of section 1310 of the Public Health Service Act shall be
effective as if such section 7(b) had not been enacted.
SEC. 204. MULTIPLE CHOICE OF HEALTH MAINTENANCE
ORGANIZATIONS.
(a) IN GENERAL.—Section 1310(a) of the Public
Health Service Act (42 U.S.C. 300e–9(a)) is amended by
adding at the end the following new paragraph:
‘‘(3) Nothing in this subsection shall be construed as
limiting the option of membership to a limited number of
organizations.’’.
(b) DISTRIBUTION OF MATERIALS.—Paragraph (1)
of such section is amended by adding at the end the follow-
ing new sentence: ‘‘Each such health benefit plan shall
make available, to each individual eligible to enroll with
a qualified health maintenance organization under such an
option, such marketing materials as the organization pro-
vides to the plan.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect 6 months after the date of
the enactment of this Act.
SEC. 205. FEDERAL ASSISTANCE FOR ESTABLISHMENT AND
INITIAL OPERATION OF STAFF AND GROUP
MODEL HMOS.
(a) IN GENERAL.—The Secretary shall provide for
grants for the establishment and initial operation of staff
or group model health maintenance organizations.
(b) PURPOSES.—Funds provided under this section
may be used for purposes specified by the Secretary, which
shall include—
(1) surveys of the prospective market for such
organizations to determine the feasibility of operat-
ing such an organization in the service area,
(2) activities relating to initial enrollment of in-
dividuals,
(3) working capital during the startup period,
(4) recruitment of physicians and other health
personnel, and
(5) acquisition of building and equipment.
(c) APPLICATION PROCESS.—No grant may be pro-
vided under this section unless—
(1) an application therefore has been submitted
(in such form and manner and containing such in-
formation, as the Secretary specifies) to and ap-
proved by the Secretary, and
(2) the Secretary determines that sufficient
planning for the organization’s establishment has
been conducted by the applicant and the feasibility
of establishing and operating the organization has
been established by the applicant.
(d) PERIOD OF GRANT.—Grants under this section
shall be for a period of 1 year but may be renewed for
2 additional periods of 1 year each.
(e) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $25,000,000 for each
of fiscal years 1994 through 1998 to carry out this
section.
SEC. 206. PREEMPTION OF STATE LAWS RESTRICTING
HEALTH MAINTENANCE ORGANIZATIONS.
(a) IN GENERAL.—
(1) PREEMPTION.—Except as provided in para-
graph (2), any provision of State law that restricts
the ability of a health maintenance organization to
negotiate reimbursement rates with providers or to
contract selectively with one provider or a limited
number of providers is hereby preempted and may
not be enforced.
(2) EXCEPTION FOR STATES WITH PROVIDER
PAYMENT CONTROL SYSTEMS.—Paragraph (1) shall
not apply to a provision of State law that restricts
the ability of a health maintenance organization to
negotiate reimbursement rates with providers if the
State has a State provider payment control system
approved under section 121.
(b) EFFECTIVE DATE.—Subsection (a) shall take ef-
fect on January 1, 1994.
SEC. 207. ADJUSTMENT IN MEDICARE CAPITATION PAY-
MENTS TO ACCOUNT FOR REGIONAL VARI-
ATIONS IN APPLICATION OF SECONDARY
PAYOR PROVISIONS.
(a) IN GENERAL.—Section 1876(a)(4) of the Social
Security Act (42 U.S.C. 1395mm(a)(4)) is amended by
adding at the end the following new sentence: ‘‘In estab-
lishing the adjusted average per capita cost for a geo-
graphic area, the Secretary shall take into account the dif-
ferences between the proportion of individuals in the area
with respect to whom there is a group health plan that
is a primary payor (within the meaning of section
1862(b)(2)(A)) compared to the proportion of all such in-
dividuals with respect to whom there is such a group
health plan.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to contracts entered into for
years beginning with 1995.
SEC. 208. GAO STUDY OF EXPANSION OF HEALTH MAINTE-
NANCE ORGANIZATIONS.
(a) STUDY.—The Comptroller General shall conduct
a study of additional measures that may be taken to en-
courage the development and expansion of health mainte-
nance organizations.
(b) REPORT.—By not later than 18 months after the
date of the enactment of this Act, the Comptroller General
shall submit a report to Congress on the study conducted
under subsection (a) and shall include in the report such
recommendations as may be appropriate.
Subtitle B—Managed Competition
PART 1—ESTABLISHMENT OF NATIONAL HEALTH PLAN
PURCHASING COOPERATIVE PROGRAM
SEC. 221. ESTABLISHMENT OF PROGRAM; GRANTS TO
STATES.
(a) IN GENERAL.—The Secretary shall establish a
program for the establishment and operation of health
plan purchasing cooperatives (each in this subtitle referred
to as a ‘‘HPPC’’) in each State in accordance with this
subtitle.
(b) GRANT PROGRAM FOR HPPCS.—
(1) IN GENERAL.—The Secretary may provide
assistance, through grants, contracts, and coopera-
tive agreements, with States and with HPPCs for
the planning, development, and initial operation of
HPPCs under this subtitle.
(2) TERMS.—Assistance under this subsection
shall be provided under such terms and conditions as
the Secretary may specify consistent with the follow-
ing:
(A) The period of such assistance may not
extend for longer than 5 years with respect to
any HPPC.
(B) The total amount of assistance with
respect 
to 
any 
HPPC 
may 
not 
exceed
$5,000,000.
(3) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated, for the pro-
vision of assistance under this subsection, a total of
$150,000,000 for the 5-fiscal-year period beginning
with fiscal year 1994.
SEC. 222. ESTABLISHMENT OF HPPCS; DESIGNATION OF
HPPC AREAS.
(a) STATE REQUIREMENT.—
(1) IN GENERAL.—Each State—
(A) shall provide by law for the organiza-
tion and operation, by not later than January
1, 1996, of 1 or more health plan purchasing
cooperatives in accordance with section 223,
and
(B) may provide (in accordance with sub-
sections (b) and (c)) for the designation of more
than 1 HPPC areas in the State.
(2) COVERAGE OF ALL GEOGRAPHIC AREAS IN
A STATE.—In carrying out this subsection, HPPCs
shall be established, and HPPC areas designated, in
a State so as to provide for the offerring of qualified
health plans in every geographic area of the State.
(3) SINGLE ORGANIZATION SERVING MULTIPLE
HPPC AREAS.—Nothing in this subsection shall be
construed as preventing—
(A) a single corporation from being the
HPPC for more than one HPPC area, or
(B) a State from coordinating, through a
single entity, the activities of one or more
HPPCs in the State.
(4) FEDERAL
DEFAULT.—If a State fails to
provide for the organization and continued operation
of 1 or more HPPCs or designation of HPPC areas
in accordance with this section, the Secretary shall
provide for such organization and operation or des-
ignation, and, in such case with respect to such a
HPPC, any subsequent reference to State law or a
Governor in this subtitle shall be deemed a reference
to Federal law or the Secretary, respectively.
(b) HPPC AREAS.—
(1) IN GENERAL.—Except as may be otherwise
provided under this subsection and subsection (c),
each State shall be considered a separate HPPC
area.
(2) 
ALTERNATIVE, 
INTRASTATE
AREAS.—
HPPC areas within a State may cover less than the
entire State so long as—
(A) all portions of each metropolitan sta-
tistical area in the State are within the same
HPPC area, and
(B) the number of individuals residing
within a HPPC area is not less than 1,000,000.
(c) INTERSTATE HPPCS.—
(1) AUTHORIZATION.—One or more contiguous
States may provide—
(A) for the designation consistent with
paragraph (2) of a HPPC area that includes
adjoining portions of the States, and
(B) for the organization and operation, in
accordance with rules of the Secretary, of a
HPPC with respect to such a designated HPPC
area.
(2) INTERSTATE
HPPC
AREAS.—Any HPPC
area designated under paragraph (1)(A)—
(A) that includes any part of a metropoli-
tan statistical area shall include all of such
area, and
(B) shall have a population of not less
than 1,000,000.
SEC. 223. ORGANIZATION AND OPERATION OF HPPCS.
(a) IN GENERAL.—Each HPPC shall be organized
and operated consistent with the requirements of this sub-
title.
(b) ORGANIZATION.—Each HPPC shall be a not-for-
profit public benefit corporation established under State
law and governed by a Board of Directors appointed by
the Governor or other chief executive officer of the State.
(c) GENERAL DUTIES OF HPPCS.—
(1) MAKING HEALTH CARE PLANS AVAILABLE
TO EMPLOYERS.—
(A) IN GENERAL.—Each HPPC shall enter
into agreements with qualified health plans
under section 225 under which coverage under
such a QHP is made available with respect to
employers which—
(i) have employees who reside in the
HPPC area served by the HPPC, and
(ii) have entered into an agreement
with the HPPC under section 224.
(B) HPPC OUTREACH TO SMALL EMPLOY-
ERS.—Beginning not later than 1 year after the
date a HPPC is organized, a HPPC shall in-
ventory and inform all small employers (as de-
fined in section 228(c)(2)) in the HPPC area
(including employers in rural areas of the
HPPC area) of the health benefits available,
through enrollment with qualified health plans,
through the HPPC for their employees (and
family members) who reside in a HPPC area
served by the HPPC.
(2) OPTION
OF
ENROLLMENT
FOR
ELIGIBLE
RESIDENTS.—A HPPC may provide, under such an
agreement with a qualified health plan, for coverage
under such a plan with respect to individuals who
are 
eligible 
residents 
(as 
defined 
in 
section
228(a)(4)).
(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed as requiring—
(A) an employer to enter into an agree-
ment under section 224 with a HPPC, or
(B) an employee or other individual to en-
roll in a QHP offered by a HPPC.
(d) SCOPE OF PLANS OFFERED.—To the maximum
extent practicable, each HPPC—
(1) shall enter into agreements with each QHP
which is a qualified health maintenance organization
(as defined in section 228(b)(2));
(2) shall enter into agreements with at least
one qualified health plan that is a service benefit
plan and at least one qualified health plan that is an
indemnity plan for each HPPC area served by the
HPPC; and
(3) may enter into agreements with other quali-
fied health plans (such as preferred provider organi-
zations).
SEC. 224. AGREEMENTS WITH EMPLOYERS.
(a) IN GENERAL.—Each agreement under this sec-
tion, between a HPPC and an employer, shall include (as
specified by the Secretary) provisions consistent with the
requirements specified in the succeeding subsections of
this section.
(b) FORWARDING INFORMATION ON ELIGIBLE EM-
PLOYEES.—
(1) IN GENERAL.—Under an agreement under
this section between an employer and a HPPC, the
employer must forward to the appropriate HPPC
the name and address (and other identifying infor-
mation required by the HPPC) of each employee (in-
cluding part-time and seasonal employees).
(2) INFORMATION
ON
PLANS.—Under the
agreement and consistent with section 226, the
HPPC—
(A) shall provide to each employee identi-
fied under paragraph (1) information on bene-
fits available through QHPs, and
(B) upon the request of such an employee,
shall enroll the employee (and, at the option of
the employee, eligible family members) in such
plans.
(3) APPROPRIATE
HPPC.—In this subsection,
the term ‘‘appropriate HPPC’’ means the HPPC for
the principal place of business of the employer or (at
the option of an employee) the HPPC serving the
place of residence of the employee.
(c) PAYROLL DEDUCTION OPTION.—
(1) IN GENERAL.—Under an agreement under
this section between an employer and a HPPC, if
the HPPC indicates to the employer that an eligible
employee is enrolled in a QHP through the HPPC—
(A) the employer shall pay to the HPPC
the amount of any employer contribution to-
wards the premium for enrollment of the em-
ployee under the QHP, and
(B) if the employee elects to have any em-
ployee share of premiums deducted from wages
or other compensation paid by the employer,
the employer shall provide for the deduction,
from the employee’s wages or other compensa-
tion, of the employee’s share of the amount of
the premium due and the payment of such de-
duction to the HPPC.
(2) SPECIAL
RULES
FOR
PAYMENT
OF
EM-
PLOYEE SHARE.—In the case of an employee who is
paid wages or other compensation on a monthly or
more frequent basis, an employer shall not be re-
quired to provide for payment of amounts of the em-
ployee’s share to a HPPC other than at the same
time at which the amounts are deducted from wages
or other compensation. In the case of an employee
who is paid wages or other compensation less fre-
quently than monthly, an employer may be required
to provide for payment of amounts under paragraph
(1)(B) to a HPPC on a monthly basis.
(d) LIMITED EMPLOYER OBLIGATIONS.—Nothing in
this section shall be construed as—
(1) requiring an employer to provide directly for
enrollment of eligible employees under a QHP or
other health plan,
(2) requiring the employer to make, or prevent-
ing the employer from making, information about
such plans available to such employees, or
(3) requiring the employer to make, or prevent-
ing the employer from making, an employer con-
tribution for coverage of such individuals under such
a plan.
(e) REFUSAL
TO ENTER
INTO AGREEMENT.—A
HPPC may refuse to enter into an agreement under this
section with a small employer if less than a percentage
(specified by the HPPC, consistent with rules of the Sec-
retary) of the otherwise eligible employees of the employer
are enrolled with a QHP pursuant to such agreement.
SEC. 225. AGREEMENTS WITH QUALIFIED HEALTH PLANS
(QHPs).
(a) AGREEMENTS.—
(1) IN GENERAL.—Each HPPC for a HPPC
area shall enter into an agreement under this section
with each qualified health plan that serves residents
of the area. Each such agreement under this section
between a QHP and a HPPC shall include (as speci-
fied by the Secretary) provisions consistent with the
requirements of the succeeding subsections of this
section. Except as provided in paragraph (2)(A), a
HPPC may not refuse to enter into such an agree-
ment with a QHP.
(2) TERMINATION OF AGREEMENT.—In accord-
ance with regulations of the Secretary—
(A) the HPPC may terminate an agree-
ment under paragraph (1) if the QHP’s ap-
proval under this subtitle is terminated, and
(B) the QHP may terminate such an
agreement only upon sufficient notice in order
to provide for the orderly enrollment of enroll-
ees under other QHPs.
The Secretary shall establish a process for the ter-
mination of agreements under this paragraph.
(b) OFFER OF ENROLLMENT UNDER PLAN.—
(1) IN GENERAL.—Under an agreement under
this section between a QHP and a HPPC, the
HPPC—
(A) shall offer, on behalf of the QHP, en-
rollment in the QHP to eligible employees, and
(B) may offer, on behalf of the QHP, en-
rollment in the QHP to eligible residents.
(2) TIMING OF OFFER.—The offer of enroll-
ment shall be available on a continuous, year-round
basis, consistent with section 2104 of the Social Se-
curity Act (as added by section 202 of this Act).
(c) RECEIPT OF GROSS PREMIUMS.—
(1) IN GENERAL.—Under an agreement under
this section between a HPPC and a QHP, payment
of premiums shall be made, by individuals or em-
ployers on their behalf, directly to the HPPC for the
benefit of the QHP.
(2) TIMING OF PAYMENT OF PREMIUMS.—Pre-
miums shall be payable on a monthly basis (or, at
the option of an eligible resident, on a quarterly
basis). The HPPC may provide for penalties and
grace periods for late payment.
(3) QHPS
RETAIN
RISK
OF
NONPAYMENT.—
Nothing in this subsection shall be construed as
placing upon a HPPC any risk associated with fail-
ure to make prompt payment of premiums (other
than the portion of the premium representing the
HPPC overhead amount). Each eligible individual
who enrolls with a QHP through the HPPC is liable
to the QHP for premiums.
(d) COLLECTION
AND
FORWARDING
OF
PRE-
MIUMS.—
(1) PREMIUM CHARGED.—Under an agreement
under this section between a QHP and a HPPC, the
HPPC shall charge, with respect to the enrollment
of eligible individuals in the plan through the
HPPC, an amount equal to the sum of—
(A) the premium rate established by the
plan (consistent with section 2104(c) of the So-
cial Security Act) for the type of enrollment,
and
(B) the HPPC overhead amount (estab-
lished under subsection (e) for enrollment of in-
dividuals through the HPPC).
(2) AMOUNT
FORWARDED.—Under an agree-
ment under this section between a QHP and a
HPPC, the HPPC shall forward to each QHP in
which an eligible individual has been enrolled an
amount equal to the premium rate established by the
plan (consistent with section 2104(c) of the Social
Security Act) for the type of enrollment.
(3) PAYMENTS.—Payments shall be made by
the HPPC under this subsection to a QHP within
a period (specified by the Secretary and not to ex-
ceed 7 days) after receipt of the premium from the
employer of the eligible individual or the eligible in-
dividual, as the case may be.
(4) 
ADJUSTMENTS
FOR
DIFFERENCES
IN
NONPAYMENT RATES.— In accordance with rules es-
tablished by the Secretary, each agreement between
a QHP and a HPPC under this section shall provide
that, if a HPPC determines that the rates of
nonpayment of premiums during grace periods es-
tablished under subsection (c)(2) vary appreciably
among QHPs, the HPPC shall provide for such ad-
justments in the payments made under this sub-
section as will place each QHP in the same position
as if the rates of nonpayment were the same.
(e) HPPC OVERHEAD AMOUNT.—
(1) HPPC BUDGET.—Each HPPC shall estab-
lish a budget for each year for each HPPC area in
accordance with regulations established by the Sec-
retary.
(2) HPPC OVERHEAD AMOUNT.—Based upon
the budget, the HPPC shall compute HPPC over-
head amounts so that—
(A) the amounts vary by type of enroll-
ment based upon factors (specified by the Sec-
retary) reflecting the relative average premium
amounts established for the different types of
enrollment,
(B) subject to subparagraph (C), the total
of such amounts are projected to equal the
budget established under paragraph (1), and
(C) the average overhead amount for a
type of enrollment does not exceed 5 percent of
the average premium amounts imposed for that
type of enrollment.
SEC. 226. ENROLLING INDIVIDUALS IN QUALIFIED HEALTH
PLANS THROUGH A HPPC.
(a) IN GENERAL.—Each HPPC shall offer in accord-
ance with this section eligible employees (and, at the op-
tion of the HPPC, eligible residents) the opportunity to
enroll in a QHP for the HPPC area in which the individ-
ual resides.
(b) ENROLLMENT PROCESS.—Each HPPC shall es-
tablish an enrollment process in accordance with rules es-
tablished by the Secretary.
(c) DISTRIBUTION
OF
COMPARATIVE
INFORMA-
TION.—Each HPPC shall distribute, to eligible individuals
and participating employers, information, in comparative
form, on the prices, outcomes, enrollee satisfaction, and
other information pertaining to the quality of the different
QHPs for which it is offering enrollment. Each HPPC also
shall make such information available to other interested
persons.
(d) PERIOD OF COVERAGE.—
(1) IN GENERAL.—Except as the Secretary may
provide, in the case of an eligible individual who en-
rolls with a QHP through a HPPC, coverage under
the plan shall begin on such date (not later than the
first day of the first month that begins at least 15
days after the date of enrollment) as the Secretary
shall specify.
(2) MINIMUM
PERIOD
OF
ENROLLMENT.—In
order to avoid adverse selection, each HPPC may re-
quire, consistent with rules of the Secretary, that en-
rollment with QHPs be for not less than 1 year
(with exceptions permitted for such exceptional cir-
cumstances as the Secretary may recognize).
SEC. 227. COORDINATION AMONG HPPCS.
(a) IN GENERAL.—The Secretary shall establish
rules consistent with this section for coordination among
HPPCs in cases where participating employers are located
in one HPPC area and their employees reside in a dif-
ferent HPPC area (and are eligible for enrollment with
QHPs located in the other area).
(b) COORDINATION RULES.—Under the rules estab-
lished under subsection (a)—
(1) HPPC FOR
EMPLOYER.—The HPPC for
the principal place of business of an employer shall
be responsible—
(A) for providing information to the em-
ployer’s employees on QHPs for areas in which
employees reside;
(B)(i) for enrolling employees under the
QHP selected (even if the QHP selected is not
in the same HPPC area as the HPPC) and (ii)
if the QHP chosen is not in the same HPPC
area as the HPPC, for forwarding the enroll-
ment information to the HPPC for the area in
which the QHP selected is located; and
(C) in the case of premiums to be paid
through payroll deduction, to receive such pre-
miums and forward them to the HPPC for the
area in which the QHP selected is located.
(2) HPPC FOR EMPLOYEE RESIDENCE.—The
HPPC for the HPPC area in which an employee re-
sides shall be responsible for providing other HPPCs
with information concerning QHPs being offered in
the HPPC’s areas.
SEC. 228. DEFINITIONS.
(a) ELIGIBILITY.—In this title:
(1) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible
individual’’ means, with respect to a HPPC area, an
individual who—
(A) is an eligible employee (as defined in
paragraph (2)),
(B) is an eligible resident (as defined in
paragraph (4)), or
(C) an eligible family member (as defined
in paragraph (3)) of an eligible employee or eli-
gible resident.
(2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible
employee’’ means, with respect to a HPPC area, an
individual residing in the area who is the employee
of a participating employer.
(3) ELIGIBLE FAMILY MEMBER.—The term ‘‘el-
igible family member’’ means, with respect to an eli-
gible employee or other principal enrollee, an individ-
ual who is residing in the United States and—
(A) is the spouse of the employee or prin-
cipal enrollee, or
(B) is an unmarried dependent child under
22 years of age, including—
(i) an adopted child or recognized nat-
ural child, and
(ii) a stepchild or foster child but only
if the child lives with the employee or prin-
cipal enrollee in a regular parent-child re-
lationship,
or such an unmarried dependent child regard-
less of age who is incapable of self-support be-
cause of mental or physical disability which ex-
isted before age 22.
(4) ELIGIBLE RESIDENT.—The term ‘‘eligible
resident’’ means, with respect to a HPPC area, an
individual who—
(A) is residing in the area, and
(B) is not an eligible employee.
(5) PARTICIPATING
EMPLOYER.—The term
‘‘participating employer’’ means an employer that
has an agreement in effect with a HPPC under sec-
tion 224.
(b) ABBREVIATIONS.—In this title:
(1) HPPC; HEALTH PLAN PURCHASING COOP-
ERATIVE.—The terms ‘‘health plan purchasing coop-
erative’’ and ‘‘HPPC’’ mean a health plan purchas-
ing cooperative established under this part.
(2) QUALIFIED HMO; QUALIFIED HEALTH MAIN-
TENANCE
ORGANIZATION.—The terms ‘‘qualified
HMO’’ and ‘‘qualified health maintenance organiza-
tion’’ mean a health benefit plan that—
(A) is an eligible organization having a
contract under section 1876 of the Social Secu-
rity Act, or
(B) is a qualified health maintenance orga-
nization (as defined in section 1310(d) of the
Public Health Service Act).
(3) QHP; QUALIFIED
HEALTH
PLAN.—The
terms ‘‘qualified health plan’’ and ‘‘QHP’’ mean a
health plan approved by the Secretary under section
251(a).
(c) OTHER TERMS.—In this title:
(1) 
HEALTH
BENEFIT
PLAN.—The 
term
‘‘health benefit plan’’ has the meaning given such
term in section 2108(3) of the Social Security Act,
as added by section 302 of this Act.
(2) SMALL EMPLOYER.—The term ‘‘small em-
ployer’’ has the meaning given such term in section
2103(d)(2) of the Social Security Act (as added by
section 302 of this Act).
(4) STATE.—The term ‘‘State’’ includes the
District of Columbia.
(5) TYPE
OF
ENROLLMENT.—There are 2
‘‘types of enrollment’’:
(A) Coverage only of an individual (re-
ferred to in this subtitle as enrollment ‘‘on an
individual basis’’).
(B) Coverage of a family consisting of
more than 1 individual (referred to in this sub-
title as enrollment ‘‘on a family basis’’).
PART 2—REQUIREMENTS FOR QUALIFIED HEALTH
PLANS
SEC. 251. APPROVAL PROCESS; QUALIFICATIONS.
(a) IN GENERAL.—The Secretary shall provide a
process whereby a health benefit plan (as defined in sec-
tion 228(c)(1)) may be approved as a qualified health
plan.
(b) QUALIFICATIONS.—
(1) IN GENERAL.—In order to be approved as
a QHP, a plan must—
(A) provide, in accordance with section
252, for coverage of the core group of benefits;
(B) subject to paragraph (2), be a quali-
fied health maintenance organization (as de-
fined in section 228(b)(2));
(C) have been certified under section 2101
of the Social Security Act as meeting the stand-
ards established under title XXI of such Act
(including standards relating to prohibiting dis-
crimination based on health status, to open en-
rollment, use of community-rated premiums,
etc.);
(D) meet standards established by the Sec-
retary to protect enrollees with respect to po-
tential insolvency; and
(E) provide, in accordance with the na-
tional patient outcomes data reporting program
under subtitle C, for the collection and report-
ing to the Secretary of certain information re-
garding its enrollees and provision of services.
(2) WAIVER
OF
QUALIFIED
HMO
REQUIRE-
MENT.—A HPPC may waive the requirement of
paragraph (1)(B) in the case of such plans as it de-
termines will promote access to quality, cost effective
health care in the HPPC area. However, any such
plan that is not a qualified health maintenance orga-
nization must meet the following additional require-
ments:
(A) 
EFFECTIVE
GRIEVANCE
PROCE-
DURES.—The plan must provide for effective
procedures for hearing and resolving grievances
between the plan and individuals enrolled under
the plan, which procedures meet standards
specified by the Secretary.
(B) RESTRICTION ON CERTAIN PHYSICIAN
INCENTIVE PLANS.—
100
(i) IN GENERAL.—If the plan operates
a physician incentive plan (as defined in
clause (ii)), the incentive plan must meet
the requirements specified in clauses (i)
through (iii) of section 1876(i)(8)(A) of
the Social Security Act (in the same man-
ner as they apply to eligible organizations
under section 1876 of such Act).
(ii) PHYSICIAN INCENTIVE PLAN DE-
FINED.—In this subparagraph, the term
‘‘physician incentive plan’’ means any com-
pensation or other financial arrangement
between a plan and a physician or physi-
cian group that may directly or indirectly
have the effect of reducing or limiting serv-
ices provided with respect to individuals
enrolled under the plan.
(C) WRITTEN POLICIES AND PROCEDURES
RESPECTING ADVANCE DIRECTIVES.—The plan
must meet the requirements of section 1866(f)
of the Social Security Act (relating to maintain-
ing written policies and procedures respecting
advance directives), insofar as such require-
ments would apply to the plan if the plan were
an eligible organization.
101
(c) PROTECTION AGAINST PROVIDER CLAIMS.—In
the case of a failure of a QHP to make payments with
respect to an individual enrolled under the plan through
a HPPC, under standards established by the Secretary,
the individual is not liable to any health care provider or
practitioner with respect to the provision of health services
within such package of benefits covered in excess of the
amount for which the enrollee would have been liable if
the plan had made payments in a timely manner.
SEC. 252. BENEFIT PACKAGES.
(a) REQUIREMENT OF OFFERING.—The Secretary
may not approve a qualified health plan unless, subject
to subsection (b), the plan—
(1) offers, as a separate and distinct benefit
package, the core benefit package specified pursuant
to subsection (c);
(2) has entered into arrangements with a suffi-
cient number and variety of providers to provide for
its enrollees benefits under such core benefit pack-
age without imposing cost-sharing in excess of the
cost-sharing permitted under such benefit package
and (except for an indemnity plan) does not permit
providers participating in the plan to charge for
services covered under the core benefit package
102
amounts in excess of the cost-sharing permitted
under such package; and
(3) provides, in the case of individuals covered
under more than one qualified health plan, for co-
ordination of coverage under such plans in an equi-
table manner specified by the Secretary.
(b) TREATMENT OF ADDITIONAL, OPTIONAL BENE-
FITS.—A QHP may also offer benefits in addition to (and
not duplicative of) the core benefit package (including re-
ducing cost-sharing below the cost-sharing provided for in
such package), if such additional benefits—
(1) are offered, and priced, separately from the
core benefit package, and
(2) are only offered consistent with such stand-
ard, incremental benefit packages as the Secretary
specifies under subsection (c).
(c) SPECIFICATION OF BENEFIT PACKAGES.—
(1) IN GENERAL.—The Secretary shall specify
the services and cost-sharing to be included in—
(A) the core benefit package under this
subtitle, and
(B) additional incremental benefit pack-
ages under this subtitle.
(2) CORE BENEFIT PACKAGE.—
103
(A) BASED ON MEDICARE BENEFITS.—Ex-
cept as provided in subparagraph (B), the serv-
ices and cost-sharing in the core benefit pack-
age shall be the same as the services and cost-
sharing provided under the medicare program.
(B) ADDITIONAL
BENEFITS.—The core
benefit package also shall include the following:
(i) No limit on days of coverage of in-
patient hospital services based on a spell of
illness.
(ii) An annual limitation on out-of-
pocket costs for cost-sharing (not including
premiums and extra-billing amounts) of
$2,500 for individual enrollment and
$3,000 for family enrollment.
(iii) Instead of the deductible for inpa-
tient hospital services under part A of title
XVIII of the Social Security Act and the
general deductible applicable under part B
of such title (subject to clause (v)), there
shall be imposed an annual deductible of
$300 for each individual (but not to exceed
$600 for all individuals in a family).
(iv) Benefits for maternity care, well-
child care, and other preventive services
104
(identified by the Secretary), without the
imposition of deductibles or other cost-
sharing.
(v) In the case of qualified health
maintenance 
organizations, 
cost-sharing
for deductibles and copayments shall be
nominal, consistent with standards for
such cost-sharing permitted of qualified
health maintenance organizations under
title XIII of the Public Health Service Act.
The Secretary may change, on an annual basis,
the dollar amounts specified under this sub-
paragraph based on changes in an appropriate
index.
(4) CHANGES IN CORE BENEFIT PACKAGE.—
The Secretary, after appropriate advance notice,
shall change the core benefit package in order to re-
flect changes in the benefits under the medicare pro-
gram which are not reflected in paragraph (3).
(5) OVERRIDING
OF
STATE
BENEFIT
MAN-
DATES.—Any State requirement relating to the pro-
vision or coverage of benefits under health plans
shall not apply to the benefits provided by qualified
health plans through HPPCs under this subtitle.
105
Subtitle C—National Patient Out-
comes and Enrollee Satisfaction
Data Reporting Program
SEC. 271. NATIONAL PATIENT OUTCOMES PROGRAM.
(a) IN GENERAL.—The Secretary shall establish a
national data base on patient outcomes (in this section re-
ferred to as the ‘‘outcomes data base’’) in accordance with
this section.
(b) COLLECTION
OF UNIFORM DATA BASE.—In
order to collect information in the outcomes data base in
a uniform format—
(1) By not later than January 1, 1995, the Sec-
retary shall define and publish the uniform outcomes
data that would be collected.
(2) By not later than July 1, 1995, the Sec-
retary shall establish, by regulation, the reporting
requirements for the routine collection of the out-
comes data.
(3) By not later than January 1, 1996, the Sec-
retary shall require all qualified health maintenance
organizations, all other health benefit plans, and all
health care providers to begin reporting on an an-
nual basis the outcomes data to the Secretary pursu-
ant to the regulations.
106
(c) PUBLICATION AND DISTRIBUTION OF NATIONAL
OUTCOMES DATA BASE.—The Secretary shall publish and
distribute an annual report regarding patient outcomes,
including information on individual providers, based on in-
formation from the outcomes data base and appropriate
utilization information available from the QHPs.
SEC. 272. ENROLLEE HEALTH PLAN SATISFACTION.
(a) IN GENERAL.—The Secretary shall establish a
national data base on enrollee satisfaction with health ben-
efit plans (including self-insured health benefit plans) (in
this section referred to as the ‘‘enrollee data base’’) in ac-
cordance with this section.
(b) COLLECTION
OF UNIFORM DATA BASE.—In
order to collect information in the enrollee data base in
a uniform format—
(1) By not later than July 1, 1995, the Sec-
retary shall define and publish the enrollee satisfac-
tion survey to be used by health benefit plans in col-
lecting data under this section.
(2) By not later than January 1, 1996, the Sec-
retary shall require all health benefit plans to begin
reporting on an annual basis the data to the Sec-
retary pursuant to the regulations.
(c) PUBLICATION
AND
DISTRIBUTION
OF
DATA
BASE.—The Secretary shall publish and distribute an an-
107
nual report regarding enrollee satisfaction with the dif-
ferent health plans based on information from the enrollee
data base.
SEC. 273. RESEARCH AND DEMONSTRATION.
(a) IN GENERAL.—The Secretary shall provide for
research and demonstration projects concerning—
(1) new methods for collecting and analyzing
outcomes and enrollee satisfaction information under
this subtitle, and
(2) the use of outcomes information systems by
qualified health maintenance organizations, health
benefits plans, and providers of health care services.
The Secretary may also provide for research and dem-
onstration projects concerning the collection and analysis
of indicators of system performance (such as health status
of community served, prevention of illness, and capacity
of delivery system) with respect to integrated health care
delivery systems.
(b) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated $20,000,000 in each of
fiscal years 1994 through 1998 to carry out this section.
108
Subtitle 
D—Study 
of 
Universal
Health Insurance Coverage and
Cost Containment
SEC. 291. STUDY.
(a) IN GENERAL.—The Congressional Budget Office
shall conduct a study on the different options for providing
universal health insurance coverage in the United States.
Such study shall identify the following:
(1) OPTIONS.—The cost of the different cov-
erage options.
(2) COST CONTAINMENT.—The effectiveness of
the different options in cost containment.
(3) REVENUES REQUIRED.—The revenue levels
required for the different options.
(4) FINANCING OPTIONS.—Options for financ-
ing these revenue levels, including—
(A) the distributional impact of these reve-
nue options, and
(B) with respect to the option of imposing
a geographic-area specific limit on the tax-fa-
vored status of employer payment for health
care for employees, former employees, and de-
pendents, the revenue, administrative, and dis-
tributive impact of imposing such limits.
109
(b) ASSISTANCE OF JOINT TAX COMMITTEE.—The
Joint Committee on Tax shall provide such assistance to
the Congressional Budget Office as may be required to
conduct the study under this section.
(c) REPORT.—The Director of the Congressional
Budget Office shall submit, by not later than January 1,
1994, a report on the study conducted under this section
to the Committees on Ways and Means and Energy and
Commerce of the House of Representatives and the Com-
mittee on Finance of the Senate.
TITLE III—HEALTH SYSTEMS
REFORM
Subtitle A—Health Insurance
Reform
SEC. 301. EXCISE TAX ON PREMIUMS RECEIVED ON
HEALTH INSURANCE POLICIES WHICH DO
NOT MEET CERTAIN REQUIREMENTS.
(a) IN GENERAL.—Chapter 47 of the Internal Reve-
nue Code of 1986 (relating to taxes on group health plans)
is amended by adding at the end thereof the following new
section:
‘‘SEC. 5000A. FAILURE TO SATISFY CERTAIN STANDARDS
FOR HEALTH INSURANCE.
‘‘(a) IMPOSITION OF TAX.—
110
‘‘(1) GENERAL RULE.—There is hereby imposed
a tax on any nonqualified health benefit plan.
‘‘(2) NONQUALIFIED
HEALTH
BENEFIT
PLAN
DEFINED.—For purposes of this section, the term
‘nonqualified health benefit plan’ means any health
benefit plan that—
‘‘(A) is not certified under section 2101 of
the Social Security Act, or
‘‘(B) the Secretary of Health and Human
Services determines is providing coverage in vio-
lation of section 2101(a) of such Act.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of tax imposed
by subsection (a) shall be equal to—
‘‘(A) in the case of an insured health bene-
fit plan, 50 percent of the gross premiums re-
ceived by the issuer which are attributable to
the period during which the plan is a non-
qualified health benefit plan, and
‘‘(B) in the case of a self-insured health
benefit plan, 50 percent of the expenditures
under such plan during the period that the plan
is a nonqualified health benefit plan.
‘‘(2) GROSS PREMIUMS.—For purposes of para-
graph (1)(A), gross premiums shall include any con-
111
sideration received with respect to any insured
health benefit plan.
‘‘(3) CONTROLLED GROUPS.—For purposes of
paragraph (1)—
‘‘(A) CONTROLLED
GROUP
OF
CORPORA-
TIONS.—All corporations which are members of
the same controlled group of corporations shall
be treated as 1 person. For purposes of the pre-
ceding sentence, the term ‘controlled group of
corporations’ has the meaning given to such
term by section 1563(a), except that—
‘‘(i) ‘more than 50 percent’ shall be
substituted for ‘at least 80 percent’ each
place it appears in section 1563(a)(1), and
‘‘(ii) the determination shall be made
without regard to subsections (a)(4) and
(e)(3)(C) of section 1563.
‘‘(B) PARTNERSHIPS, PROPRIETORSHIPS,
ETC., WHICH ARE UNDER COMMON CONTROL.—
Under regulations prescribed by the Secretary,
all trades or business (whether or not incor-
porated) which are under common control shall
be treated as 1 person. The regulations pre-
scribed under this subparagraph shall be based
112
on principles similar to the principles which
apply in the case of subparagraph (A).
‘‘(c) LIABILITY FOR TAX.—
‘‘(1) INSURED PLAN.—In the case of an insured
health benefit plan, the issuer of the insurance or
subscriber contract under which such plan is pro-
vided shall be liable for the tax imposed by this
section.
‘‘(2) SELF-INSURED PLAN.—In the case of a
self-insured plan—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the employer maintaining
such plan shall be liable for the tax imposed by
this section.
‘‘(B) MULTIEMPLOYER
PLANS, ETC.—In
the case of a multiemployer plan or any other
plan not maintained by an employer, the plan
shall be liable for the tax imposed by this
section.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) HEALTH BENEFIT PLAN.—
‘‘(A) IN GENERAL.—The term ‘health ben-
efit plan’ means any plan or contract under
which any medical benefit is provided to any
individual.
113
‘‘(B) CERTAIN
PLANS
AND
CONTRACTS
NOT COVERED.—The term ‘health benefit plan’
does not include any plan or contract—
‘‘(i) which provides for accident only,
dental only, or disability only coverage,
‘‘(ii) which provides coverage as a
supplement to liability insurance, and
‘‘(iii) which provides insurance arising
out of a workers’ compensation or similar
law, or automobile medical-payment insur-
ance.
‘‘(2) INSURED HEALTH BENEFIT PLAN.—The
term ‘insured health benefit plan’ means any health
benefit plan provided through insurance, and in-
cludes a prepaid hospital or medical service plan, the
health benefit plan of a health maintenance organi-
zation, and a multiple employer welfare arrangement
(as defined in section 3(40) of the Employee Retire-
ment Income Security Act of 1974).
‘‘(3) MEDICAL
BENEFIT.—The term ‘medical
benefit’ means any benefit which consists of the pro-
viding (through insurance or otherwise) of medical
care (as defined in section 213(d)).
‘‘(4) SELF-INSURED HEALTH BENEFIT PLAN.—
The term ‘self-insured health benefit plan’ means
149
SEC. 324. ELECTRONIC MEDICAL RECORDS AND REPORT-
ING.
(a) 
STANDARDS
FOR
ELECTRONIC
MEDICAL
RECORDS FOR HOSPITALS.—
(1) PROMULGATION OF STANDARDS.—
(A) IN GENERAL.—Between July 1, 1994,
and January 1, 1995, the Secretary shall pro-
mulgate standards described in paragraph (2)
for hospitals concerning electronic medical
records.
(B) REVISION.—The Secretary may from
time to time revise the standards promulgated
under this paragraph.
(2) CONTENTS OF STANDARDS.—The standards
promulgated under paragraph (1) shall include at
least the following:
(A) A definition of a uniform hospital clini-
cal data set, including a definition of the set of
comprehensive data elements, for use by utiliza-
tion and quality control peer review organiza-
tions.
(B) Standards for an electronic patient
care information system with data obtained at
the point of care.
150
(C) A specification of, and manner of pres-
entation of, the individual data elements of the
set and system under this paragraph.
(D) Standards concerning the transmission
of electronic medical data.
(E) Standards relating to confidentiality of
patient-specific information, which include the
physical security of electronic data and the use
of keys, passwords, encryption, and other
means to ensure the protection of the confiden-
tiality and privacy of electronic data.
(3) COORDINATION WITH STANDARDS FOR UNI-
FORM ELECTRONIC CLAIMS DATA SET.—In establish-
ing standards under this subsection, the Secretary
shall assure that—
(A) the development of such standards is
coordinated with the development of the stand-
ards for the uniform electronic claims data set
under section 323, and
(B) the coding of data elements under the
uniform hospital clinical data set and the cod-
ing of the same elements under the uniform
electronic claims data set are consistent.
(4) CONSULTATION.—in establishing standards
under this subsection, the Secretary shall—