and liabilities accumulated under the plan and
a projection of the assets, liabilities, income,
and expenses of the plan for the 12-month pe-
riod referred to in subparagraph (B). The in-
come statement shall identify separately the
plan’s administrative expenses and claims.
‘‘(D) 
COSTS
OF
COVERAGE
TO
BE
CHARGED
AND
OTHER
EXPENSES.—A state-
ment of the costs of coverage to be charged, in-
cluding an itemization of amounts for adminis-
tration, reserves, and other expenses associated
with the operation of the plan.
‘‘(E) OTHER
INFORMATION.—Any other
information which may be prescribed in regula-
tions of the applicable authority as necessary to
carry out the purposes of this part.
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH
STATES.—A certification granted under this part to an
association health plan shall not be effective unless written
notice of such certification is filed with the applicable
State authority of each State in which at least 25 percent
of the participants and beneficiaries under the plan are
located. For purposes of this subsection, an individual
shall be considered to be located in the State in which a
known address of such individual is located or in which
such individual is employed.
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case
of any association health plan certified under this part,
descriptions of material changes in any information which
was required to be submitted with the application for the
certification under this part shall be filed in such form
and manner as shall be prescribed in regulations of the
applicable authority. The applicable authority may require
by regulation prior notice of material changes with respect
to specified matters which might serve as the basis for
suspension or revocation of the certification.
‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS-
SOCIATION HEALTH PLANS.—An association health plan
certified under this part which provides benefit options in
addition to health insurance coverage for such plan year
shall meet the requirements of section 103 by filing an
annual report under such section which shall include infor-
mation described in subsection (b)(6) with respect to the
plan year and, notwithstanding section 104(a)(1)(A), shall
be filed with the applicable authority not later than 90
days after the close of the plan year (or on such later date
as may be prescribed by the applicable authority).
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The
board of trustees of each association health plan which
provides benefits options in addition to health insurance
coverage and which is applying for certification under this
part or is certified under this part shall engage, on behalf
of all participants and beneficiaries, a qualified actuary
who shall be responsible for the preparation of the mate-
rials comprising information necessary to be submitted by
a qualified actuary under this part. The qualified actuary
shall utilize such assumptions and techniques as are nec-
essary to enable such actuary to form an opinion as to
whether the contents of the matters reported under this
part—
‘‘(1) are in the aggregate reasonably related to
the experience of the plan and to reasonable expecta-
tions, and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the plan.
The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION.
‘‘Except as provided in section 809(b), an association
health plan which is or has been certified under this part
may terminate (upon or at any time after cessation of ac-
cruals in benefit liabilities) only if the board of trustees—
‘‘(1) not less than 60 days before the proposed
termination date, provides to the participants and
beneficiaries a written notice of intent to terminate
stating that such termination is intended and the
proposed termination date,
‘‘(2) develops a plan for winding up the affairs
of the plan in connection with such termination in
a manner which will result in timely payment of all
benefits for which the plan is obligated, and
‘‘(3) submits such plan in writing to the appli-
cable authority.
Actions required under this section shall be taken in such
form and manner as may be prescribed in regulations of
the applicable authority.
‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION.
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—An association health plan which is certified
under this part and which provides benefits other than
health insurance coverage shall continue to meet the re-
quirements of section 806, irrespective of whether such
certification continues in effect. The board of trustees of
such plan shall determine quarterly whether the require-
ments of section 806 are met. In any case in which the
board determines that there is reason to believe that there
is or will be a failure to meet such requirements, or the
applicable authority makes such a determination and so
notifies the board, the board shall immediately notify the
qualified actuary engaged by the plan, and such actuary
shall, not later than the end of the next following month,
make such recommendations to the board for corrective
action as the actuary determines necessary to ensure com-
pliance with section 806. Not later than 30 days after re-
ceiving from the actuary recommendations for corrective
actions, the board shall notify the applicable authority (in
such form and manner as the applicable authority may
prescribe by regulation) of such recommendations of the
actuary for corrective action, together with a description
of the actions (if any) that the board has taken or plans
to take in response to such recommendations. The board
shall thereafter report to the applicable authority, in such
form and frequency as the applicable authority may speci-
fy to the board, regarding corrective action taken by the
board until the requirements of section 806 are met.
‘‘(b) MANDATORY TERMINATION.—In any case in
which—
‘‘(1) the applicable authority has been notified
under subsection (a) of a failure of an association
health plan which is or has been certified under this
part and is described in section 806(a)(2) to meet
100
the requirements of section 806 and has not been
notified by the board of trustees of the plan that
corrective action has restored compliance with such
requirements, and
‘‘(2) the applicable authority determines that
there is a reasonable expectation that the plan will
continue to fail to meet the requirements of section
806,
the board of trustees of the plan shall, at the direction
of the applicable authority, terminate the plan and, in the
course of the termination, take such actions as the appli-
cable authority may require, including satisfying any
claims referred to in section 806(a)(2)(B)(iii) and recover-
ing for the plan any liability under subsection
(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure
that the affairs of the plan will be, to the maximum extent
possible, wound up in a manner which will result in timely
provision of all benefits for which the plan is obligated.
‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL-
VENT ASSOCIATION HEALTH PLANS PROVID-
ING HEALTH BENEFITS IN ADDITION TO
HEALTH INSURANCE COVERAGE.
‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR
INSOLVENT PLANS.—Whenever the Secretary determines
that an association health plan which is or has been cer-
101
tified under this part and which is described in section
806(a)(2) will be unable to provide benefits when due or
is otherwise in a financially hazardous condition as defined
in regulations of such Secretary, the Secretary shall, upon
notice to the plan, apply to the appropriate United States
district court for appointment of the Secretary as trustee
to administer the plan for the duration of the insolvency.
The plan may appear as a party and other interested per-
sons may intervene in the proceedings at the discretion
of the court. The court shall appoint such Secretary trust-
ee if the court determines that the trusteeship is necessary
to protect the interests of the participants and bene-
ficiaries or providers of medical care or to avoid any un-
reasonable deterioration of the financial condition of the
plan. The trusteeship of such Secretary shall continue
until the conditions described in the first sentence of this
subsection are remedied or the plan is terminated.
‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon
appointment as trustee under subsection (a), shall have
the power—
‘‘(1) to do any act authorized by the plan, this
title, or other applicable provisions of law to be done
by the plan administrator or any trustee of the plan,
102
‘‘(2) to require the transfer of all (or any part)
of the assets and records of the plan to the Sec-
retary as trustee,
‘‘(3) to invest any assets of the plan which the
Secretary holds in accordance with the provisions of
the plan, regulations of the Secretary, and applicable
provisions of law,
‘‘(4) to require the sponsor, the plan adminis-
trator, any participating employer, and any employee
organization representing plan participants to fur-
nish any information with respect to the plan which
the Secretary as trustee may reasonably need in
order to administer the plan,
‘‘(5) to collect for the plan any amounts due the
plan and to recover reasonable expenses of the trust-
eeship,
‘‘(6) to commence, prosecute, or defend on be-
half of the plan any suit or proceeding involving the
plan,
‘‘(7) to issue, publish, or file such notices, state-
ments, and reports as may be required under regula-
tions of the Secretary or by any order of the court,
‘‘(8) to terminate the plan (or provide for its
termination accordance with section 809(b)) and liq-
uidate the plan assets, to restore the plan to the re-
103
sponsibility of the sponsor, or to continue the trust-
eeship,
‘‘(9) to provide for the enrollment of plan par-
ticipants and beneficiaries under appropriate cov-
erage options, and
‘‘(10) to do such other acts as may be nec-
essary to comply with this title or any order of the
court and to protect the interests of plan partici-
pants and beneficiaries and providers of medical
care.
‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac-
ticable after the Secretary’s appointment as trustee, the
Secretary shall give notice of such appointment to—
‘‘(1) the sponsor and plan administrator,
‘‘(2) each participant,
‘‘(3) each participating employer, and
‘‘(4) if applicable, each employee organization
which, for purposes of collective bargaining, rep-
resents plan participants.
‘‘(d) ADDITIONAL DUTIES.—Except to the extent in-
consistent with the provisions of this title, or as may be
otherwise ordered by the court, the Secretary, upon ap-
pointment as trustee under this section, shall be subject
to the same duties as those of a trustee under section 704
104
of title 11, United States Code, and shall have the duties
of a fiduciary for purposes of this title.
‘‘(e) OTHER PROCEEDINGS.—An application by the
Secretary under this subsection may be filed notwithstand-
ing the pendency in the same or any other court of any
bankruptcy, mortgage foreclosure, or equity receivership
proceeding, or any proceeding to reorganize, conserve, or
liquidate such plan or its property, or any proceeding to
enforce a lien against property of the plan.
‘‘(f) JURISDICTION OF COURT.—
‘‘(1) IN GENERAL.—Upon the filing of an appli-
cation for the appointment as trustee or the issuance
of a decree under this section, the court to which the
application is made shall have exclusive jurisdiction
of the plan involved and its property wherever lo-
cated with the powers, to the extent consistent with
the purposes of this section, of a court of the United
States having jurisdiction over cases under chapter
11 of title 11, United States Code. Pending an adju-
dication under this section such court shall stay, and
upon appointment by it of the Secretary as trustee,
such court shall continue the stay of, any pending
mortgage foreclosure, equity receivership, or other
proceeding to reorganize, conserve, or liquidate the
plan, the sponsor, or property of such plan or spon-
105
sor, and any other suit against any receiver, con-
servator, or trustee of the plan, the sponsor, or
property of the plan or sponsor. Pending such adju-
dication and upon the appointment by it of the Sec-
retary as trustee, the court may stay any proceeding
to enforce a lien against property of the plan or the
sponsor or any other suit against the plan or the
sponsor.
‘‘(2) VENUE.—An action under this section
may be brought in the judicial district where the
sponsor or the plan administrator resides or does
business or where any asset of the plan is situated.
A district court in which such action is brought may
issue process with respect to such action in any
other judicial district.
‘‘(g) PERSONNEL.—In accordance with regulations of
the Secretary, the Secretary shall appoint, retain, and
compensate accountants, actuaries, and other professional
service personnel as may be necessary in connection with
the Secretary’s service as trustee under this section.
‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.
‘‘(a) IN GENERAL.—Notwithstanding section 514, a
State may impose by law a contribution tax on an associa-
tion health plan described in section 806(a)(2), if the plan
commenced operations in such State after the date of the
106
enactment of the Small Business Affordable Health Cov-
erage Act of 1998.
‘‘(b) CONTRIBUTION TAX.—For purposes of this sec-
tion, the term ‘contribution tax’ imposed by a State on
an association health plan means any tax imposed by such
State if—
‘‘(1) such tax is computed by applying a rate to
the amount of premiums or contributions, with re-
spect to individuals covered under the plan who are
residents of such State, which are received by the
plan from participating employers located in such
State or from such individuals,
‘‘(2) the rate of such tax does not exceed the
rate of any tax imposed by such State on premiums
or contributions received by insurers or health main-
tenance organizations for health insurance coverage
offered in such State in connection with a group
health plan,
‘‘(3) such tax is otherwise nondiscriminatory,
and
‘‘(4) the amount of any such tax assessed on
the plan is reduced by the amount of any tax or as-
sessment otherwise imposed by the State on pre-
miums, contributions, or both received by insurers or
health maintenance organizations for health insur-
107
ance coverage, aggregate excess/stop loss insurance
(as defined in section 806(g)(1)), specific excess/stop
loss insurance (as defined in section 806(g)(2)),
other insurance related to the provision of medical
care under the plan, or any combination thereof pro-
vided by such insurers or health maintenance organi-
zations in such State in connection with such plan.
‘‘SEC. 812. SPECIAL RULES FOR CHURCH PLANS.
‘‘(a) ELECTION
FOR CHURCH PLANS.—Notwith-
standing section 4(b)(2), if a church, a convention or asso-
ciation of churches, or an organization described in section
3(33)(C)(i) maintains a church plan which is a group
health plan (as defined in section 733(a)(1)), and such
church, convention, association, or organization makes an
election with respect to such plan under this subsection
(in such form and manner as the Secretary may by regula-
tion prescribe), then the provisions of this section shall
apply to such plan, with respect to benefits provided under
such plan consisting of medical care, as if section 4(b)(2)
did not contain an exclusion for church plans. Nothing in
this subsection shall be construed to render any other sec-
tion of this title applicable to church plans, except to the
extent that such other section is incorporated by reference
in this section.
‘‘(b) EFFECT OF ELECTION.—
108
‘‘(1) PREEMPTION OF STATE INSURANCE LAWS
REGULATING COVERED CHURCH PLANS.—Subject to
paragraphs (2) and (3), this section shall supersede
any and all State laws which regulate insurance in-
sofar as they may now or hereafter regulate church
plans to which this section applies or trusts estab-
lished under such church plans.
‘‘(2) GENERAL STATE INSURANCE REGULATION
UNAFFECTED.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B) and paragraph (3), nothing
in this section shall be construed to exempt or
relieve any person from any provision of State
law which regulates insurance.
‘‘(B) CHURCH PLANS NOT TO BE DEEMED
INSURANCE COMPANIES OR INSURERS.—Neither
a church plan to which this section applies, nor
any trust established under such a church plan,
shall be deemed to be an insurance company or
other insurer or to be engaged in the business
of insurance for purposes of any State law pur-
porting to regulate insurance companies or in-
surance contracts.
‘‘(3) PREEMPTION
OF
CERTAIN
STATE
LAWS
RELATING
TO
PREMIUM
RATE
REGULATION
AND
109
BENEFIT MANDATES.—The provisions of subsections
(a)(2)(B) and (b) of section 805 shall apply with re-
spect to a church plan to which this section applies
in the same manner and to the same extent as such
provisions apply with respect to association health
plans.
‘‘(4) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) STATE LAW.—The term ‘State law’
includes all laws, decisions, rules, regulations,
or other State action having the effect of law,
of any State. A law of the United States appli-
cable only to the District of Columbia shall be
treated as a State law rather than a law of the
United States.
‘‘(B) STATE.—The term ‘State’ includes a
State, any political subdivision thereof, or any
agency or instrumentality of either, which pur-
ports to regulate, directly or indirectly, the
terms and conditions of church plans covered by
this section.
‘‘(c) 
REQUIREMENTS
FOR
COVERED
CHURCH
PLANS.—
‘‘(1) FIDUCIARY RULES AND EXCLUSIVE PUR-
POSE.—A fiduciary shall discharge his duties with
110
respect to a church plan to which this section ap-
plies—
‘‘(A) for the exclusive purpose of:
‘‘(i) providing benefits to participants
and their beneficiaries; and
‘‘(ii) defraying reasonable expenses of
administering the plan;
‘‘(B) with the care, skill, prudence and dili-
gence under the circumstances then prevailing
that a prudent man acting in a like capacity
and familiar with such matters would use in the
conduct of an enterprise of a like character and
with like aims; and
‘‘(C) in accordance with the documents
and instruments governing the plan.
The requirements of this paragraph shall not be
treated as not satisfied solely because the plan as-
sets are commingled with other church assets, to the
extent that such plan assets are separately ac-
counted for.
‘‘(2) CLAIMS PROCEDURE.—In accordance with
regulations of the Secretary, every church plan to
which this section applies shall—
‘‘(A) provide adequate notice in writing to
any participant or beneficiary whose claim for
111
benefits under the plan has been denied, setting
forth the specific reasons for such denial, writ-
ten in a manner calculated to be understood by
the participant;
‘‘(B) afford a reasonable opportunity to
any participant whose claim for benefits has
been denied for a full and fair review by the ap-
propriate fiduciary of the decision denying the
claim; and
‘‘(C) provide a written statement to each
participant describing the procedures estab-
lished pursuant to this paragraph.
‘‘(3) ANNUAL
STATEMENTS.—In accordance
with regulations of the Secretary, every church plan
to which this section applies shall file with the Sec-
retary an annual statement—
‘‘(A) stating the names and addresses of
the plan and of the church, convention, or asso-
ciation maintaining the plan (and its principal
place of business);
‘‘(B) certifying that it is a church plan to
which this section applies and that it complies
with the requirements of paragraphs (1) and
(2);
112
‘‘(C) identifying the States in which par-
ticipants and beneficiaries under the plan are or
likely will be located during the 1-year period
covered by the statement; and
‘‘(D) containing a copy of a statement of
actuarial opinion signed by a qualified actuary
that the plan maintains capital, reserves, insur-
ance, other financial arrangements, or any com-
bination thereof adequate to enable the plan to
fully meet all of its financial obligations on a
timely basis.
‘‘(4) DISCLOSURE.—At the time that the an-
nual statement is filed by a church plan with the
Secretary pursuant to paragraph (3), a copy of such
statement shall be made available by the Secretary
to the State insurance commissioner (or similar offi-
cial) of any State. The name of each church plan
and sponsoring organization filing an annual state-
ment in compliance with paragraph (3) shall be pub-
lished annually in the Federal Register.
‘‘(c) ENFORCEMENT.—The Secretary may enforce
the provisions of this section in a manner consistent with
section 502, to the extent applicable with respect to ac-
tions under section 502(a)(5), and with section 3(33)(D),
except that, other than for the purpose of seeking a tem-
113
porary restraining order, a civil action may be brought
with respect to the plan’s failure to meet any requirement
of this section only if the plan fails to correct its failure
within the correction period described in section 3(33)(D).
The other provisions of part 5 (except sections 501(a),
503, 512, 514, and 515) shall apply with respect to the
enforcement and administration of this section.
‘‘(d) DEFINITIONS AND OTHER RULES.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, any term used in this section
which is defined in any provision of this title shall
have the definition provided such term by such pro-
vision.
‘‘(2) SEMINARY STUDENTS.—Seminary students
who are enrolled in an institution of higher learning
described in section 3(33)(C)(iv) and who are treat-
ed as participants under the terms of a church plan
to which this section applies shall be deemed to be
employees as defined in section 3(6) if the number
of such students constitutes an insignificant portion
of the total number of individuals who are treated
as participants under the terms of the plan.
‘‘SEC. 813. DEFINITIONS AND RULES OF CONSTRUCTION.
‘‘(a) DEFINITIONS.—For purposes of this part—
114
‘‘(1) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning provided in section
733(a)(1) (after applying subsection (b) of this sec-
tion).
‘‘(2) MEDICAL CARE.—The term ‘medical care’
has the meaning provided in section 733(a)(2).
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
provided in section 733(b)(1).
‘‘(4) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning provided
in section 733(b)(2).
‘‘(5) APPLICABLE AUTHORITY.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘applicable author-
ity’ means, in connection with an association
health plan—
‘‘(i) the State recognized pursuant to
subsection (c) of section 506 as the State
to which authority has been delegated in
connection with such plan, or
‘‘(ii) if there if no State referred to in
clause (i), the Secretary.
‘‘(B) EXCEPTIONS.—
115
‘‘(i) 
JOINT
AUTHORITIES.—Where
such term appears in section 808(3), sec-
tion 807(e) (in the first instance), section
809(a) (in the second instance), section
809(a) (in the fourth instance), and sec-
tion 809(b)(1), such term means, in con-
nection with an association health plan, the
Secretary and the State referred to in sub-
paragraph (A)(i) (if any) in connection
with such plan.
‘‘(ii) REGULATORY
AUTHORITIES.—
Where such term appears in section 802(a)
(in the first instance), section 802(d), sec-
tion 
802(e), 
section 
803(d), 
section
805(a)(5), 
section 
806(a)(2), 
section
806(b), section 806(c), section 806(d),
paragraphs (1)(A) and (2)(A) of section
806(g), section 806(h), section 806(i), sec-
tion 807(a) (in the second instance), sec-
tion 807(b), section 807(d), section 807(e)
(in the second instance), section 808 (in
the matter after paragraph (3)), and sec-
tion 809(a) (in the third instance), such
term means, in connection with an associa-
tion health plan, the Secretary.
116
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
provided in section 733(d)(2).
‘‘(7) INDIVIDUAL MARKET.—
‘‘(A) IN GENERAL.—The term ‘individual
market’ means the market for health insurance
coverage offered to individuals other than in
connection with a group health plan.
‘‘(B) 
TREATMENT
OF
VERY
SMALL
GROUPS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), such term includes coverage offered in
connection with a group health plan that
has fewer than 2 participants as current
employees or participants described in sec-
tion 732(d)(3) on the first day of the plan
year.
‘‘(ii) STATE
EXCEPTION.—Clause (i)
shall not apply in the case of health insur-
ance coverage offered in a State if such
State regulates the coverage described in
such clause in the same manner and to the
same extent as coverage in the small group
market (as defined in section 2791(e)(5) of
117
the Public Health Service Act) is regulated
by such State.
‘‘(8) PARTICIPATING
EMPLOYER.—The term
‘participating employer’ means, in connection with
an association health plan, any employer, if any indi-
vidual who is an employee of such employer, a part-
ner in such employer, or a self-employed individual
who is such employer (or any dependent, as defined
under the terms of the plan, of such individual) is
or was covered under such plan in connection with
the status of such individual as such an employee,
partner, or self-employed individual in relation to the
plan.
‘‘(9) APPLICABLE
STATE
AUTHORITY.—The
term ‘applicable State authority’ means, with respect
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of
title XXVII of the Public Health Service Act for the
State involved with respect to such issuer.
‘‘(10) QUALIFIED ACTUARY.—The term ‘quali-
fied actuary’ means an individual who is a member
of the American Academy of Actuaries or meets
such reasonable standards and qualifications as the
Secretary may provide by regulation.
118
‘‘(11) AFFILIATED MEMBER.—The term ‘affili-
ated member’ means, in connection with a sponsor,
a person eligible to be a member of the sponsor or,
in the case of a sponsor with member associations,
a person who is a member, or is eligible to be a
member, of a member association.
‘‘(12) LARGE EMPLOYER.—The term ‘large em-
ployer’ means, in connection with a group health
plan with respect to a plan year, an employer who
employed an average of at least 51 employees on
business days during the preceding calendar year
and who employs at least 2 employees on the first
day of the plan year.
‘‘(13) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health
plan with respect to a plan year, an employer who
is not a large employer.
‘‘(b) RULES OF CONSTRUCTION.—
‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur-
poses of determining whether a plan, fund, or pro-
gram is an employee welfare benefit plan which is an
association health plan, and for purposes of applying
this title in connection with such plan, fund, or pro-
gram so determined to be such an employee welfare
benefit plan—
119
‘‘(A) in the case of a partnership, the term
‘employer’ (as defined in section (3)(5)) in-
cludes the partnership in relation to the part-
ners, and the term ‘employee’ (as defined in
section (3)(6)) includes any partner in relation
to the partnership, and
‘‘(B) in the case of a self-employed individ-
ual, the term ‘employer’ (as defined in section
3(5)) and the term ‘employee’ (as defined in
section 3(6)) shall include such individual.
‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED
AS EMPLOYEE WELFARE BENEFIT PLANS.—In the
case of any plan, fund, or program which was estab-
lished or is maintained for the purpose of providing
medical care (through the purchase of insurance or
otherwise) for employees (or their dependents) cov-
ered thereunder and which demonstrates to the Sec-
retary that all requirements for certification under
this part would be met with respect to such plan,
fund, or program if such plan, fund, or program
were a group health plan, such plan, fund, or pro-
gram shall be treated for purposes of this title as an
employee welfare benefit plan on and after the date
of such demonstration.’’.
120
(b) CONFORMING AMENDMENTS
TO PREEMPTION
RULES.—
(1) Section 514(b)(6) of such Act (29 U.S.C.
1144(b)(6)) is amended by adding at the end the
following new subparagraph:
‘‘(E) The preceding subparagraphs of this paragraph
do not apply with respect to any State law in the case
of an association health plan which is certified under part
8.’’.
(2) Section 514 of such Act (29 U.S.C. 1144)
is amended—
(A) in subsection (b)(4), by striking ‘‘Sub-
section (a)’’ and inserting ‘‘Subsections (a) and
(d)’’;
(B) in subsection (b)(5), by striking ‘‘sub-
section (a)’’ in subparagraph (A) and inserting
‘‘subsection (a) of this section and subsections
(a)(2)(B) and (b) of section 805’’, and by strik-
ing ‘‘subsection (a)’’ in subparagraph (B) and
inserting ‘‘subsection (a) of this section or sub-
section (a)(2)(B) or (b) of section 805’’;
(C) by redesignating subsection (d) as sub-
section (e); and
(D) by inserting after subsection (c) the
following new subsection:
121
‘‘(d)(1) Except as provided in subsection (b)(4), the
provisions of this title shall supersede any and all State
laws insofar as they may now or hereafter preclude, or
have the effect of precluding, a health insurance issuer
from offering health insurance coverage in connection with
an association health plan which is certified under part
8.
‘‘(2) Except as provided in paragraphs (4) and (5)
of subsection (b) of this section—
‘‘(A) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan certified under part 8 to a partici-
pating employer operating in such State, the provi-
sions of this title shall supersede any and all laws
of such State insofar as they may preclude a health
insurance issuer from offering health insurance cov-
erage of the same policy type to other employers op-
erating in the State which are eligible for coverage
under such association health plan, whether or not
such other employers are participating employers in
such plan.
‘‘(B) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan in a State and the filing, with the
applicable State authority, of the policy form in con-
122
nection with such policy type is approved by such
State authority, the provisions of this title shall su-
persede any and all laws of any other State in which
health insurance coverage of such type is offered, in-
sofar as they may preclude, upon the filing in the
same form and manner of such policy form with the
applicable State authority in such other State, the
approval of the filing in such other State.
‘‘(3) For additional provisions relating to association
health plans, see subsections (a)(2)(B) and (b) of section
805.
‘‘(4) For purposes of this subsection, the term ‘asso-
ciation health plan’ has the meaning provided in section
801(a), and the terms ‘health insurance coverage’, ‘par-
ticipating employer’, and ‘health insurance issuer’ have
the meanings provided such terms in section 811, respec-
tively.’’.
(3) Section 514(b)(6)(A) of such Act (29
U.S.C. 1144(b)(6)(A)) is amended—
(A) in clause (i)(II), by striking ‘‘and’’ at
the end;
(B) in clause (ii), by inserting ‘‘and which
does not provide medical care (within the mean-
ing of section 733(a)(2)),’’ after ‘‘arrange-
124
the following new sentence: ‘‘Such term also includes a
person serving as the sponsor of an association health plan
under part 8.’’.
(d) DISCLOSURE OF SOLVENCY PROTECTIONS RE-
LATED TO SELF-INSURED AND FULLY INSURED OPTIONS
UNDER ASSOCIATION HEALTH PLANS.—Section 102(b)
of such Act (29 U.S.C. 102(b)) is amended by adding at
the end the following: ‘‘An association health plan shall
include in its summary plan description, in connection
with each benefit option, a description of the form of sol-
vency or guarantee fund protection secured pursuant to
this Act or applicable State law, if any.’’.
(e) SAVINGS CLAUSE.—Section 731(c) of such Act is
amended by inserting ‘‘or part 8’’ after ‘‘this part’’.
(f) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Employee Retirement Income Security
Act of 1974 is amended by inserting after the item relat-
ing to section 734 the following new items:
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS
‘‘Sec. 801. Association health plans.
‘‘Sec. 802. Certification of association health plans.
‘‘Sec. 803. Requirements relating to sponsors and boards of trustees.
‘‘Sec. 804. Participation and coverage requirements.
‘‘Sec. 805. Other requirements relating to plan documents, contribution rates,
and benefit options.
‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans pro-
viding health benefits in addition to health insurance coverage.
‘‘Sec. 807. Requirements for application and related requirements.
‘‘Sec. 808. Notice requirements for voluntary termination.
‘‘Sec. 809. Corrective actions and mandatory termination.
125
‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans
providing health benefits in addition to health insurance cov-
erage.
‘‘Sec. 811. State assessment authority.
‘‘Sec. 812. Special rules for church plans.
‘‘Sec. 813. Definitions and rules of construction.’’.
SEC. 1303. CLARIFICATION OF TREATMENT OF SINGLE EM-
PLOYER ARRANGEMENTS.
Section 3(40)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend-
ed—
(1) in clause (i), by inserting ‘‘for any plan year
of any such plan, or any fiscal year of any such
other arrangement;’’ after ‘‘single employer’’, and by
inserting ‘‘during such year or at any time during
the preceding 1-year period’’ after ‘‘control group’’;
(2) in clause (iii)—
(A) by striking ‘‘common control shall not
be based on an interest of less than 25 percent’’
and inserting ‘‘an interest of greater than 25
percent may not be required as the minimum
interest necessary for common control’’; and
(B) by striking ‘‘similar to’’ and inserting
‘‘consistent and coextensive with’’;
(3) by redesignating clauses (iv) and (v) as
clauses (v) and (vi), respectively; and
(4) by inserting after clause (iii) the following
new clause:
126
‘‘(iv) in determining, after the application of
clause (i), whether benefits are provided to employ-
ees of two or more employers, the arrangement shall
be treated as having only 1 participating employer
if, after the application of clause (i), the number of
individuals who are employees and former employees
of any one participating employer and who are cov-
ered under the arrangement is greater than 75 per-
cent of the aggregate number of all individuals who
are employees or former employees of participating
employers and who are covered under the arrange-
ment,’’.
SEC. 1304. CLARIFICATION OF TREATMENT OF CERTAIN
COLLECTIVELY 
BARGAINED 
ARRANGE-
MENTS.
(a) IN GENERAL.—Section 3(40)(A)(i) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1002(40)(A)(i)) is amended to read as follows:
‘‘(i)(I) under or pursuant to one or more collec-
tive bargaining agreements which are reached pursu-
ant to collective bargaining described in section 8(d)
of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the
Railway Labor Act (45 U.S.C. 152, paragraph
Fourth) or which are reached pursuant to labor-
127
management negotiations under similar provisions of
State public employee relations laws, and (II) in ac-
cordance with subparagraphs (C), (D), and (E),’’.
(b) LIMITATIONS.—Section 3(40) of such Act (29
U.S.C. 1002(40)) is amended by adding at the end the
following new subparagraphs:
‘‘(C) For purposes of subparagraph (A)(i)(II), a plan
or other arrangement shall be treated as established or
maintained in accordance with this subparagraph only if
the following requirements are met:
‘‘(i) The plan or other arrangement, and the
employee organization or any other entity sponsoring
the plan or other arrangement, do not—
‘‘(I) utilize the services of any licensed in-
surance agent or broker for soliciting or enroll-
ing employers or individuals as participating
employers or covered individuals under the plan
or other arrangement; or
‘‘(II) pay a commission or any other type
of compensation to a person, other than a full
time employee of the employee organization (or
a member of the organization to the extent pro-
vided in regulations of the Secretary), that is
related either to the volume or number of em-
ployers or individuals solicited or enrolled as
128
participating employers or covered individuals
under the plan or other arrangement, or to the
dollar amount or size of the contributions made
by participating employers or covered individ-
uals to the plan or other arrangement;
except to the extent that the services used by the
plan, arrangement, organization, or other entity con-
sist solely of preparation of documents necessary for
compliance with the reporting and disclosure re-
quirements of part 1 or administrative, investment,
or consulting services unrelated to solicitation or en-
rollment of covered individuals.
‘‘(ii) As of the end of the preceding plan year,
the number of covered individuals under the plan or
other arrangement who are identified to the plan or
arrangement and who are neither—
‘‘(I) employed within a bargaining unit
covered by any of the collective bargaining
agreements with a participating employer (nor
covered on the basis of an individual’s employ-
ment in such a bargaining unit); nor
‘‘(II) present employees (or former employ-
ees who were covered while employed) of the
sponsoring employee organization, of an em-
ployer who is or was a party to any of the col-
129
lective bargaining agreements, or of the plan or
other arrangement or a related plan or arrange-
ment (nor covered on the basis of such present
or former employment);
does not exceed 15 percent of the total number of
individuals who are covered under the plan or ar-
rangement and who are present or former employees
who are or were covered under the plan or arrange-
ment pursuant to a collective bargaining agreement
with a participating employer. The requirements of
the preceding provisions of this clause shall be treat-
ed as satisfied if, as of the end of the preceding plan
year, such covered individuals are comprised solely
of individuals who were covered individuals under
the plan or other arrangement as of the date of the
enactment of the Small Business Affordable Health
Coverage Act of 1998 and, as of the end of the pre-
ceding plan year, the number of such covered indi-
viduals does not exceed 25 percent of the total num-
ber of present and former employees enrolled under
the plan or other arrangement.
‘‘(iii) The employee organization or other entity
sponsoring the plan or other arrangement certifies
to the Secretary each year, in a form and manner
which shall be prescribed in regulations of the Sec-
130
retary that the plan or other arrangement meets the
requirements of clauses (i) and (ii).
‘‘(D) For purposes of subparagraph (A)(i)(II), a plan
or arrangement shall be treated as established or main-
tained in accordance with this subparagraph only if—
‘‘(i) all of the benefits provided under the plan
or arrangement consist of health insurance coverage;
or
‘‘(ii)(I) the plan or arrangement is a multiem-
ployer plan; and
‘‘(II) the requirements of clause (B) of the pro-
viso to clause (5) of section 302(c) of the Labor
Management Relations Act, 1947 (29 U.S.C.
186(c)) are met with respect to such plan or other
arrangement.
‘‘(E) For purposes of subparagraph (A)(i)(II), a plan
or arrangement shall be treated as established or main-
tained in accordance with this subparagraph only if—
‘‘(i) the plan or arrangement is in effect as of
the date of the enactment of the Small Business Af-
fordable Health Coverage Act of 1998, or
‘‘(ii) the employee organization or other entity
sponsoring the plan or arrangement—
‘‘(I) has been in existence for at least 3
years or is affiliated with another employee or-
131
ganization which has been in existence for at
least 3 years, or
‘‘(II) demonstrates to the satisfaction of
the Secretary that the requirements of subpara-
graphs (C) and (D) are met with respect to the
plan or other arrangement.’’.
(c) CONFORMING AMENDMENTS TO DEFINITIONS OF
PARTICIPANT AND BENEFICIARY.—Section 3(7) of such
Act (29 U.S.C. 1002(7)) is amended by adding at the end
the following new sentence: ‘‘Such term includes an indi-
vidual who is a covered individual described in paragraph
(40)(C)(ii).’’.
SEC. 1305. ENFORCEMENT PROVISIONS RELATING TO ASSO-
CIATION HEALTH PLANS.
(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL
MISREPRESENTATIONS.—Section 501 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1131)
is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) Any person who, either willfully or with willful
blindness, falsely represents, to any employee, any employ-
ee’s beneficiary, any employer, the Secretary, or any State,
a plan or other arrangement established or maintained for
132
the purpose of offering or providing any benefit described
in section 3(1) to employees or their beneficiaries as—
‘‘(1) being an association health plan which has
been certified under part 8;
‘‘(2) having been established or maintained
under or pursuant to one or more collective bargain-
ing agreements which are reached pursuant to col-
lective bargaining described in section 8(d) of the
National Labor Relations Act (29 U.S.C. 158(d)) or
paragraph Fourth of section 2 of the Railway Labor
Act (45 U.S.C. 152, paragraph Fourth) or which are
reached pursuant to labor-management negotiations
under similar provisions of State public employee re-
lations laws; or
‘‘(3) being a plan or arrangement with respect
to which the requirements of subparagraph (C), (D),
or (E) of section 3(40) are met;
shall, upon conviction, be imprisoned not more than five
years, be fined under title 18, United States Code, or
both.’’.
(b) CEASE ACTIVITIES ORDERS.—Section 502 of
such Act (29 U.S.C. 1132) is amended by adding at the
end the following new subsection:
‘‘(n)(1) Subject to paragraph (2), upon application
by the Secretary showing the operation, promotion, or
133
marketing of an association health plan (or similar ar-
rangement providing benefits consisting of medical care
(as defined in section 733(a)(2))) that—
‘‘(A) is not certified under part 8, is subject
under section 514(b)(6) to the insurance laws of any
State in which the plan or arrangement offers or
provides benefits, and is not licensed, registered, or
otherwise approved under the insurance laws of such
State; or
‘‘(B) is an association health plan certified
under part 8 and is not operating in accordance with
the requirements under part 8 for such certification,
a district court of the United States shall enter an order
requiring that the plan or arrangement cease activities.
‘‘(2) Paragraph (1) shall not apply in the case of an
association health plan or other arrangement if the plan
or arrangement shows that—
‘‘(A) all benefits under it referred to in para-
graph (1) consist of health insurance coverage; and
‘‘(B) with respect to each State in which the
plan or arrangement offers or provides benefits, the
plan or arrangement is operating in accordance with
applicable State laws that are not superseded under
section 514.
134
‘‘(3) The court may grant such additional equitable
relief, including any relief available under this title, as it
deems necessary to protect the interests of the public and
of persons having claims for benefits against the plan.’’.
(c) RESPONSIBILITY
FOR CLAIMS PROCEDURE.—
Section 503 of such Act (29 U.S.C. 1133) (as amended
by title I) is amended by adding at the end the following
new subsection:
‘‘(c) ASSOCIATION HEALTH PLANS.—The terms of
each association health plan which is or has been certified
under part 8 shall require the board of trustees or the
named fiduciary (as applicable) to ensure that the require-
ments of this section are met in connection with claims
filed under the plan.’’.
SEC. 1306. COOPERATION BETWEEN FEDERAL AND STATE
AUTHORITIES.
Section 506 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1136) is amended by adding
at the end the following new subsection:
‘‘(c) RESPONSIBILITY OF STATES WITH RESPECT TO
ASSOCIATION HEALTH PLANS.—
‘‘(1) AGREEMENTS
WITH
STATES.—A State
may enter into an agreement with the Secretary for
delegation to the State of some or all of—
135
‘‘(A) the Secretary’s authority under sec-
tions 502 and 504 to enforce the requirements
for certification under part 8,
‘‘(B) the Secretary’s authority to certify
association health plans under part 8 in accord-
ance with regulations of the Secretary applica-
ble to certification under part 8, or
‘‘(C) any combination of the Secretary’s
authority authorized to be delegated under sub-
paragraphs (A) and (B).
‘‘(2) DELEGATIONS.—Any department, agency,
or instrumentality of a State to which authority is
delegated pursuant to an agreement entered into
under this paragraph may, if authorized under State
law and to the extent consistent with such agree-
ment, exercise the powers of the Secretary under
this title which relate to such authority.
‘‘(3) RECOGNITION
OF
PRIMARY
DOMICILE
STATE.—In entering into any agreement with a
State under subparagraph (A), the Secretary shall
ensure that, as a result of such agreement and all
other agreements entered into under subparagraph
(A), only one State will be recognized, with respect
to any particular association health plan, as the
State to which all authority has been delegated pur-
136
suant to such agreements in connection with such
plan. In carrying out this paragraph, the Secretary
shall take into account the places of residence of the
participants and beneficiaries under the plan and the
State in which the trust is maintained.’’.
SEC. 1307. EFFECTIVE DATE AND TRANSITIONAL AND
OTHER RULES.
(a) EFFECTIVE DATE.—The amendments made by
sections 1302, 1305, and 1306 shall take effect on Janu-
ary 1, 2000. The amendments made by sections 1303 and
1304 shall take effect on the date of the enactment of
this Act. The Secretary of Labor shall first issue all regu-
lations necessary to carry out the amendments made by
this Act before January 1, 2000.
(b) EXCEPTION.—Section 801(a)(2) of the Employee
Retirement Income Security Act of 1974 (added by section
1302) does not apply in connection with an association
health plan (certified under part 8 of subtitle B of title
I of such Act) existing on April 1, 1997, if no benefits
provided thereunder as of the date of the enactment of
this Act consist of health insurance coverage (as defined
in section 733(b)(1) of such Act).
(c) TREATMENT
OF CERTAIN EXISTING HEALTH
BENEFITS PROGRAMS.—
137
(1) IN GENERAL.—In any case in which, as of
the date of the enactment of this Act, an arrange-
ment is maintained in a State for the purpose of
providing benefits consisting of medical care for the
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and
such arrangement is licensed under the laws of one
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 813(a)(5) of
the Employee Retirement Income Security Act of
1974 (as amended by this Act)) by the arrangement
of an application for certification of the arrangement
under part 8 of subtitle B of title I of such Act—
(A) such arrangement shall be deemed to
be a group health plan for purposes of title I
of such Act,
(B) the requirements of sections 801(a)(1)
and 803(a)(1) of the Employee Retirement In-
come Security Act of 1974 shall be deemed met
with respect to such arrangement,
(C) the requirements of section 803(b) of
such Act shall be deemed met, if the arrange-
138
ment is operated by a board of directors
which—
(i) is elected by the participating em-
ployers, with each employer having one
vote, and
(ii) has complete fiscal control over
the arrangement and which is responsible
for all operations of the arrangement,
(D) the requirements of section 804(a) of
such Act shall be deemed met with respect to
such arrangement,
(E) the arrangement may be certified by
any applicable authority with respect to its op-
erations in any State only if it operates in such
State on the date of certification.
The provisions of this subsection shall cease to apply
with respect to any such arrangement at such time
after the date of the enactment of this Act as the
applicable requirements of this subsection are not
met with respect to such arrangement.
(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘‘group health plan,’’ ‘‘medical
care,’’ and ‘‘participating employer’’ shall have the
meanings provided in section 813 of the Employee
Retirement Income Security Act of 1974, except
139
that the reference in paragraph (7) of such section
to an ‘‘association health plan’’ shall be deemed a
reference to an arrangement referred to in this sub-
section.
(d) PILOT PROGRAM FOR SELF-INSURED ASSOCIA-
TION HEALTH PLANS.—
(1) IN
GENERAL.—During the pilot program
period, association health plans which offer benefit
options which do not consist of health insurance cov-
erage may be certified under part 8 of subtitle B of
title I of the Employee Retirement Income Security
Act of 1974 only if such plans consist of the follow-
ing:
(A) plans which offered such coverage on
the date of the enactment of this Act,
(B) plans under which the sponsor does
not restrict membership to one or more trades
and businesses or industries and whose eligible
participating employers represent a broad cross-
section of trades and businesses or industries,
or
(C) plans whose eligible participating em-
ployers represent one or more trades or busi-
nesses, or one or more industries, which have
been indicated as having average or above-aver-
140
age health insurance risk or health claims expe-
rience by reason of State rate filings, denials of
coverage, proposed premium rate levels, and
other means demonstrated by such plans in ac-
cordance with regulations which the Secretary
shall prescribe, including (but not limited to)
the following: agriculture; automobile dealer-
ships; barbering and cosmetology; child care;
construction; dance, theatrical, and orchestra
productions; disinfecting and pest control; eat-
ing and drinking establishments; fishing; hos-
pitals; labor organizations; logging; manufactur-
ing (metals); mining; medical and dental prac-
tices; medical laboratories; sanitary services;
transportation 
(local 
and 
freight); 
and
warehousing.
(2) PILOT PROGRAM PERIOD.—For purposes of
this subsection, the term ‘‘pilot program period’’
means the 5-year period beginning on January 1,
1999.
141
TITLE II—AMENDMENTS TO
PUBLIC HEALTH SERVICE ACT
Subtitle 
A—Patient 
Protections
and Point of Service Coverage
Requirements
SEC. 2001. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
(a) IN GENERAL.—Subpart 2 of part A of title
XXVII of the Public Health Service Act is amended by
adding at the end the following new section:
‘‘SEC. 2706. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
‘‘(a) PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE.—
‘‘(1) IN GENERAL.—In the case of any health
care professional acting within the lawful scope of
practice in the course of carrying out a contractual
employment arrangement or other direct contractual
arrangement between such professional and a group
health plan or a health insurance issuer offering
health insurance coverage in connection with a group
142
health plan, the plan or issuer with which such con-
tractual employment arrangement or other direct
contractual arrangement is maintained by the pro-
fessional may not impose on such professional under
such arrangement any prohibition with respect to
advice, provided to a participant or beneficiary
under the plan who is a patient, about the health
status of the participant or beneficiary or the medi-
cal care or treatment for the condition or disease of
the participant or beneficiary, regardless of whether
benefits for such care or treatment are provided
under the plan or health insurance coverage offered
in connection with the plan.
‘‘(2) HEALTH CARE PROFESSIONAL DEFINED.—
For purposes of this subsection, the term ‘health
care professional’ means a physician (as defined in
section 1861(r) of the Social Security Act) or other
health care professional if coverage for the profes-
sional’s services is provided under the group health
plan for the services of the professional. Such term
includes a podiatrist, optometrist, chiropractor, psy-
chologist, dentist, physician assistant, physical or oc-
cupational therapist and therapy assistant, speech–
language pathologist, audiologist, registered or li-
censed practical nurse (including nurse practitioner,
143
clinical nurse specialist, certified registered nurse
anesthetist, and certified nurse–midwife), licensed
certified social worker, registered respiratory thera-
pist, and certified respiratory therapy technician.
‘‘(b) PATIENT ACCESS
TO EMERGENCY MEDICAL
CARE.—
‘‘(1) IN
GENERAL.—To the extent that the
group health plan (or health insurance issuer offer-
ing health insurance coverage in connection with the
plan) provides for any benefits consisting of emer-
gency 
medical 
care 
(as 
defined 
in 
section
503(b)(9)(I) of the Employee Retirement Income Se-
curity Act of 1974), except for items or services spe-
cifically excluded—
‘‘(A) the plan or issuer shall provide bene-
fits, without requiring preauthorization, for ap-
propriate emergency medical screening exami-
nations (within the capability of the emergency
facility, including ancillary services routinely
available to the emergency facility) to the extent
that a prudent layperson, who possesses an av-
erage knowledge of health and medicine, would
determine such examinations to be necessary in
order to determine whether emergency medical
care (as so defined) is required, and
144
‘‘(B) the plan or issuer shall provide bene-
fits for additional emergency medical services
following an emergency medical screening exam-
ination (if determined necessary under subpara-
graph (A)) to the extent that a prudent emer-
gency medical professional would determine
such additional emergency services to be nec-
essary to avoid the consequences described in
section 503(b)(9)(I) of such Act.
‘‘(2) UNIFORM
COST-SHARING
REQUIRED.—
Nothing in this subsection shall be construed as pre-
venting a group health plan or issuer from imposing
any form of cost-sharing applicable to any partici-
pant or beneficiary (including coinsurance, copay-
ments, deductibles, and any other charges) in rela-
tion to benefits described in paragraph (1), if such
form of cost-sharing is uniformly applied under such
plan, with respect to similarly situated participants
and beneficiaries, to all benefits consisting of emer-
gency 
medical 
care 
(as 
defined 
in 
section
503(b)(9)(I) of the Employee Retirement Income Se-
curity Act of 1974) provided to such similarly situ-
ated participants and beneficiaries under the plan.
‘‘(c) PATIENT ACCESS TO OBSTETRIC AND GYNECO-
LOGICAL CARE.
145
‘‘(1) IN
GENERAL.—In any case in which a
group health plan (or a health insurance issuer of-
fering health insurance coverage in connection with
the plan)—
‘‘(A) provides benefits under the terms of
the plan consisting of—
‘‘(i) routine gynecological care (such
as preventive women’s health examina-
tions), or
‘‘(ii) routine obstetric care (such as
routine pregnancy-related services),
provided by a participating physician who spe-
cializes in such care (or provides benefits con-
sisting of payment for such care), and
‘‘(B) the plan requires or provides for des-
ignation by a participant or beneficiary of a
participating primary care provider,
if the primary care provider designated by such a
participant or beneficiary is not such a physician,
then the plan (or issuer) shall meet the requirements
of paragraph (2).
‘‘(2) REQUIREMENTS.—A group health plan (or
a health insurance issuer offering health insurance
coverage in connection with the plan) meets the re-
quirements of this paragraph, in connection with
146
benefits described in paragraph (1) consisting of
care described in clause (i) or (ii) of paragraph
(1)(A) (or consisting of payment therefor), if the
plan (or issuer)—
‘‘(A) does not require authorization or a
referral by the primary care provider in order
to obtain such benefits, and
‘‘(B) treats the ordering of other routine
care of the same type, by the participating phy-
sician providing the care described in clause (i)
or (ii) of paragraph (1)(A), as the authorization
of the primary care provider with respect to
such care.
‘‘(3) CONSTRUCTION.—Nothing in paragraph
(2)(B) shall waive any requirements of coverage re-
lating to medical necessity or appropriateness with
respect to coverage of gynecological or obstetric care
so ordered.
‘‘(d) PATIENT ACCESS TO PEDIATRIC CARE.—
‘‘(1) IN
GENERAL.—In any case in which a
group health plan (or a health insurance issuer of-
fering health insurance coverage in connection with
the plan) provides benefits consisting of routine pe-
diatric care provided by a participating physician
who specializes in pediatrics (or consisting of pay-
147
ment for such care) and the plan requires or pro-
vides for designation by a participant or beneficiary
of a participating primary care provider, the plan (or
issuer) shall provide that such a participating physi-
cian may be designated, if available, by a parent or
guardian of any beneficiary under the plan is who
under 18 years of age, as the primary care provider
with respect to any such benefits.
‘‘(2) CONSTRUCTION.—Nothing in paragraph
(1) shall waive any requirements of coverage relating
to medical necessity or appropriateness with respect
to coverage of pediatric care.
‘‘(e) TREATMENT
OF MULTIPLE COVERAGE OP-
TIONS.—In the case of a plan providing benefits under two
or more coverage options, the requirements of subsections
(c) and (d) shall apply separately with respect to each cov-
erage option.’’.
(c) EFFECTIVE DATE AND RELATED RULES.—
(1) IN GENERAL.—The amendments made by
this section shall apply with respect to plan years be-
ginning on or after January 1 of the second cal-
endar year following the date of the enactment of
this Act, except that the Secretary of Health and
Human Services may issue regulations before such
date under such amendments. The Secretary shall
148
first issue all regulations necessary to carry out the
amendments made by this section before the effec-
tive date thereof.
(2) LIMITATION ON ENFORCEMENT ACTIONS.—
No enforcement action shall be taken, pursuant to
the amendments made by this section, against a
group health plan or health insurance issuer with re-
spect to a violation of a requirement imposed by
such amendments before the date of issuance of reg-
ulations issued in connection with such requirement,
if the plan or issuer has sought to comply in good
faith with such requirement.
(3) SPECIAL RULE FOR COLLECTIVE BARGAIN-
ING AGREEMENTS.—In the case of a group health
plan maintained pursuant to one or more collective
bargaining agreements between employee representa-
tives and one or more employers ratified before the
date of the enactment of this Act, the amendments
made by this section shall not apply with respect to
plan years beginning before the later of—
(1) the date on which the last of the collec-
tive bargaining agreements relating to the plan
terminates (determined without regard to any
extension thereof agreed to after the date of the
enactment of this Act), or
149
(2) January 1, 2001.
For purposes of this paragraph, any plan amend-
ments made pursuant to a collective bargaining
agreement relating to the plan which amends the
plan solely to conform to any requirement added by
this section shall not be treated as a termination of
such collective bargaining agreement.
SEC. 2002. REQUIRING HEALTH MAINTENANCE ORGANIZA-
TIONS TO OFFER OPTION OF POINT-OF-SERV-
ICE COVERAGE.
(a) IN GENERAL.—Title XXVII of the Public Health
Service Act is amended by inserting after section 2713 the
following new section:
‘‘SEC. 2714. REQUIRING OFFERING OF OPTION OF POINT-
OF-SERVICE COVERAGE.
‘‘(a) REQUIREMENT TO OFFER COVERAGE OPTION
TO CERTAIN EMPLOYERS.—Except as provided in sub-
section (c), any health insurance issuer which—
‘‘(1) is a health maintenance organization (as
defined in section 2791(b)(3)), and
‘‘(2) which provides for coverage of services of
one or more classes of health care professionals
under health insurance coverage offered in connec-
tion with a group health plan only if such services
are furnished exclusively through health care profes-
150
sionals within such class or classes who are members
of a closed panel of health care professionals,
the issuer shall make available to the plan sponsor in con-
nection with such a plan a coverage option which provides
for coverage of such services which are furnished through
such class (or classes) of health care professionals regard-
less of whether or not the professionals are members of
such panel.
‘‘(b) REQUIREMENT TO OFFER SUPPLEMENTAL COV-
ERAGE TO PARTICIPANTS IN CERTAIN CASES.—Except as
provided in subsection (c), if a health insurance issuer
makes available a coverage option under and described in
subsection (a) to a plan sponsor of a group health plan
and the sponsor declines to contract for such coverage op-
tion, then the issuer shall make available in the individual
insurance market to each participant in the group health
plan optional separate supplemental health insurance cov-
erage in the individual health insurance market which con-
sists of services identical to those provided under such cov-
erage provided through the closed panel under the group
health plan but are furnished exclusively by health care
professionals who are not members of such a closed panel.
‘‘(c) EXCEPTIONS.—
‘‘(1) OFFERING OF NON-PANEL OPTION.—Sub-
sections (a) and (b) shall not apply with respect to
151
a group health plan if the plan offers a coverage op-
tion that provides coverage for services that may be
furnished by a class or classes of health care profes-
sionals who are not in a closed panel. This para-
graph shall be applied separately to distinguishable
groups of employees under the plan.
‘‘(2) AVAILABILITY
OF
COVERAGE
THROUGH
HEALTHMART.—Subsections (a) and (b) shall not
apply to a group health plan if the health insurance
coverage under the plan is made available through a
HealthMart (as defined in section 2801) and if any
health insurance coverage made available through
the HealthMart provides for coverage of the services
of any class of health care professionals other than
through a closed panel of professionals.
‘‘(3) RELICENSURE
EXEMPTION.—Subsections
(a) and (b) shall not apply to a health maintenance
organization in a State in any case in which—
‘‘(A) the organization demonstrates to the
applicable authority that the organization has
made a good faith effort to obtain (but has
failed to obtain) a contract between the organi-
zation and any other health insurance issuer
providing for the coverage option or supple-
mental coverage described in subsection (a) or
152
(b), as the case may be, within the applicable
service area of the organization, and
‘‘(B) the State requires the organization to
receive or qualify for a separate license, as an
indemnity insurer or otherwise, in order to offer
such coverage option or supplemental coverage,
respectively.
The applicable authority may require that the orga-
nization demonstrate that it meets the requirements
of the previous sentence no more frequently that
once every two years.
‘‘(4) INCREASED COSTS.—Subsections (a) and
(b) shall not apply to a health maintenance organi-
zation if the organization demonstrates to the appli-
cable authority, in accordance with generally accept-
ed actuarial practice, that, on either a prospective or
retroactive basis, the premium for the coverage op-
tion or supplemental coverage required to be made
available under such respective subsection exceeds by
more than 1 percent the premium for the coverage
consisting of services which are furnished through a
closed panel of health care professionals in the class
or classes involved. The applicable authority may re-
quire that the organization demonstrate such an in-
crease no more frequently that once every two years.
153
This paragraph shall be applied on an average per
enrollee or similar basis.
‘‘(5) COLLECTIVE BARGAINING AGREEMENTS.—
Subsections (a) and (b) shall not apply in connection
with a group health plan if the plan is established
or maintained pursuant to one or more collective
bargaining agreements.
‘‘(d) DEFINITIONS.—For purposes of this section:
‘‘(1) COVERAGE
THROUGH
CLOSED
PANEL.—
Health insurance coverage for a class of health care
professionals shall be treated as provided through a
closed panel of such professionals only if such cov-
erage consists of coverage of items or services con-
sisting of professionals services which are reim-
bursed for or provided only within a limited network
of such professionals.
‘‘(2) HEALTH CARE PROFESSIONAL.—The term
‘health care professional’ has the meaning given
such term in section 2706(a)(2).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to coverage offered on or after
January 1 of the second calendar year following the date
of the enactment of this Act.
154
Subtitle B—Patient Access to
Information
SEC. 2101. PATIENT ACCESS TO INFORMATION REGARDING
PLAN COVERAGE, MANAGED CARE PROCE-
DURES, 
HEALTH 
CARE 
PROVIDERS, 
AND
QUALITY OF MEDICAL CARE.
(a) IN GENERAL.—Subpart 2 of part A of title
XXVII of the Public Health Service Act (as amended by
subtitle A of this title) is amended further by adding at
the end the following new section:
‘‘SEC. 2707. PATIENT ACCESS TO INFORMATION REGARD-
ING PLAN COVERAGE, MANAGED CARE PRO-
CEDURES, HEALTH CARE PROVIDERS, AND
QUALITY OF MEDICAL CARE.
‘‘(a) DISCLOSURE REQUIREMENT.—Each health in-
surance issuer offering health insurance coverage in con-
nection with a group health plan shall provide the adminis-
trator of such plan on a timely basis with the information
necessary to enable the administrator to include in the
summary plan description of the plan required under sec-
tion 102 of the Employee Retirement Income Security Act
of 1974 (or each summary plan description in any case
in which different summary plan descriptions are appro-
priate under part 1 of subtitle B of title I of such Act
for different options of coverage) the information required
155
under subsections (b), (c), (d), and (e)(2)(A). To the ex-
tent that any such issuer provides such information on a
timely basis to plan participants and beneficiaries, the re-
quirements of this subsection shall be deemed satisfied in
the case of such plan with respect to such information.
‘‘(b) PLAN BENEFITS.—The information required
under subsection (a) includes the following:
‘‘(1) COVERED ITEMS AND SERVICES.—
‘‘(A) CATEGORIZATION OF INCLUDED BEN-
EFITS.—A description of covered benefits, cat-
egorized by—
‘‘(i) types of items and services (in-
cluding any special disease management
program), and
‘‘(ii) types of health care professionals
providing such items and services.
‘‘(B) EMERGENCY MEDICAL CARE.—A de-
scription of the extent to which the coverage in-
cludes emergency medical care (including the
extent to which the coverage provides for access
to urgent care centers), and any definitions pro-
vided under in connection with such coverage
for the relevant coverage terminology referring
to such care.
156
‘‘(C) PREVENTATIVE
SERVICES.—A de-
scription of the extent to which the coverage in-
cludes benefits for preventative services.
‘‘(D) DRUG FORMULARIES.—A description
of the extent to which covered benefits are de-
termined by the use or application of a drug
formulary and a summary of the process for de-
termining what is included in such formulary.
‘‘(E) 
COBRA 
CONTINUATION
COV-
ERAGE.—A description of the benefits available
under the coverage provided pursuant to part 6
of subtitle B of title I of the Employee Retire-
ment Income Security Act of 1974.
‘‘(2) LIMITATIONS, EXCLUSIONS, AND RESTRIC-
TIONS ON COVERED BENEFITS.—
‘‘(A) 
CATEGORIZATION
OF
EXCLUDED
BENEFITS.—A description of benefits specifi-
cally excluded from coverage, categorized by
types of items and services.
‘‘(B) 
UTILIZATION
REVIEW
AND
PREAUTHORIZATION REQUIREMENTS.—Whether
coverage for medical care is limited or excluded
on 
the 
basis 
of 
utilization 
review 
or
preauthorization requirements.
157
‘‘(C) LIFETIME, ANNUAL, OR OTHER PE-
RIOD LIMITATIONS.—A description of the cir-
cumstances under which, and the extent to
which, coverage is subject to lifetime, annual, or
other period limitations, categorized by types of
benefits.
‘‘(D) CUSTODIAL CARE.—A description of
the circumstances under which, and the extent
to which, the coverage of benefits for custodial
care is limited or excluded, and a statement of
the definition used in connection with such cov-
erage for custodial care.
‘‘(E) 
EXPERIMENTAL
TREATMENTS.—
Whether coverage for any medical care is lim-
ited or excluded because it constitutes experi-
mental treatment or technology, and any defini-
tions provided in connection with such coverage
for the relevant plan terminology referring to
such limited or excluded care.
‘‘(F) MEDICAL APPROPRIATENESS OR NE-
CESSITY.—Whether coverage for medical care
may be limited or excluded by reason of a fail-
ure to meet the plan’s requirements for medical
appropriateness or necessity, and any defini-
tions provided in connection with such coverage
158
for the relevant coverage terminology referring
to such limited or excluded care.
‘‘(G) SECOND
OR
SUBSEQUENT
OPIN-
IONS.—A description of the circumstances
under which, and the extent to which, coverage
for second or subsequent opinions is limited or
excluded.
‘‘(H) SPECIALTY CARE.—A description of
the circumstances under which, and the extent
to which, coverage of benefits for specialty care
is conditioned on referral from a primary care
provider.
‘‘(I) CONTINUITY OF CARE.—A description
of the circumstances under which, and the ex-
tent to which, coverage of items and services
provided by any health care professional is lim-
ited or excluded by reason of the departure by
the professional from any defined set of provid-
ers.
‘‘(J) RESTRICTIONS
ON
COVERAGE
OF
EMERGENCY
SERVICES.—A description of the
circumstances under which, and the extent to
which, the coverage, in including emergency
medical care furnished to a participant or bene-
ficiary of the plan imposes any financial respon-
159
sibility described in subsection (c) on partici-
pants or beneficiaries or limits or conditions
benefits for such care subject to any other term
or condition of such coverage.
‘‘(c) 
PARTICIPANT’S
FINANCIAL
RESPONSIBIL-
ITIES.—The information required under subsection (a) in-
cludes an explanation of—
‘‘(1) a participant’s financial responsibility for
payment of premiums, coinsurance, copayments,
deductibles, and any other charges, and
‘‘(2) the circumstances under which, and the
extent to which, the participant’s financial respon-
sibility described in paragraph (1) may vary, includ-
ing any distinctions based on whether a health care
provider from whom covered benefits are obtained is
included in a defined set of providers.
‘‘(d) DISPUTE RESOLUTION PROCEDURES.—The in-
formation required under subsection (a) includes a de-
scription of the processes adopted in connection with such
coverage pursuant to section 503(b) of the Employee Re-
tirement Income Security Act of 1974, including—
‘‘(1) descriptions thereof relating specifically
to—
‘‘(A) coverage decisions,
160
‘‘(B) internal review of coverage decisions,
and
‘‘(C) any external review of coverage deci-
sions, and
‘‘(2) the procedures and time frames applicable
to each step of the processes referred to in subpara-
graphs (A), (B), and (C) of paragraph (1).
‘‘(e) INFORMATION AVAILABLE ON REQUEST.—
‘‘(1) ACCESS TO PLAN BENEFIT INFORMATION
IN ELECTRONIC FORM.—
‘‘(A) IN GENERAL.—A group health plan
(and a health insurance issuer offering health
insurance coverage in connection with a group
health plan) shall, upon written request (made
not more frequently than annually), make avail-
able to participants and beneficiaries, in a gen-
erally recognized electronic format, the follow-
ing information:
‘‘(i) the latest summary plan descrip-
tion, including the latest summary of ma-
terial modifications, and
‘‘(ii) the actual plan provisions setting
forth the benefits available under the plan,
to the extent such information relates to the
coverage options under the plan available to the
161
participant or beneficiary. A reasonable charge
may be made to cover the cost of providing
such information in such generally recognized
electronic format. The Secretary may by regula-
tion prescribe a maximum amount which will
constitute a reasonable charge under the pre-
ceding sentence.
‘‘(B) ALTERNATIVE ACCESS.—The require-
ments of this paragraph may be met by making
such information generally available (rather
than upon request) on the Internet or on a pro-
prietary computer network in a format which is
readily accessible to participants and bene-
ficiaries.
‘‘(2) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED ON REQUEST.—
‘‘(A) INCLUSION IN SUMMARY PLAN DE-
SCRIPTION
OF
SUMMARY
OF
ADDITIONAL
IN-
FORMATION.—The information required under
subsection (a) includes a summary description
of the types of information required by this
subsection to be made available to participants
and beneficiaries on request.
‘‘(B) 
INFORMATION
REQUIRED
FROM
PLANS AND ISSUERS ON REQUEST.—In addition
162
to information required to be included in sum-
mary plan descriptions under this subsection, a
group health plan (and a health insurance
issuer offering health insurance coverage in
connection with a group health plan) shall pro-
vide the following information to a participant
or beneficiary on request:
‘‘(i) NETWORK CHARACTERISTICS.—If
the plan (or issuer) utilizes a defined set of
providers under contract with the plan (or
issuer), a detailed list of the names of such
providers and their geographic location, set
forth separately with respect to primary
care providers and with respect to special-
ists.
‘‘(ii) CARE
MANAGEMENT
INFORMA-
TION.—A description of the circumstances
under which, and the extent to which, the
plan has special disease management pro-
grams or programs for persons with dis-
abilities, indicating whether these pro-
grams are voluntary or mandatory and
whether a significant benefit differential
results from participation in such pro-
grams.
163
‘‘(iii) INCLUSION
OF
DRUGS
AND
BIOLOGICALS IN FORMULARIES.—A state-
ment of whether a specific drug or biologi-
cal is included in a formulary used to de-
termine benefits under the plan and a de-
scription of the procedures for considering
requests for any patient-specific waivers.
‘‘(iv) PROCEDURES FOR DETERMINING
EXCLUSIONS BASED ON MEDICAL NECES-
SITY OR EXPERIMENTAL TREATMENTS.—
Upon receipt by the participant or bene-
ficiary of any notification of an adverse
coverage decision based on a determination
relating to medical necessity or an experi-
mental treatment or technology, a descrip-
tion of the procedures and medically-based
criteria used in such decision.
‘‘(v) PREAUTHORIZATION AND UTILI-
ZATION REVIEW PROCEDURES.—Upon re-
ceipt by the participant or beneficiary of
any notification of an adverse coverage de-
cision, a description of the basis on which
any preauthorization requirement or any
utilization review requirement has resulted
in such decision.
164
‘‘(vi) ACCREDITATION
STATUS
OF
HEALTH INSURANCE ISSUERS AND SERV-
ICE PROVIDERS.—A description of the ac-
creditation and licencing status (if any) of
each health insurance issuer offering
health insurance coverage in connection
with the plan and of any utilization review
organization utilized by the issuer or the
plan, together with the name and address
of the accrediting or licencing authority.
‘‘(vii) MEASURES OF ENROLLEE SAT-
ISFACTION.—The latest information (if
any) maintained by the plan, or by any
health insurance issuer offering health in-
surance coverage in connection with the
plan, relating to enrollee satisfaction.
‘‘(viii) QUALITY PERFORMANCE MEAS-
URES.—The latest information (if any)
maintained by the plan, or by any health
insurance issuer offering health insurance
coverage in connection with the plan, relat-
ing to quality of performance of the deliv-
ery of medical care with respect to cov-
erage options offered under the plan and
165
of health care professionals and facilities
providing medical care under the plan.
‘‘(C) 
INFORMATION
REQUIRED
FROM
HEALTH CARE PROFESSIONALS ON REQUEST.—
Any health care professional treating a partici-
pant or beneficiary under a group health plan
shall provide to the participant or beneficiary,
on request, a description of his or her profes-
sional qualifications (including board certifi-
cation status, licensing status, and accreditation
status, if any), privileges, and experience and a
general description by category (including sal-
ary, fee-for-service, capitation, and such other
categories as may be specified in regulations of
the Secretary) of the applicable method by
which such professional is compensated in con-
nection with the provision of such medical care.
‘‘(D) 
INFORMATION
REQUIRED
FROM
HEALTH CARE FACILITIES ON REQUEST.—Any
health care facility from which a participant or
beneficiary has sought treatment under a group
health plan shall provide to the participant or
beneficiary, on request, a description of the fa-
cility’s corporate form or other organizational
form and all forms of licensing and accredita-
166
tion status (if any) assigned to the facility by
standard-setting organizations.
‘‘(f) ACCESS TO INFORMATION RELEVANT TO THE
COVERAGE OPTIONS UNDER WHICH THE PARTICIPANT OR
BENEFICIARY IS ELIGIBLE TO ENROLL.—In addition to
information otherwise required to be made available under
this section, a group health plan (and a health insurance
issuer offering health insurance coverage in connection
with a group health plan) shall, upon written request
(made not more frequently than annually), make available
to a participant in connection with a period of enrollment
the summary plan description for any coverage option
under the plan under which the participant is eligible to
enroll and any information described in clauses (i), (ii),
(iii), (vi), (vii), and (viii) of subsection (e)(2)(B).
‘‘(g) ADVANCE NOTICE
OF CHANGES
IN DRUG
FORMULARIES.—Not later than 30 days before the effec-
tive of date of any exclusion of a specific drug or biological
from any drug formulary under the plan that is used in
the treatment of a chronic illness or disease, the plan shall
take such actions as are necessary to reasonably ensure
that plan participants are informed of such exclusion. The
requirements of this subsection may be satisfied—
167
‘‘(1) by inclusion of information in publications
broadly distributed by plan sponsors, employers, or
employee organizations,
‘‘(2) by electronic means of communication (in-
cluding the Internet or proprietary computer net-
works in a format which is readily accessible to par-
ticipants),
‘‘(3) by timely informing participants who,
under an ongoing program maintained under the
plan, have submitted their names for such notifica-
tion, or
‘‘(4) by any other reasonable means of timely
informing plan participants.’’.
SEC. 2102. REPORTING ON FRAUD AND ABUSE ENFORCE-
MENT ACTIVITIES.
The General Accounting Office shall—
(1) monitor—
(A) the compliance of the Department of
Justice and all United States Attorneys–with
the guideline entitled ‘‘Guidance on the Use of
the False Claims Act in Civil Health Care Mat-
ters’’ issued by the Department on June 3,
1998, including any revisions to such guideline,
and
168
(B) the compliance of the Office of the In-
spector General of the Department of Health
and Human Services with the protocols and
guidelines entitled ‘‘National Project Proto-
cols—Best Practice Guidelines’’ issued by the
Inspector General on June 3, 1998, including
any revisions to such protocols and guidelines,
and
(2) submit a report on such compliance to the
Committee on Commerce of the House of Represent-
atives not later than February 1, 1999, and every
year thereafter for a period of four years ending
February 1, 2002.
SEC. 2103. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act. The Secretary
shall first issue all regulations necessary to carry out the
amendments made by this subtitle before such date.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
or health insurance issuer with respect to a violation of
a requirement imposed by such amendments before the
169
date of issuance of final regulations issued in connection
with such requirement, if the plan or issuer has sought
to comply in good faith with such requirement.
Subtitle C—HealthMarts
SEC. 2201. SHORT TITLE OF SUBTITLE.
This subtitle may be cited as the ‘‘Health Care Con-
sumer Empowerment Act of 1998’’.
SEC. 2202. EXPANSION OF CONSUMER CHOICE THROUGH
HEALTHMARTS.
The Public Health Service Act is amended by adding
at the end the following new title:
‘‘TITLE XXVIII—HEALTHMARTS
‘‘SEC. 2801. DEFINITION OF HEALTHMART.
‘‘(a) IN GENERAL.—For purposes of this title, the
term ‘HealthMart’ means a legal entity that meets the fol-
lowing requirements:
‘‘(1) ORGANIZATION.—The HealthMart is a
nonprofit organization operated under the direction
of a board of directors which is composed of rep-
resentatives of not fewer than 2 and in equal num-
bers from each of the following:
‘‘(A) Small employers.
‘‘(B) Employees of small employers.
‘‘(C) Health care providers, which may be
physicians, other health care professionals,
170
health care facilities, or any combination there-
of.
‘‘(D) Entities, such as insurance compa-
nies, health maintenance organizations, and li-
censed provider-sponsored organizations, that
underwrite or administer health benefits cov-
erage.
‘‘(2) 
OFFERING
HEALTH
BENEFITS
COV-
ERAGE.—
‘‘(A) IN
GENERAL.—The HealthMart, in
conjunction with those health insurance issuers
that offer health benefits coverage through the
HealthMart, makes available health benefits
coverage in the manner described in subsection
(b) to all small employers and eligible employees
in the manner described in subsection (c)(2) at
rates (including employer’s and employee’s
share) that are established by the health insur-
ance issuer on a policy or product specific basis
and that may vary only as permissible under
State law. A HealthMart is deemed to be a
group health plan for purposes of applying sec-
tion 702 of the Employee Retirement Income
Security Act of 1974, section 2702 of this Act,
and section 9802(b) of the Internal Revenue
171
Code of 1986 (which limit variation among
similarly situated individuals of required pre-
miums for health benefits coverage on the basis
of health status-related factors).
‘‘(B) NONDISCRIMINATION
IN
COVERAGE
OFFERED.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the HealthMart may not offer health
benefits coverage to an eligible employee in
a geographic area (as specified under para-
graph (3)(A)) unless the same coverage is
offered to all such employees in the same
geographic area. Section 2711(a)(1)(B) of
this Act limits denial of enrollment of cer-
tain eligible individuals under health bene-
fits coverage in the small group market.
‘‘(ii) 
CONSTRUCTION.—Nothing 
in
this title shall be construed as requiring or
permitting a health insurance issuer to
provide coverage outside the service area of
the issuer, as approved under State law.
‘‘(C) NO FINANCIAL UNDERWRITING.—The
HealthMart provides health benefits coverage
only through contracts with health insurance
172
issuers and does not assume insurance risk with
respect to such coverage.
(D) MINIMUM COVERAGE.—By the end of
the first year of its operation and thereafter,
the HealthMart maintains not fewer than 10
purchasers and 100 members.
‘‘(3) GEOGRAPHIC AREAS.—
‘‘(A) 
SPECIFICATION
OF
GEOGRAPHIC
AREAS.—The HealthMart shall specify the geo-
graphic area (or areas) in which it makes avail-
able health benefits coverage offered by health
insurance issuers to small employers. Such an
area shall encompass at least one entire county
or equivalent area.
‘‘(B) MULTISTATE AREAS.—In the case of
a HealthMart that serves more than one State,
such geographic areas may be areas that in-
clude portions of two or more contiguous
States.
‘‘(C) 
MULTIPLE
HEALTHMARTS
PER-
MITTED IN SINGLE GEOGRAPHIC AREA.—Noth-
ing in this title shall be construed as preventing
the establishment and operation of more than
one HealthMart in a geographic area or as lim-
173
iting the number of HealthMarts that may op-
erate in any area.
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The HealthMart pro-
vides administrative services for purchasers.
Such services may include accounting, billing,
enrollment information, and employee coverage
status reports.
‘‘(B) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
HealthMart from serving as an administrative
service organization to any entity.
‘‘(5) DISSEMINATION
OF
INFORMATION.—The
HealthMart collects and disseminates (or arranges
for the collection and dissemination of) consumer-
oriented information on the scope, cost, and enrollee
satisfaction of all coverage options offered through
the HealthMart to its members and eligible individ-
uals. Such information shall be defined by the
HealthMart and shall be in a manner appropriate to
the type of coverage offered. To the extent prac-
ticable, such information shall include information
on provider performance, locations and hours of op-
eration of providers, outcomes, and similar matters.
174
Nothing in this section shall be construed as pre-
venting the dissemination of such information or
other information by the HealthMart or by health
insurance issuers through electronic or other means.
‘‘(6) 
FILING
INFORMATION.—The
HealthMart—
‘‘(A) files with the applicable Federal au-
thority information that demonstrates the
HealthMart’s compliance with the applicable re-
quirements of this title; or
‘‘(B) in accordance with rules established
under section 2803(a), files with a State such
information as the State may require to dem-
onstrate such compliance.
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage
offered through a HealthMart shall—
‘‘(A) be underwritten by a health insurance
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law (or is a community
health organization that is offering health
175
insurance coverage pursuant to section
330B(a)),
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 2802(b), and
‘‘(iii) offers the coverage under a con-
tract with the HealthMart;
‘‘(B) subject to paragraph (2), be approved
or otherwise permitted to be offered under
State law; and
‘‘(C) provide full portability of creditable
coverage for individuals who remain members of
the same HealthMart notwithstanding that they
change the employer through which they are
members in accordance with the provisions of
the parts 6 and 7 of subtitle B of title I of the
Employee Retirement Income Security Act of
1974 and titles XXII and XXVII of this Act,
so long as both employers are purchasers in the
HealthMart.
‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF
HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI-
NATION OR DELAY.—
‘‘(A) IN
GENERAL.—The requirement of
paragraph (1)(B) shall not apply to a policy or
176
product of health benefits coverage offered in a
State if the health insurance issuer seeking to
offer such policy or product files an application
to waive such requirement with the applicable
Federal authority, and the authority deter-
mines, based on the application and other evi-
dence presented to the authority, that—
‘‘(i) either (or both) of the grounds
described in subparagraph (B) for approval
of the application has been met; and
‘‘(ii) the coverage meets the applicable
State standards (other than those that
have been preempted under section 2802).
‘‘(B) GROUNDS.—The grounds described
in this subparagraph with respect to a policy or
product of health benefits coverage are as fol-
lows:
‘‘(i) FAILURE
TO
ACT
ON
POLICY,
PRODUCT, OR
RATE
APPLICATION
ON
A
TIMELY
BASIS.—The State has failed to
complete action on the policy or product
(or rates for the policy or product) within
90 days of the date of the State’s receipt
of a substantially complete application. No
period before the date of the enactment of
177
this section shall be included in determin-
ing such 90-day period.
‘‘(ii) DENIAL OF APPLICATION BASED
ON
DISCRIMINATORY
TREATMENT.—The
State has denied such an application
and—
‘‘(I) the standards or review
process imposed by the State as a
condition of approval of the policy or
product imposes either any material
requirements, procedures, or stand-
ards to such policy or product that
are not generally applicable to other
policies and products offered or any
requirements 
that 
are 
preempted
under section 2802; or
‘‘(II) the State requires the
issuer, as a condition of approval of
the policy or product, to offer any pol-
icy or product other than such policy
or product.
‘‘(C) ENFORCEMENT.—In the case of a
waiver granted under subparagraph (A) to an
issuer with respect to a State, the Secretary
may enter into an agreement with the State
178
under which the State agrees to provide for
monitoring and enforcement activities with re-
spect to compliance of such an issuer and its
health insurance coverage with the applicable
State standards described in subparagraph
(A)(ii). Such monitoring and enforcement shall
be conducted by the State in the same manner
as the State enforces such standards with re-
spect to other health insurance issuers and
plans, without discrimination based on the type
of issuer to which the standards apply. Such an
agreement shall specify or establish mechanisms
by which compliance activities are undertaken,
while not lengthening the time required to re-
view and process applications for waivers under
subparagraph (A).
‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The
health benefits coverage made available through a
HealthMart may include, but is not limited to, any
of the following if it meets the other applicable re-
quirements of this title:
‘‘(A) Coverage through a health mainte-
nance organization.
‘‘(B) Coverage in connection with a pre-
ferred provider organization.
179
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization.
‘‘(D) Indemnity coverage through an insur-
ance company.
‘‘(E) Coverage offered in connection with a
contribution into a medical savings account or
flexible spending account.
‘‘(F) Coverage that includes a point-of-
service option.
‘‘(G) Coverage offered by a community
health organization (as defined in section
330B(e)).
‘‘(H) Any combination of such types of
coverage.
‘‘(4) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as
precluding a health insurance issuer offering health
benefits coverage through a HealthMart from estab-
lishing premium discounts or rebates for members or
from modifying otherwise applicable copayments or
deductibles in return for adherence to programs of
health promotion and disease prevention so long as
such programs are agreed to in advance by the
HealthMart and comply with all other provisions of
180
this title and do not discriminate among similarly
situated members.
‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE
ISSUERS.—
‘‘(1) PURCHASERS.—
‘‘(A) IN GENERAL.—Subject to the provi-
sions of this title, a HealthMart shall permit
any small employer to contract with the
HealthMart for the purchase of health benefits
coverage for its employees and dependents of
those employees and may not vary conditions of
eligibility (including premium rates and mem-
bership fees) of a small employer to be a pur-
chaser.
‘‘(B) ROLE
OF
ASSOCIATIONS, BROKERS,
AND LICENSED HEALTH INSURANCE AGENTS.—
Nothing in this section shall be construed as
preventing an association, broker, licensed
health insurance agent, or other entity from as-
sisting or representing a HealthMart or small
employers from entering into appropriate ar-
rangements to carry out this title.
‘‘(C) 
PERIOD
OF
CONTRACT.—The
HealthMart may not require a contract under
subparagraph (A) between a HealthMart and a
181
purchaser to be effective for a period of longer
than 12 months. The previous sentence shall
not be construed as preventing such a contract
from being extended for additional 12-month
periods or preventing the purchaser from volun-
tarily electing a contract period of longer than
12 months.
‘‘(D) 
EXCLUSIVE
NATURE
OF
CON-
TRACT.—Such a contract shall provide that the
purchaser agrees not to obtain or sponsor
health benefits coverage, on behalf of any eligi-
ble employees (and their dependents), other
than through the HealthMart. The previous
sentence shall not apply to an eligible individual
who resides in an area for which no coverage is
offered by any health insurance issuer through
the HealthMart.
‘‘(2) MEMBERS.—
‘‘(A) IN
GENERAL.—Under rules estab-
lished to carry out this title, with respect to a
small employer that has a purchaser contract
with a HealthMart, individuals who are employ-
ees of the employer may enroll for health bene-
fits coverage (including coverage for dependents
182
of such enrolling employees) offered by a health
insurance issuer through the HealthMart.
‘‘(B) NONDISCRIMINATION
IN
ENROLL-
MENT.—A HealthMart may not deny enroll-
ment as a member to an individual who is an
employee (or dependent of such an employee)
eligible to be so enrolled based on health status-
related factors, except as may be permitted con-
sistent with section 2742(b).
‘‘(C) ANNUAL
OPEN
ENROLLMENT
PE-
RIOD.—In the case of members enrolled in
health benefits coverage offered by a health in-
surance issuer through a HealthMart, subject
to subparagraph (D), the HealthMart shall pro-
vide for an annual open enrollment period of 30
days during which such members may change
the coverage option in which the members are
enrolled.
‘‘(D) RULES OF ELIGIBILITY.—Nothing in
this paragraph shall preclude a HealthMart
from establishing rules of employee eligibility
for enrollment and reenrollment of members
during the annual open enrollment period under
subparagraph (C). Such rules shall be applied
consistently to all purchasers and members
183
within the HealthMart and shall not be based
in any manner on health status-related factors
and may not conflict with sections 2701 and
2702 of this Act.
‘‘(3) HEALTH INSURANCE ISSUERS.—
‘‘(A) PREMIUM
COLLECTION.—The con-
tract between a HealthMart and a health insur-
ance issuer shall provide, with respect to a
member enrolled with health benefits coverage
offered by the issuer through the HealthMart,
for the payment of the premiums collected by
the HealthMart (or the issuer) for such cov-
erage (less a pre-determined administrative
charge negotiated by the HealthMart and the
issuer) to the issuer.
‘‘(B) SCOPE OF SERVICE AREA.—Nothing
in this title shall be construed as requiring the
service area of a health insurance issuer with
respect to health insurance coverage to cover
the entire geographic area served by a
HealthMart.
‘‘(C) AVAILABILITY
OF
COVERAGE
OP-
TIONS.—A HealthMart shall enter into con-
tracts with one or more health insurance issuers
in a manner that assures that at least 2 health
184
insurance coverage options are made available
in the geographic area specified under sub-
section (a)(3)(A).
‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—
‘‘(1) FOR BOARDS OF DIRECTORS.—A member
of a board of directors of a HealthMart may not
serve as an employee or paid consultant to the
HealthMart, but may receive reasonable reimburse-
ment for travel expenses for purposes of attending
meetings of the board or committees thereof.
‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY-
EES.—An individual is not eligible to serve in a paid
or unpaid capacity on the board of directors of a
HealthMart or as an employee of the HealthMart, if
the individual is employed by, represents in any ca-
pacity, owns, or controls any ownership interest in
a organization from whom the HealthMart receives
contributions, grants, or other funds not connected
with 
a 
contract 
for 
coverage 
through 
the
HealthMart.
‘‘(3) 
EMPLOYMENT
AND
EMPLOYEE
REP-
RESENTATIVES.—
‘‘(A) IN GENERAL.—An individual who is
serving on a board of directors of a HealthMart
as a representative described in subparagraph
185
(A) or (B) of section 2801(a)(1) shall not be
employed by or affiliated with a health insur-
ance issuer or be licensed as or employed by or
affiliated with a health care provider.
‘‘(B) CONSTRUCTION.—For purposes of
subparagraph (A), the term ‘‘affiliated’’ does
not include membership in a health benefits
plan or the obtaining of health benefits cov-
erage offered by a health insurance issuer.
‘‘(e) CONSTRUCTION.—
‘‘(1) 
NETWORK
OF
AFFILIATED
HEALTHMARTS.—Nothing in this section shall be
construed as preventing one or more HealthMarts
serving different areas (whether or not contiguous)
from providing for some or all of the following
(through a single administrative organization or oth-
erwise):
‘‘(A) Coordinating the offering of the same
or similar health benefits coverage in different
areas served by the different HealthMarts.
‘‘(B) Providing for crediting of deductibles
and other cost-sharing for individuals who are
provided health benefits coverage through the
HealthMarts 
(or 
affiliated 
HealthMarts)
after—
186
‘‘(i) a change of employers through
which the coverage is provided, or
‘‘(ii) a change in place of employment
to an area not served by the previous
HealthMart.
‘‘(2) PERMITTING
HEALTHMARTS
TO
ADJUST
DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL-
ATIVE RISK OF ENROLLEES.—Nothing in this sec-
tion shall be construed as precluding a HealthMart
from providing for adjustments in amounts distrib-
uted among the health insurance issuers offering
health benefits coverage through the HealthMart
based on factors such as the relative health care risk
of members enrolled under the coverage offered by
the different issuers.
‘‘(3) APPLICATION OF UNIFORM MINIMUM PAR-
TICIPATION
AND
CONTRIBUTION
RULES.—Nothing
in this section shall be construed as precluding a
HealthMart from establishing minimum participa-
tion and contribution rules (described in section
2711(e)(1)) for small employers that apply to be-
come purchasers in the HealthMart, so long as such
rules are applied uniformly for all health insurance
issuers.
187
‘‘SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS.
‘‘(a) AUTHORITY OF STATES.—Nothing in this sec-
tion shall be construed as preempting State laws relating
to the following:
‘‘(1) The regulation of underwriters of health
coverage, including licensure and solvency require-
ments.
‘‘(2) The application of premium taxes and re-
quired payments for guaranty funds or for contribu-
tions to high-risk pools.
‘‘(3) The application of fair marketing require-
ments and other consumer protections (other than
those specifically relating to an item described in
subsection (b)).
‘‘(4) The application of requirements relating to
the adjustment of rates for health insurance cov-
erage.
‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE-
QUIREMENTS.—State laws insofar as they relate to any
of the following are superseded and shall not apply to
health benefits coverage made available through a
HealthMart:
‘‘(1) Benefit requirements for health benefits
coverage offered through a HealthMart, including
(but not limited to) requirements relating to cov-
188
erage of specific providers, specific services or condi-
tions, or the amount, duration, or scope of benefits,
but not including requirements to the extent re-
quired to implement title XXVII or other Federal
law and to the extent the requirement prohibits an
exclusion of a specific disease from such coverage.
‘‘(2) Requirements (commonly referred to as
fictitious group laws) relating to grouping and simi-
lar requirements for such coverage to the extent
such requirements impede the establishment and op-
eration of HealthMarts pursuant to this title.
‘‘(3) Any other requirements (including limita-
tions on compensation arrangements) that, directly
or indirectly, preclude (or have the effect of preclud-
ing) the offering of such coverage through a
HealthMart, if the HealthMart meets the require-
ments of this title.
Any State law or regulation relating to the composition
or organization of a HealthMart is preempted to the ex-
tent the law or regulation is inconsistent with the provi-
sions of this title.
‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS-
CLOSURE REQUIREMENTS.—The board of directors of a
HealthMart is deemed to be a plan administrator of an
employee welfare benefit plan which is a group health plan
189
for purposes of applying parts 1 and 4 of subtitle B of
title I of the Employee Retirement Income Security Act
of 1974 and those provisions of part 5 of such subtitle
which are applicable to enforcement of such parts 1 and
4, and the HealthMart shall be treated as such a plan
and the enrollees shall be treated as participants and bene-
ficiaries for purposes of applying such provisions pursuant
to this subsection.
‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO-
TECTION.—A HealthMart is deemed to be group health
plan that is a multiple employer welfare arrangement for
purposes of applying section 703 of the Employee Retire-
ment Income Security Act of 1974.
‘‘(e) APPLICATION OF RULES FOR NETWORK PLANS
AND
FINANCIAL
CAPACITY.—The provisions of sub-
sections (c) and (d) of section 2711 apply to health bene-
fits coverage offered by a health insurance issuer through
a HealthMart.
‘‘(f) CONSTRUCTION RELATING TO OFFERING RE-
QUIREMENT.—Nothing in section 2711(a) of this Act or
703 of the Employee Retirement Income Security Act of
1974 shall be construed as permitting the offering outside
the HealthMart of health benefits coverage that is only
made available through a HealthMart under this section
because of the application of subsection (b).
190
‘‘(g) APPLICATION TO GUARANTEED RENEWABILITY
REQUIREMENTS IN CASE OF DISCONTINUATION OF AN
ISSUER.—For purposes of applying section 2712 in the
case of health insurance coverage offered by a health in-
surance issuer through a HealthMart, if the contract be-
tween the HealthMart and the issuer is terminated and
the HealthMart continues to make available any health in-
surance coverage after the date of such termination, the
following rules apply:
‘‘(1) RENEWABILITY.—The HealthMart shall
fulfill the obligation under such section of the issuer
renewing and continuing in force coverage by offer-
ing purchasers (and members and their dependents)
all available health benefits coverage that would oth-
erwise be available to similarly-situated purchasers
and members from the remaining participating
health insurance issuers in the same manner as
would be required of issuers under section 2712(c).
‘‘(2) APPLICATION OF ASSOCIATION RULES.—
The HealthMart shall be considered an association
for purposes of applying section 2712(e).
‘‘(h) CONSTRUCTION
IN RELATION
TO CERTAIN
OTHER LAWS.—Nothing in this title shall be construed
as modifying or affecting the applicability to HealthMarts
or health benefits coverage offered by a health insurance
191
issuer through a HealthMart of parts 6 and 7 of subtitle
B of title I of the Employee Retirement Income Security
Act of 1974 or titles XXII and XXVII of this Act.
‘‘SEC. 2803. ADMINISTRATION.
‘‘(a) IN GENERAL.—The applicable Federal authority
shall administer this title through the division established
under subsection (b) and is authorized to issue such regu-
lations as may be required to carry out this title. Such
regulations shall be subject to Congressional review under
the provisions of chapter 8 of title 5, United States Code.
The applicable Federal authority shall incorporate the
process of ‘deemed file and use’ with respect to the infor-
mation filed under section 2801(a)(6)(A) and shall deter-
mine whether information filed by a HealthMart dem-
onstrates compliance with the applicable requirements of
this title. Such authority shall exercise its authority under
this title in a manner that fosters and promotes the devel-
opment of HealthMarts in order to improve access to
health care coverage and services.
‘‘(b) ADMINISTRATION THROUGH HEALTH CARE
MARKETPLACE DIVISION.—
‘‘(1) IN GENERAL.—The applicable Federal au-
thority shall carry out its duties under this title
through a separate Health Care Marketplace Divi-
192
sion, the sole duty of which (including the staff of
which) shall be to administer this title.
‘‘(2) ADDITIONAL
DUTIES.—In addition to
other responsibilities provided under this title, such
Division is responsible for—
‘‘(A) 
oversight 
of 
the 
operations 
of
HealthMarts under this title; and
‘‘(B) the periodic submittal to Congress of
reports on the performance of HealthMarts
under this title under subsection (c).
‘‘(c) PERIODIC REPORTS.—The applicable Federal
authority shall submit to Congress a report every 30
months, during the 10-year period beginning on the effec-
tive date of the rules promulgated by the applicable Fed-
eral authority to carry out this title, on the effectiveness
of this title in promoting coverage of uninsured individ-
uals. Such authority may provide for the production of
such reports through one or more contracts with appro-
priate private entities.
‘‘SEC. 2804. DEFINITIONS.
‘‘For purposes of this title:
‘‘(1) APPLICABLE FEDERAL AUTHORITY.—The
term ‘applicable Federal authority’ means the Sec-
retary of Health and Human Services .
193
‘‘(2) ELIGIBLE
EMPLOYEE
OR
INDIVIDUAL.—
The term ‘eligible’ means, with respect to an em-
ployee or other individual and a HealthMart, an em-
ployee or individual who is eligible under section
2801(c)(2) to enroll or be enrolled in health benefits
coverage offered through the HealthMart.
‘‘(3) EMPLOYER; EMPLOYEE; DEPENDENT.—
Except as the applicable Federal authority may oth-
erwise provide, the terms ‘employer’, ‘employee’, and
‘dependent’, as applied to health insurance coverage
offered by a health insurance issuer licensed (or oth-
erwise regulated) in a State, shall have the meanings
applied to such terms with respect to such coverage
under the laws of the State relating to such coverage
and such an issuer.
‘‘(4) HEALTH BENEFITS COVERAGE.—The term
‘health benefits coverage’ has the meaning given the
term group health insurance coverage in section
2791(b)(4).
‘‘(5) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning given such
term in section 2791(b)(2) and includes a commu-
nity health organization that is offering coverage
pursuant to section 330B(a).
194
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
given such term in section 2791(d)(9).
‘‘(7) HEALTHMART.—The term ‘HealthMart’ is
defined in section 2801(a).
‘‘(8) MEMBER.—The term ‘member‘‘ means,
with respect to a HealthMart, an individual enrolled
for health benefits coverage through the HealthMart
under section 2801(c)(2).
‘‘(9) 
PURCHASER.—The 
term 
‘purchaser’
means, with respect to a HealthMart, a small em-
ployer 
that 
has 
contracted 
under 
section
2801(c)(1)(A) with the HealthMart for the purchase
of health benefits coverage.
‘‘(10) SMALL EMPLOYER.—The term ‘small em-
ployer’ has the meaning given such term for pur-
poses of title XXVII.’’.
Subtitle D—Community Health
Organizations
SEC. 2301. PROMOTION OF PROVISION OF INSURANCE BY
COMMUNITY HEALTH ORGANIZATIONS.
(a) WAIVER OF STATE LICENSURE REQUIREMENT
FOR COMMUNITY HEALTH ORGANIZATIONS IN CERTAIN
CASES.—Subpart I of part D of title III of the Public
195
Health Service Act is amended by adding at the end the
following new section:
‘‘WAIVER OF STATE LICENSURE REQUIREMENT FOR
COMMUNITY HEALTH ORGANIZATIONS IN CERTAIN CASES
‘‘SEC. 330B. (a) WAIVER AUTHORIZED.—
‘‘(1) IN GENERAL.—A community health orga-
nization may offer health insurance coverage in a
State notwithstanding that it is not licensed in such
a State to offer such coverage if—
‘‘(A) the organization files an application
for waiver of the licensure requirement with the
Secretary of Health and Human Services (in
this section referred to as the ‘Secretary’) by
not later than November 1, 2003, and
‘‘(B) the Secretary determines, based on
the application and other evidence presented to
the Secretary, that any of the grounds for ap-
proval of the application described in subpara-
graph (A), (B), or (C) of paragraph (2) has
been met.
‘‘(2) GROUNDS FOR APPROVAL OF WAIVER.—
‘‘(A) FAILURE TO ACT ON LICENSURE AP-
PLICATION ON A TIMELY BASIS.—The ground
for approval of such a waiver application de-
scribed in this subparagraph is that the State
has failed to complete action on a licensing ap-
196
plication of the organization within 90 days of
the date of the State’s receipt of a substantially
complete application. No period before the date
of the enactment of this section shall be in-
cluded in determining such 90-day period.
‘‘(B) DENIAL OF APPLICATION BASED ON
DISCRIMINATORY TREATMENT.—The ground for
approval of such a waiver application described
in this subparagraph is that the State has de-
nied such a licensing application and the stand-
ards or review process imposed by the State as
a condition of approval of the license or as the
basis for such denial by the State imposes any
material requirements, procedures, or standards
(other than solvency requirements) to such or-
ganizations that are not generally applicable to
other entities engaged in a substantially similar
business.
‘‘(C) DENIAL OF APPLICATION BASED ON
APPLICATION OF SOLVENCY REQUIREMENTS.—
With respect to waiver applications filed on or
after the date of publication of solvency stand-
ards established by the Secretary under sub-
section (d), the ground for approval of such a
waiver application described in this subpara-
197
graph is that the State has denied such a li-
censing application based (in whole or in part)
on the organization’s failure to meet applicable
State solvency requirements and such require-
ments are not the same as the solvency stand-
ards established by the Secretary. For purposes
of this subparagraph, the term solvency require-
ments means requirements relating to solvency
and other matters covered under the standards
established by the Secretary under subsection
(d).
‘‘(3) TREATMENT OF WAIVER.—In the case of
a waiver granted under this subsection for a commu-
nity health organization with respect to a State—
‘‘(A) LIMITATION TO STATE.—The waiver
shall be effective only with respect to that State
and does not apply to any other State.
‘‘(B) LIMITATION TO 36-MONTH PERIOD.—
The waiver shall be effective only for a 36-
month period but may be renewed for up to 36
additional months if the Secretary determines
that such an extension is appropriate.
‘‘(C) CONDITIONED ON COMPLIANCE WITH
CONSUMER PROTECTION AND QUALITY STAND-
ARDS.—The continuation of the waiver is condi-
198
tioned upon the organization’s compliance with
the requirements described in paragraph (5).
‘‘(D) PREEMPTION OF STATE LAW.—Any
provisions of law of that State which relate to
the licensing of the organization and which pro-
hibit the organization from providing health in-
surance coverage shall be superseded.
‘‘(4) PROMPT ACTION ON APPLICATION.—The
Secretary shall grant or deny such a waiver applica-
tion within 60 days after the date the Secretary de-
termines that a substantially complete waiver appli-
cation has been filed. Nothing in this section shall
be construed as preventing an organization which
has had such a waiver application denied from sub-
mitting a subsequent waiver application.
‘‘(5) APPLICATION
AND
ENFORCEMENT
OF
STATE
CONSUMER
PROTECTION
AND
QUALITY
STANDARDS.—A waiver granted under this sub-
section to an organization with respect to licensing
under State law is conditioned upon the organiza-
tion’s compliance with all consumer protection and
quality standards insofar as such standards—
‘‘(A) would apply in the State to the com-
munity health organization if it were licensed as
199
an entity offering health insurance coverage
under State law; and
‘‘(B) are generally applicable to other risk-
bearing managed care organizations and plans
in the State.
‘‘(6) REPORT.—By not later than December 31,
2002, the Secretary shall submit to the Committee
on Commerce of the House of Representatives and
the Committee on Labor and Human Resources of
the Senate a report regarding whether the waiver
process under this subsection should be continued
after December 31, 2003.
‘‘(b) ASSUMPTION OF FULL FINANCIAL RISK.—To
qualify for a waiver under subsection (a), the community
health organization shall assume full financial risk on a
prospective basis for the provision of covered health care
services, except that the organization—
‘‘(1) may obtain insurance or make other ar-
rangements for the cost of providing to any enrolled
member such services the aggregate value of which
exceeds such aggregate level as the Secretary speci-
fies from time to time;
‘‘(2) may obtain insurance or make other ar-
rangements for the cost of such services provided to
its enrolled members other than through the organi-
200
zation because medical necessity required their pro-
vision before they could be secured through the orga-
nization;
‘‘(3) may obtain insurance or make other ar-
rangements for not more than 90 percent of the
amount by which its costs for any of its fiscal years
exceed 105 percent of its income for such fiscal year;
and
‘‘(4) may make arrangements with physicians
or other health care professionals, health care insti-
tutions, or any combination of such individuals or
institutions to assume all or part of the financial
risk on a prospective basis for the provision of
health services by the physicians or other health pro-
fessionals or through the institutions.
‘‘(c) CERTIFICATION OF PROVISION AGAINST RISK OF
INSOLVENCY FOR UNLICENSED CHOS.—
‘‘(1) IN GENERAL.—Each community health or-
ganization that is not licensed by a State and for
which a waiver application has been approved under
subsection (a)(1), shall meet standards established
by the Secretary under subsection (d) relating to the
financial solvency and capital adequacy of the orga-
nization.
201
‘‘(2) CERTIFICATION PROCESS FOR SOLVENCY
STANDARDS FOR CHOS.—The Secretary shall estab-
lish a process for the receipt and approval of appli-
cations of a community health organization de-
scribed in paragraph (1) for certification (and peri-
odic recertification) of the organization as meeting
such solvency standards. Under such process, the
Secretary shall act upon such a certification applica-
tion not later than 60 days after the date the appli-
cation has been received.
‘‘(d) ESTABLISHMENT
OF SOLVENCY STANDARDS
FOR COMMUNITY HEALTH ORGANIZATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish, on an expedited basis and by rule pursuant to
section 553 of title 5, United States Code and
through the Health Resources and Services Adminis-
tration, standards described in subsection (c)(1) (re-
lating to financial solvency and capital adequacy)
that entities must meet to obtain a waiver under
subsection (a)(2)(C). In establishing such standards,
the Secretary shall consult with interested organiza-
tions, including the National Association of Insur-
ance Commissioners, the Academy of Actuaries, and
organizations representing Federally qualified health
centers.
202
‘‘(2) FACTORS
TO
CONSIDER
FOR
SOLVENCY
STANDARDS.—In establishing solvency standards for
community health organizations under paragraph
(1), the Secretary shall take into account—
‘‘(A) the delivery system assets of such an
organization and ability of such an organization
to provide services to enrollees;
‘‘(B) alternative means of protecting
against insolvency, including reinsurance, unre-
stricted surplus, letters of credit, guarantees,
organizational insurance coverage, partnerships
with other licensed entities, and valuation at-
tributable to the ability of such an organization
to meet its service obligations through direct
delivery of care; and
‘‘(C) any standards developed by the Na-
tional Association of Insurance Commissioners
specifically for risk-based health care delivery
organizations.
‘‘(3) ENROLLEE PROTECTION AGAINST INSOL-
VENCY.—Such standards shall include provisions to
prevent enrollees from being held liable to any per-
son or entity for the organization’s debts in the
event of the organization’s insolvency.
203
‘‘(4) DEADLINE.—Such standards shall be pro-
mulgated in a manner so they are first effective by
not later than April 1, 1999.
‘‘(e) DEFINITIONS.—In this section:
‘‘(1) COMMUNITY
HEALTH
ORGANIZATION.—
The term ‘community health organization ’ means
an organization that is a Federally-qualified health
center or is controlled by one or more Federally-
qualified health centers.
‘‘(2) FEDERALLY-QUALIFIED
HEALTH
CEN-
TER.—The term ‘Federally-qualified health center’
has the meaning given such term in section
1905(l)(2)(B) of the Social Security Act.
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
given such term in section 2791(b)(1).
‘‘(4) CONTROL.—The term ‘control’ means the
possession, whether direct or indirect, of the power
to direct or cause the direction of the management
and policies of the organization through member-
ship, board representation, or an ownership interest
equal to or greater than 50.1 percent.’’.
204
TITLE 
III—AMENDMENTS 
TO
THE 
INTERNAL 
REVENUE
CODE OF 1986
Subtitle A—Patient Protections
SEC. 3001. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
(a) IN GENERAL.—Subchapter B of chapter 100 of
the Internal Revenue Code of 1986 (relating to other re-
quirements) is amended by adding at the end the following
new section:
‘‘SEC. 9813. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
‘‘(a) PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE.—
‘‘(1) IN GENERAL.—In the case of any health
care professional acting within the lawful scope of
practice in the course of carrying out a contractual
employment arrangement or other direct contractual
arrangement between such professional and a group
health plan, the plan with which such contractual
employment arrangement or other direct contractual
205
arrangement is maintained by the professional may
not impose on such professional under such arrange-
ment any prohibition with respect to advice, pro-
vided to a participant or beneficiary under the plan
who is a patient, about the health status of the par-
ticipant or beneficiary or the medical care or treat-
ment for the condition or disease of the participant
or beneficiary, regardless of whether benefits for
such care or treatment are provided under the plan.
‘‘(2) HEALTH CARE PROFESSIONAL DEFINED.—
For purposes of this subsection, the term ‘health
care professional’ means a physician (as defined in
section 1861(r) of the Social Security Act) or other
health care professional if coverage for the profes-
sional’s services is provided under the group health
plan for the services of the professional. Such term
includes a podiatrist, optometrist, chiropractor, psy-
chologist, dentist, physician assistant, physical or oc-
cupational therapist and therapy assistant, speech–
language pathologist, audiologist, registered or li-
censed practical nurse (including nurse practitioner,
clinical nurse specialist, certified registered nurse
anesthetist, and certified nurse–midwife), licensed
certified social worker, registered respiratory thera-
pist, and certified respiratory therapy technician.
206
‘‘(b) PATIENT ACCESS
TO EMERGENCY MEDICAL
CARE.—
‘‘(1) IN
GENERAL.—To the extent that the
group health plan provides for any benefits consist-
ing of emergency medical care (as defined in section
503(b)(9)(I) of the Employee Retirement Income Se-
curity Act of 1974), except for items or services spe-
cifically excluded—
‘‘(A) the plan shall provide benefits, with-
out requiring preauthorization, for appropriate
emergency 
medical 
screening 
examinations
(within the capability of the emergency facility,
including ancillary services routinely available
to the emergency facility) to the extent that a
prudent layperson, who possesses an average
knowledge of health and medicine, would deter-
mine such examinations to be necessary in
order to determine whether emergency medical
care (as so defined) is required, and
‘‘(B) the plan shall provide benefits for ad-
ditional emergency medical services following an
emergency medical screening examination (if
determined necessary under subparagraph (A))
to the extent that a prudent emergency medical
professional would determine such additional
207
emergency services to be necessary to avoid the
consequences described in clause (i) of section
503(b)(9)(I) of such Act.
‘‘(2) UNIFORM
COST-SHARING
REQUIRED.—
Nothing in this subsection shall be construed as pre-
venting a group health plan from imposing any form
of cost-sharing applicable to any participant or bene-
ficiary 
(including 
coinsurance, 
copayments,
deductibles, and any other charges) in relation to
benefits described in paragraph (1), if such form of
cost-sharing is uniformly applied under such plan,
with respect to similarly situated participants and
beneficiaries, to all benefits consisting of emergency
medical care (as defined in section 503(b)(9)(I) of
the Employee Retirement Income Security Act of
1974) provided to such similarly situated partici-
pants and beneficiaries under the plan.
‘‘(c) PATIENT ACCESS TO OBSTETRIC AND GYNECO-
LOGICAL CARE.
‘‘(1) IN
GENERAL.—In any case in which a
group health plan—
‘‘(A) provides benefits under the terms of
the plan consisting of—
208
‘‘(i) routine gynecological care (such
as preventive women’s health examina-
tions), or
‘‘(ii) routine obstetric care (such as
routine pregnancy-related services),
provided by a participating physician who spe-
cializes in such care (or provides benefits con-
sisting of payment for such care), and
‘‘(B) the plan requires or provides for des-
ignation by a participant or beneficiary of a
participating primary care provider,
if the primary care provider designated by such a
participant or beneficiary is not such a physician,
then the plan shall meet the requirements of para-
graph (2).
‘‘(2) REQUIREMENTS.—A group health plan
meets the requirements of this paragraph, in connec-
tion with benefits described in paragraph (1) con-
sisting of care described in clause (i) or (ii) of para-
graph (1)(A) (or consisting of payment therefor), if
the plan—
‘‘(A) does not require authorization or a
referral by the primary care provider in order
to obtain such benefits, and
209
‘‘(B) treats the ordering of other routine
care of the same type, by the participating phy-
sician providing the care described in clause (i)
or (ii) of paragraph (1)(A), as the authorization
of the primary care provider with respect to
such care.
‘‘(3) CONSTRUCTION.—Nothing in paragraph
(2)(B) shall waive any requirements of coverage re-
lating to medical necessity or appropriateness with
respect to coverage of gynecological or obstetric care
so ordered.
‘‘(d) PATIENT ACCESS TO PEDIATRIC CARE.—
‘‘(1) IN
GENERAL.—In any case in which a
group health plan (or a health insurance issuer of-
fering health insurance coverage in connection with
the plan) provides benefits consisting of routine pe-
diatric care provided by a participating physician
who specializes in pediatrics (or consisting of pay-
ment for such care) and the plan requires or pro-
vides for designation by a participant or beneficiary
of a participating primary care provider, the plan (or
issuer) shall provide that such a participating physi-
cian may be designated, if available, by a parent or
guardian of any beneficiary under the plan is who
210
under 18 years of age, as the primary care provider
with respect to any such benefits.
‘‘(2) CONSTRUCTION.—Nothing in paragraph
(1) shall waive any requirements of coverage relating
to medical necessity or appropriateness with respect
to coverage of pediatric care.
‘‘(e) TREATMENT
OF MULTIPLE COVERAGE OP-
TIONS.—In the case of a plan providing benefits under two
or more coverage options, the requirements of subsections
(c) and (d) shall apply separately with respect to each cov-
erage option.’’.
(b) CLERICAL AMENDMENT.—The table of sections
of such subchapter of such chapter is amended by adding
at the end the following new item:
‘‘Sec. 9813. Patient access to unrestricted medical advice, emer-
gency medical care, obstetric and gynecological
care, pediatric care.’’
SEC. 3002. EFFECTIVE DATE AND RELATED RULES.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act, except that the
Secretary of the Treasury may issue regulations before
such date under such amendments. The Secretary shall
first issue regulations necessary to carry out the amend-
ments made by this section before the effective date there-
of.
211
(b) LIMITATION ON PENALTY FOR CERTAIN FAIL-
URES.—No penalty shall be imposed on any failure to
comply with any requirement imposed by the amendments
made by section 3101 to the extent such failure occurs
before the date of issuance of regulations issued in connec-
tion with such requirement if the plan has sought to com-
ply in good faith with such requirement.
(c) SPECIAL RULE FOR COLLECTIVE BARGAINING
AGREEMENTS.—In the case of a group health plan main-
tained pursuant to one or more collective bargaining
agreements between employee representatives and one or
more employers ratified before the date of the enactment
of this Act, the provisions of subsections (b), (c), and (d)
of section 9813 of the Internal Revenue Code of 1986 (as
added by this subtitle) shall not apply with respect to plan
years beginning before the later of—
(1) the date on which the last of the collective
bargaining agreements relating to the plan termi-
nates (determined without regard to any extension
thereof agreed to after the date of the enactment of
this Act), or
(2) January 1, 2001.
For purposes of this subsection, any plan amend-
ment made pursuant to a collective bargaining
agreement relating to the plan which amends the
212
plan solely to conform to any requirement added by
this subtitle shall not be treated as a termination of
such collective bargaining agreement.
Subtitle B—Patient Access to
Information
SEC. 3101. PATIENT ACCESS TO INFORMATION REGARDING
PLAN COVERAGE, MANAGED CARE PROCE-
DURES, 
HEALTH 
CARE 
PROVIDERS, 
AND
QUALITY OF MEDICAL CARE.
(a) IN GENERAL.—Subchapter B of chapter 100 of
the Internal Revenue Code of 1986 (relating to other re-
quirements) is amended by adding at the end the following
new section:
‘‘SEC. 9814. DISCLOSURE BY GROUP HEALTH PLANS.
‘‘(a) DISCLOSURE
REQUIREMENT.—The adminis-
trator of each group health plan shall take such actions
as are necessary to ensure that the summary plan descrip-
tion of the plan required under section 102 of Employee
Retirement Income Security Act of 1974 (or each sum-
mary plan description in any case in which different sum-
mary plan descriptions are appropriate under part 1 of
subtitle B of title I of such Act for different options of
coverage) contains the information required under sub-
sections (b), (c), (d), and (e)(2)(A). To the extent that
any health insurance issuer offering health insurance cov-
213
erage in connection with such plan provides such informa-
tion on a timely basis to plan participants and bene-
ficiaries, the requirements of this subsection shall be
deemed satisfied in the case of such plan with respect to
such information.
‘‘(b) PLAN BENEFITS.—The information required
under subsection (a) includes the following:
‘‘(1) COVERED ITEMS AND SERVICES.—
‘‘(A) CATEGORIZATION OF INCLUDED BEN-
EFITS.—A description of covered benefits, cat-
egorized by—
‘‘(i) types of items and services (in-
cluding any special disease management
program), and
‘‘(ii) types of health care professionals
providing such items and services.
‘‘(B) EMERGENCY MEDICAL CARE.—A de-
scription of the extent to which the plan covers
emergency medical care (including the extent to
which the plan provides for access to urgent
care centers), and any definitions provided
under the plan for the relevant plan terminol-
ogy referring to such care.
214
‘‘(C) PREVENTATIVE
SERVICES.—A de-
scription of the extent to which the plan pro-
vides benefits for preventative services.
‘‘(D) DRUG FORMULARIES.—A description
of the extent to which covered benefits are de-
termined by the use or application of a drug
formulary and a summary of the process for de-
termining what is included in such formulary.
‘‘(E) 
COBRA 
CONTINUATION
COV-
ERAGE.—A description of the requirements
under section 4980B.
‘‘(2) LIMITATIONS, EXCLUSIONS, AND RESTRIC-
TIONS ON COVERED BENEFITS.—
‘‘(A) 
CATEGORIZATION
OF
EXCLUDED
BENEFITS.—A description of benefits specifi-
cally excluded from coverage, categorized by
types of items and services.
‘‘(B) 
UTILIZATION
REVIEW
AND
PREAUTHORIZATION REQUIREMENTS.—Whether
coverage for medical care is limited or excluded
on 
the 
basis 
of 
utilization 
review 
or
preauthorization requirements.
‘‘(C) LIFETIME, ANNUAL, OR OTHER PE-
RIOD LIMITATIONS.—A description of the cir-
cumstances under which, and the extent to
215
which, coverage is subject to lifetime, annual, or
other period limitations, categorized by types of
benefits.
‘‘(D) CUSTODIAL CARE.—A description of
the circumstances under which, and the extent
to which, the coverage of benefits for custodial
care is limited or excluded, and a statement of
the definition used by the plan for custodial
care.
‘‘(E) 
EXPERIMENTAL
TREATMENTS.—
Whether coverage for any medical care is lim-
ited or excluded because it constitutes experi-
mental treatment or technology, and any defini-
tions provided under the plan for the relevant
plan terminology referring to such limited or
excluded care.
‘‘(F) MEDICAL APPROPRIATENESS OR NE-
CESSITY.—Whether coverage for medical care
may be limited or excluded by reason of a fail-
ure to meet the plan’s requirements for medical
appropriateness or necessity, and any defini-
tions provided under the plan for the relevant
plan terminology referring to such limited or
excluded care.
216
‘‘(G) SECOND
OR
SUBSEQUENT
OPIN-
IONS.—A description of the circumstances
under which, and the extent to which, coverage
for second or subsequent opinions is limited or
excluded.
‘‘(H) SPECIALTY CARE.—A description of
the circumstances under which, and the extent
to which, coverage of benefits for specialty care
is conditioned on referral from a primary care
provider.
‘‘(I) CONTINUITY OF CARE.—A description
of the circumstances under which, and the ex-
tent to which, coverage of items and services
provided by any health care professional is lim-
ited or excluded by reason of the departure by
the professional from any defined set of provid-
ers.
‘‘(J) RESTRICTIONS
ON
COVERAGE
OF
EMERGENCY
SERVICES.—A description of the
circumstances under which, and the extent to
which, the plan, in covering emergency medical
care furnished to a participant or beneficiary of
the plan imposes any financial responsibility de-
scribed in subsection (c) on participants or
beneficiaries or limits or conditions benefits for
217
such care subject to any other term or condition
of such plan.
‘‘(c) 
PARTICIPANT’S
FINANCIAL
RESPONSIBIL-
ITIES.—The information required under subsection (a) in-
cludes an explanation of—
‘‘(1) a participant’s financial responsibility for
payment of premiums, coinsurance, copayments,
deductibles, and any other charges, and
‘‘(2) the circumstances under which, and the
extent to which, the participant’s financial respon-
sibility described in paragraph (1) may vary, includ-
ing any distinctions based on whether a health care
provider from whom covered benefits are obtained is
included in a defined set of providers.
‘‘(d) DISPUTE RESOLUTION PROCEDURES.—The in-
formation required under subsection (a) includes a de-
scription of the processes adopted by the plan pursuant
to section 503(b) of Employee Retirement Income Secu-
rity Act of 1974, including—
‘‘(1) descriptions thereof relating specifically
to—
‘‘(A) coverage decisions,
‘‘(B) internal review of coverage decisions,
and
218
‘‘(C) any external review of coverage deci-
sions, and
‘‘(2) the procedures and time frames applicable
to each step of the processes referred to in subpara-
graphs (A), (B), and (C) of paragraph (1).
‘‘(e) INFORMATION AVAILABLE ON REQUEST.—
‘‘(1) ACCESS TO PLAN BENEFIT INFORMATION
IN ELECTRONIC FORM.—
‘‘(A) IN GENERAL.—A group health plan
shall, upon written request (made not more fre-
quently than annually), make available to par-
ticipants and beneficiaries, in a generally recog-
nized electronic format, the following informa-
tion:
‘‘(i) the latest summary plan descrip-
tion, including the latest summary of ma-
terial modifications; and
‘‘(ii) the actual plan provisions setting
forth the benefits available under the plan
to the extent such information relates to the
coverage options under the plan available to the
participant or beneficiary. A reasonable charge
may be made to cover the cost of providing
such information in such generally recognized
electronic format. The Secretary may by regula-
219
tion prescribe a maximum amount which will
constitute a reasonable charge under the pre-
ceding sentence.
‘‘(B) ALTERNATIVE ACCESS.—The require-
ments of this paragraph may be met by making
such information generally available (rather
than upon request) on the Internet or on a pro-
prietary computer network in a format which is
readily accessible to participants and bene-
ficiaries.
‘‘(2) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED ON REQUEST.—
‘‘(A) INCLUSION IN SUMMARY PLAN DE-
SCRIPTION
OF
SUMMARY
OF
ADDITIONAL
IN-
FORMATION.—The information required under
subsection (a) includes a summary description
of the types of information required by this
subsection to be made available to participants
and beneficiaries on request.
‘‘(B) 
INFORMATION
REQUIRED
FROM
PLANS ON REQUEST.—In addition to informa-
tion required to be included in summary plan
descriptions under this subsection, a group
health plan shall provide the following informa-
tion to a participant or beneficiary on request:
220
‘‘(i) NETWORK CHARACTERISTICS.—If
the plan (or a health insurance issuer of-
fering health insurance coverage in connec-
tion with the plan) utilizes a defined set of
providers under contract with the plan (or
issuer), a detailed list of the names of such
providers and their geographic location, set
forth separately with respect to primary
care providers and with respect to special-
ists.
‘‘(ii) CARE
MANAGEMENT
INFORMA-
TION.—A description of the circumstances
under which, and the extent to which, the
plan has special disease management pro-
grams or programs for persons with dis-
abilities, indicating whether these pro-
grams are voluntary or mandatory and
whether a significant benefit differential
results from participation in such pro-
grams.
‘‘(iii) INCLUSION
OF
DRUGS
AND
BIOLOGICALS IN FORMULARIES.—A state-
ment of whether a specific drug or biologi-
cal is included in a formulary used to de-
termine benefits under the plan and a de-
221
scription of the procedures for considering
requests for any patient-specific waivers.
‘‘(iv) PROCEDURES FOR DETERMINING
EXCLUSIONS BASED ON MEDICAL NECES-
SITY OR EXPERIMENTAL TREATMENTS.—
Upon receipt by the participant or bene-
ficiary of any notification of an adverse
coverage decision based on a determination
relating to medical necessity or an experi-
mental treatment or technology, a descrip-
tion of the procedures and medically-based
criteria used in such decision.
‘‘(v) PREAUTHORIZATION AND UTILI-
ZATION REVIEW PROCEDURES.—Upon re-
ceipt by the participant or beneficiary of
any notification of an adverse coverage de-
cision, a description of the basis on which
any preauthorization requirement or any
utilization review requirement has resulted
in such decision.
‘‘(vi) ACCREDITATION
STATUS
OF
HEALTH INSURANCE ISSUERS AND SERV-
ICE PROVIDERS.—A description of the ac-
creditation and licencing status (if any) of
each health insurance issuer offering
222
health insurance coverage in connection
with the plan and of any utilization review
organization utilized by the issuer or the
plan, together with the name and address
of the accrediting or licencing authority.
‘‘(vii) MEASURES OF ENROLLEE SAT-
ISFACTION.—The latest information (if
any) maintained by the plan, or by any
health insurance issuer offering health in-
surance coverage in connection with the
plan, relating to enrollee satisfaction.
‘‘(viii) QUALITY PERFORMANCE MEAS-
URES.—The latest information (if any)
maintained by the plan, or by any health
insurance issuer offering health insurance
coverage in connection with the plan, relat-
ing to quality of performance of the deliv-
ery of medical care with respect to cov-
erage options offered under the plan and
of health care professionals and facilities
providing medical care under the plan.
‘‘(C) 
INFORMATION
REQUIRED
FROM
HEALTH CARE PROFESSIONALS ON REQUEST.—
Any health care professional treating a partici-
pant or beneficiary under a group health plan
223
shall provide to the participant or beneficiary,
on request, a description of his or her profes-
sional qualifications (including board certifi-
cation status, licensing status, and accreditation
status, if any), privileges, and experience and a
general description by category (including sal-
ary, fee-for-service, capitation, and such other
categories as may be specified in regulations of
the Secretary) of the applicable method by
which such professional is compensated in con-
nection with the provision of such medical care.
‘‘(D) 
INFORMATION
REQUIRED
FROM
HEALTH CARE FACILITIES ON REQUEST.—Any
health care facility from which a participant or
beneficiary has sought treatment under a group
health plan shall provide to the participant or
beneficiary, on request, a description of the fa-
cility’s corporate form or other organizational
form and all forms of licensing and accredita-
tion status (if any) assigned to the facility by
standard-setting organizations.
‘‘(f) ACCESS TO INFORMATION RELEVANT TO THE
COVERAGE OPTIONS UNDER WHICH THE PARTICIPANT OR
BENEFICIARY IS ELIGIBLE TO ENROLL.—In addition to
information otherwise required to be made available under
224
this section, a group health plan shall, upon written re-
quest (made not more frequently than annually), make
available to a participant in connection with a period of
enrollment the summary plan description for any coverage
option under the plan under which the participant is eligi-
ble to enroll and any information described in clauses (i),
(ii), (iii), (vi), (vii), and (viii) of subsection (e)(2)(B).
‘‘(g) ADVANCE NOTICE
OF CHANGES
IN DRUG
FORMULARIES.—Not later than 30 days before the effec-
tive of date of any exclusion of a specific drug or biological
from any drug formulary under the plan that is used in
the treatment of a chronic illness or disease, the plan shall
take such actions as are necessary to reasonably ensure
that plan participants are informed of such exclusion. The
requirements of this subsection may be satisfied—
‘‘(1) by inclusion of information in publications
broadly distributed by plan sponsors, employers, or
employee organizations,
‘‘(2) by electronic means of communication (in-
cluding the Internet or proprietary computer net-
works in a format which is readily accessible to par-
ticipants),
‘‘(3) by timely informing participants who,
under an ongoing program maintained under the
225
plan, have submitted their names for such notifica-
tion, or
‘‘(4) by any other reasonable means of timely
informing plan participants.’’.
(b) CLERICAL AMENDMENT.—The table of sections
of such subchapter of such chapter is amended by adding
at the end the following new item:
‘‘Sec. 9814. Disclosure by group health plans.’’
SEC. 3102. REPORTING ON FRAUD AND ABUSE ENFORCE-
MENT ACTIVITIES.
The General Accounting Office shall—
(1) monitor—
(A) the compliance of the Department of
Justice and all United States Attorneys–with
the guideline entitled ‘‘Guidance on the Use of
the False Claims Act in Civil Health Care Mat-
ters’’ issued by the Department on June 3,
1998, including any revisions to that guideline,
and
(B) the compliance of the Office of the In-
spector General of the Department of Health
and Human Services with the protocols and
guidelines entitled ‘‘National Project Proto-
cols—Best Practice Guidelines’’ issued by the
Inspector General on June 3, 1998, including
226
any revisions to such protocols and guidelines,
and
(2) submit a report on such compliance to the
Committee on the Judiciary and the Committee on
Ways and Means of the House of Representatives
and the Committee on the Judiciary and the Com-
mittee on Finance of the Senate not later than Feb-
ruary 1, 1999, and every year thereafter for a period
of four years ending February 1, 2002.
SEC. 3103. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act. The Secretary
of the Treasury or the Secretary’s delegate shall first issue
all regulations necessary to carry out the amendments
made by this subtitle before such date.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
with respect to a violation of a requirement imposed by
such amendments before the date of issuance of final regu-
lations issued in connection with such requirement, if the
plan has sought to comply in good faith with such require-
ment.
227
Subtitle C—Medical Savings
Accounts
SEC. 3201. EXPANSION OF AVAILABILITY OF MEDICAL SAV-
INGS ACCOUNTS.
(a) REPEAL OF LIMITATIONS ON NUMBER OF MEDI-
CAL SAVINGS ACCOUNTS.—
(1) IN GENERAL.—Subsections (i) and (j) of
section 220 of the Internal Revenue Code of 1986
are hereby repealed.
(2) CONFORMING AMENDMENT.—Paragraph (1)
of section 220(c) of such Code is amended by strik-
ing subparagraph (D).
(b) ALL EMPLOYERS MAY OFFER MEDICAL SAVINGS
ACCOUNTS.—
(1) IN
GENERAL.—Subclause (I) of section
220(c)(1)(A)(iii) of such Code (defining eligible indi-
vidual) is amended by striking ‘‘and such employer
is a small employer’’.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 220(c) of
such Code is amended by striking subparagraph
(C).
(B) Subsection (c) of section 220 of such
Code is amended by striking paragraph (4) and
228
by redesignating paragraph (5) as paragraph
(4).
(c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED
FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
220(b) of such Code is amended to read as follows:
‘‘(2) MONTHLY LIMITATION.—The monthly lim-
itation for any month is the amount equal to 1⁄12 of
the annual deductible (as of the first day of such
month) of the taxpayer’s coverage under the high
deductible health plan.’’
(2) CONFORMING AMENDMENT.—Clause (ii) of
section 220(d)(1)(A) of such Code is amended by
striking ‘‘75 percent of’’.
(d) BOTH EMPLOYERS AND EMPLOYEES MAY CON-
TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph
(5) of section 220(b) of such Code is amended to read
as follows:
‘‘(5) COORDINATION WITH EXCLUSION FOR EM-
PLOYER
CONTRIBUTIONS.—The limitation which
would (but for this paragraph) apply under this sub-
section to the taxpayer for any taxable year shall be
reduced (but not below zero) by the amount which
would (but for section 106(b)) be includible in the
taxpayer’s gross income for such taxable year.’’
229
(e) REDUCTION
OF
PERMITTED
DEDUCTIBLES
UNDER HIGH DEDUCTIBLE HEALTH PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section
220(c)(2) of such Code (defining high deductible
health plan) is amended—
(A) by striking ‘‘$1,500’’ and inserting
‘‘$1,000’’, and
(B) by striking ‘‘$3,000’’ and inserting
‘‘$2,000’’.
(2) CONFORMING AMENDMENT.—Subsection (g)
of section 220 of such Code is amended—
(A) by striking ‘‘1998’’ and inserting
‘‘1999’’, and
(B) by striking ‘‘1997’’ and inserting
‘‘1998’’.
(f) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED
UNDER CAFETERIA PLANS.—Subsection (f) of section
125 of such Code is amended by striking ‘‘106(b),’’.
(g) INDIVIDUALS RECEIVING IMMEDIATE FEDERAL
ANNUITIES
ELIGIBLE
FOR
MEDICAL
SAVINGS
AC-
COUNTS.—Paragraph (1) of section 220(c) of such Code
(defining eligible individual), as amended by subsections
(a) and (b), is amended by adding at the end the following
new subparagraph:
230
‘‘(C) SPECIAL
RULES
FOR
INDIVIDUALS
RECEIVING IMMEDIATE FEDERAL ANNUITIES.—
‘‘(i) 
IN
GENERAL.—Subparagraph
(A)(iii) and subsection (b)(4) shall not
apply for any month to an individual—
‘‘(I) who, as of the 1st day of
such month, is enrolled in a high de-
ductible health plan under chapter 89
of title 5, United States Code, and
‘‘(II) who is entitled to receive
for such month any amount by reason
of being an annuitant (as defined in
section 8901(3) of such title 5).
‘‘(ii) SPECIAL RULE FOR SPOUSE OF
ANNUITANT.—In the case of the spouse of
an individual described in clause (i) who is
not also described in clause (i), subsection
(b)(4) shall not apply to such spouse if
such individual and spouse have family
coverage under the same plan described in
clause (i)(I).’’
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
231
SEC. 3202. EXCEPTION FROM INSURANCE LIMITATION IN
CASE OF MEDICAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Section 220(d)(2)(B) of the Inter-
nal Revenue Code of 1986 is amended by adding at the
end the following new clause:
‘‘(iii) INSURANCE OFFERED BY COM-
MUNITY HEALTH CENTERS.—
‘‘(I) IN
GENERAL.—Subject to
clauses (II) and (III), clause (i) shall
not apply to any expense for coverage
under insurance offered by a health
center (as defined in section 330(a)(1)
of the Public Health Service Act) if
the coverage consists solely of cov-
erage for required primary health ben-
efits 
(as 
defined 
in 
section
330(b)(1)(A) of such Act) provided on
a capitated basis.
‘‘(II) INCOME LIMITATION.—Sub-
clause (I) shall only apply to expenses
for coverage of an individual who, in
the taxable year involved, has income
that is less than 200 percent of the
income official poverty line (as defined
by the Office of Management and
Budget, and revised annually in ac-
232
cordance with section 673(2) of the
Omnibus Budget Reconciliation Act of
1981) applicable to a family of the
size involved.
‘‘(III) LIMITATION
ON
NUMBER
OF CONTRACTS.—For a taxable year
ending in a calendar year, subclause
(I) shall apply only to expenses for
coverage for the first 15,000 individ-
uals enrolled in insurance described in
such subclause in the year.’’.
(b) REPORTS ON ENROLLMENT.—Section 330(j)(3)
of the Public Health Service Act (42 U.S.C. 254c(j)(3))
is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (K),
(2) by striking the period at the end of sub-
paragraph (L) and inserting ‘‘; and’’, and
(3) by inserting after subparagraph (L) the fol-
lowing new subparagraph:
‘‘(M) if the center offers insurance cov-
erage to an individual with a medical savings
account 
under 
subclause 
(I) 
of 
section
220(d)(2)(B)(iii), the center shall provide such
reports in such time and manner as may be re-
233
quired by the Secretary and the Secretary of
the Treasury in order to carry out subclause
(III) of such section.’’.
TITLE IV—HEALTH CARE
LAWSUIT REFORM
Subtitle A—General Provisions
SEC. 4001. FEDERAL REFORM OF HEALTH CARE LIABILITY
ACTIONS.
(a) APPLICABILITY.—This title shall apply with re-
spect to any health care liability action brought in any
State or Federal court, except that this title shall not
apply to—
(1) an action for damages arising from a vac-
cine-related injury or death to the extent that title
XXI of the Public Health Service Act applies to the
action, or
(2) an action under the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1001 et
seq.).
(b) PREEMPTION.—This title shall preempt any State
law to the extent such law is inconsistent with the limita-
tions contained in this title. This title shall not preempt
any State law that provides for defenses or places limita-
tions on a person’s liability in addition to those contained
234
in this title or otherwise imposes greater restrictions than
those provided in this title.
(c) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (b) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
(d) AMOUNT
IN CONTROVERSY.—In an action to
which this title applies and which is brought under section
1332 of title 28, United States Code, the amount of non-
economic damages or punitive damages, and attorneys’
fees or costs, shall not be included in determining whether
235
the matter in controversy exceeds the sum or value of
$50,000.
(e) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this title shall be construed to establish any jurisdiction
in the district courts of the United States over health care
liability actions on the basis of section 1331 or 1337 of
title 28, United States Code.
SEC. 4002. DEFINITIONS.
As used in this title:
(1) ACTUAL DAMAGES.—The term ‘‘actual dam-
ages’’ means damages awarded to pay for economic
loss.
(2) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means a system established
under Federal or State law that provides for the res-
olution of health care liability claims in a manner
other than through health care liability actions.
(3) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a health care liability action
and any person on whose behalf such an action is
brought. If such action is brought through or on be-
half of an estate, the term includes the claimant’s
decedent. If such action is brought through or on be-
236
half of a minor or incompetent, the term includes
the claimant’s legal guardian.
(4) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure or degree of proof that will produce in the mind
of the trier of fact a firm belief or conviction as to
the truth of the allegations sought to be established.
Such measure or degree of proof is more than that
required under preponderance of the evidence but
less than that required for proof beyond a reason-
able doubt.
(5) COLLATERAL
SOURCE
PAYMENTS.—The
term ‘‘collateral source payments’’ means any
amount paid or reasonably likely to be paid in the
future to or on behalf of a claimant, or any service,
product, or other benefit provided or reasonably like-
ly to be provided in the future to or on behalf of a
claimant, as a result of an injury or wrongful death,
pursuant to—
(A) any State or Federal health, sickness,
income-disability, accident or workers’ com-
pensation Act;
(B) any health, sickness, income-disability,
or accident insurance that provides health bene-
fits or income-disability coverage;
237
(C) any contract or agreement of any
group, organization, partnership, or corporation
to provide, pay for, or reimburse the cost of
medical, hospital, dental, or income disability
benefits; and
(D) any other publicly or privately funded
program.
(6) DRUG.—The term ‘‘drug’’ has the meaning
given such term in section 201(g)(1) of the Federal
Food, 
Drug, 
and 
Cosmetic 
Act 
(21 
U.S.C.
321(g)(1)).
(7) ECONOMIC
LOSS.—The term ‘‘economic
loss’’ means any pecuniary loss resulting from injury
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs,
and loss of business or employment opportunities),
to the extent recovery for such loss is allowed under
applicable State law.
(8) HARM.—The term ‘‘harm’’ means any le-
gally cognizable wrong or injury for which punitive
damages may be imposed.
(9) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ means—
238
(A) a hospital or medical expense incurred
policy or certificate,
(B) a hospital or medical service plan con-
tract,
(C) a health maintenance subscriber con-
tract, or
(D) a Medicare+Choice plan (offered
under part C of title XVIII of the Social Secu-
rity Act),
that provides benefits with respect to health care
services.
(10) HEALTH
CARE
LIABILITY
ACTION.—The
term ‘‘health care liability action’’ means a civil ac-
tion brought in a State or Federal court against—
(A) a health care provider,
(B) an entity which is obligated to provide
or pay for health benefits under any health ben-
efit plan (including any person or entity acting
under a contract or arrangement to provide or
administer any health benefit), or
(C) the manufacturer, distributor, supplier,
marketer, promoter, or seller of a medical prod-
uct,
in which the claimant alleges a claim (including third
party claims, cross claims, counter claims, or contribution
239
claims) based upon the provision of (or the failure to pro-
vide or pay for) health care services or the use of a medical
product, regardless of the theory of liability on which the
claim is based or the number of plaintiffs, defendants, or
causes of action.
(11) HEALTH
CARE
LIABILITY
CLAIM.—The
term ‘‘health care liability claim’’ means a claim in
which the claimant alleges that injury was caused by
the provision of (or the failure to provide) health
care services.
(12) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any person that is en-
gaged in the delivery of health care services in a
State and that is required by the laws or regulations
of the State to be licensed or certified by the State
to engage in the delivery of such services in the
State.
(13) 
HEALTH
CARE
SERVICE.—The 
term
‘‘health care service’’ means any service eligible for
payment under a health benefit plan, including serv-
ices related to the delivery or administration of such
service.
(14) MEDICAL DEVICE.—The term ‘‘medical de-
vice’’ has the meaning given such term in section
240
201(h) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 321(h)).
(15) NON-ECONOMIC
DAMAGES.—The term
‘‘non-economic damages’’ means damages paid to an
individual for pain and suffering, inconvenience,
emotional distress, mental anguish, loss of consor-
tium, injury to reputation, humiliation, and other
nonpecuniary losses.
(16) PERSON.—The term ‘‘person’’ means any
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any
other entity, including any governmental entity.
(17) PRODUCT SELLER.—
(A) IN
GENERAL.—Subject to subpara-
graph (B), the term ‘‘product seller’’ means a
person who, in the course of a business con-
ducted for that purpose—
(i) sells, distributes, rents, leases, pre-
pares, blends, packages, labels, or is other-
wise involved in placing, a product in the
stream of commerce, or
(ii) installs, repairs, or maintains the
harm-causing aspect of a product.
(B) EXCLUSION.—Such term does not in-
clude—
241
(i) a seller or lessor of real property;
(ii) a provider of professional services
in any case in which the sale or use of a
product is incidental to the transaction and
the essence of the transaction is the fur-
nishing of judgment, skill, or services; or
(iii) any person who—
(I) acts in only a financial capac-
ity with respect to the sale of a prod-
uct; or
(II) leases a product under a
lease arrangement in which the selec-
tion, possession, maintenance, and op-
eration of the product are controlled
by a person other than the lessor.
(18) PUNITIVE DAMAGES.—The term ‘‘punitive
damages’’ means damages awarded against any per-
son not to compensate for actual injury suffered, but
to punish or deter such person or others from en-
gaging in similar behavior in the future.
(19) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, American Samoa,
the Northern Mariana Islands, and any other terri-
tory or possession of the United States.
242
SEC. 4003. EFFECTIVE DATE.
This title will apply to—
(1) any health care liability action brought in a
Federal or State court, and
(2) any health care liability claim subject to an
alternative dispute resolution system,
that is initiated on or after the date of enactment of this
title, except that any health care liability claim or action
arising from an injury occurring before the date of enact-
ment of this title shall be governed by the applicable stat-
ute of limitations provisions in effect at the time the injury
occurred.
Subtitle B—Uniform Standards for
Health Care Liability Actions
SEC. 4011. STATUTE OF LIMITATIONS.
A health care liability action may not be brought
after the expiration of the 2-year period that begins on
the date on which the alleged injury that is the subject
of the action was discovered or should reasonably have
been discovered, but in no case after the expiration of the
5-year period that begins on the date the alleged injury
occurred.
SEC. 4012. CALCULATION AND PAYMENT OF DAMAGES.
(a) TREATMENT OF NON-ECONOMIC DAMAGES.—
(1) LIMITATION
ON
NON-ECONOMIC
DAM-
AGES.—The total amount of non-economic damages
243
that may be awarded to a claimant for losses result-
ing from the injury which is the subject of a health
care liability action may not exceed $250,000, re-
gardless of the number of parties against whom the
action is brought or the number of actions brought
with respect to the injury. The limitation under this
paragraph shall not apply to an action for damages
based solely on intentional denial of medical treat-
ment necessary to preserve a patient’s life that the
patient is otherwise qualified to receive, against the
wishes of a patient, or if the patient is incompetent,
against the wishes of the patient’s guardian, on the
basis of the patient’s present or predicated age, dis-
ability, degree of medical dependency, or quality of
life.
(2) LIMIT.—If, after the date of the enactment
of this Act, a State enacts a law which prescribes
the amount of non-economic damages which may be
awarded in a health care liability action which is dif-
ferent from the amount prescribed by section
4012(a)(1), the State amount shall apply in lieu of
the amount prescribed by such section. If, after the
date of the enactment of this Act, a State enacts a
law which limits the amount of recovery in a health
care liability action without delineating between eco-
244
nomic and non-economic damages, the State amount
shall apply in lieu of the amount prescribed by such
section.
(3) JOINT AND SEVERAL LIABILITY.—In any
health care liability action brought in State or Fed-
eral court, a defendant shall be liable only for the
amount of non-economic damages attributable to
such defendant in direct proportion to such defend-
ant’s share of fault or responsibility for the claim-
ant’s actual damages, as determined by the trier of
fact. In all such cases, the liability of a defendant
for non-economic damages shall be several and not
joint and a separate judgment shall be rendered
against each defendant for the amount allocated to
such defendant.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) GENERAL RULE.—Punitive damages may,
to the extent permitted by applicable State law, be
awarded in any health care liability action for harm
in any Federal or State court against a defendant if
the claimant establishes by clear and convincing evi-
dence that the harm suffered was the result of con-
duct—
(A) specifically intended to cause harm, or
245
(B) conduct manifesting a conscious, fla-
grant indifference to the rights or safety of oth-
ers.
(2) 
APPLICABILITY.—This 
subsection 
shall
apply to any health care liability action brought in
any Federal or State court on any theory where pu-
nitive damages are sought. This subsection does not
create a cause of action for punitive damages. This
subsection does not preempt or supersede any State
or Federal law to the extent that such law would
further limit the award of punitive damages.
(3) BIFURCATION.—At the request of any
party, the trier of fact shall consider in a separate
proceeding whether punitive damages are to be
awarded and the amount of such award. If a sepa-
rate proceeding is requested, evidence relevant only
to the claim of punitive damages, as determined by
applicable State law, shall be inadmissible in any
proceeding to determine whether actual damages are
to be awarded.
(4) DRUGS AND DEVICES.—
(A) IN GENERAL.—
(i) 
PUNITIVE
DAMAGES.—Punitive
damages shall not be awarded against a
manufacturer or product seller of a drug
246
or medical device which caused the claim-
ant’s harm where—
(I) such drug or device was sub-
ject to premarket approval by the
Food and Drug Administration with
respect to the safety of the formula-
tion or performance of the aspect of
such drug or device which caused the
claimant’s harm, or the adequacy of
the packaging or labeling of such drug
or device which caused the harm, and
such drug, device, packaging, or label-
ing was approved by the Food and
Drug Administration; or
(II) the drug is generally recog-
nized as safe and effective pursuant to
conditions established by the Food
and Drug Administration and applica-
ble regulations, including packaging
and labeling regulations.
(ii) APPLICATION.—Clause (i) shall
not apply in any case in which the defend-
ant, before or after premarket approval of
a drug or device—
247
(I) intentionally and wrongfully
withheld from or misrepresented to
the Food and Drug Administration in-
formation concerning such drug or de-
vice required to be submitted under
the Federal Food, Drug, and Cos-
metic Act (21 U.S.C. 301 et seq.) or
section 351 of the Public Health Serv-
ice Act (42 U.S.C. 262) that is mate-
rial and relevant to the harm suffered
by the claimant, or
(II) made an illegal payment to
an official or employee of the Food
and Drug Administration for the pur-
pose of securing or maintaining ap-
proval of such drug or device.
(B) PACKAGING.—In a health care liability
action for harm which is alleged to relate to the
adequacy of the packaging or labeling of a drug
which is required to have tamper-resistant
packaging under regulations of the Secretary of
Health and Human Services (including labeling
regulations related to such packaging), the
manufacturer or product seller of the drug shall
not be held liable for punitive damages unless
248
such packaging or labeling is found by the court
by clear and convincing evidence to be substan-
tially out of compliance with such regulations.
(c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—
(1) GENERAL RULE.—In any health care liabil-
ity action in which the damages awarded for future
economic and non-economic loss exceeds $50,000, a
person shall not be required to pay such damages in
a single, lump-sum payment, but shall be permitted
to make such payments periodically based on when
the damages are likely to occur, as such payments
are determined by the court.
(2) FINALITY OF JUDGMENT.—The judgment
of the court awarding periodic payments under this
subsection may not, in the absence of fraud, be re-
opened at any time to contest, amend, or modify the
schedule or amount of the payments.
(3) 
LUMP-SUM
SETTLEMENTS.—This 
sub-
section shall not be construed to preclude a settle-
ment providing for a single, lump-sum payment.
(d) TREATMENT
OF COLLATERAL SOURCE PAY-
MENTS.—
(1) INTRODUCTION
INTO
EVIDENCE.—In any
health care liability action, any defendant may intro-
duce evidence of collateral source payments. If any
249
defendant elects to introduce such evidence, the
claimant may introduce evidence of any amount paid
or contributed or reasonably likely to be paid or con-
tributed in the future by or on behalf of the claim-
ant to secure the right to such collateral source pay-
ments.
(2) NO SUBROGATION.—No provider of collat-
eral source payments shall recover any amount
against the claimant or receive any lien or credit
against the claimant’s recovery or be equitably or le-
gally subrogated to the right of the claimant in a
health care liability action.
(3) APPLICATION TO SETTLEMENTS.—This sub-
section shall apply to an action that is settled as well
as an action that is resolved by a fact finder.
SEC. 4013. ALTERNATIVE DISPUTE RESOLUTION.
Any ADR used to resolve a health care liability action
or claim shall contain provisions relating to statute of limi-
tations, non-economic damages, joint and several liability,
punitive damages, collateral source rule, and periodic pay-
ments which are consistent with the provisions relating to
such matters in this title.
250
TITLE V—CONFIDENTIALITY OF
HEALTH INFORMATION
SEC. 5001. CONFIDENTIALITY OF PROTECTED HEALTH IN-
FORMATION.
(a) IN GENERAL.—Title XI of the Social Security Act
(42 U.S.C. 1301 et seq.) is amended by adding at the end
the following:
‘‘PART D—CONFIDENTIALITY OF PROTECTED HEALTH
INFORMATION
‘‘INSPECTION AND COPYING OF PROTECTED HEALTH
INFORMATION
‘‘SEC. 1181. (a) IN GENERAL.—Subject to the suc-
ceeding provisions of this section, upon the request of an
individual who is the subject of protected health informa-
tion, a person who is a health care provider, health plan,
employer, health or life insurer, or educational institution
shall make available to the individual (or, in the discretion
of the person, to a health care provider designated by the
individual), for inspection and copying, protected health
information concerning the individual that the person
maintains, including records created under section 1182.
‘‘(b) ACCESS THROUGH ORIGINATING PROVIDER.—
Protected health information that is created by an origi-
nating provider, and subsequently received by another
health care provider or a health plan as part of treatment
251
or payment activities, shall be made available for inspec-
tion and copying as provided in this section through the
originating provider, rather than the receiving health care
provider or health plan, unless the originating provider
does not maintain the information.
‘‘(c) INVESTIGATIONAL INFORMATION.—With respect
to protected health information that was created as part
of the requesting individual’s participation in a clinical
trial monitored by an institutional review board estab-
lished to review health research with respect to potential
risks to human subjects pursuant to Federal regulations
adopted under section 1802(b) of the Public Health Serv-
ice Act (42 U.S.C. 300v–1(b)) and the notice (informally
referred to as the ‘Common Rule’) promulgated in the
Federal Register at 56 Fed. Reg. 28003), a request under
subsection (a) shall be granted only to the extent and in
a manner consistent with such regulations.
‘‘(d) OTHER EXCEPTIONS.—Unless ordered by a
court of competent jurisdiction, a person to whom a re-
quest under subsection (a) is made is not required to grant
the request, if—
‘‘(1) the person determines that the disclosure
of the information could reasonably be expected to
endanger the life or physical safety of, or cause sub-
stantial harm to, any individual; or
252
‘‘(2) the information is compiled principally—
‘‘(A) in anticipation of a civil, criminal, or
administrative action or proceeding; or
‘‘(B) for use in such action or proceeding.
‘‘(e) DENIAL
OF REQUEST
FOR INSPECTION
OR
COPYING.—If a person to whom a request under sub-
section (a) is made denies a request for inspection or copy-
ing pursuant to this section, the person shall inform the
individual making the request, in writing, of—
‘‘(1) the reasons for the denial of the request;
‘‘(2) the availability of procedures for further
review of the denial; and
‘‘(3) the individual’s right to file with the per-
son a concise statement setting forth the request.
‘‘(f) STATEMENT REGARDING REQUEST.—If an indi-
vidual has filed with a person a statement under sub-
section (e)(3) with respect to protected health information,
the person, in any subsequent disclosure of the informa-
tion—
‘‘(1) shall include a notation concerning the in-
dividual’s statement; and
‘‘(2) may include a concise statement of the
reasons for denying the request for inspection or
copying.
253
‘‘(g) PROCEDURES.—A person providing access to
protected health information for inspection or copying
under this section may set forth appropriate procedures
to be followed for such inspection or copying and may re-
quire an individual to pay reasonable costs associated with
such inspection or copying.
‘‘(h) INSPECTION
AND COPYING
OF SEGREGABLE
PORTION.—A person to whom a request under subsection
(a) is made shall permit the inspection and copying of any
reasonably segregable portion of a record after deletion of
any portion that the person is not required to disclose
under this section.
‘‘(i) DEADLINE.—A person described in subsection
(a) shall comply with or deny, in accordance with this sec-
tion, a request for inspection or copying of protected
health information under this section not later than 30
days after the date on which the person receives the re-
quest.
‘‘(j) RULES GOVERNING AGENTS.—An agent of a
person described in subsection (a) shall not be required
to provide for the inspection and copying of protected
health information, except where—
‘‘(1) the protected health information is re-
tained by the agent; and
254
‘‘(2) the agent has been asked by the person to
fulfill the requirements of this section.
‘‘SUPPLEMENTATION OF PROTECTED HEALTH
INFORMATION
‘‘SEC. 1182. (a) IN GENERAL.—Subject to subsection
(b), not later than 45 days after the date on which a per-
son who is a health care provider, health plan, employer,
health or life insurer, or educational institution receives,
from an individual who is a subject of protected health
information that is maintained by the person, a request
in writing to amend the information by adding a concise
written supplement to it, the person—
‘‘(1) shall make the amendment requested;
‘‘(2) shall inform the individual of the amend-
ment that has been made; and
‘‘(3) shall make reasonable efforts to inform
any person who is identified by the individual, who
is not an officer, employer, or agent of the person
receiving the request, and to whom the unamended
portion of the information was disclosed during the
preceding year, by sending a notice to the person’s
last known address that an amendment, consisting
of the addition of a supplement, has been made to
the protected health information of the individual.
‘‘(b) REFUSAL TO AMEND.—If a person described in
subsection (a) refuses to make an amendment requested
255
by an individual under such subsection, the person shall
inform the individual, in writing, of—
‘‘(1) the reasons for the refusal to make the
amendment;
‘‘(2) any procedures for further review of the
refusal; and
‘‘(3) the individual’s right to file with the per-
son a concise statement setting forth the requested
amendment and the individual’s reasons for dis-
agreeing with the refusal.
‘‘(c) STATEMENT OF DISAGREEMENT.—If an individ-
ual has filed a statement of disagreement with a person
under subsection (b)(3), the person, in any subsequent dis-
closure of the disputed portion of the information—
‘‘(1) shall include a notation that such individ-
ual has filed a statement of disagreement; and
‘‘(2) may include a concise statement of the
reasons for not making the requested amendment.
‘‘(d) RULES GOVERNING AGENTS.—The agent of a
person described in subsection (a) shall not be required
to make amendments to individually identifiable health in-
formation, except where—
‘‘(1) the information is retained by the agent;
and
256
‘‘(2) the agent has been asked by such person
to fulfill the requirements of this section.
‘‘(e) DUPLICATIVE REQUESTS FOR AMENDMENTS.—
If a person described in subsection (a) receives a duplica-
tive request for an amendment of information as provided
for in such subsection and a statement of disagreement
with respect to the request has been filed pursuant to sub-
section (c), the person shall inform the individual of such
filing and shall not be required to carry out the procedures
under this section.
‘‘(f) RULE OF CONSTRUCTION.—This section shall
not be construed—
‘‘(1) to permit an individual to modify state-
ments in his or her record that document the factual
observations of another individual or state the re-
sults of diagnostic tests; or
‘‘(2) to permit an individual to amend his or
her record as to the type, duration, or quality of
treatment the individual believes he or she should
have been provided.
‘‘NOTICE OF CONFIDENTIALITY PRACTICES
‘‘SEC. 1183. (a) PREPARATION OF WRITTEN NO-
TICE.—A person who is a health care provider, health
plan, health oversight agency, public health authority, em-
ployer, health or life insurer, health researcher, or edu-
cational institution shall post or provide, in writing and
257
in a clear and conspicuous manner, notice of the person’s
protected health information confidentiality practices. The
notice shall include—
‘‘(1) a description of an individual’s rights with
respect to protected health information;
‘‘(2) the intended uses and disclosures of pro-
tected health information;
‘‘(3) the procedures established by the person
for the exercise of an individual’s rights with respect
to protected health information; and
‘‘(4) the procedures established by the person
for obtaining copies of the notice.
‘‘(b) MODEL NOTICE.—The Secretary, after notice
and opportunity for public comment, and based on the ad-
vice of the National Committee on Vital and Health Sta-
tistics established under section 306(k) of the Public
Health Service Act (42 U.S.C. 242k(k)), shall develop and
disseminate, not later than 6 months after the date of the
enactment of the Patient Protection Act of 1998, model
notices of confidentiality practices, for use under this sec-
tion. Use of a model notice developed by the Secretary
shall serve as a complete defense in any civil action to an
allegation that a violation of this section has occurred.
‘‘ESTABLISHMENT OF SAFEGUARDS
‘‘SEC. 1184. (a) IN GENERAL.—A person who is a
health care provider, health plan, health oversight agency,
258
public health authority, employer, health or life insurer,
health researcher, or educational institution shall estab-
lish, maintain, and enforce reasonable and appropriate ad-
ministrative, technical, and physical safeguards to protect
the confidentiality, security, accuracy, and integrity of
protected health information created, received, obtained,
maintained, used, transmitted, or disposed of by the per-
son.
‘‘(b) FACTORS TO BE CONSIDERED.—A person sub-
ject to subsection (a) shall consider the following factors
in establishing safeguards under such subsection:
‘‘(1) The need for protected health information.
‘‘(2) The categories of personnel who will have
access to protected health information.
‘‘(3) The feasibility of limiting access to individ-
ual identifiers.
‘‘(4) The appropriateness of the policy or proce-
dure to the person, and to the medium in which pro-
tected health information is stored and transmitted.
‘‘(5) The value of audit trails in computerized
records.
‘‘(c) RELATIONSHIP TO PART C REQUIREMENT.—
Any safeguard established under this section shall be con-
sistent with the requirement in section 1173(d)(2).
259
‘‘(d) CONVERSION TO NONIDENTIFIABLE HEALTH
INFORMATION.—A person subject to subsection (a) shall,
to the extent practicable and consistent with the purpose
for which protected health information is maintained, con-
vert such information into nonidentifiable health informa-
tion.
‘‘AVAILABILITY OF PROTECTED HEALTH INFORMATION
FOR PURPOSES OF HEALTH CARE OPERATIONS
‘‘SEC. 1185. DISCLOSURE.—Any person who main-
tains protected health information may disclose the infor-
mation to a health care provider or a health plan for the
purpose of permitting the provider or plan to conduct
health care operations.
‘‘(b) USE.—A health care provider or a health plan
that maintains protected health information may use it for
the purposes described in subsection (a).
‘‘RELATIONSHIP TO OTHER LAWS
‘‘SEC. 1186. (a) STATE LAW.—
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), the provisions of this part shall
preempt a provision of State law to the extent that
such provision—
‘‘(A) otherwise would be preempted as in-
consistent with this part under article VI of the
Constitution of the United States;
260
‘‘(B) relates to authorization for the use or
disclosure of—
‘‘(i) protected health information for
health care operations; or
‘‘(ii) nonidentifiable health informa-
tion; or
‘‘(C) relates to any of the following:
‘‘(i) Inspection or copying of protected
health information by a person who is a
subject of the information.
‘‘(ii) Amendment of protected health
information by a person who is a subject
of the information.
‘‘(iii) Notice of confidentiality prac-
tices with respect to protected health infor-
mation.
‘‘(iv) Establishment of safeguards for
protected health information.
‘‘(2) EXCEPTIONS.—Nothing in this part shall
be construed to preempt or modify a provision of
State law to the extent that such provision relates
to protected health information and—
‘‘(A) the confidentiality of the records
maintained by a licensed mental health profes-
sional;
261
‘‘(B) the provision of health care to a
minor, or the disclosure of information about a
minor to a parent or guardian of the minor;
‘‘(C) condition-specific limitations on dis-
closure;
‘‘(D) the use or disclosure of information
for use in legally authorized—
‘‘(i) disease or injury reporting;
‘‘(ii) public health surveillance, inves-
tigation, or intervention;
‘‘(iii) vital statistics reporting, such as
reporting of birth or death information;
‘‘(iv) reporting of abuse or neglect in-
formation;
‘‘(v) reporting of information concern-
ing a communicable disease status; or
‘‘(vi) reporting concerning the safety
or effectiveness of a biological product reg-
ulated under section 351 of the Public
Health Service Act (42 U.S.C. 262) or a
drug or device regulated under the Federal
Food, Drug, and Cosmetic Act (21 U.S.C.
301 et seq.);
‘‘(E) the disclosure to a person by a health
care provider of information about an individ-
262
ual, in any case in which the provider has de-
termined—
‘‘(i) in the provider’s reasonable medi-
cal judgment, that the individual is uncon-
scious, incompetent, or otherwise incapable
of deciding whether to authorize disclosure
of the protected health information; and
‘‘(ii) in the provider’s reasonable judg-
ment, that the person is a spouse, relative,
guardian, or close friend of the individ-
ual’s; or
‘‘(F) the use of information by, or the dis-
closure of information to, a person holding a
valid and applicable power of attorney that in-
cludes the authority to make health care deci-
sions on behalf of an individual who is a subject
of the information.
‘‘(3) PRIVILEGES.—Nothing in this part shall
be construed to preempt or modify a provision of
State law to the extent that such provision relates
to a privilege of a witness or other person in a court
of that State.
‘‘(b) FEDERAL LAW.—Nothing in this part shall be
construed to preempt, modify, or repeal a provision of any
other Federal law relating to protected health information
263
or relating to an individual’s access to protected health
information or health care services. Nothing in this part
shall be construed to preempt, modify, or repeal a provi-
sion of Federal law to the extent that such provision re-
lates to a privilege of a witness or other person in a court
of the United States.
‘‘CIVIL PENALTIES
‘‘SEC. 1187. (a) VIOLATION.—A person who the Sec-
retary determines has substantially and materially failed
to comply with this part shall be subject, in addition to
any other penalties that may be prescribed by law—
‘‘(1) in a case in which the violation relates to
section 1181 or 1182, to a civil penalty of not more
than $500 for each such violation but not to exceed
$5,000 in the aggregate for all violations of an iden-
tical requirement or prohibition during a calendar
year;
‘‘(2) in the case in which the violation relates
to section 1183 or 1184, to a civil penalty of not
more than $10,000 for each such violation, but not
to exceed $50,000 in the aggregate for all violations
of an identical requirement or prohibition during a
calendar year; or
‘‘(3) in a case in which the Secretary finds that
such violations have occurred with such frequency as
264
to constitute a general business practice, to a civil
penalty of not more than $100,000.
‘‘(b) PROCEDURES
FOR
IMPOSITION
OF
PEN-
ALTIES.—Section 1128A, other than subsections (a) and
(b) and the second sentence of subsection (f) of that sec-
tion, shall apply to the imposition of a civil or monetary
penalty under this section in the same manner as such
provisions apply with respect to the imposition of a penalty
under section 1128A.
‘‘DEFINITIONS
‘‘SEC. 1188. As used in this part:
‘‘(1) AGENT.—The term ‘agent’ means a per-
son, including a contractor, who represents and acts
for another under the contract or relation of agency,
or whose function is to bring about, modify, affect,
accept performance of, or terminate contractual obli-
gations between the principal and a third person.
‘‘(2) CONDITION-SPECIFIC LIMITATIONS ON DIS-
CLOSURE.—The term ‘condition-specific limitations
on disclosure’ means State laws that prohibit the
disclosure of protected health information relating to
a health condition or disease that has been identified
by the Secretary as posing a public health threat.
‘‘(3) DISCLOSE.—The term ‘disclose’ means to
release, transfer, provide access to, or otherwise di-
vulge protected health information to any person
265
other than an individual who is the subject of such
information.
‘‘(4) EDUCATIONAL
INSTITUTION.—The term
‘educational institution’ means an institution or
place accredited or licensed for purposes of providing
for instruction or education, including an elementary
school, secondary school, or institution of higher
learning, a college, or an assemblage of colleges
united under one corporate organization or govern-
ment.
‘‘(5) EMPLOYER.—The term ‘employer’ has the
meaning given such term under section 3(5) of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1002(5)), except that such term shall in-
clude only employers of two or more employees.
‘‘(6) HEALTH CARE.—The term ‘health care’
means—
‘‘(A) preventive, diagnostic, therapeutic,
rehabilitative, maintenance, or palliative care,
including appropriate assistance with disease or
symptom management and maintenance, coun-
seling, service, or procedure—
‘‘(i) with respect to the physical or
mental condition of an individual; or
266
‘‘(ii) affecting the structure or func-
tion of the human body or any part of the
human body, including the banking of
blood, sperm, organs, or any other tissue;
or
‘‘(B) any sale or dispensing, pursuant to a
prescription or medical order, of a drug, device,
equipment, or other health care-related item to
an individual, or for the use of an individual.
‘‘(7) HEALTH
CARE
OPERATIONS.—The term
‘health care operations’ means services, provided di-
rectly by or on behalf of a health plan or health care
provider or by its agent, for any of the following
purposes:
‘‘(A) Coordinating health care, including
health care management of the individual
through risk assessment, case management, and
disease management.
‘‘(B) Conducting quality assessment and
improvement activities, including outcomes eval-
uation, clinical guideline development and im-
provement, and health promotion.
‘‘(C) Carrying out utilization review activi-
ties, 
including 
precertification 
and
preauthorization of services, and health plan
267
rating activities, including underwriting and ex-
perience rating.
‘‘(D) Conducting or arranging for auditing
services.
‘‘(8) HEALTH
CARE
PROVIDER.—The term
‘health care provider’ means a person, who with re-
spect to a specific item of protected health informa-
tion, receives, creates, uses, maintains, or discloses
the information while acting in whole or in part in
the capacity of—
‘‘(A) a person who is licensed, certified,
registered, or otherwise authorized by Federal
or State law to provide an item or service that
constitutes health care in the ordinary course of
business, or practice of a profession;
‘‘(B) a Federal, State, or employer-spon-
sored or any other privately-sponsored program
that directly provides items or services that con-
stitute health care to beneficiaries; or
‘‘(C) an officer or employee of a person de-
scribed in subparagraph (A) or (B).
‘‘(9) HEALTH
OR
LIFE
INSURER.—The term
‘health or life insurer’ means a health insurance
issuer, as defined in section 9832(b)(2) of the Inter-
268
nal Revenue Code of 1986, or a life insurance com-
pany, as defined in section 816 of such Code.
‘‘(10) HEALTH PLAN.—The term ‘health plan’
means any health insurance plan, including any hos-
pital or medical service plan, dental or other health
service plan, health maintenance organization plan,
plan offered by a provider-sponsored organization
(as defined in section 1855(d)), or other program
providing or arranging for the provision of health
benefits.
‘‘(11) 
HEALTH
RESEARCHER.—The 
term
‘health researcher’ means a person (or an officer,
employee, or agent of a person) who is engaged in
systematic investigation, including research develop-
ment, testing, data analysis, and evaluation, de-
signed to develop or contribute to generalizable
knowledge relating to basic biomedical processes,
health, health care, health care delivery, or health
care cost.
‘‘(12) NONIDENTIFIABLE
HEALTH
INFORMA-
TION.—The term ‘nonidentifiable health information’
means protected health information from which per-
sonal identifiers that reveal the identity of the indi-
vidual who is the subject of such information or pro-
vide a direct means of identifying the individual
269
(such as name, address, and social security number)
have been removed, encrypted, or replaced with a
code, such that the identity of the individual is not
evident without (in the case of encrypted or coded
information) use of a key.
‘‘(13) 
ORIGINATING
PROVIDER.—The 
term
‘originating provider’, when used with respect to
protected health information, means the health care
provider who takes an action that initiates the treat-
ment episode to which that information relates, such
as prescribing a drug, ordering a diagnostic test, or
admitting an individual to a health care facility. A
hospital or nursing facility is the originating pro-
vider with respect to protected health information
created or received as part of inpatient or outpatient
treatment provided in the hospital or facility.
‘‘(14) PAYMENT ACTIVITIES.—The term ‘pay-
ment activities’ means—
‘‘(A) activities undertaken—
‘‘(i) by, or on behalf of, a health plan
to determine its responsibility for coverage
under the plan; or
‘‘(ii) by a health care provider to ob-
tain payment for items or services provided
to an individual, provided under a health
270
plan, or provided based on a determination
by the health plan of responsibility for cov-
erage under the plan; and
‘‘(B) includes the following activities, when
performed in a manner consistent with subpara-
graph (A):
‘‘(i) Billing, claims management, med-
ical data processing, other administrative
services, and actual payment.
‘‘(ii) Determinations of coverage or
adjudication of health benefit or subroga-
tion claims.
‘‘(iii) Review of health care services
with respect to coverage under a health
plan or justification of charges.
‘‘(15) PERSON.—The term ‘person’ means—
‘‘(A) a natural person;
‘‘(B) a government or governmental sub-
division, agency, or authority;
‘‘(C) a company, corporation, estate, firm,
trust, partnership, association, joint venture,
society, or joint stock company; or
‘‘(D) any other legal entity.
‘‘(16) PROTECTED
HEALTH
INFORMATION.—
The term ‘protected health information’, when used
271
with respect to an individual who is a subject of in-
formation means any information (including genetic
information) that identifies the individual, whether
oral or recorded in any form or medium, and that—
‘‘(A) is created or received by a health care
provider, health plan, health oversight agency,
public health authority, employer, health or life
insurer, or educational institution;
‘‘(B) relates to the past, present, or future
physical or mental health or condition of an in-
dividual (including individual cells and their
components);
‘‘(C) is derived from—
‘‘(i) the provision of health care to an
individual; or
‘‘(ii) payment for the provision of
health care to an individual; and
‘‘(D) is not nonidentifiable health informa-
tion.
‘‘(17) STATE.—The term ‘State’ includes the
District of Columbia, Puerto Rico, the Virgin Is-
lands, Guam, American Samoa, and the Northern
Mariana Islands.
272
‘‘(18) 
TREATMENT.—The 
term 
‘treatment’
means the provision of health care by a health care
provider.
‘‘(19) WRITING.—The term ‘writing’ means
writing either in a paper-based, computer-based, or
electronic form, including electronic signatures.’’.
(b) ENFORCEMENT OF PROVISIONS THROUGH CON-
DITIONS ON PARTICIPATION.—
(1) PARTICIPATING
PHYSICIANS
AND
SUPPLI-
ERS.—Section 1842(h) of the Social Security Act
(42 U.S.C. 1395u(h)) is amended by adding at the
end the following:
‘‘(9) The Secretary may refuse to enter into an agree-
ment with a physician or supplier under this subsection,
or may terminate or refuse to renew such agreement, in
the event that such physician or supplier has been found
to have violated a provision of part D of title XI.’’.
(2) MEDICARE+CHOICE ORGANIZATIONS.—Sec-
tion 1852(h) of the Social Security Act (42 U.S.C.
1395w–22(h)) is amended—
(A) in the matter preceding paragraph (1),
by striking ‘‘procedures—’’ and inserting ‘‘pro-
cedures, consistent with sections 1181 through
1185—’’; and
273
(B) in paragraph (1), by striking ‘‘privacy
of any individually identifiable enrollee informa-
tion;’’ and inserting ‘‘confidentiality of pro-
tected health information concerning enroll-
ees;’’.
(3) 
MEDICARE
PROVIDERS.—Section
1866(a)(1) of the Social Security Act (42 U.S.C.
1395cc(a)(1)) is amended—
(A) by inserting a semicolon at the end of
subparagraph (R);
(B) by striking the period at the end of
subparagraph (S) and inserting ‘‘; and’’; and
(C) by inserting immediately after sub-
paragraph (S) the following new subparagraph:
‘‘(T) to comply with sections 1181 through
1184.’’.
(4) HEALTH
MAINTENANCE
ORGANIZATIONS
WITH
RISK-SHARING
CONTRACTS.—Section
1876(k)(4) of the Social Security Act (42 U.S.C.
1395mm(k)(4)) of the Social Security Act is amend-
ed by adding at the end the following:
‘‘(E) The confidentiality and accuracy proce-
dure requirements under section 1852(h).’’.
(c) CONFORMING AMENDMENTS.—
274
(1) TITLE HEADING.—Title XI of the Social
Security Act (42 U.S.C. 1301 et seq.) is amended by
striking the title heading and inserting the following:
‘‘TITLE XI—GENERAL PROVISIONS, PEER RE-
VIEW, ADMINISTRATIVE SIMPLIFICATION,
AND CONFIDENTIALITY OF PROTECTED
HEALTH INFORMATION’’.
(2) NATIONAL
COMMITTEE
ON
VITAL
AND
HEALTH
STATISTICS.—Section 306(k)(5) of the
Public Health Service Act (42 U.S.C. 242(k)(5)) is
amended—
(A) in subparagraphs (A)(viii) and (D), by
striking ‘‘part C’’ and inserting ‘‘parts C and
D’’;
(B) in subparagraph (C), by striking
‘‘and’’ at the end;
(C) in subparagraph (D), by striking the
period at the end and inserting ‘‘; and’’; and
(D) by adding at the end the following:
‘‘(E) shall study the issues relating to section
1184 of the Social Security Act (as added by the Pa-
tient Protection Act of 1998), and, not later than 1
year after the date of the enactment of the Patient
Protection Act of 1998, shall report to the Congress
on such section.’’.
275
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date that is 1 year
after the date of the enactment of this Act, except that
subsection (c)(2), and section 1183(b) of the Social Secu-
rity Act (as added by subsection (a)), shall take effect on
the date of the enactment of this Act.
SEC. 5002. STUDY AND REPORT ON EFFECT OF STATE LAW
ON HEALTH-RELATED RESEARCH.
Not later than one year after the date of the enact-
ment of this Act, the Comptroller General of the United
States shall prepare and submit to the Congress a report
containing the results of a study on the effect of State
laws on health-related research subject to review by an in-
stitutional review board or institutional review committee
with respect to the protection of human subjects.
SEC. 5003. STUDY AND REPORT ON STATE LAW ON PRO-
TECTED HEALTH INFORMATION.
(a) IN GENERAL.—Not later than 9 months after the
date of the enactment of this Act, the Comptroller General
of the United States shall prepare and submit to the Con-
gress a report containing the results of a study—
(1) compiling State laws on the confidentiality
of protected health information (as defined in sec-
tion 1188 of the Social Security Act, as added by
section 5001 of this Act); and
283
‘‘(d) The Office shall by regulation prescribe the time,
form, and manner in which an employee or annuitant shall
submit any information (and supporting documentation)
necessary to identify any medical savings account to which
contributions under this section are requested to be made.
‘‘(e) Nothing in this section shall be considered to en-
title an employee or annuitant to any Government con-
tribution under this section with respect to any period for
which such employee or annuitant is ineligible for a Gov-
ernment contribution under section 8906(b).
‘‘§ 8906b. Individual contributions to medical savings
accounts
‘‘(a) Upon the written request of an employee or an-
nuitant enrolled in a high deductible health plan, there
shall be withheld from the pay or annuity of such employee
or annuitant and contributed to the medical savings ac-
count identified by such employee or annuitant in accord-
ance with applicable regulations under subsection (c) such
amount as the employee or annuitant may specify.
‘‘(b) Notwithstanding subsection (a), no withholding
under this section may be made from the pay or annuity
of an employee or annuitant for any period—
‘‘(1) if, or to the extent that, a Government
contribution for such period under section 8906a