‘‘(1) IN GENERAL.—A health maintenance orga-
nization which offers health insurance coverage in 
connection with a group health plan and which does 
not impose any preexisting condition exclusion al-
lowed under subsection (a) with respect to any par-
ticular coverage option may impose an affiliation pe-
riod for such coverage option, but only if— 
‘‘(A) such period is applied uniformly with-
out regard to any health status-related factors; 
and 
‘‘(B) such period does not exceed 2 months 
(or 3 months in the case of a late enrollee). 
‘‘(2) AFFILIATION PERIOD.— 
‘‘(A) DEFINED.—For purposes of this 
title, the term ‘affiliation period’ means a pe-
riod which, under the terms of the health insur-
ance coverage offered by the health mainte-
nance organization, must expire before the 
health insurance coverage becomes effective. 
The organization is not required to provide 
health care services or benefits during such pe-
riod and no premium shall be charged to the 
participant or beneficiary for any coverage dur-
ing the period. 
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‘‘(B) BEGINNING.—Such period shall begin 
on the enrollment date. 
‘‘(C) RUNS CONCURRENTLY WITH WAITING 
PERIODS.—An affiliation period under a plan 
shall run concurrently with any waiting period 
under the plan. 
‘‘(3) ALTERNATIVE METHODS.—A health main-
tenance organization described in paragraph (1) may 
use alternative methods, from those described in 
such paragraph, to address adverse selection as ap-
proved by the State insurance commissioner or offi-
cial or officials designated by the State to enforce 
the requirements of this part for the State involved 
with respect to such issuer. 
‘‘SEC. 199A. ENFORCEMENT OF CERTAIN HEALTH INSUR-
ANCE REQUIREMENTS. 
‘‘(a) STATE ENFORCEMENT.— 
‘‘(1) STATE AUTHORITY.—Each State may re-
quire that health insurance issuers that issue, sell, 
renew, or offer health insurance coverage in the 
State in the individual or group market meet the re-
quirements of this part with respect to such issuers. 
‘‘(2) FAILURE TO IMPLEMENT PROVISIONS.—In 
the case of a determination by the Secretary that a 
State has failed to substantially enforce a provision 
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(or provisions) of sections 196 through 199 with re-
spect to health insurance issuers in the State, the 
Secretary shall enforce such provision (or provisions) 
under subsection (b) insofar as they relate to the 
issuance, sale, renewal, and offering of health insur-
ance coverage in connection with group health plans 
or individual health insurance coverage in such 
State. 
‘‘(b) SECRETARIAL ENFORCEMENT AUTHORITY.— 
‘‘(1) LIMITATION.—The provisions of this sub-
section shall apply to enforcement of a provision (or 
provisions) described in subsection (a)(2) only— 
‘‘(A) as provided under such subsection; 
and 
‘‘(B) with respect to individual health in-
surance coverage or group health plans that are 
non-Federal governmental plans. 
‘‘(2) IMPOSITION OF PENALTIES.—In the cases 
described in paragraph (1)— 
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this subsection, any non- 
Federal governmental plan that is a group 
health plan and any health insurance issuer 
that fails to meet a provision of this part appli-
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cable to such plan or issuer is subject to a civil 
money penalty under this subsection. 
‘‘(B) LIABILITY
FOR
PENALTY.—In the 
case of a failure by— 
‘‘(i) a health insurance issuer, the 
issuer is liable for such penalty; or 
‘‘(ii) a group health plan that is a 
non-Federal governmental plan which is— 
‘‘(I) sponsored by 2 or more em-
ployers, the plan is liable for such 
penalty; or 
‘‘(II) not so sponsored, the em-
ployer is liable for such penalty. 
‘‘(C) AMOUNT OF PENALTY.— 
‘‘(i) IN
GENERAL.—The maximum 
amount of penalty imposed under this 
paragraph is $100 for each day for each 
individual with respect to which such a 
failure occurs. 
‘‘(ii) CONSIDERATIONS
IN
IMPOSI-
TION.—In determining the amount of any 
penalty to be assessed under this para-
graph, the Secretary shall take into ac-
count the previous record of compliance of 
the entity being assessed with the applica-
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ble provisions of this part and the gravity 
of the violation. 
‘‘(iii) LIMITATIONS.— 
‘‘(I) PENALTY
NOT
TO
APPLY 
WHERE
FAILURE
NOT
DISCOVERED 
EXERCISING
REASONABLE
DILI-
GENCE.—No civil money penalty shall 
be imposed under this paragraph on 
any failure during any period for 
which it is established to the satisfac-
tion of the Secretary that none of the 
entities against whom the penalty 
would be imposed knew, or exercising 
reasonable 
diligence 
would 
have 
known, that such failure existed. 
‘‘(II) PENALTY
NOT
TO
APPLY 
TO FAILURES CORRECTED WITHIN 30 
DAYS.—No civil money penalty shall 
be imposed under this paragraph on 
any failure if such failure was due to 
reasonable cause and not to willful ne-
glect, and such failure is corrected 
during the 30-day period beginning on 
the first day any of the entities 
against whom the penalty would be 
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imposed knew, or exercising reason-
able diligence would have known, that 
such failure existed. 
‘‘(D) ADMINISTRATIVE REVIEW.— 
‘‘(i) OPPORTUNITY
FOR
HEARING.— 
The entity assessed shall be afforded an 
opportunity for hearing by the Secretary 
upon request made within 30 days after 
the date of the issuance of a notice of as-
sessment. In such hearing the decision 
shall be made on the record pursuant to 
section 554 of title 5, United States Code. 
If no hearing is requested, the assessment 
shall constitute a final and unappealable 
order. 
‘‘(ii) HEARING
PROCEDURE.—If a 
hearing is requested, the initial agency de-
cision shall be made by an administrative 
law judge, and such decision shall become 
the final order unless the Secretary modi-
fies or vacates the decision. Notice of in-
tent to modify or vacate the decision of the 
administrative law judge shall be issued to 
the parties within 30 days after the date of 
the decision of the judge. A final order 
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which takes effect under this paragraph 
shall be subject to review only as provided 
under subparagraph (E). 
‘‘(E) JUDICIAL REVIEW.— 
‘‘(i) FILING
OF
ACTION
FOR
RE-
VIEW.—Any entity against whom an order 
imposing a civil money penalty has been 
entered after an agency hearing under this 
paragraph may obtain review by the 
United States district court for any district 
in which such entity is located or the 
United States District Court for the Dis-
trict of Columbia by filing a notice of ap-
peal in such court within 30 days from the 
date of such order, and simultaneously 
sending a copy of such notice by registered 
mail to the Secretary. 
‘‘(ii) CERTIFICATION OF ADMINISTRA-
TIVE
RECORD.—The 
Secretary 
shall 
promptly certify and file in such court the 
record upon which the penalty was im-
posed. 
‘‘(iii) STANDARD FOR REVIEW.—The 
findings of the Secretary shall be set aside 
only if found to be unsupported by sub-
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stantial evidence as provided by section 
706(2)(E) of title 5, United States Code. 
‘‘(iv) APPEAL.—Any final decision, 
order, or judgment of the district court 
concerning such review shall be subject to 
appeal as provided in chapter 83 of title 28 
of such Code. 
‘‘(F) FAILURE TO PAY ASSESSMENT; MAIN-
TENANCE OF ACTION.— 
‘‘(i) FAILURE TO PAY ASSESSMENT.— 
If any entity fails to pay an assessment 
after 
it 
has 
become 
a 
final 
and 
unappealable order, or after the court has 
entered final judgment in favor of the Sec-
retary, the Secretary shall refer the matter 
to the Attorney General who shall recover 
the amount assessed by action in the ap-
propriate United States district court. 
‘‘(ii) NONREVIEWABILITY.—In such 
action the validity and appropriateness of 
the final order imposing the penalty shall 
not be subject to review. 
‘‘(G) PAYMENT OF PENALTIES.—Except as 
otherwise provided, penalties collected under 
this paragraph shall be paid to the Secretary 
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(or other officer) imposing the penalty and shall 
be available without appropriation and until ex-
pended for the purpose of enforcing the provi-
sions with respect to which the penalty was im-
posed. 
‘‘(3) ENFORCEMENT AUTHORITY RELATING TO 
GENETIC DISCRIMINATION.— 
‘‘(A) GENERAL RULE.—In the cases de-
scribed in paragraph (1), notwithstanding the 
provisions of paragraph (2)(C), the succeeding 
subparagraphs of this paragraph shall apply 
with respect to an action under this subsection 
by the Secretary with respect to any failure of 
a health insurance issuer in connection with a 
group health plan, to meet the requirements of 
subsection (a)(1)(F), (b)(3), (c), or (d) of sec-
tion 196 or section 197 or 196(b)(1) with re-
spect to genetic information in connection with 
the plan. 
‘‘(B) AMOUNT.— 
‘‘(i) IN
GENERAL.—The amount of 
the penalty imposed under this paragraph 
shall be $100 for each day in the non-
compliance period with respect to each par-
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ticipant or beneficiary to whom such fail-
ure relates. 
‘‘(ii) NONCOMPLIANCE PERIOD.—For 
purposes of this paragraph, the term ‘non-
compliance period’ means, with respect to 
any failure, the period— 
‘‘(I) beginning on the date such 
failure first occurs; and 
‘‘(II) ending on the date the fail-
ure is corrected. 
‘‘(C) MINIMUM PENALTIES WHERE FAIL-
URE DISCOVERED.—Notwithstanding clauses (i) 
and (ii) of subparagraph (D): 
‘‘(i) IN GENERAL.—In the case of 1 or 
more failures with respect to an indi-
vidual— 
‘‘(I) which are not corrected be-
fore the date on which the plan re-
ceives a notice from the Secretary of 
such violation; and 
‘‘(II) which occurred or continued 
during the period involved; 
the amount of penalty imposed by subpara-
graph (A) by reason of such failures with 
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respect to such individual shall not be less 
than $2,500. 
‘‘(ii) 
HIGHER
MINIMUM
PENALTY 
WHERE VIOLATIONS ARE MORE THAN DE 
MINIMIS.—To the extent violations for 
which any person is liable under this para-
graph for any year are more than de mini-
mis, clause (i) shall be applied by sub-
stituting ‘$15,000’ for ‘$2,500’ with re-
spect to such person. 
‘‘(D) LIMITATIONS.— 
‘‘(i) PENALTY NOT TO APPLY WHERE 
FAILURE
NOT
DISCOVERED
EXERCISING 
REASONABLE
DILIGENCE.—No 
penalty 
shall be imposed by subparagraph (A) on 
any failure during any period for which it 
is established to the satisfaction of the 
Secretary that the person otherwise liable 
for such penalty did not know, and exer-
cising reasonable diligence would not have 
known, that such failure existed. 
‘‘(ii) PENALTY
NOT
TO
APPLY
TO 
FAILURES
CORRECTED
WITHIN
CERTAIN 
PERIODS.—No penalty shall be imposed by 
subparagraph (A) on any failure if— 
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‘‘(I) such failure was due to rea-
sonable cause and not to willful ne-
glect; and 
‘‘(II) such failure is corrected 
during the 30-day period beginning on 
the first date the person otherwise lia-
ble for such penalty knew, or exer-
cising reasonable diligence would have 
known, that such failure existed. 
‘‘(iii) OVERALL LIMITATION FOR UN-
INTENTIONAL FAILURES.—In the case of 
failures which are due to reasonable cause 
and not to willful neglect, the penalty im-
posed by subparagraph (A) for failures 
shall not exceed the amount equal to the 
lesser of— 
‘‘(I) 10 percent of the aggregate 
amount paid or incurred by the em-
ployer (or predecessor employer) dur-
ing the preceding taxable year for 
group health plans; or 
‘‘(II) $500,000. 
‘‘(E) WAIVER BY SECRETARY.—In the case 
of a failure which is due to reasonable cause 
and not to willful neglect, the Secretary may 
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waive part or all of the penalty imposed by sub-
paragraph (A) to the extent that the payment 
of such penalty would be excessive relative to 
the failure involved. 
‘‘(c) DEFINITIONS.—For purposes of this section: 
‘‘(1) GOVERNMENTAL PLAN.—The term ‘gov-
ernmental plan’ has the meaning given such term 
under section 3(32) of the Employee Retirement In-
come Security Act of 1974 and any Federal govern-
mental plan. 
‘‘(2) FEDERAL
GOVERNMENTAL
PLAN.—The 
term ‘‘Federal governmental plan’’ means a govern-
mental plan established or maintained for its em-
ployees by the Government of the United States or 
by any agency or instrumentality of such Govern-
ment. 
‘‘(3) NON-FEDERAL
GOVERNMENTAL
PLAN.— 
The term ‘non-Federal governmental plan’ means a 
governmental plan that is not a Federal govern-
mental plan.’’. 
(b) CONFORMING AMENDMENT.—The table of con-
tents under section 1(b) of the Health Insurance Port-
ability and Accountability Act of 1996 (Public Law 104– 
191) is amended by inserting after the item relating to 
section 195 the following: 
‘‘Sec. 196. Guaranteed availability of coverage. 
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‘‘Sec. 197. Fair health insurance premiums. 
‘‘Sec. 198. Prohibiting discrimination against individual participants and bene-
ficiaries based on health status. 
‘‘Sec. 199. Prohibition of preexisting condition exclusions or other discrimina-
tion based on health status. 
‘‘Sec. 199A. Enforcement of certain health insurance requirements.’’. 
(c) ERISA AND IRC ENFORCEMENT.— 
(1) ERISA.—Subpart B of part 7 of title I of 
the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1185 et seq.) is amended by adding 
at the end the following new section: 
‘‘SEC. 716. OTHER MARKET REFORMS. 
‘‘Sections 196 and 197 of the Health Insurance Port-
ability and Accountability Act of 1996 shall apply to 
health insurance issuers providing health insurance cov-
erage in connection with group health plans, and sections 
198 through 199 of such Act shall apply to group health 
plans and health insurance issuers providing health insur-
ance coverage in connection with group health plans, as 
if included in this subpart, and to the extent that any pro-
vision of this part conflicts with a provision of such sec-
tions 196 or 197 with respect to health insurance issuers 
providing health insurance coverage in connection with 
group health plans or of such sections 198 or 199 with 
respect to group health plans or health insurance issuers 
providing health insurance coverage in connection with 
group health plans, the provisions of such sections 196 
through 199 shall apply.’’. 
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(2) IRC.—Subchapter B of chapter 100 of sub-
title K of title 26 of the Internal Revenue Code of 
1986 is amended by adding at the end the following 
new section: 
‘‘SEC. 9816. OTHER MARKET REFORMS. 
‘‘Sections 196 and 197 of the Health Insurance Port-
ability and Accountability Act of 1996 shall apply to 
health insurance issuers providing health insurance cov-
erage in connection with group health plans, and sections 
198 through 199 of such Act shall apply to group health 
plans and health insurance issuers providing health insur-
ance coverage in connection with group health plans, as 
if included in this subchapter, and to the extent that any 
provision of this chapter conflicts with a provision of such 
sections 196 or 197 with respect to health insurance 
issuers providing health insurance coverage in connection 
with group health plans or of such sections 198 or 199 
with respect to group health plans or health insurance 
issuers providing health insurance coverage in connection 
with group health plans, the provisions of such sections 
196 through 199 shall apply.’’. 
Æ 
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