I
103D CONGRESS
1ST SESSION
H. R. 1976
To guarantee access to affordable health care coverage, to provide for equality
with respect to the provision of service in rural areas, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 5, 1993
Mr. THOMAS of Wyoming introduced the following bill; which was referred
jointly to the Committees on Ways and Means, Energy and Commerce,
the Judiciary, and Education and Labor
A BILL
To guarantee access to affordable health care coverage, to
provide for equality with respect to the provision of serv-
ice in rural areas, and for other purposes.
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
‘‘Comprehensive Health and Rural Equality Act of 1993’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—GUARANTEED ACCESS TO AFFORDABLE HEALTH CARE
COVERAGE
Sec. 101. Requirement of health insurance coverage.
Sec. 102. Registration of eligible uninsured individuals.
Sec. 103. Eligibility for credit certificates.
Sec. 104. Requirement for offering of MedEquality plans.
Sec. 105. Definitions.
TITLE II—SMALL EMPLOYER INSURANCE REFORM
Sec. 201. Establishment and enforcement of standards for small employer
health insurance plans.
Sec. 202. Preemption of State benefits mandates for plans that meet consumer
protection standards.
Sec. 203. Requirement for offering of basic, low cost plan (MedEquality plan).
Sec. 204. Requirements relating to initial writing of policies.
Sec. 205. Requirements relating to renewal.
Sec. 206. Establishment of reinsurance mechanisms for high risk individuals.
Sec. 207. Registration of all health benefit plans required.
Sec. 208. Definitions.
Sec. 209. Preemption from insurance mandates for qualified small employer
purchasing groups.
Sec. 210. Equalization of tax benefits for self-employed persons.
Sec. 211. Managed care rights.
TITLE III—HEALTH CARE COST CONTAINMENT
Subtitle A—Denial of Certain Tax Deductions and Exclusion for Excess
Benefits
Sec. 301. Denial of employer tax deduction for providing health care coverage
in excess of minimum benefits; denial of employee exclusion for
such excess coverage.
Subtitle B—Medical Malpractice Reform
PART 1—GENERAL PROVISIONS
Sec. 311. Federal reform of medical malpractice liability actions.
Sec. 312. Definitions.
Sec. 313. Effective date.
PART 2—UNIFORM STANDARDS FOR MEDICAL MALPRACTICE LIABILITY
Sec. 321. Statute of limitations.
Sec. 322. Requirement for initial resolution of action through alternative dis-
pute resolution.
Sec. 323. Relation to alternative dispute resolution of Federal agencies.
Sec. 324. Mandatory pretrial settlement conference.
Sec. 325. Calculation and payment of damages.
Sec. 326. Treatment of attorney’s fees and other costs.
Sec. 327. Joint and several liability.
Sec. 328. Uniform standard for determining negligence.
Sec. 329. Application of medical practice guidelines in malpractice liability ac-
tions.
Sec. 330. Special provision for certain obstetric services.
Sec. 331. Preemption.
PART 3—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION
SYSTEMS
Sec. 341. Basic requirements for ADR.
Sec. 342. Certification of State systems.
Sec. 343. Reports on implementation and effectiveness of alternative dispute
resolution systems.
PART 4—OTHER REQUIREMENTS AND PROGRAMS
Sec. 351. Permitting State professional societies to participate in disciplinary
activities.
Subtitle C—Administrative Cost Savings
PART 1—STANDARDIZED CLAIMS PROCESSING
Sec. 361. Adoption of data elements, uniform claims, and uniform electronic
transmission standards.
Sec. 362. Application of standards.
Sec. 363. Periodic review and revision of standards.
Sec. 364. Health benefit plan defined.
PART 2—ELECTRONIC MEDICAL DATA STANDARDS
Sec. 371. Medical data standards for hospitals and other providers.
Sec. 372. Application of electronic data standards to certain hospitals.
Sec. 373. Electronic transmission to Federal agencies.
Sec. 374. Limitation on data requirements where standards are in effect.
Sec. 375. Advisory commission.
PART 3—ADDITIONAL STANDARDS AND REQUIREMENTS
Sec. 381. Standards relating to use of medicare and medicaid magnetized
health benefit cards; secondary payor data bank.
Sec. 382. Preemption of State quill pen laws.
Sec. 383. Use of standard identification numbers.
Sec. 384. Coordination of benefit standards.
Subtitle C—Estimates of Expenses Prior to Treatment
Sec. 391. Requirement.
Subtitle D—Antitrust Exemptions
Sec. 395. Permitting cooperative arrangements between hospitals.
TITLE IV—LONG-TERM CARE
Subtitle A—Treatment of Long-Term Care Insurance Plans
Sec. 401. Qualified long-term care insurance treated as accident and health in-
surance for purposes of taxation of life insurance companies.
Sec. 402. Qualified long-term care insurance treated as accident and health in-
surance for purposes of exclusion for benefits received under
such insurance and for employer contributions for such insur-
ance.
Sec. 403. Exclusion from gross income for amounts withdrawn from individual
retirement plans or 401(k) plans for qualified long-term care
insurance.
Sec. 404. Exchange of life insurance policy for qualified long-term care policy
not taxable.
Subtitle B—Treatment of Accelerated Death Benefits
Sec. 411. Tax treatment of accelerated death benefits under life insurance con-
tracts.
Sec. 412. Tax treatment of companies issuing qualified accelerated death bene-
fit riders.
TITLE V—INCENTIVES FOR PROVISION OF SERVICES IN RURAL
AREAS
Sec. 501. Deduction for medical school education loan interest incurred by doc-
tors serving in medically underserved rural areas.
Sec. 502. Requiring development of comprehensive plans for medically under-
served rural populations.
Sec. 503. Inclusion of transportation costs for physicians in underserved rural
areas in the practice index under the medicare physician pay-
ment schedule.
TITLE I—GUARANTEED ACCESS
TO 
AFFORDABLE 
HEALTH
CARE COVERAGE
SEC. 101. REQUIREMENT OF HEALTH INSURANCE COV-
ERAGE.
(a) IN GENERAL.—Each eligible individual who does
not establish (in a manner specified by the Secretary) cov-
erage under a health insurance program (as defined in sec-
tion 105(2)) shall—
(1) register with the Secretary under section
102, and
(2) be enrolled under a MedEquality plan in ac-
cordance with this title.
(b) ENFORCEMENT THROUGH INFORMATION CON-
CERNING HEALTH COVERAGE SHOWN
ON TAX RE-
TURN.—Section 6012 of the Internal Revenue Code of
1986 is amended by redesignating subsection (e) as sub-
section (f) and by inserting after subsection (d) the follow-
ing new subsection:
‘‘(e) HEALTH CARE COVERAGE.—Every person re-
quired to file a return under this section for the taxable
year shall include on such return a statement declaring
whether or not the taxpayer and dependents of the tax-
payer are covered under an accident or health plan as of
the time such return is filed.’’
SEC. 102. REGISTRATION OF ELIGIBLE UNINSURED INDI-
VIDUALS.
(a) BY MAIL.—Each eligible individual who is not in-
sured under a MedEquality plan or other health care plan
shall register under this title, either as an individual or
as a member of a family, by mailing a registration form
to the Secretary.
(b) AVAILABILITY OF FORMS.—The Secretary shall
make registration forms readily available at post offices
and other suitable locations.
SEC. 103. CREDIT CERTIFICATES.
(a) CREDIT CERTIFICATES.—
(1) IN GENERAL.—Each individual, in a State
with an agreement described in subsection (d)(2),
determined to be a credit eligible individual (as de-
fined in subsection (b)) shall receive a credit certifi-
cate the value of which may be applied towards pur-
chase of a MedEquality plan through an employer or
an insurer.
(2) VALUE OF CERTIFICATE.—
(A) SCALED TO INCOME.—The value of a
credit certificate for an individual shall be
scaled according to the income of the individual,
in a manner specified by the Secretary so
that—
(i) for individuals and families with
income below the poverty level, the value
equals the maximum value, and
(ii) for individuals and families with
income more than 150 percent of the pov-
erty level, there is no value to the credit
certificate.
(B) 
LIMIT
TO
LOWEST
PREMIUM
CHARGED.—The value of the credit certificate
under this section shall not exceed the cost of
coverage under the least expensive MedEquality
plan available for the type of coverage under
which the individual is enrolled.
(3) APPLICATION OF CREDIT CERTIFICATE.—In
accordance with regulations of the Secretary, upon
presentation of a credit certificate of an individual to
a MedEquality plan, the plan shall reduce the value
of the premium otherwise imposed and shall trans-
mit to the State electronically such information as
may be required in order for the State to provide for
payment to the plan (in accordance with subsection
(c)(1)(C)).
(b) CREDIT ELIGIBLE INDIVIDUAL DEFINED.—In
this title, the term ‘‘credit eligible individual’’ means a eli-
gible individual—
(1) whose income (as determined under section
1612 of the Social Security Act for purposes of the
supplemental security income program) does not ex-
ceed 150 percent of the poverty level; and
(2) whose resources (as determined under sec-
tion 1613 of such Act for purposes of the supple-
mental security income program) do not exceed the
maximum amount of resources that an individual
may have and obtain benefits under that program.
(c) ELIGIBILITY DETERMINATION.—
(1) STATE
RESPONSIBILITY.—States are re-
sponsible—
(A) for determining if individuals are cred-
it eligible individuals;
(B) in the case of credit eligible individ-
uals, for determining the value of the credit cer-
tificate and for the issues of certificates to such
individuals; and
(C) for making payment to MedEquality
plans for the value of certificates presented to
them.
(2) APPLICATION.—
(A) IN
GENERAL.—States shall provide
that individuals seeking a determination that
they are credit eligible individuals may apply
for, and obtain, such a determination (and if
found eligible, for a credit certificate under sub-
section (a)) in conjunction with—
(i) applying for public welfare assist-
ance (including assistance under title IV,
or supplemental security income benefits
under title XVI, of the Social Security
Act), and
(ii) receiving medical services at a
hospital emergency room.
(B) PERIODIC REAPPLICATIONS.—Individ-
uals who are determined to be credit eligible in-
dividuals are required to reapply for such deter-
mination (and the determination of the amount
of the credit certificate) not less often than
once every 6 months.
(3) USE
OF
SOCIAL
SECURITY
ADMINISTRA-
TION.—At the request of a State, the Secretary may
enter into an agreement with a State under which
eligibility determinations under this section are con-
ducted by the Social Security Administration on be-
half of the State.
(d) PAYMENT TO STATES.—
(1) IN GENERAL.—From the amounts in the
Treasury not otherwise appropriated, the Secretary
shall provide for payments to States with an agree-
ment in effect under paragraph (2) (on a quarterly
basis in the same manner as payments are made to
States under section 1903(d) of the Social Security
Act) of amounts equal to the sum of—
(A) the Federal medical assistance percent-
age (as defined in section 1905(a)(2) of such
Act) amounts paid by the States for credit cer-
tificates issued under subsection (c), and
(B) 60 percent of the reasonable adminis-
trative expenses of the State in administering
the certificate program under this title.
(2) AGREEMENTS.—An agreement under this
paragraph is an agreement between the Secretary
and a State which provides—
(A) for the State—
(i) to carry out this title in the State
(including implementing section 104(b)),
and
(ii) to comply with the applicable re-
quirements of section 502 (relating to com-
prehensive plans for medically underserved
rural populations); and
(B) for the Secretary to make payments to
the State under paragraph (1).
(3) RELATION TO MEDICAID PROGRAM.—
(A) DUPLICATION.—Notwithstanding any
other provision of law, such a State plan is not
required to provide for benefits for services
under such State plan to the extent the individ-
ual is entitled to benefits for such services
under a MedEquality plan.
(B) MEDICAID
AS
SECONDARY
PAYOR.—
State plans for medical assistance under title
XIX of the Social Security Act shall, under sec-
tion 1902(a)(25) of such Act, not make pay-
ment for services to the extent that payment
may be made for such services under a
MedEquality plan.
(e) NOTICE.—Whenever a credit certificate is issued
under this section, the issuer shall notify the Commis-
sioner of Internal Revenue concerning such issuance.
SEC. 104. REQUIREMENT FOR OFFERING OF MEDEQUALITY
PLANS.
(a) IN GENERAL.—Each licensed insurance carrier in
a State shall make available a MedEquality plan to all
individuals residing in the State.
(b) ENFORCEMENT.—If a carrier in a State fails to
comply with development of a MedEquality plan, the In-
surance Commissioner of the State shall revoke the car-
rier’s license to offer health insurance in the State.
SEC. 105. DEFINITIONS.
In this title:
(1) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible
individual’’ means an individual who (A) is a citizen
or national of the United States, an alien lawfully
admitted for permanent residence, or an alien other-
wise permanently residing in the United States
under color of law and (B) is residing in the United
States.
(2) HEALTH INSURANCE PROGRAM.—The term
‘‘health insurance program’’ means any private or
public program, other than a MedEquality plan, that
provides for benefits (through insurance or other-
wise) that are not less than the benefits provided
under a MedEquality plan, and includes the medi-
care and medicaid programs (under titles XVIII and
XIX of the Social Security Act), the Federal employ-
ees health insurance program (under chapter 89 of
title 5, United States Code), the program for the
provision of medical and dental benefits under chap-
ter 55 of title 10, United States Code, and the pro-
gram for the provision of hospital care and medical
services by the Department of Veterans Affairs
under chapter 17 of title 38, United States Code.
(3) 
MEDEQUALITY
PLAN.—The 
term
‘‘MedEquality plan’’ has the meaning given such
term in section 203(b).
(4) POVERTY
LEVEL.—The term ‘‘poverty
level’’ means the official poverty line (as defined by
the Office of Management and Budget, and revised
annually in accordance with section 673(2) of the
Omnibus Budget Reconciliation Act of 1981) appli-
cable to a family of the size involved.
(5) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(6) STATE.—The term ‘‘State’’ includes the
District of Columbia, Puerto Rico, the Virgin Is-
lands, Guam, and American Samoa.
TITLE II—SMALL EMPLOYER
INSURANCE REFORM
SEC. 201. ESTABLISHMENT AND ENFORCEMENT OF STAND-
ARDS FOR SMALL EMPLOYER HEALTH INSUR-
ANCE PLANS.
(a) ESTABLISHMENT OF GENERAL STANDARDS.—
(1) ROLE OF NAIC.—The Secretary of Health
and Human Services shall request the National As-
sociation of Insurance Commissioners to develop,
within 1 year after the date of the enactment of this
Act, model regulations that specify standards with
respect to each of the following:
(A) 
The 
requirement, 
under 
section
203(a), that small employer carriers offer
MedEquality plans.
(B) The basic benefits to be included in
MedEquality plans under section 203(b).
(C) The requirements of guaranteed issue
of MedEquality plans under section 203(c).
(D) The requirements of sections 204 and
205(b).
(E) The requirements of subsections (a)
and (c) of section 205.
If the NAIC develops such regulations specifying
such standards within such period, the Secretary
shall review such standards to determine if they
meet such requirements. Such review shall be com-
pleted within 6 months after the date the regulations
are developed. Unless the Secretary determines with-
in such period that the standards do not meet the
requirements, such standards shall serve as the
standards under this section.
(2) CONTINGENCY.—If the NAIC does not de-
velop such model regulations within such period or
the Secretary determines that such regulations do
not meet the requirements described in paragraph
(1), the Secretary shall inform the NAIC of the spe-
cific deficiencies and request the NAIC to develop
such model regulations in conformity with paragraph
(1).
(3) EFFECTIVE DATE.—The standards provided
under this subsection—
(A) shall apply to small employer health
benefit plans offered in a State on or after the
date the standards are implemented in the
State under subsection (b)(1), and
(B) with respect to the requirements re-
ferred to in paragraph (1)(D), shall apply to
small employer health benefit plans renewed on
or after 3 years after the date such standards
are implemented in the State under subsection
(b)(1).
(b) 
APPLICATION
OF
STANDARDS
THROUGH
STATES.—
(1) APPLICATION OF ALL STANDARDS TO NEW
PLANS.—
(A) IN GENERAL.—Each State shall sub-
mit to the Secretary, by the deadline specified
in subparagraph (B), a report on the implemen-
tation and enforcement of the standards estab-
lished under subsection (a) with respect to
small employer health benefit plans offered not
later than such deadline.
(B) DEADLINE FOR REPORT.—
(i) 1 YEAR AFTER STANDARDS ESTAB-
LISHED.—Subject to clause (ii), the dead-
line under this subparagraph is 1 year
after the date standards are established
under subsection (a).
(ii) EXCEPTION FOR LEGISLATION.—
In the case of a State which the Secretary
identifies, in consultation with the NAIC,
as—
(I) requiring State legislation
(other than legislation appropriating
funds) in order for carriers and health
benefit plans offered to small employ-
ers to meet the standards established
under subsection (a), but
(II) having a legislature which is
not scheduled to meet in 1994 in a
legislative session in which such legis-
lation may be considered,
the date specified in this subparagraph is
the first day of the first calendar quarter
beginning after the close of the first legis-
lative session of the State legislature that
begins on or after January 1, 1994. For
purposes of the previous sentence, in the
case of a State that has a 2-year legislative
session, each year of such session shall be
deemed to be a separate regular session of
the State legislature.
(2) APPLICATION OF CONSUMER PROTECTION
TO ALL PLANS.—Each State shall submit to the Sec-
retary, by not later than 4 years after the date
standards are established under subsection (a), a re-
port on the implementation and enforcement of the
standards established under subparagraphs (D) and
(E) subsection (a)(1) with respect to small employer
health benefit plans renewed not later than 4 years
after the date such standards were established.
(3) MORE STRINGENT STATE STANDARDS PER-
MITTED.—A State may implement standards that
are more stringent than the standards established
under subsection (a).
(4) ENFORCEMENT.—If the Secretary deter-
mines that a State has failed to submit a report by
the deadline under paragraph (1) or (2) or finds
that the State no longer is carrying out its respon-
sibility under the respective paragraph, the Sec-
retary shall notify the State and provide the State
a period of 30 days in which to submit such report
or to carry out its responsibilities under the respec-
tive paragraph. If, after such 30-day period, the Sec-
retary finds that such a failure has not been cor-
rected, the Secretary shall provide for such mecha-
nism for the implementation and enforcement of the
standards established under subsection (a) in the
State as the Secretary determines to be appropriate.
Such standards shall apply to health benefit plans
offered or renewed on or after 3 months after the
applicable deadlines established under subpara-
graphs (A) through (C) of subsection (a)(3).
SEC. 202. PREEMPTION OF STATE BENEFITS MANDATES
FOR PLANS THAT MEET CONSUMER PROTEC-
TION STANDARDS.
(a) FINDING.—Congress finds that health benefit
plans offered with respect to small employers affect inter-
state commerce.
(b) PREEMPTION.—In the case of a small employer
health benefit plan that meets the standards with respect
to the requirements referred to in subparagraphs (D) and
(E) of section 201(a)(1), no provision of State law shall
apply that requires the offering, as part of the health ben-
efit plan with respect to such an employer, of any services,
category of care, or services of any class or type of pro-
vider.
SEC. 203. REQUIREMENT FOR OFFERING OF BASIC, LOW
COST PLAN (MEDEQUALITY PLAN).
(a) IN GENERAL.—Each small employer carrier
which makes available in a State any small employer
health benefit plan shall make available to each small em-
ployer in the State a MedEquality plan (as defined in sub-
section (b)).
(b) MEDEQUALITY PLAN DEFINED.—
(1) IN GENERAL.—In this title, except as pro-
vided in paragraph (2), the term ‘‘MedEquality
plan’’ means a health benefits plan that—
(A) is designed to provide only basic hos-
pital, medical, surgical, preventive, and diag-
nostic benefits, specified under standards under
section 201(a)(1)(B), so as to make it afford-
able to small employers;
(B) includes cost-sharing that provides an
appropriate incentive to avoid unnecessary care
while avoiding excessive cost-sharing by individ-
uals with catastrophic illnesses;
(C) is guaranteed issue (as described in
subsection (c));
(D) meets the standards established under
subparagraphs 
(D) 
and 
(E) 
of 
section
201(a)(1) (relating to the requirements of sec-
tions 204 and 205); and
(E) provides for cost-containment in ac-
cordance with the model made applicable under
subsection (d) in the State in which the plan is
issued.
(2) SPECIAL
RULES
FOR
HEALTH
MAINTE-
NANCE ORGANIZATIONS.—With respect to a carrier
that is a Federally-qualified health maintenance or-
(A) subject to paragraph (2), must accept
every small employer in the State that applies
for coverage under the plan;
(B) subject to paragraphs (2) and (3),
must accept for enrollment every individual who
is a full-time employee (or, in the case of family
enrollment with respect to such an employee,
the employee’s spouse and the employee’s de-
pendents who are under 19 years of age or who
are full-time students and under 21 years of
age) who applies for enrollment on a timely
basis; and
(C) subject to paragraphs (2) and (3), may
not place any restriction on the eligibility of an
individual to enroll, so long as such an individ-
ual is a full-time employee or the employee’s
spouse or dependent described in subparagraph
(B).
(2) SPECIAL
RULES
FOR
HEALTH
MAINTE-
NANCE
ORGANIZATIONS.—In 
the 
case 
of 
a
MedEquality plan offered by a health maintenance
organization, the plan shall—
(A) limit the employers that may apply for
coverage to those with eligible individuals resid-
ing in the service area of the plan,
(B) limit the individuals who may be en-
rolled under the plan to those who reside in the
service area of the plan, and
(C) within the service area of the plan,
deny coverage to such employers if the plan
demonstrates that—
(i) it will not have the capacity to de-
liver services adequately to enrollees of any
additional groups because of its obligations
to existing group contract holders and en-
rollees, and
(ii) it is applying this subparagraph
uniformly to all employers without regard
to the health status, claims experience, or
duration of coverage of those employers
and their employees.
(3) EXCEPTION FOR CERTAIN LATE ENROLL-
EES.—
(A) IN GENERAL.—Except as provided in
this paragraph, paragraph (1)(B) shall not
apply to an eligible employee or dependent who
fails to enroll in a health benefit plan during an
initial enrollment period, if such period is at
least 30 days long.
(B) EXCEPTION
FOR
THOSE
WITH
PRE-
VIOUS
EMPLOYER
COVERAGE.—Subparagraph
(A) shall not apply to an individual who—
(i) was covered under another em-
ployer health benefit plan at the time of
the individual’s initial enrollment period,
(ii) stated at the time of initial enroll-
ment period that coverage under another
employer health benefit plan was the rea-
son for declining enrollment,
(iii) lost coverage under another em-
ployer health benefit plan as a result of
termination of employment, the termi-
nation of the other plan’s coverage, death
of a spouse, or divorce, and
(iv) requests enrollment within 30
days after termination of coverage under
another employer health benefit plan.
(C) 
EXCEPTION
FOR
OPEN
ENROLL-
MENT.—Subparagraph (A) shall not apply to
an individual who—
(i) is employed by an employer which
offers multiple health benefit plans, and
(ii) elects a different plan during an
open enrollment period.
(D) EXCEPTION
FOR
COURT
ORDERS.—
Subparagraph (A) shall not apply to a spouse
or minor child if a court has ordered coverage
be provided for the spouse or child under a cov-
ered employee’s health benefit plan and request
for such coverage is made within 30 days after
issuance of such court order.
(d) COST CONTAINMENT STANDARDS.—
(1) DEVELOPMENT OF MODELS.—
(A) ROLE OF NAIC.—The Secretary shall
request the NAIC to develop, within 1 year
after the date of the enactment of this Act,
models 
for 
cost-containment 
features 
in
MedEquality plans. Such models shall include a
managed care plan (described in paragraph (3))
and any combination of such models the NAIC
finds appropriate. If the NAIC develops such
models within such period, the Secretary shall
review such models to determine if they provide
for effective cost-containment. Such review shall
be completed within 6 months after the date the
models are developed. Unless the Secretary de-
termines within such period that such a model
does not provide effective cost-containment,
such remaining models shall serve as the mod-
els under this subsection.
(B) CONTINGENCY.—If the NAIC does not
develop such models within such period or the
Secretary determines that all such models do
not provide for effective cost-containment, the
Secretary shall inform the NAIC of the specific
deficiencies and request the NAIC to develop
such models in conformity with paragraph (1).
(2) SELECTION OF COST-CONTAINMENT MODEL
BY STATE.—By not later than 2 years after the date
of the enactment of this Act, each State shall specify
the cost-containment model (developed under para-
graph (1)) that will be applied under subsection (a)
to MedEquality plans issued in the State.
(3) MANAGED CARE PLAN DEFINED.—For pur-
poses of paragraph (1), the term ‘‘managed care
plan’’ includes (but is not limited to) any plan
that—
(A) arranges with selected providers for
the furnishing of health care services,
(B) provides explicit standards for the se-
lection of such providers,
(C) has formal programs for ongoing qual-
ity assurance and utilization review, and
(D) provides significant financial incentives
for beneficiaries to use providers and proce-
dures associated with the plan.
(d) ROLE OF STATE INSURANCE COMMISSIONER.—
The commissioner or superintendent of insurance of each
State shall be responsible for determining that the pre-
mium charged for each MedEquality plan is reasonable
and not excessive in relation to the benefits.
SEC. 204. REQUIREMENTS RELATING TO INITIAL WRITING
OF POLICIES.
(a) LIMITATIONS ON TREATMENT OF PRE-EXISTING
CONDITIONS.—
(1) IN GENERAL.—A carrier may not impose
(or require an employer to impose through a waiting
period for coverage under a health benefit policy or
similar requirement) a limitation or exclusion of ben-
efits under a small employer health benefit plan re-
lating to treatment of a condition based on the fact
that the condition preexisted the effectiveness of the
policy if—
(A) the condition relates to a condition
that did not exist within 6 months before the
date of coverage under the plan, or
(B) the limitation or exclusion extends over
more than 12 months after the date of coverage
under the plan.
(2) PREVIOUS SATISFACTION OF PREEXISTING
CONDITION REQUIREMENT.—
(A) IN GENERAL.—In addition, each car-
rier shall waive any period applicable to a pre-
existing condition for similar benefits with re-
spect to an individual to the extent that the in-
dividual was covered for the condition under a
small employer health benefit plan that was in
effect before the date of the enrollment under
the carrier’s plan.
(B) CONTINUOUS COVERAGE REQUIRED.—
Subparagraph (A) shall no longer apply if there
is a continuous period of more than 60 days on
which the individual was not covered under an
employer health benefit plan.
(b) LIMITS ON PREMIUMS.—
(1) LIMIT ON VARIATION OF INDEX RATES BE-
TWEEN BLOCKS OF BUSINESS.—
(A) IN GENERAL.—As a standard under
section 202, the index rate for a rating period
for any block of business of a small employer
carrier may not exceed the index rate for any
other block of business by more than 20 per-
cent.
(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply to a block of business if—
(i) the block is one for which the car-
rier does not reject, and never has rejected,
small employers included within the defini-
tion of employers eligible for the block of
business or otherwise eligible employees
and dependents who enroll on a timely
basis, based upon their claim experience or
health status,
(ii) the carrier does not involuntarily
transfer, and never has involuntarily trans-
ferred, a health benefit plan into or out of
the block of business, and
(iii) the block of business is currently
available for purchase.
(2) LIMIT ON VARIATION OF PREMIUM RATES
WITHIN
A
BLOCK
OF
BUSINESS.—For a block of
business of a small employer carrier, as a standard
under section 202 the premium rates charged during
a rating period to small employers with similar de-
mographic or other relevant characteristics (not re-
lating to claims experience, health status, or dura-
tion of coverage) for the same or similar coverage,
or the rates which could be charged to such employ-
ers under the rating system for that block of busi-
ness, shall not vary from the index rate by more
than 25 percent of the index rate.
(3) LIMIT
ON
PERMISSIBLE
RATE
VARI-
ATIONS.—Subject to paragraphs (1) and (2), as a
standard under section 202, a carrier may establish
rate variations based on factors such as geography,
demography, and industry and plan design.
(4) LIMIT
ON
TRANSFER
OF
EMPLOYERS
AMONG BLOCKS OF BUSINESS.—As a standard under
section 202, a small employer carrier may not invol-
untarily transfer a small employer into or out of a
block of business. A small employer carrier may not
offer to transfer a small employer into or out of a
block of business unless such offer is made to trans-
fer all small employers in the block of business with-
out regard to demographic characteristics, claim ex-
perience, health status, or duration since issue.
(5) DEFINITIONS.—In this subsection:
(A) BASE
PREMIUM
RATE.—The term
‘‘base premium rate’’ means, for each block of
business for each rating period, the lowest pre-
mium rate charged or which could have been
charged under a rating system for that block of
business by the small employer carrier to small
employers with similar demographic or other
relevant characteristics (not relating to claims
experience, health status, or duration of cov-
erage) for health benefit plans with the same or
similar coverage.
(B) BLOCK
OF
BUSINESS.—The term
‘‘block of business’’ means, with respect to a
carrier, all (or a distinct group of) small em-
ployers as shown on the records of the carrier.
(C) RULES FOR ESTABLISHING BLOCKS OF
BUSINESS.—For purposes of subparagraph
(B)—
(i) a carrier may establish, subject to
clause (ii), a distinct group of small em-
ployers on the basis that the applicable
health benefit plans either—
(I) 
are 
marketed 
and 
sold
through individuals and organizations
which are not participating in the
marketing or sale of other distinct
groups of small employers for the car-
rier,
(II) have been acquired from an-
other carrier as a distinct group, or
(III) are provided through an as-
sociation with membership of not less
than 100 small employers which has
been formed for purposes other than
obtaining insurance;
(ii) a carrier may not establish more
than 2 groupings under each block of busi-
ness because the carrier uses managed-care
techniques which are expected to produce
substantial variation in health care costs;
and
(iii) notwithstanding clauses (i) and
(ii), a Commissioner of Insurance of a
State may, upon application, approve addi-
tional distinct groups upon a finding that
such approval would enhance the efficiency
and fairness of the small employer market-
place.
(D) INDEX RATE.—The term ‘‘index rate’’
means, with respect to a block of business, the
arithmetic average of the applicable base pre-
mium rate and the corresponding highest pre-
mium rate for the block.
(c) FULL DISCLOSURE OF RATING PRACTICES.—At
the time a carrier offers a health benefit plan to a small
employer, the carrier shall fully disclose to the employer
rating practices for small employer health benefit plans,
including rating practices for different industries, popu-
lations, and benefit designs.
(d) ACTUARIAL CERTIFICATION.—Each carrier shall
file annually with the State commissioner of insurance a
written statement by a member of the American Academy
of Actuaries (or other individual acceptable to the commis-
sioner) that, based upon an examination by the individual
which includes a review of the appropriate records and of
the actuarial assumptions of the carrier and methods used
by the carrier in establishing premium rates for applicable
small employer health benefit plans—
(1) the carrier is in compliance with the appli-
cable provisions of this section, and
(2) the rating methods are actuarially sound.
Each carrier shall retain a copy of such statement for ex-
amination at its principal place of business.
(e) REGISTRATION AND REPORTING.—Each carrier
that issues any small employer health benefit plan in a
State shall be registered or licensed with the State com-
missioner of insurance and shall comply with any report-
ing requirements of the commissioner relating to such a
plan.
(f) USE
OF MINIMUM PARTICIPATION REQUIRE-
MENT.—A carrier may condition issuance, or renewal, of
a health benefit plan to a small employer on the enroll-
ment of a minimum number (or percentage) of its full-
time employees, in accordance with standards established
to carry out this section. Such standards shall require that
any such conditions be imposed uniformly on employers
of the same size.
SEC. 205. REQUIREMENTS RELATING TO RENEWAL.
(a) RENEWABILITY.—A carrier may not cancel a
small employer health benefit plan or deny renewal of cov-
erage under such a plan other than—
(1) for nonpayment of premiums,
(2) for fraud or other misrepresentation by the
insured,
(3) for noncompliance with plan provisions,
(4) for failure to maintain (in accordance with
standards established under section 204(f)) the
number of enrollees under the plan at the number
(or percentage) required under the plan,
(5) for misuse of a provider network provision,
or
(6) because the carrier is ceasing to provide any
small employer health benefit plan in a State, or, in
the case of a health maintenance organization, in a
geographic area.
(b) LIMITATION ON PREMIUM INCREASES.—A carrier
may not provide for an increase in the premium charged
a small employer for a small employer health benefit plan
in a percentage greater than such percentage as shall be
specified in standards referred to in section 201(a)(1)(E).
Such standards shall take into account increases in pre-
miums charged for new coverage of small employers under
the plan.
(c) LIMITATION ON MARKET REENTRY.—If a carrier
terminates the offering of health benefit plans to small
employers in an area, the carrier may not offer such a
health benefit plan to any small employer in the area until
5 years have elapsed since the date of the termination.
SEC. 206. ESTABLISHMENT OF REINSURANCE MECHANISMS
FOR HIGH RISK INDIVIDUALS.
(a) ESTABLISHMENT OF STANDARDS.—
(1) ROLE OF NAIC.—The Secretary shall re-
quest the NAIC to develop, within 1 year after the
date of the enactment of this Act, models for rein-
surance mechanisms (each in this section referred to
as the ‘‘reinsurance mechanism’’) for individuals and
small employers who are enrolled under a small em-
ployer health benefit plan that meets the standards
with respect to the requirements referred to in sub-
paragraphs (D) and (E) of section 201(a)(1) and for
whom a carrier is at risk of incurring high costs
under the plan. Such models shall include models
based on each of the following:
(A) A voluntary prospective reinsurance
option.
(B) A retrospective reinsurance option.
(C) An allocation option.
(D) A pooled employee option.
(E) A designated carrier option.
(F) A mandatory reinsurance option.
If the NAIC develops such models within such pe-
riod, the Secretary shall review such models to deter-
mine if they provide for an effective reinsurance
mechanism. Such review shall be completed within 6
months after the date the models are developed. Un-
less the Secretary determines within such period
that such a model is not an effective reinsurance
mechanism, such remaining models shall serve as
the models under this section.
(2) CONTINGENCY.—If the NAIC does not de-
velop such models within such period or the Sec-
retary determines that all such models do not pro-
vide for an effective reinsurance mechanism, the
Secretary shall inform the NAIC of the specific defi-
ciencies and request the NAIC to develop such mod-
els in conformity with paragraph (1).
(b) REQUIREMENT OF IMPLEMENTATION OF REIN-
SURANCE MECHANISMS.—
(1) IN GENERAL.—By not later than 2 years
after the date of the enactment of this Act, each
State shall establish one or more reinsurance mecha-
nisms by not later than the deadline specified in sec-
tion 201(b)(1)(B) of this Act.
(2) DEFAULT.—If the Secretary determines
that a State has failed to establish any reinsurance
mechanism under paragraph (1), the Secretary shall
establish one or more such mechanisms with respect
to that State. The authority provided under the pre-
vious sentence shall expire upon the Secretary’s de-
termination that the State has provided, by law, for
establishment of a reinsurance mechanism that
meets the requirement of paragraph (1).
(c) CONSTRUCTION.—Nothing in this section shall be
construed as to prohibit reinsurance arrangements, wheth-
er on a State or regional basis, not required under this
section.
SEC. 207. REGISTRATION OF ALL HEALTH BENEFIT PLANS
REQUIRED.
Notwithstanding any other provision of law, each
State commissioner or superintendent of insurance may,
under State law, require each employer health benefit plan
(including a self-insured plan) to be registered with such
official, if the plan is not otherwise required to be reg-
istered or licensed with the official under section 204(e),
and to provide the official with such information on the
plan as may be necessary to carry out section 206.
SEC. 208. DEFINITIONS.
In this subtitle:
(1)(A) The term ‘‘carrier’’ means any entity
which provides health insurance or health benefits in
a State, and includes a licensed insurance company,
a prepaid hospital or medical service plan, a health
maintenance organization, a multiple employer wel-
fare arrangement or employee benefits plan (as de-
fined under the Employee Retirement Income Secu-
rity Act of 1974), or any other entity providing a
plan of health insurance subject to State insurance
regulation.
(B) The term ‘‘small employer carrier’’ means
a carrier with respect to the issuance of a small em-
ployer health benefit plan.
(2) The term ‘‘health benefit plan’’ means any
hospital or medical expense incurred policy or certifi-
cate, hospital or medical service plan contract, or
health maintenance subscriber contract, but does not
include—
(A) accident-only, credit, dental, or disabil-
ity income insurance,
(B) coverage issued as a supplement to li-
ability insurance,
(C) worker’s compensation or similar in-
surance, or
(D) automobile medical-payment insur-
ance.
(3) The term ‘‘NAIC’’ means the National As-
sociation of Insurance Commissioners.
(4) The term ‘‘Secretary’’ means the Secretary
of Health and Human Services.
(5)(A) The term ‘‘small employer’’ means an
entity actively engaged in business which, on at least
50 percent of its working days during the preceding
year, employed at least 3, but fewer than 50, full-
time employees. For purposes of determining if an
employer is a small employer, rules similar to the
rules of subsections (b) and (c) of section 414 of the
Internal Revenue Code of 1986 shall apply.
(B) The term ‘‘full-time employee’’ means, with
respect to an employer, an individual who normally
is employed for at least 30 hours per week by the
employer.
(6) The term ‘‘small employer health benefit
plan’’ means a health benefit plan which provides
coverage to one or more full-time employees of a
small employer.
(7) The term ‘‘State’’ means the 50 States, the
District of Columbia, and Puerto Rico.
(8) The term ‘‘State commissioner of insur-
ance’’ includes a State superintendent of insurance.
SEC. 209. PREEMPTION FROM INSURANCE MANDATES FOR
QUALIFIED SMALL EMPLOYER PURCHASING
GROUPS.
(a) QUALIFIED
SMALL
EMPLOYER
PURCHASING
GROUP DEFINED.—For purposes of this section, an asso-
ciation is a qualified small employer purchasing group if—
(1) the association submits an application to
the Secretary of Health and Human Services at such
time and in such form as the Secretary may require;
and
(2) on the basis of information contained in the
application and any other information the Secretary
may require, the Secretary determines that—
(A) the association is administered solely
under the authority and control of its mem-
ber employers,
(B) the association’s membership consists
solely of employers with not more than 100 em-
ployees (except that an employer member of the
group may retain its membership in the group
if, after the Secretary determines that the asso-
ciation meets the requirements of this para-
graph, the number of employees of the employer
member increases to more than 100),
(C) with respect to each State in which its
members are located, the association consists of
not fewer than 100 employers, and
(D) at the time the association submits its
application, the health benefit plans with re-
spect to the employer members of the associa-
tion are in compliance with applicable State
laws relating to health benefit plans.
(b) PREEMPTION FROM INSURANCE MANDATES.—
(1) FINDING.—Congress finds that employer
purchasing groups organized for the purpose of ob-
taining health insurance for employer members af-
fect interstate commerce.
tiate reimbursement rates with providers or to
contract selectively with one provider or a lim-
ited number of providers.
(B) RESTRICTIONS ON DIFFERENTIAL FI-
NANCIAL INCENTIVES.—Any law that limits the
financial incentives that a health benefit plan
may require a beneficiary to pay when a
nonplan provider is used on a nonemergency
basis.
(C) RESTRICTIONS
ON
UTILIZATION
RE-
VIEW METHODS.—(i) Any law that—
(I) prohibits utilization review of any
or all treatments and conditions;
(II) requires that such review be made
by a resident of the State in which the
treatment is to be offered or by an individ-
ual licensed in such State, or by a physi-
cian in any particular specialty or with any
board certified specialty of the same medi-
cal specialty as the provider whose services
are being rendered;
(III) requires the use of specified
standards of health care practice in such
reviews or requires the disclosure of the
specific criteria used in such reviews;
(IV) requires payments to providers
for the expenses of responding to utiliza-
tion review requests; or
(V) imposes liability for delays in per-
forming such review.
(ii) Nothing in clause (i)(II) shall be con-
strued as prohibiting a State from requiring
that utilization review be conducted by a li-
censed health care professional, or requiring
that any appeal from such a review be made by
a licensed physician or by a licensed physi-
cian in any particular specialty or with any
board certified specialty of the same medical
specialty as the provider whose services are
being rendered.
(c) EFFECTIVE DATE.—This section shall take effect
60 days after the date of the enactment of this Act.
SEC. 210. EQUALIZATION OF TAX BENEFITS FOR SELF-EM-
PLOYED PERSONS.
(a) INCREASE
IN DEDUCTION.—Paragraph (1) of
section 162(l) of the Internal Revenue Code of 1986 (re-
lating to special rules for health insurance costs of self-
employed individuals) is amended—
(1) by striking ‘‘25 percent’’ and inserting ‘‘the
applicable percentage (determined in accordance
with the following table)’’,
(2) by striking the period at the end and insert-
ing a colon, and
(3) by adding at the end thereof the following
table:
‘‘In the case of taxable
The applicable
years beginning in:
percentage is:
1994 ..........................................................................
1995 or 1996 .............................................................
1997 or thereafter .....................................................
100.’’
(b) DEDUCTION MADE PERMANENT.—Subsection (l)
of section 162 of such Code is amended by striking para-
graph (6).
(c) DEDUCTION LIMITED TO MEDEQUALITY PLANS
OR EQUIVALENT PLANS.—Subsection (l) of section 162
of such Code is amended by adding at the end thereof
the following new paragraph:
‘‘(6) DEDUCTION
LIMITED
TO
MEDEQUALITY
PLANS OR EQUIVALENT PLANS.—No deduction shall
be allowed under paragraph (1) for insurance which
is not a MedEquality plan (within the meaning of
section 203(b) of the Comprehensive Health and
Rural Equality Act of 1993 or an equivalent plan
(as defined by the Secretary).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 211. MANAGED CARE RIGHTS.
(a) PREEMPTION OF STATE LAW PROVISIONS.—The
following provisions of State law are preempted and may
not be enforced:
(1) RESTRICTIONS ON REIMBURSEMENT RATES
OR
SELECTIVE
CONTRACTING.—Any law that re-
stricts the ability of a carrier to negotiate reimburse-
ment rates with providers or to contract selectively
with one provider or a limited number of providers.
(2) RESTRICTIONS
ON
DIFFERENTIAL
FINAN-
CIAL INCENTIVES.—Any law that limits the financial
incentives that a health benefit plan may require a
beneficiary to pay when a non-plan provider is used
on a non-emergency basis.
(3) RESTRICTIONS
ON
UTILIZATION
REVIEW
METHODS.—Any law that—
(A) prohibits utilization review of any or
all treatments and conditions,
(B) requires that such review be made (i)
by a resident of the State in which the treat-
ment is to be offered or by an individual li-
censed in such State, or (ii) by a physician in
any particular specialty or with any board cer-
tified specialty of the same medical specialty as
the provider whose services are being rendered,
(C) requires the use of specified standards
of health care practice in such reviews or re-
quires the disclosure of the specific criteria used
in such reviews,
(D) requires payments to providers for the
expenses of responding to utilization review re-
quests, or
(E) imposes liability for delays in perform-
ing such review.
Nothing in subparagraph (B) shall be construed as
prohibiting a State from (i) requiring that utilization
review be conducted by a licensed health care profes-
sional or (ii) requiring that any appeal from such a
review be made by a licensed physician or by a li-
censed physician in any particular specialty or with
any board certified specialty of the same medical
specialty as the provider whose services are being
rendered.
(b) GAO STUDY.—
(1) IN
GENERAL.—The Comptroller General
shall conduct a study of the benefits and cost effec-
tiveness of the use of managed care in the delivery
of health services.
(2) REPORT.—By not later than 4 years after
the date of the enactment of this Act, the Comptrol-
ler General shall submit a report to Congress on the
study conducted under paragraph (1) and shall in-
clude in the report such recommendations as may be
appropriate.
TITLE III—HEALTH CARE COST
CONTAINMENT
Subtitle A—Denial of Certain Tax
Deductions and Exclusion for
Excess Benefits
SEC. 301. DENIAL OF EMPLOYER TAX DEDUCTION FOR PRO-
VIDING HEALTH CARE COVERAGE IN EXCESS
OF MINIMUM BENEFITS; DENIAL OF EM-
PLOYEE EXCLUSION FOR SUCH EXCESS COV-
ERAGE.
(a) DENIAL OF DEDUCTION.—Section 162 of the In-
ternal Revenue Code of 1986 (relating to trade or business
expenses) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the fol-
lowing new subsection:
‘‘(m) EXPENSES FOR PROVIDING HEALTH CARE IN
EXCESS OF MINIMUM BENEFITS.—No deduction shall be
allowed under this chapter for expenses incurred to pro-
vide health care for any employee of the taxpayer (or any
beneficiary of such employee) to the extent such expenses
are attributable to benefits that are not within the basic
benefits included in MedEquality plans under section
203(b) of the Comprehensive Health and Rural Equality
Act of 1993.’’
(b) DENIAL OF EXCLUSION.—The text of section 106
of such Code is amended to read as follows:
‘‘(a) IN GENERAL.—Gross income of an employee
does not include employer-provided coverage under an ac-
cident or health plan.
‘‘(b) NO EXCLUSION FOR HEALTH CARE COVERAGE
IN EXCESS OF MINIMUM BENEFITS.—Subsection (a) shall
not apply to the extent coverage is provided for benefits
that are not within the basic benefits included in
MedEquality plans under section 203(b) of the Com-
prehensive Health and Rural Equality Act of 1993.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning on or
after the first day of the second calendar year beginning
after the date of the enactment of this Act, but shall not
apply to taxable years beginning before the date the basic
benefits, to be included in MedEquality plans under sec-
tion 203(b) of this Act, have become effective under sec-
tion 203(a)(3) of this Act.
Subtitle B—Medical Malpractice
Reform
PART 1—GENERAL PROVISIONS
SEC. 311. FEDERAL REFORM OF MEDICAL MALPRACTICE
LIABILITY ACTIONS.
(a) CONGRESSIONAL FINDINGS.—
(1) EFFECT
ON
INTERSTATE
COMMERCE.—
Congress finds that the health care and insurance
industries are industries affecting interstate com-
merce and the medical malpractice litigation systems
existing throughout the United States affect inter-
state commerce by contributing to the high cost of
health care and premiums for malpractice insurance
purchased by health care providers.
(2) EFFECT
ON
FEDERAL
SPENDING.—Con-
gress finds that the medical malpractice litigation
systems existing throughout the United States have
a significant effect on the amount, distribution, and
use of Federal funds because of—
(A) the large number of individuals who
receive health care benefits under programs op-
erated or financed by the Federal Government;
(B) the large number of individuals who
benefit because of the exclusion from Federal
taxes of the amounts spent by their employers
to provide them with health insurance benefits;
(C) the large number of health care provid-
ers and health care professionals who provide
items or services for which the Federal Govern-
ment makes payments; and
(D) the large number of such providers
and professionals who have received direct or
indirect financial assistance from the Federal
Government because of their status as such
professionals or providers.
(b) APPLICABILITY.—This subtitle shall apply with
respect to any medical malpractice liability claim and to
any medical malpractice liability action brought in any
State or Federal court, except that this subtitle shall not
apply to—
(1) a claim or action for damages arising from
a vaccine-related injury or death to the extent that
title XXI of the Public Health Service Act applies to
the action; or
(2) a claim or action in which the plaintiff’s
sole allegation is an allegation of an injury arising
from the use of a medical product.
(c) PREEMPTION OF STATE LAW.—Subject to section
331, this subtitle supersedes State law only to the extent
that State law differs from any provision of law estab-
lished by or under this subtitle. Any issue that is not gov-
erned by any provision of law established by or under this
subtitle shall be governed by otherwise applicable State or
Federal law.
(d) FEDERAL COURT JURISDICTION NOT ESTAB-
LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in
this subtitle shall be construed to establish any jurisdiction
in the district courts of the United States over medical
malpractice liability actions on the basis of sections 1331
or 1337 of title 28, United States Code.
SEC. 312. DEFINITIONS.
As used in this subtitle:
(1) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution
system’’ or ‘‘ADR’’ means a system established by
a State that provides for the resolution of medical
malpractice liability claims in a manner other than
through medical malpractice liability actions.
(2) CLAIMANT.—The term ‘‘claimant’’ means
any person who alleges a medical malpractice liabil-
ity claim, or, in the case of an individual who is de-
ceased, incompetent, or a minor, the person on
whose behalf such a claim is alleged.
(3) ECONOMIC DAMAGES.—The term ‘‘economic
damages’’ means damages paid to compensate an in-
dividual for losses for hospital and other medical ex-
penses, lost wages, lost employment, and other pecu-
niary losses.
(4) HEALTH CARE PROFESSIONAL.—The term
‘‘health care professional’’ means any individual who
provides health care services in a State and who is
required by State law or regulation to be licensed or
certified by the State to provide such services in the
State.
(5) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ means any organization or
institution that is engaged in the delivery of health
care services in a State and that is required by State
law or regulation to be licensed or certified by the
State to engage in the delivery of such services in
the State.
(6) INJURY.—The term ‘‘injury’’ means any ill-
ness, disease, or other harm that is the subject of
a medical malpractice liability action or claim.
(7) MEDICAL
MALPRACTICE
LIABILITY
AC-
TION.—The term ‘‘medical malpractice liability ac-
tion’’ means a civil action (other than an action in
which the plaintiff’s sole allegation is an allegation
of an intentional tort) brought in a State or Federal
court against a health care provider or health care
professional (regardless of the theory of liability on
which the action is based) in which the plaintiff al-
leges a medical malpractice liability claim.
(8) 
MEDICAL
MALPRACTICE
LIABILITY
CLAIM.—The term ‘‘medical malpractice liability
claim’’ means a claim in which the claimant alleges
that injury was caused by the provision of (or the
failure to provide) health care services.
(9) MEDICAL
PRODUCT.—The term ‘‘medical
product’’ means a device (as defined in section
201(h) of the Federal Food, Drug, and Cosmetic
Act) or a drug (as defined in section 201(g)(1) of
the Federal Food, Drug, and Cosmetic Act).
(10) 
NONECONOMIC
DAMAGES.—The 
term
‘‘noneconomic damages’’ means damages paid to
compensate an individual for losses for physical and
emotional pain, suffering, inconvenience, physical
impairment, mental anguish, disfigurement, loss of
enjoyment of life, loss of consortium, and other
nonpecuniary losses, but does not include punitive
damages.
(11) 
SECRETARY.—The 
term 
‘‘Secretary’’
means the Secretary of Health and Human Services.
(12) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands,
Guam, and American Samoa.
SEC. 313. EFFECTIVE DATE.
(a) IN GENERAL.—Except as provided in subsection
(b) and sections 330 and 351, this subtitle shall apply with
respect to claims accruing or actions brought on or after
the expiration of the 3-year period that begins on the date
of the enactment of this Act.
(b) EXCEPTION FOR STATES REQUESTING EARLIER
IMPLEMENTATION OF REFORMS.—
(1) APPLICATION.—A State may submit an ap-
plication to the Secretary requesting the early imple-
mentation of this subtitle with respect to claims or
actions brought in the State.
(2) DECISION BY SECRETARY.—The Secretary
shall issue a response to a State’s application under
paragraph (1) not later than 90 days after receiving
the application. If the Secretary determines that the
State meets the requirements of this subtitle at the
time of submitting its application, the Secretary
shall approve the State’s application, and this sub-
SEC. 322. REQUIREMENT FOR INITIAL RESOLUTION OF AC-
TION THROUGH ALTERNATIVE DISPUTE RES-
OLUTION.
(a) IN GENERAL.—No medical malpractice liability
action may be brought in any State court unless the medi-
cal malpractice liability claim that is the subject of the
action has been initially resolved under an alternative dis-
pute resolution system certified by the Secretary under
section 341(b).
(b) INITIAL
RESOLUTION
OF
CLAIMS
UNDER
ADR.—For purposes of subsection (a), an action is ‘‘ini-
tially resolved’’ under an alternative dispute resolution
system if—
(1) the ADR reaches a decision on whether the
defendant is liable to the plaintiff for damages; and
(2) if the ADR determines that the defendant
is liable, the ADR determines the amount of dam-
ages assessed against the defendant.
(c) PROCEDURES FOR FILING ACTIONS.—
(1) DEADLINE.—No medical malpractice liabil-
ity action may be brought unless the action is filed
in a court of competent jurisdiction not later than
90 days after an opinion resolving the medical mal-
practice liability claim that is the subject of the ac-
tion is issued under the applicable alternative dis-
pute resolution system.
(2) COURT
OF
COMPETENT
JURISDICTION.—
For purposes of paragraph (1), the term ‘‘court of
competent jurisdiction’’ means—
(A) with respect to actions filed in a State
court, the appropriate State trial court; and
(B) with respect to actions filed in a Fed-
eral court, the appropriate United States dis-
trict court.
(d) STATUS
OF
ADR DECISION.—The decision
reached under an alternative dispute resolution system
shall, for purposes of enforcement by a court of competent
jurisdiction, have the same status in the court as the ver-
dict of a medical malpractice liability action adjudicated
in a State or Federal trial court.
(e) TREATMENT OF ADR DECISION.—
(1) REQUIREMENTS FOR GOING FORWARD WITH
ACTION.—In order to bring a medical malpractice li-
ability action to contest the decision made under the
previous alternative dispute resolution system with
respect to a medical malpractice liability claim, the
party contesting the decision must—
(A) show that—
(i) the decision was procured by cor-
ruption, fraud, or undue means,
(ii) there was partiality or corruption
under the system,
(iii) there was other misconduct under
the system that materially prejudiced the
party’s rights, or
(iv) the decision was based on an
error of law; or
(B) present new evidence before the trier
of fact that was not available for presentation
under the ADR system.
(2) BURDEN OF PROOF.—In any medical mal-
practice liability action, the trier of fact shall uphold
the decision made under the previous alternative dis-
pute resolution system with respect to the claim that
is the subject of the action unless the party contest-
ing the decision proves by a preponderance of the
evidence that the decision was incorrect.
SEC. 323. RELATION TO ALTERNATIVE DISPUTE RESOLU-
TION OF FEDERAL AGENCIES.
(a) MANDATORY APPLICATION OF FEDERAL ADR IN
MALPRACTICE CLAIMS AGAINST UNITED STATES.—Sec-
tion 2672 of title 28, United States Code, is amended by
striking the period at the end of the first paragraph and
inserting the following: ‘‘, except that each Federal agency
shall use arbitration or such alternative means of dispute
resolution to settle any tort claim against the United
States consisting of a medical malpractice liability claim
(as defined in section 312(8) of the Comprehensive Health
and Rural Equality Act of 1993).’’.
(b) TRANSMITTAL
OF
INFORMATION
OF
MAL-
PRACTICE CLAIMS RESOLVED UNDER FEDERAL ADR.—
Section 584 of title 5, United States Code, as added by
section 4(b) of the Administrative Dispute Resolution Act
(Public Law 101–552), is amended by adding at the end
the following new subsection:
‘‘(k) Each agency shall transmit on a regular basis
to the Administrator for Health Care Policy and Research
information on issues in controversy consisting of medical
malpractice liability claims (as defined in section 312(8)
of the Comprehensive Health and Rural Equality Act of
1993) that are resolved under the agency’s dispute resolu-
tion proceeding under this subchapter, in a manner that
assures that the identity of the parties to such proceedings
shall not be revealed.’’.
SEC. 
324. 
MANDATORY 
PRETRIAL 
SETTLEMENT 
CON-
FERENCE.
(a) IN GENERAL.—Before the beginning of the trial
phase of any medical malpractice liability action, the par-
ties shall attend a conference called by the court for pur-
poses of determining whether grounds exist upon which
the parties may negotiate a settlement for the action.
(b) REQUIRING PARTIES TO SUBMIT SETTLEMENT
OFFERS.—At the conference called pursuant to subsection
(a), each party to a medical malpractice liability action
shall present an offer of settlement for the action.
SEC. 325. CALCULATION AND PAYMENT OF DAMAGES.
(a) LIMITATION ON NONECONOMIC DAMAGES.—The
total amount of noneconomic damages that may be award-
ed to a plaintiff and the members of the plaintiff’s family
for losses resulting from the injury which is the subject
of a medical malpractice liability action may not exceed
$250,000, regardless of the number of parties against
whom the action is brought or the number of actions
brought with respect to the injury.
(b) TREATMENT OF PUNITIVE DAMAGES.—
(1) 
LIMITATION
ON
AMOUNT.—The 
total
amount of punitive damages that may be imposed
under a medical malpractice liability action may not
exceed twice the total of the damages awarded to the
plaintiff and the members of the plaintiff’s family.
(2) PAYMENTS TO STATE FOR MEDICAL QUAL-
ITY ASSURANCE ACTIVITIES.—
(A) IN GENERAL.—Any punitive damages
imposed under a medical malpractice liability
action shall be paid to the State in which the
action is brought.
(B) ACTIVITIES
DESCRIBED.—A State
shall use amount paid pursuant to subpara-
graph (A) to carry out activities to assure the
safety and quality of health care services pro-
vided in the State, including (but not limited
to)—
(i) licensing or certifying health care
professionals and health care providers in
the State;
(ii) operating alternative dispute reso-
lution systems;
(iii) carrying out public education pro-
grams relating to medical malpractice and
the availability of alternative dispute reso-
lution systems in the State; and
(iv) carrying out programs to reduce
malpractice-related costs for retired provid-
ers or other providers volunteering to pro-
vide services in medically underserved
areas.
(C) MAINTENANCE OF EFFORT.—A State
shall use any amounts paid pursuant to sub-
paragraph (A) to supplement and not to replace
amounts spent by the State for the activities
described in subparagraph (B).
(c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—If
more than $100,000 in damages for expenses to be in-
curred in the future is awarded to the plaintiff in a medi-
cal malpractice liability action, the defendant shall provide
for payment for such damages on a periodic basis deter-
mined appropriate by the court (based upon projections
of when such expenses are likely to be incurred), unless
the court determines that it is not in the plaintiff’s best
interests to receive payments for such damages on such
a periodic basis.
(d) MANDATORY OFFSETS FOR DAMAGES PAID BY
A COLLATERAL SOURCE.—
(1) IN GENERAL.—The total amount of dam-
ages received by a plaintiff in a medical malpractice
liability action shall be reduced (in accordance with
paragraph (2)) by any other payment that has been
or will be made to the individual to compensate the
plaintiff for the injury that was the subject of the
action, including payment under—
(A) Federal or State disability or sickness
programs;
(B) Federal, State, or private health insur-
ance programs;
(C) private disability insurance programs;
(D) employer wage continuation programs;
and
(E) any other source of payment intended
to compensate the plaintiff for such injury.
(2) AMOUNT OF REDUCTION.—The amount by
which an award of damages to a plaintiff shall be re-
duced under paragraph (1) shall be—
(A) the total amount of any payments
(other than such award) that have been made
or that will be made to the plaintiff to com-
pensate the plaintiff for the injury that was the
subject of the action; minus
(B) the amount paid by the plaintiff (or by
the spouse, parent, or legal guardian of the
plaintiff) to secure the payments described in
subparagraph (A).
SEC. 326. TREATMENT OF ATTORNEY’S FEES AND OTHER
COSTS.
(a) LIMITATION
ON ATTORNEY’S FEES.—If the
plaintiff in a medical malpractice liability action has en-
tered into an agreement with the plaintiff’s attorney to
pay the attorney’s fees on a contingency basis, the attor-
ney’s fees for the action may not exceed—
(1) 25 percent of the first $150,000 of any
award or settlement paid to the plaintiff; or
(2) 15 percent of any additional amounts paid
to the plaintiff.
(b) AWARDING
ATTORNEY’S
FEES
AND
OTHER
COSTS TO WINNING PARTY.—
(1) IN GENERAL.—If the court in a medical
malpractice liability action upholds a ruling of the
alternative dispute resolution system with respect to
whether or not a health care professional or health
care provider committed malpractice or with respect
to the amount of damages awarded, the court shall
require the party that contested the ruling to pay to
the opposing party the costs incurred by the oppos-
ing party under the action, including attorney’s fees,
fees paid to expert witnesses, and other litigation ex-
penses (but not including court costs, filing fees, or
other expenses paid directly by the party to the
court, or any fees or costs associated with the reso-
lution of the claim that is the subject of the action
under the alternative dispute resolution system).
(2) PERMITTING COURT TO WAIVE OR MODIFY
IMPOSITION OF COSTS.—A court may issue a written
order waiving or modifying the application of para-
graph (1) to a party if the court finds that the appli-
cation of such paragraph to the party would con-
stitute an undue hardship, or if the medical mal-
practice liability action raised a novel issue of law.
The order shall specify the grounds for the court’s
decision to waive or modify the application of such
paragraph.
SEC. 327. JOINT AND SEVERAL LIABILITY.
The liability of each defendant in a medical mal-
practice liability action shall be several only and shall not
be joint, and each defendant shall be liable only for the
amount of damages allocated to the defendant in direct
proportion to the defendant’s percentage of responsibility
(as determined by the trier of fact).
SEC. 328. UNIFORM STANDARD FOR DETERMINING NEG-
LIGENCE.
A defendant in a medical malpractice liability action
may not be found to have acted negligently unless the de-
fendant’s conduct at the time of providing the health care
services that are the subject of the action was not reason-
able.
SEC. 329. APPLICATION OF MEDICAL PRACTICE GUIDE-
LINES IN MALPRACTICE LIABILITY ACTIONS.
(a) USE
OF GUIDELINES
AS AFFIRMATIVE DE-
FENSE.—In any medical malpractice liability action, it
shall be a complete defense to any allegation that the de-
fendant was negligent that, in the provision of (or the fail-
ure to provide) the services that are the subject of the
action, the defendant followed the appropriate practice
guideline.
(b) RESTRICTION ON GUIDELINES CONSIDERED AP-
PROPRIATE.—
(1) 
GUIDELINES
SANCTIONED
BY
SEC-
RETARY.—For purposes of subsection (a), a practice
guideline may not be considered appropriate with re-
spect to actions brought during a year unless the
Secretary has sanctioned the use of the guideline for
purposes of an affirmative defense to medical mal-
practice liability actions brought during the year in
accordance with paragraph (2) or (3).
(2) 
ANNUAL
PROCESS
FOR
SANCTIONING
GUIDELINES.—By not later than October 1 of each
year (beginning with 1994), the Secretary shall re-
view the practice guidelines and standards developed
by the Administrator for Health Care Policy and Re-
search pursuant to section 1142 of the Social Secu-
rity Act, and shall sanction those guidelines which
the Secretary considers appropriate for purposes of
an affirmative defense to medical malpractice liabil-
ity actions brought during the next year as appro-
priate practice guidelines for purposes of subsection
(a).
(3) USE OF STATE GUIDELINES.—Upon the ap-
plication of a State, the Secretary may sanction
practice guidelines selected by the State for purposes
of an affirmative defense to medical malpractice li-
ability actions brought in the State as appropriate
practice guidelines for purposes of subsection (a) if
the guidelines meet such requirements as the Sec-
retary may impose.
(c) PROHIBITING APPLICATION OF FAILURE TO FOL-
LOW GUIDELINES AS PRIMA FACIE EVIDENCE OF NEG-
LIGENCE.—No plaintiff in a medical malpractice liability
action may be deemed to have presented prima facie evi-
dence that a defendant was negligent solely by showing
that the defendant failed to follow the appropriate practice
guideline.
(d) PROMOTION
OF MEDICAL PRACTICE GUIDE-
LINES.—
(1) CONSIDERATION OF MALPRACTICE LIABIL-
ITY DATA IN DEVELOPING AND UPDATING GUIDE-
LINES.—Section 1142(c)(5) of the Social Security
Act (42 U.S.C. 1320b–12(c)(5)) is amended by
striking ‘‘claims data’’ and all that follows through
‘‘patients’’ and inserting the following: ‘‘claims data,
data on clinical and functional status of patients,
and data on medical malpractice liability actions’’.
(2) DEVELOPMENT OF REPORTING FORMS FOR
STATE ADR SYSTEMS.—The Secretary, in consulta-
tion with the Administrator for the Health Care Pol-
icy and Research, shall develop a standard reporting
form to be used by State alternative dispute resolu-
tion systems in transmitting information to the Ad-
ministrator pursuant to section 341(a)(7) of this Act
on disputes resolved under such systems.
(e) FUNDING ESTABLISHMENT OF PRACTICE GUIDE-
LINES.—
(1) IN GENERAL.—Each insurer or other entity
that provides individual or group health coverage (as
defined by the Secretary), including health insurance
and coverage under an employer group health plan,
shall pay to the Secretary, at a time and in a man-
ner specified by the Secretary, 1⁄4 of 1 percent of the
gross premiums or other amounts paid for the provi-
sion of such coverage.
(2) PLACEMENT IN A SEPARATE ACCOUNT.—
Amounts paid to the Secretary under paragraph (1)
shall be placed in a separate account in the Treas-
ury.
(3) USE
OF
FUNDS
FOR
PRACTICE
GUIDE-
LINES.—Amounts in such account shall only be
available, pursuant to appropriations Act, for pur-
poses of establishing and sanctioning practice guide-
lines to carry out this section.
(4) SUPPLEMENTATION.—The funds in such
account are intended to supplement, and not to dis-
place, amounts otherwise appropriated for the estab-
lishment of such practice guidelines.
SEC. 330. SPECIAL PROVISION FOR CERTAIN OBSTETRIC
SERVICES.
(a) IMPOSITION OF HIGHER STANDARD OF PROOF.—
(1) IN
GENERAL.—In the case of a medical
malpractice liability action relating to services pro-
vided during labor or the delivery of a baby, if the
defendant health care professional did not previously
treat the plaintiff for the pregnancy, the trier of fact
may not find that the defendant committed mal-
practice and may not assess damages against the de-
fendant unless the malpractice is proven by clear
and convincing evidence.
(2) APPLICABILITY TO GROUP PRACTICES OR
AGREEMENTS AMONG PROVIDERS.—For purposes of
paragraph (1), a health care professional shall be
considered to have previously treated an individual
for a pregnancy if the professional is a member of
a group practice whose members previously treated
the individual for the pregnancy or is providing serv-
ices to the individual during labor or the delivery of
a baby pursuant to an agreement with another pro-
fessional.
(b) CLEAR AND CONVINCING EVIDENCE DEFINED.—
In subsection (a), the term ‘‘clear and convincing evi-
dence’’ is that measure or degree of proof that will
produce in the mind of the trier of fact a firm belief or
conviction as to the truth of the allegations sought to be
established, except that such measure or degree of proof
is more than that required under preponderance of the evi-
dence, but less than that required for proof beyond a rea-
sonable doubt.
(c) EFFECTIVE DATE.—This section shall apply to
claims accruing or actions brought on or after the expira-
tion of the 2-year period that begins on the date of the
enactment of this Act.
SEC. 331. PREEMPTION.
(a) IN GENERAL.—This part supersedes any State
law only to the extent that State law—
(1) permits the recovery of a greater amount of
damages by a plaintiff;
(2) permits the collection of a greater amount
of attorneys’ fees by a plaintiff’s attorney;
(3) establishes a longer period during which a
medical malpractice liability claim may be initiated;
or
(4) establishes a stricter standard for determin-
ing whether a defendant was negligent or for deter-
mining the liability of defendants described in sec-
tion 330(a) in actions described in such section.
(b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE
OF LAW OR VENUE.—Nothing in subsection (a) shall be
construed to—
(1) waive or affect any defense of sovereign im-
munity asserted by any State under any provision of
law;
(2) waive or affect any defense of sovereign im-
munity asserted by the United States;
(3) affect the applicability of any provision of
the Foreign Sovereign Immunities Act of 1976;
(4) preempt State choice-of-law rules with re-
spect to claims brought by a foreign nation or a citi-
zen of a foreign nation; or
(5) affect the right of any court to transfer
venue or to apply the law of a foreign nation or to
dismiss a claim of a foreign nation or of a citizen
of a foreign nation on the ground of inconvenient
forum.
PART 3—REQUIREMENTS FOR STATE
ALTERNATIVE DISPUTE RESOLUTION SYSTEMS
SEC. 341. BASIC REQUIREMENTS FOR ADR.
(a) IN GENERAL.—A State’s alternative dispute reso-
lution system meets the requirements of this section if the
system—
(1) applies to all medical malpractice liability
claims under the jurisdiction of the State courts;
(2) requires that a written opinion resolving the
dispute be issued that contains findings of fact relat-
ing to the dispute;
(3) requires individuals who hear and resolve
claims under the system to meet such qualifications
as the State may require (in accordance with regula-
tions of the Secretary);
(4) is approved by the State or by local govern-
ments in the State;
(5) with respect to a State system that consists
of multiple dispute resolution procedures—
(A) permits the parties to a dispute to se-
lect the procedure to be used for the resolution
of the dispute under the system, and
(B) if the parties do not agree on the pro-
cedure to be used for the resolution of the dis-
pute, assigns a particular procedure to the par-
ties;
(6) provides for the transmittal to the State
agency responsible for monitoring or disciplining
health care professionals and health care providers
of any findings made under the system that such a
professional or provider committed malpractice, un-
less, during the 90-day period beginning on the date
the system resolves the claim against the profes-
sional or provider, the professional or provider
brings a medical malpractice liability action contest-
ing the decision made under the system; and
(7) provides for the regular transmittal to the
Administrator for Health Care Policy and Research
of information on disputes resolved under the sys-
tem, in a manner that assures that the identity of
the parties to a dispute shall not be revealed.
(b) APPLICATION
OF
MALPRACTICE
LIABILITY
STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—
The provisions of part 2 shall apply with respect to claims
brought under a State’s alternative dispute resolution sys-
tem in the same manner as such provisions apply with
respect to medical malpractice liability actions brought in
the State.
SEC. 342. CERTIFICATION OF STATE SYSTEMS.
(a) IN GENERAL.—Not later than October 1 of each
year (beginning with 1994), the Secretary, in consultation
with the Attorney General, shall determine whether a
State’s alternative dispute resolution system meets the re-
quirements of this part for the following calendar year.
(b) BASIS FOR CERTIFICATION.—The Secretary shall
certify a State’s alternative dispute resolution system
under this subsection if the Secretary determines under
subsection (a) that the system meets the requirements of
section 341.
SEC. 343. REPORTS ON IMPLEMENTATION AND EFFECTIVE-
NESS OF ALTERNATIVE DISPUTE RESOLU-
TION SYSTEMS.
(a) IN GENERAL.—Not later than 5 years after the
date of the enactment of this Act, the Secretary shall pre-
pare and submit to Congress a report describing and eval-
uating State alternative dispute resolution systems oper-
ated pursuant to this part.
(b) CONTENTS OF REPORT.—The Secretary shall in-
clude in the report prepared and submitted under sub-
section (a)—
(1) information on—
(A) the effect of such systems on the cost
of health care within the State,
(B) the impact of such systems on the ac-
cess of individuals to health care within the
State, and
(C) the effect of such systems on the qual-
ity of health care provided within such State;
and
(2) to the extent that such report does not pro-
vide information on no-fault systems operated by
States as alternative dispute resolution systems pur-
suant to this part, an analysis of the feasibility and
desirability of establishing a system under which
medical malpractice liability claims shall be resolved
on a no-fault basis.
PART 4—OTHER REQUIREMENTS AND
PROGRAMS
SEC. 351. PERMITTING STATE PROFESSIONAL SOCIETIES
TO PARTICIPATE IN DISCIPLINARY ACTIVI-
TIES.
(a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith-
standing any other provision of State or Federal law, a
State agency responsible for the conduct of disciplinary
actions for a type of health care practitioner may enter
into agreements with State or county professional societies
of such type of health care practitioner to permit such so-
cieties to participate in the licensing of such health care
practitioner, and to review any health care malpractice ac-
tion, health care malpractice claim or allegation, or other
information concerning the practice patterns of any such
health care practitioner. Any such agreement shall comply
with subsection (b).
(b) REQUIREMENTS OF AGREEMENTS.—Any agree-
ment entered into under subsection (a) for licensing activi-
ties or the review of any health care malpractice action,
health care malpractice claim or allegation, or other infor-
mation concerning the practice patterns of a health care
practitioner shall provide that—
(1) the health care professional society conducts
such activities or review as expeditiously as possible;
(2) after the completion of such review, such so-
ciety shall report its findings to the State agency
with which it entered into such agreement;
(3) the conduct of such activities or review and
the reporting of such findings be conducted in a
manner which assures the preservation of confiden-
tiality of health care information and of the review
process; and
(4) no individual affiliated with such society is
liable for any damages or injury directly caused by
the individual’s actions in conducting such activities
or review.
(c) AGREEMENTS NOT MANDATORY.—Nothing in
this section may be construed to require a State to enter
into agreements with societies described in subsection (a)
to conduct the activities described in such subsection.
(d) EFFECTIVE DATE.—This section shall take effect
2 years after the date of the enactment of this Act.
Subtitle C—Administrative Cost
Savings
PART 1—STANDARDIZED CLAIMS PROCESSING
SEC. 
361. 
ADOPTION 
OF 
DATA 
ELEMENTS, 
UNIFORM
CLAIMS, AND UNIFORM ELECTRONIC TRANS-
MISSION STANDARDS.
(a) IN GENERAL.—The Secretary of Health and
Human Services (in this subtitle referred to as the ‘‘Sec-
retary’’) shall adopt standards relating to each of the fol-
lowing:
(1) Data elements for use in paper and elec-
tronic claims processing under health benefit plans,
as well as for use in utilization review and manage-
ment of care (including data fields, formats, and
medical nomenclature, and including plan benefit
and insurance information).
(2) Uniform claims forms (including uniform
procedure and billing codes for uses with such forms
and including information on other health benefit
plans that may be liable for benefits).
(3) Uniform electronic transmission of the data
elements (for purposes of billing and utilization re-
view).
Standards under paragraph (3) relating to electronic
transmission of data elements for claims for services shall
supersede (to the extent specified in such standards) the
standards adopted under paragraph (2) relating to the
submission of paper claims for such services. Standards
under paragraph (3) shall include protections to assure
the confidentiality of patient-specific information and to
protect against the unauthorized use and disclosure of in-
formation.
(b) USE OF TASK FORCES.—In adopting standards
under this section—
(1) the Secretary shall take into account the
recommendations of current task forces, including at
least the Workgroup on Electronic Data Inter-
change, National Uniform Billing Committee, the
Uniform Claim Task Force, and the Computer-based
Patient Record Institute;
(2) the Secretary shall consult with the Na-
tional Association of Insurance Commissioners (and,
with respect to standards under subsection (a)(3),
the American National Standards Institute); and
(3) the Secretary shall, to the maximum extent
practicable, seek to make the standards consistent
with any uniform clinical data sets which have been
adopted and are widely recognized.
(c) DEADLINES
FOR PROMULGATION.—The Sec-
retary shall promulgate the standards under—
(1) subsection (a)(1) relating to claims process-
ing data, by not later than 12 months after the date
of the enactment of this Act;
(2) subsection (a)(2) (relating to uniform
claims forms) by not later than 12 months after the
date of the enactment of this Act; and
(3)(A) subsection (a)(3) relating to trans-
mission of information concerning hospital and phy-
sicians services, by not later than 24 months after
the date of the enactment of this Act, and
(B) subsection (a)(3) relating to transmission
of information on other services, by such later date
as the Secretary may determine it to be feasible.
(d) REPORT TO CONGRESS.—Not later than 3 years
after the date of the enactment of this Act, the Secretary
shall report to Congress recommendations regarding re-
structuring the medicare peer review quality assurance
program given the availability of hospital data in elec-
tronic form.
SEC. 362. APPLICATION OF STANDARDS.
(a) IN GENERAL.—If the Secretary determines, at
the end of the 2-year period beginning on the date that
standards are adopted under section 361 with respect to
classes of services, that a significant number of claims for
benefits for such services under health benefit plans are
not being submitted in accordance with such standards,
the Secretary may require, after notice in the Federal
Register of not less than 6 months, that all providers of
such services must submit claims to health benefit plans
in accordance with such standards. The Secretary may
waive the application of such a requirement in such cases
as the Secretary finds that the imposition of the require-
ment would not be economically practicable.
(b) SIGNIFICANT NUMBER.—The Secretary shall
make an affirmative determination described in subsection
(a) for a class of services only if the Secretary finds that
there would be a significant, measurable additional gain
in efficiencies in the health care system that would be ob-
tained by imposing the requirement described in such
paragraph with respect to such services.
(c) APPLICATION OF REQUIREMENT.—
(1) IN GENERAL.—If the Secretary imposes the
requirement under subsection (a)—
(A) in the case of a requirement that im-
poses the standards relating to electronic trans-
mission of claims for a class of services, each
health care provider that furnishes such services
for which benefits are payable under a health
benefit plan shall transmit electronically and di-
rectly to the plan on behalf of the beneficiary
involved a claim for such services in accordance
with such standards;
(B) any health benefit plan may reject any
claim subject to the standards adopted under
section 361 but which is not submitted in ac-
cordance with such standards;
(C) it is unlawful for a health benefit plan
(i) to reject any such claim on the basis of the
form in which it is submitted if it is submitted
in accordance with such standards or (ii) to re-
quire, for the purpose of utilization review or as
a condition of providing benefits under the plan,
a provider to transmit medical data elements
that are inconsistent with the standards estab-
lished under section 361(a)(1); and
(D) the Secretary may impose a civil
money penalty on any provider that knowingly
and repeatedly submits claims in violation of
such standards or on any health benefit plan
(other than a health benefit plan described in
paragraph (2)) that knowingly and repeatedly
rejects claims in violation of subparagraph (B),
in an amount not to exceed $100 for each such
claim.
The provisions of section 1128A of the Social Secu-
rity Act (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a
civil money penalty under subparagraph (D) in the
same manner as such provisions apply to a penalty
or proceeding under section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan—
(A) that is subject to regulation by a
State, and
(B) with respect to which the Secretary
finds that—
(i) the State provides for application
of the standards established under section
361, and
(ii) the State regulatory program pro-
vides for the appropriate and effective en-
forcement of such standards.
(d) TREATMENT OF REJECTIONS.—If a plan rejects
a claim pursuant to subsection (c)(1), the plan shall per-
mit the person submitting the claim a reasonable oppor-
tunity to resubmit the claim on a form or in an electronic
manner that meets the requirements for acceptance of the
claim under such subsection.
SEC. 
363. 
PERIODIC 
REVIEW 
AND 
REVISION 
OF
STANDARDS.
(a) IN GENERAL.—The Secretary shall—
(1) provide for the ongoing receipt and review
of comments and suggestions for changes in the
standards adopted and promulgated under section
361;
(2) establish a schedule for the periodic review
of such standards; and
(3) based upon such comments, suggestions,
and review, revise such standards and promulgate
such revisions.
(b) APPLICATION OF REVISED STANDARDS.—If the
Secretary under subsection (a) revises the standards de-
scribed in 501, then, in the case of any claim for benefits
submitted under a health benefit plan more than the mini-
mum period (of not less than 6 months specified by the
Secretary) after the date the revision is promulgated
under subsection (a)(3), such standards shall apply under
section 362 instead of the standards previously promul-
gated.
SEC. 364. HEALTH BENEFIT PLAN DEFINED.
In this subtitle, the term ‘‘health benefit plan’’ has
the meaning given such term in section 208(2) and in-
cludes—
(1) the medicare program (under title XVIII of
the Social Security Act) and medicare supplemental
health insurance, and
(2) a State medicaid plan (approved under title
XIX of such Act).
PART 2—ELECTRONIC MEDICAL DATA
STANDARDS
SEC. 371. MEDICAL DATA STANDARDS FOR HOSPITALS AND
OTHER PROVIDERS.
(a) PROMULGATION
OF HOSPITAL DATA STAND-
ARDS.—
(1) IN GENERAL.—Between July 1, 1995, and
January 1, 1996, the Secretary shall promulgate
standards described in subsection (b) for hospitals
concerning electronic medical data.
(2) REVISION.—The Secretary may from time
to time revise the standards promulgated under this
subsection.
(b) CONTENTS OF DATA STANDARDS.—The stand-
ards promulgated under subsection (a) shall include at
least the following:
(1) A definition of a standard set of data ele-
ments for use by utilization and quality control peer
review organizations.
(2) A definition of the set of comprehensive
data elements, which set shall include for hospitals
the standard set of data elements defined under
paragraph (1).
(3) Standards for an electronic patient care in-
formation system with data obtained at the point of
care, including standards to protect against the un-
authorized use and disclosure of information.
(4) A specification of, and manner of presen-
tation of, the individual data elements of the sets
and system under this subsection.
(5) Standards concerning the transmission of
electronic medical data.
(6) Standards relating to confidentiality of pa-
tient-specific information.
The standards under this section shall be consistent with
standards for data elements established under section 361.
(c) OPTIONAL DATA STANDARDS FOR OTHER PRO-
VIDERS.—
(1) IN GENERAL.—The Secretary may promul-
gate standards described in paragraph (2) concern-
ing electronic medical data for providers that are not
hospitals. The Secretary may from time to time re-
vise the standards promulgated under this sub-
section.
(2) CONTENTS
OF
DATA
STANDARDS.—The
standards promulgated under paragraph (1) for non-
hospital providers may include standards comparable
to the standards described in paragraphs (2), (4),
and (5) of subsection (b) for hospitals.
(d) CONSULTATION.—In promulgating and revising
standards under this section, the Secretary shall—
(1) consult with the American National Stand-
ards Institute, hospitals, with the advisory commis-
sion established under section 375, and with other
affected providers, health benefit plans, and other
interested parties, and
(2) take into consideration, in developing stand-
ards under subsection (b)(1), the data set used by
the utilization and quality control peer review pro-
gram under part B of title XI of the Social Security
Act.
SEC. 372. APPLICATION OF ELECTRONIC DATA STANDARDS
TO CERTAIN HOSPITALS.
(a) MEDICARE REQUIREMENT
FOR SHARING
OF
HOSPITAL INFORMATION.—As of January 1, 1997, sub-
ject to paragraph (2), each hospital, as a requirement of
each participation agreement under section 1866 of the
Social Security Act, shall—
(1) maintain clinical data included in the set of
comprehensive 
data 
elements 
under 
section
371(b)(2) in electronic form on all inpatients,
(2) upon request of the Secretary or of a utili-
zation and quality control peer review organization
(with which the Secretary has entered into a con-
tract under part B of title XI of such Act), transmit
electronically the data set, and
(3) upon request of the Secretary, or of a fiscal
intermediary or carrier, transmit electronically any
data (with respect to a claim) from such data set,
in accordance with the standards promulgated under sec-
tion 371(a).
(b) WAIVER AUTHORITY.—Until January 1, 2000:
(1) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is a small rural hospital, for such period as the
hospital demonstrates compliance with such require-
ments would constitute an undue financial hardship.
(2) The Secretary may waive the application of
the requirements of subsection (a) for a hospital
that is in the process of developing a system to pro-
vide the required data set and executes agreements
with its fiscal intermediary and its utilization and
quality control peer review organization that the hos-
pital will meet the requirements of subsection (a) by
a specified date (not later than January 1, 2000).
(3) The Secretary may waive the application of
the requirement of subsection (a)(1) for a hospital
that agrees to obtain from its records the data ele-
ments that are needed to meet the requirements of
paragraphs (2) and (3) of subsection (a) and agrees
to subject its data transfer process to a quality as-
surance program specified by the Secretary.
(c) APPLICATION TO HOSPITALS OF THE DEPART-
MENT OF VETERANS AFFAIRS.—
(1) IN GENERAL.—The Secretary of Veterans
Affairs shall provide that each hospital of the De-
partment of Veterans Affairs shall comply with the
requirements of subsection (a) in the same manner
as such requirements would apply to the hospital if
it were participating in the medicare program.
(2) WAIVER.—Such Secretary may waive the
application of such requirements to a hospital in the
same manner as the Secretary of Health and
Human Services may waive under subsection (b) the
application of the requirements of subsection (a).
SEC. 373. ELECTRONIC TRANSMISSION TO FEDERAL AGEN-
CIES.
(a) IN GENERAL.—Effective January 1, 2000, if a
provider is required under a Federal program to transmit
a data element that is subject to a presentation or trans-
mission standard (as defined in subsection (b)), the head
of the Federal agency responsible for such program (if not
otherwise authorized) is authorized to require the provider
to present and transmit the data element electronically in
accordance with such a standard.
(b) PRESENTATION
OR TRANSMISSION STANDARD
DEFINED.—In subsection (a), the term ‘‘presentation or
transmission standard’’ means a standard, promulgated
under subsection (b) or (c) of section 371, described in
paragraph (4) or (5) of section 371(b).
SEC. 374. LIMITATION ON DATA REQUIREMENTS WHERE
STANDARDS ARE IN EFFECT.
(a) IN GENERAL.—If standards with respect to data
elements are promulgated under section 371 with respect
to a class of provider, a health benefit plan may not re-
quire, for the purpose of utilization review or as a condi-
tion of providing benefits under the plan, that a provider
in the class—
(1) provide any data element not in the set of
comprehensive data elements specified under such
standards, or
(2) transmit or present any such data element
in a manner inconsistent with the applicable stand-
ards for such transmission or presentation.
(b) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with subsection (a) in an
amount not to exceed $100 for each such failure.
The provisions of section 1128A of the Social Secu-
rity Act (other than the first sentence of subsection
(a) and other than subsection (b)) shall apply to a
civil money penalty under this paragraph in the
same manner as such provisions apply to a penalty
or proceeding under section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the requirement of subsection (a), and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such requirement with respect to such plans.
SEC. 375. ADVISORY COMMISSION.
(a) IN GENERAL.—The Secretary shall establish an
advisory commission including hospital executives, hospital
data base managers, physicians, health services research-
ers, and technical experts in collection and use of data
and operation of data systems. Such commission shall in-
clude, as ex officio members, a representative of the Direc-
tor of the National Institutes of Health, the Administrator
for Health Care Policy and Research, the Secretary of
Veterans Affairs, and the Director of the Centers for Dis-
ease Control.
(b) FUNCTIONS.—The advisory commission shall
monitor and advise the Secretary concerning—
(1) the standards established under this part,
and
(2) operational concerns about the implementa-
tion of such standards under this part.
(c) STAFF.—From the amounts appropriated under
subsection (d), the Secretary shall provide sufficient staff
to assist the advisory commission in its activities under
this section.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated such sums as are nec-
essary to carry out this section.
PART 3—ADDITIONAL STANDARDS AND
REQUIREMENTS
SEC. 381. STANDARDS RELATING TO USE OF MEDICARE
AND MEDICAID MAGNETIZED HEALTH BENE-
FIT CARDS; SECONDARY PAYOR DATA BANK.
(a) MAGNETIZED IDENTIFICATION CARDS UNDER
MEDICARE PROGRAM.—The Secretary shall adopt stand-
ards relating to the design and use of magnetized medi-
care identification cards in order to assist health care pro-
viders providing medicare covered services to individuals—
(1) in determining whether individuals are eligi-
ble for benefits under the medicare program, and
(2) in billing the medicare program for such
services provided to eligible individuals.
Such cards shall be designed to be compatible with ma-
chines currently employed to transmit information on
credit cards. Such cards also shall be designed to be able
to be used with respect to the provision of benefits under
medicare supplemental policies.
(b) ADOPTION UNDER MEDICAID PLANS.—
(1) IN
GENERAL.—The Secretary shall take
such steps as may be necessary to encourage and as-
sist States to design and use magnetized medicaid
identification cards that meet such standards, for
use under their medicaid plans.
(2) LIMITATION ON MMIS FUNDS.—In applying
section 1903(a)(3) of the Social Security Act, the
Secretary may determine that Federal financial par-
ticipation is not available under that section to a
State which has provided for a magnetized card sys-
tem that is inconsistent with the standards adopted
under subsection (a).
(c) MEDICARE AND MEDICAID SECONDARY PAYOR
DATA BANK.—The Secretary shall establish a medicare
and medicaid information system which is designed to pro-
vide information on those group health plans and other
health benefit plans that are primary payors to the medi-
care program and medicaid program under section
1862(b) or section 1905(a)(25) of the Social Security Act.
(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated, in equal proportions
from the Federal Hospital Insurance Trust Fund and
from the Federal Supplementary Medical Insurance Trust
Fund, a total of $25,000,000 to carry out subsections (a)
and (c), including the issuance of magnetized cards to
medicare beneficiaries.
SEC. 382. PREEMPTION OF STATE QUILL PEN LAWS.
(a) IN GENERAL.—Effective January 1, 1995, no ef-
fect shall be given to any provision of State law that re-
quires medical or health insurance records (including bill-
ing information) to be maintained in written, rather than
electronic, form.
(b) SECRETARIAL AUTHORITY.—The Secretary of
Health and Human Services may issue regulations to
carry out subsection (a). Such regulations may provide for
such exceptions to subsection (a) as the Secretary deter-
mines to be necessary to prevent fraud and abuse, with
respect to controlled substances, and in such other cases
as the Secretary deems appropriate.
SEC. 383. USE OF STANDARD IDENTIFICATION NUMBERS.
(a) IN GENERAL.—Effective January 1, 1995, each
health benefit plan shall—
(1) for each of its beneficiaries that has a social
security account number, use that number as the
personal identifier for claims processing and related
purposes, and
(2) for each provider that has a unique identi-
fier for purposes of title XVIII of the Social Security
Act and that furnishes health care items or services
to a beneficiary under the plan, use that identifier
as the identifier of that provider for claims process-
ing and related purposes.
(b) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with standards established
under subsection (a) in an amount not to exceed
$100 for each such failure. The provisions of section
1128A of the Social Security Act (other than the
first sentence of subsection (a) and other than sub-
section (b)) shall apply to a civil money penalty
under this paragraph in the same manner as such
provisions apply to a penalty or proceeding under
section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the requirement of subsection (a), and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such requirement with respect to such plans.
SEC. 384. COORDINATION OF BENEFIT STANDARDS.
(a) REVIEW OF COORDINATION OF BENEFIT PROB-
LEMS.—Between July 1, 1995, and January 1, 1996, the
Secretary shall determine whether problems relating to—
(1) the rules for determining the liability of
health benefit plans when benefits are payable under
two or more such plans, or
(2) the availability of information among such
health benefit plans when benefits are so payable,
cause significant administrative costs.
(b) CONTINGENT PROMULGATION OF STANDARDS.—
(1) IN GENERAL.—If the Secretary determines
that such problems do cause significant administra-
tive costs that could be significantly reduced through
the implementation of standards, the Secretary shall
promulgate standards concerning—
(A) the liability of health benefit plans
when benefits are payable under two or more
such plans, and
(B) the transfer among health benefit
plans of appropriate information (which may in-
clude standards for the use of unique identifi-
ers, and for the listing of all individuals covered
under a health benefit plan) in determining li-
ability in cases when benefits are payable under
two or more such plans.
(2) EFFECTIVE DATE.—The standards promul-
gated under paragraph (1) shall become effective on
a date specified by the Secretary, which date shall
be not earlier than one year after the date of pro-
mulgation of the standards.
(c) COMPLIANCE.—
(1) IN GENERAL.—The Secretary may impose a
civil money penalty on any health benefit plan (other
than a health benefit plan described in paragraph
(2)) that fails to comply with standards promulgated
under subsection (b) in an amount not to exceed
$100 for each such failure. The provisions of section
1128A of the Social Security Act (other than the
first sentence of subsection (a) and other than sub-
section (b)) shall apply to a civil money penalty
under this paragraph in the same manner as such
provisions apply to a penalty or proceeding under
section 1128A(a) of such Act.
(2) PLANS SUBJECT TO EFFECTIVE STATE REG-
ULATION.—A plan described in this paragraph is a
health benefit plan that is subject to regulation by
a State, if the Secretary finds that—
(A) the State provides for application of
the standards established under subsection (b),
and
(B) the State regulatory program provides
for the appropriate and effective enforcement of
such standards with respect to such plans.
(d) REVISION OF STANDARDS.—If the Secretary es-
tablishes standards under subsection (b), the Secretary
may revise such standards from time to time and such
revised standards shall be applied under subsection (c) on
or after such date (not earlier than 6 months after the
date the revision is promulgated) as the Secretary shall
specify.
Subtitle C—Estimates of Expenses
Prior to Treatment
SEC. 391. REQUIREMENT.
(a) IN GENERAL.—If requested, except as provided
in subsection (b), each hospital, physician, or other pro-
vider of a health care item or service, before providing any
health care item or services to any individual in the United
States shall disclose to the individual (in form and manner
specified by the Secretary of Health and Human Services)
a range of prices to be charged for the item or service.
In the case of provision of items and services for which
the particular services to be provided are not readily deter-
minable in advance, the Secretary shall permit the use of
such estimates as may be appropriate.
(b) EXCEPTION FOR EMERGENCIES.—Subsection (a)
shall not apply in the case of emergency treatment and
such other extenuating circumstances as the Secretary
may provide by regulation.
(c) ENFORCEMENT.—No individual shall be liable for
payment for a health care item or service for which a dis-
closure is required under subsection (a), if the disclosure
has not been substantially made in accordance with such
subsection.
(d) EFFECTIVE DATE.—This section shall apply to
items and services furnished on or after 1 year after the
date of the enactment of this Act.
Subtitle D—Antitrust Exemptions
SEC. 395. PERMITTING COOPERATIVE ARRANGEMENTS BE-
TWEEN HOSPITALS.
(a) EXEMPTION.—Upon issuance of a certificate
under subsection (c) with respect to an arrangement, the
antitrust laws shall not apply with respect to—
(1) an arrangement among hospitals providing
for (or attempting to provide for) the combination of
two or more hospitals, or
100
(2) a cooperative arrangement entered into sole-
ly by two or more hospitals with respect to sharing
expensive capital-intensive medical technology or
other highly resource-intensive services.
(b) APPLICATION.—In order to obtain the benefits of
subsection (a) with respect to an arrangement, one or
more licensed hospitals may submit to the Secretary of
Health and Human Services an application, containing
such information as the Secretary may require with re-
spect to the arrangement, including—
(1) a statement that such hospital desires to
negotiate and enter into a voluntary cooperative ar-
rangement under which the hospital is operating in
one State or region for the sharing of medical tech-
nology or services with another hospital;
(2) a description of the nature and scope of the
activities contemplated under the arrangement that
demonstrates that consumer costs would not in-
crease under the arrangement;
(3) a description of the financial arrangement
between the hospital and other hospitals that are
parties to the arrangement; and
(4) any other information determined appro-
priate by the Secretary.
101
(c) EVALUATIONS
OF
APPLICATIONS.—Not later
than 120 days after the date an application under sub-
section (b) is received, the Secretary, in consultation with
the Administrator for the Health Care Financing Admin-
istration, shall issue a certificate approving the arrange-
ment if the Secretary determines that under the arrange-
ment—
(1) Federal expenditures will be reduced;
(2) hospital services in geographical proximity
to the communities traditionally served will be pre-
served; and
(3) consumer costs would not increase.
(d) ANTITRUST LAWS DEFINED.—For purposes of
this section, the term ‘‘antitrust laws’’ has the meaning
given such term in subsection (a) of the first section of
the Clayton Act (15 U.S.C. 12), except that such term
includes section 5 of the Federal Trade Commission Act
(15 U.S.C. 45) to the extent that such section 5 applies
with respect to unfair methods of competition.
102
TITLE IV—LONG-TERM CARE
Subtitle A—Treatment of Long-
Term Care Insurance Plans
SEC. 401. QUALIFIED LONG-TERM CARE INSURANCE TREAT-
ED AS ACCIDENT AND HEALTH INSURANCE
FOR PURPOSES OF TAXATION OF LIFE INSUR-
ANCE COMPANIES.
(a) IN GENERAL.—Section 818 of the Internal Reve-
nue Code of 1986 (relating to other definitions and special
rules) is amended by adding at the end the following new
subsection:
‘‘(g) QUALIFIED
LONG-TERM
CARE
INSURANCE
TREATED AS ACCIDENT OR HEALTH INSURANCE.—For
purposes of this part—
‘‘(1) IN GENERAL.—Any reference to accident
or health insurance shall be treated as including a
reference to qualified long-term care insurance.
‘‘(2) QUALIFIED
LONG-TERM
CARE
INSUR-
ANCE.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), the term ‘qualified long-
term care insurance’ means insurance under a
policy or rider, which is issued by a qualified is-
suer, which meets standards at least as strin-
gent as those set forth in the January 1990
103
Long-Term Care Insurance Model Regulation
of the National Association of Insurance Com-
missioners, and which is certified by the Sec-
retary of Health and Human Services (in ac-
cordance with procedures similar to the proce-
dures prescribed in section 1882 of the Social
Security Act (42 U.S.C. 1385ss) used in the
certification of medicare supplemental policies
(as defined in subsection (g)(1) of such sec-
tion)) to be advertised, marketed, offered, or
designed to provide coverage—
‘‘(i) for not less than 12 consecutive
months for each covered person who has
attained age 50,
‘‘(ii) on an expense incurred, indem-
nity, or prepaid basis,
‘‘(iii) for 1 or more medically nec-
essary, diagnostic services, preventive serv-
ices, therapeutic services, rehabilitation
services, maintenance services, or personal
care services, and
‘‘(iv) provided in a setting other than
an acute care unit of a hospital.
104
The requirement of clause (iv) shall be met only
if at least 1 of the settings in which such cov-
erage is provided is the patient’s home.
‘‘(B) 
COVERAGE
SPECIFICALLY
EX-
CLUDED.—Such term does not include any in-
surance under any policy or rider which is of-
fered primarily to provide any combination of
the following kinds of coverage:
‘‘(i) Basic Medicare supplement cov-
erage.
‘‘(ii) Basic hospital-based acute care
expense coverage.
‘‘(iii) Basic medical-surgical expense
coverage.
‘‘(iv) Hospital confinement indemnity
coverage.
‘‘(v) Major medical expense coverage.
‘‘(vi) Disability income protection cov-
erage.
‘‘(vii) Accident only coverage.
‘‘(viii) Specified disease coverage.
‘‘(ix) Specified accident coverage.
‘‘(x) Limited benefit health coverage.
105
‘‘(C) QUALIFIED ISSUER.—For purposes of
subparagraph (A), the term ‘qualified issuer’
means any of the following:
‘‘(i) Private insurance company.
‘‘(ii) Fraternal benefit society.
‘‘(iii) Nonprofit health corporation.
‘‘(iv) Nonprofit hospital corporation.
‘‘(v) Nonprofit medical service cor-
poration.
‘‘(vi) Prepaid health plan.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
SEC. 402. QUALIFIED LONG-TERM CARE INSURANCE TREAT-
ED AS ACCIDENT AND HEALTH INSURANCE
FOR PURPOSES OF EXCLUSION FOR BENE-
FITS RECEIVED UNDER SUCH INSURANCE
AND FOR EMPLOYER CONTRIBUTIONS FOR
SUCH INSURANCE.
(a) IN GENERAL.—Section 105 of the Internal Reve-
nue Code of 1986 (relating to amounts received under ac-
cident and health plans) is amended by adding at the end
the following new subsection:
106
‘‘(j) SPECIAL
RULES
RELATING
TO
QUALIFIED
LONG-TERM CARE INSURANCE.—For purposes of section
104, this section, and section 106—
‘‘(1) BENEFITS
TREATED
AS
PAYABLE
FOR
SICKNESS, ETC.—Any benefit received through quali-
fied long-term care insurance (as defined in section
818(g)) shall be treated as received for personal in-
juries or sickness.
‘‘(2) EXPENSES FOR WHICH REIMBURSEMENT
PROVIDED UNDER QUALIFIED LONG-TERM CARE IN-
SURANCE
TREATED
AS
INCURRED
FOR
MEDICAL
CARE.—Expenses incurred by a taxpayer for which
reimbursement is paid through qualified long-term
care insurance (as so defined) shall be treated for
purposes of subsection (b) as incurred for medical
care (as defined in section 213(d)).
‘‘(3) REFERENCES TO ACCIDENT AND HEALTH
PLANS.—Any reference to an accident or health plan
shall be treated as including a reference to a plan
providing qualified long-term care insurance.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
107
SEC. 403. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
WITHDRAWN 
FROM 
INDIVIDUAL 
RETIRE-
MENT PLANS OR 401(k) PLANS FOR QUALI-
FIED LONG-TERM CARE INSURANCE.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 136 as section 137 and by insert-
ing after section 135 the following new section:
‘‘SEC. 136. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT
ACCOUNTS AND SECTION 401(k) PLANS FOR
QUALIFIED LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount includible in the
gross income of an individual for the taxable year by rea-
son of qualified distributions during such taxable year
shall not exceed the excess of—
‘‘(1) the amount which would (but for this sec-
tion) be so includible by reason of such distributions,
over
‘‘(2) the aggregate premiums paid by such indi-
vidual during such taxable year for any policy of
qualified long-term care insurance (as defined in sec-
tion 818(g)) for the benefit of such individual or the
spouse of such individual.
‘‘(b) QUALIFIED DISTRIBUTION.—For purposes of
this section, the term ‘qualified distribution’ means any
108
distribution to an individual from an individual retirement
account or a section 401(k) plan if such individual has
attained age 591⁄2 on or before the date of the distribution
(and, in the case of a distribution used to pay premiums
for the benefit of the spouse of such individual, such
spouse has attained age 591⁄2 on or before the date of the
distribution).
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) INDIVIDUAL RETIREMENT ACCOUNT.—The
term ‘individual retirement account’ has the mean-
ing given such term by section 408(a).
‘‘(2) SECTION 401(k) PLAN.—The term ‘section
401(k) plan’ means any employer plan which meets
the requirements of section 401(a) and which in-
cludes a qualified cash or deferred arrangement (as
defined in section 401(k)).
‘‘(d) SPECIAL RULES FOR SECTION 401(k) PLANS.—
‘‘(1) WITHDRAWALS
CANNOT
EXCEED
ELEC-
TIVE CONTRIBUTIONS UNDER QUALIFIED CASH OR
DEFERRED ARRANGEMENT.—This section shall not
apply to any distribution from a section 401(k) plan
to the extent the aggregate amount of such distribu-
tions for the use described in subsection (a) exceeds
the aggregate employer contributions made pursuant
to the employee’s election under section 401(k)(2).
109
‘‘(2) WITHDRAWALS NOT TO CAUSE DISQUALI-
FICATION.—A plan shall not be treated as failing to
satisfy the requirements of section 401, and an ar-
rangement shall not be treated as failing to be a
qualified cash or deferred arrangement (as defined
in section 401(k)(2)), merely because under the plan
or arrangement distributions are permitted which
are excludable from gross income by reason of this
section.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 401(k) of such Code is amended by
adding at the end the following new paragraph:
‘‘(11) CROSS REFERENCE.—
‘‘For provision permitting tax-free withdrawals
for payment of long-term care premiums, see section
136.’’
(2) Section 408(d) of such Code is amended by
adding at the end the following new paragraph:
‘‘(8) CROSS REFERENCE.—
For provision permitting tax-free withdrawals
from individual retirement accounts for payment of
long-term care premiums, see section 136.’’
(3) The table of sections for such part III is
amended by striking the last item and inserting the
following new items:
‘‘Sec. 136. Distributions from individual retirement accounts and
section 401(k) plans for qualified long-term care in-
surance.
‘‘Sec. 137. Cross references to other Acts.’’
110
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1993.
SEC. 404. EXCHANGE OF LIFE INSURANCE POLICY FOR
QUALIFIED LONG-TERM CARE POLICY NOT
TAXABLE.
(a) IN GENERAL.—Subsection (a) of section 1035 of
the Internal Revenue Code of 1986 (relating to certain
exchanges of insurance policies) is amended by striking
the period at the end of paragraph (3) and inserting ‘‘;
or’’ and by adding at the end the following new paragraph:
‘‘(4) in the case of an individual who has at-
tained age 591⁄2, a contract of life insurance or a
contract of endowment insurance or an annuity con-
tract for a contract of qualified long-term care insur-
ance (as defined in section 818(g)) for the benefit of
such individual or the spouse of such individual if
such spouse has attained age 591⁄2 on or before the
date of the exchange.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1993.
111
Subtitle B—Treatment of
Accelerated Death Benefits
SEC. 411. TAX TREATMENT OF ACCELERATED DEATH BENE-
FITS UNDER LIFE INSURANCE CONTRACTS.
(a) GENERAL RULE.—Section 101 of the Internal
Revenue Code of 1986 (relating to certain death benefits)
is amended by adding at the end thereof the following new
subsection:
‘‘(g) TREATMENT
OF
CERTAIN
ACCELERATED
DEATH BENEFITS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, any amount paid to an individual under a life
insurance contract on the life of an insured who is
a terminally ill individual or who is permanently con-
fined to a nursing home shall be treated as an
amount paid by reason of the death of such insured.
‘‘(2) TERMINALLY ILL INDIVIDUAL.—For pur-
poses of this subsection, the term ‘terminally ill indi-
vidual’ means an individual who has been certified
by a physician, licensed under State law, as having
an illness or physical condition which can reasonably
be expected to result in death in 12 months or less.
‘‘(3) PERMANENTLY CONFINED TO A NURSING
HOME.—For purposes of this subsection, an individ-
ual has been permanently confined to a nursing
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home if the individual is presently confined to a
nursing home and has been certified by a physician,
licensed under State law, as having an illness or
physical condition which can reasonably be expected
to result in the individual remaining in a nursing
home for the rest of his life.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 412. TAX TREATMENT OF COMPANIES ISSUING QUALI-
FIED ACCELERATED DEATH BENEFIT RID-
ERS.
(a) QUALIFIED ACCELERATED DEATH BENEFIT RID-
ERS TREATED AS LIFE INSURANCE.—Section 818 of the
Internal Revenue Code of 1986 (relating to other defini-
tions and special rules) is amended by adding at the end
thereof the following new subsection:
‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS TREATED AS LIFE INSURANCE.—For purposes of
this part—
‘‘(1) IN GENERAL.—Any reference to a life in-
surance contract shall be treated as including a ref-
erence to a qualified accelerated death benefit rider
on such contract.
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‘‘(2) QUALIFIED ACCELERATED DEATH BENE-
FIT RIDERS.—For purposes of this subsection, the
term ‘qualified accelerated death benefit rider’
means any rider or addendum on, or other provision
of, a life insurance contract which provides for pay-
ments to an individual on the life of an insured upon
such insured becoming a terminally ill individual (as
defined in section 101(g)(2)) or being permanently
confined to a nursing home (as defined in section
101(g)(3)).’’
(b) DEFINITIONS OF LIFE INSURANCE AND MODI-
FIED ENDOWMENT CONTRACTS.—
(1) RIDER
TREATED
AS
QUALIFIED
ADDI-
TIONAL
BENEFIT.—Paragraph (5)(A) of section
7702(f) of such Code is amended by striking ‘‘or’’
at the end of clause (iv), by redesignating clause (v)
as clause (vi), and by inserting after clause (iv) the
following new clause:
‘‘(v) any qualified accelerated death
benefit 
rider 
(as 
defined 
in 
section
818(g)(2)) or any qualified long-term care
insurance rider which reduces the death
benefit, or’’.
(2) TRANSITIONAL RULE.—For purposes of ap-
plying section 7702 or 7702A of the Internal Reve-
114
nue Code of 1986 to any contract (or determining
whether either such section applies to such con-
tract), the issuance of a rider or addendum on, or
other provision of, a life insurance contract permit-
ting the acceleration of death benefits (as described
in section 101(g) of such Code) or for qualified long-
term care insurance (as defined in section 849(b) of
such Code) shall not be treated as a modification or
material change of such contract.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning before,
on, or after December 31, 1993.
TITLE V—INCENTIVES FOR PRO-
VISION 
OF 
SERVICES 
IN
RURAL AREAS
SEC. 501. DEDUCTION FOR MEDICAL SCHOOL EDUCATION
LOAN INTEREST INCURRED BY DOCTORS
SERVING 
IN 
MEDICALLY 
UNDERSERVED
RURAL AREAS.
(a) IN GENERAL.—Paragraph (2) of section 163(h)
of the Internal Revenue Code of 1986 (relating to dis-
allowance of deduction for personal interest) is amended
by striking ‘‘and’’ at the end of subparagraph (D), by re-
designating subparagraph (E) as subparagraph (F), and