and orders governing the insurance business per-
taining to— 
‘‘(i) individual health insurance cov-
erage issued by a health insurance issuer; 
‘‘(ii) the offer, sale, rating (including 
medical 
underwriting), 
renewal, 
and 
issuance of individual health insurance cov-
erage to an individual; 
‘‘(iii) the provision to an individual in 
relation to individual health insurance cov-
erage of health care and insurance related 
services; 
‘‘(iv) the provision to an individual in 
relation to individual health insurance cov-
erage of management, operations, and in-
vestment activities of a health insurance 
issuer; and 
‘‘(v) the provision to an individual in 
relation to individual health insurance cov-
erage of loss control and claims administra-
tion for a health insurance issuer with re-
spect to liability for which the issuer pro-
vides insurance. 
‘‘(B) EXCEPTION.—Such term does not in-
clude any law, rule, regulation, agreement, or
order governing the use of care or cost manage-
ment techniques, including any requirement re-
lated to provider contracting, network access or 
adequacy, health care data collection, or quality 
assurance. 
‘‘(8) STATE.—The term ‘State’ means only the 
50 States and the District of Columbia. 
‘‘(9) UNFAIR CLAIMS SETTLEMENT PRACTICES.— 
The term ‘unfair claims settlement practices’ means 
only the following practices: 
‘‘(A) Knowingly misrepresenting to claim-
ants and insured individuals relevant facts or 
policy provisions relating to coverage at issue. 
‘‘(B) Failing to acknowledge with reason-
able promptness pertinent communications with 
respect to claims arising under policies. 
‘‘(C) Failing to adopt and implement rea-
sonable standards for the prompt investigation 
and settlement of claims arising under policies. 
‘‘(D) Failing to effectuate prompt, fair, and 
equitable settlement of claims submitted in which 
liability has become reasonably clear. 
‘‘(E) Refusing to pay claims without con-
ducting a reasonable investigation.
‘‘(F) Failing to affirm or deny coverage of 
claims within a reasonable period of time after 
having completed an investigation related to 
those claims. 
‘‘(G) A pattern or practice of compelling in-
sured individuals or their beneficiaries to insti-
tute suits to recover amounts due under its poli-
cies by offering substantially less than the 
amounts ultimately recovered in suits brought by 
them. 
‘‘(H) A pattern or practice of attempting to 
settle or settling claims for less than the amount 
that a reasonable person would believe the in-
sured individual or his or her beneficiary was 
entitled by reference to written or printed adver-
tising material accompanying or made part of 
an application. 
‘‘(I) Attempting to settle or settling claims 
on the basis of an application that was materi-
ally altered without notice to, or knowledge or 
consent of, the insured. 
‘‘(J) Failing to provide forms necessary to 
present claims within 15 calendar days of a re-
quests with reasonable explanations regarding 
their use.
‘‘(K) Attempting to cancel a policy in less 
time than that prescribed in the policy or by the 
law of the primary State. 
‘‘(10) FRAUD AND ABUSE.—The term ‘fraud and 
abuse’ means an act or omission committed by a per-
son who, knowingly and with intent to defraud, com-
mits, or conceals any material information con-
cerning, one or more of the following: 
‘‘(A) Presenting, causing to be presented or 
preparing with knowledge or belief that it will be 
presented to or by an insurer, a reinsurer, broker 
or its agent, false information as part of, in sup-
port of or concerning a fact material to one or 
more of the following: 
‘‘(i) An application for the issuance or 
renewal of an insurance policy or reinsur-
ance contract. 
‘‘(ii) The rating of an insurance policy 
or reinsurance contract. 
‘‘(iii) A claim for payment or benefit 
pursuant to an insurance policy or reinsur-
ance contract. 
‘‘(iv) Premiums paid on an insurance 
policy or reinsurance contract.
‘‘(v) Payments made in accordance 
with the terms of an insurance policy or re-
insurance contract. 
‘‘(vi) A document filed with the com-
missioner or the chief insurance regulatory 
official of another jurisdiction. 
‘‘(vii) The financial condition of an 
insurer or reinsurer. 
‘‘(viii) The formation, acquisition, 
merger, reconsolidation, dissolution or with-
drawal from one or more lines of insurance 
or reinsurance in all or part of a State by 
an insurer or reinsurer. 
‘‘(ix) The issuance of written evidence 
of insurance. 
‘‘(x) The reinstatement of an insurance 
policy. 
‘‘(B) Solicitation or acceptance of new or 
renewal insurance risks on behalf of an insurer 
reinsurer or other person engaged in the business 
of insurance by a person who knows or should 
know that the insurer or other person responsible 
for the risk is insolvent at the time of the trans-
action.
‘‘(C) Transaction of the business of insur-
ance in violation of laws requiring a license, cer-
tificate of authority or other legal authority for 
the transaction of the business of insurance. 
‘‘(D) Attempt to commit, aiding or abetting 
in the commission of, or conspiracy to commit 
the acts or omissions specified in this paragraph. 
‘‘SEC. 2796. APPLICATION OF LAW. 
‘‘(a) IN GENERAL.—The covered laws of the primary 
State shall apply to individual health insurance coverage 
offered by a health insurance issuer in the primary State 
and in any secondary State, but only if the coverage and 
issuer comply with the conditions of this section with re-
spect to the offering of coverage in any secondary State. 
‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC-
ONDARY STATE.—Except as provided in this section, a 
health insurance issuer with respect to its offer, sale, rating 
(including medical underwriting), renewal, and issuance of 
individual health insurance coverage in any secondary 
State is exempt from any covered laws of the secondary 
State (and any rules, regulations, agreements, or orders 
sought or issued by such State under or related to such cov-
ered laws) to the extent that such laws would— 
‘‘(1) make unlawful, or regulate, directly or indi-
rectly, the operation of the health insurance issuer op-
erating in the secondary State, except that any sec-
ondary State may require such an issuer— 
‘‘(A) to pay, on a nondiscriminatory basis, 
applicable premium and other taxes (including 
high risk pool assessments) which are levied on 
insurers and surplus lines insurers, brokers, or 
policyholders under the laws of the State; 
‘‘(B) to register with and designate the 
State insurance commissioner as its agent solely 
for the purpose of receiving service of legal docu-
ments or process; 
‘‘(C) to submit to an examination of its fi-
nancial condition by the State insurance com-
missioner in any State in which the issuer is 
doing business to determine the issuer’s financial 
condition, if— 
‘‘(i) the State insurance commissioner 
of the primary State has not done an exam-
ination within the period recommended by 
the National Association of Insurance Com-
missioners; and 
‘‘(ii) any such examination is con-
ducted in accordance with the examiners’ 
handbook of the National Association of In-
surance Commissioners and is coordinated
to avoid unjustified duplication and un-
justified repetition; 
‘‘(D) to comply with a lawful order 
issued— 
‘‘(i) in a delinquency proceeding com-
menced by the State insurance commis-
sioner if there has been a finding of finan-
cial impairment under subparagraph (C); 
or 
‘‘(ii) in a voluntary dissolution pro-
ceeding; 
‘‘(E) to comply with an injunction issued 
by a court of competent jurisdiction, upon a pe-
tition by the State insurance commissioner alleg-
ing that the issuer is in hazardous financial con-
dition; 
‘‘(F) to participate, on a nondiscriminatory 
basis, in any insurance insolvency guaranty as-
sociation or similar association to which a 
health insurance issuer in the State is required 
to belong; 
‘‘(G) to comply with any State law regard-
ing fraud and abuse (as defined in section 
2795(10)), except that if the State seeks an in-
junction regarding the conduct described in this
subparagraph, such injunction must be obtained 
from a court of competent jurisdiction; 
‘‘(H) to comply with any State law regard-
ing unfair claims settlement practices (as de-
fined in section 2795(9)); or 
‘‘(I) to comply with the applicable require-
ments for independent review under section 2798 
with respect to coverage offered in the State; 
‘‘(2) require any individual health insurance 
coverage issued by the issuer to be countersigned by 
an insurance agent or broker residing in that Sec-
ondary State; or 
‘‘(3) otherwise discriminate against the issuer 
issuing insurance in both the primary State and in 
any secondary State. 
‘‘(c) CLEAR
AND
CONSPICUOUS
DISCLOSURE.—A 
health insurance issuer shall provide the following notice, 
in 12-point bold type, in any insurance coverage offered 
in a secondary State under this part by such a health insur-
ance issuer and at renewal of the policy, with the 5 blank 
spaces therein being appropriately filled with the name of 
the health insurance issuer, the name of primary State, the 
name of the secondary State, the name of the secondary 
State, and the name of the secondary State, respectively, 
for the coverage concerned:
‘Notice 
‘This policy is issued by lllll and is 
governed by the laws and regulations of the 
State of lllll, and it has met all the laws 
of that State as determined by that State’s De-
partment of Insurance. This policy may be less 
expensive than others because it is not subject 
to all of the insurance laws and regulations of 
the State of lllll, including coverage of 
some services or benefits mandated by the law 
of the State of lllll. Additionally, this 
policy is not subject to all of the consumer pro-
tection laws or restrictions on rate changes of 
the State of lllll. As with all insurance 
products, before purchasing this policy, you 
should carefully review the policy and deter-
mine what health care services the policy cov-
ers and what benefits it provides, including 
any exclusions, limitations, or conditions for 
such services or benefits.’. 
‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS 
AND PREMIUM INCREASES.— 
‘‘(1) IN GENERAL.—For purposes of this section, 
a health insurance issuer that provides individual 
health insurance coverage to an individual under this
part in a primary or secondary State may not upon 
renewal— 
‘‘(A) move or reclassify the individual in-
sured under the health insurance coverage from 
the class such individual is in at the time of 
issue of the contract based on the health-status 
related factors of the individual; or 
‘‘(B) increase the premiums assessed the in-
dividual for such coverage based on a health sta-
tus-related factor or change of a health status-re-
lated factor or the past or prospective claim ex-
perience of the insured individual. 
‘‘(2) CONSTRUCTION.—Nothing in paragraph (1) 
shall be construed to prohibit a health insurance 
issuer— 
‘‘(A) from terminating or discontinuing 
coverage or a class of coverage in accordance 
with subsections (b) and (c) of section 2742; 
‘‘(B) from raising premium rates for all 
policy holders within a class based on claims ex-
perience; 
‘‘(C) from changing premiums or offering 
discounted premiums to individuals who engage 
in wellness activities at intervals prescribed by
the issuer, if such premium changes or incen-
tives— 
‘‘(i) are disclosed to the consumer in 
the insurance contract; 
‘‘(ii) are based on specific wellness ac-
tivities that are not applicable to all indi-
viduals; and 
‘‘(iii) are not obtainable by all indi-
viduals to whom coverage is offered; 
‘‘(D) from reinstating lapsed coverage; or 
‘‘(E) from retroactively adjusting the rates 
charged an insured individual if the initial rates 
were set based on material misrepresentation by 
the individual at the time of issue. 
‘‘(e) PRIOR
OFFERING
OF
POLICY
IN
PRIMARY 
STATE.—A health insurance issuer may not offer for sale 
individual health insurance coverage in a secondary State 
unless that coverage is currently offered for sale in the pri-
mary State. 
‘‘(f) LICENSING OF AGENTS OR BROKERS FOR HEALTH 
INSURANCE ISSUERS.—Any State may require that a per-
son acting, or offering to act, as an agent or broker for a 
health insurance issuer with respect to the offering of indi-
vidual health insurance coverage obtain a license from that 
State, with commissions or other compensation subject to
the provisions of the laws of that State, except that a State 
may not impose any qualification or requirement which 
discriminates against a nonresident agent or broker. 
‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE INSUR-
ANCE
COMMISSIONER.—Each health insurance issuer 
issuing individual health insurance coverage in both pri-
mary and secondary States shall submit— 
‘‘(1) to the insurance commissioner of each State 
in which it intends to offer such coverage, before it 
may offer individual health insurance coverage in 
such State— 
‘‘(A) a copy of the plan of operation or fea-
sibility study or any similar statement of the 
policy being offered and its coverage (which shall 
include the name of its primary State and its 
principal place of business); 
‘‘(B) written notice of any change in its 
designation of its primary State; and 
‘‘(C) written notice from the issuer of the 
issuer’s compliance with all the laws of the pri-
mary State; and 
‘‘(2) to the insurance commissioner of each sec-
ondary State in which it offers individual health in-
surance coverage, a copy of the issuer’s quarterly fi-
nancial statement submitted to the primary State,
which statement shall be certified by an independent 
public accountant and contain a statement of opinion 
on loss and loss adjustment expense reserves made 
by— 
‘‘(A) a member of the American Academy of 
Actuaries; or 
‘‘(B) a qualified loss reserve specialist. 
‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.—Noth-
ing in this section shall be construed to affect the authority 
of any Federal or State court to enjoin— 
‘‘(1) the solicitation or sale of individual health 
insurance coverage by a health insurance issuer to 
any person or group who is not eligible for such in-
surance; or 
‘‘(2) the solicitation or sale of individual health 
insurance coverage that violates the requirements of 
the law of a secondary State which are described in 
subparagraphs (A) through (H) of section 2796(b)(1). 
‘‘(i) POWER OF SECONDARY STATES TO TAKE ADMIN-
ISTRATIVE ACTION.—Nothing in this section shall be con-
strued to affect the authority of any State to enjoin conduct 
in violation of that State’s laws described in section 
2796(b)(1). 
‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.—
‘‘(1) IN GENERAL.—Subject to the provisions of 
subsection (b)(1)(G) (relating to injunctions) and 
paragraph (2), nothing in this section shall be con-
strued to affect the authority of any State to make use 
of any of its powers to enforce the laws of such State 
with respect to which a health insurance issuer is not 
exempt under subsection (b). 
‘‘(2) COURTS OF COMPETENT JURISDICTION.—If 
a State seeks an injunction regarding the conduct de-
scribed in paragraphs (1) and (2) of subsection (h), 
such injunction must be obtained from a Federal or 
State court of competent jurisdiction. 
‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 
section shall affect the authority of any State to bring ac-
tion in any Federal or State court. 
‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in this 
section shall be construed to affect the applicability of State 
laws generally applicable to persons or corporations. 
‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO 
HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 
health insurance issuer is offering coverage in a primary 
State that does not accommodate residents of secondary 
States or does not provide a working mechanism for resi-
dents of a secondary State, and the issuer is offering cov-
erage under this part in such secondary State which has
not adopted a qualified high risk pool as its acceptable al-
ternative mechanism (as defined in section 2744(c)(2)), the 
issuer shall, with respect to any individual health insurance 
coverage offered in a secondary State under this part, com-
ply with the guaranteed availability requirements for eligi-
ble individuals in section 2741. 
‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 
BEFORE ISSUER MAY SELL INTO SECONDARY 
STATES. 
‘‘A health insurance issuer may not offer, sell, or issue 
individual health insurance coverage in a secondary State 
if the State insurance commissioner does not use a risk- 
based capital formula for the determination of capital and 
surplus requirements for all health insurance issuers. 
‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE-
DURES. 
‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur-
ance issuer may not offer, sell, or issue individual health 
insurance coverage in a secondary State under the provi-
sions of this title unless—— 
‘‘(1) both the secondary State and the primary 
State have legislation or regulations in place estab-
lishing an independent review process for individuals 
who are covered by individual health insurance cov-
erage, or
‘‘(2) in any case in which the requirements of 
subparagraph (A) are not met with respect to the ei-
ther of such States, the issuer provides an inde-
pendent review mechanism substantially identical (as 
determined by the applicable State authority of such 
State) to that prescribed in the ‘Health Carrier Exter-
nal Review Model Act’ of the National Association of 
Insurance Commissioners for all individuals who 
purchase insurance coverage under the terms of this 
part, except that, under such mechanism, the review 
is conducted by an independent medical reviewer, or 
a panel of such reviewers, with respect to whom the 
requirements of subsection (b) are met. 
‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL RE-
VIEWERS.—In the case of any independent review mecha-
nism referred to in subsection (a)(2)— 
‘‘(1) IN GENERAL.—In referring a denial of a 
claim to an independent medical reviewer, or to any 
panel of such reviewers, to conduct independent med-
ical review, the issuer shall ensure that— 
‘‘(A) each independent medical reviewer 
meets the qualifications described in paragraphs 
(2) and (3); 
‘‘(B) with respect to each review, each re-
viewer meets the requirements of paragraph (4)
and the reviewer, or at least 1 reviewer on the 
panel, meets the requirements described in para-
graph (5); and 
‘‘(C) compensation provided by the issuer to 
each reviewer is consistent with paragraph (6). 
‘‘(2) LICENSURE AND EXPERTISE.—Each inde-
pendent medical reviewer shall be a physician 
(allopathic or osteopathic) or health care professional 
who— 
‘‘(A) is appropriately credentialed or li-
censed in 1 or more States to deliver health care 
services; and 
‘‘(B) typically treats the condition, makes 
the diagnosis, or provides the type of treatment 
under review. 
‘‘(3) INDEPENDENCE.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each independent medical reviewer in 
a case shall— 
‘‘(i) not be a related party (as defined 
in paragraph (7)); 
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with 
such a party; and
‘‘(iii) not otherwise have a conflict of 
interest with such a party (as determined 
under regulations). 
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to— 
‘‘(i) prohibit an individual, solely on 
the basis of affiliation with the issuer, from 
serving as an independent medical reviewer 
if— 
‘‘(I) a non-affiliated individual is 
not reasonably available; 
‘‘(II) the affiliated individual is 
not involved in the provision of items 
or services in the case under review; 
‘‘(III) the fact of such an affili-
ation is disclosed to the issuer and the 
enrollee (or authorized representative) 
and neither party objects; and 
‘‘(IV) the affiliated individual is 
not an employee of the issuer and does 
not provide services exclusively or pri-
marily to or on behalf of the issuer; 
‘‘(ii) prohibit an individual who has 
staff privileges at the institution where the 
treatment involved takes place from serving
as an independent medical reviewer merely 
on the basis of such affiliation if the affili-
ation is disclosed to the issuer and the en-
rollee (or authorized representative), and 
neither party objects; or 
‘‘(iii) prohibit receipt of compensation 
by an independent medical reviewer from 
an entity if the compensation is provided 
consistent with paragraph (6). 
‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL 
IN SAME FIELD.— 
‘‘(A) IN
GENERAL.—In a case involving 
treatment, or the provision of items or services— 
‘‘(i) by a physician, a reviewer shall be 
a practicing physician (allopathic or osteo-
pathic) of the same or similar specialty, as 
a physician who, acting within the appro-
priate scope of practice within the State in 
which the service is provided or rendered, 
typically treats the condition, makes the di-
agnosis, or provides the type of treatment 
under review; or 
‘‘(ii) by a non-physician health care 
professional, the reviewer, or at least 1 
member of the review panel, shall be a prac-
ticing non-physician health care profes-
sional of the same or similar specialty as 
the non-physician health care professional 
who, acting within the appropriate scope of 
practice within the State in which the serv-
ice is provided or rendered, typically treats 
the condition, makes the diagnosis, or pro-
vides the type of treatment under review. 
‘‘(B) PRACTICING DEFINED.—For purposes 
of this paragraph, the term ‘practicing’ means, 
with respect to an individual who is a physician 
or other health care professional, that the indi-
vidual provides health care services to individual 
patients on average at least 2 days per week. 
‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 
external review relating to a child, a reviewer shall 
have expertise under paragraph (2) in pediatrics. 
‘‘(6) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by the issuer to an 
independent medical reviewer in connection with a 
review under this section shall— 
‘‘(A) not exceed a reasonable level; and 
‘‘(B) not be contingent on the decision ren-
dered by the reviewer.
‘‘(7) RELATED PARTY DEFINED.—For purposes 
of this section, the term ‘related party’ means, with 
respect to a denial of a claim under a coverage relat-
ing to an enrollee, any of the following: 
‘‘(A) The issuer involved, or any fiduciary, 
officer, director, or employee of the issuer. 
‘‘(B) The enrollee (or authorized representa-
tive). 
‘‘(C) The health care professional that pro-
vides the items or services involved in the denial. 
‘‘(D) The institution at which the items or 
services (or treatment) involved in the denial are 
provided. 
‘‘(E) The manufacturer of any drug or 
other item that is included in the items or serv-
ices involved in the denial. 
‘‘(F) Any other party determined under any 
regulations to have a substantial interest in the 
denial involved. 
‘‘(8) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) 
ENROLLEE.—The 
term 
‘enrollee’ 
means, with respect to health insurance coverage 
offered by a health insurance issuer, an indi-
vidual enrolled with the issuer to receive such 
coverage. 
‘‘(B) HEALTH
CARE
PROFESSIONAL.—The 
term ‘health care professional’ means an indi-
vidual who is licensed, accredited, or certified 
under State law to provide specified health care 
services and who is operating within the scope of 
such licensure, accreditation, or certification. 
‘‘SEC. 2799. ENFORCEMENT. 
‘‘(a) IN GENERAL.—Subject to subsection (b), with re-
spect to specific individual health insurance coverage the 
primary State for such coverage has sole jurisdiction to en-
force the primary State’s covered laws in the primary State 
and any secondary State. 
‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 
subsection (a) shall be construed to affect the authority of 
a secondary State to enforce its laws as set forth in the 
exception specified in section 2796(b)(1). 
‘‘(c) COURT INTERPRETATION.—In reviewing action 
initiated by the applicable secondary State authority, the 
court of competent jurisdiction shall apply the covered laws 
of the primary State. 
‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 
of individual health insurance coverage offered in a sec-
ondary State that fails to comply with the covered laws of
the primary State, the applicable State authority of the sec-
ondary State may notify the applicable State authority of 
the primary State.’’. 
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to individual health insurance cov-
erage offered, issued, or sold after the date that is one year 
after the date of the enactment of this Act. 
(c) GAO ONGOING STUDY AND REPORTS.— 
(1) STUDY.—The Comptroller General of the 
United States shall conduct an ongoing study con-
cerning the effect of the amendment made by sub-
section (a) on— 
(A) the number of uninsured and under-in-
sured; 
(B) the availability and cost of health in-
surance policies for individuals with pre-existing 
medical conditions; 
(C) the availability and cost of health in-
surance policies generally; 
(D) the elimination or reduction of different 
types of benefits under health insurance policies 
offered in different States; and 
(E) cases of fraud or abuse relating to 
health insurance coverage offered under such 
amendment and the resolution of such cases.
(2) ANNUAL REPORTS.—The Comptroller General 
shall submit to Congress an annual report, after the 
end of each of the 5 years following the effective date 
of the amendment made by subsection (a), on the on-
going study conducted under paragraph (1). 
SEC. 5. SEVERABILITY. 
If any provision of the Act or the application of such 
provision to any person or circumstance is held to be uncon-
stitutional, the remainder of this Act and the application 
of the provisions of such to any other person or cir-
cumstance shall not be affected.
Union Calendar No. 207 
109TH CONGRESS 
2D SESSION 
H. R. 2355 
[Report No. 109–378] 
A BILL 
To amend the Public Health Service Act to provide 
for cooperative governing of individual health in-
surance coverage offered in interstate commerce. 
FEBRUARY 16, 2006 
Reported from the Committee on Energy and Commerce 
with an amendment