I 

108TH CONGRESS 

2D SESSION H. R. 4662 

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 

JUNE 23, 2004 

Mr. SHADEGG (for himself, Mr. BARTLETT of Maryland, Mr. CANNON, Mr. 

TOM DAVIS of Virginia, Mr. DEAL of Georgia, Mr. FEENEY, Mr. FLAKE, 

Mr. FRANKS of Arizona, Mr. GARRETT of New Jersey, Mr. GINGREY, Mr. 

HOEKSTRA, Mr. JONES of North Carolina, Mr. KING of Iowa, Mr. 

OTTER, Mr. PENCE, Mr. RYAN of Wisconsin, Mr. SENSENBRENNER, Mr. 

SESSIONS, Mr. SMITH of New Jersey, Mr. TOOMEY, and Mr. WILSON of 

South Carolina) 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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as ‘‘Health Care Choice Act’’. 
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1 SEC. 2. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

2 FOR ENACTMENT OF LAW. 

3 This Act is enacted pursuant to the power granted 

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

5 States Constitution. 

6 SEC. 3. 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. 4. 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 ‘‘SEC. 2795. DEFINITIONS. 

9 ‘‘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 its primary 

14 State. An issuer, with respect to a particular policy, 

15 may only designate one such State as its primary 

16 State with respect to all such coverage it offers. 

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

18 State’ means, with respect to a health insurance 

19 issuer, any State (in the United States or District 

20 of Columbia) that is not the primary State. 

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

22 ‘health insurance issuer’ has the meaning given such 

23 term in section 2791(b)(2). 

24 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV25 ERAGE.—The term ‘individual health insurance cov26 erage’ means health insurance coverage offered in 
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1 the individual market, as defined in section 

2 2791(e)(1). 

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

4 term ‘applicable State authority’ means, with respect 

5 to a health insurance issuer in a State, the State in6 surance commissioner or official or officials des7 ignated by the State to enforce the requirements of 

8 this title for the State involved with respect to the 

9 issuer. 

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

11 term ‘hazardous financial condition’ means that, 

12 based on its present or reasonably anticipated finan13 cial condition, a health insurance issuer is unlikely 

14 to be able— 

15 ‘‘(A) to meet obligations to policyholders 

16 with respect to known claims and reasonably 

17 anticipated claims; or 

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

19 course of business. 

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

21 means the laws governing the issuance of an indi22 vidual health insurance coverage pertaining to— 

23 ‘‘(A) the provision of insurance related 

24 services; 
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1 ‘‘(B) management, operations, and invest2 ment activities; and 

3 ‘‘(C) loss control and claims administration 

4 for a health insurance issuer with respect to li5 ability for which the issuer provides insurance. 

6 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

8 State shall apply to individual health insurance coverage 

9 offered by that health insurance issuer in the primary 

10 State and in any secondary State. 

11 ‘‘(b) EXEMPTIONS FROM STATE LAWS, RULES, REG12 ULATIONS, JUDGMENTS, AGREEMENTS, OR ORDERS IN A

13 SECONDARY STATE.—Except as provided in this section, 

14 a health insurance issuer with respect to its offer, sale, 

15 and issuance of individual health insurance coverage in 

16 any secondary State is exempt from any State law, rule, 

17 regulation, judgment, agreement, or order of the sec18 ondary State to the extent that such law, rule, regulation, 

19 judgment, agreement, or order would— 

20 ‘‘(1) make unlawful, or regulate, directly or in21 directly, the operation of the health insurance issuer 

22 operating in the secondary State, except that any 

23 secondary State may require such an issuer— 

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

25 applicable premium and other taxes which are 
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1 levied on insurers and surplus lines insurers, 

2 brokers, or policyholders under the laws of the 

3 State; 

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

5 State insurance commissioner as its agent solely 

6 for the purpose of receiving service of legal doc7 uments or process; 

8 ‘‘(C) to comply with a lawful order issued 

9 in a voluntary dissolution proceeding; 

10 ‘‘(D) to comply with an injunction issued 

11 by a court of competent jurisdiction, upon a pe12 tition by the State insurance commissioner al13 leging that the issuer is in hazardous financial 

14 condition; and 

15 ‘‘(E) to provide the following notice, in 12- 

16 point bold type, in any insurance coverage 

17 issued by such a health insurance issuer, with 

18 the 4 blank spaces therein being appropriately 

19 filled with the name of the health insurance 

20 issuer, the name of primary State, the name of 

21 the secondary State, and the name of the sec22 ondary State, respectively, for the coverage con23 cerned: 
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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. This policy may not be sub5 ject to all of the insurance laws and regula6 tions of the State of lllll, including cov7 erage of some services or benefits mandated 

8 by the law of the State of lllll. Before 

9 purchasing this policy, you should carefully 

10 review the policy and determine what health 

11 care services the policy covers and what bene12 fits it provides, including any exclusions, limi13 tations, or conditions for such services or ben14 efits.’; or 

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

16 basis, in any insurance insolvency guaranty as17 sociation to which a health insurance issuer in 

18 the State is required to belong; 

19 ‘‘(2) require any individual health insurance 

20 coverage issued by the issuer to be countersigned by 

21 an insurance agent or broker residing in that Sec22 ondary State; or 

23 ‘‘(3) otherwise discriminate against the issuer 

24 issuing insurance in both primary and secondary 

25 States. 
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1 ‘‘(c) SCOPE OF EXEMPTIONS.—The exemptions spec2 ified in subsection (b) apply to laws, rules, regulations, 

3 judgments, agreements, and orders governing the insur4 ance business pertaining to— 

5 ‘‘(1) individual health insurance coverage issued 

6 by a health insurance issuer; 

7 ‘‘(2) the offer, sale, and issuance of individual 

8 health insurance coverage to an individual; and 

9 ‘‘(3) the provision to an individual in relation to 

10 individual health insurance coverage of— 

11 ‘‘(A) insurance related services; 

12 ‘‘(B) management, operations, and invest13 ment activities; and 

14 ‘‘(C) loss control and claims administration 

15 for a health insurance issuer with respect to li16 ability for which the issuer provides insurance. 

17 ‘‘(d) LICENSING OF AGENTS OR BROKERS FOR

18 HEALTH INSURANCE ISSUERS.—Any State may require 

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

20 broker for a health insurance issuer with respect to the 

21 offering of individual health insurance coverage obtain a 

22 license from that State, except that a State many not im23 pose any qualification or requirement which discriminates 

24 against a nonresident agent or broker. 
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1 ‘‘(e) DOCUMENTS FOR SUBMISSION TO STATE INSUR2 ANCE COMMISSIONER.—Each health insurance issuer 

3 issuing individual health insurance coverage in both pri4 mary and secondary States shall submit— 

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

6 State in which it intends to offer such coverage, be7 fore it may offer individual health insurance cov8 erage in such State— 

9 ‘‘(A) a copy of plan of operation or 

10 feasability study (which shall include the name 

11 of its primary State and its principal place of 

12 business); and 

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

14 designation of its primary State; and 

15 ‘‘(2) to the insurance commissioner of each sec16 ondary State in which it offers individual health in17 surance coverage, a copy of the issuer’s annual fi18 nancial statement submitted to the primary State, 

19 which statement shall be certified by an independent 

20 public accountant and contain a statement of opin21 ion on loss and loss adjustment expense reserves 

22 made by— 

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

24 of Actuaries; or 

25 ‘‘(B) a qualified loss reserve specialist. 
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1 ‘‘(f) POWER OF COURTS TO ENJOIN CONDUCT.— 

2 Nothing in this section shall be construed to affect the 

3 authority of any Federal or State court to enjoin— 

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

5 insurance coverage by a health insurance issuer to 

6 any person or group who is not eligible for such in7 surance; or 

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

9 insurance coverage by, or operation of, a health in10 surance issuer that is in hazardous financial condi11 tion. 

12 ‘‘(g) STATE POWERS TO ENFORCE STATE LAWS.— 

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

14 subsection (b)(1)(D) (relating to injunctions), noth15 ing in this section shall be construed to affect the 

16 authority of any State to make use of any of its 

17 powers to enforce the laws of such State with re18 spect to which a health insurance issuer is not ex19 empt under this section. 

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

21 If a State seeks an injunction regarding the conduct 

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

23 (f), such injunction must be obtained from a Federal 

24 or State court of competent jurisdiction. 
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1 ‘‘(h) STATES’ AUTHORITY TO SUE.—Nothing in this 

2 section shall affect the authority of any State to bring ac3 tion in any Federal or State court. 

4 ‘‘(i) GENERALLY APPLICABLE LAWS.—Nothing in 

5 this section shall be construed to affect the applicability 

6 of State laws generally applicable to persons or corpora7 tions. 

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

9 BEFORE ISSUER MAY SELL INTO SECONDARY 

10 STATES. 

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

12 issue individual health insurance coverage in a secondary 

13 State if the primary State does not meet the following re14 quirements: 

15 ‘‘(1) The State insurance commissioner must 

16 use a risk-based capital formula for the determina17 tion of capital and surplus requirements for all 

18 health insurance issuers that are not health mainte19 nance organizations (as defined in section 1301(a)). 

20 For such health maintenance organizations the State 

21 must have legislative or regulatory capital and sur22 plus requirements. 

23 ‘‘(2) The State must have legislation or regula24 tions in place establishing an independent review 

25 process for individuals who are covered by individual 
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1 health insurance coverage unless the issuer provides 

2 an independent review mechanism functionally equiv3 alent (as determined by the primary State insurance 

4 commissioner or official) to that prescribed in the 

5 ‘Health Carrier External Review Model Act’ of the 

6 National Association of Insurance Commissioners for 

7 all individuals who purchase insurance coverage 

8 under the terms of this part. 

9 ‘‘SEC. 2798. ENFORCEMENT. 

10 ‘‘(a) IN GENERAL.—Subject to subsection (c), the 

11 primary State has sole jurisdiction to enforce covered laws 

12 in primary and secondary States. 

13 ‘‘(b) FAILURE TO COMPLY WITH PRIMARY STATE

14 LAW.—In the case of individual health insurance coverage 

15 offered in a secondary State that fails to comply with cov16 ered laws of the primary State, the applicable State au17 thority of the secondary State shall notify, in writing, the 

18 applicable State authority of the primary State of sus19 pected violations of the primary State’s laws. 

20 ‘‘(c) FAILURE OF A PRIMARY STATE AUTHORITY TO

21 TAKE ACTION.—The applicable State authority of the sec22 ondary State may initiate regulatory proceedings to en23 force the covered laws of the primary State if the applica24 ble State authority of the primary State— 
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1 ‘‘(1) does not initiate regulatory or legal pro2 ceedings within 30 days; or 

3 ‘‘(2) fails to maintain an active investigation, 

4 negotiation, regulatory, or judicial proceeding for 

5 any 30-day period. 

6 ‘‘(d) FAILURE TO RESOLVE DISPUTE.—If upon initi7 ating proceedings under subsection (c), the applicable 

8 State authority of the secondary State is unable to resolve 

9 concerns related to suspected violations of covered laws of 

10 the primary State, such applicable secondary State au11 thority may bring action in a court of appropriate jurisdic12 tion. 

13 ‘‘(e) COURT INTERPRETATION.—In reviewing action 

14 initiated by the applicable secondary State authority, the 

15 court of appropriate jurisdiction shall apply the covered 

16 laws of the primary State.’’. 

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

18 subsection (a) shall apply to individual health insurance 

19 coverage offered, issued, or sold after the date of the en20 actment of this Act. 

21 SEC. 5. SEVERABILITY. 

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

23 provision to any person or circumstance is held to be un24 constitutional, the remainder of this Act and the applica-
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1 tion of the provisions of such to any other person or cir2 cumstance shall not be affected. 

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