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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 2396 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 2396

            Entitled the ``Affordable Health Care Now Act''.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

              August 16 (legislative day, August 11), 1994

 Mr. Lott introduced the following bill; which was read the first time

_______________________________________________________________________

                                 A BILL

 
            Entitled the ``Affordable Health Care Now Act''.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Affordable Health 
Care Now Act of 1994''.
    (b) Table of Contents of Titles and Subtitles in Act.--The 
following are the titles and subtitles contained in this Act:

           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

Subtitle A--Increased Availability and Continuity of Health Coverage 
                            for Individuals and Their Families
Subtitle B--Reform of Health Insurance
Subtitle C--Preemption
Subtitle D--Health Deduction Fairness
Subtitle E--Improved Access to Community Health Services
Subtitle F--Improved Access to Rural Health Services
Subtitle G--Assistance in Enrolling Uninsured Children in Health 
                            Insurance
Subtitle H--Medicaid Reform
Subtitle I--Remedies and Enforcement with Respect to Group Health Plans
Subtitle J--Delivery of Health Care Services to Illegal Immigrants
     TITLE II--HEALTH CARE COST CONTAINMENT AND QUALITY ENHANCEMENT

Subtitle A--Medical Malpractice Liability Reform
Subtitle B--Administrative Cost Savings and Fair Health Information 
                            Practices
Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts
Subtitle D--Anti-Fraud
Subtitle E--Increased Medicare Beneficiary Choice; Additional Medicare 
                            Reforms
Subtitle F--Health Care Antitrust Improvements
Subtitle G--Encouraging Enforcement Activities of Medical Self-
                            Regulatory Entities
Subtitle H--Reform of Clinical Laboratory Requirements for Simple Tests
Subtitle I--Miscellaneous Provisions
                       TITLE III--LONG-TERM CARE

Subtitle A--Tax Treatment of Long-term Care Insurance
Subtitle B--Establishment of Federal Standards for Long-term Care 
                            Insurance
Subtitle C--Protection of Assets Under Medicaid Through Use of 
                            Qualified Long-term Care Insurance
Subtitle D--Studies
Subtitle E--Volunteer Service Credit Demonstration Projects

           TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH CARE

                       table of contents of title
 Subtitle A--Increased Availability and Continuity of Health Coverage 
                   for Individuals and Their Families

Part 1--Required Coverage Options for Eligible Employees, Spouses, and 
                               Dependents

Sec. 1001. Requiring employers to offer option of coverage for eligible 
                            individuals.
               Part 2--Portability and Nondiscrimination

Sec. 1011. Nondiscrimination based on health status.
Sec. 1012. Portability.
Sec. 1013. Requirements relating to renewability generally.
Part 3--Standards for Managed Care Arrangements and Essential Community 
                               Providers

Sec. 1021. Standards for managed care arrangements.
Sec. 1022. Utilization review.
           Part 4--Enforcement; Effective Dates; Definitions

Sec. 1031. Enforcement.
Sec. 1032. Effective dates.
Sec. 1033. Definitions and special rules.
                 Subtitle B--Reform of Health Insurance

                 Part 1--Marketplace for Small Business

Sec. 1101. Requirement for insurers to offer MedAccess coverage.
Sec. 1102. MedAccess coverage defined.
Sec. 1103. Establishment of other MedAccess standards.
Sec. 1104. Use of modified community rating, uniform marketing 
                            materials, and miscellaneous consumer 
                            protections.
Sec. 1105. Monitoring and response to adverse selection; risk 
                            adjustment programs.
Sec. 1106. Establishment of reinsurance or allocation of risk 
                            mechanisms for high risk individuals in 
                            marketplace for small business and 
                            marketplace for individuals.
                  Part 2--Marketplace for Individuals

Sec. 1111. Application of similar requirements.
            Part 3--Voluntary Health Purchasing Arrangements

Sec. 1121. Establishment and organization.
Sec. 1122. Agreements with insurers.
Sec. 1123. Provision of information.
Sec. 1124. Enrolling eligible employees and eligible individuals 
                            through a purchasing arrangement.
Sec. 1125. Restriction on charges.
            Part 4--Definitions and Miscellaneous Provisions

Sec. 1131. Definitions.
Sec. 1132. Prohibition of improper incentives.
Sec. 1133. Enforcement.
Sec. 1134. Annual reports.
Sec. 1135. Research and demonstration projects; development of a health 
                            risk pooling model.
                         Subtitle C--Preemption

                   Part 1--Scope of State Regulation

Sec. 1201. Prohibition of State benefit mandates for group health 
                            plans.
Sec. 1202. Prohibition of provisions prohibiting employer groups from 
                            purchasing health insurance.
Sec. 1203. Preemption of State anti-managed care laws.
Sec. 1204. Definitions.
         Part 2--Multiple Employer Health Benefits Protections

Sec. 1211. Limited exemption from certain restrictions on ERISA 
                            preemption of State law for health plans 
                            maintained by multiple employers subject to 
                            certain Federal standards.
                ``Part 7--Multiple Employer Health Plans

        ``Sec. 701. Definitions.
        ``Sec. 702. Exempted multiple employer health plans relieved of 
                            certain restrictions on preemption of State 
                            law and treated as employee welfare benefit 
                            plans.
        ``Sec. 703. Exemption procedure.
        ``Sec. 704. Eligibility requirements.
        ``Sec. 705. Additional requirements applicable to exempted 
                            multiple employer health plans.
        ``Sec. 706. Disclosure to participating employers by 
                            arrangements providing medical care.
        ``Sec. 707. Maintenance of reserves.
        ``Sec. 708. Corrective actions.
        ``Sec. 709. Expiration, suspension, or revocation of exemption.
        ``Sec. 710. Review of actions of the Secretary.''
Sec. 1212. Clarification of scope of preemption rules.
Sec. 1213. Clarification of treatment of single employer arrangements.
Sec. 1214. Clarification of treatment of certain collectively bargained 
                            arrangements.
Sec. 1215. Employee leasing healthcare arrangements.
Sec. 1216. Enforcement provisions relating to multiple employer welfare 
                            arrangements and employee leasing 
                            healthcare arrangements.
Sec. 1217. Solvency requirements for certain self-insured group health 
                            plans.
Sec. 1218. Filing requirements for multiple employer welfare 
                            arrangements providing health benefits.
Sec. 1219. Cooperation between Federal and State authorities.
Sec. 1220. Effective date; transitional rules.
Part 3--Encouragement of Multiple Employer Arrangements Providing Basic 
                            Health Benefits

Sec. 1221. Eliminating commonality of interest or geographic location 
                            requirement for tax exempt trust status.
Sec. 1222. Single annual filing for all participating employers.
Sec. 1223. Compliance with coverage requirements through multiple 
                            employer health arrangements.
                 Subtitle D--Health Deduction Fairness

Sec. 1301. Permanent extension and increase in health insurance tax 
                            deduction for self-employed individuals.
Sec. 1302. Deduction of health insurance premiums for certain 
                            previously uninsured individuals.
        Subtitle E--Improved Access to Community Health Services

   Part 1--Increased Authorization for Community and Migrant Health 
                                Centers

Sec. 1401. Grant program to promote primary health care services for 
                            underserved populations.
   Part 2--Grants for Projects for Coordinating Delivery of Services

Sec. 1411. Projects for coordinating delivery of outpatient primary 
                            health services.
                   Part 3--Community Health Networks

Sec. 1421. Qualifications for community health networks.
          Subtitle F--Improved Access to Rural Health Services

 Part 1--Establishment of Rural Emergency Access Care Hospitals under 
                                Medicare

Sec. 1501. Rural emergency access care hospitals described.
Sec. 1502. Coverage of and payment for services.
Sec. 1503. Effective date.
            Part 2--Rural Medical Emergencies Air Transport

Sec. 1511. Grants to States regarding aircraft for transporting rural 
                            victims of medical emergencies.
             Part 3--Emergency Medical Services Amendments

Sec. 1521. Establishment of Office of Emergency Medical Services.
Sec. 1522. State offices of emergency medical services.
Sec. 1523. Programs for rural areas.
Sec. 1524. Funding.
Sec. 1525. Conforming amendments.
Sec. 1526. Effective date.
            Part 4--Additional Rural Health Care Provisions

Sec. 1531. Development of community-operated health plans in rural and 
                            frontier areas.
Sec. 1532. Primary health care for medically underserved rural 
                            communities; increased capacity of 
                            hospitals and outpatient facilities.
Sec. 1533. Innovative approaches to delivery of health services in 
                            rural areas.
Sec. 1534. Training of rural health professionals other than 
                            physicians.
Sec. 1535. General provisions.
   Subtitle G--Assistance in Enrolling Uninsured Children in Health 
                               Insurance

Sec. 1601. Establishment of State programs.
                      Subtitle H--Medicaid Reform

 Part 1--State Flexibility in the Medicaid Program: the Medical Health 
                           Allowance Program

Sec. 1701. Establishment of program.
Sec. 1702. Optional use of program to offer coverage to some or all 
                            State residents.
                  Part 2--Medicaid Program Flexibility

Sec. 1711. Modification of Federal requirements to allow States more 
                            flexibility in contracting for coordinated 
                            care services under medicaid.
Sec. 1712. Period of certain waivers.
Sec. 1713. Elimination of duplicative pediatric immunization program.
           Part 3--Medicaid Disproportionate Share Adjustment

Sec. 1721. 25 percent reduction in amount of payment adjustments for 
                            disproportionate share hospitals.
Subtitle I--Remedies and Enforcement With Respect to Group Health Plans

Sec. 1801. Claims procedure for group health plans.
Sec. 1802. Mediation of group health plan claims.
           ``Subpart B--Mediation of Group Health Plan Claims

        ``Sec. 521. Eligibility for submission to mediation.
        ``Sec. 522. Facilitators.
        ``Sec. 523. Role of attorneys.
        ``Sec. 524. Initiation of mediation.
        ``Sec. 525. Mediation procedure.
        ``Sec. 526. Mediation time limit.
        ``Sec. 527. Cost of mediation.
        ``Sec. 528. Legal effect of participation in mediation program.
        ``Sec. 529. Confidentiality and admissibility.''
Sec. 1803. Available court remedies.
Sec. 1804. Effective date.
   Subtitle J--Delivery of Health Care Services to Illegal Immigrants

Sec. 1901. Study on the delivery of health care services to illegal 
                            immigrants.
Sec. 1902. Report.

 Subtitle A--Increased Availability and Continuity of Health Coverage 
                   for Individuals and Their Families

PART 1--REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES, SPOUSES, AND 
                               DEPENDENTS

SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF COVERAGE FOR ELIGIBLE 
              INDIVIDUALS.

    (a) In General.--Each employer shall make available with respect to 
each eligible employee a group health plan under which--
            (1) coverage of each eligible individual with respect to 
        such an eligible employee may be elected on an annual basis for 
        each plan year,
            (2) subject to subsection (d), coverage is provided for at 
        least the required coverage specified in subsection (c), and
            (3) each eligible employee electing such coverage may elect 
        to have any premiums owed by the employee collected through 
        payroll deduction.
An employer is not required under this subsection to make any 
contribution to the cost of coverage under such a plan.
    (b) Special Rules.--
            (1) Exclusion of new employers and certain small 
        employers.--Subsection (a) shall not apply to any employer for 
        any plan year if, as of the beginning of such plan year--
                    (A) such employer (including any predecessor 
                thereof) has been an employer for less than 2 years,
                    (B) such employer has no more than 2 eligible full-
                time employees, or
                    (C) there are no more than 2 full-time eligible 
                employees who both are not covered under any group 
                health plan and do not have health insurance coverage.
            (2) Exclusion of family members.--Under such procedures as 
        the Secretary may prescribe, any relative of an employer may 
        be, at the election of the employer, excluded from 
        consideration as an eligible employee for purposes of applying 
        the requirements of subsection (a). In the case of an employer 
        that is not an individual, an employee who is a relative of a 
        key employee (as defined in section 416(i)(1) of the Internal 
        Revenue Code of 1986) of the employer may, at the election of 
        the key employee, be considered a relative excludable under 
        this paragraph.
            (3) Optional application of waiting period.--A group health 
        plan shall not be treated as failing to meet the requirements 
        of subsection (a) solely because a period of service by an 
        eligible employee of not more than 60 days is required under 
        the plan for coverage under the plan of eligible individuals 
        with respect to such employee.
    (c) Required Coverage.--
            (1) In general.--Except as provided in paragraph (2), the 
        required coverage specified in this subsection is standard 
        coverage (consistent with section 1102(c)), including at least 
        one option (either a fee-for-service option or a point-of-
        service option) that permits covered individuals an unlimited 
        choice of the lawful providers for which covered benefits are 
        made available.
            (2) Special treatment of small employers not contributing 
        to employee coverage.--In the case of a small employer (as 
        defined in section 1131(9)) that has not contributed during the 
        previous plan year to the cost of coverage for any eligible 
        employee under any group health plan, the required coverage 
        specified in this subsection for the plan year (with respect to 
        each eligible employee) is--
                    (A) MedAccess standard coverage, with a fee-for-
                service option and, if available, a point-of-service 
                option and a managed care option (as defined in section 
                1033);
                    (B) MedAccess catastrophic coverage; and
                    (C) if available, MedAccess medisave coverage,
        as such terms are defined in section 1102(a)(2).
            (3) Construction.--Nothing in this section shall be 
        construed as limiting the group health plans, or types of 
        coverage under such a plan, that an employer may offer to an 
        employee.
    (d) 5-Year Transition for Existing Group Health Plans.--
            (1) In general.--The requirement of subsection (a)(2) shall 
        not apply to a group health plan for a plan year if--
                    (A) the group health plan is in effect in the plan 
                year in which July 1, 1994, occurs, and
                    (B) the employer makes (or offers to make), in such 
                plan year and each subsequent plan year through the 
                plan year involved, a contribution to the plan on 
                behalf of each employee who is eligible to participate 
                in the plan.
            (2) Sunset.--Paragraph (1) shall only apply to a group 
        health plan for each of the 5 plan years beginning with the 
        first plan year to which the requirement of subsection (a) 
        applies.

               PART 2--PORTABILITY AND NONDISCRIMINATION

SEC. 1011. NONDISCRIMINATION BASED ON HEALTH STATUS.

    (a) In General.--A group health plan and an insurer providing 
health insurance coverage may not deny or impose (and an insurer may 
not require an employer under a group health plan to impose or 
otherwise to impose through a waiting period for coverage under a plan 
or similar requirement) a limitation or exclusion of benefits relating 
to treatment of a condition based on health status or based on the fact 
that the condition preexisted the effective date of coverage of the 
individual under the plan if--
            (1) in the case of any individual eligible for such 
        coverage, such individual has such coverage at the time at 
        which such individual first becomes eligible;
            (2) the limitation or exclusion applies to an individual 
        who, as of the date of birth, was covered under the plan;
            (3) the limitation or exclusion relates to pregnancy;
            (4) the condition relates to a condition that was not 
        diagnosed or treated within 3 months (or 6 months in the case 
        of coverage not under a group health plan) before the date of 
        such coverage; or
            (5) the limitation or exclusion extends over more than 6 
        months (or 12 months in the case of coverage not under a group 
        health plan) after the date of such coverage.
In the case of an individual who is eligible for coverage but for a 
waiting period imposed by the employer, in applying paragraphs (4) and 
(5), the individual shall be treated as having had such coverage as of 
the earliest date of the beginning of the waiting period.
    (b) One-Time Amnesty Period.--
            (1) In general.--In the case of an individual who, as of 
        the first date of the amnesty period is--
                    (A) covered under a group health plan or has health 
                insurance coverage, such coverage shall not be subject 
                to pre-existing condition exclusions on and after such 
                date; or
                    (B) not so covered, if the individual obtains 
                coverage under a group health plan or health insurance 
                coverage during the next available open enrollment 
                period with respect to the individual, coverage so 
                obtained shall not be subject to pre-existing condition 
                exclusions on and after the effective date of such 
                coverage.
            (2) Amnesty period.--The amnesty period described in this 
        paragraph, with respect to an individual who is a resident of a 
        State, is the 45-calendar-day period beginning on the effective 
        date of this part (under section 1032(b)).
            (3) Establishment of special allocation of risk pool for 
        amnesty.--Each State shall establish rules and requirements 
        relating to the allocation of risk among insurers with respect 
        to additional risks assumed as a result of the amnesty period 
        under this subsection (including individuals previously covered 
        for whom a preexisting condition exclusion will be no longer 
        applicable).
    (c) Application of Rules by Certain Health Maintenance 
Organizations.--A health maintenance organization that provides health 
insurance coverage shall not be considered as failing to meet the 
requirements of section 1301 of the Public Health Service Act 
notwithstanding that it provides for an exclusion of the coverage based 
on a preexisting condition consistent with the provisions of this part 
so long as such exclusion is applied consistent with the provisions of 
this part.

SEC. 1012. PORTABILITY.

    (a) In General.--Each group health plan and an insurer providing 
health insurance coverage shall waive any period applicable to a 
preexisting condition for similar benefits with respect to an 
individual to the extent that the individual, immediately prior to the 
date of such individual's enrollment in such plan, had health insurance 
coverage for the condition, or was covered for the condition under a 
group health plan, that was in effect before such date.
    (b) Continuous Coverage Required.--
            (1) In general.--Subsection (a) shall no longer apply if 
        there is a continuous period of more than 60 days (or, in the 
        case of an individual described in paragraph (2), 6 months) for 
        which the individual did not have health insurance coverage for 
        the condition or was not covered under a group health plan for 
        the condition.
            (2) Job termination.--An individual is described in this 
        paragraph if the individual loses coverage under a group health 
        plan due to termination of employment.
            (3) Exclusion of cash-only and dread disease plans.--In 
        this subsection, the term ``group health plan'' does not 
        include any group health plan which is offered primarily to 
        provide--
                    (A) coverage for a specified disease or illness, or
                    (B) a hospital or fixed indemnity policy, unless 
                the Secretary determines that such a plan provides 
                sufficiently comprehensive coverage of a benefit so 
                that it should be treated as a group health plan under 
                this subsection.
    (c) Transition for Non-Conforming Policies.--Notwithstanding State 
law or the provision of any agreement to the contrary, effective 
January 1, 1997, an insurer may cancel or refuse to renew health 
insurance coverage in a State prior to the application of this subtitle 
to health insurance coverage issued in the State if the coverage does 
not provide for either standard or catastrophic coverage, but only if 
the insurer offers the covered individual affected the opportunity to 
obtain health insurance coverage that meets the applicable requirements 
of this title.
    (d) Applicability of Coverage Under Public Insurance.--In this 
section, an individual shall be considered to have health insurance 
coverage for a condition without regard to whether such coverage is 
under a private or public plan.

SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY GENERALLY.

    (a) Multiemployer Plans and Exempted Multiple Employer Health 
Plans.--A multiemployer plan and an exempted multiple employer health 
plan may not cancel coverage or deny renewal of coverage under such a 
plan with respect to an employer other than--
            (1) for nonpayment of contributions,
            (2) for fraud or other misrepresentation by the employer,
            (3) for noncompliance with plan provisions, or
            (4) because the plan is ceasing to provide any coverage in 
        a geographic area.
    (b) Insurers.--
            (1) In general.--An insurer may not cancel health insurance 
        coverage or deny renewal of such coverage other than--
                    (A) for nonpayment of premiums,
                    (B) for fraud or other misrepresentation by the 
                insured,
                    (C) for noncompliance with plan provisions, or
                    (D) subject to paragraph (2), because the insurer 
                is ceasing to provide any health insurance coverage (or 
                the same type of health insurance coverage in the same 
                individual or small employer insurance market) in a 
                State, or, in the case of a health maintenance 
                organization or other network plan, in a geographic 
                area.
            (2) Notice requirement for market exit.--Paragraph (1)(D) 
        shall not apply to an insurer ceasing to provide coverage 
        unless the insurer provides notice of such termination to 
        employers and individuals covered at least 180 days before the 
        date of termination of coverage.
            (3) Limitation on reentry in employer and individual 
        markets.--If an insurer ceases to offer or provide health 
        insurance coverage (or a type of insurance coverage) in an area 
        with respect to the individual or small group market, the 
        insurer may not offer such health insurance coverage (or type 
        of coverage) in the area in such market until 5 years after the 
        date of the termination.
            (4) Type of coverage and insurance market defined.--In this 
        subsection--
                    (A) MedAccess standard coverage, MedAccess 
                catastrophic coverage, and MedAccess medisave coverage 
                shall each be considered to be separate types of health 
                insurance coverage;
                    (B) the term ``small group market'' means the 
                insurance market offered to individuals seeking health 
                care coverage on behalf of themselves (and their 
                dependents) on the basis of employment or other 
                relationship with respect to an employer or an 
                association.

PART 3--STANDARDS FOR MANAGED CARE ARRANGEMENTS AND ESSENTIAL COMMUNITY 
                               PROVIDERS

SEC. 1021. STANDARDS FOR MANAGED CARE ARRANGEMENTS.

    (a) Requirement.--
            (1) In general.--Each group health plan, and each insurer 
        providing health insurance coverage, for health care through a 
        managed care arrangement shall comply with the applicable 
        requirements of this section.
            (2) Definitions.--In this section:
                    (A) Managed care arrangement defined.--The term 
                ``managed care arrangement'' means, with respect to an 
                arrangement under a group health plan or under health 
                insurance coverage, providers who have entered into an 
                agreement under the arrangement under which such 
                providers are obligated to provide items and services 
                covered under the arrangement to individuals covered 
                under the plan or who have such coverage.
                    (B) Provider network.--The term ``provider 
                network'' means, with respect to a group health plan or 
                health insurance coverage, providers who have entered 
                into an agreement described in subparagraph (A) under a 
                managed care arrangement.
    (b) Scope of Arrangements With Providers.--
            (1) In general.--The entity providing for a managed care 
        arrangement on behalf of a group health plan or under health 
        insurance coverage shall enter into such agreements with health 
        care providers (including primary and specialty providers for 
        children) or have such other arrangements as may be necessary 
        to assure that covered individuals have reasonably prompt 
        access through the entity's provider network to all items and 
        services contained in the package of benefits for which 
        coverage is provided (including access to emergency services on 
        a 24-hour basis where medically necessary), in a manner that 
        assures the continuity of the provision of such items and 
        services.
            (2) Access to centers of excellence.--
                    (A) In general.--The entity providing for a managed 
                care arrangement on behalf of a group health plan or 
                under health insurance coverage shall demonstrate that 
                covered individuals (including individuals with chronic 
                diseases) have access through the entity's provider 
                network to specialized treatment expertise of 
                designated centers of excellence. Such entity shall 
                demonstrate such access according to standards 
                developed by the Secretary, including requirements 
                relating to arrangements with such centers and referral 
                of patients to such centers.
                    (B) Designation of centers of excellence.--The 
                Secretary shall establish a process for the designation 
                of facilities, including children's hospitals and other 
                pediatric facilities, as centers of excellence for 
                purposes of this paragraph. A facility may not be 
                designated unless the facility is determined--
                            (i) to provide specialty care,
                            (ii) to deliver care for complex cases 
                        requiring specialized treatment and for 
                        individuals with chronic diseases, and
                            (iii) to meet other requirements that may 
                        be established by the Secretary relating to 
                        specialized education and training of health 
                        professionals, participation in peer-reviewed 
                        research, or treatment of patients from outside 
                        the geographic area of the facility.
            (3) No referral required for obstetrics and gynecology.--An 
        entity providing for a managed care arrangement may not require 
        an individual to obtain a referral from a physician in order to 
        obtain covered items and services within the network of the 
        arrangement from a physician who specializes in obstetrics and 
        gynecology.
    (c) Provision of Emergency and Urgent Care Services.--
            (1) In general.--The entity providing for a managed care 
        arrangement on behalf of a group health plan or under health 
        insurance coverage must cover medically necessary emergency and 
        urgent care services provided to covered individuals (including 
        trauma services provided by designated trauma centers), without 
        regard to whether or not the provider furnishing such services 
        has a contractual (or other) arrangement with the entity to 
        provide items or services to covered individuals and, in the 
        case of services furnished for the treatment of an emergency 
        medical condition (as defined in section 1867(e)(1) of the 
        Social Security Act), without regard to prior authorization.
            (2) Designated trauma centers defined.--In paragraph (1), 
        the term ``designated trauma center''--
                    (A) has the meaning given such term in section 1231 
                of the Public Health Service Act, and
                    (B) includes (for years prior to 2001) a trauma 
                center that--
                            (i) is located in a State that has not 
                        designated trauma centers under section 1213 of 
                        such Act, and
                            (ii) the Secretary finds meets the 
                        standards under such section to be a designated 
                        trauma center.
    (d) Due Process Standards Relating to Provider Networks.--
            (1) Standards for selection of providers for network.--
                    (A) Establishment.--The entity providing for a 
                managed care arrangement on behalf of a group health 
                plan or under health insurance coverage shall establish 
                standards to be used by the entity for contracting with 
                health care providers with respect the entity's 
                provider network. Such standards shall be established 
                in consultation with providers who are members of the 
                network.
                    (B) Distribution of information.--Descriptive 
                information regarding these standards shall be made 
                available upon request to enrollees, providers who are 
                members of the network, and prospective enrollees and 
                prospective participating providers.
            (2) Notice requirement.--
                    (A) In general.--The entity may not terminate or 
                refuse to renew an agreement with a provider to 
                participate in the entity's provider network unless the 
                entity provides written notification to the provider of 
                the entity's decision to terminate or to refuse to 
                renew the agreement. The notification shall include a 
                statement of the reasons for the entity's decision, 
                consistent with the standards established under 
                paragraph (1).
                    (B) Timing of notification.--The entity shall 
                provide the notification required under subparagraph 
                (A) at least 45 days prior to the effective date of the 
                termination or expiration of the agreement (whichever 
                is applicable). The previous sentence shall not apply 
                if failure to terminate the agreement prior to the 
                deadline would adversely affect the health or safety of 
                a covered individual.
            (3) Review process.--
                    (A) In general.--The entity shall provide a process 
                under which the provider may request a review of the 
                entity's decision to terminate or refuse to renew the 
                provider's participation agreement. Such review shall 
                be conducted by a group of individuals the majority of 
                whom are health care providers who are members of the 
                entity's provider network or employees of the entity, 
                and who are members of the same profession as the 
                provider who requests the review.
                    (B) Counsel.--If the provider requests in advance, 
                the entity shall permit an attorney representing the 
                provider to be present at the provider's review.
                    (C) Review advisory.--The findings and conclusions 
                of a review under this paragraph shall be advisory and 
                non-binding.
            (4) Construction.--Nothing in this subsection shall be 
        construed to affect any other provision of law that provides an 
        appeals process or other form of relief to a provider of health 
        care services.

SEC. 1022. UTILIZATION REVIEW.

    (a) Requiring Review to Meet Standards.--A group health plan or 
insurer providing health insurance coverage may not deny coverage of or 
payment for items and services on the basis of a utilization review 
program unless the program meets the standards established by the 
Secretary under this section.
    (b) Establishment of Standards by Secretary.--The Secretary shall 
establish standards for utilization review programs, consistent with 
subsection (c), and shall periodically review and update such standards 
to reflect changes in the delivery of health care services. The 
Secretary shall establish such standards in consultation with 
appropriate parties, including representatives of health care 
providers, specialists, insurers, plan administrators, and other 
experts.
    (c) Requirements for Standards.--Under the standards established 
under subsection (a)--
            (1) individuals performing utilization review may not 
        receive financial compensation based upon the number of denials 
        of coverage;
            (2) negative determinations of the medical necessity or 
        appropriateness of services or the site at which services are 
        furnished may be made only by clinically qualified personnel;
            (3) the utilization review program shall provide for a 
        process under which an enrollee or provider may obtain timely 
        review of a denial of coverage;
            (4) utilization review shall be conducted in accordance 
        with uniformly applied standards that are based on the most 
        currently available medical evidence; and
            (5) providers shall participate in the development of the 
        utilization review program.
    (d) Preemption.--For provision preempting State laws relating to 
utilization review, see section 1203(a)(3).

           PART 4--ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS

SEC. 1031. ENFORCEMENT.

    (a) Enforcement by Department of Labor for Employers and Group 
Health Plans.--
            (1) In general.--For purposes of part 5 of subtitle B of 
        title I of the Employee Retirement Income Security Act of 1974, 
        the provisions of parts 1 and 2 of this subtitle and part 1 of 
        subtitle B shall be deemed to be provisions of title I of such 
        Act irrespective of exclusions under section 4(b) of such Act.
            (2) Regulatory authority.--With respect to the regulatory 
        authority of the Secretary of Labor under this subtitle 
        pursuant to subsection (a), section 505 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall 
        apply.
    (b) Enforcement by Penalty for Insurers.--
            (1) In general.--Chapter 43 of the Internal Revenue Code of 
        1986 (relating to qualified pension, etc., plans) is amended by 
        adding at the end thereof the following new section:

``SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH HEALTH INSURANCE 
              STANDARDS.

    ``(a) Imposition of Penalty.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of an insurer to comply with the requirements 
        applicable to the insurer under parts 2 and 3 of subtitle A of 
        title I and subtitle B of the Affordable Health Care Now Act of 
        1994.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by an insurer in a State if the Secretary of Health and 
        Human Services determines that the State has in effect a 
        regulatory enforcement mechanism that provides adequate 
        sanctions with respect to such a failure by such an insurer.
    ``(b) Amount of Penalty.--
            ``(1) In general.--Subject to paragraph (2), the amount of 
        the tax imposed by subsection (a) shall be $100 for each day 
        during which such failure persists for each individual to which 
        such failure relates. A rule similar to the rule of section 
        4980B(b)(3) shall apply for purposes of this section.
            ``(2) Limitation.--The amount of the tax imposed by 
        subsection (a) for an insurer with respect to health insurance 
        coverage shall not exceed 25 percent of the amounts received 
        for such coverage during the period such failure persists.
    ``(c) Liability for Penalty.--The penalty imposed by this section 
shall be paid by the insurer.
    ``(d) Exceptions.--
            ``(1) Corrections within 30 days.--No tax shall be imposed 
        by subsection (a) by reason of any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected within the 30-day 
                period beginning on the earliest date the insurer knew, 
                or exercising reasonable diligence would have known, 
                that such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that payment of such tax would be 
        excessive relative to the failure involved.
    ``(e) Definitions.--For purposes of this section, the terms `health 
insurance coverage' and `insurer' have the respective meanings given 
such terms in section 1033 of the Affordable Health Care Now Act of 
1994.''
            (2) Clerical amendment.--The table of sections for chapter 
        43 of such Code is amended by adding at the end thereof the 
        following new items:

                              ``Sec. 4980C. Failure of insurer to 
                                        comply with health insurance 
                                        standards.''

SEC. 1032. EFFECTIVE DATES.

    (a) Part 1.--The requirements of part 1 shall apply to plans years 
beginning after December 31, 1996.
    (b) Parts 2 and 3.--The requirements of parts 2 and 3 shall apply 
with respect to--
            (1) group health plans and employers shall apply to plans 
        years beginning after December 31, 1996, and
            (2) insurers shall take effect on January 1, 1997.

SEC. 1033. DEFINITIONS AND SPECIAL RULES.

    (a) In General.--For purposes of this subtitle:
            (1) Dependent.--The term ``dependent'' means, with respect 
        to any individual, any person who is--
                    (A) the spouse or surviving spouse of the 
                individual, or
                    (B) under regulations of the Secretary, a child 
                (including an adopted child) of such individual and--
                            (i) under 19 years of age, or
                            (ii) under 25 years of age and a full-time 
                        student.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 10 hours of service per 
        week for that employer. Such term shall not include any 
        employee who is not reasonably expected as of the 1st day of a 
        month to be employed by the employer for a period of 120 
        consecutive days during any 365-day period that includes such 
        1st day.
            (3) Eligible individual.--The term ``eligible individual'' 
        means, with respect to an eligible employee, such employee, and 
        any dependent of such employee.
            (4) Employer.--The term ``employer'' shall have the meaning 
        applicable under section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (5) Exempted multiple employer health plan.--The term 
        ``exempted multiple employer health plan'' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of an exemption under part 7 of subtitle 
        B of title I of the Employee Retirement Income Security Act of 
        1974 (as added by part 2 of subtitle C of this title).
            (6) Group health plan; plan.--(A) The term ``group health 
        plan'' means an employee welfare benefit plan providing medical 
        care (as defined in section 213(d) of the Internal Revenue Code 
        of 1986) to participants or beneficiaries directly or through 
        insurance, reimbursement, or otherwise, but does not include 
        any type of coverage excluded from the definition of a health 
        insurance coverage under section 1131(4)(B).
            (B) The term ``plan'' means a group health plan (including 
        any such plan which is a multiemployer plan) and an exempted 
        multiple employer health plan.
            (7) Health insurance coverage.--The term ``health insurance 
        coverage'' shall have the meaning applicable under section 
        1131(4).
            (8) Fully insured.--The term ``fully insured'' shall have 
        the meaning applicable under section 701(9) of Employee 
        Retirement Income Security Act of 1974 (as added by section 
        1211 of this title).
            (9) Insurer.--The term ``insurer'' has the meaning given 
        such term in section 1131(6).
            (10) Multiple employer welfare arrangement.--The term 
        ``multiple employer welfare arrangement'' shall have the 
        meaning applicable under section 3(40) of the Employee 
        Retirement Income Security Act of 1974.
            (11) Options.--
                    (A) Fee-for-service option.--Standard coverage is 
                considered to provide a ``fee-for-service option'' if 
                benefits with respect to the covered items and services 
                in the coverage are made available for such items and 
                services provided through any lawful provider of such 
                covered items and services.
                    (B) Managed care option.--Standard coverage is 
                considered to provide a ``managed care option'' if 
                benefits with respect to the covered items and services 
                in the coverage are made available exclusively through 
                a managed care arrangement (as defined in section 
                1021(a)(2)), except in the case of emergency and urgent 
                services and as otherwise required under law.
                    (C) Point-of-service option.--Standard coverage is 
                considered to provide a ``point-of-service option'' if 
                the benefits with respect to covered items and services 
                in the coverage are made available principally through 
                a managed care arrangement, with the choice of the 
                enrollee to obtain such benefits for items and services 
                provided through any lawful provider of such covered 
                items and services. The coverage may provide for 
                different cost sharing schedules based on whether the 
                items and services are provided through such an 
                arrangement or outside such an arrangement.
    (b) Application of ERISA Definitions.--Except as otherwise provided 
in this subtitle, terms used in this subtitle shall have the meanings 
applicable to such terms under section 3 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002).
    (c) Secretary.--Except with respect to references specifically to 
the Secretary of Labor, the term ``Secretary'' means the Secretary of 
Health and Human Services.

                 Subtitle B--Reform of Health Insurance

                 PART 1--MARKETPLACE FOR SMALL BUSINESS

SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER MEDACCESS COVERAGE.

    (a) Requirement.--
            (1) In general.--Each insurer (as defined in section 
        1131(6)) that makes available any health insurance coverage (as 
        defined in section 1131(4)) to a small employer (as defined in 
        section 1131(9)) in a State--
                    (A) shall make available to each small employer in 
                the State MedAccess standard coverage (as defined in 
                section 1102(a)(2)), with a fee-for-service option and, 
                if available, a point-of-service option and a managed 
                care option (as defined in section 1033),
                    (B) shall make available to each small employer in 
                the State MedAccess catastrophic coverage (as defined 
                in section 1102(a)(2)), and
                    (C) may make available to each small employer in 
                the State MedAccess medisave coverage (as defined in 
                section 1102(a)(2)).
            (2) Special rule for health maintenance organizations.--The 
        requirements of paragraph (1)(A) (with regard to requiring a 
        fee-for-service option), and paragraphs (1)(B) and (1)(C) shall 
        not apply with respect to a health insurance coverage that--
                    (A) is provided by a Federally qualified health 
                maintenance organization (as defined in section 1301(a) 
                of the Public Health Service Act), or
                    (B) is not provided by such an organization but is 
                provided by an organization recognized under State law 
                as a health maintenance organization or managed care 
                organization or a similar organization regulated under 
                State law for solvency.
            (3) Exception if state provides for guaranteed availability 
        (rather than guaranteed issue).--Paragraph (1) shall not apply 
        to an insurer in a State if the State is providing--
                    (A) access to each small employer in the State to 
                MedAccess standard coverage, to MedAccess catastrophic 
                coverage, and to a MedAccess medisave coverage, and
                    (B) a risk allocation mechanism described in 
                subsection (c).
    (b) Guaranteed Issue of MedAccess Coverage.--Subject to subsection 
(c)--
            (1) In general.--Subject to paragraphs (2) and (3), each 
        insurer that offers MedAccess coverage to a small employer in a 
        State--
                    (A) must accept every small employer in the State 
                that applies for such coverage; and
                    (B) must accept for enrollment under such coverage 
                every eligible individual (as defined in paragraph (5)) 
                who applies for enrollment on a timely basis 
                (consistent with paragraph (4)) and may not place any 
                restriction on the eligibility of an individual to 
                enroll so long as such individual is an eligible 
                individual.
            (2) Special rules for health maintenance organizations.--In 
        the case of coverage offered by a health maintenance 
        organization or other network plan, the organization may--
                    (A) limit the employers that may apply for such 
                coverage to those with eligible individuals residing in 
                the service area of the plan;
                    (B) limit the individuals who may be enrolled under 
                such coverage to those who reside in the service area 
                for such organization; and
                    (C) within the service area of such organization, 
                deny such coverage to such employers if the 
                organization demonstrates that--
                            (i) it will not have the capacity to 
                        deliver services adequately to enrollees of any 
                        additional groups because of its obligations to 
                        existing group contract holders and enrollees, 
                        and
                            (ii) it is applying this subparagraph 
                        uniformly to all employers without regard to 
                        the health status, claims experience, or 
                        duration of coverage of those employers and 
                        their employees.
        In this paragraph, the term ``health maintenance organization'' 
        includes an organization recognized under State law as a health 
        maintenance organization or managed care organization or a 
        similar organization regulated under State law for solvency.
            (3) Special rule for financial capacity limits.--In the 
        case of coverage offered by an insurer other than a health 
        maintenance organization or network plan, the insurer may deny 
        such coverage to small employers if the organization 
        demonstrates that--
                    (A) it does not have the financial reserves 
                necessary to underwrite additional coverage, and
                    (B) it is applying this paragraph uniformly to all 
                employers without regard to the health status, claims 
                experience, or duration of coverage of those employers 
                and their employees.
            (4) Clarification of timely enrollment.--
                    (A) General initial enrollment requirement.--Except 
                as provided in this paragraph, enrollment of an 
                eligible individual for MedAccess coverage may be 
                considered not to be timely if the eligible employee or 
                dependent fails to enroll under such coverage during an 
                initial enrollment period, if such period is at least 
                30 days long.
                    (B) Enrollment due to loss of previous coverage.--
                Enrollment under MedAccess coverage is considered to be 
                timely in the case of an eligible individual who--
                            (i) was covered under a group health plan 
                        or had other health insurance coverage at the 
                        time of the individual's initial enrollment 
                        period,
                            (ii) stated at the time of the initial 
                        enrollment period that coverage under a group 
                        health plan or other health insurance coverage 
                        was the reason for declining enrollment,
                            (iii) lost coverage under a group health 
                        plan or other health insurance coverage (as a 
                        result of the termination of the coverage, 
                        termination or reduction of employment, or 
                        other reason), and
                            (iv) requests enrollment within 30 days 
                        after termination of the coverage.
                    (C) Requirement applies during open enrollment 
                periods.--Each insurer and each group health plan 
                providing MedAccess coverage shall provide for at least 
                one period (of not less than 30 days) each year during 
                which enrollment under such coverage shall be 
                considered to be timely.
                    (D) Exception for court orders.--Enrollment of a 
                spouse or minor child of an employee shall be 
                considered to be timely if--
                            (i) a court has ordered that coverage be 
                        provided for the spouse or child under a 
                        covered employee's group health plan, and
                            (ii) a request for enrollment is made 
                        within 30 days after the date the court issues 
                        the order.
                    (E) Enrollment of spouses and dependents.--
                            (i) In general.--Enrollment of the spouse 
                        (including a child of the spouse) and any 
                        dependent child of an eligible employee shall 
                        be considered to be timely if a request for 
                        enrollment is made either--
                                    (I) within 30 days of the date of 
                                the marriage or of the date of the 
                                birth or adoption of a child, if family 
                                coverage is available as of such date, 
                                or
                                    (II) within 30 days of the date 
                                family coverage is first made 
                                available.
                            (ii) Coverage.--If available coverage 
                        includes family coverage and enrollment is made 
                        under such coverage on a timely basis under 
                        clause (i)(I), the coverage shall become 
                        effective not later than the first day of the 
                        first month beginning after the date of the 
                        marriage or the date of birth or adoption of 
                        the child (as the case may be).
            (5) Definitions.--In this subsection, the terms ``eligible 
        individual'' and ``group health plan'' have the meanings given 
        such terms in section 1023(a).
    (c) State Option of Guaranteed Availability Through Allocation of 
Risk (Rather than Through Guaranteed Issue).--The requirements of 
subsection (b) shall not apply in a State if the State has provided (in 
accordance with standards established under this part) a mechanism 
under which--
            (1) each insurer offering health insurance coverage to a 
        small employer in the State must participate in a program for 
        assigning high-risk small employer groups (or individuals 
        within such a group) among some or all such insurers, and
            (2) the insurers to which such high-risk small employer 
        groups or individuals are so assigned comply with the 
        requirements of subsection (b).

SEC. 1102. MEDACCESS COVERAGE DEFINED.

    (a) MedAccess Coverage Defined.--In this subtitle:
            (1) In general.--The term ``MedAccess coverage'' means a 
        health insurance coverage (whether under a managed-care plan, 
        indemnity plan, or other plan) that meets the following 
        requirements:
                    (A) The coverage--
                            (i) is designed to provide standard 
                        coverage (consistent with subsection (c)) with 
                        substantial cost-sharing,
                            (ii) is designed to provide only 
                        catastrophic coverage (consistent with 
                        subsection (d)), or
                            (iii) is designed to provide medisave 
                        coverage (consistent with subsection (e)).
                    (B) The coverage includes only services, including 
                (but not limited to) medical, surgical, hospital, and 
                preventive services, which are essential and medically 
                necessary; except that no specific procedure or 
                treatment, or classes thereof, is required to be 
                included in such coverage, by this Act or through 
                regulations.
                    (C) The coverage meets the applicable requirements 
                of section 1101(b) (relating to guaranteed issue).
                    (D) The coverage meets the consumer protection 
                standards established under section 1103(a)(1)(B).
            (2) MedAccess standard, catastrophic, and medisave 
        coverage.--The terms ``MedAccess standard coverage'', 
        ``MedAccess catastrophic coverage'', ``MedAccess medisave 
        coverage'' mean MedAccess coverage that provides for at least 
        standard coverage (referred to in paragraph (1)(A)(i)), for 
        only catastrophic coverage (referred to in paragraph 
        (1)(A)(ii)), or medisave coverage (referred to in paragraph 
        (1)(A)(iii)), respectively.
    (b) Set of Rules of Actuarial Equivalence.--
            (1) Initial determination.--The NAIC is requested to submit 
        to the Secretary, within 6 months after the date of the 
        enactment of this Act, a set of rules, including an appropriate 
        set of safe-harbors, which the NAIC determines is sufficient 
        for determining, in the case of any health insurance coverage 
        and for purposes of this section, the actuarial value of the 
        coverage offered.
            (2) Certification.--If the Secretary determines that the 
        NAIC has submitted a set of rules that comply with the 
        requirements of paragraph (1), the Secretary shall certify such 
        set of rules for use under this part. If the Secretary 
        determines that such a set of rules has not been submitted or 
        does not comply with such requirements, the Secretary shall 
        promptly establish a set of rules that meets such requirements.
    (c) Standard Coverage.--
            (1) In general.--For purposes of this Act, health insurance 
        coverage is considered to provide standard coverage consistent 
        with this subsection if the benefits are specified in a written 
        instrument providing for such coverage as essential and 
        medically necessary services described in subsection (a)(1)(B) 
        and determined, in accordance with the set of actuarial 
        equivalence rules certified under subsection (b), to have a 
        value that is within 5 percentage points of the applicable 
        target actuarial value for standard coverage established under 
        paragraph (2).
            (2) Initial determination of applicable target actuarial 
        value for standard coverage.--
                    (A) Initial determination.--The NAIC is requested 
                to submit to the Secretary, within 6 months after the 
                date of the enactment of this Act, a procedure for 
                determining the applicable target actuarial value for 
                standard coverage (which may vary by geographic area). 
                Such value shall be equal to the average actuarial 
                value of a representative range of the different types 
                of health benefits provisions (which include cost-
                sharing) typically offered as standard coverage in the 
                small employer health coverage market. In determining 
                the actuarial value, the benefits considered should be 
                sufficient to cover only services, including (but not 
                limited to) medical, surgical, hospital, and preventive 
                services, which are essential and medically necessary; 
                except that no specific procedure or treatment, or 
                classes thereof, is required to be considered in such 
                determination by this Act or through regulations. The 
                determination of such value shall be based on a 
                representative distribution of the population of 
                eligible employees offered such coverage and a single 
                set of standardized utilization and cost factors (which 
                may vary by geographic area).
                    (B) Certification.--If the Secretary determines 
                that the NAIC has submitted a procedure for determining 
                the applicable target actuarial value for standard 
                coverage that complies with the requirements of 
                subparagraph (A), the Secretary shall certify such 
                procedure for use under this part. If the Secretary 
                determines that such a procedure has not been submitted 
                or does not comply with such requirements, the 
                Secretary shall promptly prescribe such a procedure 
                that meets such requirements.
    (d) Catastrophic Coverage.--
            (1) In general.--For purposes of subsection (a)(1)(B), 
        health insurance coverage is considered to provide catastrophic 
        coverage consistent with this subsection if--
                    (A) benefits are available under such coverage for 
                a year only to the extent that expenses for covered 
                services in a year exceed a deductible amount that is 
                consistent with the dollar amounts specified in section 
                220(c)(2)(A) of the Internal Revenue Code of 1986, as 
                added by section 2202, and
                    (B) the benefits are determined, in accordance with 
                the set of actuarial equivalence rules certified under 
                subsection (b), to have a value that is within 5 
                percentage points of the target actuarial value for 
                catastrophic coverage established under paragraph (2).
            (2) Initial determination of target actuarial value for 
        catastrophic coverage.--
                    (A) Initial determination.--The NAIC is requested 
                to submit to the Secretary, within 6 months after the 
                date of the enactment of this Act, a target actuarial 
                value for catastrophic coverage equal to the actuarial 
                value that would have been computed under subsection 
                (c)(2)(A) if a deductible that represents the midpoint 
                of the range of deductibles permitted consistent with 
                subsections (b)(2) and (c)(2)(A) of section 220 of the 
                Internal Revenue Code of 1986 were used in place of any 
                deductible that otherwise would be applicable.
                    (B) Certification.--If the Secretary determines 
                that the NAIC has submitted a target actuarial value 
                for catastrophic coverage that comply with the 
                requirements of subparagraph (A), the Secretary shall 
                certify such value for use under this part. If the 
                Secretary determines that such a value has not been 
                submitted or does not comply with such requirements, 
                the Secretary shall promptly determine such a target 
                actuarial value that meets such requirements.
    (e) Medisave Coverage.--
            (1) In general.--For purposes of subsection (a)(1)(C), 
        health insurance coverage is considered to provide medisave 
        coverage consistent with this subsection if such coverage 
        consists of--
                    (A) coverage under a catastrophic health plan 
                (within the meaning of section 220(c)(2) of the 
                Internal Revenue Code of 1986, as inserted by section 
                2202 of this Act), and
                    (B) a medical savings account described in section 
                220(d)(1)(B) of such Code.
    (f) Subsequent Revisions.--
            (1) NAIC.--The NAIC may submit from time to time to the 
        Secretary revisions of the set of rules of actuarial 
        equivalence previously established or determined under this 
        section if the NAIC determines such revision necessary to take 
        into account changes in the relevant types of health benefits 
        provisions, in deductible levels for catastrophic coverage, or 
        in demographic conditions which form the basis for such set of 
        rules. The provisions of subsection (b)(2) shall apply to such 
        a revision in the same manner as they apply to the initial 
        determination of the set of rules.
            (2) Secretary.--The Secretary may by regulation revise such 
        set of rules and values from time to time if the Secretary 
        determines such revision necessary to take into account changes 
        described in paragraph (1).

SEC. 1103. ESTABLISHMENT OF OTHER MEDACCESS STANDARDS.

    (a) Establishment of General Standards.--
            (1) Role of naic.--The Secretary shall request the NAIC to 
        develop, within 9 months after the date of the enactment of 
        this Act, model regulations that specify standards with respect 
        to each of the following:
                    (A)(i) The requirement, under section 1101(a), that 
                insurers make available MedAccess coverage.
                    (ii) The requirements of guaranteed availability of 
                MedAccess coverage to small employers under section 
                1101(b).
                    (B) The requirements of section 1104 (relating to 
                use of modified community rating, uniform marketing 
                materials, and miscellaneous consumer protections).
        If the NAIC develops recommended regulations specifying such 
        standards within such period, the Secretary shall review the 
        standards. Such review shall be completed within 60 days after 
        the date the regulations are developed. Unless the Secretary 
        determines within such period that the standards do not meet 
        the requirements, such standards shall serve as the standards 
        under this section, with such amendments as the Secretary deems 
        necessary.
            (2) Contingency.--If the NAIC does not develop such model 
        regulations within such period or the Secretary determines that 
        such regulations do not specify standards that meet the 
        requirements described in paragraph (1), the Secretary shall 
        specify, within 15 months after the date of the enactment of 
        this Act, standards to carry out those requirements.
            (3) Effective date.--The MedAccess standards and consumer 
        protection standards (as defined in paragraph (5)) shall apply 
        to MedAccess coverage and health insurance coverage provided in 
        a State on or after the respective date the standards are 
        implemented in the State under subsections (b) and (c).
            (4) Preemption of state law.--
                    (A) In general.--Except as provided in subparagraph 
                (B), a State may not establish or enforce standards for 
                health insurance coverage made available to small 
                employers and individuals that are different from the 
                standards established under this part.
                    (B) Grandfather.--In the case of a State that, as 
                of August 1, 1994, required that premiums in the 
                individual and small group market sectors be community-
                rated and not vary based on age, the State continue 
                such standards (and reasonable modifications thereof) 
                in force.
            (5) Definitions.--In this section:
                    (A) Consumer protection standards.--The term 
                ``consumer protection standards'' means the standards 
                established under paragraph (1)(B).
                    (B) MedAccess standards.--The term ``MedAccess 
                standards'' means the standards established under 
                paragraph (1)(A) (relating to the requirements of 
                section 1101), and includes the consumer protection 
                standards insofar as they relate to MedAccess coverage.
    (b) Application of Standards Through States.--
            (1) Application of medaccess standards.--
                    (A) In general.--Each State shall submit to the 
                Secretary, by the deadline specified in subparagraph 
                (B), a report on steps the State is taking to implement 
                and enforce the consumer protection standards with 
                respect to insurers, and MedAccess coverage offered, 
                not later than such deadline.
                    (B) Deadline for report.--
                            (i) 1 year after standards established.--
                        Subject to clause (ii), the deadline under this 
                        subparagraph is 1 year after the date the 
                        MedAccess standards are established under 
                        subsection (a).
                            (ii) Exception for legislation.--In the 
                        case of a State which the Secretary identifies, 
                        in consultation with the NAIC, as--
                                    (I) requiring State legislation 
                                (other than legislation appropriating 
                                funds) in order for insurers and plans 
                                providing MedAccess coverage offered to 
                                meet the MedAccess standards 
                                established under subsection (a), but
                                    (II) having a legislature which is 
                                not scheduled to meet in 1995 in a 
                                legislative session in which such 
                                legislation may be considered,
                        the date specified in this subparagraph is the 
                        first day of the first calendar quarter 
                        beginning after the close of the first 
                        legislative session of the State legislature 
                        that begins on or after January 1, 1996. For 
                        purposes of the previous sentence, in the case 
                        of a State that has a 2-year legislative 
                        session, each year of such session shall be 
                        deemed to be a separate regular session of the 
                        State legislature.
            (2) Federal role.--If the Secretary determines that a State 
        has failed to submit a report by the deadline specified under 
        paragraph (1) or finds that the State has not implemented and 
        provided adequate enforcement of the MedAccess standards under 
        such paragraph, the Secretary shall notify the State and 
        provide the State a period of 60 days in which to submit such 
        report or to implement and enforce such standards under such 
        paragraph. If, after such 60-day period, the Secretary finds 
        that such a failure has not been corrected, the Secretary shall 
        provide for such mechanism for the implementation and 
        enforcement of such standards in the State as the Secretary 
        determines to be appropriate. Such implementation and 
        enforcement shall take effect with respect to insurers, and 
        plans providing MedAccess coverage offered or renewed, on or 
        after 3 months after the date of the Secretary's finding under 
        the previous sentence, and until the date the Secretary finds 
        that such a failure has been corrected. In exercising authority 
        under this subparagraph, the Secretary shall determine whether 
        the use of a risk-allocation mechanism, described in section 
        1101(c), would be more consistent with the small employer group 
        health coverage market in the State than the guaranteed 
        availability provisions of section 1101(b).
            (3) Application of consumer protection standards.--
                    (A) In general.--Each State shall submit to the 
                Secretary, by the deadline specified in subparagraph 
                (B), a report on steps the State is taking to implement 
                and enforce the MedAccess standards with respect to 
                insurers, and health insurance coverage (other than 
                MedAccess coverage) offered, not later than such 
                deadline.
                    (B) Deadline for report.--
                            (i) 1 year after standards established.--
                        Subject to clause (ii), the deadline under this 
                        subparagraph is 1 year after the date the 
                        consumer protection standards are established 
                        under subsection (a).
                            (ii) Exception for legislation.--In the 
                        case of a State which the Secretary identifies, 
                        in consultation with the NAIC, as--
                                    (I) requiring State legislation 
                                (other than legislation appropriating 
                                funds) in order for insurers and plans 
                                providing health insurance coverage 
                                offered to meet the consumer protection 
                                standards established under subsection 
                                (a), but
                                    (II) having a legislature which is 
                                not scheduled to meet in 1995 in a 
                                legislative session in which such 
                                legislation may be considered,
                        the date specified in this subparagraph is the 
                        first day of the first calendar quarter 
                        beginning after the close of the first 
                        legislative session of the State legislature 
                        that begins on or after January 1, 1996. For 
                        purposes of the previous sentence, in the case 
                        of a State that has a 2-year legislative 
                        session, each year of such session shall be 
                        deemed to be a separate regular session of the 
                        State legislature.
            (4) Federal role.--If the Secretary determines that a State 
        has failed to submit a report by the deadline specified under 
        paragraph (1) or finds that the State has not implemented and 
        provided adequate enforcement of the consumer protection 
        standards under such paragraph, the Secretary shall notify the 
        State and provide the State a period of 60 days in which to 
        submit such report or to implement and enforce such standards 
        under such paragraph. If, after such 60-day period, the 
        Secretary finds that such a failure has not been corrected, the 
        Secretary shall provide for such mechanism for the 
        implementation and enforcement of such standards in the State 
        as the Secretary determines to be appropriate. Such 
        implementation and enforcement shall take effect with respect 
        to insurers, and health insurance coverage (other than 
        MedAccess coverage) offered or renewed, on or after 3 months 
        after the date of the Secretary's finding under the previous 
        sentence, and until the date the Secretary finds that such a 
        failure has been corrected.

SEC. 1104. USE OF MODIFIED COMMUNITY RATING, UNIFORM MARKETING 
              MATERIALS, AND MISCELLANEOUS CONSUMER PROTECTIONS.

    (a) Use of Modified Community Rating.--
            (1) In general.--As a standard under section 1103(a)(1)(B), 
        subject to paragraph (2), the premium rate established by an 
        insurer for coverage may not vary within a plan design except 
        by the following:
                    (A) Age.--By age, based on classes of age 
                established by a State.
                    (B) Geographic area.--By geographic area, based on 
                3-digit zip code or counties, as identified by a State.
                    (C) Family size.--Family size, based on a 
                classification of individual, individual with one or 
                more children, married couple without children, and 
                married couple with children.
            (2) Discount for employer wellness program.--An insurer may 
        provide for a group discount with respect to an employer that 
        provides for a wellness program for employees.
    (b) Full Disclosure of Rating Practices.--At the time an insurer 
offers health insurance coverage to a small employer, the insurer shall 
fully disclose to the employer rating practices for health insurance 
coverage, including rating practices for different plan designs.
    (c) Actuarial Certification.--Each insurer that offers health 
insurance coverage to a small employer in a State shall file annually 
with the State commissioner of insurance a written statement by a 
member of the American Academy of Actuaries (or other individual 
acceptable to the commissioner) that, based upon an examination by the 
individual which includes a review of the appropriate records and of 
the actuarial assumptions of the insurer and methods used by the 
insurer in establishing premium rates for applicable health insurance 
coverage--
            (1) the insurer is in compliance with the applicable 
        provisions of this section, and
            (2) the rating methods are actuarially sound.
Each such insurer shall retain a copy of such statement for examination 
at its principal place of business.
    (d) Registration and Reporting.--Each insurer that issues any 
health insurance coverage to a small employer in a State shall be 
registered or licensed with the State commissioner of insurance and 
shall comply with any reporting requirements of the commissioner 
relating to such coverage.
    (e) Marketing Material.--Each insurer that issues any health 
insurance coverage to a small employer in a State shall file with the 
State those marketing materials relating to the offer and sale of 
health insurance coverage to be used for distribution before the 
materials are used. Such materials shall be in a uniform format 
specified under the standards established under section 1101. Such 
materials (including information on plan designs offered by different 
insurers) shall be distributed to employers that do not contribute to 
health insurance coverage for their employees, in order to distribute 
such information to their employees as part of the offer of coverage 
under section 1001(a).

SEC. 1105. MONITORING AND RESPONSE TO ADVERSE SELECTION; RISK 
              ADJUSTMENT PROGRAMS.

    (a) Monitoring.--The Secretary of Labor shall monitor the 
prevalence and impact of adverse risk selection in the fully insured 
plans made available to small employers resulting from the decision of 
small employers to self insure. State insurance commissioners may 
submit to the Secretary such information on such adverse risk selection 
as they determine to be appropriate.
    (b) Response.--If the Secretary of Labor determines, on the basis 
of such information or otherwise, that, due to decisions of small 
employers to self-insure, there has been substantial or significant 
favorable selection with respect to self-insured plans or unfavorable 
selection with respect to fully insured plans in a State, the Secretary 
shall develop a risk adjustment program under subsection (c) that 
responds to such a pattern in the State. The Secretary shall request 
the NAIC to submit to the Secretary recommendations regarding the 
structure and operation of such a program.
    (c) Establishment of Risk Adjustment Program.--The risk adjustment 
program applied in a State under this subsection--
            (1) shall be designed to be operated on a non-governmental 
        basis,
            (2) shall require participation of each small employer in 
        the State that is self-insured,
            (3) shall require the imposition of such assessments on 
        self-insured plans offered by such employers as may be 
        appropriate to prevent further adverse or favorable selection, 
        and
            (4) shall provide for the distribution of such assessments 
        to the State involved for purposes of making payments to 
        insurers to stabilize the small group insurance market.
The amounts of the assessments under paragraph (3) for individual 
employers may take into account the number of lives covered under the 
plans of such employers and the area of residence of the lives covered.

SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCATION OF RISK 
              MECHANISMS FOR HIGH RISK INDIVIDUALS IN MARKETPLACE FOR 
              SMALL BUSINESS AND MARKETPLACE FOR INDIVIDUALS.

    (a) Establishment of Standards.--
            (1) Role of naic.--The Secretary shall request the NAIC to 
        develop, within 9 months after the date of the enactment of 
        this Act, models for reinsurance or allocation of risk 
        mechanisms (each in this section referred to as a ``reinsurance 
        or allocation of risk mechanism'') for health insurance 
        coverage made available to small employers and for whom an 
        insurer is at risk of incurring high costs in providing such 
        coverage. If the NAIC develops such models within such period, 
        the Secretary shall review such models to determine if they 
        provide for an effective reinsurance or allocation of risk 
        mechanism. Such review shall be completed within 30 days after 
        the date the models are developed. Unless the Secretary 
        determines within such period that such a model is not an 
        effective reinsurance or allocation of risk mechanism, such 
        remaining models shall serve as the models under this section, 
        with such amendments as the Secretary deems necessary.
            (2) Contingency.--If the NAIC does not develop such models 
        within such period or the Secretary determines that all such 
        models do not provide for an effective reinsurance or 
        allocation of risk mechanism, the Secretary shall specify, 
        within 15 months after the date of the enactment of this Act, 
        models to carry out this section.
    (b) Implementation of Reinsurance or Allocation of Risk 
Mechanisms.--
            (1) By states.--Each State shall establish and maintain one 
        or more reinsurance or allocation of risk mechanisms that are 
        consistent with a model established under subsection (a) by not 
        later than the deadline specified in section 1103(b)(1)(B). A 
        State may establish and maintain such a mechanism jointly with 
        one or more other States.
            (2) Federal role.--
                    (A) In general.--If the Secretary determines that a 
                State has failed to establish or maintain a reinsurance 
                or allocation of risk mechanism in accordance with 
                paragraph (1), the Secretary shall establish and 
                maintain such a reinsurance or allocation of risk 
                mechanism meeting the requirements of this paragraph.
                    (B) Reinsurance mechanism.--Unless the Secretary 
                determines under subparagraph (C) that an allocation of 
                risk mechanism is the appropriate mechanism to use in a 
                State under this paragraph, the Secretary shall 
                establish and maintain for use under this section for 
                each State an appropriate reinsurance mechanism.
                    (C) Allocation of risk mechanism.--If the Secretary 
                determines that, due to the nature of the health 
                coverage market in the State (including a relatively 
                small number of plans offered providing health 
                insurance coverage or a relatively small number of 
                uninsurable small employers), an allocation of risk 
                mechanism would be a better mechanism than a 
                reinsurance mechanism, the Secretary shall establish 
                and maintain for use under this section for a State an 
                allocation of risk mechanism under which small 
                employers with employees who are at higher risk of 
                significantly higher claims would be equitably assigned 
                among insurers offering health insurance coverage to 
                small employers.
    (c) Construction.--Nothing in this section shall be construed to 
prohibit reinsurance or allocation of risk arrangements relating to 
health insurance coverage, whether on a State or multi-State basis, not 
required under this section.

                  PART 2--MARKETPLACE FOR INDIVIDUALS

SEC. 1111. APPLICATION OF SIMILAR REQUIREMENTS.

    (a) In General.--Except as provided in subsection (c)--
            (1) the provisions of part 1 of this subtitle shall apply 
        to insurers offering health insurance coverage to individuals 
        in the individual market (as defined in subsection (b)) in the 
        same manner as such provisions apply to insurers offering 
        health insurance coverage to employers, and
            (2) the standards established under section 1103 shall 
        apply under this part in the same manner as they apply under 
        part 1.
For purposes of this subsection, any reference to an employee or 
eligible employee is deemed a reference to such an individual.
    (b) Individual Market Defined.--In subsection (a), the term 
``individual market'' means the insurance market offered to individuals 
seeking health care coverage on behalf of themselves (and their 
dependents) and not seeking coverage on the basis of employment, 
membership in a organization, or through another group purchasing 
arrangement.
    (c) Exception and Special Rule.--
            (1) Wellness discounts.--Section 1104(a)(2) (relating to 
        discounts for employer wellness programs) shall not apply under 
        this part.
            (2) Separate application of risk adjustment to individual 
        market sector.--Section 1105 (relating to monitoring and 
        response to adverse selection; risk adjustment programs) shall 
        be applied under this part in a manner that is separate from 
        its application under part A.
            (3) Separate age rating factor for the individual market.--
        The provisions regarding age under section 1104(a)(1)(A) shall 
        be determined separately for each year of age and not by the 
        classes of age referred to in such section.
            (4) Conversion of permanent health insurance policies.--The 
        provisions of section 1104 shall not apply in connection with a 
        permanent policy of health insurance existing on the effective 
        date, if each individual covered under the policy is given the 
        option to convert the policy to a policy of health insurance 
        subject to this part.
    (d) Application of Requirements.--Coverage offered by an insurer 
shall not be treated as MedAccess coverage under this part unless the 
insurer complies with the requirements of part 3 of subtitle A 
(relating to standards for managed care arrangements and essential 
community providers) in the same manner as such requirements apply to a 
group health plan.

            PART 3--VOLUNTARY HEALTH PURCHASING ARRANGEMENTS

SEC. 1121. ESTABLISHMENT AND ORGANIZATION.

    (a) In General.--Voluntary health purchasing arrangements (in this 
part referred to as ``purchasing arrangements'') may be established in 
accordance with this part. Each purchasing arrangement shall be 
chartered under State law and operated as a not-for-profit corporation. 
An insurer may not form, underwrite, or possess a majority vote of a 
purchasing arrangement, but may administer such an arrangement.
    (b) Board of Directors.--
            (1) In general.--Each purchasing arrangement shall be 
        governed by a Board of Directors. Such Board shall initially be 
        appointed under procedures established by the State in which it 
        operates. Subsequently, the Board shall be elected by the 
        members of the arrangement in accordance with paragraph (3). 
        Such Board shall be composed of individuals who are small 
        employers (or representatives of small employers), eligible 
        employees of small employers (or representatives of such 
        employees), and eligible individuals in the area in which the 
        arrangement operates.
            (2) Membership.--A purchasing arrangement shall accept all 
        small employers, eligible employees, and eligible individuals 
        residing within the area served by the arrangement as members 
        if such employers, employees or individuals request such 
        membership.
            (3) Voting.--Members of a purchasing arrangement shall have 
        voting rights consistent with the rules established under the 
        bylaws governing the arrangement.
    (c) Duties of Purchasing Arrangements.--
            (1) In general.--Subject to paragraph (2), each purchasing 
        arrangement shall--
                    (A) market MedAccess coverage to members throughout 
                the entire area served by the arrangement;
                    (B) enter into agreements with insurers offering 
                MedAccess coverage under section 1122;
                    (C) enter into agreements with small employers 
                under section 1123;
                    (D) enroll individuals in MedAccess coverage, only 
                in accordance with section 1124; and
                    (E) carry out other functions provided for under 
                this part.
            (2) Limitation on activities.--A purchasing arrangement 
        shall not--
                    (A) perform any activity (including review, 
                approval, or enforcement) relating to payment rates for 
                providers;
                    (B) perform any activity (including certification 
                or enforcement) relating to compliance of insurers or 
                coverage with the requirements of parts 1 or 2;
                    (C) assume financial risk in relation to any such 
                coverage; or
                    (D) perform other activities identified by the 
                State as being inconsistent with the performance of its 
                duties under paragraph (1).
            (3) Characteristics of service area.--A purchasing 
        arrangement need not serve areas that are contiguous, but the 
        geographic boundaries of such areas shall be consistent with 
        the boundaries established for geographic areas used in 
        establishing premium rates in the individual and small group 
        marketplace. If a purchasing arrangement serves a part of a 
        metropolitan statistical area the arrangement shall serve the 
        entire area.
    (d) Establishment not Required.--Nothing in this section shall be 
construed as requiring--
            (1) that a purchasing arrangement be established in each 
        area of a State in which it operates; and
            (2) that there be only one purchasing arrangement 
        established with respect to any area.

SEC. 1122. AGREEMENTS WITH INSURERS.

    (a) Agreements.--
            (1) In general.--Except as provided in paragraph (3), each 
        purchasing arrangement for an area shall enter into an 
        agreement under this section with each insurer that desires to 
        make MedAccess coverage available through the purchasing 
        arrangement (consistent with any procedures established by the 
        State).
            (2) Termination of agreement.--An agreement under paragraph 
        (1) shall remain in effect for a 12-month period, except that 
        the purchasing arrangement may terminate an agreement under 
        paragraph (1) if the insurer's license or certification under 
        State law is terminated or for other good cause shown.
            (3) Limitation on renewal of agreements.--Subsequent to the 
        12-month period described in paragraph (2), a purchasing 
        arrangement may--
                    (A) refuse to enter into a subsequent agreement 
                with an insurer if the arrangement determines that the 
                enrollment or premium is too low, and
                    (B) if a previous agreement with an insurer was 
                terminated for good cause and the arrangement 
                determines appropriate actions have not been taken to 
                correct the problems, refuse to enter into a subsequent 
                agreement with the insurer.
            (4) No prohibition on offering of coverage.--Nothing in 
        this subsection shall be construed as prohibiting an insurer 
        that does not enter into an agreement under paragraph (1) from 
        offering health insurance coverage to small employers and 
        eligible individuals within any area, so long as the premium 
        rates charged outside such arrangement are the same as those 
        charged within the arrangement (subject to reasonable 
        differences in premiums that only reflect savings in 
        administrative costs under such an arrangement).
    (b) Receipt of Premiums on Behalf of Plans.--
            (1) In general.--Under an agreement under this section 
        between a purchasing arrangement and an insurer--
                    (A) premiums shall be payable, and
                    (B) payment of premiums may be made by individuals 
                (or employers on their behalf) directly to the 
                purchasing arrangement for the benefit of the insurer.
            (2) Timing of payment of premiums.--Premiums may be payable 
        on a monthly basis (or, at the option of an eligible employee 
        or individual, on a quarterly basis). The purchasing 
        arrangement may provide for reasonable penalties and grace 
        periods for late payment.
            (3) Qualified health plans retain risk of nonpayment.--
        Nothing in this subsection shall be construed as placing upon a 
        purchasing arrangement any risk associated with the failure of 
        individuals and employers to make prompt payment of premiums to 
        the purchasing arrangement (other than the portion of the 
        premium representing the purchasing arrangement administrative 
        fee under section 1125). Each small employer and eligible 
        individual who enrolls with an insurer through the purchasing 
        arrangement is liable to the insurer for premiums.
    (c) Forwarding of Premiums.--
            (1) In general.--If, under an agreement under subsection 
        (a), premium payments for an insurer are made to the purchasing 
        arrangement, the purchasing arrangement shall forward to the 
        insurer the amount of the premiums and the purchasing 
        arrangement (and not the employer or individual) shall be 
        liable for the premium payment collected under such 
        arrangement.
            (2) Payments.--Payments shall be made by the purchasing 
        arrangement under this subsection within a period of days 
        (specified by the Secretary and not to exceed 7 days) after 
        receipt of the premium from the small employer of the eligible 
        employee or the eligible individual, as the case may be.

SEC. 1123. PROVISION OF INFORMATION.

    (a) In General.--Each purchasing arrangement for an area shall 
provide, upon request, to each small employer that employs individuals 
in the area and to each eligible individual who resides in the area--
            (1) information provided to the purchasing arrangement by 
        the State or insurers in accordance with rules by the State in 
        which such arrangement is located, and
            (2) the opportunity to enter into an agreement with the 
        arrangement for the purchase of coverage through the insurer.
    (b) Forwarding Information and Payroll Deductions.--As part of an 
agreement entered into under this section, a small employer shall 
forward the information and make the payroll deductions required under 
section 1001.

SEC. 1124. ENROLLING ELIGIBLE EMPLOYEES AND ELIGIBLE INDIVIDUALS 
              THROUGH A PURCHASING ARRANGEMENT.

    A purchasing arrangement shall offer, on behalf of each insurer 
with which an agreement was entered into under section 1122 and in 
accordance with the enrollment procedures of such insurers, enrollment 
in health insurance coverage only to--
            (1) all eligible employees employed by small employers in 
        the area served by the purchasing arrangement; and
            (2) all eligible individuals residing in such area.

SEC. 1125. RESTRICTION ON CHARGES.

    (a) In General.--A purchasing arrangement may impose an 
administrative fee with respect to an eligible employee or eligible 
individual obtaining coverage through the purchasing arrangement.
    (b) Fee.--A purchasing arrangement that elects to impose a fee 
under subsection (a) shall ensure that such fee is set as a percentage 
of the premium for such coverage and is imposed uniformly with respect 
to all coverage provided through the arrangement.

            PART 4--DEFINITIONS AND MISCELLANEOUS PROVISIONS

SEC. 1131. DEFINITIONS.

    Except as otherwise specifically provided, for purposes of this 
subtitle:
            (1) Dependent child.--The term ``dependent child'' means a 
        child (including an adopted child) who is under 19 years of age 
        or who is a full-time student and under 25 years of age.
            (2) Eligible employee.--The term ``eligible employee'' 
        means, with respect to an employer, an employee who--
                    (A) normally performs on a monthly basis at least 
                10 hours of service per week for that employer; or
                    (B) is reasonably expected as of the 1st day of 
                such month to be employed by the employer for a period 
                of 120 consecutive days during any 365-day period that 
                includes such 1st day.
            (3) Employer.--The term ``employer'' shall have the meaning 
        applicable under section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (4) Health insurance coverage.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``health insurance coverage'' means any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract offered by an 
                insurer.
                    (B) Exception.--Such term does not include any of 
                the following:
                            (i) Coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof.
                            (ii) Medicare supplemental health 
                        insurance.
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Liability insurance, including general 
                        liability insurance and automobile liability 
                        insurance.
                            (v) Worker's compensation or similar 
                        insurance.
                            (vi) Automobile medical-payment insurance.
                            (vii) Coverage for a specified disease or 
                        illness.
                            (viii) A hospital or fixed indemnity 
                        policy.
            (5) Network plan.--The term ``network plan'' includes, as 
        defined in standards established under section 1103, an 
        organization that provides health insurance coverage which 
        meets specified standards and under which health services are 
        offered to be provided on a prepaid, at-risk basis primarily 
        through a defined set of providers.
            (6) Insurer.--The term ``insurer'' means a licensed 
        insurance company, an entity offering prepaid hospital or 
        medical services, and a health maintenance organization 
        offering such services to an employer, and includes a similar 
        organization regulated under State law for solvency.
            (7) NAIC.--The term ``NAIC'' means the National Association 
        of Insurance Commissioners.
            (8) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (9) Small employer.--The term ``small employer'' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 51 eligible employees on a 
        typical business day. For the purposes of this paragraph, the 
        term ``employee'' includes a self-employed individual. For 
        purposes of determining if an employer is a small employer, 
        rules similar to the rules of subsection (b) and (c) of section 
        414 of the Internal Revenue Code of 1986 shall apply.
            (10) State.--The term ``State'' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        and American Samoa.
            (11) State commissioner of insurance.--The term ``State 
        commissioner of insurance'' includes a State superintendent of 
        insurance.

SEC. 1132. ENFORCEMENT.

    For enforcement of requirements of this subtitle, see section 1031.

SEC. 1133. PROHIBITION OF IMPROPER INCENTIVES.

    (a) Limitation on Financial Incentives.--No insurer that offers 
health insurance coverage may vary the commission or financial or other 
remuneration to a person based on the claims experience or health 
status of individuals enrolled by or through the person.
    (b) Prohibition of Tie-in Arrangements.--No insurer that offers 
health insurance coverage may require the purchase of any other 
insurance or product as a condition for the purchase of such coverage.

SEC. 1134. ANNUAL REPORTS.

    (a) In General.--The Secretary shall submit to Congress an annual 
report on the implementation of this subtitle and the need for 
additional reforms to assure and expand coverage.
    (b) Information Regarding Impact of Reforms.--Each annual report 
shall include information concerning at least the following:
            (1) Implementation and enforcement of the applicable 
        MedAccess standards and consumer protection standards under 
        this subtitle by the States and by the Secretary.
            (2) An evaluation of the impact of the reforms under this 
        subtitle on the availability of affordable health coverage for 
        individuals and for small employers that purchase group health 
        coverage and for their employees, and, in particular, the 
        impact of--
                    (A) guaranteed availability of health coverage,
                    (B) limitations of restrictions from coverage of 
                preexisting conditions,
                    (C) requirement for continuity of coverage,
                    (D) risk-management mechanisms for health coverage,
                    (E) limits on premium variations, and
                    (F) preemption of State benefit mandates.
        In performing such evaluation, the Secretary shall seek to 
        discount the effect of the insurance cycle on health insurance 
        premiums.
            (3) An assessment of the implications of the reforms on 
        adverse selection among health insurance plans and the 
        distribution of risk among health insurance plans.
    (c) Information Regarding Coverage of the Uninsured.--The report 
submitted under this section 5 years after the date of the enactment of 
this Act also shall include findings and recommendations regarding each 
of the following:
            (1) Characteristics of the insured and uninsured, including 
        demographic characteristics, working status, health status, and 
        geographic distribution.
            (2) Steps which should be taken to improve access to health 
        care and increase health insurance coverage of the chronically 
        uninsured.
            (3) Effectiveness of efforts to measure and improve health 
        care outcomes in the public and private sectors.
            (4) Effectiveness of initiatives targeted to improving 
        access of underserved urban and rural populations to health 
        care services.
            (5) Effectiveness of new Federal subsidy programs, 
        including recommendations to restrain future growth of such 
        programs.

SEC. 1135. RESEARCH AND DEMONSTRATION PROJECTS; DEVELOPMENT OF A HEALTH 
              RISK POOLING MODEL.

    (a) Research and Demonstrations.--The Secretary is authorized, 
directly, by contract, and through grants and cooperative agreements 
within the Department of Health and Human Services and outside the 
Department--
            (1) to conduct research on the impact of this subtitle on 
        the availability of affordable health coverage for employees 
        and dependents in the small employers group and individual 
        health care coverage market and other topics described in 
        section 1134(b), and
            (2) to conduct demonstration projects relating to such 
        topics.
    (b) Development of Methods of Measuring Relative Health Risk.--
            (1) In general.--The Secretary shall develop methods for 
        measuring, in terms of the expected costs of providing benefits 
        under health insurance plans and, in particular, MedAccess 
        plans, the relative health risks of eligible individuals.
            (2) Methodology.--The methods--
                    (A) shall rely on diagnosis or other health-related 
                information that is predictive of individual health 
                care needs,
                    (B) may rely upon information routinely collected 
                in the process of making payments under group health 
                plans, and
                    (C) may provide for such random, sample audits of 
                records as may be necessary to verify the accuracy of 
                measurements.
    (c) Development of a Health Risk Pooling Model.--
            (1) In general.--The Secretary shall develop a model, based 
        on the methods of measuring risks under subsection (b), for 
        equitably distributing health risks among insurers and group 
        health plans in the small employer and individual health care 
        coverage market.
            (2) Redistribution of risk.--Under such model, insurers and 
        group health plans with below average health risks would be 
        required to contribute to a common fund for payment to insurers 
        and group health plans with above average health risks, each in 
        relation to the degree of their favorable or adverse risk 
        selection.
            (3) Incentives.--Such model shall include incentives to 
        encourage continuous coverage of individuals and eligible 
        individuals and small employers.
    (d) Consultation.--The methods and model under this section shall 
be developed in consultation with the NAIC.
    (e) Report.--By not later than January 1, 1996, the Secretary shall 
submit to Congress a report on the methods and model developed under 
this section (as well as on research and demonstration projects 
conducted under subsection (a)). The Secretary shall include in the 
report such recommendations respecting the application of the model to 
insurers and group health plans (and, in particular, to MedAccess 
plans) under this subtitle as the Secretary deems appropriate.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $5,000,000 in each of fiscal 
years 1995 through 1999.

                         Subtitle C--Preemption

                   PART 1--SCOPE OF STATE REGULATION

SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES FOR GROUP HEALTH 
              PLANS.

    In the case of a group health plan, no provision of State or local 
law shall apply that requires the coverage of one or more specific 
benefits, services, or categories of health care, or services of any 
class or type of provider of health care.

SEC. 1202. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER GROUPS FROM 
              PURCHASING HEALTH INSURANCE.

    No provision of State or local law shall apply that prohibits 2 or 
more employers from obtaining coverage under a multiple employer 
welfare arrangement under which all coverage consists of medical care 
described in section 607(1) of the Employee Retirement Income Security 
Act of 1974 and is fully insured.

SEC. 1203. PREEMPTION OF STATE ANTI-MANAGED CARE LAWS.

    (a) Preemption of State Law Provisions.--Subject to subsection (c), 
the following provisions of State law are preempted and may not be 
enforced:
            (1) Restrictions on reimbursement rates or selective 
        contracting.--Any law that restricts the ability of a group 
        health plan or insurer to negotiate reimbursement rates with 
        providers or to contract selectively with one provider or a 
        limited number of providers.
            (2) Restrictions on differential financial incentives.--Any 
        law that limits the financial incentives that a group health 
        plan or insurer may require a beneficiary to pay when a non-
        plan provider is used on a non-emergency basis.
            (3) Restrictions on utilization review methods.--Any law 
        that--
                    (A) prohibits utilization review of any or all 
                treatments and conditions,
                    (B) requires that such review be made (i) by a 
                resident of the State in which the treatment is to be 
                offered or by an individual licensed in such State, or 
                (ii) by a physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                reviewed,
                    (C) requires the use of specified standards of 
                health care practice in such reviews or requires the 
                disclosure of the specific criteria used in such 
                reviews,
                    (D) requires payments to providers for the expenses 
                of responding to utilization review requests,
                    (E) imposes liability for delays in performing such 
                review, or
                    (F) requires standards in addition to or 
                inconsistent with standards established under section 
                1022(b).
        Nothing in subparagraph (B) shall be construed as prohibiting a 
        State from (i) requiring a licensed physician or other health 
        care professional be available at some time in the review or 
        appeal process, or (ii) requiring that any decision in an 
        appeal from such a review be made by a licensed physician.
    (b) GAO Study.--
            (1) In general.--The Comptroller General shall conduct a 
        study of the benefits and cost effectiveness of the use of 
        managed care in the delivery of health services.
            (2) Report.--By not later than 4 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        a report to Congress on the study conducted under paragraph (1) 
        and shall include in the report such recommendations (including 
        whether the provisions of subsection (a) should be extended) as 
        may be appropriate.
    (c) Sunset.--Unless otherwise provided, subsection (a) shall not 
apply 5 years after the date of the enactment of this Act.

SEC. 1204. DEFINITIONS.

    For purposes of this part, the terms ``dependent'', ``employee'', 
``employer'', ``fully insured'', ``group health plan'', ``health 
insurance plan'', ``multiple employer welfare arrangement'', and 
``State'' have the meanings given such terms in section 1023(a).

         PART 2--MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS

SEC. 1211. LIMITED EXEMPTION FROM CERTAIN RESTRICTIONS ON ERISA 
              PREEMPTION OF STATE LAW FOR HEALTH PLANS MAINTAINED BY 
              MULTIPLE EMPLOYERS SUBJECT TO CERTAIN FEDERAL STANDARDS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end the 
following new part:

                ``Part 7--Multiple Employer Health Plans

``SEC. 701. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Insurer.--The term `insurer' means an insurance 
        company, insurance service, or insurance organization, licensed 
        to engage in the business of insurance by a State.
            ``(2) Participating employer.--The term `participating 
        employer' means, in connection with a multiple employer welfare 
        arrangement, any employer if any of its employees, or any of 
        the dependents of its employees, are or were covered under such 
        arrangement in connection with the employment of the employees.
            ``(3) Excess/stop loss coverage.--The term `excess/stop 
        loss coverage' means, in connection with a multiple employer 
        welfare arrangement, a contract under which an insurer provides 
        for payment with respect to claims under the arrangement, 
        relating to participants or beneficiaries individually or 
        otherwise, in excess of an amount or amounts specified in such 
        contract.
            ``(4) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries or meets such reasonable standards and qualifications 
        as the Secretary may provide by regulation.
            ``(5) Sponsor.--The term `sponsor' means, in connection 
        with a multiple employer welfare arrangement, the association 
        or other entity which establishes or maintains the arrangement.
            ``(6) State insurance commissioner.--The term `State 
        insurance commissioner' means the insurance commissioner (or 
        similar official) of a State.
            ``(7) Domicile state.--The term `domicile State' means, in 
        connection with a multiple employer welfare arrangement, the 
        State in which, according to the application for an exemption 
        under this part, most individuals to be covered under the 
        arrangement are located, except that, in any case in which 
        information contained in the latest annual report of the 
        arrangement filed under this part indicates that most 
        individuals covered under the arrangement are located in a 
        different State, such term means such different State.
            ``(8) Fully insured.--Coverage under a multiple employer 
        welfare arrangement is `fully insured' if one or more insurers, 
        health maintenance organizations, similar organizations 
        regulated under State law for solvency, or any combination 
        thereof are liable under one or more insurance policies or 
        contracts for all benefits under the arrangement (irrespective 
        of any recourse they may have against other parties).
            ``(9) Exempted multiple employer health plan.--The term 
        `exempted multiple employer health plan' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of an exemption under this part.
            ``(10) Community health network.--The term `community 
        health network' has the meaning given such term in section 1421 
        of the Affordable Health Care Now Act of 1994.

``SEC. 702. EXEMPTED MULTIPLE EMPLOYER HEALTH PLANS RELIEVED OF CERTAIN 
              RESTRICTIONS ON PREEMPTION OF STATE LAW AND TREATED AS 
              EMPLOYEE WELFARE BENEFIT PLANS.

    ``(a) In General.--Subject to subsection (b), a multiple employer 
welfare arrangement under which coverage is not fully insured and with 
respect to which there is in effect an exemption granted by the 
Secretary under this part (or with respect to which there is pending a 
complete application for such an exemption and the Secretary determines 
that provisional protection under this part is appropriate)--
            ``(1) shall be treated for purposes of subtitle A and the 
        preceding parts of this subtitle as an employee welfare benefit 
        plan, irrespective of whether such arrangement is an employee 
        welfare benefit plan, and
            ``(2) shall be exempt from section 514(b)(6)(A)(ii).
    ``(b) Benefits Must Consist of Medical Care.--Subsection (a) shall 
apply to a multiple employer welfare arrangement only if the benefits 
provided thereunder consist solely of medical care described in section 
607(1) (disregarding such incidental benefits as the Secretary shall 
specify by regulation).
    ``(c) Restriction on Commencement of New Arrangements.--A multiple 
employer welfare arrangement providing benefits which consist of 
medical care described in section 607(1) which has not commenced 
operations as of January 1, 1995, may commence operations only if an 
exemption granted to the arrangement under this part is in effect (or 
there is pending with respect to the arrangement a complete application 
for such an exemption and the Secretary determines that provisional 
protection under this part is appropriate).

``SEC. 703. EXEMPTION PROCEDURE.

    ``(a) In General.--The Secretary shall grant an exemption described 
in section 702(a) to a multiple employer welfare arrangement if--
            ``(1) an application for such exemption with respect to 
        such arrangement, identified individually or by class, has been 
        duly filed in complete form with the Secretary in accordance 
        with this part,
            ``(2) such application demonstrates compliance with the 
        requirements of section 704 with respect to such arrangement, 
        and
            ``(3) the Secretary finds that such exemption is--
                    ``(A) administratively feasible,
                    ``(B) not adverse to the interests of the 
                individuals covered under the arrangement, and
                    ``(C) protective of the rights and benefits of the 
                individuals covered under the arrangement.
    ``(b) Notice and Hearing.--Before granting an exemption under this 
section, the Secretary shall publish notice in the Federal Register of 
the pendency of the exemption, shall require that adequate notice be 
given to interested persons, including the State insurance commissioner 
of each State in which covered individuals under the arrangement are, 
or are expected to be, located, and shall afford interested persons 
opportunity to present views. The Secretary may not grant an exemption 
under this section unless the Secretary affords an opportunity for a 
hearing and makes a determination on the record with respect to the 
findings required under subsection (a)(3). The Secretary shall, to the 
maximum extent practicable, make a final determination with respect to 
any application filed under this section in the case of a newly 
established arrangement within 90 days after the date which the 
Secretary determines is the date on which such application is filed in 
complete form.

``SEC. 704. ELIGIBILITY REQUIREMENTS.

    ``(a) Application for Exemption.--
            ``(1) In general.--An exemption may be granted by the 
        Secretary under this part only on the basis of an application 
        filed with the Secretary in such form and manner as shall be 
        prescribed in regulations of the Secretary. Any such 
        application shall be signed by the operating committee and the 
        sponsor of the arrangement.
            ``(2) Filing fee.--The arrangement shall pay to the 
        Secretary at the time of filing an application under this 
        section a filing fee in the amount of $5,000, which shall be 
        available, to the extent provided in appropriation Acts, to the 
        Secretary for the sole purpose of administering the exemption 
        procedures under this part.
            ``(3) Information included.--An application filed under 
        this section shall include, in a manner and form prescribed in 
        regulations of the Secretary, at least the following 
        information:
                    ``(A) Identifying information.--The names and 
                addresses of--
                            ``(i) the sponsor, and
                            ``(ii) the members of the operating 
                        committee of the arrangement.
                    ``(B) States in which arrangement intends to do 
                business.--The States in which individuals covered 
                under the arrangement are to be located and the number 
                of such individuals expected to be located in each such 
                State.
                    ``(C) Bonding requirements.--Evidence provided by 
                the operating committee that the bonding requirements 
                of section 412 will be met as of the date of the 
                application.
                    ``(D) Plan documents.--A copy of the documents 
                governing the arrangement (including any bylaws and 
                trust agreements), the summary plan description, and 
                other material describing the benefits and coverage 
                that will be provided to individuals covered under the 
                arrangement.
                    ``(E) Agreements with service providers.--A copy of 
                any agreements between the arrangement and contract 
                administrators and other service providers.
                    ``(F) Funding report.--A report setting forth 
                information determined as of a date within the 120-day 
                period ending with the date of the application, 
                including the following:
                            ``(i) Reserves.--A statement, certified by 
                        the operating committee of the arrangement, and 
                        a statement of actuarial opinion, signed by a 
                        qualified actuary, that all applicable 
                        requirements of section 707 are or will be met 
                        in accordance with regulations which the 
                        Secretary shall prescribe.
                            ``(ii) Adequacy of contribution rates.--A 
                        statement of actuarial opinion, signed by a 
                        qualified actuary, which sets forth a 
                        description of the extent to which contribution 
                        rates are adequate to provide for the payment 
                        of all obligations and the maintenance of 
                        required reserves under the arrangement for the 
                        12-month period beginning with such date within 
                        such 120-day period, taking into account the 
                        expected coverage and experience of the 
                        arrangement. If the contribution rates are not 
                        fully adequate, the statement of actuarial 
                        opinion shall indicate the extent to which the 
                        rates are inadequate and the changes needed to 
                        ensure adequacy.
                            ``(iii) Current and projected value of 
                        assets and liabilities.--A statement of 
                        actuarial opinion signed by a qualified 
                        actuary, which sets forth the current value of 
                        the assets and liabilities accumulated under 
                        the arrangement and a projection of the assets, 
                        liabilities, income, and expenses of the 
                        arrangement for the 12-month period referred to 
                        in clause (ii). The income statement shall 
                        identify separately the arrangement's 
                        administrative expenses and claims.
                            ``(iv) Costs of coverage to be charged and 
                        other expenses.--A statement of the costs of 
                        coverage to be charged, including an 
                        itemization of amounts for administration, 
                        reserves, and other expenses associated with 
                        the operation of the arrangement.
                            ``(v) Other information.--Any other 
                        information which may be prescribed in 
                        regulations of the Secretary as necessary to 
                        carry out the purposes of this part.
    ``(b) Other Requirements.--A complete application for an exemption 
under this part shall include information which the Secretary 
determines to be complete and accurate and sufficient to demonstrate 
that the following requirements are met with respect to the 
arrangement:
            ``(1) Sponsor.--
                    ``(A) In general.--Except in a case to which 
                subparagraph (B) or (C) applies, the sponsor is, and 
                has been (together with its immediate predecessor, if 
                any) for a continuous period of not less than 3 years 
                before the date of the application, organized and 
                maintained in good faith, with a constitution and 
                bylaws specifically stating its purpose, as a trade 
                association, an industry association, a professional 
                association, or a chamber of commerce (or similar 
                business group), for substantial purposes other than 
                that of obtaining or providing medical care described 
                in section 607(1), and the applicant demonstrates to 
                the satisfaction of the Secretary that the sponsor is 
                established as a permanent entity which receives the 
                active support of its members.
                    ``(B) Special rule for community health networks.--
                In the case of an arrangement that is a community 
                health network (as defined in section 701(11)), the 
                sponsor is the operating committee of the network.
                    ``(C) Special rule for employers in the same trade 
                or business.--In the case of an arrangement under which 
                all participating employers are engaged in a common 
                type of trade or business, the sponsor is the operating 
                committee of the arrangement.
            ``(2) Operating committee.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the arrangement is operated, pursuant 
                to a trust agreement, by an operating committee which 
                has complete fiscal control over the arrangement and 
                which is responsible for all operations of the 
                arrangement, and the operating committee has in effect 
                rules of operation and financial controls, based on a 
                3-year plan of operation, adequate to carry out the 
                terms of the arrangement and to meet all requirements 
                of this title applicable to the arrangement. The 
                members of the committee are individuals selected from 
                individuals who are the owners, officers, directors, or 
                employees of the participating employers or who are 
                partners in the participating employers and actively 
                participate in the business. No such member is an 
                owner, officer, director, or employee of, or partner 
                in, a contract administrator or other service provider 
                to the arrangement, except that officers or employees 
                of a sponsor which is a service provider (other than a 
                contract administrator) to the arrangement may be 
                members of the committee if they constitute not more 
                than 25 percent of the membership of the committee and 
                they do not provide services to the arrangement other 
                than on behalf of the sponsor. The committee has sole 
                authority to approve applications for participation in 
                the arrangement and to contract with a service provider 
                to administer the day-to-day affairs of the 
                arrangement.
                    ``(B) Special rule for community health networks.--
                In the case of an arrangement that is a community 
                health network (as defined in section 701(11)), the 
                operating committee is the board of the entity that is 
                the network.
            ``(3) Contents of governing instruments.--The instruments 
        governing the arrangement include a written instrument, meeting 
        the requirements of an instrument required under section 
        1212(a)(1), which--
                    ``(A) provides that the committee serves as the 
                named fiduciary required for plans under section 
                1212(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A)),
                    ``(B) provides that the sponsor is to serve as plan 
                sponsor (referred to in section 3(16)(B)),
                    ``(C) incorporates the requirements of section 707, 
                and
                    ``(D) provides that, effective upon the granting of 
                an exemption under this part--
                            ``(i) all participating employers must be 
                        members or affiliated members of the sponsor, 
                        except that, in the case of a sponsor which is 
                        a professional association or other individual-
                        based association, if at least one of the 
                        officers, directors, or employees of an 
                        employer, or at least one of the individuals 
                        who are partners in an employer and who 
                        actively participates in the business, is a 
                        member or affiliated member of the sponsor, 
                        participating employers may also include such 
                        employer, and
                            ``(ii) all individuals thereafter 
                        commencing coverage under the arrangement must 
                        be--
                                    ``(I) active or retired owners, 
                                officers, directors, or employees of, 
                                or partners in, participating 
                                employers, or
                                    ``(II) the beneficiaries of 
                                individuals described in subclause (I).
            ``(4) Contribution rates.--The contribution rates referred 
        to in subsection (a)(3)(F)(ii) are adequate.
            ``(5) Regulatory requirements.--Such other requirements as 
        the Secretary may prescribe by regulation as necessary to carry 
        out the purposes of this part.
    ``(c) Treatment of Party Seeking Exemption Where Party is Subject 
to Disqualification.--
            ``(1) In general.--In the case of any application for an 
        exemption under this part with respect to a multiple employer 
        welfare arrangement, if the Secretary determines that the 
        sponsor of the arrangement or any other person associated with 
        the arrangement is subject to disqualification under paragraph 
        (2), the Secretary may deny the exemption with respect to such 
        arrangement.
            ``(2) Disqualification.--A person is subject to 
        disqualification under this paragraph if such person--
                    ``(A) has intentionally made a material 
                misstatement in the application for exemption;
                    ``(B) has obtained or attempted to obtain an 
                exemption under this part through misrepresentation or 
                fraud;
                    ``(C) has misappropriated or converted to such 
                person's own use, or improperly withheld, money held 
                under a plan or any multiple employer welfare 
                arrangement;
                    ``(D) is prohibited (or would be prohibited if the 
                arrangement were a plan) from serving in any capacity 
                in connection with the arrangement under section 411,
                    ``(E) has failed to appear without reasonable cause 
                or excuse in response to a subpoena, examination, 
                warrant, or any other order lawfully issued by the 
                Secretary compelling such response,
                    ``(F) has previously been subject to a 
                determination under this part resulting in the denial, 
                suspension, or revocation of an exemption under this 
                part on similar grounds, or
                    ``(G) has otherwise violated any provision of this 
                title with respect to a matter which the Secretary 
                determines of sufficient consequence to merit 
                disqualification for purposes of this part.
    ``(d) Franchise Networks.--In the case of a multiple employer 
welfare arrangement established and maintained by a franchisor for a 
franchise network consisting of its franchisees, such franchisor shall 
be treated as the sponsor referred to in the preceding provisions of 
this section, such network shall be treated as an association referred 
to in such provisions, and each franchisee shall be treated as a member 
(of the association and the sponsor) referred to in such provisions, if 
all participating employers are such franchisees and the requirements 
of subsection (b)(1) with respect to a sponsor are met with respect to 
the network.
    ``(e) Certain Collectively Bargained Arrangements.--In applying the 
preceding provisions of this section in the case of a multiple employer 
welfare arrangement which would be described in section 3(40)(A)(i) but 
for the failure to meet any requirement of section 3(40)(C)--
            ``(1) paragraphs (1) and (2) of subsection (b) and 
        subparagraphs (A), (B), and (D) of paragraph (3) of subsection 
        (b) shall be disregarded, and
            ``(2) the joint board of trustees shall be considered the 
        operating committee of the arrangement.
    ``(f) Certain Arrangements Not Meeting Single Employer 
Requirement.--
            ``(1) In general.--In any case in which the majority of the 
        employees covered under a multiple employer welfare arrangement 
        are employees of a single employer (within the meaning of 
        clauses (i) and (ii) of section 3(40)(B)), if all other 
        employees covered under the arrangement are employed by 
        employers who are related to such single employer, subsection 
        (b)(3)(D) shall be disregarded.
            ``(2) Related employers.--For purposes of paragraph (1), 
        employers are `related' if there is among all such employers a 
        common ownership interest or a substantial commonality of 
        business operations based on common suppliers or customers.

``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO EXEMPTED MULTIPLE 
              EMPLOYER HEALTH PLANS.

    ``(a) Notice of Material Changes.--In the case of any exempted 
multiple employer health plan, descriptions of material changes in any 
information which was required to be submitted with the application for 
the exemption granted under this part shall be filed in such form and 
manner as shall be prescribed in regulations of the Secretary. The 
Secretary may require by regulation prior notice of material changes 
with respect to specified matters which might serve as the basis for 
suspension or revocation of the exemption.
    ``(b) Reporting Requirements.--Under regulations of the Secretary, 
the requirements of sections 102, 103, and 104 shall apply with respect 
to any multiple employer welfare arrangement which is or has been an 
exempted multiple employer health plan in the same manner and to the 
same extent as such requirements apply to employee welfare benefit 
plans, irrespective of whether such exemption continues in effect. The 
annual report required under section 103 for any plan year in the case 
of any such multiple employer welfare arrangement shall also include 
information described in section 704(a)(3)(F) with respect to the plan 
year and, notwithstanding section 104(a)(1)(A), shall be filed not 
later than 90 days after the close of the plan year.
    ``(c) Engagement of Qualified Actuary.--The operating committee of 
each multiple employer welfare arrangement which is or has been an 
exempted multiple employer health plan shall engage, on behalf of all 
covered individuals, a qualified actuary who shall be responsible for 
the preparation of the materials comprising information necessary to be 
submitted by a qualified actuary under this part. The qualified actuary 
shall utilize such assumptions and techniques as are necessary to 
enable such actuary to form an opinion as to whether the contents of 
the matters reported under this part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the arrangement and to reasonable expectations, 
        and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the arrangement.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.
    ``(d) Filing Notice of Exemption With States.--An exemption granted 
to a multiple employer welfare arrangement under this part shall not be 
effective unless written notice of such exemption is filed with the 
State insurance commissioner of each State in which at least 5 percent 
of the individuals covered under the arrangement are located. For 
purposes of this paragraph, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed. The Secretary may by 
regulation provide in specified cases for the application of the 
preceding sentence with lesser percentages in lieu of such 5 percent 
amount.

``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY ARRANGEMENTS 
              PROVIDING MEDICAL CARE.

    ``(a) In General.--A multiple employer welfare arrangement 
providing benefits consisting of medical care described in section 
607(1) shall issue to each participating employer--
            ``(1) a document equivalent to the summary plan description 
        required of plans under part 1,
            ``(2) information describing the contribution rates 
        applicable to participating employers, and
            ``(3) a statement indicating--
                    ``(A) that the arrangement is not a licensed 
                insurer under the laws of any State,
                    ``(B) whether coverage under the arrangement is 
                fully insured,
                    ``(C) if coverage under the arrangement if not 
                fully insured, (i) whether the arrangement is (or has 
                ceased to be) an exempted multiple employer health 
                plan, and (ii) if such an arrangement is an exempted 
                multiple employer health plan, that such arrangement is 
                treated as an employee welfare benefit plan under this 
                title.
    ``(b) Time for Disclosure.--Such information shall be issued to 
employers within such reasonable period of time before becoming 
participating employers as may be prescribed in regulations of the 
Secretary.

``SEC. 707. MAINTENANCE OF RESERVES.

    ``(a) In General.--Each multiple employer welfare arrangement which 
is or has been an exempted multiple employer health plan and under 
which coverage is not fully insured shall establish and maintain 
reserves, consisting of--
            ``(1) a reserve for unearned contributions,
            ``(2) a reserve for payment of claims reported and not yet 
        paid and claims incurred but not yet reported, and for expected 
        administrative costs with respect to such claims, and
            ``(3) a reserve, in an amount recommended by the qualified 
        actuary, for any other obligations of the arrangement.
    ``(b) Minimum Amount for Certain Reserves.--The total of the 
reserves described in subsection (a)(2) shall not be less than an 
amount equal to 25 percent of expected incurred claims and expenses for 
the plan year.
    ``(c) Required Margin.--In determining the amounts of reserves 
required under this section in connection with any multiple employer 
welfare arrangement, the qualified actuary shall include a margin for 
error and other fluctuations taking into account the specific 
circumstances of such arrangement.
    ``(d) Additional Requirements.--The Secretary may provide such 
additional requirements relating to reserves and excess/stop loss 
coverage as the Secretary considers appropriate. Such requirements may 
be provided, by regulation or otherwise, with respect to any 
arrangement or any class of arrangements.
    ``(e) Adjustments for Excess/Stop Loss Coverage.--The Secretary may 
provide for adjustments to the levels of reserves otherwise required 
under subsections (a) and (b) with respect to any arrangement or class 
of arrangements to take into account excess/stop loss coverage provided 
with respect to such arrangement or arrangements.
    ``(f) Alternative Means of Compliance.--The Secretary may permit an 
arrangement (including a community health network) to substitute, for 
all or part of the reserves required under subsection (a), such 
security, guarantee, or other financial arrangement as the Secretary 
determines to be adequate to enable the arrangement to fully meet all 
its financial obligations on a timely basis.

``SEC. 708. CORRECTIVE ACTIONS.

    ``(a) Actions To Avoid Depletion of Reserves.--A multiple employer 
welfare arrangement with respect to which there is or has been in 
effect an exemption granted under this part shall continue to meet the 
requirements of section 707, irrespective of whether such exemption 
continues in effect. The operating committee of such arrangement shall 
determine semiannually whether the requirements of section 707 are met. 
In any case in which the committee determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the Secretary makes such a determination and so notifies the 
committee, the committee shall immediately notify the qualified actuary 
engaged by the arrangement, and such actuary shall, not later than the 
end of the next following month, make such recommendations to the 
committee for corrective action as the actuary determines necessary to 
ensure compliance with section 707. Not later than 10 days after 
receiving from the actuary recommendations for corrective actions, the 
committee shall notify the Secretary (in such form and manner as the 
Secretary may prescribe by regulation) of such recommendations of the 
actuary for corrective action, together with a description of the 
actions (if any) that the committee has taken or plans to take in 
response to such recommendations. The committee shall thereafter report 
to the Secretary, in such form and frequency as the Secretary may 
specify to the committee, regarding corrective action taken by the 
committee until the requirements of section 707 are met.
    ``(b) Termination.--
            ``(1) Notice of termination.--In any case in which the 
        operating committee of a multiple employer welfare arrangement 
        which is or has been an exempted multiple employer health plan 
        determines that there is reason to believe that the arrangement 
        will terminate, the committee shall so inform the Secretary, 
        shall develop a plan for winding up the affairs of the 
        arrangement in connection with such termination in a manner 
        which will result in timely payment of all benefits for which 
        the arrangement is obligated, and shall submit such plan in 
        writing to the Secretary. Actions required under this paragraph 
        shall be taken in such form and manner as may be prescribed in 
        regulations of the Secretary.
            ``(2) Actions required in connection with termination.--In 
        any case in which--
                    ``(A) the Secretary has been notified under 
                subsection (a) of a failure of a multiple employer 
                welfare arrangement which is or has been an exempted 
                multiple employer health plan to meet the requirements 
                of section 707 and has not been notified by the 
                operating committee of the arrangement that corrective 
                action has restored compliance with such requirements, 
                and
                    ``(B) the Secretary determines that the continuing 
                failure to meet the requirements of section 707 can be 
                reasonably expected to result in a continuing failure 
                to pay benefits for which the arrangement is obligated,
        the operating committee of the arrangement shall, at the 
        direction of the Secretary, terminate the arrangement and, in 
        the course of the termination, take such actions as the 
        Secretary may require as necessary to ensure that the affairs 
        of the arrangement will be, to the maximum extent possible, 
        wound up in a manner which will result in timely payment of all 
        benefits for which the arrangement is obligated.

``SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF EXEMPTION.

    ``(a) Expiration and Renewal of Exemption.--An exemption granted to 
a multiple employer welfare arrangement under this part shall expire 3 
years after the date on which the exemption is granted. An exemption 
which has expired may be renewed by means of application for an 
exemption in accordance with section 704.
    ``(b) Suspension or Revocation of Exemption by Secretary.--The 
Secretary may suspend or revoke an exemption granted to a multiple 
employer welfare arrangement under this part--
            ``(1) for any cause that may serve as the basis for the 
        denial of an initial application for such an exemption under 
        section 704, or
            ``(2) if the Secretary finds that--
                    ``(A) the arrangement, or the sponsor thereof, in 
                the transaction of business while under the exemption, 
                has used fraudulent, coercive, or dishonest practices, 
                or has demonstrated incompetence, untrustworthiness, or 
                financial irresponsibility,
                    ``(B) the arrangement, or the sponsor thereof, is 
                using such methods or practices in the conduct of its 
                operations, so as to render its further transaction of 
                operations hazardous or injurious to participating 
                employers, or covered individuals,
                    ``(C) the arrangement, or the sponsor thereof, has 
                refused to be examined in accordance with this part or 
                to produce its accounts, records, and files for 
                examination in accordance with this part, or
                    ``(D) any of the officers of the arrangement, or 
                the sponsor thereof, has refused to give information 
                with respect to the affairs of the arrangement or the 
                sponsor or to perform any other legal obligation 
                relating to such an examination when required by the 
                Secretary in accordance with this part.
Any such suspension or revocation under this subsection shall be 
effective only upon a final decision of the Secretary made after notice 
and opportunity for a hearing is provided in accordance with section 
710.
    ``(c) Suspension or Revocation of Exemption Under Court 
Proceedings.--An exemption granted to a multiple employer welfare 
arrangement under this part may be suspended or revoked by a court of 
competent jurisdiction in an action by the Secretary brought under 
paragraph (2), (5), or (6) of section 502(a), except that the 
suspension or revocation under this subsection shall be effective only 
upon notification of the Secretary of such suspension or revocation.
    ``(d) Notification of Participating Employers.--All participating 
employers in a multiple employer welfare arrangement shall be notified 
of the expiration, suspension, or revocation of an exemption granted to 
such arrangement under this part, by such persons and in such form and 
manner as shall be prescribed in regulations of the Secretary, not 
later than 20 days after such expiration or after receipt of notice of 
a final decision requiring such suspension or revocation.
    ``(e) Publication of Expirations, Suspensions, and Revocations.--
The Secretary shall publish all expirations of, and all final decisions 
to suspend or revoke, exemptions granted under this part.

``SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

    ``(a) In General.--Any decision by the Secretary which involves the 
denial of an application by a multiple employer welfare arrangement for 
an exemption under this part or the suspension or revocation of such an 
exemption shall contain a statement of the specific reason or reasons 
supporting the Secretary's action, including reference to the specific 
terms of the exemption and the statutory provision or provisions 
relevant to the determination.
    ``(b) Denials of Applications.--In the case of the denial of an 
application for an exemption under this part, the Secretary shall send 
a copy of the decision to the applicant by certified or registered mail 
at the address specified in the records of the Secretary. Such decision 
shall constitute the final decision of the Secretary unless the 
arrangement, or any party that would be prejudiced by the decision, 
files a written appeal of the denial within 30 days after the mailing 
of such decision. The Secretary may affirm, modify, or reverse the 
initial decision. The decision on appeal shall become final upon the 
mailing of a copy by certified or registered mail to the arrangement or 
party that filed the appeal.
    ``(c) Suspensions or Revocations of Exemption.--In the case of the 
suspension or revocation of an exemption granted under this part, the 
Secretary shall send a copy of the decision to the arrangement by 
certified or registered mail at its address, as specified in the 
records of the Secretary. Upon the request of the arrangement, or any 
party that would be prejudiced by the suspension or revocation, filed 
within 15 days of the mailing of the Secretary's decision, the 
Secretary shall schedule a hearing on such decision by written notice, 
sent by certified or registered mail to the arrangement or party 
requesting such hearing. Such notice shall set forth--
            ``(1) a specific date and time for the hearing, which shall 
        be within the 10-day period commencing 20 days after the date 
        of the mailing of the notice, and
            ``(2) a specific place for the hearing, which shall be in 
        the District of Columbia or in the State and county thereof (or 
        parish or other similar political subdivision thereof) in which 
        is located the arrangement's principal place of business.
The decision as affirmed or modified in such hearing shall constitute 
the final decision of the Secretary, unless such decision is reversed 
in such hearing.''.
    (b) Conforming Amendment to Definition of Plan Sponsor.--Section 
3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is amended by adding at 
the end the following new sentence: ``Such term also includes the 
sponsor (as defined in section 701(5)) of a multiple employer welfare 
arrangement which is or has been an exempted multiple employer health 
plan (as defined in section 701(10)).''.
    (c) Alternative Means of Distribution of Summary Plan 
Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is amended by 
adding at the end the following new subsection:
    ``(c) The Secretary shall prescribe, as an alternative method for 
distributing summary plan descriptions in order to meet the 
requirements of section 104(b)(1) in the case of multiple employer 
welfare arrangements providing benefits consisting of medical care 
described in section 607(1), a means of distribution of such 
descriptions by participating employers.''.
    (d) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 608 the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Exempted multiple employer health plans relieved of certain 
                            restrictions on preemption of State law and 
                            treated as employee welfare benefit plans.
``Sec. 703. Exemption procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to exempted multiple 
                            employer health plans.
``Sec. 706. Disclosure to participating employers by arrangements 
                            providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of exemption.
``Sec. 710. Review of actions of the secretary.''

SEC. 1212. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

    (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(6)(A)(ii)) is 
amended by inserting ``, but only, in the case of an arrangement which 
provides medical care described in section 607(1) and with respect to 
which an exemption under part 7 is not in effect,'' before ``to the 
extent not inconsistent with the preceding sections of this title''.
    (b) Cross-Reference.--Section 514(b)(6) of such Act (29 U.S.C. 
1144(b)(6)) is amended by adding at the end the following new 
subparagraph:
    ``(E) For additional rules relating to exemption from subparagraph 
(A)(ii) of multiple employer welfare arrangements providing medical 
care, see part 7.''.

SEC. 1213. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting ``for any plan year of any 
        such plan, or any fiscal year of any such other arrangement,'' 
        after ``single employer'', and by inserting ``during such year 
        or at any time during the preceding 1-year period'' after 
        ``common control'';
            (2) in clause (iii), by striking ``common control shall not 
        be based on an interest of less than 25 percent'' and inserting 
        ``an interest of greater than 25 percent may not be required as 
        the minimum interest necessary for common control'', and by 
        striking ``and'' at the end,
            (3) by redesignating clause (iv) as clause (v), and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in determining, after the application of clause (i), 
        whether benefits are provided to employees of two or more 
        employers, the arrangement shall be treated as having only 1 
        participating employer if, at the time the determination under 
        clause (i) is made, the number of individuals who are employees 
        and former employees of any one participating employer and who 
        are covered under the arrangement is greater than 95 percent of 
        the aggregate number of all individuals who are employees or 
        former employees of participating employers and who are covered 
        under the arrangement.''.

SEC. 1214. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED 
              ARRANGEMENTS.

    (a) In General.--Section 3(40)(A)(i) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to 
read as follows:
            ``(i) under or pursuant to one or more collective 
        bargaining agreements,''.
    (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraphs:
                    ``(C) Clause (i) of subparagraph (A) shall apply 
                only if--
                            ``(i) the plan or other arrangement, and 
                        the employee organization or any other entity 
                        sponsoring the plan or other arrangement, do 
                        not--
                                    ``(I) utilize the services of any 
                                licensed insurance agent or broker for 
                                soliciting or enrolling employers or 
                                individuals as participating employers 
                                or covered individuals under the plan 
                                or other arrangement, or
                                    ``(II) pay a commission or any 
                                other type of compensation to a person 
                                that is related either to the volume or 
                                number of employers or individuals 
                                solicited or enrolled as participating 
                                employers or covered individuals under 
                                the plan or other arrangement, or to 
                                the dollar amount or size of the 
                                contributions made by participating 
                                employers or covered individuals to the 
                                plan or other arrangement,
                            ``(ii) not less than 85 percent of the 
                        covered individuals under the plan or other 
                        arrangement are individuals who--
                                    ``(I) are employed within a 
                                bargaining unit covered by at least one 
                                of the collective bargaining agreements 
                                with a participating employer (or are 
                                covered on the basis of an individual's 
                                employment in such a bargaining unit), 
                                or
                                    ``(II) are present or former 
                                employees of the sponsoring employee 
                                organization, of an employer who is or 
                                was a party to at least one of the 
                                collective bargaining agreements, or of 
                                the plan or other arrangement or a 
                                related plan or arrangement (or are 
                                covered on the basis of such present or 
                                former employment),
                            ``(iii) the plan or other arrangement does 
                        not provide benefits to individuals (other than 
                        individuals described in clause (ii)(II)) who 
                        work outside the standard metropolitan 
                        statistical area in which the sponsoring 
                        employee organization represents employees (or 
                        to individuals (other than individuals 
                        described in clause (ii)(II)) on the basis of 
                        such work by others), except that in the case 
                        of a sponsoring employee organization that 
                        represents employees who work outside of any 
                        standard metropolitan statistical area, this 
                        clause shall be applied by reference to the 
                        State in which the sponsoring organization 
                        represents employees,
                            ``(iv) the employee organization or other 
                        entity sponsoring the plan or other arrangement 
                        certifies to the Secretary each year, in a form 
                        and manner which shall be prescribed in 
                        regulations of the Secretary--
                                    ``(I) that the plan or other 
                                arrangement meets the requirements of 
                                clauses (i), (ii), and (iii), and
                                    ``(II) if, for any year, 10 percent 
                                or more of the covered individuals 
                                under the plan are individuals not 
                                described in subclause (I) or (II) of 
                                clause (ii), the total number of 
                                covered individuals and the total 
                                number of covered individuals not so 
                                described.
                    ``(D)(i) Clause (i) of subparagraph (A) shall not 
                apply to a plan or other arrangement that is 
                established or maintained pursuant to one or more 
                collective bargaining agreements which the National 
                Labor Relations Boards determines to have been 
                negotiated or otherwise agreed to in a manner or 
                through conduct which violates section 8(a)(2) of the 
                National Labor Relations Act (29 U.S.C. 158(a)(2)).
                    ``(ii)(I) Whenever a State insurance commissioner 
                has reason to believe that this subparagraph is 
                applicable to part or all of a plan or other 
                arrangement, the State insurance commissioner may file 
                a petition with the National Labor Relations Board for 
                a determination under clause (i), along with sworn 
                written testimony supporting the petition.
                    ``(II) The Board shall give any such petition 
                priority over all other petitions and cases, other than 
                other petitions under subclause (I) or cases given 
                priority under section 10 of the National Labor 
                Relations Act (29 U.S.C. 160).
                    ``(III) The Board shall determine, upon the 
                petition and any response, whether, on the facts before 
                it, the plan or other arrangement was negotiated, 
                created, or otherwise agreed to in a manner or through 
                conduct which violates section 8(a)(2) of the National 
                Labor Relations Act (29 U.S.C. 158(a)(2)). Such 
                determination shall constitute a final determination 
                for purposes of this subparagraph and shall be binding 
                in all Federal or State actions with respect to the 
                status of the plan or other arrangement under this 
                subparagraph.
                    ``(IV) A person aggrieved by the determination of 
                the Board under subclause (III) may obtain review of 
                the determination in any United States court of appeals 
                in the circuit in which the collective bargaining at 
                issue occurred. Commencement of proceedings under this 
                subclause shall not, unless specifically ordered by the 
                court, operate as a stay of any State administrative or 
                judicial action or proceeding related to the status of 
                the plan or other arrangement, except that in no case 
                may the court stay, before the completion of the 
                review, an order which prohibits the enrollment of new 
                individuals into coverage under a plan or 
                arrangement.''.

SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    (a) Employee Leasing Healthcare Arrangement Defined.--Section 3 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is 
amended by adding at the end the following new paragraph:
    ``(43) Employee Leasing Healthcare Arrangement.--
            ``(A) In general.--Subject to subparagraph (B), the term 
        `employee leasing healthcare arrangement' means any labor 
        leasing arrangement, staff leasing arrangement, extended 
        employee staffing or supply arrangement, or other arrangement 
        under which--
                    ``(i) one business or other entity (hereinafter in 
                this paragraph referred to as the `lessee'), under a 
                lease or other arrangement entered into with any other 
                business or other entity (hereinafter in this paragraph 
                referred to as the `lessor'), receives from the lessor 
                the services of individuals to be performed under such 
                lease or other arrangement, and
                    ``(ii) benefits consisting of medical care 
                described in section 607(1) are provided to such 
                individuals or such individuals and their dependents as 
                participants and beneficiaries.
            ``(B) Exception.--Such term does not include an arrangement 
        described in subparagraph (A) if, under such arrangement, the 
        lessor retains, both legally and in fact, a complete right of 
        direction and control within the scope of employment over the 
        individuals whose services are supplied under such lease or 
        other arrangement, and such individuals perform a specified 
        function for the lessee which is separate and divisible from 
        the primary business or operations of the lessee.''.
    (b) Treatment of Employee Leasing Healthcare Arrangements as 
Multiple Employer Welfare Arrangements.--Section 3(40) of such Act (29 
U.S.C. 1002(40)) (as amended by the preceding provisions of this title) 
is further amended by adding at the end the following new subparagraph:
    ``(E) The term `multiple employer welfare arrangement' includes any 
employee leasing healthcare arrangement.''.
    (c) Special Rules for Employee Leasing Healthcare Arrangements.--
            (1) In general.--Part 7 of subtitle B of title I of such 
        Act (as added by the preceding provisions of this Act) is 
        amended by adding at the end the following new section:

``SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    ``(a) In General.--The requirements of paragraphs (1), (2), and (3) 
of section 704(b) shall be treated as satisfied in the case of a 
multiple employer welfare arrangement that is an employee leasing 
healthcare arrangement if the application for exemption includes 
information which the Secretary determines to be complete and accurate 
and sufficient to demonstrate that the following requirements are met 
with respect to the arrangement:
            ``(1) 3-year tenure.--The lessor has been in operation for 
        not less than 3 years.
            ``(2) Solicitation restrictions.--Employee leasing services 
        provided under the arrangement are not solicited, advertised, 
        or marketed through licensed insurance agents or brokers acting 
        in such capacity.
            ``(3) Creation of employment relationship.--
                    ``(A) Disclosure statement.--Written notice is 
                provided to each applicant for employment subject to 
                coverage under the arrangement, at the time of 
                application for employment and before commencing 
                coverage under the arrangement, stating that the 
                employer is the lessor under the arrangement.
                    ``(B) Informed consent.--Each such applicant signs 
                a written statement consenting to the employment 
                relationship with the lessor.
                    ``(C) Informed recruitment of lessee's employees.--
                In any case in which the lessor offers employment to an 
                employee of a lessee under the arrangement, the lessor 
                informs each employee in writing that his or her 
                acceptance of employment with the lessor is voluntary 
                and that refusal of such offer will not be deemed to be 
                resignation from or abandonment of current employment.
            ``(4) Requisite employer-employee relationship under 
        arrangement.--Under the employer-employee relationship with the 
        employees of the lessor--
                    ``(A) the lessor retains the ultimate authority to 
                hire, terminate, and reassign such employees,
                    ``(B) the lessor is responsible for the payment of 
                wages, payroll-related taxes, and employee benefits, 
                without regard to payment by the lessee to the lessor 
                for its services,
                    ``(C) the lessor maintains the right of direction 
                and control over its employees, except to the extent 
                that the lessee is responsible for supervision of the 
                work performed consistent with the lessee's 
                responsibility for its product or service, and
                    ``(D) in accordance with section 301(a) of the 
                Labor Management Relations Act, 1947 (29 U.S.C. 
                185(a)), the lessor retains in the absence of an 
                applicable collective bargaining agreement, the right 
                to enter into arbitration and to decide employee 
                grievances, and
                    ``(E) no owner, officer, or director of, or partner 
                in, a lessee is an employee of the lessor, and not more 
                than 10 percent of the individuals covered under the 
                arrangement consist of owners, officers, or directors 
                of, or partners in, such a lessee (or any combination 
                thereof).
    ``(b) Definitions.--For purposes of this section--
            ``(1) Lessor.--The term `lessor' means the business or 
        other entity from which services of individuals are obtained 
        under an employee leasing healthcare arrangement.
            ``(2) Lessee.--The term `lessee' means a business or other 
        entity which receives the services of individuals provided 
        under an employee leasing healthcare arrangement.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act (as amended by the preceding provisions of this 
        title) is further amended by inserting after the item relating 
        to section 710 the following new item:

``Sec. 711. Employee leasing healthcare arrangements.''.

SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS AND EMPLOYEE LEASING HEALTHCARE 
              ARRANGEMENTS.

    (a) Enforcement of Filing Requirements.--Section 502 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is 
amended--
            (1) in subsection (a)(6), by striking ``subsection (c)(2) 
        or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
        subsection (c) or subsection (i) or (l)''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
    ``(4) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of such person's failure or refusal 
to file the information required to be filed with the Secretary under 
section 101(e).''.
    (b) Actions by States in Federal Court.--Section 502(a) of such Act 
(29 U.S.C. 1132(a)) is amended--
            (1) in paragraph (5), by striking ``or'' at the end;
            (2) in paragraph (6), by striking the period and inserting 
        ``, or''; and
            (3) by adding at the end the following:
            ``(7) by a State official having authority under the law of 
        such State to enforce the laws of such State regulating 
        insurance, to enjoin any act or practice which violates any 
        provision of part 7 which such State has the power to enforce 
        under part 7.''.
    (c) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of such Act (29 U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who, either willfully or with willful blindness, 
falsely represents, to any employee, any employee's beneficiary, any 
employer, the Secretary, or any State, an arrangement established or 
maintained for the purpose of offering or providing any benefit 
described in section 3(1) to employees or their beneficiaries as--
            ``(1) being an exempted multiple employer welfare 
        arrangement (as defined in section 701(10)),
            ``(2) being an employee leasing healthcare arrangement 
        under an exemption granted under part 7, or
            ``(3) having been established or maintained under or 
        pursuant to a collective bargaining agreement,
shall, upon conviction, be imprisoned not more than five years, be 
fined under title 18, United States Code, or both.''.
    (d) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(m)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of a multiple 
employer welfare arrangement providing benefits consisting of medical 
care described in section 607(1) that--
            ``(A) is not licensed, registered, or otherwise approved 
        under the insurance laws of the States in which the arrangement 
        offers or provides benefits, or
            ``(B) is not operating in accordance with the terms of an 
        exemption granted by the Secretary under part 7,
a district court of the United States shall enter an order requiring 
that the arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of a multiple 
employer welfare arrangement if the arrangement shows that--
            ``(A) coverage under it is fully insured, within the 
        meaning of section 701(9),
            ``(B) it is licensed, registered, or otherwise approved in 
        each State in which it offers or provides benefits, except to 
        the extent that such State does not require licensing, 
        registration, or approval of multiple employer welfare 
        arrangements under which all coverage is fully insured, and
            ``(C) with respect to each such State, it is operating in 
        accordance with applicable State insurance laws that are not 
        superseded under section 514.
    ``(3) The court may grant such additional equitable or remedial 
relief, including any relief available under this title, as it deems 
necessary to protect the interests of the public and of persons having 
claims for benefits against the arrangement.''.
    (e) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by adding at the end (after and below 
paragraph (2)) the following new sentence: ``The terms of each multiple 
employer welfare arrangement to which this section applies and which 
provides benefits consisting of medical care described in section 
607(1) shall require the operating committee or the named fiduciary (as 
applicable) to ensure that the requirements of this section are met in 
connection with claims filed under the arrangement.''.

SEC. 1217. SOLVENCY REQUIREMENTS FOR CERTAIN SELF-INSURED GROUP HEALTH 
              PLANS.

    (a) In General.--The Secretary of Labor shall prescribe by 
regulation provisions described in subsection (b) applicable to group 
health plans which are not multiple employer health plans, which offer 
coverage with respect to employees of small employers (as defined in 
section 1131), and under which some or all coverage is not fully 
insured (within the meaning of section 701(9) of the Employee 
Retirement Income Security Act of 1974)), for the purpose of promoting 
adequate funding of such plans.
    (b) Requirements.--
            (1) General rule.--Except as provided in paragraph (2), the 
        provisions described in subsection (a) shall require the group 
        health plan to establish and maintain reserves, consisting of--
                    (A) a reserve for unearned contributions, and
                    (B) a reserve for payment of claims reported and 
                not yet paid and claims incurred but not yet reported, 
                and for expected administrative costs with respect to 
                such claims.
            (2) Exception.--The Secretary may in such regulations 
        permit a group health plan to substitute, for all or part of 
        the reserves required under paragraph (1), such security, 
        guarantee, or other financial arrangement as the Secretary 
        determines to be adequate to enable the plan to fully meet all 
        its financial obligations on a timely basis.
    (c) Criteria for Compliance.--The criteria that the Secretary shall 
take into account in determining compliance with the requirements 
described in subsection (b) shall include:
            (1) the size of the employer involved;
            (2) the benefit package provided under the plan;
            (3) whether the coverage provided under the plan is in the 
        form of a fee-for-service arrangement, a health maintenance 
        organization, or any other type of coverage;
            (4) the extent to which excess/stop loss coverage is 
        maintained for the plan; and
            (5) the nature of any security, guarantee, or other 
        financial arrangement described in subsection (b)(2) obtained 
        for the plan.

SEC. 1218. FILING REQUIREMENTS FOR MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS PROVIDING HEALTH BENEFITS.

    Section 101 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1021) is amended--
            (1) by redesignating subsection (e) as subsection (f); and
            (2) by inserting after subsection (d) the following new 
        subsection:
    ``(e)(1) Each multiple employer welfare arrangement shall file with 
the Secretary a registration statement described in paragraph (2) 
within 60 days before commencing operations (in the case of an 
arrangement commencing operations on or after January 1, 1995) and no 
later than February 15 of each year (in the case of an arrangement in 
operation since the beginning of such year), unless, as of the date by 
which such filing otherwise must be made, such arrangement provides no 
benefits consisting of medical care described in section 607(1).
    ``(2) Each registration statement--
            ``(A) shall be filed in such form, and contain such 
        information concerning the multiple employer welfare 
        arrangement and any persons involved in its operation 
        (including whether coverage under the arrangement is fully 
        insured), as shall be provided in regulations which shall be 
        prescribed by the Secretary, and
            ``(B) if coverage under the arrangement is not fully 
        insured, shall contain a certification that copies of such 
        registration statement have been transmitted by certified mail 
        to--
                    ``(i) in the case of an arrangement which is an 
                exempted multiple employer health plan (as defined in 
                section 701(10)), the State insurance commissioner of 
                the domicile State of such arrangement, or
                    ``(ii) in the case of an arrangement which is not 
                an exempted multiple employer health plan, the State 
                insurance commissioner of each State in which the 
                arrangement is located.
    ``(3) The person or persons responsible for filing the annual 
registration statement are--
            ``(A) the trustee or trustees so designated by the terms of 
        the instrument under which the multiple employer welfare 
        arrangement is established or maintained, or
            ``(B) in the case of a multiple employer welfare 
        arrangement for which the trustee or trustees cannot be 
        identified, or upon the failure of the trustee or trustees of 
        an arrangement to file, the person or persons actually 
        responsible for the acquisition, disposition, control, or 
        management of the cash or property of the arrangement, 
        irrespective of whether such acquisition, disposition, control, 
        or management is exercised directly by such person or persons 
        or through an agent designated by such person or persons.
    ``(4) Any agreement entered into under section 506(c) with a State 
as the primary domicile State with respect to any multiple employer 
welfare arrangement shall provide for simultaneous filings of reports 
required under this subsection with the Secretary and with the State 
insurance commissioner of such State.''.

SEC. 1219. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(c) Responsibility With Respect to Multiple Employer Welfare 
Arrangements.--
            ``(1) State enforcement.--
                    ``(A) Agreements with states.--A State may enter 
                into an agreement with the Secretary for delegation to 
                the State of some or all of the Secretary's authority 
                under sections 502 and 504 to enforce the provisions of 
                this title applicable to multiple employer welfare 
                arrangements which are or have been exempted multiple 
                employer health plans (as defined in section 701(10)). 
                The Secretary shall enter into the agreement if the 
                Secretary determines that the delegation provided for 
                therein would not result in a lower level or quality of 
                enforcement of the provisions of this title.
                    ``(B) Delegations.--Any department, agency, or 
                instrumentality of a State to which authority is 
                delegated pursuant to an agreement entered into under 
                this paragraph may, if authorized under State law and 
                to the extent consistent with such agreement, exercise 
                the powers of the Secretary under this title which 
                relate to such authority.
                    ``(C) Concurrent authority of the secretary.--If 
                the Secretary delegates authority to a State in an 
                agreement entered into under subparagraph (A), the 
                Secretary may continue to exercise such authority 
                concurrently with the State.
                    ``(D) Recognition of primary domicile state.--In 
                entering into any agreement with a State under 
                subparagraph (A), the Secretary shall ensure that, as a 
                result of such agreement and all other agreements 
                entered into under subparagraph (A), only one State 
                will be recognized, with respect to any particular 
                multiple employer welfare arrangement, as the primary 
                domicile State to which authority has been delegated 
                pursuant to such agreements.
            ``(2) Assistance to states.--The Secretary shall--
                    ``(A) provide enforcement assistance to the States 
                with respect to multiple employer welfare arrangements, 
                including, but not limited to, coordinating Federal and 
                State efforts through the establishment of cooperative 
                agreements with appropriate State agencies under which 
                the Pension and Welfare Benefits Administration keeps 
                the States informed of the status of its cases and 
                makes available to the States information obtained by 
                it,
                    ``(B) provide continuing technical assistance to 
                the States with respect to issues involving multiple 
                employer welfare arrangements and this Act,
                    ``(C) assist the States in obtaining from the 
                Office of Regulations and Interpretations timely and 
                complete responses to requests for advisory opinions on 
                issues described in subparagraph (B), and
                    ``(D) distribute copies of all advisory opinions 
                described in subparagraph (C) to the State insurance 
                commissioner of each State.''.

SEC. 1220. EFFECTIVE DATE; TRANSITIONAL RULES.

    (a) Effective Date.--The amendments made by this part shall take 
effect January 1, 1995, except that the Secretary of Labor may issue 
regulations before such date under such amendments. The Secretary shall 
issue all regulations necessary to carry out the amendments made by 
this title before the effective date thereof.
    (b) Transitional Rules.--If the sponsor of a multiple employer 
welfare arrangement which, as of January 1, 1995, provides benefits 
consisting of medical care described in section 607(1) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1167(1)) files with 
the Secretary of Labor an application for an exemption under part 7 of 
subtitle B of title I of such Act within 180 days after such date and 
the Secretary has not, as of 90 days after receipt of such application, 
found such application to be materially deficient, section 514(b)(6)(A) 
of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply with respect to 
such arrangement during the 18-month period following such date. If the 
Secretary determines, at any time after the date of enactment of this 
Act, that any such exclusion from coverage under the provisions of such 
section 514(b)(6)(A) of such Act of a multiple employer welfare 
arrangement would be detrimental to the interests of individuals 
covered under such arrangement, such exclusion shall cease as of the 
date of the determination. Any determination made by the Secretary 
under this subsection shall be in the Secretary's sole discretion.

PART 3--ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS PROVIDING BASIC 
                            HEALTH BENEFITS

SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR GEOGRAPHIC LOCATION 
              REQUIREMENT FOR TAX EXEMPT TRUST STATUS.

    (a) In General.--Paragraph (9) of section 501(c) of the Internal 
Revenue Code of 1986 (relating to exempt organizations) is amended--
            (1) by inserting ``(A)'' after ``(9)''; and
            (2) by adding at the end the following:
            ``(B) Any determination of whether a multiple employer 
        health plan (as defined in section 701(10) of the Employee 
        Retirement Income Security Act of 1974) or an insured multiple 
        employer health plan (as defined in section 701(11) of such 
        Act) is a voluntary employees' beneficiary association meeting 
        the requirements of this paragraph shall be made without regard 
        to any determination of commonality of interest or geographic 
        location if--
                    ``(i) such plan provides at least standard coverage 
                (consistent with section 102(c) of the Affordable 
                Health Care Now Act of 1994), and
                    ``(ii) in the case of an insured multiple employer 
                health plan, it meets the requirements enforcible under 
                section 514(b)(6)(B)(i) of the Employee Retirement 
                Income Security Act of 1974 to the extent not preempted 
                by section 1202 of the Affordable Health Care Now Act 
                of 1994.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to determinations made on or after January 1, 1995.

SEC. 1222. SINGLE ANNUAL FILING FOR ALL PARTICIPATING EMPLOYERS.

    (a) In General.--Section 110 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1030), as amended by section 1211(c) of 
this subtitle, is amended by adding at the end the following new 
subsection:
    ``(d) The Secretary shall prescribe by regulation or otherwise an 
alternative method providing for the filing of a single annual report 
(as referred to in section 104(a)(1)(A)) with respect to all employers 
who are participating employers under a multiple employer welfare 
arrangement under which all coverage consists of medical care 
(described in section 607(1)) and is fully insured (as defined in 
section 701(9)).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act. The Secretary of 
Labor shall prescribe the alternative method referred to in section 
110(d) of the Employee Retirement Income Security Act of 1974, as added 
by such amendment, within 90 days after the date of the enactment of 
this Act.

SEC. 1223. COMPLIANCE WITH COVERAGE REQUIREMENTS THROUGH MULTIPLE 
              EMPLOYER HEALTH ARRANGEMENTS.

    (a) Compliance With Applicable Requirements Through Multiemployer 
Plans.--In any case in which an eligible employee is, for any plan 
year, a participant in a group health plan which is a multiemployer 
plan, the requirements of section 1001(a) shall be deemed to be met 
with respect to such employee for such plan year if the employer 
requirements of subsection (c) are met with respect to the eligible 
employee, irrespective of whether, or to what extent, the employer 
makes employer contributions on behalf of the eligible employee.
    (b) Compliance With Applicable Requirements Through Other Multiple 
Employer Health Arrangements.--
            (1) In general.--In any case in which an employer is, for 
        any plan year, a participating employer (as defined in 
        paragraph (3)) in an exempted multiple employer health plan or 
        in a multiple employer welfare arrangement under which all 
        coverage consists of medical care (described in section 607(1) 
        of the Employee Retirement Income Security Act of 1974) and is 
        fully insured (as defined in section 701(9) of such Act), the 
        requirements of section 1001(a) shall be deemed to be met (and 
        the ERISA requirements of paragraph (2) shall be deemed to be 
        met by the employer) with respect to an eligible employee of 
        the employer if--
                    (A) the employer requirements of subsection (c) are 
                met with respect to the eligible employee, and
                    (B) the applicable ERISA requirements of paragraph 
                (2) are met by the plan or arrangement with respect to 
                the plan or arrangement,
        irrespective of whether, or to what extent, the employer makes 
        employer contributions on behalf of the eligible employee.
            (2) Applicable erisa requirements.--The applicable ERISA 
        requirements of this paragraph are the requirements of--
                    (A) part 1 of subtitle B of title I of the Employee 
                Retirement Income Security Act of 1974 (relating to 
                reporting and disclosure),
                    (B) section 503 of such Act (relating to claims 
                procedure), and
                    (C) part 6 of subtitle B of such title I (relating 
                to group health plans),
        to the extent that such requirements relate to employers as 
        plan sponsors or plan administrators.
            (3) Participating employer.--In this subsection, the term 
        ``participating employer'' means, in connection with an 
        exempted multiple employer health plan or a multiple employer 
        welfare arrangement under which all coverage consists of 
        medical care (described in section 607(1) of the Employee 
        Retirement Income Security Act of 1974) and is fully insured 
        (as defined in section 701(9) of such Act), any employer if any 
        of its employees, or any of the dependents of its employees, 
        are or were covered under such plan or arrangement in 
        connection with the employment of the employees.
    (c) Employer Requirements.--The employer requirements of this 
subsection are met under a plan or arrangement with respect to an 
eligible employee if--
            (1) the employee is eligible under the plan or arrangement 
        to elect coverage on an annual basis and is provided a 
        reasonable opportunity to make the election in such form and 
        manner and at such times as are provided by the plan or 
        arrangement,
            (2) subject to section 1001(c), such coverage includes at 
        least the standard coverage (consistent with section 1102(c)),
            (3) the employer facilitates collection of any employee 
        contributions under the plan or arrangement and permits the 
        employee to elect to have employee contributions under the plan 
        or arrangement collected through payroll deduction, and
            (4) in the case of a plan or arrangement to which part 1 of 
        subtitle B of title I of the Employee Retirement Income 
        Security Act of 1974 does not otherwise apply, the employer 
        provides to the employee a summary plan description described 
        in section 102(a)(1) of such Act in the form and manner and at 
        such times as are required under such part 1 with respect to 
        employee welfare benefit plans.

                 Subtitle D--Health Deduction Fairness

SEC. 1301. PERMANENT EXTENSION AND INCREASE IN HEALTH INSURANCE TAX 
              DEDUCTION FOR SELF-EMPLOYED INDIVIDUALS.

    (a) Permanent Extension of Deduction.--
            (1) In general.--Subsection (l) of section 162 of the 
        Internal Revenue Code of 1986 (relating to special rules for 
        health insurance costs of self-employed individuals) is amended 
        by striking paragraph (6).
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning after December 31, 1993.
    (b) Increase in Amount of Deduction; Insurance Purchased Must Meet 
Certain Standards.--
            (1) Increase in amount of deduction.--Paragraph (1) of 
        section 162(l) of such Code is amended by striking ``25 percent 
        of'' and inserting ``100 percent (25 percent in the case of 
        taxable years beginning in 1994 or 1995 and 50 percent in the 
        case of taxable years beginning in 1996 or 1997) of''.
            (2) Insurance purchased must meet certain standards.--
        Paragraph (2) of section 162(l) of such Code is amended by 
        adding at the end thereof the following new subparagraph:
                    ``(C) Treatment of group health plans.--For 
                purposes of this subsection, an amount paid into a 
                multiple employer health plan (as defined in section 
                701(10) of the Employee Retirement Income Security Act 
                of 1974) shall be deemed to be an amount paid for 
                insurance which constitutes medical care.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 1994.

SEC. 1302. DEDUCTION OF HEALTH INSURANCE PREMIUMS FOR CERTAIN 
              PREVIOUSLY UNINSURED INDIVIDUALS.

    (a) In General.--Section 213 of the Internal Revenue Code of 1986 
(relating to medical, dental, etc., expenses) is amended by adding at 
the end thereof the following new subsection:
    ``(f) Deduction for Certain Health Insurance Costs Determined 
Without Regard to Adjusted Gross Income Threshold.--
            ``(1) In general.--Subsection (a) shall be applied without 
        regard to the limitation based on adjusted gross income in the 
        case of the applicable percentage of the amounts paid for 
        insurance referred to in section 162(l)(2)(C) (and including 
        payments referred to in section 162(l)(2)(D)).
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 25 percent for taxable years beginning in 
                1994 or 1995,
                    ``(B) 50 percent for taxable years beginning in 
                1996 or 1997, and
                    ``(C) 100 percent for taxable years beginning after 
                1997.
            ``(3) Deduction not allowed to individuals eligible for 
        employer-subsidized coverage.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any individual--
                            ``(i) who is eligible to participate in any 
                        subsidized health plan maintained by an 
                        employer of such individual or the spouse of 
                        such individual, or
                            ``(ii) who is (or whose spouse is) a member 
                        of a subsidized class of employees of an 
                        employer of such individual or spouse.
                    ``(B) Subsidized class.--For purposes of 
                subparagraph (A), an individual is a member of a 
                subsidized class of employees of an employer if, at any 
                time during the 3 calendar years ending with or within 
                the taxable year, any member of such class was eligible 
                to participate in any subsidized health plan maintained 
                by such employer.
                    ``(C) Special rules.--
                            ``(i) Controlled groups.--All persons 
                        treated as a single employer under subsection 
                        (a) or (b) of section 52 or subsection (m) or 
                        (o) of section 414 shall be treated as a single 
                        employer for purposes of subparagraph (B).
                            ``(ii) Classes.--Classes of employees shall 
                        be determined under regulations prescribed by 
                        the Secretary based on such factors as the 
                        Secretary determines appropriate to carry out 
                        the purposes of this subsection.
            ``(4) Coordination with deduction for other amounts.--
        Amounts allowable as a deduction under subsection (a) by reason 
        of this subsection shall not be taken into account in 
        determining the deduction under subsection (a) for other 
        amounts.
            ``(5) Subsection not to apply to individuals eligible for 
        medicare.--This subsection shall not apply to amount paid for 
        insurance covering an individual who is eligible for benefits 
        under title XVIII of the Social Security Act.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (15) the following new paragraph:
            ``(16) Costs of certain health insurance.--The deduction 
        allowed by section 213 to the extent allowable by reason of 
        section 213(f).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

        Subtitle E--Improved Access to Community Health Services

   PART 1--INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT HEALTH 
                                CENTERS

SEC. 1401. GRANT PROGRAM TO PROMOTE PRIMARY HEALTH CARE SERVICES FOR 
              UNDERSERVED POPULATIONS.

    (a) Authorization.--The Secretary of Health and Human Services 
shall provide for a program of grants to migrant and community health 
centers (receiving grants or contracts under section 329, 330, or 340 
of the Public Health Service Act) in order to promote the provision of 
primary health care services for underserved individuals. Such grants 
may be used--
            (1) to promote the provision of off-site services (through 
        means such as mobile medical clinics);
            (2) to improve birth outcomes in areas with high infant 
        mortality and morbidity;
            (3) to establish primary care clinics in areas identified 
        as in need of such clinics; and
            (4) for recruitment and training costs of necessary 
        providers and operating costs for unreimbursed services.
    (b) Conditions.--(1) Grants under this subsection shall only be 
made upon application, approved by the Secretary.
    (2) The amount of grants made under this section shall be 
determined by the Secretary.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated--
            (1) in fiscal year 1995, $100,000,000,
            (2) in fiscal year 1996, $200,000,000,
            (3) in fiscal year 1997, $300,000,000,
            (4) in fiscal year 1998, $400,000,000, and
            (5) in fiscal year 1999, $500,000,000,
to carry out this section. Of the amounts appropriated each fiscal year 
under this section, at least 10 percent shall be used for grants 
described in subsection (a)(1) and at least 10 percent shall be used 
for grants described in subsection (a)(2). The Secretary may use not to 
exceed 50 percent of the amounts appropriated to carry out this section 
for the purpose of making new grants or contracts under sections 329, 
330, and 340 of the Public Health Service Act.
    (d) Study and Report.--The Secretary shall conduct a study of the 
impact of the grants made under this section to migrant and community 
health centers on access to health care, birth outcomes, and the use of 
emergency room services. Not later than 2 years after the date of the 
enactment of this Act, the Secretary shall submit to Congress a report 
on such study and on recommendations for changes in the programs under 
this section in order to promote the appropriate use of cost-effective 
outpatient services.

   PART 2--GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF SERVICES

SEC. 1411. PROJECTS FOR COORDINATING DELIVERY OF OUTPATIENT PRIMARY 
              HEALTH SERVICES.

    Part D of title III of the Public Health Service Act (42 U.S.C. 
254b et seq.) is amended by adding at the end the following new 
subpart:

                  ``Subpart VII--Delivery of Services

            ``projects for coordinating delivery of services

    ``Sec. 340E. (a) Authority for Grants.--
            ``(1) In general.--The Secretary may make grants to public 
        and nonprofit private entities to carry out demonstration 
        projects for the purpose of increasing access to outpatient 
        primary health services in geographic areas described in 
        subsection (b) through coordinating the delivery of such 
        services under Federal, State, local, and private programs.
            ``(2) Requirement regarding plan.--The Secretary may make a 
        grant under paragraph (1) only if--
                    ``(A) the applicant involved has received a grant 
                under subsection (l) and the Secretary has approved the 
                plan developed with such grant; and
                    ``(B) the applicant agrees to carry out the project 
                under paragraph (1) in accordance with the plan.
    ``(b) Qualified Health Service Areas.--
            ``(1) In general.--A geographic area described in this 
        subsection is a geographic area that--
                    ``(A) is a rational area for the delivery of health 
                services;
                    ``(B) has a population of not more than 500,000 
                individuals; and
                    ``(C)(i) has been designated by the Secretary as an 
                area with a shortage of personal health services; or
                    ``(ii) has a significant number of individuals who 
                have low incomes or who have insufficient insurance 
                regarding health care.
            ``(2) Authority regarding multiple political 
        subdivisions.--The Secretary shall make a determination of 
        whether a geographic area is a geographic area described in 
        paragraph (1) without regard to whether the area is a political 
        subdivision, without regard to whether the area is located in 2 
        or more political subdivisions or States, and without regard to 
        whether the area encompasses 2 or more political subdivisions.
    ``(c) Preferences in Making Grants.--In making grants under 
subsection (a), the Secretary shall give preference to applicants 
demonstrating that, with respect to the outpatient primary health 
services that will be the subject of the project conducted by the 
applicant under such subsection--
            ``(1)(A) the project will result in the reduction of 
        administrative expenses associated with such services by 
        increasing the efficiency of the administrative processes of 
        the providers participating in the project, and (B) the 
        resulting savings will be expended for the direct provision of 
        such services for the designated population; or
            ``(2) the services that will be the subject of the project 
        will be provided in facilities that are underutilized.
    ``(d) Activities of Project Must Serve Designated Population.--The 
Secretary may make a grant under subsection (a) to an applicant only if 
the applicant demonstrates that carrying out the project under such 
subsection will increase access to outpatient primary health services 
for a significant segment of the designated population.
    ``(e)  Matching Funds.--
            ``(1) In general.--With respect to the costs of the project 
        to be carried out under subsection (a) by an applicant, the 
        Secretary may make a grant under such subsection only if the 
        applicant agrees to make available (directly or through 
        donations from public or private entities) non-Federal 
        contributions toward such costs in an amount that is not less 
        than 50 percent of such costs.
            ``(2) Determination of amount contributed.--Non-Federal 
        contributions required in paragraph (1) may be in cash or in 
        kind, fairly evaluated, including plant, equipment, or 
        services. Amounts provided by the Federal Government, or 
        services assisted or subsidized to any significant extent by 
        the Federal Government, may not be included in determining the 
        amount of such non-Federal contributions.
    ``(f) Certain Limitations Regarding Grants.--
            ``(1) Provision of health services; construction of 
        facilities.--The Secretary may make a grant under subsection 
        (a) only if the applicant involved agrees that the grant will 
        not be expended for the direct provision of any health service 
        or for the construction or renovation of facilities.
            ``(2) Duration and amount of grant.--The period during 
        which payments are made for a project under subsection (a) may 
        not exceed 4 years, and the aggregate amount of such payments 
        for the period may not exceed $200,000. The provision of such 
        payments shall be subject to annual approval by the Secretary 
        of the payments and subject to the availability of 
        appropriations for the fiscal year involved to make the 
        payments.
            ``(3) Financial capacity for continuation of project after 
        termination of grant.--The Secretary may make a grant under 
        subsection (a) only if the Secretary determines that there is a 
        reasonable basis for believing that, after termination of 
        payments under such subsection pursuant to paragraph (2), the 
        project under such subsection will have the financial capacity 
        to continue operating.
    ``(g) Agreements Among Participants in Projects.--
            ``(1) Required participants.--The Secretary may make a 
        grant under subsection (a) only if the applicant for the grant 
        has, for purposes of carrying out a project under such 
        subsection, entered into agreements with--
                    ``(A) the chief public health officers, and the 
                chief health officers for the elementary and secondary 
                schools, of each of the political subdivisions of the 
                qualified health service area in which the project 
                under such subsection is to be carried out (or, in the 
                case of a political subdivision that does not have such 
                an official, with another appropriate official of such 
                subdivision);
                    ``(B) each hospital in the qualified health service 
                area;
                    ``(C) representatives of entities in such area that 
                provide outpatient primary health services under 
                Federal, State, local, or private programs;
                    ``(D) representatives of businesses in such area, 
                including small businesses; and
                    ``(E) representatives of nonprofit private entities 
                in such area.
            ``(2) Optional participants.--With respect to compliance 
        with this section, a grantee under subsection (a) may, for 
        purposes of carrying out a project under such subsection, enter 
        into such agreements with public and private entities in the 
        qualified health service area involved (in addition to the 
        entities specified in paragraph (1)) as the grantee may elect.
    ``(h) Expenditures of Grant.--With respect to a project under 
subsection (a), the purposes for which a grant under such subsection 
may be expended include (but are not limited to) expenditures to 
increase the efficiency of the administrative processes of providers 
participating in the project, paying the costs of hiring and 
compensating staff, obtaining computers and other equipment (including 
vehicles to transport individuals to programs providing outpatient 
primary health services), and developing and operating provider 
networks.
    ``(i) Maintenance of Effort.--In the case of services and 
populations that are the subject of a project under subsection (a), the 
Secretary may make such a grant for a fiscal year only if the applicant 
involved agrees that the applicant, and each entity making an agreement 
under subsection (g), will maintain expenditures of non-Federal amounts 
for such services and populations at a level that is not less than the 
level of such expenditures maintained by the applicant and the entity, 
respectively, for the fiscal year preceding the first fiscal year for 
which the applicant receives such a grant.
    ``(j) Reports to Secretary.--The Secretary may make a grant under 
subsection (a) only if the applicant involved agrees to submit to the 
Secretary such reports on the project carried out under such subsection 
as the Secretary may require.
    ``(k) Evaluations and Dissemination of Information.--The Secretary 
shall provide for evaluations of projects carried out under subsection 
(a), and for the collection and dissemination of information developed 
as a result of such projects and as a result of similar projects.
    ``(l) Planning Grants.--
            ``(1) In general.--The Secretary may make grants to public 
        and nonprofit private entities for the purpose of developing 
        plans to carry out projects under subsection (a). Such a grant 
        may be made only if the applicant involved submits to the 
        Secretary information--
                    ``(A) providing a detailed statement of the 
                proposal of the applicant for carrying out the project;
                    ``(B) identifying the geographic area in which the 
                project is to be carried out; and
                    ``(C) demonstrating that the area is a qualified 
                health service area and that the proposal otherwise is 
                in accordance with the requirements established in this 
                section for the receipt of a grant under subsection 
                (a).
            ``(2) Duration and amount of grant.--The period during 
        which payments are made under paragraph (1) for the development 
        of a plan under such paragraph may not exceed 1 year, and the 
        amount of such payments may not exceed $100,000.
    ``(m) Application for Grant.--The Secretary may make a grant under 
subsection (a) or (l) only if the applicant for the grant submits an 
application to the Secretary that--
            ``(1) contains any agreements, assurances, and information 
        required in this section with respect to the grant; and
            ``(2) is in such form, is made in such manner, and contains 
        such other agreements, assurances, and information as the 
        Secretary determines to be necessary to carry out the purpose 
        for which the grant is to be provided.
    ``(n) Definitions.--For purposes of this section:
            ``(1) The term `designated population' means individuals 
        described in subsection (b)(1)(C)(ii).
            ``(2) The term `primary health services' includes 
        preventive health services.
            ``(3) The term `qualified health service area' means a 
        geographic area described in subsection (b).
    ``(o) Authorization of Appropriations.--
            ``(1) Planning for projects.--For the purpose of grants 
        under subsection (l), there is authorized to be appropriated 
        $5,000,000 for fiscal year 1995, to remain available until 
        expended.
            ``(2) Operation of projects.--For the purpose of grants 
        under subsection (a), there is authorized to be appropriated an 
        aggregate $10,000,000 for the fiscal years 1996 through 
        1999.''.

                   PART 3--COMMUNITY HEALTH NETWORKS

SEC. 1421. QUALIFICATIONS FOR COMMUNITY HEALTH NETWORKS.

    (a) Community Health Network Defined.--For purposes of part 7 of 
subtitle B of title I of Employee Retirement Income Security Act of 
1974 and this Act, added by section 1211(a) of this title, the term 
``community health network'' means an arrangement that--
            (1) is organized by health care providers (including 
        medical practitioners), community groups, or both, and such 
        other organizations as may be designated by the arrangement, to 
        provide health care services to an enrolled population in a 
        service area,
            (2) provides to its enrollees at least the benefits 
        included in standard coverage (consistent with section 
        1102(c)),
            (3) receives payment for such services on a prospective 
        capitated basis, which may vary only by family composition, 
        geographic area, and age,
            (4) meets the requirements of subsection (b) (relating to 
        public accountability),
            (5) meets the requirements of subsection (c) (relating to 
        coordination and integration of care),
            (6) meets the requirements of subsection (d) to the extent 
        the arrangement is organized as a nonprofit entity, and
            (7) meets the requirements of section 707 of the Employee 
        Retirement Income Security Act of 1974 (relating to maintenance 
        of reserves), added by section 1211.
    (b) Public Accountability Requirements.--The public accountability 
requirements of this subsection, with respect to a network, are as 
follows:
            (1) Performance measures.--The network must establish and 
        implement procedures for developing, compiling, evaluating, and 
        reporting performance measures, statistics, and other 
        information on--
                    (A) the cost and financial performance of network 
                operations,
                    (B) the service utilization patterns of enrollees,
                    (C) the availability, accessibility, and 
                acceptability of health care services to enrollees,
                    (D) ownership and governance of the network, and
                    (E) demographic characteristics of enrollees, and
        Such information shall be published annually and disseminated 
        to enrollees and the public.
            (2) Quality assurance program.--The network must have an 
        organizational arrangement for an ongoing quality assurance 
        program for all health services it provides which--
                    (A) stresses health outcomes,
                    (B) to the maximum extent possible, relies 
                primarily on evaluating and comparing practice patterns 
                (rather than routine case-by-case review) to identify 
                problems,
                    (C) provides review by physicians and other health 
                professionals of the outcomes and process followed in 
                the provision of health services, and
                    (D) makes the coverage and utilization review 
                requirements of the plan, and the standards applied for 
                such review, available to providers and the public.
            (3) Enrollment.--The network does not expel or refuse to 
        enroll any applicant or limit coverage of services included in 
        standard coverage for any applicant because of the health 
        status or requirements for health services.
            (4) Credentialing.--The network must develop and implement 
        a process for the credentialing (and renewal of credentials) of 
        network providers (including practitioners).
            (5) Grievance process.--The network must have an enrollee 
        complaint and grievance resolution process which shall meet any 
        requirements of applicable law.
    (c) Coordination and Integration of Care Requirements.--The 
coordination and integration of care requirements of this subsection, 
with respect to a network, are as follows:
            (1) Coordination and integration of care.--The network must 
        establish and implement mechanisms for coordinating the 
        delivery of care across provider settings and over time, 
        including at least mechanisms for--
                    (A) linking patient registration and medical record 
                information so that it is accessible to all parts of 
                the network and, consistent with State law, assures the 
                confidentiality of patient information,
                    (B) assisting enrollees to obtain necessary care, 
                including preventive services, and
                    (C) coordinating the services furnished to an 
                enrollee when more than one practitioner or provider is 
                involved.
            (2) Out-of-area coverage.--The network must provide care 
        within a defined service area established by the arrangement 
        and must provide for reimbursement for standard coverage 
        (consistent with section 1102(c)) for enrollees who are 
        temporarily outside such area.
            (3) Common malpractice policy.--Providers (including 
        practitioners) that provide standard coverage to network 
        enrollees must be covered for malpractice in accordance with 
        documented criteria established by the arrangement.
            (4) Record keeping.--The network must use a unified patient 
        registration system and medical records system that is 
        accessible to all parts of the network and assures 
        confidentiality of patient information, consistent with State 
        law.
    (d) Requirements for Networks Organized as Nonprofit Entities.--The 
requirements of this subsection, with respect to a network, are as 
follows:
            (1) Community health status improvement process.--The 
        network develops and implements a community health status 
        improvement process, in cooperation with other existing 
        networks and community organizations from the same service 
        area, that--
                    (A) provides for an assessment of community health 
                status that identifies important health status problems 
                in such area,
                    (B) implements measures to address such problems, 
                and
                    (C) evaluates the efficiency and effectiveness of 
                such measures in addressing such problems.
        The results of evaluations made pursuant to subparagraph (C) 
        shall be made publicly available on at least an annual basis.
            (2) Enrollment.--The network enrolls individuals who are 
        broadly representative of the various age, social, and income 
        groups within the area it serves.

          Subtitle F--Improved Access to Rural Health Services

 PART 1--ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS UNDER 
                                MEDICARE

SEC. 1501. RURAL EMERGENCY ACCESS CARE HOSPITALS DESCRIBED.

    Section 1861 of the Social Security Act (42 U.S.C. 1395x) is 
amended by adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
            ``(A) The facility is located in a rural area (as defined 
        in section 1886(d)(2)(D)).
            ``(B) The facility was a hospital under this title at any 
        time during the 5-year period that ends on the date of the 
        enactment of this subsection.
            ``(C) The facility is in danger of closing due to low 
        inpatient utilization rates and negative operating losses, and 
        the closure of the facility would limit the access of 
        individuals residing in the facility's service area to 
        emergency services.
            ``(D) The facility has entered into (or plans to enter 
        into), with a hospital with a participation agreement in effect 
        under section 1866(a), and under such agreement the hospital 
        shall accept patients transferred to the hospital from the 
        facility and receives data from and transmits data to the 
        facility.
            ``(E) There is a practitioner who is qualified to provide 
        advanced cardiac life support services (as determined by the 
        State in which the facility is located) on-site at the facility 
        on a 24-hour basis.
            ``(F) A physician is available on-call to provide emergency 
        medical services on a 24-hour basis.
            ``(G) The facility meets such staffing requirements as 
        would apply under section 1861(e) to a hospital located in a 
        rural area, except that--
                    ``(i) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open, 
                except insofar as the facility is required to provide 
                emergency care on a 24-hour basis under subparagraphs 
                (E) and (F); and
                    ``(ii) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietician, pharmacist, laboratory technician, 
                medical technologist, or radiological technologist on a 
                part-time, off-site basis.
            ``(H) The facility meets the requirements applicable to 
        clinics and facilities under subparagraphs (C) through (J) of 
        paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) 
        of the second sentence of such paragraph (or, in the case of 
        the requirements of subparagraph (E), (F), or (J) of such 
        paragraph, would meet the requirements if any reference in such 
        subparagraph to a `nurse practitioner' or to `nurse 
        practitioners' was deemed to be a reference to a `nurse 
        practitioner or nurse' or to `nurse practitioners or nurses'), 
        except that in determining whether a facility meets the 
        requirements of this subparagraph, subparagraphs (E) and (F) of 
        that paragraph shall be applied as if any reference to a 
        `physician' is a reference to a physician as defined in section 
        1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means medical and other health services furnished by a rural emergency 
access care hospital.''.

SEC. 1502. COVERAGE OF AND PAYMENT FOR SERVICES.

    (a) Coverage Under Part B.--Section 1832(a)(2) of the Social 
Security Act (42 U.S.C. 1395k(a)(2)) is amended--
            (1) by striking ``and'' at the end of subparagraph (I);
            (2) by striking the period at the end of subparagraph (J) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(K) rural emergency access care hospital services 
                (as defined in section 1861(oo)(2)).''.
    (b) Payment Based on Payment for Outpatient Rural Primary Care 
Hospital Services.--
            (1) In general.--Section 1833(a)(6) of the Social Security 
        Act (42 U.S.C. 1395l(a)(6)) is amended by striking 
        ``services,'' and inserting ``services and rural emergency 
        access care hospital services,''.
            (2) Payment methodology described.--Section 1834(g) of such 
        Act (42 U.S.C. 1395m(g)) is amended--
                    (A) in the heading, by striking ``Services'' and 
                inserting ``Services and Rural Emergency Access Care 
                Hospital Services''; and
                    (B) in paragraph (1), by striking ``during a year 
                before 1993'' and inserting ``during a year before the 
                prospective payment system described in paragraph (2) 
                is in effect'';
                    (C) in paragraph (1), by adding at the end the 
                following:
        ``The amount of payment shall be determined under either method 
        without regard to the amount of the customary or other 
        charge.'';
                    (D) in paragraph (2), by striking ``January 1, 
                1993,'' and inserting ``January 1, 1996,''; and
                    (E) by adding at the end the following new 
                paragraph:
            ``(3) Application of methods to payment for rural emergency 
        access care hospital services.--The amount of payment for rural 
        emergency access care hospital services provided during a year 
        shall be determined using the applicable method provided under 
        this subsection for determining payment for outpatient rural 
        primary care hospital services during the year.''.

SEC. 1503. EFFECTIVE DATE.

    The amendments made by sections 1501 and 1502 shall apply to fiscal 
years beginning on or after October 1, 1994.

            PART 2--RURAL MEDICAL EMERGENCIES AIR TRANSPORT

SEC. 1511. GRANTS TO STATES REGARDING AIRCRAFT FOR TRANSPORTING RURAL 
              VICTIMS OF MEDICAL EMERGENCIES.

    Part E of title XII of the Public Health Service Act (42 U.S.C. 
300d-51 et seq.) is amended by adding at the end thereof the following 
new section:

``SEC. 1252. GRANTS FOR SYSTEMS TO TRANSPORT RURAL VICTIMS OF MEDICAL 
              EMERGENCIES.

    ``(a) In General.--The Secretary shall make grants to States to 
assist such States in the creation or enhancement of air medical 
transport systems that provide victims of medical emergencies in rural 
areas with access to treatments for the injuries or other conditions 
resulting from such emergencies.
    ``(b) Application and Plan.--
            ``(1) Application.--To be eligible to receive a grant under 
        subsection (a), a State shall prepare and submit to the 
        Secretary an application in such form, made in such manner, and 
        containing such agreements, assurances, and information, 
        including a State plan as required in paragraph (2), as the 
        Secretary determines to be necessary to carry out this section.
            ``(2) State plan.--An application submitted under paragraph 
        (1) shall contain a State plan that shall--
                    ``(A) describe the intended uses of the grant 
                proceeds and the geographic areas to be served;
                    ``(B) demonstrates that the geographic areas to be 
                served, as described under subparagraph (A), are rural 
                in nature;
                    ``(C) demonstrate that there is a lack of 
                facilities available and equipped to deliver advanced 
                levels of medical care in the geographic areas to be 
                served;
                    ``(D) demonstrate that in utilizing the grant 
                proceeds for the establishment or enhancement of air 
                medical services the State would be making a cost-
                effective improvement to existing ground-based or air 
                emergency medical service systems;
                    ``(E) demonstrate that the State will not utilize 
                the grant proceeds to duplicate the capabilities of 
                existing air medical systems that are effectively 
                meeting the emergency medical needs of the populations 
                they serve;
                    ``(F) demonstrate that in utilizing the grant 
                proceeds the State is likely to achieve a reduction in 
                the morbidity and mortality rates of the areas to be 
                served, as determined by the Secretary;
                    ``(G) demonstrate that the State, in utilizing the 
                grant proceeds, will--
                            ``(i) maintain the expenditures of the 
                        State for air and ground medical transport 
                        systems at a level equal to not less than the 
                        level of such expenditures maintained by the 
                        State for the fiscal year preceding the fiscal 
                        year for which the grant is received; and
                            ``(ii) ensure that recipients of direct 
                        financial assistance from the State under such 
                        grant will maintain expenditures of such 
                        recipients for such systems at a level at least 
                        equal to the level of such expenditures 
                        maintained by such recipients for the fiscal 
                        year preceding the fiscal year for which the 
                        financial assistance is received;
                    ``(H) demonstrate that persons experienced in the 
                field of air medical service delivery were consulted in 
                the preparation of the State plan;
                    ``(I) contain such other information as the 
                Secretary may determine appropriate.
    ``(c) Considerations in Awarding Grants.--In determining whether to 
award a grant to a State under this section, the Secretary shall--
            ``(1) consider the rural nature of the areas to be served 
        with the grant proceeds and the services to be provided with 
        such proceeds, as identified in the State plan submitted under 
        subsection (b); and
            ``(2) give preference to States with State plans that 
        demonstrate an effective integration of the proposed air 
        medical transport systems into a comprehensive network or plan 
        for regional or statewide emergency medical service delivery.
    ``(d) State Administration and Use of Grant.--
            ``(1) In general.--The Secretary may not make a grant to a 
        State under subsection (a) unless the State agrees that such 
        grant will be administered by the State agency with principal 
        responsibility for carrying out programs regarding the 
        provision of medical services to victims of medical emergencies 
        or trauma.
            ``(2) Permitted uses.--A State may use amounts received 
        under a grant awarded under this section to award subgrants to 
        public and private entities operating within the State.
            ``(3) Opportunity for public comment.--The Secretary may 
        not make a grant to a State under subsection (a) unless that 
        State agrees that, in developing and carrying out the State 
        plan under subsection (b)(2), the State will provide public 
        notice with respect to the plan (including any revisions 
        thereto) and facilitate comments from interested persons.
    ``(e) Number of Grants.--The Secretary shall award grants under 
this section to not less than 7 States.
    ``(f) Reports.--
            ``(1) Requirement.--A State that receives a grant under 
        this section shall annually (during each year in which the 
        grant proceeds are used) prepare and submit to the Secretary a 
        report that shall contain--
                    ``(A) a description of the manner in which the 
                grant proceeds were utilized;
                    ``(B) a description of the effectiveness of the air 
                medical transport programs assisted with grant 
                proceeds; and
                    ``(C) such other information as the Secretary may 
                require.
            ``(2) Termination of funding.--In reviewing reports 
        submitted under paragraph (1), if the Secretary determines that 
        a State is not using amounts provided under a grant awarded 
        under this section in accordance with the State plan submitted 
        by the State under subsection (b), the Secretary may terminate 
        the payment of amounts under such grant to the State until such 
        time as the Secretary determines that the State comes into 
        compliance with such plan.
    ``(g) Definition.--As used in this section, the term `rural areas' 
means geographic areas that are located outside of standard 
metropolitan statistical areas, as identified by the Secretary.
    ``(h) Authorization of Appropriations.--There are authorized to be 
appropriated to make grants under this section, $15,000,000 for fiscal 
year 1994, and such sums as may be necessary for each of the fiscal 
years 1996 and 1997.''.

             PART 3--EMERGENCY MEDICAL SERVICES AMENDMENTS

SEC. 1521. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL SERVICES.

    Title XII of the Public Health Service Act (42 U.S.C. 300d et seq.) 
is amended--
            (1) in the heading for the title, by striking ``TRAUMA 
        CARE'' and inserting ``EMERGENCY MEDICAL SERVICES'';
            (2) in the heading for part A, by striking ``General'' and 
        all that follows and inserting ``General Authorities and 
        Duties''; and
            (3) by amending section 1201 to read as follows:

``SEC. 1201. ESTABLISHMENT OF OFFICE OF EMERGENCY MEDICAL SERVICES.

    ``(a) In General.--The Secretary shall establish an office to be 
known as the Office of Emergency Medical Services, which shall be 
headed by a director appointed by the Secretary. The Secretary shall 
carry out this title acting through the Director of such Office.
    ``(b) General Authorities and Duties.--With respect to emergency 
medical services (including trauma care), the Secretary shall--
            ``(1) conduct and support research, training, evaluations, 
        and demonstration projects;
            ``(2) foster the development of appropriate, modern systems 
        of such services through the sharing of information among 
        agencies and individuals involved in the study and provision of 
        such services;
            ``(3) sponsor workshops and conferences;
            ``(4) as appropriate, disseminate to public and private 
        entities information obtained in carrying out paragraphs (1) 
        through (4);
            ``(5) provide technical assistance to State and local 
        agencies;
            ``(6) coordinate activities of the Department of Health and 
        Human Services; and
            ``(7) as appropriate, coordinate activities of such 
        Department with activities of other Federal agencies.
    ``(c) Certain Requirements.--With respect to emergency medical 
services (including trauma care), the Secretary shall ensure that 
activities under subsection (b) are carried out regarding--
            ``(1) maintaining an adequate number of health 
        professionals with expertise in the provision of the services, 
        including hospital-based professionals and prehospital-based 
        professionals;
            ``(2) developing, periodically reviewing, and revising as 
        appropriate, in collaboration with appropriate public and 
        private entities, guidelines for the provision of such services 
        (including, for various typical circumstances, guidelines on 
        the number and variety of professionals, on equipment, and on 
        training);
            ``(3) the appropriate use of available technologies, 
        including communications technologies; and
            ``(4) the unique needs of underserved inner-city areas and 
        underserved rural areas.
    ``(d) Grants, Cooperative Agreements, and Contracts.--In carrying 
out subsections (b) and (c), the Secretary may make grants and enter 
into cooperative agreements and contracts.
    ``(e) Definitions.--For purposes of this part:
            ``(1) The term `hospital-based professional' means a health 
        professional (including an allied health professional) who has 
        expertise in providing one or more emergency medical services 
        and who normally provides the services at a medical facility.
            ``(2) The term `prehospital-based professional' means a 
        health professional (including an allied health professional) 
        who has expertise in providing one or more emergency medical 
        services and who normally provides the services at the site of 
        the medical emergency or during transport to a medical 
        facility.''.

SEC. 1522. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

    (a) Technical Amendments to Facilitate Establishment of Program.--
            (1) In general.--Title XII of the Public Health Service Act 
        (42 U.S.C. 300d et seq.) is amended--
                    (A) by redesignating section 1239 as section 1235;
                    (B) by redesignating sections 1231 and 1233 as 
                sections 1236 and 1237, respectively; and
                    (C) by redesignating sections 1211 through 1222 as 
                sections 1221 through 1232, respectively.
            (2) Modifications in format of title xii.--Title XII of the 
        Public Health Service Act, as amended by paragraph (1) of this 
        subsection, is amended--
                    (A) by striking ``Part B'' and all that follow 
                through ``State Plans'' and inserting the following:

  ``Subpart II--Formula Grants With Respect to Modifications of State 
                                Plans'';

                    (B) by striking ``Part C--General Provisions'' and 
                inserting the following:

                  ``Subpart III--General Provisions'';

                    (C) by redesignating sections 1202 and 1203 as 
                sections 1211 and 1212, respectively; and
                    (D) by inserting before section 1211 (as so 
                redesignated) the following:

                         ``Part B--Trauma Care

            ``Subpart I--Advisory Council; Clearinghouse''.

    (b) State Offices.--Title XII of the Public Health Service Act, as 
amended by subsection (a) of this section, is amended by inserting 
after section 1201 the following new section:

``SEC. 1202. STATE OFFICES OF EMERGENCY MEDICAL SERVICES.

    ``(a) Program of Grants.--The Secretary may make grants to States 
for the purpose of improving the availability and quality of emergency 
medical services through the operation of State offices of emergency 
medical services.
    ``(b) Requirement of Matching Funds.--
            ``(1) In general.--The Secretary may not make a grant under 
        subsection (a) unless the State involved agrees, with respect 
        to the costs to be incurred by the State in carrying out the 
        purpose described in such subsection, to provide non-Federal 
        contributions toward such costs in an amount that--
                    ``(A) for the first fiscal year of payments under 
                the grant, is not less than $1 for each $3 of Federal 
                funds provided in the grant;
                    ``(B) for any second fiscal year of such payments, 
                is not less than $1 for each $1 of Federal funds 
                provided in the grant; and
                    ``(C) for any third fiscal year of such payments, 
                is not less than $3 for each $1 of Federal funds 
                provided in the grant.
            ``(2) Determination of amount of non-federal 
        contribution.--
                    ``(A) Subject to subparagraph (B), non-Federal 
                contributions required in paragraph (1) may be in cash 
                or in kind, fairly evaluated, including plant, 
                equipment, or services. Amounts provided by the Federal 
                Government, or services assisted or subsidized to any 
                significant extent by the Federal Government, may not 
                be included in determining the amount of such non-
                Federal contributions.
                    ``(B) The Secretary may not make a grant under 
                subsection (a) unless the State involved agrees that--
                            ``(i) for the first fiscal year of payments 
                        under the grant, 100 percent or less of the 
                        non-Federal contributions required in paragraph 
                        (1) will be provided in the form of in-kind 
                        contributions;
                            ``(ii) for any second fiscal year of such 
                        payments, not more than 50 percent of such non-
                        Federal contributions will be provided in the 
                        form of in-kind contributions; and
                            ``(iii) for any third fiscal year of such 
                        payments, such non-Federal contributions will 
                        be provided solely in the form of cash.
    ``(c) Certain Required Activities.--The Secretary may not make a 
grant under subsection (a) unless the State involved agrees that 
activities carried out by an office operated pursuant to such 
subsection will include--
            ``(1) coordinating the activities carried out in the State 
        that relate to emergency medical services;
            ``(2) activities regarding the matters described in 
        paragraphs (1) through (4) section 1201(b);
            ``(3) identifying Federal and State programs regarding 
        emergency medical services and providing technical assistance 
        to public and nonprofit private entities regarding 
        participation in such programs.
    ``(d) Requirement Regarding Annual Budget for Office.--The 
Secretary may not make a grant under subsection (a) unless the State 
involved agrees that, for any fiscal year for which the State receives 
such a grant, the office operated pursuant to subsection (a) will be 
provided with an annual budget of not less than $50,000.
    ``(e) Certain Uses of Funds.--
            ``(1) Restrictions.--The Secretary may not make a grant 
        under subsection (a) unless the State involved agrees that--
                    ``(A) if research with respect to emergency medical 
                services is conducted pursuant to the grant, not more 
                than 10 percent of the grant will be expended for such 
                research; and
                    ``(B) the grant will not be expended to provide 
                emergency medical services (including providing cash 
                payments regarding such services).
            ``(2) Establishment of office.--Activities for which a 
        State may expend a grant under subsection (a) include paying 
        the costs of establishing an office of emergency medical 
        services for purposes of such subsection.
    ``(f) Reports.--The Secretary may not make a grant under subsection 
(a) unless the State involved agrees to submit to the Secretary reports 
containing such information as the Secretary may require regarding 
activities carried out under this section by the State.
    ``(g) Requirement of Application.--The Secretary may not make a 
grant under subsection (a) unless an application for the grant is 
submitted to the Secretary and the application is in such form, is made 
in such manner, and contains such agreements, assurances, and 
information as the Secretary determines to be necessary to carry out 
this section.''.

SEC. 1523. PROGRAMS FOR RURAL AREAS.

    (a) In General.--Title XII of the Public Health Service Act, as 
amended by section 1522, is amended--
            (1) by transferring section 1204 to part A;
            (2) by redesignating such section as section 1203;
            (3) by inserting such section after section 1202; and
            (4) in section 1203 (as so redesignated)--
                    (A) by redesignating subsection (c) as subsection 
                (d); and
                    (B) by inserting after subsection (b) the following 
                new subsection:
    ``(c) Demonstration Program Regarding Telecommunications.--
            ``(1) Linkages for rural facilities.--Projects under 
        subsection (a)(1) shall include demonstration projects to 
        establish telecommunications between rural medical facilities 
        and medical facilities that have expertise or equipment that 
        can be utilized by the rural facilities through the 
        telecommunications.
            ``(2) Modes of communication.--The Secretary shall ensure 
        that the telecommunications technologies demonstrated under 
        paragraph (1) include interactive video telecommunications, 
        static video imaging transmitted through the telephone system, 
        and facsimiles transmitted through such system.''.
    (b) Conforming Amendment.--Section 1203 of the Public Health 
Service Act, as redesignated by subsection (a)(2) of this section, is 
amended in the heading for the section by striking ``establishment'' 
and all that follows and inserting ``programs for rural areas.''.

SEC. 1524. FUNDING.

    Title XII of the Public Health Service Act, as amended by the 
preceding provisions of this title, is amended--
            (1) by redesignating parts C through F as parts D through 
        G, respectively;
            (2) by inserting after subpart III of part B the following:

                          ``Part C--Funding'';

            (3) by transferring section 1239 to part C (as so added); 
        and
            (4) in such section, by striking subsections (a) and (b) 
        and inserting the following:
    ``(a) Emergency Medical Services Generally.--
            ``(1) In general.--For the purpose of carrying out section 
        1201 other than with respect to trauma care, there are 
        authorized to be appropriated $2,000,000 for fiscal year 1995, 
        and such sums as may be necessary for each of the fiscal years 
        1996 and 1997.
            ``(2) State offices.--For the purpose of carrying out 
        section 1202, there are authorized to be appropriated 
        $3,000,000 for fiscal year 1995, and such sums as may be 
        necessary for each of the fiscal years 1996 and 1997.
            ``(3) Certain telecommunications demonstrations.--For the 
        purpose of carrying out section 1203(c), there are authorized 
        to be appropriated $10,000,000 for fiscal year 1995 and such 
        sums as may be necessary for each of the fiscal years 1996 and 
        1997.
    ``(b) Trauma Care and Certain Other Activities.--
            ``(1) In general.--For the purpose of carrying out part B, 
        section 1201 with respect to trauma care, and section 1203 
        (other than subsection (c) of such section), there are 
        authorized to be appropriated $60,000,000 for fiscal year 1995, 
        and such sums as may be necessary for each of the fiscal years 
        1996 and 1997.
            ``(2) Allocation of funds by secretary.--
                    ``(A) For the purpose of carrying out subpart I of 
                part B, section 1201 with respect to trauma care, and 
                section 1203 (other than subsection (c) of such 
                section), the Secretary shall make available 10 percent 
                of the amounts appropriated for a fiscal year under 
                paragraph (1).
                    ``(B) For the purpose of carrying out section 1203 
                (other than subsection (c) of such section), the 
                Secretary shall make available 10 percent of the 
                amounts appropriated for a fiscal year under paragraph 
                (1).
                    ``(C)(i) For the purpose of making allotments under 
                section 1221(a), the Secretary shall, subject to 
                subsection (c), make available 80 percent of the 
                amounts appropriated for a fiscal year under paragraph 
                (1).
                    ``(ii) Amounts paid to a State under section 
                1221(a) for a fiscal year shall, for the purposes for 
                which the amounts were paid, remain available for 
                obligation until the end of the fiscal year immediately 
                following the fiscal year for which the amounts were 
                paid.''.

SEC. 1525. CONFORMING AMENDMENTS.

    Title XII of the Public Health Service Act, as amended by the 
preceding provisions of this title, is amended--
            (1) in section 1203(b), by striking ``1214(c)(1)'' and 
        inserting ``1224(c)(1)'';
            (2) in section 1211(b)(3), by striking ``1213(c)'' and 
        inserting ``1223(c)'';
            (3) in section 1221--
                    (A) in subsection (a)--
                            (i) by striking ``1218'' and inserting 
                        ``1228''; and
                            (ii) by striking ``1217'' and inserting 
                        ``1227''; and
                    (B) in subsection (b)--
                            (i) by striking ``1233'' and inserting 
                        ``1237''; and
                            (ii) by striking ``1213'' and inserting 
                        ``1223'';
            (4) in section 1222--
                    (A) in subsection (a)--
                            (i) in paragraph (1), by striking 
                        ``1211(a)'' and inserting ``1221(a)''; and
                            (ii) in paragraph (2)(A), by striking 
                        ``1211(c)'' and inserting ``1221(c)''; and
                    (B) in subsection (b), by striking ``1211(a)'' and 
                inserting ``1221(a)'';
            (5) in section 1223--
                    (A) in subsection (a), by striking ``1211(b)'' and 
                inserting ``1221(b)'';
                    (B) in subsection (b)--
                            (i) in paragraph (1), by striking 
                        ``1211(a)'' and inserting ``1221(a)''; and
                            (ii) in paragraph (3), by striking 
                        ``1211(a)'' and inserting ``1221(a)''; and
                    (C) in subsection (d), by striking ``1211(a)'' and 
                inserting ``1221(a)'';
            (6) in section 1224--
                    (A) in each of subsections (a) through (c), by 
                striking ``1211(a)'' and inserting ``1221(a)''; and
                    (B) in subsection (b), by striking ``1213(a)(7)'' 
                and inserting ``1223(a)(7)'';
            (7) in section 1225--
                    (A) in subsection (a)--
                            (i) by striking ``1211(a)'' and inserting 
                        ``1221(a)''; and
                            (ii) by striking ``1233'' and inserting 
                        ``1237''; and
                    (B) in subsection (b), by striking ``1211(b)'' and 
                inserting ``1221(b)'';
            (8) in section 1226, in each of subsections (a) through 
        (c), by striking ``1211(a)'' and inserting ``1221(a)'';
            (9) in section 1227--
                    (A) by striking ``1211(a)'' and inserting 
                ``1221(a)''; and
                    (B) by striking ``1214'' and inserting ``1224'';
            (10) in section 1228--
                    (A) in each of subsections (a) through (c), by 
                striking ``1211(a)'' each place such term appears and 
                inserting ``1221(a)'';
                    (B) in subsection (b), in each of paragraphs (2)(A) 
                and (3)(A), by striking ``1232(a)'' and inserting 
                ``1239(a)''; and
                    (C) in subsection (c)(2)--
                            (i) by striking ``1232(b)(3)'' and 
                        inserting ``1239(b)(3)''; and
                            (ii) by striking ``1217'' and inserting 
                        ``1227'';
            (11) in section 1229(a), by striking ``1211(a)'' each place 
        such term appears and inserting ``1221(a)'';
            (12) in section 1230(a), by striking ``1211(a)'' each place 
        such term appears and inserting ``1221(a)'';
            (13) in section 1231--
                    (A) in each of subsections (a) and (b), by striking 
                ``1211(a)'' each place such term appears and inserting 
                ``1221(a)''; and
                    (B) in each of subsections (a) and (b), by striking 
                ``1211(b)'' and inserting ``1221(b)'';
            (14) in section 1232, by striking ``1211'' and inserting 
        ``1221'';
            (15) in section 1236--
                    (A) in the matter preceding paragraph (1), by 
                striking ``this title'' and inserting ``this part''; 
                and
                    (B) in paragraph (1), by striking ``1213'' and 
                inserting ``1223'';
            (16) in section 1237--
                    (A) in each of subsections (a) and (b), by striking 
                ``1211'' each place such term appears and inserting 
                ``1221'';
                    (B) in subsection (b)--
                            (i) by striking ``part B'' and inserting 
                        ``subpart II''; and
                            (ii) by striking ``1214(c)(1)'' and 
                        inserting ``1224(c)(1)''; and
                    (C) in subsection (c), by striking ``1213'' and 
                inserting ``1223''; and
            (17) in section 1239(c)(1)--
                    (A) by striking ``1211(a)'' and inserting 
                ``1221(a)'';
                    (B) by striking ``1218(a)(2)'' and inserting 
                ``1228(a)(2)''; and
                    (C) by striking ``part B'' and inserting ``subpart 
                II''.

SEC. 1526. EFFECTIVE DATE.

    The amendments made by this part shall take effect October 1, 1994, 
or upon the date of the enactment of this Act, whichever occurs later.

            PART 4--ADDITIONAL RURAL HEALTH CARE PROVISIONS

SEC. 1531. DEVELOPMENT OF COMMUNITY-OPERATED HEALTH PLANS IN RURAL AND 
              FRONTIER AREAS.

    (a) Community-Operated Health Plans.--The Secretary of Health and 
Human Services (in this part referred to as the ``Secretary'') may make 
grants to public and nonprofit private entities for the purpose of 
carrying out projects to develop health plans to provide services 
exclusively in rural and frontier areas.
    (b) Community Involvement.--The Secretary may make a grant under 
subsection (a) only if the applicant involved meets the following 
conditions:
            (1) In developing the proposal of the applicant for a 
        project under such subsection, the applicant has consulted with 
        the local governments of the geographic area to be served by 
        the health plan developed through the project, with individuals 
        who reside in the area, and with a reasonable number and 
        variety of health professionals who provide services in the 
        area.
            (2) The applicant agrees that the principal legal authority 
        over the operation of the health plan will be vested in 
        individuals who reside in such geographic area.
            (3) In the proposal the applicant specifies how a full 
        continuum of services will be provided.
            (4) In the proposal the applicant specifies how the 
        proposed health plan will utilize existing health care 
        facilities in a manner that avoids unnecessary duplication.
    (c) Use of Funds.--
            (1) In general.--Funds made available under this section 
        may be used for the following:
                    (A) To develop integrated health networks, 
                utilizing existing local providers and facilities where 
                appropriate, with community involvement.
                    (B) For information systems, including 
                telecommunications.
                    (C) For transportation services.
                    (D) To develop rural emergency access care 
                hospitals (as defined in section 1861(oo)(1) of the 
                Social Security Act, as added by section 1501).
            (2) Limitations.--Funds made available under this section 
        shall not be used for the following:
                    (A) For a telecommunications system, unless the 
                system is coordinated with, and does not duplicate, 
                such a system existing in the area.
                    (B) For paying off existing debt.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated $25,000,000 in each of fiscal years 1996, 1997, and 1998 
to carry out this section.

SEC. 1532. PRIMARY HEALTH CARE FOR MEDICALLY UNDERSERVED RURAL 
              COMMUNITIES; INCREASED CAPACITY OF HOSPITALS AND 
              OUTPATIENT FACILITIES.

    (a) In General.--The Secretary may make grants to public and 
nonprofit private hospitals in medically underserved rural communities, 
and to public and nonprofit outpatient facilities in such communities, 
for the purpose of carrying out projects to develop or increase the 
capacity of the hospitals and facilities to provide primary health 
services.
    (b) Medically Underserved Rural Community.--For purposes of this 
section, the term ``medically underserved rural community'' means--
            (1) a rural area that has a substantial number of 
        individuals who are members of a medically underserved 
        population, as defined in section 330 of the Public Health 
        Service Act; or
            (2) a rural area a significant portion of which is a health 
        professional shortage area designated under section 332 of such 
        Act.
    (c) Certain Expenditures.--The purposes for which the Secretary may 
authorize a grant under subsection (a) to be expended include the 
renovation of facilities, the purchase of equipment, and the training 
of personnel.
    (d) Authorization of Appropriations.--
            (1) Hospitals.--There are authorized to be appropriated 
        $50,000,000 in each of fiscal years 1996, 1997, and 1998 for 
        the purpose of making grants to hospitals under subsection (a).
            (2) Outpatient facilities.--There are authorized to be 
        appropriated $25,000,000 in each of fiscal years 1996, 1997, 
        and 1998 for the purpose of making grants to outpatient 
        facilities under subsection (a).

SEC. 1533. INNOVATIVE APPROACHES TO DELIVERY OF HEALTH SERVICES IN 
              RURAL AREAS.

    (a) In General.--The Secretary, acting through the Administrator 
for Health Care Policy and Research, may make grants to public and 
nonprofit private entities for the purposes of conducting research and 
carrying out demonstration projects to develop innovative approaches to 
the delivery of health care in rural areas, such as the use of 
telemedicine and the use of mobile delivery units.
    (b) Authorization of Appropriations.--There are authorized to be 
appropriated $15,000,000 in each of fiscal years 1996 through 2000 to 
carry out this section.

SEC. 1534. TRAINING OF RURAL HEALTH PROFESSIONALS OTHER THAN 
              PHYSICIANS.

    (a) Funding for Programs Under Public Health Service Act.--With 
respect to programs of title VII or VIII of the Public Health Service 
Act that provide for the training of individuals as health 
professionals other than physicians, there are authorized to be 
appropriated, in addition to amounts otherwise authorized to be 
appropriated, $50,000,000 in each of fiscal years 1996 through 2000 for 
the purpose of the Secretary carrying out such programs through 
entities described in subsection (b).
    (b) Eligibility.--With respect to a program referred to in 
subsection (a), an entity described in this subsection is an entity--
            (1) that is eligible to receive grants or contracts under 
        the program (as provided in the applicable provisions of title 
        VII or VIII of the Public Health Service Act); and
            (2) a substantial number of whose designated graduates are 
        providing health services in a rural area.
    (c) Definition of Designated Graduate.--For purposes of this 
section, the term ``designated graduate'', with respect to an entity, 
means an individual completing the training involved during the 5-year 
period preceding the fiscal year for which the entity is applying to 
receive a grant or contract under the applicable program referred to in 
subsection (a).
    (d) Relationship to Other Funds.--The amounts made available in 
subsection (a) for carrying out programs referred to in such subsection 
are in addition to any other amounts that are available for carrying 
out the programs.

SEC. 1535. GENERAL PROVISIONS.

    (a) Application for Grant.--The Secretary may make a grant under 
any section of this part only if an application for the grant is 
submitted to the Secretary and the application is in such form, is made 
in such manner, and contains such agreements, assurances, and 
information as the Secretary determines to be necessary to carry out 
the program involved.
    (b) Technical Assistance.--The Secretary may provide technical 
assistance to recipients of grants or contracts under this part with 
respect to the planning, development, and operation of activities under 
the grants or contracts.

   Subtitle G--Assistance in Enrolling Uninsured Children in Health 
                               Insurance

SEC. 1601. ESTABLISHMENT OF STATE PROGRAMS.

    (a) Medicaid State Plan Requirement.--Section 1902(a) of the Social 
Security Act (42 U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(63) provide for a State program furnishing premium 
        subsidies for needy children in accordance with section 
        1932.''.
    (b) State Programs for Premium Subsidies for Needy Children.--Title 
XIX of the Social Security Act (42 U.S.C. 1396 et seq.) is amended by 
redesignating section 1931 as section 1932 and by inserting after 
section 1930 the following new section:

          ``state premium subsidy programs for needy children

    ``Sec. 1932. (a) Requirement to Operate State Program.--
            ``(1) In general.--A State with a State plan approved under 
        this title shall have in effect a premium subsidy program for 
        furnishing premium subsidy under subsection (b) to premium 
        subsidy eligible children in the State in fiscal years 
        beginning with fiscal year 1998.
            ``(2) Designation of state agency.--A State may designate 
        any appropriate State agency to administer the program under 
        this section.
    ``(b) Assistance With Premiums for Standard Health Coverage.--
            ``(1) Eligibility.--
                    ``(A) In general.--An eligible individual who has 
                been determined by a State to be a premium subsidy 
                eligible child (as defined in paragraph (2)) shall be 
                entitled to premium subsidies in the amount determined 
                under subsection (b).
                    ``(B) Premium subsidy eligible child.--For purposes 
                of this section, the term `premium subsidy eligible 
                child' means an individual--
                            ``(i) under 19 years of age,
                            ``(ii) whose family has a family income 
                        determined under this section which does not 
                        exceed 185 percent (or such lesser percent as 
                        the Secretary may specify for a fiscal year, 
                        based on available funds during such fiscal 
                        year) of the poverty line, and
                            ``(iii) except as provided in subparagraph 
                        (C), who is not otherwise eligible for medical 
                        assistance under the State plan (or would be 
                        eligible for such assistance on the basis of 
                        the plan in effect as of the date of the 
                        enactment of the Affordable Health Care Now Act 
                        of 1994).
                    ``(C) Eligibility of children becoming eligible for 
                medicaid.--At the option of the State, a premium 
                subsidy eligible child may include an individual who 
                meets the requirements of clauses (i) and (ii) of 
                subparagraph (B) and is eligible for medical assistance 
                under the State plan if the individual was formerly a 
                premium subsidy eligible child under subparagraph (B).
                    ``(D) Additional children using state-only funds.--
                Nothing in this section shall be construed as 
                preventing a State, using its own funds and without any 
                Federal financial participation, from covering 
                additional children as premium subsidy eligible 
                children.
    ``(c) Amount of Premium Subsidy.--
            ``(1) In general.--
                    ``(A) In general.--The premium subsidy amount 
                determined under this paragraph is a monthly amount 
                equal to the subsidy percentage of \1/12\th of the 
                lesser of--
                            ``(i) the annual premium for certified 
                        standard health coverage provided the child, or
                            ``(ii) the actuarial value of the standard 
                        option, nationwide service benefit plan (taking 
                        into account cost sharing) made available under 
                        chapter 89 of title, United States Code for the 
                        year, adjusted to reflect a premium for a 
                        single child of the age involved and adjusted 
                        to reflect the relative cost of premiums for 
                        health coverage of premium subsidy eligible 
                        children in the geographic area in which the 
                        child resides compared to the national average.
                    ``(B) Subsidy percentage.--For purposes of 
                paragraph (1), an individual's `subsidy percentage' 
                means 100 percent reduced (but not below zero percent) 
                by 0.85 percentage points for each percentage point (or 
                portion thereof) such individual's income equals or 
                exceeds 100 percent of the poverty line.
    ``(d) Payments.--
            ``(1) In general.--The amount of the premium subsidy 
        available to a premium subsidy eligible child under subsection 
        (b) shall be paid by the State in which the individual resides 
        directly to the insurer that provides the coverage for the 
        premium subsidy eligible child. Payments under the preceding 
        sentence shall commence in the first month during which the 
        individual is provided coverage and determined under this 
        section to be a premium subsidy eligible child.
            ``(2) Administrative errors.--A State is financially 
        responsible for premium subsidy paid based on an eligibility 
        determination error to the extent the State's error rate for 
        eligibility determinations exceeds a maximum permissible error 
        rate to be specified by the Secretary.
    ``(e) Eligibility Determinations.--
            ``(1) In general.--The Secretary shall promulgate 
        regulations specifying requirements for State programs under 
        this section with respect to determining eligibility for 
        premium subsidy, including requirements with respect to--
                    ``(A) application procedures;
                    ``(B) information verification procedures;
                    ``(C) timeliness of eligibility determinations;
                    ``(D) procedures for applicants to appeal adverse 
                decisions; and
                    ``(E) any other matters determined appropriate by 
                the Secretary.
            ``(2) Specifications for regulations.--The regulations 
        promulgated by the Secretary under paragraph (1) shall include 
        the following requirements:
                    ``(A) Frequency of applications.--A State program 
                shall provide that an individual may file an 
                application for assistance with an agency designated by 
                the State at any time, in person or by mail.
                    ``(B) Application form.--A State program shall 
                provide for the use of an application form developed by 
                the Secretary under this section.
                    ``(C) Distribution of Applications.--A State 
                program shall distribute applications for assistance 
                through employers and appropriate public agencies.
                    ``(D) Requirement to submit revised application.--A 
                State program shall, in accordance with regulations 
                promulgated by the Secretary, require individuals to 
                submit revised applications during a year to reflect 
                changes in estimated family incomes, including changes 
                in employment status of family members, during the 
                year. The State shall revise the amount of any premium 
                subsidy based on such a revised application.
                    ``(E) Verification.--A State program shall provide 
                for verification of the information supplied in 
                applications under this section. Such verification may 
                include examining return information disclosed to the 
                State for such purpose under section 6103(l)(15) of the 
                Internal Revenue Code of 1986.
    ``(f) Administration of State Programs.--
            ``(1) In general.--The Secretary shall establish standards 
        for States operating programs under this section which ensure 
        that such programs are operated in a uniform manner with 
        respect to application procedures, data processing systems, and 
        such other administrative activities as the Secretary 
        determines to be necessary.
            ``(2) Application forms.--The Secretary shall develop an 
        application form for assistance which shall--
                    ``(A) be simple in form and understandable to the 
                average individual;
                    ``(B) require the provision of information 
                necessary to make a determination as to whether an 
                individual is a premium subsidy eligible child 
                including a declaration of estimated income by the 
                individual based, at the election of the individual--
                            ``(i) on multiplying by a factor of 4 the 
                        individual's family income for the 3-month 
                        period immediately preceding the month in which 
                        the application is made, or
                            ``(ii) on estimated income for the entire 
                        year for which the application is submitted; 
                        and
                    ``(C) require attachment of such documentation as 
                deemed necessary by the Secretary in order to ensure 
                eligibility for assistance.
            ``(3) Outreach activities.--A State operating a program 
        under this section shall conduct such outreach activities as 
        the Secretary determines appropriate.
            ``(4) Effectiveness of eligibility for premium subsidies.--
        A determination by a State that an individual is a premium 
        subsidy eligible child shall be effective for the calendar year 
        for which such determination is made unless a revised 
        application submitted under paragraph (2) indicates that an 
        individual is no longer eligible for premium subsidies.
            ``(5) Penalties for material misrepresentations.--
                    ``(A) In general.--Any individual who knowingly 
                makes a material misrepresentation of information in an 
                application for assistance under this section shall be 
                liable to the Federal Government for the amount of any 
                premium subsidy received by individual on the basis of 
                a misrepresentation and interest on such amount at a 
                rate specified by the Secretary, and shall, in 
                addition, be liable to the Federal Government for 
                $2,000 or, if greater, 3 times the amount any premium 
                subsidy received by individual on the basis of a 
                misrepresentation.
                    ``(B) Collection of penalty amounts.--A State which 
                receives an application for assistance with respect to 
                which a material misrepresentation has been made shall 
                collect the penalty amount required under subparagraph 
                (A) and submit 50 percent of such amount to the 
                Secretary in a timely manner.
    ``(g) End-of-Year Reconciliation for Premium Subsidy.--
            ``(1) In general.--
                    ``(A) Requirement to file statement.--An individual 
                who received premium subsidies under this section from 
                a State for any month in a calendar year shall file 
                with the State an income reconciliation statement to 
                verify the individual's family income for the year. 
                Such a statement shall be filed at such time, and 
                contain such information, as the State may specify in 
                accordance with regulations promulgated by the 
                Secretary.
                    ``(B) Notice of requirement.--A State shall provide 
                a written notice of the requirement under subparagraph 
                (A) at the end of the year to an individual who 
                received premium subsidies under this part from such 
                State in any month during the year.
            ``(2) Reconciliation of premium subsidy based on actual 
        income.--
                    ``(A) In general.--Based on and using the income 
                reported in the reconciliation statement filed under 
                paragraph (1) with respect to an individual, the State 
                shall compute the amount of premium subsidy that should 
                have been provided under this section with respect to 
                the individual for the year involved.
                    ``(B) Overpayment of assistance.--If the total 
                amount of the premium subsidy provided was greater than 
                the amount computed under subparagraph (A), the 
                individual is liable to the State to pay an amount 
                equal to the amount of the excess payment. Any amount 
                collected by a State under this subparagraph shall be 
                submitted to the Secretary in a timely manner.
                    ``(C) Underpayment of assistance.--If the total 
                amount of the premium subsidy provided was less than 
                the amount computed under subparagraph (A), the State 
                shall pay to the individual an amount equal to the 
                amount of the deficit.
                    ``(D) State option.--A State may, in accordance 
                with regulations promulgated by the Secretary, 
                establish a procedure under which any overpayments or 
                underpayments of premium subsidy determined under 
                subparagraphs (A) and (B) with respect to an individual 
                for a year may be collected or paid, as appropriate, 
                through adjustments to the premium subsidy furnished to 
                such individual in the succeeding year.
            ``(3) Verification.--Each State may use such information as 
        it has available to verify income of individuals with 
        applications filed under this section, including return 
        information disclosed to the state for such purpose under 
        section 6103(l)(15) of the internal revenue code of 1986.
            ``(4) Penalties for failure to file.--In the case of an 
        individual who is required to file a statement under this 
        subsection in a year who fails to file such a statement by such 
        date as the Secretary shall specify in regulations, the entire 
        amount of the premium subsidy provided in such year shall be 
        considered an excess amount under paragraph (2)(A) and such 
        individual shall not be eligible for premium subsidy assistance 
        under this section until such statement is filed. A State, 
        using rules established by the Secretary, shall waive the 
        application of this paragraph if the individual establishes, to 
        the satisfaction of the State under such rules, good cause for 
        the failure to file the statement on a timely basis.
            ``(5) Penalties for false information.--Any individual who 
        provides false information in a statement filed under paragraph 
        (1) is subject to the same penalties as are provided under 
        subsection (f)(5) for a misrepresentation of material fact 
        described in such section.
    ``(h) Special Rules on Federal Financial Participation.--
            ``(1) Premium subsidy.--In applying section 1903(a)(1) with 
        respect to expenditures for premium subsidy (other than 
        administrative expenses) under this section--
                    ``(A) such expenditures shall be considered to be 
                expenditures on medical assistance;
                    ``(B) in the case of assistance for a premium 
                subsidy eligible child not described in subsection 
                (b)(1)(C), the Federal medical assistance percentage is 
                deemed to be 100 percent, and
                    ``(C) the total amount of Federal financial 
                participation with respect to any State for quarters in 
                any fiscal year shall not exceed the State allotment 
                under subsection (i)(2) for that year.
            ``(2) Administration expenses.--The amount of expenditures 
        that may be taken into account in computing amounts that are 
        payable to a State under section 1903(a) (other than paragraph 
        (1)) with respect to the administration of the program under 
        this section may not exceed 3 percent of the total expenditures
    ``(i) Total Federal Budget for Program; Allotments to States.--
            ``(1) Total federal budget.--
                    ``(A) Fiscal years 1998 through 2004.--Subject to 
                subparagraph (E)(iii), for purposes of this section, 
                the total Federal payments to States under this section 
                may not exceed the following:
                            ``(i) For fiscal year 1998, $5.2 billion.
                            ``(ii) For fiscal year 1999, $7.0 billion.
                            ``(iii) For fiscal year 2000, $10.0 
                        billion.
                            ``(iv) For fiscal year 2001, $11.3 billion.
                            ``(v) For fiscal year 2002, $15.3 billion.
                            ``(vi) For fiscal year 2003, $18.0 billion.
                            ``(vii) For fiscal year 2004, $22.4 
                        billion.
                    ``(B) Subsequent fiscal years.--For purposes of 
                this section, the total Federal budget for State plans 
                under this part for each fiscal year after fiscal year 
                2004 is the total Federal budget under this subsection 
                for the preceding fiscal year multiplied by the 
                Secretary's estimate of the percentage increase in 
                private sector health expenditures for the year.
            ``(2) Allotments to states.--
                    ``(A) In general.--The amount of a State's 
                allotment under this section for a fiscal year shall be 
                equal to the product of--
                            ``(i) the limit on the total amount of 
                        Federal payments for the year under paragraph 
                        (1)(A); and
                            ``(ii) the State's allotment percentage 
                        under subparagraph (B).
                    ``(B) State allotment percentage.--In subparagraph 
                (A), a State's allotment percentage for a fiscal year 
                is equal to the percentage of all premium subsidy 
                eligible children in the United States who are 
                residents of the State (as estimated by the Secretary 
                prior to the beginning of the fiscal year).
    ``(j) Certified Standard Health Coverage Defined.--
            ``(1) In general.--In this section, health insurance 
        coverage is considered to provide certified standard health 
        coverage if--
                    ``(A) benefits under such coverage are provided 
                within at least each of the required categories of 
                benefits described in subparagraph (A) of paragraph (2) 
                and consistent with such paragraph;
                    ``(B) the actuarial value of the benefits meets the 
                requirements of paragraph (3),
                    ``(C) the benefits comply with the minimum 
                requirements specified in paragraph (4), and
                    ``(D) the benefits do not violate the anti-
                discrimination rules described in paragraph (5).
            ``(2) Required categories of covered benefits.--
                    ``(A) In general.--The categories of covered 
                benefits described in this subparagraph are the types 
                of benefits specified in subparagraphs (A), (B), (C), 
                (D), and (F) of paragraph (1), and subparagraphs (E) 
                and (F) of paragraph (2), of section 8904(a) of title 
                5, United States Code (relating to types of benefits 
                required to be in health insurance offered to Federal 
                employees).
                    ``(B) Coverage of off-label use.--An off-label use 
                for a drug that has been found to be safe and effective 
                under section 505 of the Federal Food, Drug, and 
                Cosmetic Act shall be covered if the medical indication 
                for which it is used is listed in one of the following 
                3 compendia: the American Hospital Formulary Service-
                Drug Information, the American Medical Association Drug 
                Evaluations, and the United States Pharmacopeia-Drug 
                Information.
                    ``(C) No coverage of specific treatment, 
                procedures, or classes required.--Nothing in this 
                subsection may be construed to require the coverage of 
                any specific procedure or treatment or class of service 
                in certified standard health coverage under this Act or 
                through regulation.
            ``(3) Standard actuarial value.--
                    ``(A) In general.--The actuarial value of the 
                benefits under standard coverage in a rating area meets 
                the requirements of this paragraph if such value is 
                equivalent to the standard actuarial value described in 
                subparagraph (B) for the area, as adjusted for 
                inflation under subparagraph (D). The actuarial value 
                of benefits under standard coverage shall be determined 
                using the standardized population and set of 
                standardized utilization and cost factors described in 
                subparagraph (C).
                    ``(B) Standard actuarial value described.--The 
                standard actuarial value described in this subparagraph 
                for coverage in a geographic area is the actuarial 
                value of benchmark coverage during 1994 in such area. 
                Such actuarial value shall be determined using the 
                standardized population and set of standardized 
                utilization and cost factors described in subparagraph 
                (C).
                    ``(C) Adjustments for standardized population, 
                standardized utilization and cost factors, and 
                geographic area.--The adjustment under this 
                subparagraph--
                            ``(i) for a standardized population shall 
                        be made by not taking into account individuals 
                        65 years of age or older, employees of the 
                        United States Postal Service, and retirees; and
                            ``(ii) for a geographic area shall be made 
                        in a manner that reflects the ratio of the 
                        actuarial value of benchmark coverage in such 
                        geographic area (as adjusted under clause (i)) 
                        to such actuarial value for such benchmark 
                        coverage for the United States as a whole, 
                        taking into account standardized actuarial 
                        utilization and cost factors.
                    ``(D) Adjustment for inflation.--
                            ``(i) In general.--The adjustment under 
                        this paragraph for a year (beginning with 1995) 
                        is the FEHBP national rolling increase 
                        percentage for the year involved, compounded by 
                        such increase for each preceding year after 
                        1994.
                            ``(ii) FEHBP national rolling increase 
                        percentage.--For purposes of this paragraph, 
                        the term ``FEHBP national rolling increase 
                        percentage'' means, for a year, the 5-year 
                        average of the annual national percentage 
                        increase in the premiums for health plans 
                        offered under the Federal Employees Health 
                        Benefits Program (under chapter 89 of title 5, 
                        United States Code) for the period ending with 
                        the previous year. Such increase shall be 
                        determined by the Secretary in consultation 
                        with the Director of Office of Personnel 
                        Management based on the best information 
                        available.
            ``(4) Minimum requirements.--Benefits offered under 
        standard coverage within any category shall be not less than 
        the narrowest scope and shortest duration of benefits within 
        that category, in an approved health benefits plan under 
        chapter 89 of title 5, United States Code, except that under 
        such coverage--
                    ``(A) no cost-sharing may be imposed for preventive 
                services (as specified by the Secretary); and
                    ``(B) any cost-sharing imposed for other items and 
                services may only be nominal.
    ``(k) Definitions; Determinations of Income.--For purposes of this 
part:
            ``(1) Determinations of income.--
                    ``(A) Family income.--The term `family income' 
                means, with respect to an individual who--
                            ``(i) is not a dependent (as defined in 
                        subparagraph (B)) of another individual, the 
                        sum of the modified adjusted gross incomes (as 
                        defined in subparagraph (D)) for the 
                        individual, the individual's spouse, and 
                        dependents of the individual; or
                            ``(ii) is a dependent of another 
                        individual, the sum of the modified adjusted 
                        gross incomes for the other individual, the 
                        other individual's spouse, and dependents of 
                        the other individual.
                    ``(B) Dependent.--The term `dependent' shall have 
                the meaning given such term under paragraphs (1) or (2) 
                of section 152(a) of the Internal Revenue Code of 1986.
                    ``(C) Special rule for foster children.--For 
                purposes of subparagraph (A), a child who is placed in 
                foster care by a State agency shall not be considered a 
                dependent of another individual.
                    ``(D) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income (as defined in section 62(a) of the Internal 
                Revenue Code of 1986)--
                            ``(i) determined without regard to sections 
                        135, 162(l), 911, 931, and 933 of such Code, 
                        and
                            ``(ii) increased by--
                                    ``(I) the amount of interest 
                                received or accrued by the individual 
                                during the taxable year which is exempt 
                                from tax, and
                                    ``(II) the amount of the social 
                                security benefits (as defined in 
                                section 86(d) of such Code) received 
                                during the taxable year to the extent 
                                not included in gross income under 
                                section 86 of such Code.
                The determination under the preceding sentence shall be 
                made without regard to any carryover or carryback.
            ``(2) Eligible Individual.--
                    ``(A) In general.--The term `eligible individual' 
                means an individual who is residing in the United 
                States and who is--
                            ``(i) a citizen or national of the United 
                        States; or
                            ``(ii) an alien permanently residing in the 
                        United States under color of law (as defined in 
                        subparagraph (C)).
                    ``(B) Exclusion.--The term `eligible individual' 
                shall not include an individual who is an inmate of a 
                public institution (except as a patient of a medical 
                institution).
                    ``(C) Alien permanently residing in the united 
                states under color of law.--The term `alien permanently 
                residing in the United States under color of law' means 
                an alien lawfully admitted for permanent residence 
                (within the meaning of section 101(a)(20) of the 
                Immigration and Nationality Act), and includes any of 
                the following:
                            ``(i) An alien who is admitted as a refugee 
                        under section 207 of the Immigration and 
                        Nationality Act.
                            ``(ii) An alien who is granted asylum under 
                        section 208 of such Act.
                            ``(iii) An alien whose deportation is 
                        withheld under section 243(h) of such Act.
                            ``(iv) An alien who is admitted for 
                        temporary residence under section 210, 210A, or 
                        245A of such Act.
                            ``(v) An alien who has been paroled into 
                        the United States under section 212(d)(5) of 
                        such Act for an indefinite period or who has 
                        been granted extended voluntary departure as a 
                        member of a nationality group.
                            ``(vi) An alien who is the spouse or 
                        unmarried child under 21 years of age of a 
                        citizen of the United States, or the parent of 
                        such a citizen if the citizen is over 21 years 
                        of age, and with respect to whom an application 
                        for adjustment to lawful permanent residence is 
                        pending.
            ``(3) Poverty line.--The term `poverty line' means the 
        income official poverty line (as defined by the Office of 
        Management and Budget, and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981) that--
                    ``(A) in the case of a family of less than five 
                individuals, is applicable to a family of the size 
                involved; and
                    ``(B) in the case of a family of more than four 
                individuals, is applicable to a family of four persons.
            ``(4) Premium.--Any reference to the term `premium' 
        includes a reference to premium equivalence for self-insured 
        plans.''.

                      Subtitle H--Medicaid Reform

 PART 1--STATE FLEXIBILITY IN THE MEDICAID PROGRAM: THE MEDICAL HEALTH 
                           ALLOWANCE PROGRAM

SEC. 1701. ESTABLISHMENT OF PROGRAM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.), as amended by section 1601, is further amended--
            (1) by redesignating section 1932 as section 1933; and
            (2) by inserting after section 1931 the following new 
        section:

                   ``state health allowance programs

    ``Sec. 1932. (a) Treatment of Expenditures Under Health Allowance 
Programs as Medical Assistance Under State Plan.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, for purposes of determining the amount to be paid 
        to a State under section 1903(a)(1) for quarters in any fiscal 
        year, amounts expended by an eligible State (as described in 
        subsection (b)) during the fiscal year under a State health 
        allowance program (as described in subsection (c)) shall be 
        included in the total amount expended during the fiscal year as 
        medical assistance under the State plan (except as provided 
        under paragraphs (2) and (3) and under subsection (d)(1)(C)).
            ``(2) Federal payment restricted to acute care services.--
        No amounts expended under a State health allowance program that 
        are attributable to medical assistance described in paragraphs 
        (4), (14), (15), (23), or (24) of section 1905(a) shall be 
        included in the total amount expended as medical assistance 
        under the State plan.
            ``(3) Amount of federal payment based upon unused premium 
        subsidy program allotment.--In no case shall this subsection 
        result in the total Federal payments to the State under this 
        title (including payments attributable to this section and 
        section 1923) for quarters in a fiscal year exceeding an amount 
        equal to the difference between--
                    ``(A) the State's allotment for the premium subsidy 
                program for children under section 1931(i)(2) for such 
                fiscal year; and
                    ``(B) the amount paid to the State for such program 
                for such fiscal year.
    ``(b) Eligibility of State.--A State is eligible for purposes of 
subsection (a) if the State submits (at such time and in such form as 
the Secretary may require) an application to the Secretary containing 
such information and assurances as the Secretary may require, including 
assurances that the State has adopted and is enforcing standards 
regarding quality assurance for group health plans participating in the 
State health allowance program, including standards regarding--
            ``(1) uniform reporting requirements for such plans 
        relating to a minimum set of clinical data, patient 
        satisfaction data, and other information that may be used by 
        individuals to compare the quality of various plans; and
            ``(2) the establishment or designation of an entity of the 
        State government to collect the data described in subparagraph 
        (A) and to regularly report such data to the Secretary.
    ``(c) State Health Allowance Program Described.--
            ``(1) Enrollment of participating individuals in approved 
        group health plans.--In this section, a State health allowance 
        program is a program in effect in all the political 
        subdivisions of the State (except as provided in (c)) under 
        which the State makes payments to a group health plan (approved 
        under paragraph (2)) which provides coverage to the individual 
        as an allowance towards the costs of providing the individual 
        with benefits under the plan.
            ``(2) Approved plans described.--For purposes of paragraph 
        (1), a State shall approve group health plans in accordance 
        with such standards as the State may establish, except that--
                    ``(A) the State may not approve a plan for a year 
                unless the plan provides certified standard health 
                coverage described in section 1931(j);
                    ``(B) at least one of the plans approved by the 
                State shall be a health maintenance organization or 
                other plan under which payments are otherwise made on a 
                capitated basis for providing medical assistance to 
                individuals enrolled in the State plan under this 
                title; and
                    ``(C) in the case of an individual who is entitled 
                to benefits under the State plan under this title as of 
                the first month during which the State health allowance 
                program is in effect, an approved plan may not require 
                the individual to contribute a greater amount of cost-
                sharing than the individual would have been required to 
                contribute under the State plan (except as may be 
                imposed on an individual described in subparagraph (B) 
                or subparagraph (C) of subsection (d)(1)).
            ``(3) Waiver of statewideness requirement.--At the request 
        of a State, the Secretary may waive for a period not to exceed 
        3 years (subject to one 3-year extension) the requirement under 
        paragraph (1) that the State health allowance program be in 
        effect in all political subdivisions of the State.
    ``(d) Eligibility of Individuals To Participate in Allowance 
Program.--
            ``(1) Automatic eligibility of medicaid categorically 
        eligible individuals.--Subject to subsection (e), any 
        individual to whom the State makes medical assistance available 
        under the State plan under this title pursuant to clause (i) of 
        section 1902(a)(10)(A) shall be eligible to participate in the 
        State health allowance program.
            ``(2) Mandatory eligibility of pregnant women with income 
        under 150 percent of the poverty level.--
                    ``(A) In general.--Subject to subsection (e) and 
                subparagraph (B), an individual lawfully residing in 
                the State shall be eligible to participate in the 
                program if the individual is a pregnant woman and the 
                income of the individual's family is equal to or less 
                than 150 percent of the official poverty line (as 
                defined by the Office of Management and Budget, and 
                revised annually in accordance with section 673(2) of 
                the Omnibus Budget Reconciliation Act of 1991) 
                applicable to a family of the size involved.
                    ``(B) Exception.--If the application of 
                subparagraph (A) would result in--
                            ``(i) the total State expenditures for a 
                        quarter under this title (including 
                        expenditures attributable to this section and 
                        section 1923), exceeding
                            ``(ii) the total State expenditures that 
                        the Secretary estimates would have been made 
                        under this title for the quarter if the State 
                        did not have a program under this section,
                then there shall be substituted for 150 percent in 
                subparagraph (A) such percent as would result in the 
                amount described in clause (i) equaling the amount 
                described in clause (ii).
            ``(3) Optional eligibility of other individuals with income 
        up to 150 percent of poverty level.--
                    ``(A) In general.--Subject to subsection (e), a 
                State operating a State health allowance program under 
                this section may make an individual lawfully residing 
                in the State who is not described in paragraph (2) 
                eligible to participate in the program if the income of 
                the individual's family is not greater than 150 percent 
                of such official poverty line.
                    ``(B) Contribution may be required.--In the case of 
                an individual who is participating in the program under 
                this paragraph and whose family income is greater than 
                100 percent of the official poverty line, the program 
                may require such an individual to contribute all (or a 
                portion) of the premiums for such a group health plan 
                if the amount of such contribution is determined in 
                accordance with a sliding scale based on the 
                individual's family income.
    ``(e) Exclusion and Use of Resource Standard.--
            ``(1) Exclusion of elderly medicare-eligible individuals.--
        No individual shall be eligible to participate in the program 
        if the individual is entitled to benefits under title XVIII 
        pursuant to section 226.
            ``(2) Use of resource standard.--A State may require an 
        individual to meet a resource standard as a condition of 
        eligibility to participate in the program only if the Secretary 
        approves the State's use of such a standard.
    ``(f) Construction.--No provision of any Federal law shall prevent 
a State from enrolling any employee or other individual in accordance 
with this section. The previous sentence shall not be construed as 
permitting a State to require the employer of an individual 
participating in the program to contribute toward the individual's 
premium required for such participation.
    ``(g) Evaluations and Reports.--
            ``(1) Evaluations.--Not later than 3 years after the date 
        of the enactment of this section (and at such subsequent 
        intervals as the Secretary considers appropriate), the 
        Secretary shall evaluate the effectiveness of the State health 
        allowance programs for which Federal financial participation is 
        provided under this section, and the impact of such programs on 
        increasing the number of individuals with health insurance 
        coverage in participating States and in controlling the costs 
        of health care in such States.
            ``(2) Reports.--Not later than 3 years after the date of 
        the enactment of this section (and at such subsequent intervals 
        as the Secretary considers appropriate), the Secretary shall 
        submit a report on the program to Congress.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to calendar quarters beginning on or after January 1, 1996.

SEC. 1702. OPTIONAL USE OF PROGRAM TO OFFER COVERAGE TO SOME OR ALL 
              STATE RESIDENTS.

    Section 1932 of the Social Security Act, as inserted by section 
1701(a)(2), is amended--
            (1) in subsection (c)(2)(A), in the matter before clause 
        (i), by inserting ``, except as provided in subsection 
        (d)(4)(B)(iii),'' after ``unless'', and
            (2) by adding at the end of subsection (d) the following 
        new paragraphs:
            ``(4) Optional enrollment of other individuals.--
                    ``(A) In general.--Subject to subsection (e), a 
                State operating a State health allowance program under 
                this section may make any individual (or class of 
                individuals) who is not described in paragraph (1), 
                (2), or (3) and who is not offered coverage under an 
                employer group health plan eligible to participate in 
                the program.
                    ``(B) Special rules.--
                            ``(i) Contribution may be required.--In the 
                        case of an individual who is participating in 
                        the program under this paragraph, the program 
                        may require such an individual to contribute 
                        all (or a portion) of the premiums and cost-
                        sharing of such a group health plan.
                            ``(ii) No federal matching payments.--For 
                        purposes of payment to States under section 
                        1903(a), no amounts expended by the State under 
                        the program during a fiscal year on behalf of 
                        an individual enrolled under subparagraph (A) 
                        may be included in the total amount expended 
                        during the fiscal year as medical assistance 
                        under the State plan.
            ``(5) Offering of coverage through other programs.--Nothing 
        in this section shall be construed as preventing a State 
        which--
                    ``(A) does not operate a State health allowance 
                program under this section from assuring that 
                individuals in the State who are not offered coverage 
                under an employer group health plan are offered 
                coverage under a health plan, or
                    ``(B) does operate such a program from assuring 
                that individuals in the State who are not described in 
                paragraph (1), (2), or (3) and who are not offered 
                coverage under an employer group health plan are 
                offered coverage under a health plan other than through 
                such program.''.

                  PART 2--MEDICAID PROGRAM FLEXIBILITY

SEC. 1711. MODIFICATION OF FEDERAL REQUIREMENTS TO ALLOW STATES MORE 
              FLEXIBILITY IN CONTRACTING FOR COORDINATED CARE SERVICES 
              UNDER MEDICAID.

    (a) In General.--Section 1903(m) of the Social Security Act (42 
U.S.C. 1396b(m)) is amended--
            (1) by striking all that precedes paragraph (4) and 
        inserting the following:
    ``(m) Coordinated Care.--
            ``(1) Payment conditioned on compliance.--
                    ``(A) General rule.--No payment shall be made under 
                this title to a State with respect to expenditures 
                incurred by it for payment to a risk contracting entity 
                or primary care case management entity (as defined in 
                subparagraph (B)), or with respect to an undertaking 
                described in paragraph (6), unless the State and the 
                entity or undertaking meet the applicable requirements 
                of this subsection. For purposes of determining whether 
                payment may be made under this section, the Secretary 
                may reject a State's determination of compliance with 
                any provision of this subsection.
                    ``(B) General definitions.--For purposes of this 
                title--
                            ``(i) Risk contracting entity.--The term 
                        `risk contracting entity' means an entity that 
                        has a contract with the State agency under 
                        which the entity--
                                    ``(I) provides or arranges for the 
                                provision of health care items or 
                                services to individuals eligible for 
                                medical assistance under the State plan 
                                under this title, and
                                    ``(II) is at risk (as defined in 
                                clause (iv)) for part or all of the 
                                cost of such items or services 
                                furnished to such individuals.
                            ``(ii) Primary care case management 
                        program.--The term `primary care case 
                        management program' means a State program under 
                        which individuals eligible for medical 
                        assistance under the State plan under this 
                        title are enrolled with primary care case 
                        management entities, and are entitled to 
                        receive specified health care items and 
                        services covered under such plan only as 
                        arranged for and approved by such entities.
                            ``(iii) At risk.--An entity is `at risk', 
                        for purposes of this subparagraph, if it has a 
                        contract with the State agency under which it 
                        is paid a fixed amount for providing or 
                        arranging for the provision of specified health 
                        care items or services to an individual 
                        eligible for medical assistance and enrolled 
                        with the entity, regardless of whether such 
                        items or services are furnished to such 
                        individual, and is liable for all or part of 
                        the cost of furnishing such items or services, 
                        regardless of whether or the extent to which 
                        such cost exceeds such fixed payment.
                            ``(iv) Primary care case management 
                        entity.--The term `primary care case management 
                        entity' means a health care provider (whether 
                        an individual or an entity) that, under a State 
                        primary care case management program meeting 
                        the requirements of paragraph (7), has a 
                        contract with the State agency under which the 
                        entity arranges for or authorizes the provision 
                        of health care items and services to 
                        individuals eligible for medical assistance 
                        under the State plan under this title, but is 
                        not at risk (as defined in clause (iv)) for the 
                        cost of such items or services provided to such 
                        individuals.
            ``(2) General requirements for risk contracting entities.--
                    ``(A) Federal or state qualification.--Subject to 
                paragraph (3), a risk contracting entity meets the 
                requirements of this subsection only if it either--
                            ``(i) is a qualified health maintenance 
                        organization as defined in section 1310(d) of 
                        the Public Health Service Act, as determined by 
                        the Secretary pursuant to section 1312 of that 
                        Act, or
                            ``(ii) is an entity which the State agency 
                        has determined--
                                    ``(I) affords, to individuals 
                                eligible for medical assistance under 
                                the State plan and enrolled with the 
                                entity, access to health care items and 
                                services furnished by the entity, 
                                within the area served by the entity, 
                                at least equivalent to the access such 
                                individuals would have to such health 
                                care items and services in such area if 
                                not enrolled with the entity, and
                                    ``(II) has made adequate provision 
                                against the risk of insolvency, and 
                                assures that individuals eligible for 
                                medical assistance under this title are 
                                not held liable for the entity's debts 
                                in case of the entity's insolvency.
                    ``(B) Internal quality assurance.--Subject to 
                paragraph (3), a risk contracting entity meets the 
                requirements of this subsection only if it has in 
                effect an internal quality assurance program that meets 
                the requirements of paragraph (9).
                    ``(C) Contract with state agency.--Subject to 
                paragraph (3), a risk contracting entity meets the 
                requirements of this subsection only if the entity has 
                a written contract with the State agency that 
                provides--
                            ``(i) that the entity will comply with all 
                        applicable provisions of this subsection;
                            ``(ii) for a payment methodology based on 
                        experience rating or another actuarially sound 
                        methodology approved by the Secretary, which 
                        guarantees (as demonstrated by such models or 
                        formulas as the Secretary may approve) that 
                        payments to the entity under the contract shall 
                        not exceed 100 percent of expenditures that 
                        would have been made by the State agency in the 
                        absence of the contract;
                            ``(iii) that the Secretary and the State 
                        (or any person or organization designated by 
                        either) shall have the right to audit and 
                        inspect any books and records of the entity 
                        (and of any subcontractor) that pertain--
                                    ``(I) to the ability of the entity 
                                to bear the risk of potential financial 
                                losses, or
                                    ``(II) to services performed or 
                                determinations of amounts payable under 
                                the contract;
                            ``(iv) that in the entity's enrollment, 
                        reenrollment, or disenrollment of individuals 
                        eligible for medical assistance under this 
                        title and eligible to enroll, reenroll, or 
                        disenroll with the entity pursuant to the 
                        contract, the entity will not discriminate 
                        among such individuals on the basis of their 
                        health status or requirements for health care 
                        services;
                            ``(v)(I) that individuals eligible for 
                        medical assistance under the State plan who 
                        have enrolled with the entity are permitted to 
                        terminate such enrollment without cause as of 
                        the beginning of the first calendar month 
                        following a full calendar month after the 
                        request is made for such termination (or at 
                        such times as required pursuant to paragraph 
                        (8)), and
                            ``(II) for notification of each such 
                        individual, at the time of the individual's 
                        enrollment, of the right to terminate 
                        enrollment;
                            ``(vi) for reimbursement, either by the 
                        entity or by the State agency, for medically 
                        necessary services provided--
                                    ``(I) to an individual eligible for 
                                medical assistance under the State plan 
                                and enrolled with the entity, and
                                    ``(II) other than through the 
                                entity because the services were 
                                immediately required due to an 
                                unforeseen illness, injury, or 
                                condition;
                            ``(vii) for disclosure of information in 
                        accordance with paragraph (4);
                            ``(viii) in the case of an entity that has 
                        entered into a contract with a Federally-
                        qualified health center for the provision of 
                        services of such center--
                                    ``(I) that rates of prepayment from 
                                the State are adjusted to reflect fully 
                                the rates of payment specified in 
                                section 1902(a)(13)(E), and
                                    ``(II) that, at the election of 
                                such center, payments made by the 
                                entity to such center for services 
                                described in section 1905(a)(2)(C) are 
                                made at the rates of payment specified 
                                in section 1902(a)(13)(E);
                            ``(ix) that any physician incentive plan 
                        that the entity operates meets the requirements 
                        of section 1876(i)(8);
                            ``(x) for maintenance of sufficient patient 
                        encounter data to identify the physician who 
                        delivers services to patients; and
                            ``(xi) that the entity complies with the 
                        requirement of section 1902(w) with respect to 
                        each enrollee.
            ``(3) Exceptions to requirements for risk contracting 
        entities.--The requirements of paragraph (2) (other than 
        subparagraph (C)(viii)) do not apply to an entity that--
                    ``(A)(i) received a grant of at least $100,000 in 
                the fiscal year ending June 30, 1976, under section 
                329(d)(1)(A) or 330(d)(1) of the Public Health Service 
                Act, and for the period beginning July 1, 1976, and 
                ending on the expiration of the period for which 
                payments are to be made under this title, has been the 
                recipient of a grant under either such section; and
                    ``(ii) provides to its enrollees, on a prepaid 
                capitation or other risk basis, all of the services 
                described in paragraphs (1), (2), (3), (4)(C), and (5) 
                of section 1905(a) and, to the extent required by 
                section 1902(a)(10)(D) to be provided under the State 
                plan, the services described in section 1905(a)(7);
                    ``(B) is a nonprofit primary health care entity 
                located in a rural area (as defined by the Appalachian 
                Regional Commission)--
                            ``(i) which received in the fiscal year 
                        ending June 30, 1976, at least $100,000 (by 
                        grant, subgrant, or subcontract) under the 
                        Appalachian Regional Development Act of 1965), 
                        and
                            ``(ii) for the period beginning July 1, 
                        1976, and ending on the expiration of the 
                        period for which payments are to be made under 
                        this title either has been the recipient of a 
                        grant, subgrant, or subcontract under such Act 
                        or has provided services under a contract 
                        (initially entered into during a year in which 
                        the entity was the recipient of such a grant, 
                        subgrant, or subcontract) with a State agency 
                        under this title on a prepaid capitation or 
                        other risk basis; or
                    ``(C) which has contracted with the State agency 
                for the provision of services (but not including 
                inpatient hospital services) to persons eligible for 
                medical assistance under this title on a prepaid risk 
                basis prior to 1970.''; and
            (2) by adding after paragraph (6) the following new 
        paragraphs:
            ``(7) General requirements for primary care case 
        management.--A State that elects in its State plan under this 
        title to implement a primary care case management program under 
        this subsection shall include in the plan methods for the 
        selection and monitoring of participating primary care case 
        management entities to ensure that--
                    ``(A) the numbers, geographic locations, hours of 
                operation, and other relevant characteristics of such 
                entities are sufficient to afford individuals eligible 
                for medical assistance reasonable access to and choice 
                among such entities;
                    ``(B) such entities and their professional 
                personnel are qualified to provide health care case 
                management services, through methods including ongoing 
                monitoring of compliance with applicable requirements 
                for licensing of health care providers, providing 
                training and certification of primary care case 
                managers, and providing information and technical 
                assistance; and
                    ``(C) such entities are making timely and 
                appropriate decisions with respect to enrollees' need 
                for health care items and services, and are giving 
                timely approval and referral to providers of adequate 
                quality where such items and services are determined to 
                be medically necessary.
            ``(8) State options with respect to enrollment and 
        disenrollment.--
                    ``(A) Mandatory enrollment option.--A State plan 
                may require an individual eligible for medical 
                assistance under the State plan (other than a medicare 
                qualified beneficiary) to enroll with a risk 
                contracting entity or primary care case management 
                entity, without regard to the requirement of section 
                1902(a)(1) (concerning statewideness), the requirements 
                of section 1902(a)(10)(B) (concerning comparability of 
                benefits), or the requirements of section 1902(a)(23) 
                (concerning freedom of choice of provider), if the 
                individual is permitted a choice--
                            ``(i) between or among two or more risk 
                        contracting entities,
                            ``(ii) between a risk contracting entity 
                        and a primary care case management entity, or
                            ``(iii) between or among two or more 
                        primary care case management entities.
                    ``(B)(i) Restrictions on disenroll- ment without 
                cause.--A State plan may restrict the period in which 
                individuals enrolled with a qualifying risk contracting 
                entity (as defined in clause (ii)) may terminate such 
                enrollment without cause to the first month of each 
                period of enrollment (as defined in clause (iii)), but 
                only if the State provides notification, at least once 
                during each such enrollment period, to individuals 
                enrolled with such entity of the right to terminate 
                such enrollment and the restriction on the exercise of 
                this right. Such restriction shall not apply to 
                requests for termination of enrollment for cause.
                    ``(ii) For purposes of this subparagraph, the term 
                `qualifying risk contracting entity' means a risk 
                contracting entity that is--
                            ``(I) a qualified health maintenance 
                        organization as defined in section 1310(d) of 
                        the Public Health Service Act;
                            ``(II) an eligible organization with a 
                        contract under section 1876;
                            ``(III) an entity that is receiving (and 
                        has received during the previous 2 years) a 
                        grant of at least $100,000 under section 
                        329(d)(1)(A) or 330(d)(1) of the Public Health 
                        Service Act;
                            ``(IV) an entity that is receiving (and has 
                        received during the previous 2 years) at least 
                        $100,000 (by grant, subgrant, or subcontract) 
                        under the Appalachian Regional Development Act 
                        of 1965;
                            ``(V) a program pursuant to an undertaking 
                        described in paragraph (6) in which at least 25 
                        percent of the membership enrolled on a prepaid 
                        basis are individuals who (I) are not insured 
                        for benefits under part B of title XVIII or 
                        eligible for medical assistance under this 
                        title, and (II) (in the case of such 
                        individuals whose prepayments are made in whole 
                        or in part by any government entity) had the 
                        opportunity at the time of enrollment in the 
                        program to elect other coverage of health care 
                        costs that would have been paid in whole or in 
                        part by any governmental entity; or
                            ``(VI) an entity that, on the date of 
                        enactment of this provision, had a contract 
                        with the State agency under a waiver under 
                        section 1115 or 1915(b) and was not subject to 
                        a requirement under this subsection to permit 
                        disenrollment without cause.
                    ``(iii) For purposes of this subparagraph, the term 
                `period of enrollment' means--
                            ``(I) a period not to exceed 6 months in 
                        duration, or
                            ``(II) a period not to exceed one year in 
                        duration, in the case of a State that, on the 
                        effective date of this subparagraph, had in 
                        effect a waiver under section 1115 of 
                        requirements under this title under which the 
                        State could establish a 1-year minimum period 
                        of enrollment with risk contracting entities.
                    ``(C) Reenrollment of individuals who regain 
                eligibility.--In the case of an individual who--
                            ``(i) in a month is eligible for medical 
                        assistance under the State plan and enrolled 
                        with a risk contracting entity with a contract 
                        under this subsection,
                            ``(ii) in the next month (or next 2 months) 
                        is not eligible for such medical assistance, 
                        but
                            ``(iii) in the succeeding month is again 
                        eligible for such benefits,
                the State plan may enroll the individual for that 
                succeeding month with such entity, if the entity 
                continues to have a contract with the State agency 
                under this subsection.
            ``(9) Requirements for internal quality assurance 
        programs.--The requirements for an internal quality assurance 
        program of a risk contracting entity are that program is 
        written and the program--
                    ``(A) specifies a systematic process including 
                ongoing monitoring, corrective action, and other 
                appropriate activities to achieve specified and 
                measurable goals and objectives for quality of care, 
                and including annual evaluation of the program;
                    ``(B) identifies the organizational units 
                responsible for performing specific quality assurance 
                functions, and ensure that they are accountable to the 
                governing body of the entity and that they have 
                adequate supervision, staff, and other necessary 
                resources to perform these functions effectively;
                    ``(C) if any quality assistance functions are 
                delegated to other entities, ensures that the risk 
                contracting entity remains accountable for all quality 
                assurance functions, and has mechanisms to ensure that 
                all quality assurance activities are carried out;
                    ``(D) includes methods to ensure that physicians 
                and other health care professionals under contract with 
                the entity are qualified to perform the services they 
                provide, and that these qualifications are ensured 
                through appropriate credentialing and recredentialing 
                procedures;
                    ``(E) includes policies addressing enrollee rights 
                and responsibilities, including grievance mechanisms 
                and mechanisms to inform enrollees about access to and 
                use of services provided by the entity;
                    ``(F) provides for continuous monitoring of the 
                delivery of health care, including--
                            ``(i) identification of clinical areas to 
                        be monitored,
                            ``(ii) use of quality indicators and 
                        standards for assessing care delivered, 
                        including availability and accessibility of 
                        care,
                            ``(iii) monitoring, through use of 
                        epidemiological data or chart review, the care 
                        of individuals, as appropriate, and patterns of 
                        care overall, and
                            ``(iv) implementation of corrective 
                        actions; and
                    ``(G) meets any other requirements prescribed by 
                the Secretary after consultation with States.
            ``(10) Independent review and quality assurance.--
                    ``(A) State grievance procedure.--A State 
                contracting with a risk contracting entity or primary 
                care case management entity under this subsection shall 
                provide for a grievance procedure for enrollees of such 
                entity with at least the following elements:
                            ``(i) A toll-free telephone number for 
                        enrollee questions and grievances.
                            ``(ii) A State-operated enrollee grievance 
                        procedure.
                            ``(iii) Periodic notification of enrollees 
                        of their rights with respect to such entity or 
                        program.
                            ``(iv) Periodic sample reviews of 
                        grievances registered with such entity or 
                        program or with the State.
                            ``(v) Periodic survey and analysis of 
                        enrollee satisfaction with such entity or 
                        program.
                    ``(B) State monitoring of risk contracting 
                entities' quality assurance programs.--A State 
                contracting with a risk contracting entity under this 
                subsection shall periodically review such entity's 
                quality assurance program to ensure that it meets the 
                requirements of paragraph (9).
                    ``(C) External independent review of internal 
                quality assurance.--A State contracting with a risk 
                contracting entity under this subsection shall provide 
                for annual external independent review (by a 
                utilization control and peer review organization with a 
                contract under section 1153, or another organization 
                unaffiliated with the State government approved by the 
                Secretary) of such entity's internal quality assurance 
                activities. Such independent review shall include--
                            ``(i) review of the entity's medical care, 
                        through sampling of medical records or other 
                        appropriate methods, for indications of 
                        inappropriate utilization and treatment,
                            ``(ii) review of enrollee inpatient and 
                        ambulatory data, through sampling of medical 
                        records or other appropriate methods, to 
                        determine quality trends,
                            ``(iii) review of the entity's internal 
                        quality assurance activities, and
                            ``(iv) notification of the entity and the 
                        State, and appropriate followup activities, 
                        when the review under this subparagraph 
                        indicates inappropriate care or treatment.''.
    (b) State Option To Guarantee Medicaid Eligibility.--Section 
1902(e)(2) of such Act (42 U.S.C. 1396a(e)(2)) is amended--
                    (A) in subparagraph (A), by striking all that 
                precedes ``(but for this paragraph)'' and inserting 
                ``In the case of an individual who is enrolled--
                            ``(i) with a risk contracting entity (as 
                        defined in section 1903(m)(1)(B)(i)) 
                        responsible for the provision of inpatient 
                        hospital services and any other service 
                        described in paragraphs (2), (3), (4), (5), and 
                        (7) of section 1905(a),
                            ``(ii) with any risk contracting entity (as 
                        so defined) in a State that, on the effective 
                        date of this provision, had in effect a waiver 
                        under section 1115 of requirements under this 
                        title under which the State could extend 
                        eligibility for medical assistance for 
                        enrollees of such entity, or
                            ``(iii) with an eligible organization with 
                        a contract under section 1876 and who would'', 
                        and
                    (B) in subparagraph (B), by striking ``organization 
                or'' each place it appears.
    (c) Conforming Amendments.--
            (1) Section 1128(b)(6)(C)(i) of such Act (42 U.S.C. 1320a-
        7(b)(6)(C)(i)) is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (2) Section 1902(a)(25)(A) of such Act (42 U.S.C. 
        1396a(a)(25)(A)), as amended by section 13622(a)(1) of the 
        Omnibus Budget Reconciliation Act of 1993, is amended by 
        striking ``health maintenance organizations'' and inserting 
        ``risk contracting entities''.
            (3) Section 1902(a)(25)(H) of such Act (42 U.S.C. 
        1396a(a)(25)(H)), as added by section 13622(b)(3) of the 
        Omnibus Budget Reconciliation Act of 1993, is amended by 
        striking ``health maintenance organization'' and inserting 
        ``risk contracting entity''.
            (4) Section 1902(a)(30)(C) of such Act (42 U.S.C. 
        1396a(a)(30)(C)) is amended by striking all that precedes 
        ``with the results'' and inserting ``provide for independent 
        review and quality assurance of entities with contracts under 
        section 1903(m), in accordance with paragraph (10) of such 
        section,''.
            (5) Section 1902(a)(57) of such Act (42 U.S.C. 
        1396a(a)(57)) is amended by striking ``or health maintenance 
        organization'' and inserting ``or risk contracting entity''.
            (6) Section 1902(a) of such Act (42 U.S.C. 1396a(a)), as 
        amended by sections 13623(a), 13625(a), and 13631(a) of the 
        Omnibus Budget Reconciliation Act of 1993, is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (61);
                    (B) by striking the period at the end of paragraph 
                (62) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(63) at State option, provide for a primary care case 
        management program in accordance with section 1903(m)(7).''.
            (7) Section 1902(p)(2) of such Act (42 U.S.C. 1396a(p)(2)) 
        is amended by striking ``health maintenance organization'' and 
        inserting ``risk contracting entity''.
            (8) Section 1902(w) of such Act (42 U.S.C. 1396a(w)) is 
        amended--
                    (A) in paragraph (1), by striking ``section 
                1903(m)(1)(A)'' and inserting ``section 
                1903(m)(2)(C)(xi)'', and
                    (B) in paragraph (2)(E), by striking ``health 
                maintenance organization'' and ``the organization'' and 
                inserting ``risk contracting entity'' and ``the 
                entity'', respectively.
            (9) Section 1903(k) of such Act (42 U.S.C. 1396b(k)) is 
        amended by striking ``health maintenance organization'' and 
        inserting ``risk contracting entity''.
            (10) Section 1903(m)(4)(A) of such Act (42 U.S.C. 
        1396b(m)(4)(A)) is amended--
                    (A) in the first sentence, by striking ``Each 
                health maintenance organization'' and inserting ``Each 
                risk contracting entity'',
                    (B) in the first sentence, by striking ``the 
                organization'' each place it appears and inserting 
                ``the entity'', and
                    (C) in the second sentence, by striking ``an 
                organization'' and ``the organization'' and inserting 
                ``a risk contracting entity'' and ``the risk 
                contracting entity'', respectively.
            (11) Section 1903(m)(4)(B) of such Act (42 U.S.C. 
        1396b(m)(4)(B)) is amended by striking ``organization'' and 
        inserting ``risk contracting entity''.
            (12) Section 1903(m)(5) of such Act (42 U.S.C. 1396b(m)(5)) 
        is amended in paragraphs (A)(iii) and (B)(ii) by striking 
        ``organization'' and inserting ``entity''.
            (13) Section 1903(o) (42 U.S.C. 1396b(o)), as amended by 
        section 13622(a)(2) of the Omnibus Budget Reconciliation Act of 
        1993, is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (14) Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 
        1396b(w)(7)(A)(viii)) is amended by striking ``health 
        maintenance organizations (and other organizations with 
        contracts under section 1903(m))'' and inserting ``risk 
        contracting entities with contracts under section 1903(m)''.
            (15) Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is 
        amended, in the matter preceding clause (i), by inserting 
        ``(which may be on a prepaid capitation or other risk basis)'' 
        after ``payment'' the first place it appears.
            (16) Section 1908(b) of such Act, as added by section 
        13623(b) of the Omnibus Budget Reconciliation Act of 1993, is 
        amended by striking ``health maintenance organization'' and 
        inserting ``risk contracting entity''.
            (17) Section 1916(b)(2)(D) of such Act (42 U.S.C. 
        1396o(b)(2)(D)) is amended by striking ``health maintenance 
        organization'' and inserting ``risk contracting entity''.
            (18) Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 
        1396r-6(b)(4)(D)(iv)) is amended--
                    (A) in the heading, by striking ``hmo'' and 
                inserting ``risk contracting entity'',
                    (B) by striking ``health maintenance organization'' 
                and inserting ``risk contracting entity'' each place it 
                appears, and
                    (C) by striking ``section 1903(m)(1)(A)'' and 
                inserting ``section 1903(m)(1)(B)(i)''.
            (19) Paragraphs (1) and (2) of section 1926(a) of such Act 
        (42 U.S.C. 1396r-7(a)) are each amended by striking ``health 
        maintenance organizations'' and inserting ``risk contracting 
        entities''.
            (20) Section 1927 of such Act (42 U.S.C. 1396s) is 
        amended--
                    (A) in subsection (c)(1)(C)(i), as amended by 
                section 13602(a)(1) of the Omnibus Budget 
                Reconciliation Act of 1993, by striking ``health 
                maintenance organization'' and inserting ``risk 
                contracting entity'' , and
                    (B) in subsection (j)(1), by striking ``*** Health 
                Maintenance Organizations, including those 
                organizations'' and inserting ``risk contracting 
                entities''.
    (d) Effective Date.--The amendments made by this section shall 
become effective with respect to calendar quarters beginning on or 
after January 1, 1995.

SEC. 1712. PERIOD OF CERTAIN WAIVERS.

    (a) In General.--Section 1915(h) of the Social Security Act (42 
U.S.C. 1396n(h)) is amended by striking ``No waiver'' and all that 
follows through ``unless the Secretary'' and inserting ``A waiver under 
this section (other than under subsection (c), (d), or (e)) shall be 
for an initial term of 3 years and, upon the request of a State, shall 
be extended for additional 5 year periods unless the Secretary''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to waivers pursuant to applications which are approved, and with 
respect to continuations of waivers for which requests are made, later 
than 30 days after the date of the enactment of this Act.

SEC. 1713. ELIMINATION OF DUPLICATIVE PEDIATRIC IMMUNIZATION PROGRAM.

    Effective as if included in the enactment of the 13621 of the 
Omnibus Budget Reconciliation Act of 1993, title XIX of the Social 
Security Act is amended as follows:
            (1) Section 1902(a) is amended--
                    (A) by adding ``and'' at the end of paragraph (60),
                    (B) by striking ``; and'' at the end of paragraph 
                (61) and inserting a period, and
                    (C) by striking paragraph (62).
            (2) Section 1928 is repealed.
            (3) Section 1903(i) is amended--
                    (A) by inserting ``or'' at the end of paragraph 
                (12),
                    (B) by striking the semicolon at the end of 
                paragraph (13) and inserting a period, and
                    (C) by striking paragraphs (14) and (15).
            (4) Section 1902(a)(32) is amended--
                    (A) by adding ``and'' at the end of subparagraph 
                (B),
                    (B) by striking ``; and'' at the end of 
                subparagraph (C) and inserting a period, and
                    (C) by striking subparagraph (D).
            (5) Section 1902(a) is amended--
                    (A) in paragraph (11)(B)--
                            (ii) by inserting ``and'' before ``(ii)'', 
                        and
                            (iii) by striking ``to the individual under 
                        section 1903, and (iii) providing for 
                        coordination of information and education on 
                        pediatric vaccinations and delivery of 
                        immunization services'' and inserting ``to him 
                        under section 1903'';
                    (B) in paragraph (11)(C), by striking ``, including 
                the provision of information and education on pediatric 
                vaccinations and the delivery of immunization 
                services,'' and
                    (C) in paragraph (43)(A), by striking ``and the 
                need for age-appropriate immunizations against vaccine-
                preventable diseases''.
            (6) Section 1905(r)(1) is amended--
                    (A) in subparagraph (A)(i), by striking ``and, with 
                respect to immunizations under subparagraph (B)(iii), 
                in accordance with the schedule referred to in section 
                1928(c)(2)(B)(i) for pediatric vaccines''; and
                    (B) in subparagraph (B)(iii), by striking 
                ``(according to the schedule referred to in section 
                1928(c)(2)(B)(i) for pediatric vaccines)''.

           PART 3--MEDICAID DISPROPORTIONATE SHARE ADJUSTMENT

SEC. 1721. 25 PERCENT REDUCTION IN AMOUNT OF PAYMENT ADJUSTMENTS FOR 
              DISPROPORTIONATE SHARE HOSPITALS.

    (a) In General.--Section 1923 of the Social Security Act (42 U.S.C. 
1396r-4) is amended by adding at the end the following new subsection:
    ``(h) Reduction in Federal Financial Participation for 
Disproportionate Share Adjustments.--Notwithstanding any other 
provision of this section, the amount of payments under section 1903(a) 
with respect to any payment adjustment made under this section for 
hospitals in a State for quarters in a fiscal year shall not exceed 75 
percent of the amount otherwise determined under subsection (f).''.
    (b) Conforming Amendment.--Section 1923(c) of such Act (42 U.S.C. 
1396r-4(c)) is amended in the matter preceding paragraph (1) by 
striking ``(f) and (g)'' and inserting ``(f), (g), and (h)''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to quarters in fiscal years beginning on or after October 
1, 1996.

Subtitle I--Remedies and Enforcement With Respect to Group Health Plans

SEC. 1801. CLAIMS PROCEDURE FOR GROUP HEALTH PLANS.

    (a) In General.--Section 503 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1133) is amended--
            (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
        and
            (2) by adding at the end the following new subsection:
    ``(b) Special Rules for Group Health Plans.--
            ``(1) In general.--In addition to meeting the requirements 
        of subsection (a), every group health plan shall afford a 
        reasonable opportunity to any participant or beneficiary, whose 
        request for a preauthorization, an emergency preauthorization, 
        a utilization review determination, or an emergency utilization 
        review determination has been denied, for a full and fair 
        review by the appropriate fiduciary of the decision denying the 
        request
            ``(2) Time limits for deciding claims.--
                    ``(A) Initial decisions.--A group health plan shall 
                issue an initial approval or denial of any claim for 
                medical, surgical, or hospital benefits not later than 
                30 days after its filing completion date. Failure to 
                approve or deny such a claim within such 30-day period 
                shall be treated as a denial of the claim.
                    ``(B) Reviews of initial decisions.--Every review 
                by a fiduciary required under paragraph (1) of an 
                initial denial under subparagraph (A) shall be 
                completed not later than 30 days after the review 
                filing date. Failure to issue a decision affirming, 
                reversing, or modifying the initial denial shall be 
                treated as a final decision denying the claim.
            ``(3) Time limit for deciding requests for 
        preauthorization.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B)--
                            ``(i) Initial decisions.--If a request for 
                        preauthorization is required under the terms of 
                        a group health plan, the plan shall approve or 
                        deny any such request not later than 30 days 
                        after its filing completion date. Failure to 
                        approve or deny such a request within such 30-
                        day period shall be treated as a denial of the 
                        request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 30 days after the 
                        review filing date. Failure to issue a decision 
                        affirming, reversing, or modifying the initial 
                        denial within such 30-day period shall be 
                        treated as a final decision denying the 
                        request.
                    ``(B) Requests for emergency preauthorization.--
                            ``(i) Initial decisions.--In any case in 
                        which a request for preauthorization required 
                        under the terms of a group health plan is a 
                        request for emergency preauthorization, the 
                        plan shall approve or deny any such request not 
                        later than 10 days after its filing completion 
                        date (24 hours after such date in cases 
                        involving emergency medical care). Failure to 
                        approve or deny such a request within such 10-
                        day period (or 24-hour period) shall be treated 
                        as a denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 10 days after the 
                        review filing date (24 hours after such date in 
                        cases involving emergency medical care). 
                        Failure to issue a decision affirming, 
                        reversing, or modifying the initial denial 
                        within such 10-day period (or 24-hour period) 
                        shall be treated as a final decision denying 
                        the request.
            ``(4) Time limit for deciding requests for utilization 
        review determinations.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B)--
                            ``(i) Initial decisions.--If a request for 
                        a utilization review determination is required 
                        under the terms of a group health plan, the 
                        plan shall approve or deny any such request not 
                        later than 30 days after its filing completion 
                        date. Failure to approve or deny such a request 
                        within such 30-day period shall be treated as a 
                        denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 30 days after the 
                        review filing date. Failure to issue a decision 
                        affirming, reversing, or modifying the initial 
                        denial within such 30-day period shall be 
                        treated as a final decision denying the 
                        request.
                    ``(B) Requests for emergency utilization review 
                determinations.--
                            ``(i) Initial decisions.--In any case in 
                        which a request for a utilization review 
                        determination required under the terms of a 
                        group health plan is a request for an emergency 
                        utilization review determination, the plan 
                        shall approve or deny any such request not 
                        later than 10 days after its filing completion 
                        date (24 hours after such date in cases 
                        involving emergency medical care). Failure to 
                        approve or deny such a request within such 10-
                        day period (or 24-hour period) shall be treated 
                        as a denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 10 days after the 
                        review filing date (24 hours after such date in 
                        cases involving emergency medical care). 
                        Failure to issue a decision affirming, 
                        reversing, or modifying the initial denial 
                        within such 10-day period (or 24-hour period) 
                        shall be treated as a final decision denying 
                        the request.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Claim for medical, surgical, or hospital 
                benefits.--The term `claim for medical, surgical, or 
                hospital benefits' means a request for payment by a 
                group health plan of such benefits made by or on behalf 
                of a participant or beneficiary after the expense for 
                medical, surgical, or hospital care has been incurred.
                    ``(B) Utilization review determination.--The term 
                `utilization review determination' means a 
                determination under a group health plan solely that 
                proposed medical, surgical, or hospital care is 
                medically necessary (as defined in section 1131(7) of 
                the Health Security Act). Unless otherwise expressly 
                provided under the terms of the plan, any such 
                determination shall not by itself constitute a 
                guarantee that benefits under the plan will be 
                provided.
                    ``(C) preauthorization.--The term 
                `preauthorization' means a determination under a group 
                health plan that proposed medical, surgical, or 
                hospital care meets the plan's terms and conditions of 
                coverage. Such a determination shall constitute a 
                guarantee that benefits under the plan will be 
                provided.
                    ``(D) Request for preauthoriza- tion.--The term 
                `request for preauthorization' means a request for 
                preauthorization by a group health plan of medical, 
                surgical, or hospital benefits made by or on behalf of 
                a participant or beneficiary before the expense for 
                such care has been incurred.
                    ``(E) Request for emergency preauthorization.--The 
                term `request for emergency preauthorization' means a 
                request for preauthorization. by a group health plan in 
                any case in which the medical, surgical, or hospital 
                benefits for which the expense is to be incurred 
                constitutes urgent medical care or emergency medical 
                care.
                    ``(F) Request for utilization review 
                determination.--The term `request for a utilization 
                review determination' means a request by or on behalf 
                of a participant or beneficiary, made before an expense 
                for medical, hospital, or surgical care has been 
                incurred, for a utilization review determination by a 
                plan.
                    ``(G) Request for emergency utilization review 
                determination.--The term `request for an emergency 
                utilization review determination' means a request for a 
                utilization review determination in any case in which 
                the medical, hospital, or surgical care to be incurred 
                constitutes urgent medical care or emergency medical 
                care.
                    ``(H) Urgent medical care.--The term `urgent 
                medical care' means medical, surgical, or hospital care 
                in any case in which a physician with appropriate 
                expertise has certified in writing that failure to 
                provide the participant or beneficiary with such care 
                within 45 days will result in either--
                            ``(i) the death of the participant or 
                        beneficiary within 120 days, or
                            ``(ii) the immediate, serious, and 
                        irreversible deterioration of the health of the 
                        participant or beneficiary within 120 days 
                        which will significantly increase the 
                        reasonable likelihood of death of the 
                        participant or beneficiary.
                    ``(I) Emergency medical care.--The term `emergency 
                medical care' means medical, surgical, or hospital care 
                in any case in which a physician with appropriate 
                expertise has certified in writing--
                            ``(i) that failure to immediately provide 
                        the care to the participant or beneficiary 
                        could reasonably be expected to result in--
                                    ``(I) placing the health of such 
                                participant or beneficiary (or, with 
                                respect to such a participant or 
                                beneficiary who is a pregnant woman, 
                                the health of the woman or her unborn 
                                child) in serious jeopardy,
                                    ``(II) serious impairment to bodily 
                                functions, or
                                    ``(III) serious dysfunction of any 
                                bodily organ or part,
                        or
                            ``(ii) that immediate provision of the care 
                        is necessary because the participant or 
                        beneficiary has made or is at serious risk of 
                        making an attempt to harm himself or herself or 
                        another individual.
                    ``(J) Filing completion date.--The term `filing 
                completion date' means, in connection with a group 
                health plan, the date as of which the plan is in 
                receipt of all information reasonably required to make 
                an initial decision to approve or deny a claim for 
                medical, surgical, or hospital benefits, a request for 
                preauthorization, a request for emergency 
                preauthorization, a request for a utilization review 
                determination or a request for an emergency utilization 
                review determination.
                    ``(K) Review filing date.--The term `review filing 
                date' means, in connection with a group health plan, 
                the date as of which the appropriate fiduciary is in 
                receipt of all information reasonably required to make 
                a decision upon a full and fair review of the denial, 
                in whole or in part, of a claim for medical, surgical, 
                or hospital benefits, a request for preauthorization, a 
                request for emergency preauthorization, a request for a 
                utilization review determination or a request for an 
                emergency utilization review determination.
                    ``(L) Appropriate fiduciary.--The term `appropriate 
                fiduciary' means with respect to any determination 
                under a group health plan a person designated by the 
                plan to make such determination. One or more 
                appropriate fiduciaries shall be designated under each 
                group health plan for making determinations under the 
                plan.''.
    (b) Definition of Group Health Plan.--
            (1) In general.--Section 3 of such Act (29 U.S.C. 1002) is 
        amended by adding at the end the following new paragraph:
    ``(42) The term `group health plan' means an employee welfare 
benefit plan providing medical care (as defined in section 213(d) of 
the Internal Revenue Code of 1986) to participants or beneficiaries 
directly or through insurance, reimbursement, or otherwise.''.
            (2) Conforming amendment.--Section 607 of such Act (29 
        U.S.C. 1167) is amended by striking paragraph (1).

SEC. 1802. MEDIATION OF GROUP HEALTH PLAN CLAIMS.

    (a) In General.--Part 5 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended--
            (1) by inserting below the heading for part 5 the 
        following:

                       ``Subpart A--In General'';

        and
            (2) by adding at the end the following new subpart:

           ``Subpart B--Mediation of Group Health Plan Claims

``SEC. 521. ELIGIBILITY FOR SUBMISSION TO MEDIATION.

    ``(a) In General.--The Secretary shall establish a mediation 
program under this subpart (hereinafter in this subpart referred to as 
the `mediation program') for the purpose of facilitating mediation of 
disputes meeting the requirements specified in subsection (b). At the 
time notice is provided to any participant or beneficiary of a group 
health plan's denial of any claim for benefits pursuant to section 503, 
the plan shall provide reasonable notice in writing to the participant 
or beneficiary whose claim for benefits under the plan has been denied 
of the availability of mediation under this subpart at the election of 
either the claimant or the plan.
    ``(b) Dispute Criteria.--A dispute may be submitted for mediation 
under the mediation program only if the following requirements are met 
with respect to such dispute:
            ``(1) Parties.--The dispute consists of an assertion by a 
        participant, a beneficiary, or the duly authorized 
        representative of a participant or beneficiary (or, in the case 
        of an assignment, the assignee) of one or more claims under a 
        group health plan, and a denial of such claims, or a denial of 
        appropriate reimbursement based on such claims, by such plan or 
        an appropriate fiduciary.
            ``(2) Nature of claim.--The claim consists of a claim for 
        benefits for medical, surgical, or hospital expenses under a 
        group health plan which consist of benefits described in 
        section 3(1).
            ``(3) Submission After Exhaustion of Plan Remedies.--The 
        claimant has received a final determination regarding the claim 
        under the plan's claims procedure under section 503, or has 
        otherwise exhausted all remedies under the plan provided 
        pursuant to section 503.
            ``(4) Appropriate fiduciary.--For purposes of this subpart, 
        the term `appropriate fiduciary' has the meaning provided in 
        section 503(b)(5)(K).

``SEC. 522. FACILITATORS.

    ``(a) Roster.--The Secretary shall maintain a list of individuals 
with appropriate expertise to serve as facilitators in proceedings 
under the mediation program.
    ``(b) Criteria.--In identifying individuals to serve as 
facilitators, the Secretary shall consider the following:
            ``(1) the individual's experience in dispute resolution;
            ``(2) the individual's ability to act impartially;
            ``(3) the individual's ability to perform evaluations 
        quickly and to present them in nontechnical terms; and
            ``(4) the individual's experience in employee medical, 
        hospital, and surgical benefits.
    ``(c) Appointment of Facilitator.--Within 15 days after either 
party files with the Secretary an election of mediation with respect to 
a dispute, the Secretary shall propose a facilitator, selected under a 
random selection procedure prescribed in regulations, and notify the 
parties of such selection. Within 10 days after receipt of the 
notification of the selection of a facilitator, either party may reject 
the proposed facilitator. If neither party objects to the Secretary's 
proposed facilitator within such 10-day period, the appointment shall 
become final. If either party objects to the Secretary's proposed 
facilitator, the procedure set forth in the preceding provisions of 
this subsection shall be repeated. Each party is limited to 1 objection 
to the Secretary's proposed facilitator for each mediation.

``SEC. 523. ROLE OF ATTORNEYS.

    ``Parties may represent themselves or be represented by attorneys 
throughout the mediation process.

``SEC. 524. INITIATION OF MEDIATION.

    ``(a) Claimant Initiation.--A claimant may initiate mediation of a 
dispute under this subpart only if no action has been commenced by the 
claimant under section 502 with respect to any claim involved. To 
initiate mediation, a claimant shall file an election for mediation 
with the Secretary (and shall file a copy of the election with the plan 
or the appropriate fiduciary) within 30 days after a final 
determination regarding the claim pursuant to section 503.
    ``(b) Plan Initiation.--A participant or beneficiary may not 
commence an action under section 502 with respect to any claim until 
the participant or beneficiary has provided to the plan or the 
appropriate fiduciary 10 days advance notice of the filing of such 
action. Within the earlier of (1) 25 days after receipt of such a 
notice with respect to any claim or (2) the date preceding the date on 
which such claim is filed in court, the plan or the appropriate 
fiduciary may elect mediation of a dispute under this subpart involving 
such claim by filing an election for mediation with the Secretary (and 
a copy of the election with the claimant). Upon a timely election of 
mediation by the plan or the appropriate fiduciary, the claimant's 
right to pursue the claim under section 502 shall be suspended until 
the earlier of 75 days after the date of the filing of the election of 
mediation or the termination of the mediation proceedings.
    ``(c) Election for Mediation.--An election by any party for 
mediation under this subpart shall be in such form and manner as the 
Secretary shall prescribe by regulation.
    ``(d) Participation.--The claimant and the plan shall participate 
in the mediation. Each party shall provide the facilitator a written 
summary of its position with respect to the dispute accompanied by 
supporting documentation.
    ``(e) Filing Fee.--The party initiating mediation under this 
section shall include with any election for mediation under this 
subpart a reasonable nonrefundable filing fee payable to the Secretary. 
The filing fee shall be determined pursuant to regulations prescribed 
by the Secretary.
    ``(f) Tolling of Statutes of Limitations.--The applicable statute 
of limitations with respect to any claim involved in a dispute subject 
to mediation proceedings under this subpart shall be tolled for the 
period commencing with the 10-day notice period required under 
subsection (b) and ending with the termination of the mediation 
proceedings with respect to such dispute. In no event shall the 
applicable statute of limitations be tolled beyond the 60-day-time 
limit for completion of mediation provided under section 526.

``SEC. 525. MEDIATION PROCEDURE.

    ``(a) In General.--Mediation proceedings under this subpart shall 
be conducted, at locations convenient to complainants, by facilitators 
recruited and assigned by the Secretary under section 522.
    ``(b) Duties of Facilitator.--The Secretary shall prescribe by 
regulation the duties and role of the facilitator during the mediation 
process. Such regulations may require the facilitator to identify 
parties, establish a schedule, request position papers from the 
parties, and evaluate positions of the parties. Such regulations shall 
provide that the mediation will be informal, convenient, inexpensive, 
and expeditious for all parties.
    ``(c) Neutrality of Facilitator.--The facilitator shall maintain a 
neutral stance between the parties.

``SEC. 526. MEDIATION TIME LIMIT.

    ``Any mediation proceedings commenced under this subpart shall be 
completed within 60 days from the final appointment of a facilitator 
pursuant to section 522(c).

``SEC. 527. COST OF MEDIATION.

    ``All reasonable costs of the mediation process under this subpart 
with respect to any dispute, including the cost of the facilitator, 
shall be divided equally among the parties. Facilitators shall be 
compensated at a rate established by the Secretary by regulation. The 
Secretary shall prescribe regulations specifying reasonable mediation 
costs and alternative means of allocating the costs in cases of 
hardship on the part of the claimant.

``SEC. 528. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROGRAM.

    ``(a) Nonbinding Mediation.--The results of any mediation under 
this subpart shall be treated as advisory in nature and nonbinding. 
Except as provided in subsection (b), the rights of the parties shall 
not be affected by participation in the mediation program.
    ``(b) Resolution Through Settlement Agreement.--If a dispute is 
settled through participation in the mediation program, the facilitator 
shall, upon the request of either party, assist the parties in drawing 
up a settlement agreement between the parties.

``SEC. 529. CONFIDENTIALITY AND ADMISSIBILITY.

    ``(a) In General.--All documents and communications made during or 
generated in connection with the mediation program, as well as any 
settlement offers or agreements made or entered into under such 
program--
            ``(1) shall be privileged and confidential, and
            ``(2) shall not be admissible as evidence in any Federal or 
        State judicial proceeding unless all parties to the mediation 
        consent in writing.
    ``(b) Execution of Privilege.--Any individual or entity involved in 
the mediation (including any party or facilitator or other individual 
who acts on behalf of a party or who provides information or an opinion 
in connection with the mediation) receiving a subpoena or other lawful 
process seeking disclosure of any information or documents rendered 
privileged and confidential under subsection (a) shall assert the 
privilege provided under subsection (a) and promptly notify all parties 
to the mediation proceedings of the request for disclosure. The 
privilege provided for in this section shall be in addition to any 
attorney-client privilege or other privilege which may be asserted by a 
party and nothing in this section shall constitute a waiver of such 
attorney-client privilege or other privilege.''.
    (b) Clerical Amendments.--The table of contents in section 1 of 
such Act is amended--
            (1) by inserting after the item relating to the heading for 
        part 5 of subtitle B of title I the following new item:

                   ``Subpart A--General Provisions'';

        and
            (2) by inserting after the item relating to section 514 the 
        following new items:

           ``Subpart B--Mediation of Group Health Plan Claims

        ``Sec. 521. Eligibility for submission to mediation.
        ``Sec. 522. Facilitators.
        ``Sec. 523. Role of attorneys.
        ``Sec. 524. Initiation of mediation.
        ``Sec. 525. Mediation procedure.
        ``Sec. 526. Mediation time limit.
        ``Sec. 527. Cost of mediation.
        ``Sec. 528. Legal effect of participation in mediation program.
        ``Sec. 529. Confidentiality and admissibility.''.

SEC. 1803. AVAILABLE COURT REMEDIES.

    (a) In General.--Section 502(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) is amended by adding at the end 
the following new paragraphs:
    ``(5) In any action commenced under subsection (a) by a participant 
or beneficiary with respect to a group health plan in which the 
plaintiff alleges that a person, in the capacity of a fiduciary and in 
violation of the terms of the plan or this title, has taken an action 
resulting in a failure to provide an item or service, or payment 
therefor, or has failed to take an action for which such person is 
responsible under the plan and which is necessary under the plan for 
provision of such item or service, or payment therefor, upon finding in 
favor of the plaintiff, the court shall cause to be served on the 
defendant an order requiring the defendant--
            ``(i) to cease and desist from the alleged action or 
        failure to act,
            ``(ii) to provide the item or service, or payment therefor, 
        and to otherwise comply with the terms of the plan and the 
        applicable requirements of this title,
            ``(iii) to pay to the plaintiff prejudgment interest on the 
        actual costs incurred in obtaining any item or service, or 
        payment therefor, at issue in the complaint, and
            ``(iv) to pay to the plaintiff a reasonable attorney's fee, 
        reasonable expert witness fees, and other reasonable costs 
        relating to the action on the charges on which the plaintiff 
        prevails.
The remedies provided under this paragraph shall be in addition to 
remedies otherwise provided under this section.
    ``(6)(A) The Secretary may assess a civil penalty against the plan 
administrator of, or the appropriate fiduciary (as defined in section 
503(b)(5)(K)) of, one or more group health plans for any pattern or 
practice thereof of repeated failures to provide benefits under the 
terms of the plan or plans without any reasonable basis or repeated 
violations thereby of the requirements of section 503 with respect to 
such plan or plans. Such penalty shall be payable only upon proof by 
clear and convincing evidence of such pattern or practice.
    ``(B) Such penalty shall be in an amount not to exceed the lesser 
of--
            ``(i) 20 percent of the aggregate value of claims shown by 
        the Secretary to have been denied, or unlawfully delayed in 
        violation of section 503, under such pattern or practice, or
            ``(ii) $1,000,000.
    ``(C) The plan administrator or the appropriate fiduciary of any 
group health plan or plans who has engaged in any such pattern or 
practice with respect to such plans, upon the petition of the 
Secretary, may be removed by the court from that position, and from any 
other involvement, with respect to such plan or plans, for a period of 
not less than 7 years.
    ``(D) For purposes of this paragraph, the phrase `without any 
reasonable basis' means, in connection with any denial of claims for 
benefits under a group health plan, that such denial does not have any 
reasonable basis, support, or justification under--
            ``(i) the facts regarding such claim which were reasonably 
        available to the plan administrator or the appropriate 
        fiduciary at the time the claim was denied, and
            ``(ii) the terms of the plan.
    (b) Conforming Amendment.--Section 502(a)(6) of such Act (29 U.S.C. 
1132(a)(6)) is amended by inserting ``or (c)(6)'' after ``(c)(2)''.

SEC. 1804. EFFECTIVE DATE.

    The amendments made by this subtitle shall take effect January 1, 
1995, except that the Secretary of Labor may issue regulations before 
such date under such amendments. The Secretary shall issue all 
regulations necessary to carry out the amendments made by this subtitle 
before the effective date thereof.

Subtitle I--Remedies and Enforcement With Respect to Group Health Plans

SEC. 1801. CLAIMS PROCEDURE FOR GROUP HEALTH PLANS.

    (a) In General.--Section 503 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1133) is amended--
            (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
        and
            (2) by adding at the end the following new subsection:
    ``(b) Special Rules for Group Health Plans.--
            ``(1) In general.--In addition to meeting the requirements 
        of subsection (a), every group health plan shall afford a 
        reasonable opportunity to any participant or beneficiary, whose 
        request for a preauthorization, an emergency preauthorization, 
        a utilization review determination, or an emergency utilization 
        review determination has been denied, for a full and fair 
        review by the appropriate fiduciary of the decision denying the 
        request
            ``(2) Time limits for deciding claims.--
                    ``(A) Initial decisions.--A group health plan shall 
                issue an initial approval or denial of any claim for 
                medical, surgical, or hospital benefits not later than 
                30 days after its filing completion date. Failure to 
                approve or deny such a claim within such 30-day period 
                shall be treated as a denial of the claim.
                    ``(B) Reviews of initial decisions.--Every review 
                by a fiduciary required under paragraph (1) of an 
                initial denial under subparagraph (A) shall be 
                completed not later than 30 days after the review 
                filing date. Failure to issue a decision affirming, 
                reversing, or modifying the initial denial shall be 
                treated as a final decision denying the claim.
            ``(3) Time limit for deciding requests for 
        preauthorization.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B)--
                            ``(i) Initial decisions.--If a request for 
                        preauthorization is required under the terms of 
                        a group health plan, the plan shall approve or 
                        deny any such request not later than 30 days 
                        after its filing completion date. Failure to 
                        approve or deny such a request within such 30-
                        day period shall be treated as a denial of the 
                        request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 30 days after the 
                        review filing date. Failure to issue a decision 
                        affirming, reversing, or modifying the initial 
                        denial within such 30-day period shall be 
                        treated as a final decision denying the 
                        request.
                    ``(B) Requests for emergency preauthorization.--
                            ``(i) Initial decisions.--In any case in 
                        which a request for preauthorization required 
                        under the terms of a group health plan is a 
                        request for emergency preauthorization, the 
                        plan shall approve or deny any such request not 
                        later than 10 days after its filing completion 
                        date (24 hours after such date in cases 
                        involving emergency medical care). Failure to 
                        approve or deny such a request within such 10-
                        day period (or 24-hour period) shall be treated 
                        as a denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 10 days after the 
                        review filing date (24 hours after such date in 
                        cases involving emergency medical care). 
                        Failure to issue a decision affirming, 
                        reversing, or modifying the initial denial 
                        within such 10-day period (or 24-hour period) 
                        shall be treated as a final decision denying 
                        the request.
            ``(4) Time limit for deciding requests for utilization 
        review determinations.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B)--
                            ``(i) Initial decisions.--If a request for 
                        a utilization review determination is required 
                        under the terms of a group health plan, the 
                        plan shall approve or deny any such request not 
                        later than 30 days after its filing completion 
                        date. Failure to approve or deny such a request 
                        within such 30-day period shall be treated as a 
                        denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 30 days after the 
                        review filing date. Failure to issue a decision 
                        affirming, reversing, or modifying the initial 
                        denial within such 30-day period shall be 
                        treated as a final decision denying the 
                        request.
                    ``(B) Requests for emergency utilization review 
                determinations.--
                            ``(i) Initial decisions.--In any case in 
                        which a request for a utilization review 
                        determination required under the terms of a 
                        group health plan is a request for an emergency 
                        utilization review determination, the plan 
                        shall approve or deny any such request not 
                        later than 10 days after its filing completion 
                        date (24 hours after such date in cases 
                        involving emergency medical care). Failure to 
                        approve or deny such a request within such 10-
                        day period (or 24-hour period) shall be treated 
                        as a denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 10 days after the 
                        review filing date (24 hours after such date in 
                        cases involving emergency medical care). 
                        Failure to issue a decision affirming, 
                        reversing, or modifying the initial denial 
                        within such 10-day period (or 24-hour period) 
                        shall be treated as a final decision denying 
                        the request.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Claim for medical, surgical, or hospital 
                benefits.--The term `claim for medical, surgical, or 
                hospital benefits' means a request for payment by a 
                group health plan of such benefits made by or on behalf 
                of a participant or beneficiary after the expense for 
                medical, surgical, or hospital care has been incurred.
                    ``(B) Utilization review determination.--The term 
                `utilization review determination' means a 
                determination under a group health plan solely that 
                proposed medical, surgical, or hospital care is 
                medically necessary (as defined in section 1131(7) of 
                the Health Security Act). Unless otherwise expressly 
                provided under the terms of the plan, any such 
                determination shall not by itself constitute a 
                guarantee that benefits under the plan will be 
                provided.
                    ``(C) Preauthorization.--The term 
                `preauthorization' means a determination under a group 
                health plan that proposed medical, surgical, or 
                hospital care meets the plan's terms and conditions of 
                coverage. Such a determination shall constitute a 
                guarantee that benefits under the plan will be 
                provided.
                    ``(D) Request for preauthoriza- tion.--The term 
                `request for preauthorization' means a request for 
                preauthorization by a group health plan of medical, 
                surgical, or hospital benefits made by or on behalf of 
                a participant or beneficiary before the expense for 
                such care has been incurred.
                    ``(E) Request for emergency preauthorization.--The 
                term `request for emergency preauthorization' means a 
                request for preauthorization. by a group health plan in 
                any case in which the medical, surgical, or hospital 
                benefits for which the expense is to be incurred 
                constitutes urgent medical care or emergency medical 
                care.
                    ``(F) Request for utilization review 
                determination.--The term `request for a utilization 
                review determination' means a request by or on behalf 
                of a participant or beneficiary, made before an expense 
                for medical, hospital, or surgical care has been 
                incurred, for a utilization review determination by a 
                plan.
                    ``(G) Request for emergency utilization review 
                determination.--The term `request for an emergency 
                utilization review determination' means a request for a 
                utilization review determination in any case in which 
                the medical, hospital, or surgical care to be incurred 
                constitutes urgent medical care or emergency medical 
                care.
                    ``(H) Urgent medical care.--The term `urgent 
                medical care' means medical, surgical, or hospital care 
                in any case in which a physician with appropriate 
                expertise has certified in writing that failure to 
                provide the participant or beneficiary with such care 
                within 45 days will result in either--
                            ``(i) the death of the participant or 
                        beneficiary within 120 days, or
                            ``(ii) the immediate, serious, and 
                        irreversible deterioration of the health of the 
                        participant or beneficiary within 120 days 
                        which will significantly increase the 
                        reasonable likelihood of death of the 
                        participant or beneficiary.
                    ``(I) Emergency medical care.--The term `emergency 
                medical care' means medical, surgical, or hospital care 
                in any case in which a physician with appropriate 
                expertise has certified in writing--
                            ``(i) that failure to immediately provide 
                        the care to the participant or beneficiary 
                        could reasonably be expected to result in--
                                    ``(I) placing the health of such 
                                participant or beneficiary (or, with 
                                respect to such a participant or 
                                beneficiary who is a pregnant woman, 
                                the health of the woman or her unborn 
                                child) in serious jeopardy,
                                    ``(II) serious impairment to bodily 
                                functions, or
                                    ``(III) serious dysfunction of any 
                                bodily organ or part,
                        or
                            ``(ii) that immediate provision of the care 
                        is necessary because the participant or 
                        beneficiary has made or is at serious risk of 
                        making an attempt to harm himself or herself or 
                        another individual.
                    ``(J) Filing completion date.--The term `filing 
                completion date' means, in connection with a group 
                health plan, the date as of which the plan is in 
                receipt of all information reasonably required to make 
                an initial decision to approve or deny a claim for 
                medical, surgical, or hospital benefits, a request for 
                preauthorization, a request for emergency 
                preauthorization, a request for a utilization review 
                determination or a request for an emergency utilization 
                review determination.
                    ``(K) Review filing date.--The term `review filing 
                date' means, in connection with a group health plan, 
                the date as of which the appropriate fiduciary is in 
                receipt of all information reasonably required to make 
                a decision upon a full and fair review of the denial, 
                in whole or in part, of a claim for medical, surgical, 
                or hospital benefits, a request for preauthorization, a 
                request for emergency preauthorization, a request for a 
                utilization review determination or a request for an 
                emergency utilization review determination.
                    ``(L) Appropriate fiduciary.--The term `appropriate 
                fiduciary' means with respect to any determination 
                under a group health plan a person designated by the 
                plan to make such determination. One or more 
                appropriate fiduciaries shall be designated under each 
                group health plan for making determinations under the 
                plan.''.
    (b) Definition of Group Health Plan.--
            (1) In general.--Section 3 of such Act (29 U.S.C. 1002) is 
        amended by adding at the end the following new paragraph:
    ``(42) The term `group health plan' means an employee welfare 
benefit plan providing medical care (as defined in section 213(d) of 
the Internal Revenue Code of 1986) to participants or beneficiaries 
directly or through insurance, reimbursement, or otherwise.''.
            (2) Conforming amendment.--Section 607 of such Act (29 
        U.S.C. 1167) is amended by striking paragraph (1).

SEC. 1802. MEDIATION OF GROUP HEALTH PLAN CLAIMS.

    (a) In General.--Part 5 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is amended--
            (1) by inserting below the heading for part 5 the 
        following:

                       ``Subpart A--In General'';

        and
            (2) by adding at the end the following new subpart:

           ``Subpart B--Mediation of Group Health Plan Claims

``SEC. 521. ELIGIBILITY FOR SUBMISSION TO MEDIATION.

    ``(a) In General.--The Secretary shall establish a mediation 
program under this subpart (hereinafter in this subpart referred to as 
the `mediation program') for the purpose of facilitating mediation of 
disputes meeting the requirements specified in subsection (b). At the 
time notice is provided to any participant or beneficiary of a group 
health plan's denial of any claim for benefits pursuant to section 503, 
the plan shall provide reasonable notice in writing to the participant 
or beneficiary whose claim for benefits under the plan has been denied 
of the availability of mediation under this subpart at the election of 
either the claimant or the plan.
    ``(b) Dispute Criteria.--A dispute may be submitted for mediation 
under the mediation program only if the following requirements are met 
with respect to such dispute:
            ``(1) Parties.--The dispute consists of an assertion by a 
        participant, a beneficiary, or the duly authorized 
        representative of a participant or beneficiary (or, in the case 
        of an assignment, the assignee) of one or more claims under a 
        group health plan, and a denial of such claims, or a denial of 
        appropriate reimbursement based on such claims, by such plan or 
        an appropriate fiduciary.
            ``(2) Nature of claim.--The claim consists of a claim for 
        benefits for medical, surgical, or hospital expenses under a 
        group health plan which consist of benefits described in 
        section 3(1).
            ``(3) Submission After Exhaustion of Plan Remedies.--The 
        claimant has received a final determination regarding the claim 
        under the plans' claims procedure under section 503, or has 
        otherwise exhausted all remedies under the plan provided 
        pursuant to section 503.
            ``(4) Appropriate fiduciary.--For purposes of this subpart, 
        the term `appropriate fiduciary' has the meaning provided in 
        section 503(b)(5)(K).

``SEC. 522. FACILITATORS.

    ``(a) Roster.--The Secretary shall maintain a list of individuals 
with appropriate expertise to serve as facilitators in proceedings 
under the mediation program.
    ``(b) Criteria.--In identifying individuals to serve as 
facilitators, the Secretary shall consider the following:
            ``(1) the individual's experience in dispute resolution;
            ``(2) the individual's ability to act impartially;
            ``(3) the individual's ability to perform evaluations 
        quickly and to present them in nontechnical terms; and
            ``(4) the individual's experience in employee medical, 
        hospital, and surgical benefits.
    ``(c) Appointment of Facilitator.--Within 15 days after either 
party files with the Secretary an election of mediation with respect to 
a dispute, the Secretary shall propose a facilitator, selected under a 
random selection procedure prescribed in regulations, and notify the 
parties of such selection. Within 10 days after receipt of the 
notification of the selection of a facilitator, either party may reject 
the proposed facilitator. If neither party objects to the Secretary's 
proposed facilitator within such 10-day period, the appointment shall 
become final. If either party objects to the Secretary's proposed 
facilitator, the procedure set forth in the preceding provisions of 
this subsection shall be repeated. Each party is limited to 1 objection 
to the Secretary's proposed facilitator for each mediation.

``SEC. 523. ROLE OF ATTORNEYS.

    ``Parties may represent themselves or be represented by attorneys 
throughout the mediation process.

``SEC. 524. INITIATION OF MEDIATION.

    ``(a) Claimant Initiation.--A claimant may initiate mediation of a 
dispute under this subpart only if no action has been commenced by the 
claimant under section 502 with respect to any claim involved. To 
initiate mediation, a claimant shall file an election for mediation 
with the Secretary (and shall file a copy of the election with the plan 
or the appropriate fiduciary) within 30 days after a final 
determination regarding the claim pursuant to section 503.
    ``(b) Plan Initiation.--A participant or beneficiary may not 
commence an action under section 502 with respect to any claim until 
the participant or beneficiary has provided to the plan or the 
appropriate fiduciary 10 days advance notice of the filing of such 
action. Within the earlier of (1) 25 days after receipt of such a 
notice with respect to any claim or (2) the date preceding the date on 
which such claim is filed in court, the plan or the appropriate 
fiduciary may elect mediation of a dispute under this subpart involving 
such claim by filing an election for mediation with the Secretary (and 
a copy of the election with the claimant). Upon a timely election of 
mediation by the plan or the appropriate fiduciary, the claimant's 
right to pursue the claim under section 502 shall be suspended until 
the earlier of 75 days after the date of the filing of the election of 
mediation or the termination of the mediation proceedings.
    ``(c) Election for Mediation.--An election by any party for 
mediation under this subpart shall be in such form and manner as the 
Secretary shall prescribe by regulation.
    ``(d) Participation.--The claimant and the plan shall participate 
in the mediation. Each party shall provide the facilitator a written 
summary of its position with respect to the dispute accompanied by 
supporting documentation.
    ``(e) Filing Fee.--The party initiating mediation under this 
section shall include with any election for mediation under this 
subpart a reasonable nonrefundable filing fee payable to the Secretary. 
The filing fee shall be determined pursuant to regulations prescribed 
by the Secretary.
    ``(f) Tolling of Statutes of Limitations.--The applicable statute 
of limitations with respect to any claim involved in a dispute subject 
to mediation proceedings under this subpart shall be tolled for the 
period commencing with the 10-day notice period required under 
subsection (b) and ending with the termination of the mediation 
proceedings with respect to such dispute. In no event shall the 
applicable statute of limitations be tolled beyond the 60-day-time 
limit for completion of mediation provided under section 526.

``SEC. 525. MEDIATION PROCEDURE.

    ``(a) In General.--Mediation proceedings under this subpart shall 
be conducted, at locations convenient to complainants, by facilitators 
recruited and assigned by the Secretary under section 522.
    ``(b) Duties of Facilitator.--The Secretary shall prescribe by 
regulation the duties and role of the facilitator during the mediation 
process. Such regulations may require the facilitator to identify 
parties, establish a schedule, request position papers from the 
parties, and evaluate positions of the parties. Such regulations shall 
provide that the mediation will be informal, convenient, inexpensive, 
and expeditious for all parties.
    ``(c) Neutrality of Facilitator.--The facilitator shall maintain a 
neutral stance between the parties.

``SEC. 526. MEDIATION TIME LIMIT.

    ``Any mediation proceedings commenced under this subpart shall be 
completed within 60 days from the final appointment of a facilitator 
pursuant to section 522(c).

``SEC. 527. COST OF MEDIATION.

    ``All reasonable costs of the mediation process under this subpart 
with respect to any dispute, including the cost of the facilitator, 
shall be divided equally among the parties. Facilitators shall be 
compensated at a rate established by the Secretary by regulation. The 
Secretary shall prescribe regulations specifying reasonable mediation 
costs and alternative means of allocating the costs in cases of 
hardship on the part of the claimant.

``SEC. 528. LEGAL EFFECT OF PARTICIPATION IN MEDIATION PROGRAM.

    ``(a) Nonbinding Mediation.--The results of any mediation under 
this subpart shall be treated as advisory in nature and nonbinding. 
Except as provided in subsection (b), the rights of the parties shall 
not be affected by participation in the mediation program.
    ``(b) Resolution Through Settlement Agreement.--If a dispute is 
settled through participation in the mediation program, the facilitator 
shall, upon the request of either party, assist the parties in drawing 
up a settlement agreement between the parties.

``SEC. 529. CONFIDENTIALITY AND ADMISSIBILITY.

    ``(a) In General.--All documents and communications made during or 
generated in connection with the mediation program, as well as any 
settlement offers or agreements made or entered into under such 
program--
            ``(1) shall be privileged and confidential, and
            ``(2) shall not be admissible as evidence in any Federal or 
        State judicial proceeding unless all parties to the mediation 
        consent in writing.
    ``(b) Execution of Privilege.--Any individual or entity involved in 
the mediation (including any party or facilitator or other individual 
who acts on behalf of a party or who provides information or an opinion 
in connection with the mediation) receiving a subpoena or other lawful 
process seeking disclosure of any information or documents rendered 
privileged and confidential under subsection (a) shall assert the 
privilege provided under subsection (a) and promptly notify all parties 
to the mediation proceedings of the request for disclosure. The 
privilege provided for in this section shall be in addition to any 
attorney-client privilege or other privilege which may be asserted by a 
party and nothing in this section shall constitute a waiver of such 
attorney-client privilege or other privilege.''.
    (b) Clerical Amendments.--The table of contents in section 1 of 
such Act is amended--
            (1) by inserting after the item relating to the heading for 
        part 5 of subtitle B of title I the following new item:

                   ``Subpart A--General Provisions'';

        and
            (2) by inserting after the item relating to section 514 the 
        following new items:

           ``Subpart B--Mediation of Group Health Plan Claims

        ``Sec. 521. Eligibility for submission to mediation.
        ``Sec. 522. Facilitators.
        ``Sec. 523. Role of attorneys.
        ``Sec. 524. Initiation of mediation.
        ``Sec. 525. Mediation procedure.
        ``Sec. 526. Mediation time limit.
        ``Sec. 527. Cost of mediation.
        ``Sec. 528. Legal effect of participation in mediation program.
        ``Sec. 529. Confidentiality and admissibility.''.

SEC. 1803. AVAILABLE COURT REMEDIES.

    (a) In General.--Section 502(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) is amended by adding at the end 
the following new paragraphs:
    ``(5) In any action commenced under subsection (a) by a participant 
or beneficiary with respect to a group health plan in which the 
plaintiff alleges that a person, in the capacity of a fiduciary and in 
violation of the terms of the plan or this title, has taken an action 
resulting in a failure to provide an item or service, or payment 
therefor, or has failed to take an action for which such person is 
responsible under the plan and which is necessary under the plan for 
provision of such item or service, or payment therefor, upon finding in 
favor of the plaintiff, the court shall cause to be served on the 
defendant an order requiring the defendant--
            ``(i) to cease and desist from the alleged action or 
        failure to act,
            ``(ii) to provide the item or service, or payment therefor, 
        and to otherwise comply with the terms of the plan and the 
        applicable requirements of this title,
            ``(iii) to pay to the plaintiff prejudgment interest on the 
        actual costs incurred in obtaining any item or service, or 
        payment therefor, at issue in the complaint, and
            ``(iv) to pay to the plaintiff a reasonable attorney's fee, 
        reasonable expert witness fees, and other reasonable costs 
        relating to the action on the charges on which the plaintiff 
        prevails.
The remedies provided under this paragraph shall be in addition to 
remedies otherwise provided under this section.
    ``(6)(A) The Secretary may assess a civil penalty against the plan 
administrator of, or the appropriate fiduciary (as defined in section 
503(b)(5)(K)) of, one or more group health plans for any pattern or 
practice thereof of repeated failures to provide benefits under the 
terms of the plan or plans without any reasonable basis or repeated 
violations thereby of the requirements of section 503 with respect to 
such plan or plans. Such penalty shall be payable only upon proof by 
clear and convincing evidence of such pattern or practice.
    ``(B) Such penalty shall be in an amount not to exceed the lesser 
of--
            ``(i) 20 percent of the aggregate value of claims shown by 
        the Secretary to have been denied, or unlawfully delayed in 
        violation of section 503, under such pattern or practice, or
            ``(ii) $1,000,000.
    ``(C) The plan administrator or the appropriate fiduciary of any 
group health plan or plans who has engaged in any such pattern or 
practice with respect to such plans, upon the petition of the 
Secretary, may be removed by the court from that position, and from any 
other involvement, with respect to such plan or plans, for a period of 
not less than 7 years.
    ``(D) For purposes of this paragraph, the phrase `without any 
reasonable basis' means, in connection with any denial of claims for 
benefits under a group health plan, that such denial does not have any 
reasonable basis, support, or justification under--
            ``(i) the facts regarding such claim which were reasonably 
        available to the plan administrator or the appropriate 
        fiduciary at the time the claim was denied, and
            ``(ii) the terms of the plan.
    (b) Conforming Amendment.--Section 502(a)(6) of such Act (29 U.S.C. 
1132(a)(6)) is amended by inserting ``or (c)(6)'' after ``(c)(2)''.

SEC. 1804. EFFECTIVE DATE.

    The amendments made by this subtitle shall take effect January 1, 
1995, except that the Secretary of Labor may issue regulations before 
such date under such amendments. The Secretary shall issue all 
regulations necessary to carry out the amendments made by this subtitle 
before the effective date thereof.

   Subtitle J--Delivery of Health Care Services to Illegal Immigrants

SEC. 1901. STUDY ON THE DELIVERY OF HEALTH CARE SERVICES TO ILLEGAL 
              IMMIGRANTS.

    (a) In General.--As soon as practicable after the date of the 
enactment of this Act, the Secretary of Health and Human Services shall 
conduct a detailed study of health care in the United States to 
populations of individuals immigrating to the United States illegally, 
including the effect of illegal immigration on levels of health costs 
and the shifting of health costs.
    (b) Matters to be Analyzed.--In conducting the study under this 
section, the Secretary shall analyze--
            (1) the extent to which individuals illegally immigrating 
        into the United States obtain health care services in the 
        United States,
            (2) the costs of such services,
            (3) the means currently used to finance such costs,
            (4) the means currently used for identifying, evaluating, 
        preventing, and resolving health problems of populations 
        comprised of such individuals,
            (5) the extent of efforts currently being undertaken to 
        prevent or resolve such health problems,
            (6) the extent of efforts currently being undertaken to 
        educate populations comprised of such individuals concerning 
        such health problems and to coordinate such efforts,
            (7) the programs currently in place for carrying out the 
        activities described in paragraphs (3) through (6), and
            (8) the extent of intergovernmental cooperation currently 
        in place between the United States and other countries in 
        dealing with health problems described in the preceding 
        provisions of this subsection.

SEC. 1902. REPORT.

    Not later than one year after the date of the enactment of this 
Act, the Secretary of Health and Human Services shall submit to each 
House of the Congress a final report on the matters analyzed in the 
study conducted under section 1801. The Secretary shall include in such 
report any recommendations derived by the Secretary regarding 
appropriate means of--
            (1) alleviating the health problems peculiar to populations 
        of individuals who have immigrated to the United States 
        illegally,
            (2) financing health care provided to such populations, and
            (3) increasing intergovernmental cooperation and 
        coordination of efforts between the United States and other 
        countries to alleviate such health problems and to finance such 
        efforts.

     TITLE II--HEALTH CARE COST CONTAINMENT AND QUALITY ENHANCEMENT

                     table of contents of subtitle

            Subtitle A--Medical Malpractice Liability Reform

                       Part 1--General Provisions

Sec. 2001. Federal reform of medical malpractice liability actions.
Sec. 2002. Definitions.
Sec. 2003. Effective date.
        Part 2--Medical Malpractice and Product Liability Reform

Sec. 2011. Requirement for initial resolution of action through 
                            alternative dispute resolution.
Sec. 2012. Calculation and payment of damages.
Sec. 2013. Treatment of attorney's fees and other costs.
Sec. 2014. Joint and several liability.
Sec. 2015. Statute of limitations.
Sec. 2016. Uniform standard for determining negligence.
Sec. 2017. Special provision for certain obstetric services.
 Part 3--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 2031. Basic requirements.
Sec. 2032. Certification of State systems; applicability of alternative 
                            Federal system.
Sec. 2033. Reports on implementation and effectiveness of alternative 
                            dispute resolution systems.
   Part 4--Other Provisions Relating to Medical Malpractice Liability

Sec. 2041. Permitting State professional societies to participate in 
                            disciplinary activities.
Sec. 2042. Study of incentives to encourage voluntary service by 
                            physicians.
Sec. 2043. Requirements for risk management programs.
Sec. 2044. Grants for medical safety promotion.
  Subtitle B--Administrative Cost Savings and Fair Health Information 
                               Practices

                  Part 1--Administrative Cost Savings

Sec. 2100. Purpose.
Sec. 210subpart a--standards for data elements and transactions
Sec. 2103. General requirements on Secretary.
Sec. 2104. Standards for data elements of health information.
Sec. 2105. Information transaction standards.
Secsubpart b--requirements with respect to certain transactions and 
                              information
Sec. 2111. Standard transactions and information.
Sec. 2112. Accessing health information for authorized purposes.
Sec. 2113. Ensuring availability of information.
Sec. 2114. Timetabsubpart c--miscellaneous provisionss.
Sec. 2121. Standards and certification for health information network 
                            services.
Sec. 2122. Imposition of additional requirements.
Sec. 2123. Effect on State law.
Sec. 2124. Grantssubpart d--assistance to the secretary
Sec. 2131. General requirement on Secretary.
Sec. 2132. Health Information Advisory Committee.
               Part 2--Fair Health Information Practices

Sec. 2140. Dsubpart a--duties of health information trustees
Sec. 2141. Inspection of protected health information.
Sec. 2142. Amendment of protected health information.
Sec. 2143. Notice of information practices.
Sec. 2144. Accounting for disclosures.
Sec. subpart b--use and disclosure of protected health information
Sec. 2151. General limitations on use and disclosure.
Sec. 2152. Authorizations for disclosure of protected health 
                            information.
Sec. 2153. Treatment, payment, and oversight.
Sec. 2154. Next of kin and directory information.
Sec. 2155. Public health.
Sec. 2156. Health research.
Sec. 2157. Emergency circumstances.
Sec. 2158. Judicial and administrative purposes.
Sec. 2159. Law enforcement.
Sec. 2160. Subpoenas, warrants, and search warrants.
Sec. 2161. subpart c--access procedures and challenge rights
Sec. 2171. Access procedures for law enforcement subpoenas, warrants, 
                            and search warrants.
Sec. 2172. Challenge procedures for law enforcement subpoenas.
Sec. 2173. Access and challenge procedures for other subpoenas.
Sec. 2174. Construction of subpart; suspension of statute of 
                            limitations.
Sec. 2175. Responssubpart d--miscellaneous provisions
Sec. 2181. Payment card and electronic payment transactions.
Sec. 2182. Access to protected health information outside of the United 
                            States.
Sec. 2183. Standards for electronic documents and communications.
Sec. 2184. Duties and authorities of affiliated persons.
Sec. 2185. Agents and attorneys.
Sec. 2186. Minors.
Sec. 2187. Maintenance ofsubpart e--enforcementlth information.
Sec. 2191. Civil actions.
Sec. 2192. Civil money penalties.
Sec. 2193. Alternative dispute resolution.
Sec. 2194.subpart f--amendments to title 5, united states code
Secsubpart g--regulations, research, and education; effective dates; 
             applicability; and relationship to other laws
Sec. 2196. Regulations; research and education.
Sec. 2197. Effective dates.
Sec. 2198. Applicability.
Sec. 2199. Relationship to other laws.
  Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts

Sec. 2201. Individuals allowed deduction from gross income for cost of 
                            catastrophic health plan.
Sec. 2202. Medical savings accounts.
                         Subtitle D--Anti-Fraud

Part 1--Establishment of All-payer Health Care Fraud and Abuse Control 
                                Program

Sec. 2301. All-payer health care fraud and abuse control program.
Sec. 2302. Authorization of additional appropriations for investigators 
                            and other personnel.
Sec. 2303. Establishment of anti-fraud and abuse trust fund.
       Part 2--Revisions to Current Sanctions for Fraud and Abuse

Sec. 2311. Mandatory exclusion from participation in medicare and State 
                            health care programs.
Sec. 2312. Establishment of minimum period of exclusion for certain 
                            individuals and entities subject to 
                            permissive exclusion from medicare and 
                            State health care programs.
Sec. 2313. Revisions to criminal penalties.
Sec. 2315. Revisions to limitations on physician self-referral.
Sec. 2316. Medicare health maintenance organizations.
Sec. 2317. Effective date.
                   Part 3--Amendments to Criminal Law

Sec. 2321. Penalties for health care fraud.
Sec. 2322. Rewards for information leading to prosecution and 
                            conviction.
Sec. 2323. Broadening application of mail fraud statute.
                       Part 4--Advisory Opinions

Sec. 2331. Authorizing the Secretary of Health and Human Services to 
                            issue advisory opinions under title XI.
Sec. 2332. Authorizing the Secretary of Health and Human Services to 
                            issue advisory opinions relating to 
                            physician ownership and referral.
Sec. 2333. Effective date.
Subtitle E--Increased Medicare Beneficiary Choice; Additional Medicare 
                                Reforms

             Part 1--Increased Medicare Beneficiary Choice

Sec. 2401. Requirements for health maintenance organizations under 
                            medicare.
Sec. 2402. Expansion and revision of medicare select policies.
Sec. 2403. Including notice of available health maintenance 
                            organizations in annual notice to 
                            beneficiaries.
Sec. 2404. Legislative proposal on enrolling medicare beneficiaries in 
                            qualified health plans.
Sec. 2405. Optional interim enrollment of medicare beneficiaries in 
                            private health plans.
    Part 2--Medicare Part B Premium; Other Medicare Payment Changes

Sec. 2411. Extension of current rules for computing medicare part B 
                            premium.
Sec. 2412. Increase in medicare part B premium for individuals with 
                            high income.
Sec. 2413. Improved efficiency through consolidation of administration 
                            of parts A and B.
Sec. 2414. Extension of medicare secondary payment provisions.
             Subtitle F--Health Care Antitrust Improvements

Sec. 2501. Protection from antitrust laws for certain competitive and 
                            collaborative activities.
Sec. 2502. Designation of safe harbors.
Sec. 2503. Certificates of review.
Sec. 2504. Notifications providing reduction in certain penalties under 
                            antitrust law for health care joint 
                            ventures.
Sec. 2505. Review and reports on safe harbors, certificates of review, 
                            and notifications.
Sec. 2506. Rules, regulations, and guidelines.
Sec. 2507. Establishment of HHS Office of Health Care Competition 
                            Policy.
Sec. 2508. Definitions.
    Subtitle G--Encouraging Enforcement Activities of Medical Self-
                          Regulatory Entities

   Part 1--Application of the Clayton Act to Medical Self-regulatory 
                                Entities

Sec. 2601. Antitrust exemption for medical self-regulatory entities.
Sec. 2602. Definitions.
                Part 2--Consultation by Federal Agencies

Sec. 2611. Consultation with medical self-regulatory entities 
                            respecting medical professional guidelines 
                            and standards.
Subtitle H--Reform of Clinical Laboratory Requirements for Simple Tests

Sec. 2701. Eliminating CLIA requirement for certificate of waiver for 
                            simple laboratory examinations and 
                            procedures.
Sec. 2702. Amendment related to simple laboratory examinations.
Sec. 2703. Amendment related to study.
Sec. 2704. Amendments related to the Clinical Laboratory Improvement 
                            Advisory Committee.
                  Subtitle I--Miscellaneous Provisions

Sec. 2801. Requirement that certain agencies prefund government health 
                            benefits contributions for their 
                            annuitants.
Sec. 2802. Ineligibility of aliens for SSI and medicaid.
Sec. 2803. Limitation on SSI benefits for drug and alcohol addicts.

            Subtitle A--Medical Malpractice Liability Reform

                       PART 1--GENERAL PROVISIONS

SEC. 2001. FEDERAL REFORM OF MEDICAL MALPRACTICE LIABILITY ACTIONS.

    (a) Applicability.--This subtitle shall apply with respect to any 
medical malpractice liability claim and to any medical malpractice 
liability action brought in any State or Federal court, except that 
this subtitle shall not apply to a claim or action for damages arising 
from a vaccine-related injury or death to the extent that title XXI of 
the Public Health Service Act applies to the claim or action.
    (b) Preemption.--The provisions of this subtitle shall preempt any 
State law to the extent such law is inconsistent with the limitations 
contained in such provisions. The provisions of this subtitle shall not 
preempt any State law that provides for defenses or places limitations 
on a person's liability in addition to those contained in this 
subtitle, places greater limitations on the amount of attorneys' fees 
that can be collected, or otherwise imposes greater restrictions than 
those provided in this subtitle.
    (c) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in subsection (b) shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum.
    (d) Federal Court Jurisdiction Not Established on Federal Question 
Grounds.--Nothing in this subtitle shall be construed to establish any 
jurisdiction in the district courts of the United States over medical 
malpractice liability actions on the basis of section 1331 or 1337 of 
title 28, United States Code.

SEC. 2002. DEFINITIONS.

    As used in this subtitle:
            (1) Alternative dispute resolution system; ADR.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system established under this subtitle that provides for the 
        resolution of medical malpractice liability claims in a manner 
        other than through medical malpractice liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice liability claim, and any person 
        on whose behalf such a claim is alleged, including the decedent 
        in the case of an action brought through or on behalf of an 
        estate.
            (3) Clear and convincing evidence.--The term ``clear and 
        convincing evidence'' is that measure or degree of proof that 
        will produce in the mind of the trier of fact a firm belief or 
        conviction as to the truth of the allegations sought to be 
        established, except that such measure or degree of proof is 
        more than that required under preponderance of the evidence, 
        but less than that required for proof beyond a reasonable 
        doubt.
            (4) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for hospital and other 
        medical expenses, lost wages, lost employment, and other 
        pecuniary losses.
            (5) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by the laws or 
        regulations of the State to be licensed or certified by the 
        State to provide such services in the State.
            (6) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by the laws or regulations of the State to be 
        licensed or certified by the State to engage in the delivery of 
        such services in the State.
            (7) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or a medical malpractice liability 
        claim.
            (8) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a civil action 
        brought in a State or Federal court against a health care 
        provider or health care professional in which the plaintiff 
        alleges a medical malpractice liability claim, but does not 
        include any action in which the plaintiff's sole allegation is 
        an allegation of an intentional tort.
            (9) Medical malpractice liability claim.--The term 
        ``medical malpractice liability claim'' means a claim in which 
        the claimant alleges that injury was caused by the provision of 
        (or the failure to provide) health care services or the use of 
        a medical product.
            (10) Medical product.--
                    (A) In general.--The term ``medical product'' 
                means, with respect to the allegation of a claimant, a 
                drug (as defined in section 201(g)(1) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a 
                medical device (as defined in section 201(h) of the 
                Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
                if--
                            (i) such drug or device was subject to 
                        premarket approval under section 505, 507, or 
                        515 of the Federal Food, Drug, and Cosmetic Act 
                        (21 U.S.C. 355, 357, or 360e) or section 351 of 
                        the Public Health Service Act (42 U.S.C. 262) 
                        with respect to the safety of the formulation 
                        or performance of the aspect of such drug or 
                        device which is the subject of the claimant's 
                        allegation or the adequacy of the packaging or 
                        labeling of such drug or device, and such drug 
                        or device is approved by the Food and Drug 
                        Administration; or
                            (ii) the drug or device is generally 
                        recognized as safe and effective under 
                        regulations issued by the Secretary of Health 
                        and Human Services under section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
                        321(p)).
                    (B) Exception in case of misrepresentation or 
                fraud.--Notwithstanding subparagraph (A), the term 
                ``medical product'' shall not include any product 
                described in such subparagraph if the claimant shows 
                that the product is approved by the Food and Drug 
                Administration for marketing as a result of withheld 
                information, misrepresentation, or an illegal payment 
                by manufacturer of the product.
            (11) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for physical and 
        emotional pain, suffering, inconvenience, physical impairment, 
        mental anguish, disfigurement, loss of enjoyment of life, loss 
        of consortium, and other nonpecuniary losses, but does not 
        include punitive damages.
            (12) Punitive damages; exemplary damages.--The terms 
        ``punitive damages'' and ``exemplary damages'' mean 
        compensation, in addition to compensation for actual harm 
        suffered, that is awarded for the purpose of punishing a person 
        for conduct deemed to be malicious, wanton, willful, or 
        excessively reckless.
            (13) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (14) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, and American Samoa.

SEC. 2003. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b) and section 
2017(c), this subtitle shall apply with respect to claims accruing or 
actions brought on or after the expiration of the 3-year period that 
begins on the date of the enactment of this Act.
    (b) Exception for States Requesting Earlier Implementation of 
Reforms.--
            (1) Application.--A State may submit an application to the 
        Secretary requesting the early implementation of this subtitle 
        with respect to claims or actions brought in the State.
            (2) Decision by secretary.--The Secretary shall issue a 
        response to a State's application under paragraph (1) not later 
        than 90 days after receiving the application. If the Secretary 
        determines that the State meets the requirements of this 
        subtitle at the time of submitting its application, the 
        Secretary shall approve the State's application, and this 
        subtitle shall apply with respect to actions brought in the 
        State on or after the expiration of the 90-day period that 
        begins on the date the Secretary issues the response. If the 
        Secretary denies the State's application, the Secretary shall 
        provide the State with a written explanation of the grounds for 
        the decision.

        PART 2--MEDICAL MALPRACTICE AND PRODUCT LIABILITY REFORM

SEC. 2011. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--
            (1) State cases.--A medical malpractice liability action 
        may not be brought in any State court during a calendar year 
        unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under an 
        alternative dispute resolution system certified for the year by 
        the Secretary under section 2032(a), or, in the case of a State 
        in which such a system is not in effect for the year, under the 
        alternative Federal system established under section 2032(b).
            (2) Federal diversity actions.--A medical malpractice 
        liability action may not be brought in any Federal court under 
        section 1332 of title 28, United States Code, during a calendar 
        year unless the medical malpractice liability claim that is the 
        subject of the action has been initially resolved under the 
        alternative dispute resolution system referred to in paragraph 
        (1) that applied in the State whose law applies in such action.
            (3) Claims against united states.--
                    (A) Establishment of process for claims.--The 
                Attorney General shall establish an alternative dispute 
                resolution process for the resolution of tort claims 
                consisting of medical malpractice liability claims 
                brought against the United States under chapter 171 of 
                title 28, United States Code. Under such process, the 
                resolution of a claim shall occur after the completion 
                of the administrative claim process applicable to the 
                claim under section 2675 of such title.
                    (B) Requirement for initial resolution under 
                process.--A medical malpractice liability action based 
                on a medical malpractice liability claim described in 
                subparagraph (A) may not be brought in any Federal 
                court unless the claim has been initially resolved 
                under the alternative dispute resolution process 
                established by the Attorney General under such 
                subparagraph.
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
            (1) the ADR reaches a decision on whether the defendant is 
        liable to the plaintiff for damages; and
            (2) if the ADR determines that the defendant is liable, the 
        ADR reaches a decision on the amount of damages assessed 
        against the defendant.
    (c) Procedures for Filing Actions.--
            (1) Notice of intent to contest decision.--Not later than 
        60 days after a decision is issued with respect to a medical 
        malpractice liability claim under an alternative dispute 
        resolution system, each party affected by the decision shall 
        submit a sealed statement to a court of competent jurisdiction 
        indicating whether or not the party intends to contest the 
        decision.
            (2) Deadline for filing action.--A medical malpractice 
        liability action may not be brought by a party unless--
                    (A) the party has filed the notice of intent 
                required by paragraph (1); and
                    (B) the party files the action in a court of 
                competent jurisdiction not later than 90 days after the 
                decision resolving the medical malpractice liability 
                claim that is the subject of the action is issued under 
                the applicable alternative dispute resolution system.
            (3) Court of competent jurisdiction.--For purposes of this 
        subsection, the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Legal Effect of Uncontested ADR Decision.--The decision reached 
under an alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court. The previous sentence 
shall not apply to a decision that is contested by a party affected by 
the decision pursuant to subsection (c)(1).

SEC. 2012. CALCULATION AND PAYMENT OF DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a claimant and the members 
of the claimant's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) Treatment of Punitive Damages.--
            (1) Basis for recovery.--Punitive or exemplary damages 
        shall not be awarded in a medical malpractice liability action 
        unless the claimant establishes by clear and convincing 
        evidence that the injury suffered was the direct result of 
        conduct manifesting a malicious, wanton, willful, or 
        excessively reckless disregard of the safety of others.
            (2) No award against manufacturer of medical product.--In 
        the case of a medical malpractice liability action in which the 
        plaintiff alleges a claim against the manufacturer of a medical 
        product, no punitive or exemplary damages may be awarded 
        against such manufacturer.
            (3) Payments to state for medical quality assurance 
        activities.--
                    (A) In general.--Any punitive or exemplary damages 
                awarded in a medical malpractice liability action shall 
                be paid to the State in which the action is brought or, 
                in a case brought in Federal court, in the State in 
                which the health care services that caused the injury 
                that is the subject of the action were provided.
                    (B) Activities described.--A State shall use 
                amounts paid pursuant to subparagraph (A) to carry out 
                activities to assure the safety and quality of health 
                care services provided in the State, including (but not 
                limited to)--
                            (i) licensing or certifying health care 
                        professionals and health care providers in the 
                        State;
                            (ii) operating alternative dispute 
                        resolution systems;
                            (iii) carrying out public education 
                        programs relating to medical malpractice and 
                        the availability of alternative dispute 
                        resolution systems in the State; and
                            (iv) carrying out programs to reduce 
                        malpractice-related costs for retired providers 
                        or other providers volunteering to provide 
                        services in medically underserved areas.
                    (C) Maintenance of effort.--A State shall use any 
                amounts paid pursuant to subparagraph (A) to supplement 
                and not to replace amounts spent by the State for the 
                activities described in subparagraph (B).
    (c) Periodic Payments for Future Losses.--
            (1) General rule.--In any medical malpractice liability 
        action in which the damages awarded for future economic loss 
        exceeds $100,000, a defendant may not be required to pay such 
        damages in a single, lump-sum payment, but shall be permitted 
        to make such payments periodically based on when the damages 
        are found likely to occur, as such payments are determined by 
        the court.
            (2) Waiver.--A court may waive the application of paragraph 
        (1) with respect to a defendant if the court determines that it 
        is not in the best interests of the plaintiff to receive 
        payments for damages on such a periodic basis.
    (d) Mandatory Offsets for Damages Paid by a Collateral Source.--
            (1) In general.--With respect to a medical malpractice 
        liability claim or action, the total amount of damages received 
        by an individual under such claim or action shall be reduced, 
        in accordance with paragraph (2), by any other payment that has 
        been, or will be, made to an individual to compensate such 
        individual for the injury that was the subject of such claim or 
        action.
            (2) Amount of reduction.--The amount by which an award of 
        damages to an individual for an injury shall be reduced under 
        paragraph (1) shall be--
                    (A) the total amount of any payments (other than 
                such award) that have been made or that will be made to 
                such individual to pay costs of or compensate such 
                individual for the injury that was the subject of the 
                claim or action; minus
                    (B) the amount paid by such individual (or by the 
                spouse, parent, or legal guardian of such individual) 
                to secure the payments described in subparagraph (A).

SEC. 2013. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

    (a) Limitation on Amount of Contingency Fees.--
            (1) In general.--An attorney who represents, on a 
        contingency fee basis, a claimant in a medical malpractice 
        liability claim may not charge, demand, receive, or collect for 
        services rendered in connection with such claim in excess of 
        the following amount recovered by judgment or settlement under 
        such claim:
                    (A) 25 percent of the first $150,000 (or portion 
                thereof) recovered, plus
                    (B) 10 percent of any amount in excess of $150,000 
                recovered.
            (2) Calculation of periodic payments.--In the event that a 
        judgment or settlement includes periodic or future payments of 
        damages, the amount recovered for purposes of computing the 
        limitation on the contingency fee under paragraph (1) shall be 
        based on the cost of the annuity or trust established to make 
        the payments. In any case in which an annuity or trust is not 
        established to make such payments, such amount shall be based 
        on the present value of the payments.
    (b) Requiring Party Contesting ADR Ruling To Pay Attorney's Fees 
and Other Costs.--
            (1) In general.--The court in a medical malpractice 
        liability action shall require the party that (pursuant to 
        section 2011(c)(1)) contested the ruling of the alternative 
        dispute resolution system with respect to the medical 
        malpractice liability claim that is the subject of the action 
        to pay to the opposing party the costs incurred by the opposing 
        party under the action, including attorney's fees, fees paid to 
        expert witnesses, and other litigation expenses (but not 
        including court costs, filing fees, or other expenses paid 
        directly by the party to the court, or any fees or costs 
        associated with the resolution of the claim under the 
        alternative dispute resolution system), but only if--
                    (A) in the case of an action in which the party 
                that contested the ruling is the claimant, the amount 
                of damages awarded to the party under the action does 
                not exceed the amount of damages awarded to the party 
                under the ADR system by at least 10 percent; and
                    (B) in the case of an action in which the party 
                that contested the ruling is the defendant, the amount 
                of damages assessed against the party under the action 
                is not at least 10 percent less than the amount of 
                damages assessed under the ADR system.
            (2) Exceptions.--Paragraph (1) shall not apply if--
                    (A) the party contesting the ruling made under the 
                previous alternative dispute resolution system shows 
                that--
                            (i) the ruling was procured by corruption, 
                        fraud, or undue means,
                            (ii) there was partiality or corruption 
                        under the system,
                            (iii) there was other misconduct under the 
                        system that materially prejudiced the party's 
                        rights, or
                            (iv) the ruling was based on an error of 
                        law;
                    (B) the party contesting the ruling made under the 
                alternative dispute resolution system presents new 
                evidence before the trier of fact that was not 
                available for presentation under the ADR system;
                    (C) the medical malpractice liability action raised 
                a novel issue of law; or
                    (D) the court finds that the application of such 
                paragraph to a party would constitute an undue 
                hardship, and issues an order waiving or modifying the 
                application of such paragraph that specifies the 
                grounds for the court's decision.
            (3) Requirement for performance bond.--The court in a 
        medical malpractice liability action shall require the party 
        that (pursuant to section 2011(c)(1)) contested the ruling of 
        the alternative dispute resolution system with respect to the 
        medical malpractice liability claim that is the subject of the 
        action to post a performance bond (in such amount and 
        consisting of such funds and assets as the court determines to 
        be appropriate), except that the court may waive the 
        application of such requirement to a party if the court 
        determines that the posting of such a bond is not necessary to 
        ensure that the party shall meet the requirements of this 
        subsection to pay the opposing party the costs incurred by the 
        opposing party under the action.
            (4) Limit on attorney's fees paid.--Attorneys' fees that 
        are required to be paid under paragraph (1) by the contesting 
        party shall not exceed the amount of the attorneys' fees 
        incurred by the contesting party in the action. If the 
        attorneys' fees of the contesting party are based on a 
        contingency fee agreement, the amount of attorneys' fees for 
        purposes of the preceding sentence shall not exceed the 
        reasonable value of those services.
            (5) Records.--In order to receive attorneys' fees under 
        paragraph (1), counsel of record in the medical malpractice 
        liability action involved shall maintain accurate, complete 
        records of hours worked on the action, regardless of the fee 
        arrangement with the client involved.
    (c) Contingency Fee Defined.--As used in this section, the term 
``contingency fee'' means any fee for professional legal services which 
is, in whole or in part, contingent upon the recovery of any amount of 
damages, whether through judgment or settlement.

SEC. 2014. JOINT AND SEVERAL LIABILITY.

    A defendant may be held severally but not jointly liable in a 
medical malpractice action. A person found liable for damages in any 
such action may be found liable, if at all, only for those damages 
directly attributable to the person's proportionate share of fault or 
responsibility for the injury, and may not be found liable for damages 
attributable to the proportionate share of fault or responsibility of 
any other person (without regard to whether that person is a party to 
the action) for the injury, including any person bringing the action.

SEC. 2015. STATUTE OF LIMITATIONS.

    A medical malpractice liability claim may not be brought after the 
expiration of the 7-year period that begins on the date the alleged 
injury that is the subject of the claim occurred. If the commencement 
of such an action is stayed or enjoined, the running of the statute of 
limitations under this section shall be suspended for the period of the 
stay or injunction.

SEC. 2016. UNIFORM STANDARD FOR DETERMINING NEGLIGENCE.

    A defendant in a medical malpractice liability action may not be 
found to have acted negligently unless the defendant's conduct at the 
time of providing the health care services that are the subject of the 
action was not reasonable.

SEC. 2017. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) Imposition of Higher Standard of Proof.--In the case of a 
medical malpractice liability claim relating to services provided 
during labor or the delivery of a baby, if the health care professional 
against whom the claim is brought did not previously treat the 
individual alleged to have been injured for the pregnancy, the trier of 
fact may not find that the defendant committed malpractice and may not 
assess damages against the health care professional unless the 
malpractice is proven by clear and convincing evidence.
    (b) Applicability to Group Practices or Agreements Among 
Providers.--For purposes of subsection (a), a health care professional 
shall be considered to have previously treated an individual for a 
pregnancy if the professional is a member of a group practice whose 
members previously treated the individual for the pregnancy or is 
providing services to the individual during labor or the delivery of a 
baby pursuant to an agreement with another health care professional.
    (c) Effective Date.--This section shall apply with respect to 
claims accruing or actions brought on or after the expiration of the 2-
year period that begins on the date of the enactment of this Act.

 PART 3--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS 
                                 (ADR)

SEC. 2031. BASIC REQUIREMENTS.

    (a) In General.--A State's alternative dispute resolution system 
meets the requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the courts of that State;
            (2) requires that a written opinion resolving the dispute 
        be issued not later than 6 months after the date by which each 
        party against whom the claim is filed has received notice of 
        the claim (other than in exceptional cases for which a longer 
        period is required for the issuance of such an opinion), and 
        that the opinion contain--
                    (A) findings of fact relating to the dispute, and
                    (B) a description of the costs incurred in 
                resolving the dispute under the system (including any 
                fees paid to the individuals hearing and resolving the 
                claim), together with an appropriate assessment of the 
                costs against any of the parties;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
        (in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings an action 
        contesting the decision made under the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.
    (b) Application of Malpractice Liability Standards to Alternative 
Dispute Resolution.--The provisions of part 2 shall apply with respect 
to claims brought under a State alternative dispute resolution system 
or the alternative Federal system in the same manner as such provisions 
apply with respect to medical malpractice liability actions brought in 
the State.

SEC. 2032. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE 
              FEDERAL SYSTEM.

    (a) Certification.--
            (1) In general.--Not later than October 1 of each year 
        (beginning with 1995), the Secretary, in consultation with the 
        Attorney General, shall determine whether a State's alternative 
        dispute resolution system meets the requirements of this part 
        for the following calendar year.
            (2) Basis for certification.--The Secretary shall certify a 
        State's alternative dispute resolution system under this 
        subsection for a calendar year if the Secretary determines 
        under paragraph (1) that the system meets the requirements of 
        section 2031.
    (b) Applicability of Alternative Federal System.--
            (1) Establishment and applicability.--Not later than 
        October 1, 1995, the Secretary, in consultation with the 
        Attorney General, shall establish by rule an alternative 
        Federal ADR system for the resolution of medical malpractice 
        liability claims during a calendar year in States that do not 
        have in effect an alternative dispute resolution system 
        certified under subsection (a) for the year.
            (2) Requirements for system.--Under the alternative Federal 
        ADR system established under paragraph (1)--
                    (A) paragraphs (1), (2), (6), and (7) of section 
                2031(a) shall apply to claims brought under the system;
                    (B) if the system provides for the resolution of 
                claims through arbitration, the claims brought under 
                the system shall be heard and resolved by arbitrators 
                appointed by the Secretary in consultation with the 
                Attorney General; and
                    (C) with respect to a State in which the system is 
                in effect, the Secretary may (at the State's request) 
                modify the system to take into account the existence of 
                dispute resolution procedures in the State that affect 
                the resolution of medical malpractice liability claims.
            (3) Treatment of states with alternative system in 
        effect.--If the alternative Federal ADR system established 
        under this subsection is applied with respect to a State for a 
        calendar year--
                    (A) the State shall reimburse the United States (at 
                such time and in such manner as the Secretary may 
                require) for the costs incurred by the United States 
                during the year as a result of the application of the 
                system with respect to the State; and
                    (B) notwithstanding any other provision of law, no 
                funds may be paid to the State (or to any unit of local 
                government in the State) or to any entity in the State 
                pursuant to the Public Health Service Act.

SEC. 2033. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to the 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this part and the alternative 
Federal system established under section 2032(b).
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of the alternative dispute 
                resolution systems on the cost of health care within 
                each State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within the State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

   PART 4--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY

SEC. 2041. PERMITTING STATE PROFESSIONAL SOCIETIES TO PARTICIPATE IN 
              DISCIPLINARY ACTIVITIES.

    (a) Role of Professional Societies.--Notwithstanding any other 
provision of State or Federal law, a State agency responsible for the 
conduct of disciplinary actions for a type of health care practitioner 
may enter into agreements with State or county professional societies 
of such type of health care practitioner to permit such societies to 
participate in the licensing of such health care practitioner, and to 
review any health care malpractice action, health care malpractice 
claim or allegation, or other information concerning the practice 
patterns of any such health care practitioner. Any such agreement shall 
comply with subsection (b).
    (b) Requirements of Agreements.--Any agreement entered into under 
subsection (a) for licensing activities or the review of any health 
care malpractice action, health care malpractice claim or allegation, 
or other information concerning the practice patterns of a health care 
practitioner shall provide that--
            (1) the health care professional society conducts such 
        activities or review as expeditiously as possible;
            (2) after the completion of such review, such society shall 
        report its findings to the State agency with which it entered 
        into such agreement;
            (3) the conduct of such activities or review and the 
        reporting of such findings be conducted in a manner which 
        assures the preservation of confidentiality of health care 
        information and of the review process; and
            (4) no individual affiliated with such society is liable 
        for any damages or injury directly caused by the individual's 
        actions in conducting such activities or review.
    (c) Agreements Not Mandatory.--Nothing in this section may be 
construed to require a State to enter into agreements with societies 
described in subsection (a) to conduct the activities described in such 
subsection.
    (d) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 2042. STUDY OF INCENTIVES TO ENCOURAGE VOLUNTARY SERVICE BY 
              PHYSICIANS.

    (a) Study.--The Secretary shall conduct a study analyzing the 
existence and effectiveness of incentives adopted by State and local 
governments, insurers, medical societies, and other entities to 
encourage physicians (whether practicing or retired) to volunteer to 
provide health care services in medically underserved areas.
    (b) Reports.--(1) Not later than 1 year after the date of the 
enactment of this Act, the Secretary shall submit an interim report to 
Congress on the study conducted under subsection (a), together with the 
Secretary's recommendations for actions to increase the number of 
physicians volunteering to provide health care services in medically 
underserved areas.
    (2) Not later than 5 years after the date of the enactment of this 
Act, the Secretary shall submit a final report to the Congress on the 
study conducted under subsection (a) (taking into account the effects 
of this subtitle on the incidence and costs of medical malpractice), 
together with the Secretary's recommendations for actions to increase 
the number of physicians volunteering to provide health care services 
in medically underserved areas.

SEC. 2043. REQUIREMENTS FOR RISK MANAGEMENT PROGRAMS.

    (a) Requirements for Providers.--Each State shall require each 
health care professional and health care provider providing services in 
the State to participate in a risk management program to prevent and 
provide early warning of practices which may result in injuries to 
patients or which otherwise may endanger patient safety.
    (b) Requirements for Insurers.--Each State shall require each 
entity which provides health care professional or provider liability 
insurance to health care professionals and health care providers in the 
State to--
            (1) establish risk management programs based on data 
        available to such entity or sanction programs of risk 
        management for health care professionals and health care 
        providers provided by other entities; and
            (2) require each such professional or provider, as a 
        condition of maintaining insurance, to participate in one 
        program described in paragraph (1) at least once in each 3-year 
        period.
    (c) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 2044. GRANTS FOR MEDICAL SAFETY PROMOTION.

    (a) Research on Medical Injury Prevention and Compensation.
            (1) In general.--The Secretary shall make grants for the 
        conduct of basic research in the prevention of and compensation 
        for injuries resulting from health care professional or health 
        care provider malpractice, and research of the outcomes of 
        health care procedures.
            (2) Preference for research on certain activities.--In 
        making grants under paragraph (1), the Secretary shall give 
        preference to applications for grants to conduct research on 
        the behavior of health care providers and health care 
        professionals in carrying out their professional duties and of 
        other participants in systems for compensating individuals 
        injured by medical malpractice, the effects of financial and 
        other incentives on such behavior, the determinants of 
        compensation system outcomes, and the costs and benefits of 
        alternative compensation policy options.
            (3) Application.--The Secretary may not make a grant under 
        paragraph (1) unless an applicant submits an application to the 
        Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary may require.
    (b) Grants for Licensing and Disciplinary Activities.--
            (1) In general.--The Secretary shall make grants to States 
        to assist States in improving the State's ability to license 
        and discipline health care professionals.
            (2) Uses for grants.--A State may use a grant awarded under 
        subsection (a) to develop and implement improved mechanisms for 
        monitoring the practices of health care professionals or for 
        conducting disciplinary activities.
            (3) Technical assistance.--The Secretary shall provide 
        technical assistance to States receiving grants under paragraph 
        (1) to assist them in evaluating their medical practice acts 
        and procedures and to encourage the use of efficient and 
        effective early warning systems and other mechanisms for 
        detecting practices which endanger patient safety and for 
        disciplining health care professionals.
            (4) Applications.--The Secretary may not make a grant under 
        paragraph (1) unless the applicant submits an application to 
        the Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary shall require.
    (c) Grants for Public Education Programs.--
            (1) In general.--The Secretary shall make grants to States 
        and to local governments, private nonprofit organizations, and 
        health professional schools (as defined in paragraph (3)) for--
                    (A) educating the general public about the 
                appropriate use of health care and realistic 
                expectations of medical intervention;
                    (B) educating the public about the resources and 
                role of health care professional licensing and 
                disciplinary boards in investigating claims of 
                incompetence or health care malpractice; and
                    (C) developing programs of faculty training and 
                curricula for educating health care professionals in 
                quality assurance, risk management, and medical injury 
                prevention.
            (2) Applications.--The Secretary may not make a grant under 
        paragraph (1) unless the applicant submits an application to 
        the Secretary at such time, in such form, in such manner, and 
        containing such information as the Secretary shall require.
            (3) Health professional school defined.--In paragraph (1), 
        the term ``health professional school'' means a school of 
        nursing (as defined in section 853(2) of the Public Health 
        Service Act) or a school or program under section 799(1) of 
        such Act.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated not more than $15,000,000 for each of the first 5 fiscal 
years beginning on or after the date of the enactment of this Act for 
grants under this section.

  Subtitle B--Administrative Cost Savings and Fair Health Information 
                               Practices

                  PART 1--ADMINISTRATIVE COST SAVINGS

SEC. 2100. PURPOSE.

    It is the purpose of this part to improve the efficiency and 
effectiveness of the health care system, including the medicare program 
under title XVIII of the Social Security Act and the medicaid program 
under title XIX of such Act, by encouraging the development of a health 
information network through the adoption of standards and the 
establishment of requirements for the electronic transmission of 
certain health information.

SEC. 2101. DEFINITIONS.

    For purposes of this part:
            (1) Code set.--The term ``code set'' means any set of codes 
        used for encoding data elements, such as tables of terms, 
        medical concepts, medical diagnostic codes, or medical 
        procedure codes.
            (2) Coordination of benefits.--The term ``coordination of 
        benefits'' means determining and coordinating the financial 
        obligations of plan sponsors when health care benefits are 
        payable by more than one such sponsor.
            (3) Employer.--The term ``employer'' has the meaning given 
        such term in section 3(5) of the Employee Retirement Income 
        Security Act of 1974.
            (4) Health information.--The term ``health information'' 
        means any information that relates to the past, present, or 
        future physical or mental health or condition or functional 
        status of an individual, the provision of health care to an 
        individual, or payment for the provision of health care to an 
        individual.
            (5) Health information network.--The term ``health 
        information network'' means the health information system that 
        is formed through the application of the requirements and 
        standards established under this part.
            (6) Health information network service.--The term ``health 
        information network service''--
                    (A) means a private entity or an entity operated by 
                a State that enters into contracts--
                            (i) to process or facilitate the processing 
                        of nonstandard data elements of health 
                        information into standard data elements;
                            (ii) to provide the means by which persons 
                        are connected to the health information network 
                        for purposes of meeting the requirements of 
                        this part, including the holding of standard 
                        data elements of health information;
                            (iii) to provide authorized access to 
                        health information through the health 
                        information network; or
                            (iv) to provide specific information 
                        processing services, such as automated 
                        coordination of benefits and claims transaction 
                        routing; and
                    (B) includes a health information protection 
                service.
            (7) Health information protection service.--The term 
        ``health information protection service'' means a private 
        entity or an entity operated by a State that accesses standard 
        data elements of health information through the health 
        information network, processes such information into non-
        identifiable health information, and may store such 
        information.
            (8) Health provider.--The term ``health provider'' includes 
        a provider of services (as defined in section 1861(u) of the 
        Social Security Act), a provider of medical or other health 
        services (as defined in section 1861(s) of such Act), and any 
        other person (other than a plan sponsor) furnishing health care 
        items or services.
            (9) Non-identifiable health information.--The term ``non-
        identifiable health information'' means health information that 
        is not protected health information (as defined in part 2).
            (10) Plan sponsor.--The term ``plan sponsor'' means--
                    (A) a plan (as defined in section 1033(6)(B));
                    (B) an insurer (as defined in section 1131(6)) 
                providing health insurance coverage (as defined in 
                section 1131(4)); and
                    (C) a State, or the Federal Government, acting in a 
                capacity as a provider of health benefits to eligible 
                individuals that is equivalent to that of an insurer.
            (11) Purchasing arrangement.--The term ``purchasing 
        arrangement'' means a voluntary health purchasing arrangement 
        described in part 3 of subtitle B of title I.
            (12) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (13) Standard.--The term ``standard'', when used with 
        reference to a transaction or to data elements of health 
        information, means that the transaction or data elements meet 
        any standard adopted by the Secretary under subpart A that 
        applies to the transaction or data elements.

        Subpart A--Standards for Data Elements and Transactions

SEC. 2103. GENERAL REQUIREMENTS ON SECRETARY.

    (a) In General.--The Secretary shall adopt standards and 
modifications to standards under this part that are--
            (1) consistent with the objective of reducing the costs of 
        providing and paying for health care; and
            (2) in use and generally accepted, developed, or modified 
        by the standard-setting organizations accredited by the 
        American National Standard Institute.
    (b) Initial Standards.--The Secretary may develop an expedited 
process for the adoption of initial standards under this subpart.
    (c) Protection of Commercial Information.--In adopting standards 
under this part, the Secretary may not require disclosure of trade 
secrets and confidential commercial information by any person.

SEC. 2104. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

    (a) In General.--The Secretary shall adopt standards necessary to 
make uniform and compatible for electronic transmission through the 
health information network the data elements of any health information 
that the Secretary determines is appropriate for transmission in 
connection with a transaction described in section 2111.
    (b) Additions.--The Secretary may make additions to any set of data 
elements adopted under subsection (a) as the Secretary determines 
appropriate in a manner that minimizes the disruption and cost of 
compliance with such additions.
    (c) Certain Data Elements.--
            (1) Unique health identifiers.--The Secretary shall 
        establish a system to provide for a standard unique health 
        identifier for each individual, employer, plan sponsor, and 
        health provider for use in the health care system.
            (2) Code sets.--
                    (A) In general.--The Secretary, in consultation 
                with experts from the private sector and Federal 
                agencies, shall--
                            (i) select code sets for appropriate data 
                        elements from among the code sets that have 
                        been developed by private and public entities; 
                        or
                            (ii) establish code sets for such data 
                        elements if no code sets for the data elements 
                        have been developed.
                    (B) Distribution.--The Secretary shall establish 
                efficient and low-cost procedures for distribution of 
                code sets and modifications to code sets.

SEC. 2105. INFORMATION TRANSACTION STANDARDS.

    (a) In General.--The Secretary shall adopt technical standards that 
are consistent with part 2 relating to the method by which standard 
data elements of health information may be transmitted electronically, 
including standards with respect to the format in which such data 
elements may be transmitted.
    (b) Special Rule for Coordination of Benefits.--Any standard 
adopted by the Secretary under paragraph (1) that relates to 
coordination of benefits shall provide that a claim for reimbursement 
for health services furnished shall be tested, by an algorithm 
specified by the Secretary, against all records of enrollment and 
eligibility for the individual who received such services that are 
available to the recipient of the claim through the health information 
network to determine any primary and secondary obligors for payment.
    (c) Electronic Signature.--The Secretary, in coordination with the 
Secretary of Commerce, shall promulgate regulations specifying 
procedures for the electronic transmission and authentication of 
signatures, compliance with which shall be deemed to satisfy State and 
Federal statutory requirements for written signatures with respect to 
transactions described in section 2111 and written signatures on health 
records and prescriptions.
    (d) Standards for Claims for Clinical Laboratory Tests.--The 
standards under this section shall provide that claims for clinical 
laboratory tests for which benefits are payable by a plan sponsor shall 
be submitted directly by the person or entity that performed (or 
supervised the performance of) the tests to the sponsor in a manner 
consistent with (and subject to such exceptions as are provided under) 
the requirement for direct submission of such claims under the medicare 
program.

SEC. 2106. TIMETABLES FOR ADOPTION OF STANDARDS.

    (a) Initial Standards for Data Elements.--The Secretary shall adopt 
standards relating to--
            (1) the data elements for the information described in 
        section 2104(a) not later than 9 months after the date of the 
        enactment of this Act (except in the case of standards with 
        respect to data elements for claims attachments, which shall be 
        adopted not later than 24 months after the date of the 
        enactment of this Act); and
            (2) any addition to a set of data elements, in conjunction 
        with making such an addition.
    (b) Initial Standards for Information Transactions.--The Secretary 
shall adopt standards relating to information transactions under 
section 2105 not later than 9 months after the date of the enactment of 
this Act (except in the case of standards for claims attachments, which 
shall be adopted not later than 24 months after the date of the 
enactment of this Act).
    (c) Modifications to Standards.--
            (1) In general.--Except as provided in paragraph (2), the 
        Secretary shall review the standards adopted under this subpart 
        and shall adopt modified standards as determined appropriate, 
        but not more frequently than once every 6 months. Any 
        modification to standards shall be completed in a manner which 
        minimizes the disruption to, and costs of compliance incurred 
        by, a plan sponsor, health provider, or purchasing arrangement 
        that is required to comply with subpart B.
            (2) Special rules.--
                    (A) Modifications during first 12-month period.--
                Except with respect to additions and modifications to 
                code sets under subparagraph (B), the Secretary may not 
                adopt any modification to a standard adopted under this 
                subpart during the 12-month period beginning on the 
                date the standard is adopted, unless the Secretary 
                determines that the modification is necessary in order 
                to permit a plan sponsor, a health provider, or a 
                purchasing arrangement to comply with subpart B.
                    (B) Additions and modifications to code sets.--
                            (i) In general.--The Secretary shall ensure 
                        that procedures exist for the routine 
                        maintenance, testing, enhancement, and 
                        expansion of code sets.
                            (ii) Additional rules.--If a code set is 
                        modified under this subsection, the modified 
                        code set shall include instructions on how data 
                        elements that were encoded prior to the 
                        modification are to be converted or translated 
                        so as to preserve the value of the data 
                        elements. Any modification to a code set under 
                        this subsection shall be implemented in a 
                        manner that minimizes the disruption to, and 
                        costs of compliance incurred by, a plan 
                        sponsor, health provider, or purchasing 
                        arrangement that is required to comply with 
                        subpart B.
    (d) Evaluation of Standards.--The Secretary may establish a process 
to measure or verify the consistency of standards adopted or modified 
under this subpart. Such process may include demonstration projects and 
analyses of the cost of implementing such standards and modifications.

   Subpart B--Requirements With Respect to Certain Transactions and 
                              Information

SEC. 2111. STANDARD TRANSACTIONS AND INFORMATION.

    (a) Transactions by Sponsors.--
            (1) Transactions with providers.--If a plan sponsor 
        conducts any of the transactions described in paragraph (3) 
        with a health provider--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by the 
                sponsor to the provider or by the provider to the 
                sponsor in connection with the transaction shall be in 
                the form of standard data elements.
            (2) Transactions with sponsors.--If a plan sponsor conducts 
        any of the transactions described in paragraph (3) with another 
        plan sponsor--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by either 
                sponsor in connection with the transaction shall be in 
                the form of standard data elements.
            (3) Transactions.--The transactions referred to in 
        paragraphs (1) and (2) are the following:
                    (A) Verification of eligibility for benefits.
                    (B) Coordination of benefits.
                    (C) Claim submission.
                    (D) Claim attachment submission.
                    (E) Claim status notification.
                    (F) Claim status verification.
                    (G) Claim adjudication.
                    (H) Payment and remittance advice.
                    (I) Certification or authorization of a referral to 
                a health provider who is not part of the defined set of 
                providers providing items and services under a network 
                plan (as defined in section 1131(5)).
    (b) Transactions by Purchasing Arrangements.--
            (1) In general.--If a purchasing arrangement conducts any 
        of the transactions described in paragraph (2) with a plan 
        sponsor--
                    (A) the transaction shall be a standard 
                transaction; and
                    (B) the health information transmitted by the 
                arrangement to the sponsor or by the sponsor to the 
                arrangement in connection with the transaction shall be 
                in the form of standard data elements.
            (2) Transactions.--The transactions referred to in 
        paragraph (1) are the following:
                    (A) Enrollment and disenrollment.
                    (B) Premium payment.
    (c) Use of Health Information Network Services.--A plan sponsor, a 
health provider, or a purchasing arrangement may comply with any 
provision of this section by entering into an agreement or other 
arrangement with a health information network service certified under 
section 2121 pursuant to which the service undertakes the duties 
applicable to the sponsor, provider, or arrangement under the 
provision.

SEC. 2112. ACCESSING HEALTH INFORMATION FOR AUTHORIZED PURPOSES.

    (a) Procurement Rule for Government Agencies.--
            (1) In general.--A health information protection service 
        that is certified under section 2121 shall make available to a 
        Federal or State agency, pursuant to a cost-type contract (as 
        defined under the Federal Acquisition Regulation), any non-
        identifiable health information, including non-identifiable 
        health information that is derived from protected health 
        information, that--
                    (A) is held by the service or may be obtained by 
                the service under paragraph (2) or subsection (b);
                    (B) consists of data elements that are subject to a 
                standard under subpart A; and
                    (C) is requested by the agency to fulfill a 
                requirement under this Act.
            (2) Certain information available at low cost.--If a health 
        information protection service requires health information 
        consisting of data elements that are subject to a standard 
        under subpart A from a plan sponsor or a health provider in 
        order to comply with a request made by a Federal or State 
        agency under paragraph (1), the sponsor or provider shall make 
        such information available to such organization for a charge 
        that does not exceed the reasonable cost of transmitting the 
        information.
    (b) Procurement Rule for Information Protection Services.--A health 
information protection service that makes non-identifiable health 
information available to a Federal or State agency under subsection (a) 
shall make such non-identifiable information available, for a charge 
that does not exceed the reasonable cost of transmitting the 
information, to any other health information protection service that--
            (A) is certified under section 2121; and
            (B) requests the information.

SEC. 2113. ENSURING AVAILABILITY OF INFORMATION.

    The Secretary shall establish a procedure under which a plan 
sponsor or health provider that does not have the ability to transmit 
standard data elements directly, and does not have access to a health 
information network service certified under section 2121, may comply 
with the provisions of this subpart.

SEC. 2114. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

    (a) Initial Compliance.--
            (1) In general.--Not later than 12 months after the date on 
        which standards are adopted under subpart A with respect to a 
        type of transaction, or data elements for a type of health 
        information, a plan sponsor, health provider, or purchasing 
        arrangement shall comply with the requirements of this subpart 
        with respect to such transaction or information.
            (2) Additional data elements.--Not later than 12 months 
        after the date on which the Secretary adopts an addition to a 
        set of data elements for health information under section 2104, 
        a plan sponsor, health provider, or purchasing arrangement 
        shall comply with the requirements of this subpart using such 
        data elements.
    (b) Compliance with Modified Standards.--
            (1) In general.--If the Secretary adopts a modified 
        standard under section 2106(c), a plan sponsor, health 
        provider, or purchasing arrangement shall comply with the 
        modified standard at such time as the Secretary determines 
        appropriate, taking into account the time needed to comply due 
        to the nature and extent of the modification.
            (2) Special rule.--In the case of a modification to a 
        standard that does not occur within the 12-month period 
        beginning on the date the standard is adopted, the time 
        determined appropriate by the Secretary under paragraph (1) may 
        not be--
                    (A) earlier than the last day of the 90-day period 
                beginning on the date the modified standard is adopted; 
                or
                    (B) later than the last day of the 12-month period 
                beginning on the date the modified standard is adopted.

                  Subpart C--Miscellaneous Provisions

SEC. 2121. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK 
              SERVICES.

    (a) Standards for Operation.--The Secretary shall establish 
standards with respect to the operation of health information network 
services, including standards ensuring that such services--
            (1) develop, operate, and cooperate with one another to 
        form the health information network;
            (2) meet all of the requirements under part 2 that are 
        applicable to the services;
            (3) make public information concerning their performance, 
        as measured by uniform indicators such as accessibility, 
        transaction responsiveness, administrative efficiency, 
        reliability, dependability, and any other indicator determined 
        appropriate by the Secretary;
            (4) have security procedures that are consistent with the 
        requirements under part 2, including secure methods of 
        accessing and transmitting data; and
            (5) if they are part of a larger organization, have 
        policies and procedures in place which isolate their activities 
        with respect to processing information in a manner that 
        prevents access to such information by such larger 
        organization.
    (b) Certification by the Secretary.--
            (1) Establishment.--Not later than 12 months after the date 
        of the enactment of this Act, the Secretary shall establish a 
        certification procedure for health information network services 
        which ensures that certified services are qualified to meet the 
        requirements of this part and the standards established by the 
        Secretary under this section. Such certification procedure 
        shall be implemented in a manner that minimizes the costs and 
        delays of operations for such services.
            (2) Application.--Each entity desiring to be certified as a 
        health information network service shall apply to the Secretary 
        for certification in a form and manner determined appropriate 
        by the Secretary.
            (3) Audits and reports.--The procedure established under 
        paragraph (1) shall provide for audits by the Secretary and 
        reports by an entity certified under this section as the 
        Secretary determines appropriate in order to monitor such 
        entity's compliance with the requirements of this part, part 2, 
        and the standards established by the Secretary under this 
        section.
            (4) Recertification.--A health information network service 
        shall be recertified under this subsection at least every 3 
        years.
    (c) Loss of certification.--
            (1) Mandatory termination.--Except as provided in paragraph 
        (2), if a health information network service violates a 
        requirement imposed on such service under part 2, its 
        certification under this section shall be terminated unless the 
        Secretary determines that appropriate corrective action has 
        been taken.
            (2) Conditional certification--The Secretary may establish 
        a procedure under which a health information network service 
        may remain certified on a conditional basis if the service is 
        operating consistently with a plan intended to correct any 
        violations described in paragraph (1). Such procedure may 
        provide for the appointment of a trustee to continue operation 
        of the service until the requirements for full certification 
        are met.
    (d) Certification by Private Entities.--The Secretary may designate 
private entities to conduct the certification procedures established by 
the Secretary under this section. A health information network service 
certified by such an entity in accordance with such designation shall 
be considered to be certified by the Secretary.
    (e) Information Held by Health Information Network Services.--If a 
health information network service certified under this section loses 
its certified status or takes any action that would threaten the 
continued availability of the standard data elements of health 
information held by such service, such data elements shall be 
transferred to another health information network service certified 
under this section that has been designated by the Secretary.

SEC. 2122. IMPOSITION OF ADDITIONAL REQUIREMENTS.

    (a) In General.--Except as provided in subsection (c), after the 
Secretary has established standards under section 2104 that are 
necessary to make uniform and compatible for electronic transmission 
the data elements that the Secretary determines are appropriate for 
transmission in connection with a transaction described in subpart B, 
an individual or entity may not require an individual or entity, to 
provide in any manner any additional data element in connection with--
            (1) the transaction; or
            (2) an inquiry with respect to the transaction.
    (b) Transmission Method.--Except as provided in subsection (c), 
after the Secretary has established standards under section 2105 
relating to the method by which data elements that the Secretary 
determines are appropriate for transmission in connection with a 
transaction described in subpart B may be transmitted electronically, 
an individual or entity may not require an individual or entity to 
transmit any data element in a manner inconsistent with the standards 
in connection with--
            (1) the transaction; or
            (2) an inquiry with respect to the transaction.
    (c) Exception.--Subsections (a) and (b) do not apply if--
            (1) an individual or entity voluntarily agrees to provide 
        the additional data element; or
            (2) a waiver is granted under subsection (d) to permit the 
        requirement.
    (d) Conditions for Waivers.--
            (1) In general.--An individual or entity may request a 
        waiver from the Secretary in order to impose on an individual 
        or entity a requirement otherwise prohibited under subsection 
        (a) or (b).
            (2) Consideration of waiver requests.--A waiver may not be 
        granted under this subsection to impose an otherwise prohibited 
        requirement unless the Secretary determines that the value of 
        any additional information to be provided under the requirement 
        for research or other purposes significantly outweighs the 
        administrative cost of the imposition of the requirement, 
        taking into account the burden of the timing of the imposition 
        of the requirement.
            (3) Anonymous reporting.--If an individual or entity 
        attempts to impose on an individual or entity a requirement 
        prohibited under subsection (a) or (b), the individual or 
        entity on whom the requirement is being imposed may contact the 
        Secretary. The Secretary shall develop a procedure under which 
        an individual or entity that contacts the Secretary under the 
        preceding sentence shall remain anonymous. The Secretary shall 
        notify the individual or entity imposing the requirement that 
        the requirement may not be imposed unless the other individual 
        or entity voluntarily agrees to such requirement or a waiver is 
        obtained under this subsection.

SEC. 2123. EFFECT ON STATE LAW.

    (a) In General.--Except as otherwise provided in this section, a 
provision, requirement, or standard under this part shall supersede any 
contrary provision of State law.
    (b) State ``Quill and Pen'' Laws.--A State may not establish, 
continue in effect, or enforce any provision of State law that requires 
medical or health plan records (including billing information) to be 
maintained or transmitted in written rather than electronic form, 
except where the Secretary determines that the provision is necessary 
to prevent fraud and abuse, with respect to controlled substances, or 
for other purposes.
    (c) Public Health Reporting.--Nothing in this part shall be 
construed to invalidate or limit the authority, power, or procedures 
established under any law providing for the reporting of disease or 
injury, child abuse, birth, or death, public health surveillance, or 
public health investigation or intervention.
    (d) Public Use Functions.--Nothing in this part shall be construed 
to limit the authority of a Federal or State agency to make non-
identifiable health information available for public use.
    (e) Payment for Health Care Services or Premiums.--Nothing in this 
part shall be construed to prohibit a consumer from paying for health 
care items or services, or plan or health insurance coverage premiums, 
by debit, credit, or other payment cards or numbers or other electronic 
payment means.

SEC. 2124. GRANTS FOR DEMONSTRATION PROJECTS.

    (a) In General.--The Secretary may make grants for demonstration 
projects to promote the development and use of electronically 
integrated community-based clinical information systems and 
computerized patient medical records.
    (b) Applications.--
            (1) Submission.--To apply for a grant under this section 
        for any fiscal year, an applicant shall submit an application 
        to the Secretary in accordance with the procedures established 
        by the Secretary.
            (2) Criteria for approval.--The Secretary may not approve 
        an application submitted under paragraph (1) unless the 
        application includes assurances satisfactory to the Secretary 
        regarding the following:
                    (A) Use of existing technology.--Funds received 
                under this section will be used to apply 
                telecommunications and information systems technology 
                that is in existence on the date the application is 
                submitted in a manner that improves the quality of 
                health care, reduces the costs of such care, and 
                protects the privacy and confidentiality of information 
                relating to the physical or mental condition of an 
                individual.
                    (B) Use of existing information systems.--Funds 
                received under this section will be used--
                            (i) to enhance telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted;
                            (ii) to integrate telecommunications or 
                        information systems that are operating on the 
                        date the application is submitted; or
                            (iii) to connect additional users to 
                        telecommunications or information networks or 
                        systems that are operating on the date the 
                        application is submitted.
                    (C) Matching funds.--The applicant shall make 
                available funds for the demonstration project in an 
                amount that equals at least 20 percent of the cost of 
                the project.
    (c) Geographic Diversity.--In making any grants under this section, 
the Secretary shall, to the extent practicable, make grants to persons 
representing different geographic areas of the United States, including 
urban and rural areas.
    (d) Review and Sanctions.--The Secretary shall review at least 
annually the compliance of a person receiving a grant under this 
section with the provisions of this section. The Secretary shall 
establish a procedure for determining whether such a person has failed 
to comply substantially within the provisions of this section and the 
sanctions to be imposed for any such noncompliance.
    (e) Annual Report.--The Secretary shall submit an annual report to 
the President for transmittal to Congress containing a description of 
the activities carried out under this section.

                 Subpart D--Assistance to the Secretary

SEC. 2131. GENERAL REQUIREMENT ON SECRETARY.

    In complying with any requirements imposed on the Secretary under 
this part, the Secretary shall rely on recommendations of the Health 
Information Advisory Committee established under section 2132 and shall 
consult with appropriate Federal agencies.

SEC. 2132. HEALTH INFORMATION ADVISORY COMMITTEE.

    (a) Establishment.--There is established a committee to be known as 
the Health Care Information Advisory Committee.
    (b) Duty.--
            (1) In general.--The committee shall--
                    (A) provide assistance to the Secretary in 
                complying with the requirements imposed on the 
                Secretary under this part and part 2;
                    (B) be generally responsible for advising the 
                Secretary and the Congress on the status of the health 
                information network; and
                    (C) make recommendations to correct any problems 
                that may occur in the network's implementation and 
                ongoing operations and to refine and improve the 
                network.
            (2) Technical assistance.--In performing its duties under 
        this subsection, the committee shall receive technical 
        assistance from appropriate Federal agencies.
    (c) Membership.--
            (1) In general.--The committee shall consist of 15 members 
        to be appointed by the President not later than 60 days after 
        the date of the enactment of this part. The President shall 
        designate 1 member as the Chair.
            (2) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction and who possess the demonstrated capacity to 
        discharge the duties imposed on the committee.
            (3) Terms.--Each member of the committee shall be appointed 
        for a term of 5 years, except that the members first appointed 
        shall serve staggered terms such that the terms of no more than 
        3 members expire at one time.
            (4) Vacancies.--
                    (A) In general.--A vacancy on the committee shall 
                be filled in the manner in which the original 
                appointment was made and shall be subject to any 
                conditions which applied with respect to the original 
                appointment.
                    (B) Filling unexpired term.--An individual chosen 
                to fill a vacancy shall be appointed for the unexpired 
                term of the member replaced.
                    (C) Expiration of terms.--The term of any member 
                shall not expire before the date on which the member's 
                successor takes office.
            (5) Conflicts of interest.--Members of the committee shall 
        disclose upon appointment to the committee or at any subsequent 
        time that it may occur, conflicts of interest.
    (d) Meetings.--
            (1) In general.--Except as provided in paragraph (2), the 
        committee shall meet at the call of the Chair.
            (2) Initial meeting.--Not later than 30 days after the date 
        on which all members of the committee have been appointed, the 
        committee shall hold its first meeting.
            (3) Quorum.--A majority of the members of the committee 
        shall constitute a quorum, but a lesser number of members may 
        hold hearings.
    (e) Power To Hold Hearings.--The committee may hold such hearings, 
sit and act at such times and places, take such testimony, and receive 
such evidence as the committee considers advisable to carry out the 
purposes of this section.
    (f) Other Administrative Provisions.--Subparagraphs (C), (D), and 
(H) of section 1886(e)(6) of the Social Security Act shall apply to the 
committee in the same manner as they apply to the Prospective Payment 
Assessment Commission.
    (g) Reports.--
            (1) In general.--The committee shall annually prepare and 
        submit to Congress and the Secretary a report including at 
        least an analysis of--
                    (A) the status of the health information network 
                established under this part, including whether the 
                network is fulfilling the purpose described in section 
                2100;
                    (B) the savings and costs of the network;
                    (C) the activities of health information network 
                services certified under section 2121, health 
                providers, and plan sponsors under this part;
                    (D) the extent to which entities described in 
                subparagraph (C) are meeting the standards adopted 
                under this part and working together to form an 
                integrated network that meets the needs of its users;
                    (E) the extent to which entities described in 
                subparagraph (C) are meeting the privacy and security 
                protections of part 2;
                    (F) whether the Federal Government and State 
                Governments are receiving information of sufficient 
                quality to meet their responsibilities under this Act;
                    (G) any problems with respect to implementation of 
                the network;
                    (H) the extent to which timetables under this part 
                for the adoption and implementation of standards are 
                being met; and
                    (I) any legislative recommendations related to the 
                health information network.
            (2) Availability to the public.--Any information in the 
        report submitted to Congress under paragraph (1) shall be made 
        available to the public, unless such information may not be 
        disclosed by law.
    (h) Duration.--Notwithstanding section 14(a) of the Federal 
Advisory Committee Act, the committee shall continue in existence until 
otherwise provided by law.

               PART 2--FAIR HEALTH INFORMATION PRACTICES

SEC. 2140. DEFINITIONS.

    (a) Definitions Relating to Protected Health Information.--For 
purposes of this part:
            (1) Disclose.--The term ``disclose'', when used with 
        respect to protected health information that is held by a 
        health information trustee, means to provide access to the 
        information, but only if such access is provided by the trustee 
        to a person other than--
                    (A) the trustee or an officer or employee of the 
                trustee;
                    (B) an affiliated person of the trustee; or
                    (C) a protected individual who is a subject of the 
                information.
            (2) Disclosure.--The term ``disclosure'' means the act or 
        an instance of disclosing.
            (3) Protected health information.--The term ``protected 
        health information'' means any information, whether oral or 
        recorded in any form or medium--
                    (A) that is created or received in a State by--
                            (i) a health care provider;
                            (ii) a health benefit plan sponsor;
                            (iii) a health oversight agency;
                            (iv) a health information service 
                        organization; or
                            (v) a public health authority;
                    (B) that relates in any way to the past, present, 
                or future physical or mental health or condition or 
                functional status of a protected individual, the 
                provision of health care to a protected individual, or 
                payment for the provision of health care to a protected 
                individual; and
                    (C) that--
                            (i) identifies the individual; or
                            (ii) with respect to which there is a 
                        reasonable basis to believe that the 
                        information can be used to identify the 
                        individual.
            (4) Protected individual.--The term ``protected 
        individual'' means an individual who, with respect to a date--
                    (A) is living on the date; or
                    (B) has died within the 2-year period ending on the 
                date.
            (5) Use.--The term ``use'', when used with respect to 
        protected health information that is held by a health 
        information trustee, means--
                    (A) to use, or provide access to, the information 
                in any manner that does not constitute a disclosure; or
                    (B) any act or instance of using, or providing 
                access, described in subparagraph (A).
    (b) Definitions Relating to Health Information Trustees.--For 
purposes of this part:
            (1) Carrier.--The term ``carrier'' means a licensed 
        insurance company, a hospital or medical service corporation 
        (including an existing Blue Cross or Blue Shield organization, 
        within the meaning of section 833(c)(2) of the Internal Revenue 
        Code of 1986), a health maintenance organization, or other 
        entity licensed or certified by a State to provide health 
        insurance or health benefits.
            (2) Health benefit plan.--The term ``health benefit plan'' 
        means--
                    (A) any contract of health insurance, including any 
                hospital or medical service policy or certificate, 
                hospital or medical service plan contract, or health 
                maintenance organization group contract, that is 
                provided by a carrier; and
                    (B) an employee welfare benefit plan or other 
                arrangement insofar as the plan or arrangement provides 
                health benefits and is funded in a manner other than 
                through the purchase of one or more policies or 
                contracts described in subparagraph (A).
            (3) Health benefit plan sponsor.--The term ``health benefit 
        plan sponsor'' means a person who, with respect to a specific 
        item of protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) a carrier providing a health benefit plan;
                    (B) any other provider of a health benefit plan, 
                including any public entity that provides payments for 
                health care items and services under a health benefit 
                plan that are equivalent to payments provided by a 
                private person under such a plan; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
            (4) Health care provider.--The term ``health care 
        provider'' means a person who, with respect to a specific item 
        of protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) a person who is licensed, certified, 
                registered, or otherwise authorized by law to provide 
                an item or service that constitutes health care in the 
                ordinary course of business or practice of a 
                profession;
                    (B) a Federal or State program that directly 
                provides items or services that constitute health care 
                to beneficiaries; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
            (5) Health information service organization.--The term 
        ``health information service organization'' means a person who, 
        with respect to a specific item of protected health 
        information, receives, creates, uses, maintains, or discloses 
        the information while acting in whole or in part in the 
        capacity of--
                    (A) a person, other than an affiliated person, who 
                performs specific functions for which the Secretary has 
                authorized (by means of a designation or certification) 
                the person to receive access to health care data in 
                electronic or magnetic form that are regulated by this 
                Act; or
                    (B) an officer or employee of a person described in 
                subparagraph (A).
            (6) Health information trustee.--The term ``health 
        information trustee'' means--
                    (A) a health care provider;
                    (B) a health information service organization;
                    (C) a health oversight agency;
                    (D) a health benefit plan sponsor;
                    (E) a public health authority;
                    (F) a health researcher;
                    (G) a person who, with respect to a specific item 
                of protected health information, is not described in 
                subparagraphs (A) through (F) but receives the 
                information--
                            (i) pursuant to--
                                    (I) section 2157 (relating to 
                                emergency circumstances);
                                    (II) section 2158 (relating to 
                                judicial and administrative purposes);
                                    (III) section 2159 (relating to law 
                                enforcement); or
                                    (IV) section 2160 (relating to 
                                subpoenas, warrants, and search 
                                warrants); or
                            (ii) while acting in whole or in part in 
                        the capacity of an officer or employee of a 
                        person described in clause (i).
            (7) Health oversight agency.--The term ``health oversight 
        agency'' means a person who, with respect to a specific item of 
        protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) a person who performs or oversees the 
                performance of an assessment, evaluation, 
                determination, or investigation relating to the 
                licensing, accreditation, or certification of health 
                care providers;
                    (B) a person who--
                            (i) performs or oversees the performance of 
                        an audit, assessment, evaluation, 
                        determination, or investigation relating to the 
                        effectiveness of, compliance with, or 
                        applicability of, legal, fiscal, medical, or 
                        scientific standards or aspects of performance 
                        related to the delivery of, or payment for, 
                        health care; and
                            (ii) is a public agency, acting on behalf 
                        of a public agency, acting pursuant to a 
                        requirement of a public agency, or carrying out 
                        activities under a State or Federal statute 
                        regulating the assessment, evaluation, 
                        determination, or investigation; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
            (8) Health researcher.--The term ``health researcher'' 
        means a person who, with respect to a specific item of 
        protected health information, receives the information--
                    (A) pursuant to section 2156 (relating to health 
                research); or
                    (B) while acting in whole or in part in the 
                capacity of an officer or employee of a person 
                described in subparagraph (A).
            (9) Public health authority.--The term ``public health 
        authority'' means a person who, with respect to a specific item 
        of protected health information, receives, creates, uses, 
        maintains, or discloses the information while acting in whole 
        or in part in the capacity of--
                    (A) an authority of the United States, a State, or 
                a political subdivision of a State that is responsible 
                for public health matters;
                    (B) a person acting under the direction of such an 
                authority; or
                    (C) an officer or employee of a person described in 
                subparagraph (A) or (B).
    (c) Other Definitions.--For purposes of this part:
            (1) Affiliated person.--The term ``affiliated person'' 
        means a person who--
                    (A) is not a health information trustee;
                    (B) is a contractor, subcontractor, associate, or 
                subsidiary of a person who is a health information 
                trustee; and
                    (C) pursuant to an agreement or other relationship 
                with such trustee, receives, creates, uses, maintains, 
                or discloses protected health information.
            (2) Approved health research project.--The term ``approved 
        health research project'' means a biomedical, epidemiological, 
        or health services research or statistics project, or a 
        research project on behavioral and social factors affecting 
        health, that has been approved by a certified institutional 
        review board.
            (3) Certified institutional review board.--The term 
        ``certified institutional review board'' means a board--
                    (A) established by an entity to review research 
                involving protected health information and the rights 
                of protected individuals conducted at or supported by 
                the entity;
                    (B) established in accordance with regulations of 
                the Secretary under section 2156(e)(1); and
                    (C) certified by the Secretary under section 
                2156(e)(2).
            (4) Health care.--The term ``health care''--
                    (A) means--
                            (i) any preventive, diagnostic, 
                        therapeutic, rehabilitative, maintenance, or 
                        palliative care, counseling, service, or 
                        procedure--
                                    (I) with respect to the physical or 
                                mental condition, or functional status, 
                                of an individual; or
                                    (II) affecting the structure or 
                                function of the human body or any part 
                                of the human body, including banking of 
                                blood, sperm, organs, or any other 
                                tissue; or
                            (ii) any sale or dispensing of a drug, 
                        device, equipment, or other item to an 
                        individual, or for the use of an individual, 
                        pursuant to a prescription; but
                    (B) does not include any item or service that is 
                not furnished for the purpose of maintaining or 
                improving the health of an individual.
            (5) Law enforcement inquiry.--The term ``law enforcement 
        inquiry'' means a lawful investigation or official proceeding 
        inquiring into a violation of, or failure to comply with, any 
        criminal or civil statute or any regulation, rule, or order 
        issued pursuant to such a statute.
            (6) Person.--The term ``person'' includes an authority of 
        the United States, a State, or a political subdivision of a 
        State.

            Subpart A--Duties of Health Information Trustees

SEC. 2141. INSPECTION OF PROTECTED HEALTH INFORMATION.

    (a) In General.--Except as provided in subsection (b), a health 
information trustee described in subsection (g)--
            (1) shall permit a protected individual to inspect any 
        protected health information about the individual that the 
        trustee maintains, any accounting with respect to such 
        information required under section 2144, and any copy of an 
        authorization required under section 2152 that pertains to such 
        information;
            (2) shall provide the protected individual with a copy of 
        the information upon request by the individual and subject to 
        any conditions imposed by the trustee under subsection (d);
            (3) shall permit a person who has been designated in 
        writing by the protected individual to inspect the information 
        on behalf of the individual or to accompany the individual 
        during the inspection; and
            (4) may offer to explain or interpret information that is 
        inspected or copied under this subsection.
    (b) Exceptions.--A health information trustee is not required by 
this section to permit inspection or copying of protected health 
information by a protected individual if any of the following 
conditions apply:
            (1) Mental health treatment notes.--The information 
        consists of psychiatric, psychological, or mental health 
        treatment notes about the individual, the trustee determines in 
        the exercise of reasonable professional judgment that 
        inspection or copying of the notes would cause sufficient harm 
        to the protected individual so as to outweigh the desirability 
        of permitting access, and the trustee does not disclose the 
        notes to any person not directly engaged in treating the 
        individual, except with the authorization of the individual or 
        under compulsion of law.
            (2) Information about others.--The information relates to 
        an individual, other than the protected individual or a health 
        care provider, and the trustee determines in the exercise of 
        reasonable professional judgment that inspection or copying of 
        the information would cause sufficient harm to one or both of 
        the individuals so as to outweigh the desirability of 
        permitting access.
            (3) Endangerment to life or safety.--Inspection or copying 
        of the information could reasonably be expected to endanger the 
        life or physical safety of an individual.
            (4) Confidential source.--The information identifies or 
        could reasonably lead to the identification of an individual 
        (other than a health care provider) who provided information 
        under a promise of confidentiality to a health care provider 
        concerning a protected individual who is a subject of the 
        information.
            (5) Administrative purposes.--The information--
                    (A) is used by the trustee solely for 
                administrative purposes and not in the provision of 
                health care to a protected individual who is a subject 
                of the information; and
                    (B) is not disclosed by the trustee to any person.
            (6) Duplicative information.--The information duplicates 
        information available for inspection under subsection (a).
            (7) Information compiled in anticipation of litigation.--
        The information is compiled principally--
                    (A) in anticipation of a civil, criminal, or 
                administrative action or proceeding; or
                    (B) for use in such an action or proceeding.
    (c) Inspection and Copying of Segregable Portion.--A health 
information trustee shall permit inspection and copying under 
subsection (a) of any reasonably segregable portion of a record after 
deletion of any portion that is exempt under subsection (b).
    (d) Conditions.--A health information trustee may--
            (1) require a written request for the inspection and 
        copying of protected health information under this section; and
            (2) charge a reasonable cost-based fee for--
                    (A) permitting inspection of information under this 
                section; and
                    (B) providing a copy of protected health 
                information under this section.
    (e) Statement of Reasons for Denial.--If a health information 
trustee denies in whole or in part a request for inspection or copying 
under this section, the trustee shall provide the protected individual 
who made the request with a written statement of the reasons for the 
denial.
    (f) Deadline.--A health information trustee shall comply with or 
deny a request for inspection or copying of protected health 
information under this section within the 30-day period beginning on 
the date the trustee receives the request.
    (g) Applicability.--This section applies to a health information 
trustee who is--
            (1) a health benefit plan sponsor;
            (2) a health care provider;
            (3) a health information service organization;
            (4) a health oversight agency; or
            (5) a public health authority.

SEC. 2142. AMENDMENT OF PROTECTED HEALTH INFORMATION.

    (a) In General.--A health information trustee described in 
subsection (f) shall, within the 45-day period beginning on the date 
the trustee receives from a protected individual about whom the trustee 
maintains protected health information a written request that the 
trustee correct or amend the information, complete the duties described 
in one of the following paragraphs:
            (1) Correction or amendment and notification.--The trustee 
        shall--
                    (A) make the correction or amendment requested;
                    (B) inform the protected individual of the 
                amendment or correction that has been made;
                    (C) make reasonable efforts to inform any person 
                who is identified by the protected individual, who is 
                not an employee of the trustee, and to whom the 
                uncorrected or unamended portion of the information was 
                previously disclosed of the correction or amendment 
                that has been made; and
                    (D) at the request of the individual, make 
                reasonable efforts to inform any known source of the 
                uncorrected or unamended portion of the information 
                about the correction or amendment that has been made.
            (2) Reasons for refusal and review procedures.--The trustee 
        shall inform the protected individual of--
                    (A) the reasons for the refusal of the trustee to 
                make the correction or amendment;
                    (B) any procedures for further review of the 
                refusal; and
                    (C) the individual's right to file with the trustee 
                a concise statement setting forth the requested 
                correction or amendment and the individual's reasons 
                for disagreeing with the refusal of the trustee.
    (b) Standards for Correction or Amendment.--A trustee shall correct 
or amend protected health information in accordance with a request made 
under subsection (a) if the trustee determines that the information is 
not accurate, relevant, timely, or complete for the purposes for which 
the information may be used or disclosed by the trustee.
    (c) Statement of Disagreement.--After a protected individual has 
filed a statement of disagreement under subsection (a)(2)(C), the 
trustee, in any subsequent disclosure of the disputed portion of the 
information, shall include a copy of the individual's statement and may 
include a concise statement of the trustee's reasons for not making the 
requested correction or amendment.
    (d) Construction.--This section may not be construed to require a 
health information trustee to conduct a hearing or proceeding 
concerning a request for a correction or amendment to protected health 
information the trustee maintains.
    (e) Correction.--For purposes of subsection (a), a correction is 
deemed to have been made to protected health information when--
            (1) information that is not timely, accurate, relevant, or 
        complete is clearly marked as incorrect; or
            (2) supplementary correct information is made part of the 
        information and adequately cross-referenced.
    (f) Applicability.--This section applies to a health information 
trustee who is--
            (1) a health benefit plan sponsor;
            (2) a health care provider;
            (3) a health information service organization;
            (4) a health oversight agency; or
            (5) a public health authority.

SEC. 2143. NOTICE OF INFORMATION PRACTICES.

    (a) Preparation of Notice.--A health information trustee described 
in subsection (d) shall prepare a written notice of information 
practices describing the following:
            (1) The rights under this part of a protected individual 
        who is the subject of protected health information, including 
        the right to inspect and copy such information and the right to 
        seek amendments to such information, and the procedures for 
        authorizing disclosures of protected health information and for 
        revoking such authorizations.
            (2) The procedures established by the trustee for the 
        exercise of such rights.
            (3) The uses and disclosures of protected health 
        information that are authorized under this part.
    (b) Dissemination of Notice.--A health information trustee--
            (1) shall, upon request, provide any person with a copy of 
        the trustee's notice of information practices (described in 
        subsection (a)); and
            (2) shall make reasonable efforts to inform persons in a 
        clear and conspicuous manner of the existence and availability 
        of such notice.
    (c) Model Notices.--Not later than July 1, 1996, the Secretary, 
after notice and opportunity for public comment, shall develop and 
disseminate model notices of information practices for use by health 
information trustees under this section.
    (d) Applicability.--This section applies to a health information 
trustee who is--
            (1) a health benefit plan sponsor;
            (2) a health care provider;
            (3) a health information service organization; or
            (4) a health oversight agency.

SEC. 2144. ACCOUNTING FOR DISCLOSURES.

    (a) In General.--Except as provided in subsection (b) and section 
2154, each health information trustee shall create and maintain, with 
respect to any protected health information the trustee discloses, a 
record of--
            (1) the date and purpose of the disclosure;
            (2) the name of the person to whom the disclosure was made;
            (3) the address of the person to whom the disclosure was 
        made or the location to which the disclosure was made; and
            (4) where practicable, a description of the information 
        disclosed.
    (b) Regulations.--Not later than July 1, 1996, the Secretary shall 
promulgate regulations that exempt a health information trustee from 
maintaining a record under subsection (a) with respect to protected 
health information disclosed by the trustee for purposes of peer 
review, licensing, certification, accreditation, and similar 
activities.

SEC. 2145. SECURITY.

    (a) In General.--Each health information trustee who receives or 
creates protected health information that is subject to this part shall 
maintain reasonable and appropriate administrative, technical, and 
physical safeguards--
            (1) to ensure the integrity and confidentiality of the 
        information;
            (2) to protect against any reasonably anticipated--
                    (A) threats or hazards to the security or integrity 
                of the information; and
                    (B) unauthorized uses or disclosures of the 
                information; and
            (3) otherwise ensure compliance with this part by the 
        trustee and the officers and employees of the trustee.
    (b) Guidelines.--Not later than July 1, 1996, the Secretary, after 
notice and opportunity for public comment, shall develop and 
disseminate guidelines for the implementation of this section. The 
guidelines shall take into account--
            (1) the technical capabilities of record systems used to 
        maintain protected health information;
            (2) the costs of security measures;
            (3) the need for training persons who have access to 
        protected health information; and
            (4) the value of audit trails in computerized record 
        systems.

     Subpart B--Use and Disclosure of Protected Health Information

SEC. 2151. GENERAL LIMITATIONS ON USE AND DISCLOSURE.

    (a) Use.--Except as otherwise provided under this part, a health 
information trustee may use protected health information only for a 
purpose--
            (1) that is compatible with and directly related to the 
        purpose for which the information--
                    (A) was collected; or
                    (B) was received by the trustee; or
            (2) for which the trustee is authorized to disclose the 
        information under this part.
    (b) Disclosure.--A health information trustee may disclose 
protected health information only as authorized under this part.
    (c) Scope of Uses and Disclosures.--
            (1) In general.--A use or disclosure of protected health 
        information by a health information trustee shall be limited, 
        when practicable, to the minimum amount of information 
        necessary to accomplish the purpose for which the information 
        is used or disclosed.
            (2) Guidelines.--Not later than July 1, 1996, the 
        Secretary, after notice and opportunity for public comment, 
        shall issue guidelines to implement paragraph (1), which shall 
        take into account the technical capabilities of the record 
        systems used to maintain protected health information and the 
        costs of limiting use and disclosure.
    (d) Identification of Disclosed Information as Protected 
Information.--Except with respect to protected health information that 
is disclosed under section 2154 (relating to next of kin and directory 
information), a health information trustee may disclose protected 
health information only if the recipient has been notified that the 
information is protected health information that is subject to this 
part.
    (e) Agreement To Limit Use or Disclosure.--A health information 
trustee who receives protected health information from any person 
pursuant to a written agreement to restrict use or disclosure of the 
information to a greater extent than otherwise would be required under 
this part shall comply with the terms of the agreement, except where 
use or disclosure of the information in violation of the agreement is 
required by law. A trustee who fails to comply with the preceding 
sentence shall be subject to section 2191 (relating to civil actions) 
with respect to such failure.
    (f) No General Requirement To Disclose.--Nothing in this part shall 
be construed to require a health information trustee to disclose 
protected health information not otherwise required to be disclosed by 
law.

SEC. 2152. AUTHORIZATIONS FOR DISCLOSURE OF PROTECTED HEALTH 
              INFORMATION.

    (a) Written Authorizations.--A health information trustee, other 
than a health information service organization, may disclose protected 
health information pursuant to an authorization executed by the 
protected individual who is the subject of the information, if each of 
the following requirements is satisfied:
            (1) Writing.--The authorization is in writing, signed by 
        the individual, and dated on the date of such signature.
            (2) Separate form.--The authorization is not on a form used 
        to authorize or facilitate the provision of, or payment for, 
        health care.
            (3) Trustee described.--The trustee is specifically named 
        or generically described in the authorization as authorized to 
        disclose such information.
            (4) Recipient described.--The person to whom the 
        information is to be disclosed is specifically named or 
        generically described in the authorization as a person to whom 
        such information may be disclosed.
            (5) Statement of intended uses and disclosures received.--
        The authorization contains an acknowledgment that the 
        individual has received a statement described in subsection (b) 
        from such person.
            (6) Information described.--The information to be disclosed 
        is described in the authorization.
            (7) Authorization timely received.--The authorization is 
        received by the trustee during a period described in subsection 
        (c)(1).
            (8) Disclosure timely made.--The disclosure occurs during a 
        period described in subsection (c)(2).
    (b) Statement of Intended Uses and Disclosures.--
            (1) In general.--A person who wishes to receive from a 
        health information trustee protected health information about a 
        protected individual pursuant to an authorization executed by 
        the individual shall supply the individual, in writing and on a 
        form that is distinct from the authorization, with a statement 
        of the uses for which the person intends the information and 
        the disclosures the person intends to make of the information. 
        Such statement shall be supplied before the authorization is 
        executed.
            (2) Enforcement.--If the person uses or discloses the 
        information in a manner that is inconsistent with such 
        statement, the person shall be subject to section 2191 
        (relating to civil actions) with respect to such failure, 
        except where such use or disclosure is required by law.
            (3) Model statements.--Not later than July 1, 1996, the 
        Secretary, after notice and opportunity for public comment, 
        shall develop and disseminate model statements of intended uses 
        and disclosures of the type described in paragraph (1).
    (c) Time Limitations on Authorizations.--
            (1) Receipt by trustee.--For purposes of subsection (a)(7), 
        an authorization is timely received if it is received by the 
        trustee during--
                    (A) the 1-year period beginning on the date that 
                the authorization is signed under subsection (a)(1), if 
                the authorization permits the disclosure of protected 
                health information to--
                            (i) a health benefit plan sponsor;
                            (ii) a health care provider;
                            (iii) a health oversight agency;
                            (iv) a public health authority;
                            (v) a health researcher; or
                            (vi) a person who provides counseling or 
                        social services to individuals; or
                    (B) the 30-day period beginning on the date that 
                the authorization is signed under subsection (a)(1), if 
                the authorization permits the disclosure of protected 
                health information to a person other than a person 
                described in subparagraph (A).
            (2) Disclosure by trustee.--For purposes of subsection 
        (a)(8), a disclosure is timely made if it occurs before--
                    (A) the date or event (if any) specified in the 
                authorization upon which the authorization expires; and
                    (B) the expiration of the 6-month period beginning 
                on the date the trustee receives the authorization.
    (d) Revocation or Amendment of Authorization.--
            (1) In general.--A protected individual in writing may 
        revoke or amend an authorization described in subsection (a), 
        in whole or in part, at any time, except insofar as--
                    (A) disclosure of protected health information has 
                been authorized to permit validation of expenditures 
                based on health condition by a government authority; or
                    (B) action has been taken in reliance on the 
                authorization.
            (2) Notice of revocation.--A health information trustee who 
        discloses protected health information in reliance on an 
        authorization that has been revoked shall not be subject to any 
        liability or penalty under this part if--
                    (A) the reliance was in good faith;
                    (B) the trustee had no notice of the revocation; 
                and
                    (C) the disclosure was otherwise in accordance with 
                the requirements of this section.
    (e) Additional Requirements of Trustee.--A health information 
trustee may impose requirements for an authorization that are in 
addition to the requirements in this section.
    (f) Copy.--A health information trustee who discloses protected 
health information pursuant to an authorization under this section 
shall maintain a copy of the authorization.
    (g) Construction.--This section may not be construed--
            (1) to require a health information trustee to disclose 
        protected health information; or
            (2) to limit the right of a health information trustee to 
        charge a fee for the disclosure or reproduction of protected 
        health information.
    (h) Subpoenas, Warrants, and Search Warrants.--If a health 
information trustee discloses protected health information pursuant to 
an authorization in order to comply with an administrative subpoena or 
warrant or a judicial subpoena or search warrant, the authorization--
            (1) shall specifically authorize the disclosure for the 
        purpose of permitting the trustee to comply with the subpoena, 
        warrant, or search warrant; and
            (2) shall otherwise meet the requirements in this section.

SEC. 2153. TREATMENT, PAYMENT, AND OVERSIGHT.

    (a) Disclosures by Plans, Providers, and Oversight Agencies.--A 
health information trustee described in subsection (d) may disclose 
protected health information to a health benefit plan sponsor, health 
care provider, or health oversight agency if the disclosure is--
            (1) for the purpose of providing health care and a 
        protected individual who is a subject of the information has 
        not previously objected to the disclosure in writing;
            (2) for the purpose of providing for the payment for health 
        care furnished to an individual; or
            (3) for use by a health oversight agency for a purpose that 
        is described in subparagraph (A) or (B)(i) of section 
        2140(b)(7).
    (b) Disclosures by Certain Other Trustees.--A health information 
trustee may disclose protected health information to a health care 
provider if--
            (1) the disclosure is for the purpose described in 
        subsection (a)(1); and
            (2) the trustee--
                    (A) is a public health authority;
                    (B) received protected health information pursuant 
                to section 2157 (relating to emergency circumstances); 
                or
                    (C) is an officer or employee of a trustee 
                described in subsection (B).
    (c) Use in Action Against Individual.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information 
in any administrative, civil, or criminal action or investigation 
directed against the individual, except an action or investigation 
arising out of and related to receipt of health care or payment for 
health care.
    (d) Applicability.--A health information trustee referred to in 
subsection (a) is any of the following:
            (1) A health benefit plan sponsor.
            (2) A health care provider.
            (3) A health oversight agency.
            (4) A health information service organization.

SEC. 2154. NEXT OF KIN AND DIRECTORY INFORMATION.

    (a) Next of Kin.--A health information trustee who is a health care 
provider, who received protected health information pursuant to section 
2157 (relating to emergency circumstances), or who is an officer or 
employee of such a recipient may orally disclose protected health 
information about a protected individual to the next of kin of the 
individual (as defined under State law), or to a person with whom the 
individual has a close personal relationship, if--
            (1) the trustee has no reason to believe that the 
        individual would consider the information especially sensitive;
            (2) the individual has not previously objected to the 
        disclosure;
            (3) the disclosure is consistent with good medical or other 
        professional practice; and
            (4) the information disclosed is limited to information 
        about health care that is being provided to the individual at 
        or about the time of the disclosure.
    (b) Directory Information.--
            (1) In General.--A health information trustee who is a 
        health care provider, who received protected health information 
        pursuant to section 2157 (relating to emergency circumstances), 
        or who is an officer or employee of such a recipient may 
        disclose to any person the information described in paragraph 
        (2) if--
                    (A) a protected individual who is a subject of the 
                information has not objected in writing to the 
                disclosure;
                    (B) the disclosure is otherwise consistent with 
                good medical and other professional practice; and
                    (C) the information does not reveal specific 
                information about the physical or mental condition or 
                functional status of a protected individual or about 
                the health care provided to a protected individual.
            (2) Information described.--The information referred to in 
        paragraph (1) is the following:
                    (A) The name of an individual receiving health care 
                from a health care provider on a premises controlled by 
                the provider.
                    (B) The location of the individual on such 
                premises.
                    (C) The general health status of the individual, 
                described in terms of critical, poor, fair, stable, 
                satisfactory, or terms denoting similar conditions.
    (c) No Accounting Required.--A health information trustee who 
discloses protected health information under this section is not 
required to maintain an accounting of the disclosure under section 
2144.
    (d) Recipients.--A person to whom protected health information is 
disclosed under this section shall not, by reason of such disclosure, 
be subject to any requirement under this part.

SEC. 2155. PUBLIC HEALTH.

    (a) In General.--A health information trustee who is a health care 
provider or a public health authority may disclose protected health 
information to--
            (1) a public health authority for use in legally 
        authorized--
                    (A) disease or injury reporting;
                    (B) public health surveillance; or
                    (C) public health investigation or intervention; or
            (2) an individual who is authorized by law to receive the 
        information in a public health intervention.
    (b) Use in Action Against Individual.--A public health authority 
who receives protected health information about a protected individual 
through a disclosure under this section may not use or disclose the 
information in any administrative, civil, or criminal action or 
investigation directed against the individual, except where the use or 
disclosure is authorized by law for protection of the public health.
    (c) Individual Recipients.--An individual to whom protected health 
information is disclosed under subsection (a)(2) shall not, by reason 
of such disclosure, be subject to any requirement under this part.

SEC. 2156. HEALTH RESEARCH.

    (a) In General.--A health information trustee described in 
subsection (d) may disclose protected health information to a person 
if--
            (1) the person is conducting an approved health research 
        project;
            (2) the information is to be used in the project; and
            (3) the project has been determined by a certified 
        institutional review board to be--
                    (A) of sufficient importance so as to outweigh the 
                intrusion into the privacy of the protected individual 
                who is the subject of the information that would result 
                from the disclosure; and
                    (B) impracticable to conduct without the 
                information.
    (b) Disclosures by Health Information Service Organizations.--A 
health information service organization may disclose protected health 
information under subsection (a) only if the certified institutional 
review board referred to in subsection (a)(3) has been certified as 
being qualified to make determinations under such subsection with 
respect to disclosures by such organizations.
    (c) Limitations on Use and Disclosure; Obligations of Recipient.--A 
health researcher who receives protected health information about a 
protected individual pursuant to subsection (a)--
            (1) may use the information solely for purposes of an 
        approved health research project;
            (2) may not use or disclose the information in any 
        administrative, civil, or criminal action or investigation 
        directed against the individual; and
            (3) shall remove or destroy, at the earliest opportunity 
        consistent with the purposes of the approved health research 
        project in connection with which the disclosure was made, 
        information that would enable an individual to be identified, 
        unless a certified institutional review board has determined 
        that there is a health or research justification for retention 
        of such identifiers and there is an adequate plan to protect 
        the identifiers from use and disclosure that is inconsistent 
        with this part.
    (d) Applicability.--A health information trustee referred to in 
subsection (a) is any health information trustee other than a person 
who, with respect to the specific protected health information to be 
disclosed under such subsection, received the information--
            (1) pursuant to--
                    (A) section 2158 (relating to judicial and 
                administrative purposes);
                    (B) paragraph (1), (2), or (3) of section 2159(a) 
                (relating to law enforcement); or
                    (C) section 2160 (relating to subpoenas, warrants, 
                and search warrants); or
            (2) while acting in whole or in part in the capacity of an 
        officer or employee of a person described in paragraph (1).
    (e) Requirements for Institutional Review Boards.--
            (1) Regulations.--Not later than July 1, 1996, the 
        Secretary, after opportunity for notice and comment, shall 
        promulgate regulations establishing requirements for certified 
        institutional review boards under this part. The regulations 
        shall be based on regulations promulgated under section 491(a) 
        of the Public Health Service Act and shall ensure that 
        certified institutional review boards are qualified to assess 
        and protect the confidentiality of research subjects. The 
        regulations shall include specific requirements for certified 
        institutional review boards that make determinations under 
        subsection (a)(3) with respect to disclosures by health 
        information service organizations.
            (2) Certification.--The Secretary shall certify that an 
        institutional review board satisfies the requirements of the 
        regulations promulgated under paragraph (1).

SEC. 2157. EMERGENCY CIRCUMSTANCES.

    (a) In General.--A health information trustee may disclose 
protected health information if the trustee believes, on reasonable 
grounds, that the disclosure is necessary to prevent or lessen a 
serious and imminent threat to the health or safety of an individual.
    (b) Use in Action Against Individual.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information 
in any administrative, civil, or criminal action or investigation 
directed against the individual, except an action or investigation 
arising out of and related to receipt of health care or payment for 
health care.

SEC. 2158. JUDICIAL AND ADMINISTRATIVE PURPOSES.

    (a) In General.--A health information trustee described in 
subsection (d) may disclose protected health information--
            (1) pursuant to the Federal Rules of Civil Procedure, the 
        Federal Rules of Criminal Procedure, or comparable rules of 
        other courts or administrative agencies in connection with 
        litigation or proceedings to which a protected individual who 
        is a subject of the information is a party and in which the 
        individual has placed the individual's physical or mental 
        condition or functional status in issue;
            (2) if directed by a court in connection with a court-
        ordered examination of an individual; or
            (3) to assist in the identification of a dead individual.
    (b) Written Statement.--A person seeking protected health 
information about a protected individual held by health information 
trustee under--
            (1) subsection (a)(1)--
                    (A) shall notify the protected individual or the 
                attorney of the protected individual of the request for 
                the information;
                    (B) shall provide the trustee with a signed 
                document attesting--
                            (i) that the protected individual is a 
                        party to the litigation or proceedings for 
                        which the information is sought;
                            (ii) that the individual has placed the 
                        individual's physical or mental condition or 
                        functional status in issue; and
                            (iii) the date on which the protected 
                        individual or the attorney of the protected 
                        individual was notified under subparagraph (A); 
                        and
                    (C) shall not accept any requested protected health 
                information from the trustee until the termination of 
                the 10-day period beginning on the date notice was 
                given under subparagraph (A); or
            (2) subsection (a)(3) shall provide the trustee with a 
        written statement that the information is sought to assist in 
        the identification of a dead individual.
    (c) Use and Disclosure.--A person to whom protected health 
information is disclosed under this section may use and disclose the 
information only to accomplish the purpose for which the disclosure was 
made.
    (d) Applicability.--A health information trustee referred to in 
subsection (a) is any of the following:
            (1) A health benefit plan sponsor.
            (2) A health care provider.
            (3) A health oversight agency.
            (4) A person who, with respect to the specific protected 
        health information to be disclosed under such subsection, 
        received the information--
                    (A) pursuant to--
                            (i) section 2157 (relating to emergency 
                        circumstances); or
                            (ii) section 2160 (relating to subpoenas, 
                        warrants, and search warrants); or
                    (B) while acting in whole or in part in the 
                capacity of an officer or employee of a person 
                described in subparagraph (A).

SEC. 2159. LAW ENFORCEMENT.

    (a) In General.--A health information trustee, other than a health 
information service organization, may disclose protected health 
information to a law enforcement agency, other than a health oversight 
agency--
            (1) if the information is disclosed for use in an 
        investigation or prosecution of a health information trustee;
            (2) in connection with criminal activity committed against 
        the trustee or an affiliated person of the trustee or on 
        premises controlled by the trustee; or
            (3) if the information is needed to determine whether a 
        crime has been committed and the nature of any crime that may 
        have been committed (other than a crime that may have been 
        committed by the protected individual who is the subject of the 
        information).
    (b) Additional Authority of Certain Trustees.--A health information 
trustee who is not a health information service organization, a public 
health authority, or a health researcher may disclose protected health 
information to a law enforcement agency (other than a health oversight 
agency)--
            (1) to assist in the identification or location of a 
        victim, fugitive, or witness in a law enforcement inquiry;
            (2) pursuant to a law requiring the reporting of specific 
        health care information to law enforcement authorities; or
            (3) if the information is specific health information 
        described in paragraph (2) and the trustee is operated by a 
        Federal agency.
    (c) Certification.--Where a law enforcement agency requests a 
health information trustee to disclose protected health information 
under subsection (a) or (b)(1), the agency shall provide the trustee 
with a written certification that--
            (1) is signed by a supervisory official of a rank 
        designated by the head of the agency;
            (2) specifies the information requested; and
            (3) states that the information is needed for a lawful 
        purpose under this section.
    (d) Restrictions on Disclosure and Use.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information--
            (1) in any administrative, civil, or criminal action or 
        investigation directed against the individual, except an action 
        or investigation arising out of and directly related to the 
        action or investigation for which the information was obtained; 
        and
            (2) otherwise unless the use or disclosure is necessary to 
        fulfill the purpose for which the information was obtained and 
        is not prohibited by any other provision of law.

SEC. 2160. SUBPOENAS, WARRANTS, AND SEARCH WARRANTS.

    (a) In General.--A health information trustee described in 
subsection (g) may disclose protected health information if the 
disclosure is pursuant to any of the following:
            (1) A subpoena issued under the authority of a grand jury 
        and the trustee is provided a written certification by the 
        grand jury that the grand jury has complied with the applicable 
        access provisions of section 2171.
            (2) An administrative subpoena or warrant or a judicial 
        subpoena or search warrant and the trustee is provided a 
        written certification by the person seeking the information 
        that the person has complied with the applicable access 
        provisions of section 2171 or 2173(a).
            (3) An administrative subpoena or warrant or a judicial 
        subpoena or search warrant and the disclosure otherwise meets 
        the conditions of one of sections 2153 through 2159.
    (b) Authority of All Trustees.--Any health information trustee may 
disclose protected health information if the disclosure is pursuant to 
subsection (a)(3).
    (c) Restrictions on Use and Disclosure.--Protected health 
information about a protected individual that is disclosed by a health 
information trustee pursuant to--
            (1) subsection (a)(2) may not be otherwise used or 
        disclosed by the recipient unless the use or disclosure is 
        necessary to fulfill the purpose for which the information was 
        obtained; and
            (2) subsection (a)(3) may not be used or disclosed by the 
        recipient unless the recipient complies with the conditions and 
        restrictions on use and disclosure with which the recipient 
        would have been required to comply if the disclosure by the 
        trustee had been made under the section referred to in 
        subsection (a)(3) the conditions of which were met by the 
        disclosure.
    (d) Restrictions on Grand Juries.--Protected health information 
that is disclosed by a health information trustee under subsection 
(a)(1)--
            (1) shall be returnable on a date when the grand jury is in 
        session and actually presented to the grand jury;
            (2) shall be used only for the purpose of considering 
        whether to issue an indictment or report by that grand jury, or 
        for the purpose of prosecuting a crime for which that 
        indictment or report is issued, or for a purpose authorized by 
        rule 6(e) of the Federal Rules of Criminal Procedure or a 
        comparable State rule;
            (3) shall be destroyed or returned to the trustee if not 
        used for one of the purposes specified in paragraph (2); and
            (4) shall not be maintained, or a description of the 
        contents of such information shall not be maintained, by any 
        government authority other than in the sealed records of the 
        grand jury, unless such information has been used in the 
        prosecution of a crime for which the grand jury issued an 
        indictment or presentment or for a purpose authorized by rule 
        6(e) of the Federal Rules of Criminal Procedure or a comparable 
        State rule.
    (e) Use in Action Against Individual.--A person who receives 
protected health information about a protected individual through a 
disclosure under this section may not use or disclose the information 
in any administrative, civil, or criminal action or investigation 
directed against the individual, except an action or investigation 
arising out of and directly related to the inquiry for which the 
information was obtained;
    (f) Construction.--Nothing in this section shall be construed as 
authority for a health information trustee to refuse to comply with a 
valid administrative subpoena or warrant or a valid judicial subpoena 
or search warrant that meets the requirements of this part.
    (g) Applicability.--A health information trustee referred to in 
subsection (a) is any trustee other than the following:
            (1) A health information service organization.
            (2) A public health authority.
            (3) A health researcher.

SEC. 2161. HEALTH INFORMATION SERVICE ORGANIZATIONS.

    A health information trustee may disclose protected health 
information to a health information service organization for the 
purpose of permitting the organization to perform a function for which 
the Secretary has authorized (by means of a designation or 
certification) the organization to receive access to health care data 
in electronic or magnetic form that are regulated by this Act.

           Subpart C--Access Procedures and Challenge Rights

SEC. 2171. ACCESS PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS, WARRANTS, 
              AND SEARCH WARRANTS.

    (a) Probable Cause Requirement.--A government authority may not 
obtain protected health information about a protected individual from a 
health information trustee under paragraph (1) or (2) of section 
2160(a) for use in a law enforcement inquiry unless there is probable 
cause to believe that the information is relevant to a legitimate law 
enforcement inquiry being conducted by the government authority.
    (b) Warrants and Search Warrants.--A government authority that 
obtains protected health information about a protected individual from 
a health information trustee under circumstances described in 
subsection (a) and pursuant to a warrant or search warrant shall, not 
later than 30 days after the date the warrant was served on the 
trustee, serve the individual with, or mail to the last known address 
of the individual, a copy of the warrant.
    (c) Subpoenas.--Except as provided in subsection (d), a government 
authority may not obtain protected health information about a protected 
individual from a health information trustee under circumstances 
described in subsection (a) and pursuant to a subpoena unless a copy of 
the subpoena has been served by hand delivery upon the individual, or 
mailed to the last known address of the individual, on or before the 
date on which the subpoena was served on the trustee, together with a 
notice (published by the Secretary under section 2175(1)) of the 
individual's right to challenge the subpoena in accordance with section 
2172, and--
            (1) 30 days have passed from the date of service, or 30 
        days have passed from the date of mailing, and within such time 
        period the individual has not initiated a challenge in 
        accordance with section 2172; or
            (2) disclosure is ordered by a court under section 2172.
    (d) Application for Delay.--
            (1) In general.--A government authority may apply to an 
        appropriate court to delay (for an initial period of not longer 
        than 90 days) serving a copy of a subpoena and a notice 
        otherwise required under subsection (c) with respect to a law 
        enforcement inquiry. The government authority may apply to the 
        court for extensions of the delay.
            (2) Reasons for delay.--An application for a delay, or 
        extension of a delay, under this subsection shall state, with 
        reasonable specificity, the reasons why the delay or extension 
        is being sought.
            (3) Ex parte order.--The court shall enter an ex parte 
        order delaying, or extending the delay of, the notice and an 
        order prohibiting the trustee from revealing the request for, 
        or the disclosure of, the protected health information being 
        sought if the court finds that--
                    (A) the inquiry being conducted is within the 
                lawful jurisdiction of the government authority seeking 
                the protected health information;
                    (B) there is probable cause to believe that the 
                protected health information being sought is relevant 
                to a legitimate law enforcement inquiry being conducted 
                by the government authority;
                    (C) the government authority's need for the 
                information outweighs the privacy interest of the 
                protected individual who is the subject of the 
                information; and
                    (D) there are reasonable grounds to believe that 
                receipt of a notice by the individual will result in--
                            (i) endangering the life or physical safety 
                        of any individual;
                            (ii) flight from prosecution;
                            (iii) destruction of or tampering with 
                        evidence or the information being sought; or
                            (iv) intimidation of potential witnesses.
            (4) Service of application on individual.--Upon the 
        expiration of a period of delay of notice under this 
        subsection, the government authority shall serve upon the 
        individual, with the service of the subpoena and the notice, a 
        copy of any applications filed and approved under this 
        subsection.

SEC. 2172. CHALLENGE PROCEDURES FOR LAW ENFORCEMENT SUBPOENAS.

    (a) Motion To Quash Subpoena.--Within 30 days of the date of 
service, or 30 days of the date of mailing, of a subpoena of a 
government authority seeking protected health information about a 
protected individual from a health information trustee under paragraph 
(1) or (2) of section 2160(a) (except a subpoena to which section 2173 
applies), the individual may file (without filing fee) a motion to 
quash the subpoena--
            (1) in the case of a State judicial subpoena, in the court 
        which issued the subpoena;
            (2) in the case of a subpoena issued under the authority of 
        a State that is not a State judicial subpoena, in a court of 
        competent jurisdiction;
            (3) in the case of a subpoena issued under the authority of 
        a Federal court, in any court of the United States of competent 
        jurisdiction; or
            (4) in the case of any other subpoena issued under the 
        authority of the United States, in--
                    (A) the United States district court for the 
                district in which the individual resides or in which 
                the subpoena was issued; or
                    (B) another United States district court of 
                competent jurisdiction.
    (b) Copy.--A copy of the motion shall be served by the individual 
upon the government authority by delivery of registered or certified 
mail.
    (c) Affidavits and Sworn Documents.--The government authority may 
file with the court such affidavits and other sworn documents as 
sustain the validity of the subpoena. The individual may file with the 
court, within 5 days of the date of the authority's filing, affidavits 
and sworn documents in response to the authority's filing. The court, 
upon the request of the individual, the government authority, or both, 
may proceed in camera.
    (d) Proceedings and Decision on Motion.--The court may conduct such 
proceedings as it deems appropriate to rule on the motion. All such 
proceedings shall be completed, and the motion ruled on, within 10 
calendar days of the date of the government authority's filing.
    (e) Extension of Time Limits for Good Cause.--The court, for good 
cause shown, may at any time in its discretion enlarge the time limits 
established by subsections (c) and (d).
    (f) Standard for Decision.--A court may deny a motion under 
subsection (a) if it finds that there is probable cause to believe that 
the protected health information being sought is relevant to a 
legitimate law enforcement inquiry being conducted by the government 
authority, unless the court finds that the individual's privacy 
interest outweighs the government authority's need for the information. 
The individual shall have the burden of demonstrating that the 
individual's privacy interest outweighs the need established by the 
government authority for the information.
    (g) Specific Considerations With Respect to Privacy Interest.--In 
determining under subsection (f) whether an individual's privacy 
interest outweighs the government authority's need for the information, 
the court shall consider--
            (1) the particular purpose for which the information was 
        collected by the trustee;
            (2) the degree to which disclosure of the information will 
        embarrass, injure, or invade the privacy of the individual;
            (3) the effect of the disclosure on the individual's future 
        health care;
            (4) the importance of the inquiry being conducted by the 
        government authority, and the importance of the information to 
        that inquiry; and
            (5) any other factor deemed relevant by the court.
    (h) Attorney's Fees.--In the case of any motion brought under 
subsection (a) in which the individual has substantially prevailed, the 
court, in its discretion, may assess against a government authority a 
reasonable attorney's fee and other litigation costs (including expert 
fees) reasonably incurred.
    (i) No Interlocutory Appeal.--A court ruling denying a motion to 
quash under this section shall not be deemed a final order and no 
interlocutory appeal may be taken therefrom by the individual. An 
appeal of such a ruling may be taken by the individual within such 
period of time as is provided by law as part of any appeal from a final 
order in any legal proceeding initiated against the individual arising 
out of or based upon the protect health information disclosed.

SEC. 2173. ACCESS AND CHALLENGE PROCEDURES FOR OTHER SUBPOENAS.

    (a) In General.--A person (other than a government authority 
seeking protected health information under circumstances described in 
section 2171(a)) may not obtain protected health information about a 
protected individual from a health information trustee pursuant to a 
subpoena under section 2160(a)(2) unless--
            (1) a copy of the subpoena has been served upon the 
        individual or mailed to the last known address of the 
        individual on or before the date on which the subpoena was 
        served on the trustee, together with a notice (published by the 
        Secretary under section 2175(2)) of the individual's right to 
        challenge the subpoena, in accordance with subsection (b); and
            (2) either--
                    (A) 30 days have passed from the date of service or 
                30 days have passed from the date of the mailing and 
                within such time period the individual has not 
                initiated a challenge in accordance with subsection 
                (b); or
                    (B) disclosure is ordered by a court under such 
                subsection.
    (b) Motion To Quash.--Within 30 days of the date of service or 30 
days of the date of mailing of a subpoena seeking protected health 
information about a protected individual from a health information 
trustee under subsection (a), the individual may file (without filing 
fee) in any court of competent jurisdiction, a motion to quash the 
subpoena, with a copy served on the person seeking the information. The 
individual may oppose, or seek to limit, the subpoena on any grounds 
that would otherwise be available if the individual were in possession 
of the information.
    (c) Standard for Decision.--The court shall grant an individual's 
motion under subsection (b) if the person seeking the information has 
not sustained the burden of demonstrating that--
            (1) there are reasonable grounds to believe that the 
        information will be relevant to a lawsuit or other judicial or 
        administrative proceeding; and
            (2) the need of the person for the information outweighs 
        the privacy interest of the individual.
    (d) Specific Considerations With Respect to Privacy Interest.--In 
determining under subsection (c) whether the need of the person for the 
information outweighs the privacy interest of the individual, the court 
shall consider--
            (1) the particular purpose for which the information was 
        collected by the trustee;
            (2) the degree to which disclosure of the information will 
        embarrass, injure, or invade the privacy of the individual;
            (3) the effect of the disclosure on the individual's future 
        health care;
            (4) the importance of the information to the lawsuit or 
        proceeding; and
            (5) any other factor deemed relevant by the court.
    (e) Attorney's Fees.--In the case of any motion brought under 
subsection (b) by an individual against a person in which the 
individual has substantially prevailed, the court, in its discretion, 
may assess against the person a reasonable attorney's fee and other 
litigation costs (including expert fees) reasonably incurred.

SEC. 2174. CONSTRUCTION OF SUBPART; SUSPENSION OF STATUTE OF 
              LIMITATIONS.

    (a) In General.--Nothing in this subpart shall affect the right of 
a health information trustee to challenge a request for protected 
health information. Nothing in this subpart shall entitle a protected 
individual to assert the rights of a health information trustee.
    (b) Effect of Motion on Statute of Limitations.--If an individual 
who is the subject of protected health information files a motion under 
this subpart which has the effect of delaying the access of a 
government authority to such information, the period beginning on the 
date such motion was filed and ending on the date on which the motion 
is decided shall be excluded in computing any period of limitations 
within which the government authority may commence any civil or 
criminal action in connection with which the access is sought.

SEC. 2175. RESPONSIBILITIES OF SECRETARY.

    Not later than July 1, 1996, the Secretary, after notice and 
opportunity for public comment, shall develop and disseminate brief, 
clear, and easily understood model notices--
            (1) for use under subsection (c) of section 2171, detailing 
        the rights of a protected individual who wishes to challenge, 
        under section 2172, the disclosure of protected health 
        information about the individual under such subsection; and
            (2) for use under subsection (a) of section 2173, detailing 
        the rights of a protected individual who wishes to challenge, 
        under subsection (b) of such section, the disclosure of 
        protected health information about the individual under such 
        section.

                  Subpart D--Miscellaneous Provisions

SEC. 2181. PAYMENT CARD AND ELECTRONIC PAYMENT TRANSACTIONS.

    (a) Payment for Health Care Through Card or Electronic Means.--If a 
protected individual pays a health information trustee for health care 
by presenting a debit, credit, or other payment card or account number, 
or by any other electronic payment means, the trustee may disclose to a 
person described in subsection (b) only such protected health 
information about the individual as is necessary for the processing of 
the payment transaction or the billing or collection of amounts charged 
to, debited from, or otherwise paid by, the individual using the card, 
number, or other electronic payment means.
    (b) Transaction Processing.--A person who is a debit, credit, or 
other payment card issuer, is otherwise directly involved in the 
processing of payment transactions involving such cards or other 
electronic payment transactions, or is otherwise directly involved in 
the billing or collection of amounts paid through such means, may only 
use or disclose protected health information about a protected 
individual that has been disclosed in accordance with subsection (a) 
when necessary for--
            (1) the authorization, settlement, billing or collection of 
        amounts charged to, debited from, or otherwise paid by, the 
        individual using a debit, credit, or other payment card or 
        account number, or by other electronic payment means;
            (2) the transfer of receivables, accounts, or interest 
        therein;
            (3) the audit of the credit, debit, or other payment card 
        account information;
            (4) compliance with Federal, State, or local law; or
            (5) a properly authorized civil, criminal, or regulatory 
        investigation by Federal, State, or local authorities.

SEC. 2182. ACCESS TO PROTECTED HEALTH INFORMATION OUTSIDE OF THE UNITED 
              STATES.

    (a) In General.--Notwithstanding the provisions of subpart B, and 
except as provided in subsection (b), a health information trustee may 
not permit any person who is not in a State to have access to protected 
health information about a protected individual unless one or more of 
the following conditions exist:
            (1) Specific authorization.--The individual has 
        specifically consented to the provision of such access outside 
        of the United States in an authorization that meets the 
        requirements of section 2152.
            (2) Equivalent protection.--The provision of such access is 
        authorized under this part and the Secretary has determined 
        that there are fair information practices for protected health 
        information in the jurisdiction where the access will be 
        provided that provide protections for individuals and protected 
        health information that are equivalent to the protections 
        provided for by this part.
            (3) Access required by law.--The provision of such access 
        is required under--
                    (A) a Federal statute; or
                    (B) a treaty or other international agreement 
                applicable to the United States.
    (b) Exceptions.--Subsection (a) does not apply where the provision 
of access to protected health information--
            (1) is to a foreign public health authority;
            (2) is authorized under section 2154 (relating to next of 
        kin and directory information), 2156 (relating to health 
        research), or 2157 (relating to emergency circumstances); or
            (3) is necessary for the purpose of providing for payment 
        for health care that has been provided to an individual.

SEC. 2183. STANDARDS FOR ELECTRONIC DOCUMENTS AND COMMUNICATIONS.

    (a) Standards.--Not later than July 1, 1996, the Secretary, after 
notice and opportunity for public comment and in consultation with 
appropriate private standard-setting organizations and other interested 
parties, shall establish standards with respect to the creation, 
transmission, receipt, and maintenance, in electronic and magnetic 
form, of each type of written document specifically required or 
authorized under this part. Where a signature is required under any 
other provision of this part, such standards shall provide for an 
electronic or magnetic substitute that serves the functional equivalent 
of a signature.
    (b) Treatment of Complying Documents and Communications.--An 
electronic or magnetic document or communication that satisfies the 
standards established under subsection (a) with respect to such 
document or communication shall be treated as satisfying the 
requirements of this part that apply to an equivalent written document.

SEC. 2184. DUTIES AND AUTHORITIES OF AFFILIATED PERSONS.

    (a) Requirements on Trustees.--
            (1) Provision of information.--A health information trustee 
        may provide protected health information to a person who, with 
        respect to the trustee, is an affiliated person and may permit 
        the affiliated person to use such information, only for the 
        purpose of conducting, supporting, or facilitating an activity 
        that the trustee is authorized to undertake.
            (2) Notice to affiliated person.--A health information 
        trustee shall notify a person who, with respect to the trustee, 
        is an affiliated person of any duties under this part that the 
        affiliated person is required to fulfill and of any authorities 
        under this part that the affiliated person is authorized to 
        exercise.
    (b) Duties of Affiliated Persons.--
            (1) In general.--An affiliated person shall fulfill any 
        duty under this part that--
                    (A) the health information trustee with whom the 
                person has an agreement or relationship described in 
                section 2140(c)(1)(C) is required to fulfill; and
                    (B) the person has undertaken to fulfill pursuant 
                to such agreement or relationship.
            (2) Construction of other subparts.--With respect to a duty 
        described in paragraph (1) that an affiliated person is 
        required to fulfill, the person shall be considered a health 
        information trustee for purposes of this part. The person shall 
        be subject to subpart E (relating to enforcement) with respect 
        to any such duty that the person fails to fulfill.
            (3) Effect on trustee.--An agreement or relationship with 
        an affiliated person does not relieve a health information 
        trustee of any duty or liability under this part.
    (c) Authorities of Affiliated Persons.--
            (1) In general.--An affiliated person may only exercise an 
        authority under this part that the health information trustee 
        with whom the person is affiliated may exercise and that the 
        person has been given by the trustee pursuant to an agreement 
        or relationship described in section 2140(c)(1)(C). With 
        respect to any such authority, the person shall be considered a 
        health information trustee for purposes of this part. The 
        person shall be subject to subpart E (relating to enforcement) 
        with respect to any act that exceeds such authority.
            (2) Effect on trustee.--An agreement or relationship with 
        an affiliated person does not affect the authority of a health 
        information trustee under this part.

SEC. 2185. AGENTS AND ATTORNEYS.

    (a) In General.--Except as provided in subsections (b) and (c), a 
person who is authorized by law (on grounds other than an individual's 
minority), or by an instrument recognized under law, to act as an 
agent, attorney, proxy, or other legal representative for a protected 
individual or the estate of a protected individual, or otherwise to 
exercise the rights of the individual or estate, may, to the extent 
authorized, exercise and discharge the rights of the individual or 
estate under this part.
    (b) Health Care Power of Attorney.--A person who is authorized by 
law (on grounds other than an individual's minority), or by an 
instrument recognized under law, to make decisions about the provision 
of health care to an individual who is incapacitated may exercise and 
discharge the rights of the individual under this part to the extent 
necessary to effectuate the terms or purposes of the grant of 
authority.
    (c) No Court Declaration.--If a health care provider determines 
that an individual, who has not been declared to be legally 
incompetent, suffers from a medical condition that prevents the 
individual from acting knowingly or effectively on the individual's own 
behalf, the right of the individual to authorize disclosure under 
section 2152 may be exercised and discharged in the best interest of 
the individual by--
            (1) a person described in subsection (b) with respect to 
        the individual;
            (2) a person described in subsection (a) with respect to 
        the individual, but only if a person described in paragraph (1) 
        cannot be contacted after a reasonable effort;
            (3) the next of kin of the individual, but only if a person 
        described in paragraph (1) or (2) cannot be contacted after a 
        reasonable effort; or
            (4) the health care provider, but only if a person 
        described in paragraph (1), (2), or (3) cannot be contacted 
        after a reasonable effort.

SEC. 2186. MINORS.

    (a) Individuals Who Are 18 or Legally Capable.--In the case of an 
individual--
            (1) who is 18 years of age or older, all rights of the 
        individual shall be exercised by the individual, except as 
        provided in section 2185; or
            (2) who, acting alone, has the legal capacity to apply for 
        and obtain health care and has sought such care, the individual 
        shall exercise all rights of an individual under this part with 
        respect to protected health information relating to such care.
    (b) Individuals Under 18.--Except as provided in subsection (a)(2), 
in the case of an individual who is--
            (1) under 14 years of age, all the individual's rights 
        under this part shall be exercised through the parent or legal 
        guardian of the individual; or
            (2) 14, 15, 16, or 17 years of age, the right of inspection 
        (under section 2141), the right of amendment (under section 
        2142), and the right to authorize disclosure of protected 
        health information (under section 2152) of the individual may 
        be exercised either by the individual or by the parent or legal 
        guardian of the individual.

SEC. 2187. MAINTENANCE OF CERTAIN PROTECTED HEALTH INFORMATION.

    (a) In General.--A State shall establish a process under which the 
protected health information described in subsection (b) that is 
maintained by a person described in subsection (c) is delivered to, and 
maintained by, the State or an individual or entity designated by the 
State.
    (b) Information Described.--The protected health information 
referred to in subsection (a) is protected health information that--
            (1) is recorded in any form or medium;
            (2) is created by--
                    (A) a health care provider; or
                    (B) a health benefit plan sponsor that provides 
                benefits in the form of items and services to enrollees 
                and not in the form of reimbursement for items and 
                services; and
            (3) relates in any way to the past, present, or future 
        physical or mental health or condition or functional status of 
        a protected individual or the provision of health care to a 
        protected individual.
    (c) Persons Described.--A person referred to in subsection (a) is 
any of the following:
                    (A) A health care facility previously located in 
                the State that has closed.
                    (B) A professional practice previously operated by 
                a health care provider in the State that has closed.
                    (C) A health benefit plan sponsor that--
                            (i) previously provided benefits in the 
                        form of items and services to enrollees in the 
                        State; and
                            (ii) has ceased to do business.

                         Subpart E--Enforcement

SEC. 2191. CIVIL ACTIONS.

    (a) In General.--Any individual whose right under this part has 
been knowingly or negligently violated--
            (1) by a health information trustee, or any other person, 
        who is not described in paragraph (2), (3), (4), or (5) may 
        maintain a civil action for actual damages and for equitable 
        relief against the health information trustee or other person;
            (2) by an officer or employee of the United States while 
        the officer or employee was acting within the scope of the 
        office or employment may maintain a civil action for actual 
        damages and for equitable relief against the United States;
            (3) by an officer or employee of any government authority 
        of a State that has waived its sovereign immunity to a claim 
        for damages resulting from a violation of this part while the 
        officer or employee was acting within the scope of the office 
        or employment may maintain a civil action for actual damages 
        and for equitable relief against the State government;
            (4) by an officer or employee of a government of a State 
        that is not described in paragraph (3) may maintain a civil 
        action for actual damages and for equitable relief against the 
        officer or employee; or
            (5) by an officer or employee of a government authority 
        while the officer or employee was not acting within the scope 
        of the office or employment may maintain a civil action for 
        actual damages and for equitable relief against the officer or 
        employee.
    (b) Knowing Violations.--Any individual entitled to recover actual 
damages under this section because of a knowing violation of a 
provision of this part (other than subsection (c) or (d) of section 
2151) shall be entitled to recover the amount of the actual damages 
demonstrated or $5000, whichever is greater.
    (c) Actual Damages.--For purposes of this section, the term 
``actual damages'' includes damages paid to compensate an individual 
for nonpecuniary losses such as physical and mental injury as well as 
damages paid to compensate for pecuniary losses.
    (d) Punitive Damages; Attorney's Fees.--In any action brought under 
this section in which the complainant has prevailed because of a 
knowing violation of a provision of this part (other than subsection 
(c) or (d) of section 2151), the court may, in addition to any relief 
awarded under subsections (a) and (b), award such punitive damages as 
may be warranted. In such an action, the court, in its discretion, may 
allow the prevailing party a reasonable attorney's fee (including 
expert fees) as part of the costs, and the United States shall be 
liable for costs the same as a private person.
    (e) Limitation.--A civil action under this section may not be 
commenced more than 2 years after the date on which the aggrieved 
individual discovered the violation or the date on which the aggrieved 
individual had a reasonable opportunity to discover the violation, 
whichever occurs first.
    (f) Inspection and Amendment.--If a health information trustee has 
established a formal internal procedure that allows an individual who 
has been denied inspection or amendment of protected health information 
to appeal the denial, the individual may not maintain a civil action in 
connection with the denial until the earlier of--
            (1) the date the appeal procedure has been exhausted; or
            (2) the date that is 4 months after the date on which the 
        appeal procedure was initiated.
    (g) No Liability for Permissible Disclosures.--A health information 
trustee who makes a disclosure of protected health information about a 
protected individual that is permitted by this part and not otherwise 
prohibited by State or Federal statute shall not be liable to the 
individual for the disclosure under common law.
    (h) No Liability for Institutional Review Board Determinations.--If 
the members of a certified institutional review board have in good 
faith determined that an approved health research project is of 
sufficient importance so as to outweigh the intrusion into the privacy 
of an individual pursuant to section 2156(a)(1), the members, the 
board, and the parent institution of the board shall not be liable to 
the individual as a result of such determination.
    (i) Good Faith Reliance on Certification.--A health information 
trustee who relies in good faith on a certification by a government 
authority or other person and discloses protected health information 
about an individual in accordance with this part shall not be liable to 
the individual for such disclosure.

SEC. 2192. CIVIL MONEY PENALTIES.

    (a) Violation.--Any health information trustee who the Secretary 
determines has demonstrated a pattern or practice of failure to comply 
with the provisions of this part shall be subject, in addition to any 
other penalties that may be prescribed by law, to a civil money penalty 
of not more than $10,000 for each such failure. In determining the 
amount of any penalty to be assessed under the procedures established 
under subsection (b), the Secretary shall take into account the 
previous record of compliance of the person being assessed with the 
applicable requirements of this part and the gravity of the violation.
    (b) Procedures for Imposition of Penalties.--The provisions of 
section 1128A of the Social Security Act (other than subsections (a) 
and (b)) shall apply to the imposition of a civil monetary penalty 
under this section in the same manner as such provisions apply with 
respect to the imposition of a penalty under section 1128A of such Act.

SEC. 2193. ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--Not later than July 1, 1996, the Secretary shall, 
by regulation, develop alternative dispute resolution methods for use 
by individuals, health information trustees, and other persons in 
resolving claims under section 2191.
    (b) Effect on Initiation of Civil Actions.--
            (1) In general.--Subject to paragraph (2), the regulations 
        established under subsection (a) may provide that an individual 
        alleging that a right of the individual under this part has 
        been violated shall pursue at least one alternative dispute 
        resolution method developed under such subsection as a 
        condition precedent to commencing a civil action under section 
        2191.
            (2) Limitation.--Such regulations may not require an 
        individual to refrain from commencing a civil action to pursue 
        one or more alternative dispute resolution method for a period 
        that is greater than 6 months.
            (3) Suspension of statute of limitations.--The regulations 
        established by the Secretary under subsection (a) may provide 
        that a period in which an individual described in paragraph (1) 
        pursues (as defined by the Secretary) an alternative dispute 
        resolution method under this section shall be excluded in 
        computing the period of limitations under section 2191(e).
    (c) Methods.--The methods under subsection (a) shall include at 
least the following:
            (1) Arbitration.--The use of arbitration.
            (2) Mediation.--The use of mediation.
            (3) Early offers of settlement.--The use of a process under 
        which parties make early offers of settlement.
    (d) Standards for Establishing Methods.--In developing alternative 
dispute resolution methods under subsection (a), the Secretary shall 
ensure that the methods promote the resolution of claims in a manner 
that--
            (1) is affordable for the parties involved;
            (2) provides for timely and fair resolution of claims; and
            (3) provides for reasonably convenient access to dispute 
        resolution for individuals.

SEC. 2194. AMENDMENTS TO CRIMINAL LAW.

    (a) In General.--Title 18, United States Code, is amended by 
inserting after chapter 89 the following:

               ``CHAPTER 90--PROTECTED HEALTH INFORMATION

``Sec.
``1831. Definitions.
``1832. Obtaining protected health information under false pretenses.
``1833. Monetary gain from obtaining protected health information under 
                            false pretenses.
``1834. Knowing and unlawful obtaining of protected health information.
``1835. Monetary gain from knowing and unlawful obtaining of protected 
                            health information.
``1836. Knowing and unlawful use or disclosure of protected health 
                            information.
``1837. Monetary gain from knowing and unlawful sale, transfer, or use 
                            of protected health information.
``Sec. 1831. Definitions
    ``As used in this chapter--
            ``(1) the term `health information trustee' has the meaning 
        given such term in section 2140(b)(6) of the Affordable Health 
        Care Now Act of 1994;
            ``(2) the term `protected health information' has the 
        meaning given such term in section 2140(a)(3) of such Act; and
            ``(3) the term `protected individual' has the meaning given 
        such term in section 2140(a)(4) of such Act.
``Sec. 1832. Obtaining protected health information under false 
              pretenses
    ``Whoever under false pretenses--
            ``(1) requests or obtains protected health information from 
        a health information trustee; or
            ``(2) obtains from a protected individual an authorization 
        for the disclosure of protected health information about the 
        individual maintained by a health information trustee;
shall be fined under this title or imprisoned not more than 5 years, or 
both.
``Sec. 1833. Monetary gain from obtaining protected health information 
              under false pretenses
    ``Whoever under false pretenses--
            ``(1) requests or obtains protected health information from 
        a health information trustee with the intent to sell, transfer, 
        or use such information for profit or monetary gain; or
            ``(2) obtains from a protected individual an authorization 
        for the disclosure of protected health information about the 
        individual maintained by a health information trustee with the 
        intent to sell, transfer, or use such authorization for profit 
        or monetary gain;
and knowingly sells, transfers, or uses such information or 
authorization for profit or monetary gain shall be fined under this 
title or imprisoned not more than 10 years, or both.
``Sec. 1834. Knowing and unlawful obtaining of protected health 
              information
    ``Whoever knowingly obtains protected health information from a 
health information trustee in violation of part 2 of subtitle B of 
title II of the Affordable Health Care Now Act of 1994, knowing that 
such obtaining is unlawful, shall be fined under this title or 
imprisoned not more than 5 years, or both.
``Sec. 1835. Monetary gain from knowing and unlawful obtaining of 
              protected health information
    ``Whoever knowingly--
            ``(1) obtains protected health information from a health 
        information trustee in violation of part 2 of subtitle B of 
        title II of the Affordable Health Care Now Act of 1994, knowing 
        that such obtaining is unlawful and with the intent to sell, 
        transfer, or use such information for profit or monetary gain; 
        and
            ``(2) knowingly sells, transfers, or uses such information 
        for profit or monetary gain;
shall be fined under this title or imprisoned not more than 10 years, 
or both.
``Sec. 1836. Knowing and unlawful use or disclosure of protected health 
              information
    ``Whoever knowingly uses or discloses protected health information 
in violation of part 2 of subtitle B of title II of the Affordable 
Health Care Now Act of 1994, knowing that such use or disclosure is 
unlawful, shall be fined under this title or imprisoned not more than 5 
years, or both.
``Sec. 1837. Monetary gain from knowing and unlawful sale, transfer, or 
              use of protected health information
    ``Whoever knowingly sells, transfers, or uses protected health 
information in violation of part 2 of subtitle B of title II of the 
Affordable Health Care Now Act of 1994, knowing that such sale, 
transfer, or use is unlawful, shall be fined under this title or 
imprisoned not more than 10 years, or both.''.
    (b) Clerical Amendment.--The table of chapters for part I of title 
18, United States Code, is amended by inserting after the item relating 
to chapter 89 the following:

``90. Protected health information..........................    1831''.

          Subpart F--Amendments to Title 5, United States Code

SEC. 2195. AMENDMENTS TO TITLE 5, UNITED STATES CODE.

    (a) New Subsection.--Section 552a of title 5, United States Code, 
is amended by adding at the end the following:

    ``(w) Medical Exemptions.--The head of an agency that is a health 
information trustee (as defined in section 2140(b)(6) of the Affordable 
Health Care Now Act of 1994) shall promulgate rules, in accordance with 
the requirements (including general notice) of subsections (b)(1), 
(b)(2), (b)(3), (c), and (e) of section 553 of this title, to exempt a 
system of records within the agency, to the extent that the system of 
records contains protected health information (as defined in section 
2140(a)(3) of such Act), from all provisions of this section except 
subsections (e)(1), (e)(2), subparagraphs (A) through (C) and (E) 
through (I) of subsection (e)(4), and subsections (e)(5), (e)(6), 
(e)(9), (e)(12), (l), (n), (o), (p), (q), (r), and (u).''.
    (b) Repeal.--Section 552a(f)(3) of title 5, United States Code, is 
amended by striking ``pertaining to him,'' and all that follows through 
the semicolon and inserting ``pertaining to the individual;''.

   Subpart G--Regulations, Research, and Education; Effective Dates; 
             Applicability; and Relationship to Other Laws

SEC. 2196. REGULATIONS; RESEARCH AND EDUCATION.

    (a) Regulations.--Not later than July 1, 1996, the Secretary shall 
prescribe regulations to carry out this part.
    (b) Research and Technical Support.--The Secretary may sponsor--
            (1) research relating to the privacy and security of 
        protected health information;
            (2) the development of consent forms governing disclosure 
        of such information; and
            (3) the development of technology to implement standards 
        regarding such information.
    (c) Education.--The Secretary shall establish education and 
awareness programs--
            (1) to foster adequate security practices by health 
        information trustees;
            (2) to train personnel of health information trustees 
        respecting the duties of such personnel with respect to 
        protected health information; and
            (3) to inform individuals and employers who purchase health 
        care respecting their rights with respect to such information.

SEC. 2197. EFFECTIVE DATES.

    (a) In General.--Except as provided in subsection (b), this part, 
and the amendments made by this part, shall take effect on January 1, 
1997.
    (b) Provisions Effective Immediately.--A provision of this part 
shall take effect on the date of the enactment of this Act if the 
provision--
            (1) imposes a duty on the Secretary to develop, establish, 
        or promulgate regulations, guidelines, notices, statements, or 
        education and awareness programs; or
            (2) authorizes the Secretary to sponsor research or the 
        development of forms or technology.

SEC. 2198. APPLICABILITY.

    (a) Protected Health Information.--Except as provided in 
subsections (b) and (c), the provisions of this part shall apply to any 
protected health information that is received, created, used, 
maintained, or disclosed by a health information trustee in a State on 
or after January 1, 1997, regardless of whether the information existed 
or was disclosed prior to such date.
    (b) Exception.--
            (1) In general.--The provisions of this part shall not 
        apply to a trustee described in paragraph (2), except with 
        respect to protected health information that is received by the 
        trustee on or after January 1, 1997.
            (2) Applicability.--A trustee referred to in paragraph (1) 
        is--
                    (A) a health researcher; or
                    (B) a person who, with respect to specific 
                protected health information, received the 
                information--
                            (i) pursuant to--
                                    (I) section 2157 (relating to 
                                emergency circumstances);
                                    (II) section 2158 (relating to 
                                judicial and administrative purposes);
                                    (III) section 2159 (relating to law 
                                enforcement); or
                                    (IV) section 2160 (relating to 
                                subpoenas, warrants, and search 
                                warrants); or
                            (ii) while acting in whole or in part in 
                        the capacity of an officer or employee of a 
                        person described in clause (i).
    (c) Authorizations for Disclosures.--An authorization for the 
disclosure of protected health information about a protected individual 
that is executed by the individual before January 1, 1997, and is 
recognized and valid under State law on December 31, 1996, shall remain 
valid and shall not be subject to the requirements of section 2152 
until January 1, 1998, or the occurrence of the date or event (if any) 
specified in the authorization upon which the authorization expires, 
whichever occurs earlier.

SEC. 2199. RELATIONSHIP TO OTHER LAWS.

    (a) State Law.--Except as otherwise provided in subsections (b), 
(c), (d), and (f), a State may not establish, continue in effect, or 
enforce any State law to the extent that the law is inconsistent with, 
or imposes additional requirements with respect to, any of the 
following:
            (1) A duty of a health information trustee under this part.
            (2) An authority of a health information trustee under this 
        part to disclose protected health information.
            (3) A provision of subpart C (relating to access procedures 
        and challenge rights), subpart D (miscellaneous provisions), or 
        subpart (E) (relating to enforcement).
    (b) Laws Relating to Public Health and Mental Health.--This part 
does not preempt, supersede, or modify the operation of any State law 
regarding public health or mental health to the extent that the law 
prohibits or regulates a disclosure of protected health information 
that is permitted under this part.
    (c) Criminal Penalties.--A State may establish and enforce criminal 
penalties with respect to a failure to comply with a provision of this 
part.
    (d) Privileges.--A privilege that a person has under law in a court 
of a State or the United States or under the rules of any agency of a 
State or the United States may not be diminished, waived, or otherwise 
affected by--
            (1) the execution by a protected individual of an 
        authorization for disclosure of protected health information 
        under this part, if the authorization is executed for the 
        purpose of receiving health care or providing for the payment 
        for health care; or
            (2) any provision of this part that authorizes the 
        disclosure of protected health information for the purpose of 
        receiving health care or providing for the payment for health 
        care.
    (e) Department of Veterans Affairs.--The limitations on use and 
disclosure of protected health information under this part shall not be 
construed to prevent any exchange of such information within and among 
components of the Department of Veterans Affairs that determine 
eligibility for or entitlement to, or that provide, benefits under laws 
administered by the Secretary of Veterans Affairs.
    (f) Certain Duties Under State or Federal Law.--This part shall not 
be construed to preempt, supersede, or modify the operation of any of 
the following:
            (1) Any law that provides for the reporting of vital 
        statistics such as birth or death information.
            (2) Any law requiring the reporting of abuse or neglect 
        information about any individual.
            (3) Subpart II of part E of title XXVI of the Public Health 
        Service Act (relating to notifications of emergency response 
        employees of possible exposure to infectious diseases).
            (4) The Americans with Disabilities Act of 1990.
            (5) Any Federal or State statute that establishes a 
        privilege for records used in health professional peer review 
        activities.
    (g) Secretarial Authority.--
            (1) Secretary of health and human services.--A provision of 
        this part does not preempt, supersede, or modify the operation 
        of section 543 of the Public Health Service Act, except to the 
        extent that the Secretary of Health and Human Services 
        determines through regulations promulgated by such Secretary 
        that the provision provides greater protection for protected 
        health information, and the rights of protected individuals, 
        than is provided under such section 543.
            (2) Secretary of veterans affairs.--A provision of this 
        part does not preempt, supersede, or modify the operation of 
        section 7332 of title 38, United States Code, except to the 
        extent that the Secretary of Veterans Affairs determines 
        through regulations promulgated by such Secretary that the 
        provision provides greater protection for protected health 
        information, and the rights of protected individuals, than is 
        provided under such section 7332.

  Subtitle C--Deduction for Cost of Catastrophic Health Plan; Medical 
                            Savings Accounts

SEC. 2201. INDIVIDUALS ALLOWED DEDUCTION FROM GROSS INCOME FOR COST OF 
              CATASTROPHIC HEALTH PLAN.

    (a) In General.--Subsection (a) of section 62 of the Internal 
Revenue Code of 1986, as amended by title I, is amended by inserting 
after paragraph (16) the following new paragraph:
            ``(17) Medical expenses attributable to catastrophic health 
        plan coverage.--
                    ``(A) In general.--The deduction allowed by section 
                213 to the extent attributable to coverage under a 
                catastrophic health plan (as defined in section 
                220(c)(2)).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to coverage of an individual who has coverage described 
                in section 220(c)(1)(B)(i).''.
    (b) Coordination With Deduction for Other Medical Expenses.--
Subsection (a) of section 213 of such Code is amended to read as 
follows:
    ``(a) Allowance of Deduction.--There shall be allowed as a 
deduction the expenses paid during the taxable year, not compensated by 
insurance or otherwise, for medical care of the taxpayer, his spouse, 
or a dependent (as defined in section 152) in an amount equal to the 
sum of--
            ``(1) the portion of such expenses attributable to coverage 
        under a catastrophic health plan (as defined in section 
        220(c)(2)), and
            ``(2) the excess of such expenses (other than expenses 
        described in paragraph (1)) over 7.5 percent of the adjusted 
        gross income of the taxpayer.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 2202. MEDICAL SAVINGS ACCOUNTS.

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

``SEC. 220. MEDICAL SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--
            ``(1) In general.--In the case of an eligible individual, 
        there shall be allowed as a deduction the applicable percentage 
        of the amounts paid in cash during the taxable year by or on 
        behalf of such individual to a medical savings account for the 
        benefit of such individual and (if any) such individual's 
        spouse and dependents if such spouse and dependents are 
        eligible individuals.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the term `applicable percentage' means--
                    ``(A) 25 percent for taxable years beginning in 
                1994 or 1995,
                    ``(B) 50 percent for taxable years beginning in 
                1996 or 1997, and
                    ``(C) 100 percent for taxable years beginning after 
                1997.
    ``(b) Limitations.--
            ``(1) Only 1 account per family.--Except as provided in 
        regulations prescribed by this Secretary, no deduction shall be 
        allowed under subsection (a) for amounts paid to any medical 
        savings account for the benefit of an individual, such 
        individual's spouse, or any dependent of such individual or 
        spouse if such individual, spouse, or dependent is a 
        beneficiary of any other medical savings account.
            ``(2) Dollar limitation.--The amount allowable as a 
        deduction under subsection (a) for the taxable year shall not 
        exceed whichever of the following is the least:
                    ``(A) The lowest deductible under any catastrophic 
                health plan providing coverage to any beneficiary of 
                the medical savings account.
                    ``(B) $2,500 ($5,000 if the catastrophic health 
                plan covering the taxpayer provides coverage for more 
                than 1 individual).
                    ``(C) The excess of--
                            ``(i) the applicable target actuarial value 
                        for standard coverage established under section 
                        1102(c)(2) of the Affordable Health Care Now 
                        Act of 1994, over
                            ``(ii) the deduction allowed by section 213 
                        for the taxable year to the extent attributable 
                        to coverage under a catastrophic health plan.
                Under rules of the Secretary, the target actuarial 
                value under subparagraph (C)(i) shall be made 
                applicable to individual and family coverage. A 
                beneficiary of such account who has attained age 65 
                before the close of the taxable year shall not be taken 
                into account in determining the limitation under the 
                preceding sentence.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--
                    ``(A) In general.--The term `eligible individual' 
                means any individual who is covered under a 
                catastrophic health plan throughout the calendar year 
                in which or with which the taxable year ends.
                    ``(B) Limitations.--Such term does not include--
                            ``(i) an individual who is 65 years of age 
                        or older, unless the individual is covered 
                        under a catastrophic health plan that is a 
                        primary plan (within the meaning of section 
                        1862(b)(2)(A) of the Social Security Act); and
                            ``(ii) an individual who has coverage under 
                        a group health plan or health insurance plan 
                        (other than a plan described in 1131(4)(B) of 
                        the Affordable Health Care Now Act of 1994) 
                        that has either a deductible that is less than 
                        the minimum deductible required under a 
                        catastrophic health plan (as defined in 
                        paragraph (2)) or has an actuarial value that 
                        is greater than the value for MedAccess 
                        catastrophic coverage (as provided in section 
                        1102(d) of such Act).
                    ``(C) Deduction not allowed before 1999 to 
                individuals eligible for employer-subsidized 
                coverage.--In the case of any taxable year beginning 
                before January 1, 1999, such term does not include an 
                individual--
                            ``(i) who is eligible to participate in any 
                        subsidized health plan maintained by an 
                        employer of such individual or the spouse of 
                        such individual, or
                            ``(ii) who is (or whose spouse is) a member 
                        of a subsidized class of employees of an 
                        employer.
                The rules of subparagraphs (B) and (C) of section 
                213(f)(3) shall apply for purposes of this preceding 
                sentence.
            ``(2) Catastrophic health plan.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The term `catastrophic health 
                plan' means a health plan covering specified expenses 
                incurred by an individual for medical care for such 
                individual and the spouse and dependents (as defined in 
                section 152) of such individual only to the extent such 
                expenses covered by the plan for any calendar year 
                exceed $1,800 ($3,600 if the catastrophic health plan 
                covering the taxpayer provides coverage for more than 1 
                individual) or such higher amounts as may be specified 
                by the plan.
                    ``(B) Cost-of-living adjustment.--In the case of 
                any calendar year after 1994, each dollar amount in 
                subparagraph (A) shall be increased by an amount equal 
                to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under section 1(f)(3) for such 
                        calendar year.
                If any increase under the preceding sentence is not a 
                multiple of $50, such increase shall be rounded to the 
                nearest multiple of $50.
    ``(d) Medical Savings Accounts.--For purposes of this section--
            ``(1) Medical savings account.--
                    ``(A) In general.--The term `medical savings 
                account' means a trust created or organized in the 
                United States exclusively for the purpose of paying the 
                medical expenses of the beneficiaries of such trust, 
                but only if the written governing instrument creating 
                the trust meets the following requirements:
                            ``(i) Except in the case of a rollover 
                        contribution described in subsection (e)(4), no 
                        contribution will be accepted unless it is in 
                        cash, and contributions will not be accepted in 
                        excess of the amount allowed as a deduction 
                        under this section for the taxable year (or 
                        would be allowed as such a deduction but for 
                        subsection (c)(1)(C)).
                            ``(ii) The trustee is a bank (as defined in 
                        section 408(n)) or another person who 
                        demonstrates to the satisfaction of the 
                        Secretary that the manner in which such person 
                        will administer the trust will be consistent 
                        with the requirements of this section.
                            ``(iii) No part of the trust assets will be 
                        invested in life insurance contracts.
                            ``(iv) The assets of the trust will not be 
                        commingled with other property except in a 
                        common trust fund or common investment fund.
                            ``(v) The interest of an individual in the 
                        balance in his account is nonforfeitable.
                            ``(vi) Under regulations prescribed by the 
                        Secretary, rules similar to the rules of 
                        section 401(a)(9) shall apply to the 
                        distribution of the entire interest of 
                        beneficiaries of such trust.
                    ``(B) Treatment of comparable accounts held by 
                insurance companies.--For purposes of this section, an 
                account held by an insurance company in the United 
                States shall be treated as a medical savings account 
                (and such company shall be treated as a bank) if--
                            ``(i) such account is part of a health 
                        insurance plan that includes a catastrophic 
                        health plan (as defined in subsection (c)(2)),
                            ``(ii) such account is exclusively for the 
                        purpose of paying the medical expenses of the 
                        beneficiaries of such account who are covered 
                        under such catastrophic health plan, and
                            ``(iii) the written instrument governing 
                        the account meets the requirements of clauses 
                        (i), (v), and (vi) of subparagraph (A).
            ``(2) Medical expenses.--
                    ``(A) In general.--The term `medical expenses' 
                means, with respect to an individual, amounts paid or 
                incurred by such individual for--
                            ``(i) medical care (as defined in section 
                        213), or
                            ``(ii) long-term care (as defined in 
                        paragraph (3)),
                for such individual, the spouse of such individual, and 
                any dependent (as defined in section 152) of such 
                individual, but only to the extent such amounts are not 
                compensated for by insurance or otherwise.
                    ``(B) Health plan coverage may not be purchased 
                from account.--
                            ``(i) In general.--Such term shall not 
                        include any amount paid for coverage under a 
                        health plan.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply--
                                    ``(I) in the case of coverage of an 
                                individual under 65 years of age under 
                                a catastrophic health plan or under a 
                                long-term care insurance plan, or
                                    ``(II) in the case of coverage of 
                                an individual 65 years of age or older 
                                under a medicare supplemental policy or 
                                under a long-term care insurance plan 
                                or for payment of premiums under part A 
                                or part B of title XVIII of the Social 
                                Security Act.
            ``(3) Long-term care.--
                    ``(A) In general.--The term `long-term care' means 
                diagnostic, preventive, therapeutic, rehabilitative, 
                maintenance, or personal care services which are 
                required by, and provided to, a chronically ill 
                individual, which have as their primary purpose the 
                direct provision of needed assistance with 1 or more 
                activities of daily living (or the alleviation of the 
                conditions necessitating such assistance) that the 
                individual is certified under subparagraph (B) as being 
                unable to perform, and which are provided in a setting 
                other than an acute care unit of a hospital pursuant to 
                a continuing plan of care prescribed by a physician or 
                registered professional nurse. Such term does not 
                include food or lodging provided in an institutional or 
                other setting, or basic living services associated with 
                the maintenance of a household or participation in 
                community life, such as case management, transportation 
                or legal services, or the performance of home 
                maintenance or household chores.
                    ``(B) Chronically ill individual.--The term 
                `chronically ill individual' means an individual who is 
                certified by a physician or registered professional 
                nurse as being unable to perform at least 3 activities 
                of daily living without substantial assistance from 
                another individual. For purposes of this paragraph, the 
                term `activities of daily living' means bathing, 
                dressing, eating, toileting, transferring, and walking.
            ``(4) Time when contributions deemed made.--A contribution 
        shall be deemed to be made on the last day of the preceding 
        taxable year if the contribution is made on account of such 
        taxable year and is made not later than the time prescribed by 
        law for filing the return for such taxable year (not including 
        extensions thereof).
    ``(e) Tax Treatment of Distributions.--
            ``(1) In general.--Any amount paid or distributed out of a 
        medical savings account shall be included in the gross income 
        of the individual for whose benefit such account was 
        established unless such amount is used exclusively to pay the 
        medical expenses of such individual.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical 
        savings account to the extent that such contribution exceeds 
        the amount allowable as a deduction under subsection (a) if--
                    ``(A) such distribution is received by the 
                individual on or before the last day prescribed by law 
                (including extensions of time) for filing such 
                individual's return for such taxable year, and
                    ``(B) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (B) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(3) Penalty for distributions not used for medical 
        expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a medical savings account which is 
                not used to pay the medical expenses of the individual 
                for whose benefit the account was established shall be 
                increased by 10 percent of the amount of such payment 
                or distribution which is includible in gross income 
                under paragraph (1).
                    ``(B) Account balance limitation.--If--
                            ``(i) the tax imposed by this chapter is 
                        required to be increased under subparagraph (A) 
                        by reason of a distribution, and
                            ``(ii) after such distribution, the 
                        aggregate balance of all medical savings 
                        accounts established for the benefit of the 
                        individual, is less than the amount of the 
                        deductible under the catastrophic health plan 
                        covering such individual,
                subparagraph (A) shall be applied by substituting `50 
                percent' for `10 percent'.
            ``(4) Rollovers.--Paragraph (1) shall not apply to any 
        amount paid or distributed out of a medical savings account to 
        the individual for whose benefit the account is maintained if 
        the entire amount received (including money and any other 
        property) is paid into another medical savings account for the 
        benefit of such individual not later than the 60th day after 
        the day on which he received the payment or distribution.
            ``(5) Penalty for mandatory distributions not made from 
        account.--
                    ``(A) In general.--If during any taxable year--
                            ``(i) there is a payment of a mandatory 
                        distribution expense incurred by a beneficiary 
                        of a medical savings account, and
                            ``(ii) the person making such payment is 
                        not reimbursed for such payment with a 
                        distribution from such account before the 60th 
                        day after such payment,
                the taxpayer's tax imposed by this chapter for such 
                taxable year shall be increased by 100 percent of the 
                excess of the amount of such payment over the amount of 
                reimbursement made before such 60th day.
                    ``(B) Mandatory distribution expense.--For purposes 
                of subparagraph (A), the term `mandatory distribution 
                expense' means--
                            ``(i) any expense incurred which may be 
                        counted towards a deductible, or for a 
                        copayment or coinsurance, under the 
                        catastrophic health plan covering such 
                        beneficiary, and
                            ``(ii) in the case of a beneficiary who has 
                        attained age 65, any expense for coverage 
                        described in subsection (d)(2)(B)(ii)(II) and 
                        any expense incurred which may be counted 
                        toward a deductible, or for a copayment or 
                        coinsurance, under title XVIII of the Social 
                        Security Act.
    ``(f) Tax Treatment of Accounts.--
            ``(1) Exemption from tax.--Any medical savings account is 
        exempt from taxation under this subtitle unless such account 
        has ceased to be a medical savings account by reason of 
        paragraph (2) or (3). Notwithstanding the preceding sentence, 
        any such account shall be subject to the taxes imposed by 
        section 511 (relating to imposition of tax on unrelated 
        business income of charitable, etc. organizations).
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the individual for whose benefit the medical savings 
                account was established, such individual engages in any 
                transaction prohibited by section 4975 with respect to 
                the account, the account ceases to be a medical savings 
                account as of the first day of that taxable year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical savings account by reason of subparagraph (A) 
                on the first day of any taxable year, paragraph (1) of 
                subsection (e) shall be applied as if there were a 
                distribution on such first day in an amount equal to 
                the fair market value (on such first day) of all assets 
                in the account (on such first day) and no portion of 
                such distribution were used to pay medical expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the individual for whose benefit a medical 
        savings account was established uses the account or any portion 
        thereof as security for a loan, the portion so used is treated 
        as distributed to that individual and not used to pay medical 
        expenses.
    ``(g) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)) or another person who demonstrates 
        to the satisfaction of the Secretary that the manner in which 
        he will administer the account will be consistent with the 
        requirements of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical savings account 
        described in subsection (d).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(h) Reports.--The trustee of a medical savings account shall make 
such reports regarding such account to the Secretary and to the 
individual for whose benefit the account is maintained with respect to 
contributions, distributions, and such other matters as the Secretary 
may require under regulations. The reports required by this subsection 
shall be filed at such time and in such manner and furnished to such 
individuals at such time and in such manner as may be required by those 
regulations.''
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting after paragraph (17) the following new paragraph:
            ``(18) Medical savings accounts.--The deduction allowed by 
        section 220.''
    (c) Distributions From Medical Savings Accounts Not Allowed As 
Medical Expense Deduction.--Section 213 of such Code is amended by 
adding at the end thereof the following new subsection:
    ``(g) Coordination With Medical Savings Accounts.--The amount 
otherwise taken into account under subsection (a) as expenses paid for 
medical care shall be reduced by the amount (if any) of the 
distributions from any medical savings account of the taxpayer during 
the taxable year which is not includible in gross income by reason of 
being used for medical care.''
    (d) Exclusion of Employer Contributions To Medical Savings Accounts 
From Employment Taxes.--
            (1) Social security taxes.--
                    (A) Subsection (a) of section 3121 of such Code is 
                amended by striking ``or'' at the end of paragraph 
                (20), by striking the period at the end of paragraph 
                (21) and inserting ``; or'', and by inserting after 
                paragraph (21) the following new paragraph:
            ``(22) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220.''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by striking ``or'' at the end 
                of paragraph (17), by striking the period at the end of 
                paragraph (18) and inserting ``; or'', and by inserting 
                after paragraph (18) the following new paragraph:
            ``(19) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220 of the Internal 
        Revenue Code of 1986.''
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 of such Code is amended by adding at the end thereof the 
        following new paragraph:
            ``(10) Employer contributions to medical savings 
        accounts.--The term `compensation' shall not include any 
        payment made to or on behalf of an employee if (and to the 
        extent that) at the time of payment of such remuneration it is 
        reasonable to believe that a corresponding deduction is 
        allowable under section 220.''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (15), by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and by inserting after paragraph (16) the 
        following new paragraph:
            ``(17) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220.''
            (4) Withholding tax.--Subsection (a) of section 3401 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (19), by striking the period at the end of paragraph (20) and 
        inserting ``; or'', and by inserting after paragraph (20) the 
        following new paragraph:
            ``(21) remuneration paid to or on behalf of an employee if 
        (and to the extent that) at the time of payment of such 
        remuneration it is reasonable to believe that a corresponding 
        deduction is allowable under section 220.''
    (e) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to individual retirement 
accounts, certain section 403(b) contracts, and certain individual 
retirement annuities) is amended--
            (1) by inserting ``medical savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical savings account (within the meaning of 
        section 220(d)),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 220(d)), the term `excess contributions' 
means the amount by which the amount contributed for the taxable year 
to the account exceeds the amount excludable from gross income under 
section 220 for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the medical savings account in 
a distribution to which section 220(e)(2) applies shall be treated as 
an amount not contributed.''
    (f) Tax on Prohibited Transactions.--Section 4975 of such Code 
(relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical savings accounts.--An 
        individual for whose benefit a medical savings account (within 
        the meaning of section 220(d)) is established shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical savings account 
        by reason of the application of section 220(e)(2)(A) to such 
        account.'', and
            (2) by inserting ``or a medical savings account described 
        in section 220(d)'' in subsection (e)(1) after ``described in 
        section 408(a)''.
    (g) Failure To Provide Reports on Medical Savings Accounts.--
Section 6693 of such Code (relating to failure to provide reports on 
individual retirement account or annuities) is amended--
            (1) by inserting ``or on medical savings accounts'' after 
        ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 220(h) to file a report 
        regarding a medical savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (h) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following:

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

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, medical savings 
                                        accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.
    (i) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

                         Subtitle D--Anti-Fraud

PART 1--ESTABLISHMENT OF ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL 
                                PROGRAM

SEC. 2301. ALL-PAYER HEALTH CARE FRAUD AND ABUSE CONTROL PROGRAM.

    (a) In General.--Not later than January 1, 1996, the Attorney 
General shall establish a program--
            (1) to coordinate Federal, State, and local law enforcement 
        programs to control fraud and abuse with respect to the 
        delivery of and payment for health care in the United States,
            (2) to conduct investigations, audits, evaluations, and 
        inspections relating to the delivery of and payment for health 
        care in the United States, and
            (3) in consultation with the Inspector General of the 
        Department of Health and Human Services, to facilitate the 
        enforcement of the provisions of sections 1128, 1128A, and 
        1128B of the Social Security Act and other statutes applicable 
        to health care fraud and abuse.
    (b) Coordination With Law Enforcement Agencies.--In carrying out 
the program under subsection (a), the Attorney General shall consult 
with, and arrange for the sharing of data and resources with Federal, 
State and local law enforcement agencies, State Medicaid Fraud Control 
Units, and State agencies responsible for the licensing and 
certification of health care providers.
    (c) Coordination With Third Party Insurers.--In carrying out the 
program established under subsection (a), the Attorney General shall 
consult with, and arrange for the sharing of data with representatives 
of private sponsors of health benefit plans and other providers of 
health insurance.
    (d) Regulations.--
            (1) In general.--The Attorney General shall by regulation 
        establish standards to carry out the program under subsection 
        (a).
            (2) Information standards.--
                    (A) In general.--Such standards shall include 
                standards relating to the furnishing of information by 
                health insurers (including self-insured health benefit 
                plans), providers, and others to enable the Attorney 
                General to carry out the program (including 
                coordination with law enforcement agencies under 
                subsection (b) and third party insurers under 
                subsection (c)).
                    (B) Confidentiality.--Such standards shall include 
                procedures to assure that such information is provided 
                and utilized in a manner that protects the 
                confidentiality of the information and the privacy of 
                individuals receiving health care services.
                    (C) Qualified immunity for providing information.--
                The provisions of section 1157(a) of the Social 
                Security Act (relating to limitation on liability) 
                shall apply to a person providing information to the 
                Attorney General under the program under this section, 
                with respect to the Attorney General's performance of 
                duties under the program, in the same manner as such 
                section applies to information provided to 
                organizations with a contract under part B of title XI 
                of such Act, with respect to the performance of such a 
                contract.

SEC. 2302. AUTHORIZATION OF ADDITIONAL APPROPRIATIONS FOR INVESTIGATORS 
              AND OTHER PERSONNEL.

    In addition to any other amounts authorized to be appropriated to 
the Attorney General for health care anti-fraud and abuse activities 
for a fiscal year, there are authorized to be appropriated such sums as 
may be necessary to enable the Attorney General to conduct 
investigations of allegations of health care fraud and otherwise carry 
out the program established under section 2301 in a fiscal year.

SEC. 2303. ESTABLISHMENT OF ANTI-FRAUD AND ABUSE TRUST FUND.

    (a) Establishment.--There is hereby created on the books of the 
Treasury of the United States a trust fund to be known as the ``Anti-
Fraud and Abuse Trust Fund'' (in this section referred to as the 
``Trust Fund''). The Trust Fund shall consist of such amounts as may be 
deposited in, or appropriated to, such Trust Fund as provided in this 
part and section 1128A(f)(3) of the Social Security Act.
    (b) Management.--
            (1) In general.--The Trust Fund shall be managed by the 
        Attorney General through a Managing Trustee designated by the 
        Attorney General.
            (2) Investment of funds.--It shall be the duty of the 
        Managing Trustee to invest such portion of the Trust Fund as is 
        not, in the trustee's judgment, required to meet current 
        withdrawals. Such investments may be made only in interest-
        bearing obligations of the United States or in obligations 
        guaranteed as to both principal and interest by the United 
        States. For such purpose such obligations may be acquired on 
        original issue at the issue price, or by purchase of 
        outstanding obligations at market price. The purposes for which 
        obligations of the United States may be issued under chapter 31 
        of title 31, United States Code, are hereby extended to 
        authorize the issuance at par of public-debt obligations for 
        purchase by the Trust Fund. Such obligations issued for 
        purchase by the Trust Fund shall have maturities fixed with due 
        regard for the needs of the Trust Fund and shall bear interest 
        at a rate equal to the average market yield (computed by the 
        Managing Trustee on the basis of market quotations as of the 
        end of the calendar month next preceding the date of such 
        issue) on all marketable interest-bearing obligations of the 
        United States then forming a part of the public debt which are 
        not due or callable until after the expiration of 4 years from 
        the end of such calendar month, except that where such average 
        is not a multiple of \1/8\ of 1 percent, the rate of interest 
        on such obligations shall be the multiple of \1/8\ of 1 percent 
        nearest such market yield. The Managing Trustee may purchase 
        other interest-bearing obligations of the United States or 
        obligations guaranteed as to both principal and interest by the 
        United States, on original issue or at the market price, only 
        where the Trustee determines that the purchase of such other 
        obligations is in the public interest.
            (3) Any obligations acquired by the Trust Fund (except 
        public-debt obligations issued exclusively to the Trust Fund) 
        may be sold by the Managing Trustee at the market price, and 
        such public-debt obligations may be redeemed at par plus 
        accrued interest.
            (4) The interest on, and the proceeds from the sale or 
        redemption of, any obligations held in the Trust Fund shall be 
        credited to and form a part of the Trust Fund.
            (5) The receipts and disbursements of the Attorney General 
        in the discharge of the functions of the Attorney General shall 
        not be included in the totals of the budget of the United 
        States Government. For purposes of part C of the Balanced 
        Budget and Emergency Deficit Control Act of 1985, the Attorney 
        General and the Trust Fund shall be treated in the same manner 
        as the Federal Retirement Thrift Investment Board and the 
        Thrift Savings Fund, respectively. The United States is not 
        liable for any obligation or liability incurred by the Trust 
        Fund.
    (c) Use of Funds.--Of the amounts in the Trust Fund--
            (1) not less than 60 percent shall be used to support 
        educational activities to prevent the occurrence of violations 
        of anti-fraud and abuse laws, including the issuance of 
        advisory opinions under section 1129 and 1877(i) of the Social 
        Security Act (as added by part 4) and fraud alerts, seminars 
        for providers, and program updates; and
            (2) any amounts remaining after use for activities under 
        paragraph (1) shall be used to assist the Attorney General in 
        carrying out the all-payor fraud and abuse control program 
        established under section 2301(a) in the fiscal year involved.
    (d) Deposit of Federal Health Anti-Fraud and Abuse Penalties Into 
Trust Fund.--Section 1128A(f)(3) of the Social Security Act (42 U.S.C. 
1320a-7a(f)(3)) is amended by striking ``as miscellaneous receipts of 
the Treasury of the United States'' and inserting ``in the Anti-Fraud 
and Abuse Trust Fund established under section 2303(a) of the 
Affordable Health Care Now Act of 1994''.
    (e) Use of Federal Health Anti-Fraud and Abuse Penalties To Repay 
Beneficiaries for Cost-Sharing.--Section 1128A(f) of the Social 
Security Act (42 U.S.C. 1320a-7a(f)) is amended in the matter preceding 
paragraph (1) by striking ``Secretary and disposed of as follows:'' and 
inserting the following: ``Secretary. If the person against whom such a 
penalty or assessment was assessed collected a payment from an 
individual for providing to the individual the service that is the 
subject of the penalty or assessment, the Secretary shall pay a portion 
of the amount recovered to the individual in the nature of restitution 
in an amount equal to the payment so collected. The Secretary shall 
dispose of any remaining amounts recovered under this section as 
follows:''.

       PART 2--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

SEC. 2311. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

    (a) Individual Convicted of Felony Relating to Fraud.--
            (1) In general.--Section 1128(a) of the Social Security Act 
        (42 U.S.C. 1320a-7(a)) is amended by adding at the end the 
        following new paragraph:
            ``(3) Felony conviction relating to fraud.--Any individual 
        or entity that has been convicted, under Federal or State law, 
        in connection with the delivery of a health care item or 
        service on or after the date of the enactment of this 
        paragraph, or with respect to any act or omission on or after 
        such date in a program (other than those specifically described 
        in paragraph (1)) operated by or financed in whole or in part 
        by any Federal, State, or local government agency, of a 
        criminal offense consisting of a felony relating to fraud, 
        theft, embezzlement, breach of fiduciary responsibility, or 
        other financial misconduct.''.
            (2) Conforming amendment.--Section 1128(b)(1) of such Act 
        (42 U.S.C. 1320a-7(b)(1)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.
    (b) Individual Convicted of Felony Relating to Controlled 
Substance.--
            (1) In general.--Section 1128(a) of the Social Security Act 
        (42 U.S.C. 1320a-7(a)), as amended by subsection (a), is 
        amended by adding at the end the following new paragraph:
            ``(4) Felony conviction relating to controlled substance.--
        Any individual or entity that has been convicted, under Federal 
        or State law, of a criminal offense consisting of a felony 
        relating to the unlawful manufacture, distribution, 
        prescription, or dispensing of a controlled substance.''.
            (2) Conforming amendment.--Section 1128(b)(3) of such Act 
        (42 U.S.C. 1320a-7(b)(3)) is amended--
                    (A) in the heading, by striking ``Conviction'' and 
                inserting ``Misdemeanor conviction''; and
                    (B) by striking ``criminal offense'' and inserting 
                ``criminal offense consisting of a misdemeanor''.

SEC. 2312. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

    Section 1128(c)(3) of the Social Security Act (42 U.S.C. 1320a-
7(c)(3)) is amended by adding at the end the following new 
subparagraphs:
    ``(D) In the case of an exclusion of an individual or entity under 
paragraph (1), (2), or (3) of subsection (b), the period of the 
exclusion shall be 3 years, unless the Secretary determines in 
accordance with published regulations that a shorter period is 
appropriate because of mitigating circumstances or that a longer period 
is appropriate because of aggravating circumstances.
    ``(E) In the case of an exclusion of an individual or entity under 
subsection (b)(4) or (b)(5), the period of the exclusion shall not be 
less than the period during which the individual's or entity's license 
to provide health care is revoked, suspended, or surrendered, or the 
individual or the entity is excluded or suspended from a Federal or 
State health care program.
    ``(F) In the case of an exclusion of an individual or entity under 
subsection (b)(6)(B), the period of the exclusion shall be not less 
than 1 year.''.

SEC. 2313. REVISIONS TO CRIMINAL PENALTIES.

    (a) Clarification of Discount Exception to Anti-Kickback 
Provisions.--Section 1128B(b)(3)(A) of the Social Security Act (42 
U.S.C. 1320a-7b(b)(3)(A)) is amended--
            (1) by inserting ``(regardless of its timing or 
        availability)'' after ``in price''; and
            (2) by striking ``program;'' and inserting ``program and is 
        not paid in the form of currency or coin;''.
    (b) Exemption From Anti-Kickback Penalties for Certain Managed Care 
Arrangements.--Section 1128B(b)(3) of such Act (42 U.S.C. 1320a-
7b(b)(3)) is amended--
            (1) by striking ``and'' at the end of subparagraph (D);
            (2) by striking the period at the end of subparagraph (E) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(F) any reduction in cost sharing or increased benefits 
        given to an individual, any amounts paid to a provider for an 
        item or service furnished to an individual, or any discount or 
        reduction in price given by the provider for such an item or 
        service, if--
                    ``(A) the item or service is provided through an 
                organization described in section 1877(b)(3), or
                    ``(B) the item or service is provided through such 
                an organization on behalf of another entity (including 
                but not limited to a self-insured employer or indemnity 
                plan) that assumes financial risk for the provision of 
                the item or service.''.
    (c) Exemption From Anti-Kickback Penalties for Certain Protected 
Financial Relationships.--Section 1128B(b)(3) of such Act (42 U.S.C. 
1320a-7b(b)(3)), as amended by subsection (b), is further amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by striking the period at the end of subparagraph (F) 
        and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(G) any amount in a financial relationship of a physician 
        (or an immediate family member of such physician) with an 
        entity specified in section 1877(a)(2), if section 1877(a)(1) 
        does not apply to that amount or financial relationship.''.

SEC. 2315. REVISIONS TO LIMITATIONS ON PHYSICIAN SELF-REFERRAL.

    (a) Clarification of Coverage of Radiology or Diagnostic 
Services.--Section 1877(h)(6) of the Social Security Act (42 U.S.C. 
1395nn(h)(6)) is amended by striking subparagraph (D).
    (b) New Exception for Shared Facility Services.--Section 1877(b) of 
such Act (42 U.S.C. 1395nn(b)) is amended--
            (1) by redesignating paragraph (4) as paragraph (5); and
            (2) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) Shared facility services.--
                    ``(A) In general.--In the case of a shared facility 
                service of a shared facility--
                            ``(i) that is furnished--
                                    ``(I) personally by the referring 
                                physician who is a shared facility 
                                physician or personally by an 
                                individual directly employed by such a 
                                physician,
                                    ``(II) by a shared facility in a 
                                building in which the referring 
                                physician furnishes substantially all 
                                of the services of the physician that 
                                are unrelated to the furnishing of 
                                shared facility services, and
                                    ``(III) to a patient of a shared 
                                facility physician; and
                            ``(ii) that is billed by the referring 
                        physician.
                    ``(B) Shared facility related definitions.--
                            ``(i) Shared facility service.--The term 
                        `shared facility service' means, with respect 
                        to a shared facility, a designated health 
                        service furnished by the facility to patients 
                        of shared facility physicians.
                            ``(ii) Shared facility.--The term `shared 
                        facility' means an entity that furnishes shared 
                        facility services under a shared facility 
                        arrangement.
                            ``(iii) Shared facility physician.--The 
                        term `shared facility physician' means, with 
                        respect to a shared facility, a physician who 
                        has a financial relationship under a shared 
                        facility arrangement with the facility.
                            ``(iv) Shared facility arrangement.--The 
                        term `shared facility arrangement' means, with 
                        respect to the provision of shared facility 
                        services in a building, a financial 
                        arrangement--
                                    ``(I) which is only between 
                                physicians who are providing services 
                                (unrelated to shared facility services) 
                                in the same building,
                                    ``(II) in which the overhead 
                                expenses of the facility are shared, in 
                                accordance with methods previously 
                                determined by the physicians in the 
                                arrangement, among the physicians in 
                                the arrangement, and
                                    ``(III) which, in the case of a 
                                corporation, is wholly owned and 
                                controlled by shared facility 
                                physicians.''.
    (c) Revision to Rural Provider Exception.--Section 1877(d)(2) of 
such Act (42 U.S.C. 1395nn(d)(2)) is amended by striking 
``substantially all'' and inserting ``not less than 75 percent (as 
determined in accordance with regulations of the Secretary)''.
    (d) Clarification of Referrals by Nephrologists.--Section 
1877(h)(5)(C) of such Act (42 U.S.C. 1395nn(H)(5)(C)) is amended--
            (1) by striking ``and a request'' and inserting ``a 
        request'';
            (2) by inserting after ``radiation therapy,'' the 
        following: ``and a request by a nephrologist for items or 
        services related to renal dialysis,''; and
            (3) by striking ``or radiation oncologist'' and inserting 
        ``radiation oncologist, or nephrologist''.
    (e) Revision of Reporting Requirements.--Section 1877(f) of such 
Act (42 U.S.C. 1395nn(f)) is amended--
            (1) by striking ``Each entity'' and all that follows 
        through paragraph (2) and inserting the following: ``The 
        Secretary may require each entity (other than a physician or 
        physician group practice) providing designated health services 
        to provide the Secretary with the following information 
        concerning the entity's ownership, investment, and compensation 
        arrangements:
            ``(1) the designated health services provided by the 
        entity; and
            ``(2) the names and unique physician identifier numbers of 
        all physicians with an ownership or investment interest (as 
        described in subsection (a)(2)(A)) or with a compensation 
        interest (as described in subsection (a)(2)(B)) in the entity, 
        or whose immediate relatives have such an ownership, 
        investment, or compensation interest in the entity.''; and
            (2) by striking the fifth sentence.
    (f) Exception for Certain Managed Care Arrangements.--Section 
1877(b)(3) of such Act (42 U.S.C. 1395nn(b)(3)) is amended--
            (1) by striking ``or'' at the end of subparagraph (C);
            (2) by striking the period at the end of subparagraph (D) 
        and inserting a comma; and
            (3) by adding at the end the following new subparagraphs:
                    ``(E) with a contract with a State to provide 
                services under the State plan under title XIX (in 
                accordance with section 1903(m)); or
                    ``(F) which meets State regulatory requirements 
                applicable to health maintenance organizations and 
                which--
                            ``(i) provides designated health services 
                        directly or through contractual arrangements 
                        with providers;
                            ``(ii) assumes financial risk for the 
                        provision of services or provides services on 
                        behalf of another individual or entity 
                        (including but not limited to a self-insured 
                        employer, indemnity plan, physician, or 
                        physician group) that assumes financial risk 
                        for the provision of the item or service; and
                            ``(iii) subjects the services to a program 
                        of utilization review offered by an 
                        organization described in a preceding 
                        subparagraph, an organization meeting State 
                        regulatory requirements applicable to 
                        utilization review, or an organization 
                        accredited to perform utilization review 
                        considered appropriate by the Secretary.''.
    (g) Preemption of State Law.--Section 1877(g) of such Act (42 
U.S.C. 1395nn(g)) is amended by adding at the end the following new 
paragraph:
            ``(6) Preemption of state law.--The provisions of this 
        section shall supersede any State law to the extent State law 
        prohibits a physician from making a referral, or an entity from 
        presenting a bill, for the furnishing of a service which is not 
        subject to the restrictions applicable under paragraph (1).''.
    (h) Revision of Effective Date Exception Provision.--Section 
13562(b)(2) of the Omnibus Budget Reconciliation Act of 1993 is amended 
by striking subparagraphs (A) and (B) and inserting the following:
                    ``(A) the second sentence of subsection (a)(2), and 
                subsections (b)(2)(B) and (d)(2), of section 1877 of 
                the Social Security Act (as in effect on the day before 
                the date of the enactment of this Act) shall apply 
                instead of the corresponding provisions in section 1877 
                (as amended by this Act);
                    ``(B) section 1877(b)(4) of the Social Security Act 
                (as in effect on the day before the date of the 
                enactment of this Act) shall apply;
                    ``(C) the requirements of section 1877(c)(2) of the 
                Social Security Act (as amended by this Act) shall not 
                apply to any securities of a corporation that meets the 
                requirements of section 1877(c)(2) of the Social 
                Security Act (as in effect on the day before the date 
                of the enactment of this Act);
                    ``(D) section 1877(e)(3) of the Social Security Act 
                (as amended by this Act) shall apply, except that it 
                shall not apply to any arrangement that meets the 
                requirements of subsection (e)(2) or subsection (e)(3) 
                of section 1877 of the Social Security Act (as in 
                effect on the day before the date of the enactment of 
                this Act);
                    ``(E) the requirements of clauses (iv) and (v) of 
                section 1877(h)(4)(A), and of clause (i) of section 
                1877(h)(4)(B), of the Social Security Act (as amended 
                by this Act) shall not apply; and
                    ``(F) section 1877(h)(4)(B) of the Social Security 
                Act (as in effect on the day before the date of the 
                enactment of this Act) shall apply instead of section 
                1877(h)(4)(A)(ii) of such Act (as amended by this 
                Act).''.
    (i) Effective Date.--The amendments made by this section shall 
apply to referrals made on or after January 1, 1995, except that the 
amendments made by subsection (h) shall apply as if included in the 
enactment of the Omnibus Budget Reconciliation Act of 1993.

SEC. 2316. MEDICARE HEALTH MAINTENANCE ORGANIZATIONS.

    (a) Study on Costs of Peer Review Contracts for Medicare HMOs.--The 
Comptroller General shall conduct a study of the costs incurred by 
eligible organizations with risk-sharing contracts under section 
1876(b) of the Social Security Act of complying with the requirement of 
entering into a written agreement with an entity providing peer review 
services with respect to services provided by the organization, 
together with an analysis of how information generated by such entities 
is used by the Secretary of Health and Human Services to assess the 
quality of services provided by such eligible organizations.
    (b) Report to Congress.--Not later than July 1, 1997, the 
Comptroller General shall submit a report to the Committee on Ways and 
Means and the Committee on Energy and Commerce of the House of 
Representatives and the Committee on Finance and the Special Committee 
on Aging of the Senate on the study conducted under subsection (a).

SEC. 2317. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this part 
shall take effect January 1, 1996.

                   PART 3--AMENDMENTS TO CRIMINAL LAW

SEC. 2321. PENALTIES FOR HEALTH CARE FRAUD.

    (a) In General.--
            (1) Fines and imprisonment for health care fraud 
        violations.--Chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:
``Sec. 1347. Health care fraud
    ``(a) Whoever knowingly executes, or attempts to execute, a scheme 
or artifice--
            ``(1) to defraud any health care plan or other person, in 
        connection with the delivery of or payment for health care 
        benefits, items, or services; or
            ``(2) to obtain, by means of false or fraudulent pretenses, 
        representations, or promises, any of the money or property 
        owned by, or under the custody or control of, any health care 
        plan, or person in connection with the delivery of or payment 
        for health care benefits, items, or services;
shall be guilty of a felony, and fined under this title or imprisoned 
not more than 5 years, or both.
    ``(b) In determining the amount or scope of any penalty or 
assessment, the court shall take into account--
            ``(1) the nature of the false or fraudulent claims and the 
        circumstances under which they are presented;
            ``(2) the degree of culpability and history of prior 
        offenses by the convicted health care provider;
            ``(3) the extent to which restitution is paid; and
            ``(4) such other matters as justice may require.
    ``(c) A principal is liable for penalties and assessments under 
this section for the acts of the principal's agents acting within the 
scope of the agency.
    ``(d) For purposes of this section, the term `health care plan' 
means a Federally-funded public program or private program for the 
delivery of or payment for health care items or services.''.
            (2) Clerical amendment.--The table of sections at the 
        beginning of chapter 63 of title 18, United States Code, is 
        amended by adding at the end the following:

``1347. Health care fraud.''.

SEC. 2322. REWARDS FOR INFORMATION LEADING TO PROSECUTION AND 
              CONVICTION.

    Section 3059 of title 18, United States Code, is amended by adding 
at the end the following new subsection:
    ``(c)(1) In special circumstances and in the Attorney General's 
sole discretion, the Attorney General may make a payment of up to 
$10,000 to a person who furnishes information unknown to the Government 
relating to a possible prosecution under section 1347.
    ``(2) A person is not eligible for a payment under paragraph (1) 
if--
            ``(A) the person is a current or former officer or employee 
        of a Federal or State government agency or instrumentality who 
        furnishes information discovered or gathered in the course of 
        government employment;
            ``(B) the person knowingly participated in the offense;
            ``(C) the information furnished by the person consists of 
        allegations or transactions that have been disclosed to the 
        public--
                    ``(i) in a criminal, civil, or administrative 
                proceeding;
                    ``(ii) in a congressional, administrative or 
                General Accounting Office report, hearing, audit or 
                investigation; or
                    ``(iii) by the news media, unless the person is the 
                original source of the information; or
            ``(D) when, in the judgment of the Attorney General, it 
        appears that a person whose illegal activities are being 
        prosecuted or investigated could benefit from the award.
    ``(3) For the purposes of paragraph (2)(C)(iii), the term `original 
source' means a person who has direct and independent knowledge of the 
information that is furnished and has voluntarily provided the 
information to the Government prior to disclosure by the news media.
    ``(4) Neither the failure of the Attorney General to authorize a 
payment under paragraph (1) nor the amount authorized shall be subject 
to judicial review.''.

SEC. 2323. BROADENING APPLICATION OF MAIL FRAUD STATUTE.

    Section 1341 of title 18, United States Code, is amended--
            (1) by inserting ``or deposits or causes to be deposited 
        any matter or thing whatever to be sent or delivered by any 
        private or commercial interstate carrier,'' after ``Postal 
        Service,''; and
            (2) by inserting ``or such carrier'' after ``causes to be 
        delivered by mail''.

                       PART 4--ADVISORY OPINIONS

SEC. 2331. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN SERVICES TO 
              ISSUE ADVISORY OPINIONS UNDER TITLE XI.

    Title XI of the Social Security Act (42 U.S.C. 1301 et seq.) is 
amended by inserting after section 1128B the following new section:

                          ``advisory opinions

    ``Sec. 1129. (a) Issuance of Advisory Opinions.--The Secretary 
shall issue advisory opinions as provided in this section.
    ``(b) Matters Subject to Advisory Opinions.--The Secretary shall 
issue advisory opinions as to the following matters:
            ``(1) What constitutes prohibited remuneration within the 
        meaning of section 1128B(b).
            ``(2) Whether an arrangement or proposed arrangement 
        satisfies the criteria set forth in section 1128B(b)(3) for 
        activities which do not result in prohibited remuneration.
            ``(3) Whether an arrangement or proposed arrangement 
        satisfies the criteria which the Secretary has established, or 
        shall establish by regulation for activities which do not 
        result in prohibited remuneration.
            ``(4) What constitutes an inducement to reduce or limit 
        services to individuals entitled to benefits under title XVIII 
        or title XIX within the meaning of section 1128B(b).
            ``(5) Whether an arrangement, activity or proposed 
        arrangement or proposed activity violates any other provision 
        of this Act.
    ``(c) Matters Not Subject to Advisory Opinions.--Such advisory 
opinions shall not address the following matters:
            ``(1) Whether the fair market value shall be, or was paid 
        or received for any goods, services or property.
            ``(2) Whether an individual is a bona fide employee within 
        the requirements of section 3121(d)(2) of the Internal Revenue 
        Code of 1986.
    ``(d) Effect of Advisory Opinions.--
            ``(1) Each advisory opinion issued by the Secretary shall 
        be binding as to the Secretary and the party or parties 
        requesting the opinion.
            ``(2) The failure of a party to seek an advisory opinion 
        may not be introduced into evidence to prove that the party 
        intended to violate the provisions of sections 1128, 1128A, or 
        1128B.
    ``(e) Regulations.--The Secretary within 180 days of the date of 
enactment, shall issue regulations establishing a system for the 
issuance of advisory opinions. Such regulations shall provide for--
            ``(1) the procedure to be followed by a party applying for 
        an advisory opinion;
            ``(2) the procedure to be followed by the Secretary in 
        responding to a request for an advisory opinion;
            ``(3) the interval in which the Secretary shall respond;
            ``(4) the reasonable fee to be charged to the party 
        requesting an advisory opinion; and
            ``(5) the manner in which advisory opinions will be made 
        available to the public.
    ``(f) Interval for Issuance of Advisory Opinions.--Under no 
circumstances shall the interval in which the Secretary shall respond 
to a party requesting an advisory opinion exceed 30 days.''.

SEC. 2332. AUTHORIZING THE SECRETARY OF HEALTH AND HUMAN SERVICES TO 
              ISSUE ADVISORY OPINIONS RELATING TO PHYSICIAN OWNERSHIP 
              AND REFERRAL.

    Section 1877 of the Social Security Act (42 U.S.C. 1395nn) is 
amended by the addition of the following new subsection:
    ``(i) Advisory Opinions.--
            ``(1) In general.--The Secretary shall issue advisory 
        opinions on whether an arrangement or proposed arrangement will 
        result in a prohibited referral within the meaning of this 
        section.
            ``(2) Effect of Advisory Opinions.--
                    ``(A) Each advisory opinion issued by the Secretary 
                shall be binding as to the Secretary and the party or 
                parties requesting the opinion.
                    ``(B) The failure of a party to seek an advisory 
                opinion may not be introduced into evidence to prove 
                that the party intended to violate the provisions of 
                this section.
            ``(3) Regulations.--The Secretary within one hundred and 
        eighty days of the date of enactment, shall issue regulations 
        establishing a system for the issuance of advisory opinions. 
        Such regulations shall provide for--
                    ``(A) the procedure to be followed by a party 
                applying for an advisory opinion;
                    ``(B) the procedure to be followed by the Secretary 
                in responding to a request for an advisory opinion;
                    ``(C) the interval in which the Secretary shall 
                respond;
                    ``(D) the reasonable fee to be charged to the party 
                requesting an advisory opinion; and
                    ``(E) the manner in which advisory opinions will be 
                made available to the public.
            ``(4) Interval for issuance of advisory opinions.--Under no 
        circumstances shall the interval in which the Secretary shall 
        respond to a party requesting an advisory opinion exceed thirty 
        days.''.

SEC. 2333. EFFECTIVE DATE.

    Unless otherwise specified, the amendments made by this part shall 
be effective upon the enactment of this Act.

Subtitle E--Increased Medicare Beneficiary Choice; Additional Medicare 
                                Reforms

             PART 1--INCREASED MEDICARE BENEFICIARY CHOICE

SEC. 2401. REQUIREMENTS FOR HEALTH MAINTENANCE ORGANIZATIONS UNDER 
              MEDICARE.

    (a) Use of Metropolitan Statistical Areas to Determine Adjusted 
Average Per Capita Cost.--Section 1876(a)(4) of such Act (42 U.S.C. 
1395mm(a)(4)) is amended by striking ``in a geographic area served by 
an eligible organization or in a similar area'' and inserting ``in the 
metropolitan statistical area (as defined by the Office of Management 
and Budget) in which the individual resides, or in the entire portion 
of the State in which the individual resides which is not located in a 
metropolitan statistical area in the case of an individual who does not 
reside in a metropolitan statistical area''.
    (b) Determination of Model Additional Health Benefit Packages.--
Section 1876(g) of such Act (42 U.S.C. 1395mm(g)) is amended by 
inserting after paragraph (3) the following new paragraph:
    ``(4) The Secretary shall develop the following model packages of 
additional health benefits (referred to in paragraph (3)(B)) which an 
eligible organization may provide (at its option) under paragraph (2):
            ``(A) Coverage for catastrophic illness (subject to a limit 
        on out-of-pocket expenditures).
            ``(B) Coverage for prescription drugs.
            ``(C) Coverage for preventive services.''.
    (c) Revision of Membership Limitation.--Section 1876(f) of the 
Social Security Act (42 U.S.C. 1395mm(f)) is amended--
            (1) in paragraph (1), by striking ``one-half'' and 
        inserting ``25 percent''; and
            (2) in paragraph (2)(A), by striking ``50 percent'' and 
        inserting ``75 percent''.
    (d) Enrollment Periods for Medicare Health Maintenance 
Organizations.--
            (1) Uniform open enrollment period.--Section 
        1876(c)(3)(A)(i) of such Act (42 U.S.C. 1395mm(c)(3)(A)(i)) is 
        amended by striking ``must have'' and all that follows through 
        ``and including'' and inserting the following: ``shall have 
        open enrollment during an annual uniform open enrollment period 
        established by the Secretary for all eligible organizations, 
        together with''.
            (2) Open enrollment for certain disenrolled individuals.--
        Section 1876(c)(3)(A)(ii)(I) of such Act (42 U.S.C. 
        1395mm(c)(3)(A)(ii)(I)) is amended by adding at the end the 
        following: ``Each eligible organization with a risk-sharing 
        contract under this section shall have an open enrollment 
        period for individuals residing in the organization's service 
        area who disenroll from another eligible organization with a 
        risk-sharing contract under this section on the grounds that 
        the individual's primary care physician is no longer a member 
        of the organization's provider network or for cause (in 
        accordance with such standards, and as demonstrated through an 
        appeals process that meets such requirements, as the Secretary 
        may establish).
    (e) Effective Date.--The amendments made by this section shall 
apply to contracts entered into on or after the date of the enactment 
of this Act.

SEC. 2402. EXPANSION AND REVISION OF MEDICARE SELECT POLICIES.

    (a) Permitting Medicare Select Policies in All States.--
            (1) In general.--Subsection (c) of section 4358 of the 
        Omnibus Budget Reconciliation Act of 1990 (hereafter referred 
        to as ``OBRA-1990'') is hereby repealed.
            (2) Conforming amendment.--Section 4358 of OBRA-1990 is 
        amended by redesignating subsection (d) as subsection (c).
    (b) Requirements of Medicare Select Policies.--Section 1882(t)(1) 
of the Social Security Act (42 U.S.C. 1395ss(t)(1)) is amended to read 
as follows:
    ``(1)(A) If a medicare supplemental policy meets the 1991 NAIC 
Model Regulation or 1991 Federal Regulation and otherwise complies with 
the requirements of this section except that--
            ``(i) the benefits under such policy are restricted to 
        items and services furnished by certain entities (or reduced 
        benefits are provided when items or services are furnished by 
        other entities), and
            ``(ii) in the case of a policy described in subparagraph 
        (C)(i)--
                    ``(I) the benefits under such policy are not one of 
                the groups or packages of benefits described in 
                subsection (p)(2)(A),
                    ``(II) except for nominal copayments imposed for 
                services covered under part B of this title, such 
                benefits include at least the core group of basic 
                benefits described in subsection (p)(2)(B), and
                    ``(III) an enrollee's liability under such policy 
                for physician's services covered under part B of this 
                title is limited to the nominal copayments described in 
                subclause (II),
the policy shall nevertheless be treated as meeting those standards if 
the policy meets the requirements of subparagraph (B).
    ``(B) A policy meets the requirements of this subparagraph if--
            ``(i) full benefits are provided for items and services 
        furnished through a network of entities which have entered into 
        contracts or agreements with the issuer of the policy,
            ``(ii) full benefits are provided for items and services 
        furnished by other entities if the services are medically 
        necessary and immediately required because of an unforeseen 
        illness, injury, or condition and it is not reasonable given 
        the circumstances to obtain the services through the network,
            ``(iii) the network offers sufficient access,
            ``(iv) the issuer of the policy has arrangements for an 
        ongoing quality assurance program for items and services 
        furnished through the network,
            ``(v)(I) the issuer of the policy provides to each enrollee 
        at the time of enrollment an explanation of--
                    ``(aa) the restrictions on payment under the policy 
                for services furnished other than by or through the 
                network,
                    ``(bb) out of area coverage under the policy,
                    ``(cc) the policy's coverage of emergency services 
                and urgently needed care, and
                    ``(dd) the availability of a policy through the 
                entity that meets the 1991 Model NAIC Regulation or 
                1991 Federal Regulation without regard to this 
                subsection and the premium charged for such policy, and
            ``(II) each enrollee prior to enrollment acknowledges 
        receipt of the explanation provided under subclause (I), and
            ``(vi) the issuer of the policy makes available to 
        individuals, in addition to the policy described in this 
        subsection, any policy (otherwise offered by the issuer to 
        individuals in the State) that meets the 1991 Model NAIC 
        Regulation or 1991 Federal Regulation and other requirements of 
        this section without regard to this subsection.
    ``(C)(i) A policy described in this subparagraph--
            ``(I) is offered by an eligible organization (as defined in 
        section 1876(b)),
            ``(II) is not a policy or plan providing benefits pursuant 
        to a contract under section 1876 or an approved demonstration 
        project described in section 603(c) of the Social Security 
        Amendments of 1983, section 2355 of the Deficit Reduction Act 
        of 1984, or section 9412(b) of the Omnibus Budget 
        Reconciliation Act of 1986, and
            ``(III) provides benefits which, when combined with 
        benefits which are available under this title, are 
        substantially similar to benefits under policies offered to 
        individuals who are not entitled to benefits under this title.
    ``(ii) In making a determination under subclause (III) of clause 
(i) as to whether certain benefits are substantially similar, there 
shall not be taken into account, except in the case of preventive 
services, benefits provided under policies offered to individuals who 
are not entitled to benefits under this title which are in addition to 
the benefits covered by this title and which are benefits an entity 
must provide in order to meet the definition of an eligible 
organization under section 1876(b)(1).''.
    (c) Renewability of Medicare Select Policies.--Section 1882(q)(1) 
of the Social Security Act (42 U.S.C. 1395ss(q)(1)) is amended--
            (1) by striking ``(1) Each'' and inserting ``(1)(A) Except 
        as provided in subparagraph (B), each'';
            (2) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively; and
            (3) by adding at the end the following new subparagraph:
            ``(B)(i) Except as provided in clause (ii), in the case of 
        a policy that meets the requirements of subsection (t), an 
        issuer may cancel or nonrenew such policy with respect to an 
        individual who leaves the service area of such policy.
            ``(ii) If an individual described in clause (i) moves to a 
        geographic area where an issuer described in clause (i), or 
        where an affiliate of such issuer, is issuing medicare 
        supplemental policies, such individual must be permitted to 
        enroll in any medicare supplemental policy offered by such 
        issuer or affiliate that provides benefits comparable to or 
        less than the benefits provided in the policy being canceled or 
        nonrenewed. An individual whose coverage is canceled or 
        nonrenewed under this subparagraph shall, as part of the notice 
        of termination or nonrenewal, be notified of the right to 
        enroll in other medicare supplemental policies offered by the 
        issuer or its affiliates.
            ``(iii) For purposes of this subparagraph, the term 
        `affiliate' shall have the meaning given such term by the 1991 
        NAIC Model Regulation.''.
    (d) Civil Money Penalty.--Section 1882(t)(2) of the Social Security 
Act (42 U.S.C. 1395ss(t)(2)) is amended--
            (1) by striking ``(2)'' and inserting ``(2)(A)'';
            (2) by redesignating subparagraphs (A), (B), (C), and (D) 
        as clauses (i), (ii), (iii), and (iv), respectively;
            (3) in clause (iv), as so redesignated--
                    (A) by striking ``paragraph (1)(E)(i)'' and 
                inserting ``paragraph (1)(B)(v)(I), and
                    (B) by striking ``paragraph (1)(E)(ii)'' and 
                inserting ``paragraph (1)(B)(v)(II)'';
            (4) by striking ``the previous sentence'' and inserting 
        ``this subparagraph''; and
            (5) by adding at the end the following new subparagraph:
    ``(B) If the Secretary determines that an issuer of a policy 
approved under paragraph (1) has made a misrepresentation to the 
Secretary or has provided the Secretary with false information 
regarding such policy, the issuer is subject to a civil money penalty 
in an amount not to exceed $100,000 for each such determination. The 
provisions of section 1128A (other than the first sentence of 
subsection (a) and other than subsection (b)) shall apply to a civil 
money penalty under this subparagraph in the same manner as such 
provisions apply to a penalty or proceeding under section 1128A(a).''.
    (e) Effective Dates.--
            (1) NAIC standards.--If, within 6 months after the date of 
        the enactment of this Act, the National Association of 
        Insurance Commissioners (hereafter in this subsection referred 
        to as the ``NAIC'') makes changes in the 1991 NAIC Model 
        Regulation (as defined in section 1882(p)(1)(A) of the Social 
        Security Act) to incorporate the additional requirements 
        imposed by the amendments made by this section, section 
        1882(g)(2)(A) of such Act shall be applied in each State, 
        effective for policies issued to policyholders on and after the 
        date specified in paragraph (3), as if the reference to the 
        Model Regulation adopted on June 6, 1979, were a reference to 
        the 1991 NAIC Model Regulation (as so defined) as changed under 
        this paragraph (such changed Regulation referred to in this 
        subsection as the ``1994 NAIC Model Regulation'').
            (2) Secretary standards.--If the NAIC does not make changes 
        in the 1991 NAIC Model Regulation (as so defined) within the 6-
        month period specified in paragraph (1), the Secretary of 
        Health and Human Services (in this subsection as the 
        ``Secretary'') shall promulgate a regulation and section 
        1882(g)(2)(A) of the Social Security Act shall be applied in 
        each State, effective for policies issued to policyholders on 
        and after the date specified in paragraph (3), as if the 
        reference to the Model Regulation adopted in June 6, 1979, were 
        a reference to the 1991 NAIC Model Regulation (as so defined) 
        as changed by the Secretary under this paragraph (such changed 
        Regulation referred to in this subsection as the ``1994 Federal 
        Regulation'').
            (3) Date specified.--
                    (A) In general.--Subject to subparagraph (B), the 
                date specified in this paragraph for a State is the 
                earlier of--
                            (i) the date the State adopts the 1994 NAIC 
                        Model Regulation or the 1994 Federal 
                        Regulation; or
                            (ii) 1 year after the date the NAIC or the 
                        Secretary first adopts such regulations.
                    (B) Additional legislative action required.--In the 
                case of a State which the Secretary identifies, in 
                consultation with the NAIC, as--
                            (i) requiring State legislation (other than 
                        legislation appropriating funds) in order for 
                        medicare supplemental policies to meet the 1994 
                        NAIC Model Regulation or the 1994 Federal 
                        Regulation, but
                            (ii) having a legislature which is not 
                        scheduled to meet in 1995 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1995. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.

SEC. 2403. INCLUDING NOTICE OF AVAILABLE HEALTH MAINTENANCE 
              ORGANIZATIONS IN ANNUAL NOTICE TO BENEFICIARIES.

    Section 1804 of the Social Security Act (42 U.S.C. 1395b-2) is 
amended--
            (1) by striking ``and'' at the end of paragraph (2);
            (2) by striking the period at the end of paragraph (3) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (3) the following new 
        paragraph:
            ``(4) with respect to the area in which the individual 
        receiving the notice resides, a description of the eligible 
        organizations under section 1833(a)(1) or section 1876 and the 
        carriers offering a medicare supplemental policy described in 
        section 1882(t)(1) which serve the area in which the individual 
        receiving the notice resides.''.

SEC. 2404. LEGISLATIVE PROPOSAL ON ENROLLING MEDICARE BENEFICIARIES IN 
              QUALIFIED HEALTH PLANS.

    (a) In General.--
            (1) Legislative proposal.--Not later than 1 year after the 
        date of the enactment of this Act, the Secretary shall develop 
        and submit to Congress a proposal for legislation which 
        provides for the enrollment of medicare beneficiaries in 
        private health insurance plans (including medisave coverage 
        described in section 1102(e)).
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Contents of the Proposal.--A proposal for legislation submitted 
under subsection (a) shall--
            (1) provide for an appropriate methodology by which the 
        Secretary shall make payment to private health insurance plans 
        for the enrollment of medicare beneficiaries;
            (2) provide individuals the opportunity to remain enrolled 
        in such a plan without an interruption in coverage upon 
        becoming medicare beneficiaries; and
            (3) provide medicare beneficiaries with the opportunity to 
        enroll in a private health insurance plan.

SEC. 2405. OPTIONAL INTERIM ENROLLMENT OF MEDICARE BENEFICIARIES IN 
              PRIVATE HEALTH PLANS.

    (a) Interim Enrollment of Medicare Beneficiaries in Qualified 
Health Plans.--
            (1) In general.--Notwithstanding title XVIII of the Social 
        Security Act, the Secretary shall provide for a monthly payment 
        as provided under subsection (b)(1) to a private health 
        insurance plan on behalf of enrolled medicare beneficiaries who 
        choose to enroll in such a plan.
            (2) Medicare beneficiary.--For purposes of this section, 
        the term ``medicare beneficiary'' means an individual who is 
        eligible for benefits under part A of title XVIII of the Social 
        Security Act and is enrolled under part B of such title.
    (b) Payment Specified.--
            (1) Federal payment.--
                    (A) In general.--The amount of payment specified in 
                this paragraph for an individual who is enrolled in a 
                private health insurance plan is the lesser of--
                            (i) the applicable rate specified in 
                        section 1876(a)(1)(C) of the Social Security 
                        Act (but at 100 percent, rather than 95 
                        percent, of the applicable amount); or
                            (ii) the monthly premium charged the 
                        individual for coverage under the private 
                        health insurance plan.
                    (B) Source of payment.--The payment to a private 
                health insurance plan under this paragraph for 
                individuals entitled to benefits under part A and 
                enrolled under part B of title XVIII of the Social 
                Security Act shall be made from the Federal Hospital 
                Insurance Trust Fund and the Federal Supplementary 
                Medical Insurance Trust Fund, with the allocation to be 
                determined by the Secretary.
            (2) Individual's share.--If the monthly premium for the 
        private plan in which the individual is enrolled is greater 
        than the amount specified under paragraph (1)(A)(i), the 
        individual shall be responsible for paying to the plan the 
        difference between the monthly premium charged the individual 
        for coverage under the plan and the amount specified in 
        paragraph (1)(A)(i).
    (c) Payments Under this Section as Sole Medicare Benefits.--
Payments made under this section shall be instead of the amounts that 
would otherwise be payable, pursuant to sections 1814(b) and 1833(a) of 
the Social Security Act, for services furnished to medicare 
beneficiaries.
    (d) Inclusion in Annual Notice to Beneficiaries.--Section 1804 of 
the Social Security Act (42 U.S.C. (42 U.S.C. 1395b-2), as amended by 
section 2403, is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting ``, and''; and
            (3) by inserting after paragraph (4) the following new 
        paragraph:
            ``(5) a description of the option provided pursuant to 
        section 2405 of the Affordable Health Care Now Act of 1994 for 
        payment to be made by the Secretary on the individual's behalf 
        for enrollment in a private health insurance plan.''.

    PART 2--MEDICARE PART B PREMIUM; OTHER MEDICARE PAYMENT CHANGES

SEC. 2411. EXTENSION OF CURRENT RULES FOR COMPUTING MEDICARE PART B 
              PREMIUM.

    Section 1839(e) of the Social Security Act (42 U.S.C. 1395r(e)) is 
amended--
            (1) in paragraph (1)(A), by striking ``January 1999'' and 
        inserting ``January 2005''; and
            (2) in paragraph (2), by striking ``January 1998'' and 
        inserting ``January 2004''.

SEC. 2412. INCREASE IN MEDICARE PART B PREMIUM FOR INDIVIDUALS WITH 
              HIGH INCOME.

    (a) In General.--Subchapter A of chapter 1 of the Internal Revenue 
Code of 1986 is amended by adding at the end thereof the following new 
part:

   ``PART VIII--MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS

                              ``Sec. 59B. Medicare part B premium tax.

``SEC. 59B. MEDICARE PART B PREMIUM TAX.

    ``(a) Imposition of Tax.--In the case of an individual to whom this 
section applies for the taxable year, there is hereby imposed (in 
addition to any other tax imposed by this subtitle) a tax for such 
taxable year equal to the aggregate of the Medicare part B premium 
taxes for each of the months during such year that such individual is 
covered by Medicare part B.
    ``(b) Individuals to Whom Section Applies.--This section shall 
apply to any individual for any taxable year if--
            ``(1) such individual is covered under Medicare part B for 
        any month during such year, and
            ``(2) the modified adjusted gross income of the taxpayer 
        for such taxable year exceeds the threshold amount.
    ``(c) Medicare Part B Premium Tax for Month.--
            ``(1) In general.--The Medicare part B premium tax for any 
        month is \2/3\ the amount equal to the excess of--
                    ``(A) 150 percent of the monthly actuarial rate for 
                enrollees age 65 and over determined for that calendar 
                year under section 1839(b) of the Social Security Act, 
                over
                    ``(B) the total monthly premium under section 1839 
                of the Social Security Act (determined without regard 
                to subsections (b) and (f) of section 1839 of such 
                Act).
            ``(2) Phasein of tax.--If the modified adjusted gross 
        income of the taxpayer for any taxable years exceeds the 
        threshold amount by less than $50,000, the Medicare part B 
        premium tax for any month during such taxable year shall be an 
        amount which bears the same ratio to the amount determined 
        under paragraph (1) (without regard to this paragraph) as such 
        excess bears to $50,000. The preceding sentence shall not apply 
        to any individual whose threshold amount is zero.
    ``(d) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Threshold amount.--The term `threshold amount' 
        means--
                    ``(A) except as otherwise provided in this 
                paragraph, $100,000,
                    ``(B) $125,000 in the case of a joint return, and
                    ``(C) zero in the case of a taxpayer who--
                            ``(i) is married at the close of the 
                        taxable year but does not file a joint return 
                        for such year, and
                            ``(ii) does not live apart from his spouse 
                        at all times during the taxable year.
            ``(2) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income--
                    ``(A) determined without regard to sections 135, 
                911, 931, and 933, and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(3) Medicare part b coverage.--An individual shall be 
        treated as covered under Medicare part B for any month if a 
        premium is paid under part B of title XVIII of the Social 
        Security Act for the coverage of the individual under such part 
        for the month.
            ``(4) Married individual.--The determination of whether an 
        individual is married shall be made in accordance with section 
        7703.''
    (b) Clerical Amendment.--The table of parts for subchapter A of 
chapter 1 of such Code is amended by adding at the end thereof the 
following new item:

                              ``Part VIII. Medicare Part B Premiums For 
                                        High-Income Individuals.''
    (c) Effective Date.--The amendments made by this section shall 
apply to months after December 1994 in taxable years ending after 
December 31, 1994.

SEC. 2413. IMPROVED EFFICIENCY THROUGH CONSOLIDATION OF ADMINISTRATION 
              OF PARTS A AND B.

    (a) In General.--The Secretary of Health and Human Services shall 
take such steps as may be necessary to consolidate the administration 
(including processing systems) of parts A and B of the medicare program 
(under title XVIII of the Social Security Act) including over a 5-year 
period.
    (b) Combination of Intermediary and Carrier Functions.--In taking 
such steps, the Secretary shall contract with a single entity that 
combines the fiscal intermediary and carrier functions in each area 
except where the Secretary finds that special regional or national 
contracts are appropriate.
    (c) Superseding Conflicting Requirements.--The provisions of 
sections 1816 and 1842 of the Social Security Act (including provider 
nominating provisions in such section 1816) are superseded to the 
extent required to carry out this section.

SEC. 2414. EXTENSION OF MEDICARE SECONDARY PAYMENT PROVISIONS.

    (a) Extension of Data Match.--
            (1) Section 1862(b)(5)(C)(iii) of the Social Security Act 
        (42 U.S.C. 1395y(b)(5)(C)(iii)) is amended by striking ``1998'' 
        and inserting ``2004''.
            (2) Section 6103(l)(12)(F) of the Internal Revenue Code of 
        1986 is amended--
                    (A) in clause (i), by striking ``1998'' and 
                inserting ``2004'',
                    (B) in clause (ii)(I), by striking ``1997'' and 
                inserting ``2003'', and
                    (C) in clause (ii)(II), by striking ``1998'' and 
                inserting ``2004''.
    (b) Extension of Medicare Secondary Payer to Disabled 
Beneficiaries.--Section 1862(b)(1)(B)(iii) of such Act (42 U.S.C. 
1395y(b)(1)(B)(iii)) is amended by striking ``1998'' and inserting 
``2004''.
    (c) Extension of Period for End Stage Renal Disease 
Beneficiaries.--Section 1862(b)(1)(C) of such Act (42 U.S.C. 
1395y(b)(1)(C)) is amended in the second sentence by striking ``1998'' 
and inserting ``2004''.

             Subtitle F--Health Care Antitrust Improvements

SEC. 2501. PROTECTION FROM ANTITRUST LAWS FOR CERTAIN COMPETITIVE AND 
              COLLABORATIVE ACTIVITIES.

    (a) Protections Described.--An activity relating to the provision 
of health care services shall receive the following protection from the 
antitrust laws:
            (1) If the activity is within a safe harbor designated by 
        the Attorney General under section 2502, the safe harbor shall 
        be a defense to all antitrust claims, except for claims for 
        injunctive relief asserted by the Attorney General or the Chair 
        of the Federal Trade Commission in extraordinary circumstances.
            (2) If the activity is specified in and in compliance with 
        the terms of a certificate of review issued by the Attorney 
        General under section 2503 and the activity occurs while the 
        certificate is in effect, the certificate shall be a defense to 
        antitrust claims, other than claims for injunctive relief.
    (b) Award of Attorney's Fees and Costs of Suit.--
            (1) In general.--If any person brings an action alleging a 
        claim under the antitrust laws and the activity on which the 
        claim is based is found by the court to be protected from such 
        laws under subsection (a), the court shall, at the conclusion 
        of the action--
                    (A) award to a substantially prevailing claimant 
                the cost of suit attributable to such claim, including 
                a reasonable attorney's fee, or
                    (B) award to a substantially prevailing party 
                defending against such claim the cost of such suit 
                attributable to such claim, including reasonable 
                attorney's fee, if the claim, or the claimant's conduct 
                during litigation of the claim, was frivolous, 
                unreasonable, without foundation, or in bad faith.
            (2) Offset in cases of bad faith.--The court may reduce an 
        award made pursuant to paragraph (1) in whole or in part by an 
        award in favor of another party for any part of the cost of 
        suit (including a reasonable attorney's fee) attributable to 
        conduct during the litigation by any prevailing party that the 
        court finds to be frivolous, unreasonable, without foundation, 
        or in bad faith.

SEC. 2502. DESIGNATION OF SAFE HARBORS.

    (a) In General.--
            (1) Designation by attorney general.--The Attorney General, 
        in consultation with the Secretary of Health and Human Services 
        and the Chair, shall develop and designate pursuant to 
        paragraph (C) safe harbors for purposes of section 2501(a)(1) 
        relating to--
                    (A) each category of activities referred to in 
                paragraph (2); and
                    (B) such other categories of activities as the 
                Attorney General may designate in accordance with the 
                process described in this section.
            (2) Required categories of activities subject to safe 
        harbors.--The categories of activities referred to in this 
        paragraph are as follows:
                    (A) Joint purchasing of health care services.--
                Providing the terms under which consumers of health 
                care services (patients or others acting on their 
                behalf) may jointly negotiate and purchase health care 
                services.
                    (B) Small hospital mergers.--Providing for small 
                hospitals lawfully to merge under the antitrust laws 
                without undue delay or review, taking into account the 
                special needs and circumstances of rural health care 
                markets.
                    (C) Network formation and operation.--Permitting 
                activities related to the startup and operation of 
                collaborations between State-licensed providers through 
                partial or full integration, including multi-provider 
                networks, hospital networks, physician-hospital 
                organizations, and other efforts to provide health care 
                services more efficiently.
                    (D) Activities of medical self-regulatory 
                entities.--Permitting standard setting and enforcement 
                activities by medical self-regulatory entities (such as 
                hospital boards and medical societies) to promote 
                health care quality, except that a safe harbor under 
                this paragraph may not provide protection for any 
                activity undertaken for financial gain or for 
                anticompetitive reasons.
                    (E) Provision of information to buyers and 
                consumers.--Permitting health care providers 
                collectively to supply non-price medical information to 
                buyers and consumers relating to the type, quality and 
                efficiency of treatment, including joint views on 
                procedures that should be covered by purchasers and 
                medical protocols, except that a safe harbor under this 
                subparagraph may not provide protection for any 
                collective refusals to deal or collective attempts at 
                coercion.
                    (F) Participation in surveys.--Providing the terms 
                under which health care providers may lawfully 
                participate in written surveys of prices of services, 
                reimbursements received, employee compensation, and 
                other relevant areas.
                    (G) High-technology and tertiary care joint 
                ventures.--Permitting activities of health care joint 
                ventures to purchase or use new or existing high 
                technology or costly equipment, or to provide advanced 
                tertiary care services.
                    (H) Market power screens.--Providing market power 
                screens at appropriate levels below which combinations 
                of health care providers are too small to pose a 
                realistic antitrust threat. There may be different 
                levels for different activities and markets, taking 
                into account the special needs of rural health care 
                markets.
                    (I) Joint purchasing arrangements.--Providing the 
                terms under which health care providers may make joint 
                purchases of products and services.
                    (J) Good faith negotiations.--Providing the terms 
                under which health care providers may engage in 
                discussions relating to legitimate collaborative 
                activities contemplated by the safe harbors.
    (b) Process for Designation of Additional Categories of 
Activities.--
            (1) Solicitation of proposals.--Not later than 30 days 
        after the date of the enactment of this Act, the Attorney 
        General shall publish a notice in the Federal Register 
        soliciting proposals for safe harbors.
            (2) Review of proposed safe harbors.--Not later than 180 
        days after the date of the enactment of this Act, the Attorney 
        General (in consultation with the Secretary and the Chair) 
        shall review the proposed safe harbors submitted under 
        paragraph (1) and include a description of the safe harbors in 
        the report under subsection (d).
            (3) Additional safe harbors.--After submitting the report 
        under subsection (d), the Attorney General (in consultation 
        with the Secretary and the Chair) may from time to time add 
        additional safe harbors in accordance with the procedures 
        described in this subsection.
    (c) Effective Date of Safe Harbors.--
            (1) Publication.--Not later than 180 days after the date of 
        the enactment of this Act, the Attorney General shall publish 
        in the Federal Register for public comment the safe harbors 
        proposed for designation under this section. Not later than 180 
        days after publishing such proposed safe harbors in the Federal 
        Register, the Attorney General shall issue final rules 
        establishing such safe harbors.
            (2) Effective date.--The safe harbors established under the 
        final rules issued under paragraph (1) shall take effect 90 
        days after issuance, unless disapproved by the Congress.
    (d) Report on Proposed Safe Harbors.--Not later than 180 days after 
the date of the enactment of this Act, the Attorney General (in 
consultation with the Secretary and the Chair) shall submit a report to 
Congress describing the proposals from subsections (a) and (b)(1) to be 
included in the publication of safe harbors described in subsection 
(c)(1) and the proposals from subsection (b)(1) that are not to be so 
included, together with explanations therefor.
    (e) Modification or Removal of Safe Harbors.--The Attorney General 
(in consultation with the Secretary and the Chair) may modify or remove 
a safe harbor following notice and comment upon a determination that 
the safe harbor does not meet the criteria of subsection (f).
    (f) Criteria for Safe Harbors.--In establishing safe harbors under 
this section, the Attorney General shall take into account the 
following:
            (1) The extent to which a competitive or collaborative 
        activity will accomplish any of the following:
                    (A) An increase in access to health care services.
                    (B) The enhancement of the quality of health care 
                services.
                    (C) The establishment of cost efficiencies that 
                will be passed on to consumers, including economies of 
                scale and reduced transaction and administrative costs.
                    (D) An increase in the ability of health care 
                facilities to provide services in medically underserved 
                areas or to medically underserved populations.
                    (E) An improvement in the utilization of health 
                care resources or the reduction in the inefficient 
                duplication of the use of such resources.
            (2) Whether the designation of an activity as a safe harbor 
        will result in the following outcomes:
                    (A) Health plans and other health care insurers, 
                consumers of health care services, and health care 
                providers will be better able to negotiate payment and 
                service arrangements which will reduce costs to 
                consumers.
                    (B) Taking into consideration the characteristics 
                of the particular purchasers and providers involved, 
                competition will not be unduly restricted.
                    (C) Equally efficient and less restrictive 
                alternatives do not exist to meet the criteria 
                described in paragraph (1).
                    (D) The activity will not unreasonably foreclose 
                competition by denying competitors a necessary element 
                of competition.

SEC. 2503. CERTIFICATES OF REVIEW.

    (a) Establishment of Program.--In consultation with the Secretary, 
the Attorney General shall (not later than 180 days after the date of 
the enactment of this Act) issue certificates of review in accordance 
with this section for providers of health care services and advise and 
assist any person with respect to applying for such a certificate of 
review.
    (b) Procedures for Application for Certificate.--
            (1) Submission of application.--
                    (A) Form; content.--To apply for a certificate of 
                review, a person shall submit to the Attorney General a 
                written application which--
                            (i) specifies the activities relating to 
                        the provision of health care services which 
                        satisfy the criteria described in section 
                        2502(e) and which will be included in the 
                        certificate; and
                            (ii) is in a form and contains any 
                        information, including information pertaining 
                        to the overall market in which the applicant 
                        operates, required by rule or regulation 
                        promulgated under section 2506.
                    (B) Filing fee.--The Attorney General may require a 
                filing fee to be submitted with the application to 
                cover the cost of publication and the cost of review 
                required by this section. The amount of the filing fee 
                shall be determined on a sliding scale established by 
                the Attorney General (based on the monetary size of the 
                transaction involved), except that such fee may not 
                exceed $5,000.
            (2) Publication of notice in federal register.--Within 10 
        days after an application submitted under paragraph (1) is 
        received by the Attorney General, the Attorney General shall 
        publish in the Federal Register a notice that announces that an 
        application for a certificate of review has been submitted, 
        identifies each person submitting the application, and 
        describes the conduct for which the application is submitted.
            (3) Establishment of procedures for issuance of 
        certificate.--In consultation with the Chair and the Secretary, 
        the Attorney General shall establish procedures to be used in 
        applying for and in determining whether to approve an 
        application for a certificate of review under this title. Under 
        such procedures the Attorney General, in consultation with the 
        Secretary, shall approve an application if the Attorney General 
        determines that the activities to be covered under the 
        certificate will satisfy the criteria described in section 
        2502(f) for safe harbors designated under such section and that 
        the benefits of the issuance of the certificate will outweigh 
        any disadvantages that may result from reduced competition. If 
        the Attorney General, with the concurrence of the Secretary, 
        determines that the requirements for a certificate are met, the 
        Attorney General shall issue to the applicant a certificate of 
        review. The certificate of review shall specify--
                            (i) the health care market activities to 
                        which the certificate applies,
                            (ii) the person to whom the certificate of 
                        review is issued, and
                            (iii) any terms and conditions the Attorney 
                        General or the Secretary deems necessary to 
                        assure compliance with the applicable 
                        procedures described in paragraph (3).
            (4) Timing for decision on application.--Within 90 days 
        after the Attorney General receives an application for a 
        certificate of review, the Attorney General shall determine 
        whether to grant or deny the certificate.
            (5) Notification of decision.--The Attorney General shall 
        notify the applicant of the Attorney General's determination 
        and if the application is denied, the reasons for the denial.
            (6) Fraudulent procurement.--A certificate of review shall 
        be void ab initio with respect to any health care market 
        activities for which the certificate was procured by fraud.
    (c) Amendment and Revocation of Certificates.--
            (1) Notification of changes.--Any applicant who receives a 
        certificate of review--
                    (A) shall promptly report to the Attorney General 
                any change relevant to the matters specified in the 
                certificate; and
                    (B) may submit to the Attorney General an 
                application to amend the certificate to reflect the 
                effect of the change on the conduct specified in the 
                certificate.
            (2) Amendment to certificate.--An application for an 
        amendment to a certificate of review shall be treated as an 
        application for the issuance of a certificate. The effective 
        date of an amendment shall be the date on which the application 
        for the amendment is received by the Attorney General.
            (3) Revocation.--
                    (A) Grounds for revocation.--In accordance with 
                this paragraph, the Attorney General, in consultation 
                with the Secretary, may revoke in whole or in part a 
                certificate of review issued under this section. There 
                shall be considered as grounds for the revocation of a 
                certificate the fact that--
                            (i) after the expiration of the 2-year 
                        period beginning on the date a person's 
                        certificate is issued, the activities of the 
                        person have not substantially accomplished the 
                        purposes for the issuance of the certificate;
                            (ii) the person has failed to comply with 
                        any of the terms or conditions imposed under 
                        the certificate by the Attorney General or the 
                        Secretary under subsection (b)(4); or
                            (iii) the activities covered under the 
                        certificate no longer satisfy the criteria set 
                        forth in section 2502(f).
                    (B) Request for compliance information.--If the 
                Attorney General or the Secretary has reason to believe 
                that any of the grounds for revocation of a certificate 
                of review described in subparagraph (A) may apply to a 
                person holding the certificate, the Attorney General 
                shall request such information from such person as the 
                Attorney General or the Secretary deems necessary to 
                resolve the matter of compliance. Failure to comply 
                with such request shall be grounds for revocation of 
                the certificate under this paragraph.
                    (C) Procedures for revocation.--If the Attorney 
                General or the Secretary determines that any of the 
                grounds for revocation of a certificate of review 
                described in subparagraph (A) apply to a person holding 
                the certificate, or that such person has failed to 
                comply with a request made under subparagraph (B), the 
                Attorney General shall give written notice of the 
                determination to such person. The notice shall include 
                a statement of the circumstances underlying, and the 
                reasons in support of, the determination. In the 60-day 
                period beginning 30 days after the notice is given, the 
                Attorney General shall revoke the certificate or modify 
                it as the Attorney General or the Secretary deems 
                necessary to cause the certificate to apply only to 
                activities that meet the criteria set forth in section 
                2502(f).
                    (D) Investigation authority.--For purposes of 
                carrying out this paragraph, the Attorney General may 
                conduct investigations in the same manner as the 
                Attorney General conducts investigations under section 
                3 of the Antitrust Civil Process Act, except that no 
                civil investigative demand may be issued to a person to 
                whom a certificate of review is issued if such person 
                is the target of such investigation.
    (d) Review of Determinations.--
            (1) Availability of review for certain actions.--If the 
        Attorney General denies, in whole or in part, an application 
        for a certificate of review or for an amendment to a 
        certificate, or revokes or modifies a certificate pursuant to 
        paragraph (3), the applicant or certificate holder (as the case 
        may be) may, within 30 days of the denial or revocation, bring 
        an action in the United States District Court for the District 
        of Columbia to set aside the determination on the ground that 
        such determination is clearly erroneous.
            (2) No other review permitted.--Except as provided in 
        paragraph (1), no action by the Attorney General, the Chair, or 
        the Secretary pursuant to this subtitle shall be subject to 
        judicial review.
            (3) Effect of rejected application.--If the Attorney 
        General denies, in whole or in part, an application for a 
        certificate of review or for an amendment to a certificate, or 
        revokes or amends a certificate, neither the negative 
        determination nor the statement of reasons therefore shall be 
        admissible in evidence, in any administrative or judicial 
        proceeding, concerning any claim under the antitrust laws.
    (e) Publication of Decisions.--The Attorney General shall publish a 
notice in the Federal Register on a timely basis of each decision made 
with respect to an application for a certificate of review under this 
section or the amendment or revocation of such a certificate, in a 
manner that protects the confidentiality of any proprietary information 
relating to the application.
    (f) Annual Reports.--Every person to whom a certificate of review 
is issued shall submit to the Attorney General an annual report, in 
such form and at such time as the Attorney General may require, that 
contains any necessary updates to the information required under 
subsection (b) and a description of the activities of the holder under 
the certificate during the preceding year.
    (g) Restrictions on Disclosure of Information.--
            (1) Waiver of disclosure requirements under administrative 
        procedure act.--Information submitted by any person in 
        connection with the issuance, amendment, or revocation of a 
        certificate of review shall be exempt from disclosure under 
        section 552 of title 5, United States Code.
            (2) Restrictions on disclosure of commercial or financial 
        information.--
                    (A) In general.--Except as provided in subparagraph 
                (B), no officer or employee of the United States shall 
                disclose commercial or financial information submitted 
                in connection with the issuance, amendment, or 
                revocation of a certificate of review if the 
                information is privileged or confidential or if 
                disclosure of the information would cause harm to the 
                person who submitted the information.
                    (B) Exceptions.--Subparagraph (A) shall not apply 
                with respect to information disclosed--
                            (i) upon a request made by the Congress or 
                        any committee of the Congress,
                            (ii) in a judicial or administrative 
                        proceeding, subject to appropriate protective 
                        orders,
                            (iii) with the consent of the person who 
                        submitted the information,
                            (iv) in the course of making a 
                        determination with respect to the issuance, 
                        amendment, or revocation of a certificate of 
                        review, if the Attorney General deems 
                        disclosure of the information to be necessary 
                        in connection with making the determination,
                            (v) in accordance with any requirement 
                        imposed by a statute of the United States, or
                            (vi) in accordance with any rule or 
                        regulation promulgated under subsection (i) 
                        permitting the disclosure of the information to 
                        an agency of the United States or of a State on 
                        the condition that the agency will disclose the 
                        information only under the circumstances 
                        specified in clauses (i) through (v).
            (3) Prohibition against use of information to support or 
        answer claims under antitrust laws.--Any information disclosed 
        in an application for a certificate of review under this 
        section shall only be admissible into evidence in a judicial or 
        administrative proceeding for the sole purpose of establishing 
        whether a person is entitled to the protections provided by 
        such a certificate.

SEC. 2504. NOTIFICATIONS PROVIDING REDUCTION IN CERTAIN PENALTIES UNDER 
              ANTITRUST LAW FOR HEALTH CARE JOINT VENTURES.

    (a) Notifications Described.--
            (1) Submission of notification by venture.--Any party to a 
        health care joint venture, acting on such venture's behalf, 
        may, not later than 90 days after entering into a written 
        agreement to form such venture or not later than 90 days after 
        the date of the enactment of this Act, whichever is later, file 
        with the Attorney General a written notification disclosing--
                    (A) the identities of the parties to such venture,
                    (B) the nature and objectives of such venture, and
                    (C) such additional information as the Attorney 
                General may require by regulation.
            (2) Filing fee.--The Attorney General may require a filing 
        fee to be submitted with the notification to cover the cost of 
        publication and the cost of administering this section, except 
        that the amount of such fee shall not exceed $250.
            (3) Submission of additional information.--
                    (A) Request of attorney general.--At any time after 
                receiving a notification filed under paragraph (1), the 
                Attorney General may require the submission of 
                additional information or documentary material relevant 
                to the proposed health care joint venture.
                    (B) Parties to venture.--Any party to a health care 
                joint venture may submit such additional information on 
                the venture's behalf as may be appropriate to ensure 
                that the venture will receive the protections provided 
                under subsection (b).
                    (C) Required submission of information on changes 
                to venture.--A health care joint venture for which a 
                notification is in effect under this section shall 
                submit information on any change in the membership of 
                the venture not later than 90 days after such change 
                occurs.
            (4) Publication of notification.--
                    (A) Information made publicly available.--Not later 
                than 30 days after receiving a notification with 
                respect to a venture under paragraph (1), the Attorney 
                General shall publish in the Federal Register a notice 
                with respect to the venture that identifies the parties 
                to the venture and generally describes the purpose and 
                planned activity of the venture. Prior to its 
                publication, the contents of the notice shall be made 
                available to the parties to the venture.
                    (B) Restriction on disclosure of other 
                information.--All information and documentary material 
                submitted pursuant to this section and all information 
                obtained by the Attorney General in the course of any 
                investigation or case with respect to a potential 
                violation of the antitrust laws by the health care 
                joint venture (other than information and material 
                described in subparagraph (A)) shall be exempt from 
                disclosure under section 552 of title 5, United States 
                Code, and shall not be made publicly available by any 
                agency of the United States to which such section 
                applies except in a judicial proceeding in which such 
                information and material is subject to any protective 
                order.
            (5) Withdrawal of notification.--Any person who files a 
        notification pursuant to this section may withdraw such 
        notification before a publication by the Attorney General 
        pursuant to paragraph (4).
            (6) No judicial review permitted.--Any action taken or not 
        taken by the Attorney General with respect to notifications 
        filed pursuant to this subsection shall not be subject to 
        judicial review.
    (b) Protections for Ventures Subject to Notification.--
            (1) In general.--
                    (A) Protections described.--Except as provided in 
                subsection (c), the provisions of paragraphs (2), (3), 
                (4), and (5) shall apply with respect to any action 
                under the antitrust laws challenging conduct within the 
                scope of a notification which is in effect pursuant to 
                subsection (a)(1).
                    (B) Timing of protections.--The protections 
                described in this subsection shall apply to the venture 
                that is the subject of a notification under subsection 
                (a)(1) as of the earlier of--
                            (i) the date of the publication in the 
                        Federal Register of the notice published with 
                        respect to the notification; or
                            (ii) if such notice is not published during 
                        the period required under subsection (a)(4), 
                        the expiration of the 30-day period that begins 
                        on the date the Attorney General receives any 
                        necessary information required to be submitted 
                        under subsection (a)(1) or any additional 
                        information required by the Attorney General 
                        under subsection (a)(3)(A).
            (2) Applicability of rule of reason standard.--In any 
        action under the antitrust laws, the conduct of any person 
        which is within the scope of a notification filed under 
        subsection (a) shall not be deemed illegal per se, but shall be 
        judged on the basis of its reasonableness, taking into account 
        all relevant factors affecting competition, including, but not 
        limited to, effects on competition in relevant markets.
            (3) Limitation on recovery to actual damages and 
        interest.--Notwithstanding section 4 of the Clayton Act, any 
        person who is entitled to recovery under the antitrust laws for 
        conduct that is within the scope of a notification filed under 
        subsection (a) shall recover the actual damages sustained by 
        such person and interest calculated at the rate specified in 
        section 1961 of title 28, United States Code, for the period 
        beginning on the earliest date for which injury can be 
        established and ending on the date of judgment, unless the 
        court finds that the award of all or part of such interest is 
        unjust under the circumstances.
            (4) Award of attorney's fees and costs of suit.--
                    (A) In general.--In any action under the antitrust 
                laws brought against a health care joint venture for 
                conduct that is within the scope of a notification 
                filed under subsection (a), the court shall, at the 
                conclusion of the action--
                            (i) award to a substantially prevailing 
                        claimant the cost of suit attributable to such 
                        claim, including a reasonable attorney's fee, 
                        or
                            (ii) award to a substantially prevailing 
                        party defending against such claim the cost of 
                        such suit attributable to such claim, including 
                        reasonable attorney's fee, if the claim, or the 
                        claimant's conduct during litigation of the 
                        claim, was frivolous, unreasonable, without 
                        foundation, or in bad faith.
                    (B) Offset in cases of bad faith.--The court may 
                reduce an award made pursuant to subparagraph (A) in 
                whole or in part by an award in favor of another party 
                for any part of the cost of suit (including a 
                reasonable attorney's fee) attributable to conduct 
                during the litigation by any prevailing party that the 
                court finds to be frivolous, unreasonable, without 
                foundation, or in bad faith.
            (5) Restrictions on admissibility of information.--
                    (A) In general.--Any information disclosed in a 
                notification submitted under subsection (a)(1) and the 
                fact of the publication of a notification by the 
                Attorney General under subsection (a)(4) shall only be 
                admissible into evidence in a judicial or 
                administrative proceeding for the sole purpose of 
                establishing whether a party to a health care joint 
                venture is entitled to the protections described in 
                this subsection.
                    (B) Actions of attorney general.--No action taken 
                by the Attorney General pursuant to this section shall 
                be admissible into evidence in any judicial or 
                administrative proceeding for the purpose of supporting 
                or answering any claim under the antitrust laws.
    (c) Exception for Certain Activities.--
            (1) Activities described.--The protections described in 
        subsection (b) shall not apply to conduct which constitutes 
        price-fixing, bid-rigging, or market allocation, unless such 
        conduct is related to procompetitive aspects of a health care 
        joint venture (as determined in accordance with the process 
        described in paragraph (2)).
            (2) Process.--If conduct of a health care joint venture 
        which is subject to a notification under subsection (a)(1) is 
        challenged for price-fixing, bid-rigging, or market allocation, 
        any party to the joint venture shall be entitled to show the 
        procompetitive aspects of such conduct. The protections 
        described in subsection (b) shall not apply to the conduct if 
        the party is unable to show that the conduct is not mere price-
        fixing, bid-rigging, or market allocation.

SEC. 2505. REVIEW AND REPORTS ON SAFE HARBORS, CERTIFICATES OF REVIEW, 
              AND NOTIFICATIONS.

    (a) In General.--The Attorney General, in consultation with the 
Secretary and the Chair, shall periodically review the safe harbors 
designated under section 2502, the certificates of review issued under 
section 2503, and notification received under section 2504, and--
            (1) with respect to the safe harbors, issue modifications 
        to such safe harbors in such manner as the Attorney General 
        considers appropriate in accordance with the requirements of 
        section 2502, which modifications shall take effect 90 days 
        after issuance, unless disapproved by the Congress; and
            (2) with respect to the certificates of review and 
        notifications, submit a report to Congress on the issuance of 
        such certificates and receipt of notifications, including a 
        description of the effect of such certificates and 
        notifications on increasing access to high quality health care 
        services at reduced costs.
    (b) Recommendations for Legislation.--The Attorney General shall 
include in the reports submitted under subsection (a)(2) any 
recommendations of the Attorney General for legislation to improve the 
programs for the issuance of certificates of review and receipt of 
notifications established under this subtitle.

SEC. 2506. RULES, REGULATIONS, AND GUIDELINES.

    (a) Safe Harbors, Certificates, and Notifications.--The Attorney 
General, in consultation with the Secretary and the Chair, shall 
promulgate such rules, regulations, and guidelines as are necessary to 
carry out sections 2502, 2503, and 2504.
    (b) Guidance for Providers.--
            (1) In general.--To promote greater certainty regarding the 
        application of the antitrust laws to activities in the health 
        care market, the Attorney General, in consultation with the 
        Secretary and the Chair, shall (not later than 1 year after the 
        date of the enactment of this Act), taking into account the 
        criteria used to designate safe harbors under section 2502 and 
        grant certificates of review under section 2503, publish 
        guidelines--
                    (A) to define or provide assistance in determining 
                relevant geographic and product markets for health care 
                services and providers of health care services;
                    (B) to further collaborative activities which may 
                be helpful to enhance services in underserved and 
                geographically disadvantaged areas such as rural 
                markets and inner cities;
                    (C) to assist collaboration between providers (such 
                as hospital networks, physician-hospital organizations, 
                and other groups of providers) which will help provide 
                health care services more efficiently;
                    (D) to further activities by which public health 
                clinics (including community health centers and migrant 
                health centers under title III of the Public Health 
                Service Act) may participate in networks and other 
                collaborative activities in order to enhance services 
                in underserved areas;
                    (E) to assist providers of health care services in 
                analyzing whether the activities of such providers may 
                be subject to a safe harbor under section 2502;
                    (F) to provide clarification for activities in the 
                general subject matter areas described in the safe 
                harbors in section 2502, but which fall outside the 
                safe harbors; and
                    (G) to describe specific types of activities which 
                would meet the requirements for issuance of a 
                certificate of review under section 2503, and 
                summarizing the factual and legal bases on which the 
                activities would meet the requirements.
            (2) Periodic update.--The Attorney General shall 
        periodically update the guidelines published under paragraph 
        (1) as the Attorney General considers appropriate.
            (3) Waiver of administrative procedure act.--Section 553 of 
        title 5, United States Code, shall not apply to the issuance of 
        guidelines under paragraph (1).

SEC. 2507. ESTABLISHMENT OF HHS OFFICE OF HEALTH CARE COMPETITION 
              POLICY.

    (a) In General.--There is established within the Department of 
Health and Human Services an Office to be known as the Office of Health 
Care Competition Policy (hereafter in this section referred to as the 
``Office''). The Office shall be headed by a director, who shall be 
appointed by the Secretary.
    (b) Duties.--The Office shall coordinate the responsibilities of 
the Secretary under this subtitle and otherwise assist the Secretary in 
developing policies relating to the competitive and collaborative 
activities of providers of health care services.

SEC. 2508. DEFINITIONS.

    In this subtitle:
            (1) The term ``antitrust laws''--
                    (A) has the meaning given it in subsection (a) of 
                the first section of the Clayton Act (15 U.S.C. 12(a)), 
                except that such term includes section 5 of the Federal 
                Trade Commission Act (15 U.S.C. 45) to the extent such 
                section applies to unfair methods of competition; and
                    (B) includes any State law similar to the laws 
                referred to in subparagraph (A).
            (2) The term ``Chair'' means the Chair of the Federal Trade 
        Commission.
            (3) The term ``health benefit plan'' means any hospital or 
        medical expense incurred policy or certificate, hospital or 
        medical service plan contract, or health maintenance subscriber 
        contract, or a multiple employer welfare arrangement or 
        employee benefit plan (as defined under the Employee Retirement 
        Income Security Act of 1974) which provides benefits with 
        respect to health care services.
            (4) The term ``health care joint venture'' means a joint 
        venture of 2 or more persons formed for the purpose of 
        providing health care services, including attempts to enter 
        into or perform a contract or agreement to provide such 
        services.
            (5) The term ``health care services'' means any services 
        for which payment may be made under a health benefit plan, 
        including services related to the delivery or administration of 
        such services.
            (6) The term ``medical self-regulatory entity'' means a 
        medical society or association, a specialty board, a recognized 
        accrediting agency, or a hospital medical staff, and includes 
        the members, officers, employees, consultants, and volunteers 
        or committees of such an entity.
            (7) The term ``person'' includes a State or unit of local 
        government.
            (8) The term ``provider of health care services'' means any 
        individual or entity that is engaged in the delivery of health 
        care services in a State and that is required by State law or 
        regulation to be licensed or certified by the State to engage 
        in the delivery of such services in the State.
            (9) The term ``Secretary'' means the Secretary of Health 
        and Human Services.
            (10) The term ``specialty group'' means a medical specialty 
        or subspecialty in which a provider of health care services may 
        be licensed to practice by a State (as determined by the 
        Secretary in consultation with the certification boards for 
        such specialties and subspecialties).
            (11) The term ``standard setting and enforcement 
        activities'' means--
                    (A) accreditation of health care practitioners, 
                health care providers, medical education institutions, 
                or medical education programs,
                    (B) technology assessment and risk management 
                activities,
                    (C) the development and implementation of practice 
                guidelines or practice parameters, or
                    (D) official peer review proceedings undertaken by 
                a hospital medical staff (or committee thereof) or a 
                medical society or association for purposes of 
                evaluating the professional conduct or quality of 
                health care provided by a medical professional.

    Subtitle G--Encouraging Enforcement Activities of Medical Self-
                          Regulatory Entities

   PART 1--APPLICATION OF THE CLAYTON ACT TO MEDICAL SELF-REGULATORY 
                                ENTITIES

SEC. 2601. ANTITRUST EXEMPTION FOR MEDICAL SELF-REGULATORY ENTITIES.

    (a) In General.--(1) Except as provided in paragraph (2), no 
damages, interest on damages, cost of suit, or attorney's fee may be 
recovered under section 4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 
15a, 15c), or under any State law similar to such section, from any 
medical self-regulatory entity (including its members, officers, 
employees, consultants, and volunteers or committees thereof) as a 
result of engaging in standard setting or enforcement activities that 
are--
            (A) designed to promote the quality of health care provided 
        to patients, and
            (B) not conducted for purposes of financial gain.
    (2) Paragraph (1) shall not prohibit the recovery of actual 
damages, interest on damages, the cost of suit, or a reasonable 
attorney's fee under section 4 or 4A of the Clayton Act (15 U.S.C. 15, 
15a), or under any State law similar to such section, by a State or the 
United States from a medical self-regulatory entity (including its 
members, officers, employees, consultants, and volunteers or committees 
thereof) for injury sustained as a result of engaging in the conduct 
described in such paragraph.
    (b) Fees.--In any action under section 4, 4C, or 16 of the Clayton 
Act (15 U.S.C. 15, 15c, 26), or under a similar State law, brought 
against any medical self-regulatory entity (including its members, 
officers, employees, consultants, and volunteers or committees thereof) 
as a result of engaging in conduct described in subsection (a)(1), the 
court shall award the cost of suit, including a reasonable attorney's 
fee, to a substantially prevailing defendant.

SEC. 2602. DEFINITIONS.

    For purposes of this subtitle:
            (1) The term ``medical self-regulatory entity'' means a 
        medical society or association, a specialty board, a recognized 
        accrediting agency, or a hospital medical staff.
            (2) The term ``standard setting and enforcement 
        activities'' means--
                    (A) accreditation of health care practitioners, 
                health care providers, medical education institutions, 
                or medical education programs,
                    (B) technology assessment and risk management 
                activities,
                    (C) the development and implementation of practice 
                guidelines or practice parameters, or
                    (D) official peer review proceedings undertaken by 
                a hospital medical staff (or committee thereof) or a 
                medical society or association for purposes of 
                evaluating the quality of health care provided by a 
                medical professional.

                PART 2--CONSULTATION BY FEDERAL AGENCIES

SEC. 2611. CONSULTATION WITH MEDICAL SELF-REGULATORY ENTITIES 
              RESPECTING MEDICAL PROFESSIONAL GUIDELINES AND STANDARDS.

    Any Federal agency engaged in the establishment of medical 
professional standards shall consult with appropriate medical societies 
or associations, specialty boards, or recognized accrediting agencies, 
if available, in carrying out medical professional standard setting and 
guidelines or standards relating to the practice of medicine.

Subtitle H--Reform of Clinical Laboratory Requirements for Simple Tests

SEC. 2701. ELIMINATING CLIA REQUIREMENT FOR CERTIFICATE OF WAIVER FOR 
              SIMPLE LABORATORY EXAMINATIONS AND PROCEDURES.

    (a) In General.--Section 353 of the Public Health Service Act (42 
U.S.C. 263a) is amended--
            (1) in subsection (b), by inserting before the period at 
        the end the following: ``or unless the laboratory is exempt 
        from the certificate requirement under subsection (d)(2)'';
            (2) by amending paragraph (2) of subsection (d) to read as 
        follows:
            ``(2) Exemption from certificate requirement for 
        laboratories performing only simple examinations and 
        procedures.--A laboratory which performs only laboratory 
        examinations and procedures described in paragraph (3) is not 
        required to have in effect a certificate under this section.'';
            (3) by striking paragraph (4) of subsection (d); and
            (4) in subsection (m)(1), by striking ``, except that the 
        Secretary'' and all that follows and inserting a period.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the first day of the first month beginning after the date of 
the enactment of this Act.

SEC. 2702. AMENDMENT RELATED TO SIMPLE LABORATORY EXAMINATIONS.

    Section 353(d) of the Public Health Service Act (42 U.S.C. 263) is 
amended by striking paragraph (3) and inserting the following:
            ``(3) Examinations and procedures.--The examinations and 
        procedures identified in paragraph (2) are simple laboratory 
        examinations and procedures which have an insignificant risk of 
        an erroneous result and include those which--
                    ``(A) have been approved by the Food and Drug 
                Administration for home use,
                    ``(B) employ methodologies that are so simple and 
                accurate as to render the likelihood of erroneous 
                results negligible,
                    ``(C) the Secretary has determined pose no 
                reasonable risk of serious harm to the patient if 
                performed incorrectly, or
                    ``(D)(i) are performed by or under the direction or 
                supervision of or in collaboration with a doctor of 
                medicine or osteopathy licensed to practice medicine or 
                osteopathy in the State in which the laboratory is 
                located, or by an individual qualified to direct, 
                supervise, or perform examinations and procedures under 
                State laws or such standards as the Secretary may 
                establish; and
                    ``(ii) the patient is available for clinical 
                observation; and
                    ``(iii) prompt results are needed to evaluate, 
                diagnose, and treat the patient or to avoid additional 
                burdens on the patient that could result from not 
                performing the test.
            ``(4) Definition.--As used in this section, the term 
        `simple laboratory examinations and procedures' includes 
        dipstick tests for total and allergen-specific IgE; microscopic 
        examination of nasal smears (for cells and bacteria); mono spot 
        tests; testing for theophylline using the Accu-Level method; 
        microscopic urinalysis; vaginal wet mount; KOH prep, scabies 
        prep; rapid strep antigen; nonautomated qualitative and 
        quantitative semen analysis; pin worm; prostate smears; 
        synovial fluid analysis for inflammation and infection; post 
        coital test; fern test; occult blood; Gram stain; qualitative 
        drug screen; pulse oximetry; hemoglobin (by hand-held 
        hemoglobinometer); ASO, CRP, RF, and mono screen; sickle cell 
        screen; white blood cell count by manual chamber count; 
        peripheral blood smears; sputum eosinophil; urine culture 
        colony; urine sensitivities; microscopic examination of hair 
        morphology; molluscum smear; fungal cultures, including 
        dermatophyte test medium; Tzank smear; Darkfield examination; 
        agglutination pregnancy test; urethral gram stains, and 
        centrifigal hematology, including white blood cell count, 
        hematocrit, differential, and platelet count.''.

SEC. 2703. AMENDMENT RELATED TO STUDY.

    (a) Study.--The Secretary of Health and Human Services, acting 
through the Centers for Disease Control and Prevention, shall use 
existing appropriations to conduct the study required by section 4 of 
the Clinical Laboratory Improvement Amendments of 1988 (42 U.S.C. 263a 
note). The Secretary shall report the results of such study to the 
Committee on Ways and Means and the Committee on Energy and Commerce of 
the House of Representatives and the Committee on Finance and the 
Committee on Labor and Human Resources of the Senate not later than May 
1, 1996.
    (b) Sunset.--If the results of the study described in subsection 
(a) are not reported to the committees of Congress by May 1, 1996, 
section 353 of the Public Health Service Act shall not be in effect 
after May 1, 1996.

SEC. 2704. AMENDMENTS RELATED TO THE CLINICAL LABORATORY IMPROVEMENT 
              ADVISORY COMMITTEE.

    The Secretary of Health and Human Services shall revise the 
membership of the Clinical Laboratory Improvement Advisory Committee 
established by the Secretary in regulations to implement section 353 of 
the Public Health Service Act (subpart T of part 493 of title 42 Code 
of Federal Regulations) to contain, in the membership which does not 
include ex-officio members or officers or employees of the Federal 
Government, a number of practicing physicians which is proportionate to 
the number of physician laboratories regulated under such section 353. 
For purposes of this section, the term ``practicing physician'' means a 
licensed doctor of medicine or osteopathy who spends at least 80 
percent of the physician's professional time in direct patient care and 
who directs an in-office clinical laboratory for the physician's 
patients.

                  Subtitle I--Miscellaneous Provisions

SEC. 2801. REQUIREMENT THAT CERTAIN AGENCIES PREFUND GOVERNMENT HEALTH 
              BENEFITS CONTRIBUTIONS FOR THEIR ANNUITANTS.

    (a) Definitions.--For the purpose of this section--
            (1) the term ``agency'' means any agency or other 
        instrumentality within the executive branch of the Government, 
        the receipts and disbursements of which are not generally 
        included in the totals of the budget of the United States 
        Government submitted by the President;
            (2) the term ``health benefits plan'' means, with respect 
        to an agency, a health benefits plan, established by or under 
        Federal law, in which employees or annuitants of such agency 
        may participate;
            (3) the term ``health-benefits coverage'' means coverage 
        under a health benefits plan'';
            (4) an individual shall be considered to be an ``annuitant 
        of an agency'' if such individual is entitled to an annuity, 
        under a retirement system established by or under Federal law, 
        by virtue of--
                    (A) such individual's service with, and separation 
                from, such agency; or
                    (B) being the survivor of an annuitant under 
                subparagraph (A) or of an individual who died while 
                employed by such agency; and
            (5) the term ``Office'' means the Office of Personnel 
        Management.
    (b) Prefunding Requirement.--
            (1) In general.--Effective as of October 1, 1994, each 
        agency (or February 1, 1995, in the case of the agency with the 
        greatest number of employees, as determined by the Office) 
        shall be required to prepay the Government contributions which 
        are or will be required in connection with providing health-
        benefits coverage for annuitants of such agency.
            (2) Regulations.--The Office shall prescribe such 
        regulations as may be necessary to carry out this section. The 
        regulations shall be designed to ensure at least the following:
                    (A) Amounts paid by each agency shall be sufficient 
                to cover the amounts which would otherwise be payable 
                by such agency (on a ``pay-as-you-go'' basis), on or 
                after the applicable effective date under paragraph 
                (1), on behalf of--
                            (i) individuals who are annuitants of the 
                        agency as of such effective date; and
                            (ii) individuals who are employed by the 
                        agency as of such effective date, or who become 
                        employed by the agency after such effective 
                        date, after such individuals have become 
                        annuitants of the agency (including their 
                        survivors).
                    (B)(i) For purposes of determining any amounts 
                payable by an agency--
                            (I) this section shall be treated as if it 
                        had taken effect at the beginning of the 20-
                        year period which ends on the effective date 
                        applicable under paragraph (1) with respect to 
                        such agency; and
                            (II) in addition to any amounts payable 
                        under subparagraph (A), each agency shall also 
                        be responsible for paying any amounts for which 
                        it would have been responsible, with respect to 
                        the 20-year period described in subclause (I), 
                        in connection with any individuals who are 
                        annuitants or employees of the agency as of the 
                        applicable effective date under paragraph (1).
                    (ii) Any amounts payable under this subparagraph 
                for periods preceding the applicable effective date 
                under paragraph (1) shall be payable in equal 
                installments over the 20-year period beginning on such 
                effective date.
    (c) FASB Standards.--Regulations under subsection (b) shall be in 
conformance with the provisions of standard 106 of the Financial 
Accounting Standards Board, issued in December 1990.
    (d) Clarification.--Nothing in this section shall be considered to 
permit or require duplicative payments on behalf of any individuals.
    (e) Draft Legislation.--The Office shall prepare and submit to 
Congress any draft legislation which may be necessary in order to carry 
out this section.

SEC. 2802. INELIGIBILITY OF ALIENS FOR SSI AND MEDICAID.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsections (b) and (c), no alien shall be 
eligible for any program referred to in subsection (d).
    (b) Exceptions.--
            (1) Refugee exception.--Subsection (a) shall not apply to 
        an alien admitted to the United States as a refugee under 
        section 207 of the Immigration and Nationality Act until 6 
        years after the date of such alien's arrival into the United 
        States.
            (2) Aged exception.--Subsection (a) shall not apply to an 
        alien who--
                    (A) has been lawfully admitted to the United States 
                for permanent residence;
                    (B) is over 75 years of age; and
                    (C) has resided in the United States for at least 5 
                years.
            (3) Current resident exception.--Subsection (a) shall not 
        apply to the eligibility of an alien for a program referred to 
        in subsection (d) until 1 year after the date of the enactment 
        of this Act if, on such date of enactment, the alien is 
        residing in the United States and is eligible for the program.
    (c) Programs For Which Aliens May Be Eligible.--The limitation 
under subsection (a) shall not apply to medical assistance with respect 
to emergency services (as defined for purposes of section 1916(a)(2)(D) 
of the Social Security Act).
    (d) Programs For Which Aliens Are Ineligible.--The programs 
referred to in this subsection are the following:
            (1) The program of medical assistance under title XIX of 
        the Social Security Act, except emergency services as provided 
        in subsection (c).
            (2) The supplemental security income program under title 
        XVI of the Social Security Act.
    (e) Notification of Aliens.--Any Federal agency that administers a 
program referred to in subsection (d) shall, directly or through the 
States, notify each alien receiving benefits under the program whose 
eligibility for the program is or will be terminated by reason of this 
section.

SEC. 2803. LIMITATION ON SSI BENEFITS FOR DRUG AND ALCOHOL ADDICTS.

    (a) In General.--
            (1) Limitation described.--Section 1614(a) of the Social 
        Security Act (42 U.S.C. 1382c(a)) is amended by adding at the 
        end the following:
    ``(5)(A) The Secretary shall identify all recipients of benefits 
under this title by reason of disability whose disability is a result 
of addiction to illegal drugs.
    ``(B) The Secretary shall periodically, on a random basis, test 
each recipient identified under subparagraph (A) to determine whether 
the recipient is using illegal drugs.
    ``(C)(i) Notwithstanding any other provision of this title, any 
individual who is determined under subparagraph (B) to be using illegal 
drugs, or who refuses to submit to testing as provided for under 
subparagraph (B), shall not be eligible for benefits under this title 
for a period of at least 1 year.
    ``(ii) The period of ineligibility under clause (i) shall terminate 
(after the last day of such 1-year period) if the individual has 2 
tests (at least 2 months apart and not paid for through Federal funds) 
which establish that the recipient is not using illegal drugs.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to quarters beginning after the expiration of the 
        6-month period that begins on the date of the enactment of this 
        Act.
    (b) Representative Payee Reforms.--
            (1) Authority of government agencies to become paid 
        representative payees.--Section 1631(a)(2)(D)(ii) of such Act 
        (42 U.S.C. 1383(a)(2)(D)(ii)) is amended by adding at the end 
        the following: ``The term `qualified organization' also 
        includes any government agency that meets the requirements of 
        items (aa) and (bb) of subclause (II).''.
            (2) Maximum fee payable to representative payees.--Section 
        1631(a)(2)(D)(i) of such Act (42 U.S.C. 1383(a)(2)(D)(i)) is 
        amended by striking ``the lesser of--'' and all that follows 
        and inserting ``10 percent of the monthly benefit involved.''.

                       TITLE III--LONG-TERM CARE

                       table of contents of title
         Subtitle A--Tax Treatment of Long-term Care Insurance

Sec. 3001. Treatment of long-term care insurance or plans.
Sec. 3002. Exclusion for benefits provided under long-term care 
                            insurance; inclusion of employer-provided 
                            coverage.
Sec. 3003. Qualified long-term services treated as medical care.
Sec. 3004. Effective date.
   Subtitle B--Establishment of Federal Standards for Long-term Care 
                               Insurance

Sec. 3101. Establishment of Federal standards for long-term care 
                            insurance.
           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

        ``Sec. 2701. Standards.
``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

        ``Sec. 2711. Implementation of policy standards.
        ``Sec. 2712. Regulation of sales practices.
        ``Sec. 2713. Additional responsibilities for carriers.
        ``Sec. 2714. Renewability standards for issuance, and basis for 
                            cancellation of policies.
        ``Sec. 2715. Benefit standards.
        ``Sec. 2716. Nonforfeiture.
        ``Sec. 2717. Limit of period of contestability and right to 
                            return.
        ``Sec. 2718. Civil money penalty.
      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

        ``Sec. 2721. Long-term care insurance policy defined.
        ``Sec. 2722. Code of conduct with respect to endorsements.
                   ``Part D--Miscellaneous Provisions

        ``Sec. 2731. Funding for long-term care insurance information, 
                            counseling, and assistance.
        ``Sec. 2732. Definitions''.
    Subtitle C--Protection of Assets Under Medicaid Through Use of 
                   Qualified Long-term Care Insurance

Sec. 3201. Protection of assets through use of qualified long-term care 
                            insurance.
                          Subtitle D--Studies

Sec. 3301. Feasibility of encouraging health care providers to donate 
                            services to homebound patients.
Sec. 3302. Feasibility of tax credit for heads of households who care 
                            for elderly family members in their homes.
Sec. 3303. Case management of current long-term care benefits.
      Subtitle E--Volunteer Service Credit Demonstration Projects

Sec. 3401. Amendment to the Older Americans Act of 1965.

         Subtitle A--Tax Treatment of Long-term Care Insurance

SEC. 3001. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    (a) General Rule.--Subpart E of part I of subchapter L of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 818 the following new section:

``SEC. 818A. TREATMENT OF LONG-TERM CARE INSURANCE OR PLANS.

    ``(a) General Rule.--For purposes of this part, a long-term care 
insurance contract shall be treated as an accident or health insurance 
contract.
    ``(b) Long-Term Care Insurance Contract.--
            ``(1) In general.--For purposes of this part, the term 
        `long-term care insurance contract' means any insurance 
        contract issued if--
                    ``(A) the only insurance protection provided under 
                such contract is coverage of qualified long-term care 
                services and benefits incidental to such coverage,
                    ``(B) the maximum benefit under the policy for 
                expenses incurred for any day does not exceed $200,
                    ``(C) such contract does not cover expenses 
                incurred for services or items to the extent that such 
                expenses are reimbursable under title XVIII of the 
                Social Security Act or would be so reimbursable but for 
                the application of a deductible or coinsurance amount,
                    ``(D) such contract is guaranteed renewable,
                    ``(E) such contract does not have any cash 
                surrender value, and
                    ``(F) all refunds of premiums, and all policyholder 
                dividends or similar amounts, under such contract are 
                to be applied as a reduction in future premiums or to 
                increase future benefits.
            ``(2) Special rules.--
                    ``(A) Per diem, etc. payments permitted.--A 
                contract shall not fail to be treated as described in 
                paragraph (1)(A) by reason of payments being made on a 
                per diem or other periodic basis without regard to the 
                expenses incurred during the period to which the 
                payments relate.
                    ``(B) Contract may cover medicare reimbursable 
                expenses where medicare is secondary payor.--Paragraph 
                (1)(C) shall not apply to expenses which are 
                reimbursable under title XVIII of the Social Security 
                Act only as a secondary payor.
                    ``(C) Refunds of premiums.--Paragraph (1)(F) shall 
                not apply to any refund of premiums on surrender or 
                cancellation of the contract.
    ``(c) Qualified Long-Term Care Services.--For purposes of this 
section--
            ``(1) In general.--The term `qualified long-term care 
        services' means necessary diagnostic, preventive, therapeutic, 
        and rehabilitative services, and maintenance or personal care 
        services, which--
                    ``(A) are required by a chronically ill individual 
                in a qualified facility, and
                    ``(B) are provided pursuant to a plan of care 
                prescribed by a licensed health care practitioner.
            ``(2) Chronically ill individual.--
                    ``(A) In general.--The term `chronically ill 
                individual' means any individual who has been certified 
                by a licensed health care practitioner as--
                            ``(i)(I) being unable to perform (without 
                        substantial assistance from another individual) 
                        at least 2 activities of daily living (as 
                        defined in subparagraph (B)) for a period of at 
                        least 90 days due to a loss of functional 
                        capacity, or
                            ``(II) having a level of disability similar 
                        (as determined by the Secretary in consultation 
                        with the Secretary of Health and Human 
                        Services) to the level of disability described 
                        in subclause (I), or
                            ``(ii) having a similar level of disability 
                        due to cognitive impairment.
                    ``(B) Activities of daily living.--For purposes of 
                subparagraph (A), each of the following is an activity 
                of daily living:
                            ``(i) Mobility.--The process of walking or 
                        wheeling on a level surface which may include 
                        the use of an assistive device such as a cane, 
                        walker, wheelchair, or brace.
                            ``(ii) Dressing.--The overall complex 
                        behavior of getting clothes from closets and 
                        drawers and then getting dressed.
                            ``(iii) Toileting.--The act of going to the 
                        toilet room for bowel and bladder function, 
                        transferring on and off the toilet, cleaning 
                        after elimination, and arranging clothes or the 
                        ability to voluntarily control bowel and 
                        bladder function, or in the event of 
                        incontinence, the ability to maintain a 
                        reasonable level of personal hygiene.
                            ``(iv) Transfer.--The process of getting in 
                        and out of bed or in and out of a chair or 
                        wheelchair.
                            ``(v) Eating.--The process of getting food 
                        from a plate or its equivalent into the mouth.
            ``(3) Qualified facility.--The term `qualified facility' 
        means--
                    ``(A) a nursing, rehabilitative, hospice, or adult 
                day care facility (including a hospital, retirement 
                home, nursing home, skilled nursing facility, 
                intermediate care facility, or similar institution)--
                            ``(i) which is licensed under State law, or
                            ``(ii) which is a certified facility for 
                        purposes of title XVIII or XIX of the Social 
                        Security Act, or
                    ``(B) an individual's home if a licensed health 
                care practitioner certifies that without home care the 
                individual would have to be cared for in a facility 
                described in subparagraph (A).
            ``(4) Maintenance or personal care services.--The term 
        `maintenance or personal care services' means any care the 
        primary purpose of which is to provide needed assistance with 
        any of the activities of daily living described in paragraph 
        (2)(B).
            ``(5) Licensed health care practitioner.--The term 
        `licensed health care practitioner' means any physician (as 
        defined in section 1861(r) of the Social Security Act) and any 
        registered professional nurse, licensed social worker, or other 
        individual who meets such requirements as may be prescribed by 
        the Secretary.
    ``(d) Continuation Coverage Excise Tax Not To Apply.--This section 
shall not apply in determining whether section 4980B (relating to 
failure to satisfy continuation coverage requirements of group health 
plans) applies.
    ``(e) Inflation Adjustment of $200 Benefit Limit.--
            ``(1) In general.--In the case of a calendar year after 
        1994, the $200 amount contained in subsection (b)(1)(B) shall 
        be increased for such calendar year by the medical care cost 
        adjustment for such calendar year. If any increase determined 
        under the preceding sentence is not a multiple of $10, such 
        increase shall be rounded to the nearest multiple of $10.
            ``(2) Medical care cost adjustment.--For purposes of 
        paragraph (1), the medical care cost adjustment for any 
        calendar year is the percentage (if any) by which--
                    ``(A) the medical care component of the Consumer 
                Price Index (as defined in section 1(f)(5)) for August 
                of the preceding calendar year, exceeds
                    ``(B) such component for August of 1993.''.
    (b) Reserves.--Clause (iii) of section 807(d)(3)(A) is amended by 
inserting ``(other than a long-term care insurance contract within the 
meaning of section 818A)'' after ``contract''.
    (c) Clerical Amendment.--The table of sections for such subpart E 
is amended by inserting after the item relating to section 818 the 
following new item:

                              ``Sec. 818A. Treatment of long-term care 
                                        insurance or plans.''.

SEC. 3002. EXCLUSION FOR BENEFITS PROVIDED UNDER LONG-TERM CARE 
              INSURANCE; INCLUSION OF EMPLOYER-PROVIDED COVERAGE.

    (a) In General.--Subsection (a) of section 104 of the Internal 
Revenue Code of 1986 (relating to compensation for injuries or 
sickness) is amended by striking ``and'' at the end of paragraph (4), 
by striking the period at the end of paragraph (5) and inserting ``, 
and'', and by inserting after paragraph (4) the following new 
paragraph:
            ``(6) benefits under a long-term care insurance contract 
        (as defined in section 818A(b)).''.
    (b) Inclusion of Employer-Provided Coverage.--Section 106 of such 
Code (relating to contributions by employer to accident and health 
plans) is amended by adding at the end thereof the following sentence: 
``The preceding sentence shall not apply to any plan providing coverage 
for long-term care services.''.

SEC. 3003. QUALIFIED LONG-TERM SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) of the Internal 
Revenue Code of 1986 (defining medical care) is amended by striking 
``or'' at the end of subparagraph (B), by redesignating subparagraph 
(C) as subparagraph (D), and by inserting after subparagraph (B) the 
following new subparagraph:
                    ``(C) for qualified long-term care services (as 
                defined in section 818A(c)), or''.
    (b) Deduction for Long-Term Care Expenses for Parent or 
Grandparent.--Section 213 of such Code (relating to deduction for 
medical expenses) is amended by adding at the end the following new 
subsection:
    ``(g) Special Rule for Certain Long-Term Care Expenses.--For 
purposes of subsection (a), the term `dependent' shall include any 
parent or grandparent of the taxpayer for whom the taxpayer has 
expenses for long-term care services described in section 818A(c), but 
only to the extent of such expenses.''.
    (c) Technical Amendments.--
            (1) Subparagraph (D) of section 213(d)(1) of such Code (as 
        redesignated by subsection (a)) is amended by striking 
        ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
        (A), (B), and (C)''.
            (2)(A) Paragraph (1) of section 213(d) of such Code is 
        amended by adding at the end thereof the following new flush 
        sentence:
        ``In the case of a long-term care insurance contract (as 
        defined in section 818A), only eligible long-term care premiums 
        (as defined in paragraph (10)) shall be taken into account 
        under subparagraph (D).''
            (B) Subsection (d) of section 213 is amended by adding at 
        the end the following new paragraph:
            ``(10) Eligible Long-Term Care Premiums.--
                    ``(A) In general.--For purposes of this section, 
                the term `eligible long-term care premiums' means the 
                amount paid during a taxable year for any long-term 
                care insurance contract (as defined in section 818A) 
                covering an individual, to the extent such amount does 
                not exceed the limitation determined under the 
                following table:
        ``In the case of an individual
                                                                       
          with an attained age before the
                                                         The limitation
          close of the taxable year of:
                                                              is:      
                40 or less...........................          $200    
                More than 40 but not more than 50....           375    
                More than 50 but not more than 60....           750    
                More than 60 but not more than 70....         1,600    
                More than 70.........................        2,000.    
                    ``(B) Indexing.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        1993, each dollar amount contained in paragraph 
                        (1) shall be increased by the medical care cost 
                        adjustment of such amount for such calendar 
                        year. If any increase determined under the 
                        preceding sentence is not a multiple of $10, 
                        such increase shall be rounded to the nearest 
                        multiple of $10.
                            ``(ii) Medical care cost adjustment.--For 
                        purposes of clause (i), the medical care cost 
                        adjustment for any calendar year is the 
                        percentage (if any) by which--
                                    ``(I) the medical care component of 
                                the Consumer Price Index (as defined in 
                                section 1(f)(5)) for August of the 
                                preceding calendar year, exceeds
                                    ``(II) such component for August of 
                                1991.''.
            (3) Paragraph (6) of section 213(d) of such Code is 
        amended--
                    (A) by striking ``subparagraphs (A) and (B)'' and 
                inserting ``subparagraphs (A), (B), and (C)'', and
                    (B) by striking ``paragraph (1)(C)'' in 
                subparagraph (A) and inserting ``paragraph (1)(D)''.
            (4) Paragraph (7) of section 213(d) of such Code is amended 
        by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)''.

SEC. 3004. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply to taxable years 
beginning after December 31, 1994.

   Subtitle B--Establishment of Federal Standards for Long-term Care 
                               Insurance

SEC. 3101. ESTABLISHMENT OF FEDERAL STANDARDS FOR LONG-TERM CARE 
              INSURANCE.

    (a) In General.--The Public Health Service Act is amended--
            (1) by redesignating title XXVII (42 U.S.C. 300cc et seq.) 
        as title XXVIII; and
            (2) by inserting after title XXVI the following new title:

           ``TITLE XXVII--LONG-TERM CARE INSURANCE STANDARDS

         ``Part A--Promulgation of Standards and Model Benefits

``SEC. 2701. STANDARDS.

    ``(a) Application of Standards.--
            ``(1) NAIC.--The Secretary shall request that the National 
        Association of Insurance Commissioners (hereinafter in this 
        title referred to as the `NAIC')--
                    ``(A) develop specific standards that incorporate 
                the requirements of this title; and
                    ``(B) report to the Secretary on such standards,
        by not later than 12 months after enactment of this title. If 
        the NAIC develops such model standards that incorporate the 
        requirements of this title within such period and the Secretary 
        finds that such standards implement the requirements of this 
        title, such standards shall be the standards applied under this 
        title.
            ``(2) Default.--If the NAIC does not promulgate the model 
        standards under paragraph (1) by the deadline established in 
        that paragraph, the Secretary shall promulgate, within 12 
        months after such deadline, a regulation that provides 
        standards that incorporate the requirements of this title and 
        such standards shall apply as provided for in this title.
            ``(3) Relation to state law.--Nothing in this title shall 
        be construed as preventing a State from applying standards that 
        provide greater protection to policyholders of long-term care 
        insurance policies than the standards promulgated under this 
        title, except that such State standards may not be inconsistent 
        or in conflict with any of the requirements of this title.
    ``(b) Deadline for Application of Standards.--
            ``(1) In general.--Subject to paragraph (2), the date 
        specified in this subsection for a State is--
                    ``(A) the date the State adopts the standards 
                established under subsection (a)(1); or
                    ``(B) the date that is 1 year after the first day 
                of the first regular legislative session that begins 
                after the date such standards are first established 
                under subsection (a)(2);
        whichever is earlier.
            ``(2) State requiring legislation.--In the case of a State 
        which the Secretary identifies, in consultation with the NAIC, 
        as--
                    ``(A) requiring State legislation (other than 
                legislation appropriating funds) in order for the 
                standards established under subsection (a) to be 
                applied; but
                    ``(B) having a legislature which is not scheduled 
                to meet within 1 year following the beginning of the 
                next regular legislative session in which such 
                legislation may be considered;
        the date specified in this subsection is the first day of the 
        first calendar quarter beginning after the close of the first 
        legislative session of the State legislature that begins on or 
        after January 1, 1994. For purposes of the previous sentence, 
        in the case of a State that has a 2-year legislative session, 
        each year of such session shall be deemed to be a separate 
        regular session of the State legislature.
    ``(c) Items Included in Standards.--The standards promulgated under 
subsection (a) shall include--
            ``(1) minimum Federal standards for long-term care 
        insurance consistent with the provisions of this title;
            ``(2) standards for the enhanced protection of consumers 
        with long-term care insurance;
            ``(3) procedures for the modification of the standards 
        established under paragraph (1) in a manner consistent with 
        future laws to expand existing Federal or State long-term care 
        benefits or establish a comprehensive Federal or State long-
        term care benefit program; and
            ``(4) other activities determined appropriate by Congress.
    ``(d) Consultation.--In establishing standards and models of 
benefits under this section, the Secretary shall provide for and 
consult with an advisory committee to be chosen by the Secretary, and 
composed of--
            ``(1) three individuals who are representatives of 
        carriers;
            ``(2) three individuals who are representatives of consumer 
        groups;
            ``(3) three representatives who are representatives of 
        providers of long-term care services;
            ``(4) three other individuals who are not representatives 
        of carriers or of providers of long-term care services and who 
        have expertise in the delivery and financing of such services; 
        and
            ``(5) the Secretary of Veterans Affairs.
    ``(e) Duties.--The advisory committee established under subsection 
(d) shall--
            ``(1) recommend the appropriate inflationary index to be 
        used with respect to the inflation protection benefit portion 
        of the standards;
            ``(2) recommend the uniform needs assessment mechanism to 
        be used in determining the eligibility of individuals for 
        benefits under a policy;
            ``(3) recommend appropriate standards for benefits under 
        section 2715(c); and
            ``(4) perform such other activities as determined 
        appropriate by the Secretary.
    ``(f) Administrative Provisions.--The following provisions of 
section 1886(e)(6) of the Social Security Act shall apply to the 
advisory committee chosen under subsection (d) in the same manner as 
such provisions apply under such section:
            ``(1) Subparagraph (C) (relating to staffing and 
        administration).
            ``(2) Subparagraph (D) (relating to compensation of 
        members).
            ``(3) Subparagraph (F) (relating to access to information).
            ``(4) Subparagraph (G) (relating to use of funds).
            ``(5) Subparagraph (H) (relating to periodic GAO audits).
            ``(6) Subparagraph (J) (relating to requests for 
        appropriations).

``Part B--Establishment and Implementation of Long-Term Care Insurance 
                            Policy Standards

``SEC. 2711. IMPLEMENTATION OF POLICY STANDARDS.

    ``(a) In General.--
            ``(1) Regulatory program.--No long-term care policy (as 
        defined in section (2721)) may be issued, sold, or offered for 
        sale as a long-term care insurance policy in a State on or 
        after the date specified in section 2701(b) unless--
                    ``(A) the Secretary determines that the State has 
                established a regulatory program that--
                            ``(i) provides for the application and 
                        enforcement of the standards established under 
                        section 2701(a); and
                            ``(ii) complies with the requirements of 
                        subsection (b);
                by the date specified in section 2701(b), and the 
                policy has been approved by the State commissioner or 
                superintendent of insurance under such program; or
                    ``(B) if the State has not established such a 
                program, or if the State's regulatory program has been 
                decertified, the policy has been certified by the 
                Secretary (in accordance with such procedures as the 
                Secretary may establish) as meeting the standards 
                established under section 2701(a) by the date specified 
                in section 2701(b).
        For purposes of this subsection, the advertising or soliciting 
        with respect to a policy, directly or indirectly, shall be 
        deemed the offering for sale of the policy.
            ``(2) Review of state regulatory programs.--The Secretary 
        periodically shall review regulatory programs described in 
        paragraph (1)(A) to determine if they continue to provide for 
        the application and enforcement of the standards and procedures 
        established under section 2701(a) and (b). If the Secretary 
        determines that a State regulatory program no longer meets such 
        standards and requirements, before making a final 
        determination, the Secretary shall provide the State an 
        opportunity to adopt such a plan of correction as would permit 
        the program to continue to meet such standards and 
        requirements. If the Secretary makes a final determination that 
        the State regulatory program, after such an opportunity, fails 
        to meet such standards and requirements, the Secretary shall 
        assume responsibility under paragraph (1)(B) with respect to 
        certifying policies in the State and shall exercise full 
        authority under section 2701 for carriers, agents, or 
        associations or its subsidiary in the State plans in the State.
    ``(b) Additional Requirements for Approval of State Regulatory 
Programs.--For purposes of subsection (a)(1)(A)(ii), the requirements 
of this subsection for a State regulatory program are as follows:
            ``(1) Enforcement.--The enforcement under the program--
                    ``(A) shall be designed in a manner so as to secure 
                compliance with the standards within 30 days after the 
                date of a finding of noncompliance with such standards; 
                and
                    ``(B) shall provide for notice in the annual report 
                required under paragraph (5) to the Secretary of cases 
                where such compliance is not secured within such 30-day 
                period.
            ``(2) Process.--The enforcement process under each State 
        regulatory program shall provide for--
                    ``(A) procedures for individuals and entities to 
                file written, signed complaints respecting alleged 
                violations of the standards;
                    ``(B) responding on a timely basis to such 
                complaints;
                    ``(C) the investigation of--
                            ``(i) those complaints which have a 
                        reasonable probability of validity, and
                            ``(ii) such other alleged violations of the 
                        standards as the program finds appropriate; and
                    ``(D) the imposition of appropriate sanctions 
                (which include, in appropriate cases, the imposition of 
                a civil money penalty as provided for in section 2718) 
                in the case of a carrier, agent, or association or its 
                subsidiary determined to have violated the standards.
            ``(3) Consumer access to compliance information.--
                    ``(A) In general.--A State regulatory program must 
                provide for consumer access to complaints filed with 
                the State commissioner or superintendent of insurance 
                with respect to long-term care insurance policies.
                    ``(B) Confidentiality.--The access provided under 
                subparagraph (A) shall be limited to the extent 
                required to protect the confidentiality of the identity 
                of individual policyholders.
            ``(4) Process for approval of premiums.--
                    ``(A) In general.--Each State regulatory program 
                shall--
                            ``(i) provide for a process for approving 
                        or disapproving proposed premium increases or 
                        decreases with respect to long-term care 
                        insurance policies; and
                            ``(ii) establish a policy for receipt and 
                        consideration of public comments before 
                        approving such a premium increase or decrease.
                    ``(B) Conditions for approval.--No premium increase 
                shall be approved (or deemed approved) under 
                subparagraph (A) unless the proposed increase is 
                accompanied by an actuarial memorandum which--
                            ``(i) includes a description of the 
                        assumptions that justify the increase;
                            ``(ii) contains such information as may be 
                        required under the Standards; and
                            ``(iii) is made available to the public.
                    ``(C) Application.--Except as provided in 
                subparagraph (D), this paragraph shall not apply to a 
                group long-term care insurance policy issued to a group 
                described in section 4(E)(1) of the NAIC Long Term Care 
                Insurance Model Act (effective January 1991), except 
                that such group policy shall, pursuant to guidelines 
                developed by the NAIC, provide notice to policyholders 
                and certificate holders of any premium change under 
                such group policy.
                    ``(D) Exception.--Subparagraph (C) shall not apply 
                to--
                            ``(i) group conversion policies;
                            ``(ii) the group continuation feature of a 
                        group policy if the insurer separately rates 
                        employee and continuation coverages; and
                            ``(iii) group policies where the function 
                        of the employer is limited solely to collecting 
                        premiums (through payroll deductions or dues 
                        checkoff) and remitting them to the insurer.
                    ``(E) Construction.--Nothing in this paragraph 
                shall be construed as preventing the NAIC from 
                promulgating standards, or a State from enacting and 
                enforcing laws, with respect to premium rates or loss 
                ratios for all, including group, long-term care 
                insurance policies.
            ``(5) Annual reports.--Each State regulatory program shall 
        provide for annual reports to be submitted to the Secretary on 
        the implementation and enforcement of the standards in the 
        State, including information concerning violations in excess of 
        30 days.
            ``(6) Access to other information.--The State regulatory 
        program must provide for consumer access to actuarial memoranda 
        provided under paragraph (4).
            ``(7) Default.--In the case of a State without a regulatory 
        program approved under subsection (a), the Secretary shall 
        provide for the enforcement activities described in subsection 
        (c).
    ``(c) Secretarial Enforcement Authority.--
            ``(1) In general.--The Secretary shall exercise authority 
        under this section in the case of a State that does not have a 
        regulatory program approved under this section.
            ``(2) Complaints and investigations.--The Secretary shall 
        establish procedures--
                    ``(A) for individuals and entities to file written, 
                signed complaints respecting alleged violations of the 
                requirements of this title;
                    ``(B) for responding on a timely basis to such 
                complaints; and
                    ``(C) for the investigation of--
                            ``(i) those complaints that have a 
                        reasonable probability of validity; and
                            ``(ii) such other alleged violations of the 
                        requirements of this title as the Secretary 
                        determines to be appropriate.
        In conducting investigations under this subsection, agents of 
        the Secretary shall have reasonable access necessary to enable 
        such agents to examine evidence of any carrier, agent, or 
        association or its subsidiary being investigated.
            ``(3) Hearings.--
                    ``(A) In general.--Prior to imposing an order 
                described in paragraph (4) against a carrier, agent, or 
                association or its subsidiary under this section for a 
                violation of the requirements of this title, the 
                Secretary shall provide the carrier, agent, association 
                or subsidiary with notice and, upon request made within 
                a reasonable time (of not less than 30 days, as 
                established by the Secretary by regulation) of the date 
                of the notice, a hearing respecting the violation.
                    ``(B) Conduct of hearing.--Any hearing requested 
                under subparagraph (A) shall be conducted before an 
                administrative law judge. If no hearing is so 
                requested, the Secretary's imposition of the order 
                shall constitute a final and unappealable order.
                    ``(C) Authority in hearings.--In conducting 
                hearings under this paragraph--
                            ``(i) agents of the Secretary and 
                        administrative law judges shall have reasonable 
                        access necessary to enable such agents and 
                        judges to examine evidence of any carrier, 
                        agent, or association or its subsidiary being 
                        investigated; and
                            ``(ii) administrative law judges, may, if 
                        necessary, compel by subpoena the attendance of 
                        witnesses and the production of evidence at any 
                        designated place or hearing.
                In case of contumacy or refusal to obey a subpoena 
                lawfully issued under this subparagraph and upon 
                application of the Secretary, an appropriate district 
                court of the United States may issue an order requiring 
                compliance with such subpoena and any failure to obey 
                such order may be punished by such court as a contempt 
                thereof.
                    ``(D) Issuance of orders.--If an administrative law 
                judge determines in a hearing under this paragraph, 
                upon the preponderance of the evidence received, that a 
                carrier, agent, or association or its subsidiary named 
                in the complaint has violated the requirements of this 
                title, the administrative law judge shall state the 
                findings of fact and issue and cause to be served on 
                such carrier, agent, association, or subsidiary an 
                order described in paragraph (4).
            ``(4) Cease and desist order with civil money penalty.--
                    ``(A) In general.--Subject to the provisions of 
                subparagraphs (B) through (F), an order under this 
                paragraph--
                            ``(i) shall require the agent, association 
                        or its subsidiary, or a carrier--
                                    ``(I) to cease and desist from such 
                                violations; and
                                    ``(II) to pay a civil penalty in an 
                                amount not to exceed $15,000 in the 
                                case of each agent, and not to exceed 
                                $25,000 for each association or its 
                                subsidiary or a carrier for each such 
                                violation; and
                            ``(ii) may require the agent, association 
                        or its subsidiary, or a carrier to take such 
                        other remedial action as is appropriate.
                    ``(B) Corrections within 30 days.--No order shall 
                be imposed under this paragraph by reason of any 
                violation if the carrier, agent, or association or its 
                subsidiary establishes to the satisfaction of the 
                Secretary that--
                            ``(i) such violation was due to reasonable 
                        cause and was not intentional and was not due 
                        to willful neglect; and
                            ``(ii) such violation is corrected within 
                        the 30-day period beginning on the earliest 
                        date the carrier, agent, association, or 
                        subsidiary knew, or exercising reasonable 
                        diligence could have known, that such a 
                        violation was occurring.
                    ``(C) Waiver by secretary.--In the case of a 
                violation under this title that is due to reasonable 
                cause and not to willful neglect, the Secretary may 
                waive part or all of the civil money penalty imposed 
                under subparagraph (A)(i)(II) to the extent that 
                payment of such penalty would be grossly excessive 
                relative to the violation involved and to the need for 
                deterrence of violations.
                    ``(D) Administrative appellate review.--The 
                decision and order of an administrative law judge under 
                this paragraph shall become the final agency decision 
                and order of the Secretary unless, within 30 days, the 
                Secretary modifies or vacates the decision and order, 
                in which case the decision and order of the Secretary 
                shall become a final order under this paragraph.
                    ``(E) Judicial review.--A carrier, agent, or 
                association or its subsidiary or any other individual 
                adversely affected by a final order issued under this 
                paragraph may, within 45 days after the date the final 
                order is issued, file a petition in the Court of 
                Appeals for the appropriate circuit for review of the 
                order.
                    ``(F) Enforcement of orders.--If a carrier, agent, 
                or association or its subsidiary fails to comply with a 
                final order issued under this paragraph against the 
                carrier, agent, association or subsidiary after 
                opportunity for judicial review under subparagraph (E), 
                the Secretary shall file a suit to seek compliance with 
                the order in any appropriate district court of the 
                United States. In any such suit, the validity and 
                appropriateness of the final order shall not be subject 
                to review.
    ``(d) Demonstration Grant Program.--
            ``(1) In general.--The Secretary may award grants to States 
        for the establishment of demonstration programs to improve the 
        enforcement within such States of long-term care insurance 
        standards applicable under this title.
            ``(2) Application.--To be eligible to receive a grant under 
        paragraph (1), a State shall prepare and submit to the 
        Secretary an application at such time, in such manner, and 
        containing such information as the Secretary may require, 
        including a description of the program for which the State 
        intends to use the amounts provided under the grant.
            ``(3) Minimum amount of grants.--The amount of a grant 
        awarded under this subsection shall not be less than $100,000.
            ``(4) Evaluation.--A State that receives a grant under this 
        subsection shall comply with such evaluation procedures as the 
        Secretary shall by regulation establish. The Secretary shall 
        utilize such evaluations to conduct an overall evaluation of 
        the results of the demonstration programs established under 
        this section.
            ``(5) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this subsection, 
        $5,000,000 for each of the fiscal years 1996 through 2000.

``SEC. 2712. REGULATION OF SALES PRACTICES.

    ``(a) Duty of Good Faith and Fair Dealing.--
            ``(1) In general.--Each agent (as defined in section 2733) 
        or association that is selling or offering for sale a long-term 
        care insurance policy has the duty of good faith and fair 
        dealing to the purchaser or potential purchaser of such a 
        policy.
            ``(2) Prohibited practices.--An agent or association is 
        considered to have violated paragraph (1) if the agent or 
        association engages in any of the following practices:
                    ``(A) Twisting.--
                            ``(i) In general.--Knowingly making any 
                        misleading representation (including the 
                        inaccurate completion of medical histories) or 
                        incomplete or fraudulent comparison of any 
                        long-term care insurance policy or insurers for 
                        the purpose of inducing, or tending to induce, 
                        any person to retain or effect a change with 
                        respect to a long-term care insurance policy.
                            ``(ii) Policy replacement form.--With 
                        respect to any person who elects to replace or 
                        effect a change in a long-term care insurance 
                        policy, the individual that is selling such 
                        policy shall ensure that such person completes 
                        a policy replacement form developed by the 
                        NAIC. A copy of such form shall be provided to 
                        such person and additional copies shall be 
                        delivered by the selling individual to the old 
                        policy issuer and the new issuer and kept on 
                        file for inspection by the State regulatory 
                        agency.
                    ``(B) High pressure tactics.--Employing any method 
                of marketing having the effect of, or intending to, 
                induce the purchase of long-term care insurance policy 
                through force, fright, threat or undue pressure, 
                whether explicit or implicit.
                    ``(C) Cold lead advertising.--Making use directly 
                or indirectly of any method of marketing which fails to 
                disclose in a conspicuous manner that a purpose of the 
                method of marketing is solicitation of insurance and 
                that contact will be made by an insurance agent or 
                insurance company.
                    ``(D) Others.--Engaging in such other practices 
                determined inappropriate under guidelines issued by the 
                NAIC.
    ``(b) Financial Standards.--The NAIC shall develop recommended 
financial minimum standards (including both income and asset criteria) 
for the purpose of advising individuals considering the purchase of a 
long-term care insurance policy.
    ``(c) Prohibition of Sale or Issuance to Medicaid Beneficiaries.--
An agent, an association, or a carrier may not knowingly sell or issue 
a long-term care insurance policy to an individual who is eligible for 
medical assistance under title XIX of the Social Security Act.
    ``(d) Prohibition of Sale or Issuance of Duplicate Service Benefit 
Policies.--An agent, association or its subsidiary, or a carrier may 
not sell or issue a service-benefit long-term care insurance policy to 
an individual--
            ``(1) knowing that the policy provides for coverage that 
        duplicates coverage already provided in another service-benefit 
        long-term care insurance policy held by such individual (unless 
        the policy is intended to replace such other policy); or
            ``(2) for the benefit of an individual unless the 
        individual (or a representative of the individual) provides a 
        written statement to the effect that the coverage--
                    ``(A) does not duplicate other coverage in effect 
                under a service-benefit long-term care insurance 
                policy; or
                    ``(B) will replace another service-benefit long-
                term care insurance policy.
In this subsection, the term `service-benefit long-term care insurance 
policy' means a long-term care insurance policy which provides for 
benefits based on the type and amount of services furnished.
    ``(e) Prohibition Based on Eligibility for Other Benefits.--A 
carrier may not sell or issue a long-term care insurance policy that 
reduces, limits or coordinates the benefits provided under the policy 
on the basis that the policyholder has or is eligible for other long-
term care insurance coverage or benefits.
    ``(f) Provision of Outline of Coverage.--No agent, association or 
its subsidiary, or carrier may sell or offer for a sale a long-term 
care insurance policy (or for a certificate under a group long-term 
care insurance policy) without providing to the purchaser or potential 
purchaser (or representative) an outline of coverage that complies with 
the standards established under section 2701(a).
    ``(g) Penalties.--Any agent who sells, offers for sale, or issues a 
long-term care insurance policy in violation of this section may be 
imprisoned not more than 5 years, or fined in accordance with title 18, 
United States Code, and, in addition, is subject to a civil money 
penalty of not to exceed $15,000 for each such violation. Any 
association or its subsidiary or carrier that sells, offers for sale, 
or issues a long-term care insurance policy in violation of this 
section may be fined in accordance with title 18, United States Code, 
and in addition, is subject to a civil money penalty of not to exceed 
$25,000 for each violation.
    ``(h) Agent Training and Certification Requirements.--The NAIC, 
shall establish requirements for long-term care insurance agent 
training and certification that--
            ``(1) specify requirements for training insurance agents 
        who desire to sell or offer for sale long-term care insurance 
        policies; and
            ``(2) specify procedures for certifying agents who have 
        completed such training and who are as qualified to sell or 
        offer for sale long-term care insurance policies.

``SEC. 2713. ADDITIONAL RESPONSIBILITIES FOR CARRIERS.

    ``(a) Refund of Premiums.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is denied or an applicant returns a policy or 
certificate within 30 days of the date of its issuance pursuant to 
subsection 2717, the carrier shall refund directly to the applicant, or 
in the case of an employer to whomever remits the premium, and not by 
delivery by the agent, not later than 30 days after the date of the 
denial or return, any premiums paid with respect to such a policy (or 
certificate).
    ``(b) Mailing of Policy.--If an application for a long-term care 
insurance policy (or for a certificate under a group long-term care 
insurance policy) is approved, the carrier shall provide the applicant, 
or in the case of a group plan the employer, the policy (or 
certificate) of insurance not later than 30 days after the date of the 
approval.
    ``(c) Information on Denials of Claims.--If a claim under a long-
term care insurance policy is denied, the carrier shall, within 30 days 
of the date of a written request by the policyholder or certificate 
holder (or representative)--
            ``(1) provide a written explanation of the reasons for the 
        denial; and
            ``(2) make available all medical and patient records 
        directly relating to such denial.
Except as provided in subsection (e) of section 2715, no claim under 
such a policy may be denied on the basis of a failure to disclose a 
condition at the time of issuance of the policy if the application for 
the policy failed to request information respecting the condition.
    ``(d) Reporting of Information.--A carrier that issues one or more 
long-term care insurance policies shall periodically (not less often 
than annually) report, in a form and in a manner determined by the 
NAIC, to the Commissioner, superintendent or director of insurance of 
each State in which the policy is delivered, and shall make available 
to the Secretary, upon request, information in a form and manner 
determined by the NAIC concerning--
            ``(1) the long-term care insurance policies of the carrier 
        that are in force;
            ``(2) the most recent premiums for such policies and the 
        premiums imposed for such policies since their initial 
        issuance;
            ``(3) the lapse rate, replacement rate, and rescission 
        rates by policy;
            ``(4) the names of that 10 percent of its agents that--
                    ``(A) have the greatest lapse and replacement rate; 
                and
                    ``(B) have produced at least $50,000 of long-term 
                care insurance sales in the previous year; and
            ``(5) the claims denied (expressed as a number and as a 
        percentage of claims submitted) by policy.
Information required under this subsection shall be reported in a 
format specified in the standards established under section 2701(a). 
For purposes of paragraph (3), there shall be included (but reported 
separately) data concerning lapses due to the death of the 
policyholder. For purposes of paragraph (4), there shall not be 
included as a claim any claim that is denied solely because of the 
failure to meet a deductible, waiting period, or exclusionary period.
    ``(e) Standards on Compensation for Sale of Policies.--
            ``(1) In general.--A carrier that issues one or more long-
        term care insurance policies may provide a commission or other 
        compensation to an agent or other representative for the sale 
        of such a policy only if the first year commission or other 
        first year compensation to be paid does not exceed 200 percent 
        of the commission or other compensation paid for selling or 
        servicing the policy in the second year, or if the first year 
        commission or other compensation to be paid does not exceed 50 
        percent of the premium paid on the first year policy, until the 
        NAIC promulgates mandatory standards concerning compensation 
        for the sale of such policies.
            ``(2) Subsequent years.--The commission or other 
        compensation provided for the sale of long-term care insurance 
        policies in years subsequent to the first year of the policy 
        shall be the same as that provided in the second subsequent 
        year and shall be provided for no fewer than 5 subsequent 
        years.
            ``(3) Limitation.--No carrier shall provide compensation to 
        its agents for the sale of a long-term care insurance policy 
        and no agent shall receive compensation greater than the 
        renewal compensation payable by the replacing carrier on 
        renewal policies if an existing policy is replaced.
            ``(4) Compensation defined.--As used in this subsection, 
        the term `compensation' includes pecuniary or nonpecuniary 
        remuneration of any kind relating to the sale or renewal of the 
        policy, including but not limited to deferred compensation, 
        bonuses, gifts, prizes, awards, and finders fees.

``SEC. 2714. RENEWABILITY STANDARDS FOR ISSUANCE, AND BASIS FOR 
              CANCELLATION OF POLICIES.

    ``(a) In General.--No long-term care insurance policy may be 
canceled or nonrenewed for any reason other than nonpayment of premium, 
material misrepresentation or fraud.
    ``(b) Continuation and Conversion Rights for Group Policies.--
            ``(1) In general.--Each group long-term care insurance 
        policy shall provide covered individuals with a basis for 
        continuation or conversion in accordance with this subsection.
            ``(2) Basis for continuation.--For purposes of paragraph 
        (1), a policy provides a basis for continuation of coverage if 
        the policy maintains coverage under the existing group policy 
        when such coverage would otherwise terminate and which is 
        subject only to the continued timely payment of premium when 
        due. A group policy which restricts provision of benefits and 
        services to or contains incentives to use certain providers or 
        facility, may provide continuation benefits which are 
        substantially equivalent to the benefits of the existing group 
        policy.
            ``(3) Basis for conversion.--For purposes of paragraph (1), 
        a policy provides a basis for conversion of coverage if the 
        policy entitles each individual--
                    ``(A) whose coverage under the group policy would 
                otherwise be terminated for any reason; and
                    ``(B) who has been continuously insured under the 
                policy (or group policy which was replaced) for at 
                least 6 months before the date of the termination;
        to issuance of a policy providing benefits identical to, 
        substantially equivalent to, or in excess of, those of the 
        policy being terminated, without evidence of insurability.
            ``(4) Treatment of substantial equivalence.--In determining 
        under this subsection whether benefits are substantially 
        equivalent, consideration should be given to the difference 
        between managed care and non-managed care plans.
            ``(5) Group replacement of policies.--If a group long-term 
        care insurance policy is replaced by another long-term care 
        insurance policy purchased by the same policyholder, the 
        succeeding issuer shall offer coverage to all persons covered 
        under the old group policy on its date of termination. Coverage 
        under the new group policy shall not result in any exclusion 
        for preexisting conditions that would have been covered under 
        the group policy being replaced.
    ``(c) Standards for Issuance.--
            ``(1) In general.--
                    ``(A) Guarantee.--An agent, association or carrier 
                that sells or issues long-term care insurance policies 
                shall guarantee that such policies shall be sold or 
                issued to an individual, or eligible individual in the 
                case of a group plan, if such individual meets the 
                minimum medical underwriting requirements of such 
                policy.
                    ``(B) Premium for converted policy.--If a group 
                policy from which conversion is made is a replacement 
                for a previous group policy, the premium for the 
                converted policy shall be calculated on the basis of 
                the insured's age at the inception of coverage under 
                the group policy from which conversion is made. Where 
                the group policy from which conversion is made replaced 
                previous group coverage, the premium for the converted 
                policy shall be calculated on the basis of the 
                insured's age at inception of coverage under the group 
                policy replaced.
            ``(2) Upgrade for current policies.--The NAIC shall 
        establish standards, including those providing guidance on 
        medical underwriting and age rating, with respect to the access 
        of individuals to policies offering upgraded benefits.
    ``(d) Effect of Incapacitation.--
            ``(1) In general.--
                    ``(A) Prohibition.--Except as provided in paragraph 
                (2), a long-term care insurance policy in effect as of 
                the effective date of the standards established under 
                section 2701(a) may not be canceled for nonpayment if 
                the policy holder is determined by a long-term care 
                provider, physician or other health care provider, 
                independent of the issuer of the policy, to be 
                cognitively or mentally incapacitated so as to not make 
                payments in a timely manner.
                    ``(B) Reinstatement.--A long-term care policy shall 
                include a provision that provides for the reinstatement 
                of such coverage, in the event of lapse, if the insurer 
                is provided with proof of cognitive or mental 
                incapacitation. Such reinstatement option shall remain 
                available for a period of not less than 5 months after 
                termination and shall allow for the collection of past 
                due premium.
            ``(2) Permitted cancellation.--A long-term care insurance 
        policy may be canceled under paragraph (1) for nonpayment if--
                    ``(A) the period of such nonpayment is in excess of 
                30 days; and
                    ``(B) notice of intent to cancel is provided to the 
                policyholder or designated representative of the policy 
                holder not less than 30 days prior to such 
                cancellation, except that notice may not be provided 
                until the expiration of 30 days after a premium is due 
                and unpaid.
        Notice under this paragraph shall be deemed to have been given 
        as of 5 days after the mailing date.

``SEC. 2715. BENEFIT STANDARDS.

    ``(a) Use of Standard Definitions and Terminology, Uniform Format, 
and Standard Benefits.--Each long-term care insurance policy shall, 
with respect to services, providers or facilities, pursuant to 
standards established under section 2701(a)--
            ``(1) use uniform language and definitions, except that 
        such language and definitions may take into account the 
        differences between States with respect to definitions and 
        terminology used for long-term care services and providers;
            ``(2) use a uniform format for presenting the outline of 
        coverage under such a policy; and
            ``(3) provide coverage for at least one standard benefits 
        package (of those developed by the NAIC) that shall include the 
        limitations on the amount of payments per day and the lengths 
        of covered stays for nursing facility and home health care 
        services;
as prescribed under guidelines issued by the NAIC and periodically 
updated.
    ``(b) Disclosure.--
            ``(1) Outline of coverage.--
                    ``(A) Requirement.--Each carrier that sells or 
                offers for sale a long-term care insurance policy shall 
                provide an outline of coverage under such policy that 
                meets the applicable standards established pursuant to 
                section 2701(a), complies with the requirements of 
                subparagraph (B), and is in a uniform format as 
                prescribed in guidelines issued by the NAIC and 
                periodically updated.
                    ``(B) Contents.--The outline of coverage for each 
                long-term care insurance policy shall include at least 
                the following:
                            ``(i) A description of the principal 
                        benefits and coverage under the policy.
                            ``(ii) A statement of the principal 
                        exclusions, reductions, and limitations 
                        contained in the policy.
                            ``(iii) A statement of the terms under 
                        which the policy (or certificate) may be 
                        continued in force or discontinued, the terms 
                        for continuation or conversion, and any 
                        reservation in the policy of a right to change 
                        premiums.
                            ``(iv) A statement, in bold face type on 
                        the face of the document in language that is 
                        understandable to an average individual, that 
                        the outline of coverage is a summary only, not 
                        a contract of insurance, and that the policy 
                        (or master policy) contains the contractual 
                        provisions that govern, except that such 
                        summary shall substantially and accurately 
                        reflect the contents of the policy or the 
                        master policy.
                            ``(v) A description of the terms, specified 
                        in section 2717, under which a policy or 
                        certificate may be returned and premium 
                        refunded.
                            ``(vi) Information on national average 
                        costs for nursing facility and home health care 
                        and information (in graphic form) on the 
                        relationship of the value of the benefits 
                        provided under the policy to such national 
                        average costs and State average costs, where 
                        available.
                            ``(vii) A statement of the percentage limit 
                        on annual premium increases that is provided 
                        under the policy pursuant to this section.
            ``(2) Certificates.--A certificate issued pursuant to a 
        group long-term care insurance policy shall include--
                    ``(A) a description of the principal benefits and 
                coverage provided in the policy;
                    ``(B) a statement of the principal exclusions, 
                reductions, and limitations contained in the policy; 
                and
                    ``(C) a statement that the group master policy 
                determines governing contractual provisions.
            ``(3) Long-term care as part of life insurance.--In the 
        case of a long-term care insurance policy issued as a part of, 
        or a rider on, a life insurance policy, at the time of policy 
        delivery there shall be provided a policy summary that 
        includes--
                    ``(A) an explanation of how the long-term care 
                benefits interact with other components of the policy 
                (including deductions from death benefits);
                    ``(B) an illustration of the amount of benefits, 
                the length of benefit, and the guaranteed lifetime 
                benefits (if any) for each covered person; and
                    ``(C) any exclusions, reductions, and limitations 
                on benefits of long-term care.
            ``(4) Additional information.--The NAIC shall develop 
        recommendations with respect to informing consumers of the 
        long-term economic viability of carriers issuing long-term care 
        insurance policies.
    ``(c) Limiting Conditions on Benefits; Minimum Benefits.--
            ``(1) In general.--A long-term care insurance policy may 
        not condition or limit eligibility--
                    ``(A) for benefits for a type of services to the 
                need for or receipt of any other services;
                    ``(B) for any benefit on the medical necessity for 
                such benefit;
                    ``(C) for benefits furnished by licensed or 
                certified providers in compliance with conditions which 
                are in addition to those required for licensure or 
                certification under State law, except that if no State 
                licensure or certification laws exists, in compliance 
                with qualifications developed by the NAIC; or
                    ``(D) for residential care (if covered under the 
                policy) only--
                            ``(i) to care provided in facilities which 
                        provide a higher level of care; or
                            ``(ii) to care provided in facilities which 
                        provide for 24-hour or other nursing care not 
                        required in order to be licensed by the State.
            ``(2) Home health care or community-based services.--If a 
        long-term care insurance policy provides benefits for the 
        payment of specified home health care or community-based 
        services, the policy--
                    ``(A) may not limit such benefits to services 
                provided by registered nurses or licensed practical 
                nurses;
                    ``(B) may not require benefits for such services to 
                be provided by a nurse or therapist that can be 
                provided by a home health aide or licensed or certified 
                home care worker, except that if no State licensure or 
                certification laws exists, in compliance with 
                qualifications developed by the NAIC;
                    ``(C) may not limit such benefits to services 
                provided by agencies or providers certified under title 
                XVIII of the Social Security Act; and
                    ``(D) must provide, at a minimum, benefits for 
                personal care services (including home health aide and 
                home care worker services as defined by the NAIC) home 
                health services, adult day care, and respite care in an 
                individual's home or in another setting in the 
                community, or any of these benefits on a respite care 
                basis.
            ``(3) Nursing facility services.--If a long-term care 
        insurance policy provides benefits for the payment of specified 
        nursing facility services, the policy must provide such 
        benefits with respect to all nursing facilities (as defined in 
        section 1919(a) of the Social Security Act or until such time 
        as subsequently provided for by the NAIC in establishing 
        uniform language and definitions under section 2715(a)(1)) in 
        the State.
            ``(4) Per diem policies.--
                    ``(A) Definition.--For purposes of this title, the 
                term `per diem long-term care insurance policy' means a 
                long-term care insurance policy (or certificate under a 
                group long-term care insurance policy) that provides 
                for benefit payments on a periodic basis due to 
                cognitive impairment or loss of functional capacity 
                without regard to the expenses incurred or services 
                rendered during the period to which the payments 
                relate.
                    ``(B) Limitation.--No per diem long-term care 
                insurance policy (or certificate) may condition or 
                otherwise exclude benefit payments based on the receipt 
                of any type of nursing facility, home health care or 
                community-based services.
    ``(d) Prohibition of Discrimination.--A long-term care insurance 
policy may not treat benefits under the policy in the case of an 
individual with Alzheimer's disease, with any related progressive 
degenerative dementia of an organic origin, with any organic or 
inorganic mental illness, or with mental retardation or any other 
cognitive or mental impairment differently from an individual having 
another medical condition for which benefits may be made available.
    ``(e) Limitation on Use of Preexisting Condition Limits.--
            ``(1) Initial issuance.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                long-term care insurance policy may not exclude or 
                condition benefits based on a medical condition for 
                which the policyholder received treatment or was 
                otherwise diagnosed before the issuance of the policy.
                    ``(B) 6-month limit.--
                            ``(i) In general.--No long-term care 
                        insurance policy or certificate issued under 
                        this title shall utilize a definition of 
                        `preexisting condition' that is more 
                        restrictive than the following: The term 
                        `preexisting condition' means a condition for 
                        which medical advice or treatment was 
                        recommended by, or received from a provider of 
                        health care services, within 6 months preceding 
                        the effective date of coverage of an insured 
                        individual.
                            ``(ii) Prohibition on exclusion of 
                        coverage.--No long-term care insurance policy 
                        or certificate may exclude coverage for a loss 
                        or confinement that is the result of a 
                        preexisting condition unless such loss or 
                        confinement begins within 6 months following 
                        the effective date of the coverage of the 
                        insured individual.
            ``(2) Replacement policies.--If a long-term care insurance 
        policy replaces another long-term care insurance policy, the 
        issuer of the replacing policy shall waive any time periods 
        applicable to preexisting conditions, waiting period, 
        elimination periods and probationary periods in the new policy 
        for similar benefits to the extent such time was spent under 
        the original policy.
    ``(f) Eligibility for Benefits.--
            ``(1) Long-term care policies.--Each long-term care 
        insurance policy shall--
                    ``(A) describe the level of benefits available 
                under the policy; and
                    ``(B) specify in clear, understandable terms, the 
                level (or levels) of physical, cognitive, or mental 
                impairment required in order to receive benefits under 
                the policy.
            ``(2) Functional assessment.--In order to submit a claim 
        under any long-term care insurance policy, each claimant shall 
        have a professional functional assessment of his or her 
        physical, cognitive, and mental abilities. Such initial 
        assessment shall be conducted by an individual or entity, 
        meeting the qualifications established by the NAIC to assure 
        the professional competence and credibility of such individual 
        or entity and that such individual meets any applicable State 
        licensure and certification requirements. The individual or 
        entity conducting such assessment may not control, or be 
        controlled by, the issuer of the policy. For purposes of this 
        paragraph and paragraph (4), the term `control' means the 
        direct or indirect possession of the power to direct the 
        management and policies of a person. Control is presumed to 
        exist, if any person directly or indirectly, owns, controls, 
        holds with the power to vote, or holds proxies representing 10 
        percent of the voting securities of another person.
            ``(3) Claims review.--Except as provided in paragraph (4), 
        each long-term care insurance policy shall be subject to final 
        claims review by the carrier pursuant to the terms of the long-
        term care insurance policy.
            ``(4) Appeals process.--
                    ``(A) In general.--Each long-term care insurance 
                policy shall provide for a timely and independent 
                appeals process, meeting standards established by the 
                NAIC, for individuals who dispute the results of the 
                claims review, conducted under paragraph (3), of the 
                claimant's functional assessment, conducted under 
                paragraph (2).
                    ``(B) Independent assessment.--An appeals process 
                under this paragraph shall include, at the request of 
                the claimant, an independent assessment of the 
                claimant's physical, cognitive or mental abilities.
                    ``(C) Conduct.--An independent assessment under 
                subparagraph (B) shall be conducted by an individual or 
                entity meeting the qualifications established by the 
                NAIC to assure the professional competence and 
                credibility of such individual or entity and any 
                applicable State licensure and certification 
                requirements and may not be conducted--
                            ``(i) by an individual who has a direct or 
                        indirect significant or controlling interest 
                        in, or direct affiliation or relationship with, 
                        the issuer of the policy;
                            ``(ii) by an entity that provides services 
                        to the policyholder or certificateholder for 
                        which benefits are available under the long-
                        term care insurance policy; or
                            ``(iii) by an individual or entity in 
                        control of, or controlled by, the issuer of the 
                        policy.
            ``(5) Standard assessments.--Not later than 2 years after 
        the date of enactment of this title, the advisory committee 
        established under section 2701(d) shall recommend uniform needs 
        assessment mechanisms for the determination of eligibility for 
        benefits under such assessments.
    ``(g) Inflation Protection.--
            ``(1) Option to purchase.--A carrier may not offer a long-
        term care insurance policy unless the carrier also offers to 
        the proposed policyholder, including each group policyholder, 
        the option to purchase a policy that provides for increases in 
        benefit levels, with benefit maximums or reasonable durations 
        that are meaningful, to account for reasonably anticipated 
        increases in the costs of long-term care services covered by 
        the policy. A carrier may not offer to a policyholder an 
        inflation protection feature that is less favorable to the 
        policyholder than one of the following:
                    ``(A) With respect to policies that provide for 
                automatic periodic increases in benefits, the policy 
                provides for an annual increase in benefits in a manner 
                so that such increases are computed annually at a rate 
                of not less than 5 percent.
                    ``(B) With respect to policies that provide for 
                periodic opportunities to elect an increase in 
                benefits, the policy guarantees that the insured 
                individual will have the right to periodically increase 
                the benefit levels under the policy without providing 
                evidence of insurability or health status so long as 
                the option for the previous period was not declined. 
                The amount of any such additional benefit may not be 
                less than the difference between--
                            ``(i) the existing policy benefit; and
                            ``(ii) such existing benefit compounded 
                        annually at a rate of at least 5 percent for 
                        the period beginning on the date on which the 
                        existing benefit is purchased and extending 
                        until the year in which the offer of increase 
                        is made.
                    ``(C) With respect to service benefit policies, the 
                policy covers a specified percentage of the actual or 
                reasonable charges and does not include a maximum 
                specified indemnity amount or limit.
            ``(2) Exception.--The requirements of paragraph (1) shall 
        not apply to life insurance policies or riders containing 
        accelerated long-term care benefits.
            ``(3) Required information.--Carriers shall include the 
        following information in or together with the outline of 
        coverage provided under this title:
                    ``(A) A graphic comparison of the benefit levels of 
                a policy that increases benefits over the policy period 
                with a policy that does not increase benefits. Such 
                comparison shall show benefit levels over not less than 
                a 20-year period.
                    ``(B) Any expected premium increases or additional 
                premiums required to pay for any automatic or optional 
                benefit increases, whether the individual who purchases 
                the policy obtains the inflation protection initially 
                or whether such individual delays purchasing such 
                protection until a future time.
            ``(4) Continuation of protection.--Inflation protection 
        benefit increases under this subsection under a policy that 
        contains such protection shall continue without regard to an 
        insured's age, claim status or claim history, or the length of 
        time the individual has been insured under the policy.
            ``(5) Constant premium.--An offer of inflation protection 
        under this subsection that provides for automatic benefit 
        increases shall include an offer of a premium that the carrier 
        expects to remain constant. Such offer shall disclose in a 
        conspicuous manner that the premium may change in the future 
        unless the premium is guaranteed to remain constant.
            ``(6) Rejection.--Inflation protection under this 
        subsection shall be included in a long-term care insurance 
        policy unless a carrier obtains a written rejection of such 
        protection signed by the policyholder.

``SEC. 2716. NONFORFEITURE.

    ``(a) In General.--Each long-term care insurance policy (or 
certificate) shall provide that if the policy lapses after the policy 
has been in effect for a minimum period (specified under the standards 
under section 2701(a)), the policy will provide, without payment of any 
additional premiums, nonforfeiture benefits as determined appropriate 
by the NAIC.
    ``(b) Establishment of Standards.--The standards under section 
2701(a) shall provide that the percentage or amount of benefits under 
subsection (a) must increase based upon the policyholder's equity in 
the policy.

``SEC. 2717. LIMIT OF PERIOD OF CONTESTABILITY AND RIGHT TO RETURN.

    ``(a) Contestability.--A carrier may not cancel or renew a long-
term care insurance policy or deny a claim under the policy based on 
fraud or material misrepresentation relating to the issuance of the 
policy unless notice of such fraud or material misrepresentation is 
provided within a time period to be determined by the NAIC.
    ``(b) Right To Return.--Each applicant for a long-term care 
insurance policy shall have the right to return the policy (or 
certificates) within 30 days of the date of its delivery (and to have 
the premium refunded) if, after examination of the policy or 
certificate, the applicant is not satisfied for any reason.

``SEC. 2718. CIVIL MONEY PENALTY.

    ``(a) Carrier.--Any carrier, association or its subsidiary that 
sells or offers for sale a long-term care insurance policy and that--
            ``(1) fails to make a refund in accordance with section 
        2713(a);
            ``(2) fails to transmit a policy in accordance with section 
        2713(b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsection (c) or (d) of section 
        2713;
            ``(4) provides a commission or compensation in violation of 
        section 2713(e);
            ``(5) fails to provide an outline of coverage in violation 
        of section 2715(b)(1); or
            ``(6) issues a policy without obtaining certain information 
        in violation of section 2715(f);
is subject to a civil money penalty of not to exceed $25,000 for each 
such violation.
    ``(b) Agents.--Any agent that sells or offers for sale a long-term 
care insurance policy and that--
            ``(1) fails to make a refund in accordance with section 
        2713(a);
            ``(2) fails to transmit a policy in accordance with section 
        2713(b);
            ``(3) fails to provide, make available, or report 
        information in accordance with subsection (c) or (d) of section 
        2713;
            ``(4) fails to provide an outline of coverage in violation 
        of section 2715(b)(1); or
            ``(5) issues a policy without obtaining certain information 
        in violation of section 2715(f);
is subject to a civil money penalty of not to exceed $15,000 for each 
such violation.

      ``Part C--Long-Term Care Insurance Policies, Definition and 
                              Endorsements

``SEC. 2721. LONG-TERM CARE INSURANCE POLICY DEFINED.

    ``(a) In General.--As used in this section, the term `long-term 
care insurance policy' means any insurance policy, rider or certificate 
advertised, marketed, offered or designed to provide coverage for not 
less than 12 consecutive months for each covered person on an expense 
incurred, indemnity prepaid or other basis, for one or more necessary 
diagnostic, preventive, therapeutic, rehabilitative, maintenance or 
personal care services, provided in a setting other than an acute care 
unit of a hospital. Such term includes--
            ``(1) group and individual annuities and life insurance 
        policies, riders or certificates that provide directly, or that 
        supplement long-term care insurance; and
            ``(2) a policy, rider or certificates that provides for 
        payment of benefits based on cognitive impairment or the loss 
        of functional capacity.
    ``(b) Issuance.--Long-term care insurance policies may be issued 
by--
            ``(1) carriers;
            ``(2) fraternal benefit societies;
            ``(3) nonprofit health, hospital, and medical service 
        corporations;
            ``(4) prepaid health plans;
            ``(5) health maintenance organizations; or
            ``(6) any similar organization to the extent they are 
        otherwise authorized to issue life or health insurance.
    ``(c) Policies Excluded.--The term `long-term care insurance 
policy' shall not include any insurance policy, rider or certificate 
that is offered primarily to provide basic Medicare supplement 
coverage, basic hospital expense coverage, basic medical-surgical 
expense coverage, hospital confinement indemnity coverage, major 
medical expense coverage, disability income or related asset-protection 
coverage, accident only coverage, specified disease or specified 
accident coverage, or limited benefit health coverage. With respect to 
life insurance, such term shall not include life insurance policies, 
riders or certificates that accelerate the death benefit specifically 
for one or more of the qualifying events of terminal illness, medical 
conditions requiring extraordinary medical intervention, or permanent 
institutional confinement, and that provide the option of a lump-sum 
payment for those benefits and in which neither the benefits nor the 
eligibility for the benefits is conditioned upon the receipt of long-
term care.
    ``(d) Applications.--Notwithstanding any other provision of this 
title, this title shall apply to any product advertised, marketed or 
offered as a long-term insurance policy, rider or certificate.

``SEC. 2722. CODE OF CONDUCT WITH RESPECT TO ENDORSEMENTS.

    ``Not later than 1 year after the date of enactment of this title 
the NAIC shall issue guidelines that shall apply to organizations and 
associations, other than employers and labor organizations that do not 
accept compensation, and their subsidiaries that provide endorsements 
of long-term care insurance policies, or that permit such policies to 
be offered for sale through the organization or association. Such 
guidelines shall include at minimum the following:
            ``(1) In endorsing or selling long-term care insurance 
        policies, the primary responsibility of an organization or 
        association shall be to educate their members concerning such 
        policies and assist such members in making informed decisions. 
        Such organizations and associations may not function primarily 
        as sales agents for insurance companies.
            ``(2) Organizations and associations shall provide 
        objective information regarding long-term care insurance 
        policies sold or endorsed by such organizations and 
        associations to ensure that members of such organizations and 
        associations have a balanced and complete understanding of both 
        the strengths and weaknesses of the policies that are being 
        endorsed or sold.
            ``(3) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the manner in which such policies and the insurance company 
        issuing such policies were selected. If the organization or 
        association and the insurance company have interlocking 
        directorates, the organization or association shall disclose 
        such fact to their members.
            ``(4) Organizations and associations selling or endorsing 
        long-term care insurance policies shall disclose in marketing 
        literature provided to their members concerning such policies 
        the nature and amount of the compensation arrangements 
        (including all fees, commissions, administrative fees and other 
        forms of financial support that the organization or association 
        receives) from the endorsement or sale of the policy to its 
        members.
            ``(5) The Boards of Directors of organizations and 
        associations selling or endorsing long-term care insurance 
        policies, if such organizations and associations have a Board 
        of Directors, shall review and approve such insurance policies, 
        the compensation arrangements and the marketing materials used 
        to promote sales of such policies.

                   ``Part D--Miscellaneous Provisions

``SEC. 2731. FUNDING FOR LONG-TERM CARE INSURANCE INFORMATION, 
              COUNSELING, AND ASSISTANCE.

    ``(a) In General.--The Secretary, acting through the Public Health 
Service, may award grants to States, and national organizations with 
demonstrated experience in long-term care insurance, for the 
establishment of programs to provide information, counseling, and 
assistance relating to the procurement of adequate and appropriate 
long-term care insurance.
    ``(b) Application.--To be eligible to receive a grant under 
subsection (a), a State or national organization shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
a description of the program for which the State or organization 
intends to use the amounts provided under the grant.
    ``(c) Authorization of Appropriations.--
            ``(1) In general.--There are authorized to be appropriate 
        for grants to States under subsection (a), $10,000,000 for each 
        of the fiscal years 1996 through 1998.
            ``(2) National organizations.--There are authorized to be 
        appropriate for grants to national organizations under 
        subsection (a), $1,000,000 for each of the fiscal years 1996 
        through 1998.

``SEC. 2732. DEFINITIONS.

    ``As used in this title:
            ``(1) Agent.--The term `agent' means--
                    ``(A) prior to 2 years after the date of enactment 
                of this Act, an individual who sells or offers for sale 
                a long-term care insurance policy subject to the 
                requirements of this title and is licensed or required 
                to be licensed under State law for such purpose; and
                    ``(B) after the date referred to in subparagraph 
                (A), an individual who meets the training and 
                certification requirements established under section 
                2712(f).
            ``(2) Association.--The term `association' includes the 
        association and its subsidiaries.
            ``(3) Carrier.--The term `carrier' means any person that 
        offers a health benefit plan, whether through insurance or 
        otherwise, including a licensed insurance company, a prepaid 
        hospital or medical service plan, a health maintenance 
        organization, a self-insured carrier, a reinsurance carrier, 
        and a multiple employer welfare arrangement (a combination of 
        employers associated for the purpose of providing health 
        benefit plan coverage for their employees).''.
    (b) Conforming Amendments.--
            (1) Sections 2701 through 2714 of the Public Health Service 
        Act (42 U.S.C. 300cc through 300cc-15) are redesignated as 
        sections 2801 through 2814, respectively.
            (2) Sections 465(f) and 497 of such Act (42 U.S.C. 286(f) 
        and 289(f)) are amended by striking ``2701'' each place that 
        such appears and inserting ``2801''.

    Subtitle C--Protection of Assets Under Medicaid Through Use of 
                   Qualified Long-term Care Insurance

SEC. 3201. PROTECTION OF ASSETS THROUGH USE OF QUALIFIED LONG-TERM CARE 
              INSURANCE.

    (a) In General.--Title XIX of the Social Security Act, as amended 
by sections 1601(a) and 1701(a), is amended--
            (1) by redesignating section 1933 as section 1934; and
            (2) by inserting after section 1932 the following new 
        section:

``special rules for asset disregard in the case of qualified long-term 
                        care insurance contracts

    ``Sec. 1933. (a) In General.--Each State plan under this title may 
provide, subject to subsection (d), that in determining the eligibility 
of an individual for medical assistance under the plan with respect to 
such services there shall be disregarded some or all of the 
individual's assets which are attributable (as determined under 
subsection (c)(2)) to coverage under a qualified long-term care 
insurance contract (as defined in subsection (b)).
    ``(b) Qualified Long-Term Care Insurance Contract Defined.--In this 
section, the term `qualified long-term care insurance contract' means, 
with respect to a State, a long-term care insurance contract (as 
defined in section 818A(b) of the Internal Revenue Code of 1986) 
which--
            ``(1) provides such protection against the costs of 
        receiving long-term care services as the State may require by 
        law;
            ``(2) provides that benefits under the contract shall be 
        paid without regard to eligibility for medical assistance under 
        this title; and
            ``(3) meets such other requirements (such as requirements 
        relating to premiums, disclosure, minimum benefits, rights of 
        conversion, and standards for claims processing) as the State 
        may determine to be appropriate.
    ``(c) Other Definitions.--In this section:
            ``(1) Long-term care services.--The term `long-term care 
        services' means nursing facility services, home health care 
        services, and home and community-based services, and includes 
        such other similar items and services described in section 
        1905(a) as a State may specify.
            ``(2) Attribution rules.--An individual's assets are 
        considered to be `attributable' to a qualified long-term care 
        insurance contract to the extent specified under the State 
        plan. Such a plan shall provide for at least one of the 
        following:
                    ``(A) All assets are considered attributable if the 
                insurance contract provides coverage for at least a 
                specified period of coverage (of not less than 3 years 
                and of not more than 6 years) for long-term care 
                services.
                    ``(B) An amount of assets, up to the dollar 
                limitation on benefits for long-term care services 
                under the contract, is considered attributable to the 
                contract.
    ``(d) Limitation.--In no case shall this section result in (1) the 
total Federal payments to the State for the quarter under this title 
(including payments attributable to this section), exceeding (2) the 
total Federal payments that the Secretary estimates would have been 
paid under this title to the State for the quarter if the State did not 
provide for the determination of eligibility in accordance with 
subsection (a).''.
    (b) Conforming Amendment.--Section 1902(a)(17)(A) of such Act (42 
U.S.C. 1396a(a)(17)(A)) is amended by inserting ``and section 1932'' 
after ``objectives of this title''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply (except as provided under paragraph (2)) to payments to 
        States under title XIX of the Social Security Act for calendar 
        quarters beginning on or after one year after the date of the 
        enactment of this Act, without regard to whether regulations to 
        implement such amendment are promulgated by such date.
            (2) Delay permitted if state legislation required.--In the 
        case of a State plan for medical assistance under title XIX of 
        the Social Security Act which the Secretary of Health and Human 
        Services determines requires State legislation (other than 
        legislation authorizing or appropriating funds) in order for 
        the plan to meet the additional requirements imposed by the 
        amendments made by this section, the State plan shall not be 
        regarded as failing to comply with the requirements of such 
        title solely on the basis of its failure to meet these 
        additional requirements before the first day of the first 
        calendar quarter beginning after the close of the first regular 
        session of the State legislature that begins after the date of 
        the enactment of this Act. For purposes of the previous 
        sentence, in the case of a State that has a 2-year legislative 
        session, each year of such session shall be deemed to be a 
        separate regular session of the State legislature.

                          Subtitle D--Studies

SEC. 3301. FEASIBILITY OF ENCOURAGING HEALTH CARE PROVIDERS TO DONATE 
              SERVICES TO HOMEBOUND PATIENTS.

    The Comptroller General of the United States shall conduct a study 
on the feasibility of encouraging health care providers to donate their 
services to homebound patients. Such study shall include an examination 
of the effects of qualifying such services as a charitable 
contribution.

SEC. 3302. FEASIBILITY OF TAX CREDIT FOR HEADS OF HOUSEHOLDS WHO CARE 
              FOR ELDERLY FAMILY MEMBERS IN THEIR HOMES.

    The Comptroller General of the United States shall conduct a study 
on the feasibility of providing heads of households who care for 
elderly family members in their homes with a tax credit. Such study 
shall estimate the cost of such a tax credit which would apply to 
expenses incurred in the custodial care of such an elderly family 
member to the extent such expenses exceed 5 percent of adjusted gross 
income.

SEC. 3303. CASE MANAGEMENT OF CURRENT LONG-TERM CARE BENEFITS.

    (a) In General.--The Secretary of Health and Human Services shall 
conduct a study of the feasibility of encouraging or requiring the use 
of a single designated public or nonprofit agency (such as an area 
agency on aging) to coordinate, through case management, the provision 
of long-term care benefits under current Federal, State, and local 
programs in a geographic area.
    (b) Report.--The Secretary shall submit to Congress a report on the 
study conducted under subsection (a) by not later than 1 year after the 
date of the enactment of this Act. Such report shall include such 
recommendations regarding changes in legislation to encourage or 
require the use (described in subsection (a)) of an agency to 
coordinate long-term care benefits as may be appropriate.

      Subtitle E--Volunteer Service Credit Demonstration Projects

SEC. 3401. AMENDMENT TO THE OLDER AMERICANS ACT OF 1965.

    (a) In General.--Part B of title IV of the Older Americans Act of 
1965 (42 U.S.C. 3034-3035r) is amended by adding at the end the 
following:

``SEC. 429K. VOLUNTEER SERVICE CREDIT DEMONSTRATION PROJECTS.

    ``(a) Requirements.--The Commissioner shall--
            ``(1) establish and operate (directly, or through the State 
        agency on aging or one or more area agencies on aging) a 
        volunteer service credit demonstration project in all or part 
        of each State;
            ``(2) establish criteria for selecting individuals to whom 
        volunteer services will be provided under volunteer service 
        credit demonstration projects operated under paragraph (1);
            ``(3) recruit and train (directly or through State agencies 
        on aging or area agencies on aging) individuals who volunteer 
        to provide services through such projects;
            ``(4) establish a minimum standard for each service to be 
        provided by volunteers through such projects;
            ``(5) monitor services provided by volunteers through such 
        projects to ensure that standards established under paragraph 
        (4) are met; and
            ``(6) maintain (directly or through State agencies on aging 
        or area agencies on aging) with respect to each individual who 
        provides services through a volunteer service credit 
        demonstration project operated under paragraph (1) a separately 
        identifiable account showing the number of hours such 
        individual provided such services.
    ``(b) Definition.--For purposes of subsection (a), the term 
`volunteer service credit demonstration project' means a demonstration 
project through which homemaker services, respite care for families, 
adult day care, and educational, transportation, and home-delivery 
services are provided by--
            ``(1) volunteer older individuals for the benefit of older 
        individuals or low-income children; or
            ``(2) volunteer individuals of any age for the benefit of 
        older individuals;
in return for the receipt of similar services under any such 
demonstration project (that is established under this section) at a 
time at which such volunteers are older individuals in need of such 
services.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect October 1, 1995.
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