I 

109TH CONGRESS 

2D SESSION H. R. 4845 

To better prepare and develop the United States workforce for the global 

economy, and remove barriers that stifle innovation. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 2, 2006 

Mr. GOODLATTE (for himself, Mr. SMITH of Texas, Mrs. JOHNSON of Connecticut, Mr. PUTNAM, Mr. SWEENEY, and Mr. TIAHRT) introduced the 

following bill; which was referred to the Committee on the Judiciary, and 

in addition to the Committees on Ways and Means, Science, Education 

and the Workforce, and Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such 

provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To better prepare and develop the United States workforce 

for the global economy, and remove barriers that stifle 

innovation. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Innovation and Competitiveness Act’’. 

6 (b) TABLE OF CONTENTS.— 

Sec. 1. Short title; table of contents. 


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TITLE I—REDUCE RED TAPE AND CREATE OPPORTUNITIES FOR 

ECONOMIC GROWTH 

Subtitle A—Business Activity Tax Simplification 

Sec. 101. Short title. 

Sec. 102. Removal of certain limitations on the application of Public Law 86– 

272. 

‘‘Sec. 105. Removal of certain limitations on the application of Public Law 

86–272. 

Sec. 103. Jurisdictional standard for State and local net income taxes and 

other business activity taxes. 

Sec. 104. Definitions. 

Sec. 105. Effective date. 

Subtitle B—Attorney Accountability 

Sec. 121. Short title. 

Sec. 122. Attorney accountability. 

Sec. 123. Applicability of Rule 11 to State cases affecting interstate commerce. 

Sec. 124. Prevention of forum-shopping. 

Sec. 125. Rule of construction. 

Sec. 126. Three-strikes Rule for suspending attorneys who commit multiple 

Rule 11 violations. 

Sec. 127. Presumption of Rule 11 violation for repeatedly relitigating same 

issue. 

Sec. 128. Enhanced sanctions for document destruction in pending Federal 

court proceedings. 

Sec. 129. Ban on concealment of unlawful conduct. 

TITLE II—INCREASE AMERICA’S TALENT POOL 

Sec. 201. Innovation Scholarship Program. 

‘‘SUBPART 6—INNOVATION SCHOLARSHIP PROGRAM

‘‘Sec. 419A. Innovation mathematics and science honors scholarship program. 

‘‘Sec. 419B. Mathematics and science incentive program. 

‘‘Sec. 419C. Mathematics and science education coordinating council 

grants. 

‘‘Sec. 419D. Authorization of appropriations. 

TITLE III—PROMOTION OF RESEARCH AND DEVELOPMENT 

Sec. 301. Short title. 

Sec. 302. Findings. 

Sec. 303. Permanent extension of research credit. 

Sec. 304. Increase in rates of alternative incremental credit. 

Sec. 305. Alternative simplified credit for qualified research expenses. 

TITLE IV—INCREASE ACCESS TO AND EFFICIENCY OF HEALTH 

CARE 

Subtitle A—Health Care Choice 

Sec. 401. Short title of subtitle. 

Sec. 402. Specification of constitutional authority for enactment of law. 


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Sec. 403. Findings. 

Sec. 404. Cooperative governing of individual health insurance coverage. 

‘‘PART D—COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE

COVERAGE

‘‘Sec. 2795. Definitions. 

‘‘Sec. 2796. Application of law. 

‘‘Sec. 2797. Primary State must meet Federal floor before issuer may sell 

into secondary States. 

‘‘Sec. 2798. Enforcement. 

Sec. 405. Severability. 

Subtitle B—Health Information Technology Promotion 

Sec. 411. Short title of subtitle. 

Sec. 412. Office of the National Coordinator for Health Information Technology. 

‘‘PART D—HEALTH INFORMATION TECHNOLOGY

‘‘Sec. 271. Office of the National Coordinator for Health Information 

Technology. 

Sec. 413. Safe harbors for provision of health information technology and training services to health care professionals. 

Sec. 414. Uniform health information laws and regulations. 

Sec. 415. Rulemaking to upgrade ASC X12 and NCPDP standards and ICD 

codes. 

Sec. 416. Report on the American Health Information Community. 

Sec. 417. Strategic plan for coordinating implementation of health information 

technology. 

TITLE V—SEAMLESS MOBILITY 

Sec. 501. Prohibition on impeding. 

1 TITLE I—REDUCE RED TAPE 

2 AND CREATE OPPORTUNITIES 

3 FOR ECONOMIC GROWTH 

4 Subtitle A—Business Activity Tax 

5 Simplification 

6 SEC. 101. SHORT TITLE. 

7 This subtitle may be cited as the ‘‘Business Activity 

8 Tax Simplification Act of 2006’’. 


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1 SEC. 102. REMOVAL OF CERTAIN LIMITATIONS ON THE AP2 PLICATION OF PUBLIC LAW 86–272. 

3 (a) SOLICITATIONS WITH RESPECT TO SALES AND

4 TRANSACTIONS OF OTHER THAN TANGIBLE PERSONAL

5 PROPERTY.—Section 101 of the Act entitled ‘‘An Act re6 lating to the power of the States to impose net income 

7 taxes on income derived from interstate commerce, and 

8 authorizing studies by congressional committees of mat9 ters pertaining thereto’’, approved September 14, 1959 

10 (15 U.S.C. 381 et seq.), is amended— 

11 (1) in subsection (a)(1) by striking ‘‘of tan12 gible’’ and all that follows through ‘‘State; and’’ and 

13 inserting the following: ‘‘or transactions, which or14 ders are sent outside the State for approval or rejec15 tion and, if approved, are— 

16 ‘‘(A) in the case of tangible personal prop17 erty, filled by shipment or delivery from a point 

18 outside the State; and 

19 ‘‘(B) in the case of all other forms of prop20 erty, services, and other transactions, fulfilled 

21 from a point outside the State; 

22 and’’; 

23 (2) in subsection (c)— 

24 (A) by inserting ‘‘or fulfilling transactions’’ 

25 after ‘‘making sales’’; 


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1 (B) by inserting ‘‘or transactions’’ after 

2 ‘‘sales’’ the other places it appears; and 

3 (C) by striking ‘‘of tangible personal prop4 erty’’ each place it appears; and 

5 (3) in subsection (d)(1) by striking ‘‘the sale of, 

6 tangible personal property’’ and inserting ‘‘a sale or 

7 transaction,’’. 

8 (b) APPLICATION OF PROHIBITIONS TO OTHER BUSI9 NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 

10 Act relating to the power of the States to impose net in11 come taxes on income derived from interstate commerce, 

12 and authorizing studies by congressional committees of 

13 matters pertaining thereto’’, approved September 14, 

14 1959 (15 U.S.C. 381 et seq.), is amended by adding at 

15 the end the following: 

16 ‘‘SEC. 105. Beginning with taxable periods beginning 

17 on or after the first day of the first calendar year that 

18 begins after the date of the enactment of the Business 

19 Activity Tax Simplification Act of 2006, the prohibitions 

20 of section 101 that apply with respect to net income taxes 

21 shall also apply with respect to each other business activity 

22 tax, as defined in section 104 of the Business Activity Tax 

23 Simplification Act of 2006. A State or political subdivision 

24 thereof may not assess or collect any tax which by reason 


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1 of this section the State or political subdivision may not 

2 impose.’’. 

3 (c) EFFECTIVE DATE OF SUBSECTION (a) AMEND4 MENTS.—The amendments made by subsection (a) shall 

5 apply with respect to the imposition, assessment, and col6 lection of taxes for taxable periods beginning on or after 

7 the first day of the first calendar year that begins after 

8 the date of the enactment of the Business Activity Tax 

9 Simplification Act of 2006. 

10 SEC. 103. JURISDICTIONAL STANDARD FOR STATE AND 

11 LOCAL NET INCOME TAXES AND OTHER BUSI12 NESS ACTIVITY TAXES. 

13 (a) IN GENERAL.—No taxing authority of a State 

14 shall have power to impose, assess, or collect a net income 

15 tax or other business activity tax on any person relating 

16 to such person’s activities in interstate commerce unless 

17 such person has a physical presence in the State during 

18 the taxable period with respect to which the tax is im19 posed. 

20 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.—For 

21 the purposes of subsection (a), a person has a physical 

22 presence in a State only if such person’s business activities 

23 in the State include any of the following, collectively and 

24 on more than 21 days in the aggregate, during such per25 son’s taxable year: 


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1 (1) Being an individual physically in the State, 

2 or assigning one or more employees to be in the 

3 State, except that the following shall be excluded in 

4 determining whether such 21-day limit has been ex5 ceeded: 

6 (A) Activities in connection with a possible 

7 or an actual purchase of goods or services, for 

8 consumption by the person’s business. 

9 (B) Gathering news and covering events 

10 for print, broadcast, or other distribution 

11 through the media. 

12 (C) Meeting government officials for pur13 poses other than selling goods or services, for 

14 consumption by such government. 

15 (D) Merely attending educational or train16 ing conferences, seminars or other similar func17 tions. 

18 (E) Participating in charitable activities. 

19 (2) Using the services of an agent (excluding an 

20 employee) to establish or maintain the market in the 

21 State, if such agent does not perform business serv22 ices in the State for any other person during such 

23 taxable year. 

24 (3) The leasing or owning of tangible personal 

25 property or of real property in the State, except that 


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1 the following shall be excluded in determining wheth2 er such 21-day limit has been exceeded: 

3 (A) Tangible personal property located in 

4 the State for purposes of being assembled, man5 ufactured, processed, or tested by another per6 son for the benefit of the owner or lessee, or 

7 used to furnish a service to the owner or lessee 

8 by another person. 

9 (B) Marketing or promotional materials 

10 distributed in the State. 

11 (C) Any property to the extent used ancil12 lary to an activity excluded from the computa13 tion of the 21-day period based on paragraph 

14 (1) or (2). 

15 (c) TAXABLE PERIODS NOT CONSISTING OF A

16 YEAR.—If the taxable period for which the tax is imposed 

17 is not a year, then any requirements expressed in days 

18 for establishing physical presence under this subtitle shall 

19 be adjusted pro rata accordingly. 

20 (d) EXCEPTIONS.— 

21 (1) DOMESTIC BUSINESS ENTITIES AND INDI22 VIDUALS DOMICILED IN, OR RESIDENTS OF, THE

23 STATE.—Subsection (a) does not apply with respect 

24 to— 


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1 (A) a person (other than an individual) 

2 that is incorporated or formed under the laws 

3 of the State (or domiciled in the State) in which 

4 the tax is imposed; or 

5 (B) an individual who is domiciled in, or a 

6 resident of, the State in which the tax is im7 posed. 

8 (2) TAXATION OF PARTNERS AND SIMILAR PER9 SONS.—This section shall not be construed to modify 

10 or affect any State business activity tax liability of 

11 an owner or beneficiary of an entity that is a part12 nership, an S corporation (as defined in section 

13 1361 of the Internal Revenue Code of 1986 (26 

14 U.S.C. 1361)), a limited liability company, a trust, 

15 an estate, or any other similar entity, if the entity 

16 has a physical presence in the State in which the tax 

17 is imposed. 

18 (3) PRESERVATION OF AUTHORITY.—This sec19 tion shall not be construed to modify, affect, or su20 persede the authority of a State to bring an enforce21 ment action against a person or entity that may be 

22 engaged in an illegal activity, a sham transaction, or 

23 any perceived or actual abuse in its business activi24 ties if such enforcement action— 


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1 (A) is of a kind customarily used by the 

2 State; and 

3 (B) does not modify, affect, or supersede 

4 the operation of any provision of this subtitle or 

5 of any other Federal law. 

6 (4) CERTAIN ACTIVITIES.—With respect to the 

7 following, subsection (b) shall be read by sub8 stituting ‘‘at least one day’’ for ‘‘more than 21 days 

9 in the aggregate’’: 

10 (A) The sale within a State of tangible 

11 personal property, if delivery of the property 

12 originates and is completed within the State. 

13 (B) The performance of services that phys14 ically affect real property within a State. 

15 (5) EXCEPTION RELATING TO CERTAIN PER16 FORMANCES AND SPORTING EVENTS.—With respect 

17 to the taxation of the following, subsection (b) shall 

18 be read by substituting ‘‘at least one day’’ for ‘‘more 

19 than 21 days in the aggregate’’: 

20 (A) A live performance in a State, before 

21 a live audience of more than 100 individuals. 

22 (B) A live sporting event in a State before 

23 more than 100 spectators present at the event. 

24 (e) RULE OF CONSTRUCTION.—This section shall not 

25 be construed to modify, affect, or supersede the operation 


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1 of title I of the Act entitled ‘‘An Act relating to the power 

2 of the States to impose net income taxes on income derived 

3 from interstate commerce, and authorizing studies by con4 gressional committees of matters pertaining thereto’’, ap5 proved September 14, 1959 (15 U.S.C. 381 et seq.). 

6 SEC. 104. DEFINITIONS. 

7 The following definitions apply in this subtitle: 

8 (1) NET INCOME TAX.—The term ‘‘net income 

9 tax’’ has the meaning given that term for the pur10 poses of the Act entitled ‘‘An Act relating to the 

11 power of the States to impose net income taxes on 

12 income derived from interstate commerce, and au13 thorizing studies by congressional committees of 

14 matters pertaining thereto’’, approved September 

15 14, 1959 (15 U.S.C. 381 et seq.). 

16 (2) OTHER BUSINESS ACTIVITY TAX.— 

17 (A) The term ‘‘other business activity tax’’ 

18 means— 

19 (i) a tax imposed on or measured by 

20 gross receipts, gross income, or gross prof21 its; 

22 (ii) a business license tax; 

23 (iii) a business and occupation tax; 

24 (iv) a franchise tax; 


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1 (v) a single business tax or a capital 

2 stock tax; or 

3 (vi) any other tax imposed by a State 

4 on a business for the right to do business 

5 in the State or measured by the amount 

6 of, or economic results of, business or re7 lated activity conducted in the State. 

8 (B) The term ‘‘other business activity tax’’ 

9 does not include a sales tax, a use tax, or a 

10 similar tax, imposed as the result of the sale or 

11 acquisition of goods or services, whether or not 

12 denominated a tax imposed on the privilege of 

13 doing business. 

14 (3) STATE.—The term ‘‘State’’ means any of 

15 the several States, the District of Columbia, or any 

16 territory or possession of the United States, or any 

17 political subdivision of any of the foregoing. 

18 (4) TANGIBLE PERSONAL PROPERTY.—The 

19 term ‘‘tangible personal property’’ does not include 

20 computer software that is owned and licensed by the 

21 owner to another person. 

22 SEC. 105. EFFECTIVE DATE. 

23 Except as provided otherwise in this subtitle, this 

24 subtitle applies with respect to taxable periods beginning 


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1 on and after the first day of the first year that begins 

2 after the date of enactment of this Act. 

3 Subtitle B—Attorney 

4 Accountability 

5 SEC. 121. SHORT TITLE. 

6 This subtitle may be cited as the ‘‘Lawsuit Abuse Re7 duction Act of 2006’’. 

8 SEC. 122. ATTORNEY ACCOUNTABILITY. 

9 Rule 11(c) of the Federal Rules of Civil Procedure 

10 is amended— 

11 (1) by amending the first sentence to read as 

12 follows: ‘‘If a pleading, motion, or other paper is 

13 signed in violation of this rule, the court, upon mo14 tion or upon its own initiative, shall impose upon the 

15 attorney, law firm, or parties that have violated this 

16 subdivision or are responsible for the violation, an 

17 appropriate sanction, which may include an order to 

18 pay the other party or parties for the reasonable ex19 penses incurred as a direct result of the filing of the 

20 pleading, motion, or other paper, that is the subject 

21 of the violation, including a reasonable attorney’s 

22 fee.’’; 

23 (2) in paragraph (1)(A)— 


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1 (A) by striking ‘‘Rule 5’’ and all that fol2 lows through ‘‘corrected.’’ and inserting ‘‘Rule 

3 5.’’; and 

4 (B) by striking ‘‘the court may award’’ 

5 and inserting ‘‘the court shall award’’; and 

6 (3) in paragraph (2), by striking ‘‘shall be lim7 ited to what is sufficient’’ and all that follows 

8 through the end of the paragraph (including sub9 paragraphs (A) and (B)) and inserting ‘‘shall be suf10 ficient to deter repetition of such conduct or com11 parable conduct by others similarly situated, and to 

12 compensate the parties that were injured by such 

13 conduct. The sanction may consist of an order to 

14 pay to the party or parties the amount of the rea15 sonable expenses incurred as a direct result of the 

16 filing of the pleading, motion, or other paper that is 

17 the subject of the violation, including a reasonable 

18 attorney’s fee.’’. 

19 SEC. 123. APPLICABILITY OF RULE 11 TO STATE CASES AF20 FECTING INTERSTATE COMMERCE. 

21 In any civil action in State court, the court, upon mo22 tion, shall determine within 30 days after the filing of such 

23 motion whether the action substantially affects interstate 

24 commerce. Such court shall make such determination 

25 based on an assessment of the costs to the interstate econVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 omy, including the loss of jobs, were the relief requested 

2 granted. If the court determines such action substantially 

3 affects interstate commerce, the provisions of Rule 11 of 

4 the Federal Rules of Civil Procedure shall apply to such 

5 action. 

6 SEC. 124. PREVENTION OF FORUM-SHOPPING. 

7 (a) IN GENERAL.—Subject to subsection (b), a per8 sonal injury claim filed in State or Federal court may be 

9 filed only in the State and, within that State, in the county 

10 (or if there is no State court in the county, the nearest 

11 county where a court of general jurisdiction is located) or 

12 Federal district in which— 

13 (1) the person bringing the claim, including an 

14 estate in the case of a decedent and a parent or 

15 guardian in the case of a minor or incompetent— 

16 (A) resides at the time of filing; or 

17 (B) resided at the time of the alleged in18 jury; 

19 (2) the alleged injury or circumstances giving 

20 rise to the personal injury claim allegedly occurred; 

21 (3) the defendant’s principal place of business 

22 is located, if the defendant is a corporation; or 

23 (4) the defendant resides, if the defendant is an 

24 individual. 


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1 (b) DETERMINATION OF MOST APPROPRIATE

2 FORUM.—If a person alleges that the injury or cir3 cumstances giving rise to the personal injury claim oc4 curred in more than one county (or Federal district), the 

5 trial court shall determine which State and county (or 

6 Federal district) is the most appropriate forum for the 

7 claim. If the court determines that another forum would 

8 be the most appropriate forum for a claim, the court shall 

9 dismiss the claim. Any otherwise applicable statute of limi10 tations shall be tolled beginning on the date the claim was 

11 filed and ending on the date the claim is dismissed under 

12 this subsection. 

13 (c) DEFINITIONS.—In this section: 

14 (1) The term ‘‘personal injury claim’’— 

15 (A) means a civil action brought under 

16 State law by any person to recover for a per17 son’s personal injury, illness, disease, death, 

18 mental or emotional injury, risk of disease, or 

19 other injury, or the costs of medical monitoring 

20 or surveillance (to the extent such claims are 

21 recognized under State law), including any de22 rivative action brought on behalf of any person 

23 on whose injury or risk of injury the action is 

24 based by any representative party, including a 


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1 spouse, parent, child, or other relative of such 

2 person, a guardian, or an estate; 

3 (B) does not include a claim brought as a 

4 class action; and 

5 (C) does not include a claim against a 

6 debtor in a case pending under title 11 of the 

7 United States Code that is a personal injury 

8 tort or wrongful death claim within the mean9 ing of section 157(b)(5) of title 28, United 

10 States Code. 

11 (2) The term ‘‘person’’ means any individual, 

12 corporation, company, association, firm, partnership, 

13 society, joint stock company, or any other entity, but 

14 not any governmental entity. 

15 (3) The term ‘‘State’’ includes the District of 

16 Columbia, the Commonwealth of Puerto Rico, the 

17 United States Virgin Islands, Guam, and any other 

18 territory or possession of the United States. 

19 (d) APPLICABILITY.—This section applies to any per20 sonal injury claim filed in Federal or State court on or 

21 after the date of the enactment of this subtitle. 

22 SEC. 125. RULE OF CONSTRUCTION. 

23 Nothing in section 123 or in the amendments made 

24 by section 122 shall be construed to bar or impede the 


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1 assertion or development of new claims or remedies under 

2 Federal, State, or local civil rights law. 

3 SEC. 126. THREE-STRIKES RULE FOR SUSPENDING ATTOR4 NEYS WHO COMMIT MULTIPLE RULE 11 VIO5 LATIONS. 

6 (a) MANDATORY SUSPENSION.—Whenever a Federal 

7 district court determines that an attorney has violated 

8 Rule 11 of the Federal Rules of Civil Procedure, the court 

9 shall determine the number of times that the attorney has 

10 violated that rule in that Federal district court during that 

11 attorney’s career. If the court determines that the number 

12 is 3 or more, the Federal district court— 

13 (1) shall suspend that attorney from the prac14 tice of law in that Federal district court for 1 year; 

15 and 

16 (2) may suspend that attorney from the prac17 tice of law in that Federal district court for any ad18 ditional period that the court considers appropriate. 

19 (b) APPEAL; STAY.—An attorney has the right to ap20 peal a suspension under subsection (a). While such an ap21 peal is pending, the suspension shall be stayed. 

22 (c) REINSTATEMENT.—To be reinstated to the prac23 tice of law in a Federal district court after completion of 

24 a suspension under subsection (a), the attorney must first 


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1 petition the court for reinstatement under such procedures 

2 and conditions as the court may prescribe. 

3 SEC. 127. PRESUMPTION OF RULE 11 VIOLATION FOR RE4 PEATEDLY RELITIGATING SAME ISSUE. 

5 Whenever a party presents to a Federal court a 

6 pleading, written motion, or other paper, that includes a 

7 claim or defense that the party has already litigated and 

8 lost on the merits in any forum in final decisions not sub9 ject to appeal on 3 consecutive occasions, and the claim 

10 or defense involves the same plaintiff and the same de11 fendant, there shall be a rebuttable presumption that the 

12 presentation of such paper is in violation of Rule 11 of 

13 the Federal Rules of Civil Procedure. 

14 SEC. 128. ENHANCED SANCTIONS FOR DOCUMENT DE15 STRUCTION IN PENDING FEDERAL COURT 

16 PROCEEDINGS. 

17 Whoever willfully and intentionally influences, ob18 structs, or impedes, or attempts to influence, or obstruct, 

19 or impede, a pending Federal court proceeding through 

20 the willful and intentional destruction of documents 

21 sought pursuant to the rules of such Federal court pro22 ceeding and highly relevant to that proceeding— 

23 (1) shall be punished with mandatory civil sanc24 tions of a degree commensurate with the civil sanc25 tions available under Rule 11 of the Federal Rules 


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1 of Civil Procedure, in addition to any other civil 

2 sanctions that otherwise apply; and 

3 (2) shall be held in contempt of court and, if 

4 an attorney, referred to one or more appropriate 

5 State bar associations for disciplinary proceedings. 

6 SEC. 129. BAN ON CONCEALMENT OF UNLAWFUL CONDUCT. 

7 (a) IN GENERAL.—In any Rule 11 of the Federal 

8 Rules of Civil Procedure proceeding, a court may not order 

9 that a court record not be disclosed unless the court makes 

10 a finding of fact that identifies the interest that justifies 

11 the order and determines that that interest outweighs any 

12 interest in the public health and safety that the court de13 termines would be served by disclosing the court record. 

14 (b) APPLICABILITY.—This section applies to any 

15 record formally filed with the court, but shall not include 

16 any records subject to— 

17 (1) the attorney-client privilege or any other 

18 privilege recognized under Federal or State law that 

19 grants the right to prevent disclosure of certain in20 formation unless the privilege has been waived; or 

21 (2) applicable State or Federal laws that pro22 tect the confidentiality of crime victims, including 

23 victims of sexual abuse. 


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1 TITLE II—INCREASE AMERICA’S 

2 TALENT POOL 

3 SEC. 201. INNOVATION SCHOLARSHIP PROGRAM. 

4 Subpart 6 of part A of title IV is amended to read 

5 as follows: 

6 ‘‘Subpart 6—Innovation Scholarship Program 

7 ‘‘SEC. 419A. INNOVATION MATHEMATICS AND SCIENCE 

8 HONORS SCHOLARSHIP PROGRAM. 

9 ‘‘(a) PURPOSE.—The purpose of this section is to 

10 award scholarships to students who are enrolled in studies 

11 leading to baccalaureate and advanced degrees in physical, 

12 life, or computer sciences, mathematics, and engineering. 

13 ‘‘(b) DEFINITIONS.—As used in this section— 

14 ‘‘(1) the term ‘computer science’ means the 

15 branch of knowledge or study of computers, includ16 ing such fields of knowledge or study as computer 

17 hardware, computer software, computer engineering, 

18 information systems, and robotics; 

19 ‘‘(2) the term ‘eligible student’ means a student 

20 who— 

21 ‘‘(A) is a citizen of the United States; 

22 ‘‘(B) is selected by the managing agent to 

23 receive a scholarship; 


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1 ‘‘(C) is enrolled full-time in an institution 

2 of higher education, other than a United States 

3 service academy; and 

4 ‘‘(D) has shown a commitment to and is 

5 pursuing a major in studies leading to a bacca6 laureate, masters, or doctoral degree (or a com7 bination thereof) in physical, life, or computer 

8 sciences, mathematics, or engineering; 

9 ‘‘(3) the term ‘engineering’ means the science 

10 by which the properties of matter and the sources of 

11 energy in nature are made useful to humanity in 

12 structures, machines, and products, as in the con13 struction of engines, bridges, buildings, mines, and 

14 chemical plants, including such fields of knowledge 

15 or study as aeronautical engineering, chemical engi16 neering, civil engineering, electrical engineering, in17 dustrial engineering, materials engineering, manu18 facturing engineering, and mechanical engineering; 

19 ‘‘(4) the term ‘life sciences’ means the branch 

20 of knowledge or study of living things, including 

21 such fields of knowledge or study as biology, bio22 chemistry, biophysics, microbiology, genetics, physi23 ology, botany, zoology, ecology, and behavioral biol24 ogy, except that the term does not encompass social 

25 psychology or the health professions; 


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1 ‘‘(5) the term ‘managing agent’ means an enti2 ty to which an award is made under subsection (c) 

3 to manage a program of Mathematics and Science 

4 Honors Scholarships; 

5 ‘‘(6) the term ‘mathematics’ means the branch 

6 of knowledge or study of numbers and the system7 atic treatment of magnitude, relationships between 

8 figures and forms, and relations between quantities 

9 expressed symbolically, including such fields of 

10 knowledge or study as statistics, applied mathe11 matics, and operations research; and 

12 ‘‘(7) the term ‘physical sciences’ means the 

13 branch of knowledge or study of the material uni14 verse, including such fields of knowledge or study as 

15 astronomy, atmospheric sciences, chemistry, earth 

16 sciences, ocean sciences, physics, and planetary 

17 sciences. 

18 ‘‘(c) AWARD.— 

19 ‘‘(1)(A) From funds authorized under section 

20 419D to carry out this section, the Secretary is au21 thorized, through a grant or cooperative agreement, 

22 to make an award to a private, non-profit organiza23 tion, other than an institution of higher education or 

24 system of institutions of higher education, to man25 age, through a public and private partnership, a proVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 gram of Mathematics and Science Honors Scholar2 ships under this section. 

3 ‘‘(B) The award under subparagraph (A) shall 

4 be for a five-year period. 

5 ‘‘(2)(A) One hundred percent of the funds 

6 awarded under paragraph (1)(A) for any fiscal year 

7 shall be obligated and expended solely on scholar8 ships to eligible students. 

9 ‘‘(B) No Federal funds shall be used to provide 

10 more than 50 percent of the cost of any scholarship 

11 to an eligible student. 

12 ‘‘(C) The maximum scholarship award shall be 

13 the difference between an eligible student’s cost of 

14 attendance minus any non-loan based aid such stu15 dent receives. 

16 ‘‘(3)(A) The secretary may establish— 

17 ‘‘(i) eligibility criteria for applicants for 

18 managing agent, including criteria regarding fi19 nancial and administrative capability; and 

20 ‘‘(ii) operational standards for the man21 aging agent, including management and per22 formance requirements, such as audit, record23 keeping, record retention, and reporting proce24 dures and requirements. 


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1 ‘‘(B) The Secretary, as necessary, may review 

2 and revise any criteria, standards, and rules estab3 lished under this paragraph and, through the agree4 ment with the managing agent, see that any revi5 sions are implemented. 

6 ‘‘(4) If the managing agent fails to meet the re7 quirements of this section the Secretary may termi8 nate the award to the managing agent. 

9 ‘‘(5) The Secretary shall conduct outreach ef10 forts to help raise awareness of the Mathematics and 

11 Science Honors Scholarships. 

12 ‘‘(d) DUTIES OF THE MANAGING AGENT.—The man13 aging agent shall— 

14 ‘‘(1) develop criteria to award Mathematics and 

15 Science Honors Scholarships based on established 

16 measurements available to secondary students who 

17 wish to pursue degrees in physical, life, or computer 

18 sciences, mathematics, and engineering; 

19 ‘‘(2) establish a Mathematics and Science Hon20 ors Scholarship Fund in a separate, named account 

21 that clearly discloses the amount of Federal and 

22 non-Federal funds deposited in the account and used 

23 for scholarships under this section; 


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1 ‘‘(3) solicit funds for scholarships and for the 

2 administration of the program from non-Federal 

3 sources; 

4 ‘‘(4) solicit applicants for scholarships; 

5 ‘‘(5) from the amounts in the Fund, award 

6 scholarships to eligible students and transfer such 

7 funds to the institutions of higher education that 

8 they attend; and 

9 ‘‘(6) annually submit to the Secretary a finan10 cial audit and a report on the progress of the pro11 gram, and such other documents as the Secretary 

12 may require to determine the effective management 

13 of the program. 

14 ‘‘(e) APPLICATIONS.— 

15 ‘‘(1) Any eligible entity that desires to be the 

16 managing agent under this section shall submit an 

17 application to the Secretary, in such form and con18 taining such information, as the Secretary may re19 quire. 

20 ‘‘(2) Each application shall include a descrip21 tion of— 

22 ‘‘(A) how the applicant meets or will meet 

23 requirements established under subsections 

24 (c)(3)(A) and (d); 


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1 ‘‘(B) how the applicant will solicit funds 

2 for scholarships and for the administration of 

3 the program from non-Federal sources; 

4 ‘‘(C) how the applicant will provide nation5 wide outreach to inform students about the pro6 gram and to encourage students to pursue de7 grees in physical, life, or computer sciences, 

8 mathematics, and engineering; 

9 ‘‘(D) how the applicant will solicit applica10 tions for scholarships, including how the appli11 cant will balance efforts in urban and rural 

12 areas; 

13 ‘‘(E) the selection criteria based on estab14 lished measurements available to secondary stu15 dents the applicant will use to award scholar16 ships and to renew those awards; 

17 ‘‘(F) how the applicant will inform the in18 stitution of higher education chosen by the re19 cipient of the name and scholarship amount of 

20 the recipient; 

21 ‘‘(G) what procedures and assurances the 

22 applicant and the institution of higher edu23 cation that the recipient attends will use to 

24 verify student eligibility, attendance, degree 

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1 liver and account for payments to such institu2 tion; 

3 ‘‘(H) the management (including audit and 

4 accounting) procedures the applicant will use 

5 for the program; 

6 ‘‘(I) the human, financial, and other re7 sources that the applicant will need and use to 

8 manage the program; 

9 ‘‘(J) how the applicant will evaluate the 

10 program and report to the Secretary annually; 

11 and 

12 ‘‘(K) a description of how the entity will 

13 coordinate with, complement, and build on simi14 lar public and private mathematics and science 

15 programs. 

16 ‘‘(f) SCHOLARSHIP RECIPIENTS.— 

17 ‘‘(1) A student receiving a scholarship under 

18 this section shall be known as a ‘Innovation Mathe19 matics and Science Honors Scholar’. 

20 ‘‘(2) Any student desiring to receive a scholar21 ship under this section shall submit an application 

22 to the managing agent in such form, and containing 

23 such information, as the managing agent may re24 quire. 


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1 ‘‘(3) Any student that receives a scholarship 

2 under this section shall enter into an agreement with 

3 the managing agent to complete 5 consecutive years 

4 of service to begin no later than 12 months following 

5 completion of the final degree in a position related 

6 to physical, life, or computer sciences, mathematics, 

7 or engineering as defined under this section. 

8 ‘‘(4) If any student that receives a scholarship 

9 under this section fails to earn at least a bacca10 laureate degree in physical, life, or computer 

11 sciences, mathematics, or engineering as defined 

12 under this section, the student shall repay to the 

13 managing agent the amount of any financial assist14 ance paid to such student. 

15 ‘‘(5) If any student that receives a scholarship 

16 under this section fails to meet the requirements of 

17 paragraph (3), the student shall repay to the man18 aging agent the amount of any financial assistance 

19 paid to such student. 

20 ‘‘(6)(A) Scholarships shall be awarded for only 

21 one academic year of study at a time. 

22 ‘‘(B)(i) A scholarship shall be renewable on an 

23 annual basis for the established length of the aca24 demic program if the student awarded the scholar25 ship remains eligible. 


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1 ‘‘(ii) The managing agent may condition re2 newal of a scholarship on measures of academic 

3 progress and achievement, with the approval of the 

4 Secretary. 

5 ‘‘(C)(i) If a student fails to either remain eligi6 ble or meet established measures of academic 

7 progress and achievement, the managing agent shall 

8 instruct the student’s institution of higher education 

9 to suspend payment of the student’s scholarship. 

10 ‘‘(ii) A suspension of payment shall remain in 

11 effect until the student is able to demonstrate to the 

12 satisfaction of the managing agent that he or she is 

13 again eligible and meets the established measures of 

14 academic progress and achievement. 

15 ‘‘(iii) A student’s eligibility for a scholarship 

16 shall be terminated if a suspension period exceeds 

17 12 months. 

18 ‘‘(D)(i)(I) A student awarded a scholarship 

19 may, in a manner and under the terms established 

20 by, and with the approval of, the managing agent, 

21 postpone or interrupt his or her enrollment at an in22 stitution of higher education for up to 12 months. 

23 ‘‘(II) Such a postponement or interruption shall 

24 not be considered a suspension for purposes of sub25 paragraph (C). 


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1 ‘‘(ii) Neither a student nor the student’s insti2 tution of higher education shall receive the student’s 

3 scholarship payments during the period of postpone4 ment or interruption, but such payments shall re5 sume upon enrollment or reenrollment. 

6 ‘‘(iii) In exceptional circumstances, such as seri7 ous injury or illness or the necessity to care for fam8 ily members, the student’s postponement or inter9 ruption may, upon notification and approval of the 

10 managing agent, be extended beyond the 12 month 

11 period described in clause (i)(I). 

12 ‘‘(g) RESPONSIBILITIES OF INSTITUTION OF HIGHER

13 EDUCATION.— 

14 ‘‘(1) The managing agent shall require any in15 stitution of higher education that enrolls a student 

16 who receives a scholarship under this section to an17 nually provide an assurance, prior to making any 

18 payment, that the student— 

19 ‘‘(A) is eligible in accordance with sub20 section (b)(2); and 

21 ‘‘(B) has provided the institution with a 

22 written commitment to attend, or is attending, 

23 classes and is satisfactorily meeting the institu24 tion’s academic criteria for enrollment in its 

25 program of study. 


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1 ‘‘(2)(A) The managing agent shall provide the 

2 institution of higher education with payments from 

3 the Fund for selected recipients in at least two in4 stallments. 

5 ‘‘(B) An institution of higher education shall re6 turn prorated amounts of any scholarship payment 

7 to the managing agent, who shall deposit it in to the 

8 Fund, if a recipient declines a scholarship, does not 

9 attend courses, transfers to another institution of 

10 higher education, or becomes ineligible for a scholar11 ship. 

12 ‘‘SEC. 419B. MATHEMATICS AND SCIENCE INCENTIVE PRO13 GRAM. 

14 ‘‘(a) PROGRAM.— 

15 ‘‘(1) IN GENERAL.—The Secretary is authorized 

16 to carry out a program of assuming the obligation 

17 to pay, pursuant to the provisions of this section, the 

18 interest on a loan made, insured, or guaranteed 

19 under part B or D of this title. 

20 ‘‘(2) ELIGIBILITY.—The Secretary may assume 

21 interest payments under paragraph (1) only for a 

22 borrower who— 

23 ‘‘(A) has submitted an application in com24 pliance with subsection (d); 


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1 ‘‘(B) obtained one or more loans described 

2 in paragraph (1) as an undergraduate student; 

3 ‘‘(C) is a new borrower (within the mean4 ing of section 103(7) of this Act) on or after 

5 the date of enactment of the College Access and 

6 Opportunity Act of 2005; 

7 ‘‘(D) is a highly qualified teacher of 

8 science, technology, engineering or mathematics 

9 at an elementary or secondary school in a high 

10 need local educational agency, or is a mathe11 matics, science, or engineering professional; and 

12 ‘‘(E) enters into an agreement with the 

13 Secretary to complete 5 consecutive years of 

14 service in a position described in subparagraph 

15 (D), starting on the date of the agreement. 

16 ‘‘(3) PRIOR INTEREST LIMITATIONS.—The Sec17 retary shall not make any payments for interest 

18 that— 

19 ‘‘(A) accrues prior to the beginning of the 

20 repayment period on a loan in the case of a 

21 loan made under section 428H or a Federal Di22 rect Unsubsidized Stafford Loan; or 

23 ‘‘(B) has accrued prior to the signing of an 

24 agreement under paragraph (2)(E). 


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1 ‘‘(4) INITIAL SELECTION.—In selecting partici2 pants for the program under this section, the Sec3 retary— 

4 ‘‘(A) shall choose among eligible applicants 

5 on the basis of— 

6 ‘‘(i) the national security, homeland 

7 security, and economic security needs of 

8 the United States, as determined by the 

9 Secretary, in consultation with other Fed10 eral agencies, including the Departments 

11 of Labor, Defense, Homeland Security, 

12 Commerce, and Energy, the Central Intel13 ligence Agency, and the National Science 

14 Foundation; and 

15 ‘‘(ii) the academic record or job per16 formance of the applicant; and 

17 ‘‘(B) may choose among eligible applicants 

18 on the basis of— 

19 ‘‘(i) the likelihood of the applicant to 

20 complete the 5-year service obligation; 

21 ‘‘(ii) the likelihood of the applicant to 

22 remain in science, mathematics, or engi23 neering after the completion of the service 

24 requirement; or 


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1 ‘‘(iii) other relevant criteria deter2 mined by the Secretary. 

3 ‘‘(5) AVAILABILITY SUBJECT TO APPROPRIA4 TIONS.—Loan interest payments under this section 

5 shall be subject to the availability of appropriations. 

6 If the amount appropriated for any fiscal year is not 

7 sufficient to provide interest payments on behalf of 

8 all qualified applicants, the Secretary shall give pri9 ority to those individuals on whose behalf interest 

10 payments were made during the preceding fiscal 

11 year. 

12 ‘‘(6) REGULATIONS.—The Secretary is author13 ized to prescribe such regulations as may be nec14 essary to carry out the provisions of this section. 

15 ‘‘(b) DURATION AND AMOUNT OF INTEREST PAY16 MENTS.—The period during which the Secretary shall pay 

17 interest on behalf of a student borrower who is selected 

18 under subsection (a) is the period that begins on the effec19 tive date of the agreement under subsection (a)(2)(E), 

20 continues after successful completion of the service obliga21 tion, and ends on the earlier of— 

22 ‘‘(1) the completion of the repayment period of 

23 the loan; 

24 ‘‘(2) payment by the Secretary of a total of 

25 $5,000 on behalf of the borrower; 


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1 ‘‘(3) if the borrower ceases to fulfill the service 

2 obligation under such agreement prior to the end of 

3 the 5-year period, as soon as the borrower is deter4 mined to have ceased to fulfill such obligation in ac5 cordance with regulations of the Secretary; or 

6 ‘‘(4) 6 months after the end of any calendar 

7 year in which the borrower’s gross income equals or 

8 exceeds 4 times the national per capita disposable 

9 personal income (current dollars) for such calendar 

10 year, as determined on the basis of the National In11 come and Product Accounts Tables of the Bureau of 

12 Economic Analysis of the Department of Commerce, 

13 as determined in accordance with regulations pre14 scribed by the Secretary. 

15 ‘‘(c) REPAYMENT TO ELIGIBLE LENDERS.—Subject 

16 to the regulations prescribed by the Secretary by regula17 tion under subsection (a)(6), the Secretary shall pay to 

18 each eligible lender or holder for each payment period the 

19 amount of the interest that accrues on a loan of a student 

20 borrower who is selected under subsection (a). 

21 ‘‘(d) APPLICATION FOR REPAYMENT.— 

22 ‘‘(1) IN GENERAL.—Each eligible individual de23 siring loan interest payment under this section shall 

24 submit a complete and accurate application to the 

25 Secretary at such time, in such manner, and conVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 taining such information as the Secretary may re2 quire. 

3 ‘‘(2) FAILURE TO COMPLETE SERVICE AGREE4 MENT.—Such application shall contain an agreement 

5 by the individual that, if the individual fails to com6 plete the 5 consecutive years of service required by 

7 subsection (a)(2)(E), the individual agrees to repay 

8 the Secretary the amount of any interest paid by the 

9 Secretary on behalf of the individual. 

10 ‘‘(e) TREATMENT OF CONSOLIDATION LOANS.—A 

11 consolidation loan made under section 428C of this Act, 

12 or a Federal Direct Consolidation Loan made under part 

13 D of title IV of this Act, may be a qualified loan for the 

14 purpose of this section only to the extent that such loan 

15 amount was used by a borrower who otherwise meets the 

16 requirements of this section to repay— 

17 ‘‘(1) a loan made under section 428 or 428H 

18 of this Act; or 

19 ‘‘(2) a Federal Direct Stafford Loan, or a Fed20 eral Direct Unsubsidized Stafford Loan, made under 

21 part D of title IV of this Act. 

22 ‘‘(f) PREVENTION OF DOUBLE BENEFITS.—No bor23 rower may, for the same service, receive a benefit under 

24 both this section and— 


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1 ‘‘(1) any loan forgiveness program under title 

2 IV of this Act; or 

3 ‘‘(2) subtitle D of title I of the National and 

4 Community Service Act of 1990 (42 U.S.C. 12601 

5 et seq.). 

6 ‘‘(g) DEFINITIONS.—As used in this section— 

7 ‘‘(1) the term ‘high need local educational agen8 cy’ has the same meaning given such term in section 

9 201(b)(4); and 

10 ‘‘(2) the term ‘mathematics, science, or engi11 neering professional’ means a person who— 

12 ‘‘(A) holds a baccalaureate, masters, or 

13 doctoral degree (or a combination thereof) in 

14 science, mathematics, or engineering; and 

15 ‘‘(B) works in a field the Secretary deter16 mines is closely related to that degree, which 

17 shall include working as a professor at a two18 or four-year institution of higher education. 

19 ‘‘SEC. 419C. MATHEMATICS AND SCIENCE EDUCATION CO20 ORDINATING COUNCIL GRANTS. 

21 ‘‘(a) PURPOSES.—The purposes of this section in22 clude— 

23 ‘‘(1) supporting programs that encourage stu24 dents to enroll in and successfully complete baccaVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00038 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 laureate and advanced degrees in science, tech2 nology, engineering, and mathematics; 

3 ‘‘(2) achieving the common objective of orga4 nizing, leading, and implementing State-based re5 form agendas that support the continuing improve6 ment of mathematics and science education; and 

7 ‘‘(3) improving collaboration in a State among 

8 the State educational agency, 2-year and 4-year in9 stitutions of higher education, and the business com10 munity through the development or improvement of 

11 a coordinating council. 

12 ‘‘(b) DEFINITIONS.—For the purposes of this section: 

13 ‘‘(1) the term ‘eligible State’ means— 

14 ‘‘(A) the Governor of a State; or 

15 ‘‘(B) in the case of a State for which the 

16 constitution or laws of the State designate an 

17 individual, entity, or agency in the State, other 

18 than the Governor, to be responsible for coordi19 nation among segments of the State’s edu20 cational systems, such individual, entity, or 

21 agency. 

22 ‘‘(2) the term ‘mathematics and science edu23 cation coordinating council’ means an organization 

24 that is charged by a State with coordinating mathe25 matics and science education in the State. Such a 


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1 council shall be composed of education, business, 

2 and community leaders working together to increase 

3 student participation and academic achievement in 

4 mathematics and science. 

5 ‘‘(c) STATE GRANTS.—From amounts made available 

6 under section 419D for this section, the Secretary is au7 thorized to use not more than $5,000,000 to award grants 

8 on a competitive basis to eligible States for the purpose 

9 of carrying out activities described in subsection (d). 

10 ‘‘(d) USES OF FUNDS.—An eligible State that re11 ceives a grant under this section is authorized to use grant 

12 funds to carry out one or more of the following activities: 

13 ‘‘(1) In a State in which a mathematics and 

14 science education coordinating council does not exist, 

15 planning and establishing such a council. 

16 ‘‘(2) In a State in which such a council exists, 

17 reforming or expanding the activities of the council, 

18 including implementing State-based reform agendas 

19 that support the continuing improvement of mathe20 matics and science education, and support services 

21 that lead to better teacher recruitment and training, 

22 increased student academic achievement, and in23 creased student enrollment and degree attainment in 

24 science, technology, engineering, and mathematics. 


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1 ‘‘(3) Coordinating with activities under part B 

2 of title II of the Elementary and Secondary Edu3 cation Act of 1965 and with title II of this Act, es4 pecially as it pertains to the recruitment and prepa5 ration of highly qualified mathematics and science 

6 teachers. 

7 ‘‘(e) APPLICATION.—To be eligible to receive a grant 

8 under this section, an eligible State shall submit an appli9 cation to the Secretary that— 

10 ‘‘(1) describes the activities the State will carry 

11 out with the funds; 

12 ‘‘(2) contains a plan for continuing such activi13 ties once Federal funding ceases; and 

14 ‘‘(3) contains such other information and assur15 ances as the Secretary may require. 

16 ‘‘(f) CONSULTATION.—The Governor of a State, or 

17 the individual, entity, or agency in the State described in 

18 subsection (b)(1)(B), shall consult with the State board 

19 of education, State educational agency, and the State 

20 agency for higher education, as appropriate, with respect 

21 to the activities assisted under this section. In the case 

22 of an individual, entity, or agency described in subsection 

23 (b)(1)(B), such consultation shall also include the Gov24 ernor. 


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1 ‘‘(g) CONSTRUCTION.—Nothing in this section shall 

2 be construed to negate or supersede the legal authority 

3 under State law of any State agency, State entity, or State 

4 public official over programs that are under the jurisdic5 tion of the agency, entity, or official. 

6 ‘‘(h) ADMINISTRATIVE PROVISIONS.— 

7 ‘‘(1) IN GENERAL.— 

8 ‘‘(A) Grants awarded under this section 

9 shall be awarded for a period not to exceed 5 

10 years. 

11 ‘‘(B) A grantee may receive a grant under 

12 this part only once. 

13 ‘‘(C) Payments of grant funds under this 

14 section shall be annual. 

15 ‘‘(2) SECRETARIAL SELECTIONS.—The Sec16 retary shall determine which applications receive 

17 funds under this section, and the amount of the 

18 grant. In determining grant amounts, the Secretary 

19 shall take into account the total amount of funds 

20 available for all grants under this section and the 

21 nature of each grant proposal, including whether 

22 funds are being sought to assist in the creation of 

23 a new State mathematics and science education co24 ordinating council or to extend the work of an exist25 ing council. The Secretary shall also take into acVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00042 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 count the equitable geographic distribution of grants 

2 throughout the United States. 

3 ‘‘(3) MATCHING REQUIREMENT.—Each eligible 

4 State receiving a grant under this section shall pro5 vide, from non-Federal sources, an amount equal to 

6 50 percent of the amount of the grant (in cash or 

7 in kind) to carry out the activities supported by the 

8 grant. 

9 ‘‘(i) ACCOUNTABILITY AND EVALUATION.— 

10 ‘‘(1) STATE GRANT ACCOUNTABILITY RE11 PORT.—An eligible State that receives a grant under 

12 this section shall submit an annual accountability re13 port to the Secretary. Such report shall include a de14 scription of the degree to which the eligible State, in 

15 using grant funds, has made substantial progress in 

16 meeting its objectives. 

17 ‘‘(2) EVALUATION AND DISSEMINATION.—The 

18 Secretary shall evaluate the activities funded under 

19 this section and report the Secretary’s findings re20 garding such activities to the authorizing commit21 tees. The Secretary shall broadly disseminate suc22 cessful practices developed by eligible States under 

23 this section, and shall broadly disseminate informa24 tion regarding such practices that were found to be 

25 ineffective. 


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1 ‘‘(3) REVOCATION.—If the Secretary deter2 mines that an eligible State is not making substan3 tial progress in meeting the purposes, objectives, and 

4 measures, as appropriate, required under this sec5 tion by the end of the second year of a grant, then 

6 the grant payment shall not be made for the third 

7 year and subsequent years of the grant. 

8 ‘‘SEC. 419D. AUTHORIZATION OF APPROPRIATIONS. 

9 ‘‘There are authorized to be appropriated 

10 $41,000,000 for fiscal year 2006 and such sums as may 

11 be necessary for each of the 5 succeeding fiscal years to 

12 carry out this subpart.’’. 

13 TITLE III—PROMOTION OF 

14 RESEARCH AND DEVELOPMENT 

15 SEC. 301. SHORT TITLE. 

16 This title may be cited as the ‘‘Investment in America 

17 Act of 2006’’. 

18 SEC. 302. FINDINGS. 

19 The Congress finds as follows: 

20 (1) Research and development performed in the 

21 United States results in quality jobs, better and 

22 safer products, increased ownership of technology23 based intellectual property, and higher productivity 

24 in the United States. 


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1 (2) The extent to which companies perform and 

2 increase research and development activities in the 

3 United States is in part dependent on Federal tax 

4 policy. 

5 (3) The Congress should make permanent a re6 search and development credit that provides a mean7 ingful incentive to all types of taxpayers. 

8 SEC. 303. PERMANENT EXTENSION OF RESEARCH CREDIT. 

9 (a) IN GENERAL.—Section 41 of the Internal Rev10 enue Code of 1986 (relating to credit for increasing re11 search activities) is amended by striking subsection (h). 

12 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

13 section 45C(b) of such Code is amended by striking sub14 paragraph (D). 

15 (c) EFFECTIVE DATE.—The amendments made by 

16 this section shall apply to amounts paid or incurred after 

17 the date of the enactment of this Act. 

18 SEC. 304. INCREASE IN RATES OF ALTERNATIVE INCRE19 MENTAL CREDIT. 

20 (a) IN GENERAL.—Subparagraph (A) of section 

21 41(c)(4) of the Internal Revenue Code of 1986 (relating 

22 to election of alternative incremental credit) is amended— 

23 (1) by striking ‘‘2.65 percent’’ and inserting ‘‘3 

24 percent’’, 


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1 (2) by striking ‘‘3.2 percent’’ and inserting ‘‘4 

2 percent’’, and 

3 (3) by striking ‘‘3.75 percent’’ and inserting ‘‘5 

4 percent’’. 

5 (b) EFFECTIVE DATE.—The amendment made by 

6 this section shall apply to taxable years ending after the 

7 date of the enactment of this Act. 

8 SEC. 305. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALI9 FIED RESEARCH EXPENSES. 

10 (a) IN GENERAL.—Subsection (c) of section 41 of the 

11 Internal Revenue Code of 1986 (relating to base amount) 

12 is amended by redesignating paragraphs (5) and (6) as 

13 paragraphs (6) and (7), respectively, and by inserting 

14 after paragraph (4) the following new paragraph: 

15 ‘‘(5) ELECTION OF ALTERNATIVE SIMPLIFIED

16 CREDIT.— 

17 ‘‘(A) IN GENERAL.—At the election of the 

18 taxpayer, the credit determined under sub19 section (a)(1) shall be equal to 12 percent of so 

20 much of the qualified research expenses for the 

21 taxable year as exceeds 50 percent of the aver22 age qualified research expenses for the 3 tax23 able years preceding the taxable year for which 

24 the credit is being determined. 


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1 ‘‘(B) SPECIAL RULE IN CASE OF NO

2 QUALIFIED RESEARCH EXPENSES IN ANY OF 3

3 PRECEDING TAXABLE YEARS.— 

4 ‘‘(i) TAXPAYERS TO WHICH SUBPARA5 GRAPH APPLIES.—The credit under this 

6 paragraph shall be determined under this 

7 subparagraph if the taxpayer has no quali8 fied research expenses in any one of the 3 

9 taxable years preceding the taxable year 

10 for which the credit is being determined. 

11 ‘‘(ii) CREDIT RATE.—The credit de12 termined under this subparagraph shall be 

13 equal to 6 percent of the qualified research 

14 expenses for the taxable year. 

15 ‘‘(C) ELECTION.—An election under this 

16 paragraph shall apply to the taxable year for 

17 which made and all succeeding taxable years 

18 unless revoked with the consent of the Sec19 retary. An election under this paragraph may 

20 not be made for any taxable year to which an 

21 election under paragraph (4) applies.’’. 

22 (b) COORDINATION WITH ELECTION OF ALTER23 NATIVE INCREMENTAL CREDIT.— 

24 (1) IN GENERAL.—Section 41(c)(4)(B) of such 

25 Code (relating to election) is amended by adding at 


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1 the end the following: ‘‘An election under this para2 graph may not be made for any taxable year to 

3 which an election under paragraph (5) applies.’’. 

4 (2) TRANSITION RULE.—In the case of an elec5 tion under section 41(c)(4) of the Internal Revenue 

6 Code of 1986 which applies to the taxable year 

7 which includes the date of the enactment of this Act, 

8 such election shall be treated as revoked with the 

9 consent of the Secretary of the Treasury if the tax10 payer makes an election under section 41(c)(5) of 

11 such Code (as added by subsection (a)) for such 

12 year. 

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

14 this section shall apply to taxable years ending after the 

15 date of the enactment of this Act. 

16 TITLE IV—INCREASE ACCESS TO 

17 AND EFFICIENCY OF HEALTH 

18 CARE 

19 Subtitle A—Health Care Choice 

20 SEC. 401. SHORT TITLE OF SUBTITLE. 

21 This subtitle may be cited as ‘‘Health Care Choice 

22 Act of 2006’’. 


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1 SEC. 402. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

2 FOR ENACTMENT OF LAW. 

3 This subtitle is enacted pursuant to the power grant4 ed Congress under article I, section 8, clause 3, of the 

5 United States Constitution. 

6 SEC. 403. FINDINGS. 

7 Congress finds the following: 

8 (1) The application of numerous and significant 

9 variations in State law impacts the ability of insur10 ers to offer, and individuals to obtain, affordable in11 dividual health insurance coverage, thereby impeding 

12 commerce in individual health insurance coverage. 

13 (2) Individual health insurance coverage is in14 creasingly offered through the Internet, other elec15 tronic means, and by mail, all of which are inher16 ently part of interstate commerce. 

17 (3) In response to these issues, it is appropriate 

18 to encourage increased efficiency in the offering of 

19 individual health insurance coverage through a col20 laborative approach by the States in regulating this 

21 coverage. 

22 (4) The establishment of risk-retention groups 

23 has provided a successful model for the sale of insur24 ance across State lines, as the acts establishing 

25 those groups allow insurance to be sold in multiple 

26 States but regulated by a single State. 


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1 SEC. 404. COOPERATIVE GOVERNING OF INDIVIDUAL 

2 HEALTH INSURANCE COVERAGE. 

3 (a) IN GENERAL.—Title XXVII of the Public Health 

4 Service Act (42 U.S.C. 300gg et seq.) is amended by add5 ing at the end the following new part: 

6 ‘‘PART D—COOPERATIVE GOVERNING OF INDIVIDUAL

7 HEALTH INSURANCE COVERAGE

8 ‘‘DEFINITIONS

9 ‘‘SEC. 2795. In this part: 

10 ‘‘(1) PRIMARY STATE.—The term ‘primary 

11 State’ means, with respect to individual health insur12 ance coverage offered by a health insurance issuer, 

13 the State designated by the issuer as the State 

14 whose covered laws shall govern the health insurance 

15 issuer in the sale of such coverage under this part. 

16 An issuer, with respect to a particular policy, may 

17 only designate one such State as its primary State 

18 with respect to all such coverage it offers. Such an 

19 issuer may not change the designated primary State 

20 with respect to individual health insurance coverage 

21 once the policy is issued, except that such a change 

22 may be made upon renewal of the policy. With re23 spect to such designated State, the issuer is deemed 

24 to be doing business in that State. 

25 ‘‘(2) SECONDARY STATE.—The term ‘secondary 

26 State’ means, with respect to individual health insurVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00050 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 ance coverage offered by a health insurance issuer, 

2 any State that is not the primary State. In the case 

3 of a health insurance issuer that is selling a policy 

4 in, or to a resident of, a secondary State, the issuer 

5 is deemed to be doing business in that secondary 

6 State. 

7 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

8 ‘health insurance issuer’ has the meaning given such 

9 term in section 2791(b)(2), except that such an 

10 issuer must be licensed in the primary State and be 

11 qualified to sell individual health insurance coverage 

12 in that State. 

13 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV14 ERAGE.—The term ‘individual health insurance cov15 erage’ means health insurance coverage offered in 

16 the individual market, as defined in section 

17 2791(e)(1). 

18 ‘‘(5) APPLICABLE STATE AUTHORITY.—The 

19 term ‘applicable State authority’ means, with respect 

20 to a health insurance issuer in a State, the State in21 surance commissioner or official or officials des22 ignated by the State to enforce the requirements of 

23 this title for the State with respect to the issuer. 

24 ‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 

25 term ‘hazardous financial condition’ means that, 


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1 based on its present or reasonably anticipated finan2 cial condition, a health insurance issuer is unlikely 

3 to be able— 

4 ‘‘(A) to meet obligations to policyholders 

5 with respect to known claims and reasonably 

6 anticipated claims; or 

7 ‘‘(B) to pay other obligations in the normal 

8 course of business. 

9 ‘‘(7) COVERED LAWS.—The term ‘covered laws’ 

10 means the laws, rules, regulations, agreements, and 

11 orders governing the insurance business pertaining 

12 to— 

13 ‘‘(A) individual health insurance coverage 

14 issued by a health insurance issuer; 

15 ‘‘(B) the offer, sale, and issuance of indi16 vidual health insurance coverage to an indi17 vidual; and 

18 ‘‘(C) the provision to an individual in rela19 tion to individual health insurance coverage 

20 of— 

21 ‘‘(i) health care and insurance related 

22 services; 

23 ‘‘(ii) management, operations, and in24 vestment activities of a health insurance 

25 issuer; and 


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1 ‘‘(iii) loss control and claims adminis2 tration for a health insurance issuer with 

3 respect to liability for which the issuer pro4 vides insurance. 

5 ‘‘(8) STATE.—The term ‘State’ means only the 

6 50 States and the District of Columbia. 

7 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC8 TICES.—The term ‘unfair claims settlement prac9 tices’ means only the following practices: 

10 ‘‘(A) Knowingly misrepresenting to claim11 ants and insured individuals relevant facts or 

12 policy provisions relating to coverage at issue. 

13 ‘‘(B) Failing to acknowledge with reason14 able promptness pertinent communications with 

15 respect to claims arising under policies. 

16 ‘‘(C) Failing to adopt and implement rea17 sonable standards for the prompt investigation 

18 and settlement of claims arising under policies. 

19 ‘‘(D) Failing to effectuate prompt, fair, 

20 and equitable settlement of claims submitted in 

21 which liability has become reasonably clear. 

22 ‘‘(E) Refusing to pay claims without con23 ducting a reasonable investigation. 

24 ‘‘(F) Failing to affirm or deny coverage of 

25 claims within a reasonable period of time after 


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1 having completed an investigation related to 

2 those claims. 

3 ‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 

4 and abuse’ means an act or omission committed by 

5 a person who, knowingly and with intent to defraud, 

6 commits, or conceals any material information con7 cerning, one or more of the following: 

8 ‘‘(A) Presenting, causing to be presented 

9 or preparing with knowledge or belief that it 

10 will be presented to or by an insurer, a rein11 surer, broker or its agent, false information as 

12 part of, in support of or concerning a fact ma13 terial to one or more of the following: 

14 ‘‘(i) An application for the issuance or 

15 renewal of an insurance policy or reinsur16 ance contract. 

17 ‘‘(ii) The rating of an insurance policy 

18 or reinsurance contract. 

19 ‘‘(iii) A claim for payment or benefit 

20 pursuant to an insurance policy or reinsur21 ance contract. 

22 ‘‘(iv) Premiums paid on an insurance 

23 policy or reinsurance contract. 


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1 ‘‘(v) Payments made in accordance 

2 with the terms of an insurance policy or 

3 reinsurance contract. 

4 ‘‘(vi) A document filed with the com5 missioner or the chief insurance regulatory 

6 official of another jurisdiction. 

7 ‘‘(vii) The financial condition of an in8 surer or reinsurer. 

9 ‘‘(viii) The formation, acquisition, 

10 merger, reconsolidation, dissolution or 

11 withdrawal from one or more lines of in12 surance or reinsurance in all or part of a 

13 State by an insurer or reinsurer. 

14 ‘‘(ix) The issuance of written evidence 

15 of insurance. 

16 ‘‘(x) The reinstatement of an insur17 ance policy. 

18 ‘‘(B) Solicitation or acceptance of new or 

19 renewal insurance risks on behalf of an insurer 

20 reinsurer or other person engaged in the busi21 ness of insurance by a person who knows or 

22 should know that the insurer or other person 

23 responsible for the risk is insolvent at the time 

24 of the transaction. 


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1 ‘‘(C) Transaction of the business of insur2 ance in violation of laws requiring a license, cer3 tificate of authority or other legal authority for 

4 the transaction of the business of insurance. 

5 ‘‘(D) Attempt to commit, aiding or abet6 ting in the commission of, or conspiracy to com7 mit the acts or omissions specified in this para8 graph. 

9 ‘‘APPLICATION OF LAW

10 ‘‘SEC. 2796. (a) IN GENERAL.—The covered laws of 

11 the primary State shall apply to individual health insur12 ance coverage offered by a health insurance issuer in the 

13 primary State and in any secondary State, but only if the 

14 coverage and issuer comply with the conditions of this sec15 tion with respect to the offering of coverage in any sec16 ondary State. 

17 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC18 ONDARY STATE.—Except as provided in this section, a 

19 health insurance issuer with respect to its offer, sale, re20 newal, and issuance of individual health insurance cov21 erage in any secondary State is exempt from any covered 

22 laws of the secondary State (and any rules, regulations, 

23 agreements, or orders sought or issued by such State 

24 under or related to such covered laws) to the extent that 

25 such laws would— 


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1 ‘‘(1) make unlawful, or regulate, directly or in2 directly, the operation of the health insurance issuer 

3 operating in the secondary State, except that any 

4 secondary State may require such an issuer— 

5 ‘‘(A) to pay, on a nondiscriminatory basis, 

6 applicable premium and other taxes (including 

7 high risk pool assessments) which are levied on 

8 insurers and surplus lines insurers, brokers, or 

9 policyholders under the laws of the State; 

10 ‘‘(B) to register with and designate the 

11 State insurance commissioner as its agent solely 

12 for the purpose of receiving service of legal doc13 uments or process; 

14 ‘‘(C) to submit to an examination of its fi15 nancial condition by the State insurance com16 missioner in any State in which the issuer is 

17 doing business to determine the issuer’s finan18 cial condition, if— 

19 ‘‘(i) the State insurance commissioner 

20 of the primary State has not done an ex21 amination within the period recommended 

22 by the National Association of Insurance 

23 Commissioners; and 

24 ‘‘(ii) any such examination is con25 ducted in accordance with the examiners’ 


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1 handbook of the National Association of 

2 Insurance Commissioners and is coordi3 nated to avoid unjustified duplication and 

4 unjustified repetition; 

5 ‘‘(D) to comply with a lawful order 

6 issued— 

7 ‘‘(i) in a delinquency proceeding com8 menced by the State insurance commis9 sioner if there has been a finding of finan10 cial impairment under subparagraph (C); 

11 or 

12 ‘‘(ii) in a voluntary dissolution pro13 ceeding; 

14 ‘‘(E) to comply with an injunction issued 

15 by a court of competent jurisdiction, upon a pe16 tition by the State insurance commissioner al17 leging that the issuer is in hazardous financial 

18 condition; 

19 ‘‘(F) to participate, on a nondiscriminatory 

20 basis, in any insurance insolvency guaranty as21 sociation or similar association to which a 

22 health insurance issuer in the State is required 

23 to belong; 

24 ‘‘(G) to comply with any State law regard25 ing fraud and abuse (as defined in section 


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1 2795(10)), except that if the State seeks an in2 junction regarding the conduct described in this 

3 subparagraph, such injunction must be obtained 

4 from a court of competent jurisdiction; or 

5 ‘‘(H) to comply with any State law regard6 ing unfair claims settlement practices (as de7 fined in section 2795(9)); 

8 ‘‘(2) require any individual health insurance 

9 coverage issued by the issuer to be countersigned by 

10 an insurance agent or broker residing in that Sec11 ondary State; or 

12 ‘‘(3) otherwise discriminate against the issuer 

13 issuing insurance in both the primary State and in 

14 any secondary State. 

15 ‘‘(c) CLEAR AND CONSPICUOUS DISCLOSURE.—A 

16 health insurance issuer shall provide the following, in 12- 

17 point bold type, in any insurance coverage offered in a 

18 secondary State under this part by such a health insur19 ance issuer and at renewal of the policy, with the 5 blank 

20 spaces therein being appropriately filled with the name of 

21 the health insurance issuer, the name of primary State, 

22 the name of the secondary State, the name of the sec23 ondary State, and the name of the secondary State, re24 spectively, for the coverage concerned: 


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1 ‘Notice 

2 ‘This policy is issued by lllll and is 

3 governed by the laws and regulations of the 

4 State of lllll, and it has met all the laws 

5 of that State as determined by that State’s De6 partment of Insurance. This policy may be 

7 less expensive than others because it is not 

8 subject to all of the insurance laws and regu9 lations of the State of lllll, including 

10 coverage of some services or benefits man11 dated by the law of the State of lllll. Ad12 ditionally, this policy is not subject to all of 

13 the consumer protection laws or restrictions 

14 on rate changes of the State of lllll. As 

15 with all insurance products, before pur16 chasing this policy, you should carefully re17 view the policy and determine what health 

18 care services the policy covers and what bene19 fits it provides, including any exclusions, limi20 tations, or conditions for such services or ben21 efits.’. 

22 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

23 AND PREMIUM INCREASES.— 

24 ‘‘(1) IN GENERAL.—For purposes of this sec25 tion, a health insurance issuer that provides indiVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00060 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 vidual health insurance coverage to an individual 

2 under this part in a primary or secondary State may 

3 not upon renewal— 

4 ‘‘(A) move or reclassify the individual in5 sured under the health insurance coverage from 

6 the class such individual is in at the time of 

7 issue of the contract based on the health-status 

8 related factors of the individual; or 

9 ‘‘(B) increase the premiums assessed the 

10 individual for such coverage based on a health 

11 status-related factor or change of a health sta12 tus-related factor or the past or prospective 

13 claim experience of the insured individual. 

14 ‘‘(2) CONSTRUCTION.—Nothing in paragraph 

15 (1) shall be construed to prohibit a health insurance 

16 issuer— 

17 ‘‘(A) from terminating or discontinuing 

18 coverage or a class of coverage in accordance 

19 with subsections (b) and (c) of section 2742; 

20 ‘‘(B) from raising premium rates for all 

21 policy holders within a class based on claims ex22 perience; 

23 ‘‘(C) from changing premiums or offering 

24 discounted premiums to individuals who engage 

25 in wellness activities at intervals prescribed by 


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1 the issuer, if such premium changes or incen2 tives— 

3 ‘‘(i) are disclosed to the consumer in 

4 the insurance contract; 

5 ‘‘(ii) are based on specific wellness ac6 tivities that are not applicable to all indi7 viduals; and 

8 ‘‘(iii) are not obtainable by all individ9 uals to whom coverage is offered; 

10 ‘‘(D) from reinstating lapsed coverage; or 

11 ‘‘(E) from retroactively adjusting the rates 

12 charged an individual insured individual if the 

13 initial rates were set based on material mis14 representation by the individual at the time of 

15 issue. 

16 ‘‘(e) PRIOR OFFERING OF POLICY IN PRIMARY

17 STATE.—A health insurance issuer may not offer for sale 

18 individual health insurance coverage in a secondary State 

19 unless that coverage is currently offered for sale in the 

20 primary State. 

21 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR

22 HEALTH INSURANCE ISSUERS.—Any State may require 

23 that a person acting, or offering to act, as an agent or 

24 broker for a health insurance issuer with respect to the 

25 offering of individual health insurance coverage obtain a 


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1 license from that State, except that a State many not im2 pose any qualification or requirement which discriminates 

3 against a nonresident agent or broker. 

4 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN5 SURANCE COMMISSIONER.—Each health insurance issuer 

6 issuing individual health insurance coverage in both pri7 mary and secondary States shall submit— 

8 ‘‘(1) to the insurance commissioner of each 

9 State in which it intends to offer such coverage, be10 fore it may offer individual health insurance cov11 erage in such State— 

12 ‘‘(A) a copy of the plan of operation or fea13 sibility study or any similar statement of the 

14 policy being offered and its coverage (which 

15 shall include the name of its primary State and 

16 its principal place of business); 

17 ‘‘(B) written notice of any change in its 

18 designation of its primary State; and 

19 ‘‘(C) written notice from the issuer of the 

20 issuer’s compliance with all the laws of the pri21 mary State; and 

22 ‘‘(2) to the insurance commissioner of each sec23 ondary State in which it offers individual health in24 surance coverage, a copy of the issuer’s quarterly fi25 nancial statement submitted to the primary State, 


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1 which statement shall be certified by an independent 

2 public accountant and contain a statement of opin3 ion on loss and loss adjustment expense reserves 

4 made by— 

5 ‘‘(A) a member of the American Academy 

6 of Actuaries; or 

7 ‘‘(B) a qualified loss reserve specialist. 

8 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 

9 Nothing in this section shall be construed to affect the 

10 authority of any Federal or State court to enjoin— 

11 ‘‘(1) the solicitation or sale of individual health 

12 insurance coverage by a health insurance issuer to 

13 any person or group who is not eligible for such in14 surance; or 

15 ‘‘(2) the solicitation or sale of individual health 

16 insurance coverage by, or operation of, a health in17 surance issuer that is in hazardous financial condi18 tion. 

19 ‘‘(i) STATE POWERS TO ENFORCE STATE LAWS.— 

20 ‘‘(1) IN GENERAL.—Subject to the provisions of 

21 subsection (b)(1)(G) (relating to injunctions) and 

22 paragraph (2), nothing in this section shall be con23 strued to affect the authority of any State to make 

24 use of any of its powers to enforce the laws of such 


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1 State with respect to which a health insurance issuer 

2 is not exempt under subsection (b). 

3 ‘‘(2) COURTS OF COMPETENT JURISDICTION.— 

4 If a State seeks an injunction regarding the conduct 

5 described in paragraphs (1) and (2) of subsection 

6 (h), such injunction must be obtained from a Fed7 eral or State court of competent jurisdiction. 

8 ‘‘(j) STATES’ AUTHORITY TO SUE.—Nothing in this 

9 section shall affect the authority of any State to bring ac10 tion in any Federal or State court. 

11 ‘‘(k) GENERALLY APPLICABLE LAWS.—Nothing in 

12 this section shall be construed to affect the applicability 

13 of State laws generally applicable to persons or corpora14 tions. 

15 ‘‘PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE

16 ISSUER MAY SELL INTO SECONDARY STATES

17 ‘‘SEC. 2797. A health insurance issuer may not offer, 

18 sell, or issue individual health insurance coverage in a sec19 ondary State if the primary State does not meet the fol20 lowing requirements: 

21 ‘‘(1) The State insurance commissioner must 

22 use a risk-based capital formula for the determina23 tion of capital and surplus requirements for all 

24 health insurance issuers. 

25 ‘‘(2) The State must have legislation or regula26 tions in place establishing an independent review 


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1 process for individuals who are covered by individual 

2 health insurance coverage unless the issuer provides 

3 an independent review mechanism functionally equiv4 alent (as determined by the primary State insurance 

5 commissioner or official) to that prescribed in the 

6 ‘Health Carrier External Review Model Act’ of the 

7 National Association of Insurance Commissioners for 

8 all individuals who purchase insurance coverage 

9 under the terms of this part. 

10 ‘‘ENFORCEMENT

11 ‘‘SEC. 2798. (a) IN GENERAL.—Subject to subsection 

12 (b), with respect to specific individual health insurance 

13 coverage the primary State for such coverage has sole ju14 risdiction to enforce the primary State’s covered laws in 

15 the primary State and any secondary State. 

16 ‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 

17 subsection (a) shall be construed to affect the authority 

18 of a secondary State to enforce its laws as set forth in 

19 the exception specified in section 2796(b)(1). 

20 ‘‘(c) COURT INTERPRETATION.—In reviewing action 

21 initiated by the applicable secondary State authority, the 

22 court of competent jurisdiction shall apply the covered 

23 laws of the primary State. 

24 ‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 

25 of individual health insurance coverage offered in a sec26 ondary State that fails to comply with the covered laws 


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1 of the primary State, the applicable State authority of the 

2 secondary State may notify the applicable State authority 

3 of the primary State.’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 subsection (a) shall apply to individual health insurance 

6 coverage offered, issued, or sold after the date of the en7 actment of this Act. 

8 SEC. 405. SEVERABILITY. 

9 If any provision of this subtitle or the application of 

10 such provision to any person or circumstance is held to 

11 be unconstitutional, the remainder of this subtitle and the 

12 application of the provisions of such to any other person 

13 or circumstance shall not be affected. 

14 Subtitle B—Health Information 

15 Technology Promotion 

16 SEC. 411. SHORT TITLE OF SUBTITLE. 

17 This subtitle may be cited as the ‘‘Health Informa18 tion Technology Promotion Act of 2006’’. 

19 SEC. 412. OFFICE OF THE NATIONAL COORDINATOR FOR 

20 HEALTH INFORMATION TECHNOLOGY. 

21 (a) IN GENERAL.—Title II of the Public Health Serv22 ice Act is amended by adding at the end the following new 

23 part: 


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1 ‘‘PART D—HEALTH INFORMATION TECHNOLOGY

2 ‘‘OFFICE OF THE NATIONAL COORDINATOR FOR HEALTH

3 INFORMATION TECHNOLOGY

4 ‘‘SEC. 271. (a) ESTABLISHMENT.—There is estab5 lished within the Department of Health and Human Serv6 ices an Office of the National Coordinator for Health In7 formation Technology that shall be headed by the National 

8 Coordinator for Health Information Technology (referred 

9 to in this section as the ‘National Coordinator’). The Na10 tional Coordinator shall be appointed by the President and 

11 shall report directly to the Secretary. The National Coor12 dinator shall be paid at a rate equal to the rate of basic 

13 pay for level IV of the Executive Schedule. 

14 ‘‘(b) GOALS OF NATIONWIDE INTEROPERABLE

15 HEALTH INFORMATION TECHNOLOGY INFRASTRUC16 TURE.—The National Coordinator shall perform the du17 ties under subsection (c) in a manner consistent with the 

18 development of a nationwide interoperable health informa19 tion technology infrastructure that— 

20 ‘‘(1) improves health care quality, reduces med21 ical errors, increases the efficiency of care, and ad22 vances the delivery of appropriate, evidence-based 

23 health care services; 

24 ‘‘(2) promotes wellness, disease prevention, and 

25 management of chronic illnesses by increasing the 


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1 availability and transparency of information related 

2 to the health care needs of an individual for such in3 dividual; 

4 ‘‘(3) ensures that appropriate information nec5 essary to make medical decisions is available in a us6 able form at the time and in the location that the 

7 medical service involved is provided; 

8 ‘‘(4) produces greater value for health care ex9 penditures by reducing health care costs that result 

10 from inefficiency, medical errors, inappropriate care, 

11 and incomplete information; 

12 ‘‘(5) promotes a more effective marketplace, 

13 greater competition, greater systems analysis, in14 creased choice, enhanced quality, and improved out15 comes in health care services; 

16 ‘‘(6) improves the coordination of information 

17 and the provision of such services through an effec18 tive infrastructure for the secure and authorized ex19 change and use of health care information; and 

20 ‘‘(7) ensures that the confidentiality of individ21 ually identifiable health information of a patient is 

22 secure and protected. 

23 ‘‘(c) DUTIES OF NATIONAL COORDINATOR.— 

24 ‘‘(1) STRATEGIC PLANNER FOR INTEROPER25 ABLE HEALTH INFORMATION TECHNOLOGY.—The 


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1 National Coordinator shall maintain, direct, and 

2 oversee the continuous improvement of a strategic 

3 plan to guide the nationwide implementation of 

4 interoperable health information technology in both 

5 the public and private health care sectors consistent 

6 with subsection (b). 

7 ‘‘(2) PRINCIPAL ADVISOR TO HHS.—The Na8 tional Coordinator shall serve as the principal advi9 sor of the Secretary on the development, application, 

10 and use of health information technology, and co11 ordinate the health information technology programs 

12 of the Department of Health and Human Services. 

13 ‘‘(3) COORDINATOR OF FEDERAL GOVERNMENT

14 ACTIVITIES.— 

15 ‘‘(A) IN GENERAL.—The National Coordi16 nator shall serve as the coordinator of Federal 

17 Government activities relating to health infor18 mation technology. 

19 ‘‘(B) SPECIFIC COORDINATION FUNC20 TIONS.—In carrying out subparagraph (A), the 

21 National Coordinator shall provide for— 

22 ‘‘(i) the development and approval of 

23 standards used in the electronic creation, 

24 maintenance, or exchange of health infor25 mation; and 


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1 ‘‘(ii) the certification and inspection of 

2 health information technology products, ex3 changes, and architectures to ensure that 

4 such products, exchanges, and architec5 tures conform to the applicable standards 

6 approved under clause (i). 

7 ‘‘(C) USE OF PRIVATE ENTITIES.—The 

8 National Coordinator shall, to the maximum ex9 tent possible, contract with or recognize private 

10 entities in carrying out subparagraph (B). 

11 ‘‘(D) UNIFORM APPLICATION OF STAND12 ARDS.—A standard approved under subpara13 graph (B)(i) for use in the electronic creation, 

14 maintenance, or exchange of health information 

15 shall preempt a standard adopted under State 

16 law, regulation, or rule for such a use. 

17 ‘‘(4) INTRAGOVERNMENTAL COORDINATOR.— 

18 The National Coordinator shall ensure that health 

19 information technology policies and programs of the 

20 Department of Health and Human Services are co21 ordinated with those of relevant executive branch 

22 agencies and departments with a goal to avoid dupli23 cation of effort and to ensure that each agency or 

24 department conducts programs within the areas of 

25 its greatest expertise and its mission in order to creVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00071 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 ate a national interoperable health information sys2 tem capable of meeting national public health needs 

3 effectively and efficiently. 

4 ‘‘(5) ADVISOR TO OMB.—The National Coordi5 nator shall provide to the Director of the Office of 

6 Management and Budget comments and advice with 

7 respect to specific Federal health information tech8 nology programs. 

9 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

10 are authorized to be appropriated such sums as may be 

11 necessary to carry out this section for each of fiscal years 

12 2007 through 2011.’’. 

13 (b) TREATMENT OF EXECUTIVE ORDER 13335.—Ex14 ecutive Order 13335 shall not have any force or effect 

15 after the date of the enactment of this Act. 

16 (c) TRANSITION FROM ONCHIT UNDER EXECUTIVE

17 ORDER.— 

18 (1) IN GENERAL.—All functions, personnel, as19 sets, liabilities, administrative actions, and statutory 

20 reporting requirements applicable to the old Na21 tional Coordinator or the Office of the old National 

22 Coordinator on the date before the date of the enact23 ment of this Act shall be transferred, and applied in 

24 the same manner and under the same terms and 

25 conditions, to the new National Coordinator and the 


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1 Office of the new National Coordinator as of the 

2 date of the enactment of this Act. 

3 (2) ACTING NATIONAL COORDINATOR.—Before 

4 the appointment of the new National Coordinator, 

5 the old National Coordinator shall act as the Na6 tional Coordinator for Health Information Tech7 nology until the office is filled as provided in section 

8 271(a) of the Public Health Service Act, as added 

9 by subsection (a). The President may appoint the 

10 old National Coordinator as the new National Coor11 dinator. 

12 (3) DEFINITIONS.—For purposes of this sub13 section: 

14 (A) NEW NATIONAL COORDINATOR.—The 

15 term ‘‘new National Coordinator’’ means the 

16 National Coordinator for Health Information 

17 Technology appointed under section 271(a) of 

18 the Public Health Service Act, as added by sub19 section (a). 

20 (B) OLD NATIONAL COORDINATOR.—The 

21 term ‘‘old National Coordinator’’ means the 

22 National Coordinator for Health Information 

23 Technology appointed under Executive Order 

24 13335. 


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1 SEC. 413. SAFE HARBORS FOR PROVISION OF HEALTH IN2 FORMATION TECHNOLOGY AND TRAINING 

3 SERVICES TO HEALTH CARE PROFES4 SIONALS. 

5 (a) FOR CIVIL PENALTIES.—Section 1128A(b) of the 

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

7 by adding at the end the following new paragraph: 

8 ‘‘(4)(A) For purposes of this subsection, a payment 

9 described in paragraph (1) does not include any nonmone10 tary remuneration (in the form of health information tech11 nology and related training services) made by an entity 

12 to a physician if— 

13 ‘‘(i) such remuneration is made without a con14 dition that— 

15 ‘‘(I) limits or restricts the use of the health 

16 information technology to services provided by 

17 the physician to individuals receiving services at 

18 the entity; 

19 ‘‘(II) limits or restricts the use of the 

20 health information technology in conjunction 

21 with other health information technology; or 

22 ‘‘(III) takes into account the volume or 

23 value of referrals (or other business generated) 

24 by the physician to the entity; 

25 ‘‘(ii) in the case of such remuneration made on 

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1 tion 413(d)(2) of the Health Information Tech2 nology Promotion Act of 2006, to the extent the Na3 tional Coordinator of Health Information Tech4 nology has approved a standard under section 

5 271(c)(3)(B)(i) of the Public Health Service Act, the 

6 health information technology provided conforms to 

7 such standard; 

8 ‘‘(iii) in the case of such remuneration made on 

9 or after the date that is three years after the date 

10 described in section 413(d)(2) of the Health Infor11 mation Technology Promotion Act of 2006, if the 

12 Secretary establishes criteria under section 

13 413(e)(3) of such Act, such remuneration is made in 

14 accordance with such criteria; and 

15 ‘‘(iv) such remuneration is arranged for in a 

16 written agreement that is signed by a representative 

17 of the entity and by the physician and that specifies 

18 the remuneration made. 

19 ‘‘(B) For purposes of subparagraph (A) and sections 

20 1128B(b)(3)(J) and 1877(e)(9), the term ‘health informa21 tion technology’ means hardware, software, license, right, 

22 intellectual property, equipment, or other information 

23 technology used primarily for the electronic creation, 

24 maintenance, and exchange of clinical health information 

25 to improve health care quality or efficiency.’’. 


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1 (b) FOR CRIMINAL PENALTIES.—Section 

2 1128B(b)(3) of such Act (42 U.S.C. 1320a–7b(b)(3)) is 

3 amended— 

4 (1) in subparagraph (G), by striking ‘‘and’’ at 

5 the end; 

6 (2) in the subparagraph (H) added by section 

7 237(d) of the Medicare Prescription Drug, Improve8 ment, and Modernization Act of 2003 (Public Law 

9 108–173; 117 Stat. 2213)— 

10 (A) by moving such subparagraph 2 ems to 

11 the left; and 

12 (B) by striking the period at the end and 

13 inserting a semicolon; 

14 (3) in the subparagraph (H) added by section 

15 431(a) of such Act (117 Stat. 2287)— 

16 (A) by redesignating such subparagraph as 

17 subparagraph (I); 

18 (B) by moving such subparagraph 2 ems 

19 to the left; and 

20 (C) by striking the period at the end and 

21 inserting ‘‘; and’’; and 

22 (4) by adding at the end the following new sub23 paragraph: 

24 ‘‘(J) any nonmonetary remuneration (in the 

25 form of health information technology, as defined in 


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1 section 1128A(b)(4)(B), and related training serv2 ices) made to a person if— 

3 ‘‘(i) such remuneration is solicited or re4 ceived (or offered or paid) without a condition 

5 that— 

6 ‘‘(I) limits or restricts the use of the 

7 health information technology to services 

8 provided by the person to individuals re9 ceiving services at the location of the entity 

10 providing such technology; 

11 ‘‘(II) limits or restricts the use of the 

12 health information technology in conjunc13 tion with other health information tech14 nology; or 

15 ‘‘(III) takes into account the volume 

16 or value of referrals (or other business 

17 generated) by the person to the entity pro18 viding such technology; 

19 ‘‘(ii) in the case of such remuneration 

20 made on a date that is on or after the date de21 scribed in section 413(d)(2) of the Health In22 formation Technology Promotion Act of 2006, 

23 to the extent the National Coordinator of 

24 Health Information Technology has approved a 

25 standard under section 271(c)(3)(B)(i) of the 


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1 Public Health Service Act, the health informa2 tion technology provided conforms to such 

3 standard; 

4 ‘‘(iii) in the case of such remuneration 

5 made on or after the date that is three years 

6 after the date described in section 413(d)(2) of 

7 the Health Information Technology Promotion 

8 Act of 2006, if the Secretary establishes criteria 

9 under section 413(e)(3) of such Act, such remu10 neration is made in accordance with such cri11 teria; and 

12 ‘‘(iv) such remuneration is arranged for in 

13 a written agreement that is signed by the par14 ties involved and that specifies the remunera15 tion solicited or received (or offered or paid).’’. 

16 (c) FOR LIMITATION ON CERTAIN PHYSICIAN RE17 FERRALS.—Section 1877(e) of such Act (42 U.S.C. 

18 1395nn(e)) is amended by adding at the end the following 

19 new paragraph: 

20 ‘‘(9) INFORMATION TECHNOLOGY AND TRAIN21 ING SERVICES.—Any nonmonetary remuneration (in 

22 the form of health information technology, as de23 fined in section 1128A(b)(4)(B), and related train24 ing services) made by an entity to a physician if— 


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1 ‘‘(A) such remuneration is made without a 

2 condition that— 

3 ‘‘(i) limits or restricts the use of the 

4 health information technology to services 

5 provided by the physician to individuals re6 ceiving services at the location of the entity 

7 providing such technology; 

8 ‘‘(ii) limits or restricts the use of the 

9 health information technology in conjunc10 tion with other health information tech11 nology; or 

12 ‘‘(iii) takes into account the volume or 

13 value of referrals (or other business gen14 erated) by the physician to the entity pro15 viding such technology; 

16 ‘‘(B) in the case of such remuneration 

17 made on a date that is on or after the date de18 scribed in section 413(d)(2) of the Health In19 formation Technology Promotion Act of 2006, 

20 to the extent the National Coordinator of 

21 Health Information Technology has approved a 

22 standard under section 271(c)(3)(B)(i) of the 

23 Public Health Service Act, the health informa24 tion technology provided conforms to such 

25 standard; 


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1 ‘‘(C) in the case of such remuneration 

2 made on or after the date that is three years 

3 after the date described in section 413(d)(2) of 

4 the Health Information Technology Promotion 

5 Act of 2006, if the Secretary establishes criteria 

6 under section 413(e)(3) of such Act, such remu7 neration is made in accordance with such cri8 teria; and 

9 ‘‘(D) such remuneration is arranged for in 

10 a written agreement that is signed by a rep11 resentative of the entity and by the physician 

12 and that specifies the remuneration made.’’. 

13 (d) REGULATION, EFFECTIVE DATE, AND EFFECT

14 ON STATE LAWS.— 

15 (1) REGULATIONS.—Not later than 180 days 

16 after the date of the enactment of this Act, the Sec17 retary of Health and Human Services shall promul18 gate such regulations as may be necessary to carry 

19 out the provisions of this section. 

20 (2) EFFECTIVE DATE.—The amendments made 

21 by this section shall take effect on the date that is 

22 180 days after the date of the enactment of this Act. 

23 (3) PREEMPTION OF STATE LAWS.—No State 

24 (as defined in section 414(a)(3)) shall have in effect 

25 a State law that imposes a criminal or civil penalty 


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1 for a transaction described in section 1128A(b)(4); 

2 1128B(b)(3)(J); or 1877(e)(9) of the Social Security 

3 Act, as added by this section, if the conditions de4 scribed in the respective section, with respect to such 

5 transaction, are met. 

6 (e) STUDY AND REPORT TO ASSESS EFFECT OF

7 SAFE HARBORS ON HEALTH SYSTEM.— 

8 (1) IN GENERAL.—The Secretary of Health and 

9 Human Services shall conduct a study to determine 

10 the impact of each of the safe harbors described in 

11 paragraph (4). In particular, the study shall examine 

12 the following: 

13 (A) The effectiveness of each safe harbor 

14 in increasing the adoption of health information 

15 technology. 

16 (B) The types of health information tech17 nology provided under each safe harbor. 

18 (C) The extent to which the financial or 

19 other business relationships between providers 

20 under each safe harbor have changed as a re21 sult of the safe harbor in a way that adversely 

22 affects the health care system or choices avail23 able to consumers. 

24 (2) REPORT.—Not later than three years after 

25 the effective date described in subsection (d)(2), the 


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1 Secretary of Health and Human Services shall sub2 mit to Congress a report on the study under para3 graph (1) and shall include such recommendations 

4 for changes in the safe harbors as the Secretary de5 termines may be appropriate. 

6 (3) UPDATED CRITERIA FOR PERMISSIBLE

7 HEALTH INFORMATION TECHNOLOGY REMUNERA8 TION UNDER SAFE HARBORS.—Not later than three 

9 years after the effective date described in subsection 

10 (d)(2), the Secretary of Health and Human Services 

11 may issue regulations that establish updated criteria 

12 for nonmonetary remuneration (in the form of 

13 health information technology and related training 

14 services) for purposes of the safe harbors described 

15 in paragraph (4). Such criteria may be based on the 

16 extent to which the health information technology 

17 conforms to a standard developed under section 

18 271(c)(3)(B)(i) of the Public Health Service Act, as 

19 added by section 412, only to the extent that such 

20 standard is recognized by the National Coordinator 

21 of Health Information Technology under such sec22 tion 271(c)(3)(B)(i). 

23 (4) SAFE HARBORS DESCRIBED.—For purposes 

24 of paragraphs (1) and (3), the safe harbors de25 scribed in this paragraph are— 


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1 (A) the safe harbor under section 

2 1128A(b)(4) of the Social Security Act (42 

3 U.S.C. 1320a–7a(b)(4)), as added by subsection 

4 (a); 

5 (B) the safe harbor under section 

6 1128B(b)(3)(J) of such Act (42 U.S.C. 1320a– 

7 7b(b)(3)(J)), as added by subsection (b); and 

8 (C) the safe harbor under section 

9 1877(e)(9) of such Act (42 U.S.C. 

10 1395nn(e)(9)), as added by subsection (c). 

11 SEC. 414. UNIFORM HEALTH INFORMATION LAWS AND REG12 ULATIONS. 

13 (a) STUDY TO DETERMINE EXTENT OF VARIATION

14 IN STATE HEALTH INFORMATION LAWS AND REGULA15 TIONS.— 

16 (1) IN GENERAL.—The Secretary of Health and 

17 Human Services shall conduct a study of State secu18 rity and confidentiality laws and current Federal se19 curity and confidentiality standards to determine— 

20 (A) the degree to which such State laws 

21 vary among States, and between the States and 

22 such current Federal standards; 

23 (B) how any such variation may adversely 

24 impact the security and confidentiality of indi25 vidually identifiable health information and the 


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1 electronic exchange of clinical health informa2 tion among States, the Federal government, 

3 and private entities; and 

4 (C) the strengths and weaknesses of such 

5 State laws and of such current Federal stand6 ards for purposes of protecting the security and 

7 confidentiality of individually identifiable health 

8 information while also taking into account the 

9 need for timely and efficient exchanges of 

10 health information to improve quality of care 

11 and ensure the availability of health informa12 tion necessary to make medical decisions at the 

13 the location in which the medical care involved 

14 is provided. 

15 (2) REPORT.—Not later than 18 months after 

16 the date of the enactment of this Act, the Secretary 

17 of Health and Human Services shall submit to Con18 gress a report on the study under paragraph (1) and 

19 shall include in such report— 

20 (A) a determination by the Secretary 

21 whether State security and confidentiality laws 

22 and current Federal security and confidentiality 

23 standards should be conformed to create a sin24 gle set of national standards to preserve and 

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1 tient health information in order to improve 

2 health care quality and efficiency; and 

3 (B) if the Secretary determines such State 

4 laws and such current Federal standards should 

5 be conformed to create such a single set of na6 tional standards, what the single set of stand7 ards should be. 

8 (3) DEFINITIONS.—For purposes of this sub9 section: 

10 (A) STATE SECURITY AND CONFIDEN11 TIALITY LAWS.—The term ‘‘State security and 

12 confidentiality laws’’ means State laws and reg13 ulations relating to the privacy and confiden14 tiality of individually identifiable health infor15 mation or to the security of such information. 

16 (B) CURRENT FEDERAL SECURITY AND

17 CONFIDENTIALITY STANDARDS.—The term 

18 ‘‘current Federal security and confidentiality 

19 standards’’ means the Federal privacy stand20 ards established pursuant to section 264(c) of 

21 the Health Insurance Portability and Account22 ability Act of 1996 (42 U.S.C. 1320d–2 note) 

23 and security standards established under sec24 tion 1173(d) of the Social Security Act. 


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1 (C) STATE.—The term ‘‘State’’ has the 

2 meaning given such term when used in title XI 

3 of the Social Security Act, as provided under 

4 section 1101(a) of such Act (42 U.S.C. 

5 1301(a)). 

6 (b) ESTABLISHMENT OF UNIFORM CONFIDEN7 TIALITY AND SECURITY STANDARDS.— 

8 (1) IN GENERAL.—Section 1178(a) of the So9 cial Security Act (42 U.S.C. 1320d–7(a)), is amend10 ed— 

11 (A) in paragraph (1), by inserting after 

12 ‘‘Except as provided in paragraph (2)’’ the fol13 lowing: ‘‘and subject to paragraph (3)’’; 

14 (B) in paragraph (2), by striking ‘‘A provi15 sion’’ and inserting ‘‘Subject to paragraph 

16 (3)(B), a provision’’; and 

17 (C) by adding at the end the following new 

18 paragraph: 

19 ‘‘(3) UNIFORM NATIONAL STANDARDS.— 

20 ‘‘(A) IN GENERAL.— 

21 ‘‘(i) CREATING UNIFORM NATIONAL

22 STANDARDS.—If the conditions under 

23 clause (ii) are met, then the regulation and 

24 standards described in subparagraph (C) 

25 shall become the single set of national 


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1 standards to preserve and protect the secu2 rity and confidentiality of individually iden3 tifiable patient health information in order 

4 to improve health care quality and effi5 ciency and supersede the current Federal 

6 security and confidentiality standards and 

7 State security and confidentiality laws, as 

8 defined in section 414(a)(3) of the Health 

9 Information Technology Promotion Act of 

10 2006. 

11 ‘‘(ii) CONDITIONS.—For purposes of 

12 clause (i), the conditions under this clause 

13 are the following: 

14 ‘‘(I) DETERMINATION OF NEED

15 FOR SINGLE SET OF STANDARDS.— 

16 The Secretary determines under sec17 tion 414(a)(2)(A) of the Health Infor18 mation Technology Promotion Act of 

19 2006 that State security and con20 fidentiality laws and current Federal 

21 security and confidentiality standards 

22 should be conformed to create a single 

23 set of national standards to preserve 

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1 tient health information in order to 

2 improve health care quality and effi3 ciency. 

4 ‘‘(II) SECRETARY SPECIFIES

5 STANDARDS.—The Secretary specifies 

6 that the regulation and standards de7 scribed in subparagraph (C) should be 

8 the single set of national standards. 

9 ‘‘(III) NO LEGISLATION ESTAB10 LISHING STANDARDS.—Legislation 

11 creating a single set of national stand12 ards and preempting State security 

13 and confidentiality laws is not enacted 

14 by the date that is 36 months after 

15 the date of the enactment of the 

16 Health Information Technology Pro17 motion Act of 2006. 

18 ‘‘(B) NARROWING OF PREEMPTION EXCEP19 TIONS.— 

20 ‘‘(i) SUBSEQUENT LEGISLATION.—If 

21 legislation described in subparagraph (A) 

22 is enacted by the date described in such 

23 subparagraph, as of the date of enactment 

24 of such legislation paragraph (2) shall be 

25 superseded by such exceptions as may be 


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1 provided for in such legislation. It is the 

2 intent of Congress that such exceptions be 

3 as narrow as possible to maximize the uni4 form application of the regulation and 

5 standards described in subparagraph (C). 

6 ‘‘(ii) NO LEGISLATION.—If legislation 

7 described in subparagraph (A) is not en8 acted by the date described in such sub9 paragraph, paragraph (2) shall be super10 seded by such exceptions as may be pro11 vided for by the Secretary by regulation 

12 issued in connection with the regulation 

13 and standards described in subparagraph 

14 (C). It is the intent of Congress that such 

15 exceptions be as narrow as possible to 

16 maximize the uniform application of the 

17 regulation and standards described in sub18 paragraph (C). 

19 ‘‘(C) APPLICATION OF UNIFORM STAND20 ARDS.—The regulation and standards described 

21 in this subparagraph are the regulation promul22 gated under section 264(c)(1) of the Health In23 surance Portability and Accountability Act of 

24 1996 (42 U.S.C. 1320d–2 note) and standards 

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1 retary to the extent the Secretary determines, 

2 after consideration of the results of the study 

3 conducted under section 414(a) of the Health 

4 Information Technology Promotion Act of 

5 2006, necessary to promote uniformity and effi6 ciency in the application of confidentiality and 

7 security standards with respect to individually 

8 identifiable health information.’’. 

9 (2) HIPAA CONFORMING AMENDMENT.—Sec10 tion 264(c)(2) of the Health Insurance Portability 

11 and Accountability Act of 1996 (42 U.S.C. 1320d– 

12 2 note) is amended by striking ‘‘A regulation’’ and 

13 inserting ‘‘(A) Subject to section 1178(a)(3) of the 

14 Social Security Act, a regulation’’. 

15 SEC. 415. RULEMAKING TO UPGRADE ASC X12 AND NCPDP 

16 STANDARDS AND ICD CODES. 

17 (a) IN GENERAL.—Not later than April 1, 2007, the 

18 Secretary of Health and Human Services shall promulgate 

19 a final rule under section 1174(b) of the Social Security 

20 Act (42 U.S.C. 1320d–3(b)) to provide for the following 

21 modification of standards: 

22 (1) ACCREDITED STANDARDS COMMITTEE X12

23 (ASC X12) STANDARD.—The replacement of the Ac24 credited Standards Committee X12 (ASC X12) 

25 version 4010 adopted under section 1173(a) of such 


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1 Act (42 U.S.C. 1320d–2(a)), including for purposes 

2 of part A of title XVIII of such Act, with the ASC 

3 X12 version 5010, as reviewed by the National Com4 mittee on Vital Health Statistics. 

5 (2) NATIONAL COUNCIL FOR PRESCRIPTION

6 DRUG PROGRAMS (NCPDP) TELECOMMUNICATIONS

7 STANDARDS.—The replacement of the National 

8 Council for Prescription Drug Programs (NCPDP) 

9 Telecommunications Standards version 5.1 adopted 

10 under section 1173(a) of such Act (42 U.S.C. 

11 1320d–2(a)), including for purposes of part A of 

12 title XVIII of such Act, with NCPDP Telecommuni13 cations Standards version C.3, as approved by such 

14 Council and reviewed by the National Committee on 

15 Vital Health Statistics. 

16 (3) ICD CODES.—The replacement of the Inter17 national Statistical Classification of Diseases and 

18 Related Health Problems, 9th revision, Clinical 

19 Modification (ICD–9–CM) under the regulation pro20 mulgated under section 1173(c) of such Act (42 

21 U.S.C. 1320d–2(c)), including for purposes of part 

22 A of title XVIII of such Act, with both of the fol23 lowing: 

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1 lems, 10th revision, Clinical Modification (ICD– 

2 10–CM). 

3 (B) The International Statistical Classi4 fication of Diseases and Related Health Prob5 lems, 10th revision, Procedure Coding System 

6 (ICD–10–PCS). 

7 (b) RULE OF CONSTRUCTION.—Nothing in sub8 section (a)(3) shall be construed as affecting the applica9 tion of classification methodologies or codes, such as CPT 

10 or HCPCS codes, other than under the International Sta11 tistical Classification of Diseases and Related Health 

12 Problems (ICD). 

13 (c) NOTICE.—Not later than 30 days after the date 

14 of the enactment of this Act, the Secretary of Health and 

15 Human Services shall publish in the Federal Register a 

16 notice of the requirements to promulgate final rules under 

17 subsection (a). Such notice shall include— 

18 (1) the respective date by which each such rule 

19 must be promulgated under such subsection; 

20 (2) the respective compliance date described in 

21 subsection (e) for each such rule; and 

22 (3) a statement that entities covered under the 

23 Health Insurance Portability and Accountability Act 

24 of 1996 and health information technology vendors 

25 should plan for the implementation of upgraded ASC 


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1 X12, NCPDP, and ICD codes under such sub2 section. 

3 (d) NO JUDICIAL REVIEW.—The final rules promul4 gated under subsections (a) shall not be subject to judicial 

5 review. 

6 (e) COMPLIANCE WITH UPGRADED STANDARDS.— 

7 For purposes of section 1175(b)(2) of the Social Security 

8 Act (42 U.S.C. 1320d–4(b)(2))— 

9 (1) ASC X12 AND NCPDP STANDARDS.—The 

10 final rules promulgated under paragraphs (1) and 

11 (2) of subsection (a) shall apply to transactions oc12 curring on or after April 1, 2009. 

13 (2) ICD CODES.—The final rule promulgated 

14 under paragraph (3) of subsection (a) shall apply to 

15 transactions occurring on or after October 1, 2009. 

16 SEC. 416. REPORT ON THE AMERICAN HEALTH INFORMA17 TION COMMUNITY. 

18 Not later than two years after the date of the enact19 ment of this Act, the Secretary of Health and Human 

20 Services shall submit to Congress a report on the work 

21 conducted by the American Health Information Commu22 nity (in this section referred to as ‘‘AHIC’’), as established 

23 by the Secretary. Such report shall include the following: 

24 (1) A description of the accomplishments of 

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1 ment of a nationwide health information network 

2 and the increased adoption of health information 

3 technology. 

4 (2) Information identifying the practices that 

5 are used to protect health information and to guar6 antee confidentiality and security of such informa7 tion. 

8 (3) Information on the progress in— 

9 (A) establishing uniform industry-wide 

10 health information technology standards; 

11 (B) achieving an internet-based nationwide 

12 health information network; and 

13 (C) achieving interoperable electronic 

14 health record adoption across health care pro15 viders. 

16 (4) Recommendations for the transition of the 

17 AHIC to a permanent advisory entity, including— 

18 (A) a schedule for such transition; 

19 (B) options for structuring the entity as ei20 ther a public-private or private sector entity; 

21 (C) the role of the Federal Government in 

22 the entity; and 

23 (D) the ongoing responsibilities of the enti24 ty, such as in establishing standards, certifying 

25 health information technology, and providing 


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1 long-term governance for health care trans2 formation. 

3 SEC. 417. STRATEGIC PLAN FOR COORDINATING IMPLE4 MENTATION OF HEALTH INFORMATION 

5 TECHNOLOGY. 

6 (a) IN GENERAL.—Not later than 180 days after the 

7 date of the enactment of this Act, the Secretary of Health 

8 and Human Services, in consultation with entities involved 

9 in the area of health information technology, shall develop 

10 a strategic plan related to the need for coordination in 

11 such area. 

12 (b) COORDINATION OF SPECIFIC IMPLEMENTATION

13 PROCESSES.—The strategic plan under subsection (a) 

14 shall address the need for coordination in the implementa15 tion of the following: 

16 (1) HEALTH INFORMATION TECHNOLOGY

17 STANDARDS.—Health information technology stand18 ards approved under section 271(c)(3)(B)(i) of the 

19 Public Health Service Act, as added by section 412. 

20 (2) HIPAA TRANSACTION STANDARDS.—Trans21 action standards under section 1173(a) of the Social 

22 Security Act (42 U.S.C. 1320d–2(d)). 

23 (3) UPDATED ICD CODES.—The International 

24 Statistical Classification of Diseases and Related 

25 Health Problems, 10th revision, Clinical ModificaVerDate Aug 31 2005 20:46 Mar 10, 2006 Jkt 049200 PO 00000 Frm 00095 Fmt 6652 Sfmt 6201 E:\BILLS\H4845.IH H4845

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1 tion (ICD–10–CM) and the International Statistical 

2 Classification of Diseases and Related Health Prob3 lems, 10th revision, Procedure Coding System 

4 (ICD–10–PCS) described in section 415. 

5 (c) COORDINATION AMONG SPECIFIC FEDERAL EN6 TITIES.—The strategic plan under subsection (a) shall ad7 dress any methods to coordinate, with respect to the elec8 tronic exchange of health information, actions taken by 

9 the following entities: 

10 (1) The Office of the National Coordinator for 

11 Health Information Technology. 

12 (2) The American Health Information Commu13 nity. 

14 (3) The Office of Electronic Standards and Se15 curity of the Centers for Medicare and Medicaid 

16 Services. 

17 (4) The National Committee on Vital Health 

18 Statistics. 

19 (5) Any other entity involved in the electronic 

20 exchange of health information that the Secretary 

21 determines appropriate. 

22 TITLE V—SEAMLESS MOBILITY 

23 SEC. 501. PROHIBITION ON IMPEDING. 

24 (a) PROHIBITION.—The Federal Communications 

25 Commission shall not, in this or any other proceeding, 


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1 take any action to impede the development of seamless 

2 mobility. 

3 (b) DEFINITION.—For purposes of this section, the 

4 term ‘‘seamless mobility’’ means the ability of a user and 

5 a user’s connecting devices to move easily and smoothly 

6 between and among Internet-protocol enabled technology 

7 platforms, facilities, and networks. 

Æ 


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