I
103D CONGRESS
1ST SESSION
H. R. 196
To provide improved access to health care, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 5, 1993
Mr. HOUGHTON introduced the following bill; which was referred jointly to the
Committees on Ways and Means, Energy and Commerce, and the Judiciary
A BILL
To provide improved access to health care, 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.
This Act may be cited as the ‘‘Health Equity and
Access Improvement Act of 1992’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—TAX INCENTIVES FOR HEALTH CARE ACCESS
Sec. 101. Refundable health expenses tax credit.
Sec. 102. Individual tax deduction for health insurance costs.
Sec. 103. Credit for employers to provide health insurance.
Sec. 104. Deductibility for self-employed individuals.
Sec. 105. Revenue incentives for practice in rural areas.
TITLE II—HEALTH CARE REFORM PROVISIONS
Subtitle A—Model Health Care Insurance Benefits Plan
Sec. 201. Model health care insurance benefits plan.
Sec. 202. Definitions.
Subtitle B—Managed Care
Sec. 211. Development of standards for managed care plans.
Sec. 212. Preemption of provisions relating to managed care.
Subtitle C—Small Employer Purchasing Groups
Sec. 221. Qualified small employer purchasing groups.
Sec. 222. Preemption from insurance mandates for small employer purchasing
groups.
Subtitle D—Insurance Market Reform
Sec. 231. Failure to satisfy certain standards for health care insurance pro-
vided to small employers.
Subtitle E—Uniform Standards for Reporting Services and Processing Claims
Sec. 241. Application and establishment of uniform standards.
Sec. 242. Effective date.
TITLE III—MEDICAL LIABILITY REFORM
Subtitle A—Definitions and Findings
Sec. 301. Definitions.
Sec. 302. Effect on interstate commerce.
Subtitle B—Expedited Medical Malpractice Settlements
Sec. 311. Expedited medical malpractice settlements.
Subtitle C—Alternative Dispute Resolution Procedures
Sec. 321. Establishment of board of advisors.
Sec. 322. Development of State voluntary dispute resolution procedures.
Sec. 323. Application of existing procedures, rebuttable presumption.
Subtitle D—Uniform Standards for Medical Malpractice Cases
Sec. 331. Application to civil actions.
Sec. 332. Damages.
Sec. 333. Joint and several liability for noneconomic damages.
Sec. 334. Uniform statute of limitations.
Sec. 335. Special protection for obstetricians and gynecologists.
Subtitle E—Uniform Disciplinary Reforms
Sec. 341. Requirement of compliance.
Sec. 342. Funds for State disciplinary activities.
Sec. 343. Membership of State health care practitioner boards.
Sec. 344. Immunity for members of State health care practitioner boards.
Sec. 345. Risk management programs.
Sec. 346. Punitive damages.
Subtitle F—Medical Products
Sec. 351. Limitation on award of punitive damages in product liability actions
involving drugs and devices.
Subtitle G—Community Health Centers
Sec. 361. Community and migrant health centers risk retention group.
Subtitle H—Miscellaneous Provisions
Sec. 371. Severability.
Sec. 372. Compliance.
TITLE IV—PUBLIC HEALTH PROVISIONS
Subtitle A—New Basic Health Care Program
Sec. 401. Establishment of BasiCare program.
Sec. 402. GAO study of payments under BasiCare.
Subtitle B—Medicaid Provisions
Sec. 411. Expansion of medicaid waiver authority.
Sec. 412. Establishment of Federal Medical Waiver Demonstration Board.
TITLE V—MEDICALLY UNDERSERVED AREAS
Subtitle A—Public Health Service Act Provisions
Sec. 501. National Health Service Corps.
Sec. 502. Establishment of grant program.
Sec. 503. Establishment of new program to provide funds to allow federally
qualified health centers and other entities or organizations to
provide expanded services to medically underserved individuals.
Sec. 504. Rural mental health outreach grants.
Sec. 505. Health professions training.
Sec. 506. Area health education centers.
Sec. 507. Rural health extension networks.
Sec. 508. Rural managed care cooperatives.
Subtitle B—Provision Relating to Social Security
Sec. 511. Rural health care transition grant program.
Sec. 512. Essential access community hospital program.
TITLE VI—INCENTIVES TO ENCOURAGE PREVENTIVE SERVICES
Sec. 601. Preventive services tax credit.
Sec. 602. Increase in authorization for childhood immunizations.
TITLE VII—TAX TREATMENT OF LONG-TERM CARE INSURANCE
AND PLANS
Subtitle A—Treatment of Long-Term Care Insurance
Sec. 701. Qualified long-term care insurance treated as accident and health in-
surance for purposes of taxation of life insurance companies.
Sec. 702. 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. 703. Exclusion from gross income for amounts withdrawn from individual
retirement plans or 401(k) plans for qualified long-term care
insurance.
Sec. 704. Exchange of life insurance policy for qualified long-term care policy
not taxable.
Subtitle B—Employer Funding of Medical Benefits
Sec. 711. Medical benefits for retired employees and their spouses and depend-
ents.
Sec. 712. Treatment of health benefits accounts.
Subtitle C—Reverse Mortgage Insurance for Older Americans.
Sec. 721. Maximum amount insured.
Subtitle D—Income Tax Credits
Sec. 731. Refundable credit for custodial care of certain dependents in tax-
payer’s home.
Sec. 732. Credit for expenses for long-term care services provided to certain
independent persons requiring such care.
Subtitle E—Treatment of Accelerated Death Benefits
Sec. 741. Tax treatment of accelerated death benefits under life insurance con-
tracts.
Sec. 742. Tax treatment of companies issuing qualified accelerated death bene-
fit riders.
Subtitle F—Federal National Long-Term Care Reinsurance Corporation
Sec. 751. Authorization for establishment of corporation.
Sec. 752. Board of directors and officers.
Sec. 753. Purpose and authority of corporation.
Sec. 754. Capitalization.
Sec. 755. Exemption from state regulation and taxation.
Sec. 756. Audit and annual report.
Sec. 757. Protection of name.
TITLE VIII—IMPROVEMENTS IN PORTABILITY OF PRIVATE
HEALTH INSURANCE
Sec. 801. Excise tax imposed on failure to provide for preexisting condition.
TITLE I—TAX INCENTIVES FOR
HEALTH CARE ACCESS
SEC. 101. REFUNDABLE HEALTH EXPENSES TAX CREDIT.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable personal credits) is amended
by inserting after section 34 the following new section:
‘‘SEC. 34A. HEALTH EXPENSES.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount
equal to the qualified health expenses paid by such individ-
ual during the taxable year.
‘‘(b) QUALIFIED HEALTH EXPENSES.—For purposes
of this section—
‘‘(1) IN GENERAL.—The term ‘qualified health
expenses’ means amounts paid during the taxable
year for medical care (within the meaning of section
213(d)(1)).
‘‘(2) DOLLAR
LIMIT
ON
QUALIFIED
HEALTH
EXPENSES.—The amount of the qualified health ex-
penses paid during any taxable year which may be
taken into account under subsection (a) shall not ex-
ceed—
‘‘(A) $600, in the case of a taxpayer de-
scribed in section 1(c) or 1(d), and
‘‘(B) $1,200, in the case of any other tax-
payer.
For purposes of this paragraph, the rule of section
219(g)(4) shall apply.
‘‘(3) PHASEOUT.—In the case of any taxpayer
whose adjusted gross income exceeds $10,000
($20,000, in the case of a taxpayer described in
paragraph (2)(B)), the dollar amounts under para-
graph (2) shall be reduced (but not below zero) by
an amount equal to 10 percent of such excess.
‘‘(4) ELECTION NOT TO TAKE CREDIT.—A tax-
payer may elect for any taxable year to have
amounts described in paragraph (1) not treated as
qualified health expenses.
‘‘(c) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) COORDINATION WITH ADVANCE PAYMENT
AND MINIMUM TAX.—Rules similar to the rules of
subsections (g) and (h) of section 32 shall apply to
any credit to which this section applies.
‘‘(2) SUBSIDIZED EXPENSES.—No expense shall
be treated as a qualified health expense if—
‘‘(A) such expense is paid, reimbursed, or
subsidized (whether by being disregarded for
purposes of another program or otherwise) by
the Federal Government, a State or local gov-
ernment, or any agency or instrumentality
thereof, and
‘‘(B) the payment, reimbursement, or sub-
sidy of such expense is not includable in the
gross income of the recipient.
‘‘(d) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section.’’.
(b) ADVANCE PAYMENT OF CREDIT.—Chapter 25 of
the Internal Revenue Code of 1986 (relating to general
provisions relating to employment taxes) is amended by
inserting after section 3507 the following new section:
‘‘SEC. 3507A. ADVANCE PAYMENT OF HEALTH EXPENSES
CREDIT.
‘‘(a) GENERAL RULE.—Except as otherwise provided
in this section, every employer making payment of wages
with respect to whom a health expenses eligibility certifi-
cate is in effect shall, at the time of paying such wages,
make an additional payment equal to such employee’s
health expenses advance amount.
‘‘(b) HEALTH
EXPENSES
ELIGIBILITY
CERTIFI-
CATE.—For purposes of this title, a health expenses eligi-
bility certificate is a statement furnished by an employee
to the employer which—
‘‘(1) certifies that the employee will be eligible
to receive the credit provided by section 34A for the
taxable year,
‘‘(2) certifies that the employee does not have
a health expenses eligibility certificate in effect for
the calendar year with respect to the payment of
wages by another employer,
‘‘(3) states whether or not the employee’s
spouse has a health expenses eligibility certificate in
effect, and
‘‘(4) estimates the amount of qualified health
expenses (as defined in section 34A(b)) for the cal-
endar year.
For purposes of this section, a certificate shall be treated
as being in effect with respect to a spouse if such a certifi-
cate will be in effect on the first status determination date
following the date on which the employee furnishes the
statement in question.
‘‘(c) HEALTH EXPENSES ADVANCE AMOUNT.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘health expenses advance amount’ means,
with respect to any payroll period, the amount deter-
mined—
‘‘(A) on the basis of the employee’s wages
from the employer for such period,
‘‘(B) on the basis of the employee’s esti-
mated qualified health expenses included in the
health expenses eligibility certificate, and
‘‘(C) in accordance with tables provided by
the Secretary.
‘‘(2) ADVANCE AMOUNT TABLES.—The tables
referred to in paragraph (1)(C) shall be similar in
form to the tables prescribed under section 3402
and, to the maximum extent feasible, shall be coordi-
nated with such tables and the tables prescribed
under section 3507(c).
‘‘(d) OTHER RULES.—For purposes of this section,
rules similar to the rules of subsections (d) and (e) of sec-
tion 3507 shall apply.
‘‘(e) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary to carry out the pur-
poses of this section.’’.
(c) TERMINATION OF HEALTH INSURANCE CRED-
IT.—Section 32 of the Internal Revenue Code of 1986 (re-
lating to earned income credit) is amended by adding at
the end thereof the following new subsection:
‘‘(d) TERMINATION OF HEALTH INSURANCE CRED-
IT.—In the case of taxable years beginning after Decem-
ber 31, 1992, the health insurance credit percentage shall
be equal to 0 percent.’’.
(d) CONFORMING AMENDMENT.—Section 213 of the
Internal Revenue Code of 1986 (relating to deduction for
medical, dental, etc., expenses) is amended by striking
subsections (e) and (f) and by inserting the following new
subsection:
‘‘(e) COORDINATION
WITH
HEALTH
EXPENSES
CREDIT UNDER SECTION 34A.—The amount otherwise
taken into account under subsection (a) as expenses paid
for medical care shall be reduced by the amount (if any)
of the health expenses credit allowable to the taxpayer for
the taxable year under section 34A.’’.
(e) CLERICAL AMENDMENTS.—
(1) The table of sections for subpart A of part
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by inserting after the
item relating to section 34 the following new item:
‘‘Sec. 34A. Health expenses.’’.
(2) The table of sections for chapter 25 of such
Code is amended by adding after the item relating
to section 3507 the following new item:
‘‘Sec. 3507A. Advance payment of health expenses credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 102. INDIVIDUAL TAX DEDUCTION FOR HEALTH IN-
SURANCE COSTS.
(a) FULL DEDUCTION ALLOWED.—Subsection (a) of
section 213 of the Internal Revenue Code of 1986 (relat-
ing to deduction for medical, dental, etc., expenses) is
amended to read as follows:
‘‘(a) ALLOWANCE OF DEDUCTION.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), there shall be allowed as a deduction the
expenses paid during the taxable year, not com-
pensated for by insurance or otherwise, for medical
care of the taxpayer, the taxpayer’s spouse, or a de-
pendent (as defined in section 152).
‘‘(2) SPECIAL DOLLAR LIMITATION.—Expenses
for medical care described in subparagraphs (A) and
(B) of subsection (d)(1) shall be taken into account
under subsection (a) only to the extent that such ex-
penses exceed 7.5 percent of the taxpayer’s adjusted
gross income for the taxable year.’’.
(b) DEDUCTION AVAILABLE FOR NONITEMIZERS.—
(1) IN GENERAL.—Section 213 of the Internal
Revenue Code of 1986, as amended by section
101(d), is further amended by adding at the end
thereof the following new subsection:
‘‘(f) RULE
FOR
NONITEMIZATION
OF
DEDUC-
TIONS.—In the case of an individual who does not itemize
his deductions for the taxable year, the amount allowable
under subsection (a) for the taxable year with respect to
expenses described in subsection (d)(1)(C) shall be taken
into account as a direct health insurance deduction under
section 63.’’.
(2) DEFINITION OF TAXABLE INCOME.—
(A) IN GENERAL.—Section 63(b) of such
Code (relating to individuals who do not itemize
their deductions) is amended—
(i) by striking ‘‘and’’ at the end of
paragraph (1),
(ii) by striking the period at the end
of paragraph (2) and inserting ‘‘, and’’,
and
(iii) by adding at the end thereof the
following new paragraph:
‘‘(3) the direct health insurance deduction.’’.
(B) DIRECT HEALTH INSURANCE DEDUC-
TION DEFINED.—Section 63 of such Code (de-
fining taxable income) is amended by adding at
the end thereof the following new subsection:
‘‘(h) DIRECT HEALTH INSURANCE DEDUCTION.—
For purposes of this section, the term ‘direct health insur-
ance deduction’ means that portion of the amount allow-
able under section 213(a) which is taken as a direct health
insurance deduction for the taxable year under section
213(f).’’.
(C) CONFORMING
AMENDMENT.—Section
63(d) of such Code (defining itemized deduc-
tions) is amended—
(i) by striking ‘‘and’’ at the end of
paragraph (1),
(ii) by striking the period at the end
of paragraph (2) and inserting ‘‘, and’’,
and
(iii) by adding at the end thereof the
following new paragraph:
‘‘(3) the direct health insurance deduction.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 103. CREDIT FOR EMPLOYERS TO PROVIDE HEALTH
INSURANCE.
(a) ALLOWANCE OF CREDIT.—Section 38(b) of the
Internal Revenue Code of 1986 (defining general business
credit) is amended by striking ‘‘plus’’ at the end of para-
graph (6), by striking the period at the end of paragraph
(7) and inserting ‘‘, plus’’, and by adding at the end there-
of the following new paragraph:
‘‘(8) the employer health insurance credit.’’
(b) EMPLOYER HEALTH INSURANCE CREDIT.—Sub-
part D of part IV of subchapter A of chapter 1 of such
Code (relating to business related credits) is amended by
adding at the end thereof the following new section:
‘‘SEC. 45. EMPLOYER HEALTH INSURANCE CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the amount of the employer health insurance credit deter-
mined under this section for the taxable year is an amount
equal to the sum of—
‘‘(1) the small employer basic health insurance
credit,
‘‘(2) the managed care credit,
‘‘(3) the dependent coverage credit, and
‘‘(4) the small employer purchasing group
health insurance credit.
‘‘(b) DEFINITION
OF
SMALL
EMPLOYER
BASIC
HEALTH INSURANCE CREDIT, MANAGED CARE CREDIT,
DEPENDENT COVERAGE CREDIT, AND SMALL EMPLOYER
PURCHASING GROUP HEALTH INSURANCE CREDIT.—
‘‘(1) SMALL EMPLOYER BASIC HEALTH INSUR-
ANCE CREDIT.—The small employer basic health in-
surance credit of any eligible employer which is an
eligible small employer is 25 percent of the qualified
health care costs of such employer beginning with
the first full taxable year in which such employer of-
fers health-care coverage to employees of such em-
ployer, reduced (but not below zero percentage) by
5 percentage points for each taxable year thereafter.
‘‘(2) MANAGED CARE CREDIT.—The managed
care credit of any eligible employer is 25 percent of
the approved managed care plan costs of such em-
ployer beginning with the first full taxable year in
which such employer offers an approved managed
care 
plan 
(within 
the 
meaning 
of 
section
162(m)(3)(B)) to employees of such employer for
the taxable year, reduced (but not below zero per-
cent) by 5 percentage points for each taxable year
thereafter.
‘‘(3) DEPENDENT COVERAGE CREDIT.—The de-
pendent coverage credit of any eligible employer is
25 percent of the qualified dependent coverage costs
of such employer beginning with the first full taxable
year in which such employer offers health-care cov-
erage to dependents of employees of such employer
for the taxable year, reduced (but not below zero
percent) by 5 percentage points for each taxable
year thereafter.
‘‘(4) SMALL
EMPLOYER
PURCHASING
GROUP
HEALTH INSURANCE CREDIT.—The small employer
purchasing group health insurance credit of any eli-
gible small employer which is a member of a quali-
fied small employer purchasing group is 20 percent
of the qualified health care costs of such employer
for the taxable year.
‘‘(c) ELIGIBLE EMPLOYER.—An employer is eligible
for a small employer basic health insurance credit, man-
aged care credit, and dependent coverage credit under this
section if such employer (or any predecessor employer) has
never provided health-care coverage, an approved managed
care plan, or dependent coverage for its employees (as the
case may be) at any time before the calendar year in which
occurs the first full taxable year described in paragraphs
(1), (2), or (3) of subsection (b), respectively.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED
HEALTH
CARE
COSTS.—The
term ‘qualified health care costs’ means the amounts
paid by the employer for health-care coverage of its
employees.
‘‘(2) APPROVED MANAGED CARE PLAN COSTS.—
‘‘(A) IN
GENERAL.—The term ‘approved
managed care plan costs’ means the amounts
paid by the employer for an approved managed
care plan for the employees of such employer.
‘‘(B) APPROVED MANAGED CARE PLAN.—
The term ‘approved managed care plan’ means
a managed care plan meeting the requirements
of section 202(2) of the Health Equity and Ac-
cess Improvement Act of 1992.
‘‘(3) 
QUALIFIED
DEPENDENT
COVERAGE
COSTS.—The term ‘qualified dependent coverage
costs’ means the amounts paid by the employer for
health-care coverage of the dependents of employees
of such employer.
‘‘(4) ELIGIBLE SMALL EMPLOYER.—
‘‘(A) IN
GENERAL.—The term ‘eligible
small employer’ means any person—
‘‘(i) which, on an average business
day during the preceding taxable year, had
more than 2 but less than 100 employees,
and
‘‘(ii) at least 60 percent of the em-
ployees of which during the taxable year
received health-care coverage described in
paragraph (1).
‘‘(B) AGGREGATION RULES.—All members
of the same controlled group of corporations
(within the meaning of section 52(a)) and all
persons under common control (within the
meaning of section 52(b)) shall be treated as 1
person.
‘‘(C) EMPLOYEE.—The term ‘employee’
shall not include—
‘‘(i) a self-employed individual as de-
fined in section 401(c)(1), or
‘‘(ii) an employee who works less than
20 hours per week.
‘‘(5) QUALIFIED SMALL EMPLOYER PURCHAS-
ING
GROUP.—The term ‘qualified small employer
purchasing group’ has the meaning given such term
by section 221(a) of the Health Equity and Access
Improvement Act of 1992.
‘‘(e) COORDINATION WITH DEDUCTION.—No deduc-
tion shall be allowable under this chapter for any qualified
health care costs taken into account in computing the
amount of the credit under section 38.’’.
(c) CONFORMING AMENDMENT.—Section 39(d) of
such Code is amended by adding at the end thereof the
following new paragraph:
‘‘(3) NO
CARRYBACK
OF
EMPLOYER
HEALTH
INSURANCE CREDIT BEFORE 1993.—No portion of
the unused business credit for any taxable year
which is attributable to the credit determined under
section 45(a) (relating to employer health insurance
credit) may be carried to a taxable year beginning
before January 1, 1992.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 104. DEDUCTIBILITY FOR SELF-EMPLOYED INDIVID-
UALS.
(a) IN GENERAL.—Paragraph (1) of section 162(l)
of the Internal Revenue Code of 1986 (relating to special
rules for health insurance costs of self-employed individ-
uals) is amended by striking ‘‘25 percent of’’.
(b) DEDUCTION MADE PERMANENT.—Section 162(l)
of the Internal Revenue Code of 1986 is amended by strik-
ing paragraph (6).
(c) CONFORMING AMENDMENT.—Subparagraph (B)
of section 162(l)(3) of the Internal Revenue Code of 1986
(relating to coordination with medical deduction, etc.) is
amended—
(1) by striking ‘‘health insurance credit’’ and
inserting ‘‘health expenses credit and employer
health insurance credit’’,
(2) by striking ‘‘section 32’’ and inserting ‘‘sec-
tion 34A with respect to such insurance and section
38, respectively’’, and
(3) by striking ‘‘CREDIT’’ in the heading thereof
and inserting ‘‘CREDITS’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1992.
SEC. 105. REVENUE INCENTIVES FOR PRACTICE IN RURAL
AREAS.
(a) NONREFUNDABLE CREDIT FOR CERTAIN PRI-
MARY HEALTH SERVICES PROVIDERS.—
(1) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code
of 1986 (relating to nonrefundable personal credits)
is amended by inserting after section 25 the follow-
ing new section:
‘‘SEC. 25A. PRIMARY HEALTH SERVICES PROVIDERS.
‘‘(a) ALLOWANCE
OF CREDIT.—In the case of a
qualified primary health services provider, there is allowed
as a credit against the tax imposed by this chapter for
any taxable year in a mandatory service period an amount
equal to the product of—
‘‘(1) the lesser of—
‘‘(A) the number of months of such period
occurring in such taxable year, or
‘‘(B) 36 months, reduced by the number of
months taken into account under this para-
graph with respect to such provider for all pre-
ceding taxable years (whether or not in the
same mandatory service period), multiplied by
‘‘(2) $1,000 ($500 in the case of a qualified
health services provider who is a physician assistant
or a nurse practitioner).
‘‘(b) QUALIFIED PRIMARY HEALTH SERVICES PRO-
VIDER.—For purposes of this section, the term ‘qualified
primary health services provider’ means any physician,
physician assistant, or nurse practitioner who for any
month during a mandatory service period is certified by
the Bureau to be a primary health services provider who—
‘‘(1) is providing primary health services—
‘‘(A) full time, and
‘‘(B) to individuals at least 80 percent of
whom reside in a rural health professional
shortage area,
‘‘(2) is not receiving during such year a scholar-
ship under the National Health Service Corps Schol-
arship Program or a loan repayment under the Na-
tional Health Service Corps Loan Repayment Pro-
gram,
‘‘(3) is not fulfilling service obligations under
such Programs, and
‘‘(4) has not defaulted on such obligations.
‘‘(c) MANDATORY SERVICE PERIOD.—For purposes
of this section, the term ‘mandatory service period’ means
the period of 60 consecutive calendar months beginning
with the first month the taxpayer is a qualified primary
health services provider.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) BUREAU.—The term ‘Bureau’ means the
Bureau of Health Care Delivery and Assistance,
Health Resources and Services Administration of the
United States Public Health Service.
‘‘(2) PHYSICIAN.—The term ‘physician’ has the
meaning given to such term by section 1861(r) of
the Social Security Act.
‘‘(3) PHYSICIAN
ASSISTANT; NURSE
PRACTI-
TIONER.—The terms ‘physician assistant’ and ‘nurse
practitioner’ have the meanings given to such terms
by section 1861(aa)(3) of the Social Security Act.
‘‘(4) PRIMARY HEALTH SERVICES PROVIDER.—
The term ‘primary health services provider’ means a
provider of primary health services (as defined in
section 330(b)(1) of the Public Health Service Act).
‘‘(5) RURAL HEALTH PROFESSIONAL SHORTAGE
AREA.—The term ‘rural health professional shortage
area’ means—
‘‘(A) a class 1 or class 2 health profes-
sional shortage area (as defined in section
332(a)(1)(A) of the Public Health Service Act)
in a rural area (as determined under section
1886(d)(2)(D) of the Social Security Act), or
‘‘(B) an area which is determined by the
Secretary of Health and Human Services as
equivalent to an area described in subparagraph
(A) and which is designated by the Bureau of
the Census as not urbanized.
‘‘(e) RECAPTURE OF CREDIT.—
‘‘(1) IN GENERAL.—If, during any taxable year,
there is a recapture event, then the tax of the tax-
payer under this chapter for such taxable year shall
be increased by an amount equal to the product of—
‘‘(A) the applicable percentage, and
‘‘(B) the aggregate unrecaptured credits
allowed to such taxpayer under this section for
all prior taxable years.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
‘‘If the recapture
The applicable recap-
event occurs during:
ture percentage is:
Months 1–24 ..............................................
100
Months 25–36 ............................................
Months 37–48 ............................................
Months 49–60 ............................................
Months 61 and thereafter ..........................
0.
‘‘(B) TIMING.—For purposes of subpara-
graph (A), month 1 shall begin on the first day
of the mandatory service period.
‘‘(3) RECAPTURE EVENT DEFINED.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘recapture event’ means
the failure of the taxpayer to be a qualified pri-
mary health services provider for any month
during any mandatory service period.
‘‘(B) CESSATION
OF
DESIGNATION.—The
cessation of the designation of any area as a
rural health professional shortage area after the
beginning of the mandatory service period for
any taxpayer shall not constitute a recapture
event.
‘‘(C) SECRETARIAL
WAIVER.—The Sec-
retary may waive any recapture event caused by
extraordinary circumstances.
‘‘(4) NO CREDITS AGAINST TAX.—Any increase
in tax under this subsection shall not be treated as
a tax imposed by this chapter for purposes of deter-
mining the amount of any credit under subpart A,
B, or D of this part.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of
chapter 1 of such Code is amended by inserting
after the item relating to section 25 the following
new item:
‘‘Sec. 25A. Primary health services providers.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1992.
(b) NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS EXCLUDED FROM GROSS INCOME.—
(1) IN GENERAL.—Part III of subchapter B of
chapter 1 of the Internal Revenue Code of 1986 (re-
lating to items specifically excluded from gross in-
come) is amended by redesignating section 136 as
section 137 and by inserting after section 135 the
following new section:
‘‘SEC. 136. NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any qualified loan repayment.
‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes
of this section, the term ‘qualified loan repayment’ means
any payment made on behalf of the taxpayer by the Na-
tional Health Service Corps Loan Repayment Program
under section 338B(g) of the Public Health Service Act.’’.
(2) CONFORMING AMENDMENT.—Paragraph (3)
of section 338B(g) of the Public Health Service Act
is amended by striking ‘‘Federal, State, or local’’
and inserting ‘‘State or local’’.
(3) CLERICAL AMENDMENT.—The table of sec-
tions for part III of subchapter B of chapter 1 of
the Internal Revenue Code of 1986 is amended by
striking the item relating to section 136 and insert-
ing the following:
‘‘Sec. 136. National Health Service Corps loan repayments.
‘‘Sec. 137. Cross references to other Acts.’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to payments made
under section 338B(g) of the Public Health Service
Act after the date of the enactment of this Act.
(c) EXPENSING OF MEDICAL EQUIPMENT.—
(1) IN GENERAL.—Section 179 of the Internal
Revenue Code of 1986 (relating to election to ex-
pense of certain depreciable business assets) is
amended—
(A) by striking paragraph (1) of subsection
(b) and inserting the following:
‘‘(1) DOLLAR LIMITATION.—
‘‘(A) GENERAL RULE.—The aggregate cost
which may be taken into account under sub-
section (a) for any taxable year shall not exceed
$10,000.
‘‘(B) RURAL HEALTH CARE PROPERTY.—
In the case of rural health care property, the
aggregate cost which may be taken into account
under subsection (a) for any taxable year shall
not exceed $25,000, reduced by the amount
otherwise taken into account under subsection
(a) for such year.’’; and
(B) by adding at the end of subsection (d)
the following new paragraph:
‘‘(11) RURAL HEALTH CARE PROPERTY.—For
purposes of this section, the term ‘rural health care
property’ means section 179 property used by a phy-
sician (as defined in section 1861(r) of the Social
Security Act) in the active conduct of such physi-
cian’s full-time trade or business of providing pri-
mary health services (as defined in section 330(b)(1)
of the Public Health Service Act) in a rural health
professional shortage area (as defined in section
25A(d)(5)).’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to property placed in
service after December 31, 1992, in taxable years
ending after such date.
(d) DEDUCTION FOR STUDENT LOAN PAYMENTS BY
MEDICAL
PROFESSIONALS
PRACTICING
IN
RURAL
AREAS.—
(1) INTEREST ON STUDENT LOANS NOT TREAT-
ED AS PERSONAL INTEREST.—Section 163(h)(2) of
the Internal Revenue Code of 1986 (defining per-
sonal interest) is amended by striking ‘‘and’’ at the
end of subparagraph (D), by striking the period at
the end of subparagraph (E) and inserting ‘‘, and’’,
and by adding at the end thereof the following new
subparagraph:
‘‘(F) any qualified medical education interest
(within the meaning of subsection (k)).’’.
(2) QUALIFIED MEDICAL EDUCATION INTEREST
DEFINED.—Section 163 of such Code (relating to in-
terest expenses) is amended by redesignating sub-
section (k) as subsection (l) and by inserting after
subsection (j) the following new subsection:
‘‘(k) QUALIFIED MEDICAL EDUCATION INTEREST OF
MEDICAL
PROFESSIONALS
PRACTICING
IN
RURAL
AREAS.—
‘‘(1) IN GENERAL.—For purposes of subsection
(h)(2)(F), the term ‘qualified medical education in-
terest’ means an amount which bears the same ratio
to the interest paid on qualified educational loans
during the taxable year by an individual performing
services under a qualified rural medical practice
agreement as—
‘‘(A) the number of months during the tax-
able year during which such services were per-
formed, bears to
‘‘(B) the number of months in the taxable
year.
‘‘(2) DOLLAR
LIMITATION.—The aggregate
amount which may be treated as qualified medical
education interest for any taxable year with respect
to any individual shall not exceed $5,000.
‘‘(3) QUALIFIED
RURAL
MEDICAL
PRACTICE
AGREEMENT.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
rural medical practice agreement’ means a writ-
ten agreement between an individual and an ap-
plicable rural community under which the indi-
vidual agrees—
‘‘(i) in the case of a medical doctor,
upon completion of the individual’s resi-
dency (or internship if no residency is re-
quired), or
‘‘(ii) in the case of a registered nurse,
nurse practitioner, or physician’s assistant,
upon completion of the education to which
the qualified education loan relates,
to perform full-time services as such a medical
professional in the applicable rural community
for a period of 24 consecutive months. An indi-
vidual and an applicable rural community may
elect to have the agreement apply for 36 con-
secutive months rather than 24 months.
‘‘(B) SPECIAL RULE FOR COMPUTING PE-
RIODS.—An individual shall be treated as meet-
ing the 24 or 36 consecutive month requirement
under subparagraph (A) if, during each 12-con-
secutive month period within either such period,
the individual performs full-time services as a
medical doctor, registered nurse, nurse practi-
tioner, or physician’s assistant, whichever ap-
plies, in the applicable rural community during
9 of the months in such 12-consecutive month
period. For purposes of this subsection, an indi-
vidual meeting the requirements of the preced-
ing sentence shall be treated as performing
services during the entire 12-month period.
‘‘(C) APPLICABLE
RURAL
COMMUNITY.—
The term ‘applicable rural community’ means—
‘‘(i) any political subdivision of a
State which—
‘‘(I) has a population of 5,000 or
less, and
‘‘(II) has a per capita income of
$15,000 or less, or
‘‘(ii) an Indian reservation which has
a per capita income of $15,000 or less.
‘‘(4) QUALIFIED
EDUCATIONAL
LOAN.—The
term ‘qualified educational loan’ means any indebt-
edness to pay qualified tuition and related expenses
(within the meaning of section 117(b)) and reason-
able living expenses—
‘‘(A) which are paid or incurred—
‘‘(i) as a candidate for a degree as a
medical doctor at an educational institu-
tion described in section 170(b)(1)(A)(ii),
or
‘‘(ii) in connection with courses of in-
struction at such an institution necessary
for certification as a registered nurse,
nurse practitioner, or physician’s assistant,
and
‘‘(B) which are paid or incurred within a
reasonable time before or after such indebted-
ness is incurred.
‘‘(5) RECAPTURE.—If an individual fails to
carry out a qualified rural medical practice agree-
ment during any taxable year, then—
‘‘(A) no deduction with respect to such
agreement shall be allowable by reason of sub-
section (h)(2)(F) for such taxable year and any
subsequent taxable year, and
‘‘(B) there shall be included in gross in-
come for such taxable year the aggregate
amount of the deductions allowable under this
section (by reason of subsection (h)(2)(F)) for
all preceding taxable years.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section, the terms ‘registered nurse’, ‘nurse practi-
tioner’, and ‘physician’s assistant’ have the meaning
given such terms by section 1861 of the Social Secu-
rity Act.’’.
(3) DEDUCTION ALLOWED IN COMPUTING AD-
JUSTED
GROSS
INCOME.—Section 62(a) of such
Code is amended by inserting after paragraph (13)
the following new paragraph:
‘‘(14) INTEREST ON STUDENT LOANS OF RURAL
HEALTH PROFESSIONALS.—The deduction allowable
by reason of section 163(h)(2)(F) (relating to stu-
dent loan payments of medical professionals practic-
ing in rural areas).’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1991.
TITLE II—HEALTH CARE
REFORM PROVISIONS
Subtitle A—Model Health Care
Insurance Benefits Plan
SEC. 201. MODEL HEALTH CARE INSURANCE BENEFITS
PLAN.
(a) IN GENERAL.—The Secretary shall request that
the NAIC—
(1) develop a model health care insurance bene-
fits plan that shall contain standards that entities
offering health care insurance policies should meet
with respect to the benefits and coverage provided
under such policies, and
(2) report to the Secretary on such standards,
not later than 1 year after the date of enactment of
this Act.
If the NAIC develops such a plan by such date and the
Secretary finds that such plan implements the require-
ments of subsection (c), such plan shall be the model
health care insurance benefits plan under this Act.
(b) ROLE OF THE SECRETARY IN ABSENCE OF NAIC
PLAN.—If the NAIC fails to develop and report a model
health care insurance benefits plan by the date specified
in subsection (a) or the Secretary finds that such plan
does not implement the requirements of subsection (c), the
Secretary shall develop and publish such a plan, by not
later than eighteen months after the date of enactment
of this Act. Such plan shall then be the plan under this
Act.
(c) CONTENTS.—The standards under the model ben-
efits plan should require—
(1) that coverage be provided under health care
insurance policies for basic hospital, medical and
surgical services, including preventative care services
determined appropriate by the Secretary;
(2) reasonable cost sharing by the beneficiaries
under such policies; and
(3) appropriate copayments and deductibles.
SEC. 202. DEFINITIONS.
As used in this title:
(1) HEALTH
CARE
INSURANCE.—The term
‘‘health care insurance’’ means any hospital or medi-
cal expense incurred policy or certificate, hospital or
medical service plan contract, health maintenance
subscriber contract, multiple employer welfare ar-
rangement, other employee welfare plan (as defined
in the Employee Retirement Income Security Act of
1974), or any other health insurance arrangement,
and includes an employment-related reinsurance
plan, but does not include—
(A) a self-insured health care insurance
plan; or
(B) any of the following offered by an in-
surer—
(i) accident only, dental only, or dis-
ability income only insurance,
(ii) coverage issued as a supplement
to liability insurance,
(iii) worker’s compensation or similar
insurance, or
(iv) automobile medical-payment in-
surance.
(2) MANAGED CARE PLAN.—The term ‘‘man-
aged care plan’’ means a health care insurance plan
in which the insurer offering such plan utilizes the
standards recommended under section 211 concern-
ing the benefits and coverage under such plan.
(3) MODEL BENEFITS PLAN.—The term ‘‘model
benefits plan’’ means the model health care insur-
ance benefits plan developed under section 201(a).
(4) NAIC.—The term ‘‘NAIC’’ means the Na-
tional Association of Insurance Commissioners.
(5) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(6) SMALL EMPLOYER.—
(A) IN GENERAL.—The term ‘‘small em-
ployer’’ means any employer which, on an aver-
age business day during the preceding taxable
year, had more than 2 but less than 100 em-
ployees.
(B) EMPLOYEE.—The term ‘‘employee’’
shall not include—
(i) a self-employed individual as de-
fined in section 401(c)(1) of the Internal
Revenue Code of 1986, or
(ii) an employee who works less than
20 hours per week.
Subtitle B—Managed Care
SEC. 211. DEVELOPMENT OF STANDARDS FOR MANAGED
CARE PLANS.
(a) IN GENERAL.—Not later than 1 year after the
date of enactment of this Act, the Secretary, taking into
account recommendations of the Managed Care Advisory
Committee, shall develop recommended standards that in-
surers offering managed care plans should meet with re-
spect to the benefits, coverage, and delivery systems pro-
vided under such plans. Such standards shall encompass
the standards by which managed care entities operate.
(b) MANAGED CARE ADVISORY COMMITTEE.—
(1) ESTABLISHMENT.—There shall be estab-
lished a Managed Care Advisory Committee (herein-
after referred to as the ‘‘Committee’’).
(2) MEMBERSHIP.—The Committee shall be
composed of 5 members appointed by the Secretary,
each member representing 1 of the following areas:
(A) Health care professionals.
(B) Managed care industry.
(C) Academia (with specific expertise in
managed care plans).
(D) Business management.
(E) Organized labor.
(3) COMPENSATION.—
(A) IN GENERAL.—Members of the Com-
mittee shall serve without compensation.
(B) EXPENSES, 
ETC., 
REIMBURSED.—
While away from their homes or regular places
of business on the business of the Committee,
the members may be allowed travel expenses,
including per diem in lieu of subsistence, as au-
thorized by section 5703 of title 5, United
States Code, for persons employed intermit-
tently in Government service.
(C) APPLICATION OF ACT.—The provisions
of the Federal Advisory Committee Act (5
U.S.C. App.) shall not apply with respect to the
Committee.
(D) SUPPORT.—The Secretary shall supply
such necessary office facilities, office supplies,
support services, and related expenses as nec-
essary to carry out the functions of the Com-
mittee.
SEC. 212. PREEMPTION OF PROVISIONS RELATING TO MAN-
AGED CARE.
In the case of a managed care plan meeting the rec-
ommended standards under section 211 that is offered by
an insurer, the following provisions of State law are pre-
empted and may not be enforced against the managed care
plan with respect to an insurer offering such plan:
(1) RESTRICTIONS ON REIMBURSEMENT RATES
OR
SELECTIVE
CONTRACTING.—Any law that re-
stricts the ability of the insurer to negotiate reim-
bursement rates with health care 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 the managed care 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.—
(A) IN GENERAL.—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
review or requires the disclosure of the
specific criteria used in such review;
(iv) requires payments to providers for
the expenses of responding to utilization
review requests; or
(v) imposes liability for delays in per-
forming such review.
(B) CONSTRUCTION.—Nothing in subpara-
graph (A)(ii) shall be construed as prohibiting
a State from requiring that utilization review be
conducted by a licensed health care profes-
sional, or requiring that any appeal from such
a review be made by a licensed physician or by
a licensed physician in any particular specialty
or with any board certified specialty of the
same medical specialty as the provider whose
services are being rendered.
(4) RESTRICTIONS
ON
BENEFITS.—Any law
that mandates benefits under the managed care plan
that are greater than the benefits recommended
under the standards developed under section 211.
Subtitle C—Small Employer
Purchasing Groups
SEC. 221. QUALIFIED SMALL EMPLOYER PURCHASING
GROUPS.
(a) DEFINED.—For purposes of this title, an entity
is a qualified small employer purchasing group if—
(1) the entity submits an application to the Sec-
retary at such time, in such form and containing
such information 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 entity is administered solely under
the authority and control of its member employ-
ers;
(B) the membership of the entity consists
solely of small employers (except that an em-
ployer member of the group may retain its
membership in the group if, after the Secretary
determines that the entity meets the require-
ments of this subsection, the number of employ-
ees of the employer member increases to more
than 100);
(C) with respect to each State in which its
members are located, the entity consists of not
fewer than 100 employers;
(D) at the time the entity submits its ap-
plication, the health care insurance plans with
respect to the employer members of the entity
are in compliance with applicable State laws
and the model benefits plan relating to such
plans;
(E) the health care insurance plans of the
entity and the employer members of the entity
are not self-insured plans;
(F) each enrollee in the program of the en-
tity may enroll with any participating carrier
that offers health care insurance coverage in
the geographic area in which the enrollee re-
sides; and
(G) such entity will be a nonprofit entity;
and
(3) such entity has a board of directors as de-
scribed in subsection (b) with authority to act as de-
scribed in subsection (c).
(b) OPERATIONS.—A small employer purchasing
group shall be administered by a board of directors. The
members of such board shall be elected by the employers
that are members of the group, and such board members
shall serve at the pleasure of the majority of such employ-
ers.
(c) DUTIES OF BOARD.—
(1) IN GENERAL.—The board shall have the au-
thority to—
(A) enter into contracts with carriers to
provide health care insurance coverage to eligi-
ble employees and their dependents;
(B) enter into other contracts as are nec-
essary or proper to carry out the provisions of
this subtitle;
(C) employ necessary staff;
(D) appoint committees as necessary to
provide technical assistance in the operation of
the entity’s program;
(E) assess participating employers a rea-
sonable fee for necessary costs in connection
with the program;
(F) undertake activities necessary to ad-
minister the program including marketing and
publicizing the program and assuring carrier,
employer, and enrollee compliance with program
requirements;
(G) issue rules and regulations necessary
to carry out the purpose of this subtitle; and
(H) accept and expend funds received
through fees, grants, appropriations, or other
appropriate and lawful means.
(2) PROGRAM MANAGEMENT.—
(A) GEOGRAPHIC AREAS OF COVERAGE.—
The board shall establish geographic areas
within which participating carriers may offer
health care insurance coverage to eligible em-
ployees and dependents. The board shall con-
tract with sufficient numbers and types of car-
riers in an area to assure that employees have
a choice from among a reasonable number and
type of competing health care insurance car-
riers.
(B) CONTRACT REQUIREMENTS.—
(i) IN
GENERAL.—The board shall
enter into contracts with qualified carriers
for the purpose of providing health care in-
surance coverage to eligible employees and
dependents, and shall pay qualified carriers
on at least a monthly basis at the con-
tracted rates.
(ii) GENERAL
QUALIFICATIONS
OF
CARRIERS.—Participating carriers shall be
qualified if such carriers have—
(I) adequate administrative man-
agement,
(II) financial solvency, and
(III) the ability to assume the
risk of providing and paying for cov-
ered services.
A participating carrier may utilize reinsur-
ance, provider risk sharing, and other ap-
propriate mechanisms to share a portion of
the risk described in subclause (III). The
board may establish risk adjustment mech-
anisms that can be utilized to address cir-
cumstances where a participating carrier
has a significantly disproportionate share
of high risk or low risk enrollees based
upon valid data provided by carrier. Any
such risk adjustment mechanism may be
developed and applied only after consulta-
tion with the participating carriers.
(C) PROGRAM
STANDARDS.—The board
shall require that participating carriers that
contract with or employ health care providers
shall have mechanisms to accomplish at least
the following, satisfactory to the program:
(i) Review the quality of care covered.
(ii) Review the appropriateness of care
covered.
(iii) Provide accessible health services.
(D) UNIFORMITY
OF
BENEFITS.—The
board shall assure that participating carriers—
(i) shall offer substantially similar
benefits to enrollees in the program, except
that enrollees cost sharing required by par-
ticipating carriers may vary according to
the basic method of operation of the car-
rier, and
(ii) shall not vary rates to small em-
ployers or enrollees in the program on ac-
count of claim experience, health status or
duration from issue.
(E) PAYMENT
MECHANISM.—The board
shall establish a mechanism to collect premiums
from small employers, including remittance of
the enrollee’s share of the premium.
(3) NOTIFICATION OF PROGRAM BENEFITS.—
The board shall use appropriate and efficient means
to notify employers of the availability of sponsored
health care insurance coverage from the program.
The board shall make available marketing materials
which accurately summarize the carriers’ insurance
plans and rates which are offered through the pro-
gram. A participating carrier may contract with an
agent or broker to provide marketing, advertising, or
presentation proposals or otherwise disseminate in-
formation regarding coverage or services or rates of-
fered in connection with the program.
(4) CONDITIONS OF PARTICIPATION.—
(A) IN GENERAL.—The board shall estab-
lish conditions of participation for small em-
ployers and enrollees that—
(i) assure that the entity is a valid
small employer purchasing group and is
not formed for the purpose of securing
health care insurance coverage;
(ii) assure that individuals in the
group are not added for the purpose of se-
curing such coverage;
(iii) require that a specified percent-
age of employees and dependents obtain
health care insurance coverage;
(iv) require minimum employer con-
tributions; and
(v) require prepayment of premiums
or other mechanisms to assure that pay-
ment will be made for coverage.
(B) MINIMUM PARTICIPATION.—The board
may require participating employers to agree to
participate in the program for a specified mini-
mum period of time and may include in any
participation agreements with employers a re-
quirement for a financial deposit or provision
for a financial penalty, which would be invoked
in the event the employer violates the participa-
tion agreement.
(d) GRANTS.—
(1) AUTHORITY.—The Secretary may award
grants to qualified small employer purchasing
groups to assist such groups in paying the expendi-
tures associated with the formation and initial oper-
ations of such groups.
(2) APPLICATION.—To be eligible to receive a
grant under this subsection, a qualified small em-
ployer purchasing group shall request such a grant
as part of the application submitted by such group
under subsection (a)(1).
(3) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to award grants under this
subsection, such sums as may be necessary.
(e) FREEDOM OF CONTRACT.—Nothing in this sub-
title shall be construed to prohibit a participating carrier
from offering health care insurance coverage to small em-
ployers that are not participating in the program of a
small employer purchasing group.
SEC. 222. PREEMPTION FROM INSURANCE MANDATES FOR
SMALL EMPLOYER PURCHASING GROUPS.
(a) FINDING.—Congress finds that qualified small
employer purchasing groups organized for the purpose of
obtaining health insurance for the employer members of
such groups affect interstate commerce.
(b) PREEMPTION OF STATE MANDATES.—In the case
of a qualified small employer purchasing group, no provi-
sion of State law shall apply that requires the offering,
as part of the health care insurance plan with respect to
an employer member of such a group, of any services, cat-
egory of care, or services of any class or type of provider
that is in excess of that recommended under the model
benefit plan.
Subtitle D—Insurance Market
Reform
SEC. 231. FAILURE TO SATISFY CERTAIN STANDARDS FOR
HEALTH CARE INSURANCE PROVIDED TO
SMALL EMPLOYERS.
(a) IN GENERAL.—Subchapter L of chapter 1 of the
Internal Revenue Code of 1986 (relating to insurance
companies) is amended by adding at the end thereof the
following new part:
‘‘PART IV—HEALTH CARE INSURANCE PROVIDED
TO SMALL EMPLOYERS
‘‘Sec. 850. Failure to satisfy standards for health care insurance
of small employers.
‘‘Sec. 850A. General issuance requirements.
‘‘Sec. 850B. Specific contractual requirements.
‘‘Sec. 850C. State compliance agreements.
‘‘Sec. 850D. Definitions and other rules.
‘‘SEC. 850. FAILURE TO SATISFY CERTAIN STANDARDS FOR
HEALTH CARE INSURANCE OF SMALL EM-
PLOYERS.
‘‘(a) GENERAL RULE.—No health insurance contract
issued to an eligible small employer shall be treated as
a contract for purposes of section 807 or 832 if the issuer
of such a contract fails to meet at any time during any
taxable year—
‘‘(1) the general issuance requirements of sec-
tion 850A, or
‘‘(2) the specific contractual requirements of
section 850B.
‘‘(b) LIMITATION.—
‘‘(1) SECTION NOT TO APPLY WHERE FAILURE
NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—Subsection (a) shall not apply with respect
to any failure for which it is established to the satis-
faction of the Secretary that the person described in
such subsection did not know, or exercising reason-
able diligence would not have known, that such fail-
ure existed.
‘‘(2) SECTION NOT TO APPLY WHERE FAILURES
CORRECTED WITHIN 30 DAYS.—Subsection (a) shall
not apply with respect to any failure if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the 1st date any of
the persons described in such subsection knew,
or exercising reasonable diligence would have
known, that such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive the applica-
tion of subsection (a).
‘‘SEC. 850A. GENERAL ISSUANCE REQUIREMENTS.
‘‘(a) GENERAL RULE.—The requirements of this sec-
tion are met if a person meets—
‘‘(1) the mandatory policy requirements of sub-
section (b),
‘‘(2) the guaranteed issue requirements of sub-
section (c), and
‘‘(3) the mandatory registration and disclosure
requirements of subsection (d).
‘‘(b) MANDATORY POLICY REQUIREMENTS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met if any person issuing a health
care insurance contract to any eligible small em-
ployer makes available to such employer a health
care insurance contract which—
‘‘(A) provides benefits and coverage con-
sistent with the model health care insurance
benefits plan developed under section 201 of the
Health Equity and Access Improvement Act of
1992, and
‘‘(B) is for a term of not less than 12
months.
‘‘(2) PRICING
AND
MARKETING
REQUIRE-
MENTS.—The requirements of paragraph (1) are not
met unless—
‘‘(A) the price at which the contract de-
scribed in paragraph (1) is made available is
not greater than the price for such contract de-
termined on the same basis as prices for other
health care insurance contracts within the same
class of business made available by the person
to eligible small employers, and
‘‘(B) such contract is made available to eli-
gible small employers using at least the market-
ing methods and other sales practices which are
used in selling such other contracts.
‘‘(c) GUARANTEED ISSUE.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met if the person offering health care
insurance contracts to eligible small employers issues
such a contract to any eligible small employer seek-
ing to enter into such a contract.
‘‘(2) FINANCIAL CAPACITY EXCEPTION.—Para-
graph (1) shall not require any person to issue a
health care insurance contract to the extent that the
issuance of such contract would result in such per-
son violating the financial solvency standards (if
any) established by the State in which such contract
is to be issued.
‘‘(3) DELIVERY CAPACITY EXCEPTION.—Para-
graph (1) shall not require any person to issue a
health care insurance contract to the extent that the
issuance of such contract would result, upon dem-
onstration to the Secretary, in such person exceeding
its administrative capacity to serve previously en-
rolled groups and individuals (and additional individ-
uals who will be expected to enroll because of affili-
ation with such previously enrolled groups).
‘‘(4) EXCEPTION FOR CERTAIN EMPLOYERS.—
Paragraph (1) shall not apply to a failure to issue
a health care insurance contract to an eligible small
employer if—
‘‘(A) such employer is unable to pay the
premium for such contract, or
‘‘(B) in the case of an eligible small em-
ployer with fewer than 15 employees, such em-
ployer fails to enroll a minimum percentage of
the employer’s eligible employees for coverage
under such contract, so long as such percentage
is enforced uniformly for all eligible small em-
ployers of comparable size.
‘‘(5) EXCEPTION
FOR
ALTERNATIVE
STATE
PROGRAMS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply if the State in which the health care
insurance contract is issued—
‘‘(i) has a program which—
‘‘(I) assures the availability of
health care insurance contracts to eli-
gible small employers through the eq-
uitable 
distribution 
of 
high 
risk
groups among all persons offering
such contracts to such employers, and
‘‘(II) is consistent with a model
program developed by the NAIC;
‘‘(ii) has a qualified State-run reinsur-
ance program, or
‘‘(iii) has a program which the Sec-
retary of Health and Human Services has
determined assures all eligible small em-
ployers in the State an opportunity to pur-
chase a health care insurance contract
without regard to any risk characteristic.
‘‘(B) REINSURANCE PROGRAM.—
‘‘(i) PROGRAM REQUIREMENTS.—For
purposes of subparagraph (A)(ii), a State-
run reinsurance program is qualified if
such program is one of the NAIC reinsur-
ance program models developed under
clause (ii) or is a variation of one of such
models, as approved by the Secretary of
Health and Human Services.
‘‘(ii) MODELS.—Not later than the
120 days after the date of the enactment
of the Health Equity and Access Improve-
ment Act of 1992, the NAIC shall develop
several models for a reinsurance program,
including options for program funding.
‘‘(d) MANDATORY REGISTRATION AND DISCLOSURE
REQUIREMENTS.—The requirements of this subsection
are met if the person offering health care insurance con-
tracts to eligible small employers in any State—
‘‘(1) registers with the State commissioner or
superintendent of insurance or other State authority
responsible for regulation of health insurance,
‘‘(2) fully discloses the rating practices for
small employer health care insurance contracts at
the time such person offers a health care insurance
contract to an eligible small employer, and
‘‘(3) fully discloses the terms for renewal of the
contract at the time of the offering of such contract
and at least 90 days before the expiration of such
contract.
‘‘SEC. 850B. SPECIFIC CONTRACTUAL REQUIREMENTS.
‘‘(a) GENERAL RULE.—The requirements of this sec-
tion are met if the following requirements are met:
‘‘(1) The coverage requirements of subsection
(b).
‘‘(2) The rating requirements of subsection (c).
‘‘(b) COVERAGE REQUIREMENTS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met with respect to any health care
insurance contract if, under the terms and operation
of the contract, the following requirements are met:
‘‘(A) GUARANTEED ELIGIBILITY.—No eli-
gible employee (and the spouse or any depend-
ent child of the employee eligible for coverage)
may be excluded from coverage under the con-
tract.
‘‘(B) LIMITATIONS ON COVERAGE OF PRE-
EXISTING
CONDITIONS.—Any limitation under
the contract on any preexisting condition—
‘‘(i) may not extend beyond the 6-
month period beginning with the date an
insured is first covered by the contract,
and
‘‘(ii) may only apply to preexisting
conditions which manifested themselves, or
for which medical care or advice was
sought or recommended, during the 3-
month period preceding the date an in-
sured is first covered by the contract.
‘‘(C) GUARANTEED RENEWABILITY.—
‘‘(i) IN GENERAL.—The contract must
be renewed at the election of the eligible
small employer unless the contract is ter-
minated for cause.
‘‘(ii) CAUSE.—For purposes of this
subparagraph, the term ‘cause’ means—
‘‘(I) nonpayment of the required
premiums;
‘‘(II) fraud or misrepresentation
of the employer or, with respect to
coverage of individual insureds, the
insureds or their representatives;
‘‘(III) noncompliance with the
contract’s minimum participation re-
quirements;
‘‘(IV) noncompliance with the
contract’s employer contribution re-
quirements; or
‘‘(V) repeated misuse of a pro-
vider network provision in the con-
tract.
‘‘(2) WAITING
PERIODS.—Paragraph (1)(A)
shall not apply to any period an employee is ex-
cluded from coverage under the contract solely by
reason of a requirement applicable to all employees
that a minimum period of service with the employer
is required before the employee is eligible for such
coverage.
‘‘(3) DETERMINATION OF PERIODS FOR RULES
RELATING TO PREEXISTING CONDITIONS.—For pur-
poses of paragraph (1)(B), the date on which an in-
sured is first covered by a contract shall be the ear-
lier of—
‘‘(A) the date on which coverage under
such contract begins, or
‘‘(B) the first day of any continuous pe-
riod—
‘‘(i) during which the insured was cov-
ered under 1 or more other health insur-
ance arrangements, and
‘‘(ii) which does not end more than
120 days before the date employment with
the employer begins.
‘‘(4) CESSATION OF SMALL EMPLOYER HEALTH
INSURANCE BUSINESS.—
‘‘(A) IN GENERAL.—Except as otherwise
provided in this paragraph, a person shall not
be treated as failing to meet the requirements
of paragraph (1)(C) if such person terminates
the class of business which includes the health
care insurance contract.
‘‘(B) NOTICE
REQUIREMENT.—Subpara-
graph (A) shall apply only if the person gives
notice of the decision to terminate at least 90
days before the expiration of the contract.
‘‘(C) 5-YEAR MORATORIUM.—If, within 5
years of the year in which a person terminates
a class of business under subparagraph (A),
such person establishes a new class of business,
the issuance of such contracts in that year shall
be treated as a failure to which this section ap-
plies.
‘‘(D) TRANSFERS.—If, upon a failure to
renew a contract to which subparagraph (A)
applies, a person offers to transfer such con-
tract to another class of business, such transfer
must be made without regard to risk character-
istics.
‘‘(c) RATING REQUIREMENTS.—
‘‘(1) IN GENERAL.—The requirements of this
subsection are met if—
‘‘(A) the requirements of paragraphs (2)
and (3) are met, and
‘‘(B) any increase in any premium rate
under the renewal contract over the correspond-
ing rate under the health care insurance con-
tract being renewed does not exceed the appli-
cable annual adjusted increase.
‘‘(2) LIMIT ON VARIATION OF PREMIUMS BE-
TWEEN CLASSES OF BUSINESS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met if the index rate for a
rating period for any class of business of the in-
surer does not exceed the index rate for any
other class of business by more than 20 per-
cent.
‘‘(B) 
EXCEPTIONS.—Subparagraph 
(A)
shall not apply to a class of business if—
‘‘(i) the class is one for which the in-
surer does not reject, and never has re-
jected, eligible small employers included
within the class of business or otherwise el-
igible employees and dependents who enroll
on a timely basis, based upon risk charac-
teristics,
‘‘(ii) the insurer does not transfer,
and never has transferred, a health care
insurance contract involuntarily into or out
of the class of business, and
‘‘(iii) the class of business is currently
available for purchase.
‘‘(3) LIMIT ON VARIATION IN PREMIUM RATES
WITHIN A CLASS OF BUSINESS.—The requirements
of this paragraph are met if the premium rates
charged during a rating period to eligible small em-
ployers with similar case characteristics (other than
risk characteristics) for the same or similar cov-
erage, or the rates which could be charged to such
employers under the rating system for that class of
business, do not vary from the index rate by more
than 20 percent of the index rate.
‘‘(4) APPLICABLE
ANNUAL
ADJUSTED
IN-
CREASE.—For purposes of paragraph (1)(B)—
‘‘(A) IN GENERAL.—The applicable annual
adjusted increase is an amount equal to the
sum of—
‘‘(i) the applicable percentage of the
premium rate under the health care insur-
ance contract being renewed, plus
‘‘(ii) any increase in the rate under
the renewal contract due to any change in
coverage or to any change of case charac-
teristics (other than risk characteristics),
plus
‘‘(iii) 5 percentage points.
‘‘(B) APPLICABLE PERCENTAGE.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A), the applicable percent-
age is the percentage (if any) by which—
‘‘(I) the premium rate for newly
issued contracts for substantially simi-
lar coverage for an employer with
similar case characteristics (other
than risk characteristics) as the em-
ployer under the health care insurance
contract (determined on the 1st day
of the rating period applicable to such
contracts), exceeds
‘‘(II) such rate on the 1st day of
the rating period applicable to the
contract being renewed.
‘‘(ii) CASES
WHERE
NO
NEW
BUSI-
NESS.—If no new contracts are being is-
sued for a class of business during any rat-
ing period, the applicable percentage shall
be the percentage (if any) by which the
base premium rate determined under para-
graph (5)(B) with respect to the renewal
contract exceeds such rate for the contract
to be renewed.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) INDEX RATE.—The term ‘index rate’
means, with respect to a class of business, the
arithmetic average of the applicable base pre-
mium rate and the corresponding highest pre-
mium rate for that class.
‘‘(B) BASE
PREMIUM
RATE.—The term
‘base premium rate’ means, for each class of
business for each rating period, the lowest pre-
mium rate which could have been charged
under a rating system for that class of business
by the insurer to eligible small employers with
similar case characteristics (other than risk
characteristics) for health care insurance con-
tracts with the same or similar coverage.
‘‘SEC. 850C. STATE COMPLIANCE AGREEMENTS.
‘‘(a) AGREEMENTS.—The Secretary of Health and
Human Services may enter into an agreement with any
State—
‘‘(1) to apply the standards set by the NAIC
for health care insurance contracts in lieu of the re-
quirements of this subchapter, and
‘‘(2) to provide for the State to make the initial
determination as to whether a person is in compli-
ance with such standards for purposes of applying
the sanctions under section 850.
‘‘(b) STANDARDS.—An agreement may be entered
into under subsection (a)(1) only if—
‘‘(1) the chief executive officer of the State re-
quests such agreement be entered into,
‘‘(2) the Secretary of Health and Human Serv-
ices determines that the NAIC standards to be ap-
plied under the agreement will carry out the pur-
poses of this subchapter, and
‘‘(3) the Secretary determines that the NAIC
standards to be applied under the agreement will
apply to substantially all health care insurance con-
tracts issued in such State to eligible small employ-
ers.
‘‘(c) TERMINATION.—The Secretary of Health and
Human Services shall terminate any agreement if the Sec-
retary determines that the application of NAIC standards
by the State ceases to carry out the purposes of this sub-
chapter.
‘‘(d) NAIC STANDARDS.—Not later than the 270
days after the date of the enactment of the Health Equity
and Access Improvement Act of 1992, the NAIC shall de-
velop standards which provide for requirements substan-
tially similar to the requirements of this subchapter.
‘‘SEC. 850D. DEFINITIONS AND OTHER RULES.
For purposes of this part—
‘‘(1) HEALTH
CARE
INSURANCE.—The term
‘health care insurance’ means any hospital or medi-
cal expense incurred policy or certificate, hospital or
medical service plan contract, health maintenance
subscriber contract, multiple employer welfare ar-
rangement, other employee welfare plan (as defined
in the Employee Retirement Income Security Act of
1974), or any other health insurance arrangement,
and includes an employment-related reinsurance
plan, but does not include—
‘‘(A) a self-insured health care insurance
plan; or
‘‘(B) any of the following offered by an in-
surer—
‘‘(i) accident only, dental only, or dis-
ability income only insurance,
‘‘(ii) coverage issued as a supplement
to liability insurance,
‘‘(iii) worker’s compensation or simi-
lar insurance, or
‘‘(iv) automobile medical-payment in-
surance.
‘‘(2) CLASS OF BUSINESS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘class of business’
means, with respect to health care insurance
provided to eligible small employers, all health
care insurance provided to such employers.
‘‘(B) ESTABLISHMENT OF GROUPINGS.—
‘‘(i) IN GENERAL.—An issuer may es-
tablish separate classes of business with re-
spect to health care insurance provided to
eligible small employers but only if such
classes are based on 1 or more of the fol-
lowing:
‘‘(I) Business marketed and sold
through persons not participating in
the marketing and sale of such insur-
ance to other eligible small employers.
‘‘(II) Business acquired from
other insurers as a distinct grouping.
‘‘(III) Business provided through
an association of not less than 20 eli-
gible small employers which was es-
tablished for purposes other than ob-
taining insurance.
‘‘(IV) Business related to man-
aged care plans (as defined in section
202(2) of the Health Equity and Ac-
cess Improvement Act of 1992).
‘‘(V) Any other business which
the Secretary of Health and Human
Services determines needs to be sepa-
rately grouped to prevent a substan-
tial threat to the solvency of the in-
surer.
‘‘(ii) EXCEPTION
ALLOWED.—Except
as provided in subparagraph (C), an in-
surer may not establish more than one dis-
tinct group of eligible small employers for
each category specified in clause (i).
‘‘(C) SPECIAL RULE.—An insurer may es-
tablish up to 2 groups under each category in
subparagraph (A) or (B) to account for dif-
ferences in characteristics (other than dif-
ferences in plan benefits) of health insurance
plans that are expected to produce substantial
variation in health care costs.
‘‘(2) CHARACTERISTICS.—
‘‘(A) IN GENERAL.—The term ‘characteris-
tics’ means, with respect to any insurance rat-
ing system, the factors used in determining
rates.
‘‘(B) RISK CHARACTERISTICS.—The term
‘risk characteristics’ means factors related to
the health risks of individuals, including health
status, prior claims experience, the duration
since the date of issue of a health insurance
plan or arrangement, industry, and occupation.
‘‘(C) GEOGRAPHIC FACTORS.—
‘‘(i) IN GENERAL.—In applying geo-
graphic location as a characteristic, an in-
surer may not use for purposes of this sub-
chapter areas smaller than 3-digit postal
zip code areas.
‘‘(ii) STUDY AND REPORT.—Not later
than 120 days after the date of the enact-
ment of the Health Equity and Access Im-
provement Act of 1992, the Comptroller
General of the United States shall study
and report to the Congress concerning—
‘‘(I) insurance industry practices
in determining the geographic bound-
aries of communities used for setting
rates,
‘‘(II) the feasibility and desirabil-
ity of establishing standardized geo-
graphic communities for setting rates,
and
‘‘(III) the effect such standard-
ized geographic communities would
have on rates charged small employ-
ers.
‘‘(3) ELIGIBLE SMALL EMPLOYER.—
‘‘(A) IN
GENERAL.—The term ‘eligible
small employer’ means any person which, on an
average business day during the preceding tax-
able year, had more than 2 but less than 50
employees.
‘‘(B) AGGREGATION RULES.—All members
of the same controlled group of corporations
(within the meaning of section 52(a)) and all
persons under common control (within the
meaning of section 52(b)) shall be treated as 1
person.
‘‘(C) EMPLOYEE.—The term ‘employee’
shall not include—
‘‘(i) a self-employed individual as de-
fined in section 401(c)(1), or
‘‘(ii) an employee who works less than
20 hours per week.
‘‘(4) NAIC.—The term ‘NAIC’ means the Na-
tional Association of Insurance Commissioners.’’
(b) CONFORMING AMENDMENT.—Subchapter L of
chapter 1 of the Internal Revenue Code of 1986 is amend-
ed by adding at the end thereof the following new item:
‘‘Part IV. Health care insurance provided to small employers.’’
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contracts issued, or re-
newed, after the date of the enactment of this Act.
(2) GUARANTEED
ISSUE.—The provisions of
section 850A(c) of the Internal Revenue Code of
1986, as added by this section, shall apply to con-
tracts which are issued, or renewed, after the date
which is 18 months after the date of the enactment
of this Act.
(3) PREMIUM RANGE.—In the case of any con-
tract in effect on the date of the enactment of this
Act, the provisions of section 850B(c)(1)(A) of such
Code, as added by this section, shall not apply to the
premiums under such contract or any renewal con-
tract for benefits provided during the period begin-
ning on such date and ending on the last day of the
2nd plan year beginning after such date.
Subtitle E—Uniform Standards for
Reporting Services and Process-
ing Claims
SEC. 241. APPLICATION AND ESTABLISHMENT OF UNIFORM
STANDARDS.
(a) IN GENERAL.—Each entity providing medical or
other health care services shall comply with the uniform
standards for reporting health care services and process-
ing claims established by the National Association of In-
surance Commissioners (hereafter in this section referred
to as ‘‘NAIC’’) under subsection (b)(1) (or, if applicable,
by the Secretary of Health and Human Services under
subsection (b)(2)).
(b) ESTABLISHMENT OF STANDARDS.—
(1) ROLE OF NAIC.—Not later than 18 months
after the date of the enactment of this Act, the
NAIC shall establish and submit to the Secretary of
Health and Human Services (hereafter in this sec-
tion referred to as the ‘‘Secretary’’) uniform stand-
ards for processing claims for medical or other
health services and for reporting the delivery of such
services to a national data collection entity.
(2) ESTABLISHMENT
BY
SECRETARY.—If the
NAIC fails to establish standards under paragraph
(1), or if the Secretary finds that the standards es-
tablished by the NAIC fail to promote efficiency and
cost-effectiveness in the delivery and reporting of
medically appropriate health care services, the Sec-
retary shall establish the uniform standards de-
scribed under paragraph (1).
(3) REVIEW AND UPDATING OF STANDARDS.—
The Secretary shall periodically review the standards
established under this subsection, and may revise the
standards to ensure that the standards continue to
promote efficiency and cost-effectiveness in the deliv-
ery and reporting of medically appropriate health
care services.
SEC. 242. EFFECTIVE DATE.
Section 241 shall apply with respect to medical or
other health care services provided on or after the expira-
tion of the 2-year period that begins on the date of the
enactment of this Act.
TITLE III—MEDICAL LIABILITY
REFORM
Subtitle A—Definitions and
Findings
SEC. 301. DEFINITIONS.
As used in this title:
(1) BOARD OF ADVISORS.—The term ‘‘Board of
Advisors’’ means the Alternative Dispute Resolution
Board of Advisors established under section 321.
(2) CLAIMANT.—The term ‘‘claimant’’ means
any person who brings a civil action that is subject
to the requirements of this Act, and any person on
whose behalf such an action is brought. If such an
action is brought through or on behalf of an estate,
such term includes the claimant’s decedent, or if
such an action is brought through or on behalf of a
minor or incompetent, such term includes the claim-
ant’s parent or guardian.
(3) CLEAR AND CONVINCING EVIDENCE.—The
term ‘‘clear and convincing evidence’’ is that meas-
ure 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.
The level of proof required to satisfy such standard
is more than that required under preponderance of
the evidence, but less than that required for proof
beyond a reasonable doubt.
(4) MEDICAL MALPRACTICE ACTION.—The term
‘‘medical malpractice action’’ includes any action in-
volving a claim, third-party claim, cross-claim, coun-
terclaim, or contribution claim in a civil action in
which a health care provider is alleged to be liable
for harm caused by such health care provider.
(5) NONECONOMIC DAMAGES.—The term ‘‘non-
economic damages’’ means subjective, nonmonetary
losses including, pain, suffering, inconvenience, men-
tal suffering, emotional distress, loss of society and
companionship, loss of consortium, and injury to
reputation and humiliation. Such term does not in-
clude objectively verifiable monetary losses including
medical expenses, loss of earnings, burial costs, loss
of use of property, costs of obtaining substitute do-
mestic services, rehabilitation and training expenses,
loss of employment, or loss of business or employ-
ment opportunities.
(6) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
(7) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, the Virgin Islands,
Guam, American Samoa, and any other territory or
possession of the United States, or any political sub-
division thereof.
SEC. 302. EFFECT ON INTERSTATE COMMERCE.
Congress finds that the health care and insurance in-
dustries are industries affecting interstate commerce and
the medical malpractice litigation systems existing
throughout the United States impact on interstate com-
merce by contributing to the high cost of health care and
premiums for malpractice insurance purchased by health
care providers.
Subtitle B—Expedited Medical
Malpractice Settlements
SEC. 311. EXPEDITED MEDICAL MALPRACTICE SETTLE-
MENTS.
(a) RIGHT TO BRING ACTION.—Any claimant may
bring a civil action for damages against a person for harm
caused during the provision of medical care pursuant to
applicable State law, except to the extent that such law
is superseded by this subtitle.
(b) SETTLEMENT OFFERS.—
(1) BY CLAIMANT.—Any claimant may, in addi-
tion to any claim for relief made in accordance with
State law as provided for in subsection (a), include
in the complaint filed by such complainant an offer
of settlement for a specific dollar amount.
(2) BY
DEFENDANT.—Within 60 days after
service of the complaint of a claimant of the type re-
ferred to in paragraph (1), or within the time per-
mitted pursuant to State law for a responsive plead-
ing, whichever is longer, the defendant may make an
offer of settlement for a specific dollar amount, ex-
cept that if such pleading includes a motion to dis-
miss in accordance with applicable State law, the de-
fendant may tender such relief to the claimant with-
in 10 days after the determination of the court re-
garding such motion.
(c) EXTENSION OF TIME.—
(1) AUTHORITY.—In any case in which an offer
of settlement is made pursuant to subsection (b), the
court may, upon motion made prior to the expiration
of the applicable period for response, enter an order
extending such period.
(2) CONTENTS
OF
EXTENSION
ORDER.—Any
order extending the period for response under para-
graph (1) shall contain a schedule for discovery of
evidence material to the issue of the appropriate
amount of relief, and shall not extend such period
for more than 60 days. Any such motion shall be ac-