I
104TH CONGRESS
2D SESSION
H. R. 3130
To assure availability and continuity of health insurance and to simplify
the administration of health coverage.
IN THE HOUSE OF REPRESENTATIVES
MARCH 20, 1996
Mr. PETERSON of Florida (for himself, Mr. MORAN, Mr. DOOLEY of Califor-
nia, Mr. BAESLER, Mr. BERMAN, Ms. BROWN of Florida, Mr. CLEMENT,
Mr. COLEMAN, Mr. DELLUMS, Mr. DIXON, Mr. FATTAH, Mr. FAZIO of
California, Mr. FRAZER, Mr. HASTINGS of Florida, Mr. HEFNER, Mr.
HILLIARD, Mr. HINCHEY, Ms. KAPTUR, Mr. LAFALCE, Mrs. LINCOLN,
Mr. LEWIS of Georgia, Ms. LOFGREN, Ms. MCKINNEY, Mrs. MEEK of
Florida, Mr. MINGE, Mr. NADLER, Ms. NORTON, Mr. OBERSTAR, Ms.
PELOSI, Mr. POSHARD, Ms. ROYBAL-ALLARD, Mr. SABO, Mr. SANDERS,
Mrs. SCHROEDER, Mr. STENHOLM, Mr. STUPAK, Mr. TORRES, Ms.
VELA´ZQUEZ, Mr. YATES, Mr. CLYBURN, Mr. JEFFERSON, Mr. PASTOR,
Mr. CRAMER, Mr. ROSE, Mrs. THURMAN, Mr. PAYNE of Virginia, Ms.
JACKSON-LEE of Texas, and Mr. PALLONE) introduced the following bill;
which was referred to the Committee on Commerce, and in addition to
the Committee on Ways and Means, the Judiciary, and Economic and
Educational Opportunities, for a period to be subsequently determined by
the Speaker, in each case for consideration of such provisions as fall with-
in the jurisdiction of the committee concerned
A BILL
To assure availability and continuity of health insurance
and to simplify the administration of health coverage.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Health Insurance Affordability Act of 1996’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—ASSURING AVAILABILITY AND CONTINUITY OF HEALTH
COVERAGE
Subtitle A—Guaranteed Access to Health Coverage
Sec. 101. Guaranteed offer by carriers.
Sec. 102. Guaranteed issue by carriers.
Sec. 103. Guaranteed renewal.
Sec. 104. Restricting preexisting condition exclusions.
Sec. 105. Enrollment periods.
Subtitle B—Provision of Benefits
Sec. 111. Standards for managed care arrangements.
Sec. 112. Report on utilization review standards.
Subtitle C—Fair Rating Practices
Sec. 121. Use of fair rating practices.
Sec. 122. Establishment of risk adjustment mechanisms.
Subtitle D—Consumer Protections
Sec. 131. Requirement for provision of information.
Sec. 132. Prohibition of improper incentives.
Sec. 133. Written policies and procedures respecting advance directives.
Subtitle E—Benefits
Sec. 141. Qualified health coverage.
Sec. 142. Standard coverage.
Sec. 143. High-deductible coverage.
Sec. 144. Actuarial valuation of benefits.
Sec. 145. Limitation on offering supplemental benefits.
Sec. 146. Family coverage option; supplemental coverage.
Sec. 147. Level playing field for providers.
Subtitle F—Standards and Certification; Enforcement; Preemption; General
Provisions
Sec. 151. Establishment of standards.
Sec. 152. Application of standards to carriers through States.
Sec. 153. Application to group health plans.
Sec. 154. Enforcement.
Sec. 155. Limitation on self insurance for small employers.
Subtitle G—Definitions; General Provisions
Sec. 191. General definitions.
Sec. 192. Definitions relating to employment.
Sec. 193. Definitions relating to health coverage, plans, and carriers.
Sec. 194. Definitions relating to residence and immigration status.
Sec. 195. Effective dates.
TITLE II—ADMINISTRATIVE SIMPLIFICATION
Sec. 200. Purpose.
Sec. 201. Definitions.
Subtitle A—Standards for Data Elements and Transactions
Sec. 211. General requirements on Secretary.
Sec. 212. Standards for data elements of health information.
Sec. 213. Information transaction standards.
Sec. 214. Health information network privacy standards.
Sec. 215. Timetables for adoption of standards.
Subtitle B—Requirements with Respect to Certain Transactions and
Information
Sec. 221. Standard transactions and information.
Sec. 222. Accessing health information for authorized purposes.
Sec. 223. Ensuring availability of information.
Sec. 224. Timetables for compliance with requirements.
Subtitle C—Miscellaneous Provisions
Sec. 231. Standards and certification for health information network services.
Sec. 232. Imposition of additional requirements.
Sec. 233. Effect on State law.
TITLE III—ANTITRUST
Sec. 301. Publication of antitrust guidelines on activities of health plans.
TITLE I—ASSURING AVAILABIL-
ITY 
AND 
CONTINUITY 
OF
HEALTH COVERAGE
Subtitle A—Guaranteed Access to
Health Coverage
SEC. 101. GUARANTEED OFFER BY CARRIERS.
(a) IN GENERAL.—Each carrier that offers health in-
surance coverage in the individual/small group market in
a fair rating area (as defined in section 193) shall make
available, to each qualifying individual (as defined in sec-
tion 194(3)) or small employer (covered in such market)
in such fair rating area—
(1) qualified standard coverage consistent with
section 142, and
(2) subject to subsection (b), qualified high-de-
ductible coverage consistent with section 143.
(b) HIGH-DEDUCTIBLE COVERAGE.—
(1) EXCEPTION
FOR
HEALTH
MAINTENANCE
ORGANIZATIONS.—The requirement of subsection
(a)(2) shall not apply with respect to health insur-
ance coverage that—
(A) is provided by a Federally qualified
health maintenance organization (as defined in
section 1301(a) of the Public Health Service
Act), or
(B) is not provided by such an organiza-
tion but is provided by an organization recog-
nized under State law as a health maintenance
organization or managed care organization or a
similar organization regulated under State law
for solvency.
(2) LIMITATION ON OFFER OF HIGH-DEDUCT-
IBLE COVERAGE.—Qualified high-deductible coverage
may not be made available by a carrier to a qualify-
ing individual (or to a small employer with respect
to an employee) unless the carrier also makes avail-
able qualified standard coverage that has identical
benefits (other than the amount of the deductible)
and the individual or employee demonstrates to the
carrier that the individual or employee has available
assets (as defined by the Secretary) equal to at least
the deductible amount established under section
144(b)(1) applicable to the high-deductible coverage.
A carrier may not make available to an individual
health coverage (other than coverage for supple-
mental benefits) the actuarial value of which is less
than the actuarial value of qualified high-deductible
coverage, unless the individual has available assets
(as defined by the Secretary) equal to at least the
deductible amount of the coverage offered.
(c) COVERAGE OF ENTIRE RATING AREA.—
(1) IN GENERAL.—With respect to each fair
rating area for which a carrier offers health insur-
ance coverage, the carrier shall provide for coverage
of benefits for items and services furnished through-
out the fair rating area.
(2) SPECIAL
RULE
FOR
CARRIERS
OFFERING
COVERAGE IN MULTI-STATE METROPOLITAN STATIS-
TICAL AREAS.—In the case of a carrier that offers
qualified health insurance coverage in the individual/
small employer market in a portion of a State that
is located in an interstate metropolitan statistical
area, the carrier may not provide such coverage with
respect to an individual or employer in such metro-
politan statistical area unless the carrier also offers
such coverage in other portions of the area located
in other States.
(3) SPECIAL RULE FOR COVERAGE THROUGH
MANAGED CARE ARRANGEMENT.—In the case of cov-
erage offered by a carrier or under a group health
plan to the extent that it provides benefits through
a managed care arrangement in a fair rating area,
this subsection shall not be construed as requiring
the establishment of facilities throughout the area, if
the facilities are located consistent with section
102(b)(1).
(d) FAMILY COVERAGE OPTION.—The offer of cov-
erage under this section with respect to an individual shall
include the option of coverage of family members of the
individual.
(e) LIMITATION ON CARRIERS.—A carrier may not
require an employer under a group health plan to impose
through a waiting period for health coverage under a plan
or similarly require a limitation or condition on health cov-
erage or benefits based on—
(1) the health status of an individual,
(2) claims experience of an individual,
(3) receipt of health care by an individual,
(4) medical history of an individual,
(5) receipt of public subsidies by an individual,
or
(6) lack of evidence of insurability of an individ-
ual.
(f) CONSTRUCTION FOR MEWAS.—Nothing in this
section shall be construed as requiring a multiple employer
welfare arrangement that provides health coverage other
than through a carrier to meet the requirements of this
section.
SEC. 102. GUARANTEED ISSUE BY CARRIERS.
(a) IN GENERAL.—Subject to subsections (b) and (c)
and section 103, each carrier that offers health insurance
coverage in the individual/small group market in a fair rat-
ing area—
(1) must accept every small employer in the
area that applies for such coverage during an enroll-
ment period provided under section 105; and
(2) must accept for enrollment under such cov-
erage every qualifying individual (and family mem-
ber of such an individual) who applies for enrollment
during an enrollment period provided under section
105 and may not place any restriction on the eligi-
bility of an individual to enroll so long as such indi-
vidual is a qualifying individual.
(b) SPECIAL RULES FOR MANAGED CARE ARRANGE-
MENTS.—In the case of coverage offered by a carrier or
under a group health plan that provides benefits through
a managed care arrangement in a fair rating area, the
carrier or plan—
(1) need not establish facilities for the delivery
of health care services throughout the area so long
as such facilities are located in a manner that does
not discriminate on the basis of health status of in-
dividuals residing in proximity to such facilities, and
(2) may deny such coverage in a fair rating
area to employers or individuals if the organization
demonstrates to the applicable regulatory authority
that—
(A) it will not have the capacity to deliver
services adequately to enrollees of any addi-
tional groups or additional enrollees because of
its obligations to existing group contract hold-
ers and enrollees, and
(B) it is applying this paragraph uniformly
to all employers and individuals without regard
to the health status, claims experience, or dura-
tion of coverage of those employers and their
employees.
Coverage may be denied under paragraph (2) only if the
denial is applied during a consecutive period of at least
180 days.
(c) SPECIAL RULE FOR FINANCIAL CAPACITY LIM-
ITS.—In addition to the authority provided under sub-
section (b)(2), in the case of coverage offered by any car-
rier, the carrier may deny coverage to a small employer
or individual if the carrier demonstrates to the applicable
regulatory authority that—
(1) it does not have the financial reserves nec-
essary to underwrite additional coverage, and
(2) it is applying this subsection uniformly to
all employers and individuals without regard to the
health status, claims experience, or duration of cov-
erage of those employers and their employees.
Coverage may be denied under this subsection only if the
denial is applied during a consecutive period of at least
180 days.
(d) TREATMENT OF CERTAIN MEWAS.—Subsection
(a) shall not apply to a carrier if the only coverage offered
by the carrier in the individual/small group market is
through one or more multiple employer welfare arrange-
ments. In the case of coverage offered by a carrier in the
individual/small group market through a multiple em-
ployer welfare arrangement and to which the previous sen-
tence does not apply, the requirements of subsection (a)
shall apply to the carrier and not to the arrangement.
SEC. 103. GUARANTEED RENEWAL.
(a) LIMITATION ON TERMINATION BY CARRIERS.—
A carrier may not deny, cancel, or refuse to renew health
coverage of a qualifying individual or eligible employer
within a type of coverage option described in section
193(13) except—
(1) on the basis of nonpayment of premiums,
(2) on the basis of fraud or misrepresentation,
or
(3) subject to subsection (b), in a fair rating
area because the carrier is ceasing to provide any
health insurance coverage in the individual/small
group market within such type of coverage option in
the area.
(b) LIMITATIONS ON MARKET EXIT BY CARRIERS.—
(1) NOTICE, ETC.—Subsection (a)(3) shall not
apply to a carrier ceasing to provide health insur-
ance coverage unless—
(A) such termination of coverage takes ef-
fect at the end of a contract year, and
(B) the carrier provides notice of such ter-
mination to employers and individuals covered
at least 30 days before the date of an annual
open enrollment period established with respect
to the employer or individual under section 105.
(2) LIMITATION ON REENTRY IN INDIVIDUAL/
SMALL GROUP MARKET.—If a carrier ceases to offer
or provide health insurance coverage in an area with
respect to the individual/small group market for a
type of coverage option, the insurer may not offer
health insurance coverage in the area in such market
within such type of coverage option until 5 years
after the date of the termination.
(c) RULE FOR MULTIEMPLOYER PLANS AND MUL-
TIPLE EMPLOYER HEALTH.—A multiemployer plan and
a multiple employer health plan may not cancel coverage
or deny renewal of coverage under such a plan with re-
spect to an employer other than—
(1) for nonpayment of contributions,
(2) for fraud or other misrepresentation by the
employer, or
(3) because the plan is ceasing to provide any
coverage in a geographic area.
SEC. 104. RESTRICTING PREEXISTING CONDITION EXCLU-
SIONS.
(a) IN GENERAL.—Except as provided in this section,
a carrier or group health plan providing health coverage
may not exclude health coverage with respect to services
related to treatment of a condition based on the fact that
the condition of an individual existed before the effective
date of coverage of the individual.
(b) LIMITED 6-MONTH EXCLUSION PERMITTED.—
(1) IN
GENERAL.—Subject to paragraph (2)
and subsections (c) through (e), a carrier or group
health plan providing health coverage may exclude
health coverage with respect to services related to
treatment of a condition of an individual based on
the fact that the condition existed before the effec-
tive date of coverage of the individual only if the pe-
riod of the exclusion does not exceed 6 months be-
ginning on the date of coverage.
(2) CREDITING OF PREVIOUS COVERAGE.—
(A) IN
GENERAL.—A carrier or group
health plan providing health coverage shall pro-
vide that if a covered individual is in a period
of continuous coverage (as defined in subpara-
graph (C)) as of a date upon which coverage is
initiated or reinitiated, any period of exclusion
of coverage with respect to a preexisting condi-
tion (as defined in subparagraph (B)) for such
services or type of services shall be reduced by
1 month for each month in the period of contin-
uous coverage.
(B) PREEXISTING CONDITION DEFINED.—
In this paragraph, the term ‘‘preexisting condi-
tion’’ means, with respect to health coverage, a
condition which has been diagnosed or treated
during the 6-month period ending on the day
before the first date of such coverage (without
regard to any waiting period).
(C) PERIOD OF CONTINUOUS COVERAGE.—
In this part, the term ‘‘period of continuous
coverage’’ means the period beginning on the
date an individual has health coverage (or cov-
erage under a public plan providing medical
benefits) and ends on the date the individual
does not have such coverage for a continuous
period of more than 3 months (or 6 months in
the case of an individual who loses coverage due
to involuntary termination of employment, other
than by reason of an employee’s gross mis-
conduct).
(c) EXCLUSION NOT APPLICABLE TO PREGNANCY.—
Any exclusion of coverage under subsection (b)(1) shall
not apply if the exclusion relates to pregnancy.
(d) EXCLUSION NOT APPLICABLE TO NEWBORNS
AND ADOPTED CHILDREN.—
(1) NEWBORNS.—Any exclusion of coverage
under subsection (b)(1) shall not apply to a child
who is covered at the time of birth and remains in
a period of continuous coverage after such time.
(2) ADOPTED
CHILDREN.—Any exclusion of
coverage under subsection (b)(1) shall not apply (be-
ginning on the date of adoption) to an adopted child
who is covered at the time of adoption and remains
in a period of continuous coverage after such time.
(e) EXCLUSION NOT APPLICABLE TO INDIVIDUALS
ENROLLED OR ENROLLING DURING CERTAIN OPEN EN-
ROLLMENT PERIODS.—
(1) INDIVIDUALS
ENROLLING
DURING
PE-
RIOD.—In the case of an individual who enrolls and
obtains coverage during an open enrollment period
described in section 105(b), any exclusion of cov-
erage under subsection (b)(1) shall not apply so long
as the individual remains in a period of continuous
coverage.
(2) INDIVIDUALS ENROLLED AT BEGINNING OF
PERIOD.—In the case of an individual who has
health coverage as of the first day of the initial open
enrollment period described in section 105(b)(1),
any exclusion of coverage under subsection (b)(1)
shall not apply as of such date and so long as the
individual is in a period of continuous coverage.
(f) APPLICATION OF RULES BY CERTAIN HEALTH
MAINTENANCE ORGANIZATIONS.—A health maintenance
organization that provides health insurance coverage shall
not be considered as failing to meet the requirements of
section 1301 of the Public Health Service Act notwith-
standing that it provides for an exclusion of the coverage
based on a preexisting condition consistent with the provi-
sions of this subtitle so long as such exclusion is applied
consistent with the provisions of this part.
SEC. 105. ENROLLMENT PERIODS.
(a) IN GENERAL.—Each carrier and each group
health plan providing health coverage in the individual/
small group market shall permit qualifying individuals and
eligible employers to obtain health coverage from the car-
rier or group health plan during each enrollment period
provided under this section.
(b) OPEN ENROLLMENT PERIODS FOR WHICH PRE-
EXISTING CONDITION EXCLUSIONS WAIVED.—
(1) INITIAL PERIOD.—There shall be an initial
open enrollment period, with respect to individuals
and employees who are residents of a State, during
the 60-day period beginning on January 1, 1997.
(2) INDIVIDUALS ELIGIBLE FOR SUBSIDIES.—
There shall be an individual open enrollment period
with respect to an individual at the time the individ-
ual first becomes eligible for any premium assistance
under part A of title XXI of the Social Security Act,
during the 60-day period beginning on the first date
the individual meets eligibility criteria within any
12-month period.
(3) COURT ORDERS.—If a court has ordered
that coverage be provided for a spouse or child of an
employee or individual under health coverage of the
employee or individual, there shall be an open enroll-
ment period during the 30-day period beginning on
the date of issuance of the court order.
(4) ENROLLMENT OF NEWBORNS AND NEWLY
ADOPTED CHILDREN.—There shall be an open en-
rollment period with respect to a newborn child and
a newly adopted child during the 30-day period be-
ginning on the date of the birth or adoption of a
child, if family coverage is available as of such date.
(c) ANNUAL OPEN ENROLLMENT PERIODS
FOR
WHICH
PREEXISTING
CONDITION
EXCLUSIONS
MAY
APPLY.—
(1) IN GENERAL.—Each carrier and each group
health plan providing health coverage in the individ-
ual/small group market shall provide for at least one
annual open enrollment period (of not less than 30
days) each year. Such period shall be in addition to
the open enrollment periods described in subsection
(b).
(2) COORDINATION.—
(A) 
CARRIERS
IN
INDIVIDUAL/SMALL
GROUP MARKET.—Such annual open enrollment
periods with respect to carriers in the individ-
ual/small group market are subject to coordina-
tion by States.
(d) OTHER
OPEN
ENROLLMENT
PERIODS
FOR
WHICH
PREEXISTING
CONDITION
EXCLUSIONS
MAY
APPLY.—
(1) TERMINATION OF RESIDENCE AREA.—For
each qualifying individual, at the time the individual
terminates residence in the service area of coverage
provided by a carrier to the individual, there shall be
an open enrollment period (of not less than 30 days)
during which the individual may enroll in health cov-
erage.
(2) FAMILY
OR
EMPLOYMENT
CHANGES.—In
the case of a qualifying individual who—
(A) through divorce or death of a family
member experiences a change in family com-
position, or
(B) experiences a change in employment
status (including a significant change in the
terms and conditions of employment or the
terms and conditions of employment of a
spouse),
there shall be an open enrollment period (of at least
30 days) in which the individual is permitted to
change the individual or family basis of coverage or
the health coverage in which the individual is en-
rolled. The circumstances under which such enroll-
ment periods are required and the duration of such
periods shall be specified by the Secretary.
(3) ENROLLMENT DUE TO LOSS OF PREVIOUS
COVERAGE.—In the case of a qualifying individual
who—
(A) had health coverage at the time of an
individual’s enrollment period,
(B) stated at the time of such period that
having other health coverage was the reason for
declining enrollment, and
(C) lost the other health coverage as a re-
sult of the termination of the coverage, termi-
nation or reduction of employment, or other
reason, except termination at the option of the
individual,
there shall be an open enrollment period during the
30-day period beginning on the date of termination
of the other coverage.
(4) ENROLLMENT
AT
TIME
OF
MARRIAGE.—
There shall be an open enrollment period with re-
spect to the spouse of an individual (including chil-
dren of the spouse) during the 30-day period begin-
ning on the date of the marriage, if family coverage
is available as of such date.
(5) NO EFFECT ON COBRA CONTINUATION BEN-
EFITS.—Nothing in this subsection shall be con-
strued as affecting rights of individuals to continu-
ation coverage under section 4980B of the Internal
Revenue Code of 1986, part 6 of subtitle B of title
I of the Employee Retirement Income Security Act
of 1974, or title XXII of the Public Health Service
Act.
(e) PERIOD OF COVERAGE.—
(1) IN GENERAL.—In the case of a qualifying
individual who enrolls under health coverage during
an open enrollment period under this section, cov-
erage 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, consistent with this subsection.
(2) COVERAGE OF FAMILY MEMBERS.—In the
case of an open enrollment period described in sub-
section (b)(3), (b)(4), or (d)(4), the Secretary shall
provide for coverage of family members to begin as
soon as possible on or after the date of the event
that gives rise to the special enrollment period (or,
in the case of birth or adoption, as of the date of
birth or adoption).
Subtitle B—Provision of Benefits
SEC. 111. STANDARDS FOR MANAGED CARE ARRANGE-
MENTS.
(a) APPLICATION OF REQUIREMENTS.—Each group
health plan, and each carrier providing health insurance
coverage, that provides for health care through a managed
care arrangement (as defined in section 193(10)(A)) shall
comply with the applicable requirements of this section.
(b) CONSUMER DISCLOSURE.—
(1) IN GENERAL.—The group health plan, or
carrier providing health insurance coverage, that
provides for health care shall assure that, before an
individual is enrolled with the plan or carrier, the in-
dividual is provided with information about the ar-
rangements between the entity providing for the
managed care arrangement and health care provid-
ers for the provision of covered benefits, including
the following:
(A) 
EMERGENCY
SERVICES.—Arrange-
ments for access to emergency care services in-
side and outside the provider network (includ-
ing designated trauma centers), including any
requirements for prior authorization.
(B) SPECIALIZED TREATMENT.—Arrange-
ments for access to specialized treatment pro-
viders (such as centers of excellence).
(C) CHOICE OF PERSONAL PHYSICIAN.—
Ability of enrollees to choose (and change the
selection of) a personal physician from among
available participating physicians and change
that selection as appropriate.
(D) ESSENTIAL COMMUNITY PROVIDERS.—
Arrangements for access to essential community
providers, including disproportionate share hos-
pitals, sole community hospitals, medicare-de-
pendent, small rural hospitals, Federally quali-
fied health centers, rural health clinics, local
health departments, and children’s hospitals.
(2) DESIGNATION
OF
CENTERS
OF
EXCEL-
LENCE.—The Secretary shall establish a process for
the designation of facilities, including children’s hos-
pitals and other pediatric facilities, as centers of ex-
cellence for purposes of this subsection. A facility
may not be designated unless the facility is deter-
mined—
(A) to provide specialty care,
(B) to deliver care for complex cases re-
quiring specialized treatment and for individ-
uals with chronic diseases, and
(C) to meet other requirements that may
be established by the Secretary relating to spe-
cialized education and training of health profes-
sionals, participation in peer-reviewed research,
or treatment of patients from outside the geo-
graphic area of the facility.
(c) PROVIDER DISCLOSURE AND DUE PROCESS RE-
LATING TO PROVIDER NETWORKS.—
(1) DISCLOSURE.—The entity providing for a
managed care arrangement under which health cov-
erage shall provide that before entering into a con-
tract with health care providers with respect to the
entity’s provider network, the provider is given infor-
mation concerning the terms and conditions of the
provider’s involvement with the network, including
the following:
(A) STANDARDS FOR SELECTION OF PRO-
VIDERS FOR NETWORK.—Information concern-
ing the standards (including criteria for quality,
efficiency, credentialing, and services) to be
used by the entity for contracting with health
care providers with respect to the entity’s pro-
vider network.
(B) REVIEW PROCESS.—Information con-
cerning the process under which a provider may
request a review of the entity’s decision to ter-
minate or refuse to renew the provider’s partici-
pation agreement.
(2) WRITTEN NOTICE OF DENIALS.—The entity
providing for the managed care arrangement shall
provide written notice to the provider of any denial
of an application to participate in the provider net-
work.
(3) TERMINATION PROCESS.—
(A) IN GENERAL.—The entity may not ter-
minate or refuse to renew a participation agree-
ment with a provider in the entity’s provider
network unless the entity provides written noti-
fication to the provider of the entity’s decision
to terminate or refuse to renew the agreement.
The notification shall include a statement of the
reasons for the entity’s decision, consistent with
any standards described in paragraph (1)(A).
(B) TIMING OF NOTIFICATION.—The en-
tity shall provide the notification required under
subparagraph (A) at least 30 days prior to the
effective date of the termination or expiration of
the agreement (whichever is applicable). The
previous sentence shall not apply if failure to
terminate the agreement prior to the deadline
would adversely affect the health or safety of a
covered individual.
(d) NO REFERRAL REQUIRED FOR OBSTETRICS AND
GYNECOLOGY.—A carrier or group health plan may not
require an individual to obtain a referral from a physician
in order to obtain covered items and services from a physi-
cian who specializes in obstetrics and gynecology.
(e) PREEMPTION OF STATE LAW RESTRICTIONS ON
MANAGED CARE ARRANGEMENTS.—
(1) LIMITATION
ON
RESTRICTIONS
ON
NET-
WORK PLANS.—Effective as of January 1, 1997—
(A) a State may not prohibit or limit a
carrier or group health plan providing health
coverage from including incentives for enrollees
to use the services of participating providers;
(B) a State may not prohibit or limit such
a carrier or plan from limiting coverage of serv-
ices to those provided by a participating pro-
vider;
(C) a State may not prohibit or limit the
negotiation of rates and forms of payments for
providers by such a carrier or plan with respect
to health coverage;
(D) a State may not prohibit or limit such
a carrier or plan from limiting the number of
participating providers;
(E) a State may not prohibit or limit such
a carrier or plan from requiring that services be
provided (or authorized) by a practitioner se-
lected by the enrollee from a list of available
participating providers or, except as provided in
subsection 111(d), from requiring enrollees to
obtain referral in order to have coverage for
treatment by a specialist or health institution;
and
(F) a State may not prohibit or limit the
corporate practice of medicine.
(2) DEFINITIONS.—In this subsection:
(A) MANAGED
CARE
COVERAGE.—The
term ‘‘manageds care coverage’’ means health
coverage to the extent the coverage is provided
through a managed care arrangement (as de-
fined in section 193(10)(A)) that meets the ap-
plicable requirements of this section.
(B) PARTICIPATING PROVIDER.—The term
‘‘participating provider’’ means an entity or in-
dividual which provides, sells, or leases health
care services as part of a provider network (as
defined in section 193(10)(B)).
SEC. 112. REPORT ON UTILIZATION REVIEW STANDARDS.
(a) STUDY.—The Secretary shall provide for a study
on the feasibility and appropriateness of—
(1) establishing standards for utilization review
programs, and
(2) prohibiting group health plans and carriers
providing health insurance coverage from denying
coverage of or payment for items and services on the
basis of a utilization review program unless the pro-
gram meets such standards.
(b) REPORT.—Not later than 18 months after the
date of the enactment of this Act, the Secretary shall sub-
mit to Congress a report on the study under subsection
(a). The Secretary shall include the report recommenda-
tions regarding the application of standards for utilization
review programs to group health plans and carriers pro-
viding health insurance coverage.
(c) PREEMPTION.—For provision preempting State
laws relating to utilization review, see section 6103.
Subtitle C—Fair Rating Practices
SEC. 121. USE OF FAIR RATING PRACTICES.
(a) USE OF FAIR RATING PRACTICES.—The pre-
mium rate established by a carrier for health insurance
coverage in the individual/small group market (including
the premium rate for coverage for a small employer
through a multiple employer welfare arrangement that is
fully-insured) may not vary except by the following:
(1) AGE.—By age, based on classes of age es-
tablished by the Secretary, in consultation with the
NAIC, consistent with subsection (b).
(2) GEOGRAPHIC AREA.—By geographic area,
as identified by a State consistent with subsection
(c).
(3) FAMILY CLASS.—By family class, based on
the following 4 classes of family coverage: individual,
individual with one or more children, married couple
without a child, and married couple with one or
more children.
(4) BENEFIT
DESIGN.—By benefit design of
coverage, including by type of coverage, such as
standard coverage and high-deductible coverage, and
by type of coverage option (described in section
193(13)) with respect to standard coverage.
(5) ADMINISTRATIVE
CATEGORIES.—By per-
mitted expense category, based on differences in ex-
penses among such categories, consistent with sub-
section (d).
The premiums shall be established for the different benefit
designs (including standard coverage and high-deductible
coverage) based on the actuarial value of the coverage for
the population of the individual/small group market in the
fair rating area, without regard to the distribution of such
population among the types of coverage or type of cov-
erage options.
(b) LIMITATION ON VARIATION BY AGE.—
(1) IN GENERAL.—Any variation in premium
rates by age under subsection (a)(1) for age classes
of individuals under 65 years of age may not result
in the ratio of the highest age rate to the lowest age
rate exceeding the limiting ratio described in para-
graph (2).
(2) LIMITING RATIO.—For purposes of para-
graph (1), the limiting ratio described in this para-
graph is—
(A) 4-to-1, for premiums for months in
1997,
(B) 3.67-to-1, for premiums for months in
1998,
(C) 3.33-to-1, for premiums for months in
1999, and
(D) 3-to-1, for premiums for months in
2000 and any succeeding year.
(3) SEPARATE AGE CLASSES FOR INDIVIDUALS
65 YEARS OF AGE OR OLDER.—The Secretary shall
establish one or more separate age classes for indi-
viduals 65 years of age or older.
(c) GEOGRAPHIC AREA VARIATIONS.—For purposes
of subsection (a)(2), a State—
(1) may not identify an area that divides a 3-
digit zip code, a county, or all portions of a metro-
politan statistical area,
(2) shall not permit premium rates for coverage
offered in a portion of an interstate metropolitan
statistical area to vary based on the State in which
the coverage is offered, and
(3) may, upon agreement with one or more ad-
jacent States, identify multi-state geographic areas
consistent with paragraphs (1) and (2).
(d) ADMINISTRATIVE VARIATIONS.—
(1) 
EXPENSE
CATEGORIES.—Expense 
cat-
egories shall be established under subsection (a)(5)
by a carrier in a manner that only reflects dif-
ferences based on marketing, commissions, and simi-
lar expenses. Such categories shall take into account
health plan purchasing organizations.
(2) LIMITATION
ON
VARIATIONS.—The vari-
ation provided among expense categories under sub-
section (a)(5) may not result in a premium for the
highest expense category exceeding 120 percent of
the premium for the lowest expense category.
(e) PREMIUM RATING IN GROUP HEALTH PLANS.—
The premium rate established under a group health plan
for health insurance coverage may not vary within a bene-
fit design except by the factors described in subsection (a)
and subject to the limitation specified in subsection (b).
(f) ACTUARIAL CERTIFICATION.—Each carrier that
offers health insurance coverage in a State shall file annu-
ally with the State commissioner of insurance a written
statement by a member of the American Academy of Actu-
aries (or other individual acceptable to the commissioner)
that, based upon an examination by the individual which
includes a review of the appropriate records and of the
actuarial assumptions of the carrier and methods used by
the carrier in establishing premium rates for applicable
health insurance coverage—
(1) the carrier is in compliance with the appli-
cable provisions of this section, and
(2) the rating methods are actuarially sound.
Each such carrier shall retain a copy of such statement
for examination at its principal place of business.
(g) CONSTRUCTION.—The provisions of this section
shall apply to premium rates established by carriers for
multiple employer welfare arrangements that are fully in-
sured or for fully-insured coverage offered with respect to
individuals and small employers in the individual/small
group market. Such premium rates shall apply based on
the fair rating area in which the covered individual or em-
ployee resides to reflect the population in the individual/
small group market.
SEC. 122. ESTABLISHMENT OF RISK ADJUSTMENT MECHA-
NISMS.
(a) ESTABLISHMENT OF STANDARDS.—
(1) DEVELOPMENT OF MODELS.—
(A) IN GENERAL.—The Secretary shall re-
quest the NAIC to develop, within 9 months
after the date of the enactment of this Act and
in consultation with the American Academy of
Actuaries, a model risk adjustment system com-
posed of one or more risk adjustment mecha-
nisms under which premiums applicable to
health insurance coverage in the individual/
small group market and coverage under mul-
tiple employer welfare arrangements that are
fully insured (without regard to whether such
an arrangement is offered through an associa-
tion) would be adjusted to take into account
such factors as may be appropriate to predict
the future need and the efficient use of services
by covered individuals in the market. Such fac-
tors may include the age, gender, geographic
residence, health status, or other demographic
characteristics of individuals enrolled in such
plans and shall include consideration of enroll-
ment of a disproportionate share of individuals
who enroll during the initial open enrollment
period under section 105(b)(1).
(B) 
PROMULGATION
AS
PROPOSED
RULE.—If the NAIC develops such model with-
in such period, the Secretary shall publish the
model as a proposed rule under section 553 of
title 5, United States Code. If the NAIC has
not developed such model within such period,
the Secretary shall publish (not later than 60
days after the end of such period) a proposed
rule that specifies a proposed model that pro-
vides for effective risk adjustment mechanisms.
(2) RULE
MAKING
PROCESS.—The Secretary
shall provide for a period (described in section
553(c) of title 5, United States Code) of not less
than 30 days for public comment on a proposed rule
published under paragraph (1)(B). The Secretary
shall publish a final rule, by not later than January
1, 1996, that specifies risk adjustment mechanisms
that the Secretary finds are effective for purposes of
carrying out this section. Such rule shall include
models developed by the NAIC if the Secretary finds
that such models provide for effective risk adjust-
ment mechanisms.
(3) MODIFICATION.—The Secretary, at the re-
quest of the NAIC or otherwise, may by regulation
modify the model risk adjustment system established
under this subsection.
(b) IMPLEMENTATION OF RISK ADJUSTMENT SYS-
TEM.—Each State shall establish and maintain a risk ad-
justment system that conforms with the model established
under this section by not later than January 1, 1997. A
State may establish and maintain such a system jointly
with one or more other States.
Subtitle D—Consumer Protections
SEC. 131. REQUIREMENT FOR PROVISION OF INFORMA-
TION.
(a) CARRIERS.—
(1) IN
GENERAL.—Each carrier that offers
health insurance coverage to small employers (or eli-
gible employees of small employers) or qualifying in-
dividuals must disclose to such prospective enrollees,
to brokers, and to health plan purchasing organiza-
tions the information that the Secretary may specify
relating to the performance of the carrier in provid-
ing such coverage and relating to differences be-
tween the coverage provided and the most similar
model benefit package established under section
144(b)(2). If a carrier offers to individuals or em-
ployers coverage the actuarial value of which is more
than the actuarial value for high-deductible coverage
but less than such value for standard coverage, the
carrier must disclose to such employers or individ-
uals detailed information on how the coverage of-
fered compares to any standard and high-deductible
coverage offered by the carrier to such individuals
and employers.
(2) MARKETING MATERIAL.—Each carrier that
provides any health insurance coverage in a State
shall file with the State those marketing materials
relating to the offer and sale of health insurance
coverage to be used for distribution before the mate-
rials are used. Such materials shall be in a uniform
format specified under the standards established
under section 1301.
(b) GROUP HEALTH PLANS.—Each group health
plan that provides health coverage must disclose to enroll-
ees and potential enrollees information, similar to the in-
formation described in subsection (a), relating to perform-
ance of the plan in providing such coverage and relating
to differences between the coverage provided and the most
similar model benefit package established under section
144(b)(2).
(c) INFORMATION
RELATING
TO
RISK
ADJUST-
MENT.—Each carrier or group health plan providing cov-
erage in the individual/small group market (including mul-
tiple employer health plans that are fully insured, without
regard to whether such an arrangement or plan is offered
through an association) shall provide to the State such in-
formation as the State may require in order to carry out
section 122 (relating to risk adjustment mechanisms).
SEC. 132. PROHIBITION OF IMPROPER INCENTIVES.
(a) LIMITATION
ON FINANCIAL INCENTIVES.—No
carrier that provides health insurance coverage may vary
the commission or financial or other remuneration to a
person based on the claims experience or health status of
individuals enrolled by or through the person.
(b) NONDISCRIMINATION
IN
AGENT
COMPENSA-
TION.—A carrier—
(1) may not vary or condition the compensation
provided to an agent or broker related to the sale or
renewal of health insurance coverage because of the
health status or claims experience of any individuals
enrolled with the carrier through the agent or
broker; and
(2) may not terminate, fail to renew, or limit its
contract or agreement of representation with an
agent or broker for any reason related to the health
status or claims experience of any individuals en-
rolled with the carrier through the agent or broker.
(c) PROHIBITION OF TIE-IN ARRANGEMENTS.—No
carrier that offers health insurance coverage may require
the purchase of any other insurance or product as a condi-
tion for the purchase of such coverage.
SEC. 133. WRITTEN POLICIES AND PROCEDURES RESPECT-
ING ADVANCE DIRECTIVES.
A carrier and a group health plan offering health cov-
erage shall meet the requirements of section 1866(f) of
the Social Security Act (relating to maintaining written
policies and procedures respecting advance directives), in-
sofar as such requirements would apply to the carrier or
plan if the carrier or plan were an eligible organization.
Subtitle E—Benefits
SEC. 141. QUALIFIED HEALTH COVERAGE.
In this Act, the term ‘‘qualified health coverage’’
means health coverage that—
(1) provides—
(A) standard coverage consistent with sec-
tion 142(a), or
(B) high-deductible coverage consistent
with section 143; and
(2) meets other requirements of subtitles A
through D applicable to the coverage and the carrier
or group health plan providing the coverage.
SEC. 142. STANDARD COVERAGE.
(a) IN GENERAL.—Health insurance coverage is con-
sidered to provide standard coverage consistent with this
subsection and for preventive benefits under subsection
(b)(4) if—
(1) benefits under such coverage are provided
within at least each of the required categories of
benefits described in paragraph (1) of subsection (b)
and consistent with such subsection;
(2) the actuarial value of the benefits meets the
requirements of subsection (c), and
(3) the benefits comply with the minimum re-
quirements specified in subsection (d).
(b) REQUIRED CATEGORIES
OF COVERED BENE-
FITS.—
(1) IN
GENERAL.—The categories of covered
benefits described in this paragraph are the types of
benefits specified in each of subparagraphs (A), (B),
(C), (D), (E), and (F) of paragraph (1), and sub-
paragraphs (E) and (F) of paragraph (2), of section
8904(a) of title 5, United States Code (relating to
types of benefits required to be in health insurance
offered to Federal employees).
(2) COVERAGE OF TREATMENTS IN APPROVED
RESEARCH TRIALS.—
(A) IN GENERAL.—Coverage of the routine
medical costs (as defined in subparagraph (B))
associated with the delivery of treatments shall
be considered to be medically appropriate if the
treatment is part of an approved research trial
(as defined in subparagraph (C)).
(B) ROUTINE MEDICAL COSTS DEFINED.—
In subparagraph (A), the term ‘‘routine medical
costs’’ means the cost of health services re-
quired to provide treatment according to the de-
sign of the trial, except those costs normally
paid for by other funding sources (as defined by
the Secretary). Such costs do not include the
cost of the investigational agent, devices or pro-
cedures themselves, the costs of any nonhealth
services that might be required for a person to
receive the treatment, or the costs of managing
the research.
(C) APPROVED
RESEARCH
TRIAL
DE-
FINED.—In subparagraph (A), the term ‘‘ap-
proved research trial’’ means a trial—
(i) conducted for the primary purpose
of determining the safety, effectiveness, ef-
ficacy, or health outcomes of a treatment,
compared with the best available alter-
native treatment, and
(ii) approved by the Secretary.
A trial is deemed to be approved under clause
(ii) if it is approved by the National Institutes
of Health, the Food and Drug Administration
(through an investigational new drug exemp-
tion), the Department of Veterans Affairs, or
by a qualified nongovernmental research entity
(as identified in guidelines issued by one or
more of the National Institutes of Health).
(3) COVERAGE
OF
OFF-LABEL
USE.—An off-
label use for a drug that has been found to be safe
and effective under section 505 of the Federal Food,
Drug, and Cosmetic Act shall be covered if the medi-
cal indication for which it is used is listed in one of
the following 3 compendia: the American Hospital
Formulary Service-Drug Information, the American
Medical Association Drug Evaluations, and the
United States Pharmacopeia-Drug Information.
(4) PREVENTIVE BENEFITS.—The following are
preventive benefits that shall be covered without any
deductibles, copayment, coinsurance, or other cost-
sharing:
(A) NEWBORN, WELL-BABY
AND
WELL-
CHILD
CARE.—Newborn care, well-baby care,
and well-child care for individuals under 19
years of age, including routine physical exami-
(F) PRENATAL CARE.—Prenatal care.
(G) ADULT IMMUNIZATIONS.—Routine im-
munizations for an individual over 17 years of
age (including booster immunizations against
tetanus and diphtheria, but limited to 1 such
immunization every 10 years).
(H) PROSTATE
CANCER
SCREENING.—
Routine cancer screening for a man who is at
least 40 years of age through a prostate specific
antigen test, limited to 1 test each year.
(c) STANDARD ACTUARIAL VALUE.—
(1) IN GENERAL.—The actuarial value of the
benefits under standard coverage in a fair rating
area meets the requirements of this subsection if
such value is equivalent to the standard actuarial
value described in paragraph (2) for the area. The
actuarial value of benefits under standard coverage
shall be determined using the adjustment under
paragraph (3) for a standardized population and set
of standardized utilization and cost factors.
(2) 
STANDARD
ACTUARIAL
VALUE
DE-
SCRIBED.—The standard actuarial value described
in this paragraph for coverage in a geographic area
is the actuarial value of benchmark coverage during
1994 in such area. Such actuarial value shall be de-
termined using the adjustment under paragraph (3)
for a standardized population and set of standard-
ized utilization and cost factors and updated annu-
ally in accordance with section 144(a).
(3) ADJUSTMENTS FOR STANDARDIZED POPU-
LATION, STANDARDIZED
UTILIZATION
AND
COST
FACTORS, AND GEOGRAPHIC AREA.—The adjustment
under this paragraph—
(A) for a standardized population shall be
made by not taking into account individuals 65
years of age or older, employees of the United
States Postal Service, retirees, and annuitants;
and
(B)(i) except as provided in clause (ii), for
a geographic area shall be made in a manner
that reflects the ratio of the actuarial value of
benchmark coverage in such geographic area
(as adjusted under subparagraph (A)) to such
actuarial value for such benchmark coverage for
the United States as a whole, taking into ac-
count standardized actuarial utilization and
cost factors, and
(ii) in the case of a group health plan oper-
ating in more than one geographic area, the
ratio described in clause (i) shall be determined
in accordance with regulations promulgated by
the Secretary.
At the election of a group health plan under sub-
paragraph (B)(ii), the ratio under such subpara-
graph shall be 1.
(d) MINIMUM
REQUIREMENTS
WITHIN
A
CAT-
EGORY.—Benefits offered in any standard coverage within
any category of benefits shall be not less than the narrow-
est scope and shortest duration of benefits within that cat-
egory in any of the approved health benefits plans offered
under chapter 89 of title 5, United States Code (relating
to the Federal Employees Health Benefits Program) in
1994. Benefits offered in the standard plan within the cat-
egory of preventive services shall not require payment of
cost-sharing for covered items and services.
(e) NO COVERAGE OF SPECIFIC TREATMENT, PRO-
CEDURES, OR CLASSES REQUIRED.—Nothing in this sec-
tion (or section 143) may be construed to require the cov-
erage of any specific procedure or treatment or class of
service in health coverage under this Act or through regu-
lation.
(f) CONSTRUCTION.—Nothing in this section (or sec-
tion 143) shall be construed as requiring coverage to in-
clude benefits for items and services that are not medically
necessary or appropriate.
SEC. 143. HIGH-DEDUCTIBLE COVERAGE.
Health insurance coverage is considered to provide
high-deductible coverage consistent with this section if—
(1) benefits under such coverage comply with—
(A) the requirements described in section
142(b) (relating to required categories of cov-
ered benefits), and
(B) the requirements described in section
142(d) (relating to minimum requirements
within a category);
(2) the deductible amount is the amount estab-
lished under section 144(b)(1);
(3) benefits under the coverage in any year
(other than preventive benefits described in section
142(b)(4)) are covered only to the extent expenses
incurred for items and services included in the cov-
erage for the year exceed the deductible amount
specified in paragraph (2); and
(4) the actuarial value of the coverage (as de-
termined under rules consistent with section 142(c))
is equivalent to 80 percent of the actuarial value es-
tablished under such section for standard coverage.
SEC. 144. ACTUARIAL VALUATION OF BENEFITS.
(a) IN GENERAL.—The Secretary, in consultation
with the NAIC and the American Academy of Actuaries,
shall establish (and may from time to time modify) proce-
dures by which health insurance benefits are valued for
purposes of this subtitle.
(b) DEDUCTIBLE; MODEL BENEFIT PACKAGES.—
The Secretary, in consultation with the NAIC and the
American Academy of Actuaries, shall establish—
(1) the deductible amount for high-deductible
coverage for the purposes of section 143(2) such
that the actuarial value of high-deductible coverage
described in section 143 is 20 percent less than the
actuarial value of standard coverage described in
section 142(a); and
(2) model benefit packages that may be treated,
for purposes of this title, as meeting the require-
ments for standard or high-deductible coverage
under sections 142(a) and 143, respectively, and
which shall include model cost sharing arrangements
for fee-for-service options, managed care options,
and point-of-service options.
SEC. 145. LIMITATION ON OFFERING SUPPLEMENTAL BEN-
EFITS.
A carrier or group health plan offering qualified
health coverage may offer coverage of items and services
only in addition to the qualified standard coverage offered
(whether in the form of coverage of additional items and
services or a reduction in cost sharing) and only if—
(1) such supplemental coverage is offered and
priced separately from the standard coverage offered
and is only made available to individuals who obtain
qualified standard coverage through the carrier or
plan;
(2) the purchase of the qualified health cov-
erage is not conditioned upon the purchase of such
supplemental coverage; and
(3) in the case of supplemental coverage that
consists of a reduction in the cost-sharing otherwise
applicable, the premium for the supplemental cov-
erage takes into account any expected increase in
utilization of items and services included in the
qualified health coverage resulting from obtaining
the supplemental coverage.
SEC. 146. FAMILY COVERAGE OPTION; SUPPLEMENTAL
COVERAGE.
(a) FAMILY COVERAGE OPTION.—Each carrier and
group health plan that offers health insurance coverage
shall provide for an option under which children under 26
years of age (without regard to whether they are full-time
students or disabled) will be treated (with respect to fam-
ily coverage) as family members. The carrier or plan may
impose an additional premium for such option.
(A) is held by the service or may be ob-
tained by the service under paragraph (2) or
subsection (b);
(B) consists of data elements that are sub-
ject to a standard under subtitle A; and
(C) is requested by the agency to fulfill a
requirement under this Act.
(2) CERTAIN INFORMATION AVAILABLE AT LOW
COST.—If a health information security organization
requires health information consisting of data ele-
ments that are subject to a standard under subtitle
A from a plan sponsor or a health provider in order
to comply with a request made by a Federal or State
agency under paragraph (1), the sponsor or provider
shall make such information available to such orga-
nization for a charge that does not exceed the rea-
sonable cost of transmitting the information.
(b) PROCUREMENT RULE FOR INFORMATION SECU-
RITY ORGANIZATIONS.—A health information security or-
ganization that makes non-identifiable health information
available to a Federal or State agency under subsection
(a) shall make such non-identifiable information available,
for a charge that does not exceed the reasonable cost of
transmitting the information, to any other health informa-
tion security organization that—