IB 

Union Calendar No. 207 

109TH CONGRESS 

2D SESSION H. R. 2355 

[Report No. 109–378] 

To amend the Public Health Service Act to provide for cooperative governing 

of individual health insurance coverage offered in interstate commerce. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 12, 2005 

Mr. SHADEGG (for himself, Mr. AKIN, Mr. BARTLETT of Maryland, Mr. CANNON, Mr. CARTER, Mr. COLE of Oklahoma, Mr. COX, Mrs. CUBIN, Mr. 

FEENEY, Mr. FLAKE, Mr. FRANKS of Arizona, Mr. GUTKNECHT, Mr. 

HENSARLING, Mr. HERGER, Mr. HOEKSTRA, Mr. HOSTETTLER, Mr. 

ISTOOK, Mr. JONES of North Carolina, Mr. KENNEDY of Minnesota, Mr. 

KING of Iowa, Mr. LINDER, Mr. MCHENRY, Mr. MILLER of Florida, Mrs. 

MUSGRAVE, Mrs. MYRICK, Mr. OTTER, Mr. PAUL, Mr. PENCE, Mr. 

PRICE of Georgia, Mr. RADANOVICH, Mr. RENZI, Mr. ROHRABACHER, 

Mr. RYAN of Wisconsin, Mr. RYUN of Kansas, Mr. SENSENBRENNER, 

Mr. SESSIONS, Mr. SOUDER, Mr. WAMP, Mr. WELDON of Florida, Mr. 

WICKER, Mr. WILSON of South Carolina, and Mr. GREEN of Wisconsin) 

introduced the following bill; which was referred to the Committee on Energy and Commerce 

FEBRUARY 16, 2006 

Additional sponsors: Mr. CHOCOLA, Mr. TANCREDO, Mr. INGLIS of South 

Carolina, Mr. SODREL, Miss MCMORRIS, Mr. STEARNS, Mr. MARCHANT, 

Mr. WHITFIELD, Mr. PUTNAM, Mr. BILIRAKIS, Mr. HALL, Mr. SHIMKUS, 

Mr. UPTON, Mr. MCCAUL of Texas, Mrs. BONO, Mrs. CAPITO, Mr. TOM

DAVIS of Virginia, Mr. TIAHRT, Mrs. NORTHUP, Mr. BOUSTANY, Mr. 

SHAW, Mr. SIMMONS, Mr. KINGSTON, Mr. BURTON of Indiana, Mr. PETERSON of Pennsylvania, Ms. HART, Mrs. BLACKBURN, Mr. POMBO, Mr. 

CALVERT, and Mr. PLATTS

Deleted sponsor: Mr. TOWNS (added June 27, 2005; deleted June 30, 2005) 

FEBRUARY 16, 2006 

Reported from the Committee on Energy and Commerce with an amendment 
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[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on May 12, 2005] 

A BILL 

To amend the Public Health Service Act to provide for 

cooperative governing of individual health insurance coverage offered in interstate commerce. 

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. 

4 This Act may be cited as ‘‘Health Care Choice Act of 

5 2005’’. 

6 SEC. 2. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

7 FOR ENACTMENT OF LAW. 

8 This Act is enacted pursuant to the power granted 

9 Congress under article I, section 8, clause 3, of the United 

10 States Constitution. 

11 SEC. 3. FINDINGS. 

12 Congress finds the following: 

13 (1) The application of numerous and significant 

14 variations in State law impacts the ability of insur15 ers to offer, and individuals to obtain, affordable in16 dividual health insurance coverage, thereby impeding 

17 commerce in individual health insurance coverage. 
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1 (2) Individual health insurance coverage is in2 creasingly offered through the Internet, other elec3 tronic means, and by mail, all of which are inher4 ently part of interstate commerce. 

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

6 to encourage increased efficiency in the offering of in7 dividual health insurance coverage through a collabo8 rative approach by the States in regulating this cov9 erage. 

10 (4) The establishment of risk-retention groups 

11 has provided a successful model for the sale of insur12 ance across State lines, as the acts establishing those 

13 groups allow insurance to be sold in multiple States 

14 but regulated by a single State. 

15 SEC. 4. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH 

16 INSURANCE COVERAGE. 

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

18 Service Act (42 U.S.C. 300gg et seq.) is amended by adding 

19 at the end the following new part: 

20 ‘‘PART D—COOPERATIVE GOVERNING OF INDIVIDUAL

21 HEALTH INSURANCE COVERAGE

22 ‘‘SEC. 2795. DEFINITIONS. 

23 ‘‘In this part: 

24 ‘‘(1) PRIMARY STATE.—The term ‘primary State’ 

25 means, with respect to individual health insurance 
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1 coverage offered by a health insurance issuer, the 

2 State designated by the issuer as the State whose cov3 ered laws shall govern the health insurance issuer in 

4 the sale of such coverage under this part. An issuer, 

5 with respect to a particular policy, may only des6 ignate one such State as its primary State with re7 spect to all such coverage it offers. Such an issuer 

8 may not change the designated primary State with 

9 respect to individual health insurance coverage once 

10 the policy is issued, except that such a change may 

11 be made upon renewal of the policy. With respect to 

12 such designated State, the issuer is deemed to be 

13 doing business in that State. 

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

15 State’ means, with respect to individual health insur16 ance coverage offered by a health insurance issuer, 

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

18 of a health insurance issuer that is selling a policy 

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

20 is deemed to be doing business in that secondary 

21 State. 

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

23 ‘health insurance issuer’ has the meaning given such 

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

25 must be licensed in the primary State and be quali-
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1 fied to sell individual health insurance coverage in 

2 that State. 

3 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV4 ERAGE.—The term ‘individual health insurance cov5 erage’ means health insurance coverage offered in the 

6 individual market, as defined in section 2791(e)(1). 

7 ‘‘(5) APPLICABLE STATE AUTHORITY.—The term 

8 ‘applicable State authority’ means, with respect to a 

9 health insurance issuer in a State, the State insur10 ance commissioner or official or officials designated 

11 by the State to enforce the requirements of this title 

12 for the State with respect to the issuer. 

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

14 term ‘hazardous financial condition’ means that, 

15 based on its present or reasonably anticipated finan16 cial condition, a health insurance issuer is unlikely to 

17 be able— 

18 ‘‘(A) to meet obligations to policyholders 

19 with respect to known claims and reasonably an20 ticipated claims; or 

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

22 course of business. 

23 ‘‘(7) COVERED LAWS.— 

24 ‘‘(A) IN GENERAL.—The term ‘covered laws’ 

25 means the laws, rules, regulations, agreements, 
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1 and orders governing the insurance business per2 taining to— 

3 ‘‘(i) individual health insurance cov4 erage issued by a health insurance issuer; 

5 ‘‘(ii) the offer, sale, rating (including 

6 medical underwriting), renewal, and 

7 issuance of individual health insurance cov8 erage to an individual; 

9 ‘‘(iii) the provision to an individual in 

10 relation to individual health insurance cov11 erage of health care and insurance related 

12 services; 

13 ‘‘(iv) the provision to an individual in 

14 relation to individual health insurance cov15 erage of management, operations, and in16 vestment activities of a health insurance 

17 issuer; and 

18 ‘‘(v) the provision to an individual in 

19 relation to individual health insurance cov20 erage of loss control and claims administra21 tion for a health insurance issuer with re22 spect to liability for which the issuer pro23 vides insurance. 

24 ‘‘(B) EXCEPTION.—Such term does not in25 clude any law, rule, regulation, agreement, or 
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1 order governing the use of care or cost manage2 ment techniques, including any requirement re3 lated to provider contracting, network access or 

4 adequacy, health care data collection, or quality 

5 assurance. 

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

7 50 States and the District of Columbia. 

8 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRACTICES.— 

9 The term ‘unfair claims settlement practices’ means 

10 only the following practices: 

11 ‘‘(A) Knowingly misrepresenting to claim12 ants and insured individuals relevant facts or 

13 policy provisions relating to coverage at issue. 

14 ‘‘(B) Failing to acknowledge with reason15 able promptness pertinent communications with 

16 respect to claims arising under policies. 

17 ‘‘(C) Failing to adopt and implement rea18 sonable standards for the prompt investigation 

19 and settlement of claims arising under policies. 

20 ‘‘(D) Failing to effectuate prompt, fair, and 

21 equitable settlement of claims submitted in which 

22 liability has become reasonably clear. 

23 ‘‘(E) Refusing to pay claims without con24 ducting a reasonable investigation. 
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1 ‘‘(F) Failing to affirm or deny coverage of 

2 claims within a reasonable period of time after 

3 having completed an investigation related to 

4 those claims. 

5 ‘‘(G) A pattern or practice of compelling in6 sured individuals or their beneficiaries to insti7 tute suits to recover amounts due under its poli8 cies by offering substantially less than the 

9 amounts ultimately recovered in suits brought by 

10 them. 

11 ‘‘(H) A pattern or practice of attempting to 

12 settle or settling claims for less than the amount 

13 that a reasonable person would believe the in14 sured individual or his or her beneficiary was 

15 entitled by reference to written or printed adver16 tising material accompanying or made part of 

17 an application. 

18 ‘‘(I) Attempting to settle or settling claims 

19 on the basis of an application that was materi20 ally altered without notice to, or knowledge or 

21 consent of, the insured. 

22 ‘‘(J) Failing to provide forms necessary to 

23 present claims within 15 calendar days of a re24 quests with reasonable explanations regarding 

25 their use. 
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1 ‘‘(K) Attempting to cancel a policy in less 

2 time than that prescribed in the policy or by the 

3 law of the primary State. 

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

5 abuse’ means an act or omission committed by a per6 son who, knowingly and with intent to defraud, com7 mits, or conceals any material information con8 cerning, one or more of the following: 

9 ‘‘(A) Presenting, causing to be presented or 

10 preparing with knowledge or belief that it will be 

11 presented to or by an insurer, a reinsurer, broker 

12 or its agent, false information as part of, in sup13 port of or concerning a fact material to one or 

14 more of the following: 

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

16 renewal of an insurance policy or reinsur17 ance contract. 

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

19 or reinsurance contract. 

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

21 pursuant to an insurance policy or reinsur22 ance contract. 

23 ‘‘(iv) Premiums paid on an insurance 

24 policy or reinsurance contract. 
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1 ‘‘(v) Payments made in accordance 

2 with the terms of an insurance policy or re3 insurance 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 

8 insurer or reinsurer. 

9 ‘‘(viii) The formation, acquisition, 

10 merger, reconsolidation, dissolution or with11 drawal from one or more lines of insurance 

12 or reinsurance in all or part of a State by 

13 an insurer or reinsurer. 

14 ‘‘(ix) The issuance of written evidence 

15 of insurance. 

16 ‘‘(x) The reinstatement of an insurance 

17 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 business 

21 of insurance by a person who knows or should 

22 know that the insurer or other person responsible 

23 for the risk is insolvent at the time of the trans24 action. 
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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 abetting 

6 in the commission of, or conspiracy to commit 

7 the acts or omissions specified in this paragraph. 

8 ‘‘SEC. 2796. APPLICATION OF LAW. 

9 ‘‘(a) IN GENERAL.—The covered laws of the primary 

10 State shall apply to individual health insurance coverage 

11 offered by a health insurance issuer in the primary State 

12 and in any secondary State, but only if the coverage and 

13 issuer comply with the conditions of this section with re14 spect to the offering of coverage in any secondary State. 

15 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC16 ONDARY STATE.—Except as provided in this section, a 

17 health insurance issuer with respect to its offer, sale, rating 

18 (including medical underwriting), renewal, and issuance of 

19 individual health insurance coverage in any secondary 

20 State is exempt from any covered laws of the secondary 

21 State (and any rules, regulations, agreements, or orders 

22 sought or issued by such State under or related to such cov23 ered laws) to the extent that such laws would— 

24 ‘‘(1) make unlawful, or regulate, directly or indi25 rectly, the operation of the health insurance issuer op-
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1 erating in the secondary State, except that any sec2 ondary State may require such an issuer— 

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

4 applicable premium and other taxes (including 

5 high risk pool assessments) which are levied on 

6 insurers and surplus lines insurers, brokers, or 

7 policyholders under the laws of the State; 

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

9 State insurance commissioner as its agent solely 

10 for the purpose of receiving service of legal docu11 ments or process; 

12 ‘‘(C) to submit to an examination of its fi13 nancial condition by the State insurance com14 missioner in any State in which the issuer is 

15 doing business to determine the issuer’s financial 

16 condition, if— 

17 ‘‘(i) the State insurance commissioner 

18 of the primary State has not done an exam19 ination within the period recommended by 

20 the National Association of Insurance Com21 missioners; and 

22 ‘‘(ii) any such examination is con23 ducted in accordance with the examiners’ 

24 handbook of the National Association of In25 surance Commissioners and is coordinated 
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1 to avoid unjustified duplication and un2 justified repetition; 

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

4 issued— 

5 ‘‘(i) in a delinquency proceeding com6 menced by the State insurance commis7 sioner if there has been a finding of finan8 cial impairment under subparagraph (C); 

9 or 

10 ‘‘(ii) in a voluntary dissolution pro11 ceeding; 

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

13 by a court of competent jurisdiction, upon a pe14 tition by the State insurance commissioner alleg15 ing that the issuer is in hazardous financial con16 dition; 

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

18 basis, in any insurance insolvency guaranty as19 sociation or similar association to which a 

20 health insurance issuer in the State is required 

21 to belong; 

22 ‘‘(G) to comply with any State law regard23 ing fraud and abuse (as defined in section 

24 2795(10)), except that if the State seeks an in25 junction regarding the conduct described in this 
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1 subparagraph, such injunction must be obtained 

2 from a court of competent jurisdiction; 

3 ‘‘(H) to comply with any State law regard4 ing unfair claims settlement practices (as de5 fined in section 2795(9)); or 

6 ‘‘(I) to comply with the applicable require7 ments for independent review under section 2798 

8 with respect to coverage offered in the State; 

9 ‘‘(2) require any individual health insurance 

10 coverage issued by the issuer to be countersigned by 

11 an insurance agent or broker residing in that Sec12 ondary State; or 

13 ‘‘(3) otherwise discriminate against the issuer 

14 issuing insurance in both the primary State and in 

15 any secondary State. 

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

17 health insurance issuer shall provide the following notice, 

18 in 12-point bold type, in any insurance coverage offered 

19 in a secondary State under this part by such a health insur20 ance issuer and at renewal of the policy, with the 5 blank 

21 spaces therein being appropriately filled with the name of 

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

23 name of the secondary State, the name of the secondary 

24 State, and the name of the secondary State, respectively, 

25 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 less 

7 expensive than others because it is not subject 

8 to all of the insurance laws and regulations of 

9 the State of lllll, including coverage of 

10 some services or benefits mandated by the law 

11 of the State of lllll. Additionally, this 

12 policy is not subject to all of the consumer pro13 tection laws or restrictions on rate changes of 

14 the State of lllll. As with all insurance 

15 products, before purchasing this policy, you 

16 should carefully review the policy and deter17 mine what health care services the policy cov18 ers and what benefits it provides, including 

19 any exclusions, limitations, or conditions for 

20 such services or benefits.’. 

21 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

22 AND PREMIUM INCREASES.— 

23 ‘‘(1) IN GENERAL.—For purposes of this section, 

24 a health insurance issuer that provides individual 

25 health insurance coverage to an individual under this 
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1 part in a primary or secondary State may not upon 

2 renewal— 

3 ‘‘(A) move or reclassify the individual in4 sured under the health insurance coverage from 

5 the class such individual is in at the time of 

6 issue of the contract based on the health-status 

7 related factors of the individual; or 

8 ‘‘(B) increase the premiums assessed the in9 dividual for such coverage based on a health sta10 tus-related factor or change of a health status-re11 lated factor or the past or prospective claim ex12 perience of the insured individual. 

13 ‘‘(2) CONSTRUCTION.—Nothing in paragraph (1) 

14 shall be construed to prohibit a health insurance 

15 issuer— 

16 ‘‘(A) from terminating or discontinuing 

17 coverage or a class of coverage in accordance 

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

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

20 policy holders within a class based on claims ex21 perience; 

22 ‘‘(C) from changing premiums or offering 

23 discounted premiums to individuals who engage 

24 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 indi9 viduals to whom coverage is offered; 

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

11 ‘‘(E) from retroactively adjusting the rates 

12 charged an insured individual if the initial rates 

13 were set based on material misrepresentation by 

14 the individual at the time of issue. 

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

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

17 individual health insurance coverage in a secondary State 

18 unless that coverage is currently offered for sale in the pri19 mary State. 

20 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR HEALTH

21 INSURANCE ISSUERS.—Any State may require that a per22 son acting, or offering to act, as an agent or broker for a 

23 health insurance issuer with respect to the offering of indi24 vidual health insurance coverage obtain a license from that 

25 State, with commissions or other compensation subject to 
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1 the provisions of the laws of that State, except that a State 

2 may not impose any qualification or requirement which 

3 discriminates against a nonresident agent or broker. 

4 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE INSUR5 ANCE 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 State 

9 in which it intends to offer such coverage, before it 

10 may offer individual health insurance coverage in 

11 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 shall 

15 include the name of its primary State and its 

16 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 opinion 

3 on loss and loss adjustment expense reserves made 

4 by— 

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

6 Actuaries; or 

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

8 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.—Noth9 ing in this section shall be construed to affect the authority 

10 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 that violates the requirements of 

17 the law of a secondary State which are described in 

18 subparagraphs (A) through (H) of section 2796(b)(1). 

19 ‘‘(i) POWER OF SECONDARY STATES TO TAKE ADMIN20 ISTRATIVE ACTION.—Nothing in this section shall be con21 strued to affect the authority of any State to enjoin conduct 

22 in violation of that State’s laws described in section 

23 2796(b)(1). 

24 ‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.— 
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1 ‘‘(1) IN GENERAL.—Subject to the provisions of 

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

3 paragraph (2), nothing in this section shall be con4 strued to affect the authority of any State to make use 

5 of any of its powers to enforce the laws of such State 

6 with respect to which a health insurance issuer is not 

7 exempt under subsection (b). 

8 ‘‘(2) COURTS OF COMPETENT JURISDICTION.—If 

9 a State seeks an injunction regarding the conduct de10 scribed in paragraphs (1) and (2) of subsection (h), 

11 such injunction must be obtained from a Federal or 

12 State court of competent jurisdiction. 

13 ‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 

14 section shall affect the authority of any State to bring ac15 tion in any Federal or State court. 

16 ‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in this 

17 section shall be construed to affect the applicability of State 

18 laws generally applicable to persons or corporations. 

19 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

20 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

21 health insurance issuer is offering coverage in a primary 

22 State that does not accommodate residents of secondary 

23 States or does not provide a working mechanism for resi24 dents of a secondary State, and the issuer is offering cov25 erage under this part in such secondary State which has 
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1 not adopted a qualified high risk pool as its acceptable al2 ternative mechanism (as defined in section 2744(c)(2)), the 

3 issuer shall, with respect to any individual health insurance 

4 coverage offered in a secondary State under this part, com5 ply with the guaranteed availability requirements for eligi6 ble individuals in section 2741. 

7 ‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 

8 BEFORE ISSUER MAY SELL INTO SECONDARY 

9 STATES. 

10 ‘‘A health insurance issuer may not offer, sell, or issue 

11 individual health insurance coverage in a secondary State 

12 if the State insurance commissioner does not use a risk13 based capital formula for the determination of capital and 

14 surplus requirements for all health insurance issuers. 

15 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE16 DURES. 

17 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur18 ance issuer may not offer, sell, or issue individual health 

19 insurance coverage in a secondary State under the provi20 sions of this title unless—— 

21 ‘‘(1) both the secondary State and the primary 

22 State have legislation or regulations in place estab23 lishing an independent review process for individuals 

24 who are covered by individual health insurance cov25 erage, or 
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1 ‘‘(2) in any case in which the requirements of 

2 subparagraph (A) are not met with respect to the ei3 ther of such States, the issuer provides an inde4 pendent review mechanism substantially identical (as 

5 determined by the applicable State authority of such 

6 State) to that prescribed in the ‘Health Carrier Exter7 nal Review Model Act’ of the National Association of 

8 Insurance Commissioners for all individuals who 

9 purchase insurance coverage under the terms of this 

10 part, except that, under such mechanism, the review 

11 is conducted by an independent medical reviewer, or 

12 a panel of such reviewers, with respect to whom the 

13 requirements of subsection (b) are met. 

14 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL RE15 VIEWERS.—In the case of any independent review mecha16 nism referred to in subsection (a)(2)— 

17 ‘‘(1) IN GENERAL.—In referring a denial of a 

18 claim to an independent medical reviewer, or to any 

19 panel of such reviewers, to conduct independent med20 ical review, the issuer shall ensure that— 

21 ‘‘(A) each independent medical reviewer 

22 meets the qualifications described in paragraphs 

23 (2) and (3); 

24 ‘‘(B) with respect to each review, each re25 viewer meets the requirements of paragraph (4) 
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1 and the reviewer, or at least 1 reviewer on the 

2 panel, meets the requirements described in para3 graph (5); and 

4 ‘‘(C) compensation provided by the issuer to 

5 each reviewer is consistent with paragraph (6). 

6 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde7 pendent medical reviewer shall be a physician 

8 (allopathic or osteopathic) or health care professional 

9 who— 

10 ‘‘(A) is appropriately credentialed or li11 censed in 1 or more States to deliver health care 

12 services; and 

13 ‘‘(B) typically treats the condition, makes 

14 the diagnosis, or provides the type of treatment 

15 under review. 

16 ‘‘(3) INDEPENDENCE.— 

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), each independent medical reviewer in 

19 a case shall— 

20 ‘‘(i) not be a related party (as defined 

21 in paragraph (7)); 

22 ‘‘(ii) not have a material familial, fi23 nancial, or professional relationship with 

24 such a party; and 
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1 ‘‘(iii) not otherwise have a conflict of 

2 interest with such a party (as determined 

3 under regulations). 

4 ‘‘(B) EXCEPTION.—Nothing in subpara5 graph (A) shall be construed to— 

6 ‘‘(i) prohibit an individual, solely on 

7 the basis of affiliation with the issuer, from 

8 serving as an independent medical reviewer 

9 if— 

10 ‘‘(I) a non-affiliated individual is 

11 not reasonably available; 

12 ‘‘(II) the affiliated individual is 

13 not involved in the provision of items 

14 or services in the case under review; 

15 ‘‘(III) the fact of such an affili16 ation is disclosed to the issuer and the 

17 enrollee (or authorized representative) 

18 and neither party objects; and 

19 ‘‘(IV) the affiliated individual is 

20 not an employee of the issuer and does 

21 not provide services exclusively or pri22 marily to or on behalf of the issuer; 

23 ‘‘(ii) prohibit an individual who has 

24 staff privileges at the institution where the 

25 treatment involved takes place from serving 
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1 as an independent medical reviewer merely 

2 on the basis of such affiliation if the affili3 ation is disclosed to the issuer and the en4 rollee (or authorized representative), and 

5 neither party objects; or 

6 ‘‘(iii) prohibit receipt of compensation 

7 by an independent medical reviewer from 

8 an entity if the compensation is provided 

9 consistent with paragraph (6). 

10 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

11 IN SAME FIELD.— 

12 ‘‘(A) IN GENERAL.—In a case involving 

13 treatment, or the provision of items or services— 

14 ‘‘(i) by a physician, a reviewer shall be 

15 a practicing physician (allopathic or osteo16 pathic) of the same or similar specialty, as 

17 a physician who, acting within the appro18 priate scope of practice within the State in 

19 which the service is provided or rendered, 

20 typically treats the condition, makes the di21 agnosis, or provides the type of treatment 

22 under review; or 

23 ‘‘(ii) by a non-physician health care 

24 professional, the reviewer, or at least 1 

25 member of the review panel, shall be a prac-
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1 ticing non-physician health care profes2 sional of the same or similar specialty as 

3 the non-physician health care professional 

4 who, acting within the appropriate scope of 

5 practice within the State in which the serv6 ice is provided or rendered, typically treats 

7 the condition, makes the diagnosis, or pro8 vides the type of treatment under review. 

9 ‘‘(B) PRACTICING DEFINED.—For purposes 

10 of this paragraph, the term ‘practicing’ means, 

11 with respect to an individual who is a physician 

12 or other health care professional, that the indi13 vidual provides health care services to individual 

14 patients on average at least 2 days per week. 

15 ‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 

16 external review relating to a child, a reviewer shall 

17 have expertise under paragraph (2) in pediatrics. 

18 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA19 TION.—Compensation provided by the issuer to an 

20 independent medical reviewer in connection with a 

21 review under this section shall— 

22 ‘‘(A) not exceed a reasonable level; and 

23 ‘‘(B) not be contingent on the decision ren24 dered by the reviewer. 
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1 ‘‘(7) RELATED PARTY DEFINED.—For purposes 

2 of this section, the term ‘related party’ means, with 

3 respect to a denial of a claim under a coverage relat4 ing to an enrollee, any of the following: 

5 ‘‘(A) The issuer involved, or any fiduciary, 

6 officer, director, or employee of the issuer. 

7 ‘‘(B) The enrollee (or authorized representa8 tive). 

9 ‘‘(C) The health care professional that pro10 vides the items or services involved in the denial. 

11 ‘‘(D) The institution at which the items or 

12 services (or treatment) involved in the denial are 

13 provided. 

14 ‘‘(E) The manufacturer of any drug or 

15 other item that is included in the items or serv16 ices involved in the denial. 

17 ‘‘(F) Any other party determined under any 

18 regulations to have a substantial interest in the 

19 denial involved. 

20 ‘‘(8) DEFINITIONS.—For purposes of this sub21 section: 

22 ‘‘(A) ENROLLEE.—The term ‘enrollee’ 

23 means, with respect to health insurance coverage 

24 offered by a health insurance issuer, an indi-
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1 vidual enrolled with the issuer to receive such 

2 coverage. 

3 ‘‘(B) HEALTH CARE PROFESSIONAL.—The 

4 term ‘health care professional’ means an indi5 vidual who is licensed, accredited, or certified 

6 under State law to provide specified health care 

7 services and who is operating within the scope of 

8 such licensure, accreditation, or certification. 

9 ‘‘SEC. 2799. ENFORCEMENT. 

10 ‘‘(a) IN GENERAL.—Subject to subsection (b), with re11 spect to specific individual health insurance coverage the 

12 primary State for such coverage has sole jurisdiction to en13 force the primary State’s covered laws in the primary State 

14 and any secondary State. 

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

16 subsection (a) shall be construed to affect the authority of 

17 a secondary State to enforce its laws as set forth in the 

18 exception specified in section 2796(b)(1). 

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

20 initiated by the applicable secondary State authority, the 

21 court of competent jurisdiction shall apply the covered laws 

22 of the primary State. 

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

24 of individual health insurance coverage offered in a sec25 ondary State that fails to comply with the covered laws of 
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1 the primary State, the applicable State authority of the sec2 ondary State may notify the applicable State authority of 

3 the primary State.’’. 

4 (b) EFFECTIVE DATE.—The amendment made by sub5 section (a) shall apply to individual health insurance cov6 erage offered, issued, or sold after the date that is one year 

7 after the date of the enactment of this Act. 

8 (c) GAO ONGOING STUDY AND REPORTS.— 

9 (1) STUDY.—The Comptroller General of the 

10 United States shall conduct an ongoing study con11 cerning the effect of the amendment made by sub12 section (a) on— 

13 (A) the number of uninsured and under-in14 sured; 

15 (B) the availability and cost of health in16 surance policies for individuals with pre-existing 

17 medical conditions; 

18 (C) the availability and cost of health in19 surance policies generally; 

20 (D) the elimination or reduction of different 

21 types of benefits under health insurance policies 

22 offered in different States; and 

23 (E) cases of fraud or abuse relating to 

24 health insurance coverage offered under such 

25 amendment and the resolution of such cases. 
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1 (2) ANNUAL REPORTS.—The Comptroller General 

2 shall submit to Congress an annual report, after the 

3 end of each of the 5 years following the effective date 

4 of the amendment made by subsection (a), on the on5 going study conducted under paragraph (1). 

6 SEC. 5. SEVERABILITY. 

7 If any provision of the Act or the application of such 

8 provision to any person or circumstance is held to be uncon9 stitutional, the remainder of this Act and the application 

10 of the provisions of such to any other person or cir11 cumstance shall not be affected. 

Union Calendar No. 207 

109TH CONGRESS 

2D SESSION H. R. 2355 

[Report No. 109–378] 

A BILL 

To amend the Public Health Service Act to provide 

surance coverage offered in interstate commerce. for cooperative governing of individual health inFEBRUARY 16, 2006 

Reported from the Committee on Energy and Commerce 

with an amendment