I

103D CONGRESS

1ST SESSION H. R. 196

To provide improved access to health care, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 5, 1993

Mr. HOUGHTON introduced the following bill; which was referred jointly to the

Committees on Ways and Means, Energy and Commerce, and the Judiciary

A BILL

To provide improved access to health care, and for other

purposes.

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 This Act may be cited as the ‘‘Health Equity and

5 Access Improvement Act of 1992’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—TAX INCENTIVES FOR HEALTH CARE ACCESS

Sec. 101. Refundable health expenses tax credit.

Sec. 102. Individual tax deduction for health insurance costs.

Sec. 103. Credit for employers to provide health insurance.

Sec. 104. Deductibility for self-employed individuals.

Sec. 105. Revenue incentives for practice in rural areas.
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TITLE II—HEALTH CARE REFORM PROVISIONS

Subtitle A—Model Health Care Insurance Benefits Plan

Sec. 201. Model health care insurance benefits plan.

Sec. 202. Definitions.

Subtitle B—Managed Care

Sec. 211. Development of standards for managed care plans.

Sec. 212. Preemption of provisions relating to managed care.

Subtitle C—Small Employer Purchasing Groups

Sec. 221. Qualified small employer purchasing groups.

Sec. 222. Preemption from insurance mandates for small employer purchasing

groups.

Subtitle D—Insurance Market Reform

Sec. 231. Failure to satisfy certain standards for health care insurance provided to small employers.

Subtitle E—Uniform Standards for Reporting Services and Processing Claims

Sec. 241. Application and establishment of uniform standards.

Sec. 242. Effective date.

TITLE III—MEDICAL LIABILITY REFORM

Subtitle A—Definitions and Findings

Sec. 301. Definitions.

Sec. 302. Effect on interstate commerce.

Subtitle B—Expedited Medical Malpractice Settlements

Sec. 311. Expedited medical malpractice settlements.

Subtitle C—Alternative Dispute Resolution Procedures

Sec. 321. Establishment of board of advisors.

Sec. 322. Development of State voluntary dispute resolution procedures.

Sec. 323. Application of existing procedures, rebuttable presumption.

Subtitle D—Uniform Standards for Medical Malpractice Cases

Sec. 331. Application to civil actions.

Sec. 332. Damages.

Sec. 333. Joint and several liability for noneconomic damages.

Sec. 334. Uniform statute of limitations.

Sec. 335. Special protection for obstetricians and gynecologists.

Subtitle E—Uniform Disciplinary Reforms

Sec. 341. Requirement of compliance.

Sec. 342. Funds for State disciplinary activities.

Sec. 343. Membership of State health care practitioner boards.

Sec. 344. Immunity for members of State health care practitioner boards.

Sec. 345. Risk management programs.
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Sec. 346. Punitive damages.

Subtitle F—Medical Products

Sec. 351. Limitation on award of punitive damages in product liability actions

involving drugs and devices.

Subtitle G—Community Health Centers

Sec. 361. Community and migrant health centers risk retention group.

Subtitle H—Miscellaneous Provisions

Sec. 371. Severability.

Sec. 372. Compliance.

TITLE IV—PUBLIC HEALTH PROVISIONS

Subtitle A—New Basic Health Care Program

Sec. 401. Establishment of BasiCare program.

Sec. 402. GAO study of payments under BasiCare.

Subtitle B—Medicaid Provisions

Sec. 411. Expansion of medicaid waiver authority.

Sec. 412. Establishment of Federal Medical Waiver Demonstration Board.

TITLE V—MEDICALLY UNDERSERVED AREAS

Subtitle A—Public Health Service Act Provisions

Sec. 501. National Health Service Corps.

Sec. 502. Establishment of grant program.

Sec. 503. Establishment of new program to provide funds to allow federally

qualified health centers and other entities or organizations to

provide expanded services to medically underserved individuals.

Sec. 504. Rural mental health outreach grants.

Sec. 505. Health professions training.

Sec. 506. Area health education centers.

Sec. 507. Rural health extension networks.

Sec. 508. Rural managed care cooperatives.

Subtitle B—Provision Relating to Social Security

Sec. 511. Rural health care transition grant program.

Sec. 512. Essential access community hospital program.

TITLE VI—INCENTIVES TO ENCOURAGE PREVENTIVE SERVICES

Sec. 601. Preventive services tax credit.

Sec. 602. Increase in authorization for childhood immunizations.

TITLE VII—TAX TREATMENT OF LONG-TERM CARE INSURANCE

AND PLANS

Subtitle A—Treatment of Long-Term Care Insurance

Sec. 701. Qualified long-term care insurance treated as accident and health insurance for purposes of taxation of life insurance companies.
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Sec. 702. Qualified long-term care insurance treated as accident and health insurance for purposes of exclusion for benefits received under

such insurance and for employer contributions for such insurance.

Sec. 703. Exclusion from gross income for amounts withdrawn from individual

retirement plans or 401(k) plans for qualified long-term care

insurance.

Sec. 704. Exchange of life insurance policy for qualified long-term care policy

not taxable.

Subtitle B—Employer Funding of Medical Benefits

Sec. 711. Medical benefits for retired employees and their spouses and dependents.

Sec. 712. Treatment of health benefits accounts.

Subtitle C—Reverse Mortgage Insurance for Older Americans.

Sec. 721. Maximum amount insured.

Subtitle D—Income Tax Credits

Sec. 731. Refundable credit for custodial care of certain dependents in taxpayer’s home.

Sec. 732. Credit for expenses for long-term care services provided to certain

independent persons requiring such care.

Subtitle E—Treatment of Accelerated Death Benefits

Sec. 741. Tax treatment of accelerated death benefits under life insurance contracts.

Sec. 742. Tax treatment of companies issuing qualified accelerated death benefit riders.

Subtitle F—Federal National Long-Term Care Reinsurance Corporation

Sec. 751. Authorization for establishment of corporation.

Sec. 752. Board of directors and officers.

Sec. 753. Purpose and authority of corporation.

Sec. 754. Capitalization.

Sec. 755. Exemption from state regulation and taxation.

Sec. 756. Audit and annual report.

Sec. 757. Protection of name.

TITLE VIII—IMPROVEMENTS IN PORTABILITY OF PRIVATE

HEALTH INSURANCE

Sec. 801. Excise tax imposed on failure to provide for preexisting condition.
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1 TITLE I—TAX INCENTIVES FOR

2 HEALTH CARE ACCESS

3 SEC. 101. REFUNDABLE HEALTH EXPENSES TAX CREDIT.

4 (a) IN GENERAL.—Subpart C of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of

6 1986 (relating to refundable personal credits) is amended

7 by inserting after section 34 the following new section:

8 ‘‘SEC. 34A. HEALTH EXPENSES.

9 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in10 dividual, there shall be allowed as a credit against the tax

11 imposed by this subtitle for the taxable year an amount

12 equal to the qualified health expenses paid by such individ13 ual during the taxable year.

14 ‘‘(b) QUALIFIED HEALTH EXPENSES.—For purposes

15 of this section—

16 ‘‘(1) IN GENERAL.—The term ‘qualified health

17 expenses’ means amounts paid during the taxable

18 year for medical care (within the meaning of section

19 213(d)(1)).

20 ‘‘(2) DOLLAR LIMIT ON QUALIFIED HEALTH

21 EXPENSES.—The amount of the qualified health ex22 penses paid during any taxable year which may be

23 taken into account under subsection (a) shall not ex24 ceed—
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1 ‘‘(A) $600, in the case of a taxpayer de2 scribed in section 1(c) or 1(d), and

3 ‘‘(B) $1,200, in the case of any other tax4 payer.

5 For purposes of this paragraph, the rule of section

6 219(g)(4) shall apply.

7 ‘‘(3) PHASEOUT.—In the case of any taxpayer

8 whose adjusted gross income exceeds $10,000

9 ($20,000, in the case of a taxpayer described in

10 paragraph (2)(B)), the dollar amounts under para11 graph (2) shall be reduced (but not below zero) by

12 an amount equal to 10 percent of such excess.

13 ‘‘(4) ELECTION NOT TO TAKE CREDIT.—A tax14 payer may elect for any taxable year to have

15 amounts described in paragraph (1) not treated as

16 qualified health expenses.

17 ‘‘(c) SPECIAL RULES.—For purposes of this sec18 tion—

19 ‘‘(1) COORDINATION WITH ADVANCE PAYMENT

20 AND MINIMUM TAX.—Rules similar to the rules of

21 subsections (g) and (h) of section 32 shall apply to

22 any credit to which this section applies.

23 ‘‘(2) SUBSIDIZED EXPENSES.—No expense shall

24 be treated as a qualified health expense if—
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1 ‘‘(A) such expense is paid, reimbursed, or

2 subsidized (whether by being disregarded for

3 purposes of another program or otherwise) by

4 the Federal Government, a State or local gov5 ernment, or any agency or instrumentality

6 thereof, and

7 ‘‘(B) the payment, reimbursement, or sub8 sidy of such expense is not includable in the

9 gross income of the recipient.

10 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

11 such regulations as may be necessary to carry out the pur12 poses of this section.’’.

13 (b) ADVANCE PAYMENT OF CREDIT.—Chapter 25 of

14 the Internal Revenue Code of 1986 (relating to general

15 provisions relating to employment taxes) is amended by

16 inserting after section 3507 the following new section:

17 ‘‘SEC. 3507A. ADVANCE PAYMENT OF HEALTH EXPENSES

18 CREDIT.

19 ‘‘(a) GENERAL RULE.—Except as otherwise provided

20 in this section, every employer making payment of wages

21 with respect to whom a health expenses eligibility certifi22 cate is in effect shall, at the time of paying such wages,

23 make an additional payment equal to such employee’s

24 health expenses advance amount.
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1 ‘‘(b) HEALTH EXPENSES ELIGIBILITY CERTIFI2 CATE.—For purposes of this title, a health expenses eligi3 bility certificate is a statement furnished by an employee

4 to the employer which—

5 ‘‘(1) certifies that the employee will be eligible

6 to receive the credit provided by section 34A for the

7 taxable year,

8 ‘‘(2) certifies that the employee does not have

9 a health expenses eligibility certificate in effect for

10 the calendar year with respect to the payment of

11 wages by another employer,

12 ‘‘(3) states whether or not the employee’s

13 spouse has a health expenses eligibility certificate in

14 effect, and

15 ‘‘(4) estimates the amount of qualified health

16 expenses (as defined in section 34A(b)) for the cal17 endar year.

18 For purposes of this section, a certificate shall be treated

19 as being in effect with respect to a spouse if such a certifi20 cate will be in effect on the first status determination date

21 following the date on which the employee furnishes the

22 statement in question.

23 ‘‘(c) HEALTH EXPENSES ADVANCE AMOUNT.—

24 ‘‘(1) IN GENERAL.—For purposes of this title,

25 the term ‘health expenses advance amount’ means,
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1 with respect to any payroll period, the amount deter2 mined—

3 ‘‘(A) on the basis of the employee’s wages

4 from the employer for such period,

5 ‘‘(B) on the basis of the employee’s esti6 mated qualified health expenses included in the

7 health expenses eligibility certificate, and

8 ‘‘(C) in accordance with tables provided by

9 the Secretary.

10 ‘‘(2) ADVANCE AMOUNT TABLES.—The tables

11 referred to in paragraph (1)(C) shall be similar in

12 form to the tables prescribed under section 3402

13 and, to the maximum extent feasible, shall be coordi14 nated with such tables and the tables prescribed

15 under section 3507(c).

16 ‘‘(d) OTHER RULES.—For purposes of this section,

17 rules similar to the rules of subsections (d) and (e) of sec18 tion 3507 shall apply.

19 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

20 such regulations as may be necessary to carry out the pur21 poses of this section.’’.

22 (c) TERMINATION OF HEALTH INSURANCE CRED23 IT.—Section 32 of the Internal Revenue Code of 1986 (re24 lating to earned income credit) is amended by adding at

25 the end thereof the following new subsection:
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1 ‘‘(d) TERMINATION OF HEALTH INSURANCE CRED2 IT.—In the case of taxable years beginning after Decem3 ber 31, 1992, the health insurance credit percentage shall

4 be equal to 0 percent.’’.

5 (d) CONFORMING AMENDMENT.—Section 213 of the

6 Internal Revenue Code of 1986 (relating to deduction for

7 medical, dental, etc., expenses) is amended by striking

8 subsections (e) and (f) and by inserting the following new

9 subsection:

10 ‘‘(e) COORDINATION WITH HEALTH EXPENSES

11 CREDIT UNDER SECTION 34A.—The amount otherwise

12 taken into account under subsection (a) as expenses paid

13 for medical care shall be reduced by the amount (if any)

14 of the health expenses credit allowable to the taxpayer for

15 the taxable year under section 34A.’’.

16 (e) CLERICAL AMENDMENTS.—

17 (1) The table of sections for subpart A of part

18 IV of subchapter A of chapter 1 of the Internal Rev19 enue Code of 1986 is amended by inserting after the

20 item relating to section 34 the following new item:

‘‘Sec. 34A. Health expenses.’’.

21 (2) The table of sections for chapter 25 of such

22 Code is amended by adding after the item relating

23 to section 3507 the following new item:

‘‘Sec. 3507A. Advance payment of health expenses credit.’’.
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1 (f) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1992.

4 SEC. 102. INDIVIDUAL TAX DEDUCTION FOR HEALTH IN5 SURANCE COSTS.

6 (a) FULL DEDUCTION ALLOWED.—Subsection (a) of

7 section 213 of the Internal Revenue Code of 1986 (relat8 ing to deduction for medical, dental, etc., expenses) is

9 amended to read as follows:

10 ‘‘(a) ALLOWANCE OF DEDUCTION.—

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), there shall be allowed as a deduction the

13 expenses paid during the taxable year, not com14 pensated for by insurance or otherwise, for medical

15 care of the taxpayer, the taxpayer’s spouse, or a de16 pendent (as defined in section 152).

17 ‘‘(2) SPECIAL DOLLAR LIMITATION.—Expenses

18 for medical care described in subparagraphs (A) and

19 (B) of subsection (d)(1) shall be taken into account

20 under subsection (a) only to the extent that such ex21 penses exceed 7.5 percent of the taxpayer’s adjusted

22 gross income for the taxable year.’’.

23 (b) DEDUCTION AVAILABLE FOR NONITEMIZERS.—

24 (1) IN GENERAL.—Section 213 of the Internal

25 Revenue Code of 1986, as amended by section
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1 101(d), is further amended by adding at the end

2 thereof the following new subsection:

3 ‘‘(f) RULE FOR NONITEMIZATION OF DEDUC4 TIONS.—In the case of an individual who does not itemize

5 his deductions for the taxable year, the amount allowable

6 under subsection (a) for the taxable year with respect to

7 expenses described in subsection (d)(1)(C) shall be taken

8 into account as a direct health insurance deduction under

9 section 63.’’.

10 (2) DEFINITION OF TAXABLE INCOME.—

11 (A) IN GENERAL.—Section 63(b) of such

12 Code (relating to individuals who do not itemize

13 their deductions) is amended—

14 (i) by striking ‘‘and’’ at the end of

15 paragraph (1),

16 (ii) by striking the period at the end

17 of paragraph (2) and inserting ‘‘, and’’,

18 and

19 (iii) by adding at the end thereof the

20 following new paragraph:

21 ‘‘(3) the direct health insurance deduction.’’.

22 (B) DIRECT HEALTH INSURANCE DEDUC23 TION DEFINED.—Section 63 of such Code (de24 fining taxable income) is amended by adding at

25 the end thereof the following new subsection:
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1 ‘‘(h) DIRECT HEALTH INSURANCE DEDUCTION.—

2 For purposes of this section, the term ‘direct health insur3 ance deduction’ means that portion of the amount allow4 able under section 213(a) which is taken as a direct health

5 insurance deduction for the taxable year under section

6 213(f).’’.

7 (C) CONFORMING AMENDMENT.—Section

8 63(d) of such Code (defining itemized deduc9 tions) is amended—

10 (i) by striking ‘‘and’’ at the end of

11 paragraph (1),

12 (ii) by striking the period at the end

13 of paragraph (2) and inserting ‘‘, and’’,

14 and

15 (iii) by adding at the end thereof the

16 following new paragraph:

17 ‘‘(3) the direct health insurance deduction.’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 1992.

21 SEC. 103. CREDIT FOR EMPLOYERS TO PROVIDE HEALTH

22 INSURANCE.

23 (a) ALLOWANCE OF CREDIT.—Section 38(b) of the

24 Internal Revenue Code of 1986 (defining general business

25 credit) is amended by striking ‘‘plus’’ at the end of para-
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1 graph (6), by striking the period at the end of paragraph

2 (7) and inserting ‘‘, plus’’, and by adding at the end there3 of the following new paragraph:

4 ‘‘(8) the employer health insurance credit.’’

5 (b) EMPLOYER HEALTH INSURANCE CREDIT.—Sub6 part D of part IV of subchapter A of chapter 1 of such

7 Code (relating to business related credits) is amended by

8 adding at the end thereof the following new section:

9 ‘‘SEC. 45. EMPLOYER HEALTH INSURANCE CREDIT.

10 ‘‘(a) GENERAL RULE.—For purposes of section 38,

11 the amount of the employer health insurance credit deter12 mined under this section for the taxable year is an amount

13 equal to the sum of—

14 ‘‘(1) the small employer basic health insurance

15 credit,

16 ‘‘(2) the managed care credit,

17 ‘‘(3) the dependent coverage credit, and

18 ‘‘(4) the small employer purchasing group

19 health insurance credit.

20 ‘‘(b) DEFINITION OF SMALL EMPLOYER BASIC

21 HEALTH INSURANCE CREDIT, MANAGED CARE CREDIT,

22 DEPENDENT COVERAGE CREDIT, AND SMALL EMPLOYER

23 PURCHASING GROUP HEALTH INSURANCE CREDIT.—

24 ‘‘(1) SMALL EMPLOYER BASIC HEALTH INSUR25 ANCE CREDIT.—The small employer basic health in-
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1 surance credit of any eligible employer which is an

2 eligible small employer is 25 percent of the qualified

3 health care costs of such employer beginning with

4 the first full taxable year in which such employer of5 fers health-care coverage to employees of such em6 ployer, reduced (but not below zero percentage) by

7 5 percentage points for each taxable year thereafter.

8 ‘‘(2) MANAGED CARE CREDIT.—The managed

9 care credit of any eligible employer is 25 percent of

10 the approved managed care plan costs of such em11 ployer beginning with the first full taxable year in

12 which such employer offers an approved managed

13 care plan (within the meaning of section

14 162(m)(3)(B)) to employees of such employer for

15 the taxable year, reduced (but not below zero per16 cent) by 5 percentage points for each taxable year

17 thereafter.

18 ‘‘(3) DEPENDENT COVERAGE CREDIT.—The de19 pendent coverage credit of any eligible employer is

20 25 percent of the qualified dependent coverage costs

21 of such employer beginning with the first full taxable

22 year in which such employer offers health-care cov23 erage to dependents of employees of such employer

24 for the taxable year, reduced (but not below zero
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1 percent) by 5 percentage points for each taxable

2 year thereafter.

3 ‘‘(4) SMALL EMPLOYER PURCHASING GROUP

4 HEALTH INSURANCE CREDIT.—The small employer

5 purchasing group health insurance credit of any eli6 gible small employer which is a member of a quali7 fied small employer purchasing group is 20 percent

8 of the qualified health care costs of such employer

9 for the taxable year.

10 ‘‘(c) ELIGIBLE EMPLOYER.—An employer is eligible

11 for a small employer basic health insurance credit, man12 aged care credit, and dependent coverage credit under this

13 section if such employer (or any predecessor employer) has

14 never provided health-care coverage, an approved managed

15 care plan, or dependent coverage for its employees (as the

16 case may be) at any time before the calendar year in which

17 occurs the first full taxable year described in paragraphs

18 (1), (2), or (3) of subsection (b), respectively.

19 ‘‘(d) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) QUALIFIED HEALTH CARE COSTS.—The

21 term ‘qualified health care costs’ means the amounts

22 paid by the employer for health-care coverage of its

23 employees.

24 ‘‘(2) APPROVED MANAGED CARE PLAN COSTS.—
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1 ‘‘(A) IN GENERAL.—The term ‘approved

2 managed care plan costs’ means the amounts

3 paid by the employer for an approved managed

4 care plan for the employees of such employer.

5 ‘‘(B) APPROVED MANAGED CARE PLAN.—

6 The term ‘approved managed care plan’ means

7 a managed care plan meeting the requirements

8 of section 202(2) of the Health Equity and Ac9 cess Improvement Act of 1992.

10 ‘‘(3) QUALIFIED DEPENDENT COVERAGE

11 COSTS.—The term ‘qualified dependent coverage

12 costs’ means the amounts paid by the employer for

13 health-care coverage of the dependents of employees

14 of such employer.

15 ‘‘(4) ELIGIBLE SMALL EMPLOYER.—

16 ‘‘(A) IN GENERAL.—The term ‘eligible

17 small employer’ means any person—

18 ‘‘(i) which, on an average business

19 day during the preceding taxable year, had

20 more than 2 but less than 100 employees,

21 and

22 ‘‘(ii) at least 60 percent of the em23 ployees of which during the taxable year

24 received health-care coverage described in

25 paragraph (1).
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1 ‘‘(B) AGGREGATION RULES.—All members

2 of the same controlled group of corporations

3 (within the meaning of section 52(a)) and all

4 persons under common control (within the

5 meaning of section 52(b)) shall be treated as 1

6 person.

7 ‘‘(C) EMPLOYEE.—The term ‘employee’

8 shall not include—

9 ‘‘(i) a self-employed individual as de10 fined in section 401(c)(1), or

11 ‘‘(ii) an employee who works less than

12 20 hours per week.

13 ‘‘(5) QUALIFIED SMALL EMPLOYER PURCHAS14 ING GROUP.—The term ‘qualified small employer

15 purchasing group’ has the meaning given such term

16 by section 221(a) of the Health Equity and Access

17 Improvement Act of 1992.

18 ‘‘(e) COORDINATION WITH DEDUCTION.—No deduc19 tion shall be allowable under this chapter for any qualified

20 health care costs taken into account in computing the

21 amount of the credit under section 38.’’.

22 (c) CONFORMING AMENDMENT.—Section 39(d) of

23 such Code is amended by adding at the end thereof the

24 following new paragraph:
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1 ‘‘(3) NO CARRYBACK OF EMPLOYER HEALTH

2 INSURANCE CREDIT BEFORE 1993.—No portion of

3 the unused business credit for any taxable year

4 which is attributable to the credit determined under

5 section 45(a) (relating to employer health insurance

6 credit) may be carried to a taxable year beginning

7 before January 1, 1992.’’.

8 (d) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 1992.

11 SEC. 104. DEDUCTIBILITY FOR SELF-EMPLOYED INDIVID12 UALS.

13 (a) IN GENERAL.—Paragraph (1) of section 162(l)

14 of the Internal Revenue Code of 1986 (relating to special

15 rules for health insurance costs of self-employed individ16 uals) is amended by striking ‘‘25 percent of’’.

17 (b) DEDUCTION MADE PERMANENT.—Section 162(l)

18 of the Internal Revenue Code of 1986 is amended by strik19 ing paragraph (6).

20 (c) CONFORMING AMENDMENT.—Subparagraph (B)

21 of section 162(l)(3) of the Internal Revenue Code of 1986

22 (relating to coordination with medical deduction, etc.) is

23 amended—
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1 (1) by striking ‘‘health insurance credit’’ and

2 inserting ‘‘health expenses credit and employer

3 health insurance credit’’,

4 (2) by striking ‘‘section 32’’ and inserting ‘‘sec5 tion 34A with respect to such insurance and section

6 38, respectively’’, and

7 (3) by striking ‘‘CREDIT’’ in the heading thereof

8 and inserting ‘‘CREDITS’’.

9 (d) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 1992.

12 SEC. 105. REVENUE INCENTIVES FOR PRACTICE IN RURAL

13 AREAS.

14 (a) NONREFUNDABLE CREDIT FOR CERTAIN PRI15 MARY HEALTH SERVICES PROVIDERS.—

16 (1) IN GENERAL.—Subpart A of part IV of sub17 chapter A of chapter 1 of the Internal Revenue Code

18 of 1986 (relating to nonrefundable personal credits)

19 is amended by inserting after section 25 the follow20 ing new section:

21 ‘‘SEC. 25A. PRIMARY HEALTH SERVICES PROVIDERS.

22 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a

23 qualified primary health services provider, there is allowed

24 as a credit against the tax imposed by this chapter for
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1 any taxable year in a mandatory service period an amount

2 equal to the product of—

3 ‘‘(1) the lesser of—

4 ‘‘(A) the number of months of such period

5 occurring in such taxable year, or

6 ‘‘(B) 36 months, reduced by the number of

7 months taken into account under this para8 graph with respect to such provider for all pre9 ceding taxable years (whether or not in the

10 same mandatory service period), multiplied by

11 ‘‘(2) $1,000 ($500 in the case of a qualified

12 health services provider who is a physician assistant

13 or a nurse practitioner).

14 ‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO15 VIDER.—For purposes of this section, the term ‘qualified

16 primary health services provider’ means any physician,

17 physician assistant, or nurse practitioner who for any

18 month during a mandatory service period is certified by

19 the Bureau to be a primary health services provider who—

20 ‘‘(1) is providing primary health services—

21 ‘‘(A) full time, and

22 ‘‘(B) to individuals at least 80 percent of

23 whom reside in a rural health professional

24 shortage area,
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1 ‘‘(2) is not receiving during such year a scholar2 ship under the National Health Service Corps Schol3 arship Program or a loan repayment under the Na4 tional Health Service Corps Loan Repayment Pro5 gram,

6 ‘‘(3) is not fulfilling service obligations under

7 such Programs, and

8 ‘‘(4) has not defaulted on such obligations.

9 ‘‘(c) MANDATORY SERVICE PERIOD.—For purposes

10 of this section, the term ‘mandatory service period’ means

11 the period of 60 consecutive calendar months beginning

12 with the first month the taxpayer is a qualified primary

13 health services provider.

14 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur15 poses of this section—

16 ‘‘(1) BUREAU.—The term ‘Bureau’ means the

17 Bureau of Health Care Delivery and Assistance,

18 Health Resources and Services Administration of the

19 United States Public Health Service.

20 ‘‘(2) PHYSICIAN.—The term ‘physician’ has the

21 meaning given to such term by section 1861(r) of

22 the Social Security Act.

23 ‘‘(3) PHYSICIAN ASSISTANT; NURSE PRACTI24 TIONER.—The terms ‘physician assistant’ and ‘nurse
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1 practitioner’ have the meanings given to such terms

2 by section 1861(aa)(3) of the Social Security Act.

3 ‘‘(4) PRIMARY HEALTH SERVICES PROVIDER.—

4 The term ‘primary health services provider’ means a

5 provider of primary health services (as defined in

6 section 330(b)(1) of the Public Health Service Act).

7 ‘‘(5) RURAL HEALTH PROFESSIONAL SHORTAGE

8 AREA.—The term ‘rural health professional shortage

9 area’ means—

10 ‘‘(A) a class 1 or class 2 health profes11 sional shortage area (as defined in section

12 332(a)(1)(A) of the Public Health Service Act)

13 in a rural area (as determined under section

14 1886(d)(2)(D) of the Social Security Act), or

15 ‘‘(B) an area which is determined by the

16 Secretary of Health and Human Services as

17 equivalent to an area described in subparagraph

18 (A) and which is designated by the Bureau of

19 the Census as not urbanized.

20 ‘‘(e) RECAPTURE OF CREDIT.—

21 ‘‘(1) IN GENERAL.—If, during any taxable year,

22 there is a recapture event, then the tax of the tax23 payer under this chapter for such taxable year shall

24 be increased by an amount equal to the product of—

25 ‘‘(A) the applicable percentage, and
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1 ‘‘(B) the aggregate unrecaptured credits

2 allowed to such taxpayer under this section for

3 all prior taxable years.

4 ‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—

5 ‘‘(A) IN GENERAL.—For purposes of this

6 subsection, the applicable recapture percentage

7 shall be determined from the following table:

‘‘If the recapture The applicable recapevent occurs during: ture percentage is:

Months 1–24 .............................................. 100

Months 25–36 ............................................ 75

Months 37–48 ............................................ 50

Months 49–60 ............................................ 25

Months 61 and thereafter .......................... 0.

8 ‘‘(B) TIMING.—For purposes of subpara9 graph (A), month 1 shall begin on the first day

10 of the mandatory service period.

11 ‘‘(3) RECAPTURE EVENT DEFINED.—

12 ‘‘(A) IN GENERAL.—For purposes of this

13 subsection, the term ‘recapture event’ means

14 the failure of the taxpayer to be a qualified pri15 mary health services provider for any month

16 during any mandatory service period.

17 ‘‘(B) CESSATION OF DESIGNATION.—The

18 cessation of the designation of any area as a

19 rural health professional shortage area after the

20 beginning of the mandatory service period for

21 any taxpayer shall not constitute a recapture

22 event.
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1 ‘‘(C) SECRETARIAL WAIVER.—The Sec2 retary may waive any recapture event caused by

3 extraordinary circumstances.

4 ‘‘(4) NO CREDITS AGAINST TAX.—Any increase

5 in tax under this subsection shall not be treated as

6 a tax imposed by this chapter for purposes of deter7 mining the amount of any credit under subpart A,

8 B, or D of this part.’’.

9 (2) CLERICAL AMENDMENT.—The table of sec10 tions for subpart A of part IV of subchapter A of

11 chapter 1 of such Code is amended by inserting

12 after the item relating to section 25 the following

13 new item:

‘‘Sec. 25A. Primary health services providers.’’.

14 (3) EFFECTIVE DATE.—The amendments made

15 by this subsection shall apply to taxable years begin16 ning after December 31, 1992.

17 (b) NATIONAL HEALTH SERVICE CORPS LOAN RE18 PAYMENTS EXCLUDED FROM GROSS INCOME.—

19 (1) IN GENERAL.—Part III of subchapter B of

20 chapter 1 of the Internal Revenue Code of 1986 (re21 lating to items specifically excluded from gross in22 come) is amended by redesignating section 136 as

23 section 137 and by inserting after section 135 the

24 following new section:
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1 ‘‘SEC. 136. NATIONAL HEALTH SERVICE CORPS LOAN RE2 PAYMENTS.

3 ‘‘(a) GENERAL RULE.—Gross income shall not in4 clude any qualified loan repayment.

5 ‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes

6 of this section, the term ‘qualified loan repayment’ means

7 any payment made on behalf of the taxpayer by the Na8 tional Health Service Corps Loan Repayment Program

9 under section 338B(g) of the Public Health Service Act.’’.

10 (2) CONFORMING AMENDMENT.—Paragraph (3)

11 of section 338B(g) of the Public Health Service Act

12 is amended by striking ‘‘Federal, State, or local’’

13 and inserting ‘‘State or local’’.

14 (3) CLERICAL AMENDMENT.—The table of sec15 tions for part III of subchapter B of chapter 1 of

16 the Internal Revenue Code of 1986 is amended by

17 striking the item relating to section 136 and insert18 ing the following:

‘‘Sec. 136. National Health Service Corps loan repayments.

‘‘Sec. 137. Cross references to other Acts.’’.

19 (4) EFFECTIVE DATE.—The amendments made

20 by this subsection shall apply to payments made

21 under section 338B(g) of the Public Health Service

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

23 (c) EXPENSING OF MEDICAL EQUIPMENT.—
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1 (1) IN GENERAL.—Section 179 of the Internal

2 Revenue Code of 1986 (relating to election to ex3 pense of certain depreciable business assets) is

4 amended—

5 (A) by striking paragraph (1) of subsection

6 (b) and inserting the following:

7 ‘‘(1) DOLLAR LIMITATION.—

8 ‘‘(A) GENERAL RULE.—The aggregate cost

9 which may be taken into account under sub10 section (a) for any taxable year shall not exceed

11 $10,000.

12 ‘‘(B) RURAL HEALTH CARE PROPERTY.—

13 In the case of rural health care property, the

14 aggregate cost which may be taken into account

15 under subsection (a) for any taxable year shall

16 not exceed $25,000, reduced by the amount

17 otherwise taken into account under subsection

18 (a) for such year.’’; and

19 (B) by adding at the end of subsection (d)

20 the following new paragraph:

21 ‘‘(11) RURAL HEALTH CARE PROPERTY.—For

22 purposes of this section, the term ‘rural health care

23 property’ means section 179 property used by a phy24 sician (as defined in section 1861(r) of the Social

25 Security Act) in the active conduct of such physi-
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1 cian’s full-time trade or business of providing pri2 mary health services (as defined in section 330(b)(1)

3 of the Public Health Service Act) in a rural health

4 professional shortage area (as defined in section

5 25A(d)(5)).’’.

6 (2) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply to property placed in

8 service after December 31, 1992, in taxable years

9 ending after such date.

10 (d) DEDUCTION FOR STUDENT LOAN PAYMENTS BY

11 MEDICAL PROFESSIONALS PRACTICING IN RURAL

12 AREAS.—

13 (1) INTEREST ON STUDENT LOANS NOT TREAT14 ED AS PERSONAL INTEREST.—Section 163(h)(2) of

15 the Internal Revenue Code of 1986 (defining per16 sonal interest) is amended by striking ‘‘and’’ at the

17 end of subparagraph (D), by striking the period at

18 the end of subparagraph (E) and inserting ‘‘, and’’,

19 and by adding at the end thereof the following new

20 subparagraph:

21 ‘‘(F) any qualified medical education interest

22 (within the meaning of subsection (k)).’’.

23 (2) QUALIFIED MEDICAL EDUCATION INTEREST

24 DEFINED.—Section 163 of such Code (relating to in25 terest expenses) is amended by redesignating sub-
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1 section (k) as subsection (l) and by inserting after

2 subsection (j) the following new subsection:

3 ‘‘(k) QUALIFIED MEDICAL EDUCATION INTEREST OF

4 MEDICAL PROFESSIONALS PRACTICING IN RURAL

5 AREAS.—

6 ‘‘(1) IN GENERAL.—For purposes of subsection

7 (h)(2)(F), the term ‘qualified medical education in8 terest’ means an amount which bears the same ratio

9 to the interest paid on qualified educational loans

10 during the taxable year by an individual performing

11 services under a qualified rural medical practice

12 agreement as—

13 ‘‘(A) the number of months during the tax14 able year during which such services were per15 formed, bears to

16 ‘‘(B) the number of months in the taxable

17 year.

18 ‘‘(2) DOLLAR LIMITATION.—The aggregate

19 amount which may be treated as qualified medical

20 education interest for any taxable year with respect

21 to any individual shall not exceed $5,000.

22 ‘‘(3) QUALIFIED RURAL MEDICAL PRACTICE

23 AGREEMENT.—For purposes of this subsection—

24 ‘‘(A) IN GENERAL.—The term ‘qualified

25 rural medical practice agreement’ means a writ-
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1 ten agreement between an individual and an ap2 plicable rural community under which the indi3 vidual agrees—

4 ‘‘(i) in the case of a medical doctor,

5 upon completion of the individual’s resi6 dency (or internship if no residency is re7 quired), or

8 ‘‘(ii) in the case of a registered nurse,

9 nurse practitioner, or physician’s assistant,

10 upon completion of the education to which

11 the qualified education loan relates,

12 to perform full-time services as such a medical

13 professional in the applicable rural community

14 for a period of 24 consecutive months. An indi15 vidual and an applicable rural community may

16 elect to have the agreement apply for 36 con17 secutive months rather than 24 months.

18 ‘‘(B) SPECIAL RULE FOR COMPUTING PE19 RIODS.—An individual shall be treated as meet20 ing the 24 or 36 consecutive month requirement

21 under subparagraph (A) if, during each 12-con22 secutive month period within either such period,

23 the individual performs full-time services as a

24 medical doctor, registered nurse, nurse practi25 tioner, or physician’s assistant, whichever ap-
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1 plies, in the applicable rural community during

2 9 of the months in such 12-consecutive month

3 period. For purposes of this subsection, an indi4 vidual meeting the requirements of the preced5 ing sentence shall be treated as performing

6 services during the entire 12-month period.

7 ‘‘(C) APPLICABLE RURAL COMMUNITY.—

8 The term ‘applicable rural community’ means—

9 ‘‘(i) any political subdivision of a

10 State which—

11 ‘‘(I) has a population of 5,000 or

12 less, and

13 ‘‘(II) has a per capita income of

14 $15,000 or less, or

15 ‘‘(ii) an Indian reservation which has

16 a per capita income of $15,000 or less.

17 ‘‘(4) QUALIFIED EDUCATIONAL LOAN.—The

18 term ‘qualified educational loan’ means any indebt19 edness to pay qualified tuition and related expenses

20 (within the meaning of section 117(b)) and reason21 able living expenses—

22 ‘‘(A) which are paid or incurred—

23 ‘‘(i) as a candidate for a degree as a

24 medical doctor at an educational institu-
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1 tion described in section 170(b)(1)(A)(ii),

2 or

3 ‘‘(ii) in connection with courses of in4 struction at such an institution necessary

5 for certification as a registered nurse,

6 nurse practitioner, or physician’s assistant,

7 and

8 ‘‘(B) which are paid or incurred within a

9 reasonable time before or after such indebted10 ness is incurred.

11 ‘‘(5) RECAPTURE.—If an individual fails to

12 carry out a qualified rural medical practice agree13 ment during any taxable year, then—

14 ‘‘(A) no deduction with respect to such

15 agreement shall be allowable by reason of sub16 section (h)(2)(F) for such taxable year and any

17 subsequent taxable year, and

18 ‘‘(B) there shall be included in gross in19 come for such taxable year the aggregate

20 amount of the deductions allowable under this

21 section (by reason of subsection (h)(2)(F)) for

22 all preceding taxable years.

23 ‘‘(6) DEFINITIONS.—For purposes of this sub24 section, the terms ‘registered nurse’, ‘nurse practi25 tioner’, and ‘physician’s assistant’ have the meaning
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1 given such terms by section 1861 of the Social Secu2 rity Act.’’.

3 (3) DEDUCTION ALLOWED IN COMPUTING AD4 JUSTED GROSS INCOME.—Section 62(a) of such

5 Code is amended by inserting after paragraph (13)

6 the following new paragraph:

7 ‘‘(14) INTEREST ON STUDENT LOANS OF RURAL

8 HEALTH PROFESSIONALS.—The deduction allowable

9 by reason of section 163(h)(2)(F) (relating to stu10 dent loan payments of medical professionals practic11 ing in rural areas).’’.

12 (4) EFFECTIVE DATE.—The amendments made

13 by this subsection shall apply to taxable years begin14 ning after December 31, 1991.

15 TITLE II—HEALTH CARE

16 REFORM PROVISIONS

17 Subtitle A—Model Health Care

18 Insurance Benefits Plan

19 SEC. 201. MODEL HEALTH CARE INSURANCE BENEFITS

20 PLAN.

21 (a) IN GENERAL.—The Secretary shall request that

22 the NAIC—

23 (1) develop a model health care insurance bene24 fits plan that shall contain standards that entities

25 offering health care insurance policies should meet
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1 with respect to the benefits and coverage provided

2 under such policies, and

3 (2) report to the Secretary on such standards,

4 not later than 1 year after the date of enactment of

5 this Act.

6 If the NAIC develops such a plan by such date and the

7 Secretary finds that such plan implements the require8 ments of subsection (c), such plan shall be the model

9 health care insurance benefits plan under this Act.

10 (b) ROLE OF THE SECRETARY IN ABSENCE OF NAIC

11 PLAN.—If the NAIC fails to develop and report a model

12 health care insurance benefits plan by the date specified

13 in subsection (a) or the Secretary finds that such plan

14 does not implement the requirements of subsection (c), the

15 Secretary shall develop and publish such a plan, by not

16 later than eighteen months after the date of enactment

17 of this Act. Such plan shall then be the plan under this

18 Act.

19 (c) CONTENTS.—The standards under the model ben20 efits plan should require—

21 (1) that coverage be provided under health care

22 insurance policies for basic hospital, medical and

23 surgical services, including preventative care services

24 determined appropriate by the Secretary;
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1 (2) reasonable cost sharing by the beneficiaries

2 under such policies; and

3 (3) appropriate copayments and deductibles.

4 SEC. 202. DEFINITIONS.

5 As used in this title:

6 (1) HEALTH CARE INSURANCE.—The term

7 ‘‘health care insurance’’ means any hospital or medi8 cal expense incurred policy or certificate, hospital or

9 medical service plan contract, health maintenance

10 subscriber contract, multiple employer welfare ar11 rangement, other employee welfare plan (as defined

12 in the Employee Retirement Income Security Act of

13 1974), or any other health insurance arrangement,

14 and includes an employment-related reinsurance

15 plan, but does not include—

16 (A) a self-insured health care insurance

17 plan; or

18 (B) any of the following offered by an in19 surer—

20 (i) accident only, dental only, or dis21 ability income only insurance,

22 (ii) coverage issued as a supplement

23 to liability insurance,

24 (iii) worker’s compensation or similar

25 insurance, or
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1 (iv) automobile medical-payment in2 surance.

3 (2) MANAGED CARE PLAN.—The term ‘‘man4 aged care plan’’ means a health care insurance plan

5 in which the insurer offering such plan utilizes the

6 standards recommended under section 211 concern7 ing the benefits and coverage under such plan.

8 (3) MODEL BENEFITS PLAN.—The term ‘‘model

9 benefits plan’’ means the model health care insur10 ance benefits plan developed under section 201(a).

11 (4) NAIC.—The term ‘‘NAIC’’ means the Na12 tional Association of Insurance Commissioners.

13 (5) SECRETARY.—The term ‘‘Secretary’’ means

14 the Secretary of Health and Human Services.

15 (6) SMALL EMPLOYER.—

16 (A) IN GENERAL.—The term ‘‘small em17 ployer’’ means any employer which, on an aver18 age business day during the preceding taxable

19 year, had more than 2 but less than 100 em20 ployees.

21 (B) EMPLOYEE.—The term ‘‘employee’’

22 shall not include—

23 (i) a self-employed individual as de24 fined in section 401(c)(1) of the Internal

25 Revenue Code of 1986, or
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1 (ii) an employee who works less than

2 20 hours per week.

3 Subtitle B—Managed Care

4 SEC. 211. DEVELOPMENT OF STANDARDS FOR MANAGED

5 CARE PLANS.

6 (a) IN GENERAL.—Not later than 1 year after the

7 date of enactment of this Act, the Secretary, taking into

8 account recommendations of the Managed Care Advisory

9 Committee, shall develop recommended standards that in10 surers offering managed care plans should meet with re11 spect to the benefits, coverage, and delivery systems pro12 vided under such plans. Such standards shall encompass

13 the standards by which managed care entities operate.

14 (b) MANAGED CARE ADVISORY COMMITTEE.—

15 (1) ESTABLISHMENT.—There shall be estab16 lished a Managed Care Advisory Committee (herein17 after referred to as the ‘‘Committee’’).

18 (2) MEMBERSHIP.—The Committee shall be

19 composed of 5 members appointed by the Secretary,

20 each member representing 1 of the following areas:

21 (A) Health care professionals.

22 (B) Managed care industry.

23 (C) Academia (with specific expertise in

24 managed care plans).

25 (D) Business management.
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1 (E) Organized labor.

2 (3) COMPENSATION.—

3 (A) IN GENERAL.—Members of the Com4 mittee shall serve without compensation.

5 (B) EXPENSES, ETC., REIMBURSED.—

6 While away from their homes or regular places

7 of business on the business of the Committee,

8 the members may be allowed travel expenses,

9 including per diem in lieu of subsistence, as au10 thorized by section 5703 of title 5, United

11 States Code, for persons employed intermit12 tently in Government service.

13 (C) APPLICATION OF ACT.—The provisions

14 of the Federal Advisory Committee Act (5

15 U.S.C. App.) shall not apply with respect to the

16 Committee.

17 (D) SUPPORT.—The Secretary shall supply

18 such necessary office facilities, office supplies,

19 support services, and related expenses as nec20 essary to carry out the functions of the Com21 mittee.

22 SEC. 212. PREEMPTION OF PROVISIONS RELATING TO MAN23 AGED CARE.

24 In the case of a managed care plan meeting the rec25 ommended standards under section 211 that is offered by
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1 an insurer, the following provisions of State law are pre2 empted and may not be enforced against the managed care

3 plan with respect to an insurer offering such plan:

4 (1) RESTRICTIONS ON REIMBURSEMENT RATES

5 OR SELECTIVE CONTRACTING.—Any law that re6 stricts the ability of the insurer to negotiate reim7 bursement rates with health care providers or to

8 contract selectively with one provider or a limited

9 number of providers.

10 (2) RESTRICTIONS ON DIFFERENTIAL FINAN11 CIAL INCENTIVES.—Any law that limits the financial

12 incentives that the managed care plan may require

13 a beneficiary to pay when a non-plan provider is

14 used on a non-emergency basis.

15 (3) RESTRICTIONS ON UTILIZATION REVIEW

16 METHODS.—

17 (A) IN GENERAL.—Any law that—

18 (i) prohibits utilization review of any

19 or all treatments and conditions;

20 (ii) requires that such review be made

21 by a resident of the State in which the

22 treatment is to be offered or by an individ23 ual licensed in such State, or by a physi24 cian in any particular specialty or with any

25 board certified specialty of the same medi-
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1 cal specialty as the provider whose services

2 are being rendered;

3 (iii) requires the use of specified

4 standards of health care practice in such

5 review or requires the disclosure of the

6 specific criteria used in such review;

7 (iv) requires payments to providers for

8 the expenses of responding to utilization

9 review requests; or

10 (v) imposes liability for delays in per11 forming such review.

12 (B) CONSTRUCTION.—Nothing in subpara13 graph (A)(ii) shall be construed as prohibiting

14 a State from requiring that utilization review be

15 conducted by a licensed health care profes16 sional, or requiring that any appeal from such

17 a review be made by a licensed physician or by

18 a licensed physician in any particular specialty

19 or with any board certified specialty of the

20 same medical specialty as the provider whose

21 services are being rendered.

22 (4) RESTRICTIONS ON BENEFITS.—Any law

23 that mandates benefits under the managed care plan

24 that are greater than the benefits recommended

25 under the standards developed under section 211.
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1 Subtitle C—Small Employer

2 Purchasing Groups

3 SEC. 221. QUALIFIED SMALL EMPLOYER PURCHASING

4 GROUPS.

5 (a) DEFINED.—For purposes of this title, an entity

6 is a qualified small employer purchasing group if—

7 (1) the entity submits an application to the Sec8 retary at such time, in such form and containing

9 such information as the Secretary may require; and

10 (2) on the basis of information contained in the

11 application and any other information the Secretary

12 may require, the Secretary determines that—

13 (A) the entity is administered solely under

14 the authority and control of its member employ15 ers;

16 (B) the membership of the entity consists

17 solely of small employers (except that an em18 ployer member of the group may retain its

19 membership in the group if, after the Secretary

20 determines that the entity meets the require21 ments of this subsection, the number of employ22 ees of the employer member increases to more

23 than 100);
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1 (C) with respect to each State in which its

2 members are located, the entity consists of not

3 fewer than 100 employers;

4 (D) at the time the entity submits its ap5 plication, the health care insurance plans with

6 respect to the employer members of the entity

7 are in compliance with applicable State laws

8 and the model benefits plan relating to such

9 plans;

10 (E) the health care insurance plans of the

11 entity and the employer members of the entity

12 are not self-insured plans;

13 (F) each enrollee in the program of the en14 tity may enroll with any participating carrier

15 that offers health care insurance coverage in

16 the geographic area in which the enrollee re17 sides; and

18 (G) such entity will be a nonprofit entity;

19 and

20 (3) such entity has a board of directors as de21 scribed in subsection (b) with authority to act as de22 scribed in subsection (c).

23 (b) OPERATIONS.—A small employer purchasing

24 group shall be administered by a board of directors. The

25 members of such board shall be elected by the employers
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1 that are members of the group, and such board members

2 shall serve at the pleasure of the majority of such employ3 ers.

4 (c) DUTIES OF BOARD.—

5 (1) IN GENERAL.—The board shall have the au6 thority to—

7 (A) enter into contracts with carriers to

8 provide health care insurance coverage to eligi9 ble employees and their dependents;

10 (B) enter into other contracts as are nec11 essary or proper to carry out the provisions of

12 this subtitle;

13 (C) employ necessary staff;

14 (D) appoint committees as necessary to

15 provide technical assistance in the operation of

16 the entity’s program;

17 (E) assess participating employers a rea18 sonable fee for necessary costs in connection

19 with the program;

20 (F) undertake activities necessary to ad21 minister the program including marketing and

22 publicizing the program and assuring carrier,

23 employer, and enrollee compliance with program

24 requirements;
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1 (G) issue rules and regulations necessary

2 to carry out the purpose of this subtitle; and

3 (H) accept and expend funds received

4 through fees, grants, appropriations, or other

5 appropriate and lawful means.

6 (2) PROGRAM MANAGEMENT.—

7 (A) GEOGRAPHIC AREAS OF COVERAGE.—

8 The board shall establish geographic areas

9 within which participating carriers may offer

10 health care insurance coverage to eligible em11 ployees and dependents. The board shall con12 tract with sufficient numbers and types of car13 riers in an area to assure that employees have

14 a choice from among a reasonable number and

15 type of competing health care insurance car16 riers.

17 (B) CONTRACT REQUIREMENTS.—

18 (i) IN GENERAL.—The board shall

19 enter into contracts with qualified carriers

20 for the purpose of providing health care in21 surance coverage to eligible employees and

22 dependents, and shall pay qualified carriers

23 on at least a monthly basis at the con24 tracted rates.
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1 (ii) GENERAL QUALIFICATIONS OF

2 CARRIERS.—Participating carriers shall be

3 qualified if such carriers have—

4 (I) adequate administrative man5 agement,

6 (II) financial solvency, and

7 (III) the ability to assume the

8 risk of providing and paying for cov9 ered services.

10 A participating carrier may utilize reinsur11 ance, provider risk sharing, and other ap12 propriate mechanisms to share a portion of

13 the risk described in subclause (III). The

14 board may establish risk adjustment mech15 anisms that can be utilized to address cir16 cumstances where a participating carrier

17 has a significantly disproportionate share

18 of high risk or low risk enrollees based

19 upon valid data provided by carrier. Any

20 such risk adjustment mechanism may be

21 developed and applied only after consulta22 tion with the participating carriers.

23 (C) PROGRAM STANDARDS.—The board

24 shall require that participating carriers that

25 contract with or employ health care providers
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1 shall have mechanisms to accomplish at least

2 the following, satisfactory to the program:

3 (i) Review the quality of care covered.

4 (ii) Review the appropriateness of care

5 covered.

6 (iii) Provide accessible health services.

7 (D) UNIFORMITY OF BENEFITS.—The

8 board shall assure that participating carriers—

9 (i) shall offer substantially similar

10 benefits to enrollees in the program, except

11 that enrollees cost sharing required by par12 ticipating carriers may vary according to

13 the basic method of operation of the car14 rier, and

15 (ii) shall not vary rates to small em16 ployers or enrollees in the program on ac17 count of claim experience, health status or

18 duration from issue.

19 (E) PAYMENT MECHANISM.—The board

20 shall establish a mechanism to collect premiums

21 from small employers, including remittance of

22 the enrollee’s share of the premium.

23 (3) NOTIFICATION OF PROGRAM BENEFITS.—

24 The board shall use appropriate and efficient means

25 to notify employers of the availability of sponsored
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1 health care insurance coverage from the program.

2 The board shall make available marketing materials

3 which accurately summarize the carriers’ insurance

4 plans and rates which are offered through the pro5 gram. A participating carrier may contract with an

6 agent or broker to provide marketing, advertising, or

7 presentation proposals or otherwise disseminate in8 formation regarding coverage or services or rates of9 fered in connection with the program.

10 (4) CONDITIONS OF PARTICIPATION.—

11 (A) IN GENERAL.—The board shall estab12 lish conditions of participation for small em13 ployers and enrollees that—

14 (i) assure that the entity is a valid

15 small employer purchasing group and is

16 not formed for the purpose of securing

17 health care insurance coverage;

18 (ii) assure that individuals in the

19 group are not added for the purpose of se20 curing such coverage;

21 (iii) require that a specified percent22 age of employees and dependents obtain

23 health care insurance coverage;

24 (iv) require minimum employer con25 tributions; and
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1 (v) require prepayment of premiums

2 or other mechanisms to assure that pay3 ment will be made for coverage.

4 (B) MINIMUM PARTICIPATION.—The board

5 may require participating employers to agree to

6 participate in the program for a specified mini7 mum period of time and may include in any

8 participation agreements with employers a re9 quirement for a financial deposit or provision

10 for a financial penalty, which would be invoked

11 in the event the employer violates the participa12 tion agreement.

13 (d) GRANTS.—

14 (1) AUTHORITY.—The Secretary may award

15 grants to qualified small employer purchasing

16 groups to assist such groups in paying the expendi17 tures associated with the formation and initial oper18 ations of such groups.

19 (2) APPLICATION.—To be eligible to receive a

20 grant under this subsection, a qualified small em21 ployer purchasing group shall request such a grant

22 as part of the application submitted by such group

23 under subsection (a)(1).
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1 (3) AUTHORIZATION OF APPROPRIATIONS.—

2 There are authorized to award grants under this

3 subsection, such sums as may be necessary.

4 (e) FREEDOM OF CONTRACT.—Nothing in this sub5 title shall be construed to prohibit a participating carrier

6 from offering health care insurance coverage to small em7 ployers that are not participating in the program of a

8 small employer purchasing group.

9 SEC. 222. PREEMPTION FROM INSURANCE MANDATES FOR

10 SMALL EMPLOYER PURCHASING GROUPS.

11 (a) FINDING.—Congress finds that qualified small

12 employer purchasing groups organized for the purpose of

13 obtaining health insurance for the employer members of

14 such groups affect interstate commerce.

15 (b) PREEMPTION OF STATE MANDATES.—In the case

16 of a qualified small employer purchasing group, no provi17 sion of State law shall apply that requires the offering,

18 as part of the health care insurance plan with respect to

19 an employer member of such a group, of any services, cat20 egory of care, or services of any class or type of provider

21 that is in excess of that recommended under the model

22 benefit plan.
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1 Subtitle D—Insurance Market

2 Reform

3 SEC. 231. FAILURE TO SATISFY CERTAIN STANDARDS FOR

4 HEALTH CARE INSURANCE PROVIDED TO

5 SMALL EMPLOYERS.

6 (a) IN GENERAL.—Subchapter L of chapter 1 of the

7 Internal Revenue Code of 1986 (relating to insurance

8 companies) is amended by adding at the end thereof the

9 following new part:

10 ‘‘PART IV—HEALTH CARE INSURANCE PROVIDED

11 TO SMALL EMPLOYERS

‘‘Sec. 850. Failure to satisfy standards for health care insurance

of small employers.

‘‘Sec. 850A. General issuance requirements.

‘‘Sec. 850B. Specific contractual requirements.

‘‘Sec. 850C. State compliance agreements.

‘‘Sec. 850D. Definitions and other rules.

12 ‘‘SEC. 850. FAILURE TO SATISFY CERTAIN STANDARDS FOR

13 HEALTH CARE INSURANCE OF SMALL EM14 PLOYERS.

15 ‘‘(a) GENERAL RULE.—No health insurance contract

16 issued to an eligible small employer shall be treated as

17 a contract for purposes of section 807 or 832 if the issuer

18 of such a contract fails to meet at any time during any

19 taxable year—

20 ‘‘(1) the general issuance requirements of sec21 tion 850A, or
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1 ‘‘(2) the specific contractual requirements of

2 section 850B.

3 ‘‘(b) LIMITATION.—

4 ‘‘(1) SECTION NOT TO APPLY WHERE FAILURE

5 NOT DISCOVERED EXERCISING REASONABLE DILI6 GENCE.—Subsection (a) shall not apply with respect

7 to any failure for which it is established to the satis8 faction of the Secretary that the person described in

9 such subsection did not know, or exercising reason10 able diligence would not have known, that such fail11 ure existed.

12 ‘‘(2) SECTION NOT TO APPLY WHERE FAILURES

13 CORRECTED WITHIN 30 DAYS.—Subsection (a) shall

14 not apply with respect to any failure if—

15 ‘‘(A) such failure was due to reasonable

16 cause and not to willful neglect, and

17 ‘‘(B) such failure is corrected during the

18 30-day period beginning on the 1st date any of

19 the persons described in such subsection knew,

20 or exercising reasonable diligence would have

21 known, that such failure existed.

22 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

23 failure which is due to reasonable cause and not to

24 willful neglect, the Secretary may waive the applica25 tion of subsection (a).
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1 ‘‘SEC. 850A. GENERAL ISSUANCE REQUIREMENTS.

2 ‘‘(a) GENERAL RULE.—The requirements of this sec3 tion are met if a person meets—

4 ‘‘(1) the mandatory policy requirements of sub5 section (b),

6 ‘‘(2) the guaranteed issue requirements of sub7 section (c), and

8 ‘‘(3) the mandatory registration and disclosure

9 requirements of subsection (d).

10 ‘‘(b) MANDATORY POLICY REQUIREMENTS.—

11 ‘‘(1) IN GENERAL.—The requirements of this

12 subsection are met if any person issuing a health

13 care insurance contract to any eligible small em14 ployer makes available to such employer a health

15 care insurance contract which—

16 ‘‘(A) provides benefits and coverage con17 sistent with the model health care insurance

18 benefits plan developed under section 201 of the

19 Health Equity and Access Improvement Act of

20 1992, and

21 ‘‘(B) is for a term of not less than 12

22 months.

23 ‘‘(2) PRICING AND MARKETING REQUIRE24 MENTS.—The requirements of paragraph (1) are not

25 met unless—
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1 ‘‘(A) the price at which the contract de2 scribed in paragraph (1) is made available is

3 not greater than the price for such contract de4 termined on the same basis as prices for other

5 health care insurance contracts within the same

6 class of business made available by the person

7 to eligible small employers, and

8 ‘‘(B) such contract is made available to eli9 gible small employers using at least the market10 ing methods and other sales practices which are

11 used in selling such other contracts.

12 ‘‘(c) GUARANTEED ISSUE.—

13 ‘‘(1) IN GENERAL.—The requirements of this

14 subsection are met if the person offering health care

15 insurance contracts to eligible small employers issues

16 such a contract to any eligible small employer seek17 ing to enter into such a contract.

18 ‘‘(2) FINANCIAL CAPACITY EXCEPTION.—Para19 graph (1) shall not require any person to issue a

20 health care insurance contract to the extent that the

21 issuance of such contract would result in such per22 son violating the financial solvency standards (if

23 any) established by the State in which such contract

24 is to be issued.
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1 ‘‘(3) DELIVERY CAPACITY EXCEPTION.—Para2 graph (1) shall not require any person to issue a

3 health care insurance contract to the extent that the

4 issuance of such contract would result, upon dem5 onstration to the Secretary, in such person exceeding

6 its administrative capacity to serve previously en7 rolled groups and individuals (and additional individ8 uals who will be expected to enroll because of affili9 ation with such previously enrolled groups).

10 ‘‘(4) EXCEPTION FOR CERTAIN EMPLOYERS.—

11 Paragraph (1) shall not apply to a failure to issue

12 a health care insurance contract to an eligible small

13 employer if—

14 ‘‘(A) such employer is unable to pay the

15 premium for such contract, or

16 ‘‘(B) in the case of an eligible small em17 ployer with fewer than 15 employees, such em18 ployer fails to enroll a minimum percentage of

19 the employer’s eligible employees for coverage

20 under such contract, so long as such percentage

21 is enforced uniformly for all eligible small em22 ployers of comparable size.

23 ‘‘(5) EXCEPTION FOR ALTERNATIVE STATE

24 PROGRAMS.—
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1 ‘‘(A) IN GENERAL.—Paragraph (1) shall

2 not apply if the State in which the health care

3 insurance contract is issued—

4 ‘‘(i) has a program which—

5 ‘‘(I) assures the availability of

6 health care insurance contracts to eli7 gible small employers through the eq8 uitable distribution of high risk

9 groups among all persons offering

10 such contracts to such employers, and

11 ‘‘(II) is consistent with a model

12 program developed by the NAIC;

13 ‘‘(ii) has a qualified State-run reinsur14 ance program, or

15 ‘‘(iii) has a program which the Sec16 retary of Health and Human Services has

17 determined assures all eligible small em18 ployers in the State an opportunity to pur19 chase a health care insurance contract

20 without regard to any risk characteristic.

21 ‘‘(B) REINSURANCE PROGRAM.—

22 ‘‘(i) PROGRAM REQUIREMENTS.—For

23 purposes of subparagraph (A)(ii), a State24 run reinsurance program is qualified if

25 such program is one of the NAIC reinsur-
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1 ance program models developed under

2 clause (ii) or is a variation of one of such

3 models, as approved by the Secretary of

4 Health and Human Services.

5 ‘‘(ii) MODELS.—Not later than the

6 120 days after the date of the enactment

7 of the Health Equity and Access Improve8 ment Act of 1992, the NAIC shall develop

9 several models for a reinsurance program,

10 including options for program funding.

11 ‘‘(d) MANDATORY REGISTRATION AND DISCLOSURE

12 REQUIREMENTS.—The requirements of this subsection

13 are met if the person offering health care insurance con14 tracts to eligible small employers in any State—

15 ‘‘(1) registers with the State commissioner or

16 superintendent of insurance or other State authority

17 responsible for regulation of health insurance,

18 ‘‘(2) fully discloses the rating practices for

19 small employer health care insurance contracts at

20 the time such person offers a health care insurance

21 contract to an eligible small employer, and

22 ‘‘(3) fully discloses the terms for renewal of the

23 contract at the time of the offering of such contract

24 and at least 90 days before the expiration of such

25 contract.
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1 ‘‘SEC. 850B. SPECIFIC CONTRACTUAL REQUIREMENTS.

2 ‘‘(a) GENERAL RULE.—The requirements of this sec3 tion are met if the following requirements are met:

4 ‘‘(1) The coverage requirements of subsection

5 (b).

6 ‘‘(2) The rating requirements of subsection (c).

7 ‘‘(b) COVERAGE REQUIREMENTS.—

8 ‘‘(1) IN GENERAL.—The requirements of this

9 subsection are met with respect to any health care

10 insurance contract if, under the terms and operation

11 of the contract, the following requirements are met:

12 ‘‘(A) GUARANTEED ELIGIBILITY.—No eli13 gible employee (and the spouse or any depend14 ent child of the employee eligible for coverage)

15 may be excluded from coverage under the con16 tract.

17 ‘‘(B) LIMITATIONS ON COVERAGE OF PRE18 EXISTING CONDITIONS.—Any limitation under

19 the contract on any preexisting condition—

20 ‘‘(i) may not extend beyond the 6-

21 month period beginning with the date an

22 insured is first covered by the contract,

23 and

24 ‘‘(ii) may only apply to preexisting

25 conditions which manifested themselves, or

26 for which medical care or advice was
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1 sought or recommended, during the 3-

2 month period preceding the date an in3 sured is first covered by the contract.

4 ‘‘(C) GUARANTEED RENEWABILITY.—

5 ‘‘(i) IN GENERAL.—The contract must

6 be renewed at the election of the eligible

7 small employer unless the contract is ter8 minated for cause.

9 ‘‘(ii) CAUSE.—For purposes of this

10 subparagraph, the term ‘cause’ means—

11 ‘‘(I) nonpayment of the required

12 premiums;

13 ‘‘(II) fraud or misrepresentation

14 of the employer or, with respect to

15 coverage of individual insureds, the

16 insureds or their representatives;

17 ‘‘(III) noncompliance with the

18 contract’s minimum participation re19 quirements;

20 ‘‘(IV) noncompliance with the

21 contract’s employer contribution re22 quirements; or

23 ‘‘(V) repeated misuse of a pro24 vider network provision in the con25 tract.
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1 ‘‘(2) WAITING PERIODS.—Paragraph (1)(A)

2 shall not apply to any period an employee is ex3 cluded from coverage under the contract solely by

4 reason of a requirement applicable to all employees

5 that a minimum period of service with the employer

6 is required before the employee is eligible for such

7 coverage.

8 ‘‘(3) DETERMINATION OF PERIODS FOR RULES

9 RELATING TO PREEXISTING CONDITIONS.—For pur10 poses of paragraph (1)(B), the date on which an in11 sured is first covered by a contract shall be the ear12 lier of—

13 ‘‘(A) the date on which coverage under

14 such contract begins, or

15 ‘‘(B) the first day of any continuous pe16 riod—

17 ‘‘(i) during which the insured was cov18 ered under 1 or more other health insur19 ance arrangements, and

20 ‘‘(ii) which does not end more than

21 120 days before the date employment with

22 the employer begins.

23 ‘‘(4) CESSATION OF SMALL EMPLOYER HEALTH

24 INSURANCE BUSINESS.—
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1 ‘‘(A) IN GENERAL.—Except as otherwise

2 provided in this paragraph, a person shall not

3 be treated as failing to meet the requirements

4 of paragraph (1)(C) if such person terminates

5 the class of business which includes the health

6 care insurance contract.

7 ‘‘(B) NOTICE REQUIREMENT.—Subpara8 graph (A) shall apply only if the person gives

9 notice of the decision to terminate at least 90

10 days before the expiration of the contract.

11 ‘‘(C) 5-YEAR MORATORIUM.—If, within 5

12 years of the year in which a person terminates

13 a class of business under subparagraph (A),

14 such person establishes a new class of business,

15 the issuance of such contracts in that year shall

16 be treated as a failure to which this section ap17 plies.

18 ‘‘(D) TRANSFERS.—If, upon a failure to

19 renew a contract to which subparagraph (A)

20 applies, a person offers to transfer such con21 tract to another class of business, such transfer

22 must be made without regard to risk character23 istics.

24 ‘‘(c) RATING REQUIREMENTS.—
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1 ‘‘(1) IN GENERAL.—The requirements of this

2 subsection are met if—

3 ‘‘(A) the requirements of paragraphs (2)

4 and (3) are met, and

5 ‘‘(B) any increase in any premium rate

6 under the renewal contract over the correspond7 ing rate under the health care insurance con8 tract being renewed does not exceed the appli9 cable annual adjusted increase.

10 ‘‘(2) LIMIT ON VARIATION OF PREMIUMS BE11 TWEEN CLASSES OF BUSINESS.—

12 ‘‘(A) IN GENERAL.—The requirements of

13 this paragraph are met if the index rate for a

14 rating period for any class of business of the in15 surer does not exceed the index rate for any

16 other class of business by more than 20 per17 cent.

18 ‘‘(B) EXCEPTIONS.—Subparagraph (A)

19 shall not apply to a class of business if—

20 ‘‘(i) the class is one for which the in21 surer does not reject, and never has re22 jected, eligible small employers included

23 within the class of business or otherwise el24 igible employees and dependents who enroll
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1 on a timely basis, based upon risk charac2 teristics,

3 ‘‘(ii) the insurer does not transfer,

4 and never has transferred, a health care

5 insurance contract involuntarily into or out

6 of the class of business, and

7 ‘‘(iii) the class of business is currently

8 available for purchase.

9 ‘‘(3) LIMIT ON VARIATION IN PREMIUM RATES

10 WITHIN A CLASS OF BUSINESS.—The requirements

11 of this paragraph are met if the premium rates

12 charged during a rating period to eligible small em13 ployers with similar case characteristics (other than

14 risk characteristics) for the same or similar cov15 erage, or the rates which could be charged to such

16 employers under the rating system for that class of

17 business, do not vary from the index rate by more

18 than 20 percent of the index rate.

19 ‘‘(4) APPLICABLE ANNUAL ADJUSTED IN20 CREASE.—For purposes of paragraph (1)(B)—

21 ‘‘(A) IN GENERAL.—The applicable annual

22 adjusted increase is an amount equal to the

23 sum of—
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1 ‘‘(i) the applicable percentage of the

2 premium rate under the health care insur3 ance contract being renewed, plus

4 ‘‘(ii) any increase in the rate under

5 the renewal contract due to any change in

6 coverage or to any change of case charac7 teristics (other than risk characteristics),

8 plus

9 ‘‘(iii) 5 percentage points.

10 ‘‘(B) APPLICABLE PERCENTAGE.—

11 ‘‘(i) IN GENERAL.—For purposes of

12 subparagraph (A), the applicable percent13 age is the percentage (if any) by which—

14 ‘‘(I) the premium rate for newly

15 issued contracts for substantially simi16 lar coverage for an employer with

17 similar case characteristics (other

18 than risk characteristics) as the em19 ployer under the health care insurance

20 contract (determined on the 1st day

21 of the rating period applicable to such

22 contracts), exceeds

23 ‘‘(II) such rate on the 1st day of

24 the rating period applicable to the

25 contract being renewed.
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1 ‘‘(ii) CASES WHERE NO NEW BUSI2 NESS.—If no new contracts are being is3 sued for a class of business during any rat4 ing period, the applicable percentage shall

5 be the percentage (if any) by which the

6 base premium rate determined under para7 graph (5)(B) with respect to the renewal

8 contract exceeds such rate for the contract

9 to be renewed.

10 ‘‘(5) DEFINITIONS.—For purposes of this sub11 section—

12 ‘‘(A) INDEX RATE.—The term ‘index rate’

13 means, with respect to a class of business, the

14 arithmetic average of the applicable base pre15 mium rate and the corresponding highest pre16 mium rate for that class.

17 ‘‘(B) BASE PREMIUM RATE.—The term

18 ‘base premium rate’ means, for each class of

19 business for each rating period, the lowest pre20 mium rate which could have been charged

21 under a rating system for that class of business

22 by the insurer to eligible small employers with

23 similar case characteristics (other than risk

24 characteristics) for health care insurance con25 tracts with the same or similar coverage.
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1 ‘‘SEC. 850C. STATE COMPLIANCE AGREEMENTS.

2 ‘‘(a) AGREEMENTS.—The Secretary of Health and

3 Human Services may enter into an agreement with any

4 State—

5 ‘‘(1) to apply the standards set by the NAIC

6 for health care insurance contracts in lieu of the re7 quirements of this subchapter, and

8 ‘‘(2) to provide for the State to make the initial

9 determination as to whether a person is in compli10 ance with such standards for purposes of applying

11 the sanctions under section 850.

12 ‘‘(b) STANDARDS.—An agreement may be entered

13 into under subsection (a)(1) only if—

14 ‘‘(1) the chief executive officer of the State re15 quests such agreement be entered into,

16 ‘‘(2) the Secretary of Health and Human Serv17 ices determines that the NAIC standards to be ap18 plied under the agreement will carry out the pur19 poses of this subchapter, and

20 ‘‘(3) the Secretary determines that the NAIC

21 standards to be applied under the agreement will

22 apply to substantially all health care insurance con23 tracts issued in such State to eligible small employ24 ers.

25 ‘‘(c) TERMINATION.—The Secretary of Health and

26 Human Services shall terminate any agreement if the Sec-
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1 retary determines that the application of NAIC standards

2 by the State ceases to carry out the purposes of this sub3 chapter.

4 ‘‘(d) NAIC STANDARDS.—Not later than the 270

5 days after the date of the enactment of the Health Equity

6 and Access Improvement Act of 1992, the NAIC shall de7 velop standards which provide for requirements substan8 tially similar to the requirements of this subchapter.

9 ‘‘SEC. 850D. DEFINITIONS AND OTHER RULES.

10 For purposes of this part—

11 ‘‘(1) HEALTH CARE INSURANCE.—The term

12 ‘health care insurance’ means any hospital or medi13 cal expense incurred policy or certificate, hospital or

14 medical service plan contract, health maintenance

15 subscriber contract, multiple employer welfare ar16 rangement, other employee welfare plan (as defined

17 in the Employee Retirement Income Security Act of

18 1974), or any other health insurance arrangement,

19 and includes an employment-related reinsurance

20 plan, but does not include—

21 ‘‘(A) a self-insured health care insurance

22 plan; or

23 ‘‘(B) any of the following offered by an in24 surer—
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1 ‘‘(i) accident only, dental only, or dis2 ability income only insurance,

3 ‘‘(ii) coverage issued as a supplement

4 to liability insurance,

5 ‘‘(iii) worker’s compensation or simi6 lar insurance, or

7 ‘‘(iv) automobile medical-payment in8 surance.

9 ‘‘(2) CLASS OF BUSINESS.—

10 ‘‘(A) IN GENERAL.—Except as provided in

11 subparagraph (B), the term ‘class of business’

12 means, with respect to health care insurance

13 provided to eligible small employers, all health

14 care insurance provided to such employers.

15 ‘‘(B) ESTABLISHMENT OF GROUPINGS.—

16 ‘‘(i) IN GENERAL.—An issuer may es17 tablish separate classes of business with re18 spect to health care insurance provided to

19 eligible small employers but only if such

20 classes are based on 1 or more of the fol21 lowing:

22 ‘‘(I) Business marketed and sold

23 through persons not participating in

24 the marketing and sale of such insur25 ance to other eligible small employers.
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1 ‘‘(II) Business acquired from

2 other insurers as a distinct grouping.

3 ‘‘(III) Business provided through

4 an association of not less than 20 eli5 gible small employers which was es6 tablished for purposes other than ob7 taining insurance.

8 ‘‘(IV) Business related to man9 aged care plans (as defined in section

10 202(2) of the Health Equity and Ac11 cess Improvement Act of 1992).

12 ‘‘(V) Any other business which

13 the Secretary of Health and Human

14 Services determines needs to be sepa15 rately grouped to prevent a substan16 tial threat to the solvency of the in17 surer.

18 ‘‘(ii) EXCEPTION ALLOWED.—Except

19 as provided in subparagraph (C), an in20 surer may not establish more than one dis21 tinct group of eligible small employers for

22 each category specified in clause (i).

23 ‘‘(C) SPECIAL RULE.—An insurer may es24 tablish up to 2 groups under each category in

25 subparagraph (A) or (B) to account for dif-
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1 ferences in characteristics (other than dif2 ferences in plan benefits) of health insurance

3 plans that are expected to produce substantial

4 variation in health care costs.

5 ‘‘(2) CHARACTERISTICS.—

6 ‘‘(A) IN GENERAL.—The term ‘characteris7 tics’ means, with respect to any insurance rat8 ing system, the factors used in determining

9 rates.

10 ‘‘(B) RISK CHARACTERISTICS.—The term

11 ‘risk characteristics’ means factors related to

12 the health risks of individuals, including health

13 status, prior claims experience, the duration

14 since the date of issue of a health insurance

15 plan or arrangement, industry, and occupation.

16 ‘‘(C) GEOGRAPHIC FACTORS.—

17 ‘‘(i) IN GENERAL.—In applying geo18 graphic location as a characteristic, an in19 surer may not use for purposes of this sub20 chapter areas smaller than 3-digit postal

21 zip code areas.

22 ‘‘(ii) STUDY AND REPORT.—Not later

23 than 120 days after the date of the enact24 ment of the Health Equity and Access Im25 provement Act of 1992, the Comptroller
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1 General of the United States shall study

2 and report to the Congress concerning—

3 ‘‘(I) insurance industry practices

4 in determining the geographic bound5 aries of communities used for setting

6 rates,

7 ‘‘(II) the feasibility and desirabil8 ity of establishing standardized geo9 graphic communities for setting rates,

10 and

11 ‘‘(III) the effect such standard12 ized geographic communities would

13 have on rates charged small employ14 ers.

15 ‘‘(3) ELIGIBLE SMALL EMPLOYER.—

16 ‘‘(A) IN GENERAL.—The term ‘eligible

17 small employer’ means any person which, on an

18 average business day during the preceding tax19 able year, had more than 2 but less than 50

20 employees.

21 ‘‘(B) AGGREGATION RULES.—All members

22 of the same controlled group of corporations

23 (within the meaning of section 52(a)) and all

24 persons under common control (within the
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1 meaning of section 52(b)) shall be treated as 1

2 person.

3 ‘‘(C) EMPLOYEE.—The term ‘employee’

4 shall not include—

5 ‘‘(i) a self-employed individual as de6 fined in section 401(c)(1), or

7 ‘‘(ii) an employee who works less than

8 20 hours per week.

9 ‘‘(4) NAIC.—The term ‘NAIC’ means the Na10 tional Association of Insurance Commissioners.’’

11 (b) CONFORMING AMENDMENT.—Subchapter L of

12 chapter 1 of the Internal Revenue Code of 1986 is amend13 ed by adding at the end thereof the following new item:

‘‘Part IV. Health care insurance provided to small employers.’’

14 (c) EFFECTIVE DATES.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall apply to contracts issued, or re17 newed, after the date of the enactment of this Act.

18 (2) GUARANTEED ISSUE.—The provisions of

19 section 850A(c) of the Internal Revenue Code of

20 1986, as added by this section, shall apply to con21 tracts which are issued, or renewed, after the date

22 which is 18 months after the date of the enactment

23 of this Act.

24 (3) PREMIUM RANGE.—In the case of any con25 tract in effect on the date of the enactment of this
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1 Act, the provisions of section 850B(c)(1)(A) of such

2 Code, as added by this section, shall not apply to the

3 premiums under such contract or any renewal con4 tract for benefits provided during the period begin5 ning on such date and ending on the last day of the

6 2nd plan year beginning after such date.

7 Subtitle E—Uniform Standards for

8 Reporting Services and Process9 ing Claims

10 SEC. 241. APPLICATION AND ESTABLISHMENT OF UNIFORM

11 STANDARDS.

12 (a) IN GENERAL.—Each entity providing medical or

13 other health care services shall comply with the uniform

14 standards for reporting health care services and process15 ing claims established by the National Association of In16 surance Commissioners (hereafter in this section referred

17 to as ‘‘NAIC’’) under subsection (b)(1) (or, if applicable,

18 by the Secretary of Health and Human Services under

19 subsection (b)(2)).

20 (b) ESTABLISHMENT OF STANDARDS.—

21 (1) ROLE OF NAIC.—Not later than 18 months

22 after the date of the enactment of this Act, the

23 NAIC shall establish and submit to the Secretary of

24 Health and Human Services (hereafter in this sec25 tion referred to as the ‘‘Secretary’’) uniform stand-
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1 ards for processing claims for medical or other

2 health services and for reporting the delivery of such

3 services to a national data collection entity.

4 (2) ESTABLISHMENT BY SECRETARY.—If the

5 NAIC fails to establish standards under paragraph

6 (1), or if the Secretary finds that the standards es7 tablished by the NAIC fail to promote efficiency and

8 cost-effectiveness in the delivery and reporting of

9 medically appropriate health care services, the Sec10 retary shall establish the uniform standards de11 scribed under paragraph (1).

12 (3) REVIEW AND UPDATING OF STANDARDS.—

13 The Secretary shall periodically review the standards

14 established under this subsection, and may revise the

15 standards to ensure that the standards continue to

16 promote efficiency and cost-effectiveness in the deliv17 ery and reporting of medically appropriate health

18 care services.

19 SEC. 242. EFFECTIVE DATE.

20 Section 241 shall apply with respect to medical or

21 other health care services provided on or after the expira22 tion of the 2-year period that begins on the date of the

23 enactment of this Act.
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1 TITLE III—MEDICAL LIABILITY

2 REFORM

3 Subtitle A—Definitions and

4 Findings

5 SEC. 301. DEFINITIONS.

6 As used in this title:

7 (1) BOARD OF ADVISORS.—The term ‘‘Board of

8 Advisors’’ means the Alternative Dispute Resolution

9 Board of Advisors established under section 321.

10 (2) CLAIMANT.—The term ‘‘claimant’’ means

11 any person who brings a civil action that is subject

12 to the requirements of this Act, and any person on

13 whose behalf such an action is brought. If such an

14 action is brought through or on behalf of an estate,

15 such term includes the claimant’s decedent, or if

16 such an action is brought through or on behalf of a

17 minor or incompetent, such term includes the claim18 ant’s parent or guardian.

19 (3) CLEAR AND CONVINCING EVIDENCE.—The

20 term ‘‘clear and convincing evidence’’ is that meas21 ure or degree of proof that will produce in the mind

22 of the trier of fact a firm belief or conviction as to

23 the truth of the allegations sought to be established.

24 The level of proof required to satisfy such standard

25 is more than that required under preponderance of
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1 the evidence, but less than that required for proof

2 beyond a reasonable doubt.

3 (4) MEDICAL MALPRACTICE ACTION.—The term

4 ‘‘medical malpractice action’’ includes any action in5 volving a claim, third-party claim, cross-claim, coun6 terclaim, or contribution claim in a civil action in

7 which a health care provider is alleged to be liable

8 for harm caused by such health care provider.

9 (5) NONECONOMIC DAMAGES.—The term ‘‘non10 economic damages’’ means subjective, nonmonetary

11 losses including, pain, suffering, inconvenience, men12 tal suffering, emotional distress, loss of society and

13 companionship, loss of consortium, and injury to

14 reputation and humiliation. Such term does not in15 clude objectively verifiable monetary losses including

16 medical expenses, loss of earnings, burial costs, loss

17 of use of property, costs of obtaining substitute do18 mestic services, rehabilitation and training expenses,

19 loss of employment, or loss of business or employ20 ment opportunities.

21 (6) SECRETARY.—The term ‘‘Secretary’’ means

22 the Secretary of Health and Human Services.

23 (7) STATE.—The term ‘‘State’’ means each of

24 the several States, the District of Columbia, the

25 Commonwealth of Puerto Rico, the Commonwealth
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1 of the Northern Mariana Islands, the Virgin Islands,

2 Guam, American Samoa, and any other territory or

3 possession of the United States, or any political sub4 division thereof.

5 SEC. 302. EFFECT ON INTERSTATE COMMERCE.

6 Congress finds that the health care and insurance in7 dustries are industries affecting interstate commerce and

8 the medical malpractice litigation systems existing

9 throughout the United States impact on interstate com10 merce by contributing to the high cost of health care and

11 premiums for malpractice insurance purchased by health

12 care providers.

13 Subtitle B—Expedited Medical

14 Malpractice Settlements

15 SEC. 311. EXPEDITED MEDICAL MALPRACTICE SETTLE16 MENTS.

17 (a) RIGHT TO BRING ACTION.—Any claimant may

18 bring a civil action for damages against a person for harm

19 caused during the provision of medical care pursuant to

20 applicable State law, except to the extent that such law

21 is superseded by this subtitle.

22 (b) SETTLEMENT OFFERS.—

23 (1) BY CLAIMANT.—Any claimant may, in addi24 tion to any claim for relief made in accordance with

25 State law as provided for in subsection (a), include
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1 in the complaint filed by such complainant an offer

2 of settlement for a specific dollar amount.

3 (2) BY DEFENDANT.—Within 60 days after

4 service of the complaint of a claimant of the type re5 ferred to in paragraph (1), or within the time per6 mitted pursuant to State law for a responsive plead7 ing, whichever is longer, the defendant may make an

8 offer of settlement for a specific dollar amount, ex9 cept that if such pleading includes a motion to dis10 miss in accordance with applicable State law, the de11 fendant may tender such relief to the claimant with12 in 10 days after the determination of the court re13 garding such motion.

14 (c) EXTENSION OF TIME.—

15 (1) AUTHORITY.—In any case in which an offer

16 of settlement is made pursuant to subsection (b), the

17 court may, upon motion made prior to the expiration

18 of the applicable period for response, enter an order

19 extending such period.

20 (2) CONTENTS OF EXTENSION ORDER.—Any

21 order extending the period for response under para22 graph (1) shall contain a schedule for discovery of

23 evidence material to the issue of the appropriate

24 amount of relief, and shall not extend such period

25 for more than 60 days. Any such motion shall be ac-
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1 companied by a supporting affidavit of the moving

2 party setting forth the reasons why such extension

3 is necessary to promote the interests of justice and

4 stating that the information likely to be discovered

5 is material, and is not, after reasonable inquiry, oth6 erwise available to the moving party.

7 (d) REJECTION OF OFFER BY DEFENDANT

8 OFFEREE.—If the defendant, as offeree, does not accept

9 the offer of settlement made by a claimant in accordance

10 with subsection (b)(1) within the time permitted pursuant

11 to State law for a responsive pleading or, if such pleading

12 includes a motion to dismiss in accordance with applicable

13 law, within 30 days after the court’s determination regard14 ing such motion, and a verdict is entered in such action

15 equal to or greater than the specific dollar amount of such

16 offer of settlement, the court shall enter judgment against

17 the defendant and shall include in such judgment an

18 amount for the claimant’s reasonable attorney’s fees and

19 costs. Such fees shall be offset against any fees owed by

20 the claimant to the claimant’s attorney by reason of the

21 verdict.

22 (e) REJECTION OF OFFER BY CLAIMANT

23 OFFEREE.—If the claimant, as offeree, does not accept

24 the offer of settlement made by a defendant in accordance

25 with subsection (b)(2) within 30 days after the date on
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1 which such offer is made and a verdict is entered in such

2 action equal to or less than the specific dollar amount of

3 such offer of settlement, the court shall reduce the amount

4 of the verdict in such action by an amount equal to the

5 reasonable attorney’s fees and costs owed by the defendant

6 to the defendant’s attorney by reason of the verdict, except

7 that the amount of such reduction shall not exceed that

8 portion of the verdict which is allocable to noneconomic

9 loss and economic loss for which the claimant has received

10 or will receive collateral benefits.

11 (f) CALCULATION OF ATTORNEY’S FEES.—For pur12 poses of this section, attorney’s fees shall be calculated

13 on the basis of an hourly rate that should not exceed that

14 which is considered acceptable in the community in which

15 the attorney practices, considering the attorney’s quali16 fications and experience and the complexity of the case.

17 Subtitle C—Alternative Dispute

18 Resolution Procedures

19 SEC. 321. ESTABLISHMENT OF BOARD OF ADVISORS.

20 (a) IN GENERAL.—The Secretary shall establish an

21 Alternative Dispute Resolution Board of Advisors to make

22 recommendations to the Secretary concerning the estab23 lishment of a model voluntary alternative dispute resolu24 tion program.
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1 (b) COMPOSITION.—The Board of Advisors shall be

2 composed of members to be appointed by the Secretary.

3 Such members shall include representatives of—

4 (1) patient advocacy groups;

5 (2) State governments;

6 (3) physicians groups;

7 (4) hospitals;

8 (5) health and medical malpractice insurers;

9 (6) medical product manufacturers; and

10 (7) other professions or industries determined

11 appropriate by the Secretary.

12 (c) DUTIES OF BOARD.—The Board of Advisors

13 shall—

14 (1) provide advice and assistance to representa15 tives from State governments concerning the estab16 lishment of alternative dispute resolution systems;

17 and

18 (2) not later than 1 year after the date of en19 actment of this Act, submit a recommendation to the

20 Secretary for the implementation of a model vol21 untary alternative dispute resolution system.

22 (d) APPROVAL BY SECRETARY.—The Secretary shall

23 approve the model system submitted under subsection

24 (c)(2) with any modifications that the Secretary deter25 mines appropriate.
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1 SEC. 322. DEVELOPMENT OF STATE VOLUNTARY DISPUTE

2 RESOLUTION PROCEDURES.

3 (a) PROGRAM TO ENCOURAGE ADOPTION.—The Sec4 retary shall develop and implement a program to encour5 age States to develop and implement voluntary alternative

6 dispute resolution procedures that meet the requirements

7 of this title.

8 (b) FAILURE TO ADOPT PROCEDURES.—With respect

9 to a State that has not adopted alternative dispute resolu10 tion procedures that meet the requirements of this title

11 by the date that occurs 2 years after the date of enactment

12 of this Act, such State shall be required to adopt the model

13 voluntary dispute resolution procedure system approved by

14 the Secretary under section 321(d).

15 SEC. 323. APPLICATION OF EXISTING PROCEDURES, RE16 BUTTABLE PRESUMPTION.

17 (a) OFFER TO PROCEED.—With respect to a State

18 that has an alternative dispute resolution system in effect

19 that meets the requirements of this title, in lieu of or in

20 addition to making an offer of settlement under section

21 311, a claimant or defendant may, within the time per22 mitted for the making of such an offer under section 311,

23 offer to proceed pursuant to any voluntary alternative dis24 pute resolution procedure established or recognized under

25 the law of the State in which the civil action for damages

26 for harm caused through a medical procedure is brought
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1 or under the rules of the court in which such action is

2 maintained.

3 (b) REFUSAL TO PROCEED.—If the recipient of an

4 offer to proceed under subsection (a) refuses to proceed

5 pursuant to an alternative dispute resolution procedure

6 and the court determines that such refusal was unreason7 able or not in good faith, the court shall assess reasonable

8 attorney’s fees and costs against the offeree.

9 (c) REBUTTABLE PRESUMPTION.—For the purposes

10 of this section, there shall be created a rebuttable pre11 sumption that a refusal by an offeree under subsection

12 (b) to proceed pursuant to an alternative dispute resolu13 tion procedure was unreasonable or not in good faith, if

14 a verdict is rendered in favor of the offeror.

15 Subtitle D—Uniform Standards for

16 Medical Malpractice Cases

17 SEC. 331. APPLICATION TO CIVIL ACTIONS.

18 This subtitle shall apply to any medical malpractice

19 action brought in any Federal or State court and any med20 ical malpractice claim resolved through an alternative dis21 pute resolution system.

22 SEC. 332. DAMAGES.

23 (a) PAYMENTS.—With respect to a civil action or

24 claim of the type referred to in section 331, no person

25 may be required to pay more than $100,000 in a single
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1 payment for future losses, but such person shall be per2 mitted to make such payments on a periodic basis. The

3 periods for such payments shall be determined by the

4 court, based upon projections of such future losses. This

5 subsection shall apply to awards of plaintiff’s damages.

6 (b) LIMITATION ON NONECONOMIC DAMAGES.—With

7 respect to a civil action or claim of the type referred to

8 in section 331, the total amount of damages that may be

9 awarded to an individual and the family members of such

10 individual for noneconomic losses resulting from an injury

11 alleged under such action or claim may not exceed

12 $250,000, regardless of the number of health care profes13 sionals and health care providers against whom the claim

14 is brought or the number of claims brought with respect

15 to the injury.

16 (c) MANDATORY OFFSETS FOR DAMAGES PAID BY A

17 COLLATERAL SOURCE.—

18 (1) IN GENERAL.—With respect to a civil action

19 or claim of the type referred to in section 331, the

20 total amount of damages received by an individual

21 under such action or claim shall be reduced, in ac22 cordance with paragraph (2), by any other payment

23 that has been, or will be, made to an individual to

24 compensate such individual for the injury that was

25 the subject of such action or claim.
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1 (2) AMOUNT OF REDUCTION.—The amount by

2 which an award of damages to an individual for an

3 injury shall be reduced under paragraph (1) shall

4 be—

5 (A) the total amount of any payments

6 (other than such award) that have been made

7 or that will be made to such individual to com8 pensate such individual for the injury that was

9 the subject of the action or claim; minus

10 (B) the amount paid by such individual (or

11 by the spouse, parent, or legal guardian of such

12 individual) to secure the payments described in

13 subparagraph (A).

14 (d) ATTORNEYS’ FEES.—With respect to a civil ac15 tion or claim of the type referred to in section 331, attor16 neys’ fees may not exceed—

17 (1) 25 percent of the first $150,000 of any

18 award or settlement under such action or claim; and

19 (2) 15 percent of any additional amounts in ex20 cess of $150,000.

21 SEC. 333. JOINT AND SEVERAL LIABILITY FOR NON22 ECONOMIC DAMAGES.

23 (a) IN GENERAL.—With respect to a civil action or

24 claim of the type referred to in section 331, the liability

25 of each defendant for noneconomic damages shall be sev-
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1 eral only and shall not be joint. Each defendant shall be

2 liable only for the amount of noneconomic damages allo3 cated to such defendant in direct proportion to such de4 fendant’s percentage of responsibility as determined under

5 subsection (b).

6 (b) PROPORTION OF RESPONSIBILITY.—For pur7 poses of this section, the trier of fact shall determine the

8 proportion of responsibility of each party for the claim9 ant’s harm.

10 SEC. 334. UNIFORM STATUTE OF LIMITATIONS.

11 (a) IN GENERAL.—Except as provided in subsection

12 (b), no medical malpractice civil action may be initiated

13 after the expiration of the 2-year period that begins on

14 the date on which the alleged injury should reasonably

15 have been discovered, but in no event later than 4 years

16 after the date of the alleged occurrence of the injury.

17 (b) EXCEPTION FOR MINORS.—In the case of an al18 leged injury suffered by a minor who has not attained 6

19 years of age, no medical malpractice claim may be initi20 ated after the expiration of the 2-year period that begins

21 on the date on which the alleged injury should reasonably

22 have been discovered, but in no event later than 4 years

23 after the date of the alleged occurrence of the injury or

24 the date on which the minor attains 8 years of age, which25 ever is later.
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1 SEC. 335. PROVISION FOR DROP IN DELIVERIES

2 With respect to a civil action of the type referred to

3 in section 331, for alleged medical malpractice related to

4 services provided during the delivery of a baby, a court

5 shall only find in favor of the claimant if such malpractice

6 on the part of the defendant health care professional is

7 proven by clear and convincing evidence, except that such

8 evidentiary standard shall only apply if a defendant did

9 not previously provide prenatal care to the claimant for

10 this pregnancy, was not part of group practice that pre11 viously treated the claimant during the pregnancy result12 ing in this delivery, or was not providing coverage pursu13 ant to an agreement with another health care professional

14 for this delivery.

15 Subtitle E—Uniform Disciplinary

16 Reforms

17 SEC. 341. REQUIREMENT OF COMPLIANCE.

18 Not later than 2 years after the date of enactment

19 of this Act, a State shall comply with the requirements

20 of this subtitle.

21 SEC. 342. FUNDS FOR STATE DISCIPLINARY ACTIVITIES.

22 Each State shall allocate the total amount of fees

23 paid to the State in each year for the licensing or certifi24 cation of each type of health care practitioner, or an

25 amount of State funds equal to such total amount, to the

26 State agency or agencies responsible for the conduct of
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1 licensing and disciplinary actions with respect to such type

2 of health care practitioner.

3 SEC. 343. MEMBERSHIP OF STATE HEALTH CARE PRACTI4 TIONER BOARDS.

5 Each State shall permit the general public to be rep6 resented on State health care practitioner disciplinary

7 boards. Not less than 25 percent of the membership of

8 each such health care practitioner disciplinary board shall

9 be appointed from among the general public.

10 SEC. 344. IMMUNITY FOR MEMBERS OF STATE HEALTH

11 CARE PRACTITIONER BOARDS.

12 There shall be no monetary liability on the part of,

13 and no cause of action for damages shall arise against,

14 any current or former member, officer, administrator,

15 staff member, committee member, examiner, representa16 tive, agent, employee, consultant, witness, or any other in17 dividual serving or having served on a State health care

18 practitioner disciplinary board, either as a part of the

19 board’s operation or as an individual, as a result of any

20 act, omission, proceeding, conduct or decision related to

21 the duties of such individual undertaken or performed in

22 good faith and within the scope of the function of the

23 board.
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1 SEC. 345. RISK MANAGEMENT PROGRAMS.

2 Not later than 2 years after the date of enactment

3 of this Act, each State shall have in effect a Statewide

4 risk management program, to reduce the incidence of med5 ical malpractice that meets any regulations promulgated

6 by the Secretary for the establishment of such program.

7 SEC. 346. PUNITIVE DAMAGES.

8 (a) TRUST FUND.—Each State shall establish a

9 health care disciplinary trust fund consisting of such

10 amounts as are transferred to the trust fund under sub11 section (b).

12 (b) TRANSFER OF AMOUNTS.—Each State shall re13 quire that all awards of punitive damages resulting from

14 all medical malpractice and medical products civil actions

15 in that State be transferred to the trust fund established

16 under subsection (a) in the State.

17 (c) OBLIGATIONS FROM TRUST FUND.—The chief

18 executive officer of a State shall obligate such sums as

19 are available in the trust fund established in that State

20 under subsection (a) to provide additional resources to

21 State health care practitioner disciplinary boards for the

22 disciplining of health care practitioners and to provide ad23 ditional resources for consumer protection activities of the

24 State.
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1 Subtitle F—Medical Products

2 SEC. 351. LIMITATION ON AWARD OF PUNITIVE DAMAGES

3 IN PRODUCT LIABILITY ACTIONS INVOLVING

4 DRUGS AND DEVICES.

5 (a) DEFINITIONS.—As used in this section:

6 (1) DEVICE.—The term ‘‘device’’ has the mean7 ing given the term in section 201(h) of the Federal

8 Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)).

9 (2) DRUG.—The term ‘‘drug’’ has the meaning

10 given the term in section 201(g)(1) of the Federal

11 Food, Drug, and Cosmetic Act (21 U.S.C.

12 321(g)(1)).

13 (3) HEALTH CARE PRODUCER.—The term

14 ‘‘health care producer’’ means any firm or business

15 enterprise that designs, manufactures, produces, or

16 sells a drug or device that is the subject of a liability

17 action.

18 (b) LIMITATION.—

19 (1) IN GENERAL.—Punitive damages otherwise

20 permitted by applicable law shall not be awarded in

21 an action under this Act against a health care pro22 ducer of a drug or device that caused the harm com23 plained of by the claimant if—

24 (A) the drug or device—
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1 (i) was subject to approval under sec2 tion 505 (21 U.S.C. 355) or premarket ap3 proval under section 515 (21 U.S.C. 360e),

4 respectively, of the Federal Food, Drug,

5 and Cosmetic Act, by the Food and Drug

6 Administration, with respect to—

7 (I) the safety of the formulation

8 or performance of the aspect of the

9 drug or device that caused the harm;

10 or

11 (II) the adequacy of the packag12 ing or labeling of the drug or device;

13 and

14 (ii) was approved by the Food and

15 Drug Administration; or

16 (B) the drug or device is generally recog17 nized as safe and effective pursuant to condi18 tions established by the Food and Drug Admin19 istration and applicable regulations, including

20 packaging and labeling regulations.

21 (2) WITHHELD INFORMATION; MISREPRESEN22 TATION; ILLEGAL PAYMENT.—The provisions of

23 paragraph (1) shall not apply in any case in which

24 the defendant—
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1 (A) withheld from or misrepresented to the

2 Food and Drug Administration or any other

3 agency or official of the Federal Government in4 formation that is material and relevant to the

5 performance of the drug or device; or

6 (B) made an illegal payment to an official

7 of the Food and Drug Administration for the

8 purpose of securing approval of the drug or de9 vice.

10 (c) SEPARATE PROCEEDING.—

11 (1) CONSIDERATIONS.—At the request of the

12 health care producer in an action described in sub13 section (b), the trier of fact shall consider in a sepa14 rate proceeding—

15 (A) whether punitive damages are to be

16 awarded and the amount of the award; or

17 (B) the amount of punitive damages fol18 lowing a determination of punitive liability.

19 (2) EVIDENCE.—If a separate proceeding is re20 quested in accordance with paragraph (1), evidence

21 relevant only to the claim of punitive damages, as

22 determined by applicable State law, shall be inadmis23 sible in any proceeding to determine whether com24 pensatory damages are to be awarded.
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1 (d) AMOUNT OF PUNITIVE DAMAGES.—In determin2 ing the amount of punitive damages in an action described

3 in subsection (b) or (c), the trier of fact shall consider

4 all relevant evidence, including—

5 (1) the financial condition of the health care

6 producer;

7 (2) the severity of the harm caused by the con8 duct of the health care producer;

9 (3) the duration of the conduct or any conceal10 ment of the conduct by the health care producer;

11 (4) the profitability of the conduct to the health

12 care producer;

13 (5) the number of products sold by the health

14 care producer of the kind causing the harm com15 plained of by the claimant;

16 (6) awards of punitive or exemplary damages to

17 persons similarly situated to the claimant;

18 (7) prospective awards of compensatory dam19 ages to persons similarly situated to the claimant;

20 (8) any criminal penalties imposed on the

21 health care producer as a result of the conduct com22 plained of by the claimant; and

23 (9) the amount of any civil fines assessed

24 against the defendant as a result of the conduct

25 complained of by the claimant.
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1 (e) STRICT LIABILITY DEFENSE.—In a civil action

2 brought by a claimant in a Federal or State court under

3 which the claimant alleges that a health care producer of

4 a drug or device is strictly liable to such claimant for inju5 ries sustained from the use of such drug or device, a show6 ing by the defendant that such drug or devices was subject

7 to approval and was approved by the Food and Drug Ad8 ministration as described in subsection (b)(1)(A) shall be

9 an absolute defense to such strict liability claims.

10 Subtitle G—Community Health

11 Centers

12 SEC. 361. COMMUNITY AND MIGRANT HEALTH CENTERS

13 RISK RETENTION GROUP.

14 (a) IN GENERAL.—Subpart I of part D of title III

15 of the Public Health Service Act (42 U.S.C. 254b et seq.)

16 is amended by adding at the end thereof the following new

17 section:

18 ‘‘SEC. 330A. RISK RETENTION GROUP.

19 ‘‘(a) GRANT.—The Secretary shall make a grant to

20 an entity that represents recipients of assistance under

21 section 329 and 330 to enable such entity to develop a

22 business plan as described in subsection (b)(2) and estab23 lish a nationwide risk retention group as provided for in

24 Liability Risk Retention Act of 1986 (15 U.S.C. 3901 et

25 seq.), and that meets the requirements of this section.
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1 ‘‘(b) BUSINESS PLAN AND FORMATION.—

2 ‘‘(1) DEVELOPMENT AND ESTABLISHMENT.—

3 ‘‘(A) IN GENERAL.—Not later than Sep4 tember 30, 1993, the grantee shall develop a

5 business plan as described in paragraph (2) and

6 have established a risk retention group that

7 meets the requirements of section 2(4) of the

8 Product Liability Risk Retention Act of 1981

9 (15 U.S.C. 3901(2)(4)).

10 ‘‘(B) ESTABLISHMENT.—In establishing

11 the risk retention group under subparagraph

12 (A), the grantee shall take all steps, in accord13 ance with this subsection, necessary to enable

14 such group to be prepared to issue insurance

15 policies under this section.

16 ‘‘(2) BUSINESS PLAN.—The grantee shall de17 velop a plan for the operation of the risk retention

18 group that shall include all actuarial reports and

19 studies conducted with respect to the formation, cap20 italization, and operation of the group.

21 ‘‘(3) STRUCTURE, RIGHTS, AND DUTIES OF THE

22 RISK RETENTION GROUP.—

23 ‘‘(A) BOARD OF DIRECTORS.—

24 ‘‘(i) APPOINTMENT.—The board of di25 rectors of the risk retention group shall
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1 consist of 12 members to be appointed by

2 the recipient of the grant under subsection

3 (a), and approved as provided in clause

4 (ii).

5 ‘‘(ii) APPROVAL.—The initial mem6 bers appointed under clause (i) shall be ap7 proved by the Secretary, and shall serve

8 for a term as provided in clause (iii). All

9 subsequent members shall be subject to the

10 approval of the members of the risk reten11 tion group.

12 ‘‘(iii) TERMS.—The recipient of the

13 grant under subsection (a) shall appoint

14 the members of the board under clause (i)

15 as follows:

16 ‘‘(I) Four members shall be ap17 pointed for an initial term of 1 year.

18 ‘‘(II) Four members shall be ap19 pointed for an initial term of 2 years.

20 ‘‘(III) Four members shall be ap21 pointed for an initial term of 3 years.

22 Members serving terms other than initial

23 terms shall serve for 3 years. Members

24 may serve successive terms.
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1 ‘‘(iv) EXECUTIVE DIRECTOR.—The

2 Executive Director of the board shall be

3 elected by the members of the board, and

4 shall serve at the pleasure of such mem5 bers.

6 ‘‘(v) VACANCIES.—Vacancies on the

7 board shall be filled through a vote of the

8 remaining members of the board, subject

9 to the approval of the members of the risk

10 retention group.

11 ‘‘(B) BYLAWS.—The board shall develop

12 the bylaws of the risk retention group that shall

13 be subject to the disapproval of the Secretary.

14 Any changes that the board desires to make in

15 such bylaws shall also be subject to the dis16 approval of the Secretary. The Secretary shall

17 provide the board with 90 days notice of the

18 Secretary’s intent to disapprove a bylaw.

19 ‘‘(C) ADMINISTRATION.—The risk reten20 tion group may negotiate with other entities for

21 the purposes of managing and administering

22 the risk retention group, and for purposes of

23 obtaining reinsurance.

24 ‘‘(D) PROVISION OF INSURANCE.—The

25 risk retention group shall provide professional
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1 liability insurance, and other types of profitable

2 insurance approved for issuance by the Sec3 retary, to migrant and community health cen4 ters that receive assistance under sections 329

5 and 330 and that meet the requirements of

6 subparagraph (E).

7 ‘‘(E) PARTICIPANTS.—

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clause (ii), all community and mi10 grant health centers that receive assistance

11 under section 329 and 330 shall become

12 members in the risk retention group estab13 lished under this section and shall pur14 chase the professional liability insurance

15 that is offered by such group for such cen16 ters and any health care staff or personnel

17 employed by such centers or under con18 tract with such centers. All professional

19 staff members of such centers shall be eli20 gible to obtain the insurance offered by

21 such group.

22 ‘‘(ii) EXCEPTIONS.—

23 ‘‘(I) GOOD CAUSE.—The Sec24 retary may, on a showing of good

25 cause by the center, exempt such cen-
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1 ter from the requirements of clause

2 (i).

3 ‘‘(II) FAILURE TO MEET CONDI4 TIONS.—If the risk retention group

5 determines that a center is not com6 plying with the established underwrit7 ing standards, such group may decline

8 to provide insurance to such center.

9 The risk retention group shall provide

10 a center with 60 days notice of a deci11 sion by the group not to provide in12 surance to such center.

13 ‘‘(III) HEARING.—Prior to the

14 Secretary granting an exemption or

15 severance as requested in an applica16 tion submitted under subclause (I),

17 the Secretary shall require that the

18 applicant provide evidence concerning

19 its application and shall afford the

20 risk retention group an opportunity to

21 address the allegations contained in

22 such application. The Secretary may

23 grant the center temporary relief

24 under this subparagraph without a

25 hearing in emergency situations.
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1 ‘‘(F) APPLICABILITY OF INSURANCE TO

2 CLAIMS.—Insurance provided by the risk reten3 tion group under this section shall apply to all

4 claims filed against a covered community or mi5 grant health center after the initiation of insur6 ance coverage by the risk retention group, in7 cluding acts that occur prior to coverage under

8 this section that are not covered by other insur9 ance.

10 ‘‘(c) SUBMISSION OF BUSINESS PLAN TO OUTSIDE

11 EXPERTS.—After the development of the business plan

12 and the establishment of the risk retention group as re13 quired under subsection (b), the risk retention group shall

14 enter into a contract with individuals or entities who are

15 insurance, financing, and business experts to require such

16 individuals or entities to analyze and audit the group.

17 Such individuals and entities shall provide the group with

18 an evaluation of such plan and group.

19 ‘‘(d) SUBMISSION OF PLAN AND EVALUATION.—

20 ‘‘(1) IN GENERAL.—The risk retention group

21 shall submit to the Secretary the business plan re22 quired under subsection (b) and the evaluation com23 pleted under subsection (c) to the Secretary.

24 ‘‘(2) DETERMINATION BY SECRETARY.—Not

25 later than September 30, 1993, the Secretary shall
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1 make a determination, based on the plan and evalua2 tion submitted under paragraph (1), of whether the

3 operation of the risk retention group results in an

4 increase in the amount of funds available for use by

5 community and migrant health centers and other en6 tities that receive assistance under sections 329 and

7 330 in the 2-year period ending on September 30,

8 1995.

9 ‘‘(3) IMPLEMENTATION.—If the Secretary

10 makes an affirmative determination under para11 graph (1), the Secretary shall permit the implemen12 tation of the plan and the operation of the risk re13 tention group as provided for in this section, and

14 shall capitalize such group as provided for in sub15 section (e)(2).

16 ‘‘(e) FUNDING.—

17 ‘‘(1) CAPITALIZATION.—There are authorized

18 to be appropriated to carry out this section,

19 $40,000,000 for each of the fiscal years 1993 and

20 1994. Amounts appropriated under this paragraph

21 may only be made available if the Secretary makes

22 an affirmative determination under subsection

23 (d)(2).

24 ‘‘(2) REMAINING ASSETS.—All assets of the

25 risk retention group that remain after the dissolu-
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1 tion of such group shall become the property of the

2 Secretary who shall use such assets to pay the re3 maining expenses of the group.

4 ‘‘(3) SAVINGS.—Any amount saved by the

5 grantees under sections 329 and 330 as a result of

6 the establishment of the risk retention group shall

7 be utilized—

8 ‘‘(A) to provide additional services of the

9 type permitted under section 329 or 330, as ap10 propriate; and

11 ‘‘(B) to defend against medical malpractice

12 claims arising from services provided by such

13 grantees.’’.

14 (b) CONFORMING AMENDMENTS.—

15 (1) Section 329(h)(1)(A) of the Public Health

16 Service Act (42 U.S.C. 254b(h)(1)(A)) is amended

17 by striking ‘‘1991’’ and inserting ‘‘1994’’.

18 (2) Section 330(g)(2)(A) of such Act (42

19 U.S.C. 254b(h)(1)(A)) is amended by inserting ‘‘,

20 and such sums as may be necessary for fiscal year

21 1993’’ after ‘‘1991’’.
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1 Subtitle H—Miscellaneous

2 Provisions

3 SEC. 371. SEVERABILITY.

4 If any provision of this title, or an amendment made

5 by this title, or the application of such provision to any

6 person or circumstance is held to be unconstitutional, the

7 remainder of this title and the amendments made by this

8 title, and the application of the provisions of such to any

9 person or circumstance shall not be affected thereby.

10 SEC. 372. COMPLIANCE.

11 Except as otherwise specifically provided, not later

12 than 2 years after the date of enactment of this Act, a

13 State shall enact, adopt, or otherwise comply with the pro14 visions of this title.

15 TITLE IV—PUBLIC HEALTH

16 PROVISIONS

17 Subtitle A—New Basic Health Care

18 Program

19 SEC. 401. ESTABLISHMENT OF BASICARE PROGRAM.

20 (a) IN GENERAL.—The Social Security Act (42

21 U.S.C. 301 et seq.) is amended by adding at the end there22 of the following new title:

23 ‘‘TITLE XXI—BASICARE

24 ‘‘TABLE OF CONTENTS OF TITLE

‘‘Sec. 2101. Appropriation.

‘‘Sec. 2102. State plans for BasiCare assistance.
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‘‘Sec. 2103. Payment to States.

‘‘Sec. 2104. Quality assurance.

‘‘Sec. 2105. Definitions.

1 ‘‘APPROPRIATION

2 ‘‘SEC. 2101. For the purpose of providing basic

3 health care benefits to low-income uninsured individuals

4 not eligible for coverage under title XIX of this Act, there

5 is hereby authorized to be appropriated for each fiscal year

6 a sum sufficient to carry out the purposes of this title.

7 The sums made available under this section shall be used

8 for making payments to States which have submitted, and

9 had approved by the Secretary, State plans for BasiCare

10 assistance.

11 ‘‘STATE PLANS FOR BASICARE ASSISTANCE

12 ‘‘SEC. 2102. (a) IN GENERAL.—A State plan for

13 BasiCare assistance must—

14 ‘‘(1) provide either for the establishment or des15 ignation of a single State agency to administer or

16 supervise the administration of the program estab17 lished under this title;

18 ‘‘(2) provide for financial participation by the

19 State equal to the non-Federal share of the expendi20 tures under the plan with respect to which payments

21 under section 2103 are authorized by this title;

22 ‘‘(3) provide health assistance to all eligible in23 dividuals described in subsection (b), and at the op-
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1 tion of the State, subsets of basic medical and social

2 benefits to subgroups of such eligible individuals;

3 ‘‘(4) meet the quality assurance requirements of

4 section 2104;

5 ‘‘(5) provide that the State will not modify its

6 State plan under title XIX of this Act so as to result

7 in individuals eligible under the State’s plan under

8 such title becoming eligible for enrollment under

9 BasiCare;

10 ‘‘(6) meet the requirements of paragraphs (4),

11 (6), (7), (19), (45), (46), (48), and (49) of section

12 1902(a); and

13 ‘‘(7) meet such further requirements as the

14 Secretary may specify.

15 ‘‘(b) ELIGIBILITY FOR BASICARE.—An individual is

16 eligible to receive benefits under this title if such individ17 ual—

18 ‘‘(1) has a family income below 200 percent of

19 the income official poverty line (as defined by the

20 Office of Management and Budget and revised an21 nually in accordance with section 673(2) of the Om22 nibus Budget Reconciliation Act of 1981);

23 ‘‘(2) is not otherwise eligible for medical assist24 ance under a State plan under title XIX of this Act;

25 and
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1 ‘‘(3) is not otherwise covered under a health

2 plan offered by the individual’s employer.

3 ‘‘PAYMENT TO STATES

4 ‘‘SEC. 2103. (a) IN GENERAL.—From the sums ap5 propriated therefor (subject to the expenditure limitation

6 described in subsection (b)), the Secretary shall pay to

7 each State which has a plan approved under this title, for

8 each quarter, beginning with the quarter commencing

9 January 1, 1993—

10 ‘‘(1) an amount equal to the Federal health as11 sistance percentage (as defined in section 2105(b));

12 plus

13 ‘‘(2) an amount equal to 3 percent of the aver14 age per person expenditures under the plan for each

15 individual under the plan enrolled in a managed care

16 setting (including health maintenance organizations,

17 community health centers and such other types of

18 providers as designated by the Secretary).

19 ‘‘(b) LIMIT ON FEDERAL EXPENDITURES AS

20 HEALTH ASSISTANCE.—Payments under this section to a

21 State may not exceed an average of $10,000 per year, per

22 enrolled individual.

23 ‘‘(c) COST-SHARING.—(1) With respect to individuals

24 eligible for health assistance under this title whose income

25 is between 100 and 200 percent of the income official pov26 erty line (as defined by the Office of Management and
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1 Budget and revised annually in accordance with section

2 673(2) of the Omnibus Budget Reconciliation Act of

3 1981), the State may impose such deductibles, copayments

4 or premiums with respect to such individual’s coverage

5 under this title as the State may deem appropriate, sub6 ject to the limitation in paragraph (2).

7 ‘‘(2) A State may not impose a deductible, copayment

8 or premium with respect to an individual described in

9 paragraph (1) that is in excess of 5 percent of such indi10 vidual’s gross income during a calendar year.

11 ‘‘QUALITY ASSURANCE

12 ‘‘SEC. 2104. The Secretary shall establish a program

13 to assure the quality of services provided under this title.

14 In establishing such program, the Secretary shall provide

15 that Federal employees and contractors are utilized in en16 suring compliance with the quality assurance provisions

17 of this title and provide for criteria to disallow payment

18 under section 2103 for services found not to meet the

19 quality assurance provisions of this title established by the

20 Secretary.

21 ‘‘DEFINITIONS

22 ‘‘SEC. 2105. (a) HEALTH ASSISTANCE.—For pur23 poses of this title, the term ‘health assistance’ means a

24 set of basic medical and social benefits as defined by the

25 State, including services provided in skilled nursing facili-
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1 ties or in other long-term care settings for a period not

2 to exceed 45 days in a calendar year.

3 ‘‘(b) FEDERAL HEALTH ASSISTANCE PERCENT4 AGE.—For purposes of this title, the term ‘Federal health

5 assistance percentage’ means the Federal medical assist6 ance percentage as defined in section 1905(b).’’.

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

8 subsection (a) shall become effective with respect to pay9 ments for health assistance beginning on or after January

10 1, 1993.

11 SEC. 402. GAO STUDY OF PAYMENTS UNDER BASICARE.

12 The Comptroller General of the Government Account13 ing Office shall study and report to Congress by no later

14 than January 1, 1995, on payments to providers of serv15 ices under title XXI of the Social Security Act and shall

16 include in such report recommendations on whether or not

17 payments under such title to managed care programs need

18 to be increased in order to encourage greater participation

19 of such entities under such title.

20 SEC. 411. EXPANSION OF MEDICAID WAIVER AUTHORITY.

21 (a) IN GENERAL.—Section 1115 of the Social Secu22 rity Act (42 U.S.C. 1315) is amended by adding at the

23 end the following new subsection:

24 ‘‘(e)(1) Notwithstanding any other provision of this

25 title, with respect to any waiver granted by the Secretary
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1 under title XIX (except waivers under section 1915(c))

2 after such a waiver has been in effect for over a period

3 of 3 years, the Secretary shall not require a State operat4 ing under such a waiver to conduct an independent assess5 ment of such waiver unless the State proposes a substan6 tial (as determined by the Secretary) amendment to the

7 waiver agreement.

8 ‘‘(2) Any waiver granted under title XIX which has

9 been in effect for over a period of 3 years shall be consid10 ered, at the option of a State, to be a permanent amend11 ment to the State’s plan for medical assistance in effect

12 under section 1902.’’.

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

14 subsection (a) shall become effective with respect to waiv15 ers granted under title XIX of the Social Security Act be16 ginning before, on or after January 1, 1993.

17 SEC. 412. ESTABLISHMENT OF FEDERAL MEDICAL WAIVER

18 DEMONSTRATION BOARD.

19 (a) ESTABLISHMENT.—There is established a board

20 to be known as the Federal Medical Waiver Demonstra21 tion Board (hereinafter referred to as the ‘‘Board’’).

22 (b) MEMBERSHIP.—The Board shall be composed

23 of—

24 (1) the Secretary of Health and Human Serv25 ices;
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1 (2) the Secretary of Labor; and

2 (3) the Secretary of Veterans Affairs.

3 (c) DUTIES AND POWERS OF THE BOARD.—

4 (1) REVIEW OF STATE APPLICATIONS.—The

5 Board shall review applications submitted by States

6 to conduct health care related demonstration

7 projects in the State and shall approve within 3

8 months of receiving such applications those applica9 tions which meet the requirements of this section.

10 The Board in reviewing and approving the applica11 tion of a State shall make a determination whether

12 such application provides for a demonstration

13 project which—

14 (A) would provide that at least 95 percent

15 of the residents of the State would have access

16 to basic health care services (as defined by the

17 Board);

18 (B) would improve the delivery of and in19 crease access to health care services for a sig20 nificant number of individuals in the State; and

21 (C) would assure the quality of care of

22 health care services provided under such

23 project.

24 (2) DEVELOPMENT OF MODEL STATE PLANS.—

25 The Board shall develop and publish in the Federal
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1 Register, no later than 6 months after the date of

2 enactment of this Act, at least 3 different model

3 health care delivery plans that provide for new ap4 proaches that may be adopted by States in providing

5 and furnishing health care services to residents of

6 the State.

7 (3) WAIVER OF CERTAIN FEDERAL HEALTH RE8 LATED PROVISIONS.—The Board upon approving the

9 application of a State to conduct a demonstration

10 project under this section shall waive to the extent

11 necessary to allow the State to conduct such a dem12 onstration project the following provisions of Federal

13 law:

14 (A) The Public Health Service Act.

15 (B) Subject to paragraph (4), title XVIII

16 of the Social Security Act.

17 (C) Titles XIX and XXI of the Social Se18 curity Act.

19 (D) All health care programs operated

20 under laws administered by the Secretary of

21 Veterans Affairs.

22 (E) The Employee Retirement Income Se23 curity Act of 1974.

24 (4) LIMITED WAIVER OF MEDICARE.—The

25 Board may waive the provisions of title XVIII of the
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1 Social Security Act only if a State provides that all

2 individuals residing in the State receiving benefits

3 under the medicare program under such title are eli4 gible for health care benefits under the program op5 erated by the State under a waiver granted under

6 this section and that such health care benefits pro7 vided to such individuals are equal in amount, dura8 tion, and scope to the benefits provided under such

9 title.

10 (d) 3-YEAR RENEWAL OF WAIVER.—A waiver ap11 proved by the Board for a State shall be in effect in the

12 State for a 36-month period commencing from the date

13 of such approval. At the end of the 36-month period such

14 waiver shall be renewed unless the Board determines that

15 the State is not substantially in compliance with the re16 quirements described in subparagraphs (A) through (C)

17 of subsection (c)(1).

18 (e) BUDGET NEUTRALITY.—The Board in carrying

19 out its duties under this section shall provide that total

20 Federal expenditures under the programs for which waiv21 ers are granted under this section are no greater than

22 what such expenditures would have been but for the waiv23 ers granted under this section.
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1 TITLE V—MEDICALLY

2 UNDERSERVED AREAS

3 Subtitle A—Public Health Service

4 Act Provisions

5 SEC. 501. NATIONAL HEALTH SERVICE CORPS.

6 Section 338H(b) of the Public Health Service Act (42

7 U.S.C. 254q(b)) is amended—

8 (1) in paragraph (1), by striking ‘‘and such

9 sums’’ and all that follows through the end thereof

10 and inserting ‘‘$118,900,000 for each of the fiscal

11 years 1993 through 1997.’’; and

12 (2) in paragraph (2)—

13 (A) by redesignating subparagraphs (A)

14 and (B) as subparagraphs (B) and (C), respec15 tively; and

16 (B) by inserting before subparagraph (B)

17 (as so redesignated) the following new subpara18 graph:

19 ‘‘(A) IN GENERAL.—Of the amount appro20 priated under paragraph (1) for each fiscal

21 year, the Secretary shall utilize 25 percent of

22 such amount to carry out section 338A and 75

23 percent of such amount to carry out section

24 338B.’’.
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1 SEC. 502. ESTABLISHMENT OF GRANT PROGRAM.

2 Subpart I of part D of title III of the Public Health

3 Service Act (42 U.S.C. 254b et seq.) is amended by adding

4 at the end thereof the following new section:

5 ‘‘SEC. 330A. COMMUNITY BASED PRIMARY HEALTH CARE

6 GRANT PROGRAM.

7 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab8 lish and administer a program to provide allotments to

9 States to enable such States to provide grants for the cre10 ation or enhancement of community based primary health

11 care entities that provide services to pregnant women and

12 children up to age three.

13 ‘‘(b) ALLOTMENTS TO STATES.—

14 ‘‘(1) IN GENERAL.—From the amounts avail15 able for allotment under subsection (h) for a fiscal

16 year, the Secretary shall allot to each State an

17 amount equal to the product of the grant share of

18 the State (as determined under paragraph (2)) mul19 tiplied by the amount available for allotment for

20 such fiscal year.

21 ‘‘(2) GRANT SHARE.—

22 ‘‘(A) IN GENERAL.—For purposes of para23 graph (1), the grant share of a State shall be

24 the product of the need-adjusted population of

25 the State (as determined under subparagraph

26 (B)) multiplied by the Federal matching per-
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1 centage of the State (as determined under sub2 paragraph (C)), expressed as a percentage of

3 the sum of the products of such factors for all

4 States.

5 ‘‘(B) NEED-ADJUSTED POPULATION.—

6 ‘‘(i) IN GENERAL.—For purposes of

7 subparagraph (A), the need-adjusted popu8 lation of a State shall be the product of

9 the total population of the State (as esti10 mated by the Secretary of Commerce) mul11 tiplied by the need index of the State (as

12 determined under clause (ii)).

13 ‘‘(ii) NEED INDEX.—For purposes of

14 clause (i), the need index of a State shall

15 be the ratio of—

16 ‘‘(I) the weighted sum of the geo17 graphic percentage of the State (as

18 determined under clause (iii)), the

19 poverty percentage of the State (as

20 determined under clause (iv)), and the

21 multiple grant percentage of the State

22 (as determined under clause (v)); to

23 ‘‘(II) the general population per24 centage of the State (as determined

25 under clause (vi)).
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1 ‘‘(iii) GEOGRAPHIC PERCENTAGE.—

2 ‘‘(I) IN GENERAL.—For purposes

3 of clause (ii)(I), the geographic per4 centage of the State shall be the esti5 mated population of the State that is

6 residing in nonurbanized areas (as de7 termined under subclause (II)) ex8 pressed as a percentage of the total

9 nonurbanized population of all States.

10 ‘‘(II) NONURBANIZED POPU11 LATION.—For purposes of subclause

12 (I), the estimated population of the

13 State that is residing in non-urban14 ized areas shall be one minus the ur15 banized population of the State (as

16 determined using the most recent de17 cennial census), expressed as a per18 centage of the total population of the

19 State (as determined using the most

20 recent decennial census), multiplied by

21 the current estimated population of

22 the State.

23 ‘‘(iv) POVERTY PERCENTAGE.—For

24 purposes of clause (ii)(I), the poverty per25 centage of the State shall be the estimated
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1 number of people residing in the State

2 with incomes below 200 percent of the in3 come official poverty line (as determined

4 by the Office of Management and Budget)

5 expressed as a percentage of the total

6 number of such people residing in all

7 States.

8 ‘‘(v) MULTIPLE GRANT PERCENT9 AGE.—For purposes of clause (ii)(I), the

10 multiple grant percentage of the State

11 shall be the amount of Federal funding re12 ceived by the State under grants awarded

13 under sections 329, 330 and 340, ex14 pressed as a percentage of the total

15 amounts received under such grants by all

16 States. With respect to a State, such

17 amount shall not exceed twice the general

18 population percentage of the State under

19 clause (vi) or be less than one half of the

20 States general population percentage.

21 ‘‘(vi) GENERAL POPULATION PER22 CENTAGE.—For purposes of clause (ii)(II),

23 the general population percentage of the

24 State shall be the total population of the

25 State (as determined by the Secretary of
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1 Commerce) expressed as a percentage of

2 the total population of all States.

3 ‘‘(C) FEDERAL MATCHING PERCENTAGE.—

4 ‘‘(i) IN GENERAL.—For purposes of

5 subparagraph (A), the Federal matching

6 percentage of the State shall be equal to

7 one less the State matching percentage (as

8 determined under clause (ii)).

9 ‘‘(ii) STATE MATCHING PERCENT10 AGE.—For purposes of clause (ii), the

11 State matching percentage of the State

12 shall be 0.25 multiplied by the ratio of the

13 total taxable resource percentage (as deter14 mined under clause (iii)) to the need-ad15 justed population of the State (as deter16 mined under subparagraph (B)).

17 ‘‘(iii) TOTAL TAXABLE RESOURCE

18 PERCENTAGE.—For purposes of clause (ii),

19 the total taxable resources percentage of

20 the State shall be the total taxable re21 sources of a State (as determined by the

22 Secretary of the Treasury) expressed as a

23 percentage of the sum of the total taxable

24 resources of all States.

25 ‘‘(3) ANNUAL ESTIMATES.—
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1 ‘‘(A) IN GENERAL.—If the Secretary of

2 Commerce does not produce the annual esti3 mates required under paragraph (2)(B)(iv),

4 such estimates shall be determined by multiply5 ing the percentage of the population of the

6 State that is below 200 percent of the income

7 official poverty line as determined using the

8 most recent decennial census by the most recent

9 estimate of the total population of the State.

10 Except as provided in subparagraph (B), the

11 calculations required under this subparagraph

12 shall be made based on the most recent 3 year

13 average of the total taxable resources of individ14 uals within the State.

15 ‘‘(B) DISTRICT OF COLUMBIA.—Notwith16 standing subparagraph (A), the calculations re17 quired under such subparagraph with respect to

18 the District of Columbia shall be based on the

19 most recent 3 year average of the personal in20 come of individuals residing within the District

21 as a percentage of the personal income for all

22 individuals residing within the District, as de23 termined by the Secretary of Commerce.

24 ‘‘(4) MATCHING REQUIREMENT.—A State that

25 receives an allotment under this section shall make
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1 available State resources (either directly or indi2 rectly) to carry out this section in an amount that

3 shall equal the State matching percentage for the

4 State (as determined under paragraph (2)(C)(II))

5 divided by the Federal matching percentage (as de6 termined under paragraph (2)(C)).

7 ‘‘(c) APPLICATION.—

8 ‘‘(1) IN GENERAL.—To be eligible to receive an

9 allotment under this section, a State shall prepare

10 and submit an application to the Secretary at such

11 time, in such manner, and containing such informa12 tion as the Secretary may by regulation require.

13 ‘‘(2) ASSURANCES.—A State application sub14 mitted under paragraph (1) shall contain an assur15 ance that—

16 ‘‘(A) the State will use amounts received

17 under it’s allotment consistent with the require18 ments of this section; and

19 ‘‘(B) the State will provide, from non-Fed20 eral sources, the amounts required under sub21 section (b)(4).

22 ‘‘(d) USE OF FUNDS.—

23 ‘‘(1) IN GENERAL.—The State shall use

24 amounts received under this section to award grants

25 to eligible public and nonprofit private entities, or
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1 consortia of such entities, within the State to enable

2 such entities or consortia to provide services of the

3 type described in paragraph (2) of section 329(h) to

4 pregnant women and children up to age three.

5 ‘‘(2) ELIGIBILITY.—To be eligible to receive a

6 grant under paragraph (1), an entity or consortium

7 shall—

8 ‘‘(A) prepare and submit to the admin9 istering entity of the State, an application at

10 such time, in such manner and containing such

11 information as such administering entity may

12 require, including a plan for the provision of

13 services;

14 ‘‘(B) provide assurances that services will

15 be provided under the grant at fee rates estab16 lished or determined in accordance with section

17 330(e)(3)(F); and

18 ‘‘(C) provide assurances that in the case of

19 services provided to individuals with health in20 surance, such insurance shall be used as the

21 primary source of payment for such services.

22 ‘‘(3) TARGET POPULATIONS.—Entities or con23 sortia receiving grants under paragraph (1) shall, in

24 providing the services described in paragraph (3),
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1 substantially target populations of pregnant women

2 and children within the State who—

3 ‘‘(A) lack the health care coverage, or abil4 ity to pay, for primary or supplemental health

5 care services; or

6 ‘‘(B) reside in medically underserved or

7 health professional shortage areas, areas cer8 tified as underserved under the rural health

9 clinic program, or other areas determined ap10 propriate by the State, within the State.

11 ‘‘(4) PRIORITY.—In awarding grants under

12 paragraph (1), the State shall—

13 ‘‘(A) give priority to entities or consortia

14 that can demonstrate through the plan submit15 ted under paragraph (2) that—

16 ‘‘(i) the services provided under the

17 grant will expand the availability of pri18 mary care services to the maximum num19 ber of pregnant women and children who

20 have no access to such care on the date of

21 the grant award; and

22 ‘‘(ii) the delivery of services under the

23 grant will be cost-effective; and
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1 ‘‘(B) ensure that an equitable distribution

2 of funds is achieved among urban and rural en3 tities or consortia.

4 ‘‘(e) REPORTS AND AUDITS.—Each State shall pre5 pare and submit to the Secretary annual reports concern6 ing the State’s activities under this section which shall be

7 in such form and contain such information as the Sec8 retary determines appropriate. Each such State shall es9 tablish fiscal control and fund accounting procedures as

10 may be necessary to assure that amounts received under

11 this section are being disbursed properly and are ac12 counted for, and include the results of audits conducted

13 under such procedures in the reports submitted under this

14 subsection.

15 ‘‘(f) PAYMENTS.—

16 ‘‘(1) ENTITLEMENT.—Each State for which an

17 application has been approved by the Secretary

18 under this section shall be entitled to payments

19 under this section for each fiscal year in an amount

20 not to exceed the State’s allotment under subsection

21 (b) to be expended by the State in accordance with

22 the terms of the application for the fiscal year for

23 which the allotment is to be made.

24 ‘‘(2) METHOD OF PAYMENTS.—The Secretary

25 may make payments to a State in installments, and
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1 in advance or, by way of reimbursement, with nec2 essary adjustments on account of overpayments or

3 underpayments, as the Secretary may determine.

4 ‘‘(3) STATE SPENDING OF PAYMENTS.—Pay5 ments to a State from the allotment under sub6 section (b) for any fiscal year must be expended by

7 the State in that fiscal year or in the succeeding fis8 cal year.

9 ‘‘(g) DEFINITION.—As used in this section, the term

10 ‘administering entity of the State’ means the agency or

11 official designated by the chief executive officer of the

12 State to administer the amounts provided to the State

13 under this section.

14 ‘‘(h) FUNDING.—Notwithstanding any other provi15 sion of law, the Secretary shall use 50 percent of the

16 amounts that the Secretary is required to utilize under

17 section 330B(h) in each fiscal year to carry out this sec18 tion.’’.
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1 SEC. 503. ESTABLISHMENT OF NEW PROGRAM TO PROVIDE

2 FUNDS TO ALLOW FEDERALLY QUALIFIED

3 HEALTH CENTERS AND OTHER ENTITIES OR

4 ORGANIZATIONS TO PROVIDE EXPANDED

5 SERVICES TO MEDICALLY UNDERSERVED IN6 DIVIDUALS.

7 (a) IN GENERAL.—Subpart I of part D of title III

8 of the Public Health Service Act (42 U.S.C. 254b et seq.)

9 (as amended by section 502) is further amended by adding

10 at the end thereof the following new section:

11 ‘‘SEC. 330B. ESTABLISHMENT OF NEW PROGRAM TO PRO12 VIDE FUNDS TO ALLOW FEDERALLY QUALI13 FIED HEALTH CENTERS AND OTHER ENTI14 TIES OR ORGANIZATIONS TO PROVIDE EX15 PANDED SERVICES TO MEDICALLY UNDER16 SERVED INDIVIDUALS.

17 ‘‘(a) ESTABLISHMENT OF HEALTH SERVICES AC18 CESS PROGRAM.—From amounts appropriated under this

19 section, the Secretary shall, acting through the Bureau of

20 Health Care Delivery Assistance, award grants under this

21 section to federally qualified health centers (hereinafter re22 ferred to in this section as ‘FQHC’s’) and other entities

23 and organizations submitting applications under this sec24 tion (as described in subsection (c)) for the purpose of

25 providing access to services for medically underserved pop26 ulations (as defined in section 330(b)(3)) or in high im-
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1 pact areas (as defined in section 329(a)(5)) not currently

2 being served by a FQHC.

3 ‘‘(b) ELIGIBILITY FOR GRANTS.—

4 ‘‘(1) IN GENERAL.—The Secretary shall award

5 grants under this section to entities or organizations

6 described in this paragraph and paragraph (2) which

7 have submitted a proposal to the Secretary to ex8 pand such entities or organizations operations (in9 cluding expansions to new sites (as determined nec10 essary by the Secretary)) to serve medically under11 served populations or high impact areas not cur12 rently served by a FQHC and which—

13 ‘‘(A) have as of January 1, 1992, been cer14 tified by the Secretary as a FQHC under sec15 tion 1905(l)(2)(B) of the Social Security Act;

16 ‘‘(B) have submitted applications to the

17 Secretary to qualify as FQHC’s under such sec18 tion 1905(l)(2)(B); or

19 ‘‘(C) have submitted a plan to the Sec20 retary which provides that the entity will meet

21 the requirements to qualify as a FQHC when

22 operational.

23 ‘‘(2) NON FQHC ENTITIES.—

24 ‘‘(A) ELIGIBILITY.—The Secretary shall

25 also make grants under this section to public or
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1 private nonprofit agencies, health care entities

2 or organizations which meet the requirements

3 necessary to qualify as a FQHC except, the re4 quirement that such entity have a consumer

5 majority governing board and which have sub6 mitted a proposal to the Secretary to provide

7 those services provided by a FQHC as defined

8 in section 1905(l)(2)(B) of the Social Security

9 Act and which are designed to promote access

10 to primary care services or to reduce reliance on

11 hospital emergency rooms or other high cost

12 providers of primary health care services, pro13 vided such proposal is developed by the entity

14 or organizations (or such entities or organiza15 tions acting in a consortium in a community)

16 with the review and approval of the Governor of

17 the State in which such entity or organization

18 is located.

19 ‘‘(B) LIMITATION.—The Secretary shall

20 provide in making grants to entities or organi21 zations described in this paragraph that no

22 more than 10 percent of the funds provided for

23 grants under this section shall be made avail24 able for grants to such entities or organizations.

25 ‘‘(c) APPLICATION REQUIREMENTS.—
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1 ‘‘(1) IN GENERAL.—In order to be eligible to

2 receive a grant under this section, a FQHC or other

3 entity or organization must submit an application in

4 such form and at such time as the Secretary shall

5 prescribe and which meets the requirements of this

6 subsection.

7 ‘‘(2) REQUIREMENTS.—An application submit8 ted under this section must provide—

9 ‘‘(A)(i) for a schedule of fees or payments

10 for the provision of the services provided by the

11 entity designed to cover its reasonable costs of

12 operations; and

13 ‘‘(ii) for a corresponding schedule of dis14 counts to be applied to such fees or payments,

15 based upon the patient’s ability to pay (deter16 mined by using a sliding scale formula based on

17 the income of the patient);

18 ‘‘(B) assurances that the entity or organi19 zation provides services to persons who are eli20 gible for benefits under title XVIII of the Social

21 Security Act, for medical assistance under title

22 XIX of such Act or for assistance for medical

23 expenses under any other public assistance pro24 gram or private health insurance program; and
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1 ‘‘(C) assurances that the entity or organi2 zation has made and will continue to make

3 every reasonable effort to collect reimbursement

4 for services—

5 ‘‘(i) from persons eligible for assist6 ance under any of the programs described

7 in subparagraph (B); and

8 ‘‘(ii) from patients not entitled to ben9 efits under any such programs.

10 ‘‘(d) LIMITATIONS ON USE OF FUNDS.—

11 ‘‘(1) IN GENERAL.—From the amounts award12 ed to an entity or organization under this section,

13 funds may be used for purposes of planning but may

14 only be expended for the costs of—

15 ‘‘(A) assessing the needs of the populations

16 or proposed areas to be served;

17 ‘‘(B) preparing a description of how the

18 needs identified will be met;

19 ‘‘(C) development of an implementation

20 plan that addresses—

21 ‘‘(i) recruitment and training of per22 sonnel; and

23 ‘‘(ii) activities necessary to achieve

24 operational status in order to meet FQHC
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1 requirements under 1905(l)(2)(B) of the

2 Social Security Act.

3 ‘‘(2) RECRUITING, TRAINING AND COMPENSA4 TION OF STAFF.—From the amounts awarded to an

5 entity or organization under this section, funds may

6 be used for the purposes of paying for the costs of

7 recruiting, training and compensating staff (clinical

8 and associated administrative personnel (to the ex9 tent such costs are not already reimbursed under

10 title XIX of the Social Security Act or any other

11 State or Federal program)) to the extent necessary

12 to allow the entity to operate at new or expanded ex13 isting sites.

14 ‘‘(3) FACILITIES AND EQUIPMENT.—From the

15 amounts awarded to an entity or organization under

16 this section, funds may be expended for the purposes

17 of acquiring facilities and equipment but only for the

18 costs of—

19 ‘‘(A) construction of new buildings (to the

20 extent that new construction is found to be the

21 most cost-efficient approach by the Secretary);

22 ‘‘(B) acquiring, expanding, or modernizing

23 of existing facilities;

24 ‘‘(C) purchasing essential (as determined

25 by the Secretary) equipment; and
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1 ‘‘(D) amortization of principal and pay2 ment of interest on loans obtained for purposes

3 of site construction, acquisition, modernization,

4 or expansion, as well as necessary equipment.

5 ‘‘(4) SERVICES.—From the amounts awarded

6 to an entity or organization under this section, funds

7 may be expended for the payment of services but

8 only for the costs of—

9 ‘‘(A) providing or arranging for the provi10 sion of all services through the entity necessary

11 to qualify such entity as a FQHC under section

12 1905(l)(2)(B) of the Social Security Act;

13 ‘‘(B) providing or arranging for any other

14 service that a FQHC may provide and be reim15 bursed for under title XIX of such Act; and

16 ‘‘(C) providing any unreimbursed costs of

17 providing services as described in section 330(a)

18 to patients.

19 ‘‘(e) PRIORITIES IN THE AWARDING OF GRANTS.—

20 ‘‘(1) CERTIFIED FQHC’S.—The Secretary shall

21 give priority in awarding grants under this section

22 to entities which have, as of January 1, 1992, been

23 certified as a FQHC under section 1905(l)(2)(B) of

24 the Social Security Act and which have submitted a

25 proposal to the Secretary to expand their operations
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1 (including expansion to new sites) to serve medically

2 underserved populations for high impact areas not

3 currently served by a FQHC. The Secretary shall

4 give first priority in awarding grants under this sec5 tion to those FQHCs or other entities which propose

6 to serve populations with the highest degree of

7 unmet need, and which can demonstrate the ability

8 to expand their operations in the most efficient man9 ner.

10 ‘‘(2) QUALIFIED FQHC’S.—The Secretary shall

11 give second priority in awarding grants to entities

12 which have submitted applications to the Secretary

13 which demonstrate that the entity will qualify as a

14 FQHC under section 1905(l)(2)(B) of the Social Se15 curity Act before it provides or arranges for the pro16 vision of services supported by funds awarded under

17 this section, and which are serving or proposing to

18 serve medically underserved populations or high im19 pact areas which are not currently served (or pro20 posed to be served) by a FQHC.

21 ‘‘(3) EXPANDED SERVICES AND PROJECTS.—

22 The Secretary shall give third priority in awarding

23 grants in subsequent years to those FQHCs or other

24 entities which have provided for expanded services

25 and project and are able to demonstrate that such
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1 entity will incur significant unreimbursed costs in

2 providing such expanded services.

3 ‘‘(f) RETURN OF FUNDS TO SECRETARY FOR COSTS

4 REIMBURSED FROM OTHER SOURCES.—To the extent

5 that an entity or organization receiving funds under this

6 section is reimbursed from another source for the provi7 sion of services to an individual, and does not use such

8 increased reimbursement to expand services furnished,

9 areas served, to compensate for costs of unreimbursed

10 services provided to patients, or to promote recruitment,

11 training, or retention of personnel, such excess revenues

12 shall be returned to the Secretary.

13 ‘‘(g) TERMINATION OF GRANTS.—

14 ‘‘(1) FAILURE TO MEET FQHC REQUIRE15 MENTS.—

16 ‘‘(A) IN GENERAL.—With respect to any

17 entity that is receiving funds awarded under

18 this section and which subsequently fails to

19 meet the requirements to qualify as a FQHC

20 under section 1905(l)(2)(B) or is an entity that

21 is not required to meet the requirements to

22 qualify as a FQHC under section 1905(l)(2)(B)

23 of the Social Security Act but fails to meet the

24 requirements of this section, the Secretary shall
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1 terminate the award of funds under this section

2 to such entity.

3 ‘‘(B) NOTICE.—Prior to any termination

4 of funds under this section to an entity, the en5 tities shall be entitled to 60 days prior notice of

6 termination and, as provided by the Secretary

7 in regulations, an opportunity to correct any de8 ficiencies in order to allow the entity to con9 tinue to receive funds under this section.

10 ‘‘(2) REQUIREMENTS.—Upon any termination

11 of funding under this section, the Secretary may (to

12 the extent practicable)—

13 ‘‘(A) sell any property (including equip14 ment) acquired or constructed by the entity

15 using funds made available under this section

16 or transfer such property to another FQHC,

17 provided, that the Secretary shall reimburse

18 any costs which were incurred by the entity in

19 acquiring or constructing such property (includ20 ing equipment) which were not supported by

21 grants under this section; and

22 ‘‘(B) recoup any funds provided to an en23 tity terminated under this section.

24 ‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There

25 are authorized to be appropriated to carry out this section,
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1 $400,000,000 for fiscal year 1993, $800,000,000 for fis2 cal year 1994, $1,200,000,000 for fiscal year 1995,

3 $1,600,000,000 for fiscal year 1996, and $1,600,000,000

4 for fiscal year 1997.’’.

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

6 subsection (a) shall become effective with respect to serv7 ices furnished by a federally qualified health center or

8 other qualifying entity described in this section beginning

9 on or after October 1, 1992.

10 (c) STUDY AND REPORT ON SERVICES PROVIDED BY

11 COMMUNITY HEALTH CENTERS AND HOSPITALS.—

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

13 Human Services (hereinafter referred to in this sub14 section as the ‘‘Secretary’’) shall provide for a study

15 to examine the relationship and interaction between

16 community health centers and hospitals in providing

17 services to individuals residing in medically under18 served areas. The Secretary shall ensure that the

19 National Rural Research Centers participate in such

20 study.

21 (2) REPORT.—The Secretary shall provide to

22 the appropriate committees of Congress a report

23 summarizing the findings of the study within 90

24 days of the end of each project year and shall in25 clude in such report recommendations on methods to
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1 improve the coordination of and provision of services

2 in medically underserved areas by community health

3 centers and hospitals.

4 (3) AUTHORIZATION.—There are authorized to

5 be appropriated to carry out the study provided for

6 in this subsection $150,000 for each of fiscal years

7 1993 and 1994.

8 SEC. 504. RURAL MENTAL HEALTH OUTREACH GRANTS.

9 Subpart 3 of part B of title V of the Public Health

10 Service Act (42 U.S.C. 290cc–11 et seq.) is amended by

11 adding at the end thereof the following new section:

12 ‘‘SEC. 520A. RURAL MENTAL HEALTH OUTREACH GRANTS.

13 ‘‘(a) IN GENERAL.—The Secretary may award com14 petitive grants to eligible entities to enable such entities

15 to develop and implement a plan for mental health out16 reach programs in rural areas.

17 ‘‘(b) ELIGIBLE ENTITIES.—To be eligible to receive

18 a grant under subsection (a) an entity shall—

19 ‘‘(1) prepare and submit to the Secretary an

20 application at such time, in such form and contain21 ing such information as the Secretary may require,

22 including a description of the activities that the en23 tity intends to undertake using grant funds; and

24 ‘‘(2) meet such other requirements as the Sec25 retary determines appropriate.
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1 ‘‘(c) PRIORITY.—In awarding grants under sub2 section (a), the Secretary shall give priority to applications

3 that place emphasis on mental health services for the el4 derly or children. Priority shall also be given to applica5 tions that involve relationships between the applicant and

6 rural managed care cooperatives.

7 ‘‘(d) MATCHING REQUIREMENT.—An entity that re8 ceives a grant under subsection (a) shall make available

9 (directly or through donations from public or private enti10 ties), non-Federal contributions toward the costs of the

11 operations of the network in an amount equal to the

12 amount of the grant.

13 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There

14 are authorized to be appropriated to carry out this section,

15 $5,000,000 for each of the fiscal years 1993 through

16 1997.’’.

17 SEC. 505. HEALTH PROFESSIONS TRAINING.

18 (a) MEDICALLY UNDERSERVED AREA TRAINING IN19 CENTIVES.—Part A of title VII of the Public Health Serv20 ice Act (42 U.S.C. 292 et seq.) is amended by adding at

21 the end thereof the following new section:

22 ‘‘SEC. 711. PRIORITIES IN AWARDING OF GRANTS.

23 ‘‘(a) ALLOCATION OF COMPETITIVE GRANT

24 FUNDS.—In awarding competitive grants under this title

25 or title VIII, the Secretary shall, among applicants that
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1 meet the eligibility requirements under such titles, give

2 priority to entities submitting applications that—

3 ‘‘(1) can demonstrate that such entities—

4 ‘‘(A) have a high permanent rate for plac5 ing graduates in practice settings which serve

6 residents of medically underserved communities;

7 and

8 ‘‘(B) have a curriculum that includes—

9 ‘‘(i) the rotation of medical students

10 and residents to clinical settings the focus

11 of which is to serve medically underserved

12 communities;

13 ‘‘(ii) the appointment of health profes14 sionals whose practices serve medically un15 derserved communities to act as preceptors

16 to supervise training in such settings;

17 ‘‘(iii) classroom instruction on practice

18 opportunities involving medically under19 served communities;

20 ‘‘(iv) service contingent scholarship or

21 loan repayment programs for students and

22 residents to encourage practice in or serv23 ice to underserved communities;

24 ‘‘(v) the recruitment of students who

25 are most likely to elect to practice in or
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1 provide service to medically underserved

2 communities;

3 ‘‘(vi) other training methodologies

4 that demonstrate a significant commitment

5 to the expansion of the proportion of grad6 uates that elect to practice in or serve the

7 needs of medically underserved commu8 nities; or

9 ‘‘(2) contain an organized plan for the expedi10 tious development of the placement rate and curricu11 lum described in paragraph (1).

12 ‘‘(b) SERVICE IN MEDICALLY UNDERSERVED COM13 MUNITIES.—Not less than 50 percent of the amounts ap14 propriated for fiscal year 1996, and for each subsequent

15 fiscal year, for competitive grants under this title or title

16 VIII, shall be used to award grants to institutions that

17 are otherwise eligible for grants under such titles, and that

18 can demonstrate that—

19 ‘‘(1) not less than 15 percent of the graduates

20 of such institutions during the preceding 2-year pe21 riod are engaged in full-time practice serving the

22 needs of medically underserved communities; or

23 ‘‘(2) the number of the graduates of such insti24 tutions that are practicing in a medically under25 served community has increased by not less than 50
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1 percent over that proportion of such graduates for

2 the previous 2-year period.

3 ‘‘(c) WAIVERS.—A health professions school may pe4 tition the Secretary for a temporary waiver of the prior5 ities of this section. Such waiver shall be approved if the

6 health professions school demonstrates that the State in

7 which such school is located is not suffering from a short8 age of primary care providers, as determined by the Sec9 retary. Such waiver shall not be for a period in excess of

10 2 years.

11 ‘‘(d) DEFINITIONS.—As used in this section:

12 ‘‘(1) GRADUATE.—The term ‘graduate’ means,

13 unless otherwise specified, an individual who has

14 successfully completed all training and residency re15 quirements necessary for full certification in the

16 health professions discipline that such individual has

17 selected.

18 ‘‘(2) MEDICALLY UNDERSERVED COMMUNITY.—

19 The term ‘medically underserved community’

20 means—

21 ‘‘(A) an area designated under section 332

22 as a health professional shortage area;

23 ‘‘(B) an area designated as a medically un24 derserved area under this Act;
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1 ‘‘(C) populations served by migrant health

2 centers under section 329, community health

3 centers under section 330, or Federally quali4 fied health centers under section 1905(l)(2)(B)

5 of the Social Security Act;

6 ‘‘(D) a community that is certified as un7 derserved by the Secretary for purposes of par8 ticipation in the rural health clinic program

9 under title XVIII of the Social Security Act; or

10 ‘‘(E) a community that meets the criteria

11 for the designation described in subparagraph

12 (A) or (B) but that has not been so des13 ignated.’’.

14 (b) MEDICALLY UNDERSERVED AREA TRAINING

15 GRANTS.—Part F of title VII (42 U.S.C. 295g et seq.)

16 of such Act is amended by adding at the end thereof the

17 following new section:

18 ‘‘SEC. 790B. MEDICALLY UNDERSERVED AREA TRAINING

19 GRANT PROGRAM.

20 ‘‘(a) GRANTS.—The Secretary shall award grants to

21 health professions institutions to expand training pro22 grams that are targeted at those individuals desiring to

23 practice in or serve the needs of medically underserved

24 communities.
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1 ‘‘(b) PLAN.—As part of an application submitted for

2 a grant under this section, the applicant shall prepare and

3 submit a plan that describes the proposed use of funds

4 that may be provided to the applicant under the grant.

5 ‘‘(c) PRIORITY.—In awarding grants under this sec6 tion, the Secretary shall give priority to applicants that

7 demonstrate the greatest likelihood of expanding the pro8 portion of graduates who choose to practice in or serve

9 the needs of medically underserved areas.

10 ‘‘(d) USE OF FUNDS.—An institution that receives

11 a grant under this section shall use amounts received

12 under such grant to establish or enhance procedures or

13 efforts to—

14 ‘‘(1) rotate health professions students from

15 such institution to clinical settings the focus of

16 which is to serve the residents of medically under17 served communities;

18 ‘‘(2) appoint health professionals whose prac19 tices serve medically underserved areas to serve as

20 preceptors to supervise training in such settings;

21 ‘‘(3) provide classroom instruction on practice

22 opportunities involving medically underserved com23 munities;

24 ‘‘(4) provide service contingent scholarship or

25 loan repayment programs for students and residents
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1 to encourage practice in or service to underserved

2 communities;

3 ‘‘(5) recruit students who are most likely to

4 elect to practice in or provide service to medically

5 underserved communities; or

6 ‘‘(6) provide other training methodologies that

7 demonstrate a significant commitment to the expan8 sion of the proportion of graduates that elect to

9 practice in or serve the needs of medically under10 served communities.

11 ‘‘(e) ADMINISTRATION.—

12 ‘‘(1) REQUIRED CONTRIBUTION.—An institu13 tion that receives a grant under this section shall

14 contribute, from non-Federal sources, either in cash

15 or in-kind, an amount equal to the amount of the

16 grant to the activities to be undertaken with the

17 grant funds.

18 ‘‘(2) LIMITATION.—An institution that receives

19 a grant under this section, shall use amounts re20 ceived under such grant to supplement, not sup21 plant, amounts made available by such institution

22 for activities of the type described in subsection (d)

23 in the fiscal year preceding the year for which the

24 grant is received.

25 ‘‘(f) DEFINITIONS.—As used in this section:
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1 ‘‘(1) GRADUATE.—The term ‘graduate’ means,

2 unless otherwise specified, an individual who has

3 successfully completed all training and residency re4 quirements necessary for full certification in the

5 health professions discipline that such individual has

6 selected.

7 ‘‘(2) MEDICALLY UNDERSERVED COMMUNITY.—

8 The term ‘medically underserved community’

9 means—

10 ‘‘(A) an area designated under section 332

11 as a health professional shortage area;

12 ‘‘(B) an area designated as a medically un13 derserved area under this Act;

14 ‘‘(C) populations served by migrant health

15 centers under section 329, community health

16 centers under section 330, or Federally quali17 fied health centers under section 1905(l)(2)(B)

18 of the Social Security Act;

19 ‘‘(D) a community that is certified as un20 derserved by the Secretary for purposes of par21 ticipation in the rural health clinic program

22 under title XVIII of the Social Security Act; or

23 ‘‘(E) a community that meets the criteria

24 for the designation described in subparagraph

25 (A) or (B) but that has not been so designated.
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1 ‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There

2 are authorized to be appropriated to carry out this section,

3 $15,000,000 for each of the fiscal years 1993 and 1994,

4 and such sums as may be necessary for each of the fiscal

5 years 1995 through 1997.’’.

6 (c) HEALTH PROFESSIONS TRAINING GRANTS.—

7 Part F of title VII (42 U.S.C. 295g et seq.) of such Act

8 (as amended by subsection (b)) is further amended by

9 adding at the end thereof the following new section:

10 ‘‘SEC. 790C. HEALTH PROFESSIONS INTEGRATION GRANT

11 PROGRAM.

12 ‘‘(a) GRANTS.—The Secretary shall award grants to

13 eligible regional consortia to enhance and expand coordi14 nation among various health professions programs, par15 ticularly in medically underserved rural areas.

16 ‘‘(b) ELIGIBLE REGIONAL CONSORTIUM.—

17 ‘‘(1) IN GENERAL.—To be eligible to receive a

18 grant under subsection (a), an entity must—

19 ‘‘(A) be a regional consortium consisting of

20 at least one medical school and at least one

21 other health professions school that is not a

22 medical school; and

23 ‘‘(B) prepare and submit an application

24 containing a plan of the type described in para25 graph (2).
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1 ‘‘(2) PLAN.—As part of the application submit2 ted by a consortium under paragraph (1)(B), the

3 consortium shall prepare and submit a plan that de4 scribes the proposed use of funds that may be pro5 vided to the consortium under the grant.

6 ‘‘(c) USE OF FUNDS.—A consortium that receives a

7 grant under this section shall use amounts received under

8 such grant to establish or enhance—

9 ‘‘(1) strategies for better clinical cooperation

10 among different types of health professionals;

11 ‘‘(2) classroom instruction on integrated prac12 tice opportunities, particularly targeted toward rural

13 areas;

14 ‘‘(3) integrated clinical clerkship programs that

15 make use of students in differing health professions

16 schools; or

17 ‘‘(4) other training methodologies that dem18 onstrate a significant commitment to the expansion

19 of clinical cooperation among different types of

20 health professionals, particularly in underserved

21 rural areas.

22 ‘‘(d) LIMITATION.—A consortium that receives a

23 grant under this section, shall use amounts received under

24 such grant to supplement, not supplant, amounts made

25 available by such institution for activities of the type de-
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1 scribed in subsection (c) in the fiscal year preceding the

2 year for which the grant is received.

3 ‘‘(e) AUTHORIZATION OF APPROPRIATIONS.—There

4 are authorized to be appropriated to carry out this section,

5 $7,000,000 for each of the fiscal years 1993 and 1994,

6 and such sums as may be necessary for each of the fiscal

7 years 1995 through 1997.’’.

8 SEC. 506. AREA HEALTH EDUCATION CENTERS.

9 (a) STIPENDS FOR PERSONNEL.—Section 781(a) of

10 the Public Health Service Act (42 U.S.C. 295g–1(a)) is

11 amended by adding at the end thereof the following new

12 paragraph:

13 ‘‘(3)(A) The Secretary may award grants under this

14 section to rural communities to enable such communities

15 to provide stipends to physicians, nurses or other health

16 professional trainees to encourage such individuals to con17 tinue to provide health care services in such rural commu18 nities.

19 ‘‘(B) A community that receives a grant under sub20 paragraph (A) shall make available (directly or through

21 donations from public or private entities), non-Federal

22 contributions towards the costs of the operations of the

23 network in an amount equal to the amount of the grant.’’.

24 (b) REAUTHORIZATION.—Section 781(h) of such Act

25 (42 U.S.C. 295g–1(h)) is amended to read as follows:
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1 ‘‘(h)(1) For purposes of carrying out this section,

2 other than subsection (f), there are authorized to be ap3 propriated $40,000,000 for each of the fiscal years 1993

4 through 1997.

5 ‘‘(2) For purposes of carrying out subsection (f),

6 there are authorized to be appropriated $12,000,000 for

7 each of the fiscal years 1993 through 1997.

8 ‘‘(3) A contract entered into under this section after

9 the date of enactment of this subsection shall require that

10 the entity awarded such contract make available (directly

11 or through donations from public or private entities), dur12 ing the fourth and remaining years of the contract, non13 Federal contributions equal to—

14 ‘‘(A) for the fourth year for which such con15 tract is in effect, $3 for every $7 of Federal funds

16 provided under the contract in such year;

17 ‘‘(B) for the fifth year for which such contract

18 is in effect, $4 for every $6 of Federal funds pro19 vided under the contract in such year; and

20 ‘‘(C) for the sixth and subsequent years for

21 which such contract is in effect, $1 for every $1 of

22 Federal funds provided under the contract in such

23 year.’’.
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1 SEC. 507. RURAL HEALTH EXTENSION NETWORKS.

2 Title XVII of the Public Health Service Act (42

3 U.S.C. 300u et seq.) is amended by adding at the end

4 thereof the following new section:

5 ‘‘SEC. 1707. RURAL HEALTH EXTENSION NETWORKS.

6 ‘‘(a) GRANTS.—The Secretary, acting through the

7 Health Resources and Services Administration, may

8 award competitive grants to eligible entities to enable such

9 entities to facilitate the development of networks among

10 rural and urban health care providers to preserve and

11 share health care resources and enhance the quality and

12 availability of health care in rural areas. Such networks

13 may be statewide or regionalized in focus.

14 ‘‘(b) ELIGIBLE ENTITIES.—To be eligible to receive

15 a grant under subsection (a) an entity shall—

16 ‘‘(1) be a rural health extension network that

17 meets the requirements of subsection (c);

18 ‘‘(2) prepare and submit to the Secretary an

19 application at such time, in such form and contain20 ing such information as the Secretary may require;

21 and

22 ‘‘(3) meets such other requirements as the Sec23 retary determines appropriate.

24 ‘‘(c) NETWORKS.—For purposes of subsection (b)(1),

25 a rural health extension network shall be an association

26 or consortium of three or more rural health care providers,
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1 and may include one or more urban health care providers,

2 for the purpose of applying for a grant under this section

3 and using amounts received under such grant to provide

4 the services described in subsection (d).

5 ‘‘(d) SERVICES.—

6 ‘‘(1) IN GENERAL.—An entity that receives a

7 grant under subsection (a) shall use amounts re8 ceived under such grant to—

9 ‘‘(A) provide education and community de10 cision-making support for health care providers

11 in the rural areas served by the network;

12 ‘‘(B) utilize existing health care provider

13 education programs, including but not limited

14 to, the program for area health education cen15 ters under section 781, to provide educational

16 services to health care providers in the areas

17 served by the network;

18 ‘‘(C) make appropriately trained

19 facilitators available to health care providers lo20 cated in the areas served by the network to as21 sist such providers in developing cooperative ap22 proaches to health care in such area;

23 ‘‘(D) facilitate linkage building through the

24 organization of discussion and planning groups

25 and the dissemination of information concern-
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1 ing the health care resources where available,

2 within the area served by the network;

3 ‘‘(E) support telecommunications and con4 sultative projects to link rural hospitals and

5 other health care providers, and urban or ter6 tiary hospitals in the areas served by the net7 work; or

8 ‘‘(F) carry out any other activity deter9 mined appropriate by the Secretary.

10 ‘‘(2) EDUCATION.—In carrying out activities

11 under paragraph (1)(B), an entity shall support the

12 development of an information and resource sharing

13 system, including elements targeted towards high

14 risk populations and focusing on health promotion,

15 to facilitate the ability of rural health care providers

16 to have access to needed health care information.

17 Such activities may include the provision of training

18 to enable individuals to serve as coordinators of

19 health education programs in rural areas.

20 ‘‘(3) COLLECTION AND DISSEMINATION OF

21 DATA.—The chief executive officer of a State shall

22 designate a State agency that shall be responsible

23 for collecting and regularly disseminating informa24 tion concerning the activities of the rural health ex25 tension networks in that State.
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1 ‘‘(e) MATCHING REQUIREMENT.—An entity that re2 ceives a grant under subsection (a) shall make available

3 (directly or through donations from public or private enti4 ties), non-Federal contributions towards the costs of the

5 operations of the network in an amount equal to the

6 amount of the grant.

7 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated to carry out this section,

9 $10,000,000 for each of the fiscal years 1993 through

10 1997.

11 ‘‘(g) DEFINITION.—As used in this section and sec12 tion 1708, the term ‘rural health care providers’ means

13 health care professionals and hospitals located in rural

14 areas. The Secretary shall ensure that for purposes of this

15 definition, rural areas shall include any area that meets

16 any applicable Federal or State definition of rural area.’’.

17 SEC. 508. RURAL MANAGED CARE COOPERATIVES.

18 Title XVII of the Public Health Service Act (42

19 U.S.C. 300u et seq.) as amended by section 507 is further

20 amended by adding at the end thereof the following new

21 section:

22 ‘‘SEC. 1708. RURAL MANAGED CARE COOPERATIVES.

23 ‘‘(a) GRANTS.—The Secretary, acting through the

24 Health Resources and Services Administration, may

25 award competitive grants to eligible entities to enable such
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1 entities to develop and administer cooperatives in rural

2 areas that will establish an effective case management and

3 reimbursement system designed to support the economic

4 viability of essential public or private health services, fa5 cilities, health care systems and health care resources in

6 such rural areas.

7 ‘‘(b) ELIGIBLE ENTITIES.—To be eligible to receive

8 a grant under subsection (a) an entity shall—

9 ‘‘(1) prepare and submit to the Secretary an

10 application at such time, in such form and contain11 ing such information as the Secretary may require,

12 including a description of the cooperative that the

13 entity intends to develop and operate using grant

14 funds; and

15 ‘‘(2) meet such other requirements as the Sec16 retary determines appropriate.

17 ‘‘(c) COOPERATIVES.—

18 ‘‘(1) IN GENERAL.—Amounts provided under a

19 grant awarded under subsection (a) shall be used to

20 establish and operate a cooperative made up of all

21 types of health care providers, hospitals, primary ac22 cess hospitals, other alternate rural health care fa23 cilities, physicians, rural health clinics, rural nurse

24 practitioners and physician assistant practitioners,

25 public health departments and others located in, but
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1 not restricted to, the rural areas to be served by the

2 cooperative.

3 ‘‘(2) BOARD OF DIRECTORS.—A cooperative es4 tablished under paragraph (1) shall be administered

5 by a board of directors elected by the members of

6 the cooperative, a majority of whom shall represent

7 rural providers from the local community and in8 clude representatives from the local community.

9 Such directors shall serve at the pleasure of such

10 members.

11 ‘‘(3) EXECUTIVE DIRECTOR.—The members of

12 a cooperative established under paragraph (1) shall

13 elect an executive director who shall serve as the

14 chief operating officer of the cooperative. The execu15 tive director shall be responsible for conducting the

16 day to day operation of the cooperative including—

17 ‘‘(A) maintaining an accounting system for

18 the cooperative;

19 ‘‘(B) maintaining the business records of

20 the cooperative;

21 ‘‘(C) negotiating contracts with provider

22 members of the cooperative; and

23 ‘‘(D) coordinating the membership and

24 programs of the cooperative.

25 ‘‘(4) REIMBURSEMENTS.—
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1 ‘‘(A) NEGOTIATIONS.—A cooperative es2 tablished under paragraph (1) shall facilitate

3 negotiations among member health care provid4 ers and third party payers concerning the rates

5 at which such providers will be reimbursed for

6 services provided to individuals for which such

7 payers may be liable.

8 ‘‘(B) AGREEMENTS.—Agreements reached

9 under subparagraph (A) shall be binding on the

10 members of the cooperative.

11 ‘‘(C) EMPLOYERS.—Employer entities may

12 become members of a cooperative established

13 under paragraph (a) in order to provide,

14 through a member third party payer, health in15 surance coverage for employees of such entities.

16 Deductibles shall only be charged to employees

17 covered under such insurance if such employees

18 receive health care services from a provider that

19 is not a member of the cooperative if similar

20 services would have been available from a mem21 ber provider.

22 ‘‘(D) MALPRACTICE INSURANCE.—A coop23 erative established under subsection (a) shall be

24 responsible for identifying and implementing a

25 malpractice insurance program that shall in-
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1 clude a requirement that such cooperative as2 sume responsibility for the payment of a por3 tion of the malpractice insurance premium of

4 providers members.

5 ‘‘(5) MANAGED CARE AND PRACTICE STAND6 ARDS.—A cooperative established under paragraph

7 (1) shall establish joint case management and pa8 tient care practice standards programs that health

9 care providers that are members of such cooperative

10 must meet to be eligible to participate in agreements

11 entered into under paragraph (4). Such standards

12 shall be developed by such provider members and

13 shall be subject to the approval of a majority of the

14 board of directors. Such programs shall include cost

15 and quality of care guidelines including a require16 ment that such providers make available

17 preadmission screening, selective case management

18 services, joint patient care practice standards devel19 opment and compliance and joint utilization review.

20 ‘‘(6) CONFIDENTIALITY.—Patients records,

21 records of peer review, utilization review, and quality

22 assurance proceedings conducted by the cooperative

23 should be considered confidential and protected from

24 release outside of the cooperative. The provider

25 members of the cooperative shall be indemnified by
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1 the cooperative for the good faith participation by

2 such members in such the required activities.

3 ‘‘(d) LINKAGES.—A cooperative shall create linkages

4 among member health care providers, employers, and pay5 ers for the joint consultation and formulation of the types,

6 rates, costs, and quality of health care provided in rural

7 areas served by the cooperative.

8 ‘‘(e) MATCHING REQUIREMENT.—An entity that re9 ceives a grant under subsection (a) shall make available

10 (directly or through donations from public or private enti11 ties), non-Federal contributions towards the costs of the

12 operations of the network in an amount equal to the

13 amount of the grant.

14 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There

15 are authorized to be appropriated to carry out this section,

16 $15,000,000 for each of the fiscal years 1993 through

17 1997.’’.

18 Subtitle B—Provision Relating to

19 Social Security

20 SEC. 511. RURAL HEALTH CARE TRANSITION GRANT PRO21 GRAM.

22 Section 4005(e)(9) of the Omnibus Budget Reconcili23 ation Act of 1987 (42 U.S.C. 1395ww note) is amended

24 by striking ‘‘$15,000,000’’ and all that follows through
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1 the end thereof and inserting ‘‘$50,000,000 for each of

2 the fiscal years 1993 through 1997.’’.

3 SEC. 512. ESSENTIAL ACCESS COMMUNITY HOSPITAL PRO4 GRAM.

5 Section 1820(k) of the Social Security Act (42 U.S.C.

6 1395i–4(k)) is amended to read as follows:

7 ‘‘(k) AUTHORIZATION OF APPROPRIATIONS.—There

8 are authorized to be appropriated to carry out this section,

9 $50,000,000 for each of the fiscal years 1993 through

10 1997.’’.

11 TITLE VI—INCENTIVES TO EN12 COURAGE PREVENTIVE SERV13 ICES

14 SEC. 601. PREVENTIVE SERVICES TAX CREDIT.

15 (a) IN GENERAL.—Subpart C of part IV of sub16 chapter A of chapter 1 of the Internal Revenue Code of

17 1986 (relating to refundable credits), as amended by sec18 tion 101, is further amended by inserting after section

19 34A the following new section:

20 ‘‘SEC. 34B. PREVENTIVE SERVICES CREDIT.

21 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al22 lowed as a credit against the tax imposed by this subtitle

23 for the taxable year expenditures paid or incurred during

24 the taxable year for any qualified preventive services which
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1 are included in the list under subsection (c) and which

2 are not compensated by insurance or otherwise, as follows:

3 ‘‘(1) ELIGIBLE INDIVIDUAL.—In the case of an

4 eligible individual, the amount of the credit allowable

5 under this subsection shall not exceed—

6 ‘‘(A) $250, or

7 ‘‘(B) $200 in the case of a taxpayer with

8 taxable income for the taxable year in excess of

9 the maximum rate of taxable income to which

10 the 15-percent rate applies under the applicable

11 table under section 1.

12 ‘‘(2) QUALIFIED PREVENTIVE SERVICES PRO13 VIDER.—In the case of a qualified preventive serv14 ices provider, the amount of the credit allowable

15 under this subsection shall be an amount equal to

16 the product of—

17 ‘‘(A) the lower of—

18 ‘‘(i) the usual and customary charges

19 for qualified preventive services, or

20 ‘‘(ii) the rate of payment established

21 by the Health Care Financing Administra22 tion for qualified preventive services,

23 multiplied by—
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1 ‘‘(B) the number of qualified preventive

2 services provided without charge during the tax3 able year to qualifying low-income individuals.

4 ‘‘(b) DEFINITIONS.—For purposes of subsection

5 (a)—

6 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible

7 individual’ means an individual who is—

8 ‘‘(A) the taxpayer,

9 ‘‘(B) the taxpayer’s spouse, or

10 ‘‘(C) any individual for whom the taxpayer

11 is allowed an exemption under section 151.

12 ‘‘(2) QUALIFIED PREVENTIVE SERVICES PRO13 VIDER.—The term ‘qualified preventive services pro14 vider’ means a medical practitioner, facility, hospital,

15 laboratory, or similar institution licensed under

16 State law to provide 1 or more qualified preventive

17 services.

18 ‘‘(3) QUALIFYING LOW-INCOME INDIVIDUAL.—

19 The term ‘qualifying low-income individual’ means

20 an individual—

21 ‘‘(A) whose income level does not exceed

22 150 percent of the official poverty line (as de23 fined by the Office of Management and Budget

24 and revised annually in accordance with section

25 673(2) of the Omnibus Budget Reconciliation
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1 Act of 1981) applicable to a family of the size

2 involved, and

3 ‘‘(B) with respect to whom identifying in4 formation is maintained.

5 ‘‘(c) QUALIFIED PREVENTIVE SERVICES.—

6 ‘‘(1) IN GENERAL.—For purposes of this sec7 tion, the Secretary, after consultation with the Sec8 retary of Health and Human Services and cancer re9 search and prevention organizations, shall publish,

10 not later than December 31, 1992, and annually

11 thereafter, a list of preventive services which qualify

12 for the credit allowable under this section.

13 ‘‘(2) PREVENTIVE SERVICES.—

14 ‘‘(A) IN GENERAL.—The list of preventive

15 services which qualify under this section shall

16 include at least the following:

17 ‘‘(i) Cancer screening tests.

18 ‘‘(ii) Childhood immunization.

19 ‘‘(iii) Well child care.

20 ‘‘(B) CANCER SCREENING TESTS.—The

21 term ‘cancer screening tests’ shall include at

22 least the following:

23 ‘‘(i) Physical breast examination and

24 mammogram for female breast cancer.
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1 ‘‘(ii) Digital rectal examination,

2 proctosigmoidoscopy, and blood stool test

3 for colon and rectum cancer.

4 ‘‘(iii) Rectal examination for prostate

5 cancer.

6 ‘‘(iv) Pap test for uterine cancer.

7 ‘‘(v) Pelvic examination for ovarian

8 cancer.

9 ‘‘(d) IDENTIFYING INFORMATION.—No credit shall

10 be allowed under this section unless the qualified preven11 tive services provider maintains, to the satisfaction of the

12 Secretary, adequate records regarding the name and ad13 dress, date of services, and type of services provided with

14 respect to each qualifying low-income individual with re15 spect to whom a credit is claimed.’’.

16 (b) COORDINATION WITH DEDUCTIONS FOR MEDI17 CAL EXPENSES.—Section 213(e) of such Code (relating

18 to coordination with health expenses credit under section

19 34A), as added by section 101, is amended—

20 (1) by inserting ‘‘and the amount (if any) of

21 the preventive services credit allowable to the tax22 payer for the taxable year under section 34B(a)(1)’’

23 before the end period; and
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1 (2) by inserting ‘‘AND PREVENTIVE SERVICES

2 CREDIT UNDER SECTION 34B’’ in the heading after

3 ‘‘SECTION 34A’’.

4 (c) CLERICAL AMENDMENT.—The table of sections

5 for subpart C of part IV of subchapter A of chapter 1

6 of such Code, as amended by section 101, is further

7 amended by inserting after the item relating to section

8 34A the following new item:

‘‘Sec. 34B. Preventive services credit.’’.

9 (d) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 1992.

12 SEC. 602. INCREASE IN AUTHORIZATION FOR CHILDHOOD

13 IMMUNIZATIONS.

14 Section 317(j)(1)(B) of the Public Health Service Act

15 (42 U.S.C. 247b(j)(1)(B)) is amended by striking ‘‘such

16 sums as may be necessary’’ and inserting ‘‘$238,865,000

17 for fiscal year 1993, and $240,000,000 for each of the

18 fiscal years 1994 through 1997’’.
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Æ

1 TITLE VII—TAX TREATMENT OF

2 LONG-TERM CARE INSUR3 ANCE AND PLANS

4 Subtitle A—Treatment of Long5 Term Care Insurance

6 SEC. 701. QUALIFIED LONG-TERM CARE INSURANCE TREAT7 ED AS ACCIDENT AND HEALTH INSURANCE

8 FOR PURPOSES OF TAXATION OF LIFE INSUR9 ANCE COMPANIES.

10 (a) IN GENERAL.—Section 818 of the Internal Reve11 nue Code of 1986 (relating to other definitions and special

12 rules) is amended by adding at the end the following new

13 subsection:

14 ‘‘(g) QUALIFIED LONG-TERM CARE INSURANCE

15 TREATED AS ACCIDENT OR HEALTH INSURANCE.—For

16 purposes of this part—

17 ‘‘(1) IN GENERAL.—Any reference to accident

18 or health insurance shall be treated as including a

19 reference to qualified long-term care insurance.

20 ‘‘(2) QUALIFIED LONG-TERM CARE INSUR21 ANCE.—For purposes of this subsection—

22 ‘‘(A) IN GENERAL.—Subject to subpara23 graphs (B) and (C), the term ‘qualified long24 term care insurance’ means insurance under a
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1 policy or rider, which is issued by a qualified is2 suer, which meets standards at least as strin3 gent as those set forth in the January 1990

4 Long-Term Care Insurance Model Regulation

5 of the National Association of Insurance Com6 missioners, and which is certified by the Sec7 retary of Health and Human Services (in ac8 cordance with procedures similar to the proce9 dures prescribed in section 1882 of the Social

10 Security Act (42 U.S.C. 1385ss) used in the

11 certification of medicare supplemental policies

12 (as defined in subsection (g)(1) of such sec13 tion)) to be advertised, marketed, offered, or

14 designed to provide coverage—

15 ‘‘(i) for not less than 12 consecutive

16 months for each covered person who has

17 attained age 50,

18 ‘‘(ii) on an expense incurred, indem19 nity, or prepaid basis,

20 ‘‘(iii) for 1 or more medically nec21 essary, diagnostic services, preventive serv22 ices, therapeutic services, rehabilitation

23 services, maintenance services, or personal

24 care services, and
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1 ‘‘(iv) provided in a setting other than

2 an acute care unit of a hospital.

3 The requirement of clause (iv) shall be met only

4 if at least 1 of the settings in which such cov5 erage is provided is the patient’s home.

6 ‘‘(B) COVERAGE SPECIFICALLY EX7 CLUDED.—Such term does not include any in8 surance under any policy or rider which is of9 fered primarily to provide any combination of

10 the following kinds of coverage:

11 ‘‘(i) Basic Medicare supplement cov12 erage.

13 ‘‘(ii) Basic hospital-based acute care

14 expense coverage.

15 ‘‘(iii) Basic medical-surgical expense

16 coverage.

17 ‘‘(iv) Hospital confinement indemnity

18 coverage.

19 ‘‘(v) Major medical expense coverage.

20 ‘‘(vi) Disability income protection cov21 erage.

22 ‘‘(vii) Accident only coverage.

23 ‘‘(viii) Specified disease coverage.

24 ‘‘(ix) Specified accident coverage.

25 ‘‘(x) Limited benefit health coverage.
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1 ‘‘(C) QUALIFIED ISSUER.—For purposes of

2 subparagragh (A), the term ‘qualified issuer’

3 means any of the following:

4 ‘‘(i) Private insurance company.

5 ‘‘(ii) Fraternal benefit society.

6 ‘‘(iii) Nonprofit health corporation.

7 ‘‘(iv) Nonprofit hospital corporation.

8 ‘‘(v) Nonprofit medical service cor9 poration.

10 ‘‘(vi) Prepaid health plan.’’

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

12 subsection (a) shall apply to taxable years beginning after

13 December 31, 1992.

14 SEC. 702. QUALIFIED LONG-TERM CARE INSURANCE TREAT15 ED AS ACCIDENT AND HEALTH INSURANCE

16 FOR PURPOSES OF EXCLUSION FOR BENE17 FITS RECEIVED UNDER SUCH INSURANCE

18 AND FOR EMPLOYER CONTRIBUTIONS FOR

19 SUCH INSURANCE.

20 (a) IN GENERAL.—Section 105 of the Internal Reve21 nue Code of 1986 (relating to amounts received under ac22 cident and health plans) is amended by adding at the end

23 the following new subsection:
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1 ‘‘(j) SPECIAL RULES RELATING TO QUALIFIED

2 LONG-TERM CARE INSURANCE.—For purposes of section

3 104, this section, and section 106—

4 ‘‘(1) BENEFITS TREATED AS PAYABLE FOR

5 SICKNESS, ETC.—Any benefit received through quali6 fied long-term care insurance (as defined in section

7 818(g)) shall be treated as received for personal in8 juries or sickness.

9 ‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT

10 PROVIDED UNDER QUALIFIED LONG-TERM CARE IN11 SURANCE TREATED AS INCURRED FOR MEDICAL

12 CARE.—Expenses incurred by a taxpayer for which

13 reimbursement is paid through qualified long-term

14 care insurance (as so defined) shall be treated for

15 purposes of subsection (b) as incurred for medical

16 care (as defined in section 213(d)).

17 ‘‘(3) REFERENCES TO ACCIDENT AND HEALTH

18 PLANS.—Any reference to an accident or health plan

19 shall be treated as including a reference to a plan

20 providing qualified long-term care insurance.’’

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

22 subsection (a) shall apply to taxable years beginning after

23 December 31, 1992.
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1 SEC. 703. EXCLUSION FROM GROSS INCOME FOR AMOUNTS

2 WITHDRAWN FROM INDIVIDUAL RETIRE3 MENT PLANS OR 401(k) PLANS FOR QUALI4 FIED LONG-TERM CARE INSURANCE.

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 items specifically excluded from gross income), as amend8 ed by section 105(b), is amended by redesignating section

9 137 as section 138 and by inserting after section 136 the

10 following new section:

11 ‘‘SEC. 137. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT

12 ACCOUNTS AND SECTION 401(k) PLANS FOR

13 QUALIFIED LONG-TERM CARE INSURANCE.

14 ‘‘(a) GENERAL RULE.—The amount includible in the

15 gross income of an individual for the taxable year by rea16 son of qualified distributions during such taxable year

17 shall not exceed the excess of—

18 ‘‘(1) the amount which would (but for this sec19 tion) be so includible by reason of such distributions,

20 over

21 ‘‘(2) the aggregate premiums paid by such indi22 vidual during such taxable year for any policy of

23 qualified long-term care insurance (as defined in sec24 tion 818(g)) for the benefit of such individual or the

25 spouse of such individual.
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1 ‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of

2 this section, the term ‘qualified distribution’ means any

3 distribution to an individual from an individual retirement

4 account or a section 401(k) plan if such individual has

attained age 591 5 ⁄2 on or before the date of the distribution

6 (and, in the case of a distribution used to pay premiums

7 for the benefit of the spouse of such individual, such

spouse has attained age 591 8 ⁄2 on or before the date of the

9 distribution).

10 ‘‘(c) DEFINITIONS.—For purposes of this section—

11 ‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The

12 term ‘individual retirement account’ has the mean13 ing given such term by section 408(a).

14 ‘‘(2) SECTION 401(k) PLAN.—The term ‘section

15 401(k) plan’ means any employer plan which meets

16 the requirements of section 401(a) and which in17 cludes a qualified cash or deferred arrangement (as

18 defined in section 401(k)).

19 ‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—

20 ‘‘(1) WITHDRAWALS CANNOT EXCEED ELEC21 TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR

22 DEFERRED ARRANGEMENT.—This section shall not

23 apply to any distribution from a section 401(k) plan

24 to the extent the aggregate amount of such distribu25 tions for the use described in subsection (a) exceeds
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1 the aggregate employer contributions made pursuant

2 to the employee’s election under section 401(k)(2).

3 ‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI4 FICATION.—A plan shall not be treated as failing to

5 satisfy the requirements of section 401, and an ar6 rangement shall not be treated as failing to be a

7 qualified cash or deferred arrangement (as defined

8 in section 401(k)(2)), merely because under the plan

9 or arrangement distributions are permitted which

10 are excludable from gross income by reason of this

11 section.’’

12 (b) CONFORMING AMENDMENTS.—

13 (1) Section 401(k) of such Code is amended by

14 adding at the end the following new paragraph:

15 ‘‘(11) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

for payment of long-term care premiums, see section

137.’’

16 (2) Section 408(d) of such Code is amended by

17 adding at the end the following new paragraph:

18 ‘‘(8) CROSS REFERENCE.—

‘‘For provision permitting tax-free withdrawals

from individual retirement accounts for payment of

long-term care premiums, see section 137.’’

19 (3) The table of sections for such part III is

20 amended by striking the last item and inserting the

21 following new items:
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‘‘Sec. 317. Distributions from individual retirement accounts and

section 401(k) plans for qualified long-term care insurance.

‘‘Sec. 138. Cross references to other Acts.’’

1 (c) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to taxable years beginning after

3 December 31, 1992.

4 SEC. 704. EXCHANGE OF LIFE INSURANCE POLICY FOR

5 QUALIFIED LONG-TERM CARE POLICY NOT

6 TAXABLE.

7 (a) IN GENERAL.—Subsection (a) of section 1035 of

8 the Internal Revenue Code of 1986 (relating to certain

9 exchanges of insurance policies) is amended by striking

10 the period at the end of paragraph (3) and inserting ‘‘;

11 or’’ and by adding at the end the following new paragraph:

12 ‘‘(4) in the case of an individual who has attained age 591 13 ⁄2, a contract of life insurance or a

14 contract of endowment insurance or an annuity con15 tract for a contract of qualified long-term care insur16 ance (as defined in section 818(g)) for the benefit of

17 such individual or the spouse of such individual if

such spouse has attained age 591 18 ⁄2 on or before the

19 date of the exchange.’’

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

21 this section shall apply to taxable years beginning after

22 December 31, 1992.
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1 Subtitle B—Employer Funding of

2 Medical Benefits

3 SEC. 711. MEDICAL BENEFITS FOR RETIRED EMPLOYEES

4 AND THEIR SPOUSES AND DEPENDENTS.

5 (a) IN GENERAL.—Section 401(h) of the Internal

6 Revenue Code of 1986 (relating to medical, etc., benefits

7 for retired employees and their spouses and dependents)

8 is amended to read as follows:

9 ‘‘(h) RETIREE HEALTH ACCOUNTS.—

10 ‘‘(1) GENERAL RULE.—Under regulations pre11 scribed by the Secretary, a defined benefit plan may

12 establish and maintain a separate health benefits ac13 count for the payment of medical benefits of retired

14 employees and their spouses and dependents.

15 ‘‘(2) SEPARATE ACCOUNTING REQUIRED.—An

16 employer establishing a health benefits account shall

17 maintain separate accounts within the health bene18 fits account for funded reserve accounts established

19 under section 420A.

20 ‘‘(3) USE OF ASSETS.—Subject to the provi21 sions of part III of this subchapter, the corpus or in22 come of a health benefits account shall not be used

23 for, or diverted to, any purpose other than providing

24 medical benefits to retired employees and their

25 spouses and dependents.
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1 ‘‘(4) KEY EMPLOYEES.—

2 ‘‘(A) IN GENERAL.—In the case of an em3 ployee who is a key employee—

4 ‘‘(i) a separate account shall be estab5 lished and maintained for medical benefits

6 payable to such employee (and the employ7 ee’s spouse or dependents), and

8 ‘‘(ii) medical benefits of such em9 ployee, spouse, or dependents which are at10 tributable to plan years beginning after

11 March 31, 1984, for which the employee is

12 a key employee may be payable only from

13 such account.

14 ‘‘(B) KEY EMPLOYEE.—For purposes of

15 subparagraph (A), the term ‘key employee’

16 means any employee who, at any time during

17 the plan year or any preceding plan year during

18 which contributions were made on behalf of

19 such employee, is or was a key employee (as de20 fined in section 416(i)).

21 ‘‘(5) APPLICABLE RULES.—For rules applicable

22 to health benefits accounts, see subpart F of this

23 part (sec. 420A et seq.).’’

24 (b) CONFORMING AMENDMENT.—Section 415(l)(2)

25 of such Code (relating to treatment of certain medical ben-
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1 efits) is amended by inserting ‘‘by reason of section

2 401(h)(4)’’ after ‘‘dependents’’ in subparagraph (B).

3 (c) EFFECTIVE DATE.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the amendments made by this section

6 shall apply to years beginning after December 31,

7 1992.

8 (2) TRANSITION RULE.—In the case of—

9 (A) a plan other than a defined benefit

10 plan, or

11 (B) a defined benefit plan which elects, at

12 such time and in such manner as the Secretary

13 of the Treasury or his delegate may prescribe,

14 to have this paragraph apply,

15 which on or before the date of the enactment of this

16 Act established an account to which section 401(h)

17 of the Internal Revenue Code of 1986 (as in effect

18 before the amendments made by this section) ap19 plied (and which is in existence on such date), the

20 amendments made by this section shall not apply to

21 such account.

22 SEC. 712. TREATMENT OF HEALTH BENEFITS ACCOUNTS.

23 (a) IN GENERAL.—Part I of subchapter D of chapter

24 1 of the Internal Revenue Code of 1986 is amended by

25 adding at the end the following new subpart:
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1 ‘‘Subpart F—Treatment of Health Benefits Accounts

‘‘Sec. 420A. Deduction for employer contributions to health benefits accounts.

‘‘Sec. 420B. Funded reserve account.

‘‘Sec. 420C. Definitions; special rules.

2 ‘‘SEC. 420A. DEDUCTION FOR EMPLOYER CONTRIBUTIONS

3 TO HEALTH BENEFITS ACCOUNTS.

4 ‘‘(a) GENERAL RULE.—Amounts paid by an em5 ployer to a defined benefit plan which are allocated to a

6 health benefits account—

7 ‘‘(1) shall not be allowed as a deduction under

8 this chapter, but

9 ‘‘(2) if they would otherwise be deductible, shall

10 be allowed as a deduction under this section for the

11 taxable year in which paid.

12 ‘‘(b) LIMITATION.—The amount of the deduction al13 lowable under subsection (a)(2) for any taxable year shall

14 not exceed the health benefits account’s qualified cost for

15 the taxable year.

16 ‘‘(c) QUALIFIED COST.—For purposes of this sec17 tion—

18 ‘‘(1) IN GENERAL.—The term ‘qualified cost’

19 means, with respect to any taxable year, the sum

20 of—

21 ‘‘(A) the qualified direct cost for such tax22 able year, plus
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1 ‘‘(B) subject to the limitation of section

2 420B(b), any addition to the funded reserve ac3 count established under section 420B.

4 ‘‘(2) QUALIFIED DIRECT COST.—

5 ‘‘(A) IN GENERAL.—The term ‘qualified

6 direct cost’ means, with respect to any taxable

7 year, the aggregate amount (including adminis8 trative expenses) which would have been allow9 able as a deduction to the employer with re10 spect to the qualified section 401(h) medical

11 benefits provided through the health benefits

12 account during the taxable year if—

13 ‘‘(i) such benefits were provided di14 rectly by the employer, and

15 ‘‘(ii) the employer used the cash re16 ceipts and disbursements method of ac17 counting.

18 ‘‘(B) TIME WHEN BENEFITS PROVIDED.—

19 For purposes of subparagraph (A), a benefit

20 shall be treated as provided when such benefit

21 would be includible in the gross income of the

22 employee if provided directly by the employer

23 (or would be so includible but for any provision

24 of this chapter excluding such benefit from

25 gross income).
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1 ‘‘SEC. 420B. FUNDED RESERVE ACCOUNT.

2 ‘‘(a) GENERAL RULE.—For purposes of this subpart

3 and section 401(h), the term ‘funded reserve account’

4 means an account within a health benefits account—

5 ‘‘(1) to which contributions paid or accrued to

6 a defined benefit plan are allocated to provide a re7 serve for the payment of qualified section 401(h)

8 medical benefits of employees and their spouses and

9 dependents,

10 ‘‘(2) with respect to which the only contribu11 tions allocated are employer contributions, and

12 ‘‘(3) with respect to which—

13 ‘‘(A) the vesting requirements of sub14 section (c),

15 ‘‘(B) the portability requirements of sub16 section (d), and

17 ‘‘(C) the availability requirements of sub18 section (e),

19 are met.

20 ‘‘(b) LIMITATION ON ALLOCATION TO ACCOUNT.—

21 ‘‘(1) IN GENERAL.—No amount may be allo22 cated to a funded reserve account (and taken into

23 account under section 420A(c)(1)(B)) to the extent

24 such addition results in the amount allocated to such

25 account exceeding the account limit.
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1 ‘‘(2) ACCOUNT LIMIT.—The account limit for

2 any taxable year is an amount equal to 125 percent

3 of the termination liability of the account as of the

4 close of the last plan year ending with or within the

5 taxable year.

6 ‘‘(3) TERMINATION LIABILITY.—For purposes

7 of this section—

8 ‘‘(A) IN GENERAL.—The term ‘termination

9 liability’ means the present value of the quali10 fied section 401(h) medical benefits—

11 ‘‘(i) which are to be provided to em12 ployees (and their spouses and depend13 ents), and

14 ‘‘(ii) any portion of which is to be pro15 vided through a funded reserve account.

16 ‘‘(B) DETERMINATIONS.—The termination

17 liability under subparagraph (A) shall be deter18 mined—

19 ‘‘(i) on the basis of actuarial assump20 tions which are used in determining the

21 full-funding limitation of the plan under

22 section 412(c)(7),

23 ‘‘(ii) as if the benefits under the plan

24 commenced at Social Security retirement

25 age, and
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1 ‘‘(iii) by not taking into account any

2 portion of the maximum annual benefit

3 under the plan for—

4 ‘‘(I) benefits (other than post-re5 tirement long-term health care bene6 fits) in excess of $1,500, or

7 ‘‘(II) post-retirement long-term

8 health care benefits in excess of

9 $1,500.

10 ‘‘(C) ADJUSTMENTS TO ACCOUNT.—The

11 amount in the account shall be adjusted at such

12 time and in such manner as the Secretary may

13 prescribe to take into account income, gains,

14 deductions, or losses which are properly alloca15 ble to amounts in the account.

16 ‘‘(D) ACTUARIAL ADJUSTMENT.—For pur17 poses of determining termination liability, the

18 benefits provided to any participant under the

19 plan shall be actuarially adjusted to reflect any

20 commencement of benefits before or after Social

21 Security retirement age.

22 ‘‘(E) EMPLOYEE.—For purposes of this

23 paragraph, the term ‘employee’ does not include

24 a former employee.
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1 ‘‘(F) COST-OF-LIVING ADJUSTMENT.—In

2 the case of years beginning after 1995, the

3 $1,500 amounts in subparagraph (B) shall be

4 adjusted annually at the same time and in the

5 same manner as under section 415(d).

6 ‘‘(c) VESTING REQUIREMENTS.—

7 ‘‘(1) IN GENERAL.—The requirements of this

8 subsection are met if the requirements of either sub9 paragraph (A) or (B) of section 411(a)(2) are met

10 with respect to the accrued qualified section 401(h)

11 medical benefits derived from amounts which are al12 located to the funded reserve account.

13 ‘‘(2) UNIFORM RATE OF ACCRUAL OF BENE14 FITS.—

15 ‘‘(A) IN GENERAL.—Except as provided in

16 this paragraph, a plan shall not be treated as

17 meeting the requirements of this subsection un18 less the rate at which benefits accrue during a

19 plan year is the same for all participants.

20 ‘‘(B) SPECIAL RULES FOR CERTAIN INDI21 VIDUALS AGE 55 AND OVER.—A plan shall not

22 be treated as failing to meet the requirements

23 of this subsection if the plan provides that an

24 employee who as of the close of the plan year

25 in which he attains age 55 has accrued less
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1 than 30 percent of the maximum amount of

2 benefits which may be accrued under the plan

3 may accrue benefits during succeeding plan

4 years at a greater rate than the rate for other

5 employees (but not in excess of 125 percent of

6 such other rate).

7 ‘‘(C) MINIMUM HOURS OF SERVICE.—For

8 purposes of subparagraph (A), an employee

9 shall not be treated as a participant for any

10 plan year unless such individual completes more

11 than 500 hours of service during such year.

12 ‘‘(3) CERTAIN RULES MADE APPLICABLE.—Ex13 cept to the extent inconsistent with the provisions of

14 this subpart, the rules of section 411 shall apply for

15 purposes of this subsection.

16 ‘‘(d) PORTABILITY REQUIREMENTS.—

17 ‘‘(1) IN GENERAL.—Except as provided in para18 graph (2), the requirements of this subsection are

19 met if, in accordance with procedures determined by

20 the Secretary, the plan provides that—

21 ‘‘(A) except as provided in regulations, the

22 plan shall transfer, within 120 days after an

23 employee separates from service with the em24 ployer or after the termination of the plan, the

25 present value of the nonforfeitable accrued
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1 qualified section 401(h) medical benefits of the

2 employee attributable to amounts which are al3 located to the funded reserve account to—

4 ‘‘(i) a plan which is maintained by an

5 employer of such employee and which

6 maintains a health benefits account, or

7 ‘‘(ii) if the employer does not main8 tain a plan described in clause (i), an indi9 vidual retirement account established for

10 the benefit of such employee, and

11 ‘‘(B) the plan accepts transfers under sub12 paragraph (A) from another plan or individual

13 retirement account.

14 ‘‘(2) NO TRANSFERS AFTER EMPLOYEE IS DIS15 ABLED OR ATTAINS RETIREMENT AGE.—Except in

16 the case of a termination of a plan, a plan shall not

17 meet the requirements of this subsection if it per18 mits the transfer of a benefit after—

19 ‘‘(A) an employee has attained Social Se20 curity retirement age, or

21 ‘‘(B) an employee has become disabled

22 (within the meaning of section 72(m)(7)).

23 ‘‘(3) INCLUSION IN INCOME WHERE MORE

24 THAN 1 ACCOUNT.—

25 ‘‘(A) IN GENERAL.—If—
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1 ‘‘(i) an individual is a participant or

2 beneficiary under 2 or more plans main3 taining a funded reserve account or indi4 vidual retirement account to which assets

5 were transferred from such a plan, and

6 ‘‘(ii) such individual does not (within

7 a reasonable period) consolidate the

8 present value of the individual’s nonforfeit9 able accrued benefit in all such plans and

10 the assets so transferred to all such ac11 counts into 1 such plan or into 1 such ac12 count,

13 then an amount equal to the sum of the present

14 value of such benefits and the fair market value

15 of such assets shall be treated as distributed in

16 cash to such individual at the close of the plan

17 year for the plan or account involved and such

18 distribution shall be included in gross income.

19 ‘‘(B) SPECIAL RULES.—

20 ‘‘(i) EMPLOYEE MUST CONSOLIDATE

21 INTO PLAN OF CURRENT EMPLOYER.—In

22 the case of an employee who is employed

23 by an employer maintaining a plan de24 scribed in subparagraph (A)(i), a consoli25 dation satisfies subparagraph (A) only if
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1 such consolidation is into such a plan

2 maintained by such employer.

3 ‘‘(ii) MORE THAN 1 CURRENT EM4 PLOYER.—If an individual is a participant

5 in more than 1 plan described in subpara6 graph (A)(i) by reason of being currently

7 employed by more than 1 employer, such

8 plans shall be treated as 1 plan for pur9 poses of subparagraph (A).

10 ‘‘(iii) EMPLOYEE WITH NO CURRENT

11 EMPLOYER MAINTAINING PLAN.—In the

12 case of an employee who is currently not

13 employed by an employer maintaining a

14 plan described in subparagraph (A)(i), a

15 consolidation satisfies subparagraph (A)

16 only if such consolidation is into—

17 ‘‘(I) a plan described in subpara18 graph (A)(i) maintained by his most

19 recent employer maintaining such

20 plan, or

21 ‘‘(II) an individual retirement ac22 count of the individual.

23 ‘‘(C) AMOUNT TRANSFERRED NOT INCLUD24 IBLE IN INCOME.—No amount shall be includ25 ible in gross income by reason of any transfer
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1 which is part of a consolidation required under

2 this paragraph.

3 ‘‘(e) RETIRED EMPLOYEES NOT COVERED BY

4 HEALTH BENEFITS ACCOUNT MAY ELECT COVERAGE.—

5 ‘‘(1) IN GENERAL.—The requirements of this

6 subsection are met if the plan provides that a former

7 employee who—

8 ‘‘(A) is in pay status under the plan, but

9 ‘‘(B) is not eligible to receive all or any

10 portion of qualified section 401(h) medical ben11 efits provided for any period through the fund12 ed reserve account,

13 is entitled to elect such benefits for himself or his

14 spouse and dependents. A plan shall not be treated

15 as failing to meet the requirements of this sub16 section if an employee is required to pay a premium

17 for such benefits as long as such premium does not

18 exceed 102 percent of applicable premium for the

19 period such benefits are provided.

20 ‘‘(2) APPLICABLE PREMIUM.—For purposes of

21 paragraph (1), the applicable premium for any pe22 riod shall be determined in the same manner as

23 under section 4980B(f)(4).
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1 SEC. 420C. DEFINITIONS; SPECIAL RULES.

2 ‘‘(a) QUALIFIED SECTION 401(h) MEDICAL BENE3 FITS.—For purposes of this subpart, the term ‘qualified

4 section 401(h) medical benefits’ means benefits—

5 ‘‘(1) which are—

6 ‘‘(A) benefits for sickness, accident, hos7 pitalization, and medical expenses of former

8 employees who are in pay status under the plan

9 (and their spouse or dependents) after the

10 former employee—

11 ‘‘(i) has attained Social Security re12 tirement age, or

13 ‘‘(ii) is disabled (within the meaning

14 of section 72(m)(7)), or

15 ‘‘(B) post-retirement long-term health care

16 benefits, and

17 ‘‘(2) which are provided through 1 or more of

18 the following:

19 ‘‘(A) insurance acquired by the plan, or

20 ‘‘(B) self-insurance by the employer or the

21 plan.

22 ‘‘(b) POST-RETIREMENT LONG-TERM HEALTH

23 CARE.—For purposes of this subpart—

24 ‘‘(1) IN GENERAL.—The term ‘post-retirement

25 long-term health care’ means long-term health care

26 benefits provided to a former employee (or the
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1 spouse of the former employee) who is in pay status

2 under the plan after the former employee—

3 ‘‘(A) has attained Social Security retire4 ment age, or

5 ‘‘(B) is disabled (within the meaning of

6 section 72(m)(7)).

7 ‘‘(2) SPOUSE OF DECEASED EMPLOYEE.—For

8 purposes of paragraph (1), the spouse of a deceased

9 employee shall be treated—

10 ‘‘(A) as a former employee, and

11 ‘‘(B) as satisfied the requirements of para12 graph (1) if such spouse was receiving benefits

13 immediately before the death of the employee.

14 ‘‘(3) LONG-TERM HEALTH CARE BENEFIT.—

15 ‘‘(A) IN GENERAL.—The term ‘long-term

16 health care benefit’ means a benefit which con17 sists of the providing by a qualified provider in

18 a qualified facility of necessary diagnostic, pre19 ventive, therapeutic, rehabilitative, and personal

20 care services, required by a chronically ill indi21 vidual.

22 ‘‘(B) CERTAIN ITEMS NOT INCLUDED.—

23 The term ‘long-term health care benefits’ does

24 not include basic medicare supplement cov25 erage, basic hospital expense coverage, basic
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1 medical-surgical expense coverage, hospital con2 finement indemnity coverage, major medical ex3 pense coverage, disability income protection cov4 erage, accident only coverage, specified disease

5 or specified accident coverage, or limited benefit

6 health coverage.

7 ‘‘(4) QUALIFIED FACILITY.—The term ‘quali8 fied facility’ means—

9 ‘‘(A) a rehabilitative, hospice, or adult day

10 care facility, including a hospital, retirement

11 home, skilled nursing facility (within the mean12 ing of section 1919(a) of the Social Security

13 Act), or other similar facility determined by the

14 plan administrator, or

15 ‘‘(B) a home where the chronically ill indi16 vidual resides.

17 ‘‘(5) CHRONICALLY ILL INDIVIDUAL.—The term

18 ‘chronically ill individual’ means an individual whose

19 disability is such that the individual has been cer20 tified as requiring assistance with daily living (as de21 fined by the plan administrator) for a period of at

22 least 90 days.

23 ‘‘(6) QUALIFIED PROVIDER.—The term ‘quali24 fied provider’ means a medical practitioner licensed

25 under State law, registered nurse, licensed vocational
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1 nurse, qualified therapist, or trained home health

2 aide (or any organization employing such providers),

3 but does not include a relative or other person who

4 ordinarily resides in the home where the chronically

5 ill individual resides.

6 ‘‘(c) HEALTH BENEFITS ACCOUNT.—For purposes of

7 this subpart, the term ‘health benefits account’ means an

8 account established and maintained under section 401(h).

9 ‘‘(d) SOCIAL SECURITY RETIREMENT AGE.—For

10 purposes of this subpart, the term ‘Social Security retire11 ment age’ has the meaning given such term by section

12 415(b)(8).’’

13 (b) INDIVIDUAL RETIREMENT ACCOUNTS.—

14 (1) IN GENERAL.—Section 408 of such Code is

15 amended by redesignating subsection (p) as sub16 section (q) and by inserting after subsection (o) the

17 following new subsection:

18 ‘‘(p) SPECIAL RULES FOR FUNDED RESERVE AC19 COUNTS.—

20 ‘‘(1) IN GENERAL.—A trust shall not be treated

21 as an individual retirement account under subsection

22 (a) unless the trust instrument provides that the

23 trust will accept transfers of assets as provided in

24 section 420B(d)(1).
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1 ‘‘(2) ACCOUNTING.—The trustee of an individ2 ual retirement account shall maintain separate ac3 counting for assets transferred to the account under

4 section 420B(d)(1) (and any income allocable there5 to).’’

6 ‘‘(2) PENALTY FOR EARLY DISTRIBUTIONS.—

7 Section 72(t) of such Code (relating to 10-percent

8 additional tax on early distributions) is amended by

9 adding at the end the following new paragraph:

10 ‘‘(6) EARLY DISTRIBUTION OF MEDICAL BENE11 FITS.—If—

12 ‘‘(A) a taxpayer receives a distribution of

13 amounts transferred to an individual retirement

14 account under section 420B(d)(1) (or any in15 come or gain allocable thereto), and

16 ‘‘(B) such distribution—

17 ‘‘(i) is made before the individual at18 tains Social Security retirement age (with19 in the meaning of section 415(b)(8)) or be20 comes disabled (within the meaning of sub21 section (m)(7)), or

22 ‘‘(ii) exceeds the amount of qualified

23 section 401(h) medical expenses of the tax24 payer, his spouse, or dependents for the

25 taxable year, then paragraph (1) shall
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1 apply to such distribution or such excess,

2 except that ‘50 percent’ shall be sub3 stituted for ‘10 percent’. Paragraph (2)

4 shall not apply to a distribution to which

5 this paragraph applies.’’

6 (c) EXCISE TAX ON ALLOCATED ASSETS NOT USED

7 TO PROVIDE RETIREE HEALTH BENEFITS.—Section

8 4980 of such Code (relating to tax on reversion of quali9 fied plan assets to employers) is amended by adding at

10 the end the following new subsection:

11 ‘‘(e) ASSETS ALLOCATED TO RETIREE HEALTH BEN12 EFITS ACCOUNTS.—In the case of a plan which establishes

13 a health benefits account described in section 401(h), if—

14 ‘‘(1) amounts are allocated to a funded reserve

15 account under section 420B, and

16 ‘‘(2) any amount in such account is paid or dis17 tributed other than to pay for qualified section

18 401(h) medical benefits (as defined in section

19 420C(a)) provided through such account,

20 the amount so paid or distributed shall be treated as an

21 employer reversion for purposes of this section, except that

22 subsection (a) shall be applied by substituting ‘100 per23 cent’ for ‘25 percent’.’’

24 (d) CONFORMING AMENDMENTS.—
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1 (1) Section 419(e) of such Code (defining wel2 fare benefit fund) is amended by adding at the end

3 the following new paragraph:

4 ‘‘(5) HEALTH BENEFITS ACCOUNTS.—The term

5 ‘welfare benefits fund’ does not include any health

6 benefits account established under section 401(h).’’

7 (2) The table of subparts for part I of sub8 chapter D of chapter 1 of such Code is amended by

9 adding at the end the following new item:

‘‘Subpart F. Treatment of health benefit accounts.’’

10 (e) EFFECTIVE DATE.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section

13 shall apply to contributions after December 31,

14 1992.

15 (2) INDIVIDUAL RETIREMENT ACCOUNTS.—The

16 amendments made by subsection (b) shall apply to

17 accounts established after December 31, 1992.

18 Subtitle C—Reverse Mortgage

19 Insurance for Older Americans

20 SEC. 721. MAXIMUM AMOUNT INSURED.

21 Section 255(g) of the National Housing Act (12

22 U.S.C. 1715z–20(g)) is amended by striking the third sen23 tence and inserting the following new sentence: ‘‘In no

24 case may the benefits of insurance under this section ex25 ceed the greater of 95 percent of the median 1-family
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1 house price in the United States or 95 percent of the me2 dian 1-family house price in the area, as determined by

3 the Secretary.’’

4 Subtitle D—Income Tax Credits

5 SEC. 731. REFUNDABLE CREDIT FOR CUSTODIAL CARE OF

6 CERTAIN DEPENDENTS IN TAXPAYER’S

7 HOME.

8 (a) IN GENERAL.—Subpart C of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of

10 1986 (relating to refundable credits) is amended by redes11 ignating section 35 as section 37 and by inserting after

12 section 34 the following new section:

13 ‘‘SEC. 35. CREDIT FOR TAXPAYERS WITH CERTAIN PERSONS

14 REQUIRING CUSTODIAL CARE IN THEIR

15 HOUSEHOLDS.

16 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in17 dividual who maintains a household which includes as a

18 member one or more qualified persons, there shall be al19 lowed as a credit against the tax imposed by this chapter

20 for the taxable year an amount equal to $2,000 for each

21 such person.

22 ‘‘(b) DEFINITIONS.—For purposes of this section—

23 ‘‘(1) QUALIFIED PERSON.—The term ‘qualified

24 person’ means any individual—
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1 ‘‘(A) who is a parent, grandparent, de2 pendent (as defined in section 152), or spouse

3 of the taxpayer,

4 ‘‘(B) who has been certified by a physician

5 as—

6 ‘‘(i) being unable to perform (without

7 substantial assistance from another indi8 vidual) at least 2 activities of daily living

9 (as defined in paragraph (2)), or

10 ‘‘(ii) having a similar level of disabil11 ity due to cognitive impairment, and

12 ‘‘(C) who has as his principal place of

13 abode for more than half of the taxable year the

14 home of the taxpayer.

15 ‘‘(2) ACTIVITIES OF DAILY LIVING.—For pur16 poses of paragraph (1), each of the following is an

17 activity of daily living:

18 ‘‘(A) BATHING.—The overall complex be19 havior of getting water and cleansing the whole

20 body, including turning on the water for a bath,

21 shower, or sponge bath, getting to, in, and out

22 of a tub or shower, and washing and drying

23 oneself.
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1 ‘‘(B) DRESSING.—The overall complex be2 havior of getting clothes from closets and draw3 ers and then getting dressed.

4 ‘‘(C) TOILETING.—The act of going to the

5 toilet room for bowel and bladder function,

6 transferring on and off the toilet, cleaning after

7 elimination, and arranging clothes.

8 ‘‘(D) TRANSFER.—The process of getting

9 in and out of bed or in and out of a chair or

10 wheelchair.

11 ‘‘(E) EATING.—The process of getting

12 food from a plate or its equivalent into the

13 mouth.

14 ‘‘(3) PHYSICIAN.—The term ‘physician’ means

15 a doctor of medicine or osteopathy legally authorized

16 to practice medicine or surgery in the jurisdiction in

17 which he makes the determination under paragraph

18 (1).

19 ‘‘(d) SPECIAL RULES.—For purposes of this sec20 tion—

21 ‘‘(1) MAINTAINING A HOUSEHOLD.—An individ22 ual shall be treated as maintaining a household for

23 any period if over half the cost of maintaining the

24 household for such period is furnished by such indi-
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1 vidual (or, is such individual is married during such

2 period, by such individual and his spouse).

3 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE4 TURN.—If the taxpayer is married at the close of

5 the taxable year, the credit under subsection (a)

6 shall be allowed only if the taxpayer and his spouse

7 file a joint return for the taxable year.

8 ‘‘(3) MARITAL STATUS.—An individual legally

9 separated from his spouse under a decree of divorce

10 or separate maintenance shall not be considered as

11 married.

12 ‘‘(4) CERTAIN MARRIED INDIVIDUALS LIVING

13 APART.—If—

14 ‘‘(A) an individual who is married and who

15 files a separate return—

16 ‘‘(i) maintains a household which in17 cludes as a member one or more qualified

18 persons, and

19 ‘‘(ii) furnishes over half of the cost of

20 maintaining such household during such

21 taxable year, and

22 ‘‘(B) during the last 6 months of such tax23 able year such individual’s spouse is not a mem24 ber of such household,

25 such individual shall not be considered as married.
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1 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

2 such regulations as may be necessary to carry out the pur3 poses of this section.’’

4 (b) CLERICAL AMENDMENT.—The table of sections

5 for subpart C of part IV of subchapter A of chapter 1

6 of such Code is amended by striking the item relating to

7 section 35 and inserting the following:

‘‘Sec. 35. Credit for taxpayers with certain persons requiring custodial care in their households.’’

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

9 this section shall apply to taxable years beginning after

10 December 31, 1992.

11 SEC. 732. CREDIT FOR EXPENSES FOR LONG-TERM CARE

12 SERVICES PROVIDED TO CERTAIN INDE13 PENDENT PERSONS REQUIRING SUCH CARE.

14 (a) GENERAL RULE.—Subpart C of part IV of sub15 chapter A of chapter 1 of the Internal Revenue Code of

16 1986 (relating to refundable credits) is amended by insert17 ing after section 35 the following new section:

18 ‘‘SEC. 36. CREDIT FOR EXPENSES FOR LONG-TERM CARE

19 SERVICES PROVIDED TO CERTAIN INDE20 PENDENT PERSONS REQUIRING SUCH CARE.

21 ‘‘(a) GENERAL RULE.—In the case of an individual,

22 there shall be allowed as a credit against the tax imposed

23 by this subtitle for the taxable year an amount equal to
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1 25 percent of the qualified long-term care expenses paid

2 during such taxable year.

3 ‘‘(b) MAXIMUM CREDIT.—

4 ‘‘(1) IN GENERAL.—The credit allowed by sub5 section (a) for any taxable year shall not exceed

6 $2,000 with respect to each independent qualified

7 person.

8 ‘‘(2) PHASEOUT OF CREDIT FOR TAXPAYERS

9 WITH INCOMES EXCEEDING 150 PERCENT OF THE

10 POVERTY LEVEL.—If the adjusted gross income of

11 the taxpayer for the taxable year exceeds the base

12 amount, the $2,000 amount in paragraph (1) shall

13 be reduced (but not below zero) by an amount which

14 bears the same ratio to $2,000 as—

15 ‘‘(A) the excess of the taxpayer’s adjusted

16 gross income for the taxable year over the base

17 amount, bears to

18 ‘‘(B) $10,000.

19 For purposes of the preceding sentence, the base

20 amount is 150 percent of the poverty level applicable

21 to the taxpayer.

22 ‘‘(c) DEFINITIONS.—For purposes of this section—

23 ‘‘(1) QUALIFIED LONG-TERM CARE EX24 PENSES.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 long-term care expenses’ means the amount

3 paid by the taxpayer during the taxable year for

4 1 or more medically necessary, diagnostic serv5 ices, preventive services, therapeutic services,

6 rehabilitation services, maintenance services, or

7 personal care services which are required by an

8 independent qualified person and which are pro9 vided in the household referred to in paragraph

10 (2)(C).

11 ‘‘(B) COVERAGE SPECIFICALLY EX12 CLUDED.—Such term does not include any com13 bination of the following kinds of coverage:

14 ‘‘(i) Basic Medicare supplement cov15 erage.

16 ‘‘(ii) Basic hospital-based acute care

17 expense coverage.

18 ‘‘(iii) Basic medical-surgical expense

19 coverage.

20 ‘‘(iv) Hospital confinement indemnity

21 coverage.

22 ‘‘(v) Major medical expense coverage.

23 ‘‘(vi) Disability income protection cov24 erage.

25 ‘‘(vii) Accident only coverage.
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1 ‘‘(viii) Specified disease coverage.

2 ‘‘(ix) Specified accident coverage.

3 ‘‘(x) Limited benefit health coverage.

4 ‘‘(2) INDEPENDENT QUALIFIED PERSON.—The

5 term ‘independent qualified person’ means any indi6 vidual—

7 ‘‘(A) who is a parent, grandparent, or de8 pendent (as defined in section 152) of the tax9 payer,

10 ‘‘(B) who has been certified by a physician

11 as—

12 ‘‘(i) being unable to perform (without

13 substantial assistance from another indi14 vidual) at least 2 activities of daily living

15 (as defined in section 35(b)(2)), or

16 ‘‘(ii) having a similar level of disabil17 ity due to cognitive impairment, and

18 ‘‘(C) who maintains a household which is

19 his principal place of abode for more than half

20 of the taxable year of the taxpayer.

21 Such term shall not include any qualified person as

22 defined in section 35(b).’’

23 (b) CLERICAL AMENDMENT.—The table of sections

24 for subpart C of part IV of subchapter A of chapter 1
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1 of such Code is amended by adding at the end the follow2 ing:

‘‘Sec. 36. Credit for expenses for long-term care services provided

to certain independent persons requiring such

care.’’

‘‘Sec. 37. Overpayments of tax.’’

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

4 this section shall apply to taxable years beginning after

5 December 31, 1992.

6 Subtitle E—Treatment of

7 Accelerated Death Benefits

8 SEC. 741. TAX TREATMENT OF ACCELERATED DEATH BENE9 FITS UNDER LIFE INSURANCE CONTRACTS.

10 (a) GENERAL RULE.—Section 101 of the Internal

11 Revenue Code of 1986 (relating to certain death benefits)

12 is amended by adding at the end thereof the following new

13 subsection:

14 ‘‘(g) TREATMENT OF CERTAIN ACCELERATED

15 DEATH BENEFITS.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, any amount paid to an individual under a life

18 insurance contract on the life of an insured who is

19 a terminally ill individual or who is permanently con20 fined to a nursing home shall be treated as an

21 amount paid by reason of the death of such insured.

22 ‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur23 poses of this subsection, the term ‘terminally ill indi-
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1 vidual’ means an individual who has been certified

2 by a physician, licensed under State law, as having

3 an illness or physical condition which can reasonably

4 be expected to result in death in 12 months or less.

5 ‘‘(3) PERMANENTLY CONFINED TO A NURSING

6 HOME.—For purposes of this subsection, an individ7 ual has been permanently confined to a nursing

8 home if the individual is presently confined to a

9 nursing home and has been certified by a physician,

10 licensed under State law, as having an illness or

11 physical condition which can reasonably be expected

12 to result in the individual remaining in a nursing

13 home for the rest of his life.’’

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

15 this section shall apply to taxable years beginning after

16 December 31, 1992.

17 SEC. 742. TAX TREATMENT OF COMPANIES ISSUING QUALI18 FIED ACCELERATED DEATH BENEFIT RID19 ERS.

20 (a) QUALIFIED ACCELERATED DEATH BENEFIT RID21 ERS TREATED AS LIFE INSURANCE.—Section 818 of the

22 Internal Revenue Code of 1986 (relating to other defini23 tions and special rules), as amended by section 701(a),

24 is amended by adding at the end thereof the following new

25 subsection:
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1 ‘‘(h) QUALIFIED ACCELERATED DEATH BENEFIT

2 RIDERS TREATED AS LIFE INSURANCE.—For purposes of

3 this part—

4 ‘‘(1) IN GENERAL.—Any reference to a life in5 surance contract shall be treated as including a ref6 erence to a qualified accelerated death benefit rider

7 on such contract.

8 ‘‘(2) QUALIFIED ACCELERATED DEATH BENE9 FIT RIDERS.—For purposes of this subsection, the

10 term ‘qualified accelerated death benefit rider’

11 means any rider or addendum on, or other provision

12 of, a life insurance contract which provides for pay13 ments to an individual on the life of an insured upon

14 such insured becoming a terminally ill individual (as

15 defined in section 101(g)(2)) or being permanently

16 confined to a nursing home (as defined in section

17 101(g)(3)).’’

18 (b) DEFINITIONS OF LIFE INSURANCE AND MODI19 FIED ENDOWMENT CONTRACTS.—

20 (1) RIDER TREATED AS QUALIFIED ADDI21 TIONAL BENEFIT.—Paragraph (5)(A) of section

22 7702(f) of such Code is amended by striking ‘‘or’’

23 at the end of clause (iv), by redesignating clause (v)

24 as clause (vi), and by inserting after clause (iv) the

25 following new clause:
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1 ‘‘(v) any qualified accelerated death

2 benefit rider (as defined in section

3 818(h)(2)) or any qualified long-term care

4 insurance rider which reduces the death

5 benefit, or’’.

6 (2) TRANSITIONAL RULE.—For purposes of ap7 plying section 7702 or 7702A of the Internal Reve8 nue Code of 1986 to any contract (or determining

9 whether either such section applies to such con10 tract), the issuance of a rider or addendum on, or

11 other provision of, a life insurance contract permit12 ting the acceleration of death benefits (as described

13 in section 101(g) of such Code) or for qualified long14 term care insurance (as defined in section 849(b) of

15 such Code) shall not be treated as a modification or

16 material change of such contract.

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

18 this section shall apply to taxable years beginning before,

19 on, or after December 31, 1992.
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1 Subtitle F—Federal National Long2 Term Care Reinsurance Cor3 poration

4 SEC. 751. AUTHORIZATION FOR ESTABLISHMENT OF COR5 PORATION.

6 The Secretary of Health and Human Services (in this

7 subtitle referred to as the ‘‘Secretary’’) is authorized to

8 provide, in accordance with this subtitle, for the incorpora9 tion of a corporation to be known as the Federal National

10 Long-Term Care Reinsurance Corporation (in this subtitle

11 referred to as the ‘‘Corporation’’), which shall not be an

12 agency or establishment of the United States Government.

13 SEC. 752. BOARD OF DIRECTORS AND OFFICERS.

14 (a) BOARD OF DIRECTORS.—The Corporation shall

15 have a Board of Directors (in this subtitle referred to as

16 the ‘‘Board’’) consisting of 9 members, of which—

17 (1) 3 shall be appointed by the President of the

18 United States, of which one shall be representative

19 of entities providing long-term care, one shall be a

20 representative from an insurer, and one shall be a

21 representative of consumers of long-term care; and

22 (2) 6 shall be elected annually by the stockhold23 ers of the Corporation entitled to vote for such mem24 bers.
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1 Within the limitations of law and regulation, the Board

2 shall determine the general policies which shall govern the

3 operations of the Corporation, and shall have power to

4 adopt, amend, and repeal bylaws governing the perform5 ance of the powers and duties granted to or imposed upon

6 it by law.

7 (b) INITIAL BOARD.—Notwithstanding subsection

8 (a), the members described in subsection (a)(1) shall serve

9 as incorporators and are authorized to assist the Secretary

10 in taking whatever actions are necessary to incorporate

11 the Corporation.

12 (c) TERMS OF OFFICE.—The terms of office of each

13 member of the Board shall be one year, expiring on the

14 date of the annual meeting of the stockholders of the Cor15 poration, except that (1) in the case of a vacancy occurring

16 prior to the expiration of the term of a member, the va17 cancy shall be filled by the President (for members de18 scribed in subsection (a)(1)) or by the remaining members

19 of the Board (for other members) for the remainder of

20 such term, and (2) any member may be removed by the

21 President for good cause. Any vacancy in the Board shall

22 not affect its power.

23 (d) CHAIRMAN.—The President shall designate one

24 of the members described in subsection (a)(1) as the initial

25 Chairman of the Board. Thereafter, the members of the
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1 Boards shall annually elect one of their number as Chair2 man.

3 (e) TREATMENT OF MEMBERS.—

4 (1) The members of the Board shall not by rea5 son of such membership, be deemed to be employees

6 of the United States Government. Except as pro7 vided in paragraph (2), each member of the Board

8 shall be entitled to receive the daily equivalent of the

9 maximum annual rate of basic pay in effect for

10 grade GS–18 of the General Schedule for each day

11 (including travel time) during which he is engaged

12 in the actual performance of duties vested in the

13 Corporation.

14 (2) Members of the Board who are full-time of15 ficers or employees of the United States shall receive

16 no additional pay by reason of their service on the

17 Board.

18 (f) OFFICERS.—The Corporation shall have a Presi19 dent and such other executive officers and employees as

20 may be appointed by the Board at rates of compensation

21 fixed by the Board, without regard to any provisions of

22 title 5, United States Code. No such executive officer may

23 receive any salary or other compensation from any source

24 other than the Corporation during the period of his em25 ployment by the Corporation.
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1 SEC. 753. PURPOSE AND AUTHORITY OF CORPORATION.

2 (a) PURPOSE.—The Corporation shall confine its ac3 tivities to providing for the reinsurance of insurance com4 panies for extraordinary loss in the issuance or payment

5 of benefits for qualified long-term care insurance (as de6 fined in section 848(b) of the Internal Revenue Code of

7 1986). Except as may be provided by the Secretary in reg8 ulations, the Corporation may not refuse to provide for

9 such reinsurance for any insurance meeting the require10 ments of such section (other than paragraph (4)(C)(iii)

11 thereof).

12 (b) PREMIUMS.—The Corporation shall impose for

13 such reinsurance reasonable premiums which—

14 (1) are related to actuarial estimates of the

15 type and amount of financial risk assumed by the

16 Corporation, and

17 (2) in the aggregate (in conjunction with other

18 income which the Corporation may have) provide for

19 all the expenses of the Corporation.

20 (c) NO POLITICAL CONTRIBUTIONS.—The Corpora21 tion shall not contribute or otherwise support any political

22 party or candidate for elective public office.

23 (d) GENERAL POWERS.—Except as otherwise specifi24 cally provided in this subtitle, the Corporation and Board

25 shall have the powers of a corporation and board of direc26 tors in the State in which incorporated.
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1 SEC. 754. CAPITALIZATION.

2 (a) COMMON STOCK.—The Corporation shall have

3 common stock, with such par value as the Board estab4 lishes, which shall be vested with all voting rights, each

5 share being entitled to one vote with rights of cumulative

6 voting at all elections of directors. The free transferability

7 of the common stock at all times to any person, firm, cor8 poration, or other entity shall not be restricted, except

9 that, as to the Corporation, it shall be transferable only

10 on the books of the Corporation. The Corporation shall

11 only issue such common stock with the approval of the

12 Secretary.

13 (b) DEBT.—

14 (1) For purposes of carrying out this subtitle,

15 the Corporation may with the approval of the Sec16 retary and consistent with section 258, issue obliga17 tions having such maturities and bearing such rate

18 or rates and having such conditions (including sub19 ordination to other such obligations) as the Board

20 determines to be appropriate.

21 (2) The full faith and credit of the United

22 States is not pledged to the obligations and debts of

23 the Corporation. The Corporation shall insert appro24 priate language in all of its obligations issued under

25 this subsection clearly indicating that such obliga26 tions, together with the interest thereon, are not
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1 guaranteed by the United States and do not con2 stitute debt or obligation of the United States or of

3 any agency or instrumentality thereof. The Corpora4 tion may purchase in the open market any of its ob5 ligations outstanding under the subsection at any

6 time and at any price.

7 (3) All obligations, participations, or other in8 struments issued by the Corporation shall be lawful

9 investments, and may be accepted as security for all

10 fiduciary, trust, and public funds, the investment or

11 deposit of which shall be under the authority and

12 control of the United States or any officer or officers

13 thereof.

14 SEC. 755. EXEMPTION FROM STATE REGULATION AND TAX15 ATION.

16 (a) TAXATION.—The Corporation, including its cap17 ital, reserves, surplus, security holdings, and income, shall

18 be exempt from all taxation now or hereafter imposed by

19 any State, district, Commonwealth, county, municipality,

20 or local taxing authority, except that any real property of

21 the Corporation shall be subject to such taxation to the

22 same extent according to its value as other real property

23 is taxed.

24 (b) INSURANCE REGULATION.—Except to the extent

25 specified by the Secretary in regulations, the Corporation
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1 shall not be subject to any regulation under the insurance

2 laws of any State, district, or Commonwealth.

3 SEC. 756. AUDIT AND ANNUAL REPORT.

4 (a) AUDIT.—The Board shall provide for an annual

5 audit of the operations of the Corporation. Such audit

6 shall be conducted by a certified public accountant in ac7 cordance with generally accepted auditing principles (as

8 recognized by the Comptroller General).

9 (b) ANNUAL REPORT.—The Board shall report annu10 ally to the President and the Congress on the activities

11 of the Corporation. Such report shall include a presen12 tation of the financial status of the Corporation, as cer13 tified under the audit described in subsection (a).

14 SEC. 757. PROTECTION OF NAME.

15 No individual association, partnership, or corpora16 tion, except the Corporation, shall hereafter use the world

17 ‘‘Federal National Long-Term Care Reinsurance Corpora18 tion’’, or any combination of such words, as the name or

19 a part thereof under which he or it shall do business. Vio20 lations of the foregoing sentence may be enjoined by any

21 court of general jurisdiction at the suit of the Corporation.

22 In any such suit, the Corporation may recover any actual

23 damages flowing from such violations, and, in addition,

24 shall be entitled to punitive damages (regardless of the

25 existence or nonexistence of actual damages) of not ex-
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1 ceeding $10,000 for each day during which such violation

2 is committed or repealed.

3 SEC. 758. TERMINATION.

4 The Corporation shall terminate its activities not

5 later than 10 years after the date of the enactment of this

6 Act.

7 TITLE VIII—IMPROVEMENTS IN

8 PORTABILITY OF PRIVATE

9 HEALTH INSURANCE

10 SEC. 801. EXCISE TAX IMPOSED ON FAILURE TO PROVIDE

11 FOR PREEXISTING CONDITION.

12 (a) IN GENERAL.—Chapter 47 (relating to taxes on

13 group health plans) is amended by adding at the end

14 thereof the following new section:

15 ‘‘SEC. 5000A. FAILURE TO SATISFY PREEXISTING CONDI16 TION REQUIREMENTS OF GROUP HEALTH

17 PLANS.

18 ‘‘(a) GENERAL RULE.—There is hereby imposed a

19 tax on the failure of—

20 ‘‘(1) a group health plan to meet the require21 ments of subsection (e), or

22 ‘‘(2) any person to meet the requirements of

23 subsection (f),

24 with respect to any covered individual.

25 ‘‘(b) AMOUNT OF TAX.—
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1 ‘‘(1) IN GENERAL.—The amount of the tax im2 posed by subsection (a) on any failure with respect

3 to a covered individual shall be $100 for each day

4 in the noncompliance period with respect to such

5 failure.

6 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

7 of this section, the term ‘noncompliance period’

8 means, with respect to any failure, the period—

9 ‘‘(A) beginning on the date such failure

10 first occurs, and

11 ‘‘(B) ending on the date such failure is

12 corrected.

13 ‘‘(3) CORRECTION.—A failure of a group health

14 plan to meet the requirements of subsection (e) with

15 respect to any covered individual shall be treated as

16 corrected if—

17 ‘‘(A) such failure is retroactively undone to

18 the extent possible, and

19 ‘‘(B) the covered individual is placed in a

20 financial position which is as good as such indi21 vidual would have been in had such failure not

22 occurred.

23 For purposes of applying subparagraph (B), the cov24 ered individual shall be treated as if the individual

25 had elected the most favorable coverage in light of
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1 the expenses incurred since the failure first oc2 curred.

3 ‘‘(e) LIMITATIONS ON AMOUNT OF TAX.—

4 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

5 DISCOVERED EXERCISING REASONABLE DILI6 GENCE.—No tax shall be imposed by subsection (a)

7 on any failure during any period for which it is es8 tablished to the satisfaction of the Secretary that

9 none of the persons referred to in subsection (d)

10 knew, or exercising reasonable diligence would have

11 known, that such failure existed.

12 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR13 RECTED WITHIN 30 DAYS.—No tax shall be imposed

14 by subsection (a) on any failure if—

15 ‘‘(A) such failure was due to reasonable

16 cause and not to willful neglect, and

17 ‘‘(B) such failure is corrected during the

18 30-day period beginning on the first day any of

19 the persons referred to in subsection (d) knew,

20 or exercising reasonable diligence would have

21 known, that such failure existed.

22 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

23 failure which is due to reasonable cause and not to

24 willful neglect, the Secretary may waive part or all

25 of the tax imposed by subsection (a) to the extent
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1 that the payment of such tax would be excessive rel2 ative to the failure involved.

3 ‘‘(d) LIABILITY FOR TAX.—

4 ‘‘(1) IN GENERAL.—Except as otherwise pro5 vided in this subsection, the following shall be liable

6 for the tax imposed by subsection (a) on a failure:

7 ‘‘(A) In the case of a group health plan

8 other than a self-insured group health plan, the

9 issuer.

10 ‘‘(B)(i) In the case of a self-insured group

11 health plan other than a multiemployer group

12 health plan, the employer.

13 ‘‘(ii) In the case of a self-insured multiem14 ployer group health plan, the plan.

15 ‘‘(C) Each person who is responsible (other

16 than in a capacity as an employee) for admin17 istering or providing benefits under the group

18 health plan, health insurance plan, or other

19 health benefit arrangement (including a self-in20 sured plan) and whose act or failure to act

21 caused (in whole or in part) the failure.

22 ‘‘(2) SPECIAL RULES FOR PERSONS DESCRIBED

23 IN PARAGRAPH (1)(C).—A person described in sub24 paragraph (C) (and not in subparagraphs (A) and

25 (B)) of paragraph (1) shall be liable for the tax im-
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1 posed by subsection (a) on any failure only if such

2 person assumed (under a legally enforceable written

3 agreement) responsibility for the performance of the

4 act to which the failure relates.

5 ‘‘(e) NO DISCRIMINATION BASED ON HEALTH STA6 TUS FOR CERTAIN SERVICES.—

7 ‘‘(1) IN GENERAL.—Except as provided under

8 paragraph (2), group health plans may not deny,

9 limit, or condition the coverage under (or benefits

10 of) the plan based on the health status, claims expe11 rience, receipt of health care, medical history, or

12 lack of evidence of insurability, of an individual.

13 ‘‘(2) TREATMENT OF PREEXISTING CONDITION

14 EXCLUSIONS FOR ALL SERVICES.—

15 ‘‘(A) IN GENERAL.—Subject to the suc16 ceeding provisions of this paragraph, group

17 health plans may exclude coverage with respect

18 to services related to treatment of a preexisting

19 condition, but the period of such exclusion may

20 not exceed 6 months. The exclusion of coverage

21 shall not apply to services furnished to

22 newborns.

23 ‘‘(B) CREDITING OF PREVIOUS COV24 ERAGE.—
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1 ‘‘(i) IN GENERAL.—A group health

2 plan shall provide that if an individual

3 under such plan is in a period of continu4 ous coverage (as defined in clause (ii)(I))

5 with respect to particular services as of the

6 date of initial coverage under such plan

7 (determined without regard to any waiting

8 period under such plan), any period of ex9 clusion of coverage with respect to a pre10 existing condition for such services or type

11 of services shall be reduced by 1 month for

12 each month in the period of continuous

13 coverage without regard to any waiting pe14 riod.

15 ‘‘(ii) DEFINITIONS.—As used in this

16 subparagraph:

17 ‘‘(I) PERIOD OF CONTINUOUS

18 COVERAGE.—The term ‘period of con19 tinuous coverage’ means, with respect

20 to particular services, the period be21 ginning on the date an individual is

22 enrolled under a health insurance

23 plan, title XVIII or XIX of the Social

24 Security Act, or other health benefit

25 arrangement (including a self-insured
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1 plan) which provides benefits with re2 spect to such services and ends on the

3 date the individual is not so enrolled

4 for a continuous period of more than

5 3 months.

6 ‘‘(II) PREEXISTING CONDI7 TION.—The term ‘preexisting condi8 tion’ means, with respect to coverage

9 under a group health plan, a condition

10 which has been diagnosed or treated

11 during the 3-month period ending on

12 the day before the first date of such

13 coverage without regard to any wait14 ing period.

15 ‘‘(f) DISCLOSURE OF COVERAGE, ETC.—Any person

16 who has provided coverage (other than under title XVIII

17 or XIX of the Social Security Act) during a period of con18 tinuous coverage (as defined in subsection (e)(2)(B)(ii)(I))

19 with respect to a covered individual shall disclose, upon

20 the request of a group health plan subject to the require21 ments of subsection (e), the coverage provided the covered

22 individual, the period of such coverage, and the benefits

23 provided under such coverage.

24 ‘‘(g) DEFINITIONS.—For purposes of this section—
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1 ‘‘(1) COVERED INDIVIDUAL.—The term ‘cov2 ered individual’ means—

3 ‘‘(A) an individual who is (or will be) pro4 vided coverage under a group health plan by

5 virtue of the performance of services by the in6 dividual for 1 or more persons maintaining the

7 plan (including as an employee defined in sec8 tion 401(c)(1)), and

9 ‘‘(B) the spouse or any dependent child of

10 such individual.

11 ‘‘(2) GROUP HEALTH PLAN.—The term ‘group

12 health plan’ has the meaning given such term by

13 section 5000(b)(1).’’.

14 (b) CLERICAL AMENDMENT.—The table of sections

15 for such chapter 47 is amended by adding at the end

16 thereof the following new item:

‘‘Sec. 5000A. Failure to satisfy preexisting condition requirements

of group health plans.’’.

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

18 this section shall apply to plan years beginning after De19 cember 31, 1992.

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