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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
‘‘Managed Competition Act of 1993’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Page
Sec. 2. Findings; purposes ......................................................................
Sec. 3. Glossary of certain terms used in titles I and II ........................
TITLE I—MANAGED COMPETITION IN EMPLOYER-BASED HEALTH
PLANS: INCENTIVES TO CONTROL COSTS
Subtitle A—Use of Tax Incentives to Purchase Cost-Effective Plans
Sec. 1001. Uniform tax disincentive to effectively limit deductibility of
excess employer health plan expenses ...........................
Sec. 1002. Increase in deduction for health plan premium expenses of
self-employed individuals ...............................................
Sec. 1003. Deduction for health plan premium expenses of individuals
Sec. 1004. Exclusion from gross income for contributions by a partner-
ship or S corporation to a health plan covering its
partners or shareholders ...............................................
Sec. 1005. Employer obligations .............................................................
Sec. 1006. Encouraging group purchasing for large employer by elimi-
nating commonality of interest or geographic location
requirement for tax exempt trust status .......................
Sec. 1007. Simplifying filing of reports by permitting single annual fil-
ing for all employers covered under an insured mul-
tiple employer health plan .............................................
Subtitle B—Health Plan Purchasing Cooperatives (HPPCs)
Sec. 1101. Establishment and organization; HPPC areas .....................
Sec. 1102. Agreements with accountable health plans (AHPs) ..............
Sec. 1103. Agreements with small employers .........................................
Sec. 1104. Enrolling individuals in accountable health plans through a
HPPC ............................................................................
Sec. 1105. Receipt of premiums ..............................................................
Sec. 1106. Coordination among HPPCs .................................................
Sec. 1107. Complaint process; ombudsman ............................................
Sec. 1108. Enrollee 
satisfaction 
surveys; 
monitoring 
enrollee
disenrollment .................................................................
Subtitle C—Accountable Health Plans (AHPs)
PART 1—Requirements for Accountable Health Plans
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Sec. 1201. Registration process; qualifications .......................................
Sec. 1202. Specified uniform set of effective benefits; reduction in cost-
sharing for low-income individuals; quality standards ..
Sec. 1203. Collection and provision of standardized information ...........
Sec. 1204. Prohibition of discrimination based on health status for cer-
tain conditions; limitation on pre-existing condition ex-
clusions ..........................................................................
Sec. 1205. Use of standard premiums ....................................................
Sec. 1206. Financial solvency requirements ...........................................
Sec. 1207. Grievance mechanisms; enrollee protections; written policies
and procedures respecting advance directives; agent
commissions ...................................................................
Sec. 1208. Additional requirements of open AHPs ................................
Sec. 1209. Coordination of benefits with low-income assistance ............
Sec. 1210. Additional requirement of certain AHPs ..............................
Sec. 1211. Funding for approved medical residency training programs
and physician retraining programs ...............................
PART 2—Preemption of State Laws for Accountable Health Plans
Sec. 1221. Preemption from State benefit mandates .............................
Sec. 1222. Preemption of State law restrictions on network plans ........
Sec. 1223. Preemption of State laws restricting utilization review pro-
grams ............................................................................
PART 3—Antitrust Provisions
Sec. 1231. Publication of guidelines for accountable health plans .........
Sec. 1232. Issuance of health care certificates of public advantage. ......
Subtitle D—Health Care Standards Commission
Sec. 1301. Establishment of Health Care Standards Commission .........
101
Sec. 1302. Specification of uniform set of effective benefits ..................
104
Sec. 1303. Benefits, Evaluations, and Data Standards Board ...............
119
Sec. 1304. Health Plan Standards Board ...............................................
122
Sec. 1305. Registration of accountable health plans ..............................
124
Sec. 1306. Specification of risk-adjustment factors ................................
126
Sec. 1307. National health data system ..................................................
128
Sec. 1308. Measures of quality of care of specialized centers of care ....
130
Sec. 1309. Agency for Clinical Evaluations ............................................
132
Sec. 1310. Report and recommendations on achieving universal cov-
erage ..............................................................................
136
Sec. 1311. No authority to impose controls relating to health care
spending ........................................................................
137
Sec. 1312. Monitoring reinsurance market .............................................
138
Sec. 1313. Authorization of appropriations; sunset ................................
138
Subtitle E—Managed Competition in Rural and Urban Underserved Areas
PART 1—Special Treatment of Designated Underserved Areas
Sec. 1401. Designation of underserved areas .........................................
138
Sec. 1402. Special treatment ..................................................................
140
PART 2—Transitional Support for Development of Accountable Health Plans
in Underserved Areas
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Sec. 1411. Technical assistance funding .................................................
141
Sec. 1412. Rural development grants .....................................................
142
Sec. 1413. Migrant health centers ..........................................................
145
Sec. 1414. Community health centers .....................................................
146
PART 3—Establishment of Rural Emergency Access Care Hospitals
Sec. 1421. Rural emergency access care hospitals described ..................
147
Sec. 1422. Coverage of and payment for services ...................................
150
Sec. 1423. Effective date ........................................................................
152
PART 4—Transitional Assistance for Safety Net Hospitals
Sec. 1431. Payments to hospitals ...........................................................
152
Sec. 1432. Application for assistance ......................................................
155
Sec. 1433. Public service responsibilities ................................................
156
Sec. 1434. Authorization of appropriations ............................................
157
Subtitle F—Treatment of Chronically Underserved Areas
Sec. 1501. Promoting State action .........................................................
157
Subtitle G—Repeal of COBRA Continuation Requirements
Sec. 1601. Repeal of COBRA continuation requirements ......................
159
Subtitle H—Definitions
Sec. 1701. Definitions .............................................................................
160
TITLE II—LOW-INCOME ASSISTANCE FOR HEALTH COVERAGE
Subtitle A—Low-Income Assistance
Sec. 2001. Eligibility ...............................................................................
170
Sec. 2002. Premium assistance ...............................................................
171
Sec. 2003. Cost-sharing assistance .........................................................
172
Sec. 2004. Assistance for certain items and services ..............................
175
Sec. 2005. Computation of base Federal premium amount ....................
177
Sec. 2006. Applications for assistance ....................................................
182
Sec. 2007. Reconciliation of premium assistance through use of income
statements .....................................................................
187
Sec. 2008. Treatment of certain cash assistance recipients ...................
190
Sec. 2009. Definitions .............................................................................
190
Subtitle B—Long-Term Care Phase-Down Assistance to States
Sec. 2101. Long-term care phase-down assistance .................................
196
Subtitle C—Financing
PART 1—Medicare Savings
Sec. 2201. Reduction in update for inpatient hospital services ..............
199
Sec. 2202. Reduction in conversion factor for physician fee schedule
for non-primary care services ........................................
200
Sec. 2203. Reduction in hospital outpatient services through establish-
ment of prospective payment system ............................
201
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Sec. 2204. Increase in medicare part B premium for individuals with
high income ...................................................................
202
Sec. 2205. Phased-in elimination of medicare hospital disproportionate
share adjustment payments ..........................................
206
Sec. 2206. Reduction in routine cost limits for home health services ....
207
Sec. 2207. Reduction in routine cost limits for extended care services
207
Sec. 2208. Reductions in payments for hospice services ........................
208
PART 2—Other Savings
Sec. 2211. Requirement that certain agencies prefund government
health benefits contributions for their annuitants ........
209
Subtitle D—Repeal of Medicaid Program
Sec. 2301. Repeal of medicaid program ..................................................
212
TITLE III—TRAINING AND EDUCATION OF HEALTH CARE
PROFESSIONALS
Subtitle A—Reform of Federal Funding for Medical Residency Training
Sec. 3001. Definitions .............................................................................
213
Sec. 3002. Approval of medical residency training positions ..................
215
Sec. 3003. Funding for approved medical residency training programs
and physician retraining programs ...............................
218
Sec. 3004. Financing ...............................................................................
222
Sec. 3005. National Medical Education Fund ........................................
223
Sec. 3006. Repeal of separate medical education payments under medi-
care ................................................................................
224
Subtitle B—Other Medical Education Grants and Programs
Sec. 3101. Scholarship and loan repayment programs of National
Health Service Corps ....................................................
226
Sec. 3102. Area health education centers ...............................................
227
Sec. 3103. Public health and preventive medicine ..................................
227
Sec. 3104. Family medicine ....................................................................
227
Sec. 3105. General internal medicine and pediatrics ..............................
227
Sec. 3106. Physician assistants ..............................................................
227
Sec. 3107. Allied health project grants and contracts ............................
228
Sec. 3108. Nurse allied health project grants and contracts ..................
228
Sec. 3109. Nurse practitioner and nurse midwife programs ..................
228
Sec. 3110. Use of health care policy and research funds for primary
care ................................................................................
228
TITLE IV—PREVENTIVE HEALTH AND INDIVIDUAL
RESPONSIBILITY
Subtitle A—Expansion of Public Health Programs
Sec. 4001. Immunizations against vaccine-preventable diseases ............
229
Sec. 4002. Prevention, control, and elimination of tuberculosis .............
229
Sec. 4003. Lead poisoning prevention. ....................................................
229
Sec. 4004. Preventive health measures with respect to breast and cer-
vical cancers ..................................................................
229
Sec. 4005. Office of Disease Prevention and Health Promotion ............
230
Sec. 4006. Preventive health and health services block grant ................
231
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Sec. 4007. Categorical grants for early intervention regarding acquired
immune deficiency syndrome ........................................
231
Sec. 4008. Programs of Office of Smoking and Health .........................
231
Subtitle B—Medicare
PART 1—Coverage of Preventive Services
Sec. 4101. Coverage of colorectal screening ............................................
232
Sec. 4102. Coverage of certain immunizations .......................................
238
Sec. 4103. Coverage of well-child care ....................................................
239
Sec. 4104. Annual screening mammography ..........................................
242
Sec. 4105. Financing of additional benefits ............................................
242
PART 2—Notice of Advance Directive Rights
Sec. 4111. Providing notice of rights regarding medical care to individ-
uals entering medicare ..................................................
243
TITLE V—MALPRACTICE REFORM
Subtitle A—Findings; Purpose; Definitions
Sec. 5001. Findings; purpose ..................................................................
244
Sec. 5002. Definitions .............................................................................
245
Subtitle B—Uniform Standards for Malpractice Claims
Sec. 5101. Applicability ...........................................................................
250
Sec. 5102. Requirement for initial resolution of action through alter-
native dispute resolution ...............................................
250
Sec. 5103. Procedural requirements for filing of actions .......................
254
Sec. 5104. Treatment of noneconomic and punitive damages ................
258
Sec. 5105. Periodic payments for future losses ......................................
263
Sec. 5106. Treatment of attorney’s fees and other costs .......................
264
Sec. 5107. Uniform statute of limitations ..............................................
268
Sec. 5108. Special provision for certain obstetric services ......................
268
Sec. 5109. Uniform standard for determining liability in actions based
on negligence .................................................................
269
Sec. 5110. Jurisdiction of Federal courts ...............................................
270
Sec. 5111. Preemption ............................................................................
270
Subtitle C—Requirements for State Alternative Dispute Resolution Systems
(ADR)
Sec. 5201. Basic requirements ................................................................
271
Sec. 5202. Certification of State systems; applicability of alternative
Federal system ..............................................................
273
Sec. 5203. Grants to States ....................................................................
276
Sec. 5204. Reports on implementation and effectiveness of alternative
dispute resolution systems ............................................
276
Subtitle D—Grants to States for Development of Practice Guidelines
Sec. 5301. Grants to States ....................................................................
277
TITLE VI—PAPERWORK REDUCTION AND ADMINISTRATIVE
SIMPLIFICATION
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Sec. 6001. Preemption of State quill pen laws .......................................
279
Sec. 6002. Confidentiality of electronic health care information ............
279
Sec. 6003. Standardization for the electronic receipt and transmission
of health plan information ............................................
283
Sec. 6004. Use of uniform health claims forms and identification num-
bers ................................................................................
284
Sec. 6005. Priority among insurers ........................................................
285
Sec. 6006. Furnishing of information among health plans ....................
286
Sec. 6007. Failure to satisfy certain health plan requirements ..............
287
Sec. 6008. Definitions .............................................................................
290
TITLE VII—ADDITIONAL BENEFITS ON A PAY-AS-YOU-GO BASIS
Sec. 7001. Sense of Congress ..................................................................
291
SEC. 2. FINDINGS; PURPOSES.
(a) FINDINGS.—Congress finds the following:
(1) NEED
FOR
COST
CONTAINMENT
INCEN-
TIVES.—The current health insurance marketplace is
unable to provide efficient and effective health care
coverage because—
(A) there is no organized method for price-
based competition among health plans offering
standardized benefits;
(B) there is no method by which health
plans are held accountable for their perform-
ance in effectively and efficiently improving the
health and well-being of their enrollees;
(C) the Internal Revenue Code not only
provides no incentives for employees to select
carefully among competing health plans on the
basis of cost, but also provides incentives for
employers and employees to select plans with
greater expenses;
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(D) health plans frequently manage costs
through underwriting practices and favorable
selection rather than through increased effi-
ciencies in the provision of health care; and
(E) underwriting practices discriminate
unfairly against individuals in need of health
care.
(2) MANAGED COMPETITION.—
(A) The economy of the United States has
been based on a model of competitive markets
and the United States has successfully relied on
this model in order to promote efficiencies and
innovation in nearly every economic area.
(B) However, in order to provide for such
a market in health care, there is a need to pro-
vide proper incentives to providers and pur-
chasers in the market for health care.
(C) Only through such a reform will the
country achieve the dual goals of maintaining
high quality care, innovation, and consumer
choice and of providing real incentives for cost
containment.
(b) PURPOSE.—
(1) GENERAL OBJECTIVE.—It is the general ob-
jective of this Act to reform the health care market-
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place to provide universal access to high quality,
cost-effective care through competitive health plans.
(2) COST CONTAINMENT OBJECTIVE.—It is also
a specific objective of this Act to bring the rate of
increase in health care costs by the year 2000 down
to the rate of increase in costs in the economy as a
whole.
(3) SPECIFIC MEASURES TO ACHIEVE OBJEC-
TIVES.—In order to—
(A) control costs through enhanced price
competition, the Act extends tax benefits for
employer contributions only to the lowest price
of a qualifying plan in an area;
(B) promote competition based on cost-ef-
fective care instead of through risk selection,
the Act standardizes benefits, prohibits experi-
ence rating, and adjusts premium payments to
plans based on the risk characteristics of indi-
viduals enrolled in the plan;
(C) provide access to coverage, the Act
makes available to all individuals competitively
priced accountable health plans regardless of
their employment status;
(D) to promote competition based on qual-
ity, the Act provides for the systematic report-
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ing and public dissemination of information on
the performance of plans in meeting the clinical
health requirements, functional needs, well-
being, and personal satisfaction of its enrollees;
and
(E) improve health care coverage of low-in-
come individuals, the Act offers financial assist-
ance in purchasing accountable health plans
and meeting cost-sharing requirements.
SEC. 3. GLOSSARY OF CERTAIN TERMS USED IN TITLES I
AND II.
The following specialized, defined terms are used in
titles I and II of this Act:
ACCOUNTABLE
HEALTH
PLAN; 
AHP.—The
terms ‘‘accountable health plan’’ and ‘‘AHP’’ are de-
fined in section 1701(b)(1).
APPLICABLE FEDERAL ASSISTANCE AMOUNT.—
The term ‘‘applicable Federal assistance amount’’ is
defined in section 2009(c)(1).
APPLICABLE
LOW-INCOME
PREMIUM
AMOUNT.—The term ‘‘applicable low-income pre-
mium amount’’ is defined in section 2009(c)(2).
BASE FEDERAL PREMIUM AMOUNT.—The ‘‘base
Federal premium amount’’ is defined in section
2005(a)(1).
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BASE INDIVIDUAL PREMIUM.—The term ‘‘base
individual 
premium’’ 
is 
defined 
in 
section
2009(c)(3).
BENEFITS, EVALUATIONS, AND
DATA
STAND-
ARDS
BOARD.—The term ‘‘Benefits, Evaluations,
and Data Standards Board’’ refers to the Board es-
tablished under section 1303.
CLOSED
AND
OPEN
PLANS.—The 
terms
‘‘closed’’ and ‘‘open’’ are defined, with respect to a
health plan, under section 1701(b)(4).
COMMISSION.—The term ‘‘Commission’’ is de-
fined in section 1701(b)(2).
ELIGIBLE EMPLOYEE.—The term ‘‘eligible em-
ployee’’ is defined in section 1701(a)(2).
ELIGIBLE FAMILY MEMBER.—The term ‘‘eligi-
ble family member’’ is defined in section 1701(a)(3).
ELIGIBLE INDIVIDUAL.—The term ‘‘eligible in-
dividual’’ is defined in section 1701(a)(1).
ELIGIBLE RESIDENT.—The term ‘‘eligible resi-
dent’’ is defined in section 1701(a)(4).
ENROLLEE UNIT.—The term ‘‘enrollee unit’’ is
defined in section 1701(a)(5).
FAMILY ADJUSTED TOTAL INCOME.—The term
‘‘family adjusted total income’’ is defined in section
2009(b)(1).
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HEALTH
CARE
JOINT
VENTURE.—The term
‘‘health care joint venture’’ is defined in section
1232(i)(3).
HEALTH
OUTCOME.—The term ‘‘health out-
come’’ is defined in section 1302(b)(5)(B).
HEALTH PLAN STANDARDS BOARD.—The term
‘‘Health Plan Standards Board’’ refers to the Board
established under section 1304.
HEALTH PLAN.—The term ‘‘health plan’’ is de-
fined in section 1701(c)(1).
HPPC; HEALTH PLAN PURCHASING COOPERA-
TIVE.—The terms ‘‘health plan purchasing coopera-
tive’’ 
and 
‘‘HPPC’’ 
are 
defined 
in 
section
1701(b)(3).
INDIVIDUAL
RESPONSIBILITY
PERCENTAGE.—
The term ‘‘individual responsibility percentage’’ is
defined in section 2009(c)(5).
INVESTIGATIONAL TREATMENT.—The term ‘‘in-
vestigational treatment’’ is defined in section
1302(b)(4)(B).
LOW-INCOME INDIVIDUAL.—The term ‘‘low-in-
come individual’’ is defined in section 2009(a)(1).
MEDICALLY
APPROPRIATE.—The term ‘‘medi-
cally appropriate’’ is defined in section 1302(b)(1).
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MEDICARE BENEFICIARY.—The term ‘‘medicare
beneficiary’’ is defined in section 1701(a)(6).
MEDICARE-ELIGIBLE
INDIVIDUAL.—The term
‘‘medicare-eligible individual’’ is defined in section
1701(a)(6).
MODERATELY LOW-INCOME INDIVIDUAL.—The
term ‘‘moderately low-income individual’’ is defined
in section 2009(a)(2).
MODIFIED FAMILY INCOME.—The term ‘‘modi-
fied family income’’ is defined in section 2009(b)(2).
NETWORK PLAN.—The term ‘‘network plan’’ is
defined in section 1208(b)(3)(D) and in section
1222(b)(1).
PARTICIPATING PROVIDER.—The term ‘‘partici-
pating provider’’ is defined in section 1222(b)(2).
PHYSICIAN INCENTIVE PLAN.—The term ‘‘phy-
sician 
incentive 
plan’’ 
is 
defined 
in 
section
1207(b)(2).
POVERTY
LINE.—The term ‘‘poverty line’’ is
defined in section 2009(c)(4).
PRE-EXISTING CONDITION.—The term ‘‘pre-ex-
isting 
condition’’ 
is 
defined 
in 
section
1204(b)(2)(B)(ii).
PREMIUM CLASS.—The term ‘‘premium class’’
is defined in section 1701(c)(3).
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REFERENCE PREMIUM RATE.—The term ‘‘ref-
erence 
premium 
rate’’ 
is 
defined 
in 
section
2009(c)(4).
SECRETARY.—The term ‘‘Secretary’’ is defined
in section 1701(c)(4).
SMALL
EMPLOYER; LARGE
EMPLOYER.—The
terms ‘‘small employer’’ and ‘‘large employer’’ are
defined in section 1701(c)(2).
SPECIALIZED
CENTER
OF
CARE.—The term
‘‘specialized center of care’’ is defined in section
1308(d).
STATE-ADJUSTED POVERTY LEVEL DEFINED.—
The term ‘‘State-adjusted poverty level’’ is defined
in section 2009(b)(3)(A).
STATE.—The term ‘‘State’’ is defined in section
1701(c)(5).
TREATMENT.—The term ‘‘treatment’’ is defined
in section 1302(b)(5)(A).
TYPE
OF
ENROLLMENT.—The term ‘‘type of
enrollment’’ is defined in section 1701(c)(6).
UNIFORM SET OF EFFECTIVE BENEFITS.—The
term ‘‘uniform set of effective benefits’’ is defined in
section 1701(c)(7).
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UTILIZATION
REVIEW
PROGRAM.—The term
‘‘utilization review program’’ is defined in section
1223(b).
VERY
LOW-INCOME
INDIVIDUAL.—The term
‘‘very low-income individual’’ is defined in section
2009(a)(3).
TITLE 
I—MANAGED 
COMPETI-
TION 
IN 
EMPLOYER-BASED
HEALTH PLANS: INCENTIVES
TO CONTROL COSTS
Subtitle A—Use of Tax Incentives
to Purchase Cost-Effective Plans
SEC. 1001. UNIFORM TAX DISINCENTIVE TO EFFECTIVELY
LIMIT DEDUCTIBILITY OF EXCESS EMPLOYER
HEALTH PLAN EXPENSES.
(a) IN GENERAL.—Chapter 43 of the Internal Reve-
nue Code of 1986 (relating to qualified pension plans, etc.)
is amended by adding at the end thereof the following new
section:
‘‘SEC. 4980C. EMPLOYER HEALTH PLAN EXPENSES IN EX-
CESS 
OF 
ACCOUNTABLE 
HEALTH 
PLAN
COSTS.
‘‘(a) GENERAL RULE.—There is hereby imposed a
tax equal to the product of the rate of tax specified in
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section 11(b)(1)(C) and the amount of the excess health
plan expenses of any employer.
‘‘(b) EXCESS HEALTH PLAN EXPENSES.—For pur-
poses of this section—
‘‘(1) IN
GENERAL.—The term ‘excess health
plan expenses’ means health plan expenses paid or
incurred by the employer for any month with respect
to any covered individual to the extent such expenses
do not meet the requirements of paragraphs (2), (3),
and (4).
‘‘(2) 
LIMIT
TO
ACCOUNTABLE
HEALTH
PLANS.—Health plan expenses meet the require-
ments of this paragraph only if—
‘‘(A) the expenses are attributable to cov-
erage of the covered individual under an ac-
countable health plan, and
‘‘(B) in the case of a small employer, the
expenses are attributable to payment to a
health plan purchasing cooperative for coverage
under an accountable health plan.
‘‘(3) LIMIT
ON
PER
INDIVIDUAL
CONTRIBU-
TION.—
‘‘(A) IN GENERAL.—Health plan expenses
with respect to any covered individual meet the
requirements of this paragraph for any month
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only to the extent that the amount of such ex-
penses does not exceed the reference premium
rate (as defined in section 2009(c)(4) of the
Managed Competition Act of 1993) for the
month.
‘‘(B) USE OF COMMUNITY RATE WITHIN
TYPE OF ENROLLMENT OR ACROSS HPPC AREAS
IN PLACE OF REFERENCE PREMIUM RATE FOR
LARGE
EMPLOYERS.—In the case of an em-
ployer that is not a small employer and which
maintains a closed AHP (as defined in section
1701(b)(4)(A)) that elects certain rules to apply
under section 1205(b)(3) of the Managed Com-
petition Act of 1993, the reference premium
rate amount for a covered individual shall be
computed based on the weighted average of
such amounts within the type of enrollment or
across HPPC areas, as elected under such sec-
tion.
‘‘(C) TREATMENT OF HEALTH PLANS OUT-
SIDE THE UNITED STATES.—For purposes of
subparagraph (A), in the case of a covered indi-
vidual residing outside the United States, there
shall be substituted for the reference premium
rate such reasonable amounts as the Health
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Care Standards Commission determines to be
comparable to the limit imposed under subpara-
graph (A) or subparagraph (B) (if applicable).
‘‘(4) REQUIREMENT
OF
LEVEL
CONTRIBU-
TION.—Health plan expenses meet the requirements
of this paragraph for any month only if the amount
of the employer contribution (for a premium class)
does not vary based on the accountable health plan
selected.
‘‘(c) EXCEPTION FOR MEDICARE-ELIGIBLE RETIR-
EES.—Subsections (a) and (b) shall not apply to health
plan expenses with respect to an individual who is eligible
for benefits under part A of title XVIII of the Social Secu-
rity Act if such expenses are for a health plan that is not
a primary payor under section 1862(b) of such Act.
‘‘(d) SPECIAL RULES.—
‘‘(1) TREATMENT OF SELF-INSURED PLANS.—
In the case of a self-insured health plan, the amount
of contributions per employee shall be determined
for purposes of subsection (b)(3) in accordance with
rules established by the Health Care Standards
Commission which are based on the principles of
section 4980B(f)(4)(B) (as in effect before the date
of the enactment of this Act).
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‘‘(2) CONTRIBUTIONS TO CAFETERIA PLANS.—
Contributions under a cafeteria plan on behalf of an
employee that are used for a group health plan cov-
erage shall be treated for purposes of this section as
health plan expenses paid or incurred by the em-
ployer.
‘‘(e) EMPLOYEES HELD HARMLESS.—Nothing in
this section shall be construed as affecting the exclusion
from gross income of an employee under section 106.
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) COVERED
INDIVIDUAL.—The term ‘cov-
ered individual’ means any beneficiary of a group
health plan.
‘‘(2) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning given such term by
section 5000(b)(1), but does not include, as defined
by the Health Care Standards Commission, health
coverage under a disability or accident policy or
under a workers’ compensation plan.
‘‘(3) HEALTH PLAN EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘health plan
expenses’ means employer expenses for any
group health plan, including expenses for pre-
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miums as well as payment of deductibles and
coinsurance that would otherwise be applicable.
‘‘(B) EXCLUSION OF CERTAIN DIRECT EX-
PENSES.—Such term does not include expenses
for direct services which are determined by the
Health Care Standards Commission to be pri-
marily aimed at workplace health care and
health promotion or related population-based
preventive health activities.
‘‘(4) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, for a taxable year, an employer that
is a small employer (within the meaning of section
1701(c)(2) of the Managed Competition Act of
1993) for the most recent calendar year ending be-
fore the end of the taxable year.
‘‘(5) TYPE OF ENROLLMENT.—The term ‘type
of enrollment’ is described in section 1701(c)(6) of
the Managed Competition Act of 1993.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such chapter 43 is amended by adding at the end
thereof the following new section:
‘‘Sec. 4980C. Employer health plan expenses in excess of account-
able health plan costs.’’
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
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this section shall apply to expenses incurred for the
provision of health services for periods after Decem-
ber 31, 1994.
(2) TRANSITION FOR COLLECTIVE BARGAINING
AGREEMENTS.—The amendments made by this sec-
tion shall not apply to employers with respect to
their employees, insofar as such employees are cov-
ered under a collective bargaining agreement ratified
before the date of the enactment of this Act, earlier
than the date of termination of such agreement (de-
termined without regard to any extension thereof
agreed to after the date of the enactment of this
Act), or January 1, 1997, whichever is earlier.
SEC. 1002. INCREASE IN DEDUCTION FOR HEALTH PLAN
PREMIUM EXPENSES OF SELF-EMPLOYED IN-
DIVIDUALS.
(a) INCREASING DEDUCTION TO 100 PERCENT.—
Paragraph (1) of section 162(l) of the Internal Revenue
Code of 1986 is amended by striking ‘‘25 percent of’’.
(b) MAKING PROVISION PERMANENT.—Subsection
(l) of section 162 of such Code (relating to special rules
for health insurance costs of self-employed individuals) is
amended by striking paragraph (6).
(c) 
LIMITATION
TO
ACCOUNTABLE
HEALTH
PLANS.—Paragraph (2) of section 162(l) of such Code is
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amended by adding at the end thereof the following new
paragraph:
‘‘(3) DEDUCTION
LIMITED
TO
ACCOUNTABLE
HEALTH PLAN COSTS.—No deduction shall be al-
lowed under this section for any amount which
would be excess health plan expenses (as defined in
section 4980C(b), determined without regard to
paragraph (4) thereof) if the taxpayer were a small
employer.’’
(d) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to taxable years beginning
after December 31, 1994.
(2) EXCEPTION.—The amendment made by
subsection (c) shall apply to expenses for periods of
coverage beginning on or after January 1, 1995.
SEC. 1003. DEDUCTION FOR HEALTH PLAN PREMIUM EX-
PENSES OF INDIVIDUALS.
(a) IN GENERAL.—Section 213 of the Internal Reve-
nue Code of 1986 (relating to medical, dental, etc., ex-
penses) is amended by adding at the end the following new
subsection:
‘‘(g) SPECIAL RULES FOR HEALTH PLAN PREMIUM
EXPENSES.—
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‘‘(1) IN GENERAL.—The deduction under sub-
section (a) shall be determined without regard to the
limitation based on adjusted gross income with re-
spect to amounts paid for premiums for coverage
under an accountable health plan.
‘‘(2) LIMITS.—
‘‘(A) LIMIT IN AMOUNT.—The amount al-
lowed as a deduction under paragraph (1) with
respect to the cost of providing coverage for any
individual shall not exceed the applicable limit
specified in section 4980C(b)(3) reduced by the
aggregate amount paid by all other entities (in-
cluding any employer or any level of govern-
ment) for coverage of such individual under any
health plan.
‘‘(B) LIMIT TO HPPC PLANS.—
‘‘(i) IN
GENERAL.—The deduction
under this subsection shall be allowed only
in the case of an individual who obtains
coverage under an accountable health plan
through a health plan purchasing coopera-
tive.
‘‘(ii) EXCEPTION FOR EMPLOYEES OF
LARGE EMPLOYERS.—Clause (i) shall not
apply to an individual who obtains cov-
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erage in an accountable health plan by vir-
tue of the individual’s (or other person’s)
employment by a large employer.
‘‘(3) DEDUCTION ALLOWED AGAINST GROSS IN-
COME.—The deduction under this subsection shall
be taken into account in determining adjusted gross
income under section 62(a).
‘‘(4) TREATMENT
OF
MEDICARE
PROGRAM.—
Coverage under part A or part B of title XVIII of
the Social Security Act shall not be considered for
purposes of this subsection to be coverage under an
accountable health plan.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to amounts paid after December
31, 1994, and taxable years ending after such date.
SEC. 1004. EXCLUSION FROM GROSS INCOME FOR CON-
TRIBUTIONS BY A PARTNERSHIP OR S COR-
PORATION TO A HEALTH PLAN COVERING ITS
PARTNERS OR SHAREHOLDERS.
(a) S CORPORATIONS.—Section 1372 of the Internal
Revenue Code of 1986 (relating to partnership rules to
apply for fringe benefit purposes) is amended by adding
at the end thereof the following new subsection:
‘‘(c) EXCEPTION FOR COVERAGE PROVIDED UNDER
SUBSIDIZED ACCIDENT OR HEALTH PLAN.—This section
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shall not apply to coverage under a subsidized accident
or health plan maintained by the S corporation for its em-
ployees.’’
(b) PARTNERSHIPS.—Section 707 of such Code (re-
lating to transactions between partner and partnership)
is amended by adding at the end thereof the following new
subsection:
‘‘(d) EXCLUSION FOR COVERAGE PROVIDED UNDER
SUBSIDIZED ACCIDENT OR HEALTH PLAN.—In the case
of coverage under a subsidized accident or health plan
maintained by a partnership for its partners, for purposes
of sections 104, 105, 106, and 162(l)(2)(B), the partner-
ship shall be treated as the employer of each partner who
is an employee within the meaning of section 401(c)(1).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 1005. EMPLOYER OBLIGATIONS.
(a) SMALL EMPLOYERS.—Each small employer (as
defined in section 1701(c)(2)) shall—
(1) have in effect an agreement described in
section 1103 with the health plan purchasing cooper-
ative (requiring the offering to employees of cov-
erage through accountable health plans) for the
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HPPC area in which the employer has its principal
place of business, and
(2) comply with such agreement.
(b) OTHER EMPLOYERS.—
(1) IN GENERAL.—Each employer that is not a
small employer shall—
(A) offer to each employee (in a time and
manner specified by the Health Care Standards
Commission) enrollment in a qualifying ac-
countable health plan (as defined in paragraph
(3)) both on an individual basis, and, if applica-
ble and at the employee’s option, on a family
basis; and
(B) provide, at the option of the employee,
for deduction from wages or other compensa-
tion (in the manner specified in section
1103(c)) of amount of any premiums due for
such enrollment (taking into account the
amount of any employer contribution).
(2) OPEN
ENROLLMENT
PERIODS.—For pur-
poses of paragraph (1)(A), the Commission shall
provide for—
(A) initial enrollment periods (of not less
than 30 days) during which newly employed in-
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dividuals are offered enrollment under a quali-
fying accountable health plan;
(B) an annual open enrollment period (of
not less than 30 days) in which employees are
offered enrollment under a qualifying account-
able health plan (and, if there is a choice
among such plans, the opportunity to change
the plan in which the employee is enrolled); and
(C) special enrollment periods during
which, because of a change in family situation
(such as marriage, birth or adoption of a child,
divorce, separation, or death), the employee is
offered the opportunity to change the type of
enrollment provided.
(3) 
QUALIFYING
ACCOUNTABLE
HEALTH
PLAN.—For purposes of this subsection, the term
‘‘qualifying accountable health plan’’ means, with re-
spect to an employee, an accountable health plan—
(A) that serves the area in which the em-
ployee resides, and
(B) for which the premium charged to the
employee for a premium class does not exceed
(except as provided in paragraph (4)) the pre-
mium of the least expensive accountable health
plan offered to individuals by a health plan pur-
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chasing cooperative in the HPPC area in which
the employee resides for that premium class.
Nothing in this subsection shall be construed as pre-
venting an employer from offering, or an employee
from electing enrollment in, a health plan that
serves the area in which the employee is employed,
rather than the area in which the employee resides.
(4) SPECIAL RULE FOR CERTAIN CLOSED AHPS
ELECTING
SPECIAL
COMMUNITY
RATING.—In the
case of a closed AHP offered to an employee, if the
plan has made an election described in section
1205(b)(3), paragraph (3)(B) shall be applied to the
plan based on the weighted average of premiums de-
termined without regard to age, HPPC area, or both
(as elected under such section), rather than on the
basis of premium class.
(c) NONDISCRIMINATION UNDER GROUP HEALTH
PLANS.—
(1) APPLICATION OF RULES SIMILAR TO MEDI-
CARE
NONDISCRIMINATION
RULES.—Subject 
to
paragraph (2), the provisions of paragraphs (1)(A),
(1)(D), (1)(E), (3)(A), and (3)(C) of section
1862(b) of the Social Security Act shall apply to an
individual eligible for low-income assistance under
subtitle A of title II in the same manner as such
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provisions apply to an individual age 65 or over who
is entitled to benefits under title XVIII of such Act
under section 226(a) of such Act.
(2) RULES
OF
APPLICATION.—In applying
paragraph (1) under this Act—
(A) in applying clauses (ii) and (iii) of sec-
tion 1862(b)(1)(A) of the Social Security Act,
any reference to ‘‘20 or more employees’’ is
deemed a reference to ‘‘5 or more employees’’;
(B) clause (iv) of section 1862(b)(1)(A) of
such Act shall not apply; and
(C) any reference to title XVIII of such
Act is deemed a reference to assistance under
subtitle A of title II of this Act.
(d) ENFORCEMENT.—
(1) CIVIL MONEY PENALTIES.—
(A) SMALL
EMPLOYER
AGREEMENTS.—
Failure to have in effect or comply with an
agreement under subsection (a)(1)(A) is subject
to a civil monetary penalty (not to exceed $500)
for each day in which the violation continues.
(B) FAILURE
TO
OFFER
COVERAGE
OR
PROVIDE
FOR
WAGE
DEDUCTION.—Failure to
offer coverage or provide for deduction from
wages required under subsection (b)(1) is sub-
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ject to a civil monetary penalty (not to exceed
$500) for each day in which the violation con-
tinues.
(C) VIOLATION
OF
NONDISCRIMINATION
REQUIREMENTS.—Failure to comply with the
requirement of subsection (c) is subject to a
civil monetary penalty (not to exceed $500) for
each day for each individual with respect to
which the failure occurs.
(2) DIRECT ENFORCEMENT.—
(A) HPPC AGREEMENT.—An agreement in
effect between a small employer and a HPPC is
directly enforceable by civil action by the HPPC
or by an employee (as a third-party beneficiary
of the agreement). In any such action, if the
HPPC or employee substantially prevails, the
HPPC or employee is entitled to reasonable at-
torneys’ fees.
(B) OFFER.—The obligation to offer cov-
erage under subsection (b) with respect to an
employee is directly enforceable by civil action
by the employee. In any such action, if the em-
ployee substantially prevails, the employee is
entitled to reasonable attorneys’ fees.
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SEC. 1006. ENCOURAGING GROUP PURCHASING FOR LARGE
EMPLOYER BY ELIMINATING COMMONALITY
OF INTEREST OR GEOGRAPHIC LOCATION
REQUIREMENT FOR TAX EXEMPT TRUST STA-
TUS.
(a) IN GENERAL.—Paragraph (9) of section 501(c)
of the Internal Revenue Code of 1986 (relating to exempt
organizations) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and
(2) by adding at the end the following:
‘‘(B) Any determination of whether a health
plan maintained by one or more large employers
(within the meaning of section 1701(c)(2) of the
Managed Competition Act of 1993) is a voluntary
employees’ beneficiary association meeting the re-
quirements of this paragraph shall be made without
regard to any determination of commonality of inter-
est or geographic location if the plan is an account-
able health plan (as defined in section 1701(b)(1) of
such Act).’’
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply with respect to determinations
made on or after January 1, 1994.
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SEC. 1007. SIMPLIFYING FILING OF REPORTS BY PERMIT-
TING SINGLE ANNUAL FILING FOR ALL EM-
PLOYERS COVERED UNDER AN INSURED
MULTIPLE EMPLOYER HEALTH PLAN.
(a) IN GENERAL.—Section 110 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1030)
is amended by adding at the end the following new sub-
section:
‘‘(c) The Secretary shall prescribe by regulation or
otherwise an alternative method providing for the filing
of a single annual report (as referred to in section
104(a)(1)(A)) with respect to all employers who are cov-
ered under the same fully insured multiple employer wel-
fare arrangement under which benefits consist solely of
medical care described in section 607(1) (disregarding
such incidental benefits as the Secretary shall specify by
regulations).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act. The Secretary of Labor shall prescribe
the alternative method referred to in section 110(c) of the
Employee Retirement Income Security Act of 1974, as
added by such amendment, within 90 days after the date
of the enactment of this Act.
•HR 3222 SC2
Subtitle B—Health Plan
Purchasing Cooperatives (HPPCs)
SEC. 1101. ESTABLISHMENT AND ORGANIZATION; HPPC
AREAS.
(a) HPPC AREAS.—
(1) IN GENERAL.—For purposes of carrying out
this title, subject to paragraphs (2) and (3), each
State shall be considered a HPPC area.
(2) ALTERNATIVE, INTRASTATE AREAS.—Each
State may provide for the division of the State into
HPPC areas so long as—
(A) all portions of each metropolitan sta-
tistical area in a State are within the same
HPPC area, and
(B) the number of eligible individuals re-
siding within a HPPC area is not less than
250,000.
(3) ALTERNATIVE, INTERSTATE AREAS.—In ac-
cordance with rules established by the Health Care
Standards Commission, one or more contiguous
States may provide for the establishment of a HPPC
area that includes adjoining portions of the States
so long as such area, if it includes any part of a
metropolitan statistical area, includes all of such
area. In the case of a HPPC serving a multi-state
•HR 3222 SC2
area, section 1701(c)(2)(C) shall only apply to the
area if all the States encompassed in the area by law
agree to the number to be substituted.
(b) ESTABLISHMENT OF HPPCS.—
(1) IN GENERAL.—Each State shall provide, by
legislation or otherwise, for the establishment by not
later than July 1, 1994, as a not-for-profit corpora-
tion, with respect to each HPPC area (specified
under subsection (a)) of a health plan purchasing
cooperative (each in this title referred to as a
‘‘HPPC’’).
(2) INTERSTATE
HPPC
AREAS.—HPPCs with
respect to interstate areas specified under subsection
(a)(3) shall be established in accordance with rules
of the Health Care Standards Commission.
(c) COOPERATIVE BOARD.—
(1) ESTABLISHMENT.—Each HPPC shall be
governed by a Cooperative Board which shall be ini-
tially appointed by the Governor or other chief exec-
utive officer of the State (or as otherwise provided
under State law or by the Health Care Standards
Commission in the case of a HPPC described in sub-
section (b)(2)). The Cooperative Board for a HPPC
shall be responsible for ensuring the performance of
the duties of the HPPC under subsection (d).
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(2) ELECTION.—By not later than January 1,
1996, each HPPC shall provide under State law (or
in the case of a HPPC described in subsection
(b)(2), under rules established by the Health Care
Standards Commission) for the election of members
to the Cooperative Board from among eligible indi-
viduals who are enrolled in an accountable health
plan offered by the HPPC and who do not receive
remuneration from the HPPC or any such account-
able health plan for any services provided.
(3) LIMITATION ON COMPENSATION.—A HPPC
shall not provide compensation to members of the
Cooperative Board other than reimbursement for
reasonable and necessary expenses incurred in the
performance of their duties as members of the Coop-
erative Board.
(d) DUTIES OF HPPCS.—
(1) IN GENERAL.—Subject to paragraph (2),
each HPPC shall—
(A) enter into agreements with accountable
health plans under section 1102;
(B) enter into agreements with small em-
ployers under section 1103;
•HR 3222 SC2
(C) offer enrollment and enroll individuals
under accountable health plans, in accordance
with section 1104;
(D) charge, receive, and forward adjusted
premiums, in accordance with section 1105, in-
cluding 
reconciling 
low-income 
assistance
among accountable health plans;
(E) provide for coordination with other
HPPCs, in accordance with section 1106;
(F) provide for establishment of a com-
plaint process and appointment of an ombuds-
man, in accordance with section 1107;
(G) conduct and analyze surveys of en-
rollee 
satisfaction 
and 
monitor 
enrollee
disenrollment, in accordance with section 1108;
and
(H) carry out other functions provided for
under this title.
(2) LIMITATION
ON
ACTIVITIES.—A HPPC
shall not—
(A) perform any activity (including review,
approval, or enforcement) relating to payment
rates for providers;
(B) except as specifically provided under
sections 1102, 1105, or 1106(c), perform any
•HR 3222 SC2
activity (including review, approval, or enforce-
ment) relating to premium rates for health
plans;
(C) perform any activity (including reg-
istration or enforcement) relating to compliance
of accountable health plans with the require-
ments of part 1 of subtitle C (other than as re-
quired to carry out its specific duties under this
subtitle or under section 1305(c)(2));
(D) discriminate among such plans, other
than on the basis of the performance of such
plans under this title, as determined in accord-
ance with standards established by the Health
Care Standards Commission under this title;
(E) assume financial risk in relation to any
such plan; or
(F) perform other activities identified by
the Health Care Standards Commission as
being inconsistent with the performance of its
duties under paragraph (1).
(e) PERFORMANCE OF DUTIES.—
(1) IN GENERAL.—If the Health Care Stand-
ards Commission finds that a HPPC is not carrying
out its duties as required under subsection (d), the
Commission shall notify the Cooperative Board of
•HR 3222 SC2
the HPPC, and the Governor (or other chief execu-
tive officer) of each State in which the HPPC oper-
ates, of such finding and permit the Board an op-
portunity to take such action as may be necessary
for the HPPC to carry out such duties.
(2) CORRECTIVE ACTION.—If, after such an op-
portunity, the deficiency has not been corrected, the
Health Care Standards Commission may—
(A) order the HPPC to hold a new election
for members of the Cooperative Board, and
(B) take such other action as may be ap-
propriate in order to assure the performance of
such duties.
(3) PERFORMANCE CRITERIA.—
(A) DEVELOPMENT.—The Health Care
Standards Commission shall develop criteria re-
lating to HPPC performance of duties. Such
criteria shall include criteria relating to the fol-
lowing:
(i) OVERHEAD.—The HPPC overhead
percentage 
(computed 
under 
section
1105(b)(2)) for the HPPC.
(ii) FLOAT.—The average period (de-
scribed in section 1102(d)(2)) between the
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HPPC’s receipt and payment of funds re-
ceived.
(iii) SATISFACTION OF ELIGIBLE INDI-
VIDUALS.—The satisfaction of eligible indi-
viduals with the performance of the HPPC
(as measured under surveys under section
1108).
(iv) ENROLLMENT OF AT RISK INDI-
VIDUALS.—The 
effectiveness 
of 
the
HPPC’s 
activities 
under 
section
1102(b)(3) in enrolling individuals who are
eligible for low-income assistance or who
reside in medically underserved areas.
(B) REPORT.—Each HPPC shall report to
the Health Care Standards Commission, at
such time and in such manner as the Commis-
sion specifies, such information as the Commis-
sion may require in order to evaluate the per-
formance of the HPPC in accordance with the
criteria developed under subparagraph (A).
(C) 
PUBLICATION.—The 
Health 
Care
Standards Commission shall publish annually a
report that provides a comparison of the rel-
ative performance of each HPPC, based on
such criteria.
•HR 3222 SC2
(f) EDUCATION
AND
DEVELOPMENT
GRANTS.—
There are authorized to be appropriated $25,000,000 for
fiscal year 1994 for grants to assist States in the develop-
ment of HPPCs.
SEC. 1102. AGREEMENTS WITH ACCOUNTABLE HEALTH
PLANS (AHPS).
(a) AGREEMENTS.—
(1) OPEN
AHPS.—Each HPPC for a HPPC
area shall enter into an agreement under this section
with each open accountable health plan (described in
section 1701(b)(4)(B)) that serves residents of the
area. Each such agreement under this section shall
include (as specified by the Health Care Standards
Commission) provisions consistent with the require-
ments of the succeeding subsections of this section.
A HPPC may not terminate such an agreement ex-
cept as provided in paragraph (3)(A).
(2) CLOSED AHPS.—Each HPPC for a HPPC
area shall enter into a special agreement under this
paragraph with each closed AHP that serves resi-
dents of the area, in order to carry out subsection
(e). Except as otherwise specifically provided, any
reference in this Act to an agreement under this sec-
tion shall not be considered to be a reference to an
agreement under this paragraph.
•HR 3222 SC2
(3) TERMINATION OF AGREEMENT.—In accord-
ance with regulations of the Health Care Standards
Commission—
(A) the HPPC may terminate an agree-
ment under paragraph (1) or (2) if—
(i) the AHP’s registration under part
1 of subtitle C is revoked, or
(ii) the AHP is determined (in accord-
ance with rules established by the Commis-
sion) substantially to have violated the con-
ditions of such agreement; and
(B) the AHP may terminate either such
agreement only upon sufficient notice in order
to provide for the orderly enrollment of enroll-
ees under other AHPs.
The Commission shall establish a process for the
termination of agreements under this paragraph.
(b) OFFER OF ENROLLMENT OF INDIVIDUALS.—
(1) IN GENERAL.—Under an agreement under
this section between an AHP and a HPPC, the
HPPC shall offer, on behalf of the AHP, enrollment
in the AHP to eligible individuals (as defined in sec-
tion 1701(a)(1)) at the applicable monthly premium
rates (specified under section 1105(a)).
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(2) TIMING OF OFFER.—The offer of enroll-
ment shall be available—
(A) to eligible individuals who are employ-
ees of small employers, during the 30-day pe-
riod beginning on the date of commencement of
employment, and
(B) to other eligible individuals, at such
time (including an annual open enrollment pe-
riod specified by the Health Care Standards
Commission) as the HPPC shall specify, con-
sistent with section 1104(b).
(3) OUTREACH.—In carrying out the respon-
sibilities under paragraph (1), a HPPC shall per-
form such activities, including outreach, as may be
necessary to seek actively the enrollment of eligible
individuals, including individuals who are eligible for
low-income assistance or who reside in medically un-
derserved areas.
(c) RECEIPT OF GROSS PREMIUMS.—
(1) IN GENERAL.—Under an agreement under
this section between a HPPC and an AHP, payment
of premiums shall be made, by individuals or em-
ployers on their behalf, directly to the HPPC for the
benefit of the AHP.
•HR 3222 SC2
(2) TIMING OF PAYMENT OF PREMIUMS.—Pre-
miums shall be payable on a monthly basis (or, at
the option of an eligible individual described in para-
graph (2)(B), on a quarterly basis). The HPPC may
provide for penalties and grace periods for late pay-
ment.
(3) AHPS
RETAIN
RISK
OF
NONPAYMENT.—
Nothing in this subsection shall be construed as
placing upon a HPPC any risk associated with fail-
ure to make prompt payment of premiums (other
than the portion of the premium representing the
HPPC overhead amount). Each eligible individual
who enrolls with an AHP through the HPPC is lia-
ble to the AHP for premiums.
(d) FORWARDING OF ADJUSTED PREMIUMS.—
(1) IN GENERAL.—Under an agreement under
this section between an AHP and a HPPC, subject
to section 1205(c), the HPPC shall forward to each
AHP in which an eligible individual in an enrollee
unit has been enrolled an amount equal to the sum
of—
(A) the standard premium rate (estab-
lished under section 1205) received for the pre-
mium class, and
•HR 3222 SC2
(B) the product of (i) the lowest standard
premium rate offered by an open AHP for the
premium class, and (ii) a risk-adjustment factor
(determined and adjusted in accordance with
section 1306(b)) for the enrollee unit.
(2) PAYMENTS.—Payments shall be made by
the HPPC under this subsection within a period
(specified by the Health Care Standards Commission
and not to exceed 3 business days) after the time of
receipt of the premium from the employer of the eli-
gible individual or the eligible individual, as the case
may be, based on estimates of applicable risk-adjust-
ment factors. Subsequent payments shall be ad-
justed as appropriate to reflect differences between
the payments that were made based on estimates
and the payments that should have been made based
on reported (and audited) information.
(3) 
ADJUSTMENTS
FOR
DIFFERENCES
IN
NONPAYMENT RATES.—In accordance with rules es-
tablished by the Health Care Standards Commis-
sion, each agreement between an AHP and a HPPC
under this section shall provide that, if a HPPC de-
termines that the rates of nonpayment of premiums
during grace periods established under subsection
(c)(2) vary appreciably among AHPs, the HPPC
•HR 3222 SC2
shall provide for such adjustments in the payments
made under this subsection as will place each AHP
in the same position as if the rates of nonpayment
were the same.
(e) RECONCILIATION OF LOW-INCOME ASSISTANCE
AMONG ACCOUNTABLE HEALTH PLANS.—
(1) IN GENERAL.—Each agreement between an
AHP and a HPPC under this section (including a
special agreement entered into under subsection
(a)(2)) shall provide for such payments from the
AHP to the HPPC, and such payments from the
HPPC to the AHP, as the Health Care Standards
Commission determines is necessary in order to as-
sure the equitable distribution among all AHPs, na-
tionwide, of reductions in premiums and cost-sharing
under section 1205(c) and section 1202(c), respec-
tively.
(2) INTER-HPPC
COORDINATION.—For inter-
HPPC coordination of reconciliation processes under
paragraph (1), see section 1106(c).
(f) NOTICE OF DISENROLLMENT.—Within 3 business
days after receiving a notice of disenrollment of an individ-
ual from an AHP offered by a HPPC, the HPPC shall
notify the AHP of such notice.
•HR 3222 SC2
(g) LIMITATION ON EMPLOYMENT.—An AHP agrees
not to employ (or enter into a consulting or similar con-
tract with) any individual who was, within the previous
2 years, an employee of the HPPC with which the AHP
has an agreement in effect under this section.
(h) STANDARDS FOR OPERATIONAL SOFTWARE.—
The Health Care Standards Commission shall establish
standards for operational software that may be used by
HPPCs and AHPs in carrying out agreements under this
section.
SEC. 1103. AGREEMENTS WITH SMALL EMPLOYERS.
(a) IN GENERAL.—Each HPPC for a HPPC area
shall enter into an agreement under this section with each
small employer that employs individuals in the area. Each
agreement under this section, between a small employer
and a HPPC shall include (as specified by the Health Care
Standards Commission) provisions consistent with the re-
quirements specified in the succeeding subsections of this
section.
(b) FORWARDING INFORMATION ON ELIGIBLE EM-
PLOYEES.—
(1) IN GENERAL.—Under an agreement under
this section between a small employer and a HPPC,
the employer must forward to the appropriate
HPPC the name and address (and other identifying
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information required by the HPPC) of each em-
ployee (including part-time and seasonal employees).
(2) APPROPRIATE
HPPC.—In this subsection,
the term ‘‘appropriate HPPC’’ means the HPPC for
the principal place of business of the employer or (at
the option of an employee) the HPPC serving the
place of residence of the employee.
(c) PAYROLL DEDUCTION.—
(1) IN GENERAL.—Under an agreement under
this section between a small employer and a HPPC,
if the HPPC notifies the employer that an eligible
employee is enrolled in an AHP through the HPPC,
the employer shall provide for—
(A) the deduction, from the employee’s
wages or other compensation, of the amount of
the premium due (less the amount of any em-
ployer contribution), and
(B) payment of such amount (including
any such contribution) to the HPPC.
In the case of an employee who is paid wages or
other compensation on a monthly or more frequent
basis, an employer shall not be required to provide
for payment of amounts to a HPPC other than at
the same time at which the amounts are deducted
from wages or other compensation. In the case of an
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employee who is paid wages or other compensation
less frequently than monthly, an employer may be
required to provide for payment of amounts to a
HPPC on a monthly basis.
(2) ADDITIONAL PREMIUMS.—If the sum of the
amount of the employer contribution and the
amount withheld under paragraph (1) is not suffi-
cient to cover the entire cost of the premiums, the
employee shall be responsible for paying directly to
the HPPC the difference between the amount of
such premiums and such sum.
(d) LIMITED EMPLOYER OBLIGATIONS.—Nothing in
this section shall be construed as—
(1) requiring an employer to provide directly for
enrollment of eligible employees under an account-
able health plan or other health plan,
(2) requiring an employer to make, or prevent-
ing an employer from making, information about
such plans available to such employees, or
(3) requiring an employer to make, or prevent-
ing an employer from making, an employer contribu-
tion for coverage of such individuals under such a
plan.
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SEC. 1104. ENROLLING INDIVIDUALS IN ACCOUNTABLE
HEALTH PLANS THROUGH A HPPC.
(a) OFFER OF ENROLLMENT.—
(1) IN GENERAL.—Each HPPC shall offer in
accordance with this section eligible individuals the
opportunity to enroll in an AHP for the HPPC area
in which the individual resides.
(2) FREEZING
ENROLLMENT
IN
INSOLVENT
PLANS.—If a State superintendent of insurance,
State insurance commissioner, or other State official
with regulatory authority over an AHP has deter-
mined that the AHP is insolvent, a HPPC may dis-
continue offering enrollment in the AHP to individ-
uals not previously enrolled in the plan.
(b) ENROLLMENT PROCESS.—
(1) IN GENERAL.—Each HPPC shall establish
an enrollment (and disenrollment) process in accord-
ance with rules established by the Health Care
Standards Commission consistent with this sub-
section.
(2) INITIAL ENROLLMENT PERIOD.—For each
eligible individual, at the time the individual first be-
comes an eligible individual in a HPPC area of a
HPPC, there shall be an initial enrollment period (of
not less than 30 days) during which the individual
may enroll in an AHP.
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(3) GENERAL
ENROLLMENT
PERIOD.—Each
HPPC shall establish an annual period, of not less
than 30 days, during which eligible individuals may
enroll in an AHP or change the AHP in which the
individual is enrolled.
(4) SPECIAL
ENROLLMENT
PERIODS.—In the
case of individuals who—
(A) through marriage, divorce, birth or
adoption of a child, or similar circumstances,
experience a change in family composition, or
(B) experience a change in employment
status (including a significant change in the
terms and conditions of employment),
each HPPC shall provide for a special enrollment
period in which the individual is permitted to change
the individual or family basis of coverage or the
AHP in which the individual is enrolled. The cir-
cumstances under which such special enrollment pe-
riods are required and the duration of such periods
shall be specified by the Health Care Standards
Commission.
(5) TRANSITIONAL
ENROLLMENT
PERIOD.—
Each HPPC shall provide for a special transitional
enrollment period (during a period beginning in the
Fall of 1994 specified by the Health Care Standards
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Commission) during which eligible individuals may
first enroll.
(6) NO DUPLICATE ENROLLMENT.—No HPPC
shall permit an individual to be enrolled in more
than one AHP at a time.
(7) INDIVIDUAL ENROLLMENT OF FAMILY MEM-
BERS PERMITTED.—Nothing in this section shall be
construed as preventing an eligible individual who is
an eligible family member of an eligible employee or
other principal enrollee from electing to enroll on an
individual basis in a plan.
(c) ANALYSIS AND DISTRIBUTION OF COMPARATIVE
INFORMATION.—
(1) ANALYSIS OF INFORMATION.—Each HPPC
shall analyze the information reported under section
1203(a) on AHPs for which the HPPC is offering
enrollment (and may analyze such information on
closed AHPs serving residents of the HPPC area) in
order to distribute the information under paragraph
(2) in a form, consistent with section 1307(a)(2),
that permits the direct comparison of different
AHPs on the basis of the ability of the AHPs—
(A) to maintain and improve clinical
health, functional status, and well-being, and
(B) to satisfy enrolled individuals.
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Such comparison may also be made to show changes
in the performance of AHPs over time.
(2) DISTRIBUTION OF INFORMATION.—
(A) IN GENERAL.—Each HPPC shall dis-
tribute, to eligible individuals and employers,
information, in comparative form, on the prices,
health outcomes, and enrollee satisfaction of the
different AHPs for which it is offering enroll-
ment and may provide other information per-
taining to the quality of such AHPs. Such dis-
tribution shall occur at least annually before
each general enrollment period. Each HPPC
also shall make such information available to
other interested persons.
(B) ADDITIONAL INFORMATION.—Such in-
formation shall include—
(i) a summary of the analysis of infor-
mation collected under paragraph (1) and
information 
collected 
under 
section
1108(a)(2), and
(ii) a breakdown of the portion of
AHP premiums attributable to the HPPC
overhead amount (specified under section
1105(b)(3)).
(d) PERIOD OF COVERAGE.—
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(1) INITIAL ENROLLMENT PERIOD.—In the case
of an eligible individual who enrolls with an AHP
through a HPPC during an initial enrollment period,
coverage under the plan shall begin on such date
(not later than the first day of the first month that
begins at least 15 days after the date of enrollment)
as the Health Care Standards Commission shall
specify.
(2) GENERAL ENROLLMENT PERIODS.—In the
case of an eligible individual who enrolls with an
AHP through a HPPC during a general enrollment
period, coverage under the plan shall begin on the
first day of the first month beginning at least 15
days after the end of such period.
(3) SPECIAL ENROLLMENT PERIODS.—
(A) IN GENERAL.—In the case of an eligi-
ble individual who enrolls with an AHP during
a special enrollment period described in sub-
section (b)(4), coverage under the plan shall
begin on such date (not later than the first day
of the first month that begins at least 15 days
after the date of enrollment) as the Commission
shall specify, except that coverage of family
members shall begin as soon as possible on or
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after the date of the event that gives rise to the
special enrollment period.
(B) TRANSITIONAL SPECIAL ENROLLMENT
PERIOD.—In the case of an eligible individual
who enrolls with an AHP during the transi-
tional special enrollment period described in
subsection (b)(5), coverage under the plan shall
begin on January 1, 1995.
(4) MINIMUM
PERIOD
OF
ENROLLMENT.—In
order to avoid adverse selection, each HPPC may re-
quire, consistent with rules of the Health Care
Standards Commission, that enrollments with AHPs
be for not less than a specified minimum enrollment
period (with exceptions permitted for such excep-
tional circumstances as the Commission may recog-
nize).
SEC. 1105. RECEIPT OF PREMIUMS.
(a) ENROLLMENT CHARGE.—The amount charged by
a HPPC for coverage under an AHP in a HPPC area
is equal to the sum of—
(1) the amount of the premium applicable to
the individual under section 1205(a)(1)(B) for such
coverage, and
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(2) the HPPC overhead amount established
under subsection (b)(3) for enrollment of individuals
in the HPPC area.
(b) HPPC OVERHEAD AMOUNT.—
(1) HPPC BUDGET.—Each HPPC shall estab-
lish a budget for each year for each HPPC area in
accordance with regulations established by the
Health Care Standards Commission.
(2) 
HPPC 
OVERHEAD
PERCENTAGE.—The
HPPC shall compute for each HPPC area an over-
head percentage which, when applied for each en-
rollee unit (whether enrolled on a family or individ-
ual basis) to the weighted average of the standard
premium amounts for premium classes for enroll-
ment on an individual basis (taking into account any
reduction in premiums attributable to low-income as-
sistance under section 2002), will provide for reve-
nues equal to the budget for the HPPC area for the
year. Such percentage may in no case exceed 1 per-
centage point.
(3) HPPC OVERHEAD
AMOUNT.—The HPPC
overhead amount for enrollment, whether on an indi-
vidual or family basis, in an AHP for a HPPC area
for a month is equal to the applicable HPPC over-
head percentage (computed under paragraph (2))
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multiplied by the weighted average of the standard
premium amounts for premium classes for enroll-
ment on an individual basis under the AHP for the
month (taking into account any reduction in pre-
miums attributable to low-income assistance under
section 2002).
SEC. 1106. COORDINATION AMONG HPPCS.
(a) IN GENERAL.—The Health Care Standards Com-
mission shall establish rules consistent with this section
for—
(1) coordination among HPPCs in cases where
small employers are located in one HPPC area and
their employees reside in a different HPPC area
(and are eligible for enrollment with AHPs located
in the other area), and
(2) coordination among HPPCs in the low-in-
come assistance reconciliation processes under sec-
tion 1102(e)(1).
The Commission shall establish standards for operational
software in order to promote coordination among HPPCs
under this title.
(b) COORDINATION RULES.—Under the rules estab-
lished under subsection (a)(1)—
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(1) HPPC FOR
EMPLOYER.—The HPPC for
the principal place of business of a small employer
shall be responsible—
(A) for providing information to the em-
ployer’s employees on AHPs for areas in which
employees reside;
(B)(i) for enrolling employees under the
AHP selected (even if the AHP selected is not
in the same HPPC area as the HPPC) and (ii)
if the AHP chosen is not in the same HPPC
area as the HPPC, for forwarding the enroll-
ment information to the HPPC for the area in
which the AHP selected is located; and
(C) in the case of premiums to be paid
through payroll deduction, or employer con-
tribution, or both, to receive such premiums
and forward them to the HPPC for the area in
which the AHP selected is located.
(2) HPPC FOR EMPLOYEE RESIDENCE.—The
HPPC for the HPPC area in which an employee re-
sides shall be responsible for providing other HPPCs
with information concerning AHPs being offered in
such HPPC area.
(c) COORDINATION OF RECONCILIATION OF LOW-IN-
COME ASSISTANCE.—Under the rules established under
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subsection (a)(2), the Commission shall provide for such
payments among the different HPPCs as the Commission
determines is necessary in order to assure the equitable
distribution among AHPs in different HPPC areas of ad-
justments in premiums and cost-sharing under section
1205(c) and section 1202(c), respectively.
SEC. 1107. COMPLAINT PROCESS; OMBUDSMAN.
(a) COMPLAINT PROCESS.—Each HPPC shall estab-
lish a process for the receipt and disposition of complaints
regarding the performance of its duties.
(b) OMBUDSMAN.—
(1) IN GENERAL.—Each HPPC shall provide—
(A) for the appointment of an ombudsman,
and
(B) for a reasonable salary and staff for
the ombudsman.
(2) DUTIES AND AUTHORITIES.—Each ombuds-
man shall have the duty and authority to do the fol-
lowing:
(A) RELATING TO HPPCS.—(i) To inves-
tigate complaints regarding the failure of a
HPPC to perform its duties.
(ii) To assist AHPs and eligible individuals
in resolving grievances with the HPPC.
•HR 3222 SC2
(iii) To issue public reports and reports to
the Health Care Standards Commission on the
HPPC’s performance of such duties.
(B) RELATING
TO
AHPS.—(i) To inves-
tigate complaints concerning the failure of an
AHP to meet the applicable requirements of
part 1 of subtitle C.
(ii) To assist enrollees in AHPs in resolv-
ing grievances with such plans.
(iii) To issue public reports and reports to
the Health Care Standards Commission on any
finding that an AHP has failed to meet the ap-
plicable requirements of part 1 of subtitle C.
(3) ACCESS
TO
INFORMATION.—The HPPC
shall provide the ombudsman and the ombudsman’s
staff with access to such information as may be nec-
essary to carry out such duties.
SEC. 1108. ENROLLEE SATISFACTION SURVEYS; MONITOR-
ING ENROLLEE DISENROLLMENT.
(a) ENROLLEE SATISFACTION SURVEYS.—
(1) IN GENERAL.—Each HPPC, using a stand-
ard survey instrument prescribed by the Health Care
Standards Commission, shall collect information on
the satisfaction of eligible individuals with—
(A) the performance of the HPPC, and
•HR 3222 SC2
(B) the performance of the AHP in which
they are enrolled.
(2) ANALYSIS.—Each HPPC shall—
(A) analyze the information collected under
paragraph (1),
(B) submit to the Health Care Standards
Commission an annual report that summarizes
such analysis, and
(C) make a summary of such analysis
available to enrollees under section 1104(c)(2).
(b) MONITORING ENROLLEE DISENROLLMENT.—
Each HPPC shall monitor enrollee disenrollment from
AHPs in order to determine whether there is a pattern
of disenrollment which does not reflect the distribution of
age, income, health condition, place of residence, and other
potential risk characteristics of their enrollees. If a HPPC
determines that such a pattern exists, the HPPC shall
provide the Health Care Standards Commission with such
information on such pattern as the Commission may speci-
fy and may petition under section 1305(c)(2) for the rev-
ocation of the registration of the AHP.
•HR 3222 SC2
Subtitle C—Accountable Health
Plans (AHPs)
PART 1—REQUIREMENTS FOR ACCOUNTABLE
HEALTH PLANS
SEC. 1201. REGISTRATION PROCESS; QUALIFICATIONS.
(a) IN GENERAL.—The Health Care Standards Com-
mission shall provide a process whereby a health plan (as
defined in section 1701(c)(1)) may be registered with the
Commission by its sponsor as an accountable health plan.
Such a registered AHP is authorized to allocate its re-
sources (except as otherwise specifically required under
this subtitle) to maximize the health of its enrollees.
(b) QUALIFICATIONS.—In order to be eligible to be
registered, a plan must—
(1) provide, in accordance with section 1202,
for coverage of the uniform set of effective benefits
specified by the Commission, for adjustments in
cost-sharing in the case of low-income individuals,
and for meeting quality standards established by the
Commission;
(2) provide, in accordance with section 1203,
for the collection and provision to the Commission
and HPPCs of certain information regarding its en-
rollees and provision of services;
•HR 3222 SC2
(3) not discriminate in enrollment or benefits,
as required under section 1204;
(4) establish standard premiums for the uni-
form set of effective benefits, in accordance with sec-
tion 1205;
(5) meet financial solvency requirements, in ac-
cordance with section 1206;
(6) meet requirements relating to grievance pro-
cedures, physician incentive plans, advance direc-
tives, and agent commissions, in accordance with
section 1207;
(7) in the case of an open plan (as defined in
section 1701(b)(4)(B)), meet certain additional re-
quirements under section 1208 (relating to offering
of plans, acceptance of enrollees, and participation
as a plan under the medicare program and under
the Federal employees health benefits program);
(8) provide for coordination of benefits with
low-income assistance under subtitle A of title II, in
accordance with section 1209;
(9) provide for any required medicare adjust-
ment payments, in accordance with section 1210;
(10) pay certain premiums to the National
Medical Education Fund, in accordance with section
1211; and
•HR 3222 SC2
(11) pay registration fees imposed under sec-
tions 1303(d)(1) and 1304(d).
(c) MINIMUM SIZE FOR CLOSED PLANS.—No plan
may be registered as a closed AHP under this section un-
less the plan covers at least a number of employees greater
than the applicable number of employees specified in or
under section 1701(c)(2).
SEC. 1202. SPECIFIED UNIFORM SET OF EFFECTIVE BENE-
FITS; REDUCTION IN COST-SHARING FOR
LOW-INCOME INDIVIDUALS; QUALITY STAND-
ARDS.
(a) BENEFITS.—The Health Care Standards Com-
mission shall not accept the registration of a health plan
as an AHP unless, subject to subsection (b), the plan—
(1) offers only the uniform set of effective bene-
fits, established under section 1302(a)(1);
(2) has entered into arrangements with a suffi-
cient number, distribution, and variety of providers
to assure that the uniform set of effective benefits
is—
(A) available and accessible to each en-
rollee, within the area served by the plan, with
reasonable promptness and in a manner which
assures continuity, and
•HR 3222 SC2
(B) when medically necessary, available
and accessible twenty-four hours a day and
seven days a week,
without imposing cost-sharing in excess of the cost-
sharing described in paragraph (4);
(3) provides for the application of coverage
standards, with respect to the uniform set of effec-
tive benefits, which are disclosed by the plan to plan
enrollees (in a manner specified by the Commission)
and which are consistent with coverage criteria
under section 1302(b) (as interpreted by the Com-
mission);
(4) if it is a network plan (as defined in section
1222(b)(1)), (A) selects providers of each type of
good or service offered by the plan based on a com-
petitive criteria, including price, quality, and services
offered, and (B) publicizes and makes available,
upon request, before the selection of participating
providers such competitiive criteria;
(5)(A) provides, subject to subsection (c), for
imposition of uniform cost-sharing, specified under
such section as part of such set of benefits; and
(B) does not permit providers participating in
the plan under paragraph (2) to charge for services
•HR 3222 SC2
included in the uniform set of effective benefits serv-
ices amounts in excess of such cost-sharing; and
(6) does not accept enrollment of an individual
who is enrolled under another AHP unless, as of the
effective date of the enrollment, the enrollment
under the other plan will be terminated.
(b) TREATMENT OF ADDITIONAL BENEFITS.—
(1) IN GENERAL.—Subject to paragraphs (2)
and (3), subsection (a) shall not be construed as
preventing an AHP from offering benefits in addi-
tion to the uniform set of effective benefits, if such
additional benefits are offered, and priced, sepa-
rately from the benefits described in subsection (a).
(2) NO DUPLICATIVE BENEFITS OR COVERAGE
OF COST-SHARING.—An AHP or other entity may
not offer under paragraph (1) or otherwise any addi-
tional benefits or plan that has the effect—
(A) of duplicating the benefits required
under subsection (a), or
(B) of reducing the cost-sharing below the
uniform cost-sharing.
The Health Care Standards Commission may file an
action, in any appropriate court, to enjoin an entity
(other than an AHP) that violates this paragraph.
•HR 3222 SC2
(c) REDUCTION IN COST-SHARING FOR LOW-INCOME
INDIVIDUALS.—In the case of a low-income individual (as
defined in section 2009(a)(1)) eligible for cost-sharing as-
sistance under section 2003(a) and enrolled with an AHP,
the AHP shall reduce the cost-sharing otherwise applica-
ble to amounts that are nominal (as specified for purposes
of section 2003(a)(1)).
(d) LIMITATION
ON IMPOSITION
OF COST-SHAR-
ING.—In order to assure that providers of services for
which benefits are available through an AHP do not im-
pose cost-sharing in excess of that permitted under sub-
section (a)(5), each AHP may not provide payment for
services (other than emergency services) furnished by a
provider with an arrangement described in subsection
(a)(2) to meet the uniform set of effective benefits unless
the provider has agreed (in a manner specified by the
Health Care Standards Commission) not to impose cost-
sharing in excess of that so specified.
(e) QUALITY STANDARDS.—The Health Care Stand-
ards Commission shall establish standards relating to the
minimum level of acceptable quality for an AHP’s provi-
sion of the uniform set of effective benefits. In order for
a plan to be registered under this subtitle, the plan must
agree to provide benefits in a manner that complies with
such standards.
•HR 3222 SC2
SEC. 1203. COLLECTION AND PROVISION OF STANDARD-
IZED INFORMATION.
(a) PROVISION OF INFORMATION.—
(1) IN GENERAL.—Each AHP must provide the
applicable HPPC and the Health Care Standards
Commission (at a time, not less frequently than an-
nually, and in an electronic, standardized form and
manner specified by the Commission) such informa-
tion as the Commission determines to be necessary,
consistent with this subsection and sections 1104(c)
and 1307, to forward payments to AHPs under sec-
tion 1102(d) and to evaluate the performance of the
AHP in providing the uniform set of effective bene-
fits to enrollees in each HPPC area.
(2) INFORMATION TO BE INCLUDED.—Subject
to paragraph (3), information to be provided under
this subsection shall include at least the following:
(A) Information on the characteristics of
enrollees that may affect their need for or use
of health services and the determination of risk-
adjustment factors for enrollee units.
(B) Information on the types of treatments
and outcomes of treatments with respect to the
clinical health, functional status, and well-being
of enrollees.
•HR 3222 SC2
(C) Information on health care expendi-
tures, volume and prices of procedures, and use
of specialized centers of care (for which infor-
mation is submitted under section 1308).
(D) Information on the flexibility per-
mitted by plans to enrollees in their selection of
providers.
(3) SPECIAL
TREATMENT.—The Commission
may waive the provision of such information under
paragraph (2), or require such other information, as
the Commission finds appropriate in the case of a
newly established AHP for which such information
is not available.
(b) 
CONDITIONING
CERTAIN
PROVIDER
PAY-
MENTS.—
(1) IN GENERAL.—In order to assure the collec-
tion of all information required from the direct pro-
viders of services for which benefits are available
through an AHP, each AHP may not provide pay-
ment for services (other than emergency services)
furnished by a provider to meet the uniform set of
effective benefits unless the provider has given the
AHP (or has given directly to the Health Care
Standards Commission and the applicable HPPC)
•HR 3222 SC2
standard information (specified by the Commission)
respecting the services.
(2) FORWARDING
INFORMATION.—If informa-
tion under paragraph (1) is given to the AHP, the
AHP is responsible for forwarding the information
to the Commission and the applicable HPPC.
(c) AUDITING.—Each AHP shall provide, in accord-
ance with standards established by the Commission, for
the auditing of information provided under this section.
SEC. 1204. PROHIBITION OF DISCRIMINATION BASED ON
HEALTH STATUS FOR CERTAIN CONDITIONS;
LIMITATION ON PRE-EXISTING CONDITION
EXCLUSIONS.
(a) IN GENERAL.—Except as provided under sub-
section (b), an AHP may not deny, limit, or condition the
coverage under (or benefits of) the plan based on the
health status of an individual, claims experience of an indi-
vidual, receipt of health care by an individual, medical his-
tory of an individual, receipt of public subsidies by an indi-
vidual, lack of evidence of insurability of an individual, or
any other characteristic of the individual that may relate
to the need for health care services.
(b) TREATMENT OF PREEXISTING CONDITION EX-
CLUSIONS FOR SERVICES.—
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(1) IN
GENERAL.—Subject to the succeeding
provisions of this subsection, an AHP may exclude
coverage with respect to services related to treat-
ment of a preexisting condition, but the period of
such exclusion may not exceed 6 months beginning
on the date of coverage under the plan. The exclu-
sion of coverage shall not apply to services furnished
to newborns and to pregnant women.
(2) CREDITING OF PREVIOUS COVERAGE.—
(A) IN GENERAL.—An AHP shall provide
that if an enrollee is in a period of continuous
coverage (as defined in subparagraph (B)(i)) as
of the date of initial coverage under such plan,
any period of exclusion of coverage with respect
to a preexisting condition for such services or
type of services shall be reduced by 1 month for
each month in the period of continuous cov-
erage.
(B) DEFINITIONS.—As used in this para-
graph:
(i) PERIOD
OF
CONTINUOUS
COV-
ERAGE.—
(I) IN GENERAL.—The term ‘‘pe-
riod of continuous coverage’’ means
the period beginning on the date an
•HR 3222 SC2
individual is enrolled under an AHP
and ends on the date the individual is
not so enrolled for a continuous period
of more than 3 months.
(II) TRANSITIONAL AMNESTY AT
TIME OF INITIAL ENROLLMENT.—For
purposes of this clause, each individ-
ual who enrolls in an AHP before
July 1, 1995, is considered to have
had a period of continuous coverage
during the 6 months ending January
1, 1995.
(ii) PREEXISTING
CONDITION.—The
term ‘‘preexisting condition’’ means, with
respect to coverage under an AHP, a con-
dition which has been diagnosed or treated
during the 3-month period ending on the
day before the first date of such coverage
(without regard to any waiting period).
(3) LIMITATION TO UNIFORM SET OF EFFEC-
TIVE BENEFITS.—This subsection shall not apply to
treatment which is not within the uniform set of ef-
fective benefits.
(4) SPECIAL
RULE
FOR
CERTAIN
HEALTH
MAINTENANCE
ORGANIZATIONS.—A health mainte-
•HR 3222 SC2
nance organization that is an AHP shall not be con-
sidered as failing to meet the requirements of sec-
tion 1301 of the Public Health Service Act notwith-
standing that it provides for an exclusion of the type
described in paragraph (1) so long as such exclusion
is applied consistent with the previous provisions of
this subsection.
SEC. 1205. USE OF STANDARD PREMIUMS.
(a) STANDARD PREMIUMS FOR OPEN AHPS.—
(1) IN GENERAL.—
(A) ESTABLISHMENT.—Subject to sub-
section (c), each open AHP shall establish a
standard premium for the uniform set of effec-
tive benefits within each HPPC area in which
the plan is offered.
(B) APPLICABLE PREMIUM.—The amount
of premium applicable for all individuals within
a premium class (established under paragraph
(2)) is the standard premium amount multiplied
by the premium class factor specified by the
Commission for that class under paragraph
(2)(B).
(C) UNIFORMITY WITHIN A YEAR.—Within
a HPPC area for individuals within a premium
class for months in a calendar year, the stand-
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ard premium for all individuals in the class for
each month shall be the same.
(2) PREMIUM CLASSES.—
(A) IN
GENERAL.—The Health Care
Standards Commission shall establish premium
classes—
(i) based on types of enrollment (de-
scribed in section 1701(c)(6)), and
(ii) within each type of enrollment,
based on the age of the principal enrollee
(or based on the age of another family
member of such enrollee in such cases as
the Commission may provide).
In carrying out clause (ii), the Commission
shall establish reasonable age bands within
which premium amounts will not vary for a type
of enrollment.
(B) PREMIUM CLASS FACTORS.—
(i) IN GENERAL.—For each premium
class established under subparagraph (A),
the Health Care Standards Commission
shall establish a premium class factor that
reflects, subject to clause (ii), the relative
actuarial value of benefits for that class
compared to the actuarial value of benefits
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for an average class. The weighted average
of the premium class factors shall be 1.
Such premium class factors shall be com-
puted based on the actuarial value of bene-
fits for such population group within the
class (which shall include the population el-
igible to enroll with open AHPs through
HPPCs) as the Commission determines to
be appropriate.
(ii) LIMIT ON VARIATION IN PREMIUM
CLASS FACTORS WITHIN A TYPE OF EN-
ROLLMENT.—The highest premium class
factor within a type of enrollment may not
exceed twice the lowest premium class fac-
tor for that type of enrollment. The pre-
vious sentence shall not apply to premiums
imposed pursuant to a risk-sharing con-
tract under section 1876 of the Social Se-
curity Act.
(3) METHODOLOGY.—The amount of premiums
forwarded to AHPs is adjusted in accordance with
section 1102(d)(1).
(b) STANDARD PREMIUMS FOR CLOSED AHPS.—
(1) ESTABLISHMENT.—Subject to subsection
(c) and paragraph (3), each closed AHP shall estab-
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lish a standard premium for the uniform set of ef-
fective benefits within each HPPC area in which the
plan is offered.
(2) APPLICATION BY PREMIUM CLASS.—Subject
to paragraph (3)—
(A) the amount of premium applicable for
all individuals within a premium class is the
standard premium amount multiplied by the
premium class factor specified by the Commis-
sion for that class under subsection (a)(2)(B),
and
(B) within a HPPC area for individuals
within a premium class, the standard premium
for all individuals in the premium class shall be
the same.
(3) COMMUNITY RATING PERMITTED.—
(A) SAME
RATES
WITHIN
TYPE
OF
EN-
ROLLMENT
WITHOUT
REGARD
TO
AGE.—A
closed AHP may elect (in a manner specified by
the Health Care Standards Commission) to
apply this subsection on the basis of type of en-
rollment rather than premium class. In such
case, all references in this subsection to pre-
mium class are deemed a reference to type of
enrollment and the reference to premium class
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factor (for a type of enrollment) is the weighted
average of such factors for the plan within the
type of enrollment.
(B) COMMUNITY
RATING
ACROSS
HPPC
AREAS.—A closed AHP may elect (in a manner
specified by the Commission) to apply this sub-
section by treating two or more HPPC areas as
a single HPPC area. In such case, subject to
subparagraph (A), the premium class factor to
be applied shall be the weighted average of such
factors for the plan for the HPPC areas in-
volved.
(c) ADJUSTMENT OF PREMIUMS FOR LOW-INCOME
INDIVIDUALS.—
(1) VERY LOW-INCOME INDIVIDUALS.—In the
case of a very low-income individual (as defined in
section 2009(a)(3)) eligible for premium assistance
under section 2002 and enrolled with an AHP—
(A) the AHP shall adjust the premium
otherwise applicable so that the premium does
not exceed the sum of—
(i) the base Federal premium amount
(as defined in section 2005(a)(1)) for en-
rollment under the plan, and
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(ii) 10 percent of the amount (if any)
by which (I) the premium for the AHP in
which the individual is enrolled exceeds
(II) the reference premium rate (as defined
in section 2009(c)(4)); and
(B) the AHP shall credit against the pre-
mium owed the applicable Federal assistance
amount (as defined in section 2009(c)(1)) pro-
vided the plan under section 2002(a)(1)(B).
(2) MODERATELY LOW-INCOME INDIVIDUALS.—
In the case of a moderately low-income individual
(as defined in section 2009(a)(2)) eligible for pre-
mium assistance under section 2002 and enrolled
with an AHP—
(A) the AHP shall adjust the premium
otherwise applicable so that the premium does
not exceed the sum of—
(i) applicable low-income premium
amount (as defined in section 2009(c)(2))
for enrollment under the plan, plus
(ii) the individual responsibility per-
centage (as defined in section 2009(c)(5),
or 10 percentage points, whichever is
greater) of the amount by which (I) the
premium for the AHP in which the individ-