II

★(Star Print)

104TH CONGRESS

1ST SESSION S. 7

To provide for health care reform through health insurance market reform

and assistance for small business and families, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 4, 1995

Mr. DASCHLE (for himself, Mr. KENNEDY, Mr. REID, Ms. MIKULSKI, Mr.

ROCKEFELLER, Mr. DODD, Mr. BREAUX, Ms. MOSELEY-BRAUN, Mr.

PELL, Mrs. MURRAY, and Mr. INOUYE) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To provide for health care reform through health insurance

market reform and assistance for small business and

families, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Family Health Insurance Protection Act’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—HEALTH INSURANCE MARKET REFORM
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Subtitle A—Insurance Market Standards

Sec. 1001. Nondiscrimination based on health status.

Sec. 1002. Guaranteed issue and renewal.

Sec. 1003. Rating limitations.

Sec. 1004. Delivery system quality standards.

Sec. 1005. Benchmark benefits package.

Sec. 1006. Risk adjustment.

Sec. 1007. Effective dates.

Subtitle B—Establishment and Application of Standards

Sec. 1011. General rules.

Sec. 1012. Encouragement of State reforms.

Sec. 1013. Grants to States for small group health insurance purchasing arrangements.

Sec. 1014. Enforcement of standards.

Subtitle C—Health Care Cost and Access Advisory Commission

Sec. 1021. Health Care Cost and Access Advisory Commission.

Sec. 1022. Duties of Commission.

Sec. 1023. Operation of Commission.

Subtitle D—Definitions

Sec. 1031. Definitions.

TITLE II—IMPROVING ACCESS TO HEALTH CARE COVERAGE

Subtitle A—Coverage Under Qualified Health Plans and Premium Assistance

PART 1—ACCESS TO QUALIFIED HEALTH PLANS

SUBPART A—GENERAL PROVISIONS

Sec. 2001. Establishment of State program.

Sec. 2002. Assistance with health plan premiums.

SUBPART B—PREMIUM ASSISTANCE TO ELIGIBLE INDIVIDUALS

Sec. 2011. Amount of premium assistance.

Sec. 2012. Assistance to children.

Sec. 2013. Assistance to temporarily unemployed individuals.

PART 2—AGGREGATE FEDERAL PAYMENTS

Sec. 2021. Aggregate Federal payments.

PART 3—DEFINITIONS AND DETERMINATIONS OF INCOME

Sec. 2031. Definitions and determinations of income.

Sec. 2032. References to individual.

Subtitle B—Self-Employed Health Insurance Deduction

Sec. 2101. Deduction for health insurance costs of self-employed individuals.

TITLE III—IMPROVING ACCESS IN RURAL AREAS
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Subtitle A—Office of Rural Health Policy

Sec. 3001. Office of Rural Health Policy.

Subtitle B—Development of Telemedicine in Rural Underserved Areas

Sec. 3101. Grants for development of rural telemedicine.

Sec. 3102. Report and evaluation of telemedicine.

Sec. 3103. Regulations on reimbursement of telemedicine.

Sec. 3104. Authorization of appropriations.

Sec. 3105. Definitions.

Subtitle C—Rural Health Plan Demonstration Projects

Sec. 3201. Rural health plan demonstration projects.

Subtitle D—Antitrust Safe Harbors for Rural Health Providers

Sec. 3301. Antitrust safe harbors for rural health providers.

TITLE IV—QUALITY AND CONSUMER PROTECTION

Subtitle A—Administrative Simplification

PART 1—PURPOSE AND DEFINITIONS

Sec. 4001. Purpose.

Sec. 4002. Definitions.

PART 2—STANDARDS FOR DATA ELEMENTS AND INFORMATION

TRANSACTIONS

Sec. 4011. General requirements on secretary.

Sec. 4012. Standards for health information transactions and data elements.

PART 3—REQUIREMENTS WITH RESPECT TO CERTAIN TRANSACTIONS AND

INFORMATION

Sec. 4021. Requirements on health plans and health care providers.

Sec. 4022. Standards and certification for health information protection organizations.

PART 4—ACCESSING HEALTH INFORMATION

Sec. 4031. Access for authorized purposes.

PART 5—PENALTIES

Sec. 4041. General penalty for failure to comply with requirements and standards.

PART 6—MISCELLANEOUS PROVISIONS

Sec. 4051. Effect on State law.

Sec. 4052. Authorization of appropriations.

Subtitle B—Privacy of Health Information

PART 1—DEFINITIONS

Sec. 4101. Definitions.
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PART 2—AUTHORIZED DISCLOSURES

SUBPART A—GENERAL PROVISIONS

Sec. 4106. General rules regarding disclosure.

Sec. 4107. Authorizations for disclosure of protected health information.

Sec. 4108. Health information protection organizations.

SUBPART B—SPECIFIC DISCLOSURES RELATING TO PATIENT

Sec. 4111. Disclosures for treatment and financial and administrative transactions.

Sec. 4112. Emergency circumstances.

SUBPART C—DISCLOSURE FOR OVERSIGHT, PUBLIC HEALTH, AND RESEARCH

PURPOSES

Sec. 4116. Oversight.

Sec. 4117. Public health.

Sec. 4118. Health research.

SUBPART D—DISCLOSURE FOR JUDICIAL, ADMINISTRATIVE, AND LAW

ENFORCEMENT PURPOSES

Sec. 4121. Judicial and administrative purposes.

Sec. 4122. Law enforcement.

SUBPART E—DISCLOSURE PURSUANT TO GOVERNMENT SUBPOENA OR

WARRANT

Sec. 4126. Government subpoenas and warrants.

Sec. 4127. Access procedures for law enforcement subpoenas and warrants.

Sec. 4128. Challenge procedures for law enforcement warrants, subpoenas, and

summons.

SUBPART F—DISCLOSURE PURSUANT TO PARTY SUBPOENA

Sec. 4131. Party subpoenas.

Sec. 4132. Access procedures for party subpoenas.

Sec. 4133. Challenge procedures for party subpoenas.

PART 3—PROCEDURES FOR ENSURING SECURITY OF PROTECTED HEALTH

INFORMATION

SUBPART A—ESTABLISHMENT OF SAFEGUARDS

Sec. 4136. Establishment of safeguards.

Sec. 4137. Accounting for disclosures.

SUBPART B—REVIEW OF PROTECTED HEALTH INFORMATION BY SUBJECTS OF

THE INFORMATION

Sec. 4141. Inspection of protected health information.

Sec. 4142. Amendment of protected health information.

Sec. 4143. Notice of information practices.

PART 4—SANCTIONS

SUBPART A—CIVIL SANCTIONS

Sec. 4151. Civil penalty.
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Sec. 4152. Civil action.

SUBPART B—CRIMINAL SANCTIONS

Sec. 4161. Wrongful disclosure of protected health information.

PART 5—ADMINISTRATIVE PROVISIONS

Sec. 4166. Relationship to other laws.

Sec. 4167. Rights of incompetents.

Sec. 4168. Exercise of rights.

Subtitle C—Enhanced Penalties for Health Care Fraud

Sec. 4201. All-payer fraud and abuse control program.

Sec. 4202. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health plan.

Sec. 4203. Establishment of the health care fraud and abuse data collection

program.

Sec. 4204. Health care fraud.

Subtitle D—Health Care Malpractice Reform

Sec. 4301. Federal tort reform.

Sec. 4302. State-based alternative dispute resolution mechanisms.

Sec. 4303. Limitation on amount of attorney’s contingency fees.

Sec. 4304. Periodic payment of awards.

Sec. 4305. Allocation of punitive damage awards for provider licensing and disciplinary activities.

TITLE V—BUDGET NEUTRALITY

Sec. 5001. Assurance of budget neutrality.

1 TITLE I—HEALTH INSURANCE

2 MARKET REFORM

3 Subtitle A—Insurance Market

4 Standards

5 SEC. 1001. NONDISCRIMINATION BASED ON HEALTH STA6 TUS.

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

8 (b) and section 1003(d), a health plan may not deny, limit,

9 or condition the coverage under (or benefits of) the plan,

10 or vary the premium, for an individual based on the health

11 status, medical condition, claims experience, receipt of
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1 health care, medical history, anticipated need for health

2 care services, disability, or lack of evidence of insurability.

3 (b) TREATMENT OF PREEXISTING CONDITION EX4 CLUSIONS FOR ALL SERVICES.—

5 (1) IN GENERAL.—A health plan may impose a

6 limitation or exclusion of benefits relating to treat7 ment of a condition based on the fact that the condi8 tion preexisted the effective date of the plan with re9 spect to an individual only if—

10 (A) the condition was diagnosed or treated

11 during the 3-month period ending on the day

12 before the date of enrollment under the plan;

13 (B) the limitation or exclusion extends for

14 a period not more than 6 months after the date

15 of enrollment under the plan;

16 (C) the limitation or exclusion does not

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

18 birth, was covered under the plan; or

19 (D) the limitation or exclusion does not

20 apply to pregnancy.

21 (2) CREDITING OF PREVIOUS COVERAGE.—A

22 health plan shall provide that if an individual under

23 such plan is in a period of continuous coverage as

24 of the date of enrollment under such plan, any pe25 riod of exclusion of coverage with respect to a pre-
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1 existing condition shall be reduced by 1 month for

2 each month in the period of continuous coverage.

3 (3) DEFINITIONS.—For purposes of this sub4 section:

5 (A) PERIOD OF CONTINUOUS COVERAGE.—

6 (i) IN GENERAL.—The term ‘‘period

7 of continuous coverage’’ means the period

8 beginning on the date an individual is en9 rolled under a health plan or an equivalent

10 health care program and ends on the date

11 the individual is not so enrolled for a con12 tinuous period of more than 3 months.

13 (ii) EQUIVALENT HEALTH CARE PRO14 GRAM.—The term ‘‘equivalent health care

15 program’’ means—

16 (I) part A or part B of the medi17 care program under title XVIII of the

18 Social Security Act (42 U.S.C. 1395

19 et seq.),

20 (II) the medicaid program under

21 title XIX of the Social Security Act

22 (42 U.S.C. 1396 et seq.),

23 (III) the health care program for

24 active military personnel under title

25 10, United States Code,
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1 (IV) the veterans health care pro2 gram under chapter 17 of title 38,

3 United States Code,

4 (V) the Civilian Health and Med5 ical Program of the Uniformed Serv6 ices (CHAMPUS), as defined in sec7 tion 1073(4) of title 10, United States

8 Code, and

9 (VI) the Indian health service

10 program under the Indian Health

11 Care Improvement Act (25 U.S.C.

12 1601 et seq.).

13 (B) PREEXISTING CONDITION.—The term

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

15 coverage under a health plan, a condition which

16 was diagnosed, or which was treated, within the

17 3-month period ending on the day before the

18 date of enrollment (without regard to any wait19 ing period).

20 (c) LIMITATIONS PROHIBITED.—

21 (1) IN GENERAL.—A health plan may not im22 pose a lifetime limitation on the provision of benefits

23 under the plan.

24 (2) RULE OF CONSTRUCTION.—The prohibition

25 contained in paragraph (1) shall not be construed as
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1 prohibiting limitations on the scope or duration of

2 particular items or services covered by a health plan.

3 SEC. 1002. GUARANTEED ISSUE AND RENEWAL

4 (a) SMALL GROUP MARKET.—Each health plan of5 fering coverage in the small group market shall guarantee

6 each individual purchaser and small employer (and each

7 eligible employee of such small employer) applying for cov8 erage in such market the opportunity to enroll in the plan.

9 (b) LARGE EMPLOYER MARKET.—Each health plan

10 offering coverage in the large employer market shall guar11 antee any individual eligible for coverage under the plan

12 the opportunity to enroll in such plan.

13 (c) CAPACITY LIMITS.—Notwithstanding this section,

14 a health plan may apply a capacity limit based on limited

15 financial or provider capacity if the plan enrolls individ16 uals in a manner that provides prospective enrollees with

17 a fair chance of enrollment regardless of the method by

18 which the individual seeks enrollment.

19 (d) RENEWAL OF POLICY.—

20 (1) SMALL GROUP MARKET.—A health plan is21 sued to a small employer or an individual purchaser

22 in the small group market shall be renewed at the

23 option of the employer or individual, if such em24 ployer or individual purchaser remains eligible for

25 coverage under the plan.
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1 (2) LARGE EMPLOYER MARKET.—A health plan

2 issued to an individual eligible for coverage under a

3 large employer plan shall be renewed at the option

4 of the individual, if such individual remains eligible

5 for coverage under the plan.

6 (e) GROUNDS FOR REFUSAL TO RENEW.—A health

7 plan may refuse to renew a policy only in the case of—

8 (1) the nonpayment of premiums;

9 (2) fraud on the part of the employer or indi10 vidual relating to such plan; or

11 (3) the misrepresentation by the employer or in12 dividual of material facts relating to an application

13 for coverage of a claim or benefit.

14 (f) NOTIFICATION OF AVAILABILITY.—Each health

15 plan sponsor shall publicly disclose the availability of each

16 health plan that such sponsor provides or offers in a small

17 group market. Such disclosure shall be accompanied by

18 information describing the method by which eligible em19 ployers and individuals may enroll in such plans.

20 SEC. 1003. RATING LIMITATIONS.

21 (a) IN GENERAL.—A health plan offering coverage

22 in the small group market shall comply with the standards

23 developed under this section.

24 (b) ROLE OF NAIC.—The Secretary shall request

25 that the NAIC—
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1 (1) develop specific standards in the form of a

2 model Act and model regulations that provide for

3 the implementation of the rating limitations de4 scribed in subsection (d); and

5 (2) report to the Secretary concerning such

6 standards within 6 months after the date of enact7 ment of this Act.

8 (c) ROLE OF THE SECRETARY.—The Secretary, upon

9 review of the report received under subsection (b)(2), shall

10 not later than January 1, 1997, promulgate final stand11 ards implementing this section. Such standards shall be

12 the applicable health plan standards under this section.

13 (d) RATING STANDARDS.—The standards described

14 in this section shall provide for the following:

15 (1) A determination of factors that health plans

16 may use to vary the premium rates of such plans.

17 Such factors—

18 (A) shall be applied in a uniform fashion

19 to all enrollees covered by a plan;

20 (B) shall include age (as specified in para21 graph (3)), family type, and geography; and

22 (C) except as provided in paragraph

23 (2)(A), shall not include gender, health status,

24 or health expenditures.
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1 (2)(A) Factors prohibited under paragraph

2 (1)(C) shall be phased out over a period not to ex3 ceed 3 years after the effective date of this section.

4 (B) Other rating factors (other than age) may

5 be phased out to the extent necessary to minimize

6 market disruption and maximize coverage rates.

7 (3) Uniform age categories and age adjustment

8 factors that reflect the relative actuarial costs of

9 benefit packages among enrollees. By the end of the

10 3-year period beginning on the effective date of this

11 section, for individuals who have attained age 18 but

12 not age 65, the highest age adjustment factor may

13 not exceed 3 times the lowest age adjustment factor.

14 (e) DISCOUNTS.—Standards developed under this

15 section shall permit health plans to provide premium dis16 counts based on workplace health promoting activities.

17 SEC. 1004. DELIVERY SYSTEM QUALITY STANDARDS.

18 (a) IN GENERAL.—Each health plan shall comply

19 with the standards developed under this section.

20 (b) ROLE OF THE SECRETARY.—Not later than 9

21 months after the date of enactment of this Act, the Sec22 retary, in consultation with the NAIC and other organiza23 tions with expertise in the areas of quality assurance (in24 cluding the Joint Commission on Accreditation of Health

25 Care Organizations, the National Committee for Quality
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1 Assurance, and peer review organizations), shall establish

2 minimum guidelines specified in subsection (c) for the is3 suance by each State of delivery system quality standards.

4 Such standards shall be the applicable health plan stand5 ards under this section.

6 (c) MINIMUM GUIDELINES.—The minimum guide7 lines specified in this subsection are as follows:

8 (1) Establishing and maintaining health plan

9 quality assurance, including—

10 (A) quality management;

11 (B) credentialing;

12 (C) utilization management;

13 (D) health care provider selection and due

14 process in selection; and

15 (E) practice guidelines and protocols.

16 (2) Providing consumer protection for health

17 plan enrollees, including—

18 (A) comparative standardized consumer in19 formation with respect to health plan premiums

20 and quality measures, including health care re21 port cards;

22 (B) nondiscrimination in plan enrollment,

23 disenrollment, and service provision;

24 (C) continuation of treatment with respect

25 to health plans that become insolvent; and
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1 (D) grievance procedures.

2 (3) Ensuring reasonable access to health care

3 services, including access for vulnerable populations

4 in underserved areas.

5 SEC. 1005. BENCHMARK BENEFITS PACKAGE.

6 (a) IN GENERAL.—With respect to an individual eli7 gible for enrollment, a sponsor of a health plan—

8 (1) shall offer the benchmark benefits package

9 described in subsection (b); and

10 (2) may offer any other health benefits pack11 age.

12 (b) BENCHMARK BENEFITS PACKAGE DESCRIBED.—

13 (1) IN GENERAL.—

14 (A) PACKAGE DESCRIBED.—The bench15 mark benefits package described in this sub16 section is a benefits package that covers all of

17 the items and services under the categories of

18 health care items and services specified by the

19 Secretary under paragraph (2) when medically

20 necessary or appropriate (as determined in ac21 cordance with paragraph (3)) and provides for

22 a cost-sharing schedule specified by the Sec23 retary under paragraph (4).

24 (B) ACTUARIAL VALUE.—The benchmark

25 benefits package established by the Secretary
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1 under this subsection shall have an actuarial

2 value that equals the actuarial value of the ben3 efits package provided under the health benefits

4 plan offered under chapter 89 of title 5, United

5 States Code, with the highest enrollment during

6 1994, adjusted for a national population under

7 65 years of age (as determined by the Sec8 retary).

9 (2) CATEGORIES OF HEALTH CARE ITEMS AND

10 SERVICES.—

11 (A) IN GENERAL.—The categories of

12 health care items and services specified by the

13 Secretary under this paragraph shall include at

14 least the categories described in section 1302(1)

15 of the Public Health Service Act (42 U.S.C.

16 300e-1(a)) and section 8904(a) of title 5, Unit17 ed States Code. The Secretary may add or de18 lete categories of health care items and services

19 under this paragraph as medical practice

20 changes.

21 (B) SPECIFYING ITEMS AND SERVICES.—

22 (i) IN GENERAL.—The Secretary shall

23 specify the items and services under the

24 categories specified under subparagraph

25 (A).
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1 (ii) PRIORITIES FOR THE SEC2 RETARY.—In specifying items and services

3 under this subparagraph the Secretary

4 shall take into account the following:

5 (I) MENTAL HEALTH AND SUB6 STANCE ABUSE SERVICES.—With re7 spect to mental health and substance

8 abuse services, the Secretary shall

9 give priority to parity for such serv10 ices with other medical services with

11 respect to cost-sharing and duration

12 of treatment.

13 (II) VULNERABLE POPULATIONS

14 AND UNDERSERVED AREAS.—The

15 Secretary shall give priority to the

16 needs of children and vulnerable popu17 lations, including those populations in

18 rural, frontier, and underserved areas.

19 (III) PREVENTION.—The Sec20 retary shall give priority to improving

21 the health of individuals through pre22 vention.

23 (3) MEDICAL NECESSITY OR APPROPRIATE24 NESS.—The Secretary shall establish general criteria

25 for determining whether an item or service specified
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1 by the Secretary under paragraph (2)(B) is medi2 cally necessary or appropriate. Health plans shall

3 make coverage decisions regarding procedures and

4 technologies consistent with such general criteria.

5 (4) COST-SHARING.—The Secretary shall estab6 lish cost-sharing schedules to be provided by a

7 benchmark benefits package. In establishing such

8 cost-sharing schedules, the Secretary shall meet the

9 following requirements:

10 (A) ANNUAL BASIS.—The Secretary shall

11 review and update cost-sharing schedules as de12 termined appropriate by the Secretary, but on

13 at least an annual basis.

14 (B) PREVENTIVE SERVICES EXEMPTED.—

15 The Secretary shall exempt from any cost-shar16 ing schedules clinical preventive services and

17 prenatal care services.

18 (C) DELIVERY SYSTEMS.—In establishing

19 cost-sharing schedules for benchmark benefits

20 packages, the Secretary shall ensure that the

21 schedules permit a variety of delivery systems,

22 including fee-for-service, preferred provider or23 ganizations, point of service, and health mainte24 nance organizations.
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1 SEC. 1006. RISK ADJUSTMENT.

2 Each health plan offering coverage in the small group

3 market in a State shall participate in a risk adjustment

4 program developed by such State under standards estab5 lished by the Secretary.

6 SEC. 1007. EFFECTIVE DATES.

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

8 (b), this title shall take effect on January 1, 1996.

9 (b) RATING LIMITATIONS, BENCHMARK BENEFITS

10 PACKAGES, AND RISK ADJUSTMENTS.—The standards

11 promulgated under sections 1003, 1005, and 1006 shall

12 apply to plans that are issued or renewed after December

13 31, 1996.

14 Subtitle B—Establishment and

15 Application of Standards

16 SEC. 1011. GENERAL RULES.

17 (a) CONSTRUCTION.—

18 (1) IN GENERAL.—A requirement or standard

19 imposed on a health plan under this Act shall be

20 deemed to be a requirement or standard imposed on

21 the insurer or sponsor of such plan.

22 (2) PREEMPTION OF STATE LAW.—

23 (A) IN GENERAL.—No requirement of this

24 title shall be construed as preempting any State

25 law unless such State law directly conflicts with

26 such requirement. The provision of additional
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1 consumer protections under State law as de2 scribed in subparagraph (B) shall not be con3 sidered to directly conflict with any such re4 quirement.

5 (B) CONSUMER PROTECTION LAWS.—State

6 laws referred to in subparagraph (A) that are

7 not preempted by this title include—

8 (i) laws that limit the exclusions or

9 limitations for preexisting medical condi10 tions to periods that are less than those

11 provided for under section 1001;

12 (ii) laws that limit variations in pre13 mium rates beyond the variations per14 mitted under section 1003; and

15 (iii) laws that would expand the small

16 group market in excess of that provided for

17 under this title.

18 (b) REGULATIONS.—The Secretary, in consultation

19 with NAIC, and the Secretary of Labor are each author20 ized to issue regulations as are necessary to implement

21 this Act.

22 SEC. 1012. ENCOURAGEMENT OF STATE REFORMS.

23 Nothing in this Act shall be construed as prohibiting

24 States from enacting health care reform measures that ex25 ceed the measures established under this Act, including
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1 reforms that expand access to health care services, control

2 health care costs, and enhance quality of care.

3 SEC. 1013. GRANTS TO STATES FOR SMALL GROUP HEALTH

4 INSURANCE PURCHASING ARRANGEMENTS.

5 (a) IN GENERAL.—The Secretary shall make grants

6 to States that submit applications meeting the require7 ments of this section for the establishment and operation

8 of small group health insurance purchasing arrangements.

9 (b) USE OF FUNDS.—Grant funds awarded under

10 this section to a State may be used to finance administra11 tive costs associated with developing and operating a small

12 group health insurance purchasing arrangement, including

13 the costs associated with—

14 (1) engaging in marketing and outreach efforts

15 to inform individuals and small employers about the

16 small group health insurance purchasing arrange17 ment, which may include the payment of sales com18 missions;

19 (2) negotiating with insurers to provide health

20 insurance through the small group health insurance

21 purchasing arrangement; or

22 (3) providing administrative functions, such as

23 eligibility screening, claims administration, and cus24 tomer service.
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1 (c) APPLICATION REQUIREMENTS.—An application

2 submitted by a State to the Secretary shall describe—

3 (1) whether the program will be operated di4 rectly by the State or through 1 or more State-spon5 sored private organizations and the details of such

6 operation;

7 (2) program goals for reducing the cost of

8 health insurance for, and increasing insurance cov9 erage in, the small group market;

10 (3) the approaches proposed for enlisting par11 ticipation by insurers and small employers, including

12 any plans to use State funds to subsidize the cost

13 of insurance for participating individuals and em14 ployers; and

15 (4) the methods proposed for evaluating the ef16 fectiveness of the program in reducing the number

17 of uninsured in the State and on lowering the cost

18 of health insurance for the small group market in

19 the State.

20 (d) GRANT CRITERIA.—In awarding grants, the Sec21 retary shall consider the potential impact of the State’s

22 proposal on the cost of health insurance for the small

23 group market and on the number of uninsured, and the

24 need for regional variation in the awarding of grants. To

25 the extent the Secretary deems appropriate, grants shall
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1 be awarded to fund programs employing a variety of ap2 proaches for establishing small group health insurance

3 purchasing arrangements.

4 (e) PROHIBITION ON GRANTS.—No grant funds shall

5 be paid to States that do not meet the requirements of

6 this title with respect to small group health plans, or to

7 States with group purchasing programs involving small

8 group health plans that do not meet the requirements of

9 this title.

10 (f) ANNUAL REPORT BY STATES.—States receiving

11 grants under this section shall report to the Secretary an12 nually on the numbers and rates of participation by eligi13 ble insurers and small employers, on the estimated impact

14 of the program on reducing the number of uninsured, and

15 on the cost of insurance available to the small group mar16 ket in the State.

17 (g) AUTHORIZATION OF APPROPRIATIONS.—There

18 are authorized to be appropriated $200,000,000 for fiscal

19 years 1996, 1997, and 1998.

20 (h) SECRETARIAL REPORT.—The Secretary shall re21 port to Congress by not later than January 1, 1997, on

22 the number and amount of grants awarded under this sec23 tion, and include with such report an evaluation of the

24 impact of the grant program on the number of uninsured
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1 and cost of health insurance to small group markets in

2 participating States.

3 SEC. 1014. ENFORCEMENT OF STANDARDS.

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

5 (b), each State shall require that each health plan issued,

6 sold, offered for sale, or operated in such State meets the

7 insurance reform standards established under this title

8 pursuant to an enforcement plan filed by the State with,

9 and approved by, the Secretary. If the State does not file

10 an acceptable plan, the Secretary shall enforce such stand11 ards until a plan is filed and approved.

12 (b) SECRETARY OF LABOR.—With respect to any

13 health plan for which the application of State insurance

14 laws are preempted under section 514 of Employee Retire15 ment Income Security Act of 1974 (29 U.S.C. 1144), the

16 enforcement of the insurance reform standards established

17 under this title shall be by the Secretary of Labor.

18 Subtitle C—Health Care Cost and

19 Access Advisory Commission

20 SEC. 1021. HEALTH CARE COST AND ACCESS ADVISORY

21 COMMISSION.

22 There is established a commission to be known as the

23 Health Care Cost and Advisory Commission (in this sub24 title referred to as the ‘‘Commission’’).
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1 SEC. 1022. DUTIES OF COMMISSION.

2 (a) IN GENERAL.—The general duties of the Com3 mission are to monitor and respond to trends in national

4 health care spending and health insurance coverage. The

5 Commission may be advised by individuals with expertise

6 concerning the economic, demographic, and insurance

7 market factors that affect the cost and availability of

8 health insurance.

9 (b) ANNUAL REPORTS.—

10 (1) IN GENERAL.—The Commission shall report

11 to Congress and the President annually on January

12 15 (beginning in 1999) on the status of health care

13 spending and health insurance coverage in the na14 tion.

15 (2) CONTENTS OF REPORT.—Each annual re16 port shall include—

17 (A) findings regarding—

18 (i) the characteristics of the insured

19 and uninsured, including demographic

20 characteristics, working status, health sta21 tus, and geographic distribution;

22 (ii) the effectiveness of insurance re23 forms on increasing access to health insur24 ance and making health insurance more af25 fordable; and
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1 (iii) the effectiveness of cost contain2 ment strategies at the Federal and State

3 levels and in the private sector; and

4 (B) recommendations for improving access

5 to health insurance and reducing health care

6 cost inflation.

7 SEC. 1023. OPERATION OF COMMISSION.

8 (a) MEMBERSHIP.—

9 (1) IN GENERAL.—The Commission shall be

10 composed of 11 members appointed by the President

11 and confirmed by the Senate. Members shall be ap12 pointed not later than 90 days after the date of en13 actment of this Act.

14 (2) CHAIRPERSON.—The President shall des15 ignate 1 individual described in paragraph (1) who

16 shall serve as Chairperson of the Commission.

17 (b) COMPOSITION.—The membership of the Commis18 sion shall include individuals with national recognition for

19 their expertise in health care and health care markets. In

20 appointing members of the Commission, the President

21 shall ensure that no more than 6 members of the Commis22 sion are affiliated with the same political party.

23 (c) TERMS.—

24 (1) IN GENERAL.—The terms of members of

25 the Commission shall be for 6 years, except that of
26

•S 7 IS1S

1 the members first appointed, 4 shall be appointed

2 for an initial term of 4 years and 4 shall be ap3 pointed for an initial term of 2 years.

4 (2) CONTINUATION IN OFFICE.—Upon the expi5 ration of a term of office, a member shall continue

6 to serve until a successor is appointed and qualified.

7 (d) VACANCIES.—

8 (1) IN GENERAL.—A vacancy in the Commis9 sion shall be filled in the same manner as the origi10 nal appointment, but the individual appointed to fill

11 the vacancy shall serve only for the unexpired por12 tion of the term for which the individual’s prede13 cessor was appointed.

14 (2) NO IMPAIRMENT OF FUNCTION.—A vacancy

15 in the membership of the Commission does not im16 pair the authority of the remaining members to exer17 cise all of the powers of the Commission.

18 (3) ACTING CHAIRPERSON.—The Commission

19 may designate a member to act as Chairperson dur20 ing any period in which there is no Chairperson des21 ignated by the President.

22 (e) MEETINGS; QUORUM.—

23 (1) MEETINGS.—The Chairperson shall preside

24 at meetings of the Commission, and in the absence
27

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1 of the Chairperson, the Commission shall elect a

2 member to act as Chairperson pro tempore.

3 (2) QUORUM.—Six members of the Commission

4 shall constitute a quorum thereof.

5 (f) ADMINISTRATIVE PROVISIONS.—

6 (1) PAY AND TRAVEL EXPENSES.—

7 (A) PAY.—Each member shall be paid at

8 a rate equal to the daily equivalent of the mini9 mum annual rate of basic pay payable for level

10 IV of the Executive Schedule under section

11 5315 of title 5, United States Code, for each

12 day (including travel time) during which the

13 member is engaged in the actual performance of

14 duties vested in the Commission.

15 (B) TRAVEL EXPENSES.—Members shall

16 receive travel expenses, including per diem in

17 lieu of subsistence, in accordance with sections

18 5702 and 5703 of title 5, United States Code.

19 (2) EXECUTIVE DIRECTOR.—

20 (A) IN GENERAL.—The Commission shall,

21 without regard to section 5311(b) of title 5,

22 United States Code, appoint an Executive Di23 rector.
28

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1 (B) PAY.—The Executive Director shall be

2 paid at a rate equivalent to a rate for the Sen3 ior Executive Service.

4 (3) STAFF.—

5 (A) IN GENERAL.—Subject to subpara6 graphs (B) and (C), the Executive Director,

7 with the approval of the Commission, may ap8 point and fix the pay of additional personnel.

9 (B) PAY.—The Executive Director may

10 make such appointments without regard to the

11 provisions of title 5, United States Code, gov12 erning appointments in the competitive service,

13 and any personnel so appointed may be paid

14 without regard to the provisions of chapter 51

15 and subchapter III of chapter 53 of such title,

16 relating to classification and General Schedule

17 pay rates, except that an individual so ap18 pointed may not receive pay in excess of 120

19 percent of the annual rate of basic pay payable

20 for GS–15 of the General Schedule.

21 (C) DETAILED PERSONNEL.—Upon re22 quest of the Executive Director, the head of any

23 Federal department or agency may detail any

24 of the personnel of that department or agency
29

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1 to the Commission to assist the Commission in

2 carrying out its duties under this Act.

3 (4) OTHER AUTHORITY.—

4 (A) CONTRACT SERVICES.—The Commis5 sion may procure by contract, to the extent

6 funds are available, the temporary or intermit7 tent services of experts or consultants pursuant

8 to section 3109 of title 5, United States Code.

9 (B) LEASES AND PROPERTY.—The Com10 mission may lease space and acquire personal

11 property to the extent funds are available.

12 (f) AUTHORIZATION OF APPROPRIATIONS.—There

13 are authorized to be appropriated such sums as are nec14 essary for the operation of the Commission.

15 Subtitle D—Definitions

16 SEC. 1031. DEFINITIONS.

17 (a) HEALTH PLAN.—For purposes of this title, the

18 term ‘‘health plan’’ means a plan that provides, or pays

19 the cost of, health benefits. Such term does not include

20 the following, or any combination thereof:

21 (1) Coverage only for accidental death, dis22 memberment, dental, or vision.

23 (2) Coverage providing wages or payments in

24 lieu of wages for any period during which the em-
30

•S 7 IS1S

1 ployee is absent from work on account of sickness or

2 injury.

3 (3) A medicare supplemental policy (as defined

4 in section 1882(g)(1) of the Social Security Act (42

5 U.S.C. 1395ss(g)(1)).

6 (4) Coverage issued as a supplement to liability

7 insurance.

8 (5) Worker’s compensation or similar insurance.

9 (6) Automobile medical-payment insurance.

10 (7) A long-term care insurance policy, including

11 a nursing home fixed indemnity policy (unless the

12 Secretary determines that such a policy provides suf13 ficiently comprehensive coverage of a benefit so that

14 it should be treated as a health plan).

15 (8) Any plan or arrangement not described in

16 any preceding subparagraph which provides for ben17 efit payments, on a periodic basis, for a specified

18 disease or illness or period of hospitalization without

19 regard to the costs incurred or services rendered

20 during the period to which the payments relate.

21 (9) Such other plan or arrangement as the Sec22 retary determines is not a health plan.

23 (b) TERMS AND RULES RELATING TO THE SMALL

24 GROUP AND LARGE EMPLOYER MARKETS.—For purposes

25 of this title:
31

•S 7 IS1S

1 (1) SMALL GROUP MARKET.—The term ‘‘small

2 group market’’ means the market for health plans

3 which is composed of small employers and individual

4 purchasers.

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

7 any employer if, on each of 20 days during the pre8 ceding calendar year (each day being in a different

9 week), such employer (or any predecessor) employed

10 less than 51 employees for some portion of the day.

11 (3) INDIVIDUAL PURCHASER.—The term ‘‘indi12 vidual purchaser’’ means an individual who is not el13 igible to enroll in a health plan sponsored by a large

14 or small employer.

15 (4) LARGE EMPLOYER MARKET.—The term

16 ‘‘large employer market’’ means the market for

17 health plans which is composed of large employers.

18 (5) LARGE EMPLOYER.—The term ‘‘large em19 ployer’’—

20 (A) means an employer that is not a small

21 employer; and

22 (B) includes a multiemployer plan as de23 fined in section 3(37) of the Employment Re24 tirement Income Security Act of 1974 (29

25 U.S.C. 1002(37)) and a plan which is main-
32

•S 7 IS1S

1 tained by a rural electric cooperative or a rural

2 telephone cooperative association (within the

3 meaning of section 3(40) of such Act (29

4 U.S.C. 1002(40)).

5 (c) ADDITIONAL DEFINITIONS.—For purposes of this

6 title:

7 (1) NAIC.—The term ‘‘NAIC’’ means the Na8 tional Association of Insurance Commissioners.

9 (2) SECRETARY.—The term ‘‘Secretary’’ means

10 the Secretary of Health and Human Services.

11 TITLE II—IMPROVING ACCESS

12 TO HEALTH CARE COVERAGE

13 Subtitle A—Coverage Under Quali14 fied Health Plans and Premium

15 Assistance

16 PART 1—ACCESS TO QUALIFIED HEALTH PLANS

17 Subpart A—General Provisions

18 SEC. 2001. ESTABLISHMENT OF STATE PROGRAM.

19 In order to qualify for payments under part 2, each

20 State shall establish a program under which the State—

21 (1) makes available at least 1 qualified health

22 plan to each premium subsidy eligible individual re23 siding in the State; and

24 (2) furnishes premium assistance to such indi25 vidual in accordance with this part.
33

•S 7 IS1S

1 The program shall comply with requirements specified

2 under regulations issued by the Secretary and may be in

3 effect for calendar years beginning after 1996.

4 SEC. 2002. ASSISTANCE WITH HEALTH PLAN PREMIUMS.

5 (a) IN GENERAL.—An individual who has been deter6 mined by a State under subsection (b) to be a premium

7 subsidy eligible individual (as defined in subpart B) shall

8 be eligible for premium assistance in the amount deter9 mined under such subpart.

10 (b) DETERMINATION OF ELIGIBILITY.—

11 (1) IN GENERAL.—The Secretary shall issue

12 regulations specifying requirements for each State

13 program under this part with respect to determining

14 eligibility for premium assistance, including meas15 ures to prevent individuals from knowingly making

16 material misrepresentations of information or pro17 viding false information in applications for assist18 ance under the program.

19 (2) EMPLOYER MAINTENANCE OF EFFORT.—In

20 order to promote employer-based coverage, the Sec21 retary shall issue regulations that provide that an el22 igible individual may not be a premium subsidy eligi23 ble individual described in subsection (a) if a signifi24 cant employer contribution toward the premium
34

•S 7 IS1S

1 under a qualified health plan is available to the indi2 vidual.

3 (3) STATE MAINTENANCE OF EFFORT.—In

4 order to promote State maintenance of effort, the

5 Secretary shall issue regulations that provide that an

6 eligible individual may not be a premium subsidy eli7 gible individual described in subsection (a) until

8 such individual has been determined to be ineligible

9 for assistance under any other public health insur10 ance program provided by a State or instrumentality

11 thereof.

12 (c) LIMITATION ON USE OF ASSISTANCE.—A pre13 mium subsidy eligible individual who receives premium as14 sistance under this part shall use such assistance only for

15 payments toward the premium under a qualified health

16 plan made available by the State under the program estab17 lished under section 2001.

18 Subpart B—Premium Assistance to Eligible

19 Individuals

20 SEC. 2011. AMOUNT OF PREMIUM ASSISTANCE.

21 (a) IN GENERAL.—The amount of premium assist22 ance for a month for a premium subsidy eligible individual

23 in a State is an amount equal to the lesser of—

24 (1) the applicable subsidy percentage multiplied

by 1 25 ⁄12th of the annual premium paid for coverage
35

•S 7 IS1S

1 under a qualified health plan in which the individual

2 is enrolled; or

3 (2) the applicable subsidy percentage multiplied

by 1 4 ⁄12th of the maximum subsidy amount (as deter5 mined under subsection (b)).

6 (b) MAXIMUM SUBSIDY AMOUNT.—For purposes of

7 this section, the maximum subsidy amount for a State

8 shall be the Secretary’s estimate of the annual premium

9 of the health plan with the highest enrollment offered

10 under chapter 89 of title 5, United States Code, adjusted

11 to reflect—

12 (1) coverage of the items and services and cost

13 sharing under the benchmark benefits package; and

14 (2) the difference in expected health care

15 spending of the population enrolled in such plan of16 fered under such chapter 89 and of the population

17 of premium subsidy eligible individuals in such

18 State.

19 SEC. 2012. ASSISTANCE TO CHILDREN.

20 (a) ELIGIBILITY.—A child shall be considered a pre21 mium eligible individual under this part if such child—

22 (1) is not eligible for medical assistance under

23 a State plan under title XIX of the Social Security

24 Act;
36

•S 7 IS1S

1 (2) has not been enrolled in a health plan of2 fered by an employer (under rules established by the

3 Secretary) during the 6-month period ending on the

4 date the individual submits an application to the

5 State for premium assistance under this part, unless

6 such employer coverage was discontinued as a result

7 of a loss of employment by the individual’s parent or

8 guardian; and

9 (3) has a family income determined under sec10 tion 2031(3) which does not exceed (except as pro11 vided under section 2021(b)(3))—

12 (A) with respect to 1997, 133 percent of

13 the applicable Federal poverty level;

14 (B) with respect to 1998, 150 percent of

15 the applicable Federal poverty level;

16 (C) with respect to 1999, 185 percent of

17 the applicable Federal poverty level;

18 (D) with respect to 2000, 200 percent of

19 the applicable Federal poverty level;

20 (E) with respect to 2001 and years there21 after, 240 percent of the applicable Federal

22 poverty level.

23 (b) APPLICABLE SUBSIDY PERCENTAGE.—For the

24 purposes of this part, the term ‘‘applicable subsidy per25 centage’’ for an individual described in subsection (a)
37

•S 7 IS1S

1 means 100 percent reduced (but not below zero) by 1.82

2 percentage points for every 1 percentage point (or portion

3 thereof) by which the premium subsidy eligible individual’s

4 family income exceeds 185 percent of the applicable Fed5 eral poverty level.

6 SEC. 2013. ASSISTANCE TO TEMPORARILY UNEMPLOYED

7 INDIVIDUALS.

8 (a) ELIGIBILITY.—An eligible individual shall be con9 sidered a premium subsidy eligible individual under this

10 part if such individual—

11 (1) has been employed continuously for a 6-

12 month period ending within a month preceding the

13 date the individual submits an application to the

14 State for premium assistance under this part;

15 (2) has been covered under a health plan during

16 such period of employment;

17 (3) is not eligible for medical assistance under

18 a State plan under title XIX of the Social Security

19 Act;

20 (4) has not received a premium subsidy under

21 a program established under this subtitle for more

22 than a 6-month period beginning with the date de23 scribed in paragraph (1); and
38

•S 7 IS1S

1 (5) has a family income determined under sec2 tion 2031(3) which does not exceed (except as pro3 vided under section 2021(b)(3))—

4 (A) with respect to 1997, 100 percent of

5 the applicable Federal poverty level;

6 (B) with respect to 1998, 125 percent of

7 the applicable Federal poverty level;

8 (C) with respect to 1999, 150 percent of

9 the applicable Federal poverty level;

10 (D) with respect to 2000, 200 percent of

11 the applicable Federal poverty level;

12 (E) with respect to 2001 and years there13 after, 240 percent of the applicable Federal

14 poverty level.

15 (b) APPLICABLE SUBSIDY PERCENTAGE.—For the

16 purposes of this part, the term ‘‘applicable subsidy per17 centage’’ for an individual described in subsection (a)

18 means 100 percent reduced (but not below zero) by 1 per19 centage point for each 1 percentage point (or portion

20 thereof) by which the premium subsidy eligible individual’s

21 family income exceeds 100 percent of the applicable Fed22 eral poverty level.
39

•S 7 IS1S

1 PART 2—AGGREGATE FEDERAL PAYMENTS

2 SEC. 2021. AGGREGATE FEDERAL PAYMENTS.

3 (a) IN GENERAL.—Subject to subsection (b), with re4 spect to any quarter beginning on or after January 1,

5 1997, a State shall receive payments from the Secretary

6 in an amount equal to the sum of—

7 (1) the total premium assistance paid on behalf

8 of individuals eligible for such assistance under part

9 1 for enrollment in qualified health plans; and

10 (2) 75 percent of the total amount estimated by

11 the Secretary to be expended by the State during

12 such quarter for proper and efficient operation and

13 administration of the program established under this

14 subtitle.

15 (b) LIMITATIONS.—

16 (1) BUDGETARY.—

17 (A) IN GENERAL.—The total amount of

18 payments under subsection (a) to all States

19 with programs established under this subtitle

20 for any calender year shall not exceed the esti21 mate by the Congressional Budget Office on

22 January 1, 1997, of the total amount of pay23 ments under subsection (a) for 1997 (assuming

24 participation levels under full implementation of

25 this subtitle), adjusted for such year by popu26 lation growth and the increase in health care
40

•S 7 IS1S

1 costs reflected in the cost of providing the bene2 fits package under chapter 89 of title 5, United

3 States Code.

4 (B) ALLOWABLE ADJUSTMENTS.—If the

5 total payment to States under subsection (a)

6 for any calender year is estimated to be limited

7 under subparagraph (A), corresponding adjust8 ments shall be made to the family income limits

9 under sections 2012(a)(3) and 2013(a)(5) for

10 such year.

11 (2) REDUCTION IN PAYMENTS FOR ADMINIS12 TRATIVE ERRORS.—

13 (A) IN GENERAL.—In the case of adminis14 trative errors described in subparagraph (B),

15 payments available to a State under subsection

16 (a) shall be reduced by an amount determined

17 appropriate by the Secretary.

18 (B) ADMINISTRATIVE ERRORS DE19 SCRIBED.—The administrative errors described

20 in this subparagraph include the following:

21 (i) An eligibility error rate for pre22 mium assistance to the extent the applica23 ble error rate exceeds the maximum per24 missible error rate specified by the Sec25 retary.
41

•S 7 IS1S

1 (ii) Misappropriations or other ex2 penditures that the Secretary finds are at3 tributable to malfeasance or misfeasance.

4 (c) REPORTS ON UNEMPLOYMENT.—If there are sig5 nificant changes in the national unemployment level, the

6 Director of the Office of Management and Budget (in con7 sultation with the Secretary) shall issue a report to Con8 gress on the implications for coverage under State pro9 grams established under this subtitle.

10 (d) AUDITS.—The Secretary shall conduct regular

11 audits of the activities conducted under this subtitle.

12 (e) BUDGETARY TREATMENT.—This section con13 stitutes budget authority in advance of appropriations

14 Acts, and represents the obligation of the Federal Govern15 ment to provide payments to the States in accordance with

16 this section.

17 PART 3—DEFINITIONS AND DETERMINATIONS OF

18 INCOME.

19 SEC. 2031. DEFINITIONS AND DETERMINATIONS OF IN20 COME.

21 For purposes of this subtitle:

22 (1) QUALIFIED HEALTH PLAN.—The term

23 ‘‘qualified health plan’’ means a health plan provid24 ing the benchmark benefits package as described in

25 section 1005.
42

•S 7 IS1S

1 (2) CHILD.—The term ‘‘child’’ means an indi2 vidual who is under 19 years of age.

3 (3) DETERMINATIONS OF INCOME.—

4 (A) FAMILY INCOME.—The term ‘‘family

5 income’’ means, with respect to an individual

6 who—

7 (i) is not a dependent (as defined in

8 subparagraph (B)) of another individual,

9 the sum of the modified adjusted gross in10 comes (as defined in subparagraph (D))

11 for the individual, the individual’s spouse,

12 and children who are dependents of the in13 dividual; or

14 (ii) is a dependent of another individ15 ual, the sum of the modified adjusted gross

16 incomes for the other individual, the other

17 individual’s spouse, and children who are

18 dependents of the other individual.

19 (B) DEPENDENT.—The term ‘‘dependent’’

20 has the meaning given such term in section 152

21 of the Internal Revenue Code of 1986.

22 (C) MODIFIED ADJUSTED GROSS IN23 COME.—The term ‘‘modified adjusted gross in24 come’’ means adjusted gross income (as defined
43

•S 7 IS1S

1 in section 62(a) of the Internal Revenue Code

2 of 1986)—

3 (i) determined without regard to sec4 tions 135, 162(l), 911, 931, and 933 of

5 such Code, and

6 (ii) increased by—

7 (I) the amount of interest re8 ceived or accrued by the individual

9 during the taxable year which is ex10 empt from tax, and

11 (II) the amount of the social se12 curity benefits (as defined in section

13 86(d) of such Code) received during

14 the taxable year to the extent not in15 cluded in gross income under section

16 86 of such Code.

17 The determination under the preceding sen18 tence shall be made without regard to any

19 carryover or carryback.

20 (D) RULES RELATING TO DISREGARD OF

21 CERTAIN INCOME.—The Secretary may promul22 gate rules under which spousal income may be

23 disregarded in instances in which a spouse is

24 not part of a family unit.

25 (4) ELIGIBLE INDIVIDUAL.—
44

•S 7 IS1S

1 (A) IN GENERAL.—The term ‘‘eligible indi2 vidual’’ means an individual who is residing in

3 the United States and who is—

4 (i) a citizen or national of the United

5 States; or

6 (ii) a lawful alien.

7 (B) EXCLUSION.—The term ‘‘eligible indi8 vidual’’ shall not include an individual who is

9 an inmate of a public institution (except as a

10 patient of a medical institution).

11 (C) LAWFUL ALIEN.—The term ‘‘lawful

12 alien’’ means an individual who is—

13 (i) an alien lawfully admitted for per14 manent residence,

15 (ii) an asylee,

16 (iii) a refugee,

17 (iv) an alien whose deportation has

18 been withheld under section 243(h) of the

19 Immigration and Nationality Act, or

20 (v) a parolee who has been paroled for

21 a period of 1 year or more.

22 (5) POVERTY LINE.—The term ‘‘poverty line’’

23 means the income official poverty line (as defined by

24 the Office of Management and Budget, and revised
45

•S 7 IS1S

1 annually in accordance with section 673(2) of the

2 Omnibus Budget Reconciliation Act of 1981) that—

3 (A) in the case of a family of less than 5

4 individuals, is applicable to a family of the size

5 involved; and

6 (B) in the case of a family of more than

7 4 individuals, is applicable to a family of 4 indi8 viduals.

9 (6) SECRETARY.—The term ‘‘Secretary’’ means

10 the Secretary of Health and Human Services.

11 SEC. 2032. REFERENCES TO INDIVIDUAL.

12 For purposes of this subtitle, any reference to an in13 dividual shall include a reference to the parent or guardian

14 of such individual.

15 Subtitle B—Self-Employed Health

16 Insurance Deduction

17 SEC. 2101. DEDUCTION FOR HEALTH INSURANCE COSTS OF

18 SELF-EMPLOYED INDIVIDUALS.

19 (a) PHASE-IN DEDUCTION.—Section 162(l) of the In20 ternal Revenue Code of 1986 (relating to special rules for

21 health insurance costs of self-employed individuals) is

22 amended—

23 (1) by striking paragraph (6); and

24 (2) by striking paragraph (1) and inserting the

25 following:
46

•S 7 IS1S

1 ‘‘(1) ALLOWANCE OF DEDUCTION.—

2 ‘‘(A) IN GENERAL.—In the case of an indi3 vidual who is an employee within the meaning

4 of section 401(c)(1), there shall be allowed as

5 a deduction under this section an amount equal

6 to the applicable percentage of the amount paid

7 during the taxable year for insurance which

8 constitutes medical care for the taxpayer, his

9 spouse, and dependents.

10 ‘‘(B) APPLICABLE PERCENTAGE.—For

11 purposes of subparagraph (A), the applicable

12 percentage shall be determined as follows:

‘‘If the taxable year The applicable

begins in: percentage is:

1994, 1995, or 1996 ................................................................ 25 percent

1997 ......................................................................................... 50 percent

1998 ......................................................................................... 75 percent

1999 or thereafter ....................................................................100 percent.’’.

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

14 this section shall apply to taxable years beginning after

15 December 31, 1993.

16 TITLE III—IMPROVING ACCESS

17 IN RURAL AREAS

18 Subtitle A—Office of Rural Health

19 Policy

20 SEC. 3001. OFFICE OF RURAL HEALTH POLICY.

21 (a) APPOINTMENT OF ASSISTANT SECRETARY.—
47

•S 7 IS1S

1 (1) IN GENERAL.—Section 711(a) of the Social

2 Security Act (42 U.S.C. 912(a)) is amended—

3 (A) by striking ‘‘by a Director, who shall

4 advise the Secretary’’ and inserting ‘‘by an As5 sistant Secretary for Rural Health (in this sec6 tion referred to as the ‘Assistant Secretary’),

7 who shall report directly to the Secretary’’; and

8 (B) by adding at the end the following new

9 sentence: ‘‘The Office shall not be a component

10 of any other office, service, or component of the

11 Department.’’.

12 (2) CONFORMING AMENDMENTS.—(A) Section

13 711(b) of the Social Security Act (42 U.S.C. 912(b))

14 is amended by striking ‘‘the Director’’ and inserting

15 ‘‘the Assistant Secretary’’.

16 (B) Section 338J(a) of the Public Health Serv17 ice Act (42 U.S.C. 254r(a)) is amended by striking

18 ‘‘Director of the Office of Rural Health Policy’’ and

19 inserting ‘‘Assistant Secretary for Rural Health’’.

20 (C) Section 464T(b) of the Public Health Serv21 ice Act (42 U.S.C. 285p–2(b)) is amended in the

22 matter preceding paragraph (1) by striking ‘‘Direc23 tor of the Office of Rural Health Policy’’ and insert24 ing ‘‘Assistant Secretary for Rural Health’’.
48

•S 7 IS1S

1 (D) Section 6213 of the Omnibus Budget Rec2 onciliation Act of 1989 (42 U.S.C. 1395x note) is

3 amended in subsection (e)(1) by striking ‘‘Director

4 of the Office of Rural Health Policy’’ and inserting

5 ‘‘Assistant Secretary for Rural Health’’.

6 (E) Section 403 of the Ryan White Comprehen7 sive AIDS Resources Emergency Act of 1990 (42

8 U.S.C. 300ff–11 note) is amended in the matter pre9 ceding paragraph (1) of subsection (a) by striking

10 ‘‘Director of the Office of Rural Health Policy’’ and

11 inserting ‘‘Assistant Secretary for Rural Health’’.

12 (3) AMENDMENT TO THE EXECUTIVE SCHED13 ULE.—Section 5315 of title 5, United States Code,

14 is amended by striking ‘‘Assistant Secretaries of

15 Health and Human Services (5)’’ and inserting ‘‘As16 sistant Secretaries of Health and Human Services

17 (6)’’.

18 (b) EXPANSION OF DUTIES.—Section 711(a) of the

19 Social Security Act (42 U.S.C. 912(a)) is amended by

20 striking ‘‘and access to (and the quality of) health care

21 in rural areas’’ and inserting ‘‘access to, and quality of,

22 health care in rural areas, and reforms to the health care

23 system and the implications of such reforms for rural

24 areas’’.
49

•S 7 IS1S

1 (c) TRANSFER OF DUTIES.—Effective January 1,

2 1996, the functions, powers, duties, and authority that

3 were carried out in accordance with Federal law by the

4 Office of Rural Health Policy in the Department of Health

5 and Human Services are transferred to the Office of the

6 Assistant Secretary for Rural Health in the Department

7 of Health and Human Services.

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

9 this section shall take effect on January 1, 1996.

10 Subtitle B—Development of

11 Telemedicine in Rural Under12 served Areas

13 SEC. 3101. GRANTS FOR DEVELOPMENT OF RURAL

14 TELEMEDICINE.

15 (a) IN GENERAL.—

16 (1) GRANTS AWARDED.—The Secretary, acting

17 through the Office of Rural Health Policy, shall

18 award grants to eligible entities that have applica19 tions approved under subsection (b) for the purpose

20 of expanding access to health care services for indi21 viduals in rural areas through the use of

22 telemedicine. Grants shall be awarded under this

23 section to encourage the initial development of rural

24 telemedicine networks, expand existing networks,

25 link existing networks together, or link such net-
50

•S 7 IS1S

1 works to existing fiber optic telecommunications sys2 tems.

3 (2) ELIGIBLE ENTITY.—For purposes of this

4 section, the term ‘‘eligible entity’’ includes hospitals

5 and other health care providers in a health care net6 work of community-based providers that includes at

7 least 3 of the following:

8 (A) Community or migrant health centers.

9 (B) Local health departments.

10 (C) Community mental health centers.

11 (D) Nonprofit hospitals.

12 (E) Private practice health professionals,

13 including rural health clinics.

14 (F) Other publicly funded health or social

15 services agencies.

16 (b) APPLICATION.—To be eligible to receive a grant

17 under this section an entity shall submit to the Secretary

18 an application containing such information as the Sec19 retary may require, including the anticipated need for the

20 grant and the source and amount of non-Federal funds

21 the entity would pledge for the project.

22 (c) PREFERENCE.—The Secretary shall, in awarding

23 grants under this section, give preference to applicants

24 that—
51

•S 7 IS1S

1 (1) are health care providers in rural health

2 care networks or providers that propose to form

3 such networks in medically underserved or health

4 professional shortage areas;

5 (2) propose to use Federal funds to develop

6 plans for, or to establish, telemedicine systems that

7 will link rural hospitals and rural health care provid8 ers to other hospitals and health care providers; and

9 (3) demonstrate financial, institutional, and

10 community support for the long range viability of

11 the network.

12 (d) USE OF AMOUNTS.—Amounts received under a

13 grant awarded under this section shall be utilized for the

14 development of telemedicine networks. Such amounts may

15 be used to cover the costs associated with the development

16 of telemedicine networks and the acquisition of

17 telemedicine equipment and modifications or improve18 ments of telecommunications facilities as approved by the

19 Secretary.

20 (e) PROHIBITED USES.—Amounts received under a

21 grant awarded under this section may not be used for any

22 of the following:

23 (1) Expenditures to purchase or lease equip24 ment to the extent the expenditures would exceed

25 more than 60 percent of the total grant funds.
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1 (2) Expenditures for indirect costs (as deter2 mined by the Secretary) to the extent the expendi3 tures would exceed more than 10 percent of the total

4 grant funds.

5 SEC. 3102. REPORT AND EVALUATION OF TELEMEDICINE.

6 Not later than October 1, 1995, the White House In7 formation Infrastructure Task Force shall prepare and

8 submit to Congress a report that evaluates the cost effec9 tiveness and utility of telemedicine and includes rec10 ommendations for a coordinated Federal strategy to in11 crease access to health care through telemedicine.

12 SEC. 3103. REGULATIONS ON REIMBURSEMENT OF

13 TELEMEDICINE.

14 Not later than July 1, 1996, the Secretary, in con15 sultation with the Assistant Secretary for Rural Health

16 and the Administrator of the Health Care Financing Ad17 ministration, shall issue regulations concerning reimburse18 ment for telemedicine services provided under title XVIII

19 of the Social Security Act.

20 SEC. 3104. AUTHORIZATION OF APPROPRIATIONS.

21 There are authorized to be appropriated $20,000,000

22 for each of fiscal years 1996, 1997, 1998, 1999, and 2000,

23 to carry out this subtitle.

24 SEC. 3105. DEFINITIONS.

25 For purposes of this subtitle:
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1 (1) RURAL HEALTH CARE NETWORK.—The

2 term ‘‘rural health care network’’ means a group of

3 rural hospitals or other rural health care providers

4 (including clinics, physicians and non-physicians pri5 mary care providers) that have entered into a rela6 tionship with each other or with nonrural hospitals

7 and health care providers for the purpose of

8 strengthening the delivery of health care services in

9 rural areas or specifically to improve their patients’

10 access to telemedicine services. At least 75 percent

11 of hospitals and other health care providers partici12 pating in the network shall be located in rural areas.

13 (2) SECRETARY.—The term ‘‘Secretary’’ means

14 the Secretary of Health and Human Services.

15 Subtitle C—Rural Health Plan

16 Demonstration Projects

17 SEC. 3201. RURAL HEALTH PLAN DEMONSTRATION

18 PROJECTS.

19 (a) IN GENERAL.—The Secretary of Health and

20 Human Services, in consultation with the Secretary of

21 Labor, shall establish and implement not more than 3

22 demonstration projects for the designation of rural health

23 plan areas. To be designated as a rural health plan area

24 under this section, an area must be a rural area (as de25 fined in section 1866(d)(2)(D) of the Social Security Act
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1 (42 U.S.C. 1395cc(d)(2)(D))) or an underserved non2 urban area in accordance with other criteria specified by

3 the Secretary of Health and Human Services.

4 (b) APPLICATION.—To be eligible to conduct a dem5 onstration project under this section, an entity shall pre6 pare and submit to the Secretary of Health and Human

7 Services an application containing such information as the

8 Secretary may require to ensure that project participants

9 meet the goals described in subsection (d). An application

10 submitted under this section shall—

11 (1) identify the area in which the demonstration

12 project will be conducted; and

13 (2) provide assurances that the area described

14 in paragraph (1) meets the requirements of sub15 section (a).

16 (c) REQUIREMENTS.—An entity offering a health

17 plan (as defined in section 1031(a)) through a demonstra18 tion project under this section shall—

19 (1) have a recognized, long-standing relation20 ship with the rural community in which the project

21 is being conducted; and

22 (2) ensure that the plan meets the requirements

23 for health plans under title I.

24 (d) GOALS.—The goals referred to in this subsection

25 are as follows:
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1 (1) To develop a reliable supply of health care

2 providers and rural health service delivery infra3 structures with a sound financial footing.

4 (2) To develop a mechanism to begin to provide

5 the benefits of networking found in urban health

6 systems to rural Americans living in rural health

7 plan areas.

8 (e) REPORT.—Not later than 360 days after the date

9 on which the first demonstration project is implemented

10 under this section, and annually thereafter for each year

11 in which a project is being conducted, the Secretary of

12 Health and Human Services shall submit to Congress a

13 report that evaluates the effectiveness of such projects.

14 Such reports shall include any legislative recommendations

15 determined appropriate by the Secretary.

16 Subtitle D—Antitrust Safe Harbors

17 for Rural Health Providers

18 SEC. 3301. ANTITRUST SAFE HARBORS FOR RURAL HEALTH

19 PROVIDERS.

20 (a) IN GENERAL.—The Attorney General of the Unit21 ed States, in consultation with the Commissioner of the

22 Federal Trade Commission, shall establish policy guide23 lines to assist rural health care providers in complying

24 with safe harbor requirements with respect to the conduct
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1 of activities relating to the provision of health care services

2 in rural areas.

3 (b) DISSEMINATION OF INFORMATION.—The Attor4 ney General, in consultation with the Commissioner of the

5 Federal Trade Commission and the Assistant Secretary

6 for Rural Health, shall develop methods for the dissemina7 tion of the guidelines established under subsection (a) to

8 rural health care providers.

9 (c) PUBLICATION OF ADDITIONAL SAFE HARBORS.—

10 Not later than 120 days after the date of enactment of

11 this Act, the Attorney General shall publish in the Federal

12 Register the guidelines established under subsection (a)

13 together with any proposed additional safe harbors for

14 rural providers of health care services.

15 TITLE IV—QUALITY AND

16 CONSUMER PROTECTION

17 Subtitle A—Administrative

18 Simplification

19 PART 1—PURPOSE AND DEFINITIONS

20 SEC. 4001. PURPOSE.

21 (a) IN GENERAL.—It is the purpose of this subtitle

22 to promote administrative simplification, enhance the use23 fulness of health information, and protect privacy through

24 the establishment of a national framework for health in25 formation.
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1 (b) GOALS OF FRAMEWORK.—By standardizing data

2 elements, code sets, and electronic transactions, and by

3 assuring a secure environment for the transmission and

4 exchange of health information, it is the goal of the na5 tional framework to reduce the burden of administrative

6 complexity, paper work, and cost on the health care sys7 tem, including the medicare program under title XVIII of

8 the Social Security Act and the medicaid program under

9 title XIX of such Act. It is the further goal of the national

10 framework to enable the information routinely collected in

11 the health care and claims processes to be used for other

12 health related purposes, including promoting access and

13 quality of care, achieving public health objectives, improv14 ing the detection of fraud and abuse, and advancing medi15 cal research.

16 SEC. 4002. DEFINITIONS.

17 (a) DEFINITIONS FOR TITLE.—For purposes of this

18 title:

19 (1) HEALTH CARE PROVIDER.—The term

20 ‘‘health care provider’’ means any person furnishing

21 health care services or supplies.

22 (2) HEALTH INFORMATION.—The term ‘‘health

23 information’’ means any information, whether oral

24 or recorded in any form or medium that—
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1 (A) is created or received by a health care

2 provider, health plan, health oversight agency

3 (as defined in section 4101), health researcher,

4 public health authority (as defined in section

5 4101), employer, life insurer, school or univer6 sity, or certified health information network

7 service; and

8 (B) relates to the past, present, or future

9 physical or mental health or condition of an in10 dividual, the provision of health care to an indi11 vidual, or the past, present, or future payment

12 for the provision of health care to an individual.

13 (3) HEALTH INFORMATION PROTECTION ORGA14 NIZATION.—The term ‘‘health information protection

15 organization’’ means a private entity or an entity op16 erated by a State, certified under section 4022, that

17 accesses standard data elements of health informa18 tion through the health information network and—

19 (A) stores such information; and

20 (B) processes such information into non21 identifiable health information and discloses

22 such information in accordance with subtitle B.

23 (4) HEALTH PLAN.—The term ‘‘health plan’’

24 has the meaning given such term in section 1031(a)
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1 except that such term shall include paragraphs (3),

2 (4), (5), (6), (7), (8), and (9) of such section.

3 (5) NON-IDENTIFIABLE HEALTH INFORMA4 TION.—The term ‘‘non-identifiable health informa5 tion’’ means health information that is not protected

6 health information as defined in section 4101.

7 (6) SECRETARY.—The term ‘‘Secretary’’ means

8 the Secretary of Health and Human Services.

9 (b) DEFINITIONS FOR SUBTITLE.—For purposes of

10 this subtitle:

11 (1) CODE SET.—The term ‘‘code set’’ means

12 any set of codes used for encoding data elements,

13 such as tables of terms, medical concepts, medical

14 diagnostic codes, or medical procedure codes.

15 (2) COORDINATION OF BENEFITS.—The term

16 ‘‘coordination of benefits’’ means determining and

17 coordinating the financial obligations of health plans

18 when health care benefits are payable under 2 or

19 more health plans.

20 (3) HEALTH INFORMATION NETWORK.—The

21 term ‘‘health information network’’ means the health

22 information system that is formed through the appli23 cation of the requirements and standards established

24 under this subtitle.
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1 (4) STANDARD.—The term ‘‘standard’’, when

2 referring to an information transaction or to data

3 elements of health information, means the trans4 action or data elements meet any standard adopted

5 by the Secretary under part 2 that applies to such

6 information transaction or data elements.

7 PART 2—STANDARDS FOR DATA ELEMENTS AND

8 INFORMATION TRANSACTIONS

9 SEC. 4011. GENERAL REQUIREMENTS ON SECRETARY.

10 The Secretary shall adopt standards and modifica11 tions to standards under this subtitle relying, if possible,

12 on standards in use and generally accepted or developed

13 or modified by the standards setting organizations accred14 ited by the American National Standard Institute (ANSI).

15 SEC. 4012. STANDARDS FOR HEALTH INFORMATION TRANS16 ACTIONS AND DATA ELEMENTS.

17 (a) IN GENERAL.—The Secretary shall adopt stand18 ards for transactions, data elements, and code sets, to

19 make uniform and able to be exchanged electronically

20 health information that is—

21 (1) appropriate for the following financial and

22 administrative transactions: claims (including coordi23 nation of benefits) or equivalent encounter informa24 tion in the case of health care providers that do not

25 file claims, claims attachments, enrollment and
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1 disenrollment, eligibility, payment and remittance

2 advice, premium payments, first report of injury,

3 claims status, and referral certification and author4 ization;

5 (2) related to other transactions determined ap6 propriate by the Secretary consistent with the goals

7 of improving the health care system and reducing

8 administrative costs; and

9 (3) related to inquiries by a health information

10 protection organization with respect to information

11 standardized under paragraph (1) or (2).

12 (b) UNIQUE HEALTH IDENTIFIERS.—The Secretary

13 shall adopt standards providing for a standard unique

14 health identifier for each individual, employer, health plan,

15 and health care provider for use in the health care system.

16 (c) CODE SETS.—

17 (1) IN GENERAL.—The Secretary shall, if pos18 sible, select code sets from among the code sets that

19 have been developed, and shall establish efficient and

20 low-cost procedures for distribution of code sets and

21 modifications made to such code sets under section

22 4013(b).

23 (2) ADDITIONS AND MODIFICATIONS TO CODE

24 SETS.—The Secretary shall ensure that procedures

25 exist for the routine maintenance, testing, enhance-
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1 ment, and expansion of code sets to accommodate

2 changes in biomedical science and health care deliv3 ery. Modified code sets shall be adopted not more

4 frequently than once every 6 months.

5 (d) ELECTRONIC SIGNATURE.—The Secretary, in co6 ordination with the Secretary of Commerce, shall promul7 gate regulations specifying procedures for the electronic

8 transmission and authentication of signatures, compliance

9 with which shall be deemed to satisfy Federal and State

10 statutory requirements for written signatures with respect

11 to information transactions required by this subtitle and

12 written signatures on medical records and prescriptions.

13 (e) SPECIAL RULES FOR COORDINATION OF BENE14 FITS.—Any standards adopted under subsection (a) that

15 relate to coordination of benefits shall provide that a claim

16 for reimbursement for medical services furnished is tested

17 by an algorithm specified by the Secretary against all

18 records that are electronically available through the health

19 information network relating to enrollment and eligibility

20 for the individual who received such services to determine

21 any primary and secondary obligers for payment.
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1 PART 3—REQUIREMENTS WITH RESPECT TO

2 CERTAIN TRANSACTIONS AND INFORMATION

3 SEC. 4021. REQUIREMENTS ON HEALTH PLANS AND

4 HEALTH CARE PROVIDERS.

5 (a) IN GENERAL.—A health plan or health care pro6 vider shall conduct transactions described in section

7 4012(a) as standard transactions.

8 (b) COMPLIANCE.—Not later than 12 months after

9 the date on which a standard is adopted under part 2,

10 a health plan or health care provider shall comply with

11 the requirement under subsection (a) with respect to such

12 standard.

13 (c) RESPONSE TO ELECTRONIC INQUIRY.—If a

14 health plan or health care provider conducts a transaction

15 in compliance with subsection (a), such transaction and

16 the standard data elements of such transaction shall be

17 made available electronically, in accordance with section

18 4031, in response to an electronic inquiry from a health

19 information protection organization.

20 SEC. 4022. STANDARDS AND CERTIFICATION FOR HEALTH

21 INFORMATION PROTECTION ORGANIZA22 TIONS.

23 (a) STANDARDS FOR OPERATION.—The Secretary

24 shall establish standards with respect to the operation and

25 certification of health information protection organiza26 tions, including standards ensuring that—
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1 (1) such organizations have capabilities, poli2 cies, and procedures in place that are consistent with

3 the privacy requirements under subtitle B; and

4 (2) such organizations, if part of a larger orga5 nization, have policies and procedures in place which

6 isolate their information processing activities in a

7 manner that prevents unauthorized access to such

8 information by such larger organization.

9 (b) CERTIFICATION BY PRIVATE ENTITIES.—The

10 Secretary may designate private entities to conduct the

11 certification procedures established by the Secretary under

12 this section.

13 PART 4—ACCESSING HEALTH INFORMATION

14 SEC. 4031. ACCESS FOR AUTHORIZED PURPOSES.

15 (a) IN GENERAL.—The Secretary shall adopt tech16 nical standards for appropriate persons to locate and ac17 cess the health information that is available through the

18 health information network. Such technical standards

19 shall ensure that any request to locate or access informa20 tion shall be authorized under subtitle B.

21 (b) GOVERNMENT AGENCIES.—

22 (1) IN GENERAL.—Health information protec23 tion organizations shall make available to a Federal

24 or State agency pursuant to a Federal Acquisition

25 Regulation (or an equivalent State system), any non-
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1 identifiable health information that is requested by

2 such agency.

3 (2) CERTAIN INFORMATION AVAILABLE AT LOW

4 COST.—If a health information protection organiza5 tion described in paragraph (1) needs information

6 from a health plan, health care provider, or other

7 health information protection organization in order

8 to comply with a request of a Federal or State agen9 cy under this Act, such plan, provider, or other orga10 nization shall make such information available to

11 such organization for a charge that does not exceed

12 the reasonable cost of transmitting the information.

13 (c) MODIFICATIONS TO STANDARDS.—Rules similar

14 to rules under section 4012(c)(2) shall apply to modifica15 tions to standards under this part.

16 PART 5—PENALTIES

17 SEC. 4041. GENERAL PENALTY FOR FAILURE TO COMPLY

18 WITH REQUIREMENTS AND STANDARDS.

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

20 (b), the Secretary shall impose on any person that violates

21 a requirement or standard imposed under this subtitle a

22 penalty of not more than $1,000 for each violation. The

23 provisions of section 1128A of the Social Security Act (42

24 U.S.C. 1320a-7a) (other than subsections (a) and (b) and

25 the second sentence of subsection (f)) shall apply to the
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1 imposition of a civil money penalty under this subsection

2 in the same manner as such provisions apply to the impo3 sition of a penalty under such section 1128A.

4 (b) LIMITATIONS.—

5 (1) NONCOMPLIANCE NOT DISCOVERED.—A

6 penalty may not be imposed under subsection (a) if

7 it is established to the satisfaction of the Secretary

8 that the person liable for the penalty did not know,

9 and by exercising reasonable diligence would not

10 have known, that such person failed to comply with

11 the requirement or standard described in subsection

12 (a).

13 (2) FAILURES DUE TO REASONABLE CAUSE.—

14 A penalty may not be imposed under subsection (a)

15 if the failure to comply was due to reasonable cause

16 and not to willful neglect, and the failure to comply

17 is corrected during the time period established by

18 the Secretary.

19 (3) REDUCTION.—In the case of a failure to

20 comply which is due to reasonable cause and not to

21 willful neglect, any penalty under subsection (a) that

22 is not entirely waived under paragraph (2) may be

23 waived to the extent that the payment of such pen24 alty would be excessive relative to the compliance

25 failure involved.
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1 PART 6—MISCELLANEOUS PROVISIONS

2 SEC. 4051. EFFECT ON STATE LAW.

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

4 (b), a provision, requirement, or standard under this sub5 title shall supersede any contrary provision of State law,

6 including—

7 (1) any law that requires medical or health plan

8 records (including billing information) to be main9 tained or transmitted in writing, and

10 (2) a provision of State law which provides for

11 requirements or standards that are more stringent

12 than the requirements or standards under this sub13 title;

14 except if the Secretary determines that the provision is

15 necessary to prevent fraud and abuse, with respect to con16 trolled substances, or for other purposes.

17 (b) PUBLIC HEALTH REPORTING.—Nothing in this

18 subtitle shall be construed to invalidate or limit the au19 thority, power, or procedures established under any law

20 providing for the reporting of disease or injury, child

21 abuse, birth, or death, public health surveillance, or public

22 health investigation or intervention.

23 SEC. 4052. AUTHORIZATION OF APPROPRIATIONS.

24 There are authorized to be appropriated such sums

25 as may be necessary to carry out the purposes of this sub26 title.
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1 Subtitle B—Privacy of Health

2 Information

3 PART 1—DEFINITIONS

4 SEC. 4101. DEFINITIONS.

5 For purposes of this subtitle:

6 (1) PROTECTED HEALTH INFORMATION.—The

7 term ‘‘protected health information’’ means any in8 formation, including demographic information col9 lected from an individual, whether oral or recorded

10 in any form or medium, that—

11 (A) is created or received by a health care

12 provider, health plan, health oversight agency,

13 health researcher, public health authority, em14 ployer, life insurer, school or university, or

15 health information protection organization; and

16 (B) relates to the past, present, or future

17 physical or mental health or condition of an in18 dividual, the provision of health care to an indi19 vidual, or the past, present, or future payment

20 for the provision of health care to an individual,

21 and—

22 (i) identifies an individual; or

23 (ii) with respect to which there is a

24 reasonable basis to believe that the infor-
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1 mation can be used to identify an individ2 ual.

3 (2) DISCLOSE.—The term ‘‘disclose’’, when

4 used with respect to protected health information,

5 means to provide access to the information, but only

6 if such access is provided to a person other than the

7 individual who is the subject of the information.

8 (3) HEALTH INFORMATION TRUSTEE.—The

9 term ‘‘health information trustee’’ means—

10 (A) a health care provider, health plan,

11 health oversight agency, health information pro12 tection organization, employer, life insurer, or

13 school or university insofar as it creates, re14 ceives, maintains, uses, or transmits protected

15 health information;

16 (B) any person who obtains protected

17 health information under section 4108, 4111,

18 4116, 4117, 4118, 4121, 4122, 4126, or 4131;

19 and

20 (C) any employee or agent of a person cov21 ered under subparagraphs (A) or (B).

22 (4) HEALTH OVERSIGHT AGENCY.—The term

23 ‘‘health oversight agency’’ means a person who—

24 (A) performs or oversees the performance

25 of an assessment, evaluation, determination, or
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1 investigation relating to the licensing, accredita2 tion, or certification of health care providers; or

3 (B)(i) performs or oversees the perform4 ance of an assessment, evaluation, determina5 tion, investigation, or prosecution relating to

6 the effectiveness of, compliance with, or applica7 bility of legal, fiscal, medical, or scientific

8 standards or aspects of performance related to

9 the delivery of, or payment for health care or

10 relating to health care fraud or fraudulent

11 claims for payment regarding health care; and

12 (ii) is a public agency, acting on behalf of

13 a public agency, acting pursuant to a require14 ment of a public agency, or carrying out activi15 ties under a Federal or State law governing the

16 assessment, evaluation, determination, inves17 tigation, or prosecution described in clause (i).

18 (5) PUBLIC HEALTH AUTHORITY.—The term

19 ‘‘public health authority’’ means an authority or in20 strumentality of the United States, a State, or a po21 litical subdivision of a State that is—

22 (A) responsible for public health matters;

23 and
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1 (B) engaged in such activities as injury re2 porting, public health surveillance, and public

3 health investigation or intervention.

4 (6) INDIVIDUAL REPRESENTATIVE.—The term

5 ‘‘individual representative’’ means any individual le6 gally empowered to make decisions concerning the

7 provision of health care to an individual (if the indi8 vidual lacks the legal capacity under State law to

9 make such decisions) or the administrator or execu10 tor of the estate of a deceased individual.

11 (7) PERSON.—The term ‘‘person’’ includes an

12 authority of the United States, a State, or a political

13 subdivision of a State.

14 PART 2—AUTHORIZED DISCLOSURES

15 Subpart A—General Provisions

16 SEC. 4106. GENERAL RULES REGARDING DISCLOSURE.

17 (a) GENERAL RULE.—A health information trustee

18 may disclose protected health information only for a pur19 pose that is authorized under this subtitle.

20 (b) DISCLOSURE WITHIN A TRUSTEE.—A health in21 formation trustee may disclose protected health informa22 tion to an officer, employee, or agent of the trustee for

23 a purpose that is compatible with and related to the pur24 pose for which the information was collected or received

25 by that trustee.
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1 (c) SCOPE OF DISCLOSURE.—Every disclosure of pro2 tected health information by a health information trustee

3 shall be limited to the minimum amount of information

4 necessary to accomplish the purpose for which the infor5 mation is disclosed.

6 (d) NO GENERAL REQUIREMENT TO DISCLOSE.—

7 Nothing in this subtitle that permits a disclosure of health

8 information shall be construed to require such disclosure.

9 (e) USE AND REDISCLOSURE OF INFORMATION.—

10 Protected health information about an individual that is

11 disclosed under this subtitle may not be used in, or dis12 closed to any person for use in, any administrative, civil,

13 or criminal action or investigation directed against the in14 dividual unless the action or investigation arises out of or

15 is directly related to the law enforcement inquiry for which

16 the information was obtained.

17 (f) IDENTIFICATION OF DISCLOSED INFORMATION AS

18 PROTECTED INFORMATION.—When engaging in a per19 mitted disclosure, a health information trustee shall clear20 ly identify protected health information as such and as

21 protected by this subtitle, unless the disclosure is made

22 under section 4112 or is a routine disclosure made under

23 a written agreement which satisfies this subsection.

24 (g) DIRECTORY INFORMATION.—A health care pro25 vider and a person receiving protected health information
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1 under section 4112 may disclose protected health informa2 tion to any person if the information consists only of 1

3 or more of the following items:

4 (1) The name of the individual who is the sub5 ject of the information.

6 (2) If the individual who is the subject of the

7 information is receiving health care from a health

8 care provider on a premises controlled by the pro9 vider—

10 (A) the location of the individual on the

11 premises; and

12 (B) the general health status of the indi13 vidual, described as critical, poor, fair, stable,

14 or satisfactory, or in terms denoting similar

15 conditions.

16 (h) NEXT OF KIN.—A health care provider or person

17 who receives protected health information under section

18 4112 may disclose protected health information to the

19 next of kin, an individual representative of the individual

20 who is the subject of the information, or an individual with

21 whom that individual has a close personal relationship if—

22 (1) the individual who is the subject of the in23 formation—
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1 (A) has been notified of the individual’s

2 right to object and has not objected to the dis3 closure;

4 (B) is not competent to be notified about

5 the right to object; or

6 (C) is subject to exigent circumstances

7 such that it would not be practicable to notify

8 the individual of the right to object; and

9 (2) the information disclosed relates to health

10 care currently being provided to that individual.

11 (i) INFORMATION IN WHICH PROVIDERS ARE IDEN12 TIFIED.—The Secretary may issue regulations protecting

13 information identifying providers in order to promote the

14 availability of health care services.

15 SEC. 4107. AUTHORIZATIONS FOR DISCLOSURE OF PRO16 TECTED HEALTH INFORMATION.

17 (a) WRITTEN AUTHORIZATIONS.—A health informa18 tion trustee may disclose protected health information

19 pursuant to an authorization executed by the individual

20 who is the subject of the information under regulations

21 issued by the Secretary.

22 (b) WRITTEN OBJECTIONS TO DISCLOSURE.—Except

23 if required by law, nothing in this subtitle that permits

24 a disclosure shall allow such disclosure if the subject of
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1 the protected health information has previously objected

2 to disclosure in writing.

3 SEC. 4108. HEALTH INFORMATION PROTECTION ORGANIZA4 TIONS.

5 A health information trustee may disclose protected

6 health information to a health information protection or7 ganization for the purpose of creating non-identifiable

8 health information.

9 Subpart B—Specific Disclosures Relating to Patient

10 SEC. 4111. DISCLOSURES FOR TREATMENT AND FINANCIAL

11 AND ADMINISTRATIVE TRANSACTIONS.

12 (a) HEALTH CARE TREATMENT.—A health care pro13 vider, health plan, employer, or person who receives pro14 tected health information under section 4112, may dis15 close protected health information to a health care pro16 vider for the purpose of providing health care to an indi17 vidual.

18 (b) DISCLOSURE FOR FINANCIAL AND ADMINISTRA19 TIVE PURPOSES.—A health care provider or employer may

20 disclose protected health information to a health care pro21 vider or health plan for the purpose of providing for the

22 payment for, or reviewing the payment of, health care fur23 nished to an individual.
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1 SEC. 4112. EMERGENCY CIRCUMSTANCES.

2 A health care provider, health plan, employer, or per3 son who receives protected health information under this

4 section may disclose protected health information in emer5 gency circumstances when necessary to protect the health

6 or safety of an individual from imminent harm.

7 Subpart C—Disclosure for Oversight, Public Health,

8 and Research Purposes

9 SEC. 4116. OVERSIGHT.

10 A health information trustee may disclose protected

11 health information to a health oversight agency for an

12 oversight function authorized by law.

13 SEC. 4117. PUBLIC HEALTH.

14 A health care provider, health plan, public health au15 thority, employer, or person who receives protected health

16 information under section 4112 may disclose protected

17 health information to a public health authority or other

18 person authorized by law for use in a legally authorized—

19 (1) disease or injury reporting;

20 (2) public health surveillance; or

21 (3) public health investigation or intervention.

22 SEC. 4118. HEALTH RESEARCH.

23 (a) IN GENERAL.—A health information trustee may

24 disclose protected health information to a health re25 searcher if an institutional review board determines that

26 the research project engaged in by the health researcher—
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1 (1) requires use of the protected health infor2 mation for the effectiveness of the project; and

3 (2) is of sufficient importance to outweigh the

4 intrusion into the privacy of the individual who is

5 the subject of the information that would result from

6 the disclosure.

7 (b) RESEARCH REQUIRING DIRECT CONTACT.—A

8 health care provider or health plan may disclose protected

9 health information to a health researcher for a research

10 project that includes direct contact with an individual who

11 is the subject of protected health information if an institu12 tional review board determines that direct contact is nec13 essary and will be made in a manner that minimizes the

14 risk of harm, embarrassment, or other adverse con15 sequences to the individual.

16 (c) OBLIGATIONS OF RECIPIENT.—A person who re17 ceives protected health information under subsection (a)

18 shall use such information solely for the purposes of the

19 approved research project and shall remove or destroy, at

20 the earliest opportunity consistent with the purposes of

21 the project, information that would enable an individual

22 to be identified.
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1 Subpart D—Disclosure For Judicial, Administrative,

2 and Law Enforcement Purposes

3 SEC. 4121. JUDICIAL AND ADMINISTRATIVE PURPOSES.

4 A health care provider, health plan, health oversight

5 agency, or employer may disclose protected health infor6 mation, subject to a court’s rules of procedure—

7 (1) in connection with litigation or proceedings

8 to which the individual who is the subject of the in9 formation is a party and in which the individual has

10 placed the individual’s physical or mental condition

11 at issue;

12 (2) if the protected health information is devel13 oped in response to a court-ordered physical or men14 tal examination; or

15 (3) pursuant to a law requiring the reporting of

16 specific medical information to law enforcement au17 thorities.

18 SEC. 4122. LAW ENFORCEMENT.

19 (a) IN GENERAL.—A health care provider, health

20 plan, health oversight agency, employer, or person who re21 ceives protected health information under section 4112

22 may disclose protected health information to a law en23 forcement agency (other than a health oversight agency

24 governed by section 4116) if the information is requested

25 for use—
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1 (1) in an investigation or prosecution of a

2 health information trustee;

3 (2) in the identification of a victim or witness

4 in a law enforcement inquiry; or

5 (3) in connection with the investigation of

6 criminal activity committed against the trustee or on

7 premises controlled by the trustee.

8 (b) WRITTEN CERTIFICATION.—If a law enforcement

9 agency (other than a health oversight agency) requests

10 that a health information trustee disclose protected health

11 information under this section, such agency shall provide

12 the trustee with a written certification that—

13 (1) specifies the information requested;

14 (2) states that the information is needed for a

15 lawful purpose under this section; and

16 (3) is signed by a supervisory official of a rank

17 designated by the head of the agency.

18 Subpart E—Disclosure Pursuant to Government

19 Subpoena or Warrant

20 SEC. 4126. GOVERNMENT SUBPOENAS AND WARRANTS.

21 A health care provider, health plan, health oversight

22 agency, employer, or person who receives protected health

23 information under section 4112 may disclose protected

24 health information under this section if the disclosure is

25 pursuant to—
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1 (1) an administrative subpoena or summons, a

2 judicial subpoena or warrant, or a grand jury sub3 poena, and the trustee is provided written certifi4 cation that section 4127 has been complied with by

5 the person seeking the subpoena or summons; or

6 (2) an administrative subpoena or summons, a

7 judicial subpoena or warrant, or a grand jury sub8 poena, and the disclosure otherwise meets the condi9 tions of section 4116, 4117, 4118, 4121, or 4122.

10 SEC. 4127. ACCESS PROCEDURES FOR LAW ENFORCEMENT

11 SUBPOENAS AND WARRANTS.

12 (a) PROBABLE CAUSE REQUIREMENT.—A govern13 ment authority may not obtain protected health informa14 tion about an individual under paragraph (1) or (2) of

15 section 4126 for use in a law enforcement inquiry unless

16 there is probable cause to believe that the information is

17 relevant to a legitimate law enforcement inquiry being con18 ducted by the government authority.

19 (b) WARRANTS.—A government authority that ob20 tains protected health information about an individual

21 under circumstances described in subsection (a) and pur22 suant to a warrant shall, not later than 30 days after the

23 date the warrant was executed, serve the individual with,

24 or mail to the last known address of the individual, a no25 tice that protected health information about the individual
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1 was so obtained, together with a notice of the individual’s

2 right to challenge the warrant.

3 (c) SUBPOENA OR SUMMONS.—Except as provided in

4 subsection (d), a government authority may not obtain

5 protected health information about an individual under

6 circumstances described in subsection (a) and pursuant to

7 a subpoena or summons unless a copy of the subpoena

8 or summons has been served on the individual on or before

9 the date of return of the subpoena or summons, together

10 with notice of the individual’s right to challenge the sub11 poena or summons. No disclosure may be made until after

12 the 15th day after the individual has been served or after

13 a court order allowing disclosure.

14 (d) APPLICATION FOR DELAY.—

15 (1) IN GENERAL.—A government authority may

16 apply ex parte and under seal to an appropriate

17 court to delay (or extend a delay) serving a notice

18 or copy of a warrant, subpoena, or summons re19 quired under subsection (b) or (c). The initial period

20 of delay may not exceed 90 days.

21 (2) EX PARTE ORDER.—The court shall enter

22 an ex parte order delaying or extending the delay of

23 notice, an order prohibiting the disclosure of the re24 quest for, or disclosure of, the protected health in25 formation, and an order requiring the disclosure of
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1 the protected health information if the court finds

2 that—

3 (A) the inquiry being conducted is within

4 the lawful jurisdiction of the government au5 thority seeking the protected health informa6 tion;

7 (B) there is probable cause to believe that

8 the protected health information being sought is

9 relevant to a legitimate law enforcement in10 quiry;

11 (C) the government authority’s need for

12 the information outweighs the privacy interest

13 of the individual who is the subject of the infor14 mation; and

15 (D) there is reasonable ground to believe

16 that receipt of notice by the individual will re17 sult in—

18 (i) endangering the life or physical

19 safety of any individual;

20 (ii) flight from prosecution;

21 (iii) destruction of or tampering with

22 evidence or the information being sought;

23 (iv) intimidation of potential wit24 nesses; or
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1 (v) disclosure of the existence or na2 ture of a confidential law enforcement in3 vestigation or grand jury investigation is

4 likely to seriously jeopardize such inves5 tigation.

6 SEC. 4128. CHALLENGE PROCEDURES FOR LAW ENFORCE7 MENT WARRANTS, SUBPOENAS, AND SUM8 MONS.

9 (a) MOTION TO QUASH.—Within 15 days after the

10 date of service of a notice of execution or a copy of a war11 rant, subpoena, or summons of a government authority

12 seeking protected health information about an individual

13 under paragraph (1) or (2) of section 4126, the individual

14 may file a motion to quash.

15 (b) STANDARD FOR DECISION.—The court shall

16 grant a motion under subsection (a) unless the govern17 ment demonstrates that there is probable cause to believe

18 the protected health information is relevant to a legitimate

19 law enforcement inquiry being conducted by the govern20 ment authority and the government authority’s need for

21 the information outweighs the privacy interest of the indi22 vidual.
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1 Subpart F—Disclosure Pursuant to Party Subpoena

2 SEC. 4131. PARTY SUBPOENAS.

3 A health care provider, health plan, employer, or per4 son who receives protected health information under sec5 tion 4112 may disclose protected health information under

6 this section if the disclosure is pursuant to a subpoena

7 issued on behalf of a party who has complied with the ac8 cess provisions of section 4132.

9 SEC. 4132. ACCESS PROCEDURES FOR PARTY SUBPOENAS.

10 A party may not obtain protected health information

11 about an individual pursuant to a subpoena unless a copy

12 of the subpoena together with a notice of the individual’s

13 right to challenge the subpoena in accordance with section

14 4133 has been served upon the individual on or before the

15 date of return of the subpoena.

16 SEC. 4133. CHALLENGE PROCEDURES FOR PARTY SUBPOE17 NAS.

18 (a) MOTION TO QUASH SUBPOENA.—After service of

19 a copy of the subpoena seeking protected health informa20 tion under section 4131, the individual who is the subject

21 of the protected health information may file in any court

22 of competent jurisdiction a motion to quash the subpoena.

23 (b) STANDARD FOR DECISION.—The court shall

24 grant a motion under subsection (a) unless the respondent

25 demonstrates that—
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1 (1) there is reasonable ground to believe the in2 formation is relevant to a lawsuit or other judicial

3 or administrative proceeding; and

4 (2) the need of the respondent for the informa5 tion outweighs the privacy interest of the individual.

6 PART 3—PROCEDURES FOR ENSURING SECURITY

7 OF PROTECTED HEALTH INFORMATION

8 Subpart A—Establishment of Safeguards

9 SEC. 4136. ESTABLISHMENT OF SAFEGUARDS.

10 A health information trustee shall establish and

11 maintain appropriate administrative, technical, and phys12 ical safeguards to ensure the integrity and confidentiality

13 of protected health information created or received by the

14 trustee.

15 SEC. 4137. ACCOUNTING FOR DISCLOSURES.

16 A health information trustee shall create and main17 tain, with respect to any protected health information dis18 closed in exceptional circumstances, a record of the disclo19 sure in accordance with regulations issued by the Sec20 retary.
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1 Subpart B—Review of Protected Health Information

2 By Subjects of the Information

3 SEC. 4141. INSPECTION OF PROTECTED HEALTH INFORMA4 TION.

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

6 (b), a health care provider or health plan shall permit an

7 individual who is the subject of protected health informa8 tion or the individual’s designee to inspect any such infor9 mation that the provider or plan maintains. A health care

10 provider or health plan may require an individual to reim11 burse the provider or plan for the cost of such inspection.

12 (b) EXCEPTIONS.—A health care provider or health

13 plan is not required by this section to permit inspection

14 or copying of protected health information if any of the

15 following conditions apply:

16 (1) MENTAL HEALTH TREATMENT NOTES.—

17 The information consists of psychiatric, psycho18 logical, or mental health treatment notes, and the

19 provider or plan determines, based on reasonable

20 medical judgment, that inspection or copying of the

21 notes would cause sufficient harm.

22 (2) ENDANGERMENT TO LIFE OR SAFETY.—

23 The provider or plan determines that disclosure of

24 the information could reasonably be expected to en25 danger the life or physical safety of any individual.
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1 (3) CONFIDENTIAL SOURCE.—The information

2 identifies or could reasonably lead to the identifica3 tion of a person (other than a health care provider)

4 who provided information under a promise of con5 fidentiality to a health care provider concerning the

6 individual who is the subject of the information.

7 (4) ADMINISTRATIVE PURPOSES.—The informa8 tion is used by the provider or plan solely for admin9 istrative purposes and not in the provision of health

10 care to the individual who is the subject of the infor11 mation.

12 SEC. 4142. AMENDMENT OF PROTECTED HEALTH INFORMA13 TION.

14 A health care provider or health plan shall, within

15 45 days after receiving a written request to correct or

16 amend protected health information from the individual

17 who is the subject of the information—

18 (1) correct or amend such information; or

19 (2) provide the individual with a statement of

20 the reasons for refusing to correct or amend such in21 formation and include a copy of such statement in

22 the provider’s or plan’s records.

23 SEC. 4143. NOTICE OF INFORMATION PRACTICES.

24 A health care provider or health plan shall provide

25 written notice of the provider’s or plan’s information prac-
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1 tices, including notice of individual rights with respect to

2 protected health information.

3 PART 4—SANCTIONS

4 Subpart A—Civil Sanctions

5 SEC. 4151. CIVIL PENALTY.

6 (a) VIOLATION.—Any health information trustee who

7 the Secretary determines has substantially failed to com8 ply with this subtitle shall be subject, in addition to any

9 other penalties that may be prescribed by law, to a civil

10 penalty of not more than $10,000 for each such violation.

11 (b) PROCEDURES FOR IMPOSITION OF PENALTIES.—

12 Section 1128A of the Social Security Act (42 U.S.C.

13 1320a–7a), other than subsections (a) and (b) and the

14 second sentence of subsection (f) of that section, shall

15 apply to the imposition of a civil monetary penalty under

16 this section in the same manner as such provisions apply

17 with respect to the imposition of a penalty under such sec18 tion 1128A.

19 SEC. 4152. CIVIL ACTION.

20 (a) IN GENERAL.—An individual who is aggrieved by

21 negligent conduct in violation of this subtitle may bring

22 a civil action to recover—

23 (1) the greater of actual damages or liquidated

24 damages of $5,000;

25 (2) punitive damages;
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1 (3) a reasonable attorney’s fee and expenses of

2 litigation;

3 (4) costs of litigation; and

4 (5) such preliminary and equitable relief as the

5 court determines to be appropriate.

6 (b) LIMITATION.—No action may be commenced

7 under this section more than 3 years after the date on

8 which the violation was or should reasonably have been

9 discovered.

10 Subpart B—Criminal Sanctions

11 SEC. 4161. WRONGFUL DISCLOSURE OF PROTECTED

12 HEALTH INFORMATION.

13 (a) OFFENSE.—A person who knowingly—

14 (1) obtains protected health information relat15 ing to an individual in violation of this subtitle; or

16 (2) discloses protected health information to an17 other person in violation of this subtitle,

18 shall be punished as provided in subsection (b).

19 (b) PENALTIES.—A person described in subsection

20 (a) shall—

21 (1) be fined not more than $50,000, imprisoned

22 not more than 1 year, or both;

23 (2) if the offense is committed under false pre24 tenses, be fined not more than $100,000, imprisoned

25 not more than 5 years, or both; and
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1 (3) if the offense is committed with intent to

2 sell, transfer, or use protected health information for

3 commercial advantage, personal gain, or malicious

4 harm, fined not more than $250,000, imprisoned not

5 more than 10 years, or both.

6 PART 5—ADMINISTRATIVE PROVISIONS

7 SEC. 4166. RELATIONSHIP TO OTHER LAWS.

8 (a) STATE LAW.—Except as provided in subsections

9 (b), (c), and (d), this subtitle preempts State law.

10 (b) LAWS RELATING TO PUBLIC OR MENTAL

11 HEALTH.—Nothing in this subtitle shall be construed to

12 preempt or operate to the exclusion of any State law relat13 ing to public health or mental health that prevents or reg14 ulates disclosure of protected health information otherwise

15 allowed under this subtitle.

16 (c) PRIVILEGES.—Nothing in this subtitle is intended

17 to preempt or modify State common or statutory law to

18 the extent such law concerns a privilege of a witness or

19 person in a court of the State. This subtitle does not su20 persede or modify Federal common or statutory law to the

21 extent such law concerns a privilege of a witness or person

22 in a court of the United States. Authorizations pursuant

23 to section 4107 shall not be construed as a waiver of any

24 such privilege.
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1 (d) CERTAIN DUTIES UNDER STATE OR FEDERAL

2 LAW.—This subtitle shall not be construed to preempt,

3 supersede, or modify the operation of—

4 (1) any law that provides for the reporting of

5 vital statistics such as birth or death information;

6 (2) any law requiring the reporting of abuse or

7 neglect information about any individual;

8 (3) subpart II of part E of title XXVI of the

9 Public Health Service Act (42 U.S.C. 300ff-81 et

10 seq.) (relating to notifications of emergency response

11 employees of possible exposure to infectious dis12 eases); or

13 (4) any Federal law or regulation governing

14 confidentiality of alcohol and drug patient records.

15 SEC. 4167. RIGHTS OF INCOMPETENTS.

16 Except as provided in section 4168, if an individual

17 has been declared to be incompetent by a court of com18 petent jurisdiction, the rights of the individual under this

19 subtitle shall be exercised and discharged in the best inter20 ests of the individual through the individual’s representa21 tive.

22 SEC. 4168. EXERCISE OF RIGHTS.

23 (a) INDIVIDUALS WHO ARE 18 OR LEGALLY CAPA24 BLE.—In the case of an individual—
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1 (1) who is 18 years of age or older, all rights

2 of the individual shall be exercised by the individual;

3 or

4 (2) who, acting alone, has the legal right, as de5 termined by State law, to apply for and obtain a

6 type of medical examination, care, or treatment and

7 who has sought such examination, care, or treat8 ment, the individual shall exercise all rights of an in9 dividual under this subtitle with respect to protected

10 health information relating to such examination,

11 care, or treatment.

12 (b) INDIVIDUALS UNDER 18.—Except as provided in

13 subsection (a)(2), in the case of an individual who is—

14 (1) under 14 years of age, all the individual’s

15 rights under this subtitle shall be exercised through

16 the parent or legal guardian of the individual; or

17 (2) 14, 15, 16, or 17 years of age, the rights

18 of inspection and amendment, and the right to au19 thorize disclosure of protected health information of

20 the individual may be exercised either by the individ21 ual or by the parent or legal guardian of the individ22 ual.
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1 Subtitle C—Enhanced Penalties for

2 Health Care Fraud

3 SEC. 4201. ALL-PAYER FRAUD AND ABUSE CONTROL PRO4 GRAM.

5 (a) ESTABLISHMENT OF PROGRAM.—

6 (1) IN GENERAL.—Not later than January 1,

7 1996, the Secretary of Health and Human Services

8 (in this subtitle referred to as the ‘‘Secretary’’), act9 ing through the Office of the Inspector General of

10 the Department of Health and Human Services, and

11 the Attorney General shall establish a program—

12 (A) to coordinate Federal, State, and local

13 law enforcement programs to control fraud and

14 abuse with respect to the delivery of and pay15 ment for health care in the United States,

16 (B) to conduct investigations, audits, eval17 uations, and inspections relating to the delivery

18 of and payment for health care in the United

19 States,

20 (C) to facilitate the enforcement of the

21 provisions of sections 1128, 1128A, and 1128B

22 of the Social Security Act (42 U.S.C. 1320a-7,

23 1320a-7a, and 1320a-7b) and other statutes

24 applicable to health care fraud and abuse, and
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1 (D) to provide for the modification and es2 tablishment of safe harbors and to issue inter3 pretative rulings and special fraud alerts.

4 (2) REGULATIONS.—The Secretary and the At5 torney General shall by regulation establish stand6 ards to carry out the program under paragraph (1).

7 (b) HEALTH CARE FRAUD AND ABUSE CONTROL AC8 COUNT.—

9 (1) ESTABLISHMENT.—

10 (A) IN GENERAL.—There is hereby estab11 lished an account to be known as the ‘‘Health

12 Care Fraud and Abuse Control Account’’ (in

13 this section referred to as the ‘‘Anti-Fraud Ac14 count’’).

15 (B) TRANSFER OF AMOUNTS.—The Sec16 retary of the Treasury shall transfer to the

17 Anti-Fraud Account an amount equal to the

18 sum of the following:

19 (i) Criminal fines imposed in cases in20 volving a Federal health care offense (as

21 defined in subparagraph (C)).

22 (ii) Administrative penalties and as23 sessments imposed under titles XI, XVIII,

24 and XIX of the Social Security Act (except

25 as otherwise provided by law).
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1 (iii) Amounts resulting from the for2 feiture of property by reason of a Federal

3 health care offense.

4 (iv) Penalties and damages imposed

5 under the False Claims Act (31 U.S.C.

6 3729 et seq.) (except as otherwise provided

7 by law), in cases involving claims related to

8 the provision of health care items and serv9 ices (other than funds awarded to a relator

10 or for restitution).

11 (C) For purposes of this paragraph, the

12 term ‘‘Federal health care offense’’ means a

13 violation of, or a criminal conspiracy to vio14 late—

15 (i) section 1347 of title 18, United

16 States Code;

17 (ii) section 1128B of the Social Secu18 rity Act (42 U.S.C. 1320a-7b);

19 (iii) sections 287, 371, 664, 666,

20 1001, 1027, 1341, 1343, or 1954 of title

21 18, United States Code, if the violation or

22 conspiracy relates to health care fraud;

23 and

24 (iv) section 501 or 511 of the Em25 ployee Retirement Income Security Act of
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1 1974 (29 U.S.C. 1131 and 1141), if the

2 violation or conspiracy relates to health

3 care fraud.

4 (2) USE OF FUNDS.—

5 (A) IN GENERAL.—Amounts in the Anti6 Fraud Account shall be available without appro7 priation and until expended as determined

8 jointly by the Secretary and the Attorney Gen9 eral of the United States in carrying out the

10 health care fraud and abuse control program

11 established under subsection (a) (including the

12 administration of the program), and may be

13 used to cover costs incurred in operating the

14 program, including costs (including equipment,

15 salaries and benefits, and travel and training)

16 of—

17 (i) prosecuting health care matters

18 (through criminal, civil, and administrative

19 proceedings);

20 (ii) investigations;

21 (iii) financial and performance audits

22 of health care programs and operations;

23 (iv) inspections and other evaluations;

24 and
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1 (v) provider and consumer education

2 regarding compliance with the provisions of

3 this subtitle.

4 (4) USE OF FUNDS BY INSPECTOR GENERAL.—

5 The Inspector General is authorized to receive and

6 retain for current use reimbursement for the costs of

7 conducting investigations, when such restitution is

8 ordered by a court, voluntarily agreed to by the

9 payer, or otherwise.

10 SEC. 4202. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

11 AND ABUSE SANCTIONS TO ALL FRAUD AND

12 ABUSE AGAINST ANY HEALTH PLAN.

13 (a) APPLICATION OF CIVIL MONETARY PEN14 ALTIES.—Section 1128A of the Social Security Act (42

15 U.S.C. 1320a–7a) is amended as follows:

16 (1) In subsection (a)(1), by inserting ‘‘or of any

17 health plan (as defined in section 1128(i)),’’ after

18 ‘‘subsection (i)(1)),’’.

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

20 under a health plan’’ after ‘‘title XIX’’.

21 (3) In subsection (i)—

22 (A) in paragraph (2), by inserting ‘‘or

23 under a health plan’’ before the period at the

24 end, and
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1 (B) in paragraph (5), by inserting ‘‘or

2 under a health plan’’ after ‘‘or XX’’.

3 (b) PERMITTING SECRETARY TO IMPOSE CIVIL MON4 ETARY PENALTY.—Section 1128A(b) of the Social Secu5 rity Act (42 U.S.C. 1320a–7a(a)) is amended by adding

6 the following new paragraph:

7 ‘‘(3) Any person (including any organization,

8 agency, or other entity, but excluding a beneficiary

9 as defined in subsection (i)(5)) who the Secretary

10 determines has violated section 1128B(b) of this

11 title shall be subject to a civil monetary penalty of

12 not more than $10,000 for each such violation. In

13 addition, such person shall be subject to an assess14 ment of not more than twice the total amount of the

15 remuneration offered, paid, solicited, or received in

16 violation of section 1128B(b). The total amount of

17 remuneration subject to an assessment shall be cal18 culated without regard to whether some portion

19 thereof also may have been intended to serve a pur20 pose other than one proscribed by section

21 1128B(b).’’.

22 (c) HEALTH PLAN DEFINED.—Section 1128 of the

23 Social Security Act (42 U.S.C. 1320a–7) is amended by

24 redesignating subsection (i) as subsection (j) and by in25 serting after subsection (h) the following new subsection:
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1 ‘‘(i) HEALTH PLAN DEFINED.—For purposes of sec2 tions 1128A and 1128B, the term ‘health plan’ has the

3 meaning given such term in section 1031(a) of the Family

4 Health Insurance Protection Act.’’.

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

6 this section shall take effect on January 1, 1996.

7 SEC. 4203. ESTABLISHMENT OF THE HEALTH CARE FRAUD

8 AND ABUSE DATA COLLECTION PROGRAM.

9 (a) GENERAL PURPOSE.—Not later than January 1,

10 1996, the Secretary shall establish a national health care

11 fraud and abuse data collection program for the reporting

12 of final adverse actions (not including settlements in which

13 no findings of liability have been made) against health

14 care providers, suppliers, or practitioners as required by

15 regulations issued by the Secretary.

16 (b) CONFORMING AMENDMENT.—Section 1921(d) of

17 the Social Security Act (42 U.S.C. 1396r–2(d)) is amend18 ed by inserting ‘‘and section 4203 of the Family Health

19 Insurance Protection Act’’ after ‘‘section 422 of the

20 Health Care Quality Improvement Act of 1986’’.

21 SEC. 4204. HEALTH CARE FRAUD.

22 (a) FINES AND IMPRISONMENT FOR HEALTH CARE

23 FRAUD VIOLATIONS.—Chapter 63 of title 18, United

24 States Code, is amended by adding at the end the follow25 ing new section:
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1 ‘‘§ 1347. Health care fraud

2 ‘‘(a) Whoever knowingly executes, or attempts to exe3 cute, a scheme or artifice—

4 ‘‘(1) to defraud any health plan or other per5 son, in connection with the delivery of or payment

6 for health care benefits, items, or services; or

7 ‘‘(2) to obtain, by means of false or fraudulent

8 pretenses, representations, or promises, any of the

9 money or property owned by, or under the custody

10 or control of, any health plan, or person in connec11 tion with the delivery of or payment for health care

12 benefits, items, or services;

13 shall be fined under this title or imprisoned not more than

14 10 years, or both. If the violation results in serious bodily

15 injury (as defined in section 1365(g)(3) of this title), such

16 person shall be imprisoned for any term of years.

17 ‘‘(b) For purposes of this section, the term ‘health

18 plan’ has the meaning given such term in section 1128(i)

19 of the Social Security Act (42 U.S.C. 1320a–7(i)).’’.

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

21 at the beginning of chapter 63 of title 18, United States

22 Code, is amended by adding at the end the following:

‘‘1347. Health care fraud.’’.
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1 Subtitle D—Health Care

2 Malpractice Reform

3 SEC. 4301. FEDERAL TORT REFORM.

4 (a) APPLICABILITY.—

5 (1) IN GENERAL.—Except as provided in sec6 tion 4302, this subtitle shall apply with respect to

7 any medical malpractice liability action brought in

8 any State or Federal court, except that this subtitle

9 shall not apply to a claim or action for damages

10 arising from a vaccine-related injury or death to the

11 extent that title XXI of the Public Health Service

12 Act (42 U.S.C. 300aa–1 et seq.) applies to the claim

13 or action.

14 (2) EFFECT ON SOVEREIGN IMMUNITY AND

15 CHOICE OF LAW OR VENUE.—Nothing in this sub16 title shall be construed to—

17 (A) waive or affect any defense of sov18 ereign immunity asserted by any State under

19 any provision of law;

20 (B) waive or affect any defense of sov21 ereign immunity asserted by the United States;

22 (C) affect the applicability of any provision

23 of the Foreign Sovereign Immunities Act of

24 1976;
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1 (D) preempt State choice-of-law rules with

2 respect to claims brought by a foreign nation or

3 a citizen of a foreign nation; or

4 (E) affect the right of any court to trans5 fer venue or to apply the law of a foreign nation

6 or to dismiss a claim of a foreign nation or of

7 a citizen of a foreign nation on the ground of

8 inconvenient forum.

9 (3) FEDERAL COURT JURISDICTION NOT ES10 TABLISHED ON FEDERAL QUESTION GROUNDS.—

11 Nothing in this subtitle shall be construed to estab12 lish any jurisdiction in the district courts of the

13 United States over medical malpractice liability ac14 tions on the basis of section 1331 or 1337 of title

15 28, United States Code.

16 (b) DEFINITIONS.—For purposes of this subtitle:

17 (1) ALTERNATIVE DISPUTE RESOLUTION SYS18 TEM; ADR.—The term ‘‘alternative dispute resolution

19 system’’ or ‘‘ADR’’ means a system that provides

20 for the resolution of medical malpractice claims in a

21 manner other than through medical malpractice li22 ability actions.

23 (2) CLAIMANT.—The term ‘‘claimant’’ means

24 any person who alleges a medical malpractice claim,

25 and any person on whose behalf such a claim is al-
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1 leged, including the decedent in the case of an action

2 brought through or on behalf of an estate.

3 (3) HEALTH CARE PROFESSIONAL.—The term

4 ‘‘health care professional’’ means any individual who

5 provides health care services in a State and who is

6 required by the laws or regulations of the State to

7 be licensed or certified by the State to provide such

8 services in the State.

9 (4) HEALTH CARE PROVIDER.—The term

10 ‘‘health care provider’’ means any organization or

11 institution that is engaged in the delivery of health

12 care services in a State and that is required by the

13 laws or regulations of the State to be licensed or cer14 tified by the State to engage in the delivery of such

15 services in the State.

16 (5) HEALTH PLAN.—The term ‘‘health plan’’

17 has the meaning given such term in section 1031(a).

18 (6) INJURY.—The term ‘‘injury’’ means any ill19 ness, disease, or other harm that is the subject of

20 a medical malpractice liability action or a medical

21 malpractice claim.

22 (7) MEDICAL MALPRACTICE LIABILITY AC23 TION.—The term ‘‘medical malpractice liability ac24 tion’’ means a cause of action brought in a State or

25 Federal court against a health care provider or
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1 health care professional by which the plaintiff brings

2 a medical malpractice claim.

3 (8) MEDICAL MALPRACTICE CLAIM.—The term

4 ‘‘medical malpractice claim’’ means a claim brought

5 against a health care provider or health care profes6 sional in which a claimant alleges that injury was

7 caused by the provision of (or the failure to provide)

8 health care services, except that such term does not

9 include—

10 (A) any claim based on an allegation of an

11 intentional tort;

12 (B) any claim based on an allegation that

13 a product is defective that is brought against

14 any individual or entity that is not a health

15 care professional or health care provider; or

16 (C) any claim brought pursuant to a

17 health plan benefit determination review proce18 dure.

19 (9) SECRETARY.—The term ‘‘Secretary’’ means

20 the Secretary of Health and Human Services.

21 SEC. 4302. STATE-BASED ALTERNATIVE DISPUTE RESOLU22 TION MECHANISMS.

23 (a) APPLICATION TO MALPRACTICE CLAIMS UNDER

24 PLANS.—Prior to or immediately following the commence25 ment of any medical malpractice action, the parties shall
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1 participate in the alternative dispute resolution system ad2 ministered by the State under subsection (b). Such partici3 pation shall be in lieu of any other provision of Federal

4 or State law or any contractual agreement made by or on

5 behalf of the parties prior to the commencement of the

6 medical malpractice action.

7 (b) ADOPTION OF MECHANISM BY STATE.—Each

8 State shall—

9 (1) maintain or adopt at least 1 of the alter10 native dispute resolution methods satisfying the re11 quirements specified under subsection (c) and (d) for

12 the resolution of medical malpractice claims; and

13 (2) clearly disclose to enrollees (and potential

14 enrollees) of health plans the availability and proce15 dures for consumer grievances, including a descrip16 tion of the alternative dispute resolution method or

17 methods adopted under this subsection.

18 (c) SPECIFICATION OF PERMISSIBLE ALTERNATIVE

19 DISPUTE RESOLUTION METHODS.—

20 (1) IN GENERAL.—The Secretary shall, by reg21 ulation, develop alternative dispute resolution meth22 ods for the use by States in resolving medical mal23 practice claims under subsection (a). Such methods

24 shall include at least the following:
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1 (A) ARBITRATION.—The use of arbitra2 tion, a nonjury adversarial dispute resolution

3 process which may, subject to subsection (d),

4 result in a final decision as to facts, law, liabil5 ity, or damages.

6 (B) CLAIMANT-REQUESTED BINDING ARBI7 TRATION.—For claims involving a sum of

8 money that falls below a threshold amount set

9 by the Secretary, the use of arbitration not sub10 ject to subsection (d). Such binding arbitration

11 shall be at the sole discretion of the claimant.

12 (C) MEDIATION.—The use of mediation, a

13 settlement process coordinated by a neutral

14 third party without the ultimate rendering of a

15 formal opinion as to factual or legal findings.

16 (D) EARLY NEUTRAL EVALUATION.—The

17 use of early neutral evaluation, in which the

18 parties make a presentation to a neutral attor19 ney or other neutral evaluator for an assess20 ment of the merits, to encourage settlement. If

21 the parties do not settle as a result of assess22 ment and proceed to trial, the neutral eval23 uator’s opinion shall be kept confidential.

24 (2) STANDARDS FOR ESTABLISHING METH25 ODS.—In developing alternative dispute resolution
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1 methods under paragraph (1), the Secretary shall

2 assure that the methods promote the resolution of

3 medical malpractice claims in a manner that is af4 fordable, timely, consistent and fair, and reasonably

5 convenient.

6 (3) WAIVER AUTHORITY.—Upon application of

7 a State, the Secretary may grant the State the au8 thority to fulfill the requirement of subsection (b) by

9 adopting a mechanism other than a mechanism es10 tablished by the Secretary pursuant to this sub11 section, except that such mechanism must meet the

12 standards set forth in paragraph (2).

13 (d) FURTHER REDRESS.—Except with respect to the

14 claimant-requested binding arbitration method set forth in

15 subsection (c)(1)(B), and notwithstanding any other provi16 sion of a law or contractual agreement, a plan enrollee

17 dissatisfied with the determination reached as a result of

18 an alternative dispute resolution method applied under

19 this section may, after the final resolution of the enrollee’s

20 claim under the method, initiate or resume a cause of ac21 tion to seek damages or other redress with respect to the

22 claim to the extent otherwise permitted under State law.

23 The results of any alternative dispute resolution procedure

24 are inadmissible at any subsequent trial, as are all state25 ments, offers, and other communications made during
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1 such procedures, unless otherwise admissible under State

2 law.

3 SEC. 4303. LIMITATION ON AMOUNT OF ATTORNEY’S CON4 TINGENCY FEES.

5 (a) IN GENERAL.—An attorney who represents, on

6 a contingency fee basis, a plaintiff in a medical mal7 practice liability action may not charge, demand, receive,

8 or collect for services rendered in connection with such ac9 tion (including the resolution of the claim that is the sub10 ject of the action under any alternative dispute resolution

11 system) in excess of—

(1) 331 12 ⁄3 percent of the first $150,000 of the

13 total amount recovered by judgment or settlement in

14 such action; plus

15 (2) 25 percent of any amount recovered above

16 the amount described in paragraph (1);

17 unless otherwise determined under State law. Such

18 amount shall be computed after deductions are made for

19 all the expenses associated with the claim other than those

20 attributable to the normal operating expenses of the attor21 ney.

22 (b) CALCULATION OF PERIODIC PAYMENTS.—In the

23 event that a judgment or settlement includes periodic or

24 future payments of damages, the amount recovered for

25 purposes of computing the limitation on the contingency
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1 fee under subsection (a) may, in the discretion of the

2 court, be based on the cost of the annuity or trust estab3 lished to make the payments. In any case in which an an4 nuity or trust is not established to make such payments,

5 such amount shall be based on the present value of the

6 payments.

7 (c) CONTINGENCY FEE DEFINED.—For purposes of

8 this section, the term ‘‘contingency fee’’ means any fee

9 for professional legal services which is, in whole or in part,

10 contingent upon the recovery of any amount of damages,

11 whether through judgment or settlement.

12 SEC. 4304. PERIODIC PAYMENT OF AWARDS.

13 (a) IN GENERAL.—A party to a medical malpractice

14 liability action may petition the court to instruct the trier

15 of fact to award any future damages on an appropriate

16 periodic basis. If the court, in its discretion, so instructs

17 the trier of fact, and damages are awarded on a periodic

18 basis, the court may require the defendant to purchase

19 an annuity or other security instrument (typically based

20 on future damages discounted to present value) adequate

21 to assure payments of future damages.

22 (b) FAILURE OR INABILITY TO PAY.—With respect

23 to an award of damages described in subsection (a), if a

24 defendant fails to make payments in a timely fashion, or

25 if the defendant becomes or is at risk of becoming insol-
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1 vent, upon such a showing the claimant may petition the

2 court for an order requiring that remaining balance be dis3 counted to present value and paid to the claimant in a

4 lump-sum.

5 (c) MODIFICATION OF PAYMENT SCHEDULE.—The

6 court shall retain authority to modify the payment sched7 ule based on changed circumstances.

8 (d) FUTURE DAMAGES DEFINED.—For purposes of

9 this section, the term ‘‘future damages’’ means any eco10 nomic or noneconomic loss other than that incurred or ac11 crued as of the time of judgment.

12 SEC. 4305. ALLOCATION OF PUNITIVE DAMAGE AWARDS

13 FOR PROVIDER LICENSING AND DISCIPLI14 NARY ACTIVITIES.

15 (a) IN GENERAL.—With respect to the total amount

16 of any punitive damages awarded in a medical malpractice

17 liability action, 50 percent of such amount shall be paid

18 to the State in which the action is brought (or, in a case

19 brought in Federal court, in the State in which the health

20 care services that caused the injury that is the subject of

21 the action were provided) for the purposes of carrying out

22 the activities described in subsection (b).

23 (b) ACTIVITIES DESCRIBED.—A State shall use

24 amounts paid pursuant to subsection (a) to carry out ac-
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1 tivities to ensure the safety and quality of health care serv2 ices provided in the State, including—

3 (1) licensing or certifying health care profes4 sionals and health care providers in the State;

5 (2) implementing health care quality assurance

6 and quality improvement programs;

7 (3) carrying out programs to reduce mal8 practice-related costs for providers volunteering to

9 provide services in medically underserved areas; and

10 (4) providing resources for additional investiga11 tion and disciplinary activities by the State licensing

12 board.

13 (c) MAINTENANCE OF EFFORT.—A State shall use

14 any amounts paid pursuant to subsection (a) to supple15 ment and not to replace amounts spent by the State for

16 the activities described in subsection (b).

17 TITLE V—BUDGET NEUTRALITY

18 SEC. 5001. ASSURANCE OF BUDGET NEUTRALITY.

19 Notwithstanding any other provision of this Act, no

20 provision of, or amendment made by, this Act shall take

21 effect until legislation is enacted which by its terms spe22 cifically provides for the Federal budget neutrality of this

23 Act.

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