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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 150 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 150

To amend the Internal Revenue Code of 1986 to improve access to health 
                     care, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 5, 1993

   Mr. Hastert (for himself, Mr. Goss and Ms. Fowler) introduced the 
 following bill; which was referred jointly to the Committees on Ways 
           and Means, Energy and Commerce, and the Judiciary

                            January 27, 1994

Additional sponsors: Mr. Gallegly, Mr. Baker of Louisiana, Mr. Herger, 
Mr. Cox, Mr. Sundquist, Mr. Emerson, Mr. Kyl, Mr. Machtley, Mr. McKeon, 
Mr. Lewis of Florida, Mr. Sensenbrenner, Mr. Zeliff, Mr. Kingston, and 
                             Mr. Ballenger

_______________________________________________________________________

                                 A BILL

 
To amend the Internal Revenue Code of 1986 to improve access to health 
                     care, and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care Choice 
and Access Improvement Act of 1993''.
    (b) Table of Contents.--

Sec. 1. Short title and table of contents.
            TITLE I--FAMILY HEALTH AND WELLNESS SAVINGS PLAN

Sec. 101. Medical savings accounts.
Sec. 102. Unused amounts in flexible spending accounts transferable to 
                            medical savings accounts.
Sec. 103. Deduction for amounts paid for qualified catastrophic 
                            coverage health plan.
     TITLE II--TAX TREATMENT OF LONG-TERM CARE INSURANCE AND PLANS

           Subtitle A--Treatment of Long-Term Care Insurance

Sec. 201. Qualified long-term care insurance treated as accident and 
                            health insurance for purposes of taxation 
                            of life insurance companies.
Sec. 202. Qualified long-term care insurance treated as accident and 
                            health insurance for purposes of exclusion 
                            for benefits received under such insurance 
                            and for employer contributions for such 
                            insurance.
Sec. 203. Exclusion from gross income for amounts withdrawn from 
                            individual retirement plans or 401(k) plans 
                            for qualified long-term care insurance.
Sec. 204. Exchange of life insurance policy for qualified long-term 
                            care policy not taxable.
            Subtitle B--Employer Funding of Medical Benefits

Sec. 211. Medical benefits for retired employees and their spouses and 
                            dependents.
Sec. 212. Treatment of health benefits accounts.
       Subtitle C--Reverse Mortgage Insurance for Older Americans

Sec. 221. Maximum amount insured.
                     Subtitle D--Income Tax Credits

Sec. 231. Refundable credit for custodial care of certain dependents in 
                            taxpayer's home.
Sec. 232. Credit for expenses for long-term care services provided to 
                            certain independent persons requiring such 
                            care.
          Subtitle E--Treatment of Accelerated Death Benefits

Sec. 241. Tax treatment of accelerated death benefits under life 
                            insurance contracts.
Sec. 242. Tax treatment of companies issuing qualified accelerated 
                            death benefit riders.
  Subtitle F--Federal National Long-Term Care Reinsurance Corporation

Sec. 251. Authorization for establishment of Corporation.
Sec. 252. Board of directors and officers.
Sec. 253. Purpose and authority of Corporation.
Sec. 254. Capitalization.
Sec. 255. Exemption from state regulation and taxation.
Sec. 256. Audit and annual report.
Sec. 257. Protection of name.
Sec. 258. Termination.
                TITLE III--MALPRACTICE LIABILITY REFORM

Sec. 301. Definitions.
Sec. 302. Malpractice liability reform requirements described.
Sec. 303. Waiver of requirements for good cause or for carrying out 
                            demonstration projects.
Sec. 304. Certification of state compliance.
Sec. 305. Incentives through Medicare and Medicaid.
Sec. 306. Applicability of certain provisions to Federal Tort Claims 
                            Act.
Sec. 307. Rules of construction.
           TITLE IV--WORKING AMERICANS ACCESS TO HEALTH CARE

  Subtitle A--Increase in Small Employer Access to Affordable Health 
                               Insurance

Sec. 401. Establishment and enforcement of standards for small employer 
                            health insurance plans.
Sec. 402. Preemption of state benefits mandates for plans that meet 
                            consumer protection standards.
Sec. 403. Requirement for offering of basic, low cost plan (medequity 
                            plan).
Sec. 404. Requirements relating to initial writing of policies.
Sec. 405. Requirements relating to renewal.
Sec. 406. Establishment of reinsurance mechanisms for high risk 
                            individuals.
Sec. 407. Registration of all health benefit plans required.
Sec. 408. Definitions.
Sec. 409. Preemption from insurance mandates for qualified small 
                            employer purchasing groups.
  Subtitle B--Equalization of Tax Benefits for Self-Employed Persons 
                          Under Certain Plans

Sec. 411. Equalization of tax benefits for self-employed persons under 
                            certain plans.
                    Subtitle C--Managed Care Rights

Sec. 421. Managed care rights.
                      Subtitle D--Study and Report

Sec. 431. Study and report on impact.
                  TITLE V--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

Sec. 501. Adoption of data elements, uniform claims, and uniform 
                            electronic transmission standards.
Sec. 502. Application of standards.
Sec. 503. Periodic review and revision of standards.
Sec. 504. Health benefit plan defined.
             Subtitle B--Electronic Medical Data Standards

Sec. 511. Medical data standards for hospitals and other providers.
Sec. 512. Application of electronic data standards to certain 
                            hospitals.
Sec. 513. Electronic transmission to Federal agencies.
Sec. 514. Limitation on data requirements where standards in effect.
Sec. 515. Advisory commission.
     Subtitle C--Development and Distribution of Comparative Value 
                              Information

Sec. 521. State comparative value information programs for health care 
                            purchasing.
Sec. 522. Federal implementation.
Sec. 523. Comparative value information concerning Federal programs.
Sec. 524. Development of model systems.
    Subtitle D--Additional Standards and Requirements; Research and 
                             Demonstrations

Sec. 531. Standards relating to use of Medicare and Medicaid magnetized 
                            health benefit cards; secondary payor data 
                            bank.
Sec. 532. Preemption of State quill pen laws.
Sec. 533. Use of standard identification numbers.
Sec. 534. Coordination of benefit standards.
Sec. 535. Research and demonstrations.

            TITLE I--FAMILY HEALTH AND WELLNESS SAVINGS PLAN

SEC. 101. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 220 as 
section 221 and by inserting after section 219 the following new 
section:

``SEC. 220. MEDICAL SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an eligible individual, 
there shall be allowed as a deduction amounts paid in cash during the 
taxable year by or on behalf of such individual to a medical savings 
account.
    ``(b) Limitation.--
            ``(1) In general.--The amount allowable as a deduction 
        under subsection (a) to an individual for the taxable year 
        shall not exceed the excess (if any) of--
                    ``(A) the lesser of--
                            ``(i) the applicable limit, or
                            ``(ii) the compensation (as defined in 
                        section 219(f)) includible in the individual's 
                        gross income for the taxable year, over
                    ``(B) the sum of--
                            ``(i) the value of employer-provided 
                        coverage for the medical expenses of such 
                        individual,
                            ``(ii) the amount paid by the individual 
                        (other than from amounts distributed from a 
                        medical savings account) for coverage under 
                        qualified catastrophic coverage health plan for 
                        coverage for such individual, the spouse of 
                        such individual, and dependents (as defined in 
                        section 152) of such individual, plus
                            ``(iii) the aggregate amount contributed to 
                        such account during the taxable year pursuant 
                        to section 125(d)(3).
            ``(2) Applicable limit.--For purposes of paragraph (1), the 
        applicable limit is the sum of--
                    ``(A) $4,800, plus
                    ``(B) $600 for each individual who is a dependent 
                (as defined in section 152) of the individual for whose 
                benefit the account is established.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Medical savings account.--The term `medical savings 
        account' means a trust created or organized in the United 
        States exclusively for the purpose of paying the qualified 
        medical expenses of the individual for whose benefit the trust 
        is established, but only if the written governing instrument 
        creating the trust meets the following requirements:
                    ``(A) No contribution will be accepted unless it is 
                in cash and contributions will not be accepted for any 
                taxable year in excess of the applicable limit (as 
                defined in subsection (b)(2)).
                    ``(B) The trustee is a bank (as defined in section 
                408(n)) or another person who demonstrates to the 
                satisfaction of the Secretary that the manner in which 
                such person will administer the trust will be 
                consistent with the requirements of this section.
                    ``(C) No part of the trust assets will be invested 
                in life insurance contracts.
                    ``(D) The assets of the trust will not be 
                commingled with other property except in a common trust 
                fund or common investment fund.
            ``(2) Eligible individual.--The term `eligible individual' 
        means any individual if--
                    ``(A) such individual is not covered by any 
                employer-provided group health plan, or
                    ``(B) such individual is covered by an employer-
                provided group health plan which is a qualified 
                catastrophic coverage health plan and is not covered by 
                any other health plan.
            ``(3) Qualified medical expenses.--
                    ``(A) In general.--The term `qualified medical 
                expenses' means--
                            ``(i) medical expenses, and
                            ``(ii) amounts paid for qualified long-term 
                        care insurance (as defined in section 818(g)).
                    ``(B) Medical expenses.--The term `medical 
                expenses' means amounts paid by the individual for 
                whose benefit the account was established for medical 
                care (as defined in section 213) of such individual, 
                the spouse of such individual, and any dependent (as 
                defined in section 152) of such individual, but only to 
                the extent such amounts are not compensated for by 
                insurance or otherwise.
            ``(4) Qualified catastrophic coverage health plan.--The 
        term `qualified catastrophic coverage health plan' means any 
        health plan which is certified by the Secretary of Health and 
        Human Services as a plan--
                    ``(A) which provides no compensation for medical 
                expenses not exceeding $3,000 during any year,
                    ``(B) which requires the individual to pay 15 
                percent of such individual's medical expenses to the 
                extent they exceed $3,000 but not $9,000 during any 
                year, and
                    ``(C) which provides full reimbursement for medical 
                expenses exceeding $9,000.
            ``(5) Time when contributions deemed made.--A taxpayer 
        shall be deemed to have made a contribution on the last day of 
        the preceding taxable year if the contribution is made on 
        account of such taxable year and is made not later than the 
        time prescribed by law for filing the return for such taxable 
        year (not including extensions thereof).
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, any amount paid or distributed out of a medical 
        savings account shall be included in the gross income of the 
        individual for whose benefit such account was established 
        unless such amount is used exclusively to pay the qualified 
        medical expenses of such individual.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount allowable as a deduction under subsection (a) if--
                    ``(A) such distribution is received on or before 
                the day prescribed by law (including extensions of 
                time) for filing such individual's return for such 
                taxable year,
                    ``(B) no deduction is allowed under subsection (a) 
                with respect to such excess contribution, and
                    ``(C) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (C) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
    ``(e) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--A medical savings account is 
        exempt from taxation under this subtitle unless such account 
        has ceased to be an investment savings account by reason of 
        paragraph (2). Notwithstanding the preceding sentence, any such 
        account is subject to the taxes imposed by section 511 
        (relating to imposition of tax on unrelated business income of 
        charitable, etc. organizations).
            ``(2) Loss of exemption of account where individual engages 
        in prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the individual for whose benefit the medical savings 
                account was established, such individual engages in any 
                transaction prohibited by section 4975 with respect to 
                the account, the account ceases to be a medical savings 
                account as of the first day of that taxable year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, paragraph (1) of 
                subsection (d) applies as if there were a distribution 
                on such first day in an amount equal to the fair market 
                value (on such first day) of all assets in the account 
                (on such first day).
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit a medical 
        savings account was established uses the account or any portion 
        thereof as security for a loan, the portion so used is treated 
        as distributed to that individual.
    ``(f) Additional Tax on Certain Amounts Included in Gross Income.--
            ``(1) Distribution not used for qualified medical 
        expenses.--If a distribution from a medical savings account is 
        made, and not used to pay the qualified medical expenses of the 
        individual for whose benefit the account was established, the 
        tax liability of such individual for the taxable year in which 
        such distribution is received shall be increased by an amount 
        equal to 10 percent of the amount of the distribution which is 
        includible in gross income for such taxable year.
            ``(2) Disqualification cases.--If an amount is includible 
        in the gross income of an individual for a taxable year under 
        subsection (e), his tax under this chapter for such taxable 
        year shall be increased by an amount equal to 10 percent of 
        such amount includible in his gross income.
            ``(3) Disability or death cases.--Paragraphs (1) and (2) do 
        not apply if the payment or distribution is made after the 
        individual for whose benefit the medical savings account was 
        established becomes disabled within the meaning of section 
        72(m)(7) or dies.
    ``(g) Special Rules.--
            ``(1) Community property laws.--This section shall be 
        applied without regard to any community property laws.
            ``(2) Custodial accounts.--For purposes of this section, a 
        custodial account shall be treated as a trust if--
                    ``(A) the assets of such account are held by a bank 
                (as defined in section 408(n)) or another person who 
                demonstrates to the satisfaction of the Secretary that 
                the manner in which he will administer the account will 
                be consistent with the requirements of this section, 
                and
                    ``(B) the custodial account would, except for the 
                fact that it is not a trust, constitute a medical 
                savings account described in subsection (c).
        For purposes of this title, in the case of a custodial account 
        treated as a trust by reason of the preceding sentence, the 
        custodian of such account shall be treated as the trustee 
        thereof.
            ``(3) Denial of deductions.--No amount paid or distributed 
        from a medical savings account shall be taken into account in 
        determining the deduction provided by section 213.
    ``(h) Inflation Adjustment.--
            ``(1) In general.--In the case of any taxable year 
        beginning in a calendar year after 1993, each applicable dollar 
        amount shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment for the 
                calendar year in which the taxable year begins.
            ``(2) Cost-of-living adjustment.--For purposes of paragraph 
        (1), the cost-of-living adjustment for any calendar year is the 
        percentage (if any) by which--
                    ``(A) the deemed average total wages (as defined in 
                section 209(k) of the Social Security Act) for the 
                preceding calendar year, exceeds
                    ``(B) the deemed average total wages (as so 
                defined) for calendar year 1992.
            ``(3) Applicable dollar amount.--For purposes of paragraph 
        (1), the term `applicable dollar amount' means--
                    ``(A) the $4,800 and $600 amounts in subsection 
                (b), and
                    ``(B) the $3,000 and $9,000 amounts in subsection 
                (c)(4).
            ``(4) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $10, such amount shall be rounded to 
        the nearest multiple of $10 (or, if such amount is a multiple 
        of $5 and not of $10, such amount shall be rounded to the next 
        highest multiple of $10).
    ``(i) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the 
individual for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''
    (b) Deduction Allowed in Arriving at Adjusted Gross Income.--
Paragraph (7) of section 62(a) of such Code (relating to retirement 
savings) is amended--
            (1) by inserting ``or medical expense'' after 
        ``Retirement'' in the heading of such paragraph, and
            (2) by inserting before the period at the end thereof the 
        following: ``and the deduction allowed by section 220 (relating 
        to deduction of certain payments to medical savings 
        accounts)''.
    (c) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to individual retirement 
accounts, certain section 403(b) contracts, and certain individual 
retirement annuities) is amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 220(c)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account, the 
term `excess contributions' means the amount by which the amount 
contributed for the taxable year to the account exceeds the amount 
allowable as a deduction under section 220 for such taxable year. For 
purposes of this subsection, any contribution which is distributed out 
of the medical savings account and a distribution to which section 
220(d)(2) applies shall be treated as an amount not contributed.''
    (d) Tax on Prohibited Transactions.--Section 4975 of such Code 
(relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account is 
        established shall be exempt from the tax imposed by this 
        section with respect to any transaction concerning such account 
        (which would otherwise be taxable under this section) if, with 
        respect to such transaction, the account ceases to be a medical 
        savings account by reason of the application of section 
        220(e)(2)(A) to such account.'', and
            (2) by inserting ``or a medical savings account described 
        in section 220(c)'' in subsection (e)(1) after ``described in 
        section 408(a)''.
    (e) Failure To Provide Reports on Medical Savings Accounts.--
Section 6693 of such Code (relating to failure to provide reports on 
individual retirement account or annuities) is amended--
            (1) by inserting ``or on medical savings accounts'' after 
        ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 220(i) to file a report 
        regarding a medical savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (f) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 220 and inserting the following:

                              ``Sec. 220. Medical savings accounts.
                              ``Sec. 221. Cross reference.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, medical savings 
                                        accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

SEC. 102. UNUSED AMOUNTS IN FLEXIBLE SPENDING ACCOUNTS TRANSFERABLE TO 
              MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Subsection (d) of section 125 of the Internal 
Revenue Code of 1986 (relating to cafeteria plans) is amended by adding 
at the end thereof the following new paragraph:
            ``(3) Unused amounts transferable to medical savings 
        accounts.--
                    ``(A) In general.--Subsection (a) shall not fail to 
                apply to a participant in a plan, and a plan shall not 
                fail to be treated as a cafeteria plan, solely because 
                under the plan amounts not paid out as reimbursements 
                under a flexible spending arrangement for health and 
                disability for the benefit of an individual are 
                contributed to a medical savings account (as defined in 
                section 220(c)) for the benefit of such individual.
                    ``(B) Special rules.--
                            ``(i) Timing of contributions.--
                        Contributions made under this paragraph shall 
                        be made on the last day of the plan year of the 
                        cafeteria plan.
                            ``(ii) Availability requirement.--
                        Subparagraph (A) shall apply only if the plan 
                        is available to at least 80 percent of the 
                        employees of the employer. For purposes of the 
                        preceding sentence, there shall be excluded 
                        employees who are excluded under section 
                        414(q)(8) or who would be so excluded if `30' 
                        were substituted for `17\1/2\' in subparagraph 
                        (B) thereof.''
    (b) Treatment of Amounts Received by Qualified Cash or Deferred 
Arrangement.--
            (1) Paragraph (2) of section 401(k) of such Code is amended 
        by striking ``and'' at the end of subparagraph (C), by striking 
        the period at the end of subparagraph (D) and inserting ``, 
        and'', and by adding at the end thereof the following new 
        subparagraph:
                    ``(E) which provides that, with respect to amounts 
                held by the trust which are attributable to 
                contributions made to the trust pursuant to section 
                125(d)(3)--
                            ``(i) an employee's right to such amounts 
                        is nonforfeitable, and
                            ``(ii) such amounts may be used only to pay 
                        expenses (not compensated for by insurance or 
                        otherwise) for the medical care (as defined in 
                        section 213) of the employee, the spouse of the 
                        employee, or any dependent (as defined in 
                        section 152) of the employee.''
            (2) Subsection (k) of section 401 of such Code is amended 
        by adding at the end thereof the following new paragraph:
            ``(11) Treatment of amounts received from medical savings 
        arrangements.--Contributions made to a trust by reason of 
        section 125(d)(3) shall not be taken into account under 
        paragraph (3)(A)(ii), and subsection (l) shall not apply to 
        such contributions.''
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1992.

SEC. 103. DEDUCTION FOR AMOUNTS PAID FOR QUALIFIED CATASTROPHIC 
              COVERAGE HEALTH PLAN.

    (a) In General.--Section 213 of the Internal Revenue Code of 1986 
(relating to medical, dental, etc., expenses) is amended adding at the 
end thereof the following new subsection:
    ``(g) Full Deduction for Amounts Paid for Qualified Catastrophic 
Coverage Health Plans.--In the case of amounts paid for coverage under 
a qualified catastrophic coverage health plan (as defined in section 
220(c))--
            ``(1) subsection (a) shall be applied without regard to the 
        limitation based on adjusted gross income, and
            ``(2) such amounts shall not be taken into account in 
        determining whether any other amounts are allowable as a 
        deduction under this section.''
    (b) Technical Amendment.--Paragraph (2) of section 162(l) of such 
Code is amended by adding at the end thereof the following new 
subparagraph:
                    ``(C) Qualified catastrophic coverage.--Paragraph 
                (1) shall not apply to any amount allowed as a 
                deduction under section 213 for amounts paid for 
                coverage under a qualified catastrophic coverage health 
                plan (as defined in section 220(c)).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

     TITLE II--TAX TREATMENT OF LONG-TERM CARE INSURANCE AND PLANS

           Subtitle A--Treatment of Long-Term Care Insurance

SEC. 201. QUALIFIED LONG-TERM CARE INSURANCE TREATED AS ACCIDENT AND 
              HEALTH INSURANCE FOR PURPOSES OF TAXATION OF LIFE 
              INSURANCE COMPANIES.

    (a) In General.--Section 818 of the Internal Revenue Code of 1986 
(relating to other definitions and special rules) is amended by adding 
at the end the following new subsection:
    ``(g) Qualified Long-Term Care Insurance Treated as Accident or 
Health Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to accident or health 
        insurance shall be treated as including a reference to 
        qualified long-term care insurance.
            ``(2) Qualified long-term care insurance.--For purposes of 
        this subsection--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), the term `qualified long-term care insurance' 
                means insurance under a policy or rider, which is 
                issued by a qualified issuer, which meets standards at 
                least as stringent as those set forth in the January 
                1990 Long-Term Care Insurance Model Regulation of the 
                National Association of Insurance Commissioners, and 
                which is certified by the Secretary of Health and Human 
                Services (in accordance with procedures similar to the 
                procedures prescribed in section 1882 of the Social 
                Security Act (42 U.S.C. 1385ss) used in the 
                certification of medicare supplemental policies (as 
                defined in subsection (g)(1) of such section)) to be 
                advertised, marketed, offered, or designed to provide 
                coverage--
                            ``(i) for not less than 12 consecutive 
                        months for each covered person who has attained 
                        age 50,
                            ``(ii) on an expense incurred, indemnity, 
                        or prepaid basis,
                            ``(iii) for 1 or more medically necessary, 
                        diagnostic services, preventive services, 
                        therapeutic services, rehabilitation services, 
                        maintenance services, or personal care 
                        services, and
                            ``(iv) provided in a setting other than an 
                        acute care unit of a hospital.
                The requirement of clause (iv) shall be met only if at 
                least 1 of the settings in which such coverage is 
                provided is the patient's home.
                    ``(B) Coverage specifically excluded.--Such term 
                does not include any insurance under any policy or 
                rider which is offered primarily to provide any 
                combination of the following kinds of coverage:
                            ``(i) Basic Medicare supplement coverage.
                            ``(ii) Basic hospital-based acute care 
                        expense coverage.
                            ``(iii) Basic medical-surgical expense 
                        coverage.
                            ``(iv) Hospital confinement indemnity 
                        coverage.
                            ``(v) Major medical expense coverage.
                            ``(vi) Disability income protection 
                        coverage.
                            ``(vii) Accident only coverage.
                            ``(viii) Specified disease coverage.
                            ``(ix) Specified accident coverage.
                            ``(x) Limited benefit health coverage.
                    ``(C) Qualified issuer.--For purposes of 
                subparagraph (A), the term `qualified issuer' means any 
                of the following:
                            ``(i) Private insurance company.
                            ``(ii) Fraternal benefit society.
                            ``(iii) Nonprofit health corporation.
                            ``(iv) Nonprofit hospital corporation.
                            ``(v) Nonprofit medical service 
                        corporation.
                            ``(vi) Prepaid health plan.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1992.

SEC. 202. QUALIFIED LONG-TERM CARE INSURANCE TREATED AS ACCIDENT AND 
              HEALTH INSURANCE FOR PURPOSES OF EXCLUSION FOR BENEFITS 
              RECEIVED UNDER SUCH INSURANCE AND FOR EMPLOYER 
              CONTRIBUTIONS FOR SUCH INSURANCE.

    (a) In General.--Section 105 of the Internal Revenue Code of 1986 
(relating to amounts received under accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(j) Special Rules Relating to Qualified Long-Term Care 
Insurance.--For purposes of section 104, this section, and section 
106--
            ``(1) Benefits treated as payable for sickness, etc.--Any 
        benefit received through qualified long-term care insurance (as 
        defined in section 818(g)) shall be treated as received for 
        personal injuries or sickness.
            ``(2) Expenses for which reimbursement provided under 
        qualified long-term care insurance treated as incurred for 
        medical care.--Expenses incurred by a taxpayer for which 
        reimbursement is paid through qualified long-term care 
        insurance (as so defined) shall be treated for purposes of 
        subsection (b) as incurred for medical care (as defined in 
        section 213(d)).
            ``(3) References to accident and health plans.--Any 
        reference to an accident or health plan shall be treated as 
        including a reference to a plan providing qualified long-term 
        care insurance.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1992.

SEC. 203. EXCLUSION FROM GROSS INCOME FOR AMOUNTS WITHDRAWN FROM 
              INDIVIDUAL RETIREMENT PLANS OR 401(k) PLANS FOR QUALIFIED 
              LONG-TERM CARE INSURANCE.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by redesignating section 136 as section 
137 and by inserting after section 135 the following new section:

``SEC. 136. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS AND 
              SECTION 401(k) PLANS FOR QUALIFIED LONG-TERM CARE 
              INSURANCE.

    ``(a) General Rule.--The amount includible in the gross income of 
an individual for the taxable year by reason of qualified distributions 
during such taxable year shall not exceed the excess of--
            ``(1) the amount which would (but for this section) be so 
        includible by reason of such distributions, over
            ``(2) the aggregate premiums paid by such individual during 
        such taxable year for any policy of qualified long-term care 
        insurance (as defined in section 818(g)) for the benefit of 
        such individual or the spouse of such individual.
    ``(b) Qualified Distribution.--For purposes of this section, the 
term `qualified distribution' means any distribution to an individual 
from an individual retirement account or a section 401(k) plan if such 
individual has attained age 59\1/2\ on or before the date of the 
distribution (and, in the case of a distribution used to pay premiums 
for the benefit of the spouse of such individual, such spouse has 
attained age 59\1/2\ on or before the date of the distribution).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Individual retirement account.--The term `individual 
        retirement account' has the meaning given such term by section 
        408(a).
            ``(2) Section 401(k) plan.--The term `section 401(k) plan' 
        means any employer plan which meets the requirements of section 
        401(a) and which includes a qualified cash or deferred 
        arrangement (as defined in section 401(k)).
    ``(d) Special Rules for Section 401(k) Plans.--
            ``(1) Withdrawals cannot exceed elective contributions 
        under qualified cash or deferred arrangement.--This section 
        shall not apply to any distribution from a section 401(k) plan 
        to the extent the aggregate amount of such distributions for 
        the use described in subsection (a) exceeds the aggregate 
        employer contributions made pursuant to the employee's election 
        under section 401(k)(2).
            ``(2) Withdrawals not to cause disqualification.--A plan 
        shall not be treated as failing to satisfy the requirements of 
        section 401, and an arrangement shall not be treated as failing 
        to be a qualified cash or deferred arrangement (as defined in 
        section 401(k)(2)), merely because under the plan or 
        arrangement distributions are permitted which are excludable 
        from gross income by reason of this section.''
    (b) Conforming Amendments.--
            (1) Section 401(k) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(11) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals for payment of long-term care premiums, see section 136.''
            (2) Section 408(d) of such Code is amended by adding at the 
        end the following new paragraph:
            ``(8) Cross reference.--

                                ``For provision permitting tax-free 
withdrawals from individual retirement accounts for payment of long-
term care premiums, see section 136.''
            (3) The table of sections for such part III is amended by 
        striking the last item and inserting the following new items:

                              ``Sec. 136. Distributions from individual 
                                        retirement accounts and section 
                                        401(k) plans for qualified 
                                        long-term care insurance.
                              ``Sec. 137. Cross references to other 
                                        Acts.''
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1992.

SEC. 204. EXCHANGE OF LIFE INSURANCE POLICY FOR QUALIFIED LONG-TERM 
              CARE POLICY NOT TAXABLE.

    (a) In General.--Subsection (a) of section 1035 of the Internal 
Revenue Code of 1986 (relating to certain exchanges of insurance 
policies) is amended by striking the period at the end of paragraph (3) 
and inserting ``; or'' and by adding at the end the following new 
paragraph:
            ``(4) in the case of an individual who has attained age 
        59\1/2\, a contract of life insurance or a contract of 
        endowment insurance or an annuity contract for a contract of 
        qualified long-term care insurance (as defined in section 
        818(g)) for the benefit of such individual or the spouse of 
        such individual if such spouse has attained age 59\1/2\ on or 
        before the date of the exchange.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1992.

            Subtitle B--Employer Funding of Medical Benefits

SEC. 211. MEDICAL BENEFITS FOR RETIRED EMPLOYEES AND THEIR SPOUSES AND 
              DEPENDENTS.

    (a) In General.--Section 401(h) of the Internal Revenue Code of 
1986 (relating to medical, etc., benefits for retired employees and 
their spouses and dependents) is amended to read as follows:
    ``(h) Retiree Health Accounts.--
            ``(1) General rule.--Under regulations prescribed by the 
        Secretary, a defined benefit plan may establish and maintain a 
        separate health benefits account for the payment of medical 
        benefits of retired employees and their spouses and dependents.
            ``(2) Separate accounting required.--An employer 
        establishing a health benefits account shall maintain separate 
        accounts within the health benefits account for funded reserve 
        accounts established under section 420A.
            ``(3) Use of assets.--Subject to the provisions of part III 
        of this subchapter, the corpus or income of a health benefits 
        account shall not be used for, or diverted to, any purpose 
        other than providing medical benefits to retired employees and 
        their spouses and dependents.
            ``(4) Key employees.--
                    ``(A) In general.--In the case of an employee who 
                is a key employee--
                            ``(i) a separate account shall be 
                        established and maintained for medical benefits 
                        payable to such employee (and the employee's 
                        spouse or dependents), and
                            ``(ii) medical benefits of such employee, 
                        spouse, or dependents which are attributable to 
                        plan years beginning after March 31, 1984, for 
                        which the employee is a key employee may be 
                        payable only from such account.
                    ``(B) Key employee.--For purposes of subparagraph 
                (A), the term `key employee' means any employee who, at 
                any time during the plan year or any preceding plan 
                year during which contributions were made on behalf of 
                such employee, is or was a key employee (as defined in 
                section 416(i)).
            ``(5) Applicable rules.--For rules applicable to health 
        benefits accounts, see subpart F of this part (sec. 420A et 
        seq.).''
    (b) Conforming Amendment.--Section 415(l)(2) of such Code (relating 
to treatment of certain medical benefits) is amended by inserting ``by 
reason of section 401(h)(4)'' after ``dependents'' in subparagraph (B).
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to years beginning 
        after December 31, 1992.
            (2) Transition rule.--In the case of--
                    (A) a plan other than a defined benefit plan, or
                    (B) a defined benefit plan which elects, at such 
                time and in such manner as the Secretary of the 
                Treasury or his delegate may prescribe, to have this 
                paragraph apply,
        which on or before the date of the enactment of this Act 
        established an account to which section 401(h) of the Internal 
        Revenue Code of 1986 (as in effect before the amendments made 
        by this section) applied (and which is in existence on such 
        date), the amendments made by this section shall not apply to 
        such account.

SEC. 212. TREATMENT OF HEALTH BENEFITS ACCOUNTS.

    (a) In General.--Part I of subchapter D of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new subpart:

           ``Subpart F--Treatment of Health Benefits Accounts

                              ``Sec. 420A. Deduction for employer 
                                        contributions to health 
                                        benefits accounts.
                              ``Sec. 420B. Funded reserve account.
                              ``Sec. 420C. Definitions; special rules.

``SEC. 420A. DEDUCTION FOR EMPLOYER CONTRIBUTIONS TO HEALTH BENEFITS 
              ACCOUNTS.

    ``(a) General Rule.--Amounts paid by an employer to a defined 
benefit plan which are allocated to a health benefits account--
            ``(1) shall not be allowed as a deduction under this 
        chapter, but
            ``(2) if they would otherwise be deductible, shall be 
        allowed as a deduction under this section for the taxable year 
        in which paid.
    ``(b) Limitation.--The amount of the deduction allowable under 
subsection (a)(2) for any taxable year shall not exceed the health 
benefits account's qualified cost for the taxable year.
    ``(c) Qualified Cost.--For purposes of this section--
            ``(1) In general.--The term `qualified cost' means, with 
        respect to any taxable year, the sum of--
                    ``(A) the qualified direct cost for such taxable 
                year, plus
                    ``(B) subject to the limitation of section 420B(b), 
                any addition to the funded reserve account established 
                under section 420B.
            ``(2) Qualified direct cost.--
                    ``(A) In general.--The term `qualified direct cost' 
                means, with respect to any taxable year, the aggregate 
                amount (including administrative expenses) which would 
                have been allowable as a deduction to the employer with 
                respect to the qualified section 401(h) medical 
                benefits provided through the health benefits account 
                during the taxable year if--
                            ``(i) such benefits were provided directly 
                        by the employer, and
                            ``(ii) the employer used the cash receipts 
                        and disbursements method of accounting.
                    ``(B) Time when benefits provided.--For purposes of 
                subparagraph (A), a benefit shall be treated as 
                provided when such benefit would be includible in the 
                gross income of the employee if provided directly by 
                the employer (or would be so includible but for any 
                provision of this chapter excluding such benefit from 
                gross income).

``SEC. 420B. FUNDED RESERVE ACCOUNT.

    ``(a) General Rule.--For purposes of this subpart and section 
401(h), the term `funded reserve account' means an account within a 
health benefits account--
            ``(1) to which contributions paid or accrued to a defined 
        benefit plan are allocated to provide a reserve for the payment 
        of qualified section 401(h) medical benefits of employees and 
        their spouses and dependents,
            ``(2) with respect to which the only contributions 
        allocated are employer contributions, and
            ``(3) with respect to which--
                    ``(A) the vesting requirements of subsection (c),
                    ``(B) the portability requirements of subsection 
                (d), and
                    ``(C) the availability requirements of subsection 
                (e),
        are met.
    ``(b) Limitation on Allocation to Account.--
            ``(1) In general.--No amount may be allocated to a funded 
        reserve account (and taken into account under section 
        420A(c)(1)(B)) to the extent such addition results in the 
        amount allocated to such account exceeding the account limit.
            ``(2) Account limit.--The account limit for any taxable 
        year is an amount equal to 125 percent of the termination 
        liability of the account as of the close of the last plan year 
        ending with or within the taxable year.
            ``(3) Termination liability.--For purposes of this 
        section--
                    ``(A) In general.--The term `termination liability' 
                means the present value of the qualified section 401(h) 
                medical benefits--
                            ``(i) which are to be provided to employees 
                        (and their spouses and dependents), and
                            ``(ii) any portion of which is to be 
                        provided through a funded reserve account.
                    ``(B) Determinations.--The termination liability 
                under subparagraph (A) shall be determined--
                            ``(i) on the basis of actuarial assumptions 
                        which are used in determining the full-funding 
                        limitation of the plan under section 412(c)(7),
                            ``(ii) as if the benefits under the plan 
                        commenced at Social Security retirement age, 
                        and
                            ``(iii) by not taking into account any 
                        portion of the maximum annual benefit under the 
                        plan for--
                                    ``(I) benefits (other than post-
                                retirement long-term health care 
                                benefits) in excess of $1,500, or
                                    ``(II) post-retirement long-term 
                                health care benefits in excess of 
                                $1,500.
                    ``(C) Adjustments to account.--The amount in the 
                account shall be adjusted at such time and in such 
                manner as the Secretary may prescribe to take into 
                account income, gains, deductions, or losses which are 
                properly allocable to amounts in the account.
                    ``(D) Actuarial adjustment.--For purposes of 
                determining termination liability, the benefits 
                provided to any participant under the plan shall be 
                actuarially adjusted to reflect any commencement of 
                benefits before or after Social Security retirement 
                age.
                    ``(E) Employee.--For purposes of this paragraph, 
                the term `employee' does not include a former employee.
                    ``(F) Cost-of-living adjustment.--In the case of 
                years beginning after 1995, the $1,500 amounts in 
                subparagraph (B) shall be adjusted annually at the same 
                time and in the same manner as under section 415(d).
    ``(c) Vesting Requirements.--
            ``(1) In general.--The requirements of this subsection are 
        met if the requirements of either subparagraph (A) or (B) of 
        section 411(a)(2) are met with respect to the accrued qualified 
        section 401(h) medical benefits derived from amounts which are 
        allocated to the funded reserve account.
            ``(2) Uniform rate of accrual of benefits.--
                    ``(A) In general.--Except as provided in this 
                paragraph, a plan shall not be treated as meeting the 
                requirements of this subsection unless the rate at 
                which benefits accrue during a plan year is the same 
                for all participants.
                    ``(B) Special rules for certain individuals age 55 
                and over.--A plan shall not be treated as failing to 
                meet the requirements of this subsection if the plan 
                provides that an employee who as of the close of the 
                plan year in which he attains age 55 has accrued less 
                than 30 percent of the maximum amount of benefits which 
                may be accrued under the plan may accrue benefits 
                during succeeding plan years at a greater rate than the 
                rate for other employees (but not in excess of 125 
                percent of such other rate).
                    ``(C) Minimum hours of service.--For purposes of 
                subparagraph (A), an employee shall not be treated as a 
                participant for any plan year unless such individual 
                completes more than 500 hours of service during such 
                year.
            ``(3) Certain rules made applicable.--Except to the extent 
        inconsistent with the provisions of this subpart, the rules of 
        section 411 shall apply for purposes of this subsection.
    ``(d) Portability Requirements.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        requirements of this subsection are met if, in accordance with 
        procedures determined by the Secretary, the plan provides 
        that--
                    ``(A) except as provided in regulations, the plan 
                shall transfer, within 120 days after an employee 
                separates from service with the employer or after the 
                termination of the plan, the present value of the 
                nonforfeitable accrued qualified section 401(h) medical 
                benefits of the employee attributable to amounts which 
                are allocated to the funded reserve account to--
                            ``(i) a plan which is maintained by an 
                        employer of such employee and which maintains a 
                        health benefits account, or
                            ``(ii) if the employer does not maintain a 
                        plan described in clause (i), an individual 
                        retirement account established for the benefit 
                        of such employee, and
                    ``(B) the plan accepts transfers under subparagraph 
                (A) from another plan or individual retirement account.
            ``(2) No transfers after employee is disabled or attains 
        retirement age.--Except in the case of a termination of a plan, 
        a plan shall not meet the requirements of this subsection if it 
        permits the transfer of a benefit after--
                    ``(A) an employee has attained Social Security 
                retirement age, or
                    ``(B) an employee has become disabled (within the 
                meaning of section 72(m)(7)).
            ``(3) Inclusion in income where more than 1 account.--
                    ``(A) In general.--If--
                            ``(i) an individual is a participant or 
                        beneficiary under 2 or more plans maintaining a 
                        funded reserve account or individual retirement 
                        account to which assets were transferred from 
                        such a plan, and
                            ``(ii) such individual does not (within a 
                        reasonable period) consolidate the present 
                        value of the individual's nonforfeitable 
                        accrued benefit in all such plans and the 
                        assets so transferred to all such accounts into 
                        1 such plan or into 1 such account,
                then an amount equal to the sum of the present value of 
                such benefits and the fair market value of such assets 
                shall be treated as distributed in cash to such 
                individual at the close of the plan year for the plan 
                or account involved and such distribution shall be 
                included in gross income.
                    ``(B) Special rules.--
                            ``(i) Employee must consolidate into plan 
                        of current employer.--In the case of an 
                        employee who is employed by an employer 
                        maintaining a plan described in subparagraph 
                        (A)(i), a consolidation satisfies subparagraph 
                        (A) only if such consolidation is into such a 
                        plan maintained by such employer.
                            ``(ii) More than 1 current employer.--If an 
                        individual is a participant in more than 1 plan 
                        described in subparagraph (A)(i) by reason of 
                        being currently employed by more than 1 
                        employer, such plans shall be treated as 1 plan 
                        for purposes of subparagraph (A).
                            ``(iii) Employee with no current employer 
                        maintaining plan.--In the case of an employee 
                        who is currently not employed by an employer 
                        maintaining a plan described in subparagraph 
                        (A)(i), a consolidation satisfies subparagraph 
                        (A) only if such consolidation is into--
                                    ``(I) a plan described in 
                                subparagraph (A)(i) maintained by his 
                                most recent employer maintaining such 
                                plan, or
                                    ``(II) an individual retirement 
                                account of the individual.
                    ``(C) Amount transferred not includible in 
                income.--No amount shall be includible in gross income 
                by reason of any transfer which is part of a 
                consolidation required under this paragraph.
    ``(e) Retired Employees Not Covered by Health Benefits Account May 
Elect Coverage.--
            ``(1) In general.--The requirements of this subsection are 
        met if the plan provides that a former employee who--
                    ``(A) is in pay status under the plan, but
                    ``(B) is not eligible to receive all or any portion 
                of qualified section 401(h) medical benefits provided 
                for any period through the funded reserve account,
        is entitled to elect such benefits for himself or his spouse 
        and dependents. A plan shall not be treated as failing to meet 
        the requirements of this subsection if an employee is required 
        to pay a premium for such benefits as long as such premium does 
        not exceed 102 percent of applicable premium for the period 
        such benefits are provided.
            ``(2) Applicable premium.--For purposes of paragraph (1), 
        the applicable premium for any period shall be determined in 
        the same manner as under section 4980B(f)(4).

``SEC. 420C. DEFINITIONS; SPECIAL RULES.

    ``(a) Qualified Section 401(h) Medical Benefits.--For purposes of 
this subpart, the term `qualified section 401(h) medical benefits' 
means benefits--
            ``(1) which are--
                    ``(A) benefits for sickness, accident, 
                hospitalization, and medical expenses of former 
                employees who are in pay status under the plan (and 
                their spouse or dependents) after the former employee--
                            ``(i) has attained Social Security 
                        retirement age, or
                            ``(ii) is disabled (within the meaning of 
                        section 72(m)(7)), or
                    ``(B) post-retirement long-term health care 
                benefits, and
            ``(2) which are provided through 1 or more of the 
        following:
                    ``(A) insurance acquired by the plan, or
                    ``(B) self-insurance by the employer or the plan.
    ``(b) Post-Retirement Long-Term Health Care.--For purposes of this 
subpart--
            ``(1) In general.--The term `post-retirement long-term 
        health care' means long-term health care benefits provided to a 
        former employee (or the spouse of the former employee) who is 
        in pay status under the plan after the former employee--
                    ``(A) has attained Social Security retirement age, 
                or
                    ``(B) is disabled (within the meaning of section 
                72(m)(7)).
            ``(2) Spouse of deceased employee.--For purposes of 
        paragraph (1), the spouse of a deceased employee shall be 
        treated--
                    ``(A) as a former employee, and
                    ``(B) as satisfying the requirements of paragraph 
                (1) if such spouse was receiving benefits immediately 
                before the death of the employee.
            ``(3) Long-term health care benefit.--
                    ``(A) In general.--The term `long-term health care 
                benefit' means a benefit which consists of the 
                providing by a qualified provider in a qualified 
                facility of necessary diagnostic, preventive, 
                therapeutic, rehabilitative, and personal care 
                services, required by a chronically ill individual.
                    ``(B) Certain items not included.--The term `long-
                term health care benefits' does not include basic 
                medicare supplement coverage, basic hospital expense 
                coverage, basic medical-surgical expense coverage, 
                hospital confinement indemnity coverage, major medical 
                expense coverage, disability income protection 
                coverage, accident only coverage, specified disease or 
                specified accident coverage, or limited benefit health 
                coverage.
            ``(4) Qualified facility.--The term `qualified facility' 
        means--
                    ``(A) a rehabilitative, hospice, or adult day care 
                facility, including a hospital, retirement home, 
                skilled nursing facility (within the meaning of section 
                1919(a) of the Social Security Act), or other similar 
                facility determined by the plan administrator, or
                    ``(B) a home where the chronically ill individual 
                resides.
            ``(5) Chronically ill individual.--The term `chronically 
        ill individual' means an individual whose disability is such 
        that the individual has been certified as requiring assistance 
        with daily living (as defined by the plan administrator) for a 
        period of at least 90 days.
            ``(6) Qualified provider.--The term `qualified provider' 
        means a medical practitioner licensed under State law, 
        registered nurse, licensed vocational nurse, qualified 
        therapist, or trained home health aide (or any organization 
        employing such providers), but does not include a relative or 
        other person who ordinarily resides in the home where the 
        chronically ill individual resides.
    ``(c) Health Benefits Account.--For purposes of this subpart, the 
term `health benefits account' means an account established and 
maintained under section 401(h).
    ``(d) Social Security Retirement Age.--For purposes of this 
subpart, the term `Social Security retirement age' has the meaning 
given such term by section 415(b)(8).''
    (b) Individual Retirement Accounts.--
            (1) In general.--Section 408 of such Code is amended by 
        redesignating subsection (p) as subsection (q) and by inserting 
        after subsection (o) the following new subsection:
    ``(p) Special Rules for Funded Reserve Accounts.--
            ``(1) In general.--A trust shall not be treated as an 
        individual retirement account under subsection (a) unless the 
        trust instrument provides that the trust will accept transfers 
        of assets as provided in section 420B(d)(1).
            ``(2) Accounting.--The trustee of an individual retirement 
        account shall maintain separate accounting for assets 
        transferred to the account under section 420B(d)(1) (and any 
        income allocable thereto).''
            (2) Penalty for early distributions.--Section 72(t) of such 
        Code (relating to 10-percent additional tax on early 
        distributions) is amended by adding at the end the following 
        new paragraph:
            ``(6) Early distribution of medical benefits.--If--
                    ``(A) a taxpayer receives a distribution of amounts 
                transferred to an individual retirement account under 
                section 420B(d)(1) (or any income or gain allocable 
                thereto), and
                    ``(B) such distribution--
                            ``(i) is made before the individual attains 
                        Social Security retirement age (within the 
                        meaning of section 415(b)(8)) or becomes 
                        disabled (within the meaning of subsection 
                        (m)(7)), or
                            ``(ii) exceeds the amount of qualified 
                        section 401(h) medical expenses of the 
                        taxpayer, his spouse, or dependents for the 
                        taxable year,
        then paragraph (1) shall apply to such distribution or such 
        excess, except that `50 percent' shall be substituted for `10 
        percent'. Paragraph (2) shall not apply to a distribution to 
        which this paragraph applies.''
    (c) Excise Tax on Allocated Assets Not Used To Provide Retiree 
Health Benefits.--Section 4980 of such Code (relating to tax on 
reversion of qualified plan assets to employers) is amended by adding 
at the end the following new subsection:
    ``(e) Assets Allocated to Retiree Health Benefits Accounts.--In the 
case of a plan which establishes a health benefits account described in 
section 401(h), if--
            ``(1) amounts are allocated to a funded reserve account 
        under section 420B, and
            ``(2) any amount in such account is paid or distributed 
        other than to pay for qualified section 401(h) medical benefits 
        (as defined in section 420C(a)) provided through such account,
the amount so paid or distributed shall be treated as an employer 
reversion for purposes of this section, except that subsection (a) 
shall be applied by substituting `100 percent' for `25 percent'.''
    (d) Conforming Amendments.--
            (1) Section 419(e) of such Code (defining welfare benefit 
        fund) is amended by adding at the end the following new 
        paragraph:
            ``(5) Health benefits accounts.--The term `welfare benefits 
        fund' does not include any health benefits account established 
        under section 401(h).''
            (2) The table of subparts for part I of subchapter D of 
        chapter 1 of such Code is amended by adding at the end the 
        following new item:

                              ``Subpart F. Treatment of health benefit 
                                        accounts.''
    (e) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        after December 31, 1992.
            (2) Individual retirement accounts.--The amendments made by 
        subsection (b) shall apply to accounts established after 
        December 31, 1992.

       Subtitle C--Reverse Mortgage Insurance for Older Americans

SEC. 221. MAXIMUM AMOUNT INSURED.

    Section 255(g) of the National Housing Act (12 U.S.C. 1715z-20(g)) 
is amended by striking the third sentence and inserting the following 
new sentence: ``In no case may the benefits of insurance under this 
section exceed the greater of 95 percent of the median 1-family house 
price in the United States or 95 percent of the median 1-family house 
price in the area, as determined by the Secretary.''

                     Subtitle D--Income Tax Credits

SEC. 231. REFUNDABLE CREDIT FOR CUSTODIAL CARE OF CERTAIN DEPENDENTS IN 
              TAXPAYER'S HOME.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 37 and by inserting 
after section 34 the following new section:

``SEC. 35. CREDIT FOR TAXPAYERS WITH CERTAIN PERSONS REQUIRING 
              CUSTODIAL CARE IN THEIR HOUSEHOLDS.

    ``(a) Allowance of Credit.--In the case of an individual who 
maintains a household which includes as a member one or more qualified 
persons, there shall be allowed as a credit against the tax imposed by 
this chapter for the taxable year an amount equal to $2,000 for each 
such person.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified person.--The term `qualified person' means 
        any individual--
                    ``(A) who is a parent, grandparent, dependent (as 
                defined in section 152), or spouse of the taxpayer,
                    ``(B) who has been certified by a physician as--
                            ``(i) being unable to perform (without 
                        substantial assistance from another individual) 
                        at least 2 activities of daily living (as 
                        defined in paragraph (2)), or
                            ``(ii) having a similar level of disability 
                        due to cognitive impairment, and
                    ``(C) who has as his principal place of abode for 
                more than half of the taxable year the home of the 
                taxpayer.
            ``(2) Activities of daily living.--For purposes of 
        paragraph (1), each of the following is an activity of daily 
        living:
                    ``(A) Bathing.--The overall complex behavior of 
                getting water and cleansing the whole body, including 
                turning on the water for a bath, shower, or sponge 
                bath, getting to, in, and out of a tub or shower, and 
                washing and drying oneself.
                    ``(B) Dressing.--The overall complex behavior of 
                getting clothes from closets and drawers and then 
                getting dressed.
                    ``(C) Toileting.--The act of going to the toilet 
                room for bowel and bladder function, transferring on 
                and off the toilet, cleaning after elimination, and 
                arranging clothes.
                    ``(D) Transfer.--The process of getting in and out 
                of bed or in and out of a chair or wheelchair.
                    ``(E) Eating.--The process of getting food from a 
                plate or its equivalent into the mouth.
            ``(3) Physician.--The term `physician' means a doctor of 
        medicine or osteopathy legally authorized to practice medicine 
        or surgery in the jurisdiction in which he makes the 
        determination under paragraph (1).
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Maintaining a household.--An individual shall be 
        treated as maintaining a household for any period if over half 
        the cost of maintaining the household for such period is 
        furnished by such individual (or, if such individual is married 
        during such period, by such individual and his spouse).
            ``(2) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit under subsection (a) shall be allowed only if the 
        taxpayer and his spouse file a joint return for the taxable 
        year.
            ``(3) Marital status.--An individual legally separated from 
        his spouse under a decree of divorce or separate maintenance 
        shall not be considered as married.
            ``(4) Certain married individuals living apart.--If--
                    ``(A) an individual who is married and who files a 
                separate return--
                            ``(i) maintains a household which includes 
                        as a member one or more qualified persons, and
                            ``(ii) furnishes over half of the cost of 
                        maintaining such household during such taxable 
                        year, and
                    ``(B) during the last 6 months of such taxable year 
                such individual's spouse is not a member of such 
                household,
        such individual shall not be considered as married.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''
    (b) Clerical Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 of such Code is amended by 
striking the item relating to section 35 and inserting the following:

                              ``Sec. 35. Credit for taxpayers with 
                                        certain persons requiring 
                                        custodial care in their 
                                        households.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

SEC. 232. CREDIT FOR EXPENSES FOR LONG-TERM CARE SERVICES PROVIDED TO 
              CERTAIN INDEPENDENT PERSONS REQUIRING SUCH CARE.

    (a) General Rule.--Subpart C of part IV of subchapter A of chapter 
1 of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by inserting after section 35 the following new section:

``SEC. 36. CREDIT FOR EXPENSES FOR LONG-TERM CARE SERVICES PROVIDED TO 
              CERTAIN INDEPENDENT PERSONS REQUIRING SUCH CARE.

    ``(a) General Rule.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle for the 
taxable year an amount equal to 25 percent of the qualified long-term 
care expenses paid during such taxable year.
    ``(b) Maximum Credit.--
            ``(1) In general.--The credit allowed by subsection (a) for 
        any taxable year shall not exceed $2,000 with respect to each 
        independent qualified person.
            ``(2) Phaseout of credit for taxpayers with incomes 
        exceeding 150 percent of the poverty level.--If the adjusted 
        gross income of the taxpayer for the taxable year exceeds the 
        base amount, the $2,000 amount in paragraph (1) shall be 
        reduced (but not below zero) by an amount which bears the same 
        ratio to $2,000 as--
                    ``(A) the excess of the taxpayer's adjusted gross 
                income for the taxable year over the base amount, bears 
                to
                    ``(B) $10,000.
        For purposes of the preceding sentence, the base amount is 150 
        percent of the poverty level applicable to the taxpayer.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified long-term care expenses.--
                    ``(A) In general.--The term `qualified long-term 
                care expenses' means the amount paid by the taxpayer 
                during the taxable year for 1 or more medically 
                necessary, diagnostic services, preventive services, 
                therapeutic services, rehabilitation services, 
                maintenance services, or personal care services which 
                are required by an independent qualified person and 
                which are provided in the household referred to in 
                paragraph (2)(C).
                    ``(B) Coverage specifically excluded.--Such term 
                does not include any combination of the following kinds 
                of coverage:
                            ``(i) Basic Medicare supplement coverage.
                            ``(ii) Basic hospital-based acute care 
                        expense coverage.
                            ``(iii) Basic medical-surgical expense 
                        coverage.
                            ``(iv) Hospital confinement indemnity 
                        coverage.
                            ``(v) Major medical expense coverage.
                            ``(vi) Disability income protection 
                        coverage.
                            ``(vii) Accident only coverage.
                            ``(viii) Specified disease coverage.
                            ``(ix) Specified accident coverage.
                            ``(x) Limited benefit health coverage.
            ``(2) Independent qualified person.--The term `independent 
        qualified person' means any individual--
                    ``(A) who is a parent, grandparent, or dependent 
                (as defined in section 152) of the taxpayer,
                    ``(B) who has been certified by a physician as--
                            ``(i) being unable to perform (without 
                        substantial assistance from another individual) 
                        at least 2 activities of daily living (as 
                        defined in section 35(b)(2)), or
                            ``(ii) having a similar level of disability 
                        due to cognitive impairment, and
                    ``(C) who maintains a household which is his 
                principal place of abode for more than half of the 
                taxable year of the taxpayer.
        Such term shall not include any qualified person as defined in 
        section 35(b).''
    (b) Clerical Amendment.--The table of sections for subpart C of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following:

                              ``Sec. 36. Credit for expenses for long-
                                        term care services provided to 
                                        certain independent persons 
                                        requiring such care.
                              ``Sec. 37. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

          Subtitle E--Treatment of Accelerated Death Benefits

SEC. 241. TAX TREATMENT OF ACCELERATED DEATH BENEFITS UNDER LIFE 
              INSURANCE CONTRACTS.

    (a) General Rule.--Section 101 of the Internal Revenue Code of 1986 
(relating to certain death benefits) is amended by adding at the end 
thereof the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
            ``(1) In general.--For purposes of this section, any amount 
        paid to an individual under a life insurance contract on the 
        life of an insured who is a terminally ill individual or who is 
        permanently confined to a nursing home shall be treated as an 
        amount paid by reason of the death of such insured.
            ``(2) Terminally ill individual.--For purposes of this 
        subsection, the term `terminally ill individual' means an 
        individual who has been certified by a physician, licensed 
        under State law, as having an illness or physical condition 
        which can reasonably be expected to result in death in 12 
        months or less.
            ``(3) Permanently confined to a nursing home.--For purposes 
        of this subsection, an individual has been permanently confined 
        to a nursing home if the individual is presently confined to a 
        nursing home and has been certified by a physician, licensed 
        under State law, as having an illness or physical condition 
        which can reasonably be expected to result in the individual 
        remaining in a nursing home for the rest of his life.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1992.

SEC. 242. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 of the Internal Revenue Code of 1986 (relating 
to other definitions and special rules) is amended by adding at the end 
thereof the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
            ``(1) In general.--Any reference to a life insurance 
        contract shall be treated as including a reference to a 
        qualified accelerated death benefit rider on such contract.
            ``(2) Qualified accelerated death benefit riders.--For 
        purposes of this subsection, the term `qualified accelerated 
        death benefit rider' means any rider or addendum on, or other 
        provision of, a life insurance contract which provides for 
        payments to an individual on the life of an insured upon such 
        insured becoming a terminally ill individual (as defined in 
        section 101(g)(2)) or being permanently confined to a nursing 
        home (as defined in section 101(g)(3)).''
    (b) Definitions of Life Insurance and Modified Endowment 
Contracts.--
            (1) Rider treated as qualified additional benefit.--
        Paragraph (5)(A) of section 7702(f) of such Code is amended by 
        striking ``or'' at the end of clause (iv), by redesignating 
        clause (v) as clause (vi), and by inserting after clause (iv) 
        the following new clause:
                            ``(v) any qualified accelerated death 
                        benefit rider (as defined in section 818(g)(2)) 
                        or any qualified long-term care insurance rider 
                        which reduces the death benefit, or''.
            (2) Transitional rule.--For purposes of applying section 
        7702 or 7702A of the Internal Revenue Code of 1986 to any 
        contract (or determining whether either such section applies to 
        such contract), the issuance of a rider or addendum on, or 
        other provision of, a life insurance contract permitting the 
        acceleration of death benefits (as described in section 101(g) 
        of such Code) or for qualified long-term care insurance (as 
        defined in section 849(b) of such Code) shall not be treated as 
        a modification or material change of such contract.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning before, on, or after December 31, 
1992.

  Subtitle F--Federal National Long-Term Care Reinsurance Corporation

SEC. 251. AUTHORIZATION FOR ESTABLISHMENT OF CORPORATION.

    The Secretary of Health and Human Services (in this subtitle 
referred to as the ``Secretary'') is authorized to provide, in 
accordance with this subtitle, for the incorporation of a corporation 
to be known as the Federal National Long-Term Care Reinsurance 
Corporation (in this subtitle referred to as the ``Corporation''), 
which shall not be an agency or establishment of the United States 
Government.

SEC. 252. BOARD OF DIRECTORS AND OFFICERS.

    (a) Board of Directors.--The Corporation shall have a Board of 
Directors (in this subtitle referred to as the ``Board'') consisting of 
9 members, of which--
            (1) 3 shall be appointed by the President of the United 
        States, of which one shall be representative of entities 
        providing long-term care, one shall be a representative from an 
        insurer, and one shall be a representative of consumers of 
        long-term care; and
            (2) 6 shall be elected annually by the stockholders of the 
        Corporation entitled to vote for such members.
Within the limitations of law and regulation, the Board shall determine 
the general policies which shall govern the operations of the 
Corporation, and shall have power to adopt, amend, and repeal bylaws 
governing the performance of the powers and duties granted to or 
imposed upon it by law.
    (b) Initial Board.--Notwithstanding subsection (a), the members 
described in subsection (a)(1) shall serve as incorporators and are 
authorized to assist the Secretary in taking whatever actions are 
necessary to incorporate the Corporation.
    (c) Terms of Office.--The terms of office of each member of the 
Board shall be one year, expiring on the date of the annual meeting of 
the stockholders of the Corporation; except that (1) in the case of a 
vacancy occurring prior to the expiration of the term of a member, the 
vacancy shall be filled by the President (for members described in 
subsection (a)(1)) or by the remaining members of the Board (for other 
members) for the remainder of such term, and (2) any member may be 
removed by the President for good cause. Any vacancy in the Board shall 
not affect its power.
    (d) Chairman.--The President shall designate one of the members 
described in subsection (a)(1) as the initial Chairman of the Board. 
Thereafter, the members of the Boards shall annually elect one of their 
number as Chairman.
    (e) Treatment of Members.--
            (1) The members of the Board shall not by reason of such 
        membership, be deemed to be employees of the United States 
        Government. Except as provided in paragraph (2), each member of 
        the Board shall be entitled to receive the daily equivalent of 
        the maximum annual rate of basic pay in effect for grade GS-18 
        of the General Schedule for each day (including travel time) 
        during which he is engaged in the actual performance of duties 
        vested in the Corporation.
            (2) Members of the Board who are full-time officers or 
        employees of the United States shall receive no additional pay 
        by reason of their service on the Board.
    (f) Officers.--The Corporation shall have a President and such 
other executive officers and employees as may be appointed by the Board 
at rates of compensation fixed by the Board, without regard to any 
provisions of title 5, United States Code. No such executive officer 
may receive any salary or other compensation from any source other than 
the Corporation during the period of his employment by the Corporation.

SEC. 253. PURPOSE AND AUTHORITY OF CORPORATION.

    (a) Purpose.--The Corporation shall confine its activities to 
providing for the reinsurance of insurance companies for extraordinary 
loss in the issuance or payment of benefits for qualified long-term 
care insurance (as defined in section 848(b) of the Internal Revenue 
Code of 1986). Except as may be provided by the Secretary in 
regulations, the Corporation may not refuse to provide for such 
reinsurance for any insurance meeting the requirements of such section 
(other than paragraph (4)(C)(iii) thereof).
    (b) Premiums.--The Corporation shall impose for such reinsurance 
reasonable premiums which--
            (1) are related to actuarial estimates of the type and 
        amount of financial risk assumed by the Corporation, and
            (2) in the aggregate (in conjunction with other income 
        which the Corporation may have) provide for all the expenses of 
        the Corporation.
    (c) No Political Contributions.--The Corporation shall not 
contribute or otherwise support any political party or candidate for 
elective public office.
    (d) General Powers.--Except as otherwise specifically provided in 
this subtitle, the Corporation and Board shall have the powers of a 
corporation and board of directors in the State in which incorporated.

SEC. 254. CAPITALIZATION.

    (a) Common Stock.--The Corporation shall have common stock, with 
such par value as the Board establishes, which shall be vested with all 
voting rights, each share being entitled to one vote with rights of 
cumulative voting at all elections of directors. The free 
transferability of the common stock at all times to any person, firm, 
corporation, or other entity shall not be restricted, except that, as 
to the Corporation, it shall be transferable only on the books of the 
Corporation. The Corporation shall only issue such common stock with 
the approval of the Secretary.
    (b) Debt.--
            (1) For purposes of carrying out this subtitle, the 
        Corporation may, with the approval of the Secretary and 
        consistent with section 258, issue obligations having such 
        maturities and bearing such rate or rates and having such 
        conditions (including subordination to other such obligations) 
        as the Board determines to be appropriate.
            (2) The full faith and credit of the United States is not 
        pledged to the obligations and debts of the Corporation. The 
        Corporation shall insert appropriate language in all of its 
        obligations issued under this subsection clearly indicating 
        that such obligations, together with the interest thereon, are 
        not guaranteed by the United States and do not constitute debt 
        or obligation of the United States or of any agency or 
        instrumentality thereof. The Corporation may purchase in the 
        open market any of its obligations outstanding under this 
        subsection at any time and at any price.
            (3) All obligations, participations, or other instruments 
        issued by the Corporation shall be lawful investments, and may 
        be accepted as security for all fiduciary, trust, and public 
        funds, the investment or deposit of which shall be under the 
        authority and control of the United States or any officer or 
        officers thereof.

SEC. 255. EXEMPTION FROM STATE REGULATION AND TAXATION.

    (a) Taxation.--The Corporation, including its capital, reserves, 
surplus, security holdings, and income, shall be exempt from all 
taxation now or hereafter imposed by any State, district, Commonwealth, 
county, municipality, or local taxing authority, except that any real 
property of the Corporation shall be subject to such taxation to the 
same extent according to its value as other real property is taxed.
    (b) Insurance Regulation.--Except to the extent specified by the 
Secretary in regulations, the Corporation shall not be subject to any 
regulation under the insurance laws of any State, district, or 
Commonwealth.

SEC. 256. AUDIT AND ANNUAL REPORT.

    (a) Audit.--The Board shall provide for an annual audit of the 
operations of the Corporation. Such audit shall be conducted by a 
certified public accountant in accordance with generally accepted 
auditing principles (as recognized by the Comptroller General).
    (b) Annual Report.--The Board shall report annually to the 
President and the Congress on the activities of the Corporation. Such 
report shall include a presentation of the financial status of the 
Corporation, as certified under the audit described in subsection (a).

SEC. 257. PROTECTION OF NAME.

    No individual association, partnership, or corporation, except the 
Corporation, shall hereafter use the word ``Federal National Long-Term 
Care Reinsurance Corporation'', or any combination of such words, as 
the name or a part thereof under which he or it shall do business. 
Violations of the foregoing sentence may be enjoined by any court of 
general jurisdiction at the suit of the Corporation. In any such suit, 
the Corporation may recover any actual damages flowing from such 
violations, and, in addition, shall be entitled to punitive damages 
(regardless of the existence or nonexistence of actual damages) of not 
exceeding $10,000 for each day during which such violation is committed 
or repealed.

SEC. 258. TERMINATION.

    The Corporation shall terminate its activities not later than 10 
years after the date of the enactment of this Act.

                TITLE III--MALPRACTICE LIABILITY REFORM

SEC. 301. DEFINITIONS.

    In this title, the following definitions shall apply:
            (1) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for medical expenses, 
        lost wages or other income, lost employment, burial expenses, 
        and other pecuniary losses.
            (2) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought against a 
        health care provider (regardless of the theory of liability on 
        which the action is based) in which a plaintiff alleges an 
        injury caused by the provision of (or the failure to provide) 
        health care services, except that such term does not include--
                    (A) any action in which a plaintiff alleges an 
                intentional tort; or
                    (B) any action in which the plaintiff's sole 
                allegation is an allegation of an injury arising from 
                the use of a medical product.
            (3) Health care provider.--The term ``health care 
        provider'' means any individual or entity that is engaged in 
        the delivery of health care services and is required under 
        Federal or State law to be licensed, certified, or accredited 
        in order to deliver such services.
            (4) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a health care 
        liability action.
            (5) Non-economic damages.--The term ``non-economic 
        damages'' means any damages paid to compensate an individual 
        for subjective, non-monetary losses, including pain, suffering, 
        inconvenience, mental suffering, emotional distress, loss of 
        society and companionship, loss of consortium, injury to 
        reputation, and humiliation, but does not include punitive 
        damages.
            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (7) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, and the 
        Northern Mariana Islands.

SEC. 302. MALPRACTICE LIABILITY REFORM REQUIREMENTS DESCRIBED.

    (a) In General.--Subject to section 303, a State meets the 
requirements of this section if it has enacted laws, rules, or 
regulations relating to the treatment of health care liability actions 
that meet the requirements of subsections (b) through (h), relating to 
alternative dispute resolution mechanisms that meet the requirements of 
subsection (i), and relating to quality assurance reform that meet the 
requirements of subsection (j).
    (b) Liability Several and Not Joint for Non-Economic Damages.--
            (1) In general.--With respect to non-economic damages, the 
        liability of each defendant in a health care liability action 
        shall be several only and shall not be joint. Each defendant 
        shall be liable only for the amount of non-economic losses 
        incurred by the plaintiff that is in direct proportion to the 
        defendant's percentage of responsibility for the injury 
        suffered by the plaintiff (as determined by the trier of fact 
        pursuant to paragraph (2)).
            (2) Determination of percentage of responsibility.--The 
        trier of fact shall determine the extent of each defendant's 
        responsibility for the non-economic injury suffered by the 
        plaintiff, and shall assign a percentage of responsibility for 
        such injury to each defendant.
    (c) Limitation on Non-economic Damages.--
            (1) In general.--The total amount of noneconomic damages 
        that may be awarded to an individual and the family members of 
        such individual for losses resulting from an injury which is 
        the subject of a health care liability action may not exceed 
        $250,000, regardless of the number of health care providers 
        against whom the action is brought or the number of actions 
        brought with respect to the injury.
            (2) Adjustment for inflation.--The amount referred to in 
        paragraph (1) shall be increased every 3rd year (beginning with 
        the 3rd year that begins after the date of the enactment of 
        this Act) in the same manner as amounts are increased under 
        section 215(i) of the Social Security Act for base quarters or 
        cost-of-living computation quarters in such a year.
    (d) Mandatory Offsets for Damages Paid by a Collateral Source.--
            (1) In general.--The total amount of damages received by an 
        individual under a health care liability action shall be 
        reduced (in accordance with paragraph (2)) by any other payment 
        that has been or will be made to the individual to compensate 
        the individual for the injury that was the subject of the 
        health care liability action, including payment under--
                    (A) Federal or State disability or sickness 
                programs;
                    (B) Federal, State, or private health insurance 
                programs;
                    (C) private disability insurance programs;
                    (D) employer wage continuation programs; and
                    (E) any other source of payment intended to 
                compensate such individual for such injury.
            (2) Amount of reduction.--The amount by which an award of 
        damages to an individual shall be reduced under paragraph (1) 
        shall be the total amount of any payments (other than such 
        award) that have been made or that will be made to the 
        individual to compensate the individual for the injury that was 
        the subject of the action.
    (f) Treatment of Payments for Future Economic Losses.--
            (1) Prohibiting single lump-sum payment.--No health care 
        provider shall be required to make a single, lump-sum payment 
        for damages for any economic losses to be incurred after the 
        date on which judgment is entered in a health care liability 
        action, but shall be permitted to make periodic payments of 
        such damages on the basis of projections of the amount of costs 
        expected to be incurred by the plaintiff at appropriate 
        intervals (as determined by the trier of fact).
            (2) Use of annuities or trusts.--The court may require a 
        health care provider to purchase an annuity or fund a 
        reversionary trust to make periodic payments under paragraph 
        (1) if the court finds a reasonable basis for concluding that 
        the health care provider may be unable to or will not otherwise 
        make the periodic payments.
            (3) Requirement of periodic payment as final order.--The 
        judgment of the court awarding periodic payments may not be 
        reopened at any time to contest, amend, or modify the schedule 
        or amount of the payments in the absence of fraud or any other 
        basis under which a party may obtain relief from a final 
        judgment.
            (4) Lump-sum payment under settlement not precluded.--
        Nothing in this subsection shall be construed to preclude the 
        parties to a health care liability action from entering into a 
        settlement providing for a single, lump-sum payment for damages 
        described in paragraph (1).
    (g) Limitation on Attorney's Fees.--The amount of attorney's fees 
that may be collected by the attorney for any party to a health care 
liability action for services relating to the action may not exceed--
            (1) 33 percent of the first $50,000 awarded to the party;
            (2) 20 percent of the next $100,000 awarded to the party;
            (3) 15 percent of the next $100,000 awarded to the party; 
        and
            (4) 10 percent of any amount in excess of $250,000 awarded 
        to the party.
    (h) Special Provision for Certain Obstetric Services.--
            (1) Imposition of higher standard of proof.--In the case of 
        a health care liability action relating to services provided 
        during labor or the delivery of a baby, if the plaintiff was 
        not previously treated for the pregnancy by the defendant 
        health care provider a court may not find that the defendant 
        committed malpractice and may not assess damages against the 
        defendant unless the malpractice is proven by clear and 
        convincing evidence.
            (2) Applicability to group practices or agreements among 
        providers.--For purposes of paragraph (1), a health care 
        provider shall be considered to have previously treated an 
        individual for a pregnancy if the provider is a member of a 
        group practice whose members previously treated the individual 
        for the pregnancy or is providing services to the individual 
        during labor or the delivery of a baby pursuant to an agreement 
        with another provider.
    (i) Establishment of Alternative Dispute Resolution Mechanisms.--
            (1) In general.--Each State shall have in effect at least 
        one mediation or pretrial screening panel that meets 
        requirements specified in regulations issued by the Secretary, 
        or shall have in effect another alternative dispute resolution 
        mechanism which the Secretary, in consultation with the 
        Attorney General, finds to be equally effective in deterring 
        the filing of frivolous health care liability actions and 
        providing fair and expeditious compensation for meritorious 
        health care liability claims.
            (2) Promulgation of regulations.--Subject to paragraph (3), 
        the Secretary, in consultation with the Administrative 
        Conference of the United States and the Attorney General, shall 
        promulgate regulations that specify the Secretary's criteria 
        for mediation and pretrial screening panels and for evaluating 
        the effectiveness of other alternative dispute resolution 
        mechanisms under paragraph (1).
            (3) Tolling of statute of limitations during alternative 
        procedures.--Any regulations promulgated by the Secretary 
        pursuant to paragraph (2) shall include a requirement that a 
        State may not include any time occurring after a claim is filed 
        with a mediation or pretrial screening panel or under any other 
        alternative dispute resolution mechanism under paragraph (1) 
        for purposes of determining the applicability of any statute of 
        limitations to a health care liability action arising from the 
        injury that is the subject of the claim.
    (j) Quality Assurance Reform.--
            (1) Improving the performance of state medical boards.--(A) 
        The State, through the appropriate health authority, shall 
        collect, analyze and supply the Secretary with information and 
        data, as specified in regulations to be promulgated by the 
        Secretary, on staffing, revenue, disciplinary actions, 
        expenditures, case-loads of the State Medical Board, and use of 
        continuing medical education programs in order to demonstrate 
        that the State medical boards meet performance criteria 
        established by the Secretary in regulations.
            (B) The State, through the appropriate health authority, 
        shall impose a requirement on the State Medical Board to 
        require a physician disciplined by the State Medical Board to 
        take a certain number of continuing education courses as the 
        board requires, with educational outcome measures required, in 
        the subject areas in which the board determines that the 
        physician's knowledge is deficient.
            (2) Alternative programs.--The Secretary shall deem a State 
        in compliance with the requirements of this section if (instead 
        of complying with the requirements of paragraph (1)) the State 
        has in effect a program to reduce the incidence of physician 
        negligence which the Secretary finds to be at least as 
        effective in reducing the incidence of negligence as compliance 
        with the requirements of paragraph (1), in accordance with 
        criteria established by the Secretary that may include--
                    (A) requirements for risk management systems to be 
                carried out by institutions providing health care in 
                the State;
                    (B) quality assurance systems, administered by the 
                State or professional bodies, which review the quality 
                of care rendered by the physicians of the State; or
            (3) State programs for the promulgation of standards of 
        care in areas of medical practice in which the risk of 
        negligence is greatest.

SEC. 303. WAIVER OF REQUIREMENTS FOR GOOD CAUSE OR FOR CARRYING OUT 
              DEMONSTRATION PROJECTS.

    The Secretary may waive any of the requirements of subsections (b) 
through (j) of section 302 for good cause or to the extent necessary to 
enable a State to carry out an experimental, demonstration, or pilot 
project if, in the judgment of the Secretary, the project is likely to 
promote the objectives of this title.

SEC. 304. CERTIFICATION OF STATE COMPLIANCE.

    (a) Notification.--
            (1) In general.--Not later than 6 months before the 
        beginning of each year (beginning with the first year that 
        begins after the expiration of the 3-year period beginning on 
        the date of the enactment of this Act), each State shall submit 
        a notification to the Secretary, with a certification by the 
        Chief Executive Officer of the State that, on the date the 
        notification is submitted, the State has enacted, adopted, or 
        otherwise has in effect laws, rules, or regulations that meet 
        the requirements of section 302.
            (2) Contents of notification.--The notification shall be 
        accompanied by documentation to support the certification 
        required by this subsection, including copies of relevant State 
        statutes, rules, procedures, regulations, judicial decisions, 
        State constitutional provisions, and opinions of the State 
        Attorney General, and shall contain such other information, be 
        in such form, and be submitted in such manner, as the Secretary 
        may require.
    (b) Review of Notification.--
            (1) In general.--Within 90 days after receiving a 
        notification under subsection (a), the Secretary shall review 
        the notification and determine whether the notification 
        demonstrates that the State has enacted, adopted, or otherwise 
        has in effect laws, rules, or regulations that meet the 
        requirements of section 302.
            (2) Approval of notification.--If the Secretary determines 
        that the notification makes such demonstration, the Secretary 
        shall approve the notification.
            (3) Notice of disapproval.--If, after reviewing a State's 
        notification under subsection (a), the Secretary determines 
        that the notification does not make the demonstration required, 
        the Secretary shall, not later than 15 days after making such 
        determination, provide the State with a written notice 
        specifying such determination and containing recommendations 
        for revisions which would cause the notification of the State 
        to be approved.
            (4) Review of revised notifications.--Not later than 30 
        days after receiving a revised notification, the Secretary 
        shall review the revised notification and determine whether the 
        notification demonstrates that the State has enacted, adopted, 
        or otherwise has in effect laws, rules, or regulations that 
        meet the requirements of section 302. If the Secretary 
        determines that the revised notification makes such a 
        demonstration, the Secretary shall approve the revised 
        notification.
    (c) Non-Compliance.--
            (1) Failure to submit notification.--If a State fails to 
        submit to the Secretary a notification or revised notification 
        pursuant to this section, the Secretary shall, not later than 
        15 days after the period provided for submitting notification 
        under this section, send the State written notice of 
        determination of non-compliance.
            (2) Failure to meet requirements.--If the Secretary 
        determines that a revised notification submitted under 
        subsection (b) does not demonstrate that the State has enacted, 
        adopted, or otherwise has in effect laws, rules, or regulations 
        that meet the requirements of section 302, and disapproves the 
        State's revised notification, the Secretary shall, not later 
        than 15 days after making such determination, provide the State 
        with written notice of non-compliance, including the 
        determination of the Secretary and the reasons therefore.
            (3) Failure to meet requirements after initial approval.--
        If, during any time period after a notification is approved 
        under this section, the Secretary determines that the State 
        does not have currently in effect or has ceased enforcing the 
        laws, rules, or regulations upon which the notification was 
        approved, the Secretary shall, not later than thirty days of 
        making such determination provide the State with written notice 
        of such determination and withdraw the approval of the 
        notification. Such notice shall specify the determination of 
        the Secretary and the reasons therefore.
    (d) Consultation With Attorney General.--In making determinations 
of compliance or non-compliance pursuant to this section, the Secretary 
shall consult with the Attorney General.

SEC. 305. INCENTIVES THROUGH MEDICARE AND MEDICAID.

    (a) Medicare Incentives.--
            (1) In General.--Section 1886 of the Social Security Act 
        (42 U.S.C. 1395ww) is amended by adding at the end the 
        following new subsection:
    ``(j) Payment Incentives to Encourage Medical Malpractice Liability 
Reform.--
            ``(1) Reduction in payments for hospitals located in 
        certain states.--Notwithstanding any other provision of this 
        title, the Secretary shall reduce each payment amount otherwise 
        determined under this section by 1 percent for discharges 
        during a cost reporting period with respect to hospitals that 
        are not located in a State which the Secretary certifies 
        (pursuant to section 304 of the Health Care Choice and Access 
        Improvement Act of 1992) meets the requirements of section 302 
        of the Health Care Choice and Access Improvement Act of 1992 
        for the cost reporting period.
            ``(2) Additional payment for hospitals located in states 
        enacting reforms.--With respect to hospitals that are not 
        subject to a reduction in payment under paragraph (1), the 
        Secretary shall make an additional payment for discharges 
        during a cost reporting period equal to the product of--
                    ``(A) an amount equal to the total of all amounts 
                that were not paid to hospitals during the cost 
                reporting period as a result of the reductions made 
                under such paragraph; and
                    ``(B) a percentage equal to the percentage of all 
                payments under this section during the year to all 
                hospitals that are not subject to the reduction 
                described in such paragraph that is attributable to 
                payments to that hospital.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply with respect to discharges for cost reporting 
        periods beginning on or after the first day of the first fiscal 
        year that begins after the expiration of the 3-year period 
        beginning on the date of the enactment of this Act.
    (b) Medicaid Incentives.--
            (1) In general.--Section 1903 of the Social Security Act 
        (42 U.S.C. 1396b) is amended by inserting after subsection (r) 
        the following new subsection:
    ``(s)(1)(A) In order for a State to receive payments under 
paragraph (7) of subsection (a) for quarters in a year without being 
subject to the reduction described in subparagraph (B), the Secretary 
must certify (pursuant to section 304 of the Health Care Choice and 
Access Improvement Act of 1992) that the State meets the requirements 
of section 302 of the Health Care Choice and Access Improvement Act of 
1992 for the year.
    ``(B) If a State is not certified for a year by the Secretary under 
subparagraph (A), the per centum specified in paragraph (7) of 
subsection (a) with respect to the State shall be reduced by 2 
percentage points for quarters during the year.
    ``(2) In the case of a State that is not subject to the reduction 
described in paragraph (1)(B) for quarters during a year, the Secretary 
shall make an additional payment to the State equal to the product of--
            ``(A) an amount equal to the total of all amounts that were 
        not paid to States during the year as a result of the 
        reductions made under such paragraph; and
            ``(B) a percentage equal to the percentage of all payments 
        under this section during the year to all States that are not 
        subject to the reduction described in such paragraph that is 
        attributable to payments to that State.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to calendar quarters beginning on or after the 
        first January 1 that begins after the expiration of the 3-year 
        period beginning on the date of the enactment of this Act.

SEC. 306. APPLICABILITY OF CERTAIN PROVISIONS TO FEDERAL TORT CLAIMS 
              ACT.

    (a) In General.--Chapter 171 of title 28, United States Code, is 
amended by adding at the end the following new section:
``Sec. 2681. Special rules for health care liability actions
    ``(a) Notwithstanding any other provision of this chapter, any 
action brought against the United States under this chapter that is a 
health care liability action shall be subject to the following:
            ``(1)(A) With respect to non-economic damages, the 
        liability of the United States shall be several only and shall 
        not be joint. The United States shall be liable only for the 
        amount of non-economic losses incurred by the plaintiff that is 
        in direct proportion to the United States' percentage of 
        responsibility for the injury suffered by the plaintiff (as 
        determined by the court pursuant to subparagraph (B)).
            ``(B) The court shall determine the extent of each 
        defendant's responsibility for the non-economic injury suffered 
        by the plaintiff, and shall assign a percentage of 
        responsibility for such injury to each defendant.
            ``(2)(A) The total amount of non-economic damages that may 
        be awarded to an individual and the family members of such 
        individual for losses resulting from an injury which is the 
        subject of the action may not exceed $250,000, regardless of 
        the number of defendants against whom the action is brought or 
        the number of actions brought with respect to the injury.
            ``(B) The amount referred to in subparagraph (A) shall be 
        increased every 3rd year (beginning with the 3rd year that 
        begins after the date of the enactment of this Act) in the same 
        manner as amounts are increased under section 215(i) of the 
        Social Security Act for base quarters or cost-of-living 
        computation quarters in such a year.
            ``(3)(A) The total amount of damages received by an 
        individual shall be reduced (in accordance with subparagraph 
        (B)) by any other payment that has been or will be made to the 
        individual to compensate the individual for the injury that was 
        the subject of the action, including payment under--
                    ``(i) Federal or State disability or sickness 
                programs;
                    ``(ii) Federal, State, or private health insurance 
                programs;
                    ``(iii) private disability insurance programs;
                    ``(iv) employer wage continuation programs; and
                    ``(v) any other source of payment intended to 
                compensate such individual for such injury.
            ``(B) The amount by which an award of damages to an 
        individual shall be reduced under subparagraph (A) shall be the 
        total amount of any payments (other than such award) that have 
        been made or that will be made to the individual to compensate 
        the individual for the injury that was the subject of the 
        action.
            ``(4)(A) The United States may not be required to make a 
        single, lump-sum payment for damages for any economic losses to 
        be incurred after the date on which judgment is entered, but 
        shall be permitted to make periodic payments of such damages on 
        the basis of projections of the amount of costs expected to be 
        incurred by the plaintiff at appropriate intervals (as 
        determined by the court).
            ``(B) The United States may at its discretion purchase an 
        annuity or fund a reversionary trust to make periodic payments 
        under subparagraph (A).
            ``(C) The judgment of the court awarding periodic payments 
        may not be reopened at any time to contest, amend, or modify 
        the schedule or amount of the payments in the absence of fraud 
        or any other basis under which a party may obtain relief from a 
        final judgment.
            ``(D) Nothing in this paragraph shall be construed to 
        preclude the parties to an action from entering into a 
        settlement providing for a single, lump-sum payment for damages 
        described in subparagraph (A).
    ``(b) In this section, the following definitions shall apply:
            ``(1) The term `economic damages' means damages paid to 
        compensate an individual for medical expenses, lost wages or 
        other income, lost employment, burial expenses, and other 
        pecuniary losses.
            ``(2) The term `health care liability action' means a civil 
        action brought against the United States (regardless of the 
        theory of liability on which the action is based) in which a 
        plaintiff alleges an injury caused by the provision of (or the 
        failure to provide) health care services, except that such term 
        does not include--
                    ``(A) any action in which a plaintiff alleges an 
                intentional tort; or
                    ``(B) any action in which the plaintiff's sole 
                allegation is an allegation of an injury arising from 
                the use of a medical product.
            ``(3) The term `injury' means any illness, disease, or 
        other harm that is the subject of a health care liability 
        action.
            ``(4) The term `non-economic damages' means any damages 
        paid to compensate an individual for subjective, non-monetary 
        losses, including pain, suffering, inconvenience, mental 
        suffering, emotional distress, loss of society and 
        companionship, loss of consortium, injury to reputation, and 
        humiliation, but does not include punitive damages.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 171 of title 28, United States Code, is amended by adding at 
the end the following new item:

``2681. Special rules for health care liability actions.''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to actions brought against the United States on or after 
the date of the enactment of this Act.

SEC. 307. RULES OF CONSTRUCTION.

    Nothing in this title may be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any law or by the United States;
            (2) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation;
            (3) affect the right of any court to transfer venue, to 
        apply the law of a foreign nation, or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum;
            (4) create or vest jurisdiction in the district courts of 
        the United States over any health care liability action subject 
        to this Act (which is not otherwise properly in Federal 
        district court); or
            (5) prevent any State from enacting, adopting, or otherwise 
        having in effect more comprehensive or additional health care 
        liability reforms than those set forth in this Act.

           TITLE IV--WORKING AMERICANS ACCESS TO HEALTH CARE

  Subtitle A--Increase in Small Employer Access to Affordable Health 
                               Insurance

SEC. 401. ESTABLISHMENT AND ENFORCEMENT OF STANDARDS FOR SMALL EMPLOYER 
              HEALTH INSURANCE PLANS.

    (a) Establishment of General Standards.--
            (1) Role of naic.--The Secretary of Health and Human 
        Services shall request the National Association of Insurance 
        Commissioners to develop, within 1 year after the date of the 
        enactment of this Act, model regulations that specify standards 
        with respect to each of the following:
                    (A) The requirement, under section 403(a), that 
                small employer carriers offer MedEquity plans.
                    (B) The basic benefits to be included in MedEquity 
                plans under section 403(b).
                    (C) The requirements of guaranteed issue of 
                MedEquity plans under section 403(c).
                    (D) The requirements of sections 404 and 405(b).
                    (E) The requirements of subsections (a) and (c) of 
                section 405.
        If the NAIC develops such regulations specifying such standards 
        within such period, the Secretary shall review such standards 
        to determine if they meet such requirements. Such review shall 
        be completed within 6 months after the date the regulations are 
        developed. Unless the Secretary determines within such period 
        that the standards do not meet the requirements, such standards 
        shall serve as the standards under this section.
            (2) Contingency.--If the NAIC does not develop such model 
        regulations within such period or the Secretary determines that 
        such regulations do not meet the requirements described in 
        paragraph (1), the Secretary shall inform the NAIC of the 
        specific deficiencies and request the NAIC to develop such 
        model regulations in conformity with paragraph (1).
            (3) Effective date.--The standards provided under this 
        subsection--
                    (A) shall apply to small employer health benefit 
                plans offered in a State on or after the date the 
                standards are implemented in the State under subsection 
                (b)(1), and
                    (B) with respect to the requirements referred to in 
                paragraph (1)(D), shall apply to small employer health 
                benefit plans renewed on or after 3 years after the 
                date such standards are implemented in the State under 
                subsection (b)(1).
    (b) Application of Standards Through States.--
            (1) Application of all standards to new plans.--
                    (A) In general.--Each State shall submit to the 
                Secretary, by the deadline specified in subparagraph 
                (B), a report on the implementation and enforcement of 
                the standards established under subsection (a) with 
                respect to small employer health benefit plans offered 
                not later than such deadline.
                    (B) Deadline for report.--
                            (i) 1 year after standards established.--
                        Subject to clause (ii), the deadline under this 
                        subparagraph is 1 year after the date standards 
                        are established under subsection (a).
                            (ii) Exception for legislation.--In the 
                        case of a State which the Secretary identifies, 
                        in consultation with the NAIC, as--
                                    (I) requiring State legislation 
                                (other than legislation appropriating 
                                funds) in order for carriers and health 
                                benefit plans offered to small 
                                employers to meet the standards 
                                established under subsection (a), but
                                    (II) having a legislature which is 
                                not scheduled to meet in 1993 in a 
                                legislative session in which such 
                                legislation may be considered,
                        the date specified in this subparagraph is the 
                        first day of the first calendar quarter 
                        beginning after the close of the first 
                        legislative session of the State legislature 
                        that begins on or after January 1, 1993. For 
                        purposes of the previous sentence, in the case 
                        of a State that has a 2-year legislative 
                        session, each year of such session shall be 
                        deemed to be a separate regular session of the 
                        State legislature.
            (2) Application of consumer protection to all plans.--Each 
        State shall submit to the Secretary, by not later than 4 years 
        after the date standards are established under subsection (a), 
        a report on the implementation and enforcement of the standards 
        established under subparagraphs (D) and (E) subsection (a)(1) 
        with respect to small employer health benefit plans renewed not 
        later than 4 years after the date such standards were 
        established.
            (3) More stringent state standards permitted.--A State may 
        implement standards that are more stringent than the standards 
        established under subsection (a).
            (4) Enforcement.--If the Secretary determines that a State 
        has failed to submit a report by the deadline under paragraph 
        (1) or (2) or finds that the State no longer is carrying out 
        its responsibility under the respective paragraph, the 
        Secretary shall notify the State and provide the State a period 
        of 30 days in which to submit such report or to carry out its 
        responsibilities under the respective paragraph. If, after such 
        30-day period, the Secretary finds that such a failure has not 
        been corrected, the Secretary shall provide for such mechanism 
        for the implementation and enforcement of the standards 
        established under subsection (a) in the State as the Secretary 
        determines to be appropriate. Such standards shall apply to 
        health benefit plans offered or renewed on or after 3 months 
        after the applicable deadlines established under subparagraphs 
        (A) through (C) of subsection (a)(3).

SEC. 402. PREEMPTION OF STATE BENEFITS MANDATES FOR PLANS THAT MEET 
              CONSUMER PROTECTION STANDARDS.

    (a) Finding.--Congress finds that health benefit plans offered with 
respect to small employers affect interstate commerce.
    (b) Preemption.--In the case of a small employer health benefit 
plan that meets the standards with respect to the requirements referred 
to in subparagraphs (D) and (E) of section 401(a)(1), no provision of 
State law shall apply that requires the offering, as part of the health 
benefit plan with respect to such an employer, of any services, 
category of care, or services of any class or type of provider.

SEC. 403. REQUIREMENT FOR OFFERING OF BASIC, LOW COST PLAN (MEDEQUITY 
              PLAN).

    (a) In General.--Each small employer carrier which makes available 
in a State any small employer health benefit plan shall make available 
to each small employer in the State a MedEquity plan (as defined in 
subsection (b)).
    (b) MedEquity Plan Defined.--
            (1) In general.--In this title, except as provided in 
        paragraph (2), the term ``MedEquity plan'' means a health 
        benefits plan that--
                    (A) is designed to provide only basic hospital, 
                medical, and surgical benefits, specified under 
                standards under section 401(a)(1)(B), so as to make it 
                affordable to small employers;
                    (B) is guaranteed issue (as described in subsection 
                (c));
                    (C) meets the standards established under 
                subparagraphs (D) and (E) section 401(a)(1) (relating 
                to the requirements of sections 404 and 405); and
                    (D) provides for cost-containment in accordance 
                with the model made applicable under subsection (d) in 
                the State in which the plan is issued.
            (2) Special rules for health maintenance organizations.--
        With respect to a carrier that is a Federally-qualified health 
        maintenance organization (as defined in section 1301(a) of the 
        Public Health Service Act), the term ``MedEquity plan'' means a 
        plan of the type described in paragraph (1) but with benefits 
        that are consistent with the requirements for the plans of such 
        an organization under title XIII of such Act. With respect to a 
        carrier that is not such a Federally-qualified health 
        maintenance organization but which is recognized under State 
        law as a health maintenance organization, the term ``MedEquity 
        plan'' means a plan of the type described in paragraph (1) but 
        with benefits that are consistent with the requirements of 
        State law for the plans of such an organization.
            (3) Review of minimum benefit standards.--The NAIC is 
        requested to periodically review the standards for minimum 
        benefits described in paragraph (1)(A). The NAIC is requested 
        to submit to the Secretary and the Congress its recommendations 
        on changes that should be made in such standards.
    (c) Guaranteed Issue for MedEquity Plans.--
            (1) In general.--Each MedEquity plan in a State--
                    (A) subject to paragraph (2), must accept every 
                small employer in the State that applies for coverage 
                under the plan;
                    (B) subject to paragraphs (2) and (3), must accept 
                for enrollment every individual who is a full-time 
                employee (or, in the case of family enrollment with 
                respect to such an employee, the employee's spouse and 
                the employee's dependents who are under 19 years of age 
                or who are full-time students and under 21 years of 
                age) who applies for enrollment on a timely basis; and
                    (C) subject to paragraphs (2) and (3), may not 
                place any restriction on the eligibility of an 
                individual to enroll, so long as such an individual is 
                a full-time employee or the employee's spouse or 
                dependent described in subparagraph (B).
            (2) Special rules for health maintenance organizations.--In 
        the case of a MedEquity plan offered by a health maintenance 
        organization, the plan shall--
                    (A) limit the employers that may apply for coverage 
                to those with eligible individuals residing in the 
                service area of the plan,
                    (B) limit the individuals who may be enrolled under 
                the plan to those who reside in the service area of the 
                plan, and
                    (C) within the service area of the plan, deny 
                coverage to such employers if the plan demonstrates 
                that--
                            (i) it will not have the capacity to 
                        deliver services adequately to enrollees of any 
                        additional groups because of its obligations to 
                        existing group contract holders and enrollees, 
                        and
                            (ii) it is applying this subparagraph 
                        uniformly to all employers without regard to 
                        the health status, claims experience, or 
                        duration of coverage of those employers and 
                        their employees.
            (3) Exception for certain late enrollees.--
                    (A) In general.--Except as provided in this 
                paragraph, paragraph (1)(B) shall not apply to an 
                eligible employee or dependent who fails to enroll in a 
                health benefit plan during an initial enrollment 
                period, if such period is at least 30 days long.
                    (B) Exception for those with previous employer 
                coverage.--Subparagraph (A) shall not apply to an 
                individual who--
                            (i) was covered under another employer 
                        health benefit plan at the time of the 
                        individual's initial enrollment period,
                            (ii) stated at the time of initial 
                        enrollment period that coverage under another 
                        employer health benefit plan was the reason for 
                        declining enrollment,
                            (iii) lost coverage under another employer 
                        health benefit plan as a result of termination 
                        of employment, the termination of the other 
                        plan's coverage, death of a spouse, or divorce, 
                        and
                            (iv) requests enrollment within 30 days 
                        after termination of coverage under another 
                        employer health benefit plan.
                    (C) Exception for open enrollment.--Subparagraph 
                (A) shall not apply to an individual who--
                            (i) is employed by an employer which offers 
                        multiple health benefit plans, and
                            (ii) elects a different plan during an open 
                        enrollment period.
                    (D) Exception for court orders.--Subparagraph (A) 
                shall not apply to a spouse or minor child if a court 
                has ordered coverage be provided for the spouse or 
                child under a covered employee's health benefit plan 
                and request for such coverage is made within 30 days 
                after issuance of such court order.
    (d) Cost Containment Standards.--
            (1) Development of models.--
                    (A) Role of naic.--The Secretary shall request the 
                NAIC to develop, within 1 year after the date of the 
                enactment of this Act, models for cost-containment 
                features in MedEquity plans. Such models shall include 
                a managed care plan (described in paragraph (3)) and 
                any combination of such models the NAIC finds 
                appropriate. If the NAIC develops such models within 
                such period, the Secretary shall review such models to 
                determine if they provide for effective cost-
                containment. Such review shall be completed within 6 
                months after the date the models are developed. Unless 
                the Secretary determines within such period that such a 
                model does not provide effective cost-containment, such 
                remaining models shall serve as the models under this 
                subsection.
                    (B) Contingency.--If the NAIC does not develop such 
                models within such period or the Secretary determines 
                that all such models do not provide for effective cost-
                containment, the Secretary shall inform the NAIC of the 
                specific deficiencies and request the NAIC to develop 
                such models in conformity with paragraph (1).
            (2) Selection of cost-containment model by state.--By not 
        later than 2 years after the date of the enactment of this Act, 
        each State shall specify the cost-containment model (developed 
        under paragraph (1)) that will be applied under subsection (a) 
        to MedEquity plans issued in the State.
            (3) Managed care plan defined.--For purposes of paragraph 
        (1), the term ``managed care plan'' includes (but is not 
        limited to) any plan that--
                    (A) arranges with selected providers for the 
                furnishing of health care services,
                    (B) provides explicit standards for the selection 
                of such providers,
                    (C) has formal programs for ongoing quality 
                assurance and utilization review, and
                    (D) provides significant financial incentives for 
                beneficiaries to use providers and procedures 
                associated with the plan.

SEC. 404. REQUIREMENTS RELATING TO INITIAL WRITING OF POLICIES.

    (a) Limitations on Treatment of Pre-Existing Conditions.--
            (1) In general.--A carrier may not impose (or require an 
        employer to impose through a waiting period for coverage under 
        a health benefit policy or similar requirement) a limitation or 
        exclusion of benefits under a small employer health benefit 
        plan relating to treatment of a condition based on the fact 
        that the condition pre-existed the effectiveness of the policy 
        if--
                    (A) the condition relates to a condition that did 
                not exist within 6 months before the date of coverage 
                under the plan, or
                    (B) the limitation or exclusion extends over more 
                than 12 months after the date of coverage under the 
                plan.
            (2) Previous satisfaction of pre-existing condition 
        requirement.--
                    (A) In general.--In addition, each carrier shall 
                waive any period applicable to a preexisting condition 
                for similar benefits with respect to an individual to 
                the extent that the individual was covered for the 
                condition under a small employer health benefit plan 
                that was in effect before the date of the enrollment 
                under the carrier's plan.
                    (B) Continuous coverage required.--Subparagraph (A) 
                shall no longer apply if there is a continuous period 
                of more than 60 days on which the individual was not 
                covered under an employer health benefit plan.
    (b) Limits on Premiums.--
            (1) Limit on variation of index rates between blocks of 
        business.--
                    (A) In general.--As a standard under section 402, 
                the index rate for a rating period for any block of 
                business of a small employer carrier may not exceed the 
                index rate for any other block of business by more than 
                20 percent.
                    (B) Exceptions.--Subparagraph (A) shall not apply 
                to a block of business if--
                            (i) the block is one for which the carrier 
                        does not reject, and never has rejected, small 
                        employers included within the definition of 
                        employers eligible for the block of business or 
                        otherwise eligible employees and dependents who 
                        enroll on a timely basis, based upon their 
                        claim experience or health status,
                            (ii) the carrier does not involuntarily 
                        transfer, and never has involuntarily 
                        transferred, a health benefit plan into or out 
                        of the block of business, and
                            (iii) the block of business is currently 
                        available for purchase.
            (2) Limit on variation of premium rates within a block of 
        business.--For a block of business of a small employer carrier, 
        as a standard under section 402 the premium rates charged 
        during a rating period to small employers with similar 
        demographic or other relevant characteristics (not relating to 
        claims experience, health status, or duration of coverage) for 
        the same or similar coverage, or the rates which could be 
        charged to such employers under the rating system for that 
        block of business, shall not vary from the index rate by more 
        than 25 percent of the index rate.
            (3) Limit on permissible rate variations.--Subject to 
        paragraphs (1) and (2), as a standard under section 402, a 
        carrier may establish rate variations based on factors such as 
        geography, demography, and industry and plan design.
            (4) Limit on transfer of employers among blocks of 
        business.--As a standard under section 402, a small employer 
        carrier may not involuntarily transfer a small employer into or 
        out of a block of business. A small employer carrier may not 
        offer to transfer a small employer into or out of a block of 
        business unless such offer is made to transfer all small 
        employers in the block of business without regard to 
        demographic characteristics, claim experience, health status, 
        or duration since issue.
            (5) Definitions.--In this subsection:
                    (A) Base premium rate.--The term ``base premium 
                rate'' means, for each block of business for each 
                rating period, the lowest premium rate charged or which 
                could have been charged under a rating system for that 
                block of business by the small employer carrier to 
                small employers with similar demographic or other 
                relevant characteristics (not relating to claims 
                experience, health status, or duration of coverage) for 
                health benefit plans with the same or similar coverage.
                    (B) Block of business.--The term ``block of 
                business'' means, with respect to a carrier, all (or a 
                distinct group of) small employers as shown on the 
                records of the carrier.
                    (C) Rules for establishing blocks of business.--For 
                purposes of subparagraph (B)--
                            (i) a carrier may establish, subject to 
                        clause (ii), a distinct group of small 
                        employers on the basis that the applicable 
                        health benefit plans either--
                                    (I) are marketed and sold through 
                                individuals and organizations which are 
                                not participating in the marketing or 
                                sale of other distinct groups of small 
                                employers for the carrier,
                                    (II) have been acquired from 
                                another carrier as a distinct group, or
                                    (III) are provided through an 
                                association with membership of not less 
                                than 100 small employers which has been 
                                formed for purposes other than 
                                obtaining insurance;
                            (ii) a carrier may not establish more than 
                        2 groupings under each block of business 
                        because the carrier uses managed-care 
                        techniques which are expected to produce 
                        substantial variation in health care costs; and
                            (iii) notwithstanding clauses (i) and (ii), 
                        a Commissioner of Insurance of a State may, 
                        upon application, approve additional distinct 
                        groups upon a finding that such approval would 
                        enhance the efficiency and fairness of the 
                        small employer marketplace.
                    (D) Index rate.--The term ``index rate'' means, 
                with respect to a block of business, the arithmetic 
                average of the applicable base premium rate and the 
                corresponding highest premium rate for the block.
    (c) Full Disclosure of Rating Practices.--At the time a carrier 
offers a health benefit plan to a small employer, the carrier shall 
fully disclose to the employer rating practices for small employer 
health benefit plans, including rating practices for different 
industries, populations, and benefit designs.
    (d) Actuarial Certification.--Each carrier shall file annually with 
the State commissioner of insurance a written statement by a member of 
the American Academy of Actuaries (or other individual acceptable to 
the commissioner) that, based upon an examination by the individual 
which includes a review of the appropriate records and of the actuarial 
assumptions of the carrier and methods used by the carrier in 
establishing premium rates for applicable small employer health benefit 
plans--
            (1) the carrier is in compliance with the applicable 
        provisions of this section, and
            (2) the rating methods are actuarially sound.
Each carrier shall retain a copy of such statement for examination at 
its principal place of business.
    (e) Registration and Reporting.--Each carrier that issues any small 
employer health benefit plan in a State shall be registered or licensed 
with the State commissioner of insurance and shall comply with any 
reporting requirements of the commissioner relating to such a plan.
    (f) Use of Minimum Participation Requirement.--A carrier may 
condition issuance, or renewal, of a health benefit plan to a small 
employer on the enrollment of a minimum number (or percentage) of its 
full-time employees, in accordance with standards established to carry 
out this section. Such standards shall require that any such conditions 
be imposed uniformly on employers of the same size.

SEC. 405. REQUIREMENTS RELATING TO RENEWAL.

    (a) Renewability.--A carrier may not cancel a small employer health 
benefit plan or deny renewal of coverage under such a plan other than--
            (1) for nonpayment of premiums,
            (2) for fraud or other misrepresentation by the insured,
            (3) for noncompliance with plan provisions,
            (4) for failure to maintain (in accordance with standards 
        established under section 404(f)) the number of enrollees under 
        the plan at the number (or percentage) required under the plan,
            (5) for misuse of a provider network provision, or
            (6) because the carrier is ceasing to provide any small 
        employer health benefit plan in a State, or, in the case of a 
        health maintenance organization, in a geographic area.
    (b) Limitation on Premium Increases.--A carrier may not provide for 
an increase in the premium charged a small employer for a small 
employer health benefit plan in a percentage greater than such 
percentage as shall be specified in standards referred to in section 
401(a)(1)(E). Such standards shall take into account increases in 
premiums charged for new coverage of small employers under the plan.
    (c) Limitation on Market Reentry.--If a carrier terminates the 
offering of health benefit plans to small employers in an area, the 
carrier may not offer such a health benefit plan to any small employer 
in the area until 5 years have elapsed since the date of the 
termination.

SEC. 406. ESTABLISHMENT OF REINSURANCE MECHANISMS FOR HIGH RISK 
              INDIVIDUALS.

    (a) Establishment of Standards.--
            (1) Role of naic.--The Secretary shall request the NAIC to 
        develop, within 1 year after the date of the enactment of this 
        Act, models for reinsurance mechanisms (each in this section 
        referred to as the ``reinsurance mechanism'') for individuals 
        and small employers who are enrolled under a small employer 
        health benefit plan that meets the standards with respect to 
        the requirements referred to in subparagraphs (D) and (E) of 
        section 401(a)(1) and for whom a carrier is at risk of 
        incurring high costs under the plan. Such models shall include 
        models based on each of the following:
                    (A) A voluntary prospective reinsurance option.
                    (B) A retrospective reinsurance option.
                    (C) An allocation option.
                    (D) A pooled employee option.
                    (E) A designated carrier option.
                    (F) A mandatory reinsurance option.
        If the NAIC develops such models within such period, the 
        Secretary shall review such models to determine if they provide 
        for an effective reinsurance mechanism. Such review shall be 
        completed within 6 months after the date the models are 
        developed. Unless the Secretary determines within such period 
        that such a model is not an effective reinsurance mechanism, 
        such remaining models shall serve as the models under this 
        section.
            (2) Contingency.--If the NAIC does not develop such models 
        within such period or the Secretary determines that all such 
        models do not provide for an effective reinsurance mechanism, 
        the Secretary shall inform the NAIC of the specific 
        deficiencies and request the NAIC to develop such models in 
        conformity with paragraph (1).
    (b) Requirement of Implementation of Reinsurance Mechanisms.--
            (1) In general.--By not later than 2 years after the date 
        of the enactment of this Act, each State shall establish one or 
        more reinsurance mechanisms by not later than the deadline 
        specified in section 401(b)(1)(B) of this Act.
            (2) Default.--If the Secretary determines that a State has 
        failed to establish any reinsurance mechanism under paragraph 
        (1), the Secretary shall establish one or more such mechanisms 
        with respect to that State. The authority provided under the 
        previous sentence shall expire upon the Secretary's 
        determination that the State has provided, by law, for 
        establishment of a reinsurance mechanism that meets the 
        requirement of paragraph (1).
    (c) Construction.--Nothing in this section shall be construed as to 
prohibit reinsurance arrangements, whether on a State or regional 
basis, not required under this section.

SEC. 407. REGISTRATION OF ALL HEALTH BENEFIT PLANS REQUIRED.

    Notwithstanding any other provision of law, each State commissioner 
or superintendant of insurance may, under State law, require each 
employer health benefit plan (including a self-insured plan) to be 
registered with such official, if the plan is not otherwise required to 
be registered or licensed with the official under section 404(e), and 
to provide the official with such information on the plan as may be 
necessary to carry out section 406.

SEC. 408. DEFINITIONS.

    In this subtitle:
            (1)(A) The term ``carrier'' means any entity which provides 
        health insurance or health benefits in a State, and includes a 
        licensed insurance company, a prepaid hospital or medical 
        service plan, a health maintenance organization, a multiple 
        employer welfare arrangement or employee benefits plan (as 
        defined under the Employee Retirement Income Security Act of 
        1974), or any other entity providing a plan of health insurance 
        subject to State insurance regulation.
            (B) The term ``small employer carrier'' means a carrier 
        with respect to the issuance of a small employer health benefit 
        plan.
            (2) The term ``health benefit plan'' means any hospital or 
        medical expense incurred policy or certificate, hospital or 
        medical service plan contract, or health maintenance subscriber 
        contract, but does not include--
                    (A) accident-only, credit, dental, or disability 
                income insurance,
                    (B) coverage issued as a supplement to liability 
                insurance,
                    (C) worker's compensation or similar insurance, or
                    (D) automobile medical-payment insurance.
            (2) The term ``NAIC'' means the National Association of 
        Insurance Commissioners.
            (3) The term ``Secretary'' means the Secretary of Health 
        and Human Services.
            (4)(A) The term ``small employer'' means an entity actively 
        engaged in business which, on at least 50 percent of its 
        working days during the preceding year, employed at least 3, 
        but fewer than 50, full-time employees. For purposes of 
        determining if an employer is a small employer, rules similar 
        to the rules of subsections (b) and (c) of section 414 of the 
        Internal Revenue Code of 1986 shall apply.
            (B) The term ``full-time employee'' means, with respect to 
        an employer, an individual who normally is employed for at 
        least 30 hours per week by the employer.
            (5) The term ``small employer health benefit plan'' means a 
        health benefit plan which provides coverage to one or more 
        full-time employees of a small employer.
            (6) The term ``State'' means the 50 States, the District of 
        Columbia, and Puerto Rico.
            (7) The term ``State commissioner of insurance'' includes a 
        State superintendent of insurance.

SEC. 409. PREEMPTION FROM INSURANCE MANDATES FOR QUALIFIED SMALL 
              EMPLOYER PURCHASING GROUPS.

    (a) Qualified Small Employer Purchasing Group Defined.--For 
purposes of this section, an association is a qualified small employer 
purchasing group if--
            (1) the association submits an application to the Secretary 
        of Health and Human Services at such time and in such form as 
        the Secretary may require; and
            (2) on the basis of information contained in the 
        application and any other information the Secretary may 
        require, the Secretary determines that--
                    (A) the association is administered solely under 
                the authority and control of its member employers,
                    (B) the association's membership consists solely of 
                employers with not more than 100 employees (except that 
                an employer member of the group may retain its 
                membership in the group if, after the Secretary 
                determines that the association meets the requirements 
                of this paragraph, the number of employees of the 
                employer member increases to more than 100),
                    (C) with respect to each State in which its members 
                are located, the association consists of not fewer than 
                100 employers, and
                    (D) at the time the association submits its 
                application, the health benefit plans with respect to 
                the employer members of the association are in 
                compliance with applicable State laws relating to 
                health benefit plans.
    (b) Preemption From Insurance Mandates.--
            (1) Finding.--Congress finds that employer purchasing 
        groups organized for the purpose of obtaining health insurance 
        for employer members affect interstate commerce.
            (2) Preemption of state mandates.--In the case of a 
        qualified small employer purchasing group described in 
        subsection (a), no provision of State law shall apply that 
        requires the offering, as part of the health benefit plan with 
        respect to an employer member of such a group, of any services, 
        category of care, or services of any class or type of provider.
            (3) Preemption of taxes on premiums.--In the case of a 
        qualified small employer purchasing group described in 
        subsection (a), no provision of State or local law shall apply 
        that requires a provider of insurance to pay a tax on premiums 
        received from employer members of the group under a health 
        benefit plan obtained by the group from the insurer for its 
        employer members.
            (4) Preemption of provisions relating to managed care.--In 
        the case of a qualified small employer purchasing group 
        described in subsection (a), the following provisions of State 
        law are preempted and may not be enforced against the health 
        benefit plan with respect to an employer member of such a 
        group:
                    (A) Restrictions on reimbursement rates or 
                selective contracting.--Any law that restricts the 
                ability of a carrier to negotiate reimbursement rates 
                with providers or to contract selectively with one 
                provider or a limited number of providers.
                    (B) Restrictions on differential financial 
                incentives.--Any law that limits the financial 
                incentives that a health benefit plan may require a 
                beneficiary to pay when a nonplan provider is used on a 
                nonemergency basis.
                    (C) Restrictions on utilization review methods.--
                (i) Any law that--
                            (I) prohibits utilization review of any or 
                        all treatments and conditions;
                            (II) requires that such review be made by a 
                        resident of the State in which the treatment is 
                        to be offered or by an individual licensed in 
                        such State, or by a physician in any particular 
                        specialty or with any board certified specialty 
                        of the same medical specialty as the provider 
                        whose services are being rendered;
                            (III) requires the use of specified 
                        standards of health care practice in such 
                        reviews or requires the disclosure of the 
                        specific criteria used in such reviews;
                            (IV) requires payments to providers for the 
                        expenses of responding to utilization review 
                        requests; or
                            (V) imposes liability for delays in 
                        performing such review.
                    (ii) Nothing in clause (i)(II) shall be construed 
                as prohibiting a State from requiring that utilization 
                review be conducted by a licensed health care 
                professional, or requiring that any appeal from such a 
                review be made by a licensed physician or by a licensed 
                physician in any particular specialty or with any board 
                certified specialty of the same medical specialty as 
                the provider whose services are being rendered.
    (c) Effective Date.--This section shall take effect 60 days after 
the date of the enactment of this Act.

  Subtitle B--Equalization of Tax Benefits for Self-employed Persons 
                          Under Certain Plans

SEC. 411. EQUALIZATION OF TAX BENEFITS FOR SELF-EMPLOYED PERSONS UNDER 
              CERTAIN PLANS.

    (a) Increase in Deduction.--Paragraph (1) of section 162(l) of the 
Internal Revenue Code of 1986 (relating to special rules for health 
insurance costs of self-employed individuals) is amended by striking 
``25 percent'' and inserting ``100 percent''.
    (b) Deduction Made Permanent.--Subsection (l) of section 162 of 
such Code is amended by striking paragraph (6).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1992.

                    Subtitle C--Managed Care Rights

SEC. 421. MANAGED CARE RIGHTS.

    (a) Preemption of State Law Provisions.--The following provisions 
of State law are preempted and may not be enforced:
            (1) Restrictions on reimbursement rates or selective 
        contracting.--Any law that restricts the ability of a carrier 
        to negotiate reimbursement rates with providers or to contract 
        selectively with one provider or a limited number of providers.
            (2) Restrictions on differential financial incentives.--Any 
        law that limits the financial incentives that a health benefit 
        plan may require a beneficiary to pay when a non-plan provider 
        is used on a non-emergency basis.
            (3) Restrictions on utilization review methods.--Any law 
        that--
                    (A) prohibits utilization review of any or all 
                treatments and conditions,
                    (B) requires that such review be made (i) by a 
                resident of the State in which the treatment is to be 
                offered or by an individual licensed in such State, or 
                (ii) by a physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                rendered,
                    (C) requires the use of specified standards of 
                health care practice in such reviews or requires the 
                disclosure of the specific criteria used in such 
                reviews,
                    (D) requires payments to providers for the expenses 
                of responding to utilization review requests, or
                    (E) imposes liability for delays in performing such 
                review.
        Nothing in subparagraph (B) shall be construed as prohibiting a 
        State from (i) requiring that utilization review be conducted 
        by a licensed health care professional or (ii) requiring that 
        any appeal from such a review be made by a licensed physician 
        or by a licensed physician in any particular specialty or with 
        any board certified specialty of the same medical specialty as 
        the provider whose services are being rendered.
    (b) GAO Study.--
            (1) In general.--The Comptroller General shall conduct a 
        study of the benefits and cost effectiveness of the use of 
        managed care in the delivery of health services.
            (2) Report.--By not later than 4 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        a report to Congress on the study conducted under paragraph (1) 
        and shall include in the report such recommendations as may be 
        appropriate.

                      Subtitle D--Study and Report

SEC. 431. STUDY AND REPORT ON IMPACT.

    (a) Study.--The Secretary of Health and Human Services shall 
provide for a study of the impact of the changes made by this title 
on--
            (1) increasing access to health care,
            (2) the number of employees of small employers who do not 
        have health insurance coverage,
            (3) the cost of small employer health benefit plans, and
            (4) the effectiveness of MedEquity plans.
    (b) Report.--Not later than 2 years after the first date provided 
in section 401(b), the Secretary shall submit to Congress a report on 
the study conducted under subsection (a). The Secretary shall include 
in the report such recommendations for changes in the provisions of 
this Act as the Secretary deems appropriate.

                  TITLE V--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

SEC. 501. ADOPTION OF DATA ELEMENTS, UNIFORM CLAIMS, AND UNIFORM 
              ELECTRONIC TRANSMISSION STANDARDS.

    (a) In General.--The Secretary of Health and Human Services (in 
this subtitle referred to as the ``Secretary'') shall adopt standards 
relating to each of the following:
            (1) Data elements for use in paper and electronic claims 
        processing under health benefit plans, as well as for use in 
        utilization review and management of care (including data 
        fields, formats, and medical nomenclature, and including plan 
        benefit and insurance information).
            (2) Uniform claims forms (including uniform procedure and 
        billing codes for uses with such forms and including 
        information on other health benefit plans that may be liable 
        for benefits).
            (3) Uniform electronic transmission of the data elements 
        (for purposes of billing and utilization review).
Standards under paragraph (3) relating to electronic transmission of 
data elements for claims for services shall supersede (to the extent 
specified in such standards) the standards adopted under paragraph (2) 
relating to the submission of paper claims for such services. Standards 
under paragraph (3) shall include protections to assure the 
confidentiality of patient-specific information and to protect against 
the unauthorized use and disclosure of information.
    (b) Use of Task Forces.--In adopting standards under this section--
            (1) the Secretary shall take into account the 
        recommendations of current task forces, including at least the 
        Workgroup on Electronic Data Interchange, National Uniform 
        Billing Committee, the Uniform Claim Task Force, and the 
        Computer-based Patient Record Institute;
            (2) the Secretary shall consult with the National 
        Association of Insurance Commissioners (and, with respect to 
        standards under subsection (a)(3), the American National 
        Standards Institute); and
            (3) the Secretary shall, to the maximum extent practicable, 
        seek to make the standards consistent with any uniform clinical 
        data sets which have been adopted and are widely recognized.
    (c) Deadlines for Promulgation.--The Secretary shall promulgate the 
standards under--
            (1) subsection (a)(1) relating to claims processing data, 
        by not later than 12 months after the date of the enactment of 
        this Act;
            (2) subsection (a)(2) (relating to uniform claims forms) by 
        not later than 12 months after the date of the enactment of 
        this Act; and
            (3)(A) subsection (a)(3) relating to transmission of 
        information concerning hospital and physicians services, by not 
        later than 24 months after the date of the enactment of this 
        Act, and
            (B) subsection (a)(3) relating to transmission of 
        information on other services, by such later date as the 
        Secretary may determine it to be feasible.
    (d) Report to Congress.--Not later than 3 years after the date of 
the enactment of this Act, the Secretary shall report to Congress 
recommendations regarding restructuring the medicare peer review 
quality assurance program given the availability of hospital data in 
electronic form.

SEC. 502. APPLICATION OF STANDARDS.

    (a) In General.--If the Secretary determines, at the end of the 2-
year period beginning on the date that standards are adopted under 
section 501 with respect to classes of services, that a significant 
number of claims for benefits for such services under health benefit 
plans are not being submitted in accordance with such standards, the 
Secretary may require, after notice in the Federal Register of not less 
than 6 months, that all providers of such services must submit claims 
to health benefit plans in accordance with such standards. The 
Secretary may waive the application of such a requirement in such cases 
as the Secretary finds that the imposition of the requirement would not 
be economically practicable.
    (b) Significant Number.--The Secretary shall make an affirmative 
determination described in subsection (a) for a class of services only 
if the Secretary finds that there would be a significant, measurable 
additional gain in efficiencies in the health care system that would be 
obtained by imposing the requirement described in such paragraph with 
respect to such services.
    (c) Application of Requirement.--
            (1) In general.--If the Secretary imposes the requirement 
        under subsection (a)--
                    (A) in the case of a requirement that imposes the 
                standards relating to electronic transmission of claims 
                for a class of services, each health care provider that 
                furnishes such services for which benefits are payable 
                under a health benefit plan shall transmit 
                electronically and directly to the plan on behalf of 
                the beneficiary involved a claim for such services in 
                accordance with such standards;
                    (B) any health benefit plan may reject any claim 
                subject to the standards adopted under section 501 but 
                which is not submitted in accordance with such 
                standards;
                    (C) it is unlawful for a health benefit plan (i) to 
                reject any such claim on the basis of the form in which 
                it is submitted if it is submitted in accordance with 
                such standards or (ii) to require, for the purpose of 
                utilization review or as a condition of providing 
                benefits under the plan, a provider to transmit medical 
                data elements that are inconsistent with the standards 
                established under section 501(a)(1); and
                    (D) the Secretary may impose a civil money penalty 
                on any provider that knowingly and repeatedly submits 
                claims in violation of such standards or on any health 
                benefit plan (other than a health benefit plan 
                described in paragraph (2)) that knowingly and 
                repeatedly rejects claims in violation of subparagraph 
                (B), in an amount not to exceed $100 for each such 
                claim.
        The provisions of section 1128A of the Social Security Act 
        (other than the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty under 
        subparagraph (D) in the same manner as such provisions apply to 
        a penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan--
                    (A) that is subject to regulation by a State, and
                    (B) with respect to which the Secretary finds 
                that--
                            (i) the State provides for application of 
                        the standards established under section 501, 
                        and
                            (ii) the State regulatory program provides 
                        for the appropriate and effective enforcement 
                        of such standards.
    (d) Treatment of Rejections.--If a plan rejects a claim pursuant to 
subsection (c)(1), the plan shall permit the person submitting the 
claim a reasonable opportunity to resubmit the claim on a form or in an 
electronic manner that meets the requirements for acceptance of the 
claim under such subsection.

SEC. 503. PERIODIC REVIEW AND REVISION OF STANDARDS.

    (a) In General.--The Secretary shall--
            (1) provide for the ongoing receipt and review of comments 
        and suggestions for changes in the standards adopted and 
        promulgated under section 501;
            (2) establish a schedule for the periodic review of such 
        standards; and
            (3) based upon such comments, suggestions, and review, 
        revise such standards and promulgate such revisions.
    (b) Application of Revised Standards.--If the Secretary under 
subsection (a) revises the standards described in 501, then, in the 
case of any claim for benefits submitted under a health benefit plan 
more than the minimum period (of not less than 6 months specified by 
the Secretary) after the date the revision is promulgated under 
subsection (a)(3), such standards shall apply under section 502 instead 
of the standards previously promulgated.

SEC. 504. HEALTH BENEFIT PLAN DEFINED.

    In this subtitle, the term ``health benefit plan'' has the meaning 
given such term in section 408(2) and includes--
            (1) the medicare program (under title XVIII of the Social 
        Security Act) and medicare supplemental health insurance, and
            (2) a State medicaid plan (approved under title XIX of such 
        Act).

             Subtitle B--Electronic Medical Data Standards

SEC. 511. MEDICAL DATA STANDARDS FOR HOSPITALS AND OTHER PROVIDERS.

    (a) Promulgation of Hospital Data Standards.--
            (1) In general.--Between July 1, 1995, and January 1, 1996, 
        the Secretary shall promulgate standards described in 
        subsection (b) for hospitals concerning electronic medical 
        data.
            (2) Revision.--The Secretary may from time to time revise 
        the standards promulgated under this subsection.
    (b) Contents of Data Standards.--The standards promulgated under 
subsection (a) shall include at least the following:
            (1) A definition of a standard set of data elements for use 
        by utilization and quality control peer review organizations.
            (2) A definition of the set of comprehensive data elements, 
        which set shall include for hospitals the standard set of data 
        elements defined under paragraph (1).
            (3) Standards for an electronic patient care information 
        system with data obtained at the point of care, including 
        standards to protect against the unauthorized use and 
        disclosure of information.
            (4) A specification of, and manner of presentation of, the 
        individual data elements of the sets and system under this 
        subsection.
            (5) Standards concerning the transmission of electronic 
        medical data.
            (6) Standards relating to confidentiality of patient-
        specific information.
The standards under this section shall be consistent with standards for 
data elements established under section 501.
    (c) Optional Data Standards for Other Providers.--
            (1) In general.--The Secretary may promulgate standards 
        described in paragraph (2) concerning electronic medical data 
        for providers that are not hospitals. The Secretary may from 
        time to time revise the standards promulgated under this 
        subsection.
            (2) Contents of data standards.--The standards promulgated 
        under paragraph (1) for non-hospital providers may include 
        standards comparable to the standards described in paragraphs 
        (2), (4), and (5) of subsection (b) for hospitals.
    (d) Consultation.--In promulgating and revising standards under 
this section, the Secretary shall--
            (1) consult with the American National Standards Institute, 
        hospitals, with the advisory commission established under 
        section 515, and with other affected providers, health benefit 
        plans, and other interested parties, and
            (2) take into consideration, in developing standards under 
        subsection (b)(1), the data set used by the utilization and 
        quality control peer review program under part B of title XI of 
        the Social Security Act.

SEC. 512. APPLICATION OF ELECTRONIC DATA STANDARDS TO CERTAIN 
              HOSPITALS.

    (a) Medicare Requirement for Sharing of Hospital Information.--As 
of January 1, 1997, subject to paragraph (2), each hospital, as a 
requirement of each participation agreement under section 1866 of the 
Social Security Act, shall--
            (1) maintain clinical data included in the set of 
        comprehensive data elements under section 511(b)(2) in 
        electronic form on all inpatients,
            (2) upon request of the Secretary or of a utilization and 
        quality control peer review organization (with which the 
        Secretary has entered into a contract under part B of title XI 
        of such Act), transmit electronically the data set, and
            (3) upon request of the Secretary, or of a fiscal 
        intermediary or carrier, transmit electronically any data (with 
        respect to a claim) from such data set,
in accordance with the standards promulgated under section 511(a).
    (b) Waiver Authority.--Until January 1, 2000:
            (1) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is a small 
        rural hospital, for such period as the hospital demonstrates 
        compliance with such requirements would constitute an undue 
        financial hardship.
            (2) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is in the 
        process of developing a system to provide the required data set 
        and executes agreements with its fiscal intermediary and its 
        utilization and quality control peer review organization that 
        the hospital will meet the requirements of subsection (a) by a 
        specified date (not later than January 1, 2000).
            (3) The Secretary may waive the application of the 
        requirement of subsection (a)(1) for a hospital that agrees to 
        obtain from its records the data elements that are needed to 
        meet the requirements of paragraphs (2) and (3) of subsection 
        (a) and agrees to subject its data transfer process to a 
        quality assurance program specified by the Secretary.
    (c) Application to Hospitals of the Department of Veterans 
Affairs.--
            (1) In general.--The Secretary of Veterans Affairs shall 
        provide that each hospital of the Department of Veterans 
        Affairs shall comply with the requirements of subsection (a) in 
        the same manner as such requirements would apply to the 
        hospital if it were participating in the medicare program.
            (2) Waiver.--Such Secretary may waive the application of 
        such requirements to a hospital in the same manner as the 
        Secretary of Health and Human Services may waive under 
        subsection (b) the application of the requirements of 
        subsection (a).

SEC. 513. ELECTRONIC TRANSMISSION TO FEDERAL AGENCIES.

    (a) In General.--Effective January 1, 2000, if a provider is 
required under a Federal program to transmit a data element that is 
subject to a presentation or transmission standard (as defined in 
subsection (b)), the head of the Federal agency responsible for such 
program (if not otherwise authorized) is authorized to require the 
provider to present and transmit the data element electronically in 
accordance with such a standard.
    (b) Presentation or Transmission Standard Defined.--In subsection 
(a), the term ``presentation or transmission standard'' means a 
standard, promulgated under subsection (b) or (c) of section 511, 
described in paragraph (4) or (5) of section 511(b).

SEC. 514. LIMITATION ON DATA REQUIREMENTS WHERE STANDARDS ARE IN 
              EFFECT.

    (a) In General.--If standards with respect to data elements are 
promulgated under section 511 with respect to a class of provider, a 
health benefit plan may not require, for the purpose of utilization 
review or as a condition of providing benefits under the plan, that a 
provider in the class--
            (1) provide any data element not in the set of 
        comprehensive data elements specified under such standards, or
            (2) transmit or present any such data element in a manner 
        inconsistent with the applicable standards for such 
        transmission or presentation.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        subsection (a) in an amount not to exceed $100 for each such 
        failure. The provisions of section 1128A of the Social Security 
        Act (other than the first sentence of subsection (a) and other 
        than subsection (b)) shall apply to a civil money penalty under 
        this paragraph in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 515. ADVISORY COMMISSION.

    (a) In General.--The Secretary shall establish an advisory 
commission including hospital executives, hospital data base managers, 
physicians, health services researchers, and technical experts in 
collection and use of data and operation of data systems. Such 
commission shall include, as ex officio members, a representative of 
the Director of the National Institutes of Health, the Administrator 
for Health Care Policy and Research, the Secretary of Veterans Affairs, 
and the Director of the Centers for Disease Control.
    (b) Functions.--The advisory commission shall monitor and advise 
the Secretary concerning--
            (1) the standards established under this part, and
            (2) operational concerns about the implementation of such 
        standards under this part.
    (c) Staff.--From the amounts appropriated under subsection (d), the 
Secretary shall provide sufficient staff to assist the advisory 
commission in its activities under this section.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated $2,000,000 for each of fiscal years 1994 through 1998 to 
carry out this section.

     Subtitle C--Development and Distribution of Comparative Value 
                              Information

SEC. 521. STATE COMPARATIVE VALUE INFORMATION PROGRAMS FOR HEALTH CARE 
              PURCHASING.

    (a) Purpose.--In order to assure the availability of comparative 
value information to purchasers of health care in each State, the 
Secretary shall determine whether each State is developing and 
implementing a health care value information program that meets the 
criteria and schedule set forth in subsection (b).
    (b) Criteria and Schedule for State Programs.--The criteria and 
schedule for a State health care value information program in this 
subsection shall be specified by the Secretary as follows:
            (1) The State begins promptly after enactment of this Act 
        to develop (directly or through contractual or other 
        arrangements with one or more States, coalitions of health 
        insurance purchasers, other entities, or any combination of 
        such arrangements) information systems regarding comparative 
        health values.
            (2) The information contained in such systems covers at 
        least the average prices of common health care services (as 
        defined in subsection (d)) and health insurance plans, and, 
        where available, measures of the variability of these prices 
        within a State or other market areas.
            (3) The information described in paragraph (2) is made 
        available within the State beginning not later than one year 
        after the date of the enactment of this Act, and is revised as 
        frequently as reasonably necessary, but at intervals of no 
        greater than one year.
            (4) Not later than 6 years after the date of the enactment 
        of this Act the State has developed information systems that 
        provide comparative costs, quality, and outcomes data with 
        respect to health insurance plans and hospitals and made the 
        information broadly available within the relevant market areas.
Nothing in this section shall preclude a State from providing 
additional information, such as information on prices and benefits of 
different health benefit plans, available.
    (c) Grants to States for the Development of State Programs.--
            (1) Grant authority.--The Secretary may make grants to each 
        State to enable such State to plan the development of its 
        health care value information program and, if necessary, to 
        initiate the implementation of such program. Each State seeking 
        such a grant shall submit an application therefore, containing 
        such information as the Secretary finds necessary to assure 
        that the State is likely to develop and implement a program in 
        accordance with the criteria and schedule in subsection (b).
            (2) Offset authority.--If, at any time within the 3-year 
        period following the receipt by a State of a grant under this 
        subsection, the Secretary is required by section 522 to 
        implement a health care information program in the State, the 
        Secretary may recover the amount of the grant under this 
        subsection by offset against any other amount payable to the 
        State under the Social Security Act. The amount of the offset 
        shall be made available (from the appropriation account with 
        respect to which the offset was taken) to the Secretary to 
        carry out such section.
            (3) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as are necessary to make grants 
        under this subsection, to remain available until expended.
    (d) Common Health Care Services Defined.--In this section, the term 
``common health care services'' includes such procedures as the 
Secretary may specify and any additional health care services which a 
State may wish to include in its comparative value information program.
    (e) State Defined.--In this subtitle, the term ``State'' includes 
the District of Columbia, Puerto Rico, the Virgin Islands, Guam, and 
American Samoa.

SEC. 522. FEDERAL IMPLEMENTATION.

    (a) In General.--If the Secretary finds, at any time, that a State 
has failed to develop or to continue to implement a health care value 
information program in accordance with the criteria and schedule in 
section 521(b), the Secretary shall take the actions necessary, 
directly or through grants or contract, to implement a comparable 
program in the State.
    (b) Fees.--Fees may be charged by the Secretary for the information 
materials provided pursuant to a program under this section. Any 
amounts so collected shall be deposited in the appropriation account 
from which the Secretary's costs of providing such materials were met, 
and shall remain available for such purposes until expended.

SEC. 523. COMPARATIVE VALUE INFORMATION CONCERNING FEDERAL PROGRAMS.

    (a) Development.--The head of each Federal agency with 
responsibility for the provision of health insurance or of health care 
services to individuals shall promptly develop health care value 
information relating to each program that such head administers and 
covering the same types of data that a State program meeting the 
criteria of section 521(b) would provide.
    (b) Dissemination of Information.--Such information shall be made 
generally available to States and to providers and consumers of health 
care services.

SEC. 524. DEVELOPMENT OF MODEL SYSTEMS.

    (a) In General.--The Secretary shall, directly or through grant or 
contract, develop model systems to facilitate--
            (1) the gathering of data on health care cost, quality, and 
        outcome described in section 521(b)(4), and
            (2) analyzing such data in a manner that will permit the 
        valid comparison of such data among providers and among health 
        plans.
    (b) Experimentation.--The Secretary shall support experimentation 
with different approaches to achieve the objectives of subsection (a) 
in the most cost effective manner (relative to the accuracy and 
timeliness of the data secured) and shall evaluate the various methods 
to determine their relative success.
    (c) Standards.--When the Secretary considers it appropriate, the 
Secretary may establish standards for the collection and reporting of 
data on health care cost, quality and outcomes in order to facilitate 
analysis and comparisons among States and nationally.
    (e) Report.--By not later than 3 years after the date of the 
enactment of this Act, the Secretary shall report to the Congress and 
the States on the models developed, and experiments conducted, under 
this section.
    (e) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary for each fiscal year beginning 
with fiscal year 1994 to enable the Secretary to carry out this 
section, including evaluation of the different approaches tested under 
subsection (b) and their relative cost effectiveness.

    Subtitle D--Additional Standards and Requirements; Research and 
                             Demonstrations

SEC. 531. STANDARDS RELATING TO USE OF MEDICARE AND MEDICAID MAGNETIZED 
              HEALTH BENEFIT CARDS; SECONDARY PAYOR DATA BANK.

    (a) Magnetized Identification Cards Under Medicare Program.--The 
Secretary shall adopt standards relating to the design and use of 
magnetized medicare identification cards in order to assist health care 
providers providing medicare covered services to individuals--
            (1) in determining whether individuals are eligible for 
        benefits under the medicare program, and
            (2) in billing the medicare program for such services 
        provided to eligible individuals.
Such cards shall be designed to be compatible with machines currently 
employed to transmit information on credit cards. Such cards also shall 
be designed to be able to be used with respect to the provision of 
benefits under medicare supplemental policies.
    (b) Adoption Under Medicaid Plans.--
            (1) In general.--The Secretary shall take such steps as may 
        be necessary to encourage and assist States to design and use 
        magnetized medicaid identification cards that meet such 
        standards, for use under their medicaid plans.
            (2) Limitation on mmis funds.--In applying section 
        1903(a)(3) of the Social Security Act, the Secretary may 
        determine that Federal financial participation is not available 
        under that section to a State which has provided for a 
        magnetized card system that is inconsistent with the standards 
        adopted under subsection (a).
    (c) Medicare and Medicaid Secondary Payor Data Bank.--The Secretary 
shall establish a medicare and medicaid information system which is 
designed to provide information on those group health plans and other 
health benefit plans that are primary payors to the medicare program 
and medicaid program under section 1862(b) or section 1905(a)(25) of 
the Social Security Act.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated, in equal proportions from the Federal Hospital Insurance 
Trust Fund and from the Federal Supplementary Medical Insurance Trust 
Fund, a total of $25,000,000 to carry out subsections (a) and (c), 
including the issuance of magnetized cards to medicare beneficiaries.

SEC. 532. PREEMPTION OF STATE QUILL PEN LAWS.

    (a) In General.--Effective January 1, 1995, no effect shall be 
given to any provision of State law that requires medical or health 
insurance records (including billing information) to be maintained in 
written, rather than electronic, form.
    (b) Secretarial Authority.--The Secretary of Health and Human 
Services may issue regulations to carry out subsection (a). Such 
regulations may provide for such exceptions to subsection (a) as the 
Secretary determines to be necessary to prevent fraud and abuse, with 
respect to controlled substances, and in such other cases as the 
Secretary deems appropriate.

SEC. 533. USE OF STANDARD IDENTIFICATION NUMBERS.

    (a) In General.--Effective January 1, 1995, each health benefit 
plan shall--
            (1) for each of its beneficiaries that has a social 
        security account number, use that number as the personal 
        identifier for claims processing and related purposes, and
            (2) for each provider that has a unique identifier for 
        purposes of title XVIII of the Social Security Act and that 
        furnishes health care items or services to a beneficiary under 
        the plan, use that identifier as the identifier of that 
        provider for claims processing and related purposes.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        standards established under subsection (a) in an amount not to 
        exceed $100 for each such failure. The provisions of section 
        1128A of the Social Security Act (other than the first sentence 
        of subsection (a) and other than subsection (b)) shall apply to 
        a civil money penalty under this paragraph in the same manner 
        as such provisions apply to a penalty or proceeding under 
        section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 534. COORDINATION OF BENEFIT STANDARDS.

    (a) Review of Coordination of Benefit Problems.--Between July 1, 
1995, and January 1, 1996, the Secretary shall determine whether 
problems relating to--
            (1) the rules for determining the liability of health 
        benefit plans when benefits are payable under two or more such 
        plans, or
            (2) the availability of information among such health 
        benefit plans when benefits are so payable,
cause significant administrative costs.
    (b) Contingent Promulgation of Standards.--
            (1) In general.--If the Secretary determines that such 
        problems do cause significant administrative costs that could 
        be significantly reduced through the implementation of 
        standards, the Secretary shall promulgate standards 
        concerning--
                    (A) the liability of health benefit plans when 
                benefits are payable under two or more such plans, and
                    (B) the transfer among health benefit plans of 
                appropriate information (which may include standards 
                for the use of unique identifiers, and for the listing 
                of all individuals covered under a health benefit plan) 
                in determining liability in cases when benefits are 
                payable under two or more such plans.
            (2) Effective date.--The standards promulgated under 
        paragraph (1) shall become effective on a date specified by the 
        Secretary, which date shall be not earlier than one year after 
        the date of promulgation of the standards.
    (c) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        standards promulgated under subsection (b) in an amount not to 
        exceed $100 for each such failure. The provisions of section 
        1128A of the Social Security Act (other than the first sentence 
        of subsection (a) and other than subsection (b)) shall apply to 
        a civil money penalty under this paragraph in the same manner 
        as such provisions apply to a penalty or proceeding under 
        section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                standards established under subsection (b), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such standards 
                with respect to such plans.
    (d) Revision of Standards.--If the Secretary establishes standards 
under subsection (b), the Secretary may revise such standards from time 
to time and such revised standards shall be applied under subsection 
(c) on or after such date (not earlier than 6 months after the date the 
revision is promulgated) as the Secretary shall specify.

SEC. 535. RESEARCH AND DEMONSTRATIONS.

    (a) Demonstrations and Research on Monitoring and Improving Patient 
Care.--
            (1) The Secretary shall provide grants to qualified 
        entities to demonstrate (and conduct research concerning) the 
        application of comprehensive information systems--
                    (A) in continuously monitoring patient care, and
                    (B) in improving patient care.
            (2) To make grants under this subsection, there are 
        authorized to be appropriated from the Federal Hospital 
        Insurance Trust Fund $10,000,000 for each fiscal year 
        (beginning with fiscal year 1995 and ending with fiscal year 
        1999).
    (b) Communication Links.--
            (1) The Secretary may make grants to at least two, but not 
        more than five, community organizations, or coalitions of 
        health care providers, health benefit plans, and purchasers, to 
        establish and document the efficacy of communication links 
        between the information systems of health benefit plans and of 
        health care providers.
            (2) To make grants under this subsection, there are 
        authorized to be appropriated such sums as may be necessary for 
        fiscal year 1994, to remain available until expended.
    (c) Regional or Community Based Clinical Information Systems.--
            (1) The Secretary may make grants to at least two, but not 
        more than five, public or private non-profit entities for the 
        development of regional or community-based clinical information 
        systems.
            (2) To make grants under this subsection, there are 
        authorized to be appropriated such sums as may be necessary for 
        fiscal year 1994, to remain available until expended.
    (d) Ambulatory Care Data Sets.--
            (1) The Secretary may make grants to public or private non-
        profit entities to develop and test, for electronic medical 
        data generated by physicians and other entities (other than 
        hospitals) that provide health care services--
                    (A) the definition of a comprehensive set of data 
                elements, and
                    (B) the specification of, and manner of 
                presentation of, the individual data elements of the 
                set under subparagraph (A).
            (2) To make grants under this subsection, there are 
        authorized to be appropriated such sums as may be necessary for 
        fiscal year 1994, to remain available until expended.

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