111
‘‘(ii) 
CONSTRUCTION.—Nothing 
in
this title shall be construed as requiring or
permitting a health insurance issuer to
provide coverage outside the service area of
the issuer, as approved under State law.
‘‘(C) NO FINANCIAL UNDERWRITING.—The
HealthMart provides health benefits coverage
only through contracts with health insurance
issuers and does not assume insurance risk with
respect to such coverage.
(D) MINIMUM COVERAGE.—By the end of
the first year of its operation and thereafter,
the HealthMart maintains not fewer than 10
purchasers and 100 members.
‘‘(3) GEOGRAPHIC AREAS.—
‘‘(A) 
SPECIFICATION
OF
GEOGRAPHIC
AREAS.—The HealthMart shall specify the geo-
graphic area (or areas) in which it makes avail-
able health benefits coverage offered by health
insurance issuers to small employers. Such an
area shall encompass at least one entire county
or equivalent area.
‘‘(B) MULTISTATE AREAS.—In the case of
a HealthMart that serves more than one State,
such geographic areas may be areas that in-
112
clude portions of two or more contiguous
States.
‘‘(C) 
MULTIPLE
HEALTHMARTS
PER-
MITTED IN SINGLE GEOGRAPHIC AREA.—Noth-
ing in this title shall be construed as preventing
the establishment and operation of more than
one HealthMart in a geographic area or as lim-
iting the number of HealthMarts that may op-
erate in any area.
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The HealthMart pro-
vides administrative services for purchasers.
Such services may include accounting, billing,
enrollment information, and employee coverage
status reports.
‘‘(B) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
HealthMart from serving as an administrative
service organization to any entity.
‘‘(5) DISSEMINATION
OF
INFORMATION.—The
HealthMart collects and disseminates (or arranges
for the collection and dissemination of) consumer-
oriented information on the scope, cost, and enrollee
satisfaction of all coverage options offered through
113
the HealthMart to its members and eligible individ-
uals. Such information shall be defined by the
HealthMart and shall be in a manner appropriate to
the type of coverage offered. To the extent prac-
ticable, such information shall include information
on provider performance, locations and hours of op-
eration of providers, outcomes, and similar matters.
Nothing in this section shall be construed as pre-
venting the dissemination of such information or
other information by the HealthMart or by health
insurance issuers through electronic or other means.
‘‘(6) 
FILING
INFORMATION.—The 
Health-
Mart—
‘‘(A) files with the applicable Federal au-
thority information that demonstrates the
HealthMart’s compliance with the applicable re-
quirements of this title; or
‘‘(B) in accordance with rules established
under section 2803(a), files with a State such
information as the State may require to dem-
onstrate such compliance.
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
114
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage
offered through a HealthMart shall—
‘‘(A) be underwritten by a health insurance
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law (or is a community
health organization that is offering health
insurance coverage pursuant to section
330B(a));
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 2802(b); and
‘‘(iii) offers the coverage under a con-
tract with the HealthMart;
‘‘(B) subject to paragraph (2), be approved
or otherwise permitted to be offered under
State law; and
‘‘(C) provide full portability of creditable
coverage for individuals who remain members of
the same HealthMart notwithstanding that they
change the employer through which they are
members in accordance with the provisions of
the parts 6 and 7 of subtitle B of title I of the
Employee Retirement Income Security Act of
115
1974 and titles XXII and XXVII of this Act,
so long as both employers are purchasers in the
HealthMart.
‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF
HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI-
NATION OR DELAY.—
‘‘(A) IN
GENERAL.—The requirement of
paragraph (1)(B) shall not apply to a policy or
product of health benefits coverage offered in a
State if the health insurance issuer seeking to
offer such policy or product files an application
to waive such requirement with the applicable
Federal authority, and the authority deter-
mines, based on the application and other evi-
dence presented to the authority, that—
‘‘(i) either (or both) of the grounds
described in subparagraph (B) for approval
of the application has been met; and
‘‘(ii) the coverage meets the applicable
State standards (other than those that
have been preempted under section 2802).
‘‘(B) GROUNDS.—The grounds described
in this subparagraph with respect to a policy or
product of health benefits coverage are as fol-
lows:
116
‘‘(i) FAILURE
TO
ACT
ON
POLICY,
PRODUCT, OR
RATE
APPLICATION
ON
A
TIMELY BASIS.—The State has failed to
complete action on the policy or product
(or rates for the policy or product) within
90 days of the date of the State’s receipt
of a substantially complete application. No
period before the date of the enactment of
this section shall be included in deter-
mining such 90-day period.
‘‘(ii) DENIAL OF APPLICATION BASED
ON
DISCRIMINATORY
TREATMENT.—The
State has denied such an application
and—
‘‘(I) the standards or review
process imposed by the State as a
condition of approval of the policy or
product imposes either any material
requirements, procedures, or stand-
ards to such policy or product that
are not generally applicable to other
policies and products offered or any
requirements 
that 
are 
preempted
under section 2802; or
117
‘‘(II) the State requires the
issuer, as a condition of approval of
the policy or product, to offer any pol-
icy or product other than such policy
or product.
‘‘(C) ENFORCEMENT.—In the case of a
waiver granted under subparagraph (A) to an
issuer with respect to a State, the Secretary
may enter into an agreement with the State
under which the State agrees to provide for
monitoring and enforcement activities with re-
spect to compliance of such an issuer and its
health insurance coverage with the applicable
State standards described in subparagraph
(A)(ii). Such monitoring and enforcement shall
be conducted by the State in the same manner
as the State enforces such standards with re-
spect to other health insurance issuers and
plans, without discrimination based on the type
of issuer to which the standards apply. Such an
agreement shall specify or establish mechanisms
by which compliance activities are undertaken,
while not lengthening the time required to re-
view and process applications for waivers under
subparagraph (A).
118
‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The
health benefits coverage made available through a
HealthMart may include, but is not limited to, any
of the following if it meets the other applicable re-
quirements of this title:
‘‘(A) Coverage through a health mainte-
nance organization.
‘‘(B) Coverage in connection with a pre-
ferred provider organization.
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization.
‘‘(D) Indemnity coverage through an insur-
ance company.
‘‘(E) Coverage offered in connection with a
contribution into a medical savings account or
flexible spending account.
‘‘(F) Coverage that includes a point-of-
service option.
‘‘(G) Coverage offered by a community
health organization (as defined in section
330B(e)).
‘‘(H) Any combination of such types of
coverage.
‘‘(4) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as
119
precluding a health insurance issuer offering health
benefits coverage through a HealthMart from estab-
lishing premium discounts or rebates for members or
from modifying otherwise applicable copayments or
deductibles in return for adherence to programs of
health promotion and disease prevention so long as
such programs are agreed to in advance by the
HealthMart and comply with all other provisions of
this title and do not discriminate among similarly
situated members.
‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE
ISSUERS.—
‘‘(1) PURCHASERS.—
‘‘(A) IN GENERAL.—Subject to the provi-
sions of this title, a HealthMart shall permit
any small employer to contract with the
HealthMart for the purchase of health benefits
coverage for its employees and dependents of
those employees and may not vary conditions of
eligibility (including premium rates and mem-
bership fees) of a small employer to be a pur-
chaser.
‘‘(B) ROLE
OF
ASSOCIATIONS, BROKERS,
AND LICENSED HEALTH INSURANCE AGENTS.—
Nothing in this section shall be construed as
120
preventing an association, broker, licensed
health insurance agent, or other entity from as-
sisting or representing a HealthMart or small
employers from entering into appropriate ar-
rangements to carry out this title.
‘‘(C) 
PERIOD
OF
CONTRACT.—The
HealthMart may not require a contract under
subparagraph (A) between a HealthMart and a
purchaser to be effective for a period of longer
than 12 months. The previous sentence shall
not be construed as preventing such a contract
from being extended for additional 12-month
periods or preventing the purchaser from volun-
tarily electing a contract period of longer than
12 months.
‘‘(D) 
EXCLUSIVE
NATURE
OF
CON-
TRACT.—Such a contract shall provide that the
purchaser agrees not to obtain or sponsor
health benefits coverage, on behalf of any eligi-
ble employees (and their dependents), other
than through the HealthMart. The previous
sentence shall not apply to an eligible individual
who resides in an area for which no coverage is
offered by any health insurance issuer through
the HealthMart.
121
‘‘(2) MEMBERS.—
‘‘(A) IN
GENERAL.—Under rules estab-
lished to carry out this title, with respect to a
small employer that has a purchaser contract
with a HealthMart, individuals who are employ-
ees of the employer may enroll for health bene-
fits coverage (including coverage for dependents
of such enrolling employees) offered by a health
insurance issuer through the HealthMart.
‘‘(B) NONDISCRIMINATION
IN
ENROLL-
MENT.—A HealthMart may not deny enroll-
ment as a member to an individual who is an
employee (or dependent of such an employee)
eligible to be so enrolled based on health status-
related factors, except as may be permitted con-
sistent with section 2742(b).
‘‘(C) ANNUAL
OPEN
ENROLLMENT
PE-
RIOD.—In the case of members enrolled in
health benefits coverage offered by a health in-
surance issuer through a HealthMart, subject
to subparagraph (D), the HealthMart shall pro-
vide for an annual open enrollment period of 30
days during which such members may change
the coverage option in which the members are
enrolled.
122
‘‘(D) RULES OF ELIGIBILITY.—Nothing in
this paragraph shall preclude a HealthMart
from establishing rules of employee eligibility
for enrollment and reenrollment of members
during the annual open enrollment period under
subparagraph (C). Such rules shall be applied
consistently to all purchasers and members
within the HealthMart and shall not be based
in any manner on health status-related factors
and may not conflict with sections 2701 and
2702 of this Act.
‘‘(3) HEALTH INSURANCE ISSUERS.—
‘‘(A) PREMIUM
COLLECTION.—The con-
tract between a HealthMart and a health insur-
ance issuer shall provide, with respect to a
member enrolled with health benefits coverage
offered by the issuer through the HealthMart,
for the payment of the premiums collected by
the HealthMart (or the issuer) for such cov-
erage (less a pre-determined administrative
charge negotiated by the HealthMart and the
issuer) to the issuer.
‘‘(B) SCOPE OF SERVICE AREA.—Nothing
in this title shall be construed as requiring the
service area of a health insurance issuer with
123
respect to health insurance coverage to cover
the entire geographic area served by a
HealthMart.
‘‘(C) AVAILABILITY
OF
COVERAGE
OP-
TIONS.—A HealthMart shall enter into con-
tracts with one or more health insurance issuers
in a manner that assures that at least 2 health
insurance coverage options are made available
in the geographic area specified under sub-
section (a)(3)(A).
‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—
‘‘(1) FOR BOARDS OF DIRECTORS.—A member
of a board of directors of a HealthMart may not
serve as an employee or paid consultant to the
HealthMart, but may receive reasonable reimburse-
ment for travel expenses for purposes of attending
meetings of the board or committees thereof.
‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY-
EES.—An individual is not eligible to serve in a paid
or unpaid capacity on the board of directors of a
HealthMart or as an employee of the HealthMart, if
the individual is employed by, represents in any ca-
pacity, owns, or controls any ownership interest in
a organization from whom the HealthMart receives
contributions, grants, or other funds not connected
124
with 
a 
contract 
for 
coverage 
through 
the
HealthMart.
‘‘(3) 
EMPLOYMENT
AND
EMPLOYEE
REP-
RESENTATIVES.—
‘‘(A) IN GENERAL.—An individual who is
serving on a board of directors of a HealthMart
as a representative described in subparagraph
(A) or (B) of section 2801(a)(1) shall not be
employed by or affiliated with a health insur-
ance issuer or be licensed as or employed by or
affiliated with a health care provider.
‘‘(B) CONSTRUCTION.—For purposes of
subparagraph (A), the term ‘‘affiliated’’ does
not include membership in a health benefits
plan or the obtaining of health benefits cov-
erage offered by a health insurance issuer.
‘‘(e) CONSTRUCTION.—
‘‘(1) 
NETWORK
OF
AFFILIATED
HEALTHMARTS.—Nothing in this section shall be
construed as preventing one or more HealthMarts
serving different areas (whether or not contiguous)
from providing for some or all of the following
(through a single administrative organization or oth-
erwise):
125
‘‘(A) Coordinating the offering of the same
or similar health benefits coverage in different
areas served by the different HealthMarts.
‘‘(B) Providing for crediting of deductibles
and other cost-sharing for individuals who are
provided health benefits coverage through the
HealthMarts 
(or 
affiliated 
HealthMarts)
after—
‘‘(i) a change of employers through
which the coverage is provided; or
‘‘(ii) a change in place of employment
to an area not served by the previous
HealthMart.
‘‘(2) PERMITTING
HEALTHMARTS
TO
ADJUST
DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL-
ATIVE RISK OF ENROLLEES.—Nothing in this sec-
tion shall be construed as precluding a HealthMart
from providing for adjustments in amounts distrib-
uted among the health insurance issuers offering
health benefits coverage through the HealthMart
based on factors such as the relative health care risk
of members enrolled under the coverage offered by
the different issuers.
‘‘(3) APPLICATION OF UNIFORM MINIMUM PAR-
TICIPATION
AND
CONTRIBUTION
RULES.—Nothing
126
in this section shall be construed as precluding a
HealthMart from establishing minimum participa-
tion and contribution rules (described in section
2711(e)(1)) for small employers that apply to be-
come purchasers in the HealthMart, so long as such
rules are applied uniformly for all health insurance
issuers.
‘‘SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS.
‘‘(a) AUTHORITY OF STATES.—Nothing in this sec-
tion shall be construed as preempting State laws relating
to the following:
‘‘(1) The regulation of underwriters of health
coverage, including licensure and solvency require-
ments.
‘‘(2) The application of premium taxes and re-
quired payments for guaranty funds or for contribu-
tions to high-risk pools.
‘‘(3) The application of fair marketing require-
ments and other consumer protections (other than
those specifically relating to an item described in
subsection (b)).
‘‘(4) The application of requirements relating to
the adjustment of rates for health insurance cov-
erage.
127
‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE-
QUIREMENTS.—State laws insofar as they relate to any
of the following are superseded and shall not apply to
health benefits coverage made available through a
HealthMart:
‘‘(1) Benefit requirements for health benefits
coverage offered through a HealthMart, including
(but not limited to) requirements relating to cov-
erage of specific providers, specific services or condi-
tions, or the amount, duration, or scope of benefits,
but not including requirements to the extent re-
quired to implement title XXVII or other Federal
law and to the extent the requirement prohibits an
exclusion of a specific disease from such coverage.
‘‘(2) Requirements (commonly referred to as
fictitious group laws) relating to grouping and simi-
lar requirements for such coverage to the extent
such requirements impede the establishment and op-
eration of HealthMarts pursuant to this title.
‘‘(3) Any other requirements (including limita-
tions on compensation arrangements) that, directly
or indirectly, preclude (or have the effect of pre-
cluding) the offering of such coverage through a
HealthMart, if the HealthMart meets the require-
ments of this title.
128
Any State law or regulation relating to the composition
or organization of a HealthMart is preempted to the ex-
tent the law or regulation is inconsistent with the provi-
sions of this title.
‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS-
CLOSURE REQUIREMENTS.—The board of directors of a
HealthMart is deemed to be a plan administrator of an
employee welfare benefit plan which is a group health plan
for purposes of applying parts 1 and 4 of subtitle B of
title I of the Employee Retirement Income Security Act
of 1974 and those provisions of part 5 of such subtitle
which are applicable to enforcement of such parts 1 and
4, and the HealthMart shall be treated as such a plan
and the enrollees shall be treated as participants and bene-
ficiaries for purposes of applying such provisions pursuant
to this subsection.
‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO-
TECTION.—A HealthMart is deemed to be a group health
plan that is a multiple employer welfare arrangement for
purposes of applying section 703 of the Employee Retire-
ment Income Security Act of 1974.
‘‘(e) APPLICATION OF RULES FOR NETWORK PLANS
AND
FINANCIAL
CAPACITY.—The provisions of sub-
sections (c) and (d) of section 2711 apply to health bene-
129
fits coverage offered by a health insurance issuer through
a HealthMart.
‘‘(f) CONSTRUCTION RELATING TO OFFERING RE-
QUIREMENT.—Nothing in section 2711(a) of this Act or
703 of the Employee Retirement Income Security Act of
1974 shall be construed as permitting the offering outside
the HealthMart of health benefits coverage that is only
made available through a HealthMart under this section
because of the application of subsection (b).
‘‘(g) APPLICATION TO GUARANTEED RENEWABILITY
REQUIREMENTS IN CASE OF DISCONTINUATION OF AN
ISSUER.—For purposes of applying section 2712 in the
case of health insurance coverage offered by a health in-
surance issuer through a HealthMart, if the contract be-
tween the HealthMart and the issuer is terminated and
the HealthMart continues to make available any health in-
surance coverage after the date of such termination, the
following rules apply:
‘‘(1) RENEWABILITY.—The HealthMart shall
fulfill the obligation under such section of the issuer
renewing and continuing in force coverage by offer-
ing purchasers (and members and their dependents)
all available health benefits coverage that would oth-
erwise be available to similarly-situated purchasers
and members from the remaining participating
130
health insurance issuers in the same manner as
would be required of issuers under section 2712(c).
‘‘(2) APPLICATION OF ASSOCIATION RULES.—
The HealthMart shall be considered an association
for purposes of applying section 2712(e).
‘‘(h) CONSTRUCTION
IN RELATION
TO CERTAIN
OTHER LAWS.—Nothing in this title shall be construed
as modifying or affecting the applicability to HealthMarts
or health benefits coverage offered by a health insurance
issuer through a HealthMart of parts 6 and 7 of subtitle
B of title I of the Employee Retirement Income Security
Act of 1974 or titles XXII and XXVII of this Act.
‘‘SEC. 2803. ADMINISTRATION.
‘‘(a) IN GENERAL.—The applicable Federal authority
shall administer this title through the division established
under subsection (b) and is authorized to issue such regu-
lations as may be required to carry out this title. Such
regulations shall be subject to Congressional review under
the provisions of chapter 8 of title 5, United States Code.
The applicable Federal authority shall incorporate the
process of ‘deemed file and use’ with respect to the infor-
mation filed under section 2801(a)(6)(A) and shall deter-
mine whether information filed by a HealthMart dem-
onstrates compliance with the applicable requirements of
this title. Such authority shall exercise its authority under
131
this title in a manner that fosters and promotes the devel-
opment of HealthMarts in order to improve access to
health care coverage and services.
‘‘(b) ADMINISTRATION THROUGH HEALTH CARE
MARKETPLACE DIVISION.—
‘‘(1) IN GENERAL.—The applicable Federal au-
thority shall carry out its duties under this title
through a separate Health Care Marketplace Divi-
sion, the sole duty of which (including the staff of
which) shall be to administer this title.
‘‘(2) ADDITIONAL
DUTIES.—In addition to
other responsibilities provided under this title, such
Division is responsible for—
‘‘(A) 
oversight 
of 
the 
operations 
of
HealthMarts under this title; and
‘‘(B) the periodic submittal to Congress of
reports on the performance of HealthMarts
under this title under subsection (c).
‘‘(c) PERIODIC REPORTS.—The applicable Federal
authority shall submit to Congress a report every 30
months, during the 10-year period beginning on the effec-
tive date of the rules promulgated by the applicable Fed-
eral authority to carry out this title, on the effectiveness
of this title in promoting coverage of uninsured individ-
uals. Such authority may provide for the production of
132
such reports through one or more contracts with appro-
priate private entities.
‘‘SEC. 2804. DEFINITIONS.
‘‘For purposes of this title:
‘‘(1) APPLICABLE FEDERAL AUTHORITY.—The
term ‘applicable Federal authority’ means the Sec-
retary of Health and Human Services.
‘‘(2) ELIGIBLE
EMPLOYEE
OR
INDIVIDUAL.—
The term ‘eligible’ means, with respect to an em-
ployee or other individual and a HealthMart, an em-
ployee or individual who is eligible under section
2801(c)(2) to enroll or be enrolled in health benefits
coverage offered through the HealthMart.
‘‘(3) EMPLOYER; EMPLOYEE; DEPENDENT.—
Except as the applicable Federal authority may oth-
erwise provide, the terms ‘employer’, ‘employee’, and
‘dependent’, as applied to health insurance coverage
offered by a health insurance issuer licensed (or oth-
erwise regulated) in a State, shall have the meanings
applied to such terms with respect to such coverage
under the laws of the State relating to such coverage
and such an issuer.
‘‘(4) HEALTH BENEFITS COVERAGE.—The term
‘health benefits coverage’ has the meaning given the
133
term group health insurance coverage in section
2791(b)(4).
‘‘(5) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning given such
term in section 2791(b)(2) and includes a commu-
nity health organization that is offering coverage
pursuant to section 330B(a).
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
given such term in section 2791(d)(9).
‘‘(7) HEALTHMART.—The term ‘HealthMart’ is
defined in section 2801(a).
‘‘(8) MEMBER.—The term ‘member’ means,
with respect to a HealthMart, an individual enrolled
for health benefits coverage through the HealthMart
under section 2801(c)(2).
‘‘(9) 
PURCHASER.—The 
term 
‘purchaser’
means, with respect to a HealthMart, a small em-
ployer 
that 
has 
contracted 
under 
section
2801(c)(1)(A) with the HealthMart for the purchase
of health benefits coverage.
‘‘(10) SMALL EMPLOYER.—The term ‘small em-
ployer’ has the meaning given such term for pur-
poses of title XXVII.’’.
134
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on January 1, 2000. The
Secretary of Health and Human Services shall first issue
all regulations necessary to carry out such amendment be-
fore such date.
TITLE IV—COMMUNITY HEALTH
ORGANIZATIONS
SEC. 401. PROMOTION OF PROVISION OF INSURANCE BY
COMMUNITY HEALTH ORGANIZATIONS.
(a) WAIVER OF STATE LICENSURE REQUIREMENT
FOR COMMUNITY HEALTH ORGANIZATIONS IN CERTAIN
CASES.—Subpart I of part D of title III of the Public
Health Service Act is amended by adding at the end the
following new section:
‘‘WAIVER OF STATE LICENSURE REQUIREMENT FOR
COMMUNITY HEALTH ORGANIZATIONS IN CERTAIN CASES
‘‘SEC. 330D. (a) WAIVER AUTHORIZED.—
‘‘(1) IN GENERAL.—A community health orga-
nization may offer health insurance coverage in a
State notwithstanding that it is not licensed in such
a State to offer such coverage if—
‘‘(A) the organization files an application
for waiver of the licensure requirement with the
Secretary of Health and Human Services (in
this section referred to as the ‘Secretary’) by
not later than November 1, 2005; and
135
‘‘(B) the Secretary determines, based on
the application and other evidence presented to
the Secretary, that any of the grounds for ap-
proval of the application described in subpara-
graph (A), (B), or (C) of paragraph (2) has
been met.
‘‘(2) GROUNDS FOR APPROVAL OF WAIVER.—
‘‘(A) FAILURE TO ACT ON LICENSURE AP-
PLICATION ON A TIMELY BASIS.—The ground
for approval of such a waiver application de-
scribed in this subparagraph is that the State
has failed to complete action on a licensing ap-
plication of the organization within 90 days of
the date of the State’s receipt of a substantially
complete application. No period before the date
of the enactment of this section shall be in-
cluded in determining such 90-day period.
‘‘(B) DENIAL OF APPLICATION BASED ON
DISCRIMINATORY TREATMENT.—The ground for
approval of such a waiver application described
in this subparagraph is that the State has de-
nied such a licensing application and the stand-
ards or review process imposed by the State as
a condition of approval of the license or as the
basis for such denial by the State imposes any
136
material requirements, procedures, or standards
(other than solvency requirements) to such or-
ganizations that are not generally applicable to
other entities engaged in a substantially similar
business.
‘‘(C) DENIAL OF APPLICATION BASED ON
APPLICATION OF SOLVENCY REQUIREMENTS.—
With respect to waiver applications filed on or
after the date of publication of solvency stand-
ards established by the Secretary under sub-
section (d), the ground for approval of such a
waiver application described in this subpara-
graph is that the State has denied such a li-
censing application based (in whole or in part)
on the organization’s failure to meet applicable
State solvency requirements and such require-
ments are not the same as the solvency stand-
ards established by the Secretary. For purposes
of this subparagraph, the term solvency require-
ments means requirements relating to solvency
and other matters covered under the standards
established by the Secretary under subsection
(d).
137
‘‘(3) TREATMENT OF WAIVER.—In the case of
a waiver granted under this subsection for a commu-
nity health organization with respect to a State—
‘‘(A) LIMITATION TO STATE.—The waiver
shall be effective only with respect to that State
and does not apply to any other State.
‘‘(B) LIMITATION TO 36-MONTH PERIOD.—
The waiver shall be effective only for a 36-
month period but may be renewed for up to 36
additional months if the Secretary determines
that such an extension is appropriate.
‘‘(C) CONDITIONED ON COMPLIANCE WITH
CONSUMER PROTECTION AND QUALITY STAND-
ARDS.—The continuation of the waiver is condi-
tioned upon the organization’s compliance with
the requirements described in paragraph (5).
‘‘(D) PREEMPTION OF STATE LAW.—Any
provisions of law of that State which relate to
the licensing of the organization and which pro-
hibit the organization from providing health in-
surance coverage shall be superseded.
‘‘(4) PROMPT ACTION ON APPLICATION.—The
Secretary shall grant or deny such a waiver applica-
tion within 60 days after the date the Secretary de-
termines that a substantially complete waiver appli-
138
cation has been filed. Nothing in this section shall
be construed as preventing an organization which
has had such a waiver application denied from sub-
mitting a subsequent waiver application.
‘‘(5) APPLICATION
AND
ENFORCEMENT
OF
STATE
CONSUMER
PROTECTION
AND
QUALITY
STANDARDS.—A waiver granted under this sub-
section to an organization with respect to licensing
under State law is conditioned upon the organiza-
tion’s compliance with all consumer protection and
quality standards insofar as such standards—
‘‘(A) would apply in the State to the com-
munity health organization if it were licensed as
an entity offering health insurance coverage
under State law; and
‘‘(B) are generally applicable to other risk-
bearing managed care organizations and plans
in the State.
‘‘(6) REPORT.—By not later than December 31,
2004, the Secretary shall submit to the Committee
on Commerce of the House of Representatives and
the Committee on Labor and Human Resources of
the Senate a report regarding whether the waiver
process under this subsection should be continued
after December 31, 2005.
139
‘‘(b) ASSUMPTION OF FULL FINANCIAL RISK.—To
qualify for a waiver under subsection (a), the community
health organization shall assume full financial risk on a
prospective basis for the provision of covered health care
services, except that the organization—
‘‘(1) may obtain insurance or make other ar-
rangements for the cost of providing to any enrolled
member such services the aggregate value of which
exceeds such aggregate level as the Secretary speci-
fies from time to time;
‘‘(2) may obtain insurance or make other ar-
rangements for the cost of such services provided to
its enrolled members other than through the organi-
zation because medical necessity required their pro-
vision before they could be secured through the orga-
nization;
‘‘(3) may obtain insurance or make other ar-
rangements for not more than 90 percent of the
amount by which its costs for any of its fiscal years
exceed 105 percent of its income for such fiscal year;
and
‘‘(4) may make arrangements with physicians
or other health care professionals, health care insti-
tutions, or any combination of such individuals or
institutions to assume all or part of the financial
140
risk on a prospective basis for the provision of
health services by the physicians or other health pro-
fessionals or through the institutions.
‘‘(c) CERTIFICATION OF PROVISION AGAINST RISK
OF INSOLVENCY FOR UNLICENSED CHOS.—
‘‘(1) IN GENERAL.—Each community health or-
ganization that is not licensed by a State and for
which a waiver application has been approved under
subsection (a)(1), shall meet standards established
by the Secretary under subsection (d) relating to the
financial solvency and capital adequacy of the orga-
nization.
‘‘(2) CERTIFICATION PROCESS FOR SOLVENCY
STANDARDS FOR CHOS.—The Secretary shall estab-
lish a process for the receipt and approval of appli-
cations of a community health organization de-
scribed in paragraph (1) for certification (and peri-
odic recertification) of the organization as meeting
such solvency standards. Under such process, the
Secretary shall act upon such a certification applica-
tion not later than 60 days after the date the appli-
cation has been received.
‘‘(d) ESTABLISHMENT
OF SOLVENCY STANDARDS
FOR COMMUNITY HEALTH ORGANIZATIONS.—