124 
For purposes of calculating the amount of any 
claim, the costs paid by the retiree or by the 
spouse, surviving spouse, or dependent of the re-
tiree in the form of deductibles, co-payments, and 
co-insurance shall be included along with the 
amounts paid by the participating employment- 
based plan. 
(2) PROGRAM PAYMENTS AND LIMIT.—If the Sec-
retary determines that a participating employment- 
based plan has submitted a valid claim under para-
graph (1), the Secretary shall reimburse such plan for 
80 percent of that portion of the costs attributable to 
such claim that exceeds $15,000, but is less than 
$90,000. Such amounts shall be adjusted each year 
based on the percentage increase in the medical care 
component of the Consumer Price Index (rounded to 
the nearest multiple of $1,000) for the year involved. 
(3) USE OF PAYMENTS.—Amounts paid to a par-
ticipating employment-based plan under this sub-
section shall be used to lower the costs borne directly 
by the participants and beneficiaries for health bene-
fits provided under such plan in the form of pre-
miums, co-payments, deductibles, co-insurance, or 
other out-of-pocket costs. Such payments shall not be 
used to reduce the costs of an employer maintaining 
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the participating employment-based plan. The Sec-
retary shall develop a mechanism to monitor the ap-
propriate use of such payments by such plans. 
(4) APPEALS AND PROGRAM PROTECTIONS.—The 
Secretary shall establish— 
(A) an appeals process to permit partici-
pating employment-based plans to appeal a de-
termination of the Secretary with respect to 
claims submitted under this section; and 
(B) procedures to protect against fraud, 
waste, and abuse under the program. 
(5) AUDITS.—The Secretary shall conduct an-
nual audits of claims data submitted by participating 
employment-based plans under this section to ensure 
that they are in compliance with the requirements of 
this section. 
(d) RETIREE RESERVE TRUST FUND.— 
(1) ESTABLISHMENT.— 
(A) IN GENERAL.—There is established in 
the Treasury of the United States a trust fund 
to be known as the ‘‘Retiree Reserve Trust Fund’’ 
(referred to in this section as the ‘‘Trust Fund’’), 
that shall consist of such amounts as may be ap-
propriated or credited to the Trust Fund as pro-
vided for in this subsection to enable the Sec-
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126 
retary to carry out the reinsurance program. 
Such amounts shall remain available until ex-
pended. 
(B) FUNDING.—There are hereby appro-
priated to the Trust Fund, out of any moneys in 
the Treasury not otherwise appropriated, an 
amount requested by the Secretary as necessary 
to carry out this section, except that the total of 
all such amounts requested shall not exceed 
$10,000,000,000. 
(C) APPROPRIATIONS
FROM
THE
TRUST 
FUND.— 
(i) IN
GENERAL.—Amounts in the 
Trust Fund are appropriated to provide 
funding to carry out the reinsurance pro-
gram and shall be used to carry out such 
program. 
(ii) 
BUDGETARY
IMPLICATIONS.— 
Amounts appropriated under clause (i), and 
outlays flowing from such appropriations, 
shall not be taken into account for purposes 
of any budget enforcement procedures in-
cluding allocations under section 302(a) 
and (b) of the Balanced Budget and Emer-
gency Deficit Control Act and budget resolu-
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127 
tions for fiscal years during which appro-
priations are made from the Trust Fund. 
(iii) 
LIMITATION
TO
AVAILABLE 
FUNDS.—The Secretary has the authority to 
stop taking applications for participation 
in the program or take such other steps in 
reducing expenditures under the reinsurance 
program in order to ensure that expendi-
tures under the reinsurance program do not 
exceed the funds available under this sub-
section. 
SEC. 167. LIMITATIONS ON PREEXISTING CONDITION EX-
CLUSIONS IN GROUP HEALTH PLANS AND 
HEALTH 
INSURANCE 
COVERAGE 
IN 
THE 
GROUP AND INDIVIDUAL MARKETS IN AD-
VANCE OF APPLICABILITY OF NEW PROHIBI-
TION OF PREEXISTING CONDITION EXCLU-
SIONS. 
(a) AMENDMENTS RELATING TO PREEXISTING CONDI-
TION EXCLUSIONS UNDER GROUP HEALTH PLANS.— 
(1) REDUCTION IN LOOK-BACK PERIOD.—Section 
2701(a)(1) of the Public Health Service Act (42 
U.S.C. 300gg(a)(1)) is amended by striking ‘‘6-month 
period’’ and inserting ‘‘30-day period’’. 
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(2) REDUCTION
IN
PERMITTED
PREEXISTING 
CONDITION LIMITATION PERIOD.—Section 2701(a)(2) 
of such Act (42 U.S.C. 300gg(a)(2)) is amended by 
striking ‘‘12 months’’ and inserting ‘‘3 months’’, and 
by striking ‘‘18 months’’ and inserting ‘‘9 months’’. 
(3) EFFECTIVE DATE.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), the amendments made by this 
subsection shall apply with respect to group 
health plans for plan years beginning after the 
end of the 6th calendar month following the date 
of the enactment of this Act. 
(B) SPECIAL RULE FOR COLLECTIVE BAR-
GAINING AGREEMENTS.—In the case of a group 
health plan maintained pursuant to one or more 
collective bargaining agreements between em-
ployee representatives and one or more employers 
ratified before the date of the enactment of this 
Act, the amendments made by this subsection 
shall not apply to plan years beginning before 
the earlier of— 
(i) the date on which the last of the col-
lective bargaining agreements relating to 
the plan terminates (determined without re-
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129 
gard to any extension thereof agreed to after 
the date of the enactment of this Act), or 
(ii) 3 years after the date of the enact-
ment of this Act. 
For purposes of clause (i), any plan amendment 
made pursuant to a collective bargaining agree-
ment relating to the plan which amends the plan 
solely to conform to any requirement added by 
the amendments made by this section shall not 
be treated as a termination of such collective bar-
gaining agreement. 
(b) AMENDMENTS RELATING TO PREEXISTING CONDI-
TION EXCLUSIONS IN HEALTH INSURANCE COVERAGE IN 
THE
INDIVIDUAL
MARKET
UNDER
GRANDFATHERED 
HEALTH INSURANCE COVERAGE.— 
(1) APPLICABILITY OF GROUP HEALTH INSUR-
ANCE LIMITATIONS ON IMPOSITION OF PREEXISTING 
CONDITION EXCLUSIONS.— 
(A) IN GENERAL.—Section 2741 of the Pub-
lic Health Service Act (42 U.S.C. 300gg–41) is 
amended— 
(i) by redesignating the second sub-
section (e) (relating to market requirements) 
and subsection (f) as subsections (f) and (g), 
respectively; and 
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(ii) by adding at the end the following 
new subsection: 
‘‘(h) APPLICATION OF GROUP HEALTH INSURANCE 
LIMITATIONS ON IMPOSITION OF PREEXISTING CONDITION 
EXCLUSIONS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), a 
health insurance issuer that provides individual 
health insurance coverage may not impose a pre-
existing condition exclusion (as defined in subsection 
(b)(1)(A) of section 2701) with respect to such cov-
erage except to the extent that such exclusion could be 
imposed consistent with such section if such coverage 
were group health insurance coverage. 
‘‘(2) LIMITATION.—In the case of an individual 
who— 
‘‘(A) is enrolled in individual health insur-
ance coverage; 
‘‘(B) during the period of such enrollment 
has a condition for which no medical advice, di-
agnosis, care, or treatment had been rec-
ommended or received as of the enrollment date; 
and 
‘‘(C) seeks to enroll under other individual 
health insurance coverage which provides benefits 
different from those provided under the coverage 
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131 
referred to in subparagraph (A) with respect to 
such condition, 
the issuer of the individual health insurance coverage 
described in subparagraph (C) may impose a pre-
existing condition exclusion with respect to such con-
dition and any benefits in addition to those provided 
under the coverage referred to in subparagraph (A), 
but such exclusion may not extend for a period of 
more than 3 months.’’. 
(B) ELIMINATION
OF
COBRA
REQUIRE-
MENT.—Subsection (b) of such section is amend-
ed— 
(i) by adding ‘‘and’’ at the end of 
paragraph (2); 
(ii) by striking the semicolon at the 
end of paragraph (3) and inserting a pe-
riod; and 
(iii) by striking paragraphs (4) and 
(5). 
(C) 
CONFORMING
AMENDMENT.—Section 
2744(a)(1) of such Act (42 U.S.C. 300gg– 
44(a)(1)) is amended by inserting ‘‘(other than 
subsection (h))’’ after ‘‘section 2741’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply with respect to health 
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132 
insurance coverage offered, sold, issued, renewed, in 
effect, or operated in the individual market beginning 
after the end of the 6th calendar month following the 
date of the enactment of this Act. 
(c) INAPPLICABILITY OF INTERIM LIMITATIONS UPON 
APPLICABILITY OF TOTAL PROHIBITION OF EXCLUSION.— 
Section 2701 of such Act and the amendments made by sub-
section (b) of this section to sections 2741 and 2744 of such 
Act shall cease to be effective in the case of any health bene-
fits plan as of the date on which such plan becomes subject 
to the requirements of section 111 of this Act (relating to 
prohibiting preexisting condition exclusions). 
TITLE II—HEALTH INSURANCE 
EXCHANGE 
AND 
RELATED 
PROVISIONS 
Subtitle A—Health Insurance 
Exchange 
SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE EX-
CHANGE; OUTLINE OF DUTIES; DEFINITIONS. 
(a) ESTABLISHMENT.—There is established within the 
Health Choices Administration and under the direction of 
the Commissioner a Health Insurance Exchange in order 
to facilitate access of individuals and employers, through 
a transparent process, to a variety of choices of affordable, 
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quality health insurance coverage, including a public health 
insurance option. 
(b) OUTLINE OF DUTIES OF COMMISSIONER.—In ac-
cordance with this subtitle and in coordination with appro-
priate Federal and State officials as provided under section 
143(b), the Commissioner shall— 
(1) under section 204 establish standards for, ac-
cept bids from, and negotiate and enter into contracts 
with, QHBP offering entities for the offering of health 
benefits plans through the Health Insurance Ex-
change, with different levels of benefits required under 
section 203, and including with respect to oversight 
and enforcement; 
(2) under section 205 facilitate outreach and en-
rollment in such plans of Exchange-eligible individ-
uals and employers described in section 202; and 
(3) conduct such activities related to the Health 
Insurance Exchange as required, including establish-
ment of a risk pooling mechanism under section 206 
and consumer protections under subtitle D of title I. 
(c) EXCHANGE-PARTICIPATING
HEALTH
BENEFITS 
PLAN DEFINED.—In this division, the term ‘‘Exchange- 
participating health benefits plan’’ means a qualified health 
benefits plan that is offered through the Health Insurance 
Exchange. 
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134 
SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOY-
ERS. 
(a) ACCESS TO COVERAGE.—Except as provided in 
subsection (i) and in accordance with this section, all indi-
viduals are eligible to obtain coverage through enrollment 
in an Exchange-participating health benefits plan offered 
through the Health Insurance Exchange unless such indi-
viduals are enrolled in another qualified health benefits 
plan or other acceptable coverage. 
(b) DEFINITIONS.—In this division: 
(1) EXCHANGE-ELIGIBLE INDIVIDUAL.—The term 
‘‘Exchange-eligible individual’’ means an individual 
who is eligible under this section to be enrolled 
through the Health Insurance Exchange in an Ex-
change-participating health benefits plan and, with 
respect to family coverage, includes dependents of 
such individual. 
(2) EXCHANGE-ELIGIBLE EMPLOYER.—The term 
‘‘Exchange-eligible employer’’ means an employer that 
is eligible under this section to enroll through the 
Health Insurance Exchange employees of the employer 
(and their dependents) in Exchange-eligible health 
benefits plans. 
(3) EMPLOYMENT-RELATED
DEFINITIONS.—The 
terms ‘‘employer’’, ‘‘employee’’, ‘‘full-time employee’’, 
and ‘‘part-time employee’’ have the meanings given 
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(1) INDIVIDUAL DESCRIBED.—Subject to the suc-
ceeding provisions of this subsection, an individual 
described in this paragraph is an individual who— 
(A) is not enrolled in coverage described in 
subparagraphs (C) through (F) of paragraph (2); 
and 
(B) is not enrolled in coverage as a full- 
time employee (or as a dependent of such an em-
ployee) under a group health plan if the coverage 
and an employer contribution under the plan 
meet the requirements of section 312. 
For purposes of subparagraph (B), in the case of an 
individual who is self-employed, who has at least 1 
employee, and who meets the requirements of section 
312, such individual shall be deemed a full-time em-
ployee described in such subparagraph. 
(2) ACCEPTABLE
COVERAGE.—For purposes of 
this division, the term ‘‘acceptable coverage’’ means 
any of the following: 
(A) QUALIFIED
HEALTH
BENEFITS
PLAN 
COVERAGE.—Coverage under a qualified health 
benefits plan. 
(B) GRANDFATHERED HEALTH INSURANCE 
COVERAGE; COVERAGE UNDER CURRENT GROUP 
HEALTH PLAN.—Coverage under a grandfathered 
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health insurance coverage (as defined in sub-
section (a) of section 102) or under a current 
group health plan (described in subsection (b) of 
such section). 
(C) MEDICARE.—Coverage under part A of 
title XVIII of the Social Security Act. 
(D) MEDICAID.—Coverage for medical as-
sistance under title XIX of the Social Security 
Act, excluding such coverage that is only avail-
able because of the application of subsection (u), 
(z), or (aa) of section 1902 of such Act 
(E) MEMBERS OF THE ARMED FORCES AND 
DEPENDENTS
(INCLUDING
TRICARE).—Coverage 
under chapter 55 of title 10, United States Code, 
including similar coverage furnished under sec-
tion 1781 of title 38 of such Code. 
(F) VA.—Coverage under the veteran’s 
health care program under chapter 17 of title 38, 
United States Code, but only if the coverage for 
the individual involved is determined by the 
Commissioner in coordination with the Sec-
retary of Treasury to be not less than a level 
specified by the Commissioner and Secretary of 
Veteran’s Affairs, in coordination with the Sec-
retary of Treasury, based on the individual’s 
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138 
priority for services as provided under section 
1705(a) of such title. 
(G) OTHER COVERAGE.—Such other health 
benefits coverage, such as a State health benefits 
risk pool, as the Commissioner, in coordination 
with the Secretary of the Treasury, recognizes for 
purposes of this paragraph. 
The Commissioner shall make determinations under 
this paragraph in coordination with the Secretary of 
the Treasury. 
(3) TREATMENT OF CERTAIN NON-TRADITIONAL 
MEDICAID
ELIGIBLE
INDIVIDUALS.—An individual 
who is a non-traditional Medicaid eligible individual 
(as defined in section 205(e)(4)(C)) in a State may 
be an Exchange-eligible individual if the individual 
was enrolled in a qualified health benefits plan, 
grandfathered health insurance coverage, or current 
group health plan during the 6 months before the in-
dividual became a non-traditional Medicaid eligible 
individual. During the period in which such an indi-
vidual has chosen to enroll in an Exchange-partici-
pating health benefits plan, the individual is not also 
eligible for medical assistance under Medicaid. 
(4) CONTINUING ELIGIBILITY PERMITTED.— 
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139 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), once an individual qualifies 
as an Exchange-eligible individual under this 
subsection (including as an employee or depend-
ent of an employee of an Exchange-eligible em-
ployer) and enrolls under an Exchange-partici-
pating health benefits plan through the Health 
Insurance Exchange, the individual shall con-
tinue to be treated as an Exchange-eligible indi-
vidual until the individual is no longer enrolled 
with an Exchange-participating health benefits 
plan. 
(B) EXCEPTIONS.— 
(i) IN
GENERAL.—Subparagraph (A) 
shall not apply to an individual once the 
individual becomes eligible for coverage— 
(I) under part A of the Medicare 
program; 
(II) under the Medicaid program 
as a Medicaid eligible individual, ex-
cept as permitted under paragraph (3) 
or clause (ii); or 
(III) in such other circumstances 
as the Commissioner may provide. 
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140 
(ii) TRANSITION PERIOD.—In the case 
described in clause (i)(II), the Commis-
sioner shall permit the individual to con-
tinue treatment under subparagraph (A) 
until such limited time as the Commissioner 
determines it is administratively feasible, 
consistent with minimizing disruption in 
the individual’s access to health care. 
(e) EMPLOYERS.— 
(1) SMALLEST
EMPLOYER.—Subject to para-
graph (4), smallest employers described in this para-
graph are employers with 10 or fewer employees. 
(2) SMALLER
EMPLOYERS.—Subject to para-
graph (4), smaller employers described in this para-
graph are employers that are not smallest employers 
described in paragraph (1) and have 20 or fewer em-
ployees. 
(3) LARGER EMPLOYERS.— 
(A) IN GENERAL.—Beginning with Y3, the 
Commissioner may permit employers not de-
scribed in paragraph (1) or (2) to be Exchange- 
eligible employers. 
(B) PHASE-IN.—In applying subparagraph 
(A), the Commissioner may phase-in the appli-
cation of such subparagraph based on the num-
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141 
ber of full-time employees of an employer and 
such other considerations as the Commissioner 
deems appropriate. 
(4) CONTINUING
ELIGIBILITY.—Once an em-
ployer is permitted to be an Exchange-eligible em-
ployer under this subsection and enrolls employees 
through the Health Insurance Exchange, the employer 
shall continue to be treated as an Exchange-eligible 
employer for each subsequent plan year regardless of 
the number of employees involved unless and until the 
employer meets the requirement of section 311(a) 
through paragraph (1) of such section by offering a 
group health plan and not through offering an Ex-
change-participating health benefits plan. 
(5) EMPLOYER PARTICIPATION AND CONTRIBU-
TIONS.— 
(A) SATISFACTION OF EMPLOYER RESPONSI-
BILITY.—For any year in which an employer is 
an Exchange-eligible employer, such employer 
may meet the requirements of section 312 with 
respect to employees of such employer by offering 
such employees the option of enrolling with Ex-
change-participating 
health 
benefits 
plans 
through the Health Insurance Exchange con-
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142 
sistent with the provisions of subtitle B of title 
III. 
(B) EMPLOYEE CHOICE.—Any employee of-
fered 
Exchange-participating 
health 
benefits 
plans by the employer of such employee under 
subparagraph (A) may choose coverage under 
any such plan. That choice includes, with respect 
to family coverage, coverage of the dependents of 
such employee. 
(6) AFFILIATED GROUPS.—Any employer which 
is part of a group of employers who are treated as a 
single employer under subsection (b), (c), (m), or (o) 
of section 414 of the Internal Revenue Code of 1986 
shall be treated, for purposes of this subtitle, as a sin-
gle employer. 
(7) OTHER
COUNTING
RULES.—The Commis-
sioner shall establish rules relating to how employees 
are counted for purposes of carrying out this sub-
section. 
(f) SPECIAL SITUATION AUTHORITY.—The Commis-
sioner shall have the authority to establish such rules as 
may be necessary to deal with special situations with re-
gard to uninsured individuals and employers participating 
as Exchange-eligible individuals and employers, such as 
transition periods for individuals and employers who gain, 
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143 
or lose, Exchange-eligible participation status, and to estab-
lish grace periods for premium payment. 
(g) SURVEYS OF INDIVIDUALS AND EMPLOYERS.—The 
Commissioner shall provide for periodic surveys of Ex-
change-eligible individuals and employers concerning satis-
faction of such individuals and employers with the Health 
Insurance Exchange and Exchange-participating health 
benefits plans. 
(h) EXCHANGE ACCESS STUDY.— 
(1) IN GENERAL.—The Commissioner shall con-
duct a study of access to the Health Insurance Ex-
change for individuals and for employers, including 
individuals and employers who are not eligible and 
enrolled in Exchange-participating health benefits 
plans. The goal of the study is to determine if there 
are significant groups and types of individuals and 
employers who are not Exchange-eligible individuals 
or employers, but who would have improved benefits 
and affordability if made eligible for coverage in the 
Exchange. 
(2) ITEMS
INCLUDED
IN
STUDY.—Such study 
also shall examine— 
(A) the terms, conditions, and affordability 
of group health coverage offered by employers 
and QHBP offering entities outside of the Ex-
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change 
compared 
to 
Exchange-participating 
health benefits plans; and 
(B) the affordability-test standard for access 
of certain employed individuals to coverage in 
the Health Insurance Exchange. 
(3) REPORT.—Not later than January 1 of Y3, 
in Y6, and thereafter, the Commissioner shall submit 
to Congress on the study conducted under this sub-
section and shall include in such report recommenda-
tions regarding changes in standards for Exchange 
eligibility for individuals and employers. 
(i) EXCEPTION
FOR VETERANS
AND MEMBERS
OF 
ARMED FORCES.—Notwithstanding any other provision of 
this Act, an individual with acceptable coverage described 
in subparagraph (E) or (F) of subsection (d)(2) is eligible 
to obtain coverage through enrollment in an Exchange-par-
ticipating health benefits plan offered through the Health 
Insurance Exchange. 
(j) DEPARTMENT OF VETERANS AFFAIRS AND DE-
PARTMENT OF DEFENSE HEALTH PROGRAMS.—Nothing in 
this section shall be construed as affecting any authority 
under title 38, United States Code, or chapter 55 of title 
10, United States Code. 
(k) REPORT ON COMPARABLE COVERAGE FOR CHIP 
CHILDREN; SPECIAL RULE FOR CHIP CHILDREN.— 
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(1) REPORT.—No later than December 31, 2011, 
the Secretary of Health and Human Services shall 
submit to Congress a report that compares the benefits 
packages offered in 2011 to an average State child 
health plan under title XXI of the Social Security Act 
and to the benefit standards adopted under section 
124 for the essential benefits package and the afford-
ability credits under subtitle C. 
(2) CERTIFICATION
OF
SECRETARY.—Notwith-
standing the previous provisions of this section, no 
child who would be eligible for coverage under title 
XXI of the Social Security Act shall be enrolled in an 
Exchange participating health benefits plan until the 
Secretary of Health and Human Services has cer-
tified, based on the findings in the report under para-
graph (1) and changes made pursuant to the rec-
ommendations in the report, if any, that the coverage 
(as described in section 121(a)) is at least comparable 
to the coverage provided to children under an average 
State child health plan under such title as in effect 
in 2011. 
SEC. 203. BENEFITS PACKAGE LEVELS. 
(a) IN GENERAL.—The Commissioner shall specify the 
benefits to be made available under Exchange-participating 
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health benefits plans during each plan year, consistent with 
subtitle C of title I and this section. 
(b) LIMITATION ON HEALTH BENEFITS PLANS OF-
FERED BY OFFERING ENTITIES.—The Commissioner may 
not enter into a contract with a QHBP offering entity 
under section 204(c) for the offering of an Exchange-partici-
pating health benefits plan in a service area unless the fol-
lowing requirements are met: 
(1) REQUIRED OFFERING OF BASIC PLAN.—The 
entity offers only one basic plan for such service area. 
(2) OPTIONAL OFFERING OF ENHANCED PLAN.— 
If and only if the entity offers a basic plan for such 
service area, the entity may offer one enhanced plan 
for such area. 
(3) OPTIONAL OFFERING OF PREMIUM PLAN.—If 
and only if the entity offers an enhanced plan for 
such service area, the entity may offer one premium 
plan for such area. 
(4) OPTIONAL
OFFERING
OF
PREMIUM-PLUS 
PLANS.—If and only if the entity offers a premium 
plan for such service area, the entity may offer one 
or more premium-plus plans for such area. 
All such plans may be offered under a single contract with 
the Commissioner. 
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(c) 
SPECIFICATION
OF
BENEFIT
LEVELS
FOR 
PLANS.— 
(1) IN GENERAL.—The Commissioner shall estab-
lish the following standards consistent with this sub-
section and title I: 
(A) BASIC, 
ENHANCED, 
AND
PREMIUM 
PLANS.—Standards for 3 levels of Exchange-par-
ticipating health benefits plans: basic, enhanced, 
and premium (in this division referred to as a 
‘‘basic plan’’, ‘‘enhanced plan’’, and ‘‘premium 
plan’’, respectively). 
(B) 
PREMIUM-PLUS
PLAN
BENEFITS.— 
Standards for additional benefits that may be of-
fered, consistent with this subsection and subtitle 
C of title I, under a premium plan (such a plan 
with additional benefits referred to in this divi-
sion as a ‘‘premium-plus plan’’) . 
(2) BASIC PLAN.— 
(A) IN GENERAL.—A basic plan shall offer 
the essential benefits package required under title 
I for a qualified health benefits plan. 
(B) TIERED
COST-SHARING
FOR
AFFORD-
ABLE
CREDIT
ELIGIBLE
INDIVIDUALS.—In the 
case of an affordable credit eligible individual 
(as defined in section 242(a)(1)) enrolled in an 
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variation shall permit a variation of not more than 
plus (or minus) 10 percent in cost-sharing with re-
spect to each benefit category specified under section 
122. 
(d) TREATMENT OF STATE BENEFIT MANDATES.—In-
sofar as a State requires a health insurance issuer offering 
health insurance coverage to include benefits beyond the es-
sential benefits package, such requirement shall continue to 
apply to an Exchange-participating health benefits plan, 
if the State has entered into an arrangement satisfactory 
to the Commissioner to reimburse the Commissioner for the 
amount of any net increase in affordability premium cred-
its under subtitle C as a result of an increase in premium 
in basic plans as a result of application of such require-
ment. 
(e) RULES REGARDING COVERAGE OF AND AFFORD-
ABILITY CREDITS FOR SPECIFIED SERVICES.— 
(1) ASSURED
AVAILABILITY
OF
VARIED
COV-
ERAGE
THROUGH
THE
HEALTH
INSURANCE
EX-
CHANGE.—The Commissioner shall assure that, of the 
Exchange participating health benefits plan offered in 
each premium rating area of the Health Insurance 
Exchange— 
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(A) there is at least one such plan that pro-
vides coverage of services described in subpara-
graphs (A) and (B) of section 122(d)(4); and 
(B) there is at least one such plan that does 
not provide coverage of services described in sec-
tion 122(d)(4)(A) which plan may also be one 
that does not provide coverage of services de-
scribed in section 122(d)(4)(B). 
(2) SEGREGATION
OF
FUNDS.—If a qualified 
health benefits plan provides coverage of services de-
scribed in section 122(d)(4)(A), the plan shall provide 
assurances satisfactory to the Commissioner that— 
(A) any affordability credits provided under 
subtitle C of title II are not used for purposes of 
paying for such services; and 
(B) only premium amounts attributable to 
the actuarial value described in section 113(b) 
are used for such purpose. 
SEC. 204. CONTRACTS FOR THE OFFERING OF EXCHANGE- 
PARTICIPATING HEALTH BENEFITS PLANS. 
(a) CONTRACTING DUTIES.—In carrying out section 
201(b)(1) and consistent with this subtitle: 
(1) OFFERING ENTITY AND PLAN STANDARDS.— 
The Commissioner shall— 
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(A) establish standards necessary to imple-
ment the requirements of this title and title I 
for— 
(i) QHBP offering entities for the of-
fering of an Exchange-participating health 
benefits plan; and 
(ii) for Exchange-participating health 
benefits plans; and 
(B) certify QHBP offering entities and 
qualified health benefits plans as meeting such 
standards and requirements of this title and title 
I for purposes of this subtitle. 
(2) SOLICITING
AND
NEGOTIATING
BIDS; CON-
TRACTS.—The Commissioner shall— 
(A) solicit bids from QHBP offering entities 
for the offering of Exchange-participating health 
benefits plans; 
(B) based upon a review of such bids, nego-
tiate with such entities for the offering of such 
plans; and 
(C) enter into contracts with such entities 
for the offering of such plans through the Health 
Insurance Exchange under terms (consistent 
with this title) negotiated between the Commis-
sioner and such entities. 
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(3) FAR NOT APPLICABLE.—The provisions of 
the Federal Acquisition Regulation shall not apply to 
contracts between the Commissioner and QHBP offer-
ing entities for the offering of Exchange-participating 
health benefits plans under this title. 
(b) STANDARDS FOR QHBP OFFERING ENTITIES TO 
OFFER
EXCHANGE-PARTICIPATING
HEALTH
BENEFITS 
PLANS.—The standards established under subsection 
(a)(1)(A) shall require that, in order for a QHBP offering 
entity to offer an Exchange-participating health benefits 
plan, the entity must meet the following requirements: 
(1) LICENSED.—The entity shall be licensed to 
offer health insurance coverage under State law for 
each State in which it is offering such coverage. 
(2) DATA REPORTING.—The entity shall provide 
for the reporting of such information as the Commis-
sioner may specify, including information necessary 
to administer the risk pooling mechanism described 
in section 206(b) and information to address dispari-
ties in health and health care. 
(3) IMPLEMENTING AFFORDABILITY CREDITS.— 
The entity shall provide for implementation of the af-
fordability credits provided for enrollees under sub-
title C, including the reduction in cost-sharing under 
section 244(c). 
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(4) ENROLLMENT.—The entity shall accept all 
enrollments under this subtitle, subject to such excep-
tions (such as capacity limitations) in accordance 
with the requirements under title I for a qualified 
health benefits plan. The entity shall notify the Com-
missioner if the entity projects or anticipates reaching 
such a capacity limitation that would result in a lim-
itation in enrollment. 
(5) RISK POOLING PARTICIPATION.—The entity 
shall participate in such risk pooling mechanism as 
the Commissioner establishes under section 206(b). 
(6) ESSENTIAL
COMMUNITY
PROVIDERS.—With 
respect to the basic plan offered by the entity, the en-
tity shall contract for outpatient services with covered 
entities (as defined in section 340B(a)(4) of the Pub-
lic Health Service Act, as in effect as of July 1, 
2009). The Commissioner shall specify the extent to 
which and manner in which the previous sentence 
shall apply in the case of a basic plan with respect 
to which the Commissioner determines provides sub-
stantially all benefits through a health maintenance 
organization, as defined in section 2791(b)(3) of the 
Public Health Service Act. 
(7) CULTURALLY
AND
LINGUISTICALLY
APPRO-
PRIATE SERVICES AND COMMUNICATIONS.—The entity 
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shall provide for culturally and linguistically appro-
priate communication and health services. 
(8) ADDITIONAL
REQUIREMENTS.—The entity 
shall comply with other applicable requirements of 
this title, as specified by the Commissioner, which 
shall include standards regarding billing and collec-
tion practices for premiums and related grace periods 
and which may include standards to ensure that the 
entity does not use coercive practices to force pro-
viders not to contract with other entities offering cov-
erage through the Health Insurance Exchange. 
(c) CONTRACTS.— 
(1) BID APPLICATION.—To be eligible to enter 
into a contract under this section, a QHBP offering 
entity shall submit to the Commissioner a bid at such 
time, in such manner, and containing such informa-
tion as the Commissioner may require. 
(2) TERM.—Each contract with a QHBP offer-
ing entity under this section shall be for a term of not 
less than one year, but may be made automatically 
renewable from term to term in the absence of notice 
of termination by either party. 
(3) ENFORCEMENT OF NETWORK ADEQUACY.—In 
the case of a health benefits plan of a QHBP offering 
entity that uses a provider network, the contract 
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under this section with the entity shall provide that 
if— 
(A) the Commissioner determines that such 
provider network does not meet such standards 
as the Commissioner shall establish under section 
115; and 
(B) an individual enrolled in such plan re-
ceives an item or service from a provider that is 
not within such network; 
then any cost-sharing for such item or service shall be 
equal to the amount of such cost-sharing that would 
be imposed if such item or service was furnished by 
a provider within such network. 
(4) OVERSIGHT
AND
ENFORCEMENT
RESPON-
SIBILITIES.—The Commissioner shall establish proc-
esses, in coordination with State insurance regulators, 
to oversee, monitor, and enforce applicable require-
ments of this title with respect to QHBP offering enti-
ties offering Exchange-participating health benefits 
plans and such plans, including the marketing of 
such plans. Such processes shall include the following: 
(A) GRIEVANCE
AND
COMPLAINT
MECHA-
NISMS.—The Commissioner shall establish, in co-
ordination with State insurance regulators, a 
process under which Exchange-eligible individ-
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uals and employers may file complaints con-
cerning violations of such standards. 
(B) ENFORCEMENT.—In carrying out au-
thorities under this division relating to the 
Health Insurance Exchange, the Commissioner 
may impose one or more of the intermediate 
sanctions described in section 142(c). 
(C) TERMINATION.— 
(i) IN
GENERAL.—The Commissioner 
may terminate a contract with a QHBP of-
fering entity under this section for the offer-
ing of an Exchange-participating health 
benefits plan if such entity fails to comply 
with the applicable requirements of this 
title. Any determination by the Commis-
sioner to terminate a contract shall be made 
in accordance with formal investigation 
and compliance procedures established by 
the Commissioner under which— 
(I) the Commissioner provides the 
entity with the reasonable opportunity 
to develop and implement a corrective 
action plan to correct the deficiencies 
that were the basis of the Commis-
sioner’s determination; and 
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(II) the Commissioner provides 
the entity with reasonable notice and 
opportunity for hearing (including the 
right to appeal an initial decision) be-
fore terminating the contract. 
(ii) EXCEPTION
FOR
IMMINENT
AND 
SERIOUS
RISK
TO
HEALTH.—Clause (i) 
shall not apply if the Commissioner deter-
mines that a delay in termination, result-
ing from compliance with the procedures 
specified in such clause prior to termi-
nation, would pose an imminent and seri-
ous risk to the health of individuals enrolled 
under the qualified health benefits plan of 
the QHBP offering entity. 
(D) CONSTRUCTION.—Nothing in this sub-
section shall be construed as preventing the ap-
plication of other sanctions under subtitle E of 
title I with respect to an entity for a violation 
of such a requirement. 
(d) NO DISCRIMINATION ON THE BASIS OF PROVISION 
OF ABORTION.—No Exchange participating health benefits 
plan may discriminate against any individual health care 
provider or health care facility because of its willingness 
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or unwillingness to provide, pay for, provide coverage of, 
or refer for abortions. 
SEC. 205. OUTREACH AND ENROLLMENT OF EXCHANGE-ELI-
GIBLE INDIVIDUALS AND EMPLOYERS IN EX-
CHANGE-PARTICIPATING HEALTH BENEFITS 
PLANS. 
(a) IN GENERAL.— 
(1) OUTREACH.—The Commissioner shall con-
duct outreach activities consistent with subsection (c), 
including through use of appropriate entities as de-
scribed in paragraph (3) of such subsection, to inform 
and educate individuals and employers about the 
Health Insurance Exchange and Exchange-partici-
pating health benefits plan options. Such outreach 
shall include outreach specific to vulnerable popu-
lations, such as children, individuals with disabil-
ities, individuals with mental illness, and individuals 
with other cognitive impairments. 
(2) ELIGIBILITY.—The Commissioner shall make 
timely determinations of whether individuals and em-
ployers are Exchange-eligible individuals and employ-
ers (as defined in section 202). 
(3) ENROLLMENT.—The Commissioner shall es-
tablish and carry out an enrollment process for Ex-
change-eligible individuals and employers, including 
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at community locations, in accordance with sub-
section (b). 
(b) ENROLLMENT PROCESS.— 
(1) IN GENERAL.—The Commissioner shall estab-
lish a process consistent with this title for enrollments 
in Exchange-participating health benefits plans. Such 
process shall provide for enrollment through means 
such as the mail, by telephone, electronically, and in 
person. 
(2) ENROLLMENT PERIODS.— 
(A) 
OPEN
ENROLLMENT
PERIOD.—The 
Commissioner shall establish an annual open en-
rollment period during which an Exchange-eligi-
ble individual or employer may elect to enroll in 
an Exchange-participating health benefits plan 
for the following plan year and an enrollment 
period for affordability credits under subtitle C. 
Such periods shall be during September through 
November of each year, or such other time that 
would 
maximize 
timeliness 
of 
income 
verification for purposes of such subtitle. The 
open enrollment period shall not be less than 30 
days. 
(B) SPECIAL ENROLLMENT.—The Commis-
sioner shall also provide for special enrollment 
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periods to take into account special cir-
cumstances of individuals and employers, such 
as an individual who— 
(i) loses acceptable coverage; 
(ii) experiences a change in marital or 
other dependent status; 
(iii) moves outside the service area of 
the Exchange-participating health benefits 
plan in which the individual is enrolled; or 
(iv) experiences a significant change in 
income. 
(C) 
ENROLLMENT
INFORMATION.—The 
Commissioner shall provide for the broad dis-
semination of information to prospective enroll-
ees on the enrollment process, including before 
each open enrollment period. In carrying out the 
previous sentence, the Commissioner may work 
with other appropriate entities to facilitate such 
provision of information. 
(3) AUTOMATIC ENROLLMENT FOR NON-MEDICAID 
ELIGIBLE INDIVIDUALS.— 
(A) IN GENERAL.—The Commissioner shall 
provide for a process under which individuals 
who are Exchange-eligible individuals described 
in subparagraph (B) are automatically enrolled 
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under an appropriate Exchange-participating 
health benefits plan. Such process may involve a 
random assignment or some other form of as-
signment that takes into account the health care 
providers used by the individual involved or such 
other relevant factors as the Commissioner may 
specify. 
(B) 
SUBSIDIZED
INDIVIDUALS
DE-
SCRIBED.—An individual described in this sub-
paragraph is an Exchange-eligible individual 
who is either of the following: 
(i) AFFORDABILITY CREDIT ELIGIBLE 
INDIVIDUALS.—The individual— 
(I) has applied for, and been de-
termined 
eligible 
for, 
affordability 
credits under subtitle C; 
(II) has not opted out from receiv-
ing such affordability credit; and 
(III) does not otherwise enroll in 
another Exchange-participating health 
benefits plan. 
(ii) INDIVIDUALS ENROLLED IN A TER-
MINATED PLAN.—The individual is enrolled 
in an Exchange-participating health bene-
fits plan that is terminated (during or at 
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the end of a plan year) and who does not 
otherwise enroll in another Exchange-par-
ticipating health benefits plan. 
(4) DIRECT PAYMENT OF PREMIUMS TO PLANS.— 
Under the enrollment process, individuals enrolled in 
an Exchange-participating health benefits plan shall 
pay such plans directly, and not through the Commis-
sioner or the Health Insurance Exchange. 
(c) COVERAGE INFORMATION AND ASSISTANCE.— 
(1) COVERAGE
INFORMATION.—The Commis-
sioner shall provide for the broad dissemination of in-
formation on Exchange-participating health benefits 
plans offered under this title. Such information shall 
be provided in a comparative manner, and shall in-
clude information on benefits, premiums, cost-shar-
ing, quality, provider networks, and consumer satis-
faction. 
(2) CONSUMER ASSISTANCE WITH CHOICE.—To 
provide assistance to Exchange-eligible individuals 
and employers, the Commissioner shall— 
(A) provide for the operation of a toll-free 
telephone hotline to respond to requests for assist-
ance and maintain an Internet website through 
which individuals may obtain information on 
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coverage under Exchange-participating health 
benefits plans and file complaints; 
(B) develop and disseminate information to 
Exchange-eligible enrollees on their rights and 
responsibilities; 
(C) assist Exchange-eligible individuals in 
selecting Exchange-participating health benefits 
plans and obtaining benefits through such plans; 
and 
(D) ensure that the Internet website de-
scribed in subparagraph (A) and the information 
described in subparagraph (B) is developed using 
plain language (as defined in section 133(a)(2)). 
(3) USE OF OTHER ENTITIES.—In carrying out 
this subsection, the Commissioner may work with 
other appropriate entities to facilitate the dissemina-
tion of information under this subsection and to pro-
vide assistance as described in paragraph (2). 
(d) SPECIAL DUTIES RELATED TO MEDICAID AND 
CHIP.— 
(1) COVERAGE FOR CERTAIN NEWBORNS.— 
(A) IN GENERAL.—In the case of a child 
born in the United States who at the time of 
birth is not otherwise covered under acceptable 
coverage, for the period of time beginning on the 
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date of birth and ending on the date the child 
otherwise is covered under acceptable coverage 
(or, if earlier, the end of the month in which the 
60-day period, beginning on the date of birth, 
ends), the child shall be deemed— 
(i) to be a non-traditional Medicaid el-
igible individual (as defined in subsection 
(e)(5)) for purposes of this division and 
Medicaid; and 
(ii) to have elected to enroll in Med-
icaid through the application of paragraph 
(3). 
(B) EXTENDED
TREATMENT
AS
TRADI-
TIONAL MEDICAID ELIGIBLE INDIVIDUAL.—In the 
case of a child described in subparagraph (A) 
who at the end of the period referred to in such 
subparagraph is not otherwise covered under ac-
ceptable coverage, the child shall be deemed 
(until such time as the child obtains such cov-
erage or the State otherwise makes a determina-
tion of the child’s eligibility for medical assist-
ance under its Medicaid plan pursuant to sec-
tion 1943(c)(1) of the Social Security Act) to be 
a traditional Medicaid eligible individual de-
scribed in section 1902(l)(1)(B) of such Act. 
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(2) CHIP TRANSITION.—A child who, as of the 
day before the first day of Y1, is eligible for child 
health assistance under title XXI of the Social Secu-
rity Act (including a child receiving coverage under 
an arrangement described in section 2101(a)(2) of 
such Act) is deemed as of such first day to be an Ex-
change-eligible individual unless the individual is a 
traditional Medicaid eligible individual as of such 
day. 
(3) AUTOMATIC ENROLLMENT OF MEDICAID ELI-
GIBLE INDIVIDUALS INTO MEDICAID.—The Commis-
sioner shall provide for a process under which an in-
dividual who is described in section 202(d)(3) and 
has not elected to enroll in an Exchange-participating 
health benefits plan is automatically enrolled under 
Medicaid. 
(4) NOTIFICATIONS.—The Commissioner shall 
notify each State in Y1 and for purposes of section 
1902(gg)(1) of the Social Security Act (as added by 
section 1703(a)) whether the Health Insurance Ex-
change can support enrollment of children described 
in paragraph (2) in such State in such year. 
(e) MEDICAID COVERAGE FOR MEDICAID ELIGIBLE IN-
DIVIDUALS.— 
(1) IN GENERAL.— 
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(A) CHOICE FOR LIMITED EXCHANGE-ELIGI-
BLE
INDIVIDUALS.—As part of the enrollment 
process under subsection (b), the Commissioner 
shall provide the option, in the case of an Ex-
change-eligible individual described in section 
202(d)(3), for the individual to elect to enroll 
under Medicaid instead of under an Exchange- 
participating health benefits plan. Such an indi-
vidual may change such election during an en-
rollment period under subsection (b)(2). 
(B) MEDICAID ENROLLMENT OBLIGATION.— 
An Exchange eligible individual may apply, in 
the manner described in section 241(b)(1), for a 
determination of whether the individual is a 
Medicaid-eligible individual. If the individual is 
determined to be so eligible, the Commissioner, 
through the Medicaid memorandum of under-
standing, shall provide for the enrollment of the 
individual under the State Medicaid plan in ac-
cordance with the Medicaid memorandum of un-
derstanding under paragraph (4). In the case of 
such an enrollment, the State shall provide for 
the same periodic redetermination of eligibility 
under Medicaid as would otherwise apply if the 
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individual had directly applied for medical as-
sistance to the State Medicaid agency. 
(2) NON-TRADITIONAL MEDICAID ELIGIBLE INDI-
VIDUALS.—In the case of a non-traditional Medicaid 
eligible individual described in section 202(d)(3) who 
elects to enroll under Medicaid under paragraph 
(1)(A), the Commissioner shall provide for the enroll-
ment of the individual under the State Medicaid plan 
in accordance with the Medicaid memorandum of un-
derstanding under paragraph (3). 
(3) COORDINATED
ENROLLMENT
WITH
STATE 
THROUGH MEMORANDUM OF UNDERSTANDING.—The 
Commissioner, in consultation with the Secretary of 
Health and Human Services, shall enter into a 
memorandum of understanding with each State (each 
in this division referred to as a ‘‘Medicaid memo-
randum of understanding’’) with respect to coordi-
nating enrollment of individuals in Exchange-partici-
pating health benefits plans and under the State’s 
Medicaid program consistent with this section and to 
otherwise coordinate the implementation of the provi-
sions of this division with respect to the Medicaid 
program. Such memorandum shall permit the ex-
change of information consistent with the limitations 
described in section 1902(a)(7) of the Social Security 
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Act. Nothing in this section shall be construed as per-
mitting such memorandum to modify or vitiate any 
requirement of a State Medicaid plan. 
(4) MEDICAID ELIGIBLE INDIVIDUALS.—For pur-
poses of this division: 
(A) MEDICAID ELIGIBLE INDIVIDUAL.—The 
term ‘‘Medicaid eligible individual’’ means an 
individual who is eligible for medical assistance 
under Medicaid. 
(B) TRADITIONAL MEDICAID ELIGIBLE INDI-
VIDUAL.—The term ‘‘traditional Medicaid eligi-
ble individual’’ means a Medicaid eligible indi-
vidual other than an individual who is— 
(i) a Medicaid eligible individual by 
reason of the application of subclause (VIII) 
of section 1902(a)(10)(A)(i) of the Social 
Security Act; or 
(ii) a childless adult not described in 
section 1902(a)(10)(A) or (C) of such Act 
(as in effect as of the day before the date of 
the enactment of this Act). 
(C) NON-TRADITIONAL MEDICAID ELIGIBLE 
INDIVIDUAL.—The term ‘‘non-traditional Med-
icaid eligible individual’’ means a Medicaid eli-
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gible individual who is not a traditional Med-
icaid eligible individual. 
(f) EFFECTIVE CULTURALLY AND LINGUISTICALLY AP-
PROPRIATE COMMUNICATION.—In carrying out this section, 
the Commissioner shall establish effective methods for com-
municating in plain language and a culturally and lin-
guistically appropriate manner. 
(g) ROLE
FOR ENROLLMENT AGENTS
AND BRO-
KERS.—Nothing in this division shall be construed to affect 
the role of enrollment agents and brokers under State law, 
including with regard to the enrollment of individuals and 
employers in qualified health benefits plans including the 
public health insurance option. 
SEC. 206. OTHER FUNCTIONS. 
(a) COORDINATION
OF AFFORDABILITY CREDITS.— 
The Commissioner shall coordinate the distribution of af-
fordability premium and cost-sharing credits under subtitle 
C to QHBP offering entities offering Exchange-partici-
pating health benefits plans. 
(b) COORDINATION OF RISK POOLING.—The Commis-
sioner shall establish a mechanism whereby there is an ad-
justment made of the premium amounts payable among 
QHBP offering entities offering Exchange-participating 
health benefits plans of premiums collected for such plans 
that takes into account (in a manner specified by the Com-
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missioner) the differences in the risk characteristics of indi-
viduals and employers enrolled under the different Ex-
change-participating health benefits plans offered by such 
entities so as to minimize the impact of adverse selection 
of enrollees among the plans offered by such entities. 
(c) SPECIAL INSPECTOR GENERAL FOR THE HEALTH 
INSURANCE EXCHANGE.— 
(1) ESTABLISHMENT; APPOINTMENT.—There is 
hereby established the Office of the Special Inspector 
General for the Health Insurance Exchange, to be 
headed by a Special Inspector General for the Health 
Insurance Exchange (in this subsection referred to as 
the ‘‘Special Inspector General’’) to be appointed by 
the President, by and with the advice and consent of 
the Senate. The nomination of an individual as Spe-
cial Inspector General shall be made as soon as prac-
ticable after the establishment of the program under 
this subtitle. 
(2) DUTIES.—The Special Inspector General 
shall— 
(A) conduct, supervise, and coordinate au-
dits, evaluations and investigations of the Health 
Insurance Exchange to protect the integrity of 
the Health Insurance Exchange, as well as the 
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health and welfare of participants in the Ex-
change; 
(B) report both to the Commissioner and to 
the Congress regarding program and manage-
ment problems and recommendations to correct 
them; 
(C) have other duties (described in para-
graphs (2) and (3) of section 121 of division A 
of Public Law 110–343) in relation to the duties 
described in the previous subparagraphs; and 
(D) have the authorities provided in section 
6 of the Inspector General Act of 1978 in car-
rying out duties under this paragraph. 
(3) APPLICATION OF OTHER SPECIAL INSPECTOR 
GENERAL PROVISIONS.—The provisions of subsections 
(b) (other than paragraphs (1) and (3)), (d) (other 
than paragraph (1)), and (e) of section 121 of divi-
sion A of the Emergency Economic Stabilization Act 
of 2009 (Public Law 110–343) shall apply to the Spe-
cial Inspector General under this subsection in the 
same manner as such provisions apply to the Special 
Inspector General under such section. 
(4) REPORTS.—Not later than one year after the 
confirmation of the Special Inspector General, and 
annually thereafter, the Special Inspector General 
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shall submit to the appropriate committees of Con-
gress a report summarizing the activities of the Spe-
cial Inspector General during the one year period 
ending on the date such report is submitted. 
(5) TERMINATION.—The Office of the Special In-
spector General shall terminate five years after the 
date of the enactment of this Act. 
SEC. 207. HEALTH INSURANCE EXCHANGE TRUST FUND. 
(a) ESTABLISHMENT
OF HEALTH INSURANCE EX-
CHANGE TRUST FUND.—There is created within the Treas-
ury of the United States a trust fund to be known as the 
‘‘Health Insurance Exchange Trust Fund’’ (in this section 
referred to as the ‘‘Trust Fund’’), consisting of such 
amounts as may be appropriated or credited to the Trust 
Fund under this section or any other provision of law. 
(b) PAYMENTS FROM TRUST FUND.—The Commis-
sioner shall pay from time to time from the Trust Fund 
such amounts as the Commissioner determines are nec-
essary to make payments to operate the Health Insurance 
Exchange, including payments under subtitle C (relating 
to affordability credits). 
(c) TRANSFERS TO TRUST FUND.— 
(1) DEDICATED PAYMENTS.—There is hereby ap-
propriated to the Trust Fund amounts equivalent to 
the following: 
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(A) TAXES ON INDIVIDUALS NOT OBTAINING 
ACCEPTABLE COVERAGE.—The amounts received 
in the Treasury under section 59B of the Inter-
nal Revenue Code of 1986 (relating to require-
ment of health insurance coverage for individ-
uals). 
(B) EMPLOYMENT
TAXES
ON
EMPLOYERS 
NOT
PROVIDING
ACCEPTABLE
COVERAGE.—The 
amounts received in the Treasury under section 
3111(c) of the Internal Revenue Code of 1986 
(relating to employers electing to not provide 
health benefits). 
(C) EXCISE
TAX
ON
FAILURES
TO
MEET 
CERTAIN HEALTH COVERAGE REQUIREMENTS.— 
The amounts received in the Treasury under sec-
tion 4980H(b) (relating to excise tax with re-
spect to failure to meet health coverage partici-
pation requirements). 
(2) APPROPRIATIONS
TO
COVER
GOVERNMENT 
CONTRIBUTIONS.—There are hereby appropriated, out 
of any moneys in the Treasury not otherwise appro-
priated, to the Trust Fund, an amount equivalent to 
the amount of payments made from the Trust Fund 
under subsection (b) plus such amounts as are nec-
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essary reduced by the amounts deposited under para-
graph (1). 
(d) APPLICATION OF CERTAIN RULES.—Rules similar 
to the rules of subchapter B of chapter 98 of the Internal 
Revenue Code of 1986 shall apply with respect to the Trust 
Fund. 
SEC. 208. OPTIONAL OPERATION OF STATE-BASED HEALTH 
INSURANCE EXCHANGES. 
(a) IN GENERAL.—If— 
(1) a State (or group of States, subject to the ap-
proval of the Commissioner) applies to the Commis-
sioner for approval of a State-based Health Insurance 
Exchange to operate in the State (or group of States); 
and 
(2) the Commissioner approves such State-based 
Health Insurance Exchange, 
then, subject to subsections (c) and (d), the State-based 
Health Insurance Exchange shall operate, instead of the 
Health Insurance Exchange, with respect to such State (or 
group of States). The Commissioner shall approve a State- 
based Health Insurance Exchange if it meets the require-
ments for approval under subsection (b). 
(b) REQUIREMENTS FOR APPROVAL.— 
(1) IN GENERAL.—The Commissioner may not 
approve a State-based Health Insurance Exchange 
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under this section unless the following requirements 
are met: 
(A) The State-based Health Insurance Ex-
change must demonstrate the capacity to and 
provide assurances satisfactory to the Commis-
sioner that the State-based Health Insurance Ex-
change will carry out the functions specified for 
the Health Insurance Exchange in the State (or 
States) involved, including— 
(i) negotiating and contracting with 
QHBP offering entities for the offering of 
Exchange-participating 
health 
benefits 
plan, which satisfy the standards and re-
quirements of this title and title I; 
(ii) enrolling Exchange-eligible indi-
viduals and employers in such State in such 
plans; 
(iii) the establishment of sufficient 
local offices to meet the needs of Exchange- 
eligible individuals and employers; 
(iv) administering affordability credits 
under subtitle B using the same methodolo-
gies (and at least the same income 
verification methods) as would otherwise 
apply under such subtitle and at a cost to 
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the Federal Government which does exceed 
the cost to the Federal Government if this 
section did not apply; and 
(v) enforcement activities consistent 
with federal requirements. 
(B) There is no more than one Health In-
surance Exchange operating with respect to any 
one State. 
(C) The State provides assurances satisfac-
tory to the Commissioner that approval of such 
an Exchange will not result in any net increase 
in expenditures to the Federal Government. 
(D) The State provides for reporting of such 
information as the Commissioner determines and 
assurances satisfactory to the Commissioner that 
it will vigorously enforce violations of applicable 
requirements. 
(E) The State is eligible to receive an incen-
tive payment for enacting and implementing 
medical liability reforms as specified in sub-
section (g). 
(F) Such other requirements as the Commis-
sioner may specify. 
(2) PRESUMPTION
FOR
CERTAIN
STATE-OPER-
ATED EXCHANGES.— 
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(A) to ensure quality healthcare is readily 
available by providing an alternative framework 
to reduce the costs of defensive medicine and 
allow victims of malpractice to be fairly com-
pensated; and 
(B) to do the above without limiting attor-
neys fees or imposing caps on damages. 
(2) INCENTIVE PAYMENTS FOR MEDICAL LIABIL-
ITY REFORM.— 
(A) IN GENERAL.—Each State is eligible to 
receive an incentive payment, in an amount de-
termined by the Secretary subject to the avail-
ability of appropriations, if the State enacts 
after the date of the enactment of this subsection, 
and is implementing, an alternative medical li-
ability law that complies with this subsection. 
(B) DETERMINATION BY SECRETARY.—The 
Secretary shall determine that a State’s alter-
native medical liability law complies with this 
subsection if the Secretary is satisfied that the 
State— 
(i) has enacted and is currently imple-
menting that law; and 
(ii) that law is effective. 
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(C) 
CONSIDERATIONS
FOR
DETERMINA-
TION.—In making a determination of the effec-
tiveness of a law, the Secretary shall consider 
whether the law— 
(i) makes the medical liability system 
more reliable through prevention of or 
prompt and fair resolution of disputes; 
(ii) encourages the disclosure of health 
care errors; and 
(iii) maintains access to affordable li-
ability insurance. 
(D) OPTIONAL CONTENTS OF ALTERNATIVE 
MEDICAL LIABILITY LAW.—An alternative med-
ical liability law shall contain any one or a 
combination of the following litigation alter-
natives: 
(i) Certificate of Merit. 
(ii) Early offer. 
(E) USE
OF
INCENTIVE
PAYMENTS.—The 
State shall use an incentive payment received 
under this subsection to improve health care in 
that State. 
(3) APPLICATION.—Each State seeking an incen-
tive payment under this subsection shall submit to the 
Secretary an application, at such time, in such man-
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ner, and containing such information as the Sec-
retary may require. 
(4) TECHNICAL
ASSISTANCE.—The Secretary 
may provide technical assistance to the States apply-
ing for or awarded an incentive payment under this 
subsection. 
(5) REPORTS.—Beginning not later than one 
year after the date of the enactment of this subsection, 
the Secretary shall submit to Congress an annual re-
port on the progress States have made in adopting 
and implementing alternative medical liability laws 
that comply with this subsection. Such reports shall 
contain sufficient documentation regarding the effec-
tiveness of such laws to enable an objective compara-
tive analysis of them. 
(6) RULEMAKING.—The Secretary may make 
rules to carry out this subsection. 
(7) DEFINITION.—In this subsection— 
(A) the term ‘‘Secretary’’ means the Sec-
retary of Health and Human Services; and 
(B) the term ‘‘State’’ includes the District of 
Columbia, Puerto Rico, and each other territory 
or possession of the United States. 
(8) AUTHORIZATION
OF
APPROPRIATIONS.— 
There are authorized to be appropriated to carry out 
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this subsection such sums as may be necessary, to re-
main available until expended. 
SEC. 209. LIMITATION ON PREMIUM INCREASES UNDER EX-
CHANGE-PARTICIPATING HEALTH BENEFITS 
PLANS. 
(a) IN GENERAL.—The annual increase in the pre-
miums charged under any Exchange-participating health 
benefits plan may not exceed 150 percent of the annual per-
centage increase in medical inflation for the 12-month pe-
riod ending in June of the prior year, unless the plan re-
ceives approval for a higher rate increase in accordance 
with subsection (b) or (c). 
(b) EXCEPTION FOR ADDITIONAL REQUIRED BENE-
FITS.—If the Health Choices Commissioner requires Ex-
change-participating health benefits plans to provide addi-
tional benefits, the annual increase permitted under sub-
section (a) with respect to the first year to which such bene-
fits are required shall be increased to take into account the 
costs of such additional benefits. 
(c) EXCEPTION
TO WHERE FINANCIAL VIABILITY 
THREATENED.—Subsection (a) shall not apply to any Ex-
change-participating health benefits plan for any year if 
such plan demonstrates to the Commissioner (or, if deter-
mined appropriate by the Commissioner, the insurance 
commissioner for the State in which the plan is offered) 
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that complying with subsection (a) for such year would 
threaten its financial viability or its ability to provide 
timely benefits to plan participants. 
(d) NON-PREEMPTION.—Nothing in this section shall 
be construed as preempting existing State prior approval 
laws. 
Subtitle B—Public Health 
Insurance Option 
SEC. 221. ESTABLISHMENT AND ADMINISTRATION OF A 
PUBLIC HEALTH INSURANCE OPTION AS AN 
EXCHANGE-QUALIFIED 
HEALTH 
BENEFITS 
PLAN. 
(a) ESTABLISHMENT.—For years beginning with Y1, 
the Secretary of Health and Human Services (in this sub-
title referred to as the ‘‘Secretary’’) shall provide for the 
offering of an Exchange-participating health benefits plan 
(in this division referred to as the ‘‘public health insurance 
option’’) that ensures choice, competition, and stability of 
affordable, high quality coverage throughout the United 
States in accordance with this subtitle. In designing the op-
tion, the Secretary’s primary responsibility is to create a 
low-cost plan without compromising quality or access to 
care. 
(b) OFFERING
AS
AN
EXCHANGE-PARTICIPATING 
HEALTH BENEFITS PLAN.— 
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(1) EXCLUSIVE TO THE EXCHANGE.—The public 
health insurance option shall only be made available 
through the Health Insurance Exchange. 
(2) ENSURING A LEVEL PLAYING FIELD.—Con-
sistent with this subtitle, the public health insurance 
option shall comply with requirements that are appli-
cable under this title to an Exchange-participating 
health benefits plan, including requirements related to 
benefits, benefit levels, provider networks, notices, con-
sumer protections, and cost sharing. 
(3) PROVISION OF BENEFIT LEVELS.—The public 
health insurance option— 
(A) shall offer basic, enhanced, and pre-
mium plans; and 
(B) may offer premium-plus plans. 
(c) ADMINISTRATIVE CONTRACTING.—The Secretary 
may enter into contracts for the purpose of performing ad-
ministrative functions (including functions described in 
subsection (a)(4) of section 1874A of the Social Security 
Act) with respect to the public health insurance option in 
the same manner as the Secretary may enter into contracts 
under subsection (a)(1) of such section. The Secretary has 
the same authority with respect to the public health insur-
ance option as the Secretary has under subsections (a)(1) 
and (b) of section 1874A of the Social Security Act with 
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respect to title XVIII of such Act. Contracts under this sub-
section shall not involve the transfer of insurance risk to 
such entity. 
(d) OMBUDSMAN.—The Secretary shall establish an of-
fice of the ombudsman for the public health insurance op-
tion which shall have duties with respect to the public 
health insurance option similar to the duties of the Medi-
care Beneficiary Ombudsman under section 1808(c)(2) of 
the Social Security Act. 
(e) DATA COLLECTION.—The Secretary shall collect 
such data as may be required to establish premiums and 
payment rates for the public health insurance option and 
for other purposes under this subtitle, including to improve 
quality and to reduce racial, ethnic, and other disparities 
in health and health care. 
(f) TREATMENT OF PUBLIC HEALTH INSURANCE OP-
TION.—With respect to the public health insurance option, 
the Secretary shall be treated as a QHBP offering entity 
offering an Exchange-participating health benefits plan. 
(g) ACCESS TO FEDERAL COURTS.—The provisions of 
Medicare (and related provisions of title II of the Social 
Security Act) relating to access of Medicare beneficiaries 
to Federal courts for the enforcement of rights under Medi-
care, including with respect to amounts in controversy, 
shall apply to the public health insurance option and indi-
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viduals enrolled under such option under this title in the 
same manner as such provisions apply to Medicare and 
Medicare beneficiaries. 
SEC. 222. PREMIUMS AND FINANCING. 
(a) ESTABLISHMENT OF PREMIUMS.— 
(1) IN GENERAL.—The Secretary shall establish 
geographically-adjusted premium rates for the public 
health insurance option in a manner— 
(A) that complies with the premium rules 
established by the Commissioner under section 
113 for Exchange-participating health benefit 
plans; and 
(B) at a level sufficient to fully finance the 
costs of— 
(i) health benefits provided by the pub-
lic health insurance option; and 
(ii) administrative costs related to op-
erating the public health insurance option. 
(2) CONTINGENCY MARGIN.—In establishing pre-
mium rates under paragraph (1), the Secretary shall 
include an appropriate amount for a contingency 
margin (which shall be not less than 90 days of esti-
mated claims). Before setting such appropriate 
amount for years starting with Y3, the Secretary 
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shall solicit a recommendation on such amount from 
the American Academy of Actuaries. 
(b) ACCOUNT.— 
(1) ESTABLISHMENT.—There is established in 
the Treasury of the United States an Account for the 
receipts and disbursements attributable to the oper-
ation of the public health insurance option, including 
the start-up funding under paragraph (2). Section 
1854(g) of the Social Security Act shall apply to re-
ceipts described in the previous sentence in the same 
manner as such section applies to payments or pre-
miums described in such section. 
(2) START-UP FUNDING.— 
(A) IN GENERAL.—In order to provide for 
the establishment of the public health insurance 
option there is hereby appropriated to the Sec-
retary, out of any funds in the Treasury not oth-
erwise appropriated, $2,000,000,000. In order to 
provide for initial claims reserves before the col-
lection of premiums, there is hereby appro-
priated to the Secretary, out of any funds in the 
Treasury not otherwise appropriated, such sums 
as necessary to cover 90 days worth of claims re-
serves based on projected enrollment. 
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(B) AMORTIZATION
OF
START-UP
FUND-
ING.—The Secretary shall provide for the repay-
ment of the startup funding provided under sub-
paragraph (A) to the Treasury in an amortized 
manner over the 10-year period beginning with 
Y1. 
(C) LIMITATION ON FUNDING.—Nothing in 
this section shall be construed as authorizing any 
additional appropriations to the Account, other 
than such amounts as are otherwise provided 
with respect to other Exchange-participating 
health benefits plans. 
(3) NO BAILOUTS.—In no case shall the public 
health insurance option receive any Federal funds for 
purposes of insolvency in any manner similar to the 
manner in which entities receive Federal funding 
under the Troubled Assets Relief Program of the Sec-
retary of the Treasury. 
SEC. 223. NEGOTIATED PAYMENT RATES FOR ITEMS AND 
SERVICES. 
(a) NEGOTIATION OF PAYMENT RATES.— 
(1) IN GENERAL.—The Secretary shall negotiate 
payment rates for the public health insurance option 
for services and health care providers consistent with 
this section and section 224. 
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(2) MANNER OF NEGOTIATION.—The Secretary 
shall negotiate such rates in a manner that results in 
payment rates that are not lower, in the aggregate, 
than rates under title XVIII of the Social Security 
Act, and not higher, in the aggregate, than the aver-
age rates paid by other QHBP offering entities for 
services and health care providers. 
(3) INNOVATIVE
PAYMENT
METHODS.—Nothing 
in this subsection shall be construed as preventing the 
use of innovative payment methods such as those de-
scribed in section 224 in connection with the negotia-
tion of payment rates under this subsection. 
(4) 
PRESCRIPTION
DRUGS.—Notwithstanding 
any other provision of law, the Secretary shall estab-
lish a particular formulary for prescription drugs 
under the public health insurance option. 
(b) ESTABLISHMENT OF A PROVIDER NETWORK.— 
(1) IN GENERAL.—Health care providers (includ-
ing physicians and hospitals) participating in Medi-
care are participating providers in the public health 
insurance option unless they opt out in a process es-
tablished by the Secretary consistent with this sub-
section. 
(2) REQUIREMENTS
FOR
OPT-OUT
PROCESS.— 
Under the process established under paragraph (1)— 
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(A) providers described in such subpara-
graph shall be provided at least a 1-year period 
prior to the first day of Y1 to opt out of partici-
pating in the public health insurance option; 
(B) no provider shall be subject to a penalty 
for not participating in the public health insur-
ance option; 
(C) the Secretary shall include information 
on how providers participating in Medicare who 
chose to opt out of participating in the public 
health insurance option may opt back in; and 
(D) there shall be an annual enrollment pe-
riod in which providers may decide whether to 
participate in the public health insurance op-
tion. 
(3) RULEMAKING.—Not later than 18 months be-
fore the first day of Y1, the Secretary shall promul-
gate rules (pursuant to notice and comment) for the 
process described in paragraph (1). 
(c) LIMITATIONS ON REVIEW.—There shall be no ad-
ministrative or judicial review of a payment rate or meth-
odology established under this section or under section 224. 
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SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIV-
ERY SYSTEM REFORM. 
(a) IN GENERAL.—For plan years beginning with Y1, 
the Secretary may utilize innovative payment mechanisms 
and policies to determine payments for items and services 
under the public health insurance option. The payment 
mechanisms and policies under this section may include 
patient-centered medical home and other care management 
payments, accountable care organizations, value-based pur-
chasing, bundling of services, differential payment rates, 
performance or utilization based payments, partial capita-
tion, and direct contracting with providers. 
(b) REQUIREMENTS FOR INNOVATIVE PAYMENTS.—The 
Secretary shall design and implement the payment mecha-
nisms and policies under this section in a manner that— 
(1) seeks to— 
(A) improve health outcomes; 
(B) reduce health disparities (including ra-
cial, ethnic, and other disparities); 
(C) provide efficient and affordable care; 
(D) address geographic variation in the 
provision of health services; or 
(E) prevent or manage chronic illness; and 
(2) promotes care that is integrated, patient-cen-
tered, quality, and efficient. 
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(c) ENCOURAGING THE USE OF HIGH VALUE SERV-
ICES.—To the extent allowed by the benefit standards ap-
plied to all Exchange-participating health benefits plans, 
the public health insurance option may modify cost sharing 
and payment rates to encourage the use of services that pro-
mote health and value. 
(d) PROMOTION OF DELIVERY SYSTEM REFORM.—The 
Secretary shall monitor and evaluate the progress of pay-
ment and delivery system reforms under this section and 
shall seek to implement such reforms subject to the fol-
lowing: 
(1) To the extent that the Secretary finds a pay-
ment and delivery system reform successful in im-
proving quality and reducing costs, the Secretary 
shall implement such reform on as large a geographic 
scale as practical and economical. 
(2) The Secretary may delay the implementation 
of such a reform in geographic areas in which such 
implementation would place the public health insur-
ance option at a competitive disadvantage. 
(3) The Secretary may prioritize implementation 
of such a reform in high cost geographic areas or oth-
erwise in order to reduce total program costs or to 
promote high value care. 
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(e) NON-UNIFORMITY PERMITTED.—Nothing in this 
subtitle shall prevent the Secretary from varying payments 
based on different payment structure models (such as ac-
countable care organizations and medical homes) under the 
public health insurance option for different geographic 
areas. 
SEC. 225. PROVIDER PARTICIPATION. 
(a) IN GENERAL.—The Secretary shall establish condi-
tions of participation for health care providers under the 
public health insurance option. 
(b) LICENSURE OR CERTIFICATION.—The Secretary 
shall not allow a health care provider to participate in the 
public health insurance option unless such provider is ap-
propriately licensed or certified under State law. 
(c) PAYMENT TERMS FOR PROVIDERS.—The Secretary 
shall establish terms and conditions for the participation 
(on an annual or other basis specified by the Secretary) 
of physicians and other health care providers under the 
public health insurance option, for which payment may be 
made for services furnished during the year. 
(d) EXCLUSION OF CERTAIN PROVIDERS.—The Sec-
retary shall exclude from participation under the public 
health insurance option a health care provider that is ex-
cluded from participation in a Federal health care program 
(as defined in section 1128B(f) of the Social Security Act). 
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SEC. 226. APPLICATION OF FRAUD AND ABUSE PROVISIONS. 
Provisions of law (other than criminal law provisions) 
identified by the Secretary by regulation, in consultation 
with the Inspector General of the Department of Health and 
Human Services, that impose sanctions with respect to 
waste, fraud, and abuse under Medicare, such as the False 
Claims Act (31 U.S.C. 3729 et seq.), shall also apply to 
the public health insurance option. 
SEC. 227. APPLICATION OF HIPAA INSURANCE REQUIRE-
MENTS. 
The requirements of sections 2701 through 2792 of the 
Public Health Service Act shall apply to the public health 
insurance option in the same manner as they apply to 
health insurance coverage offered by a health insurance 
issuer in the individual market. 
SEC. 228. APPLICATION OF HEALTH INFORMATION PRI-
VACY, SECURITY, AND ELECTRONIC TRANS-
ACTION REQUIREMENTS. 
Part C of title XI of the Social Security Act, relating 
to standards for protections against the wrongful disclosure 
of individually identifiable health information, health in-
formation security, and the electronic exchange of health 
care information, shall apply to the public health insurance 
option in the same manner as such part applies to other 
health plans (as defined in section 1171(5) of such Act). 
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SEC. 229. ENROLLMENT IN PUBLIC HEALTH INSURANCE OP-
TION IS VOLUNTARY. 
Nothing in this division shall be construed as requir-
ing anyone to enroll in the public health insurance option. 
Enrollment in such option is voluntary. 
Subtitle C—Individual 
Affordability Credits 
SEC. 241. AVAILABILITY THROUGH HEALTH INSURANCE EX-
CHANGE. 
(a) IN GENERAL.—Subject to the succeeding provisions 
of this subtitle, in the case of an affordable credit eligible 
individual enrolled in an Exchange-participating health 
benefits plan— 
(1) the individual shall be eligible for, in accord-
ance with this subtitle, affordability credits consisting 
of— 
(A) an affordability premium credit under 
section 243 to be applied against the premium 
for the Exchange-participating health benefits 
plan in which the individual is enrolled; and 
(B) an affordability cost-sharing credit 
under section 244 to be applied as a reduction 
of the cost-sharing otherwise applicable to such 
plan; and 
(2) the Commissioner shall pay the QHBP offer-
ing entity that offers such plan from the Health In-
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surance Exchange Trust Fund the aggregate amount 
of affordability credits for all affordable credit eligible 
individuals enrolled in such plan. 
(b) APPLICATION.— 
(1) IN
GENERAL.—An Exchange eligible indi-
vidual may apply to the Commissioner through the 
Health Insurance Exchange or through another entity 
under an arrangement made with the Commissioner, 
in a form and manner specified by the Commissioner. 
The Commissioner through the Health Insurance Ex-
change or through another public entity under an ar-
rangement made with the Commissioner shall make a 
determination as to eligibility of an individual for af-
fordability credits under this subtitle. The Commis-
sioner shall establish a process whereby, on the basis 
of information otherwise available, individuals may 
be deemed to be affordable credit eligible individuals. 
In carrying this subtitle, the Commissioner shall es-
tablish effective methods that ensure that individuals 
with limited English proficiency are able to apply for 
affordability credits. 
(2) USE OF STATE MEDICAID AGENCIES.—If the 
Commissioner determines that a State Medicaid agen-
cy has the capacity to make a determination of eligi-
bility for affordability credits under this subtitle and 
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under the same standards as used by the Commis-
sioner, under the Medicaid memorandum of under-
standing (as defined in section 205(c)(4))— 
(A) the State Medicaid agency is authorized 
to conduct such determinations for any Ex-
change-eligible individual who requests such a 
determination; and 
(B) the Commissioner shall reimburse the 
State Medicaid agency for the costs of conducting 
such determinations. 
(3) MEDICAID
SCREEN
AND
ENROLL
OBLIGA-
TION.—In the case of an application made under 
paragraph (1), there shall be a determination of 
whether the individual is a Medicaid-eligible indi-
vidual. If the individual is determined to be so eligi-
ble, the Commissioner, through the Medicaid memo-
randum of understanding, shall provide for the enroll-
ment of the individual under the State Medicaid plan 
in accordance with the Medicaid memorandum of un-
derstanding. In the case of such an enrollment, the 
State shall provide for the same periodic redetermina-
tion of eligibility under Medicaid as would otherwise 
apply if the individual had directly applied for med-
ical assistance to the State Medicaid agency. 
(c) USE OF AFFORDABILITY CREDITS.— 
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(1) IN GENERAL.—In Y1 and Y2 an affordable 
credit eligible individual may use an affordability 
credit only with respect to a basic plan. 
(2) FLEXIBILITY IN PLAN ENROLLMENT AUTHOR-
IZED.—Beginning with Y3, the Commissioner shall 
establish a process to allow an affordability credit to 
be used for enrollees in enhanced or premium plans. 
In the case of an affordable credit eligible individual 
who enrolls in an enhanced or premium plan, the in-
dividual shall be responsible for any difference be-
tween the premium for such plan and the affordable 
credit amount otherwise applicable if the individual 
had enrolled in a basic plan. 
(3) PROHIBITION OF USE OF PUBLIC FUNDS FOR 
ABORTION COVERAGE.—An affordability credit may 
not be used for payment for services described in sec-
tion 122(d)(4)(A). 
(d) ACCESS TO DATA.—In carrying out this subtitle, 
the Commissioner shall request from the Secretary of the 
Treasury consistent with section 6103 of the Internal Rev-
enue Code of 1986 such information as may be required 
to carry out this subtitle. 
(e) NO CASH REBATES.—In no case shall an afford-
able credit eligible individual receive any cash payment as 
a result of the application of this subtitle. 
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SEC. 242. AFFORDABLE CREDIT ELIGIBLE INDIVIDUAL. 
(a) DEFINITION.— 
(1) IN GENERAL.—For purposes of this division, 
the term ‘‘affordable credit eligible individual’’ means, 
subject to subsection (b), an individual who is law-
fully present in a State in the United States (other 
than as a nonimmigrant described in a subparagraph 
(excluding subparagraphs (K), (T), (U), and (V)) of 
section 101(a)(15) of the Immigration and Nation-
ality Act)— 
(A) who is enrolled under an Exchange-par-
ticipating health benefits plan and is not en-
rolled under such plan as an employee (or de-
pendent of an employee) through an employer 
qualified health benefits plan that meets the re-
quirements of section 312; 
(B) with family income below 400 percent 
of the Federal poverty level for a family of the 
size involved; and 
(C) who is not a Medicaid eligible indi-
vidual, other than an individual described in 
section 202(d)(3) or an individual during a 
transition period under section 202(d)(4)(B)(ii). 
(2) TREATMENT
OF
FAMILY.—Except as the 
Commissioner may otherwise provide, members of the 
same family who are affordable credit eligible indi-
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viduals shall be treated as a single affordable credit 
individual eligible for the applicable credit for such a 
family under this subtitle. 
(3) EQUAL TREATMENT OF CERTAIN EMPLOYED 
INDIVIDUALS.— 
(A) IN GENERAL.—For purposes of apply-
ing this section with respect to an individual 
who is an employee of an employer that has an 
annual payroll (for the preceding calendar year) 
which does not exceed $750,000 and that makes 
the contribution which would be required under 
section 313(a) if the table specified in subpara-
graph (B) were substituted for the table specified 
in section 313(b)(1) (and if, in applying section 
313(b)(2), 
$750,000 
were 
substituted 
for 
$400,000), such individual shall be treated in the 
same manner as an employee of an employer 
that makes the contribution described in section 
313(a) (without regard to this paragraph). 
(B) TABLE.—The table specified in this sub-
paragraph is the following: 
If the annual payroll of such employer for 
the preceding calendar year: 
The applicable 
percentage is: 
Does not exceed $500,000 ...........................................
0 percent 
Exceeds $500,000, but does not exceed $585,000 ......
2 percent 
Exceeds $585,000, but does not exceed $670,000 ......
4 percent 
Exceeds $670,000, but does not exceed $750,000 ......
6 percent 
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(b) LIMITATIONS ON EMPLOYEE AND DEPENDENT DIS-
QUALIFICATION.— 
(1) IN GENERAL.—Subject to paragraph (2), the 
term ‘‘affordable credit eligible individual’’ does not 
include a full-time employee of an employer if the em-
ployer offers the employee coverage (for the employee 
and dependents) as a full-time employee under a 
group health plan if the coverage and employer con-
tribution under the plan meet the requirements of sec-
tion 312. 
(2) EXCEPTIONS.— 
(A) 
FOR
CERTAIN
FAMILY
CIR-
CUMSTANCES.—The Commissioner shall establish 
such exceptions and special rules in the case de-
scribed in paragraph (1) as may be appropriate 
in the case of a divorced or separated individual 
or such a dependent of an employee who would 
otherwise be an affordable credit eligible indi-
vidual. 
(B) FOR
UNAFFORDABLE
EMPLOYER
COV-
ERAGE.—Beginning in Y2, in the case of full- 
time employees for which the cost of the employee 
premium for coverage under a group health plan 
would exceed 12 percent of current family in-
come (determined by the Commissioner on the 
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203 
basis of verifiable documentation and without re-
gard to section 245), paragraph (1) shall not 
apply. 
(c) INCOME DEFINED.— 
(1) IN GENERAL.—In this title, the term ‘‘in-
come’’ means modified adjusted gross income (as de-
fined in section 59B of the Internal Revenue Code of 
1986). 
(2) STUDY OF INCOME DISREGARDS.—The Com-
missioner shall conduct a study that examines the ap-
plication of income disregards for purposes of this 
subtitle. Not later than the first day of Y2, the Com-
missioner shall submit to Congress a report on such 
study and shall include such recommendations as the 
Commissioner determines appropriate. 
(d) CLARIFICATION
OF
TREATMENT
OF
AFFORD-
ABILITY CREDITS.—Affordability credits under this subtitle 
shall not be treated, for purposes of title IV of the Personal 
Responsibility and Work Opportunity Reconciliation Act 
of 1996, to be a benefit provided under section 403 of such 
title. 
SEC. 243. AFFORDABLE PREMIUM CREDIT. 
(a) IN GENERAL.—The affordability premium credit 
under this section for an affordable credit eligible indi-
vidual enrolled in an Exchange-participating health bene-
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fits plan is in an amount equal to the amount (if any) 
by which the premium for the plan (or, if less, the reference 
premium amount specified in subsection (c)), exceeds the 
affordable premium amount specified in subsection (b) for 
the individual. 
(b) AFFORDABLE PREMIUM AMOUNT.— 
(1) IN
GENERAL.—The affordable premium 
amount specified in this subsection for an individual 
for monthly premium in a plan year shall be equal 
to 1⁄12 of the product of— 
(A) the premium percentage limit specified 
in paragraph (2) for the individual based upon 
the individual’s family income for the plan year; 
and 
(B) the individual’s family income for such 
plan year. 
(2) PREMIUM
PERCENTAGE
LIMITS
BASED
ON 
TABLE.—The Commissioner shall establish premium 
percentage limits so that for individuals whose family 
income is within an income tier specified in the table 
in subsection (d) such percentage limits shall increase, 
on a sliding scale in a linear manner, from the ini-
tial premium percentage to the final premium per-
centage specified in such table for such income tier. 
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(c) REFERENCE PREMIUM AMOUNT.—The reference 
premium amount specified in this subsection for a plan 
year for an individual in a premium rating area is equal 
to the average premium for the 3 basic plans in the area 
for the plan year with the lowest premium levels. In com-
puting such amount the Commissioner may exclude plans 
with extremely limited enrollments. 
(d) TABLE OF PREMIUM PERCENTAGE LIMITS AND AC-
TUARIAL VALUE PERCENTAGES BASED ON INCOME TIER.— 
(1) IN GENERAL.—For purposes of this subtitle, 
subject to paragraphs (3) and (4), the table specified 
in this subsection is as follows: 
In the case of family in-
come (expressed as a per-
cent of FPL) within the 
following income tier: 
The initial pre-
mium percent-
age is— 
The final pre-
mium percent-
age is— 
The actuarial 
value percentage 
is— 
133% through 150% 
1.5% 
3.0% 
97% 
150% through 200% 
3.0% 
5.5% 
93% 
200% through 250% 
5.5% 
8% 
85% 
250% through 300% 
8% 
10% 
78% 
300% through 350% 
10% 
11% 
72% 
350% through 400% 
11% 
12% 
70% 
(2) SPECIAL RULES.—For purposes of applying 
the table under paragraph (1)— 
(A) FOR LOWEST LEVEL OF INCOME.—In 
the case of an individual with income that does 
not exceed 133 percent of FPL, the individual 
shall be considered to have income that is 133% 
of FPL. 
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(B) APPLICATION
OF
HIGHER
ACTUARIAL 
VALUE
PERCENTAGE
AT
TIER
TRANSITION 
POINTS.—If two actuarial value percentages may 
be determined with respect to an individual, the 
actuarial value percentage shall be the higher of 
such percentages. 
(3) INDEXING.—For years after Y1, the Commis-
sioner shall adjust the initial and final premium per-
centages to maintain the ratio of governmental to en-
rollee shares of premiums over time, for each income 
tier identified in the table in paragraph (1). 
(4) CONTINGENT ADJUSTMENT FOR ADDITIONAL 
SAVINGS.— 
(A) IN GENERAL.—Before the beginning of 
each year beginning with Y2— 
(i) the Chief Actuary of the Centers of 
Medicare & Medicaid Services shall esti-
mate the amount of savings in the previous 
year under this division resulting from the 
application of the provisions described in 
subparagraph (B) and shall report such es-
timate to the Commissioner; and 
(ii) the Commissioner, based upon such 
estimate, shall provide for an appropriate 
increase in the initial and final premium 
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percentages in the table specified in para-
graph (1) in a manner that is designed to 
result in an increase in aggregate afford-
ability credits equivalent to the amount so 
estimated. 
(B) PROVISIONS
DESCRIBED.—The provi-
sions described in this subparagraph are as fol-
lows: 
(i) FORMULARY
UNDER
PUBLIC
OP-
TION.—Section 223(a)(4). 
(ii) 
PBM 
TRANSPARENCY.—Section 
133(d). 
(iii) 
ACO 
IN
MEDICAID.—Section 
1730. 
(iv) 
ADMINISTRATIVE
SIMPLIFICA-
TION.— 
(I) Section 1173A of the Social 
Security Act, as added by section 
163(a)(1). 
(II) Section 163(c). 
(III) Section 164. 
(v) LIMITATION
ON
PREMIUM
IN-
CREASES
IN
EXCHANGE-PARTICIPATING 
PLANS.—Section 209. 
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(vi) NEGOTIATION OF LOWER PART D 
DRUG PRICES.—Section 1186. 
SEC. 244. AFFORDABILITY COST-SHARING CREDIT. 
(a) IN GENERAL.—The affordability cost-sharing cred-
it under this section for an affordable credit eligible indi-
vidual enrolled in an Exchange-participating health bene-
fits plan is in the form of the cost-sharing reduction de-
scribed in subsection (b) provided under this section for the 
income tier in which the individual is classified based on 
the individual’s family income. 
(b) COST-SHARING REDUCTIONS.—The Commissioner 
shall specify a reduction in cost-sharing amounts and the 
annual limitation on cost-sharing specified in section 
122(c)(2)(B) under a basic plan for each income tier speci-
fied in the table under section 243(d), with respect to a 
year, in a manner so that, as estimated by the Commis-
sioner, the actuarial value of the coverage with such reduced 
cost-sharing amounts (and the reduced annual cost-sharing 
limit) is equal to the actuarial value percentage (specified 
in the table under section 243(d) for the income tier in-
volved) of the full actuarial value if there were no cost-shar-
ing imposed under the plan. 
(c) DETERMINATION AND PAYMENT OF COST-SHARING 
AFFORDABILITY CREDIT.—In the case of an affordable cred-
it eligible individual in a tier enrolled in an Exchange- 
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participating health benefits plan offered by a QHBP offer-
ing entity, the Commissioner shall provide for payment to 
the offering entity of an amount equivalent to the increased 
actuarial value of the benefits under the plan provided 
under section 203(c)(2)(B) resulting from the reduction in 
cost-sharing described in subsection (b). 
SEC. 245. INCOME DETERMINATIONS. 
(a) IN GENERAL.—In applying this subtitle for an af-
fordability credit for an individual for a plan year, the in-
dividual’s income shall be the income (as defined in section 
242(c)) for the individual for the most recent taxable year 
(as determined in accordance with rules of the Commis-
sioner). The Federal poverty level applied shall be such level 
in effect as of the date of the application. 
(b) PROGRAM INTEGRITY; INCOME VERIFICATION PRO-
CEDURES.— 
(1) PROGRAM
INTEGRITY.—The Commissioner 
shall take such steps as may be appropriate to ensure 
the accuracy of determinations and redeterminations 
under this subtitle. 
(2) INCOME VERIFICATION.— 
(A) IN GENERAL.—Upon an initial appli-
cation of an individual for an affordability cred-
it under this subtitle (or in applying section 
242(b)) or upon an application for a change in 
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the affordability credit based upon a significant 
change in family income described in subpara-
graph (A)— 
(i) the Commissioner shall request from 
the Secretary of the Treasury the disclosure 
to the Commissioner of such information as 
may be permitted to verify the information 
contained in such application; and 
(ii) the Commissioner shall use the in-
formation so disclosed to verify such infor-
mation. 
(B) 
ALTERNATIVE
PROCEDURES.—The 
Commissioner shall establish procedures for the 
verification of income for purposes of this sub-
title if no income tax return is available for the 
most recent completed tax year. 
(c) SPECIAL RULES.— 
(1) CHANGES
IN
INCOME
AS
A
PERCENT
OF 
FPL.—In the case that an individual’s income (ex-
pressed as a percentage of the Federal poverty level 
for a family of the size involved) for a plan year is 
expected (in a manner specified by the Commissioner) 
to be significantly different from the income (as so ex-
pressed) used under subsection (a), the Commissioner 
shall establish rules requiring an individual to report, 
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consistent with the mechanism established under 
paragraph (2), significant changes in such income 
(including a significant change in family composi-
tion) to the Commissioner and requiring the substi-
tution of such income for the income otherwise appli-
cable. 
(2) REPORTING OF SIGNIFICANT CHANGES IN IN-
COME.—The Commissioner shall establish rules under 
which an individual determined to be an affordable 
credit eligible individual would be required to inform 
the Commissioner when there is a significant change 
in the family income of the individual (expressed as 
a percentage of the FPL for a family of the size in-
volved) and of the information regarding such change. 
Such mechanism shall provide for guidelines that 
specify the circumstances that qualify as a significant 
change, the verifiable information required to docu-
ment such a change, and the process for submission 
of such information. If the Commissioner receives new 
information from an individual regarding the family 
income of the individual, the Commissioner shall pro-
vide for a redetermination of the individual’s eligi-
bility to be an affordable credit eligible individual. 
(3) TRANSITION FOR CHIP.—In the case of a 
child described in section 205(d)(2), the Commissioner 
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shall establish rules under which the family income of 
the child is deemed to be no greater than the family 
income of the child as most recently determined before 
Y1 by the State under title XXI of the Social Security 
Act. 
(4) STUDY OF GEOGRAPHIC VARIATION IN APPLI-
CATION OF FPL.— 
(A) IN GENERAL.—The Commissioner shall 
examine the feasibility and implication of ad-
justing the application of the Federal poverty 
level under this subtitle for different geographic 
areas so as to reflect the variations in cost-of-liv-
ing among different areas within the United 
States. If the Commissioner determines that an 
adjustment is feasible, the study should include 
a methodology to make such an adjustment. Not 
later than the first day of Y2, the Commissioner 
shall submit to Congress a report on such study 
and shall include such recommendations as the 
Commissioner determines appropriate. 
(B) INCLUSION OF TERRITORIES.— 
(i) IN
GENERAL.—The Commissioner 
shall ensure that the study under subpara-
graph (A) covers the territories of the 
United States and that special attention is 
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paid to the disparity that exists among pov-
erty levels and the cost of living in such ter-
ritories and to the impact of such disparity 
on efforts to expand health coverage and en-
sure health care. 
(ii) TERRITORIES
DEFINED.—In this 
subparagraph, the term ‘‘territories of the 
United States’’ includes the Commonwealth 
of Puerto Rico, the United States Virgin Is-
lands, Guam, the Northern Mariana Is-
lands, and any other territory or possession 
of the United States. 
(d) PENALTIES
FOR MISREPRESENTATION.—In the 
case of an individual intentionally misrepresents family in-
come or the individual fails (without regard to intent) to 
disclose to the Commissioner a significant change in family 
income under subsection (c) in a manner that results in 
the individual becoming an affordable credit eligible indi-
vidual when the individual is not or in the amount of the 
affordability credit exceeding the correct amount— 
(1) the individual is liable for repayment of the 
amount of the improper affordability credit; ;and 
(2) in the case of such an intentional misrepre-
sentation or other egregious circumstances specified 
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by the Commissioner, the Commissioner may impose 
an additional penalty. 
SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED 
ALIENS. 
Nothing in this subtitle shall allow Federal payments 
for affordability credits on behalf of individuals who are 
not lawfully present in the United States. 
Subtitle D—Health Insurance 
Cooperatives 
SEC. 251. ESTABLISHMENT. 
Not later than 6 months after the date of the enactment 
of this Act, the Commissioner, in consultation with the Sec-
retary of the Treasury, shall establish a Consumer Operated 
and Oriented Plan program (in this subtitle referred to as 
the ‘‘CO–OP program’’) under which the Commissioner 
may make grants and loans for the establishment and ini-
tial operation of not-for-profit, member–run health insur-
ance cooperatives (in this subtitle individually referred to 
as a ‘‘cooperative’’) that provide insurance through the 
Health Insurance Exchange or a State-based Health Insur-
ance Exchange under section 208. Nothing in this subtitle 
shall be construed as requiring a State to establish such a 
cooperative. 
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SEC. 252. START-UP AND SOLVENCY GRANTS AND LOANS. 
(a) IN GENERAL.—Not later than 36 months after the 
date of the enactment of this Act, the Commissioner, acting 
through the CO–OP program, may make— 
(1) loans (of such period and with such terms as 
the Secretary may specify) to cooperatives to assist 
such cooperatives with start-up costs; and 
(2) grants to cooperatives to assist such coopera-
tives in meeting State solvency requirements in the 
States in which such cooperative offers or issues in-
surance coverage. 
(b) CONDITIONS.—A grant or loan may not be award-
ed under this section with respect to a cooperative unless 
the following conditions are met: 
(1) The cooperative is structured as a not-for- 
profit, member organization under the law of each 
State in which such cooperative offers, intends to 
offer, or issues insurance coverage, with the member-
ship of the cooperative being made up entirely of 
beneficiaries of the insurance coverage offered by such 
cooperative. 
(2) The cooperative did not offer insurance on or 
before July 16, 2009, and the cooperatives is not an 
affiliate or successor to an insurance company offer-
ing insurance on or before such date. 
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(3) The governing documents of the cooperatives 
incorporate ethical and conflict of interest standards 
designed to protect against insurance industry in-
volvement and interference in the governance of the 
cooperative. 
(4) The cooperative is not sponsored by a State 
government. 
(5) Substantially all of the activities of the coop-
erative consist of the issuance of qualified health ben-
efit plans through the Health Insurance Exchange or 
a State-based health insurance exchange. 
(6) The cooperative is licenced to offer insurance 
in each State in which it offers insurance. 
(7) The governance of the cooperative must be 
subject to a majority vote of its members. 
(8) As provided in guidance issued by the Sec-
retary of Health and Human Services, the cooperative 
operates with a strong consumer focus, including 
timeliness, responsiveness, and accountability to 
members. 
(9) Any profits made by the cooperative are used 
to lower premiums, improve benefits, or to otherwise 
improve the quality of health care delivered to mem-
bers. 
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(c) PRIORITY.—The Commissioner, in making grants 
and loans under this section, shall give priority to coopera-
tives that— 
(1) operate on a Statewide basis; 
(2) use an integrated delivery system; or 
(3) have a significant level of financial support 
from non-governmental sources. 
(d) RULES OF CONSTRUCTION.—Nothing in this sub-
title shall be construed to prevent a cooperative established 
in one State from integrating with a cooperative established 
in another State the administration, issuance of coverage, 
or other activities related to acting as a QHBP offering en-
tity. Nothing in this subtitle shall be construed as pre-
venting State governments from taking actions to permit 
such integration. 
(e) REPAYMENT FOR VIOLATIONS OF TERMS OF PRO-
GRAM.—If a cooperative violates the terms of the CO–OP 
program and fails to correct the violation within a reason-
able period of time, as determined by the Commissioner, 
the cooperative shall repay the total amount of any loan 
or grant received by such cooperative under this section, 
plus interest (at a rate determined by the Secretary). 
(f) AUTHORIZATION OF APPROPRIATIONS.—There are 
authorized to be appropriated $5,000,000,000 for the period 
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of fiscal years 2010 through 2014 to provide for grants and 
loans under this section. 
SEC. 253. DEFINITIONS. 
For purposes of this subtitle: 
(1) STATE.—The term ‘‘State’’ means each of the 
50 States and the District of Columbia. 
(2) MEMBER.—The term ‘‘member’’, with respect 
to a cooperative, means an individual who, after the 
cooperative offers health insurance coverage, is en-
rolled in such coverage. 
TITLE III—SHARED 
RESPONSIBILITY 
Subtitle A—Individual 
Responsibility 
SEC. 301. INDIVIDUAL RESPONSIBILITY. 
For an individual’s responsibility to obtain acceptable 
coverage, see section 59B of the Internal Revenue Code of 
1986 (as added by section 401 of this Act). 
Subtitle B—Employer Responsibility 
PART 1—HEALTH COVERAGE PARTICIPATION 
REQUIREMENTS 
SEC. 311. HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS. 
An employer meets the requirements of this section if 
such employer does all of the following: 
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(1) OFFER OF COVERAGE.—The employer offers 
each employee individual and family coverage under 
a qualified health benefits plan (or under a current 
employment-based health plan (within the meaning of 
section 102(b))) in accordance with section 312. 
(2) CONTRIBUTION TOWARDS COVERAGE.—If an 
employee accepts such offer of coverage, the employer 
makes timely contributions towards such coverage in 
accordance with section 312. 
(3) CONTRIBUTION IN LIEU OF COVERAGE.—Be-
ginning with Y2, if an employee declines such offer 
but otherwise obtains coverage in an Exchange-par-
ticipating health benefits plan (other than by reason 
of being covered by family coverage as a spouse or de-
pendent of the primary insured), the employer shall 
make a timely contribution to the Health Insurance 
Exchange with respect to each such employee in ac-
cordance with section 313. 
SEC. 312. EMPLOYER RESPONSIBILITY TO CONTRIBUTE TO-
WARDS EMPLOYEE AND DEPENDENT COV-
ERAGE. 
(a) IN GENERAL.—An employer meets the require-
ments of this section with respect to an employee if the fol-
lowing requirements are met: 
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(1) OFFERING OF COVERAGE.—The employer of-
fers the coverage described in section 311(1) either 
through an Exchange-participating health benefits 
plan or other than through such a plan. 
(2) EMPLOYER REQUIRED CONTRIBUTION.—The 
employer timely pays to the issuer of such coverage 
an amount not less than the employer required con-
tribution specified in subsection (b) for such coverage. 
(3) PROVISION OF INFORMATION.—The employer 
provides the Health Choices Commissioner, the Sec-
retary of Labor, the Secretary of Health and Human 
Services, and the Secretary of the Treasury, as appli-
cable, with such information as the Commissioner 
may require to ascertain compliance with the require-
ments of this section. 
(4) AUTOENROLLMENT
OF
EMPLOYEES.—The 
employer provides for autoenrollment of the employee 
in accordance with subsection (c). 
(b) REDUCTION OF EMPLOYEE PREMIUMS THROUGH 
MINIMUM EMPLOYER CONTRIBUTION.— 
(1) FULL-TIME EMPLOYEES.—The minimum em-
ployer contribution described in this subsection for 
coverage of a full-time employee (and, if any, the em-
ployee’s spouse and qualifying children (as defined in 
section 152(c) of the Internal Revenue Code of 1986) 
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under a qualified health benefits plan (or current em-
ployment-based health plan) is equal to— 
(A) in case of individual coverage, not less 
than 72.5 percent of the applicable premium (as 
defined in section 4980B(f)(4) of such Code, sub-
ject to paragraph (2)) of the lowest cost plan of-
fered by the employer that is a qualified health 
benefits plan (or is such current employment- 
based health plan); and 
(B) in the case of family coverage which in-
cludes coverage of such spouse and children, not 
less 65 percent of such applicable premium of 
such lowest cost plan. 
(2) APPLICABLE PREMIUM FOR EXCHANGE COV-
ERAGE.—In this subtitle, the amount of the applicable 
premium of the lowest cost plan with respect to cov-
erage of an employee under an Exchange-partici-
pating health benefits plan is the reference premium 
amount under section 243(c) for individual coverage 
(or, if elected, family coverage) for the premium rat-
ing area in which the individual or family resides. 
(3) MINIMUM EMPLOYER CONTRIBUTION FOR EM-
PLOYEES OTHER THAN FULL-TIME EMPLOYEES.—In 
the case of coverage for an employee who is not a full- 
time employee, the amount of the minimum employer 
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contribution under this subsection shall be a propor-
tion (as determined in accordance with rules of the 
Health Choices Commissioner, the Secretary of Labor, 
the Secretary of Health and Human Services, and the 
Secretary of the Treasury, as applicable) of the min-
imum employer contribution under this subsection 
with respect to a full-time employee that reflects the 
proportion of— 
(A) the average weekly hours of employment 
of the employee by the employer, to 
(B) the minimum weekly hours specified by 
the Commissioner for an employee to be a full- 
time employee. 
(4) SALARY REDUCTIONS NOT TREATED AS EM-
PLOYER CONTRIBUTIONS.—For purposes of this sec-
tion, any contribution on behalf of an employee with 
respect to which there is a corresponding reduction in 
the compensation of the employee shall not be treated 
as an amount paid by the employer. 
(c) AUTOMATIC ENROLLMENT FOR EMPLOYER SPON-
SORED HEALTH BENEFITS.— 
(1) IN GENERAL.—The requirement of this sub-
section with respect to an employer and an employee 
is that the employer automatically enroll such em-
ployee into the employment-based health benefits plan 
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for individual coverage under the plan option with 
the lowest applicable employee premium. 
(2) OPT-OUT.—In no case may an employer 
automatically enroll an employee in a plan under 
paragraph (1) if such employee makes an affirmative 
election to opt out of such plan or to elect coverage 
under an employment-based health benefits plan of-
fered by such employer. An employer shall provide an 
employee with a 30-day period to make such an af-
firmative election before the employer may automati-
cally enroll the employee in such a plan. 
(3) NOTICE REQUIREMENTS.— 
(A) IN GENERAL.—Each employer described 
in paragraph (1) who automatically enrolls an 
employee into a plan as described in such para-
graph shall provide the employees, within a rea-
sonable period before the beginning of each plan 
year (or, in the case of new employees, within a 
reasonable period before the end of the enrollment 
period for such a new employee), written notice 
of the employees’ rights and obligations relating 
to the automatic enrollment requirement under 
such paragraph. Such notice must be comprehen-
sive and understood by the average employee to 
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224 
whom the automatic enrollment requirement ap-
plies. 
(B) INCLUSION
OF
SPECIFIC
INFORMA-
TION.—The written notice under subparagraph 
(A) must explain an employee’s right to opt out 
of being automatically enrolled in a plan and in 
the case that more than one level of benefits or 
employee premium level is offered by the em-
ployer involved, the notice must explain which 
level of benefits and employee premium level the 
employee will be automatically enrolled in the 
absence of an affirmative election by the em-
ployee. 
SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COV-
ERAGE. 
(a) IN GENERAL.—A contribution is made in accord-
ance with this section with respect to an employee if such 
contribution is equal to an amount equal to 8 percent of 
the average wages paid by the employer during the period 
of enrollment (determined by taking into account all em-
ployees of the employer and in such manner as the Commis-
sioner provides, including rules providing for the appro-
priate aggregation of related employers). Any such con-
tribution— 
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225 
(1) shall be paid to the Health Choices Commis-
sioner for deposit into the Health Insurance Exchange 
Trust Fund, and 
(2) shall not be applied against the premium of 
the employee under the Exchange-participating health 
benefits plan in which the employee is enrolled. 
(b) SPECIAL RULES FOR SMALL EMPLOYERS.— 
(1) IN GENERAL.—In the case of any employer 
who is a small employer for any calendar year, sub-
section (a) shall be applied by substituting the appli-
cable percentage determined in accordance with the 
following table for ‘‘8 percent’’: 
If the annual payroll of such employer for 
the preceding calendar year: 
The applicable 
percentage is: 
Does not exceed $250,000 ...........................................
0 percent 
Exceeds $250,000, but does not exceed $300,000 ......
2 percent 
Exceeds $300,000, but does not exceed $350,000 ......
4 percent 
Exceeds $350,000, but does not exceed $400,000 ......
6 percent 
(2) SMALL
EMPLOYER.—For purposes of this 
subsection, the term ‘‘small employer’’ means any em-
ployer for any calendar year if the annual payroll of 
such employer for the preceding calendar year does 
not exceed $400,000. 
(3) ANNUAL
PAYROLL.—For purposes of this 
paragraph, the term ‘‘annual payroll’’ means, with 
respect to any employer for any calendar year, the 
aggregate wages paid by the employer during such 
calendar year. 
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(4) AGGREGATION
RULES.—Related employers 
and predecessors shall be treated as a single employer 
for purposes of this subsection. 
SEC. 314. AUTHORITY RELATED TO IMPROPER STEERING. 
The Health Choices Commissioner (in coordination 
with the Secretary of Labor, the Secretary of Health and 
Human Services, and the Secretary of the Treasury) shall 
have authority to set standards for determining whether em-
ployers or insurers are undertaking any actions to affect 
the risk pool within the Health Insurance Exchange by in-
ducing individuals to decline coverage under a qualified 
health benefits plan (or current employment-based health 
plan (within the meaning of section 102(b)) offered by the 
employer and instead to enroll in an Exchange-partici-
pating health benefits plan. An employer violating such 
standards shall be treated as not meeting the requirements 
of this section. 
PART 2—SATISFACTION OF HEALTH COVERAGE 
PARTICIPATION REQUIREMENTS 
ƒFor sections 321 and 322, see text of bill as intro-
duced on July 14, 2009.≈ 
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SEC. 323. SATISFACTION OF HEALTH COVERAGE PARTICI-
PATION REQUIREMENTS UNDER THE PUBLIC 
HEALTH SERVICE ACT. 
(a) IN GENERAL.—Part C of title XXVII of the Public 
Health Service Act is amended by adding at the end the 
following new section: 
‘‘SEC. 2793. NATIONAL HEALTH COVERAGE PARTICIPATION 
REQUIREMENTS. 
‘‘(a) ELECTION OF EMPLOYER TO BE SUBJECT TO NA-
TIONAL HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS.— 
‘‘(1) IN GENERAL.—An employer may make an 
election with the Secretary to be subject to the health 
coverage participation requirements. 
‘‘(2) TIME
AND
MANNER.—An election under 
paragraph (1) may be made at such time and in such 
form and manner as the Secretary may prescribe. 
‘‘(b) TREATMENT
OF COVERAGE RESULTING FROM 
ELECTION.— 
‘‘(1) IN GENERAL.—If an employer makes an 
election to the Secretary under subsection (a)— 
‘‘(A) such election shall be treated as the es-
tablishment and maintenance of a group health 
plan for purposes of this title, subject to section 
151 of the America’s Affordable Health Choices 
Act of 2009, and 
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‘‘(B) the health coverage participation re-
quirements shall be deemed to be included as 
terms and conditions of such plan. 
‘‘(2) PERIODIC INVESTIGATIONS TO DETERMINE 
COMPLIANCE WITH HEALTH COVERAGE PARTICIPATION 
REQUIREMENTS.—The Secretary shall regularly audit 
a representative sampling of employers and conduct 
investigations and other activities with respect to 
such sampling of employers so as to discover non-
compliance with the health coverage participation re-
quirements in connection with such employers (dur-
ing any period with respect to which an election 
under subsection (a) is in effect). The Secretary shall 
communicate findings of noncompliance made by the 
Secretary under this subsection to the Secretary of the 
Treasury and the Health Choices Commissioner. The 
Secretary shall take such timely enforcement action as 
appropriate to achieve compliance. 
‘‘(c) HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS.—For purposes of this section, the term ‘health cov-
erage participation requirements’ means the requirements 
of part 1 of subtitle B of title III of division A of the Amer-
ica’s Affordable Health Choices Act of 2009 (as in effect on 
the date of the enactment of this section). 
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229 
‘‘(d) SEPARATE ELECTIONS.—Under regulations pre-
scribed by the Secretary, separate elections may be made 
under subsection (a) with respect to full-time employees and 
employees who are not full-time employees. 
‘‘(e) TERMINATION OF ELECTION IN CASES OF SUB-
STANTIAL NONCOMPLIANCE.—The Secretary may terminate 
the election of any employer under subsection (a) if the Sec-
retary (in coordination with the Health Choices Commis-
sioner) determines that such employer is in substantial non-
compliance with the health coverage participation require-
ments and shall refer any such determination to the Sec-
retary of the Treasury as appropriate. 
‘‘(f) ENFORCEMENT OF HEALTH COVERAGE PARTICI-
PATION REQUIREMENTS.— 
‘‘(1) CIVIL PENALTIES.—In the case of any em-
ployer who fails (during any period with respect to 
which the election under subsection (a) is in effect) to 
satisfy the health coverage participation requirements 
with respect to any employee, the Secretary may as-
sess a civil penalty against the employer of $100 for 
each day in the period beginning on the date such 
failure first occurs and ending on the date such fail-
ure is corrected. 
‘‘(2) LIMITATIONS ON AMOUNT OF PENALTY.— 
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230 
‘‘(A) PENALTY NOT TO APPLY WHERE FAIL-
URE NOT DISCOVERED EXERCISING REASONABLE 
DILIGENCE.—No penalty shall be assessed under 
paragraph (1) with respect to any failure during 
any period for which it is established to the sat-
isfaction of the Secretary that the employer did 
not know, or exercising reasonable diligence 
would not have known, that such failure existed. 
‘‘(B) PENALTY NOT TO APPLY TO FAILURES 
CORRECTED WITHIN 30 DAYS.—No penalty shall 
be assessed under paragraph (1) with respect to 
any failure if— 
‘‘(i) such failure was due to reasonable 
cause and not to willful neglect, and 
‘‘(ii) such failure is corrected during 
the 30-day period beginning on the 1st date 
that the employer knew, or exercising rea-
sonable diligence would have known, that 
such failure existed. 
‘‘(C) OVERALL LIMITATION FOR UNINTEN-
TIONAL FAILURES.—In the case of failures which 
are due to reasonable cause and not to willful ne-
glect, the penalty assessed under paragraph (1) 
for failures during any 1-year period shall not 
exceed the amount equal to the lesser of— 
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‘‘(i) 10 percent of the aggregate 
amount paid or incurred by the employer 
(or predecessor employer) during the pre-
ceding taxable year for group health plans, 
or 
‘‘(ii) $500,000. 
‘‘(3) ADVANCE NOTIFICATION OF FAILURE PRIOR 
TO ASSESSMENT.—Before a reasonable time prior to 
the assessment of any penalty under paragraph (1) 
with respect to any failure by an employer, the Sec-
retary shall inform the employer in writing of such 
failure and shall provide the employer information 
regarding efforts and procedures which may be under-
taken by the employer to correct such failure. 
‘‘(4) ACTIONS TO ENFORCE ASSESSMENTS.—The 
Secretary may bring a civil action in any District 
Court of the United States to collect any civil penalty 
under this subsection. 
‘‘(5) COORDINATION WITH EXCISE TAX.—Under 
regulations prescribed in accordance with section 324 
of the America’s Affordable Health Choices Act of 
2009, the Secretary and the Secretary of the Treasury 
shall coordinate the assessment of penalties under 
paragraph (1) in connection with failures to satisfy 
health coverage participation requirements with the 
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232 
imposition of excise taxes on such failures under sec-
tion 4980H(b) of the Internal Revenue Code of 1986 
so as to avoid duplication of penalties with respect to 
such failures. 
‘‘(6) DEPOSIT
OF
PENALTY
COLLECTED.—Any 
amount of penalty collected under this subsection 
shall be deposited as miscellaneous receipts in the 
Treasury of the United States. 
‘‘(g) REGULATIONS.—The Secretary may promulgate 
such regulations as may be necessary or appropriate to 
carry out the provisions of this section, in accordance with 
section 324(a) of the America’s Affordable Health Choices 
Act of 2009. The Secretary may promulgate any interim 
final rules as the Secretary determines are appropriate to 
carry out this section.’’. 
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to periods beginning after December 
31, 2012. 
SEC. 324. ADDITIONAL RULES RELATING TO HEALTH COV-
ERAGE PARTICIPATION REQUIREMENTS. 
(a) ASSURING COORDINATION.—The officers consisting 
of the Secretary of Labor, the Secretary of the Treasury, 
the Secretary of Health and Human Services, and the 
Health Choices Commissioner shall ensure, through the exe-
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cution of an interagency memorandum of understanding 
among such officers, that— 
(1) regulations, rulings, and interpretations 
issued by such officers relating to the same matter 
over which two or more of such officers have responsi-
bility under subpart B of part 6 of subtitle B of title 
I of the Employee Retirement Income Security Act of 
1974, section 4980H of the Internal Revenue Code of 
1986, and section 2793 of the Public Health Service 
Act are administered so as to have the same effect at 
all times; and 
(2) coordination of policies relating to enforcing 
the same requirements through such officers in order 
to have a coordinated enforcement strategy that 
avoids duplication of enforcement efforts and assigns 
priorities in enforcement. 
(b) MULTIEMPLOYER PLANS.—In the case of a group 
health plan that is a multiemployer plan (as defined in 
section 3(37) of the Employee Retirement Income Security 
Act of 1974), the regulations prescribed in accordance with 
subsection (a) by the officers referred to in subsection (a) 
shall provide for the application of the health coverage par-
ticipation requirements to the plan sponsor and contrib-
uting sponsors of such plan. 
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ƒTITLE IV—AMENDMENTS TO IN-
TERNAL REVENUE CODE OF 
1986≈ 
ƒFor title IV, see text of bill as introduced on July 
14, 2009.≈ 
DIVISION B—MEDICARE AND 
MEDICAID IMPROVEMENTS 
SEC. 1001. TABLE OF CONTENTS OF DIVISION. 
The table of contents for this division is as follows: 
DIVISION B—MEDICARE AND MEDICAID IMPROVEMENTS 
Sec. 1001. Table of contents of division. 
TITLE I—IMPROVING HEALTH CARE VALUE 
Subtitle A—Provisions Related to Medicare Part A 
PART 1—MARKET BASKET UPDATES 
Sec. 1101. Skilled nursing facility payment update. 
Sec. 1102. Inpatient rehabilitation facility payment update. 
Sec. 1103. Incorporating productivity improvements into market basket updates 
that do not already incorporate such improvements. 
PART 2—OTHER MEDICARE PART A PROVISIONS 
Sec. 1111. Payments to skilled nursing facilities. 
Sec. 1112. Medicare DSH report and payment adjustments in response to cov-
erage expansion. 
Subtitle B—Provisions Related to Medicare Part B 
PART 1—PHYSICIANS’ SERVICES 
Sec. 1121. Sustainable growth rate reform. 
Sec. 1122. Misvalued codes under the physician fee schedule. 
Sec. 1123. Payments for efficient areas. 
Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI). 
Sec. 1125. Adjustment to Medicare payment localities. 
Sec. 1126. Resource-based feedback program for physicians in Medicare. 
PART 2—MARKET BASKET UPDATES 
Sec. 1131. Incorporating productivity improvements into market basket updates 
that do not already incorporate such improvements. 
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PART 3—OTHER PROVISIONS 
Sec. 1141. Rental and purchase of power-driven wheelchairs. 
Sec. 1141A. Election to take ownership, or to decline ownership, of a certain item 
of complex durable medical equipment after the 13-month 
capped rental period ends. 
Sec. 1142. Extension of payment rule for brachytherapy. 
Sec. 1143. Home infusion therapy report to congress. 
Sec. 1144. Require ambulatory surgical centers (ASCs) to submit cost data and 
other data. 
Sec. 1145. Treatment of certain cancer hospitals. 
Sec. 1146. Medicare Improvement Fund. 
Sec. 1147. Payment for imaging services. 
Sec. 1148. Durable medical equipment program improvements. 
Sec. 1149. MedPAC study and report on bone mass measurement. 
Sec. 1149A. Exclusion of customary prompt pay discounts extended to wholesalers 
from manufacturer’s average sales price for payments for drugs 
and biologicals under Medicare part B. 
Sec. 1149B. Timely access to postmastectomy items. 
Sec. 1149C. Moratorium on Medicare reductions in payment rates for certain 
interventional pain management procedures covered under the 
ASC fee schedule. 
Sec. 1149D. Medicare coverage of services of qualified respiratory therapists per-
formed under the general supervision of a physician. 
Subtitle C—Provisions Related to Medicare Parts A and B 
Sec. 1151. Reducing potentially preventable hospital readmissions. 
Sec. 1152. Post acute care services payment reform plan and bundling pilot pro-
gram. 
Sec. 1153. Home health payment update for 2010. 
Sec. 1154. Payment adjustments for home health care. 
Sec. 1155. Incorporating productivity improvements into market basket update 
for home health services. 
Sec. 1156. Limitation on Medicare exceptions to the prohibition on certain physi-
cian referrals made to hospitals. 
Sec. 1157. Institute of Medicine study of geographic adjustment factors under 
Medicare. 
Sec. 1158. Revision of Medicare payment systems to address geographic inequi-
ties. 
Subtitle D—Medicare Advantage Reforms 
PART 1—PAYMENT AND ADMINISTRATION 
Sec. 1161. Phase-in of payment based on fee-for-service costs. 
Sec. 1162. Quality bonus payments. 
Sec. 1163. Extension of Secretarial coding intensity adjustment authority. 
Sec. 1164. Simplification of annual beneficiary election periods. 
Sec. 1165. Extension of reasonable cost contracts. 
Sec. 1166. Limitation of waiver authority for employer group plans. 
Sec. 1167. Improving risk adjustment for payments. 
Sec. 1168. Elimination of MA Regional Plan Stabilization Fund. 
Sec. 1169. Study regarding the effects of calculating Medicare Advantage pay-
ment rates on a regional average of Medicare fee for service 
rates. 
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PART 2—BENEFICIARY PROTECTIONS AND ANTI-FRAUD 
Sec. 1171. Limitation on cost-sharing for individual health services. 
Sec. 1172. Continuous open enrollment for enrollees in plans with enrollment sus-
pension. 
Sec. 1173. Information for beneficiaries on MA plan administrative costs. 
Sec. 1174. Strengthening audit authority. 
Sec. 1175. Authority to deny plan bids. 
PART 3—TREATMENT OF SPECIAL NEEDS PLANS 
Sec. 1176. Limitation on enrollment outside open enrollment period of individ-
uals into chronic care specialized MA plans for special needs in-
dividuals. 
Sec. 1177. Extension of authority of special needs plans to restrict enrollment. 
Subtitle E—Improvements to Medicare Part D 
Sec. 1181. Elimination of coverage gap. 
Sec. 1182. Discounts for certain part D drugs in original coverage gap. 
Sec. 1183. Repeal of provision relating to submission of claims by pharmacies lo-
cated in or contracting with long-term care facilities. 
Sec. 1184. Including costs incurred by AIDS drug assistance programs and In-
dian Health Service in providing prescription drugs toward the 
annual out-of-pocket threshold under part D. 
Sec. 1185. Permitting mid-year changes in enrollment for formulary changes that 
adversely impact an enrollee. 
Sec. 1186. Negotiation of lower covered part D drug prices on behalf of Medicare 
beneficiaries. 
Sec. 1187. State certification prior to waiver of licensure requirements under 
Medicare prescription drug program. 
Subtitle F—Medicare Rural Access Protections 
Sec. 1191. Telehealth expansion and enhancements. 
Sec. 1192. Extension of outpatient hold harmless provision. 
Sec. 1193. Extension of section 508 hospital reclassifications. 
Sec. 1194. Extension of geographic floor for work. 
Sec. 1195. Extension of payment for technical component of certain physician pa-
thology services. 
Sec. 1196. Extension of ambulance add-ons. 
Sec. 1197. Ensuring proportional representation of interests of rural areas on 
MedPAC. 
TITLE II—MEDICARE BENEFICIARY IMPROVEMENTS 
Subtitle A—Improving and Simplifying Financial Assistance for Low Income 
Medicare Beneficiaries 
Sec. 1201. Improving assets tests for Medicare Savings Program and low-income 
subsidy program. 
Sec. 1202. Elimination of part D cost-sharing for certain noninstitutionalized 
full-benefit dual eligible individuals. 
Sec. 1203. Eliminating barriers to enrollment. 
Sec. 1204. Enhanced oversight relating to reimbursements for retroactive low in-
come subsidy enrollment. 
Sec. 1205. Intelligent assignment in enrollment. 
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Sec. 1206. Special enrollment period and automatic enrollment process for cer-
tain subsidy eligible individuals. 
Sec. 1207. Application of MA premiums prior to rebate in calculation of low in-
come subsidy benchmark. 
Subtitle B—Reducing Health Disparities 
Sec. 1221. Ensuring effective communication in Medicare. 
Sec. 1222. Demonstration to promote access for Medicare beneficiaries with lim-
ited-English proficiency by providing reimbursement for cul-
turally and linguistically appropriate services. 
Sec. 1223. IOM report on impact of language access services. 
Sec. 1224. Definitions. 
Subtitle C—Miscellaneous Improvements 
Sec. 1231. Extension of therapy caps exceptions process. 
Sec. 1232. Extended months of coverage of immunosuppressive drugs for kidney 
transplant patients and other renal dialysis provisions. 
Sec. 1233. Advance care planning consultation. 
Sec. 1234. Part B special enrollment period and waiver of limited enrollment 
penalty for TRICARE beneficiaries. 
Sec. 1235. Exception for use of more recent tax year in case of gains from sale 
of primary residence in computing part B income-related pre-
mium. 
Sec. 1236. Demonstration program on use of patient decisions aids. 
TITLE III—PROMOTING PRIMARY CARE, MENTAL HEALTH 
SERVICES, AND COORDINATED CARE 
Sec. 1301. Accountable Care Organization pilot program. 
Sec. 1302. Medical home pilot program. 
Sec. 1303. Independence at home pilot program. 
Sec. 1304. Payment incentive for selected primary care services. 
Sec. 1305. Increased reimbursement rate for certified nurse-midwives. 
Sec. 1306. Coverage and waiver of cost-sharing for preventive services. 
Sec. 1307. Waiver of deductible for colorectal cancer screening tests regardless of 
coding, subsequent diagnosis, or ancillary tissue removal. 
Sec. 1308. Excluding clinical social worker services from coverage under the 
Medicare skilled nursing facility prospective payment system 
and consolidated payment. 
Sec. 1309. Coverage of marriage and family therapist services and mental health 
counselor services. 
Sec. 1310. Extension of physician fee schedule mental health add-on. 
Sec. 1311. Expanding access to vaccines. 
Sec. 1312. Recognition of certified diabetes educators as certified providers for 
purposes of Medicare diabetes outpatient self-management train-
ing services. 
TITLE IV—QUALITY 
Subtitle A—Comparative Effectiveness Research 
Sec. 1401. Comparative effectiveness research. 
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Subtitle B—Nursing Home Transparency 
PART 1—IMPROVING TRANSPARENCY OF INFORMATION ON SKILLED NURSING 
FACILITIES AND NURSING FACILITIES 
Sec. 1411. Required disclosure of ownership and additional disclosable parties in-
formation. 
Sec. 1412. Accountability requirements. 
Sec. 1413. Nursing home compare Medicare website. 
Sec. 1414. Reporting of expenditures. 
Sec. 1415. Standardized complaint form. 
Sec. 1416. Ensuring staffing accountability. 
PART 2—TARGETING ENFORCEMENT 
Sec. 1421. Civil money penalties. 
Sec. 1422. National independent monitor pilot program. 
Sec. 1423. Notification of facility closure. 
PART 3—IMPROVING STAFF TRAINING 
Sec. 1431. Dementia and abuse prevention training. 
Sec. 1432. Study and report on training required for certified nurse aides and 
supervisory staff. 
Sec. 1433. Qualification of director of food services of a Medicaid nursing facility. 
Subtitle C—Quality Measurements 
Sec. 1441. Establishment of national priorities for quality improvement. 
Sec. 1442. Development of new quality measures; GAO evaluation of data collec-
tion process for quality measurement. 
Sec. 1443. Multistakeholder prerulemaking input into selection of quality meas-
ures. 
Sec. 1444. Application of quality measures. 
Sec. 1445. Consensus-based entity funding. 
Sec. 1446. Quality indicators for care of people with Alzheimer’s disease. 
Sec. 1447. Study on five star quality rating system. 
Subtitle D—Physician Payments Sunshine Provision 
Sec. 1451. Reports on financial relationships between manufacturers and dis-
tributors of covered drugs, devices, biologicals, or medical sup-
plies under Medicare, Medicaid, or CHIP and physicians and 
other health care entities and between physicians and other 
health care entities. 
Subtitle E—Public Reporting on Health Care-Associated Infections 
Sec. 1461. Requirement for public reporting by hospitals and ambulatory surgical 
centers on health care-associated infections. 
TITLE V—MEDICARE GRADUATE MEDICAL EDUCATION 
Sec. 1501. Distribution of unused residency positions. 
Sec. 1502. Increasing training in nonprovider settings. 
Sec. 1503. Rules for counting resident time for didactic and scholarly activities 
and other activities. 
Sec. 1504. Preservation of resident cap positions from closed hospitals. 
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Sec. 1505. Improving accountability for approved medical residency training. 
TITLE VI—PROGRAM INTEGRITY 
Subtitle A—Increased Funding To Fight Waste, Fraud, and Abuse 
Sec. 1601. Increased funding and flexibility to fight fraud and abuse. 
Subtitle B—Enhanced Penalties for Fraud and Abuse 
Sec. 1611. Enhanced penalties for false statements on provider or supplier enroll-
ment applications. 
Sec. 1612. Enhanced penalties for submission of false statements material to a 
false claim. 
Sec. 1613. Enhanced penalties for delaying inspections. 
Sec. 1614. Enhanced hospice program safeguards. 
Sec. 1615. Enhanced penalties for individuals excluded from program participa-
tion. 
Sec. 1616. Enhanced penalties for provision of false information by Medicare Ad-
vantage and part D plans. 
Sec. 1617. Enhanced penalties for Medicare Advantage and part D marketing 
violations. 
Sec. 1618. Enhanced penalties for obstruction of program audits. 
Sec. 1619. Exclusion of certain individuals and entities from participation in 
Medicare and State health care programs. 
Subtitle C—Enhanced Program and Provider Protections 
Sec. 1631. Enhanced CMS program protection authority. 
Sec. 1632. Enhanced Medicare, Medicaid, and CHIP program disclosure require-
ments relating to previous affiliations. 
Sec. 1633. Required inclusion of payment modifier for certain evaluation and 
management services. 
Sec. 1634. Evaluations and reports required under Medicare Integrity Program. 
Sec. 1635. Require providers and suppliers to adopt programs to reduce waste, 
fraud, and abuse. 
Sec. 1636. Maximum period for submission of Medicare claims reduced to not 
more than 12 months. 
Sec. 1637. Physicians who order durable medical equipment or home health serv-
ices required to be Medicare-enrolled physicians or eligible pro-
fessionals. 
Sec. 1638. Requirement for physicians to provide documentation on referrals to 
programs at high risk of waste and abuse. 
Sec. 1639. Face-to-face encounter with patient required before physicians may 
certify eligibility for home health services or durable medical 
equipment under Medicare. 
Sec. 1640. Extension of testimonial subpoena authority to program exclusion in-
vestigations. 
Sec. 1641. Required repayments of Medicare and Medicaid overpayments. 
Sec. 1642. Expanded application of hardship waivers for OIG exclusions to bene-
ficiaries of any Federal health care program. 
Sec. 1643. Access to certain information on renal dialysis facilities. 
Sec. 1644. Billing agents, clearinghouses, or other alternate payees required to 
register under Medicare. 
Sec. 1645. Conforming civil monetary penalties to False Claims Act amendments. 
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Subtitle D—Access to Information Needed To Prevent Fraud, Waste, and Abuse 
Sec. 1651. Access to information necessary to identify fraud, waste, and abuse. 
Sec. 1652. Elimination of duplication between the Healthcare Integrity and Pro-
tection Data Bank and the National Practitioner Data Bank. 
Sec. 1653. Compliance with HIPAA privacy and security standards. 
TITLE VII—MEDICAID AND CHIP 
Subtitle A—Medicaid and Health Reform 
Sec. 1701. Eligibility for individuals with income below 1331⁄3 percent of the Fed-
eral poverty level. 
Sec. 1702.
Requirements and special rules for certain Medicaid eligible individ-
uals. 
Sec. 1703. CHIP and Medicaid maintenance of eligibility. 
Sec. 1704. Reduction in Medicaid DSH. 
Sec. 1705. Expanded outstationing. 
Subtitle B—Prevention 
Sec. 1711. Required coverage of preventive services. 
Sec. 1712. Tobacco cessation. 
Sec. 1713. Optional coverage of nurse home visitation services. 
Sec. 1714. State eligibility option for family planning services. 
Subtitle C—Access 
Sec. 1721. Payments to primary care practitioners. 
Sec. 1722. Medical home pilot program. 
Sec. 1723. Translation or interpretation services. 
Sec. 1724. Optional coverage for freestanding birth center services. 
Sec. 1725. Inclusion of public health clinics under the vaccines for children pro-
gram. 
Sec. 1726. Requiring coverage of services of podiatrists. 
Sec. 1726A. Requiring coverage of services of optometrists. 
Sec. 1727. Therapeutic foster care. 
Sec. 1728. Assuring adequate payment levels for services. 
Sec. 1729. Preserving Medicaid coverage for youths upon release from public in-
stitutions. 
Sec. 1730. Quality measures for maternity and adult health services under Med-
icaid and CHIP. 
Sec. 1730A. Accountable care organization pilot program. 
Subtitle D—Coverage 
Sec. 1731. Optional Medicaid coverage of low-income HIV-infected individuals. 
Sec. 1732. Extending transitional Medicaid Assistance (TMA). 
Sec. 1733. Requirement of 12-month continuous coverage under certain CHIP 
programs. 
Sec. 1734. Preventing the application under CHIP of coverage waiting periods 
for certain children. 
Sec. 1735. Adult day health care services. 
Sec. 1736. Medicaid coverage for citizens of Freely Associated States. 
Sec. 1737. Continuing requirement of Medicaid coverage of nonemergency trans-
portation to medically necessary services. 
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Sec. 1738. State option to disregard certain income in providing continued Med-
icaid coverage for certain individuals with extremely high pre-
scription costs. 
Subtitle E—Financing 
Sec. 1741. Payments to pharmacists. 
Sec. 1742. Prescription drug rebates. 
Sec. 1743. Extension of prescription drug discounts to enrollees of Medicaid man-
aged care organizations. 
Sec. 1744. Payments for graduate medical education. 
Sec. 1745. Report on Medicaid payments. 
Sec. 1746. Reviews of Medicaid. 
Sec. 1747. Extension of delay in managed care organization provider tax elimi-
nation. 
Subtitle F—Waste, Fraud, and Abuse 
Sec. 1751. Health care acquired conditions. 
Sec. 1752. Evaluations and reports required under Medicaid Integrity Program. 
Sec. 1753. Require providers and suppliers to adopt programs to reduce waste, 
fraud, and abuse. 
Sec. 1754. Overpayments. 
Sec. 1755. Managed care organizations. 
Sec. 1756. Termination of provider participation under Medicaid and CHIP if 
terminated under Medicare or other State plan or child health 
plan. 
Sec. 1757.
Medicaid and CHIP exclusion from participation relating to certain 
ownership, control, and management affiliations. 
Sec. 1758.
Requirement to report expanded set of data elements under MMIS to 
detect fraud and abuse. 
Sec. 1759. Billing agents, clearinghouses, or other alternate payees required to 
register under Medicaid. 
Sec. 1760. Denial of payments for litigation-related misconduct. 
Sec. 1761. Mandatory State use of national correct coding initiative. 
Subtitle G—Payments to the Territories 
Sec. 1771. Payment to territories. 
Subtitle H—Miscellaneous 
Sec. 1781. Technical corrections. 
Sec. 1782. Extension of QI program. 
Sec. 1783. Outreach and enrollment of Medicaid and CHIP eligible individuals. 
Sec. 1784. Prohibitions on Federal Medicaid and CHIP payment for undocu-
mented aliens. 
Sec. 1785. Demonstration project for stabilization of emergency medical condi-
tions by nonpublicly owned or operated institutions for mental 
diseases. 
TITLE VIII—REVENUE-RELATED PROVISIONS 
Sec. 1801. Disclosures to facilitate identification of individuals likely to be ineli-
gible for the low-income assistance under the Medicare prescrip-
tion drug program to assist Social Security Administration’s 
outreach to eligible individuals. 
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Sec. 1802. Comparative Effectiveness Research Trust Fund; financing for Trust 
Fund. 
TITLE IX—MISCELLANEOUS PROVISIONS 
Sec. 1901. Repeal of trigger provision. 
Sec. 1902. Repeal of comparative cost adjustment (CCA) program. 
Sec. 1903. Extension of gainsharing demonstration. 
Sec. 1904. Grants to States for quality home visitation programs for families 
with young children and families expecting children. 
Sec. 1905. Improved coordination and protection for dual eligibles. 
Sec. 1906. Standardized marketing requirements under the Medicare Advantage 
and Medicare prescription drug programs. 
Sec. 1907. NAIC recommendations on the establishment of standardized benefit 
packages for Medicare Advantage plans and prescription drug 
plans. 
Sec. 1908. Application of emergency services laws. 
Sec. 1909. Nationwide program for national and State background checks on di-
rect patient access employees of long-term care facilities and pro-
viders. 
Sec. 1910. Establishment of Center for Medicare and Medicaid Payment Innova-
tion within CMS. 
TITLE I—IMPROVING HEALTH 
CARE VALUE 
ƒSubtitle A—Provisions Related to 
Medicare Part A≈ 
ƒFor subtitle A of title I of division B, see text of bill 
as introduced on July 14, 2009.≈ 
Subtitle B—Provisions Related to 
Medicare Part B 
PART 1—PHYSICIANS’ SERVICES 
SEC. 1121. SUSTAINABLE GROWTH RATE REFORM. 
(a) TRANSITIONAL
UPDATE
FOR
2010.—Section 
1848(d) of the Social Security Act (42 U.S.C. 1395w–4(d)) 
is amended by adding at the end the following new para-
graph: 
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‘‘(10) UPDATE FOR 2010.—The update to the sin-
gle conversion factor established in paragraph (1)(C) 
for 2010 shall be the percentage increase in the MEI 
(as defined in section 1842(i)(3)) for that year.’’. 
(b) REBASING SGR USING 2009; LIMITATION ON CU-
MULATIVE ADJUSTMENT PERIOD.—Section 1848(d)(4) of 
such Act (42 U.S.C. 1395w–4(d)(4)) is amended— 
(1) in subparagraph (B), by striking ‘‘subpara-
graph (D)’’ and inserting ‘‘subparagraphs (D) and 
(G)’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(G) REBASING
USING
2009
FOR
FUTURE 
UPDATE ADJUSTMENTS.—In determining the up-
date adjustment factor under subparagraph (B) 
for 2011 and subsequent years— 
‘‘(i) the allowed expenditures for 2009 
shall be equal to the amount of the actual 
expenditures for physicians’ services during 
2009; and 
‘‘(ii) the reference in subparagraph 
(B)(ii)(I) to ‘April 1, 1996’ shall be treated 
as a reference to ‘January 1, 2009 (or, if 
later, the first day of the fifth year before 
the year involved)’.’’. 
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(c) LIMITATION ON PHYSICIANS’ SERVICES INCLUDED 
IN TARGET GROWTH RATE COMPUTATION TO SERVICES 
COVERED UNDER PHYSICIAN FEE SCHEDULE.—Effective 
for services furnished on or after January 1, 2009, section 
1848(f)(4)(A) of such Act is amended by striking ‘‘(such as 
clinical’’ and all that follows through ‘‘in a physician’s of-
fice’’ and inserting ‘‘for which payment under this part is 
made under the fee schedule under this section, for services 
for practitioners described in section 1842(b)(18)(C) on a 
basis related to such fee schedule, or for services described 
in section 1861(p) (other than such services when furnished 
in the facility of a provider of services)’’. 
(d) ESTABLISHMENT OF SEPARATE TARGET GROWTH 
RATES FOR CATEGORIES OF SERVICES.— 
(1) ESTABLISHMENT OF SERVICE CATEGORIES.— 
Subsection (j) of section 1848 of the Social Security 
Act (42 U.S.C. 1395w–4) is amended by adding at 
the end the following new paragraph: 
‘‘(5) SERVICE
CATEGORIES.—For services fur-
nished on or after January 1, 2009, each of the fol-
lowing categories of physicians’ services (as defined in 
paragraph (3)) shall be treated as a separate ‘service 
category’: 
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‘‘(A) Evaluation and management services 
that are procedure codes (for services covered 
under this title) for— 
‘‘(i) services in the category designated 
Evaluation and Management in the Health 
Care Common Procedure Coding System 
(established by the Secretary under sub-
section (c)(5) as of December 31, 2009, and 
as subsequently modified by the Secretary); 
and 
‘‘(ii) preventive services (as defined in 
section 1861(iii)) for which payment is 
made under this section. 
‘‘(B) All other services not described in sub-
paragraph (A). 
Service categories established under this paragraph 
shall apply without regard to the specialty of the phy-
sician furnishing the service.’’. 
(2) ESTABLISHMENT OF SEPARATE CONVERSION 
FACTORS FOR EACH SERVICE CATEGORY.—Subsection 
(d)(1) of section 1848 of the Social Security Act (42 
U.S.C. 1395w–4) is amended— 
(A) in subparagraph (A)— 
(i) by designating the sentence begin-
ning ‘‘The conversion factor’’ as clause (i) 
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with the heading ‘‘APPLICATION OF SINGLE 
CONVERSION FACTOR.—’’ and with appro-
priate indentation; 
(ii) by striking ‘‘The conversion factor’’ 
and inserting ‘‘Subject to clause (ii), the 
conversion factor’’; and 
(iii) by adding at the end the following 
new clause: 
‘‘(ii) APPLICATION OF MULTIPLE CON-
VERSION FACTORS BEGINNING WITH 2011.— 
‘‘(I) IN
GENERAL.—In applying 
clause (i) for years beginning with 
2011, separate conversion factors shall 
be established for each service category 
of physicians’ services (as defined in 
subsection (j)(5)) and any reference in 
this section to a conversion factor for 
such years shall be deemed to be a ref-
erence to the conversion factor for each 
of such categories. 
‘‘(II) INITIAL
CONVERSION
FAC-
TORS.—Such factors for 2011 shall be 
based upon the single conversion factor 
for the previous year multiplied by the 
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update established under paragraph 
(11) for such category for 2011. 
‘‘(III) UPDATING OF CONVERSION 
FACTORS.—Such factor for a service 
category for a subsequent year shall be 
based upon the conversion factor for 
such category for the previous year and 
adjusted by the update established for 
such category under paragraph (11) 
for the year involved.’’; and 
(B) in subparagraph (D), by striking ‘‘other 
physicians’ services’’ and inserting ‘‘physicians’ 
services described in the service category de-
scribed in subsection (j)(5)(B)’’. 
(3) ESTABLISHING
UPDATES
FOR
CONVERSION 
FACTORS
FOR
SERVICE
CATEGORIES.—Section 
1848(d) of the Social Security Act (42 U.S.C. 1395w– 
4(d)), as amended by subsection (a), is amended— 
(A) in paragraph (4)(C)(iii), by striking 
‘‘The allowed’’ and inserting ‘‘Subject to para-
graph (11)(B), the allowed’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(11) UPDATES FOR SERVICE CATEGORIES BE-
GINNING WITH 2011.— 
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‘‘(A) IN GENERAL.—In applying paragraph 
(4) for a year beginning with 2011, the following 
rules apply: 
‘‘(i) APPLICATION
OF
SEPARATE
UP-
DATE
ADJUSTMENTS
FOR
EACH
SERVICE 
CATEGORY.—Pursuant 
to 
paragraph 
(1)(A)(ii)(I), the update shall be made to 
the conversion factor for each service cat-
egory (as defined in subsection (j)(5)) based 
upon an update adjustment factor for the 
respective category and year and the update 
adjustment factor shall be computed, for a 
year, separately for each service category. 
‘‘(ii) COMPUTATION OF ALLOWED AND 
ACTUAL EXPENDITURES BASED ON SERVICE 
CATEGORIES.—In computing the prior year 
adjustment component and the cumulative 
adjustment component under clauses (i) and 
(ii) of paragraph (4)(B), the following rules 
apply: 
‘‘(I) 
APPLICATION
BASED
ON 
SERVICE
CATEGORIES.—The allowed 
expenditures and actual expenditures 
shall be the allowed and actual expend-
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249 
itures for the service category, as deter-
mined under subparagraph (B). 
‘‘(II) APPLICATION OF CATEGORY 
SPECIFIC TARGET GROWTH RATE.—The 
growth rate applied under clause 
(ii)(II) of such paragraph shall be the 
target growth rate for the service cat-
egory involved under subsection (f)(5). 
‘‘(B) DETERMINATION
OF
ALLOWED
EX-
PENDITURES.—In applying paragraph (4) for a 
year beginning with 2010, notwithstanding sub-
paragraph (C)(iii) of such paragraph, the al-
lowed expenditures for a service category for a 
year is an amount computed by the Secretary as 
follows: 
‘‘(i) FOR 2010.—For 2010: 
‘‘(I) TOTAL 2009 ACTUAL EXPENDI-
TURES FOR ALL SERVICES INCLUDED 
IN SGR COMPUTATION FOR EACH SERV-
ICE CATEGORY.—Compute total actual 
expenditures for physicians’ services 
(as defined in subsection (f)(4)(A)) for 
2009 for each service category. 
‘‘(II) INCREASE BY GROWTH RATE 
TO
OBTAIN
2010
ALLOWED
EXPENDI-
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TURES
FOR
SERVICE
CATEGORY.— 
Compute allowed expenditures for the 
service category for 2010 by increasing 
the allowed expenditures for the service 
category for 2009 computed under sub-
clause (I) by the target growth rate for 
such service category under subsection 
(f) for 2010. 
‘‘(ii) FOR SUBSEQUENT YEARS.—For a 
subsequent year, take the amount of allowed 
expenditures for such category for the pre-
ceding year (under clause (i) or this clause) 
and increase it by the target growth rate de-
termined under subsection (f) for such cat-
egory and year.’’. 
(4) APPLICATION OF SEPARATE TARGET GROWTH 
RATES FOR EACH CATEGORY.— 
(A) IN GENERAL.—Section 1848(f) of the 
Social Security Act (42 U.S.C. 1395w–4(f)) is 
amended by adding at the end the following new 
paragraph: 
‘‘(5) 
APPLICATION
OF
SEPARATE
TARGET 
GROWTH RATES FOR EACH SERVICE CATEGORY BEGIN-
NING WITH 2010.—The target growth rate for a year 
beginning with 2010 shall be computed and applied 
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251 
separately under this subsection for each service cat-
egory (as defined in subsection (j)(5)) and shall be 
computed using the same method for computing the 
target growth rate except that the factor described in 
paragraph (2)(C) for— 
‘‘(A) the service category described in sub-
section (j)(5)(A) shall be increased by 0.02; and 
‘‘(B) the service category described in sub-
section (j)(5)(B) shall be increased by 0.01.’’. 
(B) USE OF TARGET GROWTH RATES.—Sec-
tion 1848 of such Act is further amended— 
(i) in subsection (d)— 
(I) in paragraph (1)(E)(ii), by 
inserting ‘‘or target’’ after ‘‘sustain-
able’’; and 
(II) in paragraph (4)(B)(ii)(II), 
by inserting ‘‘or target’’ after ‘‘sustain-
able’’; and 
(ii) in the heading of subsection (f), by 
inserting ‘‘AND TARGET GROWTH RATE’’ 
after ‘‘SUSTAINABLE GROWTH RATE’’; 
(iii) in subsection (f)(1)— 
(I) by striking ‘‘and’’ at the end 
of subparagraph (A); 
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(II) in subparagraph (B), by in-
serting ‘‘before 2010’’ after ‘‘each suc-
ceeding year’’ and by striking the pe-
riod at the end and inserting ‘‘; and’’; 
and 
(III) by adding at the end the fol-
lowing new subparagraph: 
‘‘(C) November 1 of each succeeding year the 
target growth rate for such succeeding year and 
each of the 2 preceding years.’’; and 
(iv) in subsection (f)(2), in the matter 
before subparagraph (A), by inserting after 
‘‘beginning with 2000’’ the following: ‘‘and 
ending with 2009’’. 
(e) APPLICATION TO ACCOUNTABLE CARE ORGANIZA-
TION PILOT PROGRAM.—In applying the target growth rate 
under subsections (d) and (f) of section 1848 of the Social 
Security Act to services furnished by a practitioner to bene-
ficiaries who are attributable to an accountable care organi-
zation under the pilot program provided under section 
1866D of such Act, the Secretary of Health and Human 
Services shall develop, not later than January 1, 2012, for 
application beginning with 2012, a method that— 
(1) allows each such organization to have its own 
expenditure targets and updates for such practi-
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253 
tioners, with respect to beneficiaries who are attrib-
utable to that organization, that are consistent with 
the methodologies described in such subsection (f); and 
(2) provides that the target growth rate applica-
ble to other physicians shall not apply to such physi-
cians to the extent that the physicians’ services are 
furnished through the accountable care organization. 
In applying paragraph (1), the Secretary of Health and 
Human Services may apply the difference in the update 
under such paragraph on a claim-by-claim or lump sum 
basis and such a payment shall be taken into account under 
the pilot program. 
SEC. 1122. MISVALUED CODES UNDER THE PHYSICIAN FEE 
SCHEDULE. 
(a) IN GENERAL.—Section 1848(c)(2) of the Social Se-
curity Act (42 U.S.C. 1395w-4(c)(2)) is amended by adding 
at the end the following new subparagraphs: 
‘‘(K) POTENTIALLY MISVALUED CODES.— 
‘‘(i) 
IN
GENERAL.—The 
Secretary 
shall— 
‘‘(I) periodically identify services 
as being potentially misvalued using 
criteria specified in clause (ii); and 
‘‘(II) review and make appro-
priate adjustments to the relative val-
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254 
ues established under this paragraph 
for services identified as being poten-
tially misvalued under subclause (I). 
‘‘(ii) IDENTIFICATION OF POTENTIALLY 
MISVALUED CODES.—For purposes of iden-
tifying potentially misvalued services pur-
suant to clause (i)(I), the Secretary shall ex-
amine (as the Secretary determines to be 
appropriate) codes (and families of codes as 
appropriate) for which there has been the 
fastest growth; codes (and families of codes 
as appropriate) that have experienced sub-
stantial changes in practice expenses; codes 
for new technologies or services within an 
appropriate period (such as three years) 
after the relative values are initially estab-
lished for such codes; multiple codes that are 
frequently billed in conjunction with fur-
nishing a single service; codes with low rel-
ative values, particularly those that are 
often billed multiple times for a single treat-
ment; codes which have not been subject to 
review since the implementation of the 
RBRVS 
(the 
so-called 
‘Harvard-valued 
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255 
codes’); and such other codes determined to 
be appropriate by the Secretary. 
‘‘(iii) REVIEW AND ADJUSTMENTS.— 
‘‘(I) The Secretary may use exist-
ing processes to receive recommenda-
tions on the review and appropriate 
adjustment of potentially misvalued 
services described clause (i)(II). 
‘‘(II) The Secretary may conduct 
surveys, other data collection activities, 
studies, or other analyses as the Sec-
retary determines to be appropriate to 
facilitate the review and appropriate 
adjustment described in clause (i)(II). 
‘‘(III) The Secretary may use 
analytic contractors to identify and 
analyze services identified under clause 
(i)(I), conduct surveys or collect data, 
and make recommendations on the re-
view and appropriate adjustment of 
services described in clause (i)(II). 
‘‘(IV) The Secretary may coordi-
nate the review and appropriate ad-
justment described in clause (i)(II) 
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with the periodic review described in 
subparagraph (B). 
‘‘(V) As part of the review and 
adjustment described in clause (i)(II), 
including with respect to codes with 
low relative values described in clause 
(ii), the Secretary may make appro-
priate 
coding 
revisions 
(including 
using existing processes for consider-
ation of coding changes) which may 
include consolidation of individual 
services into bundled codes for payment 
under the fee schedule under subsection 
(b). 
‘‘(VI) The provisions of subpara-
graph (B)(ii)(II) shall apply to adjust-
ments to relative value units made 
pursuant to this subparagraph in the 
same manner as such provisions apply 
to adjustments under subparagraph 
(B)(ii)(II). 
‘‘(L) 
VALIDATING
RELATIVE
VALUE 
UNITS.— 
‘‘(i) IN GENERAL.—The Secretary shall 
establish a process to validate relative value 
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257 
units under the fee schedule under sub-
section (b). 
‘‘(ii) COMPONENTS AND ELEMENTS OF 
WORK.—The process described in clause (i) 
may include validation of work elements 
(such as time, mental effort and profes-
sional judgment, technical skill and phys-
ical effort, and stress due to risk) involved 
with furnishing a service and may include 
validation of the pre, post, and intra-service 
components of work. 
‘‘(iii) SCOPE OF CODES.—The valida-
tion of work relative value units shall in-
clude a sampling of codes for services that 
is the same as the codes listed under sub-
paragraph (K)(ii) 
‘‘(iv) METHODS.—The Secretary may 
conduct the validation under this subpara-
graph using methods described in subclauses 
(I) through (V) of subparagraph (K)(iii) as 
the Secretary determines to be appropriate. 
‘‘(v) ADJUSTMENTS.—The Secretary 
shall make appropriate adjustments to the 
work relative value units under the fee 
schedule under subsection (b). The provi-
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sions of subparagraph (B)(ii)(II) shall 
apply to adjustments to relative value units 
made pursuant to this subparagraph in the 
same manner as such provisions apply to 
adjustments 
under 
subparagraph 
(B)(ii)(II).’’. 
(b) IMPLEMENTATION.— 
(1) FUNDING.—For purposes of carrying out the 
provisions 
of 
subparagraphs 
(K) 
and 
(L) 
of 
1848(c)(2) of the Social Security Act, as added by 
subsection (a), in addition to funds otherwise avail-
able, out of any funds in the Treasury not otherwise 
appropriated, there are appropriated to the Secretary 
of Health and Human Services for the Center for 
Medicare & Medicaid Services Program Management 
Account $20,000,000 for fiscal year 2010 and each 
subsequent fiscal year. Amounts appropriated under 
this paragraph for a fiscal year shall be available 
until expended. 
(2) ADMINISTRATION.— 
(A) Chapter 35 of title 44, United States 
Code and the provisions of the Federal Advisory 
Committee Act (5 U.S.C. App.) shall not apply 
to this section or the amendment made by this 
section. 
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259 
(B) Notwithstanding any other provision of 
law, the Secretary may implement subpara-
graphs (K) and (L) of 1848(c)(2) of the Social 
Security Act, as added by subsection (a), by pro-
gram instruction or otherwise. 
(C) Section 4505(d) of the Balanced Budget 
Act of 1997 is repealed. 
(D) Except for provisions related to con-
fidentiality of information, the provisions of the 
Federal Acquisition Regulation shall not apply 
to this section or the amendment made by this 
section. 
(3) FOCUSING CMS RESOURCES ON POTENTIALLY 
OVERVALUED CODES.—Section 1868(a) of the Social 
Security Act (42 1395ee(a)) is repealed. 
SEC. 1123. PAYMENTS FOR EFFICIENT AREAS. 
Section 1833 of the Social Security Act (42 U.S.C. 
1395l) is amended by adding at the end the following new 
subsection: 
‘‘(x) INCENTIVE PAYMENTS FOR EFFICIENT AREAS.— 
‘‘(1) IN GENERAL.—In the case of services fur-
nished under the physician fee schedule under section 
1848 on or after January 1, 2011, and before Janu-
ary 1, 2013, by a supplier that is paid under such 
fee schedule in an efficient area (as identified under 
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260 
paragraph (2)), in addition to the amount of pay-
ment that would otherwise be made for such services 
under this part, there also shall be paid (on a month-
ly or quarterly basis) an amount equal to 5 percent 
of the payment amount for the services under this 
part. 
‘‘(2) IDENTIFICATION OF EFFICIENT AREAS.— 
‘‘(A) IN GENERAL.—Based upon available 
data, the Secretary shall identify those counties 
or equivalent areas in the United States in the 
lowest fifth percentile of utilization based on per 
capita spending under this part and part A for 
services provided in the most recent year for 
which data are available as of the date of the en-
actment of this subsection, as standardized to 
eliminate the effect of geographic adjustments in 
payment rates. 
‘‘(B) IDENTIFICATION OF COUNTIES WHERE 
SERVICE IS FURNISHED..—For purposes of pay-
ing the additional amount specified in para-
graph (1), if the Secretary uses the 5-digit postal 
ZIP Code where the service is furnished, the 
dominant county of the postal ZIP Code (as de-
termined by the United States Postal Service, or 
otherwise) shall be used to determine whether the 
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261 
postal ZIP Code is in a county described in sub-
paragraph (A). 
‘‘(C) LIMITATION ON REVIEW.—There shall 
be no administrative or judicial review under 
section 1869, 1878, or otherwise, respecting— 
‘‘(i) the identification of a county or 
other area under subparagraph (A); or 
‘‘(ii) the assignment of a postal ZIP 
Code to a county or other area under sub-
paragraph (B). 
‘‘(D) PUBLICATION OF LIST OF COUNTIES; 
POSTING ON WEBSITE.—With respect to a year 
for which a county or area is identified under 
this paragraph, the Secretary shall identify such 
counties or areas as part of the proposed and 
final rule to implement the physician fee sched-
ule under section 1848 for the applicable year. 
The Secretary shall post the list of counties iden-
tified under this paragraph on the Internet 
website of the Centers for Medicare & Medicaid 
Services.’’. 
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262 
SEC. 1124. MODIFICATIONS TO THE PHYSICIAN QUALITY RE-
PORTING INITIATIVE (PQRI). 
(a) FEEDBACK.—Section 1848(m)(5) of the Social Se-
curity Act (42 U.S.C. 1395w–4(m)(5)) is amended by add-
ing at the end the following new subparagraph: 
‘‘(H) FEEDBACK.—The Secretary shall pro-
vide timely feedback to eligible professionals on 
the performance of the eligible professional with 
respect to satisfactorily submitting data on qual-
ity measures under this subsection.’’. 
(b) APPEALS.—Such section is further amended— 
(1) in subparagraph (E), by striking ‘‘There 
shall be’’ and inserting ‘‘Subject to subparagraph (I), 
there shall be’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(I) INFORMAL
APPEALS
PROCESS.—Not-
withstanding subparagraph (E), by not later 
than January 1, 2011, the Secretary shall estab-
lish and have in place an informal process for 
eligible professionals to appeal the determination 
that an eligible professional did not satisfactorily 
submit data on quality measures under this sub-
section.’’. 
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263 
(c) INTEGRATION OF PHYSICIAN QUALITY REPORTING 
AND EHR REPORTING.—Section 1848(m) of such Act is 
amended by adding at the end the following new paragraph: 
‘‘(7) INTEGRATION OF PHYSICIAN QUALITY RE-
PORTING AND EHR REPORTING.—Not later than Jan-
uary 1, 2012, the Secretary shall develop a plan to 
integrate clinical reporting on quality measures 
under this subsection with reporting requirements 
under subsection (o) relating to the meaningful use of 
electronic health records. Such integration shall con-
sist of the following: 
‘‘(A) The development of measures, the re-
porting of which would both demonstrate— 
‘‘(i) meaningful use of an electronic 
health record for purposes of subsection (o); 
and 
‘‘(ii) clinical quality of care furnished 
to an individual. 
‘‘(B) The collection of health data to iden-
tify deficiencies in the quality and coordination 
of care for individuals eligible for benefits under 
this part. 
‘‘(C) Such other activities as specified by 
the Secretary.’’. 
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264 
(d) EXTENSION OF INCENTIVE PAYMENTS.—Section 
1848(m)(1) of such Act (42 U.S.C. 1395w–4(m)(1)) is 
amended— 
(1) in subparagraph (A), by striking ‘‘2010’’ and 
inserting ‘‘2012’’; and 
(2) in subparagraph (B)(ii), by striking ‘‘2009 
and 2010’’ and inserting ‘‘each of the years 2009 
through 2012’’. 
SEC. 1125. ADJUSTMENT TO MEDICARE PAYMENT LOCAL-
ITIES. 
(a) IN GENERAL.—Section 1848(e) of the Social Secu-
rity Act (42 U.S.C.1395w–4(e)) is amended by adding at 
the end the following new paragraph: 
‘‘(6) TRANSITION
TO
USE
OF
MSAS
AS
FEE 
SCHEDULE AREAS IN CALIFORNIA.— 
‘‘(A) IN GENERAL.— 
‘‘(i) REVISION.—Subject to clause (ii) 
and notwithstanding the previous provi-
sions of this subsection, for services fur-
nished on or after January 1, 2011, the 
Secretary shall revise the fee schedule areas 
used for payment under this section appli-
cable to the State of California using the 
Metropolitan 
Statistical 
Area 
(MSA) 
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iterative Geographic Adjustment Factor 
methodology as follows: 
‘‘(I) The Secretary shall configure 
the physician fee schedule areas using 
the Core-Based Statistical Areas-Metro-
politan Statistical Areas (each in this 
paragraph referred to as an ‘MSA’), as 
defined by the Director of the Office of 
Management and Budget, as the basis 
for the fee schedule areas. The Sec-
retary shall employ an iterative proc-
ess to transition fee schedule areas. 
First, the Secretary shall list all MSAs 
within the State by Geographic Adjust-
ment Factor described in paragraph 
(2) (in this paragraph referred to as a 
‘GAF’) in descending order. In the first 
iteration, the Secretary shall compare 
the GAF of the highest cost MSA in the 
State to the weighted-average GAF of 
the group of remaining MSAs in the 
State. If the ratio of the GAF of the 
highest cost MSA to the weighted-aver-
age GAF of the rest of State is 1.05 or 
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267 
expense, and malpractice geographic indices 
described in clauses (i), (ii), and (iii) of 
paragraph (1)(A) that would otherwise 
apply through application of this para-
graph, the Secretary shall increase any such 
index to the county-based fee schedule area 
value on December 31, 2009, if such index 
would otherwise be less than the value on 
January 1, 2010. 
‘‘(B) SUBSEQUENT REVISIONS.— 
‘‘(i) PERIODIC
REVIEW
AND
ADJUST-
MENTS IN FEE SCHEDULE AREAS.—Subse-
quent to the process outlined in paragraph 
(1)(C), not less often than every three years, 
the Secretary shall review and update the 
California Rest-of-State fee schedule area 
using MSAs as defined by the Director of 
the Office of Management and Budget and 
the iterative methodology described in sub-
paragraph (A)(i). 
‘‘(ii) LINK WITH GEOGRAPHIC INDEX 
DATA REVISION.—The revision described in 
clause (i) shall be made effective concur-
rently with the application of the periodic 
review of the adjustment factors required 
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under paragraph (1)(C) for California for 
2012 and subsequent periods. Upon request, 
the Secretary shall make available to the 
public any county-level or MSA derived 
data used to calculate the geographic prac-
tice cost index. 
‘‘(C) REFERENCES
TO
FEE
SCHEDULE 
AREAS.—Effective for services furnished on or 
after January 1, 2010, for the State of Cali-
fornia, any reference in this section to a fee 
schedule area shall be deemed a reference to an 
MSA in the State.’’. 
(b) CONFORMING AMENDMENT TO DEFINITION OF FEE 
SCHEDULE AREA.—Section 1848(j)(2) of the Social Secu-
rity Act (42 U.S.C. 1395w(j)(2)) is amended by striking 
‘‘The term’’ and inserting ‘‘Except as provided in sub-
section (e)(6)(C), the term’’. 
SEC. 1126. RESOURCE-BASED FEEDBACK PROGRAM FOR 
PHYSICIANS IN MEDICARE. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall provide for the measurement and confidential 
communication of reports (each in this section referred to 
as a ‘‘feedback report’’) to physicians and other practi-
tioners regarding the utilization of services under the Medi-
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care program under title XVIII of the Social Security Act. 
Such reports shall be based upon claims data and shall in-
clude quality data reported under section 1848(m)(5) of 
such Act (42 U.S.C. 1395w-4(m)(5)) and such other infor-
mation as the Secretary determines appropriate. 
(b) TIMELINE FOR FEEDBACK PROGRAM.— 
(1) ANALYSIS TOOL.—Not later than December 
31, 2010, the Secretary shall initially develop an epi-
sode grouper or other initial resource analysis tool de-
scribed in subsection (c)(4). 
(2) EVALUATION.—During 2011 the Secretary 
shall conduct the evaluation specified in subsection 
(e)(1). 
(3) EXPANSION.—The Secretary shall expand the 
program as specified in subsection (e)(2). 
(c) FEEDBACK REPORTS.— 
(1) COMPARISON
OF
RESOURCE
USE
PAT-
TERNS.—Feedback reports shall include information 
allowing the comparison of a physician’s resource use 
pattern to such pattern for peers. Such reports may 
include resource use data on— 
(A) a per capita basis; 
(B) a per episode basis; or 
(C) both. 
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(2) PEER COMPARISON.—Reports under this sec-
tion shall include information regarding nationwide 
groups of similarly situated physicians (taking into 
consideration specialty, practice setting, and such 
other criteria as the Secretary finds appropriate) and 
comparing the pattern of services of each physician in 
the group to the group average pattern of services. 
(3) DETAILED
INFORMATION.—The Secretary 
shall include in feedback reports details about the 
services, procedures, and relevant clinical information 
to identify factors that may account for significant 
variation of a physician from national norms, such 
as high rates of elective surgeries, diagnostic services, 
or other utilization attributable to the judgment of the 
physician. 
(4) DEVELOPMENT OF EPISODE GROUPER.—The 
Secretary shall, in consultation with physicians and 
others as the Secretary determines to be appropriate, 
develop an episode grouper or other resource analysis 
tool that could be used to measure physician resource 
use. The Secretary may update such grouper from 
time to time as appropriate. 
(d) FEEDBACK PROGRAM.—The Secretary shall engage 
in efforts to disseminate feedback reports. In disseminating 
such reports, the Secretary shall seek to estalish their valid-
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ity and credibility to physicians and shall experiment with 
communications methods such as the following: 
(1) Direct meetings between contracted physi-
cians, facilitated by the Secretary, to discuss the con-
tents of feedback reports, including any reasons for 
divergence from national averages. 
(2) Contracts with local, non-profit entities en-
gaged in quality improvement efforts at the commu-
nity level. Such entities shall use the feedback reports, 
or such equivalent tool as specified by the Secretary. 
Any exchange of data under this paragraph shall be 
protected by appropriate privacy safeguards. 
(3) Mailings or other methods of communication 
that facilitate large-scale dissemination. 
(4) Other methods specified by the Secretary. 
(e) EVALUATION AND EXPANSION.— 
(1) EVALUATION.—The Secretary shall evaluate 
the methods specified in subsection (d) with regard to 
their efficacy in changing practice patterns to im-
prove quality and decrease costs. 
(2) EXPANSION.—Taking into account the cost of 
each method, the Secretary shall develop a plan to 
disseminate such reports in a significant manner in 
the regions and cities of the country with the highest 
utilization of services under Medicare. The Secretary 
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shall disseminate, to the extent practicable, feedback 
reports in a manner consistent with the following: 
(A) During 2011, at least 1,000 reports. 
(B) During 2012, at least 10,000 reports. 
(C) During 2013, at least 25,000 reports. 
(D) During 2014 and subsequent years, re-
ports to the physicians with utilization within 
the highest 5 percent of physicians, subject to the 
authority to focus under subsection (f). 
(3) OPT OUT.—The Secretary shall establish a 
process by which a physician may opt not to receive 
feedback reports under this section. 
(f) AUTHORITY TO FOCUS PROGRAM APPLICATION.— 
The secretary may focus the application of the program 
under this section and dissemination of feedback reports on 
physicians, as appropriate, such as on physicians who— 
(1) practice in geographic areas that account for 
unusually high rates of spending per capita; 
(2) treat conditions that have a high cost or vol-
ume under Medicare; 
(3) use a high amount of resources compared to 
other physicians; or 
(4) treat at least a minimum number of Medi-
care beneficiaries. 
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(g) INCLUSION
OF CERTAIN PRACTITIONERS.—For 
purposes of this section, the term ‘‘physician’’ includes a 
practitioner who furnishes services for which payment is 
made under Medicare and for which such payment would 
be made if furnished by a physician. 
(h) ADMINISTRATION.— 
(1) Chapter 35 of title 44, United States Code 
shall not apply to this section. 
(2) Notwithstanding any other provision of law, 
the Secretary may implement the provisions of this 
section by program instruction or otherwise. 
PART 2—MARKET BASKET UPDATES 
SEC. 
1131. 
INCORPORATING 
PRODUCTIVITY 
IMPROVE-
MENTS INTO MARKET BASKET UPDATES THAT 
DO NOT ALREADY INCORPORATE SUCH IM-
PROVEMENTS. 
(a) OUTPATIENT HOSPITALS.— 
(1) IN GENERAL.—The first sentence of section 
1833(t)(3)(C)(iv) of the Social Security Act (42 
U.S.C. 1395l(t)(3)(C)(iv)) is amended— 
(A) by inserting ‘‘(which is subject to the 
productivity adjustment described in subclause 
(II) of such section)’’ after ‘‘1886(b)(3)(B)(iii)’’; 
and 
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(B) by inserting ‘‘(but not below 0)’’ after 
‘‘reduced’’. 
(2) EFFECTIVE DATE.—The amendments made 
by paragraph (1) shall apply to increase factors for 
services furnished in years beginning with 2010. 
(b) AMBULANCE SERVICES.—Section 1834(l)(3)(B) of 
such Act (42 U.S.C. 1395m(l)(3)(B))) is amended by insert-
ing before the period at the end the following: ‘‘and, in the 
case of years beginning with 2010, subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’. 
(c) AMBULATORY SURGICAL CENTER SERVICES.—Sec-
tion 1833(i)(2)(D) of such Act (42 U.S.C. 1395l(i)(2)(D)) 
is amended— 
(1) by redesignating clause (v) as clause (vi); 
and 
(2) by inserting after clause (iv) the following 
new clause: 
‘‘(v) In implementing the system described in clause 
(i), for services furnished during 2010 or any subsequent 
year, to the extent that an annual percentage change factor 
applies, such factor shall be subject to the productivity ad-
justment described in section 1886(b)(3)(B)(iii)(II).’’. 
(d) LABORATORY SERVICES.—Section 1833(h)(2)(A) 
of such Act (42 U.S.C. 1395l(h)(2)(A)) is amended— 
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(1) in clause (i), by striking ‘‘for each of the 
years 2009 through 2013’’ and inserting ‘‘for 2009’’; 
and 
(2) clause (ii)— 
(A) by striking ‘‘and’’ at the end of sub-
clause (III); 
(B) by striking the period at the end of sub-
clause (IV) and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
subclause: 
‘‘(V) the annual adjustment in the fee schedules 
determined under clause (i) for years beginning with 
2010 shall be subject to the productivity adjustment 
described in section 1886(b)(3)(B)(iii)(II).’’. 
(e) CERTAIN DURABLE MEDICAL EQUIPMENT.—Sec-
tion 1834(a)(14) of such Act (42 U.S.C. 1395m(a)(14)) is 
amended— 
(1) in subparagraph (K), by inserting before the 
semicolon at the end the following: ‘‘, subject to the 
productivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’; 
(2) in subparagraph (L)(i), by inserting after 
‘‘June 2013,’’ the following: ‘‘subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II),’’; 
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(3) in subparagraph (L)(ii), by inserting after 
‘‘June 2013’’ the following: ‘‘, subject to the produc-
tivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’; and 
(4) in subparagraph (M), by inserting before the 
period at the end the following: ‘‘, subject to the pro-
ductivity 
adjustment 
described 
in 
section 
1886(b)(3)(B)(iii)(II)’’. 
PART 3—OTHER PROVISIONS 
SEC. 1141. RENTAL AND PURCHASE OF POWER-DRIVEN 
WHEELCHAIRS. 
(a) IN GENERAL.—Section 1834(a)(7)(A)(iii) of the 
Social Security Act (42 U.S.C. 1395m(a)(7)(A)(iii)) is 
amended— 
(1) in the heading, by inserting ‘‘CERTAIN COM-
PLEX REHABILITATIVE’’ after ‘‘OPTION FOR’’; and 
(2) by striking ‘‘power-driven wheelchair’’ and 
inserting ‘‘complex rehabilitative power-driven wheel-
chair recognized by the Secretary as classified within 
group 3 or higher’’. 
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall take effect on January 1, 2011, and shall 
apply to power-driven wheelchairs furnished on or after 
such date. Such amendments shall not apply to contracts 
entered into under section 1847 of the Social Security Act 
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(42 U.S.C. 1395w–3) pursuant to a bid submitted under 
such section before October 1, 2010, under subsection 
(a)(1)(B)(i)(I) of such section. 
SEC. 1141A. ELECTION TO TAKE OWNERSHIP, OR TO DE-
CLINE OWNERSHIP, OF A CERTAIN ITEM OF 
COMPLEX DURABLE MEDICAL EQUIPMENT 
AFTER THE 13-MONTH CAPPED RENTAL PE-
RIOD ENDS. 
(a) IN GENERAL.—Section 1834(a)(7)(A) of the Social 
Security Act (42 U.S.C. 1395m(a)(7)(A)) is amended— 
(1) in clause (ii)— 
(A) by striking ‘‘RENTAL.—On’’ and insert-
ing ‘‘RENTAL.— 
‘‘(I) IN GENERAL.—Except as pro-
vided in subclause (II), on’’; and 
(B) by adding at the end the following new 
subclause: 
‘‘(II) OPTION TO ACCEPT OR RE-
JECT TRANSFER OF TITLE TO GROUP 3 
SUPPORT SURFACE.— 
‘‘(aa) IN GENERAL.—During 
the 10th continuous month during 
which payment is made for the 
rental of a Group 3 Support Sur-
face under clause (i), the supplier 
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of such item shall offer the indi-
vidual the option to accept or re-
ject transfer of title to a Group 3 
Support Surface after the 13th 
continuous month during which 
payment is made for the rental of 
the Group 3 Support Surface 
under clause (i). Such title shall 
be transferred to the individual 
only if the individual notifies the 
supplier not later than 1 month 
after the supplier makes such offer 
that the individual agrees to ac-
cept transfer of the title to the 
Group 3 Support Surface. Unless 
the individual accepts transfer of 
title to the Group 3 Support Sur-
face in the manner set forth in 
this 
subclause, 
the 
individual 
shall be deemed to have rejected 
transfer of title. If the individual 
agrees to accept the transfer of the 
title to the Group 3 Support Sur-
face, the supplier shall transfer 
such title to the individual on the 
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first day that begins after the 13th 
continuous month during which 
payment is made for the rental of 
the Group 3 Support Surface 
under clause (i). If the supplier 
transfers title to the Group 3 Sup-
port Surface under this subclause, 
payments for maintenance and 
servicing after the transfer of title 
shall be made in accordance with 
clause (iv). If the individual re-
jects transfer of title under this 
subclause, payments for mainte-
nance and servicing after the end 
of the period of medical need dur-
ing which payment is made under 
clause (i) shall be made in accord-
ance with clause (v). 
‘‘(bb) SPECIAL RULE.—If, on 
the effective date of this subclause, 
an individual’s rental period for 
a Group 3 Support Surface has 
exceeded 10 continuous months, 
but the first day that begins after 
the 13th continuous month during 
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which payment is made for the 
rental under clause (i) has not 
been reached, the supplier shall, 
within 1 month following such ef-
fective date, offer the individual 
the option to accept or reject 
transfer of title to a Group 3 Sup-
port Surface. Such title shall be 
transferred to the individual only 
if the individual notifies the sup-
plier not later than 1 month after 
the supplier makes such offer that 
the individual agrees to accept 
transfer of title to the Group 3 
Support Surface. Unless the indi-
vidual accepts transfer of title to 
the Group 3 Support Surface in 
the manner set forth in this sub-
clause, the individual shall be 
deemed to have rejected transfer of 
title. If the individual agrees to 
accept the transfer of the title to 
the Group 3 Support Surface, the 
supplier shall transfer such title 
to the individual on the first day 
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that begins after the 13th contin-
uous month during which pay-
ment is made for the rental of the 
Group 3 Support Surface under 
clause (i) unless that day has 
passed, in which case the supplier 
shall transfer such title to the in-
dividual not later than 1 month 
after notification that the indi-
vidual accepts transfer of title. If 
the supplier transfers title to the 
Group 3 Support Surface under 
this 
subclause, 
payments 
for 
maintenance and servicing after 
the transfer of title shall be made 
in accordance with clause (iv). If 
the individual rejects transfer of 
title under this subclause, pay-
ments for maintenance and serv-
icing after the end of the period of 
medical need during which pay-
ment is made under clause (i) 
shall be made in accordance with 
clause (v).’’; 
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