Calendar No. 335 

103D CONGRESS 

1ST SESSION S. 1757 

A BILL 

To ensure individual and family security through 

Americans. and to ensure and protect the health care of all ance practices, to promote choice in health care, care costs and promotes responsible health insurner that contains the rate of growth in health health care coverage for all Americans in a manNOVEMBER 22, 1993 

Read the second time and placed on the calendar 

II 

Calendar No. 335 

103D CONGRESS 

1ST SESSION S. 1757 

To ensure individual and family security through health care coverage for 

all Americans in a manner that contains the rate of growth in health 

care costs and promotes responsible health insurance practices, to promote choice in health care, and to ensure and protect the health care 

of all Americans. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 20 (legislative day, NOVEMBER 2), 1993 

Mr. MITCHELL (for himself, Mr. MOYNIHAN, Mr. KENNEDY, Mr. DASCHLE, 

Mr. ROCKEFELLER, Mr. RIEGLE, Mr. AKAKA, Mr. BAUCUS, Mrs. BOXER, 

Mr. BUMPERS, Mr. CAMPBELL, Mr. CONRAD, Mr. DODD, Mrs. FEINSTEIN, Mr. GLENN, Mr. GRAHAM, Mr. HARKIN, Mr. INOUYE, Mr. JEFFORDS, Mr. LEAHY, Mr. LEVIN, Mr. MATHEWS, Ms. MIKULSKI, Ms. 

MOSELEY-BRAUN, Mrs. MURRAY, Mr. PELL, Mr. PRYOR, Mr. REID, Mr. 
2 

•HR 3600 IH / •S 1757 IS 

SIMON, and Mr. WOFFORD) (by request) introduced the following bill; 

which was read the first time 

NOVEMBER 22,1993 

Read the second time and placed on the calendar 

A BILL 

To ensure individual and family security through health care 

coverage for all Americans in a manner that contains 

the rate of growth in health care costs and promotes 

responsible health insurance practices, to promote choice 

in health care, and to ensure and protect the health 

care of all Americans. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
3 

Table 

•HR 3600 IH / •S 1757 IS 

1 SECTION 1. SHORT TITLE; TABLE OF TITLES AND SUB2 TITLES. 

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

4 ‘‘Health Security Act’’. 

5 (b) TABLE OF TITLES AND SUBTITLES IN ACT.—The 

6 following are the titles and subtitles contained in this Act: 

Page 

TITLE I—HEALTH CARE SECURITY 

Subtitle A—Universal Coverage and Individual Responsibility ............... 8 

Subtitle B—Benefits ................................................................................. 32 

Subtitle C—State Responsibilities ............................................................ 95 

Subtitle D—Health Alliances ................................................................... 118 

Subtitle E—Health Plans ......................................................................... 224 

Subtitle F—Federal Responsibilities ........................................................ 256 

Subtitle G—Employer Responsiblities ...................................................... 303 

Subtitle J—General Definitions; Miscellaneous Provisions ...................... 323 

TITLE II—NEW BENEFITS 

Subtitle A—Medicare Outpatient Prescription Drug Benefit .................. 343 

Subtitle B—Long-Term Care ................................................................... 389 

TITLE III—PUBLIC HEALTH INITIATIVES 

Subtitle A—Workforce Priorities Under Federal Payments .................... 504 

Subtitle B—Academic Health Centers ..................................................... 548 

Subtitle C—Health Research Initiatives .................................................. 560 

Subtitle D—Core Functions of Public Health Programs; National Initiatives Regarding Preventive Health ........................... 564 

Subtitle E—Health Services for Medically Underserved Populations ...... 578 

Subtitle F—Mental Health; Substance Abuse ......................................... 615 

Subtitle G—Comprehensive School Health Education; School-Related 

Health Services ............................................................. 627 

Subtitle H—Public Health Service Initiative ........................................... 667 

Subtitle I—Coordination With COBRA Continuation Coverage .............. 668 

TITLE IV—MEDICARE AND MEDICAID 

Subtitle A—Medicare and the Alliance System ........................................ 674 

Subtitle B—Savings in Medicare Program .............................................. 752 

Subtitle C—Medicaid ................................................................................ 807 

Subtitle D—Increase in SSI Personal Needs Allowance .......................... 832 

TITLE V—QUALITY AND CONSUMER PROTECTION 

Subtitle A—Quality Management and Improvement ............................... 835 

Subtitle B—Information Systems, Privacy, and Administrative Simplification ...................................................................... 859 

Subtitle C—Remedies and Enforcement .................................................. 887 
4 

Table 

•HR 3600 IH / •S 1757 IS 

Subtitle D—Medical Malpractice .............................................................. 933 

Subtitle E—Fraud and Abuse .................................................................. 948 

Subtitle F—McCarran-Ferguson Reform ................................................. 979 

TITLE VI—PREMIUM CAPS; PREMIUM-BASED FINANCING; 

AND PLAN PAYMENTS 

Subtitle A—Premium Caps ...................................................................... 984 

Subtitle B—Premium-Related Financing ................................................. 1025 

Subtitle C—Payments to Regional Alliance Health Plans ....................... 1086 

TITLE VII—REVENUE PROVISIONS 

Subtitle A—Financing Provisions ............................................................ 1094 

Subtitle B—Tax Treatment of Employer-Provided Health Care ............. 1133 

Subtitle C—Employment Status Provisions ............................................. 1143 

Subtitle D—Tax Treatment of Funding of Retiree Health Benefits ....... 1153 

Subtitle E—Coordination With COBRA Continuing Care Provisions ..... 1157 

Subtitle F—Tax Treatment of Organizations Providing Health Care 

Services and Related Organizations .............................. 1159 

Subtitle G—Tax Treatment of Long-term Care Insurance and Services 1171 

Subtitle H—Tax Incentives for Health Services Providers ...................... 1192 

Subtitle I—Miscellaneous Provisions ........................................................ 1199 

TITLE VIII—HEALTH AND HEALTH-RELATED PROGRAMS 

OF THE FEDERAL GOVERNMENT 

Subtitle A—Military Health Care Reform ............................................... 1207 

Subtitle B—Department of Veterans Affairs ........................................... 1218 

Subtitle C—Federal Employees Health Benefits Program ...................... 1233 

Subtitle D—Indian Health Service ........................................................... 1249 

Subtitle E—Amendments to the Employee Retirement Income Security 

Act of 1974 ................................................................... 1262 

Subtitle F—Special Fund for WIC Program ........................................... 1274 

TITLE IX—AGGREGATE GOVERNMENT PAYMENTS TO 

REGIONAL ALLIANCES 

Subtitle A—Aggregate State Payments ................................................... 1277 

Subtitle B—Aggregate Federal Alliance Payments ................................. 1296 

Subtitle C—Borrowing Authority to Cover Cash-Flow Shortfalls ........... 1308 

TITLE X—COORDINATION OF MEDICAL PORTION OF 

WORKERS COMPENSATION AND AUTOMOBILE INSURANCE 

Subtitle A—Workers Compensation Insurance ........................................ 1314 

Subtitle B—Automobile Insurance ........................................................... 1326 

Subtitle C—Commission on Integration of Health Benefits .................... 1331 

Subtitle D—Federal Employees’ Compensation Act ................................ 1333 

Subtitle E—Davis-Bacon Act and Service Contract Act ......................... 1333 

Subtitle F—Effective Dates ..................................................................... 1334 

TITLE XI—TRANSITIONAL INSURANCE REFORM 
5 

Findings 

•HR 3600 IH / •S 1757 IS 

1 SEC. 2. FINDINGS. 

2 The Congress finds as follows: 

3 (1) Under the current health care system in the 

4 United States— 

5 (A) individuals risk losing their health care 

6 coverage when they move, when they lose or 

7 change jobs, when they become seriously ill, or 

8 when the coverage becomes unaffordable; 

9 (B) continued escalation of health care 

10 costs threatens the economy of the United 

11 States, undermines the international competi12 tiveness of the Nation, and strains Federal, 

13 State, and local budgets; 

14 (C) an excessive burden of forms, paper15 work, and bureaucratic procedures confuses 

16 consumers and overwhelms health care pro17 viders; 

18 (D) fraud and abuse sap the strength of 

19 the health care system; and 

20 (E) health care is a critical part of the 

21 economy of the United States and interstate 

22 commerce, consumes a significant percentage of 

23 public and private spending, and affects all in24 dustries and individuals in the United States. 

25 (2) Under any reform of the health care sys26 tem— 
6 

Findings 

•HR 3600 IH / •S 1757 IS 

1 (A) health insurance and high quality 

2 health care should be secure, uninterrupted, 

3 and affordable for all individuals in the United 

4 States; 

5 (B) comprehensive health care benefits 

6 that meet the full range of health needs, includ7 ing primary, preventive, and specialized care, 

8 should be available to all individuals in the 

9 United States; 

10 (C) the current high quality of health care 

11 in the United States should be maintained; 

12 (D) individuals in the United States should 

13 be afforded a meaningful opportunity to choose 

14 among a range of health plans, health care pro15 viders, and treatments; 

16 (E) regulatory and administrative burdens 

17 should be reduced; 

18 (F) the rapidly escalating costs of health 

19 care should be contained without sacrificing 

20 high quality or impeding technological improve21 ments; 

22 (G) competition in the health care industry 

23 should ensure that health plans and health care 

24 providers are efficient and charge reasonable 

25 prices; 
7 

Purposes 

•HR 3600 IH / •S 1757 IS 

1 (H) a partnership between the Federal 

2 Government and each State should allow the 

3 State and its local communities to design an ef4 fective, high-quality system of care that serves 

5 the residents of the State; 

6 (I) all individuals should have a responsi7 bility to pay their fair share of the costs of 

8 health care coverage; 

9 (J) a health care system should build on 

10 the strength of the employment-based coverage 

11 arrangements that now exist in the United 

12 States; 

13 (K) the penalties for fraud and abuse 

14 should be swift and severe; and 

15 (L) an individual’s medical information 

16 should remain confidential and should be pro17 tected from unauthorized disclosure and use. 

18 SEC. 3. PURPOSES. 

19 The purposes of this Act are as follows: 

20 (1) To guarantee comprehensive and secure 

21 health care coverage. 

22 (2) To simplify the health care system for con23 sumers and health care professionals. 
8 

Purposes 

•HR 3600 IH / •S 1757 IS 

1 (3) To control the cost of health care for em2 ployers, employees, and others who pay for health 

3 care coverage. 

4 (4) To promote individual choice among health 

5 plans and health care providers. 

6 (5) To ensure high quality health care. 

7 (6) To encourage all individuals to take respon8 sibility for their health care coverage. 

9 TITLE I—HEALTH CARE 

10 SECURITY 

TABLE OF CONTENTS OF TITLE

Page 

Subtitle A—Universal Coverage and Individual Responsibility 

PART 1—UNIVERSAL COVERAGE

Sec. 1001. Entitlement to health benefits ............................................... 14 

Sec. 1002. Individual responsibilities ...................................................... 15 

Sec. 1003. Protection of consumer choice ............................................... 15 

Sec. 1004. Applicable health plan providing coverage ............................ 16 

Sec. 1005. Treatment of other nonimmigrants ....................................... 17 

Sec. 1006. Effective date of entitlement ................................................. 18 

PART 2—TREATMENT OF FAMILIES AND SPECIAL RULES

Sec. 1011. General rule of enrollment of family in same health plan .... 21 

Sec. 1012. Treatment of certain families ................................................ 25 

Sec. 1013. Multiple employment situations ............................................ 30 

Sec. 1014. Treatment of residents of States with statewide single-payer 

systems .......................................................................... 32 

Subtitle B—Benefits 

PART 1—COMPREHENSIVE BENEFIT PACKAGE

Sec. 1101. Provision of comprehensive benefits by plans ....................... 32 

PART 2—DESCRIPTION OF ITEMS AND SERVICES COVERED

Sec. 1111. Hospital services .................................................................... 34 

Sec. 1112. Services of health professionals ............................................. 36 

Sec. 1113. Emergency and ambulatory medical and surgical services ... 38 

Sec. 1114. Clinical preventive services .................................................... 38 

Sec. 1115. Mental illness and substance abuse services ......................... 46 
9 

Purposes 

•HR 3600 IH / •S 1757 IS 

Sec. 1116. Family planning services and services for pregnant women 63 

Sec. 1117. Hospice care .......................................................................... 63 

Sec. 1118. Home health care .................................................................. 64 

Sec. 1119. Extended care services .......................................................... 64 

Sec. 1120. Ambulance services ................................................................ 66 

Sec. 1121. Outpatient laboratory, radiology, and diagnostic services .... 67 

Sec. 1122. Outpatient prescription drugs and biologicals ....................... 67 

Sec. 1123. Outpatient rehabilitation services .......................................... 69 

Sec. 1124. Durable medical equipment and prosthetic and orthotic devices ............................................................................... 70 

Sec. 1125. Vision care ............................................................................. 71 

Sec. 1126. Dental care ............................................................................ 71 

Sec. 1127. Health education classes ....................................................... 73 

Sec. 1128. Investigational treatments ..................................................... 74 

PART 3—COST SHARING

Sec. 1131. Cost sharing .......................................................................... 76 

Sec. 1132. Lower cost sharing ................................................................ 80 

Sec. 1133. Higher cost sharing ............................................................... 82 

Sec. 1134. Combination cost sharing ...................................................... 85 

Sec. 1135. Table of copayments and coinsurance ................................... 86 

Sec. 1136. Indexing dollar amounts relating to cost sharing ................. 89 

PART 4—EXCLUSIONS

Sec. 1141. Exclusions .............................................................................. 90 

PART 5—ROLE OF THE NATIONAL HEALTH BOARD

Sec. 1151. Definition of benefits ............................................................. 92 

Sec. 1152. Acceleration of expanded benefits ......................................... 92 

Sec. 1153. Authority with respect to clinical preventive services ........... 93 

Sec. 1154. Establishment of standards regarding medical necessity ...... 94 

PART 6—ADDITIONAL PROVISIONS RELATING TO HEALTH CARE PROVIDERS

Sec. 1161. Override of restrictive State practice laws ............................ 95 

Sec. 1162. Provision of items or services contrary to religious belief or 

moral conviction ............................................................ 95 

Subtitle C—State Responsibilities 

Sec. 1200. Participating State ................................................................ 95 

PART 1—GENERAL STATE RESPONSIBILITIES

Sec. 1201. General State responsibilities ................................................ 97 

Sec. 1202. State responsibilities with respect to alliances ...................... 98 

Sec. 1203. State responsibilities relating to health plans ....................... 101 

Sec. 1204. Financial solvency; fiscal oversight; guaranty fund .............. 106 

Sec. 1205. Restrictions on funding of additional benefits ...................... 108 

PART 2—REQUIREMENTS FOR STATE SINGLE-PAYER SYSTEMS

Sec. 1221. Single-payer system described ............................................... 109 

Sec. 1222. General requirements for single-payer systems ..................... 109 
10 

Purposes 

•HR 3600 IH / •S 1757 IS 

Sec. 1223. Special rules for States operating statewide single-payer 

system ........................................................................... 114 

Sec. 1224. Special rules for alliance-specific single-payer systems ......... 117 

Subtitle D—Health Alliances 

Sec. 1300. Health alliance defined .......................................................... 118 

PART 1—ESTABLISHMENT OF REGIONAL AND CORPORATE ALLIANCES

SUBPART A—REGIONAL ALLIANCES

Sec. 1301. Regional alliance defined ....................................................... 118 

Sec. 1302. Board of directors ................................................................. 119 

Sec. 1303. Provider advisory boards for regional alliances .................... 120 

SUBPART B—CORPORATE ALLIANCES

Sec. 1311. Corporate alliance defined; individuals eligible for coverage 

through corporate alliances; additional definitions ....... 121 

Sec. 1312. Timing of elections ................................................................ 127 

Sec. 1313. Termination of alliance election ............................................ 129 

PART 2—GENERAL RESPONSIBILITIES AND AUTHORITIES OF REGIONAL

ALLIANCES

Sec. 1321. Contracts with health plans .................................................. 131 

Sec. 1322. Offering choice of health plans for enrollment; establishment of fee-for-service schedule .................................... 132 

Sec. 1323. Enrollment rules and procedures .......................................... 138 

Sec. 1324. Issuance of health security cards .......................................... 148 

Sec. 1325. Consumer information and marketing .................................. 148 

Sec. 1326. Ombudsman ........................................................................... 150 

Sec. 1327. Data collection; quality .......................................................... 150 

Sec. 1328. Additional duties ................................................................... 150 

Sec. 1329. Additional authorities for regional alliances to address 

needs in areas with inadequate health services; prohibition of insurance role ................................................. 151 

Sec. 1330. Prohibition against self-dealing and conflicts of interest ...... 152 

PART 3—AUTHORITIES AND RESPONSIBILITIES OF REGIONAL ALLIANCES

RELATING TO FINANCING AND INCOME DETERMINATIONS

SUBPART A—COLLECTION OF FUNDS

Sec. 1341. Information and negotiation and acceptance of bids ............ 153 

Sec. 1342. Calculation and publication of general family share and 

general employer premium amounts ............................. 156 

Sec. 1343. Determination of family share for families ........................... 158 

Sec. 1344. Notice of family payments due .............................................. 163 

Sec. 1345. Collections .............................................................................. 168 

Sec. 1346. Coordination among regional alliances .................................. 171 

SUBPART B—PAYMENTS

Sec. 1351. Payment to regional alliance health plans ............................ 174 

Sec. 1352. Alliance administrative allowance percentage ....................... 178 

Sec. 1353. Payments to the Federal Government for academic health 

centers and graduate medical education ....................... 179 
11 

Purposes 

•HR 3600 IH / •S 1757 IS 

SUBPART C—FINANCIAL MANAGEMENT

Sec. 1361. Management of finances and records .................................... 180 

SUBPART D—REDUCTIONS IN COST SHARING; INCOME DETERMINATIONS

Sec. 1371. Reduction in cost sharing for low-income families ................ 183 

Sec. 1372. Application process for cost sharing reductions .................... 186 

Sec. 1373. Application for premium discounts and reduction in liabilities to alliances ............................................................. 191 

Sec. 1374. General provisions relating to application process ................ 193 

Sec. 1375. End-of-year reconciliation for premium discount and repayment reduction with actual income ............................... 196 

PART 4—RESPONSIBILITIES AND AUTHORITIES OF CORPORATE ALLIANCES

Sec. 1381. Contracts with health plans .................................................. 199 

Sec. 1382. Offering choice of health plans for enrollment ...................... 200 

Sec. 1383. Enrollment; issuance of health security card ........................ 201 

Sec. 1384. Community-rated premiums within premium areas .............. 203 

Sec. 1385. Assistance for low-wage families ........................................... 205 

Sec. 1386. Consumer information and marketing; data collection and 

quality; additional duties ............................................... 206 

Sec. 1387. Plan and information requirements ...................................... 206 

Sec. 1388. Management of funds; relations with employees ................... 207 

Sec. 1389. Cost control ........................................................................... 207 

Sec. 1390. Payments by corporate alliance employers to corporate alliances .............................................................................. 208 

Sec. 1391. Coordination of payments ..................................................... 208 

Sec. 1392. Applicability of ERISA enforcement mechanisms for enforcement of certain requirements ................................ 209 

Sec. 1393. Applicability of certain ERISA protections to enrolled individuals ........................................................................... 209 

Sec. 1394. Disclosure and reserve requirements ..................................... 210 

Sec. 1395. Trusteeship by the Secretary of insolvent corporate alliance 

health plans ................................................................... 211 

Sec. 1396. Guaranteed benefits under trusteeship of the Secretary ...... 216 

Sec. 1397. Imposition and collection of periodic assessments on self-insured corporate alliance plans ....................................... 220 

Sec. 1398. Payments to Federal government by multiemployer corporate alliances for academic health centers and graduate medical education .................................................. 224 

Subtitle E—Health Plans 

Sec. 1400. Health plan defined ............................................................... 224 

PART 1—REQUIREMENTS RELATING TO COMPREHENSIVE BENEFIT PACKAGE

Sec. 1401. Application of requirements .................................................. 226 

Sec. 1402. Requirements relating to enrollment and coverage ............... 226 

Sec. 1403. Community rating ................................................................. 231 

Sec. 1404. Marketing of health plans; information ................................ 231 

Sec. 1405. Grievance procedure .............................................................. 233 

Sec. 1406. Health plan arrangements with providers ............................. 234 

Sec. 1407. Preemption of certain State laws relating to health plans ... 237 

Sec. 1408. Financial solvency ................................................................. 239 
12 

Purposes 

•HR 3600 IH / •S 1757 IS 

Sec. 1409. Requirement for offering cost sharing policy ........................ 239 

Sec. 1410. Quality assurance .................................................................. 239 

Sec. 1411. Provider verification .............................................................. 239 

Sec. 1412. Consumer disclosures of utilization management protocols .. 240 

Sec. 1413. Confidentiality, data management, and reporting ................ 240 

Sec. 1414. Participation in reinsurance system ...................................... 241 

PART 2—REQUIREMENTS RELATING TO SUPPLEMENTAL INSURANCE

Sec. 1421. Imposition of requirements on supplemental insurance ........ 241 

Sec. 1422. Standards for supplemental health benefit policies ............... 243 

Sec. 1423. Standards for cost sharing policies ....................................... 246 

PART 3—REQUIREMENTS RELATING TO ESSENTIAL COMMUNITY PROVIDERS

Sec. 1431. Health plan requirement ....................................................... 249 

Sec. 1432. Sunset of requirement ........................................................... 252 

PART 4—REQUIREMENTS RELATING TO WORKERS’ COMPENSATION AND

AUTOMOBILE MEDICAL LIABILITY COVERAGE

Sec. 1441. Reference to requirements relating to workers compensation 

services .......................................................................... 256 

Sec. 1442. Reference to requirements relating to automobile medical liability services ............................................................... 256 

Subtitle F—Federal Responsibilities 

PART 1—NATIONAL HEALTH BOARD

SUBPART A—ESTABLISHMENT OF NATIONAL HEALTH BOARD

Sec. 1501. Creation of National Health Board; membership ................. 256 

Sec. 1502. Qualifications of board members ........................................... 258 

Sec. 1503. General duties and responsibilities ........................................ 259 

Sec. 1504. Annual report ........................................................................ 262 

Sec. 1505. Powers ................................................................................... 263 

Sec. 1506. Funding ................................................................................. 264 

SUBPART B—RESPONSIBILITIES RELATING TO REVIEW AND APPROVAL OF

STATE SYSTEMS

Sec. 1511. Federal review and action on State systems ......................... 264 

Sec. 1512. Failure of participating States to meet conditions for compliance ........................................................................... 270 

Sec. 1513. Reduction in payments for health programs by Secretary of 

Health and Human Services ......................................... 272 

Sec. 1514. Review of Federal determinations ......................................... 273 

Sec. 1515. Federal support for State implementation ............................ 273 

SUBPART C—RESPONSIBILITIES IN ABSENCE OF STATE SYSTEMS

Sec. 1521. Application of subpart ........................................................... 275 

Sec. 1522. Federal assumption of responsibilities in non-participating 

States ............................................................................ 275 

Sec. 1523. Imposition of surcharge on premiums under federally-operated system ................................................................... 277 

Sec. 1524. Return to State operation ..................................................... 278 
13 

Purposes 

•HR 3600 IH / •S 1757 IS 

SUBPART D—ESTABLISHMENT OF CLASS FACTORS FOR CHARGING PREMIUMS

Sec. 1531. Premium class factors ........................................................... 278 

SUBPART E—RISK ADJUSTMENT AND REINSURANCE METHODOLOGY FOR

PAYMENT OF PLANS

Sec. 1541. Development of a risk adjustment and reinsurance methodology .............................................................................. 279 

Sec. 1542. Incentives to enroll disadvantaged groups ............................ 285 

Sec. 1543. Advisory committee ............................................................... 285 

Sec. 1544. Research and demonstrations ................................................ 286 

Sec. 1545. Technical assistance to States and alliances ......................... 286 

SUBPART F—RESPONSIBILITIES FOR FINANCIAL REQUIREMENTS

Sec. 1551. Capital standards for regional alliance health plan .............. 286 

Sec. 1552. Standard for guaranty funds ................................................ 287 

PART 2—RESPONSIBILITIES OF DEPARTMENT OF HEALTH AND HUMAN

SERVICES

SUBPART A—GENERAL RESPONSIBILITIES

Sec. 1571. General responsibilities of Secretary of Health and Human 

Services ......................................................................... 289 

Sec. 1572. Advisory council on breakthrough drugs ............................... 290 

SUBPART B—CERTIFICATION OF ESSENTIAL COMMUNITY PROVIDERS

Sec. 1581. Certification ........................................................................... 293 

Sec. 1582. Categories of providers automatically certified ..................... 293 

Sec. 1583. Standards for additional providers ........................................ 296 

Sec. 1584. Certification process; review; termination of certifications ... 297 

Sec. 1585. Notification of health alliances and participating States ...... 299 

PART 3—SPECIFIC RESPONSIBILITIES OF SECRETARY OF LABOR

Sec. 1591. Responsibilities of Secretary of Labor .................................. 300 

Subtitle G—Employer Responsibilities 

Sec. 1601. Payment requirement ............................................................ 303 

Sec. 1602. Requirement for information reporting ................................. 303 

Sec. 1603. Requirements relating to new employees .............................. 314 

Sec. 1604. Auditing of records ................................................................ 315 

Sec. 1605. Prohibition of certain employer discrimination ..................... 316 

Sec. 1606. Prohibition on self-funding of cost sharing benefits by regional alliance employers ............................................... 316 

Sec. 1607. Equal voluntary contribution requirement ............................ 317 

Sec. 1608. Employer retiree obligation ................................................... 321 

Sec. 1609. Enforcement .......................................................................... 323 

Subtitle J—General Definitions; Miscellaneous Provisions 

PART 1—GENERAL DEFINITIONS

Sec. 1901. Definitions relating to employment and income .................... 323 

Sec. 1902. Other general definitions ....................................................... 331 

Subtitle B—Miscellaneous Provisions 
14 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

Sec. 1911. Use of interim, final regulations ........................................... 341 

Sec. 1912. Social Security Act references ............................................... 341 

1 TITLE I—HEALTH CARE 

2 SECURITY 

3 Subtitle A—Universal Coverage 

4 and Individual Responsibility 

5 PART 1—UNIVERSAL COVERAGE 

6 SEC. 1001. ENTITLEMENT TO HEALTH BENEFITS. 

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

8 eligible individual is entitled to the comprehensive benefit 

9 package under subtitle B through the applicable health 

10 plan in which the individual is enrolled consistent with this 

11 title. 

12 (b) HEALTH SECURITY CARD.—Each eligible indi13 vidual is entitled to a health security card to be issued 

14 by the alliance or other entity that offers the applicable 

15 health plan in which the individual is enrolled. 

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

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

18 residing in the United States and who is— 

19 (1) a citizen or national of the United States; 

20 (2) an alien permanently residing in the United 

21 States under color of law (as defined in section 

22 1902(1)); or 

23 (3) a long-term nonimmigrant (as defined in 

24 section 1902(19)). 
15 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (d) TREATMENT OF MEDICARE-ELIGIBLE INDIVID2 UALS.—Subject to section 1012(a), a medicare-eligible in3 dividual is entitled to health benefits under the medicare 

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

5 (e) TREATMENT OF PRISONERS.—A prisoner (as de6 fined in section 1902(26)) is entitled to health care serv7 ices provided by the authority responsible for the prisoner 

8 instead of the entitlement under subsection (a). 

9 SEC. 1002. INDIVIDUAL RESPONSIBILITIES. 

10 (a) IN GENERAL.—In accordance with this Act, each 

11 eligible individual (other than a medicare-eligible indi12 vidual)— 

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

14 the individual, and 

15 (2) must pay any premium required, consistent 

16 with this Act, with respect to such enrollment. 

17 (b) LIMITATION ON DISENROLLMENT.—No eligible 

18 individual shall be disenrolled from an applicable health 

19 plan until the individual— 

20 (1) is enrolled under another applicable health 

21 plan, or 

22 (2) becomes a medicare-eligible individual. 

23 SEC. 1003. PROTECTION OF CONSUMER CHOICE. 

24 Nothing in this Act shall be construed as prohibiting 

25 the following: 
16 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (1) An individual from purchasing any health 

2 care services. 

3 (2) An individual from purchasing supplemental 

4 insurance (offered consistent with this Act) to cover 

5 health care services not included within the com6 prehensive benefit package. 

7 (3) An individual who is not an eligible indi8 vidual from purchasing health insurance (other than 

9 through a regional alliance). 

10 (4) Employers from providing coverage for ben11 efits in addition to the comprehensive benefit pack12 age (subject to part 2 of subtitle E). 

13 SEC. 1004. APPLICABLE HEALTH PLAN PROVIDING COV14 ERAGE. 

15 (a) SPECIFICATION OF APPLICABLE HEALTH

16 PLAN.—Except as otherwise provided: 

17 (1) GENERAL RULE: REGIONAL ALLIANCE

18 HEALTH PLANS.—The applicable health plan for a 

19 family is a regional alliance health plan for the alli20 ance area in which the family resides. 

21 (2) CORPORATE ALLIANCE HEALTH PLANS.—In 

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

23 in a corporate alliance health plan under section 

24 1311(c), the applicable health plan for the family is 

25 such a corporate alliance health plan. 
17 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (b) CHOICE OF PLANS FOR CERTAIN GROUPS.— 

2 (1) MILITARY PERSONNEL AND FAMILIES.—For 

3 military personnel and families who elect a Uni4 formed Services Health Plan of the Department of 

5 Defense under section 1073a(d) of title 10, United 

6 States Code, as inserted by section 8001(a) of this 

7 Act, that plan shall be the applicable health plan. 

8 (2) VETERANS.—For veterans and families who 

9 elect to enroll in a veterans health plan under sec10 tion 1801 of title 38, United States Code, as in11 serted by section 8101(a) of this Act, that plan shall 

12 be the applicable health plan. 

13 (3) INDIANS.—For those individuals who are el14 igible to enroll, and who elect to enroll, in a health 

15 program of the Indian Health Service under section 

16 8302(b) or 8306(b), that program shall be the appli17 cable health plan. 

18 SEC. 1005. TREATMENT OF OTHER NONIMMIGRANTS. 

19 (a) UNDOCUMENTED ALIENS INELIGIBLE FOR BEN20 EFITS.—An undocumented alien is not eligible to obtain 

21 the comprehensive benefit package through enrollment in 

22 a health plan pursuant to this Act. 

23 (b) DIPLOMATS AND OTHER FOREIGN GOVERNMENT

24 OFFICIALS.—Subject to conditions established by the Na25 tional Health Board in consultation with the Secretary of 
18 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 State, a nonimmigrant under subparagraph (A) or (G) of 

2 section 101(a)(15) of the Immigration and Nationality Act 

3 may obtain the comprehensive benefit package through en4 rollment in the regional alliance health plan for the alli5 ance area in which the nonimmigrant resides. 

6 (c) RECIPROCAL TREATMENT OF OTHER NON7 IMMIGRANTS.—With respect to those classes of individuals 

8 who are lawful nonimmigrants but who are not long-term 

9 nonimmigrants (as defined in section 1902(19)) or de10 scribed in subsection (b), such individuals may obtain such 

11 benefits through enrollment with regional alliance health 

12 plans only in accordance with such reciprocal agreements 

13 between the United States and foreign states as may be 

14 entered into. 

15 SEC. 1006. EFFECTIVE DATE OF ENTITLEMENT. 

16 (a) REGIONAL ALLIANCE ELIGIBLE INDIVIDUALS.— 

17 (1) IN GENERAL.—In the case of regional alli18 ance eligible individuals residing in a State, the enti19 tlement under this part (and requirements under 

20 section 1002) shall not take effect until the State 

21 becomes a participating State (as defined in section 

22 1200). 

23 (2) TRANSITIONAL RULE FOR CORPORATE ALLI24 ANCES.— 
19 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (A) IN GENERAL.—In the case of a State 

2 that becomes a participating State before the 

3 general effective date (as defined in subsection 

4 (c)) and for periods before such date, under 

5 rules established by the Board, an individual 

6 who is covered under a plan (described in sub7 paragraph (C)) based on the individual (or the 

8 individual’s spouse) being a qualifying employee 

9 of a qualifying employer, the individual shall 

10 not be treated under this Act as a regional alli11 ance eligible individual. 

12 (B) QUALIFYING EMPLOYER DEFINED.—In 

13 subparagraph (A), the term ‘‘qualifying em14 ployer’’ means an employer that— 

15 (i) is described in section 

16 1311(b)(1)(A), or is participating in a 

17 multiemployer plan described in section 

18 1311(b)(1)(B) or plan described in section 

19 1311(b)(1)(C), and 

20 (ii) provides such notice to the re21 gional alliance involved as the Board speci22 fies. 

23 (C) BENEFITS PLAN DESCRIBED.—A plan 

24 described in this subparagraph is an employee 

25 benefit plan that— 
20 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (i) provides (through insurance or 

2 otherwise) the comprehensive benefit pack3 age, and 

4 (ii) provides an employer contribution 

5 of at least 80 percent of the premium (or 

6 premium equivalent) for coverage. 

7 (b) CORPORATE ALLIANCE ELIGIBLE INDIVID8 UALS.— 

9 (1) IN GENERAL.—In the case of corporate alli10 ance eligible individuals, the entitlement under this 

11 part shall not take effect until the general effective 

12 date. 

13 (2) TRANSITION.—For purposes of this Act and 

14 before the general effective date, in the case of an 

15 eligible individual who resides in a participating 

16 State, the individual is deemed a regional alliance el17 igible individual until the individual becomes a cor18 porate alliance eligible individual, unless subsection 

19 (a)(2)(A) applies to the individual. 

20 (c) GENERAL EFFECTIVE DATE DEFINED.—In this 

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

22 1998. 
21 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 PART 2—TREATMENT OF 

2 FAMILIES AND SPECIAL RULES 

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

4 SAME HEALTH PLAN. 

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

6 or otherwise, all members of the same family (as defined 

7 in subsection (b)) shall be enrolled in the same applicable 

8 health plan. 

9 (b) FAMILY DEFINED.—In this Act, unless otherwise 

10 provided, the term ‘‘family’’— 

11 (1) means, with respect to an eligible individual 

12 who is not a child (as defined in subsection (c)), the 

13 individual; and 

14 (2) includes the following persons (if any): 

15 (A) The individual’s spouse if the spouse is 

16 an eligible individual. 

17 (B) The individual’s children (and, if appli18 cable, the children of the individual’s spouse) if 

19 they are eligible individuals. 

20 (c) CLASSES OF FAMILY ENROLLMENT; TERMI21 NOLOGY.— 

22 (1) IN GENERAL.—In this Act, each of the fol23 lowing is a separate class of family enrollment: 
22 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (A) Coverage only of an individual (re2 ferred to in this Act as the ‘‘individual’’ enroll3 ment or class of enrollment). 

4 (B) Coverage of a married couple without 

5 children (referred to in this Act as the ‘‘couple6 only’’ enrollment or class of enrollment). 

7 (C) Coverage of an unmarried individual 

8 and one or more children (referred to in this 

9 Act as the ‘‘single parent’’ enrollment or class 

10 of enrollment). 

11 (D) Coverage of a married couple and one 

12 or more children (referred to in this Act as the 

13 ‘‘dual parent’’ enrollment or class of enroll14 ment). 

15 (2) REFERENCES TO FAMILY AND COUPLE

16 CLASSES OF ENROLLMENT.—In this Act: 

17 (A) FAMILY.—The terms ‘‘family enroll18 ment’’ and ‘‘family class of enrollment’’, refer 

19 to enrollment in a class of enrollment described 

20 in subparagraph (B), (C), or (D) of paragraph 

21 (1). 

22 (B) COUPLE.—The term ‘‘couple class of 

23 enrollment’’ refers to enrollment in a class of 

24 enrollment described in subparagraph (B) or 

25 (D) of paragraph (1). 
23 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (d) SPOUSE; MARRIED; COUPLE.— 

2 (1) IN GENERAL.—In this Act, the terms 

3 ‘‘spouse’’ and ‘‘married’’ mean, with respect to a 

4 person, another individual who is the spouse of the 

5 person or married to the person, as determined 

6 under applicable State law. 

7 (2) COUPLE.—The term ‘‘couple’’ means an in8 dividual and the individual’s spouse. 

9 (e) CHILD DEFINED.— 

10 (1) IN GENERAL.—In this Act, except as other11 wise provided, the term ‘‘child’’ means an eligible in12 dividual who (consistent with paragraph (3))— 

13 (A) is under 18 years of age (or under 24 

14 years of age in the case of a full-time student), 

15 and 

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

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

18 paragraph (3), determinations of whether a person 

19 is the child of another person shall be made in ac20 cordance with applicable State law. 

21 (3) NATIONAL RULES.—The National Health 

22 Board may establish such national rules respecting 

23 individuals who will be treated as children under this 

24 Act as the Board determines to be necessary. Such 
24 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 rules shall be consistent with the following prin2 ciples: 

3 (A) STEP AND FOSTER CHILD.—A child in4 cludes a step child or foster child who is an eli5 gible individual living with an adult in a regular 

6 parent-child relationship. 

7 (B) DISABLED CHILD.—A child includes 

8 an unmarried dependent eligible individual re9 gardless of age who is incapable of self-support 

10 because of mental or physical disability which 

11 existed before age 21. 

12 (C) CERTAIN 3-GENERATION FAMILIES.—A 

13 child includes the grandchild of an individual, if 

14 the parent of the grandchild is a child and the 

15 parent and grandchild are living with the 

16 grandparent. 

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

20 treated as a child. 

21 (E) CHILDREN PLACED FOR ADOPTION.— 

22 A child includes a child who is placed for adop23 tion with an eligible individual. 
25 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (f) ADDITIONAL RULES.—The Board shall provide 

2 for such additional exceptions and special rules, including 

3 rules relating to— 

4 (1) families in which members are not residing 

5 in the same area or in which children are not resid6 ing with their parents, 

7 (2) the treatment of eligible individuals who are 

8 under 19 years of age and who are not a dependent 

9 of an eligible individual, 

10 (3) changes in family composition occurring 

11 during a year, and 

12 (4) treatment of children of parents who are 

13 separated or divorced, 

14 as the Board finds appropriate. 

15 SEC. 1012. TREATMENT OF CERTAIN FAMILIES. 

16 (a) TREATMENT OF MEDICARE-ELIGIBLE INDIVID17 UALS WHO ARE QUALIFYING EMPLOYEES OR SPOUSES OF

18 QUALIFYING EMPLOYEES.— 

19 (1) IN GENERAL.—Except as specifically pro20 vided, in the case of an individual who is an indi21 vidual described in paragraph (2) with respect to 2 

22 consecutive months in a year (and it is anticipated 

23 would be in the following month and in such fol24 lowing month would be a medicare-eligible individual 

25 but for this paragraph), the individual shall not be 
26 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 treated as a medicare-eligible individual under this 

2 Act during such following month and the remainder 

3 of the year. 

4 (2) INDIVIDUAL DESCRIBED.—An individual de5 scribed in this paragraph with respect to a month is 

6 an individual who is a qualifying employee or the 

7 spouse or family member of a qualifying employee in 

8 the month. 

9 (b) SEPARATE TREATMENT FOR CERTAIN GROUPS

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

11 one or more individuals in a group described in subsection 

12 (c)— 

13 (1) all the individuals in each such group within 

14 the family shall be treated collectively as a separate 

15 family, and 

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

17 group shall be treated collectively as a separate fam18 ily. 

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

20 the following is a group of individuals described in this 

21 subsection: 

22 (1) AFDC recipients (as defined in section 

23 1902(3)). 

24 (2) Disabled SSI recipients (as defined in sec25 tion 1902(13)) . 
27 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (3) SSI recipients (as defined in section 

2 1902(33)) who are not disabled SSI recipients. 

3 (4) Electing veterans (as defined in subsection 

4 (d)(1)). 

5 (5) Active duty military personnel (as defined 

6 in subsection (d)(2)). 

7 (6) Electing Indians (as defined in subsection 

8 (d)(3)). 

9 (7) Prisoners (as defined in section 1902(26)). 

10 (d) SPECIAL RULES.—In this Act: 

11 (1) ELECTING VETERANS.— 

12 (A) DEFINED.—Subject to subparagraph 

13 (B), the term ‘‘electing veteran’’ means a vet14 eran who makes an election to enroll with a 

15 health plan of the Department of Veterans Af16 fairs under chapter 18 of title 38, United 

17 States Code, as added by section 8101(a)(1). 

18 (B) FAMILY EXCEPTION.—Subparagraph 

19 (A) shall not apply with respect to coverage 

20 under a health plan referred to in such sub21 paragraph if, for the area in which the electing 

22 veteran resides, such health plan offers cov23 erage to family members of an electing veteran 

24 and the veteran elects family enrollment under 

25 such plan (instead of individual enrollment). 
28 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (2) ACTIVE DUTY MILITARY PERSONNEL.— 

2 (A) IN GENERAL.—Subject to subpara3 graph (B), the term ‘‘active duty military per4 sonnel’’ means an individual on active duty in 

5 the Uniformed Services of the United States. 

6 (B) EXCEPTION.—If an individual de7 scribed in subparagraph (A) elects family cov8 erage under section 1073a(e)(2)(A) of title 10, 

9 United States Code (as added by section 

10 8001(a)), then paragraph (5) of subsection (c) 

11 shall not apply with respect to such coverage. 

12 (3) ELECTING INDIANS.— 

13 (A) IN GENERAL.—Subject to subpara14 graph (B), the term ‘‘electing Indian’’ means 

15 an eligible individual who makes an election 

16 under section 8302(b) of this Act. 

17 (B) FAMILY ELECTION FOR ALL INDIVID18 UALS ELIGIBLE TO ELECT.—No such election 

19 shall be made with respect to an individual in 

20 a family (as defined without regard to this sec21 tion) unless such election is made for all eligible 

22 individuals (described in section 8302(a)) who 

23 are family members of the family. 

24 (4) MULTIPLE CHOICE.—Eligible individuals 

25 who are permitted to elect coverage under more than 
29 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 one health plan or program referred to in this sub2 section may elect which of such plans or programs 

3 will be the applicable health plan under this Act. 

4 (e) QUALIFYING STUDENTS.— 

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

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

7 may elect to enroll in a regional alliance health plan 

8 offered by the regional alliance for the area in which 

9 the school is located. 

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

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

12 who— 

13 (A) but for this subsection would receive 

14 coverage under a health plan as a child of an15 other person, and 

16 (B) is a full-time student at a school in an 

17 alliance area that is different from the alliance 

18 area (or, in the case of a corporate alliance, 

19 such coverage area as the Board may specify) 

20 providing the coverage described in subpara21 graph (A). 

22 (3) PAYMENT RULES.— 

23 (A) CONTINUED TREATMENT AS FAM24 ILY.—Except as provided in subparagraph (B), 

25 nothing in this subsection shall be construed as 
30 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 affecting the payment liabilities between fami2 lies and health alliances or between health alli3 ances and health plans. 

4 (B) TRANSFER PAYMENT.—In the case of 

5 an election under paragraph (1), for transfer 

6 payments see section 1346(e). 

7 (f) SPOUSES LIVING IN DIFFERENT ALLIANCE

8 AREAS.—The Board shall provide for such special rules 

9 in applying this Act in the case of a couple in which the 

10 spouses reside in different alliance areas as the Board 

11 finds appropriate. 

12 SEC. 1013. MULTIPLE EMPLOYMENT SITUATIONS. 

13 (a) MULTIPLE EMPLOYMENT OF AN INDIVIDUAL.— 

14 In the case of an individual who— 

15 (1)(A) is not married or (B) is married and 

16 whose spouse is not a qualifying employee (as de17 fined in section 1901(b)(1)), 

18 (2) is not a child, and 

19 (3) who is a qualifying employee both of a re20 gional alliance employer and of a corporate alliance 

21 employer (or of 2 corporate alliance employers), 

22 the individual may elect the applicable health plan to be 

23 either a regional alliance health plan (for the alliance area 

24 in which the individual resides) or a corporate alliance 

25 health plan (for an employer employing the individual). 
31 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (b) MULTIPLE EMPLOYMENT WITHIN A FAMILY.— 

2 (1) MARRIED COUPLE WITH EMPLOYMENT

3 WITH A REGIONAL ALLIANCE EMPLOYER AND WITH

4 A CORPORATE ALLIANCE EMPLOYER.—In the case of 

5 a married individual— 

6 (A) who is a qualifying employee of a re7 gional alliance employer and whose spouse is a 

8 qualifying employee of a corporate alliance em9 ployer, or 

10 (B) who is a qualifying employee of a cor11 porate alliance employer and whose spouse is a 

12 qualifying employee of a regional alliance em13 ployer, 

14 the individual and the individual’s spouse may elect 

15 the applicable health plan to be either a regional alli16 ance health plan (for the alliance area in which the 

17 couple resides) or a corporate alliance health plan 

18 (for an employer employing the individual or the 

19 spouse). 

20 (2) MARRIED COUPLE WITH DIFFERENT COR21 PORATE ALLIANCE EMPLOYERS.—In the case of a 

22 married individual— 

23 (A) who is a qualifying employee of a cor24 porate alliance employer, and 
32 

Title I, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (B) whose spouse is a qualifying employee 

2 of a different corporate alliance employer, 

3 the individual and the individual’s spouse may elect 

4 the applicable health plan to be a corporate alliance 

5 health plan for an employer employing either the in6 dividual or the spouse. 

7 SEC. 1014. TREATMENT OF RESIDENTS OF STATES WITH 

8 STATEWIDE SINGLE-PAYER SYSTEMS. 

9 (a) UNIVERSAL COVERAGE.—Notwithstanding the 

10 previous provisions of this title, except as provided in part 

11 2 of subtitle C, in the case of an individual who resides 

12 in a State that has a Statewide single-payer system under 

13 section 1223, universal coverage shall be provided con14 sistent with section 1222(3). 

15 (b) INDIVIDUAL RESPONSIBILITIES.—In the case of 

16 an individual who resides in a single-payer State, the re17 sponsibilities of such individual under such system shall 

18 supersede the obligations of the individual under section 

19 1002. 
33 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 Subtitle B—Benefits 

2 PART 1—COMPREHENSIVE 

3 BENEFIT PACKAGE 

4 SEC. 1101. PROVISION OF COMPREHENSIVE BENEFITS BY 

5 PLANS. 

6 (a) IN GENERAL.—The comprehensive benefit pack7 age shall consist of the following items and services (as 

8 described in part 2), subject to the cost sharing require9 ments described in part 3, the exclusions described in part 

10 4, and the duties and authority of the National Health 

11 Board described in part 5: 

12 (1) Hospital services (described in section 

13 1111). 

14 (2) Services of health professionals (described 

15 in section 1112). 

16 (3) Emergency and ambulatory medical and 

17 surgical services (described in section 1113). 

18 (4) Clinical preventive services (described in 

19 section 1114). 

20 (5) Mental illness and substance abuse services 

21 (described in section 1115). 

22 (6) Family planning services and services for 

23 pregnant women (described in section 1116). 

24 (7) Hospice care (described in section 1117). 
34 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (8) Home health care (described in section 

2 1118). 

3 (9) Extended care services (described in section 

4 1119). 

5 (10) Ambulance services (described in section 

6 1120). 

7 (11) Outpatient laboratory, radiology, and diag8 nostic services (described in section 1121). 

9 (12) Outpatient prescription drugs and 

10 biologicals (described in section 1122). 

11 (13) Outpatient rehabilitation services (de12 scribed in section 1123). 

13 (14) Durable medical equipment and prosthetic 

14 and orthotic devices (described in section 1124). 

15 (15) Vision care (described in section 1125). 

16 (16) Dental care (described in section 1126). 

17 (17) Health education classes (described in sec18 tion 1127). 

19 (18) Investigational treatments (described in 

20 section 1128). 

21 (b) NO OTHER LIMITATIONS OR COST SHARING.— 

22 The items and services in the comprehensive benefit pack23 age shall not be subject to any duration or scope limitation 

24 or any deductible, copayment, or coinsurance amount that 

25 is not required or authorized under this Act. 
35 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (c) HEALTH PLAN.—Unless otherwise provided in 

2 this subtitle, for purposes of this subtitle, the term ‘‘health 

3 plan’’ has the meaning given such term in section 1400. 

4 PART 2—DESCRIPTION OF ITEMS 

5 AND SERVICES COVERED 

6 SEC. 1111. HOSPITAL SERVICES. 

7 (a) COVERAGE.—The hospital services described in 

8 this section are the following items and services: 

9 (1) Inpatient hospital services. 

10 (2) Outpatient hospital services. 

11 (3) 24-hour a day hospital emergency services. 

12 (b) LIMITATION.—The hospital services described in 

13 this section do not include hospital services provided for 

14 the treatment of a mental or substance abuse disorder 

15 (which are subject to section 1115), except for medical de16 toxification as required for the management of medical 

17 conditions associated with withdrawal from alcohol or 

18 drugs (which is not covered under such section). 

19 (c) DEFINITIONS.—For purposes of this subtitle: 

20 (1) HOSPITAL.—The term ‘‘hospital’’ has the 

21 meaning given such term in section 1861(e) of the 

22 Social Security Act, except that such term shall in23 clude— 

24 (A) in the case of an item or service pro25 vided to an individual whose applicable health 
36 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 plan is specified pursuant to section 1004(b)(1), 

2 a facility of the uniformed services under title 

3 10, United States Code, that is primarily en4 gaged in providing services to inpatients that 

5 are equivalent to the services provided by a hos6 pital defined in such section 1861(e); 

7 (B) in the case of an item or service pro8 vided to an individual whose applicable health 

9 plan is specified pursuant to section 1004(b)(2), 

10 a facility operated by the Department of Vet11 erans Affairs that is primarily engaged in pro12 viding services to inpatients that are equivalent 

13 to the services provided by a hospital defined in 

14 such section 1861(e); and 

15 (C) in the case of an item or service pro16 vided to an individual whose applicable health 

17 plan is specified pursuant to section 1004(b)(3), 

18 a facility operated by the Indian Health Service 

19 that is primarily engaged in providing services 

20 to inpatients that are equivalent to the services 

21 provided by a hospital defined in such section 

22 1861(e). 

23 (2) INPATIENT HOSPITAL SERVICES.—The term 

24 ‘‘inpatient hospital services’’ means items and serv25 ices described in paragraphs (1) through (3) of sec-
37 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 tion 1861(b) of the Social Security Act when pro2 vided to an inpatient of a hospital. The National 

3 Health Board shall specify those health professional 

4 services described in section 1112 that shall be 

5 treated as inpatient hospital services when provided 

6 to an inpatient of a hospital. 

7 SEC. 1112. SERVICES OF HEALTH PROFESSIONALS. 

8 (a) COVERAGE.—The items and services described in 

9 this section are— 

10 (1) inpatient and outpatient health professional 

11 services, including consultations, that are provided 

12 in— 

13 (A) a home, office, or other ambulatory 

14 care setting; or 

15 (B) an institutional setting; and 

16 (2) services and supplies (including drugs and 

17 biologicals which cannot be self-administered) fur18 nished as an incident to such health professional 

19 services, of kinds which are commonly furnished in 

20 the office of a health professional and are commonly 

21 either rendered without charge or included in the bill 

22 of such professional. 

23 (b) LIMITATION.—The items and services described 

24 in this section do not include items or services that are 

25 described in any other section of this part. An item or 
38 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 service that is described in section 1114 but is not pro2 vided consistent with a periodicity schedule for such item 

3 or service specified in such section or under section 1153 

4 may be covered under this section if the item or service 

5 otherwise meets the requirements of this section. 

6 (c) DEFINITIONS.—Unless otherwise provided in this 

7 Act, for purposes of this Act: 

8 (1) HEALTH PROFESSIONAL.—The term 

9 ‘‘health professional’’ means an individual who pro10 vides health professional services. 

11 (2) HEALTH PROFESSIONAL SERVICES.—The 

12 term ‘‘health professional services’’ means profes13 sional services that— 

14 (A) are lawfully provided by a physician; or 

15 (B) would be described in subparagraph 

16 (A) if provided by a physician, but are provided 

17 by another person who is legally authorized to 

18 provide such services in the State in which the 

19 services are provided. 

20 SEC. 1113. EMERGENCY AND AMBULATORY MEDICAL AND 

21 SURGICAL SERVICES. 

22 The emergency and ambulatory medical and surgical 

23 services described in this section are the following items 

24 and services provided by a health facility that is not a hos-
39 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 pital and that is legally authorized to provide the services 

2 in the State in which they are provided: 

3 (1) 24-hour a day emergency services. 

4 (2) Ambulatory medical and surgical services. 

5 SEC. 1114. CLINICAL PREVENTIVE SERVICES. 

6 (a) COVERAGE.—The clinical preventive services de7 scribed in this section are— 

8 (1) an item or service for high risk populations 

9 (as defined by the National Health Board) that is 

10 specified and defined by the Board under section 

11 1153, but only when the item or service is provided 

12 consistent with any periodicity schedule for the item 

13 or service promulgated by the Board; 

14 (2) except as modified by the National Health 

15 Board under section 1153, an age-appropriate im16 munization, test, or clinician visit specified in one of 

17 subsections (b) through (h) that is provided con18 sistent with any periodicity schedule for the item or 

19 service specified in the applicable subsection or by 

20 the National Health Board under section 1153; and 

21 (3) an immunization, test, or clinician visit that 

22 is provided to an individual during an age range 

23 other than the age range for such immunization, 

24 test, or clinician visit that is specified in one of sub25 sections (b) through (h), but only when provided 
40 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 consistent with any requirements for such immuniza2 tions, tests, and clinician visits established by the 

3 National Health Board under section 1153. 

4 (b) INDIVIDUALS UNDER 3.—For an individual 

5 under 3 years of age: 

6 (1) IMMUNIZATIONS.—The immunizations spec7 ified in this subsection are age-appropriate immuni8 zations for the following illnesses: 

9 (A) Diphtheria. 

10 (B) Tetanus. 

11 (C) Pertussis. 

12 (D) Polio. 

13 (E) Haemophilus influenzae type B. 

14 (F) Measles. 

15 (G) Mumps. 

16 (H) Rubella. 

17 (I) Hepatitis B. 

18 (2) TESTS.—The tests specified in this sub19 section are as follows: 

20 (A) 1 hematocrit. 

21 (B) 2 blood tests to screen for blood lead 

22 levels for individuals who are at risk for lead 

23 exposure. 

24 (3) CLINICIAN VISITS.—The clinician visits 

25 specified in this subsection are 1 clinician visit for 
41 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 an individual who is newborn and 7 other clinician 

2 visits. 

3 (c) INDIVIDUALS AGE 3 TO 5.—For an individual at 

4 least 3 years of age, but less than 6 years of age: 

5 (1) IMMUNIZATIONS.—The immunizations spec6 ified in this subsection are age-appropriate immuni7 zations for the following illnesses: 

8 (A) Diphtheria. 

9 (B) Tetanus. 

10 (C) Pertussis. 

11 (D) Polio. 

12 (E) Measles. 

13 (F) Mumps. 

14 (G) Rubella. 

15 (2) TESTS.—The tests specified in this sub16 section are 1 urinalysis. 

17 (3) CLINICIAN VISITS.—The clinician visits 

18 specified in this subsection are 3 clinician visits. 

19 (d) INDIVIDUALS AGE 6 TO 12.—For an individual 

20 at least 6 years of age, but less than 13 years of age, 

21 the clinician visits specified in this subsection are 3 clini22 cian visits. 

23 (e) INDIVIDUALS AGE 13 TO 19.—For an individual 

24 at least 13 years of age, but less than 20 years of age: 
42 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (1) IMMUNIZATIONS.—The immunizations spec2 ified in this subsection are age-appropriate immuni3 zations for the following illnesses: 

4 (A) Tetanus. 

5 (B) Diphtheria. 

6 (2) TESTS.—The tests specified in this sub7 section are as follows: 

8 (A) Papanicolaou smears and pelvic exams, 

9 for females who have reached childbearing age 

10 and are at risk for cervical cancer, every 3 

11 years, but— 

12 (i) annually until 3 consecutive nega13 tive smears have been obtained, if medi14 cally necessary; and 

15 (ii) annually for females who are at 

16 risk for fertility related infectious illnesses. 

17 (B) Annual screening for chlamydia and 

18 gonorrhea for females who have reached child19 bearing age and are at risk for fertility related 

20 infectious illnesses. 

21 (3) CLINICIAN VISITS.—The clinician visits 

22 specified in this subsection are 3 clinician visits. 

23 (f) INDIVIDUALS AGE 20 TO 39.—For an individual 

24 at least 20 years of age, but less than 40 years of age: 
43 

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1 (1) IMMUNIZATIONS.—The immunizations spec2 ified in this subsection are booster immunizations 

3 against tetanus and diphtheria every 10 years. 

4 (2) TESTS.—The tests specified in this sub5 section are as follows: 

6 (A) Papanicolaou smears and pelvic exams 

7 for females every 3 years, but— 

8 (i) annually if an abnormal smear has 

9 been obtained, until 3 consecutive negative 

10 smears have been obtained; and 

11 (ii) annually for females who are at 

12 risk for fertility related infectious illnesses. 

13 (B) Annual screening for chlamydia and 

14 gonorrhea for females who are at risk for fer15 tility related infectious illnesses. 

16 (C) Cholesterol every 5 years. 

17 (3) CLINICIAN VISITS.—The clinician visits 

18 specified in this subsection are 1 clinician visit every 

19 3 years. 

20 (g) INDIVIDUALS AGE 40 TO 49.—For an individual 

21 at least 40 years of age, but less than 50 years of age: 

22 (1) IMMUNIZATIONS.—The immunizations spec23 ified in this subsection are booster immunizations 

24 against tetanus and diphtheria every 10 years. 
44 

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1 (2) TESTS.—The tests specified in this sub2 section are as follows: 

3 (A) Papanicolaou smears and pelvic exams 

4 for females every 2 years, but— 

5 (i) annually if an abnormal smear has 

6 been obtained, until 3 consecutive negative 

7 smears have been obtained; and 

8 (ii) annually for females who are at 

9 risk for fertility related infectious illnesses. 

10 (B) Annual screening for chlamydia and 

11 gonorrhea for females who are at risk for fer12 tility related infectious illnesses. 

13 (C) Cholesterol every 5 years. 

14 (3) CLINICIAN VISITS.—The clinician visits 

15 specified in this subsection are 1 clinician visit every 

16 2 years. 

17 (h) INDIVIDUALS AGE 50 TO 65.—For an individual 

18 at least 50 years of age, but less than 65 years of age: 

19 (1) IMMUNIZATIONS.—The immunizations spec20 ified in this subsection are booster immunizations 

21 against tetanus and diphtheria every 10 years. 

22 (2) TESTS.—The tests specified in this sub23 section are as follows: 

24 (A) Papanicolaou smears and pelvic exams 

25 for females every 2 years. 
45 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (B) Mammograms for females every 2 

2 years. 

3 (C) Cholesterol every 5 years. 

4 (3) CLINICIAN VISITS.—The clinician visits 

5 specified in this subsection are 1 clinician visit every 

6 2 years. 

7 (i) INDIVIDUALS AGE 65 OR OLDER.—For an indi8 vidual at least 65 years of age who is enrolled under a 

9 health plan: 

10 (1) IMMUNIZATIONS.—The immunizations spec11 ified in this subsection are as follows: 

12 (A) Booster immunizations against tetanus 

13 and diphtheria every 10 years. 

14 (B) Age-appropriate immunizations for the 

15 following illnesses: 

16 (i) Influenza. 

17 (ii) Pneumococcal invasive disease. 

18 (2) TESTS.—The tests specified in this sub19 section are as follows: 

20 (A) Papanicolaou smears and pelvic exams 

21 for females who are at risk for cervical cancer 

22 every 2 years. 

23 (B) Mammograms for females every 2 

24 years. 

25 (C) Cholesterol every 5 years. 
46 

Title I, Subtitle B 

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1 (3) CLINICIAN VISITS.—The clinician visits 

2 specified in this subsection are 1 clinician visit every 

3 year. 

4 (j) CLINICIAN VISIT.—For purposes of this section, 

5 the term ‘‘clinician visit’’ includes the following health pro6 fessional services (as defined in section 1112(c)): 

7 (1) A complete medical history. 

8 (2) An appropriate physical examination. 

9 (3) Risk assessment. 

10 (4) Targeted health advice and counseling, in11 cluding nutrition counseling. 

12 (5) The administration of age-appropriate im13 munizations and tests specified in subsections (b) 

14 through (h). 

15 (k) IMMUNIZATIONS AND TESTS NOT ADMINISTERED

16 DURING CLINICIAN VISIT.—Notwithstanding subsection 

17 (i)(5), the clinical preventive services described in this sec18 tion include an immunization or test described in this sec19 tion that is administered to an individual consistent with 

20 any periodicity schedule for the immunization or test dur21 ing the age range specified for the immunization or test, 

22 and any administration fee for such immunization or test, 

23 even if the immunization or test is not administered dur24 ing a clinician visit. 
47 

Title I, Subtitle B 

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1 SEC. 1115. MENTAL ILLNESS AND SUBSTANCE ABUSE SERV2 ICES. 

3 (a) COVERAGE.—The mental illness and substance 

4 abuse services that are described in this section are the 

5 following items and services for eligible individuals, as de6 fined in section 1001(c), who satisfy the eligibility require7 ments in subsection (b): 

8 (1) Inpatient and residential mental illness and 

9 substance abuse treatment (described in subsection 

10 (c)). 

11 (2) Intensive nonresidential mental illness and 

12 substance abuse treatment (described in subsection 

13 (d)). 

14 (3) Outpatient mental illness and substance 

15 abuse treatment (described in subsection (e)), in16 cluding case management, screening and assessment, 

17 crisis services, and collateral services. 

18 (b) ELIGIBILITY.—The eligibility requirements re19 ferred to in subsection (a) are as follows: 

20 (1) INPATIENT, RESIDENTIAL, NONRESIDEN21 TIAL, AND OUTPATIENT TREATMENT.—An eligible 

22 individual is eligible to receive coverage for inpatient 

23 and residential mental illness and substance abuse 

24 treatment, intensive nonresidential mental illness 

25 and substance abuse treatment, or outpatient mental 

26 illness and substance abuse treatment (except case 
48 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 management and collateral services) if the indi2 vidual— 

3 (A) has, or has had during the 1-year pe4 riod preceding the date of such treatment, a 

5 diagnosable mental disorder or a diagnosable 

6 substance abuse disorder; and 

7 (B) is experiencing, or is at significant risk 

8 of experiencing, functional impairment in fam9 ily, work, school, or community activities. 

10 For purposes of this paragraph, an individual who 

11 has a diagnosable mental disorder or a diagnosable 

12 substance abuse disorder, is receiving treatment for 

13 such disorder, but does not satisfy the functional im14 pairment criterion in subparagraph (B) shall be 

15 treated as satisfying such criterion if the individual 

16 would satisfy such criterion without such treatment. 

17 (2) CASE MANAGEMENT.—An eligible individual 

18 is eligible to receive coverage for case management 

19 if— 

20 (A) a health professional designated by the 

21 health plan in which the individual is enrolled 

22 determines that the individual should receive 

23 such services; and 

24 (B) the individual is eligible to receive cov25 erage for, and is receiving, outpatient mental 
49 

Title I, Subtitle B 

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1 illness and substance abuse treatment with re2 spect to a diagnosable mental disorder or a 

3 diagnosable substance abuse disorder. 

4 (3) SCREENING AND ASSESSMENT AND CRISIS

5 SERVICES.—All eligible individuals enrolled under a 

6 health plan are eligible to receive coverage for out7 patient mental illness and substance abuse treat8 ment consisting of screening and assessment and 

9 crisis services. 

10 (4) COLLATERAL SERVICES.—An eligible indi11 vidual is eligible to receive coverage for outpatient 

12 mental illness and substance abuse treatment con13 sisting of collateral services if the individual is a 

14 family member (described in section 1011(b)) of an 

15 individual who is receiving inpatient and residential 

16 mental illness and substance abuse treatment, inten17 sive nonresidential mental illness and substance 

18 abuse treatment, or outpatient mental illness and 

19 substance abuse treatment. 

20 (c) INPATIENT AND RESIDENTIAL TREATMENT.— 

21 (1) DEFINITION.—For purposes of this subtitle, 

22 the term ‘‘inpatient and residential mental illness 

23 and substance abuse treatment’’ means the items 

24 and services described in paragraphs (1) through (3) 

25 of section 1861(b) of the Social Security Act when 
50 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 provided with respect to a diagnosable mental dis2 order or a diagnosable substance abuse disorder to— 

3 (A) an inpatient of a hospital, psychiatric 

4 hospital, residential treatment center, residen5 tial detoxification center, crisis residential pro6 gram, or mental illness residential treatment 

7 program; or 

8 (B) a resident of a therapeutic family or 

9 group treatment home or community residential 

10 treatment and recovery center for substance 

11 abuse. 

12 The National Health Board shall specify those 

13 health professional services described in section 1112 

14 that shall be treated as inpatient and residential 

15 mental illness and substance abuse treatment when 

16 provided to such an inpatient or resident. 

17 (2) LIMITATIONS.—Coverage for inpatient and 

18 residential mental illness and substance abuse treat19 ment is subject to the following limitations: 

20 (A) RESIDENTIAL MENTAL ILLNESS

21 TREATMENT.—Such treatment, when provided 

22 with respect to a diagnosable mental disorder in 

23 a setting that is not a hospital or a psychiatric 

24 hospital, is covered only to avert the need for, 

25 or as an alternative to, treatment in a hospital 
51 

Title I, Subtitle B 

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1 or a psychiatric hospital, as determined by a 

2 health professional designated by the health 

3 plan in which the individual receiving such 

4 treatment is enrolled. 

5 (B) RESIDENTIAL SUBSTANCE ABUSE

6 TREATMENT.—Such treatment, when provided 

7 with respect to a diagnosable substance abuse 

8 disorder in a setting that is not a hospital or 

9 a psychiatric hospital, is covered only if a 

10 health professional designated by the health 

11 plan in which the individual receiving such 

12 treatment is enrolled determines (based on cri13 teria that the plan may choose to employ) that 

14 the individual should receive such treatment. 

15 (C) LEAST RESTRICTIVE SETTING.—Such 

16 treatment is covered only when— 

17 (i) provided to an individual in the 

18 least restrictive inpatient or residential set19 ting that is effective and appropriate for 

20 the individual; and 

21 (ii) less restrictive intensive nonresi22 dential or outpatient treatment would be 

23 ineffective or inappropriate. 

24 (D) ANNUAL LIMIT.—Prior to January 1, 

25 2001, such treatment is subject to an aggregate 
52 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 annual limit of 30 days. A maximum of 30 ad2 ditional days of such treatment shall be covered 

3 for an individual if a health professional des4 ignated by the health plan in which the indi5 vidual is enrolled determines in advance that— 

6 (i) the individual poses a threat to his 

7 or her own life or the life of another indi8 vidual; or 

9 (ii) the medical condition of the indi10 vidual requires inpatient treatment in a 

11 hospital or a psychiatric hospital in order 

12 to initiate, change, or adjust pharma13 cological or somatic therapy. 

14 (E) INPATIENT HOSPITAL TREATMENT

15 FOR SUBSTANCE ABUSE.—Such treatment, 

16 when provided in a hospital or a psychiatric 

17 hospital with respect to a diagnosable substance 

18 abuse disorder, is covered under this section 

19 only for detoxification requiring the manage20 ment of psychiatric conditions associated with 

21 withdrawal from alcohol or drugs. The items 

22 and services described in this section do not in23 clude medical detoxification as required for the 

24 management of medical conditions associated 
53 

Title I, Subtitle B 

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1 with withdrawal from alcohol or drugs (which is 

2 covered under section 1111). 

3 (d) INTENSIVE NONRESIDENTIAL TREATMENT.— 

4 (1) DEFINITION.—For purposes of this subtitle, 

5 the term ‘‘intensive nonresidential mental illness and 

6 substance abuse treatment’’ means diagnostic or 

7 therapeutic items or services provided with respect 

8 to a diagnosable mental disorder or a diagnosable 

9 substance abuse disorder to an individual— 

10 (A) participating in a partial hospitaliza11 tion program, a day treatment program, a psy12 chiatric rehabilitation program, or an ambula13 tory detoxification program; or 

14 (B) receiving home-based mental illness 

15 services or behavioral aide mental illness serv16 ices. 

17 The National Health Board shall specify those 

18 health professional services described in section 1112 

19 that shall be treated as intensive nonresidential men20 tal illness and substance abuse treatment when pro21 vided to such an individual. 

22 (2) LIMITATIONS.—Coverage for intensive non23 residential mental illness and substance abuse treat24 ment is subject to the following limitations: 
54 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (A) DISCRETION OF PLAN.—An individual 

2 shall receive coverage for such treatment if a 

3 health professional designated by the health 

4 plan in which the individual is enrolled deter5 mines (based on criteria that the plan may 

6 choose to employ) that the individual should re7 ceive such treatment. 

8 (B) TREATMENT PURPOSES.—Such treat9 ment is covered only when provided— 

10 (i) to avert the need for, or as an al11 ternative to, treatment in residential or in12 patient settings; 

13 (ii) to facilitate the earlier discharge 

14 of an individual receiving inpatient or resi15 dential care; 

16 (iii) to restore the functioning of an 

17 individual with a diagnosable mental dis18 order or a diagnosable substance abuse 

19 disorder; or 

20 (iv) to assist such an individual to de21 velop the skills and gain access to the sup22 port services the individual needs to 

23 achieve the maximum level of functioning 

24 of the individual within the community. 

25 (C) ANNUAL LIMIT.— 
55 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (i) IN GENERAL.—Prior to January 1, 

2 2001, the number of covered days of inpa3 tient and residential mental illness and 

4 substance abuse treatment that are avail5 able to an individual under the 30-day 

6 limit described in the first sentence of sub7 section (c)(2)(D) shall be reduced by 1 day 

8 for each 2 covered days of intensive non9 residential mental illness and substance 

10 abuse treatment that are provided to the 

11 individual, until such number is reduced to 

12 zero. 

13 (ii) ADDITIONAL DAYS.—After the 

14 number of covered days referred to in 

15 clause (i) has been reduced to zero with re16 spect to an individual, the individual shall 

17 receive coverage for a maximum of 60 days 

18 of intensive nonresidential mental illness 

19 and substance abuse treatment if a health 

20 professional designated by the health plan 

21 in which the individual is enrolled deter22 mines that the individual should receive 

23 such treatment. 

24 (D) DETOXIFICATION.—Intensive nonresi25 dential mental illness and substance abuse 
56 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 treatment consisting of detoxification is covered 

2 only if it is provided in the context of a treat3 ment program. 

4 (E) OUT-OF-POCKET MAXIMUM.—Prior to 

5 January 1, 2001, expenses for intensive non6 residential mental illness and substance abuse 

7 treatment that an individual incurs prior to sat8 isfying a deductible applicable to such treat9 ment, and copayments and coinsurance paid by 

10 or on behalf of the individual for such treat11 ment, may not be applied toward any annual 

12 out-of-pocket limit on cost sharing under any 

13 cost sharing schedule described in part 3 of this 

14 subtitle if such treatment is provided— 

15 (i) with respect to a diagnosable sub16 stance abuse disorder; or 

17 (ii) pursuant to subparagraph (C)(ii). 

18 (e) OUTPATIENT TREATMENT.— 

19 (1) DEFINITION.—For purposes of this subtitle, 

20 the term ‘‘outpatient mental illness and substance 

21 abuse treatment’’ means the following services pro22 vided with respect to a diagnosable mental disorder 

23 or a diagnosable substance abuse disorder in an out24 patient setting: 

25 (A) Screening and assessment. 
57 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (B) Diagnosis. 

2 (C) Medical management. 

3 (D) Substance abuse counseling and re4 lapse prevention. 

5 (E) Crisis services. 

6 (F) Somatic treatment services. 

7 (G) Psychotherapy. 

8 (H) Case management. 

9 (I) Collateral services. 

10 (2) LIMITATIONS.—Coverage for outpatient 

11 mental illness and substance abuse treatment is sub12 ject to the following limitations: 

13 (A) HEALTH PROFESSIONAL SERVICES.— 

14 Such treatment is covered only when it con15 stitutes health professional services (as defined 

16 in section 1112(c)(2)). 

17 (B) DISCRETION OF PLAN.—An individual 

18 shall receive coverage for outpatient mental ill19 ness and substance abuse treatment consisting 

20 of substance abuse counseling and relapse pre21 vention if a health professional designated by 

22 the health plan in which the individual is en23 rolled determines (based on criteria that the 

24 plan may choose to employ) that the individual 

25 should receive such treatment. This subpara-
58 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 graph does not apply to group therapy covered 

2 pursuant to subparagraph (C)(ii)(II). 

3 (C) ANNUAL LIMITS.— 

4 (i) PSYCHOTHERAPY AND COLLAT5 ERAL SERVICES.—Prior to January 1, 

6 2001, psychotherapy and collateral services 

7 are subject to an aggregate annual limit of 

8 30 visits per individual. Additional visits 

9 may be covered, at the discretion of the 

10 health plan in which the individual receiv11 ing treatment is enrolled, to prevent hos12 pitalization or to facilitate earlier hospital 

13 release, for which the number of covered 

14 days of inpatient and residential mental ill15 ness and substance abuse treatment that 

16 are available to an individual under the 30- 

17 day limit described in the first sentence of 

18 subsection (c)(2)(D) shall be reduced by 1 

19 day for each 4 visits. After such number 

20 has been reduced to zero, no additional vis21 its under the preceding sentence may be 

22 covered. 

23 (ii) SUBSTANCE ABUSE COUNSELING

24 AND RELAPSE PREVENTION.— 
59 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (I) IN GENERAL.—Except as pro2 vided in subclause (II), the number of 

3 covered days of inpatient and residen4 tial mental illness and substance 

5 abuse treatment that are available to 

6 an individual under the 30-day limit 

7 described in the first sentence of sub8 section (c)(2)(D) shall be reduced by 

9 1 day for each 4 visits for substance 

10 abuse counseling and relapse preven11 tion that are covered for the indi12 vidual under subparagraph (B). After 

13 such number has been reduced to 

14 zero, no visits for substance abuse 

15 counseling and relapse prevention may 

16 be covered, except as provided in sub17 clause (II). 

18 (II) GROUP THERAPY.—Prior to 

19 January 1, 2001, substance abuse 

20 counseling and relapse prevention con21 sisting of group therapy is subject to 

22 a separate aggregate annual limit of 

23 30 visits, if such therapy occurs with24 in 12 months after the individual has 

25 received, with respect to a diagnosable 
60 

Title I, Subtitle B 

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1 substance abuse disorder, inpatient 

2 and residential mental illness and sub3 stance abuse treatment or intensive 

4 nonresidential mental illness and sub5 stance abuse treatment. The provi6 sions of clause (i) and subclause (I) 

7 do not apply to therapy that is de8 scribed in the preceding sentence. 

9 (D) DETOXIFICATION.—Outpatient mental 

10 illness and substance abuse treatment con11 sisting of detoxification is covered only if it is 

12 provided in the context of a treatment program. 

13 (E) OUT-OF-POCKET MAXIMUM.—Prior to 

14 January 1, 2001, expenses for outpatient men15 tal illness and substance abuse treatment that 

16 an individual incurs prior to satisfying a de17 ductible applicable to such treatment, and co18 payments and coinsurance paid by or on behalf 

19 of the individual for such treatment, may not be 

20 applied toward any annual out-of-pocket limit 

21 on cost sharing under any cost sharing schedule 

22 described in part 3 of this subtitle. 

23 (f) OTHER DEFINITIONS.—For purposes of this sub24 title: 
61 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (1) CASE MANAGEMENT.—The term ‘‘case man2 agement’’ means services that assist individuals in 

3 gaining access to needed medical, social, educational, 

4 and other services. 

5 (2) DIAGNOSABLE MENTAL DISORDER AND

6 DIAGNOSABLE SUBSTANCE ABUSE DISORDER.—The 

7 terms ‘‘diagnosable mental disorder’’ and 

8 ‘‘diagnosable substance abuse disorder’’ mean a dis9 order that— 

10 (A) is listed in the Diagnostic and Statis11 tical Manual of Mental Disorders, Third Edi12 tion, Revised or a revised version of such man13 ual (except V Codes for Conditions Not Attrib14 utable to a Mental Disorder That Are a Focus 

15 of Attention or Treatment); 

16 (B) is the equivalent of a disorder de17 scribed in subparagraph (A), but is listed in the 

18 International Classification of Diseases, 9th Re19 vision, Clinical Modification, Third Edition or a 

20 revised version of such text; or 

21 (C) is listed in any authoritative text speci22 fying diagnostic criteria for mental disorders or 

23 substance abuse disorders that is identified by 

24 the National Health Board. 
62 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (3) PSYCHIATRIC HOSPITAL.—The term ‘‘psy2 chiatric hospital’’ has the meaning given such term 

3 in section 1861(f) of the Social Security Act, except 

4 that such term shall include— 

5 (A) in the case of an item or service pro6 vided to an individual whose applicable health 

7 plan is specified pursuant to section 1004(b)(1), 

8 a facility of the uniformed services under title 

9 10, United States Code, that is engaged in pro10 viding services to inpatients that are equivalent 

11 to the services provided by a psychiatric hos12 pital; 

13 (B) in the case of an item or service pro14 vided to an individual whose applicable health 

15 plan is specified pursuant to section 1004(b)(2), 

16 a facility operated by the Department of Vet17 erans Affairs that is engaged in providing serv18 ices to inpatients that are equivalent to the 

19 services provided by a psychiatric hospital; and 

20 (C) in the case of an item or service pro21 vided to an individual whose applicable health 

22 plan is specified pursuant to section 1004(b)(3), 

23 a facility operated by the Indian Health Service 

24 that is engaged in providing services to inpa-
63 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 tients that are equivalent to the services pro2 vided by a psychiatric hospital. 

3 SEC. 1116. FAMILY PLANNING SERVICES AND SERVICES 

4 FOR PREGNANT WOMEN. 

5 The services described in this section are the fol6 lowing items and services: 

7 (1) Voluntary family planning services. 

8 (2) Contraceptive devices that— 

9 (A) may only be dispensed upon prescrip10 tion; and 

11 (B) are subject to approval by the Sec12 retary of Health and Human Services under the 

13 Federal Food, Drug, and Cosmetic Act. 

14 (3) Services for pregnant women. 

15 SEC. 1117. HOSPICE CARE. 

16 The hospice care described in this section is the items 

17 and services described in paragraph (1) of section 

18 1861(dd) of the Social Security Act, as defined in para19 graphs (2), (3), and (4)(A) of such section (with the ex20 ception of paragraph (2)(A)(iii)), except that all references 

21 to the Secretary of Health and Human Services in such 

22 paragraphs shall be treated as references to the National 

23 Health Board. 
64 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 1118. HOME HEALTH CARE. 

2 (a) COVERAGE.—The home health care described in 

3 this section is— 

4 (1) the items and services described in section 

5 1861(m) of the Social Security Act; and 

6 (2) home infusion drug therapy services de7 scribed in section 1861(ll) of the Social Security Act 

8 (as inserted by section 2005). 

9 (b) LIMITATIONS.—Coverage for home health care is 

10 subject to the following limitations: 

11 (1) INPATIENT TREATMENT ALTERNATIVE.— 

12 Such care is covered only as an alternative to inpa13 tient treatment in a hospital, skilled nursing facility, 

14 or rehabilitation facility after an illness or injury. 

15 (2) REEVALUATION.—At the end of each 60- 

16 day period of home health care, the need for contin17 ued care shall be reevaluated by the person who is 

18 primarily responsible for providing the home health 

19 care. Additional periods of care are covered only if 

20 such person determines that the requirement in 

21 paragraph (1) is satisfied. 

22 SEC. 1119. EXTENDED CARE SERVICES. 

23 (a) COVERAGE.—The extended care services de24 scribed in this section are the items and services described 

25 in section 1861(h) of the Social Security Act when pro-
65 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 vided to an inpatient of a skilled nursing facility or a reha2 bilitation facility. 

3 (b) LIMITATIONS.—Coverage for extended care serv4 ices is subject to the following limitations: 

5 (1) HOSPITAL ALTERNATIVE.—Such services 

6 are covered only as an alternative to inpatient treat7 ment in a hospital after an illness or injury. 

8 (2) ANNUAL LIMIT.—Such services are subject 

9 to an aggregate annual limit of 100 days. 

10 (c) DEFINITIONS.—For purposes of this subtitle: 

11 (1) REHABILITATION FACILITY.—The term ‘‘re12 habilitation facility’’ means an institution (or a dis13 tinct part of an institution) which is established and 

14 operated for the purpose of providing diagnostic, 

15 therapeutic, and rehabilitation services to individuals 

16 for rehabilitation from illness or injury. 

17 (2) SKILLED NURSING FACILITY.—The term 

18 ‘‘skilled nursing facility’’ means an institution (or a 

19 distinct part of an institution) which is primarily en20 gaged in providing to residents— 

21 (A) skilled nursing care and related serv22 ices for residents who require medical or nurs23 ing care; or 

24 (B) rehabilitation services to residents for 

25 rehabilitation from illness or injury. 
66 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 1120. AMBULANCE SERVICES. 

2 (a) COVERAGE.—The ambulance services described in 

3 this section are the following items and services: 

4 (1) Ground transportation by ambulance. 

5 (2) Air transportation by an aircraft equipped 

6 for transporting an injured or sick individual. 

7 (3) Water transportation by a vessel equipped 

8 for transporting an injured or sick individual. 

9 (b) LIMITATIONS.—Coverage for ambulance services 

10 is subject to the following limitations: 

11 (1) MEDICAL INDICATION.—Ambulance services 

12 are covered only in cases in which the use of an am13 bulance is indicated by the medical condition of the 

14 individual concerned. 

15 (2) AIR TRANSPORT.—Air transportation is cov16 ered only in cases in which there is no other method 

17 of transportation or where the use of another meth18 od of transportation is contra-indicated by the med19 ical condition of the individual concerned. 

20 (3) WATER TRANSPORT.—Water transportation 

21 is covered only in cases in which there is no other 

22 method of transportation or where the use of an23 other method of transportation is contra-indicated 

24 by the medical condition of the individual concerned. 
67 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 1121. OUTPATIENT LABORATORY, RADIOLOGY, AND DI2 AGNOSTIC SERVICES. 

3 The items and services described in this section are 

4 laboratory, radiology, and diagnostic services provided 

5 upon prescription to individuals who are not inpatients of 

6 a hospital, hospice, skilled nursing facility, or rehabilita7 tion facility. 

8 SEC. 1122. OUTPATIENT PRESCRIPTION DRUGS AND 

9 BIOLOGICALS. 

10 (a) COVERAGE.—The items described in this section 

11 are the following: 

12 (1) Covered outpatient drugs described in sec13 tion 1861(t) of the Social Security Act (as amended 

14 by section 2001(b))— 

15 (A) except that, for purposes of this sec16 tion, a medically accepted indication with re17 spect to the use of a covered outpatient drug in18 cludes any use which has been approved by the 

19 Food and Drug Administration for the drug, 

20 and includes another use of the drug if— 

21 (i) the drug has been approved by the 

22 Food and Drug Administration; and 

23 (ii) such use is supported by one or 

24 more citations which are included (or ap25 proved for inclusion) in one or more of the 

26 following compendia: the American Hos-
68 

Title I, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 pital Formulary Service-Drug Information, 

2 the American Medical Association Drug 

3 Evaluations, the United States Pharma4 copoeia-Drug Information, and other au5 thoritative compendia as identified by the 

6 Secretary, unless the Secretary has deter7 mined that the use is not medically appro8 priate or the use is identified as not indi9 cated in one or more such compendia; or 

10 (iii) such use is medically accepted 

11 based on supportive clinical evidence in 

12 peer reviewed medical literature appearing 

13 in publications which have been identified 

14 for purposes of this clause by the Sec15 retary; and 

16 (B) notwithstanding any exclusion from 

17 coverage that may be made with respect to such 

18 a drug under title XVIII of such Act pursuant 

19 to section 1862(a)(18) of such Act. 

20 (2) Blood clotting factors when provided on an 

21 outpatient basis. 

22 (b) REVISION OF COMPENDIA LIST.—The Secretary 

23 may revise the list of compendia in subsection (a)(1)(A)(ii) 

24 designated as appropriate for identifying medically accept25 ed indications for drugs. 
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1 (c) BLOOD CLOTTING FACTORS.—For purposes of 

2 this subtitle, the term ‘‘blood clotting factors’’ has the 

3 meaning given such term in section 1861(s)(2)(I) of the 

4 Social Security Act. 

5 SEC. 1123. OUTPATIENT REHABILITATION SERVICES. 

6 (a) COVERAGE.—The outpatient rehabilitation serv7 ices described in this section are— 

8 (1) outpatient occupational therapy; 

9 (2) outpatient physical therapy; and 

10 (3) outpatient speech pathology services for the 

11 purpose of attaining or restoring speech. 

12 (b) LIMITATIONS.—Coverage for outpatient rehabili13 tation services is subject to the following limitations: 

14 (1) RESTORATION OF CAPACITY OR MINIMIZA15 TION OF LIMITATIONS.—Such services include only 

16 items or services used to restore functional capacity 

17 or minimize limitations on physical and cognitive 

18 functions as a result of an illness or injury. 

19 (2) REEVALUATION.—At the end of each 60- 

20 day period of outpatient rehabilitation services, the 

21 need for continued services shall be reevaluated by 

22 the person who is primarily responsible for providing 

23 the services. Additional periods of services are cov24 ered only if such person determines that functioning 

25 is improving. 
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1 SEC. 1124. DURABLE MEDICAL EQUIPMENT AND PROS2 THETIC AND ORTHOTIC DEVICES. 

3 (a) COVERAGE.—The items and services described in 

4 this section are— 

5 (1) durable medical equipment, including acces6 sories and supplies necessary for repair, function, 

7 and maintenance of such equipment; 

8 (2) prosthetic devices (other than dental de9 vices) which replace all or part of the function of an 

10 internal body organ (including colostomy bags and 

11 supplies directly related to colostomy care), including 

12 replacement of such devices; 

13 (3) accessories and supplies which are used di14 rectly with a prosthetic device to achieve the thera15 peutic benefits of the prosthesis or to assure the 

16 proper functioning of the device; 

17 (4) leg, arm, back, and neck braces; 

18 (5) artificial legs, arms, and eyes, including re19 placements if required because of a change in the 

20 patient’s physical condition; and 

21 (6) fitting and training for use of the items de22 scribed in paragraphs (1) through (5). 

23 (b) LIMITATION.—An item or service described in 

24 this section is covered only if it improves functional ability 

25 or prevents further deterioration in function. 
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1 (c) DURABLE MEDICAL EQUIPMENT.—For purposes 

2 of this subtitle, the term ‘‘durable medical equipment’’ has 

3 the meaning given such term in section 1861(n) of the 

4 Social Security Act. 

5 SEC. 1125. VISION CARE. 

6 (a) COVERAGE.—The vision care described in this 

7 section is routine eye examinations, diagnosis, and treat8 ment for defects in vision. 

9 (b) LIMITATION.—Eyeglasses and contact lenses are 

10 covered only for individuals less than 18 years of age, ac11 cording to a periodicity schedule established by the Board. 

12 SEC. 1126. DENTAL CARE. 

13 (a) COVERAGE.—The dental care described in this 

14 section is the following: 

15 (1) Emergency dental treatment, including sim16 ple extractions, for acute infections, bleeding, and 

17 injuries to natural teeth and oral structures for con18 ditions requiring immediate attention to prevent 

19 risks to life or significant medical complications, as 

20 specified by the National Health Board. 

21 (2) Prevention and diagnosis of dental disease, 

22 including oral dental examinations, radiographs, 

23 dental sealants, fluoride application, and dental pro24 phylaxis. 
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1 (3) Treatment of dental disease, including rou2 tine fillings, prosthetics for genetic defects, peri3 odontal maintenance, and endodontic services. 

4 (4) Space maintenance procedures to prevent 

5 orthodontic complications. 

6 (5) Interceptive orthodontic treatment to pre7 vent severe malocclusion. 

8 (b) LIMITATIONS.—Coverage for dental care is sub9 ject to the following limitations: 

10 (1) PREVENTION AND DIAGNOSIS.—Prior to 

11 January 1, 2001, the items and services described in 

12 subsection (a)(2) are covered only for individuals 

13 less than 18 years of age. On or after such date, 

14 such items and services are covered for all eligible 

15 individuals enrolled under a health plan, except that 

16 dental sealants are not covered for individuals 18 

17 years of age or older. 

18 (2) TREATMENT OF DENTAL DISEASE.—Prior 

19 to January 1, 2001, the items and services described 

20 in subsection (a)(3) are covered only for individuals 

21 less than 18 years of age. On or after such date, 

22 such items and services are covered for all eligible 

23 individuals enrolled under a health plan, except that 

24 endodontic services are not covered for individuals 

25 18 years of age or older. 
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1 (3) SPACE MAINTENANCE.—The items and 

2 services described in subsection (a)(4) are covered 

3 only for individuals at least 3 years of age, but less 

4 than 13 years of age and— 

5 (A) are limited to posterior teeth; 

6 (B) involve maintenance of a space or 

7 spaces for permanent posterior teeth that would 

8 otherwise be prevented from normal eruption if 

9 the space were not maintained; and 

10 (C) do not include a space maintainer that 

11 is placed within 6 months of the expected erup12 tion of the permanent posterior tooth con13 cerned. 

14 (4) INTERCEPTIVE ORTHODONTIC TREAT15 MENT.—Prior to January 1, 2001, the items and 

16 services described in subsection (a)(5) are not cov17 ered. On or after such date, such items and services 

18 are covered only for individuals at least 6 years of 

19 age, but less than 12 years of age. 

20 SEC. 1127. HEALTH EDUCATION CLASSES. 

21 (a) COVERAGE.—Subject to subsection (b), the items 

22 and services described in this section are health education 

23 and training classes to encourage the reduction of behav24 ioral risk factors and to promote healthy activities. Such 

25 education and training classes may include smoking ces-
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1 sation, nutrition counseling, stress management, support 

2 groups, and physical training classes. 

3 (b) DISCRETION OF PLAN.—A health plan may offer 

4 education and training classes at its discretion. 

5 (c) CONSTRUCTION.—This section shall not be con6 strued to include or limit education or training that is pro7 vided in the course of the delivery of health professional 

8 services (as defined in section 1112(c)). 

9 SEC. 1128. INVESTIGATIONAL TREATMENTS. 

10 (a) COVERAGE.—Subject to subsection (b), the items 

11 and services described in this subsection are qualifying in12 vestigational treatments that are administered for a life13 threatening disease, disorder, or other health condition (as 

14 defined by the National Health Board). 

15 (b) DISCRETION OF PLAN.—A health plan may cover 

16 an investigational treatment described in subsection (a) at 

17 its discretion. 

18 (c) ROUTINE CARE DURING INVESTIGATIONAL

19 TREATMENTS.—The comprehensive benefit package in20 cludes an item or service described in any other section 

21 of this part, subject to the limitations and cost sharing 

22 requirements applicable to the item or service, when the 

23 item or service is provided to an individual in the course 

24 of an investigational treatment, if— 
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1 (1) the treatment is a qualifying investigational 

2 treatment; and 

3 (2) the item or service would have been pro4 vided to the individual even if the individual were 

5 not receiving the investigational treatment. 

6 (d) DEFINITIONS.—For purposes of this subtitle: 

7 (1) QUALIFYING INVESTIGATIONAL TREAT8 MENT.—The term ‘‘qualifying investigational treat9 ment’’ means a treatment— 

10 (A) the effectiveness of which has not been 

11 determined; and 

12 (B) that is under clinical investigation as 

13 part of an approved research trial. 

14 (2) APPROVED RESEARCH TRIAL.—The term 

15 ‘‘approved research trial’’ means— 

16 (A) a research trial approved by the Sec17 retary of Health and Human Services, the Di18 rector of the National Institutes of Health, the 

19 Commissioner of the Food and Drug Adminis20 tration, the Secretary of Veterans Affairs, the 

21 Secretary of Defense, or a qualified nongovern22 mental research entity as defined in guidelines 

23 of the National Institutes of Health; or 

24 (B) a peer-reviewed and approved research 

25 program, as defined by the Secretary of Health 
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1 and Human Services, conducted for the primary 

2 purpose of determining whether or not a treat3 ment is safe, efficacious, or having any other 

4 characteristic of a treatment which must be 

5 demonstrated in order for the treatment to be 

6 medically necessary or appropriate. 

7 PART 3—COST SHARING 

8 SEC. 1131. COST SHARING. 

9 (a) IN GENERAL.—Each health plan shall offer to in10 dividuals enrolled under the plan one, but not more than 

11 one, of the following cost sharing schedules, which sched12 ule shall be offered to all such enrollees: 

13 (1) Lower cost sharing (described in section 

14 1132). 

15 (2) Higher cost sharing (described in section 

16 1133). 

17 (3) Combination cost sharing (described in sec18 tion 1134). 

19 (b) COST SHARING FOR LOW-INCOME FAMILIES.— 

20 For provisions relating to reducing cost sharing for certain 

21 low-income families, see section 1371. 

22 (c) DEDUCTIBLES, COST SHARING, AND OUT-OF23 POCKET LIMITS ON COST SHARING.— 

24 (1) APPLICATION ON AN ANNUAL BASIS.—The 

25 deductibles and out-of-pocket limits on cost sharing 
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1 for a year under the schedules referred to in sub2 section (a) shall be applied based upon expenses in3 curred for items and services furnished in the year. 

4 (2) INDIVIDUAL AND FAMILY GENERAL

5 DEDUCTIBLES.— 

6 (A) INDIVIDUAL.—Subject to subpara7 graph (B), with respect to an individual en8 rolled under a health plan (regardless of the 

9 class of enrollment), any individual general de10 ductible in the cost sharing schedule offered by 

11 the plan represents the amount of countable ex12 penses (as defined in subparagraph (C)) that 

13 the individual may be required to incur in a 

14 year before the plan incurs liability for expenses 

15 for such items and services furnished to the in16 dividual. 

17 (B) FAMILY.—In the case of an individual 

18 enrolled under a health plan under a family 

19 class of enrollment (as defined in section 

20 1011(c)(2)(A)), the individual general deduct21 ible under subparagraph (A) shall not apply to 

22 countable expenses incurred by any member of 

23 the individual’s family in a year at such time as 

24 the family has incurred, in the aggregate, 
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1 countable expenses in the amount of the family 

2 general deductible for the year. 

3 (C) COUNTABLE EXPENSE.—In this para4 graph, the term ‘‘countable expense’’ means, 

5 with respect to an individual for a year, an ex6 pense for an item or service covered by the 

7 comprehensive benefit package that is subject 

8 to the general deductible and for which, but for 

9 such deductible and any other cost sharing 

10 under this subtitle, a health plan is liable for 

11 payment. The amount of countable expenses for 

12 an individual for a year under this paragraph 

13 shall not exceed the individual general deduct14 ible for the year. 

15 (3) COINSURANCE AND COPAYMENTS.—After a 

16 general or separate deductible that applies to an 

17 item or service covered by the comprehensive benefit 

18 package has been satisfied for a year, subject to 

19 paragraph (4), coinsurance and copayments are 

20 amounts (expressed as a percentage of an amount 

21 otherwise payable or as a dollar amount, respec22 tively) that an individual may be required to pay 

23 with respect to the item or service. 

24 (4) INDIVIDUAL AND FAMILY LIMITS ON COST

25 SHARING.— 
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1 (A) INDIVIDUAL.—Subject to subpara2 graph (B), with respect to an individual en3 rolled under a health plan (regardless of the 

4 class of enrollment), the individual out-of-pock5 et limit on cost sharing in the cost sharing 

6 schedule offered by the plan represents the 

7 amount of expenses that the individual may be 

8 required to incur under the plan in a year be9 cause of a general deductible, separate 

10 deductibles, copayments, and coinsurance before 

11 the plan may no longer impose any cost sharing 

12 with respect to items or services covered by the 

13 comprehensive benefit package that are pro14 vided to the individual, except as provided in 

15 subsections (d)(2)(E) and (e)(2)(E) of section 

16 1115. 

17 (B) FAMILY.—In the case of an individual 

18 enrolled under a health plan under a family 

19 class of enrollment (as defined in section 

20 1011(c)(2)(A)), the family out-of-pocket limit 

21 on cost sharing in the cost sharing schedule of22 fered by the plan represents the amount of ex23 penses that members of the individual’s family, 

24 in the aggregate, may be required to incur 

25 under the plan in a year because of a general 
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1 deductible, separate deductibles, copayments, 

2 and coinsurance before the plan may no longer 

3 impose any cost sharing with respect to items 

4 or services covered by the comprehensive benefit 

5 package that are provided to any member of the 

6 individual’s family, except as provided in sub7 sections (d)(2)(E) and (e)(2)(E) of section 

8 1115. 

9 SEC. 1132. LOWER COST SHARING. 

10 (a) IN GENERAL.—The lower cost sharing schedule 

11 referred to in section 1131 that is offered by a health 

12 plan— 

13 (1) may not include a deductible; 

14 (2) shall have— 

15 (A) an annual individual out-of-pocket 

16 limit on cost sharing of $1500; and 

17 (B) an annual family out-of-pocket limit on 

18 cost sharing of $3000; 

19 (3) except as provided in paragraph (4)— 

20 (A) shall prohibit payment of any coinsur21 ance; and 

22 (B) subject to section 1152, shall require 

23 payment of the copayment for an item or serv24 ice (if any) that is specified for the item or 

25 service in the table under section 1135; and 
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1 (4) shall require payment of coinsurance for an 

2 out-of-network item or service (as defined in section 

3 1402(f)) in an amount that is a percentage (deter4 mined under subsection (b)) of the applicable pay5 ment rate for the item or service established under 

6 section 1322(c), but only if the item or service is 

7 subject to coinsurance under the higher cost sharing 

8 schedule described in section 1133. 

9 (b) OUT-OF-NETWORK COINSURANCE PERCENT10 AGE.— 

11 (1) IN GENERAL.—The National Health Board 

12 shall determine a percentage referred to in sub13 section (a)(4). The percentage— 

14 (A) may not be less than 20 percent; and 

15 (B) shall be the same with respect to all 

16 out-of-network items and services that are sub17 ject to coinsurance, except as provided in para18 graph (2). 

19 (2) EXCEPTION.—The National Health Board 

20 may provide for a percentage that is greater than a 

21 percentage determined under paragraph (1) in the 

22 case of an out-of-network item or service for which, 

23 under the higher cost sharing schedule described in 

24 section 1133, the coinsurance is greater than 20 per25 cent of the applicable payment rate. 
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1 SEC. 1133. HIGHER COST SHARING. 

2 (a) IN GENERAL.—The higher cost sharing schedule 

3 referred to in section 1131 that is offered by a health 

4 plan— 

5 (1) shall have an annual individual general de6 ductible of $200 and an annual family general de7 ductible of $400 that apply with respect to expenses 

8 incurred for all items and services in the comprehen9 sive benefit package except— 

10 (A) an item or service with respect to 

11 which a separate individual deductible applies 

12 under paragraph (2), (3), or (4); or 

13 (B) an item or service described in para14 graph (5), (6), or (7) with respect to which a 

15 deductible does not apply; 

16 (2) shall require an individual to incur expenses 

17 during each episode of inpatient and residential 

18 mental illness and substance abuse treatment (de19 scribed in section 1115(c)) equal to the cost of one 

20 day of such treatment before the plan provides bene21 fits for such treatment to the individual; 

22 (3) shall require an individual to incur expenses 

23 during each episode of intensive nonresidential men24 tal illness and substance abuse treatment (described 

25 in section 1115(d)) equal to the cost of one day of 
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1 such treatment before the plan provides benefits for 

2 such treatment to the individual; 

3 (4) shall require an individual to incur expenses 

4 in a year for outpatient prescription drugs and 

5 biologicals (described in section 1122) equal to $250 

6 before the plan provides benefits for such items to 

7 the individual; 

8 (5) shall require an individual to incur expenses 

9 in a year for dental care described in section 1126, 

10 except the items and services for prevention and di11 agnosis of dental disease described in section 

12 1126(a)(2), equal to $50 before the plan provides 

13 benefits for such care to the individual; 

14 (6) may not require any deductible for clinical 

15 preventive services (described in section 1114); 

16 (7) may not require any deductible for clinician 

17 visits and associated services related to prenatal care 

18 or 1 post-partum visit under section 1116; 

19 (8) may not require any deductible for the 

20 items and services for prevention and diagnosis of 

21 dental disease described in section 1126(a)(2); 

22 (9) shall have— 

23 (A) an annual individual out-of-pocket 

24 limit on cost sharing of $1500; and 
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1 (B) an annual family out-of-pocket limit on 

2 cost sharing of $3000; 

3 (10) shall prohibit payment of any copayment; 

4 and 

5 (11) subject to section 1152, shall require pay6 ment of the coinsurance for an item or service (if 

7 any) that is specified for the item or service in the 

8 table under section 1135. 

9 (b) EPISODES OF TREATMENT.— 

10 (1) INPATIENT AND RESIDENTIAL TREAT11 MENT.—For purposes of subsection (a)(2), an epi12 sode of inpatient and residential mental illness and 

13 substance abuse treatment shall be considered to 

14 begin on the date an individual is admitted to a fa15 cility for such treatment and to end on the date the 

16 individual is discharged from the facility. 

17 (2) INTENSIVE NONRESIDENTIAL TREAT18 MENT.—For purposes of subsection (a)(3), an epi19 sode of intensive nonresidential mental illness and 

20 substance abuse treatment— 

21 (A) shall be considered to begin on the 

22 date an individual begins participating in a pro23 gram described in section 1115(d)(1)(A) and to 

24 end on the date the individual ceases such par25 ticipation; or 
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1 (B) shall be considered to begin on the 

2 date an individual begins receiving home-based 

3 or behavioral aide services described in section 

4 1115(d)(1)(B) and to end on the date the indi5 vidual ceases to receive such services. 

6 SEC. 1134. COMBINATION COST SHARING. 

7 (a) IN GENERAL.—The combination cost sharing 

8 schedule referred to in section 1131 that is offered by a 

9 health plan— 

10 (1) shall have— 

11 (A) an annual individual out-of-pocket 

12 limit on cost sharing of $1500; and 

13 (B) an annual family out-of-pocket limit on 

14 cost sharing of $3000; and 

15 (2) otherwise shall require different cost shar16 ing for in-network items and services than for out17 of-network items and services. 

18 (b) IN-NETWORK ITEMS AND SERVICES.—With re19 spect to an in-network item or service (as defined in sec20 tion 1402(f)(1)), the combination cost sharing schedule 

21 that is offered by a health plan— 

22 (1) may not apply a deductible; 

23 (2) shall prohibit payment of any coinsurance; 

24 and 
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1 (3) shall require payment of a copayment in ac2 cordance with the lower cost sharing schedule de3 scribed in section 1132. 

4 (c) OUT-OF-NETWORK ITEMS AND SERVICES.—With 

5 respect to an out-of-network item or service (as defined 

6 in section 1402(f)(2)), the combination cost sharing sched7 ule that is offered by a health plan— 

8 (1) shall require an individual and a family to 

9 incur expenses before the plan provides benefits for 

10 the item or service in accordance with the 

11 deductibles under the higher cost sharing schedule 

12 described in section 1133; 

13 (2) shall prohibit payment of any copayment; 

14 and 

15 (3) shall require payment of coinsurance in ac16 cordance with such schedule. 

17 SEC. 1135. TABLE OF COPAYMENTS AND COINSURANCE. 

18 (a) IN GENERAL.—The following table specifies, for 

19 different items and services, the copayments and coinsur20 ance referred to in sections 1132 and 1133: 

21

Copayments and Coinsurance for Items and Services 

Benefit Section Lower Cost Sharing 

Schedule Higher Cost Sharing Schedule 

Inpatient hospital services ..... 1111 No copayment 20 percent of applicable 

payment rate 

Outpatient hospital services ... 1111 $10 per visit 20 percent of applicable 

payment rate 
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Copayments and Coinsurance for Items and Services—Continued 

Benefit Section Lower Cost Sharing 

Schedule Higher Cost Sharing Schedule 

Hospital emergency room 

services ............................... 1111 $25 per visit (unless patient has 

an emergency 

medical condition 

as defined in section 1867(e)(1) 

of the Social Security Act) 

20 percent of applicable 

payment rate 

Services of health professionals ................................ 1112 $10 per visit 20 percent of applicable 

payment rate 

Emergency services other 

than hospital emergency 

room services ...................... 1113 $25 per visit (unless patient has 

an emergency 

medical condition 

as defined in section 1867(e)(1) 

of the Social Security Act) 

20 percent of applicable 

payment rate 

Ambulatory medical and surgical services ...................... 1113 $10 per visit 20 percent of applicable 

payment rate 

Clinical preventive services .... 1114 No copayment No coinsurance 

Inpatient and residential mental illness and substance 

abuse treatment ................. 1115 No copayment 20 percent of applicable 

payment rate 

Intensive nonresidential mental illness and substance 

abuse treatment (except 

treatment provided pursuant to section 

1115(d)(2)(C)(ii)) .............. 1115 No copayment 20 percent of applicable 

payment rate 

Intensive nonresidential mental illness and substance 

abuse treatment provided 

pursuant to section 

1115(d)(2)(C)(ii) ................ 1115 $25 per visit 50 percent of applicable 

payment rate 

Outpatient mental illness and 

substance abuse treatment 

(except psychotherapy, collateral services, and case 

management) ...................... 1115 $10 per visit 20 percent of applicable 

payment rate 
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Copayments and Coinsurance for Items and Services—Continued 

Benefit Section Lower Cost Sharing 

Schedule Higher Cost Sharing Schedule 

Outpatient psychotherapy and 

collateral services ............... 1115 $25 per visit until 

January 1, 2001, 

and $10 per visit 

thereafter 

50 percent of applicable 

payment rate until January 1, 2001, and 20 

percent thereafter 

Case management .................. 1115 No copayment No coinsurance 

Family planning and services 

for pregnant women (except 

clinician visits and associated services related to prenatal care and 1 postpartum visit) ...................... 1116 $10 per visit 20 percent of applicable 

payment rate 

Clinician visits and associated 

services related to prenatal 

care and 1 post-partum 

visit ..................................... 1116 No copayment No coinsurance 

Hospice care ........................... 1117 No copayment 20 percent of applicable 

payment rate 

Home health care ................... 1118 No copayment 20 percent of applicable 

payment rate 

Extended care services ........... 1119 No copayment 20 percent of applicable 

payment rate 

Ambulance services ................ 1120 No copayment 20 percent of applicable 

payment rate 

Outpatient laboratory, radiology, and diagnostic services ..................................... 1121 No copayment 20 percent of applicable 

payment rate 

Outpatient prescription drugs 

and biologicals .................... 1122 $5 per prescription 20 percent of applicable 

payment rate 

Outpatient rehabilitation services ..................................... 1123 $10 per visit 20 percent of applicable 

payment rate 

Durable medical equipment 

and prosthetic and orthotic 

devices ................................ 1124 No copayment 20 percent of applicable 

payment rate 

Vision care ............................. 1125 $10 per visit (No 

additional charge 

for 1 set of necessary eyeglasses 

for an individual 

less than 18 

years of age) 

20 percent of applicable 

payment rate 
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Copayments and Coinsurance for Items and Services—Continued 

Benefit Section Lower Cost Sharing 

Schedule Higher Cost Sharing Schedule 

Dental care (except space 

maintenance procedures 

and interceptive orthodontic 

treatment) .......................... 1126 $10 per visit 20 percent of applicable 

payment rate 

Space maintenance procedures and interceptive orthodontic treatment ........... 1126 $20 per visit 40 percent of applicable 

payment rate 

Health education classes ........ 1127 All cost sharing 

rules determined 

by plans 

All cost sharing rules determined by plans 

Investigational treatment for 

life-threatening condition ... 1128 All cost sharing 

rules determined 

by plans 

All cost sharing rules determined by plans 

1 (b) APPLICABLE PAYMENT RATE.—For purposes of 

2 this section, the term ‘‘applicable payment rate’’, when 

3 used with respect to an item or service, means the applica4 ble payment rate for the item or service established under 

5 section 1322(c). 

6 SEC. 1136. INDEXING DOLLAR AMOUNTS RELATING TO 

7 COST SHARING. 

8 (a) IN GENERAL.—Any deductible, copayment, out9 of-pocket limit on cost sharing, or other amount expressed 

10 in dollars in this subtitle for items or services provided 

11 in a year after 1994 shall be such amount increased by 

12 the percentage specified in subsection (b) for the year. 

13 (b) PERCENTAGE.—The percentage specified in this 

14 subsection for a year is equal to the product of the factors 

15 described in subsection (d) for the year and for each pre16 vious year after 1994, minus 1. 
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1 (c) ROUNDING.—Any increase (or decrease) under 

2 subsection (a) shall be rounded, in the case of an amount 

3 specified in this subtitle of— 

4 (1) $200 or less, to the nearest multiple of $1, 

5 (2) more than $200, but less than $500, to the 

6 nearest multiple of $5, or 

7 (3) $500 or more, to the nearest multiple of 

8 $10. 

9 (d) FACTOR.— 

10 (1) IN GENERAL.—The factor described in this 

11 subsection for a year is 1 plus the general health 

12 care inflation factor (as specified in section 

13 6001(a)(3) and determined under paragraph (2)) for 

14 the year. 

15 (2) DETERMINATION.—In computing such fac16 tor for a year, the percentage increase in the CPI 

17 for a year (referred to in section 6001(b)) shall be 

18 determined based upon the percentage increase in 

19 the average of the CPI for the 12-month period end20 ing with August 31 of the previous year over such 

21 average for the preceding 12-month period. 

22 PART 4—EXCLUSIONS 

23 SEC. 1141. EXCLUSIONS. 

24 (a) MEDICAL NECESSITY.—The comprehensive ben25 efit package does not include— 
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1 (1) an item or service that is not medically nec2 essary or appropriate; or 

3 (2) an item or service that the National Health 

4 Board may determine is not medically necessary or 

5 appropriate in a regulation promulgated under sec6 tion 1154. 

7 (b) ADDITIONAL EXCLUSIONS.—The comprehensive 

8 benefit package does not include the following items and 

9 services: 

10 (1) Custodial care, except in the case of hospice 

11 care under section 1117. 

12 (2) Surgery and other procedures performed 

13 solely for cosmetic purposes and hospital or other 

14 services incident thereto, unless— 

15 (A) required to correct a congenital anom16 aly; or 

17 (B) required to restore or correct a part of 

18 the body that has been altered as a result of— 

19 (i) accidental injury; 

20 (ii) disease; or 

21 (iii) surgery that is otherwise covered 

22 under this subtitle. 

23 (3) Hearing aids. 

24 (4) Eyeglasses and contact lenses for individ25 uals at least 18 years of age. 
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1 (5) In vitro fertilization services. 

2 (6) Sex change surgery and related services. 

3 (7) Private duty nursing. 

4 (8) Personal comfort items, except in the case 

5 of hospice care under section 1117. 

6 (9) Any dental procedures involving orthodontic 

7 care, inlays, gold or platinum fillings, bridges, 

8 crowns, pin/post retention, dental implants, surgical 

9 periodontal procedures, or the preparation of the 

10 mouth for the fitting or continued use of dentures, 

11 except as specifically described in section 1126. 

12 PART 5—ROLE OF THE NATIONAL HEALTH 

13 BOARD 

14 SEC. 1151. DEFINITION OF BENEFITS. 

15 (a) IN GENERAL.—The National Health Board may 

16 promulgate such regulations or establish such guidelines 

17 as may be necessary to assure uniformity in the applica18 tion of the comprehensive benefit package across all health 

19 plans. 

20 (b) FLEXIBILITY IN DELIVERY.—The regulations or 

21 guidelines under subsection (a) shall permit a health plan 

22 to deliver covered items and services to individuals enrolled 

23 under the plan using the providers and methods that the 

24 plan determines to be appropriate. 
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1 SEC. 1152. ACCELERATION OF EXPANDED BENEFITS. 

2 (a) IN GENERAL.—Subject to subsection (b), at any 

3 time prior to January 1, 2001, the National Health 

4 Board, in its discretion, may by regulation expand the 

5 comprehensive benefit package by— 

6 (1) adding any item or service that is added to 

7 the package as of January 1, 2001; and 

8 (2) requiring that a cost sharing schedule de9 scribed in part 3 of this subtitle reflect (wholly or 

10 in part) any of the cost sharing requirements that 

11 apply to the schedule as of January 1, 2001. 

12 No such expansion shall be effective except as of January 

13 1 of a year. 

14 (b) CONDITION.—The Board may not expand the 

15 benefit package under subsection (a) which is to become 

16 effective with respect to a year, by adding any item or 

17 service or altering any cost sharing schedule, unless the 

18 Board estimates that the additional increase in per capita 

19 health care expenditures resulting from the addition or al20 teration, for each regional alliance for the year, will not 

21 cause any regional alliance to exceed its per capita target 

22 (as determined under section 6003). 
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1 SEC. 1153. AUTHORITY WITH RESPECT TO CLINICAL PRE2 VENTIVE SERVICES. 

3 (a) IN GENERAL.—With respect to clinical preventive 

4 services described in section 1114, the National Health 

5 Board— 

6 (1) shall specify and define specific items and 

7 services as clinical preventive services for high risk 

8 populations and shall establish and update a perio9 dicity schedule for such items and services; 

10 (2) shall update the periodicity schedules for 

11 the age-appropriate immunizations, tests, and clini12 cian visits specified in subsections (b) through (h) of 

13 such section; 

14 (3) shall establish rules with respect to coverage 

15 for an immunization, test, or clinician visit that is 

16 not provided to an individual during the age range 

17 for such immunization, test, or clinician visit that is 

18 specified in one of subsections (b) through (h) of 

19 such section; and 

20 (4) may otherwise modify the items and services 

21 described in such section, taking into account age 

22 and other risk factors, but may not modify the cost 

23 sharing for any such item or service. 

24 (b) CONSULTATION.—In performing the functions de25 scribed in subsection (a), the National Health Board shall 

26 consult with experts in clinical preventive services. 
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1 SEC. 1154. ESTABLISHMENT OF STANDARDS REGARDING 

2 MEDICAL NECESSITY. 

3 The National Health Board may promulgate such 

4 regulations as may be necessary to carry out section 

5 1141(a)(2) (relating to the exclusion of certain services 

6 that are not medically necessary or appropriate). 

7 PART 6—ADDITIONAL PROVISIONS RELATING TO 

8 HEALTH CARE PROVIDERS 

9 SEC. 1161. OVERRIDE OF RESTRICTIVE STATE PRACTICE 

10 LAWS. 

11 No State may, through licensure or otherwise, re12 strict the practice of any class of health professionals be13 yond what is justified by the skills and training of such 

14 professionals. 

15 SEC. 1162. PROVISION OF ITEMS OR SERVICES CONTRARY 

16 TO RELIGIOUS BELIEF OR MORAL CONVIC17 TION. 

18 A health professional or a health facility may not be 

19 required to provide an item or service in the comprehen20 sive benefit package if the professional or facility objects 

21 to doing so on the basis of a religious belief or moral con22 viction. 

23 Subtitle C—State Responsibilities 

24 SEC. 1200. PARTICIPATING STATE. 

25 (a) IN GENERAL.—For purposes of the approval of 

26 a State health care system by the Board under section 
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1 1511, a State is a ‘‘participating State’’ if the State meets 

2 the applicable requirements of this subtitle. 

3 (b) SUBMISSION OF SYSTEM DOCUMENT.— 

4 (1) IN GENERAL.—In order to be approved as 

5 a participating State under section 1511, a State 

6 shall submit to the National Health Board a docu7 ment (in a form and manner specified by the Board) 

8 that describes the State health care system that the 

9 State is establishing (or has established). 

10 (2) DEADLINE.—If a State is not a partici11 pating State with a State health care system in op12 eration by January 1, 1998, the provisions of sub13 part C of part 1 of subtitle F (relating to respon14 sibilities in absence of State systems) shall take ef15 fect. 

16 (3) SUBMISSION OF INFORMATION SUBSEQUENT

17 TO APPROVAL.—A State approved as a participating 

18 State under section 1511 shall submit to the Board 

19 an annual update to the State health care system 

20 not later than February 15 of each year following 

21 the first year for which the State is a participating 

22 State. The update shall contain— 

23 (A) such information as the Board may re24 quire to determine that the system shall meet 
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1 the applicable requirements of this Act for the 

2 succeeding year; and 

3 (B) such information as the Board may re4 quire to determine that the State operated the 

5 system during the previous year in accordance 

6 with the Board’s approval of the system for 

7 such previous year. 

8 PART 1—GENERAL STATE RESPONSIBILITIES 

9 SEC. 1201. GENERAL STATE RESPONSIBILITIES. 

10 The responsibilities for a participating State are as 

11 follows: 

12 (1) REGIONAL ALLIANCES.—Establishing one 

13 or more regional alliances (in accordance with sec14 tion 1202). 

15 (2) HEALTH PLANS.—Certifying health plans 

16 (in accordance with section 1203). 

17 (3) FINANCIAL SOLVENCY OF PLANS.—Assur18 ing the financial solvency of health plans (in accord19 ance with section 1204). 

20 (4) ADMINISTRATION.—Designating an agency 

21 or official charged with coordinating the State re22 sponsibilities under this Act. 

23 (5) WORKERS COMPENSATION AND AUTO24 MOBILE INSURANCE.—Conforming State laws to 

25 meet the requirements of subtitles A and B of title 
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1 X (relating to medical benefits under workers com2 pensation and automobile insurance). 

3 (6) OTHER RESPONSIBILITIES.—Carrying out 

4 other responsibilities of participating States specified 

5 under this Act. 

6 SEC. 1202. STATE RESPONSIBILITIES WITH RESPECT TO AL7 LIANCES. 

8 (a) ESTABLISHMENT OF ALLIANCES.— 

9 (1) IN GENERAL.—A participating State shall— 

10 (A) establish and maintain one or more re11 gional alliances in accordance with this section 

12 and subtitle D, and ensure that such alliances 

13 meet the requirements of this Act; and 

14 (B) designate alliance areas in accordance 

15 with subsection (b). 

16 (2) DEADLINE.—A State may not be a partici17 pating State for a year unless the State has estab18 lished such alliances by March 1 of the previous 

19 year. 

20 (b) ALLIANCE AREAS.— 

21 (1) IN GENERAL.—In accordance with this sub22 section, each State shall designate a geographic area 

23 assigned to each regional alliance. Each such area is 

24 referred to in this Act as an ‘‘alliance area’’. 

25 (2) POPULATION REQUIRED.— 
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1 (A) IN GENERAL.—Each alliance area shall 

2 encompass a population large enough to ensure 

3 that the alliance has adequate market share to 

4 negotiate effectively with health plans providing 

5 the comprehensive benefit package to eligible 

6 individuals who reside in the area. 

7 (B) TREATMENT OF CONSOLIDATED MET8 ROPOLITAN STATISTICAL AREAS.—An alliance 

9 area that includes a Consolidated Metropolitan 

10 Statistical Area within a State is presumed to 

11 meet the requirement of subparagraph (A). 

12 (3) SINGLE ALLIANCE IN EACH AREA.—No geo13 graphic area may be assigned to more than one re14 gional alliance. 

15 (4) BOUNDARIES.—In establishing boundaries 

16 for alliance areas, the State may not discriminate on 

17 the basis of or otherwise take into account race, age, 

18 language, religion, national origin, socio-economic 

19 status, disability, or perceived health status. 

20 (5) TREATMENT OF METROPOLITAN AREAS.— 

21 The entire portion of a metropolitan statistical area 

22 located in a State shall be included in the same alli23 ance area. 

24 (6) NO PORTIONS OF STATE PERMITTED TO BE

25 OUTSIDE ALLIANCE AREA.—Each portion of the 
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1 State shall be assigned to a regional alliance under 

2 this subsection. 

3 (c) STATE COORDINATION OF REGIONAL ALLI4 ANCES.—One or more States may allow or require two or 

5 more regional alliances to coordinate their operations, 

6 whether such alliances are in the same or different States. 

7 Such coordination may include adoption of joint operating 

8 rules, contracting with health plans, enforcement activi9 ties, and establishment of fee schedules for health pro10 viders. 

11 (d) ASSISTANCE IN COLLECTION OF AMOUNTS OWED

12 TO ALLIANCES.—Each State shall assure that the 

13 amounts owed to regional alliances in the State are col14 lected and paid to such alliances. 

15 (e) ASSISTANCE IN ELIGIBILITY VERIFICATIONS.— 

16 (1) IN GENERAL.—Each State shall assure that 

17 the determinations of eligibility for cost sharing as18 sistance (and premium discounts and cost sharing 

19 reductions for families) are made by regional alli20 ances in the State on the basis of the best informa21 tion available to the alliances and the State. 

22 (2) PROVISION OF INFORMATION.—Each State 

23 shall use the information available to the State 

24 under section 6103(l)(7)(D)(x) of the Internal Rev-
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1 enue Code of 1986 to assist regional alliances in 

2 verifying such eligibility status. 

3 (f) SPECIAL REQUIREMENTS FOR ALLIANCES WITH

4 SINGLE-PAYER SYSTEM.—If the State operates an alli5 ance-specific single-payer system (as described in part 2), 

6 the State shall assure that the regional alliance in which 

7 the system is operated meets the requirements for such 

8 an alliance described in section 1224(b). 

9 (g) PAYMENT OF SHORTFALLS FOR CERTAIN ADMIN10 ISTRATIVE ERRORS.—Each participating State is finan11 cially responsible, under section 9201(c)(2), for adminis12 trative errors described in section 9201(e)(2). 

13 SEC. 1203. STATE RESPONSIBILITIES RELATING TO HEALTH 

14 PLANS. 

15 (a) CRITERIA FOR CERTIFICATION.— 

16 (1) IN GENERAL.—For purposes of this section, 

17 a participating State shall establish and publish the 

18 criteria that are used in the certification of health 

19 plans under this section. 

20 (2) REQUIREMENTS.—Such criteria shall be es21 tablished with respect to— 

22 (A) the quality of the plan, 

23 (B) the financial stability of the plan, 
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1 (C) the plan’s capacity to deliver the com2 prehensive benefit package in the designated 

3 service area, 

4 (D) other applicable requirements for 

5 health plans under parts 1, 3, and 4 of subtitle 

6 E, and 

7 (E) other requirements imposed by the 

8 State consistent with this part. 

9 (b) CERTIFICATION OF HEALTH PLANS.—A partici10 pating State shall certify each plan as a regional alliance 

11 health plan that it determines meets the criteria for cer12 tification established and published under subsection (a). 

13 (c) MONITORING.—A participating State shall mon14 itor the performance of each State-certified regional alli15 ance health plan to ensure that it continues to meet the 

16 criteria for certification. 

17 (d) LIMITATIONS ON AUTHORITY.—A participating 

18 State may not— 

19 (1) discriminate against a plan based on the 

20 domicile of the entity offering of the plan; and 

21 (2) regulate premium rates charged by health 

22 plans, except as may be required under title VI (re23 lating to the enforcement of cost containment rules 

24 for plans in the State) or as may be necessary to en-
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1 sure that plans meet financial solvency requirements 

2 under section 1408. 

3 (e) ASSURING ADEQUATE ACCESS TO A CHOICE OF

4 HEALTH PLANS.— 

5 (1) GENERAL ACCESS.— 

6 (A) IN GENERAL.—Each participating 

7 State shall ensure that— 

8 (i) each regional alliance eligible fam9 ily has adequate access to enroll in a 

10 choice of regional alliance health plans pro11 viding services in the area in which the in12 dividual resides, including (to the max13 imum extent practicable) adequate access 

14 to a plan whose premium is at or below the 

15 weighted average premium for plans in the 

16 regional alliance, and 

17 (ii) each such family that is eligible 

18 for a premium discount under section 

19 6104(b) is provided a discount in accord20 ance with such section (including an in21 crease in such discount described in section 

22 6104(b)(2)). 

23 (B) AUTHORITY.—In order to carry out its 

24 responsibility under subparagraph (A), a par25 ticipating State may require, as a condition of 
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1 entering into a contract with a regional alliance 

2 under section 1321, that one or more certified 

3 regional alliance health plans cover all (or se4 lected portions) of the alliance area. 

5 (2) ACCESS TO PLANS USING CENTERS OF EX6 CELLENCE.—Each participating State may require, 

7 as a condition of entering into a contract with a re8 gional alliance under section 1321, that one or more 

9 certified health plans provide access (through reim10 bursement, contracts, or otherwise) of enrolled indi11 viduals to services of centers of excellence (as des12 ignated by the State in accordance with rules pro13 mulgated by the Secretary). 

14 (3) USE OF INCENTIVES TO ENROLL AND

15 SERVE DISADVANTAGED GROUPS.—A State may pro16 vide— 

17 (A) for an adjustment to the risk-adjust18 ment methodology under section 1541(b) and 

19 other financial incentives to regional alliance 

20 health plans to ensure that such plans enroll in21 dividuals who are members of disadvantaged 

22 groups, and 

23 (B) for appropriate extra services, such as 

24 outreach to encourage enrollment and transpor25 tation and interpreting services to ensure access 
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Title I, Subtitle C 

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1 to care, for certain population groups that face 

2 barriers to access because of geographic loca3 tion, income levels, or racial or cultural dif4 ferences. 

5 (f) COORDINATION OF WORKERS’ COMPENSATION

6 SERVICES AND AUTOMOBILE INSURANCE.—Each partici7 pating State shall comply with the responsibilities regard8 ing workers’ compensation and automobile insurance spec9 ified in subtitles A and B of title X. 

10 (g) IMPLEMENTATION OF MANDATORY REINSUR11 ANCE SYSTEM.—If the risk adjustment and reinsurance 

12 methodology developed under section 1541 includes a 

13 mandatory reinsurance system, each participating State 

14 shall establish a reinsurance program consistent with such 

15 methodology and any additional standards established by 

16 the Board. 

17 (h) REQUIREMENTS FOR PLANS OFFERING SUPPLE18 MENTAL INSURANCE.—Notwithstanding any other provi19 sion of this Act a State may not certify a regional alliance 

20 health plan under this section if— 

21 (1) the plan (or any entity with which the plan 

22 is affiliated under such rules as the Board may es23 tablish) offers a supplemental health benefit policy 

24 (as defined in section 1421(b)(1)) that fails to meet 

25 the applicable requirements for such a policy under 
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1 part 2 of subtitle E (without regard to the State in 

2 which the policy is offered); or 

3 (2) the plan offers a cost sharing policy (as de4 fined in section 1421(b)(2)) that fails to meet the 

5 applicable requirements for such a policy under part 

6 2 of subtitle E. 

7 SEC. 1204. FINANCIAL SOLVENCY; FISCAL OVERSIGHT; 

8 GUARANTY FUND. 

9 (a) CAPITAL STANDARDS.—A participating State 

10 shall establish capital standards for health plans that meet 

11 minimum Federal requirements established by the Na12 tional Health Board under sections 1503(i) and 1551(a). 

13 (b) REPORTING AND AUDITING REQUIREMENTS.— 

14 Each participating State shall define financial reporting 

15 and auditing requirements and requirements for fund re16 serves adequate to monitor the financial status of plans. 

17 (c) GUARANTY FUND.— 

18 (1) ESTABLISHMENT.—Each participating 

19 State shall ensure that there is a guaranty fund that 

20 meets the requirements established by the Board 

21 under sections 1503(i) and 1552, in order to provide 

22 financial protection to health care providers and oth23 ers in the case of a failure of a regional alliance 

24 health plan. 
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1 (2) ASSESSMENTS TO PROVIDE FUNDS.—In the 

2 case of a failure of one or more regional alliance 

3 health plans, the State may require each regional al4 liance health plan within the State to pay an assess5 ment to the State in an amount not to exceed 2 per6 cent of the premiums of such plans paid by or on 

7 behalf of regional alliance eligible individuals during 

8 a year for so long as necessary to generate sufficient 

9 revenue to cover any outstanding claims against the 

10 failed plan. 

11 (d) PROCEDURES IN EVENT OF PLAN FAILURE.— 

12 (1) IN GENERAL.—A participating State shall 

13 assure that, in the event of the failure of a regional 

14 alliance health plan in the State, eligible individuals 

15 enrolled in the plan will be assured continuity of cov16 erage for the comprehensive benefit package. 

17 (2) DESIGNATION OF STATE AGENCY.—A par18 ticipating State shall designate an agency of State 

19 government that supervises or assumes control of 

20 the operation of a regional alliance health plan in 

21 the case of the failure of the plan. 

22 (3) PROTECTIONS FOR HEALTH CARE PRO23 VIDERS AND ENROLLEES.—Each participating State 

24 shall assure that in the case of a plan failure— 
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1 (A) the guaranty fund shall pay health 

2 care providers for items and services covered 

3 under the comprehensive benefit package for 

4 enrollees of the plan for which the plan is other5 wise obligated to make payment; 

6 (B) after making all payments required to 

7 be made to providers under subparagraph (A), 

8 the guaranty fund shall make payments for the 

9 operational, administrative, and other costs and 

10 debts of the plan (in accordance with require11 ments imposed by the State based on rules pro12 mulgated by the Board); 

13 (C) such health care providers have no 

14 legal right to seek payment from eligible indi15 viduals enrolled in the plan for any such cov16 ered items or services (other than the enrollees’ 

17 obligations under cost sharing arrangements); 

18 and 

19 (D) health care providers are required to 

20 continue caring for such eligible individuals 

21 until such individuals are enrolled in a new 

22 health plan. 

23 (4) PLAN FAILURE.—For purposes of this sec24 tion, the failure of a health plan means the current 

25 or imminent inability of the plan to pay claims. 
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1 SEC. 1205. RESTRICTIONS ON FUNDING OF ADDITIONAL 

2 BENEFITS. 

3 If a participating State provides benefits (either di4 rectly or through regional alliance health plans or other5 wise) in addition to those covered under the comprehensive 

6 benefit package, the State may not provide for payment 

7 for such benefits through funds provided under this Act. 

8 PART 2—REQUIREMENTS FOR STATE SINGLE9 PAYER SYSTEMS 

10 SEC. 1221. SINGLE-PAYER SYSTEM DESCRIBED. 

11 The Board shall approve the application of a State 

12 to operate a single-payer system if the Board finds that 

13 the system— 

14 (1) meets the requirements of section 1222; 

15 (2)(A) meets the requirements for a Statewide 

16 single-payer system under section 1223, in the case 

17 of a system offered throughout a State; or 

18 (B) meets the requirements for an alliance-spe19 cific single-payer system under section 1224, in the 

20 case of a system offered in a single alliance of a 

21 State. 

22 SEC. 1222. GENERAL REQUIREMENTS FOR SINGLE-PAYER 

23 SYSTEMS. 

24 Each single-payer system shall meet the following re25 quirements: 
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1 (1) ESTABLISHMENT BY STATE.—The system is 

2 established under State law, and State law provides 

3 for mechanisms to enforce the requirements of the 

4 system. 

5 (2) OPERATION BY STATE.—The system is op6 erated by the State or a designated agency of the 

7 State. 

8 (3) ENROLLMENT OF ELIGIBLE INDIVIDUALS.— 

9 (A) MANDATORY ENROLLMENT OF ALL

10 REGIONAL ALLIANCE INDIVIDUALS.—The sys11 tem provides for the enrollment of all eligible 

12 individuals residing in the State (or, in the case 

13 of an alliance-specific single-payer system, in 

14 the alliance area) for whom the applicable 

15 health plan would otherwise be a regional alli16 ance health plan. 

17 (B) OPTIONAL ENROLLMENT OF MEDI18 CARE-ELIGIBLE INDIVIDUALS.—At the option of 

19 the State, the system may provide for the en20 rollment of medicare-individuals residing in the 

21 State (or, in the case of an alliance-specific sin22 gle-payer system, in the alliance area) if the 

23 Secretary of Health and Human Services has 

24 approved an application submitted by the State 

25 under section 1893 of the Social Security Act 
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1 (as added by section 4001(a)) for the integra2 tion of medicare beneficiaries into plans of the 

3 State. Nothing in this subparagraph shall be 

4 construed as requiring that a State have a sin5 gle-payer system in order to provide for such in6 tegration. 

7 (C) OPTIONAL ENROLLMENT OF COR8 PORATE ALLIANCE INDIVIDUALS IN STATEWIDE

9 PLANS.—At the option of the State, a Statewide 

10 single-payer system may provide for the enroll11 ment of individuals residing in the State who 

12 are otherwise eligible to enroll in a corporate al13 liance health plan under section 1311. 

14 (D) OPTIONS INCLUDED IN STATE SYSTEM

15 DOCUMENT.—A State may not exercise any of 

16 the options described in subparagraphs (A) or 

17 (B) for a year unless the State included a de18 scription of the option in the submission of its 

19 system document to the Board for the year 

20 under section 1200(b). 

21 (E) EXCLUSION OF CERTAIN INDIVID22 UALS.—A single-payer system may not require 

23 the enrollment of electing veterans, active duty 

24 military personnel, and electing Indians (as de25 fined in 1012(d)). 
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1 (4) DIRECT PAYMENT TO PROVIDERS.— 

2 (A) IN GENERAL.—With respect to pro3 viders who furnish items and services included 

4 in the comprehensive benefit package to individ5 uals enrolled in the system, the State shall 

6 make payments directly to such providers and 

7 assume (subject to subparagraph (B)) all finan8 cial risk associated with making such payments. 

9 (B) CAPITATED PAYMENTS PERMITTED.— 

10 Nothing in subparagraph (A) shall be construed 

11 to prohibit providers furnishing items and serv12 ices under the system from receiving payments 

13 from the plan on a capitated, at-risk basis 

14 based on prospectively determined rates. 

15 (5) PROVISION OF COMPREHENSIVE BENEFIT

16 PACKAGE.— 

17 (A) IN GENERAL.—The system shall pro18 vide for coverage of the comprehensive benefit 

19 package, including the cost sharing provided 

20 under the package (subject to subparagraph 

21 (B)), to all individuals enrolled in the system. 

22 (B) IMPOSITION OF REDUCED COST SHAR23 ING.—The system may decrease the cost shar24 ing otherwise provided in the comprehensive 

25 benefit package with respect to any class of in-
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1 dividuals enrolled in the system or any class of 

2 services included in the package, so long as the 

3 system does not increase the cost sharing other4 wise imposed with respect to any other class of 

5 individuals or services. 

6 (6) COST CONTAINMENT.—The system shall 

7 provide for mechanisms to ensure, in a manner sat8 isfactory to the Board, that— 

9 (A) per capita expenditures for items and 

10 services in the comprehensive benefit package 

11 under the system for a year (beginning with the 

12 first year) do not exceed an amount equivalent 

13 to the regional alliance per capita premium tar14 get that is determined under section 6003 

15 (based on the State being a single regional alli16 ance) for the year; 

17 (B) the per capita expenditures described 

18 in subparagraph (A) are computed and effec19 tively monitored; and 

20 (C) automatic, mandatory, nondis21 cretionary reductions in payments to health 

22 care providers will be imposed to the extent re23 quired to assure that such per capita expendi24 tures do not exceed the applicable target re25 ferred to in subparagraph (A). 
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1 (7) REQUIREMENTS GENERALLY APPLICABLE

2 TO HEALTH PLANS.—The system shall meet the re3 quirements applicable to a health plan under section 

4 1400(a), except that— 

5 (A) the system does not have the authority 

6 provided to health plans under section 

7 1402(a)(2) (relating to permissible limitations 

8 on the enrollment of eligible individuals on the 

9 basis of limits on the plan’s capacity); 

10 (B) the system is not required to meet the 

11 requirements of section 1404(a) (relating to re12 strictions on the marketing of plan materials); 

13 and 

14 (C) the system is not required to meet the 

15 requirements of section 1408 (relating to plan 

16 solvency). 

17 SEC. 1223. SPECIAL RULES FOR STATES OPERATING STATE18 WIDE SINGLE-PAYER SYSTEM. 

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

20 a Statewide single-payer system— 

21 (1) the State shall operate the system through22 out the State through a single alliance; 

23 (2) except as provided in subsection (b), the 

24 State shall meet the requirements for participating 

25 States under part 1; and 
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1 (3) the State shall assume the functions de2 scribed in subsection (c) that are otherwise required 

3 to be performed by regional alliances in participating 

4 States that do not operate a Statewide single-payer 

5 system. 

6 (b) EXCEPTIONS TO CERTAIN REQUIREMENTS FOR

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

8 a Statewide single-payer system, the State is not required 

9 to meet the following requirements otherwise applicable to 

10 participating States under part 1: 

11 (1) ESTABLISHMENT OF ALLIANCES.—The re12 quirements of section 1202 (relating to the estab13 lishment of alliances). 

14 (2) HEALTH PLANS.—The requirements of sec15 tion 1203 (relating to health plans), other than the 

16 requirement of subsection (f) of such section (relat17 ing to coordination of workers’ compensation serv18 ices and automobile liability insurance). 

19 (3) FINANCIAL SOLVENCY.—The requirements 

20 of section 1204 (relating to the financial solvency of 

21 health plans in the State). 

22 (c) ASSUMPTION BY STATE OF CERTAIN REQUIRE23 MENTS APPLICABLE TO REGIONAL ALLIANCES.—A State 

24 operating a Statewide single-payer system shall be subject 
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1 to the following requirements otherwise applicable to re2 gional alliances in other participating States: 

3 (1) ENROLLMENT; ISSUANCE OF HEALTH SECU4 RITY CARDS.—The requirements of subsections (a) 

5 and (c) of section 1323 and section 1324 shall apply 

6 to the State, eligible individuals residing in the 

7 State, and the single-payer system operated by the 

8 State in the same manner as such requirements 

9 apply to a regional alliance, alliance eligible individ10 uals, and regional alliance health plans. 

11 (2) REDUCTIONS IN COST SHARING FOR LOW12 INCOME INDIVIDUALS.—The requirement of section 

13 1371 shall apply to the State in the same manner 

14 as such requirement applies to a regional alliance. 

15 (3) DATA COLLECTION; QUALITY.—The require16 ments of section 1327 shall apply to the State and 

17 the single-payer system operated by the State in the 

18 same manner as such requirement applies to a re19 gional alliance and health plans offered through a 

20 regional alliance. 

21 (4) ANTI-DISCRIMINATION; COORDINATION.— 

22 The requirements of section 1328 shall apply to the 

23 State in the same manner as such requirements 

24 apply with respect to a regional alliance. 

25 (d) FINANCING.— 
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1 (1) IN GENERAL.—A State operating a State2 wide single-payer system shall provide for the financ3 ing of the system using, at least in part, a payroll4 based financing system that requires employers to 

5 pay at least the amount that the employers would be 

6 required to pay if the employers were subject to the 

7 requirements of subtitle B of title VI. 

8 (2) USE OF FINANCING METHODS.—Such a 

9 State may use, consistent with paragraph (1), any 

10 other method of financing. 

11 (e) SINGLE-PAYER STATE DEFINED.—In this Act, 

12 the term ‘‘single-payer State’’ means a State with a State13 wide single-payer system in effect that has been approved 

14 by the Board in accordance with this part. 

15 SEC. 1224. SPECIAL RULES FOR ALLIANCE-SPECIFIC SIN16 GLE-PAYER SYSTEMS. 

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

18 an alliance-specific single-payer system— 

19 (1) the State shall meet the requirements for 

20 participating States under part 1; and 

21 (2) the regional alliance in which the system is 

22 operated shall meet the requirements of subsection 

23 (b). 

24 (b) REQUIREMENTS FOR ALLIANCE IN WHICH SYS25 TEM OPERATES.—A regional alliance in which an alliance- 
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1 specific single payer system is operated shall meet the re2 quirements applicable to regional alliances under subtitle 

3 D, except that the alliance is not required to meet the fol4 lowing requirements of such subtitle: 

5 (1) CONTRACTS WITH HEALTH PLANS.—The re6 quirements of section 1321 (relating to contracts 

7 with health plans). 

8 (2) CHOICE OF HEALTH PLANS OFFERED.—The 

9 requirements of subsections (a) or (b) of section 

10 1322 (relating to offering a choice of health plans to 

11 eligible enrollees). 

12 (3) ESTABLISHMENT OF OMBUDSMAN OF13 FICE.—The requirements of section 1326(a) (relat14 ing to the establishment of an office of ombudsman). 

15 (4) ADDRESSING NEEDS OF AREAS WITH INAD16 EQUATE HEALTH SERVICES.—The regional alliance 

17 does not have any of the authorities described in 

18 subsections (a) and (b) of section 1329 (relating to 

19 adjusting payments to plans and encouraging the es20 tablishment of new plans). 

21 Subtitle D—Health Alliances 

22 SEC. 1300. HEALTH ALLIANCE DEFINED. 

23 In this Act, the term ‘‘health alliance’’ means a re24 gional alliance (as defined in section 1301) and a cor25 porate alliance (as defined in section 1311). 
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1 PART 1—ESTABLISHMENT OF REGIONAL AND 

2 CORPORATE ALLIANCES 

3 Subpart A—Regional Alliances 

4 SEC. 1301. REGIONAL ALLIANCE DEFINED. 

5 In this Act, the term ‘‘regional alliance’’ means a 

6 non-profit organization, an independent state agency, or 

7 an agency of the State which— 

8 (1) meets the applicable organizational require9 ments of this subpart, and 

10 (2) is carrying out activities consistent with 

11 part 2. 

12 SEC. 1302. BOARD OF DIRECTORS. 

13 (a) IN GENERAL.—A regional alliance must be gov14 erned by a Board of Directors appointed consistent with 

15 the provisions of this subpart. All powers vested in a re16 gional alliance under this Act shall be vested in the Board 

17 of Directors. 

18 (b) MEMBERSHIP.— 

19 (1) IN GENERAL.—Such a Board of Directors 

20 shall consist of— 

21 (A) members who represent employers 

22 whose employees purchase health coverage 

23 through the alliance, including self-employed in24 dividuals who purchase such coverage; and 
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1 (B) members who represent individuals 

2 who purchase such coverage, including employ3 ees who purchase such coverage. 

4 (2) EQUAL REPRESENTATION OF EMPLOYERS

5 AND CONSUMERS.—The number of members of the 

6 Board described under subparagraph (A) of para7 graph (1) shall be the same as the number of mem8 bers described in subparagraph (B) of such para9 graph. 

10 (c) NO CONFLICT OF INTEREST PERMITTED.—An 

11 individual may not serve as a member of the Board of 

12 Directors if the individual is one of the following (or an 

13 immediate family member of one of the following): 

14 (1) A health care provider. 

15 (2) An individual who is an employee or mem16 ber of the Board of Directors of, has a substantial 

17 ownership in, or derives substantial income from, a 

18 health care provider, health plan, pharmaceutical 

19 company, or a supplier of medical equipment, de20 vices, or services. 

21 (3) A person who derives substantial income 

22 from the provision of health care. 

23 (4)(A) A member or employee of an association, 

24 law firm, or other institution or organization that 

25 represents the interests of one or more health care 
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1 providers, health plans or others involved in the 

2 health care field, or (B) an individual who practices 

3 as a professional in an area involving health care. 

4 SEC. 1303. PROVIDER ADVISORY BOARDS FOR REGIONAL 

5 ALLIANCES. 

6 Each regional alliance must establish a provider advi7 sory board consisting of representatives of health care pro8 viders and professionals who provide covered services 

9 through health plans offered by the alliance. 

10 Subpart B—Corporate Alliances 

11 SEC. 1311. CORPORATE ALLIANCE DEFINED; INDIVIDUALS 

12 ELIGIBLE FOR COVERAGE THROUGH COR13 PORATE ALLIANCES; ADDITIONAL DEFINI14 TIONS. 

15 (a) CORPORATE ALLIANCE DEFINED.—In this Act, 

16 the term ‘‘corporate alliance’’ means an eligible sponsor 

17 (as defined in subsection (b)) if— 

18 (1) the sponsor elects, in a form and manner 

19 specified by the Secretary of Labor consistent with 

20 this subpart, to be treated as a corporate alliance 

21 under this title and such election has not been ter22 minated under section 1313; and 

23 (2) the sponsor has filed with the Secretary of 

24 Labor a document describing how the sponsor shall 
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1 carry out activities as such an alliance consistent 

2 with part 4. 

3 (b) ELIGIBLE SPONSORS.— 

4 (1) IN GENERAL.—In this subpart, each of the 

5 following is an eligible sponsor: 

6 (A) LARGE EMPLOYER.—An employer 

7 that— 

8 (i) is a large employer (as defined in 

9 subsection (e)(2)) as of the date of an elec10 tion under subsection (a)(1), and 

11 (ii) is not an excluded employer de12 scribed in paragraph (2). 

13 (B) PLAN SPONSOR OF A MULTIEMPLOYER

14 PLAN.—A plan sponsor described in section 

15 3(16)(B)(iii) of Employee Retirement Income 

16 Security Act of 1974, but only with respect to 

17 a group health plan that is a multiemployer 

18 plan (as defined in subsection (e)(3)) main19 tained by the sponsor and only if— 

20 (i) such plan offered health benefits 

21 as of September 1, 1993, and 

22 (ii) as of both September 1, 1993, and 

23 January 1, 1996, such plan has more than 

24 5,000 active participants in the United 

25 States, or the plan is maintained by one or 
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1 more affiliates of the same labor organiza2 tion, or one or more affiliates of labor or3 ganizations representing employees in the 

4 same industry, covering more than 5,000 

5 employees. 

6 (C) RURAL ELECTRIC COOPERATIVE AND

7 RURAL TELEPHONE COOPERATIVE ASSOCIA8 TION.—A rural electric cooperative or a rural 

9 telephone cooperative association, but only with 

10 respect to a group health plan that is main11 tained by such cooperative or association (or 

12 members of such cooperative or association) 

13 and only if such plan— 

14 (i) offered health benefits as of Sep15 tember 1, 1993, and 

16 (ii) as of both September 1, 1993, and 

17 January 1, 1996, has more than 5,000 

18 full-time employees in the United States 

19 entitled to health benefits under the plan. 

20 (2) EXCLUDED EMPLOYERS.—For purposes of 

21 paragraph (1)(A), any of the following are excluded 

22 employers described in this paragraph: 

23 (A) An employer whose primary business is 

24 employee leasing. 
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1 (B) The Federal government (other than 

2 the United States Postal Service). 

3 (C) A State government, a unit of local 

4 government, and an agency or instrumentality 

5 of government, including any special purpose 

6 unit of government. 

7 (c) INDIVIDUALS ELIGIBLE TO ENROLL IN COR8 PORATE ALLIANCE HEALTH PLANS.—For purposes of 

9 part 1 of subtitle A, subject to subsection (d)— 

10 (1) FULL-TIME EMPLOYEES OF LARGE EMPLOY11 ERS.—Each eligible individual who is a full-time em12 ployee (as defined in section 1901(b)(2)(C)) of a 

13 large employer that has an election in effect as a 

14 corporate alliance is eligible to enroll in a corporate 

15 alliance health plan offered by such corporate alli16 ance. 

17 (2) MULTIEMPLOYER ALLIANCES.— 

18 (A) PARTICIPANTS.—Each participant and 

19 beneficiary (as defined in subparagraph (B)) 

20 under a multiemployer plan, with respect to 

21 which an eligible sponsor of the plan described 

22 in subsection (b)(1)(B) has an election in effect 

23 as a corporate alliance, is eligible to enroll in a 

24 corporate alliance health plan offered by such 

25 corporate alliance. 
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1 (B) PARTICIPANT AND BENEFICIARY DE2 FINED.—In subparagraph (A), the terms ‘‘par3 ticipant’’ and ‘‘beneficiary’’ have the meaning 

4 given such terms in section 3 of the Employee 

5 Retirement Income Security Act of 1974. 

6 (3) FULL-TIME EMPLOYEES OF RURAL COOPER7 ATIVE ALLIANCES.—Each full-time employee of a 

8 member of a rural electric cooperative or rural tele9 phone cooperative association which has an election 

10 in effect as a corporate alliance (and each full-time 

11 employee of such a cooperative or association) is eli12 gible to enroll in a corporate alliance health plan of13 fered by such corporate alliance. 

14 (4) INELIGIBLE TO ENROLL IN REGIONAL ALLI15 ANCE HEALTH PLAN.—Except as provided in section 

16 1013, a corporate alliance eligible individual is not 

17 eligible to enroll under a regional alliance health 

18 plan. 

19 (d) EXCLUSION OF CERTAIN INDIVIDUALS.—In ac20 cordance with rules of the Board, the following individuals 

21 shall not be treated as corporate alliance eligible individ22 uals: 

23 (1) AFDC recipients. 

24 (2) SSI recipients. 
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1 (3) Individuals who are described in section 

2 1004(b) (relating to veterans, military personnel, 

3 and Indians) and who elect an applicable health plan 

4 described in such section. 

5 (4) Employees who are seasonal or temporary 

6 workers (as defined by the Board), other than such 

7 workers who are treated as corporate alliance eligible 

8 individuals pursuant to a collective bargaining agree9 ment (as defined by the Secretary of Labor). 

10 (e) DEFINITIONS RELATING TO CORPORATE ALLI11 ANCES.—In this subtitle, except as otherwise provided: 

12 (1) GROUP HEALTH PLAN.—The term ‘‘group 

13 health plan’’ means an employee welfare benefit plan 

14 (as defined in section 3(1) of the Employee Retire15 ment Income Security Act of 1974) providing med16 ical care (as defined in section 213(d) of the Inter17 nal Revenue Code of 1986) to participants or bene18 ficiaries (as defined in section 3 of the Employee Re19 tirement Income Security Act of 1974) directly or 

20 through insurance, reimbursement, or otherwise. 

21 (2) LARGE EMPLOYER.—The term ‘‘large em22 ployer’’ means an employer that has more than 

23 5,000 full-time employees in the United States. Such 

24 term includes the United States Postal Service. 
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1 (3) MULTIEMPLOYER PLAN.—The term ‘‘multi2 employer plan’’ has the meaning given such term in 

3 section 3(37) of the Employee Retirement Income 

4 Security Act of 1974, and includes any plan that is 

5 treated as such a plan under title I of such Act. 

6 (4) RURAL ELECTRIC COOPERATIVE.—The term 

7 ‘‘rural electric cooperative’’ has the meaning given 

8 such term in section 3(40)(A)(iv) of the Employee 

9 Retirement Income Security Act of 1974. 

10 (5) RURAL TELEPHONE COOPERATIVE ASSOCIA11 TIONS.—The term ‘‘rural telephone cooperative asso12 ciation’’ has the meaning given such term in section 

13 3(40)(A)(v) of the Employee Retirement Income Se14 curity Act of 1974. 

15 SEC. 1312. TIMING OF ELECTIONS. 

16 (a) FOR LARGE EMPLOYERS.— 

17 (1) CURRENT LARGE EMPLOYERS.— 

18 (A) IN GENERAL.—In the case of an em19 ployer that is an eligible sponsor described in 

20 section 1311(b)(1)(A) as of the most recent 

21 January 1 prior to the general effective date, 

22 the sponsor’s election to be a corporate alliance 

23 under such section must be made and filed with 

24 the Secretary of Labor not later than the date 

25 specified in subparagraph (B). 
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1 (B) DEADLINE FOR NOTICE.—The date 

2 specified in this subparagraph is January 1 of 

3 the second year preceding the general effective 

4 date or, in the case of a State that elects to be5 come a participating State before the general 

6 effective date, not later than one month later 

7 than the date specified for States under section 

8 1202(a)(2). 

9 (2) NEW LARGE EMPLOYERS.—In the case of 

10 an employer that is not an eligible sponsor described 

11 in section 1311(b)(1)(A) as of the most recent Janu12 ary 1 prior to the general effective date, but first be13 comes such a sponsor as of a subsequent date, the 

14 election to be a corporate alliance under such section 

15 must be made and filed with the Secretary of Labor 

16 not later than March 1 of the year following the 

17 year in which the employer first becomes such a 

18 sponsor. 

19 (3) APPLICATION OF OPTION.—The Secretary 

20 of Labor shall promulgate rules regarding how the 

21 option described in section 1311(c)(1)(B) will be ap22 plied to the determination of whether an employer is 

23 a large employer before an election is made under 

24 section 1311. 
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1 (b) FOR MULTIEMPLOYER PLANS AND RURAL CO2 OPERATIVES.—In the case of an eligible sponsor described 

3 in section 1311(b)(1) (B) or (C), the sponsor’s election 

4 to be a corporate alliance under such section must be 

5 made and filed with the Secretary of Labor not later than 

6 March 1, 1996. 

7 (c) EFFECTIVE DATE OF ELECTION.—An election 

8 made under subsection (a) or (b) shall be effective for cov9 erage provided under health plans on and after January 

10 1 of the year following the year in which the election is 

11 made. 

12 (d) ONE-TIME ELECTION.—If an eligible sponsor 

13 fails to make the election on a timely manner under sub14 section (a) or (b), the sponsor may not make such election 

15 at any other time. 

16 SEC. 1313. TERMINATION OF ALLIANCE ELECTION. 

17 (a) TERMINATION FOR INSUFFICIENT NUMBER OF

18 FULL-TIME EMPLOYEES OR PARTICIPANTS.—If a cor19 porate alliance reports under section 1387(c), that there 

20 were fewer than 4,800 full-time employees (or, active par21 ticipants, in the case of one or more plans offered by a 

22 corporate alliance which is an eligible sponsor described 

23 in section 1311(b)(1)(B)) who are enrolled in a health 

24 plan through the alliance, the election under this part with 

25 respect to the alliance shall terminate. 
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1 (b) TERMINATION FOR FAILURE TO MEET REQUIRE2 MENTS.— 

3 (1) IN GENERAL.—If the Secretary of Labor 

4 finds that a corporate alliance has failed substan5 tially to meet the applicable requirements of this 

6 subtitle, the Secretary shall terminate the election 

7 under this part with respect to the alliance 

8 (2) EXCESS INCREASE IN PREMIUM EQUIVA9 LENT.—If the Secretary of Labor finds that the alli10 ance is in violation of the requirements of section 

11 6022 (relating to prohibition against excess increase 

12 in premium expenditures), the Secretary shall termi13 nate the alliance in accordance with such section. 

14 (c) ELECTIVE TERMINATION.—A corporate alliance 

15 may terminate an election under this part by filing with 

16 the National Health Board and the Secretary of Labor 

17 a notice of intent to terminate. 

18 (d) EFFECTIVE DATE OF TERMINATION.—In the 

19 case of a termination of an election under this section, 

20 in accordance with rules established by the Secretary of 

21 Labor— 

22 (1) subject to section 6022(a)(1), the termi23 nation shall take effect as of the effective date of en24 rollments in regional alliance health plans made dur-
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1 ing the next open enrollment period (as provided in 

2 section 1323(d)), and 

3 (2) the enrollment of eligible individuals in cor4 porate alliance health plans of the corporate alliance 

5 shall be terminated as of such date and such individ6 uals shall be enrolled in other applicable health plans 

7 effective on such date. 

8 (e) NOTICE TO BOARD.—If an election with respect 

9 to a corporate alliance is terminated pursuant to sub10 section (a) or subsection (b), the Secretary of Labor shall 

11 notify the National Health Board of the termination of 

12 the election. 

13 PART 2—GENERAL RESPONSIBILITIES AND 

14 AUTHORITIES OF REGIONAL ALLIANCES 

15 SEC. 1321. CONTRACTS WITH HEALTH PLANS. 

16 (a) CONTRACTS WITH PLANS.— 

17 (1) IN GENERAL.—In order to assure the avail18 ability of the comprehensive benefit package to eligi19 ble individuals residing in the alliance area in a cost20 effective manner, except as provided in this section, 

21 each regional alliance shall negotiate with any will22 ing State-certified health plan to enter into a con23 tract with the alliance for the enrollment under the 

24 plan of eligible individuals in the alliance area. Sub25 ject to paragraph (2), a regional alliance shall not 
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1 enter into any such contract with a health plan that 

2 is not a State-certified health plan. 

3 (2) TREATMENT OF CERTAIN PLANS.—Each re4 gional alliance shall enter into a contract under this 

5 section with any veterans health plan of the Depart6 ment of Veterans Affairs and with a Uniformed 

7 Services Health Plan of the Department of Defense, 

8 that offers the comprehensive benefit package to eli9 gible individuals residing in the alliance area if the 

10 appropriate official requests to enter into such a 

11 contract. 

12 (b) GENERAL CONDITIONS FOR DENIAL OF CON13 TRACT BY A REGIONAL ALLIANCE.—A regional alliance 

14 is not required under this section to offer a contract with 

15 a health plan if— 

16 (1) the alliance finds that the proposed bid ex17 ceeds 120 percent of the regional alliance per capita 

18 prremium target (as determined under section 

19 6003); or 

20 (2) the plan has failed to comply with require21 ments under prior contracts with the alliance, in22 cluding failing to offer coverage for all the services 

23 in the comprehensive benefit package in the entire 

24 service area of the plan. 
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1 SEC. 1322. OFFERING CHOICE OF HEALTH PLANS FOR EN2 ROLLMENT; ESTABLISHMENT OF FEE-FOR3 SERVICE SCHEDULE. 

4 (a) IN GENERAL.—Each regional alliance must pro5 vide to each eligible enrollee (as defined in section 

6 1902(14)) with respect to the alliance a choice of health 

7 plans among the plans which have contracts in effect with 

8 the alliance under section 1321 (in the case of a regional 

9 alliance) or section 1341 (in the case of a corporate alli10 ance). 

11 (b) OFFERING OF PLANS BY REGIONAL ALLI12 ANCES.— 

13 (1) IN GENERAL.—Each regional alliance shall 

14 include among its health plan offerings at least one 

15 fee-for-service plan (as defined in paragraph (2)). 

16 (2) FEE-FOR-SERVICE PLAN DEFINED.— 

17 (A) IN GENERAL.—For purposes of this 

18 Act, the term ‘‘fee-for-service plan’’ means a 

19 health plan that— 

20 (i) provides coverage for all items and 

21 services included in the comprehensive ben22 efit package that are furnished by any law23 ful health care provider of the enrollee’s 

24 choice, subject to reasonable restrictions 

25 (described in subparagraph (B)), and 
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1 (ii) makes payment to such a provider 

2 without regard to whether or not there is 

3 a contractual arrangement between the 

4 plan and the provider. 

5 (B) REASONABLE RESTRICTIONS DE6 SCRIBED.—The reasonable restrictions on cov7 erage permitted under a fee-for-service plan (as 

8 specified by the National Health Board) are as 

9 follows: 

10 (i) Utilization review. 

11 (ii) Prior approval for specified serv12 ices. 

13 (iii) Exclusion of providers on the 

14 basis of poor quality of care, based on evi15 dence obtainable by the plan. 

16 Clause (ii) shall not be construed as permitting 

17 a plan to require prior approval for non-pri18 mary health care services through a gatekeeper 

19 or other process. 

20 (c) ESTABLISHMENT OF FEE-FOR-SERVICE SCHED21 ULE.— 

22 (1) IN GENERAL.—Except in the case of re23 gional alliances of a State that has established a 

24 Statewide fee schedule under paragraph (3), each re25 gional alliance shall establish a fee schedule setting 
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1 forth the payment rates applicable to services fur2 nished during a year to individuals enrolled in fee3 for-service plans (or to services furnished under the 

4 fee-for-service component of any regional alliance 

5 health plan) for use by regional alliance health plans 

6 under section 1406(c) and corporate alliance health 

7 plans providing services subject to the schedule in 

8 the regional alliance area. 

9 (2) NEGOTIATION WITH PROVIDERS.—The fee 

10 schedule under paragraph (1) shall be established 

11 after negotiations with providers, and (subject to 

12 paragraphs (5) and (6)) providers may collectively 

13 negotiate the fee schedule with the regional alliance. 

14 (3) USE OF STATEWIDE SCHEDULE.—At the 

15 option of a State, the State may establish its own 

16 statewide fee schedule which shall apply to all fee17 for-service plans offered by regional alliances and 

18 corporate alliances in the State instead of alliance19 specific schedules established under paragraph (1). 

20 (4) ANNUAL REVISION.—A regional alliance or 

21 State (as the case may be) shall annually update the 

22 payment rates provided under the fee schedule es23 tablished pursuant to paragraph (1) or paragraph 

24 (3). 
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1 (5) ACTIVITIES TREATED AS STATE ACTION OR

2 EFFORTS INTENDED TO INFLUENCE GOVERNMENT

3 ACTION.—The establishment of a fee schedule under 

4 this subsection by a regional alliance of a State shall 

5 be considered to be pursuant to a clearly articulated 

6 and affirmatively expressed State policy to displace 

7 competition and to be actively supervised by the 

8 State, and conduct by providers respecting the es9 tablishment of the fee schedule, including collective 

10 negotiations by providers with the regional alliance 

11 (or the State) pursuant to paragraph (2), shall be 

12 considered as efforts intended to influence govern13 mental action. 

14 (6) NO BOYCOTT PERMITTED.—Nothing in this 

15 subsection shall be construed to permit providers to 

16 threaten or engage in any boycott. 

17 (7) NEGOTIATIONS DEFINED.—In this sub18 section, ‘‘negotiations’’ are the process by which pro19 viders collectively and jointly meet, confer, consult, 

20 discuss, share information, among and between 

21 themselves in order to agree on information to be 

22 provided, presentations to be made, and other such 

23 activities with respect to regional alliances (or 

24 States) relating to the establishment of the fee 

25 schedule (but not including any activity that con-
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1 stitutes engaging in or threatening to engage in a 

2 boycott), as well as any and all collective and joint 

3 meetings, discussions, presentations, conferences, 

4 and consultations between or among providers and 

5 any regional alliance (or State) for the purpose of 

6 establishing the fee schedule described in this sub7 section. 

8 (d) PROSPECTIVE BUDGETING OF FEE-FOR-SERV9 ICE.— 

10 (1) IN GENERAL.—The fee schedule established 

11 by a regional alliance or a State under subsection (c) 

12 may be based on prospective budgeting described in 

13 paragraph (2). 

14 (2) PROSPECTIVE BUDGETING DESCRIBED.— 

15 Under prospective budgeting— 

16 (A) the regional alliance or State (as the 

17 case may be) shall negotiate with health pro18 viders annually to develop a budget for the des19 ignated fee-for-service plan; 

20 (B) the negotiated budget shall establish 

21 spending targets for each sector of health ex22 penditures made by the plan; and 

23 (C) if the regional alliance or State (as the 

24 case may be) determines that the utilization of 

25 services under the plan is at a level that will re-
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1 sult in expenditures under the plan exceeding 

2 the negotiated budget, the plan shall reduce the 

3 amount of payments otherwise made to pro4 viders (through a withhold or delay in payments 

5 or adjustments) in such a manner and by such 

6 amounts as necessary to assure that expendi7 tures will not exceed the budget. 

8 (3) USE OF PROSPECTIVE BUDGETING EXCLU9 SIVE.—If a regional alliance or State establishes the 

10 fee schedule for fee-for-service plans on the basis of 

11 prospective budgeting under this subsection, pay12 ment for all services provided by fee-for-service plans 

13 in the alliance or State shall be determined on such 

14 basis. 

15 SEC. 1323. ENROLLMENT RULES AND PROCEDURES. 

16 (a) IN GENERAL.—Each regional alliance shall as17 sure that each regional alliance eligible individual who re18 sides in the alliance area is enrolled in a regional alliance 

19 health plan and shall establish and maintain methods and 

20 procedures, consistent with this section, sufficient to as21 sure such enrollment. Such methods and procedures shall 

22 assure the enrollment of alliance eligible individuals at the 

23 time they first become eligible enrollees in the alliance 

24 area, including individuals at the time of birth, at the time 

25 they move into the alliance area, and at the time of reach-
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1 ing the age of individual eligibility as an eligible enrollee 

2 (and not merely as a family member). Each regional alli3 ance shall establish procedures, consistent with subtitle A, 

4 for the selection of a single health plan in which all mem5 bers of a family are enrolled. 

6 (b) POINT OF SERVICE ENROLLMENT MECHA7 NISM.— 

8 (1) IN GENERAL.—Each regional alliance shall 

9 establish a point-of-service enrollment mechanism 

10 (meeting the requirements of this subsection) for en11 rolling eligible individuals who are not enrolled in a 

12 health plan of the alliance when the individual seeks 

13 health services. 

14 (2) REQUIREMENTS OF MECHANISM.—Under 

15 such a mechanism, if an eligible individual seeks to 

16 receive services (included in the comprehensive ben17 efit package) from a provider in an alliance area and 

18 does not present evidence of enrollment under any 

19 applicable health plan, or if the provider has no evi20 dence of the individual’s enrollment under any such 

21 plan, the following rules shall apply: 

22 (A) NOTICE TO ALLIANCE.—Consistent 

23 with part 2 of subtitle B of title V, the pro24 vider— 
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1 (i) shall provide the regional alliance 

2 with information relating to the identity of 

3 the eligible individual, and 

4 (ii) may request payment from the re5 gional alliance for the furnishing of such 

6 services. 

7 (B) INITIAL DETERMINATION OF ELIGI8 BILITY AND ENROLLMENT STATUS.—The re9 gional alliance shall determine— 

10 (i) if the individual is an alliance eligi11 ble individual for the alliance, and 

12 (ii) if the individual is enrolled under 

13 an applicable health plan (including a cor14 porate alliance health plan). 

15 (C) TREATMENT OF ALLIANCE ELIGIBLE

16 INDIVIDUALS.—If the regional alliance deter17 mines that the individual is an alliance eligible 

18 individual with respect to the alliance and— 

19 (i) is enrolled under a regional alli20 ance health plan of the alliance, the alli21 ance shall forward the claim to the health 

22 plan involved and shall notify the provider 

23 (and the individual) of the fact of such en24 rollment and the forwarding of such claim 

25 (and the plan shall make payment to the 
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1 provider for the services furnished to the 

2 individual as described in paragraph 

3 (3)(C)); 

4 (ii) is not enrolled under a regional al5 liance health plan of the alliance but is re6 quired to be so enrolled in a specific health 

7 plan as a family member under section 

8 1011, the alliance shall record the individ9 ual’s enrollment under such specific plan, 

10 shall forward the claim to such plan, and 

11 shall notify the provider (and the indi12 vidual) of the fact of such enrollment and 

13 the forwarding of such claim (and the plan 

14 shall make payment to the provider for the 

15 services furnished to the individual as de16 scribed in paragraph (3)(C)); or 

17 (iii) is not enrolled under such a plan 

18 and is not described in clause (ii), the 

19 point-of-service enrollment procedures de20 scribed in paragraph (3) shall apply. 

21 (D) TREATMENT OF INDIVIDUALS EN22 ROLLED UNDER HEALTH PLANS OF OTHER AL23 LIANCES.—If the regional alliance determines 

24 that the individual is not an alliance eligible in-
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1 dividual with respect to the alliance but the in2 dividual is enrolled— 

3 (i) under a regional alliance health 

4 plan of another alliance, the alliance shall 

5 forward the claim to the other regional alli6 ance and shall notify the provider (and the 

7 individual) of the fact of such enrollment 

8 and the forwarding of such claim (and the 

9 plan shall make payment to the provider 

10 for the services furnished to the individual 

11 as described in paragraph (3)(C)); or 

12 (ii) under a corporate alliance health 

13 plan, the alliance shall forward the claim 

14 to the corporate alliance involved and shall 

15 notify the provider (and the individual) of 

16 the fact of such enrollment and the for17 warding of such claim (and the plan shall 

18 make payment to the provider for the serv19 ices furnished to the individual as de20 scribed in section 1383(b)(2)(B)). 

21 (E) TREATMENT OF OTHER ALLIANCE ELI22 GIBLE INDIVIDUALS NOT ENROLLED IN HEALTH

23 PLAN.—If the regional alliance determines that 

24 the individual is not an alliance eligible indi25 vidual with respect to the alliance and the indi-
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1 vidual is an alliance eligible individual with re2 spect to another health alliance but is not en3 rolled in a health plan of such alliance, the re4 gional alliance shall forward the claim to the 

5 other alliance involved and shall notify the pro6 vider (and the individual) of the forwarding of 

7 such claim and the requirement for prompt en8 rollment of the individual under an applicable 

9 health plan of such alliance pursuant to the 

10 procedures described in paragraph (3) (in the 

11 case of a regional alliance) or in section 

12 1383(b) (in the case of a corporate alliance). 

13 (F) TREATMENT OF ALL OTHER INDIVID14 UALS.—The National Board shall promulgate 

15 rules regarding the responsibilities of regional 

16 alliances relating to individuals whose applicable 

17 health plan is not an alliance plan and other in18 dividuals the alliance is unable to identify as eli19 gible individuals. 

20 (3) POINT-OF-SERVICE ENROLLMENT PROCE21 DURES DESCRIBED.—The point-of-service enrollment 

22 procedures under this paragraph are as follows: 

23 (A) Not later than 10 days after the date 

24 an alliance is notified of the receipt of services 

25 by an unenrolled eligible individual, the alliance 
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1 provides the individual with materials describ2 ing health plans offered through the alliance. 

3 (B) The individual shall be provided a pe4 riod of 30 days in which to enroll in a health 

5 plan of the individual’s choice. If the individual 

6 fails to so enroll during such period, the alli7 ance shall enroll the individual in a health plan 

8 of the alliance selected on a random basis. 

9 (C) Using the fee-for-service schedule 

10 adopted by the alliance under section 1322(c), 

11 the health plan in which the individual is en12 rolled under this subparagraph shall reimburse 

13 the provider who provided the services referred 

14 to in subparagraph (A) to the same extent as 

15 if the individual had been enrolled under the 

16 plan at the time of provision of the services. 

17 (c) ENROLLMENT OF NEW RESIDENTS.— 

18 (1) IN GENERAL.—Each regional alliance shall 

19 establish procedures for enrolling regional alliance 

20 eligible individuals who move into the alliance area. 

21 (2) LONG-TERM RESIDENTS.—Such procedures 

22 shall assure that regional alliance eligible individuals 

23 who intend to reside in the alliance area for longer 

24 than 6 months shall register with the regional alli-
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1 ance for the area and shall enroll in a regional alli2 ance health plan offered by the alliance. 

3 (3) SHORT-TERM RESIDENTS.—Such proce4 dures shall permit eligible individuals who intend to 

5 reside in the alliance area for more than 3 months 

6 but less than 6 months to choose among the fol7 lowing options: 

8 (A) To continue coverage through the 

9 health plan in which such individual is pre10 viously enrolled, in which case coverage for care 

11 in the area of temporary residence may be lim12 ited to emergency services and urgent care. 

13 (B) To register with the regional alliance 

14 and enroll in a regional alliance health plan of15 fered by the alliance. 

16 (C) To change enrollment in the previous 

17 alliance area to enrollment in a health plan of 

18 such alliance that provides for coverage on a 

19 fee-for-service basis of services provided outside 

20 the area of that alliance. 

21 (d) CHANGES IN ENROLLMENT.— 

22 (1) ANNUAL OPEN ENROLLMENT PERIOD TO

23 CHANGE PLAN ENROLLMENT.—Each regional alli24 ance shall hold an annual open enrollment period 

25 during which each eligible enrollee in the alliance 
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1 has the opportunity to choose among health plans 

2 offered through the alliance, according to rules to be 

3 promulgated by the National Health Board. 

4 (2) DISENROLLMENT FOR CAUSE.—In addition 

5 to the annual open enrollment period held under 

6 paragraph (1), each regional alliance shall establish 

7 procedures under which alliance eligible individuals 

8 enrolled in a plan may disenroll from the plan for 

9 good cause at any time during a year and enroll in 

10 another plan of the alliance. Such procedures shall 

11 be implemented in a manner that ensures continuity 

12 of coverage for the comprehensive benefit package 

13 for such individuals during the year. 

14 (e) ENROLLMENT OF FAMILY MEMBERS.—Each re15 gional alliance shall provide for the enrollment of all family 

16 members in the same plan, consistent with part 2 of sub17 title A. 

18 (f) OVERSUBSCRIPTION OF PLANS.— 

19 (1) IN GENERAL.—Each regional alliance shall 

20 establish a method for establishing enrollment prior21 ities in the case of a health plan that does not have 

22 sufficient capacity to enroll all eligible individuals 

23 seeking enrollment. 
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1 (2) PREFERENCE FOR CURRENT MEMBERS.— 

2 Such method shall provide that in the case of such 

3 an oversubscribed plan— 

4 (A) individuals already enrolled in the plan 

5 are given priority in continuing enrollment in 

6 the plan, and 

7 (B) other individuals who seek enrollment 

8 during an applicable enrollment period are per9 mitted to enroll in accordance with a random 

10 selection method, up to the enrollment capacity 

11 of the plan. 

12 (g) TERMINATION OF ENROLLMENT.— 

13 (1) IN GENERAL.—Each regional alliance shall 

14 establish special enrollment procedures to permit al15 liance eligible individuals to change the plan in 

16 which they are enrolled in the case of the termi17 nation of coverage under a plan, in a manner that 

18 ensures the individuals’ continuation of coverage for 

19 the comprehensive benefit package. 

20 (2) FAILURE OF A CORPORATE ALLIANCE.— 

21 Each regional alliance shall establish special enroll22 ment procedures to permit individuals, who become 

23 alliance eligible individuals as a result of the failure 

24 of a corporate alliance, to enroll promptly in regional 

25 alliance health plans in a manner that ensures the 
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1 individuals’ continuation of coverage for the com2 prehensive benefit package. 

3 (h) LIMITATION ON OFFERING OF COVERAGE TO IN4 ELIGIBLE INDIVIDUALS.—A regional alliance may not 

5 knowingly offer coverage under a regional alliance health 

6 plan or other health insurance or health benefits to an 

7 individual who is not an eligible individual. Nothing in this 

8 section shall be construed as affecting the ability of a re9 gional alliance health plan or other health plan to offer 

10 coverage to such individuals without any financial pay11 ment or participation by a regional alliance. 

12 (i) ENFORCEMENT OF ENROLLMENT REQUIRE13 MENT.—In the case of a regional alliance eligible indi14 vidual who fails to enroll in an applicable health plan as 

15 required under section 1002(a)— 

16 (1) the applicable regional alliance shall enroll 

17 the individual in a regional alliance health plan (se18 lected by the alliance consistent with this Act and 

19 with any rules established by the Board), and 

20 (2) such alliance shall require the payment of 

21 twice the amount of the family share of premiums 

22 that would have been payable under subtitle B of 

23 title VI if the individual had enrolled on a timely 

24 basis in the plan, unless the individual has estab-
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1 lished to the satisfaction of the alliance good cause 

2 for the failure to enroll on a timely basis. 

3 SEC. 1324. ISSUANCE OF HEALTH SECURITY CARDS. 

4 A regional alliance is responsible for the issuance of 

5 health security cards to regional alliance eligible individ6 uals under section 1001(b). 

7 SEC. 1325. CONSUMER INFORMATION AND MARKETING. 

8 (a) CONSUMER INFORMATION.— 

9 (1) IN GENERAL.—Before each open enrollment 

10 period, each regional alliance shall make available to 

11 eligible enrollees information, in an easily under12 stood and useful form, that allows such enrollees 

13 (and other alliance eligible individuals) to make valid 

14 comparisons among health plans offered by the alli15 ance. 

16 (2) INFORMATION TO BE INCLUDED.—Such in17 formation must include, in the same format for each 

18 plan, such information as the National Health 

19 Board shall require, including at least the following: 

20 (A) The cost of the plan, including pre21 miums and average out-of-pocket expenses. 

22 (B) The characteristics and availability of 

23 health care professionals and institutions par24 ticipating in the plan. 
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1 (C) Any restrictions on access to providers 

2 and services under the plan. 

3 (D) A summary of the annual quality per4 formance report, established pursuant to section 

5 5005(c)(1), which contains measures of quality 

6 presented in a standard format. 

7 (b) MARKETING.—Each regional alliance shall, con8 sistent with section 1404, review and approve or dis9 approve the distribution of any materials used to market 

10 health plans offered through the alliance. 

11 SEC. 1326. OMBUDSMAN. 

12 (a) ESTABLISHMENT.—Each regional alliance must 

13 establish and maintain an office of an ombudsman to as14 sist consumers in dealing with problems that arise with 

15 health plans and the alliance. 

16 (b) OPTIONAL FINANCING THROUGH VOLUNTARY

17 CONTRIBUTION.—At the option of the State in which a 

18 regional alliance is located, the alliance— 

19 (1) shall permit alliance eligible individuals to 

20 designate that one dollar of the premium paid for 

21 enrollment in the individual’s regional alliance health 

22 plan for the operation of the office of the alliance’s 

23 ombudsman; and 

24 (2) shall apply any such amounts towards the 

25 establishment and operation of such office. 
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1 SEC. 1327. DATA COLLECTION; QUALITY. 

2 Each regional alliance shall comply with requirements 

3 of subtitles A and B of title V (relating to quality, infor4 mation systems, and privacy), and shall take appropriate 

5 steps to ensure that health plans offered through the alli6 ance comply with such requirements. 

7 SEC. 1328. ADDITIONAL DUTIES. 

8 (a) ANTI-DISCRIMINATION.—In carrying out its ac9 tivities under this part, a regional alliance may not dis10 criminate against health plans on the basis of race, sex, 

11 national origin, religion, mix of health professionals, loca12 tion of the plan’s headquarters, or (except as specifically 

13 provided in this part) organizational arrangement. 

14 (b) COORDINATION OF ENROLLMENT ACTIVITIES.— 

15 Each regional alliance shall coordinate, in a manner speci16 fied by the National Health Board, with other health alli17 ances its activities, including enrollment and disenrollment 

18 activities, in a manner that ensures continuous, non19 duplicative coverage of alliance eligible individuals in 

20 health plans and that minimizes administrative procedures 

21 and paperwork. 
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1 SEC. 1329. ADDITIONAL AUTHORITIES FOR REGIONAL ALLI2 ANCES TO ADDRESS NEEDS IN AREAS WITH 

3 INADEQUATE HEALTH SERVICES; PROHIBI4 TION OF INSURANCE ROLE. 

5 (a) PAYMENT ADJUSTMENT.—In order to ensure 

6 that plans are available to all eligible individuals residing 

7 in all portions of the alliance area, a regional alliance may 

8 adjust payments to plans or use other financial incentives 

9 to encourage health plans to expand into areas that have 

10 inadequate health services. 

11 (b) ENCOURAGING NEW PLANS.—Subject to sub12 section (c), in order to encourage the establishment of a 

13 new health plan in an area that has inadequate health 

14 services, an alliance may— 

15 (1) organize health providers to create such a 

16 plan in such an area a new health plan targeted at 

17 such an area, 

18 (2) provide assistance with setting up and ad19 ministering such a plan, and 

20 (3) arrange favorable financing for such a plan. 

21 (c) PROHIBITION OF REGIONAL ALLIANCES BEARING

22 RISK.—A regional alliance may not bear insurance risk. 

23 SEC. 1330. PROHIBITION AGAINST SELF-DEALING AND CON24 FLICTS OF INTEREST. 

25 (a) PROMULGATION OF STANDARDS.—The Board 

26 shall promulgate standards of conduct in accordance with 
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1 subsection (b) for any administrator, officer, trustee, fidu2 ciary, custodian, counsel, agent, or employee of any re3 gional alliance. 

4 (b) REQUIREMENTS FOR STANDARDS.—The stand5 ards of conduct referred to in subsection (a) shall set 

6 forth— 

7 (1) the types of investment interests, ownership 

8 interests, affiliations or other employment that 

9 would be improper for an individual described in 

10 subsection (a) to hold during the time of the individ11 ual’s service or employment with an alliance; and 

12 (2) the circumstances that will constitute im13 permissible conflicts of interest or self-dealing by 

14 such employees in performing their official duties 

15 and functions for any regional alliance. 

16 (c) CIVIL MONETARY PENALTY.—Any individual who 

17 engages in an activity that the individual knows or has 

18 reason to know is in violation of the regulations and stand19 ards promulgated by the Board pursuant to subsections 

20 (a) and (b) shall be subject, in addition to any other pen21 alties that may be prescribed by law, to a civil money pen22 alty of not more than $10,000 for each such violation. The 

23 provisions of section 1128A of the Social Security Act 

24 (other than subsections (a) and (b)) shall apply to civil 

25 money penalties under this subsection in the same manner 
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1 as they apply to a penalty or proceeding under section 

2 1128A(a) of such Act. 

3 PART 3—AUTHORITIES AND RESPONSIBILITIES 

4 OF REGIONAL ALLIANCES RELATING TO FI5 NANCING AND INCOME DETERMINATIONS 

6 Subpart A—Collection of Funds 

7 SEC. 1341. INFORMATION AND NEGOTIATION AND ACCEPT8 ANCE OF BIDS. 

9 (a) INFORMATION PROVIDED TO PLANS BEFORE SO10 LICITING BIDS.— 

11 (1) IN GENERAL.—Each regional alliance shall 

12 make available, by April 1 of each year, to each plan 

13 that indicates an interest in submitting a premium 

14 bid under section 6004 in the year, information (in15 cluding information described in paragraph (2)) that 

16 the Board specifies as being necessary to enable a 

17 plan to estimate, based upon an accepted bid, the 

18 amounts payable to such a plan under section 1351. 

19 (2) INFORMATION TO BE INCLUDED.—Such in20 formation shall include the following: 

21 (A) The demographic and other character22 istics of regional alliance eligible individuals for 

23 the regional alliance. 
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1 (B) The uniform per capita conversion fac2 tor for the regional alliance (established under 

3 subsection (b)). 

4 (C) The premium class factors (established 

5 by the Board under section 1531). 

6 (D) The regional alliance inflation factor 

7 (determined under section 6001(a)). 

8 (E) The risk-adjustment factors and rein9 surance methodology and payment amounts 

10 (published under subsection (c)) to be used by 

11 the regional alliance in computing blended plan 

12 per capita rates (in accordance with section 

13 6201). 

14 (F) The plan bid proportion, the AFDC 

15 proportion, the SSI proportion, the AFDC per 

16 capita premium amount, and the SSI per capita 

17 premium amount, for the year, as computed 

18 under subtitle D of title VI. 

19 (G) The alliance administrative allowance 

20 percentage, computed under section 1352(b). 

21 (b) DETERMINATION OF UNIFORM PER CAPITA CON22 VERSION FACTOR.—Each regional alliance shall specify, 

23 not later than April 1 of each year (beginning with the 

24 year before the first year) a uniform per capita conversion 

25 factor to be used under section 6102(a)(2) in converting 
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1 the accepted bid for each plan for the year into the pre2 mium for an individual enrollment for such plan for the 

3 year. SSI or AFDC recipients shall not be included for 

4 purposes of computing the conversion factor. 

5 (c) DETERMINATION OF RISK-ADJUSTMENT FAC6 TORS AND REINSURANCE PAYMENT AMOUNTS.—Each re7 gional alliance shall compute and publish the risk-adjust8 ment factors and reinsurance payment amounts to be used 

9 by the regional alliance in computing blended plan per 

10 capita rates under section 6201. 

11 (d) SOLICITATION OF BIDS.—Each regional alliance 

12 shall solicit and negotiate, consistent with section 6004, 

13 with each regional alliance health plan a bid for the pay14 ment rate on a per capita basis for the comprehensive ben15 efit package for all alliance eligible individuals in the alli16 ance area. 

17 SEC. 1342. CALCULATION AND PUBLICATION OF GENERAL 

18 FAMILY SHARE AND GENERAL EMPLOYER 

19 PREMIUM AMOUNTS. 

20 (a) CALCULATION OF COMPONENTS IN GENERAL

21 FAMILY SHARE AND GENERAL EMPLOYER PREMIUMS.— 

22 (1) FAMILY SHARE.—Each regional alliance 

23 shall compute the following components of the gen24 eral family share of premiums (as defined in sub25 section (b)(1)(B)): 
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1 (A) PLAN PREMIUMS.—For each plan of2 fered, the premium for the plan for each class 

3 of family enrollment (including the amount of 

4 any family collection shortfall). 

5 (B) ALLIANCE CREDIT.—The alliance cred6 it amount for each class of family enrollment, 

7 under section 6103. 

8 (C) EXCESS PREMIUM CREDIT.—The 

9 amount of any excess premium credit provided 

10 under section 6105 for each class of family en11 rollment. 

12 (D) CORPORATE ALLIANCE OPT-IN CRED13 IT.—The amount of any corporate alliance opt14 in credit provided under section 6106 for each 

15 class of family enrollment. 

16 (2) EMPLOYER PREMIUMS.—Each regional alli17 ance shall compute the following components of the 

18 general employer premium payment amount (as de19 fined in subsection (b)(2)(B)): 

20 (A) BASE EMPLOYER MONTHLY PREMIUM

21 PER WORKER.—The base employer monthly 

22 premium determined under section 6122 for 

23 each class of family enrollment. 
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1 (B) EMPLOYER COLLECTION SHORTFALL

2 ADD-ON.—The employer collection shortfall 

3 add-on computed under section 6125(b). 

4 (b) PUBLICATION.— 

5 (1) FAMILY SHARE.— 

6 (A) IN GENERAL.—Each regional alliance 

7 shall publish, before the open enrollment period 

8 in each year, the general family share of the 

9 premium (as defined in subparagraph (B)) for 

10 each class of family enrollment for each re11 gional alliance health plan to be offered by the 

12 alliance in the following year. 

13 (B) GENERAL FAMILY SHARE OF PREMIUM

14 DEFINED.—In this subpart, the term ‘‘general 

15 family share of premium’’ means the family 

16 share of premium under section 6101 computed 

17 without regard to section 6104 and without re18 gard to section 6101(b)(2)(C)(v). 

19 (2) EMPLOYER PREMIUM.— 

20 (A) IN GENERAL.—Each regional alliance 

21 shall publish, in December before each year (be22 ginning with December before the first year) 

23 the general employer premium payment amount 

24 (as defined in subparagraph (B)) for each class 

25 of family enrollment for the following year. 
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1 (B) GENERAL EMPLOYER PREMIUM PAY2 MENT AMOUNT DEFINED.—In this subpart, the 

3 term ‘‘general employer premium payment 

4 amount’’ means the employer premium payment 

5 under section 6121 computed, as an amount 

6 per full-time equivalent worker, without regard 

7 to sections 6124 through 6126. 

8 SEC. 1343. DETERMINATION OF FAMILY SHARE FOR FAMI9 LIES. 

10 (a) AMOUNT OF FAMILY SHARE.—The amount 

11 charged by a regional alliance to a family for a class of 

12 family enrollment (specified under section 1011(c)) under 

13 a regional alliance health plan is equal to the family share 

14 of premium established under section 6101(a) for the fam15 ily. Based upon the information described in this section, 

16 each regional alliance shall determine the amount required 

17 to be paid under section 6101 and under section 6111 for 

18 each year for families enrolling in regional alliance health 

19 plans. 

20 (b) FAMILY SHARE AMOUNT.—The amount required 

21 to be paid under section 6101, with respect to each family, 

22 takes into account— 

23 (1) the general family share of premium (as de24 fined in section 1342(b)(1)(B)) for the class of en25 rollment involved; 
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1 (2) any income-related discount provided under 

2 section 6104(a)(1) for the family; and 

3 (3) whether or not the family is an SSI or 

4 AFDC family. 

5 (c) ALLIANCE CREDIT REPAYMENT AMOUNT.—The 

6 amount of the alliance credit repayment amount under 

7 section 6111, with respect to each family, takes into ac8 count the following: 

9 (1) The number of months of enrollment, and 

10 class of enrollment, in regional alliance health plans, 

11 used in determining the amount of the alliance cred12 it under section 6103 for the family. 

13 (2) Reductions in liability under section 

14 6111(b) based on employer premium payments 

15 based on net earnings from self-employment for the 

16 family. 

17 (3) Reductions in liability under section 6112 

18 based on months of employment for the family. 

19 (4) Limitations in liability under section 6113 

20 on the basis of the adjusted family income for the 

21 family. 

22 (5) The elimination of liability in the case of 

23 certain retirees and qualified spouses and children 

24 under section 6114. 
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1 (6) The elimination of liability in the case of 

2 certain working medicare beneficiaries under section 

3 6115. 

4 (d) ACCESS TO NECESSARY INFORMATION TO MAKE

5 DETERMINATION.—Information required for an alliance 

6 to make the determination under subsection (a) shall be 

7 based on information obtained or maintained by the alli8 ance in the conduct of its business, including the following: 

9 (1) Information required for income-related de10 terminations shall be obtained under subpart B. 

11 (2) Information on SSI and AFDC recipients 

12 under subsection (e). 

13 (3) Information submitted on a monthly and 

14 annual basis by employers under section 1602. 

15 (4) Information submitted by self-employed in16 dividuals on net earnings from self-employment 

17 under section 1602(d). 

18 (5) Applications for premium reductions under 

19 section 6114. 

20 (6) Information concerning medicare-eligible in21 dividuals under subsection (f). 

22 (7) Any income-related discount provided under 

23 section 6104(a)(1) for the family. 

24 (8) Whether or not the family is an SSI or 

25 AFDC family. 
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1 (e) INFORMATION CONCERNING CASH ASSISTANCE

2 STATUS.—Each participating State and the Secretary 

3 shall make available (in a time and manner specified by 

4 the Secretary) to each regional alliance such information 

5 as may be necessary to determine and verify whether an 

6 individual is an AFDC or SSI recipient for a month in 

7 a year. 

8 (f) INFORMATION CONCERNING MEDICARE-ELIGIBLE

9 INDIVIDUALS.— 

10 (1) INFORMATION TO REGIONAL ALLIANCES.— 

11 The Secretary shall make available to regional alli12 ances (through regional information centers or oth13 erwise) information necessary to determine— 

14 (A) whether an individual is a medicare-eli15 gible individual, 

16 (B) the eligibility of individuals for the 

17 special treatment under section 6115, 

18 (C) if medicare-eligible individuals are de19 scribed in section 1012(a), and 

20 (D) the amounts of payments owed the al21 liance under section 1894 of the Social Security 

22 Act, added by section 4003. 

23 (2) INFORMATION TO SECRETARY.—Each re24 gional alliance shall make available to the Secretary 

25 (through the national information system under sec-
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1 tion 5101 or otherwise) information relating to the 

2 enrollment of individuals who would be medicare-eli3 gible individuals but for section 1012(a). 

4 (g) ALLIANCE ACCOUNTING SYSTEM.— 

5 (1) IN GENERAL.—Each regional alliance shall 

6 establish an accounting system that meets standards 

7 established by the Secretary. 

8 (2) SPECIFICS.—Such system shall collect infor9 mation, on a timely basis for each individual enrolled 

10 (and, to the extent required by the Secretary, identi11 fied and required to be enrolled) in a regional alli12 ance health plan regarding— 

13 (A) the applicable premium for such enroll14 ment, 

15 (B) family members covered under such 

16 enrollment, 

17 (C) the premium payments made by (or on 

18 behalf of) the individual for such enrollment, 

19 (D) employer premium payments made re20 specting the employment of the individual and 

21 other employer contributions made respecting 

22 such enrollment, and 

23 (E) any government contributions made 

24 with respect to such enrollment (including con-
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1 tributions for electing veterans and active duty 

2 military personnel). 

3 (3) END-OF-YEAR REPORTING.—Such system 

4 shall provide for a report, at the end of each year, 

5 regarding the total premiums imposed, and total 

6 amounts collected, for individuals enrolled under re7 gional health alliance plans, in such manner as iden8 tifies net amounts that may be owed to the regional 

9 alliance. 

10 SEC. 1344. NOTICE OF FAMILY PAYMENTS DUE. 

11 (a) FAMILY STATEMENTS.— 

12 (1) NOTICE OF NO AMOUNT OWED.—If the re13 gional alliance determines under section 1343 that a 

14 family has paid any family share required under sec15 tion 6101 and is not required to repay any amount 

16 under section 6111 for a year, the alliance shall pro17 vide notice of such determination to the family. Such 

18 notice shall include a prominent statement that the 

19 family is not required to make any additional pay20 ment and is not required to file any additional infor21 mation with the regional alliance. 

22 (2) NOTICE OF AMOUNT OWED.— 

23 (A) IN GENERAL.—If the regional alliance 

24 determines that a family has not paid the entire 

25 family share required under section 6101 or is 
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1 required to repay an amount under section 

2 6111 for a year, the alliance shall provide to 

3 the family a notice of such determination. 

4 (B) INFORMATION ON AMOUNT DUE.— 

5 Such notice shall include detailed information 

6 regarding the amount owed, the basis for the 

7 computation (including the amount of any re8 ductions that have been made in the family’s li9 ability under subtitle B of title VI), and the 

10 date the amount is due and the manner in 

11 which such amount is payable. 

12 (C) INFORMATION ON DISCOUNTS AND RE13 DUCTIONS AVAILABLE.—Such notice shall in14 clude— 

15 (i) information regarding the dis16 counts and reductions available (under sec17 tions 6104, 6112, 6113, 6114, and 6115) 

18 to reduce or eliminate any liability, and 

19 (ii) a worksheet which may be used to 

20 calculate reductions in liability based on 

21 income under sections 6104 and 6113. 

22 (3) INCLUSION OF INCOME RECONCILIATION

23 FORM FOR FAMILIES PROVIDED PREMIUM DIS24 COUNTS.— 
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1 (A) IN GENERAL.—A notice under this 

2 subsection shall include, in the case of a family 

3 that has been provided a premium discount 

4 under section 6104 (or section 6113) for the 

5 previous year, an income reconciliation state6 ment (for use under section 1375) to be com7 pleted and returned to the regional alliance 

8 (along with any additional amounts owed) by 

9 the deadline specified in subsection (b). Such 

10 form shall require the submission of such infor11 mation as the Secretary specifies to establish or 

12 verify eligibility for such premium discount. 

13 (B) OTHER FAMILIES.—Any family which 

14 has not been provided such a discount but may 

15 be eligible for such a discount may submit such 

16 an income reconciliation statement and, if eligi17 ble, receive a rebate of the amount of excess 

18 family share paid for the previous year. 

19 (C) ADDITIONAL INFORMATION.—The alli20 ance shall permit a family to provide additional 

21 information relating to the amount of such re22 ductions or the income of the family (insofar as 

23 it may relate to a premium discount or reduc24 tion in liability under section 6104 or 6113). 
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1 (4) TIMING OF NOTICE.—Notices under this 

2 subsection shall be mailed to each family at least 45 

3 days before the deadline specified in subsection (b). 

4 (b) DEADLINE FOR PAYMENT.—The deadline speci5 fied in this subsection for amounts owed for a year is such 

6 date as the Secretary may specify, taking into account the 

7 dates when the information specified in section 1343 be8 comes available to compute the amounts owed and to file 

9 income reconciliation statements under section 1375. 

10 Amounts not paid by such deadline are subject to interest 

11 and penalty. 

12 (c) CHANGE IN REGIONAL ALLIANCE.—In the case 

13 of a family that during a year changes the regional alli14 ance through which the family obtains coverage under a 

15 regional alliance health plan, the Secretary shall establish 

16 rules which provide that the regional alliance in which the 

17 family last obtained such coverage in a year— 

18 (1) is responsible for recovering amounts due 

19 under this subpart for the year (whether or not at20 tributable to periods of coverage obtained through 

21 that alliance); 

22 (2) shall obtain such information, through the 

23 health information system implemented under sec24 tion 5101, as the alliance may require in order to 

25 compute the amount of any liability owed under this 
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1 subpart (taking into account any reduction in such 

2 amount under this section), and 

3 (3) shall provide for the payment to other re4 gional alliances of such amounts collected as may be 

5 attributable to amounts owed for periods of coverage 

6 obtained through such alliances. 

7 (d) NO LOSS OF COVERAGE.—In no case shall the 

8 failure to pay amounts owed under this subsection result 

9 in an individual’s or family’s loss of coverage under this 

10 Act. 

11 (e) DISPUTE RESOLUTION.—Each regional alliance 

12 shall establish a fair hearing mechanism for the resolution 

13 of disputes concerning amounts owed the alliance under 

14 this subpart. 

15 SEC. 1345. COLLECTIONS. 

16 (a) IN GENERAL.—Each regional alliance is respon17 sible for the collection of all amounts owed the alliance 

18 (whether by individuals, employers, or others and whether 

19 on the basis of premiums owed, incorrect amounts of dis20 counts or premium, cost sharing, or other reductions 

21 made, or otherwise). No amounts are payable by the Fed22 eral Government under this Act (including section 9102) 

23 with respect to the failure to collect any such amounts. 

24 Each regional alliance shall use credit and collection pro25 cedures, including the imposition of interest charges and 
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1 late fees for failure to make timely payment, as may be 

2 necessary to collect amounts owed to the alliance. States 

3 assist regional alliances in such collection process under 

4 section 1202(d). 

5 (b) COLLECTION OF FAMILY SHARE.— 

6 (1) WITHHOLDING.— 

7 (A) IN GENERAL.—In the case of a family 

8 that includes a qualifying employee of an em9 ployer, the employer shall deduct from the 

10 wages of the qualifying employee (in a manner 

11 consistent with any rules of the Secretary of 

12 Labor) the amount of the family share of the 

13 premium for the plan in which the family is en14 rolled. 

15 (B) MULTIPLE EMPLOYMENT.—In the case 

16 of a family that includes more than one quali17 fying employee, the family shall choose the em18 ployer to which subparagraph (A) will apply. 

19 (C) PAYMENT.—Amounts withheld under 

20 this paragraph shall be maintained in a manner 

21 consistent with standards established by the 

22 Secretary of Labor and paid to the regional alli23 ance involved in a manner consistent with the 

24 payment of employer premiums under sub25 section (c). 
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1 (D) SATISFACTION OF LIABILITY.—An 

2 amount deducted from wages of a qualifying 

3 employee by an employer is deemed to have 

4 been paid by the employee and to have satisfied 

5 the employee’s obligation under subsection (a) 

6 to the extent of such amount. 

7 (2) OTHER METHODS.—In the case of a family 

8 that does not include a qualifying employee, the re9 gional alliance shall require payment to be made 

10 prospectively. Such payment may be required to be 

11 made not less frequently than monthly. The Sec12 retary may issue regulations in order to assure the 

13 timely and accurate collection of the family share 

14 due. 

15 (c) TIMING AND METHOD OF PAYMENT OF EM16 PLOYER PREMIUMS.— 

17 (1) FREQUENCY OF PAYMENT.—Payment of 

18 employer premiums under section 6121 for a month 

19 shall be made not less frequently than monthly (or 

20 quarterly in the case of such payments made by vir21 tue of section 6126). The Secretary of Labor may 

22 establish a method under which employers that pay 

23 wages on a weekly or biweekly basis are permitted 

24 to make such employer payments on such a weekly 

25 or biweekly basis. 
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1 (2) ELECTRONIC TRANSFER.—A regional alli2 ance may require those employers that have the ca3 pacity to make payments by electronic transfer to 

4 make payments under this subsection by electronic 

5 transfer. 

6 (d) ASSISTANCE.— 

7 (1) EMPLOYER COLLECTIONS.—The Secretary 

8 of Labor shall provide regional alliances with such 

9 technical and other assistance as may promote the 

10 efficient collection of all amounts owed such alli11 ances under this Act by employers. Such assistance 

12 may include the assessment of civil monetary pen13 alties, not to exceed $5,000 or three times the 

14 amount of the liability owed, whichever is greater, in 

15 the case of repeated failure to pay (as specified in 

16 rules of the Secretary of Labor). 

17 (2) FAMILY COLLECTIONS.—Except as provided 

18 in paragraph (1), the Secretary shall provide re19 gional alliances with such technical and other assist20 ance as may promote the efficient collection of other 

21 amounts owed such alliances under this Act. Such 

22 assistance may include the assessment of civil mone23 tary penalties, not to exceed $5,000 or three times 

24 the amount of the liability owed, whichever is great-
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1 er, in the case of repeated failure to pay (as speci2 fied in rules of the Secretary). 

3 (e) RECEIPT OF MISCELLANEOUS AMOUNTS.—For 

4 payments to regional alliances by— 

5 (1) States, see subtitle A of title IX, and 

6 (2) the Federal Government, see subtitle B of 

7 such title and section 1894 of the Social Security 

8 Act (as added by section 4003). 

9 SEC. 1346. COORDINATION AMONG REGIONAL ALLIANCES. 

10 (a) IN GENERAL.—The regional alliance which offers 

11 the regional alliance health plan in which a family is en12 rolled in December of each year (in this section referred 

13 to as the ‘‘final alliance’’) is responsible for the collection 

14 of any amounts owed by the family under this subpart, 

15 without regard to whether the family resided in the alli16 ance area during the entire year. 

17 (b) PROVISION OF INFORMATION IN THE CASE OF

18 CHANGE OF RESIDENCE.—In the case of a family that 

19 moves from one alliance area to another alliance area dur20 ing a year, each regional alliance (other than the final alli21 ance) is responsible for providing to the final alliance 

22 (through the national information system under section 

23 5101 or otherwise) such information as the final alliance 

24 may require in order to determine the liability (and reduc-
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1 tions in liability under section 6112) attributable to alli2 ance credits provided by such regional alliance. 

3 (c) DISTRIBUTION OF PROCEEDS.—In accordance 

4 with rules established by the Secretary, in consultation 

5 with the Secretary of Labor, the final alliance shall provide 

6 for the distribution of amounts collected under this sub7 part with respect to families in a year in an equitable man8 ner among the regional alliances that provided health plan 

9 coverage to the families in the year. 

10 (d) EXPEDITING PROCESS.—In order to reduce pa11 perwork and promote efficiency in the collection of 

12 amounts owed regional alliances under this subpart, the 

13 Secretary may require or permit regional alliances to share 

14 such information (through the national information sys15 tem under section 5101 or otherwise) as the Secretary de16 termines to be cost-effective, subject to such confiden17 tiality restrictions as may otherwise apply. 

18 (e) STUDENTS.—In the case of a qualifying student 

19 who makes an election described in section 1012(e)(1) (re20 lating to certain full-time students who are covered under 

21 the plan of a parent but enrolled in a health plan offered 

22 by a different regional alliance from the one in which the 

23 parent is enrolled), the regional alliance that offered the 

24 plan to the parent shall provide for transfers of an appro25 priate portion of the premium (determined in accordance 
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1 with procedures specified by the Board) to the other re2 gional alliance in order to compensate that alliance for the 

3 provision of such coverage. 

4 (f) PAYMENTS OF CERTAIN AMOUNTS TO COR5 PORATE ALLIANCES.—In the case of a married couple in 

6 which one spouse is a qualifying employee of a regional 

7 alliance employer and the other spouse is a qualifying em8 ployee of a corporate alliance employer, if the couple is 

9 enrolled with a corporate alliance health plan the regional 

10 alliance (which receives employer premium payments from 

11 such regional alliance employer with respect to such em12 ployee) shall pay to the corporate alliance the amounts so 

13 paid (or would be payable by the employer if section 6123 

14 did not apply). 

15 Subpart B—Payments 

16 SEC. 1351. PAYMENT TO REGIONAL ALLIANCE HEALTH 

17 PLANS. 

18 (a) COMPUTATION OF BLENDED PLAN PER CAPITA

19 PAYMENT AMOUNT.—For purposes of making payments 

20 to plans under this section, each regional alliance shall 

21 compute, under section 6201(a), a blended plan per capita 

22 payment amount for each regional alliance health plan for 

23 enrollment in the alliance for a year. 

24 (b) AMOUNT OF PAYMENT TO PLANS.— 
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1 (1) IN GENERAL.—Subject to subsection (e) 

2 and section 6121(b)(5)(B), each regional alliance 

3 shall provide for payment to each regional alliance 

4 health plan, in which an alliance eligible individual 

5 is enrolled, an amount equal to the net blended rate 

6 (described in paragraph (2)) adjusted (consistent 

7 with subsection (c)) to take into account the relative 

8 actuarial risk associated with the coverage with re9 spect to the individual. 

10 (2) NET BLENDED RATE.—The net blended 

11 rate described in this paragraph is the blended plan 

12 per capita payment amount (determined under sec13 tion 6201(a)), reduced by— 

14 (A) such amount multiplied by the sum 

15 of— 

16 (i) the administrative allowance per17 centage for the regional alliance, computed 

18 by the alliance under section 1352(b), and 

19 (ii) 1.5 percentage points; and 

20 (B) any plan payment reduction imposed 

21 under section 6011 for the plan for the year. 

22 (c) APPLICATION OF RISK ADJUSTMENT AND REIN23 SURANCE METHODOLOGY.—Each regional alliance shall 

24 use the risk adjustment methodology developed under sec25 tion 1541 in making payments to regional alliance health 
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1 plans under this section, except as provided in section 

2 1542. 

3 (d) APPLICATION OF PORTION OF SET ASIDE.— 

4 Amounts attributable to subsection (b)(2)(A)(ii) are paid 

5 to the Federal Government (for academic health centers 

6 and graduate medical education) under section 1353. 

7 (e) TREATMENT OF VETERANS, MILITARY, AND IN8 DIAN HEALTH PLANS AND PROGRAMS.— 

9 (1) VETERANS HEALTH PLAN.—In applying 

10 this subtitle (and title VI) in the case of a regional 

11 alliance health plan that is a veterans health plan of 

12 the Department of Veterans Affairs, the following 

13 rules apply: 

14 (A) For purposes of applying subtitle A of 

15 title VI, families enrolled under the plan shall 

16 not be taken into account. 

17 (B) The provisions of subtitle A of title VI 

18 shall not apply to the plan, other than such pro19 visions as require the plan to submit a per cap20 ita amount for each regional alliance area on a 

21 timely basis, which amount shall be treated as 

22 the final accepted bid of the plan for the area 

23 for purposes of subtitle B of such title and this 

24 subtitle. This amount shall not be subject to ne-
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1 gotiation and not subject to reduction under 

2 section 6011. 

3 (C) For purposes of computing the blended 

4 plan per capita payment amount under section 

5 6201(a), the AFDC and SSI proportions (under 

6 section 6202(a)) are deemed to be 0 percent. 

7 (2) UNIFORMED SERVICES HEALTH PLAN.—In 

8 applying this subtitle (and title VI) in the case of a 

9 regional alliance health plan that is a Uniformed 

10 Services Health Plan of the Department of Defense, 

11 the following rules apply: 

12 (A) For purposes of applying subtitle A of 

13 title VI, families enrolled under the plan shall 

14 not be taken into account. 

15 (B) The provisions of subtitle A of title VI 

16 shall not apply to the plan, other than such pro17 visions as require the plan to submit a per cap18 ita amount on a timely basis, which amount 

19 shall be treated as the final accepted bid of the 

20 plan for the area involved for purposes of sub21 title B of such title and this subtitle. This 

22 amount shall not be subject to negotiation and 

23 not subject to reduction under section 6011. 

24 The Board, in consultation with the Secretary 
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1 of Defense, shall establish rules relating to the 

2 area (or areas) in which such a bid shall apply. 

3 (C) For purposes of computing the blended 

4 plan per capita payment amount under section 

5 6201(a), the AFDC and SSI proportions (under 

6 section 6202(a)) are deemed to be 0 percent. 

7 (3) INDIAN HEALTH PROGRAMS.—In applying 

8 this subtitle (and title VI) in the case of a health 

9 program of the Indian Health Service, the following 

10 rules apply: 

11 (A) Except as provided in this paragraph, 

12 the plan shall not be considered or treated to be 

13 a regional alliance health plan and for purposes 

14 of applying title VI, families enrolled under the 

15 program shall not be taken into account. 

16 (B) In accordance with rules established by 

17 the Secretary, regional alliances shall act as 

18 agents for the collection of employer premium 

19 payments (including payments of corporate alli20 ance employers) required under subtitle B of 

21 title VI with respect to qualifying employees 

22 who are enrolled under a health program of the 

23 Indian Health Service. The Secretary shall per24 mit such alliances to retain a nominal fee to 

25 compensate them for such collection activities. 
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1 In applying this subparagraph, the family share 

2 of premium for such employees is deemed to be 

3 zero for electing Indians (as defined in section 

4 1012(d)(3)) and for other employees is the 

5 amount of the premium established under sec6 tion 8306(b)(4)(A), employees are deemed to be 

7 residing in the area of residence (or area of em8 ployment), as specified under rules of the Sec9 retary, and the class of enrollment shall be such 

10 class (or classes) as specified under rules of the 

11 Secretary. 

12 SEC. 1352. ALLIANCE ADMINISTRATIVE ALLOWANCE PER13 CENTAGE. 

14 (a) SPECIFICATION BY ALLIANCE.—Before obtaining 

15 bids under section 6004 from health plans for a year, each 

16 regional alliance shall establish the administrative allow17 ance for the operation of the regional alliance in the year. 

18 (b) ADMINISTRATIVE ALLOWANCE PERCENTAGE.— 

19 Subject to subsection (c), the regional alliance shall com20 pute an administrative allowance percentage for each year 

21 equal to— 

22 (1) the administrative allowance determined 

23 under subsection (a) for the year, divided by 

24 (2) the total of the amounts payable to regional 

25 alliance health plans under subpart A (as estimated 
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1 by the alliance and determined without regard to 

2 section 1345(d)). 

(c) LIMITATION TO 21 3 ⁄2 PERCENT.—In no case shall 

4 an administrative allowance percentage exceed 2.5 per5 cent. 

6 SEC. 1353. PAYMENTS TO THE FEDERAL GOVERNMENT FOR 

7 ACADEMIC HEALTH CENTERS AND GRAD8 UATE MEDICAL EDUCATION. 

9 Each regional alliance shall make payment to the 

10 Secretary of an amount equal to the reduction in pay11 ments by the alliance to regional alliance health plans at12 tributable to section 1351(b)(2)(A)(ii). 

13 Subpart C—Financial Management 

14 SEC. 1361. MANAGEMENT OF FINANCES AND RECORDS. 

15 (a) IN GENERAL.—Each regional alliance shall com16 ply with standards established under section 1571(b) (re17 lating to the management of finances, maintenance of 

18 records, accounting practices, auditing procedures, and fi19 nancial reporting) and under section 1591(d) (relating to 

20 employer payments). 

21 (b) SPECIFIC PROVISIONS.—In accordance with such 

22 standards— 

23 (1) FINANCIAL STATEMENTS.— 
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1 (A) IN GENERAL.—Each regional alliance 

2 shall publish periodic audited financial state3 ments. 

4 (B) ANNUAL FINANCIAL AUDIT.— 

5 (i) IN GENERAL.—Each regional alli6 ance shall have an annual financial audit 

7 conducted by an independent auditor in ac8 cordance with generally accepted auditing 

9 standards. 

10 (ii) PUBLICATION.—A report on each 

11 such audit shall be made available to the 

12 public at nominal cost. 

13 (iii) REQUIRED ACTIONS FOR DEFI14 CIENCIES.—If the report from such an 

15 audit does not bear an unqualified opinion, 

16 the alliance shall take such steps on a 

17 timely basis as may be necessary to correct 

18 any material deficiency identified in the re19 port. 

20 (C) ELIGIBILITY ERROR RATES.—Each re21 gional alliance shall make eligibility determina22 tions for premium discounts, liability reduc23 tions, and cost sharing reductions under sec24 tions 6104 and 6123, section 6113, and section 

25 1371, respectively, in a manner that maintains 
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1 the error rates below an applicable maximum 

2 permissible error rate specified by the Secretary 

3 (or the Secretary of Labor with respect to sec4 tion 6123). In specifying such a rate, the Sec5 retary shall take into account maximum permis6 sible error rates recognized by the Federal Gov7 ernment under comparable State-administered 

8 programs. 

9 (2) SAFEGUARDING OF FUNDS.—Each regional 

10 alliance shall safeguard family, employer, State, and 

11 Federal government payments to the alliance in ac12 cordance with fiduciary standards and shall hold 

13 such payments in financial institutions and instru14 ments that meet standards recognized or established 

15 by the Secretary, in consultation with the Secre16 taries of Labor and the Treasury and taking into ac17 count current Federal laws and regulations relating 

18 to fiduciary responsibilities and financial manage19 ment of public funds. 

20 (3) CONTINGENCIES.—Each regional alliance 

21 shall provide that any surplus of funds resulting 

22 from an estimation discrepancy described in section 

23 9201(e)(1), up to a reasonable amount specified by 

24 the Secretary, shall be held in a contingency fund 
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1 established by the alliance and used to fund any fu2 ture shortfalls resulting from such a discrepancy. 

3 (4) AUDITING OF EMPLOYER PAYMENTS.— 

4 (A) IN GENERAL.—Each regional alliance 

5 is responsible for auditing the records of re6 gional alliance employers to assure that em7 ployer payments (including the payment of 

8 amounts withheld) were made in the appro9 priate amount as provided under subpart A of 

10 part 2 of subtitle B of title VI. 

11 (B) EMPLOYERS WITH EMPLOYEES RESID12 ING IN DIFFERENT ALLIANCE AREAS.—In the 

13 case of a regional alliance employer which has 

14 employees who reside in more than one alliance 

15 area, the Secretary of Labor, in consultation 

16 with the Secretary, shall establish a process for 

17 the coordination of regional alliance auditing 

18 activities among the regional alliances involved. 

19 (C) APPEAL.—In the case of an audit con20 ducted by a regional alliance on an employer 

21 under this paragraph, an employer or other re22 gional alliance that is aggrieved by the deter23 mination in the audit is entitled to review of 

24 such audit by the Secretary of Labor in a man25 ner to be provided by such Secretary. 
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1 Subpart D—Reductions in Cost Sharing; Income 

2 Determinations 

3 SEC. 1371. REDUCTION IN COST SHARING FOR LOW-INCOME 

4 FAMILIES. 

5 (a) REDUCTION.— 

6 (1) IN GENERAL.—Subject to subsection (b), in 

7 the case of a family that is enrolled in a regional al8 liance health plan and that is either (A) an AFDC 

9 or SSI family or (B) is determined under this sub10 part to have family adjusted income below 150 per11 cent of the applicable poverty level, the family is en12 titled to a reduction in cost sharing in accordance 

13 with this section. 

14 (2) TIMING OF REDUCTION.—The reduction in 

15 cost sharing shall only apply to items and services 

16 furnished after the date the application for such re17 duction is approved under section 1372(c) and be18 fore the date of termination of the reduction under 

19 this subpart, or, in the case of an AFDC or SSI 

20 family, during the period in which the family is such 

21 a family. 

22 (3) INFORMATION TO PROVIDERS AND

23 PLANS.—Each regional alliance shall provide, 

24 through electronic means and otherwise, health care 

25 providers and regional alliance health plans with ac26 cess to such information as may be necessary in 
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1 order to provide for the cost sharing reductions 

2 under this section. 

3 (b) LIMITATION.—No reduction in cost sharing under 

4 subsection (c)(1) shall be available for families residing 

5 in an alliance area if the regional alliance for the area 

6 determines that there are sufficient low-cost plans (as de7 fined in section 6104(b)(3)) that are lower or combination 

8 cost sharing plans available in the alliance area to enroll 

9 AFDC and SSI families and families with family adjusted 

10 income below 150 percent of the applicable poverty level. 

11 (c) AMOUNT OF COST SHARING REDUCTION.— 

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

13 the reduction in cost sharing under this section shall 

14 be such reduction as will reduce cost sharing to the 

15 level of a lower or combination cost sharing plan. 

16 (2) SPECIAL TREATMENT OF CERTAIN AFDC

17 AND SSI FAMILIES.—In the case of an AFDC or SSI 

18 family enrolled in a lower or combination cost shar19 ing plan or receiving a reduction in cost sharing 

20 under paragraph (1), the amount of copayment ap21 plied with respect to an item or service (other than 

22 with respect to hospital emergency room services for 

23 which there is no emergency medical condition, as 

24 defined in section 1867(e)(1) of the Social Security 

25 Act) shall be an amount equal to 20 percent of the 
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1 copayment amount otherwise applicable under sec2 tions 1135 and 1136, rounded to the nearest dollar. 

3 (d) ADMINISTRATION.— 

4 (1) IN GENERAL.—In the case of an approved 

5 family (as defined in section 1372(b)(3)) enrolled in 

6 a regional alliance health plan, the regional alliance 

7 shall pay the plan for cost sharing reductions (other 

8 than cost sharing reductions under subsection 

9 (c)(2)) provided under this section and included in 

10 payments made by the plan to its providers. 

11 (2) ESTIMATED PAYMENTS, SUBJECT TO REC12 ONCILIATION.—Such payment shall be made initially 

13 on the basis of reasonable estimates of cost sharing 

14 reductions incurred by such a plan with respect to 

15 approved families and shall be reconciled not less 

16 often than quarterly based on actual claims for 

17 items and services provided. 

18 (e) NO COST SHARING FOR INDIANS AND CERTAIN

19 VETERANS AND MILITARY PERSONNEL.—The provisions 

20 of section 6104(a)(3) shall apply to cost sharing reduc21 tions under this section in the same manner as such provi22 sions apply to premium discounts under section 6104. 

23 SEC. 1372. APPLICATION PROCESS FOR COST SHARING RE24 DUCTIONS. 

25 (a) APPLICATION.— 
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1 (1) IN GENERAL.—A regional alliance eligible 

2 family may apply for a determination of the family 

3 adjusted income of the family, for the purpose of es4 tablishing eligibility for cost sharing reductions 

5 under section 1371. 

6 (2) FORM.—An application under this section 

7 shall include such information as may be determined 

8 by the regional alliance (consistent with rules devel9 oped by the Secretary) and shall include at least in10 formation about the family’s employment status and 

11 income. 

12 (b) TIMING.— 

13 (1) IN GENERAL.—An application under this 

14 section may be filed at such times as the Secretary 

15 may provide, including during any open enrollment 

16 period, at the time of a move, or after a change in 

17 life circumstances (such as unemployment or di18 vorce) affecting class of enrollment or amount of 

19 family share or repayment amount. 

20 (2) CONSIDERATION.—Each regional alliance 

21 shall approve or disapprove an application under this 

22 section, and notify the applicant of such decision, 

23 within such period (specified by the Secretary) after 

24 the date of the filing of the application. 
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1 (3) APPROVED FAMILY DEFINED.—In this sec2 tion and section 1371, the term ‘‘approved family’’ 

3 means a family for which an application under this 

4 section is approved, until the date of termination of 

5 such approval under this section. 

6 (c) APPROVAL OF APPLICATION.— 

7 (1) IN GENERAL.—A regional alliance shall ap8 prove an application of a family under this section 

9 filed in a month if the application demonstrates that 

10 the family adjusted income of the family (as defined 

11 in subsection (d) and determined under paragraph 

12 (2)) is (or is expected to be) less than 150 percent 

13 of the applicable poverty level. 

14 (2) USE OF CURRENT INCOME.—In making the 

15 determination under paragraph (1), a regional alli16 ance shall take into account the income for the pre17 vious 3-month period and current wages from em18 ployment (if any), consistent with rules specified by 

19 the Secretary. 

20 (d) FAMILY ADJUSTED INCOME.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (4), in this Act the term ‘‘family adjusted in23 come’’ means, with respect to a family, the sum of 

24 the adjusted incomes (as defined in paragraph (2)) 
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1 for all members of the family (determined without 

2 regard to section 1012). 

3 (2) ADJUSTED INCOME.—In paragraph (1), the 

4 term ‘‘adjusted income’’ means, with respect to an 

5 individual, adjusted gross income (as defined in sec6 tion 62(a) of the Internal Revenue Code of 1986)— 

7 (A) determined without regard to sections 

8 135, 162(l), 911, 931, and 933 of such Code, 

9 and 

10 (B) increased by the amount of interest re11 ceived or accrued by the individual which is ex12 empt from tax. 

13 (3) PRESENCE OF ADDITIONAL DEPEND14 ENTS.—At the option of an individual, a family may 

15 include (and not be required to separate out) the in16 come of other individuals who are claimed as de17 pendents of the family for income tax purposes, but 

18 such individuals shall not be counted as part of the 

19 family for purposes of determining the size of the 

20 family. 

21 (e) REQUIREMENT FOR PERIODIC CONFIRMATION

22 AND VERIFICATION AND NOTICES.— 

23 (1) CONFIRMATION AND VERIFICATION RE24 QUIREMENT.—The continued eligibility of a family 
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1 for cost sharing reductions under this section is con2 ditioned upon the family’s eligibility being— 

3 (A) confirmed periodically by the regional 

4 alliance, and 

5 (B) verified (through the filing of a new 

6 application under this section) by the regional 

7 alliance at the time income reconciliation state8 ments are required to be filed under section 

9 1375. 

10 (2) RULES.—The Secretary shall issue rules re11 lated to the manner in which alliances confirm and 

12 verify eligibility under this section. 

13 (3) NOTICES OF CHANGES IN INCOME AND EM14 PLOYMENT STATUS.— 

15 (A) IN GENERAL.—Each approved family 

16 shall promptly notify the regional alliance of 

17 any material increase (as defined by the Sec18 retary) in the family adjusted income. 

19 (B) RESPONSE.—If a regional alliance re20 ceives notice under subparagraph (A) (or from 

21 an employer under section 1602(b)(3)(A)(i)) or 

22 otherwise receives information indicating a po23 tential significant change in the family’s em24 ployment status or increase in adjusted family 

25 income, the regional alliance shall promptly 
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1 take steps necessary to reconfirm the family’s 

2 eligibility. 

3 (f) TERMINATION OF COST SHARING REDUCTION.— 

4 The regional alliance shall, after notice to the family, ter5 minate the reduction of cost sharing under this subpart 

6 for an approved family if the family fails to provide for 

7 confirmation or verification or notice required under sub8 section (c) on a timely basis or the alliance otherwise de9 termines that the family is no longer eligible for such re10 duction. The previous sentence shall not prevent the fam11 ily from subsequently reapplying for cost sharing reduc12 tion under this section. 

13 (g) TREATMENT OF AFDC AND SSI RECIPIENTS.— 

14 (1) NO APPLICATION REQUIRED.—AFDC and 

15 SSI families are not required to make an application 

16 under this section. 

17 (2) NOTICE REQUIREMENT.—Each State (and 

18 the Secretary) shall notify each regional alliance, in 

19 a manner specified by the Secretary, of the identity 

20 (and period of eligibility under the AFDC or SSI 

21 programs) of each AFDC and SSI recipient, unless 

22 such a recipient elects (in a manner specified by the 

23 Secretary) not to accept the reduction of cost shar24 ing under this section. 
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1 SEC. 1373. APPLICATION FOR PREMIUM DISCOUNTS AND 

2 REDUCTION IN LIABILITIES TO ALLIANCES. 

3 (a) IN GENERAL.—Any regional alliance eligible fam4 ily may apply for a determination of the family adjusted 

5 income of the family, for the purpose of establishing eligi6 bility for a premium discount under section 6104 or a re7 duction in liability under section 6113. 

8 (b) TIMING.—Such an application may be filed at 

9 such times as an application for a cost sharing reduction 

10 may be filed under section 1372(b) and also may be filed 

11 after the end of the year to obtain a rebate for excess pre12 mium payments made during a year. 

13 (c) APPROVAL OF APPLICATION.— 

14 (1) IN GENERAL.—A regional alliance shall ap15 prove an application of a family under this section 

16 filed in a month— 

17 (A) for a premium discount under section 

18 6104, if the application demonstrates that fam19 ily adjusted income of the family (as deter20 mined under paragraph (2)) is (or is expected 

21 to be) less than 150 percent of the applicable 

22 poverty level, or 

23 (B) for a reduction in liability under sec24 tion 6113, if the application demonstrates that 

25 the wage-adjusted income (as defined in sub26 section 6113(d)) of the family (as determined 
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1 under paragraph (2)) is (or is expected to be) 

2 less than 250 percent of the applicable poverty 

3 level. 

4 (2) USE OF CURRENT INCOME.—In making the 

5 determination under paragraph (1), a regional alli6 ance shall take into account the income for the pre7 vious 3-month period and current wages from em8 ployment (if any) and the statement of estimated in9 come for the year (filed under section 1374(c)), con10 sistent with rules specified by the Secretary. 

11 (d) REQUIREMENT FOR PERIODIC CONFIRMATION

12 AND VERIFICATION AND NOTICES.—The provisions of 

13 subsection (e) of section 1372 shall apply under this sec14 tion in the same manner as it applies under such section, 

15 except that any reference to family adjusted income is 

16 deemed a reference to wage-adjusted income. 

17 SEC. 1374. GENERAL PROVISIONS RELATING TO APPLICA18 TION PROCESS. 

19 (a) DISTRIBUTION OF APPLICATIONS.—Each re20 gional alliance shall distribute applications under this sub21 part directly to consumers and through employers, banks, 

22 and designated public agencies. 

23 (b) TO WHOM APPLICATION MADE.—Applications 

24 under this subpart shall be filed, by person or mail, with 

25 a regional alliance or an agency designated by the State 
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1 for this purpose. The application may be submitted with 

2 an application to enroll with a health plan under this sub3 title or separately. 

4 (c) INCOME STATEMENT.—Each application shall in5 clude a declaration of estimated annual income for the 

6 year involved. 

7 (d) FORM AND CONTENTS.—An application for a dis8 count or reduction under this subpart shall be in a form 

9 and manner specified by the Secretary and shall require 

10 the provision of information necessary to make the deter11 minations required under this subpart. 

12 (e) FREQUENCY OF APPLICATIONS.— 

13 (1) IN GENERAL.—An application under this 

14 subpart may be filed at any time during the year 

15 (including, in the case of section 1373, during the 

16 reconciliation process). 

17 (2) CORRECTION OF INCOME.—Nothing in 

18 paragraph (1) shall be construed as preventing an 

19 individual or family from, at any time, submitting an 

20 application to reduce the amount of premium dis21 count or reduction of liability under this subpart 

22 based upon an increase in income from that stated 

23 in the previous application. 

24 (f) TIMING OF REDUCTIONS AND DISCOUNTS.— 
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1 (1) IN GENERAL.—Subject to reconciliation 

2 under section 1375, premium discounts and cost 

3 sharing reductions under this subpart shall be ap4 plied to premium payments required (and for ex5 penses incurred) after the date of approval of the 

6 application under this subpart. 

7 (2) AFDC AND SSI RECIPIENTS.—In the case 

8 of an AFDC or SSI family, in applying paragraph 

9 (1), the date of approval of benefits under the 

10 AFDC or SSI program shall be considered the date 

11 of approval of an application under this subpart. 

12 (g) VERIFICATION.—The Secretary shall provide for 

13 verification, on a sample basis or other basis, of the infor14 mation supplied in applications under this part. This 

15 verification shall be separate from the reconciliation pro16 vided under section 1375. 

17 (h) HELP IN COMPLETING APPLICATIONS.—Each re18 gional alliance shall assist individuals in the filing of appli19 cations and income reconciliation statements under this 

20 subpart. 

21 (i) PENALTIES FOR INACCURATE INFORMATION.— 

22 (1) INTEREST FOR UNDERSTATEMENTS.—Each 

23 individual who knowingly understates income re24 ported in an application to a regional alliance under 

25 this subpart or otherwise makes a material misrepre-
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1 sentation of information in such an application shall 

2 be liable to the alliance for excess payments made 

3 based on such understatement or misrepresentation, 

4 and for interest on such excess payments at a rate 

5 specified by the Secretary. 

6 (2) PENALTIES FOR MISREPRESENTATION.—In 

7 addition to the liability established under paragraph 

8 (1), each individual who knowingly misrepresents 

9 material information in an application under this 

10 subpart to a regional alliance shall be liable to the 

11 State in which the alliance is located for $2,000 or, 

12 if greater, three times the excess payments made 

13 based on such misrepresentation. The State shall 

14 provide for the transfer of a significant portion of 

15 such amount to the regional alliance involved. 

16 SEC. 1375. END-OF-YEAR RECONCILIATION FOR PREMIUM 

17 DISCOUNT AND REPAYMENT REDUCTION 

18 WITH ACTUAL INCOME. 

19 (a) IN GENERAL.—In the case of a family whose ap20 plication for a premium discount or reduction of liability 

21 for a year has been approved before the end of the year 

22 under this subpart, the family shall, subject to subsection 

23 (c) and by the deadline specified in section 1344(b) file 

24 with the regional alliance an income reconciliation state25 ment to verify the family’s adjusted income or wage-ad-
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1 justed income, as the case may be, for the previous year. 

2 Such a statement shall contain such information as the 

3 Secretary may specify. Each regional alliance shall coordi4 nate the submission of such statements with the notice 

5 and payment of family payments due under section 1344. 

6 (b) RECONCILIATION OF PREMIUM DISCOUNT AND

7 LIABILITY ASSISTANCE BASED ON ACTUAL INCOME.— 

8 Based on and using the income reported in the reconcili9 ation statement filed under subsection (a) with respect to 

10 a family, the regional alliance shall compute the amount 

11 of premium discount or reduction in liability that should 

12 have been provided under section 6104 or section 6113 

13 with respect for the family for the year involved. If the 

14 amount of such discount or liability reduction computed 

15 is— 

16 (1) greater than the amount that has been pro17 vided, the family is liable to the regional alliance to 

18 pay (directly or through an increase in future family 

19 share of premiums or other payments) a total 

20 amount equal to the amount of the excess payment, 

21 or 

22 (2) less than the amount that has been pro23 vided, the regional alliance shall pay to the family 

24 (directly or through a reduction in future family 
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1 share of premiums or other payments) a total 

2 amount equal to the amount of the deficit. 

3 (c) NO RECONCILIATION FOR AFDC AND SSI FAMI4 LIES; NO RECONCILIATION FOR COST SHARING REDUC5 TIONS.—No reconciliation statement is required under 

6 this section— 

7 (1) with respect to cost sharing reductions pro8 vided under section 1372, or 

9 (2) for a family that only claims a premium dis10 count or liability reduction under this subpart on the 

11 basis of being an AFDC or SSI family. 

12 (d) DISQUALIFICATION FOR FAILURE TO FILE.—In 

13 the case of any family that is required to file a statement 

14 under this section in a year and that fails to file such a 

15 statement by the deadline specified, members of the family 

16 shall not be eligible for premium reductions under section 

17 6104 or reductions in liability under section 6113 until 

18 such statement is filed. A regional alliance, using rules es19 tablished by the Secretary, shall waive the application of 

20 this subsection if the family establishes, to the satisfaction 

21 of the alliance under such rules, good cause for the failure 

22 to file the statement on a timely basis. 

23 (e) PENALTIES FOR FALSE INFORMATION.—Any in24 dividual that provides false information in a statement 

25 under subsection (a) is subject to the same liabilities as 
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1 are provided under section 1374(h) for a misrepresenta2 tion of material fact described in such section. 

3 (f) NOTICE OF REQUIREMENT.—Each regional alli4 ance (directly or in coordination with other regional alli5 ances) shall provide for written notice, at the end of each 

6 year, of the requirement of this section to each family 

7 which had received premium discount or reduction in li8 ability under this subpart in any month during the pre9 ceding year and to which such requirement applies. 

10 (g) TRANSMITTAL OF INFORMATION; 

11 VERIFICATION.— 

12 (1) IN GENERAL.—Each participating State 

13 shall transmit annually to the Secretary such infor14 mation relating to the income of families for the pre15 vious year as the Secretary may require to verify 

16 such income under this subpart. 

17 (2) VERIFICATION.—Each participating State 

18 may use such information as it has available to it to 

19 assist regional alliances in verifying income of fami20 lies with applications filed under this subpart. The 

21 Secretary of the Treasury may, consistent with sec22 tion 6103 of the Internal Revenue Code of 1986, 

23 permit return information to be disclosed and used 

24 by a participating State in verifying such income but 

25 only in accordance with such section and only if the 
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1 information is not directly disclosed to a regional al2 liance. 

3 (h) CONSTRUCTION.—Nothing in this section shall be 

4 construed as authorizing reconciliation of any cost sharing 

5 reduction provided under this subpart. 

6 PART 4—RESPONSIBILITIES AND AUTHORITIES 

7 OF CORPORATE ALLIANCES 

8 SEC. 1381. CONTRACTS WITH HEALTH PLANS. 

9 (a) CONTRACTS WITH PLANS.—Subject to section 

10 1382, each corporate alliance may— 

11 (1) offer to individuals eligible to enroll under 

12 section 1311(c) coverage under an appropriate self13 insured health plan (as defined in section 1400(b)), 

14 or 

15 (2) negotiate with a State-certified health plan 

16 to enter into a contract with the plan for the enroll17 ment of such individuals under the plan, 

18 or do both. 

19 (b) TERMS OF CONTRACTS WITH STATE-CERTIFIED

20 HEALTH PLANS.—Contracts under this section between 

21 a corporate alliance and a State-certified health plan may 

22 contain such provisions (not inconsistent with the require23 ments of this title) as the alliance and plan may provide, 

24 except that in no case does such contract remove the obli25 gation of the sponsor of the corporate alliance to provide 
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1 for health benefits to corporate alliance eligible individuals 

2 consistent with this part. 

3 SEC. 1382. OFFERING CHOICE OF HEALTH PLANS FOR EN4 ROLLMENT. 

5 (a) IN GENERAL.—Each corporate alliance must pro6 vide to each eligible enrollee with respect to the alliance 

7 a choice of health plans among the plans which have con8 tracts with the alliance under section 1381. 

9 (b) OFFERING OF PLANS BY ALLIANCES.—A cor10 porate alliance shall include among its health plan offer11 ings for any eligible enrollee at least 3 health plans to en12 rollees, of which the alliance must offer— 

13 (1) at least one fee-for-service plan (as defined 

14 in section 1322(b)(2)); and 

15 (2) at least two health plans that are not fee16 for-service plans. 

17 SEC. 1383. ENROLLMENT; ISSUANCE OF HEALTH SECURITY 

18 CARD. 

19 (a) IN GENERAL.— 

20 (1) ENROLLMENT OF ALLIANCE ELIGIBLE INDI21 VIDUALS.—Each corporate alliance shall assure that 

22 each alliance eligible individual with respect to the 

23 alliance is enrolled in a corporate alliance health 

24 plan offered by the alliance, and shall establish and 

25 maintain methods and procedures consistent with 
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1 this section sufficient to assure such enrollment. 

2 Such methods and procedures shall assure the en3 rollment of such individuals at the time they first 

4 become alliance eligible individuals with respect to 

5 the alliance. 

6 (2) ISSUANCE OF HEALTH SECURITY CARDS.— 

7 A corporate alliance is responsible for the issuance 

8 of health security cards to corporate alliance eligible 

9 individuals under section 1001(b). 

10 (b) RESPONSE TO POINT-OF-SERVICE NOTICES.—If 

11 a corporate alliance is notified under section 1323(b)(2) 

12 regarding an individual who has received services and ap13 pears to be a corporate alliance eligible individual— 

14 (1) the alliance shall promptly ascertain the in15 dividual’s eligibility as a corporate alliance eligible 

16 individual; and 

17 (2) if the alliance determines that the individual 

18 is a corporate alliance eligible individual— 

19 (A) the alliance shall promptly provide for 

20 the enrollment of the individual in a health plan 

21 offered by the alliance (and notify the Secretary 

22 of Labor of such enrollment), and 

23 (B) the alliance shall forward the claim for 

24 payment for the services to the health plan in 

25 which the individual is so enrolled and the plan 
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1 shall make payment to the provider for such 

2 claim (in a manner consistent with require3 ments of the Secretary of Labor). 

4 (c) ANNUAL OPEN ENROLLMENT; ENROLLMENT OF

5 FAMILY MEMBERS; OVERSUBSCRIPTION OF PLANS.—The 

6 provisions of subsections (d) through (f) of section 1323 

7 shall apply to a corporate alliance in the same manner 

8 as such provisions apply to a regional alliance. 

9 (d) TERMINATION.— 

10 (1) IN GENERAL.—The provisions of section 

11 1323(g)(1) shall apply to a corporate alliance in the 

12 same manner as such provisions apply to a regional 

13 alliance. 

14 (2) FAILURE TO PAY PREMIUMS.—If a cor15 porate alliance fails to make premium payments to 

16 a health plan, the plan, after reasonable written no17 tice to the alliance and the Secretary of Labor, may 

18 terminate coverage (and any contract with the alli19 ance under this part). If such coverage is terminated 

20 the corporate alliance is responsible for the prompt 

21 enrollment of alliance eligible individuals whose cov22 erage is terminated in another corporate alliance 

23 health plan. 

24 (e) CORPORATE ALLIANCE TRANSITION.—Each cor25 porate alliance must provide coverage— 
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1 (1) as of the first day of any month in which 

2 an individual first becomes a corporate alliance eligi3 ble individual, and 

4 (2) through the end of the month in the case 

5 of a corporate alliance eligible individual who loses 

6 such eligibility during the month. 

7 SEC. 1384. COMMUNITY-RATED PREMIUMS WITHIN PRE8 MIUM AREAS. 

9 (a) APPLICATION OF COMMUNITY-RATED PRE10 MIUMS.—The premiums charged by a corporate alliance 

11 for enrollment in a corporate alliance health plan (not tak12 ing into account any employer premium payment required 

13 under section 6131) shall vary only by class of family en14 rollment (specified in section 1011(c)) and by premium 

15 area. 

16 (b) DESIGNATION OF PREMIUM AREAS.— 

17 (1) DESIGNATION.—Each corporate alliance 

18 shall designate premium areas to be used for the im19 position of premiums (and calculation of employer 

20 premium payments) under this Act. 

21 (2) CONDITIONS.—The boundaries of such 

22 areas shall reasonably reflect labor market areas or 

23 health care delivery areas and shall be consistent 

24 with rules the Secretary of Labor establishes (con25 sistent with paragraph (3)) so that within such 
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1 areas there are not substantial differences in average 

2 per capita health care expenditures. 

3 (3) ANTI-REDLINING.—The provisions of para4 graphs (4) and (5) of section 1202(b) (relating to 

5 redlining and metropolitan statistical areas) shall 

6 apply to the establishment of premium areas in the 

7 same manner as they apply to the establishment of 

8 the boundaries of regional alliance areas. 

9 (c) APPLICATIONS OF CLASSES OF ENROLLMENT.— 

10 (1) IN GENERAL.—The premiums shall be ap11 plied under this section based on class of family en12 rollment and shall vary based on such class in ac13 cordance with factors specified by the corporate alli14 ance. 

15 (2) BASIS FOR FACTORS.—Such factors shall be 

16 the same in each premium area and shall take into 

17 account such appropriate considerations (including 

18 the considerations the Board takes into account in 

19 the establishment of premium class factors under 

20 section 1531 and the costs of regional alliance health 

21 plans providing the comprehensive benefit package 

22 for families enrolled in the different classes) as the 

23 alliance considers appropriate, consistent with rules 

24 the Secretary of Labor establishes. 
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1 (d) SPECIAL TREATMENT OF MULTIEMPLOYER ALLI2 ANCES.—The Secretary of Labor shall provide for such 

3 exceptions to the requirements of this section in the case 

4 of a corporate alliance with a sponsor described in section 

5 1311(b)(1)(B) as may be appropriate to reflect the unique 

6 and historical relationship between the employers and em7 ployees under such alliances. 

8 SEC. 1385. ASSISTANCE FOR LOW-WAGE FAMILIES. 

9 Each corporate alliance shall make an additional con10 tribution towards the enrollment in health plans of the al11 liance by certain low-wage families in accordance with sec12 tion 6131(b)(2). 

13 SEC. 1386. CONSUMER INFORMATION AND MARKETING; 

14 DATA COLLECTION AND QUALITY; ADDI15 TIONAL DUTIES. 

16 The provisions of sections 1325(a), 1327, and 1328 

17 shall apply to a corporate alliance in the same manner 

18 as such provisions apply to a regional alliance. 

19 SEC. 1387. PLAN AND INFORMATION REQUIREMENTS. 

20 (a) IN GENERAL.—A corporate alliance shall provide 

21 a written submission to the Secretary of Labor (in such 

22 form as the Secretary may require) detailing how the cor23 porate alliance will carry out its activities under this part. 

24 (b) ANNUAL INFORMATION.—A corporate alliance 

25 shall provide to the Secretary of Labor each year, in such 
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1 form and manner as the Secretary may require, such in2 formation as the Secretary may require in order to mon3 itor the compliance of the alliance with the requirements 

4 of this part. 

5 (c) ANNUAL NOTICE OF EMPLOYEES OR PARTICI6 PANTS.— 

7 (1) CORPORATE ALLIANCE.—Each corporate al8 liance shall submit to the Secretary of Labor, by not 

9 later than March 1 of each year, information on the 

10 number of full-time employees or participants ob11 taining coverage through the alliance as of January 

12 1 of that year. 

13 (2) EMPLOYERS THAT BECOME LARGE EMPLOY14 ERS.—Each employer that is not a corporate alli15 ance but employs 5,000 full-time employees as of 

16 January 1 of a year, shall submit to the Secretary 

17 of Labor, by not later than March 1 of the year, in18 formation on the number of such employees. 

19 SEC. 1388. MANAGEMENT OF FUNDS; RELATIONS WITH EM20 PLOYEES. 

21 (a) MANAGEMENT OF FUNDS.—The management of 

22 funds by a corporate alliance shall be subject to the appli23 cable fiduciary requirements of part 4 of subtitle B of title 

24 I of the Employee Retirement Income Security Act of 
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1 1974, together with the applicable enforcement provisions 

2 of part 5 of subtitle B of title I of such Act. 

3 (b) MANAGEMENT OF FINANCES AND RECORDS; AC4 COUNTING SYSTEM.—Each corporate alliance shall comply 

5 with standards relating to the management of finances 

6 and records and accounting systems as the Secretary of 

7 Labor shall specify. 

8 SEC. 1389. COST CONTROL. 

9 Each corporate alliance shall control covered expendi10 tures in a manner that meets the requirements of part 

11 2 of subtitle A of title VI. 

12 SEC. 1390. PAYMENTS BY CORPORATE ALLIANCE EMPLOY13 ERS TO CORPORATE ALLIANCES. 

14 (a) LARGE EMPLOYER ALLIANCES.—In the case of 

15 a corporate alliance with a sponsor described in section 

16 1311(b)(1)(A), the sponsor shall provide for the funding 

17 of benefits, through insurance or otherwise, consistent 

18 with section 6131, the applicable solvency requirements of 

19 sections 1394, 1395, and 1396, and any rules established 

20 by the Secretary of Labor. 

21 (b) OTHER ALLIANCES.—In the case of a corporate 

22 alliance with a sponsor described in subparagraph (B) or 

23 (C) of section 1311(b)(1), a corporate alliance employer 

24 shall make payment of the employer premiums required 

25 under section 6131 under rules established by the cor-
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1 porate alliance, which rules shall be consistent with rules 

2 established by the Secretary of Labor. 

3 SEC. 1391. COORDINATION OF PAYMENTS. 

4 (a) PAYMENTS OF CERTAIN AMOUNTS TO REGIONAL

5 ALLIANCES.—In the case of a married couple in which one 

6 spouse is a qualifying employee of a regional alliance em7 ployer and the other spouse is a qualifying employee of 

8 a corporate alliance employer, if the couple is enrolled with 

9 a regional alliance health plan, the corporate alliance 

10 (which receives employer premium payments from such 

11 corporate alliance employer with respect to such employee) 

12 shall pay to the regional alliance the amounts so paid. 

13 (b) PAYMENTS OF CERTAIN AMOUNTS TO COR14 PORATE ALLIANCES.—In the case of a married couple in 

15 which one spouse is a qualifying employee of a corporate 

16 alliance employer and the other spouse is a qualifying em17 ployee of another corporate alliance employer, the cor18 porate alliance of the corporate alliance health plan in 

19 which the couple is not enrolled shall pay to the corporate 

20 alliance of the plan in which the couple is enrolled any 

21 employer premium payments received from such corporate 

22 alliance employer with respect to such employee. 
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1 SEC. 1392. APPLICABILITY OF ERISA ENFORCEMENT MECH2 ANISMS FOR ENFORCEMENT OF CERTAIN RE3 QUIREMENTS. 

4 The provisions of sections 502 (relating to civil en5 forcement) and 504 (relating to investigative authority) of 

6 the Employee Retirement Income Security Act of 1974 

7 shall apply to enforcement by the Secretary of Labor of 

8 this part in the same manner and to same extent as such 

9 provisions apply to enforcement of title I of such Act. 

10 SEC. 1393. APPLICABILITY OF CERTAIN ERISA PROTEC11 TIONS TO ENROLLED INDIVIDUALS. 

12 The provisions of sections 510 (relating to inter13 ference with rights protected under Act) and 511 (relating 

14 to coercive interference) of the Employee Retirement In15 come Security Act of 1974 shall apply, in relation to the 

16 provisions of this Act, with respect to individuals enrolled 

17 under corporate alliance health plans in the same manner 

18 and to the same extent as such provisions apply, in rela19 tion to the provisions of the Employee Retirement Income 

20 Security Act of 1974, with respect to participants and 

21 beneficiaries under employee welfare benefit plans covered 

22 by title I of such Act. 

23 SEC. 1394. DISCLOSURE AND RESERVE REQUIREMENTS. 

24 (a) IN GENERAL.—The Secretary of Labor shall en25 sure that each corporate alliance health plan which is a 

26 self-insured plan maintains plan assets in trust as pro-
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1 vided in section 403 of the Employee Retirement Income 

2 Security Act of 1974— 

3 (1) without any exemption under section 

4 403(b)(4) of such Act, and 

5 (2) in amounts which the Secretary determines 

6 are sufficient to provide at any time for payment to 

7 health care providers of all outstanding balances 

8 owed by the plan at such time. 

9 The requirements of the preceding sentence may be met 

10 through letters of credit, bonds, or other appropriate secu11 rity to the extent provided in regulations of the Secretary. 

12 (b) DISCLOSURE.—Each self-insured corporate alli13 ance health plan shall notify the Secretary at such time 

14 as the financial reserve requirements of this section are 

15 not being met. The Secretary may assess a civil money 

16 penalty of not more than $100,000 against any corporate 

17 alliance for any failure to provide such notification in such 

18 form and manner and within such time periods as the Sec19 retary may prescribe by regulation. 

20 SEC. 1395. TRUSTEESHIP BY THE SECRETARY OF INSOL21 VENT CORPORATE ALLIANCE HEALTH PLANS. 

22 (a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

23 INSOLVENT PLANS.—Whenever the Secretary of Labor 

24 determines that a corporate alliance health plan which is 

25 a self-insured plan will be unable to provide benefits when 
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1 due or is otherwise in a financially hazardous condition 

2 as defined in regulations of the Secretary, the Secretary 

3 shall, upon notice to the plan, apply to the appropriate 

4 United States district court for appointment of the Sec5 retary as trustee to administer the plan for the duration 

6 of the insolvency. The plan may appear as a party and 

7 other interested persons may intervene in the proceedings 

8 at the discretion of the court. The court shall appoint the 

9 Secretary trustee if the court determines that the trustee10 ship is necessary to protect the interests of the enrolled 

11 individuals or health care providers or to avoid any unrea12 sonable deterioration of the financial condition of the plan 

13 or any unreasonable increase in the liability of the Cor14 porate Alliance Health Plan Insolvency Fund. The trustee15 ship of the Secretary shall continue until the conditions 

16 described in the first sentence of this subsection are rem17 edied or the plan is terminated. 

18 (b) POWERS AS TRUSTEE.—The Secretary of Labor, 

19 upon appointment as trustee under subsection (a), shall 

20 have the power— 

21 (1) to do any act authorized by the plan, this 

22 Act, or other applicable provisions of law to be done 

23 by the plan administrator or any trustee of the plan, 
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1 (2) to require the transfer of all (or any part) 

2 of the assets and records of the plan to the Sec3 retary as trustee, 

4 (3) to invest any assets of the plan which the 

5 Secretary holds in accordance with the provisions of 

6 the plan, regulations of the Secretary, and applicable 

7 provisions of law, 

8 (4) to do such other acts as the Secretary 

9 deems necessary to continue operation of the plan 

10 without increasing the potential liability of the Cor11 porate Alliance Health Plan Insolvency Fund, if 

12 such acts may be done under the provisions of the 

13 plan, 

14 (5) to require the corporate alliance, the plan 

15 administrator, any contributing employer, and any 

16 employee organization representing covered individ17 uals to furnish any information with respect to the 

18 plan which the Secretary as trustee may reasonably 

19 need in order to administer the plan, 

20 (6) to collect for the plan any amounts due the 

21 plan and to recover reasonable expenses of the trust22 eeship, 

23 (7) to commence, prosecute, or defend on behalf 

24 of the plan any suit or proceeding involving the plan, 
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1 (8) to issue, publish, or file such notices, state2 ments, and reports as may be required under regula3 tions of the Secretary or by any order of the court, 

4 (9) to terminate the plan and liquidate the plan 

5 assets in accordance with applicable provisions of 

6 this Act and other provisions of law, to restore the 

7 plan to the responsibility of the corporate alliance, 

8 or to continue the trusteeship, 

9 (10) to provide for the enrollment of individuals 

10 covered under the plan in an appropriate regional al11 liance health plan, and 

12 (11) to do such other acts as may be necessary 

13 to comply with this Act or any order of the court 

14 and to protect the interests of enrolled individuals 

15 and health care providers. 

16 (c) NOTICE OF APPOINTMENT.—As soon as prac17 ticable after the Secretary’s appointment as trustee, the 

18 Secretary shall give notice of such appointment to— 

19 (1) the plan administrator, 

20 (2) each enrolled individual, 

21 (3) each employer who may be liable for con22 tributions to the plan, and 

23 (4) each employee organization which, for pur24 poses of collective bargaining, represents enrolled in25 dividuals. 
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1 (d) ADDITIONAL DUTIES.—Except to the extent in2 consistent with the provisions of this Act or part 4 of sub3 title B of title I of the Employee Retirement Income Secu4 rity Act of 1974, or as may be otherwise ordered by the 

5 court, the Secretary of Labor, upon appointment as trust6 ee under this section, shall be subject to the same duties 

7 as those of a trustee under section 704 of title 11, United 

8 States Code, and shall have the duties of a fiduciary for 

9 purposes of such part 4. 

10 (e) OTHER PROCEEDINGS.—An application by the 

11 Secretary of Labor under this subsection may be filed not12 withstanding the pendency in the same or any other court 

13 of any bankruptcy, mortgage foreclosure, or equity receiv14 ership proceeding, or any proceeding to reorganize, con15 serve, or liquidate such plan or its property, or any pro16 ceeding to enforce a lien against property of the plan. 

17 (f) JURISDICTION OF COURT.— 

18 (1) IN GENERAL.—Upon the filing of an appli19 cation for the appointment as trustee or the issuance 

20 of a decree under this subsection, the court to which 

21 the application is made shall have exclusive jurisdic22 tion of the plan involved and its property wherever 

23 located with the powers, to the extent consistent 

24 with the purposes of this subsection, of a court of 

25 the United States having jurisdiction over cases 
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1 under chapter 11 of title 11, United States Code. 

2 Pending an adjudication under this section such 

3 court shall stay, and upon appointment by it of the 

4 Secretary of Labor as trustee, such court shall con5 tinue the stay of, any pending mortgage foreclosure, 

6 equity receivership, or other proceeding to reorga7 nize, conserve, or liquidate the plan, the sponsoring 

8 alliance, or property of such plan or alliance, and 

9 any other suit against any receiver, conservator, or 

10 trustee of the plan, the sponsoring alliance, or prop11 erty of the plan or alliance. Pending such adjudica12 tion and upon the appointment by it of the Sec13 retary as trustee, the court may stay any proceeding 

14 to enforce a lien against property of the plan or the 

15 sponsoring alliance or any other suit against the 

16 plan or the alliance. 

17 (2) VENUE.—An action under this subsection 

18 may be brought in the judicial district where the 

19 plan administrator resides or does business or where 

20 any asset of the plan is situated. A district court in 

21 which such action is brought may issue process with 

22 respect to such action in any other judicial district. 

23 (g) PERSONNEL.—In accordance with regulations of 

24 the Secretary of Labor, the Secretary shall appoint, retain, 

25 and compensate accountants, actuaries, and other profes-
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1 sional service personnel as may be necessary in connection 

2 with the Secretary’s service as trustee under this section. 

3 SEC. 1396. GUARANTEED BENEFITS UNDER TRUSTEESHIP 

4 OF THE SECRETARY. 

5 (a) IN GENERAL.—Subject to subsection (b), the Sec6 retary of Labor shall guarantee the payment of all benefits 

7 under a corporate alliance health plan which is a self-in8 sured plan while such plan is under the Secretary’s trust9 eeship under section 1395. 

10 (b) LIMITATIONS.—Any increase in the amount of 

11 benefits under the plan resulting from a plan amendment 

12 which was made, or became effective, whichever is later, 

13 within 180 days (or such other reasonable time as may 

14 be prescribed in regulations of the Secretary of Labor) be15 fore the date of the Secretary’s appointment as trustee 

16 of the plan shall be disregarded for purposes of deter17 mining the guarantee under this section. 

18 (c) CORPORATE ALLIANCE HEALTH PLAN INSOL19 VENCY FUND.— 

20 (1) ESTABLISHMENT.—The Secretary of Labor 

21 shall establish a Corporate Alliance Health Plan In22 solvency Fund (hereinafter in this part referred to 

23 as the ‘‘Fund’’) from which the Secretary shall au24 thorize payment of all guaranteed benefits under 

25 this section. 
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1 (2) RECEIPTS AND DISBURSEMENTS.— 

2 (A) RECEIPTS.—The Fund shall be cred3 ited with— 

4 (i) funds borrowed under paragraph 

5 (3), 

6 (ii) assessments collected under sec7 tion 1397, and 

8 (iii) earnings on investment of the 

9 Fund. 

10 (B) DISBURSEMENTS.—The Fund shall be 

11 available— 

12 (i) for making such payments as the 

13 Secretary of Labor determines are nec14 essary to pay benefits guaranteed under 

15 this section, 

16 (ii) to repay the Secretary of the 

17 Treasury such sums as may be borrowed 

18 (together with interest thereon) under 

19 paragraph (3), and 

20 (iii) to pay the operational and admin21 istrative expenses of the Fund. 

22 (3) BORROWING AUTHORITY.—At the direction 

23 of the Secretary of Labor, the Fund may, to the ex24 tent necessary to carry out the purposes of para25 graph (1), issue to the Secretary of the Treasury 
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1 notes or other obligations, in such forms and de2 nominations, bearing such maturities, and subject to 

3 such terms and conditions as may be prescribed by 

4 the Secretary of the Treasury. The total balance of 

5 the Fund obligations outstanding at any time shall 

6 not exceed $500,000,000. Such notes or other obli7 gations shall bear interest at a rate determined by 

8 the Secretary of the Treasury, taking into consider9 ation the current average market yield on out10 standing marketable obligations of the United States 

11 of comparable maturities during the month pre12 ceding the issuance of such notes or other obliga13 tions by the Fund. The Secretary of the Treasury 

14 shall purchase any notes or other obligations issued 

15 by the Fund under this paragraph, and for that pur16 pose the Secretary of the Treasury may use as a 

17 public debt transaction the proceeds from the sale of 

18 any securities issued under chapter 31 of title 31, 

19 United States Code and the purposes for which se20 curities may be issued under such chapter are ex21 tended to include any purchase of such notes and 

22 obligations. The Secretary of the Treasury may at 

23 any time sell any of the notes or other obligations 

24 acquired by such Secretary under this paragraph. 

25 All redemptions, purchases, and sales by the Sec-
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1 retary of the Treasury of such notes or other obliga2 tions shall be treated as public debt transactions of 

3 the United States. 

4 (4) INVESTMENT AUTHORITY.—Whenever the 

5 Secretary of Labor determines that the moneys of 

6 the Fund are in excess of current needs, such Sec7 retary may request the investment of such amounts 

8 as such Secretary determines advisable by the Sec9 retary of the Treasury in obligations issued or guar10 anteed by the United States, but, until all bor11 rowings under paragraph (3) have been repaid, the 

12 obligations in which such excess moneys are invested 

13 may not yield a rate of return in excess of the rate 

14 of interest payable on such borrowings. 

15 SEC. 1397. IMPOSITION AND COLLECTION OF PERIODIC AS16 SESSMENTS ON SELF-INSURED CORPORATE 

17 ALLIANCE PLANS. 

18 (a) IMPOSITION OF ASSESSMENTS.—Upon a deter19 mination that additional receipts to the Fund are nec20 essary in order to enable the Fund to repay amounts bor21 rowed by the Fund under section 1396(c)(3) while main22 taining a balance sufficient to ensure the solvency of the 

23 Fund, the Secretary of Labor may impose assessments 

24 under this section. The Secretary shall prescribe from time 

25 to time such schedules of assessment rates and bases for 
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1 the application of such rates as may be necessary to pro2 vide for such repayments. 

3 (b) UNIFORMITY OF ASSESSMENTS.—The assess4 ment rates so prescribed by the Secretary for any period 

5 shall be uniform for all plans, except that the Secretary 

6 may vary the amount of such assessments by category, 

7 or waive the application of such assessments by category, 

8 taking into account differences in the financial solvency 

9 of, and financial reserves maintained by, plans in each cat10 egory. 

11 (c) LIMITATION ON AMOUNT OF ASSESSMENT.—The 

12 total amount assessed against a corporate alliance health 

13 plan under this section during a year may not exceed 2 

14 percent of the total premiums paid to the plan with respect 

15 to corporate alliance eligible individuals enrolled with the 

16 plan during the year. 

17 (d) PAYMENT OF ASSESSMENTS.— 

18 (1) OBLIGATION TO PAY.—The designated 

19 payor of each plan shall pay the assessments im20 posed by the Secretary of Labor under this section 

21 with respect to that plan when they are due. Assess22 ments under this section are payable at the time, 

23 and on an estimated, advance, or other basis, as de24 termined by the Secretary. Assessments shall con25 tinue to accrue until the plan’s assets are distributed 
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1 pursuant to a termination procedure or the Sec2 retary is appointed to serve as trustee of the plan 

3 under section 1395. 

4 (2) LATE PAYMENT CHARGES AND INTEREST.— 

5 (A) LATE PAYMENT CHARGES.—If any as6 sessment is not paid when it is due, the Sec7 retary of Labor may assess a late payment 

8 charge of not more than 100 percent of the as9 sessment payment which was not timely paid. 

10 (B) WAIVERS.—Subparagraph (A) shall 

11 not apply to any assessment payment made 

12 within 60 days after the date on which payment 

13 is due, if before such date, the designated payor 

14 obtains a waiver from the Secretary of Labor 

15 based upon a showing of substantial hardship 

16 arising from the timely payment of the assess17 ment. The Secretary may grant a waiver under 

18 this subparagraph upon application made by 

19 the designated payor, but the Secretary may 

20 not grant a waiver if it appears that the des21 ignated payor will be unable to pay the assess22 ment within 60 days after the date on which it 

23 is due. 

24 (C) INTEREST.—If any assessment is not 

25 paid by the last date prescribed for a payment, 
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1 interest on the amount of such assessment at 

2 the rate imposed under section 6601(a) of the 

3 Internal Revenue Code of 1986 shall be paid 

4 for the period from such last date to the date 

5 paid. 

6 (e) CIVIL ACTION UPON NONPAYMENT.—If any des7 ignated payor fails to pay an assessment when due, the 

8 Secretary of Labor may bring a civil action in any district 

9 court of the United States within the jurisdiction of which 

10 the plan assets are located, the plan is administered, or 

11 in which a defendant resides or is found, for the recovery 

12 of the amount of the unpaid assessment, any late payment 

13 charge, and interest, and process may be served in any 

14 other district. The district courts of the United States 

15 shall have jurisdiction over actions brought under this sub16 section by the Secretary without regard to the amount in 

17 controversy. 

18 (f) GUARANTEE HELD HARMLESS.—The Secretary 

19 of Labor shall not cease to guarantee benefits on account 

20 of the failure of a designated payor to pay any assessment 

21 when due. 

22 (g) DESIGNATED PAYOR DEFINED.— 

23 (1) IN GENERAL.—For purposes of this section, 

24 the term ‘‘designated payor’’ means— 
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1 (A) the employer or plan administrator in 

2 any case in which the eligible sponsor of the 

3 corporate alliance health plan is described in 

4 subparagraph (A) of section 1311(b)(1); and 

5 (B) the contributing employers or the plan 

6 administrator in any case in which the eligible 

7 sponsor of the corporate alliance is described in 

8 subparagraph (B) or (C) of section 1311(b)(1). 

9 (2) CONTROLLED GROUPS.—If an employer is a 

10 member of a controlled group, each member of such 

11 group shall be jointly and severally liable for any as12 sessments required to be paid by such employer. For 

13 purposes of the preceding sentence, the term ‘‘con14 trolled group’’ means any group treated as a single 

15 employer under subsection (b), (c), (m), or (o) of 

16 section 414 of the Internal Revenue Code of 1986. 

17 SEC. 1398. PAYMENTS TO FEDERAL GOVERNMENT BY MUL18 TIEMPLOYER CORPORATE ALLIANCES FOR 

19 ACADEMIC HEALTH CENTERS AND GRAD20 UATE MEDICAL EDUCATION. 

21 (a) IN GENERAL.—A corporate alliance with an eligi22 ble sponsor described in section 1311(b)(1)(B) shall make 

23 payment to the Secretary of an amount equivalent to the 

24 amount (as estimated based on rules established by the 

25 Secretary and based on the annual per capita expenditure 
225 

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1 equivalent calculated under section 6021) that would have 

2 been payable by the alliance under section 1353 if the alli3 ance were a regional alliance. 

4 (b) REFERENCE TO EXEMPTION FROM ASSESS5 MENT.—For provision exempting certain corporate alli6 ance employers participating in an alliance described in 

7 subsection (a) from an assessment under section 3461 of 

8 the Internal Revenue Code of 1986, as added by section 

9 7121 of this Act, see section 3461(c)(1) of such Code. 

10 Subtitle E—Health Plans 

11 SEC. 1400. HEALTH PLAN DEFINED. 

12 (a) IN GENERAL.—In this Act, the term ‘‘health 

13 plan’’ means a plan that provides the comprehensive ben14 efit package and meets the requirements of parts 1, 3, 

15 and 4 applicable to health plans. 

16 (b) APPROPRIATE SELF-INSURED HEALTH PLAN.— 

17 In this Act, the term ‘‘appropriate self-insured health 

18 plan’’ means a group health plan (as defined in section 

19 3(42) of the Employee Retirement Income Security Act 

20 of 1974) which is a self-insured health plan and with re21 spect to which the applicable requirements of title I of the 

22 Employee Retirement Income Security Act of 1974 are 

23 met. 

24 (c) STATE-CERTIFIED HEALTH PLAN.—In this Act, 

25 the term ‘‘State-certified health plan’’ means a health plan 
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1 that has been certified by a State under section 1203(a) 

2 (or, in the case in which the Board is exercising certifi3 cation authority under section 1522(b), that has been cer4 tified by the Board). 

5 (d) APPLICABLE REGULATORY AUTHORITY DE6 FINED.—In this subtitle, the term ‘‘applicable regulatory 

7 authority’’ means— 

8 (1) with respect to a self-insured health plan, 

9 the Secretary of Labor, or 

10 (2) with respect to a State-certified health plan, 

11 the State authority responsible for certification of 

12 the plan. 

13 PART 1—REQUIREMENTS RELATING TO 

14 COMPREHENSIVE BENEFIT PACKAGE 

15 SEC. 1401. APPLICATION OF REQUIREMENTS. 

16 No plan shall be treated under this Act as a health 

17 plan— 

18 (1) unless the plan is a self-insured plan or a 

19 State-certified plan; or 

20 (2) on and after the effective date of a finding 

21 by the applicable regulatory authority that the plan 

22 has failed to comply with such applicable require23 ments. 
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1 SEC. 1402. REQUIREMENTS RELATING TO ENROLLMENT 

2 AND COVERAGE. 

3 (a) NO UNDERWRITING.— 

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

5 each health plan offered by a regional alliance or a 

6 corporate alliance must accept for enrollment every 

7 alliance eligible individual who seeks such enroll8 ment. No plan may engage in any practice that has 

9 the effect of attracting or limiting enrollees on the 

10 basis of personal characteristics, such as health sta11 tus, anticipated need for health care, age, occupa12 tion, or affiliation with any person or entity. 

13 (2) CAPACITY LIMITATIONS.—With the approval 

14 of the applicable regulatory authority, a health plan 

15 may limit enrollment because of the plan’s capacity 

16 to deliver services or to maintain financial stability. 

17 If such a limitation is imposed, the limitation may 

18 not be imposed on a basis referred to in paragraph 

19 (1). 

20 (b) NO LIMITS ON COVERAGE; NO PRE-EXISTING

21 CONDITION LIMITS.—A health plan may not— 

22 (1) terminate, restrict, or limit coverage for the 

23 comprehensive benefit package in any portion of the 

24 plan’s service area for any reason, including non25 payment of premiums; 
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1 (2) cancel coverage for any alliance eligible indi2 vidual until that individual is enrolled in another ap3 plicable health plan; 

4 (3) exclude coverage of an alliance eligible indi5 vidual because of existing medical conditions; 

6 (4) impose waiting periods before coverage be7 gins; or 

8 (5) impose a rider that serves to exclude cov9 erage of particular eligible individuals. 

10 (c) ANTIDISCRIMINATION.— 

11 (1) IN GENERAL.—No health plan may dis12 criminate, or engage (directly or through contractual 

13 arrangements) in any activity, including the selection 

14 of a service area, that has the effect of discrimi15 nating, against an individual on the basis of race, 

16 national origin, sex, language, socio-economic status, 

17 age, disability, health status, or anticipated need for 

18 health services. 

19 (2) SELECTION OF PROVIDERS FOR PLAN NET20 WORK.—In selecting among providers of health serv21 ices for membership in a provider network, or in es22 tablishing the terms and conditions of such member23 ship, a health plan may not engage in any practice 

24 that has the effect of discriminating against a pro25 vider— 
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1 (A) based on the race, national origin, sex, 

2 language, age, or disability of the provider; or 

3 (B) based on the socio-economic status, 

4 disability, health status, or anticipated need for 

5 health services of a patient of the provider. 

6 (3) BUSINESS NECESSITY.—Except in the case 

7 of intentional discrimination, it shall not be a viola8 tion of this subsection, or of any regulation issued 

9 under this subsection, for any person to take any ac10 tion otherwise prohibited under this subsection, if 

11 the action is required by business necessity. 

12 (4) REGULATIONS.—Not later than 1 year after 

13 the date of the enactment of this Act, the Secretary 

14 of Health and Human Services shall issue regula15 tions to carry out this subsection. 

16 (d) REQUIREMENTS FOR PLANS OFFERING LOWER

17 COST SHARING.—Each health plan that offers enrollees 

18 the lower cost sharing schedule referred to in section 

19 1131— 

20 (1) shall apply such schedule to all items and 

21 services in the comprehensive benefit package; 

22 (2) shall offer enrollees the opportunity to ob23 tain coverage for out-of-network items and services 

24 (as described in subsection (f)(2)); and 
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1 (3) notwithstanding section 1403, in the case of 

2 an enrollee who obtains coverage for such items and 

3 services, may charge an alternative premium to take 

4 into account such coverage. 

5 (e) TREATMENT OF COST SHARING.—Each health 

6 plan, in providing benefits in the comprehensive benefit 

7 package— 

8 (1) shall include in its payments to providers, 

9 such additional reimbursement as may be necessary 

10 to reflect cost sharing reductions to which individ11 uals are entitled under section 1371, and 

12 (2) shall maintain such claims or encounter 

13 records as may be necessary to audit the amount of 

14 such additional reimbursements and the individuals 

15 for which such reimbursement is provided. 

16 (f) IN-NETWORK AND OUT-OF-NETWORK ITEMS AND

17 SERVICES DEFINED.— 

18 (1) IN-NETWORK ITEMS AND SERVICES.—For 

19 purposes of this Act, the term ‘‘in-network’’, when 

20 used with respect to items or services described in 

21 this subtitle, means items or services provided to an 

22 individual enrolled under a health plan by a health 

23 care provider who is a member of a provider network 

24 of the plan (as defined in paragraph (3)). 
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1 (2) OUT-OF-NETWORK ITEMS AND SERVICES.— 

2 For purposes of this Act, the term ‘‘out-of network’’, 

3 when used with respect to items or services de4 scribed in this subtitle, means items or services pro5 vided to an individual enrolled under a health plan 

6 by a health care provider who is not a member of 

7 a provider network of the plan (as defined in para8 graph (3)). 

9 (3) PROVIDER NETWORK DEFINED.—A ‘‘pro10 vider network’’ means, with respect to a health plan, 

11 providers who have entered into an agreement with 

12 the plan under which such providers are obligated to 

13 provide items and services in the comprehensive ben14 efit package to individuals enrolled in the plan, or 

15 have an agreement to provide services on a fee-for16 service basis. 

17 (g) RELATION TO DETENTION.—A health plan is not 

18 required to provide any reimbursement to any detention 

19 facility for services performed in that facility for detainees 

20 in the facility. 

21 SEC. 1403. COMMUNITY RATING. 

22 (a) REGIONAL ALLIANCE HEALTH PLANS.—Each re23 gional alliance health plan may not vary the premium im24 posed with respect to residents of an alliance area, except 

25 as may be required under section 6102(a) with respect to 
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1 different types of individual and family coverage under the 

2 plan. 

3 (b) CORPORATE ALLIANCE HEALTH PLANS.—Each 

4 corporate alliance health plan may not vary the premium 

5 imposed with respect to individuals enrolled in the plan, 

6 except as may be required under section 1384 with respect 

7 to different types of individual and family coverage under 

8 the plan. 

9 SEC. 1404. MARKETING OF HEALTH PLANS; INFORMATION. 

10 (a) REGIONAL ALLIANCE MARKETING RESTRIC11 TIONS.— 

12 (1) IN GENERAL.—The contract entered into 

13 between a regional alliance and a regional alliance 

14 health plan shall prohibit the distribution by the 

15 health plan of marketing materials within the re16 gional alliance that contain false or materially mis17 leading information and shall provide for prior ap18 proval by the regional alliance of any marketing ma19 terials to be distributed by the plan. 

20 (2) ENTIRE MARKET.—A health plan offered by 

21 a regional alliance may not distribute marketing ma22 terials to an area smaller than the entire area served 

23 by the plan. 

24 (3) PROHIBITION OF TIE-INS.—A regional alli25 ance health plan, and any agency of such a plan, 
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1 may not seek to influence an individual’s choice of 

2 plans in conjunction with the sale of any other in3 surance. 

4 (b) INFORMATION AVAILABLE.— 

5 (1) IN GENERAL.—Each regional alliance health 

6 plan must provide to the regional alliance and make 

7 available to alliance eligible individuals and health 

8 care professionals complete and timely information 

9 concerning the following: 

10 (A) Costs. 

11 (B) The identity, locations, qualifications, 

12 and availability of participating providers. 

13 (C) Procedures used to control utilization 

14 of services and expenditures. 

15 (D) Procedures for assuring and improving 

16 the quality of care. 

17 (E) Rights and responsibilities of enrollees. 

18 (F) Information on the number of plan 

19 members who disenroll from the plan. 

20 (2) PROHIBITION AGAINST CERTIFICATION OF

21 PLANS PROVIDING INACCURATE INFORMATION.—No 

22 regional alliance health plan may be a State-certified 

23 health plan under this title if the State determines 

24 that the plan submitted materially inaccurate infor25 mation under paragraph (1). 
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1 (c) ADVANCE DIRECTIVES.—Each self-insured health 

2 plan and each State-certified health plan shall meet the 

3 requirement of section 1866(f) of the Social Security Act 

4 (relating to maintaining written policies and procedures 

5 respecting advance directives) in the same manner as such 

6 requirement relates to organizations with contracts under 

7 section 1876 of such Act. 

8 SEC. 1405. GRIEVANCE PROCEDURE. 

9 (a) IN GENERAL.—Each health plan must establish 

10 a grievance procedure for enrollees to use in pursuing 

11 complaints. Such procedure shall be consistent with sub12 title C of title V. 

13 (b) ADDITIONAL REMEDIES.—If the grievance proce14 dure fails to resolve an enrollee’s complaint— 

15 (1) in the case of an enrollee of a regional alli16 ance health plan, the enrollee has the option of seek17 ing assistance from the office of the ombudsman for 

18 the regional alliance established under section 

19 1326(a), and 

20 (2) the enrollee may pursue additional legal 

21 remedies, including those provided under subtitle C 

22 of title V. 
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1 SEC. 1406. HEALTH PLAN ARRANGEMENTS WITH PRO2 VIDERS. 

3 (a) REQUIREMENT.—Each health plan must enter 

4 into such agreements with health care providers or have 

5 such other arrangements as may be necessary to assure 

6 the provision of all services covered by the comprehensive 

7 benefit package to eligible individuals enrolled with the 

8 plan. 

9 (b) EMERGENCY AND URGENT CARE SERVICES.— 

10 (1) IN GENERAL.—Each health plan must cover 

11 emergency and urgent care services provided to en12 rollees, without regard to whether or not the pro13 vider furnishing such services has a contractual (or 

14 other) arrangement with the plan to provide items or 

15 services to enrollees of the plan and in the case of 

16 emergency services without regard to prior author17 ization. 

18 (2) PAYMENT AMOUNTS.—In the case of emer19 gency and urgent care provided to an enrollee out20 side of a health plan’s service area, the payment 

21 amounts of the plan shall be based on the fee for 

22 service rate schedule established by the regional alli23 ance for the alliance area where the services were 

24 provided. 

25 (c) APPLICATION OF FEE SCHEDULE.— 
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Title I, Subtitle E 

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

2 each regional alliance health plan or corporate alli3 ance health plan that provides for payment for serv4 ices on a fee-for-service basis shall make such pay5 ment in the amounts provided under the fee sched6 ule established by the regional alliance under section 

7 1322(c) (or, in the case of a plan offered in a State 

8 that has established a Statewide fee schedule under 

9 section 1322(c)(3), under such Statewide fee sched10 ule). 

11 (2) REDUCTION FOR PROVIDERS VOLUNTARILY

12 REDUCING CHARGES.—If a provider under a health 

13 plan voluntarily agrees to reduce the amount 

14 charged to an individual enrolled under the plan, the 

15 plan shall reduce the amount otherwise determined 

16 under the fee schedule applicable under paragraph 

17 (1) by the proportion of the reduction in such 

18 amount charged. 

19 (3) REDUCTION FOR NONCOMPLYING PLAN.— 

20 Each regional alliance health plan that is a noncom21 plying plan shall provide for reductions in payments 

22 under the fee schedule to providers that are not par23 ticipating providers in accordance with section 

24 6012(b). 
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1 (d) PROHIBITION AGAINST BALANCE BILLING; RE2 QUIREMENT OF DIRECT BILLING.— 

3 (1) PROHIBITION OF BALANCE BILLING.—A 

4 provider may not charge or collect from an enrollee 

5 a fee in excess of the applicable payment amount 

6 under the applicable fee schedule under subsection 

7 (c), and the health plan and its enrollees are not le8 gally responsible for payment of any amount in ex9 cess of such applicable payment amount for items 

10 and services covered under the comprehensive bene11 fits package. 

12 (2) DIRECT BILLING.—A provider may not 

13 charge or collect from an enrollee amounts that are 

14 payable by the health plan (including any cost shar15 ing reduction assistance payable by the plan) and 

16 shall submit charges to such plan in accordance with 

17 any applicable requirements of part 1 of subtitle B 

18 of title V (relating to health information systems). 

19 (3) COVERAGE UNDER AGREEMENTS WITH

20 PLANS.—The agreements or other arrangements en21 tered into under subsection (a) between a health 

22 plan and the health care providers providing the 

23 comprehensive benefit package to individuals en24 rolled with the plan shall prohibit a provider from 
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1 engaging in balance billing described in paragraph 

2 (1). 

3 (e) IMPOSITION OF PARTICIPATING PROVIDER AS4 SESSMENT IN CASE OF A NONCOMPLYING PLAN.—Each 

5 regional alliance health plan shall provide that if the plan 

6 is a noncomplying plan for a year under section 6012, pay7 ments to participating providers shall be reduced by the 

8 applicable network reduction percentage under such sec9 tion. 

10 SEC. 1407. PREEMPTION OF CERTAIN STATE LAWS RELAT11 ING TO HEALTH PLANS. 

12 (a) LAWS RESTRICTING PLANS OTHER THAN FEE13 FOR-SERVICE PLANS.—Except as may otherwise be pro14 vided in this section, no State law shall apply to any serv15 ices provided under a health plan that is not a fee-for16 service plan (or a fee-for-service component of a plan) if 

17 such law has the effect of prohibiting or otherwise restrict18 ing plans from— 

19 (1) except as provided in section 1203, limiting 

20 the number and type of health care providers who 

21 participate in the plan; 

22 (2) requiring enrollees to obtain health services 

23 (other than emergency services) from participating 

24 providers or from providers authorized by the plan; 
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1 (3) requiring enrollees to obtain a referral for 

2 treatment by a specialized physician or health insti3 tution; 

4 (4) establishing different payment rates for par5 ticipating providers and providers outside the plan; 

6 (5) creating incentives to encourage the use of 

7 participating providers; or 

8 (6) requiring the use of single-source suppliers 

9 for pharmacy, medical equipment, and other health 

10 products and services. 

11 (b) PREEMPTION OF STATE CORPORATE PRACTICE

12 ACTS.—Any State law related to the corporate practice 

13 of medicine and to provider ownership of health plans or 

14 other providers shall not apply to arrangements between 

15 health plans that are not fee-for-service plans and their 

16 participating providers. 

17 (c) PARTICIPATING PROVIDER DEFINED.—In this 

18 title, a ‘‘participating provider’’ means, with respect to a 

19 health plan, a provider of health care services who is a 

20 member of a provider network of the plan (as described 

21 in section 1402(f)(3)). 

22 SEC. 1408. FINANCIAL SOLVENCY. 

23 Each regional alliance health plan must— 

24 (1) meet or exceed minimum capital require25 ments established by States under section 1204(a); 
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1 (2) in the case of a plan operating in a State, 

2 must participate in the guaranty fund established by 

3 the State under section 1204(c); and 

4 (3) meet such other requirements relating to 

5 fiscal soundness as the State may establish (subject 

6 to the establishment of any alternative standards by 

7 the Board). 

8 SEC. 1409. REQUIREMENT FOR OFFERING COST SHARING 

9 POLICY. 

10 Each regional alliance health plan shall offer a cost 

11 sharing policy (as defined in section 1421(b)(2)) to each 

12 eligible family enrolled under the plan. 

13 SEC. 1410. QUALITY ASSURANCE. 

14 Each health plan shall comply with such quality as15 surance requirements as are imposed under subtitle A of 

16 title V with respect to such a plan. 

17 SEC. 1411. PROVIDER VERIFICATION. 

18 Each health plan shall— 

19 (1) verify the credentials of practitioners and 

20 facilities; 

21 (2) ensure that all providers participating in the 

22 plan meet applicable State licensing and certification 

23 standards; 
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1 (3) oversee the quality and performance of par2 ticipating providers, consistent with section 1410; 

3 and 

4 (4) investigate and resolve consumer complaints 

5 against participating providers. 

6 SEC. 1412. CONSUMER DISCLOSURES OF UTILIZATION MAN7 AGEMENT PROTOCOLS. 

8 Each health plan shall disclose to enrollees (and pro9 spective enrollees) the protocols used by the plan for con10 trolling utilization and costs. 

11 SEC. 1413. CONFIDENTIALITY, DATA MANAGEMENT, AND 

12 REPORTING. 

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

14 with the confidentiality, data management, and reporting 

15 requirements imposed under subtitle B of title V. 

16 (b) TREATMENT OF ELECTRONIC INFORMATION.— 

17 (1) ACCURACY AND RELIABILITY.—Each health 

18 plan shall take such measures as may be necessary 

19 to ensure that health care information in electronic 

20 form that the plan, or a member of a provider net21 work of the plan, collects for or transmits to the 

22 Board under subtitle B of title V is accurate and re23 liable. 

24 (2) PRIVACY AND SECURITY.—Each health plan 

25 shall take such measures as may be necessary to en-
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1 sure that health care information described in para2 graph (1) is not distributed to any individual or en3 tity in violation of a standard promulgated by the 

4 Board under part 2 of subtitle B of title V. 

5 SEC. 1414. PARTICIPATION IN REINSURANCE SYSTEM. 

6 Each regional alliance health plan of a State that has 

7 established a reinsurance system under section 1203(g) 

8 shall participate in the system in the manner specified by 

9 the State. 

10 PART 2—REQUIREMENTS RELATING TO 

11 SUPPLEMENTAL INSURANCE 

12 SEC. 1421. IMPOSITION OF REQUIREMENTS ON SUPPLE13 MENTAL INSURANCE. 

14 (a) IN GENERAL.—An entity may offer a supple15 mental insurance policy but only if— 

16 (1) in the case of a supplemental health benefit 

17 policy (as defined in subsection (b)(1)), the entity 

18 and the policy meet the requirements of section 

19 1422; and 

20 (2) in the case of a cost sharing policy (as de21 fined in subsection (b)(2)), the entity and the policy 

22 meet the requirements of section 1423. 

23 (b) POLICIES DEFINED.— 

24 (1) SUPPLEMENTAL HEALTH BENEFIT POL25 ICY.— 
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1 (A) IN GENERAL.—In this part, the term 

2 ‘‘supplemental health benefit policy’’ means a 

3 health insurance policy or health benefit plan 

4 offered to an alliance eligible individual which 

5 provides— 

6 (i) coverage for services and items not 

7 included in the comprehensive benefit 

8 package, or 

9 (ii) coverage for items and services in10 cluded in such package but not covered be11 cause of a limitation in amount, duration, 

12 or scope provided under this title, 

13 or both. 

14 (B) EXCLUSIONS.—Such term does not in15 clude the following: 

16 (i) A cost sharing policy (as defined in 

17 paragraph (2)). 

18 (ii) A long-term care insurance policy 

19 (as defined in section 2304(10)). 

20 (iii) Insurance that limits benefits 

21 with respect to specific diseases (or condi22 tions). 

23 (iv) Hospital or nursing home indem24 nity insurance. 
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1 (v) A medicare supplemental policy 

2 (as defined in section 1882(g) of the Social 

3 Security Act). 

4 (vi) Insurance with respect to acci5 dents. 

6 (2) COST SHARING POLICY.—In this part, the 

7 term ‘‘cost sharing policy’’ means a health insurance 

8 policy or health benefit plan offered to an alliance el9 igible individual which provides coverage for 

10 deductibles, coinsurance, and copayments imposed as 

11 part of the comprehensive benefit package under 

12 subtitle B, whether imposed under a higher cost 

13 sharing plan or with respect to out-of-network pro14 viders. 

15 SEC. 1422. STANDARDS FOR SUPPLEMENTAL HEALTH BEN16 EFIT POLICIES. 

17 (a) PROHIBITING DUPLICATION OF COVERAGE.— 

18 (1) IN GENERAL.—No health plan, insurer, or 

19 any other person may offer— 

20 (A) to any eligible individual a supple21 mental health benefit policy that duplicates any 

22 coverage provided in the comprehensive benefit 

23 package; or 

24 (B) to any medicare-eligible individual a 

25 supplemental health benefit policy that dupli-
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1 cates any coverage provided under the medicare 

2 program. 

3 (2) EXCEPTION FOR MEDICARE-ELIGIBLE INDI4 VIDUALS.—For purposes of this subsection, for the 

5 period in which an individual is a medicare-eligible 

6 individual and also is an alliance eligible individual 

7 (and is enrolled under a regional alliance or cor8 porate alliance health plan), paragraph (1)(A) (and 

9 not paragraph (1)(B)) shall apply. 

10 (b) NO LIMITATION ON INDIVIDUALS OFFERED POL11 ICY.— 

12 (1) IN GENERAL.—Except as provided in para13 graph (2), each entity offering a supplemental health 

14 benefit policy must accept for enrollment every indi15 vidual who seeks such enrollment, subject to capac16 ity and financial limits. 

17 (2) EXCEPTION FOR CERTAIN OFFERORS.— 

18 Paragraph (1) shall not apply to any supplemental 

19 health benefit policy offered to an individual only on 

20 the basis of— 

21 (A) the individual’s employment (in the 

22 case of a policy offered by the individual’s em23 ployer); or 
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1 (B) the individual’s membership or enroll2 ment in a fraternal, religious, professional, edu3 cational, or other similar organization. 

4 (c) RESTRICTIONS ON MARKETING ABUSES.—Not 

5 later than January 1, 1996, the Board shall develop (in 

6 consultation with the States) minimum standards that 

7 prohibit marketing practices by entities offering supple8 mental health benefit policies that involve: 

9 (1) Providing monetary incentives for or tying 

10 or otherwise conditioning the sale of the policy to en11 rollment in a regional alliance health plan of the en12 tity. 

13 (2) Using or disclosing to any party information 

14 about the health status or claims experience of par15 ticipants in a regional alliance health plan for the 

16 purpose of marketing such a policy. 

17 (d) CIVIL MONETARY PENALTY.—An entity that 

18 knowingly and willfully violates any provision of this sec19 tion with respect to the offering of a supplemental health 

20 benefit policy to any individual shall be subject to a civil 

21 monetary penalty (not to exceed $10,000) for each such 

22 violation. The provisions of section 1128A of the Social 

23 Security Act (other than subsections (a) and (b)) shall 

24 apply to civil money penalties under this subsection in the 
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1 same manner as they apply to a penalty or proceeding 

2 under section 1128A(a) of such Act. 

3 SEC. 1423. STANDARDS FOR COST SHARING POLICIES. 

4 (a) RULES FOR OFFERING OF POLICIES.—Subject to 

5 subsection (f), a cost sharing policy may be offered to an 

6 individual only if— 

7 (1) the policy is offered by the regional alliance 

8 health plan in which the individual is enrolled; 

9 (2) the regional alliance health plan offers the 

10 policy to all individuals enrolled in the plan; 

11 (3) the plan offers each such individual a choice 

12 of a policy that provides standard coverage and a 

13 policy that provides maximum coverage (in accord14 ance with standards established by the Board); and 

15 (4) the policy is offered only during the annual 

16 open enrollment period for regional alliance health 

17 plans (described in section 1323(d)(1)). 

18 (b) PROHIBITION OF COVERAGE OF COPAYMENTS.— 

19 Each cost sharing policy may not provide any benefits re20 lating to any copayments established under the table of 

21 copayments and coinsurance under section 1135. 

22 (c) EQUIVALENT COVERAGE FOR ALL SERVICES.— 

23 Each cost sharing policy must provide coverage for items 

24 and services in the comprehensive benefit package to the 
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1 same extent as the policy provides coverage for all items 

2 and services in the package. 

3 (d) REQUIREMENTS FOR PRICING.— 

4 (1) IN GENERAL.—The price of any cost shar5 ing policy shall— 

6 (A) be the same for each individual to 

7 whom the policy is offered; 

8 (B) take into account any expected in9 crease in utilization resulting from the purchase 

10 of the policy by individuals enrolled in the re11 gional alliance health plan; and 

12 (C) not result in a loss-ratio of less than 

13 90 percent. 

14 (2) LOSS-RATIO DEFINED.—In paragraph 

15 (1)(C), a ‘‘loss-ratio’’ is the ratio of the premium re16 turned to the consumer in payout relative to the 

17 total premium collected. 

18 (e) LOSS OF STATE CERTIFICATION FOR REGIONAL

19 ALLIANCE HEALTH PLANS FAILING TO MEET STAND20 ARDS.—A State may not certify a regional alliance health 

21 plan that offers a cost sharing policy unless the plan and 

22 the policy meet the standards described in this section. 

23 (f) SPECIAL RULES FOR FEHBP SUPPLEMENTAL

24 PLANS.—Subsection (a) shall not apply to an FEHBP 
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1 supplemental plan described in section 8203(f)(1), but 

2 only if the plan meets the following requirements: 

3 (1) The plan must be offered to all individuals 

4 to whom such a plan is required to be offered under 

5 section 8203. 

6 (2) The plan must offer each such individual a 

7 choice of a policy that provides standard coverage 

8 and a policy that provides maximum coverage (in ac9 cordance with standards established by the Board 

10 under subsection (a)(3)). 

11 (3) The plan is offered only during the annual 

12 open enrollment period for regional alliance health 

13 plans (described in section 1323(d)(1)). 

14 (4)(A) The price of the plan shall include an 

15 amount, established in accordance with rules estab16 lished by the Board in consultation with the Office 

17 of Personnel Management, that takes into account 

18 any expected increase in utilization of the items and 

19 services in the comprehensive benefit package result20 ing from the purchase of the plan by individuals en21 rolled in a regional alliance health plan. 

22 (B) The plan provides for payment, in a man23 ner specified by the Board in the case of an indi24 vidual enrolled in the plan and in a regional alliance 

25 health plan, to the regional alliance health plan of 
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1 an amount equivalent to the additional amount de2 scribed in subparagraph (A). 

3 PART 3—REQUIREMENTS RELATING TO 

4 ESSENTIAL COMMUNITY PROVIDERS 

5 SEC. 1431. HEALTH PLAN REQUIREMENT. 

6 (a) IN GENERAL.—Subject to section 1432, each 

7 health plan shall, with respect to each electing essential 

8 community provider (as defined in subsection (d), other 

9 than a provider of school health services) located within 

10 the plan’s service area, either— 

11 (1) enter into a written provider participation 

12 agreement (described in subsection (b)) with the 

13 provider, or 

14 (2) enter into a written agreement under which 

15 the plan shall make payment to the provider in ac16 cordance with subsection (c). 

17 (b) PARTICIPATION AGREEMENT.—A participation 

18 agreement between a health plan and an electing essential 

19 community provider under this subsection shall provide 

20 that the health plan agrees to treat the provider in accord21 ance with terms and conditions at least as favorable as 

22 those that are applicable to other providers participating 

23 in the health plan with respect to each of the following: 

24 (1) The scope of services for which payment is 

25 made by the plan to the provider. 
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1 (2) The rate of payment for covered care and 

2 services. 

3 (3) The availability of financial incentives to 

4 participating providers. 

5 (4) Limitations on financial risk provided to 

6 other participating providers. 

7 (5) Assignment of enrollees to participating 

8 providers. 

9 (6) Access by the provider’s patients to pro10 viders in medical specialties or subspecialties partici11 pating in the plan. 

12 (c) PAYMENTS FOR PROVIDERS WITHOUT PARTICI13 PATION AGREEMENTS.— 

14 (1) IN GENERAL.—Payment in accordance with 

15 this subsection is payment based, as elected by the 

16 electing essential community provider, either— 

17 (A) on the fee schedule developed by the 

18 applicable regional alliance (or the State) under 

19 section 1322(c), or 

20 (B) on payment methodologies and rates 

21 used under the applicable Medicare payment 

22 methodology and rates (or the most closely ap23 plicable methodology under such program as 

24 the Secretary of Health and Human Services 

25 specifies in regulations). 
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1 (2) NO APPLICATION OF GATE-KEEPER LIMITA2 TIONS.—Payment in accordance with this subsection 

3 may be subject to utilization review, but may not be 

4 subject to otherwise applicable gate-keeper require5 ments under the plan. 

6 (d) ELECTION.— 

7 (1) IN GENERAL.—In this part, the term ‘‘elect8 ing essential community provider’’ means, with re9 spect to a health plan, an essential community pro10 vider that elects this subpart to apply to the health 

11 plan. 

12 (2) FORM OF ELECTION.—An election under 

13 this subsection shall be made in a form and manner 

14 specified by the Secretary, and shall include notice 

15 to the health plan involved. Such an election may be 

16 made annually with respect to a health plan, except 

17 that the plan and provider may agree to make such 

18 an election on a more frequent basis. 

19 (e) SPECIAL RULE FOR PROVIDERS OF SCHOOL

20 HEALTH SERVICES.—A health plan shall pay, to each pro21 vider of school health services located in the plan’s service 

22 area an amount determined by the Secretary for such 

23 services furnished to enrollees of the plan. 
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1 SEC. 1432. SUNSET OF REQUIREMENT. 

2 (a) IN GENERAL.—Subject to subsection (d), the re3 quirement of section 1431 shall only apply to health plans 

4 offered by a health alliance during the 5-year period begin5 ning with the first year in which any health plan is offered 

6 by the alliance. 

7 (b) STUDIES.—In order to prepare recommendations 

8 under subsection (c), the Secretary shall conduct studies 

9 regarding essential community providers, including studies 

10 that assess— 

11 (1) the definition of essential community pro12 vider, 

13 (2) the sufficiency of the funding levels for pro14 viders, for both covered and uncovered benefits 

15 under this Act, 

16 (3) the effects of contracting requirements re17 lating to such providers on such providers, health 

18 plans, and enrollees, 

19 (4) the impact of the payment rules for such 

20 providers, and 

21 (5) the impact of national health reform on 

22 such providers. 

23 (c) RECOMMENDATIONS TO CONGRESS.—The Sec24 retary shall submit to Congress, by not later than March 

25 1, 2001, specific recommendations respecting whether, 

26 and to what extent, section 1431 should continue to apply 
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1 to some or all essential community providers. Such rec2 ommendations may include a description of the particular 

3 types of such providers and circumstances under which 

4 such section should continue to apply. 

5 (d) CONGRESSIONAL CONSIDERATION.— 

6 (1) IN GENERAL.—Recommendations submitted 

7 under subsection (c) shall apply under this part (and 

8 may supersede the provisions of subsection (a)) un9 less a joint resolution (described in paragraph (2)) 

10 disapproving such recommendations is enacted, in 

11 accordance with the provisions of paragraph (3), be12 fore the end of the 60-day period beginning on the 

13 date on which such recommendations were sub14 mitted. For purposes of applying the preceding sen15 tence and paragraphs (2) and (3), the days on which 

16 either House of Congress is not in session because 

17 of an adjournment of more than three days to a day 

18 certain shall be excluded in the computation of a pe19 riod. 

20 (2) JOINT RESOLUTION OF DISAPPROVAL.—A 

21 joint resolution described in this paragraph means 

22 only a joint resolution which is introduced within the 

23 10-day period beginning on the date on which the 

24 Secretary submits recommendations under sub25 section (c) and— 
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1 (A) which does not have a preamble; 

2 (B) the matter after the resolving clause of 

3 which is as follows: ‘‘That Congress disapproves 

4 the recommendations of the Secretary of Health 

5 and Human Services concerning the continued 

6 application of certain essential community pro7 vider requirements under section 1431 of the 

8 Health Security Act, as submitted by the Sec9 retary on lllllll.’’, the blank space 

10 being filled in with the appropriate date; and 

11 (C) the title of which is as follows: ‘‘Joint 

12 resolution disapproving recommendations of the 

13 Secretary of Health and Human Services con14 cerning the continued application of certain es15 sential community provider requirements under 

16 section 1431 of the Health Security Act, as 

17 submitted by the Secretary on 

18 lllllll.’’, the blank space being filled 

19 in with the appropriate date. 

20 (3) PROCEDURES FOR CONSIDERATION OF RES21 OLUTION OF DISAPPROVAL.—Subject to paragraph 

22 (4), the provisions of section 2908 (other than sub23 section (a)) of the Defense Base Closure and Re24 alignment Act of 1990 shall apply to the consider25 ation of a joint resolution described in paragraph (2) 
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Title I, Subtitle E 

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1 in the same manner as such provisions apply to a 

2 joint resolution described in section 2908(a) of such 

3 Act. 

4 (4) SPECIAL RULES.—For purposes of applying 

5 paragraph (3) with respect to such provisions— 

6 (A) any reference to the Committee on 

7 Armed Services of the House of Representatives 

8 shall be deemed a reference to an appropriate 

9 Committee of the House of Representatives 

10 (specified by the Speaker of the House of Rep11 resentatives at the time of submission of rec12 ommendations under subsection (c)) and any 

13 reference to the Committee on Armed Services 

14 of the Senate shall be deemed a reference to an 

15 appropriate Committee of the Senate (specified 

16 by the Majority Leader of the Senate at the 

17 time of submission of recommendations under 

18 subsection (c)); and 

19 (B) any reference to the date on which the 

20 President transmits a report shall be deemed a 

21 reference to the date on which the Secretary 

22 submits recommendations under subsection (c). 
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1 PART 4—REQUIREMENTS RELATING TO WORK2 ERS’ COMPENSATION AND AUTOMOBILE 

3 MEDICAL LIABILITY COVERAGE 

4 SEC. 1441. REFERENCE TO REQUIREMENTS RELATING TO 

5 WORKERS COMPENSATION SERVICES. 

6 Each health plan shall meet the applicable require7 ments of part 2 of subtitle A of title X (relating to provi8 sion of workers compensation services to enrollees). 

9 SEC. 1442. REFERENCE TO REQUIREMENTS RELATING TO 

10 AUTOMOBILE MEDICAL LIABILITY SERVICES. 

11 Each health plan shall meet the applicable require12 ments of part 2 of subtitle B of title X (relating to provi13 sion of automobile medical liability services to enrollees). 

14 Subtitle F—Federal 

15 Responsibilities 

16 PART 1—NATIONAL HEALTH BOARD 

17 Subpart A—Establishment of National Health Board 

18 SEC. 1501. CREATION OF NATIONAL HEALTH BOARD; MEM19 BERSHIP. 

20 (a) IN GENERAL.—There is hereby created in the Ex21 ecutive Branch a National Health Board. 

22 (b) COMPOSITION.—The Board is composed of 7 

23 members appointed by the President, by and with the ad24 vice and consent of the Senate. 

25 (c) CHAIR.—The President shall designate one of the 

26 members as chair. The chair serves a term concurrent 
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1 with that of the President. The chair may serve a max2 imum of 3 terms. The chair shall serve as the chief execu3 tive officer of the Board. 

4 (d) TERMS.— 

5 (1) IN GENERAL.—Except as provided in para6 graphs (2) and (4), the term of each member of the 

7 Board, except the chair, is 4 years and begins when 

8 the term of the predecessor of that member ends. 

9 (2) INITIAL TERMS.—The initial terms of the 

10 members of the Board (other than the chair) first 

11 taking office after the date of the enactment of this 

12 Act, shall expire as designated by the President, two 

13 at the end of one year, two at the end of two years, 

14 and two at the end of three years. 

15 (3) REAPPOINTMENT.—A member (other than 

16 the chair) may be reappointed for one additional 

17 term. 

18 (4) CONTINUATION IN OFFICE.—Upon the expi19 ration of a term of office, a member shall continue 

20 to serve until a successor is appointed and qualified. 

21 (e) VACANCIES.— 

22 (1) IN GENERAL.—Whenever a vacancy shall 

23 occur, other than by expiration of term, a successor 

24 shall be appointed by the President, by and with the 

25 consent of the Senate, to fill such vacancy, and is 
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1 appointed for the remainder of the term of the pred2 ecessor. 

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

4 in the membership of the Board does not impair the 

5 authority of the remaining members to exercise all 

6 of the powers of the Board. 

7 (3) ACTING CHAIR.—The Board may designate 

8 a Member to act as chair during any period in which 

9 there is no chair designated by the President. 

10 (f) MEETINGS; QUORUM.— 

11 (1) MEETINGS.—At meetings of the Board the 

12 chair shall preside, and in the absence of the chair, 

13 the Board shall elect a member to act as chair pro 

14 tempore. 

15 (2) QUORUM.—Four members of the Board 

16 shall constitute a quorum thereof. 

17 SEC. 1502. QUALIFICATIONS OF BOARD MEMBERS. 

18 (a) CITIZENSHIP.—Each member of the Board shall 

19 be a citizen of the United States. 

20 (b) BASIS OF SELECTION.—Board members will be 

21 selected on the basis of their experience and expertise in 

22 relevant subjects, including the practice of medicine, nurs23 ing, or other clinical practices, health care financing and 

24 delivery, state health systems, consumer protection, busi25 ness, law, and delivery of care to vulnerable populations. 
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1 (c) EXCLUSIVE EMPLOYMENT.—During the term of 

2 appointment, Board members shall serve as employees of 

3 the Federal Government and shall hold no other employ4 ment. 

5 (d) PROHIBITION OF CONFLICT OF INTEREST.—A 

6 member of the Board may not have a pecuniary interest 

7 in or hold an official relation to any health care plan, 

8 health care provider, insurance company, pharmaceutical 

9 company, medical equipment company, or other affected 

10 industry. Before entering upon the duties as a member 

11 of the Board, the member shall certify under oath compli12 ance with this requirement. 

13 (e) POST-EMPLOYMENT RESTRICTIONS.—After leav14 ing the Board, former members are subject to post-em15 ployment restrictions applicable to comparable Federal 

16 employees. 

17 (f) COMPENSATION OF BOARD MEMBERS.—Each 

18 member of the Board (other than the chair) shall receive 

19 an annual salary at the annual rate payable from time 

20 to time for level IV of the Executive Schedule. The chair 

21 of the Board, during the period of service as chair, shall 

22 receive an annual salary at the annual rate payable from 

23 time to time for level III of the Executive Schedule. 

24 SEC. 1503. GENERAL DUTIES AND RESPONSIBILITIES. 

25 (a) COMPREHENSIVE BENEFIT PACKAGE.— 
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1 (1) INTERPRETATION.—The Board shall inter2 pret the comprehensive benefit package, adjust the 

3 delivery of preventive services under section 1153, 

4 and take such steps as may be necessary to assure 

5 that the comprehensive benefit package is available 

6 on a uniform national basis to all eligible individuals. 

7 (2) RECOMMENDATIONS.—The Board may rec8 ommend to the President and the Congress appro9 priate revisions to such package. Such recommenda10 tions may reflect changes in technology, health care 

11 needs, health care costs, and methods of service de12 livery. 

13 (b) ADMINISTRATION OF COST CONTAINMENT PRO14 VISIONS.—The Board shall oversee the cost containment 

15 requirements of subtitle A of title VI and certify compli16 ance with such requirements. 

17 (c) COVERAGE AND FAMILIES.—The Board shall de18 velop and implement standards relating to the eligibility 

19 of individuals for coverage in applicable health plans under 

20 subtitle A of title I and may provide such additional excep21 tions and special rules relating to the treatment of family 

22 members under section 1012 as the Board finds appro23 priate. 

24 (d) QUALITY MANAGEMENT AND IMPROVEMENT.— 

25 The Board shall establish and have ultimate responsibility 
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Title I, Subtitle F 

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1 for a performance-based system of quality management 

2 and improvement as required by section 5001. 

3 (e) INFORMATION STANDARDS.—The Board shall de4 velop and implement standards to establish national 

5 health information system to measure quality as required 

6 by section 5101. 

7 (f) PARTICIPATING STATE REQUIREMENTS.—Con8 sistent with the provisions of subtitle C, the Board shall— 

9 (1) establish requirements for participating 

10 States, 

11 (2) monitor State compliance with those re12 quirements, 

13 (3) provide technical assistance, and 

14 in a manner that ensures access to the comprehensive ben15 efit package for all eligible individuals. 

16 (g) DEVELOPMENT OF PREMIUM CLASS FACTORS.— 

17 The Board shall establish premium class factors under 

18 subpart D of this part. 

19 (h) DEVELOPMENT OF RISK-ADJUSTMENT METHOD20 OLOGY.—The Board shall develop a methodology for the 

21 risk-adjustment of premium payments to regional alliance 

22 health plans in accordance with subpart E of this part. 

23 (i) FINANCIAL REQUIREMENTS.—The Board shall es24 tablish minimum capital requirements and requirements 

25 for guaranty funds under subpart F of this part. 
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1 (j) STANDARDS FOR HEALTH PLAN GRIEVANCE

2 PROCEDURES.—The Board shall establish standards for 

3 health plan grievance procedures that are used by enroll4 ees in pursuing complaints. 

5 SEC. 1504. ANNUAL REPORT. 

6 (a) IN GENERAL.—The Board shall prepare and send 

7 to the President and Congress an annual report address8 ing the overall implementation of the new health care sys9 tem. 

10 (b) MATTERS TO BE INCLUDED.—The Board shall 

11 include in each annual report under this section the fol12 lowing: 

13 (1) Information on Federal and State imple14 mentation. 

15 (2) Data related to quality improvement. 

16 (3) Recommendations or changes in the admin17 istration, regulation and laws related to health care 

18 and coverage. 

19 (4) A full account of all actions taken during 

20 the previous year. 

21 SEC. 1505. POWERS. 

22 (a) STAFF; CONTRACT AUTHORITY.—The Board 

23 shall have authority, subject to the provisions of the civil24 service laws and chapter 51 and subchapter III of chapter 

25 53 of title 5, United States Code, to appoint such officers 
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1 and employees as are necessary to carry out its functions. 

2 To the extent provided in advance in appropriations Acts, 

3 the Board may contract with any person (including an 

4 agency of the Federal Government) for studies and anal5 ysis as required to execute its functions. Any employee of 

6 the Executive Branch may be detailed to the Board to as7 sist the Board in carrying out its duties. 

8 (b) ESTABLISHMENT OF ADVISORY COMMITTEES.— 

9 The Board may establish advisory committees. 

10 (c) ACCESS TO INFORMATION.—The Board may se11 cure directly from any department or agency of the United 

12 States information necessary to enable it to carry out its 

13 functions, to the extent such information is otherwise 

14 available to a department or agency of the United States. 

15 Upon request of the chair, the head of that department 

16 or agency shall furnish that information to the Board. 

17 (d) DELEGATION OF AUTHORITY.—Except as other18 wise provided in this Act, the Board may delegate any 

19 function to such officers and employees as the Board may 

20 designate and may authorize such successive redelegations 

21 of such functions with the Board as the Board deems to 

22 be necessary or appropriate. No delegation of functions 

23 by the Board shall relieve the Board of responsibility for 

24 the administration of such functions. 
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1 (e) RULEMAKING.—The National Health Board is 

2 authorized to establish such rules as may be necessary to 

3 carry out this Act. 

4 SEC. 1506. FUNDING. 

5 (a) AUTHORIZATION OF APPROPRIATIONS.—There 

6 are authorized to be appropriated to the Board such sums 

7 as may be necessary for fiscal years 1994, 1995, 1996, 

8 1997, and 1998. 

9 (b) SUBMISSION OF BUDGET.—Under the procedures 

10 of chapter 11 of title 31, United States Code, the budget 

11 for the Board for a fiscal year shall be reviewed by the 

12 Director of the Office of Management and Budget and 

13 submitted to the Congress as part of the President’s sub14 mission of the Budget of the United States for the fiscal 

15 year. 

16 Subpart B—Responsibilities Relating to Review and 

17 Approval of State Systems 

18 SEC. 1511. FEDERAL REVIEW AND ACTION ON STATE SYS19 TEMS. 

20 (a) APPROVAL OF STATE SYSTEMS BY NATIONAL

21 BOARD.— 

22 (1) IN GENERAL.—The National Health Board 

23 shall approve a State health care system for which 

24 a document is submitted under section 1200(b) un25 less the Board finds that the system (as set forth in 
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1 the document) does not (or will not) provide for the 

2 State meeting the responsibilities for participating 

3 States under this Act. 

4 (2) REGULATIONS.—The Board shall issue reg5 ulations, not later than July 1, 1995, prescribing the 

6 requirements for State health care systems under 

7 parts 2 and 3 of subtitle C, except that in the case 

8 of a document submitted under section 1200(b) be9 fore the date of issuance of such regulations, the 

10 Board shall take action on such document notwith11 standing the fact that such regulations have not 

12 been issued. 

13 (3) NO APPROVAL PERMITTED FOR YEARS

14 PRIOR TO 1996.—The Board may not approve a 

15 State health care system under this subpart for any 

16 year prior to 1996. 

17 (b) REVIEW OF COMPLETENESS OF DOCUMENTS.— 

18 (1) IN GENERAL.—If a State submits a docu19 ment under subsection (a)(1), the Board shall notify 

20 the State, not later than 7 working days after the 

21 date of submission, whether or not the document is 

22 complete and provides the Board with sufficient in23 formation to approve or disapprove the document. 

24 (2) ADDITIONAL INFORMATION ON INCOMPLETE

25 DOCUMENT.—If the Board notifies a State that the 
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1 State’s document is not complete, the State shall be 

2 provided such additional period (not to exceed 45 

3 days) as the Board may by regulation establish in 

4 which to submit such additional information as the 

5 Board may require. Not later than 7 working days 

6 after the State submits the additional information, 

7 the Board shall notify the State respecting the com8 pleteness of the document. 

9 (c) ACTION ON COMPLETED DOCUMENTS.— 

10 (1) IN GENERAL.—The Board shall make a de11 termination (and notify the State) on whether the 

12 State’s document provides for implementation of a 

13 State system that meets the applicable requirements 

14 of subtitle C— 

15 (A) in the case of a State that did not re16 quire the additional period described in sub17 section (b)(2) to file a complete document, not 

18 later than 90 days after notifying a State under 

19 subsection (b) that the State’s document is 

20 complete, or 

21 (B) in the case of a State that required the 

22 additional period described in subsection (b)(2) 

23 to file a complete document, not later than 90 

24 days after notifying a State under subsection 

25 (b) that the State’s document is complete. 
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1 (2) PLANS DEEMED APPROVED.—If the Board 

2 does not meet the applicable deadline for making a 

3 determination and providing notice under paragraph 

4 (1) with respect to a State’s document, the Board 

5 shall be deemed to have approved the State’s docu6 ment for purposes of this Act. 

7 (d) OPPORTUNITY TO RESPOND TO REJECTED DOC8 UMENT.— 

9 (1) IN GENERAL.—If (within the applicable 

10 deadline under subsection (c)(1)) the Board notifies 

11 a State that its document does not provide for im12 plementation of a State system that meets the appli13 cable requirements of subtitle C, the Board shall 

14 provide the State with a period of 30 days in which 

15 to submit such additional information and assur16 ances as the Board may require. 

17 (2) DEADLINE FOR RESPONSE.—Not later than 

18 30 days after receiving such additional information 

19 and assurances, the Board shall make a determina20 tion (and notify the State) on whether the State’s 

21 document provides for implementation of a State 

22 system that meets the applicable requirements of 

23 subtitle C. 

24 (3) PLAN DEEMED APPROVED.—If the Board 

25 does not meet the deadline established under para-
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1 graph (2) with respect to a State, the Board shall 

2 be deemed to have approved the State’s document 

3 for purposes of this Act. 

4 (e) APPROVAL OF PREVIOUSLY TERMINATED

5 STATES.—If the Board has approved a State system 

6 under this part for a year but subsequently terminated 

7 the approval of the system under section 1512(b)(2), the 

8 Board shall approve the system for a succeeding year if 

9 the State— 

10 (1) demonstrates to the satisfaction of the 

11 Board that the failure that formed the basis for the 

12 termination no longer exists, and 

13 (2) provides reasonable assurances that the 

14 types of actions (or inactions) which formed the 

15 basis for such termination will not recur. 

16 (f) REVISIONS TO STATE SYSTEM.— 

17 (1) SUBMISSION.—A State may revise a system 

18 approved for a year under this section, except that 

19 such revision shall not take effect unless the State 

20 has submitted to the Board a document describing 

21 such revision and the Board has approved such revi22 sion. 

23 (2) ACTIONS ON AMENDMENTS.—Not later than 

24 60 days after a document is submitted under para25 graph (1), the Board shall make a determination 
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1 (and notify the State) on whether the implementa2 tion of the State system, as proposed to be revised, 

3 meets the applicable requirements of subtitle C. If 

4 the Board fails to meet the requirement of the pre5 ceding sentence, the Board shall be deemed to have 

6 approved the implementation of the State system as 

7 proposed to be revised. 

8 (3) REJECTION OF AMENDMENTS.—Subsection 

9 (d) shall apply to an amendment submitted under 

10 this subsection in the same manner as it applies to 

11 a completed document submitted under subsection 

12 (b). 

13 (g) NOTIFICATION OF NON-PARTICIPATING

14 STATES.—If a State fails to submit a document for a 

15 State system by the deadline referred to in section 1200, 

16 or such a document is not approved under subsection (c), 

17 the Board shall immediately notify the Secretary of Health 

18 and Human Services of the State’s failure for purposes 

19 of applying subpart C in that State. 

20 SEC. 1512. FAILURE OF PARTICIPATING STATES TO MEET 

21 CONDITIONS FOR COMPLIANCE. 

22 (a) IN GENERAL.—In the case of a participating 

23 State, if the Board determines that the operation of the 

24 State system under subtitle C fails to meet the applicable 
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1 requirements of this Act, sanctions shall apply against the 

2 State in accordance with subsection (b). 

3 (b) TYPE OF SANCTION APPLICABLE.—The sanctions 

4 applicable under this part are as follows: 

5 (1) If the Board determines that the State’s 

6 failure does not substantially jeopardize the ability 

7 of eligible individuals in the State to obtain coverage 

8 for the comprehensive benefit package— 

9 (A) the Board may order a regional alli10 ance in the State to comply with applicable re11 quirements of this Act and take such additional 

12 measures to assure compliance with such re13 quirements as the Board may impose, if the 

14 Board determines that the State’s failure re15 lates to a requirement applicable to a regional 

16 alliance in the State, or 

17 (B) if the Board does not take the action 

18 described in subparagraph (A) (or if the Board 

19 takes the action and determines that the action 

20 has not remedied the violation that led to the 

21 imposition of the sanction), the Board shall no22 tify the Secretary of Health and Human Serv23 ices, who shall reduce payments with respect to 

24 the State in accordance with section 1513. 
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1 (2) If the Board determines that the failure 

2 substantially jeopardizes the ability of eligible indi3 viduals in the State to obtain coverage for the com4 prehensive benefit package— 

5 (A) the Board shall terminate its approval 

6 of the State system; and 

7 (B) the Board shall notify the Secretary of 

8 Health and Human Services, who shall assume 

9 the responsibilities described in section 1522. 

10 (c) TERMINATION OF SANCTION.— 

11 (1) COMPLIANCE BY STATE.—A State against 

12 which a sanction is imposed may submit information 

13 at any time to the Board to demonstrate that the 

14 failure that led to the imposition of the sanction has 

15 been corrected. 

16 (2) TERMINATION OF SANCTION.—If the Board 

17 determines that the failure that led to the imposition 

18 of a sanction has been corrected— 

19 (A) in the case of the sanction described in 

20 subsection (b)(1)(A), the Board shall notify the 

21 regional alliance against which the sanction is 

22 imposed; or 

23 (B) in the case of any other sanction de24 scribed in subsection (b), the Board shall notify 

25 the Secretary of Health and Human Services. 
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1 (d) PROTECTION OF ACCESS TO BENEFITS.—The 

2 Board and the Secretary of Health and Human Services 

3 shall exercise authority to take actions under this section 

4 with respect to a State only in a manner that assures the 

5 continuous coverage of eligible individuals under regional 

6 alliance health plans. 

7 SEC. 1513. REDUCTION IN PAYMENTS FOR HEALTH PRO8 GRAMS BY SECRETARY OF HEALTH AND 

9 HUMAN SERVICES. 

10 (a) IN GENERAL.—Upon receiving notice from the 

11 Board under section 1512(b)(1)(B), the Secretary of 

12 Health and Human Services shall reduce the amount of 

13 any of the payments described in subsection (b) that would 

14 otherwise be made to individuals and entities in the State 

15 by such amount as the Secretary determines to be appro16 priate. 

17 (b) PAYMENTS DESCRIBED.—The payments de18 scribed in this subsection are as follows: 

19 (1) Payments to academic health centers in the 

20 State under subtitle B of title III. 

21 (2) Payments to individuals and entities in the 

22 State for health research activities under section 301 

23 and title IV of the Public Health Service Act. 
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1 (3) Payments to hospitals in the State under 

2 part 4 of subtitle E of title III (relating to payments 

3 to hospitals serving vulnerable populations) 

4 SEC. 1514. REVIEW OF FEDERAL DETERMINATIONS. 

5 Any State or alliance affected by a determination by 

6 the Board under this subpart may appeal such determina7 tion in accordance with section 5231. 

8 SEC. 1515. FEDERAL SUPPORT FOR STATE IMPLEMENTA9 TION. 

10 (a) PLANNING GRANTS.— 

11 (1) IN GENERAL.—Not later than 90 days after 

12 the date of the enactment of this Act, the Secretary 

13 shall make available to each State a planning grant 

14 to assist a State in the development of a health care 

15 system to become a participating State under sub16 title C. 

17 (2) FORMULA.—The Secretary shall establish a 

18 formula for the distribution of funds made available 

19 under this subsection. 

20 (3) AUTHORIZATION OF APPROPRIATIONS.— 

21 There are authorized to be appropriated 

22 $50,000,000 in each of fiscal years 1995 and 1996 

23 for grants under this subsection. 

24 (b) GRANTS FOR START-UP SUPPORT.— 
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1 (1) IN GENERAL.—The Secretary shall make 

2 available to States, upon their enacting enabling leg3 islation to become participating States, grants to as4 sist in the establishment of regional alliances. 

5 (2) FORMULA.—The Secretary shall establish a 

6 formula for the distribution of funds made available 

7 under this subsection. 

8 (3) STATE MATCHING FUNDS REQUIRED.— 

9 Funds are payable to a State under this subsection 

10 only if the State provides assurances, satisfactory to 

11 the Secretary, that amounts of State funds (at least 

12 equal to the amount made available under this sub13 section) are expended for the purposes described in 

14 paragraph (1). 

15 (4) AUTHORIZATION OF APPROPRIATIONS.— 

16 There are authorized to be appropriated 

17 $313,000,000 for fiscal year 1996, $625,000,000 for 

18 fiscal year 1997, and $313,000,000 for fiscal year 

19 1998 for grants under this subsection. 

20 Subpart C—Responsibilities in Absence of State 

21 Systems 

22 SEC. 1521. APPLICATION OF SUBPART. 

23 (a) INITIAL APPLICATION.—This subpart shall apply 

24 with respect to a State as of January 1, 1998, unless— 
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1 (1) the State submits a document for a State 

2 system under section 1511(a)(1) by July 1, 1997, 

3 and 

4 (2) the Board determines under section 1511 

5 that such system meets the requirements of part 1 

6 of subtitle C. 

7 (b) TERMINATION OF APPROVAL OF SYSTEM OF PAR8 TICIPATING STATE.—In the case of a participating State 

9 for which the Board terminates approval of the State sys10 tem under section 1512(b)(2), this subpart shall apply 

11 with respect to the State as of such date as is appropriate 

12 to assure the continuity of coverage for the comprehensive 

13 benefit package for eligible individuals in the State. 

14 SEC. 1522. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN 

15 NON-PARTICIPATING STATES. 

16 (a) NOTICE.—When the Board determines that this 

17 subpart will apply to a State for a calendar year, the 

18 Board shall notify the Secretary of Health and Human 

19 Services. 

20 (b) ESTABLISHMENT OF REGIONAL ALLIANCE SYS21 TEM.—Upon receiving notice under subsection (a), the 

22 Secretary shall take such steps, including the establish23 ment of regional alliances, and compliance with other re24 quirements applicable to participating States under sub25 title C, as are necessary to ensure that the comprehensive 
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1 benefit package is provided to eligible individuals in the 

2 State during the year. 

3 (c) REQUIREMENTS FOR ALLIANCES.—Subject to 

4 section 1523, any regional alliance established by the Sec5 retary pursuant to this section must meet all the require6 ments applicable under subtitle D to a regional alliance 

7 established and operated by a participating State, and the 

8 Secretary shall have the authority to fulfill all the func9 tions of such an alliance. 

10 (d) ESTABLISHMENT OF GUARANTY FUND.— 

11 (1) ESTABLISHMENT.—The Secretary must en12 sure that there is a guaranty fund that meets the re13 quirements established by the Board under section 

14 1552, in order to provide financial protection to 

15 health care providers and others in the case of a fail16 ure of a regional alliance health plan under a re17 gional alliance established and operated by the Sec18 retary under this section. 

19 (2) ASSESSMENTS TO PROVIDE GUARANTY

20 FUNDS.—In the case of a failure of one or more re21 gional alliance health plans under a regional alliance 

22 established and operated by the Secretary under this 

23 section, the Secretary may require each regional alli24 ance health plan under the alliance to pay an assess25 ment to the Secretary in an amount not to exceed 
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1 2 percent of the premiums of such plans paid by or 

2 on behalf of regional alliance eligible individuals dur3 ing a year for so long as necessary to generate suffi4 cient revenue to cover any outstanding claims 

5 against the failed plan. 

6 SEC. 1523. IMPOSITION OF SURCHARGE ON PREMIUMS 

7 UNDER FEDERALLY-OPERATED SYSTEM. 

8 (a) IN GENERAL.—If this subpart applies to a State 

9 for a calendar year, the premiums charged under the re10 gional alliance established and operated by the Secretary 

11 in the State shall be equal to premiums that would other12 wise be charged under a regional alliance established and 

13 operated by the State, increased by 15 percent. Such 15 

14 percent increase shall be used to reimburse the Secretary 

15 for any administrative or other expenses incurred as a re16 sult of establishing and operating the system. 

17 (b) TREATMENT OF SURCHARGE AS PART OF PRE18 MIUM.—For purposes of determining the compliance of a 

19 State for which this subpart applies in a year with the 

20 requirements for budgeting under subtitle A of title VI 

21 for the year, the 15 percent increase described in sub22 section (a) shall be treated as part of the premium for 

23 payment to a regional alliance. 
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1 SEC. 1524. RETURN TO STATE OPERATION. 

2 (a) APPLICATION PROCESS.—After the establishment 

3 and operation of an alliance system by the Secretary in 

4 a State under section 1522, the State may at any time 

5 apply to the Board for the approval of a State system in 

6 accordance with the procedures described in section 1511. 

7 (b) TIMING.—If the Board approves the system of a 

8 State for which the Secretary has operated an alliance sys9 tem during a year, the Secretary shall terminate the oper10 ation of the system, and the State shall establish and oper11 ate its approved system, as of January 1 of the first year 

12 beginning after the Board approves the State system. The 

13 termination of the Secretary’s system and the operation 

14 of the State’s system shall be conducted in a manner that 

15 assures the continuous coverage of eligible individuals in 

16 the State under regional alliance health plans. 

17 Subpart D—Establishment of Class Factors for 

18 Charging Premiums 

19 SEC. 1531. PREMIUM CLASS FACTORS. 

20 (a) IN GENERAL.—For each class of family enroll21 ment (as specified in section 1011(c)), for purposes of title 

22 VI, the Board shall establish a premium class factor that 

23 reflects, subject to subsection (b), the relative actuarial 

24 value of the comprehensive benefit package of the class 

25 of family enrollment compared to such value of such pack26 age for individual enrollment. 
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1 (b) CONDITIONS.—In establishing such factors, the 

2 factor for the class of individual enrollment shall be 1 and 

3 the factor for the couple-only class of family enrollment 

4 shall be 2. 

5 Subpart E—Risk Adjustment and Reinsurance 

6 Methodology for Payment of Plans 

7 SEC. 1541. DEVELOPMENT OF A RISK ADJUSTMENT AND RE8 INSURANCE METHODOLOGY. 

9 (a) DEVELOPMENT.— 

10 (1) INITIAL DEVELOPMENT.—Not later than 

11 April 1, 1995, the Board shall develop a risk adjust12 ment and reinsurance methodology in accordance 

13 with this subpart. 

14 (2) IMPROVEMENTS.—The Board shall make 

15 such improvements in such methodology as may be 

16 appropriate to achieve the purposes described in sub17 section (b)(1). 

18 (b) METHODOLOGY.— 

19 (1) PURPOSES.—Such methodology shall pro20 vide for the adjustment of payments to regional alli21 ance health plans for the purposes of— 

22 (A) assuring that payments to such plans 

23 reflect the expected relative utilization and ex24 penditures for such services by each plan’s en25 rollees compared to the average utilization and 
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1 expenditures for regional alliance eligible indi2 viduals, and 

3 (B) protecting health plans that enroll a 

4 disproportionate share of regional alliance eligi5 ble individuals with respect to whom expected 

6 utilization of health care services (included in 

7 the comprehensive benefit package) and ex8 pected health care expenditures for such serv9 ices are greater than the average level of such 

10 utilization and expenditures for regional alliance 

11 eligible individuals. 

12 (2) FACTORS TO BE CONSIDERED.—In devel13 oping such methodology, the Board shall take into 

14 account the following factors: 

15 (A) Demographic characteristics. 

16 (B) Health status. 

17 (C) Geographic area of residence. 

18 (D) Socio-economic status. 

19 (E) Subject to paragraph (5), (i) the pro20 portion of enrollees who are SSI recipients and 

21 (ii) the proportion of enrollees who are AFDC 

22 recipients. 

23 (F) Any other factors determined by the 

24 Board to be material to the purposes described 

25 in paragraph (1). 
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1 (3) ZERO SUM.—The methodology shall assure 

2 that the total payments to health plans by the re3 gional alliance after application of the methodology 

4 are the same as the amount of payments that would 

5 have been made without application of the method6 ology. 

7 (4) PROSPECTIVE ADJUSTMENT OF PAY8 MENTS.—The methodology, to the extent possible 

9 and except in the case of a mandatory reinsurance 

10 system described in subsection (c), shall be applied 

11 in a manner that provides for the prospective adjust12 ment of payments to health plans. 

13 (5) TREATMENT OF SSI/AFDC ADJUSTMENT.— 

14 The Board is not required to apply the factor de15 scribed in clause (i) or (ii) of paragraph (2)(E) if 

16 the Board determines that the application of the 

17 other risk adjustment factors described in paragraph 

18 (2) is sufficient to adjust premiums to take into ac19 count the enrollment in plans of AFDC recipients 

20 and SSI recipients. 

21 (6) SPECIAL CONSIDERATION FOR MENTAL ILL22 NESS.—In developing the methodology under this 

23 section, the Board shall give consideration to the 

24 unique problems of adjusting payments to health 

25 plans with respect to individuals with mental illness. 
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1 (7) SPECIAL CONSIDERATION FOR VETERANS, 

2 MILITARY, AND INDIAN HEALTH PLANS.—In devel3 oping the methodology under this section, the Board 

4 shall give consideration to the special enrollment and 

5 funding provisions relating to plans described in sec6 tion 1004(b). 

7 (8) ADJUSTMENT TO ACCOUNT FOR USE OF ES8 TIMATES.—Subject to section 1361(b)(3) (relating 

9 to establishment of regional alliance reserve funds), 

10 if the total payments made by a regional alliance to 

11 all regional alliance health plans in a year under sec12 tion 1351(b) exceeds, or is less than, the total of 

13 such payments estimated by the alliance in the ap14 plication of the methodology under this subsection, 

15 because of a difference between— 

16 (A) the alliance’s estimate of the distribu17 tion of enrolled families in different risk cat18 egories (assumed in the application of risk fac19 tors under this subsection in making payments 

20 to regional alliance health plans), and 

21 (B) the actual distribution of such enrolled 

22 families in such categories, 

23 the methodology under this subsection shall provide 

24 for an adjustment in the application of such method25 ology in the second succeeding year in a manner 
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1 that would reduce, or increase, respectively, by the 

2 amount of such excess (or deficit) the total of such 

3 payments made by the alliance to all such plans. 

4 (c) MANDATORY REINSURANCE.— 

5 (1) IN GENERAL.—The methodology developed 

6 under this section may include a system of manda7 tory reinsurance, but may not include a system of 

8 voluntary reinsurance. 

9 (2) REQUIREMENT IN CERTAIN CASES.—If the 

10 Board determines that an adequate system of pro11 spective adjustment of payments to health plans to 

12 account for the health status of individuals enrolled 

13 by regional alliance health plans cannot be developed 

14 (and ready for implementation) by the date specified 

15 in subsection (a)(1), the Board shall include a man16 datory reinsurance system as a component of the 

17 methodology. The Board may thereafter reduce or 

18 eliminate such a system at such time as the Board 

19 determines that an adequate prospective payment 

20 adjustment for health status has been developed and 

21 is ready for implementation. 

22 (3) REINSURANCE SYSTEM.—The Board, in de23 veloping the methodology for a mandatory reinsur24 ance system under this subsection, shall— 
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1 (A) provide for health plans to make pay2 ments to state-established reinsurance programs 

3 for the purpose of reinsuring part or all of the 

4 health care expenses for items and services in5 cluded in the comprehensive benefit package for 

6 specified classes of high-cost enrollees or speci7 fied high-cost treatments or diagnoses; and 

8 (B) specify the manner of creation, struc9 ture, and operation of the system in each State, 

10 including— 

11 (i) the manner (which may be pro12 spective or retrospective) in which health 

13 plans make payments to the system, and 

14 (ii) the type and level of reinsurance 

15 coverage provided by the system. 

16 (d) CONFIDENTIALITY OF INFORMATION.—The 

17 methodology shall be developed in a manner consistent 

18 with privacy standards promulgated under section 

19 5120(a). In developing such standards, the Board shall 

20 take into account any potential need of alliances for cer21 tain individually identifiable health information in order 

22 to carry out risk-adjustment and reinsurance activities 

23 under this Act, but only to the minimum extent necessary 

24 to carry out such activities and with protections provided 
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1 to minimize the identification of the individuals to whom 

2 the information relates. 

3 SEC. 1542. INCENTIVES TO ENROLL DISADVANTAGED 

4 GROUPS. 

5 The Board shall establish standards under which 

6 States may provide (under section 1203(e)(3)) for an ad7 justment in the risk-adjustment methodology developed 

8 under section 1541 in order to provide a financial incen9 tive for regional alliance health plans to enroll individuals 

10 who are members of disadvantaged groups. 

11 SEC. 1543. ADVISORY COMMITTEE. 

12 (a) IN GENERAL.—The Board shall establish an advi13 sory committee to provide technical advice and rec14 ommendations regarding the development and modifica15 tion of the risk adjustment and reinsurance methodology 

16 developed under this subpart. 

17 (b) COMPOSITION.—Such advisory committee shall 

18 consist of 15 individuals and shall include individuals who 

19 are representative of health plans, regional alliances, con20 sumers, experts, employers, and health providers. 

21 SEC. 1544. RESEARCH AND DEMONSTRATIONS. 

22 The Secretary shall conduct and support research 

23 and demonstration projects to develop and improve, on a 

24 continuing basis, the risk adjustment and reinsurance 

25 methodology under this subpart. 
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1 SEC. 1545. TECHNICAL ASSISTANCE TO STATES AND ALLI2 ANCES. 

3 The Board shall provide technical assistance to 

4 States and regional alliances in implementing the method5 ology developed under this subpart. 

6 Subpart F—Responsibilities for Financial 

7 Requirements 

8 SEC. 1551. CAPITAL STANDARDS FOR REGIONAL ALLIANCE 

9 HEALTH PLAN. 

10 (a) IN GENERAL.—The Board shall establish, in con11 sultation with the States, minimum capital requirements 

12 for regional alliance health plans, for purposes of section 

13 1204(a). 

14 (b) $500,000 MINIMUM.—Subject to subsection (c), 

15 under such requirements there shall be not less than 

16 $500,000 of capital maintained for each plan offered in 

17 each alliance area, regardless of whether or not the same 

18 sponsor offered more than one of such plans. 

19 (c) ADDITIONAL CAPITAL REQUIREMENTS.—The 

20 Board may require additional capital for factors likely to 

21 affect the financial stability of health plans, including the 

22 following: 

23 (1) Projected plan enrollment and number of 

24 providers participating in the plan. 

25 (2) Market share and strength of competition. 
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1 (3) Extent and nature of risk-sharing with par2 ticipating providers and the financial stability of 

3 risk-sharing providers. 

4 (4) Prior performance of the plan, risk history, 

5 and liquidity of assets. 

6 (d) DEVELOPMENT OF STANDARDS BY NAIC.—The 

7 Board may request the National Association of Insurance 

8 Commissioners to develop model standards for the addi9 tional capital requirements described in subsection (c) and 

10 to present such standards to the Board not later than July 

11 1, 1995. The Board may accept such standards as the 

12 standards to be applied under subsection (c) or modify the 

13 standards in any manner it finds appropriate. 

14 SEC. 1552. STANDARD FOR GUARANTY FUNDS. 

15 (a) IN GENERAL.—In consultation with the States, 

16 the Board shall establish standards for guaranty funds es17 tablished by States under section 1204(c). 

18 (b) GUARANTY FUND STANDARDS.—The standards 

19 established under subsection (a) for a guaranty fund shall 

20 include the following: 

21 (1) Each fund must have a method to generate 

22 sufficient resources to pay health providers and oth23 ers in the case of a failure of a health plan (as de24 scribed in section 1204(d)(4)) in order to meet obli25 gations with respect to— 
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1 (A) services rendered by the health plan 

2 for the comprehensive benefit package, includ3 ing any supplemental coverage for cost sharing 

4 provided by the health plan, and 

5 (B) services rendered prior to health plan 

6 insolvency and services to patients after the in7 solvency but prior to their enrollment in other 

8 health plans. 

9 (2) The fund is liable for all claims against the 

10 plan by health care providers with respect to their 

11 provision of items and services covered under the 

12 comprehensive benefit package to enrollees of the 

13 failed plan. Such claims, in full, shall take priority 

14 over all other claims. The fund also is liable, to the 

15 extent and in the manner provided in accordance 

16 with rules established by the Board, for other 

17 claims, including other claims of such providers and 

18 the claims of contractors, employees, governments, 

19 or any other claimants. 

20 (3) The fund stands as a creditor for any pay21 ments owed the plan to the extent of the payments 

22 made by the fund for obligations of the plan. 

23 (4) The fund has authority to borrow against 

24 future assessments (payable under section 
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1 1204(c)(2)) in order to meet the obligations of failed 

2 plans participating in the fund. 

3 PART 2—RESPONSIBILITIES OF DEPARTMENT OF 

4 HEALTH AND HUMAN SERVICES 

5 Subpart A—General Responsibilities 

6 SEC. 1571. GENERAL RESPONSIBILITIES OF SECRETARY OF 

7 HEALTH AND HUMAN SERVICES. 

8 (a) IN GENERAL.—Except as otherwise specifically 

9 provided under this Act (or with respect to administration 

10 of provisions in the Internal Revenue Code of 1986 or in 

11 the Employee Retirement Income Security Act of 1974), 

12 the Secretary of Health and Human Services shall admin13 ister and implement all of the provisions of this Act, except 

14 those duties delegated to the National Health Board, any 

15 other executive agency, or to any State. 

16 (b) FINANCIAL MANAGEMENT STANDARDS.—The 

17 Secretary, in consultation with the Secretaries of Labor 

18 and the Treasury, shall establish, for purposes of section 

19 1361, standards relating to the management of finances, 

20 maintenance of records, accounting practices, auditing 

21 procedures, and financial reporting for health alliances. 

22 Such standards shall take into account current Federal 

23 laws and regulations relating to fiduciary responsibilities 

24 and financial management of funds. 
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1 (c) AUDITING REGIONAL ALLIANCE PERFORM2 ANCE.—The Secretary shall perform periodic financial and 

3 other audits of regional alliances to assure that such alli4 ances are carrying out their responsibilities under this Act 

5 consistent with this Act. Such audits shall include audits 

6 of alliance performance in the areas of— 

7 (1) assuring enrollment of all regional alliance 

8 eligible individuals in health plans, 

9 (2) management of premium and cost sharing 

10 discounts and reductions provided; and 

11 (3) financial management of the alliance, in12 cluding allocation of collection shortfalls. 

13 SEC. 1572. ADVISORY COUNCIL ON BREAKTHROUGH 

14 DRUGS. 

15 (a) IN GENERAL.—The Secretary shall appoint an 

16 Advisory Council on Breakthrough Drugs (in this section 

17 referred to as the ‘‘Council’’) that will examine the reason18 ableness of launch prices of new drugs that represent a 

19 breakthrough or significant advance over existing thera20 pies. 

21 (b) DUTIES.—(1) At the request of the Secretary, or 

22 a member of the Council, the Council shall make a deter23 mination regarding the reasonableness of launch prices of 

24 a breakthrough drug. Such a determination shall be based 

25 on— 
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1 (A) prices of other drugs in the same thera2 peutic class; 

3 (B) cost information supplied by the manufac4 turer; 

5 (C) prices of the drug in countries specified in 

6 section 802(b)(4)(A) of the Federal Food, Drug, and 

7 Cosmetic Act; 

8 (D) projected prescription volume, economies of 

9 scale, product stability, special manufacturing re10 quirements and research costs; 

11 (E) cost effectiveness relative to the cost of al12 ternative course of treatment options, including non13 pharmacological medical interventions; and 

14 (F) improvements in quality of life offered by 

15 the new product, including ability to return to work, 

16 ability to perform activities of daily living, freedom 

17 from attached medical devices, and other appro18 priate measurements of quality of life improvements. 

19 (2) The Secretary shall review the determinations of 

20 the Council and publish the results of such review along 

21 with the Council’s determination (including minority opin22 ions) as a notice in the Federal Register. 

23 (c) MEMBERSHIP.—The Council shall consist of a 

24 chair and 12 other persons, appointed without regard to 

25 the provisions of title 5, United States Code, governing 
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1 appointments in the competitive service. The Council shall 

2 include a representative from the pharmaceutical industry, 

3 consumer organizations, physician organizations, the hos4 pital industry, and the managed care industry. Other indi5 viduals appointed by the Secretary shall be recognized ex6 perts in the fields of health care economics, pharmacology, 

7 pharmacy, and prescription drug reimbursement. Only one 

8 member of the Council may have direct or indirect finan9 cial ties to the pharmaceutical industry. 

10 (d) TERM OF APPOINTMENTS.—Appointments shall 

11 be for a term of 3 years, except that the Secretary may 

12 provide initially for such shorter terms as will ensure that 

13 the terms of not more than 5 members expire in any one 

14 year. 

15 (e) COMPENSATION.—Members of the Council shall 

16 be entitled to receive reimbursement of expenses and per 

17 diem in lieu of subsistence in the same manner as other 

18 members of advisory councils appointed by the Secretary 

19 are provided such reimbursements under the Social Secu20 rity Act. 

21 (f) NO TERMINATION.—Notwithstanding the provi22 sions of the Federal Advisory Committee Act, the Council 

23 shall continue in existence until otherwise specified in law. 
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1 Subpart B—Certification of Essential Community 

2 Providers 

3 SEC. 1581. CERTIFICATION. 

4 (a) IN GENERAL.—For purposes of this Act, the Sec5 retary shall certify as an ‘‘essential community provider’’ 

6 any health care provider or organization that— 

7 (1) is within any of the categories of providers 

8 and organizations specified in section 1582(a), or 

9 (2) meets the standards for certification under 

10 section 1583(a). 

11 (b) TIMELY ESTABLISHMENT OF PROCESS.—The 

12 Secretary shall take such actions as may be necessary to 

13 permit health care providers and organizations to be cer14 tified as essential community providers in a State before 

15 the beginning of the first year for the State. 

16 SEC. 1582. CATEGORIES OF PROVIDERS AUTOMATICALLY 

17 CERTIFIED. 

18 (a) IN GENERAL.—The categories of providers and 

19 organizations specified in this subsection are as follows: 

20 (1) MIGRANT HEALTH CENTERS.—A recipient 

21 or subrecipient of a grant under section 329 of the 

22 Public Health Service Act. 

23 (2) COMMUNITY HEALTH CENTERS.—A recipi24 ent or subrecipient of a grant under section 330 of 

25 the Public Health Service Act. 
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1 (3) HOMELESS PROGRAM PROVIDERS.—A re2 cipient or subrecipient of a grant under section 340 

3 of the Public Health Service Act. 

4 (4) PUBLIC HOUSING PROVIDERS.—A recipient 

5 or subrecipient of a grant under section 340A of the 

6 Public Health Service Act. 

7 (5) FAMILY PLANNING CLINICS.—A recipient or 

8 subrecipient of a grant under title X of the Public 

9 Health Service Act. 

10 (6) INDIAN HEALTH PROGRAMS.—A service unit 

11 of the Indian Health Service, a tribal organization, 

12 or an urban Indian program, as defined in the In13 dian Health Care Improvement Act. 

14 (7) AIDS PROVIDERS UNDER RYAN WHITE

15 ACT.—A public or private nonprofit health care pro16 vider that is a recipient or subrecipient of a grant 

17 under title XXVI of the Public Health Service Act. 

18 (8) MATERNAL AND CHILD HEALTH PRO19 VIDERS.—A public or private nonprofit entity that 

20 provides prenatal care, pediatric care, or ambulatory 

21 services to children, including children with special 

22 health care needs, and that receives funding for such 

23 care or services under title V of the Social Security 

24 Act. 
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1 (9) FEDERALLY QUALIFIED HEALTH CENTER; 

2 RURAL HEALTH CLINIC.—A Federally-qualified 

3 health center or a rural health clinic (as such terms 

4 are defined in section 1861(aa) of the Social Secu5 rity Act). 

6 (10) PROVIDER OF SCHOOL HEALTH SERV7 ICES.—A provider of school health services that re8 ceives funding for such services under subtitle G of 

9 title III. 

10 (11) COMMUNITY PRACTICE NETWORK.—A 

11 qualified community practice network receiving de12 velopment funds under subtitle E of title III. 

13 (b) SUBRECIPIENT DEFINED.—In this subpart, the 

14 term ‘‘subrecipient’’ means, with respect to a recipient of 

15 a grant under a particular authority, an entity that— 

16 (1) is receiving funding from such a grant 

17 under a contract with the principal recipient of such 

18 a grant, and 

19 (2) meets the requirements established to be a 

20 recipient of such a grant. 

21 (c) HEALTH PROFESSIONAL DEFINED.—In this sub22 part, the term ‘‘health professional’’ means a physician, 

23 nurse, nurse practitioner, certified nurse midwife, physi24 cian assistant, psychologist, dentist, pharmacist, and other 

25 health care professional recognized by the Secretary. 
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1 SEC. 1583. STANDARDS FOR ADDITIONAL PROVIDERS. 

2 (a) STANDARDS.—The Secretary shall publish stand3 ards for the certification of additional categories of health 

4 care providers and organizations as essential community 

5 providers, including the categories described in subsection 

6 (b). Such a health care provider or organization shall not 

7 be certified unless the Secretary determines, under such 

8 standards, that health plans operating in the area served 

9 by the applicant would not otherwise be able to assure ade10 quate access to items and services included in the com11 prehensive benefit package if such a provider was not so 

12 certified. 

13 (b) CATEGORIES TO BE INCLUDED.—The categories 

14 described in this subsection are as follows: 

15 (1) HEALTH PROFESSIONALS.—Health profes16 sionals— 

17 (A) located in an area designated as a 

18 health professional shortage area (under section 

19 332 of the Public Health Service Act), or 

20 (B) providing a substantial amount of 

21 health services (as determined in accordance 

22 with standards established by the Secretary) to 

23 a medically underserved population (as des24 ignated under section 330 of such Act). 

25 (2) INSTITUTIONAL PROVIDERS.—Public and 

26 private nonprofit hospitals and other institutional 
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1 health care providers located in such an area or pro2 viding health services to such a population. 

3 (3) OTHER PROVIDERS.—Other public and pri4 vate nonprofit agencies and organizations that— 

5 (A) are located in such an area or pro6 viding health services to such a population, and 

7 (B) provide health care and services essen8 tial to residents of such an area or such popu9 lations. 

10 SEC. 1584. CERTIFICATION PROCESS; REVIEW; TERMI11 NATION OF CERTIFICATIONS. 

12 (a) CERTIFICATION PROCESS.— 

13 (1) PUBLICATION OF PROCEDURES.—The Sec14 retary shall publish, not later than 6 months after 

15 the date of the enactment of this Act, the procedures 

16 to be used by health care professionals, providers, 

17 agencies, and organizations seeking certification 

18 under this subpart, including the form and manner 

19 in which an application for such certification is to be 

20 made. 

21 (2) TIMELY DETERMINATION.—The Secretary 

22 shall make a determination upon such an application 

23 not later than 60 days (or 15 days in the case of 

24 a certification for an entity described in section 

25 1582) after the date the complete application has 
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1 been submitted. The determination on an application 

2 for certification of an entity described in section 

3 1582 shall only involve the verification that the enti4 ty is an entity described in such section. 

5 (b) REVIEW OF CERTIFICATIONS.—The Secretary 

6 shall periodically review whether professionals, providers, 

7 agencies, and organizations certified under this subpart 

8 continue to meet the requirements for such certification. 

9 (c) TERMINATION OR DENIAL OF CERTIFICATION.— 

10 (1) PRELIMINARY FINDING.—If the Secretary 

11 preliminarily finds that an entity seeking certifi12 cation under this section does not meet the require13 ments for such certification or such an entity cer14 tified under this subpart fails to continue to meet 

15 the requirements for such certification, the Secretary 

16 shall notify the entity of such preliminary finding 

17 and permit the entity an opportunity, under subtitle 

18 C of title V, to rebut such findings. 

19 (2) FINAL DETERMINATION.—If, after such op20 portunity, the Secretary continues to find that such 

21 an entity continues to fail to meet such require22 ments, the Secretary shall terminate the certification 

23 and shall notify the entity, regional alliances, and 

24 corporate alliances of such termination and the ef25 fective date of the termination. 
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1 SEC. 1585. NOTIFICATION OF HEALTH ALLIANCES AND PAR2 TICIPATING STATES. 

3 (a) IN GENERAL.—Not less often than annually the 

4 Secretary shall notify each participating State and each 

5 health alliance of essential community providers that have 

6 been certified under this subpart. 

7 (b) CONTENTS.—Such notice shall include sufficient 

8 information to permit each health alliance to notify health 

9 plans of the identify of each entity certified as an essential 

10 community provider, including— 

11 (1) the location of the provider within each 

12 plan’s service area, 

13 (2) the health services furnished by the pro14 vider, and 

15 (3) other information necessary for health plans 

16 to carry out part 3 of subtitle E. 

17 PART 3—SPECIFIC RESPONSIBILITIES OF 

18 SECRETARY OF LABOR. 

19 SEC. 1591. RESPONSIBILITIES OF SECRETARY OF LABOR. 

20 (a) IN GENERAL.—The Secretary of Labor is respon21 sible— 

22 (1) under subtitle G, for the enforcement of re23 quirements applicable to employers under regional 

24 alliances (including requirements relating to pay25 ment of premiums) and the administration of cor26 porate alliances; 
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1 (2) under subtitle D, with respect to elections 

2 by eligible sponsors to become corporate alliances 

3 and the termination of such elections; 

4 (3) under section 1395, for the temporary as5 sumption of the operation of self-insured corporate 

6 alliance health plans that are insolvent; 

7 (4) under section 1396, for the establishment 

8 and administration of Corporate Alliance Health 

9 Plan Insolvency Fund; 

10 (5) for carrying out any other responsibilities 

11 assigned to the Secretary under this Act; and 

12 (6) for administering title I of the Employee 

13 Retirement Income Security Act of 1974 as it re14 lates to group health plans maintained by corporate 

15 alliances. 

16 (b) AGREEMENTS WITH STATES.—The Secretary of 

17 Labor may enter into agreements with States in order to 

18 enforce responsibilities of employers and corporate alli19 ances, and requirements of corporate alliance health plans, 

20 under subtitle B of title I of the Employee Retirement In21 come Security Act of 1974. 

22 (c) CONSULTATION WITH BOARD.—In carrying out 

23 activities under this Act with respect to corporate alli24 ances, corporate alliance health plans, and employers, the 
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1 Secretary of Labor shall consult with the National Health 

2 Board. 

3 (d) EMPLOYER-RELATED REQUIREMENTS.— 

4 (1) IN GENERAL.—The Secretary of Labor, in 

5 consultation with the Secretary, shall be responsible 

6 for assuring that employers— 

7 (A) make payments of any employer pre8 miums (and withhold and make payment of the 

9 family share of premiums with respect to quali10 fying employees) as required under this Act, in11 cluding auditing of regional alliance collection 

12 activities with respect to such payments, 

13 (B) submit timely reports as required 

14 under this Act, and 

15 (C) otherwise comply with requirements 

16 imposed on employers under this Act. 

17 (2) AUDIT AND SIMILAR AUTHORITIES.—The 

18 Secretary of Labor— 

19 (A) may carry out such audits (directly or 

20 through contract) and such investigations of 

21 employers and health alliances, 

22 (B) may exercise such authorities under 

23 section 504 of Employee Retirement Income Se24 curity Act of 1974 (in relation to activities 

25 under this Act), 
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1 (C) may, with the permission of the Board, 

2 provide (through contract or otherwise) for such 

3 collection activities (in relation to amounts owed 

4 to regional alliances and for the benefit of such 

5 alliances), and 

6 (D) may impose such civil penalties under 

7 section 1345(d)(1), 

8 as may be necessary to carry out such Secretary’s 

9 responsibilities under this section. 

10 (e) AUTHORITY.—The Secretary of Labor is author11 ized to issue such regulations as may be necessary to carry 

12 out section 1607 and responsibilities of the Secretary 

13 under this Act (including under title XI). 

14 Subtitle G—Employer 

15 Responsibilities 

16 SEC. 1601. PAYMENT REQUIREMENT. 

17 (a) IN GENERAL.—Each employer shall provide for 

18 payments required under section 6121 or 6131 in accord19 ance with the applicable provisions of this Act. 

20 (b) EMPLOYERS IN SINGLE-PAYER STATES.—In the 

21 case of an employer with respect to employees who reside 

22 in a single-payer State, the responsibilities of such em23 ployer under such system shall supersede the obligations 

24 of the employer under subsection (a), except as the Board 

25 may provide. 
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1 (c) EMPLOYERS PARTICIPATING IN REGIONAL ALLI2 ANCES THROUGH MULTIEMPLOYER PLANS.—In the case 

3 of an employer participating in a multiemployer plan, 

4 which plan elects to serve as a regional alliance employer 

5 on behalf of its participating employers, the employer’s 

6 payment obligation under section 6121 shall be deemed 

7 satisfied if the employer pays to the multiemployer plan 

8 at least the premium payment amount specified in section 

9 6121(b) and the plan has assumed legal obligations of 

10 such an employer under such section. 

11 SEC. 1602. REQUIREMENT FOR INFORMATION REPORTING. 

12 (a) REPORTING OF END-OF-YEAR INFORMATION TO

13 QUALIFYING EMPLOYEES.— 

14 (1) IN GENERAL.—Each employer shall provide 

15 to each individual who was a qualifying employee of 

16 the employer during any month in the previous year 

17 information described in paragraph (2) with respect 

18 to the employee. 

19 (2) INFORMATION TO BE SUPPLIED.—The in20 formation described in this paragraph, with respect 

21 to a qualifying employee, is the following (as speci22 fied by the Secretary): 

23 (A) REGIONAL ALLIANCE INFORMATION.— 

24 With respect to each regional alliance through 

25 which the individual obtained health coverage: 
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1 (i) The total number of months of 

2 full-time equivalent employment (as deter3 mined under section 1901(b)(2)) for each 

4 class of enrollment. 

5 (ii) The amount of wages attributable 

6 to qualified employment and the amount of 

7 covered wages (as defined in paragraph 

8 (4)). 

9 (iii) The total amount deducted from 

10 wages and paid for the family share of the 

11 premium. 

12 (iv) Such other information as the 

13 Secretary of Labor may specify. 

14 (B) CORPORATE ALLIANCE INFORMA15 TION.—With respect to a qualifying employee 

16 who obtains coverage through a corporate alli17 ance health plan: 

18 (i) The total number of months of 

19 full-time equivalent employees (as deter20 mined under section 1901(b)(2)) for each 

21 class of enrollment. 

22 (ii) Such other information as the 

23 Secretary of Labor may specify. 

24 (3) ALLIANCE SPECIFIC INFORMATION.—In the 

25 case of a qualifying employee with respect to whom 
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1 an employer made employer premium payments dur2 ing the year to more than one regional alliance, the 

3 information under this subsection shall be reported 

4 separately with respect to each such alliance. 

5 (4) COVERED WAGES DEFINED.—In this sec6 tion, the term ‘‘covered wages’’ means wages paid an 

7 employee of an employer during a month in which 

8 the employee was a qualifying employee of the em9 ployer. 

10 (b) REPORTING OF INFORMATION FOR USE OF RE11 GIONAL ALLIANCES.— 

12 (1) IN GENERAL.—Each employer (including 

13 corporate alliance employers) shall provide under 

14 subsection (f) on behalf of each regional alliance in15 formation described in paragraph (2) on an annual 

16 basis, information described in paragraph (3) on a 

17 monthly basis, and information described in para18 graph (4) on a one-time basis, with respect to the 

19 employment of qualifying employees in each year, 

20 month, or other time, respectively. 

21 (2) INFORMATION TO BE SUPPLIED ON AN AN22 NUAL BASIS.—The information described in this 

23 paragraph, with respect to an employer, is the fol24 lowing (as specified by the Secretary of Labor): 
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1 (A) REGIONAL ALLIANCE INFORMATION.— 

2 With respect to each regional alliance to which 

3 employer premium payments were payable in 

4 the year: 

5 (i) For each qualifying employee in 

6 the year— 

7 (I) The total number of months 

8 of full-time equivalent employment (as 

9 determined under section 1901(b)(2)) 

10 for the employee for each class of en11 rollment. 

12 (II) The total amount deducted 

13 from wages and paid for the family 

14 share of the premium of the quali15 fying employee. 

16 (ii) The total employer premium pay17 ment made under section 6121 for the 

18 year with respect to the employment of all 

19 qualifying employees residing in the alli20 ance area and, in the case of an employer 

21 that has obtained (or seeks to obtain) a 

22 premium discount under section 6123, the 

23 total employer premium payment that 

24 would have been owed for such employ25 ment for the year but for such section. 
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1 (iii) The number of full-time equiva2 lent employees (determined under section 

3 1901(b)(2)) for each class of family enroll4 ment in the year (and for each month in 

5 the year in the case of an employer that 

6 has obtained or is seeking a premium dis7 count under section 6123). 

8 (iv) In the case of an employer to 

9 which section 6124 applies in a year, such 

10 additional information as the Secretary of 

11 Labor may require for purposes of that 

12 section. 

13 (v) The amounts paid (and payable) 

14 pursuant to section 6125. 

15 (vi) The amount of covered wages for 

16 each qualifying employee. 

17 (3) INFORMATION ON A MONTHLY BASIS.— 

18 (A) IN GENERAL.—The information de19 scribed in this paragraph for a month for an 

20 employer is such information as the Secretary 

21 of Labor may specify regarding— 

22 (i) the identity of each eligible indi23 vidual who changed qualifying employee 

24 status with respect to the employer in the 

25 month; and 
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1 (ii) in the case of such an individual 

2 described in subparagraph (B)(i)— 

3 (I) the regional alliance for the 

4 alliance area in which the individual 

5 resides, and 

6 (II) the individual’s class of fam7 ily enrollment. 

8 (B) CHANGES IN QUALIFYING EMPLOYEE

9 STATUS DESCRIBED.—For purposes of subpara10 graph (A), an individual is considered to have 

11 changed qualifying employee status in a month 

12 if the individual either (i) is a qualifying em13 ployee of the employer in the month and was 

14 not a qualifying employee of the employer in 

15 the previous month, or (ii) is not a qualifying 

16 employee of the employer in the month but was 

17 a qualifying employee of the employer in the 

18 previous month. 

19 (4) INITIAL INFORMATION.—Each employer, at 

20 such time before the first year in which qualifying 

21 employees of the employer are enrolled in regional 

22 alliance health plans as the Board may specify, shall 

23 provide for the reporting of such information relat24 ing to employment of eligible individuals as the 

25 Board may specify. 
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1 (c) RECONCILIATION OF EMPLOYER PREMIUM PAY2 MENTS.— 

3 (1) PROVISION OF INFORMATION.—Each em4 ployer (whether or not the employer claimed (or 

5 claims) an employer premium discount under section 

6 6123 for a year) that is liable for employer premium 

7 payments to a regional alliance for any month in a 

8 year shall provide the alliance with such information 

9 as the alliance may require (consistent with rules of 

10 the Secretary of Labor) to determine the appropriate 

11 amount of employer premium payments that should 

12 have been made for all months in the year (taking 

13 into account any employer premium discount under 

14 section 6123 for the employer). 

15 (2) DEADLINE.—Such information shall be pro16 vided not later than the beginning of February of 

17 the following year with the payment to be made for 

18 that month. 

19 (3) RECONCILIATION.— 

20 (A) CONTINUING EMPLOYERS.—Based on 

21 such information, the employer shall adjust the 

22 amount of employer premium payment made in 

23 the month in which the information is provided 

24 to reflect the amount by which the payments in 

25 the previous year were greater or less than the 
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1 amount of payments that should have been 

2 made. 

3 (B) DISCONTINUING EMPLOYERS.—In the 

4 case of a person that ceases to be an employer 

5 in a year, such adjustment shall be made in the 

6 form of a payment to, or from, the alliance in7 volved. 

8 (4) SPECIAL TREATMENT OF SELF-EMPLOYED

9 INDIVIDUALS.—Except as the Secretary of Labor 

10 may provide, individuals who are employers only by 

11 virtue of the operation of section 6126 shall have 

12 employer premium payments attributable to such 

13 section reconciled (in the manner previously de14 scribed in this subsection) under the process for the 

15 collection of the family share of premiums under sec16 tion 1344 rather than under this subsection. 

17 (d) SPECIAL RULES FOR SELF-EMPLOYED.— 

18 (1) IN GENERAL.—In the case of an individual 

19 who is treated as an employer under section 6126, 

20 the individual shall provide, under subsection (f) on 

21 behalf of each regional alliance, information de22 scribed in paragraph (2) with respect to net earn23 ings from self-employment income of the individual 

24 in each year. 
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1 (2) INFORMATION TO BE SUPPLIED.—The in2 formation described in this paragraph, with respect 

3 to an individual, is such information as may be nec4 essary to compute the amount payable under section 

5 6131 by virtue of section 6126. 

6 (e) FORM.—Information shall be provided under this 

7 section in such electronic or other form as the Secretary 

8 specifies. Such specifications shall be done in a manner 

9 that, to the maximum extent practicable, simplifies admin10 istration for small employers. 

11 (f) INFORMATION CLEARINGHOUSE FUNCTIONS.— 

12 (1) DESIGNATION.—The Board shall provide 

13 for the use of the regional centers (which are part 

14 of the electronic data network under section 5103) 

15 to perform information clearinghouse functions 

16 under this section with respect to employers and re17 gional and corporate alliances. 

18 (2) FUNCTIONS.—The functions referred to in 

19 paragraph (1) shall include— 

20 (A) receipt of information submitted by 

21 employers under subsection (b) on an annual 

22 (or one-time) basis, 

23 (B) from the information received, trans24 mittal of information required to regional alli25 ances, and 
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1 (C) such other functions as the Board 

2 specifies. 

3 (g) DEADLINE.—Information required to be provided 

4 by an employer for a year under this section— 

5 (1) to a qualifying employee shall be provided 

6 not later than the date the employer is required 

7 under law to provide for statements under section 

8 6051 of the Internal Revenue Code of 1986 for that 

9 year, or 

10 (2) to a health alliance (through a regional cen11 ter) shall be provided not later than the date by 

12 which information is required to be filed with the 

13 Secretary pursuant to agreements under section 232 

14 of the Social Security Act for that year. 

15 (h) NOTICE TO CERTAIN INDIVIDUALS WHO ARE

16 NOT EMPLOYEES.— 

17 (1) IN GENERAL.—A person that carries on a 

18 trade or business shall notify in writing each indi19 vidual described in paragraph (2) that the person is 

20 not obligated to make any employer health care pre21 mium payment (under section 6121) in relation to 

22 the services performed by the individual for the per23 son. 

24 (2) INDIVIDUAL DESCRIBED.—An individual de25 scribed in this paragraph, with respect to a person, 
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1 is an individual who normally performs services for 

2 the person in the person’s trade or business for more 

3 than 40 hours per month but who is not an em4 ployee of the person (within the meaning of section 

5 1901(a)). 

6 (3) TIMING; EFFECTIVE DATE.—Such notice 

7 shall be provided within a reasonable time after the 

8 individual begins performing services for the person, 

9 except that in no event is such a notice required to 

10 be provided with respect to services performed before 

11 January 1, 1998. 

12 (4) EXCEPTIONS.—The Secretary shall issue 

13 regulations providing exceptions to the notice re14 quirement of paragraph (1) with respect to individ15 uals performing services on an irregular, incidental, 

16 or casual basis. 

17 (5) MODEL NOTICE.—The Secretary shall pub18 lish a model notice that is easily understood by the 

19 average reader and that persons may use to satisfy 

20 the requirements of paragraph (1). 

21 SEC. 1603. REQUIREMENTS RELATING TO NEW EMPLOYEES. 

22 (a) COMPLETION OF ENROLLMENT INFORMATION

23 FORM.—At the time an individual is hired as a qualifying 

24 employee of a regional alliance employer, the employer 
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1 shall obtain from the individual the following information 

2 (pursuant to rules established by the Secretary of Labor): 

3 (1) The identity of the individual. 

4 (2) The individual’s alliance area of residence 

5 and whether the individual has moved from another 

6 alliance area. 

7 (3) The class of family enrollment applicable to 

8 the individual. 

9 (4) The health plan (and health alliance) in 

10 which the individual is enrolled at that time. 

11 (5) If the individual has moved from another al12 liance area, whether the individual intends to enroll 

13 in a regional alliance health plan. 

14 (b) TRANSMITTAL OF INFORMATION TO ALLIANCE.— 

15 (1) IN GENERAL.—Each employer shall trans16 mit the information obtained under subsection (a) to 

17 the regional alliance for the alliance area in which 

18 the qualifying employee resides (or will reside at the 

19 time of initial employment). 

20 (2) DEADLINE.—Such information shall be 

21 transmitted within 30 days of the date of hiring of 

22 the employee. 

23 (3) FORM.—Information under this section may 

24 be forwarded in electronic form to a regional alli25 ance. 
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1 (c) PROVISION OF ENROLLMENT FORM AND INFOR2 MATION.—In the case of an individual described in sub3 section (a)(5), the employer shall provide the individual, 

4 at the time of hiring, with— 

5 (1) such information regarding the choice of, 

6 and enrollment in, regional alliance health plans, 

7 and 

8 (2) such enrollment form, 

9 as the regional alliance provides to the employer. 

10 SEC. 1604. AUDITING OF RECORDS. 

11 Each regional alliance employer shall maintain such 

12 records, and provide the regional alliance for the area in 

13 which the employer maintains the principal place of em14 ployment (as specified by the Secretary of Labor) with ac15 cess to such records, as may be necessary to verify and 

16 audit the information reported under this subtitle. 

17 SEC. 1605. PROHIBITION OF CERTAIN EMPLOYER DISCRIMI18 NATION. 

19 No employer may discriminate with respect to an em20 ployee on the basis of the family status of the employee 

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

22 with respect to the employee. 
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1 SEC. 1606. PROHIBITION ON SELF-FUNDING OF COST SHAR2 ING BENEFITS BY REGIONAL ALLIANCE EM3 PLOYERS. 

4 (a) PROHIBITION.—A regional alliance employer (and 

5 a corporate alliance employer with respect to employees 

6 who are regional alliance eligible individuals) may provide 

7 benefits to employees that consist of the benefits included 

8 in a cost sharing policy (as defined in section 1421(b)(2)) 

9 only through a contribution toward the purchase of a cost 

10 sharing policy which is funded primarily through insur11 ance. 

12 (b) INDIVIDUAL AND EMPLOYER RESPONSIBIL13 ITIES.—In the case of an individual who resides in a sin14 gle-payer State and an employer with respect to employees 

15 who reside in such a State, the responsibilities of such in16 dividual and employer under such system shall supersede 

17 the obligations of the individual and employer under this 

18 subtitle. 

19 SEC. 1607. EQUAL VOLUNTARY CONTRIBUTION REQUIRE20 MENT. 

21 (a) IN GENERAL.— 

22 (1) EQUAL VOLUNTARY EMPLOYER PREMIUM

23 PAYMENT REQUIREMENT.— 

24 (A) REGIONAL ALLIANCE HEALTH

25 PLANS.—If an employer makes available a vol26 untary employer premium payment (as defined 
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1 in subsection (d)) on behalf of a full-time em2 ployee (as defined in section 1901(b)(2)(C)) 

3 who is enrolled in a regional alliance health 

4 plan of a regional alliance in a class of family 

5 enrollment, the employer shall make available 

6 such a voluntary employer premium payment in 

7 the same dollar amount to all qualifying em8 ployees (as defined in section 1901(b)(1)) of the 

9 employer who are enrolled in any regional alli10 ance health plan of the same alliance in the 

11 same class of family enrollment. 

12 (B) CORPORATE ALLIANCE HEALTH

13 PLANS.—If a corporate alliance employer makes 

14 available a voluntary employer premium pay15 ment on behalf of a full-time employee who is 

16 enrolled in a corporate alliance health plan of a 

17 corporate alliance in a class of family enroll18 ment in a premium area (designated under sec19 tion 1384(b)), the employer shall make avail20 able such a voluntary employer premium pay21 ment in the same dollar amount to all quali22 fying employees of the employer enrolled in any 

23 corporate alliance health plan of the same alli24 ance in the same class of family enrollment in 

25 the same premium area. 
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1 (C) TREATMENT OF PART-TIME EMPLOY2 EES.—In applying subparagraphs (A) and (B) 

3 in the case of a qualifying employee employed 

4 on a part-time basis (within the meaning of sec5 tion 1901(b)(2)(A)(ii)), the dollar amount shall 

6 be equal to the full-time employment ratio (as 

7 defined in section 1901(b)(2)(B)) multiplied by 

8 the dollar amount otherwise required. 

9 (2) LIMIT ON VOLUNTARY EMPLOYER PREMIUM

10 PAYMENTS.— 

11 (A) REGIONAL ALLIANCE HEALTH

12 PLANS.—An employer may not make available a 

13 voluntary employer premium payment on behalf 

14 of an employee (enrolled in a regional alliance 

15 health plan of a regional alliance in a class of 

16 family enrollment) in an amount that exceeds 

17 the maximum amount that could be payable as 

18 the family share of premium (described in sec19 tion 6101(b)(2)) for the most expensive regional 

20 alliance health plan of the same alliance for the 

21 same class of family enrollment. 

22 (B) CORPORATE ALLIANCE HEALTH

23 PLANS.—An employer may not make available a 

24 voluntary employer premium payment on behalf 

25 of an employee (enrolled in a corporate alliance 
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1 health plan of a corporate alliance in a class of 

2 family enrollment in a premium area, des3 ignated under section 1384) in an amount that 

4 exceeds the maximum amount that could be 

5 payable as the family share of premium (de6 scribed in section 6101(b)(3)) for the most ex7 pensive corporate alliance health plan of the 

8 same alliance for the same class of family en9 rollment in the same premium area. 

10 (C) EXCLUSION OF PLANS WITHOUT MA11 TERIAL ENROLLMENT.—Subparagraphs (A) 

12 and (B) shall not take into account any health 

13 plan that does not have material enrollment (as 

14 determined in accordance with regulations of 

15 the Secretary of Labor). 

16 (3) NONDISCRIMINATION AMONG PLANS SE17 LECTED.—An employer may not discriminate in the 

18 wages or compensation paid, or other terms or con19 ditions of employment, with respect to an employee 

20 based on the health plan (or premium of such a 

21 plan) in which the employee is enrolled. 

22 (b) REBATE REQUIRED IN CERTAIN CASES.— 

23 (1) IN GENERAL.—Subject to subsection (c), 

24 if— 
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1 (A) an employer makes available a vol2 untary employer premium payment on behalf of 

3 an employee, and 

4 (B)(i) the sum of the amount of the appli5 cable alliance credit (under section 6103) and 

6 the voluntary employer premium payment, ex7 ceeds (ii) the premium for the plan selected, 

8 the employer must rebate to the employee an 

9 amount equal to the excess described in subpara10 graph (B). 

11 (2) REBATES.— 

12 (A) IN GENERAL.—Any rebate provided 

13 under paragraph (1) shall be treated, for pur14 poses of the Internal Revenue Code of 1986, as 

15 wages described in section 3121(a) of such Act. 

16 (B) TREATMENT OF MULTIPLE FULL-TIME

17 EMPLOYMENT IN A FAMILY.—In the case of— 

18 (i) an individual who is an employee 

19 of more than one employer, or 

20 (ii) a couple for which both spouses 

21 are employees, 

22 if more than one employer provides for vol23 untary employer premium payments, the indi24 vidual or couple may elect to have paragraph 

25 (1) applied with respect to all employment. 
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1 (c) EXCEPTION FOR COLLECTIVE BARGAINING

2 AGREEMENT.—Subsections (a) and (b) (other than sub3 section (a)(2)) shall not apply with respect to voluntary 

4 employer premium payments made pursuant to a bona 

5 fide collective bargaining agreement. 

6 (d) VOLUNTARY EMPLOYER PREMIUM PAYMENT.— 

7 In this section, the term ‘‘voluntary employer premium 

8 payment’’ means any payment designed to be used exclu9 sively (or primarily) towards the cost of the family share 

10 of premiums for a health plan. Such term does not include 

11 any employer premiums required to be paid under part 

12 3 of subtitle B of title VI. 

13 SEC. 1608. EMPLOYER RETIREE OBLIGATION. 

14 (a) IN GENERAL.—If an employer was providing, as 

15 of October 1, 1993, a threshold payment (specified in sub16 section (c)) for a person who was a qualifying retired bene17 ficiary (as defined in subsection (b)) as of such date, the 

18 employer shall pay, to or on behalf of that beneficiary for 

19 each month beginning with January 1998, an amount that 

20 is not less than the amount specified in subsection (d), 

21 but only if and for so long as the person remains a quali22 fying retired beneficiary. 

23 (b) QUALIFYING RETIRED BENEFICIARY.—In this 

24 section, the term ‘‘qualifying retired beneficiary’’ means 

25 a person who is an eligible retiree or qualified spouse or 
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1 child (as such terms are defined in subsections (b) and 

2 (c) of section 6114). 

3 (c) THRESHOLD PAYMENT.—The term ‘‘threshold 

4 payment’’ means, for an employer with respect to a health 

5 benefit plan providing coverage to a qualifying retired ben6 eficiary, a payment— 

7 (1) for coverage of any item or service described 

8 in section 1101, and 

9 (2) the amount of which is at least 20 percent 

10 of the amount of the premium (or premium equiva11 lent) for such coverage with respect to the bene12 ficiary (and dependents). 

13 (d) AMOUNT.—The amount specified in this sub14 section is 20 percent of the weighted average premium for 

15 the regional alliance in which the beneficiary resides and 

16 for the applicable class of family enrollment. 

17 (e) NATURE OF OBLIGATION.—The requirement of 

18 this section shall be in addition to any other requirement 

19 imposed on an employer under this Act or otherwise. 

20 (f) PROTECTION OF COLLECTIVE BARGAINING

21 RIGHTS.—Nothing in this Act (including this section) 

22 shall be construed as affecting collective bargaining rights 

23 or rights under collective bargaining agreements. 
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1 SEC. 1609. ENFORCEMENT. 

2 In the case of a person that violates a requirement 

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

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

5 each violation with respect to each individual. 

6 Subtitle J—General Definitions; 

7 Miscellaneous Provisions 

8 PART 1—GENERAL DEFINITIONS 

9 SEC. 1901. DEFINITIONS RELATING TO EMPLOYMENT AND 

10 INCOME. 

11 (a) IN GENERAL.—Except as otherwise specifically 

12 provided, in this Act the following definitions and rules 

13 apply: 

14 (1) EMPLOYER, EMPLOYEE, EMPLOYMENT, AND

15 WAGES DEFINED.—Except as provided in this sec16 tion— 

17 (A) the terms ‘‘wages’’ and ‘‘employment’’ 

18 have the meanings given such terms under sec19 tion 3121 of the Internal Revenue Code of 

20 1986, 

21 (B) the term ‘‘employee’’ has the meaning 

22 given such term under section 3121 of such 

23 Code, subject to the provisions of chapter 25 of 

24 such Code, and 
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1 (C) the term ‘‘employer’’ has the same 

2 meaning as the term ‘‘employer’’ as used in 

3 such section 3121. 

4 (2) EXCEPTIONS.—For purposes of paragraph 

5 (1)— 

6 (A) EMPLOYMENT.— 

7 (i) EMPLOYMENT INCLUDED.—Para8 graphs (1), (2), (5), (7) (other than 

9 clauses (i) through (iv) of subparagraph 

10 (C) and clauses (i) through (v) of subpara11 graph (F)), (8), (9), (10), (11), (13), (15), 

12 (18), and (19) of section 3121(b) of the 

13 Internal Revenue Code of 1986 shall not 

14 apply. 

15 (ii) EXCLUSION OF INMATES AS EM16 PLOYEES.—Employment shall not include 

17 services performed in a penal institution by 

18 an inmate thereof or in a hospital or other 

19 health care institution by a patient thereof. 

20 (B) WAGES.— 

21 (i) IN GENERAL.—Paragraph (1) of 

22 section 3121(a) of the Internal Revenue 

23 Code of 1986 shall not apply. 

24 (ii) TIPS NOT INCLUDED.—The term 

25 ‘‘wages’’ does not include cash tips. 
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1 (C) EXCLUSION OF EMPLOYEES OUTSIDE

2 THE UNITED STATES.—The term ‘‘employee’’ 

3 does not include an individual who does not re4 side in the United States. 

5 (D) EXCLUSION OF FOREIGN EMPLOY6 MENT.—The term ‘‘employee’’ does not include 

7 an individual— 

8 (i) with respect to service, if the indi9 vidual is not a citizen or resident of the 

10 United States and the service is performed 

11 outside the United States, or 

12 (ii) with respect to service, if the indi13 vidual is a citizen or resident of the United 

14 States and the service is performed outside 

15 the United States for an employer other 

16 than an American employer (as defined in 

17 section 3121(h) of the Internal Revenue 

18 Code of 1986). 

19 (3) AGGREGATION RULES FOR EMPLOYERS.— 

20 For purposes of this Act— 

21 (A) all employers treated as a single em22 ployer under subsection (a) or (b) of section 52 

23 of the Internal Revenue Code of 1986 shall be 

24 treated as a single employer, and 
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1 (B) under regulations of the Secretary of 

2 Labor, all employees of organizations which are 

3 under common control with one or more organi4 zations which are exempt from income tax 

5 under subtitle A of the Internal Revenue Code 

6 of 1986 shall be treated as employed by a single 

7 employer. 

8 The regulations prescribed under subparagraph (B) 

9 shall be based on principles similar to the principles 

10 which apply to taxable organizations under subpara11 graph (A). 

12 (4) EMPLOYER PREMIUM.—The term ‘‘employer 

13 premium’’ refers to the premium established and im14 posed under part 2 of subtitle B of title VI. 

15 (b) QUALIFYING EMPLOYEE; FULL-TIME EMPLOY16 MENT.— 

17 (1) QUALIFYING EMPLOYEE.— 

18 (A) IN GENERAL.—In this Act, the term 

19 ‘‘qualifying employee’’ means, with respect to 

20 an employer for a month, an employee (other 

21 than a covered child, as defined in subpara22 graph (C)) who is employed by the employer for 

23 at least 40 hours (as determined under para24 graph (3)) in the month. 
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1 (B) NO SPECIAL TREATMENT OF MEDI2 CARE BENEFICIARIES, SSI RECIPIENTS, AFDC

3 RECIPIENTS, AND OTHERS.—Subparagraph (A) 

4 shall apply regardless of whether or not the em5 ployee is a medicare-eligible individual, an SSI 

6 recipient, an AFDC recipient, an individual de7 scribed in section 1004(b), an eligible individual 

8 or is authorized to be so employed. 

9 (C) COVERED CHILD DEFINED.—In sub10 paragraph (A), the term ‘‘covered child’’ means 

11 an eligible individual who is a child and is en12 rolled under a health plan as a family member 

13 described in section 1011(b)(2)(B). 

14 (2) FULL-TIME EQUIVALENT EMPLOYEES; 

15 PART-TIME EMPLOYEES.— 

16 (A) IN GENERAL.—For purposes of this 

17 Act, a qualifying employee who is employed by 

18 an employer— 

19 (i) for at least 120 hours in a month, 

20 is counted as 1 full-time equivalent em21 ployee for the month and shall be deemed 

22 to be employed on a full-time basis, or 

23 (ii) for at least 40 hours, but less 

24 than 120 hours, in a month, is counted as 

25 a fraction of a full-time equivalent em-
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1 ployee in the month equal to the full-time 

2 employment ratio (as defined in subpara3 graph (B)) for the employee and shall be 

4 deemed to be employed on a part-time 

5 basis. 

6 (B) FULL-TIME EMPLOYMENT RATIO DE7 FINED.—For purposes of this Act, the term 

8 ‘‘full-time employment ratio’’ means, with re9 spect to a qualifying employee of an employer 

10 in a month, the lesser of 1 or the ratio of— 

11 (i) the number of hours of employ12 ment such employee is employed by such 

13 employer for the month (as determined 

14 under paragraph (3)), to 

15 (ii) 120 hours. 

16 (C) FULL-TIME EMPLOYEE.—For purposes 

17 of this Act, the term ‘‘full-time employee’’ 

18 means, with respect to an employer, an em19 ployee who is employed on a full-time basis (as 

20 specified in subparagraph (A)) by the employer. 

21 (D) CONSIDERATION OF INDUSTRY PRAC22 TICE.—As provided under rules established by 

23 the Board, an employee who is not described in 

24 subparagraph (C) shall be considered to be em25 ployed on a full-time basis by an employer (and 
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1 to be a full-time employee of an employer) for 

2 a month (or for all months in a 12-month pe3 riod) if the employee is employed by that em4 ployer on a continuing basis that, taking into 

5 account the structure or nature of the employ6 ment in the industry, represents full time em7 ployment. 

8 (3) HOURS OF EMPLOYMENT.— 

9 (A) IN GENERAL.—For purposes of this 

10 Act, the Board shall specify the method for 

11 computing hours of employment for employees 

12 of an employer consistent with this paragraph. 

13 The Board shall take into account rules used 

14 for purposes of applying the Fair Labor Stand15 ards Act. 

16 (B) HOURLY WAGE EARNERS.—In the case 

17 of an individual who receives compensation (in 

18 the form of hourly wages or compensation) for 

19 the performance of services, the individual is 

20 considered to be ‘‘employed’’ by an employer for 

21 an hour if compensation is payable with respect 

22 to that hour of employment, without regard to 

23 whether or not the employee is actually per24 forming services during such hours. 
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1 (4) TREATMENT OF SALARIED EMPLOYEES AND

2 EMPLOYEES PAID ON CONTINGENT OR BONUS AR3 RANGEMENTS.—In the case of an employee who re4 ceives compensation on a salaried basis or on the 

5 basis of a commission (or other contingent or bonus 

6 basis), rather than an hourly wage, the Board shall 

7 establish rules for the conversion of the compensa8 tion to hours of employment, taking into account the 

9 minimum monthly compensation levels for workers 

10 employed on a full-time basis under the Fair Labor 

11 Standards Act and other factors the Board considers 

12 relevant. 

13 (c) DEFINITIONS RELATING TO SELF-EMPLOY14 MENT.—In this Act: 

15 (1) NET EARNINGS FROM SELF-EMPLOY16 MENT.—The term ‘‘net earnings from self-employ17 ment’’ has the meaning given such term under sec18 tion 1402(a) of the Internal Revenue Code of 1986. 

19 (2) SELF-EMPLOYED INDIVIDUAL.—The term 

20 ‘‘self-employed individual’’ means, for a year, an in21 dividual who has net earnings from self-employment 

22 for the year. 

23 SEC. 1902. OTHER GENERAL DEFINITIONS. 

24 Except as otherwise specifically provided, in this Act 

25 the following definitions apply: 
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1 (1) ALIEN PERMANENTLY RESIDING IN THE

2 UNITED STATES UNDER COLOR OF LAW.—The term 

3 ‘‘alien permanently residing in the United States 

4 under color of law’’ means an alien lawfully admitted 

5 for permanent residence (within the meaning of sec6 tion 101(a)(20) of the Immigration and Nationality 

7 Act), and includes any of the following: 

8 (A) An alien who is admitted as a refugee 

9 under section 207 of the Immigration and Na10 tionality Act. 

11 (B) An alien who is granted asylum under 

12 section 208 of such Act. 

13 (C) An alien whose deportation is withheld 

14 under section 243(h) of such Act. 

15 (D) An alien who is admitted for tem16 porary residence under section 210, 210A, or 

17 245A of such Act. 

18 (E) An alien who has been paroled into the 

19 United States under section 212(d)(5) of such 

20 Act for an indefinite period or who has been 

21 granted extended voluntary departure as a 

22 member of a nationality group. 

23 (F) An alien who is the spouse or unmar24 ried child under 21 years of age of a citizen of 

25 the United States, or the parent of such a cit-
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1 izen if the citizen is over 21 years of age, and 

2 with respect to whom an application for adjust3 ment to lawful permanent residence is pending. 

4 (G) An alien within such other classifica5 tion of permanent resident aliens as the Na6 tional Health Board may establish by regula7 tion. 

8 (2) AFDC FAMILY.—The term ‘‘AFDC family’’ 

9 means a family composed entirely of one or more 

10 AFDC recipients. 

11 (3) AFDC RECIPIENT.—The term ‘‘AFDC re12 cipient’’ means, for a month, an individual who is 

13 receiving aid or assistance under any plan of the 

14 State approved under title I, X, XIV, or XVI, or 

15 part A or part E of title IV, of the Social Security 

16 Act for the month. 

17 (4) ALLIANCE AREA.—The term ‘‘alliance area’’ 

18 means the area served by a regional alliance and 

19 specified under section 1202(b). 

20 (5) ALLIANCE ELIGIBLE INDIVIDUAL.—The 

21 term ‘‘alliance eligible individual’’ means, with re22 spect to a health alliance, an eligible individual with 

23 respect to whom the applicable health plan is a 

24 health plan offered by or through such alliance and 

25 does not include a prisoner. 
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1 (6) APPLICABLE HEALTH PLAN.—The term 

2 ‘‘applicable health plan’’ means, with respect to an 

3 eligible individual, the health plan specified pursuant 

4 to section 1004 and part 2 of subtitle A. 

5 (7) COMBINATION COST SHARING PLAN.—The 

6 term ‘‘combination cost sharing plan’’ means a 

7 health plan that provides combination cost sharing 

8 schedule (consistent with section 1134). 

9 (8) COMPREHENSIVE BENEFIT PACKAGE.—The 

10 term ‘‘comprehensive benefit package’’ means the 

11 package of health benefits provided under subtitle B. 

12 (9) CONSUMER PRICE INDEX; CPI.—The terms 

13 ‘‘consumer price index’’ and ‘‘CPI’’ mean the Con14 sumer Price Index for all urban consumers (U.S. 

15 city average), as published by the Bureau of Labor 

16 Statistics. 

17 (10) CORPORATE ALLIANCE ELIGIBLE INDI18 VIDUAL.—The term ‘‘corporate alliance eligible indi19 vidual’’ means, with respect to a corporate alliance, 

20 an eligible individual with respect to whom the cor21 porate alliance is the applicable health plan. 

22 (11) CORPORATE ALLIANCE EMPLOYER.—The 

23 term ‘‘corporate alliance employer’’ means, with re24 spect to a corporate alliance, an employer of an indi-
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1 vidual who is a participant in a corporate alliance 

2 health plan of that alliance. 

3 (12) CORPORATE ALLIANCE HEALTH PLAN.— 

4 The term ‘‘corporate alliance health plan’’ means a 

5 health plan offered by a corporate alliance. 

6 (13) DISABLED SSI RECIPIENT.—The term 

7 ‘‘disabled SSI recipient’’ means an individual who— 

8 (A) is an SSI recipient, and 

9 (B) has been determined to be disabled for 

10 purposes of the supplemental security income 

11 program (under title XVI of the Social Security 

12 Act). 

13 (14) ELIGIBLE ENROLLEE.—The term ‘‘eligible 

14 enrollee’’ means, with respect to a health plan of15 fered by a health alliance, an alliance eligible indi16 vidual, but does not include such an individual if the 

17 individual is enrolled under such a plan as the fam18 ily member of another alliance eligible individual. 

19 (15) ESSENTIAL COMMUNITY PROVIDER.—The 

20 term ‘‘essential community provider’’ means an enti21 ty certified as such a provider under subpart B of 

22 part 2 of subtitle F. 

23 (16) FEE-FOR-SERVICE PLAN.—The term ‘‘fee24 for-service plan’’ means a health plan described in 

25 section 1322(b)(2)(A). 
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1 (17) FIRST YEAR.—The term ‘‘first year’’ 

2 means, with respect to— 

3 (A) a State that is a participating State in 

4 a year before 1998, the year in which the State 

5 first is a participating State, or 

6 (B) any other State, 1998. 

7 (18) HIGHER COST SHARING PLAN.—The term 

8 ‘‘higher cost sharing plan’’ means a health plan that 

9 provides a higher cost sharing schedule (consistent 

10 with section 1133). 

11 (19) LONG-TERM NONIMMIGRANT.—The term 

12 ‘‘long-term nonimmigrant’’ means a nonimmigrant 

13 described in subparagraph (E), (H), (I), (J), (K), 

14 (L), (M), (N), (O), (Q), or (R) of section 101(a)(15) 

15 of the Immigration and Nationality Act or an alien 

16 within such other classification of nonimmigrant as 

17 the National Health Board may establish by regula18 tion. 

19 (20) LOWER COST SHARING PLAN.—The term 

20 ‘‘lower cost sharing plan’’ means a health plan that 

21 provides a lower cost sharing schedule (consistent 

22 with section 1132). 

23 (21) MEDICARE PROGRAM.—The term ‘‘medi24 care program’’ means the health insurance program 

25 under title XVIII of the Social Security Act. 
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1 (22) MEDICARE-ELIGIBLE INDIVIDUAL.—The 

2 term ‘‘medicare-eligible individual’’ means, subject to 

3 section 1012(a), an individual who is entitled to ben4 efits under part A of the medicare program. 

5 (23) MOVE.—The term ‘‘move’’ means, respect 

6 to an individual, a change of residence of the indi7 vidual from one alliance area to another alliance 

8 area. 

9 (24) NATIONAL HEALTH BOARD; BOARD.—The 

10 terms ‘‘National Health Board’’ and ‘‘Board’’ mean 

11 the National Health Board created under section 

12 1501. 

13 (25) POVERTY LEVEL.— 

14 (A) IN GENERAL.—The term ‘‘applicable 

15 poverty level’’ means, for a family for a year, 

16 the official poverty line (as defined by the Of17 fice of Management and Budget, and revised 

18 annually in accordance with section 673(2) of 

19 the Omnibus Budget Reconciliation Act of 

20 1981) applicable to a family of the size involved 

21 (as determined under subparagraph (B)) for 

22 1994 adjusted by the percentage increase or de23 crease described in subparagraph (C) for the 

24 year involved. 
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1 (B) FAMILY SIZE.—In applying the appli2 cable poverty level to— 

3 (i) an individual enrollment, the fam4 ily size is deemed to be one person; 

5 (ii) a couple-only enrollment, the fam6 ily size is deemed to be two persons; 

7 (iii) a single parent enrollment, the 

8 family size is deemed to be three persons; 

9 or 

10 (iv) a dual parent enrollment, the 

11 family size is deemed to be four persons. 

12 (C) PERCENTAGE ADJUSTMENT.—The per13 centage increase or decrease described in this 

14 subparagraph for a year is the percentage in15 crease or decrease by which the average CPI for 

16 the 12-month-period ending with August 31 of 

17 the preceding year exceeds such average for the 

18 12-month period ending with August 31, 1993. 

19 (D) ROUNDING.—Any adjustment made 

20 under subparagraph (A) for a year shall be 

21 rounded to the nearest multiple of $100. 

22 (26) PRISONER.—The term ‘‘prisoner’’ means, 

23 as specified by the Board, an eligible individual dur24 ing a period of imprisonment under Federal, State, 

25 or local authority after conviction as an adult. 
339 

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1 (27) REGIONAL ALLIANCE ELIGIBLE INDI2 VIDUAL.—The term ‘‘regional alliance eligible indi3 vidual’’ means an eligible individual with respect to 

4 whom a regional alliance health plan is an applicable 

5 health plan. 

6 (28) REGIONAL ALLIANCE EMPLOYER.—The 

7 term ‘‘regional alliance employer’’ means, with re8 spect to an employee, an employer that is not a cor9 porate alliance employer with respect to such em10 ployee. 

11 (29) REGIONAL ALLIANCE HEALTH PLAN.—The 

12 term ‘‘regional alliance health plan’’ means a health 

13 plan offered by a regional alliance. 

14 (30) RESIDE.— 

15 (A) An individual is considered to reside in 

16 the location in which the individual maintains a 

17 primary residence (as established under rules of 

18 the National Health Board). 

19 (B) Under such rules and subject to sec20 tion 1323(c), in the case of an individual who 

21 maintains more than one residence, the primary 

22 residence of the individual shall be determined 

23 taking into account the proportion of time spent 

24 at each residence. 
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1 (C) In the case of a couple only one spouse 

2 of which is a qualifying employee, except as the 

3 Board may provide, the residence of the em4 ployee shall be the residence of the couple. 

5 (31) SECRETARY.—The term ‘‘Secretary’’ 

6 means the Secretary of Health and Human Services. 

7 (32) SSI FAMILY.—The term ‘‘SSI family’’ 

8 means a family composed entirely of one or more 

9 SSI recipients. 

10 (33) SSI RECIPIENT.—The term ‘‘SSI recipi11 ent’’ means, for a month, an individual— 

12 (A) with respect to whom supplemental se13 curity income benefits are being paid under title 

14 XVI of the Social Security Act for the month, 

15 (B) who is receiving a supplementary pay16 ment under section 1616 of such Act or under 

17 section 212 of Public Law 93–66 for the 

18 month, or 

19 (C) who is receiving monthly benefits 

20 under section 1619(a) of the Social Security 

21 Act (whether or not pursuant to section 

22 1616(c)(3) of such Act) for the month. 

23 (34) STATE.—The term ‘‘State’’ includes the 

24 District of Columbia, Puerto Rico, the Virgin Is-
341 

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1 lands, Guam, American Samoa, and the Northern 

2 Mariana Islands. 

3 (35) STATE MEDICAID PLAN.—The term ‘‘State 

4 medicaid plan’’ means a plan of medical assistance 

5 of a State approved under title XIX of the Social 

6 Security Act. 

7 (36) UNDOCUMENTED ALIEN.—The term ‘‘un8 documented alien’’ means an alien who is not a long9 term nonimmigrant, a diplomat, or described in sec10 tion 1005(c). 

11 (37) UNITED STATES.—The term ‘‘United 

12 States’’ means the 50 States, the District of Colum13 bia, Puerto Rico, the Virgin Islands, Guam, Amer14 ican Samoa, and Northern Mariana Islands. 

15 Subtitle B—Miscellaneous 

16 Provisions 

17 SEC. 1911. USE OF INTERIM, FINAL REGULATIONS. 

18 In order to permit the timely implementation of the 

19 provisions of this Act, the National Health Board, the Sec20 retary of Health and Human Services, the Secretary of 

21 Labor are each authorized to issue regulations under this 

22 Act on an interim basis that become final on the date of 

23 publication, subject to change based on subsequent public 

24 comment. 
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1 SEC. 1912. SOCIAL SECURITY ACT REFERENCES. 

2 Except as may otherwise be provided, any reference 

3 in this title, or in title V or VI, to a provision of the Social 

4 Security Act shall be to that provision of the Social Secu5 rity Act as in effect on the date of the enactment of this 

6 Act. 

7 TITLE II—NEW BENEFITS 

TABLE OF CONTENTS OF TITLE

Page 

Subtitle A—Medicare Outpatient Prescription Drug Benefit 

Sec. 2001. Coverage of outpatient prescription drugs ............................ 343 

Sec. 2002. Payment rules and related requirements for covered outpatient drugs ................................................................. 349 

Sec. 2003. Medicare rebates for covered outpatient drugs ..................... 365 

Sec. 2004. Extension of 25 percent rule for portion of premium attributable to covered outpatient drugs ............................... 379 

Sec. 2005. Coverage of home infusion drug therapy services ................. 380 

Sec. 2006. Conforming amendments to medicaid program .................... 387 

Sec. 2007. Effective date ........................................................................ 389 

Subtitle B—Long-Term Care 

PART 1—STATE PROGRAMS FOR HOME AND COMMUNITY-BASED SERVICES

FOR INDIVIDUALS WITH DISABILITIES

Sec. 2101. State programs for home and community-based services for 

individuals with disabilities ........................................... 389 

Sec. 2102. State plans ............................................................................. 390 

Sec. 2103. Individuals with disabilities defined ...................................... 398 

Sec. 2104. Home and community-based services covered under State 

plan ............................................................................... 402 

Sec. 2105. Cost sharing .......................................................................... 408 

Sec. 2106. Quality assurance and safeguards ......................................... 409 

Sec. 2107. Advisory groups ..................................................................... 410 

Sec. 2108. Payments to States ............................................................... 412 

Sec. 2109. Total Federal budget; allotments to States .......................... 415 

PART 2—MEDICAID NURSING HOME IMPROVEMENTS

Sec. 2201. Reference to amendments ..................................................... 425 

PART 3—PRIVATE LONG-TERM CARE INSURANCE
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SUBPART A—GENERAL PROVISIONS

Sec. 2301. Federal regulations; prior application or certain requirements ............................................................................. 426 

Sec. 2302. National Long-Term Care Insurance Advisory Council ........ 430 

Sec. 2303. Relation to State law ............................................................. 438 

Sec. 2304. Definitions ............................................................................. 438 

SUBPART B—FEDERAL STANDARDS AND REQUIREMENTS

Sec. 2321. Requirements to facilitate understanding and comparison of 

benefits .......................................................................... 443 

Sec. 2322. Requirements relating to coverage ........................................ 449 

Sec. 2323. Requirements relating to premiums ...................................... 454 

Sec. 2324. Requirements relating to sales practices ............................... 455 

Sec. 2325. Continuation, renewal, replacement, conversion, and cancellation of policies ........................................................ 461 

Sec. 2326. Requirements relating to payment of benefits ...................... 470 

SUBPART C—ENFORCEMENT

Sec. 2342. State programs for enforcement of standards ...................... 474 

Sec. 2342. Authorization of appropriations for State programs ............. 480 

Sec. 2343. Allotments to States .............................................................. 481 

Sec. 2344. Payments to States ............................................................... 481 

Sec. 2345. Federal oversight of State enforcement ................................ 482 

Sec. 2346. Effect of failure to have approved State program ................ 483 

SUBPART D—CONSUMER EDUCATION GRANTS

Sec. 2361. Grants for consumer education ............................................. 485 

PART 4—TAX TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES

Sec. 2401. Reference to tax provisions ................................................... 488 

PART 5—TAX INCENTIVES FOR INDIVIDUALS WITH DISABILITIES WHO

WORK

Sec. 2501. Reference to tax provision ..................................................... 489 

PART 6—DEMONSTRATION AND EVALUATION

Sec. 2601. Demonstration on acute and long-term care integration ...... 489 

Sec. 2602. Performance review of the long-term care programs ............ 497 

1 Subtitle A—Medicare Outpatient 

2 Prescription Drug Benefit 

3 SEC. 2001. COVERAGE OF OUTPATIENT PRESCRIPTION 

4 DRUGS. 

5 (a) COVERED OUTPATIENT DRUGS AS MEDICAL AND

6 OTHER HEALTH SERVICES.—Section 1861(s)(2)(J) of the 
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1 Social Security Act (42 U.S.C. 1395x(s)(2)(J)) is amend2 ed to read as follows: 

3 ‘‘(J) covered outpatient drugs;’’. 

4 (b) DEFINITION OF COVERED OUTPATIENT DRUG.— 

5 Section 1861(t) of such Act (42 U.S.C. 1395x(t)), as 

6 amended by section 13553(b) of the Omnibus Budget Rec7 onciliation Act of 1993 (hereafter in this subtitle referred 

8 to as ‘‘OBRA–1993’’), is amended— 

9 (1) in the heading, by adding at the end the fol10 lowing: ‘‘; Covered Outpatient Drugs’’; 

11 (2) in paragraph (1), by striking ‘‘paragraph 

12 (2)’’ and inserting ‘‘the succeeding paragraphs of 

13 this subsection’’; and 

14 (3) by striking paragraph (2) and inserting the 

15 following: 

16 ‘‘(2) Except as otherwise provided in paragraph (3), 

17 the term ‘covered outpatient drug’ means any of the fol18 lowing products used for a medically accepted indication 

19 (as described in paragraph (4)): 

20 ‘‘(A) A drug which may be dispensed only upon 

21 prescription and— 

22 ‘‘(i) which is approved for safety and effec23 tiveness as a prescription drug under section 

24 505 or 507 of the Federal Food, Drug, and 
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1 Cosmetic Act or which is approved under sec2 tion 505(j) of such Act; 

3 ‘‘(ii)(I) which was commercially used or 

4 sold in the United States before the date of the 

5 enactment of the Drug Amendments of 1962 or 

6 which is identical, similar, or related (within the 

7 meaning of section 310.6(b)(1) of title 21 of the 

8 Code of Federal Regulations) to such a drug, 

9 and (II) which has not been the subject of a 

10 final determination by the Secretary that it is 

11 a ‘new drug’ (within the meaning of section 

12 201(p) of the Federal Food, Drug, and Cos13 metic Act) or an action brought by the Sec14 retary under section 301, 302(a), or 304(a) of 

15 such Act to enforce section 502(f) or 505(a) of 

16 such Act; or 

17 ‘‘(iii)(I) which is described in section 

18 107(c)(3) of the Drug Amendments of 1962 

19 and for which the Secretary has determined 

20 there is a compelling justification for its med21 ical need, or is identical, similar, or related 

22 (within the meaning of section 310.6(b)(1) of 

23 title 21 of the Code of Federal Regulations) to 

24 such a drug, and (II) for which the Secretary 

25 has not issued a notice of an opportunity for a 
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1 hearing under section 505(e) of the Federal 

2 Food, Drug, and Cosmetic Act on a proposed 

3 order of the Secretary to withdraw approval of 

4 an application for such drug under such section 

5 because the Secretary has determined that the 

6 drug is less than effective for all conditions of 

7 use prescribed, recommended, or suggested in 

8 the labeling. 

9 ‘‘(B) A biological product which— 

10 ‘‘(i) may only be dispensed upon prescrip11 tion, 

12 ‘‘(ii) is licensed under section 351 of the 

13 Public Health Service Act, and 

14 ‘‘(iii) is produced at an establishment li15 censed under such section to produce such 

16 product. 

17 ‘‘(C) Insulin certified under section 506 of the 

18 Federal Food, Drug, and Cosmetic Act. 

19 ‘‘(3) The term ‘covered outpatient drug’ does not in20 clude any product— 

21 ‘‘(A) which is administered through infusion in 

22 a home setting unless the product is a covered home 

23 infusion drug (as defined in paragraph (5)); 
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Title II, Subtitle A 

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1 ‘‘(B) when furnished as part of, or as incident 

2 to, any other item or service for which payment may 

3 be made under this title; or 

4 ‘‘(C) which is listed under paragraph (2) of sec5 tion 1927(d) (other than subparagraph (I) or (J) of 

6 such subparagraph) as a drug which may be ex7 cluded from coverage under a State plan under title 

8 XIX and which the Secretary elects to exclude from 

9 coverage under part B. 

10 ‘‘(4) For purposes of paragraph (2), the term ‘medi11 cally accepted indication’, with respect to the use of an 

12 outpatient drug, includes any use which has been approved 

13 by the Food and Drug Administration for the drug, and 

14 includes another use of the drug if— 

15 ‘‘(A) the drug has been approved by the Food 

16 and Drug Administration; and 

17 ‘‘(B)(i) such use is supported by one or more 

18 citations which are included (or approved for inclu19 sion) in one or more of the following compendia: the 

20 American Hospital Formulary Service-Drug Infor21 mation, the American Medical Association Drug 

22 Evaluations, the United States Pharmacopoeia-Drug 

23 Information, and other authoritative compendia as 

24 identified by the Secretary, unless the Secretary has 

25 determined that the use is not medically appropriate 
348 

Title II, Subtitle A 

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1 or the use is identified as not indicated in one or 

2 more such compendia, or 

3 ‘‘(ii) the carrier involved determines, based 

4 upon guidance provided by the Secretary to carriers 

5 for determining accepted uses of drugs, that such 

6 use is medically accepted based on supportive clinical 

7 evidence in peer reviewed medical literature appear8 ing in publications which have been identified for 

9 purposes of this clause by the Secretary. 

10 The Secretary may revise the list of compendia in sub11 paragraph (B)(i) designated as appropriate for identifying 

12 medically accepted indications for drugs. 

13 ‘‘(5)(A) For purposes of paragraph (3), the term 

14 ‘covered home infusion drug’ means a covered outpatient 

15 drug or an enteral or parenteral nutrient dispensed to an 

16 individual that— 

17 ‘‘(i) is administered intravenously, 

18 subcutaneously, epidurally, or through other means 

19 determined by the Secretary, using an access device 

20 that is inserted in to the body and an infusion device 

21 to control the rate of flow of the drug, 

22 ‘‘(ii) is administered in the individual’s home 

23 (including an institution used as the individual’s 

24 home, other than a hospital under subsection (e) or 
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1 a skilled nursing facility that meets the requirements 

2 of section 1819(a)), and 

3 ‘‘(iii)(I) is an antibiotic drug and the Secretary 

4 has not determined, for the specific drug or the indi5 cation to which the drug is applied, that the drug 

6 cannot generally be administered safely and effec7 tively in a home setting, or 

8 ‘‘(II) is not an antibiotic drug and the Sec9 retary has determined, for the specific drug or the 

10 indication to which the drug is applied, that the 

11 drug can generally be administered safely and effec12 tively in a home setting. 

13 ‘‘(B) Not later than January 1, 1996, (and periodi14 cally thereafter), the Secretary shall publish a list of the 

15 drugs, and indications for such drugs, that are covered 

16 home infusion drugs, with respect to which home infusion 

17 drug therapy may be provided under this title.’’. 

18 (c) OTHER CONFORMING AMENDMENTS.—(1) Sec19 tion 1861 of such Act (42 U.S.C. 1395x) is amended— 

20 (A) in subsection (s)(2), as amended by section 

21 13553 of OBRA–1993— 

22 (i) by striking subparagraphs (O) and (Q), 

23 (ii) by adding ‘‘and’’ at the end of sub24 paragraph (N), 
350 

Title II, Subtitle A 

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1 (iii) by striking ‘‘; and’’ at the end of sub2 paragraph (P) and inserting a period, and 

3 (iv) by redesignating subparagraph (P) as 

4 subparagraph (O); and 

5 (B) by striking the subsection (jj) added by sec6 tion 4156(a)(2) of the Omnibus Budget Reconcili7 ation Act of 1990. 

8 (2) Section 1881(b)(1)(C) of such Act (42 U.S.C. 

9 1395rr(b)(1)(C)), as amended by section 13566(a) of 

10 OBRA–1993, is amended by striking ‘‘section 

11 1861(s)(2)(P)’’ and inserting ‘‘section 1861(s)(2)(O)’’. 

12 SEC. 2002. PAYMENT RULES AND RELATED REQUIREMENTS 

13 FOR COVERED OUTPATIENT DRUGS. 

14 (a) IN GENERAL.—Section 1834 of the Social Secu15 rity Act (42 U.S.C. 1395m) is amended by inserting after 

16 subsection (c) the following new subsection: 

17 ‘‘(d) PAYMENT FOR AND CERTAIN REQUIREMENTS

18 CONCERNING COVERED OUTPATIENT DRUGS.— 

19 ‘‘(1) DEDUCTIBLE.— 

20 ‘‘(A) IN GENERAL.—Payment shall be 

21 made under paragraph (2) only for expenses in22 curred by an individual for a covered outpatient 

23 drug during a calendar year after the individual 

24 has incurred expenses in the year for such 

25 drugs (during a period in which the individual 
351 

Title II, Subtitle A 

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1 is entitled to benefits under this part) equal to 

2 the deductible amount for that year. 

3 ‘‘(B) DEDUCTIBLE AMOUNT.— 

4 ‘‘(i) For purposes of subparagraph 

5 (A), the deductible amount is— 

6 ‘‘(I) for 1996, $250, and 

7 ‘‘(II) for any succeeding year, the 

8 amount (rounded to the nearest dol9 lar) that the Secretary estimates will 

10 ensure that the percentage of the av11 erage number of individuals covered 

12 under this part (other than individ13 uals enrolled with an eligible organiza14 tion under section 1876 or an organi15 zation described in section 

16 1833(a)(1)(A)) during the year who 

17 will incur expenses for covered out18 patient drugs equal to or greater than 

19 such amount will be the same as the 

20 percentage for the previous year. 

21 ‘‘(ii) The Secretary shall promulgate 

22 the deductible amount for 1997 and each 

23 succeeding year during September of the 

24 previous year. 
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1 ‘‘(C) SPECIAL RULE FOR DETERMINATION

2 OF EXPENSES INCURRED.—In determining the 

3 amount of expenses incurred by an individual 

4 for covered outpatient drugs during a year for 

5 purposes of subparagraph (A), there shall not 

6 be included any expenses incurred with respect 

7 to a drug to the extent such expenses exceed 

8 the payment basis for such drug under para9 graph (3). 

10 ‘‘(2) PAYMENT AMOUNT.— 

11 ‘‘(A) IN GENERAL.—Subject to the deduct12 ible established under paragraph (1), the 

13 amount payable under this part for a covered 

14 outpatient drug furnished to an individual dur15 ing a calendar year shall be equal to— 

16 ‘‘(i) 80 percent of the payment basis 

17 described in paragraph (3), in the case of 

18 an individual who has not incurred ex19 penses for covered outpatient drugs during 

20 the year (including the deductible imposed 

21 under paragraph (1)) in excess of the out22 of-pocket limit for the year under subpara23 graph (B); and 
353 

Title II, Subtitle A 

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1 ‘‘(ii) 100 percent of the payment basis 

2 described in paragraph (3), in the case of 

3 any other individual. 

4 ‘‘(B) OUT-OF-POCKET LIMIT DE5 SCRIBED.— 

6 ‘‘(i) For purposes of subparagraph 

7 (A), the out-of-pocket limit for a year is 

8 equal to— 

9 ‘‘(I) for 1996, $1000, and 

10 ‘‘(II) for any succeeding year, the 

11 amount (rounded to the nearest dol12 lar) that the Secretary estimates will 

13 ensure that the percentage of the av14 erage number of individuals covered 

15 under this part (other than individ16 uals enrolled with an eligible organiza17 tion under section 1876 or an organi18 zation described in section 

19 1833(a)(1)(A)) during the year who 

20 will incur expenses for covered out21 patient drugs equal to or greater than 

22 such amount will be the same as the 

23 percentage for the previous year. 

24 ‘‘(ii) The Secretary shall promulgate 

25 the out-of-pocket limit for 1997 and each 
354 

Title II, Subtitle A 

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1 succeeding year during September of the 

2 previous year. 

3 ‘‘(C) SPECIAL RULE FOR DETERMINATION

4 OF EXPENSES INCURRED.—In determining the 

5 amount of expenses incurred by an individual 

6 for covered outpatient drugs during a year for 

7 purposes of subparagraph (A), there shall not 

8 be included any expenses incurred with respect 

9 to a drug to the extent such expenses exceed 

10 the payment basis for such drug under para11 graph (3). 

12 ‘‘(3) PAYMENT BASIS.—For purposes of para13 graph (2), the payment basis is the lesser of— 

14 ‘‘(A) the actual charge for a covered out15 patient drug, or 

16 ‘‘(B) the applicable payment limit estab17 lished under paragraph (4). 

18 ‘‘(4) PAYMENT LIMITS.— 

19 ‘‘(A) PAYMENT LIMIT FOR SINGLE SOURCE

20 DRUGS AND MULTIPLE SOURCE DRUGS WITH

21 RESTRICTIVE PRESCRIPTIONS.—In the case of a 

22 covered outpatient drug that is a multiple 

23 source drug which has a restrictive prescription, 

24 or that is single source drug, the payment limit 

25 for a payment calculation period is equal to— 
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Title II, Subtitle A 

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1 ‘‘(i) the 90th percentile of the actual 

2 charges (computed on the geographic basis 

3 specified by the Secretary) for the drug 

4 product for the second previous payment 

5 calculation period, or 

6 ‘‘(ii) the amount of the administrative 

7 allowance (established under paragraph 

8 (5)) plus the product of the number of dos9 age units dispensed and the per unit esti10 mated acquisition cost for the drug prod11 uct (determined under subparagraph (C)) 

12 for the period, 

13 whichever is less. 

14 ‘‘(B) PAYMENT LIMIT FOR MULTIPLE

15 SOURCE DRUGS WITHOUT RESTRICTIVE PRE16 SCRIPTIONS.—In the case of a drug that is a 

17 multiple source drug which does not have a re18 strictive prescription, the payment limit for a 

19 payment calculation period is equal to the 

20 amount of the administrative allowance (estab21 lished under paragraph (5)) plus the product of 

22 the number of dosage units dispensed and the 

23 unweighted median of the unit estimated acqui24 sition cost (determined under subparagraph 

25 (C)) for the drug products for the period. 
356 

Title II, Subtitle A 

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1 ‘‘(C) DETERMINATION OF UNIT PRICE.— 

2 ‘‘(i) IN GENERAL.—The Secretary 

3 shall determine, for the dispensing of a 

4 covered outpatient drug product in a pay5 ment calculation period, the estimated ac6 quisition cost for the drug product. With 

7 respect to any covered outpatient drug 

8 product, such cost may not exceed 93 per9 cent of the published average wholesale 

10 price for the drug during the period. 

11 ‘‘(ii) COMPLIANCE WITH REQUEST

12 FOR INFORMATION.—If a wholesaler or di13 rect seller of a covered outpatient drug re14 fuses, after being requested by the Sec15 retary, to provide price information re16 quested to carry out clause (i), or delib17 erately provides information that is false, 

18 the Secretary may impose a civil money 

19 penalty of not to exceed $10,000 for each 

20 such refusal or provision of false informa21 tion. The provisions of section 1128A 

22 (other than subsections (a) and (b)) shall 

23 apply to civil money penalties under the 

24 previous sentence in the same manner as 

25 they apply to a penalty or proceeding 
357 

Title II, Subtitle A 

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1 under section 1128A(a). Information gath2 ered pursuant to clause (i) shall not be dis3 closed except as the Secretary determines 

4 to be necessary to carry out the purposes 

5 of this part. 

6 ‘‘(5) ADMINISTRATIVE ALLOWANCE FOR PUR7 POSES OF PAYMENT LIMIT.— 

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

9 subparagraph (B), the administrative allowance 

10 established under this paragraph is— 

11 ‘‘(i) for 1996, $5, and 

12 ‘‘(ii) for each succeeding year, the 

13 amount for the previous year adjusted by 

14 the percentage change in the consumer 

15 price index for all urban consumers (U.S. 

16 city average) for the 12-month period end17 ing with June of that previous year. 

18 ‘‘(B) REDUCTION FOR MAIL ORDER PHAR19 MACIES.—The Secretary may, after consulting 

20 with representatives of pharmacists, individuals 

21 enrolled under this part, and of private insur22 ers, reduce the administrative allowances estab23 lished under subparagraph (A) for any covered 

24 outpatient drug dispensed by a mail order phar25 macy, based on differences between such phar-
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Title II, Subtitle A 

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1 macies and other pharmacies with respect to 

2 operating costs and other economies. 

3 ‘‘(6) ASSURING APPROPRIATE PRESCRIBING

4 AND DISPENSING PRACTICES.— 

5 ‘‘(A) IN GENERAL.—The Secretary shall 

6 establish a program to identify (and to educate 

7 physicians and pharmacists concerning)— 

8 ‘‘(i) instances or patterns of unneces9 sary or inappropriate prescribing or dis10 pensing practices for covered outpatient 

11 drugs, 

12 ‘‘(ii) instances or patterns of sub13 standard care with respect to such drugs, 

14 ‘‘(iii) potential adverse reactions, and 

15 ‘‘(iv) appropriate use of generic prod16 ucts. 

17 ‘‘(B) PRIOR AUTHORIZATION.—The Sec18 retary may require advance approval for a cov19 ered outpatient drug which the Secretary finds 

20 is subject to misuse or inappropriate use, is not 

21 cost effective, which is a multiple source drug 

22 with a restrictive prescription, or is subject to 

23 negotiation under section 1850(c)(3). The Sec24 retary may also establish maximum quantities 

25 per prescription and limits on the number of 
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Title II, Subtitle A 

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1 prescription refills. The Secretary shall ensure 

2 that any advance approval requirements im3 posed under this subparagraph do not restrict 

4 the access of patients to medically necessary 

5 covered outpatient drugs on a timely basis, and 

6 assure prompt determinations of approval or 

7 disapproval and provide a means for providers 

8 and patients to appeal a decision to disapprove 

9 a drug. 

10 ‘‘(C) DRUG USE REVIEW.—The Secretary 

11 may provide for a drug use review program 

12 with respect to covered outpatient drugs dis13 pensed to individuals eligible for benefits under 

14 this part. Such program may include such ele15 ments as the Secretary determines to be nec16 essary to assure that prescriptions (i) are ap17 propriate, (ii) are medically necessary, and (iii) 

18 are not likely to result in adverse medical re19 sults, including any elements of the State drug 

20 use review programs required under section 

21 1927(g) that the Secretary determines to be ap22 propriate. 

23 ‘‘(7) ADMINISTRATIVE IMPROVEMENTS.—The 

24 Secretary shall develop, in consultation with rep25 resentatives of pharmacies and of other interested 
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Title II, Subtitle A 

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1 persons, a standard claims form for covered out2 patient drugs in accordance with title V of the 

3 Health Security Act. 

4 ‘‘(8) COUNSELING REQUIREMENTS FOR PHAR5 MACIES.—A pharmacy may not receive any payment 

6 under this part for a covered outpatient drug unless 

7 the pharmacy agrees to answer questions of individ8 uals enrolled under this part who receive a covered 

9 outpatient drug from the pharmacy regarding the 

10 appropriate use of the drug, potential interactions 

11 between the drug and other drugs dispensed to the 

12 individual, and other matters relating to the dis13 pensing of such drugs. 

14 ‘‘(9) DEFINITIONS.—In this subsection: 

15 ‘‘(A) MULTIPLE AND SINGLE SOURCE

16 DRUGS.—The terms ‘multiple source drug’ and 

17 ‘single source drug’ have the meanings of those 

18 terms under section 1927(k)(7). 

19 ‘‘(B) RESTRICTIVE PRESCRIPTION.—A 

20 drug has a ‘restrictive prescription’ only if— 

21 ‘‘(i) in the case of a written prescrip22 tion, the prescription for the drug indi23 cates, in the handwriting of the physician 

24 or other person prescribing the drug and 

25 with an appropriate phrase (such as ‘brand 
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1 medically necessary’) recognized by the 

2 Secretary, that a particular drug product 

3 must be dispensed, or 

4 ‘‘(ii) in the case of a prescription 

5 issued by telephone— 

6 ‘‘(I) the physician or other per7 son prescribing the drug (through use 

8 of such an appropriate phrase) states 

9 that a particular drug product must 

10 be dispensed, and 

11 ‘‘(II) the physician or other per12 son submits to the pharmacy involved, 

13 within 30 days after the date of the 

14 telephone prescription, a written con15 firmation which is in the handwriting 

16 of the physician or other person pre17 scribing the drug and which indicates 

18 with such appropriate phrase that the 

19 particular drug product was required 

20 to have been dispensed. 

21 ‘‘(C) PAYMENT CALCULATION PERIOD.— 

22 The term ‘payment calculation period’ means 

23 the 6-month period beginning with January of 

24 each year and the 6-month period beginning 

25 with July of each year.’’. 
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1 (b) SUBMISSION OF CLAIMS BY PHARMACIES.—Sec2 tion 1848(g)(4) of such Act (42 U.S.C. 1395w–4(g)(4)) 

3 is amended— 

4 (1) in the heading— 

5 (A) by striking ‘‘PHYSICIAN’’, and 

6 (B) by inserting ‘‘BY PHYSICIANS AND

7 SUPPLIERS’’ after ‘‘CLAIMS’’, 

8 (2) in the matter in subparagraph (A) pre9 ceding clause (i)— 

10 (A) by striking ‘‘For services furnished on 

11 or after September 1, 1990, within 1 year’’ and 

12 inserting ‘‘Within 1 year (90 days in the case 

13 of covered outpatient drugs)’’, 

14 (B) by striking ‘‘a service’’ and inserting 

15 ‘‘an item or service’’, and 

16 (C) by inserting ‘‘or of providing a covered 

17 outpatient drug,’’ after ‘‘basis,’’ and 

18 (3) in subparagraph (A)(i), by inserting ‘‘item 

19 or’’ before ‘‘service. 

20 (c) SPECIAL RULES FOR CARRIERS.— 

21 (1) USE OF REGIONAL CARRIERS.—Section 

22 1842(b)(2) of such Act (42 U.S.C. 1395u(b)(2)) is 

23 amended by adding at the end the following: 

24 ‘‘(D) With respect to activities related to covered out25 patient drugs, the Secretary may enter into contracts with 
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1 carriers under this section to perform the activities on a 

2 regional basis.’’. 

3 (2) PAYMENT ON OTHER THAN A COST

4 BASIS.—Section 1842(c)(1)(A) of such Act (42 

5 U.S.C. 1395u(c)(1)(A)) is amended— 

6 (A) by inserting ‘‘(i)’’ after ‘‘(c)(1)(A)’’, 

7 (B) in the first sentence, by inserting ‘‘, 

8 except as otherwise provided in clause (ii),’’ 

9 after ‘‘under this part, and’’, and 

10 (C) by adding at the end the following: 

11 ‘‘(ii) To the extent that a contract under this section 

12 provides for activities related to covered outpatient drugs, 

13 the Secretary may provide for payment for those activities 

14 based on any method of payment determined by the Sec15 retary to be appropriate.’’. 

16 (3) USE OF OTHER ENTITIES FOR COVERED

17 OUTPATIENT DRUGS.—Section 1842(f) of such Act 

18 (42 U.S.C. 1395u(f)) is amended— 

19 (A) by striking ‘‘and’’ at the end of para20 graph (1), 

21 (B) by striking the period at the end of 

22 paragraph (2) and inserting ‘‘; and’’, and 

23 (C) by adding at the end the following: 

24 ‘‘(3) with respect to activities related to covered 

25 outpatient drugs, any other private entity which the 
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1 Secretary determines is qualified to conduct such ac2 tivities.’’. 

3 (4) DESIGNATED CARRIERS TO PROCESS

4 CLAIMS OF RAILROAD RETIREES.—Section 1842(g) 

5 of such Act (42 U.S.C. 1395u(g)) is amended by in6 serting ‘‘(other than functions related to covered 

7 outpatient drugs)’’ after ‘‘functions’’. 

8 (d) CONTRACTS FOR AUTOMATIC DATA PROCESSING

9 EQUIPMENT.—Actions taken before 1996 that affect con10 tracts related to the processing of claims for covered out11 patient drugs (as defined in section 1861(t) of the Social 

12 Security Act) shall not be subject to section 111 of the 

13 Federal Property and Administrative Services Act of 

14 1949, and shall not be subject to administrative or judicial 

15 review. 

16 (e) CONFORMING AMENDMENTS.— 

17 (1)(A) Section 1833(a)(1) of such Act (42 

18 U.S.C. 1395l(a)(1)), as amended by section 

19 13544(b)(2) of OBRA–1993, is amended— 

20 (i) by striking ‘‘and’’ at the end of clause 

21 (O), and 

22 (ii) by inserting before the semicolon at the 

23 end the following: ‘‘, and (Q) with respect to 

24 covered outpatient drugs, the amounts paid 

25 shall be as prescribed by section 1834(d)’’. 
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1 (B) Section 1833(a)(2) of such Act (42 U.S.C. 

2 1395l(a)(2)) is amended in the matter preceding 

3 subparagraph (A) by inserting ‘‘, except for covered 

4 outpatient drugs,’’ after ‘‘and (I) of such section’’. 

5 (2) Section 1833(b)(2) of such Act (42 U.S.C. 

6 1395l(b)(2)) is amended by inserting ‘‘or with re7 spect to covered outpatient drugs’’ before the 

8 comma. 

9 (3) The first sentence of section 1842(h)(2) of 

10 such Act (42 U.S.C. 1395u(h)(2)) is amended by in11 serting ‘‘(other than a carrier described in sub12 section (f)(3))’’ after ‘‘Each carrier’’. 

13 (4) The first sentence of section 1866(a)(2)(A) 

14 of such Act (42 U.S.C. 1395cc(a)(2)(A)) is amend15 ed— 

16 (A) in clause (i), by inserting ‘‘section 

17 1834(d),’’ after ‘‘section 1833(b),’’, and 

18 (B) in clause (ii), by inserting ‘‘, other 

19 than for covered outpatient drugs,’’ after ‘‘pro20 vider)’’. 

21 SEC. 2003. MEDICARE REBATES FOR COVERED OUT22 PATIENT DRUGS. 

23 (a) IN GENERAL.—Part B of title XVIII of the Social 

24 Security Act is amended by adding at the end the fol25 lowing new section: 
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1 ‘‘REBATES FOR COVERED OUTPATIENT DRUGS

2 ‘‘Sec. 1850. (a) REQUIREMENT FOR REBATE AGREE3 MENT.—In order for payment to be available under this 

4 part for covered outpatient drugs of a manufacturer dis5 pensed on or after January 1, 1996, the manufacturer 

6 must have entered into and have in effect a rebate agree7 ment with the Secretary meeting the requirements of sub8 section (b), and an agreement to give equal access to dis9 counts in accordance with subsection (e). 

10 ‘‘(b) TERMS, IMPLEMENTATION, AND ENFORCEMENT

11 OF REBATE AGREEMENT.— 

12 ‘‘(1) PERIODIC REBATES.— 

13 ‘‘(A) IN GENERAL.—A rebate agreement 

14 under this section shall require the manufac15 turer to pay to the Secretary for each calendar 

16 quarter, not later than 30 days after the date 

17 of receipt of the information described in para18 graph (2) for such quarter, a rebate in an 

19 amount determined under subsection (c) for all 

20 covered outpatient drugs of the manufacturer 

21 described in subparagraph (B). 

22 ‘‘(B) DRUGS INCLUDED IN QUARTERLY

23 REBATE CALCULATION.—Drugs subject to re24 bate with respect to a calendar quarter are 

25 drugs which are dispensed by a pharmacy dur-
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1 ing such quarter to individuals (other than indi2 viduals enrolled with an eligible organization 

3 with a contract under section 1876) eligible for 

4 benefits under this part, as reported by such 

5 pharmacies to the Secretary. 

6 ‘‘(2) INFORMATION FURNISHED TO MANUFAC7 TURERS.— 

8 ‘‘(A) IN GENERAL.—The Secretary shall 

9 report to each manufacturer, not later than 60 

10 days after the end of each calendar quarter, in11 formation on the total number, for each covered 

12 outpatient drug, of units of each dosage form, 

13 strength, and package size dispensed under the 

14 plan during the quarter, on the basis of the 

15 data reported to the Secretary described in 

16 paragraph (1)(B). 

17 ‘‘(B) AUDIT.—The Comptroller General 

18 may audit the records of the Secretary to the 

19 extent necessary to determine the accuracy of 

20 reports by the Secretary pursuant to subpara21 graph (A). Adjustments to rebates shall be 

22 made to the extent determined necessary by the 

23 audit to reflect actual units of drugs dispensed. 

24 ‘‘(3) PROVISION OF PRICE INFORMATION BY

25 MANUFACTURER.— 
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Title II, Subtitle A 

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1 ‘‘(A) QUARTERLY PRICING INFORMA2 TION.—Each manufacturer with an agreement 

3 in effect under this section shall report to the 

4 Secretary, not later than 30 days after the last 

5 day of each calendar quarter, on the average 

6 manufacturer retail price and the average man7 ufacturer non-retail price for each dosage form 

8 and strength of each covered outpatient drug 

9 for the quarter. 

10 ‘‘(B) BASE QUARTER PRICES.—Each man11 ufacturer of a covered outpatient drug with an 

12 agreement under this section shall report to the 

13 Secretary, by not later than 30 days after the 

14 effective date of such agreement (or, if later, 30 

15 days after the end of the base quarter), the av16 erage manufacturer retail price, for such base 

17 quarter, for each dosage form and strength of 

18 each such covered drug. 

19 ‘‘(C) VERIFICATION OF AVERAGE MANU20 FACTURER PRICE.—The Secretary may inspect 

21 the records of manufacturers, and survey whole22 salers, pharmacies, and institutional purchasers 

23 of drugs, as necessary to verify prices reported 

24 under subparagraph (A). 

25 ‘‘(D) PENALTIES.— 
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1 ‘‘(i) CIVIL MONEY PENALTIES.—The 

2 Secretary may impose a civil money pen3 alty on a manufacturer with an agreement 

4 under this section— 

5 ‘‘(I) for failure to provide infor6 mation required under subparagraph 

7 (A) on a timely basis, in an amount 

8 up to $10,000 per day of delay; 

9 ‘‘(II) for refusal to provide infor10 mation about charges or prices re11 quested by the Secretary for purposes 

12 of verification pursuant to subpara13 graph (C), in an amount up to 

14 $100,000; and 

15 ‘‘(III) for provision, pursuant to 

16 subparagraph (A) or (B), of informa17 tion that the manufacturer knows or 

18 should know is false, in an amount up 

19 to $100,000 per item of information. 

20 Such civil money penalties are in addition 

21 to any other penalties prescribed by law. 

22 The provisions of section 1128A (other 

23 than subsections (a) (with respect to 

24 amounts of penalties or additional assess25 ments) and (b)) shall apply to a civil 
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Title II, Subtitle A 

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1 money penalty under this subparagraph in 

2 the same manner as such provisions apply 

3 to a penalty or proceeding under section 

4 1128A(a). 

5 ‘‘(ii) TERMINATION OF AGREE6 MENT.—If a manufacturer with an agree7 ment under this section has not provided 

8 information required under subparagraph 

9 (A) or (B) within 90 days of the deadline 

10 imposed, the Secretary may suspend the 

11 agreement with respect to covered out12 patient drugs dispensed after the end of 

13 such 90-day period and until the date such 

14 information is reported (but in no case 

15 shall a suspension be for less than 30 

16 days). 

17 ‘‘(4) LENGTH OF AGREEMENT.— 

18 ‘‘(A) IN GENERAL.—A rebate agreement 

19 shall be effective for an initial period of not less 

20 than one year and shall be automatically re21 newed for a period of not less than one year un22 less terminated under subparagraph (B). 

23 ‘‘(B) TERMINATION.— 

24 ‘‘(i) BY THE SECRETARY.—The Sec25 retary may provide for termination of a re-
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1 bate agreement for violation of the require2 ments of the agreement or other good 

3 cause shown. Such termination shall not be 

4 effective earlier than 60 days after the 

5 date of notice of such termination. The 

6 Secretary shall afford a manufacturer an 

7 opportunity for a hearing concerning such 

8 termination, but such hearing shall not 

9 delay the effective date of the termination. 

10 ‘‘(ii) BY A MANUFACTURER.—A man11 ufacturer may terminate a rebate agree12 ment under this section for any reason. 

13 Any such termination shall not be effective 

14 until the calendar quarter beginning at 

15 least 60 days after the date the manufac16 turer provides notice to the Secretary. 

17 ‘‘(iii) EFFECTIVE DATE OF TERMI18 NATION.—Any termination under this sub19 paragraph shall not affect rebates due 

20 under the agreement before the effective 

21 date of its termination. 

22 ‘‘(iv) NOTICE TO PHARMACIES.—In 

23 the case of a termination under this sub24 paragraph, the Secretary shall notify phar25 macies and physician organizations not less 
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Title II, Subtitle A 

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1 than 30 days before the effective date of 

2 such termination. 

3 ‘‘(c) AMOUNT OF REBATE.— 

4 ‘‘(1) BASIC REBATE.—Each manufacturer shall 

5 remit a basic rebate to the Secretary for each cal6 endar quarter in an amount, with respect to each 

7 dosage form and strength of a covered drug (except 

8 as provided under paragraph (4)), equal to the prod9 uct of— 

10 ‘‘(A) the total number of units subject to 

11 rebate for such quarter, as described in sub12 section (b)(1)(B); and 

13 ‘‘(B) the greater of— 

14 ‘‘(i) the difference between the aver15 age manufacturer retail price and the aver16 age manufacturer non-retail price, 

17 ‘‘(ii) 17 percent of the average manu18 facturer retail price, or 

19 ‘‘(iii) the amount determined pursuant 

20 to paragraph (3). 

21 ‘‘(2) ADDITIONAL REBATE.—Each manufac22 turer shall remit to the Secretary, for each calendar 

23 quarter, an additional rebate for each dosage form 

24 and strength of a covered drug (except as provided 

25 under paragraph (4)), in an amount equal to— 
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1 ‘‘(A) the total number of units subject to 

2 rebate for such quarter, as described in sub3 section (b)(1)(B), multiplied by 

4 ‘‘(B) the amount, if any, by which the av5 erage manufacturer retail price for covered 

6 drugs of the manufacturer exceeds the average 

7 manufacturer retail price for the base quarter, 

8 increased by the percentage increase in the 

9 Consumer Price Index for all urban consumers 

10 (U.S. average) from the end of such base quar11 ter to the month before the beginning of such 

12 calendar quarter. 

13 ‘‘(3) NEGOTIATED REBATE AMOUNT FOR NEW

14 DRUGS.— 

15 ‘‘(A) IN GENERAL.—The Secretary may 

16 negotiate with the manufacturer a per-unit re17 bate amount, in accordance with this para18 graph, for any covered outpatient drug (except 

19 as provided under paragraph (4)) first mar20 keted after June 30, 1993— 

21 ‘‘(i) which is not marketed in any 

22 country specified in section 802(b)(4)(A) 

23 of the Federal Food, Drug, and Cosmetic 

24 Act and for which the Secretary believes 
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1 the average manufacturer’s retail price 

2 may be excessive, or 

3 ‘‘(ii) which is marketed in one or more 

4 of such countries, at prices significantly 

5 lower than the average manufacturer retail 

6 price. 

7 ‘‘(B) MAXIMUM REBATE AMOUNT FOR

8 DRUGS MARKETED IN CERTAIN COUNTRIES.— 

9 The rebate negotiated pursuant to this para10 graph for a drug described in subparagraph 

11 (A)(ii) may be an amount up to the difference 

12 between the average manufacturer retail price 

13 and any price at which the drug is available to 

14 wholesalers in a country specified in such sec15 tion 802(b)(4)(A). 

16 ‘‘(C) FACTORS TO BE CONSIDERED.—In 

17 making determinations with respect to the 

18 prices of a covered drug described in subpara19 graph (A) and in negotiating a rebate amount 

20 pursuant to this paragraph, the Secretary shall 

21 take into consideration, as applicable and ap22 propriate, the prices of other drugs in the same 

23 therapeutic class, cost information requested by 

24 the Secretary and supplied by the manufacturer 

25 or estimated by the Secretary, prescription vol-
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Title II, Subtitle A 

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1 umes, economies of scale, product stability, spe2 cial manufacturing requirements, prices of the 

3 drug in countries specified in subparagraph 

4 (A)(i) (in the case of a drug described in such 

5 subparagraph), and other relevant factors. 

6 ‘‘(D) OPTION TO EXCLUDE COVERAGE.—If 

7 the Secretary is unable to negotiate with the 

8 manufacturer an acceptable rebate amount with 

9 respect to a covered outpatient drug pursuant 

10 to this paragraph, the Secretary may exclude 

11 such drug from coverage under this part. 

12 ‘‘(E) EFFECTIVE DATE OF EXCLUSION

13 FROM COVERAGE.—An exclusion of a drug from 

14 coverage pursuant to subparagraph (D) shall be 

15 effective on and after— 

16 ‘‘(i) the date 6 months after the effec17 tive date of marketing approval of such 

18 drug by the Food and Drug Administra19 tion (but in no event earlier than July 1, 

20 1996), or 

21 ‘‘(ii) the date the manufacturer termi22 nates negotiations with the Secretary con23 cerning the rebate amount, 

24 whichever is earlier. 
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Title II, Subtitle A 

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1 ‘‘(4) NO REBATE REQUIRED FOR GENERIC

2 DRUGS.—Paragraphs (1) through (3) shall not apply 

3 with respect to a covered outpatient drug that is not 

4 a single source drug or an innovator multiple source 

5 drug (as such terms are defined in section 1927(k)). 

6 ‘‘(5) DEPOSIT OF REBATES.—The Secretary 

7 shall deposit rebates under this section in the Fed8 eral Supplementary Medical Insurance Trust Fund 

9 established under section 1841. 

10 ‘‘(d) CONFIDENTIALITY OF INFORMATION.—Notwith11 standing any other provision of law, information disclosed 

12 by a manufacturer under this section is confidential and 

13 shall not be disclosed by the Secretary, except— 

14 ‘‘(A) as the Secretary determines to be nec15 essary to carry out this section, 

16 ‘‘(B) to permit the Comptroller General to re17 view the information provided, and 

18 ‘‘(C) to permit the Director of the Congres19 sional Budget Office to review the information pro20 vided. 

21 ‘‘(e) AGREEMENT TO GIVE EQUAL ACCESS TO DIS22 COUNTS.—An agreement under this subsection by a man23 ufacturer of covered outpatient drugs shall guarantee that 

24 the manufacturer will offer, to each wholesaler or retailer 

25 (or other purchaser representing a group of such whole-
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Title II, Subtitle A 

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1 salers or retailers) that purchases such drugs on substan2 tially the same terms (including such terms as prompt 

3 payment, cash payment, volume purchase, single-site de4 livery, the use of formularies by purchasers, and any other 

5 terms effectively reducing the manufacturer’s costs) as 

6 any other purchaser (including any institutional pur7 chaser) the same price for such drugs as is offered to such 

8 other purchaser. In determining a manufacturer’s compli9 ance with the previous sentence, there shall not be taken 

10 into account terms offered to the Department of Veterans 

11 Affairs, the Department of Defense, or any public pro12 gram. 

13 ‘‘(f) DEFINITIONS.—For purposes of this section— 

14 ‘‘(1) AVERAGE MANUFACTURER RETAIL

15 PRICE.—The term ‘average manufacturer retail 

16 price’ means, with respect to a covered outpatient 

17 drug of a manufacturer for a calendar quarter, the 

18 average price (inclusive of discounts for cash pay19 ment, prompt payment, volume purchases, and re20 bates (other than rebates under this section), but ex21 clusive of nominal prices) paid to the manufacturer 

22 for the drug in the United States for drugs distrib23 uted to the retail pharmacy class of trade. 

24 ‘‘(2) AVERAGE MANUFACTURER NON-RETAIL

25 PRICE.—The term ‘average manufacturer non-retail 
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Title II, Subtitle A 

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1 price’ means, with respect to a covered outpatient 

2 drug of a manufacturer for a calendar quarter, the 

3 weighted average price (inclusive of discounts for 

4 cash payment, prompt payment, volume purchases, 

5 and rebates (other than rebates under this section), 

6 but exclusive of nominal prices) paid to the manu7 facturer for the drug in the United States by hos8 pitals and other institutional purchasers that pur9 chase drugs for institutional use and not for resale. 

10 ‘‘(3) BASE QUARTER.—The term ‘base quarter’ 

11 means, with respect to a covered outpatient drug of 

12 a manufacturer, the calendar quarter beginning 

13 April 1, 1993, or (if later) the first full calendar 

14 quarter during which the drug was marketed in the 

15 United States. 

16 ‘‘(4) COVERED DRUG.—The term ‘covered drug’ 

17 includes each innovator multiple source drug and 

18 single source drug, as those terms are defined in 

19 section 1927(k)(7). 

20 ‘‘(5) MANUFACTURER.—The term ‘manufac21 turer’ means, with respect to a covered outpatient 

22 drug— 

23 ‘‘(A) the entity whose National Drug Code 

24 number (as issued pursuant to section 510(e) of 
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Title II, Subtitle A 

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1 the Federal Food, Drug, and Cosmetic Act) ap2 pears on the labeling of the drug; or 

3 ‘‘(B) if the number described in subpara4 graph (A) does not appear on the labeling of 

5 the drug, the person named as the applicant in 

6 a human drug application (in the case of a new 

7 drug) or the product license application (in the 

8 case of a biological product) for such drug ap9 proved by the Food and Drug Administration.’’. 

10 (b) EXCLUSIONS FROM COVERAGE.—Section 

11 1862(a) of such Act (42 U.S.C. 1395y(a)), as amended 

12 by sections 4034(b)(4) and 4118(b), is amended— 

13 (1) by striking ‘‘and’’ at the end of paragraph 

14 (15), 

15 (2) by striking the period at the end of para16 graph (16) and inserting ‘‘; or’’, and 

17 (3) by inserting after paragraph (16) the fol18 lowing new paragraph: 

19 ‘‘(17) A covered outpatient drug (as described 

20 in section 1861(t))— 

21 ‘‘(A) furnished during a year for which the 

22 drug’s manufacturer does not have in effect a 

23 rebate agreement with the Secretary that meets 

24 the requirements of section 1850 for the year, 

25 or 
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Title II, Subtitle A 

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1 ‘‘(B) excluded from coverage during the 

2 year by the Secretary pursuant to section 

3 1850(c)(3)(D) (relating to negotiated rebate 

4 amounts for certain new drugs).’’. 

5 SEC. 2004. EXTENSION OF 25 PERCENT RULE FOR PORTION 

6 OF PREMIUM ATTRIBUTABLE TO COVERED 

7 OUTPATIENT DRUGS. 

8 Section 1839(e) of the Social Security Act (42 U.S.C. 

9 1395r(e)) is amended by adding at the end the following: 

10 ‘‘(3) Notwithstanding the provisions of subsection 

11 (a), the portion of the monthly premium for each indi12 vidual enrolled under this part for each month after De13 cember 1998 that is attributable to covered outpatient 

14 drugs shall be an amount equal to 50 percent of the por15 tion of the monthly actuarial rate for enrollees age 65 and 

16 over, as determined under subsection (a)(1) and applicable 

17 to such month, that is attributable to covered outpatient 

18 drugs.’’. 

19 SEC. 2005. COVERAGE OF HOME INFUSION DRUG THERAPY 

20 SERVICES. 

21 (a) IN GENERAL.—Section 1832(a)(2)(A) of the So22 cial Security Act (42 U.S.C. 1395k(a)(2)(A)) is amended 

23 by inserting ‘‘and home infusion drug therapy services’’ 

24 before the semicolon. 
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Title II, Subtitle A 

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1 (b) HOME INFUSION DRUG THERAPY SERVICES DE2 FINED.—Section 1861 of such Act (42 U.S.C. 1395x) is 

3 amended— 

4 (1) by redesignating the subsection (jj) inserted 

5 by section 4156(a)(2) of the Omnibus Budget Rec6 onciliation Act of 1990 as subsection (kk); and 

7 (2) by inserting after such subsection the fol8 lowing new subsection: 

9 ‘‘Home Infusion Drug Therapy Services 

10 ‘‘(ll)(1) The term ‘home infusion drug therapy serv11 ices’ means the items and services described in paragraph 

12 (2) furnished to an individual who is under the care of 

13 a physician— 

14 ‘‘(A) in a place of residence used as the individ15 ual’s home, 

16 ‘‘(B) by a qualified home infusion drug therapy 

17 provider (as defined in paragraph (3)) or by others 

18 under arrangements with them made by that pro19 vider, and 

20 ‘‘(C) under a plan established and periodically 

21 reviewed by a physician. 

22 ‘‘(2) The items and services described in this para23 graph are such nursing, pharmacy, and related services 

24 (including medical supplies, intravenous fluids, delivery, 

25 and equipment) as are necessary to conduct safely and ef-
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1 fectively a drug regimen through use of a covered home 

2 infusion drug (as defined in subsection (t)(5)), but do not 

3 include such covered home infusion drugs. 

4 ‘‘(3) The term ‘qualified home infusion drug therapy 

5 provider’ means any entity that the Secretary determines 

6 meets the following requirements: 

7 ‘‘(A) The entity is capable of providing or ar8 ranging for the items and services described in para9 graph (2) and covered home infusion drugs. 

10 ‘‘(B) The entity maintains clinical records on 

11 all patients. 

12 ‘‘(C) The entity adheres to written protocols 

13 and policies with respect to the provision of items 

14 and services. 

15 ‘‘(D) The entity makes services available (as 

16 needed) seven days a week on a 24-hour basis. 

17 ‘‘(E) The entity coordinates all service with the 

18 patient’s physician. 

19 ‘‘(F) The entity conducts a quality assessment 

20 and assurance program, including drug regimen re21 view and coordination of patient care. 

22 ‘‘(G) The entity assures that only trained per23 sonnel provide covered home infusion drugs (and any 

24 other service for which training is required to pro25 vide the service safely). 
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Title II, Subtitle A 

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1 ‘‘(H) The entity assumes responsibility for the 

2 quality of services provided by others under arrange3 ments with the entity. 

4 ‘‘(I) In the case of an entity in any State in 

5 which State or applicable local law provides for the 

6 licensing of entities of this nature, the entity (i) is 

7 licensed pursuant to such law, or (ii) is approved, by 

8 the agency of such State or locality responsible for 

9 licensing entities of this nature, as meeting the 

10 standards established for such licensing. 

11 ‘‘(J) The entity meets such other requirements 

12 as the Secretary may determine are necessary to as13 sure the safe and effective provision of home infu14 sion drug therapy services and the efficient adminis15 tration of the home infusion drug therapy benefit.’’. 

16 (c) PAYMENT.— 

17 (1) IN GENERAL.—Section 1833 of such Act 

18 (42 U.S.C. 1395l) is amended— 

19 (A) in subsection (a)(2)(B), by striking ‘‘or 

20 (E)’’ and inserting ‘‘(E), or (F)’’, 

21 (B) in subsection (a)(2)(D), by striking 

22 ‘‘and’’ at the end, 

23 (C) in subsection (a)(2)(E), by striking the 

24 semicolon and inserting ‘‘; and’’, 
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Title II, Subtitle A 

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1 (D) by inserting after subsection (a)(2)(E) 

2 the following new subparagraph: 

3 ‘‘(F) with respect to home infusion drug 

4 therapy services, the amounts described in sec5 tion 1834(j);’’, and 

6 (E) in the first sentence of subsection (b), 

7 by striking ‘‘services, (3)’’ and inserting ‘‘serv8 ices and home infusion drug therapy services, 

9 (3)’’. 

10 (2) AMOUNT DESCRIBED.—Section 1834 of 

11 such Act, as amended by section 13544(b)(i) of 

12 OBRA–1993, is amended by adding at the end the 

13 following new subsection: 

14 ‘‘(j) HOME INFUSION DRUG THERAPY SERVICES.— 

15 ‘‘(1) IN GENERAL.—With respect to home infu16 sion drug therapy services, payment under this part 

17 shall be made in an amount equal to the lesser of 

18 the actual charges for such services or the fee sched19 ule established under paragraph (2). 

20 ‘‘(2) ESTABLISHMENT OF FEE SCHEDULE.— 

21 The Secretary shall establish by regulation before 

22 the beginning of 1996 and each succeeding year a 

23 fee schedule for home infusion drug therapy services 

24 for which payment is made under this part. A fee 
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1 schedule established under this subsection shall be 

2 on a per diem basis.’’. 

3 (3) PROHIBITION ON CERTAIN REFERRALS.— 

4 Section 1877(h)(6) of such Act (42 U.S.C. 

5 1395nn(h)(6)), as amended by section 13562(a) of 

6 OBRA–1993, is amended by adding at the end the 

7 following: 

8 ‘‘(L) Home infusion drug therapy serv9 ices.’’. 

10 (d) CERTIFICATION.—Section 1835(a)(2) of such Act 

11 (42 U.S.C. 1395n(a)(2)) is amended— 

12 (1) by striking ‘‘and’’ at the end of subpara13 graph (E), 

14 (2) by striking the period at the end of sub15 paragraph (F) and inserting ‘‘; and’’, and 

16 (3) by inserting after subparagraph (F) the fol17 lowing: 

18 ‘‘(G) in the case of home infusion drug 

19 therapy services, (i) such services are or were 

20 required because the individual needed such 

21 services for the administration of a covered 

22 home infusion drug, (ii) a plan for furnishing 

23 such services has been established and is re24 viewed periodically by a physician, and (iii) 

25 such services are or were furnished while the in-
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1 dividual is or was under the care of a physi2 cian.’’. 

3 (e) CERTIFICATION OF HOME INFUSION DRUG

4 THERAPY PROVIDERS; INTERMEDIATE SANCTIONS FOR

5 NONCOMPLIANCE.— 

6 (1) TREATMENT AS PROVIDER OF SERVICES.— 

7 Section 1861(u) of such Act (42 U.S.C. 1395x(u)) 

8 is amended by inserting ‘‘home infusion drug ther9 apy provider,’’ after ‘‘hospice program,’’. 

10 (2) CONSULTATION WITH STATE AGENCIES AND

11 OTHER ORGANIZATIONS.—Section 1863 of such Act 

12 (42 U.S.C. 1395z) is amended by striking ‘‘and 

13 (dd)(2)’’ and inserting ‘‘(dd)(2), and (ll)(3)’’. 

14 (3) USE OF STATE AGENCIES IN DETERMINING

15 COMPLIANCE.—Section 1864(a) of such Act (42 

16 U.S.C. 1395aa(a)) is amended— 

17 (A) in the first sentence, by striking ‘‘an 

18 agency is a hospice program’’ and inserting ‘‘an 

19 agency or entity is a hospice program or a 

20 home infusion drug therapy provider,’’; and 

21 (B) in the second sentence— 

22 (i) by striking ‘‘institution or agency’’ 

23 and inserting ‘‘institution, agency, or enti24 ty’’, and 
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1 (ii) by striking ‘‘or hospice program’’ 

2 and inserting ‘‘hospice program, or home 

3 infusion drug therapy provider’’. 

4 (4) APPLICATION OF INTERMEDIATE SANC5 TIONS.—Section 1846 of such Act (42 U.S.C. 

6 1395w–2) is amended— 

7 (A) in the heading, by adding ‘‘AND FOR

8 QUALIFIED HOME INFUSION DRUG THERAPY

9 PROVIDERS’’ at the end, 

10 (B) in subsection (a), by inserting ‘‘or that 

11 a qualified home infusion drug therapy provider 

12 that is certified for participation under this title 

13 no longer substantially meets the requirements 

14 of section 1861(ll)(3)’’ after ‘‘under this part’’, 

15 and 

16 (C) in subsection (b)(2)(A)(iv), by insert17 ing ‘‘or home infusion drug therapy services’’ 

18 after ‘‘clinical diagnostic laboratory tests’’. 

19 (f) USE OF REGIONAL INTERMEDIARIES IN ADMINIS20 TRATION OF BENEFIT.—Section 1816 of such Act (42 

21 U.S.C. 1395h) is amended by adding at the end the fol22 lowing new subsection: 

23 ‘‘(k) With respect to carrying out functions relating 

24 to payment for home infusion drug therapy services and 

25 covered home infusion drugs, the Secretary may enter into 
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1 contracts with agencies or organizations under this section 

2 to perform such functions on a regional basis.’’. 

3 (g) CONFORMING AMENDMENTS RELATING TO COV4 ERAGE OF ENTERAL AND PARENTERAL NUTRIENTS, SUP5 PLIES, AND EQUIPMENT.—(1) Section 1834(h)(4)(B) of 

6 such Act (42 U.S.C. 1395m(h)(4)(B)) is amended by 

7 striking ‘‘, except that’’ and all that follows through 

8 ‘‘equipment’’. 

9 (2) Section 1861(s)(8) of such Act (42 U.S.C. 

10 1395x(s)(8)) is amended by inserting after ‘‘dental’’ the 

11 following: ‘‘devices or enteral and parenteral nutrients, 

12 supplies, and equipment’’. 

13 SEC. 2006. CONFORMING AMENDMENTS TO MEDICAID PRO14 GRAM. 

15 (a) IN GENERAL.— 

16 (1) REQUIRING MEDICARE REBATE AS CONDI17 TION OF COVERAGE.—The first sentence of section 

18 1927(a)(1) of the Social Security Act (42 U.S.C. 

19 1396r–8(a)(1)) is amended— 

20 (A) in the first sentence of paragraph (1), 

21 by striking ‘‘and paragraph (6)’’ and inserting 

22 ‘‘, paragraph (6), and (for calendar quarters be23 ginning on or after January 1, 1996) para24 graph (7)’’; and 
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1 (B) by adding at the end the following new 

2 paragraph: 

3 ‘‘(7) REQUIREMENT RELATING TO REBATE

4 AGREEMENTS FOR COVERED OUTPATIENT DRUGS

5 UNDER MEDICARE PROGRAM.—A manufacturer 

6 meets the requirements of this paragraph for quar7 ters in a year if the manufacturer has in effect an 

8 agreement with the Secretary under section 1850 for 

9 providing rebates for covered outpatient drugs fur10 nished to individuals under title XVIII during the 

11 year.’’. 

12 (2) NON-DUPLICATION OF REBATES.—Section 

13 1927(b)(1) of such Act (42 U.S.C. 1396r–8(b)(1)) is 

14 amended— 

15 (A) by redesignating subparagraph (B) as 

16 subparagraph (C), and 

17 (B) by inserting after subparagraph (A) 

18 the following new subparagraph: 

19 ‘‘(B) NON-DUPLICATION OF MEDICARE RE20 BATE.—Covered drugs furnished to an indi21 vidual eligible for benefits under part B of title 

22 XVIII and enrolled in a State plan under this 

23 title shall not be included in the determination 

24 of units of covered outpatient drugs subject to 

25 rebate under this section.’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall apply to quarters beginning on or 

3 after January 1, 1996. 

4 SEC. 2007. EFFECTIVE DATE. 

5 Except as otherwise provided, the amendments made 

6 by this subtitle shall apply to items and services furnished 

7 on or after January 1, 1996. 

8 Subtitle B—Long-Term Care 

9 PART 1—STATE PROGRAMS FOR HOME AND COM10 MUNITY-BASED SERVICES FOR INDIVIDUALS 

11 WITH DISABILITIES 

12 SEC. 2101. STATE PROGRAMS FOR HOME AND COMMUNITY13 BASED SERVICES FOR INDIVIDUALS WITH 

14 DISABILITIES. 

15 (a) IN GENERAL.—Each State that has a plan for 

16 the home and community-based services to individuals 

17 with disabilities submitted to and approved by the Sec18 retary under section 2102(b) is entitled to payment in ac19 cordance with section 2108. 

20 (b) NO INDIVIDUAL ENTITLEMENT ESTABLISHED.— 

21 Nothing in this part shall be construed to create an enti22 tlement for individuals or a requirement that a State with 

23 such an approved plan expend the entire amount of funds 

24 to which it is entitled in any year. 
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1 SEC. 2102. STATE PLANS. 

2 (a) PLAN REQUIREMENTS.—In order to be approved 

3 under subsection (b), a State plan for home and commu4 nity-based services for individuals with disabilities must 

5 meet the following requirements: 

6 (1) ELIGIBILITY.— 

7 (A) IN GENERAL.—Within the amounts 

8 provided by the State (and under section 2108) 

9 for such plan, the plan shall provide that serv10 ices under the plan will be available to individ11 uals with disabilities (as defined in section 

12 2103(a)) in the State. 

13 (B) INITIAL SCREENING.—The plan shall 

14 provide a process for the initial screening of in15 dividuals who appear to have some reasonable 

16 likelihood of being an individual with disabil17 ities. 

18 (C) RESTRICTIONS.—The plan may not 

19 limit the eligibility of individuals with disabil20 ities based on— 

21 (i) income, 

22 (ii) age, 

23 (iii) geography, 

24 (iv) nature, severity, or category of 

25 disability, 
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1 (v) residential setting (other than an 

2 institutional setting), or 

3 (vi) other grounds specified by the 

4 Secretary. 

5 (D) MAINTENANCE OF EFFORT.—The plan 

6 must provide assurances that, in the case of an 

7 individual receiving medical assistance for home 

8 and community-based services under the State 

9 medicaid plan as of the date of the enactment 

10 of this Act, the State will continue to make 

11 available (either under this plan, under the 

12 State medicaid plan, or otherwise) to such indi13 vidual an appropriate level of assistance for 

14 home and community-based services, taking 

15 into account the level of assistance provided as 

16 of such date and the individual’s need for home 

17 and community-based services. 

18 (2) SERVICES.— 

19 (A) SPECIFICATION.—Consistent with sec20 tion 2104, the plan shall specify— 

21 (i) the services made available under 

22 the plan, 

23 (ii) the extent and manner in which 

24 such services are allocated and made avail25 able to individuals with disabilities, and 
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1 (iii) the manner in which services 

2 under the plan are coordinated with each 

3 other and with health and long-term care 

4 services available outside the plan for indi5 viduals with disabilities. 

6 (B) ALLOCATION.—The State plan— 

7 (i) shall specify how it will allocate 

8 services under the plan, during and after 

9 the 7-fiscal-year phase-in period beginning 

10 with fiscal year 1996, among covered indi11 viduals with disabilities, and 

12 (ii) may not allocate such services 

13 based on the income or other financial re14 sources of such individuals. 

15 (C) LIMITATION ON LICENSURE OR CER16 TIFICATION.—The State may not subject con17 sumer-directed providers of personal assistance 

18 services to licensure, certification, or other re19 quirements which the Secretary finds not to be 

20 necessary for the health and safety of individ21 uals with disabilities. 

22 (D) CONSUMER CHOICE.—To the extent 

23 possible, the choice of an individual with dis24 abilities (and that individual’s family) regarding 

25 which covered services to receive and the pro-
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1 viders who will provide such services shall be 

2 followed. 

3 (E) REQUIREMENT TO SERVE LOW-INCOME

4 INDIVIDUALS.—The plan shall assure that— 

5 (i) the proportion of the population of 

6 low-income individuals with disabilities in 

7 the State that represents individuals with 

8 disabilities who are provided home and 

9 community-based services either under the 

10 plan, under the State medicaid plan, or 

11 under both, is not less than 

12 (ii) the proportion of the population of 

13 the State that represents individuals who 

14 are low-income individuals. 

15 (3) COST SHARING.—The plan shall impose cost 

16 sharing with respect to covered services only in ac17 cordance with section 2105. 

18 (4) TYPES OF PROVIDERS AND REQUIREMENTS

19 FOR PARTICIPATION.—The plan shall specify— 

20 (A) the types of service providers eligible 

21 to participate in the program under the plan, 

22 which shall include consumer-directed providers, 

23 and 

24 (B) any requirements for participation ap25 plicable to each type of service provider. 
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Title II, Subtitle B 

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1 (5) BUDGET.—The plan shall specify how the 

2 State will manage Federal and State funds available 

3 under the plan for each fiscal year during the period 

4 beginning with fiscal year 1996 and ending with fis5 cal year 2003 and for each 5-fiscal-year periods 

6 thereafter to serve all categories of individuals with 

7 disabilities and meet the requirements of this sub8 section. If the Secretary makes an adjustment under 

9 section 2109(a)(5)(C) for a year, each State shall 

10 update the specifications under this paragraph to re11 flect the impact of such an adjustment. 

12 (6) PROVIDER REIMBURSEMENT.— 

13 (A) PAYMENT METHODS.—The plan shall 

14 specify the payment methods to be used to re15 imburse providers for services furnished under 

16 the plan. Such methods may include retrospec17 tive reimbursement on a fee-for-service basis, 

18 prepayment on a capitation basis, payment by 

19 cash or vouchers to individuals with disabilities, 

20 or any combination of these methods. In the 

21 case of the use of cash or vouchers, the plan 

22 shall specify how the plan will assure compli23 ance with applicable employment tax provisions. 

24 (B) PAYMENT RATES.—The plan shall 

25 specify the methods and criteria to be used to 
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Title II, Subtitle B 

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1 set payment rates for services furnished under 

2 the plan (including rates for cash payments or 

3 vouchers to individuals with disabilities). 

4 (C) PLAN PAYMENT AS PAYMENT IN

5 FULL.—The plan shall restrict payment under 

6 the plan for covered services to those providers 

7 that agree to accept the payment under the 

8 plan (at the rates established pursuant to sub9 paragraph (B)) and any cost sharing permitted 

10 or provided for under section 2105 as payment 

11 in full for services furnished under the plan. 

12 (7) QUALITY ASSURANCE AND SAFEGUARDS.— 

13 The State plan shall provide for quality assurance 

14 and safeguards for applicants and beneficiaries in 

15 accordance with section 2106. 

16 (8) ADVISORY GROUP.—The State plan shall— 

17 (A) assure the establishment and mainte18 nance of an advisory group under section 

19 2107(b), and 

20 (B) include the documentation prepared by 

21 the group under section 2107(b)(4). 

22 (9) ADMINISTRATION.— 

23 (A) STATE AGENCY.—The plan shall des24 ignate a State agency or agencies to administer 

25 (or to supervise the administration of) the plan. 
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Title II, Subtitle B 

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1 (B) ADMINISTRATIVE EXPENDITURES.— 

2 Effective beginning with fiscal year 2003, the 

3 plan shall contain assurances that not more 

4 than 10 percent of expenditures under the plan 

5 for all quarters in any fiscal year shall be for 

6 administrative costs. 

7 (C) COORDINATION.—The plan shall speci8 fy how the plan— 

9 (i) will be integrated with the State 

10 medicaid plan, titles V and XX of the So11 cial Security Act, programs under the 

12 Older Americans Act of 1965, programs 

13 under the Developmental Disabilities As14 sistance and Bill of Rights Act, the Indi15 viduals with Disabilities Education Act, 

16 and any other Federal or State programs 

17 that provide services or assistance targeted 

18 to individuals with disabilities, and 

19 (ii) will be coordinated with health 

20 plans. 

21 (10) REPORTS AND INFORMATION TO SEC22 RETARY; AUDITS.—The plan shall provide that the 

23 State will furnish to the Secretary— 

24 (A) such reports, and will cooperate with 

25 such audits, as the Secretary determines are 
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Title II, Subtitle B 

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1 needed concerning the State’s administration of 

2 its plan under this part, including the proc3 essing of claims under the plan, and 

4 (B) such data and information as the Sec5 retary may require in order to carry out the 

6 Secretary’s responsibilities. 

7 (11) USE OF STATE FUNDS FOR MATCHING.— 

8 The plan shall provide assurances that Federal 

9 funds will not be used to provide for the State share 

10 of expenditures under this part. 

11 (12) HEALTH CARE WORKER REDEPLOYMENT

12 REQUIREMENT.—The plan provides for compliance 

13 with the requirement of section 3074(a). 

14 (b) APPROVAL OF PLANS.—The Secretary shall ap15 prove a plan submitted by a State if the Secretary deter16 mines that the plan— 

17 (1) was developed by the State after consulta18 tion with individuals with disabilities and representa19 tives of groups of such individuals, and 

20 (2) meets the requirements of subsection (a). 

21 The approval of such a plan shall take effect as of the 

22 first day of the first fiscal year beginning after the date 

23 of such approval (except that any approval made before 

24 January 1, 1996, shall be effective as of January 1, 1996). 

25 In order to budget funds allotted under this part, the Sec-
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Title II, Subtitle B 

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1 retary may establish a deadline for the submission of such 

2 a plan before the beginning of a fiscal year as a condition 

3 of its approval effective with that fiscal year. 

4 (c) MONITORING.—The Secretary shall monitor the 

5 compliance of State plans with the eligibility requirements 

6 of section 2103 and may monitor the compliance of such 

7 plans with other requirements of this part. 

8 (d) REGULATIONS.—The Secretary shall issue such 

9 regulations as may be appropriate to carry out this part 

10 on a timely basis. 

11 SEC. 2103. INDIVIDUALS WITH DISABILITIES DEFINED. 

12 (a) IN GENERAL.—In this part, the term ‘‘individual 

13 with disabilities’’ means any individual within one or more 

14 of the following 4 categories of individuals: 

15 (1) INDIVIDUALS REQUIRING HELP WITH AC16 TIVITIES OF DAILY LIVING.—An individual of any 

17 age who— 

18 (A) requires hands-on or standby assist19 ance, supervision, or cueing (as defined in regu20 lations) to perform three or more activities of 

21 daily living (as defined in subsection (c)), and 

22 (B) is expected to require such assistance, 

23 supervision, or cueing over a period of at least 

24 100 days. 
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Title II, Subtitle B 

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1 (2) INDIVIDUALS WITH SEVERE COGNITIVE OR

2 MENTAL IMPAIRMENT.—An individual of any age— 

3 (A) whose score, on a standard mental sta4 tus protocol (or protocols) appropriate for 

5 measuring the individual’s particular condition 

6 specified by the Secretary, indicates either se7 vere cognitive impairment or severe mental im8 pairment, or both; 

9 (B) who— 

10 (i) requires hands-on or standby as11 sistance, supervision, or cueing with one or 

12 more activities of daily living, 

13 (ii) requires hands-on or standby as14 sistance, supervision, or cueing with at 

15 least such instrumental activity (or activi16 ties) of daily living related to cognitive or 

17 mental impairment as the Secretary speci18 fies, or 

19 (iii) displays symptoms of one or more 

20 serious behavioral problems (that is on a 

21 list of such problems specified by the Sec22 retary) which create a need for supervision 

23 to prevent harm to self or others; and 
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Title II, Subtitle B 

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1 (C) whose is expected to meet the require2 ments of subparagraphs (A) and (B) over a pe3 riod of at least 100 days. 

4 (3) INDIVIDUALS WITH SEVERE OR PROFOUND

5 MENTAL RETARDATION.—An individual of any age 

6 who has severe or profound mental retardation (as 

7 determined according to a protocol specified by the 

8 Secretary). 

9 (4) SEVERELY DISABLED CHILDREN.—An indi10 vidual under 6 years of age who— 

11 (A) has a severe disability or chronic med12 ical condition, 

13 (B) but for receiving personal assistance 

14 services or any of the services described in sec15 tion 2104(d)(1), would require institutionaliza16 tion in a hospital, nursing facility, or inter17 mediate care facility for the mentally retarded, 

18 and 

19 (C) is expected to have such disability or 

20 condition and require such services over a pe21 riod of at least 100 days. 

22 (b) DETERMINATION.— 

23 (1) IN GENERAL.—The determination of wheth24 er an individual is an individual with disabilities 

25 shall be made, by persons or entities specified under 
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Title II, Subtitle B 

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1 the State plan, using a uniform protocol consisting 

2 of an initial screening and assessment specified by 

3 the Secretary. A State may collect additional infor4 mation, at the time of obtaining information to 

5 make such determination, in order to provide for the 

6 assessment and plan described in section 2104(b) or 

7 for other purposes. The State shall establish a fair 

8 hearing process for appeals of such determinations. 

9 (2) PERIODIC REASSESSMENT.—The determina10 tion that an individual is an individual with disabil11 ities shall be considered to be effective under the 

12 State plan for a period of not more than 12 months 

13 (or for such longer period in such cases as a signifi14 cant change in an individual’s condition that may af15 fect such determination is unlikely). A reassessment 

16 shall be made if there is a significant change in an 

17 individual’s condition that may affect such deter18 mination. 

19 (c) ACTIVITY OF DAILY LIVING DEFINED.—In this 

20 part, the term ‘‘activity of daily living’’ means any of the 

21 following: eating, toileting, dressing, bathing, and trans22 ferring. 

23 SEC. 2104. HOME AND COMMUNITY-BASED SERVICES COV24 ERED UNDER STATE PLAN. 

25 (a) SPECIFICATION.— 
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Title II, Subtitle B 

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

2 provisions of this section, the State plan under this 

3 part shall specify— 

4 (A) the home and community-based serv5 ices available under the plan to individuals with 

6 disabilities (or to such categories of such indi7 viduals), and 

8 (B) any limits with respect to such serv9 ices. 

10 (2) FLEXIBILITY IN MEETING INDIVIDUAL

11 NEEDS.—The services shall be specified in a manner 

12 that permits sufficient flexibility for providers to 

13 meet the needs of individuals with disabilities in a 

14 cost effective manner. Subject to subsection 

15 (e)(1)(B), such services may be delivered in an indi16 vidual’s home, a range of community residential ar17 rangements, or outside the home. 

18 (b) REQUIREMENT FOR NEEDS ASSESSMENT AND

19 PLAN OF CARE.— 

20 (1) IN GENERAL.—The State plan shall provide 

21 for home and community-based services to an indi22 vidual with disabilities only if— 

23 (A) a comprehensive assessment of the in24 dividual’s need for home and community-based 

25 services (regardless of whether all needed serv-
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Title II, Subtitle B 

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1 ices are available under the plan) has been 

2 made, 

3 (B) an individualized plan of care based on 

4 such assessment is developed, and 

5 (C) such services are provided consistent 

6 with such plan of care. 

7 (2) INVOLVEMENT OF INDIVIDUALS.—The indi8 vidualized plan of care under paragraph (1)(B) for 

9 an individual with disabilities shall— 

10 (A) be developed by qualified individuals 

11 (specified under the State plan), 

12 (B) be developed and implemented in close 

13 consultation with the individual and the individ14 ual’s family, 

15 (C) be approved by the individual (or the 

16 individual’s representative), and 

17 (D) be reviewed and updated not less often 

18 than every 6 months. 

19 (3) PLAN OF CARE.—The plan of care under 

20 paragraph (1)(B) shall— 

21 (A) specify which services specified under 

22 the individual plan will be provided under the 

23 State plan under this part, 

24 (B) identify (to the extent possible) how 

25 the individual will be provided any services 
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Title II, Subtitle B 

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1 specified under the plan of care and not pro2 vided under the State plan, and 

3 (C) specify how the provision of services to 

4 the individual under the plan will be coordi5 nated with the provision of other health care 

6 services to the individual. 

7 The State shall make reasonable efforts to identify 

8 and arrange for services described in subparagraph 

9 (B). Nothing in this subsection shall be construed as 

10 requiring a State (under the State plan or other11 wise) to provide all the services specified in such a 

12 plan. 

13 (c) MANDATORY COVERAGE OF PERSONAL ASSIST14 ANCE SERVICES.—The State plan shall include, in the 

15 array of services made available to each category of indi16 viduals with disabilities, both agency-administered and 

17 consumer-directed personal assistance services (as defined 

18 in subsection (g)). 

19 (d) ADDITIONAL SERVICES.— 

20 (1) TYPES OF SERVICES.—Subject to subsection 

21 (e), services available under a State plan under this 

22 part shall include any (or all) of the following: 

23 (A) Case management. 

24 (B) Homemaker and chore assistance. 

25 (C) Home modifications. 
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Title II, Subtitle B 

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1 (D) Respite services. 

2 (E) Assistive devices. 

3 (F) Adult day services. 

4 (G) Habilitation and rehabilitation. 

5 (H) Supported employment. 

6 (I) Home health services. 

7 (J) Any other care or assistive services 

8 (approved by the Secretary) that the State de9 termines will help individuals with disabilities to 

10 remain in their homes and communities. 

11 (2) CRITERIA FOR SELECTION OF SERVICES.— 

12 The State plan shall specify— 

13 (A) the methods and standards used to se14 lect the types, and the amount, duration, and 

15 scope, of services to be covered under the plan 

16 and to be available to each category of individ17 uals with disabilities, and 

18 (B) how the types, and the amount, dura19 tion, and scope, of services specified meet the 

20 needs of individuals within each of the 4 cat21 egories of individuals with disabilities. 

22 (e) EXCLUSIONS AND LIMITATIONS.— 

23 (1) IN GENERAL.—A State plan may not pro24 vide for coverage of— 

25 (A) room and board, 
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Title II, Subtitle B 

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1 (B) services furnished in a hospital, nurs2 ing facility, intermediate care facility for the 

3 mentally retarded, or other institutional setting 

4 specified by the Secretary, or 

5 (C) items and services to the extent cov6 erage is provided for the individual under a 

7 health plan or the medicare program. 

8 (2) TAKING INTO ACCOUNT INFORMAL CARE.— 

9 A State plan may take into account, in determining 

10 the amount and array of services made available to 

11 covered individuals with disability, the availability of 

12 informal care. 

13 (f) PAYMENT FOR SERVICES.—A State plan may pro14 vide for the use of— 

15 (1) vouchers, 

16 (2) cash payments directly to individuals with 

17 disabilities, 

18 (3) capitation payments to health plans, and 

19 (4) payment to providers, 

20 to pay for covered services. 

21 (g) PERSONAL ASSISTANCE SERVICES.— 

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

23 ‘‘personal assistance services’’ means those services 

24 specified under the State plan as personal assistance 

25 services and shall include at least hands-on and 
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Title II, Subtitle B 

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1 standby assistance, supervision, and cueing with ac2 tivities of daily living, whether agency-administered 

3 or consumer-directed (as defined in paragraph (2)). 

4 (2) CONSUMER-DIRECTED; AGENCY-ADMINIS5 TERED.—In this part: 

6 (A) The term ‘‘consumer-directed’’ means, 

7 with reference to personal assistance services or 

8 the provider of such services, services that are 

9 provided by an individual who is selected and 

10 managed (and, at the individual’s option, 

11 trained) by the individual receiving the services. 

12 (B) The term ‘‘agency-administered’’ 

13 means, with respect to such services, services 

14 that are not consumer-directed. 

15 SEC. 2105. COST SHARING. 

16 (a) NO OR NOMINAL COST SHARING FOR POOR17 EST.—The State plan may not impose any cost sharing 

18 (other than nominal cost sharing) for individuals with in19 come (as determined under subsection (c)) less than 150 

20 percent of the official poverty line (referred to in section 

21 1902(25)(A)) applicable to a family of the size involved 

22 (determined without regard to section 1902(25)(B)). 

23 (b) SLIDING SCALE FOR REMAINDER.—The State 

24 plan shall impose cost sharing in the form of coinsurance 
409 

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1 (based on the amount paid under the State plan for a serv2 ice)— 

3 (1) at a rate of 10 percent for individuals with 

4 disabilities with income not less than 150 percent, 

5 and less than 200 percent, of such official poverty 

6 line (as so applied); 

7 (2) at a rate of 20 percent for such individuals 

8 with income not less than 200 percent, and less than 

9 250 percent, of such official poverty line (as so ap10 plied); and 

11 (3) at a rate of 25 percent for such individuals 

12 with income equal to at least 250 percent of such of13 ficial poverty line (as so applied). 

14 (c) DETERMINATION OF INCOME FOR PURPOSES OF

15 COST SHARING.—The State plan shall specify the process 

16 to be used to determine the income of an individual with 

17 disabilities for purposes of this section. Such process shall 

18 be consistent with standards specified by the Secretary. 

19 SEC. 2106. QUALITY ASSURANCE AND SAFEGUARDS. 

20 (a) QUALITY ASSURANCE.—The State plan shall 

21 specify how the State will ensure and monitor the quality 

22 of services, including— 

23 (1) safeguarding the health and safety of indi24 viduals with disabilities, 
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1 (2) the minimum standards for agency pro2 viders and how such standards will be enforced, 

3 (3) the minimum competency requirements for 

4 agency provider employees who provide direct serv5 ices under this part and how the competency of such 

6 employees will be enforced, 

7 (4) obtaining meaningful consumer input, in8 cluding consumer surveys that measure the extent to 

9 which participants receive the services described in 

10 the plan of care and participant satisfaction with 

11 such services, 

12 (5) participation in quality assurance activities, 

13 and 

14 (6) specifying the role of the long-term care om15 budsman (under the Older Americans Act of 1965) 

16 and the Protection and Advocacy Agency (under the 

17 Developmental Disabilities Assistance and Bill of 

18 Rights Act) in assuring quality of services and pro19 tecting the rights of individuals with disabilities. 

20 (b) SAFEGUARDS.— 

21 (1) CONFIDENTIALITY.—The State plan shall 

22 provide safeguards which restrict the use or disclo23 sure of information concerning applicants and bene24 ficiaries to purposes directly connected with the ad-
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1 ministration of the plan (including performance re2 views under section 2602). 

3 (2) SAFEGUARDS AGAINST ABUSE.—The State 

4 plans shall provide safeguards against physical, emo5 tional, or financial abuse or exploitation (specifically 

6 including appropriate safeguards in cases where pay7 ment for program benefits is made by cash pay8 ments or vouchers given directly to individuals with 

9 disabilities). 

10 SEC. 2107. ADVISORY GROUPS. 

11 (a) FEDERAL ADVISORY GROUP.— 

12 (1) ESTABLISHMENT.—The Secretary shall es13 tablish an advisory group, to advise the Secretary 

14 and States on all aspects of the program under this 

15 part. 

16 (2) COMPOSITION.—The group shall be com17 posed of individuals with disabilities and their rep18 resentatives, providers, Federal and State officials, 

19 and local community implementing agencies. A ma20 jority of its members shall be individuals with dis21 abilities and their representatives. 

22 (b) STATE ADVISORY GROUPS.— 

23 (1) IN GENERAL.—Each State plan shall pro24 vide for the establishment and maintenance of an 
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1 advisory group to advise the State on all aspects of 

2 the State plan under this part. 

3 (2) COMPOSITION.—Members of each advisory 

4 group shall be appointed by the Governor (or other 

5 chief executive officer of the State) and shall include 

6 individuals with disabilities and their representa7 tives, providers, State officials, and local community 

8 implementing agencies. A majority of its members 

9 shall be individuals with disabilities and their rep10 resentatives. 

11 (3) SELECTION OF MEMBERS.—Each State 

12 shall establish a process whereby all residents of the 

13 State, including individuals with disabilities and 

14 their representatives, shall be given the opportunity 

15 to nominate members to the advisory group. 

16 (4) PARTICULAR CONCERNS.—Each advisory 

17 group shall— 

18 (A) before the State plan is developed, ad19 vise the State on guiding principles and values, 

20 policy directions, and specific components of the 

21 plan, 

22 (B) meet regularly with State officials in23 volved in developing the plan, during the devel24 opment phase, to review and comment on all as25 pects of the plan, 
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1 (C) participate in the public hearings to 

2 help assure that public comments are addressed 

3 to the extent practicable, 

4 (D) document any differences between the 

5 group’s recommendations and the plan, 

6 (E) document specifically the degree to 

7 which the plan is consumer-directed, and 

8 (F) meet regularly with officials of the des9 ignated State agency (or agencies) to provide 

10 advice on all aspects of implementation and 

11 evaluation of the plan. 

12 SEC. 2108. PAYMENTS TO STATES. 

13 (a) IN GENERAL.—Subject to section 2102(a)(9)(B) 

14 (relating to limitation on payment for administrative 

15 costs), the Secretary, in accordance with the Cash Man16 agement Improvement Act, shall authorize payment to 

17 each State with a plan approved under this part, for each 

18 quarter (beginning on or after January 1, 1996), from its 

19 allotment under section 2109(b), an amount equal to— 

20 (1) the Federal matching percentage (as de21 fined in subsection (b)) of amount demonstrated by 

22 State claims to have been expended during the quar23 ter for home and community-based services under 

24 the plan for individuals with disabilities; plus 
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1 (2) an amount equal to 90 percent of amount 

2 expended during the quarter under the plan for ac3 tivities (including preliminary screening) relating to 

4 determination of eligibility and performance of needs 

5 assessment; plus 

6 (3) an amount equal to 90 percent (or, begin7 ning with quarters in fiscal year 2003, 75 percent) 

8 of the amount expended during the quarter for the 

9 design, development, and installation of mechanical 

10 claims processing systems and for information re11 trieval; plus 

12 (4) an amount equal to 50 percent of the re13 mainder of the amounts expended during the quar14 ter as found necessary by the Secretary for the prop15 er and efficient administration of the State plan. 

16 (b) FEDERAL MATCHING PERCENTAGE.— 

17 (1) IN GENERAL.—In subsection (a), the term 

18 ‘‘Federal matching percentage’’ means, with respect 

19 to a State, the reference percentage specified in 

20 paragraph (2) increased by 28 percentage points, ex21 cept that the Federal matching percentage shall in 

22 no case be less than 78 percent or more than 95 

23 percent. 

24 (2) REFERENCE PERCENTAGE.— 
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1 (A) IN GENERAL.—The reference percent2 age specified in this paragraph is 100 percent 

3 less the State percentage specified in subpara4 graph (B), except that— 

5 (i) the percentage under this para6 graph shall in no case be less than 50 per7 cent or more than 83 percent, and 

8 (ii) the percentage for Puerto Rico, 

9 the Virgin Islands, Guam, the Northern 

10 Mariana Islands, and American Samoa 

11 shall be 50 percent. 

12 (B) STATE PERCENTAGE.—The State per13 centage specified in this subparagraph is that 

14 percentage which bears the same ratio to 45 

15 percent as the square of the per capita income 

16 of such State bears to the square of the per 

17 capita income of the continental United States 

18 (including Alaska) and Hawaii. 

19 (c) PAYMENTS ON ESTIMATES WITH RETROSPECTIVE

20 ADJUSTMENTS.—The method of computing and making 

21 payments under this section shall be as follows: 

22 (1) The Secretary shall, prior to the beginning 

23 of each quarter, estimate the amount to be paid to 

24 the State under subsection (a) for such quarter, 

25 based on a report filed by the State containing its 
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1 estimate of the total sum to be expended in such 

2 quarter, and such other information as the Secretary 

3 may find necessary. 

4 (2) From the allotment available therefore, the 

5 Secretary shall provide for payment of the amount 

6 so estimated, reduced or increased, as the case may 

7 be, by any sum (not previously adjusted under this 

8 section) by which the Secretary finds that the esti9 mate of the amount to be paid the State for any 

10 prior period under this section was greater or less 

11 than the amount which should have been paid. 

12 (d) APPLICATION OF RULES REGARDING LIMITA13 TIONS ON PROVIDER-RELATED DONATIONS AND HEALTH

14 CARE RELATED TAXES.—The provisions of section 

15 1903(w) of the Social Security Act shall apply to pay16 ments to States under this section in the same manner 

17 as they apply to payments to States under section 1903(a) 

18 of such Act . 

19 SEC. 2109. TOTAL FEDERAL BUDGET; ALLOTMENTS TO 

20 STATES. 

21 (a) TOTAL FEDERAL BUDGET.— 

22 (1) FISCAL YEARS 1996 THROUGH 2003.—Sub23 ject to paragraph (5)(C), for purposes of this part, 

24 the total Federal budget for State plans under this 
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1 part for each of fiscal years 1996 through 2003 is 

2 the following: 

3 (A) For fiscal year 1996, $4.5 billion. 

4 (B) For fiscal year 1997, $7.8 billion. 

5 (C) For fiscal year 1998, $11.0 billion. 

6 (D) For fiscal year 1999, $14.7 billion. 

7 (E) For fiscal year 2000, $18.7 billion. 

8 (F) For fiscal year 2001, $26.7 billion. 

9 (G) For fiscal year 2002, $35.5 billion. 

10 (H) For fiscal year 2003, $38.3 billion. 

11 (2) SUBSEQUENT FISCAL YEARS.—For pur12 poses of this part, the total Federal budget for State 

13 plans under this part for each fiscal year after fiscal 

14 year 2003 is the total Federal budget under this 

15 subsection for the preceding fiscal year multiplied 

16 by— 

17 (A) a factor (described in paragraph (3)) 

18 reflecting the change in the CPI for the fiscal 

19 year, and 

20 (B) a factor (described in paragraph (4)) 

21 reflecting the change in the number of individ22 uals with disabilities for the fiscal year. 

23 (3) CPI INCREASE FACTOR.—For purposes of 

24 paragraph (2)(A), the factor described in this para25 graph for a fiscal year is the ratio of— 
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1 (A) the annual average index of the con2 sumer price index for the preceding fiscal year, 

3 to— 

4 (B) such index, as so measured, for the 

5 second preceding fiscal year. 

6 (4) DISABLED POPULATION FACTOR.—For pur7 poses of paragraph (2)(B), the factor described in 

8 this paragraph for a fiscal year is 100 percent plus 

9 (or minus) the percentage increase (or decrease) 

10 change in the disabled population of the United 

11 States (as determined for purposes of the most re12 cent update under subsection (b)(3)(D)). 

13 (5) ADDITIONAL FUNDS DUE TO MEDICAID

14 OFFSETS.— 

15 (A) IN GENERAL.—Each participating 

16 State must provide the Secretary with informa17 tion concerning offsets and reductions in the 

18 medicaid program resulting from home and 

19 community-based services provided disabled in20 dividuals under this part, that would have been 

21 paid for such individuals under the State med22 icaid plan but for the provision of similar serv23 ices under the program under this part. At the 

24 time a State first submits its plan under this 

25 title and before each subsequent fiscal year 
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1 (through fiscal year 2003), the State also must 

2 provide the Secretary with such budgetary in3 formation (for each fiscal year through fiscal 

4 year 2003), as the Secretary determines to be 

5 necessary to carry out this paragraph. 

6 (B) REPORTS.—Each State with a pro7 gram under this part shall submit such reports 

8 to the Secretary as the Secretary may require 

9 in order to monitor compliance with subpara10 graph (A). 

11 (C) ADJUSTMENTS TO FEDERAL BUDG12 ET.— 

13 (i) IN GENERAL.—For each fiscal year 

14 (beginning with fiscal year 1996 and end15 ing with fiscal year 2003) and based on a 

16 review of information submitted under sub17 paragraph (A), the Secretary shall deter18 mine the amount by which the total Fed19 eral budget under subsection (a) will in20 crease. The amount of such increase for a 

21 fiscal year shall be limited to the reduction 

22 in Federal expenditures of medical assist23 ance (as determined by Secretary) that 

24 would have been made under title XIX of 

25 the Social Security Act for home and com-
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1 munity based services for disabled individ2 uals but for the provision of similar serv3 ices under the program under this part. 

4 (ii) ANNUAL PUBLICATION.—The Sec5 retary shall publish before the beginning of 

6 such fiscal year, the revised total Federal 

7 budget under this subsection for such fis8 cal year (and succeeding fiscal years before 

9 fiscal year 2003). 

10 (D) NO DUPLICATE PAYMENT.—No pay11 ment may be made to a State under this section 

12 for any services to the extent that the State re13 ceived payment for such services under section 

14 1903(a) of the Social Security Act. 

15 (E) CONSTRUCTION.—Nothing in this sub16 section shall be construed as requiring States to 

17 determine eligibility for medical assistance 

18 under the State medicaid plan on behalf of indi19 viduals receiving assistance under this part. 

20 (b) ALLOTMENTS TO STATES.— 

21 (1) IN GENERAL.—The Secretary shall allot to 

22 each State for each fiscal year an amount that bears 

23 the same ratio to the total Federal budget for the 

24 fiscal year (specified under paragraph (1) or (2) of 

25 subsection (a)) as the State allotment factor (under 
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Title II, Subtitle B 

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1 paragraph (2) for the State for the fiscal year) bears 

2 to the sum of such factors for all States for that fis3 cal year. 

4 (2) STATE ALLOTMENT FACTOR.— 

5 (A) IN GENERAL.—For each State for each 

6 fiscal year, the Secretary shall compute a State 

7 allotment factor equal to the sum of— 

8 (i) the base allotment factor (specified 

9 in subparagraph (B)), and 

10 (ii) the low income allotment factor 

11 (specified in subparagraph (C)), 

12 for the State for the fiscal year. 

13 (B) BASE ALLOTMENT FACTOR.—The base 

14 allotment factor, specified in this subparagraph, 

15 for a State for a fiscal year is equal to the 

16 product of the following: 

17 (i) NUMBER OF INDIVIDUALS WITH

18 DISABILITIES.—The number of individuals 

19 with disabilities in the State (determined 

20 under paragraph (3)) for the fiscal year. 

21 (ii) 80 PERCENT OF THE NATIONAL

22 PER CAPITA BUDGET.—80 percent of the 

23 national average per capita budget amount 

24 (determined under paragraph (4)) for the 

25 fiscal year. 
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1 (iii) WAGE ADJUSTMENT FACTOR.— 

2 The wage adjustment factor (determined 

3 under paragraph (5)) for the State for the 

4 fiscal year. 

5 (iv) FEDERAL MATCHING RATE.—The 

6 Federal matching rate (determined under 

7 section 2108(b)) for the fiscal year. 

8 (C) LOW INCOME ALLOTMENT FACTOR.— 

9 The low income allotment factor, specified in 

10 this subparagraph, for a State for a fiscal year 

11 is equal to the product of the following: 

12 (i) NUMBER OF INDIVIDUALS WITH

13 DISABILITIES.—The number of individuals 

14 with disabilities in the State (determined 

15 under paragraph (3)) for the fiscal year. 

16 (ii) 10 PERCENT OF THE NATIONAL

17 PER CAPITA BUDGET.—10 percent of the 

18 national average per capita budget amount 

19 (determined under paragraph (4)) for the 

20 fiscal year. 

21 (iii) WAGE ADJUSTMENT FACTOR.— 

22 The wage adjustment factor (determined 

23 under paragraph (5)) for the State for the 

24 fiscal year. 
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Title II, Subtitle B 

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1 (iv) FEDERAL MATCHING RATE.—The 

2 Federal matching rate (determined under 

3 section 2108(b)) for the fiscal year. 

4 (v) LOW INCOME INDEX.—The low in5 come index (determined under paragraph 

6 (6)) for the State for the preceding fiscal 

7 year. 

8 (3) NUMBER OF INDIVIDUALS WITH DISABIL9 ITIES.—The number of individuals with disabilities 

10 in a State for a fiscal year shall be determined as 

11 follows: 

12 (A) BASE.—The Secretary shall determine 

13 the number of individuals in the State by age, 

14 sex, and income category, based on the 1990 

15 decennial census, adjusted (as appropriate) by 

16 the March 1994 current population survey. 

17 (B) DISABILITY PREVALENCE LEVEL BY

18 POPULATION CATEGORY.—The Secretary shall 

19 determine, for each such age, sex, and income 

20 category, the national average proportion of the 

21 population of such category that represents in22 dividuals with disabilities. The Secretary may 

23 conduct periodic surveys in order to determine 

24 such proportions. 
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Title II, Subtitle B 

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1 (C) BASE DISABLED POPULATION IN A

2 STATE.—The number of individuals with dis3 abilities in a State in 1994 is equal to the sum 

4 of the products, for such each age, sex, and in5 come category, of— 

6 (i) the population of individuals in the 

7 State in the category (determined under 

8 subparagraph (A)), and 

9 (ii) the national average proportion 

10 for such category (determined under sub11 paragraph (B)). 

12 (D) UPDATE.—The Secretary shall deter13 mine the number of individuals with disabilities 

14 in a State in a fiscal year equal to the number 

15 determined under subparagraph (C) for the 

16 State increased (or decreased) by the percent17 age increase (or decrease) in the disabled popu18 lation of the State as determined under the cur19 rent population survey from 1994 to the year 

20 before the fiscal year involved. 

21 (4) NATIONAL PER CAPITA BUDGET AMOUNT.— 

22 The national average per capita budget amount, for 

23 a fiscal year, is— 
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Title II, Subtitle B 

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1 (A) the total Federal budget specified 

2 under subsection (a) for the fiscal year; divided 

3 by 

4 (B) the sum, for the fiscal year, of the 

5 numbers of individuals with disabilities (deter6 mined under paragraph (3)) for all the States 

7 for the fiscal year. 

8 (5) WAGE ADJUSTMENT FACTOR.—The wage 

9 adjustment factor, for a State for a fiscal year, is 

10 equal to the ratio of— 

11 (A) the average hourly wages for service 

12 workers (other than household or protective 

13 services) in the State, to 

14 (B) the national average hourly wages for 

15 service workers (other than household or protec16 tive services). 

17 The hourly wages shall be determined under this 

18 paragraph based on data from the most recent de19 cennial census for which such data are available. 

20 (6) LOW INCOME INDEX.—The low income 

21 index for each State for a fiscal year is the ratio, de22 termined for the preceding fiscal year, of— 

23 (A) the percentage of the State’s popu24 lation that has income below 150 percent of the 

25 poverty level, to 
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1 (B) the percentage of the population of the 

2 United States that has income below 150 per3 cent of the poverty level. 

4 Such percentages shall be based on data from the 

5 most recent decennial census for which such data 

6 are available, adjusted by data from the most recent 

7 current population survey as determined appropriate 

8 by the Secretary. 

9 (c) STATE ENTITLEMENT.—This part constitutes 

10 budget authority in advance of appropriations Acts, and 

11 represents the obligation of the Federal Government to 

12 provide for the payment to States of amounts described 

13 in subsection (a). 

14 PART 2—MEDICAID NURSING HOME 

15 IMPROVEMENTS 

16 SEC. 2201. REFERENCE TO AMENDMENTS. 

17 For amendments to the medicaid program under title 

18 XIX of the Social Security Act to improve nursing home 

19 benefits under such program, see part 2 of subtitle C of 

20 title IV. 
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Title II, Subtitle B 

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1 PART 3—PRIVATE LONG-TERM CARE INSURANCE 

2 Subpart A—General Provisions 

3 SEC. 2301. FEDERAL REGULATIONS; PRIOR APPLICATION 

4 OR CERTAIN REQUIREMENTS. 

5 (a) IN GENERAL.—The Secretary, with the advice 

6 and assistance of the Advisory Council, as appropriate, 

7 shall promulgate regulations as necessary to implement 

8 the provisions of this part, in accordance with the time9 table specified in subsection (b). 

10 (b) TIMETABLE FOR PUBLICATION OF REGULA11 TIONS.— 

12 (1) FEDERAL REGISTER NOTICE.—Within 120 

13 days after the date a majority of the members are 

14 first appointed to the Advisory Council pursuant to 

15 section 2302, the Secretary shall publish in the Fed16 eral Register a notice setting forth the projected 

17 timetable for promulgation of regulations required 

18 under this part. Such timetable shall indicate which 

19 regulations are proposed to be published by the end 

20 of the first, second, and third years after appoint21 ment of the Advisory Council. 

22 (2) FINAL DEADLINE.—All regulations required 

23 under this part shall be published by the end of the 

24 third year after appointment of the Advisory Coun25 cil. 
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Title II, Subtitle B 

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1 (c) PROVISIONS EFFECTIVE WITHOUT REGARD TO

2 PROMULGATION OF REGULATIONS.— 

3 (1) IN GENERAL.—Notwithstanding any other 

4 provision of this part, insurers shall be required, not 

5 later than 6 months after the enactment of this Act, 

6 regardless of whether final implementing regulations 

7 have been promulgated by the Secretary, to comply 

8 with the following provisions of this part: 

9 (A) Section 2321(c) (standard outline of 

10 coverage); 

11 (B) Section 2321(d) (reporting to State in12 surance commissioners); 

13 (C) Section 2322(b) (preexisting condition 

14 exclusions); 

15 (D) Section 2322(c) (limiting conditions on 

16 benefits); 

17 (E) Section 2322(d) (inflation protection); 

18 (F) Section 2324 (sales practices); 

19 (G) Section 2325 (continuation, renewal, 

20 replacement, conversion, and cancellation of 

21 policies); and 

22 (H) Section 2326 (payment of benefits). 

23 (2) INTERIM REQUIREMENTS.—Before the ef24 fective date of applicable regulations promulgated by 

25 the Secretary implementing requirements of this 
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Title II, Subtitle B 

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1 part as specified below, such requirements will be 

2 considered to be met— 

3 (A) in the case of section 2321(c) (requir4 ing a standard outline of coverage), if the long5 term care insurance policy meets the require6 ments of section 6.G.(2) of the NAIC Model 

7 Act and of section 24 of the NAIC Model Regu8 lation; 

9 (B) in the case of section 2321(d) (requir10 ing reporting to the State insurance commis11 sioner), if the insurer meets the requirements of 

12 section 14 of the NAIC Model Regulation; 

13 (C) in the case of section 2322(c)(1) (gen14 eral requirements concerning limiting conditions 

15 on benefits), if such policy meets the require16 ments of section 6.D. of the NAIC Model Act; 

17 (D) in the case of section 2322(c)(2) (lim18 iting conditions on home health care or commu19 nity-based services) if such policy meets the re20 quirements of section 11 of the NAIC Model 

21 Regulations; 

22 (E) in the case of section 2322(d) (con23 cerning inflation protection), if the insurer 

24 meets the requirements of section 12 of the 

25 NAIC Model Regulation; 
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Title II, Subtitle B 

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1 (F) in the case of section 2324(b) (con2 cerning applications for the purchase of insur3 ance), if the insurer meets the requirements of 

4 section 10 of the NAIC Model Regulation; 

5 (G) in the case of section 2324(d) (con6 cerning compensation for the sale of policies), if 

7 the insurer meets the requirements of the op8 tional regulation entitled ‘‘Permitted Compensa9 tion Arrangements’’ included in the NAIC 

10 Model Regulation; 

11 (H) in the case of section 2324(g) (con12 cerning sales through employers or membership 

13 organizations), if the insurer and the member14 ship organization meet the requirements of sec15 tion 21.C. of the NAIC Model Regulation; 

16 (I) in the case of section 2324(h) (con17 cerning interstate sales of group policies), if the 

18 insurer and the policy meet the requirements of 

19 section 5 of the NAIC Model Act; and 

20 (J) in the case of section 2325(f) (con21 cerning continuation, renewal, replacement, and 

22 conversion of policies), if the insurer and the 

23 policy meet the requirements of section 7 of the 

24 NAIC Model Regulation. 
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Title II, Subtitle B 

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1 SEC. 2302. NATIONAL LONG-TERM CARE INSURANCE ADVI2 SORY COUNCIL. 

3 (a) APPOINTMENT.—The Secretary shall appoint an 

4 advisory board to be known as the National Long-Term 

5 Care Insurance Advisory Council. 

6 (b) COMPOSITION.— 

7 (1) NUMBER AND QUALIFICATIONS OF MEM8 BERS.—The Advisory Council shall consist of 5 

9 members, each of whom has substantial expertise in 

10 matters relating to the provision and regulation of 

11 long-term care insurance. At least one member shall 

12 have experience as a State insurance commissioner 

13 or legislator with expertise in policy development 

14 with respect to, and regulation of, long-term care in15 surance. 

16 (2) TERMS OF OFFICE.— 

17 (A) IN GENERAL.—Except as otherwise 

18 provided in this subsection, members shall be 

19 appointed for terms of office of 5 years. 

20 (B) INITIAL MEMBERS.—Of the initial 

21 members of the Council, one shall be appointed 

22 for a term of 5 years, one for 4 years, one for 

23 3 years, one for 2 years, and one for 1 year. 

24 (C) TWO-TERM LIMIT.—No member shall 

25 be eligible to serve in excess of two consecutive 
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Title II, Subtitle B 

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1 terms, but may continue to serve until such 

2 member’s successor is appointed. 

3 (3) VACANCIES.—Any member appointed to fill 

4 a vacancy occurring before the expiration of the 

5 term of such member’s predecessor shall be ap6 pointed for the remainder of such term. 

7 (4) REMOVAL.—No member may be removed 

8 during the member’s term of office except for just 

9 and sufficient cause. 

10 (c) CHAIRPERSON.—The Secretary shall appoint a 

11 Chairperson from among the members. 

12 (d) COMPENSATION.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (3), members of the Advisory Council, while 

15 serving on business of the Advisory Council, shall be 

16 entitled to receive compensation at a rate not to ex17 ceed the daily equivalent of the rate specified for 

18 level V of the Executive Schedule under section 5316 

19 of title 5, United States Code. 

20 (2) TRAVEL.—Except as provided in paragraph 

21 (3), members of the Advisory Council, while serving 

22 on business of the Advisory Council away from their 

23 homes or regular places of business, may be allowed 

24 travel expenses (including per diem in lieu of sub25 sistence) as authorized by section 5703(b) of title 5, 
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Title II, Subtitle B 

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1 United States Code, for persons in the Government 

2 service employed intermittently. 

3 (3) RESTRICTION.—A member of the Advisory 

4 Council may not be compensated under this section 

5 if the member is receiving compensation or travel ex6 penses from another source while serving on busi7 ness of the Advisory Council. 

8 (e) MEETINGS.—The Advisory Council shall meet not 

9 less often than 2 times a year at the direction of the Chair10 person. 

11 (f) STAFF AND SUPPORT.— 

12 (1) IN GENERAL.—The Advisory Council shall 

13 have a salaried executive director appointed by the 

14 Chairperson, and staff appointed by the executive di15 rector with the approval of the Chairperson. 

16 (2) FEDERAL ENTITIES.—The head of each 

17 Federal department and agency shall make available 

18 to the Advisory Council such information and other 

19 assistance as it may require to carry out its respon20 sibilities. 

21 (g) GENERAL RESPONSIBILITIES.—The Advisory 

22 Council shall— 

23 (1) provide advice, recommendations, and as24 sistance to the Secretary on matters relating to long- 
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Title II, Subtitle B 

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1 term care insurance as specified in this part and as 

2 otherwise required by the Secretary; 

3 (2) collect, analyze, and disseminate informa4 tion relating to long-term care insurance in order to 

5 increase the understanding of insurers, providers, 

6 consumers, and regulatory bodies of the issues relat7 ing to, and to facilitate improvements in, such insur8 ance; 

9 (3) develop for the Secretary’s consideration 

10 proposed models, standards, requirements, and pro11 cedures relating to long-term care insurance, as ap12 propriate, with respect to the content and format of 

13 insurance policies, agent and insurer practices con14 cerning the sale and servicing of such policies, and 

15 regulatory activities; and 

16 (4) monitor the development of the long-term 

17 care insurance market (including policies, marketing 

18 practices, pricing, eligibility and benefit pre19 conditions, and claims payment procedures) and ad20 vise the Secretary concerning the need for regulatory 

21 changes. 

22 (h) SPECIFIC MATTERS FOR CONSIDERATION.—The 

23 Advisory Council shall consider, and provide views and 

24 recommendations to the Secretary concerning, the fol25 lowing matters relating to long-term care insurance: 
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1 (1) UNIFORM TERMS, DEFINITIONS, AND FOR2 MATS.—The Advisory Council shall develop and pro3 pose to the Secretary uniform terminology, defini4 tions, and formats for use in long-term care insur5 ance policies. 

6 (2) STANDARD OUTLINE OF COVERAGE.—The 

7 Advisory Council shall develop and propose to the 

8 Secretary a standard format for use by all insurers 

9 offering long-term care policies for the outline of 

10 coverage required pursuant to section 2321(c). 

11 (3) PREMIUMS.—The Advisory Council shall 

12 consider, and make recommendations to the Sec13 retary concerning— 

14 (A) whether Federal standards should be 

15 established governing the amounts of and rates 

16 of increase in premiums in long-term care poli17 cies, and 

18 (B) if so, what factors should be taken into 

19 account (and whether such factors should in20 clude the age of the insured, actuarial informa21 tion, cost of care, lapse rates, financial reserve 

22 requirements, insurer solvency, and tax treat23 ment of premiums, and benefits. 

24 (4) UPGRADES OF COVERAGE.—The Advisory 

25 Council shall consider, and make recommendations 
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1 to the Secretary concerning, whether Federal stand2 ards are needed governing the terms and conditions 

3 insurers may place on insured individuals’ eligibility 

4 to obtain improved coverage (including any restric5 tions considered advisable with respect to premium 

6 increases, agent commissions, medical underwriting, 

7 and age rating). 

8 (5) THRESHOLD CONDITIONS FOR PAYMENT OF

9 BENEFITS.—The Advisory Council shall— 

10 (A) consider, and make recommendations 

11 to the Secretary concerning, the advisability of 

12 establishing standardized sets of threshold con13 ditions (based on degrees of functional or cog14 nitive impairment or on other conditions) for 

15 payment of covered benefits; 

16 (B) to the extent found appropriate, rec17 ommend to the Secretary specific sets of thresh18 old conditions to be used for such purpose; 

19 (C) develop and propose to the Secretary, 

20 with respect to assessments of insured individ21 uals’ levels of need for purposes of receipt of 

22 covered benefits— 

23 (i) professional qualification standards 

24 applicable to individuals making such de25 terminations; and 
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1 (ii) uniform procedures and formats 

2 for use in performing and documenting 

3 such assessments. 

4 (6) DISPUTE RESOLUTION.—The Advisory 

5 Council shall consider, and make recommendations 

6 to the Secretary concerning, procedures that insur7 ers and States should be required to implement to 

8 afford insured individuals a reasonable opportunity 

9 to dispute denial of benefits under a long-term care 

10 insurance policy. 

11 (7) SALES AND SERVICING OF POLICIES.—The 

12 Advisory Council shall consider, and make rec13 ommendations to the Secretary concerning— 

14 (A) training and certification to be re15 quired of agents involved in selling or servicing 

16 long-term care insurance policies; 

17 (B) appropriate limits on commissions or 

18 other compensation paid to agents for the sale 

19 or servicing of such policies; 

20 (C) sales practices that should be prohib21 ited or limited with respect to such policies (in22 cluding any financial limits that should be ap23 plied concerning the individuals to whom such 

24 policies may be sold); and 
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1 (D) appropriate standards and require2 ments with respect to sales of such policies by 

3 or through employers and other entities, to em4 ployees, members, or affiliates of such entities. 

5 (8) CONTINUING CARE RETIREMENT COMMU6 NITIES.—The Advisory Council shall consider, and 

7 make recommendations to the Secretary concerning, 

8 the extent to which the long-term care insurance as9 pects of continuing care retirement community ar10 rangements should be subject to regulation under 

11 this part (and the Secretary, in consultation with the 

12 Secretary of the Treasury, shall consider such rec13 ommendations and promulgate appropriate regula14 tions). 

15 (i) ACTIVITIES.—In order to carry out its responsibil16 ities under this part, the Advisory Council is authorized 

17 to— 

18 (1) consult individuals and public and private 

19 entities with experience and expertise in matters re20 lating to long-term care insurance (and shall consult 

21 the National Association of Insurance Commis22 sioners); 

23 (2) conduct meetings and hold hearings; 

24 (3) conduct research (either directly or under 

25 grant or contract); 
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Title II, Subtitle B 

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1 (4) collect, analyze, publish, and disseminate 

2 data and information (either directly or under grant 

3 or contract); and 

4 (5) develop model formats and procedures for 

5 insurance policies and marketing materials; and de6 velop proposed standards, rules, and procedures for 

7 regulatory programs. 

8 (j) AUTHORIZATION OF APPROPRIATIONS.—There 

9 are authorized to be appropriated, for activities of the Ad10 visory Council, $1,500,000 for fiscal year 1995, and 

11 $2,000,000 for each succeeding fiscal year. 

12 SEC. 2303. RELATION TO STATE LAW. 

13 Nothing in this part shall be construed as preventing 

14 a State from applying standards that provide greater pro15 tection to insured individuals under long-term care insur16 ance policies than the standards promulgated under this 

17 part, except that such State standards may not be incon18 sistent with any of the requirements of this part or of reg19 ulations hereunder. 

20 SEC. 2304. DEFINITIONS. 

21 For purposes of this part: 

22 (1) ACTIVITY OF DAILY LIVING.—The term ‘‘ac23 tivity of daily living’’ means any of the following: 

24 eating, toileting, dressing, bathing, and transferring. 
440 

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1 (2) ADULT DAY CARE.—The term ‘‘adult day 

2 care’’ means a program providing social and health3 related services during the day to six or more adults 

4 with disabilities (or such smaller number as the Sec5 retary may specify in regulations) in a community 

6 group setting outside the home. 

7 (3) ADVISORY COUNCIL.—The term ‘‘Advisory 

8 Council’’ means the National Long-Term Care In9 surance Advisory Council established pursuant to 

10 section 2302. 

11 (4) CERTIFICATE.—The term ‘‘certificate’’ 

12 means a document issued to an individual as evi13 dence of such individual’s coverage under a group 

14 insurance policy. 

15 (5) CONTINUING CARE RETIREMENT COMMU16 NITY.—The term ‘‘continuing care retirement com17 munity’’ means a residential community operated by 

18 a private entity that enters into contractual agree19 ments with residents under which such entity guar20 antees, in consideration for residents’ purchase of or 

21 periodic payment for membership in the community, 

22 to provide for such residents’ future long-term care 

23 needs. 

24 (6) DESIGNATED REPRESENTATIVE.—The term 

25 ‘‘designated representative’’ means the person des-
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1 ignated by an insured individual (or, if such indi2 vidual is incapacitated, pursuant to an appropriate 

3 administrative or judicial procedure) to communicate 

4 with the insurer on behalf of such individual in the 

5 event of such individual’s incapacitation. 

6 (7) HOME HEALTH CARE.—The term ‘‘home 

7 health care’’ means medical and nonmedical services 

8 including such services as homemaker services, as9 sistance with activities of daily living, and respite 

10 care provided to individuals in their residences. 

11 (8) INSURED INDIVIDUAL.—The term ‘‘insured 

12 individual’’ means, with respect to a long-term care 

13 insurance policy, any individual who has coverage of 

14 benefits under such policy. 

15 (9) INSURER.—The term ‘‘insurer’’ means any 

16 person that offers or sells an individual or group 

17 long-term care insurance policy under which such 

18 person is at risk for all or part of the cost of bene19 fits under the policy, and includes any agent of such 

20 person. 

21 (10) LONG-TERM CARE INSURANCE POLICY.— 

22 The term ‘‘long-term care insurance policy’’ has the 

23 meaning given that term in section 4 of the NAIC 

24 Model Act, except that the last sentence of such sec25 tion shall not apply. 
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Title II, Subtitle B 

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1 (11) NAIC MODEL ACT.—The term ‘‘NAIC 

2 Model Act’’ means the Long-Term Care Insurance 

3 Model Act published by the NAIC, as amended 

4 through January 1993. 

5 (12) NAIC MODEL REGULATION.—The term 

6 ‘‘NAIC Model Regulation’’ means the Long-Term 

7 Care Insurance Model Regulation published by the 

8 NAIC, as amended through January 1993. 

9 (13) NURSING FACILITY.—The term ‘‘nursing 

10 facility’’ means a facility licensed by the State to 

11 provide to residents— 

12 (A) skilled nursing care and related serv13 ices for residents who require medical or nurs14 ing care; 

15 (B) rehabilitation services for the rehabili16 tation of injured, disabled, or sick individuals, 

17 or 

18 (C) on a regular basis, health-related care 

19 and services to individuals who because of their 

20 mental or physical condition require care and 

21 services (above the level of room and board) 

22 which can be made available to them only 

23 through institutional facilities. 
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Title II, Subtitle B 

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1 (14) POLICYHOLDER.—The term ‘‘policyholder’’ 

2 means the entity which is the holder of record of a 

3 group long-term care insurance policy. 

4 (15) RESIDENTIAL CARE FACILITY.—The term 

5 ‘‘residential care facility’’ means a facility (including 

6 a nursing facility) that— 

7 (A) provides to residents medical or per8 sonal care services (including at a minimum as9 sistance with activities of daily living) in a set10 ting other than an individual or single-family 

11 home, and 

12 (B) does not provide services of a higher 

13 level than can be provided by a nursing facility. 

14 (16) RESPITE CARE.—The term ‘‘respite care’’ 

15 means the temporary provision of care (including as16 sistance with activities of daily living) to an indi17 vidual, in the individual’s home or another setting in 

18 the community, for the purpose of affording such in19 dividual’s unpaid caregiver a respite from the re20 sponsibilities of such care. 

21 (17) STATE INSURANCE COMMISSIONER.—The 

22 term ‘‘State insurance commissioner’’ means the 

23 State official bearing such title, or, in the case of a 

24 jurisdiction where such title is not used, the State 
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Title II, Subtitle B 

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1 official with primary responsibility for the regulation 

2 of insurance. 

3 Subpart B—Federal Standards and Requirements 

4 SEC. 2321. REQUIREMENTS TO FACILITATE UNDER5 STANDING AND COMPARISON OF BENEFITS. 

6 (a) IN GENERAL.—The Secretary, after considering 

7 (where appropriate) recommendations of the Advisory 

8 Council, shall promulgate regulations designed to stand9 ardize formats and terminology used in long-term care in10 surance policies, to require insurers to provide to cus11 tomers and beneficiaries information on the range of pub12 lic and private long-term care coverage available, and to 

13 establish such other requirements as may be appropriate 

14 to promote consumer understanding and facilitate com15 parison of benefits, which shall include at a minimum the 

16 requirements specified in this section. 

17 (b) UNIFORM TERMS, DEFINITIONS, AND FOR18 MATS.—Insurers shall be required to use, in long-term 

19 care insurance policies, uniform terminology, definitions of 

20 terms, and formats, in accordance with regulations pro21 mulgated by the Secretary, after considering recommenda22 tions of the Advisory Council. 

23 (c) STANDARD OUTLINE OF COVERAGE.— 

24 (1) IN GENERAL.—Insurers shall be required to 

25 develop for each long-term care insurance policy of-
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1 fered or sold, to include as a part of each such pol2 icy, and to make available to each potential pur3 chaser and furnish to each insured individual and 

4 policyholder, an outline of coverage under such pol5 icy that— 

6 (A) includes the elements specified in para7 graph (2), 

8 (B) is in a uniform format (as prescribed 

9 by Secretary on the basis of recommendations 

10 by the Advisory Council), 

11 (C) accurately and clearly reflects the con12 tents of the policy, and 

13 (D) is updated periodically on such time14 table as may be required by the Secretary (or 

15 more frequently as necessary to reflect signifi16 cant changes in outlined information). 

17 (2) CONTENTS OF OUTLINE.—The outline of 

18 coverage for each long-term care insurance policy 

19 shall include at least the following: 

20 (A) BENEFITS.—A description of— 

21 (i) the principal benefits covered, in22 cluding the extent of— 

23 (I) benefits for services furnished 

24 in residential care facilities, and 

25 (II) other benefits, 
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1 (ii) the principal exclusions from and 

2 limitations on coverage, 

3 (iii) the terms and conditions, if any, 

4 upon which the insured individual may ob5 tain upgraded benefits, and 

6 (iv) the threshold conditions for enti7 tlement to receive benefits. 

8 (B) CONTINUATION, RENEWAL, AND CON9 VERSION.—A statement of the terms under 

10 which a policy may be— 

11 (i) returned (and premium refunded) 

12 during an initial examination period, 

13 (ii) continued in force or renewed, 

14 (iii) converted to an individual policy 

15 (in the case of coverage under a group pol16 icy), 

17 (C) CANCELLATION.—A statement of the 

18 circumstances in which a policy may be termi19 nated, and the refund or nonforfeitures benefits 

20 (if any) applicable in each such circumstance, 

21 including— 

22 (i) death of the insured individual, 

23 (ii) nonpayment of premiums, 

24 (iii) election by the insured individual 

25 not to renew, 
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1 (iv) any other circumstance. 

2 (D) PREMIUM.—A statement of— 

3 (i) the total annual premium, and the 

4 portion of such premium attributable to 

5 each covered benefit, 

6 (ii) any reservation by the insurer of 

7 a right to change premiums, 

8 (iii) any limit on annual premium in9 creases, 

10 (iv) any expected premium increases 

11 associated with automatic or optional ben12 efit increases (including inflation protec13 tion), and 

14 (v) any circumstances under which 

15 payment of premium is waived. 

16 (E) DECLARATION CONCERNING SUM17 MARY.—A statement, in bold face type on the 

18 face of the document in language understand19 able to the average individual, that the outline 

20 of coverage is a summary only, not a contract 

21 of insurance, and that the policy contains the 

22 contractual provisions that govern. 

23 (F) COST/VALUE COMPARISON.— 

24 (i) Information on average costs (and 

25 variation in such costs) for nursing facility 
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1 care (and such other care as the Secretary 

2 may specify) and information on the value 

3 of benefits relative to such costs. 

4 (ii) A comparison of benefits, over a 

5 period of at least 20 years, for policies 

6 with and without inflation protection. 

7 (iii) A declaration as to whether the 

8 amount of benefits will increase over time, 

9 and, if so, a statement of the type and 

10 amount of, any limitations on, and any 

11 premium increases for, such benefit in12 creases. 

13 (G) TAX TREATMENT.—A statement of the 

14 Federal income tax treatment of premiums and 

15 benefits under the policy, as determined by the 

16 Secretary of the Treasury. 

17 (H) OTHER.—Such other information as 

18 the Secretary may require. 

19 (d) REPORTING TO STATE INSURANCE COMMIS20 SIONER.—Each insurer shall be required to report at least 

21 annually, to the State insurance commissioner of each 

22 State in which any long-term care insurance policy of the 

23 insurer is sold, such information, in such format, as the 

24 Secretary may specify with respect to each such policy, 

25 including— 
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Title II, Subtitle B 

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1 (1) the standard outline of coverage required 

2 pursuant to subsection (c); 

3 (2) lapse rates and replacement rates for such 

4 policies; 

5 (3) the ratio of premiums collected to benefits 

6 paid; 

7 (4) reserves; 

8 (5) written materials used in sale or promotion 

9 of such policy; and 

10 (6) any other information the Secretary may re11 quire. 

12 (e) COMPARISON OF LONG-TERM CARE COVERAGE

13 ALTERNATIVES.—Each insurer shall be required to fur14 nish to each individual before a long-term care insurance 

15 policy of the insurer is sold to the individual information 

16 on the conditions of eligibility for, and benefits under, each 

17 of the following: 

18 (1) POLICIES OFFERED BY THE INSURER.—The 

19 standard outline of coverage, and such other infor20 mation as the Secretary may specify, with respect to 

21 each long-term care insurance policy offered by the 

22 insurer. 

23 (2) COMPARISON TO OTHER AVAILABLE PRI24 VATE INSURANCE.—Information, in such format as 

25 may be required under this part, on— 
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Title II, Subtitle B 

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1 (A) benefits offered under long-term care 

2 insurance policies of the insurer (and the 

3 threshold conditions for receipt by an insured 

4 individual of each such benefit); and 

5 (B) additional benefits available under 

6 policies offered by other private insurers (to the 

7 extent such information is made available by 

8 the State insurance commissioner). 

9 (3) PUBLIC PROGRAMS; REGIONAL ALLI10 ANCES.—Information furnished to the insurer, pur11 suant to section 2342(b)(2), by the State in which 

12 such individual resides, on conditions of eligibility 

13 for, and long-term care benefits (or the lack of such 

14 benefits) under— 

15 (A) each public long-term care program 

16 administered by the State, 

17 (B) the Medicare programs under title 

18 XVIII of the Social Security Act; and 

19 (C) each regional alliance operating in the 

20 State. 

21 SEC. 2322. REQUIREMENTS RELATING TO COVERAGE. 

22 (a) IN GENERAL.—The Secretary, after considering 

23 (where appropriate) recommendations of the Advisory 

24 Council, shall promulgate regulations establishing require25 ments with respect to the terms of and benefits under 
451 

Title II, Subtitle B 

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1 long-term care insurance policies, which shall include at 

2 a minimum the requirements specified in this section. 

3 (b) LIMITATIONS ON PREEXISTING CONDITION EX4 CLUSIONS.— 

5 (1) INITIAL POLICIES.—A long-term care insur6 ance policy may not exclude or limit coverage for 

7 any service or benefit, the need for which is the re8 sult of a medical condition or disability because an 

9 insured individual received medical treatment for, or 

10 was diagnosed as having, such condition before the 

11 issuance of the policy, unless— 

12 (A) the insurer, prior to issuance of the 

13 policy, determines and documents (with evi14 dence including written evidence that such con15 dition has been treated or diagnosed by a quali16 fied health care professional) that the insured 

17 individual had such condition during the 6- 

18 month period (or such longer period as the Sec19 retary may specify) ending on the effective date 

20 of the policy; and 

21 (B) the need or such service or benefit be22 gins within 6 months (or such longer period as 

23 the Secretary may specify) following the effec24 tive date of the policy. 
452 

Title II, Subtitle B 

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1 (2) REPLACEMENT POLICIES.—Solely for pur2 poses of the requirements of paragraph (1), with re3 spect to an insured individual, the effective date of 

4 a long-term care insurance policy issued to replace 

5 a previous policy, with respect to benefits which are 

6 the same as or substantially equivalent to benefits 

7 under such previous policy, shall be considered to be 

8 the effective date of such previous policy with re9 spect to such individual. 

10 (c) LIMITING CONDITIONS ON BENEFITS.— 

11 (1) IN GENERAL.—A long-term care insurance 

12 policy may not— 

13 (A) condition eligibility for benefits for a 

14 type of service on the need for or receipt of any 

15 other type of service (such as prior hospitaliza16 tion or institutionalization, or a higher level of 

17 care than the care for which benefits are cov18 ered); 

19 (B) condition eligibility for any benefit 

20 (where the need for such benefit has been es21 tablished by an independent assessment of im22 pairment) on any particular medical diagnosis 

23 (including any acute condition) or on one of a 

24 group of diagnoses; 
453 

Title II, Subtitle B 

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1 (C) condition eligibility for benefits fur2 nished by licensed or certified providers on com3 pliance by such providers with conditions not 

4 required under Federal or State law; or 

5 (D) condition coverage of any service on 

6 provision of such service by a provider, or in a 

7 setting, providing a higher level of care than 

8 that required by an insured individual. 

9 (2) HOME CARE OR COMMUNITY-BASED SERV10 ICES.—A long-term care insurance policy that pro11 vides benefits for any home care or community-based 

12 services provided in a setting other than a residen13 tial care facility— 

14 (A) may not limit such benefits to services 

15 provided by registered nurses or licensed prac16 tical nurses; 

17 (B) may not limit such benefits to services 

18 furnished by persons or entities participating in 

19 programs under titles XVIII and XIX of the 

20 Social Security Act and in part 1 of this sub21 title; and 

22 (C) must provide, at a minimum, benefits 

23 for personal assistance with activities of daily 

24 living, home health care, adult day care, and 

25 respite care. 
454 

Title II, Subtitle B 

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1 (3) NURSING FACILITY SERVICES.—A long-term 

2 care insurance policy that provides benefits for any 

3 nursing facility services— 

4 (A) must provide benefits for such services 

5 provided by all types of nursing facilities li6 censed by the State, and 

7 (B) may provide benefits for care in other 

8 residential facilities. 

9 (4) PROHIBITION ON DISCRIMINATION BY DIAG10 NOSIS.—A long-term care insurance policy may not 

11 provide for treatment of— 

12 (A) Alzheimer’s disease or any other pro13 gressive degenerative dementia of an organic or14 igin, 

15 (B) any organic or inorganic mental ill16 ness, 

17 (C) mental retardation or any other cog18 nitive or mental impairment, or 

19 (D) HIV infection or AIDS, 

20 different from the treatment of any other medical 

21 condition for purposes of determining whether 

22 threshold conditions for the receipt of benefits have 

23 been met, or the amount of benefits under the pol24 icy. 

25 (d) INFLATION PROTECTION.— 
455 

Title II, Subtitle B 

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1 (1) REQUIREMENT TO OFFER.—An insurer of2 fering for sale any long-term care insurance policy 

3 shall be required to afford the purchaser the option 

4 to obtain coverage under such policy (upon payment 

5 of increased premiums) of annual increases in bene6 fits at rates in accordance with paragraph (2). 

7 (2) RATE INCREASE IN BENEFITS.—For pur8 poses of paragraph (1), the benefits under a policy 

9 for each year shall be increased by a percentage of 

10 the full value of benefits under the policy for the 

11 previous year, which shall be not less than 5 percent 

12 of such value (or such other rate of increase as may 

13 be determined by the Secretary to be adequate to 

14 offset increases in the costs of long-term care serv15 ices for which coverage is provided under the policy). 

16 (3) REQUIREMENT OF WRITTEN REJECTION.— 

17 Inflation protection in accordance with paragraph 

18 (1) may be excluded from the coverage under a pol19 icy only if the insured individual (or, if different, the 

20 person responsible for payment of premiums) has re21 jected in writing the option to obtain such coverage. 

22 SEC. 2323. REQUIREMENTS RELATING TO PREMIUMS. 

23 (a) IN GENERAL.—The Secretary, after considering 

24 (where appropriate) recommendations of the Advisory 

25 Council, shall promulgate regulations establishing require-
456 

Title II, Subtitle B 

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1 ments applicable to premiums for long-term care insur2 ance policies, which shall include at a minimum the re3 quirements specified in this section. 

4 (b) LIMITATIONS ON RATES AND INCREASES.—The 

5 Secretary, after considering recommendations of the Advi6 sory Council, may establish by regulation such standards 

7 and requirements as may be determined appropriate with 

8 respect to— 

9 (1) mandatory or optional State procedures for 

10 review and approval of premium rates and rate in11 creases or decreases; 

12 (2) limitations on the amount of initial pre13 miums, or on the rate or amount of premium in14 creases; 

15 (3) the factors to be taken into consideration by 

16 an insurer in proposing, and by a State in approving 

17 or disapproving, premium rates and increases; and 

18 (4) the extent to which consumers should be en19 titled to participate or be represented in the rate-set20 ting process and to have access to actuarial and 

21 other information relied on in setting rates. 

22 SEC. 2324. REQUIREMENTS RELATING TO SALES PRAC23 TICES. 

24 (a) IN GENERAL.—The Secretary, after considering 

25 (where appropriate) recommendations of the Advisory 
457 

Title II, Subtitle B 

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1 Council, shall promulgate regulations establishing require2 ments applicable to the sale or offering for sale of long3 term care insurance policies, which shall include at a min4 imum the requirements specified in this section. 

5 (b) APPLICATIONS.—Any insurer that offers any 

6 long-term care insurance policy (including any group pol7 icy) shall be required to meet such requirements with re8 spect to the content, format, and use of application forms 

9 for long-term care insurance as the Secretary may require 

10 by regulation. 

11 (c) AGENT TRAINING AND CERTIFICATION.—An in12 surer may not sell or offer for sale a long-term care insur13 ance policy through an agent who does not comply with 

14 minimum standards with respect to training and certifi15 cation established by the Secretary after consideration of 

16 recommendations by the Advisory Council. 

17 (d) COMPENSATION FOR SALE OF POLICIES.—Com18 pensation by an insurer to an agent or agents for the sale 

19 of an original long-term care insurance policy, or for serv20 icing or renewing such a policy, may not exceed amounts 

21 (or percentage shares of premiums or other reference 

22 amounts) specified by the Secretary in regulations, after 

23 considering recommendations of the Advisory Council. 

24 (e) PROHIBITED SALES PRACTICES.—The following 

25 practices by insurers shall be prohibited with respect to 
458 

Title II, Subtitle B 

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1 the sale or offer for sale of long-term care insurance poli2 cies: 

3 (1) FALSE AND MISLEADING REPRESENTA4 TIONS.—Making any statement or representation— 

5 (A) which the insurer knows or should 

6 know is false or misleading (including the inac7 curate, incomplete, or misleading comparison of 

8 long-term care insurance policies or insurers), 

9 and 

10 (B) which is intended, or would be likely, 

11 to induce any person to purchase, retain, termi12 nate, forfeit, permit to lapse, pledge, assign, 

13 borrow against, convert, or effect a change with 

14 respect to, any long-term care insurance policy. 

15 (2) INACCURATE COMPLETION OF MEDICAL

16 HISTORY.—Making or causing to be made (by any 

17 means including failure to inquire about or to record 

18 information relating to preexisting conditions) state19 ments or omissions, in records detailing the medical 

20 history of an applicant for insurance, which the in21 surer knows or should know render such records 

22 false, incomplete, or misleading in any way material 

23 to such applicant’s eligibility for or coverage under 

24 a long-term care insurance policy. 
459 

Title II, Subtitle B 

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1 (3) UNDUE PRESSURE.—Employing force, 

2 fright, threat, or other undue pressure, whether ex3 plicit or implicit, which is intended, or would be like4 ly, to induce the purchase of a long-term care insur5 ance policy. 

6 (4) COLD LEAD ADVERTISING.—Using, directly 

7 or indirectly, any method of contacting consumers 

8 (including any method designed to induce consumers 

9 to contact the insurer or agent) for the purpose of 

10 inducing the purchase of long-term care insurance 

11 (regardless of whether such purpose is the sole or 

12 primary purpose of the contact) without conspicu13 ously disclosing such purpose. 

14 (f) PROHIBITION ON SALE OF DUPLICATE BENE15 FITS.—An insurer or agent may not sell or issue to an 

16 individual a long-term care insurance policy that the in17 surer or agent knows or should know provides for coverage 

18 that duplicates coverage already provided in another long19 term care insurance policy held by such individual (unless 

20 the policy is intended to replace such other policy). 

21 (g) SALES THROUGH EMPLOYERS OR MEMBERSHIP

22 ORGANIZATIONS.— 

23 (1) REQUIREMENTS CONCERNING SUCH AR24 RANGEMENTS.—In any case where an employer, or25 ganization, association, or other entity (referred to 
460 

Title II, Subtitle B 

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1 as a ‘‘membership entity’’) endorses a long-term 

2 care insurance policy to, or such policy is marketed 

3 or sold through such membership entity to, employ4 ees, members, or other individuals affiliated with 

5 such membership entity— 

6 (A) the insurer offering such policy shall 

7 not permit its marketing or sale through such 

8 entity unless the requirements of this sub9 section are met; and 

10 (B) a membership entity that receives any 

11 compensation for such sale, marketing, or en12 dorsement of such policy shall be considered the 

13 agent of the insurer for purposes of this part. 

14 (2) DISCLOSURE AND INFORMATION REQUIRE15 MENTS.—A membership entity that endorses a long16 term care insurance policy, or through which such 

17 policy is sold, to individuals affiliated with such enti18 ty, shall— 

19 (A) disclose prominently, in a form and 

20 manner designed to ensure that each such indi21 vidual who receives information concerning any 

22 such policy through such entity is aware of and 

23 understands such disclosure— 

24 (i) the manner in which the insurer 

25 and policy were selected; 
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1 (ii) the extent (if any) to which a per2 son independent of the insurer with exper3 tise in long-term care insurance analyzed 

4 the advantages and disadvantages of such 

5 policy from the standpoint of such individ6 uals (including such matters as the merits 

7 of the policy compared to other available 

8 benefit packages, and the financial stability 

9 of the insurer), and the results of any such 

10 analysis; 

11 (iii) any organizational or financial 

12 ties between the entity (or a related entity) 

13 and the insurer (or a related entity); and 

14 (iv) the nature of compensation ar15 rangements (if any) and the amount of 

16 compensation (including all fees, commis17 sions, and other forms of financial sup18 port) for the endorsement or sale of such 

19 policy; and 

20 (B) make available to such individuals, ei21 ther directly or through referrals, appropriate 

22 counseling to assist such individuals to make 

23 educated and informed decisions concerning the 

24 purchase of such policies. 
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1 SEC. 2325. CONTINUATION, RENEWAL, REPLACEMENT, CON2 VERSION, AND CANCELLATION OF POLICIES. 

3 (a) IN GENERAL.—The Secretary, after considering 

4 (where appropriate) recommendations of the Advisory 

5 Council, shall promulgate regulations establishing require6 ments applicable to the renewal, replacement, conversion, 

7 and cancellation of long-term care insurance policies, 

8 which shall include at a minimum the requirements speci9 fied in this section. 

10 (b) INSURED’S RIGHT TO CANCEL DURING EXAM11 INATION PERIOD.—Each individual insured (or, if dif12 ferent, each individual liable for payment of premiums) 

13 under a long-term care insurance policy shall have the un14 conditional right to return the policy within 30 days after 

15 the date of its issuance and delivery, and to obtain a full 

16 refund of any premium paid. 

17 (c) INSURER’S RIGHT TO CANCEL (OR DENY BENE18 FITS) BASED ON FRAUD OR NONDISCLOSURE.—An in19 surer shall have the right to cancel a long-term care insur20 ance policy, or to refuse to pay a claim for benefits, based 

21 on evidence that the insured falsely represented or failed 

22 to disclose information material to the determination of 

23 eligibility to purchase such insurance, but only if— 

24 (1) the insurer presents written documentation, 

25 developed at the time the insured applied for such 

26 insurance, of the insurer’s request for the informa-
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1 tion thus withheld or misrepresented, and the in2 sured individual’s response to such request; 

3 (2) the insurer presents medical records or 

4 other evidence showing that the insured individual 

5 knew or should have known that such response was 

6 false, incomplete, or misleading; 

7 (3) notice of cancellation is furnished to the in8 sured individual before the date 3 years after the ef9 fective date of the policy (or such earlier date as the 

10 Secretary may specify in regulations); and 

11 (4) the insured individual is afforded the oppor12 tunity to review and refute the evidence presented by 

13 the insurer pursuant to paragraphs (1) and (2). 

14 (d) INSURER’S RIGHT TO CANCEL FOR NONPAYMENT

15 OF PREMIUMS.— 

16 (1) IN GENERAL.—Insurers shall have the right 

17 to cancel long-term care insurance policies for non18 payment of premiums, subject to the provisions of 

19 this subsection and subsection (e) (relating to non20 forfeiture). 

21 (2) NOTICE AND ACKNOWLEDGEMENT.— 

22 (A) IN GENERAL.—The insurer may not 

23 cancel coverage of an insured individual until— 

24 (i) the insurer, not earlier than the 

25 date when such payment is 30 days past 
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1 due, has given written notice to the insured 

2 individual (by registered letter or the 

3 equivalent) of such intent, and 

4 (ii) 30 days have elapsed since the in5 surer obtained written acknowledgment of 

6 receipt of such notice from the insured in7 dividual (or the designated representative, 

8 at the insured individual’s option or in the 

9 case of an insured individual determined to 

10 be incapacitated in accordance with para11 graph (4)). 

12 (B) ADDITIONAL REQUIREMENT FOR

13 GROUP POLICIES.—In the case of a group long14 term care insurance policy, the notice and ac15 knowledgement requirements of subparagraph 

16 (A) apply with respect to the policyholder and 

17 to each insured individual. 

18 (3) REINSTATEMENT OF COVERAGE OF INCA19 PACITATED INDIVIDUALS.—In any case where the 

20 coverage of an individual under a long-term care in21 surance policy has been canceled pursuant to para22 graph (2), the insurer shall be required to reinstate 

23 full coverage of such individual under such policy, 

24 retroactive to the effective date of cancellation, if the 

25 insurer receives from such individual (or the des-
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1 ignated representative of such individual), within 5 

2 months after such date— 

3 (A) evidence of a determination of such in4 dividual’s incapacitation in accordance with 

5 paragraph (4) (whether made before or after 

6 such date), and 

7 (B) payment of all premiums due and past 

8 due, and all charges for late payment. 

9 (4) DETERMINATION OF INCAPACITATION.—For 

10 purposes of this subsection, the term ‘‘determination 

11 of incapacitation’’ means a determination by a quali12 fied health professional (in accordance with such re13 quirements as the Secretary may specify), that an 

14 insured individual has suffered a cognitive impair15 ment or loss of functional capacity which could rea16 sonably be expected to render the individual perma17 nently or temporarily unable to deal with business or 

18 financial matters. The standard used to make such 

19 determination shall not be more stringent than the 

20 threshold conditions for the receipt of covered bene21 fits. 

22 (5) DESIGNATION OF REPRESENTATIVE.—The 

23 insurer shall be required— 
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1 (A) to require the insured individual, at 

2 the time of sale or issuance of a long-term care 

3 insurance policy— 

4 (i) to designate a representative for 

5 purposes of communication with the in6 surer concerning premium payments in the 

7 event the insured individual cannot be lo8 cated or is incapacitated, or 

9 (ii) to complete a signed and dated 

10 statement declining to designate a rep11 resentative, and 

12 (B) to obtain from the insured individual, 

13 at the time of each premium payment (but in 

14 no event less often than once in each 12-month 

15 period) reconfirmation or revision of such des16 ignation or declination. 

17 (e) NONFORFEITURE.— 

18 (1) IN GENERAL.—The Secretary, after consid19 eration of recommendations by the Advisory Council, 

20 shall by regulation require appropriate nonforfeiture 

21 benefits with respect to each long-term care insur22 ance policy that lapses for any reason (including 

23 nonpayment of premiums, cancellation, or failure to 

24 renew, but excluding lapses due to death) after re-
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1 maining in effect beyond a specified minimum pe2 riod. 

3 (2) NONFORFEITURE BENEFITS.—The stand4 ards established under this subsection shall require 

5 that the amount or percentage of nonforfeiture bene6 fits shall increase proportionally with the amount of 

7 premiums paid by a policyholder. 

8 (f) CONTINUATION, RENEWAL, REPLACEMENT, AND

9 CONVERSION OF POLICIES.— 

10 (1) IN GENERAL.—Insurers shall not be per11 mitted to cancel, or refuse to renew (or replace with 

12 a substantial equivalent), any long-term care insur13 ance policy for any reason other than for fraud or 

14 material misrepresentation (as provided in sub15 section (c)) or for nonpayment of premium (as pro16 vided in subsection (d)). 

17 (2) DURATION AND RENEWAL OF POLICIES.— 

18 Each long-term care insurance policy shall contain a 

19 provision that clearly states— 

20 (A) the duration of the policy, 

21 (B) the right of the insured individual (or 

22 policyholder) to renewal (or to replacement with 

23 a substantial equivalent), 
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1 (C) the date by which, and the manner in 

2 which, the option to renew must be exercised, 

3 and 

4 (D) any applicable restrictions or limita5 tions (which may not be inconsistent with the 

6 requirements of this part). 

7 (3) REPLACEMENT OF POLICIES.— 

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

9 subparagraph (B), an insurer shall not be per10 mitted to sell any long-term care insurance pol11 icy as a replacement for another such policy un12 less coverage under such replacement policy is 

13 available to an individual insured for benefits 

14 covered under the previous policy to the same 

15 extent as under such previous policy (including 

16 every individual insured under a group policy) 

17 on the date of termination of such previous pol18 icy, without exclusions or limitations that did 

19 not apply under such previous policy. 

20 (B) INSURED’S OPTION TO REDUCE COV21 ERAGE.—In any case where an insured indi22 vidual covered under a long-term care insurance 

23 policy knowingly and voluntarily elects to sub24 stitute for such policy a policy that provides less 
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1 coverage, substitute policy shall be considered a 

2 replacement policy for purposes of this part. 

3 (3) CONTINUATION AND CONVERSION RIGHTS

4 WITH RESPECT TO GROUP POLICIES.— 

5 (A) IN GENERAL.—Insurers shall be re6 quired to include in each group long-term care 

7 insurance policy, a provision affording to each 

8 insured individual, when such policy would oth9 erwise terminate, the opportunity (at the insur10 er’s option, subject to approval of the State in11 surance commissioner) either to continue or to 

12 convert coverage under such policy in accord13 ance with this paragraph. 

14 (B) RIGHTS OF RELATED INDIVIDUALS.— 

15 In the case of any insured individual whose eli16 gibility for coverage under a group policy is 

17 based on relationship to another individual, the 

18 insurer shall be required to continue such cov19 erage upon termination of the relationship due 

20 to divorce or death. 

21 (C) CONTINUATION OF COVERAGE.—A 

22 group policy shall be considered to meet the re23 quirements of this paragraph with respect to 

24 rights of an insured individual to continuation 

25 of coverage if coverage of the same (or substan-
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1 tially equivalent) benefits for such individual 

2 under such policy is maintained, subject only to 

3 timely payment of premiums. 

4 (D) CONVERSION OF COVERAGE.—A group 

5 policy shall be considered to meet the require6 ments of this paragraph with respect to conver7 sion if it entitles each individual who has been 

8 continuously covered under the policy for at 

9 least 6 months before the date of the termi10 nation to issuance of a replacement policy pro11 viding benefits identical to, substantially equiva12 lent to, or in excess of, the benefits under such 

13 terminated group policy— 

14 (i) without requiring evidence of in15 surability with respect to benefits covered 

16 under such previous policy, and 

17 (ii) at premium rates no higher than 

18 would apply if the insured individual had 

19 initially obtained coverage under such re20 placement policy on the date such insured 

21 individual initially obtained coverage under 

22 such group policy. 

23 (4) TREATMENT OF SUBSTANTIAL EQUIVA24 LENCE.— 
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1 (A) UNDER SECRETARY’S GUIDELINES.— 

2 The Secretary, after considering recommenda3 tions by the Advisory Council, shall develop 

4 guidelines for comparing long-term care insur5 ance policies for the purpose of determining 

6 whether benefits under such policies are sub7 stantially equivalent. 

8 (B) BEFORE EFFECTIVE DATE OF SEC9 RETARY’S GUIDELINES.—During the period 

10 prior to the effective date of guidelines pub11 lished by the Secretary under this paragraph, 

12 insurers shall comply with standards for deter13 minations of substantial equivalence established 

14 by State insurance commissioners. 

15 (5) ADDITIONAL REQUIREMENTS.—Insurers 

16 shall comply with such other requirements relating 

17 to continuation, renewal, replacement, and conver18 sion of long-term care insurance policies as the Sec19 retary may establish. 

20 SEC. 2326. REQUIREMENTS RELATING TO PAYMENT OF 

21 BENEFITS. 

22 (a) IN GENERAL.—The Secretary, after considering 

23 (where appropriate) recommendations of the Advisory 

24 Council, shall promulgate regulations establishing require25 ments with respect to claims for and payment of benefits 
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1 under long-term care insurance policies, which shall in2 clude at a minimum the requirements specified in this sec3 tion. 

4 (b) STANDARDS RELATING TO THRESHOLD CONDI5 TIONS FOR RECEIPT OF COVERED BENEFITS.—Each 

6 long-term care insurance policy shall meet the following 

7 requirements with respect to identification of, and deter8 mination of whether an insured individual meets, the 

9 threshold conditions for receipt of benefits covered under 

10 such policy: 

11 (1) DECLARATION OF THRESHOLD CONDI12 TIONS.— 

13 (A) IN GENERAL.—The policy shall specify 

14 the level (or levels) of functional or cognitive 

15 mental impairment (or combination of impair16 ments) required as a threshold condition of en17 titlement to receive benefits under the policy 

18 (which threshold condition or conditions shall 

19 be consistent with any regulations promulgated 

20 by the Secretary pursuant to subsection (B)). 

21 (B) SECRETARIAL RESPONSIBILITY.—The 

22 Secretary (after considering the views of the 

23 Advisory Council on current practices of insur24 ers concerning, and the appropriateness of 

25 standardizing, threshold conditions) may pro-
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1 mulgate such regulations as the Secretary finds 

2 appropriate establishing standardized thresholds 

3 to be used under such policies as preconditions 

4 for varying levels of benefits. 

5 (2) INDEPENDENT PROFESSIONAL ASSESS6 MENT.—The policy shall provide for a procedure for 

7 determining whether the threshold conditions speci8 fied under paragraph (1) have been met with respect 

9 to an insured individual which— 

10 (A) applies such uniform assessment 

11 standards, procedures, and formats as the Sec12 retary may specify, after consideration of rec13 ommendations by the Advisory Council; 

14 (B) permits an initial evaluation (or, if the 

15 initial evaluation was performed by a qualified 

16 independent assessor selected by the insurer, a 

17 reevaluation) to be made by a qualified inde18 pendent assessor selected by the insured indi19 vidual (or designated representative) as to 

20 whether the threshold conditions for receipt of 

21 benefits have been met; 

22 (C) permits the insurer the option to ob23 tain a reevaluation by a qualified independent 

24 assessor selected and reimbursed by the insurer; 
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1 (D) provides that the insurer will consider 

2 that the threshold conditions have been met in 

3 any case where— 

4 (i) the assessment under subpara5 graph (B) concluded that such conditions 

6 had been met, and the insurer declined the 

7 option under subparagraph (C), or 

8 (ii) assessments under both subpara9 graphs (B) and (C) concluded that such 

10 conditions had been met; and 

11 (E) provides for final resolution of the 

12 question by a State agency or other impartial 

13 third party in any case where assessments 

14 under subparagraphs (B) and (C) reach incon15 sistent conclusions. 

16 (3) QUALIFIED INDEPENDENT ASSESSOR.—For 

17 purposes of paragraph (2), the term ‘‘qualified inde18 pendent assessor’’ means a licensed or certified pro19 fessional, as appropriate, who— 

20 (A) meets such standards with respect to 

21 professional qualifications as may be established 

22 by the Secretary, after consulting with the Sec23 retary of the Treasury, and 

24 (B) has no significant or controlling finan25 cial interest in, is not an employee of, and does 
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1 not derive more than 5 percent of gross income 

2 from, the insurer (or any provider of services 

3 for which benefits are available under the policy 

4 and in which the insurer has a significant or 

5 controlling financial interest). 

6 (c) REQUIREMENTS RELATING TO CLAIMS FOR BEN7 EFITS.—Insurers shall be required— 

8 (1) to promptly pay or deny claims for benefits 

9 submitted by (or on behalf of) insured individuals 

10 who have been determined pursuant to subsection 

11 (b) to meet the threshold conditions for payment of 

12 benefits; 

13 (2) to provide an explanation in writing of the 

14 reasons for payment, partial payment, or denial of 

15 each such claim; and 

16 (3) to provide an administrative procedure 

17 under which an insured individual may appeal the 

18 denial of any claim. 

19 Subpart C—Enforcement 

20 SEC. 2342. STATE PROGRAMS FOR ENFORCEMENT OF 

21 STANDARDS. 

22 (a) REQUIREMENT FOR STATE PROGRAMS IMPLE23 MENTING FEDERAL STANDARDS.—In order for a State to 

24 be eligible for grants under this subpart, the State must 

25 have in effect a program (including such laws and proce-
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1 dures as may be necessary) for the regulation of long-term 

2 care insurance which the Secretary has determined— 

3 (1) includes the elements required under this 

4 subpart, and 

5 (2) is designed to ensure the compliance of 

6 long-term care insurance policies sold in the State, 

7 and insurers offering such policies and their agents, 

8 with the requirements established pursuant to sub9 part B. 

10 (b) ACTIVITIES UNDER STATE PROGRAM.—A State 

11 program approved under this subpart shall provide for the 

12 following procedures and activities: 

13 (1) MONITORING OF INSURERS AND POLI14 CIES.—Procedures for ongoing monitoring of the 

15 compliance of insurers doing business in the State, 

16 and of long-term care insurance policies sold in the 

17 State, with requirements under this part, including 

18 at least the following: 

19 (A) POLICY REVIEW AND CERTIFI20 CATION.—A program for review and certifi21 cation (and annual recertification) of each such 

22 policy sold in the State. 

23 (B) REPORTING BY INSURERS.—Require24 ments of annual reporting by insurers selling or 

25 servicing long-term care insurance policies in 
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1 the State, in such form and containing such in2 formation as the State may require to deter3 mine whether the insurer (and policies) are in 

4 compliance with requirements under this part. 

5 (C) DATA COLLECTION.—Procedures for 

6 collection, from insurers, service providers, in7 sured individuals, and others, of information re8 quired by the State for purposes of carrying out 

9 its responsibilities under this part (including 

10 authority to compel compliance of insurers with 

11 requests for such information). 

12 (D) MARKETING OVERSIGHT.—Procedures 

13 for monitoring (through sampling or other ap14 propriate procedures) the sales practices of in15 surers and agents, including review of mar16 keting literature. 

17 (E) OVERSIGHT OF ADMINISTRATION OF

18 BENEFITS.—Procedures for monitoring 

19 (through sampling or other appropriate proce20 dures) insurers’ administration of benefits, in21 cluding monitoring of— 

22 (i) determinations of insured individ23 uals’ eligibility to receive benefits, and 

24 (ii) disposition of claims for payment. 
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1 (2) INFORMATION TO INSURERS.—Procedures 

2 for furnishing, to insurers selling or servicing any 

3 long-term care insurance policies in the State, infor4 mation on conditions of eligibility for, and benefits 

5 under, each public long-term care program adminis6 tered by the State, in order to enable them to com7 ply with the requirement under section 2321(e)(3). 

8 (3) CONSUMER COMPLAINTS AND DISPUTE RES9 OLUTION.—Administrative procedures for the inves10 tigation and resolution of complaints by consumers, 

11 and disputes between consumers and insurers, with 

12 respect to long-term care insurance, including— 

13 (A) procedures for the filing, investigation, 

14 and adjudication of consumer complaints with 

15 respect to the compliance of insurers and poli16 cies with requirements under this part, or other 

17 requirements under State law; and 

18 (B) procedures for resolution of disputes 

19 between insured individuals and insurers con20 cerning eligibility for, or the amount of, benefits 

21 payable under such policies, and other issues 

22 with respect to the rights and responsibilities of 

23 insurers and insured individuals under such 

24 policies. 
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1 (4) TECHNICAL ASSISTANCE TO INSURERS.— 

2 Provision of technical assistance to insurers to help 

3 them to understand and comply with the require4 ments of this part, and other State laws, concerning 

5 long-term care insurance policies and business prac6 tices. 

7 (c) STATE ENFORCEMENT AUTHORITIES.—A State 

8 program meeting the requirements of this subpart shall 

9 ensure that the State insurance commissioner (or other 

10 appropriate official or agency) has the following authority 

11 with respect to long-term care insurers and policies: 

12 (1) PROHIBITION OF SALE.—Authority to pro13 hibit the sale, or offering for sale, of any long-term 

14 care insurance policy that fails to comply with all 

15 applicable requirements under this part. 

16 (2) PLANS OF CORRECTION.—Authority, in 

17 cases where the business practices of an insurer are 

18 determined not to comply with requirements under 

19 this part, to require the insurer to develop, submit 

20 for State approval, and implement a plan of correc21 tion which must be fulfilled within the shortest pe22 riod possible (not to exceed a year) as a condition 

23 of continuing to do business in the State. 

24 (3) CORRECTIVE ACTION ORDERS.—Authority, 

25 in cases where an insurer is determined to have 
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1 failed to comply with requirements of this part, or 

2 with the terms of a policy, with respect to a con3 sumer or insured individual, to direct the insurer 

4 (subject to appropriate due process) to eliminate 

5 such noncompliance within 30 days. 

6 (4) CIVIL MONEY PENALTIES.—Authority to as7 sess civil money penalties, in amounts for each viola8 tive act up to the greater of $10,000 or three times 

9 the amount of any commission involved— 

10 (A) for violations of subsections (d) (con11 cerning compensation or sale of policies), (e) 

12 (concerning prohibited sales practices), and (f) 

13 (prohibition on sale of duplicate benefits) of 

14 section 2324, 

15 (B) for such other violative acts as the 

16 Secretary may specify in regulations, and 

17 (C) in such other cases as the State finds 

18 appropriate. 

19 (5) OTHER AUTHORITIES.—Such other authori20 ties as the State finds necessary or appropriate to 

21 enforce requirements under this part. 

22 (d) RECORDS, REPORTS, AND AUDITS.—As a condi23 tion of approval of its program under this part, a State 

24 must agree to maintain such records, make such reports 

25 (including expenditure reports), and cooperate with such 
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1 audits, as the Secretary finds necessary to determine the 

2 compliance of such State program (and insurers and poli3 cies regulated under such program) with the requirements 

4 of this part. 

5 (e) SECRETARIAL RESPONSIBILITIES.— 

6 (1) APPROVAL OF STATE PROGRAMS.—The Sec7 retary shall approve a State program meeting the re8 quirements of this part. 

9 (2) INFORMATION ON MEDICARE BENEFITS.— 

10 The Secretary shall furnish, to the official in each 

11 State with chief responsibility for the regulation of 

12 long-term care insurance, a description of the Medi13 care programs under title XVIII of the Social Secu14 rity Act which makes clear the unavailability of long15 term benefits under such programs, for distribution 

16 by such State official to insurers selling long-term 

17 care insurance in the State, in accordance with sub18 section (b)(2). 

19 SEC. 2342. AUTHORIZATION OF APPROPRIATIONS FOR 

20 STATE PROGRAMS. 

21 There are authorized to be appropriated $10,000,000 

22 for fiscal year 1996, $10,000,000 for fiscal year 1997, 

23 $7,500,000 for fiscal year 1998, and $5,000,000 for fiscal 

24 year 1999 and each succeeding fiscal year, for grants to 
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1 States with programs meeting the requirements of this 

2 part, to remain available until expended. 

3 SEC. 2343. ALLOTMENTS TO STATES. 

4 The allotment for any fiscal year to a State with a 

5 program approved under this part shall be an amount de6 termined by the Secretary, taking into account the num7 bers of long-term care insurance policies sold, and of elder8 ly individuals residing, in the State, and such other factors 

9 as the Secretary finds appropriate. 

10 SEC. 2344. PAYMENTS TO STATES. 

11 (a) IN GENERAL.—Each State with a program ap12 proved under this part shall be entitled to payment under 

13 this title for each fiscal year in an amount equal to its 

14 allotment for such fiscal year, for expenditure by such 

15 State for up to 50 percent of the cost of activities under 

16 such program. 

17 (b) STATE SHARE OF PROGRAM EXPENDITURES.— 

18 No Federal funds from any source may be used as any 

19 part of the non-Federal share of expenditures under the 

20 State program under this subpart. 

21 (c) TRANSFER AND DEPOSIT REQUIREMENTS.—The 

22 Secretary shall make payments under this section in ac23 cordance with section 6503 of title 31, United States 

24 Code. 
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1 SEC. 2345. FEDERAL OVERSIGHT OF STATE ENFORCEMENT. 

2 (a) IN GENERAL.—The Secretary shall periodically 

3 review State regulatory programs approved under section 

4 2341 to determine whether they continue to comply with 

5 the requirements of this part. 

6 (b) NOTICE OF DETERMINATION OF NONCOMPLI7 ANCE.—The Secretary shall promptly notify the State of 

8 a determination that a State program fails to comply with 

9 this part, specifying the requirement or requirements not 

10 met and the elements of the State program requiring cor11 rection. 

12 (c) OPPORTUNITY FOR CORRECTION.— 

13 (1) IN GENERAL.—The Secretary shall afford a 

14 State notified of noncompliance pursuant to sub15 section (b) a reasonable opportunity to eliminate 

16 such noncompliance. 

17 (2) CORRECTION PLANS.—In a case where sub18 stantial corrections are needed to eliminate non19 compliance of a State program, the Secretary may— 

20 (A) permit the State a reasonable time 

21 after the date of the notice pursuant to sub22 section (b) to develop and obtain the Sec23 retary’s approval of a correction plan, and 

24 (B) permit the State a reasonable time 

25 after the date of approval of such plan to elimi26 nate the noncompliance. 
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Title II, Subtitle B 

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1 (d) WITHDRAWAL OF PROGRAM APPROVAL.—In the 

2 case of a State that fails to eliminate noncompliance with 

3 requirements under this part by the date specified by the 

4 Secretary pursuant to subsection (c), the Secretary shall 

5 withdraw the approval of the State program pursuant to 

6 section 2341(e). 

7 SEC. 2346. EFFECT OF FAILURE TO HAVE APPROVED STATE 

8 PROGRAM. 

9 (a) RESTRICTION ON SALE OF LONG-TERM CARE IN10 SURANCE.— 

11 (1) IN GENERAL.—No insurer may sell or offer 

12 for sale any long-term care insurance policy, on or 

13 after the date specified in subsection (c), in a State 

14 that does not have in effect a regulatory program 

15 approved under section 2341(e). 

16 (2) APPLICATION OF PROHIBITION.—For pur17 poses of paragraph (1), an insurance policy shall not 

18 be considered to be sold or offered for sale in a 

19 State solely because it is sold or offered to a resident 

20 of such State. 

21 (b) CIVIL MONEY PENALTY.— 

22 (1) IN GENERAL.—An insurer shall be subject 

23 to a civil money penalty, in an amount up to the 

24 greater of $10,000 or three times any commission 

25 involved, for each incident in which the insurer sells, 
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Title II, Subtitle B 

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1 or offers to sell, an insurance policy to an individual 

2 in violation of subsection (a). 

3 (2) ENFORCEMENT PROCEDURE.—The Sec4 retary shall enforce the provisions of this subsection 

5 in accordance with the procedures provided under 

6 section 5412 of this Act. 

7 (c) EFFECTIVE DATE.— 

8 (1) IN GENERAL.—The date specified in this 

9 subsection, for purposes of subsection (a), with re10 spect to any requirement under this part, is the date 

11 one year after the date the Secretary first promul12 gates regulations with respect to such requirement. 

13 (2) EXCEPTION.—To the extent that a State 

14 demonstrates to the Secretary that State legislation 

15 is required to meet any such requirement, the State 

16 shall not be regarded as failing to have in effect a 

17 program in compliance with this part solely on the 

18 basis of its failure to comply with such requirement 

19 before the first day of the first calendar quarter be20 ginning after the close of the first regular session of 

21 the State legislature that begins after the promulga22 tion of the regulation imposing such requirement. 

23 For purposes of the preceding sentence, in the case 

24 of a State that has a 2-year legislative session, each 
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1 year of such session shall be deemed to be a sepa2 rate regular session of the State legislature. 

3 Subpart D—Consumer Education Grants 

4 SEC. 2361. GRANTS FOR CONSUMER EDUCATION. 

5 (a) GRANT PROGRAM AUTHORIZED.—The Secretary 

6 is authorized to make grants— 

7 (1) to States, 

8 (2) to regional alliances (at the option of States 

9 within which such Alliances are located), and 

10 (3) to national organizations representing insur11 ance consumers, long-term care providers, and insur12 ers, 

13 for the development and implementation of long-term care 

14 information, counseling, and other programs. 

15 (b) APPLICATIONS.— 

16 (1) IN GENERAL.—Each State or organization 

17 seeking a grant under this section shall submit to 

18 the Secretary an application, in such format and 

19 containing such information as the Secretary may 

20 require. 

21 (2) GOALS.—Programs under this section shall 

22 be directed at the goals of increasing consumers’ un23 derstanding and awareness of options available to 

24 them with respect to long-term care insurance (and 
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1 alternatives, such as public long-term care pro2 grams), including— 

3 (A) the risk of needing long-term care; 

4 (B) the costs associated with long-term 

5 care services; 

6 (C) the lack of long-term care coverage 

7 under the Medicare program, Medicare supple8 mental (Medigap) policies, and standard private 

9 health insurance; 

10 (D) the limitations on (and conditions of 

11 eligibility for) long-term care coverage under 

12 State programs; 

13 (E) the availability, and variations in cov14 erage and cost, of private long-term care insur15 ance; 

16 (F) features common to many private long17 term care insurance policies; and 

18 (G) pitfalls to avoid when purchasing a 

19 long-term care insurance policy. 

20 (3) ACTIVITIES.—An application for a grant 

21 under this section shall indicate the activities the 

22 State or organization would carry out under such 

23 grant, which activities may include— 

24 (A) coordination of the activities of State 

25 agencies and private entities as necessary to 
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Title II, Subtitle B 

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1 carry out the State’s program under this sec2 tion; 

3 (B) collection, analysis, publication, and 

4 dissemination of information, 

5 (C) conducting or sponsoring of consumer 

6 education, outreach, and information programs, 

7 (D) providing (directly or through referral) 

8 counseling and consultation services to con9 sumers to assist them in choosing long-term 

10 care insurance coverage appropriate to their cir11 cumstances, and 

12 (E) other appropriate activities. 

13 (4) PRIORITY FOR INNOVATION.—In awarding 

14 grants under this section, the Secretary shall give 

15 priority to applications proposing to use innovative 

16 approaches to providing information, counseling, and 

17 other assistance to individuals who might benefit 

18 from, or are considering the purchase of, long-term 

19 care insurance. 

20 (c) PERIOD OF GRANTS.—Grants under this section 

21 shall be for not longer than 3 years. 

22 (d) EVALUATIONS AND REPORTS.— 

23 (1) BY GRANTEES TO THE SECRETARY.—Each 

24 recipient of a grant under this section shall annually 
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1 evaluate the effectiveness of its program under such 

2 grant, and report its conclusions to the Secretary. 

3 (2) BY THE SECRETARY TO THE CONGRESS.— 

4 The Secretary shall annually evaluate, and report to 

5 the Congress on, the effectiveness of programs under 

6 this section, on the basis of reports received under 

7 paragraph (1) and such independent evaluation as 

8 the Secretary finds necessary. 

9 (e) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated, for grants under this 

11 section— 

12 (1) $10,000,000 for each of fiscal years 1995 

13 through 1997 for grants to States, and 

14 (2) $1,000,000 for each of fiscal years 1995 

15 through 1997, 

16 for grants to eligible organizations. 

17 PART 4—TAX TREATMENT OF LONG-TERM CARE 

18 INSURANCE AND SERVICES 

19 SEC. 2401. REFERENCE TO TAX PROVISIONS. 

20 For amendments to the Internal Revenue Code of 

21 1986 relating to the treatment of long-term care insurance 

22 and services, see subtitle G of title VII. 
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Title II, Subtitle B 

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1 PART 5—TAX INCENTIVES FOR INDIVIDUALS 

2 WITH DISABILITIES WHO WORK 

3 SEC. 2501. REFERENCE TO TAX PROVISION. 

4 For amendment to the Internal Revenue Code of 

5 1986 providing for a tax credit for cost of personal assist6 ance services required by employed individuals, see section 

7 7901. 

8 PART 6—DEMONSTRATION AND EVALUATION 

9 SEC. 2601. DEMONSTRATION ON ACUTE AND LONG-TERM 

10 CARE INTEGRATION. 

11 (a) PROGRAM AUTHORIZED.—The Secretary of 

12 Health and Human Services shall conduct a demonstra13 tion program to test the effectiveness of various ap14 proaches to financing and providing integrated acute and 

15 long-term care services described in subsection (b) for the 

16 chronically ill and disabled who meet eligibility criteria 

17 under subsection (c). 

18 (b) SERVICES AND BENEFITS.— 

19 (1) IN GENERAL.—Except as provided in para20 graph (2), the following services and benefits shall 

21 be provided under each demonstration approved 

22 under this section: 

23 (A) COMPREHENSIVE BENEFIT PACK24 AGE.—All benefits included in the comprehen25 sive benefit package under title I of this Act. 
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1 (B) TRANSITIONAL BENEFITS.—Special2 ized benefits relating to the transition from 

3 acute to long-term care, including— 

4 (i) assessment and consultation, 

5 (ii) inpatient transitional care, 

6 (iii) medical rehabilitation, 

7 (iv) home health care and home care, 

8 (v) caregiver support, and 

9 (vi) self-help technology. 

10 (C) LONG-TERM CARE BENEFITS.—Long11 term care benefits, including— 

12 (i) adult day care, 

13 (ii) personal assistance services, 

14 (iii) homemaker services and chore 

15 services; 

16 (iv) home-delivered meals; 

17 (v) respite services; 

18 (vi) nursing facility services in special19 ized care units; 

20 (vii) services in other residential set21 tings including community supported living 

22 arrangements and assisted living facilities; 

23 and 

24 (viii) assistive devices and environ25 mental modifications. 
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Title II, Subtitle B 

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1 (D) HABILITATION SERVICES.—Specialized 

2 habilitation services for participants with devel3 opmental disabilities. 

4 (2) VARIATIONS IN MINIMUM BENEFITS.— 

5 (A) IN GENERAL.—Subject to the require6 ment of subparagraph (B), demonstrations may 

7 omit specified services listed under subpara8 graphs (C) and (D) of paragraph (1), or pro9 vide additional services, as found appropriate by 

10 the Secretary in the case of a particular dem11 onstration, taking into consideration factors 

12 such as— 

13 (i) the needs of a specialized group of 

14 eligible beneficiaries; 

15 (ii) the availability of the omitted ben16 efits under other programs in the service 

17 area; and 

18 (iii) the geographic availability of 

19 service providers. 

20 (B) BREADTH REQUIREMENT.—In approv21 ing variant demonstrations pursuant to sub22 paragraph (A), the Secretary shall ensure that 

23 demonstrations under this section, taken as a 

24 group, adequately test financing and delivery 
493 

Title II, Subtitle B 

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1 models covering the entire array of services and 

2 benefits described in paragraph (1). 

3 (c) ELIGIBILITY CRITERIA.—The Secretary shall es4 tablish eligibility criteria for individuals who may receive 

5 services under demonstrations under this section. Under 

6 such criteria, any of the following may be found to be eligi7 ble populations for such demonstrations: 

8 (1) Individuals with disabilities who are entitled 

9 to services and benefits under a State program 

10 under part 1 of this subtitle. 

11 (2) Individuals who are entitled to benefits 

12 under parts A and B of title XVIII of the Social Se13 curity Act. 

14 (3) Individuals who are entitled to medical as15 sistance under a State plan under title XIX of the 

16 Social Security Act, and are also— 

17 (A) individuals described in paragraph (2), 

18 or 

19 (B) individuals eligible for supplemental 

20 security income under title XVI of that Act. 

21 (d) APPLICATION.— 

22 (1) IN GENERAL.—Each entity seeking to par23 ticipate in a demonstration under this section shall 

24 submit an application, in such format and con25 taining such information as the Secretary may re-
494 

Title II, Subtitle B 

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1 quire, including the information specified in this 

2 subsection. 

3 (2) SERVICE DELIVERY.—The application shall 

4 state the services to be provided under the dem5 onstration (either directly by the applicant or under 

6 other arrangements approved by the Secretary), 

7 which shall include services specified pursuant to 

8 subsection (b) and— 

9 (A) enrollment services; 

10 (B) client assessment and care planning; 

11 (C) simplified access to needed services; 

12 (D) integrated management of acute and 

13 chronic care, including measures to ensure con14 tinuity of care across settings and services; 

15 (E) quality assurance, grievance, and ap16 peals mechanisms; and 

17 (F) such other services as the Secretary 

18 may require. 

19 (3) CONSUMER PROTECTION AND PARTICIPA20 TION.—The applicant shall provide evidence of con21 sumer participation— 

22 (A) in the planning of the demonstration 

23 (including a showing of support from commu24 nity agencies or consumer interest groups); and 
495 

Title II, Subtitle B 

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1 (B) in the conduct of the demonstration, 

2 including descriptions of methods and proce3 dures to be used— 

4 (i) to make available to individuals en5 rolled in the demonstration information on 

6 self-help, health promotion and disability 

7 prevention practices, and enrollees’ con8 tributions to the costs of care; 

9 (ii) to ensure participation by such en10 rollees (or their designated representatives, 

11 where appropriate) in care planning and in 

12 decisions concerning treatment; 

13 (iii) to handle and resolve client griev14 ances and appeals; 

15 (iv) to take enrollee views into account 

16 in quality assurance and provider con17 tracting procedures; and 

18 (v) to evaluate enrollee satisfaction 

19 with the program. 

20 (4) APPLICANT QUALIFICATIONS.—Applicants 

21 for grants under this section shall meet eligibility 

22 criteria established by the Secretary, including re23 quirements relating to— 

24 (A) adequate financial controls to monitor 

25 administrative and service costs, 
496 

Title II, Subtitle B 

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1 (B) demonstrated commitment of the 

2 Board of Directors or comparable governing 

3 body to the goals of demonstration, 

4 (C) information systems adequate to pay 

5 service providers, to collect required utilization 

6 and cost data, and to provide data adequate to 

7 permit evaluation of program performance, and 

8 (D) compliance with applicable State laws. 

9 (e) PAYMENTS TO PARTICIPANTS.—An entity con10 ducting a demonstration under this section shall be enti11 tled to receive, with respect to each enrollee, for the period 

12 during which it is providing to such enrollee services under 

13 a demonstration under this section, such amounts as the 

14 Secretary shall provide, which amounts— 

15 (1) may include risk-based payments and non16 risk based payments by governmental programs, by 

17 third parties, or by project enrollees, or any com18 bination of such payments, and 

19 (2) may vary by project and by enrollee. 

20 (f) NUMBER AND DURATION OF DEMONSTRATION

21 PROJECTS.— 

22 (1) REQUEST FOR APPLICATIONS.—The Sec23 retary shall publish a request for applications under 

24 this section not later than one year after enactment 

25 of this Act. 
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Title II, Subtitle B 

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1 (2) NUMBER AND DURATION.—The Secretary 

2 shall authorize not more than 25 demonstrations 

3 under this section, each of which shall run for 7 

4 years from the date of the award. 

5 (g) EVALUATION AND REPORTS.—The Secretary 

6 shall evaluate the demonstration projects under this sec7 tion, and shall submit to the Congress— 

8 (1) an interim report, by three years after en9 actment, describing the status of the demonstration 

10 and characteristics of the approved projects; and 

11 (2) a final report, by one year after completion 

12 of such demonstration projects, evaluating their ef13 fectiveness (including cost-effectiveness), and dis14 cussing the advisability of including some or all of 

15 the integrated models tested in the demonstration as 

16 a benefit under the comprehensive benefit package 

17 under title I of this Act, or under the programs 

18 under title XVIII of the Social Security Act. 

19 (h) AUTHORIZATION OF APPROPRIATIONS.— 

20 (1) FOR SECRETARIAL RESPONSIBILITIES.— 

21 (A) IN GENERAL.—There are authorized to 

22 be appropriated $7,000,000 for fiscal year 

23 1996, and $4,500,000 for each of the 6 suc24 ceeding fiscal years, for payment of costs of the 

25 Secretary in carrying out this section (including 
498 

Title II, Subtitle B 

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1 costs for technical assistance to potential serv2 ice providers, and research and evaluation), 

3 which amounts shall remain available until ex4 pended. 

5 (B) SET-ASIDE FOR FEASIBILITY STUD6 IES.—Of the total amount authorized to be ap7 propriated under subparagraph (A), not less 

8 than $1,000,000 shall be available for studies 

9 of the feasibility of systems to provide inte10 grated care for nonaged populations (including 

11 physically disabled children and adults, the 

12 chronically mentally ill, and individuals with 

13 disabilities, and combinations of these groups). 

14 (2) FOR COVERED BENEFITS.—There are au15 thorized to be appropriated $50,000,000 for the first 

16 fiscal year for which grants are awarded under this 

17 section, and for each of the four succeeding fiscal 

18 years, for payment of costs of benefits for which no 

19 public or private program or entity is legally obli20 gated to pay. 

21 SEC. 2602. PERFORMANCE REVIEW OF THE LONG-TERM 

22 CARE PROGRAMS. 

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

24 Human Services shall prepare and submit to the Con25 gress— 
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Title II, Subtitle B 

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1 (1) an interim report, not later than the end of 

2 the seventh full calendar year beginning after the 

3 date of the enactment of this Act, and 

4 (2) a final report, not later than two years after 

5 the date of the interim report, 

6 evaluating the effectiveness of the programs established 

7 and amendments made by this subtitle (and including at 

8 a minimum the elements specified in subsection (b)). 

9 (b) ELEMENTS OF ASSESSMENT.—The evaluations to 

10 be made, and included in the reports required pursuant 

11 to subsection (a), include at least the following: 

12 (1) STATE SERVICE DELIVERY PROGRAMS.—An 

13 evaluation of States’ effectiveness in meeting the 

14 needs for home and community-based services (in15 cluding personal assistance services) of individuals 

16 with disabilities (including individuals who do, and 

17 who do not, meet the eligibility criteria for the serv18 ice program under part 1, individuals of different 

19 ages, type and degree of disability, and income lev20 els, members of minority groups, and individuals re21 siding in rural areas). 

22 (2) SERVICE ACCESS.—An evaluation of the de23 gree of (and obstacles to) access of individuals with 

24 disabilities to needed home and community-based 

25 services and to inpatient services. 
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1 (3) QUALITY.—An evaluation of the quality of 

2 long-term care services available. 

3 (4) PRIVATE INSURANCE.—An evaluation of the 

4 performance of the private sector in offering afford5 able long-term care insurance that provides adequate 

6 protection against the costs of long-term care, and 

7 of the effectiveness of Federal standards and State 

8 enforcement, pursuant to part 3, in adequately pro9 tecting long-term care insurance consumers. 

10 (5) COST ISSUES.—An evaluation of the effec11 tiveness of amendments made by this subtitle in con12 taining the costs of long-term care, and in limiting 

13 the share of such costs borne by individuals with 

14 lower incomes. 

15 (6) SERVICE COORDINATION AND INTEGRA16 TION.—An evaluation of the effectiveness of the pro17 grams established or amended under this subtitle in 

18 achieving coordination and integration of long-term 

19 care services, and of such services with acute care 

20 services and social services, and in ensuring provi21 sion of services in the least restrictive setting pos22 sible. 

23 TITLE III—PUBLIC HEALTH 

24 INITIATIVES 

TABLE OF CONTENTS OF TITLE
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Page 

Subtitle A—Workforce Priorities Under Federal Payments 

PART 1—INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION; 

WORKFORCE PRIORITIES

SUBPART A—NATIONAL COUNCIL REGARDING WORKFORCE PRIORITIES

Sec. 3001. National Council on Graduate Medical Education ................ 504 

SUBPART B—AUTHORIZED POSITIONS IN SPECIALTY TRAINING

Sec. 3011. Cooperation regarding approved physician training programs ............................................................................ 506 

Sec. 3012. Annual authorization of number of specialty positions; requirements regarding primary health care ................... 509 

Sec. 3013. Allocations among specialities and programs ........................ 513 

SUBPART C—INSTITUTIONAL COSTS OF GRADUATE MEDICAL EDUCATION

Sec. 3031. Federal formula payments to approved physician training 

programs ....................................................................... 515 

Sec. 3032. Application for payments ...................................................... 516 

Sec. 3033. Availability of funds for payments; annual amount of payments ............................................................................. 517 

Sec. 3034. Additional funding provisions ................................................ 522 

SUBPART D—GENERAL PROVISIONS

Sec. 3041. Definitions ............................................................................. 526 

SUBPART E—TRANSITIONAL PROVISIONS

Sec. 3051. Transitional payments to institutions ................................... 527 

PART 2—INSTITUTIONAL COSTS OF GRADUATE NURSING EDUCATION; 

WORKFORCE PRIORITIES

Sec. 3061. National council; authorized graduate nurse training positions; institutional costs ................................................ 533 

Sec. 3062. Applicability of part 1 provisions .......................................... 535 

Sec. 3063. Funding ................................................................................. 536 

PART 3—RELATED PROGRAMS

Sec. 3071. Programs of the Secretary of Health and Human Services 536 

Sec. 3072. Programs of the Secretary of Labor ..................................... 540 

Sec. 3073. National Institute for Health Care Workforce Development 543 

Sec. 3074. Requirement for certain programs regarding redeployment 

of health care workers ................................................... 546 

Subtitle B—Academic Health Centers 

PART 1—FORMULA PAYMENTS

Sec. 3101. Federal formula payments to academic health centers ......... 548 

Sec. 3102. Request for payments ............................................................ 551 

Sec. 3103. Availability of funds for payments; annual amount of payments ............................................................................. 552 
502 

Title III 

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Sec. 3104. Additional funding provisions ................................................ 554 

PART 2—ACCESS OF PATIENTS TO ACADEMIC HEALTH CENTERS

Sec. 3131. Contracts for ensuring access to centers ............................... 558 

Sec. 3132. Discretionary grants regarding access to centers ................. 559 

Subtitle C—Health Research Initiatives 

PART 1—PROGRAMS FOR CERTAIN AGENCIES

Sec. 3201. Biomedical and behavioral research on health promotion 

and disease prevention .................................................. 560 

Sec. 3202. Health services research ........................................................ 561 

PART 2—FUNDING FOR PROGRAMS

Sec. 3211. Authorizations of appropriations ........................................... 563 

Subtitle D—Core Functions of Public Health Programs; 

National Initiatives Regarding Preventive Health 

PART 1—FUNDING

Sec. 3301. Authorizations of appropriations ........................................... 564 

PART 2—CORE FUNCTIONS OF PUBLIC HEALTH PROGRAMS

Sec. 3311. Purposes ................................................................................ 565 

Sec. 3312. Grants to States for core health functions ............................ 565 

Sec. 3313. Submission of information .................................................... 570 

Sec. 3314. Reports .................................................................................. 571 

Sec. 3315. Application for grant ............................................................. 571 

Sec. 3316. General provisions ................................................................. 572 

Sec. 3317. Allocations for certain activities ............................................ 572 

Sec. 3318. Definitions ............................................................................. 573 

PART 3—NATIONAL INITIATIVES REGARDING HEALTH PROMOTION AND

DISEASE PREVENTION

Sec. 3331. Grants for national prevention initiatives ............................. 573 

Sec. 3332. Priorities ................................................................................ 575 

Sec. 3333. Submission of information .................................................... 576 

Sec. 3334. Application for grant ............................................................. 577 

Subtitle E—Health Services for Medically Underserved 

Populations 

PART 1—COMMUNITY AND MIGRANT HEALTH CENTERS

Sec. 3401. Authorizations of appropriations ........................................... 578 

Sec. 3402. Use of funds .......................................................................... 579 

PART 2—INITIATIVES FOR ACCESS TO HEALTH CARE

SUBPART A—PURPOSES; FUNDING

Sec. 3411. Purposes ................................................................................ 579 

Sec. 3412. Authorizations of appropriations ........................................... 580 
503 

Title III 

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SUBPART B—DEVELOPMENT OF QUALIFIED COMMUNITY HEALTH PLANS AND

PRACTICE NETWORKS

Sec. 3421. Grants and contracts for development of plans and networks ............................................................................. 581 

Sec. 3422. Preferences in making awards of assistance ......................... 586 

Sec. 3423. Certain uses of awards .......................................................... 587 

Sec. 3424. Accessibility of services .......................................................... 589 

Sec. 3425. Additional agreements ........................................................... 592 

Sec. 3426. Submission of certain information ........................................ 594 

Sec. 3427. Reports; audits ...................................................................... 595 

Sec. 3428. Application for assistance ...................................................... 595 

Sec. 3429. General provisions ................................................................. 596 

SUBPART C—CAPITAL COST OF DEVELOPMENT OF QUALIFIED COMMUNITY

HEALTH PLANS AND PRACTICE NETWORKS

Sec. 3441. Loans and loan guarantees regarding plans and networks 596 

Sec. 3442. Certain requirements ............................................................. 598 

Sec. 3443. Defaults; right of recovery .................................................... 600 

Sec. 3444. Provisions regarding construction or expansion of facilities 603 

Sec. 3445. Application for assistance ...................................................... 604 

Sec. 3446. Administration of programs .................................................. 605 

SUBPART D—ENABLING SERVICES

Sec. 3461. Grants and contracts for enabling services ........................... 605 

Sec. 3462. Authorizations of appropriations ........................................... 608 

PART 3—NATIONAL HEALTH SERVICE CORPS

Sec. 3471. Authorizations of appropriations ........................................... 608 

Sec. 3472. Allocation for participation of nurses in scholarship and 

loan repayment programs ............................................. 609 

PART 4—PAYMENTS TO HOSPITALS SERVING VULNERABLE POPULATIONS

Sec. 3481. Payments to hospitals ........................................................... 610 

Sec. 3482. Identification of eligible hospitals .......................................... 612 

Sec. 3483. Amount of payments ............................................................. 613 

Sec. 3484. Base year ............................................................................... 615 

Subtitle F—Mental Health; Substance Abuse 

PART 1—FINANCIAL ASSISTANCE

Sec. 3501. Authorizations of appropriations ........................................... 615 

Sec. 3502. Supplemental formula grants for States regarding activities 

under part B of title XIX of Public Health Service Act 616 

Sec. 3503. Capital costs of development of certain centers and clinics 621 

PART 2—AUTHORITIES REGARDING PARTICIPATING STATES

SUBPART A—REPORT

Sec. 3511. Report on integration of mental health systems ................... 622 

SUBPART B—PILOT PROGRAM

Sec. 3521. Pilot program ........................................................................ 626 
504 

Title III 

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Subtitle G—Comprehensive School Health Education; SchoolRelated Health Services 

PART 1—GENERAL PROVISIONS

Sec. 3601. Purposes ................................................................................ 627 

Sec. 3602. Definitions ............................................................................. 629 

PART 2—SCHOOL HEALTH EDUCATION; GENERAL PROVISIONS

Sec. 3611. Authorizations of appropriations ........................................... 631 

Sec. 3612. Waivers of statutory and regulatory requirements ............... 632 

PART 3—SCHOOL HEALTH EDUCATION; GRANTS TO STATE EDUCATION

AGENCIES

SUBPART A—PLANNING GRANTS FOR STATE EDUCATION AGENCIES

Sec. 3621. Application for grant ............................................................. 636 

Sec. 3622. Approval of Secretary ............................................................ 638 

Sec. 3623. Amount of grant .................................................................... 638 

Sec. 3624. Authorized activities .............................................................. 639 

SUBPART B—IMPLEMENTATION GRANTS FOR STATE EDUCATION AGENCIES

Sec. 3631. Application for grant ............................................................. 640 

Sec. 3632. Selection of grantees ............................................................. 642 

Sec. 3633. Amount of grant .................................................................... 642 

Sec. 3634. Authorized activities; limitation on administrative costs ...... 643 

Sec. 3635. Subgrants to local educational agencies ................................ 644 

SUBPART C—STATE AND LOCAL REPORTS

Sec. 3641. State and local reports .......................................................... 646 

PART 4—SCHOOL HEALTH EDUCATION; GRANTS TO CERTAIN LOCAL

EDUCATIONAL AGENCIES

SUBPART A—ELIGIBILITY

Sec. 3651. Substantial need of area served by agency ........................... 647 

SUBPART B—PLANNING GRANTS FOR LOCAL EDUCATION AGENCIES

Sec. 3661. Application for grant ............................................................. 647 

Sec. 3662. Selection of grantees ............................................................. 649 

Sec. 3663. Amount of grant .................................................................... 649 

Sec. 3664. Authorized activities .............................................................. 650 

SUBPART C—IMPLEMENTATION GRANTS FOR LOCAL EDUCATIONAL AGENCIES

Sec. 3671. Application for grant ............................................................. 651 

Sec. 3672. Selection of grantees ............................................................. 653 

Sec. 3673. Amount of grant .................................................................... 654 

Sec. 3674. Authorized activities .............................................................. 655 

Sec. 3675. Reports .................................................................................. 655 

PART 5—SCHOOL-RELATED HEALTH SERVICES
505 

Title III, Subtitle A 

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SUBPART A—DEVELOPMENT AND OPERATION OF PROJECTS

Sec. 3681. Authorizations of appropriations ........................................... 656 

Sec. 3682. Eligibility for development and operation grants .................. 656 

Sec. 3683. Preferences ............................................................................ 658 

Sec. 3684. Grants for development of projects ....................................... 659 

Sec. 3685. Grants for operation of projects ............................................ 662 

Sec. 3686. Federal administrative costs ................................................. 666 

SUBPART B—CAPITAL COSTS OF DEVELOPING PROJECTS

Sec. 3691. Loans and loan guarantees regarding projects ..................... 666 

Sec. 3692. Funding ................................................................................. 667 

Subtitle H—Public Health Service Initiative 

Sec. 3701. Public health service initiative ............................................... 667 

Subtitle I—Coordination With COBRA Continuation Coverage 

Sec. 3801. Public Health Service Act; coordination with COBRA continuation coverage ......................................................... 668 

1 Subtitle A—Workforce Priorities 

2 Under Federal Payments 

3 PART 1—INSTITUTIONAL COSTS OF GRADUATE 

4 MEDICAL EDUCATION; WORKFORCE PRIORITIES 

5 Subpart A—National Council 

6 Regarding Workforce Priorities 

7 SEC. 3001. NATIONAL COUNCIL ON GRADUATE MEDICAL 

8 EDUCATION. 

9 (a) IN GENERAL.—There is established within the 

10 Department of Health and Human Services a council to 

11 be known as the National Council on Graduate Medical 

12 Education. 

13 (b) DUTIES.—The Secretary shall carry out subpart 

14 B acting through the National Council. 

15 (c) COMPOSITION.— 
506 

Title III, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (1) IN GENERAL.—The membership of the Na2 tional Council shall include individuals who are ap3 pointed to the Council from among individuals who 

4 are not officers or employees of the United States. 

5 Such individuals shall be appointed by the Secretary, 

6 and shall include individuals from each of the fol7 lowing categories: 

8 (A) Consumers of health care services. 

9 (B) Physicians who are faculty members of 

10 medical schools. 

11 (C) Physicians in private practice who are 

12 not physicians described in subparagraph (B). 

13 (D) Officers or employees of regional and 

14 corporate health alliances. 

15 (E) Officers or employees of health care 

16 plans that participate in such alliances. 

17 (F) Such other individuals as the Secretary 

18 determines to be appropriate. 

19 (2) EX OFFICIO MEMBERS; OTHER FEDERAL

20 OFFICERS OR EMPLOYEES.—The membership of the 

21 National Council shall include individuals designated 

22 by the Secretary to serve as members of the Council 

23 from among Federal officers or employees who are 

24 appointed by the President, or by the Secretary or 
507 

Title III, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 other Federal officers who are appointed by the 

2 President with the advice and consent of the Senate. 

3 (d) CHAIR.—The Secretary shall, from among mem4 bers of the National Council appointed under subsection 

5 (c)(1), designate an individual to serve as the Chair of 

6 the Council. 

7 (e) DEFINITIONS.—For purposes of this subtitle: 

8 (1) The term ‘‘medical school’’ means a school 

9 of medicine (as defined in section 799 of the Public 

10 Health Service Act) or a school of osteopathic medi11 cine (as defined in such section). 

12 (2) The term ‘‘National Council’’ means the 

13 council established in subsection (a). 

14 Subpart B—Authorized Positions 

15 in Specialty Training 

16 SEC. 3011. COOPERATION REGARDING APPROVED PHYSI17 CIAN TRAINING PROGRAMS. 

18 (a) IN GENERAL.—With respect to an approved phy19 sician training program in a medical specialty, a funding 

20 agreement for payments under section 3031 for a calendar 

21 year is that the program will ensure that the number of 

22 individuals enrolled in the program in the subsequent aca23 demic year is in accordance with this subpart. 

24 (b) DEFINITIONS.— 
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1 (1) APPROVED PROGRAM.—For purposes of this 

2 subtitle: 

3 (A) The term ‘‘approved physician training 

4 program’’, with respect to the medical speciality 

5 involved, means a residency or other post6 graduate program that trains physicians and 

7 meets the following conditions: 

8 (i) Participation in the program may 

9 be counted toward certification in the med10 ical specialty. 

11 (ii) The program is accredited by the 

12 Accreditation Council on Graduate Medical 

13 Education, or approved by the Council on 

14 Postgraduate Training of the American 

15 Osteopathic Association. 

16 (B) The term ‘‘approved physician training 

17 program’’ includes any postgraduate program 

18 described in subparagraph (A) that provides 

19 health services in an ambulatory setting, with20 out regard to whether the program provides in21 patient hospital services. 

22 (C) The term ‘‘approved physician training 

23 program’’ includes any postgraduate program 

24 described in subparagraph (A), whether oper25 ated by academic health centers, teaching hos-
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1 pitals, multispecialty group practices, ambula2 tory care providers, prepaid health plans, or 

3 other entities. 

4 (2) ELIGIBLE PROGRAM; SUBPART DEFINI5 TION.—For purposes of this subpart, the term ‘‘eli6 gible program’’, with respect to an academic year, 

7 means an approved physician training program that 

8 receives payments under subpart C for the calendar 

9 year in which the academic year begins. 

10 (3) OTHER DEFINITIONS.—For purposes of this 

11 subtitle: 

12 (A)(i) The term ‘‘academic year’’ means 

13 the 1-year period beginning on July 1. The aca14 demic year beginning July 1, 1993, is academic 

15 year 1993–94. 

16 (ii) With respect to the funding agreement 

17 described in subsection (a), the term ‘‘subse18 quent academic year’’ means the academic year 

19 beginning July 1 of the calendar year for which 

20 payments are to be made under the agreement. 

21 (B) The term ‘‘funding agreement’’, with 

22 respect to payments under section 3031 to an 

23 eligible program, means that the Secretary may 

24 make the payments only if the program makes 

25 the agreement involved. 
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1 (C) The term ‘‘medical specialty’’ includes 

2 all medical, surgical, and other physician spe3 cialties and subspecialties. 

4 SEC. 3012. ANNUAL AUTHORIZATION OF NUMBER OF SPE5 CIALTY POSITIONS; REQUIREMENTS REGARD6 ING PRIMARY HEALTH CARE. 

7 (a) ANNUAL AUTHORIZATION OF NUMBER OF POSI8 TIONS.—In the case of each medical specialty, the Na9 tional Council shall, pursuant to section 3011, designate 

10 for each academic year the number of individuals nation11 wide who are authorized to be enrolled in eligible pro12 grams. The preceding sentence is subject to subsection 

13 (c)(2). 

14 (b) PRIMARY HEALTH CARE.— 

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

16 carrying out subsection (a) for an academic year, the 

17 National Council shall ensure that, of the class of 

18 training participants entering eligible programs for 

19 academic year 1998–99 or any subsequent academic 

20 year, the percentage of such class that completes eli21 gible programs in primary health care is not less 

22 than 55 percent (without regard to the academic 

23 year in which the members of the class complete the 

24 programs). 
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1 (2) RULE OF CONSTRUCTION.—The require2 ment of paragraph (1) regarding a percentage ap3 plies in the aggregate to training participants enter4 ing eligible programs for the academic year involved, 

5 and not individually to any eligible program. 

6 (c) DESIGNATIONS REGARDING 3-YEAR PERIODS.— 

7 (1) DESIGNATION PERIODS.—For each medical 

8 specialty, the National Council shall make the an9 nual designations under subsection (a) for periods of 

10 3 academic years. 

11 (2) INITIAL PERIOD.—The first designation pe12 riod established by the National Council after the 

13 date of the enactment of this Act shall be the aca14 demic years 1998–99 through 2000–01. 

15 (d) CERTAIN CONSIDERATIONS IN DESIGNATING AN16 NUAL NUMBERS.— 

17 (1) IN GENERAL.—Factors considered by the 

18 National Council in designating the annual number 

19 of specialty positions for an academic year for a 

20 medical specialty shall include the extent to which 

21 there is a need for additional practitioners in the 

22 speciality, as indicated by the following: 

23 (A) The incidence and prevalence (in the 

24 general population and in various other popu25 lations) of the diseases, disorders, or other 
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1 health conditions with which the specialty is 

2 concerned. 

3 (B) The number of physicians who will be 

4 practicing in the specialty in the academic year. 

5 (C) The number of physicians who will be 

6 practicing in the specialty at the end of the 5- 

7 year period beginning on the first day of the 

8 academic year. 

9 (2) RECOMMENDATIONS OF PRIVATE ORGANIZA10 TIONS.—In designating the annual number of spe11 cialty positions for an academic year for a medical 

12 specialty, the National Council shall consider the 

13 recommendations of organizations representing phy14 sicians in the specialty and the recommendations of 

15 organizations representing consumers of the services 

16 of such physicians. 

17 (3) TOTAL OF RESPECTIVE ANNUAL NUM18 BERS.— 

19 (A) Subject to subparagraph (B), for aca20 demic year 1998-99 and subsequent academic 

21 years, the National Council shall ensure that 

22 the total of the respective annual numbers des23 ignated under subsection (a) for an academic 

24 year is a total that— 
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1 (i) bears a relationship to the number 

2 of individuals who graduated from medical 

3 schools in the United States in the pre4 ceding academic year; and 

5 (ii) is consistent with the purposes of 

6 this subpart. 

7 (B) For each of the academic years 1998- 

8 99 through 2002-03, the total determined 

9 under subparagraph (A) shall be reduced by a 

10 percentage determined by the National Council. 

11 (e) DEFINITIONS.—For purposes of this subtitle: 

12 (1) The term ‘‘annual number of specialty posi13 tions’’, with respect to a medical specialty, means 

14 the number designated by the National Council 

15 under subsection (a) for eligible programs for the 

16 academic year involved. 

17 (2) The term ‘‘designation period’’ means a 3- 

18 year period under subsection (c)(1) for which des19 ignations under subsection (a) are made by the Na20 tional Council. 

21 (3) The term ‘‘primary health care’’ means the 

22 following medical specialties: Family medicine, gen23 eral internal medicine, general pediatrics, and ob24 stetrics and gynecology. 
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1 (4) The term ‘‘specialty position’’ means a posi2 tion as a training participant. 

3 (5) The term ‘‘training participant’’ means an 

4 individual who is enrolled in an approved physician 

5 training program. 

6 SEC. 3013. ALLOCATIONS AMONG SPECIALITIES AND PRO7 GRAMS. 

8 (a) IN GENERAL.—For each academic year, the Na9 tional Council shall for each medical specialty make alloca10 tions among eligible programs of the annual number of 

11 specialty positions that the Council has designated for 

12 such year. The preceding sentence is subject to subsection 

13 (b)(3). 

14 (b) ALLOCATIONS REGARDING 3-YEAR PERIOD.— 

15 (1) IN GENERAL.—For each medical specialty, 

16 the National Council shall make the annual alloca17 tions under subsection (a) for periods of 3 academic 

18 years. 

19 (2) ADVANCE NOTICE TO PROGRAMS.—With re20 spect to the first academic year of an allocation pe21 riod established by the National Council, the Na22 tional Council shall, not later than July 1 of the pre23 ceding academic year, notify each eligible program of 

24 the allocations made for the program for each of the 

25 academic years of the period. 
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1 (3) INITIAL PERIOD.—The first allocation pe2 riod established by the National Council after the 

3 date of the enactment of this Act shall be the aca4 demic years 1998–99 through 2000–01. 

5 (c) CERTAIN CONSIDERATIONS.— 

6 (1) GEOGRAPHIC AREAS; QUALITY OF PRO7 GRAMS.—In making allocations under subsection (a) 

8 for eligible programs of the various geographic 

9 areas, the National Council shall include among the 

10 factors considered the historical distribution among 

11 the areas of approved physician training programs, 

12 and the quality of such programs. 

13 (2) UNDERREPRESENTATION OF MINORITY

14 GROUPS.—In making an allocation under subsection 

15 (a) for an eligible program, the National Council 

16 shall include among the factors considered the fol17 lowing: 

18 (A) The extent to which the population of 

19 training participants in the program includes 

20 training participants who are members of racial 

21 or ethnic minority groups. 

22 (B) With respect to a racial or ethnic 

23 group represented among the training partici24 pants, the extent to which the group is under-
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1 represented in the field of medicine generally 

2 and in the various medical specialities. 

3 (3) RECOMMENDATIONS OF PRIVATE ORGANIZA4 TIONS.—In making allocations under subsection (a) 

5 for eligible programs, the National Council shall con6 sider the recommendations of organizations rep7 resenting physicians in the medical specialties and 

8 the recommendations of organizations representing 

9 consumers of the services of such physicians. 

10 (d) DEFINITIONS.—For purposes of this subtitle, the 

11 term ‘‘allocation period’’ means a 3-year period under sub12 section (b)(1) for which allocations under subsection (a) 

13 are made by the National Council. 

14 Subpart C—Institutional Costs of 

15 Graduate Medical Education 

16 SEC. 3031. FEDERAL FORMULA PAYMENTS TO APPROVED 

17 PHYSICIAN TRAINING PROGRAMS. 

18 (a) IN GENERAL.—In the case of an approved physi19 cian training program that in accordance with section 

20 3032 submits to the Secretary an application for calendar 

21 year 1996 or any subsequent calendar year, the Secretary 

22 shall make payments for such year to the program for the 

23 purpose specified in subsection (b). The Secretary shall 

24 make the payments in an amount determined in accord-
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1 ance with section 3033, and may administer the payments 

2 as a contract, grant, or cooperative agreement. 

3 (b) PAYMENTS FOR OPERATION OF APPROVED PHY4 SICIAN TRAINING PROGRAMS.—The purpose of payments 

5 under subsection (a) is to assist an eligible program with 

6 the costs of operation. A funding agreement for such pay7 ments is that the approved physician training program in8 volved will expend the payments only for such purpose. 

9 (c) ELIGIBLE PROGRAM; SUBPART DEFINITION.— 

10 For purposes of this subpart, the term ‘‘eligible program’’, 

11 with respect to the calendar year involved, means an ap12 proved physician training program that submits to the 

13 Secretary an application for such year in accordance with 

14 section 3032. 

15 SEC. 3032. APPLICATION FOR PAYMENTS. 

16 (a) IN GENERAL.—For purposes of section 3031(a), 

17 an application for payments under such section for a cal18 endar year is in accordance with this section if— 

19 (1) the approved physician training program in20 volved submits the application not later than the 

21 date specified by the Secretary; 

22 (2) the application demonstrates that the condi23 tion described in subsection (b) is met with respect 

24 to the program; 
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1 (3) the application contains each funding agree2 ment described in this part and the application pro3 vides such assurances of compliance with the agree4 ments as the Secretary may require; and 

5 (4) the application is in such form, is made in 

6 such manner, and contains such agreements, assur7 ances, and information as the Secretary determines 

8 to be necessary to carry out this part. 

9 (b) CERTAIN CONDITIONS.—An approved physician 

10 training program meets the condition described in this 

11 subsection for receiving payments under section 3031 for 

12 a calendar year if the institution within which the program 

13 operates agrees that such payments will be made by the 

14 Secretary directly to the program (and such agreement is 

15 included in the application under subsection (a)), and the 

16 Secretary shall ensure that such institution is permitted 

17 to participate as a provider in a regional or corporate alli18 ance health plan during such year only if each of the ap19 proved physician training programs of the institution 

20 meets the requirements for receiving payments under such 

21 section for such year. 

22 SEC. 3033. AVAILABILITY OF FUNDS FOR PAYMENTS; AN23 NUAL AMOUNT OF PAYMENTS. 

24 (a) ANNUAL HEALTH PROFESSIONS WORKFORCE

25 ACCOUNT.— 
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1 (1) IN GENERAL.—Subject to paragraph (2) 

2 and section 3034, the amount available for a cal3 endar year for making payments under sections 

4 3031 and 3051 (constituting an account to be 

5 known as the annual health professions workforce 

6 account) is the following, as applicable to the cal7 endar year: 

8 (A) In the case of calendar year 1996, 

9 $3,200,000,000. 

10 (B) In the case of calendar year 1997, 

11 $3,550,000,000. 

12 (C) In the case of calendar year 1998, 

13 $4,800,000,000. 

14 (D) In the case of each of the calendar 

15 years 1999 and 2000, $5,800,000,000. 

16 (E) In the case of each subsequent cal17 endar year, the amount specified in subpara18 graph (D) increased by the product of such 

19 amount and the general health care inflation 

20 factor for such year (as defined in subsection 

21 (d)). 

22 (2) TRANSITIONAL PROVISION.— 

23 (A) With respect to making payments 

24 under sections 3031 and 3051 for calendar year 

25 1996 or 1997, the Secretary shall first make 
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1 payments under section 3031 to eligible pro2 grams described in subparagraph (B) in the 

3 amount determined for the programs under 

4 subsection (b) for such year, and then, from 

5 such amounts as remain available in the annual 

6 health professions workforce account for such 

7 year, shall make payments under section 3031 

8 to other eligible programs and shall make pay9 ments under section 3051. 

10 (B) An eligible program described in this 

11 subparagraph is such a program that is oper12 ated in a State that is a participating State 

13 under title I. 

14 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI15 BLE PROGRAMS.— 

16 (1) IN GENERAL.—Subject to the annual health 

17 professions workforce account available for a cal18 endar year, the amount of payments required in sec19 tion 3031 to be made to an eligible program for the 

20 calendar year is an amount equal to the product 

21 of— 

22 (A) the number of full-time equivalent 

23 training participants in the program; and 

24 (B) the national average of the costs of 

25 such programs in training such a participant, 
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1 as determined by consideration of the following 

2 factors (and as adjusted under paragraph (2)): 

3 (i) The national average salary of 

4 training participants. 

5 (ii) The national average costs of such 

6 programs in providing for faculty super7 vision of training participants and for re8 lated activities. 

9 (2) ADDITIONAL PROVISIONS REGARDING NA10 TIONAL AVERAGE COST.— 

11 (A) The Secretary shall in accordance with 

12 paragraph (1)(B) determine, for academic year 

13 1992–93, an amount equal to the national aver14 age described in such paragraph with respect to 

15 training a participant in an approved physician 

16 training program in the medical specialty in17 volved. The national average applicable under 

18 such paragraph for a calendar year for such 

19 programs is, subject to subparagraph (B), the 

20 amount determined under the preceding sen21 tence increased by the amount necessary to off22 set the effects of inflation occurring since aca23 demic year 1992–93, as determined through use 

24 of the consumer price index. 
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1 (B) The national average determined 

2 under subparagraph (A) and applicable to a cal3 endar year shall, in the case of the eligible pro4 gram involved, be adjusted by a factor to reflect 

5 regional differences in the applicable wage and 

6 wage-related costs. 

7 (c) LIMITATION.—If, subject to subsection (a)(2), the 

8 annual health professions workforce account available for 

9 a calendar year is insufficient for providing each eligible 

10 program with the amount of payments determined under 

11 subsection (b) for the program for such year, the Sec12 retary shall make such pro rata reductions in the amounts 

13 so determined as may be necessary to ensure that the total 

14 of payments made under section 3031 for such year equals 

15 the total of such account. 

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

17 (1) The term ‘‘annual health professions work18 force account’’ means the account established pursu19 ant to subsection (a)(1). 

20 (2) The term ‘‘consumer price index’’ has the 

21 meaning given such term in section 1902. 

22 (3) The term ‘‘general health care inflation fac23 tor’’, with respect to a year, has the meaning given 

24 such term in section 6001(a)(3) for such year. 
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1 SEC. 3034. ADDITIONAL FUNDING PROVISIONS. 

2 (a) SOURCES OF FUNDS FOR ANNUAL HEALTH PRO3 FESSIONS WORKFORCE ACCOUNT.—The amount specified 

4 in section 3033(a)(1) for the annual health professions 

5 workforce account for a calendar year shall be derived 

6 from the sources specified in subsection (b). 

7 (b) CONTRIBUTIONS FROM MEDICARE TRUST

8 FUNDS, REGIONAL ALLIANCES, AND CORPORATE ALLI9 ANCES.—For purposes of subsection (a), the sources spec10 ified in this subsection for a calendar year are the fol11 lowing: 

12 (1) Transfers made by the Secretary under sec13 tion 4051. 

14 (2) Payments made by regional alliances under 

15 section 1353 and— 

16 (A) in the case of each of the calendar 

17 years 1996 and 1997, transferred in an amount 

18 equal to 50 percent of such payments made for 

19 the calendar year involved; and 

20 (B) in the case of calendar year 1998 and 

21 each subsequent calendar year, transferred in 

22 an amount equal to the aggregate regional alli23 ance portion determined under subsection 

24 (c)(2)(A). 

25 (3) The transfer made under subsection (d)(1). 
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Title III, Subtitle A 

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1 (c) CONTRIBUTIONS FROM REGIONAL AND COR2 PORATE ALLIANCES.— 

3 (1) DETERMINATION OF AGGREGATE REGIONAL

4 AND CORPORATE ALLIANCE AMOUNT.—For purposes 

5 regarding the provision of funds for the annual 

6 health professions workforce account for a calendar 

7 year (other than calendar year 1996 or 1997), the 

8 Secretary shall determine an aggregate regional and 

9 corporate alliance amount, which amount is to be 

10 paid by such alliances pursuant to paragraphs 

11 (2)(B) and (3) of subsection (b), respectively, and 

12 which amount shall be equal to the difference be13 tween— 

14 (A) the amount specified in section 

15 3033(a)(1) for the annual health professions 

16 workforce account for such year; and 

17 (B) the amount transferred under section 

18 4051 for the year. 

19 (2) ALLOCATION OF AMOUNT AMONG REGIONAL

20 AND CORPORATE ALLIANCES.—With respect to the 

21 aggregate regional and corporate alliance amount 

22 determined under paragraph (1) for a calendar year 

23 (other than calendar year 1996 or 1997)— 

24 (A) the aggregate regional alliance portion 

25 of such amount is the product of such amount 
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Title III, Subtitle A 

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1 and the percentage constituted by the ratio of 

2 the total plan payments of regional alliances to 

3 the combined total plan payments of regional 

4 alliances and corporate alliances; and 

5 (B) the aggregate corporate alliance por6 tion of such amount is the product of such 

7 amount and the percentage constituted by the 

8 ratio of the total plan payments of corporate al9 liances to such combined total plan payments. 

10 (d) COMPLIANCE REGARDING CORPORATE ALLI11 ANCES.— 

12 (1) IN GENERAL.—Effective January 15 of cal13 endar year 1996 and each subsequent calendar year, 

14 there is hereby transferred to the Secretary, out of 

15 any money in the Treasury not otherwise appro16 priated— 

17 (A) in the case of each of the calendar 

18 years 1996 and 1997, an amount equal to the 

19 difference between— 

20 (i) the amount specified in section 

21 3033(a)(1) for the annual health profes22 sions workforce account for the calendar 

23 year involved; and 

24 (ii) the sum of the amount transferred 

25 under section 4051 for such year and the 
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Title III, Subtitle A 

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1 amount transferred under subsection 

2 (b)(2)(A) for such year; and 

3 (B) in the case of calendar year 1998 and 

4 each subsequent calendar year, an amount 

5 equal to the aggregate corporate alliance por6 tion determined under subsection (c)(2)(B) for 

7 the calendar year involved. 

8 (2) MANNER OF COMPLIANCE.—The payment 

9 by corporate alliances of the tax imposed under sec10 tion 3461 of the Internal Revenue Code of 1986 (as 

11 added by section 7121 of this Act), together with the 

12 transfer made in paragraph (1)(B) for the calendar 

13 year involved, is deemed to be the payment required 

14 pursuant to subsection (c)(1) for corporate alliances 

15 for such year. 

16 (3) GRADUATE NURSE EDUCATION.—Effective 

17 January 15 of calendar year 1996 and each subse18 quent calendar year, there is hereby transferred to 

19 the Secretary, out of any money in the Treasury not 

20 otherwise appropriated, 50 percent of the amount 

21 specified in section 3063(b) with respect to the an22 nual graduate nurse training account. 

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

24 term ‘‘plan payments’’ with respect to a regional or cor-
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1 porate alliance, means the amount paid to health plans 

2 by the alliance. 

3 Subpart D—General Provisions 

4 SEC. 3041. DEFINITIONS. 

5 For purposes of this subtitle: 

6 (1) The term ‘‘academic year’’ has the meaning 

7 given such term in section 3011(b). 

8 (2) The term ‘‘allocation period’’ has the mean9 ing given such term in section 3013(d). 

10 (3) The term ‘‘annual health professions work11 force account’’ has the meaning given such term in 

12 section 3033(d). 

13 (4) The term ‘‘annual number of specialty posi14 tions’’ has the meaning given such term in section 

15 3012(e). 

16 (5) The term ‘‘approved physician training pro17 gram’’ has the meaning given such term in section 

18 3011(b). 

19 (6) The term ‘‘consumer price index’’ has the 

20 meaning given such term in section 3033(d). 

21 (7) The term ‘‘designation period’’ has the 

22 meaning given such term in section 3012(e). 

23 (8) The term ‘‘eligible program’’ has the mean24 ing given such term in section 3011(b), in the case 
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1 of subpart B; and has the meaning given such term 

2 in section 3031(c), in the case of subpart C. 

3 (9) The term ‘‘funding agreement’’ has the 

4 meaning given such term in section 3011(b). 

5 (10) The term ‘‘general health care inflation 

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

7 3033(d). 

8 (11) The term ‘‘medical school’’ has the mean9 ing given such term in section 3001(e). 

10 (12) The term ‘‘medical specialty’’ has the 

11 meaning given such term in section 3011(b). 

12 (13) The term ‘‘National Council’’ has the 

13 meaning given such term in section 3001(e). 

14 (14) The term ‘‘plan payments’’ has the mean15 ing given such term in section 3034(e). 

16 (15) The term ‘‘primary health care’’ has the 

17 meaning given such term in section 3012(e). 

18 (16) The term ‘‘specialty position’’ has the 

19 meaning given such term in section 3012(e). 

20 (17) The term ‘‘training participant’’ has the 

21 meaning given such term in section 3012(e). 

22 Subpart E—Transitional Provisions 

23 SEC. 3051. TRANSITIONAL PAYMENTS TO INSTITUTIONS. 

24 (a) PAYMENTS REGARDING EFFECTS OF SUBPART B 

25 ALLOCATIONS.—For each of the four calendar years speci-
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Title III, Subtitle A 

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1 fied in subsection (b)(2), in the case of an institution that 

2 submits to the Secretary an application for such year in 

3 accordance with subsection (d), the Secretary shall make 

4 payments for the year to the institution for the purpose 

5 specified in subsection (c). The Secretary shall make the 

6 payments in an amount determined in accordance with 

7 subsection (e), and may administer the payments as a con8 tract, grant, or cooperative agreement. 

9 (b) INSTITUTIONS LOSING SPECIALTY POSITIONS; 

10 RELEVANT YEARS REGARDING PAYMENTS.— 

11 (1) INSTITUTIONS LOSING SPECIALTY POSI12 TIONS.—The Secretary may make payments under 

13 subsection (a) to an institution only if, with respect 

14 to the calendar year involved, the institution meets 

15 the following conditions: 

16 (A) The institution operates one or more 

17 programs that— 

18 (i) are approved physician training 

19 programs; and 

20 (ii) are receiving payments under sec21 tion 3031 for such year. 

22 (B) The aggregate number of speciality po23 sitions in such programs (in the medical speci24 alities with respect to which such payments are 

25 made) is below the aggregate number of such 
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Title III, Subtitle A 

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1 positions at the institution for academic year 

2 1993–94 as a result of allocations under sub3 part B. 

4 (2) RELEVANT YEARS.—The Secretary may 

5 make payments under subsection (a) to an institu6 tion only for the first four calendar years after cal7 endar 1997 for which the institution meets the con8 ditions described in paragraph (1). 

9 (3) ELIGIBLE INSTITUTION.—For purposes of 

10 this section, the term ‘‘eligible institution’’ means an 

11 institution that submits to the Secretary an applica12 tion in accordance with subsection (d). 

13 (c) PURPOSE OF PAYMENTS.—The purpose of pay14 ments under subsection (a) is to assist an eligible institu15 tion with the costs of operation. A funding agreement for 

16 such payments is that the institution involved will expend 

17 the payments only for such purpose. 

18 (d) APPLICATION FOR PAYMENTS.—For purposes of 

19 subsection (a), an application for payments under such 

20 subsection is in accordance with this subsection if the in21 stitution involved submits the application not later than 

22 the date specified by the Secretary; the application dem23 onstrates that the institution meets the conditions de24 scribed in subsection (b)(1) and that the institution has 

25 cooperated with the approved physician training programs 
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Title III, Subtitle A 

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1 of the institution in meeting the condition described in sec2 tion 3032(b); the application contains each funding agree3 ment described in this subpart and the application pro4 vides such assurances of compliance with the agreements 

5 as the Secretary may require; and the application is in 

6 such form, is made in such manner, and contains such 

7 agreements, assurances, and information as the Secretary 

8 determines to be necessary to carry out this subpart. 

9 (e) AMOUNT OF PAYMENTS.— 

10 (1) IN GENERAL.—Subject to the annual health 

11 professions workforce account available for the cal12 endar year involved, the amount of payments re13 quired in subsection (a) to be made to an eligible in14 stitution for such year is the product of the amount 

15 determined under paragraph (2) and the applicable 

16 percentage specified in paragraph (3). 

17 (2) NUMBER OF SPECIALTY POSITIONS LOST; 

18 NATIONAL AVERAGE SALARY.—For purposes of 

19 paragraph (1), the amount determined under this 

20 paragraph for an eligible institution for the calendar 

21 year involved is the product of— 

22 (A) an amount equal to the aggregate 

23 number of full-time equivalent specialty posi24 tions lost; and 
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1 (B) the national average salary of training 

2 participants. 

3 (3) APPLICABLE PERCENTAGE.—For purposes 

4 of paragraph (1), the applicable percentage for a cal5 endar year is the following, as applicable to such 

6 year: 

7 (A) For the first calendar year after cal8 endar 1997 for which the eligible institution in9 volved meets the conditions described in sub10 section (b)(1), 100 percent. 

11 (B) For the second such year, 75 percent. 

12 (C) For the third such year, 50 percent. 

13 (D) For the fourth such year, 25 percent. 

14 (4) DETERMINATION OF SPECIALTY POSITIONS

15 LOST.— 

16 (A) For purposes of this subsection, the 

17 aggregate number of specialty positions lost, 

18 with respect to a calendar year, is the difference 

19 between— 

20 (i) the aggregate number of specialty 

21 positions described in subparagraph (B) 

22 that are estimated for the eligible institu23 tion involved for the academic year begin24 ning in such calendar year; and 
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1 (ii) the aggregate number of such spe2 cialty positions at the institution for aca3 demic year 1993-94. 

4 (B) For purposes of subparagraph (A), the 

5 specialty positions described in this subpara6 graph are specialty positions in the medical spe7 cialities with respect to which payments under 

8 section 3031 are made to the approved physi9 cian training programs of the eligible institution 

10 involved. 

11 (5) ADDITIONAL PROVISION REGARDING NA12 TIONAL AVERAGE SALARY.— 

13 (A) The Secretary shall determine, for aca14 demic year 1992-93, an amount equal to the 

15 national average described in paragraph (2)(B). 

16 The national average applicable under such 

17 paragraph for a calendar year is, subject to 

18 subparagraph (B), the amount determined 

19 under the preceding sentence increased by an 

20 amount necessary to offset the effects of infla21 tion occurring since academic year 1992-93, as 

22 determined through use of the consumer price 

23 index. 

24 (B) The national average determined 

25 under subparagraph (A) and applicable to a cal-
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1 endar year shall, in the case of the eligible insti2 tution involved, be adjusted by a factor to re3 flect regional differences in the applicable wage 

4 and wage-related costs. 

5 PART 2—INSTITUTIONAL COSTS 

6 OF GRADUATE NURSING EDU7 CATION; WORKFORCE PRIOR8 ITIES 

9 SEC. 3061. NATIONAL COUNCIL; AUTHORIZED GRADUATE 

10 NURSE TRAINING POSITIONS; INSTITU11 TIONAL COSTS. 

12 (a) PROGRAM REGARDING GRADUATE NURSE TRAIN13 ING PROGRAMS.—The Secretary shall, in accordance with 

14 this part, carry out a program with respect to graduate 

15 nurse training programs that is equivalent to the program 

16 carried out under part 1 with respect to approved physi17 cian training programs. 

18 (b) DEFINITIONS.—For purposes of this part: 

19 (1) The term ‘‘graduate nurse training pro20 grams’’ means programs for advanced nurse edu21 cation, programs for education as nurse practi22 tioners, programs for education as nurse midwives, 

23 programs for education as nurse anesthetists, and 

24 such other programs for training in clinical nurse 
535 

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1 specialties as are determined by the Secretary to re2 quire advanced education. 

3 (2) The term ‘‘graduate nurse training posi4 tion’’ means a position as an individual who is en5 rolled in a graduate nurse training program. 

6 (3) The term ‘‘programs for advanced nurse 

7 education’’ means programs meeting the conditions 

8 to be programs for which awards of grants and con9 tracts may be made under section 821 of the Public 

10 Health Service Act. 

11 (4) The term ‘‘programs for education as nurse 

12 practitioners’’ means programs meeting the condi13 tions to be programs for which awards of grants and 

14 contracts may be made under section 822 of the 

15 Public Health Service Act for education as a nurse 

16 practitioners. 

17 (5) The term ‘‘programs for education as nurse 

18 midwives’’ means programs meeting the conditions 

19 to be programs for which awards of grants and con20 tracts may be made under section 822 of the Public 

21 Health Service Act for education as nurse midwives. 

22 (6) The term ‘‘programs for education as nurse 

23 anesthetists’’ means programs meeting the condi24 tions to be programs for which awards of grants 
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1 may be made under section 831 of the Public Health 

2 Service Act for education as nurse anesthetists. 

3 SEC. 3062. APPLICABILITY OF PART 1 PROVISIONS. 

4 (a) IN GENERAL.—The provisions of part 1 apply to 

5 the program carried out under section 3061 to the same 

6 extent and in the same manner as such provisions apply 

7 to the program carried out under part 1, subject to the 

8 subsequent provisions of this section. Section 3051 does 

9 not apply for purposes of the preceding sentence. 

10 (b) NATIONAL COUNCIL.—With respect to section 

11 3001 as applied to this part, the council shall be known 

12 as the National Council on Graduate Nurse Education (in 

13 this part referred to as the ‘‘National Council’’). The pro14 visions of section 851 of the Public Health Service Act 

15 regarding the composition of the council under such sec16 tion apply to the composition of the National Council to 

17 the same extent and in the same manner as such provi18 sions apply to the council under such section 851. 

19 (c) ALLOCATION OF GRADUATE NURSE TRAINING

20 POSITIONS; FORMULA PAYMENTS FOR OPERATING

21 COSTS.—With respect to subparts B and C of part 1 as 

22 applied to this part— 

23 (1) the funding agreement described in section 

24 3011 is to be made by graduate nurse training pro25 grams; 
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Title III, Subtitle A 

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1 (2) designations under section 3012 and alloca2 tions under section 3013 apply to graduate nurse 

3 training positions; and 

4 (3) payments under section 3031 are to be 

5 made to graduate nurse training programs, subject 

6 to the requirements for such payments. 

7 SEC. 3063. FUNDING. 

8 (a) IN GENERAL.—With respect to sections 3033 and 

9 3034 as applied to this part, the provisions of this section 

10 apply. 

11 (b) ANNUAL GRADUATE NURSE TRAINING AC12 COUNT.—Subject to subsection (c), the amount available 

13 for each calendar year for making payments pursuant to 

14 section 3062(c)(3) to graduate nurse training programs 

15 (constituting an account to be known as the annual grad16 uate nurse training account) is $200,000,000. 

17 (c) SOURCES OF FUNDS FOR ACCOUNT.—The 

18 amount specified in subsection (b) for the annual graduate 

19 nurse training account for a calendar year shall be derived 

20 from the following sources: 

21 (1) The transfer under section 3034(d)(3). 

22 (2) The transfer under section 3104(d)(3). 
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Title III, Subtitle A 

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1 PART 3—RELATED PROGRAMS 

2 SEC. 3071. PROGRAMS OF THE SECRETARY OF HEALTH AND 

3 HUMAN SERVICES. 

4 (a) IN GENERAL.— 

5 (1) FUNDING.—For purposes of carrying out 

6 the programs described in this section, there is au7 thorized to be appropriated $400,000,000 for fiscal 

8 year 1994 and each subsequent fiscal year (in addi9 tion to amounts that may otherwise be authorized to 

10 be appropriated for carrying out the programs). 

11 (2) ADMINISTRATION.—The programs described 

12 in this section and carried out with amounts made 

13 available under subsection (a) shall be carried out by 

14 the Secretary of Health and Human Services. 

15 (b) PRIMARY CARE PHYSICIAN AND PHYSICIAN AS16 SISTANT TRAINING.—For purposes of subsection (a), the 

17 programs described in this section include programs to 

18 support projects to train additional numbers of primary 

19 care physicians and physician assistants, including 

20 projects to enhance community-based generalist training 

21 for medical students, residents, and practicing physicians; 

22 to retrain mid-career physicians previously certified in a 

23 nonprimary care medical specialty; to expand the supply 

24 of physicians with special training to serve in rural and 

25 inner-city medically underserved areas; to support expan-
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1 sion of service-linked educational networks that train a 

2 range of primary care providers in community settings; 

3 to provide for training in managed care, cost-effective 

4 practice management, and continuous quality improve5 ment; and to develop additional information on primary 

6 care workforce issues as required to meet future needs in 

7 health care. 

8 (c) TRAINING OF UNDERREPRESENTED MINORITIES

9 AND DISADVANTAGED PERSONS.—For purposes of sub10 section (a), the programs described in this section include 

11 a program to support projects to increase the number of 

12 underrepresented minority and disadvantaged persons in 

13 medicine, osteopathy, dentistry, nursing, public health, 

14 and other health professions, including projects to provide 

15 continuing financial assistance for such persons entering 

16 health professions training programs; to increase support 

17 for recruitment and retention of such persons in the health 

18 professions; to maintain efforts to foster interest in health 

19 careers among such persons at the preprofessional level; 

20 and to increase the number of minority health professions 

21 faculty. 

22 (d) NURSE TRAINING.—For purposes of subsection 

23 (a), the programs described in this section include a pro24 gram to support projects to support midlevel provider 

25 training and address priority nursing workforce needs, in-
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1 cluding projects to train additional nurse practitioners and 

2 nurse midwives; to support baccalaureate-level nurse 

3 training programs providing preparation for careers in 

4 teaching, community health service, and specialized clin5 ical care; to train additional nurse clinicians and nurse 

6 anesthetists; to support interdisciplinary school-based 

7 community nursing programs; and to promote research on 

8 nursing workforce issues. 

9 (e) INAPPROPRIATE PRACTICE BARRIERS; FULL UTI10 LIZATION OF SKILLS.—For purposes of subsection (a), the 

11 programs described in this section include a program— 

12 (1) to develop and encourage the adoption of 

13 model professional practice statutes for advanced 

14 practice nurses and physician assistants, and to oth15 erwise support efforts to remove inappropriate bar16 riers to practice by such nurses and such physician 

17 assistants; and 

18 (2) to promote the full utilization of the profes19 sional education and clinical skills of advanced prac20 tice nurses and physician assistants. 

21 (f) OTHER PROGRAMS.—For purposes of subsection 

22 (a), the programs described in this section include a pro23 gram to train health professionals and administrators in 

24 managed care, cost-effective practice management, contin-
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1 uous quality improvement practices, and provision of cul2 turally sensitive care. 

3 (g) RELATIONSHIP TO EXISTING PROGRAMS.—This 

4 section may be carried out through programs established 

5 in title VII or VIII of the Public Health Service Act, as 

6 appropriate and as consistent with the purposes of such 

7 programs. 

8 SEC. 3072. PROGRAMS OF THE SECRETARY OF LABOR. 

9 (a) IN GENERAL.— 

10 (1) FUNDING.—For purposes of carrying out 

11 the programs described in this section, and for car12 rying out section 3073, there is authorized to be ap13 propriated $200,000,000 for fiscal year 1994 and 

14 each subsequent fiscal year (in addition to amounts 

15 that may otherwise be authorized to be appropriated 

16 for carrying out the programs). 

17 (2) ADMINISTRATION.—The programs described 

18 in this section and carried out with amounts made 

19 available under subsection (a) shall be carried out by 

20 the Secretary of Labor (in this section referred to as 

21 the ‘‘Secretary’’). 

22 (b) RETRAINING PROGRAMS; ADVANCED CAREER

23 POSITIONS; WORKFORCE ADJUSTMENT PROGRAMS.— 
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Title III, Subtitle A 

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

2 (a), the programs described in this section are the 

3 following: 

4 (A) A program for skills upgrading and oc5 cupational retraining (including retraining 

6 health care workers for more advanced positions 

7 as technicians, nurses, and physician assist8 ants), and for quality and workforce improve9 ment. 

10 (B) A demonstration program to assist 

11 workers in health care institutions in obtaining 

12 advanced career positions. 

13 (C) A program to develop and operate 

14 health-worker job banks in local employment 

15 services agencies, subject to the following: 

16 (i) Such job banks shall be available 

17 to all health care providers in the commu18 nity involved. 

19 (ii) Such job banks shall begin oper20 ation not later than 90 days after the date 

21 of the enactment of this Act. 

22 (D) A program to provide for joint labor23 management decision-making in the health care 

24 sector on workplace matters related to the re-
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1 structuring of the health care delivery system 

2 provided for in this Act. 

3 (E) A program to facilitate the comprehen4 sive workforce adjustment initiative. 

5 (2) USE OF FUNDS.—Amounts made available 

6 under subsection (a) for carrying out this section 

7 may be expended for program support, faculty devel8 opment, trainee support, workforce analysis, and dis9 semination of information, as necessary to produce 

10 required performance outcomes. 

11 (c) CERTAIN REQUIREMENTS FOR PROGRAMS.—In 

12 carrying out the programs described in subsection (b), the 

13 Secretary shall, with respect to the organizations and em14 ployment positions involved, provide for the following: 

15 (1) Explicit, clearly defined skill requirements 

16 developed for all the positions and projections of the 

17 number of openings for each position. 

18 (2) Opportunities for internal career movement. 

19 (3) Opportunities to work while training or 

20 completing an educational program. 

21 (4) Evaluation and dissemination. 

22 (5) Training opportunities in several forms, as 

23 appropriate. 

24 (d) ADMINISTRATIVE REQUIREMENTS.—In carrying 

25 out the programs described in subsection (b), the Sec-
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Title III, Subtitle A 

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1 retary shall, with respect to the organizations and employ2 ment positions involved, provide for the following: 

3 (1) Joint labor-management implementation 

4 and administration. 

5 (2) Discussion with employees as to training 

6 needs for career advancement. 

7 (3) Commitment to a policy of internal hirings 

8 and promotion. 

9 (4) Provision of support services. 

10 (5) Consultations with employers and with or11 ganized labor. 

12 SEC. 3073. NATIONAL INSTITUTE FOR HEALTH CARE WORK13 FORCE DEVELOPMENT. 

14 (a) ESTABLISHMENT OF INSTITUTE.—The Secretary 

15 of Health and Human Services and the Secretary of Labor 

16 shall jointly establish an office to be known as the Na17 tional Institute for Health Care Workforce Development. 

18 (b) DIRECTOR.—The Institute shall be headed by a 

19 director, who shall be appointed jointly by the Secretaries. 

20 (c) DUTIES.— 

21 (1) IN GENERAL.—The Director of the Institute 

22 shall make recommendations to the Secretaries re23 garding— 

24 (A) the supply of health care workers 

25 needed for proper staffing of the health care de-
545 

Title III, Subtitle A 

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1 livery system serving the regional and corporate 

2 alliance health plans established under title I; 

3 (B) the impact of this Act, and of related 

4 changes regarding health care, on health care 

5 workers and the needs of such workers with re6 spect to such matters, including needs regard7 ing education, training, and other matters relat8 ing to career development; and 

9 (C) the development and implementation of 

10 high-performance, high-quality health care de11 livery systems, including employee participation 

12 committee systems and employee team systems, 

13 that will contribute to the development of bet14 ter, more effective health care by increasing the 

15 role, the responsibilities and the area of inde16 pendent decision-making authority of health 

17 care workers. 

18 (2) ADMINISTRATION OF PROGRAMS REGARD19 ING RETRAINING, ADVANCED CAREER POSITIONS, 

20 JOB BANKS, AND HIGH-PERFORMANCE WORK21 PLACES.—The Secretary of Labor is authorized to— 

22 (A) carry out section 3073 acting through 

23 the Director of the Institute; and 
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Title III, Subtitle A 

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1 (B) implement the recommendations of the 

2 Director regarding employee participation com3 mittees and other high-performance systems. 

4 (d) ADVISORY BOARD.— 

5 (1) IN GENERAL.—The Secretaries shall estab6 lish an advisory board to assist in the develop of rec7 ommendations under subsection (c). 

8 (2) COMPOSITION.—The Advisory Board shall 

9 be composed of— 

10 (A) the Secretary of Labor; 

11 (B) the Secretary of Health and Human 

12 Services; 

13 (C) representatives of health care workers 

14 in organized labor; 

15 (D) representatives of health care institu16 tions; 

17 (E) representatives of health care edu18 cation organizations; 

19 (F) representatives of consumer organiza20 tions; and 

21 (G) such other individuals as the Secre22 taries determine to be appropriate. 

23 (e) STAFF, QUARTERS, AND OTHER ASSISTANCE.— 

24 The Secretaries shall provide the Institute and the Advi25 sory Board with such staff, quarters, and other adminis-
547 

Title III, Subtitle A 

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1 trative assistance as may be necessary for the Institute 

2 and the Advisory Board to carry out this section. 

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

4 (1) The term ‘‘Advisory Board’’ means the ad5 visory board established under subsection (d). 

6 (2) The term ‘‘employee participation commit7 tees’’ means committees of workers independently 

8 drawn from a facility’s workforce, or selected by 

9 unions where collective bargaining agreements are in 

10 effect, and which operate without employer inter11 ference and consult with management on issues of 

12 costs and efficiency, workplace reorganizations, pro13 ductivity, and quality of care. 

14 (3) The term ‘‘Institute’’ means the Institute 

15 established under subsection (a). 

16 (4) The term ‘‘Secretaries’’ means the Sec17 retary of Health and Human Services and the Sec18 retary of Labor. 

19 (g) SUNSET.—Effective upon the end of calendar 

20 year 2000, this section is repealed. 

21 SEC. 3074. REQUIREMENT FOR CERTAIN PROGRAMS RE22 GARDING REDEPLOYMENT OF HEALTH CARE 

23 WORKERS. 

24 (a) STATE PROGRAMS FOR HOME AND COMMUNITY25 BASED SERVICES FOR INDIVIDUALS WITH DISABIL-
548 

Title III, Subtitle A 

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1 ITIES.—With respect to the plan required in section 

2 2102(a) (for State programs for home and community3 based services for individuals with disabilities under part 

4 1 of subtitle B of title II), the plan shall, in addition to 

5 requirements under such part, provide for the following: 

6 (1) Before initiating the process of imple7 menting the State program under such plan, nego8 tiations will be commenced with labor unions rep9 resenting the employees of the affected hospitals or 

10 other facilities. 

11 (2) Negotiations under paragraph (1) will ad12 dress the following: 

13 (A) The impact of the implementation of 

14 the program upon the workforce. 

15 (B) Methods to redeploy workers to posi16 tions in the proposed system, in the case of 

17 workers affected by the program. 

18 (3) The plan will provide evidence that there 

19 has been compliance with paragraphs (1) and (2), 

20 including a description of the results of the negotia21 tions. 

22 (b) PLAN FOR INTEGRATION OF MENTAL HEALTH

23 SYSTEMS.—With respect to the plan required in section 

24 3511(a) (relating to the integration of the mental health 

25 and substance abuse services of a State and its political 
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Title III, Subtitle A 

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1 subdivisions with the mental health and substance abuse 

2 services included in the comprehensive benefit package 

3 under title I), the plan shall, in addition to requirements 

4 under such section, provide for the following: 

5 (1) Before initiating the process of imple6 menting the integration of such services, negotia7 tions will be commenced with labor unions rep8 resenting the employees of the affected hospitals or 

9 other facilities. 

10 (2) Negotiations under paragraph (1) will ad11 dress the following: 

12 (A) The impact of the proposed changes 

13 upon the workforce. 

14 (B) Methods to redeploy workers to posi15 tions in the proposed system, in the case of 

16 workers affected by the proposed changes. 

17 (3) The plan will provide evidence that there 

18 has been compliance with paragraphs (1) and (2), 

19 including a description of the results of the negotia20 tions. 
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Title III, Subtitle B 

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1 Subtitle B—Academic Health 

2 Centers 

3 PART 1—FORMULA PAYMENTS 

4 SEC. 3101. FEDERAL FORMULA PAYMENTS TO ACADEMIC 

5 HEALTH CENTERS. 

6 (a) IN GENERAL.—In the case of a qualified aca7 demic health center or qualified teaching hospital that in 

8 accordance with section 3102 submits to the Secretary a 

9 written request for calendar year 1996 or any subsequent 

10 calendar year, the Secretary shall make payments for such 

11 year to the center or hospital for the purpose specified 

12 in subsection (b). The Secretary shall make the payments 

13 in an amount determined in accordance with section 3103, 

14 and may administer the payments as a contract, grant, 

15 or cooperative agreement. 

16 (b) PAYMENTS FOR COSTS ATTRIBUTABLE TO ACA17 DEMIC NATURE OF INSTITUTIONS.—The purpose of pay18 ments under subsection (a) is to assist eligible institutions 

19 with costs that are not routinely incurred by other entities 

20 in providing health services, but are incurred by such insti21 tutions in providing health services by virtue of the aca22 demic nature of such institutions. Such costs include— 

23 (1) with respect to productivity in the provision 

24 of health services, costs resulting from the reduced 
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Title III, Subtitle B 

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1 rate of productivity of faculty due to teaching re2 sponsibilities; 

3 (2) the uncompensated costs of clinical re4 search; and 

5 (3) exceptional costs associated with the treat6 ment of health conditions with respect to which an 

7 eligible institution has specialized expertise (includ8 ing treatment of rare diseases, treatment of unusu9 ally severe conditions, and providing other special10 ized health care). 

11 (c) DEFINITIONS.— 

12 (1) ACADEMIC HEALTH CENTER.—For purposes 

13 of this subtitle, the term ‘‘academic health center’’ 

14 means an entity that— 

15 (A) operates a school of medicine or osteo16 pathic medicine, as defined in section 799 of 

17 the Public Health Service Act; 

18 (B) operates, or is affiliated with, one or 

19 more other types of schools or programs de20 scribed in such section, or with one or more 

21 schools of nursing (as defined in section 853 of 

22 such Act); and 

23 (C) operates, or is affiliated with, one or 

24 more teaching hospitals. 
552 

Title III, Subtitle B 

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1 (2) TEACHING HOSPITAL.—For purposes of this 

2 subtitle, the term ‘‘teaching hospital’’ means a hos3 pital that operates an approved physician training 

4 program (as defined in section 3011(b)). 

5 (3) QUALIFIED CENTER OR HOSPITAL.—For 

6 purposes of this subtitle: 

7 (A) The term ‘‘qualified academic health 

8 center’’ means an academic health center that 

9 operates a teaching hospital. 

10 (B) The term ‘‘qualified teaching hospital’’ 

11 means any teaching hospital other than a teach12 ing hospital that is operated by an academic 

13 health center. 

14 (4) ELIGIBLE INSTITUTION.—For purposes of 

15 this subtitle, the term ‘‘eligible institution’’, with re16 spect to a calendar year, means a qualified academic 

17 health center, or a qualified teaching hospital, that 

18 submits to the Secretary a written request in accord19 ance with section 3102. 

20 SEC. 3102. REQUEST FOR PAYMENTS. 

21 (a) IN GENERAL.—For purposes of section 3101, a 

22 written request for payments under such section is in ac23 cordance with this section if the qualified academic health 

24 center or qualified teaching hospital involved submits the 

25 request not later than the date specified by the Secretary; 
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Title III, Subtitle B 

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1 the request is accompanied by each funding agreement de2 scribed in this part; and the request is in such form, is 

3 made in such manner, and contains such agreements, as4 surances, and information as the Secretary determines to 

5 be necessary to carry out this part. 

6 (b) CONTINUED STATUS AS ACADEMIC HEALTH

7 CENTER.—A funding agreement for payments under sec8 tion 3101 is that the qualified academic health center or 

9 qualified teaching hospital involved will maintain status as 

10 such a center or hospital, respectively. For purposes of 

11 this subtitle, the term ‘‘funding agreement’’, with respect 

12 to payments under section 3101 to such a center or hos13 pital, means that the Secretary may make the payments 

14 only if the center or hospital makes the agreement in15 volved. 

16 SEC. 3103. AVAILABILITY OF FUNDS FOR PAYMENTS; AN17 NUAL AMOUNT OF PAYMENTS. 

18 (a) ANNUAL ACADEMIC HEALTH CENTER AC19 COUNT.—Subject to section 3104, the amount available 

20 for a calendar year for making payments under section 

21 3101 (constituting an account to be known as the annual 

22 academic health center account) is the following, as appli23 cable to the calendar year: 

24 (1) In the case of calendar year 1996, 

25 $3,100,000,000. 
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Title III, Subtitle B 

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1 (2) In the case of each of the calendar years 

2 1997 and 1998, $3,200,000,000. 

3 (3) In the case of calendar year 1999, 

4 $3,700,000,000. 

5 (4) In the case of calendar year 2000, 

6 $3,800,000,000. 

7 (5) In the case of each subsequent calendar 

8 year, the amount specified in paragraph (4) in9 creased by the product of such amount and the gen10 eral health care inflation factor (as defined in sub11 section (d)). 

12 (b) AMOUNT OF PAYMENTS FOR INDIVIDUAL ELIGI13 BLE INSTITUTIONS.—The amount of payments required 

14 in section 3101 to be made to an eligible institution for 

15 a calendar year is an amount equal to the product of— 

16 (1) the annual academic health center account 

17 available for the calendar year; and 

18 (2) the percentage constituted by the ratio of— 

19 (A) an amount equal to the product of— 

20 (i) the portion of the gross receipts of 

21 the institution for the preceding calendar 

22 year that was derived from providing serv23 ices to patients (both inpatients and out24 patients); and 
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Title III, Subtitle B 

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1 (ii) the indirect teaching adjustment 

2 factor determined under section 

3 1886(d)(5)(B)(ii) of the Social Security 

4 Act (as in effect before January 1, 1998) 

5 and— 

6 (I) applicable to patients dis7 charged from the institution (or hos8 pitals of the institution, as the case 

9 may be) in such preceding year; or 

10 (II) in the case of patients dis11 charged on or after January 1, 1998, 

12 applicable to patients discharged in 

13 calendar year 1997; to 

14 (B) the sum of the respective amounts de15 termined under subparagraph (A) for eligible 

16 institutions. 

17 (c) REPORT REGARDING MODIFICATIONS IN FOR18 MULA.—Not later than July 1, 1996, the Secretary shall 

19 submit to the Congress a report containing any rec20 ommendations of the Secretary regarding policies for allo21 cating amounts under subsection (a) among eligible insti22 tutions. In making such recommendations, the Secretary 

23 shall consider the costs described in section 3101(b) that 

24 are incurred by such institutions. 

25 (d) DEFINITION.—For purposes of this subtitle: 
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Title III, Subtitle B 

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1 (1) The term ‘‘annual academic health center 

2 account’’ means the account established pursuant to 

3 subsection (a). 

4 (2) The term ‘‘general health care inflation fac5 tor’’, with respect to a year, has the meaning given 

6 such term in section 6001(a)(3) for such year. 

7 SEC. 3104. ADDITIONAL FUNDING PROVISIONS. 

8 (a) SOURCES OF FUNDS FOR ANNUAL ACADEMIC

9 HEALTH CENTER ACCOUNT.—The amount specified in 

10 section 3103(a) for the annual academic health center ac11 count for a calendar year shall be derived from the sources 

12 specified in subsection (b). 

13 (b) CONTRIBUTIONS FROM MEDICARE TRUST

14 FUNDS, REGIONAL ALLIANCES, AND CORPORATE ALLI15 ANCES.—For purposes of subsection (a), the sources spec16 ified in this subsection for a calendar year are the fol17 lowing: 

18 (1) Transfers made by the Secretary under sec19 tion 4052. 

20 (2) Payments made by regional alliances under 

21 section 1353 and— 

22 (A) in the case of each of the calendar 

23 years 1996 and 1997, transferred in an amount 

24 equal to 50 percent of such payments made for 

25 the calendar year involved; and 
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Title III, Subtitle B 

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1 (B) in the case of calendar year 1998 and 

2 each subsequent calendar year, transferred in 

3 an amount equal to the aggregate regional alli4 ance portion determined under subsection 

5 (c)(2)(A). 

6 (3) The transfer made under subsection (d)(1). 

7 (c) CONTRIBUTIONS FROM REGIONAL AND COR8 PORATE ALLIANCES.— 

9 (1) DETERMINATION OF AGGREGATE REGIONAL

10 AND CORPORATE ALLIANCE AMOUNT.—For purposes 

11 regarding the provision of funds for the annual aca12 demic health center account for a calendar year 

13 (other than calendar year 1996 or 1997), the Sec14 retary shall determine an aggregate regional and 

15 corporate alliance amount, which amount is to be 

16 paid by such alliances pursuant to paragraphs 

17 (2)(B) and (3) of subsection (b), respectively, and 

18 which amount shall be equal to the difference be19 tween— 

20 (A) the amount specified in section 

21 3103(a) for the annual academic health center 

22 account for such year; and 

23 (B) the amount transferred under section 

24 4052 for the year. 
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Title III, Subtitle B 

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1 (2) ALLOCATION OF AMOUNT AMONG REGIONAL

2 AND CORPORATE ALLIANCES.—With respect to the 

3 aggregate regional and corporate alliance amount 

4 determined under paragraph (1) for a calendar year 

5 (other than calendar year 1996 or 1997)— 

6 (A) the aggregate regional alliance portion 

7 of such amount is the product of such amount 

8 and the percentage constituted by the ratio of 

9 the total plan payments of regional alliances to 

10 the combined total plan payments of regional 

11 alliances and corporate alliances; and 

12 (B) the aggregate corporate alliance por13 tion of such amount is the product of such 

14 amount and the percentage constituted by the 

15 ratio of the total plan payments of corporate al16 liances to such combined total plan payments. 

17 (d) COMPLIANCE REGARDING CORPORATE ALLI18 ANCES.— 

19 (1) IN GENERAL.—Effective January 15 of cal20 endar year 1996 and each subsequent calendar year, 

21 there is hereby transferred to the Secretary, out of 

22 any money in the Treasury not otherwise appro23 priated— 
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1 (A) in the case of each of the calendar 

2 years 1996 and 1997, an amount equal to the 

3 difference between— 

4 (i) the amount specified in section 

5 3103(a) for the annual academic health 

6 center account for the calendar year in7 volved; and 

8 (ii) the sum of the amount transferred 

9 under section 4052 for such year and the 

10 amount transferred under subsection 

11 (b)(2)(A) for such year; and 

12 (B) in the case of calendar year 1998 and 

13 each subsequent calendar year, an amount 

14 equal to the aggregate corporate alliance por15 tion determined under subsection (c)(2)(B) for 

16 the calendar year involved. 

17 (2) MANNER OF COMPLIANCE.—The payment 

18 by corporate alliances of the tax imposed under sec19 tion 3461 of the Internal Revenue Code of 1986 (as 

20 added by section 7121 of this Act), together with the 

21 transfer made in paragraph (1)(B) for the calendar 

22 year involved, is deemed to be the payment required 

23 pursuant to subsection (c)(1) for corporate alliances 

24 for such year. 
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1 (3) GRADUATE NURSE EDUCATION.—Effective 

2 January 15 of calendar year 1996 and each subse3 quent calendar year, there is hereby transferred to 

4 the Secretary, out of any money in the Treasury not 

5 otherwise appropriated, 50 percent of the amount 

6 specified in section 3063(b) with respect to the an7 nual graduate nurse training account. 

8 (e) DEFINITIONS.—For purposes of this subtitle, the 

9 term ‘‘plan payments’’ with respect to a regional or cor10 porate alliance, means the amount paid to health plans 

11 by the alliance. 

12 PART 2—ACCESS OF PATIENTS TO ACADEMIC 

13 HEALTH CENTERS 

14 SEC. 3131. CONTRACTS FOR ENSURING ACCESS TO CEN15 TERS. 

16 (a) CONTRACTS WITH HEALTH PLANS.—Regional 

17 and corporate health alliances under this Act shall ensure 

18 that, in accordance with subsection (b), the health plans 

19 of the alliances enter into sufficient contracts with eligible 

20 centers to ensure that enrollees in regional or corporate 

21 alliance health plans, as appropriate, receive the special22 ized treatment expertise of such centers, subject to such 

23 exceptions as the Secretary may provide. 

24 (b) UTILIZATION OF SPECIALIZED TREATMENT EX25 PERTISE OF CENTERS.—Contracts under subsection (a) 
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1 between eligible centers and health plans are in accordance 

2 with this subsection if the contracts provide that, with re3 spect to health conditions within the specialized treatment 

4 expertise of the centers, health plans will refer medical 

5 cases involving such conditions to the centers. 

6 (c) SPECIALIZED TREATMENT EXPERTISE.—For 

7 purposes of this subtitle, the term ‘‘specialized treatment 

8 expertise’’, with respect to treatment of a health condition 

9 by an academic health center, means expertise in treating 

10 rare diseases, treating unusually severe conditions, and 

11 providing other specialized health care. 

12 SEC. 3132. DISCRETIONARY GRANTS REGARDING ACCESS 

13 TO CENTERS. 

14 (a) RURAL INFORMATION AND REFERRAL SYS15 TEMS.—The Secretary may make grants to eligible centers 

16 for the establishment and operation of information and re17 ferral systems to provide the services of such centers to 

18 rural regional and corporate health alliance health plans. 

19 (b) OTHER PURPOSES REGARDING URBAN AND

20 RURAL AREAS.—The Secretary may make grants to eligi21 ble centers to carry out activities (other than activities car22 ried out under subsection (a)) for the purpose of providing 

23 the services of eligible centers to residents of rural or 

24 urban communities who otherwise would not have ade25 quate access to such services. 
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1 Subtitle C—Health Research 

2 Initiatives 

3 PART 1—PROGRAMS FOR CERTAIN AGENCIES 

4 SEC. 3201. BIOMEDICAL AND BEHAVIORAL RESEARCH ON 

5 HEALTH PROMOTION AND DISEASE PREVEN6 TION. 

7 Section 402(f) of the Public Health Service Act (42 

8 U.S.C. 282(f)), as amended by section 201 of Public Law 

9 103–43 (107 Stat. 144), is amended— 

10 (1) in paragraph (3), by redesignating subpara11 graphs (A) and (B) as clauses (i) and (ii), respec12 tively; 

13 (2) by redesignating paragraphs (1) through 

14 (3) as subparagraphs (A) through (C); 

15 (3) by inserting ‘‘(1)’’ after ‘‘(f)’’; and 

16 (4) by adding at the end the following para17 graph: 

18 ‘‘(2)(A) The Director of NIH, in collaboration with 

19 the Associate Director for Prevention and with the heads 

20 of the agencies of the National Institutes of Health, shall 

21 ensure that such Institutes conduct and support bio22 medical and behavioral research on promoting health and 

23 preventing diseases, disorders, and other health conditions 

24 (including Alzheimer’s disease, breast cancer, heart dis25 ease, and stroke). 
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1 ‘‘(B) In carrying out subparagraph (A), the Director 

2 of NIH shall give priority to conducting and supporting 

3 research on child and adolescent health (including birth 

4 defects), chronic and recurrent health conditions, repro5 ductive health, mental health, elderly health, substance 

6 abuse, infectious diseases, health and wellness promotion, 

7 and environmental health, and to resource development re8 lated to such research.’’. 

9 SEC. 3202. HEALTH SERVICES RESEARCH. 

10 Section 902 of the Public Health Service Act (42 

11 U.S.C. 299a), as amended by section 2(b) of Public Law 

12 102–410 (106 Stat. 2094), is amended by adding at the 

13 end the following subsection: 

14 ‘‘(f) RESEARCH ON HEALTH CARE REFORM.— 

15 ‘‘(1) IN GENERAL.—In carrying out section 

16 901(b), the Administrator shall conduct and support 

17 research on the reform of the health care system of 

18 the United States, as directed by the National 

19 Board. 

20 ‘‘(2) PRIORITIES.—In carrying out paragraph 

21 (1), the Administrator shall give priority to the fol22 lowing: 

23 ‘‘(A) Conducting and supporting research 

24 on the appropriateness and effectiveness of al25 ternative clinical strategies; the quality and out-
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1 comes of care; and administrative simplifica2 tion. 

3 ‘‘(B) Conducting and supporting research 

4 on consumer choice and information resources; 

5 the effects of health care reform on health de6 livery systems; workplace injury and illness pre7 vention; methods for risk adjustment; factors 

8 influencing access to health care for under9 served populations; and primary care. 

10 ‘‘(C) The development of clinical practice 

11 guidelines consistent with section 913, the dis12 semination of such guidelines consistent with 

13 section 903, and the assessment of the effec14 tiveness of such guidelines.’’. 

15 PART 2—FUNDING FOR PROGRAMS 

16 SEC. 3211. AUTHORIZATIONS OF APPROPRIATIONS. 

17 (a) BIOMEDICAL AND BEHAVIORAL RESEARCH ON

18 HEALTH PROMOTION AND DISEASE PREVENTION.—For 

19 the purpose of carrying out activities pursuant to the 

20 amendments made by section 3201, there are authorized 

21 to be appropriated $400,000,000 for fiscal year 1995, and 

22 $500,000,000 for each of the fiscal years 1996 through 

23 2000. 

24 (b) HEALTH SERVICES RESEARCH.—For the purpose 

25 of carrying out activities pursuant to the amendments 
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1 made by section 3202, there are authorized to be appro2 priated $150,000,000 for fiscal year 1995, $400,000,000 

3 for fiscal year 1996, $500,000,000 for fiscal year 1997, 

4 and $600,000,000 for each of the fiscal years 1998 

5 through 2000. 

6 (c) RELATION TO OTHER FUNDS.—The authoriza7 tions of appropriations established in subsections (a) and 

8 (b) are in addition to any other authorizations of appro9 priations that are available for the purposes described in 

10 such subsections. 

11 Subtitle D—Core Functions of Pub12 lic Health Programs; National 

13 Initiatives Regarding Preven14 tive Health 

15 PART 1—FUNDING 

16 SEC. 3301. AUTHORIZATIONS OF APPROPRIATIONS. 

17 (a) CORE FUNCTIONS OF PUBLIC HEALTH PRO18 GRAMS.—For the purpose of carrying out part 2, there 

19 are authorized to be appropriated $12,000,000 for fiscal 

20 year 1995, $325,000,000 for fiscal year 1996, 

21 $450,000,000 for fiscal year 1997, $550,000,000 for fis22 cal year 1998, $650,000,000 for fiscal year 1999, and 

23 $750,000,000 for fiscal year 2000. 

24 (b) NATIONAL INITIATIVES REGARDING HEALTH

25 PROMOTION AND DISEASE PREVENTION.—For the pur-
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1 pose of carrying out part 3, there are authorized to be 

2 appropriated $175,000,000 for fiscal year 1996, and 

3 $200,000,000 for each of the fiscal years 1997 through 

4 2000. 

5 (c) RELATION TO OTHER FUNDS.—The authoriza6 tions of appropriations established in subsections (a) and 

7 (b) are in addition to any other authorizations of appro8 priations that are available for the purposes described in 

9 such subsections. 

10 PART 2—CORE FUNCTIONS OF PUBLIC HEALTH 

11 PROGRAMS 

12 SEC. 3311. PURPOSES. 

13 Subject to the subsequent provisions of this subtitle, 

14 the purposes of this part are to strengthen the capacity 

15 of State and local public health agencies to carry out the 

16 following functions: 

17 (1) To monitor and protect the health of com18 munities against communicable diseases and expo19 sure to toxic environmental pollutants, occupational 

20 hazards, harmful products, and poor quality health 

21 care. 

22 (2) To identify and control outbreaks of infec23 tious disease and patterns of chronic disease and in24 jury. 
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1 (3) To inform and educate health care con2 sumers and providers about their roles in preventing 

3 and controlling disease and the appropriate use of 

4 medical services. 

5 (4) To develop and test new prevention and 

6 public health control interventions. 

7 SEC. 3312. GRANTS TO STATES FOR CORE HEALTH FUNC8 TIONS. 

9 (a) IN GENERAL.—The Secretary may make grants 

10 to States for the purpose of carrying out one or more of 

11 the functions described in subsection (b). 

12 (b) CORE FUNCTIONS OF PUBLIC HEALTH PRO13 GRAMS.—For purposes of subsection (a), the functions de14 scribed in this subsection are, subject to subsection to sub15 section (c), as follows: 

16 (1) Data collection, activities related to popu17 lation health measurement and outcomes monitoring, 

18 including the regular collection and analysis of pub19 lic health data, vital statistics, and personal health 

20 services data and analysis for planning and needs 

21 assessment purposes of data collected from health 

22 plans through the information system under title V 

23 of this Act. 
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1 (2) Activities to protect the environment and to 

2 assure the safety of housing, workplaces, food and 

3 water, including the following activities: 

4 (A) Monitoring the overall public health 

5 quality and safety of communities. 

6 (B) Assessing exposure to high lead levels 

7 and water contamination. 

8 (C) Monitoring sewage and solid waste dis9 posal, radiation exposure, radon exposure, and 

10 noise levels. 

11 (D) Abatement of lead-related hazards. 

12 (E) Assuring recreation and worker safety. 

13 (F) Enforcing public health safety and 

14 sanitary codes. 

15 (G) Other activities relating to promoting 

16 the public health of communities. 

17 (3) Investigation and control of adverse health 

18 conditions, including improvements in emergency 

19 treatment preparedness, cooperative activities to re20 duce violence levels in communities, activities to con21 trol the outbreak of disease, exposure related condi22 tions and other threats to the health status of indi23 viduals. 

24 (4) Public information and education programs 

25 to reduce risks to health such as use of tobacco, al-
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1 cohol and other drugs, sexual activities that increase 

2 the risk to HIV transmission and sexually trans3 mitted diseases, poor diet, physical inactivity, and 

4 low childhood immunization levels. 

5 (5) Accountability and quality assurance activi6 ties, including monitoring the quality of personal 

7 health services furnished by health plans and pro8 viders of medical and health services in a manner 

9 consistent with the overall quality of care monitoring 

10 activities undertaken under title V, and monitoring 

11 communities’ overall access to health services. 

12 (6) Provision of public health laboratory serv13 ices to complement private clinical laboratory serv14 ices and that screen for diseases and conditions such 

15 as metabolic diseases in newborns, provide toxicology 

16 assessments of blood lead levels and other environ17 mental toxins, diagnose sexually transmitted dis18 eases, tuberculosis and other diseases requiring part19 ner notification, test for infectious and food-borne 

20 diseases, and monitor the safety of water and food 

21 supplies. 

22 (7) Training and education to assure provision 

23 of care by all health professionals, with special em24 phasis placed on the training of public health profes25 sions including epidemiologists, biostatisticians, 
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1 health educators, public health administrators, 

2 sanitarians and laboratory technicians. 

3 (8) Leadership, policy development and admin4 istration activities, including needs assessment, the 

5 setting of public health standards, the development 

6 of community public health policies, and the develop7 ment of community public health coalitions. 

8 (c) RESTRICTIONS ON USE OF GRANT.— 

9 (1) IN GENERAL.—A funding agreement for a 

10 grant under subsection (a) for a State is that the 

11 grant will not be expended— 

12 (A) to provide inpatient services; 

13 (B) to make cash payments to intended re14 cipients of health services; 

15 (C) to purchase or improve land, purchase, 

16 construct, or permanently improve (other than 

17 minor remodeling) any building or other facil18 ity, or purchase major medical equipment; 

19 (D) to satisfy any requirement for the ex20 penditure of non-Federal funds as a condition 

21 for the receipt of Federal funds; or 

22 (E) to provide financial assistance to any 

23 entity other than a public or nonprofit private 

24 entity. 
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1 (2) LIMITATION ON ADMINISTRATIVE EX2 PENSES.—A funding agreement for a grant under 

3 subsection (a) is that the State involved will not ex4 pend more than 10 percent of the grant for adminis5 trative expenses with respect to the grant. 

6 (d) MAINTENANCE OF EFFORT.—A funding agree7 ment for a grant under subsection (a) is that the State 

8 involved will maintain expenditures of non-Federal 

9 amounts for core health functions at a level that is not 

10 less than the level of such expenditures maintained by the 

11 State for the fiscal year preceding the first fiscal year for 

12 which the State receives such a grant. 

13 SEC. 3313. SUBMISSION OF INFORMATION. 

14 The Secretary may make a grant under section 3312 

15 only if the State involved submits to the Secretary the fol16 lowing information: 

17 (1) A description of existing deficiencies in the 

18 State’s public health system (at the State level and 

19 the local level), using standards of sufficiency devel20 oped by the Secretary. 

21 (2) A description of health status measures to 

22 be improved within the State (at the State level and 

23 the local level) through expanded public health func24 tions. 
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1 (3) Measurable outcomes and process objectives 

2 for improving health status and core health func3 tions for which the grant is to be expended. 

4 (4) Information regarding each such function, 

5 which— 

6 (A) identifies the amount of State and 

7 local funding expended on each such function 

8 for the fiscal year preceding the fiscal year for 

9 which the grant is sought; and 

10 (B) provides a detailed description of how 

11 additional Federal funding will improve each 

12 such function by both the State and local public 

13 health agencies. 

14 (5) A description of the core health functions to 

15 be carried out at the local level, and a specification 

16 for each such function of— 

17 (A) the communities in which the function 

18 will be carried out; and 

19 (B) the amount of the grant to be ex20 pended for the function in each community so 

21 specified. 

22 SEC. 3314. REPORTS. 

23 A funding agreement for a grant under section 3312 

24 is that the States involved will, not later than the date 
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1 specified by the Secretary, submit to the Secretary a re2 port describing— 

3 (1) the purposes for which the grant was ex4 pended; and 

5 (2) describing the extent of progress made by 

6 the State in achieving measurable outcomes and 

7 process objectives described in section 3313(3). 

8 SEC. 3315. APPLICATION FOR GRANT. 

9 The Secretary may make a grant under section 3312 

10 only if an application for the grant is submitted to the 

11 Secretary, the application contains each agreement de12 scribed in this part, the application contains the informa13 tion required in section 3314, and the application is in 

14 such form, is made in such manner, and contains such 

15 agreements, assurances, and information as the Secretary 

16 determines to be necessary to carry out this part. 

17 SEC. 3316. GENERAL PROVISIONS. 

18 (a) UNIFORM DATA SETS.—The Secretary, in con19 sultation with the States, shall develop uniform sets of 

20 data for the purpose of monitoring the core health func21 tions carried out with grants under section 3312. 

22 (b) DURATION OF GRANT.—The period during which 

23 payments are made to a State from a grant under section 

24 3312 may not exceed 5 years. The provision of such pay25 ments shall be subject to annual approval by the Secretary 
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Title III, Subtitle C 

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1 of the payments. This subsection may not be construed 

2 as establishing a limitation on the number of grants under 

3 such section that may be made to the State. 

4 SEC. 3317. ALLOCATIONS FOR CERTAIN ACTIVITIES. 

5 Of the amounts made available under section 3301 

6 for a fiscal year for carrying out this part, the Secretary 

7 may reserve not more than 5 percent for carrying out the 

8 following activities: 

9 (1) Technical assistance with respect to plan10 ning, development, and operation of core health 

11 functions carried out under section 3312, including 

12 provision of biostatistical and epidemiological exper13 tise and provision of laboratory expertise. 

14 (2) Development and operation of a national in15 formation network among State and local health 

16 agencies. 

17 (3) Program monitoring and evaluation of core 

18 health functions carried out under section 3312. 

19 (4) Development of a unified electronic report20 ing mechanism to improve the efficiency of adminis21 trative management requirements regarding the pro22 vision of Federal grants to State public health agen23 cies. 

24 SEC. 3318. DEFINITIONS. 

25 For purposes of this part: 
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Title III, Subtitle C 

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1 (1) The term ‘‘funding agreement’’, with re2 spect to a grant under section 3312 to a State, 

3 means that the Secretary may make the grant only 

4 if the State makes the agreement involved. 

5 (2) The term ‘‘core health functions’’, with re6 spect to a State, means the functions described in 

7 section 3312(b). 

8 PART 3—NATIONAL INITIATIVES REGARDING 

9 HEALTH PROMOTION AND DISEASE PREVENTION 

10 SEC. 3331. GRANTS FOR NATIONAL PREVENTION INITIA11 TIVES. 

12 (a) IN GENERAL.—The Secretary may make grants 

13 to entities described in subsection (b) for the purpose of 

14 carrying out projects to develop and implement innovative 

15 community-based strategies to provide for health pro16 motion and disease prevention activities for which there 

17 is a significant need, as identified under section 1701 of 

18 the Public Health Service Act. 

19 (b) ELIGIBLE ENTITIES.—The entities referred to in 

20 subsection (a) are agencies of State or local government, 

21 private nonprofit organizations (including research institu22 tions), and coalitions that link two or more of these 

23 groups. 

24 (c) CERTAIN ACTIVITIES.—The Secretary shall en25 sure that projects carried out under subsection (a)— 
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1 (1) reflect approaches that take into account 

2 the special needs and concerns of the affected popu3 lations; 

4 (2) are targeted to the most needy and vulner5 able population groups and geographic areas of the 

6 Nation; 

7 (3) examine links between various high priority 

8 preventable health problems and the potential com9 munity-based remedial actions; and 

10 (4) establish or strengthen the links between 

11 the activities of agencies engaged in public health 

12 activities with those of health alliances, health care 

13 providers, and other entities involved in the personal 

14 health care delivery system described in title I. 

15 SEC. 3332. PRIORITIES. 

16 (a) ESTABLISHMENT.— 

17 (1) ANNUAL STATEMENT.—The Secretary shall 

18 for each fiscal year develop a statement of proposed 

19 priorities for grants under section 3331 for the fiscal 

20 year. 

21 (2) ALLOCATIONS AMONG PRIORITIES.—With 

22 respect to the amounts available under section 

23 3301(b) for the fiscal year for carrying out this part, 

24 each statement under paragraph (1) for a fiscal year 

25 shall include a specification of the percentage of the 
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1 amount to be devoted to projects addressing each of 

2 the proposed priorities established in the statement. 

3 (3) PROCESS FOR ESTABLISHING PRIORITIES.— 

4 Not later than January 1 of each fiscal year, the 

5 Secretary shall publish a statement under paragraph 

6 (1) in the Federal Register. A period of 60 days 

7 shall be allowed for the submission of public com8 ments and suggestions concerning the proposed pri9 orities. After analyzing and considering comments 

10 on the proposed priorities, the Secretary shall pub11 lish in the Federal Register final priorities (and as12 sociated reservations of funds) for approval of 

13 projects for the following fiscal year. 

14 (b) APPLICABILITY TO MAKING OF GRANTS.— 

15 (1) IN GENERAL.—The Secretary may make 

16 grants under section 3331 for projects that the Sec17 retary determines— 

18 (A) are consistent with the applicable final 

19 statement of priorities and otherwise meets the 

20 objectives described in subsection (a); and 

21 (B) will assist in meeting a health need or 

22 concern of a population served by a health plan 

23 or health alliance established under title I. 

24 (2) SPECIAL CONSIDERATION FOR CERTAIN

25 PROJECTS.—In making grants under section 3331, 
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1 the Secretary shall give special consideration to ap2 plicants that will carry out projects that, in addition 

3 to being consistent with the applicable published pri4 orities under subsection (a) and otherwise meeting 

5 the requirements of this part, have the potential for 

6 replication in other communities. 

7 SEC. 3333. SUBMISSION OF INFORMATION. 

8 The Secretary may make a grant under section 3331 

9 only if the applicant involved submits to the Secretary the 

10 following information: 

11 (1) A description of the activities to be con12 ducted, and the manner in which the activities are 

13 expected to contribute to meeting one or more of the 

14 priority health needs specified under section 3332 

15 for the fiscal year for which the grant is initially 

16 sought. 

17 (2) A description of the total amount of Federal 

18 funding requested, the geographic area and popu19 lations to be served, and the evaluation procedures 

20 to be followed. 

21 (3) Such other information as the Secretary de22 termines to be appropriate. 

23 SEC. 3334. APPLICATION FOR GRANT. 

24 The Secretary may make a grant under section 3331 

25 only if an application for the grant is submitted to the 
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1 Secretary, the application contains each agreement de2 scribed in this part, the application contains the informa3 tion required in section 3333, and the application is in 

4 such form, is made in such manner, and contains such 

5 agreements, assurances, and information as the Secretary 

6 determines to be necessary to carry out this part. 

7 Subtitle E—Health Services for 

8 Medically Underserved Popu9 lations 

10 PART 1—COMMUNITY AND MIGRANT HEALTH 

11 CENTERS 

12 SEC. 3401. AUTHORIZATIONS OF APPROPRIATIONS. 

13 (a) GRANTS TO COMMUNITY AND MIGRANT HEALTH

14 CENTERS.—The Secretary shall make grants in accord15 ance with this part to migrant health centers and commu16 nity health centers. 

17 (b) AUTHORIZATION OF APPROPRIATIONS.—For the 

18 purpose of carrying out subsection (a), there are author19 ized to be appropriated $100,000,000 for each of the fiscal 

20 years 1995 through 2000. 

21 (c) RELATION TO OTHER FUNDS.—The authoriza22 tions of appropriations established in subsection (b) for 

23 the purpose described in such subsection are in addition 

24 to any other authorizations of appropriations that are 

25 available for such purpose. 
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Title III, Subtitle E 

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1 (d) DEFINITIONS.—For purposes of this subtitle, the 

2 terms ‘‘migrant health center’’ and ‘‘community health 

3 center’’ have the meanings given such terms in sections 

4 329(a)(1) and 330(a) of the Public Health Service Act, 

5 respectively. 

6 SEC. 3402. USE OF FUNDS. 

7 (a) DEVELOPMENT, OPERATION, AND OTHER PUR8 POSES REGARDING CENTERS.—Subject to subsection (b), 

9 grants under section 3401 to migrant health centers and 

10 community health centers may be made only in accordance 

11 with the conditions upon which grants are made under 

12 sections 329 and 330 of the Public Health Service Act, 

13 respectively. 

14 (b) REQUIRED FINANCIAL RESERVES.—The Sec15 retary may authorize migrant health centers and commu16 nity health centers to expend a grant under section 3401 

17 to establish and maintain the financial reserves required 

18 under title I for providers of health services. 

19 PART 2—INITIATIVES FOR ACCESS TO HEALTH 

20 CARE 

21 Subpart A—Purposes; Funding 

22 SEC. 3411. PURPOSES. 

23 Subject to the provisions of subparts B through D, 

24 the purposes of this part are as follows: 
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Title III, Subtitle E 

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1 (1) To improve access to health services for 

2 urban and rural medically-underserved populations 

3 through a program of flexible grants, contracts, and 

4 loans. 

5 (2) To facilitate transition to a system in which 

6 medically-underserved populations have an adequate 

7 choice of community-oriented providers and health 

8 plans. 

9 (3) To promote the development of community 

10 practice networks and community health plans that 

11 integrate health professionals and health care orga12 nizations supported through public funding with 

13 other providers in medically underserved areas. 

14 (4) To support linkages between providers of 

15 health care for medically-underserved populations 

16 and regional and corporate alliance health plans. 

17 (5) To expand the capacity of community prac18 tice networks and community health plans in under19 served areas by increasing the number of practice 

20 sites and by renovating and converting substandard 

21 inpatient and outpatient facilities. 

22 (6) To link providers in underserved areas with 

23 each other and with regional health care institutions 

24 and academic health centers through information 

25 systems and telecommunications. 
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Title III, Subtitle E 

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1 (7) To support activities that enable medically 

2 underserved populations to gain access to the health 

3 care system and use it effectively. 

4 SEC. 3412. AUTHORIZATIONS OF APPROPRIATIONS. 

5 (a) DEVELOPMENT OF QUALIFIED COMMUNITY

6 HEALTH PLANS AND PRACTICE GROUPS.—For the pur7 pose of carrying out subparts B and C, there are author8 ized to be appropriated $200,000,000 for fiscal year 1995, 

9 $500,000,000 for fiscal year 1996, $600,000,000 for fis10 cal year 1997, $700,000,000 for fiscal year 1998, 

11 $500,000,000 for fiscal year 1999, and $200,000,000 for 

12 fiscal year 2000. 

13 (b) RELATION TO OTHER FUNDS.—The authoriza14 tions of appropriations established in subsection (a) are 

15 in addition to any other authorizations of appropriations 

16 that are available for the purpose described in such sub17 section. 

18 (c) RELATIONSHIP TO PROGRAM REGARDING

19 SCHOOL-RELATED HEALTH SERVICES.—This section is 

20 subject to section 3692. 
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Title III, Subtitle E 

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1 Subpart B—Development of Qualified Community 

2 Health Plans and Practice Networks 

3 SEC. 3421. GRANTS AND CONTRACTS FOR DEVELOPMENT 

4 OF PLANS AND NETWORKS. 

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

6 to and enter into contracts with consortia of public or pri7 vate health care providers for the development of qualified 

8 community health plans and qualified community practice 

9 networks. For purposes of this subtitle, the term ‘‘quali10 fied community health group’’ means such a health plan 

11 or such a practice network. 

12 (b) QUALIFIED COMMUNITY HEALTH PLANS.—For 

13 purposes of this subtitle, the term ‘‘qualified community 

14 health plan’’ means a health plan that meets the following 

15 conditions: 

16 (1) The health plan is a public or nonprofit pri17 vate entity whose principal purpose is, with respect 

18 to the items and services included in the comprehen19 sive benefit package under title I, to provide each of 

20 such items and services in one or more health pro21 fessional shortage areas or to provide such items and 

22 services to a significant number of individuals who 

23 are members of a medically underserved population. 

24 (2) The health plan is a participant in one or 

25 more health alliances. 
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1 (3) Two or more of the categories specified in 

2 subsection (d) are represented among the entities 

3 providing health services through the health plan. 

4 (c) QUALIFIED COMMUNITY PRACTICE NET5 WORKS.—For purposes of this subtitle, the term ‘‘quali6 fied community practice network’’ means a consortium of 

7 health care providers meeting the following conditions: 

8 (1) The consortium is a public or nonprofit pri9 vate entity whose principal purpose is the purpose 

10 described in subsection (b)(1). 

11 (2) The consortium has an agreement with one 

12 or more health plans that are participating in one or 

13 more health alliances. 

14 (3) The participation of health care providers in 

15 the consortium is governed by a written agreement 

16 to which each of the participating providers is a 

17 party. 

18 (4) Two or more of the categories described in 

19 subsection (d) are represented among the entities 

20 participating in the consortium. 

21 (d) RELEVANT CATEGORIES OF ENTITIES.—For pur22 poses of subsections (b)(3) and (c)(4), the categories de23 scribed in this subsection are the following categories of 

24 entities: 
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1 (1) Physicians, other health professionals, or 

2 health care institutions that provide health services 

3 in one or more health professional shortage areas or 

4 provide such services to a significant number of indi5 viduals who are members of a medically underserved 

6 population, and that do not provide health services 

7 under any of the programs specified in paragraphs 

8 (2) through (7) or as employees of public entities. 

9 (2) Entities providing health services under 

10 grants under sections 329 and 330 of the Public 

11 Health Service Act. 

12 (3) Entities providing health services under 

13 grants under sections 340 and 340A of such Act. 

14 (4) Entities providing health services under 

15 grants under section 1001 or title XXVI of such 

16 Act. 

17 (5) Entities providing health services under title 

18 V of the Social Security Act. 

19 (6) Entities providing health services through 

20 rural health clinics and other federally qualified 

21 health centers. 

22 (7) Entities providing health services in urban 

23 areas through programs under title V of the Indian 

24 Health Care Improvement Act, and entities pro-
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1 viding outpatient health services through programs 

2 under the Indian Self-Determination Act. 

3 (8) Programs providing personal health services 

4 and operating through State or local public health 

5 agencies. 

6 (e) RULE OF CONSTRUCTION.—The consortia to 

7 which the Secretary may make an award of financial as8 sistance under subsection (a) for the development of quali9 fied community practice networks include any health plan 

10 that participates in one or more health alliances, without 

11 regard to whether the health plan is a qualified community 

12 health plan. 

13 (f) SERVICE AREA.—In making an award of financial 

14 assistance under subsection (a), the Secretary shall des15 ignate the geographic area with respect to which the quali16 fied community health group involved is to provide health 

17 services. A funding agreement for such an award is that 

18 the qualified community health group involved will provide 

19 such services in the area so designated. 

20 (g) DEFINITIONS.—For purposes of this subtitle: 

21 (1) The term ‘‘health professional shortage 

22 areas’’ means health professional shortage areas des23 ignated under section 332 of the Public Health Serv24 ice Act. 
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1 (2) The term ‘‘medically underserved popu2 lation’’ means a medically underserved population 

3 designated under section 330 of the Public Health 

4 Service Act. 

5 (3) The term ‘‘rural health clinic’’ has the 

6 meaning given such term in section 1861(aa)(2) of 

7 the Social Security Act. 

8 (4) The term ‘‘federally qualified health cen9 ters’’ has the meaning given such term in section 

10 1861(aa)(4) of the Social Security Act. 

11 (5) The term ‘‘service area’’, with respect to a 

12 qualified community health group, means the geo13 graphic area designated under subsection (f). 

14 (6) The term ‘‘funding agreement’’, with re15 spect to an award of financial assistance under this 

16 section, means that the Secretary may make the 

17 award only if the applicant for the award makes the 

18 agreement involved. 

19 (7) The term ‘‘financial assistance’’, with re20 spect to awards under subsection (a), means a grant 

21 or contract. 
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1 SEC. 3422. PREFERENCES IN MAKING AWARDS OF ASSIST2 ANCE. 

3 In making awards of financial assistance under sec4 tion 3421, the Secretary shall give preference to applicants 

5 in accordance with the following: 

6 (1) The Secretary shall give preference if 3 or 

7 more of the categories described in subsection (d) of 

8 such section will be represented in the qualified com9 munity health group involved (pursuant to sub10 section (b)(3) or (c)(4) of such section, as the case 

11 may be). 

12 (2) Of applicants receiving preference under 

13 paragraph (1), the Secretary shall give a greater de14 gree of preference according to the extent to which 

15 a greater number of categories are represented. 

16 (3) Of applicants receiving preference under 

17 paragraph (1), the Secretary shall give a greater de18 gree of preference if one of the categories rep19 resented is the category described in subsection 

20 (d)(1) of such section. 

21 SEC. 3423. CERTAIN USES OF AWARDS. 

22 (a) IN GENERAL.—Subject to subsection (b), the pur23 poses for which an award of financial assistance under sec24 tion 3421 may be expended in developing a qualified com25 munity health group include the following: 
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1 (1) Planning such group, including entering 

2 into contracts between the recipient of the award 

3 and health care providers who are to participate in 

4 the group. 

5 (2) Recruitment, compensation, and training of 

6 health professionals and administrative staff. 

7 (3) Acquisition, expansion, modernization, and 

8 conversion of facilities, including for purposes of 

9 providing for sites at which health services are to be 

10 provided through such group. 

11 (4) Acquisition and development of information 

12 systems (exclusive of systems that the Secretary de13 termines are information highways). 

14 (5) Such other expenditures as the Secretary 

15 determines to be appropriate. 

16 (b) TWENTY-YEAR OBLIGATION REGARDING SIGNIFI17 CANT CAPITAL EXPENDITURES; RIGHT OF RECOVERY.— 

18 (1) IN GENERAL.—With respect to a facility for 

19 which substantial capital costs are to paid from an 

20 award of financial assistance under section 3421, 

21 the Secretary may make the award only if the appli22 cant involved agrees that the applicant will be liable 

23 to the United States for the amount of the award 

24 expended for such costs, together with an amount 

25 representing interest, if at any time during the 20- 
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1 year period beginning on the date of completion of 

2 the activities involved, the facility— 

3 (A) ceases to be a facility utilized by a 

4 qualified community health group, or by an5 other public or nonprofit private entity that 

6 provides health services in one or more health 

7 professional shortage areas or that provides 

8 such services to a significant number of individ9 uals who are members of a medically under10 served population; or 

11 (B) is sold or transferred to any entity 

12 other than an entity that is— 

13 (i) a qualified community health 

14 group or other entity described in subpara15 graph (A); and 

16 (ii) approved by the Secretary as a 

17 purchaser or transferee regarding the facil18 ity. 

19 (2) SUBORDINATION; WAIVERS.—The Secretary 

20 may subordinate or waive the right of recovery 

21 under paragraph (1), and any other Federal interest 

22 that may be derived by virtue of an award of finan23 cial assistance under section 3421 from which sub24 stantial capital costs are to paid, if the Secretary de-
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1 termines that subordination or waiver will further 

2 the objectives of this part. 

3 SEC. 3424. ACCESSIBILITY OF SERVICES. 

4 (a) SERVICES FOR CERTAIN INDIVIDUALS.—A fund5 ing agreement for an award of financial assistance under 

6 section 3421 is that the qualified community health group 

7 involved will ensure that the services of the group will be 

8 accessible directly or through formal contractual arrange9 ments with its participating providers regardless of wheth10 er individuals who seek care from the applicant are eligible 

11 persons under title I. 

12 (b) USE OF THIRD-PARTY PAYORS.—A funding 

13 agreement for an award of financial assistance under sec14 tion 3421 is that the qualified community health group 

15 involved will ensure that the health care providers of the 

16 group are all approved by the Secretary as providers under 

17 title XVIII of the Social Security Act and by the appro18 priate State agency as providers under title XIX of the 

19 Social Security Act, and the applicant has made or will 

20 make every reasonable effort to collect appropriate reim21 bursement for its costs in providing health services to indi22 viduals who are entitled to health benefits under title I 

23 of this Act, insurance benefits under title XVIII of the 

24 Social Security Act, medical assistance under a State plan 

25 approved under title XIX of the Social Security Act, or 
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1 to assistance for medical expenses under any other public 

2 assistance program or private health insurance program. 

3 (c) SCHEDULE OF FEES.—A funding agreement for 

4 an award of financial assistance under section 3421 is that 

5 the qualified community health group involved will— 

6 (1) prepare a schedule of fees or payments for 

7 the provision of health services not covered by title 

8 I that is consistent with locally prevailing rates or 

9 charges and designed to cover its reasonable costs of 

10 operation and has prepared a corresponding sched11 ule of discounts to be applied to the payment of such 

12 fees or payments (or payments of cost sharing 

13 amounts owed in the case of covered benefits) which 

14 discounts are applied on the basis of the patient’s 

15 ability to pay; and 

16 (2) make every reasonable effort to secure from 

17 patients payment in accordance with such schedules, 

18 and to collect reimbursement for services to persons 

19 entitled to public or private insurance benefits or 

20 other medical assistance on the basis of full fees 

21 without application of discounts, except that the ap22 plicant will ensure that no person is denied service 

23 based on the person’s inability to pay therefor. 

24 (d) BARRIERS WITHIN SERVICE AREA.—A funding 

25 agreement for an award of financial assistance under sec-
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1 tion 3421 is that the qualified community health group 

2 involved will ensure that the following conditions are met: 

3 (1) In the service area of the group, the group 

4 will ensure that— 

5 (A) the services of the group are accessible 

6 to all residents; and 

7 (B) to the maximum extent possible, bar8 riers to access to the services of the group are 

9 eliminated, including barriers resulting from the 

10 area’s physical characteristics, its residential 

11 patterns, its economic, social and cultural 

12 groupings, and available transportation. 

13 (2) The group will periodically conduct reviews 

14 within the service area of the group to determine 

15 whether the conditions described in paragraph (1) 

16 are being met. 

17 (e) LIMITED ABILITY TO SPEAK ENGLISH LAN18 GUAGE.—A funding agreement for an award of financial 

19 assistance under section 3421 is that, if the service area 

20 of the qualified community health group involved includes 

21 a substantial number of individuals who have a limited 

22 ability to speak the English language, the applicant will— 

23 (1) maintain arrangements responsive to the 

24 needs of such individuals for providing services to 
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1 the extent practicable in the language and cultural 

2 context most appropriate to such individuals; and 

3 (2) maintain a sufficient number of staff mem4 bers who are fluent in both English and the lan5 guages spoken by such individuals, and will ensure 

6 that the responsibilities of the employees include 

7 providing guidance and assistance to such individ8 uals and to other staff members of the group. 

9 SEC. 3425. ADDITIONAL AGREEMENTS. 

10 (a) REQUIRED SERVICES.—A funding agreement for 

11 an award of financial assistance under section 3421 is that 

12 the qualified community health group involved will provide 

13 enabling services (as defined in section 3461(g)) and all 

14 of the items and services identified by the Secretary in 

15 rules regarding qualified community health plans and 

16 practice networks. 

17 (b) QUALITY CONTROL SYSTEM.—A funding agree18 ment for an award of financial assistance under section 

19 3421 is that the qualified community health group in20 volved will maintain a community-oriented, patient respon21 sive, quality control system under which the group, in ac22 cordance with regulations prescribed by the Secretary— 

23 (1) conducts an ongoing quality assurance pro24 gram for the health services delivered by partici25 pating provider entities; 
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1 (2) maintains a continuous community health 

2 status improvement process; and 

3 (3) maintains a system for development, com4 pilation, evaluation and reporting of information to 

5 the public regarding the costs of operation, service 

6 utilization patterns, availability, accessibility and ac7 ceptability of services, developments in the health 

8 status of the populations served, uniform health and 

9 clinical performance measures and financial per10 formance of the network or plan. 

11 (c) USE OF EXISTING RESOURCES.—A funding 

12 agreement for an award of financial assistance under sec13 tion 3421 is that the applicant will, in developing the 

14 qualified community health group involved, utilize existing 

15 resources to the maximum extent practicable. 

16 SEC. 3426. SUBMISSION OF CERTAIN INFORMATION. 

17 (a) ASSESSMENT OF NEED.—The Secretary may 

18 make an award of financial assistance under section 3421 

19 only if the applicant involved submits to the Secretary an 

20 assessment of the need that the medically underserved 

21 population or populations proposed to be served by the ap22 plicant have for health services and for enabling services 

23 (as defined in section 3461(g)). 

24 (b) DESCRIPTION OF INTENDED EXPENDITURES; 

25 RELATED INFORMATION.—The Secretary may make an 
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1 award of financial assistance under section 3421 only if 

2 the applicant involved submits to the Secretary the fol3 lowing information: 

4 (1) A description of how the applicant will de5 sign the proposed quality community health plan or 

6 practice network (including the service sites in7 volved) for such populations based on the assess8 ment of need. 

9 (2) A description of efforts to secure, within the 

10 proposed service area of such health plan or practice 

11 network (including the service sites involved), finan12 cial and professional assistance and support for the 

13 project. 

14 (3) Evidence of significant community involve15 ment in the initiation, development and ongoing op16 eration of the project. 

17 SEC. 3427. REPORTS; AUDITS. 

18 A funding agreement for an award of financial assist19 ance under section 3421 is that the applicant involved 

20 will— 

21 (1) provide such reports and information on ac22 tivities carried out under this section in a manner 

23 and form required by the Secretary; and 

24 (2) provide an annual organization-wide audit 

25 that meets applicable standards of the Secretary. 
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1 SEC. 3428. APPLICATION FOR ASSISTANCE. 

2 The Secretary may make an award of financial assist3 ance under section 3421 only if an application for the 

4 award is submitted to the Secretary, the application con5 tains each funding agreement described in this subpart, 

6 the application contains the information required in sec7 tion 3426, and the application is in such form, is made 

8 in such manner, and contains such agreements, assur9 ances, and information as the Secretary determines to be 

10 necessary to carry out this subpart. 

11 SEC. 3429. GENERAL PROVISIONS. 

12 (a) LIMITATION ON NUMBER OF AWARDS.—The Sec13 retary may not make more than two awards of financial 

14 assistance under section 3421 for the same project. 

15 (b) AMOUNT.—The amount of any award of financial 

16 assistance under section 3421 for any project shall be de17 termined by the Secretary. 

18 Subpart C—Capital Cost of Development of Qualified 

19 Community Health Plans and Practice Networks 

20 SEC. 3441. LOANS AND LOAN GUARANTEES REGARDING 

21 PLANS AND NETWORKS. 

22 (a) IN GENERAL.—The Secretary may make loans to, 

23 and guarantee the payment of principal and interest to 

24 Federal and non-Federal lenders on behalf of, public and 

25 private entities for the capital costs of developing qualified 

26 community health groups (as defined in section 3421(a)). 
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1 (b) PREFERENCES; ACCESSIBILITY OF SERVICES; 

2 CERTAIN OTHER PROVISIONS.—The provisions of subpart 

3 B apply to loans and loan guarantees under subsection 

4 (a) to the same extent and in the same manner as such 

5 provisions apply to awards of grants and contracts under 

6 section 3421. 

7 (c) USE OF ASSISTANCE.— 

8 (1) IN GENERAL.—With respect to the develop9 ment of qualified community health groups, the cap10 ital costs for which loans made pursuant to sub11 section (a) may be expended are, subject to para12 graphs (2) and (3), the following: 

13 (A) The acquisition, modernization, expan14 sion or construction of facilities, or the conver15 sion of unneeded hospital facilities to facilities 

16 that will assure or enhance the provision and 

17 accessibility of health care and enabling services 

18 to medically underserved populations. 

19 (B) The purchase of major equipment, in20 cluding equipment necessary for the support of 

21 external and internal information systems. 

22 (C) The establishment of reserves required 

23 for furnishing services on a prepaid basis. 
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1 (D) Such other capital costs as the Sec2 retary may determine are necessary to achieve 

3 the objectives of this section. 

4 (2) PRIORITIES REGARDING USE OF FUNDS.— 

5 In providing loans or loan guarantees under sub6 section (a) for an entity, the Secretary shall give pri7 ority to authorizing the use of amounts for projects 

8 for the renovation and modernization of medical fa9 cilities necessary to prevent or eliminate safety haz10 ards, avoid noncompliance with licensure or accredi11 tation standards, or projects to replace obsolete fa12 cilities. 

13 (3) LIMITATION.—The Secretary may authorize 

14 the use of amounts under subsection (a) for the con15 struction of new buildings only if the Secretary de16 termines that appropriate facilities are not available 

17 through acquiring, modernizing, expanding or con18 verting existing buildings, or that construction new 

19 buildings will cost less. 

20 (d) AMOUNT OF ASSISTANCE.—The principal amount 

21 of loans or loan guarantees under subsection (a) may, 

22 when added to any other assistance under this section, 

23 cover up to 100 percent of the costs involved. 

24 SEC. 3442. CERTAIN REQUIREMENTS. 

25 (a) LOANS.— 
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1 (1) IN GENERAL.—The Secretary may approve 

2 a loan under section 3441 only if— 

3 (A) the Secretary is reasonably satisfied 

4 that the applicant for the project for which the 

5 loan would be made will be able to make pay6 ments of principal and interest thereon when 

7 due; and 

8 (B) the applicant provides the Secretary 

9 with reasonable assurances that there will be 

10 available to it such additional funds as may be 

11 necessary to complete the project or under12 taking with respect to which such loan is re13 quested. 

14 (2) TERMS AND CONDITIONS.—Any loan made 

15 under section 3441 shall, subject to the Federal 

16 Credit Reform Act of 1990, meet such terms and 

17 conditions (including provisions for recovery in case 

18 of default) as the Secretary, in consultation with the 

19 Secretary of the Treasury, determines to be nec20 essary to carry out the purposes of such section 

21 while adequately protecting the financial interests of 

22 the United States. Terms and conditions for such 

23 loans shall include provisions regarding the fol24 lowing: 

25 (A) Security. 
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1 (B) Maturity date. 

2 (C) Amount and frequency of installments. 

3 (D) Rate of interest, which shall be at a 

4 rate comparable to the rate of interest pre5 vailing on the date the loan is made. 

6 (b) LOAN GUARANTEES.—The Secretary may not ap7 prove a loan guarantee under section 3441 unless the Sec8 retary determines that the terms, conditions, security (if 

9 any), schedule and amount of repayments with respect to 

10 the loan are sufficient to protect the financial interests 

11 of the United States and are otherwise reasonable. Such 

12 loan guarantees shall be subject to such further terms and 

13 conditions as the Secretary determines, in consultation 

14 with the Secretary of the Treasury, and subject to the 

15 Federal Credit Reform Act of 1990, to be necessary to 

16 ensure that the purposes of this section will be achieved. 

17 (c) USE OF EXISTING RESOURCES.—The Secretary 

18 may provide a loan or loan guarantee under section 3441 

19 only if the applicant involved agrees that, in developing 

20 the qualified community health group involved, the appli21 cant will utilize existing resources to the maximum extent 

22 practicable. 

23 SEC. 3443. DEFAULTS; RIGHT OF RECOVERY. 

24 (a) DEFAULTS.— 
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1 (1) IN GENERAL.—The Secretary may take 

2 such action as may be necessary to prevent a default 

3 on loans or loan guarantees under section 3441, in4 cluding the waiver of regulatory conditions, deferral 

5 of loan payments, renegotiation of loans, and the ex6 penditure of funds for technical and consultative as7 sistance, for the temporary payment of the interest 

8 and principal on such a loan, and for other pur9 poses. 

10 (2) FORECLOSURE.—The Secretary may take 

11 such action, consistent with State law respecting 

12 foreclosure procedures, as the Secretary deems ap13 propriate to protect the interest of the United States 

14 in the event of a default on a loan made pursuant 

15 to section 3441, including selling real property 

16 pledged as security for such a loan or loan guarantee 

17 and for a reasonable period of time taking posses18 sion of, holding, and using real property pledged as 

19 security for such a loan or loan guarantee. 

20 (3) WAIVERS.—The Secretary may, for good 

21 cause, but with due regard to the financial interests 

22 of the United States, waive any right of recovery 

23 which the Secretary has by reasons of the failure of 

24 a borrower to make payments of principal of and in25 terest on a loan made pursuant to section 3441, ex-
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1 cept that if such loan is sold and guaranteed, any 

2 such waiver shall have no effect upon the Secretary’s 

3 guarantee of timely payment of principal and inter4 est. 

5 (b) TWENTY-YEAR OBLIGATION; RIGHT OF RECOV6 ERY.— 

7 (1) IN GENERAL.—With respect to a facility for 

8 which a loan is to be made pursuant to section 

9 3441, the Secretary may provide the loan or loan 

10 guarantee only if the applicant involved agrees that 

11 the applicant will be liable to the United States for 

12 the amount of the loan or loan guarantee, together 

13 with an amount representing interest, if at any time 

14 during the 20-period beginning on the date of com15 pletion of the activities involved, the facility— 

16 (A) ceases to be a facility utilized by a 

17 qualified community health group, or by an18 other public or nonprofit private entity that 

19 provides health services in one or more health 

20 professional shortage areas or that provides 

21 such services to a significant number of individ22 uals who are members of a medically under23 served population; or 

24 (B) is sold or transferred to any entity 

25 other than an entity that is— 
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1 (i) a qualified community health 

2 group or other entity described in subpara3 graph (A); and 

4 (ii) approved by the Secretary as a 

5 purchaser or transferee regarding the facil6 ity. 

7 (2) SUBORDINATION; WAIVERS.—The Secretary 

8 may subordinate or waive the right of recovery 

9 under paragraph (1), and any other Federal interest 

10 that may be derived by virtue of a loan or loan guar11 antee under subsection (a), if the Secretary deter12 mines that subordination or waiver will further the 

13 objectives of this part. 

14 SEC. 3444. PROVISIONS REGARDING CONSTRUCTION OR EX15 PANSION OF FACILITIES. 

16 (a) SUBMISSION OF INFORMATION.—In the case of 

17 a project for construction, conversion, expansion or mod18 ernization of a facility, the Secretary may provide loans 

19 or loan guarantees under section 3441 only if the appli20 cant submits to the Secretary the following: 

21 (1) A description of the site. 

22 (2) Plans and specifications which meet require23 ments prescribed by the Secretary. 

24 (3) Information reasonably demonstrating that 

25 title to such site is vested in one or more of the enti-
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1 ties filing the application (unless the agreement de2 scribed in subsection (b)(1) is made). 

3 (4) A specification of the type of assistance 

4 being requested under section 3441. 

5 (b) AGREEMENTS.—In the case of a project for con6 struction, conversion, expansion or modernization of a fa7 cility, the Secretary may provide loans or loan guarantees 

8 under section 3441 only if the applicant makes the fol9 lowing agreements: 

10 (1) Title to such site will be vested in one or 

11 more of the entities filing the application (unless the 

12 assurance described in subsection (a)(3) has been 

13 submitted under such subsection). 

14 (2) Adequate financial support will be available 

15 for completion of the project and for its maintenance 

16 and operation when completed. 

17 (3) All laborers and mechanics employed by 

18 contractors or subcontractors in the performance of 

19 work on a project will be paid wages at rates not 

20 less than those prevailing on similar construction in 

21 the locality as determined by the Secretary of Labor 

22 in accordance with the Act of March 3, 1931 (40 

23 U.S.C. 276a et seq; commonly known as the Davis24 Bacon Act), and the Secretary of Labor shall have 

25 with respect to such labor standards the authority 
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1 and functions set forth in Reorganization Plan 

2 Numbered 14 of 1950 (15 FR 3176; 5 U.S.C. Ap3 pendix) and section 276c of title 40. 

4 (4) The facility will be made available to all 

5 persons seeking service regardless of their ability to 

6 pay. 

7 SEC. 3445. APPLICATION FOR ASSISTANCE. 

8 The Secretary may provide loans or loan guarantees 

9 under section 3441 only if an application for such assist10 ance is submitted to the Secretary, the application con11 tains each agreement described in this subpart, the appli12 cation contains the information required in section 

13 3444(a), and the application is in such form, is made in 

14 such manner, and contains such agreements, assurances, 

15 and information as the Secretary determines to be nec16 essary to carry out this subpart. 

17 SEC. 3446. ADMINISTRATION OF PROGRAMS. 

18 This subpart, and any other program of the Secretary 

19 that provides loans or loan guarantees, shall be carried 

20 out by a centralized loan unit established within the De21 partment of Health and Human Services. 

22 Subpart D—Enabling Services 

23 SEC. 3461. GRANTS AND CONTRACTS FOR ENABLING SERV24 ICES. 

25 (a) IN GENERAL.— 
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1 (1) GRANTS AND CONTRACTS.—The Secretary 

2 may make grants to and enter into contracts with 

3 entities described in paragraph (2) to assist such en4 tities in providing the services described in sub5 section (b) for the purpose of increasing the capacity 

6 of individuals to utilize the items and services in7 cluded in the comprehensive benefits package under 

8 title I. 

9 (2) RELEVANT ENTITIES.—For purposes of 

10 paragraph (1), the entities described in this para11 graph are qualified community health groups (as de12 fined in section 3421(a)), and other public or non13 profit private entities, that— 

14 (A) provide health services in one or more 

15 health professional shortage areas or that pro16 vide such services to a significant number of in17 dividuals who are members of a medically un18 derserved population; and 

19 (B) are experienced in providing services to 

20 increase the capacity of individuals to utilize 

21 health services. 

22 (b) ENABLING SERVICES.—The services referred to 

23 in subsection (a)(1) are transportation, community and 

24 patient outreach, patient education, translation services, 

25 and such other services as the Secretary determines to be 
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1 appropriate in carrying out the purpose described in such 

2 subsection. 

3 (c) CERTAIN REQUIREMENTS REGARDING PROJECT

4 AREA.—The Secretary may make an award of a grant or 

5 contract under subsection (a) only if the applicant in6 volved— 

7 (1) submits to the Secretary— 

8 (A) information demonstrating that the 

9 medically underserved populations in the com10 munity to be served under the award have a 

11 need for enabling services; and 

12 (B) a proposed budget for providing such 

13 services; and 

14 (2) the applicant for the award agrees that the 

15 residents of the community will be significantly in16 volved in the project carried out with the award. 

17 (d) IMPOSITION OF FEES.—The Secretary may make 

18 an award of a grant or contract under subsection (a) only 

19 if the applicant involved agrees that, in the project carried 

20 out under such subsection, enabling services will be pro21 vided without charge to the recipients of the services. 

22 (e) USE OF EXISTING RESOURCES.—The Secretary 

23 may make an award of a grant or contract under sub24 section (a) only if the applicant involved agrees that, in 

25 carrying out the project under such subsection, the appli-
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1 cant will utilize existing resources to the maximum extent 

2 practicable. 

3 (f) APPLICATION FOR AWARDS OF ASSISTANCE.— 

4 The Secretary may make an award of a grant or contract 

5 under subsection (a) only if an application for the award 

6 is submitted to the Secretary, the application contains 

7 each agreement described in this subpart, the application 

8 contains the information required in subsection (d)(1), 

9 and the application is in such form, is made in such man10 ner, and contains such agreements, assurances, and infor11 mation as the Secretary determines to be necessary to 

12 carry out this subpart. 

13 (g) DEFINITION.—For purposes of this section, the 

14 term ‘‘enabling services’’ means services described in sub15 section (b) that are provided for the purpose described in 

16 subsection (a)(1). 

17 SEC. 3462. AUTHORIZATIONS OF APPROPRIATIONS. 

18 (a) ENABLING SERVICES.—For the purpose of car19 rying out section 3461, there are authorized to be appro20 priated $200,000,000 for fiscal year 1996, $300,000,000 

21 for each of the fiscal years 1997 through 1999, and 

22 $100,000,000 for fiscal year 2000. 

23 (b) RELATION TO OTHER FUNDS.—The authoriza24 tions of appropriations established in subsection (a) are 

25 in addition to any other authorizations of appropriations 
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1 that are available for the purpose described in such sub2 section. 

3 PART 3—NATIONAL HEALTH SERVICE CORPS 

4 SEC. 3471. AUTHORIZATIONS OF APPROPRIATIONS. 

5 (a) ADDITIONAL FUNDING; GENERAL CORPS PRO6 GRAM; ALLOCATIONS REGARDING NURSES.—For the pur7 pose of carrying out subpart II of part D of title III of 

8 the Public Health Service Act, and for the purpose of car9 rying out section 3472, there are authorized to be appro10 priated $50,000,000 for fiscal year 1995, $100,000,000 

11 for fiscal year 1996, and $200,000,000 for each of the 

12 fiscal years 1997 through 2000. 

13 (b) RELATION TO OTHER FUNDS.—The authoriza14 tions of appropriations established in subsection (a) are 

15 in addition to any other authorizations of appropriations 

16 that are available for the purpose described in such sub17 section. 

18 (c) AVAILABILITY OF FUNDS.—An appropriation 

19 under this section for any fiscal year may be made at any 

20 time before that fiscal year and may be included in an 

21 Act making an appropriation under an authorization 

22 under subsection (a) for another fiscal year; but no funds 

23 may be made available from any appropriation under this 

24 section for obligation under sections 331 through 335, sec25 tion 336A, and section 337 before the fiscal year involved. 
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1 SEC. 3472. ALLOCATION FOR PARTICIPATION OF NURSES 

2 IN SCHOLARSHIP AND LOAN REPAYMENT 

3 PROGRAMS. 

4 Of the amounts appropriated under section 3471, the 

5 Secretary shall reserve such amounts as may be necessary 

6 to ensure that, of the aggregate number of individuals who 

7 are participants in the Scholarship Program under section 

8 338A of the Public Health Service Act, or in the Loan 

9 Repayment Program under section 338B of such Act, the 

10 total number who are being educated as nurses or are 

11 serving as nurses, respectively, is increased to 20 percent. 

12 PART 4—PAYMENTS TO HOSPITALS SERVING 

13 VULNERABLE POPULATIONS 

14 SEC. 3481. PAYMENTS TO HOSPITALS. 

15 (a) ENTITLEMENT STATUS.—The Secretary shall 

16 make payments in accordance with this part to eligible 

17 hospitals described in section 3482. The preceding sen18 tence— 

19 (1) is an entitlement in the Secretary on behalf 

20 of such eligible hospitals (but is not an entitlement 

21 in the State in which any such hospital is located or 

22 in any individual receiving services from any such 

23 hospital); and 

24 (2) constitutes budget authority in advance of 

25 appropriations Acts and represents the obligation of 

26 the Federal Government to provide funding for such 
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1 payments in the amounts, and for the fiscal years, 

2 specified in subsection (b). 

3 (b) AMOUNT OF ENTITLEMENT.— 

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

5 (a)(2), the amounts and fiscal years specified in this 

6 subsection are (in the aggregate for all eligible hos7 pitals) $800,000,000 for the fiscal year in which the 

8 general effective date occurs and for each subse9 quent fiscal year. 

10 (2) SPECIAL RULE FOR YEARS BEFORE GEN11 ERAL EFFECTIVE DATE.— 

12 (A) IN GENERAL.—For any fiscal year 

13 that begins prior to the general effective date, 

14 the amount specified in this subsection for pur15 poses of subsection (a)(2) shall be equal to the 

16 aggregate DSH percentage of the amount oth17 erwise determined under paragraph (1). 

18 (B) AGGREGATE DSH PERCENTAGE DE19 FINED.—In subparagraph (A), the ‘‘aggregate 

20 DSH percentage’’ for a year is the amount (ex21 pressed as a percentage) equal to— 

22 (i) the total amount of payment made 

23 by the Secretary under section 1903(a) of 

24 the Social Security Act during the base 

25 year with respect to payment adjustments 
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1 made under section 1923(c) of such Act 

2 for hospitals in the States in which eligible 

3 hospitals for the year are located; divided 

4 by 

5 (ii) the total amount of payment made 

6 by the Secretary under section 1903(a) of 

7 such Act during the base year with respect 

8 to payment adjustments made under sec9 tion 1923(c) of such Act for hospitals in 

10 all States. 

11 (c) PERIOD OF PAYMENT.—An eligible hospital shall 

12 receive a payment under this section for a period of 5 

13 years, without regard to the year for which the hospital 

14 first receives a payment. 

15 (d) PAYMENTS MADE ON QUARTERLY BASIS.—Pay16 ments to an eligible hospital under this section for a year 

17 shall be made on a quarterly basis during the year. 

18 SEC. 3482. IDENTIFICATION OF ELIGIBLE HOSPITALS. 

19 (a) HOSPITALS IN PARTICIPATING STATES.—In 

20 order to be an eligible hospital under this part, a hospital 

21 must be located in a State that is a participating State 

22 under this Act, except that an eligible hospital remains 

23 eligible to receive a payment under this part notwith24 standing that, during the 5-year period for which the pay25 ment is to be made, the State in which it is located no 
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1 longer meets the requirements for participating States 

2 under this Act. 

3 (b) STATE IDENTIFICATION.—In accordance with the 

4 criteria described in subsection (c) and such procedures 

5 as the Secretary may require, each State shall identify the 

6 hospitals in the State that meet such criteria and provide 

7 the Secretary with a list of such hospitals. 

8 (c) CRITERIA FOR ELIGIBILITY.—A hospital meets 

9 the criteria described in this subsection if the hospital’s 

10 low-income utilization rate for the base year under section 

11 1923(b)(3) of the Social Security Act (as such section is 

12 in effect on the day before the date of the enactment of 

13 this Act) is not less than 25 percent. 

14 SEC. 3483. AMOUNT OF PAYMENTS. 

15 (a) DISTRIBUTION OF ALLOCATION FOR LOW-IN16 COME ASSISTANCE.— 

17 (1) ALLOCATION FROM TOTAL AMOUNT.—Of 

18 the total amount available for payments under this 

19 section in a year, 75 percent shall be allocated to 

20 hospitals for low-income assistance in accordance 

21 with this subsection. 

22 (2) DETERMINATION OF HOSPITAL PAYMENT

23 AMOUNT.—The amount of payment to an eligible 

24 hospital from the allocation made under paragraph 
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1 (1) during a year shall be the equal to the hospital’s 

2 low-income percentage of the allocation for the year. 

3 (b) DISTRIBUTION OF ALLOCATION FOR ASSISTANCE

4 FOR UNCOVERED SERVICES.— 

5 (1) ALLOCATION FROM TOTAL AMOUNT; DETER6 MINATION OF STATE-SPECIFIC PORTION OF ALLOCA7 TION.—Of the total amount available for payments 

8 under this section in a year, 25 percent shall be allo9 cated to hospitals for assistance in furnishing inpa10 tient hospital services that are not covered services 

11 under title I (in accordance with regulations of the 

12 Secretary) in accordance with this subsection. The 

13 amount available for payments to eligible hospitals 

14 in a State shall be equal to an amount determined 

15 in accordance with a methodology specified by the 

16 Secretary. 

17 (2) DETERMINATION OF HOSPITAL PAYMENT

18 AMOUNT.—The amount of payment to an eligible 

19 hospital in a State from the amount available for 

20 payments to eligible hospitals in the State under 

21 paragraph (1) during a year shall be the equal to 

22 the hospital’s low-income percentage of such amount 

23 for the year. 

24 (c) LOW-INCOME PERCENTAGE DEFINED.— 
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1 (1) IN GENERAL.—In this subsection, an eligi2 ble hospital’s ‘‘low-income percentage’’ for a year is 

3 equal to the amount (expressed as a percentage) of 

4 the total low-income days for all eligible hospitals for 

5 the year that are attributable to the hospital. 

6 (2) LOW-INCOME DAYS DESCRIBED.—For pur7 poses of paragraph (1), an eligible hospital’s low-in8 come days for a year shall be equal to the product 

9 of— 

10 (A) the total number of inpatient days for 

11 the hospital for the year (as reported to the 

12 Secretary by the State in which the hospital is 

13 located, in accordance with a reporting schedule 

14 and procedures established by the Secretary); 

15 and 

16 (B) the hospital’s low-income utilization 

17 rate for the base year under section 1923(b)(3) 

18 of the Social Security Act (as such section is in 

19 effect on the day before the date of the enact20 ment of this Act). 

21 SEC. 3484. BASE YEAR. 

22 In this part, the ‘‘base year’’ is, with respect to a 

23 State and hospitals in a State, the year immediately prior 

24 to the year in which the general effective date occurs. 
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1 Subtitle F—Mental Health; 

2 Substance Abuse 

3 PART 1—FINANCIAL ASSISTANCE 

4 SEC. 3501. AUTHORIZATIONS OF APPROPRIATIONS. 

5 (a) IN GENERAL.—For the purpose of carrying out 

6 this part, there are authorized to be appropriated 

7 $100,000,000 for fiscal year 1995, $150,000,000 for fis8 cal year 1996, and $250,000,000 for each of the fiscal 

9 years 1997 through 2000. 

10 (b) ALLOCATION AMONG PROGRAMS.—Of the 

11 amounts made available under subsection (a) for a fiscal 

12 year— 

13 (1) the Secretary may reserve for carrying out 

14 section 3503 such amounts as the Secretary deter15 mines to be appropriate; and 

16 (2) the Secretary shall, of the remaining 

17 amounts, reserve 50 percent for carrying out sub18 section (a) of section 3502 and 50 percent for car19 rying out subsection (b) of such section. 

20 (c) RELATION TO OTHER FUNDS.—The authoriza21 tions of appropriations established in subsection (a) are 

22 in addition to any other authorizations of appropriations 

23 that are available for the purpose described in such sub24 section. 
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1 SEC. 3502. SUPPLEMENTAL FORMULA GRANTS FOR STATES 

2 REGARDING ACTIVITIES UNDER PART B OF 

3 TITLE XIX OF PUBLIC HEALTH SERVICE ACT. 

4 (a) MENTAL HEALTH.— 

5 (1) IN GENERAL.—In the case of any State that 

6 submits to the Secretary an application in accord7 ance with subsection (e) for a fiscal year with re8 spect to mental health, the Secretary shall make a 

9 grant to the State for the purposes authorized in 

10 subsection (c) with respect to mental health. The 

11 grant shall consist of the allotment determined 

12 under paragraph (2) for the State for such year. 

13 (2) DETERMINATION OF ALLOTMENT.—For 

14 purposes of paragraph (1), the allotment under this 

15 paragraph for a State for a fiscal year shall be de16 termined as follows: With respect to the amount re17 served under section 3501(b)(2) for carrying out 

18 this subsection, section 1918 of the Public Health 

19 Service Act shall be applied to such amount to the 

20 same extent and in the same manner as such section 

21 1918 is applied to the amount determined under sec22 tion 1918(a)(2) of such Act. 

23 (b) SUBSTANCE ABUSE.— 

24 (1) IN GENERAL.—In the case of any State that 

25 submits to the Secretary an application in accord26 ance with subsection (e) for a fiscal year with re-
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Title III, Subtitle F 

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1 spect to substance abuse, the Secretary shall make 

2 a grant to the State for the purposes authorized in 

3 subsection (c) with respect to substance abuse. The 

4 grant shall consist of the allotment determined 

5 under paragraph (2) for the State for such year. 

6 (2) DETERMINATION OF ALLOTMENT.—For 

7 purposes of paragraph (1), the allotment under this 

8 paragraph for a State for a fiscal year shall be de9 termined as follows: With respect to the amount re10 served under section 3501(b)(2) for carrying out 

11 this subsection, section 1933 of the Public Health 

12 Service Act shall be applied to such amount to the 

13 same extent and in the same manner as such section 

14 1933 is applied to the amount determined pursuant 

15 to sections 1933(a)(1)(B)(i) and 1918(a)(2)(A) of 

16 such Act. 

17 (c) USE OF GRANTS.— 

18 (1) IN GENERAL.—With respect to the expendi19 ture of a grant to a State under subsection (a) or 

20 (b), the Secretary— 

21 (A) shall designate as authorized expendi22 tures such of the activities described in para23 graph (2) with respect to mental health and 

24 substance abuse, respectively, as the Secretary 

25 determines to be appropriate; and 
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Title III, Subtitle F 

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1 (B) may make the grant only if the State 

2 agrees to expend the grant in accordance with 

3 the activities so designated. 

4 (2) DESCRIPTION OF ACTIVITIES.—The activi5 ties referred to in paragraph (1) are (as applicable 

6 to the grant involved) the following: 

7 (A) For the purpose of increasing the ac8 cess of individuals to services relating to mental 

9 health and substance abuse, the following serv10 ices: Transportation, community and patient 

11 outreach, patient education, translation serv12 ices, and such other services as the Secretary 

13 determines to be appropriate regarding such 

14 purpose. 

15 (B) Improving the capacity of State and 

16 local service systems to coordinate and monitor 

17 mental health and substance abuse services, in18 cluding improvement of management informa19 tion systems, and establishment of linkages be20 tween providers of mental health and substance 

21 abuse services and primary care providers and 

22 health plans. 

23 (C) Providing incentives to integrate public 

24 and private systems for the treatment of mental 

25 health and substance abuse disorders. 
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Title III, Subtitle F 

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1 (D) Any activity for which a grant under 

2 section 1911 or section 1921 of the Public 

3 Health Service Act is authorized to be ex4 pended. 

5 (d) MAINTENANCE OF EFFORT.— 

6 (1) IN GENERAL.—With respect to the activities 

7 for which a grant under subsection (a) or (b) is to 

8 be made, the Secretary may make the grant only if 

9 the State involved agrees to maintain expenditures 

10 of non-Federal amounts for such activities at a level 

11 that is not less than the level of such expenditures 

12 maintained by the State for the fiscal year preceding 

13 the first fiscal year for which the State receives such 

14 a grant. 

15 (2) WAIVER.—The Secretary may waive all or 

16 part of the requirement established for a State 

17 under paragraph (1) if— 

18 (A) the State agrees that the amounts that 

19 otherwise would have been subject to such re20 quirement will be expended for the purpose of 

21 developing community-based systems of care to 

22 promote the eventual integration of the public 

23 and private systems for treatment of mental 

24 health, or substance abuse, as applicable to the 

25 grant; 
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Title III, Subtitle F 

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1 (B) the State submits to the Secretary a 

2 request for the waiver and a description of the 

3 manner in which the State will carry out such 

4 purpose; and 

5 (C) the Secretary approves the waiver. 

6 (e) APPLICATION FOR GRANT.—For purposes of sub7 section (a)(1) and (b)(1), an application for a grant under 

8 this section regarding mental health or substance abuse, 

9 respectively, is in accordance with this subsection if the 

10 State involved submits the application not later than the 

11 date specified by the Secretary, the application contains 

12 each applicable agreement described in this section, and 

13 the application otherwise is in such form, is made in such 

14 manner, and contains such agreements, assurances, and 

15 information as the Secretary determines to be necessary 

16 to carry out the purpose involved. 

17 SEC. 3503. CAPITAL COSTS OF DEVELOPMENT OF CERTAIN 

18 CENTERS AND CLINICS. 

19 (a) IN GENERAL.—The Secretary may make loans to, 

20 and guarantee the payment of principal and interest to 

21 Federal and non-Federal lenders on behalf of, public and 

22 private entities for the capital costs to be incurred by the 

23 entities in the development of non-acute, residential treat24 ment centers and community-based ambulatory clinics. 
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Title III, Subtitle F 

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1 (b) PRIORITIES REGARDING USE OF FUNDS.—In 

2 providing loans or loan guarantees under subsection (a), 

3 the Secretary shall give priority to authorizing the use of 

4 amounts for projects in health professional shortage areas 

5 or in geographic area in which there resides a significant 

6 number of individuals who are members of a medically un7 derserved population. 

8 (c) APPLICABILITY OF CERTAIN PROVISIONS.—The 

9 Secretary may provide loans or loan guarantees under 

10 subsection (a) only if the applicant involved agrees that, 

11 except to the extent inconsistent with the purpose de12 scribed in subsection (a), subpart C of part 2 of subtitle 

13 E applies to such assistance to the same extent and in 

14 the same manner as such subpart applies to loans and 

15 loan guarantees under section 3441. 

16 PART 2—AUTHORITIES REGARDING 

17 PARTICIPATING STATES 

18 Subpart A—Report 

19 SEC. 3511. REPORT ON INTEGRATION OF MENTAL HEALTH 

20 SYSTEMS. 

21 (a) IN GENERAL.—As a condition of being a partici22 pating State under title I, each State shall, not later than 

23 October 1, 1998, submit to the Secretary a report on (in24 cluding a plan for) the measures to be implemented by 

25 the State to achieve the integration of the mental illness 
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Title III, Subtitle F 

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1 and substance abuse services of the State and its political 

2 subdivisions with the mental illness and substance abuse 

3 services that are included in the comprehensive benefit 

4 package under title I. The plan required in the preceding 

5 sentence shall meet the conditions described in section 

6 3074(b). 

7 (b) REQUIRED CONTENTS.—With respect to the pro8 vision of items and services relating to mental illness and 

9 substance abuse, the report of a State under subsection 

10 (a) shall, at a minimum, contain the following information: 

11 (1) Information on the number of individuals 

12 served by or through mental illness and substance 

13 abuse programs administered by State and local 

14 agencies and the proportion who are eligible persons 

15 under title I. 

16 (2) The following information on services fur17 nished to eligible persons: 

18 (A) Each type of benefit furnished. 

19 (B) The mental illness diagnoses for which 

20 each type of benefit is covered, the amount, du21 ration and scope of coverage for each covered 

22 benefit, and any applicable limits on benefits. 

23 (C) Cost sharing rules that apply. 

24 (3) Information on the extent to which each 

25 health provider furnishing mental illness and sub-
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Title III, Subtitle F 

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1 stance abuse services under a State program partici2 pates in one or more regional or corporate alliance 

3 health plans, and, in the case of providers that do 

4 not so participate, the reasons for the lack of par5 ticipation. 

6 (4) The amount of revenues from health plans 

7 received by mental illness and substance abuse pro8 viders that are participating in such health plans 

9 and are funded under one or more State programs. 

10 (5) With respect to the two years preceding the 

11 year in which the State becomes a participating 

12 State under title I— 

13 (A) the amount of funds expended by the 

14 State and its political subdivisions for each of 

15 such years for items and services that are in16 cluded in the comprehensive benefit package 

17 under such title; 

18 (B) the amount of funds expended for 

19 medically necessary and appropriate items and 

20 services not included in such benefit package, 

21 including medical care, other health care, and 

22 supportive services related to the provision of 

23 health care. 

24 (6) An estimate of the amount that the State 

25 will expend to furnish items and services not in-
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Title III, Subtitle F 

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1 cluded in such package once the expansion of cov2 erage for mental illness and substance abuse services 

3 is implemented in the year 2001. 

4 (7) A description of how the State will assure 

5 that all individuals served by mental illness and sub6 stance abuse programs funded by the State will be 

7 enrolled in a health plan and how mental illness and 

8 substance abuse services not covered under the ben9 efit package will continue to be furnished to such en10 rollees. 

11 (8) A description of the conditions under which 

12 the integration of mental illness and substance abuse 

13 providers into regional and corporate alliances can 

14 be achieved, and an identification of changes in par15 ticipation and certification requirements that are 

16 needed to achieve the integration of such programs 

17 and providers into health plans. 

18 (9) If the integration of mental illness and sub19 stance abuse programs operated by the State into 

20 one or more health plans is not medically appro21 priate or feasible for one or more groups of individ22 uals treated under State programs, a description of 

23 the reasons that integration is not feasible or appro24 priate and a plan for assuring the coordination for 

25 such individuals of the care and services covered 
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Title III, Subtitle F 

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1 under the comprehensive benefit package with the 

2 additional items and services furnished by such pro3 grams. 

4 (c) GENERAL PROVISIONS.—Reports under sub5 section (a) shall be provided at the time and in the manner 

6 prescribed by the Secretary. 

7 Subpart B—Pilot Program 

8 SEC. 3521. PILOT PROGRAM. 

9 (a) IN GENERAL.—The Secretary shall establish a 

10 pilot program to demonstrate model methods of achieving 

11 the integration of the mental illness and substance abuse 

12 services of the States with the mental illness and sub13 stance abuse services that are included in the comprehen14 sive benefit package under title I. 

15 (b) CERTAIN CONSIDERATIONS.—With respect to the 

16 provision of items and services relating to mental illness 

17 and substance abuse, the Secretary, in carrying out sub18 section (a), shall consider the following: 

19 (1) The types of items and services needed in 

20 addition to the items and services included in the 

21 comprehensive benefits package under title I. 

22 (2) The optimal methods of treatment for indi23 viduals with long-term conditions. 

24 (3) The capacity of alliance health plans to fur25 nish such treatment. 
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Title III, Subtitle G 

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1 (4) The modifications that should be made in 

2 the items and services furnished by such health 

3 plans. 

4 (5) The role of publicly-funded health providers 

5 in the integration of acute and long-term treatment. 

6 Subtitle G—Comprehensive School 

7 Health Education; School-Re8 lated Health Services 

9 PART 1—GENERAL PROVISIONS 

10 SEC. 3601. PURPOSES. 

11 Subject to the subsequent provisions of this subtitle, 

12 the purposes of this subtitle are as follows: 

13 (1) To support the provision in kindergarten 

14 through grade 12 of sequential, age-appropriate, 

15 comprehensive health education programs that ad16 dress locally relevant priorities. 

17 (2) To establish a national framework within 

18 which States can create comprehensive school health 

19 education programs that— 

20 (A) target the health risk behaviors ac21 counting for the majority of the morbidity and 

22 mortality among youth and adults, including 

23 the following: Tobacco use; alcohol and other 

24 drug abuse; sexual behaviors resulting in infec25 tion with the human immunodeficiency virus, in 
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Title III, Subtitle G 

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1 other sexually transmitted diseases or in unin2 tended pregnancy; behaviors resulting in inten3 tional and unintentional injuries; dietary pat4 terns resulting in disease; and sedentary life5 styles; and 

6 (B) are integrated with plans and pro7 grams in the State, if any, under title III of the 

8 Goals 2000: Educate America Act and those 

9 targeting health promotion and disease preven10 tion goals related to the national health objec11 tives set forth in Healthy People 2000. 

12 (3) To pay the initial costs of planning and es13 tablishing Statewide comprehensive school health 

14 education programs that will be implemented and 

15 maintained with local, State, and other Federal re16 sources. 

17 (4) To support Federal activities such as re18 search and demonstrations, evaluations, and training 

19 and technical assistance regarding comprehensive 

20 school health education. 

21 (5) To motivate youth, especially low-achieving 

22 youth, to stay in school, avoid teen pregnancy, and 

23 strive for success by providing intensive, high-quality 

24 health education programs that include peer-teach25 ing, family, and community involvement. 
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Title III, Subtitle G 

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1 (6) To improve the knowledge and skills of chil2 dren and youth by integrating academic and experi3 ential learning in health education with other ele4 ments of a comprehensive school health program. 

5 (7) To further the National Education Goals 

6 set forth in title I of the Goals 2000: Educate Amer7 ica Act and the national health objectives set forth 

8 in Healthy People 2000. 

9 SEC. 3602. DEFINITIONS. 

10 (a) COMPREHENSIVE SCHOOL HEALTH EDUCATION

11 PROGRAM.—For purposes of this subtitle, the term ‘‘com12 prehensive school health education program’’ means a pro13 gram that addresses locally relevant priorities and meets 

14 the following conditions: 

15 (1) The program is sequential, and age and de16 velopmentally appropriate. 

17 (2) The program is provided, in the area served 

18 by the program, every year for all students from kin19 dergarten through grade 12. 

20 (3) The program provides comprehensive health 

21 education, including the following components: 

22 (A) Community health. 

23 (B) Environmental health. 

24 (C) Personal health. 

25 (D) Family life. 
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Title III, Subtitle G 

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1 (E) Growth and development. 

2 (F) Nutritional health. 

3 (G) Prevention and control of disease and 

4 disorders. 

5 (H) Safety and prevention of injuries. 

6 (I) Substance abuse, including tobacco and 

7 alcohol use. 

8 (J) Consumer health, including education 

9 to ensure that students understand the benefits 

10 and appropriate use of medical services, includ11 ing immunizations and other clinical preventive 

12 services. 

13 (4) The program promotes personal responsi14 bility for a healthy lifestyle and provides the knowl15 edge and skills necessary to adopt a healthy lifestyle, 

16 including teaching the legal, social, and health con17 sequences of behaviors that pose health risks. 

18 (5) The program is sensitive to cultural and 

19 ethnic issues in the content of instructional mate20 rials and approaches. 

21 (6) The program includes activities that sup22 port instruction. 

23 (7) The program includes activities to promote 

24 involvement by parents, families, community organi25 zations, and other appropriate entities. 
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Title III, Subtitle G 

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1 (8) The program is coordinated with other Fed2 eral, State, and local health education and preven3 tion programs and with other Federal, State and 

4 local education programs, including those carried out 

5 under title I of the Elementary and Secondary Edu6 cation Act of 1965. 

7 (9) The program focuses on the particular 

8 health concerns of the students in the State, school 

9 district, or school, as the case may be. 

10 (b) OTHER DEFINITIONS.—For purposes of this sub11 title: 

12 (1) The term ‘‘local educational agency’’ has 

13 the meaning given such term in section 1471(12) of 

14 the Elementary and Secondary Education Act of 

15 1965. 

16 (2) The term ‘‘State educational agency’’ has 

17 the meaning given such term in section 1471(23) of 

18 the Elementary and Secondary Education Act of 

19 1965. 

20 PART 2—SCHOOL HEALTH EDUCATION; GENERAL 

21 PROVISIONS 

22 SEC. 3611. AUTHORIZATIONS OF APPROPRIATIONS. 

23 (a) FUNDING FOR SCHOOL HEALTH EDUCATION.— 

24 For the purpose of carrying out parts 3 and 4, there are 
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Title III, Subtitle G 

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1 authorized to be appropriated $50,000,000 for each of the 

2 fiscal year 1995 through 2000. 

3 (b) ALLOCATIONS.—Of the amounts appropriated 

4 under subsection (a) for a fiscal year— 

5 (1) the Secretary may reserve not more than 

6 $13,000,000 for carrying out part 4; 

7 (2) the Secretary may reserve not more than 

8 $5,000,000 to support national leadership activities, 

9 such as research and demonstration, evaluation, and 

10 training and technical assistance in comprehensive 

11 school health education; and 

12 (3) the Secretary may reserve not more than 5 

13 percent for administrative expenses regarding parts 

14 3 and 4. 

15 (c) RELATION TO OTHER FUNDS.—The authoriza16 tions of appropriations established in subsection (a) are 

17 in addition to any other authorizations of appropriations 

18 that are available for the purpose described in such sub19 section. 

20 SEC. 3612. WAIVERS OF STATUTORY AND REGULATORY RE21 QUIREMENTS. 

22 (a) IN GENERAL.— 

23 (1) WAIVERS.—Except as provided in sub24 section (c), upon the request of an entity receiving 

25 funds under part 3 or part 4 and under a program 
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1 specified in paragraph (2), the Secretary of Health 

2 and Human Services or the Secretary of Education 

3 (as the case may be, according to which Secretary 

4 administers the program so specified) may grant to 

5 the entity a waiver of any requirement of such pro6 gram regarding the use of funds, or of the regula7 tions issued for the program by the Secretary in8 volved, if the following conditions are met with re9 spect to such program: 

10 (A) The Secretary involved determines that 

11 the requirement of such program impedes the 

12 ability of the State educational agency or other 

13 recipient to achieve more effectively the pur14 poses of part 3 or 4. 

15 (B) The Secretary involved determines 

16 that, with respect to the use of funds under 

17 such program, the requested use of the funds 

18 by the entity would be consistent with the pur19 poses of part 3 or 4. 

20 (C) In the case of a request for a waiver 

21 submitted by a State educational agency, the 

22 State educational agency— 

23 (i) provides all interested local edu24 cational agencies in the State with notice 
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1 and an opportunity to comment on the 

2 proposal; and 

3 (ii) submits the comments to the Sec4 retary involved. 

5 (D) In the case of a request for a waiver 

6 submitted by a local educational agency or 

7 other agency, institution, or organization that 

8 receives funds under part 3 from the State edu9 cational agency, such request has been reviewed 

10 by the State educational agency and is accom11 panied by the comments, if any, of such agency. 

12 (2) RELEVANT PROGRAMS.—For purposes of 

13 paragraph (1), the programs specified in this para14 graph are as follows: 

15 (A) In the case of programs administered 

16 by the Secretary of Health and Human Serv17 ices, the following: 

18 (i) The program known as the Preven19 tion, Treatment, and Rehabilitation Model 

20 Projects for High Risk Youth, carried out 

21 under section 517 of the Public Health 

22 Service Act. 

23 (ii) The program known as the State 

24 and Local Comprehensive School Health 

25 Programs to Prevent Important Health 
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1 Problems and Improve Educational Out2 comes, carried out under such Act. 

3 (B) In the case of programs administered 

4 by the Secretary of Education, any program 

5 carried out under part B of the Drug-Free 

6 Schools and Communities Act of 1986. 

7 (b) WAIVER PERIOD.— 

8 (1) IN GENERAL.—A waiver under this section 

9 shall be for a period not to exceed three years. 

10 (2) EXTENSIONS.—The Secretary involved 

11 under subsection (a) may extend such period if the 

12 Secretary determines that— 

13 (A) the waiver has been effective in ena14 bling the State or affected recipients to carry 

15 out the activities for which it was requested and 

16 has contributed to improved performance; and 

17 (B) such extension is in the public interest. 

18 (c) WAIVERS NOT AUTHORIZED.—The Secretary in19 volved under subsection (a) may not waive, under this sec20 tion, any statutory or regulatory requirement relating to— 

21 (1) comparability of services; 

22 (2) maintenance of effort; 

23 (3) the equitable participation of students at24 tending private schools; 

25 (4) parental participation and involvement; 
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1 (5) the distribution of funds to States or to 

2 local educational agencies or other recipients of 

3 funds under the programs specified in subsection 

4 (a)(2); 

5 (6) maintenance of records; 

6 (7) applicable civil rights requirements; or 

7 (8) the requirements of sections 438 and 439 of 

8 the General Education Provisions Act. 

9 (d) TERMINATION OF WAIVER.—The Secretary in10 volved under subsection (a) shall terminate a waiver under 

11 this section if the Secretary determines that the perform12 ance of the State or other recipient affected by the waiver 

13 has been inadequate to justify a continuation of the waiver 

14 or if it is no longer necessary to achieve its original pur15 poses. 

16 PART 3—SCHOOL HEALTH EDUCATION; GRANTS 

17 TO STATE EDUCATION AGENCIES 

18 Subpart A—Planning Grants for State Education 

19 Agencies 

20 SEC. 3621. APPLICATION FOR GRANT. 

21 (a) IN GENERAL.—Any State educational agency 

22 that wishes to receive a planning grant under this subpart 

23 shall submit an application to the Secretary of Health and 

24 Human Services, at such time and in such manner as the 

25 Secretary may require. 
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1 (b) APPLICATION; JOINT DEVELOPMENT; CON2 TENTS.—An application under subsection (a) shall be 

3 jointly developed by the State educational agency and the 

4 State health agencies of the State involved, and shall con5 tain the following: 

6 (1) An assessment of the State’s need for com7 prehensive school health education, using goals es8 tablished by the Department of Health and Human 

9 Services and the Department of Education and the 

10 State’s school improvement plan, if any, under title 

11 III of Goals 2000: Educate America Act. 

12 (2) A description of how the State educational 

13 agency will collaborate with the State health agency 

14 in the planning and development of a comprehensive 

15 school health education program in the State, in16 cluding coordination of existing health education 

17 programs and resources. 

18 (3) A plan to build capacity at the State and 

19 local levels to provide staff development and tech20 nical assistance to local educational agency and local 

21 health agency personnel involved with comprehensive 

22 school health education. 

23 (4) A preliminary plan for evaluating com24 prehensive school health education activities. 
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1 (5) Information demonstrating that the State 

2 has established a State-level advisory council whose 

3 membership includes representatives of the State 

4 agencies with principal responsibilities for programs 

5 regarding health, education, and mental health. 

6 (6) A timetable and proposed budget for the 

7 planning process. 

8 (7) Such other information and assurances as 

9 the Secretary may require. 

10 (c) NUMBER OF GRANTS.—States may receive one 

11 planning grant annually and no more than two planning 

12 grants may be awarded to any one State. 

13 SEC. 3622. APPROVAL OF SECRETARY. 

14 The Secretary may approve the application of a State 

15 under section 3621 if the Secretary determines that— 

16 (1) the application meets the requirements of 

17 this subpart; and 

18 (2) there is a substantial likelihood that the 

19 State will be able to develop and implement a com20 prehensive school health education plan that com21 plies with the requirements of subpart B. 

22 SEC. 3623. AMOUNT OF GRANT. 

23 For any fiscal year, the minimum grant to any State 

24 under this subpart is an amount determined by the Sec25 retary to be necessary to enable the State to conduct the 
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1 planning process, and the maximum such grant is 

2 $500,000. 

3 SEC. 3624. AUTHORIZED ACTIVITIES. 

4 A State may use funds received under this subpart 

5 only for the following: 

6 (1) To establish and carry out the State plan7 ning process. 

8 (2) To conduct Statewide or sub-State regional 

9 coordination and collaboration activities for local 

10 educational agencies, local health agencies, and other 

11 agencies and organizations, as appropriate. 

12 (3) To conduct activities to build capacity to 

13 provide staff development and technical assistance 

14 services to local educational agency and local health 

15 agency personnel involved with comprehensive school 

16 health education. 

17 (4) To develop student learning objectives and 

18 assessment instruments. 

19 (5) To work with State and local health agen20 cies and State and local educational agencies to re21 duce barriers to the implementation of comprehen22 sive school health education programs in schools. 

23 (6) To prepare the plan required to receive an 

24 implementation grant under subpart B. 
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1 (7) To adopt, validate, and disseminate cur2 riculum models and program strategies, if the Sec3 retary determines that such activities are necessary 

4 to achieving the objectives of the State’s program. 

5 Subpart B—Implementation Grants for State 

6 Education Agencies 

7 SEC. 3631. APPLICATION FOR GRANT. 

8 (a) IN GENERAL.—Any State that wishes to receive 

9 an implementation grant under this subpart shall submit 

10 an application to the Secretary of Health and Human 

11 Services, at such time, in such manner, and containing 

12 such information and assurances as the Secretary may re13 quire. 

14 (b) APPLICATION AND STATE PLAN; JOINT DEVEL15 OPMENT; CONTENTS.—An application under subsection 

16 (a) shall be jointly developed by the State educational 

17 agency and the State health agencies of the State involved, 

18 and shall include a State plan for comprehensive school 

19 health education programs (as defined in section 3602) 

20 that describes the following: 

21 (1) The State’s goals and objectives for those 

22 programs. 

23 (2) How the State will allocate funds to local 

24 educational agencies in accordance with section 

25 3634. 
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1 (3) How the State will coordinate programs 

2 under this subpart with other local, State and Fed3 eral health education programs. 

4 (4) How comprehensive school health education 

5 programs will be coordinated with other local, State 

6 and Federal education programs, such as programs 

7 under title I of the Elementary and Secondary Edu8 cation Act of 1965, with the State’s school improve9 ment plan, if any, under title III of the Goals 2000: 

10 Educate America Act, and with any similar pro11 grams. 

12 (5) How the State has worked with State and 

13 local education agencies and with State and local 

14 health agencies to reduce barriers to implementing 

15 comprehensive school health education programs. 

16 (6) How the State will monitor the implementa17 tion of such programs by local educational agencies. 

18 (7) How the State will build capacity for profes19 sional development of health educators. 

20 (8) How the State will provide staff develop21 ment and technical assistance to local educational 

22 agencies. 

23 (9) The respective roles of the State educational 

24 agency, local educational agencies, the State health 

25 agency, and the local health agencies in developing 
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1 and implementing such school health education pro2 grams. 

3 (10) How such school health education pro4 grams will be tailored to the extent practicable to be 

5 culturally and linguistically sensitive and responsive 

6 to the various needs of the students served, includ7 ing individuals with disabilities, and individuals from 

8 disadvantaged backgrounds (including racial and 

9 ethnic minorities). 

10 (11) How the State will evaluate and report on 

11 the State’s progress toward attaining the goals and 

12 objectives described in paragraph (1). 

13 SEC. 3632. SELECTION OF GRANTEES. 

14 (a) SELECTION OF GRANTEES.—The Secretary shall 

15 establish criteria for the competitive selection of grantees 

16 under this subpart. 

17 (b) OPPORTUNITY FOR PLANNING GRANT.—If the 

18 Secretary does not approve a State’s application under 

19 this subpart and determines that the State could benefit 

20 from a planning grant under subpart A, the Secretary 

21 shall inform the State of any planning grant funds that 

22 may be available to it under subpart A, subject to section 

23 3621(c). 
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1 SEC. 3633. AMOUNT OF GRANT. 

2 (a) IN GENERAL.—For any fiscal year, the minimum 

3 grant to any State under this subpart is an amount deter4 mined by the Secretary to be necessary to enable the State 

5 to conduct the implementation process. 

6 (b) CRITERIA.—In determining the amount of any 

7 such grant, the Secretary may consider such factors as 

8 the number of children enrolled in schools in the State, 

9 the number of school-aged children living in poverty in the 

10 State, and the scope and quality of the State’s plan. 

11 SEC. 3634. AUTHORIZED ACTIVITIES; LIMITATION ON AD12 MINISTRATIVE COSTS. 

13 (a) SUBGRANTS TO LOCAL EDUCATIONAL AGEN14 CIES.—Each State that receives funds under this subpart 

15 for any fiscal year shall retain not more than 75 percent 

16 of those funds in the first year, 50 percent of those funds 

17 in the second and third years, and 25 percent of those 

18 funds in each succeeding year. Those funds not retained 

19 by the State shall be used to make grants to local edu20 cational agencies in accordance with section 3635. 

21 (b) STATE-LEVEL ACTIVITIES.—Each State shall use 

22 retained funds for any fiscal year for the following pur23 poses: 

24 (1) To conduct Statewide or sub-State regional 

25 coordination and collaboration activities. 
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1 (2) To adapt, validate, or disseminate program 

2 models or strategies for comprehensive school health 

3 education. 

4 (3) To build capacity to deliver staff develop5 ment and technical assistance services to local edu6 cational agencies, and State and local health agen7 cies. 

8 (4) To promote program activities involving 

9 families and coordinating program activities with 

10 community groups and agencies. 

11 (5) To evaluate and report to the Secretary on 

12 the progress made toward attaining the goals and 

13 objectives described in section 3621(b)(1). 

14 (6) To conduct such other activities to achieve 

15 the objectives of this subpart as the Secretary may 

16 by regulation authorize. 

17 (c) STATE ADMINISTRATION.—Of the amounts re18 ceived by a State for a fiscal year under this subpart and 

19 remaining after any grants to local educational agencies 

20 made from such amounts, the State may use up to 10 

21 percent for the costs of administering such amounts, in22 cluding the activities of the State advisory council and 

23 monitoring the performance of local educational agencies. 
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1 SEC. 3635. SUBGRANTS TO LOCAL EDUCATIONAL AGEN2 CIES. 

3 (a) APPLICATION FOR GRANT.—Any local edu4 cational agency that wishes to receive a grant under this 

5 subpart shall submit an application to the State, con6 taining such information and assurances as the State may 

7 require, including a description of the following: 

8 (1) The local educational agency’s goals and ob9 jectives for comprehensive school health education 

10 programs. 

11 (2) How the local educational agency will con12 centrate funds in high-need schools and provide suf13 ficient funds to targeted schools to ensure the imple14 mentation of comprehensive programs. 

15 (3) How the local educational agency will mon16 itor the implementation of these programs. 

17 (4) How the local educational agency will en18 sure that school health education programs are tai19 lored to the extent practicable to be culturally and 

20 linguistically sensitive and responsive to the various 

21 needs of the students served, including individuals 

22 with disabilities, and individuals from disadvantaged 

23 backgrounds (including racial and ethnic minorities). 

24 (5) How the local educational agency, in con25 sultation with the local health agency, will evaluate 
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1 and report on its progress toward attaining the goals 

2 and objectives described in paragraph (1). 

3 (b) SELECTION OF SUBGRANTEES.—Each State shall 

4 give priority to applications from local educational agen5 cies serving areas with high needs, as indicated by criteria 

6 developed by the State, which shall include, but need not 

7 be limited to, high rates of any of the following: 

8 (1) Poverty among school-aged youth. 

9 (2) Births to adolescents. 

10 (3) Sexually transmitted diseases among school11 aged youth. 

12 (4) Drug and alcohol use among school-aged 

13 youth. 

14 (5) Violence among school-aged youth. 

15 (c) AUTHORIZED ACTIVITIES.—Each local edu16 cational agency that receives a grant under this subpart 

17 shall use the grant funds to implement comprehensive 

18 school health education programs, as defined in section 

19 3602. 

20 Subpart C—State and Local Reports 

21 SEC. 3641. STATE AND LOCAL REPORTS. 

22 (a) STATE REPORTS.—Each State that receives a 

23 grant under this part shall collect and submit to the Sec24 retary such data and other information on State and local 

25 programs as the Secretary may require. 
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1 (b) IN GENERAL.— Each local educational agency 

2 that receives a grant under subpart B shall collect and 

3 report to the State such data and other information as 

4 the Secretary may require. 

5 PART 4—SCHOOL HEALTH EDUCATION; GRANTS 

6 TO CERTAIN LOCAL EDUCATIONAL AGENCIES 

7 Subpart A—Eligibility 

8 SEC. 3651. SUBSTANTIAL NEED OF AREA SERVED BY 

9 AGENCY. 

10 Any local educational agency is eligible for a grant 

11 under this part for any fiscal year if— 

12 (1) the agency enrolls at least 25,000 students; 

13 and 

14 (2) the geographic area served by the agency 

15 has a substantial need for such a grant, relative to 

16 other geographic areas in the United States. 

17 Subpart B—Planning Grants for Local Education 

18 Agencies 

19 SEC. 3661. APPLICATION FOR GRANT. 

20 (a) IN GENERAL.—Any local educational agency that 

21 wishes to receive a planning grant under this subpart shall 

22 submit an application to the Secretary of Health and 

23 Human Services at such time and in such manner as the 

24 Secretary may require. 
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1 (b) STATE EDUCATIONAL AGENCY REVIEW.—Each 

2 such local educational agency, before submitting its appli3 cation to the Secretary, shall submit the application to the 

4 State educational agency for comment by such agency and 

5 by the State health agencies of the State. 

6 (c) CONTENTS OF APPLICATIONS.—Each such appli7 cation shall contain the following: 

8 (1) An assessment of the local educational 

9 agency’s need for comprehensive school health edu10 cation, using goals established by the Department of 

11 Health and Human Services and the Department of 

12 Education, as well as local health and education 

13 strategies, such as State school improvement plans, 

14 if any, under title III of the Goals 2000: Educate 

15 America Act. 

16 (2) Information demonstrating that the local 

17 educational agency has established or selected a 

18 community-level advisory council, which shall include 

19 representatives of relevant community agencies such 

20 as those that administer education, child nutrition, 

21 health, and mental health programs. 

22 (3) A description of how the local educational 

23 agency will collaborate with the State educational 

24 agency, the State health agency, and the local health 

25 agency in the planning and development of a com-
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1 prehensive school health education program in the 

2 local educational agency, including coordination of 

3 existing health education programs and resources. 

4 (4) A plan to build capacity at the local edu5 cational agency to provide staff development and 

6 technical assistance to local educational agency and 

7 local health agency personnel involved with com8 prehensive school health education. 

9 (5) A preliminary plan for evaluating com10 prehensive school health education activities. 

11 (6) A timetable and proposed budget for the 

12 planning process. 

13 (7) Such other information and assurances as 

14 the Secretary may require. 

15 (d) NUMBER OF GRANTS.—Local educational agen16 cies may receive at a maximum two annual planning 

17 grants. 

18 SEC. 3662. SELECTION OF GRANTEES. 

19 (a) SELECTION CRITERIA.—The Secretary shall es20 tablish criteria for the competitive selection of grantees 

21 under this part. 

22 (b) LIMITATION.—The Secretary shall not approve 

23 an application from a local educational agency in a State 

24 that has an approved plan under subpart A or B of part 

25 3 of this subtitle unless the Secretary determines, after 
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1 consultation with the State that the local application is 

2 consistent with the State plan, if one exists. 

3 SEC. 3663. AMOUNT OF GRANT. 

4 For any fiscal year, the minimum grant to any local 

5 educational agency under this subpart is an amount deter6 mined by the Secretary to be necessary to enable the local 

7 educational agency to conduct the planning process, and 

8 the maximum such grant is $500,000. 

9 SEC. 3664. AUTHORIZED ACTIVITIES. 

10 A local educational agency may use funds received 

11 under this subpart only for the following: 

12 (1) To establish and carry out the local edu13 cational agency planning process. 

14 (2) To undertake joint training, staffing, ad15 ministration, and other coordination and collabora16 tion activities for local educational agencies, local 

17 health agencies, and other agencies and organiza18 tions, as appropriate. 

19 (3) To conduct activities to build capacity to 

20 provide staff development and technical assistance 

21 services to local educational agency and local health 

22 agency personnel involved with comprehensive school 

23 health education. 

24 (4) To develop student learning objectives and 

25 assessment instruments. 
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1 (5) To work with State and local health agen2 cies and State educational agencies to reduce bar3 riers to the implementation of comprehensive school 

4 health education programs in schools, by, for exam5 ple, ensuring that adequate time is a available dur6 ing the school day for such programs. 

7 (6) To prepare the plan required to receive an 

8 implementation grant under subpart C. 

9 Subpart C—Implementation Grants for Local 

10 Educational Agencies 

11 SEC. 3671. APPLICATION FOR GRANT. 

12 (a) IN GENERAL.—Any local educational agency that 

13 wishes to receive an implementation grant under this sub14 part shall submit an application to the Secretary of Health 

15 and Human Services, at such time, in such manner, and 

16 containing such information and assurances as the Sec17 retary may require. 

18 (b) STATE EDUCATIONAL AGENCY REVIEW.—Each 

19 such local educational agency shall submit its application 

20 to the State educational agency for comment before sub21 mitting it to the Secretary. 

22 (c) LOCAL EDUCATIONAL AGENCY PLAN.—Each 

23 such application shall include a local educational agency 

24 plan for comprehensive school health education programs 

25 (as defined in section 3602) that describes the following: 
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1 (1) The local educational agency’s goals and ob2 jectives for those programs. 

3 (2) How the local educational agency will co4 ordinate programs under this subpart with other 

5 local, State and Federal health education programs. 

6 (3) How comprehensive school health education 

7 programs will be coordinated with other local, State 

8 and Federal education programs, such as programs 

9 under title I of the Elementary and Secondary Edu10 cation Act of 1965, and with State’s school improve11 ment plan, if any, under title III of the Goals 2000: 

12 Educate America Act. 

13 (4) How the local educational agency has 

14 worked with State educational agencies and with 

15 State and local health agencies to reduce barriers to 

16 implementing comprehensive school health education 

17 programs. 

18 (5) How local educational agencies will monitor 

19 the implementation of such programs. 

20 (6) How the local educational agency, in con21 sultation with the State educational agency and 

22 State and local health agencies and in conjunction 

23 with other local professional development activities, 

24 will build capacity for professional development of 

25 health educators. 
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1 (7) How the local educational agency, in con2 sultation with the State educational agency and 

3 State and local health agencies, will provide staff de4 velopment and technical assistance. 

5 (8) The respective roles of the State educational 

6 agency, local educational agencies, the State health 

7 agency, and the local health agencies in developing 

8 and implementing such school health education pro9 grams. 

10 (9) How such school health education programs 

11 will be tailored to the extent practicable to be cul12 turally and linguistically sensitive and responsive to 

13 the various needs of the students served, including 

14 individuals with disabilities, and individuals from 

15 disadvantaged backgrounds (including racial and 

16 ethnic minorities). 

17 (10) How the local educational agency, in con18 sultation with the local health agency, will evaluate 

19 and report on the local educational agency’s progress 

20 toward attaining the goals and objectives described 

21 in paragraph (1). 

22 SEC. 3672. SELECTION OF GRANTEES. 

23 (a) SELECTION OF GRANTEES.—The Secretary shall 

24 establish criteria for the competitive selection of grantees 

25 under this subpart. 
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1 (b) LIMITATION.—The Secretary shall not approve 

2 an application from a local educational agency in a State 

3 that has an approved plan under subpart A or B of part 

4 3 unless the Secretary determines, after consultation with 

5 the State that the local application is consistent with such 

6 State plan. 

7 (c) OPPORTUNITY FOR PLANNING GRANT.—If the 

8 Secretary does not approve a local educational agency’s 

9 application under this subpart and determines that the 

10 local educational agency could benefit from a planning 

11 grant under subpart B, the Secretary shall inform the 

12 local educational agency of any planning grant funds that 

13 may be available to it under subpart B, subject to section 

14 3661(d). 

15 SEC. 3673. AMOUNT OF GRANT. 

16 (a) IN GENERAL.—For any fiscal year, the minimum 

17 grant to any local educational agency under this subpart 

18 is an amount determined by the Secretary to be necessary 

19 to enable the local educational agency to conduct the im20 plementation process. 

21 (b) CRITERIA.—In determining the amount of any 

22 such grant, the Secretary may consider such factors as 

23 the number of children enrolled in schools in the local edu24 cational agency, the number of school-aged children living 
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1 in poverty in the local educational agency, and the scope 

2 and quality of the local educational agency’s plan. 

3 SEC. 3674. AUTHORIZED ACTIVITIES. 

4 Each local educational agency that receives a grant 

5 under this subpart shall use the grant funds as follows: 

6 (1) To implement comprehensive school health 

7 education programs, as defined in section 3602. 

8 (2) To conduct local or regional coordination 

9 and collaboration activities. 

10 (3) To provide staff development and technical 

11 assistance to schools, local health agencies, and 

12 other community agencies involved in providing com13 prehensive school health education programs. 

14 (4) To administer the program and monitor 

15 program implementation at the local level. 

16 (5) To evaluate and report to the Secretary on 

17 the local educational agency’s progress toward at18 taining the goals and objectives described in section 

19 3671(c)(1). 

20 (6) To conduct such other activities as the Sec21 retary may by regulation authorize. 

22 SEC. 3675. REPORTS. 

23 Each local educational agency that receives a grant 

24 under this subpart shall collect and report to the Secretary 
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1 and the State such data and other information as the Sec2 retary may require. 

3 PART 5—SCHOOL-RELATED HEALTH SERVICES 

4 Subpart A—Development and Operation of Projects 

5 SEC. 3681. AUTHORIZATIONS OF APPROPRIATIONS. 

6 (a) FUNDING FOR SCHOOL-RELATED HEALTH SERV7 ICES.—For the purpose of carrying out this subpart, there 

8 are authorized to be appropriated $100,000,000 for fiscal 

9 year 1996, $275,000,000 for fiscal year 1997, 

10 $350,000,000 for fiscal year 1998, and $400,000,000 for 

11 each of the fiscal years 1999 and 2000. 

12 (b) RELATION TO OTHER FUNDS.—The authoriza13 tions of appropriations established in subsection (a) are 

14 in addition to any other authorizations of appropriations 

15 that are available for the purpose described in such sub16 section. 

17 SEC. 3682. ELIGIBILITY FOR DEVELOPMENT AND OPER18 ATION GRANTS. 

19 (a) IN GENERAL.—Entities eligible to apply for and 

20 receive grants under section 3484 or 3485 are the fol21 lowing: 

22 (1) State health agencies that apply on behalf 

23 of local community partnerships and other commu24 nities in need of adolescent health services within the 

25 State. 
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1 (2) Local community partnerships in States in 

2 which health agencies have not applied. 

3 (b) LOCAL COMMUNITY PARTNERSHIPS.— 

4 (1) IN GENERAL.—A local community partner5 ship under subsection (a)(2) is an entity that, at a 

6 minimum, includes— 

7 (A) a local health care provider with expe8 rience in delivering services to adolescents; 

9 (B) one or more local public schools; and 

10 (C) at least one community based organi11 zation located in the community to be served 

12 that has a history of providing services to at13 risk youth in the community. 

14 (2) PARTICIPATION.—A partnership described 

15 in paragraph (1) shall, to the maximum extent fea16 sible, involve broad based community participation 

17 from parents and youth to be served, health and so18 cial service providers (including regional alliance 

19 health plans and corporate alliance health plans in 

20 which families in the community are enrolled), 

21 teachers and other public school and school board 

22 personnel, the regional health alliance in which the 

23 schools participating in the partnership are located, 

24 youth development and service organizations, and in25 terested business leaders. Such participation may be 
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1 evidenced through an expanded partnership, or an 

2 advisory board to such partnership. 

3 SEC. 3683. PREFERENCES. 

4 (a) IN GENERAL.—In making grants under sections 

5 3484 and 3485, the Secretary shall give preference to ap6 plicants whose communities to be served show the most 

7 substantial level of need for such services among individ8 uals who are between the ages of 10 and 19 (inclusive), 

9 as measured by indicators of community health including 

10 the following: 

11 (1) High levels of poverty. 

12 (2) The presence of a medically underserved 

13 area or population (as defined under section 330(a) 

14 of the Public Health Service Act). 

15 (3) A health professional shortage area, as des16 ignated under section 332 of the Public Health Serv17 ice Act. 

18 (4) High rates of indicators of health risk 

19 among children and youth, including a high propor20 tion of children receiving services through the Indi21 viduals with Disabilities Education Act, adolescent 

22 pregnancy, sexually transmitted disease (including 

23 infection with the human immunodeficiency virus), 

24 preventable disease, communicable disease, inten25 tional and unintentional injuries among children and 
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1 youth, community and gang violence, youth unem2 ployment, juvenile justice involvement, and high 

3 rates of drug and alcohol exposure. 

4 (b) LINKAGE TO QUALIFIED COMMUNITY HEALTH

5 GROUPS.—In making grants under sections 3484 and 

6 3485, the Secretary shall give preference to applicants 

7 that demonstrate a linkage to qualified community health 

8 groups (as defined in section 3421(a)). 

9 SEC. 3684. GRANTS FOR DEVELOPMENT OF PROJECTS. 

10 (a) IN GENERAL.—The Secretary may make grants 

11 to State health agencies or to local community partner12 ships to develop school health service sites. 

13 (b) USE OF FUNDS.—A project for which a grant 

14 may be made under subsection (a) may include but not 

15 be limited to the cost of the following: 

16 (1) Planning for the provision of school health 

17 services. 

18 (2) Recruitment, compensation, and training of 

19 health and administrative staff. 

20 (3) The development of agreements with re21 gional and corporate alliance health plans and the 

22 acquisition and development of equipment and infor23 mation services necessary to support information ex24 change between school health service sites and 
661 

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1 health plans, health providers, and other entities au2 thorized to collect information under this Act. 

3 (4) In the case of communities described in 

4 subsection (d)(2)(B), funds to aid in the establish5 ment of local community partnerships. 

6 (5) Other activities necessary to assume oper7 ational status. 

8 (c) APPLICATION FOR GRANT.— 

9 (1) IN GENERAL.—Applicants shall submit ap10 plications in a form and manner prescribed by the 

11 Secretary. 

12 (2) APPLICATIONS BY STATE HEALTH AGEN13 CIES.— 

14 (A) In the case of applicants that are State 

15 health agencies, the application shall contain 

16 assurances that the State health agency is ap17 plying for funds— 

18 (i) on behalf of at least one local com19 munity partnership; and 

20 (ii) on behalf of at least one other 

21 community identified by the State as in 

22 need of the services funded under this part 

23 but without a local community partnership. 

24 (B) In the case of communities identified 

25 in applications submitted by State health agen-
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Title III, Subtitle G 

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1 cies that do not yet have local community part2 nerships, the State shall describe the steps that 

3 will be taken to aid the community in devel4 oping a local community partnership. 

5 (C) A State applying on behalf of local 

6 community partnerships and other communities 

7 may retain not more than 10 percent of grants 

8 awarded under this subpart for administrative 

9 costs. 

10 (d) CONTENTS OF APPLICATION.—In order to receive 

11 a grant under this section, an applicant must include in 

12 the application the following information: 

13 (1) An assessment of the need for school health 

14 services in the communities to be served, using the 

15 latest available health data and health goals and ob16 jectives established by the Secretary. 

17 (2) A description of how the applicant will de18 sign the proposed school health services to reach the 

19 maximum number of school-aged children and youth 

20 at risk for poor health outcome. 

21 (3) An explanation of how the applicant will in22 tegrate its services with those of other health and 

23 social service programs within the community. 

24 (4) An explanation of how the applicant will 

25 link its activities to the regional and corporate alli-
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Title III, Subtitle G 

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1 ance health plans serving the communities in which 

2 the applicant’s program is to be located. 

3 (5) A description of linkages with regional and 

4 corporate health alliances in whose areas the appli5 cant’s program is to be located. 

6 (6) A description of a quality assurance pro7 gram which complies with standards that the Sec8 retary may prescribe. 

9 (e) NUMBER OF GRANTS.—Not more than one plan10 ning grant may be made to a single applicant. A planning 

11 grant may not exceed two years in duration. 

12 SEC. 3685. GRANTS FOR OPERATION OF PROJECTS. 

13 (a) IN GENERAL.—The Secretary may make grants 

14 to State health agencies or to local community partner15 ships for the cost of operating school health service sites. 

16 (b) USE OF GRANT.—The costs for which a grant 

17 may be made under this section include but are not limited 

18 to the following: 

19 (1) The cost of furnishing health services that 

20 are not covered under title I of this Act or by any 

21 other public or private insurer. 

22 (2) The cost of furnishing enabling services, as 

23 defined in section 3461(g). 

24 (3) Training, recruitment and compensation of 

25 health professionals and other staff. 
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Title III, Subtitle G 

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1 (4) Outreach services to at-risk youth and to 

2 parents. 

3 (5) Linkage of individuals to health plans, com4 munity health services and social services. 

5 (6) Other activities deemed necessary by the 

6 Secretary. 

7 (c) APPLICATION FOR GRANT.—Applicants shall sub8 mit applications in a form and manner prescribed by the 

9 Secretary. In order to receive a grant under this section, 

10 an applicant must include in the application the following 

11 information: 

12 (1) A description of the services to be furnished 

13 by the applicant. 

14 (2) The amounts and sources of funding that 

15 the applicant will expend, including estimates of the 

16 amount of payments the applicant will received from 

17 alliance health plans and from other sources. 

18 (3) Such other information as the Secretary de19 termines to be appropriate. 

20 (d) ADDITIONAL CONTENTS OF APPLICATION.—In 

21 order to receive a grant under this section, an applicant 

22 must meet the following conditions: 

23 (1) The applicant furnishes the following serv24 ices: 
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Title III, Subtitle G 

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1 (A) Diagnosis and treatment of simple ill2 nesses and minor injuries. 

3 (B) Preventive health services, including 

4 health screenings. 

5 (C) Enabling services, as defined in section 

6 3461(g). 

7 (D) Referrals and followups in situations 

8 involving illness or injury. 

9 (E) Health and social services, counseling 

10 services, and necessary referrals, including re11 ferrals regarding mental health and substance 

12 abuse. 

13 (F) Such other services as the Secretary 

14 determines to be appropriate. 

15 (2) The applicant maintains agreements with 

16 all regional and corporate alliance health plans offer17 ing services in the applicant’s service area. 

18 (3) The applicant is a participating provider in 

19 the State’s program for medical assistance under 

20 title XIX of the Social Security Act. 

21 (4) The applicant does not impose charges on 

22 students or their families for services (including col23 lection of any cost-sharing for services under the 

24 comprehensive benefit package that otherwise would 

25 be required). 
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Title III, Subtitle G 

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1 (5) The applicant has reviewed and will periodi2 cally review the needs of the population served by 

3 the applicant in order to ensure that its services are 

4 accessible to the maximum number of school age 

5 children and youth in the area, and that, to the 

6 maximum extent possible, barriers to access to serv7 ices of the applicant are removed (including barriers 

8 resulting from the area’s physical characteristics, its 

9 economic, social and cultural grouping, the health 

10 care utilization patterns of children and youth, and 

11 available transportation). 

12 (6) In the case of an applicant which serves a 

13 population that includes a substantial proportion of 

14 individuals of limited English speaking ability, the 

15 applicant has developed a plan to meet the needs of 

16 such population to the extent practicable in the lan17 guage and cultural context most appropriate to such 

18 individuals. 

19 (7) The applicant will provide non-Federal con20 tributions toward the cost of the project in an 

21 amount determined by the Secretary. 

22 (8) The applicant will operate a quality assur23 ance program consistent with section 3684(e)(6). 

24 (e) DURATION OF GRANT.—A grant under this sec25 tion shall be for a period determined by the Secretary. 
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Title III, Subtitle G 

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1 (f) REPORTS.—A recipient of funding under this sec2 tion shall provide such reports and information as are re3 quired in regulations of the Secretary. 

4 SEC. 3686. FEDERAL ADMINISTRATIVE COSTS. 

5 Of the amounts made available under section 3681, 

6 the Secretary may reserve not more than 5 percent for 

7 administrative expenses regarding this subpart. 

8 Subpart B—Capital Costs of Developing Projects 

9 SEC. 3691. LOANS AND LOAN GUARANTEES REGARDING 

10 PROJECTS. 

11 (a) IN GENERAL.—The Secretary may make loans to, 

12 and guarantee the payment of principal and interest to 

13 Federal and non-Federal lenders on behalf of, State health 

14 agencies and local community partnerships for the capital 

15 costs of developing projects in accordance with subpart A. 

16 (b) APPLICABILITY OF CERTAIN PROVISIONS.—The 

17 provisions of subpart A apply to loans and loan guarantees 

18 under subsection (a) to the same extent and in the same 

19 manner as such provisions apply to grants under subpart 

20 A. Except for any provision inconsistent with the purpose 

21 described in subsection (a), the provisions of subpart C 

22 of part 2 of subtitle E apply to loans and loan guarantees 

23 under subsection (a) to the same extent and in the same 

24 manner as such provisions apply to loans and loan guaran25 tees under section 3441. 
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Title III, Subtitle H 

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1 SEC. 3692. FUNDING. 

2 Amounts available to the Secretary under section 

3 3412 for the purpose of carrying out subparts B and C 

4 of part 2 of subtitle E are, in addition to such purpose, 

5 available to the Secretary for the purpose of carrying out 

6 this subpart. 

7 Subtitle H—Public Health Service 

8 Initiative 

9 SEC. 3701. PUBLIC HEALTH SERVICE INITIATIVE. 

10 (a) IN GENERAL.—There is established pursuant to 

11 this title a Public Health Service Initiative consisting of 

12 the total amounts authorized and described in subsection 

13 (b). The Initiative includes the programs of subtitles C 

14 through G of this title and the programs of subtitle D 

15 of title VIII. 

16 (b) TOTAL OF THE AMOUNTS AUTHORIZED TO BE

17 APPROPRIATED.—The following is the total of the 

18 amounts authorized to be appropriated for the Initiative 

19 under the previous subtitles of this title: 

20 (1) For fiscal year 1995, $1,125,000,000. 

21 (2) For fiscal year 1996, $2,984,000,000. 

22 (3) For fiscal year 1997, $3,830,000,000. 

23 (4) For fiscal year 1998, $4,205,000,000. 

24 (5) For fiscal year 1999, $4,055,000,000. 

25 (6) For fiscal year 2000, $3,666,000,000. 

26 (c) USE OF AMOUNTS; AVAILABILITY.— 
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Title III, Subtitle I 

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1 (1) USE; ANNUAL APPROPRIATIONS.—Amounts 

2 appropriated to carry out the Initiative, including 

3 subtitles A through F of this title, are available to 

4 carry out the specific programs for which the 

5 amounts are appropriated. 

6 (2) AVAILABILITY OF APPROPRIATED

7 AMOUNTS.—Amounts appropriated for programs in 

8 the Initiative are available until expended. 

9 Subtitle I—Coordination With 

10 COBRA Continuation Coverage 

11 SEC. 3801. PUBLIC HEALTH SERVICE ACT; COORDINATION 

12 WITH COBRA CONTINUATION COVERAGE. 

13 (a) PERIOD OF COVERAGE.—Subparagraph (D) of 

14 section 2202(2) of the Public Health Service Act (42 

15 U.S.C. 300bb–2(2)) is amended— 

16 (1) by striking ‘‘or’’ at the end of clause (i), by 

17 striking the period at the end of clause (ii) and in18 serting ‘‘, or’’, and by adding at the end the fol19 lowing new clause: 

20 ‘‘(iii) eligible for comprehensive health 

21 coverage described in section 1101 of the 

22 Health Security Act.’’, and 

23 (2) by striking ‘‘OR MEDICARE ENTITLEMENT’’ 

24 in the heading and inserting ‘‘, MEDICARE ENTITLE25 MENT, OR HEALTH SECURITY ACT ELIGIBILITY’’. 
670 

Title III, Subtitle I 

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1 (b) QUALIFIED BENEFICIARY.—Section 2208(3) of 

2 such Act (42 U.S.C. 300bb–8(3)) is amended by adding 

3 at the end the following new subparagraph: 

4 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS

5 COVERED BY HEALTH SECURITY ACT.—The 

6 term ‘qualified beneficiary’ shall not include any 

7 individual who, upon termination of coverage 

8 under a group health plan, is eligible for com9 prehensive health coverage described in section 

10 1101 of the Health Security Act.’’. 

11 (c) REPEAL UPON IMPLEMENTATION OF HEALTH

12 SECURITY ACT.— 

13 (1) IN GENERAL.—Title XXII of such Act (42 

14 U.S.C. 300bb–1 et seq.) is hereby repealed. 

15 (2) CONFORMING AMENDMENT.—The table of 

16 contents of such Act is amended by striking the item 

17 relating to title XXII. 

18 (3) EFFECTIVE DATE.—The amendments made 

19 by this subsection shall take effect on the earlier 

20 of— 

21 (A) January 1, 1998, or 

22 (B) the first day of the first calendar year 

23 following the calendar year in which all States 

24 have in effect plans under which individuals are 
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1 eligible for comprehensive health coverage de2 scribed in section 1101 of this Act. 

3 TITLE IV—MEDICARE AND 

4 MEDICAID 

TABLE OF CONTENTS OF TITLE

Page 

Sec. 4000. References in title .................................................................. 673 

Subtitle A—Medicare and the Alliance System 

PART 1—ENROLLMENT OF MEDICARE BENEFICIARIES IN REGIONAL

ALLIANCE PLANS

Sec. 4001. Optional State integration of medicare beneficiaries into regional alliance plans ...................................................... 674 

Sec. 4002. Individual election to remain in certain health plans ............ 681 

Sec. 4003. Payments to regional alliances on behalf of certain medicare-eligible individuals ................................................. 684 

Sec. 4004. Prohibiting employers from taking into account status as 

medicare beneficiary on any grounds ............................ 685 

PART 2—ENCOURAGING MANAGED CARE UNDER MEDICARE PROGRAM; 

COORDINATION WITH MEDIGAP PLANS

Sec. 4011. Enrollment and termination of enrollment ........................... 689 

Sec. 4012. Uniform informational materials ........................................... 692 

Sec. 4013. Outlier payments ................................................................... 693 

Sec. 4014. Point of service option ........................................................... 695 

PART 3—MEDICARE COVERAGE EXPANSIONS

Sec. 4021. Reference to coverage of outpatient prescription drugs ........ 702 

Sec. 4022. Expanded coverage for physician assistants, nurse practitioners, and clinical nurse specialists ............................ 702 

PART 4—COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND

QUALITY MANAGEMENT INITIATIVES

Sec. 4031. Repeal of separate medicare peer review program ................ 703 

Sec. 4032. Mandatory assignment for all part B services ...................... 704 

Sec. 4033. Elimination of complexities caused by dual funding sources 

and rules for payment of claims ................................... 705 

Sec. 4034. Repeal of pro precertification requirement for certain surgical procedures ............................................................. 706 

Sec. 4035. Requirements for changes in billing procedures ................... 708 

PART 5—AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS

Sec. 4041. Anti-kickback provisions ........................................................ 710 

Sec. 4042. Revisions to limitations on physician self-referral ................ 718 

Sec. 4043. Civil monetary penalties ........................................................ 730 

Sec. 4044. Exclusions from program participation ................................. 738 
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Title IV 

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Sec. 4045. Sanctions against practitioners and persons for failure to 

comply with statutory obligations relating to quality of 

care ................................................................................ 745 

Sec. 4046. Effective date ........................................................................ 746 

PART 6—FUNDING OF GRADUATE MEDICAL EDUCATION AND ACADEMIC

HEALTH CENTERS

Sec. 4051. Transfers from medicare trust funds for graduate medical 

education ....................................................................... 746 

Sec. 4052. Transfers from Hospital Insurance Trust Fund for academic health centers ...................................................... 748 

PART 7—COVERAGE OF SERVICES PROVIDED BY FACILITIES AND PLANS OF

DEPARTMENTS OF DEFENSE AND VETERANS AFFAIRS

Sec. 4061. Treatment of uniformed services health plan as eligible organization under medicare ............................................ 749 

Sec. 4062. Coverage of services provided to medicare beneficiaries by 

plans and facilities of Department of Veterans Affairs 750 

Sec. 4063. Conforming amendments ....................................................... 752 

Subtitle B—Savings in Medicare Program 

PART 1—SAVINGS RELATING TO PART A 

Sec. 4101. Reduction in update for inpatient hospital services .............. 752 

Sec. 4102. Reduction in adjustment for indirect medical education ...... 753 

Sec. 4103. Reduction in payments for capital-related costs for inpatient hospital services .................................................... 754 

Sec. 4104. Revisions to payment adjustments for disproportionate 

share hospitals in participating States ......................... 757 

Sec. 4105. Moratorium on designation of additional long-term care 

hospitals ........................................................................ 761 

Sec. 4106. Extension of freeze on updates to routine service costs of 

skilled nursing facilities ................................................ 761 

PART 2—SAVINGS RELATING TO PART B 

Sec. 4111. Establishment of cumulative expenditure goals for physician 

services .......................................................................... 762 

Sec. 4112. Use of real GDP to adjust for volume and intensity; repeal 

of restriction on maximum reduction permitted in default update ................................................................... 767 

Sec. 4113. Reduction in conversion factor for physician fee schedule 

for 1995 ........................................................................ 768 

Sec. 4114. Limitations on payment for physicians’ services furnished 

by high-cost hospital medical staffs .............................. 769 

Sec. 4115. Medicare incentives for physicians to provide primary care 780 

Sec. 4116. Elimination of formula-driven overpayments for certain outpatient hospital services ................................................ 785 

Sec. 4117. Imposition of coinsurance on laboratory services .................. 786 

Sec. 4118. Application of competitive acquisition process for part B 

items and services ......................................................... 787 

Sec. 4119. Application of competitive acquisition procedures for laboratory services ................................................................... 791 
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PART 3—SAVINGS RELATING TO PARTS A AND B 

Sec. 4131. Medicare secondary payer changes ........................................ 792 

Sec. 4132. Payment limits for HMOs and CMPs with risk-sharing contracts ............................................................................. 793 

Sec. 4133. Reduction in routine cost limits for home health services .... 800 

Sec. 4134. Imposition of copayment for certain home health visits ....... 801 

Sec. 4135. Expansion of centers of excellence ........................................ 804 

PART 4—PART B PREMIUM

Sec. 4141. General part B premium .......................................................

PART 5—REPORT ON MEDICARE SAVINGS FOR FISCAL YEARS 2000 

THROUGH 2003 

Sec. 4151. Report on savings .................................................................. 806 

Subtitle C—Medicaid 

PART 1—COMPREHENSIVE BENEFIT PACKAGE

Sec. 4201. Limiting coverage under medicaid of items and services covered under comprehensive benefit package ................... 807 

PART 2—EXPANDING ELIGIBILITY FOR NURSING FACILITY SERVICES; LONGTERM CARE INTEGRATION OPTION

Sec. 4211. Spenddown eligibility for nursing facility residents .............. 809 

Sec. 4212. Increased income and resource disregards for nursing facility residents ................................................................... 811 

Sec. 4213. Informing nursing home residents about availability of assistance for home and community-based services ......... 813 

PART 3—OTHER BENEFITS

Sec. 4221. Treatment of items and services not covered under the comprehensive benefit package ............................................ 814 

Sec. 4222. Establishment of program for poverty-level children with 

special needs .................................................................. 818 

PART 4—DISCONTINUATION OF CERTAIN PAYMENT POLICIES

Sec. 4231. Discontinuation of medicaid DSH payments ........................ 825 

Sec. 4232. Discontinuation of reimbursement standards for inpatient 

hospital services ............................................................ 827 

PART 5—COORDINATION WITH ADMINISTRATIVE SIMPLIFICATION AND

QUALITY MANAGEMENT INITIATIVES

Sec. 4241. Requirements for changes in billing procedures ................... 828 

PART 6—MEDICAID COMMISSION

Sec. 4251. Medicaid Commission ............................................................ 829 

Subtitle D—Increase in SSI Personal Needs Allowance 

Sec. 4301. Increase in SSI personal needs allowance ............................. 832 
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Title IV 

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1 TITLE IV—MEDICARE AND 

2 MEDICAID 

3 SEC. 4000. REFERENCES IN TITLE. 

4 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex5 cept as otherwise specifically provided, whenever in this 

6 title an amendment is expressed in terms of an amend7 ment to or repeal of a section or other provision, the ref8 erence shall be considered to be made to that section or 

9 other provision of the Social Security Act. 

10 (b) REFERENCES TO OBRA.—In this title, the terms 

11 ‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’, 

12 ‘‘OBRA–1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus 

13 Budget Reconciliation Act of 1986 (Public Law 99–509), 

14 the Omnibus Budget Reconciliation Act of 1987 (Public 

15 Law 100–203), the Omnibus Budget Reconciliation Act 

16 of 1989 (Public Law 101–239), the Omnibus Budget Rec17 onciliation Act of 1990 (Public Law 101–508), and the 

18 Omnibus Budget Reconciliation Act of 1993 (Public Law 

19 103–66), respectively. 
675 

Title IV, Subtitle A 

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1 Subtitle A—Medicare and the 

2 Alliance System 

3 PART 1—ENROLLMENT OF MEDICARE 

4 BENEFICIARIES IN REGIONAL ALLIANCE PLANS 

5 SEC. 4001. OPTIONAL STATE INTEGRATION OF MEDICARE 

6 BENEFICIARIES INTO REGIONAL ALLIANCE 

7 PLANS. 

8 Title XVIII is amended by adding at the end the fol9 lowing: 

10 ‘‘INTEGRATION OF MEDICARE INTO STATE HEALTH

11 SECURITY PROGRAMS

12 ‘‘SEC. 1893. (a) PAYMENT TO STATES.—The Sec13 retary shall pay a participating State that has submitted 

14 an application, as specified by subsection (b) which the 

15 Secretary has approved under subsection (c), the amount 

16 specified by subsection (d) for the period specified by sub17 section (e) for covered medicare beneficiaries. This section 

18 shall apply without regard to whether or not a State is 

19 a single-payer State. 

20 ‘‘(b) APPLICATION BY STATE.—An application sub21 mitted by a participating State shall contain the following 

22 assurances: 

23 ‘‘(1) COVERAGE OF ALL MEDICARE-ELIGIBLE

24 INDIVIDUALS.—The State’s application shall assure 

25 that the provisions of the succeeding paragraphs of 
676 

Title IV, Subtitle A 

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1 this subsection shall apply to all medicare-eligible in2 dividuals who are residents of the State.’’. 

3 ‘‘(2) ENROLLMENT IN AND SELECTION OF

4 HEALTH PLANS.— 

5 ‘‘(A) ENROLLMENT.—Each medicare-eligi6 ble individual (within a class of medicare bene7 ficiaries covered under the application) who is a 

8 resident of the State will be enrolled in a re9 gional alliance health plan serving the area in 

10 which the individual resides (or, in the case of 

11 an individual who is a resident of a single-payer 

12 State, in the Statewide single-payer system op13 erated under part 2 of subtitle C of title I of 

14 the Health Security Act). 

15 ‘‘(B) SELECTION.—Each such individual 

16 will have the same choice among applicable 

17 health plans as other individuals in the State 

18 who are eligible individuals under the Health 

19 Security Act. 

20 ‘‘(C) OFFER OF FEE-FOR-SERVICE PLAN.— 

21 Each such individual shall be offered enrollment 

22 in at least one health plan that is a fee-for-serv23 ice plan (or, in the case of an individual who is 

24 a resident of a single-payer State, the Statewide 

25 single-payer system under part 2 of subtitle C 
677 

Title IV, Subtitle A 

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1 of title I of the Health Security Act) that meets 

2 the following requirements: 

3 ‘‘(i) The plan’s premium rate, and the 

4 actuarial value of the plan’s deductibles, 

5 coinsurance, and copayments, charged to 

6 the individual do not exceed the actuarial 

7 value of the coinsurance and deductibles 

8 that would be applicable on the average if 

9 this section did not apply to those individ10 uals. 

11 ‘‘(ii) The plan’s payment rates for 

12 covered items and services are accepted as 

13 payment in full for such items and serv14 ices. 

15 ‘‘(3) COVERAGE OF FULL MEDICARE BENE16 FITS.—For each health plan providing coverage 

17 under this section— 

18 ‘‘(A) the plan shall cover at least the items 

19 and services for which payment would otherwise 

20 be made under this title (including payments 

21 under section 1862(b)(4)), and 

22 ‘‘(B) coverage determinations under the 

23 plan are made under rules that are no more re24 strictive than otherwise applicable under this 

25 title. 
678 

Title IV, Subtitle A 

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1 ‘‘(4) PREMIUM.—During the period for which 

2 payments are made to a State under this section, 

3 the requirements of the Health Security Act relating 

4 to premiums that are otherwise applicable with re5 spect to individuals enrolled in health plans in a 

6 State shall not apply with respect to medicare-eligi7 ble individuals in the State who are covered under 

8 the State’s application under this section. Nothing in 

9 the previous sentence shall operate to permit a State 

10 or health plans in a State to charge different pre11 miums among medicare-eligible individuals within 

12 the same premium class under the Health Security 

13 Act. 

14 ‘‘(5) QUALITY ASSURANCE.—For each health 

15 plan providing coverage under this section there are 

16 quality assurance mechanisms for covered medicare 

17 individuals that equal, or exceed, such mechanisms 

18 otherwise applicable under this title. 

19 ‘‘(6) REVIEW RIGHTS.—Covered medicare indi20 viduals have review, reconsideration, and appeal 

21 rights (including appeals to courts of the State) that 

22 equal or exceed such rights otherwise applicable 

23 under this title. 

24 ‘‘(7) DATA REPORTING AND ACCESS TO DOCU25 MENTS.—The State will— 
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Title IV, Subtitle A 

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1 ‘‘(A) provide such utilization and statistical 

2 data as the Secretary determines are needed for 

3 purposes of the programs established under this 

4 title, and 

5 ‘‘(B) the State will ensure access by the 

6 Secretary or the Comptroller General to rel7 evant documents. 

8 ‘‘(8) USE OF PAYMENTS.—Payments made to 

9 the State under subsection (a) will be used only to 

10 carry out the purposes of this section. 

11 ‘‘(c) APPROVAL BY SECRETARY.—The Secretary shall 

12 approve an application under subsection (b) if the Sec13 retary finds— 

14 ‘‘(1) that the individuals covered under the 

15 State’s application shall receive at least the benefits 

16 provided under this title (including cost sharing); 

17 ‘‘(2) that the amount of expenditures that will 

18 be made under this title will not exceed the amount 

19 of expenditures that will be made if the State’s ap20 plication is not accepted; and 

21 ‘‘(3) that the State is able and willing to carry 

22 out the assurances provided in its application. 

23 ‘‘(d) AMOUNT AND SOURCE OF PAYMENT.— 

24 ‘‘(1) AMOUNT OF PAYMENT.—For purposes of 

25 subsection (a), the amount of payments to a State— 
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Title IV, Subtitle A 

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1 ‘‘(A) for the first year for which payments 

2 are made to the State under this section shall 

3 be determined by the applicable rate specified 

4 in section 1876(a)(1)(C) (but at 100 percent, 

5 rather than 95 percent, of the applicable 

6 amount) for each medicare-eligible individual 

7 who is a resident of the State (but without re8 gard to any reduction based on payments to be 

9 made under section 1876(a)(1)(G)), and 

10 ‘‘(B) for each succeeding year, shall be de11 termined by the applicable rate determined 

12 under subparagraph (A) or this subparagraph 

13 for the preceding year for each such individual, 

14 adjusted by the regional alliance inflation factor 

15 applicable to regional alliances in the State (as 

16 determined in accordance with section 6001(a) 

17 of the Health Security Act) for the year. 

18 ‘‘(2) SOURCE OF PAYMENT.—Payment shall be 

19 made from the Federal Hospital Insurance Trust 

20 Fund and the Federal Supplementary Medical In21 surance Trust Fund as provided under paragraph 

22 (5) of section 1876(a) (other than as provided under 

23 subparagraph (B) of that paragraph). 
681 

Title IV, Subtitle A 

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1 ‘‘(e) PERIOD FOR WHICH PAYMENT MADE.—The pe2 riod for which payment may be made under subsection (a) 

3 to a State— 

4 ‘‘(1) begins with January 1 of the first calendar 

5 year for which the Secretary approves under sub6 section (c) the application of the State; and 

7 ‘‘(2) ends— 

8 ‘‘(A) on December 31 of the year in which 

9 the State notifies the Secretary (before April of 

10 that year) that the State no longer intends to 

11 receive payments under this section, or 

12 ‘‘(B) if the Secretary finds that the State 

13 is no longer in substantial compliance with the 

14 requirements under paragraphs (2) or (3) of 

15 subsection (c), at the time specified by the Sec16 retary. 

17 No termination is effective under paragraph (2) unless no18 tice has been provided to medicare covered individuals, 

19 health providers, and health plans affected by the termi20 nation. 

21 ‘‘(f) PAYMENTS UNDER THIS SECTION AS SOLE

22 MEDICARE BENEFITS.—Payments to a State under sub23 section (a) shall be instead of the amounts that would oth24 erwise be payable, pursuant to sections 1814(b) and 
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1 1833(a), for services furnished to medicare-eligible resi2 dents of the State covered under the application. 

3 ‘‘(g) EVALUATION.—The Secretary shall evaluate on 

4 an ongoing basis the compliance of a State with the re5 quirements of this section. 

6 ‘‘(h) DEFINITIONS.—In this section the terms ‘appli7 cable health plan’, ‘fee-for-service plan’, ‘health plan’, 

8 ‘medicare-eligible individual’, ‘participating State’, ‘single9 payer State’, and ‘Statewide single-payer system’ have the 

10 meanings of those terms in the Health Security Act.’’. 

11 SEC. 4002. INDIVIDUAL ELECTION TO REMAIN IN CERTAIN 

12 HEALTH PLANS. 

13 (a) IN GENERAL.—Section 1876 (42 U.S.C. 

14 1395mm) is amended by adding at the end the following 

15 new subsection: 

16 ‘‘(k)(1) Notwithstanding any other provision of this 

17 section, each eligible organization with a risk-sharing con18 tract (or which is eligible to enter into such a contract, 

19 as determined by the Secretary) that is the sponsor of a 

20 health plan under subtitle E of title I of the Health Secu21 rity Act shall provide each individual who meets the re22 quirements of paragraph (2) with the opportunity to elect 

23 (by submitting an application at such time and in such 

24 manner as specified by the Secretary) to continue enroll25 ment in such plan (for the same benefits as alliance-eligi-
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1 ble individuals) and to have payments made by the Sec2 retary to the plan on the individual’s behalf in accordance 

3 with paragraph (3). The premium imposed with respect 

4 to such an individual by the plan shall be in an amount 

5 (determined in accordance with rules of the Secretary and 

6 notwithstanding other provisions of such Act) which re7 flects the difference between the premium otherwise estab8 lished (adjusted by a factor to reflect the actuarial dif9 ference between medicare beneficiaries and other plan en10 rollees) and the amount payable under paragraph (3). 

11 ‘‘(2) An individual meets the requirements of this 

12 paragraph if the individual is— 

13 ‘‘(A) enrolled in the health plan of an eligible 

14 organization in a month in which the individual is 

15 either not entitled to benefits under part A, or is an 

16 eligible employee (as defined in the Health Security 

17 Act) or the spouse or dependent of an eligible em18 ployee, 

19 ‘‘(B) entitled to benefits under part A and en20 rolled under part B in the succeeding month, 

21 ‘‘(C) an eligible individual under the Health Se22 curity Act in that succeeding month, and 

23 ‘‘(D) not an eligible employee (as defined in the 

24 Health Security Act) or the spouse or dependent of 

25 an eligible employee in that succeeding month. 
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1 ‘‘(3) The Secretary shall make a payment to an eligi2 ble organization on behalf of each individual enrolled with 

3 the organization for whom an election is in effect under 

4 this subsection in an amount determined by the rate speci5 fied by subsection (a)(1)(C) (notwithstanding the second 

6 sentence of paragraph (1)). Such payment shall be made 

7 from the Federal Hospital Insurance Trust Fund and the 

8 Federal Supplementary Medical Insurance Trust Fund as 

9 provided under subsection (a)(5) (other than as provided 

10 under subparagraph (B) of that paragraph). 

11 ‘‘(4) The period for which payment may be made 

12 under paragraph (3)— 

13 ‘‘(A) begins with the first month for which the 

14 individual meets the requirements of paragraph (2) 

15 (or a later month, in the case of a late application, 

16 as may be specified by the Secretary); and 

17 ‘‘(B) ends with the earliest of— 

18 ‘‘(i) the month following the month— 

19 ‘‘(I) in which the individual notifies 

20 the Secretary that the individual no longer 

21 wishes to be enrolled in the health plan of 

22 the eligible organization and to have pay23 ment made on the individual’s behalf under 

24 this subsection; and 
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1 ‘‘(II) which is a month specified by 

2 the Secretary as a uniform open enroll3 ment period under subsection (c)(3)(A)(i), 

4 or 

5 ‘‘(ii) the month in which the individual 

6 ceases to meet the requirements of paragraph 

7 (2). 

8 ‘‘(5) Notwithstanding any other provision of this title, 

9 payments to an eligible organization under this subsection 

10 on behalf of an individual shall be the sole payments made 

11 with respect to items and services furnished to the indi12 vidual during the period for which the individual’s election 

13 under this subsection is in effect.’’. 

14 (b) CONFORMING AMENDMENT.—Section 1838(b) 

15 (42 U.S.C. 1395q(b)) is amended by inserting after ‘‘sec16 tion 1843(e)’’ the following: ‘‘, 1876(c)(3)(B), 

17 1876(k)(4)(B), or 1890(j)(1)(B)(iv)’’. 

18 SEC. 4003. PAYMENTS TO REGIONAL ALLIANCES ON BE19 HALF OF CERTAIN MEDICARE-ELIGIBLE INDI20 VIDUALS. 

21 Title XVIII, as amended by section 4001, is further 

22 amended by adding at the end the following new section: 
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1 ‘‘PAYMENTS TO REGIONAL ALLIANCES ON BEHALF OF

2 CERTAIN MEDICARE-ELIGIBLE INDIVIDUALS UNDER

3 HEALTH SECURITY ACT

4 ‘‘SEC. 1894. The Secretary shall provide for a trans5 fer from the Federal Hospital Insurance Trust Fund and 

6 the Federal Supplementary Medical Insurance Trust 

7 Fund, in appropriate proportions, to each regional alliance 

8 in each year of the amount of the reductions in liability 

9 owed to the alliance in the year resulting from the applica10 tion of section 6115 of the Health Security Act. In the 

11 case of an individual to whom such section applies, unless 

12 all the members of the family would be medicare-eligible 

13 individuals (but for section 1012(a) of such Act), the re14 ductions in liability under section 6115 of such Act shall 

15 be based upon the alliance credit amount for an individual 

16 class of enrollment (as defined in section 1011(c)(1)(A) 

17 of such Act).’’. 

18 SEC. 4004. PROHIBITING EMPLOYERS FROM TAKING INTO 

19 ACCOUNT STATUS AS MEDICARE BENE20 FICIARY ON ANY GROUNDS. 

21 (a) EXTENSION OF PROTECTIONS FOR WORKING

22 AGED TO GROUP HEALTH PLANS OF ALL EMPLOYERS.— 

23 Section 1862(b)(1)(A) (42 U.S.C. 1395y(b)(1)(A)) is 

24 amended by striking clauses (ii) and (iii). 
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1 (b) EXTENSION OF PROTECTIONS FOR DISABLED IN2 DIVIDUALS TO ALL GROUP HEALTH PLANS.— 

3 (1) IN GENERAL.—Section 1862(b)(1)(B) (42 

4 U.S.C. 1395y(b)(1)(B)), as amended by section 

5 13561(e) of OBRA–1993, is amended— 

6 (A) in clause (i), by striking ‘‘large group 

7 health plans (as defined in clause (iv))’’ and in8 serting ‘‘group health plan (as defined in sub9 paragraph (A)(v), taking into account the ex10 ceptions described in clauses (ii) and (iii) of 

11 subparagraph (A))’’; and 

12 (B) by striking clause (iv). 

13 (2) CONFORMING AMENDMENT.—Section 

14 1862(b)(1)(A)(v) (42 U.S.C. 1395y(b)(1)(A)(v)) is 

15 amended by striking ‘‘this subparagraph, and sub16 paragraph (C)’’ and inserting ‘‘this paragraph’’. 

17 (c) REPEAL OF LIMITATION ON PERIOD OF PROTEC18 TION FOR INDIVIDUALS WITH END STAGE RENAL DIS19 EASE.— 

20 (1) IN GENERAL.—Section 1862(b)(1)(C) (42 

21 U.S.C. 1395y(b)(1)(C)), as amended by section 

22 13561(c) of OBRA–1993, is amended— 

23 (A) in clause (i), by striking ‘‘an individual 

24 is entitled’’ and all that follows through ‘‘such 

25 benefits’’ and inserting ‘‘an individual (or a 
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1 member of the individual’s family) who is cov2 ered under the plan by virtue of the individual’s 

3 current employment status with an employer is 

4 entitled to benefits under this title under sec5 tion 226A’’; 

6 (B) in clause (ii), by striking the semicolon 

7 at the end and inserting a period; and 

8 (C) by striking the matter following clause 

9 (ii). 

10 (2) CONFORMING AMENDMENT.—Section 

11 1862(b)(1) is amended— 

12 (A) in subparagraph (A), by striking 

13 clause (iv); and 

14 (B) in subparagraph (B), by striking 

15 clause (ii). 

16 (d) NO PRIMARY PAYMENT FOR SERVICES UNDER

17 A HEALTH PLAN.—Section 1862(b)(2)(A) (42 U.S.C. 

18 1395y(b)(2)(A)(i)) is amended— 

19 (1) by striking ‘‘or’’ at the end of clause (i); 

20 (2) by striking the period at the end of clause 

21 (ii) and inserting ‘‘, or’’; 

22 (3) by inserting after clause (ii) the following 

23 new clause: 

24 ‘‘(iii) payment has been made, or can 

25 reasonably be expected to be made, with 
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1 respect to the item or service under any 

2 health plan under the Health Security 

3 Act.’’; and 

4 (4) in the second sentence— 

5 (A) by striking ‘‘and’’ after ‘‘applies’’, and 

6 (B) by inserting before the period at the 

7 end the following: ‘‘, and a health plan under 

8 the Health Security Act to the extent that 

9 clause (iii) applies’’. 

10 (e) SIMPLIFICATION OF COORDINATION OF BENE11 FITS.—Section 1862(b)(4) (42 U.S.C. 1395y(b)(4)) is 

12 amended by adding after and below subparagraph (B) the 

13 following: 

14 ‘‘Notwithstanding the previous sentence, where pay15 ment is made for an item or service by a primary 

16 plan that is a health plan (within the meaning of 

17 section 1400 of the Health Security Act) and for 

18 which payment would be made under this title but 

19 for this subsection, payment may be made under 

20 this title (without regard to deductibles and coinsur21 ance) in the amount of the cost sharing imposed 

22 under such primary plan (consistent with such 

23 Act).’’. 

24 (f) EFFECTIVE DATE.—The amendments made by 

25 this section shall apply with respect to medicare-eligible 
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1 individuals residing in a participating State as of January 

2 1 of the first year for which the State is a participating 

3 State. 

4 PART 2—ENCOURAGING MAN5 AGED CARE UNDER MEDI6 CARE PROGRAM; COORDINA7 TION WITH MEDIGAP PLANS 

8 SEC. 4011. ENROLLMENT AND TERMINATION OF ENROLL9 MENT. 

10 (a) UNIFORM OPEN ENROLLMENT PERIODS.— 

11 (1) FOR CAPITATED PLANS.—The first sentence 

12 of section 1876(c)(3)(A)(i) (42 U.S.C. 

13 1395mm(c)(3)(A)(i)) is amended by inserting 

14 ‘‘(which may be specified by the Secretary)’’ after 

15 ‘‘open enrollment period’’. 

16 (2) FOR MEDIGAP PLANS.—Section 1882(s) (42 

17 U.S.C. 1395ss(s)) is amended— 

18 (A) in paragraph (3), by striking ‘‘para19 graphs (1) and (2)’’ and inserting ‘‘paragraph 

20 (1), (2), or (3)’’, 

21 (B) by redesignating paragraph (3) as 

22 paragraph (4), and 

23 (C) by inserting after paragraph (2) the 

24 following new paragraph: 
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1 ‘‘(3) Each issuer of a medicare supplemental policy 

2 shall have an open enrollment period (which shall be the 

3 period specified by the Secretary under section 

4 1876(c)(3)(A)(i)), of at least 30 days duration every year, 

5 during which the issuer may not deny or condition the 

6 issuance or effectiveness of a medicare supplemental pol7 icy, or discriminate in the pricing of the policy, because 

8 of age, health status, claims experience, receipt of health 

9 care, or medical condition. The policy may not provide any 

10 time period applicable to pre-existing conditions, waiting 

11 periods, elimination periods, and probationary periods (ex12 cept as provided by paragraph (2)(B)). The Secretary may 

13 require enrollment through a third party designated under 

14 section 1876(c)(3)(B).’’. 

15 (b) ENROLLMENTS FOR NEW MEDICARE BENE16 FICIARIES AND THOSE WHO MOVE.—Section 

17 1876(c)(3)(A) (42 U.S.C. 1395mm(c)(3)(A)) is amend18 ed— 

19 (1) in clause (i), by striking ‘‘clause (ii)’’ and 

20 inserting ‘‘clauses (ii) through (iv)’’, and 

21 (2) by adding at the end the following: 

22 ‘‘(iii) Each eligible organization shall have an open 

23 enrollment period for each individual eligible to enroll 

24 under subsection (d) during any enrollment period speci25 fied by section 1837 that applies to that individual. Enroll-
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1 ment under this clause shall be effective as specified by 

2 section 1838. 

3 ‘‘(iv) Each eligible organization shall have an open 

4 enrollment period for each individual eligible to enroll 

5 under subsection (d) who has previously resided outside 

6 the geographic area which the organization serves. The en7 rollment period shall begin with the beginning of the 

8 month that precedes the month in which the individual 

9 becomes a resident of that geographic area and shall end 

10 at the end of the following month. Enrollment under this 

11 clause shall be effective as of the first of the month fol12 lowing the month in which the individual enrolls.’’. 

13 (c) ENROLLMENT THROUGH THIRD PARTY; UNI14 FORM TERMINATION OF ENROLLMENT.—The first sen15 tence of section 1876(c)(3)(B) (42 U.S.C. 

16 1395mm(c)(3)(B)) is amended— 

17 (1) by inserting ‘‘(including enrollment through 

18 a third party)’’ after ‘‘regulations’’, and 

19 (2) by striking everything after ‘‘with the eligi20 ble organization’’ and inserting ‘‘during an annual 

21 period as prescribed by the Secretary, and as speci22 fied by the Secretary in the case of financial insol23 vency of the organization, if the individual moves 

24 from the geographic area served by the organization, 
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1 or in other special circumstances that the Secretary 

2 may prescribe.’’. 

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

4 the previous subsections apply to enrollments and termi5 nations of enrollments occurring after 1995 (but only after 

6 the Secretary of Health and Human Services has pre7 scribed the relevant annual period), except that the 

8 amendments made by subsection (a)(2) apply to enroll9 ments for a medicare supplemental policy made after 

10 1995. 

11 SEC. 4012. UNIFORM INFORMATIONAL MATERIALS. 

12 (a) FOR CAPITATED PLANS.—Section 1876(c)(3)(C) 

13 (42 U.S.C. 1395mm(c)(3)(C)) is amended by adding at 

14 the end the following: ‘‘In addition, the Secretary shall de15 velop and distribute comparative materials about all eligi16 ble organizations. Each eligible organization shall reim17 burse the Secretary for its pro rata share (as determined 

18 by the Secretary) of the costs incurred by the Secretary 

19 in carrying out the requirements of the preceding sentence 

20 and other enrollment activities.’’. 

21 (b) FOR MEDIGAP PLANS.—Paragraph (1) of section 

22 1882(f) (42 U.S.C. 1395ss(f)) is amended to read as fol23 lows: 

24 ‘‘(f)(1) The Secretary shall develop and distribute 

25 comparative materials about all medicare supplemental 
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1 policies issued in a State. Each issuer of such a policy 

2 shall reimburse the Secretary for its pro rata share (as 

3 determined by the Secretary for purposes of section 

4 1876(c)(3)(C)) of the costs incurred by the Secretary in 

5 carrying out the requirements of the preceding sentence 

6 and other enrollment activities, or the issuer shall no 

7 longer be considered as meeting the requirements of this 

8 section.’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply with respect to materials for enroll11 ment in years after 1995. 

12 SEC. 4013. OUTLIER PAYMENTS. 

13 (a) GENERAL RULE.—Section 1876(a)(1) (42 U.S.C. 

14 1395mm(a)(1)) is amended by adding at the end the fol15 lowing: 

16 ‘‘(G)(i) In the case of an eligible organization with 

17 a risk-sharing contract, the Secretary may make addi18 tional payments to the organization equal to not more 

19 than 50 percent of the imputed reasonable cost (or, if so 

20 requested by the organization, the reasonable cost) above 

21 the threshold amount of services covered under parts A 

22 and B and provided (or paid for) in a year by the organi23 zation to any individual enrolled with the organization 

24 under this section. 
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1 ‘‘(ii) For purposes of clause (i), the ‘imputed reason2 able cost’ is an amount determined by the Secretary on 

3 a national, regional, or other basis that is related to the 

4 reasonable cost of services. 

5 ‘‘(iii) For purposes of clause (i), the ‘threshold 

6 amount’ is an amount determined by the Secretary from 

7 time to time, adjusted by the geographic factor utilized 

8 in determining payments to the organization under sub9 paragraph (C) and rounded to the nearest multiple of 

10 $100, such that the total amount to be paid under this 

11 subparagraph for a year is estimated to be 5 percent or 

12 less of the total amount to be paid under risk-sharing con13 tracts for services furnished for that year. 

14 ‘‘(iv) An eligible organization shall submit a claim for 

15 additional payments under subsection (i) within such time 

16 as the Secretary may specify. 

17 ‘‘(v) To the extent that total payments under clause 

18 (i) in a year— 

19 ‘‘(I) exceed the payment set aside as a result of 

20 the reduction under subparagraph (C) for the year, 

21 the Secretary shall increase the percentage reduction 

22 under such subparagraph for the following year by 

23 such percentage as will result in an increase in the 

24 reduction equal to such excess in previous payments, 

25 or 
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1 ‘‘(II) are less than the payment set aside as a 

2 result of the reduction under subparagraph (C) for 

3 the year, the amount of such difference shall remain 

4 available in the succeeding years for additional pay5 ments under this subparagraph and the Secretary 

6 may take such difference into account in establishing 

7 the percentage reduction under subparagraph (C) 

8 for the following year.’’. 

9 (b) CONFORMING AMENDMENT.—Section 

10 1876(a)(1)(C)(i) (42 U.S.C. 1395mm(a)(1)(C)(i)), as 

11 amended by section 4132(a), is further amended by insert12 ing ‘‘, and reduced by a uniform percentage (determined 

13 by the Secretary for a year, subject to adjustment under 

14 subparagraph (G)(v)) so that the total reduction is esti15 mated to equal the amount to be paid under subparagraph 

16 (G)’’ before the period. 

17 (c) EFFECTIVE DATE.—The amendments made by 

18 the preceding subsections apply to services furnished after 

19 1994. 

20 SEC. 4014. POINT OF SERVICE OPTION. 

21 (a) POINT OF SERVICE CONTRACTS.—Part C of title 

22 XVIII is amended by inserting after section 1889 the fol23 lowing: 

24 ‘‘POINT OF SERVICE OPTION

25 ‘‘SEC. 1890. (a) ESTABLISHMENT OF PROGRAM.— 

26 Not later than July 1, 1995, the Secretary shall promul-
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1 gate regulations establishing a point-of-service program 

2 under which individuals entitled to benefits under this title 

3 (other than individuals enrolled with an eligible organiza4 tion with a risk-sharing contract under section 1876(g)) 

5 may obtain such benefits through providers and suppliers 

6 who are members of a point-of-service network established 

7 by the Secretary in accordance with the criteria described 

8 in subsection (b). 

9 ‘‘(b) CRITERIA FOR NETWORKS.—In establishing cri10 teria for point-of-service networks under the program 

11 under this section, the Secretary shall— 

12 ‘‘(1) designate an appropriate geographic serv13 ice area for each such network to ensure that each 

14 network has a sufficient number of participating 

15 members to provide items and services under this 

16 title to beneficiaries, except that no such service area 

17 may be served by more than one such network; 

18 ‘‘(2) establish requirements for participating 

19 members; 

20 ‘‘(3) establish a schedule of payments for serv21 ices furnished by networks, including a schedule of 

22 bundled payment arrangements for selected medical 

23 and surgical procedures; 

24 ‘‘(4) delineate permissible incentives to encour25 age physicians and other suppliers to join the net-
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1 work, and to encourage individuals to receive serv2 ices under this title through the network; 

3 ‘‘(5) specify the rules under which carriers 

4 under section 1842 may administer the program; 

5 ‘‘(6) establish procedures to used for the provi6 sion of case management services and criteria for 

7 determining whether (and under which cir8 cumstances) services which would otherwise not be 

9 covered under this title would be covered by the net10 work under such case management; 

11 ‘‘(7) establish standards for the processing and 

12 payment of claims for payment for services fur13 nished by the network, including standards for the 

14 apportionment of payments among the Trust Funds 

15 established under this title; 

16 ‘‘(8) establish standards for the selection of 

17 physicians for the network based on practice pat18 terns and a demonstration of effective quality assur19 ance; 

20 ‘‘(9) develop standards to ensure that the point21 of-service option does not result in a net financial 

22 loss to the medicare program under this title after 

23 the implementation of the option in an area, taking 

24 into account administrative costs, the costs of serv25 ices (which would otherwise not be covered under 
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1 this title) provided to beneficiaries under case man2 agement, and the costs of incentives for physicians, 

3 other providers, and beneficiaries; and 

4 ‘‘(10) apply such other criteria as the Secretary 

5 considers appropriate. 

6 ‘‘(c) BONUS PAYMENTS PERMITTED.— 

7 ‘‘(1) IN GENERAL.—Notwithstanding any other 

8 provision of this title, the Secretary may increase the 

9 amount of payment otherwise provided under this 

10 title for items and services furnished by individuals 

11 who are members of a point-of-service network 

12 under this section by a bonus payment (in such 

13 amount as the Secretary may determine). 

14 ‘‘(2) CRITERIA FOR RECEIVING PAYMENT.—The 

15 Secretary may make a bonus payment under this 

16 subsection to members of a point-of-service network 

17 if the Secretary determines that the members of the 

18 network have reduced the costs to the medicare pro19 gram of the items and services furnished by the net20 work without adversely affecting the quality of care 

21 provided to beneficiaries.’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Section 1812(a) (42 U.S.C. 1395d(a)) is 

24 amended— 
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1 (A) by striking ‘‘and’’ at the end of para2 graph (3), 

3 (B) by substituting ‘‘; and’’ for the period 

4 at the end of paragraph (4), and 

5 (C) by adding at the end the following: 

6 ‘‘(5) such additional items and services fur7 nished by a provider of services to an individual sub8 ject to case management as may be specified under 

9 a point-of-service network arrangement under sec10 tion 1890.’’. 

11 (2)(A) Section 1814(b) (42 U.S.C. 1395f(b)) is 

12 amended— 

13 (i) in paragraph (1), by inserting ‘‘or (4)’’ 

14 after ‘‘paragraph (3)’’, 

15 (ii) by striking ‘‘or’’ at the end of para16 graph (2), 

17 (iii) by substituting ‘‘; and’’ for the period 

18 at the end of paragraph (3), and 

19 (iv) by inserting after paragraph (3) the 

20 following: 

21 ‘‘(4) in the case of items and services furnished 

22 through a point of service network (as described in 

23 section 1890), the payment basis specified under the 

24 arrangement established for such network, plus any 
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1 bonus payments as determined under subsection (c) 

2 of that section.’’. 

3 (B) The matter in section 1886(d)(1)(A) (42 

4 U.S.C. 1395ww(d)(1)(A)) preceding clause (i) is 

5 amended by inserting ‘‘(other than paragraph (4))’’ 

6 after ‘‘1814(b)’’. 

7 (3) Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) 

8 is amended— 

9 (A) by striking ‘‘and’’ at the end of sub10 paragraph (I), 

11 (B) by substituting ‘‘; and’’ for the period 

12 at the end of subparagraph (J), and 

13 (C) by adding at the end the following: 

14 ‘‘(K) such additional items and services 

15 (other than inpatient services furnished by pro16 viders of services) as may be specified under a 

17 point-of-service network arrangement under sec18 tion 1890.’’. 

19 (4) Section 1833 (42 U.S.C. 1395l), as amend20 ed by section 4032, is amended by adding at the end 

21 the following new subsection: 

22 ‘‘(u) In the case of items and services furnished 

23 through a point of service network (as described in section 

24 1890), there shall be paid (subject to subsection (b)) 

25 amounts equal to 80 percent of the payment basis speci-
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1 fied in an agreement entered into pursuant to that section, 

2 plus any bonus payments as determined under subsection 

3 (c) of that section.’’. 

4 (5) Section 1862(a) (42 U.S.C. 1395y(a)), as 

5 amended by sections 4034(b)(4), 4118(b), and 

6 2003(b), is further amended— 

7 (A) in paragraph (7), by striking ‘‘or 

8 under paragraph (1)(F)’’ and inserting ‘‘, under 

9 paragraph (1)(F), or under a contract under 

10 section 1890’’, 

11 (B) by striking ‘‘or’’ at the end of para12 graph (16), 

13 (C) by striking the period at the end of 

14 paragraph (17) and inserting ‘‘; or’’, and 

15 (D) by inserting after paragraph (17) the 

16 following new paragraph: 

17 ‘‘(18) which are furnished to an individual and 

18 related to a health condition with respect to which 

19 the individual is subject to case management 

20 through a point-of-service network under section 

21 1890 but which are not included in the plan of care 

22 developed for such individual and agreed to by the 

23 individual and the case manager.’’. 

24 (c) EFFECTIVE DATE.—The amendments made by 

25 this subsection shall take effect January 1, 1996. 
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1 PART 3—MEDICARE COVERAGE 

2 EXPANSIONS 

3 SEC. 4021. REFERENCE TO COVERAGE OF OUTPATIENT 

4 PRESCRIPTION DRUGS. 

5 For provisions adding a new outpatient prescription 

6 drug benefit to the medicare program, see subtitle A of 

7 title II. 

8 SEC. 4022. EXPANDED COVERAGE FOR PHYSICIAN ASSIST9 ANTS, NURSE PRACTITIONERS, AND CLIN10 ICAL NURSE SPECIALISTS. 

11 (a) PHYSICIAN ASSISTANTS.—Section 

12 1861(s)(2)(K)(i) (42 U.S.C. 1395x(s)(2)(K)(i)) is amend13 ed by striking ‘‘(I) in a hospital’’ and all that follows 

14 through ‘‘shortage area’’. 

15 (b) NURSE PRACTITIONERS AND CLINICAL NURSE

16 SPECIALISTS.—Section 1861(s)(2)(K)(iii) (42 U.S.C. 

17 1395x(s)(2)(K)(iii)) is amended— 

18 (1) by inserting ‘‘(I)’’ before ‘‘in a rural area’’, 

19 and 

20 (2) by inserting ‘‘, (II) in any other area, in the 

21 case of services furnished by nurse practitioners 

22 other than services furnished to an inpatient of a 

23 hospital, or (III) in any other area, in the case of 

24 services furnished by clinical nurse specialists other 

25 than services furnished to an inpatient of a hospital, 
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1 skilled nursing facility or nursing facility (as defined 

2 in section 1919(a)), and’’ after ‘‘section 

3 1886(d)(2)(D))’’. 

4 (c) CONFORMING AMENDMENTS.—(1) Section 

5 1832(a)(2)(B)(iv) (42 U.S.C. 1395k(a)(2)(B)(iv)) is 

6 amended by striking ‘‘provided in a rural area (as defined 

7 in section 1886(d)(2)(D))’’ and inserting ‘‘described in 

8 section 1861(s)(2)(K)(iii)’’. 

9 (2) Section 1833(a)(1)(O) (42 U.S.C. 

10 1395l(a)(1)(O)) is amended by striking ‘‘provided in a 

11 rural area’’. 

12 (3) Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) is 

13 amended by striking ‘‘provided in a rural area’’. 

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

15 this section shall apply to services furnished on or after 

16 January 1, 1996. 

17 PART 4—COORDINATION WITH 

18 ADMINISTRATIVE SIM19 PLIFICATION AND QUALITY 

20 MANAGEMENT INITIATIVES 

21 SEC. 4031. REPEAL OF SEPARATE MEDICARE PEER REVIEW 

22 PROGRAM. 

23 Part B of title XI of the Social Security Act (42 

24 U.S.C. 1301 et seq.) is amended by adding at the end 

25 the following new section: 
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1 ‘‘TERMINATION

2 ‘‘SEC. 1165. The provisions of this part shall termi3 nate effective upon the adoption of the National Quality 

4 Management Program under subtitle A of title V of the 

5 Health Security Act. Any reference to this part or any 

6 section in this part shall not be effective after such date.’’. 

7 SEC. 4032. MANDATORY ASSIGNMENT FOR ALL PART B 

8 SERVICES. 

9 Section 1833 (42 U.S.C. 1395l) is amended— 

10 (1) by redesignating the subsection (r) added by 

11 section 4206(b)(2) of OBRA–1990 as subsection (s); 

12 and 

13 (2) by adding at the end the following new sub14 section: 

15 ‘‘(t)(1) Notwithstanding any other provision of this 

16 part, payment under this part for any item or service fur17 nished on or after January 1, 1996, may only be made 

18 on an assignment-related basis. 

19 ‘‘(2) Except for deductible, coinsurance, or copay20 ment amounts applicable under this part, no physician, 

21 supplier, or other person may bill or collect any amount 

22 from an individual enrolled under this part or other person 

23 for an item or service for which payment may be made 

24 under this part. No such individual or person is liable for 
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1 payment of any amounts billed in violation of the previous 

2 sentence. 

3 ‘‘(3) If a physician, supplier, or other person know4 ingly and willfully bills or collects an amount in violation 

5 of paragraph (2), the Secretary may apply sanctions 

6 against such physician, supplier, or other person in ac7 cordance with section 1842(j)(2). Paragraph (4) of section 

8 1842(j) shall apply in this paragraph in the same manner 

9 as such paragraph applies to such section.’’. 

10 SEC. 4033. ELIMINATION OF COMPLEXITIES CAUSED BY 

11 DUAL FUNDING SOURCES AND RULES FOR 

12 PAYMENT OF CLAIMS. 

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

14 Human Services shall take such steps as may be necessary 

15 to consolidate the administration (including processing 

16 systems) of parts A and B of the medicare program (under 

17 title XVIII of the Social Security Act). 

18 (b) COMBINATION OF INTERMEDIARY AND CARRIER

19 FUNCTIONS.—In taking such steps, the Secretary shall 

20 contract with a single entity that combines the fiscal inter21 mediary and carrier functions in each area except where 

22 the Secretary finds that special regional or national con23 tracts are appropriate. 

24 (c) SUPERSEDING CONFLICTING REQUIREMENTS.— 

25 The provisions of sections 1816 and 1842 of the Social 
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1 Security Act (including provider nominating provisions in 

2 such section 1816) are superseded to the extent required 

3 to carry out this section. 

4 SEC. 4034. REPEAL OF PRO PRECERTIFICATION REQUIRE5 MENT FOR CERTAIN SURGICAL PROCE6 DURES. 

7 (a) IN GENERAL.—Section 1164 (42 U.S.C. 1320c– 

8 13) is repealed. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) Section 1154 (42 U.S.C. 1320c–3) is 

11 amended— 

12 (A) in subsection (a), by striking para13 graph (12), and 

14 (B) in subsection (d), by striking ‘‘(and ex15 cept as provided in section 1164)’’. 

16 (2) Section 1833 (42 U.S.C. 1395l) is amend17 ed— 

18 (A) in subsection (a)(1)(D)(i), by striking 

19 ‘‘, or for tests furnished in connection with ob20 taining a second opinion required under section 

21 1164(c)(2) (or a third opinion, if the second 

22 opinion was in disagreement with the first opin23 ion)’’; 

24 (B) in subsection (a)(1), by striking clause 

25 (G); 
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1 (C) in subsection (a)(2)(A), by striking ‘‘, 

2 to items and services (other than clinical diag3 nostic laboratory tests) furnished in connection 

4 with obtaining a second opinion required under 

5 section 1164(c)(2) (or a third opinion, if the 

6 second opinion was in disagreement with the 

7 first opinion),’’; 

8 (D) in subsection (a)(2)(D)(i)— 

9 (i) by striking ‘‘basis,’’ and inserting 

10 ‘‘basis or’’, and 

11 (ii) by striking ‘‘, or for tests fur12 nished in connection with obtaining a sec13 ond opinion required under section 

14 1164(c)(2) (or a third opinion, if the sec15 ond opinion was in disagreement with the 

16 first opinion)’’; 

17 (E) in subsection (a)(3), by striking ‘‘and 

18 for items and services furnished in connection 

19 with obtaining a second opinion required under 

20 section 1164(c)(2), or a third opinion, if the 

21 second opinion was in disagreement with the 

22 first opinion)’’; and 

23 (F) in the first sentence of subsection (b), 

24 by striking ‘‘(4)’’ and all that follows through 

25 ‘‘and (5)’’ and inserting and ‘‘(4)’’. 
709 

Title IV, Subtitle A 

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1 (3) Section 1834(g)(1)(B) (42 U.S.C. 

2 1395m(g)(1)(B)) is amended by striking ‘‘and for 

3 items and services furnished in connection with ob4 taining a second opinion required under section 

5 1164(c)(2), or a third opinion, if the second opinion 

6 was in disagreement with the first opinion)’’. 

7 (4) Section 1862(a) (42 U.S.C. 1395y(a)) is 

8 amended— 

9 (A) by adding ‘‘or’’ at the end of para10 graph (14), 

11 (B) by striking ‘‘; or’’ at the end of para12 graph (15) and inserting a period, and 

13 (C) by striking paragraph (16). 

14 (5) The third sentence of section 1866(a)(2)(A) 

15 (42 U.S.C. 1395w(a)(2)(A)) is amended by striking 

16 ‘‘, with respect to items and services furnished in 

17 connection with obtaining a second opinion required 

18 under section 1164(c)(2) (or a third opinion, if the 

19 second opinion was in disagreement with the first 

20 opinion),’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to services provided on or after 

23 the date of the enactment of this Act. 
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1 SEC. 4035. REQUIREMENTS FOR CHANGES IN BILLING PRO2 CEDURES. 

3 (a) LIMITATION ON FREQUENCY OF SYSTEM

4 CHANGES.—The Secretary of Health and Human Services 

5 may not implement any change in the system used for the 

6 billing and processing of claims for payment for items and 

7 services furnished under title XVIII of the Social Security 

8 Act within 6 months of implementing any previous change 

9 in such system. 

10 (b) ADVANCE NOTIFICATION TO PROVIDERS AS RE11 QUIREMENT FOR CARRIERS AND FISCAL INTER12 MEDIARIES.— 

13 (1) FISCAL INTERMEDIARIES.—Section 1816(c) 

14 (42 U.S.C. 1395h(c)) is amended by adding at the 

15 end the following new paragraph: 

16 ‘‘(4) Each agreement with an agency or organization 

17 under this section shall provide that the agency or organi18 zation shall notify providers of services of any major 

19 change in the procedures for billing for services furnished 

20 under this part at least 120 days before such change is 

21 to take effect.’’. 

22 (2) CARRIERS.—Section 1842(b)(3) (42 U.S.C. 

23 1395u(b)(3)) is amended— 

24 (A) by striking ‘‘and’’ at the end of sub25 paragraph (G) and the end of subparagraph 

26 (H); and 
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Title IV, Subtitle A 

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1 (B) by inserting after subparagraph (H) 

2 the following new subparagraph: 

3 ‘‘(I) will notify individuals and entities fur4 nishing items and services for which payment may 

5 be made under this part of any major change in the 

6 procedures for billing for such items and services at 

7 least 120 days before such change is to take effect; 

8 and’’. 

9 (3) EFFECTIVE DATE.—The amendments made 

10 by paragraphs (1) and (2) shall apply to agreements 

11 with fiscal intermediaries under section 1816 of the 

12 Social Security Act and to contracts with carriers 

13 under section 1842 of such Act for years beginning 

14 after the expiration of the 9-month period beginning 

15 on the date of the enactment of this Act. 

16 PART 5—AMENDMENTS TO ANTI17 FRAUD AND ABUSE PROVISIONS 

18 SEC. 4041. ANTI-KICKBACK PROVISIONS. 

19 (a) REVISION TO PENALTIES.— 

20 (1) PERMITTING SECRETARY TO IMPOSE CIVIL

21 MONETARY PENALTY.—Section 1128A(a) (42 U.S.C. 

22 1320a–7a(a)) is amended— 

23 (A) by striking ‘‘or’’ at the end of para24 graphs (1) and (2); 
712 

Title IV, Subtitle A 

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1 (B) by striking the semicolon at the end of 

2 paragraph (3) and inserting ‘‘; or’’; and 

3 (C) by inserting after paragraph (3) the 

4 following new paragraph: 

5 ‘‘(4) carries out any activity in violation of 

6 paragraph (1) or (2) of section 1128B(b);’’. 

7 (2) DESCRIPTION OF CIVIL MONETARY PEN8 ALTY APPLICABLE.—Section 1128A(a) (42 U.S.C. 

9 1320a–7a(a)) is amended— 

10 (A) by striking ‘‘given).’’ at the end of the 

11 first sentence and inserting the following: 

12 ‘‘given or, in cases under paragraph (4), 

13 $50,000 for each such violation).’’; and 

14 (B) by striking ‘‘claim.’’ at the end of the 

15 second sentence and inserting the following: 

16 ‘‘claim (or, in cases under paragraph (4), dam17 ages of not more than three times the total 

18 amount of remuneration offered, paid, solicited, 

19 or received, without regard to whether a portion 

20 of such remuneration was offered, paid, solic21 ited, or received for a lawful purpose).’’. 

22 (3) INCREASE IN CRIMINAL PENALTY.—Para23 graphs (1) and (2) of section 1128B(b) (42 U.S.C. 

24 1320a–7b(b)) are each amended— 
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Title IV, Subtitle A 

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1 (A) by striking ‘‘$25,000’’ and inserting 

2 ‘‘$50,000’’; and 

3 (B) by striking the period at the end and 

4 inserting the following: ‘‘, and shall be subject 

5 to damages of not more than three times the 

6 total remuneration offered, paid, solicited, or 

7 received, without regard to whether a portion of 

8 such remuneration was offered, paid, solicited, 

9 or received for a lawful purpose.’’. 

10 (b) REVISIONS TO EXCEPTIONS.— 

11 (1) EXCEPTION FOR DISCOUNTS.—Section 

12 1128B(b)(3)(A) (42 U.S.C. 1320a–7b(b)(3)(A)) is 

13 amended by striking ‘‘program;’’ and inserting ‘‘pro14 gram and is not— 

15 ‘‘(i) for the furnishing of one item or serv16 ice without charge or at a reduced charge in ex17 change for any agreement to buy a different 

18 item or service; 

19 ‘‘(ii) applicable to one payor but not to 

20 providers of services or other entities under title 

21 XVIII or a State health care program; or 

22 ‘‘(iii) in the form of a cash payment;’’. 

23 (2) EXCEPTION FOR PAYMENTS TO EMPLOY24 EES.—Section 1128B(b)(3)(B) (42 U.S.C. 1320a– 

25 7b(b)(3)(B)) is amended by inserting at the end ‘‘if 
714 

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1 the amount of remuneration under the arrangement 

2 is consistent with the fair market value of the serv3 ices and is not determined in a manner that takes 

4 into account (directly or indirectly) the volume or 

5 value of any referrals, except that such employee can 

6 be paid remuneration in the form of a productivity 

7 bonus based on services personally performed by the 

8 employee.’’. 

9 (3) EXCEPTION FOR WAIVER OF COINSURANCE

10 BY CERTAIN PROVIDERS.—Section 1128B(b)(3)(D) 

11 (42 U.S.C. 1320a–7b(b)(3)(D)) is amended to read 

12 as follows: 

13 ‘‘(D) a waiver or reduction of any coinsurance 

14 or other copayment if the waiver or reduction is 

15 made pursuant to a public schedule of discounts 

16 which the person is obligated as a matter of law to 

17 apply to certain individuals.’’. 

18 (4) NEW EXCEPTION FOR CERTAIN PRO19 VIDERS.—Section 1128B(b)(3) (42 U.S.C. 1320a– 

20 7b(b)(3)) is amended— 

21 (A) by striking ‘‘and’’ at the end of sub22 paragraph (D); 

23 (B) by striking the period at the end of 

24 subparagraph (E) and inserting ‘‘; and’’; and 
715 

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1 (C) by adding at the end the following new 

2 subparagraph: 

3 ‘‘(F) any remuneration obtained by or given to 

4 an individual or entity who receives assistance under 

5 a grant or cooperative agreement for the provision of 

6 health care services under title V, title XX, or the 

7 Public Health Service Act, or is obligated as a mat8 ter of law to provide services according to a schedule 

9 which provides for discounts based on the ability of 

10 the individual services to pay, if— 

11 ‘‘(i) in the case of an individual or entity 

12 who receives assistance under a grant or coop13 erative agreement for the provision of health 

14 care services under title V, title XX, or the 

15 Public Health Service Act, the remuneration is 

16 directly and primarily related to the activity 

17 supported by the grant or cooperative agree18 ment; and 

19 ‘‘(ii) the remuneration is pursuant to a 

20 written arrangement for the use or procurement 

21 of space, equipment, goods, or services for the 

22 referral of patients that— 

23 ‘‘(I) does not result in private 

24 inurement to any current employee, officer, 

25 member of the Board of Directors, or 
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Title IV, Subtitle A 

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1 agent of the recipient or any other person 

2 involved in recommending or negotiating 

3 the arrangement; and 

4 ‘‘(II) does not preclude the referral of 

5 patients to other providers of service of the 

6 patient’s own choosing and does not inter7 fere with the ability of health professionals 

8 to refer patients to providers of services 

9 they believe are the most appropriate, ex10 cept to the extent such choices or referrals 

11 are limited by the terms of a health plan 

12 in which the patient has enrolled or the 

13 terms of a grant or cooperative agreement 

14 described in clause (i).’’. 

15 (5) NEW EXCEPTION FOR CAPITATED PAY16 MENTS.—Section 1128B(b)(3) (42 U.S.C. 1320a– 

17 7b(b)(3)), as amended by paragraph (4), is further 

18 amended— 

19 (A) by striking ‘‘and’’ at the end of sub20 paragraph (E); 

21 (B) by striking the period at the end of 

22 subparagraph (F) and inserting ‘‘; and’’; and 

23 (C) by adding at the end the following new 

24 subparagraph— 
717 

Title IV, Subtitle A 

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1 ‘‘(G) any reduction in cost sharing or increased 

2 benefits given to an individual, any amounts paid to 

3 a provider of services for items or services furnished 

4 to an individual, or any discount or reduction in 

5 price given by the provider for such items or serv6 ices, if the individual is enrolled with and such items 

7 and services are covered under any of the following: 

8 ‘‘(i) A health plan which is furnishing 

9 items or services under title XVIII or a State 

10 health care program to individuals on an at11 risk, prepaid, capitated basis pursuant to a 

12 written agreement with the Secretary or a State 

13 health care program. 

14 ‘‘(ii) An organization receiving payments 

15 on a prepaid basis, under a demonstration 

16 project under section 402(a) of the Social Secu17 rity Amendments of 1967 or under section 

18 222(a) of the Social Security Amendments of 

19 1972. 

20 ‘‘(iii) Any other plan or insurer under 

21 which each participating provider is paid wholly 

22 on an at-risk, prepaid, capitated basis for such 

23 items or services pursuant to a written arrange24 ment between the plan and the provider.’’. 
718 

Title IV, Subtitle A 

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1 (c) CLARIFICATION OF COVERAGE OF EMPLOYERS

2 AND EMPLOYEES.—Section 1128B(b) (42 U.S.C. 1320a– 

3 7b(b)), as amended by subsection (a)(4), is further amend4 ed by adding at the end the following new paragraph: 

5 ‘‘(5) In this subsection, the term ‘referral’ includes 

6 the referral by an employee to his or her employer of any 

7 item or service for which payment may be made in whole 

8 or in part under title XVIII or a State health care pro9 gram.’’ 

10 (d) AUTHORIZATION FOR THE SECRETARY TO ISSUE

11 REGULATIONS.—Section 1128B(b) (42 U.S.C. 1320a– 

12 7b(b)), as amended by subsections (a)(4) and (c), is fur13 ther amended by adding at the end the following new para14 graph: 

15 ‘‘(6) The Secretary is authorized to impose by regula16 tion such other requirements as needed to protect against 

17 program or patient abuse with respect to any of the excep18 tions described in paragraph (3).’’. 

19 (e) CLARIFICATION OF OTHER ELEMENTS OF OF20 FENSE.—Section 1128B(b) (42 U.S.C. 1320a–7b(b)) is 

21 amended— 

22 (1) in paragraph (1) in the matter preceding 

23 subparagraph (A), by striking ‘‘kind—’’ and insert24 ing ‘‘kind with intent to be influenced—’’; 
719 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (2) in paragraph (1)(A), by striking ‘‘in return 

2 for referring’’ and inserting ‘‘to refer’’; 

3 (3) in paragraph (1)(B), by striking ‘‘in return 

4 for purchasing, leasing, ordering, or arranging for or 

5 recommending’’ and inserting ‘‘to purchase, lease, 

6 order, or arrange for or recommend’’; 

7 (4) in paragraph (2) in the matter preceding 

8 subparagraph (A), by striking ‘‘to induce such per9 son’’ and inserting ‘‘with intent to influence such 

10 person’’; and 

11 (5) by adding at the end of paragraphs (1) and 

12 (2) the following sentence: ‘‘A violation exists under 

13 this paragraph if one or more purposes of the remu14 neration is unlawful under this paragraph.’’. 

15 SEC. 4042. REVISIONS TO LIMITATIONS ON PHYSICIAN 

16 SELF-REFERRAL. 

17 (a) CLARIFICATION OF PAYMENT BAN.—Section 

18 1877(a)(1)(B) (42 U.S.C. 1395nn(a)(1)(B)) is amended 

19 to read as follows: 

20 ‘‘(B) no physician or entity may present or 

21 cause to be presented a claim under this title or bill 

22 to any third party payor or other entity for des23 ignated health services furnished pursuant to a re24 ferral prohibited under subparagraph (A).’’. 
720 

Title IV, Subtitle A 

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1 (b) CLARIFICATION OF COVERAGE OF HOLDING

2 COMPANY TYPE ARRANGEMENTS AND LOANS.—The last 

3 sentence of section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) 

4 is amended by striking ‘‘an interest in an entity that holds 

5 an ownership or investment interest in any entity pro6 viding the designated health service’’ and inserting the fol7 lowing: ‘‘a loan from the entity, and an interest held indi8 rectly through means such as (but not limited to) having 

9 a family member hold such investment interest or holding 

10 a legal or beneficial interest in another entity (such as a 

11 trust or holding company) that holds such investment in12 terest’’. 

13 (c) REVISIONS TO GENERAL EXCEPTIONS TO BOTH

14 OWNERSHIP AND COMPENSATION ARRANGEMENT PROHI15 BITIONS.— 

16 (1) REPEAL OF EXCEPTION FOR PHYSICIANS’ 

17 SERVICES.—Section 1877(b) (42 U.S.C. 1395nn(b)) 

18 is amended— 

19 (A) by striking paragraph (1); and 

20 (B) by redesignating paragraphs (2) and 

21 (3) as paragraphs (1) and (2). 

22 (2) REVISION TO IN-OFFICE ANCILLARY SERV23 ICES EXCEPTION.—Section 1877(b)(1) (42 U.S.C. 

24 1395nn(b)(1)), as redesignated by paragraph (1), is 

25 amended— 
721 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (A) in the matter preceding subparagraph 

2 (A), by striking ‘‘services (other than durable 

3 medical equipment (excluding infusion pumps) 

4 and parenteral and enteral nutrients, equip5 ment, and supplies)’’ and inserting ‘‘clinical lab6 oratory services, x-ray and ultrasound services 

7 that are provided at low-cost (as determined in 

8 accordance with regulations of the Secretary)’’; 

9 and 

10 (B) in subparagraph (A)— 

11 (i) in clause (ii)(I), by striking ‘‘(or 

12 another physician who is a member of the 

13 same group practice)’’, 

14 (ii) in clause (ii)(II) by inserting ‘‘the 

15 same or’’ before ‘‘another building’’, and 

16 (iii) in clause (ii)(II)(bb), by inserting 

17 ‘‘all of’’ after ‘‘centralized provision of’’. 

18 (3) REVISION TO PREPAID PLAN EXCEPTION.— 

19 Section 1877(b)(2), (42 U.S.C. 1395nn(b)(2)), as 

20 redesignated by paragraph (1), is amended to read 

21 as follows: 

22 ‘‘(2) PREPAID PLANS.—In the case of des23 ignated health services furnished by an organiza24 tion— 
722 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(A) with a risk sharing contract under 

2 section 1876(g) to an individual enrolled with 

3 the organization, 

4 ‘‘(B) receiving payments on a prepaid 

5 basis, under a demonstration project under sec6 tion 402(a) of the Social Security Amendments 

7 of 1967 or under section 222(a) of the Social 

8 Security Amendments of 1972, to an individual 

9 enrolled with the organization, or 

10 ‘‘(C) that is a qualified health maintenance 

11 organization (within the meaning of section 

12 1310(d) of the Public Health Service Act) to an 

13 individual enrolled with the organization.’’. 

14 (4) NEW EXCEPTION FOR CAPITATED PAY15 MENTS.—Section 1877(b) (42 U.S.C. 1395nn(b)), as 

16 amended by paragraph (1), is amended by inserting 

17 after paragraph (2) the following new paragraph: 

18 ‘‘(3) OTHER CAPITATED PAYMENTS.—In the 

19 case of a designated health service, if the designated 

20 health service is included in the services for which a 

21 physician or physician group is paid wholly on an at22 risk, prepaid, capitated basis by a health plan or in23 surer pursuant to a written arrangement between 

24 the plan or insurer and the physician or physician 

25 group.’’. 
723 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (d) REVISION TO PUBLICLY TRADED SECURITIES

2 EXCEPTION.—Section 1877(c)(1) (42 U.S.C. 

3 1395nn(c)(1)) is amended by inserting ‘‘at the time ac4 quired by the physician’’ after ‘‘which may be purchased 

5 on terms generally available to the public’’. 

6 (e) REVISION TO RURAL PROVIDER EXCEPTION.— 

7 Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is amended 

8 by striking ‘‘substantially all’’ and inserting ‘‘not less than 

9 85 percent (as determined in accordance with regulations 

10 of the Secretary)’’. 

11 (f) REVISIONS TO EXCEPTIONS RELATING TO OTHER

12 COMPENSATION ARRANGEMENTS.— 

13 (1) EXCEPTION FOR PERSONAL SERVICES AR14 RANGEMENTS.—(A) Section 1877(e)(3)(B)(i)(II) (42 

15 U.S.C. 1395nn(e)(3)(B)(i)(II)) is amended to read 

16 as follows: 

17 ‘‘(II) If the plan places a physi18 cian or physician group at substantial 

19 financial risk (as determined by the 

20 Secretary pursuant to section 

21 1876(i)(8)(A)(ii)), for services not 

22 provided by the physician, the entity 

23 complies with the provisions of sub24 clauses (I) and (II) of section 

25 1876(i)(8)(A)(ii).’’; 
724 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (B) Section 1877(e)(3)(B)(ii), 42 U.S.C. 

2 1395nn(e)(3)(B)(ii) is amended by striking ‘‘may di3 rectly or indirectly have the effect of’’ and inserting 

4 ‘‘has the purpose of’’. 

5 (2) REPEAL OF EXCEPTION FOR REMUNERA6 TION UNRELATED TO THE PROVISION OF DES7 IGNATED HEALTH SERVICES.—Section 1877(e) (42 

8 U.S.C. 1395nn(e)) is amended— 

9 (A) by striking paragraph (4); and 

10 (B) by redesignating paragraphs (5), (6), 

11 (7), and (8) as paragraphs (4), (5), (6), and 

12 (7). 

13 (3) EXCEPTION FOR CERTAIN PHYSICIAN RE14 CRUITMENT.—Section 1877(e)(4) (42 U.S.C. 

15 1395nn(e)(4)), as redesignated by paragraph (2), is 

16 amended to read as follows: 

17 ‘‘(4) PHYSICIAN RECRUITMENT.—In the case of 

18 remuneration which is provided by an entity located 

19 in a rural area (as defined in section 1886(d)(2)(D)) 

20 or a health professional shortage areas (designated 

21 under section 332 of the Public Health Service Act), 

22 or an entity for which 85 percent of the patients are 

23 members of a medically underserved population des24 ignated under section 330 of the Public Health Serv25 ice Act (as determined in accordance with regula-
725 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 tions of the Secretary), in order to induce a physi2 cian who has been practicing within the physician’s 

3 current specialty for less than one year to establish 

4 staff privileges at the entity, or to induce any other 

5 physician to relocate his or her primary place of 

6 practice to the geographic area served by the entity, 

7 if the following standards are met: 

8 ‘‘(A) The arrangement is set forth in a 

9 written agreement that specifies the benefits 

10 provided by the entity to the physician, the 

11 terms under which the benefits are to be pro12 vided, and the obligations of each party. 

13 ‘‘(B) If a physician is leaving an estab14 lished practice, the physical location of the new 

15 primary place of practice must be not less than 

16 100 miles from the location of the established 

17 primary place of practice and at least 85 per18 cent of the revenues of the physician’s new 

19 practice must be generated from new patients 

20 for whom the physician did not previously pro21 vide services at the former practice. 

22 ‘‘(C) The benefits are provided by the enti23 ty for a period not in excess of 3 years, and the 

24 terms of the agreement are not renegotiated 

25 during this 3-year period in any substantial as-
726 

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1 pect, unless the physician’s new primary place 

2 of practice is designated as a health profes3 sional shortage area (pursuant to section 332 of 

4 the Public Health Service Act) for the physi5 cian’s specialty category during the entire dura6 tion of the relationship between the physician 

7 and the entity. 

8 ‘‘(D) There is no requirement that the 

9 physician make referrals to, be in a position to 

10 make or influence referrals to, or otherwise gen11 erate business for the entity as a condition for 

12 receiving the benefits. 

13 ‘‘(E) The physician is not restricted from 

14 establishing staff privileges at, referring any 

15 service to, or otherwise generating any business 

16 for any other entity of the physician’s choosing. 

17 ‘‘(F) The amount or value of the benefits 

18 provided by the entity may not vary (or be ad19 justed or renegotiated) in any manner based on 

20 the volume or value of any expected referrals to 

21 or business otherwise generated for the entity 

22 by the physician for which payment may be 

23 made in whole or in part under this title or a 

24 State health care program (as defined in section 

25 1128(h)). 
727 

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1 ‘‘(G) The physician agrees to treat patients 

2 entitled to benefits under this title or enrolled 

3 in a State plan for medical assistance under 

4 title XIX.’’. 

5 (4) EXCEPTION FOR ISOLATED TRANS6 ACTIONS.—Section 1877(e)(5) (42 U.S.C. 

7 1395nn(e)(6)), as redesignated by paragraph (2), is 

8 amended— 

9 (A) by redesignating subparagraph (B) as 

10 subparagraph (C); 

11 (B) by striking ‘‘and’’ at the end of sub12 paragraph (A); and 

13 (C) by inserting after subparagraph (A) 

14 the following new subparagraph: 

15 ‘‘(B) there is no financing of the sale be16 tween the parties, and’’. 

17 (5) EXCEPTION FOR PAYMENTS BY A PHYSI18 CIAN.—Section 1877(e)(7) (42 U.S.C. 

19 1395nn(e)(7)), as redesignated by paragraph (2), is 

20 amended to read as follows: 

21 ‘‘(7) PAYMENTS BY A PHYSICIAN FOR ITEMS

22 AND SERVICES.—Payments made by a physician to 

23 an individual or entity as compensation for items or 

24 services if the items or services are furnished at a 

25 price that is consistent with fair market value.’’. 
728 

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1 (6) ADDITIONAL EXCEPTION FOR DISCOUNTS

2 OR OTHER REDUCTIONS IN PRICE.—Section 1877(e) 

3 (42 U.S.C. 1395nn(e)), as amended by paragraph 

4 (2), is amended by adding at the end the following 

5 new paragraph: 

6 ‘‘(8) DISCOUNTS OR OTHER REDUCTIONS IN

7 PRICE.—Discounts or other reductions in price be8 tween a physician and an entity for items or services 

9 for which payment may be made under this title so 

10 long as the discount or other reduction in price is 

11 properly disclosed and appropriately reflected in the 

12 costs claimed or charges made by the physician or 

13 entity under this title and is not— 

14 ‘‘(A) for the furnishing of one item or serv15 ice without charge or at a reduced charge in ex16 change for any agreement to buy a different 

17 item or service, 

18 ‘‘(B) applicable to one or more payers but 

19 not to all individuals and entities providing 

20 services for which payment may be made under 

21 this title, or 

22 ‘‘(C) in the form of a cash payment.’’. 

23 (g) CLARIFICATION OF SANCTION AUTHORITY.—Sec24 tion 1877(g)(4) (42 U.S.C. 1395nn(g)(4)) is amended by 

25 striking ‘‘Any physician’’ and all that follows through ‘‘to 
729 

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•HR 3600 IH / •S 1757 IS 

1 such entity,’’ and inserting the following: ‘‘Any physician 

2 or other entity that enters into an arrangement or scheme 

3 (such as a cross-referral arrangement or an arrangement 

4 with multiple leases overlapping in time for the same or 

5 similar rental space or equipment) which the physician or 

6 entity knows or should know has a principal purpose of 

7 inducing referrals to another entity, which referrals, if 

8 made directly by the physician or entity to such other enti9 ty,’’. 

10 (h) CLARIFICATION OF DEFINITION OF REMUNERA11 TION.—Section 1877(h)(1)(B) (42 U.S.C. 

12 1395nn(h)(1)(B)) is amended to read as follows: 

13 ‘‘(B) The term ‘remuneration’ includes any pay14 ment, discount or other reduction in price, forgive15 ness of debt or other benefit made directly or indi16 rectly, overtly or covertly, in cash or in kind.’’. 

17 (i) REVISION TO DEFINITION OF GROUP PRAC18 TICE.—Section 1877(h)(4) (42 U.S.C. 1395nn(h)(4)) is 

19 amended— 

20 (1) in subparagraph (A)(vi), by striking the pe21 riod at the end and inserting the following: ‘‘, in22 cluding a requirement for the physical grouping of 

23 physician practices as may be reasonably required to 

24 prevent the abuse of any exceptions provided to 

25 group practices under this section.’’; and 
730 

Title IV, Subtitle A 

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1 (2) in subparagraph (B)(i), by striking ‘‘or 

2 services incident to such personally performed serv3 ices’’. 

4 (j) EXPANSION TO COVER ADDITIONAL ITEMS AND

5 SERVICES.—Section 1877(h)(6) (42 U.S.C. 

6 1395nn(h)(6)), as amended by section 2005(c)(3), is 

7 amended— 

8 (1) in subparagraph (D), by striking ‘‘or 

9 other’’; and 

10 (2) by adding at the end the following new sub11 paragraphs: 

12 ‘‘(M) Diagnostic services. 

13 ‘‘(N) Any other item or service not ren14 dered by the physician personally or by a per15 son under the physician’s direct supervision.’’. 

16 (k) AUTHORIZATION FOR THE SECRETARY TO ISSUE

17 REGULATIONS.—Section 1877 (42 U.S.C. 1395nn) is 

18 amended by adding the following new subsection: 

19 ‘‘(i) ADDITIONAL REQUIREMENTS.—The Secretary is 

20 authorized to impose by regulation such other require21 ments as needed to protect against program or patient 

22 abuse with respect to any of the exceptions under this sec23 tion.’’. 

24 (l) INCORPORATION OF AMENDMENTS MADE UNDER

25 OBRA–1993.—In this section, any reference to section 
731 

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1 1877 of the Social Security Act shall be considered a ref2 erence to such section as amended by section 13562(a) 

3 of OBRA–1993. 

4 SEC. 4043. CIVIL MONETARY PENALTIES. 

5 (a) PROHIBITION AGAINST OFFERING INDUCEMENTS

6 TO INDIVIDUALS ENROLLED UNDER PLANS.— 

7 (1) OFFER OF REMUNERATION.—Section 

8 1128A(a) (42 U.S.C. 1320a–7a(a)) (as amended by 

9 section 4041(a)(1)) is amended— 

10 (A) by striking ‘‘; or’’ at the end of para11 graph (3) and inserting a semicolon; 

12 (B) by striking the semicolon at the end of 

13 paragraph (4) and inserting ‘‘; or’’; and 

14 (C) by inserting after paragraph (4) the 

15 following new paragraph: 

16 ‘‘(5) offers, pays, or transfers remuneration to 

17 any individual eligible for benefits under title XVIII 

18 of this Act, or under a State health care program 

19 (as defined in section 1128(h)) that such person 

20 knows or should know is likely to influence such in21 dividual to order or receive from a particular pro22 vider, practitioner, or supplier any item or service 

23 for which payment may be made, in whole or in 

24 part, under title XVIII, or a State health care pro25 gram;’’. 
732 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (2) REMUNERATION DEFINED.—Section 

2 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by 

3 adding at the end the following new paragraph: 

4 ‘‘(6) The term ‘remuneration’ includes the waiv5 er of coinsurance and deductible amounts (or any 

6 part thereof), and transfers of items or services for 

7 free or for other than fair market value, except that 

8 such term does not include the waiver of coinsurance 

9 or deductible amounts by a person or entity, if— 

10 ‘‘(A) the waiver is not offered as part of 

11 any advertisement or solicitation; 

12 ‘‘(B) the person does not routinely waive 

13 coinsurance or deductible amounts; and 

14 ‘‘(C) the person— 

15 ‘‘(i) waives the coinsurance and de16 ductible amounts after determining in good 

17 faith that the individual is indigent; 

18 ‘‘(ii) fails to collect coinsurance or de19 ductible amounts after making reasonable 

20 collection efforts; or 

21 ‘‘(iii) provides for any permissible 

22 waiver as specified in section 1128B(b)(3) 

23 or in regulations issued by the Secretary.’’. 

24 (b) CLAIM FOR ITEM OR SERVICE BASED ON INCOR25 RECT CODING OR MEDICALLY UNNECESSARY SERV-
733 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ICES.—Section 1128A(a)(1) (42 U.S.C. 1320a–7a(a)(1)) 

2 is amended— 

3 (1) in subparagraph (A), by striking ‘‘claimed,’’ 

4 and inserting the following: ‘‘claimed, including any 

5 person who presents or causes to be presented a 

6 claim for an item or service which includes a proce7 dure or diagnosis code that the person knows or 

8 should know will result in a greater payment to the 

9 person than the code applicable to the item or serv10 ice actually provided or actual patient medical condi11 tion,’’; 

12 (2) in subparagraph (C), by striking ‘‘or’’ at 

13 the end; 

14 (3) in subparagraph (D), by striking ‘‘; or’’ and 

15 inserting ‘‘, or’’; and 

16 (4) by inserting after subparagraph (D) the fol17 lowing new subparagraph: 

18 ‘‘(E) is for a medical or other item or serv19 ice that a person knows or should know is not 

20 medically necessary; or’’. 

21 (c) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

22 OR CONTROL INTEREST IN PARTICIPATING ENTITY.— 

23 Section 1128A(a) of such Act, as amended by section 

24 4041(a)(1) and subsection (a)(1), is further amended— 
734 

Title IV, Subtitle A 

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1 (1) by striking ‘‘or’’ at the end of paragraph 

2 (4); 

3 (2) by striking the semicolon at the end of 

4 paragraph (5) and inserting ‘‘; or’’; and 

5 (3) by inserting after paragraph (5) the fol6 lowing new paragraph: 

7 ‘‘(6) in the case of a person who is not an orga8 nization, agency, or other entity, who is excluded 

9 from participating in a program under title XVIII or 

10 a State health care program in accordance with this 

11 section, section 1128, or section 1156 and who, dur12 ing the period of exclusion, retains either a direct or 

13 indirect ownership or control interest of 5 percent or 

14 more in, or an ownership or control interest (as de15 fined in section 1124(a)(3)) in, or who is an officer, 

16 director, agent, or managing employee (as defined in 

17 section 1126(b)) of, an entity that is participating in 

18 a program under title XVIII or a State health care 

19 program;’’. 

20 (d) ADDITIONAL OFFENSES RELATING TO ALLIANCE

21 SYSTEM.—Section 1128A(a) of such Act, as amended by 

22 section 4041(a)(1) and subsections (a)(1) and (c), is fur23 ther amended— 

24 (1) by striking ‘‘or’’ at the end of paragraph 

25 (5); 
735 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (2) by striking the semicolon at the end of 

2 paragraph (6) and inserting ‘‘; or’’; and 

3 (3) by inserting after paragraph (6) the fol4 lowing new paragraphs: 

5 ‘‘(7) engages in a practice that circumvents a 

6 payment methodology intended to reimburse for two 

7 or more discreet medical items or services at a single 

8 or fixed amount, including but not limited to, mul9 tiple admissions or readmission to hospitals and 

10 other institutions reimbursed on a diagnosis reim11 bursement grouping basis; 

12 ‘‘(8) engages in a practice which has the effect 

13 of limiting or discouraging (as compared to other 

14 plan enrollees) the utilization of health care services 

15 covered by law or under the service contract by title 

16 XIX or other publicly subsidized patients, including 

17 but not limited to differential standards for the loca18 tion and hours of service offered by providers par19 ticipating in the plan; 

20 ‘‘(9) substantially fails to cooperate with a qual21 ity assurance program or a utilization review activ22 ity; 

23 ‘‘(10) fails substantially to provide or authorize 

24 medically necessary items and services that are re25 quired to be provided to an individual covered under 
736 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 a health plan under the Health Security Act or pub2 lic program for the delivery of or payment for health 

3 care items or services, if the failure has adversely af4 fected (or had a substantial likelihood of adversely 

5 affecting) the individual; 

6 ‘‘(11) employs or contracts with any individual 

7 or entity who is excluded from participating in a 

8 program under title XVIII or a State health care 

9 program in accordance with this section, section 

10 1128, or section 1156, for the provision of any serv11 ices (including but not limited to health care, utiliza12 tion review, medical social work, or administrative), 

13 or employs or contracts with any entity for the di14 rect or indirect provision of such services, through 

15 such an excluded individual or entity; or 

16 ‘‘(12) submits false or fraudulent statements, 

17 data or information or claims to the National Health 

18 Board established under part 1 of subtitle F of title 

19 I of the Health Security Act, any other Federal 

20 agency, a State health care agency, a health alliance 

21 (under subtitle D of title I of such Act), or any 

22 other Federal, State or local agency charged with 

23 implementation or oversight of a health plan under 

24 such Act or a public program that the person knows 

25 or should know is fraudulent;’’. 
737 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (e) MODIFICATIONS OF AMOUNTS OF PENALTIES

2 AND ASSESSMENTS.—Section 1128A(a) (42 U.S.C. 

3 1320a–7a(a)), as amended by section 4041(a), subsection 

4 (a)(1), subsection (c), and subsection (d), is amended in 

5 the matter following paragraph (12)— 

6 (1) by striking ‘‘$2,000’’ and inserting 

7 ‘‘$10,000’’; 

8 (2) by inserting after ‘‘under paragraph (4), 

9 $50,000 for each such violation’’ the following: ‘‘; in 

10 cases under paragraph (5), $10,000 for each such 

11 offer, payment, or transfer; in cases under para12 graph (6), $10,000 for each day the prohibited rela13 tionship occurs; in cases under paragraphs (7) 

14 through (12), an amount not to exceed $50,000 for 

15 each such determination by the Secretary’’; and 

16 (3) by striking ‘‘twice the amount’’ and insert17 ing ‘‘three times the amount’’. 

18 (f) INTEREST ON PENALTIES.—Section 1128A(f) (42 

19 U.S.C. 1320a–7a(f)) is amended by adding after the first 

20 sentence the following: ‘‘Interest shall accrue on the pen21 alties and assessments imposed by a final determination 

22 of the Secretary in accordance with an annual rate estab23 lished by the Secretary under the Federal Claims Collec24 tion Act. The rate of interest charged shall be the rate 

25 in effect on the date the determination becomes final and 
738 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 shall remain fixed at that rate until the entire amount due 

2 is paid. In addition, the Secretary is authorized to recover 

3 the costs of collection in any case where the penalties and 

4 assessments are not paid within 30 days after the deter5 mination becomes final, or in the case of a compromised 

6 amount, where payments are more than 90 days past due. 

7 In lieu of actual costs, the Secretary is authorized to im8 pose a charge of up to 10 percent of the amount of pen9 alties and assessments owed to cover the costs of collec10 tion.’’. 

11 (g) AUTHORIZATION TO ACT.— 

12 (1) IN GENERAL.—The first sentence of section 

13 1128A(c)(1) (42 U.S.C. 1320a–7a(c)(1)) is amended 

14 by striking all that follows ‘‘(b)’’ and inserting the 

15 following: ‘‘unless, within one year after the date the 

16 Secretary presents a case to the Attorney General 

17 for consideration, the Attorney General brings an ac18 tion in a district court of the United States.’’. 

19 (2) EFFECTIVE DATE.—The amendment made 

20 by this paragraph (1) shall apply to cases presented 

21 by the Secretary of Health and Human Services for 

22 consideration on or after the date of the enactment 

23 of this Act. 

24 (h) DEPOSIT OF PENALTIES COLLECTED INTO ALL25 PAYER ACCOUNT.—Section 1128A(f)(3) (42 U.S.C. 
739 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 1320a–7a(f)(3)) is amended by striking ‘‘as miscellaneous 

2 receipts of the Treasury of the United States’’ and insert3 ing ‘‘in the All-Payer Health Care Fraud and Abuse Con4 trol Account established under section 5402 of the Health 

5 Security Act’’. 

6 (i) CLARIFICATION OF PENALTY IMPOSED ON EX7 CLUDED PROVIDER FURNISHING SERVICES.—Section 

8 1128A(a)(1)(D) (42 U.S.C. 1320a–7a(a)(1)(D)) is 

9 amended by inserting ‘‘who furnished the service’’ after 

10 ‘‘in which the person’’. 

11 SEC. 4044. EXCLUSIONS FROM PROGRAM PARTICIPATION. 

12 (a) MANDATORY EXCLUSION FOR INDIVIDUAL CON13 VICTED OF CRIMINAL OFFENSE RELATED TO HEALTH

14 CARE FRAUD.—Section 1128 (42 U.S.C. 1320a–7) is 

15 amended— 

16 (1) by amending paragraph (1) of subsection 

17 (a) to read as follows: 

18 ‘‘(1) CONVICTIONS OF PROGRAM-RELATED

19 CRIMES AND HEALTH CARE FRAUD.— 

20 ‘‘(A) Any individual or entity that has been 

21 convicted of a criminal offense related to the 

22 delivery of an item or service under title XVIII 

23 or under any State health care program; or 

24 ‘‘(B) Any individual or entity that has 

25 been convicted, under Federal or State law, in 
740 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 connection with the delivery of a health care 

2 item or service of a criminal offense relating to 

3 fraud, theft, embezzlement, breach of fiduciary 

4 responsibility, or other financial misconduct.’’; 

5 and 

6 (2) in subsection (b)(1), by striking ‘‘in connec7 tion with the delivery of a health care item or service 

8 or’’. 

9 (b) ESTABLISHMENT OF MINIMUM PERIOD OF EX10 CLUSION FOR CERTAIN INDIVIDUALS AND ENTITIES SUB11 JECT TO PERMISSIVE EXCLUSION FROM MEDICARE AND

12 STATE HEALTH CARE PROGRAMS.—Section 1128(c)(3) 

13 (42 U.S.C. 1320a–7(c)(3)) is amended by adding at the 

14 end the following new subparagraphs: 

15 ‘‘(D) In the case of an exclusion of an individual or 

16 entity under paragraphs (1), (2), or (3) of subsection (b), 

17 the period of exclusion shall be a minimum of 3 years, 

18 unless the Secretary determines that a longer period is 

19 appropriate because of aggravating circumstances. 

20 ‘‘(E) In the case of an exclusion of an individual or 

21 entity under paragraph (4) or (5) of subsection (b), the 

22 period of the exclusion shall not be less than the period 

23 during which the individual’s or entity’s license to provide 

24 health care is revoked, suspended, or surrendered, or the 
741 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 individual or the entity is excluded or suspended from a 

2 Federal or State health care program. 

3 ‘‘(F) In the case of an exclusion of an individual or 

4 entity under subsection (b)(6)(B), the period of the exclu5 sion shall be not less than 1 year.’’. 

6 (c) REVISION TO EXCLUSION FOR DEFAULT ON

7 HEALTH EDUCATION LOAN OR SCHOLARSHIP OBLIGA8 TIONS.—Section 1128(b)(14) (42 U.S.C. 1320a–7(b)(14)) 

9 is amended by striking ‘‘all reasonable steps’’ and insert10 ing ‘‘reasonable steps’’. 

11 (d) PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

12 OWNERSHIP OR CONTROL INTEREST IN SANCTIONED EN13 TITIES.—Section 1128(b) (42 U.S.C. 1320a–7(b)) is 

14 amended by adding at the end the following new para15 graph: 

16 ‘‘(15) INDIVIDUALS CONTROLLING A SANC17 TIONED ENTITY.—Any individual who has a direct 

18 or indirect ownership or control interest of 5 percent 

19 or more, or an ownership or control interest (as de20 fined in section 1124(a)(3)) in, or who is an officer, 

21 director, agent, or managing employee (as defined in 

22 section 1126(b)) of, an entity— 

23 ‘‘(A) that has been convicted of any of24 fense described in subsection (a) or in para25 graph (1), (2), or (3) of this subsection; 
742 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(B) against which a civil monetary pen2 alty has been assessed under section 1128A; or 

3 ‘‘(C) that has been excluded from partici4 pation under a program under title XVIII or 

5 under a State health care program.’’. 

6 (e) EXCLUSIONS BASED ON ACTIONS UNDER ALLI7 ANCE SYSTEM.—Section 1128 (42 U.S.C. 1320a–7), as 

8 amended by subsections (a) and (d), is amended— 

9 (1) in subsection (a)(1)(A), by striking ‘‘XVIII 

10 or under a State health care program’’ and inserting 

11 ‘‘XVIII, a State health care program, or under an 

12 applicable health plan (as defined in section 1902(6) 

13 of the Health Security Act)’’; 

14 (2) in subsection (b)(5)— 

15 (A) by striking ‘‘or’’ at the end of subpara16 graph (A), 

17 (B) by adding ‘‘or’’ at the end of subpara18 graph (B), and 

19 (C) by inserting after subparagraph (B) 

20 the following new subparagraph: 

21 ‘‘(C) an applicable health plan (as defined 

22 in section 1902(6) of the Health Security Act) 

23 under section 5411 or 5412(b)(3) of such 

24 Act,’’; 
743 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (3) in subsection (b)(6)(B), by striking ‘‘XVIII 

2 or under a State health care program’’ and inserting 

3 ‘‘XVIII, a State health care program, or an applica4 ble health plan (as defined in section 1902(6) of the 

5 Health Security Act)’’; 

6 (4) in subsection (b)(7), by striking the period 

7 at the end and inserting ‘‘, or in section 5412 of the 

8 Health Security Act.’’; 

9 (5) in subsection (b)(8)(B)— 

10 (A) in clause (ii), by striking ‘‘1128A’’ and 

11 inserting ‘‘1128A or under section 5412 of the 

12 Health Security Act’’, and 

13 (B) in clause (iii), by striking ‘‘XVIII or 

14 under a State health care program’’ and insert15 ing ‘‘XVIII, a State health care program, or 

16 under an applicable health plan (as defined in 

17 section 1902(6) of the Health Security Act)’’; 

18 (6) in subsection (b)(9), by striking the period 

19 at the end and inserting ‘‘, or provide any informa20 tion requested by the Inspector General of the De21 partment of Health and Human Services to carry 

22 out the All-Payer Health Care Fraud and Abuse 

23 Control Program established under section 5401 of 

24 the Health Security Act.’’; 

25 (7) in subsection (b)(11)— 
744 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (A) by striking ‘‘title XVIII or a State 

2 health care program’’ and inserting ‘‘title 

3 XVIII, a State health care program, or an ap4 plicable health plan (as defined in section 

5 1902(6) of the Health Security Act)’’, 

6 (B) by striking ‘‘Secretary or the appro7 priate State agency’’ and inserting ‘‘Secretary, 

8 the appropriate State agency, or plan sponsor’’, 

9 and 

10 (C) by striking ‘‘Secretary or that agency’’ 

11 and inserting ‘‘Secretary, that agency, or that 

12 sponsor’’; 

13 (8) in subsection (b)(12), by adding at the end 

14 the following new subparagraph: 

15 ‘‘(E) Any entity authorized by law to (i) 

16 conduct on-site health, safety or patient care re17 views and surveys or (ii) to investigate whether 

18 any violations of law have occurred, including 

19 violations under this section, section 1128A, 

20 section 1128B, or part 2 of subtitle E of title 

21 V of the Health Security Act.’’; 

22 (9) in subsection (b)(14), by striking ‘‘XVIII or 

23 XIX’’ and inserting ‘‘XVIII, a State health care pro24 gram, or an applicable health plan (as defined in 

25 section 1902(6) of the Health Security Act)’’; and 
745 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (10) in subsection (b)(15)— 

2 (A) in subparagraph (B), by striking 

3 ‘‘1128A’’ and inserting ‘‘1128A or section 5412 

4 of the Health Security Act’’, and 

5 (B) in subparagraph (C), by striking ‘‘title 

6 XVIII or under a State health care program’’ 

7 and inserting ‘‘title XVIII, a State health care 

8 program, or an applicable health plan (as de9 fined in section 1902(6) of the Health Security 

10 Act’’. 

11 (f) APPEAL OF EXCLUSIONS TO COURT OF AP12 PEALS.—Section 1128(f)(1) (42 U.S.C. 1320a–7(f)(1)) is 

13 amended by striking the period at the end and inserting 

14 the following: ‘‘, except that any action brought to appeal 

15 such decision shall be brought in the United States Court 

16 of Appeals for the judicial circuit in which the individual 

17 or entity resides or has a principal place of business (or, 

18 if the individual or entity does not reside or have a prin19 cipal place of business within any such judicial circuit, in 

20 the United States Court of Appeals for the District of Co21 lumbia Circuit).’’. 
746 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 SEC. 4045. SANCTIONS AGAINST PRACTITIONERS AND PER2 SONS FOR FAILURE TO COMPLY WITH STATU3 TORY OBLIGATIONS RELATING TO QUALITY 

4 OF CARE. 

5 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI6 TIONERS AND PERSONS FAILING TO MEET STATUTORY

7 OBLIGATIONS.— 

8 (1) IN GENERAL.—The second sentence of sec9 tion 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is 

10 amended by striking ‘‘may prescribe)’’ and inserting 

11 ‘‘may prescribe, except that such period may not be 

12 less than one year)’’. 

13 (2) CONFORMING AMENDMENT.—Section 

14 1156(b)(2) (42 U.S.C. 1320c-5(b)(2)) is amended by 

15 striking ‘‘shall remain’’ and inserting ‘‘shall (subject 

16 to the minimum period specified in the second sen17 tence of paragraph (1)) remain’’. 

18 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI19 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1) 

20 (42 U.S.C. 1320c-5(b)(1)) is amended— 

21 (1) in the second sentence, by striking ‘‘and de22 termines’’ and all that follows through ‘‘such obliga23 tions,’’ and 

24 (2) by striking the third sentence. 

25 (c) AMOUNT OF CIVIL MONEY PENALTY.—Section 

26 1156(b)(3) (42 U.S.C. 1320c-5(b)(3)) is amended by 
747 

Title IV, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 striking ‘‘the actual or estimated cost’’ and inserting the 

2 following: ‘‘$50,000 for each instance’’. 

3 SEC. 4046. EFFECTIVE DATE. 

4 The amendments made by this part shall take effect 

5 January 1, 1995. 

6 PART 6—FUNDING OF GRADUATE MEDICAL 

7 EDUCATION AND ACADEMIC HEALTH CENTERS 

8 SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS 

9 FOR GRADUATE MEDICAL EDUCATION. 

10 (a) IN GENERAL.—For purposes of complying with 

11 section 3034(a), there shall be transferred to the Sec12 retary from the Federal Hospital Insurance Trust Fund 

13 (established under section 1817 of the Social Security Act) 

14 and the Federal Supplementary Medical Insurance Trust 

15 Fund (established under section 1841 of such Act) the fol16 lowing amount (in the aggregate), as applicable to a fiscal 

17 year: 

18 (1) In the case of fiscal year 1996, 

19 $1,500,000,000. 

20 (2) In the case of each of the fiscal years 1997 

21 and 1998, $1,600,000,000. 

22 (3) In the case of each subsequent fiscal year, 

23 the amount specified in paragraph (2) increased by 

24 the Secretary’s estimate of the percentage increase 

25 in the consumer price index for all urban consumers 
748 

Title IV, Subtitle A 

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1 (U.S. city average) for the 12-month period ending 

2 with the midpoint of the previous fiscal year. 

3 (b) ALLOCATION OF AMOUNT AMONG FUNDS.—With 

4 respect to the amount required under subsection (a) to 

5 be transferred for a year from the Federal Hospital Insur6 ance Trust Fund and the Federal Supplementary Medical 

7 Insurance Trust Fund, the Secretary shall determine an 

8 equitable allocation of such amount among the funds. 

9 (c) TERMINATION OF GRADUATE MEDICAL EDU10 CATION PAYMENTS UNDER MEDICARE.— 

11 (1) IN GENERAL.— Section 1886(h) (42 U.S.C. 

12 1395ww(h)) is amended by adding at the end the 

13 following new paragraph: 

14 ‘‘(6) TERMINATION OF PAYMENTS ATTRIB15 UTABLE TO COSTS OF TRAINING PHYSICIANS.—Not16 withstanding any other provision of this section or 

17 section 1861(v), no payment may be made under 

18 this title for direct graduate medical education costs 

19 attributable to an approved medical residency train20 ing program for any cost reporting period (or por21 tion thereof) beginning on or after October 1, 

22 1995.’’. 

23 (2) PROHIBITION AGAINST RECOGNITION OF

24 COSTS.—Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) 
749 

Title IV, Subtitle A 

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1 is amended by adding at the end the following new 

2 subparagraph: 

3 ‘‘(T) Such regulations shall not include any provision 

4 for specific recognition of the costs of graduate medical 

5 education for hospitals for any cost reporting period (or 

6 portion thereof) beginning on or after October 1, 1995. 

7 Nothing in the previous sentence shall be construed to af8 fect in any way payments to hospitals for the costs of any 

9 approved educational activities that are not described in 

10 such sentence.’’. 

11 SEC. 4052. TRANSFERS FROM HOSPITAL INSURANCE TRUST 

12 FUND FOR ACADEMIC HEALTH CENTERS. 

13 (a) IN GENERAL.—For purposes of complying with 

14 section 3104(a), there shall be transferred to the Sec15 retary from the Federal Hospital Insurance Trust Fund 

16 (established under section 1817 of the Social Security Act) 

17 the following amount (in the aggregate), as applicable to 

18 a fiscal year: 

19 (1) In the case of fiscal year 1996, 

20 $2,100,000,000. 

21 (2) In the case of each of the fiscal years 1997 

22 and 1998, $2,000,000,000. 

23 (3) In the case of each subsequent fiscal year, 

24 the amount specified in paragraph (2) increased by 

25 the Secretary’s estimate of the percentage increase 
750 

Title IV, Subtitle A 

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1 in the consumer price index for all urban consumers 

2 (U.S. city average) for the 12-month period ending 

3 with the midpoint of the previous fiscal year. 

4 (b) TERMINATION OF PAYMENTS UNDER MEDI5 CARE.— 

6 (1) IN GENERAL.—Section 1886(d)(5)(B) (42 

7 U.S.C. 1395ww(d)(5)(B)) is amended in the matter 

8 preceding clause (i) by striking ‘‘The Secretary’’ and 

9 inserting ‘‘For discharges occurring before October 

10 1, 1995, the Secretary’’. 

11 (2) ADJUSTMENT TO STANDARDIZED

12 AMOUNTS.—Section 1886(d)(2)(C)(i) (42 U.S.C. 

13 1395ww(d)(2)(C)(i)) is amended by striking ‘‘exclud14 ing’’ and inserting ‘‘for discharges occurring before 

15 October 1, 1995, excluding’’. 

16 PART 7—COVERAGE OF SERVICES PROVIDED BY 

17 FACILITIES AND PLANS OF DEPARTMENTS 

18 OF DEFENSE AND VETERANS AFFAIRS 

19 SEC. 4061. TREATMENT OF UNIFORMED SERVICES HEALTH 

20 PLAN AS ELIGIBLE ORGANIZATION UNDER 

21 MEDICARE. 

22 (a) IN GENERAL.—Section 1876 (42 U.S.C. 

23 1395mm), as amended by section 4002(a), is further 

24 amended by adding at the end the following new sub25 section: 
751 

Title IV, Subtitle A 

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1 ‘‘(l) Notwithstanding any other provision of this sec2 tion, a Uniformed Services Health Plan of the Department 

3 of Defense under chapter 55 of title 10, United States 

4 Code, shall be considered an eligible organization under 

5 this section, and the Secretary shall make payments to 

6 such Plan during a year on behalf of any individuals enti7 tled to benefits under this title who are enrolled with such 

8 a Plan during the year in the same amounts and under 

9 the same terms and conditions under which the Secretary 

10 makes payments to eligible organizations with risk-sharing 

11 contracts under section 1876.’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 subsection (a) shall apply to items and services furnished 

14 under title XVIII of the Social Security Act on or after 

15 October 1, 1995. 

16 SEC. 4062. COVERAGE OF SERVICES PROVIDED TO MEDI17 CARE BENEFICIARIES BY PLANS AND FACILI18 TIES OF DEPARTMENT OF VETERANS AF19 FAIRS. 

20 (a) IN GENERAL.—Title XVIII, as amended by sec21 tions 4001 and 4003, is further amended by adding at 

22 the end the following new section: 

23 ‘‘TREATMENT OF PLANS AND FACILITIES OF

24 DEPARTMENT OF VETERANS AFFAIRS AS PROVIDERS

25 ‘‘SEC. 1895. (a) IN GENERAL.—Notwithstanding any 

26 other provision of this title— 
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1 ‘‘(1) a VA health plan (as defined in section 

2 1801(2) of title 38, United States Code) shall be 

3 considered an eligible organization for purposes of 

4 section 1876; and 

5 ‘‘(2) a health care facility of the Department of 

6 Veterans Affairs shall be considered a provider of 

7 services under section 1861(u). 

8 ‘‘(b) ELIGIBILITY FOR PAYMENTS.— 

9 ‘‘(1) VA HEALTH PLANS.—The Secretary shall 

10 make payments to a VA health plan during a year 

11 on behalf of any veteran, other than a veteran de12 scribed in section 1831(b) during the year (other 

13 than any individuals described in section 1831(b) of 

14 title 38, United States Code) in the same amounts 

15 and under the same terms and conditions under 

16 which the Secretary makes payments to eligible or17 ganizations with a risk-sharing contract under sec18 tion 1876. 

19 ‘‘(2) HEALTH CARE FACILITIES.—The Sec20 retary shall make payments to a health care facility 

21 of the Department of Veterans Affairs for services 

22 provided to an individual entitled to benefits under 

23 this title in the same amounts and under the same 

24 terms and conditions under which the Secretary 
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Title IV, Subtitle B 

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1 makes payments to provider of services under this 

2 title.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall apply to items and services furnished 

5 under title XVIII of the Social Security Act on or after 

6 January 1, 1998. 

7 SEC. 4063. CONFORMING AMENDMENTS. 

8 (a) PART A.—Section 1814 (42 U.S.C. 1395f) is 

9 amended by striking subsection (c). 

10 (b) PART B.—Section 1835 (42 U.S.C. 1395n) is 

11 amended by striking subsection (d). 

12 (c) ADDITIONAL CONFORMING AMENDMENT.—Sec13 tion 1880(a) (42 U.S.C. 1395qq(a)) is amended by strik14 ing ‘‘, notwithstanding sections 1814(c) and 1835(d),’’. 

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

16 this section shall take effect January 1, 1998. 

17 Subtitle B—Savings in Medicare 

18 Program 

19 PART 1—SAVINGS RELATING TO PART A 

20 SEC. 4101. REDUCTION IN UPDATE FOR INPATIENT HOS21 PITAL SERVICES. 

22 Section 1886(b)(3)(B)(i) (42 U.S.C. 

23 1395ww(b)(3)(B)(i)), as amended by section 13501(a)(1) 

24 of OBRA–1993, is amended— 

25 (1) in subclause (XII)— 
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Title IV, Subtitle B 

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1 (A) by striking ‘‘fiscal year 1997’’ and in2 serting ‘‘for each of the fiscal years 1997 

3 through 2000’’, and 

4 (B) by striking ‘‘0.5 percentage point’’ and 

5 inserting ‘‘2.0 percentage points’’; and 

6 (2) in subclause (XIII), by striking ‘‘fiscal year 

7 1998’’ and inserting ‘‘fiscal year 2003’’. 

8 SEC. 4102. REDUCTION IN ADJUSTMENT FOR INDIRECT 

9 MEDICAL EDUCATION. 

10 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42 

11 U.S.C. 1395ww(d)(5)(B)(ii)) is amended to read as fol12 lows: 

13 ‘‘(ii) For purposes of clause (i)(II), the indirect 

14 teaching adjustment factor is equal to c * (((1+r) 

15 to the nth power) ¥ 1), where ‘r’ is the ratio of the 

16 hospital’s full-time equivalent interns and residents 

17 to beds and ‘n’ equals .405. For discharges occur18 ring on or after— 

19 ‘‘(I) May 1, 1986, and before October 1, 

20 1995, ‘c’ is equal to 1.89, and 

21 ‘‘(II) October 1, 1995, ‘c’ is equal to 

22 0.74.’’. 

23 (b) NO RESTANDARDIZATION OF PAYMENT

24 AMOUNTS REQUIRED.—Section 1886(d)(2)(C)(i) (42 

25 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking ‘‘of 
755 

Title IV, Subtitle B 

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1 1985’’ and inserting ‘‘of 1985, but not taking into account 

2 the amendments made by section 4102(a) of the Health 

3 Security Act’’. 

4 SEC. 4103. REDUCTION IN PAYMENTS FOR CAPITAL-RE5 LATED COSTS FOR INPATIENT HOSPITAL 

6 SERVICES. 

7 (a) PPS HOSPITALS.— 

8 (1) REDUCTION IN BASE PAYMENT RATES.— 

9 Section 1886(g)(1)(A) (42 U.S.C. 

10 1395ww(g)(1)(A)), as amended by section 

11 13501(a)(3) of OBRA–1993, is amended by adding 

12 at the end the following new sentence: ‘‘In addition 

13 to the reduction described in the preceding sentence, 

14 for discharges occurring after September 30, 1995, 

15 the Secretary shall reduce by 7.31 percent the 

16 unadjusted standard Federal capital payment rate 

17 (as described in 42 CFR 412.308(c), as in effect on 

18 the date of the enactment of the Health Security 

19 Act) and shall reduce by 10.41 percent the 

20 unadjusted hospital-specific rate (as described in 42 

21 CFR 412.328(e)(1), as in effect on the date of the 

22 enactment of the Health Security Act).’’. 

23 (2) REDUCTION IN UPDATE.—Section 

24 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended— 

25 (A) in subparagraph (B)(i)— 
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Title IV, Subtitle B 

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1 (i) by striking ‘‘and (II)’’ and insert2 ing ‘‘(II)’’, and 

3 (ii) by striking the semicolon at the 

4 end and inserting the following: ‘‘, and 

5 (III) an annual update factor established 

6 for the prospective payment rates applica7 ble to discharges in a fiscal year which 

8 (subject to reduction under subparagraph 

9 (C)) will be based upon such factor as the 

10 Secretary determines appropriate to take 

11 into account amounts necessary for the ef12 ficient and effective delivery of medically 

13 appropriate and necessary care of high 

14 quality;’’; 

15 (B) by redesignating subparagraph (C) as 

16 subparagraph (D); and 

17 (C) by inserting after subparagraph (B) 

18 the following new subparagraph: 

19 ‘‘(C)(i) With respect to payments attributable 

20 to portions of cost reporting periods or discharges 

21 occurring during each of the fiscal years 1996 

22 through 2003, the Secretary shall include a reduc23 tion in the annual update factor established under 

24 subparagraph (B)(i)(III) for discharges in the year 

25 equal to the applicable update reduction described in 
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Title IV, Subtitle B 

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1 clause (ii) to adjust for excessive increases in capital 

2 costs per discharge for fiscal years prior to fiscal 

3 year 1992 (but in no event may such reduction re4 sult in an annual update factor less than zero). 

5 ‘‘(ii) In clause (i), the term ‘applicable update 

6 reduction’ means, with respect to the update factor 

7 for a fiscal year— 

8 ‘‘(I) 4.9 percentage points; or 

9 ‘‘(II) if the annual update factor for the 

10 previous fiscal year was less than the applicable 

11 update reduction for the previous year, the sum 

12 of 4.9 percentage points and the difference be13 tween the annual update factor for the previous 

14 year and the applicable update reduction for the 

15 previous year.’’. 

16 (b) PPS-EXEMPT HOSPITALS.—Section 1861(v)(1) 

17 (42 U.S.C. 1395x(v)(1)), as amended by section 

18 4051(c)(2), is further amended by adding at the end the 

19 following new subparagraph: 

20 ‘‘(U) Such regulations shall provide that, in deter21 mining the amount of the payments that may be made 

22 under this title with respect to the capital-related costs 

23 of inpatient hospital services furnished by a hospital that 

24 is not a subsection (d) hospital (as defined in section 

25 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital 
758 

Title IV, Subtitle B 

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1 (as defined in section 1886(d)(9)(A)), the Secretary shall 

2 reduce the amounts of such payments otherwise estab3 lished under this title by 15 percent for payments attrib4 utable to portions of cost reporting periods occurring dur5 ing each of the fiscal years 1996 through 2003.’’. 

6 SEC. 4104. REVISIONS TO PAYMENT ADJUSTMENTS FOR 

7 DISPROPORTIONATE SHARE HOSPITALS IN 

8 PARTICIPATING STATES. 

9 (a) APPLICATION OF ALTERNATIVE ADJUST10 MENTS.—Section 1886(d)(5) (42 U.S.C. 1395ww(d)(5)) is 

11 amended— 

12 (1) by redesignating subparagraphs (H) and (I) 

13 as subparagraphs (I) and (J); and 

14 (2) by inserting after subparagraph (G) the fol15 lowing new subparagraph: 

16 ‘‘(H)(i) In accordance with this subparagraph, the 

17 Secretary shall provide for an additional payment for each 

18 subsection (d) hospital that is located in a participating 

19 State under the Health Security Act during a cost report20 ing period and that meets the eligibility requirements de21 scribed in clause (iii). 

22 ‘‘(ii) The amount of the additional payment made 

23 under clause (i) for each discharge shall be determined 

24 by multiplying— 
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Title IV, Subtitle B 

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1 ‘‘(I) the sum of the amount determined under 

2 paragraph (1)(A)(ii)(II) (or, if applicable, the 

3 amount determined under paragraph (1)(A)(iii)) and 

4 the amount paid to the hospital under subparagraph 

5 (A) for the discharge, by 

6 ‘‘(II) the SSI adjustment percentage for the 

7 cost reporting period in which the discharge occurs 

8 (as defined in clause (iv)). 

9 ‘‘(iii) A hospital meets the eligibility requirements de10 scribed in this clause with respect to a cost reporting pe11 riod if— 

12 ‘‘(I) in the case of a hospital that is located in 

13 an urban area and that has more than 100 beds, the 

14 hospital’s SSI patient percentage (as defined in 

15 clause (v)) for the cost reporting period is not less 

16 than 5.5 percent; 

17 ‘‘(II) in the case of a hospital that is located in 

18 an urban area and that has less than 100 beds, the 

19 hospital’s SSI patient percentage is not less than 17 

20 percent; 

21 ‘‘(III) in the case of a hospital that is classified 

22 as a rural referral center under subparagraph (C) or 

23 a sole community hospital under subparagraph (D), 

24 the hospital’s SSI patient percentage for the cost re25 porting period is not less than 23 percent; and 
760 

Title IV, Subtitle B 

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1 ‘‘(IV) in the case of any other hospital, the hos2 pital’s SSI patient percentage is not less than 23 

3 percent. 

4 ‘‘(iv) For purposes of clause (ii), the ‘SSI adjustment 

5 percentage’ applicable to a hospital for a cost reporting 

6 period is equal to— 

7 ‘‘(I) in the case of a hospital described in clause 

8 (iii)(I), the percentage determined in accordance 

9 with the following formula: e to the nth power ¥ 1, 

10 where ‘e’ is the natural antilog of 1 and where ‘n’ 

11 is equal to (.5642 * (the hospital’s SSI patient per12 centage for the cost reporting period ¥ .055)); 

13 ‘‘(II) in the case of a hospital described in 

14 clause (iii)(II) or clause (iii)(IV), 2 percent; and 

15 ‘‘(III) in the case of a hospital described in 

16 clause (iii)(III), the sum of 2 percent and .30 per17 cent of the difference between the hospital’s SSI pa18 tient percentage for the cost reporting period and 23 

19 percent. 

20 ‘‘(v) In this subparagraph, a hospital’s ‘SSI patient 

21 percentage’ with respect to a cost reporting period is equal 

22 to the fraction (expressed as a percentage)— 

23 ‘‘(I) the numerator of which is the number of 

24 the hospital’s patient days for such period which 

25 were made up of patients who (for such days) were 
761 

Title IV, Subtitle B 

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1 entitled to benefits under part A and were entitled 

2 to supplementary security income benefits (excluding 

3 State supplementation) under title XVI; and 

4 ‘‘(II) the denominator of which is the number 

5 of the hospital’s patient days for such period which 

6 were made up of patients who (for such days) were 

7 entitled to benefits under part A.’’. 

8 (b) NO STANDARDIZATION RESULTING FROM RE9 DUCTION.—Section 1886(d)(2)(C)(iv) (42 U.S.C. 

10 1395ww(d)(2)(C)(iv)) is amended— 

11 (1) by striking ‘‘exclude additional payments’’ 

12 and inserting ‘‘adjust such estimate for changes in 

13 payments’’; 

14 (2) by striking ‘‘1989 or’’ and inserting 

15 ‘‘1989,’’; and 

16 (3) by striking the period at the end and insert17 ing the following: ‘‘, or the enactment of section 

18 4104 of the Health Security Act.’’. 

19 (c) CONFORMING AMENDMENT.—Section 

20 1886(d)(5)(F)(i) (42 U.S.C. 1395ww(d)(5)(F)(i)) is 

21 amended in the matter preceding subclause (I) by insert22 ing after ‘‘hospital’’ the following: ‘‘that is not located in 

23 a State that is a participating State under the Health Se24 curity Act’’. 
762 

Title IV, Subtitle B 

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1 SEC. 4105. MORATORIUM ON DESIGNATION OF ADDITIONAL 

2 LONG-TERM CARE HOSPITALS. 

3 Notwithstanding clause (iv) of section 1886(d)(1)(B) 

4 of the Social Security Act, a hospital which has an average 

5 inpatient length of stay (as determined by the Secretary 

6 of Health and Human Services) of greater than 25 days 

7 shall not be treated as a hospital described in such clause 

8 for purposes of title XVIII of such Act unless the hospital 

9 was treated as a hospital described in such clause for pur10 poses of such title as of the date of the enactment of this 

11 Act. 

12 SEC. 4106. EXTENSION OF FREEZE ON UPDATES TO ROU13 TINE SERVICE COSTS OF SKILLED NURSING 

14 FACILITIES. 

15 (a) PAYMENTS BASED ON COST LIMITS.—Section 

16 1888(a) (42 U.S.C. 1395yy(a)) is amended by striking 

17 ‘‘112 percent’’ each place it appears and inserting ‘‘100 

18 percent (adjusted by such amount as the Secretary deter19 mines to be necessary to preserve the savings resulting 

20 from the enactment of section 13503(a)(1) of the Omni21 bus Budget Reconciliation Act of 1993)’’. 

22 (b) PAYMENTS DETERMINED ON PROSPECTIVE

23 BASIS.—Section 1888(d)(2)(B) (42 U.S.C. 

24 1395yy(d)(2)(B)) is amended by striking ‘‘105 percent’’ 

25 and inserting ‘‘100 percent (adjusted by such amount as 

26 the Secretary determines to be necessary to preserve the 
763 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 savings resulting from the enactment of section 13503(b) 

2 of the Omnibus Budget Reconciliation Act of 1993)’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 subsections (a) and (b) shall apply to cost reporting peri5 ods beginning on or after October 1, 1995. 

6 PART 2—SAVINGS RELATING TO PART B 

7 SEC. 4111. ESTABLISHMENT OF CUMULATIVE EXPENDI8 TURE GOALS FOR PHYSICIAN SERVICES. 

9 (a) USE OF CUMULATIVE PERFORMANCE STAND10 ARD.—Section 1848(f)(2) (42 U.S.C. 1395w–4(f)(2)) is 

11 amended— 

12 (1) in subparagraph (A)— 

13 (A) in the heading, by striking ‘‘IN GEN14 ERAL’’ and inserting ‘‘FISCAL YEARS 1991

15 THROUGH 1994.—’’, 

16 (B) in the matter preceding clause (i), by 

17 striking ‘‘a fiscal year (beginning with fiscal 

18 year 1991)’’ and inserting ‘‘fiscal years 1991, 

19 1992, 1993, and 1994’’, and 

20 (C) in the matter following clause (iv), by 

21 striking ‘‘subparagraph (B)’’ and inserting 

22 ‘‘subparagraph (C)’’; 

23 (2) in subparagraph (B), by striking ‘‘subpara24 graph (A)’’ and inserting ‘‘subparagraphs (A) and 

25 (B)’’; 
764 

Title IV, Subtitle B 

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1 (3) by redesignating subparagraphs (B) and 

2 (C) as subparagraphs (C) and (D); and 

3 (4) by inserting after subparagraph (A) the fol4 lowing new subparagraph: 

5 ‘‘(B) FISCAL YEARS BEGINNING WITH FIS6 CAL YEAR 1995.—Unless Congress otherwise 

7 provides, the performance standard rate of in8 crease, for all physicians’ services and for each 

9 category of physicians’ services, for a fiscal year 

10 beginning with fiscal year 1995 shall be equal 

11 to the performance standard rate of increase 

12 determined under this paragraph for the pre13 vious fiscal year, increased by the product of— 

14 ‘‘(i) 1 plus the Secretary’s estimate of 

15 the weighted average percentage increase 

16 (divided by 100) in the fees for all physi17 cians’ services or for the category of physi18 cians’ services, respectively, under this part 

19 for portions of calendar years included in 

20 the fiscal year involved, 

21 ‘‘(ii) 1 plus the Secretary’s estimate of 

22 the percentage increase or decrease (di23 vided by 100) in the average number of in24 dividuals enrolled under this part (other 
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Title IV, Subtitle B 

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1 than HMO enrollees) from the previous fis2 cal year to the fiscal year involved, 

3 ‘‘(iii) 1 plus the Secretary’s estimate 

4 of the average annual percentage growth 

5 (divided by 100) in volume and intensity of 

6 all physicians’ services or of the category 

7 of physicians’ services, respectively, under 

8 this part for the 5-fiscal-year period ending 

9 with the preceding fiscal year (based upon 

10 information contained in the most recent 

11 annual report made pursuant to section 

12 1841(b)(2)), and 

13 ‘‘(iv) 1 plus the Secretary’s estimate 

14 of the percentage increase or decrease (di15 vided by 100) in expenditures for all physi16 cians’ services or of the category of physi17 cians’ services, respectively, in the fiscal 

18 year (compared with the previous fiscal 

19 year) which are estimated to result from 

20 changes in law or regulations affecting the 

21 percentage increase described in clause (i) 

22 and which is not taken into account in the 

23 percentage increase described in clause (i), 
766 

Title IV, Subtitle B 

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1 minus 1, multiplied by 100, and reduced by the 

2 performance standard factor (specified in sub3 paragraph (C)).’’. 

4 (b) TREATMENT OF DEFAULT UPDATE.— 

5 (1) IN GENERAL.—Section 1848(d)(3)(B) (42 

6 U.S.C. 1395w–4(d)(3)(B)) is amended— 

7 (A) in clause (i)— 

8 (i) in the heading, by striking ‘‘IN

9 GENERAL’’ and inserting ‘‘1992 THROUGH

10 1996’’, and 

11 (ii) by striking ‘‘for a year’’ and in12 serting ‘‘for 1992, 1993, 1994, 1995, and 

13 1996’’; and 

14 (B) by adding after clause (ii) the fol15 lowing new clause: 

16 ‘‘(iii) YEARS BEGINNING WITH 1997.— 

17 ‘‘(I) IN GENERAL.—The update 

18 for a category of physicians’ services 

19 for a year beginning with 1997 pro20 vided under subparagraph (A) shall be 

21 increased or decreased by the same 

22 percentage by which the cumulative 

23 percentage increase in actual expendi24 tures for such category of physicians’ 

25 services for such year was less or 
767 

Title IV, Subtitle B 

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1 greater, respectively, than the per2 formance standard rate of increase 

3 (established under subsection (f)) for 

4 such category of services for such 

5 year. 

6 ‘‘(II) CUMULATIVE PERCENTAGE

7 INCREASE DEFINED.—In subclause 

8 (I), the ‘cumulative percentage in9 crease in actual expenditures’ for a 

10 year shall be equal to the product of 

11 the adjusted increases for each year 

12 beginning with 1995 up to and includ13 ing the year involved, minus 1 and 

14 multiplied by 100. In the previous 

15 sentence, the ‘adjusted increase’ for a 

16 year is equal to 1 plus the percentage 

17 increase in actual expenditures for the 

18 year.’’. 

19 (2) CONFORMING AMENDMENT.—Section 

20 1848(d)(3)(A)(i) (42 U.S.C. 1395w–4(d)(3)(A)(i)) is 

21 amended by striking ‘‘subparagraph (B)’’ and insert22 ing ‘‘subparagraphs (B) and (C)’’. 
768 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 4112. USE OF REAL GDP TO ADJUST FOR VOLUME AND 

2 INTENSITY; REPEAL OF RESTRICTION ON 

3 MAXIMUM REDUCTION PERMITTED IN DE4 FAULT UPDATE. 

5 (a) USE OF REAL GDP TO ADJUST FOR VOLUME

6 AND INTENSITY.—Section 1848(f)(2)(B)(iii) (42 U.S.C. 

7 1395w–4(f)(2)(B)(iii)), as added by section 4111(a), is 

8 amended to read as follows: 

9 ‘‘(iii) 1 plus the average per capita 

10 growth in the real gross domestic product 

11 (divided by 100) for the 5-fiscal-year pe12 riod ending with the previous fiscal year 

13 (increased by 1.5 percentage points for the 

14 category of services consisting of primary 

15 care services), and’’. 

16 (b) REPEAL OF RESTRICTION ON MAXIMUM REDUC17 TION.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w– 

18 4(d)(3)(B)(ii)), as amended by section 13512(b) of 

19 OBRA–1993, is amended— 

20 (1) in the heading, by inserting ‘‘IN CERTAIN

21 YEARS’’ after ‘‘ADJUSTMENT’’; 

22 (2) in the matter preceding subclause (I), by 

23 striking ‘‘for a year’’; 

24 (3) in subclause (I), by adding ‘‘and’’ at the 

25 end; 
769 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (4) in subclause (II), by striking ‘‘, and’’ and 

2 inserting a period; and 

3 (5) by striking subclause (III). 

4 (c) REPEAL OF PERFORMANCE STANDARD FAC5 TOR.— 

6 (1) IN GENERAL.—Section 1842(f)(2), as 

7 amended by section 4111(a)(3), is amended by strik8 ing subparagraph (C) and redesignating subpara9 graph (D) as subparagraph (C). 

10 (2) CONFORMING AMENDMENT.—Section 

11 1842(f)(2)(B), as added by section 4111(a), is 

12 amended in the matter following clause (iv) by strik13 ing ‘‘1, multiplied by 100’’ and all that follows 

14 through ‘‘subparagraph (C))’’ and inserting ‘‘1 and 

15 multiplied by 100’’. 

16 SEC. 4113. REDUCTION IN CONVERSION FACTOR FOR PHY17 SICIAN FEE SCHEDULE FOR 1995. 

18 Section 1848(d)(1) (42 U.S.C. 1395w–4(d)(1)) is 

19 amended— 

20 (1) in subparagraph (A), by inserting after 

21 ‘‘subparagraph (B)’’ the following: ‘‘, and, in the 

22 case of 1995, specified in subparagraph (C)’’; 

23 (2) by redesignating subparagraph (C) as sub24 paragraph (D); and 
770 

Title IV, Subtitle B 

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1 (3) by inserting after subparagraph (B) the fol2 lowing new subparagraph: 

3 ‘‘(C) SPECIAL PROVISION FOR 1995.—For 

4 purposes of subparagraph (A), the conversion 

5 factor specified in this subparagraph for 1995 

6 is— 

7 ‘‘(i) in the case of physicians’ services 

8 included in the category of primary care 

9 services (as defined in subsection (j)(1)), 

10 the conversion factor established under this 

11 subsection for 1994 adjusted by the update 

12 established under paragraph (3) for 1995; 

13 and 

14 ‘‘(ii) in the case of any other physi15 cians’ services, the conversion factor estab16 lished under this subsection for 1994 re17 duced by 3 percent and adjusted by the 

18 update established under paragraph (3) for 

19 1995.’’. 

20 SEC. 4114. LIMITATIONS ON PAYMENT FOR PHYSICIANS’ 

21 SERVICES FURNISHED BY HIGH-COST HOS22 PITAL MEDICAL STAFFS. 

23 (a) IN GENERAL.— 

24 (1) LIMITATIONS DESCRIBED.—Part B of title 

25 XVIII, as amended by section 2003(a), is amended 
771 

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1 by inserting after section 1848 the following new 

2 section: 

3 ‘‘LIMITATIONS ON PAYMENT FOR PHYSICIANS’ SERVICES

4 FURNISHED BY HIGH-COST HOSPITAL MEDICAL STAFFS

5 ‘‘SEC. 1849. (a) SERVICES SUBJECT TO REDUC6 TION.— 

7 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

8 PER ADMISSION RELATIVE VALUE.—Not later than 

9 October 1 of each year (beginning with 1997), the 

10 Secretary shall determine for each hospital— 

11 ‘‘(A) the hospital-specific per admission 

12 relative value under subsection (b)(2) for the 

13 following year; and 

14 ‘‘(B) whether such hospital-specific relative 

15 value is projected to exceed the allowable aver16 age per admission relative value applicable to 

17 the hospital for the following year under sub18 section (b)(1). 

19 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

20 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

21 RELATIVE VALUE.—If the Secretary determines 

22 (under paragraph (1)) that a medical staff’s hos23 pital-specific per admission relative value for a year 

24 (beginning with 1998) is projected to exceed the al25 lowable average per admission relative value applica26 ble to the medical staff for the year, the Secretary 
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1 shall reduce (in accordance with subsection (c)) the 

2 amount of payment otherwise determined under this 

3 part for each physician’s service furnished during 

4 the year to an inpatient of the hospital by an indi5 vidual who is a member of the hospital’s medical 

6 staff. 

7 ‘‘(3) TIMING OF DETERMINATION; NOTICE TO

8 HOSPITALS AND CARRIERS.—Not later than October 

9 1 of each year (beginning with 1997), the Secretary 

10 shall notify the medical executive committee of each 

11 hospital (as set forth in the Standards of the Joint 

12 Commission on the Accreditation of Health Organi13 zations) of the determinations made with respect to 

14 the medical staff under paragraph (1). 

15 ‘‘(b) DETERMINATION OF ALLOWABLE AVERAGE

16 PER ADMISSION RELATIVE VALUE AND HOSPITAL-SPE17 CIFIC PER ADMISSION RELATIVE VALUES.— 

18 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

19 RELATIVE VALUE.— 

20 ‘‘(A) URBAN HOSPITALS.—In the case of a 

21 hospital located in an urban area, the allowable 

22 average per admission relative value established 

23 under this subsection for a year is equal to 125 

24 percent (or 120 percent for years after 1999) of 

25 the median of 1996 hospital-specific per admis-
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1 sion relative values determined under paragraph 

2 (2) for all hospital medical staffs. 

3 ‘‘(B) RURAL HOSPITALS.—In the case of a 

4 hospital located in a rural area, the allowable 

5 average per admission relative value established 

6 under this subsection for 1998 and each suc7 ceeding year, is equal to 140 percent of the me8 dian of the 1996 hospital-specific per admission 

9 relative values determined under paragraph (2) 

10 for all hospital medical staffs. 

11 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL12 ATIVE VALUE.— 

13 ‘‘(A) IN GENERAL.—The hospital-specific 

14 per admission relative value projected for a hos15 pital (other than a teaching hospital) for a cal16 endar year, shall be equal to the average per 

17 admission relative value (as determined under 

18 section 1848(c)(2)) for physicians’ services fur19 nished to inpatients of the hospital by the hos20 pital’s medical staff (excluding interns and resi21 dents) during the second year preceding such 

22 calendar year, adjusted for variations in case23 mix and disproportionate share status among 

24 hospitals (as determined by the Secretary under 

25 subparagraph (C)). 
774 

Title IV, Subtitle B 

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1 ‘‘(B) SPECIAL RULE FOR TEACHING HOS2 PITALS.—The hospital-specific relative value 

3 projected for a teaching hospital in a calendar 

4 year shall be equal to the sum of— 

5 ‘‘(i) the average per admission relative 

6 value (as determined under section 

7 1848(c)(2)) for physicians’ services fur8 nished to inpatients of the hospital by the 

9 hospital’s medical staff (excluding interns 

10 and residents) during the second year pre11 ceding such calendar year; and 

12 ‘‘(ii) the equivalent per admission rel13 ative value (as determined under section 

14 1848(c)(2)) for physicians’ services fur15 nished to inpatients of the hospital by in16 terns and residents of the hospital during 

17 the second year preceding such calendar 

18 year, adjusted for variations in case-mix, 

19 disproportionate share status, and teaching 

20 status among hospitals (as determined by 

21 the Secretary under subparagraph (C)). 

22 The Secretary shall determine such equiva23 lent relative value unit per admission for 

24 interns and residents based on the best 

25 available data for teaching hospitals and 
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Title IV, Subtitle B 

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1 may make such adjustment in the aggre2 gate. 

3 ‘‘(C) ADJUSTMENT FOR TEACHING AND

4 DISPROPORTIONATE SHARE HOSPITALS.—The 

5 Secretary shall adjust the allowable per admis6 sion relative values otherwise determined under 

7 this paragraph to take into account the needs 

8 of teaching hospitals and hospitals receiving ad9 ditional payments under subparagraphs (F) and 

10 (G) of section 1886(d)(5). The adjustment for 

11 teaching status or disproportionate share shall 

12 not be less than zero. 

13 ‘‘(c) AMOUNT OF REDUCTION.—The amount of pay14 ment otherwise made under this part for a physician’s 

15 service that is subject to a reduction under subsection (a) 

16 during a year shall be reduced 15 percent, in the case of 

17 a service furnished by a member of the medical staff of 

18 the hospital for which the Secretary determines under sub19 section (a)(1) that the hospital medical staff’s projected 

20 relative value per admission exceeds the allowable average 

21 per admission relative value. 

22 ‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON

23 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

24 WITH ACTUAL RELATIVE VALUES.— 
776 

Title IV, Subtitle B 

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1 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

2 PER ADMISSION RELATIVE VALUE.—Not later than 

3 October 1 of each year (beginning with 1999), the 

4 Secretary shall determine the actual average per ad5 mission relative value (as determined pursuant to 

6 section 1848(c)(2)) for the physicians’ services fur7 nished by members of a hospital’s medical staff to 

8 inpatients of the hospital during the previous year, 

9 on the basis of claims for payment for such services 

10 that are submitted to the Secretary not later than 

11 90 days after the last day of such previous year. The 

12 actual average per admission shall be adjusted by 

13 the appropriate case-mix, disproportionate share fac14 tor, and teaching factor for the hospital medical 

15 staff (as determined by the Secretary under sub16 section (b)(2)(C)). Notwithstanding any other provi17 sion of this title, no payment may be made under 

18 this part for any physician’s service furnished by a 

19 member of a hospital’s medical staff to an inpatient 

20 of the hospital during a year unless the hospital sub21 mits a claim to the Secretary for payment for such 

22 service not later than 90 days after the last day of 

23 the year. 

24 ‘‘(2) RECONCILIATION WITH REDUCTIONS

25 TAKEN.—In the case of a hospital for which the pay-
777 

Title IV, Subtitle B 

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1 ment amounts for physicians’ services furnished by 

2 members of the hospital’s medical staff to inpatients 

3 of the hospital were reduced under this section for 

4 a year— 

5 ‘‘(A) if the actual average per admission 

6 relative value for such hospital’s medical staff 

7 during the year (as determined by the Secretary 

8 under paragraph (1)) did not exceed the allow9 able average per admission relative value appli10 cable to the hospital’s medical staff under sub11 section (b)(1) for the year, the Secretary shall 

12 reimburse the fiduciary agent for the medical 

13 staff by the amount by which payments for 

14 such services were reduced for the year under 

15 subsection (c), including interest at an appro16 priate rate determined by the Secretary; 

17 ‘‘(B) if the actual average per admission 

18 relative value for such hospital’s medical staff 

19 during the year is less than 15 percentage 

20 points above the allowable average per admis21 sion relative value applicable to the hospital’s 

22 medical staff under subsection (b)(1) for the 

23 year, the Secretary shall reimburse the fidu24 ciary agent for the medical staff, as a percent 

25 of the total allowed charges for physicians’ serv-
778 

Title IV, Subtitle B 

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1 ices performed in such hospital (prior to the 

2 withhold), the difference between 15 percentage 

3 points and the actual number of percentage 

4 points that the staff exceeds the limit allowable 

5 average per admission relative value, including 

6 interest at an appropriate rate determined by 

7 the Secretary; and 

8 ‘‘(C) if the actual average per admission 

9 relative value for such hospital’s medical staff 

10 during the year exceeded the allowable average 

11 per admission relative value applicable to the 

12 hospital’s medical staff by 15 percentage points 

13 or more, none of the withhold is paid to the fi14 duciary agent for the medical staff. 

15 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

16 HOSPITAL.—Each medical executive committee of a 

17 hospital whose medical staff is projected to exceed 

18 the allowable relative value per admission for a year, 

19 shall have one year from the date of notification that 

20 such medical staff is projected to exceed the allow21 able relative value per admission to designate a fidu22 ciary agent for the medical staff to receive and dis23 burse any appropriate withhold amount made by the 

24 carrier. 
779 

Title IV, Subtitle B 

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1 ‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM2 BERS OF STAFF.—At the request of a fiduciary 

3 agent for the medical staff, if the fiduciary agent for 

4 the medical staff is owed the reimbursement de5 scribed in paragraph (2)(B) for excess reductions in 

6 payments during a year, the Secretary shall make 

7 such reimbursement to the members of the hospital’s 

8 medical staff, on a pro-rata basis according to the 

9 proportion of physicians’ services furnished to inpa10 tients of the hospital during the year that were fur11 nished by each member of the medical staff. 

12 ‘‘(e) DEFINITIONS.—In this section, the following 

13 definitions apply: 

14 ‘‘(1) MEDICAL STAFF.—An individual fur15 nishing a physician’s service is considered to be on 

16 the medical staff of a hospital— 

17 ‘‘(A) if (in accordance with requirements 

18 for hospitals established by the Joint Commis19 sion on Accreditation of Health Organiza20 tions)— 

21 ‘‘(i) the individual is subject to by22 laws, rules, and regulations established by 

23 the hospital to provide a framework for the 

24 self-governance of medical staff activities; 
780 

Title IV, Subtitle B 

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1 ‘‘(ii) subject to such bylaws, rules, and 

2 regulations, the individual has clinical 

3 privileges granted by the hospital’s gov4 erning body; and 

5 ‘‘(iii) under such clinical privileges, 

6 the individual may provide physicians’ 

7 services independently within the scope of 

8 the individual’s clinical privileges, or 

9 ‘‘(B) if such physician provides at least one 

10 service to a medicare beneficiary in such hos11 pital. 

12 ‘‘(2) RURAL AREA; URBAN AREA.—The terms 

13 ‘rural area’ and ‘urban area’ have the meaning given 

14 such terms under section 1886(d)(2)(D). 

15 ‘‘(3) TEACHING HOSPITAL.—The term ‘teaching 

16 hospital’ means a hospital which has a teaching pro17 gram approved as specified in section 1861(b)(6).’’. 

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

19 1833(a)(1)(N) (42 U.S.C. 1395l(a)(1)(N)) is 

20 amended by inserting ‘‘(subject to reduction under 

21 section 1849)’’ after ‘‘1848(a)(1)’’. 

22 (B) Section 1848(a)(1)(B) (42 U.S.C. 1395w– 

23 4(a)(1)(B)) is amended by striking ‘‘this sub24 section,’’ and inserting ‘‘this subsection and section 

25 1849,’’. 
781 

Title IV, Subtitle B 

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1 (b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL

2 AT WHICH SERVICE FURNISHED.—Section 

3 1848(g)(4)(A)(i) (42 U.S.C. 1395w–4(g)(4)(A)(i)) is 

4 amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene5 ficiary (and, in the case of a service furnished to an inpa6 tient of a hospital, report the hospital identification num7 ber on such claim form),’’. 

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

9 this section shall apply to services furnished on or after 

10 January 1, 1998. 

11 SEC. 4115. MEDICARE INCENTIVES FOR PHYSICIANS TO 

12 PROVIDE PRIMARY CARE. 

13 (a) RESOURCE-BASED PRACTICE EXPENSE REL14 ATIVE VALUE UNITS.— 

15 (1) INCREASE IN PRACTICE EXPENSE RELATIVE

16 VALUE UNITS FOR CERTAIN SERVICES.—Section 

17 1848(c)(2) (42 U.S.C. 1395w–4(c)(2)), as amended 

18 by sections 13513 and 13514 of OBRA–93, is 

19 amended by adding at the end the following new 

20 subparagraph: 

21 ‘‘(G) INCREASE IN PRACTICE EXPENSE

22 RELATIVE VALUE UNITS FOR CERTAIN SERV23 ICES.—The Secretary shall increase the practice 

24 expense relative value units applied in primary 
782 

Title IV, Subtitle B 

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1 care services, as defined in section 1842(i)(4), 

2 by 10 percent, beginning with 1996.’’. 

3 (2) ASSURING BUDGET NEUTRALITY.—Section 

4 1842(c)(2)(F) (42 U.S.C. 1395u(c)(2)(F)), as added 

5 by section 13513 and amended by section 13514 of 

6 OBRA–93, is amended by adding at the end the fol7 lowing new clause: 

8 ‘‘(iii) shall reduce the relative values 

9 for all services (other than anesthesia serv10 ices and primary care services, as defined 

11 in section 1842(i)(4)) established under 

12 this paragraph (and, in the case of anes13 thesia services, the conversion factor estab14 lished by the Secretary for such services) 

15 by such percentage as the Secretary deter16 mines to be necessary so that, beginning in 

17 1996, the amendment made by section 

18 4115(a)(1) of the Health Security Act 

19 would not result in expenditures under this 

20 section that exceed the amount of such ex21 penditures that would have been made if 

22 such amendment had not been made.’’. 

23 (3) STUDY.—The Secretary of Health and 

24 Human Services shall— 
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Title IV, Subtitle B 

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1 (A) develop a methodology for imple2 menting in 1997 a resource-based system for 

3 determining practice expense relative values 

4 unit for each physician’s service, and 

5 (B) transmit a report by June 30, 1996, 

6 on the methodology developed under paragraph 

7 (1) to the Committees on Ways and Means and 

8 Energy and Commerce of the House of Rep9 resentatives and the Committee on Finance of 

10 the Senate. The reported shall include a presen11 tation of the data utilized in developing the 

12 methodology and an explanation of the method13 ology. 

14 (b) OFFICE VISIT PRE- AND POST-TIME.— 

15 (1) INCREASE IN WORK RELATIVE VALUE UNITS

16 FOR OFFICE VISITS.—Section 1848(c)(2) (42 U.S.C. 

17 1395w–4(c)(2)), as amended by subsection (a)(1), is 

18 amended by adding at the end the following new 

19 subparagraph: 

20 ‘‘(H) INCREASE IN WORK RELATIVE VALUE

21 UNITS FOR CERTAIN SERVICES.—The Secretary 

22 shall increase the work relative value units ap23 plied to office visits by 10 percent, beginning 

24 with 1996.’’. 
784 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (2) ASSURING BUDGET NEUTRALITY.—Section 

2 1842(c)(2)(F)(iii) (42 U.S.C. 1395u(c)(2)(F)(iii)), 

3 as added by subsection (a)(2), is amended by strik4 ing ‘‘section 4115(a)(1)’’ and substituting ‘‘sections 

5 4115(a)(1) and (b)(1)’’. 

6 (c) OFFICE CONSULTATIONS.—Section 1848(c)(2) 

7 (42 U.S.C. 1395w–4(c)(2)), as amended by subsections 

8 (a)(1) and (b)(1), is amended by adding at the end the 

9 following new subparagraph: 

10 ‘‘(I) AMENDMENT IN RELATIVE VALUES

11 FOR OFFICE CONSULTATIONS.—The Secretary 

12 shall reduce the work, practice expense and 

13 malpractice relative value components of office 

14 consultations to be equal to the work, practice 

15 expense and malpractice relative value compo16 nents for comparable office visits beginning 

17 with 1996. In making such adjustment, the 

18 Secretary shall apply the savings from such re19 duction to increase each of the relative value 

20 components for office visits in a manner that 

21 would not result in expenditures under this sec22 tion that exceed the amount of such expendi23 tures that would have been made if such 

24 amendment had not been made.’’. 
785 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (d) OUTLIER INTENSITY RELATIVE VALUE ADJUST2 MENTS.— 

3 (1) ADJUSTMENT OF OUTLIER INTENSITY OF

4 RELATIVE VALUES.—Section 1848(c)(2) (42 U.S.C. 

5 1395w–4(c)(2)), as amended by subsections (a)(1), 

6 (b)(1), and (c), is amended by adding at the end the 

7 following new subparagraph: 

8 ‘‘(J) ADJUSTMENT OF OUTLIER INTENSITY

9 OF RELATIVE VALUES.—Beginning with 1996, 

10 the Secretary shall reduce the work relative 

11 value components of procedures, or classes of 

12 procedures, where the intensity exceeds thresh13 olds established by the Secretary. In the pre14 vious sentence, intensity shall mean the work 

15 relative value units for the procedure divided by 

16 the time for the procedure. The Secretary shall 

17 apply the savings from such reductions to in18 crease the work relative value components of 

19 primary care services, as defined in section 

20 1842(i)(4), such that the changes made by this 

21 subsection would not result in expenditures 

22 under this section that exceed the amount of 

23 such expenditures that would have been made if 

24 such amendment had not been made.’’. 
786 

Title IV, Subtitle B 

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1 (e) CHANGES IN UNDERSERVED AREA BONUS PAY2 MENTS.— 

3 (1) IN GENERAL.—Section 1833(m) (42 U.S.C. 

4 1395l(m)) is amended— 

5 (A) by striking ‘‘10 percent’’ and inserting 

6 ‘‘a percent’’, 

7 (B) by striking ‘‘service’’ the last place it 

8 appears and inserting ‘‘services’’, and 

9 (C) by adding the following new sentence: 

10 ‘‘The percent referred to in the previous sen11 tence is 20 percent in the case of primary care 

12 services, as defined in section 1842(i)(4), and 

13 10 percent for services other than primary care 

14 services furnished in health professional short15 age areas located in rural areas as defined in 

16 section 1886(d)(2)(D).’’. 

17 (2) The amendments made by paragraph (1) 

18 are effective for services furnished on or after Janu19 ary 1, 1996. 

20 SEC. 4116. ELIMINATION OF FORMULA-DRIVEN OVERPAY21 MENTS FOR CERTAIN OUTPATIENT HOSPITAL 

22 SERVICES. 

23 (a) AMBULATORY SURGICAL CENTER PROCE24 DURES.—Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 

25 1395l(i)(3)(B)(i)(II)) is amended— 
787 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (1) by striking ‘‘of 80 percent’’; and 

2 (2) by striking the period at the end and insert3 ing the following: ‘‘, less the amount a provider may 

4 charge as described in clause (ii) of section 

5 1866(a)(2)(A).’’. 

6 (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCE7 DURES.—Section 1833(n)(1)(B)(i)(II) (42 U.S.C. 

8 1395l(n)(1)(B)(i)(II)) is amended— 

9 (1) by striking ‘‘of 80 percent’’; and 

10 (2) by striking the period at the end and insert11 ing the following: ‘‘, less the amount a provider may 

12 charge as described in clause (ii) of section 

13 1866(a)(2)(A).’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to services furnished during por16 tions of cost reporting periods occurring on or after July 

17 1, 1994. 

18 SEC. 4117. IMPOSITION OF COINSURANCE ON LABORATORY 

19 SERVICES. 

20 (a) IN GENERAL.—Paragraphs (1)(D) and (2)(D) of 

21 section 1833(a) (42 U.S.C. 1395l(a)) are each amended— 

22 (1) by striking ‘‘(or 100 percent’’ and all that 

23 follows through ‘‘the first opinion))’’; and 
788 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (2) by striking ‘‘100 percent of such negotiated 

2 rate’’ and inserting ‘‘80 percent of such negotiated 

3 rate’’. 

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

5 subsection (a) shall apply to tests furnished on or after 

6 January 1, 1995. 

7 SEC. 4118. APPLICATION OF COMPETITIVE ACQUISITION 

8 PROCESS FOR PART B ITEMS AND SERVICES. 

9 (a) GENERAL RULE.—Part B of title XVIII of the 

10 Social Security Act is amended by inserting after section 

11 1846 the following: 

12 ‘‘COMPETITION ACQUISITION FOR ITEMS AND SERVICES

13 ‘‘SEC. 1847. (a) ESTABLISHMENT OF BIDDING

14 AREAS.— 

15 ‘‘(1) IN GENERAL.—The Secretary shall estab16 lish competitive acquisition areas for the purpose of 

17 awarding a contract or contracts for the furnishing 

18 under this part of the items and services described 

19 in subsection (c) on or after January 1, 1995. The 

20 Secretary may establish different competitive acqui21 sition areas under this subsection for different class22 es of items and services under this part. 

23 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The 

24 competitive acquisition areas established under para25 graph (1) shall— 
789 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(A) initially be, or be within, metropolitan 

2 statistical areas; and 

3 ‘‘(B) be chosen based on the availability 

4 and accessibility of suppliers and the probable 

5 savings to be realized by the use of competitive 

6 bidding in the furnishing of items and services 

7 in the area. 

8 ‘‘(b) AWARDING OF CONTRACTS IN AREAS.— 

9 ‘‘(1) IN GENERAL.—The Secretary shall con10 duct a competition among individuals and entities 

11 supplying items and services under this part for 

12 each competitive acquisition area established under 

13 subsection (a) for each class of items and services. 

14 ‘‘(2) CONDITIONS FOR AWARDING CONTRACT.— 

15 The Secretary may not award a contract to any indi16 vidual or entity under the competition conducted 

17 pursuant to paragraph (1) to furnish an item or 

18 service under this part unless the Secretary finds 

19 that the individual or entity— 

20 ‘‘(A) meets quality standards specified by 

21 the Secretary for the furnishing of such item or 

22 service; and 

23 ‘‘(B) offers to furnish a total quantity of 

24 such item or service that is sufficient to meet 
790 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 the expected need within the competitive acqui2 sition area. 

3 ‘‘(3) CONTENTS OF CONTRACT.—A contract en4 tered into with an individual or entity under the 

5 competition conducted pursuant to paragraph (1) 

6 shall specify (for all of the items and services within 

7 a class)— 

8 ‘‘(A) the quantity of items and services the 

9 entity shall provide; and 

10 ‘‘(B) such other terms and conditions as 

11 the Secretary may require. 

12 ‘‘(c) SERVICES DESCRIBED.—The items and services 

13 to which the provisions of this section shall apply are as 

14 follows: 

15 ‘‘(1) Magnetic resonance imaging tests and 

16 computerized axial tomography scans, including a 

17 physician’s interpretation of the results of such tests 

18 and scans. 

19 ‘‘(2) Oxygen and oxygen equipment. 

20 ‘‘(3) Such other items and services for which 

21 the Secretary determines that the use of competitive 

22 acquisition under this section will be appropriate and 

23 cost-effective.’’. 

24 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

25 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a) 
791 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (42 U.S.C. 1395y(a)), as amended by section 4034(b)(4), 

2 is amended— 

3 (1) by striking ‘‘or’’ at the end of paragraph 

4 (14); 

5 (2) by striking the period at the end of para6 graph (15) and inserting ‘‘; or’’; and 

7 (3) by inserting after paragraph (15) the fol8 lowing new paragraph: 

9 ‘‘(16) where such expenses are for an item or 

10 service furnished in a competitive acquisition area 

11 (as established by the Secretary under section 

12 1847(a)) by an individual or entity other than the 

13 supplier with whom the Secretary has entered into 

14 a contract under section 1847(b) for the furnishing 

15 of such item or service in that area, unless the Sec16 retary finds that such expenses were incurred in a 

17 case of urgent need.’’. 

18 (c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI19 TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC20 TION IN PAYMENTS.—Notwithstanding any other provi21 sion of title XVIII of the Social Security Act, if the estab22 lishment of competitive acquisition areas under section 

23 1847 of such Act (as added by subsection (a)) and the 

24 limitation of coverage for items and services under part 

25 B of such title to items and services furnished by providers 
792 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 with competitive acquisition contracts under such section 

2 does not result in a reduction of at least 10 percent in 

3 the projected payment amount that would have applied to 

4 the item or service under part B if the item or service 

5 had not been furnished through competitive acquisition 

6 under such section, the Secretary shall reduce the pay7 ment amount by such percentage as the Secretary deter8 mines necessary to result in such a reduction. 

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

10 this section shall apply to items and services furnished 

11 under part B of title XVIII of the Social Security Act on 

12 or after January 1, 1995. 

13 SEC. 4119. APPLICATION OF COMPETITIVE ACQUISITION 

14 PROCEDURES FOR LABORATORY SERVICES. 

15 (a) IN GENERAL.—Section 1847(c), as added by sec16 tion 4118, is amended— 

17 (1) by redesignating paragraph (4) as para18 graph (5); and 

19 (2) by inserting after paragraph (3) the fol20 lowing new paragraph: 

21 ‘‘(4) Clinical diagnostic laboratory tests.’’. 

22 (b) REDUCTION IN FEE SCHEDULE AMOUNTS IF

23 COMPETITIVE ACQUISITION FAILS TO ACHIEVE SAV24 INGS.—Section 1833(h) (42 U.S.C. 1395l(h)) is amended 

25 by adding at the end the following new paragraph: 
793 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(7) Notwithstanding any other provision of this sub2 section, if the Secretary applies the authority provided 

3 under section 1847 to establish competitive acquisition 

4 areas for the furnishing of clinical diagnostic laboratory 

5 tests in a year and the application of such authority does 

6 not result in a reduction of at least 10 percent in the pro7 jected payment amount that would have applied to such 

8 tests under this section if the tests had not been furnished 

9 through competitive acquisition under section 1847, the 

10 Secretary shall reduce each payment amount otherwise de11 termined under the fee schedules and negotiated rates es12 tablished under this subsection by such percentage as the 

13 Secretary determines necessary to result in such a reduc14 tion.’’. 

15 PART 3—SAVINGS RELATING TO PARTS A AND B 

16 SEC. 4131. MEDICARE SECONDARY PAYER CHANGES. 

17 (a) EXTENSION OF DATA MATCH.— 

18 (1) Section 1862(b)(5)(C) (42 U.S.C. 

19 1395y(b)(5)(C)) is amended by striking clause (iii). 

20 (2) Section 6103(l)(12) of the Internal Revenue 

21 Code of 1986 is amended by striking subparagraph 

22 (F). 

23 (b) REPEAL OF SUNSET ON APPLICATION TO DIS24 ABLED EMPLOYEES OF EMPLOYERS WITH MORE THAN

25 100 EMPLOYEES.—Section 1862(b)(1)(B)(iii) (42 U.S.C. 
794 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 1395y(b)(1)(B)(iii)), as amended by section 13561(b) of 

2 OBRA–1993, is amended— 

3 (1) in the heading, by striking ‘‘SUNSET’’ and 

4 inserting ‘‘EFFECTIVE DATE’’; and 

5 (2) by striking ‘‘, and before October 1, 1998’’. 

6 (c) EXTENSION OF PERIOD FOR END STAGE RENAL

7 DISEASE BENEFICIARIES.—Section 1862(b)(1)(C) (42 

8 U.S.C. 1395y(b)(1)(C)), as amended by section 13561(c) 

9 of OBRA–1993, is amended in the second sentence by 

10 striking ‘‘and on or before October 1, 1998,’’. 

11 SEC. 4132. PAYMENT LIMITS FOR HMOS AND CMPS WITH 

12 RISK-SHARING CONTRACTS. 

13 (a) IN GENERAL.—Section 1876(a)(1)(C) (42 U.S.C. 

14 1395mm(a)(1)(C)) is amended— 

15 (1) by inserting ‘‘, subject to adjustment to 

16 take into account the provisions of the succeeding 

17 clauses’’ before the period, 

18 (2) by striking ‘‘(C)’’ and inserting ‘‘(C)(i)’’, 

19 and 

20 (3) by adding at the end the following new 

21 clauses: 

22 ‘‘(ii) The portion of the annual per capita rate of pay23 ment for each such class attributable to payments made 

24 from the Federal Supplementary Medical Insurance Trust 

25 Fund may not exceed 95 percent of the following amount 
795 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (unless the portion of the annual per capita rate of pay2 ment for each such class attributable to payments made 

3 from the Federal Hospital Insurance Trust Fund is less 

4 than 95 percent of the weighted national average of all 

5 adjusted average per capita costs determined under para6 graph (4) for that class that are attributable to payments 

7 made from the Federal Hospital Insurance Trust Fund): 

8 ‘‘(I) For 1995, 150 percent of the weighted na9 tional average of all adjusted average per capita 

10 costs determined under paragraph (4) for that class 

11 that are attributable to payments made from such 

12 Trust Fund, plus 80 percent of the amount by which 

13 (if any) the adjusted average per capita cost for that 

14 class exceeds 150 percent of that weighted national 

15 average. 

16 ‘‘(II) For 1996, 150 percent of the weighted 

17 national average of all adjusted average per capita 

18 costs determined under paragraph (4) for that class 

19 that are attributable to payments made from such 

20 Trust Fund, plus 60 percent of the amount by which 

21 (if any) the adjusted average per capita cost for that 

22 class exceeds 150 percent of that weighted national 

23 average. 

24 ‘‘(III) For 1997, 150 percent of the weighted 

25 national average of all adjusted average per capita 
796 

Title IV, Subtitle B 

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1 costs determined under paragraph (4) for that class 

2 that are attributable to payments made from such 

3 Trust Fund, plus 40 percent of the amount by which 

4 (if any) the adjusted average per capita cost for that 

5 class exceeds 150 percent of that weighted national 

6 average. 

7 ‘‘(IV) For 1998, 150 percent of the weighted 

8 national average of all adjusted average per capita 

9 costs determined under paragraph (4) for that class 

10 that are attributable to payments made from such 

11 Trust Fund, plus 20 percent of the amount by which 

12 (if any) the adjusted average per capita cost for that 

13 class exceeds 150 percent of that weighted national 

14 average. 

15 ‘‘(V) For 1999 and each succeeding year (sub16 ject to the establishment by the Secretary of alter17 native limits under clause (vi)), 150 percent of the 

18 weighted national average of all adjusted average 

19 per capita costs determined under paragraph (4) for 

20 that class that are attributable to payments made 

21 from such Trust Fund. 

22 ‘‘(iii) The portion of the annual per capita rate of 

23 payment for each such class attributable to payments 

24 made from the Federal Hospital Insurance Trust Fund 

25 may not exceed 95 percent of the following amount (unless 
797 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 the portion of the annual per capita rate of payment for 

2 each such class attributable to payments made from the 

3 Federal Supplementary Medical Insurance Trust Fund is 

4 less than 95 percent of the weighted national average of 

5 all adjusted average per capita costs determined under 

6 paragraph (4) for that class that are attributable to pay7 ments made from the Federal Supplementary Medical In8 surance Trust Fund): 

9 ‘‘(I) For 1995, 170 percent of the weighted na10 tional average of all adjusted average per capita 

11 costs determined under paragraph (4) for that class 

12 that are attributable to payments made from such 

13 Trust Fund, plus 80 percent of the amount by which 

14 (if any) the adjusted average per capita cost for that 

15 class exceeds 170 percent of that weighted national 

16 average. 

17 ‘‘(II) For 1996, 170 percent of the weighted 

18 national average of all adjusted average per capita 

19 costs determined under paragraph (4) for that class 

20 that are attributable to payments made from such 

21 Trust Fund, plus 60 percent of the amount by which 

22 (if any) the adjusted average per capita cost for that 

23 class exceeds 170 percent of that weighted national 

24 average. 
798 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(III) For 1997, 170 percent of the weighted 

2 national average of all adjusted average per capita 

3 costs determined under paragraph (4) for that class 

4 that are attributable to payments made from such 

5 Trust Fund, plus 40 percent of the amount by which 

6 (if any) the adjusted average per capita cost for that 

7 class exceeds 170 percent of that weighted national 

8 average. 

9 ‘‘(IV) For 1998, 170 percent of the weighted 

10 national average of all adjusted average per capita 

11 costs determined under paragraph (4) for that class 

12 that are attributable to payments made from such 

13 Trust Fund, plus 20 percent of the amount by which 

14 (if any) the adjusted average per capita cost for that 

15 class exceeds 170 percent of that weighted national 

16 average. 

17 ‘‘(V) For 1999 and each succeeding year (sub18 ject to the establishment by the Secretary of alter19 native limits under clause (vi)), 170 percent of the 

20 weighted national average of all adjusted average 

21 per capita costs determined under paragraph (4) for 

22 that class that are attributable to payments made 

23 from such Trust Fund. 

24 ‘‘(iv) For 1995 and succeeding years, the portion of 

25 the annual per capita rate of payment for each such class 
799 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 attributable to payments made from the Federal Supple2 mentary Medical Insurance Trust Fund may not be less 

3 than 80 percent of 95 percent of the weighted national 

4 average of all adjusted average per capita costs deter5 mined under paragraph (4) for that class that are attrib6 utable to payments made from such Trust Fund, unless 

7 the portion of the annual per capita rate of payment for 

8 each such class attributable to payments made from the 

9 Federal Hospital Insurance Trust Fund is greater than 

10 95 percent of the weighted national average of all adjusted 

11 average per capita costs determined under paragraph (4) 

12 for that class that are attributable to payments made from 

13 the Federal Hospital Insurance Trust Fund. 

14 ‘‘(v) For 1995 and succeeding years, the portion of 

15 the annual per capita rate of payment for each such class 

16 attributable to payments made from the Federal Hospital 

17 Insurance Trust Fund may not be less than 80 percent 

18 of 95 percent of the weighted national average of all ad19 justed average per capita costs determined under para20 graph (4) for that class that are attributable to payments 

21 made from such Trust Fund, unless the portion of the 

22 annual per capita rate of payment for each such class at23 tributable to payments made from the Federal Supple24 mentary Medical Insurance Trust Fund is greater than 

25 95 percent of the weighted national average of all adjusted 
800 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 average per capita costs determined under paragraph (4) 

2 for that class that are attributable to payments made from 

3 the Federal Supplementary Medical Insurance Trust 

4 Fund. 

5 ‘‘(vi) For 2000 and succeeding years, the Secretary 

6 may revise any of the percentages otherwise applicable 

7 during a year under the preceding clauses (other than 

8 clause (i)), but only if the aggregate payments made under 

9 this title to eligible organizations under risk-sharing con10 tracts during the year is not greater than the aggregate 

11 payments that would have been made under this title to 

12 such organizations during the year if the Secretary had 

13 not revised the percentages. 

14 ‘‘(vii) For purposes of clauses (ii) through (v), in de15 termining the weighed average of all adjusted average per 

16 capita costs determined under paragraph (4) for a class, 

17 the Secretary shall not take into account any costs associ18 ated with individuals entitled to benefits under this title 

19 under section 226A.’’. 

20 (b) CONFORMING AMENDMENT.—Section 

21 1876(a)(5)(A) (42 U.S.C. 1395mm(a)(5)(A)) is amended 

22 by inserting ‘‘, adjusted to take into account the limita23 tions imposed by clauses (ii) through (vi) of paragraph 

24 (1)(C)’’ before the period. 
801 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 4133. REDUCTION IN ROUTINE COST LIMITS FOR 

2 HOME HEALTH SERVICES. 

3 (a) REDUCTION IN UPDATE TO MAINTAIN FREEZE

4 IN 1996.—Section 1861(v)(1)(L)(i) (42 U.S.C. 

5 1395x(v)(1)(L)(i)) is amended— 

6 (1) in subclause (II), by striking ‘‘or’’ at the 

7 end; 

8 (2) in subclause (III), by striking ‘‘112 per9 cent,’’ and inserting ‘‘and before July 1, 1996, 112 

10 percent, or’’; and 

11 (3) by inserting after subclause (III) the fol12 lowing new subclause: 

13 ‘‘(IV) July 1, 1996, 100 percent (adjusted by 

14 such amount as the Secretary determines to be nec15 essary to preserve the savings resulting from the en16 actment of section 13564(a)(1) of the Omnibus 

17 Budget Reconciliation Act of 1993),’’. 

18 (b) BASING LIMITS IN SUBSEQUENT YEARS ON ME19 DIAN OF COSTS.— 

20 (1) IN GENERAL.—Section 1861(v)(1)(L)(i) 

21 (U.S.C. 1395x(v)(1)(L)(i)), as amended by sub22 section (a), is amended in the matter following sub23 clause (IV) by striking ‘‘the mean’’ and inserting 

24 ‘‘the median’’. 
802 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (2) EFFECTIVE DATE.—The amendment made 

2 by paragraph (1) shall apply to cost reporting peri3 ods beginning on or after July 1, 1997. 

4 SEC. 4134. IMPOSITION OF COPAYMENT FOR CERTAIN 

5 HOME HEALTH VISITS. 

6 (a) IN GENERAL.— 

7 (1) PART A.—Section 1813(a) (42 U.S.C. 

8 1395e(a)) is amended by adding at the end the fol9 lowing new paragraph: 

10 ‘‘(5) The amount payable for home health services 

11 furnished to an individual under this part shall be reduced 

12 by a copayment amount equal to 10 percent of the average 

13 of all per visit costs for home health services furnished 

14 under this title determined under section 1861(v)(1)(L) 

15 (as determined by the Secretary on a prospective basis for 

16 services furnished during a calendar year), unless such 

17 services were furnished to the individual during the 30- 

18 day period that begins on the date the individual is dis19 charged as an inpatient from a hospital.’’. 

20 (2) PART B.—Section 1833(a)(2) (42 U.S.C. 

21 1395l(a)(2)) is amended— 

22 (A) in subparagraph (A), by striking ‘‘to 

23 home health services,’’ and by striking the 

24 comma after ‘‘opinion)’’; 
803 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (B) in subparagraph (D), by striking 

2 ‘‘and’’ at the end; 

3 (C) in subparagraph (E), by striking the 

4 semicolon at the end and inserting ‘‘; and’’; and 

5 (D) by adding at the end the following new 

6 subparagraph: 

7 ‘‘(F) with respect to home health serv8 ices— 

9 ‘‘(i) the lesser of — 

10 ‘‘(I) the reasonable cost of such 

11 services, as determined under section 

12 1861(v), or 

13 ‘‘(II) the customary charges with 

14 respect to such services, 

15 less the amount a provider may charge as 

16 described in clause (ii) of section 

17 1866(a)(2)(A), 

18 ‘‘(ii) if such services are furnished by 

19 a public provider of services, or by another 

20 provider which demonstrates to the satis21 faction of the Secretary that a significant 

22 portion of its patients are low-income (and 

23 requests that payment be made under this 

24 clause), free of charge or at nominal 

25 charges to the public, the amount deter-
804 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 mined in accordance with section 

2 1814(b)(2), or 

3 ‘‘(iii) if (and for so long as) the condi4 tions described in section 1814(b)(3) are 

5 met, the amounts determined under the re6 imbursement system described in such sec7 tion, 

8 less a copayment amount equal to 10 percent of 

9 the average of all per visit costs for home 

10 health services furnished under this title deter11 mined under section 1861(v)(1)(L) (as deter12 mined by the Secretary on a prospective basis 

13 for services furnished during a calendar year), 

14 unless such services were furnished to the indi15 vidual during the 30-day period that begins on 

16 the date the individual is discharged as an inpa17 tient from a hospital;’’. 

18 (3) PROVIDER CHARGES.—Section 

19 1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i)) is 

20 amended— 

21 (A) by striking ‘‘deduction or coinsurance’’ 

22 and inserting ‘‘deduction, coinsurance, or co23 payment’’; and 

24 (B) by striking ‘‘or (a)(4)’’ and inserting 

25 ‘‘(a)(4), or (a)(5)’’. 
805 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

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

2 subsection (a) shall apply to home health services fur3 nished on or after July 1, 1995. 

4 SEC. 4135. EXPANSION OF CENTERS OF EXCELLENCE. 

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

6 Human Services shall use a competitive process to con7 tract with centers of excellence for cataract surgery, coro8 nary artery by-pass surgery, and such other services as 

9 the Secretary determines to be appropriate. Payment 

10 under title XVIII of the Social Security Act will be made 

11 for services subject to such contracts on the basis of nego12 tiated or all-inclusive rates as follows: 

13 (1) The center shall cover services provided in 

14 an urban area (as defined in section 1886(d)(2)(D) 

15 of the Social Security Act) for years beginning with 

16 fiscal year 1995. 

17 (2) The amount of payment made by the Sec18 retary to the center under title XVIII of the Social 

19 Security Act for services covered under the project 

20 shall be less than the aggregate amount of the pay21 ments that the Secretary would have made to the 

22 center for such services had the project not been in 

23 effect. 

24 (3) The Secretary shall make payments to the 

25 center on such a basis for the following services fur-
806 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 nished to individuals entitled to benefits under such 

2 title: 

3 (A) Facility, professional, and related serv4 ices relating to cataract surgery. 

5 (B) Coronary artery bypass surgery and 

6 related services. 

7 (C) Such other services as the Secretary 

8 and the center may agree to cover under the 

9 agreement. 

10 (b) REBATE OF PORTION OF SAVINGS.—In the case 

11 of any services provided under a demonstration project 

12 conducted under subsection (a), the Secretary shall make 

13 a payment to each individual to whom such services are 

14 furnished (at such time and in such manner as the Sec15 retary may provide) in an amount equal to 10 percent of 

16 the amount by which— 

17 (1) the amount of payment that would have 

18 been made by the Secretary under title XVIII of the 

19 Social Security Act to the center for such services if 

20 the services had not been provided under the project, 

21 exceeds 

22 (2) the amount of payment made by the Sec23 retary under such title to the center for such serv24 ices. 
807 

Title IV, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 PART 4—PART B PREMIUM 

2 SEC. 4141. GENERAL PART B PREMIUM. 

3 Section 1839(e) (42 U.S.C. 1395r(e)), as amended 

4 by section 13571 of OBRA–1993, is amended— 

5 (1) in paragraph (1)(A), by striking ‘‘and prior 

6 to January 1999’’; and 

7 (2) in paragraph (2), by striking ‘‘prior to Jan8 uary 1998’’. 

9 PART 5—REPORT ON MEDICARE SAVINGS FOR 

10 FISCAL YEARS 2000 THROUGH 2003 

11 SEC. 4151. REPORT ON SAVINGS. 

12 (a) IN GENERAL.—The Secretary shall submit to 

13 Congress, by January 30, 1999, a report that contains— 

14 (1) a determination of whether the average, an15 nual rate of growth in spending under the medicare 

16 program (taking into account savings under this 

17 subtitle) in the 4-fiscal-year period beginning with 

18 fiscal year 2000 will exceed the rate of growth de19 scribed in subsection (b); and 

20 (2) if so, recommendations as to how to achieve 

21 the rate of growth specified in subsection (b). 

22 (b) RATE OF GROWTH DESCRIBED.—The rate of 

23 growth described in this subsection is the sum of the fol24 lowing: 

25 (1) CPI.—The average annual percentage 

26 change in the CPI. 
808 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (2) MEDICARE POPULATION.—The average, an2 nual percentage change in the number of medicare3 eligible individuals. 

4 (3) REAL GDP PER CAPITA.—The average, an5 nual percentage change in the real, per capita gross 

6 domestic product of the United States, and 

7 (4) 1 PERCENT.—1 percentage point. 

8 Subtitle C—Medicaid 

9 PART 1—COMPREHENSIVE BENEFIT PACKAGE 

10 SEC. 4201. LIMITING COVERAGE UNDER MEDICAID OF 

11 ITEMS AND SERVICES COVERED UNDER COM12 PREHENSIVE BENEFIT PACKAGE. 

13 (a) REMOVAL OF COMPREHENSIVE BENEFITS PACK14 AGE FROM STATE PLAN.—Title XIX is amended by redes15 ignating section 1931 as section 1932 and by inserting 

16 after section 1930 the following new section: 

17 ‘‘TREATMENT OF COMPREHENSIVE BENEFIT PACKAGE

18 UNDER HEALTH SECURITY ACT

19 ‘‘SEC. 1931. (a) ITEMS AND SERVICES COVERED

20 UNDER COMPREHENSIVE BENEFIT PACKAGE.—If a State 

21 plan for medical assistance under this title provides for 

22 payment in accordance with section 1902(a)(63) for a 

23 year, notwithstanding any other provision of this title, the 

24 State plan under this title is not required to provide med25 ical assistance consisting of payment for items and serv26 ices in the comprehensive benefit package under subtitle 
809 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 B of title I of the Health Security Act for alliance eligible 

2 individuals (as defined in section 1902(5) of such Act). 

3 ‘‘(b) CONSTRUCTION.—(1) Payment under section 

4 1902(a)(63) shall not constitute medical assistance for 

5 purposes of section 1903(a). 

6 ‘‘(2) This section shall not be construed as affecting 

7 the provision of medical assistance under this title for 

8 items and services included in the comprehensive benefit 

9 package for— 

10 ‘‘(A) medicare-eligible individuals, or 

11 ‘‘(B) certain emergency services to certain 

12 aliens under section 1903(v)(2).’’. 

13 (b) SUBSTITUTE REQUIREMENT OF STATE PAY14 MENT.—Section 1902(a) (42 U.S.C. 1396a(a)), as amend15 ed by section 13631(a)(3) of OBRA–1993, is amended— 

16 (1) by striking ‘‘and’’ at the end of paragraph 

17 (61), 

18 (2) by striking the period at the end of para19 graph (62) and inserting ‘‘; and’’, and 

20 (3) by inserting after paragraph (62) the fol21 lowing new paragraph: 

22 ‘‘(63) provide for payment to regional alliances 

23 of the amounts required under subtitle A of title IX 

24 of the Health Security Act.’’. 
810 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (c) NO FEDERAL FINANCIAL PARTICIPATION.—Sec2 tion 1903(i) (42 U.S.C. 1396b(i)), as amended by section 

3 13631(h)(1)(C) of OBRA–1993, is amended— 

4 (1) by striking ‘‘or’’ at the end of paragraph 

5 (14), 

6 (2) by striking the period at the end of para7 graph (15) and inserting ‘‘; or’’, and 

8 (3) by inserting after paragraph (15) the fol9 lowing new paragraph: 

10 ‘‘(16) with respect to items and services covered 

11 under the comprehensive benefit package under sub12 title B of title I of the Health Security Act for alli13 ance eligible individuals (as defined in section 

14 1902(5) of such Act).’’. 

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

16 this section shall apply with respect to items or services 

17 furnished in a State on or after January 1 of the first 

18 year (as defined in section 1902(17)) for the State. 

19 PART 2—EXPANDING ELIGIBILITY FOR NURSING 

20 FACILITY SERVICES; LONG-TERM CARE INTE21 GRATION OPTION 

22 SEC. 4211. SPENDDOWN ELIGIBILITY FOR NURSING FACIL23 ITY RESIDENTS. 

24 (a) IN GENERAL.—Section 1902(a)(10)(A)(i) (42 

25 U.S.C. 1396a(a)(10)(A)(i)) is amended— 
811 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (1) by striking ‘‘or’’ at the end of subclause 

2 (VI); 

3 (2) by striking the semicolon at the end of sub4 clause (VII) and inserting ‘‘, or’’; and 

5 (3) by inserting after subclause (VII) the fol6 lowing new subclause: 

7 ‘‘(VIII) who are individuals who 

8 would meet the income and resource 

9 requirements of the appropriate State 

10 plan described in subclause (I) or the 

11 supplemental security income program 

12 (as the case may be), if incurred ex13 penses for medical care as recognized 

14 under State law were deducted from 

15 income;’’. 

16 (b) LIMITATION TO BENEFITS FOR NURSING FACIL17 ITY SERVICES.—Section 1902(a)(10) of such Act (42 

18 U.S.C. 1396a(a)(10)), as amended by section 13603(c)(1) 

19 of OBRA–1993, is amended in the matter following sub20 paragraph (F)— 

21 (1) by striking ‘‘and (XIII)’’ and inserting 

22 ‘‘(XIII)’’; and 

23 (2) by inserting before the semicolon at the end 

24 the following: ‘‘, and (XIV) the medical assistance 

25 made available to an individual described in sub-
812 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 paragraph (A)(i)(VIII) shall be limited to medical 

2 assistance for nursing facility services, except to the 

3 extent that assistance is provided in accordance with 

4 the election described in section 1932 in the case of 

5 a State making such election’’. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 subsections (a) and (b) shall apply with respect to a State 

8 as of January 1, 1996. 

9 SEC. 4212. INCREASED INCOME AND RESOURCE DIS10 REGARDS FOR NURSING FACILITY RESI11 DENTS. 

12 (a) INCREASED DISREGARDS FOR PERSONAL NEEDS

13 ALLOWANCE; RESOURCES.—Section 1902(a)(10) (42 

14 U.S.C. 1396a(a)(1)) is amended— 

15 (1) by striking ‘‘and’’ at the end of paragraph 

16 (F); and 

17 (2) by adding at the end the following new 

18 paragraph: 

19 ‘‘(G) that, in determining the eligibility of 

20 any individual who is an inpatient in a nursing 

21 facility or intermediate care facility for the 

22 mentally retarded— 

23 ‘‘(i) the first $50 of income for each 

24 month shall be disregarded; and 
813 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(ii) in the case of an unmarried indi2 vidual, the first $12,000 of resources may, 

3 at the option of the State, be dis4 regarded;’’. 

5 (b) CONFORMING SSI PERSONAL NEEDS ALLOW6 ANCE.—For provision increasing SSI personal needs al7 lowance, see section 4301. 

8 (c) FEDERAL REIMBURSEMENT FOR REDUCTIONS IN

9 STATE FUNDS ATTRIBUTABLE TO INCREASED DIS10 REGARD.—Section 1903(a) (42 U.S.C. 1396b(a)) is 

11 amended— 

12 (1) by striking ‘‘plus’’ at the end of paragraph 

13 (6); 

14 (2) by striking the period at the end of para15 graph (7) and inserting ‘‘; plus’’; and 

16 (3) by adding at the end the following new 

17 paragraph: 

18 ‘‘(8) an amount equal to 100 percent of the dif19 ference between the amount of expenditures made by 

20 the State for nursing facility services and services in 

21 an intermediate care facility for the mentally re22 tarded during the quarter and the amount of ex23 penditures that would have been made by the State 

24 for such services during the quarter based on the 
814 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 personal needs allowance in effect in the State as of 

2 September 30, 1993.’’. 

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

4 subsection (a) shall apply with respect to months begin5 ning with January 1996. 

6 SEC. 4213. INFORMING NURSING HOME RESIDENTS ABOUT 

7 AVAILABILITY OF ASSISTANCE FOR HOME 

8 AND COMMUNITY-BASED SERVICES. 

9 (a) IN GENERAL.—Section 1902(a) (42 U.S.C. 

10 1396a(a)), as amended by section 4201(b), is amended— 

11 (1) by striking ‘‘and’’ at the end of paragraph 

12 (62), 

13 (2) by striking the period at the end of para14 graph (63) and inserting ‘‘; and’’, and 

15 (3) by inserting after paragraph (63) the fol16 lowing new paragraph: 

17 ‘‘(64) provide, in the case of an individual who 

18 is a resident (or who is applying to become a resi19 dent) of a nursing facility or intermediate care facil20 ity for the mentally retarded, at the time of applica21 tion for medical assistance and periodically there22 after, the individual (or a designated representative) 

23 with information on the range of home and commu24 nity-based services for which assistance is available 

25 in the State either under the plan under this title, 
815 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 under the program under part 1 of subtitle B of title 

2 II of the Health Security Act, or any other public 

3 program.’’. 

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

5 this section shall apply to quarters beginning on or after 

6 January 1, 1996. 

7 PART 3—OTHER BENEFITS 

8 SEC. 4221. TREATMENT OF ITEMS AND SERVICES NOT COV9 ERED UNDER THE COMPREHENSIVE BENEFIT 

10 PACKAGE. 

11 (a) CONTINUATION OF ELIGIBILITY FOR ASSISTANCE

12 FOR AFDC AND SSI RECIPIENTS.—With respect to an 

13 individual who is described in section 1933(b) of the Social 

14 Security Act (as added by subsection (b)(1)), nothing in 

15 this Act shall be construed as— 

16 (1) changing the eligibility of the individual for 

17 medical assistance under title XIX of the Social Se18 curity Act for items and services not covered under 

19 the comprehensive benefit package, or 

20 (2) subject to the amendments made by this 

21 subtitle, changing the amount, duration, or scope of 

22 medical assistance required (or permitted) to be pro23 vided to the individual under such title. 

24 (b) LIMITATION ON SCOPE OF ASSISTANCE FOR

25 OTHER MEDICAID BENEFICIARIES.— 
816 

Title IV, Subtitle C 

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1 (1) IN GENERAL.—Title XIX, as amended by 

2 sections 4201(a) and 4213, is amended by redesig3 nating section 1933 as section 1934 and by inserting 

4 after section 1932 the following new section: 

5 ‘‘LIMITATION ON SCOPE OF ASSISTANCE FOR MOST NON6 CASH BENEFICIARIES

7 ‘‘SEC 1933. (a) LIMITATION.—Notwithstanding any 

8 other provision of this title, the medical assistance made 

9 available under section 1902(a) to an individual not de10 scribed in subsection (b) shall be limited to medical assist11 ance for— 

12 ‘‘(1) long-term care services (as defined in sub13 section (c)); and 

14 ‘‘(2) medicare cost-sharing (as defined in sec15 tion 1905(p)(3)), in accordance with the require16 ments of section 1902(a)(10)(E). 

17 ‘‘(b) INDIVIDUALS EXEMPT FROM LIMITATION.—The 

18 individuals described in this subsection are the following: 

19 ‘‘(1) AFDC recipients (as defined in section 

20 1902(3) of the Health Security Act). 

21 ‘‘(2) SSI recipients (as defined in section 

22 1902(33) of the Health Security Act). 

23 ‘‘(3) Individuals entitled to benefits under title 

24 XVIII. 

25 ‘‘(4) Children under 18 years of age (or, at the 

26 option of the State, under age 19, 20, or 21). 
817 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(c) LONG-TERM CARE SERVICES DEFINED.—In 

2 subsection (a), the term ‘long-term care services’ means 

3 the following items and services, but only to the extent 

4 they are not included as an item or service under the com5 prehensive benefit package under the Health Security Act: 

6 ‘‘(1) Nursing facility services and intermediate 

7 care facility services for the mentally retarded (in8 cluding items and services that may be included in 

9 such services pursuant to regulations in effect as of 

10 October 26, 1993). 

11 ‘‘(2) Personal care services. 

12 ‘‘(3) Home or community-based services pro13 vided under a waiver granted under subsection (c), 

14 (d), or (e) of section 1915. 

15 ‘‘(4) Home and community care provided to 

16 functionally disabled elderly individuals under sec17 tion 1929. 

18 ‘‘(5) Community supported living arrangements 

19 services provided under section 1930. 

20 ‘‘(6) Case-management services (as described in 

21 section 1915(g)(2)). 

22 ‘‘(7) Home health care services, clinic services, 

23 and rehabilitation services that are furnished to an 

24 individual who has a condition or disability that 
818 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 qualifies the individual to receive any of the services 

2 described in paragraphs (1) through (6).’’. 

3 (2) CONFORMING AMENDMENT.—Section 

4 1902(a)(10) of such Act (42 U.S.C. 1396a(a)(10)), 

5 as amended by section 13603(c)(1) of OBRA–1993 

6 and section 4211(b), is amended in the matter fol7 lowing subparagraph (G) (as inserted by section 

8 4212(a))— 

9 (A) by striking ‘‘and (XIV)’’ and inserting 

10 ‘‘(XIV)’’; and 

11 (B) by inserting before the semicolon at 

12 the end the following: ‘‘, and (XV) the medical 

13 assistance made available to an individual who 

14 is not described in section 1933(b) shall be lim15 ited in accordance with section 1933’’. 

16 (c) CONFORMING AMENDMENTS RELATING TO SEC17 ONDARY PAYER.—(1) Section 1902(a)(25)(A) (42 U.S.C. 

18 1396a(a)(25)(A)), as amended by section 13622(a) of 

19 OBRA–1993, is amended by inserting ‘‘health plans (as 

20 defined in section 1400 of the Health Security Act),’’ after 

21 ‘‘of 1974),’’. 

22 (2) Section 1903(o) (42 U.S.C. 1396b(o)), as so 

23 amended, is amended by inserting ‘‘and a health plan (as 

24 defined in section 1400 of the Health Security Act)’’ after 

25 ‘‘of 1974)’’. 
819 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

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

2 this section shall apply to items and services furnished in 

3 a State on or after January 1 of the first year for which 

4 the State is a participating State under the Health Secu5 rity Act. 

6 SEC. 4222. ESTABLISHMENT OF PROGRAM FOR POVERTY7 LEVEL CHILDREN WITH SPECIAL NEEDS. 

8 (a) ESTABLISHMENT OF PROGRAM.—Title XIX, as 

9 amended by sections 4201, 4213, and 4221(b), is amended 

10 by redesignating section 1934 as section 1935 and by in11 serting after section 1933 the following new section: 

12 ‘‘SERVICES FOR POVERTY-LEVEL CHILDREN WITH

13 SPECIAL NEEDS

14 ‘‘SEC 1934. (a) ESTABLISHMENT OF PROGRAM.— 

15 There is hereby established a program under which the 

16 Secretary shall provide for payment on behalf of each 

17 qualified child (as defined in subsection (b)) during a year 

18 for all medically necessary or appropriate items and serv19 ices described in section 1905(a) (including items and 

20 services described in section 1905(r) but excluding long21 term care services described in section 1933(c)) that are 

22 not included in the comprehensive benefit package under 

23 subtitle B of title I of the Health Security Act. 

24 ‘‘(b) QUALIFIED CHILD DEFINED.— 
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Title IV, Subtitle C 

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1 ‘‘(1) IN GENERAL.—In this section, a ‘qualified 

2 child’ is an eligible individual (as defined in section 

3 1001(c) of the Health Security Act) who— 

4 ‘‘(A) for years prior to 1998, is a resident 

5 of a participating State under the Health Secu6 rity Act; 

7 ‘‘(B) is under the age of 19; and 

8 ‘‘(C) meets the requirements relating to fi9 nancial eligibility described in paragraph (2). 

10 ‘‘(2) REQUIREMENTS RELATING TO FINANCIAL

11 ELIGIBILITY.—An individual meets the requirements 

12 of this paragraph if— 

13 ‘‘(A) the individual is an AFDC recipient 

14 or an SSI recipient (as such terms are defined 

15 in section 1902 of the Health Security Act); 

16 ‘‘(B) the individual is eligible to receive 

17 medical assistance under the State plan under 

18 section 1902(a)(10)(C); or 

19 ‘‘(C) the individual is— 

20 ‘‘(i) under one year of age and has 

21 adjusted family income at or below 133 

22 percent of the income official poverty line 

23 (as defined by the Office of Management 

24 and Budget, and revised annually in ac25 cordance with section 673(2) of the Omni-
821 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 bus Budget Reconciliation Act of 1981, ap2 plicable to a family of the size involved) 

3 (or, in the case of a State that established 

4 an income level greater than 133 percent 

5 for individuals under 1 year of age for pur6 poses of section 1902(l)(2)(A) as of Octo7 ber 1, 1993, an income level which is a 

8 percentage of such level not greater than 

9 185 percent), 

10 ‘‘(ii) the individual has attained 1 

11 year of age but is under 6 years of age and 

12 has adjusted family income at or below 

13 133 percent of such income official poverty 

14 line, or 

15 ‘‘(iii) the individual was born after 

16 September 30, 1983, has attained 6 years 

17 of age, and has adjusted family income at 

18 or below 100 percent of such income offi19 cial poverty line. 

20 ‘‘(3) ENROLLMENT PROCEDURES.— 

21 ‘‘(A) IN GENERAL.—Not later than July 1, 

22 1995, the Secretary shall establish procedures 

23 for the enrollment of qualified children in the 

24 program under this section under which— 
822 

Title IV, Subtitle C 

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1 ‘‘(i) essential community providers 

2 certified by the Secretary under subpart B 

3 of part 2 of subtitle F of title I of the 

4 Health Security Act serve as enrollment 

5 sites for the program; and 

6 ‘‘(ii) any forms used for enrollment 

7 purposes are designed to make the enroll8 ment as simple as practicable. 

9 ‘‘(B) INDIVIDUALS UNDER ALLIANCE

10 PLANS AUTOMATICALLY ENROLLED.—The Sec11 retary shall establish a process under which an 

12 individual who is a qualified child under para13 graph (1) and is enrolled in a health plan (as 

14 defined in section 1400(a) of the Health Secu15 rity Act) shall automatically be deemed to have 

16 met any enrollment requirements established 

17 under paragraph (1). 

18 ‘‘(c) ADDITIONAL RESPONSIBILITIES OF SEC19 RETARY.—Not later than July 1, 1995, the Secretary shall 

20 promulgate such regulations as are necessary to establish 

21 and operate the program under this section, including reg22 ulations with respect to the following: 

23 ‘‘(1) The benefits to be provided and the cir24 cumstances under which such benefits shall be con25 sidered medically necessary. 
823 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(2) Procedures for the periodic redetermina2 tion of an individual’s eligibility for benefits. 

3 ‘‘(3) Qualification criteria for providers partici4 pating in the program. 

5 ‘‘(4) Payment amounts for services provided 

6 under the program, the methodology used to deter7 mine such payment amounts, and the procedures for 

8 making payments to providers. 

9 ‘‘(5) Standards to ensure the quality of services 

10 and the coordination of services under the program 

11 with services under the comprehensive benefit pack12 age, as well as services under parts B and H of the 

13 Individuals With Disabilities Education Act, title V, 

14 and any other program providing health care, reme15 dial, educational, and social services to qualified chil16 dren as the Secretary may identify. 

17 ‘‘(6) Hearing and appeals for individuals ad18 versely affected by any determination by the Sec19 retary under the program. 

20 ‘‘(7) Such other requirements as the Secretary 

21 determines to be necessary for the proper and effi22 cient administration of the program. 

23 ‘‘(d) FEDERAL PAYMENT FOR PROGRAM.— 

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

25 the Secretary shall pay 100 percent of the costs of 
824 

Title IV, Subtitle C 

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1 providing benefits under this program in a year, in2 cluding all administrative expenses. 

3 ‘‘(2) ANNUAL LIMIT ON EXPENDITURES.—The 

4 total amount of Federal expenditures that may be 

5 made under this section in a year may not exceed— 

6 ‘‘(A) for a year prior to 1998, an amount 

7 equal to total expenditures for medical assist8 ance under State plans under this title during 

9 fiscal year 1993 for services described in sub10 section (a) furnished to qualified children that 

11 are attributable to States in which the program 

12 is in operation during the year (adjusted to 

13 take into account the operation of the program 

14 under this section on a calendar year basis)— 

15 ‘‘(i) adjusted to take into account any 

16 increases or decreases in the number of 

17 qualified children under the most recent 

18 decennial census, as adjusted by the most 

19 recent current population survey for the 

20 year in question, and 

21 ‘‘(ii) adjusted by the applicable per22 centage applied to the State non-cash, non23 DSH baseline amount for the year under 

24 section 9003(a) of the Health Security Act; 
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Title IV, Subtitle C 

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1 ‘‘(B) for 1998, the total expenditures for 

2 medical assistance under State plans under this 

3 title during 1993 for services described in sub4 section (a) furnished to qualified children (ad5 justed to take into account the operation of the 

6 program under this section on a calendar year 

7 basis)— 

8 ‘‘(i) adjusted to take into account any 

9 increases or decreases in the number of 

10 qualified children under the most recent 

11 decennial census, as adjusted by the most 

12 recent current population survey for the 

13 year in question, and 

14 ‘‘(ii) adjusted by the update applied to 

15 the State non-cash, non-DSH baseline 

16 amount for the year under section 9003(b) 

17 of the Health Security Act; and 

18 ‘‘(C) for each succeeding year, the limit es19 tablished under this paragraph for the previous 

20 year (adjusted to take into account the oper21 ation of the program under this section on a 

22 calendar year basis), adjusted by the update ap23 plied to the State non-cash baseline amount for 

24 the year under section 9003(b) of the Health 

25 Security Act.’’. 
826 

Title IV, Subtitle C 

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1 (b) REPEAL OF ALTERNATIVE ELIGIBILITY STAND2 ARDS FOR CHILDREN IN PARTICIPATING STATES.—Sec3 tion 1902(r)(2) (42 U.S.C. 1396a(r)(2)) is amended by 

4 adding at the end the following new subparagraph: 

5 ‘‘(C) Subparagraph (A) shall not apply with respect 

6 to the determination of income and resources for children 

7 under age 18 under the State plan of a State (other than 

8 under the State plan of a State that utilized an alternative 

9 methodology pursuant to such subparagraph as of October 

10 1, 1993)— 

11 ‘‘(i) in the case of a State that is a partici12 pating State under the Health Security Act for a 

13 year prior to 1998, for quarters beginning on or 

14 after January 1 of the first year for which the State 

15 is such a participating State; and 

16 ‘‘(ii) in the case of any State not described in 

17 clause (i), for quarters beginning on or after Janu18 ary 1, 1998.’’. 

19 PART 4—DISCONTINUATION OF CERTAIN 

20 PAYMENT POLICIES 

21 SEC. 4231. DISCONTINUATION OF MEDICAID DSH PAY22 MENTS. 

23 (a) ELIMINATION OF SPECIFIC OBLIGATION.—Sec24 tion 1923(a) (42 U.S.C. 1396r–4(a)) is amended by add25 ing at the end the following new paragraph: 
827 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(5) Notwithstanding any other provision of 

2 this title, the requirement of this subsection shall 

3 not apply— 

4 ‘‘(A) with respect to a State for any por5 tion of a fiscal year during which the State is 

6 a participating State under the Health Security 

7 Act; or 

8 ‘‘(B) with respect to any State for any 

9 months beginning on or after January 1, 

10 1998.’’. 

11 (b) ELIMINATION OF STATE PLAN REQUIREMENT.— 

12 Section 1902(a)(13)(A) (42 U.S.C. 1396a(a)(13)(A)) is 

13 amended by inserting after ‘‘special needs’’ the following: 

14 ‘‘(but only with respect to any quarters during which the 

15 State is not a participating State under the Health Secu16 rity Act or with respect to any quarters ending on or be17 fore December 31, 1997)’’. 

18 (c) ELIMINATION OF STATE DSH ALLOTMENTS AND

19 FEDERAL FINANCIAL PARTICIPATION.—Section 1923(f) 

20 (42 U.S.C. 1396r–4(f)) is amended— 

21 (1) in paragraph (2), by inserting ‘‘and para22 graph (5)’’ after ‘‘subparagraph (B)’’, and 

23 (2) by adding at the end the following new 

24 paragraph: 
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Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(5) ELIMINATION OF ALLOTMENTS FOR PAR2 TICIPATING STATES AND SUNSET FOR ALL

3 STATES.— 

4 ‘‘(A) IN GENERAL.—Notwithstanding any 

5 other provision of this section, the State DSH 

6 allotment shall be zero with respect to— 

7 ‘‘(i) any participating State under the 

8 Health Security Act; and 

9 ‘‘(ii) any State for any portion of a 

10 fiscal year that occurs on or after January 

11 1, 1998. 

12 ‘‘(B) NO REDISTRIBUTION OF REDUC13 TIONS.—In the computation of State supple14 mental amounts under paragraph (3), the State 

15 DSH allotments shall be determined under sub16 paragraph (A)(ii) of such paragraph as if this 

17 paragraph did not apply.’’. 

18 SEC. 4232. DISCONTINUATION OF REIMBURSEMENT STAND19 ARDS FOR INPATIENT HOSPITAL SERVICES. 

20 Section 1902(a)(13)(A) (42 U.S.C. 

21 1396a(a)(13)(A)), as amended by section 4231(b), is 

22 amended by inserting ‘‘(in the case of services other than 

23 hospital services in a State that is a participating State 

24 under the Health Security Act)’’ before ‘‘are reasonable 

25 and adequate’’. 
829 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 PART 5—COORDINATION WITH ADMINISTRATIVE 

2 SIMPLIFICATION AND QUALITY MANAGE3 MENT INITIATIVES 

4 SEC. 4241. REQUIREMENTS FOR CHANGES IN BILLING PRO5 CEDURES. 

6 (a) LIMITATION ON FREQUENCY OF SYSTEM

7 CHANGES; ADVANCE NOTIFICATION TO PROVIDERS.— 

8 Section 1902(a) (42 U.S.C. 1396a(a)), as amended by sec9 tions 4201(b) and 4214(a), is amended— 

10 (1) by striking ‘‘and’’ at the end of paragraph 

11 (63), 

12 (2) by striking the period at the end of para13 graph (64) and inserting ‘‘; and’’, and 

14 (3) by inserting after paragraph (64) the fol15 lowing new paragraph: 

16 ‘‘(65) provide that the State— 

17 ‘‘(A) will not implement any change in the 

18 system used for the billing and processing of 

19 claims for payment for items and services fur20 nished under the State plan within 6 months of 

21 implementing any previous change in such sys22 tem; and 

23 ‘‘(B) shall notify individuals and entities 

24 providing medical assistance under the State 

25 plan of any major change in the procedures for 

26 billing for services furnished under the plan at 
830 

Title IV, Subtitle C 

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1 least 120 days before such change is to take ef2 fect.’’. 

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

4 subsection (a) shall apply to a State as of January 1 of 

5 the first year for which the State is a participating State. 

6 PART 6—MEDICAID COMMISSION 

7 SEC. 4251. MEDICAID COMMISSION. 

8 (a) ESTABLISHMENT.—There is established a com9 mission to be known as the ‘‘Medicaid Commission’’ (in 

10 this section referred to as the ‘‘Commission’’). 

11 (b) MEMBERSHIP.—(1) The Commission shall be 

12 composed of 15 members appointed by the Secretary for 

13 the life of the Commission. 

14 (2) Members shall include representatives of the Fed15 eral Government and State Governments. 

16 (3) The Administrator of the Health Care Financing 

17 Administration shall be an ex officio member of the Com18 mission. 

19 (4) Individuals, while serving as members of the 

20 Commission, shall not be entitled to compensation, other 

21 than travel expenses, including per diem in lieu of subsist22 ence, in accordance with sections 5702 and 5703 of title 

23 5, United States Code. 

24 (c) STUDY.—The Commission shall study options 

25 with respect to each of the following in relation to the 
831 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 medicaid program under title XIX of the Social Security 

2 Act: 

3 (1) USE OF BLOCK GRANT.—Whether, and (if 

4 so) how, to convert payments for services not cov5 ered in the comprehensive benefit package (for all 

6 recipients, including AFDC and SSI recipients de7 fined in section 1902) into new financing mecha8 nisms that give the States greater flexibility in tar9 geting and delivering needed services. 

10 (2) INTEGRATION OF ACUTE AND LONG-TERM

11 CARE SERVICES FOR HEALTH PLANS.—Whether, and 

12 (if so) how, to integrate long-term care services and 

13 the home and community-based services program 

14 under part 1 of subtitle B of title II with the serv15 ices covered under the comprehensive benefit pack16 age offered by health plans. 

17 (3) CONSOLIDATING INSTITUTIONAL AND HOME

18 AND COMMUNITY-BASED LONG-TERM CARE.—Wheth19 er, and (if so) how, to offer States an option to com20 bine together expenditures under the home and com21 munity-based services program (under part 1 of sub22 title B of title II) with continuing home and commu23 nity-based services and institutional care under the 

24 medicaid program into a global budget for long-term 
832 

Title IV, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 care services, and how such a combined program 

2 could be implemented. 

3 (d) REPORT AND RECOMMENDATIONS.—The Com4 mission shall submit to the Secretary and the National 

5 Health Board, not later than 1 year after the date of the 

6 enactment of this Act, a report on its study under sub7 section (c). The Commission shall include in such report 

8 such recommendations for changes in the medicaid pro9 gram, and the programs under this Act, as it deems ap10 propriate. 

11 (e) OPERATIONS.—(1) The Commission shall appoint 

12 a chair from among its members. 

13 (2) Upon request of the Chair of the Commission, 

14 the head of any Federal department or agency may detail, 

15 on a reimbursable basis, any of the personnel of that de16 partment or agency to the Commission to assist it in car17 rying out its duties under this section. 

18 (3) The Commission may secure directly from any de19 partment or agency of the United States information nec20 essary to enable it to carry out this section. Upon request 

21 of the Chair of the Commission, the head of that depart22 ment or agency shall furnish that information to the Com23 mission. 

24 (4) Upon the request of the Commission, the Admin25 istrator of General Services shall provide to the Commis-
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Title V 

•HR 3600 IH / •S 1757 IS 

1 sion, on a reimbursable basis, the administrative support 

2 services necessary for the Commission to carry out its re3 sponsibilities under this section. 

4 (f) TERMINATION.—The Commission shall terminate 

5 90 days after the date of submission of its report under 

6 subsection (d). 

7 (g) AUTHORIZATION OF APPROPRIATIONS.—There 

8 are authorized to be appropriated such sums as may be 

9 necessary to carry out this section. 

10 Subtitle D—Increase in SSI 

11 Personal Needs Allowance 

12 SEC. 4301. INCREASE IN SSI PERSONAL NEEDS ALLOW13 ANCE. 

14 (a) IN GENERAL.—Section 1611(e)(1)(B) (42 U.S.C. 

15 1382(e)(1)(B)) is amended— 

16 (1) in clauses (i) and (ii)(I), by striking ‘‘$360’’ 

17 and inserting ‘‘$600’’; and 

18 (2) in clause (iii), by striking ‘‘$720’’ and in19 serting ‘‘$1,200’’. 

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

21 subsection (a) shall apply with respect to months begin22 ning with January 1996. 

23 TITLE V—QUALITY AND 

24 CONSUMER PROTECTION 

TABLE OF CONTENTS OF TITLE
834 

Title V 

•HR 3600 IH / •S 1757 IS 

Page 

Subtitle A—Quality Management and Improvement 

Sec. 5001. National Quality Management Program ............................... 835 

Sec. 5002. National Quality Management Council ................................. 836 

Sec. 5003. National measures of quality performance ............................ 838 

Sec. 5004. Consumer surveys .................................................................. 842 

Sec. 5005. Evaluation and reporting of quality performance ................. 843 

Sec. 5006. Development and dissemination of practice guidelines ......... 846 

Sec. 5007. Research on health care quality ............................................ 849 

Sec. 5008. Regional professional foundations ......................................... 851 

Sec. 5009. National Quality Consortium ................................................ 853 

Sec. 5010. Eliminating CLIA requirement for certificate of waiver for 

simple laboratory examinations and procedures ........... 855 

Sec. 5011. Uniform standards for health care institutions .................... 856 

Sec. 5012. Role of alliances in quality assurance ................................... 857 

Sec. 5013. Role of health plans in quality management ......................... 858 

Subtitle B—Information Systems, Privacy, and Administrative 

Simplification 

PART 1—HEALTH INFORMATION SYSTEMS

Sec. 5101. Establishment of health information system ......................... 859 

Sec. 5102. Additional requirements for health information system ....... 863 

Sec. 5103. Electronic data network ........................................................ 865 

Sec. 5104. Unique identifier numbers ..................................................... 867 

Sec. 5105. Health security cards ............................................................ 868 

Sec. 5106. Technical assistance in the establishment of health information systems ................................................................... 870 

PART 2—PRIVACY OF INFORMATION

Sec. 5120. Health information system privacy standards ...................... 871 

Sec. 5121. Other duties with respect to privacy ..................................... 875 

Sec. 5122. Comprehensive Health Information Privacy Protection Act 876 

Sec. 5123. Definitions ............................................................................. 876 

PART 3—INTERIM REQUIREMENTS FOR ADMINISTRATIVE SIMPLIFICATION

Sec. 5130. Standard benefit forms ......................................................... 878 

PART 4—GENERAL PROVISIONS

Sec. 5140. National Privacy and Health Data Advisory Council ........... 883 

Sec. 5141. Civil money penalties ............................................................. 885 

Sec. 5142. Relationship to other laws ..................................................... 886 

Subtitle C—Remedies and Enforcement 

PART 1—REVIEW OF BENEFIT DETERMINATIONS FOR ENROLLED

INDIVIDUALS

SUBPART A—GENERAL RULES

Sec. 5201. Health plan claims procedure ................................................ 887 

Sec. 5202. Review in regional alliance complaint review offices of grievances based on acts or practices by health plans ......... 894 
835 

Title V 

•HR 3600 IH / •S 1757 IS 

Sec. 5203. Initial proceedings in complaint review offices ...................... 897 

Sec. 5204. Hearings before hearing officers in complaint review offices 899 

Sec. 5205. Review by Federal Health Plan Review Board ..................... 905 

Sec. 5206. Rules governing benefit claims determinations ..................... 909 

Sec. 5207. Civil money penalties ............................................................. 909 

SUBPART B—EARLY RESOLUTION PROGRAMS

Sec. 5211. Establishment of early resolution programs in complaint review offices .................................................................... 911 

Sec. 5212. Initiation of participation in mediation proceedings ............. 913 

Sec. 5213. Mediation proceedings ........................................................... 915 

Sec. 5214. Legal effect of participation in mediation proceedings ......... 918 

Sec. 5215. Enforcement of settlement agreements ................................. 919 

PART 2—ADDITIONAL REMEDIES AND ENFORCEMENT PROVISIONS

Sec. 5231. Judicial review of Federal action on State systems .............. 920 

Sec. 5232. Administrative and judicial review relating to cost containment .............................................................................. 921 

Sec. 5233. Civil enforcement ................................................................... 922 

Sec. 5234. Priority of certain bankruptcy claims ................................... 922 

Sec. 5235. Private right to enforce State responsibilities ....................... 923 

Sec. 5236. Private right to enforce Federal responsibilities in operating 

a system in a State ....................................................... 923 

Sec. 5237. Private right to enforce responsibilities of alliances ............. 925 

Sec. 5238. Discrimination claims ............................................................ 926 

Sec. 5239. Nondiscrimination in federally assisted programs ................ 929 

Sec. 5240. Civil action by essential community provider ........................ 929 

Sec. 5241. Facial constitutional challenges ............................................. 930 

Sec. 5242. Treatment of plans as parties in civil actions ....................... 932 

Sec. 5243. General nonpreemption of existing rights and remedies ....... 932 

Subtitle D—Medical Malpractice 

PART 1—LIABILITY REFORM

Sec. 5301. Federal tort reform ............................................................... 933 

Sec. 5302. Plan-based alternative dispute resolution mechanisms ......... 937 

Sec. 5303. Requirement for certificate of merit ..................................... 939 

Sec. 5304. Limitation on amount of attorney’s contingency fees ........... 942 

Sec. 5305. Reduction of awards for recovery from collateral sources .... 943 

Sec. 5306. Periodic payment of awards .................................................. 944 

PART 2—OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE

LIABILITY

Sec. 5311. Enterprise liability demonstration project ............................. 944 

Sec. 5312. Pilot program applying practice guidelines to medical malpractice liability actions ................................................ 946 

Subtitle E—Fraud and Abuse 

PART 1—ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE

CONTROL PROGRAM

Sec. 5401. All-Payer Health Care Fraud and Abuse Control Program 948 
836 

Title V, Subtitle A 

•HR 3600 IH / •S 1757 IS 

Sec. 5402. Establishment of All-Payer Health Care Fraud and Abuse 

Control Account ............................................................ 951 

Sec. 5403. Use of funds by Inspector General ........................................ 954 

PART 2—APPLICATION OF FRAUD AND ABUSE AUTHORITIES UNDER THE

SOCIAL SECURITY ACT TO ALL PAYERS

Sec. 5411. Exclusion from participation ................................................. 956 

Sec. 5412. Civil monetary penalties ........................................................ 963 

Sec. 5413. Limitations on physician self-referral ................................... 968 

Sec. 5414. Construction of Social Security Act references ..................... 969 

PART 3—AMENDMENTS TO ANTI-FRAUD AND ABUSE PROVISIONS UNDER

THE SOCIAL SECURITY ACT

Sec. 5421. Reference to amendments ..................................................... 969 

PART 4—AMENDMENTS TO CRIMINAL LAW

Sec. 5431. Health care fraud .................................................................. 970 

Sec. 5432. Forfeitures for violations of fraud statutes ........................... 971 

Sec. 5433. False Statements ................................................................... 972 

Sec. 5434. Bribery and graft .................................................................. 973 

Sec. 5435. Injunctive relief relating to health care offenses ................... 975 

Sec. 5436. Grand jury disclosure ............................................................ 975 

Sec. 5437. Theft or embezzlement .......................................................... 976 

Sec. 5438. Misuse of health security card or unique identifier .............. 977 

PART 5—AMENDMENTS TO CIVIL FALSE CLAIMS ACT

Sec. 5441. Amendments to Civil False Claims Act ................................ 978 

Subtitle F—McCarran-Ferguson Reform 

Sec. 5501. Repeal of exemption for health insurance ............................. 979 

1 Subtitle A—Quality Management 

2 and Improvement 

3 SEC. 5001. NATIONAL QUALITY MANAGEMENT PROGRAM. 

4 Not later than 1 year after the date of the enactment 

5 of this Act, the National Health Board shall establish and 

6 oversee a performance-based program of quality manage7 ment and improvement designed to enhance the quality, 

8 appropriateness, and effectiveness of health care services 

9 and access to such services. The program shall be known 

10 as the National Quality Management Program and shall 
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1 be administered by the National Quality Management 

2 Council established under section 5002. 

3 SEC. 5002. NATIONAL QUALITY MANAGEMENT COUNCIL. 

4 (a) ESTABLISHMENT.—There is established a council 

5 to be known as the National Quality Management Council. 

6 (b) DUTIES.—The Council shall— 

7 (1) administer the National Quality Manage8 ment Program; 

9 (2) perform any other duty specified as a duty 

10 of the Council in this subtitle; and 

11 (3) advise the National Health Board with re12 spect its duties under this subtitle. 

13 (c) NUMBER AND APPOINTMENT.—The Council shall 

14 be composed of 15 members appointed by the President. 

15 The Council shall consist of members who are broadly rep16 resentative of the population of the United States and 

17 shall include— 

18 (1) individuals representing the interests of gov19 ernmental and corporate purchasers of health care; 

20 (2) individuals representing the interests of 

21 health plans; 

22 (3) individuals representing the interests of 

23 States; 
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1 (4) individuals representing the interests of 

2 health care providers and academic health centers 

3 (as defined in section 3101(c)); and 

4 (5) individuals distinguished in the fields of 

5 public health, health care quality, and related fields 

6 of health services research. 

7 (d) TERMS.— 

8 (1) IN GENERAL.—Except as provided in para9 graph (2), members of the Council shall serve for a 

10 term of 3 years. 

11 (2) STAGGERED ROTATION.—Of the members 

12 first appointed to the Council under subsection (c), 

13 the President shall appoint 5 members to serve for 

14 a term of 3 years, 5 members to serve for a term 

15 of 2 years, and 5 members to serve for a term of 

16 1 year. 

17 (3) SERVICE BEYOND TERM.—A member of the 

18 Council may continue to serve after the expiration of 

19 the term of the member until a successor is ap20 pointed. 

21 (e) VACANCIES.—If a member of the Council does not 

22 serve the full term applicable under subsection (d), the in23 dividual appointed to fill the resulting vacancy shall be ap24 pointed for the remainder of the term of the predecessor 

25 of the individual. 
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1 (f) CHAIR.—The President shall designate an indi2 vidual to serve as the chair of the Council. 

3 (g) MEETINGS.—The Council shall meet not less than 

4 once during each 4-month period and shall otherwise meet 

5 at the call of the President or the chair. 

6 (h) COMPENSATION AND REIMBURSEMENT OF EX7 PENSES.—Members of the Council shall receive compensa8 tion for each day (including travel time) engaged in car9 rying out the duties of the Council. Such compensation 

10 may not be in an amount in excess of the maximum rate 

11 of basic pay payable for level IV of the Executive Schedule 

12 under section 5315 of title 5, United States Code. 

13 (i) STAFF.—The National Health Board shall provide 

14 to the Council such staff, information, and other assist15 ance as may be necessary to carry out the duties of the 

16 Council. 

17 (j) HEALTH CARE PROVIDER.—For purposes of this 

18 subtitle, the term ‘‘health care provider’’ means an indi19 vidual who, or entity that, provides an item or service to 

20 an individual that is covered under the health plan (as 

21 defined in section 1400) in which the individual is en22 rolled. 
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1 SEC. 5003. NATIONAL MEASURES OF QUALITY PERFORM2 ANCE. 

3 (a) IN GENERAL.—The National Quality Manage4 ment Council shall develop a set of national measures of 

5 quality performance, which shall be used to assess the pro6 vision of health care services and access to such services. 

7 (b) SUBJECT OF MEASURES.—National measures of 

8 quality performance shall be selected in a manner that 

9 provides information on the following subjects: 

10 (1) Access to health care services by consumers. 

11 (2) Appropriateness of health care services pro12 vided to consumers. 

13 (3) Outcomes of health care services and proce14 dures. 

15 (4) Health promotion. 

16 (5) Prevention of diseases, disorders, and other 

17 health conditions. 

18 (6) Consumer satisfaction with care. 

19 (c) SELECTION OF MEASURES.— 

20 (1) CONSULTATION.—In developing and select21 ing the national measures of quality performance, 

22 the National Quality Management Council shall con23 sult with appropriate interested parties, including— 

24 (A) States; 

25 (B) health plans; 
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1 (C) employers and individuals purchasing 

2 health care through regional and corporate alli3 ances; 

4 (D) health care providers; 

5 (E) the National Quality Consortium es6 tablished under section 5009; 

7 (F) individuals distinguished in the fields 

8 of law, medicine, economics, public health, and 

9 health services research; 

10 (G) the Administrator for Health Care 

11 Policy and Research; 

12 (H) the Director of the National Institutes 

13 of Health; and 

14 (I) the Administrator of the Health Care 

15 Financing Administration. 

16 (2) CRITERIA.—The following criteria shall be 

17 used in developing and selecting national measures 

18 of quality performance: 

19 (A) SIGNIFICANCE.—When a measure re20 lates to a specific disease, disorder, or other 

21 health condition, the disease, disorder, or condi22 tion shall be of significance in terms of preva23 lence, morbidity, mortality, or the costs associ24 ated with the prevention, diagnosis, treatment, 
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1 or clinical management of the disease, disorder, 

2 or condition. 

3 (B) RANGE OF SERVICES.—The set of 

4 measures, taken as a whole, shall be representa5 tive of the range of services provided to con6 sumers of health care. 

7 (C) RELIABILITY AND VALIDITY.—The 

8 measures shall be reliable and valid. 

9 (D) UNDUE BURDEN.—The data needed to 

10 calculate the measures shall be obtained with11 out undue burden on the entity or individual 

12 providing the data. 

13 (E) VARIATION.—Performance with re14 spect to a measure shall be expected to vary 

15 widely among the individuals and entities whose 

16 performance is assessed using the measure. 

17 (F) LINKAGE TO HEALTH OUTCOME.— 

18 When a measure is a rate of a process of care, 

19 the process shall be linked to a health outcome 

20 based upon the best available scientific evi21 dence. 

22 (G) PROVIDER CONTROL AND RISK AD23 JUSTMENT.—When a measure is an outcome of 

24 the provision of care, the outcome shall be with25 in the control of the provider and one with re-
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1 spect to which an adequate risk adjustment can 

2 be made. 

3 (H) PUBLIC HEALTH.—The measures may 

4 incorporate standards identified by the Sec5 retary of Health and Human Services for meet6 ing public health objectives. 

7 (d) UPDATING.—The National Quality Management 

8 Council shall review and update the set of national meas9 ures of quality performance annually to reflect changing 

10 goals for quality improvement. The Council shall establish 

11 and maintain a priority list of performance measures that 

12 within a 5-year period it intends to consider for inclusion 

13 within the set through the updating process. 

14 SEC. 5004. CONSUMER SURVEYS. 

15 (a) IN GENERAL.—The National Quality Manage16 ment Council shall conduct periodic surveys of health care 

17 consumers to gather information concerning access to 

18 care, use of health services, health outcomes, and patient 

19 satisfaction. The surveys shall monitor consumer reaction 

20 to the implementation of this Act and be designed to as21 sess the impact of this Act on the general population of 

22 the United States and potentially vulnerable populations. 

23 (b) SURVEY ADMINISTRATION.—The National Qual24 ity Management Council shall develop and approve a 

25 standard design for the surveys, which shall be adminis-
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1 tered by the Administrator for Health Care Policy and Re2 search on a plan-by-plan and State-by-State basis. A State 

3 may add survey questions on quality measures of local in4 terest to surveys conducted in the State. 

5 (c) SAMPLING STRATEGIES.—The National Quality 

6 Management Council shall develop sampling strategies 

7 that ensure that survey samples adequately measure popu8 lations that are considered to be at risk of receiving inad9 equate health care and may be difficult to reach through 

10 consumer-sampling methods, including individuals who— 

11 (1) fail to enroll in a health plan; 

12 (2) resign from a plan; or 

13 (3) are members of a vulnerable population. 

14 SEC. 5005. EVALUATION AND REPORTING OF QUALITY PER15 FORMANCE. 

16 (a) NATIONAL GOALS.—In subject matter areas with 

17 respect to which the National Quality Management Coun18 cil determines that sufficient information and consensus 

19 exist, the Council shall recommend to the Board that the 

20 Board establish goals for performance by health plans and 

21 health care providers on a subset of the set of national 

22 measures of quality performance. 

23 (b) IMPACT OF REFORM.—The National Quality 

24 Management Council shall evaluate the impact of the im25 plementation of this Act on the quality of health care serv-
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1 ices in the United States and the access of consumers to 

2 such services. 

3 (c) PERFORMANCE REPORTS.— 

4 (1) ALLIANCE AND HEALTH PLAN REPORTS.— 

5 Each health alliance annually shall publish and 

6 make available to the public a performance report 

7 outlining in a standard format the performance of 

8 each health plan offered in the alliance on the set of 

9 national measures of quality performance. The re10 port shall include the results of a smaller number of 

11 such measures for health care providers who are 

12 members of provider networks of such plans (as de13 fined in section 1402(f)), if the available information 

14 is statistically meaningful. The report also shall in15 clude the results of consumer surveys described in 

16 section 5004 that were conducted in the alliance 

17 area during the year that is the subject of the re18 port. 

19 (2) NATIONAL QUALITY REPORTS.—The Na20 tional Quality Management Council annually shall 

21 provide to the Congress and to each health alliance 

22 a report that— 

23 (A) outlines in a standard format the per24 formance of each regional alliance, corporate al25 liance, and health plan; 
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1 (B) discusses State-level and national 

2 trends relating to health care quality; and 

3 (C) presents data for each health alliance 

4 from consumer surveys described in section 

5 5004 that were conducted during the year that 

6 is the subject of the report. 

7 (d) PUBLIC AVAILABILITY OF INFORMATION IN NA8 TIONAL PRACTITIONER DATA BANK ON DEFENDANTS, 

9 AWARDS, AND SETTLEMENTS.— 

10 (1) IN GENERAL.—Section 427(a) of the Health 

11 Care Quality Improvement Act (42 U.S.C. 

12 11137(a)) is amended by adding at the end the fol13 lowing new sentence: ‘‘Not later than January 1, 

14 1996, the Secretary shall promulgate regulations 

15 under which individuals seeking to enroll in health 

16 plans under the Health Security Act may obtain in17 formation reported under this part with respect to 

18 physicians and other licensed health practitioners 

19 participating in such plans for whom information 

20 has been reported under this part on repeated occa21 sions.’’. 

22 (2) ACCESS TO DATA BANK FOR POINT-OF23 SERVICE CONTRACTORS UNDER MEDICARE.—Section 

24 427(a) of such Act (42 U.S.C. 11137(a)) is amend25 ed— 
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1 (A) by inserting ‘‘to sponsors of point-of2 service networks under section 1890 of the So3 cial Security Act,’’ after ‘‘State licensing 

4 boards,’’, and 

5 (B) in the heading, by inserting ‘‘RE6 LATED’’ after ‘‘CARE’’. 

7 SEC. 5006. DEVELOPMENT AND DISSEMINATION OF PRAC8 TICE GUIDELINES. 

9 (a) DEVELOPMENT OF GUIDELINES.— 

10 (1) IN GENERAL.—The National Quality Man11 agement Council shall direct the Administrator for 

12 Health Care Policy and Research to develop and pe13 riodically review and update clinically relevant guide14 lines that may be used by health care providers to 

15 assist in determining how diseases, disorders, and 

16 other health conditions can most effectively and ap17 propriately be prevented, diagnosed, treated, and 

18 managed clinically. 

19 (2) CERTAIN REQUIREMENTS.—Guidelines 

20 under paragraph (1) shall— 

21 (A) be based on the best available research 

22 and professional judgment regarding the effec23 tiveness and appropriateness of health care 

24 services and procedures; 
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1 (B) be presented in formats appropriate 

2 for use by health care providers, medical edu3 cators, medical review organizations, and con4 sumers of health care; 

5 (C) include treatment-specific or condition6 specific practice guidelines for clinical treat7 ments and conditions in forms appropriate for 

8 use in clinical practice, for use in educational 

9 programs, and for use in reviewing quality and 

10 appropriateness of medical care; 

11 (D) include information on risks and bene12 fits of alternative strategies for prevention, di13 agnosis, treatment, and management of a given 

14 disease, disorder, or other health condition; 

15 (E) include information on the costs of al16 ternative strategies for the prevention, diag17 nosis, treatment, and management of a given 

18 disease, disorder, or other health condition, 

19 where cost information is available and reliable; 

20 and 

21 (F) be developed in accordance with prior22 ities that shall be established by the National 

23 Quality Management Council based on the re24 search priorities that are established under sec25 tion 5007(b) and the 5-year priority list of per-
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1 formance measures described in section 

2 5003(d). 

3 (3) HEALTH SERVICE UTILIZATION PROTO4 COLS.—The National Quality Management Council 

5 shall establish standards and procedures for evalu6 ating the clinical appropriateness of protocols used 

7 to manage health service utilization. 

8 (4) USE IN MEDICAL MALPRACTICE LIABILITY

9 PILOT PROGRAM.—Guidelines developed under this 

10 subsection may be used by the Secretary of Health 

11 and Human Services in the pilot program applying 

12 practice guidelines to medical malpractice liability 

13 under section 5312. 

14 (b) EVALUATION AND CERTIFICATION OF OTHER

15 GUIDELINES.— 

16 (1) METHODOLOGY.—The National Quality 

17 Management Council shall direct the Administrator 

18 for Health Care Policy and Research to develop and 

19 publish standards relating to methodologies for de20 veloping the types of guidelines described in sub21 section (a)(1). 

22 (2) EVALUATION AND CERTIFICATION.—The 

23 National Quality Management Council shall direct 

24 the Administrator for Health Care Policy and Re25 search to establish a procedure by which individuals 
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1 and entities may submit guidelines of the type de2 scribed in subsection (a)(1) to the Council for eval3 uation and certification by the Council using the 

4 standards developed under paragraph (1). 

5 (3) USE IN MEDICAL MALPRACTICE LIABILITY

6 PILOT PROGRAM.—Guidelines certified under para7 graph (2) may be used by the Secretary of Health 

8 and Human Services in the pilot program applying 

9 practice guidelines to medical malpractice liability 

10 under section 5312. 

11 (c) GUIDELINE CLEARINGHOUSE.—The National 

12 Quality Management Council shall direct the Adminis13 trator for Health Care Policy and Research to establish 

14 and oversee a clearinghouse and dissemination program 

15 for practice guidelines that are developed or certified 

16 under this section. 

17 (d) DISSEMINATION OF INFORMATION ON INEFFEC18 TIVE TREATMENTS.—The National Quality Management 

19 Council shall collect and disseminate information docu20 menting clinically ineffective treatments and procedures. 

21 SEC. 5007. RESEARCH ON HEALTH CARE QUALITY. 

22 (a) RESEARCH SUPPORT.—The National Quality 

23 Management Council shall direct the Administrator for 

24 Health Care Policy and Research to support research di25 rectly related to the 5-year priority list of performance 
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1 measures described in section 5003(d), including research 

2 with respect to— 

3 (1) outcomes of health care services and proce4 dures; 

5 (2) effective and efficient dissemination of in6 formation, standards, and guidelines; 

7 (3) methods of measuring quality and shared 

8 decisionmaking; and 

9 (4) design and organization of quality of care 

10 components of automated health information sys11 tems. 

12 (b) RESEARCH PRIORITIES.—The National Quality 

13 Management Council shall establish priorities for research 

14 with respect to the quality, appropriateness, and effective15 ness of health care and make recommendations concerning 

16 research projects. In establishing the priorities, the Na17 tional Quality Management Council shall emphasize re18 search involving diseases, disorders, and health conditions 

19 as to which— 

20 (1) there is the highest level of uncertainty con21 cerning treatment; 

22 (2) there is the widest variation in practice pat23 terns; 
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1 (3) the costs associated with prevention, diag2 nosis, treatment, or clinical management are signifi3 cant; and 

4 (4) the rate of incidence or prevalence is high 

5 for the population as a whole or for particular sub6 populations. 

7 SEC. 5008. REGIONAL PROFESSIONAL FOUNDATIONS. 

8 (a) ESTABLISHMENT.—The National Health Board 

9 shall establish and oversee regional professional founda10 tions to perform the duties specified in subsection (c). 

11 (b) STRUCTURE AND MEMBERSHIP.— 

12 (1) IN GENERAL.—The National Quality Con13 sortium established under section 5009 shall oversee 

14 the establishment of regional professional founda15 tions, the membership requirements for each founda16 tion, and any other requirement for the internal op17 eration of each foundation. 

18 (2) ENTITIES ELIGIBLE FOR MEMBERSHIP.— 

19 Each regional professional foundation shall include 

20 at least one academic health center (as defined in 

21 section 3101(c)). The following entities also shall be 

22 eligible to serve as members of the regional profes23 sional foundation for the region in which the entity 

24 is located: 
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1 (A) Schools of public health (as defined in 

2 section 799 of the Public Health Service Act). 

3 (B) Other schools and programs defined in 

4 such section. 

5 (C) Health plans. 

6 (D) Regional alliances. 

7 (E) Corporate alliances. 

8 (F) Health care providers. 

9 (c) DUTIES.—A regional professional foundation 

10 shall carry out the following duties for the region in which 

11 the foundation is located (such region to be demarcated 

12 by the National Health Board with the advice of the Na13 tional Quality Consortium established under section 

14 5009): 

15 (1) Developing programs in lifetime learning for 

16 health professionals (as defined in section 

17 1112(c)(1)) to ensure the delivery of quality health 

18 care. 

19 (2) Fostering collaboration among health plans 

20 and health care providers to improve the quality of 

21 primary and specialized health care. 

22 (3) Disseminating information about successful 

23 quality improvement programs, practice guidelines, 

24 and research findings. 
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1 (4) Disseminating information on innovative 

2 uses of health professionals. 

3 (5) Developing innovative patient education sys4 tems that enhance patient involvement in decisions 

5 relating their health care. 

6 (6) Applying for and conducting research de7 scribed in section 5007. 

8 (d) PROGRAMS IN LIFETIME LEARNING.—The pro9 grams described in subsection (c)(1) shall ensure that 

10 health professionals remain abreast of new knowledge, ac11 quire new skills, and adopt new roles as technology and 

12 societal demands change. 

13 SEC. 5009. NATIONAL QUALITY CONSORTIUM. 

14 (a) ESTABLISHMENT.—The National Health Board 

15 shall establish a consortium to be known as the National 

16 Quality Consortium. 

17 (b) DUTIES.—The Consortium shall— 

18 (1) establish programs for continuing education 

19 for health professionals; 

20 (2) advise the National Quality Management 

21 Council and the Administrator for Health Care Pol22 icy and Research on research priorities; 

23 (3) oversee the development of the regional pro24 fessional foundations established under section 5008; 
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1 (4) advise the National Quality Management 

2 Council with respect to the funding of proposals to 

3 establish such foundations; 

4 (5) consult with the National Quality Manage5 ment Council regarding the selection of national 

6 measures of quality performance under section 

7 5003(c); and 

8 (6) advise the National Health Board and the 

9 National Quality Management Council with respect 

10 to any other duty of the Board or the Council under 

11 this subtitle. 

12 (c) MEMBERSHIP.—The Consortium shall be com13 posed of 11 members appointed by the National Health 

14 Board. The members of the Consortium shall include— 

15 (1) 5 individuals representing the interests of 

16 academic health centers; and 

17 (2) 6 other individuals representing the inter18 ests of one of the following persons: 

19 (A) Schools of public health. 

20 (B) Other schools and programs defined in 

21 section 799 of the Public Health Service Act 

22 (including medical schools, nursing schools, and 

23 allied health professional schools). 

24 (d) TERMS.— 
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), members of the Consortium shall serve 

3 for a term of 3 years. 

4 (2) STAGGERED ROTATION.—Of the members 

5 first appointed to the Consortium under subsection 

6 (c), the National Health Board shall appoint 4 mem7 bers to serve for a term of 3 years, 3 members to 

8 serve for a term of 2 years, and 4 members to serve 

9 for a term of 1 year. 

10 (e) CHAIR.—The National Health Board shall des11 ignate an individual to serve as the chair of the Consor12 tium. 

13 SEC. 5010. ELIMINATING CLIA REQUIREMENT FOR CERTIFI14 CATE OF WAIVER FOR SIMPLE LABORATORY 

15 EXAMINATIONS AND PROCEDURES. 

16 (a) IN GENERAL.—Section 353 of the Public Health 

17 Service Act (42 U.S.C. 263a) is amended— 

18 (1) in subsection (b), by inserting before the pe19 riod at the end the following: ‘‘or unless the labora20 tory is exempt from the certificate requirement 

21 under subsection (d)(2)’’; 

22 (2) by amending paragraph (2) of subsection 

23 (d) to read as follows: 

24 ‘‘(2) EXEMPTION FROM CERTIFICATE REQUIRE25 MENT FOR LABORATORIES PERFORMING ONLY SIM-
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1 PLE EXAMINATIONS AND PROCEDURES.—A labora2 tory which performs only laboratory examinations 

3 and procedures described in paragraph (3) is not re4 quired to have in effect a certificate under this sec5 tion.’’; 

6 (3) by striking paragraph (4) of subsection (d); 

7 and 

8 (4) in subsection (m)(1), by striking ‘‘, except 

9 that the Secretary’’ and all that follows and insert10 ing a period. 

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

12 this section shall take effect on the first day of the first 

13 month beginning after the date of the enactment of this 

14 Act. 

15 SEC. 5011. UNIFORM STANDARDS FOR HEALTH CARE INSTI16 TUTIONS. 

17 (a) DEVELOPMENT OF STANDARDS.—Not later than 

18 3 years after the date of the enactment of this Act, the 

19 National Health Board shall develop demonstration stand20 ards for the licensing of health care institutions that ad21 dress essential performance requirements related to pa22 tient care. The standards shall be developed in a manner 

23 that permits them to be applied uniformly to all such insti24 tutions, except in the areas of fire safety, sanitation, and 
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1 patient rights, and so as not to undermine ongoing nurs2 ing home reforms. 

3 (b) DEMONSTRATION PROJECTS.—By January 1, 

4 1996, the National Quality Management Council shall 

5 complete demonstration projects for the standards devel6 oped under subsection (a) and shall revise the standards 

7 according to the findings of such projects. The demonstra8 tion projects shall evaluate the impact of these standards 

9 in ensuring quality of care, reducing cost, and reducing 

10 burdens on health care providers. 

11 (c) PREEMPTIVE EFFECT OF FULLY IMPLEMENTED

12 STANDARD.—After a standard developed under this sec13 tion is tested, evaluated, revised, and fully implemented, 

14 it shall replace existing standards, except in cases in which 

15 statutory changes are necessary to implement such stand16 ards. In such cases, the National Quality Management 

17 Council shall recommend to the President and the Con18 gress revisions in Federal statutes to conform the statutes 

19 to the standards. 

20 (d) CONSOLIDATED AUDIT AND INSPECTION.—The 

21 National Quality Management Council shall undertake re22 search efforts designed to develop a system for carrying 

23 out through grant or contract a single, consolidated an24 nual audit and inspection of each health care institution 

25 and health care provider for the combined purposes of 
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1 Federal, State, local, and private licensure, accreditation, 

2 and certification. 

3 SEC. 5012. ROLE OF ALLIANCES IN QUALITY ASSURANCE. 

4 Each regional alliance and each corporate alliance 

5 shall— 

6 (1) disseminate to consumers information re7 lated to quality and access to aid in their selection 

8 of plans in accordance with section 1325; 

9 (2) disseminate information on the quality of 

10 health plans and health care providers contained in 

11 reports of the National Quality Management Council 

12 section 5005(c)(2); 

13 (3) ensure through negotiations with health 

14 plans that performance and quality standards are 

15 continually improved; and 

16 (4) conduct educational programs in coopera17 tion with regional professional foundations to assist 

18 consumers in using quality and other information in 

19 choosing health plans. 

20 SEC. 5013. ROLE OF HEALTH PLANS IN QUALITY MANAGE21 MENT. 

22 Each health plan shall— 

23 (1) measure and disclose performance on qual24 ity measures used by— 
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1 (A) participating States in which the plan 

2 does business; 

3 (B) regional alliances and corporate alli4 ances that offer the plan; and 

5 (C) the National Quality Management 

6 Council; 

7 (2) furnish information required under subtitle 

8 B of this title and provide such other reports and in9 formation on the quality of care delivered by health 

10 care providers who are members of a provider net11 work of the plan (as defined in section 1402(f)) as 

12 may be required under this Act; and 

13 (3) maintain quality management systems 

14 that— 

15 (A) use the national measures of quality 

16 performance developed by the National Quality 

17 Management Council under section 5003; and 

18 (B) measure the quality of health care fur19 nished to enrollees under the plan by all health 

20 care providers who are members of a provider 

21 network of the plan. 
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1 Subtitle B—Information Systems, 

2 Privacy, and Administrative 

3 Simplification 

4 PART 1—HEALTH INFORMATION SYSTEMS 

5 SEC. 5101. ESTABLISHMENT OF HEALTH INFORMATION SYS6 TEM. 

7 (a) IN GENERAL.—Not later than 2 years after the 

8 date of the enactment of this Act, the National Health 

9 Board shall develop and implement a health information 

10 system by which the Board shall collect, report, and regu11 late the collection and dissemination of the health care in12 formation described in subsection (e) pursuant to stand13 ards promulgated by the Board and (if applicable) con14 sistent with policies established as part of the National 

15 Information Infrastructure Act of 1993. 

16 (b) PRIVACY.—The health information system shall 

17 be developed and implemented in a manner that is con18 sistent with the privacy and security standards established 

19 under section 5120. 

20 (c) REDUCTION IN ADMINISTRATIVE COSTS.—The 

21 health information system shall be developed and imple22 mented in a manner that is consistent with the objectives 

23 of reducing wherever practicable and appropriate— 

24 (1) the costs of providing and paying for health 

25 care; 
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1 (2) the time, effort, and financial resources ex2 pended by persons to provide information to States, 

3 the Federal Government, health alliances, and health 

4 plans. 

5 (d) USES OF INFORMATION.—The health care infor6 mation described in subsection (e) shall be collected and 

7 reported in a manner that facilitates its use for the fol8 lowing purposes: 

9 (1) Health care planning, policy development, 

10 policy evaluation, and research by Federal, State, 

11 and local governments and regional and corporate 

12 alliances. 

13 (2) Establishing and monitoring payments for 

14 health services by the Federal Government, States, 

15 regional alliances, and corporate alliances. 

16 (3) Assessing and improving the quality of 

17 health care. 

18 (4) Measuring and optimizing access to health 

19 care. 

20 (5) Evaluating the cost of specific clinical or 

21 administrative functions. 

22 (6) Supporting public health functions and ob23 jectives. 
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1 (7) Improving the ability of health plans, health 

2 care providers, and consumers to coordinate, im3 prove, and make choices about health care. 

4 (8) Managing and containing costs at the alli5 ance and plan levels. 

6 (e) HEALTH CARE INFORMATION.—The health care 

7 information referred to in subsection (a) shall include data 

8 on— 

9 (1) enrollment and disenrollment in health 

10 plans; 

11 (2) clinical encounters and other items and 

12 services provided by health care providers; 

13 (3) administrative and financial transactions 

14 and activities of participating States, regional alli15 ances, corporate alliances, health plans, health care 

16 providers, employers, and individuals that are nec17 essary to determine compliance with this Act or an 

18 Act amended by this Act; 

19 (4) the characteristics of regional alliances, in20 cluding the number, and demographic characteristics 

21 of eligible individuals residing in each alliance area; 

22 (5) the characteristics of corporate alliances, in23 cluding the number, and demographic characteristics 

24 of individuals who are eligible to be enrolled in each 

25 corporate alliance health plan and individuals with 
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1 respect to whom a large employer has exercised an 

2 option under section 1311 to make ineligible for 

3 such enrollment; 

4 (6) terms of agreement between health plans 

5 and the health care providers who are members of 

6 provider networks of the plans (as defined in section 

7 1402(f)); 

8 (7) payment of benefits in cases in which bene9 fits may be payable under a health plan and any 

10 other insurance policy or health program; 

11 (8) utilization management by health plans and 

12 health care providers; 

13 (9) the information collected and reported by 

14 the Board or disseminated by other individuals or 

15 entities as part of the National Quality Management 

16 Program under subtitle A; 

17 (10) grievances filed against regional alliances, 

18 corporate alliances, and health plans and the resolu19 tions of such grievances; and 

20 (11) any other fact that may be necessary to 

21 determine whether a health plan or a health care 

22 provider has complied with a Federal statute per23 taining to fraud or misrepresentation in the provi24 sion or purchasing of health care or in the submis-
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1 sion of a claim for benefits or payment under a 

2 health plan. 

3 SEC. 5102. ADDITIONAL REQUIREMENTS FOR HEALTH IN4 FORMATION SYSTEM. 

5 (a) CONSULTATION.—The health information system 

6 shall be developed in consultation with— 

7 (1) Federal agencies that— 

8 (A) collect health care information; 

9 (B) oversee the collection of information or 

10 records management by other Federal agencies; 

11 (C) directly provide health care services; 

12 (D) provide for payments for health care 

13 services; or 

14 (E) enforce a provision of this Act or any 

15 Act amended by this Act; 

16 (2) the National Quality Management Council 

17 established under section 5002; 

18 (3) participating States; 

19 (4) regional alliances and corporate alliances; 

20 (5) health plans; 

21 (6) representatives of health care providers; 

22 (7) representatives of employers; 

23 (8) representatives of consumers of health care; 

24 (9) experts in public health and health care in25 formation and technology; and 
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1 (10) representatives of organizations furnishing 

2 health care supplies, services, and equipment. 

3 (b) COLLECTION AND TRANSMISSION REQUIRE4 MENTS.—In establishing standards under section 5101, 

5 the National Health Board shall specify the form and 

6 manner in which individuals and entities are required to 

7 collect or transmit health care information for or to the 

8 Board. The Board also shall specify the frequency with 

9 which individuals and entities are required to transmit 

10 such information to the Board. Such specifications shall 

11 include, to the extent practicable— 

12 (1) requirements for use of uniform paper 

13 forms containing standard data elements, defini14 tions, and instructions for completion in cases where 

15 the collection or transmission of data in electronic 

16 form is not specified by the Board; 

17 (2) requirements for use of uniform health data 

18 sets with common definitions to standardize the col19 lection and transmission of data in electronic form; 

20 (3) uniform presentation requirements for data 

21 in electronic form; and 

22 (4) electronic data interchange requirements for 

23 the exchange of data among automated health infor24 mation systems. 
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1 (c) PREEMPTION OF STATE ‘‘PEN & QUILL’’ LAWS.— 

2 A standard established by the National Health Board re3 lating to the form in which medical or health plan records 

4 are required to be maintained shall supercede any contrary 

5 provision of State law, except where the Board determines 

6 that the provision is necessary to prevent fraud and abuse, 

7 with respect to controlled substances, or for other pur8 poses. 

9 SEC. 5103. ELECTRONIC DATA NETWORK. 

10 (a) IN GENERAL.—As part of the health information 

11 system, the National Health Board shall oversee the estab12 lishment of an electronic data network consisting of re13 gional centers that collect, compile, and transmit informa14 tion. 

15 (b) CONSULTATION.—The electronic data network 

16 shall be developed in consultation with— 

17 (1) Federal agencies that— 

18 (A) collect health care information; 

19 (B) oversee the collection of information or 

20 records management by other Federal agencies; 

21 (C) directly provide health care services; 

22 (D) provide for payments for health care 

23 services; or 

24 (E) enforce a provision of this Act or any 

25 Act amended by this Act; 
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1 (2) the National Quality Management Council 

2 established under section 5002; 

3 (3) participating States; 

4 (4) regional alliances and corporate alliances; 

5 (5) health plans; 

6 (6) representatives of health care providers; 

7 (7) representatives of employers; 

8 (8) representatives of consumers of health care; 

9 (9) experts in public health and health care in10 formation and technology; and 

11 (10) representatives of organizations furnishing 

12 health care supplies, services, and equipment. 

13 (c) DEMONSTRATION PROJECTS.—The electronic 

14 data network shall be tested prior to full implementation 

15 through the establishment of demonstration projects. 

16 (d) DISCLOSURE OF INDIVIDUALLY IDENTIFIABLE

17 INFORMATION.—The electronic data network may be used 

18 to disclose individually identifiable health information (as 

19 defined in section 5123(3)) to any individual or entity only 

20 in accordance with the health information system privacy 

21 standards promulgated by the National Health Board 

22 under section 5120. 
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1 SEC. 5104. UNIQUE IDENTIFIER NUMBERS. 

2 (a) IN GENERAL.—As part of the health information 

3 system, the Board shall establish a system to provide for 

4 a unique identifier number for each— 

5 (1) eligible individual; 

6 (2) employer; 

7 (3) health plan; and 

8 (4) health care provider. 

9 (b) IMPERMISSIBLE DATA LINKS.—In establishing 

10 the system under subsection (a), the National Health 

11 Board shall ensure that a unique identifier number may 

12 not be used to connect individually identifiable health in13 formation (as defined in section 5123(3)) that is collected 

14 as part of the health information system or that otherwise 

15 may be accessed through the number with individually 

16 identifiable information from any other source, except in 

17 cases where the National Health Board determines that 

18 such connection is necessary to carry out a duty imposed 

19 on any individual or entity under this Act. 

20 (c) PERMISSIBLE USES OF IDENTIFIER.—The Na21 tional Health Board shall by regulation establish the pur22 poses for which a unique identifier number provided pur23 suant to this section may be used. 

24 SEC. 5105. HEALTH SECURITY CARDS. 

25 (a) PERMISSIBLE USES OF CARD.—A health security 

26 card that is issued to an eligible individual under section 
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1 1001(b) may be used by an individual or entity, in accord2 ance with regulations promulgated by the Board, only for 

3 the purpose of providing or assisting the eligible individual 

4 in obtaining an item or service that is covered under— 

5 (1) the applicable health plan in which the indi6 vidual is enrolled (as defined in section 1902); 

7 (2) a policy consisting of a supplemental health 

8 benefit policy (described in part 2 of subtitle E of 

9 title I), a cost sharing policy (described in such 

10 part), or both; 

11 (3) a FEHBP supplemental plan (described in 

12 subtitle C of title VIII); 

13 (4) a FEHBP medicare supplemental plan (de14 scribed in such subtitle); or 

15 (5) such other programs as the Board may 

16 specify. 

17 (b) FORM OF CARD AND ENCODED INFORMATION.— 

18 The National Health Board shall establish standards re19 specting the form of health security cards and the infor20 mation to be encoded in electronic form on the cards. Such 

21 information shall include— 

22 (1) the identity of the individual to whom the 

23 card is issued; 

24 (2) the applicable health plan in which the indi25 vidual is enrolled; 
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1 (3) any policy described in paragraph (2), (3), 

2 or (4) of subsection (a) in which the individual is en3 rolled; and 

4 (4) any other information that the National 

5 Health Board determines to be necessary in order 

6 for the card to serve the purpose described in sub7 section (a). 

8 (c) UNIQUE IDENTIFIER NUMBERS.—The unique 

9 identifier number system developed by the National 

10 Health Board under section 5104 shall be used in encod11 ing the information described in subsection (b). 

12 (d) REGISTRATION OF CARD.—The Board shall take 

13 appropriate steps to register the card, the name of the 

14 card, and other indicia relating to the card as a trademark 

15 or service mark (as appropriate) under the Trademark Act 

16 of 1946. For purposes of this subsection, the ‘‘Trademark 

17 Act of 1946’’ refers to the Act entitled ‘‘An Act to provide 

18 for the registration and protection of trademarks used in 

19 commerce, to carry out the provisions of international con20 ventions, and for other purposes’’, approved July 5, 1946 

21 (15 U.S.C. et seq.). 

22 (e) REFERENCE TO CRIME.—For a provision relating 

23 to criminal penalties for misuse of a health security card 

24 or a unique identifier number, see section 5438. 
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1 SEC. 5106. TECHNICAL ASSISTANCE IN THE ESTABLISH2 MENT OF HEALTH INFORMATION SYSTEMS. 

3 The National Health Board shall provide information 

4 and technical assistance to participating States, regional 

5 alliances, corporate alliances, health plans, and health care 

6 providers with respect to the establishment and operation 

7 of automated health information systems. Such assistance 

8 shall focus on— 

9 (1) the promotion of community-based health 

10 information systems; and 

11 (2) the promotion of patient care information 

12 systems that collect data at the point of care or as 

13 a by-product of the delivery of care. 

14 PART 2—PRIVACY OF 

15 INFORMATION 

16 SEC. 5120. HEALTH INFORMATION SYSTEM PRIVACY 

17 STANDARDS. 

18 (a) HEALTH INFORMATION SYSTEM STANDARDS.— 

19 Not later than 2 years after the date of the enactment 

20 of this Act, the National Health Board shall promulgate 

21 standards respecting the privacy of individually identifi22 able health information that is in the health information 

23 system described in part 1 of this subtitle. Such standards 

24 shall include standards concerning safeguards for the se25 curity of such information. The Board shall develop and 

26 periodically revise the standards in consultation with— 
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1 (1) Federal agencies that— 

2 (A) collect health care information; 

3 (B) oversee the collection of information or 

4 records management by other Federal agencies; 

5 (C) directly provide health care services; 

6 (D) provide for payments for health care 

7 services; or 

8 (E) enforce a provision of this Act or any 

9 Act amended by this Act; 

10 (2) the National Quality Management Council 

11 established under section 5002; 

12 (3) participating States; 

13 (4) regional alliances and corporate alliances; 

14 (5) health plans; and 

15 (6) representatives of consumers of health care. 

16 (b) INFORMATION COVERED.—The standards estab17 lished under subsection (a) shall apply to individually iden18 tifiable health information collected for or by, reported to 

19 or by, or the dissemination of which is regulated by, the 

20 National Health Board under section 5101. 

21 (c) PRINCIPLES.—The standards established under 

22 subsection (a) shall incorporate the following principles: 

23 (1) UNAUTHORIZED DISCLOSURE.—All disclo24 sures of individually identifiable health information 
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1 by an individual or entity shall be unauthorized un2 less— 

3 (A) the disclosure is by the enrollee identi4 fied in the information or whose identity can be 

5 associated with the information; 

6 (B) the disclosure is authorized by such 

7 enrollee in writing in a manner prescribed by 

8 the Board; 

9 (C) the disclosure is to Federal, State, or 

10 local law enforcement agencies for the purpose 

11 of enforcing this Act or an Act amended by this 

12 Act; or 

13 (D) the disclosure otherwise is consistent 

14 with this Act and specific criteria governing dis15 closure established by the Board. 

16 (2) MINIMAL DISCLOSURE.—All disclosures of 

17 individually identifiable health information shall be 

18 restricted to the minimum amount of information 

19 necessary to accomplish the purpose for which the 

20 information is being disclosed. 

21 (3) RISK ADJUSTMENT.—No individually identi22 fiable health information may be provided by a 

23 health plan to a regional alliance or a corporate alli24 ance for the purpose of setting premiums based on 

25 risk adjustment factors. 
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1 (4) REQUIRED SAFEGUARDS.—Any individual 

2 or entity who maintains, uses, or disseminates indi3 vidually identifiable health information shall imple4 ment administrative, technical, and physical safe5 guards for the security of such information. 

6 (5) RIGHT TO KNOW.—An enrollee (or an en7 rollee representative of the enrollee) has the right to 

8 know— 

9 (A) whether any individual or entity uses 

10 or maintains individually identifiable health in11 formation concerning the enrollee; and 

12 (B) for what purposes the information may 

13 be used or maintained. 

14 (6) RIGHT TO ACCESS.—Subject to appropriate 

15 procedures, an enrollee (or an enrollee representative 

16 of the enrollee) has the right, with respect to individ17 ually identifiable health information concerning the 

18 enrollee that is recorded in any form or medium— 

19 (A) to see such information; 

20 (B) to copy such information; and 

21 (C) to have a notation made with or in 

22 such information of any amendment or correc23 tion of such information requested by the en24 rollee or enrollee representative. 
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1 (7) RIGHT TO NOTICE.—An enrollee and an en2 rollee representative have the right to receive a writ3 ten statement concerning— 

4 (A) the purposes for which individually 

5 identifiable health information provided to a 

6 health care provider, a health plan, a regional 

7 alliance, a corporate alliance, or the National 

8 Health Board may be used or disclosed by, or 

9 disclosed to, any individual or entity; and 

10 (B) the right of access described in para11 graph (6). 

12 (8) USE OF UNIQUE IDENTIFIER.—When indi13 vidually identifiable health information concerning 

14 an enrollee is required to accomplish the purpose for 

15 which information is being transmitted between or 

16 among the National Health Board, regional and cor17 porate alliances, health plans, and health care pro18 viders, the transmissions shall use the unique identi19 fier number provided to the enrollee pursuant to sec20 tion 5104 in lieu of the name of the enrollee. 

21 (9) USE FOR EMPLOYMENT DECISIONS.—Indi22 vidually identifiable health care information may not 

23 be used in making employment decisions. 
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1 SEC. 5121. OTHER DUTIES WITH RESPECT TO PRIVACY. 

2 (a) RESEARCH AND TECHNICAL SUPPORT.—The Na3 tional Health Board may sponsor— 

4 (1) research relating to the privacy and security 

5 of individually identifiable health information; 

6 (2) the development of consent forms governing 

7 disclosure of such information; and 

8 (3) the development of technology to implement 

9 standards regarding such information. 

10 (c) EDUCATION.—The National Health Board shall 

11 establish education and awareness programs— 

12 (1) to foster adequate security practices by 

13 States, regional alliances, corporate alliances, health 

14 plans, and health care providers; 

15 (2) to train personnel of public and private en16 tities who have access to individually identifiable 

17 health information respecting the duties of such per18 sonnel with respect to such information; and 

19 (3) to inform individuals and employers who 

20 purchase health care respecting their rights with re21 spect to such information. 

22 SEC. 5122. COMPREHENSIVE HEALTH INFORMATION PRI23 VACY PROTECTION ACT. 

24 (a) IN GENERAL.—Not later than 3 years after the 

25 date of the enactment of this Act, the National Health 

26 Board shall submit to the President and the Congress a 
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1 detailed proposal for legislation to provide a comprehen2 sive scheme of Federal privacy protection for individually 

3 identifiable health information. 

4 (b) CODE OF FAIR INFORMATION PRACTICES.—The 

5 proposal shall include a Code of Fair Information Prac6 tices to be used to advise enrollees to whom individually 

7 identifiable health information pertains of their rights with 

8 respect to such information in an easily understood and 

9 useful form. 

10 (c) ENFORCEMENT.—The proposal shall include pro11 visions to enforce effectively the rights and duties that 

12 would be created by the legislation. 

13 SEC. 5123. DEFINITIONS. 

14 For purposes of this part: 

15 (1) ENROLLEE.—The term ‘‘enrollee’’ means 

16 an individual who enrolls or has enrolled under a 

17 health plan. The term includes a deceased individual 

18 who was enrolled under a health plan. 

19 (2) ENROLLEE REPRESENTATIVE.—The term 

20 ‘‘enrollee representative’’ means any individual le21 gally empowered to make decisions concerning the 

22 provision of health care to an enrollee or the admin23 istrator or executor of the estate of a deceased en24 rollee. 
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1 (3) INDIVIDUALLY IDENTIFIABLE HEALTH IN2 FORMATION.—The term ‘‘individually identifiable 

3 health information’’ means any information, whether 

4 oral or recorded in any form or medium, that— 

5 (A) identifies or can readily be associated 

6 with the identity of an enrollee; and 

7 (B) relates to— 

8 (i) the past, present, or future phys9 ical or mental health of the enrollee; 

10 (ii) the provision of health care to the 

11 enrollee; or 

12 (iii) payment for the provision of 

13 health care to the enrollee. 

14 PART 3—INTERIM REQUIRE15 MENTS FOR ADMINISTRATIVE 

16 SIMPLIFICATION 

17 SEC. 5130. STANDARD BENEFIT FORMS. 

18 (a) DEVELOPMENT.—Not later than 1 year after the 

19 date of the enactment of this Act, the National Health 

20 Board shall develop, promulgate, and publish in the Fed21 eral Register the following standard health care benefit 

22 forms: 

23 (1) An enrollment and disenrollment form to be 

24 used to record enrollment and disenrollment in a 

25 health benefit plan. 
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Title V, Subtitle B 

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1 (2) A clinical encounter record to be used by 

2 health benefit plans and health service providers. 

3 (3) A claim form to be used in the submission 

4 of claims for benefits or payment under a health 

5 benefit plan. 

6 (b) INSTRUCTIONS, DEFINITIONS, AND CODES.— 

7 Each standard form developed under subsection (a) shall 

8 include instructions for completing the form that— 

9 (1) specifically define, to the extent practicable, 

10 the data elements contained in the form; and 

11 (2) standardize any codes or data sets to be 

12 used in completing the form. 

13 (c) REQUIREMENTS FOR ADOPTION OF FORMS.— 

14 (1) HEALTH SERVICE PROVIDERS.—On or after 

15 the date that is 270 days after the publication of the 

16 standard forms developed under subsection (a), a 

17 health service provider that furnishes items or serv18 ices in the United States for which payment may be 

19 made under a health benefit plan may not— 

20 (A) maintain records of clinical encounters 

21 involving such items or services that are re22 quired to be maintained by the National Health 

23 Board in a paper form that is not the clinical 

24 encounter record promulgated by the Board; or 
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1 (B) submit any claim for benefits or pay2 ment for such services to such plan in a paper 

3 form that is not the claim form promulgated by 

4 the National Health Board. 

5 (2) HEALTH BENEFIT PLANS.—On or after the 

6 date that is 270 days after the publication of the 

7 standard forms developed under subsection (a), a 

8 health benefit plan may not— 

9 (A) record enrollment and disenrollment in 

10 a paper form that is not the enrollment and 

11 disenrollment form promulgated by the Na12 tional Health Board; 

13 (B) maintain records of clinical encounters 

14 that are required to be maintained by the Na15 tional Health Board in a paper form that is not 

16 the clinical encounter record promulgated by 

17 the Board; or 

18 (C) reject a claim for benefits or payment 

19 under the plan on the basis of the form or me20 dium in which the claim is submitted if— 

21 (i) the claim is submitted on the claim 

22 form promulgated by the National Health 

23 Board; and 

24 (ii) the plan accepts claims submitted 

25 in paper form. 
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1 (d) DEFINITIONS.—For purposes of this subtitle: 

2 (1) HEALTH BENEFIT PLAN.— 

3 (A) IN GENERAL.—The term ‘‘health ben4 efit plan’’ means, except as provided in sub5 paragraphs (B) through (D), any public or pri6 vate entity or program that provides for pay7 ments for health care services, including— 

8 (i) a group health plan (as defined in 

9 section 5000(b)(1) of the Internal Revenue 

10 Code of 1986); and 

11 (ii) any other health insurance ar12 rangement, including any arrangement 

13 consisting of a hospital or medical expense 

14 incurred policy or certificate, hospital or 

15 medical service plan contract, or health 

16 maintenance organization subscriber con17 tract. 

18 (B) PLANS EXCLUDED.—Such term does 

19 not include— 

20 (i) accident-only, credit, or disability 

21 income insurance; 

22 (ii) coverage issued as a supplement 

23 to liability insurance; 

24 (iii) an individual making payment on 

25 the individual’s own behalf (or on behalf of 
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1 a relative or other individual) for 

2 deductibles, coinsurance, or services not 

3 covered under a health benefit plan; and 

4 (iv) such other plans as the National 

5 Health Board may determine, because of 

6 the limitation of benefits to a single type 

7 or kind of health care, such as dental serv8 ices or hospital indemnity plans, or other 

9 reasons should not be subject to the re10 quirements of this section. 

11 (C) PLANS INCLUDED.—Such term in12 cludes— 

13 (i) workers compensation or similar 

14 insurance insofar as it relates to workers 

15 compensation medical benefits (as defined 

16 in section 10000(3)) provided by or 

17 through health plans; and 

18 (ii) automobile medical insurance in19 sofar as it relates to automobile insurance 

20 medical benefits (as defined in section 

21 10100(2)) provided by or through health 

22 plans. 

23 (D) TREATMENT OF DIRECT PROVISION OF

24 SERVICES.—Such term does not include a Fed-
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1 eral or State program that provides directly for 

2 the provision of health services to beneficiaries. 

3 (2) HEALTH SERVICE PROVIDER.—The term 

4 ‘‘health service provider’’ includes a provider of serv5 ices (as defined in section 1861(u) of the Social Se6 curity Act), physician, supplier, and other person 

7 furnishing health care services. Such term includes 

8 a Federal or State program that provides directly 

9 for the provision of health services to beneficiaries. 

10 (e) INTERIM NATURE OF REQUIREMENTS.—The Na11 tional Health Board may modify, update, or supercede any 

12 standard form or requirement developed, promulgated, or 

13 imposed under this section through the establishment of 

14 a standard under section 5101. 

15 PART 4—GENERAL PROVISIONS 

16 SEC. 5140. NATIONAL PRIVACY AND HEALTH DATA ADVI17 SORY COUNCIL. 

18 (a) ESTABLISHMENT.—There is established an advi19 sory council to be known as the National Privacy and 

20 Health Data Advisory Council. 

21 (b) DUTIES.—The Council shall advise the National 

22 Health Board with respect to its duties under this subtitle. 

23 (c) NUMBER AND APPOINTMENT.—The Council shall 

24 be composed of 15 members appointed by the National 

25 Health Board. The members of the Council shall include— 
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1 (1) individuals representing the interests of con2 sumers, employers, and other purchasers of health 

3 care; 

4 (2) individuals representing the interests of 

5 health plans, health care providers, corporate alli6 ances, regional alliances, public health agencies, and 

7 participating States; and 

8 (3) individuals distinguished in the fields of 

9 data collection, data protection and privacy, law, 

10 ethics, medical and health services research, public 

11 health, and civil liberties and patient advocacy. 

12 (d) TERMS.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), members of the Council shall serve for a 

15 term of 3 years. 

16 (2) STAGGERED ROTATION.—Of the members 

17 first appointed to the Council under subsection (c), 

18 the National Health Board shall appoint 5 members 

19 to serve for a term of 3 years, 5 members to serve 

20 for a term of 2 years, and 5 members to serve for 

21 a term of 1 year. 

22 (3) SERVICE BEYOND TERM.—A member of the 

23 Council may continue to serve after the expiration of 

24 the term of the member until a successor is ap25 pointed. 
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Title V, Subtitle B 

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1 (e) VACANCIES.—If a member of the Council does not 

2 serve the full term applicable under subsection (d), the in3 dividual appointed to fill the resulting vacancy shall be ap4 pointed for the remainder of the term of the predecessor 

5 of the individual. 

6 (f) CHAIR.—The National Health Board shall des7 ignate an individual to serve as the chair of the Council. 

8 (g) MEETINGS.—The Council shall meet not less than 

9 once during each 4-month period and shall otherwise meet 

10 at the call of the National Health Board or the chair. 

11 (h) COMPENSATION AND REIMBURSEMENT OF EX12 PENSES.—Members of the Council shall receive compensa13 tion for each day (including travel time) engaged in car14 rying out the duties of the Council. Such compensation 

15 may not be in an amount in excess of the maximum rate 

16 of basic pay payable for level IV of the Executive Schedule 

17 under section 5315 of title 5, United States Code. 

18 (i) STAFF.—The National Health Board shall provide 

19 to the Council such staff, information, and other assist20 ance as may be necessary to carry out the duties of the 

21 Council. 

22 (j) DURATION.—Notwithstanding section 14(a) of the 

23 Federal Advisory Committee Act, the Council shall con24 tinue in existence until otherwise provided by law. 
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1 SEC. 5141. CIVIL MONEY PENALTIES. 

2 (a) VIOLATION OF HEALTH INFORMATION SYSTEM

3 STANDARDS.—Any person who the Secretary of Health 

4 and Human Services determines— 

5 (1) is required, but has substantially failed, to 

6 comply with a standard established by the National 

7 Health Board under section 5101 or 5120; 

8 (2) has required the display of, has required the 

9 use of, or has used a health security card for any 

10 purpose other than a purpose described in section 

11 5105(a); or 

12 (3) has required the disclosure of, has required 

13 the use of, or has used a unique identifier number 

14 provided pursuant to section 5104 for any purpose 

15 that is not authorized by the National Health Board 

16 pursuant to such section 

17 shall be subject, in addition to any other penalties that 

18 may be prescribed by law, to a civil money penalty of not 

19 more than $10,000 for each such violation. 

20 (b) STANDARD BENEFIT FORMS.—Any health service 

21 provider or health benefit plan that the Secretary of 

22 Health and Human Services determines is required, but 

23 has substantially failed, to comply with section 5130(c) 

24 shall be subject, in addition to any other penalties that 

25 may be prescribed by law, to a civil money penalty of not 

26 more than $10,000 for each such violation. 
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1 (c) PROCESS.—The process for the imposition of a 

2 civil money penalty under the All-Payer Health Care 

3 Fraud and Abuse Control Program under part 1 of sub4 title E of this title shall apply to a civil money penalty 

5 under this section in the same manner as such process 

6 applies to a penalty or proceeding under such program. 

7 SEC. 5142. RELATIONSHIP TO OTHER LAWS. 

8 (a) COURT ORDERS.—Nothing in this title shall be 

9 construed to invalidate or limit the power or authority of 

10 any court of competent jurisdiction with respect to health 

11 care information. 

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

13 title shall be construed to invalidate or limit the authori14 ties, powers, or procedures established under any law that 

15 provides for the reporting of disease, child abuse, birth, 

16 or death. 

17 Subtitle C—Remedies and 

18 Enforcement 

19 PART 1—REVIEW OF BENEFIT DETERMINATIONS 

20 FOR ENROLLED INDIVIDUALS 

21 Subpart A—General Rules 

22 SEC. 5201. HEALTH PLAN CLAIMS PROCEDURE. 

23 (a) DEFINITIONS.—For purposes of this section— 

24 (1) CLAIM.—The term ‘‘claim’’ means a claim 

25 for payment or provision of benefits under a health 
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1 plan or a request for preauthorization of items or 

2 services which is submitted to a health plan prior to 

3 receipt of the items or services. 

4 (2) INDIVIDUAL CLAIMANT.—The term ‘‘indi5 vidual claimant’’ with respect to a claim means any 

6 individual who submits the claim to a health plan in 

7 connection with the individual’s enrollment under 

8 the plan, or on whose behalf the claim is submitted 

9 to the plan by a provider. 

10 (3) PROVIDER CLAIMANT.—The term ‘‘provider 

11 claimant’’ with respect to a claim means any pro12 vider who submits the claim to a health plan with 

13 respect to items or services provided to an individual 

14 enrolled under the plan. 

15 (b) GENERAL RULES GOVERNING TREATMENT OF

16 CLAIMS.— 

17 (1) ADEQUATE NOTICE OF DISPOSITION OF

18 CLAIM.—In any case in which a claim is submitted 

19 in complete form to a health plan, the plan shall 

20 provide to the individual claimant and any provider 

21 claimant with respect to the claim a written notice 

22 of the plan’s approval or denial of the claim within 

23 30 days after the date of the submission of the 

24 claim. The notice to the individual claimant shall be 

25 written in language calculated to be understood by 
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1 the typical individual enrolled under the plan and in 

2 a form which takes into account accessibility to the 

3 information by individuals whose primary language 

4 is not English. In the case of a denial of the claim, 

5 the notice shall be provided within 5 days after the 

6 date of the determination to deny the claim, and 

7 shall set forth the specific reasons for the denial. 

8 The notice of a denial shall include notice of the 

9 right to appeal the denial under paragraph (2). Fail10 ure by any plan to comply with the requirements of 

11 this paragraph with respect to any claim submitted 

12 to the plan shall be treated as approval by the plan 

13 of the claim. 

14 (2) PLAN’S DUTY TO REVIEW DENIALS UPON

15 TIMELY REQUEST.—The plan shall review its denial 

16 of the claim if an individual claimant or provider 

17 claimant with respect to the claim submits to the 

18 plan a written request for reconsideration of the 

19 claim after receipt of written notice from the plan of 

20 the denial. The plan shall allow any such claimant 

21 not less than 60 days, after receipt of written notice 

22 from the plan of the denial, to submit the claimant’s 

23 request for reconsideration of the claim. 

24 (3) TIME LIMIT FOR REVIEW.—The plan shall 

25 complete any review required under paragraph (2), 
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1 and shall provide the individual claimant and any 

2 provider claimant with respect to the claim written 

3 notice of the plan’s decision on the claim after re4 consideration pursuant to the review, within 30 days 

5 after the date of the receipt of the request for recon6 sideration. 

7 (4) DE NOVO REVIEWS.—Any review required 

8 under paragraph (2)— 

9 (A) shall be de novo, 

10 (B) shall be conducted by an individual 

11 who did not make the initial decision denying 

12 the claim and who is authorized to approve the 

13 claim, and 

14 (C) shall include review by a qualified phy15 sician if the resolution of any issues involved re16 quires medical expertise. 

17 (c) TREATMENT OF URGENT REQUESTS TO PLANS

18 FOR PREAUTHORIZATION.— 

19 (1) IN GENERAL.—This subsection applies in 

20 the case of any claim submitted by an individual 

21 claimant or a provider claimant consisting of a re22 quest for preauthorization of items or services (other 

23 than emergency services which under section 

24 1406(b) may not be subject to preauthorization) 

25 which is accompanied by an attestation that— 
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1 (A) failure to immediately provide the 

2 items or services could reasonably be expected 

3 to result in— 

4 (i) placing the health of the individual 

5 claimant (or, with respect to an individual 

6 claimant who is a pregnant woman, the 

7 health of the woman or her unborn child) 

8 in serious jeopardy, 

9 (ii) serious impairment to bodily func10 tions, or 

11 (iii) serious dysfunction of any bodily 

12 organ or part, 

13 or 

14 (B) immediate provision of the items or 

15 services is necessary because the individual 

16 claimant has made or is at serious risk of mak17 ing an attempt to harm such individual claim18 ant or another individual. 

19 (2) SHORTENED TIME LIMIT FOR CONSIDER20 ATION OF REQUESTS FOR PREAUTHORIZATION.— 

21 Notwithstanding subsection (b)(1), a health plan 

22 shall approve or deny any claim described in para23 graph (1) within 24 hours after submission of the 

24 claim to the plan. Failure by the plan to comply with 

25 the requirements of this paragraph with respect to 
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1 the claim shall be treated as approval by the plan of 

2 the claim. 

3 (3) EXPEDITED EXHAUSTION OF PLAN REM4 EDIES.—Any claim described in paragraph (1) which 

5 is denied by the plan shall be treated as a claim with 

6 respect to which all remedies under the plan pro7 vided pursuant to this section are exhausted, irre8 spective of any review provided under subsection 

9 (b)(2). 

10 (4) DENIAL OF PREVIOUSLY AUTHORIZED

11 CLAIMS NOT PERMITTED.—In any case in which a 

12 health plan approves a claim described in paragraph 

13 (1)— 

14 (A) the plan may not subsequently deny 

15 payment or provision of benefits pursuant to 

16 the claim, unless the plan makes a showing of 

17 an intentional misrepresentation of a material 

18 fact by the individual claimant, and 

19 (B) in the case of a violation of subpara20 graph (A) in connection with the claim, all rem21 edies under the plan provided pursuant to this 

22 section with respect to the claim shall be treat23 ed as exhausted. 

24 (d) TIME LIMIT FOR DETERMINATION OF INCOM25 PLETENESS OF CLAIM.—For purposes of this section— 
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1 (1) any claim submitted by an individual claim2 ant and accepted by a provider serving under con3 tract with a health plan and any claim described in 

4 subsection (b)(1) shall be treated with respect to the 

5 individual claimant as submitted in complete form, 

6 and 

7 (2) any other claim for benefits under the plan 

8 shall be treated as filed in complete form as of 10 

9 days after the date of the submission of the claim, 

10 unless the plan provides to the individual claimant 

11 and any provider claimant, within such period, a 

12 written notice of any required matter remaining to 

13 be filed in order to complete the claim. 

14 Any filing by the individual claimant or the provider claim15 ant of additional matter requested by the plan pursuant 

16 to paragraph (2) shall be treated for purposes of this sec17 tion as an initial filing of the claim. 

18 (e) ADDITIONAL NOTICE AND DISCLOSURE RE19 QUIREMENTS FOR HEALTH PLANS.—In the case of a de20 nial of a claim for benefits under a health plan, the plan 

21 shall include, together with the specific reasons provided 

22 to the individual claimant and any provider claimant 

23 under subsection (b)(1)— 

24 (1) if the denial is based in whole or in part on 

25 a determination that the claim is for an item or 
895 

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1 service which is not covered by the comprehensive 

2 benefit package or exceeds payment rates under the 

3 applicable alliance or State fee schedule, the factual 

4 basis for the determination, 

5 (2) if the denial is based in whole or in part on 

6 exclusion of coverage with respect to services be7 cause the services are determined to comprise an ex8 perimental treatment or investigatory procedure, the 

9 medical basis for the determination and a descrip10 tion of the process used in making the determina11 tion, and 

12 (3) if the denial is based in whole or in part on 

13 a determination that the treatment is not medically 

14 necessary or appropriate or is inconsistent with the 

15 plan’s practice guidelines, the medical basis for the 

16 determination, the guidelines used in making the de17 termination, and a description of the process used in 

18 making the determination. 

19 (f) WAIVER OF RIGHTS PROHIBITED.—A health plan 

20 may not require any party to waive any right under the 

21 plan or this Act as a condition for approval of any claim 

22 under the plan, except to the extent otherwise specified 

23 in a formal settlement agreement. 
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1 SEC. 5202. REVIEW IN REGIONAL ALLIANCE COMPLAINT 

2 REVIEW OFFICES OF GRIEVANCES BASED ON 

3 ACTS OR PRACTICES BY HEALTH PLANS. 

4 (a) COMPLAINT REVIEW OFFICES.— 

5 (1) IN GENERAL.—In accordance with rules 

6 which shall be prescribed by the Secretary of Labor, 

7 each State shall establish and maintain a complaint 

8 review office for each regional alliance established by 

9 such State. According to designations which shall be 

10 made by each State under regulations of the Sec11 retary of Labor, the complaint review office for a re12 gional alliance established by such State shall also 

13 serve as the complaint review office for corporate al14 liances operating in the State with respect to indi15 viduals who are enrolled under plans described in 

16 subsection (b) maintained by such corporate alli17 ances and who reside within the area of the regional 

18 alliance. 

19 (2) REGIONAL ALLIANCES NOT ESTABLISHED

20 BY STATES.—In the case of any regional alliance es21 tablished in any State by the Secretary of Health 

22 and Human Services, the Secretary of Health and 

23 Human Services shall assume all duties and obliga24 tions of such State under this part in accordance 

25 with the applicable regulations of the Secretary of 

26 Labor under this part. 
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1 (b) FILINGS OF COMPLAINTS BY AGGRIEVED PER2 SONS.—In the case of any person who is aggrieved by— 

3 (1) any act or practice engaged in by any 

4 health plan which consists of or results in denial of 

5 payment or provision of benefits under the plan or 

6 delay in the payment or provision of benefits, or 

7 (2) any act or practice engaged in by any other 

8 plan maintained by a regional alliance or a corporate 

9 alliance which consists of or results in denial of pay10 ment or provision of benefits under a supplemental 

11 benefit policy described in section 1421(b)(1) or a 

12 cost sharing policy described in section 1421(b)(2) 

13 or delay in the payment or provision of the benefits, 

14 if the denial or delay consists of a failure to comply with 

15 the terms of the plan (including the provision of benefits 

16 in full when due in accordance with the terms of the plan), 

17 or with the applicable requirements of this Act, such per18 son may file a complaint with the appropriate complaint 

19 review office. 

20 (c) EXHAUSTION OF PLAN REMEDIES.—Any com21 plaint including a claim to which section 5201 applies may 

22 not be filed until the complainant has exhausted all rem23 edies provided under the plan with respect to the claim 

24 in accordance with such section. 
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1 (d) EXCLUSIVE MEANS OF REVIEW FOR PLANS

2 MAINTAINED BY CORPORATE ALLIANCES.—Notwith3 standing part 2, proceedings under sections 5203 and 

4 5204 pursuant to complaints filed under subsection (b), 

5 and review under section 5205 of determinations made 

6 under section 5204, shall be the exclusive means of review 

7 of acts or practices described in subsection (b) which are 

8 engaged in by a corporate alliance health plan or by any 

9 plan maintained by a corporate alliance with respect to 

10 benefits under a supplemental benefit policy described in 

11 section 1421(b)(1) or a cost sharing policy described in 

12 section 1421(b)(2). 

13 (e) FORM OF COMPLAINT.—The complaint shall be 

14 in writing under oath or affirmation, shall set forth the 

15 complaint in a manner calculated to give notice of the na16 ture of the complaint, and shall contain such information 

17 as may be prescribed in regulations of the Secretary of 

18 Labor. 

19 (f) NOTICE OF FILING.—The complaint review office 

20 shall serve by certified mail a notice of the complaint (in21 cluding the date, place, and circumstances of the alleged 

22 violation) on the person or persons alleged in the com23 plaint to have committed the violation within 10 days after 

24 the filing of the complaint. 
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1 (g) TIME LIMITATION.—Complaints may not be 

2 brought under this section with respect to any violation 

3 later than one year after the date on which the violation 

4 occurs. This subsection shall not prevent the subsequent 

5 amending of a complaint. 

6 SEC. 5203. INITIAL PROCEEDINGS IN COMPLAINT REVIEW 

7 OFFICES. 

8 (a) ELECTIONS.—Whenever a complaint is brought 

9 to the complaint review office under section 5202(b), the 

10 complaint review office shall provide the complainant with 

11 an opportunity, in such form and manner as shall be pre12 scribed in regulations of the Secretary of Labor, to elect 

13 one of the following: 

14 (1) to forego further proceedings in the com15 plaint review office and rely on remedies available in 

16 a court of competent jurisdiction, with respect to 

17 any matter in the complaint with respect to which 

18 proceedings under this section and section 5204, and 

19 review under section 5205, are not under section 

20 5202(d) the exclusive means of review, 

21 (2) to submit the complaint as a dispute under 

22 the Early Resolution Program established under 

23 subpart B and thereby suspend further review pro24 ceedings under this section pending termination of 

25 proceedings under the Program, or 
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1 (3) in any case in which an election under para2 graph (2) is not made, or such an election was made 

3 but resolution of all matters in the complaint was 

4 not obtained upon termination of proceedings pursu5 ant to the election by settlement agreement or other6 wise, to proceed with the complaint to a hearing in 

7 the complaint review office under section 5204 re8 garding the unresolved matters. 

9 (b) EFFECT OF PARTICIPATION IN EARLY RESOLU10 TION PROGRAM.—Any matter in a complaint brought to 

11 the complaint review office which is included in a dispute 

12 which is timely submitted to the Early Resolution Pro13 gram established under subpart B shall not be assigned 

14 to a hearing under section 5204 unless the proceedings 

15 under the Program with respect to the dispute are termi16 nated without settlement or resolution of the dispute with 

17 respect to such matter. Upon termination of any pro18 ceedings regarding a dispute submitted to the Program, 

19 the applicability of this section to any matter in a com20 plaint which was included in the dispute shall not be af21 fected by participation in the proceedings, except to the 

22 extent otherwise required under the terms of any settle23 ment agreement or other formal resolution obtained in the 

24 proceedings. 
901 

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1 SEC. 5204. HEARINGS BEFORE HEARING OFFICERS IN COM2 PLAINT REVIEW OFFICES. 

3 (a) HEARING PROCESS.— 

4 (1) ASSIGNMENT OF COMPLAINTS TO HEARING

5 OFFICERS AND NOTICE TO PARTIES.— 

6 (A) IN GENERAL.—In the case of an elec7 tion under section 5203(a)(3)— 

8 (i) the complaint review office shall 

9 assign the complaint, and each motion in 

10 connection with the complaint, to a hearing 

11 officer employed by the State in the office; 

12 and 

13 (ii) the hearing officer shall have the 

14 power to issue and cause to be served upon 

15 the plan named in the complaint a copy of 

16 the complaint and a notice of hearing be17 fore the hearing officer at a place fixed in 

18 the notice, not less than 5 days after the 

19 serving of the complaint. 

20 (B) QUALIFICATIONS FOR HEARING OFFI21 CERS.—No individual may serve in a complaint 

22 review office as a hearing officer unless the in23 dividual meets standards which shall be pre24 scribed by the Secretary of Labor. Such stand25 ards shall include experience, training, affili26 ations, diligence, actual or potential conflicts of 
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1 interest, and other qualifications deemed rel2 evant by the Secretary of Labor. At no time 

3 shall a hearing officer have any official, finan4 cial, or personal conflict of interest with respect 

5 to issues in controversy before the hearing offi6 cer. 

7 (2) AMENDMENT OF COMPLAINTS.—Any such 

8 complaint may be amended by the hearing officer 

9 conducting the hearing, upon the motion of the com10 plainant, in the hearing officer’s discretion at any 

11 time prior to the issuance of an order based thereon. 

12 (3) ANSWERS.—The party against whom the 

13 complaint is filed shall have the right to file an an14 swer to the original or amended complaint and to 

15 appear in person or otherwise and give testimony at 

16 the place and time fixed in the complaint. 

17 (b) ADDITIONAL PARTIES.—In the discretion of the 

18 hearing officer conducting the hearing, any other person 

19 may be allowed to intervene in the proceeding and to 

20 present testimony. 

21 (c) HEARINGS.— 

22 (1) DE NOVO HEARING.—Each hearing officer 

23 shall hear complaints and motions de novo. 

24 (2) TESTIMONY.—The testimony taken by the 

25 hearing officer shall be reduced to writing. There-
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1 after, the hearing officer, in his or her discretion, 

2 upon notice may provide for the taking of further 

3 testimony or hear argument. 

4 (3) AUTHORITY OF HEARING OFFICERS.—The 

5 hearing officer may compel by subpoena the attend6 ance of witnesses and the production of evidence at 

7 any designated place or hearing. In case of contu8 macy or refusal to obey a subpoena lawfully issued 

9 under this paragraph and upon application of the 

10 hearing officer, an appropriate district court of the 

11 United States may issue an order requiring compli12 ance with the subpoena and any failure to obey the 

13 order may be punished by the court as a contempt 

14 thereof. The hearing officer may also seek enforce15 ment of the subpoena in a State court of competent 

16 jurisdiction. 

17 (4) EXPEDITED HEARINGS.—Notwithstanding 

18 section 5203 and the preceding provisions of this 

19 section, upon receipt of a complaint containing a 

20 claim described in section 5201(c)(1), the complaint 

21 review office shall promptly provide the complainant 

22 with the opportunity to make an election under sec23 tion 5203(a)(3) and assignment to a hearing on the 

24 complaint before a hearing officer. The complaint re25 view office shall ensure that such a hearing com-
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1 mences not later than 24 hours after receipt of the 

2 complaint by the complaint hearing office. 

3 (d) DECISION OF HEARING OFFICER.— 

4 (1) IN GENERAL.—The hearing officer shall de5 cide upon the preponderance of the evidence whether 

6 to decide in favor of the complainant with respect to 

7 each alleged act or practice. Each such decision— 

8 (A) shall include the hearing officer’s find9 ings of fact, and 

10 (B) shall constitute the hearing officer’s 

11 final disposition of the proceedings. 

12 (2) DECISIONS FINDING IN FAVOR OF COM13 PLAINANT.—If the hearing officer’s decision includes 

14 a determination that any party named in the com15 plaint has engaged in or is engaged in an act or 

16 practice described in section 5202(b), the hearing of17 ficer shall issue and cause to be served on such 

18 party an order which requires such party— 

19 (A) to cease and desist from such act or 

20 practice, 

21 (B) to provide the benefits due under the 

22 terms of the plan and to otherwise comply with 

23 the terms of the plan and the applicable re24 quirements of this Act, 
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1 (C) to pay to the complainant prejudgment 

2 interest on the actual costs incurred in obtain3 ing the items and services at issue in the com4 plaint, and 

5 (D) to pay to the prevailing complainant a 

6 reasonable attorney’s fee, reasonable expert wit7 ness fees, and other reasonable costs relating to 

8 the hearing on the charges on which the com9 plainant prevails. 

10 (3) DECISIONS NOT IN FAVOR OF COMPLAIN11 ANT.—If the hearing officer’s decision includes a de12 termination that the party named in the complaint 

13 has not engaged in or is not engaged in an act or 

14 practice referred to in section 5202(b), the hearing 

15 officer— 

16 (A) shall include in the decision a dismissal 

17 of the charge in the complaint relating to the 

18 act or practice, and 

19 (B) upon a finding that such charge is 

20 frivolous, shall issue and cause to be served on 

21 the complainant an order which requires the 

22 complainant to pay to such party a reasonable 

23 attorney’s fee, reasonable expert witness fees, 

24 and other reasonable costs relating to the pro25 ceedings on such charge. 
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1 (4) SUBMISSION AND SERVICE OF DECISIONS.— 

2 The hearing officer shall submit each decision to the 

3 complaint review office at the conclusion of the pro4 ceedings and the office shall cause a copy of the de5 cision to be served on the parties to the proceedings. 

6 (e) REVIEW.— 

7 (1) IN GENERAL.—The decision of the hearing 

8 officer shall be final and binding upon all parties. 

9 Except as provided in paragraph (2), any party to 

10 the complaint may, within 30 days after service of 

11 the decision by the complaint review office, file an 

12 appeal of the decision with the Federal Health Plan 

13 Review Board under section 5205 in such form and 

14 manner as may be prescribed by such Board. 

15 (2) EXCEPTION.—The decision in the case of 

16 an expedited hearing under subsection (c)(4) shall 

17 not be subject to review. 

18 (f) COURT ENFORCEMENT OF ORDERS.— 

19 (1) IN GENERAL.—If a decision of the hearing 

20 officer in favor of the complainant is not appealed 

21 under section 5205, the complainant may petition 

22 any court of competent jurisdiction for enforcement 

23 of the order. In any such proceeding, the order of 

24 the hearing officer shall not be subject to review. 
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1 (2) AWARDING OF COSTS.—In any action for 

2 court enforcement under this subsection, a prevailing 

3 complainant shall be entitled to a reasonable attor4 ney’s fee, reasonable expert witness fees, and other 

5 reasonable costs relating to such action. 

6 SEC. 5205. REVIEW BY FEDERAL HEALTH PLAN REVIEW 

7 BOARD. 

8 (a) ESTABLISHMENT AND MEMBERSHIP.—The Sec9 retary of Labor shall establish by regulation a Federal 

10 Health Plan Review Board (hereinafter in this subtitle re11 ferred to as the ‘‘Review Board’’). The Review Board shall 

12 be composed of 5 members appointed by the Secretary of 

13 Labor from among persons who by reason of training, 

14 education, or experience are qualified to carry out the 

15 functions of the Review Board under this subtitle. The 

16 Secretary of Labor shall prescribe such rules as are nec17 essary for the orderly transaction of proceedings by the 

18 Review Board. Every official act of the Review Board shall 

19 be entered of record, and its hearings and records shall 

20 be open to the public. 

21 (b) REVIEW PROCESS.—The Review Board shall en22 sure, in accordance with rules prescribed by the Secretary 

23 of Labor, that reasonable notice is provided for each ap24 peal before the Review Board of a hearing officer’s deci25 sion under section 5304, and shall provide for the orderly 
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1 consideration of arguments by any party to the hearing 

2 upon which the hearing officer’s decision is based. In the 

3 discretion of the Review Board, any other person may be 

4 allowed to intervene in the proceeding and to present writ5 ten argument. The National Health Board may intervene 

6 in the proceeding as a matter of right. 

7 (c) SCOPE OF REVIEW.—The Review Board shall re8 view the decision of the hearing officer from which the 

9 appeal is made, except that the review shall be only for 

10 the purposes of determining— 

11 (1) whether the determination is supported by 

12 substantial evidence on the record considered as a 

13 whole, 

14 (2) in the case of any interpretation by the 

15 hearing officer of contractual terms (irrespective of 

16 the extent to which extrinsic evidence was consid17 ered), whether the determination is supported by a 

18 preponderance of the evidence, 

19 (3) whether the determination is in excess of 

20 statutory jurisdiction, authority, or limitations, or in 

21 violation of a statutory right, or 

22 (4) whether the determination is without ob23 servance of procedure required by law. 

24 (d) DECISION OF REVIEW BOARD.—The decision of 

25 the hearing officer as affirmed or modified by the Review 
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1 Board (or any reversal by the Review Board of the hearing 

2 officer’s final disposition of the proceedings) shall become 

3 the final order of the Review Board and binding on all 

4 parties, subject to review under subsection (e). The Review 

5 Board shall cause a copy of its decision to be served on 

6 the parties to the proceedings not later than 5 days after 

7 the date of the decision. 

8 (e) REVIEW OF FINAL ORDERS.— 

9 (1) IN GENERAL.—Not later than 60 days after 

10 the entry of the final order, any person aggrieved by 

11 any such final order under which the amount or 

12 value in controversy exceeds $10,000 may seek a re13 view of the order in the United States court of ap14 peals for the circuit in which the violation is alleged 

15 to have occurred or in which the complainant re16 sides. 

17 (2) FURTHER REVIEW.—Upon the filing of the 

18 record with the court, the jurisdiction of the court 

19 shall be exclusive and its judgment shall be final, ex20 cept that the judgment shall be subject to review by 

21 the Supreme Court of the United States upon writ 

22 of certiorari or certification as provided in section 

23 1254 of title 28 of the United States Code. 

24 (3) ENFORCEMENT DECREE IN ORIGINAL RE25 VIEW.—If, upon appeal of an order under paragraph 
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1 (1), the United States court of appeals does not re2 verse the order, the court shall have the jurisdiction 

3 to make and enter a decree enforcing the order of 

4 the Review Board. 

5 (f) AWARDING OF ATTORNEYS’ FEES AND OTHER

6 COSTS AND EXPENSES.—In any proceeding before the Re7 view Board under this section or any judicial proceeding 

8 under subsection (e), the Review Board or the court (as 

9 the case may be) shall award to a prevailing complainant 

10 reasonable costs and expenses (including a reasonable at11 torney’s fee) on the causes on which the complainant pre12 vails. 

13 SEC. 5206. RULES GOVERNING BENEFIT CLAIMS DETER14 MINATIONS. 

15 (a) IN GENERAL.—Determinations made under this 

16 part or by any State court in connection with a complaint 

17 based on an act or practice described in section 5202(b) 

18 shall be in accordance with the provisions of this Act, the 

19 comprehensive benefit package as provided by this Act, the 

20 rules and regulations of the National Health Board pre21 scribed under this Act, and decisions of the National 

22 Health Board under this Act. 

23 (b) RIGHTS AND REMEDIES UNDER STATE LAW.— 

24 Subject to subsection (a), the rights and remedies avail25 able in State court against a health plan providing services 
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Title V, Subtitle C 

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1 through a regional alliance in connection with a complaint 

2 based on an act or practice described in section 5202(b) 

3 shall be governed by State law. 

4 SEC. 5207. CIVIL MONEY PENALTIES. 

5 (a) DENIAL OR DELAY IN PAYMENT OR PROVISION

6 OF BENEFITS.— 

7 (1) IN GENERAL.—The Secretary of Labor may 

8 assess a civil penalty against any health plan, or 

9 against any other plan in connection with benefits 

10 provided thereunder under a supplemental benefit 

11 policy described in section 1421(b)(1) or a cost shar12 ing policy described in section 1421(b)(2), for unrea13 sonable denial or delay in the payment or provision 

14 of benefits thereunder, in an amount not to exceed— 

15 (A) $25,000 per violation, or $75,000 per 

16 violation in the case of a finding of bad faith 

17 on the part of the plan, and 

18 (B) in the case of a finding of a pattern 

19 or practice of such violations engaged in by the 

20 plan, $1,000,000 in addition to the total 

21 amount of penalties assessed under subpara22 graph (A) with respect to such violations. 

23 For purposes of subparagraph (A), each violation 

24 with respect to any single individual shall be treated 

25 as a separate violation. 
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1 (2) CIVIL ACTION TO ENFORCE CIVIL PEN2 ALTY.—The Secretary of Labor may commence a 

3 civil action in any court of competent jurisdiction to 

4 enforce a civil penalty assessed under paragraph (1). 

5 (b) CIVIL PENALTIES FOR CERTAIN OTHER AC6 TIONS.—The Secretary of Labor may assess a civil penalty 

7 described in section 5412(b)(1) against any corporate alli8 ance health plan, or against any other plan sponsored by 

9 a corporate alliance in connection with benefits provided 

10 thereunder under a cost sharing policy described in section 

11 1421(b)(2), for any action described in section 5412(a). 

12 The Secretary of Labor may initiate proceedings to impose 

13 such penalty in the same manner as the Secretary of 

14 Health and Human Services may initiate proceedings 

15 under section 5412 with respect to actions described in 

16 section 5412(a). 

17 Subpart B—Early Resolution Programs 

18 SEC. 5211. ESTABLISHMENT OF EARLY RESOLUTION PRO19 GRAMS IN COMPLAINT REVIEW OFFICES. 

20 (a) ESTABLISHMENT OF PROGRAMS.—Each State 

21 shall establish and maintain an Early Resolution Program 

22 in each complaint review office in such State. The Pro23 gram shall include— 
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1 (1) the establishment and maintenance of fo2 rums for mediation of disputes in accordance with 

3 this subpart, and 

4 (2) the establishment and maintenance of such 

5 forums for other forms of alternative dispute resolu6 tion (including binding arbitration) as may be pre7 scribed in regulations of the Secretary of Labor. 

8 Each State shall ensure that the standards applied in 

9 Early Resolution Programs administered in such State 

10 which apply to any form of alternative dispute resolution 

11 described in paragraph (2) and which relate to time re12 quirements, qualifications of facilitators, arbitrators, or 

13 other mediators, and confidentiality are at least equivalent 

14 to the standards which apply to mediation proceedings 

15 under this subpart. 

16 (b) DUTIES OF COMPLAINT REVIEW OFFICES.— 

17 Each complaint review office in a State— 

18 (1) shall administer its Early Resolution Pro19 gram in accordance with regulations of the Secretary 

20 of Labor, 

21 (2) shall, pursuant to subsection (a)(1)— 

22 (A) recruit and train individuals to serve 

23 as facilitators for mediation proceedings under 

24 the Early Resolution Program from attorneys 

25 who have the requisite expertise for such serv-
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1 ice, which shall be specified in regulations of 

2 the Secretary of Labor, 

3 (B) provide meeting sites, maintain 

4 records, and provide facilitators with adminis5 trative support staff, and 

6 (C) establish and maintain attorney refer7 ral panels, 

8 (3) shall ensure that, upon the filing of a com9 plaint with the office, the complainant is adequately 

10 apprised of the complainant’s options for review 

11 under this part, and 

12 (4) shall monitor and evaluate the Program on 

13 an ongoing basis. 

14 SEC. 5212. INITIATION OF PARTICIPATION IN MEDIATION 

15 PROCEEDINGS. 

16 (a) ELIGIBILITY OF CASES FOR SUBMISSION TO

17 EARLY RESOLUTION PROGRAM.—A dispute may be sub18 mitted to the Early Resolution Program only if the fol19 lowing requirements are met with respect to the dispute: 

20 (1) NATURE OF DISPUTE.—The dispute con21 sists of an assertion by an individual enrolled under 

22 a health plan of one or more claims against the 

23 health plan for payment or provision of benefits, or 

24 against any other plan maintained by the regional 

25 alliance or corporate alliance sponsoring the health 
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1 plan with respect to benefits provided under a sup2 plemental benefit policy described in section 

3 1421(b)(1) or a cost sharing policy described in sec4 tion 1421(b)(2), based on alleged coverage under the 

5 plan, and a denial of the claims, or a denial of ap6 propriate reimbursement based on the claims, by the 

7 plan. 

8 (2) NATURE OF DISPUTED CLAIM.—Each claim 

9 consists of— 

10 (A) a claim for payment or provision of 

11 benefits under the plan; or 

12 (B) a request for information or docu13 ments the disclosure of which is required under 

14 this Act (including claims of entitlement to dis15 closure based on colorable claims to rights to 

16 benefits under the plan). 

17 (b) FILING OF ELECTION.—A complainant with a 

18 dispute which is eligible for submission to the Early Reso19 lution Program may make the election under section 

20 5203(a)(2) to submit the dispute to mediation proceedings 

21 under the Program not later than 15 days after the date 

22 the complaint is filed with the complaint review office 

23 under section 5202(b). 

24 (c) AGREEMENT TO PARTICIPATE.— 
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1 (1) ELECTION BY CLAIMANT.—A complainant 

2 may elect participation in the mediation proceedings 

3 only by entering into a written participation agree4 ment (including an agreement to comply with the 

5 rules of the Program and consent for the complaint 

6 review office to contact the health plan regarding the 

7 agreement), and by releasing plan records to the 

8 Program for the exclusive use of the facilitator as9 signed to the dispute. 

10 (2) PARTICIPATION BY PLANS OR HEALTH BEN11 EFITS CONTRACTORS.—Each party whose participa12 tion in the mediation proceedings has been elected 

13 by a claimant pursuant to paragraph (1) shall par14 ticipate in, and cooperate fully with, the proceedings. 

15 The claims review office shall provide such party 

16 with a copy of the participation agreement described 

17 in paragraph (1), together with a written description 

18 of the Program. Such party shall submit the copy of 

19 the agreement, together with its authorized signa20 ture signifying receipt of notice of the agreement, to 

21 the claims review office, and shall include in the sub22 mission to the claims review office a copy of the 

23 written record of the plan claims procedure com24 pleted pursuant to section 5201 with respect to the 

25 dispute and all relevant plan documents. The rel-
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1 evant documents shall include all documents under 

2 which the plan is or was administered or operated, 

3 including copies of any insurance contracts under 

4 which benefits are or were provided and any fee or 

5 reimbursement schedules for health care providers. 

6 SEC. 5213. MEDIATION PROCEEDINGS. 

7 (a) ROLE OF FACILITATOR.—In the course of medi8 ation proceedings under the Early Resolution Program, 

9 the facilitator assigned to the dispute shall prepare the 

10 parties for a conference regarding the dispute and serve 

11 as a neutral mediator at such conference, with the goal 

12 of achieving settlement of the dispute. 

13 (b) PREPARATIONS FOR CONFERENCE.—In advance 

14 of convening the conference, after identifying the nec15 essary parties and confirming that the case is eligible for 

16 the Program, the facilitator shall analyze the record of the 

17 claims procedure conducted pursuant to section 5201 and 

18 any position papers submitted by the parties to determine 

19 if further case development is needed to clarify the legal 

20 and factual issues in dispute, and whether there is any 

21 need for additional information and documents. 

22 (c) CONFERENCE.—Upon convening the conference, 

23 the facilitator shall assist the parties in identifying undis24 puted issues and exploring settlement. If settlement is 

25 reached, the facilitator shall assist in the preparation of 
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1 a written settlement agreement. If no settlement is 

2 reached, the facilitator shall present the facilitator’s eval3 uation, including an assessment of the parties’ positions, 

4 the likely outcome of further administrative action or liti5 gation, and suggestions for narrowing the issues in dis6 pute. 

7 (d) TIME LIMIT.—The facilitator shall ensure that 

8 mediation proceedings with respect to any dispute under 

9 the Early Resolution Program shall be completed within 

10 120 days after the election to participate. The parties may 

11 agree to one extension of the proceedings by not more than 

12 30 days if the proceedings are suspended to obtain an 

13 agency ruling or to reconvene the conference in a subse14 quent session. 

15 (e) INAPPLICABILITY OF FORMAL RULES.—Formal 

16 rules of evidence shall not apply to mediation proceedings 

17 under the Early Resolution Program. All statements made 

18 and evidence presented in the proceedings shall be admis19 sible in the proceedings. The facilitator shall be the sole 

20 judge of the proper weight to be afforded to each submis21 sion. The parties to mediation proceedings under the Pro22 gram shall not be required to make statements or present 

23 evidence under oath. 
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1 (f) REPRESENTATION.—Parties may participate pro 

2 se or be represented by attorneys throughout the pro3 ceedings of the Early Resolution Program. 

4 (g) CONFIDENTIALITY.— 

5 (1) IN GENERAL.—Under regulations of the 

6 Secretary of Labor, rules similar to the rules under 

7 section 574 of title 5, United States Code (relating 

8 to confidentiality in dispute resolution proceedings) 

9 shall apply to the mediation proceedings under the 

10 Early Resolution Program. 

11 (2) CIVIL REMEDIES.—The Secretary of Labor 

12 may assess a civil penalty against any person who 

13 discloses information in violation of the regulations 

14 prescribed pursuant to paragraph (1) in the amount 

15 of three times the amount of the claim involved. The 

16 Secretary of Labor may bring a civil action to en17 force such civil penalty in any court of competent ju18 risdiction. 

19 SEC. 5214. LEGAL EFFECT OF PARTICIPATION IN MEDI20 ATION PROCEEDINGS. 

21 (a) PROCESS NONBINDING.—Findings and conclu22 sions made in the mediation proceedings of the Early Res23 olution Program shall be treated as advisory in nature and 

24 nonbinding. Except as provided in subsection (b), the 
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1 rights of the parties under subpart A shall not be affected 

2 by participation in the Program. 

3 (b) RESOLUTION THROUGH SETTLEMENT AGREE4 MENT.—If a case is settled through participation in medi5 ation proceedings under the Program, the facilitator shall 

6 assist the parties in drawing up an agreement which shall 

7 constitute, upon signature of the parties, a binding con8 tract between the parties, which shall be enforceable under 

9 section 5215. 

10 (c) PRESERVATION OF RIGHTS OF NON-PARTIES.— 

11 The settlement agreement shall not have the effect of 

12 waiving or otherwise affecting any rights to review under 

13 subpart A, or any other right under this Act or the plan, 

14 with respect to any person who is not a party to the settle15 ment agreement. 

16 SEC. 5215. ENFORCEMENT OF SETTLEMENT AGREEMENTS. 

17 (a) ENFORCEMENT.—Any party to a settlement 

18 agreement entered pursuant to mediation proceedings 

19 under this subpart may petition any court of competent 

20 jurisdiction for the enforcement of the agreement, by filing 

21 in the court a written petition praying that the agreement 

22 be enforced. In such a proceeding, the order of the hearing 

23 officer shall not be subject to review. 

24 (b) COURT REVIEW.—It shall be the duty of the court 

25 to advance on the docket and to expedite to the greatest 
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1 possible extent the disposition of any petition filed under 

2 this section, with due deference to the role of settlement 

3 agreements under this part in achieving prompt resolution 

4 of disputes involving health plans. 

5 (c) AWARDING OF ATTORNEY’S FEES AND OTHER

6 COSTS AND EXPENSES.—In any action by an individual 

7 enrolled under a health plan for court enforcement under 

8 this section, a prevailing plaintiff shall be entitled to rea9 sonable costs and expenses (including a reasonable attor10 ney’s fee and reasonable expert witness fees) on the 

11 charges on which the plaintiff prevails. 

12 PART 2—ADDITIONAL REMEDIES AND 

13 ENFORCEMENT PROVISIONS 

14 SEC. 5231. JUDICIAL REVIEW OF FEDERAL ACTION ON 

15 STATE SYSTEMS. 

16 (a) IN GENERAL.—Any State or alliance that is ag17 grieved by a determination by the National Health Board 

18 under subpart B of part 1 of subtitle F of title I shall 

19 be entitled to judicial review of such determination in ac20 cordance with this section. 

21 (b) JUDICIAL REVIEW.— 

22 (1) JURISDICTION.—The courts of appeals of 

23 the United States (other than the United States 

24 Court of Appeals for the Federal Circuit) shall have 

25 jurisdiction to review a determination described in 
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1 subsection (a), to affirm the determination, or to set 

2 it aside, in whole or in part. A judgment of a court 

3 of appeals in such an action shall be subject to re4 view by the Supreme Court of the United States 

5 upon certiorari or certification as provided in section 

6 1254 of title 28, United States Code. 

7 (2) PETITION FOR REVIEW.—A State or an alli8 ance that desires judicial review of a determination 

9 described in subsection (a) shall, within 30 days 

10 after it has been notified of such determination, file 

11 with the United States court of appeals for the cir12 cuit in which the State or alliance is located a peti13 tion for review of such determination. A copy of the 

14 petition shall be transmitted by the clerk of the 

15 court to the National Health Board, and the Board 

16 shall file in the court the record of the proceedings 

17 on which the determination or action was based, as 

18 provided in section 2112 of title 28, United States 

19 Code. 

20 (3) SCOPE OF REVIEW.—The findings of fact of 

21 the National Health Board, if supported by substan22 tial evidence, shall be conclusive; but the court, for 

23 good cause shown, may remand the case to the 

24 Board to take further evidence, and the Board may 

25 make new or modified findings of fact and may mod-
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1 ify its previous action, and shall certify to the court 

2 the record of the further proceedings. Such new or 

3 modified findings of fact shall likewise be conclusive 

4 if supported by substantial evidence. 

5 SEC. 5232. ADMINISTRATIVE AND JUDICIAL REVIEW RELAT6 ING TO COST CONTAINMENT. 

7 There shall be no administrative or judicial review of 

8 any determination by the National Health Board respect9 ing any matter under subtitle A of title VI. 

10 SEC. 5233. CIVIL ENFORCEMENT. 

11 Unless otherwise provided in this Act, the district 

12 courts of the United States shall have jurisdiction of civil 

13 actions brought by— 

14 (1) the Secretary of Labor to enforce any final 

15 order of such Secretary or to collect any civil mone16 tary penalty assessed by such Secretary under this 

17 Act; and 

18 (2) the Secretary of Health and Human Serv19 ices to enforce any final order of such Secretary or 

20 to collect any civil monetary penalty assessed by 

21 such Secretary under this Act. 

22 SEC. 5234. PRIORITY OF CERTAIN BANKRUPTCY CLAIMS. 

23 Section 507(a)(8) of title 11, United States Code, is 

24 amended to read as follows: 

25 ‘‘(8) Eighth, allowed unsecured claims— 
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1 ‘‘(A) based upon any commitment by the 

2 debtor to the Federal Deposit Insurance Cor3 poration, the Resolution Trust Corporation, the 

4 Director of the Office of Thrift Supervision, the 

5 Comptroller of the Currency, or the Board of 

6 Governors of the Federal Reserve System, or 

7 their predecessors or successors, to maintain 

8 the capital of an insured depository institution; 

9 ‘‘(B) for payments under subtitle B of title 

10 IV of the Health Security Act owed to a re11 gional alliance (as defined in section 1301 of 

12 such Act); 

13 ‘‘(C) for payments owed to a corporate alli14 ance health plan under trusteeship of the Sec15 retary of Labor under section 1395 of the 

16 Health Security Act; or 

17 ‘‘(D) for assessments and related amounts 

18 owed to the Secretary of Labor under section 

19 1397 of the Health Security Act.’’. 

20 SEC. 5235. PRIVATE RIGHT TO ENFORCE STATE RESPON21 SIBILITIES. 

22 The failure of a participating State to carry out a 

23 responsibility applicable to participating States under this 

24 Act constitutes a deprivation of rights secured by this Act 

25 for the purposes of section 1977 of the Revised Statutes 
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1 of the United States (42 U.S.C. 1983). In an action 

2 brought under such section, the court shall exercise juris3 diction without regard to whether the aggrieved person 

4 has exhausted any administrative or other remedies that 

5 may be provided by law. 

6 SEC. 5236. PRIVATE RIGHT TO ENFORCE FEDERAL RESPON7 SIBILITIES IN OPERATING A SYSTEM IN A 

8 STATE. 

9 (a) IN GENERAL.—The failure of the Secretary of 

10 Health and Human Services to carry out a responsibility 

11 under section 1522 (relating to operation of an alliance 

12 system in a State) confers an enforceable right of action 

13 on any person who is aggrieved by such failure. Such a 

14 person may commence a civil action against the Secretary 

15 in an appropriate State court or district court of the 

16 United States. 

17 (b) EXHAUSTION OF REMEDIES.—In an action under 

18 subsection (a), the court shall exercise jurisdiction without 

19 regard to whether the aggrieved person has exhausted any 

20 administrative or other remedies that may be provided by 

21 law. 

22 (c) RELIEF.—In an action under subsection (a), if 

23 the court finds that a failure described in such subsection 

24 has occurred, the aggrieved person may recover compen-
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1 satory and punitive damages and the court may order any 

2 other appropriate relief. 

3 (d) ATTORNEY’S FEES.—In an action under sub4 section (a), the court, in its discretion, may allow the pre5 vailing party, other than the United States, a reasonable 

6 attorney’s fee (including expert fees) as part of the costs, 

7 and the United States shall be liable for costs the same 

8 as a private person. 

9 SEC. 5237. PRIVATE RIGHT TO ENFORCE RESPONSIBILITIES 

10 OF ALLIANCES. 

11 (a) IN GENERAL.—The failure of a regional alliance 

12 or a corporate alliance to carry out a responsibility appli13 cable to the alliance under this Act confers an enforceable 

14 right of action on any person who is aggrieved by such 

15 failure. Such a person may commence a civil action 

16 against the alliance in an appropriate State court or dis17 trict court of the United States. 

18 (b) EXHAUSTION OF REMEDIES.— 

19 (1) IN GENERAL.—Except as provided in para20 graph (2), in an action under subsection (a) the 

21 court may not exercise jurisdiction until the ag22 grieved person has exhausted any administrative 

23 remedies that may be provided by law. 

24 (2) NO EXHAUSTION REQUIRED.—In an action 

25 under subsection (a), the court shall exercise juris-
927 

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1 diction without regard to whether the aggrieved per2 son has exhausted any administrative or other rem3 edies that may be provided by law if the action re4 lates to— 

5 (A) whether the person is an eligible indi6 vidual within the meaning of section 1001(c); 

7 (B) whether the person is eligible for a 

8 premium discount under subpart A of part 1 of 

9 subtitle B of title VI; 

10 (C) whether the person is eligible for a re11 duction in cost sharing under subpart D of part 

12 3 of subtitle D of title I; or 

13 (D) enrollment or disenrollment in a health 

14 plan. 

15 (c) RELIEF.—In an action under subsection (a), if 

16 the court finds that a failure described in such subsection 

17 has occurred, the aggrieved person may recover compen18 satory and punitive damages and the court may order any 

19 other appropriate relief. 

20 (d) ATTORNEY’S FEES.—In any action under sub21 section (a), the court, in its discretion, may allow the pre22 vailing party, other than the United States, a reasonable 

23 attorney’s fee (including expert fees) as part of the costs, 

24 and the United States shall be liable for costs the same 

25 as a private person. 
928 

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1 SEC. 5238. DISCRIMINATION CLAIMS. 

2 (a) CIVIL ACTION BY AGGRIEVED PERSON.— 

3 (1) IN GENERAL.—Any person who is aggrieved 

4 by the failure of a health plan to comply with section 

5 1402(c) may commence a civil action against the 

6 plan in an appropriate State court or district court 

7 of the United States. 

8 (2) STANDARDS.—The standards used to deter9 mine whether a violation has occurred in a complaint 

10 alleging discrimination on the basis of age or dis11 ability under section 1402(c) shall be the standards 

12 applied under the Age Discrimination Act of 1975 

13 (42 U.S.C. 6101 et seq.) and the Americans with 

14 Disabilities Act of 1990 (42 U.S.C. 12101 et seq.). 

15 (3) RELIEF.—In an action under paragraph 

16 (1), if the court finds that the health plan has failed 

17 to comply with section 1402(c), the aggrieved person 

18 may recover compensatory and punitive damages 

19 and the court may order any other appropriate re20 lief. 

21 (4) ATTORNEY’S FEES.—In any action under 

22 paragraph (1), the court, in its discretion, may allow 

23 the prevailing party, other than the United States, 

24 a reasonable attorney’s fee (including expert fees) as 

25 part of the costs, and the United States shall be lia26 ble for costs the same as a private person. 
929 

Title V, Subtitle C 

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1 (b) ACTION BY SECRETARY.—Whenever the Sec2 retary of Health and Human Services finds that a health 

3 plan has failed to comply with section 1402(c), or with 

4 an applicable regulation issued under such section, the 

5 Secretary shall notify the plan. If within a reasonable pe6 riod of time the health plan fails or refuses to comply, 

7 the Secretary may— 

8 (1) refer the matter to the Attorney General 

9 with a recommendation that an appropriate civil ac10 tion be instituted; 

11 (2) terminate the participation of the health 

12 plan in an alliance; or 

13 (3) take such other action as may be provided 

14 by law. 

15 (c) ACTION BY ATTORNEY GENERAL.—When a mat16 ter is referred to the Attorney General under subsection 

17 (b)(1), the Attorney General may bring a civil action in 

18 a district court of the United States for such relief as may 

19 be appropriate, including injunctive relief. In a civil action 

20 under this section, the court— 

21 (1) may grant any equitable relief that the 

22 court considers to be appropriate; 

23 (2) may award such other relief as the court 

24 considers to be appropriate, including compensatory 

25 and punitive damages; and 
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Title V, Subtitle C 

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1 (3) may, to vindicate the public interest when 

2 requested by the Attorney General, assess a civil 

3 money penalty against the health plan in an 

4 amount— 

5 (A) not exceeding $50,000 for a first viola6 tion; and 

7 (B) not exceeding $100,000 for any subse8 quent violation. 

9 SEC. 5239. NONDISCRIMINATION IN FEDERALLY ASSISTED 

10 PROGRAMS. 

11 Federal payments to regional alliances under part 2 

12 of subtitle C of title VI shall be treated as Federal finan13 cial assistance for purposes of section 504 of the Rehabili14 tation Act of 1973 (29 U.S.C. 794), section 303 of the 

15 Age Discrimination Act of 1975 (42 U.S.C. 6102), and 

16 section 601 of the Civil Rights Act of 1964 (42 U.S.C. 

17 2000d). 

18 SEC. 5240. CIVIL ACTION BY ESSENTIAL COMMUNITY PRO19 VIDER. 

20 (a) IN GENERAL.—An electing essential community 

21 provider (as defined in section 1431(d)) who is aggrieved 

22 by the failure of a health plan to fulfill a duty imposed 

23 on the plan by section 1431 may commence a civil action 

24 against the plan in an appropriate State court or district 

25 court of the United States. 
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1 (b) RELIEF.—In an action under subsection (a), if 

2 the court finds that the health plan has failed to fulfill 

3 a duty imposed on the plan by section 1431, the electing 

4 essential community provider may recover compensatory 

5 damages and the court may order any other appropriate 

6 relief. 

7 (c) ATTORNEY’S FEES.—In any action under sub8 section (a), the court, in its discretion, may allow the pre9 vailing party, other than the United States, a reasonable 

10 attorney’s fee (including expert fees) as part of the costs, 

11 and the United States shall be liable for costs the same 

12 as a private person. 

13 SEC. 5241. FACIAL CONSTITUTIONAL CHALLENGES. 

14 (a) JURISDICTION.—The United States District 

15 Court for the District of Columbia shall have original and 

16 exclusive jurisdiction of any civil action brought to invali17 date this Act or a provision of this Act on the ground of 

18 its being repugnant to the Constitution of the United 

19 States on its face and for every purpose. In any action 

20 described in this subsection, the district court may not 

21 grant any temporary order or preliminary injunction re22 straining the enforcement, operation, or execution of this 

23 Act or any provision of this Act. 
932 

Title V, Subtitle C 

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1 (b) STATUTE OF LIMITATIONS.—An action described 

2 in subsection (a) shall be commenced not later than 1 year 

3 after the date of the enactment of this Act. 

4 (c) CONVENING OF THREE-JUDGE COURT.—An ac5 tion described in subsection (a) shall be heard and deter6 mined by a district court of three judges in accordance 

7 with section 2284 of title 28, United States Code. 

8 (d) CONSOLIDATION.—When actions described in 

9 subsection (a) involving a common question of law or fact 

10 are pending before a district court, the court shall order 

11 all the actions consolidated. 

12 (e) DIRECT APPEAL TO SUPREME COURT.—In any 

13 action described in subsection (a), an appeal may be taken 

14 directly to the Supreme Court of the United States from 

15 any final judgment, decree, or order in which the district 

16 court— 

17 (1) holds this Act or any provision of this Act 

18 invalid; and 

19 (2) makes a determination that its holding will 

20 materially undermine the application of the Act as 

21 whole. 

22 (f) CONSTRUCTION.—This section does not limit— 

23 (1) the right of any person— 

24 (A) to a litigation concerning the Act or 

25 any portion of the Act; or 
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Title V, Subtitle C 

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1 (B) to petition the Supreme Court for re2 view of any holding of a district court by writ 

3 of certiorari at any time before the rendition of 

4 judgment in a court of appeals; or 

5 (2) the authority of the Supreme Court to grant 

6 a writ of certiorari for the review described in para7 graph (1)(B). 

8 SEC. 5242. TREATMENT OF PLANS AS PARTIES IN CIVIL AC9 TIONS. 

10 (a) IN GENERAL.—A health plan may sue or be sued 

11 under this Act as an entity. Service of summons, sub12 poena, or other legal process of a court or hearing officer 

13 upon a trustee or an administrator of any such plan in 

14 his capacity as such shall constitute service upon the plan. 

15 In a case where a plan has not designated in applicable 

16 plan documents an individual as agent for the service of 

17 legal process, service upon the Secretary of Health and 

18 Human Services (in the case of a regional alliance health 

19 plan) or the Secretary of Labor (in the case of a corporate 

20 alliance health plan) shall constitute such service. The 

21 Secretary, not later than 15 days after receipt of service 

22 under the preceding sentence, shall notify the adminis23 trator or any trustee of the plan of receipt of such service. 

24 (b) OTHER PARTIES.—Any money judgment under 

25 this Act against a plan referred to in subsection (a) shall 
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Title V, Subtitle D 

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1 be enforceable only against the plan as an entity and shall 

2 not be enforceable against any other person unless liability 

3 against such person is established in his individual capac4 ity under this Act. 

5 SEC. 5243. GENERAL NONPREEMPTION OF EXISTING 

6 RIGHTS AND REMEDIES. 

7 Nothing in this title shall be construed to deny, im8 pair, or otherwise adversely affect a right or remedy avail9 able under law to any person on the date of the enactment 

10 of this Act or thereafter, except to the extent the right 

11 or remedy is inconsistent with this title. 

12 Subtitle D—Medical Malpractice 

13 PART 1—LIABILITY REFORM 

14 SEC. 5301. FEDERAL TORT REFORM. 

15 (a) APPLICABILITY.— 

16 (1) IN GENERAL.—Except as provided in sec17 tion 5302, this part shall apply with respect to any 

18 medical malpractice liability action brought in any 

19 State or Federal court, except that this part shall 

20 not apply to a claim or action for damages arising 

21 from a vaccine-related injury or death to the extent 

22 that title XXI of the Public Health Service Act ap23 plies to the claim or action. 

24 (2) PREEMPTION.—The provisions of this part 

25 shall preempt any State law to the extent such law 
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1 is inconsistent with the limitations contained in such 

2 provisions. The provisions of this part shall not pre3 empt any State law that provides for defenses or 

4 places limitations on a person’s liability in addition 

5 to those contained in this subtitle, places greater 

6 limitations on the amount of attorneys’ fees that can 

7 be collected, or otherwise imposes greater restric8 tions than those provided in this part. 

9 (3) EFFECT ON SOVEREIGN IMMUNITY AND

10 CHOICE OF LAW OR VENUE.—Nothing in this part 

11 shall be construed to— 

12 (A) waive or affect any defense of sov13 ereign immunity asserted by any State under 

14 any provision of law; 

15 (B) waive or affect any defense of sov16 ereign immunity asserted by the United States; 

17 (C) affect the applicability of any provision 

18 of the Foreign Sovereign Immunities Act of 

19 1976; 

20 (D) preempt State choice-of-law rules with 

21 respect to claims brought by a foreign nation or 

22 a citizen of a foreign nation; or 

23 (E) affect the right of any court to trans24 fer venue or to apply the law of a foreign nation 

25 or to dismiss a claim of a foreign nation or of 
936 

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1 a citizen of a foreign nation on the ground of 

2 inconvenient forum. 

3 (4) FEDERAL COURT JURISDICTION NOT ES4 TABLISHED ON FEDERAL QUESTION GROUNDS.— 

5 Nothing in this part shall be construed to establish 

6 any jurisdiction in the district courts of the United 

7 States over medical malpractice liability actions on 

8 the basis of section 1331 or 1337 of title 28, United 

9 States Code. 

10 (b) DEFINITIONS.—In this subtitle, the following 

11 definitions apply: 

12 (1) ALTERNATIVE DISPUTE RESOLUTION SYS13 TEM; ADR.—The term ‘‘alternative dispute resolu14 tion system’’ or ‘‘ADR’’ means a system that pro15 vides for the resolution of medical malpractice claims 

16 in a manner other than through medical malpractice 

17 liability actions. 

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

19 any person who alleges a medical malpractice claim, 

20 and any person on whose behalf such a claim is al21 leged, including the decedent in the case of an action 

22 brought through or on behalf of an estate. 

23 (3) HEALTH CARE PROFESSIONAL.—The term 

24 ‘‘health care professional’’ means any individual who 

25 provides health care services in a State and who is 
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1 required by the laws or regulations of the State to 

2 be licensed or certified by the State to provide such 

3 services in the State. 

4 (4) HEALTH CARE PROVIDER.—The term 

5 ‘‘health care provider’’ means any organization or 

6 institution that is engaged in the delivery of health 

7 care services in a State and that is required by the 

8 laws or regulations of the State to be licensed or cer9 tified by the State to engage in the delivery of such 

10 services in the State. 

11 (5) INJURY.—The term ‘‘injury’’ means any ill12 ness, disease, or other harm that is the subject of 

13 a medical malpractice liability action or a medical 

14 malpractice claim. 

15 (6) MEDICAL MALPRACTICE LIABILITY AC16 TION.—The term ‘‘medical malpractice liability ac17 tion’’ means a civil action brought in a State or Fed18 eral court against a health care provider or health 

19 care professional (regardless of the theory of liability 

20 on which the claim is based) in which the plaintiff 

21 alleges a medical malpractice claim. 

22 (7) MEDICAL MALPRACTICE CLAIM.—The term 

23 ‘‘medical malpractice claim’’ means a claim brought 

24 against a health care provider or health care profes25 sional in which a claimant alleges that injury was 
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1 caused by the provision of (or the failure to provide) 

2 health care services, except that such term does not 

3 include— 

4 (A) any claim based on an allegation of an 

5 intentional tort; or 

6 (B) any claim based on an allegation that 

7 a product is defective that is brought against 

8 any individual or entity that is not a health 

9 care professional or health care provider. 

10 SEC. 5302. PLAN-BASED ALTERNATIVE DISPUTE RESOLU11 TION MECHANISMS. 

12 (a) APPLICATION TO MALPRACTICE CLAIMS UNDER

13 PLANS.—In the case of any medical malpractice claim 

14 arising from the provision of (or failure to provide) health 

15 care services to an individual enrolled in a regional alliance 

16 health plan or a corporate alliance health plan, no medical 

17 malpractice liability action may be brought with respect 

18 to such claim until the final resolution of the claim under 

19 the alternative dispute resolution system adopted by the 

20 plan under subsection (b). 

21 (b) ADOPTION OF MECHANISM BY PLANS.—Each re22 gional alliance health plan and corporate alliance health 

23 plan shall— 

24 (1) adopt at least one of the alternative dispute 

25 resolution methods specified under subsection (c) for 
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1 the resolution of medical malpractice claims arising 

2 from the provision of (or failure to provide) health 

3 care services to individuals enrolled in the plan; and 

4 (2) disclose to enrollees (and potential enroll5 ees), in a manner specified by the regional alliance 

6 or the corporate alliance, the availability and proce7 dures for consumer grievances under the plan, in8 cluding the alternative dispute resolution method or 

9 methods adopted under this subsection. 

10 (c) SPECIFICATION OF PERMISSIBLE ALTERNATIVE

11 DISPUTE RESOLUTION METHODS.— 

12 (1) IN GENERAL.—The Board shall, by regula13 tion, develop alternative dispute resolution methods 

14 for the use by regional alliance and corporate alli15 ance health plans in resolving medical malpractice 

16 claims under subsection (a). Such methods shall in17 clude at least the following: 

18 (A) ARBITRATION.—The use of arbitra19 tion. 

20 (B) MEDIATION.—The use of required me21 diation. 

22 (C) EARLY OFFERS OF SETTLEMENT.— 

23 The use of a process under which parties are 

24 required to make early offers of settlement. 
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1 (2) STANDARDS FOR ESTABLISHING METH2 ODS.—In developing alternative dispute resolution 

3 methods under paragraph (1), the Board shall as4 sure that the methods promote the resolution of 

5 medical malpractice claims in a manner that— 

6 (A) is affordable for the parties involved; 

7 (B) provides for timely resolution of 

8 claims; 

9 (C) provides for the consistent and fair 

10 resolution of claims; and 

11 (D) provides for reasonably convenient ac12 cess to dispute resolution for individuals en13 rolled in plans. 

14 (d) FURTHER REDRESS.—A plan enrollee dissatisfied 

15 with the determination reached as a result of an alter16 native dispute resolution method applied under this sec17 tion may, after the final resolution of the enrollee’s claim 

18 under the method, bring a cause of action to seek damages 

19 or other redress with respect to the claim to the extent 

20 otherwise permitted under State law. 

21 SEC. 5303. REQUIREMENT FOR CERTIFICATE OF MERIT. 

22 (a) REQUIRING SUBMISSION WITH COMPLAINT.—No 

23 medical malpractice liability action may be brought by any 

24 individual unless, at the time the individual brings the ac-
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1 tion (except as provided in subsection (b)(1)), the indi2 vidual submits an affidavit— 

3 (1) declaring that the individual (or the individ4 ual’s attorney) has consulted and reviewed the facts 

5 of the action with a qualified specialist (as defined 

6 in subsection (c)); 

7 (2) including a written report by a qualified 

8 specialist that clearly identifies the individual and 

9 that includes the specialist’s determination that, 

10 after a review of the medical record and other rel11 evant material, there is a reasonable and meritorious 

12 cause for the filing of the action against the defend13 ant; and 

14 (3) on the basis of the qualified specialist’s re15 view and consultation, that the individual (or the in16 dividual’s attorney) has concluded that there is a 

17 reasonable and meritorious cause for the filing of the 

18 action. 

19 (b) EXTENSION IN CERTAIN INSTANCES.— 

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

21 subsection (a) shall not apply with respect to an in22 dividual who brings a medical malpractice liability 

23 action without submitting an affidavit described in 

24 such subsection if— 
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1 (A) the individual is unable to obtain the 

2 affidavit before the expiration of the applicable 

3 statute of limitations; or 

4 (B) at the time the individual brings the 

5 action, the individual has been unable to obtain 

6 medical records or other information necessary 

7 to prepare the affidavit requested pursuant to 

8 any applicable law. 

9 (2) DEADLINE FOR SUBMISSION WHERE EX10 TENSION APPLIES.—In the case of an individual who 

11 brings an action for which paragraph (1) applies, 

12 the action shall be dismissed unless the individual 

13 submits the affidavit described in subsection (a) not 

14 later than— 

15 (A) in the case of an action for which sub16 paragraph (A) of paragraph (1) applies, 90 

17 days after bringing the action; or 

18 (B) in the case of an action for which sub19 paragraph (B) of paragraph (1) applies, 90 

20 days after obtaining the information described 

21 in such subparagraph. 

22 (c) QUALIFIED SPECIALIST DEFINED.—In sub23 section (a), a ‘‘qualified specialist’’ means, with respect 

24 to a medical malpractice liability action, a health care pro25 fessional who— 
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1 (1) is knowledgeable of, and has expertise in, 

2 the same specialty area of practice that is the sub3 ject of the action; and 

4 (2) is reasonably believed by the individual 

5 bringing the action (or the individual’s attorney)— 

6 (A) to be knowledgeable in the relevant 

7 issues involved in the particular action, 

8 (B) to practice (or to have practiced within 

9 the preceding 6 years) or to teach (or to have 

10 taught within the preceding 6 years) in the 

11 same area of health care or medicine that is at 

12 issue in the action, and 

13 (C) to be qualified by experience or dem14 onstrated competence in the subject matter of 

15 the case. 

16 (d) SANCTIONS FOR SUBMITTING FALSE ALLEGA17 TIONS.—Upon the motion of any party or its own initia18 tive, the court in a medical malpractice liability action may 

19 impose a sanction on a party or the party’s attorney (or 

20 both), including a requirement that the party reimburse 

21 the other party to the action for costs and reasonable at22 torney’s fees, if any information contained in an affidavit 

23 described in subsection (a) is submitted without reason24 able cause and is found to be untrue. 
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1 SEC. 5304. LIMITATION ON AMOUNT OF ATTORNEY’S CON2 TINGENCY FEES. 

3 (a) IN GENERAL.—An attorney who represents, on 

4 a contingency fee basis, a plaintiff in a medical mal5 practice liability action may not charge, demand, receive, 

6 or collect for services rendered in connection with such ac7 tion (including the resolution of the claim that is the sub8 ject of the action under any alternative dispute resolution 

system) in excess of 331 9 ⁄3 percent of the total amount re10 covered by judgment or settlement in such action. 

11 (b) CALCULATION OF PERIODIC PAYMENTS.—In the 

12 event that a judgment or settlement includes periodic or 

13 future payments of damages, the amount recovered for 

14 purposes of computing the limitation on the contingency 

15 fee under subsection (a) shall be based on the cost of the 

16 annuity or trust established to make the payments. In any 

17 case in which an annuity or trust is not established to 

18 make such payments, such amount shall be based on the 

19 present value of the payments. 

20 (c) CONTINGENCY FEE DEFINED.—As used in this 

21 section, the term ‘‘contingency fee’’ means any fee for pro22 fessional legal services which is, in whole or in part, con23 tingent upon the recovery of any amount of damages, 

24 whether through judgment or settlement. 
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1 SEC. 5305. REDUCTION OF AWARDS FOR RECOVERY FROM 

2 COLLATERAL SOURCES. 

3 The total amount of damages recovered by a plaintiff 

4 in a medical malpractice liability action shall be reduced 

5 by the amount of any past or future payment which the 

6 plaintiff has received or for which the plaintiff is eligible 

7 on account of the same injury for which the damages are 

8 awarded, including payment under— 

9 (1) Federal or State disability or sickness pro10 grams; 

11 (2) Federal, State, or private health insurance 

12 programs; 

13 (3) private disability insurance programs; 

14 (4) employer wage continuation programs; and 

15 (5) any other program, if the payment is in16 tended to compensate the plaintiff for the same in17 jury for which damages are awarded. 

18 SEC. 5306. PERIODIC PAYMENT OF AWARDS. 

19 At the request of any party to a medical malpractice 

20 liability action, the defendant shall not be required to pay 

21 damages in a single, lump-sum payment, but shall be per22 mitted to make such payments periodically based on such 

23 schedule as the court considers appropriate, taking into 

24 account the periods for which the injured party will need 

25 medical and other services. 
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1 PART 2—OTHER PROVISIONS RELATING TO 

2 MEDICAL MALPRACTICE LIABILITY 

3 SEC. 5311. ENTERPRISE LIABILITY DEMONSTRATION 

4 PROJECT. 

5 (a) ESTABLISHMENT.—Not later than January 1, 

6 1996, the Secretary shall establish a demonstration 

7 project under which the Secretary shall provide funds (in 

8 such amount as the Secretary considers appropriate) to 

9 one or more eligible States to demonstrate whether sub10 stituting liability for medical malpractice on the part of 

11 the health plan in which a physician participates for the 

12 personal liability of the physician will result in improve13 ments in the quality of care provided under the plan, re14 ductions in defensive medical practices, and better risk 

15 management. 

16 (b) ELIGIBILITY OF STATE.—A State is eligible to 

17 participate in the demonstration project established under 

18 subsection (a) if the State submits an application to the 

19 Secretary (at such time and in such form as the Secretary 

20 may require) containing such information and assurances 

21 as the Secretary may require, including assurances that 

22 the State— 

23 (1) has entered into an agreement with a health 

24 plan (other than a fee-for-service plan) operating in 

25 the State under which the plan assumes legal liabil26 ity with respect to any medical malpractice claim 
947 

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1 arising from the provision of (or failure to provide) 

2 services under the plan by any physician partici3 pating in the plan; 

4 (2) has provided that, under the law of the 

5 State, a physician participating in a plan that has 

6 entered into an agreement with the State under 

7 paragraph (1) may not be liable in damages or oth8 erwise for such a claim and the plan may not require 

9 such physician to indemnify the plan for any such li10 ability; and 

11 (3) will provide the Secretary with such reports 

12 on the operation of the project as the Secretary may 

13 require. 

14 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

15 are authorized to be appropriated such sums as may be 

16 necessary to carry out demonstration projects under this 

17 section. 

18 SEC. 5312. PILOT PROGRAM APPLYING PRACTICE GUIDE19 LINES TO MEDICAL MALPRACTICE LIABILITY 

20 ACTIONS. 

21 (a) ESTABLISHMENT.—Not later than 1 year after 

22 the Secretary determines that appropriate practice guide23 lines are available, the Secretary shall establish a pilot 

24 program under which the Secretary shall provide funds (in 

25 such amount as the Secretary considers appropriate) to 
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1 one or more eligible States to determine the effect of ap2 plying practice guidelines in the resolution of medical mal3 practice liability actions. 

4 (b) ELIGIBILITY OF STATE.—A State is eligible to 

5 participate in the pilot program established under sub6 section (a) if the State submits an application to the Sec7 retary (at such time and in such form as the Secretary 

8 may require) containing— 

9 (1) assurances that, under the law of the State, 

10 in the resolution of any medical malpractice liability 

11 action, it shall be a complete defense to any allega12 tion that a party against whom the action is filed 

13 was negligent that, in the provision of (or the failure 

14 to provide) the services that are the subject of the 

15 action, the party followed the appropriate practice 

16 guideline established by the National Quality Man17 agement Program under subtitle A; and 

18 (2) such other information and assurances as 

19 the Secretary may require. 

20 (c) REPORTS TO CONGRESS.—Not later than 3 

21 months after the last day of each year for which the pilot 

22 program established under subsection (a) is in effect, the 

23 Secretary shall submit a report to Congress describing the 

24 operation of the program during the previous year and 

25 containing such recommendations as the Secretary con-
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1 siders appropriate, including recommendations relating to 

2 revisions to the laws governing medical malpractice liabil3 ity. 

4 Subtitle E—Fraud and Abuse 

5 PART 1—ESTABLISHMENT OF ALL-PAYER 

6 HEALTH CARE FRAUD AND ABUSE CONTROL 

7 PROGRAM 

8 SEC. 5401. ALL-PAYER HEALTH CARE FRAUD AND ABUSE 

9 CONTROL PROGRAM. 

10 (a) IN GENERAL.—Not later than January 1, 1996, 

11 the Secretary (acting through the Inspector General of the 

12 Department of Health and Human Services) and the At13 torney General shall establish a program— 

14 (1) to coordinate the functions of the Attorney 

15 General, the Secretary, and other organizations with 

16 respect to the prevention, detection, and control of 

17 health care fraud and abuse, 

18 (2) to conduct investigations, audits, evalua19 tions, and inspections relating to the delivery of and 

20 payment for health care in the United States, and 

21 (3) to facilitate the enforcement of this subtitle 

22 and other statutes applicable to health care fraud 

23 and abuse. 

24 (b) COORDINATION WITH LAW ENFORCEMENT

25 AGENCIES.—In carrying out the program under sub-
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1 section (a), the Secretary and Attorney General shall con2 sult with, and arrange for the sharing of data and re3 sources with Federal, State and local law enforcement 

4 agencies, State Medicaid Fraud Control Units, and State 

5 agencies responsible for the licensing and certification of 

6 health care providers. 

7 (c) COORDINATION WITH HEALTH ALLIANCES AND

8 HEALTH PLANS.—In carrying out the program under 

9 subsection (a), the Secretary and Attorney General shall 

10 consult with, and arrange for the sharing of data with rep11 resentatives of health alliances and health plans. 

12 (d) AUTHORITIES OF ATTORNEY GENERAL AND IN13 SPECTOR GENERAL.—In carrying out duties under sub14 section (a), the Attorney General and the Inspector Gen15 eral are authorized— 

16 (1) to conduct, supervise, and coordinate audits, 

17 civil and criminal investigations, inspections, and 

18 evaluations relating to the program established 

19 under such subsection; and 

20 (2) to have access (including on-line access as 

21 requested and available) to all records available to 

22 health alliances and health plans relating to the ac23 tivities described in paragraph (1) (subject to re24 strictions based on the confidentiality of certain in25 formation under part 2 of subtitle B). 
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1 (e) QUALIFIED IMMUNITY FOR PROVIDING INFORMA2 TION.—The provisions of section 1157(a) of the Social Se3 curity Act (relating to limitation on liability) shall apply 

4 to a person providing information or communications to 

5 the Secretary or Attorney General in conjunction with 

6 their performance of duties under this section, in the same 

7 manner as such section applies to information provided 

8 to organizations with a contract under part B of title XI 

9 of such Act. 

10 (f) AUTHORIZATIONS OF APPROPRIATIONS FOR IN11 VESTIGATORS AND OTHER PERSONNEL.—In addition to 

12 any other amounts authorized to be appropriated to the 

13 Secretary and the Attorney General for health care anti14 fraud and abuse activities for a fiscal year, there are au15 thorized to be appropriated such additional amounts as 

16 may be necessary to enable the Secretary and the Attorney 

17 General to conduct investigations, audits, evaluations, and 

18 inspections of allegations of health care fraud and abuse 

19 and otherwise carry out the program established under 

20 subsection (a) in a fiscal year. 

21 (g) USE OF POWERS UNDER INSPECTOR GENERAL

22 ACT OF 1978.—In carrying out duties and responsibilities 

23 under the program established under subsection (a), the 

24 Inspector General is authorized to exercise all powers 
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1 granted under the Inspector General Act of 1978 to the 

2 same manner and extent as provided in that Act. 

3 (h) DEFINITION.—In this part and part 2, the term 

4 ‘‘Inspector General’’ means the Inspector General of the 

5 Department of Health and Human Services. 

6 SEC. 5402. ESTABLISHMENT OF ALL-PAYER HEALTH CARE 

7 FRAUD AND ABUSE CONTROL ACCOUNT. 

8 (a) ESTABLISHMENT.— 

9 (1) IN GENERAL.—There is hereby created on 

10 the books of the Treasury of the United States an 

11 account to be known as the ‘‘All-Payer Health Care 

12 Fraud and Abuse Control Account’’ (in this section 

13 referred to as the ‘‘Anti-Fraud Account’’). The Anti14 Fraud Account shall consist of such gifts and be15 quests as may be made as provided in paragraph (2) 

16 and such amounts as may be deposited in such Anti17 Fraud Account as provided in section 5412(d)(2) 

18 and title XI of the Social Security Act. It shall also 

19 include the following: 

20 (A) All criminal fines imposed in cases in21 volving a Federal health care offense (as de22 fined in subsection (d)). 

23 (B) Penalties and damages imposed under 

24 the False Claims Act (31 U.S.C. 3729 et seq.), 

25 in cases involving claims related to the provision 
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1 of health care items and services (other than 

2 funds awarded to a relator or for restitution). 

3 (C) Administrative penalties and assess4 ments imposed under titles XI, XVIII, and XIX 

5 of the Social Security Act and section 5412 (ex6 cept as otherwise provided by law). 

7 (D) Amounts resulting from the forfeiture 

8 of property by reason of a Federal health care 

9 offense. 

10 Any such funds received on or after the date of the 

11 enactment of this Act shall be deposited in the Anti12 Fraud Account. 

13 (2) AUTHORIZATION TO ACCEPT GIFTS.—The 

14 Anti-Fraud Account is authorized to accept on be15 half of the United States money gifts and bequests 

16 made unconditionally to the Anti-Fraud Account, for 

17 the benefit of the Anti-Fraud Account or any activ18 ity financed through the Anti-Fraud Account. 

19 (b) USE OF FUNDS.— 

20 (1) IN GENERAL.—Amounts in the Anti-Fraud 

21 Account shall be available without appropriation and 

22 until expended as determined jointly by the Sec23 retary and Attorney General in carrying out the All24 Payer Health Care Fraud and Abuse Control Pro25 gram established under section 5401 (including the 
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Title V, Subtitle E 

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1 administration of the Program), and may be used to 

2 cover costs incurred in operating the Program, in3 cluding— 

4 (A) costs of prosecuting health care mat5 ters (through criminal, civil and administrative 

6 proceedings); 

7 (B) costs of investigations (including 

8 equipment, salaries, administratively uncontrol9 lable work, travel, and training of law enforce10 ment personnel); 

11 (C) costs of financial and performance au12 dits of health care programs and operations; 

13 and 

14 (D) costs of inspections and other evalua15 tions. 

16 (2) FUNDS USED TO SUPPLEMENT AGENCY AP17 PROPRIATIONS.—It is intended that disbursements 

18 made from the Anti-Fraud Account to any Federal 

19 agency be used to increase and not supplant the re20 cipient agency’s appropriated operating budget. 

21 (c) ANNUAL REPORT.—The Secretary and the Attor22 ney General shall submit an annual report to Congress 

23 on the amount of revenue which is generated and dis24 bursed by the Anti-Fraud Account in each fiscal year. 
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1 (d) FEDERAL HEALTH CARE OFFENSE DEFINED.— 

2 The term ‘‘Federal health care offense’’ means a violation 

3 of, or a criminal conspiracy to violate— 

4 (1) sections 226, 668, 1033, or 1347 of title 

5 18, United States Code; 

6 (2) section 1128B of the Social Security Act; 

7 (3) sections 287, 371, 664, 666, 1001, 1027, 

8 1341, 1343, or 1954 of title 18, United States Code, 

9 if the violation or conspiracy relates to health care 

10 fraud; 

11 (4) sections 501 or 511 of the Employee Retire12 ment Income Security Act of 1974, if the violation 

13 or conspiracy relates to health care fraud; or 

14 (5) sections 301, 303(a)(2), or 303 (b) or (e) 

15 of the Federal Food Drug and Cosmetic Act, if the 

16 violation or conspiracy relates to health care fraud. 

17 SEC. 5403. USE OF FUNDS BY INSPECTOR GENERAL. 

18 (a) REIMBURSEMENTS FOR INVESTIGATIONS.— 

19 (1) IN GENERAL.—The Inspector General is au20 thorized to receive and retain for current use reim21 bursement for the costs of conducting investigations, 

22 when such restitution is ordered by a court, volun23 tarily agreed to by the payor, or otherwise. 

24 (2) CREDITING.—Funds received by the Inspec25 tor General as reimbursement for costs of con-
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1 ducting investigations shall be deposited to the cred2 it of the appropriation from which initially paid, or 

3 to appropriations for similar purposes currently 

4 available at the time of deposit, and shall remain 

5 available for obligation for 1 year from the date of 

6 their deposit. 

7 (3) EXCEPTION FOR FORFEITURES.—This sub8 section does not apply to investigative costs paid to 

9 the Inspector General from the Department of Jus10 tice Asset Forfeiture Fund, which monies shall be 

11 deposited and expended in accordance with sub12 section (b). 

13 (b) HHS OFFICE OF INSPECTOR GENERAL ASSET

14 FORFEITURE PROCEEDS FUND.— 

15 (1) IN GENERAL.—There is established in the 

16 Treasury of the United States the ‘‘HHS Office of 

17 Inspector General Asset Forfeiture Proceeds Fund,’’ 

18 to be administered by the Inspector General, which 

19 shall be available to the Inspector General without 

20 fiscal year limitation for expenses relating to the in21 vestigation of matters within the jurisdiction of the 

22 Inspector General. 

23 (2) DEPOSITS.—There shall be deposited in the 

24 Fund all proceeds from forfeitures that have been 

25 transferred to the Inspector General from the De-
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Title V, Subtitle E 

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1 partment of Justice Asset Forfeiture Fund under 

2 section 524 of title 28, United States Code. 

3 PART 2—APPLICATION OF FRAUD AND ABUSE 

4 AUTHORITIES UNDER THE SOCIAL SECURITY 

5 ACT TO ALL PAYERS 

6 SEC. 5411. EXCLUSION FROM PARTICIPATION. 

7 (a) MANDATORY EXCLUSION.—The Secretary shall 

8 exclude an individual or entity from participation in any 

9 applicable health plan if the individual or entity is ex10 cluded from participation in a public program under, or 

11 is otherwise described in, section 1128(a) of the Social Se12 curity Act (relating to individuals and entities convicted 

13 of health care-related crimes or patient abuse). 

14 (b) PERMISSIVE EXCLUSION.—The Secretary may 

15 exclude an individual or entity from participation in any 

16 applicable health plan if the individual or entity is ex17 cluded from participation in a public program under, or 

18 is otherwise described in, section 1128(b) of the Social Se19 curity Act (other than paragraphs (6)(A), (6)(C), (6)(D), 

20 (10), or (13) of such section). 

21 (c) NOTICE, EFFECTIVE DATE, AND PERIOD OF EX22 CLUSION.—(1) An exclusion under this section or section 

23 5412(b)(3) shall be effective at such time and upon such 

24 reasonable notice to the public and to the individual or 
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1 entity excluded as may be specified in regulations con2 sistent with paragraph (2). 

3 (2) Such an exclusion shall be effective with respect 

4 to services furnished to an individual on or after the effec5 tive date of the exclusion. 

6 (3)(A) The Secretary shall specify, in the notice of 

7 exclusion under paragraph (1) and the notice under sec8 tion 5412(e), the minimum period (or, in the case of an 

9 exclusion of an individual excluded from participation in 

10 a public program under, or is otherwise described in, sec11 tion 1128(b)(12) of the Social Security Act, the period) 

12 of the exclusion. 

13 (B) In the case of a mandatory exclusion under sub14 section (a), the minimum period of exclusion shall be not 

15 less than 5 years. 

16 (C) In the case of an exclusion of an individual ex17 cluded from participation in a public program under, or 

18 is otherwise described in, paragraph (1), (2), or (3) of sec19 tion 1128(b) of the Social Security Act, the period of ex20 clusion shall be a minimum of 3 years, unless the Sec21 retary determines that a longer period is necessary be22 cause of aggravating circumstances. 

23 (D) In the case of an exclusion of an individual or 

24 entity excluded from participation in a public program 

25 under, or is otherwise described in, paragraph (4), (5)(A), 
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1 or (5)(B) of section 1128(b) of the Social Security Act, 

2 the period of the exclusion shall not be less than the period 

3 during which the individual’s or entity’s license to provide 

4 health care is revoked, suspended or surrendered, or the 

5 individual or the entity is excluded or suspended from a 

6 Federal or State health care program. 

7 (E) In the case of an exclusion of an individual or 

8 entity described in paragraph (6)(B) of section 1128(b) 

9 of the Social Security Act, the period of the exclusion shall 

10 be not less than 1 year. 

11 (F) In the case of an exclusion of an individual de12 scribed in paragraph (12) of section 1128(b) of the Social 

13 Security Act, the period of the exclusion shall be equal 

14 to the sum of— 

15 (i) the length of the period in which the indi16 vidual failed to grant the immediate access described 

17 in that paragraph, and 

18 (ii) an additional period, not to exceed 90 days, 

19 set by the Secretary. 

20 (d) NOTICE TO ENTITIES ADMINISTERING PUBLIC

21 PROGRAMS FOR THE DELIVERY OF OR PAYMENT FOR

22 HEALTH CARE ITEMS OR SERVICES.—(1) The Secretary 

23 shall exercise the authority under this section in a manner 

24 that results in an individual’s or entity’s exclusion from 
960 

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1 all applicable health plans for the delivery of or payment 

2 for health care items or services. 

3 (2) The Secretary shall promptly notify each sponsor 

4 of an applicable health plan and each entity that admin5 isters a State health care program described in section 

6 1128(h) of the Social Security Act of the fact and cir7 cumstances of each exclusion (together with the period 

8 thereof) effected against an individual or entity under this 

9 section or under section 5412(b)(3). 

10 (e) NOTICE TO STATE LICENSING AGENCIES.—The 

11 provisions of section 1128(e) of the Social Security Act 

12 shall apply to this section in the same manner as such 

13 provisions apply to sections 1128 and 1128A of such Act. 

14 (f) NOTICE, HEARING, AND JUDICIAL REVIEW.—(1) 

15 Subject to paragraph (2), any individual or entity that is 

16 excluded (or directed to be excluded) from participation 

17 under this section is entitled to reasonable notice and op18 portunity for a hearing thereon by the Secretary to the 

19 same extent as is provided in section 205(b) of the Social 

20 Security Act, and to judicial review of the Secretary’s final 

21 decision after such hearing as is provided in section 205(g) 

22 of such Act, except that such action shall be brought in 

23 the Court of Appeals of the United States for the judicial 

24 circuit in which the individual or entity resides, or has a 

25 principal place of business, or, if the individual or entity 
961 

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1 does not reside or have a principal place of business within 

2 any such judicial circuit, in the United States Court of 

3 Appeals for the District of Columbia Circuit. 

4 (2) Unless the Secretary determines that the health 

5 or safety of individuals receiving services warrants the ex6 clusion taking effect earlier, any individual or entity that 

7 is the subject of an adverse determination based on para8 graphs (6)(B), (7), (8), (9), (11), (12), (14), or (15) of 

9 section 1128(b) of the Social Security Act, shall be enti10 tled to a hearing by an administrative law judge (as pro11 vided under section 205(b) of the Social Security Act) on 

12 the determination before any exclusion based upon the de13 termination takes effect. If a hearing is requested, the ex14 clusion shall be effective upon the issuance of an order 

15 by the administrative law judge upholding the determina16 tion of the Secretary to exclude. 

17 (3) The provisions of section 205(h) of the Social Se18 curity Act shall apply with respect to this section or sec19 tion 5412(b)(3) to the same extent as such provisions 

20 apply with respect to title II of such Act. 

21 (g) APPLICATION FOR TERMINATION OF EXCLU22 SION.—(1) An individual or entity excluded (or directed 

23 to be excluded) from participation under this section or 

24 section 5412(b)(3) may apply to the Secretary, in a man25 ner specified by the Secretary in regulations and at the 
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1 end of the minimum period of exclusion (or, in the case 

2 of an individual or entity described in section 1128(b)(12), 

3 the period of exclusion) provided under this section or sec4 tion 5412(b)(3) and at such other times as the Secretary 

5 may provide, for termination of the exclusion. 

6 (2) The Secretary may terminate the exclusion if the 

7 Secretary determines, on the basis of the conduct of the 

8 applicant which occurred after the date of the notice of 

9 exclusion or which was unknown to the Secretary at the 

10 time of the exclusion, that— 

11 (A) there is no basis under this section or sec12 tion 5412(b)(3) for a continuation of the exclusion, 

13 and 

14 (B) there are reasonable assurances that the 

15 types of actions which formed the basis for the origi16 nal exclusion have not recurred and will not recur. 

17 (3) The Secretary shall promptly notify each sponsor 

18 of an applicable health plan and each entity that admin19 isters a State health care program described in section 

20 1128(h) of the Social Security Act of each termination of 

21 exclusion made under this subsection. 

22 (h) CONVICTED DEFINED.—In this section, the term 

23 ‘‘convicted’’ has the meaning given such term in section 

24 1128(i) of the Social Security Act. 
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1 (i) REQUEST FOR EXCLUSION.—The sponsor of any 

2 applicable health plan (including a State in the case of 

3 a regional alliance health plan and the Secretary of Labor 

4 in the case of a corporate alliance health plan) may re5 quest that the Secretary of Health and Human Services 

6 exclude an individual or entity with respect to actions 

7 under such a plan in accordance with this section. 

8 (j) EFFECT OF EXCLUSION.—Notwithstanding any 

9 other provision of this Act, no payment may be made 

10 under a health plan for the delivery of or payment for any 

11 item or service (other than an emergency item or service, 

12 not including items or services furnished in an emergency 

13 room of a hospital) furnished— 

14 (1) by an individual or entity during the period 

15 when such individual or entity is excluded pursuant 

16 to this section or section 5412(b)(3) from participa17 tion in a health plan; or 

18 (2) at the medical direction or on the prescrip19 tion of a physician during the period when the physi20 cian is excluded pursuant to this section or section 

21 5412(b)(3) from participation in a health plan and 

22 the person furnishing the item or service knew or 

23 had reason to know of the exclusion (after a reason24 able time period after reasonable notice has been 

25 furnished to the person). 
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1 (k) DELEGATION.—The Secretary may delegate au2 thority granted under this section to the Inspector Gen3 eral. 

4 SEC. 5412. CIVIL MONETARY PENALTIES. 

5 (a) ACTIONS SUBJECT TO PENALTY.—Any person 

6 who is determined by the Secretary to have committed any 

7 of the following actions with respect to an applicable 

8 health plan shall be subject to a penalty in accordance 

9 with subsection (b): 

10 (1) ACTIONS SUBJECT TO PENALTY UNDER

11 MEDICARE, MEDICAID, AND OTHER SOCIAL SECURITY

12 HEALTH PROGRAMS.—Any action that would subject 

13 the person to a penalty under paragraphs (1) 

14 through (12) of section 1128A(a) of the Social Secu15 rity Act if the action was taken with respect to title 

16 V, XVIII, XIX, or XX of such Act. 

17 (2) TERMINATION OF ENROLLMENT.—The ter18 mination of an individual’s enrollment (including the 

19 refusal to re-enroll an individual) in violation of sub20 title E of title I or State law. 

21 (3) DISCRIMINATING ON BASIS OF MEDICAL

22 CONDITION.—The engagement in any practice that 

23 would reasonably be expected to have the effect of 

24 denying or discouraging the initial or continued en25 rollment in a health plan by individuals whose med-
965 

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1 ical condition or history indicates a need for sub2 stantial future medical services. 

3 (4) INDUCING ENROLLMENT ON FALSE PRE4 TENSES.—The engagement in any practice to induce 

5 enrollment in an applicable health plan through rep6 resentations to individuals which the person knows 

7 or should know are false or fraudulent. 

8 (5) PROVIDING INCENTIVES TO ENROLL.—The 

9 offer or payment of remuneration to any individual 

10 that such person knows or should know is likely to 

11 influence such individual to enroll in a particular 

12 plan, or to cause such individual to induce others to 

13 enroll in a particular plan. 

14 (b) PENALTIES DESCRIBED.— 

15 (1) GENERAL RULE.—Any person who the Sec16 retary determines has committed an action described 

17 in paragraphs (2) through (5) of subsection (a) shall 

18 be subject to a civil monetary penalty in an amount 

19 not to exceed $50,000 for each such determination. 

20 (2) ACTIONS SUBJECT TO PENALTIES UNDER

21 SOCIAL SECURITY ACT.—In the case of a person who 

22 the Secretary determines has committed an action 

23 described in paragraph (1) of subsection (a), the 

24 person shall be subject to the civil monetary penalty 

25 (together with any additional assessment) to which 
966 

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1 the person would be subject under section 1128A of 

2 the Social Security Act if the action on which the 

3 determination is based had been committed with re4 spect to title V, XVIII, XIX, or XX of such Act. 

5 (3) DETERMINATIONS TO EXCLUDE PER6 MITTED.—In addition to any civil monetary penalty 

7 or assessment imposed under this subsection, the 

8 Secretary may make a determination in the same 

9 proceeding to exclude the person from participation 

10 in all applicable health plans for the delivery of or 

11 payment for health care items or services (in accord12 ance with section 5411(c)). 

13 (c) PROCEDURES FOR IMPOSITION OF PENALTIES.— 

14 (1) APPLICABILITY OF PROCEDURES UNDER SO15 CIAL SECURITY ACT.—Except as otherwise provided 

16 in paragraph (2), the provisions of section 1128A of 

17 the Social Security Act (other than subsections (a) 

18 and (b) and the second sentence of subsection (f)) 

19 shall apply to the imposition of a civil monetary pen20 alty, assessment, or exclusion under this section in 

21 the same manner as such provisions apply with re22 spect to the imposition of a penalty, assessment, or 

23 exclusion under section 1128A of such Act. 
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1 (2) AUTHORITY OF SECRETARY OF LABOR AND

2 STATES TO IMPOSE PENALTIES, ASSESSMENTS, AND

3 EXCLUSIONS.— 

4 (A) IN GENERAL.—The Secretary of Labor 

5 or a State may initiate an action to impose a 

6 civil monetary penalty, assessment, or exclusion 

7 under this section with respect to actions relat8 ing to a corporate alliance health plan or a re9 gional alliance health plan, respectively, if au10 thorized by the Attorney General and the Sec11 retary pursuant to regulations promulgated by 

12 the Secretary in consultation with the Attorney 

13 General. 

14 (B) REQUIREMENTS DESCRIBED.—Under 

15 the regulations promulgated under subpara16 graph (A), the Attorney General and the Sec17 retary shall review an action proposed by the 

18 Secretary of Labor or a State, and not later 

19 than 120 days after receiving notice of the pro20 posed action from the Secretary of Labor or the 

21 State, shall— 

22 (i) approve the proposed action to be 

23 taken by the Secretary of Labor or the 

24 State; 

25 (ii) disapprove the proposed action; or 
968 

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1 (iii) assume responsibility for initi2 ating a criminal, civil, or administrative ac3 tion based on the information provided in 

4 the notice. 

5 (C) ACTION DEEMED APPROVED IF DEAD6 LINE MISSED.—If the Attorney General and the 

7 Secretary fail to respond to a proposed action 

8 by the Secretary of Labor or a State within the 

9 period described in subparagraph (B), the At10 torney General and the Secretary shall be 

11 deemed to have approved the proposed action to 

12 be taken by the Secretary of Labor or the 

13 State. 

14 (d) TREATMENT OF AMOUNTS RECOVERED.—Any 

15 amounts recovered under this section shall be paid to the 

16 Secretary and disposed of as follows: 

17 (1) Such portions of the amounts recovered as 

18 is determined to have been improperly paid from an 

19 applicable health plan for the delivery of or payment 

20 for health care items or services shall be repaid to 

21 such plan. 

22 (2) The remainder of the amounts recovered 

23 shall be deposited in the All-Payer Health Care 

24 Fraud and Abuse Control Account established under 

25 section 5402. 
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1 (e) NOTIFICATION OF LICENSING AUTHORITIES.— 

2 Whenever the Secretary’s determination to impose a pen3 alty, assessment, or exclusion under this section becomes 

4 final, the Secretary shall notify the appropriate State or 

5 local licensing agency or organization (including the agen6 cy specified in section 1864(a) and 1902(a)(33) of the So7 cial Security Act) that such a penalty, assessment, or ex8 clusion has become final and the reasons therefor. 

9 SEC. 5413. LIMITATIONS ON PHYSICIAN SELF-REFERRAL. 

10 The provisions of section 1877 of the Social Security 

11 Act shall apply— 

12 (1) to items and services (and payments and 

13 claims for payment for such items and services) fur14 nished under any applicable health plan in the same 

15 manner as such provisions apply to designated 

16 health services (and payments and claims for pay17 ment for such services) under title XVIII of the So18 cial Security Act; and 

19 (2) to a State (with respect to an item or serv20 ice furnished or payment made under a regional alli21 ance health plan) and to the Secretary of Labor 

22 (with respect to an item or service furnished or pay23 ment made under a corporate alliance health plan) 

24 in the same manner as such provisions apply to the 

25 Secretary. 
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1 SEC. 5414. CONSTRUCTION OF SOCIAL SECURITY ACT REF2 ERENCES. 

3 (a) INCORPORATION OF OTHER AMENDMENTS.—Any 

4 reference in this part to a provision of the Social Security 

5 Act shall be considered a reference to the provision as 

6 amended under title IV. 

7 (b) EFFECT OF SUBSEQUENT AMENDMENTS.—Ex8 cept as provided in subsection (a), any reference to a pro9 vision of the Social Security Act in this part shall be 

10 deemed to be a reference to such provision as in effect 

11 on the date of the enactment of this Act, and (except as 

12 Congress may otherwise provide) any amendments made 

13 to such provisions after such date shall not be taken into 

14 account in determining the applicability of such provisions 

15 to individuals and entities under this Act. 

16 PART 3—AMENDMENTS TO ANTI-FRAUD AND 

17 ABUSE PROVISIONS UNDER THE SOCIAL SE18 CURITY ACT 

19 SEC. 5421. REFERENCE TO AMENDMENTS. 

20 For provisions amending the anti-fraud and abuse 

21 provisions existing under the Social Security Act, see part 

22 5 of subtitle A of title IV. 
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1 PART 4—AMENDMENTS TO CRIMINAL LAW 

2 SEC. 5431. HEALTH CARE FRAUD. 

3 (a) IN GENERAL.—Chapter 63 of title 18, United 

4 States Code, is amended by adding at the end the fol5 lowing: 

6 ‘‘§ 1347. Health care fraud 

7 ‘‘(a) Whoever knowingly executes, or attempts to exe8 cute, a scheme or artifice— 

9 ‘‘(1) to defraud any health alliance, health plan, 

10 or other person, in connection with the delivery of or 

11 payment for health care benefits, items, or services; 

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

13 pretenses, representations, or promises, any of the 

14 money or property owned by, or under the custody 

15 or control of, any health alliance, health plan, or 

16 person in connection with the delivery of or payment 

17 for health care benefits, items, or services; 

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

19 10 years, or both. If the violation results in serious bodily 

20 injury (as defined in section 1365 of this title) such person 

21 shall be imprisoned for life or any term of years. 

22 ‘‘(b) As used in this section, the terms ‘health alli23 ance’ and ‘health plan’ have the meanings given those 

24 terms in title I of the Health Security Act.’’. 
972 

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

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

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

‘‘1347. Health care fraud.’’. 

4 SEC. 5432. FORFEITURES FOR VIOLATIONS OF FRAUD STAT5 UTES. 

6 (a) IN GENERAL.—Section 982(a) of title 18, United 

7 States Code, is amended by inserting after paragraph (5) 

8 the following: 

9 ‘‘(6) If the court determines that a Federal health 

10 care offense (as defined in section 5402(d) of the Health 

11 Security Act) is of a type that poses a serious threat to 

12 the health of any person or has a significant detrimental 

13 impact on the health care system, the court, in imposing 

14 sentence on a person convicted of that offense, shall order 

15 that person to forfeit property, real or personal, that— 

16 ‘‘(A)(i) is used in the commission of the offense; 

17 or 

18 ‘‘(ii) constitutes or is derived from proceeds 

19 traceable to the commission of the offense; and 

20 ‘‘(B) is of a value proportionate to the serious21 ness of the offense.’’. 

22 (b) PROCEEDS OF HEALTH CARE FRAUD FORFEIT23 URES.—Section 524(c)(4)(A) of title 28, United States 

24 Code, is amended by inserting ‘‘all proceeds of forfeitures 

25 relating to Federal health care offenses (as defined in sec-
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Title V, Subtitle E 

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1 tion 5402(d) of the Health Security Act), and’’ after ‘‘ex2 cept’’. 

3 SEC. 5433. FALSE STATEMENTS. 

4 (a) IN GENERAL.—Chapter 47 of title 18, United 

5 States Code, is amended by adding at the end the fol6 lowing: 

7 ‘‘§ 1033. False statements relating to health care mat8 ters 

9 ‘‘(a) Whoever, in any matter involving a health alli10 ance or health plan, knowingly and willfully falsifies, con11 ceals, or covers up by any trick, scheme, or device a mate12 rial fact, or makes any false, fictitious, or fraudulent state13 ments or representations, or makes or uses any false writ14 ing or document knowing the same to contain any false, 

15 fictitious, or fraudulent statement or entry, shall be fined 

16 under this title or imprisoned not more than 5 years, or 

17 both. 

18 ‘‘(b) As used in this section the terms ‘health alliance’ 

19 and ‘health plan’ have the meanings given those terms in 

20 title I of the Health Security Act.’’. 

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

22 at the beginning of chapter 47 of title 18, United States 

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

‘‘1033. False statements relating to health care matters.’’. 
974 

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1 SEC. 5434. BRIBERY AND GRAFT. 

2 (a) IN GENERAL.—Chapter 11 of title 18, United 

3 States Code, is amended by adding at the end the fol4 lowing: 

5 ‘‘§ 226. Bribery and graft in connection with health 

6 care 

7 ‘‘(a) Whoever— 

8 ‘‘(1) directly or indirectly, corruptly gives, of9 fers, or promises anything of value to a health care 

10 official, or offers or promises a health care official 

11 to give anything of value to any other person, with 

12 intent— 

13 ‘‘(A) to influence any of the health care of14 ficial’s actions, decisions, or duties relating to a 

15 health alliance or health plan; 

16 ‘‘(B) to influence such an official to com17 mit or aid in the committing, or collude in or 

18 allow, any fraud, or make opportunity for the 

19 commission of any fraud, on a health alliance or 

20 health plan; or 

21 ‘‘(C) to induce such an official to engage 

22 in any conduct in violation of the lawful duty of 

23 such official; or 

24 ‘‘(2) being a health care official, directly or in25 directly, corruptly demands, seeks, receives, accepts, 

26 or agrees to accept anything of value personally or 
975 

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1 for any other person or entity, the giving of which 

2 violates paragraph (1) of this subsection; 

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

4 15 years, or both. 

5 ‘‘(b) Whoever, otherwise than as provided by law for 

6 the proper discharge of any duty, directly or indirectly 

7 gives, offers, or promises anything of value to a health 

8 care official, for or because of any of the health care offi9 cial’s actions, decisions, or duties relating to a health care 

10 alliance or health plan, shall be fined under this title or 

11 imprisoned not more than two years, or both. 

12 ‘‘(c) As used in this section— 

13 ‘‘(1) the term ‘health care official’ means— 

14 ‘‘(A) an administrator, officer, trustee, fi15 duciary, custodian, counsel, agent, or employee 

16 of any health care alliance or health plan; 

17 ‘‘(B) an officer, counsel, agent, or em18 ployee, of an organization that provides services 

19 under contract to any health alliance or health 

20 plan; 

21 ‘‘(C) an official or employee of a State 

22 agency having regulatory authority over any 

23 health alliance or health plan; 

24 ‘‘(D) an officer, counsel, agent, or em25 ployee of a health care sponsor; and 
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1 ‘‘(2) the term ‘health care sponsor’ means any 

2 individual or entity serving as the sponsor of a 

3 health alliance or health plan for purposes of the 

4 Health Security Act, and includes the joint board of 

5 trustees or other similar body used by two or more 

6 employers to administer a health alliance or health 

7 plan for purposes of such Act.’’. 

8 (b) CLERICAL AMENDMENT.—The table of chapters 

9 at the beginning of chapter 11 of title 18, United States 

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

‘‘226. Bribery and graft in connection with health care.’’. 

11 SEC. 5435. INJUNCTIVE RELIEF RELATING TO HEALTH 

12 CARE OFFENSES. 

13 Section 1345(a)(1) of title 18, United States Code, 

14 is amended— 

15 (1) by striking ‘‘or’’ at the end of subparagraph 

16 (A); 

17 (2) by inserting ‘‘or’’ at the end of subpara18 graph (B); and 

19 (3) by adding at the end the following: 

20 ‘‘(C) committing or about to commit a Federal 

21 health care offense (as defined in section 5402(d) of 

22 the Health Security Act);’’. 

23 SEC. 5436. GRAND JURY DISCLOSURE. 

24 Section 3322 of title 18, United States Code, is 

25 amended— 
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Title V, Subtitle E 

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1 (1) by redesignating subsections (c) and (d) as 

2 subsections (d) and (e), respectively; and 

3 (2) by inserting after subsection (b) the fol4 lowing: 

5 ‘‘(c) A person who is privy to grand jury information 

6 concerning a health law violation— 

7 ‘‘(1) received in the course of duty as an attor8 ney for the Government; or 

9 ‘‘(2) disclosed under rule 6(e)(3)(A)(ii) of the 

10 Federal Rules of Criminal Procedure; 

11 may disclose that information to an attorney for the Gov12 ernment to use in any civil proceeding related to a Federal 

13 health care offense (as defined in section 5402(d) of the 

14 Health Security Act).’’. 

15 SEC. 5437. THEFT OR EMBEZZLEMENT. 

16 (a) IN GENERAL.—Chapter 31 of title 18, United 

17 States Code, is amended by adding at the end the fol18 lowing: 

19 ‘‘§ 668. Theft or embezzlement in connection with 

20 health care 

21 ‘‘(a) Whoever embezzles, steals, willfully and unlaw22 fully converts to the use of any person other than the 

23 rightful owner, or intentionally misapplies any of the mon24 eys, securities, premiums, credits, property, or other assets 

25 of a health alliance, health plan, or of any fund connected 
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1 with such an alliance or plan, shall be fined under this 

2 title or imprisoned not more than 10 years, or both. 

3 ‘‘(b) As used in this section, the terms ‘health alli4 ance’ and ‘health plan’ have the meanings given those 

5 terms under title I of the Health Security Act.’’. 

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

7 at the beginning of chapter 31 of title 18, United States 

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

‘‘668. Theft or embezzlement in connection with health care.’’. 

9 SEC. 5438. MISUSE OF HEALTH SECURITY CARD OR UNIQUE 

10 IDENTIFIER. 

11 (a) IN GENERAL.—Chapter 33 of title 18, United 

12 States Code, is amended by adding at the end the fol13 lowing: 

14 ‘‘§ 716. Misuse of health security card or unique iden15 tifier 

16 ‘‘Whoever— 

17 ‘‘(1) requires the display of, requires the use of, 

18 or uses a health security card that is issued under 

19 section 1001(b) of the Health Security Act for any 

20 purpose other than a purpose described in section 

21 5105(a) of such Act; or 

22 ‘‘(2) requires the disclosure of, requires the use 

23 of, or uses a unique identifier number provided pur24 suant to section 5104 of such Act for any purpose 
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1 that is not authorized by the National Health Board 

2 pursuant to such section; 

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

4 2 years, or both.’’. 

5 (b) AMENDMENT TO CHAPTER HEADING.—The 

6 heading for chapter 33 of title 18, United States Code, 

7 is amended to read as follows: 

8 ‘‘CHAPTER 33—EMBLEMS, INSIGNIA, 

9 IDENTIFIERS, AND NAMES’’. 

10 (c) CLERICAL AMENDMENT TO TABLE OF SEC11 TIONS.—The table of sections at the beginning of chapter 

12 33, United States Code, is amended by adding at the end 

13 the following new item: 

‘‘716. Misuse of health security card or unique identifier.’’. 

14 (d) CLERICAL AMENDMENT TO TABLE OF CHAP15 TERS.—The item relating to chapter 33 in the table of 

16 chapters at the beginning of part 1 of title 18, United 

17 States Code, is amended to read as follows: 

‘‘33. Emblems, insignia, identifiers, and names ..................... 701’’. 

18 PART 5—AMENDMENTS TO CIVIL FALSE CLAIMS 

19 ACT 

20 SEC. 5441. AMENDMENTS TO CIVIL FALSE CLAIMS ACT. 

21 Section 3729 of title 31, United States Code, is 

22 amended— 

23 (1) in subsection (a)(7), by inserting ‘‘or to a 

24 health plan’’ after ‘‘property to the Government’’; 
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1 (2) in the matter following subsection (a)(7), by 

2 inserting ‘‘or health plan’’ before ‘‘sustains because 

3 of the act of that person,’’; 

4 (3) at the end of the first sentence of sub5 section (a), by inserting ‘‘or health plan’’ before 

6 ‘‘sustains because of the act of the person.’’; 

7 (4) in subsection (c)— 

8 (A) by inserting ‘‘the term’’ after ‘‘sec9 tion,’’; and 

10 (B) by adding at the end the following: 

11 ‘‘The term also includes any request or demand, 

12 whether under contract of otherwise, for money 

13 or property which is made or presented to a 

14 health plan.’’; and 

15 (5) by adding at the end the following: 

16 ‘‘(f) HEALTH PLAN DEFINED.—For purposes of this 

17 section, the term ‘health plan’ has the meaning given such 

18 term under section 1400 of the Health Security Act.’’. 

19 Subtitle F—McCarran-Ferguson 

20 Reform 

21 SEC. 5501. REPEAL OF EXEMPTION FOR HEALTH INSUR22 ANCE. 

23 (a) IN GENERAL.—Section 3 of the Act of March 9, 

24 1945 (15 U.S.C. 1013), known as the McCarran-Ferguson 

25 Act, is amended by adding at the end the following: 
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1 ‘‘(c) Notwithstanding that the business of insurance 

2 is regulated by State law, nothing in this Act shall limit 

3 the applicability of the following Acts to the business of 

4 insurance to the extent that such business relates to the 

5 provision of health benefits: 

6 ‘‘(1) The Sherman Act (15 U.S.C. 1 et seq.). 

7 ‘‘(2) The Clayton Act (15 U.S.C. 12 et seq.). 

8 ‘‘(3) Federal Trade Commission Act (15 U.S.C. 

9 41 et seq.). 

10 ‘‘(4) The Act of June 19, 1936 (49 Stat. 1526; 

11 15 U.S.C. 21a et seq.), known as the Robinson-Pat12 man Antidiscrimination Act.’’. 

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

14 subsection (a) shall take effect on the first day of the sixth 

15 month beginning after the date of the enactment of this 

16 Act. 

17 TITLE VI—PREMIUM CAPS; PRE18 MIUM-BASED FINANCING; 

19 AND PLAN PAYMENTS 

TABLE OF CONTENTS OF TITLE

Page 

Sec. 6000. General definitions ................................................................ 982 

Subtitle A—Premium Caps 

PART 1—REGIONAL ALLIANCE HEALTH EXPENDITURES

SUBPART A—COMPUTATION OF TARGETS AND ACCEPTED BIDS

Sec. 6001. Computation of regional alliance inflation factors ................ 984 
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Title VI 

•HR 3600 IH / •S 1757 IS 

Sec. 6002. Board determination of national per capita baseline premium target .................................................................. 990 

Sec. 6003. Determination of alliance per capita premium targets ......... 995 

Sec. 6004. Alliance initial bidding and negotiation process .................... 1000 

Sec. 6005. State financial incentives ....................................................... 1004 

Sec. 6006. Recommendations to eliminate regional variations in alliance targets due to variation in practice patterns; congressional consideration ................................................ 1005 

Sec. 6007. Reference to limitation on administrative and judicial review of certain determinations ...................................... 1012 

SUBPART B—PLAN AND PROVIDER PAYMENT REDUCTIONS TO MAINTAIN

EXPENDITURES WITHIN TARGETS

Sec. 6011. Plan payment reduction ........................................................ 1012 

Sec. 6012. Provider payment reduction .................................................. 1017 

PART 2—CORPORATE ALLIANCES HEALTH EXPENDITURES

Sec. 6021. Calculation of premium equivalents ...................................... 1020 

Sec. 6022. Termination of corporate alliance for excess increase in expenditures ...................................................................... 1021 

PART 3—TREATMENT OF SINGLE-PAYER STATES

Sec. 6031. Special rules for single-payer States ..................................... 1024 

PART 4—TRANSITION PROVISIONS

Sec. 6041. Monitoring prices and expenditures ...................................... 1024 

Subtitle B—Premium-Related Financings 

PART 1—FAMILY PREMIUM PAYMENTS

SUBPART A—FAMILY SHARE

Sec. 6101. Family share of premium ...................................................... 1025 

Sec. 6102. Amount of premium .............................................................. 1028 

Sec. 6103. Alliance credit ........................................................................ 1030 

Sec. 6104. Premium discount based on income ...................................... 1030 

Sec. 6105. Excess premium credit .......................................................... 1042 

Sec. 6106. Corporate alliance opt-in credit ............................................. 1044 

Sec. 6107. Family collection shortfall add-on ......................................... 1045 

SUBPART B—REPAYMENT OF ALLIANCE CREDIT BY CERTAIN FAMILIES

Sec. 6111. Repayment of alliance credit by certain families .................. 1047 

Sec. 6112. No liability for families employed full-time; reduction in liability for part-time employment .................................. 1048 

Sec. 6113. Limitation of liability based on income ................................. 1051 

Sec. 6114. Special treatment of certain retirees and qualified spouses 

and children .................................................................. 1055 

Sec. 6115. Special treatment of certain medicare beneficiaries .............. 1058 

PART 2—EMPLOYER PREMIUM PAYMENTS

SUBPART A—REGIONAL ALLIANCE EMPLOYERS

Sec. 6121. Employer premium payment required ................................... 1058 
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Sec. 6122. Computation of base employment monthly premium ............ 1063 

Sec. 6123. Premium discount for certain employers .............................. 1070 

Sec. 6124. Payment adjustment for large employers electing coverage 

in a regional alliance ..................................................... 1075 

Sec. 6125. Employer collection shortfall add-on ..................................... 1081 

Sec. 6126. Application to self-employed individuals ............................... 1081 

SUBPART B—CORPORATE ALLIANCE EMPLOYERS

Sec. 6131. Employer premium payment required ................................... 1084 

Subtitle C—Payments to Regional Alliance Health Plans 

Sec. 6201. Computation of blended plan per capita payment amount ... 1086 

Sec. 6202. Computation of plan bid, AFDC, and SSI proportions ........ 1088 

1 SEC. 6000. GENERAL DEFINITIONS. 

2 (a) DEFINITIONS RELATING TO BIDS.—In this title: 

3 (1) ACCEPTED BID.—The term ‘‘accepted bid’’ 

4 means the bid which is agreed to between a regional 

5 alliance health plan and a regional alliance for cov6 erage of the comprehensive benefit package in the 

7 alliance area under subpart A of part 1. 

8 (2) FINAL ACCEPTED BID.—The term ‘‘final ac9 cepted bid’’ means the accepted bid, taking into ac10 count any voluntary reduction in such bid made 

11 under section 6004(e). 

12 (3) WEIGHTED AVERAGE ACCEPTED BID.—The 

13 term ‘‘weighted average accepted bid’’ means, for a 

14 regional alliance for a year, the average of the ac15 cepted bids for all regional alliance health plans of16 fered by such alliance, weighted to reflect the rel17 ative enrollment of regional alliance eligible individ18 uals among such plans. 
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1 (4) REDUCED WEIGHTED AVERAGE ACCEPTED

2 BID.—The term ‘‘reduced weighted average accepted 

3 bid’’, for a health plan offered by a regional alliance 

4 for a year, is the lesser of— 

5 (A) the weighted average accepted bid for 

6 the regional alliance for the year (determined 

7 using the final accepted bids as the accepted 

8 bids), or 

9 (B) the regional alliance per capita target 

10 for the year. 

11 (b) WEIGHTED AVERAGE PREMIUM.—In this title, 

12 the term ‘‘weighted average premium’’ means, for a class 

13 of family enrollment and with respect to a regional alliance 

14 for a year, the product of— 

15 (1) reduced weighted average accepted bid (as 

16 defined in subsection (a)(4)); 

17 (2) the uniform per capita conversion factor 

18 (established under section 1341(b)) for the alliance; 

19 and 

20 (3) the premium class factor established by the 

21 Board for that class under section 1531. 

22 (c) INCORPORATION OF OTHER DEFINITIONS.—Ex23 cept as otherwise provided in this title, the definitions of 

24 terms in subtitle J of title I of this Act shall apply to 

25 this title. 
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1 Subtitle A—Premium Caps 

2 PART 1—REGIONAL ALLIANCE HEALTH 

3 EXPENDITURES 

4 Subpart A—Computation of Targets and Accepted 

5 Bids 

6 SEC. 6001. COMPUTATION OF REGIONAL ALLIANCE INFLA7 TION FACTORS. 

8 (a) COMPUTATION.— 

9 (1) IN GENERAL.—This section provides for the 

10 computation of factors that limit the growth of pre11 miums for the comprehensive benefit package in re12 gional alliance health plans. The Board shall com13 pute and publish, not later than March 1 of each 

14 year (beginning with 1995) the regional alliance in15 flation factor (as defined in paragraph (2)) for each 

16 regional alliance for the following year. 

17 (2) REGIONAL ALLIANCE INFLATION FACTOR.— 

18 In this part, the term ‘‘regional alliance inflation 

19 factor’’ means, for a year for a regional alliance— 

20 (A) the general health care inflation factor 

21 for the year (as defined in paragraph (3)); 

22 (B) adjusted under subsection (c) (to take 

23 into account material changes in the demo24 graphic and socio-economic characteristics of 

25 the population of alliance eligible individuals); 
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1 (C) decreased by the percentage adjust2 ment (if any) provided with respect to the re3 gional alliance under subsection (d) (relating to 

4 adjustment for previous excess expenditures); 

5 and 

6 (D) in the case of the year 2001, increased 

7 by a factor that the Board determines to reflect 

8 the ratio of (i) the actuarial value of the in9 crease in benefits provided in that year under 

10 the comprehensive benefit package to (ii) the 

11 actuarial value of the benefits that would have 

12 been in such package in the year without regard 

13 to the increase. 

14 For purposes of subparagraph (D)(i), the actuarial 

15 value of the increase with respect to mental illness 

16 and substance abuse services (included within the 

17 comprehensive benefit package) shall not exceed an 

18 actuarial value based on the amount of the total ex19 penditures that would have been made in 2001 by 

20 States and subdivisions of States for mental illness 

21 and substance abuse services (included in such pack22 age as of 2001) if this Act had not been enacted. 

23 (3) GENERAL HEALTH CARE INFLATION FAC24 TOR.— 
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1 (A) 1996 THROUGH 2000.—In this part, 

2 the term ‘‘general health care inflation factor’’, 

3 for a year, means the percentage increase in the 

4 CPI (as specified under subsection (b)) for the 

5 year plus the following: 

6 (i) For 1996, 1.5 percentage points. 

7 (ii) For 1997, 1.0 percentage points. 

8 (iii) For 1998, 0.5 percentage points. 

9 (iv) For 1999 and for 2000, 0 per10 centage points. 

11 (B) YEARS AFTER 2000.— 

12 (i) RECOMMENDATION TO CON13 GRESS.—In 1999, the Board shall submit 

14 to Congress recommendations on what the 

15 general health care inflation factor should 

16 be for years beginning with 2001. 

17 (ii) FAILURE OF CONGRESS TO ACT.— 

18 If the Congress fails to enact a law speci19 fying the general health care inflation fac20 tor for a year after 2000, the Board, in 

21 January of the year before the year in22 volved, shall compute such factor for the 

23 year involved. Such factor shall be the 

24 product of the factors described in sub-
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1 paragraph (C) for that fiscal year, minus 

2 1. 

3 (C) FACTORS.—The factors described in 

4 this subparagraph for a year are the following: 

5 (i) CPI.—1 plus the percentage 

6 change in the CPI for the year, determined 

7 based upon the percentage change in the 

8 average of the CPI for the 12-month pe9 riod ending with August 31 of the previous 

10 fiscal year over such average for the pre11 ceding 12-month period. 

12 (ii) REAL GDP PER CAPITA.—1 plus 

13 the average annual percentage change in 

14 the real, per capita gross domestic product 

15 of the United States during the 3-year pe16 riod ending in the preceding calendar year, 

17 determined by the Board based on data 

18 supplied by the Department of Commerce. 

19 (b) PROJECTION OF INCREASE IN CPI.— 

20 (1) IN GENERAL.—For purposes of this section, 

21 the Board shall specify, as of the time of publica22 tion, the annual percentage increase in the CPI (as 

23 defined in section 1902(9)) for the following year. 

24 (2) DATA TO BE USED.—Such increase shall be 

25 the projection of the CPI contained in the budget of 
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1 the United States transmitted by the President to 

2 the Congress in the year. 

3 (c) SPECIAL ADJUSTMENT FOR MATERIAL CHANGES

4 IN DEMOGRAPHIC CHARACTERISTICS OF POPULATION.— 

5 (1) ADJUSTMENT FOR CORPORATE ALLIANCE

6 OPT-IN.— 

7 (A) IN GENERAL.—The Board shall de8 velop a method for adjusting the regional alli9 ance inflation factor for each regional alliance 

10 in order to reflect material changes in the de11 mographic characteristics of regional alliance el12 igible individuals residing in the alliance area 

13 (in comparison with such characteristics for the 

14 previous year) as a result of one or more cor15 porate alliances terminating an election under 

16 section 1313. 

17 (B) BASIS FOR ADJUSTMENTS.—Adjust18 ments under this paragraph (whether an in19 crease or decrease) shall be based on the char20 acteristics and factors used for making adjust21 ments in payments under section 6124. 

22 (2) ADJUSTMENT FOR REGIONAL TREND COM23 PARED TO NATIONAL TREND.— 

24 (A) IN GENERAL.—The Board shall de25 velop a method for adjusting the regional alli-
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1 ance inflator factor for each regional alliance in 

2 order to reflect material changes in the demo3 graphic characteristics (including at least age, 

4 gender, and socio-economic status) and health 

5 status of regional alliance eligible individuals re6 siding in the alliance area in comparison with 

7 the average change in such characteristics for 

8 such individuals residing in the United States. 

9 The adjustment under this paragraph shall be 

10 for changes not taken into account in the ad11 justment under paragraph (1). 

12 (B) NEUTRAL ADJUSTMENT.—Such meth13 od (and any annual adjustment under this 

14 paragraph) shall be designed to result in the 

15 adjustment effected under this paragraph for a 

16 year not changing the weighted average of the 

17 regional alliance inflation factors. 

18 (3) APPLICATION.—The Board shall provide, on 

19 an annual basis, for an adjustment of regional alli20 ance inflation factors under this subsection using 

21 such methods. 

22 (d) CONSULTATION PROCESS.—The Board shall have 

23 a process for consulting with representatives of States and 

24 regional alliances before establishing the regional alliance 

25 inflation factors for each year under this section. 
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1 SEC. 6002. BOARD DETERMINATION OF NATIONAL PER CAP2 ITA BASELINE PREMIUM TARGET. 

3 (a) IN GENERAL.—Not later than January 1, 1995, 

4 the Board shall determine a national per capita baseline 

5 premium target. Such target is equal to— 

6 (1) the national average per capita current cov7 erage health expenditures (determined under sub8 section (b)), 

9 (2) updated under subsection (c). 

10 (b) DETERMINATION OF NATIONAL AVERAGE PER

11 CAPITA CURRENT COVERAGE HEALTH EXPENDITURES.— 

12 (1) IN GENERAL.—The Board shall determine 

13 the national average per capita current coverage 

14 health expenditures equal to— 

15 (A) total covered current health care ex16 penditures (described in paragraph (2)), divided 

17 by 

18 (B) the estimated population in the United 

19 States of regional alliance eligible individuals 

20 (as determined by the Board as of 1993 under 

21 paragraph (4)) for whom such expenditures 

22 were determined. 

23 The population under subparagraph (B) shall not in24 clude SSI recipients or AFDC recipients. 

25 (2) CURRENT HEALTH CARE EXPENDITURES.— 

26 For purposes of paragraph (1)(A), the Board shall 
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1 determine current health care expenditures as fol2 lows: 

3 (A) DETERMINATION OF TOTAL EXPENDI4 TURES.—The Board shall first determine the 

5 amount of total payments made for items and 

6 services included in the comprehensive benefit 

7 package (determined without regard to cost 

8 sharing) in the United States in 1993. 

9 (B) REMOVAL OF CERTAIN EXPENDITURES

10 NOT TO BE COVERED THROUGH REGIONAL AL11 LIANCES.—The amount so determined shall be 

12 decreased by the proportion of such amount 

13 that is attributable to any of the following: 

14 (i) Medicare beneficiaries (other than 

15 such beneficiaries who are regional alliance 

16 eligible individuals). 

17 (ii) AFDC recipients or SSI recipi18 ents. 

19 (iii) Expenditures which are paid for 

20 through workers’ compensation or auto21 mobile or other liability insurance. 

22 (iv) Expenditures by parties (includ23 ing the Federal Government) that the 

24 Board determines will not be payable by 

25 regional alliance health plans for coverage 
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1 of the comprehensive benefit package 

2 under this Act. 

3 (C) ADDITION OF PROJECTED EXPENDI4 TURES FOR UNINSURED AND UNDERINSURED

5 INDIVIDUALS.—The amount so determined and 

6 adjusted shall be increased to take into account 

7 increased utilization of, and expenditures for, 

8 items and services covered under the com9 prehensive benefit package likely to occur, as a 

10 result of coverage under a regional alliance 

11 health plan of individuals who, as of 1993 were 

12 uninsured or underinsured with respect to the 

13 comprehensive benefit package. In making such 

14 determination, such expenditures shall be based 

15 on the estimated average cost for such services 

16 in 1993 (and not on private payment rates es17 tablished for such services). In making such de18 termination, the estimated amount of uncom19 pensated care in 1993 shall be removed and will 

20 not include adjustments to offset payments 

21 below costs by public programs. 

22 (D) ADDITION OF HEALTH PLAN AND AL23 LIANCE COSTS OF ADMINISTRATION.—The 

24 amount so determined and adjusted shall be in25 creased by an estimated percentage (determined 
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1 by the Board, but no more than 15 percent) 

2 that reflects the proportion of premiums that 

3 are required for health plan and regional alli4 ance administration (including regional alliance 

5 costs for administration of income-related pre6 mium discounts and cost sharing reductions) 

7 and for State premium taxes (which taxes shall 

8 be limited to such amounts in 1993 as are at9 tributable to the health benefits to be included 

10 in the comprehensive benefit package). 

11 (E) DECREASE FOR COST SHARING.—The 

12 amount so determined and adjusted shall be de13 creased by a percentage that reflects (i) the es14 timated average percentage of total amounts 

15 payable for items and services covered under 

16 the comprehensive benefit package that will be 

17 payments in the form of cost sharing under a 

18 higher cost sharing plan, and (ii) the percent19 age reduction in utilization estimated to result 

20 from the application of high cost sharing. 

21 (3) SPECIAL RULES.— 

22 (A) BENEFITS USED.—The determinations 

23 under this section shall be based on the com24 prehensive benefit package as in effect in 1996. 
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1 (B) ASSUMING NO CHANGE IN EXPENDI2 TURE PATTERN.—The determination under 

3 paragraph (2) shall be made without regard to 

4 any change in the pattern of expenditures that 

5 may result from the enrollment of AFDC recipi6 ents and SSI recipients in regional alliance 

7 health plans. 

8 (4) ELIGIBLE INDIVIDUALS.—In this sub9 section, the determination of who are regional alli10 ance eligible individuals under this subsection shall 

11 be made as though this Act was fully in effect in 

12 each State as of 1993. 

13 (c) UPDATING.— 

14 (1) IN GENERAL.—Subject to paragraph (3), 

15 the Board shall update the amount determined 

16 under subsection (b)(1) for each of 1994 and 1995 

17 by the appropriate update factor described in para18 graph (2) for the year. 

19 (2) APPROPRIATE UPDATE FACTOR.—In para20 graph (1), the appropriate update factor for a year 

21 is 1 plus the annual percentage increase for the year 

22 (as determined by the Secretary, based on actual or 

23 projected information) in private sector health care 

24 spending for items and services included in the com25 prehensive benefit package (as of 1996). 
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1 (3) LIMIT.—The total, cumulative update under 

2 this subsection shall not exceed 15 percent. 

3 SEC. 6003. DETERMINATION OF ALLIANCE PER CAPITA 

4 PREMIUM TARGETS. 

5 (a) INITIAL DETERMINATION.—Not later than Janu6 ary 1, 1995, the Board shall determine, for each regional 

7 alliance for 1996, a regional alliance per capita premium 

8 target. Such target shall equal— 

9 (1) the national per capita baseline premium 

10 target (determined by the Board under section 

11 6002), 

12 (2) updated by the regional alliance inflation 

13 factor (as determined under section 6001(a)(2)) for 

14 1996, and 

15 (3) adjusted by the adjustment factor for the 

16 regional alliance (determined under subsection (c)). 

17 (b) SUBSEQUENT DETERMINATIONS.— 

18 (1) DETERMINATION.—Not later than March 1 

19 of each year (beginning with 1996) the Board shall 

20 determine, for each regional alliance for the suc21 ceeding year a regional alliance per capita premium 

22 target. 

23 (2) GENERAL RULE.—Subject to subsection (e), 

24 such target shall equal— 
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1 (A) the regional alliance per capita target 

2 determined under this section (without regard 

3 to subsection (e)) for the regional alliance for 

4 the previous year, 

5 (B) updated by the regional alliance infla6 tion factor (as determined in section 6001(a)) 

7 for the year. 

8 (3) ADJUSTMENT FOR PREVIOUS EXCESS RATE

9 OF INCREASE IN EXPENDITURES.—Such target for a 

10 year is subject to a decrease under section 6001(d). 

11 (c) ADJUSTMENT FACTORS FOR REGIONAL ALLI12 ANCES FOR INITIAL DETERMINATION.— 

13 (1) IN GENERAL.—The Board shall establish an 

14 adjustment factor for each regional alliance in a 

15 manner consistent with this subsection. 

16 (2) CONSIDERATIONS.—In establishing the fac17 tor for each regional alliance, the Board shall con18 sider, using information of the type described in 

19 paragraph (3), the difference between the national 

20 average of the factors taken into account in deter21 mining the national per capita baseline premium tar22 get and such factors for the regional alliance, includ23 ing variations in health care expenditures and in 

24 rates of uninsurance and underinsurance in the dif25 ferent alliance areas and including variations in the 
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1 proportion of expenditures for services provided by 

2 academic health centers in the different alliance 

3 areas. 

4 (3) TYPE OF INFORMATION.—The type of infor5 mation described in this paragraph is— 

6 (A) information on variations in premiums 

7 across States and across alliance areas within a 

8 State (based on surveys and other data); 

9 (B) information on variations in per capita 

10 health spending by State, as measured by the 

11 Secretary; 

12 (C) information on variations across States 

13 in per capita spending under the medicare pro14 gram and in such spending among alliance 

15 areas within a State under such program; and 

16 (D) area rating factors commonly used by 

17 actuaries. 

18 (4) APPLICATION OF FACTORS IN NEUTRAL

19 MANNER.—The application of the adjustment factors 

20 under this subsection for 1996 shall be done in a 

21 manner so that the weighted average of the regional 

22 alliance per capita premium targets for 1996 is 

23 equal to the national per capita baseline premium 

24 target determined under section 6002. Such weight25 ed average shall be based on the Board’s estimate of 
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Title VI, Subtitle A 

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1 the expected distribution of alliance eligible individ2 uals (taken into account under section 6002) among 

3 the regional alliances. 

4 (5) CONSULTATION PROCESS.—The Board shall 

5 have a process for consulting with representatives of 

6 States and regional alliances before establishing the 

7 adjustment for regional alliances under this sub8 section. 

9 (d) TREATMENT OF CERTAIN STATES.— 

10 (1) NON-ALLIANCE STATES.—In the case of a 

11 State that is not a participating State or otherwise 

12 has not established regional alliances, the entire 

13 State shall be treated under the provisions of this 

14 part as composing a single regional alliance. 

15 (2) CHANGES IN ALLIANCE BOUNDARIES.—In 

16 the case of a State that changes the boundaries of 

17 its regional alliances (including the establishment of 

18 such alliances after 1996), the Board shall provide 

19 a method for computing a regional alliance per cap20 ita premium target for each regional alliance af21 fected by such change in a manner that— 

22 (A) reflects the factors taken into account 

23 in establishing the adjustment factors for re24 gional alliances under subsection (c), and 
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1 (B) results in the weighted average of the 

2 newly computed regional targets for the re3 gional alliances affected by the change equal to 

4 the weighted average of the regional targets for 

5 the regional alliances as previously established. 

6 (e) ADJUSTMENT FOR PREVIOUS EXCESS RATE OF

7 INCREASE IN EXPENDITURES.— 

8 (1) IN GENERAL.—If the actual weighted aver9 age accepted bid for a regional alliance for a year 

10 (as determined by the Board based on actual enroll11 ment in the first month of the year) exceeds the re12 gional alliance per capita premium target (deter13 mined under this section) for the year, then the re14 gional alliance per capita premium target shall be 

reduced, by 1 15 ⁄2 of the excess percentage (described in 

16 paragraph (2)) for the year, for each of the 2 suc17 ceeding years. 

18 (2) EXCESS PERCENTAGE.—The excess percent19 age described in this paragraph for a year is the per20 centage by which— 

21 (A) the actual weighted average accepted 

22 bid (referred to in paragraph (1)) for a regional 

23 alliance for the year, exceeds 
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1 (B) the regional alliance per capita pre2 mium target (determined under this section) for 

3 the year. 

4 SEC. 6004. ALLIANCE INITIAL BIDDING AND NEGOTIATION 

5 PROCESS. 

6 (a) BIDDING PROCESS.— 

7 (1) OBTAINING BIDS.— 

8 (A) IN GENERAL.—Not later than July 1 

9 before the first year, and not later than August 

10 1 of each succeeding year, the regional alliance 

11 shall have obtained premium bids from each 

12 plan seeking to participate as a regional alli13 ance health plan with respect to the alliance in 

14 the following year. 

15 (B) DISCLOSURE.—In obtaining such bids, 

16 a regional alliance may determine to disclose 

17 (or not to disclose) the regional alliance per 

18 capita premium target for the regional alliance 

19 (determined under section 6003) for the year 

20 involved. 

21 (C) CONDITION.—Each bid submitted by a 

22 plan under this subsection shall be conditioned 

23 upon the plan’s agreement to accept any pay24 ment reduction that may be imposed under sec25 tion 6011. 
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Title VI, Subtitle A 

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1 (2) NEGOTIATION PROCESS.—Following the 

2 bidding process under paragraph (1), a State may 

3 provide for negotiations with health plans relating to 

4 the premiums to be charged by such plans. Such ne5 gotiations may result in the resubmission of bids, 

6 but in no case shall a health plan resubmit a bid 

7 that exceeds its prior bid. 

8 (3) LEGALLY BINDING BIDS.—All bids sub9 mitted under this subsection must be legally binding 

10 with respect to the plans involved. 

11 (4) ACCEPTANCE.—The final bid submitted by 

12 a plan under this subsection shall be considered to 

13 be the final accepted bid, except as provided in sub14 section (e). 

15 (5) ASSISTANCE.—The Board shall provide re16 gional alliances with such information and technical 

17 assistance as may assist such alliances in the bid18 ding process under this subsection. 

19 (b) SUBMISSION OF INFORMATION TO BOARD.—By 

20 not later than September 1 of each year for which bids 

21 are obtained under subsection (a), each regional alliance 

22 shall submit to the Board a report that discloses— 

23 (1) information regarding the final bids ob24 tained under subsection (a) by the different plans; 
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Title VI, Subtitle A 

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1 (2)(A) for the first year, any information the 

2 Board may request concerning an estimation of the 

3 enrollment likely in each such plan of alliance eligi4 ble individuals who will be offered enrollment in a 

5 health plan by alliance in the first year, or 

6 (B) for a succeeding year, the actual distribu7 tion of enrollment of alliance eligible individuals in 

8 regional alliance health plans in the year in which 

9 the report is transmitted; and 

10 (3) limitations on capacity of regional alliance 

11 health plans. 

12 (c) COMPUTATION OF WEIGHTED AVERAGE ACCEPT13 ED BID.— 

14 (1) IN GENERAL.—For each regional alliance 

15 the Board shall determine a weighted average ac16 cepted bid for each year for which bids are obtained 

17 under subsection (a). Such determination shall be 

18 based on information on accepted bids for the year, 

19 submitted under subsection (b)(1), and shall take 

20 into account, subject to paragraph (2), the informa21 tion on enrollment distribution submitted under sub22 section (b)(2). 

23 (2) ENROLLMENT DISTRIBUTION RULES.—In 

24 making the determination under paragraph (1) for a 

25 regional alliance, the Board shall establish rules re-
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Title VI, Subtitle A 

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1 specting the treatment of enrollment in plans that 

2 are discontinued or are newly offered. 

3 (d) NOTICE TO CERTAIN ALLIANCES.— 

4 (1) IN GENERAL.—By not later than October 1 

5 of each year for which bids are obtained, the Board 

6 shall notify a regional alliance— 

7 (A) if the weighted average accepted bid 

8 (determined under subsection (c)) for the alli9 ance is greater than the regional alliance per 

10 capita premium target for the alliance (deter11 mined under section 6003) for the year, and 

12 (B) of the reduced weighted average ac13 cepted bid for the alliance. 

14 (2) NOTICE OF PREMIUM REDUCTIONS.—If no15 tice is provided to a regional alliance under para16 graph (1), the Board shall notify the regional alli17 ance and each noncomplying plan of any plan pay18 ment reduction computed under section 6011 for 

19 such a plan and the opportunity to voluntarily re20 duce the accepted bid under subsection (e) in order 

21 to avoid such a reduction. 

22 (e) VOLUNTARY REDUCTION OF ACCEPTED BID

23 (FINAL ACCEPTED BID).—After the Board has deter24 mined under subsection (c) the weighted average accepted 

25 bid for a regional alliance and the Board has determined 
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1 plan payment reductions, before such date as the Board 

2 may specify (in order to provide for an open enrollment 

3 period), a noncomplying plan has the opportunity to volun4 tarily reduce its accepted bid by the amount of the plan 

5 payment reduction that would otherwise apply to the plan. 

6 Such reduction shall not affect the amount of the plan 

7 payment reduction for any other plan for that year. 

8 SEC. 6005. STATE FINANCIAL INCENTIVES. 

9 (a) ELECTION.—Any participating State may elect to 

10 assume responsibility for containment of health care ex11 penditures in the State consistent with this part. Such re12 sponsibility shall include submitting annual reports to the 

13 Board on any activities undertaken by the State to contain 

14 such expenditures. A participating State may regulate the 

15 rates charged by providers furnishing health care items 

16 and services to all private payers. Such regulation of rates 

17 may not cause a corporate alliance health plan to be 

18 charged, directly or indirectly, rates different from those 

19 charged other health plans for the same items and services 

20 or otherwise discriminate against corporate alliance health 

21 plans. 

22 (b) FINANCIAL INCENTIVE.—In the case of a State 

23 that has made an election under subsection (a), if the 

24 Board determines for a particular year (beginning with 

25 the first year) that the statewide weighted average of the 
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1 reduced weighted average accepted bids (based on actual 

2 average enrollment for the year), for regional alliances in 

3 the State, is less than the statewide weighted average of 

4 the regional alliance per capita premium targets (based 

5 upon such enrollment) for such alliances for the year, then 

6 the amount of the State maintenance-of-effort payment 

7 under section 9001(b), for the following year, shall be reduced by 1 8 ⁄2 of the product of— 

9 (1)(A) the amount by which the amount of such 

10 statewide average target exceeds the amount of such 

11 statewide average accepted bid, divided by (B) the 

12 amount of such target; and 

13 (2) the total of the amount of the Federal pay14 ments made in that particular year to regional alli15 ances in the State under subtitle B of title IX. 

16 SEC. 6006. RECOMMENDATIONS TO ELIMINATE REGIONAL 

17 VARIATIONS IN ALLIANCE TARGETS DUE TO 

18 VARIATION IN PRACTICE PATTERNS; CON19 GRESSIONAL CONSIDERATION. 

20 (a) ESTABLISHMENT OF ADVISORY COMMISSION ON

21 REGIONAL VARIATIONS IN HEALTH EXPENDITURES.— 

22 The chair of the Board shall establish, by not later than 

23 60 days after the date of appointment of the first chair, 

24 an advisory commission on regional variations in health 

25 expenditures. 
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1 (b) COMPOSITION.—The advisory commission shall 

2 be composed of consumers, employers, providers, rep3 resentatives of health plans, States, regional alliances, in4 dividuals with expertise in the financing of health care, 

5 individuals with expertise in the economics of health care, 

6 and representatives of diverse geographic areas. 

7 (c) ELIMINATION OF REGIONAL VARIATION IN PRE8 MIUMS DUE TO PRACTICE PATTERN.— 

9 (1) COMMISSION STUDY.—The advisory com10 mission shall examine methods of eliminating vari11 ation in regional alliance per capita premium targets 

12 due to variation in practice patterns, not due to 

13 other factors (such as health care input prices and 

14 demographic factors), by 2002. 

15 (2) COMMISSION REPORT.—The advisory com16 mission shall submit to the Board a report that 

17 specifies one or more methods for eliminating the 

18 variation described in paragraph (1). 

19 (3) BOARD RECOMMENDATIONS.—The Board 

20 shall submit to Congress, by not later July 1, 1995, 

21 detailed recommendations respecting the specific 

22 method to be used to eliminate the variation de23 scribed in paragraph (1) by 2002. Such rec24 ommendations may take into account regional vari25 ations in demographic or health status and in health 
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1 care input prices, based on the availability of accu2 rate proxies for measuring price variation. In taking 

3 into account health care input prices, the Board 

4 shall explain what percentage of variation found 

5 should be adjusted and what percentage of the pre6 mium should be adjusted. 

7 (d) CONGRESSIONAL CONSIDERATION.— 

8 (1) IN GENERAL.—Detailed recommendations 

9 submitted under subsection (c)(3) shall apply under 

10 this subtitle unless a joint resolution (described in 

11 paragraph (2)) disapproving such recommendations 

12 is enacted, in accordance with the provisions of 

13 paragraph (3), before the end of the 60-day period 

14 beginning on the date on which such recommenda15 tions were submitted. For purposes of applying the 

16 preceding sentence and paragraphs (2) and (3), the 

17 days on which either House of Congress is not in 

18 session because of an adjournment of more than 

19 three days to a day certain shall be excluded in the 

20 computation of a period. 

21 (2) JOINT RESOLUTION OF DISAPPROVAL.—A 

22 joint resolution described in this paragraph means 

23 only a joint resolution which is introduced within the 

24 10-day period beginning on the date on which the 
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1 Board submits recommendations under subsection 

2 (e)(3) and— 

3 (A) which does not have a preamble; 

4 (B) the matter after the resolving clause of 

5 which is as follows: ‘‘That Congress disapproves 

6 the recommendations of the National Health 

7 Board concerning elimination of regional vari8 ation in regional alliance premiums, as sub9 mitted by the Board on lllllll.’’, the 

10 blank space being filled in with the appropriate 

11 date; and 

12 (C) the title of which is as follows: ‘‘Joint 

13 resolution disapproving recommendations of the 

14 National Health Board concerning elimination 

15 of regional variation in regional alliance pre16 miums, as submitted by the Board on 

17 lllllll.’’, the blank space being filled 

18 in with the appropriate date. 

19 (3) PROCEDURES FOR CONSIDERATION OF RES20 OLUTION OF DISAPPROVAL.—Subject to paragraph 

21 (4), the provisions of section 2908 (other than sub22 section (a)) of the Defense Base Closure and Re23 alignment Act of 1990 shall apply to the consider24 ation of a joint resolution described in paragraph (2) 

25 in the same manner as such provisions apply to a 
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1 joint resolution described in section 2908(a) of such 

2 Act. 

3 (4) SPECIAL RULES.—For purposes of applying 

4 paragraph (3) with respect to such provisions— 

5 (A) any reference to the Committee on 

6 Armed Services of the House of Representatives 

7 shall be deemed a reference to an appropriate 

8 Committee of the House of Representatives 

9 (specified by the Speaker of the House of Rep10 resentatives at the time of submission of rec11 ommendations under subsection (c)(3)) and any 

12 reference to the Committee on Armed Services 

13 of the Senate shall be deemed a reference to an 

14 appropriate Committee of the Senate (specified 

15 by the Majority Leader of the Senate at the 

16 time of submission of recommendations under 

17 subsection (c)(3)); and 

18 (B) any reference to the date on which the 

19 President transmits a report shall be deemed a 

20 reference to the date on which the Board sub21 mits a recommendation under subsection (c)(3). 

22 (e) ELIMINATION OF REGIONAL VARIATION STATE

23 PAYMENT AMOUNTS.— 

24 (1) COMMISSION STUDY.—The advisory com25 mission shall examine methods of reducing variation 
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1 among States in the level of payments required 

2 under subtitle A of title IX by 2002. The commis3 sion shall examine methods of reducing variation due 

4 to practice patterns, historical differences in the 

5 rates of reimbursement to providers, and in the 

6 amount, duration, and scope of benefits covered 

7 under State medicaid plans. 

8 (2) COMMISSION REPORT.—The advisory com9 mission shall submit to the Board a report that 

10 specifies one or more methods for reducing the vari11 ation described in paragraph (1). 

12 (3) BOARD RECOMMENDATIONS.—The Board 

13 shall submit to Congress, by not later than July 1, 

14 1995, detailed recommendations respecting the spe15 cific method to be used to reduce the variation de16 scribed in paragraph (1) by 2002 in a budget neu17 tral manner with respect to total government pay18 ments and payments by the Federal Government. In 

19 submitting recommendations under this paragraph, 

20 the Board shall consider the fiscal capacity of the 

21 States. 

22 (4) CONGRESSIONAL CONSIDERATION.— 

23 (A) IN GENERAL.—Subject to the suc24 ceeding provisions of this paragraph, the provi25 sions of subsection (d) shall apply to rec-
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Title VI, Subtitle A 

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1 ommendations under paragraph (3) in the same 

2 manner as they apply to recommendations 

3 under subsection (c)(3). 

4 (B) SPECIAL RULES.—In applying sub5 paragraph (A)— 

6 (i) the following shall be substituted 

7 for the matter after the resolving clause 

8 described in subsection (d)(2)(B): ‘‘That 

9 Congress disapproves the recommendations 

10 of the National Health Board concerning 

11 reduction of regional variation in State 

12 payments, as submitted by the Board on 

13 lllllll.’’; and 

14 (ii) the following shall be substituted 

15 for the title described in subsection 

16 (d)(2)(C): ‘‘Joint resolution disapproving 

17 recommendations of the National Health 

18 Board concerning reducing regional vari19 ation in State payments, as submitted by 

20 the Board on lllllll.’’. 

21 (f) INFORMATION.—The advisory commission shall 

22 provide the Board, States, and regional alliances with in23 formation about regional differences in health care costs 

24 and practice patterns. 
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1 SEC. 6007. REFERENCE TO LIMITATION ON ADMINISTRA2 TIVE AND JUDICIAL REVIEW OF CERTAIN DE3 TERMINATIONS. 

4 For limitation on administrative and judicial review 

5 of certain determinations under this part, see section 

6 5232. 

7 Subpart B—Plan and Provider Payment Reductions 

8 to Maintain Expenditures within Targets 

9 SEC. 6011. PLAN PAYMENT REDUCTION. 

10 (a) PLAN PAYMENT REDUCTION.—In order to assure 

11 that payments to regional alliance health plans by a re12 gional alliance are consistent with the applicable regional 

13 alliance per capita target for the alliance (computed under 

14 this subtitle), each noncomplying plan (as defined in sub15 section (b)(2)) for a year is subject to a reduction in plan 

16 payment (under section 1351) by the amount equal to 

17 plan payment reduction specified in subsection (c) for the 

18 year. 

19 (b) NONCOMPLYING ALLIANCE AND NONCOMPLYING

20 PLAN DEFINED.—In this part: 

21 (1) NONCOMPLYING ALLIANCE.—The term 

22 ‘‘noncomplying alliance’’ means, for a year, a re23 gional alliance for which the weighted average ac24 cepted bid (computed under section 6004(c)) exceeds 

25 the regional alliance per capita premium target for 

26 the year. 
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1 (2) NONCOMPLYING PLAN.—The term ‘‘non2 complying plan’’ means, for a year, a regional alli3 ance health plan offered through a noncomplying al4 liance if the final accepted bid for the year exceeds 

5 the maximum complying bid (as defined in sub6 section (d)) for the year. No plan shall be a noncom7 plying plan for a year before the first year in which 

8 the plan is offered by a regional alliance. 

9 (c) AMOUNT OF PLAN PAYMENT REDUCTION.— 

10 (1) IN GENERAL.—The amount of the plan pay11 ment reduction, for a noncomplying plan offered by 

12 an alliance, is the alliance-wide reduction percentage 

13 (as defined in paragraph (2)) of the excess bid 

14 amount (as defined in paragraph (3)) for the plan. 

15 (2) ALLIANCE-WIDE REDUCTION PERCENT16 AGE.— 

17 (A) IN GENERAL.—In paragraph (1), the 

18 term ‘‘alliance-wide reduction percentage’’ 

19 means, for a noncomplying plan offered by an 

20 alliance for a year— 

21 (i) the amount by which (I) the 

22 weighted average accepted bid (computed 

23 under section 6004(c)(1)) for the alliance 

24 for the year, exceeds (II) the regional alli-
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Title VI, Subtitle A 

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1 ance per capita target for the alliance for 

2 the year; divided by 

3 (ii) the sum, for noncomplying plans 

4 offered by the alliance, of the plan propor5 tions of alliance excess bid amounts (de6 scribed in subparagraph (B)(i)) for the 

7 year. 

8 (B) PLAN PROPORTION OF ALLIANCE EX9 CESS BID AMOUNT DESCRIBED.— 

10 (i) IN GENERAL.—The ‘‘plan propor11 tion of alliance excess bid amount’’ de12 scribed in this clause, for a noncomplying 

13 plan, is the product of— 

14 (I) the excess bid amount (as de15 fined in paragraph (3)) for the plan, 

16 and 

17 (II) the plan enrollment propor18 tion (as defined in clause (ii)) for the 

19 plan. 

20 (ii) PLAN ENROLLMENT PROPOR21 TION.—In clause (i)(II), the term ‘‘plan 

22 enrollment proportion’’ means, with respect 

23 to a health plan offered by a regional alli24 ance, the total enrollment of alliance eligi25 ble individuals enrolled in such plan ex-
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Title VI, Subtitle A 

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1 pressed as a percentage of the total enroll2 ment of alliance eligible individuals in all 

3 regional alliance plans offered by the alli4 ance. Such proportion shall be computed 

5 based on the information used in com6 puting the weighted average accepted bid 

7 for the alliance under section 6004(c)(1). 

8 (3) EXCESS BID AMOUNT.—In this subsection, 

9 the ‘‘excess bid amount’’, with respect to a noncom10 plying plan for a year, is the amount by which— 

11 (A) the accepted bid for the year (not tak12 ing into account any voluntary reduction under 

13 section 6004(e)), exceeds 

14 (B) the maximum complying bid (as de15 fined in subsection (d)) for the plan for the 

16 year. 

17 (d) MAXIMUM COMPLYING BID.— 

18 (1) FIRST YEAR.—In this part for the first 

19 year, the ‘‘maximum complying bid’’ for each plan 

20 offered by a regional alliance, is the regional alliance 

21 per capita premium target for the alliance (deter22 mined under section 6003) for the year. 

23 (2) SUBSEQUENT YEARS.—In this part, subject 

24 to paragraph (3), for a subsequent year, the ‘‘max-
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Title VI, Subtitle A 

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1 imum complying bid’’, for a plan offered by an alli2 ance for a year, is the sum of the following: 

3 (A) NET PREVIOUS YEAR ACCEPTED BID

4 FOR PLAN.—The accepted bid for the previous 

5 year (not taking into account any voluntary re6 duction under section 6004(e)), minus the 

7 amount of any plan payment reduction for the 

8 plan for that year. 

9 (B) ALLIANCE-WIDE INFLATION ALLOW10 ANCE.—The amount by which— 

11 (i) the regional alliance per capita 

12 premium target for the year, exceeds 

13 (ii) such target for the previous year, 

14 or, if less, the weighted average accepted 

15 bid (computed under section 6004(c)(1)) 

16 for such year. 

17 (3) SPECIAL RULES FOR NEW PLANS.— 

18 (A) IN GENERAL.—Subject to subpara19 graph (B), in the case of a plan that is first of20 fered by a regional alliance in a year after the 

21 first year the maximum complying bid shall be 

22 the regional alliance per capita premium target 

23 for the year. 

24 (B) AUTHORITY.—The Board or a State 

25 may establish rules to modify the application of 
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Title VI, Subtitle A 

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1 subparagraph (A) for regional alliance health 

2 plans in the State in order— 

3 (i) to prevent abusive premium prac4 tices by entities previously offering plans, 

5 or 

6 (ii) to encourage the availability of all 

7 types of plans in the State and to permit 

8 establishment of new plans. 

9 SEC. 6012. PROVIDER PAYMENT REDUCTION. 

10 (a) PARTICIPATING PROVIDERS.— 

11 (1) IN GENERAL.—Each regional alliance health 

12 plan, as part of its contract under section 1406(e) 

13 with any participating provider (as defined in section 

14 1407(c), or group of participating providers) shall— 

15 (A) include a provision that provides that 

16 if the plan is a noncomplying plan for a year, 

17 payments to the provider (or group) shall be re18 duced by the applicable network reduction per19 centage (described in paragraph (2)) for the 

20 year, and 

21 (B) not include any provision which the 

22 State determines otherwise varies the payments 

23 to such providers (or group) because of, or in 

24 relation to, a plan payment reduction under sec-
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Title VI, Subtitle A 

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1 tion 6011 or otherwise is intended to nullify the 

2 effect of subparagraph (A). 

3 The Board may issue regulations relating to the re4 quirements of this paragraph. 

5 (2) APPLICABLE NETWORK REDUCTION PER6 CENTAGE.— 

7 (A) IN GENERAL.—Subject to subpara8 graph (B), the ‘‘applicable network reduction 

9 percentage’’, with respect to participating pro10 viders of a noncomplying plan for a year is— 

11 (i) the plan payment reduction 

12 amount for the plan for the year (as deter13 mined under section 6011(c)), divided by 

14 (ii) the final accepted bid for the plan 

15 for the year, 

16 adjusted under subparagraph (B). 

17 (B) INDUCED VOLUME OFFSET.—The 

18 Board shall provide for an appropriate increase 

19 of the percentage reduction computed under 

20 subparagraph (A) to take into account any esti21 mated increase in volume of services provided 

22 that may reasonably be anticipated as a con23 sequence of applying a reduction in payment 

24 under this subsection. The Board may compute 

25 and apply such increase differently for different 
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Title VI, Subtitle A 

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1 classes of providers or services or different 

2 types of health plans (as the Board may de3 fine). 

4 (b) OTHER PROVIDERS.— 

5 (1) IN GENERAL.—Each regional alliance health 

6 plan that is a noncomplying plan in a year shall pro7 vide for a reduction in the amount of payments to 

8 providers (or groups of providers) that are not par9 ticipating providers under the applicable alliance fee 

10 schedule under section 1406(c)(3) by the applicable 

11 nonnetwork reduction percentage (described in para12 graph (2)) for the year. 

13 (2) APPLICABLE NONNETWORK REDUCTION

14 PERCENTAGE.— 

15 (A) IN GENERAL.—Subject to subpara16 graph (B), the ‘‘applicable nonnetwork reduc17 tion percentage’’, with respect to nonpartici18 pating providers of a noncomplying plan for a 

19 year is— 

20 (i) the plan payment reduction 

21 amount for the plan for the year (as deter22 mined under section 6011(c)), divided by 

23 (ii) the final accepted bid for the plan 

24 for the year, 

25 adjusted under subparagraph (B). 
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Title VI, Subtitle A 

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1 (B) INDUCED VOLUME OFFSET.—The 

2 Board shall provide for an appropriate increase 

3 of the percentage reduction computed under 

4 subparagraph (A) to take into account any esti5 mated increase in volume of services provided 

6 that may reasonably be anticipated as a con7 sequence of applying a reduction in payment 

8 under this subsection. The Board may compute 

9 and apply such increase differently for different 

10 classes of providers or services or different 

11 types of health plans (as the Board may de12 fine). 

13 (c) APPLICATION TO COST SHARING AND TO BAL14 ANCE BILLING RESTRICTIONS.—For purposes of applying 

15 section 1406(d) (relating to balance billing limitations) 

16 and part 3 of subtitle B of title I (relating to computation 

17 of cost sharing), the payment basis otherwise used for 

18 computing any limitation on billing or cost sharing shall 

19 be such payment basis as adjusted by any reductions ef20 fected under this section. 

21 PART 2—CORPORATE ALLIANCES HEALTH 

22 EXPENDITURES 

23 SEC. 6021. CALCULATION OF PREMIUM EQUIVALENTS. 

24 (a) IN GENERAL.—By January 1, 1998, the Board 

25 shall develop a methodology for calculating an annual per 
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Title VI, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 capita expenditure equivalent for amounts paid for cov2 erage for the comprehensive benefit package within a cor3 porate alliance. 

4 (b) ADJUSTMENT PERMITTED.—Such methodology 

5 shall permit a corporate alliance to petition the Secretary 

6 of Labor for an adjustment of the inflation adjustment 

7 that would otherwise apply to compensate for material 

8 changes in the demographic characteristics of the eligible 

9 individuals receiving coverage through the alliance. 

10 (c) REPORTING.—In 2001 and each subsequent year, 

11 each corporate alliance shall report to the Secretary of 

12 Labor, in a form and manner specified by the Secretary, 

13 the average of the annual per capita expenditure equiva14 lent for the previous 3-year period. 

15 SEC. 6022. TERMINATION OF CORPORATE ALLIANCE FOR 

16 EXCESS INCREASE IN EXPENDITURES. 

17 (a) TERMINATION.— 

18 (1) IN GENERAL.—If a corporate alliance has 

19 two excess years (as defined in subsection (b)) in a 

20 3-year-period, then, effective beginning with the sec21 ond year following the second excess year in such pe22 riod— 

23 (A) the Secretary of Labor shall terminate 

24 the corporate alliance, and 
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Title VI, Subtitle A 

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1 (B) employers that were corporate alliance 

2 employers with respect to such corporate alli3 ance shall become regional alliance employers 

4 (unless, in the case of a corporate alliance with 

5 a plan sponsor described in subparagraph (B) 

6 or (C) of section 1311(b)(1), the employers be7 come corporate alliance employers of another 

8 such corporate alliance). 

9 (2) INITIAL 3-YEAR-PERIOD.—Paragraph (1) 

10 shall first apply to the 3-year-period beginning with 

11 1998. 

12 (3) SPECIAL SUBSEQUENT TREATMENT FOR

13 LARGE EMPLOYERS.—In the case of corporate alli14 ance employers described in paragraph (1)(B) that 

15 are large employers, the employer premium pay16 ments under section 6121 are subject to adjustment 

17 under section 6124. 

18 (4) NO FURTHER ELECTION.—If a corporate al19 liance of a large employer is terminated under this 

20 subsection, no employer that is a corporate alliance 

21 employer for that alliance is eligible to be a sponsor 

22 of a corporate alliance. 

23 (b) EXCESS YEAR.— 
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Title VI, Subtitle A 

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1 (1) IN GENERAL.—In subsection (a), the term 

2 ‘‘excess year’’ means, for a corporate alliance, a year 

3 (after 2000) for which— 

4 (A) the rate of increase for the corporate 

5 alliance (specified in paragraph (2)) for the 

6 year, exceeds 

7 (B) the national corporate inflation factor 

8 (specified in paragraph (3)) for the year. 

9 (2) RATE OF INCREASE FOR CORPORATE ALLI10 ANCE.—The rate of increase for a corporate alliance 

11 for a year, specified in this paragraph, is the per12 centage by which— 

13 (A) the average of the annual per capita 

14 expenditure equivalent for the corporate alliance 

15 (reported under section 6021(c)) for the 3-year 

16 period ending with such year, exceeds 

17 (B) the average of the annual per capita 

18 expenditure equivalent for the corporate alliance 

19 (reported under such subsection) for the 3-year 

20 period ending with the previous year. 

21 (3) NATIONAL CORPORATE INFLATION FAC22 TOR.—The national corporate inflation factor for a 

23 year, specified in this paragraph, is the average of 

24 the general health care inflation factors (as defined 
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Title VI, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 in section 6001(a)(3)) for each of the 3 years ending 

2 with such year. 

3 PART 3—TREATMENT OF SINGLE-PAYER STATES 

4 SEC. 6031. SPECIAL RULES FOR SINGLE-PAYER STATES. 

5 In the case of a Statewide single-payer State, for pur6 poses of section 1222(6), the Board shall compute a State7 wide per capita premium target for each year in the same 

8 manner as a regional alliance per capita premium target 

9 is determined under section 6003. 

10 PART 4—TRANSITION PROVISIONS 

11 SEC. 6041. MONITORING PRICES AND EXPENDITURES. 

12 (a) IN GENERAL.—The Secretary shall establish a 

13 program to monitor prices and expenditures in the health 

14 care system in the United States. 

15 (b) REPORTS.—The Secretary shall periodically re16 port to the President on— 

17 (1) the rate of increase in expenditures in each 

18 sector of the health care system, and 

19 (2) how such rates compare with rate of overall 

20 increase in health care spending and rate of increase 

21 in the consumer price index. 

22 (c) ACCESS TO INFORMATION.— 

23 (1) IN GENERAL.—The Secretary may obtain, 

24 through surveys or otherwise, information on prices 

25 and expenditures for health care services. The Sec-
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 retary may compel health care providers and third 

2 party payers to disclose such information as is nec3 essary to carry out the program under this section. 

4 (2) CONFIDENTIALITY.—Non-public informa5 tion obtained under this subsection with respect to 

6 individual patients is confidential. 

7 (d) PERIODIC REPORTS.—The Secretary shall peri8 odically issue public reports on the matters described in 

9 subsection (b). 

10 Subtitle B—Premium-Related 

11 Financings 

12 PART 1—FAMILY PREMIUM PAYMENTS 

13 Subpart A—Family Share 

14 SEC. 6101. FAMILY SHARE OF PREMIUM. 

15 (a) REQUIREMENT.—Each family enrolled in a re16 gional alliance health plan or in a corporate alliance health 

17 plan in a class of family enrollment is responsible for pay18 ment of the family share of premium payable respecting 

19 such enrollment. Such premium may be paid by an em20 ployer or other person on behalf of such a family. 

21 (b) FAMILY SHARE OF PREMIUM DEFINED.— 

22 (1) IN GENERAL.—In this subtitle, the term 

23 ‘‘family share of premium’’ means, with respect to 

24 enrollment of a family— 
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Title VI, Subtitle B 

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1 (A) in a regional alliance health plan, the 

2 amount specified in paragraph (2) for the class, 

3 or 

4 (B) in a corporate alliance health plan, the 

5 amount specified in paragraph (3) for the class. 

6 (2) REGIONAL ALLIANCE.— 

7 (A) IN GENERAL.—The amount specified 

8 in this paragraph for a health plan based on a 

9 class of family enrollment is the sum of the 

10 base amounts described in subparagraph (B) 

11 reduced (but not below zero) by the sum of the 

12 amounts described in subparagraph (C). 

13 (B) BASE.—The base amounts described 

14 in this subparagraph (for a plan for a class of 

15 enrollment) are as follows: 

16 (i) REGIONAL ALLIANCE PREMIUM.— 

17 The premium specified in section 6102(a) 

18 with respect to such class of enrollment. 

19 (ii) FAMILY COLLECTION SHORT20 FALL.—20 percent of the family collection 

21 shortfall add-on (computed under section 

22 6107 for such class). 

23 (C) CREDITS AND DISCOUNTS.—The 

24 amounts described in this subparagraph (for a 

25 plan for a class of enrollment) are as follows: 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (i) ALLIANCE CREDIT.—The amount 

2 of the alliance credit under section 

3 6103(a). 

4 (ii) INCOME RELATED DISCOUNT.— 

5 The amount of any income-related discount 

6 provided under section 6104(a)(1). 

7 (iii) EXCESS PREMIUM CREDIT.—The 

8 amount of any excess premium credit pro9 vided under section 6105. 

10 (iv) CORPORATE ALLIANCE OPT-IN

11 CREDIT.—The amount of any corporate al12 liance opt-in credit provided under section 

13 6106. 

14 (v) ADDITIONAL CREDIT FOR SSI AND

15 AFDC RECIPIENTS.—In the case of an SSI 

16 or AFDC family or for whom the amount 

17 described in clause (ii) is equal to the 

18 amount described in section 6104(b)(1)(A), 

19 the amount described in subparagraph 

20 (B)(ii). 

21 (D) LIMIT ON MISCELLANEOUS CRED22 ITS.—In no case shall the family share, due to 

23 credits under subparagraph (C), be less than 

24 zero. 

25 (3) CORPORATE ALLIANCE.— 
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Title VI, Subtitle B 

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1 (A) IN GENERAL.—The amount specified 

2 in this paragraph for a health plan based on a 

3 class of family enrollment is the premium de4 scribed in subparagraph (B) reduced (but not 

5 below zero) by the sum of the amounts de6 scribed in subparagraph (C). 

7 (B) PREMIUM.—The premium described in 

8 this subparagraph (for a plan for a class of en9 rollment) is premium specified under section 

10 1384 with respect to the plan and class of en11 rollment involved. 

12 (C) CREDITS AND DISCOUNTS.—The 

13 amounts described in this subparagraph (for a 

14 plan for a class of enrollment) are as follows: 

15 (i) ALLIANCE CREDIT.—The amount 

16 of the alliance credit under section 

17 6103(b). 

18 (ii) INCOME RELATED DISCOUNT.— 

19 The amount of any income-related discount 

20 provided under section 6104(a)(2). 

21 SEC. 6102. AMOUNT OF PREMIUM. 

22 (a) REGIONAL ALLIANCE.—The amount of the pre23 mium charged by a regional alliance for all families in a 

24 class of family enrollment under a regional alliance health 

25 plan offered by the alliance is equal to the product of— 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (1) the final accepted bid for the plan (as de2 fined in section 6000(a)(2)), 

3 (2) the uniform per capita conversion factor 

4 (specified under section 1341(b)) for the alliance, 

5 and 

6 (3) the premium class factor established by the 

7 Board for that class under section 1531. 

8 (b) REFERENCE TO CORPORATE ALLIANCE PREMIUM

9 PROVISIONS.—The amount of the premium charged by a 

10 corporate alliance for all families in a class of family en11 rollment under a corporate alliance health plan offered by 

12 the alliance is specified under section 1384. 

13 (c) SPECIAL RULES FOR DIVIDED FAMILIES.—In the 

14 case of an individual who is a qualifying employee of an 

15 employer, if the individual has a spouse or child who is 

16 not treated as part of the individual’s family because of 

17 section 1012— 

18 (1) the combined premium for both families 

19 under this section shall be computed as though such 

20 section had not applied if such combined premium is 

21 less than the total of the premiums otherwise appli22 cable (without regard to this subsection), 

23 (2) the regional alliance shall divide such com24 bined premium between the families proportionally 

25 (consistent with rules established by the Board), and 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (3) in such case, credits and other amounts 

2 shall be pro-rated in a manner consistent with rules 

3 established by the Board. 

4 SEC. 6103. ALLIANCE CREDIT. 

5 (a) REGIONAL ALLIANCES.—The credit provided 

6 under this section for a family enrolled in a regional alli7 ance health plan through a regional alliance for a class 

8 of family enrollment is equal to 80 percent of the weighted 

9 average premium (as defined in section 6000(b)) for 

10 health plans offered by the alliance for the class. 

11 (b) CORPORATE ALLIANCES.—The credit provided 

12 under this section for a family enrolled in a corporate alli13 ance health plan for a class of family enrollment is equal 

14 to the minimum employer premium payment required 

15 under section 6131 with respect to the family. 

16 SEC. 6104. PREMIUM DISCOUNT BASED ON INCOME. 

17 (a) IN GENERAL.— 

18 (1) ENROLLEES IN REGIONAL ALLIANCE

19 HEALTH PLANS.—Each family enrolled with a re20 gional alliance health plan is entitled to a premium 

21 discount under this section, in the amount specified 

22 in subsection (b), if the family— 

23 (A) is an AFDC or SSI family, 

24 (B) is determined, under subpart D of part 

25 3 of subtitle D of title I, to have family ad-
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 justed income below 150 percent of the applica2 ble poverty level, or 

3 (C) is a family described in subsection 

4 (c)(3) for which the family obligation amount 

5 under subsection (c) for the year would other6 wise exceed a specified percent of family ad7 justed income described in such subsection. 

8 (2) ENROLLEES IN CORPORATE ALLIANCE

9 HEALTH PLANS.— 

10 (A) IN GENERAL.—Subject to subpara11 graph (B), each family enrolled with a cor12 porate alliance health plan in a class of family 

13 enrollment by virtue of the full-time employ14 ment of a low-wage employee (as defined in 

15 subparagraph (B)) is entitled to a premium dis16 count under this section in the amount (if any) 

17 by which— 

18 (i) 95 percent of the premium (speci19 fied in section 1384) for the least expen20 sive corporate alliance health plan that is 

21 offered to the employee and that is a lower 

22 or combination cost sharing plan (as de23 fined in paragraphs (7) and (20) of section 

24 1902 for that class and premium area), ex25 ceeds 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (ii) the alliance credit under section 

2 6103(b) for that class. 

3 (B) LOW-WAGE EMPLOYEE DEFINED.— 

4 (i) IN GENERAL.—In this paragraph, 

5 the term ‘‘low-wage employee’’ means, with 

6 respect to an employer, an employee who is 

7 employed on a full-time basis and who is 

8 receiving wages (as defined in section 

9 1901(a)(1)(A)) for employment for the em10 ployer, at an annual rate of less than 

11 $15,000 (as adjusted under clause (ii)). 

12 (ii) INDEXING.—For a year after 

13 1994, the dollar amount specified in clause 

14 (i) shall be increased or decreased by the 

15 same percentage as the percentage increase 

16 or decrease by which the average CPI (de17 scribed in section 1902(9)) for the 12- 

18 month-period ending with August 31 of the 

19 preceding year exceeds such average for 

20 the 12-month period ending with August 

21 31, 1993. 

22 (C) TIMING OF DETERMINATION.— 

23 (i) IN GENERAL.—The determination 

24 of whether or not an employee is a low25 wage employee shall be made, in accord-
1034 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ance with rules of the Secretary of Labor, 

2 at the time of initial enrollment and shall 

3 also be made at the time of each subse4 quent open enrollment period, on the basis 

5 of the wages payable by the employer at 

6 that time. 

7 (ii) EFFECTIVE DATE.—Such deter8 mination shall apply as of the effective 

9 date of the initial enrollment, or, in the 

10 case of an open enrollment period, as of 

11 the effective date of changes in enrollment 

12 during such period. 

13 (3) NO LIABILITY FOR INDIANS AND CERTAIN

14 VETERANS AND MILITARY PERSONNEL.— 

15 (A) IN GENERAL.—In the case of an indi16 vidual described in subparagraph (B), because 

17 the applicable health plan does not impose any 

18 premium for such an individual, the individual 

19 is not eligible for any premium discount under 

20 this section. 

21 (B) INDIVIDUALS DESCRIBED.—An indi22 vidual described in this subparagraph is— 

23 (i) an electing veteran (as defined in 

24 section 1012(d)(1)) who is enrolled under 

25 a health plan of the Department of Vet-
1035 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 erans Affairs and who, under the laws and 

2 rules as in effect as of December 31, 1994, 

3 has a service-connected disability or who is 

4 unable to defray the expenses of necessary 

5 care as determined under section 1722(a) 

6 of title 38, United States Code, 

7 (ii) active duty military personnel (as 

8 defined in section 1012(d)(2)), and 

9 (iii) an electing Indian (as defined in 

10 section 1012(d)(3)). 

11 (4) MONTHLY APPLICATION TO AFDC AND SSI

12 FAMILIES.—Paragraph (1)(A) (and the family obli13 gation amount under subsection (c) insofar as it re14 lates to an AFDC or SSI family) shall be applied to 

15 the premium or family obligation amount only for 

16 months in which the family is such an AFDC or SSI 

17 family. 

18 (b) AMOUNT OF PREMIUM DISCOUNT FOR REGIONAL

19 ALLIANCE HEALTH PLANS.— 

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

21 paragraphs of this subsection, the amount of the 

22 premium discount under this subsection for a family 

23 enrolled in a regional alliance health plan under a 

24 class of family enrollment is equal to— 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (A) 20 percent of the weighted average 

2 premium for regional alliance health plans of3 fered by the regional alliance for that class of 

4 enrollment, increased by any amount provided 

5 under paragraph (2); reduced (but not below 

6 zero) by 

7 (B) the sum of— 

8 (i) the family obligation amount de9 scribed in subsection (c), and 

10 (ii) the amount of any employer pay11 ment (not required under part 2) towards 

12 the family share of premiums for covered 

13 members of the family. 

14 (2) INCREASE TO ASSURE ENROLLMENT IN AT15 OR-BELOW-AVERAGE-COST PLAN.—If a regional alli16 ance determines that a family eligible for a discount 

17 under this section is unable to enroll in a at-or18 below-average-cost plan (as defined in paragraph 

19 (3)) that serves the area in which the family resides, 

20 the amount of the premium discount under this sub21 section is increased but only to such amount as will 

22 permit the family to enroll in a regional alliance 

23 health plan without the need to pay a family share 

24 of premium under this part in excess of the sum de25 scribed in paragraph (1)(B). 
1037 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (3) AT-OR-BELOW-AVERAGE-COST PLAN DE2 FINED.—In this section, the term ‘‘at-or-below-aver3 age-cost plan’’ means a regional alliance health plan 

4 the premium for which does not exceed, for the class 

5 of family enrollment involved, the weighted average 

6 premium for the regional alliance. 

7 (c) FAMILY OBLIGATION AMOUNT.— 

8 (1) DETERMINATION.—Subject to paragraphs 

9 (2) and (3), the family obligation amount under this 

10 subsection is determined as follows: 

11 (A) NO OBLIGATION IF INCOME BELOW IN12 COME THRESHOLD AMOUNT OR IF AFDC OR SSI

13 FAMILY.—If the family adjusted income (as de14 fined in section 1372(d)) of the family is less 

15 than the income threshold amount (specified in 

16 paragraph (4)) or if the family is an AFDC or 

17 SSI family, the family obligation amount is 

18 zero. 

19 (B) INCOME ABOVE INCOME THRESHOLD

20 AMOUNT.—If such income is at least such in21 come threshold amount and the family is not an 

22 AFDC or SSI family, the family obligation 

23 amount is the sum of the following: 

24 (i) FOR INCOME (ABOVE INCOME

25 THRESHOLD AMOUNT) UP TO THE POV-
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Title VI, Subtitle B 

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1 ERTY LEVEL.—The product of the initial 

2 marginal rate (specified in paragraph (2)) 

3 and the amount by which— 

4 (I) the family adjusted income 

5 (not including any portion that ex6 ceeds the applicable poverty level for 

7 the class of family involved), exceeds 

8 (II) such income threshold 

9 amount. 

10 (ii) GRADUATED PHASE OUT OF DIS11 COUNT UP TO 150 PERCENT OF POVERTY

12 LEVEL.—The product of the final marginal 

13 rate (specified in paragraph (2)) and the 

14 amount by which the family adjusted in15 come exceeds 100 percent (but is less than 

16 150 percent) of the applicable poverty 

17 level. 

18 (2) MARGINAL RATES.—In paragraph (1)— 

19 (A) INDIVIDUAL MARGINAL RATES.—For a 

20 year for an individual class of enrollment— 

21 (i) INITIAL MARGINAL RATE.—The 

22 initial marginal rate is the ratio of— 

23 (I) 3 percent of the applicable 

24 poverty level for the individual class of 

25 enrollment for the year, to 
1039 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (II) the amount by which such 

2 poverty level exceeds such income 

3 threshold amount. 

4 (ii) FINAL MARGINAL RATE.—The 

5 final marginal rate is the ratio of— 

6 (I) the amount by which the gen7 eral family share (as defined in sub8 paragraph (C)) for an individual class 

9 of enrollment exceeds 3 percent of the 

10 applicable poverty level (for an indi11 vidual class of enrollment for the 

12 year); to 

13 (II) 50 percent of such poverty 

14 level. 

15 (B) FAMILY MARGINAL RATES.—For a 

16 year for a family class of enrollment (as defined 

17 in section 1011(c)(2)(A))— 

18 (i) INITIAL MARGINAL RATE.—The 

19 initial marginal rate is the ratio of— 

20 (I) 3 percent of the applicable 

21 poverty level for a dual parent class of 

22 enrollment for the year, to 

23 (II) the amount by which such 

24 poverty level exceeds such income 

25 threshold amount. 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (ii) FINAL MARGINAL RATE.—The 

2 final marginal rate is the ratio of— 

3 (I) the amount by which the gen4 eral family share (as defined in sub5 paragraph (C)) for a dual parent class 

6 of enrollment exceeds 3 percent of the 

7 applicable poverty level (for such a 

8 class for the year); to 

9 (II) 50 percent of such poverty 

10 level. 

11 (C) GENERAL FAMILY SHARE.—In sub12 paragraphs (A) and (B), the term ‘‘general 

13 family share’’ means, for a class, the weighted 

14 average premium for the class minus the alli15 ance credit (determined without regard to this 

16 section). 

17 (3) LIMITATION TO 3.9 PERCENT FOR ALL FAM18 ILIES.— 

19 (A) IN GENERAL.— 

20 (i) FAMILIES WITH INCOME BELOW

21 150 PERCENT OF POVERTY.—In the case of 

22 a family with family adjusted income of 

23 less than 150 percent of the applicable 

24 poverty level, in no case shall the family 

25 obligation amount under this subsection 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 for the year exceed 3.9 percent (adjusted 

2 under subparagraph (C)) of the amount of 

3 such adjusted income. 

4 (ii) OTHER FAMILIES WITH INCOME

5 BELOW $40,000.—In the case of a family 

6 with family adjusted income of at least 150 

7 percent of the applicable poverty level but 

8 less than $40,000 (adjusted under sub9 paragraph (B)) for a year, the family obli10 gation amount under this subsection for 

11 the year is equal to 3.9 percent (adjusted 

12 under subparagraph (C)) of the amount of 

13 such adjusted income. 

14 (B) INDEXING OF DOLLAR AMOUNTS.— 

15 (i) IN GENERAL.—For a year after 

16 1994, the dollar amounts specified in sub17 paragraph (A)(i) and in section 

18 6113(d)(1)(B) shall be increased or de19 creased by the same percentage as the per20 centage increase or decrease by which the 

21 average CPI (described in section 1902(9)) 

22 for the 12-month-period ending with Au23 gust 31 of the preceding year exceeds such 

24 average for the 12-month period ending 

25 with August 31, 1993. 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (ii) ROUNDING.—The dollar amounts 

2 adjusted under this subparagraph shall be 

3 rounded each year to the nearest multiple 

4 of $100. 

5 (C) INDEXING OF PERCENTAGE.— 

6 (i) IN GENERAL.—The percentage 

7 specified in subparagraph (A) shall be ad8 justed for any year after 1994 so that the 

9 percentage for the year bears the same 

10 ratio to the percentage so specified as the 

11 ratio of— 

12 (I) 1 plus the general health care 

13 inflation factor (as defined in section 

14 6001(a)(3)) for the year, bears to 

15 (II) 1 plus the percentage speci16 fied in section 1136(b) (relating to in17 dexing of dollar amounts related to 

18 cost sharing) for the year. 

19 (ii) ROUNDING.—Any adjustment 

20 under clause (i) for a year shall be rounded to the nearest multiple of 1 21 ⁄10 of 1 per22 centage point. 

23 (4) INCOME THRESHOLD AMOUNT.— 

24 (A) IN GENERAL.—For purposes of this 

25 subtitle, the income threshold amount specified 
1043 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 in this paragraph is $1,000 (adjusted under 

2 subparagraph (B)) . 

3 (B) INDEXING.—For a year after 1994, 

4 the income threshold amount specified in sub5 paragraph (A) shall be increased or decreased 

6 by the same percentage as the percentage in7 crease or decrease by which the average CPI 

8 (described in section 1902(9)) for the 12- 

9 month-period ending with August 31 of the pre10 ceding year exceeds such average for the 12- 

11 month period ending with August 31, 1993. 

12 (C) ROUNDING.—Any increase or decrease 

13 under subparagraph (B) for a year shall be 

14 rounded to the nearest multiple of $10. 

15 SEC. 6105. EXCESS PREMIUM CREDIT. 

16 (a) IN GENERAL.—If plan payment reductions are 

17 made for one or more regional alliance health plans offered 

18 by a regional alliance for plan payments in a year under 

19 section 6021, the alliance shall provide for a credit under 

20 this section, in the amount described in subsection (b), 

21 in the case of each family enrolled in a regional alliance 

22 health plan offered by the alliance for premiums in the 

23 year. 

24 (b) AMOUNT OF CREDIT.— 
1044 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

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

2 the amount of the credit under this subsection, for 

3 a family enrolled in a class of family enrollment for 

4 a regional alliance for a year, is the amount that 

5 would be the weighted average premium for such al6 liance, class, and year, if the per capita excess pre7 mium amount (determined under subsection (c)) for 

8 the alliance for the year were substituted for the re9 duced weighted average accepted bid for the regional 

10 alliance for the year. 

11 (2) ADJUSTMENT TO ACCOUNT FOR USE OF ES12 TIMATES.—Subject to section 1361(b)(3), if the 

13 total payments made by a regional alliance to all re14 gional alliance health plans in a year under section 

15 1351(b) exceeds (or is less than) the total of such 

16 payments estimated by the alliance (based on the re17 duced weighted average accepted bid under sub18 section (c)(1)), because of a difference between— 

19 (A) the alliance’s estimate of the distribu20 tion of enrolled families between excess pre21 mium plans and other plans, and 

22 (B) the actual distribution of such enrolled 

23 families among such plans, 

24 the amount of the credit under this section in the 

25 second succeeding year shall be reduced (or in-
1045 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 creased, respectively) by the amount of such excess 

2 (or deficit) in the total of such payments made by 

3 the alliance to all such plans. 

4 (c) PER CAPITA EXCESS PREMIUM AMOUNT.—The 

5 per capita excess premium amount, for a regional alliance 

6 for a year, is the amount by which— 

7 (1) the reduced weighted average accepted bid 

8 (as defined in section 6000(a)(1)) for the alliance 

9 for the year, exceeds 

10 (2) the regional alliance per capita premium 

11 target for the alliance for the year. 

12 SEC. 6106. CORPORATE ALLIANCE OPT-IN CREDIT. 

13 (a) IN GENERAL.—If a regional alliance is owed a 

14 payment adjustment under section 6124 for a year, then 

15 the alliance shall provide for a credit under this section 

16 equal to 20 percent of the amount described in subsection 

17 (b), in the case of each family enrolled in a regional alli18 ance plan offered by the alliance. 

19 (b) AMOUNT OF CREDIT.—The amount described in 

20 this subsection, for a family enrolled in a class of family 

21 enrollment for a regional alliance for a year, is the amount 

22 that would be the weighted average premium for such alli23 ance, class, and year, if the per capita corporate alliance 

24 opt-in amount (determined under subsection (c)) for the 

25 alliance for the year were substituted for the reduced 
1046 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 weighted average accepted bid for the regional alliance for 

2 the year. 

3 (c) PER CAPITA CORPORATE ALLIANCE OPT-IN

4 AMOUNT.—The per capita corporate alliance opt-in 

5 amount, for a regional alliance for a year, is— 

6 (1) the total amount of the payment adjust7 ments owed for the year under section 6124, divided 

8 by 

9 (2) the estimated average number of regional 

10 alliance eligible individuals in the regional alliance 

11 during the year (reduced by the average number of 

12 such individuals whose family share of premiums, 

13 determined without regard to this section and sec14 tion 6107, is zero). 

15 SEC. 6107. FAMILY COLLECTION SHORTFALL ADD-ON. 

16 (a) IN GENERAL.—The family collection shortfall 

17 add-on, for a regional alliance for a class of enrollment 

18 for a year, is the amount that would be the weighted aver19 age premium for such alliance, class, and year, if the per 

20 capita collection shortfall amount (determined under sub21 section (b)) for the alliance for the year were substituted 

22 for the reduced weighted average accepted bid for the re23 gional alliance for the year. 

24 (b) COMPUTATION OF PER CAPITA ADJUSTMENT

25 FOR COLLECTION SHORTFALLS.— 
1047 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (1) PER CAPITA COLLECTION SHORTFALL

2 AMOUNT.—The per capita collection shortfall 

3 amount, for a regional alliance for a year, under this 

4 subsection is equal to— 

5 (A) the amount estimated under paragraph 

6 (2)(A) for the year, divided by 

7 (B) the estimated average number of re8 gional alliance eligible individuals in the re9 gional alliance during the year (reduced by the 

10 average number of such individuals whose fam11 ily share of premiums, determined without re12 gard to this section and section 6106, is zero). 

13 (2) AGGREGATE COLLECTION SHORTFALL.— 

14 (A) IN GENERAL.—Each regional alliance 

15 shall estimate, for each year (beginning with 

16 the first year) the total amount of payments 

17 which the alliance can reasonably identify as 

18 owed to the alliance under this Act (taking into 

19 account any premium reduction or discount 

20 under this subtitle and including amounts owed 

21 under subpart B and not taking into account 

22 any penalties) for the year and not likely to be 

23 collected (after making collection efforts de24 scribed in section 1345) during a period speci-
1048 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 fied by the Secretary beginning on the first day 

2 of the year. 

3 (B) EXCLUSION OF GOVERNMENT

4 DEBTS.—The amount under subparagraph (A) 

5 shall not include any payments owed to a re6 gional alliance by the Federal, State, or local 

7 governments. 

8 (C) ADJUSTMENT FOR PREVIOUS SHORT9 FALL ESTIMATION DISCREPANCY.—Subject to 

10 section 1361(b)(3), the amount estimated under 

11 this paragraph for a year shall be adjusted to 

12 reflect over (or under) estimations in the 

13 amounts so computed under this paragraph for 

14 previous years (based on actual collections), 

15 taking into account interest payable based upon 

16 borrowings (or savings) attributable to such 

17 over or under estimations. 

18 Subpart B—Repayment of Alliance Credit by Certain 

19 Families 

20 SEC. 6111. REPAYMENT OF ALLIANCE CREDIT BY CERTAIN 

21 FAMILIES. 

22 (a) IN GENERAL.—Subject to the succeeding provi23 sions of this subpart, each family which is provided an 

24 alliance credit under section 6103(a) for a class of enroll25 ment is liable to the regional alliance for repayment of 
1049 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 an amount equal to the base employment monthly pre2 mium (applicable to such class) for the month under sec3 tion 6122. 

4 (b) REDUCTION FOR SELF-EMPLOYMENT PAY5 MENTS.—The liability of a family under this section for 

6 a year shall be reduced (but not below zero) by the amount 

7 of any employer payments made in the year under section 

8 6126 based on the net earnings from self-employment of 

9 a family member. 

10 SEC. 6112. NO LIABILITY FOR FAMILIES EMPLOYED FULL11 TIME; REDUCTION IN LIABILITY FOR PART12 TIME EMPLOYMENT. 

13 (a) IN GENERAL.—The amount of any liability under 

14 section 6111 shall be reduced, in accordance with rules 

15 established by the National Health Board consistent with 

16 this section, based on employer premiums payable under 

17 section 6121 with respect to the employment of a family 

18 member who is a qualifying employee or with respect to 

19 a family member. In no case shall the reduction under this 

20 section result in any payment owing to a family. 

21 (b) CREDIT FOR FULL-TIME AND PART-TIME EM22 PLOYMENT.— 

23 (1) IN GENERAL.—Under rules of the Board, in 

24 the case of a family enrolled under a class of family 

25 enrollment, if a family member is a qualifying em-
1050 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ployee for a month and (except in the case described 

2 in section 6114(a)) the employer is liable for pay3 ment under section 6121 based on such employ4 ment— 

5 (A) FULL-TIME EMPLOYMENT CREDIT.—If 

6 the employment is on a full-time basis (as de7 fined in section 1901(b)(2)(A)) the liability 

8 under section 6111 shall be reduced by the 

9 credit amount described in subparagraph (C). 

10 (B) PART-TIME EMPLOYMENT CREDIT.—If 

11 the employment is on a part-time basis (as de12 fined in section 1901(b)(2)(A)) the liability 

13 under section 6111 shall be reduced by the em14 ployment ratio (as defined in section 

15 1901(b)(2)(B)) of the credit amount described 

16 in subparagraph (C). 

17 (C) FULL-TIME MONTHLY CREDIT.—The 

18 amount of the credit under this subparagraph, 

19 with respect to employment by an employer in 

a month, is 1 20 ⁄12 (or, if applicable, the fraction 

21 described in paragraph (2)) of the amount owed 

22 under section 6111, based on the class of en23 rollment, for the year. 

24 (2) COVERAGE DURING ONLY PART OF A

25 YEAR.—In the case of a family that is not enrolled 
1051 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 in a regional alliance health plan for all the months 

2 in a year, the fraction described in this paragraph 

3 is 1 divided by the number of months in the year in 

4 which the family was enrolled in such a plan. 

5 (3) AGGREGATION OF CREDITS.—For purposes 

6 of paragraph (1)— 

7 (A) INDIVIDUALS.—In the case of an indi8 vidual who is a qualifying employee of more 

9 than one employer in a month, the credit for 

10 the month shall equal the sum of the credits 

11 earned with respect to employment by each em12 ployer. Such sum may exceed the credit amount 

13 described in paragraph (1)(C). 

14 (B) COUPLES.—In the case of a couple 

15 each spouse of which is a qualifying employee 

16 in a month, the credit for the month shall equal 

17 the sum of the credits earned with respect to 

18 employment by each spouse. Such sum may ex19 ceed the credit amount described in paragraph 

20 (1)(C). 

21 (c) TREATMENT OF CHANGE OF ENROLLMENT STA22 TUS.—In the case of a family for which the class of family 

23 enrollment changes during a year, the Board shall estab24 lish rules for appropriate conversion and allocation of the 

25 credit amounts under the previous provisions of this sec-
1052 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 tion in a manner that reflects the relative values of the 

2 base employment monthly premiums (as determined under 

3 section 6122) among the different classes of family enroll4 ment. 

5 SEC. 6113. LIMITATION OF LIABILITY BASED ON INCOME. 

6 (a) IN GENERAL.—In the case of an eligible family 

7 described in subsection (b), the repayment amount re8 quired under this subpart (after taking into account any 

9 work credit earned under section 6112) with respect to 

10 a year shall not exceed the amount of liability described 

11 in subsection (c) for the year. 

12 (b) ELIGIBLE FAMILY DESCRIBED.—An eligible fam13 ily described in this subsection is a family which is deter14 mined, under subpart B of part 3 of subtitle D of title 

15 I by the regional alliance for the alliance area in which 

16 the family resides, to have wage-adjusted income (as de17 fined in subsection (d)) below 250 percent of the applica18 ble poverty level. 

19 (c) AMOUNT OF LIABILITY.— 

20 (1) DETERMINATION.—Subject to subsection 

21 (f), in the case of a family enrolled in a class of en22 rollment with wage-adjusted income (as defined in 

23 subsection (d)), the amount of liability under this 

24 subsection is determined as follows: 
1053 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (A) NO OBLIGATION IF INCOME BELOW IN2 COME THRESHOLD AMOUNT OR IF AFDC OR SSI

3 FAMILY.—If such income is less than the in4 come threshold amount (specified in section 

5 6104(c)(4)) or if the family is an AFDC or SSI 

6 family, the amount of liability is zero. 

7 (B) INCOME ABOVE INCOME THRESHOLD

8 AMOUNT.—If such income is at least such in9 come threshold amount and the family is not an 

10 AFDC or SSI family, the amount of liability is 

11 the sum of the following: 

12 (i) 5.5 PERCENT OF INCOME (ABOVE

13 INCOME THRESHOLD AMOUNT) UP TO THE

14 POVERTY LEVEL.—The initial marginal 

15 rate (specified in paragraph (2)(A)) of the 

16 amount by which— 

17 (I) the wage-adjusted income 

18 (not including any portion that ex19 ceeds the applicable poverty level for 

20 the class of family involved), exceeds 

21 (II) such income threshold 

22 amount. 

23 (ii) GRADUATED PHASE OUT OF DIS24 COUNT UP TO 250 PERCENT OF POVERTY

25 LEVEL.—The final marginal rate (specified 
1054 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 in paragraph (2)(B)) of the amount by 

2 which the wage-adjusted income exceeds 

3 100 percent of the applicable poverty level. 

4 (2) MARGINAL RATES.—In paragraph (1)— 

5 (A) INITIAL MARGINAL RATE.—The initial 

6 marginal rate, for a year for a class of enroll7 ment, is the ratio of— 

8 (i) 5.5 percent of the applicable pov9 erty level for the class of enrollment for 

10 the year, to 

11 (ii) the amount by which such poverty 

12 level exceeds such income threshold 

13 amount. 

14 (B) FINAL MARGINAL RATE.—The final 

15 marginal rate, for a year for a class of enroll16 ment, is the ratio of— 

17 (i) the amount by which (I) the 

18 amount of the repayment amount de19 scribed in section 6111(a) exceeds (II) 5.5 

20 percent of the applicable poverty level (for 

21 the class and year); to 

22 (ii) 150 percent of such poverty level. 

23 (3) MONTHLY APPLICATION TO AFDC AND SSI

24 FAMILIES.—Paragraph (1) insofar as it relates to an 

25 AFDC or SSI family shall be applied so as to reduce 
1055 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 to zero the liability amount only for months in which 

2 the family is such an AFDC or SSI family. 

3 (d) WAGE-ADJUSTED INCOME DEFINED.—In this 

4 subtitle, the term ‘‘wage-adjusted income’’ means, for a 

5 family, family adjusted income of the family (as defined 

6 in section 1372(d)(1)), reduced by the sum of the fol7 lowing: 

8 (1)(A) Subject to subparagraph (B), the 

9 amount of any wages included in such family’s in10 come that is received for employment which is taken 

11 into account in the computation of the amount of 

12 employer premiums under section 6121 (without 

13 consideration of section 6126). 

14 (B) The reduction under subparagraph (A) 

15 shall not exceed for a year $5,000 (adjusted under 

16 section 6104(c)(3)(B)) multiplied by the number of 

17 months (including portions of months) of employ18 ment with respect to which employer premiums were 

19 payable under section 6121 (determined in a manner 

20 consistent with section 1901(b)(3)). 

21 (2) The amount of net earnings from self em22 ployment of the family taken into account under sec23 tion 6126. 
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Title VI, Subtitle B 

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1 (3) The amount of unemployment compensation 

2 included in income under section 85 of the Internal 

3 Revenue Code of 1986. 

4 (e) DETERMINATIONS.—A family’s wage-adjusted in5 come and the amount of liability under subsection (c) shall 

6 be determined by the applicable regional alliance upon ap7 plication by a family under under subpart B of part 3 of 

8 subtitle D of title I. 

9 (f) NO LIABILITY FOR INDIANS AND CERTAIN VET10 ERANS AND MILITARY PERSONNEL.—The provisions of 

11 paragraph (3) of section 6104(a) shall apply to the reduc12 tion in liability under this section in the same manner as 

13 such paragraph applies to the premium discount under 

14 section 6104. 

15 SEC. 6114. SPECIAL TREATMENT OF CERTAIN RETIREES 

16 AND QUALIFIED SPOUSES AND CHILDREN. 

17 (a) TREATMENT AS FULL-TIME EMPLOYEE.—Sub18 ject to subsection (d), an individual who is an eligible re19 tiree (as defined in subsection (b)) or a qualified spouse 

20 or child (as defined in subsection (c)) for a month in a 

21 year (beginning with 1998) is considered, for purposes of 

22 section 6112, to be a full-time employee described in such 

23 section in such month. 

24 (b) ELIGIBLE RETIREE DEFINED.—In this section, 

25 the term ‘‘eligible retiree’’ means, for a month, an indi-
1057 

Title VI, Subtitle B 

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1 vidual who establishes to the satisfaction of the regional 

2 alliance (for the alliance area in which the individual re3 sides), pursuant to rules of the Secretary, that the indi4 vidual, as of the first day of the month— 

5 (1) is at least 55, but less than 65, years of 

6 age, 

7 (2) is not employed on a full-time basis (as de8 fined in section 1901(b)(2)(A)), 

9 (3) would be eligible (under section 226(a) of 

10 the Social Security Act) for hospital insurance bene11 fits under part A of title XVIII of such Act if the 

12 individual were 65 years of age based only on the 

13 employment of the individual, and 

14 (4) is not a medicare-eligible individual. 

15 (c) QUALIFIED SPOUSE OR CHILD DEFINED.—In 

16 subsection (a), the term ‘‘qualified spouse or child’’ means, 

17 in relation to an eligible retiree for a month, an individual 

18 who establishes to the satisfaction of the regional alliance 

19 (for the alliance area in which the individual resides) 

20 under rules of the Secretary that the requirements in one 

21 of the following paragraphs is met with respect to the indi22 vidual: 

23 (1) The individual (A) is under 65 years of age 

24 and is (and has been for a period of at least one 
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Title VI, Subtitle B 

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1 year) married to an eligible retiree or (B) is a child 

2 of the eligible retiree. 

3 (2) In the case of a person who was an eligible 

4 retiree at the time of the person’s death— 

5 (A) the individual was (and had for a pe6 riod of at least one year been) married to the 

7 retiree at the time of the person’s death, 

8 (B) the individual is under 65 years of age, 

9 (C) the individual is not employed on a 

10 full-time basis (as defined in section 

11 1901(b)(2)(A)), 

12 (D) the individual is not remarried, and 

13 (E) the deceased spouse would still be an 

14 eligible retiree in the month if such spouse had 

15 not died. 

16 (3) The individual is a child of an individual de17 scribed in paragraph (2). 

18 (d) APPLICATION.—An individual may not be deter19 mined to be an eligible retiree or qualified spouse or child 

20 unless an application has been filed with the regional alli21 ance. Such application shall contain such information as 

22 the Secretary may require to establish such status and 

23 verify information in the application. Any material mis24 representation in the application is subject to a penalty 
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Title VI, Subtitle B 

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1 in the same manner as a misrepresentation described in 

2 section 1374(i)(2). 

3 SEC. 6115. SPECIAL TREATMENT OF CERTAIN MEDICARE 

4 BENEFICIARIES. 

5 In the case of an individual who would be a medicare6 eligible individual in a month but for the application of 

7 section 1012(a) on the basis of employment (in the month 

8 or a previous month) of the individual or the individual’s 

9 spouse or parent, the individual (or spouse or parent, as 

10 the case may be) so employed is considered, for purposes 

11 of section 6112, to be a full-time employee described in 

12 such section in such month. 

13 PART 2—EMPLOYER PREMIUM PAYMENTS 

14 Subpart A—Regional Alliance Employers 

15 SEC. 6121. EMPLOYER PREMIUM PAYMENT REQUIRED. 

16 (a) REQUIREMENT.— 

17 (1) IN GENERAL.—Each regional alliance em18 ployer described in paragraph (2) for a month shall 

19 pay to the regional alliance that provides health cov20 erage to a qualifying employee of the employer an 

21 employer premium in a amount at least equal to the 

22 amount specified in subsection (b). Such payments 

23 shall be made in accordance with section 1345(c). 

24 (2) EMPLOYER DESCRIBED.—An employer de25 scribed in this paragraph for a month is an employer 
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Title VI, Subtitle B 

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1 that in the month employs one or more qualifying 

2 employees (as defined in section 1901(b)(1)). 

3 (3) TREATMENT OF CERTAIN EMPLOYMENT BY

4 CORPORATE ALLIANCE EMPLOYERS.—A corporate al5 liance employer shall be deemed, for purposes of this 

6 subpart, to be a regional alliance employer with re7 spect to qualifying employees who are not corporate 

8 alliance eligible individuals. 

9 (b) PREMIUM PAYMENT AMOUNT.— 

10 (1) IN GENERAL.—Except as provided in sec11 tion 6123 (relating to a discount for certain employ12 ers), section 6124 (relating to large employers elect13 ing coverage in a regional alliance), and section 

14 6125 (relating to the employer collection shortfall 

15 add-on), the amount of the employer premium pay16 ment, for a month for qualifying employees of the 

17 employer who reside in an alliance area, is the sum 

18 of the payment amounts computed under paragraph 

19 (2) for each class of family enrollment with respect 

20 to such employees in such area. 

21 (2) PAYMENT AMOUNT FOR ALL EMPLOYEES IN

22 A CLASS OF FAMILY ENROLLMENT.—Subject to 

23 paragraph (3), the payment amount under this para24 graph, for an employer for a class of family enroll-
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Title VI, Subtitle B 

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1 ment for a month for qualifying employees residing 

2 in an alliance area, is the product of— 

3 (A) the base employment monthly premium 

4 determined under section 6122 for the class of 

5 family enrollment for the previous month for 

6 the regional alliance, and 

7 (B) the number of full-time equivalent em8 ployees (determined under section 1901(b)(2)) 

9 enrolled in that class of family enrollment for 

10 the previous month and residing in the alliance 

11 area. 

12 (3) TREATMENT OF CERTAIN EMPLOYEES.—In 

13 applying this subpart in the case of a qualifying em14 ployee (other than a medicare-eligible individual) 

15 who is not enrolled in any alliance health plan— 

16 (A) the employee is deemed enrolled in a 

17 regional alliance health plan (for the alliance 

18 area in which the individual resides) in the dual 

19 parent class of enrollment, and 

20 (B) if the employee’s residence is not 

21 known, the employee is deemed to reside in the 

22 alliance area in which the employee principally 

23 is employed for the employer. 

24 (4) TRANSITIONAL RULES FOR FIRST MONTH IN

25 FIRST YEAR FOR A STATE.—In the case of an em-
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Title VI, Subtitle B 

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1 ployer for a State in the first month of the State’s 

2 first year— 

3 (A) the premium amount for such month 

4 shall be computed by substituting ‘‘month’’ for 

5 ‘‘previous month’’ in paragraph (2); 

6 (B) payment for such month shall be made 

7 on the first of the month based on an estimate 

8 of the payment for such month; 

9 (C) an adjustment shall be made to the 

10 payment in the following month to reflect the 

11 difference between the payment in the first 

12 month and the payment in the following month 

13 (calculated without regard to the adjustment 

14 under this subparagraph); and 

15 (D) the reconciliation of premiums for 

16 such first month under section 1602(c) shall be 

17 included in the reconciliation of premiums for 

18 the following 12 months. 

19 (5) SPECIAL RULES FOR DIVIDED FAMILIES.— 

20 In the case of an individual who is a qualifying em21 ployee of an employer, if the individual has a spouse 

22 or child who is not treated as part of the individual’s 

23 family because of section 1012— 
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Title VI, Subtitle B 

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1 (A) the employer premium payment under 

2 this section shall be computed as though such 

3 section had not applied, and 

4 (B) the regional alliance shall make pro5 portional payments (consistent with rules estab6 lished by the Secretary) to the health plans (if 

7 different) of the qualifying employee and of the 

8 employee’s spouse and children. 

9 (c) APPLICATION DURING TRANSITION PERIOD.— 

10 (1) IN GENERAL.—For purposes of applying 

11 this subpart in the case of an employer described in 

12 paragraph (3), there shall only be taken into account 

13 qualifying employees (and wages of such employees) 

14 who reside in a participating State. 

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

16 apply in determining the average number of full-time 

17 equivalent employees or whether an employer is a 

18 small employer. 

19 (3) EMPLOYER DESCRIBED.—An employer de20 scribed in this paragraph is an employer that em21 ploys one or more qualifying employees in a partici22 pating State and one or more qualifying employees 

23 in a State that is not a participating State. 
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Title VI, Subtitle B 

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1 SEC. 6122. COMPUTATION OF BASE EMPLOYMENT MONTH2 LY PREMIUM. 

3 (a) IN GENERAL.—Each regional alliance shall pro4 vide for the computation for each year (beginning with the 

5 first year) of a base employment monthly premium for 

6 each class of family enrollment as follows: 

7 (1) INDIVIDUAL ENROLLMENT.—The base em8 ployment monthly premium for the individual class 

of enrollment is equal to 1 9 ⁄12 of 80 percent of the 

10 credit-adjusted weighted average premium (as de11 fined in paragraph (4)) for such regional alliance for 

12 the individual class of enrollment. 

13 (2) COUPLE-ONLY ENROLLMENT.— 

14 (A) IN GENERAL.—The base employment 

15 monthly premium for the couple-only class of 

enrollment is equal to 1 16 ⁄12 of 80 percent of the 

17 product described in subparagraph (B), divided 

18 by the sum described in subparagraph (C). 

19 (B) TOTAL PREMIUMS FOR COUPLE-ONLY

20 ENROLLMENTS.—The product described in this 

21 subparagraph is— 

22 (i) the credit-adjusted weighted aver23 age premium for such regional alliance for 

24 the couple-only class of enrollment, multi25 plied by 
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Title VI, Subtitle B 

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1 (ii) the sum, for all the months in the 

2 year, of the number of covered families re3 ceiving coverage through regional alliance 

4 health plans of the regional alliance within 

5 such class of enrollment in each such 

6 month. 

7 (C) NUMBER OF WORKERS AND EXTRA

8 WORKERS.—The sum described in this subpara9 graph is— 

10 (i) the sum specified in subparagraph 

11 (B)(ii), plus 

12 (ii) the number of additional workers 

13 (determined under subsection (b)(1)), for 

14 families receiving coverage within such 

15 class from regional alliance health plans of16 fered by the regional alliance. 

17 (3) SINGLE AND DUAL PARENT ENROLL18 MENTS.— 

19 (A) IN GENERAL.—The base employment 

20 monthly premium for the single parent and 

dual parent classes of enrollment is equal to 1 21 ⁄12

22 of 80 percent of the sum described in subpara23 graph (B), divided by the sum described in sub24 paragraph (C). 
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Title VI, Subtitle B 

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1 (B) TOTAL PREMIUMS FOR SINGLE AND

2 DUAL PARENT ENROLLMENTS.—The sum de3 scribed in this subparagraph is the sum of the 

4 products described in the following clauses: 

5 (i) TOTAL PREMIUMS FOR SINGLE

6 PARENT ENROLLMENT.—The product of— 

7 (I) the credit-adjusted weighted 

8 average premium for such regional al9 liance for the single parent class of 

10 enrollment, multiplied by 

11 (II) the sum, for all the months 

12 in the year, of the number of covered 

13 families receiving coverage through re14 gional alliance health plans of the re15 gional alliance within such class of en16 rollment in each such month. 

17 (ii) TOTAL PREMIUMS FOR DUAL PAR18 ENT ENROLLMENT.—The product of— 

19 (I) the credit-adjusted weighted 

20 average premium for such regional al21 liance for the dual parent class of en22 rollment, multiplied by 

23 (II) the sum, for all the months 

24 in the year, of the number of covered 

25 families receiving coverage through re-
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Title VI, Subtitle B 

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1 gional alliance health plans of the re2 gional alliance within such class of en3 rollment in each such month. 

4 (C) NUMBER OF WORKERS AND EXTRA

5 WORKERS.—The sum described in this subpara6 graph is— 

7 (i) the sum specified in subparagraph 

8 (B)(i)(II); plus 

9 (ii) the sum specified in subparagraph 

10 (B)(ii)(II); plus 

11 (iii) the number of additional workers 

12 (determined under subsection (b)(1)), for 

13 families receiving coverage within the dual 

14 parent class of enrollment from regional al15 liance health plans offered by the regional 

16 alliance. 

17 (4) CREDIT-ADJUSTED WEIGHTED AVERAGE

18 PREMIUM DEFINED.—In this subsection, the term 

19 ‘‘credit-adjusted weighted average premium’’ means, 

20 for a class of enrollment and a regional alliance, the 

21 weighted average premium for the class and alliance, 

22 reduced by the amount described in section 6106(b) 

23 for such class and alliance. 

24 (b) DETERMINATION OF ADDITIONAL WORKERS FOR

25 COUPLE-ONLY AND DUAL PARENT CLASS.— 
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Title VI, Subtitle B 

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

2 the regional alliance shall determine, for each couple 

3 class of family enrollment and in a manner specified 

4 by the Board, an estimated total number of addi5 tional workers equal to— 

6 (A) 12 times the alliance-wide monthly av7 erage number of premium payments (as deter8 mined under paragraph (2)) for covered fami9 lies (as defined in paragraph (3)) within such 

10 class of enrollment, minus 

11 (B) the sum described in subsection 

12 (a)(2)(B)(ii) or (a)(3)(B)(ii)(II) for the couple13 only and dual parent classes, respectively. 

14 (2) COMPUTATION OF ALLIANCE-WIDE MONTH15 LY AVERAGE NUMBER.— 

16 (A) IN GENERAL.—In determining the alli17 ance-wide monthly average number of premium 

18 payments under paragraph (1)(A), a covered 

19 family shall count for a month as 1, or, if 

20 greater, the number computed under subpara21 graph (B) (but in no case greater than 2). 

22 (B) COUNTING OF FAMILIES IN WHICH

23 BOTH SPOUSES ARE QUALIFYING EMPLOY24 EES.—The number computed under this sub25 paragraph over all families within a couple-only 
1069 

Title VI, Subtitle B 

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1 or dual parent class of enrollment in which both 

2 spouses are qualifying employees is determined 

3 on an alliance-wide basis based on the fol4 lowing: 

5 (i) For such a spouse, determine, 

6 using the rules under section 

7 1902(b)(1)(A), how many full-time equiva8 lent employees the spouse is counted as, 

9 but not to exceed 1 for either spouse. 

10 (ii) Add the 2 numbers determined 

11 under clause (i) for spouses in such fami12 lies. 

13 (3) COVERED FAMILY DEFINED.—In this sub14 section, the term ‘‘covered family’’ means a family 

15 other than— 

16 (A) an SSI family or AFDC family, 

17 (B) a family in which a spouse is a medi18 care-eligible individual, or 

19 (C) a family that is enrolled in a health 

20 plan other than a regional alliance health plan. 

21 (4) ADJUSTMENT TO ACCOUNT FOR USE OF ES22 TIMATES.—Subject to section 1361(b)(3), if the 

23 total receipts of a regional alliance to all regional al24 liance health plans in a year under this subpart ex25 ceeds, or is less than, the total of such receipts esti-
1070 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 mated by the alliance (based on the base employ2 ment monthly premium under subsection (a)), be3 cause of a difference between— 

4 (A) the alliance’s estimate of the estimated 

5 total number of additional workers for the alli6 ance and the estimate of the number of covered 

7 families, and 

8 (B) the actual total number of additional 

9 workers and the actual number of covered fami10 lies, 

11 the estimated total number of additional workers to 

12 be applied under this section in the second suc13 ceeding year shall be reduced, or increased, respec14 tively, in a manner that results in total receipts of 

15 the alliance under this subpart in such succeeding 

16 year being increased or decreased by the amount of 

17 such excess (or deficit). 

18 (c) BASIS FOR DETERMINATIONS.— 

19 (1) PREMIUMS.—The determinations of pre20 miums and families under plans under this section 

21 shall be made in a manner determined by the Board 

22 and based on the premiums and families used by the 

23 Board in carrying out subtitle A and shall be based 

24 on estimates on an annualized basis. 
1071 

Title VI, Subtitle B 

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1 (2) EMPLOYMENT.—The determinations of em2 ployment under this section for the first year for a 

3 State shall be based on estimates of employment es4 tablished by the regional alliance in accordance with 

5 standards promulgated by the Secretary of Labor in 

6 consultation with the National Health Board. 

7 (3) REPORTS.—In accordance with rules estab8 lished by the Secretary of Labor in consultation with 

9 the National Health Board, a regional alliance may 

10 require regional alliance employers to submit such 

11 periodic information on employment as may be nec12 essary to monitor the determinations made under 

13 this section, including months and extent of employ14 ment. 

15 (d) TIMING OF DETERMINATION.—Determinations 

16 under this section for a year shall be made by not later 

17 than December 1, or such other date as the Board may 

18 specify, before the beginning of the year. 

19 SEC. 6123. PREMIUM DISCOUNT FOR CERTAIN EMPLOYERS. 

20 (a) EMPLOYER DISCOUNT.— 

21 (1) IN GENERAL.—Subject to section 6124(c) 

22 (relating to phase in for certain large corporate alli23 ance employers) and section 6125 (relating to the 

24 employer collection shortfall add-on), the amount of 

25 the employer premium payment required under this 
1072 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 subpart for a regional alliance employer for any year 

2 shall not exceed the limiting percentage (as defined 

3 in subsection (b)) of the employer’s wages for that 

4 year. 

5 (2) EXCLUSION OF GOVERNMENTAL EMPLOY6 ERS AND CERTAIN CORPORATE ALLIANCE EMPLOY7 ERS.—Paragraph (1) shall not apply to— 

8 (A) the Federal Government, a State gov9 ernment, or a unit of local government, or a 

10 unit or instrumentality of such government, be11 fore 2002; and 

12 (B) a corporate alliance employer which is 

13 treated as a regional alliance employer under 

14 section 6131(a)(2). 

15 (b) LIMITING PERCENTAGE DEFINED.—In sub16 section (a)— 

17 (1) ANY EMPLOYER.—For an employer that is 

18 not a small employer (as defined in subsection (c)), 

19 the limiting percentage is 7.9 percent. 

20 (2) SMALL EMPLOYERS.—For an employer that 

21 is a small employer and that has an average number 

22 of full-time equivalent employees and average annual 

23 wages per full-time equivalent employee (as deter24 mined under subsection (d)), the limiting percentage 
1073 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 is the applicable percentage determined based on fol2 lowing table: 

3

Limiting Percentage 

Average number of full-time 

equivalent employees 

Employer’s average annual wages per full-time equivalent employee 

are: 

$0– 

$12,000 

$12,001– 

$15,000 

$15,001– 

$18,000 

$18,001– 

$21,000 

$21,001– 

$24,000 

Fewer than 25 ............... 3.5% 4.4% 5.3% 6.2% 7.1% 

25 but fewer than 50 ..... 4.4% 5.3% 6.2% 7.1% 7.9% 

50 but not over 75 ......... 5.3% 6.2% 7.1% 7.9% 7.9% 

4 (c) SMALL EMPLOYER DEFINED.— 

5 (1) IN GENERAL.—In this section— 

6 (A) the term ‘‘small employer’’ means an 

7 employer that does not employ, on average, 

8 more than 75 full-time equivalent employees; 

9 and 

10 (B) the average number of full-time equiv11 alent employees shall be determined by aver12 aging the number of full-time equivalent em13 ployees employed by the employer in each 

14 countable month during the year. 

15 (2) COUNTABLE MONTH.—In paragraph (1), 

16 the term ‘‘countable month’’ means, for an em17 ployer, a month in which the employer employs any 

18 qualifying employee. 
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Title VI, Subtitle B 

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1 (3) DETERMINATIONS.—The number of full2 time equivalent employees shall be determined using 

3 the rules under section 1901(b)(2). 

4 (d) AVERAGE ANNUAL WAGES PER FULL-TIME

5 EQUIVALENT EMPLOYEE DEFINED.— 

6 (1) IN GENERAL.—In this section, the term 

7 ‘‘average annual wages per full-time equivalent em8 ployee’’ means, for an employer for a year— 

9 (A) the total wages paid in the year to in10 dividuals who, at the time of payment of the 

11 wages, are qualifying employees of the em12 ployer; divided by 

13 (B) the number of full-time equivalent em14 ployees of the employer in the year. 

15 (2) DETERMINATION.—The Board may estab16 lish rules relating to the computation of the average 

17 annual wages for employers. 

18 (e) DETERMINATIONS.—For purposes of this section, 

19 the number of employees and average wages shall be de20 termined on an annual basis. 

21 (f) TREATMENT OF CERTAIN SELF-EMPLOYED INDI22 VIDUALS.—In the case of an individual who is a partner 

23 in a partnership, is a 2-percent shareholder in an S cor24 poration (within the meaning of section 1372 of the Inter25 nal Revenue Code of 1986), or is any other individual who 
1075 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 carries on a trade or business as a sole proprietorship, 

2 for purposes of this section— 

3 (1) the individual is deemed to be an employee 

4 of the partnership, S corporation, or proprietorship, 

5 and 

6 (2) the individual’s net earnings from self em7 ployment attributable to the partnership, S corpora8 tion, or sole proprietorship are deemed to be wages 

9 from the partnership, S corporation, or proprietor10 ship. 

11 (g) APPLICATION TO EMPLOYERS.—An employer 

12 that claims that this section applies— 

13 (1) shall provide notice to the regional alliance 

14 involved of the claim at the time of making pay15 ments under this subpart; and 

16 (2) shall make available such information (and 

17 provide access to such information) as the regional 

18 alliance may require (in accordance with regulations 

19 of the Secretary of Labor) to audit the determina20 tion of— 

21 (A) whether the employer is a small em22 ployer, and, if so, the average number of full23 time equivalent employees and average annual 

24 wages of the employer; and 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (B) the total wages paid by the employer 

2 for qualifying employees. 

3 (h) TREATMENT OF MULTI-ALLIANCE EMPLOY4 ERS.—In the case in which this section is applied to an 

5 employer that makes employer premium payments to more 

6 than one regional alliance, the reduction under this section 

7 shall be applied in a pro-rated manner to the premium 

8 payments made to all such alliances. 

9 SEC. 6124. PAYMENT ADJUSTMENT FOR LARGE EMPLOYERS 

10 ELECTING COVERAGE IN A REGIONAL ALLI11 ANCE. 

12 (a) APPLICATION OF SECTION.— 

13 (1) IN GENERAL.—Except as otherwise pro14 vided in this subsection, this section shall apply to 

15 the employer premium payments for full-time em16 ployees in a State of an employer if— 

17 (A)(i) the employer is an eligible sponsor 

18 described in section 1311(b)(1)(A), (ii) the em19 ployer elected to be a corporate alliance under 

20 section 1312(a)(1), and (iii) the election is ter21 minated under section 1313; 

22 (B)(i) the employer is such an eligible 

23 sponsor as of the first day of the first year of 

24 the State, and (ii) the employer did not provide 

25 the notice required under section 1312(a)(1) 
1077 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (with respect to an election to become a cor2 porate alliance); or 

3 (C)(i) the employer is such an eligible 

4 sponsor, (ii) the employer subsequently became 

5 a large employer and elected to be a corporate 

6 alliance under section 1312(a)(2), and (iii) the 

7 election was terminated under section 1313. 

8 (2) EFFECTIVE DATE.—In the case of an em9 ployer described in— 

10 (A) paragraph (1)(A) or (1)(C), this sec11 tion shall first apply on the effective date of the 

12 termination of the election under section 1313, 

13 or 

14 (B) paragraph (1)(B), this section shall 

15 first apply as of January 1, 1996 (or, if later 

16 with respect to a State, the first day of the first 

17 year for the State). 

18 (3) TREATMENT OF EMPLOYEES IN SMALL ES19 TABLISHMENTS.—This section shall not apply to the 

20 payment of premiums for full-time employees of an 

21 employer described in paragraph (1)(A) or (1)(C), if 

22 the employees are employed at an establishment with 

23 respect to which the option described in section 

24 1311(c)(1)(B) was exercised. 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (4) SUNSET.—This section shall cease applying 

2 to an employer with respect to employment in a 

3 State after the 7th year in which this section applies 

4 to the employer in the State. 

5 (5) LARGE EMPLOYER DEFINED.—In this sec6 tion, the term ‘‘large employer’’ has the meaning 

7 given such term in section 1311(e)(3). 

8 (b) ADDITIONAL AMOUNT.— 

9 (1) IN GENERAL.—If an employer subject to 

10 this section for a year has an excess risk proportion 

11 (specified in paragraph (3)) of greater than zero 

12 with respect to an alliance area, then the employer 

13 shall provide, on a monthly basis, for payment to the 

14 regional alliance for such area of an amount equal 

to 1 15 ⁄12 of the excess risk amount described in para16 graph (2) for the year. 

17 (2) EXCESS RISK AMOUNT.—The excess risk 

18 amount described in this paragraph, for an employer 

19 for a year with respect to an alliance area, is equal 

20 to the product of the following: 

21 (A) The reduced weighted average accept22 ed bid for the regional alliance for the area for 

23 the year. 

24 (B) The total average number of alliance 

25 eligible individuals who— 
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Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (i) were full-time employees (or family 

2 members of such employees) of the em3 ployer, and 

4 (ii) residing in the regional alliance 

5 area, 

6 in the year before the first year in which this 

7 section applies to the employer. 

8 (C) The excess risk proportion (specified in 

9 paragraph (3)) for the employer for such area. 

10 (D) The phase-down percentage (specified 

11 in paragraph (4)) for the year. 

12 (3) EXCESS RISK PROPORTION.— 

13 (A) IN GENERAL.—The ‘‘excess risk pro14 portion’’, specified in this paragraph, with re15 spect to an employer and an alliance area, is a 

16 percentage that reflects, for the year before the 

17 first year in which this section applies to the 

18 employer, the amount by which— 

19 (i) the average demographic risk for 

20 employees (and family members) described 

21 in paragraph (2)(B) residing in the alli22 ance area, exceeds 

23 (ii) the average demographic risk for 

24 all regional alliance eligible individuals re25 siding in the area. 
1080 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (B) MEASUREMENT OF DEMOGRAPHIC

2 RISK.— 

3 (i) IN GENERAL.—Demographic risk 

4 under subparagraph (A) shall be meas5 ured, in a manner specified by the Board, 

6 based on the demographic characteristics 

7 described in section 6001(c)(1)(A), that re8 late to the actuarial value of the com9 prehensive benefit package. 

10 (ii) PROVISION OF INFORMATION.— 

11 Each employer to which this section ap12 plies shall submit, to each regional alliance 

13 for which an additional payment may be 

14 required under this section, such informa15 tion (and at such time) as the Board may 

16 require in order to determine the demo17 graphic risk referred to in subparagraph 

18 (A)(i). 

19 (4) PHASE-DOWN PERCENTAGE.—The phase 

20 down percentage, specified in this paragraph for an 

21 employer for— 

22 (A) each of the first 4 years to which this 

23 section applies to the employer, is 100 percent, 

24 (B) the fifth such year, is 75 percent, 

25 (C) the sixth such year, is 50 percent, and 
1081 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (D) the seventh such year, is 25 percent. 

2 (c) PHASE IN OF EMPLOYER PREMIUM DISCOUNT.— 

3 For— 

4 (1) each of the first 4 years in which this sec5 tion applies to such employer, section 6123 shall not 

6 apply to the employer; 

7 (2) the fifth such year, section 6123 shall apply 

8 to the employer but the reduction in premium pay9 ment effected by such section shall be 25 percent of 

10 the reduction that would otherwise apply (but for 

11 this subsection); 

12 (3) the sixth such year, section 6123 shall apply 

13 to the employer but the reduction in premium pay14 ment effected by such section shall be 50 percent of 

15 the reduction that would otherwise apply (but for 

16 this subsection); 

17 (4) the seventh such year, section 6123 shall 

18 apply to the employer but the reduction in premium 

19 payment effected by such section shall be 75 percent 

20 of the reduction that would otherwise apply (but for 

21 this subsection); or 

22 (5) a subsequent year, section 6123 shall apply 

23 to the employer without any reduction under this 

24 subsection. 
1082 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 6125. EMPLOYER COLLECTION SHORTFALL ADD-ON. 

2 (a) IN GENERAL.—The amount payable by an em3 ployer under this subpart shall be increased by the amount 

4 computed under subsection (b). 

5 (b) AMOUNT.—The amount under this subsection for 

6 an employer is equal to the premium payment amount that 

7 would be computed under section 6121(b)(2) if the per 

8 capita collection shortfall amount (computed under section 

9 6107(b)(1)) for the year were substituted for the reduced 

10 weighted average accepted bid for the year. The reduced 

11 weighted average accepted bid is used under section 

12 6000(b)(1) in computing the weighted average premium, 

13 which in turn is used under section 6122(a)(1) in com14 puting the base employment monthly premium, which in 

15 turn is used under section 6121(b)(2)(A) in computing the 

16 employer premium amount. 

17 (c) DISCOUNT NOT APPLICABLE.—Section 6123 

18 shall not apply to the increase in the amount payable by 

19 virtue of this section. 

20 SEC. 6126. APPLICATION TO SELF-EMPLOYED INDIVIDUALS. 

21 (a) IN GENERAL.—A self-employed individual (as de22 fined in section 1901(c)(2)) shall be considered, for pur23 poses of this subpart to be an employer of himself or her24 self and to pay wages to himself or herself equal to the 

25 amount of net earnings from self-employment (as defined 

26 in section 1901(c)(1)). 
1083 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (b) CREDIT FOR EMPLOYER PREMIUMS.— 

2 (1) IN GENERAL.—In the case of a self-em3 ployed individual, the amount of any employer pre4 mium payable by virtue of subsection (a) in a year 

5 shall be reduced (but not below zero) by the sum of 

6 the following: 

7 (A) Subject to paragraph (2), the amount 

8 of any employer premiums payable under this 

9 subpart (determined not taking into account 

10 any adjustment in the premium amounts under 

11 section 6123 or 6124) with respect to the em12 ployment of that individual in the year. 

13 (B) The product of (i) the number of 

14 months in the year the individual was employed 

15 on a full-time basis by a corporate alliance em16 ployer, and (ii) the employer premium that 

17 would have been payable for such months under 

18 this subpart (determined not taking into ac19 count any adjustment in the premium amounts 

20 under section 6123 or 6124) for the class of en21 rollment if such employer had been a regional 

22 alliance employer. 

23 (2) SPECIAL RULE FOR CERTAIN CLOSELY24 HELD BUSINESSES.— 
1084 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (A) IN GENERAL.—In the case of an indi2 vidual who— 

3 (i) has wage-adjusted income (as de4 fined in section 6113(d), determined with5 out regard to paragraphs (1)(B) and (2) 

6 thereof) that exceeds 250 percent (or such 

7 higher percentage as the Board may estab8 lish) of the applicable poverty level, and 

9 (ii) is both a substantial owner and an 

10 employee of a closely held business, 

11 the amount of any reduction under paragraph 

12 (1)(A) that is attributable to the individual’s 

13 employment by that business shall be appro14 priately reduced in accordance with rules pre15 scribed by the Board, in order to prevent indi16 viduals from avoiding payment of the full 

17 amount owed through fraudulent or secondary 

18 employment arrangements. 

19 (B) CLOSELY HELD BUSINESS.—For pur20 poses of subparagraph (A), a business is ‘‘close21 ly held’’ if it is an employer that meets the re22 quirements of section 542(a)(2) of the Internal 

23 Revenue Code of 1986 or similar requirements 

24 as appropriate in the case of a partnership or 

25 other entity. 
1085 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 Subpart B—Corporate Alliance Employers 

2 SEC. 6131. EMPLOYER PREMIUM PAYMENT REQUIRED. 

3 (a) PER EMPLOYEE PREMIUM PAYMENT.—Subject 

4 to section 6124, each corporate alliance employer of a cor5 porate alliance that in a month in a year employs a quali6 fying employee who is— 

7 (1) enrolled in a corporate alliance health plan 

8 offered by the alliance, shall provide for a payment 

9 toward the premium for the plan in an amount at 

10 least equal to the corporate employer premium speci11 fied in subsection (b); or 

12 (2) is not so enrolled, shall make employer pre13 mium payments with respect to such employment 

14 under subpart A in the same manner as if the em15 ployer were a regional alliance employer (except as 

16 otherwise provided in such subpart). 

17 (b) CORPORATE EMPLOYER PREMIUM.— 

18 (1) AMOUNT.— 

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

20 paragraph (2), the amount of the corporate em21 ployer premium for a month in a year for a 

22 class of family enrollment for a family residing 

23 in a premium area (established under section 

24 1384(b)) is 80 percent of the weighted average 

25 monthly premium of the corporate alliance 

26 health plans offered by the corporate alliance 
1086 

Title VI, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 for that class of enrollment for families residing 

2 in that area. 

3 (B) APPLICATION TO SELF-INSURED

4 PLANS.—In applying this paragraph in the case 

5 of one or more corporate alliance health plans 

6 that are self-insured plans— 

7 (i) the ‘‘premium’’ for the plan is the 

8 actuarial equivalent of such premium, 

9 based upon the methodology (or such other 

10 consistent methodology) used under section 

11 6021(a) (relating to application of pre12 mium caps to corporate alliance health 

13 plans), and 

14 (ii) the premium amount, for different 

15 classes and, if applicable, for different pre16 mium areas, shall be computed in a man17 ner based on such factors as may bear a 

18 reasonable relationship to costs for the 

19 provision of the comprehensive benefit 

20 package to the different classes in such 

21 areas. 

22 The Secretary of Labor shall establish rules to 

23 carry out this subparagraph. 

24 (2) LOW-WAGE EMPLOYEES.—In the case of a 

25 low-wage employee entitled to a premium discount 
1087 

Title VI, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 under section 6104(a)(2), the amount of the em2 ployer premium payment for a month in a year for 

3 a class of family enrollment shall be increased by the 

4 amount of such premium discount. 

5 (c) DETERMINATIONS.— 

6 (1) BASIS.—Determinations under this section 

7 shall be made based on such information as the Sec8 retary of Labor shall specify. 

9 (2) TIMING.—Determinations of the monthly 

10 premiums under this section for months in a year 

11 shall be made not later than December 1 of the pre12 vious year. 

13 Subtitle C—Payments to Regional 

14 Alliance Health Plans 

15 SEC. 6201. COMPUTATION OF BLENDED PLAN PER CAPITA 

16 PAYMENT AMOUNT. 

17 (a) IN GENERAL.—For purposes of section 1351, the 

18 blended plan per capita payment amount for a regional 

19 alliance health plan for enrollments in an alliance for a 

20 year is equal to the sum of the 3 components described 

21 in subsection (b), multiplied by any adjustment factor ap22 plied for the year under section 6202(d). 

23 (b) SUM OF PRODUCTS.—The 3 components de24 scribed in this subsection are: 
1088 

Title VI, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (1) PLAN BID COMPONENT FOR THAT PLAN.— 

2 The product of— 

3 (A) the final accepted bid for plan (as 

4 defined in section 6000(a)(2)) for the year, 

5 and 

6 (B) the plan bid proportion deter7 mined under section 6202(a)(1) for the 

8 year. 

9 (2) AFDC COMPONENT FOR ALLIANCE.—The 

10 product of— 

11 (A) the AFDC per capita premium 

12 amount for the regional alliance for the 

13 year (determined under section 9012), and 

14 (B) the AFDC proportion determined 

15 under section 6202(a)(2) for the year. 

16 (3) SSI COMPONENT FOR ALLIANCE.—The 

17 product of— 

18 (A) the SSI per capita premium 

19 amount for the regional alliance for the 

20 year (determined under section 9013) for 

21 the year, and 

22 (B) the SSI proportion determined 

23 under section 6202(a)(3) for the year. 
1089 

Title VI, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 SEC. 6202. COMPUTATION OF PLAN BID, AFDC, AND SSI 

2 PROPORTIONS. 

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

4 (1) PLAN BID PROPORTION.—The ‘‘plan bid 

5 proportion’’ is, for a class of enrollment, 1 minus the 

6 sum of (A) the AFDC proportion, and (B) the SSI 

7 proportion. 

8 (2) AFDC PROPORTION.—The ‘‘AFDC propor9 tion’’ is, for a class of family enrollment for a year, 

10 the ratio of— 

11 (A) the average of the number of AFDC 

12 recipients (as determined under subsection (c)) 

13 enrolled in regional alliance health plans in that 

14 class of enrollment for the year, to 

15 (B) the average of the total number of in16 dividuals enrolled in regional alliance health 

17 plans in that class of enrollment for the year. 

18 (3) SSI PROPORTION.—The ‘‘SSI proportion’’ 

19 is, for a class of family enrollment for a year, the 

20 ratio of— 

21 (A) the average of the number of SSI re22 cipients (as determined under subsection (c)) 

23 enrolled in regional alliance health plans in that 

24 class of enrollment for the year, to 

25 (B) the average described in paragraph 

26 (2)(B). 
1090 

Title VI, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (b) COMPUTATION.— 

2 (1) PROJECTIONS.—The proportions described 

3 in subsection (a) shall be determined and applied by 

4 the State, based upon the best available data, at 

5 least 1 month before the date bids are submitted 

6 under section 6004 before the beginning of the cal7 endar year involved. 

8 (2) ACTUAL.—For purposes of making adjust9 ments under subsection (d), the regional alliance 

10 shall determine, after the end of each year, the ac11 tual proportions described in subsection (a). 

12 (c) COUNTING OF AFDC AND SSI RECIPIENTS.— 

13 For purposes of subsections (a)(2)(A) and (a)(3)(A), the 

14 terms ‘‘SSI recipient’’ and ‘‘AFDC recipient’’ do not in15 clude a medicare-eligible individual. 

16 (d) ADJUSTMENTS FOR DISCREPANCIES IN ESTI17 MATIONS.— 

18 (1) IN GENERAL.—If the actual AFDC propor19 tion or SSI proportion (as determined under sub20 section (a)) for a year (in this subsection referred to 

21 as the ‘‘reference year’’), determined after the end 

22 of the year based upon actual number of AFDC re23 cipients and SSI recipients in the year, is different 

24 from the projected AFDC and SSI proportions (as 

25 determined under subsection (b)(1)) used in com-
1091 

Title VI, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 puting the blended plan payment amount for the 

2 year, then, subject to section 1361(b)(3), the re3 gional alliance shall adjust the blended plan payment 

4 amount in the second succeeding year (in this sub5 section referred to as the ‘‘applicable year’’) in the 

6 manner described in paragraph (2). By regulation 

7 the Secretary may apply the adjustment, based on 

8 estimated amounts, in the year before the applicable 

9 year, with final adjustment in the applicable year. 

10 (2) ADJUSTMENT DESCRIBED.— 

11 (A) POSITIVE CASH FLOW.—If the cash 

12 flow difference (as defined in paragraph (3)(A)) 

13 for the reference year is positive, then in the 

14 applicable year the blended plan payment 

15 amount shall be increased by the adjustment 

16 percentage described in paragraph (4). 

17 (B) NEGATIVE CASH FLOW.—If the cash 

18 flow difference (as defined in paragraph (3)(A)) 

19 for the reference year is negative, then in the 

20 applicable year the blended plan payment 

21 amount shall be reduced by the adjustment per22 centage described in paragraph (4). 

23 (3) CASH FLOW DIFFERENCE DEFINED.—In 

24 this subsection: 
1092 

Title VI, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (A) IN GENERAL.—The term ‘‘cash flow 

2 difference’’ means, for a regional alliance for a 

3 reference year— 

4 (i) the actual cash flow (as defined in 

5 subparagraph (B)) for the alliance for the 

6 year, minus 

7 (ii) the reconciled cash flow (as de8 fined in subparagraph (C)) for the alliance 

9 for the year. 

10 (B) ACTUAL CASH FLOW.—The term ‘‘ac11 tual cash flow’’ means, for a regional alliance 

12 for a reference year, the total amount paid by 

13 the regional alliance to the regional alliance 

14 health plans in the year based on the blended 

15 plan payment amount (computed on the basis 

16 of projected AFDC and SSI proportions deter17 mined under subsection (b)(1)). 

18 (C) RECONCILED CASH FLOW.—The term 

19 ‘‘reconciled cash flow’’ means, for a regional al20 liance for a reference year, the total amount 

21 that would have been paid to regional alliance 

22 health plans in the year if such payments had 

23 been made based on the blended plan payment 

24 amount computed on the basis of the actual 

25 AFDC and SSI proportions for the year (deter-
1093 

Title VII 

•HR 3600 IH / •S 1757 IS 

1 mined under subsection (b)(2), rather than 

2 based on such payment amount computed on 

3 the basis of the projected AFDC and SSI pro4 portions for the year (determined under sub5 section (b)(1)). 

6 (4) PERCENTAGE ADJUSTMENT.—The percent7 age adjustment described in this paragraph for a re8 gional alliance for an applicable year is the ratio (ex9 pressed as a percentage) of— 

10 (A) the cash flow difference for the ref11 erence year, to 

12 (B) the total payments estimated by the 

13 regional alliance to be paid to regional alliance 

14 health plans under this subtitle in the applica15 ble year (determined without regard to any ad16 justment under this subsection). 

17 TITLE VII—REVENUE 

18 PROVISIONS 

TABLE OF CONTENTS OF TITLE

Page 

Sec. 7001. Amendment of 1986 Code ..................................................... 1094 

Subtitle A—Financing Provisions 

PART 1—INCREASE IN TAX ON TOBACCO PRODUCTS

Sec. 7111. Increase in excise taxes on tobacco products ........................ 1094 

Sec. 7112. Modifications of certain tobacco tax provisions .................... 1100 

Sec. 7113. Imposition of excise tax on manufacture or importation of 

roll-your-own tobacco .................................................... 1105 

PART 2—HEALTH RELATED ASSESSMENTS
1094 

Title VII 

•HR 3600 IH / •S 1757 IS 

Sec. 7121. Health related assessments ................................................... 1107 

PART 3—RECAPTURE OF CERTAIN HEALTH CARE SUBSIDIES

Sec. 7131. Recapture of certain health care subsidies received by highincome individuals ......................................................... 1116 

PART 4—OTHER PROVISIONS

Sec. 7141. Modification to self-employment tax treatment of certain S 

corporation shareholders and partners ......................... 1125 

Sec. 7142. Extending medicare coverage of, and application of hospital 

insurance tax to, all State and local government employees ........................................................................... 1128 

Subtitle B—Tax Treatment of Employer-Provided Health Care 

Sec. 7201. Limitation on exclusion for employer-provided health benefits ................................................................................. 1133 

Sec. 7202. Health benefits may not be provided under cafeteria plans 1138 

Sec. 7203. Increase in deduction for health insurance costs of self-employed individuals .......................................................... 1139 

Sec. 7204. Limitation on prepayment of medical insurance premiums 1142 

Subtitle C—Employment Status Provisions 

Sec. 7301. Anti-abuse regulations relating to employment status .......... 1143 

Sec. 7302. Increase in services reporting penalties ................................. 1144 

Sec. 7303. Revision of section 530 safe harbor rules ............................. 1146 

Subtitle D—Tax Treatment of Funding of Retiree Health 

Benefits 

Sec. 7401. Post-retirement medical and life insurance reserves ............. 1153 

Sec. 7402. Health benefits accounts maintained by pension plans ........ 1154 

Subtitle E—Coordination With COBRA Continuing Care 

Provisions 

Sec. 7501. Coordination with COBRA continuing care provisions ......... 1157 

Subtitle F—Tax Treatment of Organizations Providing Health 

Care Services and Related Organizations 

Sec. 7601. Treatment of nonprofit health care organizations ................ 1159 

Sec. 7602. Tax treatment of taxable organizations providing health insurance and other prepaid health care services ............ 1163 

Sec. 7603. Exemption from income tax for regional alliances ................ 1170 

Subtitle G—Tax Treatment of Long-term Care Insurance and 

Services 

Sec. 7701. Qualified long-term care services treated as medical care .... 1171 

Sec. 7702. Treatment of long-term care insurance ................................. 1175 

Sec. 7703. Tax treatment of accelerated death benefits under life insurance contracts .......................................................... 1187 

Sec. 7704. Tax treatment of companies issuing qualified accelerated 

death benefit riders ....................................................... 1190 
1095 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

Subtitle H—Tax Incentives for Health Services Providers 

Sec. 7801. Nonrefundable credit for certain primary health services 

providers ........................................................................ 1192 

Sec. 7802. Expensing of medical equipment ........................................... 1197 

Subtitle I—Miscellaneous Provisions 

Sec. 7901. Credit for cost of personal assistance services required by 

employed individuals ..................................................... 1199 

Sec. 7902. Denial of tax-exempt status for borrowings of health carerelated entities ............................................................... 1204 

Sec. 7903. Disclosure of return information for administration of certain programs under the Health Security Act .............. 1205 

1 SEC. 7001. AMENDMENT OF 1986 CODE. 

2 Except as otherwise expressly provided, whenever in 

3 this title an amendment or repeal is expressed in terms 

4 of an amendment to, or repeal of, a section or other provi5 sion, the reference shall be considered to be made to a 

6 section or other provision of the Internal Revenue Code 

7 of 1986. 

8 Subtitle A—Financing Provisions 

9 PART 1—INCREASE IN TAX ON TOBACCO 

10 PRODUCTS 

11 SEC. 7111. INCREASE IN EXCISE TAXES ON TOBACCO 

12 PRODUCTS. 

13 (a) CIGARETTES.—Subsection (b) of section 5701 is 

14 amended— 

15 (1) by striking ‘‘$12 per thousand ($10 per 

16 thousand on cigarettes removed during 1991 or 

17 1992)’’ in paragraph (1) and inserting ‘‘$49.50 per 

18 thousand’’, and 
1096 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (2) by striking ‘‘$25.20 per thousand ($21 per 

2 thousand on cigarettes removed during 1991 or 

3 1992)’’ in paragraph (2) and inserting ‘‘$103.95 per 

4 thousand’’. 

5 (b) CIGARS.—Subsection (a) of section 5701 is 

6 amended— 

7 (1) by striking ‘‘$1.125 cents per thousand 

8 (93.75 cents per thousand on cigars removed during 

9 1991 or 1992)’’ in paragraph (1) and inserting 

‘‘$38.621 10 ⁄2 per thousand’’, and 

11 (2) by striking ‘‘equal to’’ and all that follows 

12 in paragraph (2) and inserting ‘‘equal to 52.594 per13 cent of the price for which sold but not more than 

14 $123.75 per thousand.’’ 

15 (c) CIGARETTE PAPERS.—Subsection (c) of section 

16 5701 is amended by striking ‘‘0.75 cent (0.625 cent on 

17 cigarette papers removed during 1991 or 1992)’’ and in18 serting ‘‘3.09 cents’’. 

19 (d) CIGARETTE TUBES.—Subsection (d) of section 

20 5701 is amended by striking ‘‘1.5 cents (1.25 cents on 

21 cigarette tubes removed during 1991 or 1992)’’ and in22 serting ‘‘6.19 cents’’. 

23 (e) SMOKELESS TOBACCO.—Subsection (e) of section 

24 5701 is amended— 
1097 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (1) by striking ‘‘36 cents (30 cents on snuff re2 moved during 1991 or 1992)’’ in paragraph (1) and 

3 inserting ‘‘$12.86’’, and 

4 (2) by striking ‘‘12 cents (10 cents on chewing 

5 tobacco removed during 1991 or 1992)’’ in para6 graph (2) and inserting ‘‘$12.62’’. 

7 (f) PIPE TOBACCO.—Subsection (f) of section 5701 

8 is amended by striking ‘‘67.5 cents (56.25 cents on pipe 

9 tobacco removed during 1991 or 1992)’’ and inserting 

‘‘$13.171 10 ⁄2’’. 

11 (g) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to articles removed (as defined in 

13 section 5702(k) of the Internal Revenue Code of 1986, 

14 as amended by this Act) after September 30, 1994. 

15 (h) FLOOR STOCKS TAXES.— 

16 (1) IMPOSITION OF TAX.—On tobacco products 

17 and cigarette papers and tubes manufactured in or 

18 imported into the United States which are removed 

19 before October 1, 1994, and held on such date for 

20 sale by any person, there is hereby imposed a tax in 

21 an amount equal to the excess of— 

22 (A) the tax which would be imposed under 

23 section 5701 of the Internal Revenue Code of 

24 1986 on the article if the article had been re25 moved on such date, over 
1098 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (B) the prior tax (if any) imposed under 

2 section 5701 or 7652 of such Code on such ar3 ticle. 

4 (2) AUTHORITY TO EXEMPT CIGARETTES HELD

5 IN VENDING MACHINES.—To the extent provided in 

6 regulations prescribed by the Secretary, no tax shall 

7 be imposed by paragraph (1) on cigarettes held for 

8 retail sale on October 1, 1994, by any person in any 

9 vending machine. If the Secretary provides such a 

10 benefit with respect to any person, the Secretary 

11 may reduce the $500 amount in paragraph (3) with 

12 respect to such person. 

13 (3) CREDIT AGAINST TAX.—Each person shall 

14 be allowed as a credit against the taxes imposed by 

15 paragraph (1) an amount equal to $500. Such credit 

16 shall not exceed the amount of taxes imposed by 

17 paragraph (1) for which such person is liable. 

18 (4) LIABILITY FOR TAX AND METHOD OF PAY19 MENT.— 

20 (A) LIABILITY FOR TAX.—A person hold21 ing cigarettes on October 1, 1994, to which any 

22 tax imposed by paragraph (1) applies shall be 

23 liable for such tax. 

24 (B) METHOD OF PAYMENT.—The tax im25 posed by paragraph (1) shall be paid in such 
1099 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 manner as the Secretary shall prescribe by reg2 ulations. 

3 (C) TIME FOR PAYMENT.—The tax im4 posed by paragraph (1) shall be paid on or be5 fore December 31, 1994. 

6 (5) ARTICLES IN FOREIGN TRADE ZONES.— 

7 Notwithstanding the Act of June 18, 1934 (48 Stat. 

8 998, 19 U.S.C. 81a) and any other provision of law, 

9 any article which is located in a foreign trade zone 

10 on October 1, 1994, shall be subject to the tax im11 posed by paragraph (1) if— 

12 (A) internal revenue taxes have been deter13 mined, or customs duties liquidated, with re14 spect to such article before such date pursuant 

15 to a request made under the 1st proviso of sec16 tion 3(a) of such Act, or 

17 (B) such article is held on such date under 

18 the supervision of a customs officer pursuant to 

19 the 2d proviso of such section 3(a). 

20 (6) DEFINITIONS.—For purposes of this sub21 section— 

22 (A) IN GENERAL.—Terms used in this sub23 section which are also used in section 5702 of 

24 the Internal Revenue Code of 1986 shall have 

25 the respective meanings such terms have in 
1100 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 such section, and such term shall include arti2 cles first subject to the tax imposed by section 

3 5701 of such Code by reason of the amend4 ments made by this Act. 

5 (B) SECRETARY.—The term ‘‘Secretary’’ 

6 means the Secretary of the Treasury or his del7 egate. 

8 (7) CONTROLLED GROUPS.—Rules similar to 

9 the rules of section 5061(e)(3) of such Code shall 

10 apply for purposes of this subsection. 

11 (8) OTHER LAWS APPLICABLE.—All provisions 

12 of law, including penalties, applicable with respect to 

13 the taxes imposed by section 5701 of such Code 

14 shall, insofar as applicable and not inconsistent with 

15 the provisions of this subsection, apply to the floor 

16 stocks taxes imposed by paragraph (1), to the same 

17 extent as if such taxes were imposed by such section 

18 5701. The Secretary may treat any person who bore 

19 the ultimate burden of the tax imposed by para20 graph (1) as the person to whom a credit or refund 

21 under such provisions may be allowed or made. 
1101 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 SEC. 7112. MODIFICATIONS OF CERTAIN TOBACCO TAX 

2 PROVISIONS. 

3 (a) EXEMPTION FOR EXPORTED TOBACCO PROD4 UCTS AND CIGARETTE PAPERS AND TUBES TO APPLY

5 ONLY TO ARTICLES MARKED FOR EXPORT.— 

6 (1) Subsection (b) of section 5704 is amended 

7 by adding at the end thereof the following new sen8 tence: ‘‘Tobacco products and cigarette papers and 

9 tubes may not be transferred or removed under this 

10 subsection unless such products or papers and tubes 

11 bear such marks, labels, or notices as the Secretary 

12 shall by regulations prescribe.’’ 

13 (2) Section 5761 is amended by redesignating 

14 subsections (c) and (d) as subsections (d) and (e), 

15 respectively, and by inserting after subsection (b) 

16 the following new subsection: 

17 ‘‘(c) SALE OF TOBACCO PRODUCTS AND CIGARETTE

18 PAPERS AND TUBES FOR EXPORT.—Except as provided 

19 in subsections (b) and (d) of section 5704— 

20 ‘‘(1) every person who sells, relands, or receives 

21 within the jurisdiction of the United States any to22 bacco products or cigarette papers or tubes which 

23 have been labeled or shipped for exportation under 

24 this chapter, 
1102 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(2) every person who sells or receives such re2 landed tobacco products or cigarette papers or tubes, 

3 and 

4 ‘‘(3) every person who aids or abets in such 

5 selling, relanding, or receiving, 

6 shall, in addition to the tax and any other penalty provided 

7 in this title, be liable for a penalty equal to the greater 

8 of $1,000 or 5 times the amount of the tax imposed by 

9 this chapter. All tobacco products and cigarette papers 

10 and tubes relanded within the jurisdiction of the United 

11 States, and all vessels, vehicles, and aircraft used in such 

12 relanding or in removing such products, papers, and tubes 

13 from the place where relanded, shall be forfeited to the 

14 United States.’’ 

15 (3) Subsection (a) of section 5761 is amended 

16 by striking ‘‘subsection (b)’’ and inserting ‘‘sub17 section (b) or (c)’’. 

18 (4) Subsection (d) of section 5761, as redesig19 nated by paragraph (2), is amended by striking 

20 ‘‘The penalty imposed by subsection (b)’’ and insert21 ing ‘‘The penalties imposed by subsections (b) and 

22 (c)’’. 

23 (5)(A) Subpart F of chapter 52 is amended by 

24 adding at the end thereof the following new section: 
1103 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘SEC. 5754. RESTRICTION ON IMPORTATION OF PRE2 VIOUSLY EXPORTED TOBACCO PRODUCTS. 

3 ‘‘(a) IN GENERAL.—Tobacco products and cigarette 

4 papers and tubes previously exported from the United 

5 States may be imported or brought into the United States 

6 only as provided in section 5704(d). 

7 ‘‘(b) CROSS REFERENCE.— 

‘‘For penalty for the sale of cigarettes in the 

United States which are labeled for export, see section 5761(d).’’ 

8 (B) The table of sections for subpart F of chap9 ter 52 is amended by adding at the end thereof the 

10 following new item: 

‘‘Sec. 5754. Restriction on importation of previously exported tobacco products.’’ 

11 (b) IMPORTERS REQUIRED TO BE QUALIFIED.— 

12 (1) Sections 5712, 5713(a), 5721, 5722, 

13 5762(a)(1), and 5763(b) and (c) are each amended 

14 by inserting ‘‘or importer’’ after ‘‘manufacturer’’. 

15 (2) The heading of subsection (b) of section 

16 5763 is amended by inserting ‘‘QUALIFIED IMPORT17 ERS,’’ after ‘‘MANUFACTURERS,’’. 

18 (3) The heading for subchapter B of chapter 52 

19 is amended by inserting ‘‘and Importers’’ after 

20 ‘‘Manufacturers’’. 

21 (4) The item relating to subchapter B in the 

22 table of subchapters for chapter 52 is amended by 

23 inserting ‘‘and importers’’ after ‘‘manufacturers’’. 
1104 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (c) REPEAL OF TAX-EXEMPT SALES TO EMPLOYEES

2 OF CIGARETTE MANUFACTURERS.— 

3 (1) Subsection (a) of section 5704 is amend4 ed— 

5 (A) by striking ‘‘EMPLOYEE USE OR’’ in 

6 the heading, and 

7 (B) by striking ‘‘for use or consumption by 

8 employees or’’ in the text. 

9 (2) Subsection (e) of section 5723 is amended 

10 by striking ‘‘for use or consumption by their employ11 ees, or for experimental purposes’’ and inserting 

12 ‘‘for experimental purposes’’. 

13 (d) REPEAL OF TAX-EXEMPT SALES TO UNITED

14 STATES.—Subsection (b) of section 5704 is amended by 

15 striking ‘‘and manufacturers may similarly remove such 

16 articles for use of the United States;’’. 

17 (e) BOOKS OF 25 OR FEWER CIGARETTE PAPERS

18 SUBJECT TO TAX.—Subsection (c) of section 5701 is 

19 amended by striking ‘‘On each book or set of cigarette 

20 papers containing more than 25 papers,’’ and inserting 

21 ‘‘On cigarette papers,’’. 

22 (f) STORAGE OF TOBACCO PRODUCTS.—Subsection 

23 (k) of section 5702 is amended by inserting ‘‘under section 

24 5704’’ after ‘‘internal revenue bond’’. 
1105 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (g) AUTHORITY TO PRESCRIBE MINIMUM MANUFAC2 TURING ACTIVITY REQUIREMENTS.—Section 5712 is 

3 amended by striking ‘‘or’’ at the end of paragraph (1), 

4 by redesignating paragraph (2) as paragraph (3), and by 

5 inserting after paragraph (1) the following new paragraph: 

6 ‘‘(2) the activity proposed to be carried out at 

7 such premises does not meet such minimum capacity 

8 or activity requirements as the Secretary may pre9 scribe, or’’. 

10 (h) LIMITATION ON COVER OVER OF TAX ON TO11 BACCO PRODUCTS.—Section 7652 is amended by adding 

12 at the end thereof the following new subsection: 

13 ‘‘(h) LIMITATION ON COVER OVER OF TAX ON TO14 BACCO PRODUCTS.—For purposes of this section, with re15 spect to taxes imposed under section 5701 or this section 

16 on any tobacco product or cigarette paper or tube, the 

17 amount covered into the treasuries of Puerto Rico and the 

18 Virgin Islands shall not exceed the rate of tax under sec19 tion 5701 in effect on the article on the day before the 

20 date of the enactment of the Health Security Act.’’ 

21 (i) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to articles removed (as defined in 

23 section 5702(k) of the Internal Revenue Code of 1986, 

24 as amended by this Act) after September 30, 1994. 
1106 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 SEC. 7113. IMPOSITION OF EXCISE TAX ON MANUFACTURE 

2 OR IMPORTATION OF ROLL-YOUR-OWN TO3 BACCO. 

4 (a) IN GENERAL.—Section 5701 (relating to rate of 

5 tax) is amended by redesignating subsection (g) as sub6 section (h) and by inserting after subsection (f) the fol7 lowing new subsection: 

8 ‘‘(g) ROLL-YOUR-OWN TOBACCO.—On roll-your-own 

9 tobacco, manufactured in or imported into the United 

10 States, there shall be imposed a tax of $12.50 per pound 

11 (and a proportionate tax at the like rate on all fractional 

12 parts of a pound).’’ 

13 (b) ROLL-YOUR-OWN TOBACCO.—Section 5702 (re14 lating to definitions) is amended by adding at the end 

15 thereof the following new subsection : 

16 ‘‘(p) ROLL-YOUR-OWN TOBACCO.—The term ‘roll17 your-own tobacco’ means any tobacco which, because of 

18 its appearance, type, packaging, or labeling, is suitable for 

19 use and likely to be offered to, or purchased by, consumers 

20 as tobacco for making cigarettes.’’ 

21 (c) TECHNICAL AMENDMENTS.— 

22 (1) Subsection (c) of section 5702 is amended 

23 by striking ‘‘and pipe tobacco’’ and inserting ‘‘pipe 

24 tobacco, and roll-your-own tobacco’’. 

25 (2) Subsection (d) of section 5702 is amend26 ed— 
1107 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (A) in the material preceding paragraph 

2 (1), by striking ‘‘or pipe tobacco’’ and inserting 

3 ‘‘pipe tobacco, or roll-your-own tobacco’’, and 

4 (B) by striking paragraph (1) and insert5 ing the following new paragraph: 

6 ‘‘(1) a person who produces cigars, cigarettes, 

7 smokeless tobacco, pipe tobacco, or roll-your-own to8 bacco solely for his own personal consumption or 

9 use, and’’. 

10 (3) The chapter heading for chapter 52 is 

11 amended to read as follows: 

12 ‘‘CHAPTER 52—TOBACCO PRODUCTS AND 

13 CIGARETTE PAPERS AND TUBES’’. 

14 (4) The table of chapters for subtitle E is 

15 amended by striking the item relating to chapter 52 

16 and inserting the following new item: 

‘‘Chapter 52. Tobacco products and cigarette papers and tubes.’’ 

17 (d) EFFECTIVE DATE.— 

18 (1) IN GENERAL.—The amendments made by 

19 this section shall apply to roll-your-own tobacco re20 moved (as defined in section 5702(k) of the Internal 

21 Revenue Code of 1986, as amended by this Act) 

22 after September 30, 1994. 

23 (2) TRANSITIONAL RULE.—Any person who— 

24 (A) on the date of the enactment of this 

25 Act is engaged in business as a manufacturer of 
1108 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 roll-your-own tobacco or as an importer of to2 bacco products or cigarette papers and tubes, 

3 and 

4 (B) before October 1, 1994, submits an 

5 application under subchapter B of chapter 52 

6 of such Code to engage in such business, 

7 may, notwithstanding such subchapter B, continue 

8 to engage in such business pending final action on 

9 such application. Pending such final action, all pro10 visions of such chapter 52 shall apply to such appli11 cant in the same manner and to the same extent as 

12 if such applicant were a holder of a permit under 

13 such chapter 52 to engage in such business. 

14 PART 2—HEALTH RELATED ASSESSMENTS 

15 SEC. 7121. HEALTH RELATED ASSESSMENTS. 

16 (a) IN GENERAL.—Subtitle C (relating to employ17 ment taxes) is amended by inserting after chapter 24 the 

18 following new chapter: 

19 ‘‘CHAPTER 24A—HEALTH RELATED 

20 ASSESSMENTS 

‘‘Subchapter A. Assessment on corporate alliance employers. 

‘‘Subchapter B. Temporary assessment on employers with retiree 

health benefit costs. 

‘‘Subchapter C. Definitions and administrative provisions. 

21 ‘‘Subchapter A—Assessment on Corporate 

22 Alliance Employers 

‘‘Sec. 3461. Assessment on corporate alliance employers. 
1109 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘SEC. 3461. ASSESSMENT ON CORPORATE ALLIANCE EM2 PLOYERS. 

3 ‘‘(a) IMPOSITION OF ASSESSMENT.—Every corporate 

4 alliance employer shall pay (in addition to any other 

5 amount imposed by this subtitle) for each calendar year 

6 an assessment equal to 1 percent of the payroll of such 

7 employer. 

8 ‘‘(b) DEFINITIONS.—For purposes of this section— 

9 ‘‘(1) CORPORATE ALLIANCE EMPLOYER.—The 

10 term ‘corporate alliance employer’ means any em11 ployer if any individual, by reason of being an em12 ployee of such employer, is provided with health cov13 erage through any corporate alliance described in 

14 section 1311 of the Health Security Act. 

15 ‘‘(2) PAYROLL.—The term ‘payroll’ means the 

16 sum of— 

17 ‘‘(A) the wages (as defined in section 

18 3121(a) without regard to paragraph (1) there19 of) paid by the employer during the calendar 

20 year, plus 

21 ‘‘(B)(i) in the case of a sole proprietorship, 

22 the net earnings from self-employment of the 

23 proprietor from such trade or business for the 

24 taxable year ending with or within the calendar 

25 year, 
1110 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(ii) in the case of a partnership, the ag2 gregate of the net earnings from self-employ3 ment of each partner which is attributable to 

4 such partnership for the taxable year of such 

5 partnership ending with or within the calendar 

6 year, and 

7 ‘‘(iii) in the case of an S corporation, the 

8 aggregate of the net earnings from self-employ9 ment of each shareholder which is attributable 

10 to such corporation for the taxable year of such 

11 corporation ending with or within the calendar 

12 year. 

13 ‘‘(3) NET EARNINGS FROM SELF-EMPLOY14 MENT.—The term ‘net earnings from self-employ15 ment’ has the meaning given such term by section 

16 1402; except that the amount thereof— 

17 ‘‘(A) may never be less than zero, and 

18 ‘‘(B) shall be determined without regard to 

19 any deduction for an assessment under this sec20 tion to the extent attributable to payroll de21 scribed in paragraph (2)(B). 

22 ‘‘(c) SPECIAL RULES.—For purposes of this sec23 tion— 

24 ‘‘(1) TREATMENT OF CERTAIN EMPLOYERS IN

25 MULTIEMPLOYER CORPORATE ALLIANCES.—An em-
1111 

Title VII, Subtitle A 

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1 ployer who is a corporate alliance employer solely by 

2 reason of employees who are provided with health 

3 coverage through a corporate alliance the eligible 

4 sponsor of which is a multiemployer plan described 

5 in section 1311(b)(1)(B) of the Health Security Act 

6 is not subject to the assessment under this section. 

7 In the case of an employer who is a corporate alli8 ance employer in part (but not solely) by reason of 

9 such employees, the payroll of such employer shall 

10 be determined without taking into account such em11 ployees. 

12 ‘‘(2) CONTROLLED GROUP RULES.—All persons 

13 treated as a single employer under section 1901 of 

14 the Health Security Act (relating to employer pre15 miums for comprehensive health care) shall be treat16 ed as a single employer. 

17 ‘‘(3) APPLICATION OF ASSESSMENT BEGINNING

18 IN 1996.— 

19 ‘‘(A) IN GENERAL.—Every employer eligi20 ble to elect to be an eligible sponsor under sec21 tion 1311 of the Health Security Act shall be 

22 treated as a corporate alliance employer as of 

23 January 1, 1996, unless the employer waives 

24 such employer’s rights ever to be treated as 
1112 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 such a sponsor. The waiver under this subpara2 graph shall be irrevocable. 

3 ‘‘(B) EXCEPTION.—Subparagraph (A) 

4 shall not apply to any employer referred to in 

5 the first sentence of paragraph (1). 

6 ‘‘SEC. 3462. TEMPORARY ASSESSMENT ON EMPLOYERS 

7 WITH RETIREE HEALTH BENEFIT COSTS. 

8 ‘‘(a) IMPOSITION OF ASSESSMENT.—Every employer 

9 with base period retiree health costs shall pay (in addition 

10 to any other amount imposed by this subtitle) for each 

11 calendar year to which this section applies an assessment 

12 equal to the amount determined under subsection (b). 

13 ‘‘(b) AMOUNT OF ASSESSMENT.—For purposes of 

14 subsection (a), the amount determined under this sub15 section with respect to any employer for any calendar year 

16 is 50 percent of the greater of— 

17 ‘‘(1) the adjusted base period retiree health 

18 costs of such employer for such calendar year, or 

19 ‘‘(2) the amount (determined in the manner 

20 prescribed by the Secretary) by which such employ21 er’s applicable retiree health costs for such calendar 

22 year were reduced by reason of the enactment of the 

23 Health Security Act. 

24 ‘‘(c) DEFINITIONS.—For purposes of this section— 
1113 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(1) BASE PERIOD RETIREE HEALTH COSTS.— 

2 The term ‘base period retiree health costs’ means 

3 the average of the applicable retiree health costs of 

4 the employer for calendar years 1991, 1992, and 

5 1993. 

6 ‘‘(2) ADJUSTED BASE PERIOD RETIREE

7 HEALTH COSTS.— 

8 ‘‘(A) IN GENERAL.—The term ‘adjusted 

9 base period retiree health costs’ means, with re10 spect to any employer for any calendar year, 

11 the base period retiree health costs of the em12 ployer adjusted in the manner prescribed by the 

13 Secretary to reflect increases in the medical 

14 care component of the Consumer Price Index 

15 during the period after 1992 and before such 

16 calendar year. 

17 ‘‘(B) ADJUSTMENTS FOR ACQUISITIONS

18 AND DISPOSITIONS.—Rules similar to the rules 

19 of subparagraphs (A) and (B) of section 

20 41(f)(3) shall apply to acquisitions and disposi21 tions after December 31, 1993. 

22 ‘‘(3) APPLICABLE RETIREE HEALTH COSTS.— 

23 ‘‘(A) IN GENERAL.—The term ‘applicable 

24 retiree health costs’ means, with respect to any 

25 employer for any calendar year, the aggregate 
1114 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 cost (including administrative costs) of the 

2 health benefits or coverage provided during 

3 such calendar year (whether directly by the em4 ployer or through a plan described in section 

5 401(h) or a welfare benefit fund as defined in 

6 section 419(e)) to individuals who are entitled 

7 to receive such benefits or coverage by reason 

8 of being retired employees of such employer (or 

9 by reason of being a spouse or other beneficiary 

10 of such an employee). 

11 ‘‘(B) ONLY BENEFITS AND COVERAGE

12 AFTER AGE 55 AND BEFORE AGE 65 TAKEN

13 INTO ACCOUNT.—In applying subparagraph 

14 (A), there shall be taken into account only 

15 health benefits and coverage provided after the 

16 date the retired employee attained age 55 and 

17 before the date such employee attained (or, but 

18 for the death of such employee, would have at19 tained) age 65. 

20 ‘‘(d) YEARS TO WHICH ASSESSMENT APPLIES.—This 

21 section shall apply to calendar years 1998, 1999, and 

22 2000. 
1115 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘Subchapter C—Definitions and 

2 Administrative Provisions 

3 ‘‘SEC. 3463. DEFINITIONS AND ADMINISTRATIVE PROVI4 SIONS 

5 ‘‘(a) EMPLOYER.—For purposes of this chapter— 

6 ‘‘(1) IN GENERAL.—The term ‘employer’ means 

7 any person or governmental entity for whom an indi8 vidual performs services, of whatever nature, as an 

9 employee (as defined in section 3401(c)). 

10 ‘‘(2) SPECIAL RULES.— 

11 ‘‘(A) An individual who owns the entire in12 terest in an unincorporated trade or business 

13 shall be treated as his own employer. 

14 ‘‘(B) A partnership shall be treated as the 

15 employer of each partner who is an employee 

16 within the meaning of section 401(c)(1). 

17 ‘‘(C) An S corporation shall be treated as 

18 the employer of each shareholder who is an em19 ployee within the meaning of section 401(c)(1). 

20 ‘‘(b) ASSESSMENTS TO APPLY TO GOVERNMENTAL

21 AND OTHER TAX-EXEMPT ENTITIES.—Notwithstanding 

22 any other provision of law or rule of law, none of the fol23 lowing shall be exempt from the assessments imposed by 

24 this chapter: 
1116 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(1) The United States, any State or political 

2 subdivision thereof, the District of Columbia, and 

3 any agency or instrumentality of any of the fore4 going. 

5 ‘‘(2) Any other entity otherwise exempt from 

6 tax under chapter 1. 

7 ‘‘(c) ADMINISTRATIVE PROVISIONS.— 

8 ‘‘(1) PAYMENT.— 

9 ‘‘(A) SECTION 3461.—Any assessment 

10 under section 3461 shall be paid at the same 

11 time and in the same manner as the tax im12 posed by chapter 21. 

13 ‘‘(B) SECTION 3462.—Any assessment 

14 under section 3462 for any calendar year shall 

15 be paid on or before March 15 of the following 

16 calendar year; except that the Secretary may 

17 require quarterly estimated payments of such 

18 assessment in a manner similar to the require19 ments of section 6655. 

20 ‘‘(2) COLLECTION, ETC.—For purposes of sub21 title F, any assessment under this subchapter shall 

22 be treated as if it were a tax imposed by this sub23 title.’’ 
1117 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (b) CLERICAL AMENDMENT.—The table of chapters 

2 for subtitle C is amended by inserting after the item relat3 ing to chapter 24 the following new item: 

‘‘Chapter 24A. Health-related assessments.’’ 

4 (c) EFFECTIVE DATE.—The amendments made by 

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

6 PART 3—RECAPTURE OF CERTAIN HEALTH CARE 

7 SUBSIDIES 

8 SEC. 7131. RECAPTURE OF CERTAIN HEALTH CARE SUB9 SIDIES RECEIVED BY HIGH-INCOME INDIVID10 UALS. 

11 (a) IN GENERAL.—Subchapter A of chapter 1 is 

12 amended by adding at the end thereof the following new 

13 part: 

14 ‘‘PART VIII—CERTAIN HEALTH CARE SUBSIDIES 

15 RECEIVED BY HIGH-INCOME INDIVIDUALS 

‘‘Sec. 59B. Recapture of certain health care subsidies. 

16 ‘‘SEC. 59B. RECAPTURE OF CERTAIN HEALTH CARE SUB17 SIDIES. 

18 ‘‘(a) IMPOSITION OF RECAPTURE AMOUNT.—In the 

19 case of an individual, if the modified adjusted gross in20 come of the taxpayer for the taxable year exceeds the 

21 threshold amount, such taxpayer shall pay (in addition to 

22 any other amount imposed by this subtitle) a recapture 

23 amount for such taxable year equal to the sum of— 
1118 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(1) the aggregate of the Medicare part B re2 capture amounts (if any) for months during such 

3 year that a premium is paid under part B of title 

4 XVIII of the Social Security Act for the coverage of 

5 the individual under such part, and 

6 ‘‘(2) the aggregate reductions (if any) in the in7 dividual’s liability for periods after December 31, 

8 1997, under section 6111 of the Health Security Act 

9 (relating to repayment of alliance credit by certain 

10 families) pursuant to section 6114 of such Act (re11 lating to special treatment of certain retirees and 

12 qualified spouses and children) for months during 

13 such year. 

14 ‘‘(b) MEDICARE PART B PREMIUM RECAPTURE

15 AMOUNT FOR MONTH.—For purposes of this section, the 

16 Medicare part B premium recapture amount for any 

17 month is the amount equal to the excess of— 

18 ‘‘(1) 150 percent of the monthly actuarial rate 

19 for enrollees age 65 and over determined for that 

20 calendar year under section 1839(b) of the Social 

21 Security Act, over 

22 ‘‘(2) the total monthly premium under section 

23 1839 of the Social Security Act (determined without 

24 regard to subsections (b) and (f) of section 1839 of 

25 such Act). 
1119 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(c) PHASEIN OF RECAPTURE AMOUNT.— 

2 ‘‘(1) IN GENERAL.—If the modified adjusted 

3 gross income of the taxpayer for any taxable year 

4 exceeds the threshold amount by less than $15,000, 

5 the recapture amount imposed by this section for 

6 such taxable year shall be an amount which bears 

7 the same ratio to the recapture amount which would 

8 (but for this subsection) be imposed by this section 

9 for such taxable year as such excess bears to 

10 $15,000. 

11 ‘‘(2) JOINT RETURNS.—If a recapture amount 

12 is determined separately for each spouse filing a 

13 joint return, paragraph (1) shall be applied by sub14 stituting ‘$30,000’ for ‘$15,000’ each place it ap15 pears. 

16 ‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.— 

17 For purposes of this section— 

18 ‘‘(1) THRESHOLD AMOUNT.—The term ‘thresh19 old amount’ means— 

20 ‘‘(A) except as otherwise provided in this 

21 paragraph, $90,000, 

22 ‘‘(B) $115,000 in the case of a joint re23 turn, and 

24 ‘‘(C) zero in the case of a taxpayer who— 
1120 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(i) is married (as determined under 

2 section 7703) but does not file a joint re3 turn for such year, and 

4 ‘‘(ii) does not live apart from his 

5 spouse at all times during the taxable year. 

6 ‘‘(2) MODIFIED ADJUSTED GROSS INCOME.— 

7 The term ‘modified adjusted gross income’ means 

8 adjusted gross income— 

9 ‘‘(A) determined without regard to sections 

10 135, 911, 931, and 933, and 

11 ‘‘(B) increased by the amount of interest 

12 received or accrued by the taxpayer during the 

13 taxable year which is exempt from tax. 

14 ‘‘(3) JOINT RETURNS.—In the case of a joint 

15 return— 

16 ‘‘(A) the recapture amount under sub17 section (a) shall be the sum of the recapture 

18 amounts determined separately for each spouse, 

19 and 

20 ‘‘(B) subsections (a) and (c) shall be ap21 plied by taking into account the combined modi22 fied adjusted gross income of the spouses. 

23 ‘‘(4) COORDINATION WITH OTHER PROVI24 SIONS.— 
1121 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(A) TREATED AS TAX FOR SUBTITLE F.— 

2 For purposes of subtitle F, the recapture 

3 amount imposed by this section shall be treated 

4 as if it were a tax imposed by section 1. 

5 ‘‘(B) NOT TREATED AS TAX FOR CERTAIN

6 PURPOSES.—The recapture amount imposed by 

7 this section shall not be treated as a tax im8 posed by this chapter for purposes of deter9 mining— 

10 ‘‘(i) the amount of any credit allow11 able under this chapter, or 

12 ‘‘(ii) the amount of the minimum tax 

13 under section 55. 

14 ‘‘(C) TREATED AS PAYMENT FOR MEDICAL

15 INSURANCE.—The recapture amount imposed 

16 by this section shall be treated as an amount 

17 paid for insurance covering medical care, within 

18 the meaning of section 213(d).’’ 

19 (b) TRANSFERS TO SUPPLEMENTAL MEDICAL IN20 SURANCE TRUST FUND.— 

21 (1) IN GENERAL.—There are hereby appro22 priated to the Supplemental Medical Insurance 

23 Trust Fund amounts equivalent to the aggregate in24 crease in liabilities under chapter 1 of the Internal 

25 Revenue Code of 1986 which is attributable to the 
1122 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 application of section 59B(a)(1) of such Code, as 

2 added by this section. 

3 (2) TRANSFERS.—The amounts appropriated 

4 by paragraph (1) to the Supplemental Medical In5 surance Trust Fund shall be transferred from time 

6 to time (but not less frequently than quarterly) from 

7 the general fund of the Treasury on the basis of es8 timates made by the Secretary of the Treasury of 

9 the amounts referred to in paragraph (1). Any quar10 terly payment shall be made on the first day of such 

11 quarter and shall take into account the recapture 

12 amounts referred to in such section 59B(a)(1) for 

13 such quarter. Proper adjustments shall be made in 

14 the amounts subsequently transferred to the extent 

15 prior estimates were in excess of or less than the 

16 amounts required to be transferred. 

17 (c) REPORTING REQUIREMENTS.— 

18 (1)(A) Paragraph (1) of section 6050F(a) (re19 lating to returns relating to social security benefits) 

20 is amended by striking ‘‘and’’ at the end of subpara21 graph (B) and by inserting after subparagraph (C) 

22 the following new subparagraph: 

23 ‘‘(D) the number of months during the cal24 endar year for which a premium was paid under 

25 part B of title XVIII of the Social Security Act 
1123 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 for the coverage of such individual under such 

2 part, and’’. 

3 (B) Paragraph (2) of section 6050F(b) is 

4 amended to read as follows: 

5 ‘‘(2) the information required to be shown on 

6 such return with respect to such individual.’’ 

7 (C) Subparagraph (A) of section 6050F(c)(1) is 

8 amended by inserting before the comma ‘‘and in the 

9 case of the information specified in subsection 

10 (a)(1)(D)’’. 

11 (D) The heading for section 6050F is amended 

12 by inserting ‘‘AND MEDICARE PART B COV13 ERAGE’’ before the period. 

14 (E) The item relating to section 6050F in the 

15 table of sections for subpart B of part III of sub16 chapter A of chapter 61 is amended by inserting 

17 ‘‘and Medicare part B coverage’’ before the period. 

18 (2)(A) Subpart B of part III of subchapter A 

19 of chapter 61 (relating to information concerning 

20 transactions with other persons) is amended by add21 ing at the end thereof the following new section: 

22 ‘‘SEC. 6050Q. RETURNS RELATING TO CERTAIN RETIREE 

23 HEALTH CARE SUBSIDIES. 

24 ‘‘(a) IN GENERAL.—Every alliance (as defined in sec25 tion 1301 of the Health Security Act) that reduces an in-
1124 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 dividual’s liability under section 6111 of such Act (relating 

2 to repayment of alliance credit by certain families) pursu3 ant to section 6114 of such Act (relating to special treat4 ment of certain retirees and qualified spouses and chil5 dren) shall make a return (according to the forms and 

6 regulations prescribed by the Secretary) setting forth— 

7 ‘‘(1) the aggregate amount of such reductions 

8 by such alliance with respect to any individual dur9 ing such calendar year, and 

10 ‘‘(2) the name and address of such individual. 

11 ‘‘(b) STATEMENTS TO BE FURNISHED TO INDIVID12 UALS WITH RESPECT TO WHOM INFORMATION IS RE13 QUIRED TO BE REPORTED.—Every alliance required to 

14 make a return under subsection (a) shall furnish to each 

15 individual whose name is required to be set forth in such 

16 return a written statement showing— 

17 ‘‘(1) the name and address of such alliance, and 

18 ‘‘(2) the information required to be shown on 

19 the return with respect to such individual. 

20 ‘‘(c) DUE DATE FOR RETURNS AND STATEMENTS.— 

21 The written return required under subsection (a) shall be 

22 made, and the statement required under subsection (b) 

23 shall be furnished to the individual, on or before January 

24 31 of the second year following the calendar year for which 

25 the return under subsection (a) is required to be made.’’ 
1125 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (B) Subparagraph (B) of section 6724(d)(1) is 

2 amended by inserting after clause (viii) the following 

3 new clause (and by redesignating the following 

4 clauses accordingly): 

5 ‘‘(ix) section 6050Q(a) (relating to re6 turns relating to certain retiree health care 

7 subsidies),’’. 

8 (C) Paragraph (2) of section 6724(d) is amend9 ed by redesignating subparagraphs (Q) through (T) 

10 as subparagraphs (R) through (U), respectively, and 

11 by inserting after subparagraph (P) the following 

12 new subparagraph: 

13 ‘‘(Q) section 6050Q(b) (relating to state14 ments relating to certain retiree health care 

15 subsidies),’’. 

16 (D) The table of sections for subpart B of part 

17 III of subchapter A of chapter 61 is amended by 

18 adding at the end thereof the following new item: 

‘‘Sec. 6050Q. Returns relating to certain retiree health care subsidies.’’ 

19 (d) WAIVER OF CERTAIN ESTIMATED TAX PEN20 ALTIES.—No addition to tax shall be imposed under sec21 tion 6654 of the Internal Revenue Code of 1986 (relating 

22 to failure to pay estimated income tax) for any period be23 fore— 
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1 (1) April 16, 1997, with respect to any under2 payment to the extent that such underpayment re3 sulted from section 59B(a)(1) of the Internal Rev4 enue Code of 1986, as added by this section, and 

5 (2) April 16, 1999, with respect to any under6 payment to the extent that such underpayment re7 sulted from section 59B(a)(2) of such Code, as 

8 added by this section. 

9 (e) CLERICAL AMENDMENT.—The table of parts for 

10 subchapter A of chapter 1 is amended by adding at the 

11 end thereof the following new item: 

‘‘Part VIII. Certain health care subsidies received by high-income 

individuals.’’ 

12 (f) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to periods after December 31, 

14 1995, in taxable years ending after such date. 

15 PART 4—OTHER PROVISIONS 

16 SEC. 7141. MODIFICATION TO SELF-EMPLOYMENT TAX 

17 TREATMENT OF CERTAIN S CORPORATION 

18 SHAREHOLDERS AND PARTNERS. 

19 (a) TREATMENT OF CERTAIN S CORPORATION

20 SHAREHOLDERS.— 

21 (1) AMENDMENT TO INTERNAL REVENUE

22 CODE.—Section 1402 (relating to definitions) is 

23 amended by adding at the end thereof the following 

24 new subsection: 
1127 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(k) TREATMENT OF CERTAIN S CORPORATION

2 SHAREHOLDERS.— 

3 ‘‘(1) IN GENERAL.—In the case of any indi4 vidual— 

5 ‘‘(A) who is a 2-percent shareholder (as 

6 defined in section 1372(b)) of an S corporation 

7 for any taxable year of such corporation, and 

8 ‘‘(B) who materially participates in the ac9 tivities of such S corporation during such tax10 able year, 

11 such shareholder’s net earnings from self-employ12 ment for such shareholder’s taxable year in which 

13 the taxable year of the S corporation ends shall in14 clude such shareholder’s pro rata share (as deter15 mined under section 1366(a)) of the taxable income 

16 or loss of such corporation from service-related busi17 nesses carried on by such corporation. 

18 ‘‘(2) CERTAIN EXCEPTIONS TO APPLY.—In de19 termining the amount to be taken into account 

20 under paragraph (1), the exceptions provided in sub21 section (a) shall apply, except that, in the case of 

22 the exceptions provided in subsection (a)(5), the 

23 rules of subparagraph (B) thereof shall apply to 

24 shareholders in S corporations. 
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1 ‘‘(3) SERVICE-RELATED BUSINESS.—For pur2 poses of this subsection, the term ‘service-related 

3 business’ means any trade or business described in 

4 subparagraph (A) of section 1202(e)(3).’’ 

5 (2) AMENDMENT TO SOCIAL SECURITY ACT.— 

6 Section 211 of the Social Security Act is amended 

7 by adding at the end the following new subsection: 

8 ‘‘Treatment of Certain S Corporation Shareholders 

9 ‘‘(k)(1) In the case of any individual— 

10 ‘‘(A) who is a 2-percent shareholder (as defined 

11 in section 1372(b) of the Internal Revenue Code of 

12 1986) of an S corporation for any taxable year of 

13 such corporation, and 

14 ‘‘(B) who materially participates in the activi15 ties of such S corporation during such taxable year, 

16 such shareholder’s net earnings from self-employment for 

17 such shareholder’s taxable year in which the taxable year 

18 of the S corporation ends shall include such shareholder’s 

19 pro rata share (as determined under section 1366(a) of 

20 such Code) of the taxable income or loss of such corpora21 tion from service-related businesses (as defined in section 

22 1402(k)(3) of such Code) carried on by such corporation. 

23 ‘‘(2) In determining the amount to be taken into ac24 count under paragraph (1), the exceptions provided in 

25 subsection (a) shall apply, except that, in the case of the 
1129 

Title VII, Subtitle A 

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1 exceptions provided in subsection (a)(5), the rules of sub2 paragraph (B) thereof shall apply to shareholders in S cor3 porations.’’. 

4 (b) TREATMENT OF CERTAIN LIMITED PARTNERS.— 

5 (1) AMENDMENT OF INTERNAL REVENUE

6 CODE.—Paragraph (13) of section 1402(a) is 

7 amended by striking ‘‘limited partner, as such’’ and 

8 inserting ‘‘limited partner who does not materially 

9 participate in the activities of the partnership’’. 

10 (2) AMENDMENT OF SOCIAL SECURITY ACT.— 

11 Paragraph (12) of section 211(a) of the Social Secu12 rity Act is amended by striking ‘‘limited partner, as 

13 such’’ and inserting ‘‘limited partner who does not 

14 materially participate in the activities of the partner15 ship’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years of individuals be18 ginning after December 31, 1995, and to taxable years 

19 of S corporations and partnerships ending with or within 

20 such taxable years of individuals. 

21 SEC. 7142. EXTENDING MEDICARE COVERAGE OF, AND AP22 PLICATION OF HOSPITAL INSURANCE TAX 

23 TO, ALL STATE AND LOCAL GOVERNMENT 

24 EMPLOYEES. 

25 (a) IN GENERAL.— 
1130 

Title VII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (1) APPLICATION OF HOSPITAL INSURANCE

2 TAX.—Section 3121(u)(2) is amended by striking 

3 subparagraphs (C) and (D). 

4 (2) COVERAGE UNDER MEDICARE.—Section 

5 210(p) of the Social Security Act (42 U.S.C. 410(p)) 

6 is amended by striking paragraphs (3) and (4). 

7 (3) EFFECTIVE DATE.—The amendments made 

8 by this subsection shall apply to services performed 

9 after September 30, 1995. 

10 (b) TRANSITION IN BENEFITS FOR STATE AND

11 LOCAL GOVERNMENT EMPLOYEES AND FORMER EM12 PLOYEES.— 

13 (1) IN GENERAL.— 

14 (A) EMPLOYEES NEWLY SUBJECT TO

15 TAX.—For purposes of sections 226, 226A, and 

16 1811 of the Social Security Act, in the case of 

17 any individual who performs services during the 

18 calendar quarter beginning October 1, 1995, 

19 the wages for which are subject to the tax im20 posed by section 3101(b) of the Internal Rev21 enue Code of 1986 only because of the amend22 ment made by subsection (a), the individual’s 

23 medicare qualified State or local government 

24 employment (as defined in subparagraph (B)) 

25 performed before October 1, 1995, shall be con-
1131 

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1 sidered to be ‘‘employment’’ (as defined for pur2 poses of title II of such Act), but only for pur3 poses of providing the individual (or another 

4 person) with entitlement to hospital insurance 

5 benefits under part A of title XVIII of such Act 

6 for months beginning with October 1995. 

7 (B) MEDICARE QUALIFIED STATE OR

8 LOCAL GOVERNMENT EMPLOYMENT DE9 FINED.—In this paragraph, the term ‘‘medicare 

10 qualified State or local government employ11 ment’’ means medicare qualified government 

12 employment described in section 210(p)(1)(B) 

13 of the Social Security Act (determined without 

14 regard to section 210(p)(3) of such Act, as in 

15 effect before its repeal under subsection (a)(2)). 

16 (2) AUTHORIZATION OF APPROPRIATIONS.— 

17 There are authorized to be appropriated to the Fed18 eral Hospital Insurance Trust Fund from time to 

19 time such sums as the Secretary of Health and 

20 Human Services deems necessary for any fiscal year 

21 on account of— 

22 (A) payments made or to be made during 

23 such fiscal year from such Trust Fund with re24 spect to individuals who are entitled to benefits 
1132 

Title VII, Subtitle A 

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1 under title XVIII of the Social Security Act 

2 solely by reason of paragraph (1), 

3 (B) the additional administrative expenses 

4 resulting or expected to result therefrom, and 

5 (C) any loss in interest to such Trust 

6 Fund resulting from the payment of those 

7 amounts, in order to place such Trust Fund in 

8 the same position at the end of such fiscal year 

9 as it would have been in if this subsection had 

10 not been enacted. 

11 (3) INFORMATION TO INDIVIDUALS WHO ARE

12 PROSPECTIVE MEDICARE BENEFICIARIES BASED ON

13 STATE AND LOCAL GOVERNMENT EMPLOYMENT.— 

14 Section 226(g) of the Social Security Act (42 U.S.C. 

15 426(g)) is amended— 

16 (A) by redesignating paragraphs (1) 

17 through (3) as subparagraphs (A) through (C), 

18 respectively, 

19 (B) by inserting ‘‘(1)’’ after ‘‘(g)’’, and 

20 (C) by adding at the end the following new 

21 paragraph: 

22 ‘‘(2) The Secretary, in consultation with State 

23 and local governments, shall provide procedures de24 signed to assure that individuals who perform medi25 care qualified government employment by virtue of 
1133 

Title VII, Subtitle A 

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1 service described in section 210(a)(7) are fully in2 formed with respect to (A) their eligibility or poten3 tial eligibility for hospital insurance benefits (based 

4 on such employment) under part A of title XVIII, 

5 (B) the requirements for, and conditions of, such eli6 gibility, and (C) the necessity of timely application 

7 as a condition of becoming entitled under subsection 

8 (b)(2)(C), giving particular attention to individuals 

9 who apply for an annuity or retirement benefit and 

10 whose eligibility for such annuity or retirement ben11 efit is based on a disability.’’ 

12 (c) TECHNICAL AMENDMENTS.— 

13 (1) Subparagraph (A) of section 3121(u)(2) is 

14 amended by striking ‘‘subparagraphs (B) and (C),’’ 

15 and inserting ‘‘subparagraph (B),’’. 

16 (2) Subparagraph (B) of section 210(p)(1) of 

17 the Social Security Act (42 U.S.C. 410(p)(1)) is 

18 amended by striking ‘‘paragraphs (2) and (3).’’ and 

19 inserting ‘‘paragraph (2).’’ 

20 (3) Section 218 of the Social Security Act (42 

21 U.S.C. 418) is amended by striking subsection (n). 

22 (4) The amendments made by this subsection 

23 shall apply after September 30, 1995. 
1134 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 Subtitle B—Tax Treatment of 

2 Employer-Provided Health Care 

3 SEC. 7201. LIMITATION ON EXCLUSION FOR EMPLOYER4 PROVIDED HEALTH BENEFITS. 

5 (a) GENERAL RULE.—Section 106 (relating to con6 tributions by employer to accident and health plans) is 

7 amended to read as follows: 

8 ‘‘SEC. 106. CONTRIBUTIONS BY EMPLOYER TO ACCIDENT 

9 AND HEALTH PLANS. 

10 ‘‘(a) GENERAL RULE.—Except as otherwise provided 

11 in this section, gross income of an employee does not in12 clude employer-provided coverage under an accident or 

13 health plan. 

14 ‘‘(b) INCLUSION OF CERTAIN BENEFITS NOT PART

15 OF COMPREHENSIVE BENEFIT PACKAGE.— 

16 ‘‘(1) IN GENERAL.—Effective on and after Jan17 uary 1, 2004, gross income of an employee shall in18 clude employer-provided coverage under any accident 

19 or health plan except to the extent that— 

20 ‘‘(A) such coverage consists of comprehen21 sive health coverage described in section 1101 

22 of the Health Security Act, 

23 ‘‘(B) such coverage consists of coverage of 

24 cost sharing amounts under the comprehensive 

25 benefit package described in such section (in-
1135 

Title VII, Subtitle B 

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1 cluding such coverage under a cost sharing pol2 icy under section 1421(b)(2) of such Act), or 

3 ‘‘(C) such coverage consists of permitted 

4 coverage. 

5 ‘‘(2) PERMITTED COVERAGE.—For purposes of 

6 this subsection, the term ‘permitted coverage’ 

7 means— 

8 ‘‘(A) any coverage providing wages or pay9 ments in lieu of wages for any period during 

10 which the employee is absent from work on ac11 count of sickness or injury, 

12 ‘‘(B) any coverage providing for payments 

13 referred to in section 105(c), 

14 ‘‘(C) any coverage provided to an employee 

15 or former employee after such employee has at16 tained age 65, unless such coverage is provided 

17 by reason of the current employment of the in18 dividual (within the meaning of section 

19 1862(b)(1)(A)(i)(I) of the Social Security Act) 

20 with the employer providing the coverage, 

21 ‘‘(D) any coverage under a qualified long22 term care insurance policy (as defined in sec23 tion 7702B), 
1136 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(E) any coverage provided under Federal 

2 law to any individual (or spouse or dependent 

3 thereof) by reason of such individual being— 

4 ‘‘(i) a member of the Armed Forces of 

5 the United States, or 

6 ‘‘(ii) a veteran, and 

7 ‘‘(F) any other coverage to the extent that 

8 the Secretary determines that the continuation 

9 of an exclusion for such coverage is not incon10 sistent with the purposes of this subsection. 

11 ‘‘(3) SPECIAL RULES FOR FLEXIBLE SPENDING

12 ARRANGEMENTS.— 

13 ‘‘(A) IN GENERAL.—To the extent that 

14 any employer-provided coverage is provided 

15 through a flexible spending or similar arrange16 ment, paragraph (1) shall be applied by sub17 stituting ‘January 1, 1997,’ for ‘January 1, 

18 2004’. 

19 ‘‘(B) FLEXIBLE SPENDING ARRANGE20 MENT.—For purposes of this paragraph, a 

21 flexible spending arrangement is a benefit pro22 gram which provides employees with coverage 

23 under which— 

24 ‘‘(i) specified incurred expenses may 

25 be reimbursed (subject to reimbursement 
1137 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 maximums and other reasonable condi2 tions), and 

3 ‘‘(ii) the maximum amount of reim4 bursement which is reasonably available to 

5 a participant for such coverage is less than 

6 200 percent of the value of such coverage. 

7 In the case of an insured plan, the maximum 

8 amount reasonably available shall be deter9 mined on the basis of the underlying coverage. 

10 ‘‘(c) SPECIAL RULES FOR DETERMINING AMOUNT OF

11 INCLUSION.— 

12 ‘‘(1) IN GENERAL.—For purposes of this sec13 tion, the value of any coverage shall be determined 

14 on the basis of the average cost of providing such 

15 coverage to the beneficiaries receiving such coverage. 

16 ‘‘(2) SPECIAL RULE.—To the extent provided 

17 by the Secretary, cost determinations under para18 graph (1) may be made on the basis of reasonable 

19 estimates. 

20 ‘‘(d) POTENTIAL CASH PAYMENT NOT TO AFFECT

21 EXCLUSION.—No amount shall be included in the gross 

22 income of an employee solely because the employee may 

23 select coverage under an accident or health plan which re24 sults in a cash payment referred to in section 1607 of the 

25 Health Security Act.’’ 
1138 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (b) EMPLOYMENT TAX TREATMENT.— 

2 (1) SOCIAL SECURITY TAX.— 

3 (A) Subsection (a) of section 3121 is 

4 amended by inserting after paragraph (21) the 

5 following new sentence: 

6 ‘‘Nothing in paragraph (2) shall exclude from the term 

7 ‘wages’ any amount which is required to be included in 

8 gross income under section 106(b).’’ 

9 (B) Subsection (a) of section 209 of the 

10 Social Security Act is amended by inserting 

11 after paragraph (21) the following new sen12 tence: 

13 ‘‘Nothing in paragraph (2) shall exclude from the term 

14 ‘wages’ any amount which is required to be included in 

15 gross income under section 106(b) of the Internal Revenue 

16 Code of 1986.’’ 

17 (2) RAILROAD RETIREMENT TAX.—Paragraph 

18 (1) of section 3231(e) is amended by adding at the 

19 end thereof the following new sentence: ‘‘Nothing in 

20 clause (i) of the second sentence of this paragraph 

21 shall exclude from the term ‘compensation’ any 

22 amount which is required to be included in gross in23 come under section 106(b).’’ 
1139 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (3) UNEMPLOYMENT TAX.—Subsection (b) of 

2 section 3306 is amended by inserting after para3 graph (16) the following new sentence: 

4 ‘‘Nothing in paragraph (2) shall exclude from the term 

5 ‘wages’ any amount which is required to be included in 

6 gross income under section 106(b).’’ 

7 (4) WAGE WITHHOLDING.—Subsection (a) of 

8 section 3401 is amended by adding at the end there9 of the following new sentence: 

10 ‘‘Nothing in the preceding provisions of this subsection 

11 shall exclude from the term ‘wages’ any amount which is 

12 required to be included in gross income under section 

13 106(b).’’ 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall take effect on January 1, 1997. 

16 SEC. 7202. HEALTH BENEFITS MAY NOT BE PROVIDED 

17 UNDER CAFETERIA PLANS. 

18 (a) GENERAL RULE.—Subsection (f) of section 125 

19 (defining qualified benefits) is amended by adding at the 

20 end thereof the following new sentence: ‘‘Such term shall 

21 not include any benefits or coverage (other than coverage 

22 described in section 106(b)(2)(A)) under an accident or 

23 health plan.’’ 

24 (b) CONFORMING AMENDMENT.—Subsection (g) of 

25 section 125 is amended by striking paragraph (2) and re-
1140 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 designating paragraphs (3) and (4) as paragraphs (2) and 

2 (3), respectively. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall take effect on January 1, 1997. 

5 SEC. 7203. INCREASE IN DEDUCTION FOR HEALTH INSUR6 ANCE COSTS OF SELF-EMPLOYED INDIVID7 UALS. 

8 (a) PROVISION MADE PERMANENT.— 

9 (1) IN GENERAL.—Subsection (l) of section 162 

10 (relating to special rules for health insurance costs 

11 of self-employed individuals) is amended by striking 

12 paragraph (6). 

13 (2) EFFECTIVE DATE.—The amendment made 

14 by paragraph (1) shall apply to taxable years begin15 ning after December 31, 1993. 

16 (b) DEDUCTION LIMITED TO BASIC COVERAGE PUR17 CHASED FROM HEALTH ALLIANCE.— 

18 (1) IN GENERAL.—Paragraphs (1) and (2) of 

19 section 162(l) are amended to read as follows: 

20 ‘‘(1) IN GENERAL.—In the case of an individual 

21 who is an employee within the meaning of section 

22 401(c), there shall be allowed as a deduction under 

23 this section an amount equal to 100 percent of the 

24 amount paid during the taxable year for insurance 

25 which constitutes medical care for the taxpayer, his 
1141 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 spouse, and dependents; but only to the extent such 

2 insurance is comprehensive health coverage de3 scribed in section 1101 of the Health Security Act 

4 purchased from a qualified alliance described in sec5 tion 1311 of such Act. 

6 ‘‘(2) LIMITATIONS.— 

7 ‘‘(A) LOWER PERCENTAGE IN CERTAIN

8 CASES.—If— 

9 ‘‘(i) the taxpayer has 1 or more em10 ployees in a trade or business with respect 

11 to which such taxpayer is treated as an 

12 employee within the meaning of section 

13 401(c), and 

14 ‘‘(ii) the taxpayer does not pay at 

15 least 100 percent of the weighted average 

16 premium applicable under the Health Se17 curity Act for each of such employees, 

18 paragraph (1) shall be applied by substituting 

19 for ‘100 percent’ the lowest percentage of such 

20 weighted average premium paid by the taxpayer 

21 for any of such employees. 

22 ‘‘(B) DEDUCTION LIMITED TO EARNED IN23 COME.—No deduction shall be allowed under 

24 paragraph (1) to the extent that the amount of 
1142 

Title VII, Subtitle B 

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1 such deduction exceeds the taxpayer’s earned 

2 income (within the meaning of section 401(c)). 

3 ‘‘(C) OTHER COVERAGE.—Paragraph (1) 

4 shall not apply to amounts paid for coverage for 

5 any individual for any calendar month if such 

6 individual is employed on a full-time basis 

7 (within the meaning of section 1901 of the 

8 Health Security Act) by an employer during 

9 such month.’’ 

10 (2) CONFORMING AMENDMENT.—Subparagraph 

11 (A) of section 162(l)(5) is amended by striking 

12 ‘‘shall be treated as such individual’s earned in13 come’’ and inserting ‘‘shall be included in such indi14 vidual’s earned income’’. 

15 (3) EFFECTIVE DATE.—The amendments made 

16 by this subsection shall take effect on the earlier 

17 of— 

18 (A) January 1, 1997, or 

19 (B) the first day on which the taxpayer 

20 could purchase comprehensive health coverage 

21 from a qualified alliance. 
1143 

Title VII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 SEC. 7204. LIMITATION ON PREPAYMENT OF MEDICAL IN2 SURANCE PREMIUMS. 

3 (a) GENERAL RULE.—Subsection (d) of section 213 

4 is amended by adding at the end thereof the following new 

5 paragraph: 

6 ‘‘(10) LIMITATION ON PREPAYMENTS.—If the 

7 taxpayer pays a premium or other amount which 

8 constitutes medical care under paragraph (1), to the 

9 extent such premium or other amount is properly al10 locable to insurance coverage or care to be provided 

11 during periods more than 12 months after the 

12 month in which such payment is made, such pre13 mium shall be treated as paid ratably over the pe14 riod during which such insurance coverage or care is 

15 to be provided. The preceding sentence shall not 

16 apply to any premium to which paragraph (7) ap17 plies nor to any premium paid under a qualified 

18 long-term care insurance policy.’’ 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 subsection (a) shall apply to amounts paid after December 

21 31, 1996. 
1144 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 Subtitle C—Employment Status 

2 Provisions 

3 SEC. 7301. ANTI-ABUSE REGULATIONS RELATING TO EM4 PLOYMENT STATUS. 

5 (a) GENERAL RULE.—In order to prevent 

6 misclassification of workers so as to minimize payments 

7 under this Act, chapter 25 (relating to general provisions 

8 applicable to employment taxes) is amended by adding at 

9 the end thereof the following new section: 

10 ‘‘SEC. 3510. DEFINITION OF EMPLOYEE. 

11 ‘‘(a) REGULATIONS.—The Secretary shall prescribe 

12 regulations setting forth rules for determining whether an 

13 individual is an employee for purposes of— 

14 ‘‘(1) the employment taxes imposed under this 

15 subtitle, and 

16 ‘‘(2) to the extent provided in such regulations, 

17 subtitle A. 

18 ‘‘(b) SCOPE OF REGULATIONS.—Such regulations 

19 may modify the rules otherwise applicable for the deter20 minations referred to in paragraphs (1) and (2) of sub21 section (a); except that— 

22 ‘‘(1) such regulations shall give significant 

23 weight to the common law applicable in determining 

24 the employer-employee relationship, and 
1145 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(2) nothing in such regulations shall modify 

2 the provisions of paragraph (1), (3), or (4) of sec3 tion 3121(d), section 3506, section 3508, or section 

4 3511.’’ 

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

6 for chapter 25 is amended by adding at the end thereof 

7 the following new item: 

‘‘Sec. 3510. Definition of employee.’’ 

8 (c) EFFECTIVE DATE.—The regulations described in 

9 section 3510 of the Internal Revenue Code of 1986 (as 

10 added by this section) shall be effective for periods begin11 ning no earlier than the date which is 6 months after the 

12 date such regulations are promulgated as final regula13 tions. 

14 (d) REPORT TO CONGRESS.—Upon issuance of the 

15 regulations described in section 3510 of the Internal Rev16 enue Code of 1986 (as added by this section) as final regu17 lations, the Secretary of the Treasury shall submit a re18 port to Congress relating to such regulations, including 

19 an explanation of their purposes and the issues they are 

20 designed to address. 

21 SEC. 7302. INCREASE IN SERVICES REPORTING PENALTIES. 

22 (a) INCREASE IN PENALTY.—Section 6721(a) (relat23 ing to imposition of penalty) is amended by adding at the 

24 end the following new paragraph: 
1146 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(3) INCREASED PENALTY FOR RETURNS IN2 VOLVING PAYMENTS FOR SERVICES.— 

3 ‘‘(A) IN GENERAL.—Subject to the overall 

4 limitation of paragraph (1), the amount of the 

5 penalty under paragraph (1) for any failure 

6 with respect to any applicable return shall be 

7 equal to the greater of $50 or 5 percent of the 

8 amount required to be reported correctly but 

9 not so reported. 

10 ‘‘(B) EXCEPTION WHERE SUBSTANTIAL

11 COMPLIANCE.—Subparagraph (A) shall not 

12 apply to failures with respect to applicable re13 turns required to be filed by a person during 

14 any calendar year if the aggregate amount 

15 which is timely and correctly reported on appli16 cable returns filed by the person for the cal17 endar year is at least 97 percent of the aggre18 gate amount which is required to be reported 

19 on applicable returns by the person for the cal20 endar year. 

21 ‘‘(C) APPLICABLE RETURN.—For purposes 

22 of this paragraph, the term ‘applicable return’ 

23 means any information return required to be 

24 filed under— 
1147 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(i) section 6041(a) which relates to 

2 payments to any person for services per3 formed by such person (other than as an 

4 employee), or 

5 ‘‘(ii) section 6041A(a).’’ 

6 (b) CONFORMING AMENDMENT.—Section 6721(a)(1) 

7 is amended by striking ‘‘In’’ and inserting ‘‘Except as pro8 vided in paragraph (3), in’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to returns the due date for which 

11 (without regard to extensions) is more than 30 days after 

12 the date of the enactment of this Act. 

13 SEC. 7303. REVISION OF SECTION 530 SAFE HARBOR RULES. 

14 (a) GENERAL RULE.—Chapter 25 (relating to gen15 eral provisions applicable to employment taxes) is amend16 ed by adding at the end thereof the following new section: 

17 ‘‘SEC. 3511. PROTECTION AGAINST RETROACTIVE EMPLOY18 MENT TAX RECLASSIFICATIONS. 

19 ‘‘(a) GENERAL RULE.—If— 

20 ‘‘(1) for purposes of employment taxes, the tax21 payer treats an individual as not being an employee 

22 for any period, 

23 ‘‘(2) for such period, the taxpayer meets— 

24 ‘‘(A) the consistency requirements of sub25 section (b), 
1148 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(B) the return filing requirements of sub2 section (c), and 

3 ‘‘(C) the safe harbor requirement of sub4 section (d), and 

5 ‘‘(3) the Secretary has not notified the taxpayer 

6 in writing before the beginning of such period that 

7 the Secretary has determined that the taxpayer 

8 should treat such individual (or any individual hold9 ing a substantially similar position) as an employee, 

10 then, for purposes of applying this subtitle for such period, 

11 the individual shall be deemed not to be an employee of 

12 the taxpayer. 

13 ‘‘(b) CONSISTENCY REQUIREMENTS.—A taxpayer 

14 meets the consistency requirements of this subsection with 

15 respect to any individual for any period if the taxpayer 

16 treats such individual (and all other individuals holding 

17 substantially similar positions) as not being an employee 

18 for purposes of the employment taxes for such period and 

19 all prior periods. 

20 ‘‘(c) RETURN FILING REQUIREMENTS.— 

21 ‘‘(1) IN GENERAL.—The taxpayer meets the re22 turn filing requirements of this subsection with re23 spect to any individual for any period if all Federal 

24 tax returns (including information returns) required 

25 to be filed by the taxpayer for such period with re-
1149 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 spect to such individual (and all other individuals 

2 holding substantially similar positions) are timely 

3 filed on a basis consistent with the taxpayer’s treat4 ment of such individuals as not being employees. 

5 ‘‘(2) SPECIAL RULES.—For purposes of para6 graph (1)— 

7 ‘‘(A) any return filed for which the penalty 

8 under section 6721(a) is reduced or waived pur9 suant to subsection (b) or (c) of section 6721 

10 shall be considered timely filed, and 

11 ‘‘(B) a taxpayer shall not be considered as 

12 failing to meet the requirements of paragraph 

13 (1) solely because the taxpayer failed to timely 

14 file accurate information returns in respect of 

15 payments to individuals holding substantially 

16 similar positions if the taxpayer satisfies the re17 quirements of section 6721(a)(3)(B) for such 

18 period. 

19 ‘‘(d) SAFE HARBORS.— 

20 ‘‘(1) IN GENERAL.—The taxpayer meets the 

21 safe harbor requirement of this subsection with re22 spect to any individual for any period if the tax23 payer’s treatment of such individual as not being an 

24 employee for such period was— 
1150 

Title VII, Subtitle C 

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1 ‘‘(A) in reasonable reliance on a written 

2 determination (as defined in section 

3 6110(b)(1)) issued to or in respect of the tax4 payer that addressed the employment status of 

5 the individual or an individual holding a sub6 stantially similar position; 

7 ‘‘(B) in reasonable reliance on a concluded 

8 Internal Revenue Service audit of the tax9 payer— 

10 ‘‘(i) which was for a period in which 

11 the rules for determining employment sta12 tus were the same as for the period in 

13 question, and 

14 ‘‘(ii) in which the employment status 

15 of the individual or any individual holding 

16 a substantially similar position was exam17 ined without change to any such individ18 ual’s status; 

19 ‘‘(C) in reasonable reliance on a long20 standing recognized practice of a significant 

21 segment of the industry in which the individual 

22 is engaged; or 

23 ‘‘(D) supported by substantial authority. 

24 For purposes of subparagraph (D), the term ‘sub25 stantial authority’ has the same meaning as when 
1151 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 used in section 6662(d)(2)(B)(i); except that such 

2 term shall not include any private letter ruling 

3 issued to a person other than the taxpayer. 

4 ‘‘(2) SPECIAL RULES.— 

5 ‘‘(A) SUBSEQUENT AUTHORITY.—The tax6 payer shall not be considered to meet the safe 

7 harbor requirement of paragraph (1)(B) with 

8 respect to any individual for any period if the 

9 treatment of such individual as not being an 

10 employee is inconsistent with any regulation, 

11 Revenue Ruling, Revenue Procedure, or other 

12 authority published by the Secretary before the 

13 beginning of such period and after the conclu14 sion of the audit referred to in paragraph 

15 (1)(B). 

16 ‘‘(B) TERMINATION OF INDUSTRY PRAC17 TICE SAFE HARBOR.—The taxpayer shall not be 

18 considered to meet the safe harbor requirement 

19 of paragraph (1)(C) with respect to any indi20 vidual for— 

21 ‘‘(i) any period beginning after the 

22 date on which the Secretary prescribes reg23 ulations pursuant to section 3510, or 

24 ‘‘(ii) any period if the treatment of 

25 such individual as not being an employee is 
1152 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 inconsistent with any regulation, Revenue 

2 Ruling, Revenue Procedure, or other au3 thority published by the Secretary before 

4 the beginning of such period. 

5 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur6 poses of this section— 

7 ‘‘(1) EMPLOYMENT TAX.—The term ‘employ8 ment tax’ means any tax imposed by this subtitle. 

9 ‘‘(2) TAXPAYER.—The term ‘taxpayer’ includes 

10 any person or entity (including a governmental enti11 ty) which is (or would be but for this section) liable 

12 for any employment tax. Such term includes any 

13 predecessor or successor to the taxpayer. 

14 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

15 such regulations as may be appropriate to carry out the 

16 purposes of this section.’’ 

17 (b) RULES TO APPLY FOR INCOME TAX PUR18 POSES.—Part I of subchapter B of chapter 1 is amended 

19 by adding at the end thereof the following new section: 

20 ‘‘SEC. 69. DETERMINATION OF EMPLOYMENT STATUS. 

21 ‘‘For purposes of this subtitle, an individual shall be 

22 treated as a self-employed individual with respect to any 

23 services performed by such individual for another person 

24 if, under the rules of section 3511, such individual is treat-
1153 

Title VII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ed as not being an employee of such other person with 

2 respect to such services.’’ 

3 (c) CONFORMING AMENDMENT.—Section 530 of the 

4 Revenue Act of 1978 is hereby repealed. 

5 (d) CLERICAL AMENDMENTS.— 

6 (1) The table of sections for chapter 25 is 

7 amended by adding at the end thereof the following 

8 new item: 

‘‘Sec. 3511. Protection against retroactive employment tax reclassifications.’’ 

9 (2) The table of sections for part I of sub10 chapter B of chapter 1 is amended by adding at the 

11 end thereof the following new item: 

‘‘Sec. 69. Determination of employment status.’’ 

12 (e) EFFECTIVE DATE.— 

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the amendments made by this section 

15 shall apply to all periods beginning after December 

16 31, 1995. 

17 (2) REPEAL OF LIMITATIONS ON REGULATIONS

18 AND RULINGS.—The repeal made by subsection (c), 

19 insofar as it relates to section 530(b) of the Revenue 

20 Act of 1978, shall take effect on the date of the en21 actment of this Act. 
1154 

Title VII, Subtitle D 

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1 Subtitle D—Tax Treatment of 

2 Funding of Retiree Health Benefits 

3 SEC. 7401. POST-RETIREMENT MEDICAL AND LIFE INSUR4 ANCE RESERVES. 

(a) MINIMUM PERIOD FOR WORKING LIVES.—Section 419A(c)(2) (relating to additional reserves for postretirement medical and life insurance benefits) is amended by inserting ‘‘(but not less than 10 years)’’ after 

‘‘working lives of the covered employees’’. 

(b) SEPARATE ACCOUNTING.— 

(1) REQUIREMENT.—Section 419A(c)(2) is 

amended by adding at the end the following new 

flush sentence: 

‘‘Such reserve shall be maintained as a separate account.’’ 

(2) USE OF RESERVE FOR OTHER PURPOSES.— 

Paragraph (1) of section 4976(b) (defining disqualified benefit) is amended by striking ‘‘and’’ at the 

end of subparagraph (B), by striking the period at 

the end of subparagraph (C) and inserting ‘‘, and’’, 

and by adding after subparagraph (C) the following 

new subparagraph: 

‘‘(D) any payment to which subparagraph 

(C) does not apply which is out of an account 

described in section 419A(c)(2) and which is 
1155 

Title VII, Subtitle D 

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not used to provide a post-retirement medical 

benefit or life insurance benefit.’’ 

(c) SPECIAL LIMITATIONS.—Section 419A(e) (relating to special limitations on reserves) is amended by adding at the end the following new paragraph: 

‘‘(3) BENEFITS MUST BE EXCLUDABLE.—Postretirement medical benefits and life insurance benefits shall not be taken into account under subsection 

(c)(2) to the extent it may be reasonably anticipated 

that such benefits will be required to be included in 

gross income when provided.’’ 

(d) EFFECTIVE DATES.— 

(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section 

shall apply to contributions paid or accrued after 

December 31, 1994, in taxable years ending after 

such date. 

(2) SEPARATE ACCOUNTING.—The amendments 

made by subsection (b) shall apply to contributions 

paid or accrued after the date of the enactment of 

this Act, in taxable years ending after such date. 

SEC. 7402. HEALTH BENEFITS ACCOUNTS MAINTAINED BY 

PENSION PLANS. 

(a) TERMINATION OF ACCOUNTS.— 
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Title VII, Subtitle D 

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(1) IN GENERAL.—Section 401(h) (relating to 

medical, etc., benefits for retired employees and 

their spouses and dependents) is amended by adding 

at the end the following new paragraph: 

‘‘(2) TERMINATION.— 

‘‘(A) IN GENERAL.—In the case of a pension or annuity plan to which paragraph (1) applies— 

‘‘(i) no contributions may be made to 

the separate account described in paragraph (1)(C) other than allowable contributions, and 

‘‘(ii) such plan may pay benefits described in paragraph (1) only from funds 

attributable to allowable contributions and 

earnings allocable to such contributions. 

‘‘(B) ALLOWABLE CONTRIBUTION.—For 

purposes of subparagraph (A), the term ‘allowable contribution’ means— 

‘‘(i) any contribution made before 

January 1, 1995, 

‘‘(ii) in the case of a plan maintained 

pursuant to 1 or more collective bargaining 

agreements between employee representatives and 1 or more employees ratified on 
1157 

Title VII, Subtitle D 

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or before October 29, 1993, any contribution under such plan made before the earlier of— 

‘‘(I) the date on which the last of 

such agreements terminates (determined without regard to any extension 

after October 29, 1993), or, if later, 

January 1, 1995, or 

‘‘(II) January 1, 1998, or 

‘‘(iii) any qualified transfer under section 420.’’ 

(2) CONFORMING AMENDMENTS.—Section 

401(h) is amended— 

(A) by striking ‘‘Under’’ and inserting: 

‘‘(1) IN GENERAL.—Under’’, 

(B) by redesignating paragraphs (1) 

through (6) as subparagraphs (A) through (F), 

respectively, 

(C) by striking ‘‘paragraph (6)’’ and inserting ‘‘subparagraph (F)’’, and 

(D) by striking ‘‘paragraph (1)’’ and inserting ‘‘subparagraph (A)’’. 

(b) MINIMUM COST REQUIREMENTS OF EMPLOYER.—Paragraph (3) of section 420(c) (relating to 
1158 

Title VII, Subtitle E 

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minimum cost requirements) is amended by adding at the 

end the following new subparagraph: 

‘‘(E) ADJUSTMENT FOR COST SAVINGS

UNDER HEALTH SECURITY ACT.—To the extent 

provided by the Secretary, a plan shall not be 

treated as failing to meet the requirements of 

this section to the extent such failure is attributable to a reduction in qualified current retiree 

health liabilities by reason of the enactment of 

the Health Security Act.’’ 

1 Subtitle E—Coordination With 

2 COBRA Continuing Care Provi3 sions 

4 SEC. 7501. COORDINATION WITH COBRA CONTINUING CARE 

5 PROVISIONS. 

6 (a) PERIOD OF COVERAGE.—Clause (iv) of section 

7 4980B(f)(2)(B) (defining period of coverage) is amend8 ed— 

9 (1) by striking ‘‘or’’ at the end of subclause (I), 

10 by striking the period at the end of subclause (II) 

11 and inserting ‘‘, or’’, and by adding at the end the 

12 following new subclause: 

13 ‘‘(III) eligible for comprehensive health cov14 erage described in section 1101 of the Health Secu15 rity Act.’’, and 
1159 

Title VII, Subtitle E 

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1 (2) by striking ‘‘OR MEDICARE ENTITLEMENT’’ 

2 in the heading and inserting ‘‘, MEDICARE ENTITLE3 MENT, OR HEALTH SECURITY ACT ELIGIBILITY’’. 

4 (b) QUALIFIED BENEFICIARY.—Section 4980B(g)(1) 

5 (defining qualified beneficiary) is amended by adding at 

6 the end the following new subparagraph: 

7 ‘‘(E) SPECIAL RULE FOR INDIVIDUALS

8 COVERED BY HEALTH SECURITY ACT.—The 

9 term ‘qualified beneficiary’ shall not include any 

10 individual who, upon termination of coverage 

11 under a group health plan, is eligible for com12 prehensive health coverage described in section 

13 1101 of the Health Security Act.’’ 

14 (c) REPEAL UPON IMPLEMENTATION OF HEALTH

15 SECURITY ACT.— 

16 (1) IN GENERAL.—Section 4980B (relating to 

17 failure to satisfy continuation coverage requirements 

18 of group health care plans) is hereby repealed. 

19 (2) CONFORMING AMENDMENTS.— 

20 (A) Section 414(n)(3)(C) is amended by 

21 striking ‘‘505, and 4980B’’ and inserting ‘‘and 

22 505’’. 

23 (B) Section 414(t)(2) is amended by strik24 ing ‘‘505, or 4980B’’ and inserting ‘‘or 505’’. 
1160 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (C) The table of sections for chapter 43 is 

2 amended by striking the item relating to section 

3 4980B. 

4 (3) EFFECTIVE DATE.—The amendments made 

5 by this subsection shall take effect on the earlier 

6 of— 

7 (A) January 1, 1998, or 

8 (B) the first day of the first calendar year 

9 following the calendar year in which all States 

10 have in effect plans under which individuals are 

11 eligible for comprehensive health coverage de12 scribed in section 1101 of this Act. 

13 Such amendments shall not apply in determining the 

14 amount of any tax under section 4980B of the Inter15 nal Revenue Code of 1986 with respect to any fail16 ure occurring before the date determined under the 

17 preceding sentence. 

18 Subtitle F—Tax Treatment of Orga19 nizations Providing Health Care 

20 Services and Related Organiza21 tions 

22 SEC. 7601. TREATMENT OF NONPROFIT HEALTH CARE OR23 GANIZATIONS. 

24 (a) TREATMENT OF HOSPITALS AND OTHER ENTI25 TIES PROVIDING HEALTH CARE SERVICES.—Section 501 
1161 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (relating to exemption from tax on corporations, certain 

2 trusts, etc.) is amended by redesignating subsection (n) 

3 as subsection (o) and by inserting after subsection (m) the 

4 following new subsection: 

5 ‘‘(n) QUALIFICATION OF ORGANIZATIONS PROVIDING

6 HEALTH CARE SERVICES AS CHARITABLE ORGANIZA7 TIONS.—For purposes of subsection (c)(3), the provision 

8 of health care services shall not be treated as an activity 

9 that accomplishes a charitable purpose unless the organi10 zation providing such services, on a periodic basis (no less 

11 frequently than annually), and with the participation of 

12 community representatives— 

13 ‘‘(1) assesses the health care needs of its com14 munity, and 

15 ‘‘(2) develops a plan to meet those needs. 

16 In the case of a health maintenance organization, the pro17 vision of health care services shall not be treated as an 

18 activity that accomplishes a charitable purpose for pur19 poses of subsection (c)(3) unless, in addition to meeting 

20 the requirement of the preceding sentence, such services 

21 are provided as described in subsection (m)(6)(B)(i).’’ 

22 (b) TREATMENT OF HEALTH MAINTENANCE ORGA23 NIZATIONS.—Section 501(m) is amended by adding at the 

24 end thereof the following new paragraph: 
1162 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(6) INSURANCE PROVIDED BY HEALTH MAIN2 TENANCE ORGANIZATIONS.— 

3 ‘‘(A) CERTAIN INSURANCE TREATED AS

4 COMMERCIAL-TYPE INSURANCE.—Health insur5 ance provided by a health maintenance organi6 zation shall be treated as commercial-type in7 surance if such insurance relates to care pro8 vided other than pursuant to a pre-existing ar9 rangement with such organization. In applying 

10 the preceding sentence, care described in sub11 paragraph (B)(iv) shall not be taken into ac12 count. 

13 ‘‘(B) CERTAIN INSURANCE NOT TREATED

14 AS COMMERCIAL-TYPE INSURANCE.—Health in15 surance provided by a health maintenance orga16 nization shall not be treated as commercial-type 

17 insurance if it relates to— 

18 ‘‘(i) care provided by such organiza19 tion to its members at its own facilities 

20 through health care professionals who do 

21 not provide substantial health care services 

22 other than on behalf of such organization, 

23 ‘‘(ii) primary care provided by a 

24 health care professional to a member of 

25 such organization on a basis under which 
1163 

Title VII, Subtitle F 

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1 the amount paid to such professional does 

2 not vary with the amount of care provided 

3 to such member, 

4 ‘‘(iii) services other than primary care 

5 provided pursuant to a pre-existing ar6 rangement with such organization, or 

7 ‘‘(iv) emergency care provided to a 

8 member of such organization at a location 

9 outside such member’s area of residence.’’ 

10 (c) TREATMENT OF PARENT ORGANIZATIONS OF

11 HEALTH CARE PROVIDERS.—Section 509(a) (defining 

12 private foundation) is amended by striking ‘‘and’’ at the 

13 end of paragraph (3), by redesignating paragraph (4) as 

14 paragraph (5), and by inserting after paragraph (3) the 

15 following new paragraph: 

16 ‘‘(4) an organization which is organized and op17 erated for the benefit of, and which directly or indi18 rectly controls, an organization described in section 

19 170(b)(1)(A)(iii), and’’. 

20 (d) EFFECTIVE DATES.— 

21 (1) IN GENERAL.—Except as provided in para22 graph (2), the amendments made by this section 

23 shall take effect on January 1, 1995. 
1164 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (2) SUBSECTIONS (b) AND (c).—The amend2 ments made by subsections (b) and (c) shall take ef3 fect on the date of the enactment of this Act. 

4 SEC. 7602. TAX TREATMENT OF TAXABLE ORGANIZATIONS 

5 PROVIDING HEALTH INSURANCE AND OTHER 

6 PREPAID HEALTH CARE SERVICES. 

7 (a) GENERAL RULE.—Section 833 is amended to 

8 read as follows: 

9 ‘‘SEC. 833. TREATMENT OF ORGANIZATIONS PROVIDING 

10 HEALTH INSURANCE AND OTHER PREPAID 

11 HEALTH CARE SERVICES. 

12 ‘‘(a) GENERAL RULE.—Any organization to which 

13 this section applies shall be taxable under this part in the 

14 same manner as if it were an insurance company other 

15 than a life insurance company. 

16 ‘‘(b) ORGANIZATIONS TO WHICH SECTION AP17 PLIES.—This section shall apply to any organization— 

18 ‘‘(1) which is not exempt from taxation under 

19 this subtitle, 

20 ‘‘(2) which is not taxable as a life insurance 

21 company under part I of this subchapter, and 

22 ‘‘(3) the primary and predominant business ac23 tivity of which during the taxable year consists of 1 

24 or more of the following: 
1165 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(A) Issuing accident and health insurance 

2 contracts or the reinsuring of risks undertaken 

3 by other insurance companies under such con4 tracts. 

5 ‘‘(B) Operating as a health maintenance 

6 organization. 

7 ‘‘(C) Entering into arrangements under 

8 which— 

9 ‘‘(i) fixed payments or premiums are 

10 received as consideration for the organiza11 tion’s agreement to provide or arrange for 

12 the provision of health care services, re13 gardless of how the health care services are 

14 provided or arranged to be provided, and 

15 ‘‘(ii) such fixed payments or pre16 miums do not vary depending on the 

17 amount of health care services provided. 

18 In the case of an organization which has as a material 

19 business activity the issuing of accident and health insur20 ance contracts or the reinsuring of risks undertaken by 

21 other insurance companies under such contracts, the ad22 ministering of accident and health insurance contracts by 

23 such organization shall be treated as part of such business 

24 activity for purposes of paragraph (3)(A).’’ 

25 (b) CONFORMING AMENDMENTS.— 
1166 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (1) Subsection (c) of section 56 is amended by 

2 striking paragraph (3). 

3 (2) The table of sections for part II of sub4 chapter L of chapter 1 is amended by striking the 

5 item relating to section 833 and inserting the fol6 lowing: 

‘‘Sec. 833. Treatment of organizations providing health insurance 

and other prepaid health care services.’’ 

7 (c) EFFECTIVE DATES.— 

8 (1) IN GENERAL.—Except as otherwise pro9 vided in this subsection, the amendments made by 

10 this section shall apply to taxable years beginning 

11 after December 31, 1996. 

12 (2) TRANSITION RULES FOR BLUE CROSS AND

13 BLUE SHIELD ORGANIZATIONS.— 

14 (A) PRIOR FRESH START PRESERVED.— 

15 The adjusted basis of any asset determined 

16 under section 1012(c)(3)(A)(ii) of the Tax Re17 form Act of 1986 shall not be affected by the 

18 amendments made by this section nor by reason 

19 of any failure to qualify in taxable years begin20 ning after December 31, 1996, as an existing 

21 Blue Cross or Blue Shield organization (as de22 fined in section 833(c)(2) of the Internal Rev23 enue Code of 1986, as in effect on the day be24 fore the date of the enactment of this Act). 
1167 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (B) RECOUPMENT OF PRIOR RESERVE

2 BENEFIT.—In the case of any organization enti3 tled to the benefits of section 833(a)(3) of the 

4 Internal Revenue Code of 1986 (as in effect on 

5 the day before the date of the enactment of this 

6 Act) for such organization’s last taxable year 

7 beginning before January 1, 1997, the amount 

8 determined under paragraph (4) of section 

9 832(b) of such Code for each of such organiza10 tion’s first 6 taxable years beginning after De11 cember 31, 1996, shall be increased by an 

amount equal to 31 12 ⁄3 percent of its unearned 

13 premiums on outstanding business as of the 

14 close of such organization’s last taxable year be15 ginning before January 1, 1997. 

16 (C) PHASE-OUT OF SPECIAL DEDUCTION

17 FOR CERTAIN ORGANIZATIONS.— 

18 (i) IN GENERAL.—In the case of an 

19 organization which meets the requirements 

20 of clause (ii)— 

21 (I) such organization shall con22 tinue to be entitled to the deduction 

23 provided under section 833(b) of the 

24 Internal Revenue Code of 1986 (as in 

25 effect on the day before the date of 
1168 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 the enactment of this Act) for its first 

2 2 taxable years beginning after De3 cember 31, 1996, except that 

4 (II) the amount of such deduc5 tion for such organization’s taxable 

6 year beginning in 1997 shall be 67 

7 percent of the amount which would 

8 have been determined under such sec9 tion 833(b) as so in effect, and the 

10 amount of such deduction for organi11 zation’s taxable year beginning in 

12 1998 shall be 33 percent of the 

13 amount which would have been so de14 termined. 

15 Notwithstanding the amendment made by 

16 subsection (b)(1), any deduction under the 

17 preceding sentence shall not be allowable 

18 in computing alternative minimum taxable 

19 income. 

20 (ii) REQUIREMENTS.—An organiza21 tion meets the requirements of this clause 

22 if, for each of its taxable years beginning 

23 in 1995 and 1996, such organization— 
1169 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (I) was an organization to which 

2 section 833 of such Code (as so in ef3 fect) applied, and 

4 (II) met the requirements of sub5 paragraph (A) of section 833(c)(3) of 

6 such Code (as so in effect). 

7 (3) TRANSITIONAL RULES FOR OTHER COMPA8 NIES.— 

9 (A) ORGANIZATIONS TO WHICH PARA10 GRAPH APPLIES.—This paragraph shall apply 

11 to any organization to which section 833 of the 

12 Internal Revenue Code of 1986 (as amended by 

13 subsection (a)) applies for such organization’s 

14 first taxable year beginning after December 31, 

15 1996; except that this paragraph shall not 

16 apply if such organization treated itself as an 

17 insurance company taxable under part II of 

18 subchapter L of chapter 1 of such Code on its 

19 original Federal income tax return for its tax20 able year beginning in 1992 and for all of its 

21 taxable years thereafter beginning before Janu22 ary 1, 1997. 

23 (B) TREATMENT OF CURRENTLY TAXABLE

24 COMPANIES.—Except as provided in subpara-
1170 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 graph (C), in the case of any organization to 

2 which this paragraph applies— 

3 (i) the amendments made by this sec4 tion shall be treated as a change in the 

5 method of accounting, and 

6 (ii) all adjustments required to be 

7 taken into account under section 481 of 

8 the Internal Revenue Code of 1986, shall 

9 be taken into account for such company’s 

10 first taxable year beginning after Decem11 ber 31, 1996. 

12 (C) TREATMENT OF CURRENTLY TAX EX13 EMPT COMPANIES.—In the case of any organi14 zation to which this paragraph applies and 

15 which was exempt from tax under chapter 1 of 

16 the Internal Revenue Code of 1986 for such or17 ganization’s last taxable year beginning before 

18 January 1, 1997— 

19 (i) no adjustment shall be made under 

20 section 481 (or any other provision) of 

21 such Code on account of a change in its 

22 method of accounting required by this sec23 tion for its first taxable year beginning 

24 after December 31, 1996, and 
1171 

Title VII, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 (ii) for purposes of determining gain 

2 or loss, the adjusted basis of any asset 

3 held by such organization on the first day 

4 of such taxable year shall be treated as 

5 equal to its fair market value as of such 

6 day. 

7 SEC. 7603. EXEMPTION FROM INCOME TAX FOR REGIONAL 

8 ALLIANCES. 

9 (a) IN GENERAL.—Subsection (c) of section 501 (re10 lating to exemption from tax on corporations, certain 

11 trusts, etc.) is amended by adding at the end thereof the 

12 following new paragraph: 

13 ‘‘(26) Any regional alliance described in section 

14 1301 of the Health Security Act. Such an alliance 

15 shall be treated as not described in any other para16 graph of this subsection.’’ 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 subsection (a) shall apply to taxable years beginning after 

19 the date of the enactment of this Act. 
1172 

Title VII, Subtitle G 

•HR 3600 IH / •S 1757 IS 

1 Subtitle G—Tax Treatment of 

2 Long-term Care Insurance and 

3 Services 

4 SEC. 7701. QUALIFIED LONG-TERM CARE SERVICES TREAT5 ED AS MEDICAL CARE. 

6 (a) GENERAL RULE.—Paragraph (1) of section 

7 213(d) (defining medical care) is amended by striking 

8 ‘‘or’’ at the end of subparagraph (B), by redesignating 

9 subparagraph (C) as subparagraph (D), and by inserting 

10 after subparagraph (B) the following new subparagraph: 

11 ‘‘(C) for qualified long-term care services 

12 (as defined in subsection (g)), or’’. 

13 (b) QUALIFIED LONG-TERM CARE SERVICES DE14 FINED.—Section 213 (relating to the deduction for med15 ical, dental, etc., expenses) is amended by adding at the 

16 end thereof the following new subsection: 

17 ‘‘(g) QUALIFIED LONG-TERM CARE SERVICES.—For 

18 purposes of this section— 

19 ‘‘(1) IN GENERAL.—The term ‘qualified long20 term care services’ means necessary diagnostic, cur21 ing, mitigating, treating, preventive, therapeutic, and 

22 rehabilitative services, and maintenance and per23 sonal care services (whether performed in a residen24 tial or nonresidential setting) which— 
1173 

Title VII, Subtitle G 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(A) are required by an individual during 

2 any period the individual is an incapacitated in3 dividual (as defined in paragraph (2)), 

4 ‘‘(B) have as their primary purpose— 

5 ‘‘(i) the provision of needed assistance 

6 with 1 or more activities of daily living (as 

7 defined in paragraph (3)), or 

8 ‘‘(ii) protection from threats to health 

9 and safety due to severe cognitive impair10 ment, and 

11 ‘‘(C) are provided pursuant to a continuing 

12 plan of care prescribed by a licensed profes13 sional (as defined in paragraph (4)). 

14 ‘‘(2) INCAPACITATED INDIVIDUAL.—The term 

15 ‘incapacitated individual’ means any individual 

16 who— 

17 ‘‘(A) is unable to perform, without sub18 stantial assistance from another individual (in19 cluding assistance involving cueing or substan20 tial supervision), at least 2 activities of daily 

21 living as defined in paragraph (3), or 

22 ‘‘(B) has severe cognitive impairment as 

23 defined by the Secretary in consultation with 

24 the Secretary of Health and Human Services. 
1174 

Title VII, Subtitle G 

•HR 3600 IH / •S 1757 IS 

1 Such term shall not include any individual otherwise 

2 meeting the requirements of the preceding sentence 

3 unless a licensed professional within the preceding 

4 12-month period has certified that such individual 

5 meets such requirements. 

6 ‘‘(3) ACTIVITIES OF DAILY LIVING.—Each of 

7 the following is an activity of daily living: 

8 ‘‘(A) Eating. 

9 ‘‘(B) Toileting. 

10 ‘‘(C) Transferring. 

11 ‘‘(D) Bathing. 

12 ‘‘(E) Dressing. 

13 ‘‘(4) LICENSED PROFESSIONAL.—The term ‘li14 censed professional’ means— 

15 ‘‘(A) a physician or registered professional 

16 nurse, or 

17 ‘‘(B) any other individual who meets such 

18 requirements as may be prescribed by the Sec19 retary after consultation with the Secretary of 

20 Health and Human Services. 

21 ‘‘(5) CERTAIN SERVICES NOT INCLUDED.—The 

22 term ‘qualified long-term care services’ shall not in23 clude any services provided to an individual— 

24 ‘‘(A) by a relative (directly or through a 

25 partnership, corporation, or other entity) unless 
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1 the relative is a licensed professional with re2 spect to such services, or 

3 ‘‘(B) by a corporation or partnership which 

4 is related (within the meaning of section 267(b) 

5 or 707(b)) to the individual. 

6 For purposes of this paragraph, the term ‘relative’ 

7 means an individual bearing a relationship to the in8 dividual which is described in paragraphs (1) 

9 through (8) of section 152(a).’’ 

10 (c) TECHNICAL AMENDMENTS.— 

11 (1) Subparagraph (D) of section 213(d)(1) (as 

12 redesignated by subsection (a)) is amended to read 

13 as follows: 

14 ‘‘(D) for insurance (including amounts 

15 paid as premiums under part B of title XVIII 

16 of the Social Security Act, relating to supple17 mentary medical insurance for the aged) cov18 ering medical care referred to in— 

19 ‘‘(i) subparagraphs (A) and (B), or 

20 ‘‘(ii) subparagraph (C), but only if 

21 such insurance is provided under a quali22 fied long-term care insurance policy (as de23 fined in section 7702B(b)) and the amount 

24 paid for such insurance is not disallowed 

25 under section 7702B(d)(4).’’ 
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1 (2) Paragraph (6) of section 213(d) is amend2 ed— 

3 (A) by striking ‘‘subparagraphs (A) and 

4 (B)’’ and inserting ‘‘subparagraph (A), (B), 

5 and (C)’’, and 

6 (B) by striking ‘‘paragraph (1)(C)’’ in sub7 paragraph (A) and inserting ‘‘paragraph 

8 (1)(D)’’. 

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

10 this section shall apply to taxable years beginning after 

11 December 31, 1995. 

12 SEC. 7702. TREATMENT OF LONG-TERM CARE INSURANCE. 

13 (a) GENERAL RULE.—Chapter 79 (relating to defini14 tions) is amended by inserting after section 7702A the fol15 lowing new section: 

16 ‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR17 ANCE. 

18 ‘‘(a) IN GENERAL.—For purposes of this title— 

19 ‘‘(1) a qualified long-term care insurance policy 

20 (as defined in subsection (b)) shall be treated as an 

21 accident and health insurance contract, 

22 ‘‘(2) amounts (other than policyholder dividends 

23 (as defined in section 808) or premium refunds) re24 ceived under a qualified long-term care insurance 

25 policy shall be treated as amounts received for per-
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1 sonal injuries and sickness and shall be treated as 

2 reimbursement for expenses actually incurred for 

3 medical care (as defined in section 213(d)), 

4 ‘‘(3) any plan of an employer providing cov5 erage under a qualified long-term care insurance pol6 icy shall be treated as an accident and health plan 

7 with respect to such coverage, 

8 ‘‘(4) amounts paid for a qualified long-term 

9 care insurance policy providing the benefits de10 scribed in subsection (b)(6)(B) shall be treated as 

11 payments made for insurance for purposes of section 

12 213(d)(1)(D), and 

13 ‘‘(5) a qualified long-term care insurance policy 

14 shall be treated as a guaranteed renewable contract 

15 subject to the rules of section 816(e). 

16 ‘‘(b) QUALIFIED LONG-TERM CARE INSURANCE POL17 ICY.—For purposes of this title— 

18 ‘‘(1) IN GENERAL.—The term ‘qualified long19 term care insurance policy’ means any long-term 

20 care insurance policy (as defined in section 2304 of 

21 the Health Security Act) that— 

22 ‘‘(A) satisfies the requirements of subpart 

23 B of part 3 of subtitle B of title II of the 

24 Health Security Act, 
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1 ‘‘(B) limits benefits under such policy to 

2 individuals who are certified by a licensed pro3 fessional (as defined in section 213(g)(4)) with4 in the preceding 12-month period as being un5 able to perform, without substantial assistance 

6 from another individual (including assistance 

7 involving cueing or substantial supervision), 2 

8 or more activities of daily living (as defined in 

9 section 213(g)(3)), or who have a severe cog10 nitive impairment (as defined in section 

11 213(g)(2)(B)), and 

12 ‘‘(C) satisfies the requirements of para13 graphs (2), (3), (4), (5), and (6). 

14 ‘‘(2) PREMIUM REQUIREMENTS.—The require15 ments of this paragraph are met with respect to a 

16 policy if such policy provides that premium pay17 ments may not be made earlier than the date such 

18 payments would have been made if the contract pro19 vided for level annual payments over the life expect20 ancy of the insured or 20 years, whichever is short21 er. A policy shall not be treated as failing to meet 

22 the requirements of the preceding sentence solely by 

23 reason of a provision in the policy providing for a 

24 waiver of premiums if the insured becomes an indi25 vidual certified in accordance with paragraph (1)(B). 
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1 ‘‘(3) PROHIBITION OF CASH VALUE.—The re2 quirements of this paragraph are met if the policy 

3 does not provide for a cash value or other money 

4 that can be paid, assigned, pledged as collateral for 

5 a loan, or borrowed, other than as provided in para6 graph (4). 

7 ‘‘(4) REFUNDS OF PREMIUMS AND DIVI8 DENDS.—The requirements of this paragraph are 

9 met with respect to a policy if such policy provides 

10 that— 

11 ‘‘(A) policyholder dividends are required to 

12 be applied as a reduction in future premiums 

13 or, to the extent permitted under paragraph 

14 (6), to increase benefits described in subsection 

15 (a)(2), and 

16 ‘‘(B) refunds of premiums upon a partial 

17 surrender or a partial cancellation are required 

18 to be applied as a reduction in future pre19 miums, and 

20 ‘‘(C) any refund on the death of the in21 sured, or on a complete surrender or cancella22 tion of the policy, cannot exceed the aggregate 

23 premiums paid under the contract. 

24 Any refund on a complete surrender or cancellation 

25 of the policy shall be includible in gross income to 
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1 the extent that any deduction or exclusion was allow2 able with respect to the premiums. 

3 ‘‘(5) COORDINATION WITH OTHER ENTITLE4 MENTS.—The requirements of this paragraph are 

5 met with respect to a policy if such policy does not 

6 cover expenses incurred to the extent that such ex7 penses are also covered under title XVIII of the So8 cial Security Act or are covered under comprehensive 

9 health coverage described in section 1101 of the 

10 Health Security Act. 

11 ‘‘(6) MAXIMUM BENEFIT.— 

12 ‘‘(A) IN GENERAL.—The requirements of 

13 this paragraph are met if the benefits payable 

14 under the policy for any period (whether on a 

15 periodic basis or otherwise) shall not exceed the 

16 dollar amount in effect for such period. 

17 ‘‘(B) NONREIMBURSEMENT PAYMENTS

18 PERMITTED.—Benefits shall include all pay19 ments described in subsection (a)(2) to or on 

20 behalf of an insured individual without regard 

21 to the expenses incurred during the period to 

22 which the payments relate. For purposes of sec23 tion 213(a), such payments shall be treated as 

24 compensation for expenses paid for medical 

25 care. 
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1 ‘‘(C) DOLLAR AMOUNT.—The dollar 

2 amount in effect under this paragraph shall be 

3 $150 per day (or the equivalent amount within 

4 the calendar year in the case of payments on 

5 other than a per diem basis). 

6 ‘‘(D) ADJUSTMENTS FOR INCREASED

7 COSTS.— 

8 ‘‘(i) IN GENERAL.—In the case of any 

9 calendar year after 1996, the dollar 

10 amount in effect under subparagraph (C) 

11 for any period or portion thereof occurring 

12 during such calendar year shall be equal to 

13 the sum of— 

14 ‘‘(I) the amount in effect under 

15 subparagraph (C) for the preceding 

16 calendar year (after application of this 

17 subparagraph), plus 

18 ‘‘(II) the product of the amount 

19 referred to in subclause (I) multiplied 

20 by the cost-of-living adjustment for 

21 the calendar year of the amount 

22 under subclause (I). 

23 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.— 

24 For purposes of clause (i), the cost-of-liv25 ing adjustment for any calendar year is the 
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1 percentage (if any) by which the cost index 

2 under clause (iii) for the preceding cal3 endar year exceeds such index for the sec4 ond preceding calendar year. 

5 ‘‘(iii) COST INDEX.—The Secretary, in 

6 consultation with the Secretary of Health 

7 and Human Services, shall before January 

8 1, 1997, establish a cost index to measure 

9 increases in costs of nursing home and 

10 similar facilities. The Secretary may from 

11 time to time revise such index to the extent 

12 necessary to accurately measure increases 

13 or decreases in such costs. 

14 ‘‘(iv) SPECIAL RULE FOR CALENDAR

15 YEAR 1997.—Notwithstanding clause (ii), 

16 for purposes of clause (i), the cost-of-living 

17 adjustment for calendar year 1997 is the 

sum of 1 1 18 ⁄2 percent plus the percentage by 

19 which the CPI for calendar year 1996 (as 

20 defined in section 1(f)(4)) exceeds the CPI 

21 for calendar year 1995 (as so defined). 

22 ‘‘(E) PERIOD.—For purposes of this para23 graph, a period begins on the date that an indi24 vidual has a condition which would qualify for 
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1 certification under subsection (b)(1)(B) and 

2 ends on the earlier of the date upon which— 

3 ‘‘(i) such individual has not been so 

4 certified within the preceding 12-months, 

5 or 

6 ‘‘(ii) the individual’s condition ceases 

7 to be such as to qualify for certification 

8 under subsection (b)(1)(B). 

9 ‘‘(F) AGGREGATION RULE.—For purposes 

10 of this paragraph, all policies issued with re11 spect to the same insured shall be treated as 

12 one policy. 

13 ‘‘(c) TREATMENT OF LONG-TERM CARE INSURANCE

14 POLICIES.—For purposes of this title, any amount re15 ceived or coverage provided under a long-term care insur16 ance policy that is not a qualified long-term care insurance 

17 policy shall not be treated as an amount received for per18 sonal injuries or sickness or provided under an accident 

19 and health plan and shall not be treated as excludible from 

20 gross income under any provision of this title. 

21 ‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART

22 OF A LIFE INSURANCE CONTRACT.—Except as otherwise 

23 provided in regulations prescribed by the Secretary, in the 

24 case of any long-term care insurance coverage (whether 
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1 or not qualified) provided by rider on a life insurance con2 tract— 

3 ‘‘(1) IN GENERAL.—This section shall apply as 

4 if the portion of the contract providing such cov5 erage is a separate contract or policy. 

6 ‘‘(2) PREMIUMS AND CHARGES FOR LONG-TERM

7 CARE COVERAGE.—Premium payments for coverage 

8 under a long-term care insurance policy and charges 

9 against the life insurance contract’s cash surrender 

10 value (within the meaning of section 7702(f)(2)(A)) 

11 for such coverage shall be treated as premiums for 

12 purposes of subsection (b)(2). 

13 ‘‘(3) APPLICATION OF 7702.—Section 

14 7702(c)(2) (relating to the guideline premium limi15 tation) shall be applied by increasing the guideline 

16 premium limitation with respect to a life insurance 

17 contract, as of any date— 

18 ‘‘(A) by the sum of any charges (but not 

19 premium payments) described in paragraph (2) 

20 made to that date under the contract, less 

21 ‘‘(B) any such charges the imposition of 

22 which reduces the premiums paid for the con23 tract (within the meaning of section 

24 7702(f)(1)). 
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1 ‘‘(4) APPLICATION OF SECTION 213.—No deduc2 tion shall be allowed under section 213(a) for 

3 charges against the life insurance contract’s cash 

4 surrender value described in paragraph (2), unless 

5 such charges are includible in income as a result of 

6 the application of section 72(e)(10) and the coverage 

7 provided by the rider is a qualified long-term care 

8 insurance policy under subsection (b). 

9 For purposes of this subsection, the term ‘portion’ means 

10 only the terms and benefits under a life insurance contract 

11 that are in addition to the terms and benefits under the 

12 contract without regard to the coverage under a long-term 

13 care insurance policy. 

14 ‘‘(e) PROHIBITION OF DISCRIMINATION.— 

15 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

16 (a)(3), any plan of an employer providing coverage 

17 under a qualified long-term care insurance policy 

18 shall qualify as an accident and health plan with re19 spect to such coverage only if— 

20 ‘‘(A) the plan allows all employees, except 

21 as provided in paragraph (2), to participate, 

22 and 

23 ‘‘(B) the benefits provided under the plan 

24 are identical for all employees that choose to 

25 participate. 
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1 ‘‘(2) EXCLUSION OF CERTAIN EMPLOYEES.— 

2 For purposes of paragraph (1), there may be ex3 cluded from consideration— 

4 ‘‘(A) employees who have not completed 3 

5 years of service; 

6 ‘‘(B) employees who have not attained age 

7 25; 

8 ‘‘(C) part-time or seasonal employees; and 

9 ‘‘(D) employees who are nonresident aliens 

10 and who receive no earned income (within the 

11 meaning of section 911(d)(2)) from the em12 ployer which constitutes income from sources 

13 within the United States (within the meaning of 

14 section 861(a)(3)). 

15 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

16 such regulations as may be necessary to carry out the re17 quirements of this section, including regulations to prevent 

18 the avoidance of this section by providing long-term care 

19 insurance coverage under a life insurance contract and to 

20 provide for the proper allocation of amounts between the 

21 long-term care and life insurance portions of a contract.’’. 

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

23 for chapter 79 is amended by inserting after the item re24 lating to section 7702A the following new item: 

‘‘Sec. 7702B. Treatment of long-term care insurance.’’. 

25 (c) EFFECTIVE DATE.— 
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1 (1) IN GENERAL.—The amendments made by 

2 this section shall apply to policies issued after De3 cember 31, 1995. Solely for purposes of the pre4 ceding sentence, a policy issued prior to January 1, 

5 1996, that satisfies the requirements of a qualified 

6 long-term care insurance policy as set forth in sec7 tion 7702B(b) shall, on and after January 1, 1996, 

8 be treated as being issued after December 31, 1995. 

9 (2) TRANSITION RULE.—If, after the date of 

10 enactment of this Act and before January 1, 1996, 

11 a policy providing for long-term care insurance cov12 erage is exchanged solely for a qualified long-term 

13 care insurance policy (as defined in section 

14 7702B(b)), no gain or loss shall be recognized on 

15 the exchange. If, in addition to a qualified long-term 

16 care insurance policy, money or other property is re17 ceived in the exchange, then any gain shall be recog18 nized to the extent of the sum of the money and the 

19 fair market value of the other property received. For 

20 purposes of this paragraph, the cancellation of a pol21 icy providing for long-term care insurance coverage 

22 and reinvestment of the cancellation proceeds in a 

23 qualified long-term care insurance policy within 60 

24 days thereafter shall be treated as an exchange. 
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1 (3) ISSUANCE OF CERTAIN RIDERS PER2 MITTED.—For purposes of determining whether sec3 tion 7702 or 7702A of the Internal Revenue Code 

4 of 1986 applies to any contract, the issuance, wheth5 er before, on, or after December 31, 1995, of a rider 

6 on a life insurance contract providing long-term care 

7 insurance coverage shall not be treated as a modi8 fication or material change of such contract. 

9 SEC. 7703. TAX TREATMENT OF ACCELERATED DEATH BEN10 EFITS UNDER LIFE INSURANCE CONTRACTS. 

11 (a) GENERAL RULE.—Section 101 (relating to cer12 tain death benefits) is amended by adding at the end 

13 thereof the following new subsection: 

14 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

15 DEATH BENEFITS.— 

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, any amount distributed to an individual under 

18 a life insurance contract on the life of an insured 

19 who is a terminally ill individual (as defined in para20 graph (3)) shall be treated as an amount paid by 

21 reason of the death of such insured. 

22 ‘‘(2) NECESSARY CONDITIONS.— 

23 ‘‘(A) Paragraph (1) shall not apply to any 

24 distribution unless— 
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1 ‘‘(i) the distribution is not less than 

2 the present value (determined under sub3 paragraph (B)) of the reduction in the 

4 death benefit otherwise payable in the 

5 event of the death of the insured, and 

6 ‘‘(ii) the percentage derived from di7 viding the cash surrender value of the con8 tract, if any, immediately after the dis9 tribution by the cash surrender value of 

10 the contract immediately before the dis11 tribution is equal to or greater than the 

12 percentage derived by dividing the death 

13 benefit immediately after the distribution 

14 by the death benefit immediately before the 

15 distribution. 

16 ‘‘(B) The present value of the reduction in 

17 the death benefit occurring on the distribution 

18 must be determined by— 

19 ‘‘(i) using as the discount rate a rate 

20 not to exceed the highest rate set forth in 

21 subparagraph (C), and 

22 ‘‘(ii) assuming that the death benefit 

23 (or the portion thereof) would have been 

24 paid at the end of a period that is no more 

25 than the insured’s life expectancy from the 
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1 date of the distribution or 12 months, 

2 whichever is shorter. 

3 ‘‘(C) RATES.—The rates set forth in this 

4 subparagraph are the following: 

5 ‘‘(i) the 90-day Treasury bill yield, 

6 ‘‘(ii) the rate described as Moody’s 

7 Corporate Bond Yield Average-Monthly 

8 Average Corporates as published by 

9 Moody’s Investors Service, Inc., or any 

10 successor thereto for the calendar month 

11 ending 2 months before the date on which 

12 the rate is determined, 

13 ‘‘(iii) the rate used to compute the 

14 cash surrender values under the contract 

15 during the applicable period plus 1 percent 

16 per annum, and 

17 ‘‘(iv) the maximum permissible inter18 est rate applicable to policy loans under 

19 the contract. 

20 ‘‘(3) TERMINALLY ILL INDIVIDUAL.—For pur21 poses of this subsection, the term ‘terminally ill indi22 vidual’ means an individual who the insurer has de23 termined, after receipt of an acceptable certification 

24 by a licensed physician, has an illness or physical 

25 condition which can reasonably be expected to result 
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1 in death within 12 months of the date of certifi2 cation. 

3 ‘‘(4) APPLICATION OF SECTION 72(E)(10).—For 

4 purposes of section 72(e)(10) (relating to the treat5 ment of modified endowment contracts), section 

6 72(e)(4)(A)(i) shall not apply to distributions de7 scribed in paragraph (1).’’ 

8 (b) EFFECTIVE DATE.—The amendment made by 

9 subsection (a) shall apply to taxable years beginning after 

10 December 31, 1993. 

11 SEC. 7704. TAX TREATMENT OF COMPANIES ISSUING 

12 QUALIFIED ACCELERATED DEATH BENEFIT 

13 RIDERS. 

14 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID15 ERS TREATED AS LIFE INSURANCE.—Section 818 (relat16 ing to other definitions and special rules) is amended by 

17 adding at the end thereof the following new subsection: 

18 ‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT

19 RIDERS TREATED AS LIFE INSURANCE.—For purposes of 

20 this part— 

21 ‘‘(1) IN GENERAL.—Any reference to a life in22 surance contract shall be treated as including a ref23 erence to a qualified accelerated death benefit rider 

24 on such contract. 
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1 ‘‘(2) QUALIFIED ACCELERATED DEATH BEN2 EFIT RIDERS.—For purposes of this subsection, the 

3 term ‘qualified accelerated death benefit rider’ 

4 means any rider on a life insurance contract which 

5 provides for a distribution to an individual upon the 

6 insured becoming a terminally ill individual (as de7 fined in section 101(g)(3)). 

8 (b) DEFINITIONS OF LIFE INSURANCE AND MODI9 FIED ENDOWMENT CONTRACTS.—Paragraph (5)(A) of 

10 section 7702(f) is amended by striking ‘‘or’’ at the end 

11 of clause (iv), by redesignating clause (v) as clause (vi), 

12 and by inserting after clause (iv) the following new clause: 

13 ‘‘(v) any qualified accelerated death 

14 benefit rider (as defined in section 818(g)), 

15 or’’. 

16 (c) EFFECTIVE DATE.— 

17 (1) IN GENERAL.—The amendments made by 

18 this section shall apply to contracts issued after De19 cember 31, 1993. 

20 (2) TRANSITIONAL RULE.—For purposes of de21 termining whether section 7702 or 7702A of the In22 ternal Revenue Code of 1986 applies to any con23 tract, the issuance, whether before, on, or after De24 cember 31, 1993, of a rider on a life insurance con25 tract permitting the acceleration of death benefits 
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1 (as described in section 101(g) of such Code) shall 

2 not be treated as a modification or material change 

3 of such contract. 

4 Subtitle H—Tax Incentives for 

5 Health Services Providers 

6 SEC. 7801. NONREFUNDABLE CREDIT FOR CERTAIN PRI7 MARY HEALTH SERVICES PROVIDERS. 

8 (a) IN GENERAL.—Subpart A of part IV of sub9 chapter A of chapter 1 (relating to nonrefundable personal 

10 credits) is amended by inserting after section 22 the fol11 lowing new section: 

12 ‘‘SEC. 23. PRIMARY HEALTH SERVICES PROVIDERS. 

13 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al14 lowed as a credit against the tax imposed by this chapter 

15 for the taxable year an amount equal to the product of— 

16 ‘‘(1) the number of months during such taxable 

17 year— 

18 ‘‘(A) during which the taxpayer is a quali19 fied primary health services provider, and 

20 ‘‘(B) which are within the taxpayer’s man21 datory service period, and 

22 ‘‘(2) $1,000 ($500 in the case of a qualified 

23 practitioner who is not a physician). 

24 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO25 VIDER.—For purposes of this section, the term ‘qualified 
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1 primary health services provider’ means, with respect to 

2 any month, any qualified practitioner who— 

3 ‘‘(1) has in effect a certification by the Bureau 

4 as a provider of primary health services and such 

5 certification is, when issued, for a health profes6 sional shortage area in which the qualified practi7 tioner is commencing the providing of primary 

8 health services, 

9 ‘‘(2) is providing primary health services full 

10 time in the health professional shortage area identi11 fied in such certification, and 

12 ‘‘(3) has not received a scholarship under the 

13 National Health Service Corps Scholarship Program 

14 or any loan repayments under the National Health 

15 Service Corps Loan Repayment Program. 

16 For purposes of paragraph (2), a provider shall be treated 

17 as providing services in a health professional shortage area 

18 when such area ceases to be such an area if it was such 

19 an area when the provider commenced providing services 

20 in the area. 

21 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes 

22 of this section, the term ‘mandatory service period’ means 

23 the period of 60 consecutive calendar months beginning 

24 with the first month the taxpayer is a qualified primary 
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1 health services provider. A taxpayer shall not have more 

2 than 1 mandatory service period. 

3 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur4 poses of this section— 

5 ‘‘(1) BUREAU.—The term ‘Bureau’ means the 

6 Bureau of Primary Health Care, Health Resources 

7 and Services Administration of the United States 

8 Public Health Service. 

9 ‘‘(2) QUALIFIED PRACTITIONER.—The term 

10 ‘qualified practitioner’ means a physician, a physi11 cian assistant, a nurse practitioner, or a certified 

12 nurse-midwife. 

13 ‘‘(3) PHYSICIAN.—The term ‘physician’ has the 

14 meaning given to such term by section 1861(r) of 

15 the Social Security Act. 

16 ‘‘(4) PHYSICIAN ASSISTANT; NURSE PRACTI17 TIONER.—The terms ‘physician assistant’ and ‘nurse 

18 practitioner’ have the meanings given to such terms 

19 by section 1861(aa)(5) of the Social Security Act. 

20 ‘‘(5) CERTIFIED NURSE-MIDWIFE.—The term 

21 ‘certified nurse-midwife’ has the meaning given to 

22 such term by section 1861(gg)(2) of the Social Secu23 rity Act. 

24 ‘‘(6) PRIMARY HEALTH SERVICES.—The term 

25 ‘primary health services’ has the meaning given such 
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Title VII, Subtitle H 

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1 term by section 330(b)(1) of the Public Health Serv2 ice Act. 

3 ‘‘(7) HEALTH PROFESSIONAL SHORTAGE

4 AREA.—The term ‘health professional shortage area’ 

5 has the meaning given such term by section 

6 332(a)(1)(A) of the Public Health Service Act. 

7 ‘‘(e) RECAPTURE OF CREDIT.— 

8 ‘‘(1) IN GENERAL.—If there is a recapture 

9 event during any taxable year, then— 

10 ‘‘(A) no credit shall be allowed under sub11 section (a) for such taxable year and any suc12 ceeding taxable year, and 

13 ‘‘(B) the tax of the taxpayer under this 

14 chapter for such taxable year shall be increased 

15 by an amount equal to the product of— 

16 ‘‘(i) the applicable percentage, and 

17 ‘‘(ii) the aggregate unrecaptured cred18 its allowed to such taxpayer under this sec19 tion for all prior taxable years. 

20 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.— 

21 ‘‘(A) IN GENERAL.—For purposes of this 

22 subsection, the applicable recapture percentage 

23 shall be determined from the following table: 

‘‘If the recapture The applicable recapevent occurs during: ture percentage is: 

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50
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Title VII, Subtitle H 

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Months 49–60 ............................................ 25

Months 61 and thereafter .......................... 0.

1 ‘‘(B) TIMING.—For purposes of subpara2 graph (A), month 1 shall begin on the first day 

3 of the mandatory service period. 

4 ‘‘(3) RECAPTURE EVENT DEFINED.— 

5 ‘‘(A) IN GENERAL.—For purposes of this 

6 subsection, the term ‘recapture event’ means 

7 the failure of the taxpayer to be a qualified pri8 mary health services provider for any month 

9 during the taxpayer’s mandatory service period. 

10 ‘‘(B) CESSATION OF DESIGNATION.—The 

11 cessation of the designation of any area as a 

12 health professional shortage area after the be13 ginning of the mandatory service period for any 

14 taxpayer shall not constitute a recapture event. 

15 ‘‘(C) SECRETARIAL WAIVER.—The Sec16 retary, in consultation with the Secretary of 

17 Health and Human Services, may waive any re18 capture event caused by extraordinary cir19 cumstances. 

20 ‘‘(4) NO CREDITS AGAINST TAX; MINIMUM

21 TAX.—Any increase in tax under this subsection 

22 shall not be treated as a tax imposed by this chapter 

23 for purposes of determining the amount of any cred-
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1 it under subpart A, B, or D of this part or for pur2 poses of section 55.’’ 

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

4 for subpart A of part IV of subchapter A of chapter 1 

5 is amended by inserting after the item relating to section 

6 22 the following new item: 

‘‘Sec. 23. Primary health services providers.’’ 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years beginning after 

9 December 31, 1994. 

10 SEC. 7802. EXPENSING OF MEDICAL EQUIPMENT. 

11 (a) IN GENERAL.—Paragraph (1) of section 179(b) 

12 (relating to dollar limitation on expensing of certain depre13 ciable business assets) is amended to read as follows: 

14 ‘‘(1) DOLLAR LIMITATION.— 

15 ‘‘(A) GENERAL RULE.—The aggregate cost 

16 which may be taken into account under sub17 section (a) for any taxable year shall not exceed 

18 $17,500. 

19 ‘‘(B) HEALTH CARE PROPERTY.—The ag20 gregate cost which may be taken into account 

21 under subsection (a) shall be increased by the 

22 lesser of— 

23 ‘‘(i) the cost of section 179 property 

24 which is health care property placed in 

25 service during the taxable year, or 
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1 ‘‘(ii) $10,000.’’ 

2 (b) DEFINITION.—Section 179(d) (relating to defini3 tions) is amended by adding at the end the following new 

4 paragraph: 

5 ‘‘(11) HEALTH CARE PROPERTY.—For purposes 

6 of this section, the term ‘health care property’ 

7 means section 179 property— 

8 ‘‘(A) which is medical equipment used in 

9 the screening, monitoring, observation, diag10 nosis, or treatment of patients in a laboratory, 

11 medical, or hospital environment, 

12 ‘‘(B) which is owned (directly or indirectly) 

13 and used by a physician (as defined in section 

14 1861(r) of the Social Security Act) in the active 

15 conduct of such physician’s full-time trade or 

16 business of providing primary health services 

17 (as defined in section 330(b)(1) of the Public 

18 Health Service Act) in a health professional 

19 shortage area (as defined in section 

20 332(a)(1)(A) of the Public Health Service Act), 

21 and 

22 ‘‘(C) substantially all the use of which is in 

23 such area.’’ 
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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to property placed in service after 

3 December 31, 1994. 

4 Subtitle I—Miscellaneous 

5 Provisions 

6 SEC. 7901. CREDIT FOR COST OF PERSONAL ASSISTANCE 

7 SERVICES REQUIRED BY EMPLOYED INDIVID8 UALS. 

9 (a) IN GENERAL.—Subpart A of part IV of sub10 chapter A of chapter 1 (relating to nonrefundable personal 

11 credits) is amended by inserting after section 23 the fol12 lowing new section: 

13 ‘‘SEC. 24. COST OF PERSONAL ASSISTANCE SERVICES RE14 QUIRED BY EMPLOYED INDIVIDUALS. 

15 ‘‘(a) ALLOWANCE OF CREDIT.— 

16 ‘‘(1) IN GENERAL.—In the case of an eligible 

17 individual, there shall be allowed as a credit against 

18 the tax imposed by this chapter for the taxable year 

19 an amount equal to the applicable percentage of the 

20 personal assistance expenses paid or incurred by the 

21 taxpayer during such taxable year. 

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

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

24 means 50 percent reduced (but not below zero) by 

25 10 percentage points for each $5,000 by which the 
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1 modified adjusted gross income (as defined in sec2 tion 59B(d)(2)) of the taxpayer for the taxable year 

3 exceeds $45,000. In the case of a married individual 

4 filing a separate return, the preceding sentence shall 

5 be applied by substituting ‘$2,500’ for ‘$5,000’ and 

6 ‘$22,500’ for ‘$45,000’. 

7 ‘‘(b) LIMITATION.—The amount of personal assist8 ance expenses incurred for the benefit of an individual 

9 which may be taken into account under subsection (a) for 

10 the taxable year shall not exceed the lesser of— 

11 ‘‘(1) $15,000, or 

12 ‘‘(2) such individual’s earned income (as de13 fined in section 32(c)(2)) for the taxable year. 

14 In the case of a joint return, the amount under the pre15 ceding sentence shall be determined separately for each 

16 spouse. 

17 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this 

18 section, the term ‘eligible individual’ means any individual 

19 (other than a nonresident alien) who, by reason of any 

20 medically determinable physical impairment which can be 

21 expected to result in death or which has lasted or can be 

22 expected to last for a continuous period of not less than 

23 12 months, is unable to engage in any substantial gainful 

24 activity without personal assistance services appropriate to 

25 carry out activities of daily living. An individual shall not 
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1 be treated as an eligible individual unless such individual 

2 furnishes such proof thereof (in such form and manner, 

3 and at such times) as the Secretary may require. 

4 ‘‘(d) OTHER DEFINITIONS.—For purposes of this 

5 section— 

6 ‘‘(1) PERSONAL ASSISTANCE EXPENSES.—The 

7 term ‘personal assistance expenses’ means expenses 

8 for— 

9 ‘‘(A) personal assistance services appro10 priate to carry out activities of daily living in or 

11 outside the home, 

12 ‘‘(B) homemaker/chore services incidental 

13 to the provision of such personal assistance 

14 services, 

15 ‘‘(C) in the case of an individual with a 

16 cognitive impairment, assistance with life skills, 

17 ‘‘(D) communication services, 

18 ‘‘(E) work-related support services, 

19 ‘‘(F) coordination of services described in 

20 this paragraph, 

21 ‘‘(G) assistive technology and devises, in22 cluding assessment of the need for particular 

23 technology and devices and training of family 

24 members, and 
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1 ‘‘(H) modifications to the principal place of 

2 abode of the individual to the extent the ex3 penses for such modifications would (but for 

4 subsection (e)(2)) be expenses for medical care 

5 (as defined by section 213) of such individual. 

6 ‘‘(2) ACTIVITIES OF DAILY LIVING.—The term 

7 ‘activities of daily living’ means the activities re8 ferred to in section 213(g)(3). 

9 ‘‘(e) SPECIAL RULES.— 

10 ‘‘(1) PAYMENTS TO RELATED PERSONS.—No 

11 credit shall be allowed under this section for any 

12 amount paid by the taxpayer to any person who is 

13 related (within the meaning of section 267 or 

14 707(b)) to the taxpayer. 

15 ‘‘(2) COORDINATION WITH MEDICAL EXPENSE

16 DEDUCTION.—Any amount taken into account in de17 termining the credit under this section shall not be 

18 taken into account in determining the amount of the 

19 deduction under section 213. 

20 ‘‘(3) BASIS REDUCTION.—For purposes of this 

21 subtitle, if a credit is allowed under this section for 

22 any expense with respect to any property, the in23 crease in the basis of such property which would 

24 (but for this paragraph) result from such expense 
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1 shall be reduced by the amount of the credit so al2 lowed. 

3 ‘‘(f) COST-OF-LIVING ADJUSTMENT.—In the case of 

4 any taxable year beginning after 1996, the $45,000 and 

5 $22,500 amounts in subsection (a)(2) and the $15,000 

6 amount in subsection (b) shall be increased by an amount 

7 equal to— 

8 ‘‘(1) such dollar amount, multiplied by 

9 ‘‘(2) the cost-of-living adjustment determined 

10 under section 1(f)(3) for the calendar year in which 

11 the taxable year begins by substituting ‘calendar 

12 year 1995’ for ‘calendar year 1992’ in subparagraph 

13 (B) thereof. 

14 If any increase determined under the preceding sentence 

15 is not a multiple of $1,000, such increase shall be rounded 

16 to the nearest multiple of $1,000.’’ 

17 (b) TECHNICAL AMENDMENT.—Subsection (a) of 

18 section 1016 is amended by striking ‘‘and’’ at the end of 

19 paragraph (24), by striking the period at the end of para20 graph (25) and inserting ‘‘, and’’, and by adding at the 

21 end thereof the following new paragraph: 

22 ‘‘(26) in the case of any property with respect 

23 to which a credit has been allowed under section 23, 

24 to the extent provided in section 23(e)(3).’’ 
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1 (c) CLERICAL AMENDMENT.—The table of sections 

2 for subpart A of part IV of subchapter A of chapter 1 

3 is amended by inserting after the item relating to section 

4 22 the following new item: 

‘‘Sec. 23. Cost of personal assistance services required by employed individuals.’’ 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 1995. 

8 SEC. 7902. DENIAL OF TAX-EXEMPT STATUS FOR BOR9 ROWINGS OF HEALTH CARE-RELATED ENTI10 TIES. 

11 (a) IN GENERAL.—Paragraph (6) of section 141(b) 

12 (relating to private business use) is amended by adding 

13 at the end thereof the following new subparagraph: 

14 ‘‘(C) CERTAIN HEALTH CARE-RELATED

15 ENTITIES.—Use by— 

16 ‘‘(i) any regional alliance described in 

17 section 1301 of the Health Security Act, 

18 ‘‘(ii) any corporate alliance described 

19 in section 1311 of such Act, and 

20 ‘‘(iii) any guaranty fund described in 

21 section 1204 of such Act, 

22 shall be treated as private business use by an 

23 organization that is not a 501(c)(3) organiza24 tion.’’ 
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Title VII, Subtitle I 

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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall apply to obligations issued after the 

3 date of the enactment of this Act. 

4 SEC. 7903. DISCLOSURE OF RETURN INFORMATION FOR AD5 MINISTRATION OF CERTAIN PROGRAMS 

6 UNDER THE HEALTH SECURITY ACT. 

7 (a) IN GENERAL.—Subparagraph (D) of section 

8 6103(l)(7) (relating to disclosure of return information to 

9 Federal, State, and local agencies administering certain 

10 programs) is amended by striking ‘‘and’’ at the end of 

11 clause (viii), by striking the period at the end of clause 

12 (ix) and inserting ‘‘; and’’, and by inserting after clause 

13 (ix) the following new clause: 

14 ‘‘(x) assistance provided under the 

15 Health Security Act.’’ 

16 (b) INFORMATION NOT AVAILABLE TO LOCAL AGEN17 CIES.—Subparagraph (D) of section 6103(l)(7) is amend18 ed by adding at the end thereof the following new sen19 tence: ‘‘Subparagraphs (A) and (B) shall be applied with20 out regard to any reference to any local agency with re21 spect to the program referred to in clause (x).’’ 
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Title VIII 

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1 TITLE VIII—HEALTH AND 

2 HEALTH-RELATED PRO3 GRAMS OF THE FEDERAL 

4 GOVERNMENT 

TABLE OF CONTENTS OF TITLE

Page 

Subtitle A—Military Health Care Reform 

Sec. 8001. Uniformed services health plans ............................................ 1207 

Subtitle B—Department of Veterans Affairs 

Sec. 8101. Benefits and eligibility through Department of Veterans Affairs Medical System ..................................................... 1218 

Sec. 8102. Organization of Department of Veterans Affairs facilities as 

health plans ................................................................... 1227 

Subtitle C—Federal Employees Health Benefits Program 

Sec. 8201. Definitions ............................................................................. 1233 

Sec. 8202. FEHBP termination ............................................................. 1234 

Sec. 8203. Treatment of Federal employees, annuitants, and other individuals (who would otherwise have been eligible for 

FEHBP) under health plans ........................................ 1235 

Sec. 8204. Treatment of individuals residing abroad ............................. 1245 

Sec. 8205. Transition and savings provisions ......................................... 1246 

Sec. 8206. Regulations ............................................................................ 1248 

Sec. 8207. Technical and conforming amendments ................................ 1248 

Subtitle D—Indian Health Service 

Sec. 8301. Definitions ............................................................................. 1249 

Sec. 8302. Eligibility and health service coverage of Indians ................. 1250 

Sec. 8303. Supplemental Indian health care benefits ............................. 1252 

Sec. 8304. Health plan and health alliance requirements ...................... 1252 

Sec. 8305. Exemption of tribal governments and tribal organizations 

from employer payments ............................................... 1253 

Sec. 8306. Provision of health services to non-enrollees and non-Indians ................................................................................. 1253 

Sec. 8307. Payment by other payers ....................................................... 1258 

Sec. 8308. Contracting authority ............................................................ 1258 

Sec. 8309. Consultation .......................................................................... 1258 

Sec. 8310. Infrastructure ........................................................................ 1259 

Sec. 8311. Financing ............................................................................... 1259 

Sec. 8312. Rule of construction .............................................................. 1261 

Sec. 8313. Authorizations of appropriations ........................................... 1261 

Sec. 8314. Payment of premium discount equivalent amounts for unemployed Indians .......................................................... 1261 
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Title VIII, Subtitle A 

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Subtitle E—Amendments to the Employee Retirement Income 

Security Act of 1974 

Sec. 8401. Group health plan defined ..................................................... 1262 

Sec. 8402. Limitation on coverage of group health plans under title I 

of ERISA ...................................................................... 1263 

Sec. 8403. Amendments relating to continuation coverage .................... 1269 

Sec. 8404. Additional amendments relating to group health plans ........ 1271 

Sec. 8405. Plan claims procedures .......................................................... 1272 

Sec. 8406. Effective dates ....................................................................... 1273 

Subtitle F—Special Fund for WIC Program 

Sec. 8501. Additional funding for special supplemental food program 

for women, infants, and children (WIC) ....................... 1274 

1 Subtitle A—Military Health Care 

2 Reform 

3 SEC. 8001. UNIFORMED SERVICES HEALTH PLANS. 

(a) ESTABLISHMENT OF PLANS.—(1) Chapter 55 of 

title 10, United States Code, is amended by inserting 

after section 1073 the following new section: 

4 ‘‘§ 1073a. Uniformed Services Health Plans: establish5 ment and coordination with national 

6 health care reform 

7 ‘‘(a) ESTABLISHMENT AUTHORIZED.—(1) The Sec8 retary of Defense, in consultation with the other admin9 istering Secretaries, may establish one or more Uniformed 

10 Services Health Plans pursuant to this section in order 

11 to provide health care services to members of the uni12 formed services on active duty for a period of more than 

13 30 days and persons described in subsection (e)(2). 

14 ‘‘(2) The establishment and operation of a Uniformed 

15 Services Health Plan shall be carried out in accordance 
1209 

Title VIII, Subtitle A 

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1 with regulations prescribed by the Secretary of Defense, 

2 in consultation with the other administering Secretaries. 

3 The Secretary shall assure that such regulations conform, 

4 to the maximum extent practicable, to the requirements 

5 for health plans set forth in the Health Security Act. 

6 ‘‘(b) USE OF UNIFORMED SERVICES FACILITIES AND

7 OTHER HEALTH CARE PROVIDERS.—(1) A Uniformed 

8 Services Health Plan may rely upon the use of facilities 

9 of the uniformed services for the provision of health care 

10 services to persons enrolled in the plan, supplemented by 

11 the use of civilian health care providers or health plans 

12 under agreements entered into by the Secretary of De13 fense. 

14 ‘‘(2) An agreement with a civilian health care pro15 vider or a health plan under paragraph (1) may be entered 

16 into without regard to provisions of law requiring the use 

17 of competitive procedures. An agreement with a health 

18 plan may provide for the sharing of resources with the 

19 health plan that is a party to the agreement. 

20 ‘‘(c) HEALTH CARE SERVICES UNDER A PLAN.—(1) 

21 Subject to paragraph (2), a Uniformed Services Health 

22 Plan shall provide to persons enrolled in the plan at least 

23 the items and services in the comprehensive benefit pack24 age under the Health Security Act. 
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Title VIII, Subtitle A 

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1 ‘‘(2)(A) In addition, a Uniformed Services Health 

2 Plan shall guarantee to each person described in subpara3 graph (B) who is enrolled in the plan those health care 

4 services that the person would be entitled to receive under 

5 this chapter in the absence of this section. In the case 

6 of a person described in subparagraph (B) who is a cov7 ered beneficiary, such health care services shall consist of 

8 the types of health care services described in section 

9 1079(a) of this title. 

10 ‘‘(B) A person referred to in subparagraph (A) is a 

11 member of the uniformed services on active duty for a pe12 riod of more than 30 days as of December 31, 1994, or 

13 any person who is a covered beneficiary as of that date, 

14 who is (or afterwards becomes) enrolled in a Uniformed 

15 Services Health Plan. 

16 ‘‘(d) PREEMPTION OF CONFLICTING STATE RE17 QUIREMENTS.—In carrying out responsibilities under the 

18 Health Security Act, a State (or State-established enti19 ty)— 

20 ‘‘(1) may not impose any standard or require21 ment on a Uniformed Services Health Plan that is 

22 inconsistent with this section or any regulation pre23 scribed under this section or other Federal law re24 garding the operation of this section; and 
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Title VIII, Subtitle A 

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1 ‘‘(2) may not deny certification of a Uniformed 

2 Services Health Plan as a health plan under the 

3 Health Security Act on the basis of a conflict be4 tween a rule of a State or health alliance and this 

5 section or any regulation prescribed under this sec6 tion or other Federal law regarding the operation of 

7 this section. 

8 ‘‘(e) ENROLLMENT.—(1) Except as authorized by the 

9 administering Secretary concerned, each member of a uni10 formed service on active duty for a period of more than 

11 30 days shall be required to enroll in a Uniformed Services 

12 Health Plan available to the member. 

13 ‘‘(2) After enrolling members described in paragraph 

14 (1), opportunities for further enrollment in a Uniformed 

15 Services Health Plan shall be offered by the administering 

16 Secretaries to covered beneficiaries in the following order 

17 of priority: 

18 ‘‘(A) Spouses and children of members of the 

19 uniformed services who are on active duty for a pe20 riod of more than 30 days. 

21 ‘‘(B) Persons described in subsection (c) of sec22 tion 1086 of this title. The administering Secretary 

23 concerned may disregard the exclusion set forth in 

24 subsection (d)(1) of such section in the case of a 

25 person described in subsection (c) of such section 
1212 

Title VIII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 who is enrolled in the supplementary medical insur2 ance program under part B of title XVIII of the So3 cial Security Act (42 U.S.C. 1395j et seq.). 

4 ‘‘(3) With respect to a member described in para5 graph (1) or a covered beneficiary described in paragraph 

6 (2) who enrolls in a Uniformed Services Health Plan, par7 ticipation in such a plan shall be the exclusive source of 

8 health care services available to the member or person 

9 under this chapter. 

10 ‘‘(f) EFFECT OF FAILURE TO ENROLL.—(1) Except 

11 as provided in paragraph (2), if a person described in sub12 section (e)(2) declines the opportunity offered by the ad13 ministering Secretaries to enroll in a Uniformed Services 

14 Health Plan, the person shall not be entitled or eligible 

15 for health care services in facilities of the uniformed serv16 ices or pursuant to a contract entered into under this 

17 chapter. However, nothing in this paragraph shall be con18 strued to effect the right of a person to a premium pay19 ment by the Secretary of Defense if the person is enrolled 

20 in another health plan under the Health Security Act and 

21 is otherwise entitled to such a payment under subsection 

22 (h). 

23 ‘‘(2) A person described in subsection (e)(2) who is 

24 enrolled with a health plan that is not a Uniformed Serv25 ices Health Plan may receive the items and services in 
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Title VIII, Subtitle A 

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1 the comprehensive benefit package in a facility of the uni2 formed services only if— 

3 ‘‘(A) the Secretary of Defense authorizes the 

4 provision of a particular item or service in the pack5 age to the person; 

6 ‘‘(B) the Secretary determines that the provi7 sion of the item or service involved will not interfere 

8 with the provision of health care services to members 

9 of the uniformed services or persons enrolled in a 

10 Uniformed Services Health Plan; and 

11 ‘‘(C) the health plan in which the person is en12 rolled agrees to pay the actual and full cost of the 

13 items and services in the package actually provided 

14 to the person. 

15 ‘‘(3) The administering Secretaries shall assure that 

16 all rights and entitlements under this chapter of any per17 son described in subsection (e)(2) are fully preserved if 

18 the person— 

19 ‘‘(A) is not offered the opportunity to enroll in 

20 a Uniformed Services Health Plan; and 

21 ‘‘(B) is not otherwise enrolled in a health plan 

22 provided through a health alliance under the Health 

23 Security Act. 

24 ‘‘(g) SPECIAL RULE FOR OTHER PAYERS.—(1)(A) In 

25 the case of a person who is enrolled in the supplementary 
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Title VIII, Subtitle A 

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1 medical insurance program under part B of title XVIII 

2 of the Social Security Act (42 U.S.C. 1395j et seq.) and 

3 who is also enrolled in a Uniformed Services Health Plan, 

4 Medicare shall be responsible for making a premium pay5 ment on behalf of the person. The payment responsibilities 

6 of Medicare under this paragraph shall be in the same 

7 amounts and under the same terms and conditions under 

8 which the Secretary of Health and Human Services makes 

9 payments to eligible organizations with a risk-sharing con10 tract under section 1876 of the Social Security Act. A pre11 mium payment by Medicare under this paragraph shall be 

12 the person’s exclusive benefit under Medicare. 

13 ‘‘(B) In this paragraph, the term ‘Medicare’ means 

14 any program administered under title XVIII of the Social 

15 Security Act (42 U.S.C. 1395c et seq.). 

16 ‘‘(2) Nothing in this section shall affect the payment 

17 of the retiree discount under the Health Security Act on 

18 behalf of a person who is enrolled in a Uniformed Services 

19 Health Plan if the person is otherwise eligible for the re20 tiree discount. 

21 ‘‘(h) PAYMENT RESPONSIBILITIES OF THE SEC22 RETARY.—(1) In the case of a person described in sub23 section (e)(2) who is not enrolled in a Uniformed Services 

24 Health Plan, the Secretary may make a premium payment 

25 for the person’s enrollment through a health alliance in 
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Title VIII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 another health plan. In determining the amount of the 

2 payment, the Secretary shall consider the amount of any 

3 retiree discount payable under the Health Security Act on 

4 behalf of the person and the amount of any premium cred5 its attributable to employer payments with respect to em6 ployment of the person. 

7 ‘‘(2) The Secretary shall not make a payment pursu8 ant to this subsection in connection with any person en9 rolled in a health plan of the Department of Veterans Af10 fairs or a health program of the Indian Health Service. 

11 ‘‘(i) PAYMENT RESPONSIBILITIES OF PERSONS EN12 ROLLED IN A UNIFORMED SERVICES HEALTH PLAN.—(1) 

13 In the case of an active duty member who is enrolled in 

14 a Uniformed Services Health Plan, the administering Sec15 retaries may not impose or collect from the member a cost16 share charge of any kind (whether a premium, copayment, 

17 deductible, coinsurance charge, or other charge) other 

18 than subsistence charges authorized under section 1075 

19 of this title. 

20 ‘‘(2) Subject to paragraph (3), persons described in 

21 subsection (e)(2) who are enrolled in a Uniformed Services 

22 Health Plan shall have such payment responsibilities as 

23 the Secretary establishes, but not to exceed payment of 

24 a family share under section 1343 of a premium and cost 

25 sharing. Payment obligations established under this para-
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Title VIII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 graph may not exceed those obligations otherwise required 

2 under the national standards for health plans established 

3 pursuant to the Health Security Act. 

4 ‘‘(3)(A) Persons described in subsection (e)(2) who 

5 enroll in a Uniformed Services Health Plan and who (in 

6 the absence of this section) would be covered beneficiaries 

7 under section 1079 or 1086 of this title continuously since 

8 December 31, 1994, shall have, as a group, out-of-pocket 

9 costs in 1995 no greater than the lesser of— 

10 ‘‘(i) the out-of-pocket costs in effect for such 

11 beneficiaries under section 1075, 1078, 1079(b), or 

12 1086(b) of this title (whichever applies) on Decem13 ber 31, 1994; and 

14 ‘‘(ii) those obligations otherwise required under 

15 the national standards for health plans established 

16 pursuant to the Health Security Act. 

17 ‘‘(B) Members of the uniformed services on active 

18 duty as of December 31, 1994, who afterward become cov19 ered beneficiaries under section 1079 or 1086 of this title 

20 (or would become covered beneficiaries in the absence of 

21 this section) without a break in eligibility for health care 

22 services under this chapter shall have, as a group, out23 of-pocket costs as covered beneficiaries no higher than the 

24 out-of-pocket costs in effect for similarly situated covered 

25 beneficiaries described in subparagraph (A). 
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Title VIII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(C) The limitation on out-of-pocket costs established 

2 pursuant to subparagraph (A) may be adjusted for years 

3 after 1995 by an appropriate economic index, as deter4 mined by the Secretary of Defense. 

5 ‘‘(4) The Secretary of Defense shall establish the pay6 ment requirements under paragraph (2), and enforce the 

7 limitations on such requirements specified in paragraph 

8 (3), in regulations prescribed pursuant to subsection (a). 

9 ‘‘(j) FINANCIAL ACCOUNT.—There is hereby estab10 lished in the Department of Defense a financial account 

11 to which shall be credited all premium payments and other 

12 receipts from other payers and beneficiaries made in con13 nection with any person enrolled in a Uniformed Services 

14 Health Plan. The account shall be administered by the 

15 Secretary of Defense, and funds in the account may be 

16 used by the Secretary for any purpose directly related to 

17 the delivery and financing of health care services under 

18 this chapter, including operations, maintenance, per19 sonnel, procurement, contributions toward construction 

20 projects, and related costs. Funds in the account shall re21 main available until expended.’’. 

22 (2) The table of sections at the beginning of such 

23 chapter is amended by inserting after the item relating 

24 to section 1073 the following new item: 

‘‘1073a. Uniformed Services Health Plans: establishment and coordination with 

national health care reform.’’. 
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Title VIII, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (b) DEFINITION.—Section 1072 of such title is 

2 amended by adding at the end the following new para3 graph: 

4 ‘‘(6) The term ‘Uniformed Services Health 

5 Plan’ means a plan established by the Secretary of 

6 Defense under section 1073a(a) of this title in order 

7 to provide health care services to members of the 

8 uniformed services on active duty and other covered 

9 beneficiaries under this chapter.’’. 

10 (c) REPORT ON ESTABLISHMENT.—If the Secretary 

11 of Defense determines to establish any Uniformed Services 

12 Health Plan under section 1073a of title 10, United States 

13 Code, as added by subsection (a), the Secretary shall sub14 mit to Congress a report describing the Plans proposed 

15 to be initially offered under such section. The report re16 quired by this subsection shall be submitted not later than 

17 30 days before the date on which the Secretary first issues 

18 proposed rules under subsection (a) of such section to es19 tablish any such Plan. 
1219 

Title VIII, Subtitle B 

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1 Subtitle B—Department of 

2 Veterans Affairs 

3 SEC. 8101. BENEFITS AND ELIGIBILITY THROUGH DEPART4 MENT OF VETERANS AFFAIRS MEDICAL SYS5 TEM. 

6 (a) DVA AS A PARTICIPANT IN HEALTH CARE RE7 FORM.— 

8 (1) IN GENERAL.—Title 38, United States 

9 Code, is amended by inserting after chapter 17 the 

10 following new chapter: 

11 ‘‘CHAPTER 18—ELIGIBILITY AND BENEFITS 

12 UNDER HEALTH SECURITY ACT 

‘‘SUBCHAPTER I—GENERAL 

‘‘1801. Definitions. 

‘‘SUBCHAPTER II—ENROLLMENT 

‘‘1811. Enrollment: veterans. 

‘‘1812. Enrollment: CHAMPVA eligibles. 

‘‘1813. Enrollment: family members. 

‘‘SUBCHAPTER III—BENEFITS 

‘‘1821. Benefits for VA enrollees. 

‘‘1822. Chapter 17 benefits. 

‘‘1823. Supplemental benefits packages and policies. 

‘‘1824. Limitation regarding veterans enrolled with health plans outside Department. 

‘‘SUBCHAPTER IV—FINANCIAL MATTERS 

‘‘1831. Premiums, copayments, etc. 

‘‘1832. Medicare coverage and reimbursement. 

‘‘1833. Recovery of cost of certain care and services. 

‘‘1834. Health Plan Funds. 
1220 

Title VIII, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 ‘‘SUBCHAPTER I—GENERAL 

2 ‘‘§ 1801. Definitions 

3 ‘‘For purposes of this chapter: 

4 ‘‘(1) The term ‘health plan’ means an entity 

5 that has been certified under the Health Security 

6 Act as a health plan. 

7 ‘‘(2) The term ‘VA health plan’ means a health 

8 plan that is operated by the Secretary under section 

9 7341 of this title. 

10 ‘‘(3) The term ‘VA enrollee’ means an indi11 vidual enrolled under the Health Security Act in a 

12 VA health plan. 

13 ‘‘SUBCHAPTER II—ENROLLMENT 

14 ‘‘§ 1811. Enrollment: veterans 

15 ‘‘Each veteran who is an eligible individual within the 

16 meaning of section 1001 of the Health Security Act may 

17 enroll with a VA health plan. A veteran who wants to re18 ceive the comprehensive benefit package through the De19 partment shall enroll with a VA health plan. 

20 ‘‘§ 1812. Enrollment: CHAMPVA eligibles 

21 ‘‘An individual who is eligible for benefits under sec22 tion 1713 of this title and who is eligible to enroll in a 

23 health plan pursuant to section 1001 of the Health Secu24 rity Act may enroll under that Act with a VA health plan 

25 in the same manner as a veteran. 
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Title VIII, Subtitle B 

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1 ‘‘§ 1813. Enrollment: family members 

2 ‘‘(a) The Secretary may authorize a VA health plan 

3 to enroll members of the family of an enrollee under sec4 tion 1811 or 1812 of this title, subject to payment of pre5 miums, deductibles, copayments, and coinsurance as re6 quired under the Health Security Act. 

7 ‘‘(b) For purposes of subsection (a), an enrollee’s 

8 family is those individuals (other than the enrollee) in9 cluded within the term ‘family’ as defined in section 

10 1011(b) of the Health Security Act. 

11 ‘‘SUBCHAPTER III—BENEFITS 

12 ‘‘§ 1821. Benefits for VA enrollees 

13 ‘‘The Secretary shall ensure that each VA health plan 

14 provides to each individual enrolled with it the items and 

15 services in the comprehensive benefit package under the 

16 Health Security Act. 

17 ‘‘§ 1822. Chapter 17 benefits 

18 ‘‘The Secretary shall provide to veterans the care and 

19 services that are authorized to be provided under chapter 

20 17 of this title in accordance with the terms and conditions 

21 applicable to that veteran and that care under such chap22 ter, notwithstanding that such care and services are not 

23 included in the comprehensive benefit package. 

24 ‘‘§ 1823. Supplemental benefits packages and policies 

25 ‘‘A VA health plan may offer supplemental health 

26 benefits policies for health care services not provided 
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Title VIII, Subtitle B 

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1 under chapter 17 of this title and cost sharing policies con2 sistent with the requirements of part 2 of subtitle E of 

3 title I of the Health Security Act. 

4 ‘‘§ 1824. Limitation regarding veterans enrolled with 

5 health plans outside Department 

6 ‘‘A veteran who is residing in a regional alliance area 

7 in which the Department operates a health plan and who 

8 is enrolled in a health plan that is not operated by the 

9 Department may be provided the items and services in the 

10 comprehensive benefit package by a VA health plan only 

11 if the plan is reimbursed for the actual and full cost of 

12 the care provided. 

13 ‘‘SUBCHAPTER IV—FINANCIAL MATTERS 

14 ‘‘§ 1831. Premiums, copayments, etc. 

15 ‘‘(a) In the case of a veteran described in subsection 

16 (b) who is a VA enrollee, the Secretary may not impose 

17 or collect from the veteran a cost-share charge of any kind 

18 (whether a premium, copayment, deductible, coinsurance 

19 charge, or other charge). The Secretary shall make such 

20 arrangements as necessary with health alliances in order 

21 to carry out this subsection. 

22 ‘‘(b) The veterans referred to in subsection (a) are 

23 the following: 

24 ‘‘(1) Any veteran with a service-connected dis25 ability. 
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Title VIII, Subtitle B 

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1 ‘‘(2) Any veteran whose discharge or release 

2 from the active military, naval or air service was for 

3 a disability incurred or aggravated in the line of 

4 duty. 

5 ‘‘(3) Any veteran who is in receipt of, or who, 

6 but for a suspension pursuant to section 1151 of 

7 this title (or both such a suspension and the receipt 

8 of retired pay), would be entitled to disability com9 pensation, but only to the extent that such a vet10 eran’s continuing eligibility for such care is provided 

11 for in the judgment or settlement provided for in 

12 such section. 

13 ‘‘(4) Any veteran who is a former prisoner of 

14 war. 

15 ‘‘(5) Any veteran of the Mexican border period 

16 or World War I. 

17 ‘‘(6) Any veteran who is unable to defray the 

18 expenses of necessary care as determined under sec19 tion 1722(a) of this title. 

20 ‘‘(c) In the case of a VA enrollee who is not described 

21 in subsection (b), the Secretary shall charge premiums 

22 and establish copayments, deductibles, and coinsurance 

23 amounts. The premium rate, and the rates for deductibles 

24 and copayments, for each VA health plan shall be estab-
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1 lished by that health plan based on rules established by 

2 the health alliance under which it is operating. 

3 ‘‘(d) In the case of a veteran with a service-connected 

4 disability who is enrolled in a VA health plan and who 

5 has net earnings from self-employment, the Secretary 

6 shall, under regulations prescribed by the Secretary, pro7 vide for a reduction in any premium payment (or alliance 

8 credit repayment) owed by the veteran under section 6126 

9 or 6111 of the Health Security Act by virtue of the vet10 eran’s net earnings from self-employment. 

11 ‘‘§ 1832. Medicare coverage and reimbursement 

12 ‘‘(a) For purposes of any program administered by 

13 the Secretary of Health and Human Services under title 

14 XVIII of the Social Security Act, a Department facility 

15 shall be deemed to be a Medicare provider. 

16 ‘‘(b)(1) A VA health plan shall be considered to be 

17 a Medicare HMO. 

18 ‘‘(2) For purposes of this section, the term ‘Medicare 

19 HMO’ means an eligible organization under section 1876 

20 of the Social Security Act. 

21 ‘‘(c) In the case of care provided to a veteran other 

22 than a veteran described in section 1831(b) of this title 

23 who is eligible for benefits under the Medicare program 

24 under title XVIII of the Social Security Act, the Secretary 

25 of Health and Human Services shall reimburse a VA 
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Title VIII, Subtitle B 

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1 health plan or Department health-care facility providing 

2 services as a Medicare provider or Medicare HMO in the 

3 same amounts and under the same terms and conditions 

4 as that Secretary reimburses other Medicare providers or 

5 Medicare HMOs, respectively. The Secretary of Health 

6 and Human Services shall include with each such reim7 bursement a Medicare explanation of benefits. 

8 ‘‘(d) When the Secretary provides care to a veteran 

9 for which the Secretary receives reimbursement under this 

10 section, the Secretary shall require the veteran to pay to 

11 the Department any applicable deductible or copayment 

12 that is not covered by Medicare. 

13 ‘‘§ 1833. Recovery of cost of certain care and services 

14 ‘‘(a) In the case of an individual provided care or 

15 services through a VA health plan who has coverage under 

16 a supplemental health insurance policy pursuant to part 

17 2 of subtitle E of title I of the Health Security Act or 

18 under any other provision of law, or who has coverage 

19 under a Medicare supplemental health insurance plan (as 

20 defined in the Health Security Act) or under any other 

21 provision of law, the Secretary has the right to recover 

22 or collect charges for care or services (as determined by 

23 the Secretary, but not including care or services for a serv24 ice-connected disability) from the party providing that cov25 erage to the extent that the individual (or the provider 
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1 of the care or services) would be eligible to receive pay2 ment for such care or services from such party if the care 

3 or services had not been furnished by a department or 

4 agency of the United States. 

5 ‘‘(b) The provisions of subsections (b) through (f) of 

6 section 1729 of this title shall apply with respect to claims 

7 by the United States under subsection (a) in the same 

8 manner as they apply to claims under subsection (a) of 

9 that section. 

10 ‘‘§ 1834. Health Plan Fund 

11 ‘‘(a) There is hereby established in the Treasury a 

12 revolving fund to be known as the ‘Department of Vet13 erans Affairs Health Plan Fund’. 

14 ‘‘(b) Any amount received by the Department by rea15 son of the furnishing of health care by a VA health plan 

16 or the enrollment of an individual with a VA health plan 

17 (including amounts received as premiums, premium dis18 count payments, copayments or coinsurance, and 

19 deductibles, amounts received as third-party reimburse20 ments, and amounts received as reimbursements from an21 other health plan for care furnished to one of its enrollees) 

22 shall be credited to the revolving fund. 

23 ‘‘(c) Notwithstanding subsection (b), the Department 

24 may not retain amounts received for care furnished to a 

25 VA enrollee in a case in which the costs of such care have 
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1 been covered by appropriations. Such amounts shall be de2 posited in the General Fund of the Treasury. 

3 ‘‘(d) Amounts in the revolving fund are hereby made 

4 available for the expenses of the delivery by a VA health 

5 plan of the items and services in the comprehensive benefit 

6 package and any supplemental benefits package or policy 

7 offered by that health plan.’’. 

8 (2) The table of chapters at the beginning of 

9 part II of title 38, United States Code, is amended 

10 by inserting after the item relating to chapter 17 the 

11 following new item: 

‘‘18. Benefits and Eligibility Under Health Security Act ........................ 1801.’’. 

12 (b) PRESERVATION OF EXISTING BENEFITS FOR FA13 CILITIES NOT OPERATING AS HEALTH PLANS.—(1) 

14 Chapter 17 of title 38, United States Code, is amended 

15 by inserting after section 1704 the following new section: 

16 ‘‘§ 1705. Facilities not operating within health plans; 

17 veterans not eligible to enroll in health 

18 plans 

19 ‘‘The provisions of this chapter shall apply with re20 spect to the furnishing of care and services— 

21 ‘‘(1) by any facility of the Department that is 

22 not operating as or within a health plan certified as 

23 a health plan under the Health Security Act; and 

24 ‘‘(2) by any facility of the Department (whether 

25 or not operating as or within a health plan certified 
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Title VIII, Subtitle B 

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1 as a health plan under the Health Security Act) in 

2 the case of a veteran who is not an eligible indi3 vidual with the meaning of section 1001 of the 

4 Health Security Act.’’. 

5 (2) The table of sections at the beginning of such 

6 chapter is amended by inserting after the item relating 

7 to section 1704 the following new item: 

‘‘1705. Facilities not operating within health plans; veterans not eligible to enroll in health plans.’’. 

8 SEC. 8102. ORGANIZATION OF DEPARTMENT OF VETERANS 

9 AFFAIRS FACILITIES AS HEALTH PLANS. 

10 (a) IN GENERAL.—Chapter 73 of title 38, United 

11 States Code, is amended— 

12 (1) by redesignating subchapter IV as sub13 chapter V; and 

14 (2) by inserting after subchapter III the fol15 lowing new subchapter: 

16 ‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF 

17 NATIONAL HEALTH CARE REFORM 

18 ‘‘§ 7341. Organization of health care facilities as 

19 health plans 

20 ‘‘(a) The Secretary shall organize health plans and 

21 operate Department facilities as or within health plans 

22 under the Health Security Act. The Secretary shall pre23 scribe regulations establishing standards for the operation 

24 of Department health care facilities as or within health 
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1 plans under that Act. In prescribing those standards, the 

2 Secretary shall assure that they conform, to the maximum 

3 extent practicable, to the requirements for health plans 

4 generally set forth in part 1 of subtitle E of title I of the 

5 Health Security Act. 

6 ‘‘(b) Within a geographic area or region, health care 

7 facilities of the Department located within that area or 

8 region may be organized to operate as a single health plan 

9 encompassing all Department facilities within that area or 

10 region or may be organized to operate as several health 

11 plans. 

12 ‘‘(c) In carrying out responsibilities under the Health 

13 Security Act, a State (or a State-established entity)— 

14 ‘‘(1) may not impose any standard or require15 ment on a VA health plan that is inconsistent with 

16 this section or any regulation prescribed under this 

17 section or other Federal laws regarding the oper18 ation of this section; and 

19 ‘‘(2) may not deny certification of a VA health 

20 plan under the Health Security Act on the basis of 

21 a conflict between a rule of a State or health alliance 

22 and this section or regulations prescribed under this 

23 section or other Federal laws regarding the oper24 ation of this section. 
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1 ‘‘§ 7342. Contract authority for facilities operating as 

2 or within health plans 

3 ‘‘The Secretary may enter into a contract (without 

4 regard to provisions of law requiring the use of competitive 

5 procedures) for the provision of services by a VA health 

6 plan in any case in which the Secretary determines that 

7 such contracting is more cost-effective than providing such 

8 services directly through Department facilities or when 

9 such contracting is necessary because of geographic inac10 cessibility. 

11 ‘‘§ 7343. Resource sharing authority: facilities oper12 ating as or within health plans 

13 ‘‘The Secretary may enter into agreements under sec14 tion 8153 of this title with other health care plans, with 

15 health care providers, and with other health industry orga16 nizations, and with individuals, for the sharing of re17 sources of the Department through facilities of the De18 partment operating as or within health plans. 

19 ‘‘§ 7344. Administrative and personnel flexibility 

20 ‘‘(a) In order to carry out this subchapter, the Sec21 retary may— 

22 ‘‘(1) carry out administrative reorganizations of 

23 the Department without regard to those provisions 

24 of section 510 of this title following subsection (a) 

25 of that section; and 
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Title VIII, Subtitle B 

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1 ‘‘(2) enter into contracts for the performance of 

2 services previously performed by employees of the 

3 Department without regard to section 8110(c) of 

4 this title. 

5 ‘‘(b) The Secretary may establish alternative per6 sonnel systems or procedures for personnel at facilities op7 erating as or with health plans under the Health Security 

8 Act whenever the Secretary considers such action nec9 essary in order to carry out the terms of that Act, except 

10 that the Secretary shall provide for preference eligibles (as 

11 defined in section 2108 of title 5, United States Code) 

12 in a manner comparable to the preference for such eligi13 bles under subchapter I of chapter 33, and subchapter I 

14 of chapter 35, of such title. 

15 ‘‘(c) Subject to the provisions of section 1404 of the 

16 Health Security Act, the Secretary may carry out appro17 priate promotional, advertising, and marketing activities 

18 to inform individuals of the availability of facilities of the 

19 Department operating as or within health plans. Such ac20 tivities may only be carried out using nonappropriated 

21 funds. 

22 ‘‘§ 7345. Veterans Health Care Investment Fund 

23 ‘‘(a) There is hereby authorized to be appropriated 

24 to the Department, in addition to amounts otherwise au25 thorized to be appropriated to the Department for VA 
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1 health plans, such amounts as are necessary for the Sec2 retary of the Treasury to fulfill the requirement of sub3 section (b). 

4 ‘‘(b) For each of fiscal years 1995, 1996, and 1997, 

5 the Secretary of the Treasury shall, subject to subsection 

6 (a), credit to a special fund (in this section referred to 

7 as the ‘Fund’) of the Treasury an amount equal to— 

8 ‘‘(1) $1,000,000,000 for fiscal year 1995; 

9 ‘‘(2) $600,000,000 for fiscal year 1996; and 

10 ‘‘(3) $1,700,000,000 for fiscal year 1997. 

11 ‘‘(c)(1) Subject to paragraph (2), amounts in the 

12 Fund shall be available to the Secretary only for the VA 

13 health plans authorized under this chapter. 

14 ‘‘(2) For fiscal year 1995, 1996, or 1997, the amount 

15 credited to the Fund for the fiscal year shall be available 

16 for use by the Secretary under paragraph (1) only if ap17 propriations Acts for that fiscal year, without addition of 

18 amounts provided under subsection (a) for the Fund, pro19 vide new budget authority for the Department of Veterans 

20 Affairs Medical Care account, for that fiscal year, of no 

21 less than the amount for that account proposed in the 

22 budget of the President for that fiscal year under section 

23 1105 of title 31. 

24 ‘‘(d) The Secretary shall submit to Congress, no later 

25 than March 1, 1997, a report concerning the operation 
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1 of the Department of Veterans Affairs health care system 

2 in preparing for, and operating under, national health care 

3 reform under the Health Security Act during fiscal years 

4 1995 and 1996. The report shall include a discussion of— 

5 ‘‘(1) the adequacy of amounts in the Fund for 

6 the operation of VA health plans; 

7 ‘‘(2) the quality of care provided by such plans; 

8 ‘‘(3) the ability of such plans to attract pa9 tients; and 

10 ‘‘(4) the need (if any) for additional funds for 

11 the Fund in fiscal years after fiscal year 1997. 

12 ‘‘§ 7346. Funding provisions: grants and other sources 

13 of assistance 

14 ‘‘The Secretary may apply for and accept, if awarded, 

15 any grant or other source of funding that is intended to 

16 meet the needs of special populations and that but for this 

17 section is unavailable to facilities of the Department or 

18 to health plans operated by the Government if funds ob19 tained through the grant or other source of funding will 

20 be used through a facility of the Department operating 

21 as or within a health plan.’’. 

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

23 at the beginning of chapter 73 is amended by striking out 

24 the item relating to the heading for subchapter IV and 

25 inserting in lieu thereof the following: 
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Title VIII, Subtitle C 

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‘‘SUBCHAPTER IV—PARTICIPATION AS PART OF NATIONAL HEALTH CARE

REFORM

‘‘7341. Organization of health care facilities as health plans. 

‘‘7342. Contract authority for facilities operating as or within health plans. 

‘‘7343. Resource sharing authority: facilities operating as or within health 

plans. 

‘‘7344. Administrative and personnel flexibility. 

‘‘7345. Veterans Health Care Investment Fund. 

‘‘7346. Funding provisions: grants and other sources of assistance. 

‘‘SUBCHAPTER V—RESEARCH CORPORATIONS’’. 

1 (c) TRANSITION PROVISION.—The limitation in the 

2 second sentence of section 7344(c) of title 38, United 

3 States Code, as added by subsection (a), shall not apply 

4 during fiscal year 1994. 

5 Subtitle C—Federal Employees 

6 Health Benefits Program 

7 SEC. 8201. DEFINITIONS. 

8 Except as otherwise specifically provided, in this sub9 title: 

10 (1) ABROAD.—The term ‘‘abroad’’ means out11 side the United States. 

12 (2) ANNUITANT, ETC.—The terms ‘‘annuitant’’, 

13 ‘‘employee’’, and ‘‘Government’’, have the same re14 spective meanings as are given such terms by section 

15 8901 of title 5, United States Code (as last in ef16 fect). 

17 (3) EMPLOYEES HEALTH BENEFITS FUND.— 

18 The term ‘‘Employees Health Benefits Fund’’ means 
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Title VIII, Subtitle C 

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1 the fund under section 8909 of title 5, United States 

2 Code (as last in effect). 

3 (4) FEHBP.—The term ‘‘FEHBP’’ means the 

4 health insurance program under chapter 89 of title 

5 5, United States Code (as last in effect). 

6 (5) FEHBP PLAN.—The term ‘‘FEHBP plan’’ 

7 has the same meaning as is given the term ‘‘health 

8 benefits plan’’ by section 8901(6) of title 5, United 

9 States Code (as last in effect). 

10 (6) FEHBP TERMINATION DATE.—The term 

11 ‘‘FEHBP termination date’’ means the date (speci12 fied in section 8202) after which FEHBP ceases to 

13 be in effect. 

14 (7) RETIRED EMPLOYEES HEALTH BENEFITS

15 FUND.—The term ‘‘Retired Employees Health Bene16 fits Fund’’ means the fund under section 8 of the 

17 Retired Federal Employees Health Benefits Act 

18 (Public Law 86-724; 74 Stat. 851), as last in effect. 

19 (8) RFEHBP.—The term ‘‘RFEHBP’’ means 

20 the health insurance program under the Retired 

21 Federal Employees Health Benefits Act. 

22 SEC. 8202. FEHBP TERMINATION. 

23 Chapter 89 of title 5, United States Code, is repealed 

24 effective as of December 31, 1997, and all contracts under 

25 such chapter shall terminate not later than such date. 
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Title VIII, Subtitle C 

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1 SEC. 8203. TREATMENT OF FEDERAL EMPLOYEES, ANNU2 ITANTS, AND OTHER INDIVIDUALS (WHO 

3 WOULD OTHERWISE HAVE BEEN ELIGIBLE 

4 FOR FEHBP) UNDER HEALTH PLANS. 

5 (a) APPLICABILITY.—This section sets forth rules ap6 plicable, after the FEHBP termination date, with respect 

7 to individuals who— 

8 (1) are eligible individuals under section 1001; 

9 and 

10 (2) but for this subtitle, would be eligible to en11 roll in an FEHBP plan. 

12 (b) FEDERAL EMPLOYEES.— 

13 (1) SAME TREATMENT AS NON–FEDERAL EM14 PLOYEES.—A Federal employee shall be treated in 

15 the same way, for purposes of provisions of this Act 

16 outside of this subtitle, as if that individual were a 

17 non-Federal employee, including for purposes of any 

18 requirements relating to enrollment, family premium 

19 payments, and employer premium payments. 

20 (2) EMPLOYER PREMIUM PAYMENTS.—Any em21 ployer premium payment required with respect to 

22 the employment of a Federal employee shall be pay23 able from the appropriation or fund from which any 

24 Government contribution on behalf of such employee 

25 would have been payable under FEHBP. 
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Title VIII, Subtitle C 

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1 (3) OFFER OF FEHBP SUPPLEMENTAL

2 PLANS.—The Federal Government shall offer to 

3 Federal employees one or more FEHBP supple4 mental plans developed under subsection (f)(1). 

5 (4) DEFINITIONS.—In this subsection: 

6 (A) FEDERAL EMPLOYEE.—The term 

7 ‘‘Federal employee’’ means an ‘‘employee’’ as 

8 defined by section 8201. 

9 (B) NON-FEDERAL EMPLOYEE.—The term 

10 ‘‘non–Federal employee’’ means an ‘‘employee’’ 

11 as defined by section 1901. 

12 (c) ANNUITANTS.— 

13 (1) HEALTH PLAN.— 

14 (A) AUTHORITY TO MAKE CERTAIN

15 WITHHOLDINGS FROM ANNUITIES.— 

16 (i) IN GENERAL.—The Office of Per17 sonnel Management may, on the request of 

18 an annuitant enrolled in a health plan, 

19 withhold from the annuity of such annu20 itant any premiums required for such en21 rollment. The Office shall forward any 

22 amounts so withheld to the appropriate 

23 fund or as otherwise indicated in the re24 quest. A request under this subparagraph 

25 shall contain such information, and other-
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Title VIII, Subtitle C 

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1 wise be made in such form and manner, as 

2 the Office shall by regulation prescribe. 

3 (ii) REFERENCES.—Any reference in 

4 clause (i) to the Office of Personnel Man5 agement shall, for purposes of any annuity 

6 (including monthly compensation under 

7 subchapter I of chapter 81 of title 5, 

8 United States Code) payable under provi9 sions of law which are administered by a 

10 Government entity other than the Office, 

11 be considered to be a reference to such 

12 other Government entity. 

13 (B) PAYMENT OF ALLIANCE CREDIT LI14 ABILITY FOR ANNUITANTS BELOW AGE 55.—In 

15 the case of an annuitant who does not satisfy 

16 the eligibility requirements under section 6114, 

17 a Government contribution shall be made equal 

18 to such amount as is necessary to reduce the 

19 employee’s liability under section 6111 to zero. 

20 (2) FEHBP SUPPLEMENTAL PLAN.— 

21 (A) CURRENT ANNUITANTS.— 

22 (i) IN GENERAL.—Each current annu23 itant— 
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Title VIII, Subtitle C 

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1 (I) shall be eligible to enroll in 

2 FEHBP supplemental plans developed 

3 under subsection (f)(1); and 

4 (II) shall be eligible for the Gov5 ernment contribution amount de6 scribed in clause (ii) toward the pre7 mium for such a plan. 

8 (ii) GOVERNMENT CONTRIBUTION

9 AMOUNT.—The Office of Personnel Man10 agement shall specify a level of Govern11 ment contribution under this subparagraph 

12 for an FEHBP supplemental plan. Such 

13 level— 

14 (I) shall reasonably reflect the 

15 portion of the Government contribu16 tions (last provided under FEHBP) 

17 attributable to the portion of FEHBP 

18 benefits which the plan is designed to 

19 replace; and 

20 (II) shall be applied toward pre21 miums for such a plan. 

22 (B) FUTURE ANNUITANTS.—In the case of 

23 a future annuitant, the Federal Government 

24 shall offer to such an annuitant one or more 
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Title VIII, Subtitle C 

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1 FEHBP supplemental plans developed under 

2 subsection (f)(1). 

3 (C) DEFINITIONS.—In this paragraph: 

4 (i) CURRENT ANNUITANT.—The term 

5 ‘‘current annuitant’’ means an individual 

6 who is residing in a State on January 1, 

7 1998, and, on the day before such date, 

8 was— 

9 (I) enrolled in an FEHBP plan 

10 as an annuitant; or 

11 (II) covered under an FEHBP 

12 plan as a family member (but only if 

13 such individual would otherwise have 

14 been eligible to enroll in an FEHBP 

15 plan as an annuitant). 

16 (ii) FUTURE ANNUITANT.—The term 

17 ‘‘future annuitant’’ means an annuitant 

18 who is not a current annuitant. 

19 (d) INDIVIDUALS WHO WOULD NOT BE ELIGIBLE

20 FOR A GOVERNMENT CONTRIBUTION UNDER FEHBP.— 

21 (1) IN GENERAL.—In the case of an individual 

22 described in paragraph (2)— 

23 (A) the Federal Government may, but is 

24 not required to, offer one or more FEHBP sup-
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Title VIII, Subtitle C 

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1 plemental plans developed under subsection 

2 (f)(1); and 

3 (B) no Government contribution shall be 

4 payable with respect to the premium for such a 

5 plan. 

6 (2) APPLICABILITY.—This subsection shall 

7 apply with respect to any individual who (but for 

8 this subtitle) would be eligible to enroll in an 

9 FEHBP plan, but would not be eligible for a Gov10 ernment contribution toward any such plan. 

11 (e) MEDICARE-ELIGIBLE INDIVIDUALS.— 

12 (1) CURRENT MEDICARE-ELIGIBLE INDIVID13 UALS.— 

14 (A) IN GENERAL.—Each current medicare15 eligible individual— 

16 (i) shall be eligible to enroll in medi17 care supplemental plans developed under 

18 subsection (f)(2); and 

19 (ii) if such individual would (but for 

20 this subtitle) have been eligible for a Gov21 ernment contribution under FEHBP (as22 suming such individual were then enrolled 

23 thereunder), shall be eligible for the Gov24 ernment medicare contribution amount de25 scribed in subparagraph (B) toward the 
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Title VIII, Subtitle C 

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1 premium for such a plan or toward the 

2 premium for enrollment with an eligible or3 ganization under a risk-sharing contract 

4 under section 1876 of the Social Security 

5 Act). 

6 (B) MEDICARE CONTRIBUTION AMOUNT.— 

7 The Office of Personnel Management shall 

8 specify a level of Government contribution 

9 under this paragraph for an FEHBP medicare 

10 supplemental plan. Such level— 

11 (i) shall reasonably reflect the portion 

12 of the Government contributions (last pro13 vided under FEHBP) attributable to the 

14 portion of FEHBP benefits which the plan 

15 is designed to replace; and 

16 (ii) except as otherwise provided in 

17 paragraph (3), shall be applied toward pre18 miums for such a plan. 

19 (2) FUTURE MEDICARE-ELIGIBLE INDIVID20 UALS.—In the case of a future medicare-eligible in21 dividual, the Federal Government may, but is not re22 quired to— 

23 (A) offer to such a medicare-eligible indi24 vidual one or more FEHBP medicare supple-
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Title VIII, Subtitle C 

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1 mental plans developed under subsection (f)(2); 

2 and 

3 (B) make a Government contribution with 

4 respect to the premium for such a plan. 

5 (3) APPLICATION OF CONTRIBUTION TOWARD

6 MEDICARE HMO OPTION.— 

7 (A) ELECTION.—A medicare-eligible indi8 vidual may elect to have the amount of the Gov9 ernment contribution described in paragraph 

10 (1)(B) or referred to in paragraph (2)(B) ap11 plied toward premiums for enrollment with an 

12 eligible organization under a risk-sharing con13 tract under section 1876 of the Social Security 

14 Act. 

15 (B) LEVEL CONTRIBUTION RULE.—The 

16 level of such Government contribution on behalf 

17 of an individual shall be determined without 

18 taking into account any election under subpara19 graph (A). 

20 (4) DEFINITIONS.—In this subsection: 

21 (A) CURRENT MEDICARE-ELIGIBLE INDI22 VIDUAL.—The term ‘‘current medicare-eligible 

23 individual’’ means an individual who is residing 

24 in a State on January 1, 1998, and, on the day 
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1 before such date, was a medicare-eligible indi2 vidual. 

3 (B) FUTURE MEDICARE-ELIGIBLE INDI4 VIDUAL.—The term ‘‘future medicare-eligible 

5 individual’’ means a medicare-eligible individual 

6 who is not a current medicare-eligible indi7 vidual. 

8 (5) INAPPLICABILITY.—Subsections (b) through 

9 (d) shall not apply with respect to a medicare-eligi10 ble individual. 

11 (f) DEVELOPMENT OF SUPPLEMENTAL PLANS.— 

12 (1) FEHBP SUPPLEMENTAL PLANS.—The Of13 fice of Personnel Management shall develop one or 

14 more FEHBP supplemental plans which are supple15 mental health benefit policies or cost sharing policies 

16 (as defined in section 1421(b)). Each such plan 

17 shall— 

18 (A) be consistent with the applicable re19 quirements of part 2 of subtitle E of title I (in20 cluding the requirements under section 

21 1423(f)); and 

22 (B) reflect (taking into consideration the 

23 benefits in the comprehensive benefit package) 

24 the overall level of benefits last generally af25 forded under FEHBP. 
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Title VIII, Subtitle C 

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1 (2) FEHBP MEDICARE SUPPLEMENTAL

2 PLANS.—The Office of Personnel Management shall 

3 develop one or more medicare supplemental plans. 

4 Each such plan shall— 

5 (A) offer benefits which shall include the 

6 core group of basic benefits identified under 

7 section 1882(p)(2) of the Social Security Act; 

8 and 

9 (B) reflect (taking into consideration the 

10 benefits provided under the medicare program) 

11 the overall level of benefits last generally af12 forded under FEHBP. 

13 (g) AUTHORIZATION OF APPROPRIATIONS.—The Gov14 ernment contributions authorized by this section on behalf 

15 of an annuitant (including an annuitant who is a medi16 care-eligible individual) shall be paid from annual appro17 priations which are authorized to be made for that purpose 

18 and which may be made available until expended. 

19 (h) FUND.— 

20 (1) ESTABLISHMENT.—There shall be estab21 lished in the Treasury of the United States a fund 

22 into which shall be paid all contributions relating to 

23 any— 

24 (A) FEHBP supplemental plan developed 

25 under subsection (f)(1); 
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Title VIII, Subtitle C 

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1 (B) FEHBP medicare supplemental plan 

2 developed under subsection (f)(2); or 

3 (C) health insurance program established 

4 under section 8204. 

5 (2) ADMINISTRATION AND USE.—The fund 

6 shall be administered by the Office of Personnel 

7 Management, and any monies in the fund shall be 

8 available for purposes of the plan or program (re9 ferred to in paragraph (1)) to which they are attrib10 utable. 

11 SEC. 8204. TREATMENT OF INDIVIDUALS RESIDING 

12 ABROAD. 

13 (a) IN GENERAL.—After the FEHBP termination 

14 date, individuals residing abroad who (but for this sub15 title) would be eligible to enroll in an FEHBP plan shall 

16 be eligible for health insurance under a program which 

17 the Office of Personnel Management shall by regulation 

18 establish. 

19 (b) REQUIREMENT.—To the extent practicable, cov20 erage and benefits provided to individuals under such pro21 gram shall be equal to the coverage and benefits which 

22 would be available to them if they were residing in the 

23 United States. 

24 (c) GOVERNMENT CONTRIBUTIONS.—Any Govern25 ment contribution payable under such program shall be 
1247 

Title VIII, Subtitle C 

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1 made from the appropriation or fund from which any Gov2 ernment contribution would have been payable under 

3 FEHBP (if any) on behalf of the individual involved, ex4 cept that, in the case of an annuitant, any such contribu5 tion shall be payable from amounts appropriated pursuant 

6 to section 8203(g). 

7 SEC. 8205. TRANSITION AND SAVINGS PROVISIONS. 

8 (a) EMPLOYEES HEALTH BENEFITS FUND.— 

9 (1) TEMPORARY CONTINUED AVAILABILITY.— 

10 Notwithstanding section 8202, the Employees 

11 Health Benefits Fund shall be maintained, and 

12 amounts in such Fund shall remain available, after 

13 the FEHBP termination date, for such period of 

14 time as the Office of Personnel Management con15 siders necessary in order to satisfy any outstanding 

16 claims. 

17 (2) FINAL DISBURSEMENT.—After the end of 

18 the period referred to in paragraph (1), any 

19 amounts remaining in the Fund shall be disbursed 

20 (between the Government and former participants in 

21 FEHBP) in accordance with a plan which the Office 

22 shall prepare, consistent with the cost-sharing ratio 

23 between the Government and plan enrollees during 

24 the final contract term. The details of any such plan 

25 shall be submitted to the President and the Con-
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Title VIII, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 gress at least 1 year before the date of its proposed 

2 implementation. 

3 (b) PROCEEDINGS.—After the FEHBP termination 

4 date, chapter 89 of title 5, United States Code (as last 

5 in effect) shall be considered to have remained in effect 

6 for purposes of any suit, action, or other proceeding with 

7 respect to any liability incurred or violation which oc8 curred on or before such date. 

9 (c) RFEHBA.— 

10 (1) REPEAL.—The Retired Federal Employees 

11 Health Benefits Act (Public Law 86–724; 74 Stat. 

12 849) is repealed effective as of the FEHBP termi13 nation date. 

14 (2) RELATED PROVISIONS.—After the FEHBP 

15 termination date— 

16 (A) the Retired Employees Health Benefits 

17 Fund shall temporarily remain available, and 

18 amounts in that fund shall subsequently be dis19 bursed, in a manner comparable to that pro20 vided for under subsection (a); and 

21 (B) retired employees who (but for this 

22 subtitle) would be eligible for coverage under 

23 the Retired Federal Employees Health Benefits 

24 Act shall be treated, for purposes of this sub25 title, as if they were annuitants (subject to any 
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Title VIII, Subtitle C 

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1 differences in the overall level of coverage or 

2 benefits last generally afforded to annuitants 

3 under FEHBP and to retired employees under 

4 RFEHBP, respectively). 

5 (3) REGULATIONS.—Regulations prescribed 

6 under section 8206 to carry out this subsection shall 

7 include any necessary provisions relating to individ8 uals residing abroad. 

9 SEC. 8206. REGULATIONS. 

10 The Office of Personnel Management shall prescribe 

11 any regulations which may be necessary to carry out this 

12 subtitle. 

13 SEC. 8207. TECHNICAL AND CONFORMING AMENDMENTS. 

14 (a) OPM’S ANNUAL REPORT ON FEHBP.—Sub15 section (c) of section 1308 of title 5, United States Code, 

16 is repealed. 

17 (b) OTHER REFERENCES TO FEHBP.—Any ref18 erence in any provision of law to the health insurance pro19 gram under chapter 89 of title 5, United States Code (or 

20 any aspect of such program) shall be considered to be a 

21 reference to the health insurance program under this sub22 title (or corresponding aspect), subject to such clarifica23 tion as may be provided, or except as may otherwise be 

24 provided, in regulations prescribed by the agency or other 
1250 

Title VIII, Subtitle D 

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1 authority responsible for the administration of such provi2 sion. 

3 (c) OMNIBUS BUDGET RECONCILIATION ACT OF

4 1993.—Effective as of the date of the enactment of this 

5 Act, section 11101(b)(3) of the Omnibus Budget Rec6 onciliation Act of 1993 (Public Law 103–66; 107 Stat. 

7 413) is amended by striking ‘‘September 30, 1998’’ and 

8 inserting ‘‘December 31, 1997’’. 

9 (d) EFFECTIVE DATE.—Except as provided in sub10 section (c), this section and the amendments made by this 

11 section shall take effect on the day after the FEHBP ter12 mination date. 

13 Subtitle D—Indian Health Service 

14 SEC. 8301. DEFINITIONS. 

15 For the purposes of this subtitle— 

16 (1) the term ‘‘health program of the Indian 

17 Health Service’’ means a program which provides 

18 health services under this Act through a facility of 

19 the Indian Health Service, a tribal organization 

20 under the authority of the Indian Self-Determination 

21 Act or a self-governance compact, or an urban In22 dian program; 

23 (2) the term ‘‘reservation’’ means the reserva24 tion of any federally recognized Indian tribe, former 

25 Indian reservations in Oklahoma, and lands held by 
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Title VIII, Subtitle D 

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1 incorporated Native groups, regional corporations, 

2 and village corporations under the provisions of the 

3 Alaska Native Claims Settlement Act (43 U.S.C. 

4 1601 et seq.); 

5 (3) the term ‘‘urban Indian program’’ means 

6 any program operated pursuant to title V of the In7 dian Health Care Improvement Act; and 

8 (4) the terms ‘‘Indian’’, ‘‘Indian tribe’’, ‘‘tribal 

9 organization’’, ‘‘urban Indian’’, ‘‘urban Indian orga10 nization’’, and ‘‘service unit’’ have the same meaning 

11 as when used in the Indian Health Care Improve12 ment Act (25 U.S.C. 1601 et seq.). 

13 SEC. 8302. ELIGIBILITY AND HEALTH SERVICE COVERAGE 

14 OF INDIANS. 

15 (a) ELIGIBILITY.—An eligible individual, as defined 

16 in section 1001(c), is eligible to enroll in a health program 

17 of the Indian Health Service if the individual is— 

18 (1) an Indian, or a descendent of a member of 

19 an Indian tribe who belongs to and is regarded as 

20 an Indian by the Indian community in which the in21 dividual lives, who resides on or near an Indian res22 ervation or in a geographical area designated by 

23 statute as meeting the requirements of being on or 

24 near an Indian reservation notwithstanding the lack 

25 of an Indian reservation; 
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 (2) an urban Indian; or 

2 (3) an Indian described in section 809(b) of the 

3 Indian Health Care Improvement Act (25 U.S.C. 

4 1679(b)). 

5 (b) ELECTION.—An individual described in sub6 section (a) may elect a health program of the Indian 

7 Health Service instead of a health plan. 

8 (c) ENROLLMENT FOR BENEFITS.—An individual 

9 who elects a health program of the Indian Health Service 

10 under subsection (b) shall enroll in such program through 

11 a service unit, tribal organization, or urban Indian pro12 gram. An individual who enrolls in such program is not 

13 subject to any charge for health insurance premiums, 

14 deductibles, copayments, coinsurance, or any other cost 

15 for health services provided under such program. 

16 (d) PAYMENTS BY INDIVIDUALS WHO DO NOT EN17 ROLL.—If an individual described in subsection (a) does 

18 not enroll in a health program of the Indian Health Serv19 ice, no payment shall be made by the Indian Health Serv20 ice to the individual (or on behalf of the individual) with 

21 respect to premiums charged for enrollment in an applica22 ble health plan or any other cost of health services under 

23 the applicable health plan which the individual is required 

24 to pay. 
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 SEC. 8303. SUPPLEMENTAL INDIAN HEALTH CARE BENE2 FITS. 

3 (a) IN GENERAL.—All individuals described in sec4 tions 8302(a) remain eligible for such benefits under the 

5 laws administered by the Indian Health Service as supple6 ment the comprehensive benefit package. The individual 

7 shall not be subject to any charge or any other cost for 

8 such benefits. 

9 (b) AUTHORIZATION OF APPROPRIATIONS.—In addi10 tion to amounts otherwise authorized to be appropriated, 

11 there is authorized to be appropriated to carry out this 

12 section $180,000,000 for fiscal year 1995, $200,000,000 

13 for each of the fiscal years 1996 through 1999, and such 

14 sums as may be necessary for fiscal year 2000 and each 

15 fiscal year thereafter. 

16 SEC. 8304. HEALTH PLAN AND HEALTH ALLIANCE RE17 QUIREMENTS. 

18 (a) COMPREHENSIVE BENEFIT PACKAGE.—The Sec19 retary shall ensure that the comprehensive benefit package 

20 is provided by all health programs of the Indian Health 

21 Service effective January 1, 1999, notwithstanding section 

22 1001(a). 

23 (b) APPLICABLE REQUIREMENTS OF HEALTH

24 PLANS.—In addition to subsection (a), the Secretary shall 

25 determine which other requirements relating to health 
1254 

Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 plans apply to health programs of the Indian Health Serv2 ice. 

3 (c) CERTIFICATION.—Effective January 1, 1999, all 

4 health programs of the Indian Health Service must meet 

5 the certification requirements for health plans, as required 

6 by the Secretary under this section, as certified from time 

7 to time by the Secretary. Before January 1, 1999, all such 

8 health programs shall, to the extent practicable, meet such 

9 certification requirements. 

10 (d) HEALTH ALLIANCE REQUIREMENTS.—The Sec11 retary shall determine which requirements relating to 

12 health alliances apply to the Indian Health Service. 

13 SEC. 8305. EXEMPTION OF TRIBAL GOVERNMENTS AND 

14 TRIBAL ORGANIZATIONS FROM EMPLOYER 

15 PAYMENTS. 

16 A tribal government and a tribal organization under 

17 the Indian Self-Determination and Educational Assistance 

18 Act or a self-governance compact shall be exempt from 

19 making employer premium payments as an employer 

20 under section 6121. 

21 SEC. 8306. PROVISION OF HEALTH SERVICES TO NON-EN22 ROLLEES AND NON-INDIANS. 

23 (a) CONTRACTS WITH HEALTH PLANS.— 

24 (1) IN GENERAL.—A health program of the In25 dian Health Service, a service unit, a tribal organi-
1255 

Title VIII, Subtitle D 

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1 zation, or an urban Indian organization operating 

2 within a health program may enter into a contract 

3 with a health plan for the provision of health care 

4 services to individuals enrolled in such health plan if 

5 the program, unit, or organization determines that 

6 the provision of such health services will not result 

7 in a denial or diminution of health services to any 

8 individual described in section 8302(a) who is en9 rolled for health services provided by such program, 

10 unit, or organization. 

11 (2) REIMBURSEMENT.—Any contract entered 

12 into pursuant to paragraph (1) shall provide for re13 imbursement to such program, unit, or organization 

14 in accordance with the essential community provider 

15 provisions of section 1431(c), as determined by the 

16 Secretary. 

17 (b) FAMILY TREATMENT.— 

18 (1) DETERMINATION TO OPEN ENROLLMENT.— 

19 A health program of the Indian Health Service may 

20 open enrollment to family members of individuals 

21 described in section 8302(a). 

22 (2) ELECTION.—If a health program of the In23 dian Health Service opens enrollment to family 

24 members of individuals described in section 8302(a), 

25 an individual described in that section may elect 
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 family enrollment in the health program instead of 

2 in a health plan. 

3 (3) ENROLLMENT.— 

4 (A) IN GENERAL.—An individual who 

5 elects family enrollment under paragraph (2) in 

6 a health program of the Indian Health Service 

7 shall enroll in such program. 

8 (B) APPLICABLE INDIVIDUAL CHARGES.— 

9 The individual who enrolls in such program 

10 under subparagraph (A) is not subject to any 

11 charge for health insurance premiums, 

12 deductibles, copayments, coinsurance, or any 

13 other cost for health services provided under 

14 such program attributable to the individual, but 

15 the family members who are not eligible for a 

16 health program of the Indian Health Service 

17 under section 8302(a) are subject to all such 

18 charges. 

19 (C) APPLICABLE EMPLOYER CHARGES.— 

20 Employers, other than tribal governments and 

21 tribal organizations exempt under section 8305, 

22 are liable for making employer premium pay23 ments as an employer under section 6121 in the 

24 case of any family member enrolled under this 

25 subsection who is not eligible for a health pro-
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 gram of the Indian Health Service under sec2 tion 8302(a). 

3 (4) PREMIUM.— 

4 (A) ESTABLISHMENT AND COLLECTION.— 

5 The Secretary shall establish premiums for all 

6 family members enrolled in a health program of 

7 the Indian Health Service under this paragraph 

8 who are not eligible for a health program of the 

9 Indian Health Service under section 8302(a). 

10 The Secretary shall collect each premium pay11 ment owed under this paragraph. 

12 (B) REDUCTION.—The Secretary shall pro13 vide for a process for premium reduction which 

14 is the same as the process, and uses the same 

15 standards, used by regional alliances for the 

16 areas in which individuals described in subpara17 graph (A) reside, except that in computing the 

18 family share of the premiums the Secretary 

19 shall use the lower of the premium quoted or 

20 the reduced weighted average accepted bid for 

21 the reference regional alliance. 

22 (C) PAYMENT BY SECRETARY.—The Sec23 retary shall provide for payment to each health 

24 program of the Indian Health Service, in the 

25 same manner as payments under section 6201, 
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 amounts equivalent to the amount of payments 

2 that would have been made to a regional alli3 ance if the individuals described in subpara4 graph (A) were enrolled in a regional alliance 

5 health plan (with a final accepted bid equal to 

6 the reduced weighted average accepted bid pre7 mium for the regional alliance). 

8 (c) ESSENTIAL COMMUNITY PROVIDER.— 

9 (1) HEALTH SERVICES.—If a health program of 

10 the Indian Health Service, a service unit, a tribal or11 ganization, or an urban Indian organization oper12 ating within a health program elects to be an essen13 tial community provider under section 1431, an indi14 vidual described in paragraph (2) enrolled in a 

15 health plan other than a health program of the In16 dian Health Service may receive health services from 

17 that essential community provider. 

18 (2) INDIVIDUAL COVERED.—An individual re19 ferred to in paragraph (1) is an individual who— 

20 (A) is described in section 8302(a); or 

21 (B) is a family member described in sub22 section (b) who does not enroll in a health pro23 gram of the Indian Health Service. 
1259 

Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 SEC. 8307. PAYMENT BY OTHER PAYERS. 

2 (a) PAYMENT FOR SERVICES PROVIDED BY INDIAN

3 HEALTH SERVICE PROGRAMS.—Nothing in this subtitle 

4 shall be construed as amending section 206, 401, or 402 

5 of the Indian Health Care Improvement Act (relating to 

6 payments on behalf of Indians for health services from 

7 other Federal programs or from other third party payers). 

8 (b) PAYMENT FOR SERVICES PROVIDED BY CON9 TRACTORS.—Nothing in this subtitle shall be construed as 

10 affecting any other provision of law, regulation, or judicial 

11 or administrative interpretation of law or policy con12 cerning the status of the Indian Health Service as the 

13 payer of last resort for Indians eligible for contract health 

14 services under a health program of the Indian Health 

15 Service. 

16 SEC. 8308. CONTRACTING AUTHORITY. 

17 Section 601(d)(1)(B) of the Indian Health Care Im18 provement Act (25 U.S.C. 1661(d)(1)(B)) is amended by 

19 inserting ‘‘(including personal services for the provision of 

20 direct health care services)’’ after ‘‘goods and services’’. 

21 SEC. 8309. CONSULTATION. 

22 The Secretary shall consult with representatives of 

23 Indian tribes, tribal organizations, and urban Indian orga24 nizations annually concerning health care reform initia25 tives that affect Indian communities. 
1260 

Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 SEC. 8310. INFRASTRUCTURE. 

2 (a) FACILITIES.—The Secretary, acting through the 

3 Indian Health Service, may expend amounts appropriated 

4 pursuant to section 8313 for the construction and renova5 tion of hospitals, health centers, health stations, and other 

6 facilities for the purpose of improving and expanding such 

7 facilities to enable the delivery of the full array of items 

8 and services guaranteed in the comprehensive benefit 

9 package. 

10 (b) CAPITAL FINANCING.—There is established in the 

11 Indian Health Service a revolving loan program. Under 

12 the program, the Secretary, acting through the Indian 

13 Health Service, shall provide guaranteed loans under such 

14 terms and conditions as the Secretary may prescribe to 

15 providers within the Indian Health Service system to im16 prove and expand health care facilities to enable the deliv17 ery of the full array of items and services guaranteed in 

18 the comprehensive benefit package. 

19 SEC. 8311. FINANCING. 

20 (a) ESTABLISHMENT OF FUND.—Each health pro21 gram of the Indian Health Service shall establish a com22 prehensive benefit package fund (hereafter in this section 

23 referred to as the ‘‘fund’’). 

24 (b) DEPOSITS.—There shall be deposited into the 

25 fund the following: 
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 (1) All amounts received as employer premium 

2 payments pursuant to section 1351(e)(3). 

3 (2) All amounts received as family premium 

4 payments and premium discount payments pursuant 

5 to section 8306(b)(4). 

6 (3) All amounts appropriated for the fund for 

7 the purpose of providing the comprehensive benefit 

8 package to individuals enrolled in a health program 

9 of the Indian Health Service. 

10 (4) Any other amount received with respect to 

11 health services for the comprehensive benefit pack12 age. 

13 (c) ADMINISTRATION AND EXPENDITURES.— 

14 (1) MANAGEMENT.—The fund shall be man15 aged by the health program of the Indian Health 

16 Service. 

17 (2) EXPENDITURES.—Expenditures may be 

18 made from the fund to provide for the delivery of 

19 the items and services of the comprehensive benefit 

20 package under the health program of the Indian 

21 Health Service. 

22 (3) AVAILABILITY OF FUNDS.—Amounts in the 

23 fund established by a service unit of the Indian 

24 Health Service under this section shall be available 

25 without further appropriation and shall remain 
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Title VIII, Subtitle D 

•HR 3600 IH / •S 1757 IS 

1 available until expended for payments for the deliv2 ery of the items and services in the comprehensive 

3 benefit package. 

4 SEC. 8312. RULE OF CONSTRUCTION. 

5 Unless otherwise provided by this Act, no part of this 

6 Act shall be construed to rescind or otherwise modify any 

7 obligations, findings, or purposes contained in the Indian 

8 Health Care Improvement Act (25 U.S.C. 1601 et seq.) 

9 and in the Indian Self-Determination and Education As10 sistance Act. 

11 SEC. 8313. AUTHORIZATIONS OF APPROPRIATIONS. 

12 (a) AUTHORIZATION OF APPROPRIATIONS.—For the 

13 purpose of carrying out this subtitle, there are authorized 

14 to be appropriated $40,000,000 for fiscal year 1995, 

15 $180,000,000 for fiscal year 1996, and $200,000,000 for 

16 each of the fiscal years 1997 through 2000. 

17 (b) RELATION TO OTHER FUNDS.—The authoriza18 tions of appropriations established in subsection (a) are 

19 in addition to any other authorizations of appropriations 

20 that are available for the purposes of carrying out this 

21 subtitle. 

22 SEC. 8314. PAYMENT OF PREMIUM DISCOUNT EQUIVALENT 

23 AMOUNTS FOR UNEMPLOYED INDIANS. 

24 (a) DETERMINATION.—The Secretary shall deter25 mine (and certify to the Secretary of the Treasury) for 
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Title VIII, Subtitle E 

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1 each fiscal year (beginning with fiscal year 1998) an 

2 amount equivalent to the aggregate amount of the pre3 mium discounts (established in section 6104) that would 

4 have been paid to individuals described in subsection (c) 

5 if such individuals had been enrolled in regional alliance 

6 health plans. 

7 (b) PAYMENT.—For each fiscal year for which an 

8 amount is certified to the Secretary of the Treasury under 

9 subsection (a), from the funds available under section 

10 9102, such Secretary shall pay the amount so certified to 

11 the Indian Health Service for the purpose of providing the 

12 comprehensive benefit package. 

13 (c) INDIVIDUAL DESCRIBED.—For purposes of this 

14 section, an individual described in this subsection is an 

15 individual described in section 8302(a) who is not a quali16 fying employee or a family member of such an employee. 

17 Subtitle E—Amendments to the 

18 Employee Retirement Income 

19 Security Act of 1974 

20 SEC. 8401. GROUP HEALTH PLAN DEFINED. 

21 Section 3 of the Employee Retirement Income Secu22 rity Act of 1974 (29 U.S.C. 1002) is amended by adding 

23 at the end the following new paragraph: 

24 ‘‘(42) The term ‘group health plan’ means an em25 ployee welfare benefit plan which provides medical care (as 
1264 

Title VIII, Subtitle E 

•HR 3600 IH / •S 1757 IS 

1 defined in section 213(d) of the Internal Revenue Code 

2 of 1986) to participants or beneficiaries directly or 

3 through insurance, reimbursement, or otherwise.’’. 

4 SEC. 8402. LIMITATION ON COVERAGE OF GROUP HEALTH 

5 PLANS UNDER TITLE I OF ERISA. 

6 (a) IN GENERAL.—Section 4 of the Employee Retire7 ment Income Security Act of 1974 (29 U.S.C. 1003) is 

8 amended— 

9 (1) in subsection (a), by striking ‘‘subsection 

10 (b)’’ and inserting ‘‘subsections (b) and (c)’’; 

11 (2) in subsection (b), by striking ‘‘The provi12 sions’’ and inserting ‘‘Except as provided in sub13 section (c), the provisions’’; and 

14 (3) by adding at the end the following new sub15 section: 

16 ‘‘(c) COVERAGE OF GROUP HEALTH PLANS.— 

17 ‘‘(1) LIMITED INCLUSION.—This title shall 

18 apply to a group health plan only to the extent pro19 vided in this subsection. 

20 ‘‘(2) COVERAGE UNDER CERTAIN PROVISIONS

21 WITH RESPECT TO CERTAIN PLANS.— 

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

23 subparagraph (B), parts 1, 4, and 6 of subtitle 

24 B shall apply to— 
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Title VIII, Subtitle E 

•HR 3600 IH / •S 1757 IS 

1 ‘‘(i) a group health plan which is 

2 maintained by— 

3 ‘‘(I) a corporate alliance (as de4 fined in section 1311(a) of the Health 

5 Security Act), or 

6 ‘‘(II) a member of a corporate al7 liance (as so defined) whose eligible 

8 sponsor is described in section 

9 1311(b)(1)(C) (relating to rural elec10 tric cooperatives and rural telephone 

11 cooperative associations), and 

12 ‘‘(ii) a group health plan not de13 scribed in clause (i) which provides bene14 fits which are permitted under paragraph 

15 (4) of section 1003 of the Health Security 

16 Act. 

17 ‘‘(B) INAPPLICABILITY WITH RESPECT TO

18 STATE-CERTIFIED HEALTH PLANS.—Subpara19 graph (A) shall not apply with respect to any 

20 plan or portion thereof which consists of a 

21 State-certified health plan (as defined in section 

22 1400(c) of the Health Security Act). The Sec23 retary shall provide by regulation for treatment 

24 as a separate group health plan of any arrange25 ment which would otherwise be treated under 
1266 

Title VIII, Subtitle E 

•HR 3600 IH / •S 1757 IS 

1 this title as part of a group health plan to the 

2 extent necessary to carry out the purposes of 

3 this title. 

4 ‘‘(3) CIVIL ACTIONS BY CORPORATE ALLIANCE

5 PARTICIPANTS, BENEFICIARIES, AND FIDUCIARIES

6 AND BY THE SECRETARY.— 

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

8 subparagraph (B), in the case of a group health 

9 plan to which parts 1, 4, and 6 of subtitle B 

10 apply under paragraph (2), section 502 shall 

11 apply with respect to a civil action described in 

12 such section brought— 

13 ‘‘(i) by a participant, beneficiary, or 

14 fiduciary under such plan, or 

15 ‘‘(ii) by the Secretary. 

16 ‘‘(B) EXCEPTION WHERE REVIEW IS OTH17 ERWISE AVAILABLE UNDER HEALTH SECURITY

18 ACT.—Subparagraph (A) shall not apply with 

19 respect to any cause of action for which, under 

20 section 5202(d) of the Health Security Act, 

21 proceedings under sections 5203 and 5204 of 

22 such Act pursuant to complaints filed under 

23 section 5202(b) of such Act, and review under 

24 section 5205 of such Act of determinations 
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Title VIII, Subtitle E 

•HR 3600 IH / •S 1757 IS 

1 made under such section 5204, are the exclu2 sive means of review. 

3 ‘‘(4) DEFINITIONS AND ENFORCEMENT PROVI4 SIONS.—Sections 3, 501, 502, 503, 504, 505, 506, 

5 507, 508, 509, 510, and 511 and the preceding sub6 sections of this section shall apply to a group health 

7 plan to the extent necessary to effectively carry out, 

8 and enforce the requirements under, the provisions 

9 of this title as they apply pursuant to this sub10 section. 

11 ‘‘(5) APPLICABILITY OF PREEMPTION RULES.— 

12 Section 514 shall apply in the case of any group 

13 health plan to which parts 1, 4, and 6 of subtitle B 

14 apply under paragraph (2).’’. 

15 (b) REPORTING AND DISCLOSURE REQUIREMENTS

16 APPLICABLE TO GROUP HEALTH PLANS.— 

17 (1) IN GENERAL.—Part 1 of subtitle B of title 

18 I of such Act is amended— 

19 (A) in the heading for section 110 (29 

20 U.S.C. 1030), by adding ‘‘BY PENSION PLANS’’ 

21 at the end; 

22 (B) by redesignating section 111 (29 

23 U.S.C. 1031) as section 112; and 

24 (C) by inserting after section 110 the fol25 lowing new section: 
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Title VIII, Subtitle E 

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1 ‘‘SPECIAL RULES FOR GROUP HEALTH PLANS

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

3 regulation provide special rules for the application of this 

4 part to group health plans which are consistent with the 

5 purposes of this title and the Health Security Act and 

6 which take into account the special needs of participants, 

7 beneficiaries, and health care providers under such plans. 

8 ‘‘(b) EXPEDITIOUS REPORTING AND DISCLOSURE.— 

9 Such special rules may include rules providing for— 

10 ‘‘(1) reductions in the periods of time referred 

11 to in this part, 

12 ‘‘(2) increases in the frequency of reports and 

13 disclosures required under this part, and 

14 ‘‘(3) such other changes in the provisions of 

15 this part as may result in more expeditious reporting 

16 and disclosure of plan terms and changes in such 

17 terms to the Secretary and to plan participants and 

18 beneficiaries, 

19 to the extent that the Secretary determines that the rules 

20 described in this subsection are necessary to ensure timely 

21 reporting and disclosure of information consistent with the 

22 purposes of this part and the Health Security Act as they 

23 relate to group health plans. 

24 ‘‘(c) ADDITIONAL REQUIREMENTS.—Such special 

25 rules may include rules providing for reporting and disclo-
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1 sure to the Secretary and to participants and beneficiaries 

2 of additional information or at additional times with re3 spect to group health plans to which this part applies 

4 under section 4(c)(2), if such reporting and disclosure 

5 would be comparable to and consistent with similar re6 quirements applicable under the Health Security Act with 

7 respect to plans maintained by regional alliances (as de8 fined in such section 1301 of such Act) and applicable reg9 ulations of the Secretary of Health and Human Services 

10 prescribed thereunder.’’. 

11 (2) CLERICAL AMENDMENT.—The table of con12 tents in section 1 of such Act is amended by striking 

13 the items relating to sections 110 and 111 and in14 serting the following new items: 

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

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

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

15 (d) EXCLUSION OF PLANS MAINTAINED BY RE16 GIONAL ALLIANCES FROM TREATMENT AS MULTIPLE EM17 PLOYER WELFARE ARRANGEMENTS.—Section 3(40)(A) of 

18 such Act (29 U.S.C. 1002(40)(A)) is amended— 

19 (1) in clause (ii), by striking ‘‘or’’; 

20 (2) in clause (iii), by striking the period and in21 serting ‘‘, or’’; and 

22 (3) by adding after clause (iii) the following 

23 new clause: 
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1 ‘‘(iv) by a regional alliance (as defined in sec2 tion 1301 of the Health Security Act).’’. 

3 SEC. 8403. AMENDMENTS RELATING TO CONTINUATION 

4 COVERAGE. 

5 (a) PERIOD OF COVERAGE.—Subparagraph (D) of 

6 section 602(2) of the Employee Retirement Income Secu7 rity Act of 1974 (29 U.S.C. 1162(1)) is amended— 

8 (1) by striking ‘‘or’’ at the end of clause (i), by 

9 striking the period at the end of clause (ii) and in10 serting ‘‘, or’’, and by adding at the end the fol11 lowing new clause: 

12 ‘‘(iii) eligible for coverage under a 

13 comprehensive benefit package described in 

14 section 1101 of the Health Security Act.’’, 

15 and 

16 (2) by striking ‘‘OR MEDICARE ENTITLEMENT’’ 

17 in the heading and inserting ‘‘, MEDICARE ENTITLE18 MENT, OR HEALTH SECURITY ACT ELIGIBILITY’’. 

19 (b) QUALIFIED BENEFICIARY.—Section 607(3) of 

20 such Act (29 U.S.C. 1167(3)) is amended by adding at 

21 the end the following new subparagraph: 

22 ‘‘(D) SPECIAL RULE FOR INDIVIDUALS

23 COVERED BY HEALTH SECURITY ACT.—The 

24 term ‘qualified beneficiary’ shall not include any 

25 individual who, upon termination of coverage 
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1 under a group health plan, is eligible for cov2 erage under a comprehensive benefit package 

3 described in section 1101 of the Health Secu4 rity Act.’’ 

5 (c) REPEAL UPON IMPLEMENTATION OF HEALTH

6 SECURITY ACT.— 

7 (1) IN GENERAL.—Part 6 of subtitle B of title 

8 I of such Act (29 U.S.C. 601 et seq.) is amended 

9 by striking sections 601 through 608 and by redesig10 nating section 609 as section 601. 

11 (2) CONFORMING AMENDMENTS.— 

12 (A) Section 502(a)(7) of such Act (29 

13 U.S.C. 1132(a)(7)) is amended by striking 

14 ‘‘609(a)(2)(A)’’ and inserting ‘‘601(a)(2)(A)’’. 

15 (B) Section 502(c)(1) is amended by strik16 ing ‘‘paragraph (1) or (4) of section 606 or’’. 

17 (C) Section 514 of such Act (29 U.S.C. 

18 1144) is amended by striking ‘‘609’’ each place 

19 it appears in subsections (b)(7) and (b)(8) and 

20 inserting ‘‘601’’. 

21 (D) The table of contents in section 1 of 

22 such Act is amended by striking the items relat23 ing to sections 601 through 609 and inserting 

24 the following new item: 

‘‘Sec. 601. Additional standards for group health plans.’’ 

25 (d) EFFECTIVE DATE.— 
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1 (1) SUBSECTIONS (a) AND (b).—The amend2 ments made by subsections (a) and (b) shall take ef3 fect on the date of the enactment of this Act. 

4 (2) SUBSECTION (c).—The amendments made 

5 by subsection (c) shall take effect on the earlier of— 

6 (A) January 1, 1998, or 

7 (B) the first day of the first calendar year 

8 following the calendar year in which all States 

9 have in effect plans under which individuals are 

10 eligible for coverage under a comprehensive 

11 benefit package described in section 1101 of 

12 this Act. 

13 SEC. 8404. ADDITIONAL AMENDMENTS RELATING TO 

14 GROUP HEALTH PLANS. 

15 (a) REGULATIONS OF THE NATIONAL HEALTH

16 BOARD REGARDING CASES OF ADOPTION.—Section 

17 601(c) of the Employee Retirement Income Security Act 

18 of 1974 (as redesignated by section 8403) is amended by 

19 adding at the end the following new paragraph: 

20 ‘‘(4) REGULATIONS BY NATIONAL HEALTH

21 BOARD.—The preceding provisions of this subsection 

22 shall apply except to the extent otherwise provided 

23 in regulations of the National Health Board under 

24 the Health Security Act.’’. 
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1 (b) COVERAGE OF PEDIATRIC VACCINES.—Section 

2 601(d) of such Act (as redesignated by section 8403) is 

3 amended by adding at the end the following new sentence: 

4 ‘‘The preceding sentence shall cease to apply to a group 

5 health plan upon becoming a corporate alliance health 

6 plan pursuant to an effective election of the plan sponsor 

7 to be a corporate alliance under section 1311 of the Health 

8 Security Act.’’. 

9 (c) TECHNICAL CORRECTIONS.—Effective as if in10 cluded in the enactment of the Omnibus Budget Reconcili11 ation Act of 1993— 

12 (1) Subsection (a)(2)(B)(ii) of section 609 of 

13 the Employee Retirement Income Security Act of 

14 1974 is amended by striking ‘‘section 13822’’ and 

15 inserting ‘‘section 13623’’. 

16 (2) Subsection (a)(4) of such section 609 is 

17 amended by striking ‘‘section 13822’’ and inserting 

18 ‘‘section 13623’’. 

19 (3) Subsection (d) of such section 609 is 

20 amended by striking ‘‘section 13830’’ and inserting 

21 ‘‘section 13631’’. 

22 SEC. 8405. PLAN CLAIMS PROCEDURES. 

23 Section 503 of the Employee Retirement Income Se24 curity Act of 1974 (29 U.S.C. 1133) is amended— 
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1 (1) by inserting ‘‘(a) IN GENERAL.—’’ after 

2 ‘‘SEC. 503.’’; and 

3 (2) by adding at the end the following new sub4 section: 

5 ‘‘(b) GROUP HEALTH PLANS.—In addition to the re6 quirements of subsection (a), a group health plan to which 

7 parts 1 and 4 apply under section 4(c)(2) shall comply 

8 with the requirements of section 5201 of the Health Secu9 rity Act (relating to health plan claims procedure).’’. 

10 SEC. 8406. EFFECTIVE DATES. 

11 Except as otherwise provided in this subtitle, the 

12 amendments made by this subtitle shall take effect on the 

13 earlier of— 

14 (1) January 1, 1998, or 

15 (2) such date or dates as may be prescribed in 

16 regulations of the National Health Board in connec17 tion with plans whose participants or beneficiaries 

18 reside in any State which becomes a participating 

19 State under section 1200 of this Act before January 

20 1, 1998. 
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1 Subtitle F—Special Fund for WIC 

2 Program 

3 SEC. 8501. ADDITIONAL FUNDING FOR SPECIAL SUPPLE4 MENTAL FOOD PROGRAM FOR WOMEN, IN5 FANTS, AND CHILDREN (WIC). 

(a) AUTHORIZATION OF ADDITIONAL APPROPRIATIONS.—There is hereby authorized to be appropriated 

for the special supplemental food program for women, infants, and children (WIC) under section 17 of the Child 

Nutrition Act of 1966, in addition to amounts otherwise 

authorized to be appropriated for such program, such 

amounts as are necessary for the Secretary of the Treasury to fulfill the requirements of subsection (b). 

(b) WIC FUND.— 

(1) CREDIT.—For each of fiscal years 1996 

through 2000, the Secretary of the Treasury shall 

credit to a special fund of the Treasury an amount 

equal to— 

(A) $254,000,000 for fiscal year 1996, 

(B) $407,000,000 for fiscal year 1997, 

(C) $384,000,000 for fiscal year 1998, 

(D) $398,000,000 for fiscal year 1999, 

and 

(E) $411,000,000 for fiscal year 2000. 
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(2) AVAILABILITY.—Subject to paragraph (3), 

amounts in such fund— 

(A) shall be available only for the program 

authorized under section 17 of the Child Nutrition Act of 1966, exclusive of activities authorized under section 17(m) of such Act, and 

(B) shall be paid to the Secretary of Agriculture for such purposes. 

(3) LIMITATION.—For a fiscal year specified in 

paragraph (1), the amount credited to such fund for 

the fiscal year shall be available for use in such program only if appropriations Acts for the fiscal year, 

without the addition of amounts provided under subsection (a) for the fund, provide new budget authority for the program of no less than— 

(A) $3,660,000,000 for fiscal year 1996, 

(B) $3,759,000,000 for fiscal year 1997, 

(C) $3,861,000,000 for fiscal year 1998, 

(D) $3,996,000,000 for fiscal year 1999, 

and 

(E) $4,136,000,000 for fiscal year 2000. 

1 TITLE IX—AGGREGATE 

2 GOVERNMENT PAYMENTS 

TABLE OF CONTENTS OF TITLE
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Page 

TITLE IX—AGGREGATE GOVERNMENT PAYMENTS 

Subtitle A—Aggregate State Payments 

PART 1—STATE MAINTENANCE OF EFFORT PAYMENT

Sec. 9001. State maintenance-of-effort payment relating to non-cash 

assistance recipients ...................................................... 1277 

Sec. 9002. Non-cash baseline amounts ................................................... 1278 

Sec. 9003. Updating of baseline amounts ............................................... 1282 

Sec. 9004. Non-cash assistance child and adult defined ......................... 1284 

PART 2—STATE PREMIUM PAYMENTS

Sec. 9011. State premium payment relating to cash assistance recipients ................................................................................ 1285 

Sec. 9012. Determination of AFDC per capita premium amount for regional alliances .............................................................. 1286 

Sec. 9013. Determination of SSI per capita premium amount for regional alliances .............................................................. 1291 

Sec. 9014. Determination of number of AFDC and SSI recipients ....... 1292 

Sec. 9015. Regional alliance adjustment factors .................................... 1293 

PART 3—GENERAL AND MISCELLANEOUS PROVISIONS

Sec. 9021. Timing and manner of payments .......................................... 1294 

Sec. 9022. Review of payment level ........................................................ 1294 

Sec. 9023. Special rules for Puerto Rico and other territories ............... 1295 

Subtitle B—Aggregate Federal Alliance Payments 

Sec. 9101. Federal premium payments for cash assistance recipients ... 1296 

Sec. 9102. Capped Federal alliance payments ........................................ 1298 

Subtitle C—Borrowing Authority to Cover Cash-Flow 

Shortfalls 

Sec. 9201. Borrowing authority to cover cash-flow shortfalls ................ 1308 
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Title IX, Subtitle A 

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1 Subtitle A—Aggregate State 

2 Payments 

3 PART 1—STATE MAINTENANCE OF EFFORT 

4 PAYMENT 

5 SEC. 9001. STATE MAINTENANCE-OF-EFFORT PAYMENT RE6 LATING TO NON-CASH ASSISTANCE RECIPI7 ENTS. 

8 (a) PAYMENT.—Each participating State shall pro9 vide for each year (beginning with State’s first year) for 

10 payment to regional alliances in the State in the amounts 

11 specified in subsection (b). 

12 (b) AMOUNT.—Subject to sections 6005, 9023, and 

13 9201(c)(2), the total amount of such payment for a year 

14 shall be equal to the following: 

15 (1) FIRST YEAR.—In the case of the first year 

16 for a State, the sum of— 

17 (A) the State non-cash, non-DSH baseline 

18 amount for the State, determined under section 

19 9002(a)(1) and updated under section 

20 9003(a)(1), and 

21 (B) the State non-cash, DSH baseline 

22 amount for the State, determined under section 

23 9002(a)(2) and updated under section 

24 9003(a)(2). 
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1 (2) SUBSEQUENT YEAR.—In the case of any 

2 succeeding year, the sum computed under paragraph 

3 (1) for the first year updated to the year involved 

4 under section 9003(b) . 

5 (c) DIVISION AMONG REGIONAL ALLIANCES.—In the 

6 case of a State with more than one regional alliance, the 

7 payment required to be made under this section shall be 

8 distributed among the regional alliances in an equitable 

9 manner (determined by the State) that takes into account, 

10 for each regional alliance, the proportion of the non-cash 

11 baseline amount (described in section 9002) that is attrib12 utable to individuals who resided in the alliance area of 

13 the regional alliance. 

14 SEC. 9002. NON-CASH BASELINE AMOUNTS. 

15 (a) BASELINE AMOUNTS.— 

16 (1) NON-DSH AMOUNT.—The Secretary shall 

17 determine for each State a non-cash, non-DSH base18 line amount which is equal to the sum of the fol19 lowing: 

20 (A) EXPENDITURES FOR COMPREHENSIVE

21 BENEFIT PACKAGE FOR NON-CASH ASSISTANCE

22 CHILDREN.—The aggregate State medicaid ex23 penditures in fiscal year 1993 (as defined in 

24 subsection (b)(1)) for the comprehensive benefit 
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1 package for non-cash assistance children (as de2 fined in section 9004(a)). 

3 (B) EXPENDITURES FOR COMPREHENSIVE

4 BENEFIT PACKAGE FOR NON-CASH ASSISTANCE

5 ADULTS.—The aggregate State medicaid ex6 penditures in fiscal year 1993 for the com7 prehensive benefit package for non-cash assist8 ance adults (as defined in section 9004(b)). 

9 (C) EXPENDITURES FOR ADDITIONAL BEN10 EFITS FOR CERTAIN CHILDREN RECEIVING

11 AFDC OR SSI.—The aggregate medicaid expend12 itures in fiscal year 1993 for all medically nec13 essary items and services described in section 

14 1905(a) of the Social Security Act (including 

15 items and services described in section 1905(r) 

16 of such Act but excluding long-term care serv17 ices described in section 1933(c) of such Act) 

18 for qualified children described in section 

19 1934(b)(1) of such Act who are AFDC or SSI 

20 recipients. 

21 (2) DSH AMOUNT.—The Secretary shall deter22 mine for each State a non-cash, DSH baseline 

23 amount which is equal to the DSH expenditures in 

24 fiscal year 1993 (as defined in subsection (b)(2)). 
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1 (b) STATE MEDICAID EXPENDITURES AND DSH EX2 PENDITURES DEFINED.— 

3 (1) AGGREGATE STATE MEDICAID EXPENDI4 TURES.— 

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

6 term ‘‘aggregate State medicaid expenditures’’ 

7 means, with respect to specified individuals and 

8 a State in fiscal year 1993, the amount of pay9 ments under the State medicaid plan with re10 spect to medical assistance furnished for such 

11 individuals for calendar quarters in fiscal year 

12 1993, less the amount of Federal financial par13 ticipation paid to the State with respect to such 

14 assistance, and not including any DSH expendi15 tures. 

16 (B) LIMITED TO PAYMENTS FOR SERV17 ICES.—In applying subparagraph (A), payments 

18 under the State medicaid plan shall not be in19 cluded unless Federal financial participation is 

20 provided with respect to such payments under 

21 section 1903(a)(1) of the Social Security Act 

22 and such payments shall not include payments 

23 for medicare cost-sharing (as defined in section 

24 1905(p)(3) of the Social Security Act). 
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Title IX, Subtitle A 

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1 (2) DSH EXPENDITURES.—In this section, the 

2 term ‘‘DSH expenditures’’ means, with respect to 

3 fiscal year 1993, payments made under section 1923 

4 of the Social Security Act in fiscal year 1993 multi5 plied by proportion of payments for medical assist6 ance for hospital services (including psychiatric hos7 pital services) under the State medicaid plan in fis8 cal year 1993 that is attributable to non-cash assist9 ance adults and non-cash assistance children. 

10 (3) ADJUSTMENT AUTHORIZED TO TAKE INTO

11 ACCOUNT CASH FLOW VARIATIONS.—If the Secretary 

12 finds that a State took an action that had the effect 

13 of shifting the timing of medical assistance pay14 ments under the State medicaid plan between quar15 ters or fiscal years in a manner so that the pay16 ments made in fiscal year 1993 do not accurately re17 flect the value of the medical assistance provided 

18 with respect to items and services furnished in that 

19 fiscal year, the Secretary may provide for such ad20 justment in the amounts computed under this sub21 section as may be necessary so that the non-cash 

22 baseline amounts determined under this section ac23 curately reflects such value. 

24 (4) TREATMENT OF DISALLOWANCES.—The 

25 amounts determined under this subsection shall take 
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1 into account amounts (or an estimate of amounts) 

2 disallowed. 

3 (c) APPLICATION TO PARTICULAR ITEMS AND SERV4 ICES IN COMPREHENSIVE BENEFIT PACKAGE.—For pur5 poses of subsection (a)(1), in determining the aggregate 

6 State medicaid expenditures for a category of items and 

7 services (within the comprehensive benefit package) fur8 nished in a State, there shall be counted only that propor9 tion of such expenditures that were attributable to items 

10 and services included in the comprehensive benefit pack11 age (taking into account any limitation on amount, dura12 tion, or scope of items and services included in such pack13 age). 

14 SEC. 9003. UPDATING OF BASELINE AMOUNTS. 

15 (a) INITIAL UPDATE THROUGH THE FIRST YEAR.— 

16 (1) NON-CASH, NON-DSH BASELINE AMOUNT.— 

17 The Secretary shall update the non-cash, non-DSH 

18 baseline amount determined under section 

19 9002(a)(1) for each State from fiscal year 1993 

20 through the first year, by the following percentage: 

21 (A) If such first year is 1996, the applica22 ble percentage is 56.6 percent. 

23 (B) If such first year is 1997, the applica24 ble percentage is 78.1 percent. 
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Title IX, Subtitle A 

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1 (C) If such first year is 1998, the applica2 ble percentage is 102.2 percent. 

3 (2) NON-CASH, DSH BASELINE AMOUNT.—The 

4 Secretary shall update the non-cash, DSH baseline 

5 amount determined under section 9002(a)(2) for 

6 each State from fiscal year 1993 through the first 

7 year, by the following percentage: 

8 (A) If such first year is 1996, the applica9 ble percentage is 45.9 percent. 

10 (B) If such first year is 1997, the applica11 ble percentage is 61.8 percent. 

12 (C) If such first year is 1998, the applica13 ble percentage is 79.0 percent. 

14 (3) ADJUSTMENT AUTHORIZED TO TAKE INTO

15 ACCOUNT CASH FLOW VARIATIONS.—In determining 

16 the updates under paragraphs (1) and (2), the Sec17 retary may provide for an adjustment in a manner 

18 similar to the adjustment permitted under section 

19 9002(b)(3). 

20 (b) UPDATE FOR SUBSEQUENT YEARS.—For each 

21 State for each year after the first year, the Board shall 

22 update the non-cash baseline amount (as previously up23 dated under this subsection) by the product of— 
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1 (1) 1 plus the general health care inflation fac2 tor (as defined in section 6001(a)(3)) for the year, 

3 and 

4 (2) 1 plus the annual percentage increase in the 

5 population of the United States of individuals who 

6 are under 65 years of age (as estimated by the 

7 Board based on projections made by the Bureau of 

8 Labor Statistics of the Department of Labor) for 

9 the year. 

10 SEC. 9004. NON-CASH ASSISTANCE CHILD AND ADULT DE11 FINED. 

12 (a) NON-CASH ASSISTANCE CHILD.—In this part, 

13 the term ‘‘non-cash assistance child’’ means a child de14 scribed in section 1934(b)(1) of the Social Security Act 

15 (as inserted by section 4222(a)) who is not a medicare16 eligible individual. 

17 (b) NON-CASH ASSISTANCE ADULT.—In this part, 

18 the term ‘‘non-cash assistance adult’’ means an individual 

19 who is— 

20 (1) over 21 years, 

21 (2) is a citizen or national of the United States 

22 or an alien who is lawfully admitted for permanent 

23 residence or otherwise permanently residing in the 

24 United States under color of law, and 
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Title IX, Subtitle A 

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1 (3) is not an AFDC or SSI recipient or a medi2 care-eligible individual. 

3 PART 2—STATE PREMIUM PAYMENTS 

4 SEC. 9011. STATE PREMIUM PAYMENT RELATING TO CASH 

5 ASSISTANCE RECIPIENTS. 

6 (a) IN GENERAL.—Subject to subsection (c), each 

7 participating State shall provide in each year (beginning 

8 with the State’s first year) for payment to each regional 

9 alliance in the State of an amount equal to the State med10 ical assistance percentage (as defined in subsection (b)) 

11 of 95 percent of the sum of the following products: 

12 (1) AFDC PORTION.—The product of— 

13 (A) the AFDC per capita premium amount 

14 for the regional alliance for the year (deter15 mined under section 9012(a)), and 

16 (B) the number of AFDC recipients resid17 ing in the alliance area in the year (as deter18 mined under section 9014(b)(1)). 

19 (2) SSI PORTION.—The product of— 

20 (A) the SSI per capita premium amount 

21 for the regional alliance for the year (deter22 mined under section 9013), and 

23 (B) the number of SSI recipients residing 

24 in the alliance area in the year (as determined 

25 under section 9014(b)(1)). 
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Title IX, Subtitle A 

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1 (b) STATE MEDICAL ASSISTANCE PERCENTAGE DE2 FINED.—In subsection (a), the term ‘‘State medical assist3 ance percentage’’ means, for a State for a quarter in a 

4 fiscal year, 100 percent minus the Federal medical assist5 ance percentage (as defined in section 1905(b) of the So6 cial Security Act) for the State for the fiscal year. 

7 (c) ADDITIONAL AMOUNT.—The amount of payment 

8 under subsection (a) for a State for a year shall be in9 creased by the State medical assistance percentage multi10 plied by the sum of the following: 

11 (1) AMOUNT OF SPECIAL INCREASE IN PRE12 MIUM DISCOUNT.—The aggregate increase in the 

13 premium discounts under section 6104 for AFDC 

14 and SSI families enrolled in regional alliance health 

15 plans in the State that is attributable to subsection 

16 (b)(2) of such section, and 

17 (2) AMOUNT OF BASIC COST SHARING REDUC18 TION.—The amount of any cost sharing reduction 

19 under section 1371(c)(1) for such families. 

20 SEC. 9012. DETERMINATION OF AFDC PER CAPITA PRE21 MIUM AMOUNT FOR REGIONAL ALLIANCES. 

22 (a) IN GENERAL.—For each regional alliance in a 

23 State for each year, the Secretary shall determine an 

24 AFDC per capita premium amount in accordance with 

25 this section. Such amount is equal to— 
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1 (1) the per capita State medicaid expenditures 

2 for the comprehensive benefit package for AFDC re3 cipients for the State for the year (as determined 

4 under subsection (b)), multiplied by 

5 (2) the regional alliance adjustment factor (de6 termined under section 9015) for the year for the 

7 regional alliance. 

8 (b) PER CAPITA STATE MEDICAID EXPENDITURES

9 DEFINED.—The ‘‘per capita State medicaid expenditures 

10 for the comprehensive benefit package for AFDC recipi11 ents’’ for a State for a year is equal to the base per capita 

12 expenditures (described in subsection (c)), updated to the 

13 year involved under subsection (d)). 

14 (c) BASE PER CAPITA EXPENDITURES.—The ‘‘base 

15 per capita expenditures’’ described in this subsection, for 

16 a State for a year, is— 

17 (1) the baseline medicaid expenditures (as de18 fined in subsection (e)) for the State, divided by 

19 (2) the number of AFDC recipients enrolled in 

20 the State medicaid plan in fiscal year 1993, as de21 termined under section 9014(a). 

22 (d) UPDATING.— 

23 (1) INITIAL UPDATE THROUGH YEAR BEFORE

24 FIRST YEAR.— 
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Title IX, Subtitle A 

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1 (A) IN GENERAL.—The Secretary shall up2 date the base per capita expenditures described 

3 in subsection (c) for each State from fiscal year 

4 1993 through the year before first year, by the 

5 applicable percentage specified in subparagraph 

6 (B), or, if less, the increase percentage specified 

7 in subparagraph (C). 

8 (B) APPLICABLE PERCENTAGE.—For pur9 poses of subparagraph (A), the applicable per10 centage specified in this subparagraph, in the 

11 case of a State in which the first year is— 

12 (i) 1996 is 32.2 percent, 

13 (ii) 1997 is 46.6 percent, or 

14 (iii) 1998 is 62.1 percent. 

15 (C) INCREASE PERCENTAGE.— 

16 (i) IN GENERAL.—The increase per17 centage for a State specified in this sub18 paragraph is the Secretary’s estimate of 

19 the percentage increase in the per capita 

20 expenditures specified in clause (ii) from 

21 fiscal year 1993 through the year before 

22 the first year, adjusted so as to eliminate 

23 any change in medicaid expenditures that 

24 is attributable to a reduction in the scope 

25 of services, an arbitrary reduction in pay-
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Title IX, Subtitle A 

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1 ment rates, or a reduction in access to 

2 high quality services under the State med3 icaid plan. 

4 (ii) PER CAPITA EXPENDITURES.— 

5 The per capita expenditures specified in 

6 this clause for a year is the quotient of the 

7 baseline medicaid expenditures for the 

8 State for the year, divided by the number 

9 of AFDC recipients enrolled in the State 

10 medicaid plan for the year. 

11 (D) ADJUSTMENT AUTHORIZED TO TAKE

12 INTO ACCOUNT CASH FLOW VARIATIONS.—In 

13 determining the update under paragraph (1), 

14 the Secretary may provide for an adjustment in 

15 a manner similar to the adjustment permitted 

16 under section 9002(b)(3). 

17 (2) UPDATE FOR SUBSEQUENT YEARS.—For 

18 each State for the first year and for each year after 

19 the first year, the Board shall update the base per 

20 capita expenditures described in subsection (c) (as 

21 previously updated under this subsection) by a fac22 tor equal to 1 plus the general health care inflation 

23 factor (as defined in section 6001(a)(3)) for the 

24 year. 
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1 (e) DETERMINATION OF BASELINE MEDICAID EX2 PENDITURES.— 

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

4 (c)(1), the ‘‘baseline medicaid expenditures’’ for a 

5 State is the gross amount of payments under the 

6 State medicaid plan with respect to medical assist7 ance furnished, for items and services included in 

8 the comprehensive benefit package, for AFDC recipi9 ents for calendar quarters in fiscal year 1993, but 

10 does not include such expenditures for which no 

11 Federal financial participation is provided under 

12 such plan. 

13 (2) DISPROPORTIONATE SHARE PAYMENTS NOT

14 INCLUDED.—In applying paragraph (1), payments 

15 made under section 1923 of the Social Security Act 

16 shall not be counted in the gross amount of pay17 ments. 

18 (3) TREATMENT OF DISALLOWANCES.—The 

19 amount determined under this subsection shall take 

20 into account amounts (or an estimate of amounts) 

21 disallowed. 

22 (f) APPLICATION TO PARTICULAR ITEMS AND SERV23 ICES IN COMPREHENSIVE BENEFIT PACKAGE.—For pur24 poses of this section, in determining the per capita State 

25 medicaid expenditures for a category of items and services 
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1 (within the comprehensive benefit package) furnished in 

2 a State, there shall be counted only that proportion of 

3 such expenditures (determined only with respect to med4 ical assistance furnished to AFDC recipients) that were 

5 attributable to items and services included in the com6 prehensive benefit package (taking into account any limi7 tation on amount, duration, or scope of items and services 

8 included in such package). 

9 SEC. 9013. DETERMINATION OF SSI PER CAPITA PREMIUM 

10 AMOUNT FOR REGIONAL ALLIANCES. 

11 For each regional alliance in a State for each year, 

12 the Secretary shall determine an SSI per capita premium 

13 amount in accordance with this section. Such amount shall 

14 be determined in the same manner as the AFDC per cap15 ita premium amount for the regional alliance is deter16 mined under section 9012 except that, for purposes of this 

17 section— 

18 (1) any reference in such section (or in sections 

19 referred to in such section) to an ‘‘AFDC recipient’’ 

20 is deemed a reference to an ‘‘SSI recipient’’, and 

21 (2) the following percents shall be substituted 

22 for the percents specified in section 9012(d)(1)(B): 

23 (A) For 1996, 29.4 percent. 

24 (B) For 1997, 43.7 percent. 

25 (C) For 1998, 58.8 percent. 
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1 SEC. 9014. DETERMINATION OF NUMBER OF AFDC AND SSI 

2 RECIPIENTS. 

3 (a) BASELINE.—For purposes of section 9012 and 

4 section 9013, the number of AFDC recipients and SSI 

5 recipients for a State for fiscal year 1993 shall be deter6 mined based on actual reports submitted by the State to 

7 the Secretary. In the case of individuals who were not re8 cipients for the entire fiscal year, the number shall take 

9 into account only the portion of the year in which they 

10 were such recipients. The Secretary may audit such re11 ports. 

12 (b) SUBSEQUENT YEARS.— 

13 (1) PAYMENTS.—For purposes of section 

14 9011(a), the number of AFDC and SSI recipients 

15 enrolled in regional alliance health plans for a re16 gional alliance shall be determined on a monthly 

17 basis based on actual enrollment. 

18 (2) COMPUTATION OF REGIONAL ADJUSTMENT

19 FACTORS AND BLENDED PLAN PAYMENT RATES.— 

20 For purposes of computing regional alliance adjust21 ment factors under section 9015 and the AFDC and 

22 SSI proportions under section 6202, the number of 

23 AFDC and SSI recipients for a regional alliance in 

24 a State for a year (beginning with 1997) shall be de25 termined by the State before the date the State is 

26 required to compute AFDC and SSI proportions 
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1 under section 6202 based on the best available esti2 mate of such proportion in the previous year. 

3 SEC. 9015. REGIONAL ALLIANCE ADJUSTMENT FACTORS. 

4 (a) IN GENERAL.—If a State— 

5 (1) has more than one regional alliance oper6 ating in the State for a year, the State shall com7 pute under this section a regional alliance adjust8 ment factor for each such regional alliance for the 

9 year in accordance with subsection (b), or 

10 (2) has only one regional alliance for a year, the 

11 regional alliance adjustment factor under this sec12 tion is 1. 

13 (b) RULES.—The adjustment factors under sub14 section (a)(1) for a year shall be computed in a manner 

15 so that— 

16 (1) such factors for the different regional alli17 ances reflect— 

18 (A) the variation in regional alliance per 

19 capita premium targets (determined under sec20 tion 6003), and 

21 (B) the variation in base per capita ex22 penditures for medicaid across regional alli23 ances; and 

24 (2) the weighted average of such factors is 1. 
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1 (c) USE OF SAME DATA.—The weighted average 

2 under subsection (b)(2) shall be determined based on the 

3 number of AFDC recipients or SSI recipients (as the case 

4 may be) enrolled in each regional alliance in a State (as 

5 determined for each regional alliance under section 

6 9014(b)(2)). 

7 (d) CLARIFICATION OF SEPARATE COMPUTATIONS.— 

8 Determinations of adjustment factors under this section 

9 shall be made separately for AFDC recipients and for SSI 

10 recipients. 

11 PART 3—GENERAL AND MISCELLANEOUS 

12 PROVISIONS 

13 SEC. 9021. TIMING AND MANNER OF PAYMENTS. 

14 The provisions of paragraphs (1) and (2) of section 

15 9101(b) apply to payments by a State under this subtitle 

16 in the same manner as they apply to payments by the Sec17 retary under section 9101, and any reference in such pro18 visions to the Secretary is deemed a reference to the State. 

19 SEC. 9022. REVIEW OF PAYMENT LEVEL. 

20 (a) IN GENERAL.—The National Health Board shall 

21 review from time to time the appropriateness of the levels 

22 of payments required of States under this subtitle. 

23 (b) REPORT.—The Board may report to the Congress 

24 on such adjustments as should be made to assure an equi-
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1 table distribution of State payments under this Act, taking 

2 into account the revenue base in each of the States. 

3 (c) LIMIT ON AUTHORITY.—Nothing in this subtitle 

4 shall be construed as permitting the Board to change the 

5 amount of the payments required by States under the pre6 vious sections in this subtitle. 

7 SEC. 9023. SPECIAL RULES FOR PUERTO RICO AND OTHER 

8 TERRITORIES. 

9 (a) WAIVER AUTHORITY.—Notwithstanding any 

10 other requirement of this title or title VI, the Secretary 

11 may waive or modify any requirement of this title or title 

12 VI (other than financial contribution and subsidy require13 ments) with respect to Puerto Rico, the Virgin Islands, 

14 Guam, American Samoa, and the Northern Mariana Is15 lands, consistent with this section, to accommodate their 

16 unique geographic and social conditions and features of 

17 their health care systems. 

18 (b) TERRITORIAL MAINTENANCE OF EFFORT AND

19 DIVISION OF FINANCIAL RESPONSIBILITY.— 

20 (1) IN GENERAL.—In the case of such a Com21 monwealth or territory, the Secretary shall deter22 mine the State payments under part 1 taking into 

23 account— 
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1 (A) payments that qualify for Federal fi2 nancial participation under the medicaid pro3 gram, 

4 (B) payments that would qualify for such 

5 participation in the absence of section 1108(c) 

6 of the Social Security Act, and 

7 (C) other factors that the Secretary may 

8 consider. 

9 (2) CASH ASSISTANCE RECIPIENTS.—With re10 spect to such Commonwealths and territories not 

11 covered under the supplementary security income 

12 program, in this Act, the term ‘‘SSI recipient’’ in13 cludes an individual receiving aid under a territorial 

14 program for the aged, blind, or disabled under the 

15 Social Security Act. 

16 Subtitle B—Aggregate Federal 

17 Alliance Payments 

18 SEC. 9101. FEDERAL PREMIUM PAYMENTS FOR CASH AS19 SISTANCE RECIPIENTS. 

20 (a) AMOUNT.— 

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

22 each year (beginning with a State’s first year) for 

23 payment to each regional alliance of an amount 

24 equal to the Federal medical assistance percentage 

25 (as defined in section 1905(b) of the Social Security 
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1 Act) of (A) 95 percent of the sum of the products 

2 described in section 9011(a) for that State for that 

3 fiscal year, plus (B) the sum described in section 

4 9011(c). 

5 (2) SPECIAL RULES FOR SINGLE-PAYER

6 STATES.—In determining the products referred to in 

7 paragraph (1) in the case of a single-payer State, 

8 the State is deemed to be a single regional alliance 

9 and the regional alliance adjustment factor (under 

10 section 9015) is deemed to be 1. 

11 (b) TIMING AND MANNER OF PAYMENT.— 

12 (1) IN GENERAL.—Amounts required to be paid 

13 under this section shall be paid on a periodic basis 

14 that reflects the cash flow requirements of regional 

15 alliances for payments under this section in order to 

16 meet obligations established under this Act and, in 

17 consultation with the Secretary of the Treasury, the 

18 cash management interests of the Federal Govern19 ment. 

20 (2) PERIODIC PROVISION OF INFORMATION.— 

21 Each regional alliance shall periodically transmit to 

22 the Secretary such information as the Secretary may 

23 require to make such payments. 

24 (3) RECONCILIATION.— 
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1 (A) PRELIMINARY.—At such time after the 

2 end of each year as the Secretary shall specify, 

3 the State shall submit to the Secretary such in4 formation as the Secretary may require to do a 

5 preliminary reconciliation of the amounts paid 

6 under this section and the amounts due. 

7 (B) FINAL.—No later than June 30 of 

8 each year, the Secretary shall provide for a 

9 final reconciliation for such payments for quar10 ters in the previous year. Amounts subsequently 

11 payable are subject to adjustment to reflect the 

12 results of such reconciliation. 

13 (C) AUDIT.—Payments under this section 

14 are subject to audits by the Secretary in accord15 ance with rules established by the Secretary. 

16 SEC. 9102. CAPPED FEDERAL ALLIANCE PAYMENTS. 

17 (a) CAPPED ENTITLEMENT.— 

18 (1) PAYMENT.—The Secretary shall provide for 

19 each calendar quarter (beginning on or after Janu20 ary 1, 1996) for payment to each regional alliance 

21 of an amount equal to the capped Federal alliance 

22 payment amount (as defined in subsection (b)(1)) 

23 for the regional alliance for the quarter. 

24 (2) ENTITLEMENT.—This section constitutes 

25 budget authority in advance of appropriations Acts, 
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Title IX, Subtitle B 

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1 and represents the obligation of the Federal Govern2 ment to provide for the payment to regional alliances 

3 of the capped Federal alliance payment amount 

4 under this section. 

5 (b) CAPPED FEDERAL ALLIANCE PAYMENT

6 AMOUNT.— 

7 (1) IN GENERAL.—In this section, the term 

8 ‘‘capped Federal alliance payment amount’’ means, 

9 for a regional alliance for a calendar quarter in a 

10 year and subject to subsection (e), the amount by 

11 which— 

(A) 1 12 ⁄4 of the total payment obligation (de13 scribed in paragraph (2)) for the alliance for 

14 the year, exceeds 

(B) 1 15 ⁄4 of the total amounts receivable (de16 scribed in paragraph (3)) by the alliance for the 

17 year. 

18 (2) TOTAL PAYMENT OBLIGATION.—The total 

19 payment obligation described in this paragraph for 

20 an alliance for a year is the total amount payable by 

21 the alliance for the following: 

22 (A) PLAN PAYMENTS (AND CERTAIN COST

23 SHARING REDUCTIONS).—Payments to regional 

24 alliance health plans under section 1351 (in25 cluding amounts attributable to cost sharing re-
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Title IX, Subtitle B 

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1 ductions under section 1371, not including a re2 duction under subsection (c)(2) thereof). 

3 (B) ALLIANCE ADMINISTRATIVE EX4 PENSES.—Payments retained by the regional 

5 alliance for administration (in accordance with 

6 section 1352). 

7 (3) TOTAL AMOUNTS RECEIVABLE.—The total 

8 amounts receivable by a regional alliance for a year 

9 is the sum of the following: 

10 (A) PREMIUMS.—The amount payable to 

11 the regional alliance for the family share of pre12 miums, employer premiums, and liabilities owed 

13 the alliance under subtitle B of title VI, not 

14 taking into account any failure to make or col15 lect such payments. 

16 (B) OTHER GOVERNMENT PAYMENTS.— 

17 The amounts payable to the regional alliance 

18 under sections 9001, 9011, and 9101, and pay19 able under section 1894 of the Social Security 

20 Act (as added by section 4003) during the year. 

21 (4) NO PAYMENT FOR CERTAIN AMOUNTS.— 

22 (A) UNCOLLECTED ALLIANCE PRE23 MIUMS.—Each regional alliance is responsible, 

24 under section 1345(a), for the collection of all 

25 amounts owed the alliance (whether by individ-
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Title IX, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 uals, employers, or others and whether on the 

2 basis of premiums owed, incorrect amounts of 

3 discounts or premium, cost sharing, or other re4 ductions made, or otherwise), and no amounts 

5 are payable by the Federal Goverment under 

6 this section with respect to the failure to collect 

7 any such amounts. 

8 (B) ADMINISTRATIVE ERRORS.— 

9 (i) IN GENERAL.—Each participating 

10 State is responsible, under section 1202(g), 

11 for the payment to regional alliances in the 

12 State of amounts attributable to adminis13 trative errors (described in clause (ii)). 

14 (ii) ADMINISTRATIVE ERRORS DE15 SCRIBED.—The administrative errors de16 scribed in this clause include the following: 

17 (I) An eligibility error rate for 

18 premium discounts, liability reduc19 tions, and cost sharing reductions 

20 under sections 6104 and 6123, section 

21 6113, and section 1371, respectively, 

22 to the extent the applicable error rate 

23 exceeds the maximum permissible 

24 error rate, specified by the applicable 

25 Secretary under section 
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Title IX, Subtitle B 

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1 1361(b)(1)(C), with respect to the 

2 section involved. 

3 (II) Misappropriations or other 

4 regional alliance expenditures that the 

5 Secretary finds are attributable to 

6 malfeasance or misfeasance by the re7 gional alliance or the State. 

8 (5) SPECIAL RULES FOR SINGLE-PAYER

9 STATES.—In applying this subsection in the case of 

10 a single-payer State, the Secretary shall develop and 

11 apply a methodology for computing an amount of 

12 payment (with respect to each calendar quarter) that 

13 is equivalent to the amount of payment that would 

14 have been made to all regional alliances in the State 

15 for the quarter if the State were not a single-payer 

16 State. 

17 (c) DETERMINATION OF CAPPED FEDERAL ALLI18 ANCE PAYMENT AMOUNTS.— 

19 (1) REPORTS.—At such time as the Secretary 

20 may require before the beginning of each fiscal year, 

21 each regional alliance shall submit to the Secretary 

22 such information as the Secretary may require to es23 timate the capped Federal alliance payment amount 

24 under this section for the succeeding calendar year 
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Title IX, Subtitle B 

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1 (and the portion of such year that falls in such fiscal 

2 year). 

3 (2) ESTIMATION.—Before the beginning of each 

4 year, the Secretary shall estimate for each regional 

5 alliance the capped Federal alliance payment amount 

6 for calendar quarters in such year. Such estimate 

7 shall be based on factors including prior financial ex8 perience in the alliance, future estimates of income, 

9 wages, and employment, and other characteristics of 

10 the area found relevant by the Secretary. The Sec11 retary shall transmit to Congress, on a timely basis 

12 consistent with the timely appropriation of funds 

13 under this section, a report that specifies an esti14 mate of the total capped Federal alliance payment 

15 amounts owed to regional alliances under this sec16 tion for the fiscal and calendar year involved. 

17 (d) PAYMENTS TO REGIONAL ALLIANCES.—Subject 

18 to subsection (e), the provisions of section 9101(b) apply 

19 to payments under this section in the same manner as 

20 they apply to payments under section 9101. 

21 (e) CAP ON PAYMENTS.— 

22 (1) IN GENERAL.—The total amount of the 

23 capped Federal alliance payments made under this 

24 section for quarters in a fiscal year may not exceed 
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Title IX, Subtitle B 

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1 the cap specified under paragraph (2) for the fiscal 

2 year. 

3 (2) CAP.—Subject to paragraphs (3) and (6)— 

4 (A) FISCAL YEARS 1996 THROUGH 2000.— 

5 The cap under this paragraph— 

6 (i) for fiscal year 1996, is $10.3 bil7 lion, 

8 (ii) for fiscal year 1997, is $28.3 bil9 lion, 

10 (iii) for fiscal year 1998, is $75.6 bil11 lion, 

12 (iv) for fiscal year 1999, is $78.9 bil13 lion, and 

14 (v) for fiscal year 2000, is $81.0 bil15 lion. 

16 (B) SUBSEQUENT FISCAL YEAR.—The cap 

17 under this paragraph for a fiscal year after fis18 cal year 2000 is the cap under this paragraph 

19 for the previous fiscal year (not taking into ac20 count paragraph (3)) multiplied by the product 

21 of the factors described in subparagraph (C) for 

22 that fiscal year and for each previous year after 

23 fiscal year 2000. 
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Title IX, Subtitle B 

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1 (C) FACTOR.—The factor described in this 

2 subparagraph for a fiscal year is 1 plus the fol3 lowing: 

4 (i) CPI.—The percentage change in 

5 the CPI for the fiscal year, determined 

6 based upon the percentage change in the 

7 average of the CPI for the 12-month pe8 riod ending with May 31 of the previous 

9 fiscal year over such average for the pre10 ceding 12-month period. 

11 (ii) POPULATION.—The average an12 nual percentage change in the population 

13 of the United States during the 3-year pe14 riod ending in the preceding calendar year, 

15 determined by the Board based on data 

16 supplied by the Bureau of the Census. 

17 (iii) REAL GDP PER CAPITA.—The av18 erage annual percentage change in the 

19 real, per capita gross domestic product of 

20 the United States during the 3-year period 

21 ending in the preceding calendar year, de22 termined by the Board based on data sup23 plied by the Department of Commerce. 

24 (3) CARRYFORWARD.—If the total of the 

25 capped Federal alliance payment amounts for all re-
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Title IX, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 gional alliances for all calendar quarters in a fiscal 

2 year is less than the cap specified in paragraph (2) 

3 for the fiscal year, then the amount of such surplus 

4 shall be accumulated and will be available in the 

5 case of a year in which the cap would otherwise be 

6 breached. 

7 (4) NOTIFICATION.— 

8 (A) IN GENERAL.—If the Secretary antici9 pates that the amount of the cap, plus any 

10 carryforward from a previous year accumulated 

11 under paragraph (3), will not be sufficient for 

12 a fiscal year, the Secretary shall notify the 

13 President, the Congress, and each regional alli14 ance. Such notification shall include informa15 tion about the anticipated amount of the short16 fall and the anticipated time when the shortfall 

17 will first occur. 

18 (B) REQUIRED ACTION.—Within 30 days 

19 after receiving such a notice, the President shall 

20 submit to Congress a report containing specific 

21 legislative recommendations for actions which 

22 would eliminate the shortfall. 

23 (5) CONGRESSIONAL CONSIDERATION.— 

24 (A) EXPEDITED CONSIDERATION.—If a 

25 joint resolution the substance of which approves 
1308 

Title IX, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 the specific recommendations submitted under 

2 paragraph (4)(B) is introduced, subject to sub3 paragraph (B), the provisions of section 2908 

4 (other than subsection (a)) of the Defense Base 

5 Closure and Realignment Act of 1990 shall 

6 apply to the consideration of the joint resolution 

7 in the same manner as such provisions apply to 

8 a joint resolution described in section 2908(a) 

9 of such Act. 

10 (B) SPECIAL RULES.—For purposes of ap11 plying subparagraph (A) with respect to such 

12 provisions, any reference to the Committee on 

13 Armed Services of the House of Representatives 

14 shall be deemed a reference to an appropriate 

15 Committee of the House of Representatives 

16 (specified by the Speaker of the House of Rep17 resentatives at the time of submission of rec18 ommendations under paragraph (4)) and any 

19 reference to the Committee on Armed Services 

20 of the Senate shall be deemed a reference to an 

21 appropriate Committee of the Senate (specified 

22 by the Majority Leader of the Senate at the 

23 time of submission of such recommendations). 

24 (6) METHOD FOR ADJUSTING THE CAP FOR

25 CHANGES IN INFLATION.—If the inflation rate, as 
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Title IX, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 measured by the percentage increase in the CPI, is 

2 projected to be significantly different from the infla3 tion rate projected by the Council of Economic Advi4 sors to the President as of October 1993, the Sec5 retary may adjust the caps under paragraph (2) so 

6 as to reflect such deviation from the projection. 

7 Subtitle C—Borrowing Authority to 

8 Cover Cash-flow Shortfalls 

9 SEC. 9201. BORROWING AUTHORITY TO COVER CASH-FLOW 

10 SHORTFALLS. 

11 (a) IN GENERAL.—The Secretary shall make avail12 able loans to regional alliances in order to cover any period 

13 of temporary cash-flow shortfall attributable to any of the 

14 following: 

15 (1) Any estimation discrepancy (including those 

16 described in subsection (e)(1)). 

17 (2) A period of temporary cash-flow shortfall 

18 attributable to an administrative error (described in 

19 subsection (e)(2)). 

20 (3) A period of temporary cash-flow shortfall 

21 relating to the relative timing during the year in 

22 which amounts are received and payments are re23 quired to be made. 

24 (b) TERMS AND CONDITIONS.— 
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Title IX, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (1) IN GENERAL.—Loans shall be made under 

2 this section under terms and conditions, consistent 

3 with this subsection, specified by the Secretary, in 

4 consultation with the Secretary of the Treasury and 

5 taking into account Treasury cash management 

6 rules. 

7 (2) PERIOD.—Loans under this section shall be 

8 repayable with interest over a period of not to exceed 

9 2 years. 

10 (3) INTEREST RATE.—The rate of interest on 

11 such loans shall be at a rate determined by the Sec12 retary of the Treasury taking into consideration the 

13 current average rate on outstanding marketable obli14 gations of the United States. 

15 (4) APPROPRIATE PAYMENT ADJUSTMENTS.— 

16 As a condition of providing a loan under subsection 

17 (a)(1), the Secretary shall require the regional alli18 ance to make such adjustments under the appro19 priate estimation adjustment provision (described in 

20 subsection (f)) in order to assure the repayment of 

21 the amount so borrowed. 

22 (5) LIMITATION ON LOAN BALANCE OUT23 STANDING TO A REGIONAL ALLIANCE.—The total 

24 balance of loans outstanding at any time to a re25 gional alliance shall not exceed— 
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Title IX, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (A) for the first year, 25 percent of the es2 timated total premiums for the alliance for such 

3 year, or 

4 (B) for a subsequent year, 25 percent of 

5 the actual total premiums for the alliance for 

6 the previous year. 

7 (c) REPAYMENT.— 

8 (1) ESTIMATION DISCREPANCIES AND TIM9 ING.—Loans made under paragraphs (1) and (3) of 

10 subsection (a) shall be repaid through a reduction in 

11 the payment amounts otherwise required to be made 

12 under section 9102 to the regional alliance. 

13 (2) ADMINISTRATIVE ERROR.—Loans made 

14 under subsection (a)(2) shall be repaid through a 

15 temporary increase in the amount of the State main16 tenance-of-effort payment required under section 

17 9001. 

18 (d) REPORTS.—The Secretary shall annually report 

19 to Congress on the loans made (and loan amounts repaid) 

20 under this section. 

21 (e) SOURCES OF DISCREPANCY DESCRIBED.— 

22 (1) ESTIMATION DISCREPANCIES.—The esti23 mation discrepancies described in this paragraph are 

24 discrepancies in estimating the following: 
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Title IX, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 (A) The average premium payments per 

2 family under section 6122(b). 

3 (B) The AFDC and SSI proportions under 

4 section 6202. 

5 (C) The distribution of enrolled families in 

6 different risk categories for purposes of section 

7 1351(c). 

8 (D) The distribution of enrollment in ex9 cess premium plans (for purposes of calculating 

10 and applying the reduced weighted average ac11 cepted bid under section 6105(c)(1)). 

12 (E) The collection shortfalls (used in com13 puting the family collection shortfall add-on 

14 under section 6107). 

15 (2) ADMINISTRATIVE ERRORS.—The adminis16 trative errors described in this paragraph are errors 

17 described in section 9201(b)(4)(B)(ii). 

18 (f) ESTIMATION ADJUSTMENT PROVISIONS DE19 SCRIBED.—The estimation adjustment provisions, referred 

20 to in subsection (b)(4)) are the following adjustments (cor21 responding to the respective estimation discrepancies spec22 ified in subsection (d)(1)): 

23 (1) Adjustments for average premium payments 

24 per family under section 6122(b)(4). 
1313 

Title X 

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1 (2) Adjustments in the AFDC and SSI propor2 tions under section 6202(d). 

3 (3) Adjustments pursuant to the methodology 

4 described in section 1541(b)(8). 

5 (4) Adjustments in excess premium credit pur6 suant to section 6105(b)(2). 

7 (5) Adjustment in the collection shortfall add8 on under section 6107(b)(2)(C)). 

9 (g) ADVANCES; LIMITATIONS ON ADVANCES.— 

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

11 the Secretary of the Treasury is authorized to ad12 vance to the Secretary, under terms and conditions 

13 determined by the Secretary of the Treasury, 

14 amounts sufficient to cover the loans made to re15 gional alliances by the Secretary under this section. 

16 (2) LIMITATION.—The total balance of Treas17 ury advances outstanding at any time to the Sec18 retary under paragraph (1) shall not exceed 

19 $3,500,000,000. 

20 TITLE X—COORDINATION OF 

21 MEDICAL PORTION OF WORK22 ERS COMPENSATION AND 

23 AUTOMOBILE INSURANCE 

TABLE OF CONTENTS OF TITLE
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Title X 

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Page 

Subtitle A—Workers Compensation Insurance 

Sec. 10000. Definitions ........................................................................... 1314 

PART 1—HEALTH PLAN REQUIREMENTS RELATING TO WORKERS

COMPENSATION

Sec. 10001. Provision of workers compensation services ........................ 1315 

Sec. 10002. Payment by workers compensation carrier ......................... 1319 

PART 2—REQUIREMENTS OF PARTICIPATING STATES

Sec. 10011. Coordination of specialized workers compensation providers ............................................................................. 1320 

Sec. 10012. Preemption of State laws restricting delivery of workers 

compensation medical benefits ...................................... 1321 

Sec. 10013. Development of supplemental schedule ............................... 1322 

Sec. 10014. Construction ........................................................................ 1322 

PART 3—APPLICATION OF INFORMATION REQUIREMENTS; REPORT ON

PREMIUM REDUCTIONS

Sec. 10021. Application of information requirements ............................. 1323 

Sec. 10022. Report on reduction in workers compensation premiums ... 1324 

PART 4—DEMONSTRATION PROJECTS

Sec. 10031. Authorization ....................................................................... 1325 

Sec. 10032. Development of work-related protocols ............................... 1325 

Sec. 10033. Development of capitation payment models ........................ 1326 

Subtitle B—Automobile Insurance 

Sec. 10100. Definitions ........................................................................... 1326 

PART 1—HEALTH PLAN REQUIREMENTS RELATING TO AUTOMOBILE

INSURANCE

Sec. 10101. Provision of automobile insurance medical benefits 

through health plans ..................................................... 1327 

Sec. 10102. Payment by automobile insurance carrier ........................... 1328 

PART 2—REQUIREMENT OF PARTICIPATING STATES

Sec. 10111. Development of supplemental schedule ............................... 1330 

Sec. 10112. Construction ........................................................................ 1330 

PART 3—APPLICATION OF INFORMATION REQUIREMENTS

Sec. 10121. Application of information requirements ............................. 1330 

Subtitle C—Commission on Integration of Health Benefits 

Sec. 10201. Commission .......................................................................... 1331 

Subtitle D—Federal Employees’ Compensation Act 

Sec. 10301. Application of policy ............................................................ 1333 
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Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

Subtitle E—Davis-Bacon Act and Service Contract Act 

Sec. 10401. Coverage of benefits under Health Security Act ................. 1333 

Subtitle F—Effective Dates 

Sec. 10501. Regional alliances ................................................................ 1334 

Sec. 10502. Corporate alliances .............................................................. 1334 

Sec. 10503. Federal requirements .......................................................... 1334 

1 Subtitle A—Workers Compensation 

2 Insurance 

3 SEC. 10000. DEFINITIONS. 

4 In this subtitle: 

5 (1) INJURED WORKER.—The term ‘‘injured 

6 worker’’ means, with respect to a health plan, an in7 dividual enrolled under the plan who has a work-re8 lated injury or illness for which workers compensa9 tion medical benefits are available under State law. 

10 (2) SPECIALIZED WORKERS COMPENSATION

11 PROVIDER.—The term ‘‘specialized workers com12 pensation provider’’ means a health care provider 

13 that specializes in the provision of treatment relating 

14 to work-related injuries or illness, and includes spe15 cialists in industrial medicine, specialists in occupa16 tional therapy, and centers of excellence in industrial 

17 medicine and occupational therapy. 

18 (3) WORKERS COMPENSATION MEDICAL BENE19 FITS.—The term ‘‘workers compensation medical 

20 benefits’’ means, with respect to an enrollee who is 

21 an employee subject to the workers compensation 
1316 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 laws of a State, the comprehensive medical benefits 

2 for work-related injuries and illnesses provided for 

3 under such laws with respect to such an employee. 

4 (4) WORKERS COMPENSATION CARRIER.—The 

5 term ‘‘workers compensation carrier’’ means an in6 surance company that underwrites workers com7 pensation medical benefits with respect to one or 

8 more employers and includes an employer or fund 

9 that is financially at risk for the provision of work10 ers compensation medical benefits. 

11 (5) WORKERS COMPENSATION SERVICES.—The 

12 term ‘‘workers compensation services’’ means items 

13 and services included in workers compensation med14 ical benefits and includes items and services (includ15 ing rehabilitation services and long-term care serv16 ices) commonly used for treatment of work-related 

17 injuries and illnesses. 

18 PART 1—HEALTH PLAN REQUIREMENTS 

19 RELATING TO WORKERS COMPENSATION 

20 SEC. 10001. PROVISION OF WORKERS COMPENSATION 

21 SERVICES. 

22 (a) PROVISION OF BENEFITS.—Subject to subsection 

23 (b)— 

24 (1) REQUIREMENT FOR CERTAIN HEALTH

25 PLANS.— 
1317 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (A) IN GENERAL.—Each health plan that 

2 provides services to enrollees through partici3 pating providers shall enter into such contracts 

4 and arrangements as are necessary (in accord5 ance with subparagraph (B)) to provide or ar6 range for the provision of workers compensation 

7 services to such enrollees, in return for payment 

8 from the workers compensation carrier under 

9 section 10002. 

10 (B) PROVISION OF SERVICES.—For pur11 poses of this paragraph, a health plan provides 

12 (or arranges for the provision of) workers com13 pensation services with respect to an enrollee if 

14 the services are provided by— 

15 (i) a participating provider in the 

16 plan, 

17 (ii) any other provider with whom the 

18 plan has entered into an agreement for the 

19 provision of such services, or 

20 (iii) a specialized workers compensa21 tion provider (designated by the State 

22 under 10011(b)), whether or not the pro23 vider is a provider described in clause (i) 

24 or (ii). 
1318 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (2) INDIVIDUAL REQUIREMENT.—An individual 

2 entitled to workers compensation medical benefits 

3 and enrolled in a health plan (whether or not the 

4 plan is described in paragraph (1)(A)) shall receive 

5 workers compensation services through the provision 

6 (or arrangement for the provision) of such services 

7 by the health plan. 

8 (3) EXCEPTIONS.— 

9 (A) EMERGENCY SERVICES.—Paragraphs 

10 (1) and (2) shall not apply in the case of emer11 gency services. 

12 (B) ELECTING VETERANS, MILITARY PER13 SONNEL AND INDIANS.—Paragraphs (1) and 

14 (2) shall not apply in the case of an individual 

15 described in section 1004(b) and making an 

16 election described in such section. 

17 (4) USE OF SPECIALIZED WORKERS COMPENSA18 TION PROVIDERS.—If a participating State has des19 ignated under section 10011(b) specialized workers 

20 compensation providers with respect to one or more 

21 types of injuries or illnesses for a geographic area, 

22 either a health plan or an injured worker who has 

23 an injury or illness of such type may elect to provide 

24 or receive the benefits under this subsection through 

25 such a provider. 
1319 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (b) ALTERNATIVE PERMITTED.—Subsection (a) shall 

2 not be construed as preventing an injured worker and a 

3 workers compensation carrier from agreeing that workers 

4 compensation services shall be provided other than by or 

5 through the health plan in which the worker is enrolled. 

6 (c) COORDINATION.— 

7 (1) DESIGNATION OF CASE MANAGER.—Each 

8 health plan shall employ or contract with one or 

9 more individuals, such as occupational nurses, with 

10 experience in the treatment of occupational illness 

11 and injury to provide case management services with 

12 respect to workers compensation services provided 

13 through the plan under this section. 

14 (2) FUNCTIONS OF CASE MANAGER.—The 

15 health plan (through the case manager described in 

16 paragraph (1)) is responsible for ensuring that— 

17 (A) there is plan of treatment (when ap18 propriate) for each enrollee who is an injured 

19 worker designed to assure appropriate treat20 ment and facilitate return to work; 

21 (B) the plan of treatment is coordinated 

22 with the workers compensation carrier, the em23 ployer, or both; 
1320 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (C) the health plan (and its providers) 

2 comply with legal duties and requirements 

3 under State workers compensation law; and 

4 (D) if the health plan is unable to provide 

5 a workers compensation service needed to treat 

6 a work-related injury or illness, the injured 

7 worker is referred (in consultation with the 

8 workers compensation carrier) to an appro9 priate provider. 

10 (c) ADMINISTRATION.—The Secretary of Labor shall 

11 administer this part and, for such purposes, the Secretary 

12 is authorized to prescribe such rules and regulations as 

13 may be necessary and appropriate. 

14 SEC. 10002. PAYMENT BY WORKERS COMPENSATION CAR15 RIER. 

16 (a) PAYMENT.— 

17 (1) IN GENERAL.—Each workers compensation 

18 carrier that is liable for payment for workers com19 pensation services furnished by or through a health 

20 plan, regardless of whether or not the services are 

21 included in the comprehensive benefit package, shall 

22 make payment for such services. 

23 (2) USE OF REGIONAL ALLIANCE FEE SCHED24 ULE.—Except as provided in subsection (b), such 

25 payment shall be made in accordance with the appli-
1321 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 cable fee schedule established under section 1322(c) 

2 or section 10013. 

3 (b) ALTERNATIVE PAYMENT METHODOLOGIES.— 

4 Subsection (a)(2) shall not apply— 

5 (1) in the case of a regional alliance or partici6 pating State that establishes an alternative payment 

7 methodology (such as payment on a negotiated fee 

8 for each case) for payment for workers compensation 

9 services; or 

10 (2) in the case in which a workers compensa11 tion carrier and the health plan negotiate alternative 

12 payment arrangements. 

13 (c) LIMITATION OF LIABILITY OF INJURED WORK14 ER.—Nothing in this part shall be construed as requiring 

15 an injured worker to make any payment (including pay16 ment of any cost sharing or any amount in excess of the 

17 applicable fee schedule) to any health plan or health care 

18 provider for the receipt of workers compensation services. 

19 PART 2—REQUIREMENTS OF PARTICIPATING 

20 STATES 

21 SEC. 10011. COORDINATION OF SPECIALIZED WORKERS 

22 COMPENSATION PROVIDERS. 

23 (a) IN GENERAL.—Each participating State shall co24 ordinate access to services provided by specialized workers 

25 compensation providers on behalf of health plans, pro-
1322 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 viding coverage to individuals residing in the State, under 

2 part 1. 

3 (b) OPTIONAL DESIGNATION OF SPECIALIZED

4 WORKERS COMPENSATION PROVIDERS.—A participating 

5 State may designate such specialized workers compensa6 tion providers, with respect to one or more types of ill7 nesses or injuries in a geographic area as the State deter8 mines to be appropriate, to provide under part 1 workers 

9 compensation services that— 

10 (1) are not included in the comprehensive ben11 efit package, or 

12 (2) are so included but are specialized services 

13 that are typically provided (as determined by the 

14 State) by specialists in occupational or rehabilitative 

15 medicine. 

16 Injured workers and health plans may elect to use such 

17 providers under section 10001(a)(4). 

18 SEC. 10012. PREEMPTION OF STATE LAWS RESTRICTING 

19 DELIVERY OF WORKERS COMPENSATION 

20 MEDICAL BENEFITS. 

21 (a) IN GENERAL.—Subject to section 10011(b), no 

22 State law shall have any effect that restricts the choice, 

23 or payment, of providers that may provide workers com24 pensation services for individuals enrolled in a health plan. 
1323 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (b) DISPUTE RESOLUTION.—A State law may pro2 vide for a method for resolving disputes among parties re3 lated to— 

4 (1) an individual’s entitlement to workers com5 pensation medical benefits under State law, 

6 (2) the necessity and appropriateness of work7 ers compensation services provided to an injured 

8 worker, and 

9 (3) subject to section 10002, the reasonableness 

10 of charges or fees charged for workers compensation 

11 services. 

12 SEC. 10013. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE. 

13 Each participating State shall develop a fee schedule 

14 applicable to payment for workers compensation services 

15 for which a fee is not included in the applicable fee sched16 ule established under section 1322(c). 

17 SEC. 10014. CONSTRUCTION. 

18 (a) IN GENERAL.—Nothing in this subtitle shall be 

19 construed as altering— 

20 (1) the effect of a State workers compensation 

21 law as the exclusive remedy for work-related injuries 

22 or illnesses, 

23 (2) the determination of whether or not a per24 son is an injured worker and entitled to workers 

25 compensation medical benefits under State law, 
1324 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 (3) the scope of items and services available to 

2 injured workers entitled to workers compensation 

3 medical benefits under State law, or 

4 (4) the eligibility of any individual or class of 

5 individuals for workers compensation medical bene6 fits under State law. 

7 (b) EARLY INTEGRATION.—Nothing in this subtitle 

8 shall prevent a State from integrating or otherwise coordi9 nating the payment for workers compensation medical 

10 benefits with payment for benefits under health insurance 

11 or health benefit plans before the date the Commission 

12 submits its report under section 10201(e). 

13 PART 3—APPLICATION OF INFORMATION RE14 QUIREMENTS; REPORT ON PREMIUM REDUC15 TIONS 

16 SEC. 10021. APPLICATION OF INFORMATION REQUIRE17 MENTS. 

18 (a) IN GENERAL.—The provisions of— 

19 (1) part 3 of subtitle B of title V (relating to 

20 use of standard forms), and 

21 (2) section 5101(e)(9) (relating to provision of 

22 data on quality), 

23 apply to the provision of workers compensation services 

24 in the same manner as such provisions apply with respect 
1325 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 to the provision of services included in the comprehensive 

2 benefit package. 

3 (b) RULES.—The Secretary of Labor shall promul4 gate rules to clarify the responsibilities of health plans and 

5 workers compensation carriers in carrying out the provi6 sions referred to in subsection (a). 

7 SEC. 10022. REPORT ON REDUCTION IN WORKERS COM8 PENSATION PREMIUMS. 

9 (a) STUDY AND REPORT.— 

10 (1) STUDY.—The Secretary of Labor shall pro11 vide for a study of the impact of the provisions of 

12 this subtitle on the premium rates charged to em13 ployers for workers compensation insurance. Such 

14 study shall use information supplied by States relat15 ing to workers compensation premiums and such 

16 other information as such Secretary finds appro17 priate. 

18 (2) REPORT.—Such Secretary shall submit to 

19 the Congress, by not later than 2 years after the 

20 date that this subtitle applies in all States, a report 

21 on the findings of the study. 

22 (b) WORKERS COMPENSATION CARRIER FILINGS.— 

23 (1) IN GENERAL.—Within six months after the 

24 date this subtitle is effective in a participating State, 

25 each workers compensation carrier (other than a 
1326 

Title X, Subtitle A 

•HR 3600 IH / •S 1757 IS 

1 self-funded employer) providing workers compensa2 tion insurance in the State shall make a filing with 

3 an agency designated by the State. Such filing shall 

4 describe the manner in which such carrier has modi5 fied (or intends to modify) its premium rates for 

6 workers compensation insurance provided in the 

7 State to reflect the changes brought about by the 

8 provisions in this subtitle. The filing shall include 

9 such actuarial projections and assumptions as nec10 essary to support the modifications of such rates. 

11 (2) REPORT TO SECRETARY.—Each partici12 pating State shall provide to the Secretary of Labor 

13 such information on filings made under paragraph 

14 (1) as such Secretary may specify. 

15 PART 4—DEMONSTRATION PROJECTS 

16 SEC. 10031. AUTHORIZATION. 

17 The Secretary of Health and Human Services and the 

18 Secretary of Labor are authorized to conduct demonstra19 tion projects under this part in one or more States with 

20 respect to treatment of work-related injuries and illnesses. 

21 SEC. 10032. DEVELOPMENT OF WORK-RELATED PROTO22 COLS. 

23 (a) IN GENERAL.—Under this part, the Secretaries, 

24 in consultation with States and such experts on work-re25 lated injuries and illnesses as the Secretaries find appro-
1327 

Title X, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 priate, shall develop protocols for the appropriate treat2 ment of work-related conditions. 

3 (b) TESTING OF PROTOCOLS.—The Secretaries shall 

4 enter into contracts with one or more health alliances to 

5 test the validity of the protocols developed under sub6 section (a). 

7 SEC. 10033. DEVELOPMENT OF CAPITATION PAYMENT MOD8 ELS. 

9 Under this part, the Secretaries shall develop, using 

10 protocols developed under section 10032 if possible, meth11 ods of providing for payment by workers compensation 

12 carriers to health plans on a per case, capitated payment 

13 for the treatment of specified work-related injuries and ill14 nesses. 

15 Subtitle B—Automobile Insurance 

16 SEC. 10100. DEFINITIONS. 

17 In this subtitle: 

18 (1) INJURED INDIVIDUAL.—The term ‘‘injured 

19 individual’’ means, with respect to a health plan, an 

20 individual enrolled under the plan who has an injury 

21 or illness sustained in an automobile accident for 

22 which automobile insurance medical benefits are 

23 available. 

24 (2) AUTOMOBILE INSURANCE MEDICAL BENE25 FITS.—The term ‘‘automobile insurance medical 
1328 

Title X, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 benefits’’ means, with respect to an enrollee, the 

2 comprehensive medical benefits for injuries or ill3 nesses sustained in automobile accidents. 

4 (3) AUTOMOBILE INSURANCE CARRIER.—The 

5 term ‘‘automobile insurance carrier’’ means an in6 surance company that underwrites automobile insur7 ance medical benefits and includes an employer or 

8 fund that is financially at risk for the provision of 

9 automobile insurance medical benefits. 

10 (4) AUTOMOBILE INSURANCE MEDICAL SERV11 ICES.—The term ‘‘automobile insurance medical 

12 services’’ means items and services included in auto13 mobile insurance medical benefits and includes items 

14 and services (such as rehabilitation services and 

15 long-term care services) commonly used for treat16 ment of injuries and illnesses sustained in auto17 mobile accidents. 

18 PART 1—HEALTH PLAN REQUIREMENTS 

19 RELATING TO AUTOMOBILE INSURANCE 

20 SEC. 10101. PROVISION OF AUTOMOBILE INSURANCE MED21 ICAL BENEFITS THROUGH HEALTH PLANS. 

22 (a) IN GENERAL.—An individual entitled to auto23 mobile insurance medical benefits and enrolled in a health 

24 plan shall receive automobile insurance medical services 
1329 

Title X, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 through the provision (or arrangement for the provision) 

2 of such services by the health plan. 

3 (b) REFERRAL FOR SPECIALIZED SERVICES.—Each 

4 health plan shall provide for such referral for automobile 

5 insurance medical services as may be necessary to assure 

6 appropriate treatment of injured individuals. 

7 (c) EXCEPTIONS.—Subsections (a) and (b) shall not 

8 apply in the case of an individual described in section 

9 1004(b) and making an election described in such section. 

10 (d) ALTERNATIVE PERMITTED.—Subsection (a) shall 

11 not be construed as preventing an injured individual and 

12 an automobile insurance carrier from agreeing that auto13 mobile insurance medical services shall be provided other 

14 than by or through the health plan in which the individual 

15 is enrolled. 

16 SEC. 10102. PAYMENT BY AUTOMOBILE INSURANCE CAR17 RIER. 

18 (a) PAYMENT.— 

19 (1) IN GENERAL.—Except as provided in sub20 section (b), each automobile insurance carrier that is 

21 liable for payment for automobile insurance medical 

22 services furnished by or through a health plan, re23 gardless of whether or not the services are included 

24 in the comprehensive benefit package, shall make 

25 payment for such services. 
1330 

Title X, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 (2) USE OF REGIONAL ALLIANCE FEE SCHED2 ULE.—Such payment shall be made in accordance 

3 with the applicable fee schedule established under 

4 section 1322(c) or section 10111. 

5 (b) ALTERNATIVE PAYMENT METHODOLOGIES.— 

6 Subsection (a) shall not apply— 

7 (1) in the case of a regional alliance or partici8 pating State that establishes an alternative payment 

9 methodology (such as payment on a negotiated fee 

10 for each case) for payment for automobile insurance 

11 medical services; or 

12 (2) in the case in which a automobile insurance 

13 carrier and the health plan negotiate alternative pay14 ment arrangements. 

15 (c) LIMITATION OF LIABILITY OF INJURED INDI16 VIDUAL.—Nothing in this part shall be construed as re17 quiring an injured individual to make any payment (in18 cluding payment of any cost sharing or any amount in 

19 excess of the applicable fee schedule) to any health plan 

20 or health care provider for the receipt of automobile insur21 ance medical services. 
1331 

Title X, Subtitle B 

•HR 3600 IH / •S 1757 IS 

1 PART 2—REQUIREMENT OF PARTICIPATING 

2 STATES 

3 SEC. 10111. DEVELOPMENT OF SUPPLEMENTAL SCHEDULE. 

4 Each participating State shall develop a fee schedule 

5 applicable to payment for automobile insurance medical 

6 services for which a fee is not included in the applicable 

7 fee schedule established under section 1322(c). 

8 SEC. 10112. CONSTRUCTION. 

9 Nothing in this subtitle shall be construed as alter10 ing— 

11 (1) the determination of whether or not a per12 son is an injured individual and entitled to auto13 mobile insurance medical benefits under State law, 

14 or 

15 (2) the scope of items and services available to 

16 injured individuals entitled to automobile insurance 

17 medical benefits under State law. 

18 PART 3—APPLICATION OF INFORMATION 

19 REQUIREMENTS. 

20 SEC. 10121. APPLICATION OF INFORMATION REQUIRE21 MENTS. 

22 (a) IN GENERAL.—The provisions of— 

23 (1) part 3 of subtitle B of title V (relating to 

24 use of standard forms), and 

25 (2) section 5101(e)(9) (relating to provision of 

26 data on quality), 
1332 

Title X, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 apply to the provision of automobile insurance medical 

2 services in the same manner as such provisions apply with 

3 respect to the provision of services included in the com4 prehensive benefit package. 

5 (b) RULES.—The Secretary of Labor shall promul6 gate rules to clarify the responsibilities of health plans and 

7 automobile insurance carriers in carrying out the provi8 sions referred to in subsection (a). 

9 Subtitle C—COMMISSION ON IN10 TEGRATION OF HEALTH BEN11 EFITS 

12 SEC. 10201. COMMISSION. 

13 (a) ESTABLISHMENT.—There is hereby created a 

14 Commission on Integration of Health Benefits (in this sec15 tion referred to as the ‘‘Commission’’). 

16 (b) COMPOSITION.— 

17 (1) IN GENERAL.—The Commission shall con18 sist of 15 members appointed jointly by the Sec19 retary of Health and Human Services and the Sec20 retary of Labor. 

21 (2) NO COMPENSATION EXCEPT TRAVEL EX22 PENSES.—Members of the Commission shall serve 

23 without compensation, but the Secretaries shall pro24 vide that each member shall receive travel expenses, 

25 including per diem in lieu of subsistence, in accord-
1333 

Title X, Subtitle C 

•HR 3600 IH / •S 1757 IS 

1 ance with sections 5702 and 5703 of title 5, United 

2 States Code. 

3 (c) DUTIES.—The Commission shall study the feasi4 bility and appropriateness of transferring financial respon5 sibility for all medical benefits (including those currently 

6 covered under workers compensation and automobile in7 surance) to health plans. 

8 (d) STAFF SUPPORT.—The Secretaries shall provide 

9 staff support for the Commission. 

10 (e) REPORT.—The Commission shall submit a report 

11 on its work to the President by not later than July 1, 

12 1995. If such report recommends the integration of finan13 cial responsibility for all medical benefits in health plans, 

14 such report shall provide for a detailed plan as to how 

15 (and when) such an integration should be effected under 

16 this Act. 

17 (f) TERMINATION.—The Commission shall terminate 

18 90 days after the date of submission of its report under 

19 subsection (e). 

20 (g) AUTHORIZATION OF APPROPRIATIONS.—There 

21 are authorized to be appropriated such sums as may be 

22 necessary to carry out this section. 
1334 

Title X, Subtitle E 

•HR 3600 IH / •S 1757 IS 

1 Subtitle D—Federal Employees’ 

2 Compensation Act 

3 SEC. 10301. APPLICATION OF POLICY. 

4 (a) IN GENERAL.—Chapter 81 of title 5, United 

5 States Code, known as the Federal Employees’ Compensa6 tion Act shall be interpreted and administered consistent 

7 with the provisions of subtitle A. 

8 (b) CONSTRUCTION.—In applying subsection (a), 

9 subtitle A shall be applied as if the following modifications 

10 had been made in subtitle A: 

11 (1) Any reference in section 10000, section 

12 10001(c)(2)(C), section 10012(b), or section 10014 

13 to a State law is deemed to include a reference to 

14 chapter 81 of title 5, United States Code. 

15 (2) The term ‘‘workers compensation carrier’’ 

16 includes the Employees Compensation Fund (estab17 lished under section 8147 of title 5, United States 

18 Code). 

19 Subtitle E—Davis-Bacon Act and 

20 Service Contract Act 

21 SEC. 10401. COVERAGE OF BENEFITS UNDER HEALTH SE22 CURITY ACT. 

23 (a) DAVIS-BACON ACT.—Subsection (b)(2) of the 

24 first section of the Davis Bacon Act (40 U.S.C. 

25 276a(b)(2)) is amended in the matter following subpara-
1335 

Title X, Subtitle F 

•HR 3600 IH / •S 1757 IS 

1 graph (B) by inserting after ‘‘local law’’ the following: 

2 ‘‘(other than benefits provided pursuant to the Health Se3 curity Act)’’. 

4 (b) SERVICE CONTRACT ACT OF 1965.—The second 

5 sentence of section 2(a)(2) of the Service Contract Act of 

6 1965 (41 U.S.C. 351(a)(2)) is amended by inserting after 

7 ‘‘local law’’ the following: ‘‘(other than benefits provided 

8 pursuant to the Health Security Act)’’. 

9 Subtitle F—Effective Dates 

10 SEC. 10501. REGIONAL ALLIANCES. 

11 The provisions of subtitles A and B of this title apply 

12 to regional alliances, and regional alliance health plans, 

13 in a State 2 years after the State’s first year (as defined 

14 in section 1902(17)). 

15 SEC. 10502. CORPORATE ALLIANCES. 

16 The provisions of subtitles A and B of this title apply 

17 to corporate alliances, and corporate alliance health plans, 

18 on the date under section 10501 that such subtitles apply 

19 to regional alliances, and regional alliance health plans, 

20 in the State. 

21 SEC. 10503. FEDERAL REQUIREMENTS. 

22 The provisions of subtitle D of this title shall take 

23 effect on January 1, 1998. 
1336 

Title XI 

•HR 3600 IH / •S 1757 IS 

1 TITLE XI—TRANSITIONAL 

2 INSURANCE REFORM 

TABLE OF CONTENTS OF TITLE

Page 

Sec. 11001. Imposition of requirements ................................................. 1335 

Sec. 11002. Enforcement ........................................................................ 1337 

Sec. 11003. Requirements relating to preserving current coverage ........ 1338 

Sec. 11004. Restrictions on premium increases during transition ......... 1340 

Sec. 11005. Requirements relating to portability ................................... 1350 

Sec. 11006. Requirements limiting reduction of benefits ....................... 1353 

Sec. 11007. National transitional health insurance risk pool ................. 1354 

Sec. 11008. Definitions ........................................................................... 1358 

Sec. 11009. Termination ......................................................................... 1363 

3 SEC. 11001. IMPOSITION OF REQUIREMENTS. 

4 (a) IN GENERAL.—The Secretary and the Secretary 

5 of Labor shall apply the provisions of this title to assure, 

6 to the extent possible, the maintenance of current health 

7 care coverage and benefits during the period between the 

8 enactment of this Act and the dates its provisions are im9 plemented in the various States. 

10 (b) ENFORCEMENT.— 

11 (1) HEALTH INSURANCE PLANS.—The Sec12 retary shall enforce the requirements of this title 

13 with respect to health insurance plans. The Sec14 retary shall promulgate regulations to carry out the 

15 requirements under this title with respect to health 

16 insurance plans. The Secretary shall promulgate reg17 ulations with respect to section 11004 within 90 

18 days after the date of the enactment of this Act. 
1337 

Title XI 

•HR 3600 IH / •S 1757 IS 

1 (2) SELF-INSURED PLANS.—The Secretary of 

2 Labor shall enforce the requirements of this title 

3 with respect to self-insured plans. Such Secretary 

4 shall promulgate regulations to carry out the re5 quirements under this title as they relate to self6 funded plans. 

7 (3) ARRANGEMENTS WITH STATES.—The Sec8 retary and the Secretary of Labor may enter into ar9 rangements with a State to enforce the requirements 

10 of this title with respect to health insurance plans 

11 and self-insured plans issued or sold, or established 

12 and maintained, in the State. 

13 (c) PREEMPTION.—The requirements of this title do 

14 not preempt any State law unless State law directly con15 flicts with such requirements. The provision of additional 

16 protections under State law shall not be considered to di17 rectly conflict with such requirements. The Secretary (or, 

18 in the case of a self-insured plan, the Secretary of Labor) 

19 may issue letter determinations with respect to whether 

20 this Act preempts a provision of State law. 

21 (d) INTERIM FINAL REGULATIONS.—Section 1911 

22 shall apply to regulations issued to carry out this title. 

23 The Secretary may consult with States and the National 

24 Association of Insurance Commissioners in issuing regula25 tions and guidelines under this title. 
1338 

Title XI 

•HR 3600 IH / •S 1757 IS 

1 (e) CONSTRUCTION.—The provisions of this title shall 

2 be construed in a manner that assures, to the greatest 

3 extent practicable, continuity of health benefits under 

4 health benefit plans in effect on the effective date of this 

5 Act. 

6 (f) SPECIAL RULES FOR ACQUISITIONS AND TRANS7 FERS.—The Secretary may issue regulations regarding the 

8 application of this title in the case of health insurance 

9 plans (or groups of such plans) which are transferred from 

10 one insurer to another insurer through assumption, acqui11 sition, or otherwise. 

12 SEC. 11002. ENFORCEMENT. 

13 (a) IN GENERAL.—Any health insurer or health ben14 efit plan sponsor that violates a requirement of this title 

15 shall be subject to a civil money penalty of not more than 

16 $25,000 for each such violation. The provisions of section 

17 1128A of the Social Security Act (other than subsections 

18 (a) and (b)) shall apply to civil money penalties under this 

19 subsection in the same manner as they apply to a penalty 

20 or proceeding under section 1128A(a) of such Act. 

21 (b) EQUITABLE REMEDIES.— 

22 (1) IN GENERAL.—A civil action may be 

23 brought by the applicable Secretary— 

24 (A) to enjoin any act or practice which vio25 lates any provision of this title, or 
1339 

Title XI 

•HR 3600 IH / •S 1757 IS 

1 (B) to obtain other appropriate equitable 

2 relief (i) to redress such violations, or (ii) to en3 force any provision of this title, including, in 

4 the case of a wrongful termination of (or re5 fusal to renew) coverage, reinstating coverage 

6 effective as of the date of the violation. 

7 SEC. 11003. REQUIREMENTS RELATING TO PRESERVING 

8 CURRENT COVERAGE. 

9 (a) PROHIBITION OF TERMINATION.— 

10 (1) GROUP HEALTH INSURANCE PLANS.—Each 

11 health insurer that provides a group health insur12 ance plan may not terminate (or fail to renew) cov13 erage for any covered employee if the employer of 

14 the employee continues the plan, except in the case 

15 of— 

16 (A) nonpayment of required premiums, 

17 (B) fraud, or 

18 (C) misrepresentation of a material fact re19 lating to an application for coverage or claim 

20 for benefits. 

21 (2) INDIVIDUAL HEALTH INSURANCE PLANS.— 

22 Each health insurer that provides coverage to a cov23 ered individual under an individual health insurance 

24 plan may not terminate (or fail to renew) coverage 
1340 

Title XI 

•HR 3600 IH / •S 1757 IS 

1 for such individual (or a covered dependent), except 

2 in the case of— 

3 (A) nonpayment of required premiums, 

4 (B) fraud, or 

5 (C) misrepresentation of a material fact re6 lating to an application for coverage or claim 

7 for benefits. 

8 (2) EFFECTIVE DATE OF TITLE.— 

9 (A) IN GENERAL.—This subsection shall 

10 take effect on the effective date of this title and 

11 shall apply to coverage on or after such date. 

12 (B) DEFINITION.—Except as otherwise 

13 provided, in this title the term ‘‘effective date of 

14 this title’’ means the date of the enactment of 

15 this Act. 

16 (b) ACCEPTANCE OF NEW MEMBERS IN A GROUP

17 HEALTH INSURANCE PLAN.— 

18 (1) IN GENERAL.—In the case of a health in19 surer that provides a group health insurance plan 

20 that is in effect on the effective date of this title, the 

21 insurer is required— 

22 (A) to accept all individuals, and their eli23 gible dependents, who become full-time employ24 ees (as defined in section 1901(b)(2)(C)) of an 

25 employer covered after such effective date; 
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1 (B) to establish and apply premium rates 

2 that are consistent with section 11004(b); and 

3 (C) to limit the application of pre-existing 

4 condition restrictions in accordance with section 

5 11005. 

6 (2) CONSISTENT APPLICATION OF RULES RE7 LATING TO DEPENDENTS AND WAITING PERIODS.— 

8 In this subsection, the term ‘‘eligible dependent’’, 

9 with respect to a group health insurance plan, has 

10 the meaning provided under the plan as of October 

11 27, 1993, or, in the case of a plan not established 

12 as of such date, as of the date of establishment of 

13 the plan. 

14 SEC. 11004. RESTRICTIONS ON PREMIUM INCREASES DUR15 ING TRANSITION. 

16 (a) DIVISION OF HEALTH INSURANCE PLANS BY

17 SECTOR.—For purposes of this section, each health in18 surer shall divide its health insurance business into the 

19 following 3 sectors: 

20 (1) Health insurance for groups with at least 

21 100 covered lives (in this section referred to as the 

22 ‘‘large group sector’’) 

23 (2) Health insurance for groups with fewer 

24 than 100 covered lives (in this section referred as 

25 the ‘‘small group sector’’). 
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1 (3) Health insurance for individuals, and not 

2 for groups (in this section referred to as the ‘‘indi3 vidual sector’’). 

4 (b) PREMIUM CHANGES TO REFLECT CHANGES IN

5 GROUP OR INDIVIDUAL CHARACTERISTICS OR TERMS OF

6 COVERAGE.— 

7 (1) APPLICATION.—The provisions of this sub8 section shall apply to changes in premiums that re9 flect— 

10 (A) changes in the number of individuals 

11 covered under a plan; 

12 (B) changes in the group or individual 

13 characteristics (including age, gender, family 

14 composition or geographic area but not includ15 ing health status, claims experience or duration 

16 of coverage under the plan) of individuals cov17 ered under a plan; 

18 (C) changes in the level of benefits (includ19 ing changes in cost-sharing) under the plan; 

20 and 

21 (D) changes in any material terms and 

22 conditions of the health insurance plan (other 

23 than factors related to health status, claims ex24 perience, and duration of coverage under the 

25 plan). 
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1 (2) SPECIFICATION OF REFERENCE RATE FOR

2 EACH SECTOR.—Each health insurer shall calculate 

3 a reference rate for each such sector. The reference 

4 rate for a sector shall be calculated so that, if it 

5 were applied using the rate factors specified under 

6 paragraph (3), the average premium rate for individ7 uals and groups in that sector would approximate 

8 the average premium rate charged individuals and 

9 groups in the sector as of the effective date of this 

10 title. 

11 (3) SINGLE SET OF RATE FACTORS WITHIN

12 EACH SECTOR.— 

13 (A) IN GENERAL.—Each health insurer 

14 shall develop for each sector a single set of rate 

15 factors which will be used to calculate any 

16 changes in premium that relate to the reasons 

17 described in subparagraphs (B) through (D) of 

18 paragraph (1). 

19 (B) STANDARDS.—Such rate factors— 

20 (i) shall relate to reasonable and ob21 jective differences in demographic charac22 teristics, in the design and in levels of cov23 erage, and in other terms and conditions of 

24 a contract, 
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1 (ii) shall not relate to expected health 

2 status, claims experience, or duration of 

3 coverage of the one or more groups or indi4 viduals, and 

5 (iii) shall comply with regulations es6 tablished under subsection (f). 

7 (4) COMPUTATION OF PREMIUM CHANGES.— 

8 (A) IN GENERAL.—Changes in premium 

9 rates that relate to the reasons described in 

10 paragraph (1) shall be calculated using the rate 

11 factors developed pursuant to paragraph (3). 

12 (B) APPLICATION TO CHANGES IN NUMBER

13 OF COVERED INDIVIDUALS.—In the case of a 

14 change in premium rates related to the reason 

15 described in paragraph (1)(A), the change in 

16 premium rates shall be calculated to reflect, 

17 with respect to the enrollees who enroll or 

18 disenroll in a health insurance plan, the sum of 

19 the products, for such individuals, of the ref20 erence rate (determined under paragraph (2)) 

21 and the rate factors (specified under paragraph 

22 (3)) applicable to such enrollees. 

23 (C) APPLICATION OF OTHER FACTORS.— 

24 (i) IN GENERAL.—In the case of a 

25 change in premium rates related to a rea-
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1 son described in subparagraph (B), (C), or 

2 (D) of paragraph (1), the change in pre3 mium rates with respect to each health in4 surance plan in each sector shall reflect the 

5 rate factors specified under paragraph (3) 

6 applicable to the reason as applied to the 

7 current premium charged for the health in8 surance plan. Such rate factors shall be 

9 applied in a manner so that the resulting 

10 adjustment, to the extent possible, reflects 

11 the premium that would have been charged 

12 under the plan if the reason for the change 

13 in premium had existed at the time that 

14 the current premium rate was calculated. 

15 (ii) NO REFLECTION OF CHANGE IN

16 HEALTH STATUS.—In applying the rate 

17 factors under this subparagraph, the ad18 justment shall not reflect any change in 

19 the health status, claims experience or du20 ration of coverage with respect to any em21 ployer or individual covered under the 

22 plan. 

23 (5) LIMITATION ON APPLICATION.—This sub24 section shall only apply— 
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1 (A) to changes in premiums occurring on 

2 or after the date of the enactment of this Act 

3 to groups and individuals covered as of such 

4 date, and 

5 (B) with respect to groups and individuals 

6 subsequently covered, to changes in premiums 

7 subsequent to such coverage. 

8 (6) APPLICATION TO COMMUNITY-RATED

9 PLANS.—Nothing in this subsection shall require the 

10 application of rate factors related to individual or 

11 group characteristics with respect to community12 rated plans. 

13 (c) LIMITATIONS ON CHANGES IN PREMIUMS RE14 LATED TO INCREASES IN HEALTH CARE COSTS AND UTI15 LIZATION.— 

16 (1) APPLICATION.—The provisions of this sub17 section shall apply to changes in premiums that re18 flect increases in health care costs and utilization. 

19 (2) EQUAL INCREASE FOR ALL PLANS IN ALL

20 SECTORS.— 

21 (A) IN GENERAL.—Subject to subpara22 graph (B), the annual percentage increase in 

23 premiums by a health insurer for health insur24 ance plans in the individual sector, small group 

25 sector, and large group sector, to the extent 
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1 such increase reflect increases in health care 

2 costs and utilization, shall be the same for all 

3 such plans in those sectors. 

4 (B) SPECIAL RULE FOR LARGE GROUP

5 SECTOR.—The annual percentage increase in 

6 premiums by a health insurer for health insur7 ance plans in the large group sector may vary 

8 among such plans based on the claims experi9 ence of an employer (to the extent the experi10 ence is credible), so long as the weighted aver11 age of such increases for all such plans in the 

12 sector complies with the requirement of sub13 paragraph (A). 

14 (C) GEOGRAPHIC APPLICATION.—Subpara15 graphs (A) and (B)— 

16 (i) may be applied on a national level, 

17 or 

18 (ii) may vary based on geographic 

19 area, but only if (I) such areas are suffi20 ciently large to provide credible data on 

21 which to calculate the variation and (II) 

22 the variation is due to reasonable factors 

23 related to the objective differences among 

24 such areas in costs and utilization of 

25 health services. 
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1 (D) EXCEPTIONS TO ACCOMMODATE STATE

2 RATE REFORM EFFORTS.—Subparagraphs (A) 

3 and (B) shall not apply, in accordance with 

4 guidelines of the Secretary, to the extent nec5 essary to permit a State to narrow the vari6 ations in premiums among health insurance 

7 plans offered by health insurers to similarly sit8 uated groups or individuals within a sector. 

9 (E) EXCEPTION FOR RATES SUBJECT TO

10 PRIOR APPROVAL.—Subparagraphs (A) and (B) 

11 shall not apply to premiums that are subject to 

12 prior approval by a State insurance commis13 sioner (or similar official) and are approved by 

14 such official. 

15 (F) OTHER REASONS SPECIFIED BY THE

16 SECRETARY.—The Secretary may specify 

17 through regulations such other exceptions to 

18 the provisions of this subsection as the Sec19 retary determines are required to enhance sta20 bility of the health insurance market and con21 tinued availability of coverage. 

22 (3) EVEN APPLICATION THROUGHOUT A

23 YEAR.—In applying the provisions of this subsection 

24 to health insurance plans that are renewed in dif25 ferent months of a year, the annual percentage in-
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1 crease shall be applied in a consistent, even manner 

2 so that any variations in the rate of increase applied 

3 in consecutive months are even and continuous dur4 ing the year. 

5 (4) PETITION FOR EXCEPTION.—A health in6 surer may petition the Secretary (or a State acting 

7 under a contract with the Secretary under section 

8 11001(b)(3)) for an exception from the application 

9 of the provisions of this subsection. The Secretary 

10 may approve such an exception if— 

11 (A) the health insurer demonstrates that 

12 the application of this subsection would threat13 en the financial viability of the insurer, and 

14 (B) the health insurer offers an alternative 

15 method for increasing premiums that is not 

16 substantially discriminatory to any sector or to 

17 any group or individual covered by a health in18 surance plan offered by the insurer. 

19 (d) PRIOR APPROVAL FOR CERTAIN RATE IN20 CREASES.— 

21 (1) IN GENERAL.—If the percentage increase in 

22 the premium rate for the individual and small group 

23 sector exceeds a percentage specified by the Sec24 retary under paragraph (2), annualized over any 12- 

25 month period, the increase shall not take effect un-
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1 less the Secretary (or a State acting under a con2 tract with the Secretary under section 11001(b)(3)) 

3 has approved the increase. 

4 (2) PERCENTAGE.—The Secretary shall specify, 

5 for each 12-month period beginning after the date of 

6 the enactment of this Act, a percentage that will 

7 apply under paragraph (1). Such percentage shall be 

8 determined taking into consideration the rate of in9 crease in health care costs and utilization, previous 

10 trends in health insurance premiums, and the condi11 tions in the health insurance market. Within 30 days 

12 after the date of the enactment of this Act, the Sec13 retary shall first specify a percentage under this 

14 paragraph. 

15 (e) DOCUMENTATION OF COMPLIANCE.— 

16 (1) PERIOD FOR CONFORMANCE.—Effective 1 

17 year after the date of the enactment of this Act, the 

18 premium for each health insurance plan shall be 

19 conformed in a manner that complies with the provi20 sions of this section. 

21 (2) METHODOLOGY.—Each health insurer shall 

22 document the methodology used in applying sub23 sections (b) and (c) with respect to each sector (and 

24 each applicable health plan). Such documentation 

25 shall be sufficient to permit the auditing of the ap-
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1 plication of such methodology to determine if such 

2 application was consistent with such subsections. 

3 (3) CERTIFICATION.—For each 6-month period 

4 in which this section is effective, each health insurer 

5 shall file a certification with the Secretary (or with 

6 a State with which the Secretary has entered into an 

7 arrangement under section 11001(b)(3)) that the in8 surer is in compliance with such requirements. 

9 (f) REGULATIONS.—The Secretary shall establish 

10 regulations to carry out this section. Such regulations may 

11 include guidelines relating to the permissible variation 

12 that results from the use of demographic or other charac13 teristics in the development of rate factors. Such guide14 lines may be based on the guidelines currently used by 

15 States in applying rate limitations under State insurance 

16 regulations. 

17 (g) EFFECTIVE PERIOD.—This section shall apply to 

18 premium increases occurring during the period beginning 

19 on the date of the enactment of this Act and ending, for 

20 a health insurance plan provided in a State, on the first 

21 day of the State’s first year. 

22 SEC. 11005. REQUIREMENTS RELATING TO PORTABILITY. 

23 (a) TREATMENT OF PREEXISTING CONDITION EX24 CLUSIONS.— 
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1 (1) IN GENERAL.—Subject to the succeeding 

2 provisions of this subsection, a group health benefit 

3 plan may exclude coverage with respect to services 

4 related to treatment of a preexisting condition, but 

5 the period of such exclusion may not exceed 6 

6 months. The exclusion of coverage shall not apply to 

7 services furnished to newborns or in the case of a 

8 plan that did not apply such exclusions as of the ef9 fective date of this title. 

10 (2) CREDITING OF PREVIOUS COVERAGE.— 

11 (A) IN GENERAL.—A group health benefit 

12 plan shall provide that if an individual covered 

13 under such plan is in a period of continuous 

14 coverage (as defined in subparagraph (B)(i)) 

15 with respect to particular services as of the date 

16 of initial coverage under such plan, any period 

17 of exclusion of coverage with respect to a pre18 existing condition for such services or type of 

19 services shall be reduced by 1 month for each 

20 month in the period of continuous coverage. 

21 (B) DEFINITIONS.—As used in this para22 graph: 

23 (i) PERIOD OF CONTINUOUS COV24 ERAGE.—The term ‘‘period of continuous 

25 coverage’’ means, with respect to par-
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1 ticular services, the period beginning on 

2 the date an individual is enrolled under a 

3 group or individual health benefit plan, 

4 self-insured plan, the medicare program, a 

5 State medicaid plan, or other health ben6 efit arrangement which provides benefits 

7 with respect to such services and ends on 

8 the date the individual is not so enrolled 

9 for a continuous period of more than 3 

10 months. 

11 (ii) PREEXISTING CONDITION.—The 

12 term ‘‘preexisting condition’’ means, with 

13 respect to coverage under a health benefits 

14 plan, a condition which has been diagnosed 

15 or treated during the 6-month period end16 ing on the day before the first date of such 

17 coverage (without regard to any waiting 

18 period). 

19 (b) WAITING PERIODS.—A self-insured plan, and an 

20 employer with respect to a group health insurance plan, 

21 may not discriminate among employees in the establish22 ment of a waiting period before making health insurance 

23 coverage available based on the health status, claims expe24 rience, receipt of health care, medical history, or lack of 
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1 evidence of insurability, of the employee or the employee’s 

2 dependents. 

3 SEC. 11006. REQUIREMENTS LIMITING REDUCTION OF BEN4 EFITS. 

5 (a) IN GENERAL.—A self-insured sponsor may not 

6 make a modification of benefits described in subsection 

7 (b). 

8 (b) MODIFICATION OF BENEFITS DESCRIBED.— 

9 (1) IN GENERAL.—A modification of benefits 

10 described in this subsection is any reduction or limi11 tation in coverage, effected on or after the effective 

12 date of this title, with respect to any medical condi13 tion or course of treatment for which the anticipated 

14 cost is likely to exceed $5,000 in any 12-month pe15 riod. 

16 (2) TREATMENT OF TERMINATION.—A modi17 fication of benefits includes the termination of a 

18 plan if the sponsor, within a period (specified by the 

19 Secretary of Labor) establishes a substitute plan 

20 that reflects the reduction or limitation described in 

21 paragraph (1). 

22 (c) REMEDY.—Any modification made in violation of 

23 this section shall not be effective and the self-insured 

24 sponsor shall continue to provide benefits as though the 
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1 modification (described in subsection (b)) had not oc2 curred. 

3 SEC. 11007. NATIONAL TRANSITIONAL HEALTH INSURANCE 

4 RISK POOL. 

5 (a) ESTABLISHMENT.—In order to assure access to 

6 health insurance during the transition, the Secretary is 

7 authorized to establish a National Transitional Health In8 surance Risk Pool (in this section referred to as the ‘‘na9 tional risk pool’’) in accordance with this section. 

10 (b) ADMINISTRATION.— 

11 (1) IN GENERAL.—The Secretary may admin12 ister the national risk pool through contracts with— 

13 (A) one or more existing State health in14 surance risk pools, 

15 (B) one or more private health insurers, or 

16 (C) such other contracts as the Secretary 

17 deems appropriate. 

18 (2) COORDINATION WITH STATE RISK POOLS.— 

19 The Secretary may enter into such arrangements 

20 with existing State health insurance risk pools to co21 ordinate the coverage under such pools with the cov22 erage under the national risk pool. Such coordina23 tion may address eligibility and funding of coverage 

24 for individuals currently covered under State risk 

25 pools. 
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1 (c) ELIGIBILITY FOR COVERAGE.—The national risk 

2 pool shall provide health insurance coverage to individuals 

3 who are unable to secure health insurance coverage from 

4 private health insurers because of their health status or 

5 condition (as determined in accordance with rules and pro6 cedures specified by the Secretary). 

7 (d) BENEFITS.— 

8 (1) IN GENERAL.—Benefits and terms of cov9 erage provided through the national risk pool shall 

10 include items and services, conditions of coverage, 

11 and cost sharing (subject to out-of-pocket limits on 

12 cost sharing) comparable to the benefits and terms 

13 of coverage available in State health insurance risk 

14 pools. 

15 (2) PAYMENT RATES.—Payments under the na16 tional risk pool for covered items and services shall 

17 be made at rates (specified by the Secretary) based 

18 on payment rates for comparable items and services 

19 under the medicare program. Providers who accept 

20 payment from the national risk pool shall accept 

21 such payment as payment in full for the service, 

22 other than for cost sharing provided under the na23 tional risk pool. 

24 (e) PREMIUMS.— 
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1 (1) IN GENERAL.—Premiums for coverage in 

2 the national risk pool shall be set in a manner speci3 fied by the Secretary. 

4 (2) VARIATION.—Such premiums shall vary 

5 based upon age, place of residence, and other tradi6 tional underwriting factors other than on the basis 

7 of health status or claims experience. 

8 (3) LIMITATION.—The premiums charged indi9 viduals shall be set at a level that is no less than 

10 150 percent of the premiums that the Secretary esti11 mates would be charged to a population of average 

12 risk for the covered benefits. 

13 (f) TREATMENT OF SHORTFALLS.— 

14 (1) ESTIMATES.—The Secretary shall estimate 

15 each year the extent to which the total premiums 

16 collected under subsection (e) in the year are insuffi17 cient to cover the expenses of the national risk pool 

18 with respect to the year. 

19 (2) TEMPORARY BORROWING AUTHORITY.—The 

20 Secretary of the Treasury is authorized to advance 

21 to the Secretary amounts sufficient to cover the 

22 amount estimated under paragraph (1) during the 

23 year before assessments are collected under para24 graph (3), except that the total balance of such 

25 Treasury advances at any time shall not exceed 
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1 $1,500,000,000. The Secretary shall repay such 

2 amounts, with interest at a rate specified by the Sec3 retary of the Treasury, from the assessments under 

4 paragraph (3). 

5 (3) ASSESSMENTS.— 

6 (A) IN GENERAL.—Each health benefit 

7 plan sponsor shall be liable for an assessment 

8 in the amount specified in subparagraph (C). 

9 (B) AMOUNT.—For each year for which 

10 amounts are advanced under paragraph (2), the 

11 Secretary shall— 

12 (i) estimate the total amount of pre13 miums (and premium equivalents) for 

14 health benefits under health benefit plans 

15 for the succeeding year, and 

16 (ii) calculate a percentage equal to (I) 

17 the total amounts repayable by the Sec18 retary to the Secretary of the Treasury 

19 under paragraph (2) for the year, divided 

20 by the amount determined under clause (i). 

21 (C) ASSESSMENT AMOUNT.—The amount 

22 of an assessment for a sponsor of a health ben23 efit plan for a year shall be equal to the per24 centage calculated under subparagraph (B)(ii) 

(or, if less, 1 25 ⁄2 of 1 percent) of the total amount 
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1 of premiums (and premium equivalents) for 

2 health benefits under the plan for the previous 

3 year. 

4 (D) SELF-INSURED PLANS.—The amount 

5 of premiums (and premium equivalents) under 

6 this paragraph shall be estimated— 

7 (i) by the Secretary for health insur8 ance plans, and 

9 (ii) by the Secretary of Labor for self10 insured plans. 

11 Such estimates may be based on a methodology 

12 that requires plans liable for assessment to file 

13 information with the applicable Secretary. 

14 SEC. 11008. DEFINITIONS. 

15 In this title: 

16 (1) APPLICABLE SECRETARY.—The term ‘‘ap17 plicable Secretary’’ means— 

18 (A) the Secretary with respect to health in19 surance plans and insurers, or 

20 (B) the Secretary of Labor with respect to 

21 self-insured plans and self-insured plan spon22 sors. 

23 (2) COVERED EMPLOYEE.—The term ‘‘covered 

24 employee’’ means an employee (or dependent of such 
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1 an employee) covered under a group health benefits 

2 plan. 

3 (3) COVERED INDIVIDUAL.—The ‘‘covered indi4 vidual’’ means, with respect to a health benefit plan, 

5 an individual insured, enrolled, eligible for benefits, 

6 or otherwise covered under the plan. 

7 (4) GROUP HEALTH BENEFITS PLAN.—The 

8 term ‘‘group health benefits plan’’ means a group 

9 health insurance plan and a self-insured plan. 

10 (5) GROUP HEALTH INSURANCE PLAN.— 

11 (A) IN GENERAL.—The term ‘‘group 

12 health insurance plan’’ means a health insur13 ance plan offered primarily to employers for the 

14 purpose of providing health insurance to the 

15 employees (and dependents) of the employer. 

16 (B) INCLUSION OF ASSOCIATION PLANS

17 AND MEWAS.—Such term includes— 

18 (i) any arrangement in which coverage 

19 for health benefits is offered to employers 

20 through an association, trust, or other ar21 rangement, and 

22 (ii) a multiple employer welfare ar23 rangement (as defined in section 3(40) of 

24 the Employee Retirement Income Security 
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1 Act of 1974), whether funded through in2 surance or otherwise. 

3 (6) HEALTH BENEFITS PLAN.—The term 

4 ‘‘health benefits plan’’ means health insurance plan 

5 and a self-insured health benefit plan. 

6 (7) HEALTH BENEFIT PLAN SPONSOR.—The 

7 term ‘‘health benefit plan sponsor’’ means, with re8 spect to a health insurance plan or self-insured plan, 

9 the insurer offering the plan or the self-insured 

10 sponsor for the plan, respectively. 

11 (8) HEALTH INSURANCE PLAN.— 

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

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

14 plan’’ means any contract of health insurance, 

15 including any hospital or medical service policy 

16 or certificate, any major medical policy or cer17 tificate, any hospital or medical service plan 

18 contract, or health maintenance organization 

19 subscriber contract offered by an insurer. 

20 (B) EXCEPTION.—Such term does not in21 clude any of the following— 

22 (i) coverage only for accident, dental, 

23 vision, disability income, or long-term care 

24 insurance, or any combination thereof, 
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1 (ii) medicare supplemental health in2 surance, 

3 (iii) coverage issued as a supplement 

4 to liability insurance, 

5 (iv) worker’s compensation or similar 

6 insurance, or 

7 (v) automobile medical payment insur8 ance, 

9 or any combination thereof. 

10 (C) STOP LOSS INSURANCE NOT COV11 ERED.—Such term does not include any aggre12 gate or specific stop-loss insurance or similar 

13 coverage applicable to a self-insured plan. The 

14 Secretary may develop rules determining the 

15 applicability of this subparagraph with respect 

16 to minimum premium plans or other partially 

17 insured plans. 

18 (9) HEALTH INSURER.—The term ‘‘health in19 surer’’ means a licensed insurance company, a pre20 paid hospital or medical service plan, a health main21 tenance organization, or other entity providing a 

22 plan of health insurance or health benefits with re23 spect to which the State insurance laws are not pre24 empted under section 514 of the Employee Retire25 ment Income Security Act of 1974. 
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1 (10) INDIVIDUAL HEALTH INSURANCE PLAN.— 

2 (A) IN GENERAL.—The term ‘‘individual 

3 health insurance plan’’ means any health insur4 ance plan directly purchased by an individual or 

5 offered primarily to individuals (including fami6 lies) for the purpose of permitting individuals 

7 (without regard to an employer contribution) to 

8 purchase health insurance coverage. 

9 (B) INCLUSION OF ASSOCIATION PLANS.— 

10 Such term includes any arrangement in which 

11 coverage for health benefits is offered to indi12 viduals through an association, trust, list-billing 

13 arrangement, or other arrangement in which 

14 the individual purchaser is primarily responsible 

15 for the payment of any premium associated 

16 with the contract. 

17 (C) TREATMENT OF CERTAIN ASSOCIATION

18 PLANS.—In the case of a health insurance plan 

19 sponsored by an association, trust, or other ar20 rangement that provides health insurance cov21 erage both to employers and to individuals, the 

22 plan shall be treated as— 

23 (i) a group health insurance plan with 

24 respect to such employers, and 
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1 (ii) an individual health insurance 

2 plan with respect to such individuals. 

3 (11) SELF-INSURED PLAN.—The term ‘‘self-in4 sured plan’’ means an employee welfare benefit plan 

5 or other arrangement insofar as the plan or arrange6 ment provides benefits with respect to some or all of 

7 the items and services included in the comprehensive 

8 benefit package (as in effect as of January 1, 1996) 

9 that is funded in a manner other than through the 

10 purchase of one or more health insurance plans. 

11 Such term shall not include a group health insur12 ance plan described in paragraph (5)(B)(ii). 

13 (12) SELF-INSURED SPONSOR.—The term ‘‘self14 insured sponsor’’ includes, with respect to a self-in15 sured plan, any entity which establishes or main16 tains the plan. 

17 (13) STATE COMMISSIONER OF INSURANCE.— 

18 The term ‘‘State commissioner of insurance’’ in19 cludes a State superintendent of insurance. 

20 SEC. 11009. TERMINATION. 

21 (a) HEALTH INSURANCE PLANS.—The provisions of 

22 this title shall not apply to a health insurance plan pro23 vided in a State on and after the first day of the first 

24 year for the State. 
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1 (b) SELF-INSURED PLANS.—The provisions of this 

2 title shall not apply to a self-insured plan that— 

3 (1) is sponsored by a sponsor that is an eligible 

4 sponsor of a corporate alliance (described in section 

5 1311(b)(1)), as of the effective date of the election 

6 under section 1312(c); and 

7 (2) is sponsored by a sponsor that is not such 

8 an eligible sponsor, with respect to individuals or 

9 groups in a State on and after the first day of the 

10 first year for the State. 

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S 1757 PCS——25 

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S 1757 PCS——27 

S 1757 PCS——28 

S 1757 PCS——29 

S 1757 PCS——30 

S 1757 PCS——31 

S 1757 PCS——32 

S 1757 PCS——33 

S 1757 PCS——34 

S 1757 PCS——35 

S 1757 PCS——36 

S 1757 PCS——37 

S 1757 PCS——38 

S 1757 PCS——39 

S 1757 PCS——40 
1367 

Title XI 

•HR 3600 IH / •S 1757 IS 

S 1757 PCS——41 

S 1757 PCS——42 

S 1757 PCS——43 

S 1757 PCS——44 

S 1757 PCS——45 

S 1757 PCS——46 

S 1757 PCS——47 

S 1757 PCS——48 

S 1757 PCS——49 

S 1757 PCS——50 

S 1757 PCS——51 

S 1757 PCS——52 

S 1757 PCS——53 

S 1757 PCS——54 

S 1757 PCS——55 

S 1757 PCS——56 

S 1757 PCS——57 

S 1757 PCS——58 

S 1757 PCS——59 

S 1757 PCS——60 

S 1757 PCS——61 

S 1757 PCS——62 

S 1757 PCS——63 

S 1757 PCS——64 

S 1757 PCS——65 
1368 

Title XI 

•HR 3600 IH / •S 1757 IS 

S 1757 PCS——66 

S 1757 PCS——67 

S 1757 PCS——68 

S 1757 PCS——69 

S 1757 PCS——70 

S 1757 PCS——71 

S 1757 PCS——72 

S 1757 PCS——73 

S 1757 PCS——74 

S 1757 PCS——75 

S 1757 PCS——76 

S 1757 PCS——77 

S 1757 PCS——78 

S 1757 PCS——79 

S 1757 PCS——80 

S 1757 PCS——81 

S 1757 PCS——82 

S 1757 PCS——83 

S 1757 PCS——84 

S 1757 PCS——85 

S 1757 PCS——86 

S 1757 PCS——87 

S 1757 PCS——88 

S 1757 PCS——89