the spe-
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1 cialist’s determination that, after a review of

2 the available medical record and other relevant

3 material, there is a reasonable and meritorious

4 cause for the filing of the action against the de5 fendant.

6 (2) STANDARDS FOR ESTABLISHING METH7 ODS.—In developing alternative dispute resolution

8 methods under paragraph (1), the Board shall as9 sure that the methods promote the resolution of

10 medical malpractice claims in a manner that—

11 (A) is affordable for the parties involved;

12 (B) provides for timely resolution of

13 claims;

14 (C) provides for the consistent and fair

15 resolution of claims; and

16 (D) provides for reasonably convenient ac17 cess to dispute resolution for individuals en18 rolled in plans.

19 (3) WAIVER AUTHORITY.—Upon application of

20 a State, the Board may grant the State the author21 ity to fulfill the requirement of subsection (b) by

22 adopting a mechanism other than a mechanism es23 tablished by the Board pursuant to this subsection,

24 except that such mechanism must meet the stand25 ards set forth in paragraph (2).
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1 (d) FURTHER REDRESS.—Except with respect to the

2 claimant-requested binding arbitration method set forth in

3 subsection (c)(1)(B), and notwithstanding any other provi4 sion of a law or contractual agreement, a plan enrollee

5 dissatisfied with the determination reached as a result of

6 an alternative dispute resolution method applied under

7 this section may, after the final resolution of the enrollee’s

8 claim under the method, bring a cause of action to seek

9 damages or other redress with respect to the claim to the

10 extent otherwise permitted under State law. The results

11 of any alternative dispute resolution procedure are inad12 missible at any subsequent trial, as are all statements, of13 fers, and other communications made during such proce14 dures, unless otherwise admissible under State law.

15 SEC. 4003. LIMITATION ON AMOUNT OF ATTORNEY’S CON16 TINGENCY FEES.

17 (a) IN GENERAL.—An attorney who represents, on

18 a contingency fee basis, a plaintiff in a medical mal19 practice liability action may not charge, demand, receive,

20 or collect for services rendered in connection with such ac21 tion (including the resolution of the claim that is the sub22 ject of the action under any alternative dispute resolution

23 system) in excess of—
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(1) 331 1 ⁄3 percent of the first $150,000 of the

2 total amount recovered by judgment or settlement in

3 such action; plus

4 (2) 25 percent of any amount recovered above

5 the amount described in paragraph (1);

6 unless otherwise determined under State law. Such

7 amount shall be computed after deductions are made for

8 all the expenses associated with the claim other than those

9 attributable to the normal operating expenses of the attor10 ney.

11 (b) CALCULATION OF PERIODIC PAYMENTS.—In the

12 event that a judgment or settlement includes periodic or

13 future payments of damages, the amount recovered for

14 purposes of computing the limitation on the contingency

15 fee under subsection (a) may, in the discretion of the

16 court, be based on the cost of the annuity or trust estab17 lished to make the payments. In any case in which an an18 nuity or trust is not established to make such payments,

19 such amount shall be based on the present value of the

20 payments.

21 (c) CONTINGENCY FEE DEFINED.—As used in this

22 section, the term ‘‘contingency fee’’ means any fee for pro23 fessional legal services which is, in whole or in part, con24 tingent upon the recovery of any amount of damages,

25 whether through judgment or settlement.
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1 SEC. 4004. REDUCTION OF AWARDS FOR RECOVERY FROM

2 COLLATERAL SOURCES.

3 (a) REDUCTION OF AWARD.—The total amount of

4 damages recovered by a plaintiff in a medical malpractice

5 liability action shall be reduced by an amount that

6 equals—

7 (1) the amount of any payment which the plain8 tiff has received or to which the plaintiff is presently

9 entitled on account of the same injury for which the

10 damages are awarded, including payment under—

11 (A) Federal or State disability or sickness

12 programs;

13 (B) Federal, State, or private health insur14 ance programs;

15 (C) private disability insurance programs;

16 (D) employer wage continuation programs;

17 and

18 (E) any other program, if the payment is

19 intended to compensate the plaintiff for the

20 same injury for which damages are awarded;

21 less

22 (2) the amount of any premiums or any other

23 payments that the plaintiff has paid to be eligible to

24 receive the payment described in paragraph (1) and

25 any portion of the award subject to a subrogation

26 lien or claim.
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1 (b) SUBROGATION.—The court may reduce a sub2 rogation lien or claim described in subsection (a)(2) by

3 an amount representing reasonable costs incurred in se4 curing the award subject to the lien or claim.

5 (c) INAPPLICABILITY OF SECTION.—This section

6 shall not apply to any case in which the court determines

7 that the reduction of damages pursuant to subsection (a)

8 would compound the effect of any State law limitation on

9 damages so as to render the plaintiff less than fully com10 pensated for his or her injuries.

11 SEC. 4005. PERIODIC PAYMENT OF AWARDS.

12 (a) IN GENERAL.—A party to a medical malpractice

13 liability action may petition the court to instruct the trier

14 of fact to award any future damages on an appropriate

15 periodic basis. If the court, in its discretion, so instructs

16 the trier of fact, and damages are awarded on a periodic

17 basis, the court may require the defendant to purchase

18 an annuity or other security instrument (typically based

19 on future damages discounted to present value) adequate

20 to assure payments of future damages.

21 (b) FAILURE OR INABILITY TO PAY.—With respect

22 to an award of damages described in subsection (a), if a

23 defendant fails to make payments in a timely fashion, or

24 if the defendant becomes or is at risk of becoming insol25 vent, upon such a showing the claimant may petition the
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1 court for an order requiring that remaining balance be dis2 counted to present value and paid to the claimant in a

3 lump-sum.

4 (c) MODIFICATION OF PAYMENT SCHEDULE.—The

5 court shall retain authority to modify the payment sched6 ule based on changed circumstances.

7 (d) FUTURE DAMAGES DEFINED.—As used in this

8 section, the term ‘‘future damages’’ means any economic

9 or noneconomic loss other than that incurred or accrued

10 as of the time of judgment.

11 SEC. 4006. CONSTRUCTION.

12 Nothing in this subtitle shall be construed to preempt

13 any State law that sets a maximum limit on total dam14 ages.

15 Subtitle B—Other Provisions Relat16 ing to Medical Malpractice Li17 ability

18 SEC. 4101. STATE MALPRACTICE REFORM DEMONSTRATION

19 PROJECTS.

20 (a) ESTABLISHMENT.—The Secretary shall award

21 grants to States for the establishment of malpractice re22 form demonstration projects in accordance with this sec23 tion. Each such project shall be designed to assess the

24 fairness and effectiveness of one or more of the following

25 models:
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1 (1) No-fault liability.

2 (2) Enterprise liability.

3 (3) Practice guidelines.

4 (b) DEFINITIONS.—For purposes of this section:

5 (1) MEDICAL ADVERSE EVENT.—The term

6 ‘‘medical adverse event’’ means an injury that is the

7 result of medical management as opposed to a dis8 ease process that creates disability lasting at least

9 one month after discharge, or that prolongs a hos10 pitalization for more than one month, and for which

11 compensation is available under a no-fault medical

12 liability system established under this section.

13 (2) NO-FAULT MEDICAL LIABILITY SYSTEM.—

14 The terms ‘‘no-fault medical liability system’’ and

15 ‘‘system’’ mean a system established by a State re16 ceiving a grant under this section which replaces the

17 common law tort liability system for medical injuries

18 with respect to certain qualified health care organi19 zations and qualified insurers and which meets the

20 requirements of this section.

21 (3) PROVIDER.—The term ‘‘provider’’ means

22 physician, physician assistant, or other individual

23 furnishing health care services in affiliation with a

24 qualified health care organization.
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1 (4) QUALIFIED HEALTH CARE ORGANIZA2 TION.—The term ‘‘qualified health care organiza3 tion’’ means a hospital, a hospital system, a man4 aged care network, or other entity determined appro5 priate by the Secretary which elects in a State re6 ceiving a grant under this section to participate in

7 a no-fault medical liability system and which meets

8 the requirements of this section.

9 (5) QUALIFIED INSURER.—The term ‘‘qualified

10 insurer’’ means a health care malpractice insurer,

11 including a self-insured qualified health care organi12 zation, which elects in a State receiving a grant

13 under this section to participate in a no-fault medi14 cal liability system and which meets the require15 ments of this section.

16 (6) ENTERPRISE LIABILITY.—The term ‘‘enter17 prise liability’’ means a system in which State law

18 imposes malpractice liability on the health plan in

19 which a physician participates in place of personal li20 ability on the physician in order to achieve improved

21 quality of care, reductions in defensive medical prac22 tices, and better risk management.

23 (7) PRACTICE GUIDELINES.—The term ‘‘prac24 tice guidelines’’ means guidelines established by the
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1 Agency for Health Care Policy and Research pursu2 ant to the Public Health Service Act or this Act.

3 (c) APPLICATIONS BY STATES.—

4 (1) IN GENERAL.—Each State desiring to es5 tablish a malpractice reform demonstration project

6 shall submit an application to the Secretary at such

7 time and in such manner as the Secretary shall re8 quire.

9 (2) CONTENTS OF APPLICATION.—An applica10 tion under paragraph (1) shall include—

11 (A) an identification of the State agency or

12 agencies that will administer the demonstration

13 project and be the grant recipient of funds for

14 the State;

15 (B) a description of the manner in which

16 funds granted to a State will be expended and

17 a description of fiscal control, accounting, and

18 audit procedures to ensure the proper dispersal

19 of and accounting for funds received under this

20 section; and

21 (C) such other information as the Sec22 retary determines appropriate.

23 (3) CONSIDERATION OF APPLICATIONS.—In re24 viewing all applications received from States desiring
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1 to establish malpractice demonstration projects

2 under paragraph (1), the Secretary shall consider—

3 (A) data regarding medical malpractice

4 and malpractice litigation patterns in each

5 State;

6 (B) the contributions that any demonstra7 tion project will make toward reducing mal8 practice and costs associated with health care

9 injuries;

10 (C) diversity among the populations serv11 iced by the systems;

12 (D) geographic distribution; and

13 (E) such other criteria as the Secretary de14 termines appropriate.

15 (d) EVALUATION AND REPORTS.—

16 (1) BY THE STATES.—Each State receiving a

17 grant under this section shall conduct on-going eval18 uations of the effectiveness of any demonstration

19 project established in such State and shall submit an

20 annual report to the Secretary concerning the re21 sults of such evaluations at such times and in such

22 manner as the Secretary shall require.

23 (2) BY THE SECRETARY.—The Secretary shall

24 submit an annual report to Congress concerning the

25 fairness and effectiveness of the demonstration
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1 projects conducted under this section. Such report

2 shall analyze the reports received by the Secretary

3 under paragraph (1).

4 (e) FUNDING.—

5 (1) IN GENERAL.—There are authorized to be

6 appropriated such sums as may be necessary to

7 carry out the purposes of this section.

8 (2) LIMITATIONS ON EXPENDITURES.—

9 (A) ADMINISTRATIVE EXPENSES.—Not

10 more than 10 percent of the amount of each

11 grant awarded to a State under this section

12 may be used for administrative expenses.

13 (B) WAIVER OF COST LIMITATIONS.—The

14 limitation under subparagraph (A) may be

15 waived as determined appropriate by the Sec16 retary.

17 (f) ELIGIBILITY FOR NO-FAULT DEMONSTRATION.—

18 A State is eligible to receive a no-fault liability demonstra19 tion grant if the application of the State under subsection

20 (c) includes—

21 (1) an identification of each qualified health

22 care organization selected by the State to participate

23 in the system, including—

24 (A) the location of each organization;
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1 (B) the number of patients generally

2 served by each organization;

3 (C) the types of patients generally served

4 by each organization;

5 (D) an analysis of any characteristics of

6 each organization which makes such organiza7 tion appropriate for participation in the system;

8 (E) whether the organization is self-in9 sured for malpractice liability; and

10 (F) such other information as the Sec11 retary determines appropriate;

12 (2) an identification of each qualified insurer

13 selected by the State to participate in the system, in14 cluding—

15 (A) a schedule of the malpractice insur16 ance premiums generally charged by each in17 surer under the common law tort liability sys18 tem; and

19 (B) such other information as the Sec20 retary determines appropriate;

21 (3) a description of the procedure under which

22 qualified health care organizations and insurers elect

23 to participate in the system;

24 (4) a description of the system established by

25 the State to assure compliance with the require-
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1 ments of this section by each qualified health care

2 organization and insurer; and

3 (5) a description of procedures for the prepara4 tion and submission to the State of an annual report

5 by each qualified health care organization and quali6 fied insurer participating in a system that shall in7 clude—

8 (A) a description of activities conducted

9 under the system during the year; and

10 (B) the extent to which the system ex11 ceeded or failed to meet relevant performance

12 standards including compensation for and de13 terrence of medical adverse events.

14 (g) ELIGIBILITY FOR ENTERPRISE LIABILITY DEM15 ONSTRATION.—A State is eligible to receive an enterprise

16 liability demonstration grant if the State—

17 (1) has entered into an agreement with a health

18 plan (other than a fee-for-service plan) operating in

19 the State under which the plan assumes legal liabil20 ity with respect to any medical malpractice claim

21 arising from the provision of (or failure to provide)

22 services under the plan by any physician participat23 ing in the plan; and

24 (2) has provided that, under the law of the

25 State, a physician participating in a plan that has
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1 entered into an agreement with the State under

2 paragraph (1) may not be liable in damages or oth3 erwise for such a claim and the plan may not require

4 such physician to indemnify the plan for any such li5 ability.

6 (h) ELIGIBILITY FOR PRACTICE GUIDELINES DEM7 ONSTRATION.—A State is eligible to receive a practice

8 guidelines demonstration grant if the law of the State pro9 vides that in the resolution of any medical malpractice ac10 tion, compliance or non-compliance with an appropriate

11 practice guideline shall be admissible at trial as a rebutta12 ble presumption regarding medical negligence.

13 TITLE V—FALL-BACK PREMIUM

14 LIMITS IN CASES OF INEFFEC15 TIVE COMPETITION; PRE16 MIUM-BASED FINANCING; AS17 SISTANCE TO LOW INCOME

18 INDIVIDUALS AND TO BUSI19 NESSES

20 SEC. 5000. GENERAL DEFINITIONS.

21 (a) DEFINITIONS RELATING TO PREMIUM RATES.—

22 In this title:

23 (1) FILED COMMUNITY BID.—The term ‘‘filed

24 community bid’’ means the premium bid that is filed

25 with a State for a class of enrollment for a commu-
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1 nity-rated plan offered in a community rating area

2 pursuant to section 1413(b).

3 (2) ACCEPTED COOPERATIVE BID.—The term

4 ‘‘accepted cooperative bid’’ means the premium rate

5 agreed upon by a cooperative and a plan taking into

6 account any discount to such bid.

7 (3) FINAL COMMUNITY RATE.—The term ‘‘final

8 community rate’’ means the filed community bid,

9 taking into account any voluntary reduction in such

10 bid made under section 5004(e).

11 (4) FINAL COOPERATIVE RATE.—The term

12 ‘‘final cooperative bid’’ means the accepted coopera13 tive bid, taking into account any voluntary reduc14 tions in such bid made under section 5004(e).

15 (b) DEFINITIONS RELATED TO WEIGHTED AVERAGE

16 PREMIUM RATES.—In this title:

17 (1) WEIGHTED AVERAGE ACCEPTED BID.—The

18 term ‘‘weighted average accepted bid’’ means, for a

19 class of enrollment for a community rating area for

20 a year, the average across all plans of—

21 (A) the filed community bid for such class

22 for each community-rated health plan offered in

23 a community rating area weighted to reflect the

24 relative enrollment (net of any enrollment
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1 through a cooperative) of community rate eligi2 ble individuals among such plans; and

3 (B) the accepted cooperative bid for such

4 class for each community-rated health plan of5 fered in a community rating area weighted to

6 reflect the relative enrollment of community

7 rate eligible individuals through a cooperative

8 among such plans.

9 (2) WEIGHTED AVERAGE PREMIUM.—The term

10 ‘‘weighted average premium’’ means, for a class of

11 enrollment for a community rating area for a year,

12 the lesser of—

13 (A) the baseline premium for such class for

14 the community rating area (as defined in sec15 tion 5003) for the year; or

16 (B) the average across all plans of the less17 er of—

18 (i) the final community rate; or

19 (ii) the final cooperative rate, for such

20 class (applicable only for plans offered

21 through the cooperative);

22 for each community-rated health plan, weighted

23 to reflect the total enrollment of community

24 rate eligible individuals in such class among

25 such plans.
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1 (d) INCORPORATION OF OTHER DEFINITIONS.—Ex2 cept as otherwise provided in this title, the definitions of

3 terms in subtitle H of title I of this Act shall apply to

4 this title.

5 Subtitle A—Fall-Back Premium

6 Limits

7 PART 1—HEALTH EXPENDITURES OF

8 COMMUNITY RATING AREAS

9 Subpart A—Computation of Targets and Accepted

10 Bids

11 SEC. 5001. COMPUTATION OF AREA INFLATION FACTORS.

12 (a) COMPUTATION.—

13 (1) IN GENERAL.—The Secretary shall compute

14 and publish, not later than March 1 of each year

15 (beginning with 1996) the area inflation factor (as

16 defined in paragraph (2)) for each community rating

17 area for the following year.

18 (2) COMMUNITY RATING AREAS INFLATION

19 FACTOR.—The term ‘‘area inflation factor’’ means,

20 for a year for a community rating area—

21 (A) the general health care inflation factor

22 for the year (as defined in paragraph (3));

23 (B) adjusted under subsection (c) (to take

24 into account material changes in the demo25 graphic and socio-economic characteristics of
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1 the population of community rate eligible indi2 viduals); and

3 (C) decreased by the percentage adjust4 ment (if any) provided with respect to the com5 munity rating area under subsection (d) (relat6 ing to adjustment for previous excess expendi7 tures).

8 (3) GENERAL HEALTH CARE INFLATION FAC9 TOR.—

10 (A) 1997 THROUGH 2001.—In this part,

11 the term ‘‘general health care inflation factor’’,

12 for a year, means the percentage increase in the

13 CPI (as specified under subsection (b)) for the

14 year plus the following:

15 (i) For 1997, 1.5 percentage points.

16 (ii) For 1998, 1.0 percentage points.

17 (iii) For 1999, 0.5 percentage points.

18 (iv) For 2000 and for 2001, 0 per19 centage points.

20 (B) YEARS AFTER 2001.—

21 (i) RECOMMENDATION TO CON22 GRESS.—In 2000, the Secretary shall sub23 mit to Congress recommendations, after

24 consultation with the Federal Reserve

25 Board, on what the general health care in-
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1 flation factor should be for years beginning

2 with 2002.

3 (ii) FAILURE OF CONGRESS TO ACT.—

4 If the Congress fails to enact a law specify5 ing the general health care inflation factor

6 for a year after 2001, the Secretary, in

7 January of the year before the year in8 volved, shall compute such factor for the

9 year involved. Such factor shall be the

10 product of the factors described in sub11 paragraph (C) for that fiscal year, minus

12 1.

13 (C) FACTORS.—The factors described in

14 this subparagraph for a year are the following:

15 (i) CPI.—1 plus the percentage

16 change in the CPI for the year, determined

17 based upon the percentage change in the

18 average of the CPI for the 12-month pe19 riod ending with August 31 of the previous

20 fiscal year over such average for the pre21 ceding 12-month period.

22 (ii) REAL GDP PER CAPITA.—1 plus

23 the average annual percentage change in

24 the real, per capita gross domestic product

25 of the United States during the 3-year pe-
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1 riod ending in the preceding calendar year,

2 determined by the Secretary based on data

3 supplied by the Department of Commerce.

4 (b) PROJECTION OF INCREASE IN CPI.—

5 (1) IN GENERAL.—For purposes of this section,

6 the Secretary shall specify, as of the time of publica7 tion, the annual percentage increase in the CPI (as

8 defined in section 1701(d)) for the following year.

9 (2) DATA TO BE USED.—Such increase shall be

10 the projection of the CPI contained in the budget of

11 the United States transmitted by the President to

12 the Congress in the year.

13 (c) SPECIAL ADJUSTMENT FOR MATERIAL CHANGES

14 IN DEMOGRAPHIC CHARACTERISTICS OF POPULATION.—

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

16 a method for adjusting the area inflation factor for

17 each community rating area in order to reflect mate18 rial changes in the demographic characteristics of

19 community rate eligible individuals residing in the

20 coverage area in comparison to national trend for

21 factors that affect utilization of health care services.

22 (2) NEUTRAL ADJUSTMENT.—Such method

23 (and any annual adjustment under this paragraph)

24 shall be designed to result in the adjustment effected
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1 under this paragraph for a year not changing the

2 weighted average of the area inflation factors.

3 (d) CONSULTATION PROCESS.—The Secretary shall

4 have a process for consulting with representatives of

5 States before establishing the area inflation factors for

6 each year under this section.

7 SEC. 5002. ESTABLISHMENT OF BASELINE PREMIUMS.

8 (a) IN GENERAL.—Not later than January 1, 1996,

9 the Secretary shall determine baseline premium amounts

10 applicable under this title. Such premiums shall be—

11 (1) the premium amount as of January 1, 1995

12 for employee-only coverage under Blue Cross/Blue

13 Shield standard option plan available through the

14 Federal Employees Health Benefits Program (in the

15 case of the individual class of enrollment); and

16 (2) such amounts as determined appropriate by

17 the Secretary after making the necessary adjust18 ments to the amount described in (1) to reflect the

19 relative difference in actuarial value among the dif20 ferent classes of family enrollment (in the case of

21 the classes described in section 1413(b)(2)(B);

22 updated in accordance with sections (b), (c), and (d).

23 (b) ADJUSTMENT FOR ELIGIBLE POPULATION.—The

24 premium amounts described in paragraphs (1) and (2) of

25 subsection (a) shall be adjusted to reflect the difference
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1 in expected health care spending of the population enrolled

2 in the plan described in paragraph (1) of subsection (a)

3 and of the population of community rate eligible individ4 uals (exclusive of individuals receiving AFDC or SSI).

5 (c) REMOVAL OF UNCOMPENSATED CARE.—The pre6 mium amounts described in paragraphs (1) and (2) of

7 subsection (a) shall be reduced to remove assumed uncom8 pensated and undercompensated care that will be elimi9 nated by this Act.

10 (d) UPDATING.—

11 (1) IN GENERAL.—Subject to paragraph (3),

12 the Secretary shall update the amount determined

13 under subsection (b)(1) for each of 1995 and 1996

14 by the update factor described in paragraph (2) for

15 the year.

16 (2) UPDATE FACTOR.—In paragraph (1), the

17 update factor for a year is 1 plus the annual per18 centage increase for the year for the premium

19 charged for individual enrollment in Blue Cross/Blue

20 Shield standard option plan offered through the

21 Federal Employees Health Benefits Program.

22 (3) LIMIT.—The total cumulative update under

23 this subsection shall not exceed 15 percent.
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1 SEC. 5003. DETERMINATION OF AREA BASELINE PRE2 MIUMS.

3 (a) INITIAL DETERMINATION.—Not later than Janu4 ary 1, 1996, the Secretary shall determine, for each com5 munity rating area for 1997, area baseline premiums. For

6 each class of enrollment, the baseline premium shall

7 equal—

8 (1) the national baseline premium for such class

9 (determined by the Secretary under section 5002),

10 (2) updated by the area inflation factor (as de11 termined under section 5001) for 1997, and

12 (3) adjusted by the adjustment factor for the

13 community rating area (determined under subsection

14 (c)).

15 (b) SUBSEQUENT DETERMINATIONS.—

16 (1) DETERMINATION.—Not later than March 1

17 of each year (beginning with 1997) the Secretary

18 shall determine, for each community rating area for

19 the succeeding year area baseline premiums.

20 (2) GENERAL RULE.—Subject to subsection (e),

21 such baseline premium shall equal—

22 (A) the area baseline premium determined

23 under this section (without regard to subsection

24 (e)) for the community rating area for the pre25 vious year,
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1 (B) updated by the area inflation factor

2 (as determined in section 5001) for the year.

3 (3) ADJUSTMENT FOR PREVIOUS EXCESS RATE

4 OF INCREASE IN EXPENDITURES.—Such target for a

5 year is subject to a decrease under section 5003(e).

6 (c) ADJUSTMENT FACTORS FOR COMMUNITY RATING

7 AREAS FOR INITIAL DETERMINATION.—

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

9 an adjustment factor for each community rating

10 area.

11 (2) CONSIDERATIONS.—In establishing such

12 factor, the Secretary shall consider, the difference

13 between the national average and the community

14 rating area in such measures as health care expendi15 tures, rates of uninsurance and underinsurance, and

16 in the proportion of expenditures for services pro17 vided by academic health centers. The Secretary

18 shall also take into consideration—

19 (A) information on variations in the extent

20 to which States and community rating areas

21 need additional investment because they have

22 successfully controlled health care costs; and

23 (B) information on variations among

24 States and community rating areas due to un25 derutilization of health care services resulting
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1 from geographic barriers and lack of access to

2 health care services, particularly in underserved

3 rural and urban areas.

4 (3) APPLICATION OF FACTORS IN NEUTRAL

5 MANNER.—The application of the adjustment factors

6 under this subsection for 1997 shall be done in a

7 manner so that the weighted average of the area

8 baseline premiums for a class of enrollment for 1997

9 is equal to the national baseline premium for such

10 class determined under section 5002. Such weighted

11 average shall be based on the Secretary’s estimate of

12 the expected distribution of community rate eligible

13 individuals (taken into account under section 5002)

14 among the community rating areas.

15 (4) CONSULTATION PROCESS.—The Secretary

16 shall have a process for consulting with representa17 tives of States and purchasing cooperatives before

18 establishing the adjustment for community rating

19 areas under this subsection.

20 (d) TREATMENT OF CERTAIN STATES.—In the case

21 of a State that is not a participating State or otherwise

22 has not established community rating areas, the entire

23 State shall be treated under the provisions of this part

24 as composing a single community rating area.
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1 (e) ADJUSTMENT FOR PREVIOUS EXCESS RATE OF

2 INCREASE IN EXPENDITURES.—If the actual weighted av3 erage premium for a community rating area for a class

4 of enrollment for a year (as determined by the Secretary

5 based on actual enrollment in the first month of the year)

6 exceeds the area baseline premiums (determined under

7 this section) for the year, then the area baseline premium

shall be reduced, by 1 8 ⁄2 of the excess for the year, for each

9 of the 2 succeeding years.

10 SEC. 5004. INITIAL RATE FILING AND BID NEGOTIATION

11 PROCESS.

12 (a) FILING AND BIDDING PROCESS.—

13 (1) FILING COMMUNITY BIDS.—

14 (A) IN GENERAL.—Each participating

15 State shall establish rules and procedures for a

16 plan seeking to participate as a community17 rated health plan to file a premium rate with

18 the State and submit a premium bid to co19 operatives for coverage of the benefits as re20 quired under section 1101.

21 (B) CONDITION.—Each community bid

22 filed and cooperative bid submitted under this

23 subsection with respect to a community-rated

24 health plan shall be conditioned upon the plan’s
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1 agreement to accept any payment reduction

2 that may be imposed under section 5011.

3 (2) NEGOTIATION PROCESS.—Following the

4 bidding process under paragraph (1), a State or a

5 cooperative may conduct negotiations with health

6 plans relating to the premiums to be charged for

7 such community-rated health plans within a State or

8 cooperative. Such negotiations may result in the re9 submission of bids to the State or cooperative, but

10 in no case shall a health plan resubmit a bid that

11 exceeds its prior bid.

12 (3) LEGALLY BINDING BIDS.—All rates filed

13 and bids submitted under this subsection must be le14 gally binding with respect to the plans involved.

15 (4) ACCEPTANCE.—

16 (A) COMMUNITY BID.—The final commu17 nity rate for a community-rated health plan

18 under this subsection shall be considered to be

19 the accepted bid for such plan, except as pro20 vided in subsection (e).

21 (B) COOPERATIVE BID.—The final cooper22 ative bid submitted to a cooperative for a com23 munity-rated health plan under this subsection

24 shall be considered to be the accepted bid for

25 such plan, except as provided in subsection (e).
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1 (5) ASSISTANCE.—The Secretary shall provide

2 States and cooperatives with such information and

3 technical assistance as may assist such States and

4 cooperatives in carrying out the provisions of this

5 subsection.

6 (b) SUBMISSION OF INFORMATION TO THE SEC7 RETARY.—By not later than September 1 of each year for

8 which community bids are filed under subsection (a), each

9 State shall submit to the Secretary such information as

10 the Secretary determines necessary to conduct the process

11 described in subsection (c).

12 (c) COMPUTATION OF WEIGHTED AVERAGE ACCEPT13 ED BID.—

14 (1) IN GENERAL.—For each community rating

15 area the Secretary shall determine a weighted aver16 age accepted bid for each class of enrollment for

17 each year for which rates are filed with the State

18 under subsection (a). Such determination shall be

19 based on information, submitted under subsection

20 (b).

21 (2) EXCLUSION OF WORKSITE HEALTH PRO22 MOTION DISCOUNTS.—For purposes of calculating

23 the weighted average accepted bid and enforcing

24 baseline premiums in a community rating area in a

25 State, the Secretary shall consider the accepted bids
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1 for the year, without consideration or inclusion of

2 any worksite health promotion discount.

3 (d) NOTICE TO CERTAIN STATES.—

4 (1) IN GENERAL.—By not later than October 1

5 of each year for which rates are filed with a State,

6 the Secretary shall notify a State if the weighted av7 erage accepted bid for a class of enrollment (deter8 mined under subsection (c)) for the community rat9 ing area is greater than the area baseline premium

10 for such class for such area (determined under sec11 tion 5003) for the year.

12 (2) NOTICE OF PREMIUM REDUCTIONS.—If no13 tice is provided to a State under paragraph (1), the

14 Secretary shall notify the State and each noncomply15 ing plan of any plan payment reduction computed

16 under section 5011 for such a plan and the oppor17 tunity to voluntarily reduce the accepted bid under

18 subsection (e) in order to avoid such a reduction.

19 (e) VOLUNTARY REDUCTION OF ACCEPTED BIDS.—

20 After the Secretary has determined under subsection (c)

21 the weighted average accepted bid for a class of enrollment

22 for a community rating area and the Secretary has deter23 mined plan payment reductions, before such date as the

24 Secretary may specify (in order to provide for an open en25 rollment period), a noncomplying plan has the opportunity
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1 to voluntarily reduce its filed community bid (and if appli2 cable, its accepted cooperative bid) for such class by the

3 amount of the plan payment reduction that would other4 wise apply to the plan. Such reduction shall not affect the

5 amount of the plan payment reduction for any other plan

6 for that year.

7 SEC. 5005. STATE FINANCIAL INCENTIVES.

8 (a) ELECTION.—Any participating State may elect to

9 assume responsibility for containment of health care ex10 penditures in the State consistent with the targets estab11 lished by this part upon the approval of an application

12 by the Secretary.

13 (b) ALTERNATIVE STATE PROVIDER PAYMENT SYS14 TEMS.—Notwithstanding any other provision of law, in the

15 case of an alternative State provider payment system that

16 has been approved by the Secretary and in continuous op17 eration since July 1, 1977, the payment rates and meth18 odologies required under the State system for services pro19 vided in that State shall apply to all purchasers and

20 payors, including those under employee welfare benefit

21 plans authorized under the Employee Retirement Income

22 Security Act of 1974, workers’ compensation programs

23 under State law, the Federal Employees’ Compensation

24 Act under chapter 81 of title 5, United States Code, and
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1 Federal employee health benefit plans under chapter 89

2 of title 5, United States Code.

3 Subpart B—Plan and Provider Payment Reductions

4 to Maintain Adequate Financing

5 SEC. 5011. PLAN PAYMENT REDUCTION.

6 (a) PLAN PAYMENT REDUCTION.—In order to assure

7 that premium-related payments to community-rated

8 health plans offered in a community rating area are con9 sistent with the applicable area baseline premium for the

10 community rating area (computed under this subtitle), the

11 Secretary shall develop and utilize a methodology to re12 duce payments to each noncomplying plan within a non13 complying community rating area proportionate to the ex14 cess premium of each such plan and the relative share of

15 enrollment of community rate eligible individuals in each

16 such plan. Such methodology shall include mechanisms for

17 automatic reductions in payments made by noncomplying

18 plans to network and nonnetwork providers affiliated with

19 such plan. Such mechanism shall take into account in20 duced volume offsets.

21 (b) NONCOMPLYING COMMUNITY RATING AREA AND

22 NONCOMPLYING PLAN DEFINED.—In this part:

23 (1) NONCOMPLYING COMMUNITY RATING

24 AREA.—The term ‘‘noncomplying community rating

25 area’’ means, for a year, a community rating area
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1 for which the weighted average accepted bid (com2 puted under section 5004(c)) exceeds the community

3 rating area baseline premium for the year.

4 (2) NONCOMPLYING PLAN.—The term ‘‘non5 complying plan’’ means, for a year, a community

6 rated health plan offered in a noncomplying commu7 nity rating area if the applicable premium rate for

8 a class of enrollment for the plan for the year ex9 ceeds the baseline premiums for such class for the

10 year.

11 (c) EXCESS PREMIUM.—In this section, the ‘‘excess

12 premium’’, with respect to a noncomplying plan for a year

13 for a class of enrollment, is the amount by which—

14 (1) the accepted bid for the year for such class

15 (taking into account any voluntary reduction under

16 section 5004(e)), exceeds

17 (2) the baseline premium for such class (as de18 fined in subsection (d)) for the plan for the year.

19 (d) COMMUNITY-RATED HEALTH PLANS WITH AN

20 ACCEPTED COOPERATIVE BID NOT EQUAL TO THE FINAL

21 COMMUNITY RATE FOR SUCH PLAN.—For the purposes

22 of this section (relating to determining plan compliance

23 and plan payment reduction), if a community-rated health

24 plan has more than one applicable premium rate for a

25 class of enrollment, such health plan shall be treated as
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1 a separate health plan with respect to each applicable pre2 mium rate for such class and the enrollment in each such

3 health plan shall be considered to be the number of com4 munity-rated individuals enrolled in the community-rated

5 plan at the applicable premium rate.

6 SEC. 5012. PROVIDER PAYMENT AGREEMENTS.

7 (a) PARTICIPATING PROVIDERS.—Each community8 rated health plan in the community rating area, as part

9 of its contract or agreement with any participating pro10 vider or provider group of participating providers shall in11 clude a provision that provides that if the plan is a non12 complying plan for a year, payments to the provider (or

13 provider group) shall be reduced by an amount determined

14 appropriate by the Secretary under section 5011(a).

15 (b) APPLICATION TO COST SHARING AND TO BAL16 ANCE BILLING RESTRICTIONS.—For purposes of applying

17 section 1103 (relating to balance billing prohibitions) and

18 subtitle B of title I (relating to computation of cost shar19 ing), the payment basis otherwise used for computing any

20 limitation on billing or cost sharing shall be such payment

21 basis as adjusted by any reductions effected under this

22 section.
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1 PART 2—HEALTH EXPENDITURES OF LARGE

2 EMPLOYERS

3 SEC. 5021. CALCULATION OF PREMIUM EQUIVALENTS.

4 (a) IN GENERAL.—By January 1, 1997, the Sec5 retary shall develop a methodology for calculating an an6 nual per capita expenditure equivalent for amounts paid

7 for coverage for the benefit package by a large employer.

8 (b) ADJUSTMENT PERMITTED.—Such methodology

9 shall permit a large employer to petition the Secretary of

10 Labor for an adjustment of the inflation adjustment that

11 would otherwise apply to compensate for material changes

12 in the demographic characteristics of the experience rate

13 eligible individuals receiving coverage through plans of14 fered by the employer in a community rating area.

15 (c) REPORTING.—

16 (1) IN GENERAL.—In 1999 and each subse17 quent year, each large employer offering a health

18 plan prior to 1999, shall report to the Secretary of

19 Labor, in a form and manner specified by the Sec20 retary, the average of the annual per capita expendi21 ture equivalent for the previous 3-year period.

22 (2) OTHER EMPLOYERS.—Each large employer

23 not previously offering a plan shall make such a re24 port in 2002 and in each subsequent year.
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1 SEC. 5022. SANCTIONS FOR LARGE EMPLOYER FOR EXCESS

2 INCREASE IN EXPENDITURES.

3 (a) SANCTION.—

4 (1) ACTIONS AGAINST LARGE EMPLOYERS.—If

5 a large employer has two excess years (as defined in

6 subsection (b)) in a 3-year-period, then, effective be7 ginning with the second year following the second

8 excess year in such period, the Secretary of Labor

9 shall take action under section 1502, and such em10 ployer shall be considered to be a small employer for

11 purposes of this Act and shall be required to make

12 premium payments in accordance with section 5124.

13 (2) TERMINATION OF SPONSORSHIP FOR OTHER

14 EXPERIENCE-RATED PLANS.—If an association,

15 church, or multi-employer plan has two excess years

16 (as defined in subsection (b)) in a 3-year-period,

17 then, effective beginning with the second year follow18 ing the second excess year in such period—

19 (A) the Secretary of Labor shall terminate

20 the election of the large employer under section

21 1502; and

22 (B) an employer that was an experience23 rated employer with respect to such purchaser

24 shall become a community-rated employer (un25 less the employer is a large employer).

26 (b) EXCESS YEAR.—
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1 (1) IN GENERAL.—In subsection (a), the term

2 ‘‘excess year’’ means, for a large employer referred

3 to in section 5021(c)(2), a year (after 2000) and for

4 an employer or plan referred to in section

5 5021(c)(1) or 5022(a)(2) a year (after 1998), for

6 which the rate of increase for the large employer

7 (specified in paragraph (2)) for the year, exceeds

8 the national corporate inflation factor (specified in

9 paragraph (3)) for the year.

10 (2) RATE OF INCREASE FOR LARGE EM11 PLOYER.—The rate of increase for a large employer

12 for a year, specified in this paragraph, is the per13 centage by which the average of the annual per cap14 ita expenditure equivalent for the large employer (re15 ported under section 5021 (c)) for the 3-year period

16 ending with such year, exceeds the average of the

17 annual per capita expenditure equivalent for the

18 large group purchaser (reported under such sub19 section) for the 3-year period ending with the pre20 vious year adjusted for any changes in the actuarial

21 value of the benefit package provided by such large

22 employer.

23 (3) NATIONAL CORPORATE INFLATION FAC24 TOR.—The national corporate inflation factor for a

25 year, specified in this paragraph, is the average of
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1 the general health care inflation factors (as defined

2 in section 5001(a)(3)) for each of the 3 years ending

3 with such year.

4 PART 3—TREATMENT OF SINGLE-PAYER STATES

5 SEC. 5031. SPECIAL RULES FOR SINGLE-PAYER STATES.

6 In the case of a Statewide single-payer State, the Sec7 retary shall compute a Statewide per capita premium tar8 get for each year in the same manner as the community

9 rating area per capita premium target is determined under

10 section 5003.

11 Subtitle B—Premium-Related

12 Financings

13 PART 1—FAMILY PREMIUM PAYMENTS

14 Subpart A—Family Share

15 SEC. 5101. FAMILY SHARE OF PREMIUM.

16 (a) REQUIREMENT.—Each family enrolled in a com17 munity-rated health plan or in a, experienced-rated health

18 plan in a class of family enrollment is responsible for pay19 ment of the family share of premium payable respecting

20 such enrollment. Such premium may be paid by an em21 ployer or other person on behalf of such a family.

22 (b) FAMILY SHARE OF PREMIUM DEFINED.—

23 (1) IN GENERAL.—In this subtitle, the term

24 ‘‘family share of premium’’ means, with respect to

25 enrollment of a family—
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1 (A) in a community-rated health plan, the

2 amount specified in paragraph (2) for the class,

3 or

4 (B) in an experienced-rated health plan,

5 the amount specified in paragraph (3) for the

6 class.

7 (2) COMMUNITY-RATED PLANS.—

8 (A) IN GENERAL.—The amount specified

9 in this paragraph for a health plan based on a

10 class of family enrollment is the base amount

11 described in subparagraph (B) reduced (but not

12 below zero) by the sum of the amounts de13 scribed in subparagraph (C).

14 (B) BASE.—The base amounts described

15 in this subparagraph (for a plan for a class of

16 enrollment) is the applicable premium with re17 spect to such class of enrollment.

18 (C) CREDITS AND DISCOUNTS.—The

19 amounts described in this subparagraph (for a

20 plan for a class of enrollment) are as follows:

21 (i) FAMILY CREDIT.—The amount of

22 the family credit under section 5102(a).

23 (ii) INCOME RELATED DISCOUNT.—

24 The amount of any income-related discount

25 provided under section 5103.
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1 (D) LIMIT ON MISCELLANEOUS CRED2 ITS.—In no case shall the family share, due to

3 credits under subparagraph (C), be less than

4 zero.

5 (3) EXPERIENCE-RATED PLANS.—

6 (A) IN GENERAL.—The amount specified

7 in this paragraph for an experience-rated health

8 plan based on a class of family enrollment is

9 the applicable premium (for a plan for a class

10 of enrollment) reduced (but not below zero) by

11 the sum of the amounts described in subpara12 graph (B).

13 (B) CREDITS AND DISCOUNTS.—The

14 amounts described in this subparagraph (for a

15 plan for a class of enrollment) are as follows:

16 (i) FAMILY CREDIT.—The amount of

17 the family credit under section 5102.

18 (ii) INCOME RELATED DISCOUNT.—

19 The amount of any income-related discount

20 provided under section 5103.

21 SEC. 5102. FAMILY CREDIT.

22 (a) COMMUNITY-RATED PLANS.—The credit pro23 vided under this section for a family enrolled in a commu24 nity-rated plan for a class of family enrollment is equal

25 to 80 percent of the weighted average premium (as defined
337

•S 168 IS

1 in section 5000(b)) for community-rated plans offered in

2 the community rating area for the class.

3 (b) EXPERIENCE-RATED PLANS.—The credit pro4 vided under this section for a family enrolled in an experi5 ence-rated health plan for a class of family enrollment is

6 equal to the minimum employer premium payment re7 quired under section 5131 with respect to the family.

8 SEC. 5103. PREMIUM DISCOUNT BASED ON INCOME.

9 (a) IN GENERAL.—

10 (1) ENROLLEES IN COMMUNITY-RATED

11 PLANS.—Subject to paragraph (2), each family en12 rolled with a community-rated or experience-rated

13 plan is entitled to a premium discount under this

14 section, in the amount specified in subsection (b)(1)

15 if the family—

16 (A) is an AFDC or SSI family;

17 (B) is determined, under this title, to have

18 family adjusted income below 150 percent of

19 the applicable poverty level; or

20 (C) is a family described in subsection

21 (c)(3) for which the family obligation amount

22 under subsection (c) for the year would other23 wise exceed a specified percent of family ad24 justed income described in such subsection.
338

•S 168 IS

1 (2) MONTHLY APPLICATION TO AFDC AND SSI

2 FAMILIES.—Paragraph (1)(A) (and the family obli3 gation amount under subsection (c) insofar as it re4 lates to an AFDC or SSI family) shall be applied to

5 the premium or family obligation amount only for

6 months in which the family is such an AFDC or SSI

7 family.

8 (b) AMOUNT OF PREMIUM DISCOUNT.—

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

10 paragraphs of this subsection, the amount of the

11 premium discount under this subsection for a family

12 under a class of family enrollment is equal to—

13 (A) 20 percent of—

14 (i) for a family enrolled in a commu15 nity-rated plan offered in a community-rat16 ing area, the weighted average premium

17 for community-rated plans offered in the

18 community-rating area, increased by any

19 amount provided under paragraph (2); or

20 (ii) for a family enrolled in an experi21 ence-rated plan offered in a premium area,

22 the weighted average premium for experi23 ence-rated plans offered by the employer in

24 the premium area (as determined under

25 section 5131(b)(1)(A)) or, if less, the
339

•S 168 IS

1 amount determined under clause (i) for the

2 community-rating area in which the family

3 resides;

4 reduced (but not below zero) by—

5 (B) the sum of—

6 (i) the family obligation amount de7 scribed in subsection (c); and

8 (ii) the amount of any employer pay9 ment (not required under part 2) towards

10 the family share of premiums for covered

11 members of the family.

12 (2) INCREASE FOR COMMUNITY-RATED FAMI13 LIES TO ASSURE ENROLLMENT IN AT-OR-BELOW-AV14 ERAGE-COST PLAN.—In the case of a family enrolled

15 in a community-rated plan, if a State determines

16 that a family eligible for a discount under this sec17 tion is unable to enroll in an at-or-below-average18 cost plan (as defined in paragraph (3)) that serves

19 the area in which the family resides, the amount of

20 the premium discount under this subsection is in21 creased to the extent that such amount will permit

22 the family to enroll in a community-rated plan with23 out the need to pay a family share of premium

24 under this part in excess of the sum described in

25 paragraph (1)(B).
340

•S 168 IS

1 (3) AT-OR-BELOW-AVERAGE-COST PLAN DE2 FINED.—In this section, the term ‘‘at-or-below-aver3 age-cost plan’’ means a community-rated plan the

4 premium for which does not exceed, for the class of

5 family enrollment involved, the weighted average

6 premium for the community-rating area.

7 (c) FAMILY OBLIGATION AMOUNT.—

8 (1) DETERMINATION.—Subject to paragraphs

9 (2) and (3), the family obligation amount under this

10 subsection is determined as follows:

11 (A) NO OBLIGATION IF INCOME BELOW IN12 COME THRESHOLD AMOUNT OR IF AFDC OR SSI

13 FAMILY.—If the family adjusted income (as de14 fined in section 5302(d)) of the family is less

15 than the income threshold amount (specified in

16 paragraph (4)) or if the family is an AFDC or

17 SSI family, the family obligation amount is

18 zero.

19 (B) INCOME ABOVE INCOME THRESHOLD

20 AMOUNT.—If such income is at least such in21 come threshold amount and the family is not an

22 AFDC or SSI family, the family obligation

23 amount is the sum of the following:

24 (i) FOR INCOME (ABOVE INCOME

25 THRESHOLD AMOUNT) UP TO THE POV-
341

•S 168 IS

1 ERTY LEVEL.—The product of the initial

2 marginal rate (specified in paragraph (2))

3 and the amount by which—

4 (I) the family adjusted income

5 (not including any portion that ex6 ceeds the applicable poverty level for

7 the class of family involved), exceeds;

8 (II) such income threshold

9 amount.

10 (ii) GRADUATED PHASE OUT OF DIS11 COUNT UP TO 150 PERCENT OF POVERTY

12 LEVEL.—The product of the final marginal

13 rate (specified in paragraph (2)) and the

14 amount by which the family adjusted in15 come exceeds 100 percent (but is less than

16 150 percent) of the applicable poverty

17 level.

18 (2) MARGINAL RATES.—In paragraph (1), for a

19 year:

20 (A) INITIAL MARGINAL RATE.—The initial

21 marginal rate is the ratio of—

22 (i) 3 percent of the applicable poverty

23 level for the class of enrollment involved

24 for the year; to
342

•S 168 IS

1 (ii) the amount by which such poverty

2 level exceeds such income threshold

3 amount.

4 (B) FINAL MARGINAL RATE.—The final

5 marginal rate is 5.7 percent.

6 (3) LIMITATION TO 3.9 PERCENT FOR ALL FAM7 ILIES.—

8 (A) IN GENERAL.—In no case shall the

9 family obligation amount under this subsection

10 for the year exceed 3.9 percent.

11 (B) INDEXING OF PERCENTAGE.—

12 (i) IN GENERAL.—The percentage

13 specified in subparagraph (A) shall be ad14 justed for any year after 1995 so that the

15 percentage for the year bears the same

16 ratio to the percentage so specified as the

17 ratio of—

18 (I) 1 plus the general health care

19 inflation factor (as defined in section

20 5001(a)(3)) for the year, bears to

21 (II) 1 plus the percentage speci22 fied by the Secretary in the establish23 ment of cost sharing schedules in sub24 title B of title I (relating to indexing
343

•S 168 IS

1 of dollar amounts related to cost shar2 ing) for the year.

3 (ii) ROUNDING.—Any adjustment

4 under clause (i) for a year shall be rounded to the nearest multiple of 1 5 ⁄10 of 1 per6 centage point.

7 (4) INCOME THRESHOLD AMOUNT.—

8 (A) IN GENERAL.—For purposes of this

9 subtitle, the income threshold amount specified

10 in this paragraph is $1,000 (adjusted under

11 subparagraph (B)).

12 (B) INDEXING.—For the 1-year period be13 ginning on January 1, 1996, the income thresh14 old amount specified in subparagraph (A) shall

15 be increased or decreased by the same percent16 age as the percentage increase or decrease by

17 which the average CPI (described in section

18 1702(12)) for the 12-month-period ending with

19 August 31 of the preceding year exceeds such

20 average for the 12-month period ending with

21 August 31, 1994.

22 (C) ROUNDING.—Any increase or decrease

23 under subparagraph (B) for a year shall be

24 rounded to the nearest multiple of $10.
344

•S 168 IS

1 Subpart B—Repayment of Family Credit by Certain

2 Families

3 SEC. 5110. REPAYMENT OF FAMILY CREDIT BY CERTAIN

4 FAMILIES.

5 (a) IN GENERAL.—Subject to the succeeding provi6 sions of this subpart, each family which is provided a fam7 ily credit under section 5102 for a class of enrollment is

8 liable for repayment of an amount equal to the base em9 ployment monthly premium (applicable to such class) for

10 the month under section 5122.

11 (b) REDUCTION FOR SELF-EMPLOYMENT PAY12 MENTS.—The liability of a family under this section for

13 a year shall be reduced (but not below zero) by the amount

14 of any employer payments made in the year under section

15 5126 based on the net earnings from self-employment of

16 a family member.

17 SEC. 5111. NO LIABILITY FOR FAMILIES EMPLOYED FULL18 TIME; REDUCTION IN LIABILITY FOR PART19 TIME EMPLOYMENT.

20 (a) IN GENERAL.—The amount of any liability under

21 section 5110 shall be reduced, in accordance with rules

22 established by the Secretary consistent with this section,

23 based on employer premiums payable under section 5121

24 with respect to the employment of a family member who

25 is a qualifying employee or with respect to a family mem-
345

•S 168 IS

1 ber. In no case shall the reduction under this section result

2 in any payment owing to a family.

3 (b) CREDIT FOR FULL-TIME AND PART-TIME EM4 PLOYMENT.—

5 (1) IN GENERAL.—Under rules of the Sec6 retary, in the case of a family enrolled under a class

7 of family enrollment, if a family member is a quali8 fying employee for a month and the employer is lia9 ble for payment under section 5121 based on such

10 employment—

11 (A) FULL-TIME EMPLOYMENT CREDIT.—If

12 the employment is on a full-time basis (as de13 fined in section 1701(b)(2)(A)) the liability

14 under section 5110 shall be reduced by the

15 credit amount described in subparagraph (C).

16 (B) PART-TIME EMPLOYMENT CREDIT.—If

17 the employment is on a part-time basis (as de18 fined in section 1701(b)(2)(A)) the liability

19 under section 5110 shall be reduced by the em20 ployment ratio of the credit amount described

21 in subparagraph (C).

22 (C) FULL-TIME MONTHLY CREDIT.—The

23 amount of the credit under this subparagraph,

24 with respect to employment by an employer in

a month, is 1 25 ⁄12 (or, if applicable, the fraction
346

•S 168 IS

1 described in paragraph (2)) of the amount owed

2 under section 5110, based on the class of en3 rollment, for the year.

4 (2) COVERAGE DURING ONLY PART OF A

5 YEAR.—In the case of a family that is not enrolled

6 in a community-rated health plan for all the months

7 in a year, the fraction described in this paragraph

8 is 1 divided by the number of months in the year in

9 which the family was enrolled in such a plan.

10 SEC. 5112. LIMITATION OF LIABILITY BASED ON INCOME.

11 (a) IN GENERAL.—In the case of an eligible family

12 described in subsection (b), the repayment amount re13 quired under this subpart (after taking into account any

14 work credit earned under section 5111) with respect to

15 a year shall not exceed the amount of liability described

16 in subsection (c) for the year.

17 (b) ELIGIBLE FAMILY DESCRIBED.—An eligible fam18 ily described in this subsection is a family which is deter19 mined by the State for the community rating area in which

20 the family resides, to have wage-adjusted income (as de21 fined in subsection (d)) below 300 percent of the applica22 ble poverty level.

23 (c) AMOUNT OF LIABILITY.—

24 (1) DETERMINATION.—Subject to subsection

25 (f), in the case of a family enrolled in a class of en-
347

•S 168 IS

1 rollment with wage-adjusted income (as defined in

2 subsection (d)), the amount of liability under this

3 subsection is determined as follows:

4 (A) NO OBLIGATION IF INCOME BELOW IN5 COME THRESHOLD AMOUNT OR IF AFDC OR SSI

6 FAMILY.—If such income is than the income

7 threshold amount (specified in section

8 5103(c)(4)) or if the family is an AFDC or SSI

9 family, the amount of liability is zero.

10 (B) INCOME ABOVE INCOME THRESHOLD

11 AMOUNT.—If such income is at least such in12 come threshold amount and the family is not an

13 AFDC or SSI family, the amount of liability is

14 the sum of the following:

15 (i) FOUR PERCENT OF INCOME

16 (ABOVE INCOME THRESHOLD AMOUNT) UP

17 TO THE POVERTY LEVEL.—The initial

18 marginal rate (specified in paragraph

19 (2)(A)) of the amount by which—

20 (I) the wage-adjusted income

21 (not including any portion that ex22 ceeds the applicable poverty level for

23 the class of family involved), exceeds

24 (II) such income threshold

25 amount.
348

•S 168 IS

1 (ii) SECOND MARGINAL RATE.—The

2 second marginal rate (specified in para3 graph (2)(B) of the amount by which—

4 (I) the wage adjusted income

5 (not including any portion that ex6 ceeds twice the applicable poverty

7 level for the class of family involved),

8 exceeds

9 (II) the applicable poverty level

10 for the class of family enrollment.

11 (iii) FINAL MARGINAL RATE.—Where

12 wage-adjusted income exceeds 200 percent

13 of the applicable poverty level, the final

14 marginal rate (specified in paragraph

15 (2)(C)) of the amount by which the wage16 adjusted income exceeds 100 percent of the

17 applicable poverty level.

18 (2) MARGINAL RATES.—In paragraph (1)—

19 (A) INITIAL MARGINAL RATE.—The initial

20 marginal rate, for a year for a class of enroll21 ment, is the ratio of—

22 (i) 4 percent of the applicable poverty

23 level for the class of enrollment for the

24 year, to
349

•S 168 IS

1 (ii) the amount by which such poverty

2 level exceeds such income threshold

3 amount.

4 (B) SECOND MARGINAL RATE.—The sec5 ond marginal rate, for a year for the class of

6 enrollment, is 7.6 percent.

7 (C) FINAL MARGINAL RATE.—The final

8 marginal rate, for a year for a class of enroll9 ment, is the ratio of—

10 (i) the amount by which (I) the

11 amount of the repayment amount de12 scribed in section 5111(a) exceeds (II) 5.8

13 percent of twice the applicable poverty level

14 (for the class and year); to

15 (ii) 200 percent of such poverty level.

16 (3) SECOND MARGINAL RATE.—

17 (A) IN GENERAL.—If, for a class of enroll18 ment for a community rating area in a State,

19 the second marginal rate exceeds the final mar20 ginal rate, the State may adjust such marginal

21 rates so that the second marginal rate and the

22 final marginal rate are the same and equal to

23 the ratio of—

24 (i) the amount by which (I) the

25 amount of the repayment amount de-
350

•S 168 IS

1 scribed in section 5111(a) exceeds (II) 4

2 percent of the applicable poverty level (for

3 the class and year); to

4 (ii) 200 percent of such poverty level.

5 (d) WAGE-ADJUSTED INCOME DEFINED.—In this

6 subtitle, the term ‘‘wage-adjusted income’’ means, for a

7 family, family adjusted income of the family, reduced by

8 the sum of the following:

9 (1)(A) Subject to subparagraph (B), the

10 amount of any wages included in such family’s in11 come that is received for employment which is taken

12 into account in the computation of the amount of

13 employer premiums under section 5121 (without

14 consideration of section 5125).

15 (B) The reduction under subparagraph (A)

16 shall not exceed for a year $5,000 (adjusted under

17 section 5103(c)(3)(B)) multiplied by the number of

18 months (including portions of months) of employ19 ment with respect to which employer premiums were

20 payable under section 5121 (determined in a manner

21 consistent with section 1701(b)(3)).

22 (2) The amount of net earnings from self em23 ployment of the family taken into account under sec24 tion 5125.
351

•S 168 IS

1 (3) The amount of unemployment compensation

2 included in income under section 85 of the Internal

3 Revenue Code of 1986.

4 SEC. 5113. PAYMENTS BY NONQUALIFYING EMPLOYEES.

5 (a) IN GENERAL.—In the case of an eligible family

6 described in paragraph (b), the net liability of the family

7 under this section shall be the amount described in sub8 section (c), limited by the amount described in subsection

9 (d) plus the amount described in subsection (e).

10 (b) ELIGIBLE FAMILY DESCRIBED.—The family de11 scribed in this paragraph is a family that has one or more

12 nonqualifying employees and has no full-time qualifying

13 employees. The Secretary shall develop rules for applying

14 this section to families whose employment status with re15 spect to exempt employers changes during the year.

16 (c) AMOUNT.—The amount described in this sub17 section is the sum of—

18 (1) the family share as defined in section 5101

19 (including any discounts under 5103); and

20 (2) the family credit repayment amount de21 scribed in subpart B of title VI (including any re22 ductions under section 5103); reduced by—

23 (3) the amount (if any) by which that the pre24 mium with respect to such family exceeds the

25 weighted average premium (applicable to the family).
352

•S 168 IS

1 (d) LIMIT.—The limit described in this subsection is

2 the following:

3 (1) for a family with family adjusted income of

4 less than 150 percent of the applicable poverty level,

5 4 percent of family adjusted income;

6 (2) for a family with family adjusted income of

7 at least 150 percent but less than 175 percent of the

8 applicable poverty level, 4.5 percent of family ad9 justed income;

10 (3) for a family with family adjusted income of

11 at least 175 percent but less than 225 percent of the

12 applicable poverty level, 5 percent of family adjusted

13 income; and

14 (4) for a family with family adjusted income of

15 at least 225 percent but less than 400 percent of the

16 applicable poverty level, 6 percent of family adjusted

17 income.

18 (e) The amount described in this subsection is the

19 amount in subsection (c)(3).

20 (f) INDEXING OF PERCENTAGES.—

21 (1) IN GENERAL.—The percentage of family ad22 justed income specified in paragraphs (1) through

23 (4) of subsection (d) shall be adjusted for any year

24 after 1994 so that the percentage for the year bears
353

•S 168 IS

1 the same ratio to the percentage so specified as the

2 ratio of—

3 (A) 1 plus the general health care inflation

4 factor (as defined in section 5001(a)(3)) for the

5 year, bears to

6 (B) 1 plus the percentage specified by the

7 Secretary in the establishment of cost sharing

8 schedules in subtitle B of title I.

9 (2) ROUNDING.—Any adjustment under para10 graph (1) for a year shall be rounded to the nearest

multiple of 1 11 ⁄10 of 1 percentage point.

12 SEC. 5114. SPECIAL TREATMENT OF CERTAIN MEDICARE

13 BENEFICIARIES.

14 In the case of an individual who would be a medicare15 eligible individual in a month but for the application of

16 section 1012(a) on the basis of employment (in the month

17 or a previous month) of the individual or the individual’s

18 spouse or parent, the individual (or spouse or parent, as

19 the case may be) so employed is considered, for purposes

20 of section 5112, to be a full-time employee described in

21 such section in such month.
354

•S 168 IS

1 PART 2—EMPLOYER PREMIUM PAYMENTS

2 Subpart A—Small Business Exemption

3 SEC. 5116. EXEMPTION FROM COVERAGE OBLIGATIONS.

4 An exempt employer as defined section 5117 shall be

5 exempt from requirements described in this part, unless

6 the employer elects under section 5118 to be treated as

7 a community-rated employer.

8 SEC. 5117. EXEMPT EMPLOYER DEFINED.

9 (a) IN GENERAL.—In this section—

10 (1) the term ‘‘exempt employer’’ means an em11 ployer that does not employ, on average, more than

12 10 full-time equivalent employees;

13 (2) and is an employer with average annual

14 wages per full-time equivalent employee of less than

15 $24,000; and

16 (3) the average number of full-time equivalent

17 employees shall be determined by averaging the

18 number of full-time equivalent employees employed

19 by the employer in each countable month during the

20 year.

21 (b) DETERMINATIONS.—The number of full-time

22 equivalent employees shall be determined using the rules

23 under section 1701(b)(2).

24 (c) EXEMPT EMPLOYER.—The term ‘‘exempt em25 ployer’’ shall not include an individual described in section

26 5126(c)(2).
355

•S 168 IS

1 SEC. 5118. ELECTION.

2 A exempt employer may elect to be treated as a com3 munity-rated employer under the procedures determined

4 by the Secretary.

5 SEC. 5119. TREATMENT OF EXEMPT EMPLOYERS.

6 (a) IN GENERAL.—

7 (1) COMMUNITY RATED EMPLOYER.—An ex8 empt employer shall be treated as a community

9 rated employer as of the first date of the first year

10 following an election made under section 5118.

11 (2) ELIGIBILITY FOR DISCOUNTS.—An exempt

12 employer making an election under section 5118

13 shall be eligible for discounts under 5123.

14 SEC. 5120. NONELECTING EXEMPT EMPLOYER.

15 (a) IN GENERAL.—The term ‘‘nonelecting exempt

16 employer’’ means an exempt employer that has not made

17 an election under section 5118.

18 (b) APPLICATION OF RULES SIMILAR TO MEDICARE

19 NONDISCRIMINATION RULES TO NON-ELECTING EM20 PLOYERS.—Subject to subsection (b), the provisions of

21 paragraphs (1)(A), (1)(D), (1)(E), (3)(A), and (3)(C) of

22 section 1862(b) of the Social Security Act shall apply to

23 an individual eligible for premium assistance under this

24 title in relation to any non-electing employer in the same

25 manner as such provisions apply to an individual age 65

26 or over who is entitled to benefits under title XVIII of
356

•S 168 IS

1 such Act under section 226(a) of such Act in relation to

2 such employer.

3 Subpart B—Community-Rated Employers

4 SEC. 5121. EMPLOYER PREMIUM PAYMENT REQUIRED.

5 (a) REQUIREMENT.—

6 (1) IN GENERAL.—Each community-rated em7 ployer described in paragraph (2) for a month shall

8 pay at least an amount equal to the sum across all

9 qualifying employees of the amount specified in sub10 section (b) for each such qualifying employee of the

11 employer.

12 (2) EMPLOYER DESCRIBED.—An employer de13 scribed in this paragraph for a month is an employer

14 that—

15 (A) in a month employs one or more quali16 fying employees (as defined in section

17 1701(b)(1)); and

18 (B) is not exempt under section 3127 of

19 the Internal Revenue Code of 1986 from the

20 taxes imposed in section 3111 of such code.

21 (3) TREATMENT OF CERTAIN EMPLOYMENT BY

22 EXPERIENCE-RATED EMPLOYERS.—An experience23 rated employer shall be deemed, for purposes of this

24 subpart, to be a community-rated employer with re-
357

•S 168 IS

1 spect to qualifying employees who are not experience

2 rate eligible individuals.

3 (b) PREMIUM PAYMENT AMOUNT.—

4 (1) IN GENERAL.—Except as provided in sec5 tion 5123 (relating to a discount for certain employ6 ers), the amount of the employer premium payment,

7 for a month for each qualifying employee of the em8 ployer who is residing in a community rating area,

9 is the payment amount computed under paragraph

10 (2) with respect to such employee in such area.

11 (2) PAYMENT AMOUNT FOR EACH EMPLOYEE IN

12 A CLASS OF FAMILY ENROLLMENT.—The payment

13 amount under this paragraph, for an employer for

14 each qualifying employee residing in a community

15 rating area, is the product of—

16 (A) the base employment monthly premium

17 determined under section 5122 for the applica18 ble class of family enrollment for the previous

19 month for the community rating area, and

20 (B) the full-time employment ratio (as de21 fined in section 1701 for the previous month.

22 (3) SPECIAL RULES FOR DIVIDED FAMILIES.—

23 In the case of an individual who is a qualifying em24 ployee of an employer, if the individual has a spouse
358

•S 168 IS

1 or child who is not treated as part of the individual’s

2 family because of section 1012—

3 (A) the employer premium payment under

4 this section shall be computed as though such

5 section had not applied, and

6 (B) the State shall provide for proportional

7 payments (consistent with rules established by

8 the Secretary) to the health plans (if different)

9 of the qualifying employee and of the employ10 ee’s spouse and children.

11 SEC. 5122. COMPUTATION OF BASE EMPLOYMENT MONTH12 LY PREMIUM.

13 Each State shall provide for the computation for each

14 year (beginning with the first year) of a base employment

15 monthly premium for each class of family enrollment equal

to 1 16 ⁄12 of 80 percent of the weighted average premium for

17 the community rating area for such class of enrollment

18 adjusted to account for the average number of workers

19 per family within such class. Any such adjustment made

20 regarding the dual parent family class of enrollment shall

21 also be made to the single parent family class.

22 SEC. 5123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS.

23 (a) EMPLOYER DISCOUNT.—

24 (1) IN GENERAL.—Subject to section 5124(c),

25 the amount of the employer premium payment re-
359

•S 168 IS

1 quired under section 5121(b) for a community-rated

2 employer for any year for a qualifying employee

3 shall not exceed the limiting percentage (as defined

4 in subsection (b)) of such qualifying employee’s

5 wages for that year.

6 (2) EXCLUSION OF FEDERAL GOVERNMENT EM7 PLOYERS.—Paragraph (1) shall not apply to the

8 Federal Government.

9 (b) LIMITING PERCENTAGE DEFINED.—In sub10 section (a)—

11 (1) ANY EMPLOYER.—For an employer that is

12 not a medium-sized employer (as defined in sub13 section (c)) or an exempt employer (as defined in

14 subsection 5117), the limiting percentage is 12 per15 cent.

16 (2) MEDIUM-SIZED EMPLOYERS.—For an em17 ployer that is a medium-sized employer and that has

18 an average number of full-time equivalent employees

19 and average annual wages per full-time equivalent

20 employee (as determined under subsection (d)), the

21 limiting percentage is the applicable percentage de22 termined based on following table:

Average

number of

full-time

equivalent

employees

$0–

$12,000

$12,001–

$15,000

$15,001–

$18,000

$18,001–

$21,000

$21,001–

$24,000

$24,001 or

more

Fewer

than 15 4.2% 5.5% 6.8% 8.1% 9.4% 12%
360

•S 168 IS

Average

number of

full-time

equivalent

employees

$0–

$12,000

$12,001–

$15,000

$15,001–

$18,000

$18,001–

$21,000

$21,001–

$24,000

$24,001 or

more

15 but

fewer

than 25 5.5% 6.8% 8.1% 9.4% 10.7% 12%

25 but

fewer

than 50 6.8% 8.1% 9.4% 10.7% 12% 12%

50 but not

over 75 8.1% 9.4% 10.7% 12% 12% 12%

1 (3) SMALL EMPLOYERS.—For an employer that

2 is an exempt employer and elects to be a commu3 nity-rated employer (in accordance of section

4 5119), the limiting percentage is the limiting per5 centage described in paragraph (2).

6 (4) EXPERIENCE-RATED EMPLOYERS.—The

7 value of discounts provided to an experience-rated

8 employer shall not exceed the amount that the em9 ployer would receive if the employer was treated as

10 a community-rated employer.

11 (c) MEDIUM-SIZED EMPLOYER DEFINED.—

12 (1) IN GENERAL.—In this section, the term

13 ‘‘medium-sized employer’’ means an employer that

14 does not employ, on average, less than 11 full-time

15 equivalent employees or more than 75 full-time

16 equivalent employees.

17 (2) DETERMINATIONS.—The number of full18 time equivalent employees shall be determined using

19 the rules under section 1701(b)(2).
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•S 168 IS

1 (d) AVERAGE ANNUAL WAGES PER FULL-TIME

2 EQUIVALENT EMPLOYEE DEFINED.—

3 (1) IN GENERAL.—In this section, the term

4 ‘‘average annual wages per full-time equivalent em5 ployee’’ means, for an employer for a year—

6 (A) the total wages paid in the year to in7 dividuals who, at the time of payment of the

8 wages, are qualifying employees of the em9 ployer; divided by

10 (B) the number of full-time equivalent em11 ployees of the employer in the year.

12 (2) DETERMINATION.—The Secretary may es13 tablish rules relating to the computation of the aver14 age annual wages for employers.

15 (e) TREATMENT OF CERTAIN SELF-EMPLOYED INDI16 VIDUALS.—In the case of an individual who is a partner

17 in a partnership, is a 2-percent shareholder in an S cor18 poration (within the meaning of section 1372 of the Inter19 nal Revenue Code of 1986), or is any other individual who

20 carries on a trade or business as a sole proprietorship,

21 for purposes of this section—

22 (1) the individual is deemed to be an employee

23 of the partnership, S corporation, or proprietorship,

24 and
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1 (2) the individual’s net earnings from self em2 ployment attributable to the partnership, S corpora3 tion, or sole proprietorship are deemed to be wages

4 from the partnership, S corporation, or proprietor5 ship.

6 (f) APPLICATION TO EMPLOYERS.—An employer that

7 claims that this section applies—

8 (1) shall provide notice to the State of the claim

9 at the time of making payments under this subpart;

10 and

11 (2) shall make available such information (and

12 provide access to such information) as the State may

13 require (in accordance with regulations of the Sec14 retary of Labor) to audit the determination of—

15 (A) whether the employer is a medium em16 ployer, and, if so, the average number of full17 time equivalent employees and average annual

18 wages of the employer; and

19 (B) the total wages paid by the employer

20 for qualifying employees.

21 (g) TREATMENT OF MULTI-AREA EMPLOYERS.—In

22 the case in which this section is applied to an employer

23 that makes employer premium payments in more than one

24 community rating areas, the reduction under this section
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1 shall be applied in a pro-rated manner to the premium

2 payments made to all such areas.

3 SEC. 5124. PAYMENT ADJUSTMENT FOR CERTAIN LARGE

4 EMPLOYERS.

5 If the Secretary determines that the average antici6 pated cost for employees (and dependents of such employ7 ees) of an employer described in section 5022 exceeds the

8 anticipated average cost for all community-rate eligible in9 dividuals residing in the area, including costs to the gov10 ernment, such employee’s payments shall be adjusted by

11 an amount determined appropriate by the Secretary.

12 SEC. 5125. APPLICATION TO SELF-EMPLOYED INDIVIDUALS.

13 (a) IN GENERAL.—A self-employed individual (as de14 fined in section 1701(c)(2)) shall be considered, for pur15 poses of this subpart to be an employer of himself or her16 self and to pay wages to himself or herself equal to the

17 amount of net earnings from self-employment (as defined

18 in section 1701(c)(1)).

19 (b) SPECIAL RULE FOR CERTAIN SELF-EMPLOYED

20 INDIVIDUALS.—

21 (1) IN GENERAL.—In the case of certain self22 employed individuals described in paragraph (2), the

23 payment obligation under this section shall be lim24 ited to the liability described in subsection (c) of sec25 tion 5113 (substituting the amount of net earnings
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1 from self employment (defined in section 1701(c)(1))

2 of such individual for wage adjusted income).

3 (2) SELF-EMPLOYED INDIVIDUALS.—The indi4 viduals described in this paragraph are self-employed

5 individuals (as defined in section 1701(c)(2)) for a

6 year who are not employers with respect to other

7 qualifying employees in such year.

8 (3) SPECIAL RULE FOR CERTAIN CLOSELY9 HELD BUSINESSES.—

10 (A) IN GENERAL.—In the case of an indi11 vidual who—

12 (i) has wage-adjusted income (as de13 fined in section 5113(d), determined with14 out regard to paragraphs (1)(B) and (2)

15 thereof) that exceeds 300 percent (or such

16 higher percentage as the Secretary may es17 tablish) of the applicable poverty level, and

18 (ii) is both a substantial owner and an

19 employee of a closely held business,

20 the amount of any reduction under paragraph

21 (1)(A) that is attributable to the individual’s

22 employment by that business shall be appro23 priately reduced in accordance with rules pre24 scribed by the Secretary, in order to prevent in25 dividuals from avoiding payment of the full
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1 amount owed through fraudulent or secondary

2 employment arrangements.

3 (B) CLOSELY HELD BUSINESS.—For pur4 poses of subparagraph (A), a business is ‘‘close5 ly held’’ if it is an employer that meets the re6 quirements of section 542(a)(2) of the Internal

7 Revenue Code of 1986 or similar requirements

8 as appropriate in the case of a partnership or

9 other entity.

10 Subpart C—Large Employers

11 SEC. 5131. LARGE EMPLOYER PREMIUM PAYMENT RE12 QUIRED.

13 (a) PER EMPLOYEE PREMIUM PAYMENT.—Subject

14 to section 5124, each experience-rated large employer that

15 in a month in a year employs a qualifying employee who

16 is—

17 (1) enrolled in an experience-rated health plan,

18 shall provide for a payment toward the premium for

19 the plan for such employee in an amount at least

20 equal to the large employer premium payment speci21 fied in subsection (b); or

22 (2) is not so enrolled, shall make employer pre23 mium payments with respect to such employment

24 under subpart B in the same manner as if the em-
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1 ployer were a community-rated employer (except as

2 otherwise provided in such subpart).

3 (b) LARGE EMPLOYER PREMIUM.—

4 (1) AMOUNT.—

5 (A) IN GENERAL.—The amount of the

6 large employer premium payment for a month

7 in a year for a class of family enrollment for a

8 family residing in a geographic area is 80 per9 cent of the weighted average monthly premium

10 of the experience-rated health plans offered by

11 the large employer for that class of enrollment

12 for families residing in that area.

13 (B) APPLICATION TO SELF-INSURED

14 PLANS.—In applying this paragraph in the case

15 of one or more experience-rated health plans

16 that are self-insured plans—

17 (i) the ‘‘premium’’ for the plan is the

18 actuarial equivalent of such premium,

19 based upon the methodology (or such other

20 consistent methodology) used under section

21 5021(a); and

22 (ii) the premium amount, for different

23 classes and, if applicable, for different pre24 mium areas, shall be computed in a man25 ner based on such factors as may bear a
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1 reasonable relationship to costs for the

2 provision of the benefit package to the dif3 ferent classes in such areas.

4 The Secretary of Labor shall establish rules to

5 carry out this subparagraph.

6 (2) LOW-INCOME EMPLOYEES.—In the case of a

7 low-income employee entitled to a premium discount

8 under section 5103(a), the amount of the employer

9 premium payment for a month in a year for a class

10 of family enrollment shall be increased by the

11 amount of such premium discount.

12 (c) DETERMINATIONS.—Determinations under this

13 section shall be made based on such information as the

14 Secretary of Labor shall specify.

15 Subtitle C—Payments to Health

16 Plans and Miscellaneous Provi17 sions

18 SEC. 5201. ASSISTANCE TO PLANS.

19 States shall be responsible for assisting health plans

20 and cooperatives in the collection of premium payments.

21 A State may establish administrative systems (including

22 arrangements with private entities) to facilitate the collec23 tion of premiums from employers and families and the dis24 tribution of such premiums to health plans, consistent

25 with rules promulgated by the Secretary.
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1 SEC. 5202. COMPUTATION OF BLENDED PLAN PAYMENT

2 AMOUNT.

3 (a) IN GENERAL.—For purposes of section 5203, the

4 payment amount for a community-rated health plan in a

5 community rating area in a year is equal to a blended pay6 ment amount reflecting the final accepted bid for each

7 plan, the number of enrollees in each premium class, and

8 the proportion of AFDC and SSI beneficiaries throughout

9 the community rating area served by the plan.

10 (b) METHODOLOGY.—The Secretary shall establish a

11 methodology by which the blended payment amount de12 scribed in subsection (a) shall be computed and applied.

13 SEC. 5203. ADJUSTMENT TO HEALTH PLAN REVENUES

14 (a) IN GENERAL.—States shall develop and imple15 ment revenue adjustment mechanisms and collect such in16 formation as may be necessary for ensuring that payments

17 to health plans are appropriate and sufficient.

18 (b) ADJUSTMENTS.—Mechanisms under subsection

19 (a) shall include methods for risk adjustment and reinsur20 ance (in accordance with title I), the payment of premium

21 discounts (in accordance with subtitle B of title VI), pay22 ment adjustments to reflect each area’s share of AFDC

23 and SSI beneficiaries (in accordance with section 5202),

24 and other adjustments necessary to reconcile the amounts

25 collected by plans with the amounts plans are owed.
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1 SEC. 5204. CALCULATION AND PUBLICATION OF GENERAL

2 FAMILY SHARE AND GENERAL EMPLOYER

3 PREMIUM AMOUNTS.

4 (a) FAMILY SHARE.—Each State shall compute and

5 publish the following components of the general family

6 share of premiums for each community rating area des7 ignated by the State:

8 (1) PLAN PREMIUMS.—For each plan offered,

9 the applicable premiums for such plan for each class

10 of family enrollment (including the amount of any

11 family collection shortfall).

12 (2) QUALIFIED WORKSITE HEALTH PRO13 MOTION.—For each plan offered, the premium dis14 count for each level of qualified worksite health pro15 motion program.

16 (3) FAMILY CREDIT.—The family credit amount

17 for each class of family enrollment, under section

18 5102.

19 (b) EMPLOYER PREMIUMS.—Each State shall com20 pute and publish the following components of the general

21 employer premium payment amount for each community

22 rating area designated by the State:

23 (1) BASE EMPLOYER MONTHLY PREMIUM PER

24 WORKER.—The base employer monthly premium de25 termined under section 5122 for each class of family

26 enrollment.
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1 (2) QUALIFIED WORKSITE HEALTH PRO2 MOTION.—The base monthly premium discount for

3 each level of qualified worksite health promotion pro4 gram.

5 (c) RECONCILIATION OF FAMILY SHARE.—Each

6 State shall provide for the reconciliation of family pay7 ments in cases where the State determines that there has

8 been an overpayment or underpayment by or on the behalf

9 of such families in accordance with rules promulgated by

10 the Secretary.

11 SEC. 5205. EMPLOYER PAYMENT REQUIREMENT.

12 (a) IN GENERAL.—Each employer shall provide for

13 payments required under section 5121 or 5131 in accord14 ance with the applicable provisions of this Act.

15 (b) EMPLOYERS IN SINGLE-PAYER STATES.—In the

16 case of an employer with respect to employees who reside

17 in a single-payer State, the responsibilities of such em18 ployer under such system shall supersede the obligations

19 of the employer under subsection (a), except as the Sec20 retary may provide.

21 SEC. 5206. REQUIREMENT FOR EMPLOYER PAYMENT AND

22 RECONCILIATION REPORTING.

23 (a) RECONCILIATION OF EMPLOYER PREMIUM PAY24 MENTS.—Each employer (whether or not the employer

25 claimed (or claims) an employer premium discount under
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1 section 5123 for a year) that is liable for employer pre2 mium payments for any month in a year shall provide such

3 information as may be required (consistent with rules of

4 the Secretary of Labor) to determine—

5 (1) the amount of employee premium payments

6 made for all months in the year (taking into account

7 any employer premium discount under section

8 5123); and

9 (2) the appropriate amount of employer pre10 mium payments that should have been made for all

11 months in the year. Such reconciliation process shall

12 be conducted by the State (with respect to commu13 nity-rated employers) and by the Secretary of Labor

14 (with respect to experience-rated employers).

15 (b) NOTICE TO CERTAIN INDIVIDUALS WHO ARE

16 NOT EMPLOYEES.—

17 (1) IN GENERAL.—A person that carries on a

18 trade or business shall notify in writing each individ19 ual described in paragraph (2) that the person is not

20 obligated to make any employer health care premium

21 payment (under section 5121) in relation to the

22 services performed by the individual for the person.

23 (2) INDIVIDUAL DESCRIBED.—An individual de24 scribed in this paragraph, with respect to a person,

25 is an individual who normally performs services for
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1 the person in the person’s trade or business for more

2 than 40 hours per month but who is not an em3 ployee of the person (within the meaning of section

4 1701(a)).

5 (3) EXCEPTIONS.—The Secretary shall issue

6 regulations providing exceptions to the notice re7 quirement of paragraph (1) with respect to individ8 uals performing services on an irregular, incidental,

9 or casual basis.

10 (4) MODEL NOTICE.—The Secretary shall pub11 lish a model notice that is easily understood by the

12 average reader and that persons may use to satisfy

13 the requirements of paragraph (1).

14 (c) INFORMATION CLEARINGHOUSE FUNCTIONS.—

15 The Secretary shall perform information clearinghouse

16 functions under this section with respect to employers,

17 States, the Federal Government, and consumer purchas18 ing cooperatives.

19 SEC. 5207. EQUAL VOLUNTARY CONTRIBUTION REQUIRE20 MENT.

21 (a) IN GENERAL.—

22 (1) EQUAL VOLUNTARY EMPLOYER PREMIUM

23 PAYMENT REQUIREMENT.—

24 (A) COMMUNITY-RATED HEALTH PLANS.—

25 If an employer makes available a voluntary em-
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1 ployer premium payment (as defined in sub2 section (d)) on behalf of a full-time employee

3 (as defined in section 1701(b)(2)(C)) who is en4 rolled in a community-rated health plan of a

5 community rating area in a class of family en6 rollment, the employer shall make available

7 such a voluntary employer premium payment in

8 the same dollar amount to all qualifying em9 ployees (as defined in section 1701(b)(1)) of the

10 employer who are enrolled in any community11 rated health plan of the same coverage area in

12 the same class of family enrollment.

13 (B) EXPERIENCE-RATED HEALTH

14 PLANS.—If an experience-rated employer makes

15 available a voluntary employer premium pay16 ment on behalf of a full-time employee who is

17 enrolled in an experience-rated health plan of a

18 large employer in a class of family enrollment

19 in a premium area, the employer shall make

20 available such a voluntary employer premium

21 payment in the same dollar amount to all quali22 fying employees of the employer enrolled in any

23 experience-rated health plan of the same pur24 chaser in the same class of family enrollment in

25 the same premium area.
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1 (C) TREATMENT OF PART-TIME EMPLOY2 EES.—In applying subparagraphs (A) and (B)

3 in the case of a qualifying employee employed

4 on a part-time basis (within the meaning of sec5 tion 1701(b)(2)(A)(ii)), the dollar amount shall

6 be equal to the full-time employment ratio (as

7 defined in section 1701(b)(2)(B)) multiplied by

8 the dollar amount otherwise required.

9 (2) NONDISCRIMINATION AMONG PLANS SE10 LECTED.—An employer may not discriminate in the

11 wages or compensation paid, or other terms or con12 ditions of employment, with respect to an employee

13 based on the health plan (or premium of such a

14 plan) in which the employee is enrolled.

15 (b) REBATE REQUIRED IN CERTAIN CASES.—Subject

16 to subsection (c), if—

17 (1) an employer makes available a voluntary

18 employer premium payment on behalf of an em19 ployee, and

20 (2)(A) the sum of the amount of the applicable

21 family credit (under section 5102) and the voluntary

22 employer premium payment, exceeds (B) the pre23 mium for the plan selected,

24 the employer must rebate to the employee an amount

25 equal to the excess described in subparagraph (B).
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1 (c) EXCEPTION FOR COLLECTIVE BARGAINING

2 AGREEMENT.—Subsections (a) and (b) shall not apply

3 with respect to voluntary employer premium payments

4 made pursuant to a bona fide collective bargaining agree5 ment.

6 (d) VOLUNTARY EMPLOYER PREMIUM PAYMENT.—

7 In this section, the term ‘‘voluntary employer premium

8 payment’’ means any payment designed to be used exclu9 sively (or primarily) towards the cost of the family share

10 of premiums for a health plan. Such term does not include

11 any employer premiums required to be paid under part

12 3 of subtitle B of title VI.

13 SEC. 5208. PAYMENT ARRANGEMENTS.

14 (a) WITHHOLDING.—

15 (1) IN GENERAL.—In the case of a family that

16 includes a qualifying employee of an employer, the

17 employer shall deduct from the wages of the qualify18 ing employee (in a manner consistent with any rules

19 of the Secretary of Labor) the amount of the family

20 share of the premium for the plan in which the fam21 ily is enrolled.

22 (2) MULTIPLE EMPLOYMENT.—In the case of a

23 family that includes more than one qualifying em24 ployee, the family shall choose the employer to which

25 paragraph (1) will apply.
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1 (3) SATISFACTION OF LIABILITY.—An amount

2 deducted from wages of a qualifying employee by an

3 employer is deemed to have been paid by the em4 ployee and to have satisfied the employee’s obliga5 tion under subsection (a) to the extent of such

6 amount.

7 (b) OTHER METHODS.—In the case of a family that

8 does not include a qualifying employee, the State shall re9 quire payment to be made prospectively. Such payment

10 may be required to be made not less frequently than

11 monthly. The Secretary may issue regulations in order to

12 assure the timely and accurate collection of the family

13 share due.

14 Subtitle D—Cost-Sharing Assist15 ance, Application for Assistance

16 and Premium Discounts, and In17 come Reconciliation

18 SEC. 5301. REDUCTION IN COST SHARING FOR LOW-INCOME

19 FAMILIES.

20 (a) REDUCTION.—

21 (1) IN GENERAL.—Subject to subsection (b), in

22 the case of a family that is enrolled in a health plan

23 and that is either (A) an AFDC or SSI family or

24 (B) is determined under this subpart to have family

25 adjusted income below 200 percent of the applicable
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1 poverty level, the family is entitled to a reduction in

2 cost sharing in accordance with this section.

3 (2) TIMING OF REDUCTION.—The reduction in

4 cost sharing shall only apply to items and services

5 furnished after the date the application for such re6 duction is approved under section 5302 and before

7 the date of termination of the reduction under this

8 subpart, or, in the case of an AFDC or SSI family,

9 during the period in which the family is such a fam10 ily.

11 (3) INFORMATION TO PROVIDERS AND

12 PLANS.—Each State shall provide, through elec13 tronic means and otherwise, health care providers

14 and health plans with access to such information as

15 may be necessary in order to provide for the cost

16 sharing reductions under this section.

17 (b) LIMITATION.—No reduction in cost sharing under

18 subsection (c)(1) shall be available for—

19 (1) community-rated families residing in a

20 health care coverage area if the State for the area

21 determines that there are sufficient at or below aver22 age cost plans (as defined in section 5104(b)(3)),

23 which are plans with cost-sharing similar to the

24 model certified preferred provider network plans or

25 model certified health maintenance organization
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1 plans established by the Secretary under section

2 1101(h), available in the area to enroll AFDC and

3 SSI families and families with family adjusted in4 come below 150 percent of the applicable poverty

5 level;

6 (2) experience-rated families whose employer of7 fers a plan described in paragraph (1); or

8 (3) for families with family adjusted income be9 tween 150 and 200 percent of the applicable poverty

10 level.

11 (c) AMOUNT OF COST SHARING REDUCTION.—

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

13 the reduction in cost sharing under this section shall

14 be such reduction as will reduce cost sharing to the

15 level of plans with cost-sharing similar to the model

16 certified preferred provider network plans or model

17 certified health maintenance organization plans es18 tablished by the Secretary under section 1101(h)

19 (2) SPECIAL TREATMENT OF CERTAIN FAMI20 LIES.—

21 (A) AFDC, SSI AND FAMILIES BELOW POV22 ERTY.—In the case of a family that—

23 (i) is enrolled in a health plan;

24 (ii) is an AFDC, SSI family or a fam25 ily that is determined under this subpart
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1 to have a family adjusted income below

2 100 percent of the applicable poverty level;

3 and

4 (iii) is enrolled in a plan with cost5 sharing similar to the model certified pre6 ferred provider network plans or model

7 certified health maintenance organization

8 plans established by the Secretary under

9 section 1101(h), or receiving a reduction in

10 cost sharing under paragraph (1);

11 the amount of cost sharing applied with respect

12 to an item or service (other than with respect

13 to hospital emergency room services for which

14 there is no emergency medical condition, as de15 fined in section 1867(e)(1) of the Social Secu16 rity Act) shall be an amount equal to 20 per17 cent of the cost sharing amount otherwise ap18 plicable under the plan, rounded to the nearest

19 dollar.

20 (B) FAMILIES WITH INCOMES BETWEEN

21 100 AND 150 PERCENT OF POVERTY.—In the

22 case of a family that—

23 (i) is enrolled in a community-rated

24 health plan;
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1 (ii) is determined under this subpart

2 to have family adjusted income between

3 100 and 150 percent of the applicable pov4 erty level;

5 (iii) is not an AFDC or SSI family;

6 and

7 (iv) is enrolled in a plan with cost8 sharing similar to the model certified pre9 ferred provider network plans or model

10 certified health maintenance organization

11 plans established by the Secretary under

12 section 1101(h), or receiving a reduction in

13 cost sharing under paragraph (1);

14 the amount of cost sharing applied with respect

15 to an item or service (other than with respect

16 to hospital emergency room services for which

17 there is no emergency medical condition, as de18 fined in section 1867(e)(1) of the Social Secu19 rity Act) shall be an amount equal to 40 per20 cent of the cost sharing amount otherwise ap21 plicable, rounded to the nearest dollar.

22 (C) FAMILIES WITH INCOMES BETWEEN

23 150 AND 200 PERCENT OF POVERTY.—In the

24 case of a family that—
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1 (i) is enrolled in a community-rated

2 health plan;

3 (ii) is determined under this subpart

4 to have family adjusted income between

5 150 and 200 percent of the applicable pov6 erty level; and

7 (iii) is not an AFDC or SSI family;

8 the amount of cost sharing applied with respect

9 to an item or service (other than with respect

10 to hospital emergency room services for which

11 there is no emergency medical condition, as de12 fined in section 1867(e)(1) of the Social Secu13 rity Act) shall be an amount equal to 40 per14 cent of the cost sharing amount otherwise ap15 plicable under the plan, rounded to the nearest

16 dollar.

17 (d) ADMINISTRATION.—

18 (1) IN GENERAL.—In the case of an approved

19 family (as defined in section 5302(b)(2)) enrolled in

20 a community-rated health plan, the State shall pay

21 the plan for cost sharing reductions (other than cost

22 sharing reductions under subsection (c)(2)(A), (B)

23 and (C)) provided under this section out of Federal

24 subsidy payments provided in section 6001. Pay25 ments made by health plans to providers shall in-
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1 clude appropriate payments for cost sharing reduc2 tions.

3 (2) ESTIMATED PAYMENTS, SUBJECT TO REC4 ONCILIATION.—Such payment shall be made initially

5 on the basis of reasonable estimates of cost sharing

6 reductions incurred by such a plan with respect to

7 approved families and shall be reconciled not less

8 often than quarterly based on actual claims for

9 items and services provided.

10 SEC. 5302. APPLICATION PROCESS FOR COST-SHARING RE11 DUCTIONS AND PREMIUM DISCOUNTS.

12 (a) IN GENERAL.—A family may apply for a deter13 mination of the family adjusted income or wage adjusted

14 income of the family, for the purpose of establishing eligi15 bility for cost sharing reductions under section 5301, and

16 for premium discounts and reductions in liability under

17 sections 5103 and 5112.

18 (b) ACTION ON APPLICATION.—

19 (1) IN GENERAL.—States shall act on such ap20 plications and ensure due process in a timely man21 ner prescribed by the Board.

22 (2) APPROVED FAMILY DEFINED.—As used in

23 this part, the term ‘‘approved family’’ means a fam24 ily for which an application under this section has

25 been approved and not yet terminated.
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1 (c) HELP IN COMPLETING APPLICATIONS.—Each

2 State shall ensure adequate distribution and assist individ3 uals in the filing of applications and income reconciliation

4 statements under this subpart.

5 (d) FAMILY ADJUSTED INCOME.—

6 (1) IN GENERAL.—Except as otherwise pro7 vided, in this Act the term ‘‘family adjusted income’’

8 means, with respect to a family, the sum of the ad9 justed incomes (as defined in paragraph (2)) for all

10 members of the family (determined without regard

11 to section 1012).

12 (2) ADJUSTED INCOME.—In paragraph (1), the

13 term ‘‘adjusted income’’ means, with respect to an

14 individual, adjusted gross income (as defined in sec15 tion 62(a) of the Internal Revenue Code of 1986)—

16 (A) determined without regard to sections

17 135, 162(l), 911, 931, and 933 of such Code,

18 and

19 (B) increased by the amount of interest re20 ceived or accrued by the individual which is ex21 empt from tax.

22 (3) PRESENCE OF ADDITIONAL DEPEND23 ENTS.—At the option of an individual, a family may

24 include (and not be required to separate out) the in25 come of other individuals who are claimed as de-
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1 pendents of the family for income tax purposes, but

2 such individuals shall not be counted as part of the

3 family for purposes of determining the size of the

4 family.

5 (e) REQUIREMENT FOR PERIODIC CONFIRMATION

6 AND VERIFICATION AND NOTICES.—

7 (1) CONFIRMATION AND VERIFICATION RE8 QUIREMENT.—The continued eligibility of a family

9 for cost sharing reductions, premium discounts and

10 reductions in liability under this section shall be con11 ditioned upon the family’s eligibility being—

12 (A) confirmed periodically by the State;

13 and

14 (B) verified (through the filing of a new

15 application under this section) by the State at

16 the time income reconciliation statements are

17 required to be filed under section 5303.

18 (2) NOTICES OF CHANGES IN INCOME AND EM19 PLOYMENT STATUS.—Each approved family shall

20 promptly notify the State of any material increase

21 (as defined by the Secretary) in the family adjusted

22 income or wage adjusted income of the family.

23 (f) PENALTIES FOR INACCURATE INFORMATION.—

24 (1) INTEREST FOR UNDERSTATEMENTS.—Each

25 individual who knowingly understates income re-
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1 ported in an application to a State under this sub2 part or otherwise makes a material misrepresenta3 tion of information in such an application shall be

4 liable to the State for excess payments made based

5 on such understatement or misrepresentation, and

6 for interest on such excess payments at a rate speci7 fied by the Secretary.

8 (2) PENALTIES FOR MISREPRESENTATION.—In

9 addition to the liability established under paragraph

10 (1), each individual who knowingly misrepresents

11 material information in an application under this

12 subpart to a State shall be liable to the State for

13 $2,000 or, if greater, three times the excess pay14 ments made based on such misrepresentation.

15 (g) TERMINATION OF COST SHARING REDUCTION

16 AND PREMIUM DISCOUNTS.—The State shall, after notice

17 to the family, terminate the reduction of cost sharing, pre18 mium discounts or reduction in liability for an approved

19 family if the family fails to provide for confirmation or

20 verification on a timely basis or the State otherwise deter21 mines that the family is no longer eligible for such reduc22 tion.

23 (h) TREATMENT OF AFDC AND SSI RECIPIENTS.—
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1 (1) NO APPLICATION REQUIRED.—AFDC and

2 SSI families may not be required to submit an appli3 cation under this section.

4 (2) NOTICE REQUIREMENT FOR SSI RECIPI5 ENTS.—The Secretary shall notify each State, in a

6 manner specified by the Secretary of the identity

7 (and period of eligibility under the SSI program) of

8 each SSI recipient, unless such a recipient elects (in

9 a manner specified by the Secretary) not to accept

10 the reduction in cost sharing or premium discounts

11 under this part.

12 (i) RULES.—The Secretary shall issue rules related

13 to the application procedure, confirmation and verification

14 of eligibility, ensuring due process in enforcement of pen15 alties for inaccurate information, and other issues related

16 to the implmentation of cost sharing reductions, premium

17 discounts and reductions in liability under this subpart.

18 SEC. 5303. END-OF-YEAR RECONCILIATION.

19 (a) IN GENERAL.—In the case of a family whose ap20 plication for a premium discount or reduction of liability

21 for a year has been approved before the end of the year

22 under this subpart, the family shall, subject to subsection

23 (c), file with the State an income reconciliation statement

24 to verify the family’s adjusted income or wage-adjusted

25 income, as appropriate, for the previous year. Such a
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1 statement shall contain such information as the Secretary

2 shall require. Each State shall coordinate the submission

3 of such statements with the notice and payment of family

4 premium payments.

5 (b) RECONCILIATION OF PREMIUM DISCOUNT AND

6 LIABILITY ASSISTANCE BASED ON ACTUAL INCOME.—

7 Based on and using the income reported in the reconcili8 ation statement filed under subsection (a) with respect to

9 a family, the State shall compute the amount of premium

10 discount or reduction in liability that should have been

11 provided under section 5103 or section 5112 with respect

12 for the family for the year involved. If the amount of such

13 discount or liability reduction computed is—

14 (1) greater than the amount that has been pro15 vided, the family is liable to pay (directly or through

16 an increase in future family share of premiums or

17 other payments) a total amount equal to the amount

18 of the excess payment, or

19 (2) less than the amount that has been pro20 vided, the State shall pay to the family (directly or

21 through a reduction in future family share of pre22 miums or other payments) a total amount equal to

23 the amount of the deficit.

24 (c) NO RECONCILIATION FOR AFDC AND SSI FAMI25 LIES; NO RECONCILIATION FOR COST SHARING REDUC-
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1 TIONS.—No reconciliation statement is required under

2 this section—

3 (1) with respect to cost sharing reductions pro4 vided under section 5301, or

5 (2) for a family that only claims a premium dis6 count or liability reduction under this subpart on the

7 basis of being an AFDC or SSI family.

8 (d) DISQUALIFICATION FOR FAILURE TO FILE.—In

9 the case of any family that is required to file a statement

10 under this section in a year and that fails to file such a

11 statement by the deadline specified, members of the family

12 shall not be eligible for premium reductions under section

13 5103 or reductions in liability under section 5112 until

14 such statement is filed. A State, using rules established

15 by the Secretary, shall waive the application of this sub16 section if the family establishes, to the satisfaction of the

17 State under such rules, good cause for the failure to file

18 the statement on a timely basis.

19 (e) PENALTIES FOR FALSE INFORMATION.—Any in20 dividual that provides false information in a statement

21 under subsection (a) is subject to the same liabilities as

22 are provided under section 5302 for a misrepresentation

23 of material fact described in such section.

24 (f) NOTICE OF REQUIREMENT.—Each State shall

25 provide for written notice, at the end of each year, of the
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1 requirement of this section to each family which had re2 ceived premium discount or reduction in liability under

3 this subpart in any month during the preceding year and

4 to which such requirement applies.

5 (g) TRANSMITTAL OF INFORMATION; VERIFICA6 TION.—

7 (1) IN GENERAL.—Each participating State

8 shall transmit annually to the Secretary such infor9 mation relating to the income of families for the pre10 vious year as the Secretary may require to verify

11 such income under this subpart.

12 (2) VERIFICATION.—Each participating State

13 may use such information as it has available to it,

14 including information made available to the State

15 under section 6103(l)(7)(D)(x) of the Internal Reve16 nue Code of 1986, in verifying income of families

17 with applications filed under this subpart. The Sec18 retary of the Treasury may, consistent with section

19 6103 of the Internal Revenue Code of 1986, permit

20 return information to be disclosed and used by a

21 participating State in verifying such income but only

22 in accordance with such section.

23 (h) CONSTRUCTION.—Nothing in this section shall be

24 construed as authorizing reconciliation of any cost sharing

25 reduction provided under this subpart.
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1 SEC. 5304. ELIGIBILITY ERROR RATES.

2 Each State shall make eligibility determinations for

3 premium discounts, liability reductions, and cost sharing

4 reductions under sections 5104 and 5123, section 5113,

5 and section 5301, respectively, in a manner that maintains

6 the error rates below an applicable maximum permissible

7 error rate specified by the Secretary (or the Secretary of

8 Labor with respect to section 5123). In specifying such

9 a rate, the Secretary shall take into account maximum

10 permissible error rates recognized by the Federal Govern11 ment under comparable State-administered programs.

12 TITLE VI—AGGREGATE

13 GOVERNMENT PAYMENTS

14 Subtitle A—Aggregate Federal

15 Payments to Participating State

16 SEC. 6001. CAPPED FEDERAL PAYMENTS.

17 (a) CAPPED ENTITLEMENT.—

18 (1) PAYMENT.—The Secretary shall provide for

19 each calendar quarter (beginning on or after Janu20 ary 1, 1997) for payment to each participating State

21 of an amount equal to the capped Federal payment

22 amount (as defined in subsection (b)(1)) for each

23 State for the quarter.

24 (2) ENTITLEMENT.—This section constitutes

25 budget authority in advance of appropriations Acts,

26 and represents the obligation of the Federal Govern-
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1 ment to provide for the payment to States of the

2 capped Federal payment amount under this section.

3 (b) CAPPED FEDERAL PAYMENT AMOUNT.—

4 (1) IN GENERAL.—In this section, the term

5 ‘‘capped Federal payment amount’’ means, for a

6 State for a calendar quarter in a year and subject

7 to paragraph (6) and subsection (e), the amount by

8 which—

(A) 1 9 ⁄4 of the total payment obligation (de10 scribed in paragraph (2)) owed to community11 rated and experience-rated plans in a State for

12 the year, exceeds

(B) 1 13 ⁄4 of the total amounts receivable (de14 scribed in paragraph (3)) by community-rated

15 and experience-rated plans for the year.

16 (2) TOTAL PAYMENT OBLIGATION.—The total

17 payment obligation described in this paragraph in a

18 State for a year is the total amount payable to com19 munity-rated and experience-rated plans under title

20 V.

21 (3) TOTAL AMOUNTS RECEIVABLE.—The total

22 amounts receivable in a State for a year is the sum

23 of the following:

24 (A) PREMIUMS.—The amount payable to

25 community-rated and experience-rated plans for
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1 the family share of premiums (and premium

2 equivalents), employer premiums (and premium

3 equivalents), and liabilities owed to health plans

4 pursuant to section 6201, not taking into ac5 count any failure to make or collect such pay6 ments.

7 (B) OTHER GOVERNMENT PAYMENTS.—

8 The amounts payable to health plans under this

9 section and payable under subparagraph (C).

10 (C) PAYMENT TO HEALTH PLANS.—Each

11 participating State is responsible for paying to

12 community-rated health plans a share of its

13 savings under this Act. Such amount shall

14 equal 25 percent of the net reduction in the

15 projected expenditures of the State for health

16 care and related services that the Secretary es17 timates the State will experience as the result

18 of the enactment of this Act. A State may re19 quest the Secretary to review its estimate and

20 shall be entitled to present its case to the Sec21 retary under procedures to be established by

22 the Secretary. This subparagraph shall not be

23 construed as providing a State with a right to

24 bring suit for such payment.
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1 (D) ADDITIONAL AMOUNT.—The amount

2 collected by the State under section 1715.

3 (4) NO PAYMENT FOR CERTAIN AMOUNTS.—

4 (A) IN GENERAL.—Each participating

5 State is responsible for the payment of amounts

6 attributable to administrative errors (described

7 in subparagraph (B)).

8 (B) ADMINISTRATIVE ERRORS DE9 SCRIBED.—The administrative errors described

10 in this subparagraph include the following:

11 (i) An eligibility error rate for pre12 mium discounts, liability reductions, and

13 cost sharing reductions to the extent the

14 applicable error rate exceeds the maximum

15 permissible error rate, specified by the ap16 plicable Secretary, with respect to the sec17 tion involved.

18 (ii) Misappropriations or other State

19 expenditures that the Secretary finds are

20 attributable to malfeasance or misfeasance

21 by the State.

22 (5) SPECIAL RULES FOR SINGLE-PAYER

23 STATES.—In applying this subsection in the case of

24 a single-payer State, the Secretary shall develop and

25 apply a methodology for computing an amount of
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1 payment (with respect to each calendar quarter) that

2 is equivalent to the amount of payment that would

3 have been made to the State for the quarter if the

4 State were not a single-payer State.

5 (6) LARGE GROUP PURCHASERS.—The Sec6 retary, in consultation with the Secretary of Labor,

7 shall withhold an appropriate amount from the

8 capped Federal payment amount as may be nec9 essary to make payments to plans offered by large

10 group purchasers.

11 (c) DETERMINATION OF CAPPED FEDERAL PAY12 MENT AMOUNTS.—

13 (1) REPORTS.—At such time as the Secretary

14 may require before the beginning of each fiscal year,

15 each State shall submit to the Secretary such infor16 mation as the Secretary may require to estimate the

17 capped Federal payment amount under this section

18 for the succeeding calendar year (and the portion of

19 such year that falls in such fiscal year).

20 (2) ESTIMATION.—Before the beginning of each

21 year, the Secretary shall estimate the capped Fed22 eral payment amount for calendar quarters in such

23 year. Such estimate shall be based on factors includ24 ing prior financial experience in the State, future es25 timates of income, wages, and employment, and
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1 other characteristics of the area found relevant by

2 the Secretary. The Secretary shall transmit to Con3 gress, on a timely basis consistent with the timely

4 appropriation of funds under this section, a report

5 that specifies an estimate of the total capped Fed6 eral amounts owed to States under this section for

7 the fiscal and calendar year involved.

8 (d) CAP ON PAYMENTS.—

9 (1) IN GENERAL.—The total amount of the

10 capped Federal payments made under this section

11 for quarters in a fiscal year may not exceed the cap

12 specified under paragraph (2) for the fiscal year.

13 (2) CAP.—Subject to paragraphs (3) and (6)—

14 (A) FISCAL YEARS 1997 THROUGH 2000.—

15 The cap under this paragraph for fiscal years

16 1997 through 2000 shall be established by the

17 Secretary, in consultation with the Director of

18 the Office of Management and Budget, not

19 later than 6 months prior to the beginning of

20 fiscal year 1997. The cap for each such fiscal

21 year shall be equal to the estimated increase in

22 revenues and savings provided for by this Act

23 to finance the cost of capped Federal payments

24 under this section.
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1 (B) SUBSEQUENT FISCAL YEAR.—The cap

2 under this paragraph for a fiscal year after fis3 cal year 2000 is the cap under this paragraph

4 for the previous fiscal year (not taking into ac5 count paragraph (3)) multiplied by the product

6 of the factors described in subparagraph (C) for

7 that fiscal year and for each previous year after

8 fiscal year 2000.

9 (C) FACTOR.—The factor described in this

10 subparagraph for a fiscal year is 1 plus the fol11 lowing:

12 (i) CPI.—The percentage change in

13 the CPI for the fiscal year, determined

14 based upon the percentage change in the

15 average of the CPI for the 12-month pe16 riod ending with May 31 of the previous

17 fiscal year over such average for the pre18 ceding 12-month period.

19 (ii) POPULATION.—The average an20 nual percentage change in the population

21 of the United States during the 3-year pe22 riod ending in the preceding calendar year,

23 determined by the Secretary based on data

24 supplied by the Bureau of the Census.
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1 (iii) REAL GDP PER CAPITA.—The av2 erage annual percentage change in the

3 real, per capita gross domestic product of

4 the United States during the 3-year period

5 ending in the preceding calendar year, de6 termined by the Secretary based on data

7 supplied by the Department of Commerce.

8 (3) CARRYFORWARD.—If the total of the

9 capped Federal payment amounts for all States for

10 all calendar quarters in a fiscal year is less than the

11 cap specified in paragraph (2) for the fiscal year,

12 then the amount of such surplus shall be accumu13 lated and will be available in the case of a year in

14 which the cap would otherwise be breached.

15 (4) NOTIFICATION.—

16 (A) IN GENERAL.—If the Secretary antici17 pates that the amount of the cap, plus any

18 carryforward from a previous year accumulated

19 under paragraph (3), will not be sufficient for

20 a fiscal year, the Secretary shall notify the

21 President, the Congress, and each State. Such

22 notification shall include information about the

23 anticipated amount of the shortfall and the an24 ticipated time when the shortfall will first

25 occur.
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1 (B) REQUIRED ACTION.—Within 30 days

2 after receiving such a notice, the President shall

3 submit to Congress a report containing specific

4 legislative recommendations for actions which

5 would eliminate the shortfall.

6 (5) CONGRESSIONAL CONSIDERATION.—

7 (A) EXPEDITED CONSIDERATION.—If a

8 joint resolution the substance of which approves

9 the specific recommendations submitted under

10 paragraph (4)(B) is introduced, subject to sub11 paragraph (B), the provisions of section 2908

12 (other than subsection (a)) of the Defense Base

13 Closure and Realignment Act of 1990 shall

14 apply to the consideration of the joint resolution

15 in the same manner as such provisions apply to

16 a joint resolution described in section 2908(a)

17 of such Act.

18 (B) SPECIAL RULES.—For purposes of ap19 plying subparagraph (A) with respect to such

20 provisions, any reference to the Committee on

21 Armed Services of the House of Representatives

22 shall be deemed a reference to an appropriate

23 Committee of the House of Representatives

24 (specified by the Speaker of the House of Rep25 resentatives at the time of submission of rec-
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1 ommendations under paragraph (4)) and any

2 reference to the Committee on Armed Services

3 of the Senate shall be deemed a reference to an

4 appropriate Committee of the Senate (specified

5 by the Majority Leader of the Senate at the

6 time of submission of such recommendations).

7 (6) FAILURE OF THE CONGRESS TO ACT.—If

8 the Congress disapproves the President’s rec9 ommendations under this section and fails to enact

10 an alternative proposal which is signed to law by the

11 President which is designed to eliminate such short12 fall, the Secretary shall provide for a schedule of

13 proportional reductions in discounts to businesses

14 and individuals to be applied by States and an equal

15 reduction in capped Federal payments to States suf16 ficient to eliminate the shortfall within a reasonable

17 period of time.

18 (7) METHOD FOR ADJUSTING THE CAP FOR

19 CHANGES IN INFLATION.—If the inflation rate, as

20 measured by the percentage increase in the CPI, is

21 projected to be significantly different from the infla22 tion rate projected by the Council of Economic Advi23 sors to the President as of October 1993, the Sec24 retary may adjust the caps under paragraph (2) so

25 as to reflect such deviation from the projection.
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1 Subtitle B—Borrowing Authority to

2 Cover Cash-flow Shortfalls

3 SEC. 6101. BORROWING AUTHORITY TO COVER CASH-FLOW

4 SHORTFALLS.

5 The Secretary may make available loans to States in

6 order to cover any period of temporary cash-flow shortfall

7 at a rate of interest determined by the Secretary of the

8 Treasury. Loans under this section shall be repayable with

9 interest over a period not to exceed two years.

10 SEC. 6102. CONTINGENCIES.

11 Each State shall provide that any surplus of funds

12 resulting from an estimation discrepancy described in sec13 tion 6200(e)(1), up to a reasonable amount specified by

14 the Secretary, shall be used to fund any future shortfalls

15 resulting from such a discrepancy.

16 Subtitle C—Miscellaneous

17 Provisions

18 SEC. 6201. SENSE OF THE COMMITTEE ON LABOR AND

19 HUMAN RESOURCES.

20 It is the sense of the Committee on Labor and

21 Human Resources that when the Affordable Health Care

22 for All Americans Act is enacted it should include the fol23 lowing provisions:

24 (1) A requirement that States pay premiums

25 for AFDC and SSI recipients at a level established
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1 in the same manner as that described in title IX of

2 S. 1757 (the Health Security Act), as introduced on

3 November 22, 1993.

4 (2) A requirement that States make mainte5 nance of effort payments to be included in the

6 amounts receivable under section 6001(b)(3) at a

7 level established in the same manner as that de8 scribed in title IX of S. 1757 (the Health Security

9 Act), as introduced on November 22, 1993.

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