I
105TH CONGRESS
1ST SESSION
H. R. 2905
To provide for comprehensive reform for managed health care plans.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 7, 1997
Mr. NADLER introduced the following bill; which was referred to the Commit-
tee on Ways and Means, and in addition to the Committees on Com-
merce, and Education and the Workforce, for a period to be subsequently
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned
A BILL
To provide for comprehensive reform for managed health
care plans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Comprehensive Managed Health Care Reform Act of
1997’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Enforcement of requirements.
Sec. 4. Assuring adequate access to covered services and providers.
Sec. 5. Assuring adequate scope of coverage.
Sec. 6. Assuring unbiased medical determinations by health care professionals
and providers.
Sec. 7. Nondiscrimination against enrollees and in the selection of participating
providers; equitable access to networks.
Sec. 8. Disclosure of information.
Sec. 9. Grievance procedures and deadline for responding to requests for cov-
erage of services.
Sec. 10. Due process for health care professionals and providers.
Sec. 11. Requirements for quality improvement program and utilization review
programs.
Sec. 12. Minimum loss ratios; general consumer protections.
SEC. 2. DEFINITIONS.
(a) IN GENERAL.—For purposes of this Act:
(1) ENROLLEE.—The term ‘‘enrollee’’ means,
with respect to a managed care plan offered by a
managed care organization, an individual enrolled
with the organization for coverage under such a
plan.
(2) HEALTH CARE PROFESSIONAL.—The term
‘‘health care professional’’ means a physician or
other health care practitioner who is licensed under
State law with respect to the health care services the
practitioner furnishes.
(3) HEALTH PLAN.—The term ‘‘health plan’’
means a group health plan or health insurance cov-
erage offered by a health insurance issuer.
(4) MANAGED CARE ORGANIZATION.—The term
‘‘managed care organization’’ means any entity, in-
cluding a group health plan, health maintenance or-
ganization, or provider-sponsored organization, in re-
lation to its offering of a managed care plan, and in-
cludes any other entity that provides or manages the
coverage under such a plan under a contract or ar-
rangement with the entity.
(5) MANAGED CARE PLAN.—The term ‘‘man-
aged care plan’’ means a health plan offered by an
entity if the entity—
(A) provides or arranges for the provision
of health care items and services to enrollees in
the plan through participating health care pro-
fessionals and providers, or
(B) provides financial incentives (such as
variable copayments and deductibles) to induce
enrollees to obtain benefits through participat-
ing health care professionals and providers,
or both.
(6) PARTICIPATING.—The term ‘‘participating’’
means, with respect to a health care professional or
provider in relation to a health plan offered by an
entity, a physician or provider that furnishes health
care items and services to enrollees of the entity
under an agreement with the entity.
(7) PRIMARY CARE PROVIDER.—The term ‘‘pri-
mary care provider’’ means a health care profes-
sional who acts as a gatekeeper for the overall care
of an enrollee.
(8) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(9) STATE.—The term ‘‘State’’ includes the
District of Columbia, Puerto Rico, the Virgin Is-
lands, Guam, American Samoa, and the Northern
Mariana Islands.
(b) INCORPORATION
OF
GENERAL
DEFINITIONS
FROM HEALTH INSURANCE PORTABILITY AND ACCOUNT-
ABILITY ACT.—For purposes of this Act, the definitions
contained in section 2791 of the Public Health Service Act
(42 U.S.C. 300gg–91) shall apply under this Act.
SEC. 3. ENFORCEMENT OF REQUIREMENTS.
(a) APPLICATION TO GROUP HEALTH PLANS.—
(1) PUBLIC HEALTH SERVICE ACT.—For pur-
poses of applying title XXVII of the Public Health
Service Act, the requirements of the succeeding sec-
tions of this Act shall be treated as though they
were included in the subpart 2 of part A of such
title (42 U.S.C. 300gg–4 et seq.).
(2) EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974.—For purposes of applying part 7 of
subtitle B of title I of the Employee Retirement In-
come Security Act of 1974, the requirements of the
succeeding sections of this Act shall be treated as
though they were included in subpart B of such part
(29 U.S.C. 1185 et seq.).
(3) INTERNAL REVENUE CODE OF 1986.—For
purposes of applying chapter 100 of the Internal
Revenue Code of 1986, the requirements of the suc-
ceeding sections of this Act shall be treated as
though they were included in subchapter B of such
chapter.
(b) APPLICATION TO INDIVIDUAL HEALTH INSUR-
ANCE COVERAGE.—For purposes of applying title XXVII
of the Public Health Service Act, the requirements of the
succeeding sections of this Act also shall be treated as
though they were part of subpart 2 of part B of such title
(42 U.S.C. 300gg–51 et seq.).
(c) MEDICARE.—The Secretary may not enter into
a contract under section 1857 of the Social Security Act
(42 U.S.C. 1395w–27) with a Medicare+Choice organiza-
tion that is a managed care organization unless the con-
tract contains assurances satisfactory to the Secretary
that the organization will comply with the applicable re-
quirements of the succeeding sections of this Act.
(d) MEDICAID.—Notwithstanding any other provision
of law, no funds shall be paid to a State under section
1903(a)(1) of the Social Security Act (42 U.S.C.
1396b(a)(1)) with respect to medical assistance provided
through payment to a medicaid managed care organiza-
tion (as defined in section 1903(m)(1)(A) of such Act, 42
U.S.C. 1396b(m)(1)(A)) unless the contract with such or-
ganization contains assurances satisfactory to the Sec-
retary that the organization will comply with the applica-
ble requirements of the succeeding sections of this Act.
(e) SECRETARIAL ENFORCEMENT AUTHORITY.—
(1) IN GENERAL.—In addition to any other au-
thority provided under law, the Secretary shall es-
tablish sanctions, consistent with this subsection, for
the enforcement of the requirements of the succeed-
ing sections of this Act.
(2) 
PROGRESSIVE
CIVIL
MONETARY
PEN-
ALTIES.—Such sanctions shall include the imposition
of civil monetary penalties for violations of such re-
quirements. The amount of such penalties shall in-
crease as the frequency or severity of the violations
by a managed care organization increases.
(3) OPPORTUNITY
FOR
CORRECTIVE
ACTION
PLAN.—The Secretary shall provide an opportunity
for a managed care organization to implement a cor-
rective action plan before imposing sanctions for vio-
lations of such requirements.
(4) DISQUALIFICATION
FROM
MEDICARE
AND
MEDICAID.—In cases of repeated or egregious viola-
tions of such requirements by such an organization
that has entered into a contract under title XVIII or
XIX of the Social Security Act—
(A) the Secretary initially shall prohibit
the organization from enrolling any additional
individuals under either such title, and
(B) if the Secretary finds that the viola-
tions continue, the Secretary shall terminate
the contracts with the organization under such
titles and require the termination of enrollment
of individuals enrolled with the organization
under either such title.
(5) PRINTING LIST OF VIOLATORS.—The Sec-
retary shall periodically publish a list of the organi-
zations which have been sanctioned under this sub-
section, the nature of such sanctions, and the viola-
tions for which such sanctions were imposed. The
Secretary may exclude from such list an organiza-
tion that, in lieu of imposition of a sanction, is im-
plementing (or has completed implementation of) a
corrective plan.
(f) ADDITIONAL LIABILITY FOR WITHHOLDING OF
MEDICALLY NECESSARY CARE.—If a managed care orga-
nization in connection with a managed care plan fails
(through the curtailment of a hospital stay, a limitation
on covered tests, a limitation on treatment, or otherwise)
to provide any such benefit in accordance with the terms
of the plan, insofar as such failure occurs pursuant to a
clinically or medically inappropriate decision or determina-
tion resulting from—
(1) the application of any cost containment
technique,
(2) any utilization review directed at cost con-
tainment, or
(3) any other medical care delivery policy deci-
sion which restricts the ability of providers of medi-
cal care from utilizing their full discretion for treat-
ment of enrollees,
the organization, and any agent of the organization having
authority to make such decision or determination on be-
half of the organization, shall be jointly and severally lia-
ble to any enrollee aggrieved by such failure for actual
damages (including compensatory and consequential dam-
ages) proximately caused by such failure, and may, in the
court’s discretion, be liable to such enrollee for punitive
damages. The remedies under this subsection are in addi-
tion to remedies otherwise provided under this section.
(g) NO PREEMPTION OF STRICTER STATE LAW.—
(1) IN GENERAL.—Subject to paragraph (2),
this Act shall not be construed to supersede any pro-
vision of State law that provides protections in rela-
tion to health insurance coverage that are greater
than the protections provided under this Act.
(2) CONTINUED
PREEMPTION
WITH
RESPECT
TO
GROUP
HEALTH
PLANS.—Nothing in this Act
shall be construed to affect or modify the provisions
of section 514 of the Employee Retirement Income
Security Act of 1974 with respect to group health
plans.
(h) NULLIFICATION
OF CONTRARY CONTRACTUAL
PROVISIONS.—Any contract provision or agreement that
is in violation of any provision of this Act (or amendment
made by this Act) shall be null and void.
SEC. 4. ASSURING ADEQUATE ACCESS TO COVERED SERV-
ICES AND PROVIDERS.
(a) GENERAL ACCESS.—
(1) IN GENERAL.—Subject to paragraph (2), a
managed care organization offering a managed care
plan shall establish and maintain adequate arrange-
ments, as defined under regulations of the Secretary,
with a sufficient number, mix, and distribution of
health care professionals and providers to assure
that covered items and services are available and ac-
cessible to each enrollee under the plan—
(A) in the service area of the organization;
(B) in a variety of sites of service;
(C) with reasonable promptness (including
reasonable hours of operation and after-hours
services);
(D) with reasonable proximity to the resi-
dences and workplaces of enrollees; and
(E) in a manner that—
(i) takes into account the diverse
needs of enrollees, and
(ii) reasonably assures continuity of
care.
(2) TREATMENT OF ORGANIZATIONS SERVING
CERTAIN AREAS.—For a managed care organization
that serves a rural or medically underserved area,
the organization shall be treated as meeting the re-
quirement of paragraph (1) if the organization has
arrangements with a sufficient number, mix, and
distribution of health care professionals and provid-
ers having a history of serving such areas. The use
of telemedicine and other innovative means to pro-
vide covered items and services by a managed care
organization that serves a rural or medically under-
served area shall also be considered in determining
whether the requirement of such paragraph is met.
(3) DEFINITIONS.—For purposes of paragraph
(1):
(A) MEDICALLY
UNDERSERVED
AREA.—
The term ‘‘medically underserved area’’ means
an area that is designated as a health profes-
sional shortage area under section 332 of the
Public Health Service Act (42 U.S.C. 254e) or
as a medically underserved area for purposes of
section 330 or 1302(7) of such Act (42 U.S.C.
254c, 300e–1(7)).
(B) RURAL AREA.—The term ‘‘rural area’’
means an area that is not within a Standard
Metropolitan Statistical Area or a New England
County Metropolitan Area (as defined by the
Office of Management and Budget).
(b) ACCESS TO SPECIALIZED SERVICES.—
(1) IN GENERAL.—A managed care organiza-
tion shall demonstrate that enrollees have access to
specialized treatment expertise when such treatment
is medically or clinically indicated in the professional
judgment of the treating health care professional, in
consultation with the enrollee.
(2) MEDICAL SPECIALISTS.—A managed care
organization shall develop a system to permit enroll-
ees to use a medical specialist primary care provider
as a primary care provider when the enrollee’s medi-
cal conditions (including suffering from a chronic
disease or medical condition) warrant it.
(3) STANDING REFERRALS TO SPECIALISTS.—A
managed care organization shall provide for a stand-
ing referral to a medical specialist if the treating
primary care provider, in consultation with such spe-
cialists, determines such a referral is necessary to
provide adequate and continuous care for the pa-
tient.
(4) SPECIALIZED TREATMENT EXPERTISE DE-
FINED.—For purposes of this subsection, the term
‘‘specialized treatment expertise’’ means expertise in
diagnosing or treating—
(A) unusual diseases or conditions, or
(B) diseases and conditions that are un-
usually difficult to diagnose or treat.
(5) MEDICAL SPECIALIST DEFINED.—For pur-
poses of paragraph (2), the term ‘‘medical special-
ist’’ means, with respect to a managed care organi-
zation, a health care professional who is certified by
a national accreditation board (or pursuant to State
licensing authority) as possessing specialized treat-
ment expertise.
(c) USE OF GYNECOLOGISTS AS PRIMARY CARE PRO-
VIDERS.—A managed care organization may not require
an enrollee to obtain a referral from a physician in order
to obtain covered items and services from a physician who
specializes in obstetrics and gynecology.
(d) EMERGENCY AND URGENT CARE.—
(1) IN GENERAL.—A managed care organiza-
tion shall—
(A) assure the availability and accessibility
of medically or clinically necessary emergency
services and urgent care services within the
service area of the organization 24 hours a day,
7 days a week;
(B) require no prior authorization for
items and services furnished in a hospital emer-
gency department to an enrollee (without re-
gard to whether the health care professional or
hospital has a contractual or other arrangement
with the organization) with symptoms that
would 
reasonably 
suggest 
to 
a 
prudent
layperson that there is an emergency medical
condition (including items and services de-
scribed in subparagraph (C)(iii));
(C) cover (and make reasonable payments
for)—
(i) emergency services,
(ii) services that are not emergency
services but are described in subparagraph
(B),
(iii) medical screening examinations
and other ancillary services necessary to
diagnose, treat, and stabilize an emergency
medical condition, and
(iv) urgent care services,
without regard to whether the health care pro-
fessional or provider furnishing such services
has a contractual (or other) arrangement with
the organization; and
(D) make prior authorization determina-
tions for—
(i) services that are furnished in a
hospital emergency department (other than
services described in clauses (i) and (iii) of
subparagraph (C)), and
(ii) urgent care services,
within the time periods specified in (or pursu-
ant to) sections 9(c)(3) and 10(f).
(2) DEFINITIONS.—For purposes of this sub-
section:
(A) EMERGENCY
MEDICAL
CONDITION.—
The term ‘‘emergency medical condition’’ means
a medical condition (including emergency labor
and delivery) manifesting itself by acute symp-
toms of sufficient severity (including severe
pain) such that a prudent layperson, who pos-
sesses an average knowledge of health and med-
icine, could reasonably expect that the absence
of immediate medical attention might result
in—
(i) placing the patient’s health in seri-
ous jeopardy,
(ii) serious impairment to bodily func-
tions, or
(iii) serious dysfunction of any bodily
organ or part.
(B) EMERGENCY
SERVICES.—The term
‘‘emergency services’’ means health care items
and services that are necessary for the diag-
nosis, treatment, and stabilization of an emer-
gency medical condition.
(C) URGENT CARE SERVICES.—The term
‘‘urgent care services’’ means health care items
and services that are necessary for the treat-
ment of a condition that—
(i) is not an emergency medical condition,
(ii) requires prompt medical or clinical
treatment, and
(iii) poses a danger to the patient if not
treated in a timely manner, as defined by the
Secretary in consultation with relevant treating
health care professionals or providers.
(e) RIGHT
TO REFERRAL
TO NONPARTICIPATING
PROVIDERS.—A managed care organization shall permit
an enrollee to obtain a referral to a nonparticipating pro-
vider if the organization does not have a participating pro-
vider with appropriate training and experience to meet the
enrollee’s needs and shall pay for care provided pursuant
to such a referral.
(f) ACCESS TO CENTERS OF EXCELLENCE FOR INDI-
VIDUALS REQUIRING SPECIALIZED CARE.—
(1) IN GENERAL.—Each managed care organi-
zation shall demonstrate that enrollees who have
chronic diseases or otherwise require specialized
services, as determined by the primary care provider
or treating specialist, have access through the orga-
nization to specialized treatment expertise at des-
ignated centers of excellence in order to provide ade-
quate and continuous care for such enrollees. Such
an organization shall demonstrate such access ac-
cording to standards developed by the Secretary, in-
cluding requirements relating to arrangements with
such centers and referral of enrollees to such cen-
ters.
(2) DESIGNATION
PROCESS.—The Secretary
shall establish a process for the designation of facili-
ties as centers of excellence for purposes of this sub-
section. A facility may not be designated unless the
facility is determined—
(A) to provide specialty care,
(B) to deliver care for complex cases re-
quiring specialized treatment or for individuals
with chronic diseases, and
(C) to meet other requirements that may
be established by the Secretary relating to spe-
cialized education and training of health care
professionals, participation in peer-reviewed re-
search, or treatment of patients from outside
the geographic area of the facility.
(g) PATIENT ACCESS TO CLINICAL STUDIES.—
(1) PERMITTING PARTICIPATION IN APPROVED
CLINICAL STUDIES.—A managed care organization
may not deny (or limit or impose additional condi-
tions on) coverage of items and services furnished to
an enrollee if—
(A) the enrollee is participating in an ap-
proved clinical study,
(B) the items and services are furnished
according to the design of the study or to treat
conditions resulting from participation in the
study, and
(C) the items and services would otherwise
be covered by the organization except for the
fact that they are provided in connection with
participation in such a study.
Such an organization may not discriminate against
an enrollee on the basis of the enrollee’s participa-
tion in such a study.
(2) CONSTRUCTION.—Nothing in paragraph (1)
shall be construed as requiring an organization to
provide for payment for items and services routinely
paid for as part of an approved clinical study.
(3) APPROVED
CLINICAL
STUDY
DEFINED.—
For purposes of this subsection, the term ‘‘approved
clinical study’’ means—
(A) a research study approved by the Sec-
retary, the Director of the National Institutes
of Health, the Commissioner of the Food and
Drug Administration, the Secretary of Veterans
Affairs, the Secretary of Defense, or a qualified
nongovernmental research entity (as defined in
guidelines of the National Institute of Health),
or
(B) a peer-reviewed and approved research
program, as defined by the Secretary, con-
ducted for the primary purpose of determining
whether or not a treatment is safe, efficacious,
or having any other characteristic of a treat-
ment which must be demonstrated in order for
the treatment to be medically necessary or ap-
propriate.
(h) ACCESS TO EXPERIMENTAL TREATMENTS.—A
managed care organization shall provide access to experi-
mental treatments in the case of enrollees who have a life-
threatening disease or condition, when determined to be
medically necessary and appropriate by the treating health
care provider in consultation with the enrollee.
(i) REQUIREMENTS REGARDING USE OF PRESCRIP-
TION DRUG FORMULARIES.—
(1) IN GENERAL.—A managed care organiza-
tion shall provide coverage for a prescribed drug, ap-
proved for dispensing by the Food and Drug Admin-
istration, whether or not such drug is on a prescrip-
tion drug formulary used by the organization if the
use of such drug is judged to be medically necessary
and appropriate by the prescribing health care pro-
fessional.
(2) NOT PERMITTING CHANGES IN PRESCRIP-
TIONS.—No pharmacist or health care facility shall
change the prescription prescribed by a health care
provider, or change the drug dispensed to carry out
a prescription for an enrollee of a managed care
plan unless—
(A) the prescribing health care provider
has approved the change, and
(B) the enrollee has been informed and
given consent to the change.
(3) USE OF GENERICS PERMITTED.—Nothing
in this subsection shall be construed as preventing a
managed care organization from using medically ap-
proved generic drugs.
SEC. 5. ASSURING ADEQUATE SCOPE OF COVERAGE.
(a) COVERAGE OF PRESCRIPTION DRUGS, PREVEN-
TIVE SERVICES, AND INPATIENT AND OUTPATIENT SERV-
ICES.—A managed care organization, in offering coverage
under a managed care plan, shall include coverage of pre-
scription drugs, preventive services, and inpatient and out-
patient services, and shall—
(1) include coverage of annual screening mam-
mography for any female enrollee who is 40 years of
age or older and for any female enrollee who is less
than 40 years of age and who has a medical condi-
tion that makes such coverage medically necessary
and appropriate;
(2) not restrict benefits for any hospital length
of stay in connection with—
(A) a mastectomy for the treatment of
breast cancer to less than 48 hours, or
(B) a lymph node dissection for the treat-
ment of breast cancer to less than 24 hours;
and
(3) not exclude or restrict benefits—
(A) for prescription contraceptive drugs or
devices approved by the Food and Drug Admin-
istration, or generic equivalents approved as
substitutable by the Food and Drug Adminis-
tration, or
(B) for outpatient contraceptive services
(including consultations, examinations, proce-
dures, and medical services, provided on an out-
patient basis and related to the use of contra-
ceptive methods (including natural family plan-
ning) to prevent an unintended pregnancy).
(b) MENTAL HEALTH PARITY.—A managed care or-
ganization, in offering a managed care plan, may not dis-
tinguish in the amount, duration, or scope of coverage
under the plan among items and services based on whether
the items and services relate to mental health (or treat-
ment of mental illness or disease) or to physical health
(or treatment of physical illness or disease).
(c) COVERAGE OF SERVICES OF ESSENTIAL COMMU-
NITY PROVIDERS.—
(1) IN GENERAL.—The Secretary may require a
managed care organization to enter into agreements
with essential community providers serving the orga-
nization’s service area (in relation to the coverage)
to join the organization’s provider network if such
Secretary finds that such agreements are necessary
for the organization to make contracted for services
(A) available and accessible to each enrollee, within
the area served by the organization (in relation to
such coverage), with reasonable promptness and in
a manner which assures continuity, and (B) when
medically necessary, available and accessible 24
hours a day and 7 days a week.
(2) ESSENTIAL
COMMUNITY
PROVIDER
DE-
FINED.—For purposes of paragraph (1), the term
‘‘essential community provider’’ means a rural
health clinic (described in paragraph (2) of section
1861(aa) of the Social Security Act, 42 U.S.C.
1395x(aa)), a Federally qualified health center (de-
scribed in paragraph (4) of such section), and any
other provider meeting such standards as the Sec-
retary may require.
(d) COVERAGE OF EMERGENCY SERVICES.—A man-
aged care organization shall provide for coverage of emer-
gency services (as defined in section 4(d)(2)(B)), 24-hours
a day, 7-days-a-week, without the need for any prior ap-
proval for coverage of such services.
(e) REQUIREMENT
FOR POINT
OF SERVICE OP-
TION.—A managed care organization that offers a man-
aged care plan shall offer each enrollee an enrollment op-
tion under which the enrollee may receive benefits for serv-
ices provided by nonparticipating health care professionals
and providers. The organization may require that the en-
rollee pay a reasonable premium to reflect the cost of such
option.
(f) REQUIREMENT FOR CONTINUITY OF CARE.—A
managed care organization shall provide for continuity of
care following enrollment, including appropriate continuity
of care following termination of participation of a provider
that is providing a course of treatment to an enrollee at
the time of the termination.