I 

109TH CONGRESS 

1ST SESSION H. R. 2355

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 

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,
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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as ‘‘Health Care Choice Act 

3 of 2005’’. 

4 SEC. 2. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

5 FOR ENACTMENT OF LAW. 

6 This Act is enacted pursuant to the power granted 

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

8 States Constitution. 

9 SEC. 3. FINDINGS. 

10 Congress finds the following: 

11 (1) The application of numerous and significant 

12 variations in State law impacts the ability of insur13 ers to offer, and individuals to obtain, affordable in14 dividual health insurance coverage, thereby impeding 

15 commerce in individual health insurance coverage. 

16 (2) Individual health insurance coverage is in17 creasingly offered through the Internet, other elec18 tronic means, and by mail, all of which are inher19 ently part of interstate commerce. 

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

21 to encourage increased efficiency in the offering of 

22 individual health insurance coverage through a col23 laborative approach by the States in regulating this 

24 coverage. 

25 (4) The establishment of risk-retention groups 

26 has provided a successful model for the sale of insur-
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1 ance across State lines, as the acts establishing 

2 those groups allow insurance to be sold in multiple 

3 States but regulated by a single State. 

4 SEC. 4. COOPERATIVE GOVERNING OF INDIVIDUAL 

5 HEALTH INSURANCE COVERAGE. 

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

7 Service Act (42 U.S.C. 300gg et seq.) is amended by add8 ing at the end the following new part: 

9 ‘‘PART D—COOPERATIVE GOVERNING OF INDIVIDUAL

10 HEALTH INSURANCE COVERAGE

11 ‘‘SEC. 2795. DEFINITIONS. 

12 ‘‘In this part: 

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

14 State’ means, with respect to individual health insur15 ance coverage offered by a health insurance issuer, 

16 the State designated by the issuer as the State 

17 whose covered laws shall govern the health insurance 

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

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

20 only designate one such State as its primary State 

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

22 issuer may not change the designated primary State 

23 with respect to individual health insurance coverage 

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

25 may be made upon renewal of the policy. With re-
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1 spect to such designated State, the issuer is deemed 

2 to be doing business in that State. 

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

4 State’ means, with respect to individual health insur5 ance coverage offered by a health insurance issuer, 

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

7 of a health insurance issuer that is selling a policy 

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

9 is deemed to be doing business in that secondary 

10 State. 

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

12 ‘health insurance issuer’ has the meaning given such 

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

14 issuer must be licensed in the primary State and be 

15 qualified to sell individual health insurance coverage 

16 in that State. 

17 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV18 ERAGE.—The term ‘individual health insurance cov19 erage’ means health insurance coverage offered in 

20 the individual market, as defined in section 

21 2791(e)(1). 

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

23 term ‘applicable State authority’ means, with respect 

24 to a health insurance issuer in a State, the State in25 surance commissioner or official or officials des-
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1 ignated by the State to enforce the requirements of 

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

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

4 term ‘hazardous financial condition’ means that, 

5 based on its present or reasonably anticipated finan6 cial condition, a health insurance issuer is unlikely 

7 to be able—

8 ‘‘(A) to meet obligations to policyholders 

9 with respect to known claims and reasonably 

10 anticipated claims; or 

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

12 course of business. 

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

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

15 orders governing the insurance business pertaining 

16 to—

17 ‘‘(A) individual health insurance coverage 

18 issued by a health insurance issuer; 

19 ‘‘(B) the offer, sale, and issuance of indi20 vidual health insurance coverage to an indi21 vidual; and 

22 ‘‘(C) the provision to an individual in rela23 tion to individual health insurance coverage 

24 of—
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1 ‘‘(i) health care and insurance related 

2 services; 

3 ‘‘(ii) management, operations, and in4 vestment activities of a health insurance 

5 issuer; and 

6 ‘‘(iii) loss control and claims adminis7 tration for a health insurance issuer with 

8 respect to liability for which the issuer pro9 vides insurance. 

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

11 50 States and the District of Columbia. 

12 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC13 TICES.—The term ‘unfair claims settlement prac14 tices’ means only the following practices: 

15 ‘‘(A) Knowingly misrepresenting to claim16 ants and insured individuals relevant facts or 

17 policy provisions relating to coverage at issue. 

18 ‘‘(B) Failing to acknowledge with reason19 able promptness pertinent communications with 

20 respect to claims arising under policies. 

21 ‘‘(C) Failing to adopt and implement rea22 sonable standards for the prompt investigation 

23 and settlement of claims arising under policies. 
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1 ‘‘(D) Failing to effectuate prompt, fair, 

2 and equitable settlement of claims submitted in 

3 which liability has become reasonably clear. 

4 ‘‘(E) Refusing to pay claims without con5 ducting a reasonable investigation. 

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

7 claims within a reasonable period of time after 

8 having completed an investigation related to 

9 those claims. 

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

11 and abuse’ means an act or omission committed by 

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

13 commits, or conceals any material information con14 cerning, one or more of the following: 

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

16 or preparing with knowledge or belief that it 

17 will be presented to or by an insurer, a rein18 surer, broker or its agent, false information as 

19 part of, in support of or concerning a fact ma20 terial to one or more of the following: 

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

22 renewal of an insurance policy or reinsur23 ance contract. 

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

25 or reinsurance contract. 
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1 ‘‘(iii) A claim for payment or benefit 

2 pursuant to an insurance policy or reinsur3 ance contract. 

4 ‘‘(iv) Premiums paid on an insurance 

5 policy or reinsurance contract. 

6 ‘‘(v) Payments made in accordance 

7 with the terms of an insurance policy or 

8 reinsurance contract. 

9 ‘‘(vi) A document filed with the com10 missioner or the chief insurance regulatory 

11 official of another jurisdiction. 

12 ‘‘(vii) The financial condition of an in13 surer or reinsurer. 

14 ‘‘(viii) The formation, acquisition, 

15 merger, reconsolidation, dissolution or 

16 withdrawal from one or more lines of in17 surance or reinsurance in all or part of a 

18 State by an insurer or reinsurer. 

19 ‘‘(ix) The issuance of written evidence 

20 of insurance. 

21 ‘‘(x) The reinstatement of an insur22 ance policy. 

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

24 renewal insurance risks on behalf of an insurer 

25 reinsurer or other person engaged in the busi-
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1 ness of insurance by a person who knows or 

2 should know that the insurer or other person 

3 responsible for the risk is insolvent at the time 

4 of the transaction. 

5 ‘‘(C) Transaction of the business of insur6 ance in violation of laws requiring a license, cer7 tificate of authority or other legal authority for 

8 the transaction of the business of insurance. 

9 ‘‘(D) Attempt to commit, aiding or abet10 ting in the commission of, or conspiracy to com11 mit the acts or omissions specified in this para12 graph. 

13 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

15 State shall apply to individual health insurance coverage 

16 offered by a health insurance issuer in the primary State 

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

18 issuer comply with the conditions of this section with re19 spect to the offering of coverage in any secondary State. 

20 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC21 ONDARY STATE.—Except as provided in this section, a 

22 health insurance issuer with respect to its offer, sale, re23 newal, and issuance of individual health insurance cov24 erage in any secondary State is exempt from any covered 

25 laws of the secondary State (and any rules, regulations, 
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1 agreements, or orders sought or issued by such State 

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

3 such laws would—

4 ‘‘(1) make unlawful, or regulate, directly or in5 directly, the operation of the health insurance issuer 

6 operating in the secondary State, except that any 

7 secondary State may require such an issuer—

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

9 applicable premium and other taxes (including 

10 high risk pool assessments) which are levied on 

11 insurers and surplus lines insurers, brokers, or 

12 policyholders under the laws of the State; 

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

14 State insurance commissioner as its agent solely 

15 for the purpose of receiving service of legal doc16 uments or process; 

17 ‘‘(C) to submit to an examination of its fi18 nancial condition by the State insurance com19 missioner in any State in which the issuer is 

20 doing business to determine the issuer’s finan21 cial condition, if—

22 ‘‘(i) the State insurance commissioner 

23 of the primary State has not done an ex24 amination within the period recommended 
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1 by the National Association of Insurance 

2 Commissioners; and 

3 ‘‘(ii) any such examination is con4 ducted in accordance with the examiners’ 

5 handbook of the National Association of 

6 Insurance Commissioners and is coordi7 nated to avoid unjustified duplication and 

8 unjustified repetition; 

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

10 issued—

11 ‘‘(i) in a delinquency proceeding com12 menced by the State insurance commis13 sioner if there has been a finding of finan14 cial impairment under subparagraph (C); 

15 or 

16 ‘‘(ii) in a voluntary dissolution pro17 ceeding; 

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

19 by a court of competent jurisdiction, upon a pe20 tition by the State insurance commissioner al21 leging that the issuer is in hazardous financial 

22 condition; 

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

24 basis, in any insurance insolvency guaranty as25 sociation or similar association to which a 
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1 health insurance issuer in the State is required 

2 to belong; 

3 ‘‘(G) to comply with any State law regard4 ing fraud and abuse (as defined in section 

5 2795(10)), except that if the State seeks an in6 junction regarding the conduct described in this 

7 subparagraph, such injunction must be obtained 

8 from a court of competent jurisdiction; or 

9 ‘‘(H) to comply with any State law regard10 ing unfair claims settlement practices (as de11 fined in section 2795(9)); 

12 ‘‘(2) require any individual health insurance 

13 coverage issued by the issuer to be countersigned by 

14 an insurance agent or broker residing in that Sec15 ondary State; or 

16 ‘‘(3) otherwise discriminate against the issuer 

17 issuing insurance in both the primary State and in 

18 any secondary State. 

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

20 health insurance issuer shall provide the following notice, 

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

22 in a secondary State under this part by such a health in23 surance issuer and at renewal of the policy, with the 5 

24 blank spaces therein being appropriately filled with the 

25 name of the health insurance issuer, the name of primary 
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1 State, the name of the secondary State, the name of the 

2 secondary State, and the name of the secondary State, re3 spectively, for the coverage concerned: 

4 ‘Notice 

5 ‘This policy is issued by lllll and is 

6 governed by the laws and regulations of the 

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

8 of that State as determined by that State’s De9 partment of Insurance. This policy may be 

10 less expensive than others because it is not 

11 subject to all of the insurance laws and regu12 lations of the State of lllll, including 

13 coverage of some services or benefits man14 dated by the law of the State of lllll. Ad15 ditionally, this policy is not subject to all of 

16 the consumer protection laws or restrictions 

17 on rate changes of the State of lllll. As 

18 with all insurance products, before pur19 chasing this policy, you should carefully re20 view the policy and determine what health 

21 care services the policy covers and what bene22 fits it provides, including any exclusions, limi23 tations, or conditions for such services or ben24 efits.’. 
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1 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

2 AND PREMIUM INCREASES.—

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, a health insurance issuer that provides indi5 vidual health insurance coverage to an individual 

6 under this part in a primary or secondary State may 

7 not upon renewal—

8 ‘‘(A) move or reclassify the individual in9 sured under the health insurance coverage from 

10 the class such individual is in at the time of 

11 issue of the contract based on the health-status 

12 related factors of the individual; or 

13 ‘‘(B) increase the premiums assessed the 

14 individual for such coverage based on a health 

15 status-related factor or change of a health sta16 tus-related factor or the past or prospective 

17 claim experience of the insured individual. 

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

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

20 issuer—

21 ‘‘(A) from terminating or discontinuing 

22 coverage or a class of coverage in accordance 

23 with subsections (b) and (c) of section 2742; 
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1 ‘‘(B) from raising premium rates for all 

2 policy holders within a class based on claims ex3 perience; 

4 ‘‘(C) from changing premiums or offering 

5 discounted premiums to individuals who engage 

6 in wellness activities at intervals prescribed by 

7 the issuer, if such premium changes or incen8 tives—

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

10 the insurance contract; 

11 ‘‘(ii) are based on specific wellness ac12 tivities that are not applicable to all indi13 viduals; and 

14 ‘‘(iii) are not obtainable by all individ15 uals to whom coverage is offered; 

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

17 ‘‘(E) from retroactively adjusting the rates 

18 charged an individual insured individual if the 

19 initial rates were set based on material mis20 representation by the individual at the time of 

21 issue. 

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

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

24 individual health insurance coverage in a secondary State 
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1 unless that coverage is currently offered for sale in the 

2 primary State. 

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

4 HEALTH INSURANCE ISSUERS.—Any State may require 

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

6 broker for a health insurance issuer with respect to the 

7 offering of individual health insurance coverage obtain a 

8 license from that State, except that a State many not im9 pose any qualification or requirement which discriminates 

10 against a nonresident agent or broker. 

11 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN12 SURANCE COMMISSIONER.—Each health insurance issuer 

13 issuing individual health insurance coverage in both pri14 mary and secondary States shall submit—

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

16 State in which it intends to offer such coverage, be17 fore it may offer individual health insurance cov18 erage in such State—

19 ‘‘(A) a copy of the plan of operation or fea20 sibility study or any similar statement of the 

21 policy being offered and its coverage (which 

22 shall include the name of its primary State and 

23 its principal place of business); 

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

25 designation of its primary State; and 
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1 ‘‘(C) written notice from the issuer of the 

2 issuer’s compliance with all the laws of the pri3 mary State; and 

4 ‘‘(2) to the insurance commissioner of each sec5 ondary State in which it offers individual health in6 surance coverage, a copy of the issuer’s quarterly fi7 nancial statement submitted to the primary State, 

8 which statement shall be certified by an independent 

9 public accountant and contain a statement of opin10 ion on loss and loss adjustment expense reserves 

11 made by—

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

13 of Actuaries; or 

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

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

16 Nothing in this section shall be construed to affect the 

17 authority of any Federal or State court to enjoin—

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

19 insurance coverage by a health insurance issuer to 

20 any person or group who is not eligible for such in21 surance; or 

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

23 insurance coverage by, or operation of, a health in24 surance issuer that is in hazardous financial condi25 tion. 
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1 ‘‘(i) STATE POWERS TO ENFORCE STATE LAWS.—

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

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

4 paragraph (2), nothing in this section shall be con5 strued to affect the authority of any State to make 

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

7 State with respect to which a health insurance issuer 

8 is not exempt under subsection (b). 

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

10 If a State seeks an injunction regarding the conduct 

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

12 (h), such injunction must be obtained from a Fed13 eral or State court of competent jurisdiction. 

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

15 section shall affect the authority of any State to bring ac16 tion in any Federal or State court. 

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

18 this section shall be construed to affect the applicability 

19 of State laws generally applicable to persons or corpora20 tions. 

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

22 BEFORE ISSUER MAY SELL INTO SECONDARY 

23 STATES. 

24 ‘‘A health insurance issuer may not offer, sell, or 

25 issue individual health insurance coverage in a secondary 
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1 State if the primary State does not meet the following re2 quirements: 

3 ‘‘(1) The State insurance commissioner must 

4 use a risk-based capital formula for the determina5 tion of capital and surplus requirements for all 

6 health insurance issuers. 

7 ‘‘(2) The State must have legislation or regula8 tions in place establishing an independent review 

9 process for individuals who are covered by individual 

10 health insurance coverage unless the issuer provides 

11 an independent review mechanism functionally equiv12 alent (as determined by the primary State insurance 

13 commissioner or official) to that prescribed in the 

14 ‘Health Carrier External Review Model Act’ of the 

15 National Association of Insurance Commissioners for 

16 all individuals who purchase insurance coverage 

17 under the terms of this part. 

18 ‘‘SEC. 2798. ENFORCEMENT. 

19 ‘‘(a) IN GENERAL.—Subject to subsection (b), with 

20 respect to specific individual health insurance coverage the 

21 primary State for such coverage has sole jurisdiction to 

22 enforce the primary State’s covered laws in the primary 

23 State and any secondary State. 

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

25 subsection (a) shall be construed to affect the authority 
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1 of a secondary State to enforce its laws as set forth in 

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

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

4 initiated by the applicable secondary State authority, the 

5 court of competent jurisdiction shall apply the covered 

6 laws of the primary State. 

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

8 of individual health insurance coverage offered in a sec9 ondary State that fails to comply with the covered laws 

10 of the primary State, the applicable State authority of the 

11 secondary State may notify the applicable State authority 

12 of the primary State.’’. 

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

14 subsection (a) shall apply to individual health insurance 

15 coverage offered, issued, or sold after the date of the en16 actment of this Act. 

17 SEC. 5. SEVERABILITY. 

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

19 provision to any person or circumstance is held to be un20 constitutional, the remainder of this Act and the applica21 tion of the provisions of such to any other person or cir22 cumstance shall not be affected.

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