II

103D CONGRESS

1ST SESSION S. 1533

To improve access to health insurance and contain health care costs, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

OCTOBER 7 (legislative day, SEPTEMBER 27), 1993

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

the Committee on Finance

A BILL

To improve access to health insurance and contain health

care costs, 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 ‘‘Affordable Health Care Now Act of 1993’’.

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

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

Subtitle A—Increased Availability and Continuity of Health Coverage for

Employees and Their Families
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PART 1—REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES,

SPOUSES, AND DEPENDENTS

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

Sec. 1002. Compliance with applicable requirements through multiple employer

health arrangements.

Sec. 1003. Coverage option under State Medical Health Allowance Program.

PART 2—PREEXISTING CONDITIONS AND CONTINUITY OF COVERAGE;

RENEWABILITY

Sec. 1011. Limitation on pre-existing condition clauses.

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

pre-existing condition requirement.

Sec. 1013. Requirements relating to renewability generally.

PART 3—ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

Sec. 1021. Enforcement.

Sec. 1022. Effective dates.

Sec. 1023. Definitions and special rules.

Subtitle B—Reform of Health Insurance Marketplace for Small Business

Sec. 1101. Requirement for insurers to offer MedAccess plans.

Sec. 1102. MedAccess plan defined.

Sec. 1103. Establishment of other MedAccess standards.

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

Sec. 1105. Limitation on annual premium increases.

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

high risk individuals in marketplace for small business.

Sec. 1107. Definitions.

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

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

pooling model.

Subtitle C—Preemption

PART 1—SCOPE OF STATE REGULATION

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

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

Sec. 1203. Restrictions on managed care.

Sec. 1204. Definitions.

PART 2—MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

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

plans providing health benefits subject to certain Federal

standards.

‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

‘‘Sec. 701. Definitions.
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‘‘Sec. 702. Exempted multiple employer plans providing benefits in the

form of medical care relieved of certain restrictions on

preemption of State law and treated as employee welfare

benefit plans.

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

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

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

‘‘Sec. 707. Maintenance of reserves.

‘‘Sec. 708. Corrective actions.

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

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

Sec. 1212. Clarification of scope of preemption rules.

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

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

Sec. 1215. Employee leasing healthcare arrangements.

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

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

Sec. 1218. Cooperation between Federal and State authorities.

Sec. 1219. Effective date; transitional rules.

PART 3—ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS

PROVIDING BASIC HEALTH BENEFITS

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

PART 4—SIMPLIFYING FILING OF REPORTS FOR EMPLOYERS COVERED

UNDER INSURED MULTIPLE EMPLOYER HEALTH PLANS

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

PART 5—COMPLIANCE WITH COVERAGE OPTION REQUIREMENTS

Sec. 1241. Compliance with coverage requirements through multiple employer

health arrangements.

SUBTITLE D—HEALTH DEDUCTION FAIRNESS

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

for self-employed individuals.

Sec. 1302. Deduction of health insurance premiums for certain previously uninsured individuals.

SUBTITLE E—IMPROVED ACCESS TO COMMUNITY HEALTH SERVICES

PART 1—INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT

HEALTH CENTERS

Sec. 1401. Grant program to promote primary health care services for underserved populations.
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PART 2—GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF

SERVICES

Sec. 1411. Projects for coordinating delivery of outpatient primary health services.

SUBTITLE F—IMPROVED ACCESS TO RURAL HEALTH SERVICES

PART 1—ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS

UNDER MEDICARE

Sec. 1501. Rural emergency access care hospitals described.

Sec. 1502. Coverage of and payment for services.

Sec. 1503. Effective date.

PART 2—RURAL MEDICAL EMERGENCIES AIR TRANSPORT

Sec. 1511. Grants to States regarding aircraft for transporting rural victims of

medical emergencies.

PART 3—EMERGENCY MEDICAL SERVICES AMENDMENTS

Sec. 1521. Establishment of Office of Emergency Medical Services.

Sec. 1522. State offices of emergency medical services.

Sec. 1523. Programs for rural areas.

Sec. 1524. Funding.

Sec. 1525. Conforming amendments.

Sec. 1526. Effective date.

SUBTITLE G—STATE FLEXIBILITY IN THE MEDICAID PROGRAM: THE

MEDICAL HEALTH ALLOWANCE PROGRAM

Sec. 1601. Establishment of program.

Sec. 1602. Optional use of program to offer coverage to some or all State residents.

SUBTITLE H—MEDICAID PROGRAM FLEXIBILITY

Sec. 1701. Modification of Federal requirements to allow States more flexibility

in contracting for coordinated care services under medicaid.

Sec. 1702. Period of certain waivers.

TITLE II—HEALTH CARE COST CONTAINMENT AND QUALITY

ENHANCEMENT

SUBTITLE A—MEDICAL MALPRACTICE LIABILITY REFORM

PART 1—GENERAL PROVISIONS

Sec. 2001. Federal reform of medical malpractice liability actions.

Sec. 2002. Definitions.

Sec. 2003. Effective date.

PART 2—MEDICAL MALPRACTICE AND PRODUCT LIABILITY REFORM

Sec. 2011. Requirement for initial resolution of action through alternative dispute resolution.

Sec. 2012. Calculation and payment of damages.

Sec. 2013. Treatment of attorney’s fees and other costs.
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Sec. 2014. Joint and several liability.

Sec. 2015. Statute of limitations.

Sec. 2016. Uniform standard for determining negligence.

Sec. 2017. Special provision for certain obstetric services.

PART 3—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION

SYSTEMS (ADR)

Sec. 2031. Basic requirements.

Sec. 2032. Certification of State systems; applicability of alternative Federal

system.

Sec. 2033. Reports on implementation and effectiveness of alternative dispute

resolution systems.

PART 4—OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE

LIABILITY

Sec. 2041. Permitting State professional societies to participate in disciplinary

activities.

Sec. 2042. Study of incentives to encourage voluntary service by physicians.

Sec. 2043. Requirements for risk management programs.

Sec. 2044. Grants for medical safety promotion.

SUBTITLE B—ADMINISTRATIVE COST SAVINGS

PART 1—STANDARDIZATION OF CLAIMS PROCESSING

Sec. 2101. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 2102. Application of standards.

Sec. 2103. Periodic review and revision of standards.

Sec. 2104. Health benefit plan defined.

PART 2—ELECTRONIC MEDICAL DATA STANDARDS

Sec. 2111. Medical data standards for hospitals and other providers.

Sec. 2112. Application of electronic data standards to certain hospitals.

Sec. 2113. Electronic transmission to Federal agencies.

Sec. 2114. Limitation on data requirements where standards in effect.

Sec. 2115. Advisory commission.

PART 3—DEVELOPMENT AND DISTRIBUTION OF COMPARATIVE VALUE

INFORMATION

Sec. 2121. State comparative value information programs for health care purchasing.

Sec. 2122. Federal implementation.

Sec. 2123. Comparative value information concerning Federal programs.

Sec. 2124. Development of model systems.

PART 4—ADDITIONAL STANDARDS AND REQUIREMENTS; RESEARCH AND

DEMONSTRATIONS

Sec. 2131. Standards relating to use of medicare and medicaid magnetized

health benefit cards; secondary payor data bank.

Sec. 2132. Preemption of State quill pen laws.

Sec. 2133. Use of standard identification numbers.

Sec. 2134. Coordination of benefit standards.
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Sec. 2135. Research and demonstrations.

SUBTITLE C—DEDUCTION FOR COST OF CATASTROPHIC HEALTH PLAN;

MEDICAL SAVINGS ACCOUNTS

Sec. 2201. Individuals allowed deduction from gross income for cost of catastrophic health plan.

Sec. 2202. Medical savings accounts.

SUBTITLE D—ANTI-FRAUD

PART 1—CRIMINAL PROSECUTION OF HEALTH CARE FRAUD

Sec. 2301. Penalties for health care fraud.

Sec. 2302. Broadening application of mail fraud statute.

Sec. 2303. Authorization of appropriations.

Sec. 2304. Rewards for information leading to prosecution and conviction.

PART 2—COORDINATION OF HEALTH CARE ANTI-FRAUD AND ABUSE

ACTIVITIES

Sec. 2311. Establishment of all-payer anti-fraud and abuse program.

Sec. 2312. Authorization of additional appropriations for investigators and

other personnel.

Sec. 2313. Establishment of anti-fraud and abuse trust fund.

Sec. 2314. Application of Federal health anti-fraud and abuse sanctions to all

fraud and abuse against any health benefit plan.

SUBTITLE E—MEDICARE PAYMENT CHANGES; PART B PREMIUM TAX FOR

HIGH-INCOME INDIVIDUALS

PART 1—MEDICARE PAYMENT CHANGES

Sec. 2401. Elimination of membership limitation for medicare hmos.

Sec. 2402. Expansion and revision of medicare select policies.

Sec. 2403. Improved efficiency through consolidation of administration of parts

A and B.

PART 2—PART B PREMIUM TAX FOR HIGH-INCOME INDIVIDUALS

Sec. 2411. Increase in medicare part B premium for individuals with high income.

SUBTITLE F—REMOVING ANTI-TRUST IMPEDIMENTS

Sec. 2501. Establishment of limited exemption program for health care joint

ventures.

Sec. 2502. Issuance of health care certificates of public advantage.

Sec. 2503. Interagency Advisory Committee on Competition, Antitrust Policy,

and Health Care.

Sec. 2504. Definitions.

SUBTITLE G—ENCOURAGING ENFORCEMENT ACTIVITIES OF MEDICAL SELFREGULATORY ENTITIES

PART 1—APPLICATION OF THE CLAYTON ACT TO MEDICAL SELFREGULATORY ENTITIES

Sec. 2601. Antitrust exemption for medical self-regulatory entities.
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Sec. 2602. Definitions.

PART 2—CONSULTATION BY FEDERAL AGENCIES

Sec. 2611. Consultation with medical self-regulatory entities respecting medical

professional guidelines and standards.

SUBTITLE H—PREFUNDING GOVERNMENT HEALTH BENEFITS FOR CERTAIN

ANNUITANTS

Sec. 2701. Requirement that certain agencies prefund government health benefits contributions for their annuitants.

SUBTITLE I—MISCELLANEOUS PROVISIONS

Sec. 2801. Increase in minimum age required in order to be eligible for an immediate civil service annuity.

TITLE III—LONG-TERM CARE

SUBTITLE A—TAX TREATMENT OF LONG-TERM CARE INSURANCE

Sec. 3001. Treatment of long-term care insurance or plans.

Sec. 3002. Exclusion for benefits provided under long-term care insurance; inclusion of employer-provided coverage.

Sec. 3003. Qualified long-term services treated as medical care.

Sec. 3004. Certain exchanges of life insurance contracts for long-term care insurance contracts not taxable.

Sec. 3005. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for long-term care insurance.

Sec. 3006. Tax treatment of accelerated death benefits under life insurance

contracts.

Sec. 3007. Effective date.

SUBTITLE B—PROTECTION OF ASSETS UNDER MEDICAID THROUGH USE OF

QUALIFIED LONG-TERM CARE INSURANCE

Sec. 3101. Protection of assets through use of qualified long-term care insurance.

SUBTITLE C—STUDIES

Sec. 3201. Feasibility of encouraging health care providers to donate services

to homebound patients.

Sec. 3202. Feasibility of tax credit for heads of households who care for elderly

family members in their homes.

Sec. 3203. Case management of current long-term care benefits.

SUBTITLE D—VOLUNTEER SERVICE CREDIT DEMONSTRATION PROJECTS

Sec. 3301. Amendment to the Older Americans Act of 1965.
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1 TITLE I—IMPROVED ACCESS TO

2 AFFORDABLE HEALTH CARE

3 Subtitle A—Increased Availability

4 and Continuity of Health Cov5 erage for Employees and Their

6 Families

7 PART 1—REQUIRED COVERAGE OPTIONS

8 FOR ELIGIBLE EMPLOYEES, SPOUSES,

9 AND DEPENDENTS

10 SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF

11 COVERAGE FOR ELIGIBLE INDIVIDUALS.

12 (a) IN GENERAL.—Each employer shall make avail13 able with respect to each eligible employee a group health

14 plan under which—

15 (1) coverage of each eligible individual with re16 spect to such an eligible employee may be elected on

17 an annual basis for each plan year,

18 (2) subject to subsection (d), coverage is pro19 vided for at least the required coverage specified in

20 subsection (c), and

21 (3) each eligible employee electing such cov22 erage may elect to have any premiums owed by the

23 employee collected through payroll deduction.

24 An employer is not required under this subsection to make

25 any contribution to the cost of coverage under such a plan.
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1 (b) SPECIAL RULES.—

2 (1) EXCLUSION OF NEW EMPLOYERS AND CER3 TAIN SMALL EMPLOYERS.—Subsection (a) shall not

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

5 beginning of such plan year—

6 (A) such employer (including any prede7 cessor thereof) has been an employer for less

8 than 2 years,

9 (B) such employer has no more than 2 eli10 gible employees, or

11 (C) no more than 2 eligible employees are

12 not covered under any group health plan.

13 (2) EXCLUSION OF FAMILY MEMBERS.—Under

14 such procedures as the Secretary may prescribe, any

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

16 employer, excluded from consideration as an eligible

17 employee for purposes of applying the requirements

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

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

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

21 the Internal Revenue Code of 1986) of the employer

22 may, at the election of the key employee, be consid23 ered a relative excludible under this paragraph.

24 (3) OPTIONAL APPLICATION OF WAITING PE25 RIOD.—A group health plan shall not be treated as
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1 failing to meet the requirements of subsection (a)

2 solely because a period of service by an eligible em3 ployee of not more than 60 days is required under

4 the plan for coverage under the plan of eligible indi5 viduals with respect to such employee.

6 (c) REQUIRED COVERAGE.—

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the required coverage specified in this

9 subsection is standard coverage (consistent with sec10 tion 1102(c)).

11 (2) SPECIAL TREATMENT OF SMALL EMPLOY12 ERS NOT CONTRIBUTING TO EMPLOYEE COV13 ERAGE.—In the case of a small employer (as defined

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

15 the previous plan year to the cost of coverage for

16 any eligible employee under any group health plan,

17 the required coverage specified in this subsection for

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

19 is—

20 (A) coverage under a MedAccess standard

21 plan,

22 (B) coverage under a MedAccess cata23 strophic plan, and

24 (C) coverage under a MedAccess medisave

25 plan,
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1 as such terms are defined in section 1102(a)(2).

2 (3) CONSTRUCTION.—Nothing in this section

3 shall be construed as limiting the group health

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

5 an employer may offer to an employee.

6 (d) 5-YEAR TRANSITION FOR EXISTING GROUP

7 HEALTH PLANS.—

8 (1) IN GENERAL.—The requirement of sub9 section (a)(2), and section 1002(c)(2), shall not

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

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

12 the plan year in which September 1, 1993, oc13 curs, and

14 (B) the employer makes (or offers to

15 make), in such plan year and the plan year in16 volved, a contribution to the plan on behalf of

17 each employee who is eligible to participate in

18 the plan.

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

20 a group health plan for each of the 5 plan years be21 ginning with the first plan year to which the require22 ment of subsection (a) applies.
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1 SEC. 1002. COMPLIANCE WITH APPLICABLE REQUIRE2 MENTS THROUGH MULTIPLE EMPLOYER

3 HEALTH ARRANGEMENTS.

4 For provision easing compliance with applicable re5 quirements through multiemployer plans and through

6 other multiple employer health arrangements, see section

7 1241.

8 SEC. 1003. COVERAGE OPTION UNDER STATE MEDICAL

9 HEALTH ALLOWANCE PROGRAM.

10 For a provision permitting a State medical health al11 lowance program under the medicaid program or other

12 State program to offer health insurance coverage to resi13 dents of the State without regard to income, see the

14 amendment made by section 1602.

15 PART 2—PREEXISTING CONDITIONS AND

16 CONTINUITY OF COVERAGE; RENEW17 ABILITY

18 SEC. 1011. LIMITATION ON PREEXISTING CONDITION

19 CLAUSES.

20 A group health plan may not impose (and an insurer

21 may not require an employer under a group health plan

22 to impose through a waiting period for coverage under a

23 plan or similar requirement) a limitation or exclusion of

24 benefits relating to treatment of a condition based on the

25 fact that the condition preexisted the effective date of the

26 plan with respect to an individual if—
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1 (1) the condition relates to a condition that was

2 not diagnosed or treated within 3 months before the

3 date of coverage under the plan;

4 (2) the limitation or exclusion extends over

5 more than 6 months after the date of coverage

6 under the plan;

7 (3) the limitation or exclusion applies to an in8 dividual who, as of the date of birth, was covered

9 under the plan; or

10 (4) the limitation or exclusion relates to preg11 nancy.

12 In the case of an individual who is eligible for coverage

13 under a plan but for a waiting period imposed by the em14 ployer, in applying paragraphs (1) and (2), the individual

15 shall be treated as having been covered under the plan

16 as of the earliest date of the beginning of the waiting pe17 riod.

18 SEC. 1012. ASSURANCE OF CONTINUITY OF COVERAGE

19 THROUGH PREVIOUS SATISFACTION OF PRE20 EXISTING CONDITION REQUIREMENT.

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

22 waive any period applicable to a preexisting condition for

23 similar benefits with respect to an individual to the extent

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

25 enrollment in such plan, was covered for the condition
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1 under any other health plan that was in effect before such

2 date.

3 (b) CONTINUOUS COVERAGE REQUIRED.—

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

5 longer apply if there is a continuous period of more

6 than 60 days (or, in the case of an individual de7 scribed in paragraph (3), 6 months) on which the in8 dividual was not covered under a group health plan.

9 (2) TREATMENT OF WAITING PERIODS.—In ap10 plying paragraph (1), any waiting period imposed by

11 an employer before an employee is eligible to be cov12 ered under a plan shall be treated as a period in

13 which the employee was covered under a group

14 health plan.

15 (3) JOB TERMINATION.—An individual is de16 scribed in this paragraph if the individual loses cov17 erage under a group health plan due to termination

18 of employment.

19 (4) EXCLUSION OF CASH-ONLY AND DREAD

20 DISEASE PLANS.—In this subsection, the term

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

22 health plan which is offered primarily to provide—

23 (A) coverage for a specified disease or ill24 ness, or
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1 (B) a hospital or fixed indemnity policy,

2 unless the Secretary determines that such a

3 plan provides sufficiently comprehensive cov4 erage of a benefit so that it should be treated

5 as a group health plan under this subsection.

6 SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY

7 GENERALLY.

8 (a) MULTIEMPLOYER PLANS AND EXEMPTED MUL9 TIPLE EMPLOYER HEALTH PLANS.—A multiemployer

10 plan and an exempted multiple employer health plan may

11 not cancel coverage or deny renewal of coverage under

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

13 (1) for nonpayment of contributions,

14 (2) for fraud or other misrepresentation by the

15 employer,

16 (3) for noncompliance with plan provisions,

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

18 or

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

20 coverage in a geographic area.

21 (b) INSURERS.—

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

23 health insurance plan or deny renewal of coverage

24 under such a plan other than—

25 (A) for nonpayment of premiums,
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1 (B) for fraud or other misrepresentation

2 by the insured,

3 (C) for noncompliance with plan provi4 sions,

5 (D) for misuse of a provider network provi6 sion, or

7 (E) because the insurer is ceasing to pro8 vide any health insurance plan in a State, or,

9 in the case of a health maintenance organiza10 tion, in a geographic area.

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

12 insurer terminates the offering of health insurance

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

14 health insurance plan to any employer in the area

15 until 5 years after the date of the termination.

16 PART 3—ENFORCEMENT; EFFECTIVE

17 DATES; DEFINITIONS

18 SEC. 1021. ENFORCEMENT.

19 (a) ENFORCEMENT BY DEPARTMENT OF LABOR FOR

20 EMPLOYERS AND GROUP HEALTH PLANS.—

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

22 subtitle B of title I of the Employee Retirement In23 come Security Act of 1974, the provisions of parts

24 1 and 2 of this subtitle shall be deemed to be provi-
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1 sions of title I of such Act irrespective of exclusions

2 under section 4(b) of such Act.

3 (2) REGULATORY AUTHORITY.—With respect to

4 the regulatory authority of the Secretary of Labor

5 under this subtitle pursuant to subsection (a), sec6 tion 505 of the Employee Retirement Income Secu7 rity Act of 1974 (29 U.S.C. 1135) shall apply.

8 (b) ENFORCEMENT BY EXCISE TAX FOR INSUR9 ERS.—

10 (1) IN GENERAL.—Chapter 43 of the Internal

11 Revenue Code of 1986 (relating to qualified pension,

12 etc., plans) is amended by adding at the end thereof

13 the following new section:

14 ‘‘SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH

15 HEALTH INSURANCE STANDARDS.

16 ‘‘(a) IMPOSITION OF TAX.—

17 ‘‘(1) IN GENERAL.—There is hereby imposed a

18 tax on the failure of an insurer to comply with the

19 requirements applicable to the insurer under part 2

20 of subtitle A of title I of the Affordable Health Care

21 Now Act of 1993.

22 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

23 apply to a failure by an insurer in a State if the Sec24 retary of Health and Human Services determines

25 that the State has in effect a regulatory enforcement
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1 mechanism that provides adequate sanctions with re2 spect to such a failure by such an insurer.

3 ‘‘(b) AMOUNT OF TAX.—

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

5 the amount of the tax imposed by subsection (a)

6 shall be $100 for each day during which such failure

7 persists for each individual to which such failure re8 lates. A rule similar to the rule of section

9 4980B(b)(3) shall apply for purposes of this section.

10 ‘‘(2) LIMITATION.—The amount of the tax im11 posed by subsection (a) for an insurer with respect

12 to a health insurance plan shall not exceed 25 per13 cent of the amounts received under the plan for cov14 erage during the period such failure persists.

15 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

16 section shall be paid by the insurer.

17 ‘‘(d) EXCEPTIONS.—

18 ‘‘(1) CORRECTIONS WITHIN 30 DAYS.—No tax

19 shall be imposed by subsection (a) by reason of any

20 failure if—

21 ‘‘(A) such failure was due to reasonable

22 cause and not to willful neglect, and

23 ‘‘(B) such failure is corrected within the

24 30-day period beginning on the earliest date the
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1 insurer knew, or exercising reasonable diligence

2 would have known, that such failure existed.

3 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

4 failure which is due to reasonable cause and not to

5 willful neglect, the Secretary may waive part or all

6 of the tax imposed by subsection (a) to the extent

7 that payment of such tax would be excessive relative

8 to the failure involved.

9 ‘‘(e) DEFINITIONS.—For purposes of this section, the

10 terms ‘health insurance plan’ and ‘insurer’ have the re11 spective meanings given such terms in section 1023 of the

12 Affordable Health Care Now Act of 1993.’’

13 (2) CLERICAL AMENDMENT.—The table of sec14 tions for chapter 43 of such Code is amended by

15 adding at the end thereof the following new items:

‘‘Sec. 4980C. Failure of insurer to comply with health insurance

standards.’’

16 SEC. 1022. EFFECTIVE DATES.

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

18 to plans years beginning after December 31, 1996.

19 (b) PART 2.—The requirements of part 2 with re20 spect to—

21 (1) group health plans and employers shall

22 apply to plans years beginning after December 31,

23 1996, and
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1 (2) insurers shall take effect on January 1,

2 1997.

3 SEC. 1023. DEFINITIONS AND SPECIAL RULES.

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

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

6 means, with respect to any individual, any person

7 who is—

8 (A) the spouse or surviving spouse of the

9 individual, or

10 (B) under regulations of the Secretary, a

11 child (including an adopted child) of such indi12 vidual and—

13 (i) under 19 years of age, or

14 (ii) under 25 years of age and a full15 time student.

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

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

18 employee who normally performs on a monthly basis

19 at least 30 hours of service per week for that em20 ployer.

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

22 individual’’ means, with respect to an eligible em23 ployee, such employee, and any dependent of such

24 employee.
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1 (4) EMPLOYER.—The term ‘‘employer’’ shall

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

3 the Employee Retirement Income Security Act of

4 1974.

5 (5) EXEMPTED MULTIPLE EMPLOYER HEALTH

6 PLAN.—The term ‘‘exempted multiple employer

7 health plan’’ means a multiple employer welfare ar8 rangement treated as an employee welfare benefit

9 plan by reason of an exemption under part 7 of sub10 title B of title I of the Employee Retirement Income

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

12 C of this title).

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

14 term ‘‘group health plan’’ means an employee wel15 fare benefit plan providing medical care (as defined

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

17 1986) to participants or beneficiaries directly or

18 through insurance, reimbursement, or otherwise, but

19 does not include any type of coverage excluded from

20 the definition of a health insurance plan under sec21 tion 1107(4)(B).

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

23 a modifying term or the context specifically indicates

24 otherwise, a group health plan (including any such

25 plan which is a multiemployer plan), an exempted
22

•S 1533 IS

1 multiple employer health plan, or an insured mul2 tiple employer health plan.

3 (7) HEALTH INSURANCE PLAN.—The term

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

5 term in section 1107(4).

6 (8) INSURED MULTIPLE EMPLOYER HEALTH

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

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

9 701(11) of Employee Retirement Income Security

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

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

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

13 (b) SPECIAL RULES.—

14 (1) GENERAL RULE.—Except as otherwise pro15 vided in this subtitle, for definitions of terms used

16 in this subtitle, see section 3 of the Employee Re17 tirement Income Security Act of 1974 (29 U.S.C.

18 1002).

19 (2) SECRETARY.—Except with respect to ref20 erences specifically to the Secretary of Labor, the

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

22 and Human Services.
23

•S 1533 IS

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

3 Business

4 SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER

5 MEDACCESS PLANS.

6 (a) REQUIREMENT.—

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

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

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

11 State shall make available to each small employer in

12 the State—

13 (A) a MedAccess standard plan (as defined

14 in section 1102(a)(2)),

15 (B) a MedAccess catastrophic plan (as de16 fined in section 1102(a)(2)), and

17 (C) a MedAccess medisave plan (as defined

18 in section 1102(a)(2)).

19 (2) SPECIAL RULE FOR HEALTH MAINTENANCE

20 ORGANIZATIONS.—The requirements of paragraphs

21 (1)(B) and (1)(C) shall not apply with respect to a

22 health insurance plan that—

23 (A) is a Federally qualified health mainte24 nance organization (as defined in section

25 1301(a) of the Public Health Service Act), or
24

•S 1533 IS

1 (B) is not such an organization but is rec2 ognized under State law as a health mainte3 nance organization or managed care organiza4 tion or a similar organization regulated under

5 State law for solvency.

6 (3) EXCEPTION IF STATE PROVIDES FOR GUAR7 ANTEED AVAILABILITY (RATHER THAN GUARANTEED

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

9 in a State if the State is providing—

10 (A) access to each small employer in the

11 State to a MedAccess standard plan, to a

12 MedAccess catastrophic plan, and to a

13 MedAccess medisave plan, and

14 (B) a risk allocation mechanism described

15 in subsection (c).

16 (b) GUARANTEED ISSUE OF MEDACCESS PLANS.—

17 Subject to subsection (c)—

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

19 each insurer that offers a MedAccess plan to a small

20 employer in a State—

21 (A) must accept every small employer in

22 the State that applies for coverage under the

23 plan; and

24 (B) must accept for enrollment under the

25 plan every eligible individual (as defined in
25

•S 1533 IS

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

2 timely basis (consistent with paragraph (3))

3 and may not place any restriction on the eligi4 bility of an individual to enroll so long as such

5 individual is an eligible individual.

6 (2) SPECIAL RULES FOR HEALTH MAINTE7 NANCE ORGANIZATIONS.—In the case of a plan of8 fered by a health maintenance organization, the plan

9 may—

10 (A) limit the employers that may apply for

11 coverage to those with eligible individuals resid12 ing in the service area of the plan;

13 (B) limit the individuals who may be en14 rolled under the plan to those who reside in the

15 service area of the plan; and

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

17 deny coverage to such employers if the plan

18 demonstrates that—

19 (i) it will not have the capacity to de20 liver services adequately to enrollees of any

21 additional groups because of its obligations

22 to existing group contract holders and en23 rollees, and

24 (ii) it is applying this subparagraph

25 uniformly to all employers without regard
26

•S 1533 IS

1 to the health status, claims experience, or

2 duration of coverage of those employers

3 and their employees.

4 In this paragraph, the term ‘‘health maintenance or5 ganization’’ includes an organization recognized

6 under State law as a health maintenance organiza7 tion or managed care organization or a similar orga8 nization regulated under State law for solvency.

9 (3) CLARIFICATION OF TIMELY ENROLL10 MENT.—

11 (A) GENERAL INITIAL ENROLLMENT RE12 QUIREMENT.—Except as provided in this para13 graph, a MedAccess plan may consider enroll14 ment of an eligible individual not to be timely

15 if the eligible employee or dependent fails to en16 roll in the plan during an initial enrollment pe17 riod, if such period is at least 30 days long.

18 (B) ENROLLMENT DUE TO LOSS OF PRE19 VIOUS EMPLOYER COVERAGE.—Enrollment in a

20 MedAccess plan is considered to be timely in

21 the case of an eligible individual who—

22 (i) was covered under another health

23 insurance plan or group health plan at the

24 time of the individual’s initial enrollment

25 period,
27

•S 1533 IS

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

3 health insurance plan or a group health

4 plan was the reason for declining enroll5 ment,

6 (iii) lost coverage under another

7 health insurance plan or group health plan

8 (as a result of the termination of the other

9 plan’s coverage, termination or reduction

10 of employment, or other reason), and

11 (iv) requests enrollment within 30

12 days after termination of such coverage.

13 (C) REQUIREMENT APPLIES DURING OPEN

14 ENROLLMENT PERIODS.—Each MedAccess plan

15 shall provide for at least one period (of not less

16 than 30 days) each year during which enroll17 ment under the plan shall be considered to be

18 timely.

19 (D) EXCEPTION FOR COURT ORDERS.—

20 Enrollment of a spouse or minor child of an

21 employee shall be considered to be timely if—

22 (i) a court has ordered that coverage

23 be provided for the spouse or child under

24 a covered employee’s group health plan,

25 and
28

•S 1533 IS

1 (ii) a request for enrollment is made

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

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

6 (i) IN GENERAL.—Enrollment of the

7 spouse (including a child of the spouse)

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

10 request for enrollment is made either—

11 (I) within 30 days of the date of

12 the marriage or of the date of the

13 birth or adoption of a child, if family

14 coverage is available as of such date,

15 or

16 (II) within 30 days of the date

17 family coverage is first made avail18 able.

19 (ii) COVERAGE.—If a plan makes

20 family coverage available and enrollment is

21 made under the plan on a timely basis

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

24 of the first month beginning after the date
29

•S 1533 IS

1 of the marriage or the date of birth or

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

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

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

5 have the meanings given such terms in section

6 1023(a).

7 (c) STATE OPTION OF GUARANTEED AVAILABILITY

8 THROUGH ALLOCATION OF RISK (RATHER THAN

9 THROUGH GUARANTEED ISSUE).—The requirements of

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

11 provided (in accordance with standards established under

12 this subtitle) a mechanism under which—

13 (1) each insurer offering a health insurance

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

17 among some or all such insurers, and

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

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

21 SEC. 1102. MEDACCESS PLAN DEFINED.

22 (a) MEDACCESS PLAN DEFINED.—In this subtitle:

23 (1) IN GENERAL.—The term ‘‘MedAccess plan’’

24 means a health insurance plan (whether a managed-
30

•S 1533 IS

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

2 the following requirements:

3 (A) The plan—

4 (i) is designed to provide standard

5 coverage (consistent with subsection (c))

6 with substantial cost-sharing,

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

10 (iii) is designed to provide medisave

11 coverage (consistent with subsection (e)).

12 (B) The plan includes only essential and

13 medically necessary services, including medical,

14 surgical, hospital, and preventive services; ex15 cept that no specific procedure or treatment, or

16 classes thereof, is required to be covered in such

17 a plan, by this Act or through regulations.

18 (C) The plan meets the applicable require19 ments of section 1101(b) (relating to guaran20 teed issue).

21 (D) The plan meets the consumer protec22 tion standards established under section

23 1103(a)(1)(B).

24 (2) MEDACCESS STANDARD, CATASTROPHIC,

25 AND MEDISAVE PLANS.—The terms ‘‘MedAccess
31

•S 1533 IS

1 standard plan’’, ‘‘MedAccess catastrophic plan’’,

2 ‘‘MedAccess medisave plan’’ mean a MedAccess plan

3 that provides for at least standard coverage (re4 ferred to in paragraph (1)(A)(i)), for only cata5 strophic coverage (referred to in paragraph

6 (1)(A)(ii)), or medisave coverage (referred to in

7 paragraph (1)(A)(iii)), respectively.

8 (b) SET OF RULES OF ACTUARIAL EQUIVALENCE.—

9 (1) INITIAL DETERMINATION.—The NAIC is

10 requested to submit to the Secretary, within 6

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

12 a set of rules which the NAIC determines is suffi13 cient for determining, in the case of any health in14 surance plan and for purposes of this section, the

15 actuarial value of the coverage offered by the plan.

16 (2) CERTIFICATION.—If the Secretary deter17 mines that the NAIC has submitted a set of rules

18 that comply with the requirements of paragraph (1),

19 the Secretary shall certify such set of rules for use

20 under this subtitle. If the Secretary determines that

21 such a set of rules has not been submitted or does

22 not comply with such requirements, the Secretary

23 shall promptly establish a set of rules that meets

24 such requirements.

25 (c) STANDARD COVERAGE.—
32

•S 1533 IS

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

2 health insurance plan is considered to provide stand3 ard coverage consistent with this subsection if the

4 benefits are determined, in accordance with the set

5 of actuarial equivalence rules certified under sub6 section (b), to have a value that is within 5 percent7 age points of the target actuarial value for standard

8 coverage established under paragraph (2).

9 (2) INITIAL DETERMINATION OF TARGET ACTU10 ARIAL VALUE FOR STANDARD COVERAGE.—

11 (A) INITIAL DETERMINATION.—The NAIC

12 is requested to submit to the Secretary, within

13 6 months after the date of the enactment of

14 this Act, a target actuarial value for standard

15 coverage equal to the average actuarial value of

16 a representative range of the different types of

17 health benefits provisions (which include cost18 sharing) typically offered as standard coverage

19 in the small employer health coverage market.

20 In determining the actuarial value, the plan

21 benefits considered should be sufficient to cover

22 only essential and medically necessary services,

23 including medical, surgical, hospital, and pre24 ventive services. However, no specific procedure

25 or treatment, or classes thereof, is required to
33

•S 1533 IS

1 be considered in such determination by this Act

2 or through regulations. The determination of

3 such value shall be based on a representative

4 distribution of the population of eligible employ5 ees offered such coverage and a single set of

6 standardized utilization and cost factors.

7 (B) CERTIFICATION.—If the Secretary de8 termines that the NAIC has submitted a target

9 actuarial value for standard coverage that com10 ply with the requirements of subparagraph (A),

11 the Secretary shall certify such value for use

12 under this subtitle. If the Secretary determines

13 that such a value has not been submitted or

14 does not comply with such requirements, the

15 Secretary shall promptly determine such a tar16 get actuarial value that meets such require17 ments.

18 (d) CATASTROPHIC COVERAGE.—

19 (1) IN GENERAL.—For purposes of subsection

20 (a)(1)(B), a health insurance plan is considered to

21 provide catastrophic coverage consistent with this

22 subsection if—

23 (A) benefits are available under the plan

24 for a year only to the extent that expenses for

25 covered services in a year exceed a deductible
34

•S 1533 IS

1 amount that is consistent with the requirement

2 for a catastrophic health plan under section

3 220(c)(2)(A) of the Internal Revenue Code of

4 1986, as added by section 2202, and

5 (B) the benefits are determined, in accord6 ance with the set of actuarial equivalence rules

7 certified under subsection (b), to have a value

8 that is within 5 percentage points of the target

9 actuarial value for catastrophic coverage estab10 lished under paragraph (2).

11 (2) INITIAL DETERMINATION OF TARGET ACTU12 ARIAL VALUE FOR CATASTROPHIC COVERAGE.—

13 (A) INITIAL DETERMINATION.—The NAIC

14 is requested to submit to the Secretary, within

15 6 months after the date of the enactment of

16 this Act, a target actuarial value for cata17 strophic coverage equal to the actuarial value

18 that would have been computed under sub19 section (c)(2)(A) if a deductible that represents

20 the midpoint of the range of deductibles per21 mitted consistent with subsections (b)(2) and

22 (c)(2)(A) of section 220 of the Internal Reve23 nue Code of 1986 were used in place of any de24 ductible that otherwise would be applicable.
35

•S 1533 IS

1 (B) CERTIFICATION.—If the Secretary de2 termines that the NAIC has submitted a target

3 actuarial value for catastrophic coverage that

4 comply with the requirements of subparagraph

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

6 use under this subtitle. If the Secretary deter7 mines that such a value has not been submitted

8 or does not comply with such requirements, the

9 Secretary shall promptly determine such a tar10 get actuarial value that meets such require11 ments.

12 (e) MEDISAVE COVERAGE.—

13 (1) IN GENERAL.—For purposes of subsection

14 (a)(1)(C), a health insurance plan is considered to

15 provide medisave coverage consistent with this sub16 section if such plan consists of—

17 (A) a catastrophic health plan (within the

18 meaning of section 220(c)(2) of the Internal

19 Revenue Code of 1986, as inserted by section

20 2202 of this Act), and

21 (B) a medical savings account described in

22 section 220(d)(1)(B) of such Code.

23 (f) SUBSEQUENT REVISIONS.—

24 (1) NAIC.—The NAIC may submit from time

25 to time to the Secretary revisions of the set of rules
36

•S 1533 IS

1 of actuarial equivalence and target actuarial values

2 previously established or determined under this sec3 tion if the NAIC determines such revision necessary

4 to take into account changes in the relevant types of

5 health benefits provisions, in deductible levels for

6 catastrophic coverage, or in demographic conditions

7 which form the basis for such set of rules or values.

8 The provisions of subsection (b)(2) shall apply to

9 such a revision in the same manner as they apply to

10 the initial determination of the set of rules.

11 (2) SECRETARY.—The Secretary may by regu12 lation revise such set or rules and values from time

13 to time if the Secretary determines such revision

14 necessary to take into account changes described in

15 paragraph (1).

16 SEC. 1103. ESTABLISHMENT OF OTHER MEDACCESS STAND17 ARDS.

18 (a) ESTABLISHMENT OF GENERAL STANDARDS.—

19 (1) ROLE OF NAIC.—The Secretary shall re20 quest the NAIC to develop, within 9 months after

21 the date of the enactment of this Act, model regula22 tions that specify standards with respect to each of

23 the following:
37

•S 1533 IS

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

2 1101(a), that insurers make available

3 MedAccess plans.

4 (ii) The requirements of guaranteed avail5 ability of MedAccess plans to small employers

6 under section 1101(b).

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

8 (relating to limits on premiums and miscellane9 ous consumer protections).

10 (ii) The requirement of section 1105 (re11 lating to limitation on annual premium in12 creases).

13 If the NAIC develops recommended regulations

14 specifying such standards within such period, the

15 Secretary shall review the standards. Such review

16 shall be completed within 60 days after the date the

17 regulations are developed. Unless the Secretary de18 termines within such period that the standards do

19 not meet the requirements, such standards shall

20 serve as the standards under this section, with such

21 amendments as the Secretary deems necessary.

22 (2) CONTINGENCY.—If the NAIC does not de23 velop such model regulations within such period or

24 the Secretary determines that such regulations do

25 not specify standards that meet the requirements de-
38

•S 1533 IS

1 scribed in paragraph (1), the Secretary shall specify,

2 within 15 months after the date of the enactment of

3 this Act, standards to carry out those requirements.

4 (3) EFFECTIVE DATE.—The MedAccess stand5 ards and consumer protection standards (as defined

6 in paragraph (5)) shall apply to MedAccess plans

7 and health insurance plans in a State on or after the

8 respective date the standards are implemented in the

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

10 (4) NONPREEMPTION OF STATE LAW.—A State

11 may implement standards for health insurance plans

12 made available to small employers that are more

13 stringent than the requirements under this part; ex14 cept that a State may not implement standards that

15 prevent the offering by an insurer of at least one

16 MedAccess standard plan, one MedAccess cata17 strophic plan, and one MedAccess medical plan.

18 (5) DEFINITIONS.—In this section:

19 (A) CONSUMER PROTECTION STAND20 ARDS.—The term ‘‘consumer protection stand21 ards’’ means the standards established under

22 paragraph (1)(B).

23 (B) MEDACCESS STANDARDS.—The term

24 ‘‘MedAccess standards’’ means the standards

25 established under paragraph (1)(A) (relating to
39

•S 1533 IS

1 the requirements of section 1101), and includes

2 the consumer protection standards insofar as

3 they relate to MedAccess plans.

4 (b) APPLICATION OF STANDARDS THROUGH

5 STATES.—

6 (1) APPLICATION OF MEDACCESS STAND7 ARDS.—

8 (A) IN GENERAL.—Each State shall sub9 mit to the Secretary, by the deadline specified

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

11 State is taking to implement and enforce the

12 consumer protection standards with respect to

13 insurers, and MedAccess plans offered, not later

14 than such deadline.

15 (B) DEADLINE FOR REPORT.—

16 (i) 1 YEAR AFTER STANDARDS ESTAB17 LISHED.—Subject to clause (ii), the dead18 line under this subparagraph is 1 year

19 after the date the MedAccess standards

20 are established under subsection (a).

21 (ii) EXCEPTION FOR LEGISLATION.—

22 In the case of a State which the Secretary

23 identifies, in consultation with the NAIC,

24 as—
40

•S 1533 IS

1 (I) requiring State legislation

2 (other than legislation appropriating

3 funds) in order for insurers and

4 MedAccess plans offered to meet the

5 MedAccess standards established

6 under subsection (a), but

7 (II) having a legislature which is

8 not scheduled to meet in 1994 in a

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

11 the date specified in this subparagraph is

12 the first day of the first calendar quarter

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

15 begins on or after January 1, 1996. For

16 purposes of the previous sentence, in the

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

18 session, each year of such session shall be

19 deemed to be a separate regular session of

20 the State legislature.

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

23 the deadline specified under paragraph (1) or finds

24 that the State has not implemented and provided

25 adequate enforcement of the MedAccess standards
41

•S 1533 IS

1 under such paragraph, the Secretary shall notify the

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

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

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

6 failure has not been corrected, the Secretary shall

7 provide for such mechanism for the implementation

8 and enforcement of such standards in the State as

9 the Secretary determines to be appropriate. Such

10 implementation and enforcement shall take effect

11 with respect to insurers, and MedAccess plans of12 fered or renewed, on or after 3 months after the

13 date of the Secretary’s finding under the previous

14 sentence, and until the date the Secretary finds that

15 such a failure has been corrected. In exercising au16 thority under this subparagraph, the Secretary shall

17 determine whether the use of a risk-allocation mech18 anism, described in section 1101(c), would be more

19 consistent with the small employer group health cov20 erage market in the State than the guaranteed avail21 ability provisions of section 1101(b).

22 (2) APPLICATION OF CONSUMER PROTECTION

23 STANDARDS.—

24 (A) IN GENERAL.—Each State shall sub25 mit to the Secretary, by the deadline specified
42

•S 1533 IS

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

2 State is taking to implement and enforce the

3 MedAccess standards with respect to insurers,

4 and health insurance plans (other than

5 MedAccess plans) offered, not later than such

6 deadline.

7 (B) DEADLINE FOR REPORT.—

8 (i) 1 YEAR AFTER STANDARDS ESTAB9 LISHED.—Subject to clause (ii), the dead10 line under this subparagraph is 1 year

11 after the date the consumer protection

12 standards are established under subsection

13 (a).

14 (ii) EXCEPTION FOR LEGISLATION.—

15 In the case of a State which the Secretary

16 identifies, in consultation with the NAIC,

17 as—

18 (I) requiring State legislation

19 (other than legislation appropriating

20 funds) in order for insurers and

21 health insurance plans offered to meet

22 the consumer protection standards es23 tablished under subsection (a), but

24 (II) having a legislature which is

25 not scheduled to meet in 1994 in a
43

•S 1533 IS

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

3 the date specified in this subparagraph is

4 the first day of the first calendar quarter

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

7 begins on or after January 1, 1996. For

8 purposes of the previous sentence, in the

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

10 session, each year of such session shall be

11 deemed to be a separate regular session of

12 the State legislature.

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

15 the deadline specified under paragraph (1) or finds

16 that the State has not implemented and provided

17 adequate enforcement of the consumer protection

18 standards under such paragraph, the Secretary shall

19 notify the State and provide the State a period of

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

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

24 Secretary shall provide for such mechanism for the

25 implementation and enforcement of such standards
44

•S 1533 IS

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

3 shall take effect with respect to insurers, and health

4 insurance plans (other than MedAccess plans) of5 fered or renewed, on or after 3 months after the

6 date of the Secretary’s finding under the previous

7 sentence, and until the date the Secretary finds that

8 such a failure has been corrected.

9 SEC. 1104. LIMITS ON PREMIUMS AND MISCELLANEOUS

10 CONSUMER PROTECTIONS.

11 (a) LIMITS ON PREMIUMS.—

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

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

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

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

18 the index rate for any other class of business.

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

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

25 definition of employers eligible for the class
45

•S 1533 IS

1 of business or otherwise eligible employees

2 and dependents who enroll on a timely

3 basis, based upon their claim experience or

4 health status,

5 (ii) the insurer does not involuntarily

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

8 of the class of business, and

9 (iii) the class of business is currently

10 available for purchase.

11 (2) LIMIT ON VARIATION OF PREMIUM RATES

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

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

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

18 health status, industry, occupation, or duration of

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

21 to such employers under the rating system for that

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

23 1.5 times the base premium rate for the class of

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

25 occurs in the first 3 years in which this section is
46

•S 1533 IS

1 in effect, and 1.35 times the base premium rate

2 thereafter.

3 (3) OBJECTIVE BASIS FOR DIFFERENCES IN

4 PREMIUMS FOR STANDARD AND CATASTROPHIC

5 MEDACCESS PLANS.—The difference between the

6 index rates for MedAccess catastrophic plans and

7 the index rates for MedAccess standard plans shall

8 be reasonable and shall reflect the difference in plan

9 design and shall not take into account differences

10 due to the nature of the groups assumed to select

11 particular health plans.

12 (4) LIMIT ON TRANSFER OF EMPLOYERS

13 AMONG CLASSES OF BUSINESS.—As a standard

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

15 involuntarily transfer a small employer into or out of

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

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

18 business unless such offer is made to transfer all

19 small employers in the class of business without re20 gard to demographic characteristics, claim experi21 ence, health status, industry, occupation, or duration

22 since issue.

23 (5) DEFINITIONS.—In this subsection:

24 (A) BASE PREMIUM RATE.—The term

25 ‘‘base premium rate’’ means, for each class of
47

•S 1533 IS

1 business for each rating period, the lowest pre2 mium rate charged or which could have been

3 charged under a rating system for that class of

4 business by the insurer to small employers with

5 similar demographic characteristics and other

6 similar objective characteristics (not relating to

7 claims experience, health status, industry, occu8 pation, or duration of coverage since issue) for

9 health insurance plans with the same or similar

10 coverage.

11 (B) CLASS OF BUSINESS.—The term

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

13 insurer, all (or a distinct group of) small em14 ployers as shown on the records of the insurer.

15 (C) RULES FOR ESTABLISHING CLASSES

16 OF BUSINESS.—For purposes of subparagraph

17 (B)—

18 (i) an insurer may establish, subject

19 to clause (ii), a distinct group of small em20 ployers on the basis that the applicable

21 health insurance plans either—

22 (I) are marketed and sold

23 through individuals and organizations

24 which are not participating in the

25 marketing or sale of other distinct
48

•S 1533 IS

1 groups of small employers for the in2 surer,

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

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

7 not less than 100 small employers and

8 that has been formed for purposes

9 other than obtaining health coverage;

10 (ii) an insurer may not establish more

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

14 expected to produce substantial variation

15 in health care costs; and

16 (iii) notwithstanding clauses (i) and

17 (ii), a State commissioner of insurance,

18 upon application and if authorized under

19 State law, may approve additional distinct

20 groups upon a finding that such approval

21 would enhance the efficiency and fairness

22 of the small employer marketplace.

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

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

25 arithmetic average of the applicable base pre-
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1 mium rate and the corresponding highest pre2 mium rate for the class.

3 (E) DEMOGRAPHIC CHARACTERISTICS.—

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

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

8 group size.

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

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

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

14 designs.

15 (c) ACTUARIAL CERTIFICATION.—Each insurer that

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

17 State shall file annually with the State commissioner of

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

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

21 the individual which includes a review of the appropriate

22 records and of the actuarial assumptions of the insurer

23 and methods used by the insurer in establishing premium

24 rates for applicable health insurance plans—
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1 (1) the insurer is in compliance with the appli2 cable provisions of this section, and

3 (2) the rating methods are actuarially sound.

4 Each such insurer shall retain a copy of such statement

5 for examination at its principal place of business.

6 (d) REGISTRATION AND REPORTING.—Each insurer

7 that issues any health insurance plan to a small employer

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

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

11 a plan.

12 SEC. 1105. LIMITATION ON ANNUAL PREMIUM INCREASES.

13 An insurer may not provide for an increase in the

14 premium charged a small employer for a health insurance

15 plan in a percentage that exceeds the percentage change

16 in the premium charged under the plan for a newly cov17 ered small employer within the same class of business rate

18 plus 15 percentage points.

19 SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCA20 TION OF RISK MECHANISMS FOR HIGH RISK

21 INDIVIDUALS IN MARKETPLACE FOR SMALL

22 BUSINESS.

23 (a) ESTABLISHMENT OF STANDARDS.—

24 (1) ROLE OF NAIC.—The Secretary shall re25 quest the NAIC to develop, within 9 months after
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•S 1533 IS

1 the date of the enactment of this Act, models for re2 insurance or allocation of risk mechanisms (each in

3 this section referred to as a ‘‘reinsurance or alloca4 tion of risk mechanism’’) for health insurance plans

5 made available to small employers and for whom an

6 insurer is at risk of incurring high costs under the

7 plan. If the NAIC develops such models within such

8 period, the Secretary shall review such models to de9 termine if they provide for an effective reinsurance

10 or allocation of risk mechanism. Such review shall be

11 completed within 30 days after the date the models

12 are developed. Unless the Secretary determines with13 in such period that such a model is not an effective

14 reinsurance or allocation of risk mechanism, such re15 maining models shall serve as the models under this

16 section, with such amendments as the Secretary

17 deems necessary.

18 (2) CONTINGENCY.—If the NAIC does not de19 velop such models within such period or the Sec20 retary determines that all such models do not pro21 vide for an effective reinsurance or allocation of risk

22 mechanism, the Secretary shall specify, within 15

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

24 models to carry out this section.
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1 (b) IMPLEMENTATION OF REINSURANCE OR ALLOCA2 TION OF RISK MECHANISMS.—

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

4 and maintain one or more reinsurance or allocation

5 of risk mechanisms that are consistent with a model

6 established under subsection (a) by not later than

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

8 State may establish and maintain such a mechanism

9 jointly with one or more other States.

10 (2) FEDERAL ROLE.—

11 (A) IN GENERAL.—If the Secretary deter12 mines that a State has failed to establish or

13 maintain a reinsurance or allocation of risk

14 mechanism in accordance with paragraph (1),

15 the Secretary shall establish and maintain such

16 a reinsurance or allocation of risk mechanism

17 meeting the requirements of this paragraph.

18 (B) REINSURANCE MECHANISM.—Unless

19 the Secretary determines under subparagraph

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

21 appropriate mechanism to use in a State under

22 this paragraph, the Secretary shall establish

23 and maintain for use under this section for

24 each State an appropriate reinsurance mecha25 nism.
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1 (C) ALLOCATION OF RISK MECHANISM.—If

2 the Secretary determines that, due to the na3 ture of the health coverage market in the State

4 (including a relatively small number of health

5 insurance plans offered or a relatively small

6 number of uninsurable small employers), an al7 location of risk mechanism would be a better

8 mechanism than a reinsurance mechanism, the

9 Secretary shall establish and maintain for use

10 under this section for a State an allocation of

11 risk mechanism under which uninsurable small

12 employers would be equitably assigned among

13 insurers offering health insurance plans to

14 small employers.

15 (D) FINANCING DEFICIT FOR REINSUR16 ANCE MECHANISMS.—

17 (i) IN GENERAL.—Chapter 43 of the

18 Internal Revenue Code of 1986 (relating to

19 qualified pension plans, etc.) is amended

20 by adding at the end thereof the following

21 new section:
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1 ‘‘SEC. 4980D. ADDITIONAL TAX TO FUND REINSURANCE IN

2 STATES UNDER FEDERAL REINSURANCE.

3 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

4 a tax on the providing of any health insurance plan which

5 covers any employee in a Federal reinsurance State.

6 ‘‘(b) AMOUNT OF TAX.—

7 ‘‘(1) IN GENERAL.—The tax imposed by sub8 section (a) shall be equal to the applicable percent9 age of the amount received by the insurer for provid10 ing such plan in such Federal reinsurance State.

11 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

12 of paragraph (1), the term ‘applicable percentage’

13 means, with respect to any State for any period, the

14 lowest percentage estimated by the Secretary as gen15 erating sufficient revenues to carry out section

16 1106(b)(2) of the Affordable Health Care Now Act

17 of 1993 in such State for such period.

18 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

19 section shall be paid by the insurer.

20 ‘‘(d) DEFINITIONS.—For purposes of this section—

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

22 meaning given such term in section 1107(6) of the

23 Affordable Health Care Now Act of 1993.

24 ‘‘(2) FEDERAL REINSURANCE STATE.—The

25 term ‘Federal reinsurance State’ means any State

26 with respect to which a determination is in effect
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1 under section 1106(b)(2) of the Affordable Health

2 Care Now Act of 1993 and for which the Secretary

3 of Health and Human Services has established and

4 is maintaining a reinsurance mechanism under sub5 paragraph (B) of such section for the State.’’

6 (ii) CLERICAL AMENDMENT.—The

7 table of sections for chapter 43 of such

8 Code is amended by adding at the end

9 thereof the following new item:

‘‘Sec. 4980D. Additional tax to fund reinsurance in States under

Federal reinsurance.’’

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

11 construed to prohibit reinsurance or allocation of risk ar12 rangements relating to health insurance plans, whether on

13 a State or multi-State basis, not required under this sec14 tion.

15 SEC. 1107. DEFINITIONS.

16 Except as otherwise specifically provided, for pur17 poses of this subtitle:

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

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

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

21 student and under 25 years of age.

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

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

24 employee who normally performs on a monthly basis
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•S 1533 IS

1 at least 30 hours of service per week for that em2 ployer.

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

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

5 the Employee Retirement Income Security Act of

6 1974.

7 (4) HEALTH INSURANCE PLAN.—

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

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

10 plan’’ means any hospital or medical service

11 policy or certificate, hospital or medical service

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

14 (B) EXCEPTION.—Such term does not in15 clude any of the following—

16 (i) coverage only for accident, dental,

17 vision, disability income, or long-term care

18 insurance, or any combination thereof,

19 (ii) medicare supplemental health in20 surance,

21 (iii) coverage issued as a supplement

22 to liability insurance,

23 (iv) worker’s compensation or similar

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

3 or any combination thereof.

4 (5) HEALTH MAINTENANCE ORGANIZATION.—

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

7 section 1103, a health insurance plan that meets

8 specified standards and that offers to provide health

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

10 a defined set of providers.

11 (6) INSURER.—The term ‘‘insurer’’ means a li12 censed insurance company, a prepaid hospital or

13 medical service plan, and a health maintenance orga14 nization offering such a plan to an employer, and in15 cludes a similar organization regulated under State

16 law for solvency.

17 (7) NAIC.—The term ‘‘NAIC’’ means the Na18 tional Association of Insurance Commissioners.

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

20 the Secretary of Health and Human Services.

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

23 employer that normally employs more than 1 but

24 less than 51 eligible employees on a typical business

25 day. For the purposes of this paragraph, the term
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1 ‘‘employee’’ includes a self-employed individual. For

2 purposes of determining if an employer is a small

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

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

5 of 1986 shall apply.

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

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

8 Virgin Islands, Guam, and American Samoa.

9 (11) STATE COMMISSIONER OF INSURANCE.—

10 The term ‘‘State commissioner of insurance’’ in11 cludes a State superintendent of insurance.

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

13 ANNUAL REPORTS ON EVALUATION OF

14 HEALTH CARE COVERAGE REFORM.

15 (a) IN GENERAL.—In order to carry out the respon16 sibilities of the Secretary under this subtitle, the Secretary

17 shall establish an Office of Private Health Care Coverage,

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

19 1109 referred to as the ‘‘Director’’) appointed by the Sec20 retary.

21 (b) ANNUAL REPORT.—

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

23 Congress an annual report on the implementation of

24 this subtitle.
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1 (2) INFORMATION TO BE INCLUDED.—Each an2 nual report shall include information concerning at

3 least the following:

4 (A) Implementation and enforcement of

5 the applicable MedAccess standards and

6 consumer protection standards under this sub7 title by the States and by the Secretary.

8 (B) An evaluation of the impact of the re9 forms under this subtitle on the availability of

10 affordable health coverage for small employers

11 that purchase group health coverage and for

12 their employees, and, in particular, the impact

13 of—

14 (i) guaranteed availability of health

15 coverage,

16 (ii) limitations of restrictions from

17 coverage of preexisting conditions,

18 (iii) requirement for continuity of cov19 erage,

20 (iv) risk-management mechanisms for

21 health coverage,

22 (v) limits on premium variations,

23 (vi) limits on annual premium in24 creases, and
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1 (vii) preemption of State benefit man2 dates.

3 In performing such evaluation, the Secretary

4 shall seek to discount the effect of the insur5 ance cycle on health insurance premiums.

6 (C) An assessment of the implications of

7 the reforms on adverse selection among health

8 insurance plans and the distribution of risk

9 among health insurance plans.

10 (c) ADVISORY COMMITTEE.—The Secretary shall pro11 vide for appointment of an advisory committee to advise

12 the Director concerning activities of the Office under this

13 subtitle. Membership on the committee shall consist of 17

14 individuals and shall include individuals from the general

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

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

17 shall include individuals who are experts in the fields of

18 the actuarial science, health economics, and health services

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

20 officio members of the committee, such representatives of

21 government agencies as the Secretary deems appropriate.

22 The chairperson of the committee shall not be a health

23 care provider or receive any direct or indirect compensa24 tion from an insurer, health insurance plan, or a health

25 care provider.
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1 SEC. 1109. RESEARCH AND DEMONSTRATION PROJECTS;

2 DEVELOPMENT OF A HEALTH RISK POOLING

3 MODEL.

4 (a) RESEARCH AND DEMONSTRATIONS.—The Direc5 tor is authorized, directly, by contract, and through grants

6 and cooperative agreements within the Department of

7 Health and Human Services and outside the Depart8 ment—

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

10 subtitle on the availability of affordable health cov11 erage for employees and dependents in the small em12 ployers group health care coverage market and other

13 topics described in section 1108(b), and

14 (2) to conduct demonstration projects relating

15 to such topics.

16 (b) DEVELOPMENT OF METHODS OF MEASURING

17 RELATIVE HEALTH RISK.—

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

19 methods for measuring, in terms of the expected

20 costs of providing benefits under health insurance

21 plans and, in particular, MedAccess plans, the rel22 ative health risks of eligible individuals.

23 (2) METHODOLOGY.—The methods—

24 (A) shall rely on diagnosis or other health25 related information that is predictive of individ26 ual health care needs,
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1 (B) may rely upon information routinely

2 collected in the process of making payments

3 under group health plans, and

4 (C) may provide for such random, sample

5 audits of records as may be necessary to verify

6 the accuracy of measurements.

7 (c) DEVELOPMENT OF A HEALTH RISK POOLING

8 MODEL.—

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

10 model, based on the methods of measuring risks

11 under subsection (b), for equitably distributing

12 health risks among insurers in the small employer

13 health care coverage market.

14 (2) REDISTRIBUTION OF RISK.—Under such

15 model, insurers with below average health risks

16 would be required to contribute to a common fund

17 for payment to insurers with above average health

18 risks, each in relation to the degree of their favor19 able or adverse risk selection.

20 (3) INCENTIVES.—Such model shall include in21 centives to encourage continuous coverage of eligible

22 individuals and small employers.

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

24 this section shall be developed in consultation with the
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1 NAIC and the advisory committee established under sec2 tion 1108(c).

3 (e) REPORT.—By not later than January 1, 1995,

4 the Director shall submit to Congress a report on the

5 methods and model developed under this section (as well

6 as on research and demonstration projects conducted

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

8 report such recommendations respecting the application of

9 the model to insurers (and, in particular, to MedAccess

10 plans) under this subtitle as the Director deems appro11 priate.

12 (f) AUTHORIZATION OF APPROPRIATIONS.—There

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

14 $5,000,000 in each of fiscal years 1994 through 1998.

15 Subtitle C—Preemption

16 PART 1—SCOPE OF STATE REGULATION

17 SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES

18 FOR GROUP HEALTH PLANS.

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

20 State or local law shall apply that requires the coverage

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

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

23 of health care.
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1 SEC. 1202. PROHIBITION OF PROVISIONS PROHIBITING EM2 PLOYER GROUPS FROM PURCHASING

3 HEALTH INSURANCE.

4 No provision of State or local law shall apply that

5 prohibits 2 or more employers from obtaining coverage

6 under an insured multiple employer health plan.

7 SEC. 1203. RESTRICTIONS ON MANAGED CARE.

8 (a) PREEMPTION OF STATE LAW PROVISIONS.—Sub9 ject to subsection (c), the following provisions of State law

10 are preempted and may not be enforced:

11 (1) RESTRICTIONS ON REIMBURSEMENT RATES

12 OR SELECTIVE CONTRACTING.—Any law that re13 stricts the ability of a group health plan to negotiate

14 reimbursement rates with providers or to contract

15 selectively with one provider or a limited number of

16 providers.

17 (2) RESTRICTIONS ON DIFFERENTIAL FINAN18 CIAL INCENTIVES.—Any law that limits the financial

19 incentives that a group health plan may require a

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

21 on a non-emergency basis.

22 (3) RESTRICTIONS ON UTILIZATION REVIEW

23 METHODS.—Any law that—

24 (A) prohibits utilization review of any or

25 all treatments and conditions,
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1 (B) requires that such review be made (i)

2 by a resident of the State in which the treat3 ment is to be offered or by an individual li4 censed in such State, or (ii) by a physician in

5 any particular specialty or with any board cer6 tified specialty of the same medical specialty as

7 the provider whose services are being reviewed,

8 (C) requires the use of specified standards

9 of health care practice in such reviews or re10 quires the disclosure of the specific criteria used

11 in such reviews,

12 (D) requires payments to providers for the

13 expenses of responding to utilization review re14 quests, or

15 (E) imposes liability for delays in perform16 ing such review.

17 Nothing in subparagraph (B) shall be construed as

18 prohibiting a State from (i) requiring a licensed phy19 sician or other health care professional be available

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

21 requiring that any decision in an appeal from such

22 a review be made by a licensed physician.

23 (b) GAO STUDY.—

24 (1) IN GENERAL.—The Comptroller General

25 shall conduct a study of the benefits and cost effec-
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1 tiveness of the use of managed care in the delivery

2 of health services.

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

4 the date of the enactment of this Act, the Comptrol5 ler General shall submit a report to Congress on the

6 study conducted under paragraph (1) and shall in7 clude in the report such recommendations (including

8 whether the provisions of subsection (a) should be

9 extended) as may be appropriate.

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

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

12 of this Act.

13 SEC. 1204. DEFINITIONS.

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

15 ‘‘employee’’, ‘‘employer’’, ‘‘group health plan’’, ‘‘health in16 surance plan’’, ‘‘insured multiple employer health plan’’,

17 and ‘‘State’’ have the meanings given such terms in sec18 tion 1023(a).
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1 PART 2—MULTIPLE EMPLOYER HEALTH

2 BENEFITS PROTECTIONS

3 SEC. 1211. LIMITED EXEMPTION UNDER PREEMPTION

4 RULES FOR MULTIPLE EMPLOYER PLANS

5 PROVIDING HEALTH BENEFITS SUBJECT TO

6 CERTAIN FEDERAL STANDARDS.

7 (a) IN GENERAL.—Subtitle B of title I of the Em8 ployee Retirement Income Security Act of 1974 is amend9 ed by adding at the end the following new part:

10 ‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

11 ‘‘SEC. 701. DEFINITIONS.

12 ‘‘For purposes of this part—

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

14 insurance company, insurance service, or insurance

15 organization, licensed to engage in the business of

16 insurance by a State.

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

18 ‘participating employer’ means, in connection with a

19 multiple employer welfare arrangement, any em20 ployer if any of its employees, or any of the depend21 ents of its employees, are or were covered under

22 such arrangement in connection with the employ23 ment of the employees.

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

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

26 a multiple employer welfare arrangement, a contract
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1 under which an insurer provides for payment with

2 respect to claims under the arrangement, relating to

3 participants or beneficiaries individually or other4 wise, in excess of an amount or amounts specified in

5 such contract.

6 ‘‘(4) QUALIFIED ACTUARY.—The term ‘quali7 fied actuary’ means an individual who is a member

8 of the American Academy of Actuaries or meets

9 such reasonable standards and qualifications as the

10 Secretary may provide by regulation.

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

12 connection with a multiple employer welfare arrange13 ment, the association or other entity which estab14 lishes or maintains the arrangement.

15 ‘‘(6) STATE LOCATION OF COVERED INDIVID16 UALS.—

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

18 welfare arrangement shall be treated as cover19 ing individuals located in a State only if the

20 minimum required number of individuals who

21 are covered under the arrangement are located

22 in such State, except that if the minimum re23 quired number of individuals are not located in

24 any State, such arrangement shall be treated as
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•S 1533 IS

1 covering individuals in any State in which any

2 covered individual is located.

3 ‘‘(B) MINIMUM REQUIRED NUMBER.—For

4 purposes of subparagraph (A), the minimum re5 quired number is the greater of—

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

7 individuals described in subparagraph (A),

8 or

9 ‘‘(ii) 50.

10 ‘‘(C) LOCATION OF INDIVIDUALS IN

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

12 individual shall be treated as located in a State

13 if such individual is employed in such State or

14 the address of such individual last known by

15 the arrangement is located in such State.

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

17 term ‘State insurance commissioner’ means the in18 surance commissioner (or similar official) of a State.

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

20 State’ means, in connection with a multiple employer

21 welfare arrangement, the State in which, according

22 to the application for an exemption under this part,

23 most individuals to be covered under the arrange24 ment are located, except that, in any case in which

25 information contained in the latest annual report of
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•S 1533 IS

1 the arrangement filed under this part indicates that

2 most individuals covered under the arrangement are

3 located in a different State, such term means such

4 different State.

5 ‘‘(9) FULLY INSURED ARRANGEMENT.—A mul6 tiple employer welfare arrangement shall be treated

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

8 maintenance organizations, similar organizations

9 regulated under State law for solvency, or any com10 bination thereof are liable under one or more insur11 ance policies or contracts for all benefits under the

12 arrangement (irrespective of any recourse they may

13 have against other parties).

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

15 The term ‘multiple employer health plan’ means a

16 multiple employer welfare arrangement treated as an

17 employee welfare benefit plan by reason of an

18 exemption under this part.

19 ‘‘(11) INSURED MULTIPLE EMPLOYER HEALTH

20 PLAN.—The term ‘insured multiple employer health

21 plan’ means a fully insured multiple employer wel22 fare arrangement under which benefits consist solely

23 of medical care described in section 607(1) (dis24 regarding such incidental benefits as the Secretary

25 shall specify by regulations).
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•S 1533 IS

1 ‘‘(12) PREPAID HEALTH CARE ARRANGE2 MENT.—The term ‘prepaid health care arrangement’

3 means a nonprofit entity which—

4 ‘‘(A) offers benefits consisting of medical

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

6 basis, and

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

8 group medical practice or similar group, by a

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

10 a hospital.

11 ‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PRO12 VIDING BENEFITS IN THE FORM OF MEDICAL

13 CARE RELIEVED OF CERTAIN RESTRICTIONS

14 ON PREEMPTION OF STATE LAW AND TREAT15 ED AS EMPLOYEE WELFARE BENEFIT PLANS.

16 ‘‘(a) IN GENERAL.—Subject to subsection (b), a mul17 tiple employer welfare arrangement which is not fully in18 sured and with respect to which there is in effect an ex19 emption granted by the Secretary under this part (or with

20 respect to which there is pending a complete application

21 for such an exemption and the Secretary determines that

22 provisional protection under this part is appropriate)—

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

24 and the preceding parts of this subtitle as an em25 ployee welfare benefit plan, irrespective of whether
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•S 1533 IS

1 such arrangement is an employee welfare benefit

2 plan, and

3 ‘‘(2) shall be exempt from section

4 514(b)(6)(A)(ii).

5 ‘‘(b) BENEFITS MUST CONSIST OF MEDICAL

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

7 welfare arrangement only if the benefits provided there8 under consist solely of medical care described in section

9 607(1) (disregarding such incidental benefits as the

10 Secretary shall specify by regulation).

11 ‘‘(c) RESTRICTION ON COMMENCEMENT OF NEW AR12 RANGEMENTS.—A multiple employer welfare arrangement

13 providing benefits which consist of medical care described

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

15 of January 1, 1994, may commence operations only if an

16 exemption granted to the arrangement under this part is

17 in effect (or there is pending with respect to the arrange18 ment a complete application for such an exemption and

19 the Secretary determines that provisional protection under

20 this part is appropriate).

21 ‘‘SEC. 703. EXEMPTION PROCEDURE.

22 ‘‘(a) IN GENERAL.—The Secretary shall grant an ex23 emption described in section 702(a) to a multiple employer

24 welfare arrangement if—
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•S 1533 IS

1 ‘‘(1) an application for such exemption with re2 spect to such arrangement, identified individually or

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

4 the Secretary in accordance with this part,

5 ‘‘(2) such application demonstrates compliance

6 with the requirements of section 704 with respect to

7 such arrangement, and

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

9 is—

10 ‘‘(A) administratively feasible,

11 ‘‘(B) not adverse to the interests of the in12 dividuals covered under the arrangement, and

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

14 of the individuals covered under the arrange15 ment.

16 ‘‘(b) NOTICE AND HEARING.—Before granting an ex17 emption under this section, the Secretary shall publish no18 tice in the Federal Register of the pendency of the exemp19 tion, shall require that adequate notice be given to inter20 ested persons, including the State insurance commissioner

21 of each State in which covered individuals under the ar22 rangement are, or are expected to be, located, and shall

23 afford interested persons opportunity to present views.

24 The Secretary may not grant an exemption under this sec25 tion unless the Secretary affords an opportunity for a
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•S 1533 IS

1 hearing and makes a determination on the record with re2 spect to the findings required under subsection (a)(3). The

3 Secretary shall, to the maximum extent practicable, make

4 a final determination with respect to any application filed

5 under this section in the case of a newly established ar6 rangement within 90 days after the date which the Sec7 retary determines is the date on which such application

8 is filed in complete form.

9 ‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.

10 ‘‘(a) APPLICATION FOR EXEMPTION.—

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

12 granted by the Secretary under this part only on the

13 basis of an application filed with the Secretary in

14 such form and manner as shall be prescribed in reg15 ulations of the Secretary. Any such application shall

16 be signed by the operating committee and the spon17 sor of the arrangement.

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

19 to the Secretary at the time of filing an application

20 under this section a filing fee in the amount of

21 $5,000, which shall be available, to the extent pro22 vided in appropriation Acts, to the Secretary for the

23 sole purpose of administering the exemption proce24 dures under this part.
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•S 1533 IS

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

2 filed under this section shall include, in a manner

3 and form prescribed in regulations of the Secretary,

4 at least the following information:

5 ‘‘(A) IDENTIFYING INFORMATION.—The

6 names and addresses of—

7 ‘‘(i) the sponsor, and

8 ‘‘(ii) the members of the operating

9 committee of the arrangement.

10 ‘‘(B) STATES IN WHICH ARRANGEMENT IN11 TENDS TO DO BUSINESS.—The States in which

12 individuals covered under the arrangement are

13 to be located and the number of such individ14 uals expected to be located in each such State.

15 ‘‘(C) BONDING REQUIREMENTS.—Evidence

16 provided by the operating committee that the

17 bonding requirements of section 412 will be met

18 as of the date of the application.

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

20 documents governing the arrangement (includ21 ing any bylaws and trust agreements), the sum22 mary plan description, and other material de23 scribing the benefits and coverage that will be

24 provided to individuals covered under the ar25 rangement.
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•S 1533 IS

1 ‘‘(E) AGREEMENTS WITH SERVICE PROVID2 ERS.—A copy of any agreements between the

3 arrangement and contract administrators and

4 other service providers.

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

6 forth information determined as of a date with7 in the 120-day period ending with the date of

8 the application, including the following:

9 ‘‘(i) RESERVES.—A statement, cer10 tified by the operating committee of the ar11 rangement, and a statement of actuarial

12 opinion, signed by a qualified actuary, that

13 all applicable requirements of section 707

14 are or will be met in accordance with regu15 lations which the Secretary shall prescribe.

16 ‘‘(ii) ADEQUACY OF CONTRIBUTION

17 RATES.—A statement of actuarial opinion,

18 signed by a qualified actuary, which sets

19 forth a description of the extent to which

20 contribution rates are adequate to provide

21 for the payment of all obligations and the

22 maintenance of required reserves under the

23 arrangement for the 12-month period be24 ginning with such date within such 120-

25 day period, taking into account the ex-
77

•S 1533 IS

1 pected coverage and experience of the ar2 rangement. If the contribution rates are

3 not fully adequate, the statement of actu4 arial opinion shall indicate the extent to

5 which the rates are inadequate and the

6 changes needed to ensure adequacy.

7 ‘‘(iii) CURRENT AND PROJECTED

8 VALUE OF ASSETS AND LIABILITIES.—A

9 statement of actuarial opinion signed by a

10 qualified actuary, which sets forth the cur11 rent value of the assets and liabilities accu12 mulated under the arrangement and a pro13 jection of the assets, liabilities, income,

14 and expenses of the arrangement for the

15 12-month period referred to in clause (ii).

16 The income statement shall identify sepa17 rately the arrangement’s administrative ex18 penses and claims.

19 ‘‘(iv) COSTS OF COVERAGE TO BE

20 CHARGED AND OTHER EXPENSES.—A

21 statement of the costs of coverage to be

22 charged, including an itemization of

23 amounts for administration, reserves, and

24 other expenses associated with the oper25 ation of the arrangement.
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•S 1533 IS

1 ‘‘(v) OTHER INFORMATION.—Any

2 other information which may be prescribed

3 in regulations of the Secretary as nec4 essary to carry out the purposes of this

5 part.

6 ‘‘(b) OTHER REQUIREMENTS.—A complete applica7 tion for an exemption under this part shall include infor8 mation which the Secretary determines to be complete and

9 accurate and sufficient to demonstrate that the following

10 requirements are met with respect to the arrangement:

11 ‘‘(1) SPONSOR.—

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

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

14 (together with its immediate predecessor, if

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

16 years before the date of the application, orga17 nized and maintained in good faith, with a con18 stitution and bylaws specifically stating its pur19 pose, as a trade association, an industry asso20 ciation, a professional association, or a chamber

21 of commerce or other business group, for sub22 stantial purposes other than that of obtaining

23 or providing medical care described in section

24 607(1), and the applicant demonstrates to the

25 satisfaction of the Secretary that the sponsor is
79

•S 1533 IS

1 established as a permanent entity which re2 ceives the active support of its members.

3 ‘‘(B) SPECIAL RULE FOR PREPAID HEALTH

4 CARE ARRANGEMENTS.—In the case of an ar5 rangement that is a prepaid health care ar6 rangement (as defined in section 701(12)), the

7 sponsor is the operating committee of the ar8 rangement.

9 ‘‘(2) OPERATING COMMITTEE.—

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

11 subparagraph (B), the arrangement is operated,

12 pursuant to a trust agreement, by an operating

13 committee which has complete fiscal control

14 over the arrangement and which is responsible

15 for all operations of the arrangement, and the

16 operating committee has in effect rules of oper17 ation and financial controls, based on a 3-year

18 plan of operation, adequate to carry out the

19 terms of the arrangement and to meet all re20 quirements of this title applicable to the ar21 rangement. The members of the committee are

22 individuals selected from individuals who are

23 the owners, officers, directors, or employees of

24 the participating employers or who are partners

25 in the participating employers and actively par-
80

•S 1533 IS

1 ticipate in the business. No such member is an

2 owner, officer, director, or employee of, or part3 ner in, a contract administrator or other service

4 provider to the arrangement, except that offi5 cers or employees of a sponsor which is a serv6 ice provider (other than a contract adminis7 trator) to the arrangement may be members of

8 the committee if they constitute not more than

9 25 percent of the membership of the committee

10 and they do not provide services to the arrange11 ment other than on behalf of the sponsor. The

12 committee has sole authority to approve appli13 cations for participation in the arrangement

14 and to contract with a service provider to ad15 minister the day-to-day affairs of the arrange16 ment.

17 ‘‘(B) SPECIAL RULE FOR PREPAID HEALTH

18 CARE ARRANGEMENTS.—In the case of an ar19 rangement that is a prepaid health care ar20 rangement (as defined in section 701(12)), the

21 operating committee is the board of the entity

22 that is the arrangement.

23 ‘‘(3) CONTENTS OF GOVERNING INSTRU24 MENTS.—The instruments governing the arrange25 ment include a written instrument, meeting the re-
81

•S 1533 IS

1 quirements of an instrument required under section

2 1212(a)(1), which—

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

4 the named fiduciary required for plans under

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

6 a plan administrator (referred to in section

7 3(16)(A)),

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

9 as plan sponsor (referred to in section

10 3(16)(B)),

11 ‘‘(C) incorporates the requirements of sec12 tion 707, and

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

14 granting of an exemption under this part—

15 ‘‘(i) all participating employers must

16 be members or affiliated members of the

17 sponsor, except that, in the case of a spon18 sor which is a professional association or

19 other individual-based association, if at

20 least one of the officers, directors, or em21 ployees of an employer, or at least one of

22 the individuals who are partners in an em23 ployer and who actively participates in the

24 business, is a member or affiliated member
82

•S 1533 IS

1 of the sponsor, participating employers

2 may also include such employer, and

3 ‘‘(ii) all individuals thereafter com4 mencing coverage under the arrangement

5 must be—

6 ‘‘(I) active or retired owners, offi7 cers, directors, or employees of, or

8 partners in, participating employers,

9 or

10 ‘‘(II) the beneficiaries of individ11 uals described in subclause (I).

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

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

14 adequate.

15 ‘‘(5) REGULATORY REQUIREMENTS.—Such

16 other requirements as the Secretary may prescribe

17 by regulation as necessary to carry out the purposes

18 of this part.

19 ‘‘(c) TREATMENT OF PARTY SEEKING EXEMPTION

20 WHERE PARTY IS SUBJECT TO DISQUALIFICATION.—

21 ‘‘(1) IN GENERAL.—In the case of any applica22 tion for an exemption under this part with respect

23 to a multiple employer welfare arrangement, if the

24 Secretary determines that the sponsor of the ar25 rangement or any other person associated with the
83

•S 1533 IS

1 arrangement is subject to disqualification under

2 paragraph (2), the Secretary may deny the exemp3 tion with respect to such arrangement.

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

5 to disqualification under this paragraph if such per6 son—

7 ‘‘(A) has intentionally made a material

8 misstatement in the application for exemption;

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

10 an exemption under this part through misrepre11 sentation or fraud;

12 ‘‘(C) has misappropriated or converted to

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

14 money held under a plan or any multiple

15 employer welfare arrangement;

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

17 if the arrangement were a plan) from serving in

18 any capacity in connection with the arrange19 ment under section 411,

20 ‘‘(E) has failed to appear without reason21 able cause or excuse in response to a subpoena,

22 examination, warrant, or any other order law23 fully issued by the Secretary compelling such

24 response,
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•S 1533 IS

1 ‘‘(F) has previously been subject to a de2 termination under this part resulting in the de3 nial, suspension, or revocation of an exemption

4 under this part on similar grounds, or

5 ‘‘(G) has otherwise violated any provision

6 of this title with respect to a matter which the

7 Secretary determines of sufficient consequence

8 to merit disqualification for purposes of this

9 part.

10 ‘‘(d) FRANCHISE NETWORKS.—In the case of a mul11 tiple employer welfare arrangement established and main12 tained by a franchisor for a franchise network consisting

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

14 sponsor referred to in the preceding provisions of this sec15 tion, such network shall be treated as an association re16 ferred to in such provisions, and each franchisee shall be

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

18 referred to in such provisions, if all participating employ19 ers are such franchisees and the requirements of sub20 section (b)(1) with respect to a sponsor are met with

21 respect to the network.

22 ‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE23 MENTS.—In applying the preceding provisions of this sec24 tion in the case of a multiple employer welfare arrange25 ment which would be described in section 3(40)(A)(i) but
85

•S 1533 IS

1 for the failure to meet any requirement of section

2 3(40)(C)—

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

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

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

6 ‘‘(2) the joint board of trustees shall be consid7 ered the operating committee of the arrangement.

8 ‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN9 GLE EMPLOYER REQUIREMENT.—

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

11 majority of the employees covered under a multiple

12 employer welfare arrangement are employees of a

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

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

15 covered under the arrangement are employed by em16 ployers who are related to such single employer, sub17 section (b)(3)(D) shall be disregarded.

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

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

20 among all such employers a common ownership in21 terest or a substantial commonality of business oper22 ations based on common suppliers or customers.
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•S 1533 IS

1 ‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO

2 EXEMPTED ARRANGEMENTS.

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

4 of any multiple employer welfare arrangement with respect

5 to which there is in effect an exemption granted under

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

10 The Secretary may require by regulation prior notice of

11 material changes with respect to specified matters which

12 might serve as the basis for suspension or revocation of

13 the exemption.

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

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

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

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

22 The annual report required under section 103 for any plan

23 year in the case of any such multiple employer welfare ar24 rangement shall also include information described in sec25 tion 704(a)(3)(F) with respect to the plan year and, not-
87

•S 1533 IS

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

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

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

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

6 effect an exemption granted under this part shall engage,

7 on behalf of all covered individuals, a qualified actuary

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

10 a qualified actuary under this part. The qualified actuary

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

13 whether the contents of the matters reported under this

14 part—

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

16 the experience of the arrangement and to reasonable

17 expectations, and

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

19 anticipated experience under the arrangement.

20 The opinion by the qualified actuary shall be made with

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

22 ‘‘(d) FILING NOTICE OF EXEMPTION WITH

23 STATES.—An exemption granted to a multiple employer

24 welfare arrangement under this part shall not be effective

25 unless written notice of such exemption is filed with the
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•S 1533 IS

1 State insurance commissioner of each State in which at

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

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

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

6 in which such individual is employed. The Secretary may

7 by regulation provide in specified cases for the application

8 of the preceding sentence with lesser percentages in lieu

9 of such 5 percent amount.

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

11 ARRANGEMENTS PROVIDING MEDICAL CARE.

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

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

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

17 plan description required of plans under part 1,

18 ‘‘(2) information describing the contribution

19 rates applicable to participating employers, and

20 ‘‘(3) a statement indicating—

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

22 fully insured,

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

24 respect to the arrangement an exemption grant25 ed under this part and, if there is in effect such
89

•S 1533 IS

1 an exemption, that the arrangement is (or is

2 treated as) an employee welfare benefit plan

3 under this title, and

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

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

7 shall be issued to employers within such reasonable period

8 of time before becoming participating employers as may

9 be prescribed in regulations of the Secretary.

10 ‘‘SEC. 707. MAINTENANCE OF RESERVES.

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

12 arrangement with respect to which there is or has been

13 in effect an exemption granted under this part and which

14 is not fully insured shall establish and maintain reserves,

15 consisting of—

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

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

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

20 respect to such claims, and

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

22 the qualified actuary, for any other obligations of

23 the arrangement.

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

25 The total of the reserves described in subsection (a)(2)
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•S 1533 IS

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

2 expected incurred claims and expenses for the plan year.

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

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

6 qualified actuary shall include a margin for error and

7 other fluctuations taking into account the specific

8 circumstances of such arrangement.

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

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

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

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

17 the levels of reserves otherwise required under subsections

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

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

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

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

25 of the reserves required under subsection (a), such secu-
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•S 1533 IS

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

4 basis.

5 ‘‘SEC. 708. CORRECTIVE ACTIONS.

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

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

10 requirements of section 707, irrespective of whether such

11 exemption continues in effect. The operating committee of

12 such arrangement shall determine semiannually whether

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

14 which the committee determines that there is reason to

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

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

20 of the next following month, make such recommendations

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

23 Not later than 10 days after receiving from the actuary

24 recommendations for corrective actions, the committee

25 shall notify the Secretary (in such form and manner as
92

•S 1533 IS

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

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

5 recommendations. The committee shall thereafter report

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

8 action taken by the committee until the requirements of

9 section 707 are met.

10 ‘‘(b) TERMINATION.—

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

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

14 there is or has been in effect an exemption granted

15 under this part determines that there is reason to

16 believe that the arrangement will terminate, the

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

20 manner which will result in timely payment of all

21 benefits for which the arrangement is obligated, and

22 shall submit such plan in writing to the Secretary.

23 Actions required under this paragraph shall be taken

24 in such form and manner as may be prescribed in

25 regulations of the Secretary.
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•S 1533 IS

1 ‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH

2 TERMINATION.—In any case in which—

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

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

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

11 compliance with such requirements, and

12 ‘‘(B) the Secretary determines that the

13 continuing failure to meet the requirements of

14 section 707 can be reasonably expected to result

15 in a continuing failure to pay benefits for which

16 the arrangement is obligated,

17 the operating committee of the arrangement shall, at

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

20 take such actions as the Secretary may require as

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

23 up in a manner which will result in timely payment

24 of all benefits for which the arrangement is

25 obligated.
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•S 1533 IS

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

2 EXEMPTION.

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

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

6 date on which the exemption is granted. An exemption

7 which has expired may be renewed by means of application

8 for an exemption in accordance with section 704.

9 ‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION

10 BY SECRETARY.—The Secretary may suspend or revoke

11 an exemption granted to a multiple employer welfare

12 arrangement under this part—

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

14 for the denial of an initial application for such an

15 exemption under section 704, or

16 ‘‘(2) if the Secretary finds that—

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

18 thereof, in the transaction of business while

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

22 financial irresponsibility,

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

24 thereof, is using such methods or practices in

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

26 further transaction of operations hazardous or
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•S 1533 IS

1 injurious to participating employers, or covered

2 individuals,

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

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

6 records, and files for examination in accordance

7 with this part, or

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

10 give information with respect to the affairs of

11 the arrangement or the sponsor or to perform

12 any other legal obligation relating to such an

13 examination when required by the Secretary in

14 accordance with this part.

15 Any such suspension or revocation under this subsection

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

18 is provided in accordance with section 710.

19 ‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION

20 UNDER COURT PROCEEDINGS.—An exemption granted to

21 a multiple employer welfare arrangement under this part

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

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

25 the suspension or revocation under this subsection shall
96

•S 1533 IS

1 be effective only upon notification of the Secretary of such

2 suspension or revocation.

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

5 welfare arrangement shall be notified of the expiration,

6 suspension, or revocation of an exemption granted to such

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

8 form and manner as shall be prescribed in regulations of

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

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

11 suspension or revocation.

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

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

15 exemptions granted under this part.

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

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

18 which involves the denial of an application by a multiple

19 employer welfare arrangement for an exemption under this

20 part or the suspension or revocation of such an exemption

21 shall contain a statement of the specific reason or reasons

22 supporting the Secretary’s action, including reference to

23 the specific terms of the exemption and the statutory pro24 vision or provisions relevant to the determination.
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•S 1533 IS

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

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

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

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

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

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

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

12 by certified or registered mail to the arrangement or party

13 that filed the appeal.

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

16 exemption granted under this part, the Secretary shall

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

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

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

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

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

25 requesting such hearing. Such notice shall set forth—
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•S 1533 IS

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

2 which shall be within the 10-day period commencing

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

4 and

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

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

7 county thereof (or parish or other similar political

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

10 The decision as affirmed or modified in such hearing shall

11 constitute the final decision of the Secretary, unless such

12 decision is reversed in such hearing.’’.

13 (b) CONFORMING AMENDMENT TO DEFINITION OF

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

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

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

18 welfare arrangement, or a multiple employer health plan

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

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

21 part 7.’’.

22 (c) ALTERNATIVE MEANS OF DISTRIBUTION OF

23 SUMMARY PLAN DESCRIPTIONS.—Section 110 of such

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

25 the following new subsection:
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•S 1533 IS

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

2 method for distributing summary plan descriptions in

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

4 case of multiple employer welfare arrangements providing

5 benefits consisting of medical care described in section

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

7 participating employers.’’.

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

9 in section 1 of the Employee Retirement Income Security

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

‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

‘‘Sec. 701. Definitions.

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

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

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

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

medical care.

‘‘Sec. 707. Maintenance of reserves.

‘‘Sec. 708. Corrective actions.

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

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

12 SEC. 1212. CLARIFICATION OF SCOPE OF PREEMPTION

13 RULES.

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

15 Employee Retirement Income Security Act of 1974 (29

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

17 only, in the case of an arrangement which provides medi18 cal care described in section 607(1) and with respect to
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•S 1533 IS

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

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

3 of this title’’.

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

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

6 end the following new subparagraph:

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

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

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

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

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

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

16 of any such plan, or any fiscal year of any such

17 other arrangement,’’ after ‘‘single employer’’, and by

18 inserting ‘‘during such year or at any time during

19 the preceding 1-year period’’ after ‘‘common con20 trol’’;

21 (2) in clause (iii), by striking ‘‘common control

22 shall not be based on an interest of less than 25 per23 cent’’ and inserting ‘‘an interest of greater than 25

24 percent may not be required as the minimum inter-
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1 est necessary for common control’’, and by striking

2 ‘‘and’’ at the end,

3 (3) by redesignating clause (iv) as clause (v),

4 and

5 (4) by inserting after clause (iii) the following

6 new clause:

7 ‘‘(iv) in determining, after the application of

8 clause (i), whether benefits are provided to employ9 ees of two or more employers, the arrangement shall

10 be treated as having only 1 participating employer

11 if, at the time the determination under clause (i) is

12 made, the number of individuals who are employees

13 and former employees of any one participating em14 ployer and who are covered under the arrangement

15 is greater than 95 percent of the aggregate number

16 of all individuals who are employees or former em17 ployees of participating employers and who are

18 covered under the arrangement.’’.

19 SEC. 1214. CLARIFICATION OF TREATMENT OF CERTAIN

20 COLLECTIVELY BARGAINED ARRANGE21 MENTS.

22 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em23 ployee Retirement Income Security Act of 1974 (29

24 U.S.C. 1002(40)(A)(i)) is amended to read as follows:
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1 ‘‘(i) under or pursuant to one or more collective

2 bargaining agreements,’’.

3 (b) LIMITATIONS.—Section 3(40) of such Act (29

4 U.S.C. 1002(40)) is amended by adding at the end the

5 following new subparagraphs:

6 ‘‘(C) Clause (i) of subparagraph (A) shall

7 apply only if—

8 ‘‘(i) the plan or other arrangement,

9 and the employee organization or any other

10 entity sponsoring the plan or other ar11 rangement, do not—

12 ‘‘(I) utilize the services of any li13 censed insurance agent or broker for

14 soliciting or enrolling employers or in15 dividuals as participating employers or

16 covered individuals under the plan or

17 other arrangement, or

18 ‘‘(II) pay a commission or any

19 other type of compensation to a per20 son that is related either to the vol21 ume or number of employers or indi22 viduals solicited or enrolled as partici23 pating employers or covered individ24 uals under the plan or other arrange25 ment, or to the dollar amount or size
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1 of the contributions made by partici2 pating employers or covered individ3 uals to the plan or other arrangement,

4 ‘‘(ii) not less than 85 percent of the

5 covered individuals under the plan or other

6 arrangement are individuals who—

7 ‘‘(I) are employed within a bar8 gaining unit covered by at least one of

9 the collective bargaining agreements

10 with a participating employer (or are

11 covered on the basis of an individual’s

12 employment in such a bargaining

13 unit), or

14 ‘‘(II) are present or former em15 ployees of the sponsoring employee or16 ganization, of an employer who is or

17 was a party to at least one of the col18 lective bargaining agreements, or of

19 the plan or other arrangement or a

20 related plan or arrangement (or are

21 covered on the basis of such present

22 or former employment),

23 ‘‘(iii) the plan or other arrangement

24 does not provide benefits to individuals

25 (other than individuals described in clause
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1 (ii)(II)) who work outside the standard

2 metropolitan statistical area in which the

3 sponsoring employee organization rep4 resents employees (or to individuals (other

5 than individuals described in clause

6 (ii)(II)) on the basis of such work by oth7 ers), except that in the case of a sponsor8 ing employee organization that represents

9 employees who work outside of any stand10 ard metropolitan statistical area, this

11 clause shall be applied by reference to the

12 State in which the sponsoring organization

13 represents employees,

14 ‘‘(iv) the employee organization or

15 other entity sponsoring the plan or other

16 arrangement certifies to the Secretary each

17 year, in a form and manner which shall be

18 prescribed in regulations of the Sec19 retary—

20 ‘‘(I) that the plan or other ar21 rangement meets the requirements of

22 clauses (i), (ii), and (iii), and

23 ‘‘(II) if, for any year, 10 percent

24 or more of the covered individuals

25 under the plan are individuals not de-
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1 scribed in subclause (I) or (II) of

2 clause (ii), the total number of cov3 ered individuals and the total number

4 of covered individuals not so de5 scribed.

6 ‘‘(D)(i) Clause (i) of subparagraph (A)

7 shall not apply to a plan or other arrangement

8 that is established or maintained pursuant to

9 one or more collective bargaining agreements

10 which the National Labor Relations Board de11 termines to have been negotiated or otherwise

12 agreed to in a manner or through conduct

13 which violates section 8(a)(2) of the National

14 Labor Relations Act (29 U.S.C. 158(a)(2)).

15 ‘‘(ii)(I) Whenever a State insurance com16 missioner has reason to believe that this sub17 paragraph is applicable to part or all of a plan

18 or other arrangement, the State insurance com19 missioner may file a petition with the National

20 Labor Relations Board for a determination

21 under clause (i), along with sworn written testi22 mony supporting the petition.

23 ‘‘(II) The Board shall give any such peti24 tion priority over all other petitions and cases,

25 other than other petitions under subclause (I)
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1 or cases given priority under section 10 of the

2 National Labor Relations Act (29 U.S.C. 160).

3 ‘‘(III) The Board shall determine, upon

4 the petition and any response, whether, on the

5 facts before it, the plan or other arrangement

6 was negotiated, created, or otherwise agreed to

7 in a manner or through conduct which violates

8 section 8(a)(2) of the National Labor Relations

9 Act (29 U.S.C. 158(a)(2)). Such determination

10 shall constitute a final determination for pur11 poses of this subparagraph and shall be binding

12 in all Federal or State actions with respect to

13 the status of the plan or other arrangement

14 under this subparagraph.

15 ‘‘(IV) A person aggrieved by the deter16 mination of the Board under subclause (III)

17 may obtain review of the determination in any

18 United States court of appeals in the circuit in

19 which the collective bargaining at issue oc20 curred. Commencement of proceedings under

21 this subclause shall not, unless specifically or22 dered by the court, operate as a stay of any

23 State administrative or judicial action or pro24 ceeding related to the status of the plan or

25 other arrangement, except that in no case may
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1 the court stay, before the completion of the re2 view, an order which prohibits the enrollment of

3 new individuals into coverage under a plan or

4 arrangement.’’.

5 SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGE6 MENTS.

7 (a) EMPLOYEE LEASING HEALTHCARE ARRANGE8 MENT DEFINED.—Section 3 of the Employee Retirement

9 Income Security Act of 1974 (29 U.S.C. 1002) is amended

10 by adding at the end the following new paragraph:

11 ‘‘(43) EMPLOYEE LEASING HEALTHCARE ARRANGE12 MENT.—

13 ‘‘(A) IN GENERAL.—Subject to subparagraph

14 (B), the term ‘employee leasing healthcare arrange15 ment’ means any labor leasing arrangement, staff

16 leasing arrangement, extended employee staffing or

17 supply arrangement, or other arrangement under

18 which—

19 ‘‘(i) one business or other entity (herein20 after in this paragraph referred to as the ‘les21 see’), under a lease or other arrangement en22 tered into with any other business or other en23 tity (hereinafter in this paragraph referred to

24 as the ‘lessor’), receives from the lessor the
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1 services of individuals to be performed under

2 such lease or other arrangement, and

3 ‘‘(ii) benefits consisting of medical care de4 scribed in section 607(1) are provided to such

5 individuals or such individuals and their de6 pendents as participants and beneficiaries.

7 ‘‘(B) EXCEPTION.—Such term does not include

8 an arrangement described in subparagraph (A) if,

9 under such arrangement, the lessor retains, both le10 gally and in fact, a complete right of direction and

11 control within the scope of employment over the in12 dividuals whose services are supplied under such

13 lease or other arrangement, and such individuals

14 perform a specified function for the lessee which is

15 separate and divisible from the primary business or

16 operations of the lessee.’’.

17 (b) TREATMENT OF EMPLOYEE LEASING

18 HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER

19 WELFARE ARRANGEMENTS.—Section 3(40) of such Act

20 (29 U.S.C. 1002(40)) (as amended by the preceding provi21 sions of this title) is further amended by adding at the

22 end the following new subparagraph:

23 ‘‘(E) The term ‘multiple employer welfare arrange24 ment’ includes any employee leasing healthcare arrange25 ment, except that such term does not include any employee
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•S 1533 IS

1 leasing healthcare arrangement which is a multiple em2 ployer health plan (as defined in section 701(10)).’’.

3 (c) SPECIAL RULES FOR EMPLOYEE LEASING

4 HEALTHCARE ARRANGEMENTS.—

5 (1) IN GENERAL.—Part 7 of subtitle B of title

6 I of such Act (as added by the preceding provisions

7 of this Act) is amended by adding at the end the fol8 lowing new section:

9 ‘‘SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING

10 HEALTHCARE ARRANGEMENTS.

11 ‘‘(a) IN GENERAL.—The requirements of paragraphs

12 (1), (2), and (3) of section 704(b) shall be treated as satis13 fied in the case of a multiple employer welfare arrange14 ment that is an employee leasing healthcare arrangement

15 if the application for exemption includes information

16 which the Secretary determines to be complete and accu17 rate and sufficient to demonstrate that the following

18 requirements are met with respect to the arrangement:

19 ‘‘(1) 3-YEAR TENURE.—The lessor has been in

20 operation for not less than 3 years.

21 ‘‘(2) SOLICITATION RESTRICTIONS.—Employee

22 leasing services provided under the arrangement are

23 not solicited, advertised, or marketed through li24 censed insurance agents or brokers acting in such

25 capacity.
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1 ‘‘(3) CREATION OF EMPLOYMENT RELATION2 SHIP.—

3 ‘‘(A) DISCLOSURE STATEMENT.—Written

4 notice is provided to each applicant for employ5 ment subject to coverage under the arrange6 ment, at the time of application for employment

7 and before commencing coverage under the ar8 rangement, stating that the employer is the les9 sor under the arrangement.

10 ‘‘(B) INFORMED CONSENT.—Each such

11 applicant signs a written statement consenting

12 to the employment relationship with the lessor.

13 ‘‘(C) INFORMED RECRUITMENT OF LES14 SEE’S EMPLOYEES.—In any case in which the

15 lessor offers employment to an employee of a

16 lessee under the arrangement, the lessor in17 forms each employee in writing that his or her

18 acceptance of employment with the lessor is vol19 untary and that refusal of such offer will not be

20 deemed to be resignation from or abandonment

21 of current employment.

22 ‘‘(4) REQUISITE EMPLOYER-EMPLOYEE RELA23 TIONSHIP UNDER ARRANGEMENT.—Under the em24 ployer-employee relationship with the employees of

25 the lessor—
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1 ‘‘(A) the lessor retains the ultimate author2 ity to hire, terminate, and reassign such em3 ployees,

4 ‘‘(B) the lessor is responsible for the pay5 ment of wages, payroll-related taxes, and em6 ployee benefits, without regard to payment by

7 the lessee to the lessor for its services,

8 ‘‘(C) the lessor maintains the right of di9 rection and control over its employees, except to

10 the extent that the lessee is responsible for su11 pervision of the work performed consistent with

12 the lessee’s responsibility for its product or

13 service, and

14 ‘‘(D) in accordance with section 301(a) of

15 the Labor Management Relations Act, 1947 (29

16 U.S.C. 185(a)), the lessor retains in the ab17 sence of an applicable collective bargaining

18 agreement, the right to enter into arbitration

19 and to decide employee grievances, and

20 ‘‘(E) no owner, officer, or director of, or

21 partner in, a lessee is an employee of the lessor,

22 and not more than 10 percent of the individuals

23 covered under the arrangement consist of own24 ers, officers, or directors of, or partners in,

25 such a lessee (or any combination thereof).
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1 ‘‘(b) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) LESSOR.—The term ‘lessor’ means the

3 business or other entity from which services of indi4 viduals are obtained under an employee leasing

5 healthcare arrangement.

6 ‘‘(2) LESSEE.—The term ‘lessee’ means a busi7 ness or other entity which receives the services of in8 dividuals provided under an employee leasing

9 healthcare arrangement.’’.

10 (2) CLERICAL AMENDMENT.—The table of con11 tents in section 1 of such Act (as amended by the

12 preceding provisions of this title) is further amended

13 by inserting after the item relating to section 710

14 the following new item:

‘‘Sec. 711. Employee leasing healthcare arrangements.’’.

15 SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MUL16 TIPLE EMPLOYER WELFARE ARRANGEMENTS

17 AND EMPLOYEE LEASING HEALTHCARE AR18 RANGEMENTS.

19 (a) ENFORCEMENT OF FILING REQUIREMENTS.—

20 Section 502 of the Employee Retirement Income Security

21 Act of 1974 (29 U.S.C. 1132) is amended—

22 (1) in subsection (a)(6), by striking ‘‘subsection

23 (c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or

24 (4) of subsection (c) or subsection (i) or (l)’’; and
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1 (2) by adding at the end of subsection (c) the

2 following new paragraph:

3 ‘‘(4) The Secretary may assess a civil penalty against

4 any person of up to $1,000 a day from the date of such

5 person’s failure or refusal to file the information required

6 to be filed with the Secretary under section 101(e).’’.

7 (b) ACTIONS BY STATES IN FEDERAL COURT.—Sec8 tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—

9 (1) in paragraph (5), by striking ‘‘or’’ at the

10 end;

11 (2) in paragraph (6), by striking the period and

12 inserting ‘‘, or’’; and

13 (3) by adding at the end the following:

14 ‘‘(7) by a State official having authority under

15 the law of such State to enforce the laws of such

16 State regulating insurance, to enjoin any act or

17 practice which violates any provision of part 7 which

18 such State has the power to enforce under part 7.’’.

19 (c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of such Act (29

21 U.S.C. 1131) is amended—

22 (1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and

23 (2) by adding at the end the following new sub24 section:
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1 ‘‘(b) Any person who, either willfully or with willful

2 blindness, falsely represents, to any employee, any employ3 ee’s beneficiary, any employer, the Secretary, or any State,

4 an arrangement established or maintained for the purpose

5 of offering or providing any benefit described in section

6 3(1) to employees or their beneficiaries as being a multiple

7 employer welfare arrangement granted an exemption

8 under part 7, as being an employee leasing healthcare ar9 rangement under such an exemption, or as having been

10 established or maintained under or pursuant to a collective

11 bargaining agreement shall, upon conviction, be impris12 oned not more than five years, be fined under title 18,

13 United States Code, or both.’’.

14 (d) CEASE ACTIVITIES ORDERS.—Section 502 of

15 such Act (29 U.S.C. 1132) is amended by adding at the

16 end the following new subsection:

17 ‘‘(m)(1) Subject to paragraph (2), upon application

18 by the Secretary showing the operation, promotion, or

19 marketing of a multiple employer welfare arrangement

20 providing benefits consisting of medical care described in

21 section 607(1) that—

22 ‘‘(A) is not licensed, registered, or otherwise ap23 proved under the insurance laws of the States in

24 which the arrangement offers or provides benefits, or
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1 ‘‘(B) is not operating in accordance with the

2 terms of an exemption granted by the Secretary

3 under part 7,

4 a district court of the United States shall enter an order

5 requiring that the arrangement cease activities.

6 ‘‘(2) Paragraph (1) shall not apply in the case of a

7 multiple employer welfare arrangement if the arrangement

8 shows that it—

9 ‘‘(A) is fully insured, within the meaning of

10 section 701(9),

11 ‘‘(B) is licensed, registered, or otherwise ap12 proved in each State in which it offers or provides

13 benefits, except to the extent that such State does

14 not require licensing, registration, or approval of

15 fully insured multiple employer welfare arrange16 ments, and

17 ‘‘(C) with respect to each such State, is operat18 ing in accordance with applicable State insurance

19 laws that are not superseded under section 514.

20 ‘‘(3) The court may grant such additional equitable

21 or remedial relief, including any relief available under this

22 title, as it deems necessary to protect the interests of the

23 public and of persons having claims for benefits against

24 the arrangement.’’.
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1 (e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

2 Section 503 of such Act (29 U.S.C. 1133) is amended by

3 adding at the end (after and below paragraph (2)) the fol4 lowing new sentence: ‘‘The terms of each multiple em5 ployer welfare arrangement to which this section applies

6 and which provides benefits consisting of medical care de7 scribed in section 607(1) shall require the operating com8 mittee or the named fiduciary (as applicable) to ensure

9 that the requirements of this section are met in connection

10 with claims filed under the arrangement.’’.

11 SEC. 1217. FILING REQUIREMENTS FOR HEALTH BENEFIT

12 MULTIPLE EMPLOYER WELFARE ARRANGE13 MENTS.

14 Section 101 of the Employee Retirement Income Se15 curity Act of 1974 (29 U.S.C. 1021) is amended—

16 (1) by redesignating subsection (e) as sub17 section (f); and

18 (2) by inserting after subsection (d) the follow19 ing new subsection:

20 ‘‘(e)(1) Each multiple employer welfare arrangement

21 shall file with the Secretary a registration statement de22 scribed in paragraph (2) within 60 days before commenc23 ing operations (in the case of an arrangement commencing

24 operations on or after January 1, 1994) and no later than

25 February 15 of each year (in the case of an arrangement
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1 in operation since the beginning of such year), unless, as

2 of the date by which such filing otherwise must be made,

3 such arrangement provides no benefits consisting of medi4 cal care described in section 607(1).

5 ‘‘(2) Each registration statement—

6 ‘‘(A) shall be filed in such form, and contain

7 such information concerning the multiple employer

8 welfare arrangement and any persons involved in its

9 operation (including whether the arrangement is

10 fully insured), as shall be provided in regulations

11 which shall be prescribed by the Secretary, and

12 ‘‘(B) if the arrangement is not fully insured,

13 shall contain a certification that copies of such reg14 istration statement have been transmitted by cer15 tified mail to—

16 ‘‘(i) in the case of an arrangement with re17 spect to which an exemption under part 7 is in

18 effect, the State insurance commissioner of the

19 domicile State of such arrangement, or

20 ‘‘(ii) in the case of an arrangement which

21 is not so exempt, the State insurance commis22 sioner of each State in which the arrangement

23 is located.

24 ‘‘(3) The person or persons responsible for filing the

25 annual registration statement are—
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•S 1533 IS

1 ‘‘(A) the trustee or trustees so designated by

2 the terms of the instrument under which the mul3 tiple employer welfare arrangement is established or

4 maintained, or

5 ‘‘(B) in the case of a multiple employer welfare

6 arrangement for which the trustee or trustees can7 not be identified, or upon the failure of the trustee

8 or trustees of an arrangement to file, the person or

9 persons actually responsible for the acquisition, dis10 position, control, or management of the cash or

11 property of the arrangement, irrespective of whether

12 such acquisition, disposition, control, or management

13 is exercised directly by such person or persons or

14 through an agent designated by such person or

15 persons.

16 ‘‘(4) Any agreement entered into under section

17 506(c) with a State as the primary domicile State with

18 respect to any multiple employer welfare arrangement

19 shall provide for simultaneous filings of reports required

20 under this subsection with the Secretary and with the

21 State insurance commissioner of such State.’’.
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1 SEC. 1218. COOPERATION BETWEEN FEDERAL AND STATE

2 AUTHORITIES.

3 Section 506 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

5 at the end the following new subsection:

6 ‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE

7 EMPLOYER WELFARE ARRANGEMENTS.—

8 ‘‘(1) STATE ENFORCEMENT.—

9 ‘‘(A) AGREEMENTS WITH STATES.—A

10 State may enter into an agreement with the

11 Secretary for delegation to the State of some or

12 all of the Secretary’s authority under sections

13 502 and 504 to enforce the provisions of this

14 title applicable to multiple employer welfare ar15 rangements with respect to which an exemption

16 under part 7 is or has been in effect. The Sec17 retary shall enter into the agreement if the Sec18 retary determines that the delegation provided

19 for therein would not result in a lower level or

20 quality of enforcement of the provisions of this

21 title.

22 ‘‘(B) DELEGATIONS.—Any department,

23 agency, or instrumentality of a State to which

24 authority is delegated pursuant to an agree25 ment entered into under this paragraph may, if

26 authorized under State law and to the extent
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1 consistent with such agreement, exercise the

2 powers of the Secretary under this title which

3 relate to such authority.

4 ‘‘(C) CONCURRENT AUTHORITY OF THE

5 SECRETARY.—If the Secretary delegates author6 ity to a State in an agreement entered into

7 under subparagraph (A), the Secretary may

8 continue to exercise such authority concurrently

9 with the State.

10 ‘‘(D) RECOGNITION OF PRIMARY DOMICILE

11 STATE.—In entering into any agreement with a

12 State under subparagraph (A), the Secretary

13 shall ensure that, as a result of such agreement

14 and all other agreements entered into under

15 subparagraph (A), only one State will be recog16 nized, with respect to any particular multiple

17 employer welfare arrangement, as the primary

18 domicile State to which authority has been dele19 gated pursuant to such agreements.

20 ‘‘(2) ASSISTANCE TO STATES.—The Secretary

21 shall—

22 ‘‘(A) provide enforcement assistance to the

23 States with respect to multiple employer welfare

24 arrangements, including, but not limited to, co25 ordinating Federal and State efforts through
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1 the establishment of cooperative agreements

2 with appropriate State agencies under which

3 the Pension and Welfare Benefits Administra4 tion keeps the States informed of the status of

5 its cases and makes available to the States in6 formation obtained by it,

7 ‘‘(B) provide continuing technical assist8 ance to the States with respect to issues involv9 ing multiple employer welfare arrangements

10 and this Act,

11 ‘‘(C) assist the States in obtaining from

12 the Office of Regulations and Interpretations

13 timely and complete responses to requests for

14 advisory opinions on issues described in sub15 paragraph (B), and

16 ‘‘(D) distribute copies of all advisory opin17 ions described in subparagraph (C) to the State

18 insurance commissioner of each State.’’.

19 SEC. 1219. EFFECTIVE DATE; TRANSITIONAL RULES.

20 (a) EFFECTIVE DATE.—The amendments made by

21 this part shall take effect January 1, 1994, except that

22 the Secretary of Labor may issue regulations before such

23 date under such amendments. The Secretary shall issue

24 all regulations necessary to carry out the amendments

25 made by this title before the effective date thereof.
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1 (b) TRANSITIONAL RULES.—If the sponsor of a mul2 tiple employer welfare arrangement which, as of January

3 1, 1994, provides benefits consisting of medical care de4 scribed in section 607(1) of the Employee Retirement In5 come Security Act of 1974 (29 U.S.C. 1167(1)) files with

6 the Secretary of Labor an application for an exemption

7 under part 7 of subtitle B of title I of such Act within

8 180 days after such date and the Secretary has not, as

9 of 90 days after receipt of such application, found such

10 application to be materially deficient, section 514(b)(6)(A)

11 of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply

12 with respect to such arrangement during the 18-month pe13 riod following such date. If the Secretary determines, at

14 any time after the date of enactment of this Act, that any

15 such exclusion from coverage under the provisions of such

16 section 514(b)(6)(A) of such Act of a multiple employer

17 welfare arrangement would be detrimental to the interests

18 of individuals covered under such arrangement, such ex19 clusion shall cease as of the date of the determination.

20 Any determination made by the Secretary under this sub21 section shall be in the Secretary’s sole discretion.
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1 PART 3—ENCOURAGEMENT OF MULTIPLE EM2 PLOYER ARRANGEMENTS PROVIDING BASIC

3 HEALTH BENEFITS

4 SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR

5 GEOGRAPHIC LOCATION REQUIREMENT FOR

6 TAX EXEMPT TRUST STATUS.

7 (a) IN GENERAL.—Paragraph (9) of section 501(c)

8 of the Internal Revenue Code of 1986 (relating to exempt

9 organizations) is amended—

10 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

11 (2) by adding at the end the following:

12 ‘‘(B) Any determination of whether a multiple

13 employer health plan (as defined in section 701(10)

14 of the Employee Retirement Income Security Act of

15 1974) or an insured multiple employer health plan

16 (as defined in section 701(11) of such Act) is a vol17 untary employees’ beneficiary association meeting

18 the requirements of this paragraph shall be made

19 without regard to any determination of commonality

20 of interest or geographic location if—

21 ‘‘(i) such plan provides at least standard

22 coverage (consistent with section 102(c) of the

23 Affordable Health Care Now Act of 1993), and

24 ‘‘(ii) in the case of an insured multiple em25 ployer health plan, it meets the requirements

26 enforcible under section 514(b)(6)(B)(i) of the
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1 Employee Retirement Income Security Act of

2 1974 to the extent not preempted by section

3 1202 of the Affordable Health Care Now Act of

4 1993.’’.

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

6 subsection (a) shall apply with respect to determinations

7 made on or after January 1, 1994.

8 PART 4—SIMPLIFYING FILING OF REPORTS FOR

9 EMPLOYERS COVERED UNDER INSURED

10 MULTIPLE EMPLOYER HEALTH PLANS

11 SEC. 1231. SINGLE ANNUAL FILING FOR ALL EMPLOYERS

12 COVERED UNDER AN INSURED MULTIPLE

13 EMPLOYER HEALTH PLAN.

14 (a) IN GENERAL.—Section 110 of the Employee Re15 tirement Income Security Act of 1974 (29 U.S.C. 1030),

16 as amended by section 1211(c) of this subtitle, is amended

17 by adding at the end the following new subsection:

18 ‘‘(d) The Secretary shall prescribe by regulation or

19 otherwise an alternative method providing for the filing

20 of a single annual report (as referred to in section

21 104(a)(1)(A)) with respect to all employers who are cov22 ered under the same insured multiple employer health plan

23 (as defined in section 701(11)).’’

24 (b) EFFECTIVE DATE.—The amendment made by

25 subsection (a) shall take effect on the date of the enact-
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1 ment of this Act. The Secretary of Labor shall prescribe

2 the alternative method referred to in section 110(d) of the

3 Employee Retirement Income Security Act of 1974, as

4 added by such amendment, within 90 days after the date

5 of the enactment of this Act.

6 PART 5—COMPLIANCE WITH COVERAGE OPTION

7 REQUIREMENTS

8 SEC. 1241. COMPLIANCE WITH COVERAGE REQUIREMENTS

9 THROUGH MULTIPLE EMPLOYER HEALTH AR10 RANGEMENTS.

11 (a) COMPLIANCE WITH APPLICABLE REQUIREMENTS

12 THROUGH MULTIEMPLOYER PLANS.—In any case in

13 which an eligible employee is, for any plan year, a partici14 pant in a group health plan which is a multiemployer plan,

15 the requirements of section 1001(a) shall be deemed to

16 be met with respect to such employee for such plan year

17 if the employer requirements of subsection (c) are met

18 with respect to the eligible employee, irrespective of wheth19 er, or to what extent, the employer makes employer con20 tributions on behalf of the eligible employee.

21 (b) COMPLIANCE WITH APPLICABLE REQUIREMENTS

22 THROUGH OTHER MULTIPLE EMPLOYER HEALTH AR23 RANGEMENTS.—

24 (1) IN GENERAL.—In any case in which an em25 ployer is, for any plan year, a participating employer
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1 (as defined in paragraph (3)) in an exempted mul2 tiple employer health plan or an insured multiple

3 employer health plan, the requirements of section

4 1001(a) shall be deemed to be met (and the ERISA

5 requirements of paragraph (2) shall be deemed to be

6 met by the employer) with respect to an eligible em7 ployee of the employer if—

8 (A) the employer requirements of sub9 section (c) are met with respect to the eligible

10 employee, and

11 (B) the applicable ERISA requirements of

12 paragraph (2) are met by the plan with respect

13 to the plan,

14 irrespective of whether, or to what extent, the em15 ployer makes employer contributions on behalf of the

16 eligible employee.

17 (2) APPLICABLE ERISA REQUIREMENTS.—The

18 applicable ERISA requirements of this paragraph

19 are the requirements of—

20 (A) part 1 of subtitle B of title I of the

21 Employee Retirement Income Security Act of

22 1974 (relating to reporting and disclosure),

23 (B) section 503 of such Act (relating to

24 claims procedure), and
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1 (C) part 6 of subtitle B of such title I (re2 lating to group health plans),

3 to the extent that such requirements relate to em4 ployers as plan sponsors or plan administrators.

5 (3) PARTICIPATING EMPLOYER.—In this sub6 section, the term ‘‘participating employer’’ means, in

7 connection with an exempted multiple employer

8 health plan or an insured multiple employer health

9 plan, any employer if any of its employees, or any

10 of the dependents of its employees, are or were cov11 ered under such plan in connection with the employ12 ment of the employees.

13 (c) EMPLOYER REQUIREMENTS.—The employer re14 quirements of this subsection are met under a plan with

15 respect to an eligible employee if—

16 (1) the employee is eligible under the plan to

17 elect coverage on an annual basis and is provided a

18 reasonable opportunity to make the election in such

19 form and manner and at such times as are provided

20 by the plan,

21 (2) subject to section 1001(c), such coverage in22 cludes at least the standard coverage (consistent

23 with section 1102(c)),

24 (3) the employer facilitates collection of any

25 employee contributions under the plan and permits
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1 the employee to elect to have employee contributions

2 under the plan collected through payroll deduction,

3 and

4 (4) in the case of a plan to which part 1 of sub5 title B of title I of the Employee Retirement Income

6 Security Act of 1974 does not otherwise apply, the

7 employer provides to the employee a summary plan

8 description described in section 102(a)(1) of such

9 Act in the form and manner and at such times as

10 are required under such part 1 with respect to em11 ployee welfare benefit plans.

12 Subtitle D—Health Deduction

13 Fairness

14 SEC. 1301. PERMANENT EXTENSION AND INCREASE IN

15 HEALTH INSURANCE TAX DEDUCTION FOR

16 SELF-EMPLOYED INDIVIDUALS.

17 (a) PERMANENT EXTENSION OF DEDUCTION.—

18 (1) IN GENERAL.—Subsection (l) of section 162

19 of the Internal Revenue Code of 1986 (relating to

20 special rules for health insurance costs of self-em21 ployed individuals) is amended by striking paragraph

22 (6).

23 (2) EFFECTIVE DATE.—The amendment made

24 by this subsection shall apply to taxable years begin25 ning after December 31, 1993.
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1 (b) INCREASE IN AMOUNT OF DEDUCTION; INSUR2 ANCE PURCHASED MUST MEET CERTAIN STANDARDS.—

3 (1) INCREASE IN AMOUNT OF DEDUCTION.—

4 Paragraph (1) of section 162(l) of such Code is

5 amended by striking ‘‘25 percent of’’ and inserting

6 ‘‘100 percent (50 percent in the case of taxable

7 years beginning in 1996 or 1997) of’’.

8 (2) INSURANCE PURCHASED MUST MEET CER9 TAIN STANDARDS.—Paragraph (2) of section 162(l)

10 of such Code is amended by adding at the end there11 of the following new subparagraph:

12 ‘‘(C) INSURANCE MUST MEET CERTAIN

13 STANDARDS.—Paragraph (1) shall apply only to

14 insurance which is—

15 ‘‘(i) a MedAccess plan (as defined in

16 section 1102(a)(2) of such Act), or

17 ‘‘(ii) a health plan which provides at

18 least the standard coverage (consistent

19 with section 1102(c) of the Affordable

20 Health Care Now Act of 1993) with sub21 stantial cost-sharing (as defined for pur22 poses of section 1102(a)(1)(A)(i) of such

23 Act).

24 ‘‘(D) TREATMENT OF GROUP HEALTH

25 PLANS.—For purposes of this subsection, an
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1 amount paid into a multiple employer health

2 plan (as defined in section 701(10) of the Em3 ployee Retirement Income Security Act of

4 1974) shall be deemed to be an amount paid for

5 insurance which constitutes medical care.’’

6 (3) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply to taxable years begin8 ning after December 31, 1993.

9 SEC. 1302. DEDUCTION OF HEALTH INSURANCE PREMIUMS

10 FOR CERTAIN PREVIOUSLY UNINSURED INDI11 VIDUALS.

12 (a) IN GENERAL.—Section 213 of the Internal Reve13 nue Code of 1986 (relating to medical, dental, etc., ex14 penses) is amended by adding at the end thereof the fol15 lowing new subsection:

16 ‘‘(f) DEDUCTION FOR CERTAIN HEALTH INSURANCE

17 COSTS DETERMINED WITHOUT REGARD TO ADJUSTED

18 GROSS INCOME THRESHOLD.—

19 ‘‘(1) IN GENERAL.—Subsection (a) shall be ap20 plied without regard to the limitation based on ad21 justed gross income in the case of the applicable per22 centage of the amounts paid for insurance referred

23 to in section 162(l)(2)(C) (and including payments

24 referred to in section 162(l)(2)(D)).
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1 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

2 of paragraph (1), the term ‘applicable percentage’

3 means—

4 ‘‘(A) 25 percent for taxable years begin5 ning in 1994 or 1995,

6 ‘‘(B) 50 percent for taxable years begin7 ning in 1996 or 1997, and

8 ‘‘(C) 100 percent for taxable years begin9 ning after 1997.

10 ‘‘(3) DEDUCTION NOT ALLOWED TO INDIVID11 UALS ELIGIBLE FOR EMPLOYER-SUBSIDIZED COV12 ERAGE.—

13 ‘‘(A) IN GENERAL.—Paragraph (1) shall

14 not apply to any individual—

15 ‘‘(i) who is eligible to participate in

16 any subsidized health plan maintained by

17 an employer of such individual or the

18 spouse of such individual, or

19 ‘‘(ii) who is (or whose spouse is) a

20 member of a subsidized class of employees

21 of an employer.

22 ‘‘(B) SUBSIDIZED CLASS.—For purposes of

23 subparagraph (A), an individual is a member of

24 a subsidized class of employees of an employer

25 if, at any time during the 3 calendar years end-
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1 ing with or within the taxable year, any mem2 ber of such class was eligible to participate in

3 any subsidized health plan maintained by such

4 employer.

5 ‘‘(C) SPECIAL RULES.—

6 ‘‘(i) CONTROLLED GROUPS.—All per7 sons treated as a single employer under

8 subsection (a) or (b) of section 52 or sub9 section (m) or (o) of section 414 shall be

10 treated as a single employer for purposes

11 of subparagraph (B).

12 ‘‘(ii) CLASSES.—Classes of employees

13 shall be determined under regulations pre14 scribed by the Secretary based on such fac15 tors as the Secretary determines appro16 priate to carry out the purposes of this

17 subsection.

18 ‘‘(4) COORDINATION WITH DEDUCTION FOR

19 OTHER AMOUNTS.—Amounts allowable as a deduc20 tion under subsection (a) by reason of this sub21 section shall not be taken into account in determin22 ing the deduction under subsection (a) for other

23 amounts.

24 ‘‘(5) SUBSECTION NOT TO APPLY TO INDIVID25 UALS ELIGIBLE FOR MEDICARE.—This subsection
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1 shall not apply to amount paid for insurance cover2 ing an individual who is eligible for benefits under

3 title XVIII of the Social Security Act.’’

4 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI5 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

6 of section 62 of such Code is amended by inserting after

7 paragraph (15) the following new paragraph:

8 ‘‘(16) COSTS OF CERTAIN HEALTH INSUR9 ANCE.—The deduction allowed by section 213 to the

10 extent allowable by reason of section 213(f).’’

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1993.

14 Subtitle E—Improved Access to

15 Community Health Services

16 PART 1—INCREASED AUTHORIZATION

17 FOR COMMUNITY AND MIGRANT

18 HEALTH CENTERS

19 SEC. 1401. GRANT PROGRAM TO PROMOTE PRIMARY

20 HEALTH CARE SERVICES FOR UNDERSERVED

21 POPULATIONS.

22 (a) AUTHORIZATION.—The Secretary of Health and

23 Human Services shall provide for a program of grants to

24 migrant and community health centers (receiving grants

25 or contracts under section 329, 330, or 340 of the Public
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1 Health Service Act) in order to promote the provision of

2 primary health care services for underserved individuals.

3 Such grants may be used—

4 (1) to promote the provision of off-site services

5 (through means such as mobile medical clinics);

6 (2) to improve birth outcomes in areas with

7 high infant mortality and morbidity;

8 (3) to establish primary care clinics in areas

9 identified as in need of such clinics; and

10 (4) for recruitment and training costs of nec11 essary providers and operating costs for unreim12 bursed services.

13 (b) CONDITIONS.—(1) Grants under this subsection

14 shall only be made upon application, approved by the Sec15 retary.

16 (2) The amount of grants made under this section

17 shall be determined by the Secretary.

18 (c) AUTHORIZATION OF APPROPRIATIONS.—There

19 are authorized to be appropriated—

20 (1) in fiscal year 1994, $100,000,000,

21 (2) in fiscal year 1995, $200,000,000,

22 (3) in fiscal year 1996, $300,000,000,

23 (4) in fiscal year 1997, $400,000,000, and

24 (5) in fiscal year 1998, $500,000,000,
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1 to carry out this section. Of the amounts appropriated

2 each fiscal year under this section, at least 10 percent

3 shall be used for grants described in subsection (a)(1) and

4 at least 10 percent shall be used for grants described in

5 subsection (a)(2). The Secretary may use not to exceed

6 50 percent of the amounts appropriated to carry out this

7 section for the purpose of making new grants or contracts

8 under sections 329, 330, and 340 of the Public Health

9 Service Act.

10 (d) STUDY AND REPORT.—The Secretary shall con11 duct a study of the impact of the grants made under this

12 section to migrant and community health centers on ac13 cess to health care, birth outcomes, and the use of emer14 gency room services. Not later than 2 years after the date

15 of the enactment of this Act, the Secretary shall submit

16 to Congress a report on such study and on recommenda17 tions for changes in the programs under this section in

18 order to promote the appropriate use of cost-effective out19 patient services.
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1 PART 2—GRANTS FOR PROJECTS FOR

2 COORDINATING DELIVERY OF SERVICES

3 SEC. 1411. PROJECTS FOR COORDINATING DELIVERY OF

4 OUTPATIENT PRIMARY HEALTH SERVICES.

5 Part D of title III of the Public Health Service Act

6 (42 U.S.C. 254b et seq.) is amended by adding at the end

7 the following new subpart:

8 ‘‘Subpart VII—Delivery of Services

9 ‘‘PROJECTS FOR COORDINATING DELIVERY OF SERVICES

10 ‘‘SEC. 340E. (a) AUTHORITY FOR GRANTS.—

11 ‘‘(1) IN GENERAL.—The Secretary may make

12 grants to public and nonprofit private entities to

13 carry out demonstration projects for the purpose of

14 increasing access to outpatient primary health serv15 ices in geographic areas described in subsection (b)

16 through coordinating the delivery of such services

17 under Federal, State, local, and private programs.

18 ‘‘(2) REQUIREMENT REGARDING PLAN.—The

19 Secretary may make a grant under paragraph (1)

20 only if—

21 ‘‘(A) the applicant involved has received a

22 grant under subsection (l) and the Secretary

23 has approved the plan developed with such

24 grant; and
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1 ‘‘(B) the applicant agrees to carry out the

2 project under paragraph (1) in accordance with

3 the plan.

4 ‘‘(b) QUALIFIED HEALTH SERVICE AREAS.—

5 ‘‘(1) IN GENERAL.—A geographic area de6 scribed in this subsection is a geographic area

7 that—

8 ‘‘(A) is a rational area for the delivery of

9 health services;

10 ‘‘(B) has a population of not more than

11 500,000 individuals; and

12 ‘‘(C)(i) has been designated by the Sec13 retary as an area with a shortage of personal

14 health services; or

15 ‘‘(ii) has a significant number of individ16 uals who have low incomes or who have insuffi17 cient insurance regarding health care.

18 ‘‘(2) AUTHORITY REGARDING MULTIPLE POLIT19 ICAL SUBDIVISIONS.—The Secretary shall make a

20 determination of whether a geographic area is a geo21 graphic area described in paragraph (1) without re22 gard to whether the area is a political subdivision,

23 without regard to whether the area is located in 2

24 or more political subdivisions or States, and without
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1 regard to whether the area encompasses 2 or more

2 political subdivisions.

3 ‘‘(c) PREFERENCES IN MAKING GRANTS.—In making

4 grants under subsection (a), the Secretary shall give pref5 erence to applicants demonstrating that, with respect to

6 the outpatient primary health services that will be the sub7 ject of the project conducted by the applicant under such

8 subsection—

9 ‘‘(1)(A) the project will result in the reduction

10 of administrative expenses associated with such serv11 ices by increasing the efficiency of the administrative

12 processes of the providers participating in the

13 project, and (B) the resulting savings will be ex14 pended for the direct provision of such services for

15 the designated population; or

16 ‘‘(2) the services that will be the subject of the

17 project will be provided in facilities that are

18 underutilized.

19 ‘‘(d) ACTIVITIES OF PROJECT MUST SERVE DES20 IGNATED POPULATION.—The Secretary may make a

21 grant under subsection (a) to an applicant only if the ap22 plicant demonstrates that carrying out the project under

23 such subsection will increase access to outpatient primary

24 health services for a significant segment of the designated

25 population.
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1 ‘‘(e) MATCHING FUNDS.—

2 ‘‘(1) IN GENERAL.—With respect to the costs of

3 the project to be carried out under subsection (a) by

4 an applicant, the Secretary may make a grant under

5 such subsection only if the applicant agrees to make

6 available (directly or through donations from public

7 or private entities) non-Federal contributions toward

8 such costs in an amount that is not less than 50

9 percent of such costs.

10 ‘‘(2) DETERMINATION OF AMOUNT CONTRIB11 UTED.—Non-Federal contributions required in para12 graph (1) may be in cash or in kind, fairly evalu13 ated, including plant, equipment, or services.

14 Amounts provided by the Federal Government, or

15 services assisted or subsidized to any significant ex16 tent by the Federal Government, may not be in17 cluded in determining the amount of such non-Fed18 eral contributions.

19 ‘‘(f) CERTAIN LIMITATIONS REGARDING GRANTS.—

20 ‘‘(1) PROVISION OF HEALTH SERVICES; CON21 STRUCTION OF FACILITIES.—The Secretary may

22 make a grant under subsection (a) only if the appli23 cant involved agrees that the grant will not be ex24 pended for the direct provision of any health service

25 or for the construction or renovation of facilities.
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1 ‘‘(2) DURATION AND AMOUNT OF GRANT.—The

2 period during which payments are made for a

3 project under subsection (a) may not exceed 4 years,

4 and the aggregate amount of such payments for the

5 period may not exceed $200,000. The provision of

6 such payments shall be subject to annual approval

7 by the Secretary of the payments and subject to the

8 availability of appropriations for the fiscal year in9 volved to make the payments.

10 ‘‘(3) FINANCIAL CAPACITY FOR CONTINUATION

11 OF PROJECT AFTER TERMINATION OF GRANT.—The

12 Secretary may make a grant under subsection (a)

13 only if the Secretary determines that there is a rea14 sonable basis for believing that, after termination of

15 payments under such subsection pursuant to para16 graph (2), the project under such subsection will

17 have the financial capacity to continue operating.

18 ‘‘(g) AGREEMENTS AMONG PARTICIPANTS IN

19 PROJECTS.—

20 ‘‘(1) REQUIRED PARTICIPANTS.—The Secretary

21 may make a grant under subsection (a) only if the

22 applicant for the grant has, for purposes of carrying

23 out a project under such subsection, entered into

24 agreements with—
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1 ‘‘(A) the chief public health officers, and

2 the chief health officers for the elementary and

3 secondary schools, of each of the political sub4 divisions of the qualified health service area in

5 which the project under such subsection is to be

6 carried out (or, in the case of a political sub7 division that does not have such an official,

8 with another appropriate official of such sub9 division);

10 ‘‘(B) each hospital in the qualified health

11 service area;

12 ‘‘(C) representatives of entities in such

13 area that provide outpatient primary health

14 services under Federal, State, local, or private

15 programs;

16 ‘‘(D) representatives of businesses in such

17 area, including small businesses; and

18 ‘‘(E) representatives of nonprofit private

19 entities in such area.

20 ‘‘(2) OPTIONAL PARTICIPANTS.—With respect

21 to compliance with this section, a grantee under sub22 section (a) may, for purposes of carrying out a

23 project under such subsection, enter into such agree24 ments with public and private entities in the quali25 fied health service area involved (in addition to the
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1 entities specified in paragraph (1)) as the grantee

2 may elect.

3 ‘‘(h) EXPENDITURES OF GRANT.—With respect to a

4 project under subsection (a), the purposes for which a

5 grant under such subsection may be expended include (but

6 are not limited to) expenditures to increase the efficiency

7 of the administrative processes of providers participating

8 in the project, paying the costs of hiring and compensating

9 staff, obtaining computers and other equipment (including

10 vehicles to transport individuals to programs providing

11 outpatient primary health services), and developing and

12 operating provider networks.

13 ‘‘(i) MAINTENANCE OF EFFORT.—In the case of serv14 ices and populations that are the subject of a project

15 under subsection (a), the Secretary may make such a

16 grant for a fiscal year only if the applicant involved agrees

17 that the applicant, and each entity making an agreement

18 under subsection (g), will maintain expenditures of non19 Federal amounts for such services and populations at a

20 level that is not less than the level of such expenditures

21 maintained by the applicant and the entity, respectively,

22 for the fiscal year preceding the first fiscal year for which

23 the applicant receives such a grant.

24 ‘‘(j) REPORTS TO SECRETARY.—The Secretary may

25 make a grant under subsection (a) only if the applicant
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1 involved agrees to submit to the Secretary such reports

2 on the project carried out under such subsection as the

3 Secretary may require.

4 ‘‘(k) EVALUATIONS AND DISSEMINATION OF INFOR5 MATION.—The Secretary shall provide for evaluations of

6 projects carried out under subsection (a), and for the col7 lection and dissemination of information developed as a

8 result of such projects and as a result of similar projects.

9 ‘‘(l) PLANNING GRANTS.—

10 ‘‘(1) IN GENERAL.—The Secretary may make

11 grants to public and nonprofit private entities for

12 the purpose of developing plans to carry out projects

13 under subsection (a). Such a grant may be made

14 only if the applicant involved submits to the Sec15 retary information—

16 ‘‘(A) providing a detailed statement of the

17 proposal of the applicant for carrying out the

18 project;

19 ‘‘(B) identifying the geographic area in

20 which the project is to be carried out; and

21 ‘‘(C) demonstrating that the area is a

22 qualified health service area and that the pro23 posal otherwise is in accordance with the re24 quirements established in this section for the

25 receipt of a grant under subsection (a).
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1 ‘‘(2) DURATION AND AMOUNT OF GRANT.—The

2 period during which payments are made under para3 graph (1) for the development of a plan under such

4 paragraph may not exceed 1 year, and the amount

5 of such payments may not exceed $100,000.

6 ‘‘(m) APPLICATION FOR GRANT.—The Secretary may

7 make a grant under subsection (a) or (l) only if the appli8 cant for the grant submits an application to the Secretary

9 that—

10 ‘‘(1) contains any agreements, assurances, and

11 information required in this section with respect to

12 the grant; and

13 ‘‘(2) is in such form, is made in such manner,

14 and contains such other agreements, assurances, and

15 information as the Secretary determines to be nec16 essary to carry out the purpose for which the grant

17 is to be provided.

18 ‘‘(n) DEFINITIONS.—For purposes of this section:

19 ‘‘(1) The term ‘designated population’ means

20 individuals described in subsection (b)(1)(C)(ii).

21 ‘‘(2) The term ‘primary health services’ includes

22 preventive health services.

23 ‘‘(3) The term ‘qualified health service area’

24 means a geographic area described in subsection (b).

25 ‘‘(o) AUTHORIZATION OF APPROPRIATIONS.—
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1 ‘‘(1) PLANNING FOR PROJECTS.—For the pur2 pose of grants under subsection (l), there is author3 ized to be appropriated $5,000,000 for fiscal year

4 1994, to remain available until expended.

5 ‘‘(2) OPERATION OF PROJECTS.—For the pur6 pose of grants under subsection (a), there is author7 ized to be appropriated an aggregate $10,000,000

8 for the fiscal years 1995 through 1998.’’.

9 Subtitle F—Improved Access to

10 Rural Health Services

11 PART 1—ESTABLISHMENT OF RURAL

12 EMERGENCY ACCESS CARE HOS13 PITALS UNDER MEDICARE

14 SEC. 1501. RURAL EMERGENCY ACCESS CARE HOSPITALS

15 DESCRIBED.

16 Section 1861 of the Social Security Act (42 U.S.C.

17 1395x) is amended by adding at the end the following new

18 subsection:

19 ‘‘Rural Emergency Access Care Hospital; Rural

20 Emergency Access Care Hospital Services

21 ‘‘(oo)(1) The term ‘rural emergency access care hos22 pital’ means, for a fiscal year, a facility with respect to

23 which the Secretary finds the following:

24 ‘‘(A) The facility is located in a rural area (as

25 defined in section 1886(d)(2)(D)).
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1 ‘‘(B) The facility was a hospital under this title

2 at any time during the 5-year period that ends on

3 the date of the enactment of this subsection.

4 ‘‘(C) The facility is in danger of closing due to

5 low inpatient utilization rates and negative operating

6 losses, and the closure of the facility would limit the

7 access of individuals residing in the facility’s service

8 area to emergency services.

9 ‘‘(D) The facility has entered into (or plans to

10 enter into), with a hospital with a participation

11 agreement in effect under section 1866(a), and

12 under such agreement the hospital shall accept pa13 tients transferred to the hospital from the facility

14 and receives data from and transmits data to the fa15 cility.

16 ‘‘(E) There is a practitioner who is qualified to

17 provide advanced cardiac life support services (as de18 termined by the State in which the facility is lo19 cated) on-site at the facility on a 24-hour basis.

20 ‘‘(F) A physician is available on-call to provide

21 emergency medical services on a 24-hour basis.

22 ‘‘(G) The facility meets such staffing require23 ments as would apply under section 1861(e) to a

24 hospital located in a rural area, except that—
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1 ‘‘(i) the facility need not meet hospital

2 standards relating to the number of hours dur3 ing a day, or days during a week, in which the

4 facility must be open, except insofar as the fa5 cility is required to provide emergency care on

6 a 24-hour basis under subparagraphs (E) and

7 (F); and

8 ‘‘(ii) the facility may provide any services

9 otherwise required to be provided by a full-time,

10 on-site dietician, pharmacist, laboratory techni11 cian, medical technologist, or radiological tech12 nologist on a part-time, off-site basis.

13 ‘‘(H) The facility meets the requirements appli14 cable to clinics and facilities under subparagraphs

15 (C) through (J) of paragraph (2) of section

16 1861(aa) and of clauses (ii) and (iv) of the second

17 sentence of such paragraph (or, in the case of the

18 requirements of subparagraph (E), (F), or (J) of

19 such paragraph, would meet the requirements if any

20 reference in such subparagraph to a ‘nurse practi21 tioner’ or to ‘nurse practitioners’ was deemed to be

22 a reference to a ‘nurse practitioner or nurse’ or to

23 ‘nurse practitioners or nurses’), except that in deter24 mining whether a facility meets the requirements of

25 this subparagraph, subparagraphs (E) and (F) of
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1 that paragraph shall be applied as if any reference

2 to a ‘physician’ is a reference to a physician as de3 fined in section 1861(r)(1).

4 ‘‘(2) The term ‘rural emergency access care hospital

5 services’ means medical and other health services fur6 nished by a rural emergency access care hospital.’’.

7 SEC. 1502. COVERAGE OF AND PAYMENT FOR SERVICES.

8 (a) COVERAGE UNDER PART B.—Section 1832(a)(2)

9 of the Social Security Act (42 U.S.C. 1395k(a)(2)) is

10 amended—

11 (1) by striking ‘‘and’’ at the end of subpara12 graph (I);

13 (2) by striking the period at the end of sub14 paragraph (J) and inserting ‘‘; and’’; and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(K) rural emergency access care hospital

18 services (as defined in section 1861(oo)(2)).’’.

19 (b) PAYMENT BASED ON PAYMENT FOR OUTPATIENT

20 RURAL PRIMARY CARE HOSPITAL SERVICES.—

21 (1) IN GENERAL.—Section 1833(a)(6) of the

22 Social Security Act (42 U.S.C. 1395l(a)(6)) is

23 amended by striking ‘‘services,’’ and inserting ‘‘serv24 ices and rural emergency access care hospital serv25 ices,’’.
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1 (2) PAYMENT METHODOLOGY DESCRIBED.—

2 Section 1834(g) of such Act (42 U.S.C. 1395m(g))

3 is amended—

4 (A) in the heading, by striking ‘‘SERV5 ICES’’ and inserting ‘‘SERVICES AND RURAL

6 EMERGENCY ACCESS CARE HOSPITAL SERV7 ICES’’; and

8 (B) in paragraph (1), by striking ‘‘during

9 a year before 1993’’ and inserting ‘‘during a

10 year before the prospective payment system de11 scribed in paragraph (2) is in effect’’;

12 (C) in paragraph (1), by adding at the end

13 the following:

14 ‘‘The amount of payment shall be determined under

15 either method without regard to the amount of the

16 customary or other charge.’’;

17 (D) in paragraph (2), by striking ‘‘Janu18 ary 1, 1993,’’ and inserting ‘‘January 1,

19 1996,’’; and

20 (E) by adding at the end the following new

21 paragraph:

22 ‘‘(3) APPLICATION OF METHODS TO PAYMENT

23 FOR RURAL EMERGENCY ACCESS CARE HOSPITAL

24 SERVICES.—The amount of payment for rural emer25 gency access care hospital services provided during
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1 a year shall be determined using the applicable

2 method provided under this subsection for determin3 ing payment for outpatient rural primary care hos4 pital services during the year.’’.

5 SEC. 1503. EFFECTIVE DATE.

6 The amendments made by sections 1501 and 1502

7 shall apply to fiscal years beginning on or after October

8 1, 1993.

9 PART 2—RURAL MEDICAL EMERGENCIES

10 AIR TRANSPORT

11 SEC. 1511. GRANTS TO STATES REGARDING AIRCRAFT FOR

12 TRANSPORTING RURAL VICTIMS OF MEDICAL

13 EMERGENCIES.

14 Part E of title XII of the Public Health Service Act

15 (42 U.S.C. 300d–51 et seq.) is amended by adding at the

16 end thereof the following new section:

17 ‘‘SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL

18 VICTIMS OF MEDICAL EMERGENCIES.

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

20 to States to assist such States in the creation or enhance21 ment of air medical transport systems that provide victims

22 of medical emergencies in rural areas with access to treat23 ments for the injuries or other conditions resulting from

24 such emergencies.

25 ‘‘(b) APPLICATION AND PLAN.—
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1 ‘‘(1) APPLICATION.—To be eligible to receive a

2 grant under subsection (a), a State shall prepare

3 and submit to the Secretary an application in such

4 form, made in such manner, and containing such

5 agreements, assurances, and information, including

6 a State plan as required in paragraph (2), as the

7 Secretary determines to be necessary to carry out

8 this section.

9 ‘‘(2) STATE PLAN.—An application submitted

10 under paragraph (1) shall contain a State plan that

11 shall—

12 ‘‘(A) describe the intended uses of the

13 grant proceeds and the geographic areas to be

14 served;

15 ‘‘(B) demonstrates that the geographic

16 areas to be served, as described under subpara17 graph (A), are rural in nature;

18 ‘‘(C) demonstrate that there is a lack of

19 facilities available and equipped to deliver ad20 vanced levels of medical care in the geographic

21 areas to be served;

22 ‘‘(D) demonstrate that in utilizing the

23 grant proceeds for the establishment or en24 hancement of air medical services the State

25 would be making a cost-effective improvement
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1 to existing ground-based or air emergency medi2 cal service systems;

3 ‘‘(E) demonstrate that the State will not

4 utilize the grant proceeds to duplicate the capa5 bilities of existing air medical systems that are

6 effectively meeting the emergency medical needs

7 of the populations they serve;

8 ‘‘(F) demonstrate that in utilizing the

9 grant proceeds the State is likely to achieve a

10 reduction in the morbidity and mortality rates

11 of the areas to be served, as determined by the

12 Secretary;

13 ‘‘(G) demonstrate that the State, in utiliz14 ing the grant proceeds, will—

15 ‘‘(i) maintain the expenditures of the

16 State for air and ground medical transport

17 systems at a level equal to not less than

18 the level of such expenditures maintained

19 by the State for the fiscal year preceding

20 the fiscal year for which the grant is re21 ceived; and

22 ‘‘(ii) ensure that recipients of direct

23 financial assistance from the State under

24 such grant will maintain expenditures of

25 such recipients for such systems at a level
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1 at least equal to the level of such expendi2 tures maintained by such recipients for the

3 fiscal year preceding the fiscal year for

4 which the financial assistance is received;

5 ‘‘(H) demonstrate that persons experienced

6 in the field of air medical service delivery were

7 consulted in the preparation of the State plan;

8 ‘‘(I) contain such other information as the

9 Secretary may determine appropriate.

10 ‘‘(c) CONSIDERATIONS IN AWARDING GRANTS.—In

11 determining whether to award a grant to a State under

12 this section, the Secretary shall—

13 ‘‘(1) consider the rural nature of the areas to

14 be served with the grant proceeds and the services

15 to be provided with such proceeds, as identified in

16 the State plan submitted under subsection (b); and

17 ‘‘(2) give preference to States with State plans

18 that demonstrate an effective integration of the pro19 posed air medical transport systems into a com20 prehensive network or plan for regional or statewide

21 emergency medical service delivery.

22 ‘‘(d) STATE ADMINISTRATION AND USE OF

23 GRANT.—

24 ‘‘(1) IN GENERAL.—The Secretary may not

25 make a grant to a State under subsection (a) unless
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1 the State agrees that such grant will be adminis2 tered by the State agency with principal responsibil3 ity for carrying out programs regarding the provi4 sion of medical services to victims of medical emer5 gencies or trauma.

6 ‘‘(2) PERMITTED USES.—A State may use

7 amounts received under a grant awarded under this

8 section to award subgrants to public and private en9 tities operating within the State.

10 ‘‘(3) OPPORTUNITY FOR PUBLIC COMMENT.—

11 The Secretary may not make a grant to a State

12 under subsection (a) unless that State agrees that,

13 in developing and carrying out the State plan under

14 subsection (b)(2), the State will provide public notice

15 with respect to the plan (including any revisions

16 thereto) and facilitate comments from interested

17 persons.

18 ‘‘(e) NUMBER OF GRANTS.—The Secretary shall

19 award grants under this section to not less than 7 States.

20 ‘‘(f) REPORTS.—

21 ‘‘(1) REQUIREMENT.—A State that receives a

22 grant under this section shall annually (during each

23 year in which the grant proceeds are used) prepare

24 and submit to the Secretary a report that shall con25 tain—
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1 ‘‘(A) a description of the manner in which

2 the grant proceeds were utilized;

3 ‘‘(B) a description of the effectiveness of

4 the air medical transport programs assisted

5 with grant proceeds; and

6 ‘‘(C) such other information as the Sec7 retary may require.

8 ‘‘(2) TERMINATION OF FUNDING.—In reviewing

9 reports submitted under paragraph (1), if the Sec10 retary determines that a State is not using amounts

11 provided under a grant awarded under this section

12 in accordance with the State plan submitted by the

13 State under subsection (b), the Secretary may termi14 nate the payment of amounts under such grant to

15 the State until such time as the Secretary deter16 mines that the State comes into compliance with

17 such plan.

18 ‘‘(g) DEFINITION.—As used in this section, the term

19 ‘rural areas’ means geographic areas that are located out20 side of standard metropolitan statistical areas, as identi21 fied by the Secretary.

22 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated to make grants under

24 this section, $15,000,000 for fiscal year 1994, and such
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1 sums as may be necessary for each of the fiscal years 1995

2 and 1996.’’.

3 PART 3—EMERGENCY MEDICAL SERVICES

4 AMENDMENTS

5 SEC. 1521. ESTABLISHMENT OF OFFICE OF EMERGENCY

6 MEDICAL SERVICES.

7 Title XII of the Public Health Service Act (42 U.S.C.

8 300d et seq.) is amended—

9 (1) in the heading for the title, by striking

10 ‘‘TRAUMA CARE’’ and inserting ‘‘EMERGENCY

11 MEDICAL SERVICES’’;

12 (2) in the heading for part A, by striking

13 ‘‘GENERAL’’ and all that follows and inserting

14 ‘‘GENERAL AUTHORITIES AND DUTIES’’; and

15 (3) by amending section 1201 to read as fol16 lows:

17 ‘‘SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY

18 MEDICAL SERVICES.

19 ‘‘(a) IN GENERAL.—The Secretary shall establish an

20 office to be known as the Office of Emergency Medical

21 Services, which shall be headed by a director appointed

22 by the Secretary. The Secretary shall carry out this title

23 acting through the Director of such Office.
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1 ‘‘(b) GENERAL AUTHORITIES AND DUTIES.—With

2 respect to emergency medical services (including trauma

3 care), the Secretary shall—

4 ‘‘(1) conduct and support research, training,

5 evaluations, and demonstration projects;

6 ‘‘(2) foster the development of appropriate,

7 modern systems of such services through the sharing

8 of information among agencies and individuals in9 volved in the study and provision of such services;

10 ‘‘(3) sponsor workshops and conferences;

11 ‘‘(4) as appropriate, disseminate to public and

12 private entities information obtained in carrying out

13 paragraphs (1) through (4);

14 ‘‘(5) provide technical assistance to State and

15 local agencies;

16 ‘‘(6) coordinate activities of the Department of

17 Health and Human Services; and

18 ‘‘(7) as appropriate, coordinate activities of

19 such Department with activities of other Federal

20 agencies.

21 ‘‘(c) CERTAIN REQUIREMENTS.—With respect to

22 emergency medical services (including trauma care), the

23 Secretary shall ensure that activities under subsection (b)

24 are carried out regarding—
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1 ‘‘(1) maintaining an adequate number of health

2 professionals with expertise in the provision of the

3 services, including hospital-based professionals and

4 prehospital-based professionals;

5 ‘‘(2) developing, periodically reviewing, and re6 vising as appropriate, in collaboration with appro7 priate public and private entities, guidelines for the

8 provision of such services (including, for various typ9 ical circumstances, guidelines on the number and va10 riety of professionals, on equipment, and on train11 ing);

12 ‘‘(3) the appropriate use of available tech13 nologies, including communications technologies; and

14 ‘‘(4) the unique needs of underserved inner-city

15 areas and underserved rural areas.

16 ‘‘(d) GRANTS, COOPERATIVE AGREEMENTS, AND

17 CONTRACTS.—In carrying out subsections (b) and (c), the

18 Secretary may make grants and enter into cooperative

19 agreements and contracts.

20 ‘‘(e) DEFINITIONS.—For purposes of this part:

21 ‘‘(1) The term ‘hospital-based professional’

22 means a health professional (including an allied

23 health professional) who has expertise in providing

24 one or more emergency medical services and who

25 normally provides the services at a medical facility.
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1 ‘‘(2) The term ‘prehospital-based professional’

2 means a health professional (including an allied

3 health professional) who has expertise in providing

4 one or more emergency medical services and who

5 normally provides the services at the site of the med6 ical emergency or during transport to a medical fa7 cility.’’.

8 SEC. 1522. STATE OFFICES OF EMERGENCY MEDICAL SERV9 ICES.

10 (a) TECHNICAL AMENDMENTS TO FACILITATE ES11 TABLISHMENT OF PROGRAM.—

12 (1) IN GENERAL.—Title XII of the Public

13 Health Service Act (42 U.S.C. 300d et seq.) is

14 amended—

15 (A) by redesignating section 1239 as sec16 tion 1235;

17 (B) by redesignating sections 1231 and

18 1233 as sections 1236 and 1237, respectively;

19 and

20 (C) by redesignating sections 1211 through

21 1222 as sections 1221 through 1232, respec22 tively.

23 (2) MODIFICATIONS IN FORMAT OF TITLE

24 XII.—Title XII of the Public Health Service Act, as
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1 amended by paragraph (1) of this subsection, is

2 amended—

3 (A) by striking ‘‘PART B’’ and all that fol4 low through ‘‘STATE PLANS’’ and inserting the

5 following:

6 ‘‘Subpart II—Formula Grants With Respect to

7 Modifications of State Plans’’;

8 (B) by striking ‘‘PART C—GENERAL PRO9 VISIONS’’ and inserting the following:

10 ‘‘Subpart III—General Provisions’’;

11 (C) by redesignating sections 1202 and

12 1203 as sections 1211 and 1212, respectively;

13 and

14 (D) by inserting before section 1211 (as so

15 redesignated) the following:

16 ‘‘PART B—TRAUMA CARE

17 ‘‘Subpart I—Advisory Council; Clearinghouse’’.

18 (b) STATE OFFICES.—Title XII of the Public Health

19 Service Act, as amended by subsection (a) of this section,

20 is amended by inserting after section 1201 the following

21 new section:

22 ‘‘SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL

23 SERVICES.

24 ‘‘(a) PROGRAM OF GRANTS.—The Secretary may

25 make grants to States for the purpose of improving the
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1 availability and quality of emergency medical services

2 through the operation of State offices of emergency medi3 cal services.

4 ‘‘(b) REQUIREMENT OF MATCHING FUNDS.—

5 ‘‘(1) IN GENERAL.—The Secretary may not

6 make a grant under subsection (a) unless the State

7 involved agrees, with respect to the costs to be in8 curred by the State in carrying out the purpose de9 scribed in such subsection, to provide non-Federal

10 contributions toward such costs in an amount that—

11 ‘‘(A) for the first fiscal year of payments

12 under the grant, is not less than $1 for each $3

13 of Federal funds provided in the grant;

14 ‘‘(B) for any second fiscal year of such

15 payments, is not less than $1 for each $1 of

16 Federal funds provided in the grant; and

17 ‘‘(C) for any third fiscal year of such pay18 ments, is not less than $3 for each $1 of Fed19 eral funds provided in the grant.

20 ‘‘(2) DETERMINATION OF AMOUNT OF NON21 FEDERAL CONTRIBUTION.—

22 ‘‘(A) Subject to subparagraph (B), non23 Federal contributions required in paragraph (1)

24 may be in cash or in kind, fairly evaluated, in25 cluding plant, equipment, or services. Amounts
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1 provided by the Federal Government, or serv2 ices assisted or subsidized to any significant ex3 tent by the Federal Government, may not be in4 cluded in determining the amount of such non5 Federal contributions.

6 ‘‘(B) The Secretary may not make a grant

7 under subsection (a) unless the State involved

8 agrees that—

9 ‘‘(i) for the first fiscal year of pay10 ments under the grant, 100 percent or less

11 of the non-Federal contributions required

12 in paragraph (1) will be provided in the

13 form of in-kind contributions;

14 ‘‘(ii) for any second fiscal year of such

15 payments, not more than 50 percent of

16 such non-Federal contributions will be pro17 vided in the form of in-kind contributions;

18 and

19 ‘‘(iii) for any third fiscal year of such

20 payments, such non-Federal contributions

21 will be provided solely in the form of cash.

22 ‘‘(c) CERTAIN REQUIRED ACTIVITIES.—The Sec23 retary may not make a grant under subsection (a) unless

24 the State involved agrees that activities carried out by an

25 office operated pursuant to such subsection will include—
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1 ‘‘(1) coordinating the activities carried out in

2 the State that relate to emergency medical services;

3 ‘‘(2) activities regarding the matters described

4 in paragraphs (1) through (4) section 1201(b);

5 ‘‘(3) identifying Federal and State programs re6 garding emergency medical services and providing

7 technical assistance to public and nonprofit private

8 entities regarding participation in such programs.

9 ‘‘(d) REQUIREMENT REGARDING ANNUAL BUDGET

10 FOR OFFICE.—The Secretary may not make a grant

11 under subsection (a) unless the State involved agrees that,

12 for any fiscal year for which the State receives such a

13 grant, the office operated pursuant to subsection (a) will

14 be provided with an annual budget of not less than

15 $50,000.

16 ‘‘(e) CERTAIN USES OF FUNDS.—

17 ‘‘(1) RESTRICTIONS.—The Secretary may not

18 make a grant under subsection (a) unless the State

19 involved agrees that—

20 ‘‘(A) if research with respect to emergency

21 medical services is conducted pursuant to the

22 grant, not more than 10 percent of the grant

23 will be expended for such research; and
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1 ‘‘(B) the grant will not be expended to pro2 vide emergency medical services (including pro3 viding cash payments regarding such services).

4 ‘‘(2) ESTABLISHMENT OF OFFICE.—Activities

5 for which a State may expend a grant under sub6 section (a) include paying the costs of establishing

7 an office of emergency medical services for purposes

8 of such subsection.

9 ‘‘(f) REPORTS.—The Secretary may not make a

10 grant under subsection (a) unless the State involved

11 agrees to submit to the Secretary reports containing such

12 information as the Secretary may require regarding activi13 ties carried out under this section by the State.

14 ‘‘(g) REQUIREMENT OF APPLICATION.—The Sec15 retary may not make a grant under subsection (a) unless

16 an application for the grant is submitted to the Secretary

17 and the application is in such form, is made in such man18 ner, and contains such agreements, assurances, and infor19 mation as the Secretary determines to be necessary to

20 carry out this section.’’.

21 SEC. 1523. PROGRAMS FOR RURAL AREAS.

22 (a) IN GENERAL.—Title XII of the Public Health

23 Service Act, as amended by section 1522, is amended—

24 (1) by transferring section 1204 to part A;
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1 (2) by redesignating such section as section

2 1203;

3 (3) by inserting such section after section 1202;

4 and

5 (4) in section 1203 (as so redesignated)—

6 (A) by redesignating subsection (c) as sub7 section (d); and

8 (B) by inserting after subsection (b) the

9 following new subsection:

10 ‘‘(c) DEMONSTRATION PROGRAM REGARDING TELE11 COMMUNICATIONS.—

12 ‘‘(1) LINKAGES FOR RURAL FACILITIES.—

13 Projects under subsection (a)(1) shall include dem14 onstration projects to establish telecommunications

15 between rural medical facilities and medical facilities

16 that have expertise or equipment that can be utilized

17 by the rural facilities through the telecommuni18 cations.

19 ‘‘(2) MODES OF COMMUNICATION.—The Sec20 retary shall ensure that the telecommunications

21 technologies demonstrated under paragraph (1) in22 clude interactive video telecommunications, static

23 video imaging transmitted through the telephone

24 system, and facsimiles transmitted through such sys25 tem.’’.
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1 (b) CONFORMING AMENDMENT.—Section 1203 of the

2 Public Health Service Act, as redesignated by subsection

3 (a)(2) of this section, is amended in the heading for the

4 section by striking ‘‘ESTABLISHMENT’’ and all that fol5 lows and inserting ‘‘PROGRAMS FOR RURAL AREAS.’’.

6 SEC. 1524. FUNDING.

7 Title XII of the Public Health Service Act, as amend8 ed by the preceding provisions of this title, is amended—

9 (1) by redesignating parts C through F as parts

10 D through G, respectively;

11 (2) by inserting after subpart III of part B the

12 following:

13 ‘‘PART C—FUNDING’’;

14 (3) by transferring section 1239 to part C (as

15 so added); and

16 (4) in such section, by striking subsections (a)

17 and (b) and inserting the following:

18 ‘‘(a) EMERGENCY MEDICAL SERVICES GEN19 ERALLY.—

20 ‘‘(1) IN GENERAL.—For the purpose of carry21 ing out section 1201 other than with respect to trau22 ma care, there are authorized to be appropriated

23 $2,000,000 for fiscal year 1994, and such sums as

24 may be necessary for each of the fiscal years 1995

25 and 1996.
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1 ‘‘(2) STATE OFFICES.—For the purpose of car2 rying out section 1202, there are authorized to be

3 appropriated $3,000,000 for fiscal year 1994, and

4 such sums as may be necessary for each of the fiscal

5 years 1995 and 1996.

6 ‘‘(3) CERTAIN TELECOMMUNICATIONS DEM7 ONSTRATIONS.—For the purpose of carrying out sec8 tion 1203(c), there are authorized to be appro9 priated $10,000,000 for fiscal year 1994 and such

10 sums as may be necessary for each of the fiscal

11 years 1995 and 1996.

12 ‘‘(b) TRAUMA CARE AND CERTAIN OTHER ACTIVI13 TIES.—

14 ‘‘(1) IN GENERAL.—For the purpose of carry15 ing out part B, section 1201 with respect to trauma

16 care, and section 1203 (other than subsection (c) of

17 such section), there are authorized to be appro18 priated $60,000,000 for fiscal year 1994, and such

19 sums as may be necessary for each of the fiscal

20 years 1995 and 1996.

21 ‘‘(2) ALLOCATION OF FUNDS BY SECRETARY.—

22 ‘‘(A) For the purpose of carrying out sub23 part I of part B, section 1201 with respect to

24 trauma care, and section 1203 (other than sub25 section (c) of such section), the Secretary shall
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1 make available 10 percent of the amounts ap2 propriated for a fiscal year under paragraph

3 (1).

4 ‘‘(B) For the purpose of carrying out sec5 tion 1203 (other than subsection (c) of such

6 section), the Secretary shall make available 10

7 percent of the amounts appropriated for a fiscal

8 year under paragraph (1).

9 ‘‘(C)(i) For the purpose of making allot10 ments under section 1221(a), the Secretary

11 shall, subject to subsection (c), make available

12 80 percent of the amounts appropriated for a

13 fiscal year under paragraph (1).

14 ‘‘(ii) Amounts paid to a State under sec15 tion 1221(a) for a fiscal year shall, for the pur16 poses for which the amounts were paid, remain

17 available for obligation until the end of the fis18 cal year immediately following the fiscal year

19 for which the amounts were paid.’’.

20 SEC. 1525. CONFORMING AMENDMENTS.

21 Title XII of the Public Health Service Act, as amend22 ed by the preceding provisions of this title, is amended—

23 (1) in section 1203(b), by striking ‘‘1214(c)(1)’’

24 and inserting ‘‘1224(c)(1)’’;
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1 (2) in section 1211(b)(3), by striking ‘‘1213(c)’’

2 and inserting ‘‘1223(c)’’;

3 (3) in section 1221—

4 (A) in subsection (a)—

5 (i) by striking ‘‘1218’’ and inserting

6 ‘‘1228’’; and

7 (ii) by striking ‘‘1217’’ and inserting

8 ‘‘1227’’; and

9 (B) in subsection (b)—

10 (i) by striking ‘‘1233’’ and inserting

11 ‘‘1237’’; and

12 (ii) by striking ‘‘1213’’ and inserting

13 ‘‘1223’’;

14 (4) in section 1222—

15 (A) in subsection (a)—

16 (i) in paragraph (1), by striking

17 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

18 (ii) in paragraph (2)(A), by striking

19 ‘‘1211(c)’’ and inserting ‘‘1221(c)’’; and

20 (B) in subsection (b), by striking

21 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

22 (5) in section 1223—

23 (A) in subsection (a), by striking

24 ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

25 (B) in subsection (b)—
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1 (i) in paragraph (1), by striking

2 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

3 (ii) in paragraph (3), by striking

4 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’; and

5 (C) in subsection (d), by striking

6 ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

7 (6) in section 1224—

8 (A) in each of subsections (a) through (c),

9 by striking ‘‘1211(a)’’ and inserting ‘‘1221(a)’’;

10 and

11 (B) in subsection (b), by striking

12 ‘‘1213(a)(7)’’ and inserting ‘‘1223(a)(7)’’;

13 (7) in section 1225—

14 (A) in subsection (a)—

15 (i) by striking ‘‘1211(a)’’ and insert16 ing ‘‘1221(a)’’; and

17 (ii) by striking ‘‘1233’’ and inserting

18 ‘‘1237’’; and

19 (B) in subsection (b), by striking

20 ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

21 (8) in section 1226, in each of subsections (a)

22 through (c), by striking ‘‘1211(a)’’ and inserting

23 ‘‘1221(a)’’;

24 (9) in section 1227—
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1 (A) by striking ‘‘1211(a)’’ and inserting

2 ‘‘1221(a)’’; and

3 (B) by striking ‘‘1214’’ and inserting

4 ‘‘1224’’;

5 (10) in section 1228—

6 (A) in each of subsections (a) through (c),

7 by striking ‘‘1211(a)’’ each place such term ap8 pears and inserting ‘‘1221(a)’’;

9 (B) in subsection (b), in each of para10 graphs (2)(A) and (3)(A), by striking

11 ‘‘1232(a)’’ and inserting ‘‘1239(a)’’; and

12 (C) in subsection (c)(2)—

13 (i) by striking ‘‘1232(b)(3)’’ and in14 serting ‘‘1239(b)(3)’’; and

15 (ii) by striking ‘‘1217’’ and inserting

16 ‘‘1227’’;

17 (11) in section 1229(a), by striking ‘‘1211(a)’’

18 each place such term appears and inserting

19 ‘‘1221(a)’’;

20 (12) in section 1230(a), by striking ‘‘1211(a)’’

21 each place such term appears and inserting

22 ‘‘1221(a)’’;

23 (13) in section 1231—
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1 (A) in each of subsections (a) and (b), by

2 striking ‘‘1211(a)’’ each place such term ap3 pears and inserting ‘‘1221(a)’’; and

4 (B) in each of subsections (a) and (b), by

5 striking ‘‘1211(b)’’ and inserting ‘‘1221(b)’’;

6 (14) in section 1232, by striking ‘‘1211’’ and

7 inserting ‘‘1221’’;

8 (15) in section 1236—

9 (A) in the matter preceding paragraph (1),

10 by striking ‘‘this title’’ and inserting ‘‘this

11 part’’; and

12 (B) in paragraph (1), by striking ‘‘1213’’

13 and inserting ‘‘1223’’;

14 (16) in section 1237—

15 (A) in each of subsections (a) and (b), by

16 striking ‘‘1211’’ each place such term appears

17 and inserting ‘‘1221’’;

18 (B) in subsection (b)—

19 (i) by striking ‘‘part B’’ and inserting

20 ‘‘subpart II’’; and

21 (ii) by striking ‘‘1214(c)(1)’’ and in22 serting ‘‘1224(c)(1)’’; and

23 (C) in subsection (c), by striking ‘‘1213’’

24 and inserting ‘‘1223’’; and

25 (17) in section 1239(c)(1)—
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1 (A) by striking ‘‘1211(a)’’ and inserting

2 ‘‘1221(a)’’;

3 (B) by striking ‘‘1218(a)(2)’’ and inserting

4 ‘‘1228(a)(2)’’; and

5 (C) by striking ‘‘part B’’ and inserting

6 ‘‘subpart II’’.

7 SEC. 1526. EFFECTIVE DATE.

8 The amendments made by this part shall take effect

9 October 1, 1993, or upon the date of the enactment of

10 this Act, whichever occurs later.

11 Subtitle G—State Flexibility in the

12 Medicaid Program: The Medical

13 Health Allowance Program

14 SEC. 1601. ESTABLISHMENT OF PROGRAM.

15 (a) IN GENERAL.—Title XIX of the Social Security

16 Act (42 U.S.C. 1396 et seq.), as amended by section

17 13631(b) of the Omnibus Budget Reconciliation Act of

18 1993, is amended—

19 (1) by redesignating section 1931 as section

20 1932; and

21 (2) by inserting after section 1930 the following

22 new section:

23 ‘‘STATE HEALTH ALLOWANCE PROGRAMS

24 ‘‘SEC. 1931. (a) TREATMENT OF EXPENDITURES

25 UNDER HEALTH ALLOWANCE PROGRAMS AS MEDICAL

26 ASSISTANCE UNDER STATE PLAN.—
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1 ‘‘(1) IN GENERAL.—Notwithstanding any other

2 provision of this title, for purposes of determining

3 the amount to be paid to a State under section

4 1903(a)(1) for quarters in any fiscal year, amounts

5 expended by an eligible State (as described in sub6 section (b)) during the fiscal year under a State

7 health allowance program (as described in subsection

8 (c)) shall be included in the total amount expended

9 during the fiscal year as medical assistance under

10 the State plan (except as provided under paragraphs

11 (2) and (3) and under subsection (d)(1)(C)).

12 ‘‘(2) FEDERAL PAYMENT RESTRICTED TO

13 ACUTE CARE SERVICES.—No amounts expended

14 under a State health allowance program that are at15 tributable to medical assistance described in para16 graphs (4), (14), (15), (23), or (24) of section

17 1905(a) shall be included in the total amount ex18 pended as medical assistance under the State plan.

19 ‘‘(3) LIMITATION.—In no case shall this sub20 section result in (A) the total Federal payments to

21 the State for the quarter under this title (including

22 payments attributable to this section and section

23 1923), exceeding (B) the total Federal payments

24 that the Secretary estimates would have been paid
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•S 1533 IS

1 under this title to the State for the quarter if the

2 State did not have a program under this section.

3 ‘‘(b) ELIGIBILITY OF STATE.—A State is eligible for

4 purposes of subsection (a) if the State submits (at such

5 time and in such form as the Secretary may require) an

6 application to the Secretary containing such information

7 and assurances as the Secretary may require, including

8 assurances that the State has adopted and is enforcing

9 standards regarding quality assurance for group health

10 plans participating in the State health allowance program,

11 including standards regarding—

12 ‘‘(1) uniform reporting requirements for such

13 plans relating to a minimum set of clinical data, pa14 tient satisfaction data, and other information that

15 may be used by individuals to compare the quality

16 of various plans; and

17 ‘‘(2) the establishment or designation of an en18 tity of the State government to collect the data de19 scribed in subparagraph (A) and to regularly report

20 such data to the Secretary.

21 ‘‘(c) STATE HEALTH ALLOWANCE PROGRAM DE22 SCRIBED.—

23 ‘‘(1) ENROLLMENT OF PARTICIPATING INDIVID24 UALS IN APPROVED GROUP HEALTH PLANS.—In this

25 section, a State health allowance program is a pro-
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•S 1533 IS

1 gram in effect in all the political subdivisions of the

2 State (except as provided in (c)) under which the

3 State makes payments to a group health plan (ap4 proved under paragraph (2)) which provides cov5 erage to the individual as an allowance towards the

6 costs of providing the individual with benefits under

7 the plan.

8 ‘‘(2) APPROVED PLANS DESCRIBED.—For pur9 poses of paragraph (1), a State shall approve group

10 health plans in accordance with such standards as

11 the State may establish, except that—

12 ‘‘(A) the State may not approve a plan for

13 a year unless the actuarial value of the benefits

14 provided by the plan (taking into account the

15 cost-sharing associated with the plan) for the

16 year—

17 ‘‘(i) with respect to the first year for

18 which the plan is approved for purposes of

19 this subsection, is not less than the actuar20 ial value of the medical assistance provided

21 under the State plan under this title for

22 the year (as determined by the Secretary

23 without regard to medical assistance de24 scribed in paragraphs (4), (14), (15), (23),

25 or (24) of section 1905(a)); and
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•S 1533 IS

1 ‘‘(ii) with respect to any subsequent

2 year, is not greater than the amount deter3 mined under this subparagraph for the

4 preceding year, increased or decreased by

5 the amount (expressed as a percentage) by

6 which the actuarial value of the medical

7 assistance described in clause (i) for the

8 year exceeds or is less than the actuarial

9 value of such medical assistance for the

10 preceding year;

11 ‘‘(B) at least one of the plans approved by

12 the State shall be a health maintenance organi13 zation or other plan under which payments are

14 otherwise made on a capitated basis for provid15 ing medical assistance to individuals enrolled in

16 the State plan under this title; and

17 ‘‘(C) in the case of an individual who is en18 titled to benefits under the State plan under

19 this title as of the first month during which the

20 State health allowance program is in effect, an

21 approved plan may not require the individual to

22 contribute a greater amount of cost-sharing

23 than the individual would have been required to

24 contribute under the State plan (except as may

25 be imposed on an individual described in sub-
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•S 1533 IS

1 paragraph (B) or subparagraph (C) of sub2 section (d)(1)).

3 ‘‘(3) WAIVER OF STATEWIDENESS REQUIRE4 MENT.—At the request of a State, the Secretary

5 may waive for a period not to exceed 3 years (sub6 ject to one 3-year extension) the requirement under

7 paragraph (1) that the State health allowance pro8 gram be in effect in all political subdivisions of the

9 State.

10 ‘‘(d) ELIGIBILITY OF INDIVIDUALS TO PARTICIPATE

11 IN ALLOWANCE PROGRAM.—

12 ‘‘(1) AUTOMATIC ELIGIBILITY OF MEDICAID

13 CATEGORICALLY ELIGIBLE INDIVIDUALS.—Subject

14 to subsection (e), any individual to whom the State

15 makes medical assistance available under the State

16 plan under this title pursuant to clause (i) of section

17 1902(a)(10)(A) shall be eligible to participate in the

18 State health allowance program.

19 ‘‘(2) MANDATORY ELIGIBILITY OF INDIVIDUALS

20 WITH INCOME UNDER THE POVERTY LEVEL.—

21 ‘‘(A) IN GENERAL.—Subject to subsection

22 (e) and subparagraph (B), an individual law23 fully residing in the State shall be eligible to

24 participate in the program if the income of the

25 individual’s family is equal to or less than 100
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•S 1533 IS

1 percent of the official poverty line (as defined

2 by the Office of Management and Budget, and

3 revised annually in accordance with section

4 673(2) of the Omnibus Budget Reconciliation

5 Act of 1991) applicable to a family of the size

6 involved.

7 ‘‘(B) EXCEPTION.—If the application of

8 subparagraph (A) would result in—

9 ‘‘(i) the total State expenditures for a

10 quarter under this title (including expendi11 tures attributable to this section and sec12 tion 1923), exceeding

13 ‘‘(ii) the total State expenditures that

14 the Secretary estimates would have been

15 made under this title for the quarter if the

16 State did not have a program under this

17 section,

18 then there shall be substituted for 100 percent

19 in subparagraph (A) such percent as would re20 sult in the amount described in clause (i) equal21 ing the amount described in clause (ii).

22 ‘‘(3) OPTIONAL ELIGIBILITY OF INDIVIDUALS

23 WITH INCOME UP TO 200 PERCENT OF POVERTY

24 LEVEL.—
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•S 1533 IS

1 ‘‘(A) IN GENERAL.—Subject to subsection

2 (e), a State operating a State health allowance

3 program under this section may make an indi4 vidual lawfully residing in the State eligible to

5 participate in the program if the income of the

6 individual’s family is greater than 100 percent

7 (but less than such percentage, not to exceed

8 200 percent, as the State may specify) of such

9 official poverty line.

10 ‘‘(B) CONTRIBUTION MAY BE REQUIRED.—

11 In the case of an individual who is participating

12 in the program under this paragraph, the pro13 gram may require such an individual to contrib14 ute all (or a portion) of the premiums and cost15 sharing of such a group health plan if the

16 amount of such contribution is determined in

17 accordance with a sliding scale based on the in18 dividual’s family income.

19 ‘‘(e) EXCLUSION AND USE OF RESOURCE STAND20 ARD.—

21 ‘‘(1) EXCLUSION OF ELDERLY MEDICARE-ELIGI22 BLE INDIVIDUALS.—No individual shall be eligible to

23 participate in the program if the individual is enti24 tled to benefits under title XVIII of the Social Secu25 rity Act pursuant to section 226 of such Act.
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•S 1533 IS

1 ‘‘(2) USE OF RESOURCE STANDARD.—A State

2 may require an individual to meet a resource stand3 ard as a condition of eligibility to participate in the

4 program only if the Secretary approves the State’s

5 use of such a standard.

6 ‘‘(f) CONSTRUCTION.—No provision of any Federal

7 law shall prevent a State from enrolling any employee or

8 other individual in accordance with this section. The pre9 vious sentence shall not be construed as permitting a State

10 to require the employer of an individual participating in

11 the program to contribute toward the individual’s pre12 mium required for such participation.

13 ‘‘(g) EVALUATIONS AND REPORTS.—

14 ‘‘(1) EVALUATIONS.—Not later than 3 years

15 after the date of the enactment of this section (and

16 at such subsequent intervals as the Secretary consid17 ers appropriate), the Secretary shall evaluate the ef18 fectiveness of the State health allowance programs

19 for which Federal financial participation is provided

20 under this section, and the impact of such programs

21 on increasing the number of individuals with health

22 insurance coverage in participating States and in

23 controlling the costs of health care in such States.

24 ‘‘(2) REPORTS.—Not later than 3 years after

25 the date of the enactment of this section (and at
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•S 1533 IS

1 such subsequent intervals as the Secretary considers

2 appropriate), the Secretary shall submit a report on

3 the program to Congress.’’.

4 (b) ENSURING BUDGET NEUTRALITY THROUGH RE5 DUCTION IN DISPROPORTIONATE SHARE HOSPITAL PAY6 MENTS FOR PARTICIPATING STATES.—Section 1923 of

7 the Social Security Act (42 U.S.C. 1396r–4), as amended

8 by section 13621(b)(1) of the Omnibus Budget Reconcili9 ation Act of 1993, is amended by adding at the end the

10 following new subsection:

11 ‘‘(h) REDUCTION IN PAYMENT ADJUSTMENTS FOR

12 STATES WITH HEALTH ALLOWANCE PROGRAMS.—In the

13 case of a State operating a State health allowance pro14 gram under section 1931 in a fiscal year, the Secretary

15 shall reduce the total payment adjustments made under

16 this section for hospitals in the State for quarters in the

17 year by such amount as the Secretary determines to be

18 necessary to ensure that the total amount paid to the

19 State under section 1903(a)(1) for the year does not ex20 ceed the amount that would have been paid to the State

21 under such section for the year if the State did not operate

22 such a program.’’.

23 (c) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to calendar quarters beginning on

25 or after January 1, 1994.
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•S 1533 IS

1 SEC. 1602. OPTIONAL USE OF PROGRAM TO OFFER COV2 ERAGE TO SOME OR ALL STATE RESIDENTS.

3 Section 1931 of the Social Security Act, as inserted

4 by section 1601(a)(2), is amended—

5 (1) in subsection (c)(2)(A), in the matter before

6 clause (i), by inserting ‘‘, except as provided in sub7 section (d)(4)(B)(iii),’’ after ‘‘unless’’, and

8 (2) by adding at the end of subsection (d) the

9 following new paragraphs:

10 ‘‘(4) OPTIONAL ENROLLMENT OF OTHER INDI11 VIDUALS.—

12 ‘‘(A) IN GENERAL.—Subject to subsection

13 (e), a State operating a State health allowance

14 program under this section may make any indi15 vidual (or class of individuals) who is not de16 scribed in paragraph (1), (2), or (3) and who

17 is not offered coverage under an employer

18 group health plan eligible to participate in the

19 program.

20 ‘‘(B) SPECIAL RULES.—

21 ‘‘(i) CONTRIBUTION MAY BE RE22 QUIRED.—In the case of an individual who

23 is participating in the program under this

24 paragraph, the program may require such

25 an individual to contribute all (or a por-
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•S 1533 IS

1 tion) of the premiums and cost-sharing of

2 such a group health plan.

3 ‘‘(ii) NO FEDERAL MATCHING PAY4 MENTS.—For purposes of payment to

5 States under section 1903(a), no amounts

6 expended by the State under the program

7 during a fiscal year on behalf of an indi8 vidual enrolled under subparagraph (A)

9 may be included in the total amount ex10 pended during the fiscal year as medical

11 assistance under the State plan.

12 ‘‘(iii) OPTIONAL USE OF STANDARD

13 COVERAGE.—Notwithstanding subsection

14 (c)(2)(A), with respect to individuals en15 rolled under subparagraph (A), such pro16 gram may provide standard coverage (con17 sistent with section 1102(c) of the Afford18 able Health Care Now Act of 1993) rather

19 than the benefits of an actuarial value oth20 erwise required under such subsection.

21 ‘‘(5) OFFERING OF COVERAGE THROUGH

22 OTHER PROGRAMS.—Nothing in this section shall be

23 construed as preventing a State which—

24 ‘‘(A) does not operate a State health allow25 ance program under this section from assuring
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•S 1533 IS

1 that individuals in the State who are not of2 fered coverage under an employer group health

3 plan are offered coverage under a health plan,

4 or

5 ‘‘(B) does operate such a program from as6 suring that individuals in the State who are not

7 described in paragraph (1), (2), or (3) and who

8 are not offered coverage under an employer

9 group health plan are offered coverage under a

10 health plan other than through such program.’’.

11 Subtitle H—Medicaid Program

12 Flexibility

13 SEC. 1701. MODIFICATION OF FEDERAL REQUIREMENTS TO

14 ALLOW STATES MORE FLEXIBILITY IN CON15 TRACTING FOR COORDINATED CARE SERV16 ICES UNDER MEDICAID.

17 (a) IN GENERAL.—Section 1903(m) of the Social Se18 curity Act (42 U.S.C. 1396b(m)) is amended—

19 (1) by striking all that precedes paragraph (4)

20 and inserting the following:

21 ‘‘(m) COORDINATED CARE.—

22 ‘‘(1) PAYMENT CONDITIONED ON COMPLI23 ANCE.—

24 ‘‘(A) GENERAL RULE.—No payment shall

25 be made under this title to a State with respect
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•S 1533 IS

1 to expenditures incurred by it for payment to a

2 risk contracting entity or primary care case

3 management entity (as defined in subparagraph

4 (B)), or with respect to an undertaking de5 scribed in paragraph (6), unless the State and

6 the entity or undertaking meet the applicable

7 requirements of this subsection. For purposes

8 of determining whether payment may be made

9 under this section, the Secretary may reject a

10 State’s determination of compliance with any

11 provision of this subsection.

12 ‘‘(B) GENERAL DEFINITIONS.—For pur13 poses of this title—

14 ‘‘(i) RISK CONTRACTING ENTITY.—

15 The term ‘risk contracting entity’ means

16 an entity that has a contract with the

17 State agency under which the entity—

18 ‘‘(I) provides or arranges for the

19 provision of health care items or serv20 ices to individuals eligible for medical

21 assistance under the State plan under

22 this title, and

23 ‘‘(II) is at risk (as defined in

24 clause (iv)) for part or all of the cost
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•S 1533 IS

1 of such items or services furnished to

2 such individuals.

3 ‘‘(ii) PRIMARY CARE CASE MANAGE4 MENT PROGRAM.—The term ‘primary care

5 case management program’ means a State

6 program under which individuals eligible

7 for medical assistance under the State plan

8 under this title are enrolled with primary

9 care case management entities, and are en10 titled to receive specified health care items

11 and services covered under such plan only

12 as arranged for and approved by such enti13 ties.

14 ‘‘(iii) AT RISK.—An entity is ‘at risk’,

15 for purposes of this subparagraph, if it has

16 a contract with the State agency under

17 which it is paid a fixed amount for provid18 ing or arranging for the provision of speci19 fied health care items or services to an in20 dividual eligible for medical assistance and

21 enrolled with the entity, regardless of

22 whether such items or services are fur23 nished to such individual, and is liable for

24 all or part of the cost of furnishing such

25 items or services, regardless of whether or
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•S 1533 IS

1 the extent to which such cost exceeds such

2 fixed payment.

3 ‘‘(iv) PRIMARY CARE CASE MANAGE4 MENT ENTITY.—The term ‘primary care

5 case management entity’ means a health

6 care provider (whether an individual or an

7 entity) that, under a State primary care

8 case management program meeting the re9 quirements of paragraph (7), has a con10 tract with the State agency under which

11 the entity arranges for or authorizes the

12 provision of health care items and services

13 to individuals eligible for medical assist14 ance under the State plan under this title,

15 but is not at risk (as defined in clause (iv))

16 for the cost of such items or services pro17 vided to such individuals.

18 ‘‘(2) GENERAL REQUIREMENTS FOR RISK CON19 TRACTING ENTITIES.—

20 ‘‘(A) FEDERAL OR STATE QUALIFICA21 TION.—Subject to paragraph (3), a risk con22 tracting entity meets the requirements of this

23 subsection only if it either—

24 ‘‘(i) is a qualified health maintenance

25 organization as defined in section 1310(d)
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•S 1533 IS

1 of the Public Health Service Act, as deter2 mined by the Secretary pursuant to section

3 1312 of that Act, or

4 ‘‘(ii) is an entity which the State

5 agency has determined—

6 ‘‘(I) affords, to individuals eligi7 ble for medical assistance under the

8 State plan and enrolled with the en9 tity, access to health care items and

10 services furnished by the entity, with11 in the area served by the entity, at

12 least equivalent to the access such in13 dividuals would have to such health

14 care items and services in such area if

15 not enrolled with the entity, and

16 ‘‘(II) has made adequate provi17 sion against the risk of insolvency,

18 and assures that individuals eligible

19 for medical assistance under this title

20 are not held liable for the entity’s

21 debts in case of the entity’s insol22 vency.

23 ‘‘(B) INTERNAL QUALITY ASSURANCE.—

24 Subject to paragraph (3), a risk contracting en25 tity meets the requirements of this subsection
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•S 1533 IS

1 only if it has in effect an internal quality assur2 ance program that meets the requirements of

3 paragraph (9).

4 ‘‘(C) CONTRACT WITH STATE AGENCY.—

5 Subject to paragraph (3), a risk contracting en6 tity meets the requirements of this subsection

7 only if the entity has a written contract with

8 the State agency that provides—

9 ‘‘(i) that the entity will comply with

10 all applicable provisions of this subsection;

11 ‘‘(ii) for a payment methodology based

12 on experience rating or another actuarially

13 sound methodology approved by the Sec14 retary, which guarantees (as demonstrated

15 by such models or formulas as the Sec16 retary may approve) that payments to the

17 entity under the contract shall not exceed

18 100 percent of expenditures that would

19 have been made by the State agency in the

20 absence of the contract;

21 ‘‘(iii) that the Secretary and the State

22 (or any person or organization designated

23 by either) shall have the right to audit and

24 inspect any books and records of the entity

25 (and of any subcontractor) that pertain—
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•S 1533 IS

1 ‘‘(I) to the ability of the entity to

2 bear the risk of potential financial

3 losses, or

4 ‘‘(II) to services performed or de5 terminations of amounts payable

6 under the contract;

7 ‘‘(iv) that in the entity’s enrollment,

8 reenrollment, or disenrollment of individ9 uals eligible for medical assistance under

10 this title and eligible to enroll, reenroll, or

11 disenroll with the entity pursuant to the

12 contract, the entity will not discriminate

13 among such individuals on the basis of

14 their health status or requirements for

15 health care services;

16 ‘‘(v)(I) that individuals eligible for

17 medical assistance under the State plan

18 who have enrolled with the entity are per19 mitted to terminate such enrollment with20 out cause as of the beginning of the first

21 calendar month following a full calendar

22 month after the request is made for such

23 termination (or at such times as required

24 pursuant to paragraph (8)), and
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•S 1533 IS

1 ‘‘(II) for notification of each such in2 dividual, at the time of the individual’s en3 rollment, of the right to terminate enroll4 ment;

5 ‘‘(vi) for reimbursement, either by the

6 entity or by the State agency, for medically

7 necessary services provided—

8 ‘‘(I) to an individual eligible for

9 medical assistance under the State

10 plan and enrolled with the entity, and

11 ‘‘(II) other than through the en12 tity because the services were imme13 diately required due to an unforeseen

14 illness, injury, or condition;

15 ‘‘(vii) for disclosure of information in

16 accordance with paragraph (4) and section

17 1124;

18 ‘‘(viii) in the case of an entity that

19 has entered into a contract with a Feder20 ally-qualified health center for the provi21 sion of services of such center—

22 ‘‘(I) that rates of prepayment

23 from the State are adjusted to reflect

24 fully the rates of payment specified in

25 section 1902(a)(13)(E), and
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•S 1533 IS

1 ‘‘(II) that, at the election of such

2 center, payments made by the entity

3 to such center for services described

4 in section 1905(a)(2)(C) are made at

5 the rates of payment specified in sec6 tion 1902(a)(13)(E);

7 ‘‘(ix) that any physician incentive plan

8 that the entity operates meets the require9 ments of section 1876(i)(8);

10 ‘‘(x) for maintenance of sufficient pa11 tient encounter data to identify the physi12 cian who delivers services to patients; and

13 ‘‘(xi) that the entity complies with the

14 requirement of section 1902(w) with re15 spect to each enrollee.

16 ‘‘(3) EXCEPTIONS TO REQUIREMENTS FOR RISK

17 CONTRACTING ENTITIES.—The requirements of

18 paragraph (2) (other than subparagraph (C)(viii))

19 do not apply to an entity that—

20 ‘‘(A)(i) received a grant of at least

21 $100,000 in the fiscal year ending June 30,

22 1976, under section 329(d)(1)(A) or 330(d)(1)

23 of the Public Health Service Act, and for the

24 period beginning July 1, 1976, and ending on

25 the expiration of the period for which payments
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•S 1533 IS

1 are to be made under this title, has been the re2 cipient of a grant under either such section;

3 and

4 ‘‘(ii) provides to its enrollees, on a prepaid

5 capitation or other risk basis, all of the services

6 described in paragraphs (1), (2), (3), (4)(C),

7 and (5) of section 1905(a) and, to the extent

8 required by section 1902(a)(10)(D) to be pro9 vided under the State plan, the services de10 scribed in section 1905(a)(7);

11 ‘‘(B) is a nonprofit primary health care en12 tity located in a rural area (as defined by the

13 Appalachian Regional Commission)—

14 ‘‘(i) which received in the fiscal year

15 ending June 30, 1976, at least $100,000

16 (by grant, subgrant, or subcontract) under

17 the Appalachian Regional Development Act

18 of 1965), and

19 ‘‘(ii) for the period beginning July 1,

20 1976, and ending on the expiration of the

21 period for which payments are to be made

22 under this title either has been the recipi23 ent of a grant, subgrant, or subcontract

24 under such Act or has provided services

25 under a contract (initially entered into dur-
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•S 1533 IS

1 ing a year in which the entity was the re2 cipient of such a grant, subgrant, or sub3 contract) with a State agency under this

4 title on a prepaid capitation or other risk

5 basis; or

6 ‘‘(C) which has contracted with the State

7 agency for the provision of services (but not in8 cluding inpatient hospital services) to persons

9 eligible for medical assistance under this title

10 on a prepaid risk basis prior to 1970.’’; and

11 (2) by adding after paragraph (6) the following

12 new paragraphs:

13 ‘‘(7) GENERAL REQUIREMENTS FOR PRIMARY

14 CARE CASE MANAGEMENT.—A State that elects in

15 its State plan under this title to implement a pri16 mary care case management program under this

17 subsection shall include in the plan methods for the

18 selection and monitoring of participating primary

19 care case management entities to ensure that—

20 ‘‘(A) the numbers, geographic locations,

21 hours of operation, and other relevant charac22 teristics of such entities are sufficient to afford

23 individuals eligible for medical assistance rea24 sonable access to and choice among such enti25 ties;
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•S 1533 IS

1 ‘‘(B) such entities and their professional

2 personnel are qualified to provide health care

3 case management services, through methods in4 cluding ongoing monitoring of compliance with

5 applicable requirements for licensing of health

6 care providers, providing training and certifi7 cation of primary care case managers, and pro8 viding information and technical assistance; and

9 ‘‘(C) such entities are making timely and

10 appropriate decisions with respect to enrollees’

11 need for health care items and services, and are

12 giving timely approval and referral to providers

13 of adequate quality where such items and serv14 ices are determined to be medically necessary.

15 ‘‘(8) STATE OPTIONS WITH RESPECT TO EN16 ROLLMENT AND DISENROLLMENT.—

17 ‘‘(A) MANDATORY ENROLLMENT OP18 TION.—A State plan may require an individual

19 eligible for medical assistance under the State

20 plan (other than a medicare qualified bene21 ficiary) to enroll with a risk contracting entity

22 or primary care case management entity, with23 out regard to the requirement of section

24 1902(a)(1) (concerning Statewideness), the re25 quirements of section 1902(a)(10)(B) (concern-
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•S 1533 IS

1 ing comparability of benefits), or the require2 ments of section 1902(a)(23) (concerning free3 dom of choice of provider), if the individual is

4 permitted a choice—

5 ‘‘(i) between or among two or more

6 risk contracting entities,

7 ‘‘(ii) between a risk contracting entity

8 and a primary care case management en9 tity, or

10 ‘‘(iii) between or among two or more

11 primary care case management entities.

12 ‘‘(B)(i) RESTRICTIONS ON

13 DISENROLLMENT WITHOUT CAUSE.—A State

14 plan may restrict the period in which individ15 uals enrolled with a qualifying risk contracting

16 entity (as defined in clause (ii)) may terminate

17 such enrollment without cause to the first

18 month of each period of enrollment (as defined

19 in clause (iii)), but only if the State provides

20 notification, at least once during each such en21 rollment period, to individuals enrolled with

22 such entity of the right to terminate such en23 rollment and the restriction on the exercise of

24 this right. Such restriction shall not apply to
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1 requests for termination of enrollment for

2 cause.

3 ‘‘(ii) For purposes of this subparagraph,

4 the term ‘qualifying risk contracting entity’

5 means a risk contracting entity that is—

6 ‘‘(I) a qualified health maintenance

7 organization as defined in section 1310(d)

8 of the Public Health Service Act;

9 ‘‘(II) an eligible organization with a

10 contract under section 1876;

11 ‘‘(III) an entity that is receiving (and

12 has received during the previous 2 years)

13 a grant of at least $100,000 under section

14 329(d)(1)(A) or 330(d)(1) of the Public

15 Health Service Act;

16 ‘‘(IV) an entity that is receiving (and

17 has received during the previous 2 years)

18 at least $100,000 (by grant, subgrant, or

19 subcontract) under the Appalachian Re20 gional Development Act of 1965;

21 ‘‘(V) a program pursuant to an under22 taking described in paragraph (6) in which

23 at least 25 percent of the membership en24 rolled on a prepaid basis are individuals

25 who (I) are not insured for benefits under
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1 part B of title XVIII or eligible for medical

2 assistance under this title, and (II) (in the

3 case of such individuals whose prepay4 ments are made in whole or in part by any

5 government entity) had the opportunity at

6 the time of enrollment in the program to

7 elect other coverage of health care costs

8 that would have been paid in whole or in

9 part by any governmental entity; or

10 ‘‘(VI) an entity that, on the date of

11 enactment of this provision, had a contract

12 with the State agency under a waiver

13 under section 1115 or 1915(b) and was

14 not subject to a requirement under this

15 subsection to permit disenrollment without

16 cause.

17 ‘‘(iii) For purposes of this subparagraph,

18 the term ‘period of enrollment’ means—

19 ‘‘(I) a period not to exceed 6 months

20 in duration, or

21 ‘‘(II) a period not to exceed one year

22 in duration, in the case of a State that, on

23 the effective date of this subparagraph,

24 had in effect a waiver under section 1115

25 of requirements under this title under
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1 which the State could establish a 1-year

2 minimum period of enrollment with risk

3 contracting entities.

4 ‘‘(C) REENROLLMENT OF INDIVIDUALS

5 WHO REGAIN ELIGIBILITY.—In the case of an

6 individual who—

7 ‘‘(i) in a month is eligible for medical

8 assistance under the State plan and en9 rolled with a risk contracting entity with a

10 contract under this subsection,

11 ‘‘(ii) in the next month (or next 2

12 months) is not eligible for such medical as13 sistance, but

14 ‘‘(iii) in the succeeding month is again

15 eligible for such benefits,

16 the State plan may enroll the individual for

17 that succeeding month with such entity, if the

18 entity continues to have a contract with the

19 State agency under this subsection.

20 ‘‘(9) REQUIREMENTS FOR INTERNAL QUALITY

21 ASSURANCE PROGRAMS.—The requirements for an

22 internal quality assurance program of a risk con23 tracting entity are that program is written and the

24 program—
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•S 1533 IS

1 ‘‘(A) specifies a systematic process includ2 ing ongoing monitoring, corrective action, and

3 other appropriate activities to achieve specified

4 and measurable goals and objectives for quality

5 of care, and including annual evaluation of the

6 program;

7 ‘‘(B) identifies the organizational units re8 sponsible for performing specific quality assur9 ance functions, and ensure that they are ac10 countable to the governing body of the entity

11 and that they have adequate supervision, staff,

12 and other necessary resources to perform these

13 functions effectively;

14 ‘‘(C) if any quality assistance functions are

15 delegated to other entities, ensures that the risk

16 contracting entity remains accountable for all

17 quality assurance functions, and has mecha18 nisms to ensure that all quality assurance ac19 tivities are carried out;

20 ‘‘(D) includes methods to ensure that phy21 sicians and other health care professionals

22 under contract with the entity are qualified to

23 perform the services they provide, and that

24 these qualifications are ensured through appro-
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1 priate credentialing and recredentialing proce2 dures;

3 ‘‘(E) includes policies addressing enrollee

4 rights and responsibilities, including grievance

5 mechanisms and mechanisms to inform enroll6 ees about access to and use of services provided

7 by the entity;

8 ‘‘(F) provides for continuous monitoring of

9 the delivery of health care, including—

10 ‘‘(i) identification of clinical areas to

11 be monitored,

12 ‘‘(ii) use of quality indicators and

13 standards for assessing care delivered, in14 cluding availability and accessibility of

15 care,

16 ‘‘(iii) monitoring, through use of epi17 demiological data or chart review, the care

18 of individuals, as appropriate, and patterns

19 of care overall, and

20 ‘‘(iv) implementation of corrective ac21 tions; and

22 ‘‘(G) meets any other requirements pre23 scribed by the Secretary after consultation with

24 States.
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1 ‘‘(10) INDEPENDENT REVIEW AND QUALITY AS2 SURANCE.—

3 ‘‘(A) STATE GRIEVANCE PROCEDURE.—A

4 State contracting with a risk contracting entity

5 or primary care case management entity under

6 this subsection shall provide for a grievance

7 procedure for enrollees of such entity with at

8 least the following elements:

9 ‘‘(i) A toll-free telephone number for

10 enrollee questions and grievances.

11 ‘‘(ii) A State-operated enrollee griev12 ance procedure.

13 ‘‘(iii) Periodic notification of enrollees

14 of their rights with respect to such entity

15 or program.

16 ‘‘(iv) Periodic sample reviews of griev17 ances registered with such entity or pro18 gram or with the State.

19 ‘‘(v) Periodic survey and analysis of

20 enrollee satisfaction with such entity or

21 program.

22 ‘‘(B) STATE MONITORING OF RISK CON23 TRACTING ENTITIES’ QUALITY ASSURANCE PRO24 GRAMS.—A State contracting with a risk con25 tracting entity under this subsection shall peri-
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1 odically review such entity’s quality assurance

2 program to ensure that it meets the require3 ments of paragraph (9).

4 ‘‘(C) EXTERNAL INDEPENDENT REVIEW

5 OF INTERNAL QUALITY ASSURANCE.—A State

6 contracting with a risk contracting entity under

7 this subsection shall provide for annual external

8 independent review (by a utilization control and

9 peer review organization with a contract under

10 section 1153, or another organization unaffili11 ated with the State government approved by the

12 Secretary) of such entity’s internal quality as13 surance activities. Such independent review

14 shall include—

15 ‘‘(i) review of the entity’s medical

16 care, through sampling of medical records

17 or other appropriate methods, for indica18 tions of inappropriate utilization and treat19 ment,

20 ‘‘(ii) review of enrollee inpatient and

21 ambulatory data, through sampling of

22 medical records or other appropriate meth23 ods, to determine quality trends,

24 ‘‘(iii) review of the entity’s internal

25 quality assurance activities, and
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•S 1533 IS

1 ‘‘(iv) notification of the entity and the

2 State, and appropriate followup activities,

3 when the review under this subparagraph

4 indicates inappropriate care or treat5 ment.’’.

6 (b) STATE OPTION TO GUARANTEE MEDICAID ELI7 GIBILITY.—Section 1902(e)(2) of such Act (42 U.S.C.

8 1396a(e)(2)) is amended—

9 (A) in subparagraph (A), by striking all

10 that precedes ‘‘(but for this paragraph)’’ and

11 inserting ‘‘In the case of an individual who is

12 enrolled—

13 ‘‘(i) with a risk contracting entity (as

14 defined in section 1903(m)(1)(B)(i)) re15 sponsible for the provision of inpatient hos16 pital services and any other service de17 scribed in paragraphs (2), (3), (4), (5),

18 and (7) of section 1905(a),

19 ‘‘(ii) with any risk contracting entity

20 (as so defined) in a State that, on the ef21 fective date of this provision, had in effect

22 a waiver under section 1115 of require23 ments under this title under which the

24 State could extend eligibility for medical

25 assistance for enrollees of such entity, or
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•S 1533 IS

1 ‘‘(iii) with an eligible organization

2 with a contract under section 1876 and

3 who would’’, and

4 (B) in subparagraph (B), by striking ‘‘or5 ganization or’’ each place it appears.

6 (c) CONFORMING AMENDMENTS.—

7 (1) Section 1128(b)(6)(C)(i) of such Act (42

8 U.S.C. 1320a–7(b)(6)(C)(i)) is amended by striking

9 ‘‘health maintenance organization’’ and inserting

10 ‘‘risk contracting entity’’.

11 (2) Section 1902(a)(25)(A) of such Act (42

12 U.S.C. 1396a(a)(25)(A)), as amended by section

13 13622(a)(1) of the Omnibus Budget Reconciliation

14 Act of 1993, is amended by striking ‘‘health mainte15 nance organizations’’ and inserting ‘‘risk contracting

16 entities’’.

17 (3) Section 1902(a)(25)(H) of such Act (42

18 U.S.C. 1396a(a)(25)(H)), as added by section

19 13622(b)(3) of the Omnibus Budget Reconciliation

20 Act of 1993, is amended by striking ‘‘health mainte21 nance organization’’ and inserting ‘‘risk contracting

22 entity’’.

23 (4) Section 1902(a)(30)(C) of such Act (42

24 U.S.C. 1396a(a)(30)(C)) is amended by striking all

25 that precedes ‘‘with the results’’ and inserting ‘‘pro-
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•S 1533 IS

1 vide for independent review and quality assurance of

2 entities with contracts under section 1903(m), in ac3 cordance with paragraph (10) of such section,’’.

4 (5) Section 1902(a)(57) of such Act (42 U.S.C.

5 1396a(a)(57)) is amended by striking ‘‘or health

6 maintenance organization’’ and inserting ‘‘or risk

7 contracting entity’’.

8 (6) Section 1902(a) of such Act (42 U.S.C.

9 1396a(a)), as amended by sections 13623(a),

10 13625(a), and 13631(a) of the Omnibus Budget

11 Reconciliation Act of 1993, is amended—

12 (A) by striking ‘‘and’’ at the end of para13 graph (61);

14 (B) by striking the period at the end of

15 paragraph (62) and inserting ‘‘; and’’; and

16 (C) by adding at the end the following new

17 paragraph:

18 ‘‘(63) at State option, provide for a primary

19 care case management program in accordance with

20 section 1903(m)(7).’’.

21 (7) Section 1902(p)(2) of such Act (42 U.S.C.

22 1396a(p)(2)) is amended by striking ‘‘health mainte23 nance organization’’ and inserting ‘‘risk contracting

24 entity’’.
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1 (8) Section 1902(w) of such Act (42 U.S.C.

2 1396a(w)) is amended—

3 (A) in paragraph (1), by striking ‘‘section

4 1903(m)(1)(A)’’ and inserting ‘‘section

5 1903(m)(2)(C)(xi)’’, and

6 (B) in paragraph (2)(E), by striking

7 ‘‘health maintenance organization’’ and ‘‘the or8 ganization’’ and inserting ‘‘risk contracting en9 tity’’ and ‘‘the entity’’, respectively.

10 (9) Section 1903(k) of such Act (42 U.S.C.

11 1396b(k)) is amended by striking ‘‘health mainte12 nance organization’’ and inserting ‘‘risk contracting

13 entity’’.

14 (10) Section 1903(m)(4)(A) of such Act (42

15 U.S.C. 1396b(m)(4)(A)) is amended—

16 (A) in the first sentence, by striking ‘‘Each

17 health maintenance organization’’ and inserting

18 ‘‘Each risk contracting entity’’,

19 (B) in the first sentence, by striking ‘‘the

20 organization’’ each place it appears and insert21 ing ‘‘the entity’’, and

22 (C) in the second sentence, by striking ‘‘an

23 organization’’ and ‘‘the organization’’ and in24 serting ‘‘a risk contracting entity’’ and ‘‘the

25 risk contracting entity’’, respectively.
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•S 1533 IS

1 (11) Section 1903(m)(4)(B) of such Act (42

2 U.S.C. 1396b(m)(4)(B)) is amended by striking ‘‘or3 ganization’’ and inserting ‘‘risk contracting entity’’.

4 (12) Section 1903(m)(5) of such Act (42

5 U.S.C. 1396b(m)(5)) is amended in paragraphs

6 (A)(iii) and (B)(ii) by striking ‘‘organization’’ and

7 inserting ‘‘entity’’.

8 (13) Section 1903(o) (42 U.S.C. 1396b(o)), as

9 amended by section 13622(a)(2) of the Omnibus

10 Budget Reconciliation Act of 1993, is amended by

11 striking ‘‘health maintenance organization’’ and in12 serting ‘‘risk contracting entity’’.

13 (14) Section 1903(w)(7)(A)(viii) of such Act

14 (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended by

15 striking ‘‘health maintenance organizations (and

16 other organizations with contracts under section

17 1903(m))’’ and inserting ‘‘risk contracting entities

18 with contracts under section 1903(m)’’.

19 (15) Section 1905(a) of such Act (42 U.S.C.

20 1396d(a)) is amended, in the matter preceding

21 clause (i), by inserting ‘‘(which may be on a prepaid

22 capitation or other risk basis)’’ after ‘‘payment’’ the

23 first place it appears.

24 (16) Section 1908(b) of such Act, as added by

25 section 13623(b) of the Omnibus Budget Reconcili-
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•S 1533 IS

1 ation Act of 1993, is amended by striking ‘‘health

2 maintenance organization’’ and inserting ‘‘risk con3 tracting entity’’.

4 (17) Section 1916(b)(2)(D) of such Act (42

5 U.S.C. 1396o(b)(2)(D)) is amended by striking

6 ‘‘health maintenance organization’’ and inserting

7 ‘‘risk contracting entity’’.

8 (18) Section 1925(b)(4)(D)(iv) of such Act (42

9 U.S.C. 1396r–6(b)(4)(D)(iv)) is amended—

10 (A) in the heading, by striking ‘‘HMO’’ and

11 inserting ‘‘RISK CONTRACTING ENTITY’’,

12 (B) by striking ‘‘health maintenance orga13 nization’’ and inserting ‘‘risk contracting en14 tity’’ each place it appears, and

15 (C) by striking ‘‘section 1903(m)(1)(A)’’

16 and inserting ‘‘section 1903(m)(1)(B)(i)’’.

17 (19) Paragraphs (1) and (2) of section 1926(a)

18 of such Act (42 U.S.C. 1396r–7(a)) are each amend19 ed by striking ‘‘health maintenance organizations’’

20 and inserting ‘‘risk contracting entities’’.

21 (20) Section 1927 of such Act (42 U.S.C.

22 1396s) is amended—

23 (A) in subsection (c)(1)(C)(i), as amended

24 by section 13602(a)(1) of the Omnibus Budget

25 Reconciliation Act of 1993, by striking ‘‘health
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•S 1533 IS

1 maintenance organization’’ and inserting ‘‘risk

2 contracting entity’’ , and

3 (B) in subsection (j)(1), by striking ‘‘***

4 Health Maintenance Organizations, including

5 those organizations’’ and inserting ‘‘risk con6 tracting entities’’.

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

8 this section shall become effective with respect to calendar

9 quarters beginning on or after January 1, 1994.

10 SEC. 1702. PERIOD OF CERTAIN WAIVERS.

11 (a) IN GENERAL.—Section 1915(h) of the Social Se12 curity Act (42 U.S.C. 1396n(h)) is amended by striking

13 ‘‘No waiver’’ and all that follows through ‘‘unless the Sec14 retary’’ and inserting ‘‘A waiver under this section (other

15 than under subsection (c), (d), or (e)) shall be for an ini16 tial term of 3 years and, upon the request of a State, shall

17 be extended for additional 5 year periods unless the Sec18 retary’’.

19 (b) EFFECTIVE DATE.—The amendment made by

20 subsection (a) shall apply to waivers pursuant to applica21 tions which are approved, and with respect to continu22 ations of waivers for which requests are made, later than

23 30 days after the date of the enactment of this Act.
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1 TITLE II—HEALTH CARE COST

2 CONTAINMENT AND QUALITY

3 ENHANCEMENT

4 Subtitle A—Medical Malpractice

5 Liability Reform

6 PART 1—GENERAL PROVISIONS

7 SEC. 2001. FEDERAL REFORM OF MEDICAL MALPRACTICE

8 LIABILITY ACTIONS.

9 (a) APPLICABILITY.—This subtitle shall apply with

10 respect to any medical malpractice liability claim and to

11 any medical malpractice liability action brought in any

12 State or Federal court, except that this subtitle shall not

13 apply to a claim or action for damages arising from a vac14 cine-related injury or death to the extent that title XXI

15 of the Public Health Service Act applies to the claim or

16 action.

17 (b) PREEMPTION.—The provisions of this subtitle

18 shall preempt any State law to the extent such law is in19 consistent with the limitations contained in such provi20 sions. The provisions of this subtitle shall not preempt any

21 State law that provides for defenses or places limitations

22 on a person’s liability in addition to those contained in

23 this subtitle, places greater limitations on the amount of

24 attorneys’ fees that can be collected, or otherwise imposes

25 greater restrictions than those provided in this subtitle.
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•S 1533 IS

1 (c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

2 OF LAW OR VENUE.—Nothing in subsection (b) shall be

3 construed to—

4 (1) waive or affect any defense of sovereign im5 munity asserted by any State under any provision of

6 law;

7 (2) waive or affect any defense of sovereign im8 munity asserted by the United States;

9 (3) affect the applicability of any provision of

10 the Foreign Sovereign Immunities Act of 1976;

11 (4) preempt State choice-of-law rules with re12 spect to claims brought by a foreign nation or a citi13 zen of a foreign nation; or

14 (5) affect the right of any court to transfer

15 venue or to apply the law of a foreign nation or to

16 dismiss a claim of a foreign nation or of a citizen

17 of a foreign nation on the ground of inconvenient

18 forum.

19 (d) FEDERAL COURT JURISDICTION NOT ESTAB20 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

21 this subtitle shall be construed to establish any jurisdiction

22 in the district courts of the United States over medical

23 malpractice liability actions on the basis of section 1331

24 or 1337 of title 28, United States Code.
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•S 1533 IS

1 SEC. 2002. DEFINITIONS.

2 As used in this subtitle:

3 (1) ALTERNATIVE DISPUTE RESOLUTION SYS4 TEM; ADR.—The term ‘‘alternative dispute resolu5 tion system’’ or ‘‘ADR’’ means a system established

6 under this subtitle that provides for the resolution of

7 medical malpractice liability claims in a manner

8 other than through medical malpractice liability ac9 tions.

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

11 any person who alleges a medical malpractice liabil12 ity claim, and any person on whose behalf such a

13 claim is alleged, including the decedent in the case

14 of an action brought through or on behalf of an es15 tate.

16 (3) CLEAR AND CONVINCING EVIDENCE.—The

17 term ‘‘clear and convincing evidence’’ is that meas18 ure or degree of proof that will produce in the mind

19 of the trier of fact a firm belief or conviction as to

20 the truth of the allegations sought to be established,

21 except that such measure or degree of proof is more

22 than that required under preponderance of the evi23 dence, but less than that required for proof beyond

24 a reasonable doubt.

25 (4) ECONOMIC DAMAGES.—The term ‘‘economic

26 damages’’ means damages paid to compensate an in-
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1 dividual for hospital and other medical expenses, lost

2 wages, lost employment, and other pecuniary losses.

3 (5) 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 (6) 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 (7) INJURY.—The term ‘‘injury’’ means any ill17 ness, disease, or other harm that is the subject of

18 a medical malpractice liability action or a medical

19 malpractice liability claim.

20 (8) MEDICAL MALPRACTICE LIABILITY AC21 TION.—The term ‘‘medical malpractice liability ac22 tion’’ means a civil action brought in a State or Fed23 eral court against a health care provider or health

24 care professional in which the plaintiff alleges a

25 medical malpractice liability claim, but does not in-
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1 clude any action in which the plaintiff’s sole allega2 tion is an allegation of an intentional tort.

3 (9) MEDICAL MALPRACTICE LIABILITY

4 CLAIM.—The term ‘‘medical malpractice liability

5 claim’’ means a claim in which the claimant alleges

6 that injury was caused by the provision of (or the

7 failure to provide) health care services or the use of

8 a medical product.

9 (10) MEDICAL PRODUCT.—

10 (A) IN GENERAL.—The term ‘‘medical

11 product’’ means, with respect to the allegation

12 of a claimant, a drug (as defined in section

13 201(g)(1) of the Federal Food, Drug, and Cos14 metic Act (21 U.S.C. 321(g)(1)) or a medical

15 device (as defined in section 201(h) of the Fed16 eral Food, Drug, and Cosmetic Act (21 U.S.C.

17 321(h)) if—

18 (i) such drug or device was subject to

19 premarket approval under section 505,

20 507, or 515 of the Federal Food, Drug,

21 and Cosmetic Act (21 U.S.C. 355, 357, or

22 360e) or section 351 of the Public Health

23 Service Act (42 U.S.C. 262) with respect

24 to the safety of the formulation or per25 formance of the aspect of such drug or de-
217

•S 1533 IS

1 vice which is the subject of the claimant’s

2 allegation or the adequacy of the packag3 ing or labeling of such drug or device, and

4 such drug or device is approved by the

5 Food and Drug Administration; or

6 (ii) the drug or device is generally rec7 ognized as safe and effective under regula8 tions issued by the Secretary of Health

9 and Human Services under section 201(p)

10 of the Federal Food, Drug, and Cosmetic

11 Act (21 U.S.C. 321(p)).

12 (B) EXCEPTION IN CASE OF MISREPRE13 SENTATION OR FRAUD.—Notwithstanding sub14 paragraph (A), the term ‘‘medical product’’

15 shall not include any product described in such

16 subparagraph if the claimant shows that the

17 product is approved by the Food and Drug Ad18 ministration for marketing as a result of with19 held information, misrepresentation, or an ille20 gal payment by manufacturer of the product.

21 (11) NONECONOMIC DAMAGES.—The term

22 ‘‘noneconomic damages’’ means damages paid to

23 compensate an individual for physical and emotional

24 pain, suffering, inconvenience, physical impairment,

25 mental anguish, disfigurement, loss of enjoyment of
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•S 1533 IS

1 life, loss of consortium, and other nonpecuniary

2 losses, but does not include punitive damages.

3 (12) PUNITIVE DAMAGES; EXEMPLARY DAM4 AGES.—The terms ‘‘punitive damages’’ and ‘‘exem5 plary damages’’ mean compensation, in addition to

6 compensation for actual harm suffered, that is

7 awarded for the purpose of punishing a person for

8 conduct deemed to be malicious, wanton, willful, or

9 excessively reckless.

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

11 means the Secretary of Health and Human Services.

12 (14) STATE.—The term ‘‘State’’ means each of

13 the several States, the District of Columbia, the

14 Commonwealth of Puerto Rico, the Virgin Islands,

15 Guam, and American Samoa.

16 SEC. 2003. EFFECTIVE DATE.

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

18 (b) and section 2017(c), this subtitle shall apply with re19 spect to claims accruing or actions brought on or after

20 the expiration of the 3-year period that begins on the date

21 of the enactment of this Act.

22 (b) EXCEPTION FOR STATES REQUESTING EARLIER

23 IMPLEMENTATION OF REFORMS.—

24 (1) APPLICATION.—A State may submit an ap25 plication to the Secretary requesting the early imple-
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•S 1533 IS

1 mentation of this subtitle with respect to claims or

2 actions brought in the State.

3 (2) DECISION BY SECRETARY.—The Secretary

4 shall issue a response to a State’s application under

5 paragraph (1) not later than 90 days after receiving

6 the application. If the Secretary determines that the

7 State meets the requirements of this subtitle at the

8 time of submitting its application, the Secretary

9 shall approve the State’s application, and this sub10 title shall apply with respect to actions brought in

11 the State on or after the expiration of the 90-day

12 period that begins on the date the Secretary issues

13 the response. If the Secretary denies the State’s ap14 plication, the Secretary shall provide the State with

15 a written explanation of the grounds for the deci16 sion.

17 PART 2—MEDICAL MALPRACTICE AND

18 PRODUCT LIABILITY REFORM

19 SEC. 2011. REQUIREMENT FOR INITIAL RESOLUTION OF AC20 TION THROUGH ALTERNATIVE DISPUTE RES21 OLUTION.

22 (a) IN GENERAL.—

23 (1) STATE CASES.—A medical malpractice li24 ability action may not be brought in any State court

25 during a calendar year unless the medical mal-
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•S 1533 IS

1 practice liability claim that is the subject of the ac2 tion has been initially resolved under an alternative

3 dispute resolution system certified for the year by

4 the Secretary under section 2032(a), or, in the case

5 of a State in which such a system is not in effect

6 for the year, under the alternative Federal system

7 established under section 2032(b).

8 (2) FEDERAL DIVERSITY ACTIONS.—A medical

9 malpractice liability action may not be brought in

10 any Federal court under section 1332 of title 28,

11 United States Code, during a calendar year unless

12 the medical malpractice liability claim that is the

13 subject of the action has been initially resolved

14 under the alternative dispute resolution system re15 ferred to in paragraph (1) that applied in the State

16 whose law applies in such action.

17 (3) CLAIMS AGAINST UNITED STATES.—

18 (A) ESTABLISHMENT OF PROCESS FOR

19 CLAIMS.—The Attorney General shall establish

20 an alternative dispute resolution process for the

21 resolution of tort claims consisting of medical

22 malpractice liability claims brought against the

23 United States under chapter 171 of title 28,

24 United States Code. Under such process, the

25 resolution of a claim shall occur after the com-
221

•S 1533 IS

1 pletion of the administrative claim process ap2 plicable to the claim under section 2675 of such

3 title.

4 (B) REQUIREMENT FOR INITIAL RESOLU5 TION UNDER PROCESS.—A medical malpractice

6 liability action based on a medical malpractice

7 liability claim described in subparagraph (A)

8 may not be brought in any Federal court unless

9 the claim has been initially resolved under the

10 alternative dispute resolution process estab11 lished by the Attorney General under such sub12 paragraph.

13 (b) INITIAL RESOLUTION OF CLAIMS UNDER

14 ADR.—For purposes of subsection (a), an action is ‘‘ini15 tially resolved’’ under an alternative dispute resolution

16 system if—

17 (A) the ADR reaches a decision on wheth18 er the defendant is liable to the plaintiff for

19 damages; and

20 (B) if the ADR determines that the de21 fendant is liable, the ADR reaches a decision on

22 the amount of damages assessed against the de23 fendant.

24 (c) PROCEDURES FOR FILING ACTIONS.—
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•S 1533 IS

1 (1) NOTICE OF INTENT TO CONTEST DECI2 SION.—Not later than 60 days after a decision is is3 sued with respect to a medical malpractice liability

4 claim under an alternative dispute resolution system,

5 each party affected by the decision shall submit a

6 sealed statement to a court of competent jurisdiction

7 indicating whether or not the party intends to con8 test the decision.

9 (2) DEADLINE FOR FILING ACTION.—A medical

10 malpractice liability action may not be brought by a

11 party unless—

12 (A) the party has filed the notice of intent

13 required by paragraph (1); and

14 (B) the party files the action in a court of

15 competent jurisdiction not later than 90 days

16 after the decision resolving the medical mal17 practice liability claim that is the subject of the

18 action is issued under the applicable alternative

19 dispute resolution system.

20 (3) COURT OF COMPETENT JURISDICTION.—

21 For purposes of this subsection, the term ‘‘court of

22 competent jurisdiction’’ means—

23 (A) with respect to actions filed in a State

24 court, the appropriate State trial court; and
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•S 1533 IS

1 (B) with respect to actions filed in a Fed2 eral court, the appropriate United States dis3 trict court.

4 (d) LEGAL EFFECT OF UNCONTESTED ADR DECI5 SION.—The decision reached under an alternative dispute

6 resolution system shall, for purposes of enforcement by a

7 court of competent jurisdiction, have the same status in

8 the court as the verdict of a medical malpractice liability

9 action adjudicated in a State or Federal trial court. The

10 previous sentence shall not apply to a decision that is con11 tested by a party affected by the decision pursuant to sub12 section (c)(1).

13 SEC. 2012. CALCULATION AND PAYMENT OF DAMAGES.

14 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

15 total amount of noneconomic damages that may be award16 ed to a claimant and the members of the claimant’s family

17 for losses resulting from the injury which is the subject

18 of a medical malpractice liability action may not exceed

19 $250,000, regardless of the number of parties against

20 whom the action is brought or the number of actions

21 brought with respect to the injury.

22 (b) TREATMENT OF PUNITIVE DAMAGES.—

23 (1) BASIS FOR RECOVERY.—Punitive or exem24 plary damages shall not be awarded in a medical

25 malpractice liability action unless the claimant es-
224

•S 1533 IS

1 tablishes by clear and convincing evidence that the

2 injury suffered was the direct result of conduct

3 manifesting a malicious, wanton, willful, or exces4 sively reckless disregard of the safety of others.

5 (2) NO AWARD AGAINST MANUFACTURER OF

6 MEDICAL PRODUCT.—In the case of a medical mal7 practice liability action in which the plaintiff alleges

8 a claim against the manufacturer of a medical prod9 uct, no punitive or exemplary damages may be

10 awarded against such manufacturer.

11 (3) PAYMENTS TO STATE FOR MEDICAL QUAL12 ITY ASSURANCE ACTIVITIES.—

13 (A) IN GENERAL.—Any punitive or exem14 plary damages awarded in a medical mal15 practice liability action shall be paid to the

16 State in which the action is brought or, in a

17 case brought in Federal court, in the State in

18 which the health care services that caused the

19 injury that is the subject of the action were

20 provided.

21 (B) ACTIVITIES DESCRIBED.—A State

22 shall use amounts paid pursuant to subpara23 graph (A) to carry out activities to assure the

24 safety and quality of health care services pro-
225

•S 1533 IS

1 vided in the State, including (but not limited

2 to)—

3 (i) licensing or certifying health care

4 professionals and health care providers in

5 the State;

6 (ii) operating alternative dispute reso7 lution systems;

8 (iii) carrying out public education pro9 grams relating to medical malpractice and

10 the availability of alternative dispute reso11 lution systems in the State; and

12 (iv) carrying out programs to reduce

13 malpractice-related costs for retired provid14 ers or other providers volunteering to pro15 vide services in medically underserved

16 areas.

17 (C) MAINTENANCE OF EFFORT.—A State

18 shall use any amounts paid pursuant to sub19 paragraph (A) to supplement and not to replace

20 amounts spent by the State for the activities

21 described in subparagraph (B).

22 (c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—

23 (1) GENERAL RULE.—In any medical mal24 practice liability action in which the damages award25 ed for future economic loss exceeds $100,000, a de-
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1 fendant may not be required to pay such damages

2 in a single, lump-sum payment, but shall be per3 mitted to make such payments periodically based on

4 when the damages are found likely to occur, as such

5 payments are determined by the court.

6 (2) WAIVER.—A court may waive the applica7 tion of paragraph (1) with respect to a defendant if

8 the court determines that it is not in the best inter9 ests of the plaintiff to receive payments for damages

10 on such a periodic basis.

11 SEC. 2013. TREATMENT OF ATTORNEY’S FEES AND OTHER

12 COSTS.

13 (a) LIMITATION ON AMOUNT OF CONTINGENCY

14 FEES.—

15 (1) IN GENERAL.—An attorney who represents,

16 on a contingency fee basis, a claimant in a medical

17 malpractice liability claim may not charge, demand,

18 receive, or collect for services rendered in connection

19 with such claim in excess of the following amount re20 covered by judgment or settlement under such claim:

21 (A) 25 percent of the first $150,000 (or

22 portion thereof) recovered, plus

23 (B) 10 percent of any amount in excess of

24 $150,000 recovered.
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1 (2) CALCULATION OF PERIODIC PAYMENTS.—In

2 the event that a judgment or settlement includes

3 periodic or future payments of damages, the amount

4 recovered for purposes of computing the limitation

5 on the contingency fee under paragraph (1) shall be

6 based on the cost of the annuity or trust established

7 to make the payments. In any case in which an an8 nuity or trust is not established to make such pay9 ments, such amount shall be based on the present

10 value of the payments.

11 (b) REQUIRING PARTY CONTESTING ADR RULING

12 TO PAY ATTORNEY’S FEES AND OTHER COSTS.—

13 (1) IN GENERAL.—The court in a medical mal14 practice liability action shall require the party that

15 (pursuant to section 2011(c)(1)) contested the ruling

16 of the alternative dispute resolution system with re17 spect to the medical malpractice liability claim that

18 is the subject of the action to pay to the opposing

19 party the costs incurred by the opposing party under

20 the action, including attorney’s fees, fees paid to ex21 pert witnesses, and other litigation expenses (but not

22 including court costs, filing fees, or other expenses

23 paid directly by the party to the court, or any fees

24 or costs associated with the resolution of the claim
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1 under the alternative dispute resolution system), but

2 only if—

3 (A) in the case of an action in which the

4 party that contested the ruling is the claimant,

5 the amount of damages awarded to the party

6 under the action does not exceed the amount of

7 damages awarded to the party under the ADR

8 system by at least 10 percent; and

9 (B) in the case of an action in which the

10 party that contested the ruling is the defendant,

11 the amount of damages assessed against the

12 party under the action is not at least 10 per13 cent less than the amount of damages assessed

14 under the ADR system.

15 (2) EXCEPTIONS.—Paragraph (1) shall not

16 apply if—

17 (A) the party contesting the ruling made

18 under the previous alternative dispute resolu19 tion system shows that—

20 (i) the ruling was procured by corrup21 tion, fraud, or undue means,

22 (ii) there was partiality or corruption

23 under the system,
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1 (iii) there was other misconduct under

2 the system that materially prejudiced the

3 party’s rights, or

4 (iv) the ruling was based on an error

5 of law;

6 (B) the party contesting the ruling made

7 under the alternative dispute resolution system

8 presents new evidence before the trier of fact

9 that was not available for presentation under

10 the ADR system;

11 (C) the medical malpractice liability action

12 raised a novel issue of law; or

13 (D) the court finds that the application of

14 such paragraph to a party would constitute an

15 undue hardship, and issues an order waiving or

16 modifying the application of such paragraph

17 that specifies the grounds for the court’s deci18 sion.

19 (3) REQUIREMENT FOR PERFORMANCE

20 BOND.—The court in a medical malpractice liability

21 action shall require the party that (pursuant to sec22 tion 2011(c)(1)) contested the ruling of the alter23 native dispute resolution system with respect to the

24 medical malpractice liability claim that is the subject

25 of the action to post a performance bond (in such
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•S 1533 IS

1 amount and consisting of such funds and assets as

2 the court determines to be appropriate), except that

3 the court may waive the application of such require4 ment to a party if the court determines that the

5 posting of such a bond is not necessary to ensure

6 that the party shall meet the requirements of this

7 subsection to pay the opposing party the costs in8 curred by the opposing party under the action.

9 (4) LIMIT ON ATTORNEY’S FEES PAID.—Attor10 neys’ fees that are required to be paid under para11 graph (1) by the contesting party shall not exceed

12 the amount of the attorneys’ fees incurred by the

13 contesting party in the action. If the attorneys’ fees

14 of the contesting party are based on a contingency

15 fee agreement, the amount of attorneys’ fees for

16 purposes of the preceding sentence shall not exceed

17 the reasonable value of those services.

18 (5) RECORDS.—In order to receive attorneys’

19 fees under paragraph (1), counsel of record in the

20 medical malpractice liability action involved shall

21 maintain accurate, complete records of hours worked

22 on the action, regardless of the fee arrangement

23 with the client involved.

24 (c) CONTINGENCY FEE DEFINED.—As used in this

25 section, the term ‘‘contingency fee’’ means any fee for pro-
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1 fessional legal services which is, in whole or in part, con2 tingent upon the recovery of any amount of damages,

3 whether through judgment or settlement.

4 SEC. 2014. JOINT AND SEVERAL LIABILITY.

5 Except as provided in subsection (b), a defendant

6 may be held severally but not jointly liable in a medical

7 malpractice action. A person found liable for damages in

8 any such action may be found liable, if at all, only for

9 those damages directly attributable to the person’s propor10 tionate share of fault or responsibility for the injury, and

11 may not be found liable for damages attributable to the

12 proportionate share of fault or responsibility of any other

13 person (without regard to whether that person is a party

14 to the action) for the injury, including any person bringing

15 the action.

16 SEC. 2015. STATUTE OF LIMITATIONS.

17 A medical malpractice liability claim may not be

18 brought after the expiration of the 7-year period that be19 gins on the date the alleged injury that is the subject of

20 the claim occurred. If the commencement of such an ac21 tion is stayed or enjoined, the running of the statute of

22 limitations under this section shall be suspended for the

23 period of the stay or injunction.
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1 SEC. 2016. UNIFORM STANDARD FOR DETERMINING NEG2 LIGENCE.

3 A defendant in a medical malpractice liability action

4 may not be found to have acted negligently unless the de5 fendant’s conduct at the time of providing the health care

6 services that are the subject of the action was not reason7 able.

8 SEC. 2017. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

9 SERVICES.

10 (a) IMPOSITION OF HIGHER STANDARD OF PROOF.—

11 In the case of a medical malpractice liability claim relating

12 to services provided during labor or the delivery of a baby,

13 if the health care professional against whom the claim is

14 brought did not previously treat the individual alleged to

15 have been injured for the pregnancy, the trier of fact may

16 not find that the defendant committed malpractice and

17 may not assess damages against the health care profes18 sional unless the malpractice is proven by clear and con19 vincing evidence.

20 (b) APPLICABILITY TO GROUP PRACTICES OR

21 AGREEMENTS AMONG PROVIDERS.—For purposes of sub22 section (a), a health care professional shall be considered

23 to have previously treated an individual for a pregnancy

24 if the professional is a member of a group practice whose

25 members previously treated the individual for the preg26 nancy or is providing services to the individual during
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•S 1533 IS

1 labor or the delivery of a baby pursuant to an agreement

2 with another health care professional.

3 (c) EFFECTIVE DATE.—This section shall apply with

4 respect to claims accruing or actions brought on or after

5 the expiration of the 2-year period that begins on the date

6 of the enactment of this Act.

7 PART 3—REQUIREMENTS FOR STATE AL8 TERNATIVE DISPUTE RESOLUTION

9 SYSTEMS (ADR)

10 SEC. 2031. BASIC REQUIREMENTS.

11 (a) IN GENERAL.—A State’s alternative dispute reso12 lution system meets the requirements of this section if the

13 system—

14 (1) applies to all medical malpractice liability

15 claims under the jurisdiction of the courts of that

16 State;

17 (2) requires that a written opinion resolving the

18 dispute be issued not later than 6 months after the

19 date by which each party against whom the claim is

20 filed has received notice of the claim (other than in

21 exceptional cases for which a longer period is re22 quired for the issuance of such an opinion), and that

23 the opinion contain—

24 (A) findings of fact relating to the dispute,

25 and
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1 (B) a description of the costs incurred in

2 resolving the dispute under the system (includ3 ing any fees paid to the individuals hearing and

4 resolving the claim), together with an appro5 priate assessment of the costs against any of

6 the parties;

7 (3) requires individuals who hear and resolve

8 claims under the system to meet such qualifications

9 as the State may require (in accordance with regula10 tions of the Secretary);

11 (4) is approved by the State or by local govern12 ments in the State;

13 (5) with respect to a State system that consists

14 of multiple dispute resolution procedures—

15 (A) permits the parties to a dispute to se16 lect the procedure to be used for the resolution

17 of the dispute under the system, and

18 (B) if the parties do not agree on the pro19 cedure to be used for the resolution of the dis20 pute, assigns a particular procedure to the par21 ties;

22 (6) provides for the transmittal to the State

23 agency responsible for monitoring or disciplining

24 health care professionals and health care providers

25 of any findings made under the system that such a
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•S 1533 IS

1 professional or provider committed malpractice, un2 less, during the 90-day period beginning on the date

3 the system resolves the claim against the profes4 sional or provider, the professional or provider

5 brings an action contesting the decision made under

6 the system; and

7 (7) provides for the regular transmittal to the

8 Administrator for Health Care Policy and Research

9 of information on disputes resolved under the sys10 tem, in a manner that assures that the identity of

11 the parties to a dispute shall not be revealed.

12 (b) APPLICATION OF MALPRACTICE LIABILITY

13 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

14 The provisions of part 2 shall apply with respect to claims

15 brought under a State alternative dispute resolution sys16 tem or the alternative Federal system in the same manner

17 as such provisions apply with respect to medical mal18 practice liability actions brought in the State.

19 SEC. 2032. CERTIFICATION OF STATE SYSTEMS; APPLICA20 BILITY OF ALTERNATIVE FEDERAL SYSTEM.

21 (a) CERTIFICATION.—

22 (1) IN GENERAL.—Not later than October 1 of

23 each year (beginning with 1994), the Secretary, in

24 consultation with the Attorney General, shall deter25 mine whether a State’s alternative dispute resolution
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1 system meets the requirements of this part for the

2 following calendar year.

3 (2) BASIS FOR CERTIFICATION.—The Secretary

4 shall certify a State’s alternative dispute resolution

5 system under this subsection for a calendar year if

6 the Secretary determines under paragraph (1) that

7 the system meets the requirements of section 2031.

8 (b) APPLICABILITY OF ALTERNATIVE FEDERAL SYS9 TEM.—

10 (1) ESTABLISHMENT AND APPLICABILITY.—

11 Not later than October 1, 1994, the Secretary, in

12 consultation with the Attorney General, shall estab13 lish by rule an alternative Federal ADR system for

14 the resolution of medical malpractice liability claims

15 during a calendar year in States that do not have

16 in effect an alternative dispute resolution system

17 certified under subsection (a) for the year.

18 (2) REQUIREMENTS FOR SYSTEM.—Under the

19 alternative Federal ADR system established under

20 paragraph (1)—

21 (A) paragraphs (1), (2), (6), and (7) of

22 section 2031(a) shall apply to claims brought

23 under the system;

24 (B) if the system provides for the resolu25 tion of claims through arbitration, the claims
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•S 1533 IS

1 brought under the system shall be heard and

2 resolved by arbitrators appointed by the Sec3 retary in consultation with the Attorney Gen4 eral; and

5 (C) with respect to a State in which the

6 system is in effect, the Secretary may (at the

7 State’s request) modify the system to take into

8 account the existence of dispute resolution pro9 cedures in the State that affect the resolution

10 of medical malpractice liability claims.

11 (3) TREATMENT OF STATES WITH ALTER12 NATIVE SYSTEM IN EFFECT.—If the alternative Fed13 eral ADR system established under this subsection is

14 applied with respect to a State for a calendar year—

15 (A) the State shall reimburse the United

16 States (at such time and in such manner as the

17 Secretary may require) for the costs incurred

18 by the United States during the year as a result

19 of the application of the system with respect to

20 the State; and

21 (B) notwithstanding any other provision of

22 law, no funds may be paid to the State (or to

23 any unit of local government in the State) or to

24 any entity in the State pursuant to the Public

25 Health Service Act.
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1 SEC. 2033. REPORTS ON IMPLEMENTATION AND EFFEC2 TIVENESS OF ALTERNATIVE DISPUTE RESO3 LUTION SYSTEMS.

4 (a) IN GENERAL.—Not later than 5 years after the

5 date of the enactment of this Act, the Secretary shall pre6 pare and submit to the Congress a report describing and

7 evaluating State alternative dispute resolution systems op8 erated pursuant to this part and the alternative Federal

9 system established under section 2032(b).

10 (b) CONTENTS OF REPORT.—The Secretary shall in11 clude in the report prepared and submitted under sub12 section (a)—

13 (1) information on—

14 (A) the effect of the alternative dispute

15 resolution systems on the cost of health care

16 within each State,

17 (B) the impact of such systems on the ac18 cess of individuals to health care within the

19 State, and

20 (C) the effect of such systems on the qual21 ity of health care provided within the State; and

22 (2) to the extent that such report does not pro23 vide information on no-fault systems operated by

24 States as alternative dispute resolution systems pur25 suant to this part, an analysis of the feasibility and

26 desirability of establishing a system under which
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1 medical malpractice liability claims shall be resolved

2 on a no-fault basis.

3 PART 4—OTHER PROVISIONS RELATING

4 TO MEDICAL MALPRACTICE LIABILITY

5 SEC. 2041. PERMITTING STATE PROFESSIONAL SOCIETIES

6 TO PARTICIPATE IN DISCIPLINARY ACTIVI7 TIES.

8 (a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith9 standing any other provision of State or Federal law, a

10 State agency responsible for the conduct of disciplinary

11 actions for a type of health care practitioner may enter

12 into agreements with State or county professional societies

13 of such type of health care practitioner to permit such so14 cieties to participate in the licensing of such health care

15 practitioner, and to review any health care malpractice ac16 tion, health care malpractice claim or allegation, or other

17 information concerning the practice patterns of any such

18 health care practitioner. Any such agreement shall comply

19 with subsection (b).

20 (b) REQUIREMENTS OF AGREEMENTS.—Any agree21 ment entered into under subsection (a) for licensing activi22 ties or the review of any health care malpractice action,

23 health care malpractice claim or allegation, or other infor24 mation concerning the practice patterns of a health care

25 practitioner shall provide that—
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1 (1) the health care professional society conducts

2 such activities or review as expeditiously as possible;

3 (2) after the completion of such review, such so4 ciety shall report its findings to the State agency

5 with which it entered into such agreement;

6 (3) the conduct of such activities or review and

7 the reporting of such findings be conducted in a

8 manner which assures the preservation of confiden9 tiality of health care information and of the review

10 process; and

11 (4) no individual affiliated with such society is

12 liable for any damages or injury directly caused by

13 the individual’s actions in conducting such activities

14 or review.

15 (c) AGREEMENTS NOT MANDATORY.—Nothing in

16 this section may be construed to require a State to enter

17 into agreements with societies described in subsection (a)

18 to conduct the activities described in such subsection.

19 (d) EFFECTIVE DATE.—This section shall take effect

20 2 years after the date of the enactment of this Act.

21 SEC. 2042. STUDY OF INCENTIVES TO ENCOURAGE VOL22 UNTARY SERVICE BY PHYSICIANS.

23 (a) STUDY.—The Secretary shall conduct a study

24 analyzing the existence and effectiveness of incentives

25 adopted by State and local governments, insurers, medical
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•S 1533 IS

1 societies, and other entities to encourage physicians

2 (whether practicing or retired) to volunteer to provide

3 health care services in medically underserved areas.

4 (b) REPORTS.—(1) Not later than 1 year after the

5 date of the enactment of this Act, the Secretary shall sub6 mit an interim report to Congress on the study conducted

7 under subsection (a), together with the Secretary’s rec8 ommendations for actions to increase the number of physi9 cians volunteering to provide health care services in medi10 cally underserved areas.

11 (2) Not later than 5 years after the date of the enact12 ment of this Act, the Secretary shall submit a final report

13 to the Congress on the study conducted under subsection

14 (a) (taking into account the effects of this subtitle on the

15 incidence and costs of medical malpractice), together with

16 the Secretary’s recommendations for actions to increase

17 the number of physicians volunteering to provide health

18 care services in medically underserved areas.

19 SEC. 2043. REQUIREMENTS FOR RISK MANAGEMENT PRO20 GRAMS.

21 (a) REQUIREMENTS FOR PROVIDERS.—Each State

22 shall require each health care professional and health care

23 provider providing services in the State to participate in

24 a risk management program to prevent and provide early
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1 warning of practices which may result in injuries to pa2 tients or which otherwise may endanger patient safety.

3 (b) REQUIREMENTS FOR INSURERS.—Each State

4 shall require each entity which provides health care profes5 sional or provider liability insurance to health care profes6 sionals and health care providers in the State to—

7 (1) establish risk management programs based

8 on data available to such entity or sanction pro9 grams of risk management for health care profes10 sionals and health care providers provided by other

11 entities; and

12 (2) require each such professional or provider,

13 as a condition of maintaining insurance, to partici14 pate in one program described in paragraph (1) at

15 least once in each 3-year period.

16 (c) EFFECTIVE DATE.—This section shall take effect

17 2 years after the date of the enactment of this Act.

18 SEC. 2044. GRANTS FOR MEDICAL SAFETY PROMOTION.

19 (a) RESEARCH ON MEDICAL INJURY PREVENTION

20 AND COMPENSATION.

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

22 grants for the conduct of basic research in the pre23 vention of and compensation for injuries resulting

24 from health care professional or health care provider
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•S 1533 IS

1 malpractice, and research of the outcomes of health

2 care procedures.

3 (2) PREFERENCE FOR RESEARCH ON CERTAIN

4 ACTIVITIES.—In making grants under paragraph

5 (1), the Secretary shall give preference to applica6 tions for grants to conduct research on the behavior

7 of health care providers and health care profes8 sionals in carrying out their professional duties and

9 of other participants in systems for compensating in10 dividuals injured by medical malpractice, the effects

11 of financial and other incentives on such behavior,

12 the determinants of compensation system outcomes,

13 and the costs and benefits of alternative compensa14 tion policy options.

15 (3) APPLICATION.—The Secretary may not

16 make a grant under paragraph (1) unless an appli17 cant submits an application to the Secretary at such

18 time, in such form, in such manner, and containing

19 such information as the Secretary may require.

20 (b) GRANTS FOR LICENSING AND DISCIPLINARY AC21 TIVITIES.—

22 (1) IN GENERAL.—The Secretary shall make

23 grants to States to assist States in improving the

24 State’s ability to license and discipline health care

25 professionals.
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1 (2) USES FOR GRANTS.—A State may use a

2 grant awarded under subsection (a) to develop and

3 implement improved mechanisms for monitoring the

4 practices of health care professionals or for conduct5 ing disciplinary activities.

6 (3) TECHNICAL ASSISTANCE.—The Secretary

7 shall provide technical assistance to States receiving

8 grants under paragraph (1) to assist them in evalu9 ating their medical practice acts and procedures and

10 to encourage the use of efficient and effective early

11 warning systems and other mechanisms for detecting

12 practices which endanger patient safety and for dis13 ciplining health care professionals.

14 (4) APPLICATIONS.—The Secretary may not

15 make a grant under paragraph (1) unless the appli16 cant submits an application to the Secretary at such

17 time, in such form, in such manner, and containing

18 such information as the Secretary shall require.

19 (c) GRANTS FOR PUBLIC EDUCATION PROGRAMS.—

20 (1) IN GENERAL.—The Secretary shall make

21 grants to States and to local governments, private

22 nonprofit organizations, and health professional

23 schools (as defined in paragraph (3)) for—
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•S 1533 IS

1 (A) educating the general public about the

2 appropriate use of health care and realistic ex3 pectations of medical intervention;

4 (B) educating the public about the re5 sources and role of health care professional li6 censing and disciplinary boards in investigating

7 claims of incompetence or health care mal8 practice; and

9 (C) developing programs of faculty train10 ing and curricula for educating health care pro11 fessionals in quality assurance, risk manage12 ment, and medical injury prevention.

13 (2) APPLICATIONS.—The Secretary may not

14 make a grant under paragraph (1) unless the appli15 cant submits an application to the Secretary at such

16 time, in such form, in such manner, and containing

17 such information as the Secretary shall require.

18 (3) HEALTH PROFESSIONAL SCHOOL DE19 FINED.—In paragraph (1), the term ‘‘health profes20 sional school’’ means a school of nursing (as defined

21 in section 853(2) of the Public Health Service Act)

22 or a school or program under section 799(1) of such

23 Act.

24 (d) AUTHORIZATION OF APPROPRIATIONS.—There

25 are authorized to be appropriated not more than
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•S 1533 IS

1 $15,000,000 for each of the first 5 fiscal years beginning

2 on or after the date of the enactment of this Act for grants

3 under this section.

4 Subtitle B—Administrative Cost

5 Savings

6 PART 1—STANDARDIZATION OF CLAIMS

7 PROCESSING

8 SEC. 2101. ADOPTION OF DATA ELEMENTS, UNIFORM

9 CLAIMS, AND UNIFORM ELECTRONIC TRANS10 MISSION STANDARDS.

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

12 Human Services (in this subtitle referred to as the ‘‘Sec13 retary’’) shall adopt standards relating to each of the fol14 lowing:

15 (1) Data elements for use in paper and elec16 tronic claims processing under health benefit plans,

17 as well as for use in utilization review and manage18 ment of care (including data fields, formats, and

19 medical nomenclature, and including plan benefit

20 and insurance information).

21 (2) Uniform claims forms (including uniform

22 procedure and billing codes for uses with such forms

23 and including information on other health benefit

24 plans that may be liable for benefits).
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•S 1533 IS

1 (3) Uniform electronic transmission of the data

2 elements (for purposes of billing and utilization re3 view).

4 Standards under paragraph (3) relating to electronic

5 transmission of data elements for claims for services shall

6 supersede (to the extent specified in such standards) the

7 standards adopted under paragraph (2) relating to the

8 submission of paper claims for such services. Standards

9 under paragraph (3) shall include protections to assure

10 the confidentiality of patient-specific information and to

11 protect against the unauthorized use and disclosure of in12 formation.

13 (b) USE OF TASK FORCES.—In adopting standards

14 under this section—

15 (1) the Secretary shall take into account the

16 recommendations of current taskforces, including at

17 least the Workgroup on Electronic Data Inter18 change, National Uniform Billing Committee, the

19 Uniform Claim Task Force, and the Computer-based

20 Patient Record Institute;

21 (2) the Secretary shall consult with the Na22 tional Association of Insurance Commissioners (and,

23 with respect to standards under subsection (a)(3),

24 the American National Standards Institute); and
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•S 1533 IS

1 (3) the Secretary shall, to the maximum extent

2 practicable, seek to make the standards consistent

3 with any uniform clinical data sets which have been

4 adopted and are widely recognized.

5 (c) DEADLINES FOR PROMULGATION.—The Sec6 retary shall promulgate the standards under—

7 (1) subsection (a)(1) relating to claims process8 ing data, by not later than 12 months after the date

9 of the enactment of this Act;

10 (2) subsection (a)(2) (relating to uniform

11 claims forms) by not later than 12 months after the

12 date of the enactment of this Act; and

13 (3)(A) subsection (a)(3) relating to trans14 mission of information concerning hospital and phy15 sicians services, by not later than 24 months after

16 the date of the enactment of this Act, and

17 (B) subsection (a)(3) relating to transmission

18 of information on other services, by such later date

19 as the Secretary may determine it to be feasible.

20 (d) REPORT TO CONGRESS.—Not later than 3 years

21 after the date of the enactment of this Act, the Secretary

22 shall report to Congress recommendations regarding re23 structuring the medicare peer review quality assurance

24 program given the availability of hospital data in elec25 tronic form.
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1 SEC. 2102. APPLICATION OF STANDARDS.

2 (a) IN GENERAL.—If the Secretary determines, at

3 the end of the 2-year period beginning on the date that

4 standards are adopted under section 2101 with respect to

5 classes of services, that a significant number of claims for

6 benefits for such services under health benefit plans are

7 not being submitted in accordance with such standards,

8 the Secretary may require, after notice in the Federal

9 Register of not less than 6 months, that all providers of

10 such services must submit claims to health benefit plans

11 in accordance with such standards. The Secretary may

12 waive the application of such a requirement in such cases

13 as the Secretary finds that the imposition of the require14 ment would not be economically practicable.

15 (b) SIGNIFICANT NUMBER.—The Secretary shall

16 make an affirmative determination described in subsection

17 (a) for a class of services only if the Secretary finds that

18 there would be a significant, measurable additional gain

19 in efficiencies in the health care system that would be ob20 tained by imposing the requirement described in such

21 paragraph with respect to such services.

22 (c) APPLICATION OF REQUIREMENT.—

23 (1) IN GENERAL.—If the Secretary imposes the

24 requirement under subsection (a)—

25 (A) in the case of a requirement that im26 poses the standards relating to electronic trans-
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1 mission of claims for a class of services, each

2 health care provider that furnishes such services

3 for which benefits are payable under a health

4 benefit plan shall transmit electronically and di5 rectly to the plan on behalf of the beneficiary

6 involved a claim for such services in accordance

7 with such standards;

8 (B) any health benefit plan may reject any

9 claim subject to the standards adopted under

10 section 2101 but which is not submitted in ac11 cordance with such standards;

12 (C) it is unlawful for a health benefit plan

13 (i) to reject any such claim on the basis of the

14 form in which it is submitted if it is submitted

15 in accordance with such standards or (ii) to re16 quire, for the purpose of utilization review or as

17 a condition of providing benefits under the plan,

18 a provider to transmit medical data elements

19 that are inconsistent with the standards estab20 lished under section 2101(a)(1); and

21 (D) the Secretary may impose a civil

22 money penalty on any provider that knowingly

23 and repeatedly submits claims in violation of

24 such standards or on any health benefit plan

25 (other than a health benefit plan described in
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1 paragraph (2)) that knowingly and repeatedly

2 rejects claims in violation of subparagraph (B),

3 in an amount not to exceed $100 for each such

4 claim.

5 The provisions of section 1128A of the Social Secu6 rity Act (other than the first sentence of subsection

7 (a) and other than subsection (b)) shall apply to a

8 civil money penalty under subparagraph (D) in the

9 same manner as such provisions apply to a penalty

10 or proceeding under section 1128A(a) of such Act.

11 (2) PLANS SUBJECT TO EFFECTIVE STATE REG12 ULATION.—A plan described in this paragraph is a

13 health benefit plan—

14 (A) that is subject to regulation by a

15 State, and

16 (B) with respect to which the Secretary

17 finds that—

18 (i) the State provides for application

19 of the standards established under section

20 2101, and

21 (ii) the State regulatory program pro22 vides for the appropriate and effective en23 forcement of such standards.

24 (d) TREATMENT OF REJECTIONS.—If a plan rejects

25 a claim pursuant to subsection (c)(1), the plan shall per-
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1 mit the person submitting the claim a reasonable oppor2 tunity to resubmit the claim on a form or in an electronic

3 manner that meets the requirements for acceptance of the

4 claim under such subsection.

5 SEC. 2103. PERIODIC REVIEW AND REVISION OF

6 STANDARDS.

7 (a) IN GENERAL.—The Secretary shall—

8 (1) provide for the ongoing receipt and review

9 of comments and suggestions for changes in the

10 standards adopted and promulgated under section

11 2101;

12 (2) establish a schedule for the periodic review

13 of such standards; and

14 (3) based upon such comments, suggestions,

15 and review, revise such standards and promulgate

16 such revisions.

17 (b) APPLICATION OF REVISED STANDARDS.—If the

18 Secretary under subsection (a) revises the standards de19 scribed in 2101, then, in the case of any claim for benefits

20 submitted under a health benefit plan more than the mini21 mum period (of not less than 6 months specified by the

22 Secretary) after the date the revision is promulgated

23 under subsection (a)(3), such standards shall apply under

24 section 2102 instead of the standards previously promul25 gated.
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1 SEC. 2104. HEALTH BENEFIT PLAN DEFINED.

2 In this subtitle, the term ‘‘health benefit plan’’ has

3 the meaning given such term in section 112(6) and in4 cludes—

5 (1) the medicare program (under title XVIII of

6 the Social Security Act) and medicare supplemental

7 health insurance, and

8 (2) a State medicaid plan (approved under title

9 XIX of such Act).

10 PART 2—ELECTRONIC MEDICAL DATA

11 STANDARDS

12 SEC. 2111. MEDICAL DATA STANDARDS FOR HOSPITALS

13 AND OTHER PROVIDERS.

14 (a) PROMULGATION OF HOSPITAL DATA STAND15 ARDS.—

16 (1) IN GENERAL.—Between July 1, 1994, and

17 January 1, 1995, the Secretary shall promulgate

18 standards described in subsection (b) for hospitals

19 concerning electronic medical data.

20 (2) REVISION.—The Secretary may from time

21 to time revise the standards promulgated under this

22 subsection.

23 (b) CONTENTS OF DATA STANDARDS.—The stand24 ards promulgated under subsection (a) shall include at

25 least the following:
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1 (1) A definition of a standard set of data ele2 ments for use by utilization and quality control peer

3 review organizations.

4 (2) A definition of the set of comprehensive

5 data elements, which set shall include for hospitals

6 the standard set of data elements defined under

7 paragraph (1).

8 (3) Standards for an electronic patient care in9 formation system with data obtained at the point of

10 care, including standards to protect against the un11 authorized use and disclosure of information.

12 (4) A specification of, and manner of presen13 tation of, the individual data elements of the sets

14 and system under this subsection.

15 (5) Standards concerning the transmission of

16 electronic medical data.

17 (6) Standards relating to confidentiality of pa18 tient-specific information.

19 The standards under this section shall be consistent with

20 standards for data elements established under section

21 2101.

22 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO23 VIDERS.—

24 (1) IN GENERAL.—The Secretary may promul25 gate standards described in paragraph (2) concern-
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1 ing electronic medical data for providers that are not

2 hospitals. The Secretary may from time to time re3 vise the standards promulgated under this sub4 section.

5 (2) CONTENTS OF DATA STANDARDS.—The

6 standards promulgated under paragraph (1) for non7 hospital providers may include standards comparable

8 to the standards described in paragraphs (2), (4),

9 and (5) of subsection (b) for hospitals.

10 (d) CONSULTATION.—In promulgating and revising

11 standards under this section, the Secretary shall—

12 (1) consult with the American National Stand13 ards Institute, hospitals, with the advisory commis14 sion established under section 2115, and with other

15 affected providers, health benefit plans, and other

16 interested parties, and

17 (2) take into consideration, in developing stand18 ards under subsection (b)(1), the data set used by

19 the utilization and quality control peer review pro20 gram under part B of title XI of the Social Security

21 Act.

22 SEC. 2112. APPLICATION OF ELECTRONIC DATA STAND23 ARDS TO CERTAIN HOSPITALS.

24 (a) MEDICARE REQUIREMENT FOR SHARING OF

25 HOSPITAL INFORMATION.—As of January 1, 1996, sub-
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1 ject to paragraph (2), each hospital, as a requirement of

2 each participation agreement under section 1866 of the

3 Social Security Act, shall—

4 (1) maintain clinical data included in the set of

5 comprehensive data elements under section

6 2111(b)(2) in electronic form on all inpatients,

7 (2) upon request of the Secretary or of a utili8 zation and quality control peer review organization

9 (with which the Secretary has entered into a con10 tract under part B of title XI of such Act), transmit

11 electronically the data set, and

12 (3) upon request of the Secretary, or of a fiscal

13 intermediary or carrier, transmit electronically any

14 data (with respect to a claim) from such data set,

15 in accordance with the standards promulgated under sec16 tion 2111(a).

17 (b) WAIVER AUTHORITY.—Until January 1, 2000:

18 (1) The Secretary may waive the application of

19 the requirements of subsection (a) for a hospital

20 that is a small rural hospital, for such period as the

21 hospital demonstrates compliance with such require22 ments would constitute an undue financial hardship.

23 (2) The Secretary may waive the application of

24 the requirements of subsection (a) for a hospital

25 that is in the process of developing a system to pro-
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1 vide the required data set and executes agreements

2 with its fiscal intermediary and its utilization and

3 quality control peer review organization that the hos4 pital will meet the requirements of subsection (a) by

5 a specified date (not later than January 1, 2000).

6 (3) The Secretary may waive the application of

7 the requirement of subsection (a)(1) for a hospital

8 that agrees to obtain from its records the data ele9 ments that are needed to meet the requirements of

10 paragraphs (2) and (3) of subsection (a) and agrees

11 to subject its data transfer process to a quality as12 surance program specified by the Secretary.

13 (c) APPLICATION TO HOSPITALS OF THE DEPART14 MENT OF VETERANS AFFAIRS.—

15 (1) IN GENERAL.—The Secretary of Veterans

16 Affairs shall provide that each hospital of the De17 partment of Veterans Affairs shall comply with the

18 requirements of subsection (a) in the same manner

19 as such requirements would apply to the hospital if

20 it were participating in the Medicare program.

21 (2) WAIVER.—Such Secretary may waive the

22 application of such requirements to a hospital in the

23 same manner as the Secretary of Health and

24 Human Services may waive under subsection (b) the

25 application of the requirements of subsection (a).
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1 SEC. 2113. ELECTRONIC TRANSMISSION TO FEDERAL AGEN2 CIES.

3 (a) IN GENERAL.—Effective January 1, 2000, if a

4 provider is required under a Federal program to transmit

5 a data element that is subject to a presentation or trans6 mission standard (as defined in subsection (b)), the head

7 of the Federal agency responsible for such program (if not

8 otherwise authorized) is authorized to require the provider

9 to present and transmit the data element electronically in

10 accordance with such a standard.

11 (b) PRESENTATION OR TRANSMISSION STANDARD

12 DEFINED.—In subsection (a), the term ‘‘presentation or

13 transmission standard’’ means a standard, promulgated

14 under subsection (b) or (c) of section 2111, described in

15 paragraph (4) or (5) of section 2111(b).

16 SEC. 2114. LIMITATION ON DATA REQUIREMENTS WHERE

17 STANDARDS IN EFFECT.

18 (a) IN GENERAL.—If standards with respect to data

19 elements are promulgated under section 2111 with respect

20 to a class of provider, a health benefit plan may not re21 quire, for the purpose of utilization review or as a condi22 tion of providing benefits under the plan, that a provider

23 in the class—

24 (1) provide any data element not in the set of

25 comprehensive data elements specified under such

26 standards, or
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1 (2) transmit or present any such data element

2 in a manner inconsistent with the applicable stand3 ards for such transmission or presentation.

4 (b) COMPLIANCE.—

5 (1) IN GENERAL.—The Secretary may impose a

6 civil money penalty on any health benefit plan (other

7 than a health benefit plan described in paragraph

8 (2)) that fails to comply with subsection (a) in an

9 amount not to exceed $100 for each such failure.

10 The provisions of section 1128A of the Social Secu11 rity Act (other than the first sentence of subsection

12 (a) and other than subsection (b)) shall apply to a

13 civil money penalty under this paragraph in the

14 same manner as such provisions apply to a penalty

15 or proceeding under section 1128A(a) of such Act.

16 (2) PLANS SUBJECT TO EFFECTIVE STATE REG17 ULATION.—A plan described in this paragraph is a

18 health benefit plan that is subject to regulation by

19 a State, if the Secretary finds that—

20 (A) the State provides for application of

21 the requirement of subsection (a), and

22 (B) the State regulatory program provides

23 for the appropriate and effective enforcement of

24 such requirement with respect to such plans.
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1 SEC. 2115. ADVISORY COMMISSION.

2 (a) IN GENERAL.—The Secretary shall establish an

3 advisory commission including hospital executives, hospital

4 data base managers, physicians, health services research5 ers, and technical experts in collection and use of data

6 and operation of data systems. Such commission shall in7 clude, as ex officio members, a representative of the Direc8 tor of the National Institutes of Health, the Administrator

9 for Health Care Policy and Research, the Secretary of

10 Veterans Affairs, and the Director of the Centers for Dis11 ease Control.

12 (b) FUNCTIONS.—The advisory commission shall

13 monitor and advise the Secretary concerning—

14 (1) the standards established under this part,

15 and

16 (2) operational concerns about the implementa17 tion of such standards under this part.

18 (c) STAFF.—From the amounts appropriated under

19 subsection (d), the Secretary shall provide sufficient staff

20 to assist the advisory commission in its activities under

21 this section.

22 (d) AUTHORIZATION OF APPROPRIATIONS.—There

23 are authorized to be appropriated $2,000,000 for each of

24 fiscal years 1994 through 1999 to carry out this section.
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1 PART 3—DEVELOPMENT AND DISTRIBU2 TION OF COMPARATIVE VALUE INFOR3 MATION

4 SEC. 2121. STATE COMPARATIVE VALUE INFORMATION

5 PROGRAMS FOR HEALTH CARE PURCHASING.

6 (a) PURPOSE.—In order to assure the availability of

7 comparative value information to purchasers of health

8 care in each State, the Secretary shall determine whether

9 each State is developing and implementing a health care

10 value information program that meets the criteria and

11 schedule set forth in subsection (b).

12 (b) CRITERIA AND SCHEDULE FOR STATE PRO13 GRAMS.—The criteria and schedule for a State health care

14 value information program in this subsection shall be spec15 ified by the Secretary as follows:

16 (1) The State begins promptly after enactment

17 of this Act to develop (directly or through contrac18 tual or other arrangements with one or more States,

19 coalitions of health insurance purchasers, other enti20 ties, or any combination of such arrangements) in21 formation systems regarding comparative health val22 ues.

23 (2) The information contained in such systems

24 covers at least the average prices of common health

25 care services (as defined in subsection (d)) and
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•S 1533 IS

1 health insurance plans, and, where available, meas2 ures of the variability of these prices within a State

3 or other market areas.

4 (3) The information described in paragraph (2)

5 is made available within the State beginning not

6 later than one year after the date of the enactment

7 of this Act, and is revised as frequently as reason8 ably necessary, but at intervals of no greater than

9 one year.

10 (4) Not later than 6 years after the date of the

11 enactment of this Act the State has developed infor12 mation systems that provide comparative costs, qual13 ity, and outcomes data with respect to health insur14 ance plans and hospitals and made the information

15 broadly available within the relevant market areas.

16 Nothing in this section shall preclude a State from provid17 ing additional information, such as information on prices

18 and benefits of different health benefit plans, available.

19 (c) GRANTS TO STATES FOR THE DEVELOPMENT OF

20 STATE PROGRAMS.—

21 (1) GRANT AUTHORITY.—The Secretary may

22 make grants to each State to enable such State to

23 plan the development of its health care value infor24 mation program and, if necessary, to initiate the im25 plementation of such program. Each State seeking
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1 such a grant shall submit an application therefore,

2 containing such information as the Secretary finds

3 necessary to assure that the State is likely to de4 velop and implement a program in accordance with

5 the criteria and schedule in subsection (b).

6 (2) OFFSET AUTHORITY.—If, at any time with7 in the 3-year period following the receipt by a State

8 of a grant under this subsection, the Secretary is re9 quired by section 2122 to implement a health care

10 information program in the State, the Secretary may

11 recover the amount of the grant under this sub12 section by offset against any other amount payable

13 to the State under the Social Security Act. The

14 amount of the offset shall be made available (from

15 the appropriation account with respect to which the

16 offset was taken) to the Secretary to carry out such

17 section.

18 (3) AUTHORIZATION OF APPROPRIATIONS.—

19 There are authorized to be appropriated such sums

20 as are necessary to make grants under this sub21 section, to remain available until expended.

22 (d) COMMON HEALTH CARE SERVICES DEFINED.—

23 In this section, the term ‘‘common health care services’’

24 includes such procedures as the Secretary may specify and
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•S 1533 IS

1 any additional health care services which a State may wish

2 to include in its comparative value information program.

3 (e) STATE DEFINED.—In this subtitle, the term

4 ‘‘State’’ includes the District of Columbia, Puerto Rico,

5 the Virgin Islands, Guam, and American Samoa.

6 SEC. 2122. FEDERAL IMPLEMENTATION.

7 (a) IN GENERAL.—If the Secretary finds, at any

8 time, that a State has failed to develop or to continue to

9 implement a health care value information program in ac10 cordance with the criteria and schedule in section 2121(b),

11 the Secretary shall take the actions necessary, directly or

12 through grants or contract, to implement a comparable

13 program in the State.

14 (b) FEES.—Fees may be charged by the Secretary

15 for the information materials provided pursuant to a pro16 gram under this section. Any amounts so collected shall

17 be deposited in the appropriation account from which the

18 Secretary’s costs of providing such materials were met,

19 and shall remain available for such purposes until ex20 pended.

21 SEC. 2123. COMPARATIVE VALUE INFORMATION CONCERN22 ING FEDERAL PROGRAMS.

23 (a) DEVELOPMENT.—The head of each Federal agen24 cy with responsibility for the provision of health insurance

25 or of health care services to individuals shall promptly de-
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1 velop health care value information relating to each pro2 gram that such head administers and covering the same

3 types of data that a State program meeting the criteria

4 of section 2121(b) would provide.

5 (b) DISSEMINATION OF INFORMATION.—Such infor6 mation shall be made generally available to States and to

7 providers and consumers of health care services.

8 SEC. 2124. DEVELOPMENT OF MODEL SYSTEMS.

9 (a) IN GENERAL.—The Secretary shall, directly or

10 through grant or contract, develop model systems to facili11 tate—

12 (1) the gathering of data on health care cost,

13 quality, and outcome described in section

14 2121(b)(4), and

15 (2) analyzing such data in a manner that will

16 permit the valid comparison of such data among

17 providers and among health plans.

18 (b) EXPERIMENTATION.—The Secretary shall sup19 port experimentation with different approaches to achieve

20 the objectives of subsection (a) in the most cost effective

21 manner (relative to the accuracy and timeliness of the

22 data secured) and shall evaluate the various methods to

23 determine their relative success.

24 (c) STANDARDS.—When the Secretary considers it

25 appropriate, the Secretary may establish standards for the
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1 collection and reporting of data on health care cost, qual2 ity and outcomes in order to facilitate analysis and com3 parisons among States and nationally.

4 (d) REPORT.—By not later than 3 years after the

5 date of the enactment of this Act, the Secretary shall re6 port to the Congress and the States on the models devel7 oped, and experiments conducted, under this section.

8 (e) AUTHORIZATION OF APPROPRIATIONS.—There

9 are authorized to be appropriated such sums as are nec10 essary for each fiscal year beginning with fiscal year 1994

11 to enable the Secretary to carry out this section, including

12 evaluation of the different approaches tested under sub13 section (b) and their relative cost effectiveness.

14 PART 4—ADDITIONAL STANDARDS AND

15 REQUIREMENTS; RESEARCH AND

16 DEMONSTRATIONS

17 SEC. 2131. STANDARDS RELATING TO USE OF MEDICARE

18 AND MEDICAID MAGNETIZED HEALTH BENE19 FIT CARDS; SECONDARY PAYOR DATA BANK.

20 (a) MAGNETIZED IDENTIFICATION CARDS UNDER

21 MEDICARE PROGRAM.—The Secretary shall adopt stand22 ards relating to the design and use of magnetized medi23 care identification cards in order to assist health care pro24 viders providing medicare covered services to individuals—
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1 (1) in determining whether individuals are eligi2 ble for benefits under the medicare program, and

3 (2) in billing the medicare program for such

4 services provided to eligible individuals.

5 Such cards shall be designed to be compatible with ma6 chines currently employed to transmit information on

7 credit cards. Such cards also shall be designed to be able

8 to be used with respect to the provision of benefits under

9 medicare supplemental policies.

10 (b) ADOPTION UNDER MEDICAID PLANS.—

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

12 such steps as may be necessary to encourage and as13 sist States to design and use magnetized medicaid

14 identification cards that meet such standards, for

15 use under their medicaid plans.

16 (2) LIMITATION ON MMIS FUNDS.—In applying

17 section 1903(a)(3) of the Social Security Act, the

18 Secretary may determine that Federal financial par19 ticipation is not available under that section to a

20 State which has provided for a magnetized card sys21 tem that is inconsistent with the standards adopted

22 under subsection (a).

23 (c) MEDICARE AND MEDICAID SECONDARY PAYOR

24 DATA BANK.—The Secretary shall establish a medicare

25 and medicaid information system which is designed to pro-
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1 vide information on those group health plans and other

2 health benefit plans that are primary payors to the medi3 care program and medicaid program under section

4 1862(b) or section 1905(a)(25) of the Social Security Act.

5 (d) AUTHORIZATION OF APPROPRIATIONS.—There

6 are authorized to be appropriated, in equal proportions

7 from the Federal Hospital Insurance Trust Fund and

8 from the Federal Supplementary Medical Insurance Trust

9 Fund, a total of $25,000,000 to carry out subsections (a)

10 and (c), including the issuance of magnetized cards to

11 medicare beneficiaries.

12 SEC. 2132. PREEMPTION OF STATE QUILL PEN LAWS.

13 (a) IN GENERAL.—Effective January 1, 1994, no ef14 fect shall be given to any provision of State law that re15 quires medical or health insurance records (including bill16 ing information) to be maintained in written, rather than

17 electronic form.

18 (b) SECRETARIAL AUTHORITY.—The Secretary of

19 Health and Human Services may issue regulations to

20 carry out subsection (a). Such regulations may provide for

21 such exceptions to subsection (a) as the Secretary deter22 mines to be necessary to prevent fraud and abuse, with

23 respect to controlled substances, and in such other cases

24 as the Secretary deems appropriate.
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1 SEC. 2133. USE OF STANDARD IDENTIFICATION NUMBERS.

2 (a) IN GENERAL.—Effective January 1, 1995, each

3 health benefit plan shall—

4 (1) for each of its beneficiaries that has a social

5 security account number, use that number as the

6 personal identifier for claims processing and related

7 purposes, and

8 (2) for each provider that has a unique identi9 fier for purposes of title XVIII of the Social Security

10 Act and that furnishes health care items or services

11 to a beneficiary under the plan, use that identifier

12 as the identifier of that provider for claims process13 ing and related purposes.

14 (b) COMPLIANCE.—

15 (1) IN GENERAL.—The Secretary may impose a

16 civil money penalty on any health benefit plan (other

17 than a health benefit plan described in paragraph

18 (2)) that fails to comply with standards established

19 under subsection (a) in an amount not to exceed

20 $100 for each such failure. The provisions of section

21 1128A of the Social Security Act (other than the

22 first sentence of subsection (a) and other than sub23 section (b)) shall apply to a civil money penalty

24 under this paragraph in the same manner as such

25 provisions apply to a penalty or proceeding under

26 section 1128A(a) of such Act.
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•S 1533 IS

1 (2) PLANS SUBJECT TO EFFECTIVE STATE REG2 ULATION.—A plan described in this paragraph is a

3 health benefit plan that is subject to regulation by

4 a State, if the Secretary finds that—

5 (A) the State provides for application of

6 the requirement of subsection (a), and

7 (B) the State regulatory program provides

8 for the appropriate and effective enforcement of

9 such requirement with respect to such plans.

10 SEC. 2134. COORDINATION OF BENEFIT STANDARDS.

11 (a) REVIEW OF COORDINATION OF BENEFIT PROB12 LEMS.—Between July 1, 1994, and January 1, 1995, the

13 Secretary shall determine whether problems relating to—

14 (1) the rules for determining the liability of

15 health benefit plans when benefits are payable under

16 two or more such plans, or

17 (2) the availability of information among such

18 health benefit plans when benefits are so payable,

19 cause significant administrative costs.

20 (b) CONTINGENT PROMULGATION OF STANDARDS.—

21 (1) IN GENERAL.—If the Secretary determines

22 that such problems do cause significant administra23 tive costs that could be significantly reduced through

24 the implementation of standards, the Secretary shall

25 promulgate standards concerning—
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•S 1533 IS

1 (A) the liability of health benefit plans

2 when benefits are payable under two or more

3 such plans, and

4 (B) the transfer among health benefit

5 plans of appropriate information (which may in6 clude standards for the use of unique identifi7 ers, and for the listing of all individuals covered

8 under a health benefit plan) in determining li9 ability in cases when benefits are payable under

10 two or more such plans.

11 (2) EFFECTIVE DATE.—The standards promul12 gated under paragraph (1) shall become effective on

13 a date specified by the Secretary, which date shall

14 be not earlier than one year after the date of pro15 mulgation of the standards.

16 (c) COMPLIANCE.—

17 (1) IN GENERAL.—The Secretary may impose a

18 civil money penalty on any health benefit plan (other

19 than a health benefit plan described in paragraph

20 (2)) that fails to comply with standards promulgated

21 under subsection (b) in an amount not to exceed

22 $100 for each such failure. The provisions of section

23 1128A of the Social Security Act (other than the

24 first sentence of subsection (a) and other than sub25 section (b)) shall apply to a civil money penalty
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•S 1533 IS

1 under this paragraph in the same manner as such

2 provisions apply to a penalty or proceeding under

3 section 1128A(a) of such Act.

4 (2) PLANS SUBJECT TO EFFECTIVE STATE REG5 ULATION.—A plan described in this paragraph is a

6 health benefit plan that is subject to regulation by

7 a State, if the Secretary finds that—

8 (A) the State provides for application of

9 the standards established under subsection (b),

10 and

11 (B) the State regulatory program provides

12 for the appropriate and effective enforcement of

13 such standards with respect to such plans.

14 (d) REVISION OF STANDARDS.—If the Secretary es15 tablishes standards under subsection (b), the Secretary

16 may revise such standards from time to time and such

17 revised standards shall be applied under subsection (c) on

18 or after such date (not earlier than 6 months after the

19 date the revision is promulgated) as the Secretary shall

20 specify.

21 SEC. 2135. RESEARCH AND DEMONSTRATIONS.

22 (a) DEMONSTRATIONS AND RESEARCH ON MONITOR23 ING AND IMPROVING PATIENT CARE.—

24 (1) The Secretary shall provide grants to quali25 fied entities to demonstrate (and conduct research
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1 concerning) the application of comprehensive infor2 mation systems—

3 (A) in continuously monitoring patient

4 care, and

5 (B) in improving patient care.

6 (2) To make grants under this subsection, there

7 are authorized to be appropriated from the Federal

8 Hospital Insurance Trust Fund $10,000,000 for

9 each fiscal year (beginning with fiscal year 1994 and

10 ending with fiscal year 1998).

11 (b) COMMUNICATION LINKS.—

12 (1) The Secretary may make grants to at least

13 two, but not more than five, community organiza14 tions, or coalitions of health care providers, health

15 benefit plans, and purchasers, to establish and docu16 ment the efficacy of communication links between

17 the information systems of health benefit plans and

18 of health care providers.

19 (2) To make grants under this subsection, there

20 are authorized to be appropriated such sums as may

21 be necessary for fiscal year 1994, to remain avail22 able until expended.

23 (c) REGIONAL OR COMMUNITY BASED CLINICAL IN24 FORMATION SYSTEMS.—
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1 (1) The Secretary may make grants to at least

2 two, but not more than five, public or private non3 profit entities for the development of regional or

4 community-based clinical information systems.

5 (2) To make grants under this subsection, there

6 are authorized to be appropriated such sums as may

7 be necessary for fiscal year 1994, to remain avail8 able until expended.

9 (d) AMBULATORY CARE DATA SETS.—

10 (1) The Secretary may make grants to public or

11 private non-profit entities to develop and test, for

12 electronic medical data generated by physicians and

13 other entities (other than hospitals) that provide

14 health care services—

15 (A) the definition of a comprehensive set of

16 data elements, and

17 (B) the specification of, and manner of

18 presentation of, the individual data elements of

19 the set under subparagraph (A).

20 (2) To make grants under this subsection, there

21 are authorized to be appropriated such sums as may

22 be necessary for fiscal year 1994, to remain avail23 able until expended.
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1 Subtitle C—Deduction for Cost of

2 Catastrophic Health Plan; Medi3 cal Savings Accounts

4 SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM

5 GROSS INCOME FOR COST OF CATASTROPHIC

6 HEALTH PLAN.

7 (a) IN GENERAL.—Subsection (a) of section 62 of the

8 Internal Revenue Code of 1986, as amended by title I,

9 is amended by inserting after paragraph (16) the following

10 new paragraph:

11 ‘‘(17) MEDICAL EXPENSES ATTRIBUTABLE TO

12 CATASTROPHIC HEALTH PLAN COVERAGE.—

13 ‘‘(A) IN GENERAL.—The deduction allowed

14 by section 213 to the extent attributable to cov15 erage under a catastrophic health plan (as de16 fined in section 220(c)(2)).

17 ‘‘(B) EXCEPTION.—Subparagraph (A)

18 shall not apply to coverage of an individual who

19 has coverage described in section

20 220(c)(1)(B)(i).’’.

21 (b) COORDINATION WITH DEDUCTION FOR OTHER

22 MEDICAL EXPENSES.—Subsection (a) of section 213 of

23 such Code is amended to read as follows:

24 ‘‘(a) ALLOWANCE OF DEDUCTION.—There shall be

25 allowed as a deduction the expenses paid during the tax-
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1 able year, not compensated by insurance or otherwise, for

2 medical care of the taxpayer, his spouse, or a dependent

3 (as defined in section 152) in an amount equal to the sum

4 of—

5 ‘‘(1) the portion of such expenses attributable

6 to coverage under a catastrophic health plan (as de7 fined in section 220(c)(2)), and

8 ‘‘(2) the excess of such expenses (other than ex9 penses described in paragraph (1)) over 7.5 percent

10 of the adjusted gross income of the taxpayer.’’

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1993.

14 SEC. 2202. MEDICAL SAVINGS ACCOUNTS.

15 (a) IN GENERAL.—Part VII of subchapter B of chap16 ter 1 of the Internal Revenue Code of 1986 (relating to

17 additional itemized deductions for individuals) is amended

18 by redesignating section 220 as section 221 and by insert19 ing after section 219 the following new section:

20 ‘‘SEC. 220. MEDICAL SAVINGS ACCOUNTS.

21 ‘‘(a) DEDUCTION ALLOWED.—

22 ‘‘(1) IN GENERAL.—In the case of an eligible

23 individual, there shall be allowed as a deduction the

24 applicable percentage of the amounts paid in cash

25 during the taxable year by or on behalf of such indi-
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1 vidual to a medical savings account for the benefit

2 of such individual and (if any) such individual’s

3 spouse and dependents if such spouse and depend4 ents are eligible individuals.

5 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes

6 of paragraph (1), the term ‘applicable percentage’

7 means—

8 ‘‘(A) 25 percent for taxable years begin9 ning in 1994 or 1995,

10 ‘‘(B) 50 percent for taxable years begin11 ning in 1996 or 1997, and

12 ‘‘(C) 100 percent for taxable years begin13 ning after 1997.

14 ‘‘(b) LIMITATIONS.—

15 ‘‘(1) ONLY 1 ACCOUNT PER FAMILY.—Except as

16 provided in regulations prescribed by this Secretary,

17 no deduction shall be allowed under subsection (a)

18 for amounts paid to any medical savings account for

19 the benefit of an individual, such individual’s spouse,

20 or any dependent of such individual or spouse if

21 such individual, spouse, or dependent is a beneficiary

22 of any other medical savings account.

23 ‘‘(2) DOLLAR LIMITATION.—The amount allow24 able as a deduction under subsection (a) for the tax25 able year shall not exceed the lesser of—
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1 ‘‘(A) the lowest deductible under any cata2 strophic health plan providing coverage to any

3 beneficiary of the medical savings account, or

4 ‘‘(B)(i) $2,500, or

5 ‘‘(ii) $5,000 if the catastrophic health plan

6 covering the taxpayer provides coverage for

7 more than 1 individual.

8 A beneficiary of such account who has attained age

9 65 before the close of the taxable year shall not be

10 taken into account in determining the limitation

11 under the preceding sentence.

12 ‘‘(c) DEFINITIONS.—For purposes of this section—

13 ‘‘(1) ELIGIBLE INDIVIDUAL.—

14 ‘‘(A) IN GENERAL.—The term ‘eligible in15 dividual’ means any individual who is covered

16 under a catastrophic health plan throughout the

17 calendar year in which or with which the tax18 able year ends.

19 ‘‘(B) LIMITATIONS.—Such term does not

20 include—

21 ‘‘(i) an individual who is 65 years of

22 age or older, unless the individual is cov23 ered under a catastrophic health plan that

24 is a primary plan (within the meaning of
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1 section 1862(b)(2)(A) of the Social Secu2 rity Act); and

3 ‘‘(ii) an individual who has coverage

4 under a group health plan or health insur5 ance plan (other than a plan described in

6 1107(4)(B) of the Affordable Health Care

7 Now Act of 1993) that has either a de8 ductible that is less than the minimum de9 ductible required under a catastrophic

10 health plan (as defined in paragraph (2))

11 or has an actuarial value that is greater

12 than the value for MedAccess catastrophic

13 coverage (as provided in section 1102(d) of

14 such Act).

15 ‘‘(C) DEDUCTION NOT ALLOWED BEFORE

16 1999 TO INDIVIDUALS ELIGIBLE FOR EM17 PLOYER-SUBSIDIZED COVERAGE.—In the case

18 of any taxable year beginning before January 1,

19 1999, such term does not include an individ20 ual—

21 ‘‘(i) who is eligible to participate in

22 any subsidized health plan maintained by

23 an employer of such individual or the

24 spouse of such individual, or
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•S 1533 IS

1 ‘‘(ii) who is (or whose spouse is) a

2 member of a subsidized class of employees

3 of an employer.

4 The rules of subparagraphs (B) and (C) of sec5 tion 213(f)(3) shall apply for purposes of this

6 preceding sentence.

7 ‘‘(2) CATASTROPHIC HEALTH PLAN.—For pur8 poses of paragraph (1)—

9 ‘‘(A) IN GENERAL.—The term ‘cata10 strophic health plan’ means a health plan cover11 ing specified expenses incurred by an individual

12 for medical care for such individual and the

13 spouse and dependents (as defined in section

14 152) of such individual only to the extent such

15 expenses covered by the plan for any calendar

16 year exceed $1,800 ($3,600 if the catastrophic

17 health plan covering the taxpayer provides cov18 erage for more than 1 individual) or such high19 er amounts as may be specified by the plan.

20 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—In

21 the case of any calendar year after 1994, each

22 dollar amount in subparagraph (A) shall be in23 creased by an amount equal to—

24 ‘‘(i) such dollar amount, multiplied by
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•S 1533 IS

1 ‘‘(ii) the cost-of-living adjustment de2 termined under section 1(f)(3) for such

3 calendar year.

4 If any increase under the preceding sentence is

5 not a multiple of $50, such increase shall be

6 rounded to the nearest multiple of $50.

7 ‘‘(d) MEDICAL SAVINGS ACCOUNTS.—For purposes

8 of this section—

9 ‘‘(1) MEDICAL SAVINGS ACCOUNT.—

10 ‘‘(A) IN GENERAL.—The term ‘medical

11 savings account’ means a trust created or orga12 nized in the United States exclusively for the

13 purpose of paying the medical expenses of the

14 beneficiaries of such trust, but only if the writ15 ten governing instrument creating the trust

16 meets the following requirements:

17 ‘‘(i) Except in the case of a rollover

18 contribution described in subsection (e)(4),

19 no contribution will be accepted unless it is

20 in cash, and contributions will not be ac21 cepted in excess of the amount allowed as

22 a deduction under this section for the tax23 able year (or would be allowed as such a

24 deduction but for subsection (c)(1)(C)).
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1 ‘‘(ii) The trustee is a bank (as defined

2 in section 408(n)) or another person who

3 demonstrates to the satisfaction of the Sec4 retary that the manner in which such per5 son will administer the trust will be con6 sistent with the requirements of this sec7 tion.

8 ‘‘(iii) No part of the trust assets will

9 be invested in life insurance contracts.

10 ‘‘(iv) The assets of the trust will not

11 be commingled with other property except

12 in a common trust fund or common invest13 ment fund.

14 ‘‘(v) The interest of an individual in

15 the balance in his account is nonforfeit16 able.

17 ‘‘(vi) Under regulations prescribed by

18 the Secretary, rules similar to the rules of

19 section 401(a)(9) shall apply to the dis20 tribution of the entire interest of bene21 ficiaries of such trust.

22 ‘‘(B) TREATMENT OF COMPARABLE AC23 COUNTS HELD BY INSURANCE COMPANIES.—

24 For purposes of this section, an account held by

25 an insurance company in the United States
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•S 1533 IS

1 shall be treated as a medical savings account

2 (and such company shall be treated as a bank)

3 if—

4 ‘‘(i) such account is part of a health

5 insurance plan that includes a catastrophic

6 health plan (as defined in subsection

7 (c)(2)),

8 ‘‘(ii) such account is exclusively for

9 the purpose of paying the medical expenses

10 of the beneficiaries of such account who

11 are covered under such catastrophic health

12 plan, and

13 ‘‘(iii) the written instrument govern14 ing the account meets the requirements of

15 clauses (i), (v), and (vi) of subparagraph

16 (A).

17 ‘‘(2) MEDICAL EXPENSES.—

18 ‘‘(A) IN GENERAL.—The term ‘medical ex19 penses’ means, with respect to an individual,

20 amounts paid or incurred by such individual

21 for—

22 ‘‘(i) medical care (as defined in sec23 tion 213), or

24 ‘‘(ii) long-term care (as defined in

25 paragraph (3)),
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•S 1533 IS

1 for such individual, the spouse of such individ2 ual, and any dependent (as defined in section

3 152) of such individual, but only to the extent

4 such amounts are not compensated for by in5 surance or otherwise.

6 ‘‘(B) HEALTH PLAN COVERAGE MAY NOT

7 BE PURCHASED FROM ACCOUNT.—

8 ‘‘(i) IN GENERAL.—Such term shall

9 not include any amount paid for coverage

10 under a health plan.

11 ‘‘(ii) EXCEPTION.—Clause (i) shall

12 not apply—

13 ‘‘(I) in the case of coverage of an

14 individual under 65 years of age

15 under a catastrophic health plan or

16 under a long-term care insurance

17 plan, or

18 ‘‘(II) in the case of coverage of

19 an individual 65 years of age or older

20 under a medicare supplemental policy

21 or under a long-term care insurance

22 plan or for payment of premiums

23 under part A or part B of title XVIII

24 of the Social Security Act.

25 ‘‘(3) LONG-TERM CARE.—
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•S 1533 IS

1 ‘‘(A) IN GENERAL.—The term ‘long-term

2 care’ means diagnostic, preventive, therapeutic,

3 rehabilitative, maintenance, or personal care

4 services which are required by, and provided to,

5 a chronically ill individual, which have as their

6 primary purpose the direct provision of needed

7 assistance with 1 or more activities of daily liv8 ing (or the alleviation of the conditions neces9 sitating such assistance) that the individual is

10 certified under subparagraph (B) as being un11 able to perform, and which are provided in a

12 setting other than an acute care unit of a hos13 pital pursuant to a continuing plan of care pre14 scribed by a physician or registered professional

15 nurse. Such term does not include food or lodg16 ing provided in an institutional or other setting,

17 or basic living services associated with the

18 maintenance of a household or participation in

19 community life, such as case management,

20 transportation or legal services, or the perform21 ance of home maintenance or household chores.

22 ‘‘(B) CHRONICALLY ILL INDIVIDUAL.—The

23 term ‘chronically ill individual’ means an indi24 vidual who is certified by a physician or reg25 istered professional nurse as being unable to
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•S 1533 IS

1 perform at least 3 activities of daily living with2 out substantial assistance from another individ3 ual. For purposes of this paragraph, the term

4 ‘activities of daily living’ means bathing, dress5 ing, eating, toileting, transferring, and walking.

6 ‘‘(4) TIME WHEN CONTRIBUTIONS DEEMED

7 MADE.—A contribution shall be deemed to be made

8 on the last day of the preceding taxable year if the

9 contribution is made on account of such taxable year

10 and is made not later than the time prescribed by

11 law for filing the return for such taxable year (not

12 including extensions thereof).

13 ‘‘(e) TAX TREATMENT OF DISTRIBUTIONS.—

14 ‘‘(1) IN GENERAL.—Any amount paid or dis15 tributed out of a medical savings account shall be in16 cluded in the gross income of the individual for

17 whose benefit such account was established unless

18 such amount is used exclusively to pay the medical

19 expenses of such individual.

20 ‘‘(2) EXCESS CONTRIBUTIONS RETURNED BE21 FORE DUE DATE OF RETURN.—Paragraph (1) shall

22 not apply to the distribution of any contribution paid

23 during a taxable year to a medical savings account

24 to the extent that such contribution exceeds the
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•S 1533 IS

1 amount allowable as a deduction under subsection

2 (a) if—

3 ‘‘(A) such distribution is received by the

4 individual on or before the last day prescribed

5 by law (including extensions of time) for filing

6 such individual’s return for such taxable year,

7 and

8 ‘‘(B) such distribution is accompanied by

9 the amount of net income attributable to such

10 excess contribution.

11 Any net income described in subparagraph (B) shall

12 be included in the gross income of the individual for

13 the taxable year in which it is received.

14 ‘‘(3) PENALTY FOR DISTRIBUTIONS NOT USED

15 FOR MEDICAL EXPENSES.—

16 ‘‘(A) IN GENERAL.—The tax imposed by

17 this chapter for any taxable year in which there

18 is a payment or distribution from a medical

19 savings account which is not used to pay the

20 medical expenses of the individual for whose

21 benefit the account was established shall be in22 creased by 10 percent of the amount of such

23 payment or distribution which is includible in

24 gross income under paragraph (1).
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•S 1533 IS

1 ‘‘(B) ACCOUNT BALANCE LIMITATION.—

2 If—

3 ‘‘(i) the tax imposed by this chapter is

4 required to be increased under subpara5 graph (A) by reason of a distribution, and

6 ‘‘(ii) after such distribution, the ag7 gregate balance of all medical savings ac8 counts established for the benefit of the in9 dividual, is less than the amount of the de10 ductible under the catastrophic health plan

11 covering such individual,

12 subparagraph (A) shall be applied by substitut13 ing ‘50 percent’ for ‘10 percent’.

14 ‘‘(4) ROLLOVERS.—Paragraph (1) shall not

15 apply to any amount paid or distributed out of a

16 medical savings account to the individual for whose

17 benefit the account is maintained if the entire

18 amount received (including money and any other

19 property) is paid into another medical savings ac20 count for the benefit of such individual not later

21 than the 60th day after the day on which he received

22 the payment or distribution.

23 ‘‘(5) PENALTY FOR MANDATORY DISTRIBU24 TIONS NOT MADE FROM ACCOUNT.—
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•S 1533 IS

1 ‘‘(A) IN GENERAL.—If during any taxable

2 year—

3 ‘‘(i) there is a payment of a manda4 tory distribution expense incurred by a

5 beneficiary of a medical savings account,

6 and

7 ‘‘(ii) the person making such payment

8 is not reimbursed for such payment with a

9 distribution from such account before the

10 60th day after such payment,

11 the taxpayer’s tax imposed by this chapter for

12 such taxable year shall be increased by 100 per13 cent of the excess of the amount of such pay14 ment over the amount of reimbursement made

15 before such 60th day.

16 ‘‘(B) MANDATORY DISTRIBUTION EX17 PENSE.—For purposes of subparagraph (A),

18 the term ‘mandatory distribution expense’

19 means—

20 ‘‘(i) any expense incurred which may

21 be counted towards a deductible, or for a

22 copayment or coinsurance, under the cata23 strophic health plan covering such bene24 ficiary, and
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•S 1533 IS

1 ‘‘(ii) in the case of a beneficiary who

2 has attained age 65, any expense for cov3 erage described in subsection

4 (d)(2)(B)(ii)(II) and any expense incurred

5 which may be counted toward a deductible,

6 or for a copayment or coinsurance, under

7 title XVIII of the Social Security Act.

8 ‘‘(f) TAX TREATMENT OF ACCOUNTS.—

9 ‘‘(1) EXEMPTION FROM TAX.—Any medical sav10 ings account is exempt from taxation under this sub11 title unless such account has ceased to be a medical

12 savings account by reason of paragraph (2) or (3).

13 Notwithstanding the preceding sentence, any such

14 account shall be subject to the taxes imposed by sec15 tion 511 (relating to imposition of tax on unrelated

16 business income of charitable, etc. organizations).

17 ‘‘(2) ACCOUNT TERMINATES IF INDIVIDUAL EN18 GAGES IN PROHIBITED TRANSACTION.—

19 ‘‘(A) IN GENERAL.—If, during any taxable

20 year of the individual for whose benefit the

21 medical savings account was established, such

22 individual engages in any transaction prohibited

23 by section 4975 with respect to the account, the

24 account ceases to be a medical savings account

25 as of the first day of that taxable year.
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•S 1533 IS

1 ‘‘(B) ACCOUNT TREATED AS DISTRIBUTING

2 ALL ITS ASSETS.—In any case in which any ac3 count ceases to be a medical savings account by

4 reason of subparagraph (A) on the first day of

5 any taxable year, paragraph (1) of subsection

6 (e) shall be applied as if there were a distribu7 tion on such first day in an amount equal to

8 the fair market value (on such first day) of all

9 assets in the account (on such first day) and no

10 portion of such distribution were used to pay

11 medical expenses.

12 ‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU13 RITY.—If, during any taxable year, the individual for

14 whose benefit a medical savings account was estab15 lished uses the account or any portion thereof as se16 curity for a loan, the portion so used is treated as

17 distributed to that individual and not used to pay

18 medical expenses.

19 ‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this

20 section, a custodial account shall be treated as a trust if—

21 ‘‘(1) the assets of such account are held by a

22 bank (as defined in section 408(n)) or another per23 son who demonstrates to the satisfaction of the Sec24 retary that the manner in which he will administer
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•S 1533 IS

1 the account will be consistent with the requirements

2 of this section, and

3 ‘‘(2) the custodial account would, except for the

4 fact that it is not a trust, constitute a medical sav5 ings account described in subsection (d).

6 For purposes of this title, in the case of a custodial ac7 count treated as a trust by reason of the preceding sen8 tence, the custodian of such account shall be treated as

9 the trustee thereof.

10 ‘‘(h) REPORTS.—The trustee of a medical savings ac11 count shall make such reports regarding such account to

12 the Secretary and to the individual for whose benefit the

13 account is maintained with respect to contributions, dis14 tributions, and such other matters as the Secretary may

15 require under regulations. The reports required by this

16 subsection shall be filed at such time and in such manner

17 and furnished to such individuals at such time and in such

18 manner as may be required by those regulations.’’

19 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI20 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a)

21 of section 62 of such Code is amended by inserting after

22 paragraph (17) the following new paragraph:

23 ‘‘(18) MEDICAL SAVINGS ACCOUNTS.—The de24 duction allowed by section 220.’’
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•S 1533 IS

1 (c) DISTRIBUTIONS FROM MEDICAL SAVINGS AC2 COUNTS NOT ALLOWED AS MEDICAL EXPENSE DEDUC3 TION.—Section 213 of such Code is amended by adding

4 at the end thereof the following new subsection:

5 ‘‘(g) COORDINATION WITH MEDICAL SAVINGS AC6 COUNTS.—The amount otherwise taken into account

7 under subsection (a) as expenses paid for medical care

8 shall be reduced by the amount (if any) of the distribu9 tions from any medical savings account of the taxpayer

10 during the taxable year which is not includible in gross

11 income by reason of being used for medical care.’’

12 (d) EXCLUSION OF EMPLOYER CONTRIBUTIONS TO

13 MEDICAL SAVINGS ACCOUNTS FROM EMPLOYMENT

14 TAXES.—

15 (1) SOCIAL SECURITY TAXES.—

16 (A) Subsection (a) of section 3121 of such

17 Code is amended by striking ‘‘or’’ at the end of

18 paragraph (20), by striking the period at the

19 end of paragraph (21) and inserting ‘‘; or’’, and

20 by inserting after paragraph (21) the following

21 new paragraph:

22 ‘‘(22) remuneration paid to or on behalf of

23 an employee if (and to the extent that) at the

24 time of payment of such remuneration it is rea-
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•S 1533 IS

1 sonable to believe that a corresponding deduc2 tion is allowable under section 220.’’

3 (B) Subsection (a) of section 209 of the Social

4 Security Act is amended by striking ‘‘or’’ at the end

5 of paragraph (17), by striking the period at the end

6 of paragraph (18) and inserting ‘‘; or’’, and by in7 serting after paragraph (18) the following new para8 graph:

9 ‘‘(19) remuneration paid to or on behalf of an

10 employee if (and to the extent that) at the time of

11 payment of such remuneration it is reasonable to be12 lieve that a corresponding deduction is allowable

13 under section 220 of the Internal Revenue Code of

14 1986.’’

15 (2) RAILROAD RETIREMENT TAX.—Subsection

16 (e) of section 3231 of such Code is amended by add17 ing at the end thereof the following new paragraph:

18 ‘‘(10) EMPLOYER CONTRIBUTIONS TO MEDICAL

19 SAVINGS ACCOUNTS.—The term ‘compensation’ shall

20 not include any payment made to or on behalf of an

21 employee if (and to the extent that) at the time of

22 payment of such remuneration it is reasonable to be23 lieve that a corresponding deduction is allowable

24 under section 220.’’
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•S 1533 IS

1 (3) UNEMPLOYMENT TAX.—Subsection (b) of

2 section 3306 of such Code is amended by striking

3 ‘‘or’’ at the end of paragraph (15), by striking the

4 period at the end of paragraph (16) and inserting ‘‘;

5 or’’, and by inserting after paragraph (16) the fol6 lowing new paragraph:

7 ‘‘(17) remuneration paid to or on behalf of

8 an employee if (and to the extent that) at the

9 time of payment of such remuneration it is rea10 sonable to believe that a corresponding deduc11 tion is allowable under section 220.’’

12 (4) WITHHOLDING TAX.—Subsection (a) of sec13 tion 3401 of such Code is amended by striking ‘‘or’’

14 at the end of paragraph (19), by striking the period

15 at the end of paragraph (20) and inserting ‘‘; or’’,

16 and by inserting after paragraph (20) the following

17 new paragraph:

18 ‘‘(21) remuneration paid to or on behalf of

19 an employee if (and to the extent that) at the

20 time of payment of such remuneration it is rea21 sonable to believe that a corresponding deduc22 tion is allowable under section 220.’’

23 (e) TAX ON EXCESS CONTRIBUTIONS.—Section 4973

24 of such Code (relating to tax on excess contributions to

25 individual retirement accounts, certain section 403(b) con-
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•S 1533 IS

1 tracts, and certain individual retirement annuities) is

2 amended—

3 (1) by inserting ‘‘MEDICAL SAVINGS AC4 COUNTS,’’ after ‘‘ACCOUNTS,’’ in the heading of

5 such section,

6 (2) by redesignating paragraph (2) of sub7 section (a) as paragraph (3) and by inserting after

8 paragraph (1) the following:

9 ‘‘(2) a medical savings account (within the

10 meaning of section 220(d)),’’,

11 (3) by striking ‘‘or’’ at the end of paragraph

12 (1) of subsection (a), and

13 (4) by adding at the end thereof the following

14 new subsection:

15 ‘‘(d) EXCESS CONTRIBUTIONS TO MEDICAL SAVINGS

16 ACCOUNTS.—For purposes of this section, in the case of

17 a medical savings account (within the meaning of section

18 220(d)), the term ‘excess contributions’ means the amount

19 by which the amount contributed for the taxable year to

20 the account exceeds the amount excludable from gross in21 come under section 220 for such taxable year. For pur22 poses of this subsection, any contribution which is distrib23 uted out of the medical savings account in a distribution

24 to which section 220(e)(2) applies shall be treated as an

25 amount not contributed.’’
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•S 1533 IS

1 (f) TAX ON PROHIBITED TRANSACTIONS.—Section

2 4975 of such Code (relating to prohibited transactions)

3 is amended—

4 (1) by adding at the end of subsection (c) the

5 following new paragraph:

6 ‘‘(4) SPECIAL RULE FOR MEDICAL SAVINGS AC7 COUNTS.—An individual for whose benefit a medical

8 savings account (within the meaning of section

9 220(d)) is established shall be exempt from the tax

10 imposed by this section with respect to any trans11 action concerning such account (which would other12 wise be taxable under this section) if, with respect

13 to such transaction, the account ceases to be a medi14 cal savings account by reason of the application of

15 section 220(e)(2)(A) to such account.’’, and

16 (2) by inserting ‘‘or a medical savings account

17 described in section 220(d)’’ in subsection (e)(1)

18 after ‘‘described in section 408(a)’’.

19 (g) FAILURE TO PROVIDE REPORTS ON MEDICAL

20 SAVINGS ACCOUNTS.—Section 6693 of such Code (relat21 ing to failure to provide reports on individual retirement

22 account or annuities) is amended—

23 (1) by inserting ‘‘OR ON MEDICAL SAVINGS

24 ACCOUNTS’’ after ‘‘ANNUITIES’’ in the heading of

25 such section, and
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•S 1533 IS

1 (2) by adding at the end of subsection (a) the

2 following: ‘‘The person required by section 220(h) to

3 file a report regarding a medical savings account at

4 the time and in the manner required by such section

5 shall pay a penalty of $50 for each failure unless it

6 is shown that such failure is due to reasonable

7 cause.’’

8 (h) CLERICAL AMENDMENTS.—

9 (1) The table of sections for part VII of sub10 chapter B of chapter 1 of such Code is amended by

11 striking the last item and inserting the following:

‘‘Sec. 220. Medical savings accounts.

‘‘Sec. 221. Cross reference.’’

12 (2) The table of sections for chapter 43 of such

13 Code is amended by striking the item relating to sec14 tion 4973 and inserting the following:

‘‘Sec. 4973. Tax on excess contributions to individual retirement

accounts, medical savings accounts, certain 403(b)

contracts, and certain individual retirement annuities.’’

15 (3) The table of sections for subchapter B of

16 chapter 68 of such Code is amended by inserting ‘‘or

17 on medical savings accounts’’ after ‘‘annuities’’ in

18 the item relating to section 6693.

19 (i) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 1993.
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1 Subtitle D—Anti-Fraud

2 PART 1—CRIMINAL PROSECUTION OF

3 HEALTH CARE FRAUD

4 SEC. 2301. PENALTIES FOR HEALTH CARE FRAUD.

5 (a) IN GENERAL.—Chapter 63 of title 18, United

6 States Code, is amended by adding at the end the follow7 ing:

8 ‘‘§ 1347. Health care fraud

9 ‘‘(a) OFFENSE.—Whoever, being a health care pro10 vider, knowingly engages in any scheme or artifice to de11 fraud any person in connection with the provision of

12 health care shall be fined under this title or imprisoned

13 not more than 5 years, or both.

14 ‘‘(b) DEFINITION.—In this section, the term ‘health

15 care provider’ means—

16 ‘‘(1) a physician, nurse, dentist, therapist, phar17 macist, or other professional provider of health care;

18 and

19 ‘‘(2) a hospital, health maintenance organiza20 tion, pharmacy, laboratory, clinic, or other health

21 care facility or a provider of medical services, medi22 cal devices, medical equipment, or other medical sup23 plies.

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

25 at the beginning of chapter 63 of title 18, United States
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•S 1533 IS

1 Code, is amended by adding at the end the following new

2 item:

‘‘1347. Health care fraud.’’.

3 SEC. 2302. BROADENING APPLICATION OF MAIL FRAUD

4 STATUTE.

5 Section 1341 of title 18, United States Code, is

6 amended—

7 (1) by inserting ‘‘or deposits or causes to be de8 posited any matter or thing whatever to be sent or

9 delivered by any private or commercial interstate

10 carrier,’’ after ‘‘Postal Service,’’; and

11 (2) by inserting ‘‘or such carrier’’ after ‘‘causes

12 to be delivered by mail’’.

13 SEC. 2303. AUTHORIZATION OF APPROPRIATIONS.

14 There are authorized to be appropriated for the pur15 poses of carrying out the purposes of this part and the

16 amendments made by this part—

17 (1) such sums as may be necessary for the Fed18 eral Bureau of Investigation to hire, equip, and train

19 no fewer than 225 special agents and support staff

20 to investigate health-care fraud cases;

21 (2) such sums as may be necessary to hire,

22 equip, and train no fewer than 50 assistant United

23 States Attorneys and support staff to prosecute

24 health-care fraud cases; and
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•S 1533 IS

1 (3) such sums as may be necessary to hire,

2 equip, and train no fewer than 25 investigators in

3 the Office of Inspector General, Department of

4 Health and Human Services, to be devoted exclu5 sively to health-care fraud cases.

6 SEC. 2304. REWARDS FOR INFORMATION LEADING TO

7 PROSECUTION AND CONVICTION.

8 Section 3059 of title 18, United States Code, is

9 amended by adding at the end the following new sub10 section:

11 ‘‘(c)(1) In special circumstances and in the Attorney

12 General’s sole discretion, the Attorney General may make

13 a payment of up to $10,000 to a person who furnishes

14 information unknown to the Government relating to a pos15 sible prosecution under section 1101.

16 ‘‘(2) A person is not eligible for a payment under

17 paragraph (1) if—

18 ‘‘(A) the person is a current or former officer

19 or employee of a Federal or State government agen20 cy or instrumentality who furnishes information dis21 covered or gathered in the course of government em22 ployment;

23 ‘‘(B) the person knowingly participated in the

24 offense;
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•S 1533 IS

1 ‘‘(C) the information furnished by the person

2 consists of allegations or transactions that have been

3 disclosed to the public—

4 ‘‘(i) in a criminal, civil, or administrative

5 proceeding;

6 ‘‘(ii) in a congressional, administrative or

7 General Accounting Office report, hearing,

8 audit, or investigation; or

9 ‘‘(iii) by the news media, unless the person

10 is the original source of the information; or

11 ‘‘(D) when, in the judgment of the Attorney

12 General, it appears that a person whose illegal ac13 tivities are being prosecuted or investigated could

14 benefit from the award.

15 ‘‘(3) For the purposes of paragraph (2)(C)(iii), the

16 term ‘original source’ means a person who has direct and

17 independent knowledge of the information that is fur18 nished and has voluntarily provided the information to the

19 Government prior to disclosure by the news media.

20 ‘‘(4) Neither the failure of the Attorney General to

21 authorize a payment under paragraph (1) nor the amount

22 authorized shall be subject to judicial review.’’.
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•S 1533 IS

1 PART 2—COORDINATION OF HEALTH

2 CARE ANTI-FRAUD AND ABUSE ACTIVI3 TIES

4 SEC. 2311. ESTABLISHMENT OF ALL-PAYER ANTI-FRAUD

5 AND ABUSE PROGRAM.

6 (a) IN GENERAL.—Not later than January 1, 1995,

7 the Secretary shall establish in the Office of the Inspector

8 General of the Department of Health and Human Services

9 a program—

10 (1) to coordinate Federal, State, and local law

11 enforcement programs to control fraud and abuse

12 with respect to the delivery of and payment for

13 health care in the United States,

14 (2) to conduct investigations, audits, evalua15 tions, and inspections relating to the delivery of and

16 payment for health care in the United States, and

17 (3) to facilitate the enforcement of the provi18 sions of sections 1128, 1128A, and 1128B of the

19 Social Security Act and other statutes applicable to

20 health care fraud and abuse.

21 (b) COORDINATION WITH LAW ENFORCEMENT

22 AGENCIES.—In carrying out the program established

23 under subsection (a), the Secretary shall consult with, and

24 arrange for the sharing of data and resources with the

25 Attorney General, State law enforcement agencies, State
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•S 1533 IS

1 medicaid fraud and abuse units, and State agencies re2 sponsible for the licensing and certification of health care

3 providers.

4 (c) COORDINATION WITH THIRD PARTY INSUR5 ERS.—In carrying out the program established under sub6 section (a), the Secretary shall consult with, and arrange

7 for the sharing of data with representatives of private

8 sponsors of health benefit plans and other providers of

9 health insurance.

10 (d) REGULATIONS.—

11 (1) IN GENERAL.—The Secretary shall by regu12 lation establish standards to carry out the program

13 under subsection (a).

14 (2) INFORMATION STANDARDS.—

15 (A) IN GENERAL.—Such standards shall

16 include standards relating to the furnishing of

17 information by health insurers (including self18 insured health benefit plans), providers, and

19 others to enable the Secretary to carry out the

20 program (including coordination with law en21 forcement agencies under subsection (b) and

22 third party insurers under subsection (c)).

23 (B) CONFIDENTIALITY.—Such standards

24 shall include procedures to assure that such in25 formation is provided and utilized in a manner
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1 that protects the confidentiality of the informa2 tion and the privacy of individuals receiving

3 health care services.

4 (C) QUALIFIED IMMUNITY FOR PROVIDING

5 INFORMATION.—The provisions of section

6 1157(a) of the Social Security Act (relating to

7 limitation on liability) shall apply to a person

8 providing information to the Secretary under

9 the program under this section, with respect to

10 the Secretary’s performance of duties under the

11 program, in the same manner as such section

12 applies to information provided to organizations

13 with a contract under part B of title XI of such

14 Act, with respect to the performance of such a

15 contract.

16 (e) ENSURING ACCESS TO DOCUMENTATION.—

17 (1) IN GENERAL.—The Inspector General of

18 the Department of Health and Human Services is

19 authorized to exercise the authority described in

20 paragraphs (4) and (5) of section 6 of the Inspector

21 General Act of 1978 (relating to subpoenas and ad22 ministration of oaths) with respect to the activities

23 under the all-payor fraud and abuse control program

24 established under this section to the same extent as

25 such Inspector General may exercise such authorities
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1 to perform the functions assigned to such official by

2 such Act.

3 (2) FAILURE TO COMPLY AS GROUNDS FOR EX4 CLUSION FROM MEDICARE AND MEDICAID PRO5 GRAMS.—Section 1128(b) of the Social Security Act

6 (42 U.S.C. 1320a–7(b)) is amended by adding at

7 the end the following new paragraph:

8 ‘‘(15) FAILURE TO SUPPLY REQUESTED

9 INFORMATION TO THE INSPECTOR GENERAL.—

10 Any individual or entity that fails fully and ac11 curately to provide, upon request of the Inspec12 tor General of the Department of Health and

13 Human Services, records, documents, and other

14 information necessary for the purposes of carry15 ing out activities under the all-payor fraud and

16 abuse control program established under section

17 2311 of the Affordable Health Care Now Act of

18 1993.’’.

19 SEC. 2312. AUTHORIZATION OF ADDITIONAL APPROPRIA20 TIONS FOR INVESTIGATORS AND OTHER PER21 SONNEL.

22 (a) IN GENERAL.—In addition to any other amounts

23 authorized to be appropriated to the Secretary of Health

24 and Human Services for health care anti-fraud and abuse

25 activities for a fiscal year, there are authorized to be ap-
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1 propriated additional amounts described in subsection (b)

2 to enable the Secretary to conduct investigations of allega3 tions of health care fraud and otherwise carry out the pro4 gram established under section 2311 in a fiscal year.

5 (b) AMOUNTS DESCRIBED.—The amounts referred to

6 in subsection (a) are as follows:

7 (1) For fiscal year 1995, $100,000,000.

8 (2) For each of the fiscal years 1996 through

9 1998, such sums as may be necessary to assist the

10 Secretary in carrying out the program established

11 under section 2311 for such a fiscal year.

12 SEC. 2313. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE

13 TRUST FUND.

14 (a) ESTABLISHMENT.—

15 (1) IN GENERAL.—There is hereby created on

16 the books of the Treasury of the United States a

17 trust fund to be known as the ‘‘Anti-Fraud and

18 Abuse Trust Fund’’ (in this section referred to as

19 the ‘‘Trust Fund’’). The Trust Fund shall consist of

20 such gifts and bequests as may be made as provided

21 in paragraph (2) and such amounts as may be de22 posited in, or appropriated to, such Trust Fund as

23 provided in this subtitle and section 1128A(f)(3) of

24 the Social Security Act.
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1 (2) AUTHORIZATION TO ACCEPT GIFTS.—The

2 Managing Trustee of the Trust Fund is authorized

3 to accept on behalf of the United States money gifts

4 and bequests made unconditionally to the Trust

5 Fund, for the benefit of the Trust Fund, or any ac6 tivity financed through the Trust Fund.

7 (b) MANAGEMENT.—

8 (1) IN GENERAL.—The Trust Fund shall be

9 managed by the Secretary through a Managing

10 Trustee designated by the Secretary.

11 (2) INVESTMENT OF FUNDS.—It shall be the

12 duty of the Managing Trustee to invest such portion

13 of the Trust Fund as is not, in the trustee’s judg14 ment, required to meet current withdrawals. Such

15 investments may be made only in interest-bearing

16 obligations of the United States or in obligations

17 guaranteed as to both principal and interest by the

18 United States. For such purpose such obligations

19 may be acquired on original issue at the issue price,

20 or by purchase of outstanding obligations at market

21 price. The purposes for which obligations of the

22 United States may be issued under chapter 31 of

23 title 31, United States Code, are hereby extended to

24 authorize the issuance at par of public-debt obliga25 tions for purchase by the Trust Fund. Such obliga-
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•S 1533 IS

1 tions issued for purchase by the Trust Fund shall

2 have maturities fixed with due regard for the needs

3 of the Trust Fund and shall bear interest at a rate

4 equal to the average market yield (computed by the

5 Managing Trustee on the basis of market quotations

6 as of the end of the calendar month next preceding

7 the date of such issue) on all marketable interest8 bearing obligations of the United States then form9 ing a part of the public debt which are not due or

10 callable until after the expiration of 4 years from the

11 end of such calendar month, except that where such

average is not a multiple of 1 12 ⁄8 of 1 percent, the rate

13 of interest on such obligations shall be the multiple

of 1 14 ⁄8 of 1 percent nearest such market yield. The

15 Managing Trustee may purchase other interest-bear16 ing obligations of the United States or obligations

17 guaranteed as to both principal and interest by the

18 United States, on original issue or at the market

19 price, only where the Trustee determines that the

20 purchase of such other obligations is in the public

21 interest.

22 (3) Any obligations acquired by the Trust Fund

23 (except public-debt obligations issued exclusively to

24 the Trust Fund) may be sold by the Managing

25 Trustee at the market price, and such public-debt
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1 obligations may be redeemed at par plus accrued in2 terest.

3 (4) The interest on, and the proceeds from the

4 sale or redemption of, any obligations held in the

5 Trust Fund shall be credited to and form a part of

6 the Trust Fund.

7 (5) The receipts and disbursements of the Sec8 retary in the discharge of the functions of the Sec9 retary shall not be included in the totals of the

10 budget of the United States Government. For pur11 poses of part C of the Balanced Budget and Emer12 gency Deficit Control Act of 1985, the Secretary and

13 the Trust Fund shall be treated in the same manner

14 as the Federal Retirement Thrift Investment Board

15 and the Thrift Savings Fund, respectively. The

16 United States is not liable for any obligation or li17 ability incurred by the Trust Fund.

18 (c) USE OF FUNDS.—Amounts in the Trust Fund

19 shall be used to assist the Inspector General of the De20 partment of Health and Human Services in carrying out

21 the all-payor fraud and abuse control program established

22 under section 2311(a) in the fiscal year involved.

23 (d) DEPOSIT OF FEDERAL HEALTH ANTI-FRAUD

24 AND ABUSE PENALTIES INTO TRUST FUND.—Section

25 1128A(f)(3) of the Social Security Act (42 U.S.C. 1320a–
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•S 1533 IS

1 7a(f)(3)) is amended by striking ‘‘as miscellaneous re2 ceipts of the Treasury of the United States’’ and inserting

3 ‘‘in the Anti-Fraud and Abuse Trust Fund established

4 under section 2313(a) of the Affordable Health Care Now

5 Act of 1993’’.

6 (e) USE OF FEDERAL HEALTH ANTI-FRAUD AND

7 ABUSE PENALTIES TO REPAY BENEFICIARIES FOR COST8 SHARING.—Section 1128A(f) of the Social Security Act

9 (42 U.S.C. 1320a–7a(f)) is amended in the matter preced10 ing paragraph (1) by striking ‘‘Secretary and disposed of

11 as follows:’’ and inserting the following: ‘‘Secretary. If the

12 person against whom such a penalty or assessment was

13 assessed collected a payment from an individual for pro14 viding to the individual the service that is the subject of

15 the penalty or assessment, the Secretary shall pay a por16 tion of the amount recovered to the individual in the na17 ture of restitution in an amount equal to the payment so

18 collected. The Secretary shall dispose of any remaining

19 amounts recovered under this section as follows:’’.

20 SEC. 2314. APPLICATION OF FEDERAL HEALTH ANTI-FRAUD

21 AND ABUSE SANCTIONS TO ALL FRAUD AND

22 ABUSE AGAINST ANY HEALTH BENEFIT PLAN.

23 (a) CIVIL MONETARY PENALTIES.—Section 1128A

24 of the Social Security Act (42 U.S.C. 1320a–7a) is amend25 ed as follows:
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1 (1) In subsection (a)(1), in the matter before

2 subparagraph (A), by inserting ‘‘or of any health

3 benefit plan,’’ after ‘‘subsection (i)(1)),’’.

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

5 under a health benefit plan’’ after ‘‘title XIX’’.

6 (3) In subsection (f)—

7 (A) by redesignating paragraph (3) as

8 paragraph (4); and

9 (B) by inserting after paragraph (2) the

10 following new paragraph:

11 ‘‘(3) With respect to amounts recovered arising

12 out of a claim under a health benefit plan, the por13 tion of such amounts as is determined to have been

14 paid by the plan shall be repaid to the plan.’’.

15 (4) In subsection (i)—

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

17 under a health benefit plan’’ before the period

18 at the end, and

19 (B) in paragraph (5), by inserting ‘‘or

20 under a health benefit plan’’ after ‘‘or XX’’.

21 (b) CRIMES.—

22 (1) SOCIAL SECURITY ACT.—Section 1128B of

23 such Act (42 U.S.C. 1320a–7b) is amended as fol24 lows:
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1 (A) In the heading, by adding at the end

2 the following: ‘‘OR HEALTH BENEFIT PLANS’’.

3 (B) In subsection (a)(1)—

4 (i) by striking ‘‘title XVIII or’’ and

5 inserting ‘‘title XVIII,’’, and

6 (ii) by adding at the end the follow7 ing: ‘‘or a health benefit plan (as defined

8 in section 1128(i)),’’.

9 (C) In subsection (a)(5), by striking ‘‘title

10 XVIII or a State health care program’’ and in11 serting ‘‘title XVIII, a State health care pro12 gram, or a health benefit plan’’.

13 (D) In the second sentence of subsection

14 (a)—

15 (i) by inserting after ‘‘title XIX’’ the

16 following: ‘‘or a health benefit plan’’, and

17 (ii) by inserting after ‘‘the State’’ the

18 following: ‘‘or the plan’’.

19 (E) In subsection (b)(1), by striking ‘‘title

20 XVIII or a State health care program’’ each

21 place it appears and inserting ‘‘title XVIII, a

22 State health care program, or a health benefit

23 plan’’.

24 (F) In subsection (b)(2), by striking ‘‘title

25 XVIII or a State health care program’’ each
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•S 1533 IS

1 place it appears and inserting ‘‘title XVIII, a

2 State health care program, or a health benefit

3 plan’’.

4 (G) In subsection (b)(3), by striking ‘‘title

5 XVIII or a State health care program’’ each

6 place it appears in subparagraphs (A) and (C)

7 and inserting ‘‘title XVIII, a State health care

8 program, or a health benefit plan’’.

9 (H) In subsection (d)(2)—

10 (i) by striking ‘‘title XIX,’’ and insert11 ing ‘‘title XIX or under a health benefit

12 plan,’’, and

13 (ii) by striking ‘‘State plan,’’ and in14 serting ‘‘State plan or the health benefit

15 plan,’’.

16 (2) TREBLE DAMAGES FOR CRIMINAL SANC17 TIONS.—Section 1128B of such Act (42 U.S.C.

18 1320a–7b) is amended by adding at the end the fol19 lowing new subsection:

20 ‘‘(f) In addition to the fines that may be imposed

21 under subsection (a), (b), or (c), any individual found to

22 have violated the provisions of any of such subsections

23 may be subject to treble damages.’’.

24 (3) IDENTIFICATION OF COMMUNITY SERVICE

25 OPPORTUNITIES.—Section 1128B of such Act (42
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•S 1533 IS

1 U.S.C. 1320a–7b) is further amended by adding at

2 the end the following new subsection:

3 ‘‘(g) The Secretary shall—

4 ‘‘(1) in consultation with State and local health

5 care officials, identify opportunities for the satisfac6 tion of community service obligations that a court

7 may impose upon the conviction of an offense under

8 this section, and

9 ‘‘(2) make information concerning such oppor10 tunities available to Federal and State law enforce11 ment officers and State and local health care offi12 cials.’’.

13 (c) HEALTH BENEFIT PLAN DEFINED.—Section

14 1128 of such Act (42 U.S.C. 1320a–7) is amended by re15 designating subsection (i) as subsection (j) and by insert16 ing after subsection (h) the following new subsection:

17 ‘‘(i) HEALTH BENEFIT PLAN DEFINED.—For pur18 poses of sections 1128A and 1128B, the term ‘health ben19 efit plan’ means a health benefit program other than the

20 medicare program, the medicaid program, or a State

21 health care program.’’.

22 (d) CONFORMING AMENDMENT.—Section

23 1128(b)(8)(B)(ii) of such Act (42 U.S.C. 1320a–

24 7(b)(8)(B)(ii)) is amended by striking ‘‘1128A’’ and in-
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•S 1533 IS

1 serting ‘‘1128A (other than a penalty arising from a

2 health benefit plan, as defined in subsection (i))’’.

3 (e) EFFECTIVE DATE.—The amendments made by

4 this section shall take effect January 1, 1995.

5 Subtitle E—Medicare Payment

6 Changes; Part B Premium Tax

7 for High-Income Individuals

8 PART 1—MEDICARE PAYMENT CHANGES

9 SEC. 2401. ELIMINATION OF MEMBERSHIP LIMITATION FOR

10 MEDICARE HMOS.

11 (a) IN GENERAL.—Section 1876 of the Social Secu12 rity Act (42 U.S.C. 1395mm) is amended by striking sub13 section (f).

14 (b) CONFORMING AMENDMENTS.—Such section is

15 further amended—

16 (1) in subsection (c)(3)(A)(i), by striking ‘‘in

17 failure to meet the requirements of subsection (f) or

18 would result’’, and

19 (2) in subsection (i)(1)(C), by striking ‘‘(e), and

20 (f)’’ and inserting ‘‘and (e)’’.

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to contracts entered into on or

23 after the date of the enactment of this Act.
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1 SEC. 2402. EXPANSION AND REVISION OF MEDICARE SE2 LECT POLICIES.

3 (a) PERMITTING MEDICARE SELECT POLICIES IN

4 ALL STATES.—

5 (1) IN GENERAL.—Subsection (c) of section

6 4358 of the Omnibus Budget Reconciliation Act of

7 1990 (hereafter referred to as ‘‘OBRA–1990’’) is

8 hereby repealed.

9 (2) CONFORMING AMENDMENT.—Section 4358

10 of OBRA–1990 is amended by redesignating sub11 section (d) as subsection (c).

12 (b) REQUIREMENTS OF MEDICARE SELECT POLI13 CIES.—Section 1882(t)(1) of the Social Security Act (42

14 U.S.C. 1395ss(t)(1)) is amended to read as follows:

15 ‘‘(1)(A) If a medicare supplemental policy meets the

16 1991 NAIC Model Regulation or 1991 Federal Regulation

17 and otherwise complies with the requirements of this sec18 tion except that—

19 ‘‘(i) the benefits under such policy are re20 stricted to items and services furnished by certain

21 entities (or reduced benefits are provided when items

22 or services are furnished by other entities), and

23 ‘‘(ii) in the case of a policy described in sub24 paragraph (C)(i)—
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1 ‘‘(I) the benefits under such policy are not

2 one of the groups or packages of benefits de3 scribed in subsection (p)(2)(A),

4 ‘‘(II) except for nominal copayments im5 posed for services covered under part B of this

6 title, such benefits include at least the core

7 group of basic benefits described in subsection

8 (p)(2)(B), and

9 ‘‘(III) an enrollee’s liability under such pol10 icy for physician’s services covered under part

11 B of this title is limited to the nominal

12 copayments described in subclause (II),

13 the policy shall nevertheless be treated as meeting those

14 standards if the policy meets the requirements of subpara15 graph (B).

16 ‘‘(B) A policy meets the requirements of this sub17 paragraph if—

18 ‘‘(i) full benefits are provided for items and

19 services furnished through a network of entities

20 which have entered into contracts or agreements

21 with the issuer of the policy,

22 ‘‘(ii) full benefits are provided for items and

23 services furnished by other entities if the services are

24 medically necessary and immediately required be25 cause of an unforeseen illness, injury, or condition
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1 and it is not reasonable given the circumstances to

2 obtain the services through the network,

3 ‘‘(iii) the network offers sufficient access,

4 ‘‘(iv) the issuer of the policy has arrangements

5 for an ongoing quality assurance program for items

6 and services furnished through the network,

7 ‘‘(v)(I) the issuer of the policy provides to each

8 enrollee at the time of enrollment an explanation

9 of—

10 ‘‘(aa) the restrictions on payment under

11 the policy for services furnished other than by

12 or through the network,

13 ‘‘(bb) out of area coverage under the pol14 icy,

15 ‘‘(cc) the policy’s coverage of emergency

16 services and urgently needed care, and

17 ‘‘(dd) the availability of a policy through

18 the entity that meets the 1991 Model NAIC

19 Regulation or 1991 Federal Regulation without

20 regard to this subsection and the premium

21 charged for such policy, and

22 ‘‘(II) each enrollee prior to enrollment acknowl23 edges receipt of the explanation provided under

24 subclause (I), and
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1 ‘‘(vi) the issuer of the policy makes available to

2 individuals, in addition to the policy described in this

3 subsection, any policy (otherwise offered by the is4 suer to individuals in the State) that meets the 1991

5 Model NAIC Regulation or 1991 Federal Regulation

6 and other requirements of this section without re7 gard to this subsection.

8 ‘‘(C)(i) A policy described in this subparagraph—

9 ‘‘(I) is offered by an eligible organization (as

10 defined in section 1876(b)),

11 ‘‘(II) is not a policy or plan providing benefits

12 pursuant to a contract under section 1876 or an ap13 proved demonstration project described in section

14 603(c) of the Social Security Amendments of 1983,

15 section 2355 of the Deficit Reduction Act of 1984,

16 or section 9412(b) of the Omnibus Budget Reconcili17 ation Act of 1986, and

18 ‘‘(III) provides benefits which, when combined

19 with benefits which are available under this title, are

20 substantially similar to benefits under policies of21 fered to individuals who are not entitled to benefits

22 under this title.

23 ‘‘(ii) In making a determination under subclause (III)

24 of clause (i) as to whether certain benefits are substan25 tially similar, there shall not be taken into account, except
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1 in the case of preventive services, benefits provided under

2 policies offered to individuals who are not entitled to bene3 fits under this title which are in addition to the benefits

4 covered by this title and which are benefits an entity must

5 provide in order to meet the definition of an eligible orga6 nization under section 1876(b)(1).’’.

7 (c) RENEWABILITY OF MEDICARE SELECT POLI8 CIES.—Section 1882(q)(1) of the Social Security Act (42

9 U.S.C. 1395ss(q)(1)) is amended—

10 (1) by striking ‘‘(1) Each’’ and inserting

11 ‘‘(1)(A) Except as provided in subparagraph (B),

12 each’’;

13 (2) by redesignating subparagraphs (A) and

14 (B) as clauses (i) and (ii), respectively; and

15 (3) by adding at the end the following new sub16 paragraph:

17 ‘‘(B)(i) Except as provided in clause (ii), in the

18 case of a policy that meets the requirements of sub19 section (t), an issuer may cancel or nonrenew such

20 policy with respect to an individual who leaves the

21 service area of such policy.

22 ‘‘(ii) If an individual described in clause (i)

23 moves to a geographic area where an issuer de24 scribed in clause (i), or where an affiliate of such is25 suer, is issuing medicare supplemental policies, such
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1 individual must be permitted to enroll in any medi2 care supplemental policy offered by such issuer or

3 affiliate that provides benefits comparable to or less

4 than the benefits provided in the policy being can5 celed or nonrenewed. An individual whose coverage

6 is canceled or nonrenewed under this subparagraph

7 shall, as part of the notice of termination or

8 nonrenewal, be notified of the right to enroll in other

9 medicare supplemental policies offered by the issuer

10 or its affiliates.

11 ‘‘(iii) For purposes of this subparagraph, the

12 term ‘affiliate’ shall have the meaning given such

13 term by the 1991 NAIC Model Regulation.’’.

14 (d) CIVIL MONEY PENALTY.—Section 1882(t)(2) of

15 the Social Security Act (42 U.S.C. 1395ss(t)(2)) is

16 amended—

17 (1) by striking ‘‘(2)’’ and inserting ‘‘(2)(A)’’;

18 (2) by redesignating subparagraphs (A), (B),

19 (C), and (D) as clauses (i), (ii), (iii), and (iv), re20 spectively;

21 (3) in clause (iv), as so redesignated—

22 (A) by striking ‘‘paragraph (1)(E)(i)’’ and

23 inserting ‘‘paragraph (1)(B)(v)(I)’’, and

24 (B) by striking ‘‘paragraph (1)(E)(ii)’’ and

25 inserting ‘‘paragraph (1)(B)(v)(II)’’;
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1 (4) by striking ‘‘the previous sentence’’ and in2 serting ‘‘this subparagraph’’; and

3 (5) by adding at the end the following new sub4 paragraph:

5 ‘‘(B) If the Secretary determines that an issuer of

6 a policy approved under paragraph (1) has made a mis7 representation to the Secretary or has provided the Sec8 retary with false information regarding such policy, the

9 issuer is subject to a civil money penalty in an amount

10 not to exceed $100,000 for each such determination. The

11 provisions of section 1128A (other than the first sentence

12 of subsection (a) and other than subsection (b)) shall

13 apply to a civil money penalty under this subparagraph

14 in the same manner as such provisions apply to a penalty

15 or proceeding under section 1128A(a).’’.

16 (e) EFFECTIVE DATES.—

17 (1) NAIC STANDARDS.—If, within 6 months

18 after the date of the enactment of this Act, the Na19 tional Association of Insurance Commissioners

20 (hereafter in this subsection referred to as the

21 ‘‘NAIC’’) makes changes in the 1991 NAIC Model

22 Regulation (as defined in section 1882(p)(1)(A) of

23 the Social Security Act) to incorporate the additional

24 requirements imposed by the amendments made by

25 this section, section 1882(g)(2)(A) of such Act shall
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•S 1533 IS

1 be applied in each State, effective for policies issued

2 to policyholders on and after the date specified in

3 paragraph (3), as if the reference to the Model Reg4 ulation adopted on June 6, 1979, were a reference

5 to the 1991 NAIC Model Regulation (as so defined)

6 as changed under this paragraph (such changed

7 Regulation referred to in this subsection as the

8 ‘‘1994 NAIC Model Regulation’’).

9 (2) SECRETARY STANDARDS.—If the NAIC

10 does not make changes in the 1991 NAIC Model

11 Regulation (as so defined) within the 6-month period

12 specified in paragraph (1), the Secretary of Health

13 and Human Services (in this subsection as the ‘‘Sec14 retary’’) shall promulgate a regulation and section

15 1882(g)(2)(A) of the Social Security Act shall be ap16 plied in each State, effective for policies issued to

17 policyholders on and after the date specified in para18 graph (3), as if the reference to the Model Regula19 tion adopted in June 6, 1979, were a reference to

20 the 1991 NAIC Model Regulation (as so defined) as

21 changed by the Secretary under this paragraph

22 (such changed Regulation referred to in this sub23 section as the ‘‘1994 Federal Regulation’’).

24 (3) DATE SPECIFIED.—
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•S 1533 IS

1 (A) IN GENERAL.—Subject to subpara2 graph (B), the date specified in this paragraph

3 for a State is the earlier of—

4 (i) the date the State adopts the 1994

5 NAIC Model Regulation or the 1994 Fed6 eral Regulation; or

7 (ii) 1 year after the date the NAIC or

8 the Secretary first adopts such regulations.

9 (B) ADDITIONAL LEGISLATIVE ACTION RE10 QUIRED.—In the case of a State which the Sec11 retary identifies, in consultation with the NAIC,

12 as—

13 (i) requiring State legislation (other

14 than legislation appropriating funds) in

15 order for medicare supplemental policies to

16 meet the 1994 NAIC Model Regulation or

17 the 1994 Federal Regulation, but

18 (ii) having a legislature which is not

19 scheduled to meet in 1995 in a legislative

20 session in which such legislation may be

21 considered,

22 the date specified in this paragraph is the first

23 day of the first calendar quarter beginning after

24 the close of the first legislative session of the

25 State legislature that begins on or after Janu-
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•S 1533 IS

1 ary 1, 1995. For purposes of the previous sen2 tence, in the case of a State that has a 2-year

3 legislative session, each year of such session

4 shall be deemed to be a separate regular session

5 of the State legislature.

6 SEC. 2403. IMPROVED EFFICIENCY THROUGH CONSOLIDA7 TION OF ADMINISTRATION OF PARTS A AND

8 B.

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

10 Human Services shall take such steps as may be necessary

11 to consolidate the administration (including processing

12 systems) of parts A and B of the medicare program (under

13 title XVIII of the Social Security Act) including over a

14 5-year period.

15 (b) COMBINATION OF INTERMEDIARY AND CARRIER

16 FUNCTIONS.—In taking such steps, the Secretary shall

17 contract with a single entity that combines the fiscal

18 intermediary and carrier functions in each area except

19 where the Secretary finds that special regional or national

20 contracts are appropriate.

21 (c) SUPERSEDING CONFLICTING REQUIREMENTS.—

22 The provisions of sections 1816 and 1842 of the Social

23 Security Act (including provider nominating provisions in

24 such section 1816) are superseded to the extent required

25 to carry out this section.
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1 PART 2—PART B PREMIUM TAX FOR HIGH2 INCOME INDIVIDUALS

3 SEC. 2411. INCREASE IN MEDICARE PART B PREMIUM FOR

4 INDIVIDUALS WITH HIGH INCOME.

5 (a) IN GENERAL.—Subchapter A of chapter 1 of the

6 Internal Revenue Code of 1986 is amended by adding at

7 the end thereof the following new part:

8 ‘‘PART VIII—MEDICARE PART B PREMIUMS FOR

9 HIGH-INCOME INDIVIDUALS

‘‘Sec. 59B. Medicare part B premium tax.

10 ‘‘SEC. 59B. MEDICARE PART B PREMIUM TAX.

11 ‘‘(a) IMPOSITION OF TAX.—In the case of an individ12 ual to whom this section applies for the taxable year, there

13 is hereby imposed (in addition to any other tax imposed

14 by this subtitle) a tax for such taxable year equal to the

15 aggregate of the Medicare part B premium taxes for each

16 of the months during such year that such individual is

17 covered by Medicare part B.

18 ‘‘(b) INDIVIDUALS TO WHOM SECTION APPLIES.—

19 This section shall apply to any individual for any taxable

20 year if—

21 ‘‘(1) such individual is covered under Medicare

22 part B for any month during such year, and

23 ‘‘(2) the modified adjusted gross income of the

24 taxpayer for such taxable year exceeds the threshold

25 amount.
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1 ‘‘(c) MEDICARE PART B PREMIUM TAX FOR

2 MONTH.—

3 ‘‘(1) IN GENERAL.—The Medicare part B premium tax for any month is 2 4 ⁄3 the amount equal to

5 the excess of—

6 ‘‘(A) 150 percent of the monthly actuarial

7 rate for enrollees age 65 and over determined

8 for that calendar year under section 1839(b) of

9 the Social Security Act, over

10 ‘‘(B) the total monthly premium under sec11 tion 1839 of the Social Security Act (deter12 mined without regard to subsections (b) and (f)

13 of section 1839 of such Act).

14 ‘‘(2) PHASEIN OF TAX.—If the modified ad15 justed gross income of the taxpayer for any taxable

16 years exceeds the threshold amount by less than

17 $50,000, the Medicare part B premium tax for any

18 month during such taxable year shall be an amount

19 which bears the same ratio to the amount deter20 mined under paragraph (1) (without regard to this

21 paragraph) as such excess bears to $50,000. The

22 preceding sentence shall not apply to any individual

23 whose threshold amount is zero.

24 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—

25 For purposes of this section—
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1 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh2 old amount’ means—

3 ‘‘(A) except as otherwise provided in this

4 paragraph, $100,000,

5 ‘‘(B) $125,000 in the case of a joint re6 turn, and

7 ‘‘(C) zero in the case of a taxpayer who—

8 ‘‘(i) is married at the close of the tax9 able year but does not file a joint return

10 for such year, and

11 ‘‘(ii) does not live apart from his

12 spouse at all times during the taxable year.

13 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.—

14 The term ‘modified adjusted gross income’ means

15 adjusted gross income—

16 ‘‘(A) determined without regard to sections

17 135, 911, 931, and 933, and

18 ‘‘(B) increased by the amount of interest

19 received or accrued by the taxpayer during the

20 taxable year which is exempt from tax.

21 ‘‘(3) MEDICARE PART B COVERAGE.—An indi22 vidual shall be treated as covered under Medicare

23 part B for any month if a premium is paid under

24 part B of title XVIII of the Social Security Act for
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•S 1533 IS

1 the coverage of the individual under such part for

2 the month.

3 ‘‘(4) MARRIED INDIVIDUAL.—The determina4 tion of whether an individual is married shall be

5 made in accordance with section 7703.’’

6 (b) CLERICAL AMENDMENT.—The table of parts for

7 subchapter A of chapter 1 of such Code is amended by

8 adding at the end thereof the following new item:

‘‘Part VIII. Medicare Part B Premiums For High-Income Individuals.’’

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to months after December 1993

11 in taxable years ending after December 31, 1993.

12 Subtitle F—Removing Anti-Trust

13 Impediments

14 SEC. 2501. ESTABLISHMENT OF LIMITED EXEMPTION PRO15 GRAM FOR HEALTH CARE JOINT VENTURES.

16 (a) ESTABLISHMENT.—

17 (1) IN GENERAL.—Not later than 6 months

18 after the date of the enactment of this Act, the At19 torney General, after consultation with the Secretary

20 of Health and Human Services and the Interagency

21 Advisory Committee on Competition, Antitrust Pol22 icy, and Health Care, shall promulgate specific

23 guidelines under which a health care joint venture

24 may submit an application requesting that the At-
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1 torney General provide the entities participating in

2 the joint venture with an exemption under which

3 (notwithstanding any other provision of law)—

4 (A) monetary recovery on a claim under

5 the antitrust laws shall be limited to actual

6 damages if the claim results from conduct with7 in the scope of the joint venture that occurs

8 while the exemption is in effect; and

9 (B) the conduct of the entity in making or

10 performing a contract to carry out the joint

11 venture shall not be deemed illegal per se under

12 the antitrust laws but shall be judged on the

13 basis of its reasonableness, taking into account

14 all relevant factors affecting competition, in15 cluding (but not limited to) effects on competi16 tion in properly defined, relevant research, de17 velopment, product, process, and service mar18 kets (taking into consideration worldwide capac19 ity to the extent that it may be appropriate in

20 the circumstances).

21 (2) DEADLINE FOR RESPONSE.—The Attorney

22 General, after consultation with the Secretary and

23 the Advisory Committee, shall approve or disapprove

24 the application of a health care joint venture for an

25 exemption under this subsection not later than 30
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•S 1533 IS

1 days after the Attorney General receives the joint

2 venture’s application.

3 (3) PROVIDING REASONS FOR DISAPPROVAL.—

4 If the Attorney General disapproves the application

5 of a health care joint venture for an exemption

6 under this subsection, the Attorney General shall

7 provide the joint venture with a statement explaining

8 the reasons for the Attorney General’s disapproval.

9 (b) REQUIREMENTS FOR APPROVAL.—For purposes

10 of subsection (a), the Attorney General shall approve the

11 application of a health care joint venture for an exemption

12 under subsection (a) if an entity participating in the joint

13 venture submits to the Attorney General an application

14 not later than 30 days after the entity has entered into

15 a written agreement to participate in the joint venture (or

16 not later than 30 days after the date of the enactment

17 of this Act in the case of a joint venture in effect as of

18 such date) that contains the following information and as19 surances:

20 (1) The identities of the parties to the joint

21 venture.

22 (2) The nature, objectives, and planned activi23 ties of the joint venture.

24 (3) Assurances that the entities participating in

25 the joint venture shall notify the Attorney General
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•S 1533 IS

1 of any changes in the information described in para2 graphs (1) and (2) during the period for which the

3 exemption is in effect.

4 (c) REVOCATION OF EXEMPTION.—

5 (1) IN GENERAL.—The Attorney General, after

6 consultation with the Secretary, may revoke an ex7 emption provided to a health care joint venture

8 under this section if, at any time during which the

9 exemption is in effect, the Attorney General finds

10 that the joint venture no longer meets the applicable

11 requirements for approval under subsection (b), ex12 cept that the Attorney General may not revoke such

13 an exemption if the failure of the health care joint

14 venture to meet such requirements is merely tech15 nical in nature.

16 (2) TIMING.—The revocation of an exemption

17 under paragraph (1) shall apply only to conduct of

18 the health care joint venture occurring after the ex19 emption is no longer in effect.

20 (d) WITHDRAWAL OF APPLICATION.—Any party that

21 submits an application under this section may withdraw

22 such application at any time before the Attorney General’s

23 response to the application.
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1 (e) REQUIREMENTS RELATING TO NOTICE AND PUB2 LICATION OF EXEMPTIONS AND RELATED INFORMA3 TION.—

4 (1) PUBLICATION OF APPROVED APPLICATIONS

5 FOR EXEMPTIONS IN FEDERAL REGISTER.—

6 (A) IN GENERAL.—With respect to each

7 exemption for a health care joint venture pro8 vided under subsection (a), the Attorney Gen9 eral (acting jointly with the Secretary) shall—

10 (i) prepare a notice with respect to

11 the joint venture that identifies the parties

12 to the venture and that describes the

13 planned activities of the venture;

14 (ii) submit the notice to the entities

15 participating in the joint venture; and

16 (iii) after submitting the notice to

17 such entities (but not later than 30 days

18 after approving the application for the ex19 emption for the joint venture), publish the

20 notice in the Federal Register.

21 (B) EFFECT OF PUBLICATION.—An ex22 emption provided by the Attorney General

23 under subsection (a) shall take effect as of the

24 date of the publication in the Federal Register
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•S 1533 IS

1 of the notice with respect to the exemption pur2 suant to subparagraph (A).

3 (2) WAIVER OF DISCLOSURE REQUIREMENTS

4 FOR INFORMATION RELATING TO APPLICATIONS FOR

5 EXEMPTIONS.—

6 (A) IN GENERAL.—All information and

7 documentary material submitted as part of an

8 application of a health care joint venture for an

9 exemption under subsection (a), together with

10 any other information obtained by the Attorney

11 General, the Secretary, or the Advisory Com12 mittee in the course of any investigation, ad13 ministrative proceeding, or case with respect to

14 a potential violation of the antitrust laws by the

15 joint venture with respect to which the exemp16 tion applies, shall be exempt from disclosure

17 under section 552 of title 5, United States

18 Code, and shall not be made publicly available

19 by any agency of the United States to which

20 such section applies, except as relevant to a law

21 enforcement investigation or in a judicial or ad22 ministrative proceeding in which such informa23 tion and material is subject to any protective

24 order.
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•S 1533 IS

1 (B) EXCEPTION FOR INFORMATION IN2 CLUDED IN FEDERAL REGISTER NOTICE.—Sub3 paragraph (A) shall not apply with respect to

4 information contained in a notice published in

5 the Federal Register pursuant to paragraph

6 (1).

7 (3) USE OF INFORMATION TO SUPPORT OR AN8 SWER CLAIMS UNDER ANTITRUST LAWS.—

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

10 subparagraph (B), the fact of disclosure of con11 duct under an application for an exemption

12 under subsection (a) and the fact of publication

13 of a notice in the Federal Register under para14 graph (1) shall be admissible into evidence in

15 any judicial or administrative proceeding for the

16 sole purpose of establishing that a person is en17 titled to the protections provided by an exemp18 tion granted under subsection (a).

19 (B) EFFECT OF REJECTED APPLICA20 TION.—If the Attorney General denies, in whole

21 or in part, an application for an exemption

22 under subsection (a), or revokes an exemption

23 under such section, neither the negative deter24 mination nor the statement of reasons therefor

25 shall be admissible into evidence in any admin-
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•S 1533 IS

1 istrative or judicial proceeding for the purpose

2 of supporting or answering any claim under the

3 antitrust laws.

4 SEC. 2502. ISSUANCE OF HEALTH CARE CERTIFICATES OF

5 PUBLIC ADVANTAGE.

6 (a) ISSUANCE AND EFFECT OF CERTIFICATE.—The

7 Attorney General, after consultation with the Secretary

8 and the Advisory Committee, shall issue in accordance

9 with this section a certificate of public advantage to each

10 eligible health care joint venture that complies with the

11 requirements in effect under this section on or after the

12 expiration of the 1-year period that begins on the date

13 of the enactment of this Act (without regard to whether

14 or not the Attorney General has promulgated regulations

15 to carry out this section by such date). Such venture, and

16 the parties to such venture, shall not be liable under any

17 of the antitrust laws for conduct described in such certifi18 cate and engaged in by such venture if such conduct oc19 curs while such certificate is in effect.

20 (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF

21 CERTIFICATES.—

22 (1) STANDARDS TO BE MET.—The Attorney

23 General shall issue a certificate to an eligible health

24 care joint venture if the Attorney General finds

25 that—
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•S 1533 IS

1 (A) the benefits that are likely to result

2 from carrying out the venture outweigh the re3 duction in competition (if any) that is likely to

4 result from the venture, and

5 (B) such reduction in competition is rea6 sonably necessary to obtain such benefits.

7 (2) FACTORS TO BE CONSIDERED.—

8 (A) WEIGHING OF BENEFITS AGAINST RE9 DUCTION IN COMPETITION.—For purposes of

10 making the finding described in paragraph

11 (1)(A), the Attorney General shall consider

12 whether the venture is likely—

13 (i) to maintain or to increase the

14 quality of health care,

15 (ii) to increase access to health care,

16 (iii) to achieve cost efficiencies that

17 will be passed on to health care consumers,

18 such as economies of scale, reduced trans19 action costs, and reduced administrative

20 costs,

21 (iv) to preserve the operation of

22 health care facilities located in underserved

23 geographical areas,

24 (v) to improve utilization of health

25 care resources, and
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•S 1533 IS

1 (vi) to reduce inefficient health care

2 resource duplication.

3 (B) NECESSITY OF REDUCTION IN COM4 PETITION.—For purposes of making the finding

5 described in paragraph (1)(B), the Attorney

6 General shall consider—

7 (i) the ability of the providers of

8 health care services that are (or likely to

9 be) affected by the health care joint ven10 ture and the entities responsible for mak11 ing payments to such providers to nego12 tiate societally optimal payment and serv13 ice arrangements,

14 (ii) the effects of the health care joint

15 venture on premiums and other charges

16 imposed by the entities described in clause

17 (i), and

18 (iii) the availability of equally effi19 cient, less restrictive alternatives to achieve

20 the benefits that are intended to be

21 achieved by carrying out the venture.

22 (c) ESTABLISHMENT OF CRITERIA AND PROCE23 DURES.—Subject to subsections (d) and (e), not later than

24 1 year after the date of the enactment of this Act, the

25 Attorney General and the Secretary shall establish jointly
340

•S 1533 IS

1 by rule the criteria and procedures applicable to the issu2 ance of certificates under subsection (a). The rules shall

3 specify the form and content of the application to be sub4 mitted to the Attorney General to request a certificate,

5 the information required to be submitted in support of

6 such application, the procedures applicable to denying and

7 to revoking a certificate, and the procedures applicable to

8 the administrative appeal (if such appeal is authorized by

9 rule) of the denial and the revocation of a certificate. Such

10 information may include the terms of the health care joint

11 venture (in the case of a venture in existence as of the

12 time of the application) and implementation plan for the

13 joint venture.

14 (d) ELIGIBLE HEALTH CARE JOINT VENTURE.—To

15 be an eligible health care joint venture for purposes of this

16 section, a health care joint venture shall submit to the At17 torney General an application that complies with the rules

18 in effect under subsection (c) and that includes—

19 (1) an agreement by the parties to the venture

20 that the venture will not foreclose competition by en21 tering into contracts that prevent health care provid22 ers from providing health care in competition with

23 the venture,

24 (2) an agreement that the venture will submit

25 to the Attorney General annually a report that de-
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•S 1533 IS

1 scribes the operations of the venture and informa2 tion regarding the impact of the venture on health

3 care and on competition in health care, and

4 (3) an agreement that the parties to the ven5 ture will notify the Attorney General and the Sec6 retary of the termination of the venture not later

7 than 30 days after such termination occurs.

8 (e) REVIEW OF APPLICATIONS FOR CERTIFICATES.—

9 Not later than 30 days after an eligible health care joint

10 venture submits to the Attorney General an application

11 that complies with the rules in effect under subsection (c)

12 and with subsection (d), the Attorney General shall issue

13 or deny the issuance of such certificate. If, before the expi14 ration of such 30-day period, the Attorney General fails

15 to issue or deny the issuance of such certificate, the Attor16 ney General shall be deemed to have issued such certifi17 cate.

18 (f) REVOCATION OF CERTIFICATE.—Whenever the

19 Attorney General finds that a health care joint venture

20 with respect to which a certificate is in effect does not

21 meet the standards specified in subsection (b), the Attor22 ney General shall revoke such certificate.

23 (g) WRITTEN REASONS; JUDICIAL REVIEW.—

24 (1) DENIAL AND REVOCATION OF CERTIFI25 CATES.—If the Attorney General denies an applica-
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•S 1533 IS

1 tion for a certificate or revokes a certificate, the At2 torney General shall include in the notice of denial

3 or revocation a statement of the reasons relied upon

4 for the denial or revocation of such certificate.

5 (2) JUDICIAL REVIEW.—

6 (A) AFTER ADMINISTRATIVE PROCEED7 ING.—(i) If the Attorney General denies an ap8 plication submitted or revokes a certificate is9 sued under this section after an opportunity for

10 hearing on the record, then any party to the

11 health care joint venture involved may com12 mence a civil action, not later than 60 days

13 after receiving notice of the denial or revoca14 tion, in an appropriate district court of the

15 United States for review of the record of such

16 denial or revocation.

17 (ii) As part of the Attorney General’s an18 swer, the Attorney General shall file in such

19 court a certified copy of the record on which

20 such denial or revocation is based. The findings

21 of fact of the Attorney General may be set aside

22 only if found to be unsupported by substantial

23 evidence in such record taken as a whole.

24 (B) DENIAL OR REVOCATION WITHOUT AD25 MINISTRATIVE PROCEEDING.—If the Attorney
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•S 1533 IS

1 General denies an application submitted or re2 vokes a certificate issued under this section

3 without an opportunity for hearing on the

4 record, then any party to the health care joint

5 venture involved may commence a civil action,

6 not later than 60 days after receiving notice of

7 the denial or revocation, in an appropriate dis8 trict court of the United States for de novo re9 view of such denial or revocation.

10 (h) EXEMPTION.—A person shall not be liable under

11 any of the antitrust laws for conduct necessary—

12 (1) to prepare, agree to prepare, or attempt to

13 agree to prepare an application to request a certifi14 cate under this section, or

15 (2) to attempt to enter into any health care

16 joint venture with respect to which such a certificate

17 is in effect.

18 SEC. 2503. INTERAGENCY ADVISORY COMMITTEE ON COM19 PETITION, ANTITRUST POLICY, AND HEALTH

20 CARE.

21 (a) ESTABLISHMENT.—There is hereby established

22 the Interagency Advisory Committee on Competition,

23 Antitrust Policy, and Health Care. The Advisory Commit24 tee shall be composed of—
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•S 1533 IS

1 (1) the Secretary of Health and Human Serv2 ices (or the designee of the Secretary);

3 (2) the Attorney General (or the designee of the

4 Attorney General);

5 (3) the Director of the Office of Management

6 and Budget (or the designee of the Director); and

7 (4) a representative of the Federal Trade Com8 mission.

9 (b) DUTIES.—The duties of the Advisory Committee

10 are—

11 (1) to discuss and evaluate competition and

12 antitrust policy, and their implications with respect

13 to the performance of health care markets;

14 (2) to analyze the effectiveness of health care

15 joint ventures receiving exemptions under the pro16 gram established under section 2501(a) or certifi17 cates under section 2502 in reducing the costs of

18 and expanding access to the health care services that

19 are the subject of such ventures; and

20 (3) to make such recommendations to Congress

21 not later than 2 years after the date of the enact22 ment of this Act (and at such subsequent periods as

23 the Advisory Committee considers appropriate) re24 garding modifications to the program established

25 under section 2501(a) or to section 2502 as the Ad-
345

•S 1533 IS

1 visory Committee considers appropriate, including

2 modifications relating to the costs to health care

3 providers of obtaining an exemption for a joint ven4 ture under such program.

5 SEC. 2504. DEFINITIONS.

6 For purposes of this subtitle:

7 (1) The term ‘‘Advisory Committee’’ means the

8 Interagency Advisory Committee on Competition,

9 Antitrust Policy, and Health Care established under

10 section 2503.

11 (2) The term ‘‘antitrust laws’’—

12 (A) has the meaning given it in subsection

13 (a) of the first section of the Clayton Act (15

14 U.S.C. 12(a)), except that such term includes

15 section 5 of the Federal Trade Commission Act

16 (15 U.S.C. 45) to the extent such section ap17 plies to unfair methods of competition; and

18 (B) includes any State law similar to the

19 laws referred to in subparagraph (A).

20 (3) The term ‘‘certificate’’ means a certificate

21 of public advantage authorized to be issued under

22 section 2502(a).

23 (4) The term ‘‘health care joint venture’’ means

24 an agreement (whether existing or proposed) be25 tween 2 or more providers of health care services
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•S 1533 IS

1 that is entered into solely for the purpose of sharing

2 in the provision of health care services and that in3 volves substantial integration or financial risk-shar4 ing between the parties, but does not include the ex5 changing of information, the entering into of any

6 agreement, or the engagement in any other conduct

7 that is not reasonably required to carry out such

8 agreement.

9 (5) The term ‘‘health care services’’ includes

10 services related to the delivery or administration of

11 health care services.

12 (6) The term ‘‘liable’’ means liable for any civil

13 or criminal violation of the antitrust laws.

14 (7) The term ‘‘provider of health care services’’

15 means any individual or entity that is engaged in the

16 delivery of health care services in a State and that

17 is required by State law or regulation to be licensed

18 or certified by the State to engage in the delivery of

19 such services in the State.

20 (8) The term ‘‘Secretary’’ means the Secretary

21 of Health and Human Services.
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•S 1533 IS

1 Subtitle G—Encouraging Enforce2 ment Activities of Medical Self3 Regulatory Entities

4 PART 1—APPLICATION OF THE CLAYTON

5 ACT TO MEDICAL SELF-REGULATORY

6 ENTITIES

7 SEC. 2601. ANTITRUST EXEMPTION FOR MEDICAL SELF8 REGULATORY ENTITIES.

9 (a) IN GENERAL.—(1) Except as provided in para10 graph (2), no damages, interest on damages, cost of suit,

11 or attorney’s fee may be recovered under section 4, 4A,

12 or 4C of the Clayton Act (15 U.S.C. 15, 15a, 15c), or

13 under any State law similar to such section, from any

14 medical self-regulatory entity (including its members, offi15 cers, employees, consultants, and volunteers or committees

16 thereof) as a result of engaging in standard setting or en17 forcement activities that are—

18 (A) designed to promote the quality of health

19 care provided to patients, and

20 (B) not conducted for purposes of financial

21 gain.

22 (2) Paragraph (1) shall not prohibit the recovery of

23 actual damages, interest on damages, the cost of suit, or

24 a reasonable attorney’s fee under section 4 or 4A of the

25 Clayton Act (15 U.S.C. 15, 15a), or under any State law
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•S 1533 IS

1 similar to such section, by a State or the United States

2 from a medical self-regulatory entity (including its mem3 bers, officers, employees, consultants, and volunteers or

4 committees thereof) for injury sustained as a result of en5 gaging in the conduct described in such paragraph.

6 (b) FEES.—In any action under section 4, 4C, or 16

7 of the Clayton Act (15 U.S.C. 15, 15c, 26), or under a

8 similar State law, brought against any medical self-regu9 latory entity (including its members, officers, employees,

10 consultants, and volunteers or committees thereof) as a

11 result of engaging in conduct described in subsection

12 (a)(1), the court shall award the cost of suit, including

13 a reasonable attorney’s fee, to a substantially prevailing

14 defendant.

15 SEC. 2602. DEFINITIONS.

16 For purposes of this subtitle:

17 (1) The term ‘‘medical self-regulatory entity’’

18 means a medical society or association, a specialty

19 board, a recognized accrediting agency, or a hospital

20 medical staff.

21 (2) The term ‘‘standard setting and enforce22 ment activities’’ means—

23 (A) accreditation of health care practition24 ers, health care providers, medical education in25 stitutions, or medical education programs,
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•S 1533 IS

1 (B) technology assessment and risk man2 agement activities,

3 (C) the development and implementation of

4 practice guidelines or practice parameters, or

5 (D) official peer review proceedings under6 taken by a hospital medical staff (or committee

7 thereof) or a medical society or association for

8 purposes of evaluating the quality of health care

9 provided by a medical professional.

10 PART 2—CONSULTATION BY FEDERAL

11 AGENCIES

12 SEC. 2611. CONSULTATION WITH MEDICAL SELF-REGU13 LATORY ENTITIES RESPECTING MEDICAL

14 PROFESSIONAL GUIDELINES AND STAND15 ARDS.

16 Any Federal agency engaged in the establishment of

17 medical professional standards shall consult with appro18 priate medical societies or associations, specialty boards,

19 or recognized accrediting agencies, if available, in carrying

20 out medical professional standard setting and guidelines

21 or standards relating to the practice of medicine.
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•S 1533 IS

1 Subtitle H—Prefunding Govern2 ment Health Benefits for Cer3 tain Annuitants

4 SEC. 2701. REQUIREMENT THAT CERTAIN AGENCIES

5 PREFUND GOVERNMENT HEALTH BENEFITS

6 CONTRIBUTIONS FOR THEIR ANNUITANTS.

7 (a) DEFINITIONS.—For the purpose of this section—

8 (1) the term ‘‘agency’’ means any agency or

9 other instrumentality within the executive branch of

10 the Government, the receipts and disbursements of

11 which are not generally included in the totals of the

12 budget of the United States Government submitted

13 by the President;

14 (2) the term ‘‘health benefits plan’’ means, with

15 respect to an agency, a health benefits plan, estab16 lished by or under Federal law, in which employees

17 or annuitants of such agency may participate;

18 (3) the term ‘‘health-benefits coverage’’ means

19 coverage under a health benefits plan’’;

20 (4) an individual shall be considered to be an

21 ‘‘annuitant of an agency’’ if such individual is enti22 tled to an annuity, under a retirement system estab23 lished by or under Federal law, by virtue of—

24 (A) such individual’s service with, and sep25 aration from, such agency; or
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•S 1533 IS

1 (B) being the survivor of an annuitant

2 under subparagraph (A) or of an individual who

3 died while employed by such agency; and

4 (5) the term ‘‘Office’’ means the Office of Per5 sonnel Management.

6 (b) PREFUNDING REQUIREMENT.—

7 (1) IN GENERAL.—Effective as of October 1,

8 1994, each agency (or February 1, 1995, in the case

9 of the agency with the greatest number of employ10 ees, as determined by the Office) shall be required

11 to prepay the Government contributions which are

12 or will be required in connection with providing

13 health-benefits coverage for annuitants of such agen14 cy.

15 (2) REGULATIONS.—The Office shall prescribe

16 such regulations as may be necessary to carry out

17 this section. The regulations shall be designed to en18 sure at least the following:

19 (A) Amounts paid by each agency shall be

20 sufficient to cover the amounts which would

21 otherwise be payable by such agency (on a

22 ‘‘pay-as-you-go’’ basis), on or after the applica23 ble effective date under paragraph (1), on be24 half of—
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•S 1533 IS

1 (i) individuals who are annuitants of

2 the agency as of such effective date; and

3 (ii) individuals who are employed by

4 the agency as of such effective date, or

5 who become employed by the agency after

6 such effective date, after such individuals

7 have become annuitants of the agency (in8 cluding their survivors).

9 (B)(i) For purposes of determining any

10 amounts payable by an agency—

11 (I) this section shall be treated as if

12 it had taken effect at the beginning of the

13 20-year period which ends on the effective

14 date applicable under paragraph (1) with

15 respect to such agency; and

16 (II) in addition to any amounts pay17 able under subparagraph (A), each agency

18 shall also be responsible for paying any

19 amounts for which it would have been re20 sponsible, with respect to the 20-year pe21 riod described in subclause (I), in connec22 tion with any individuals who are annu23 itants or employees of the agency as of the

24 applicable effective date under paragraph

25 (1).
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•S 1533 IS

1 (ii) Any amounts payable under this sub2 paragraph for periods preceding the applicable

3 effective date under paragraph (1) shall be pay4 able in equal installments over the 20-year pe5 riod beginning on such effective date.

6 (c) FASB STANDARDS.—Regulations under sub7 section (b) shall be in conformance with the provisions of

8 standard 106 of the Financial Accounting Standards

9 Board, issued in December 1990.

10 (d) CLARIFICATION.—Nothing in this section shall be

11 considered to permit or require duplicative payments on

12 behalf of any individuals.

13 (e) DRAFT LEGISLATION.—The Office shall prepare

14 and submit to Congress any draft legislation which may

15 be necessary in order to carry out this section.

16 Subtitle I—Miscellaneous

17 Provisions

18 SEC. 2801. INCREASE IN MINIMUM AGE REQUIRED IN

19 ORDER TO BE ELIGIBLE FOR AN IMMEDIATE

20 CIVIL SERVICE ANNUITY.

21 (a) CIVIL SERVICE RETIREMENT SYSTEM.—

22 (1) WITH 30 YEARS OF SERVICE.—Section

23 8336(a) of title 5, United States Code, is amended

24 to read as follows:
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•S 1533 IS

1 ‘‘(a)(1) An employee who is separated from the serv2 ice after attaining the minimum retirement age under

3 paragraph (2) and completing 30 years of service is enti4 tled to an annuity.

5 ‘‘(2) The minimum retirement age under this para6 graph is—

7 ‘‘(A) for an individual whose date of birth is be8 fore January 1, 1939, 55 years of age; and

9 ‘‘(B) for an individual whose date of birth is

10 after December 31, 1938, and before January 1,

11 1942, 58 years of age.

12 ‘‘(3) The preceding provisions of this subsection shall

13 not apply with respect to any individual whose date of

14 birth is after December 31, 1941.’’.

15 (2) WITH 20 YEARS OF SERVICE.—Section

16 8336(b) of title 5, United States Code, is amended

17 to read as follows:

18 ‘‘(b)(1) An employee who is separated from the serv19 ice after attaining the minimum retirement age under

20 paragraph (2) and completing 20 years of service is enti21 tled to an annuity.

22 ‘‘(2) The minimum retirement age under this para23 graph is, for an individual whose date of birth is before

24 January 1, 1935, 60 years of age.
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1 ‘‘(3) The preceding provisions of this subsection shall

2 not apply with respect to any individual whose date of

3 birth is after December 31, 1934.’’.

4 (3) MEMBERS OF CONGRESS.—Section 8336(g)

5 of title 5, United States Code, is amended—

6 (A) by redesignating paragraphs (1) and

7 (2) as subparagraphs (A) and (B), respectively,

8 and by striking ‘‘(g)’’ and inserting ‘‘(g)(1)’’;

9 (B) in the first sentence by striking ‘‘be10 coming 60 years of age’’ and inserting ‘‘satisfy11 ing the requirements of paragraph (2)’’;

12 (C) in the second sentence by striking ‘‘be13 coming 55 years of age (but before becoming 60

14 years of age)’’ and inserting ‘‘satisfying the re15 quirements of paragraph (3)’’; and

16 (D) by adding at the end the following:

17 ‘‘(2) A Member shall be considered to satisfy the re18 quirements of this paragraph if such Member has attained

19 the minimum retirement age which would apply to such

20 Member under section 8336(b), except that such require21 ments shall not be considered satisfied by any Member de22 scribed in section 8336(b)(3).

23 ‘‘(3) A Member shall be considered to satisfy the re24 quirements of this paragraph if such Member—
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•S 1533 IS

1 ‘‘(A) has attained the minimum retirement age

2 which would apply to such Member under section

3 8336(a), but

4 ‘‘(B) has not attained the minimum retirement

5 age which would apply to such Member under sec6 tion 8336(b),

7 except that such requirements shall not be considered sat8 isfied by any Member described in section 8336(b)(3).’’.

9 (b) FEDERAL EMPLOYEES’ RETIREMENT SYSTEM.—

10 (1) WITH 20 YEARS OF SERVICE.—Section

11 8412(b) of title 5, United States Code, is amended

12 to read as follows:

13 ‘‘(b)(1) An employee or Member who is separated

14 from the service after attaining the minimum retirement

15 age under paragraph (2) and completing 20 years of serv16 ice is entitled to an annuity.

17 ‘‘(2) The minimum retirement age under this para18 graph is, for an individual whose date of birth is before

19 January 1, 1935, 60 years of age.

20 ‘‘(3) The preceding provisions of this subsection shall

21 not apply with respect to any individual whose date of

22 birth is after December 31, 1934.’’.

23 (2) WITH 30 YEARS OF SERVICE.—Section

24 8412(h) of title 5, United States Code, is amended

25 to read as follows:
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•S 1533 IS

1 ‘‘(h)(1) The applicable minimum retirement age

2 under this subsection is—

3 ‘‘(A) for an individual whose date of birth is be4 fore January 1, 1939, 55 years of age; and

5 ‘‘(B) for an individual whose date of birth is

6 after December 31, 1938, and before January 1,

7 1948, 58 years of age.

8 ‘‘(2) Nothing in paragraph (1) shall be considered to

9 apply with respect to any individual whose date of birth

10 is after December 31, 1947.’’.

11 (c) CONFORMING AMENDMENT.—Section

12 8442(c)(2)(B)(i)(I) of title 5, United States Code, is

13 amended by striking ‘‘age 60’’ and inserting ‘‘the mini14 mum retirement age under section 8412(b)’’.

15 (d) CONFORMANCE OF THE RETIREMENT SYSTEMS

16 RELATING TO THE FOREIGN SERVICE AND THE CENTRAL

17 INTELLIGENCE AGENCY.—

18 (1) FOREIGN SERVICE.—The President shall, in

19 accordance with applicable provisions of section 827

20 of the Foreign Service Act of 1980 (22 U.S.C.

21 4067), provide that the Foreign Service Retirement

22 and Disability System and the Foreign Service Pen23 sion System are conformed to reflect the amend24 ments made by this section.
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1 (2) CENTRAL INTELLIGENCE AGENCY.—The

2 President shall, using the authority available to him

3 under section 292 of the Central Intelligence Agency

4 Retirement Act, as set forth in section 802 of the

5 CIARDS Technical Corrections Act of 1992 (Public

6 Law 102–496; 106 Stat. 3241), provide that the

7 Central Intelligence Agency Retirement and Disabil8 ity System shall be conformed to reflect the amend9 ments made by this section.

10 (e) EFFECTIVE DATE.—This section and the amend11 ments made by this section shall take effect on January

12 1, 1994, and shall apply with respect to annuities based

13 on the service of any individual separating on or after that

14 date.

15 TITLE III—LONG-TERM CARE

16 Subtitle A—Tax Treatment of Long17 term Care Insurance

18 SEC. 3001. TREATMENT OF LONG-TERM CARE INSURANCE

19 OR PLANS.

20 (a) GENERAL RULE.—Subpart E of part I of sub21 chapter L of chapter 1 of the Internal Revenue Code of

22 1986 is amended by inserting after section 818 the follow23 ing new section:
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•S 1533 IS

1 ‘‘SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE

2 OR PLANS.

3 ‘‘(a) GENERAL RULE.—For purposes of this part, a

4 long-term care insurance contract shall be treated as an

5 accident or health insurance contract.

6 ‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—

7 ‘‘(1) IN GENERAL.—For purposes of this part,

8 the term ‘long-term care insurance contract’ means

9 any insurance contract issued if—

10 ‘‘(A) the only insurance protection pro11 vided under such contract is coverage of quali12 fied long-term care services and benefits inci13 dental to such coverage,

14 ‘‘(B) the maximum benefit under the pol15 icy for expenses incurred for any day does not

16 exceed $200,

17 ‘‘(C) such contract does not cover expenses

18 incurred for services or items to the extent that

19 such expenses are reimbursable under title

20 XVIII of the Social Security Act or would be so

21 reimbursable but for the application of a de22 ductible or coinsurance amount,

23 ‘‘(D) such contract is guaranteed renew24 able,

25 ‘‘(E) such contract does not have any cash

26 surrender value, and
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1 ‘‘(F) all refunds of premiums, and all pol2 icyholder dividends or similar amounts, under

3 such contract are to be applied as a reduction

4 in future premiums or to increase future bene5 fits.

6 ‘‘(2) SPECIAL RULES.—

7 ‘‘(A) PER DIEM, ETC. PAYMENTS PER8 MITTED.—A contract shall not fail to be treated

9 as described in paragraph (1)(A) by reason of

10 payments being made on a per diem or other

11 periodic basis without regard to the expenses

12 incurred during the period to which the pay13 ments relate.

14 ‘‘(B) CONTRACT MAY COVER MEDICARE

15 REIMBURSABLE EXPENSES WHERE MEDICARE

16 IS SECONDARY PAYOR.—Paragraph (1)(C) shall

17 not apply to expenses which are reimbursable

18 under title XVIII of the Social Security Act

19 only as a secondary payor.

20 ‘‘(C) REFUNDS OF PREMIUMS.—Paragraph

21 (1)(F) shall not apply to any refund of pre22 miums on surrender or cancellation of the con23 tract.

24 ‘‘(c) QUALIFIED LONG-TERM CARE SERVICES.—For

25 purposes of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified long2 term care services’ means necessary diagnostic, pre3 ventive, therapeutic, and rehabilitative services, and

4 maintenance or personal care services, which—

5 ‘‘(A) are required by a chronically ill indi6 vidual in a qualified facility, and

7 ‘‘(B) are provided pursuant to a plan of

8 care prescribed by a licensed health care practi9 tioner.

10 ‘‘(2) CHRONICALLY ILL INDIVIDUAL.—

11 ‘‘(A) IN GENERAL.—The term ‘chronically

12 ill individual’ means any individual who has

13 been certified by a licensed health care practi14 tioner as—

15 ‘‘(i)(I) being unable to perform (with16 out substantial assistance from another in17 dividual) at least 2 activities of daily living

18 (as defined in subparagraph (B)) for a pe19 riod of at least 90 days due to a loss of

20 functional capacity, or

21 ‘‘(II) having a level of disability simi22 lar (as determined by the Secretary in con23 sultation with the Secretary of Health and

24 Human Services) to the level of disability

25 described in subclause (I), or
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•S 1533 IS

1 ‘‘(ii) having a similar level of disabil2 ity due to cognitive impairment.

3 ‘‘(B) ACTIVITIES OF DAILY LIVING.—For

4 purposes of subparagraph (A), each of the fol5 lowing is an activity of daily living:

6 ‘‘(i) MOBILITY.—The process of walk7 ing or wheeling on a level surface which

8 may include the use of an assistive device

9 such as a cane, walker, wheelchair, or

10 brace.

11 ‘‘(ii) DRESSING.—The overall complex

12 behavior of getting clothes from closets

13 and drawers and then getting dressed.

14 ‘‘(iii) TOILETING.—The act of going

15 to the toilet room for bowel and bladder

16 function, transferring on and off the toilet,

17 cleaning after elimination, and arranging

18 clothes or the ability to voluntarily control

19 bowel and bladder function, or in the event

20 of incontinence, the ability to maintain a

21 reasonable level of personal hygiene.

22 ‘‘(iv) TRANSFER.—The process of get23 ting in and out of bed or in and out of a

24 chair or wheelchair.
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1 ‘‘(v) EATING.—The process of getting

2 food from a plate or its equivalent into the

3 mouth.

4 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali5 fied facility’ means—

6 ‘‘(A) a nursing, rehabilitative, hospice, or

7 adult day care facility (including a hospital, re8 tirement home, nursing home, skilled nursing

9 facility, intermediate care facility, or similar in10 stitution)—

11 ‘‘(i) which is licensed under State law,

12 or

13 ‘‘(ii) which is a certified facility for

14 purposes of title XVIII or XIX of the So15 cial Security Act, or

16 ‘‘(B) an individual’s home if a licensed

17 health care practitioner certifies that without

18 home care the individual would have to be cared

19 for in a facility described in subparagraph (A).

20 ‘‘(4) MAINTENANCE OR PERSONAL CARE SERV21 ICES.—The term ‘maintenance or personal care serv22 ices’ means any care the primary purpose of which

23 is to provide needed assistance with any of the ac24 tivities of daily living described in paragraph (2)(B).
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•S 1533 IS

1 ‘‘(5) LICENSED HEALTH CARE PRACTI2 TIONER.—The term ‘licensed health care practi3 tioner’ means any physician (as defined in section

4 1861(r) of the Social Security Act) and any reg5 istered professional nurse, licensed social worker, or

6 other individual who meets such requirements as

7 may be prescribed by the Secretary.

8 ‘‘(d) CONTINUATION COVERAGE EXCISE TAX NOT

9 TO APPLY.—This section shall not apply in determining

10 whether section 4980B (relating to failure to satisfy con11 tinuation coverage requirements of group health plans) ap12 plies.

13 ‘‘(e) INFLATION ADJUSTMENT OF $200 BENEFIT

14 LIMIT.—

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

16 year after 1994, the $200 amount contained in sub17 section (b)(1)(B) shall be increased for such cal18 endar year by the medical care cost adjustment for

19 such calendar year. If any increase determined

20 under the preceding sentence is not a multiple of

21 $10, such increase shall be rounded to the nearest

22 multiple of $10.

23 ‘‘(2) MEDICAL CARE COST ADJUSTMENT.—For

24 purposes of paragraph (1), the medical care cost ad-
365

•S 1533 IS

1 justment for any calendar year is the percentage (if

2 any) by which—

3 ‘‘(A) the medical care component of the

4 Consumer Price Index (as defined in section

5 1(f)(5)) for August of the preceding calendar

6 year, exceeds

7 ‘‘(B) such component for August of 1993.’’

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

9 for such subpart E is amended by inserting after the item

10 relating to section 818 the following new item:

‘‘Sec. 818A. Treatment of long-term care insurance or plans.’’

11 SEC. 3002. EXCLUSION FOR BENEFITS PROVIDED UNDER

12 LONG-TERM CARE INSURANCE; INCLUSION

13 OF EMPLOYER-PROVIDED COVERAGE.

14 (a) IN GENERAL.—Subsection (a) of section 104 of

15 the Internal Revenue Code of 1986 (relating to compensa16 tion for injuries or sickness) is amended by striking ‘‘and’’

17 at the end of paragraph (4), by striking the period at the

18 end of paragraph (5) and inserting ‘‘, and’’, and by insert19 ing after paragraph (4) the following new paragraph:

20 ‘‘(6) benefits under a long-term care insurance

21 contract (as defined in section 818A(b)).’’

22 (b) INCLUSION OF EMPLOYER-PROVIDED COV23 ERAGE.—Section 106 of such Code (relating to contribu24 tions by employer to accident and health plans) is amend25 ed by adding at the end thereof the following sentence:
366

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1 ‘‘The preceding sentence shall not apply to any plan pro2 viding coverage for long-term care services.’’

3 SEC. 3003. QUALIFIED LONG-TERM SERVICES TREATED AS

4 MEDICAL CARE.

5 (a) GENERAL RULE.—Paragraph (1) of section

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

7 medical care) is amended by striking ‘‘or’’ at the end of

8 subparagraph (B), by redesignating subparagraph (C) as

9 subparagraph (D), and by inserting after subparagraph

10 (B) the following new subparagraph:

11 ‘‘(C) for qualified long-term care services

12 (as defined in section 818A(c)), or’’.

13 (b) DEDUCTION FOR LONG-TERM CARE EXPENSES

14 FOR PARENT OR GRANDPARENT.—Section 213 of such

15 Code (relating to deduction for medical expenses) is

16 amended by adding at the end the following new sub17 section:

18 ‘‘(g) SPECIAL RULE FOR CERTAIN LONG-TERM CARE

19 EXPENSES.—For purposes of subsection (a), the term ‘de20 pendent’ shall include any parent or grandparent of the

21 taxpayer for whom the taxpayer has expenses for long22 term care services described in section 818A(c), but only

23 to the extent of such expenses.’’

24 (c) TECHNICAL AMENDMENTS.—
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1 (1) Subparagraph (D) of section 213(d)(1) of

2 such Code (as redesignated by subsection (a)) is

3 amended by striking ‘‘subparagraphs (A) and (B)’’

4 and inserting ‘‘subparagraphs (A), (B), and (C)’’.

5 (2)(A) Paragraph (1) of section 213(d) of such

6 Code is amended by adding at the end thereof the

7 following new flush sentence:

8 ‘‘In the case of a long-term care insurance contract

9 (as defined in section 818A), only eligible long-term

10 care premiums (as defined in paragraph (10)) shall

11 be taken into account under subparagraph (D).’’

12 (B) Subsection (d) of section 213 is amended

13 by adding at the end the following new paragraph:

14 ‘‘(10) ELIGIBLE LONG-TERM CARE PRE15 MIUMS.—

16 ‘‘(A) IN GENERAL.—For purposes of this

17 section, the term ‘eligible long-term care pre18 miums’ means the amount paid during a tax19 able year for any long-term care insurance con20 tract (as defined in section 818A) covering an

21 individual, to the extent such amount does not

22 exceed the limitation determined under the fol23 lowing table:

‘‘In the case of an individual

with an attained age before the The limitation

close of the taxable year of: is:

40 or less ................................................................... $200

More than 40 but not more than 50 ......................... 375
368

•S 1533 IS

More than 50 but not more than 60 ......................... 750

More than 60 but not more than 70 ......................... 1,600

More than 70 ............................................................. 2,000.

1 ‘‘(B) INDEXING.—

2 ‘‘(i) IN GENERAL.—In the case of any

3 taxable year beginning in a calendar year

4 after 1993, each dollar amount contained

5 in paragraph (1) shall be increased by the

6 medical care cost adjustment of such

7 amount for such calendar year. If any in8 crease determined under the preceding sen9 tence is not a multiple of $10, such in10 crease shall be rounded to the nearest mul11 tiple of $10.

12 ‘‘(ii) MEDICAL CARE COST ADJUST13 MENT.—For purposes of clause (i), the

14 medical care cost adjustment for any cal15 endar year is the percentage (if any) by

16 which—

17 ‘‘(I) the medical care component

18 of the Consumer Price Index (as de19 fined in section 1(f)(5)) for August of

20 the preceding calendar year, exceeds

21 ‘‘(II) such component for August

22 of 1991.’’

23 (3) Paragraph (6) of section 213(d) of such

24 Code is amended—
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•S 1533 IS

1 (A) by striking ‘‘subparagraphs (A) and

2 (B)’’ and inserting ‘‘subparagraphs (A), (B),

3 and (C)’’, and

4 (B) by striking ‘‘paragraph (1)(C)’’ in sub5 paragraph (A) and inserting ‘‘paragraph

6 (1)(D)’’.

7 (4) Paragraph (7) of section 213(d) of such

8 Code is amended by striking ‘‘subparagraphs (A)

9 and (B)’’ and inserting ‘‘subparagraphs (A), (B),

10 and (C)’’.

11 SEC. 3004. CERTAIN EXCHANGES OF LIFE INSURANCE CON12 TRACTS FOR LONG-TERM CARE INSURANCE

13 CONTRACTS NOT TAXABLE.

14 Subsection (a) of section 1035 of the Internal Reve15 nue Code of 1986 (relating to certain exchanges of insur16 ance contracts) is amended by striking the period at the

17 end of paragraph (3) and inserting ‘‘; or’’, and by adding

18 at the end thereof the following new paragraph:

19 ‘‘(4) a contract of life insurance or an endow20 ment or annuity contract for a long-term care insur21 ance contract (as defined in section 818A).’’
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•S 1533 IS

1 SEC. 3005. EXCLUSION FROM GROSS INCOME FOR

2 AMOUNTS WITHDRAWN FROM INDIVIDUAL

3 RETIREMENT PLANS OR 401(k) PLANS FOR

4 LONG-TERM CARE INSURANCE.

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 items specifically excluded from gross income) is amended

8 by redesignating section 137 as section 138 and by insert9 ing after section 136 the following new section:

10 ‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

11 ACCOUNTS AND SECTION 401(k) PLANS FOR

12 LONG-TERM CARE INSURANCE.

13 ‘‘(a) GENERAL RULE.—The amount includible in the

14 gross income of an individual for the taxable year by rea15 son of qualified distributions during such taxable year

16 shall not exceed the excess of—

17 ‘‘(1) the amount which would (but for this sec18 tion) be so includible by reason of such distributions,

19 over

20 ‘‘(2) the aggregate premiums paid by such indi21 vidual during such taxable year for any long-term

22 care insurance contract (as defined in section 818A)

23 for the benefit of such individual or the spouse of

24 such individual.

25 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

26 this section, the term ‘qualified distribution’ means any
371

•S 1533 IS

1 distribution to an individual from an individual retirement

2 account or a section 401(k) plan if such individual has

attained age 591 3 ⁄2 on or before the date of the distribution

4 (and, in the case of a distribution used to pay premiums

5 for the benefit of the spouse of such individual, such

spouse has attained age 591 6 ⁄2 on or before the date of the

7 distribution).

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

10 term ‘individual retirement account’ has the mean11 ing given such term by section 408(a).

12 ‘‘(2) SECTION 401(k) PLAN.—The term ‘section

13 401(k) plan’ means any employer plan which meets

14 the requirements of section 401(a) and which in15 cludes a qualified cash or deferred arrangement (as

16 defined in section 401(k)).

17 ‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—

18 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC19 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

20 DEFERRED ARRANGEMENT.—This section shall not

21 apply to any distribution from a section 401(k) plan

22 to the extent the aggregate amount of such distribu23 tions for the use described in subsection (a) exceeds

24 the aggregate employer contributions made pursuant

25 to the employee’s election under section 401(k)(2).
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1 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI2 FICATION.—A plan shall not be treated as failing to

3 satisfy the requirements of section 401, and an ar4 rangement shall not be treated as failing to be a

5 qualified cash or deferred arrangement (as defined

6 in section 401(k)(2)), merely because under the plan

7 or arrangement distributions are permitted which

8 are excludable from gross income by reason of this

9 section.’’

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 401(k) of such Code is amended by

12 adding at the end the following new paragraph:

13 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

137.’’

14 (2) Section 408(d) of such Code is amended by

15 adding at the end the following new paragraph:

16 ‘‘(8) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 137.’’

17 (3) The table of sections for such part III is

18 amended by striking the last item and inserting the

19 following new items:

‘‘Sec. 137. Distributions from individual retirement accounts and

section 401(k) plans for long-term care insurance.

‘‘Sec. 138. Cross references to other Acts.’’
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1 SEC. 3006. TAX TREATMENT OF ACCELERATED DEATH BEN2 EFITS UNDER LIFE INSURANCE CONTRACTS.

3 Section 101 of the Internal Revenue Code of 1986

4 (relating to certain death benefits) is amended by adding

5 at the end thereof the following new subsection:

6 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

7 DEATH BENEFITS.—

8 ‘‘(1) IN GENERAL.—For purposes of this sec9 tion, any amount paid or advanced to an individual

10 under a life insurance contract on the life of an in11 sured—

12 ‘‘(A) who is a terminally ill individual, or

13 ‘‘(B) who is a chronically ill individual (as

14 defined in section 818A(c)(2)) who is confined

15 to a qualified facility (as defined in section

16 818A(c)(3)(A)),

17 shall be treated as an amount paid by reason of the

18 death of such insured.

19 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur20 poses of this subsection, the term ‘terminally ill indi21 vidual’ means an individual who has been certified

22 by a physician as having an illness or physical condi23 tion which can reasonably be expected to result in

24 death in 12 months or less.
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•S 1533 IS

1 ‘‘(3) PHYSICIAN.—For purposes of this sub2 section, the term ‘physician’ has the meaning given

3 to such term by section 213(d)(4).’’

4 SEC. 3007. EFFECTIVE DATE.

5 The amendments made by this subtitle shall apply to

6 taxable years beginning after December 31, 1994.

7 Subtitle B—Protection of Assets

8 Under Medicaid Through Use of

9 Qualified Long-term Care Insur10 ance

11 SEC. 3101. PROTECTION OF ASSETS THROUGH USE OF

12 QUALIFIED LONG-TERM CARE INSURANCE.

13 (a) IN GENERAL.—Title XIX of the Social Security

14 Act, as amended by section 1601(a), is amended—

15 (1) by redesignating section 1932 as section

16 1933; and

17 (2) by inserting after section 1931 the following

18 new section:

19 ‘‘SPECIAL RULES FOR ASSET DISREGARD IN THE CASE OF

20 QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS

21 ‘‘SEC. 1932. (a) IN GENERAL.—Each State plan

22 under this title, as a condition for the receipt of payment

23 under section 1903(a) with respect to long-term care serv24 ices (as defined in subsection (c)(1)), shall provide that

25 in determining the eligibility of an individual for medical

26 assistance under the plan with respect to such services
375

•S 1533 IS

1 there shall be disregarded some or all of the individual’s

2 assets which are attributable (as determined under sub3 section (c)(2)) to coverage under a qualified long-term

4 care insurance contract (as defined in subsection (b)).

5 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE

6 CONTRACT DEFINED.—In this section, the term ‘qualified

7 long-term care insurance contract’ means, with respect to

8 a State, a long-term care insurance contract (as defined

9 in section 818A(b) of the Internal Revenue Code of 1986)

10 which—

11 ‘‘(1) provides such protection against the costs

12 of receiving long-term care services as the State may

13 require by law;

14 ‘‘(2) provides that benefits under the contract

15 shall be paid without regard to eligibility for medical

16 assistance under this title; and

17 ‘‘(3) meets such other requirements (such as re18 quirements relating to premiums, disclosure, mini19 mum benefits, rights of conversion, and standards

20 for claims processing) as the State may determine to

21 be appropriate.

22 ‘‘(c) OTHER DEFINITIONS.—In this section:

23 ‘‘(1) LONG-TERM CARE SERVICES.—The term

24 ‘long-term care services’ means nursing facility serv25 ices, home health care services, and home and com-
376

•S 1533 IS

1 munity-based services, and includes such other simi2 lar items and services described in section 1905(a)

3 as a State may specify.

4 ‘‘(2) ATTRIBUTION RULES.—An individual’s as5 sets are considered to be ‘attributable’ to a qualified

6 long-term care insurance contract to the extent spec7 ified under the State plan. Such a plan shall provide

8 for at least one of the following:

9 ‘‘(A) All assets are considered attributable

10 if the insurance contract provides coverage for

11 at least a specified period of coverage (of not

12 less than 3 years and of not more than 6 years)

13 for long-term care services.

14 ‘‘(B) An amount of assets, up to the dollar

15 limitation on benefits for long-term care serv16 ices under the contract, is considered attrib17 utable to the contract.’’.

18 (b) CONFORMING AMENDMENT.—Section

19 1902(a)(17)(A) of such Act (42 U.S.C. 1396a(a)(17)(A))

20 is amended by inserting ‘‘and section 1932’’ after ‘‘objec21 tives of this title’’.

22 (c) EFFECTIVE DATE.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply (except as provided under

25 paragraph (2)) to payments to States under title
377

•S 1533 IS

1 XIX of the Social Security Act for calendar quarters

2 beginning on or after one year after the date of the

3 enactment of this Act, without regard to whether

4 regulations to implement such amendment are pro5 mulgated by such date.

6 (2) DELAY PERMITTED IF STATE LEGISLATION

7 REQUIRED.—In the case of a State plan for medical

8 assistance under title XIX of the Social Security Act

9 which the Secretary of Health and Human Services

10 determines requires State legislation (other than leg11 islation authorizing or appropriating funds) in order

12 for the plan to meet the additional requirements im13 posed by the amendments made by this section, the

14 State plan shall not be regarded as failing to comply

15 with the requirements of such title solely on the

16 basis of its failure to meet these additional require17 ments before the first day of the first calendar quar18 ter beginning after the close of the first regular ses19 sion of the State legislature that begins after the

20 date of the enactment of this Act. For purposes of

21 the previous sentence, in the case of a State that has

22 a 2-year legislative session, each year of such session

23 shall be deemed to be a separate regular session of

24 the State legislature.
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1 Subtitle C—Studies

2 SEC. 3201. FEASIBILITY OF ENCOURAGING HEALTH CARE

3 PROVIDERS TO DONATE SERVICES TO HOME4 BOUND PATIENTS.

5 The Comptroller General of the United States shall

6 conduct a study on the feasibility of encouraging health

7 care providers to donate their services to homebound pa8 tients. Such study shall include an examination of the ef9 fects of qualifying such services as a charitable contribu10 tion.

11 SEC. 3202. FEASIBILITY OF TAX CREDIT FOR HEADS OF

12 HOUSEHOLDS WHO CARE FOR ELDERLY FAM13 ILY MEMBERS IN THEIR HOMES.

14 The Comptroller General of the United States shall

15 conduct a study on the feasibility of providing heads of

16 households who care for elderly family members in their

17 homes with a tax credit. Such study shall estimate the

18 cost of such a tax credit which would apply to expenses

19 incurred in the custodial care of such an elderly family

20 member to the extent such expenses exceed 5 percent of

21 adjusted gross income.

22 SEC. 3203. CASE MANAGEMENT OF CURRENT LONG-TERM

23 CARE BENEFITS.

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

25 Human Services shall conduct a study of the feasibility
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1 of encouraging or requiring the use of a single designated

2 public or nonprofit agency (such as an area agency on

3 aging) to coordinate, through case management, the provi4 sion of long-term care benefits under current Federal,

5 State, and local programs in a geographic area.

6 (b) REPORT.—The Secretary shall submit to Con7 gress a report on the study conducted under subsection

8 (a) by not later than 1 year after the date of the enact9 ment of this Act. Such report shall include such rec10 ommendations regarding changes in legislation to encour11 age or require the use (described in subsection (a)) of an

12 agency to coordinate long-term care benefits as may be

13 appropriate.

14 Subtitle D—Volunteer Service

15 Credit Demonstration Projects

16 SEC. 3301. AMENDMENT TO THE OLDER AMERICANS ACT

17 OF 1965.

18 (a) IN GENERAL.—Part B of title IV of the Older

19 Americans Act of 1965 (42 U.S.C. 3034–3035r) is amend20 ed by adding at the end the following:

21 ‘‘SEC. 429K. VOLUNTEER SERVICE CREDIT DEMONSTRA22 TION PROJECTS.

23 ‘‘(a) REQUIREMENTS.—The Commissioner shall—

24 ‘‘(1) establish and operate (directly, or through

25 the State agency on aging or one or more area agen-
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1 cies on aging) a volunteer service credit demonstra2 tion project in all or part of each State;

3 ‘‘(2) establish criteria for selecting individuals

4 to whom volunteer services will be provided under

5 volunteer service credit demonstration projects oper6 ated under paragraph (1);

7 ‘‘(3) recruit and train (directly or through State

8 agencies on aging or area agencies on aging) individ9 uals who volunteer to provide services through such

10 projects;

11 ‘‘(4) establish a minimum standard for each

12 service to be provided by volunteers through such

13 projects;

14 ‘‘(5) monitor services provided by volunteers

15 through such projects to ensure that standards es16 tablished under paragraph (4) are met; and

17 ‘‘(6) maintain (directly or through State agen18 cies on aging or area agencies on aging) with respect

19 to each individual who provides services through a

20 volunteer service credit demonstration project oper21 ated under paragraph (1) a separately identifiable

22 account showing the number of hours such individ23 ual provided such services.

24 ‘‘(b) DEFINITION.—For purposes of subsection (a),

25 the term ‘volunteer service credit demonstration project’
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1 means a demonstration project through which homemaker

2 services, respite care for families, adult day care, and edu3 cational, transportation, and home-delivery services are

4 provided by—

5 ‘‘(1) volunteer older individuals for the benefit

6 of older individuals or low-income children; or

7 ‘‘(2) volunteer individuals of any age for the

8 benefit of older individuals;

9 in return for the the receipt of similar services under any

10 such demonstration project (that is established under this

11 section) at a time at which such volunteers are older indi12 viduals in need of such services.’’.

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

14 subsection (a) shall take effect October 1, 1994.

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