246
Title I, Subtitle E
(B) the individual’s membership or enroll-
ment in a fraternal, religious, professional, edu-
cational, or other similar organization.
(c) RESTRICTIONS
ON MARKETING ABUSES.—Not
later than January 1, 1996, the Board shall develop (in
consultation with the States) minimum standards that
prohibit marketing practices by entities offering supple-
mental health benefit policies that involve:
(1) Providing monetary incentives for or tying
or otherwise conditioning the sale of the policy to en-
rollment in a regional alliance health plan of the en-
tity.
(2) Using or disclosing to any party information
about the health status or claims experience of par-
ticipants in a regional alliance health plan for the
purpose of marketing such a policy.
(d) CIVIL MONETARY PENALTY.—An entity that
knowingly and willfully violates any provision of this sec-
tion with respect to the offering of a supplemental health
benefit policy to any individual shall be subject to a civil
monetary penalty (not to exceed $10,000) for each such
violation. The provisions of section 1128A of the Social
Security Act (other than subsections (a) and (b)) shall
apply to civil money penalties under this subsection in the
247
Title I, Subtitle E
same manner as they apply to a penalty or proceeding
under section 1128A(a) of such Act.
SEC. 1423. STANDARDS FOR COST SHARING POLICIES.
(a) RULES FOR OFFERING OF POLICIES.—Subject to
subsection (f), a cost sharing policy may be offered to an
individual only if—
(1) the policy is offered by the regional alliance
health plan in which the individual is enrolled;
(2) the regional alliance health plan offers the
policy to all individuals enrolled in the plan;
(3) the plan offers each such individual a choice
of a policy that provides standard coverage and a
policy that provides maximum coverage (in accord-
ance with standards established by the Board); and
(4) the policy is offered only during the annual
open enrollment period for regional alliance health
plans (described in section 1323(d)(1)).
(b) PROHIBITION OF COVERAGE OF COPAYMENTS.—
Each cost sharing policy may not provide any benefits re-
lating to any copayments established under the table of
copayments and coinsurance under section 1135.
(c) EQUIVALENT COVERAGE FOR ALL SERVICES.—
Each cost sharing policy must provide coverage for items
and services in the comprehensive benefit package to the
248
Title I, Subtitle E
same extent as the policy provides coverage for all items
and services in the package.
(d) REQUIREMENTS FOR PRICING.—
(1) IN GENERAL.—The price of any cost shar-
ing policy shall—
(A) be the same for each individual to
whom the policy is offered;
(B) take into account any expected in-
crease in utilization resulting from the purchase
of the policy by individuals enrolled in the re-
gional alliance health plan; and
(C) not result in a loss-ratio of less than
90 percent.
(2) 
LOSS-RATIO
DEFINED.—In 
paragraph
(1)(C), a ‘‘loss-ratio’’ is the ratio of the premium re-
turned to the consumer in payout relative to the
total premium collected.
(e) LOSS OF STATE CERTIFICATION FOR REGIONAL
ALLIANCE HEALTH PLANS FAILING TO MEET STAND-
ARDS.—A State may not certify a regional alliance health
plan that offers a cost sharing policy unless the plan and
the policy meet the standards described in this section.
(f) SPECIAL RULES FOR FEHBP SUPPLEMENTAL
PLANS.—Subsection (a) shall not apply to an FEHBP
249
Title I, Subtitle E
supplemental plan described in section 8203(f)(1), but
only if the plan meets the following requirements:
(1) The plan must be offered to all individuals
to whom such a plan is required to be offered under
section 8203.
(2) The plan must offer each such individual a
choice of a policy that provides standard coverage
and a policy that provides maximum coverage (in ac-
cordance with standards established by the Board
under subsection (a)(3)).
(3) The plan is offered only during the annual
open enrollment period for regional alliance health
plans (described in section 1323(d)(1)).
(4)(A) The price of the plan shall include an
amount, established in accordance with rules estab-
lished by the Board in consultation with the Office
of Personnel Management, that takes into account
any expected increase in utilization of the items and
services in the comprehensive benefit package result-
ing from the purchase of the plan by individuals en-
rolled in a regional alliance health plan.
(B) The plan provides for payment, in a man-
ner specified by the Board in the case of an indi-
vidual enrolled in the plan and in a regional alliance
health plan, to the regional alliance health plan of
250
Title I, Subtitle E
an amount equivalent to the additional amount de-
scribed in subparagraph (A).
PART 3—REQUIREMENTS RELATING TO
ESSENTIAL COMMUNITY PROVIDERS
SEC. 1431. HEALTH PLAN REQUIREMENT.
(a) IN GENERAL.—Subject to section 1432, each
health plan shall, with respect to each electing essential
community provider (as defined in subsection (d), other
than a provider of school health services) located within
the plan’s service area, either—
(1) enter into a written provider participation
agreement (described in subsection (b)) with the
provider, or
(2) enter into a written agreement under which
the plan shall make payment to the provider in ac-
cordance with subsection (c).
(b) PARTICIPATION AGREEMENT.—A participation
agreement between a health plan and an electing essential
community provider under this subsection shall provide
that the health plan agrees to treat the provider in accord-
ance with terms and conditions at least as favorable as
those that are applicable to other providers participating
in the health plan with respect to each of the following:
(1) The scope of services for which payment is
made by the plan to the provider.
251
Title I, Subtitle E
(2) The rate of payment for covered care and
services.
(3) The availability of financial incentives to
participating providers.
(4) Limitations on financial risk provided to
other participating providers.
(5) Assignment of enrollees to participating
providers.
(6) Access by the provider’s patients to pro-
viders in medical specialties or subspecialties partici-
pating in the plan.
(c) PAYMENTS FOR PROVIDERS WITHOUT PARTICI-
PATION AGREEMENTS.—
(1) IN GENERAL.—Payment in accordance with
this subsection is payment based, as elected by the
electing essential community provider, either—
(A) on the fee schedule developed by the
applicable regional alliance (or the State) under
section 1322(c), or
(B) on payment methodologies and rates
used under the applicable Medicare payment
methodology and rates (or the most closely ap-
plicable methodology under such program as
the Secretary of Health and Human Services
specifies in regulations).
252
Title I, Subtitle E
(2) NO APPLICATION OF GATE-KEEPER LIMITA-
TIONS.—Payment in accordance with this subsection
may be subject to utilization review, but may not be
subject to otherwise applicable gate-keeper require-
ments under the plan.
(d) ELECTION.—
(1) IN GENERAL.—In this part, the term ‘‘elect-
ing essential community provider’’ means, with re-
spect to a health plan, an essential community pro-
vider that elects this subpart to apply to the health
plan.
(2) FORM
OF
ELECTION.—An election under
this subsection shall be made in a form and manner
specified by the Secretary, and shall include notice
to the health plan involved. Such an election may be
made annually with respect to a health plan, except
that the plan and provider may agree to make such
an election on a more frequent basis.
(e) SPECIAL RULE
FOR PROVIDERS
OF SCHOOL
HEALTH SERVICES.—A health plan shall pay, to each pro-
vider of school health services located in the plan’s service
area an amount determined by the Secretary for such
services furnished to enrollees of the plan.
253
Title I, Subtitle E
SEC. 1432. SUNSET OF REQUIREMENT.
(a) IN GENERAL.—Subject to subsection (d), the re-
quirement of section 1431 shall only apply to health plans
offered by a health alliance during the 5-year period begin-
ning with the first year in which any health plan is offered
by the alliance.
(b) STUDIES.—In order to prepare recommendations
under subsection (c), the Secretary shall conduct studies
regarding essential community providers, including studies
that assess—
(1) the definition of essential community pro-
vider,
(2) the sufficiency of the funding levels for pro-
viders, for both covered and uncovered benefits
under this Act,
(3) the effects of contracting requirements re-
lating to such providers on such providers, health
plans, and enrollees,
(4) the impact of the payment rules for such
providers, and
(5) the impact of national health reform on
such providers.
(c) RECOMMENDATIONS TO CONGRESS.—The Sec-
retary shall submit to Congress, by not later than March
1, 2001, specific recommendations respecting whether,
and to what extent, section 1431 should continue to apply
254
Title I, Subtitle E
to some or all essential community providers. Such rec-
ommendations may include a description of the particular
types of such providers and circumstances under which
such section should continue to apply.
(d) CONGRESSIONAL CONSIDERATION.—
(1) IN GENERAL.—Recommendations submitted
under subsection (c) shall apply under this part (and
may supersede the provisions of subsection (a)) un-
less a joint resolution (described in paragraph (2))
disapproving such recommendations is enacted, in
accordance with the provisions of paragraph (3), be-
fore the end of the 60-day period beginning on the
date on which such recommendations were sub-
mitted. For purposes of applying the preceding sen-
tence and paragraphs (2) and (3), the days on which
either House of Congress is not in session because
of an adjournment of more than three days to a day
certain shall be excluded in the computation of a pe-
riod.
(2) JOINT RESOLUTION OF DISAPPROVAL.—A
joint resolution described in this paragraph means
only a joint resolution which is introduced within the
10-day period beginning on the date on which the
Secretary submits recommendations under sub-
section (c) and—
255
Title I, Subtitle E
(A) which does not have a preamble;
(B) the matter after the resolving clause of
which is as follows: ‘‘That Congress disapproves
the recommendations of the Secretary of Health
and Human Services concerning the continued
application of certain essential community pro-
vider requirements under section 1431 of the
Health Security Act, as submitted by the Sec-
retary on lllllll.’’, the blank space
being filled in with the appropriate date; and
(C) the title of which is as follows: ‘‘Joint
resolution disapproving recommendations of the
Secretary of Health and Human Services con-
cerning the continued application of certain es-
sential community provider requirements under
section 1431 of the Health Security Act, as
submitted 
by 
the 
Secretary 
on
lllllll.’’, the blank space being filled
in with the appropriate date.
(3) PROCEDURES FOR CONSIDERATION OF RES-
OLUTION OF DISAPPROVAL.—Subject to paragraph
(4), the provisions of section 2908 (other than sub-
section (a)) of the Defense Base Closure and Re-
alignment Act of 1990 shall apply to the consider-
ation of a joint resolution described in paragraph (2)
256
Title I, Subtitle E
in the same manner as such provisions apply to a
joint resolution described in section 2908(a) of such
Act.
(4) SPECIAL RULES.—For purposes of applying
paragraph (3) with respect to such provisions—
(A) any reference to the Committee on
Armed Services of the House of Representatives
shall be deemed a reference to an appropriate
Committee of the House of Representatives
(specified by the Speaker of the House of Rep-
resentatives at the time of submission of rec-
ommendations under subsection (c)) and any
reference to the Committee on Armed Services
of the Senate shall be deemed a reference to an
appropriate Committee of the Senate (specified
by the Majority Leader of the Senate at the
time of submission of recommendations under
subsection (c)); and
(B) any reference to the date on which the
President transmits a report shall be deemed a
reference to the date on which the Secretary
submits recommendations under subsection (c).
257
Title I, Subtitle F
PART 4—REQUIREMENTS RELATING TO WORK-
ERS’ 
COMPENSATION 
AND 
AUTOMOBILE
MEDICAL LIABILITY COVERAGE
SEC. 1441. REFERENCE TO REQUIREMENTS RELATING TO
WORKERS COMPENSATION SERVICES.
Each health plan shall meet the applicable require-
ments of part 2 of subtitle A of title X (relating to provi-
sion of workers compensation services to enrollees).
SEC. 1442. REFERENCE TO REQUIREMENTS RELATING TO
AUTOMOBILE MEDICAL LIABILITY SERVICES.
Each health plan shall meet the applicable require-
ments of part 2 of subtitle B of title X (relating to provi-
sion of automobile medical liability services to enrollees).
Subtitle F—Federal
Responsibilities
PART 1—NATIONAL HEALTH BOARD
Subpart A—Establishment of National Health Board
SEC. 1501. CREATION OF NATIONAL HEALTH BOARD; MEM-
BERSHIP.
(a) IN GENERAL.—There is hereby created in the Ex-
ecutive Branch a National Health Board.
(b) COMPOSITION.—The Board is composed of 7
members appointed by the President, by and with the ad-
vice and consent of the Senate.
(c) CHAIR.—The President shall designate one of the
members as chair. The chair serves a term concurrent
258
Title I, Subtitle F
with that of the President. The chair may serve a max-
imum of 3 terms. The chair shall serve as the chief execu-
tive officer of the Board.
(d) TERMS.—
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (4), the term of each member of the
Board, except the chair, is 4 years and begins when
the term of the predecessor of that member ends.
(2) INITIAL TERMS.—The initial terms of the
members of the Board (other than the chair) first
taking office after the date of the enactment of this
Act, shall expire as designated by the President, two
at the end of one year, two at the end of two years,
and two at the end of three years.
(3) REAPPOINTMENT.—A member (other than
the chair) may be reappointed for one additional
term.
(4) CONTINUATION IN OFFICE.—Upon the expi-
ration of a term of office, a member shall continue
to serve until a successor is appointed and qualified.
(e) VACANCIES.—
(1) IN GENERAL.—Whenever a vacancy shall
occur, other than by expiration of term, a successor
shall be appointed by the President, by and with the
consent of the Senate, to fill such vacancy, and is
259
Title I, Subtitle F
appointed for the remainder of the term of the pred-
ecessor.
(2) NO IMPAIRMENT OF FUNCTION.—A vacancy
in the membership of the Board does not impair the
authority of the remaining members to exercise all
of the powers of the Board.
(3) ACTING CHAIR.—The Board may designate
a Member to act as chair during any period in which
there is no chair designated by the President.
(f) MEETINGS; QUORUM.—
(1) MEETINGS.—At meetings of the Board the
chair shall preside, and in the absence of the chair,
the Board shall elect a member to act as chair pro
tempore.
(2) QUORUM.—Four members of the Board
shall constitute a quorum thereof.
SEC. 1502. QUALIFICATIONS OF BOARD MEMBERS.
(a) CITIZENSHIP.—Each member of the Board shall
be a citizen of the United States.
(b) BASIS OF SELECTION.—Board members will be
selected on the basis of their experience and expertise in
relevant subjects, including the practice of medicine, nurs-
ing, or other clinical practices, health care financing and
delivery, state health systems, consumer protection, busi-
ness, law, and delivery of care to vulnerable populations.
260
Title I, Subtitle F
(c) EXCLUSIVE EMPLOYMENT.—During the term of
appointment, Board members shall serve as employees of
the Federal Government and shall hold no other employ-
ment.
(d) PROHIBITION OF CONFLICT OF INTEREST.—A
member of the Board may not have a pecuniary interest
in or hold an official relation to any health care plan,
health care provider, insurance company, pharmaceutical
company, medical equipment company, or other affected
industry. Before entering upon the duties as a member
of the Board, the member shall certify under oath compli-
ance with this requirement.
(e) POST-EMPLOYMENT RESTRICTIONS.—After leav-
ing the Board, former members are subject to post-em-
ployment restrictions applicable to comparable Federal
employees.
(f) COMPENSATION
OF BOARD MEMBERS.—Each
member of the Board (other than the chair) shall receive
an annual salary at the annual rate payable from time
to time for level IV of the Executive Schedule. The chair
of the Board, during the period of service as chair, shall
receive an annual salary at the annual rate payable from
time to time for level III of the Executive Schedule.
SEC. 1503. GENERAL DUTIES AND RESPONSIBILITIES.
(a) COMPREHENSIVE BENEFIT PACKAGE.—
261
Title I, Subtitle F
(1) INTERPRETATION.—The Board shall inter-
pret the comprehensive benefit package, adjust the
delivery of preventive services under section 1153,
and take such steps as may be necessary to assure
that the comprehensive benefit package is available
on a uniform national basis to all eligible individuals.
(2) RECOMMENDATIONS.—The Board may rec-
ommend to the President and the Congress appro-
priate revisions to such package. Such recommenda-
tions may reflect changes in technology, health care
needs, health care costs, and methods of service de-
livery.
(b) ADMINISTRATION OF COST CONTAINMENT PRO-
VISIONS.—The Board shall oversee the cost containment
requirements of subtitle A of title VI and certify compli-
ance with such requirements.
(c) COVERAGE AND FAMILIES.—The Board shall de-
velop and implement standards relating to the eligibility
of individuals for coverage in applicable health plans under
subtitle A of title I and may provide such additional excep-
tions and special rules relating to the treatment of family
members under section 1012 as the Board finds appro-
priate.
(d) QUALITY MANAGEMENT AND IMPROVEMENT.—
The Board shall establish and have ultimate responsibility
262
Title I, Subtitle F
for a performance-based system of quality management
and improvement as required by section 5001.
(e) INFORMATION STANDARDS.—The Board shall de-
velop and implement standards to establish national
health information system to measure quality as required
by section 5101.
(f) PARTICIPATING STATE REQUIREMENTS.—Con-
sistent with the provisions of subtitle C, the Board shall—
(1) establish requirements for participating
States,
(2) monitor State compliance with those re-
quirements,
(3) provide technical assistance, and
in a manner that ensures access to the comprehensive ben-
efit package for all eligible individuals.
(g) DEVELOPMENT OF PREMIUM CLASS FACTORS.—
The Board shall establish premium class factors under
subpart D of this part.
(h) DEVELOPMENT OF RISK-ADJUSTMENT METHOD-
OLOGY.—The Board shall develop a methodology for the
risk-adjustment of premium payments to regional alliance
health plans in accordance with subpart E of this part.
(i) FINANCIAL REQUIREMENTS.—The Board shall es-
tablish minimum capital requirements and requirements
for guaranty funds under subpart F of this part.
263
Title I, Subtitle F
(j) STANDARDS
FOR HEALTH PLAN GRIEVANCE
PROCEDURES.—The Board shall establish standards for
health plan grievance procedures that are used by enroll-
ees in pursuing complaints.
SEC. 1504. ANNUAL REPORT.
(a) IN GENERAL.—The Board shall prepare and send
to the President and Congress an annual report address-
ing the overall implementation of the new health care sys-
tem.
(b) MATTERS TO BE INCLUDED.—The Board shall
include in each annual report under this section the fol-
lowing:
(1) Information on Federal and State imple-
mentation.
(2) Data related to quality improvement.
(3) Recommendations or changes in the admin-
istration, regulation and laws related to health care
and coverage.
(4) A full account of all actions taken during
the previous year.
SEC. 1505. POWERS.
(a) STAFF; CONTRACT AUTHORITY.—The Board
shall have authority, subject to the provisions of the civil-
service laws and chapter 51 and subchapter III of chapter
53 of title 5, United States Code, to appoint such officers
264
Title I, Subtitle F
and employees as are necessary to carry out its functions.
To the extent provided in advance in appropriations Acts,
the Board may contract with any person (including an
agency of the Federal Government) for studies and anal-
ysis as required to execute its functions. Any employee of
the Executive Branch may be detailed to the Board to as-
sist the Board in carrying out its duties.
(b) ESTABLISHMENT OF ADVISORY COMMITTEES.—
The Board may establish advisory committees.
(c) ACCESS TO INFORMATION.—The Board may se-
cure directly from any department or agency of the United
States information necessary to enable it to carry out its
functions, to the extent such information is otherwise
available to a department or agency of the United States.
Upon request of the chair, the head of that department
or agency shall furnish that information to the Board.
(d) DELEGATION OF AUTHORITY.—Except as other-
wise provided in this Act, the Board may delegate any
function to such officers and employees as the Board may
designate and may authorize such successive redelegations
of such functions with the Board as the Board deems to
be necessary or appropriate. No delegation of functions
by the Board shall relieve the Board of responsibility for
the administration of such functions.
265
Title I, Subtitle F
(e) RULEMAKING.—The National Health Board is
authorized to establish such rules as may be necessary to
carry out this Act.
SEC. 1506. FUNDING.
(a) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Board such sums
as may be necessary for fiscal years 1994, 1995, 1996,
1997, and 1998.
(b) SUBMISSION OF BUDGET.—Under the procedures
of chapter 11 of title 31, United States Code, the budget
for the Board for a fiscal year shall be reviewed by the
Director of the Office of Management and Budget and
submitted to the Congress as part of the President’s sub-
mission of the Budget of the United States for the fiscal
year.
Subpart B—Responsibilities Relating to Review and
Approval of State Systems
SEC. 1511. FEDERAL REVIEW AND ACTION ON STATE SYS-
TEMS.
(a) APPROVAL OF STATE SYSTEMS BY NATIONAL
BOARD.—
(1) IN GENERAL.—The National Health Board
shall approve a State health care system for which
a document is submitted under section 1200(b) un-
less the Board finds that the system (as set forth in
266
Title I, Subtitle F
the document) does not (or will not) provide for the
State meeting the responsibilities for participating
States under this Act.
(2) REGULATIONS.—The Board shall issue reg-
ulations, not later than July 1, 1995, prescribing the
requirements for State health care systems under
parts 2 and 3 of subtitle C, except that in the case
of a document submitted under section 1200(b) be-
fore the date of issuance of such regulations, the
Board shall take action on such document notwith-
standing the fact that such regulations have not
been issued.
(3) NO
APPROVAL
PERMITTED
FOR
YEARS
PRIOR
TO
1996.—The Board may not approve a
State health care system under this subpart for any
year prior to 1996.
(b) REVIEW OF COMPLETENESS OF DOCUMENTS.—
(1) IN GENERAL.—If a State submits a docu-
ment under subsection (a)(1), the Board shall notify
the State, not later than 7 working days after the
date of submission, whether or not the document is
complete and provides the Board with sufficient in-
formation to approve or disapprove the document.
(2) ADDITIONAL INFORMATION ON INCOMPLETE
DOCUMENT.—If the Board notifies a State that the
267
Title I, Subtitle F
State’s document is not complete, the State shall be
provided such additional period (not to exceed 45
days) as the Board may by regulation establish in
which to submit such additional information as the
Board may require. Not later than 7 working days
after the State submits the additional information,
the Board shall notify the State respecting the com-
pleteness of the document.
(c) ACTION ON COMPLETED DOCUMENTS.—
(1) IN GENERAL.—The Board shall make a de-
termination (and notify the State) on whether the
State’s document provides for implementation of a
State system that meets the applicable requirements
of subtitle C—
(A) in the case of a State that did not re-
quire the additional period described in sub-
section (b)(2) to file a complete document, not
later than 90 days after notifying a State under
subsection (b) that the State’s document is
complete, or
(B) in the case of a State that required the
additional period described in subsection (b)(2)
to file a complete document, not later than 90
days after notifying a State under subsection
(b) that the State’s document is complete.
268
Title I, Subtitle F
(2) PLANS DEEMED APPROVED.—If the Board
does not meet the applicable deadline for making a
determination and providing notice under paragraph
(1) with respect to a State’s document, the Board
shall be deemed to have approved the State’s docu-
ment for purposes of this Act.
(d) OPPORTUNITY TO RESPOND TO REJECTED DOC-
UMENT.—
(1) IN
GENERAL.—If (within the applicable
deadline under subsection (c)(1)) the Board notifies
a State that its document does not provide for im-
plementation of a State system that meets the appli-
cable requirements of subtitle C, the Board shall
provide the State with a period of 30 days in which
to submit such additional information and assur-
ances as the Board may require.
(2) DEADLINE FOR RESPONSE.—Not later than
30 days after receiving such additional information
and assurances, the Board shall make a determina-
tion (and notify the State) on whether the State’s
document provides for implementation of a State
system that meets the applicable requirements of
subtitle C.
(3) PLAN DEEMED APPROVED.—If the Board
does not meet the deadline established under para-
269
Title I, Subtitle F
graph (2) with respect to a State, the Board shall
be deemed to have approved the State’s document
for purposes of this Act.
(e) 
APPROVAL
OF
PREVIOUSLY
TERMINATED
STATES.—If the Board has approved a State system
under this part for a year but subsequently terminated
the approval of the system under section 1512(b)(2), the
Board shall approve the system for a succeeding year if
the State—
(1) demonstrates to the satisfaction of the
Board that the failure that formed the basis for the
termination no longer exists, and
(2) provides reasonable assurances that the
types of actions (or inactions) which formed the
basis for such termination will not recur.
(f) REVISIONS TO STATE SYSTEM.—
(1) SUBMISSION.—A State may revise a system
approved for a year under this section, except that
such revision shall not take effect unless the State
has submitted to the Board a document describing
such revision and the Board has approved such revi-
sion.
(2) ACTIONS ON AMENDMENTS.—Not later than
60 days after a document is submitted under para-
graph (1), the Board shall make a determination
270
Title I, Subtitle F
(and notify the State) on whether the implementa-
tion of the State system, as proposed to be revised,
meets the applicable requirements of subtitle C. If
the Board fails to meet the requirement of the pre-
ceding sentence, the Board shall be deemed to have
approved the implementation of the State system as
proposed to be revised.
(3) REJECTION OF AMENDMENTS.—Subsection
(d) shall apply to an amendment submitted under
this subsection in the same manner as it applies to
a completed document submitted under subsection
(b).
(g) 
NOTIFICATION
OF
NON-PARTICIPATING
STATES.—If a State fails to submit a document for a
State system by the deadline referred to in section 1200,
or such a document is not approved under subsection (c),
the Board shall immediately notify the Secretary of Health
and Human Services of the State’s failure for purposes
of applying subpart C in that State.
SEC. 1512. FAILURE OF PARTICIPATING STATES TO MEET
CONDITIONS FOR COMPLIANCE.
(a) IN GENERAL.—In the case of a participating
State, if the Board determines that the operation of the
State system under subtitle C fails to meet the applicable
271
Title I, Subtitle F
requirements of this Act, sanctions shall apply against the
State in accordance with subsection (b).
(b) TYPE OF SANCTION APPLICABLE.—The sanctions
applicable under this part are as follows:
(1) If the Board determines that the State’s
failure does not substantially jeopardize the ability
of eligible individuals in the State to obtain coverage
for the comprehensive benefit package—
(A) the Board may order a regional alli-
ance in the State to comply with applicable re-
quirements of this Act and take such additional
measures to assure compliance with such re-
quirements as the Board may impose, if the
Board determines that the State’s failure re-
lates to a requirement applicable to a regional
alliance in the State, or
(B) if the Board does not take the action
described in subparagraph (A) (or if the Board
takes the action and determines that the action
has not remedied the violation that led to the
imposition of the sanction), the Board shall no-
tify the Secretary of Health and Human Serv-
ices, who shall reduce payments with respect to
the State in accordance with section 1513.
272
Title I, Subtitle F
(2) If the Board determines that the failure
substantially jeopardizes the ability of eligible indi-
viduals in the State to obtain coverage for the com-
prehensive benefit package—
(A) the Board shall terminate its approval
of the State system; and
(B) the Board shall notify the Secretary of
Health and Human Services, who shall assume
the responsibilities described in section 1522.
(c) TERMINATION OF SANCTION.—
(1) COMPLIANCE BY STATE.—A State against
which a sanction is imposed may submit information
at any time to the Board to demonstrate that the
failure that led to the imposition of the sanction has
been corrected.
(2) TERMINATION OF SANCTION.—If the Board
determines that the failure that led to the imposition
of a sanction has been corrected—
(A) in the case of the sanction described in
subsection (b)(1)(A), the Board shall notify the
regional alliance against which the sanction is
imposed; or
(B) in the case of any other sanction de-
scribed in subsection (b), the Board shall notify
the Secretary of Health and Human Services.
273
Title I, Subtitle F
(d) PROTECTION OF ACCESS TO BENEFITS.—The
Board and the Secretary of Health and Human Services
shall exercise authority to take actions under this section
with respect to a State only in a manner that assures the
continuous coverage of eligible individuals under regional
alliance health plans.
SEC. 1513. REDUCTION IN PAYMENTS FOR HEALTH PRO-
GRAMS BY SECRETARY OF HEALTH AND
HUMAN SERVICES.
(a) IN GENERAL.—Upon receiving notice from the
Board under section 1512(b)(1)(B), the Secretary of
Health and Human Services shall reduce the amount of
any of the payments described in subsection (b) that would
otherwise be made to individuals and entities in the State
by such amount as the Secretary determines to be appro-
priate.
(b) PAYMENTS
DESCRIBED.—The payments de-
scribed in this subsection are as follows:
(1) Payments to academic health centers in the
State under subtitle B of title III.
(2) Payments to individuals and entities in the
State for health research activities under section 301
and title IV of the Public Health Service Act.
274
Title I, Subtitle F
(3) Payments to hospitals in the State under
part 4 of subtitle E of title III (relating to payments
to hospitals serving vulnerable populations)
SEC. 1514. REVIEW OF FEDERAL DETERMINATIONS.
Any State or alliance affected by a determination by
the Board under this subpart may appeal such determina-
tion in accordance with section 5231.
SEC. 1515. FEDERAL SUPPORT FOR STATE IMPLEMENTA-
TION.
(a) PLANNING GRANTS.—
(1) IN GENERAL.—Not later than 90 days after
the date of the enactment of this Act, the Secretary
shall make available to each State a planning grant
to assist a State in the development of a health care
system to become a participating State under sub-
title C.
(2) FORMULA.—The Secretary shall establish a
formula for the distribution of funds made available
under this subsection.
(3) AUTHORIZATION
OF
APPROPRIATIONS.—
There 
are 
authorized 
to 
be 
appropriated
$50,000,000 in each of fiscal years 1995 and 1996
for grants under this subsection.
(b) GRANTS FOR START-UP SUPPORT.—
275
Title I, Subtitle F
(1) IN GENERAL.—The Secretary shall make
available to States, upon their enacting enabling leg-
islation to become participating States, grants to as-
sist in the establishment of regional alliances.
(2) FORMULA.—The Secretary shall establish a
formula for the distribution of funds made available
under this subsection.
(3) STATE
MATCHING
FUNDS
REQUIRED.—
Funds are payable to a State under this subsection
only if the State provides assurances, satisfactory to
the Secretary, that amounts of State funds (at least
equal to the amount made available under this sub-
section) are expended for the purposes described in
paragraph (1).
(4) AUTHORIZATION
OF
APPROPRIATIONS.—
There 
are 
authorized 
to 
be 
appropriated
$313,000,000 for fiscal year 1996, $625,000,000 for
fiscal year 1997, and $313,000,000 for fiscal year
1998 for grants under this subsection.
Subpart C—Responsibilities in Absence of State
Systems
SEC. 1521. APPLICATION OF SUBPART.
(a) INITIAL APPLICATION.—This subpart shall apply
with respect to a State as of January 1, 1998, unless—
276
Title I, Subtitle F
(1) the State submits a document for a State
system under section 1511(a)(1) by July 1, 1997,
and
(2) the Board determines under section 1511
that such system meets the requirements of part 1
of subtitle C.
(b) TERMINATION OF APPROVAL OF SYSTEM OF PAR-
TICIPATING STATE.—In the case of a participating State
for which the Board terminates approval of the State sys-
tem under section 1512(b)(2), this subpart shall apply
with respect to the State as of such date as is appropriate
to assure the continuity of coverage for the comprehensive
benefit package for eligible individuals in the State.
SEC. 1522. FEDERAL ASSUMPTION OF RESPONSIBILITIES IN
NON-PARTICIPATING STATES.
(a) NOTICE.—When the Board determines that this
subpart will apply to a State for a calendar year, the
Board shall notify the Secretary of Health and Human
Services.
(b) ESTABLISHMENT OF REGIONAL ALLIANCE SYS-
TEM.—Upon receiving notice under subsection (a), the
Secretary shall take such steps, including the establish-
ment of regional alliances, and compliance with other re-
quirements applicable to participating States under sub-
title C, as are necessary to ensure that the comprehensive
277
Title I, Subtitle F
benefit package is provided to eligible individuals in the
State during the year.
(c) REQUIREMENTS
FOR ALLIANCES.—Subject to
section 1523, any regional alliance established by the Sec-
retary pursuant to this section must meet all the require-
ments applicable under subtitle D to a regional alliance
established and operated by a participating State, and the
Secretary shall have the authority to fulfill all the func-
tions of such an alliance.
(d) ESTABLISHMENT OF GUARANTY FUND.—
(1) ESTABLISHMENT.—The Secretary must en-
sure that there is a guaranty fund that meets the re-
quirements established by the Board under section
1552, in order to provide financial protection to
health care providers and others in the case of a fail-
ure of a regional alliance health plan under a re-
gional alliance established and operated by the Sec-
retary under this section.
(2) ASSESSMENTS
TO
PROVIDE
GUARANTY
FUNDS.—In the case of a failure of one or more re-
gional alliance health plans under a regional alliance
established and operated by the Secretary under this
section, the Secretary may require each regional alli-
ance health plan under the alliance to pay an assess-
ment to the Secretary in an amount not to exceed
278
Title I, Subtitle F
2 percent of the premiums of such plans paid by or
on behalf of regional alliance eligible individuals dur-
ing a year for so long as necessary to generate suffi-
cient revenue to cover any outstanding claims
against the failed plan.
SEC. 1523. IMPOSITION OF SURCHARGE ON PREMIUMS
UNDER FEDERALLY-OPERATED SYSTEM.
(a) IN GENERAL.—If this subpart applies to a State
for a calendar year, the premiums charged under the re-
gional alliance established and operated by the Secretary
in the State shall be equal to premiums that would other-
wise be charged under a regional alliance established and
operated by the State, increased by 15 percent. Such 15
percent increase shall be used to reimburse the Secretary
for any administrative or other expenses incurred as a re-
sult of establishing and operating the system.
(b) TREATMENT OF SURCHARGE AS PART OF PRE-
MIUM.—For purposes of determining the compliance of a
State for which this subpart applies in a year with the
requirements for budgeting under subtitle A of title VI
for the year, the 15 percent increase described in sub-
section (a) shall be treated as part of the premium for
payment to a regional alliance.
279
Title I, Subtitle F
SEC. 1524. RETURN TO STATE OPERATION.
(a) APPLICATION PROCESS.—After the establishment
and operation of an alliance system by the Secretary in
a State under section 1522, the State may at any time
apply to the Board for the approval of a State system in
accordance with the procedures described in section 1511.
(b) TIMING.—If the Board approves the system of a
State for which the Secretary has operated an alliance sys-
tem during a year, the Secretary shall terminate the oper-
ation of the system, and the State shall establish and oper-
ate its approved system, as of January 1 of the first year
beginning after the Board approves the State system. The
termination of the Secretary’s system and the operation
of the State’s system shall be conducted in a manner that
assures the continuous coverage of eligible individuals in
the State under regional alliance health plans.
Subpart D—Establishment of Class Factors for
Charging Premiums
SEC. 1531. PREMIUM CLASS FACTORS.
(a) IN GENERAL.—For each class of family enroll-
ment (as specified in section 1011(c)), for purposes of title
VI, the Board shall establish a premium class factor that
reflects, subject to subsection (b), the relative actuarial
value of the comprehensive benefit package of the class
of family enrollment compared to such value of such pack-
age for individual enrollment.
280
Title I, Subtitle F
(b) CONDITIONS.—In establishing such factors, the
factor for the class of individual enrollment shall be 1 and
the factor for the couple-only class of family enrollment
shall be 2.
Subpart E—Risk Adjustment and Reinsurance
Methodology for Payment of Plans
SEC. 1541. DEVELOPMENT OF A RISK ADJUSTMENT AND RE-
INSURANCE METHODOLOGY.
(a) DEVELOPMENT.—
(1) INITIAL
DEVELOPMENT.—Not later than
April 1, 1995, the Board shall develop a risk adjust-
ment and reinsurance methodology in accordance
with this subpart.
(2) IMPROVEMENTS.—The Board shall make
such improvements in such methodology as may be
appropriate to achieve the purposes described in sub-
section (b)(1).
(b) METHODOLOGY.—
(1) PURPOSES.—Such methodology shall pro-
vide for the adjustment of payments to regional alli-
ance health plans for the purposes of—
(A) assuring that payments to such plans
reflect the expected relative utilization and ex-
penditures for such services by each plan’s en-
rollees compared to the average utilization and
281
Title I, Subtitle F
expenditures for regional alliance eligible indi-
viduals, and
(B) protecting health plans that enroll a
disproportionate share of regional alliance eligi-
ble individuals with respect to whom expected
utilization of health care services (included in
the comprehensive benefit package) and ex-
pected health care expenditures for such serv-
ices are greater than the average level of such
utilization and expenditures for regional alliance
eligible individuals.
(2) FACTORS TO BE CONSIDERED.—In devel-
oping such methodology, the Board shall take into
account the following factors:
(A) Demographic characteristics.
(B) Health status.
(C) Geographic area of residence.
(D) Socio-economic status.
(E) Subject to paragraph (5), (i) the pro-
portion of enrollees who are SSI recipients and
(ii) the proportion of enrollees who are AFDC
recipients.
(F) Any other factors determined by the
Board to be material to the purposes described
in paragraph (1).
282
Title I, Subtitle F
(3) ZERO SUM.—The methodology shall assure
that the total payments to health plans by the re-
gional alliance after application of the methodology
are the same as the amount of payments that would
have been made without application of the method-
ology.
(4) 
PROSPECTIVE
ADJUSTMENT
OF
PAY-
MENTS.—The methodology, to the extent possible
and except in the case of a mandatory reinsurance
system described in subsection (c), shall be applied
in a manner that provides for the prospective adjust-
ment of payments to health plans.
(5) TREATMENT OF SSI/AFDC ADJUSTMENT.—
The Board is not required to apply the factor de-
scribed in clause (i) or (ii) of paragraph (2)(E) if
the Board determines that the application of the
other risk adjustment factors described in paragraph
(2) is sufficient to adjust premiums to take into ac-
count the enrollment in plans of AFDC recipients
and SSI recipients.
(6) SPECIAL CONSIDERATION FOR MENTAL ILL-
NESS.—In developing the methodology under this
section, the Board shall give consideration to the
unique problems of adjusting payments to health
plans with respect to individuals with mental illness.
283
Title I, Subtitle F
(7) SPECIAL CONSIDERATION FOR VETERANS,
MILITARY, AND INDIAN HEALTH PLANS.—In devel-
oping the methodology under this section, the Board
shall give consideration to the special enrollment and
funding provisions relating to plans described in sec-
tion 1004(b).
(8) ADJUSTMENT TO ACCOUNT FOR USE OF ES-
TIMATES.—Subject to section 1361(b)(3) (relating
to establishment of regional alliance reserve funds),
if the total payments made by a regional alliance to
all regional alliance health plans in a year under sec-
tion 1351(b) exceeds, or is less than, the total of
such payments estimated by the alliance in the ap-
plication of the methodology under this subsection,
because of a difference between—
(A) the alliance’s estimate of the distribu-
tion of enrolled families in different risk cat-
egories (assumed in the application of risk fac-
tors under this subsection in making payments
to regional alliance health plans), and
(B) the actual distribution of such enrolled
families in such categories,
the methodology under this subsection shall provide
for an adjustment in the application of such method-
ology in the second succeeding year in a manner
284
Title I, Subtitle F
that would reduce, or increase, respectively, by the
amount of such excess (or deficit) the total of such
payments made by the alliance to all such plans.
(c) MANDATORY REINSURANCE.—
(1) IN GENERAL.—The methodology developed
under this section may include a system of manda-
tory reinsurance, but may not include a system of
voluntary reinsurance.
(2) REQUIREMENT IN CERTAIN CASES.—If the
Board determines that an adequate system of pro-
spective adjustment of payments to health plans to
account for the health status of individuals enrolled
by regional alliance health plans cannot be developed
(and ready for implementation) by the date specified
in subsection (a)(1), the Board shall include a man-
datory reinsurance system as a component of the
methodology. The Board may thereafter reduce or
eliminate such a system at such time as the Board
determines that an adequate prospective payment
adjustment for health status has been developed and
is ready for implementation.
(3) REINSURANCE SYSTEM.—The Board, in de-
veloping the methodology for a mandatory reinsur-
ance system under this subsection, shall—
285
Title I, Subtitle F
(A) provide for health plans to make pay-
ments to state-established reinsurance programs
for the purpose of reinsuring part or all of the
health care expenses for items and services in-
cluded in the comprehensive benefit package for
specified classes of high-cost enrollees or speci-
fied high-cost treatments or diagnoses; and
(B) specify the manner of creation, struc-
ture, and operation of the system in each State,
including—
(i) the manner (which may be pro-
spective or retrospective) in which health
plans make payments to the system, and
(ii) the type and level of reinsurance
coverage provided by the system.
(d) 
CONFIDENTIALITY
OF
INFORMATION.—The
methodology shall be developed in a manner consistent
with privacy standards promulgated under section
5120(a). In developing such standards, the Board shall
take into account any potential need of alliances for cer-
tain individually identifiable health information in order
to carry out risk-adjustment and reinsurance activities
under this Act, but only to the minimum extent necessary
to carry out such activities and with protections provided
286
Title I, Subtitle F
to minimize the identification of the individuals to whom
the information relates.
SEC. 
1542. 
INCENTIVES 
TO 
ENROLL 
DISADVANTAGED
GROUPS.
The Board shall establish standards under which
States may provide (under section 1203(e)(3)) for an ad-
justment in the risk-adjustment methodology developed
under section 1541 in order to provide a financial incen-
tive for regional alliance health plans to enroll individuals
who are members of disadvantaged groups.
SEC. 1543. ADVISORY COMMITTEE.
(a) IN GENERAL.—The Board shall establish an advi-
sory committee to provide technical advice and rec-
ommendations regarding the development and modifica-
tion of the risk adjustment and reinsurance methodology
developed under this subpart.
(b) COMPOSITION.—Such advisory committee shall
consist of 15 individuals and shall include individuals who
are representative of health plans, regional alliances, con-
sumers, experts, employers, and health providers.
SEC. 1544. RESEARCH AND DEMONSTRATIONS.
The Secretary shall conduct and support research
and demonstration projects to develop and improve, on a
continuing basis, the risk adjustment and reinsurance
methodology under this subpart.
287
Title I, Subtitle F
SEC. 1545. TECHNICAL ASSISTANCE TO STATES AND ALLI-
ANCES.
The Board shall provide technical assistance to
States and regional alliances in implementing the method-
ology developed under this subpart.
Subpart F—Responsibilities for Financial
Requirements
SEC. 1551. CAPITAL STANDARDS FOR REGIONAL ALLIANCE
HEALTH PLAN.
(a) IN GENERAL.—The Board shall establish, in con-
sultation with the States, minimum capital requirements
for regional alliance health plans, for purposes of section
1204(a).
(b) $500,000 MINIMUM.—Subject to subsection (c),
under such requirements there shall be not less than
$500,000 of capital maintained for each plan offered in
each alliance area, regardless of whether or not the same
sponsor offered more than one of such plans.
(c) ADDITIONAL
CAPITAL
REQUIREMENTS.—The
Board may require additional capital for factors likely to
affect the financial stability of health plans, including the
following:
(1) Projected plan enrollment and number of
providers participating in the plan.
(2) Market share and strength of competition.
288
Title I, Subtitle F
(3) Extent and nature of risk-sharing with par-
ticipating providers and the financial stability of
risk-sharing providers.
(4) Prior performance of the plan, risk history,
and liquidity of assets.
(d) DEVELOPMENT OF STANDARDS BY NAIC.—The
Board may request the National Association of Insurance
Commissioners to develop model standards for the addi-
tional capital requirements described in subsection (c) and
to present such standards to the Board not later than July
1, 1995. The Board may accept such standards as the
standards to be applied under subsection (c) or modify the
standards in any manner it finds appropriate.
SEC. 1552. STANDARD FOR GUARANTY FUNDS.
(a) IN GENERAL.—In consultation with the States,
the Board shall establish standards for guaranty funds es-
tablished by States under section 1204(c).
(b) GUARANTY FUND STANDARDS.—The standards
established under subsection (a) for a guaranty fund shall
include the following:
(1) Each fund must have a method to generate
sufficient resources to pay health providers and oth-
ers in the case of a failure of a health plan (as de-
scribed in section 1204(d)(4)) in order to meet obli-
gations with respect to—
289
Title I, Subtitle F
(A) services rendered by the health plan
for the comprehensive benefit package, includ-
ing any supplemental coverage for cost sharing
provided by the health plan, and
(B) services rendered prior to health plan
insolvency and services to patients after the in-
solvency but prior to their enrollment in other
health plans.
(2) The fund is liable for all claims against the
plan by health care providers with respect to their
provision of items and services covered under the
comprehensive benefit package to enrollees of the
failed plan. Such claims, in full, shall take priority
over all other claims. The fund also is liable, to the
extent and in the manner provided in accordance
with rules established by the Board, for other
claims, including other claims of such providers and
the claims of contractors, employees, governments,
or any other claimants.
(3) The fund stands as a creditor for any pay-
ments owed the plan to the extent of the payments
made by the fund for obligations of the plan.
(4) The fund has authority to borrow against
future 
assessments 
(payable 
under 
section
290
Title I, Subtitle F
1204(c)(2)) in order to meet the obligations of failed
plans participating in the fund.
PART 2—RESPONSIBILITIES OF DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Subpart A—General Responsibilities
SEC. 1571. GENERAL RESPONSIBILITIES OF SECRETARY OF
HEALTH AND HUMAN SERVICES.
(a) IN GENERAL.—Except as otherwise specifically
provided under this Act (or with respect to administration
of provisions in the Internal Revenue Code of 1986 or in
the Employee Retirement Income Security Act of 1974),
the Secretary of Health and Human Services shall admin-
ister and implement all of the provisions of this Act, except
those duties delegated to the National Health Board, any
other executive agency, or to any State.
(b) FINANCIAL
MANAGEMENT
STANDARDS.—The
Secretary, in consultation with the Secretaries of Labor
and the Treasury, shall establish, for purposes of section
1361, standards relating to the management of finances,
maintenance of records, accounting practices, auditing
procedures, and financial reporting for health alliances.
Such standards shall take into account current Federal
laws and regulations relating to fiduciary responsibilities
and financial management of funds.
291
Title I, Subtitle F
(c) AUDITING
REGIONAL
ALLIANCE
PERFORM-
ANCE.—The Secretary shall perform periodic financial and
other audits of regional alliances to assure that such alli-
ances are carrying out their responsibilities under this Act
consistent with this Act. Such audits shall include audits
of alliance performance in the areas of—
(1) assuring enrollment of all regional alliance
eligible individuals in health plans,
(2) management of premium and cost sharing
discounts and reductions provided; and
(3) financial management of the alliance, in-
cluding allocation of collection shortfalls.
SEC. 
1572. 
ADVISORY 
COUNCIL 
ON 
BREAKTHROUGH
DRUGS.
(a) IN GENERAL.—The Secretary shall appoint an
Advisory Council on Breakthrough Drugs (in this section
referred to as the ‘‘Council’’) that will examine the reason-
ableness of launch prices of new drugs that represent a
breakthrough or significant advance over existing thera-
pies.
(b) DUTIES.—(1) At the request of the Secretary, or
a member of the Council, the Council shall make a deter-
mination regarding the reasonableness of launch prices of
a breakthrough drug. Such a determination shall be based
on—
292
Title I, Subtitle F
(A) prices of other drugs in the same thera-
peutic class;
(B) cost information supplied by the manufac-
turer;
(C) prices of the drug in countries specified in
section 802(b)(4)(A) of the Federal Food, Drug, and
Cosmetic Act;
(D) projected prescription volume, economies of
scale, product stability, special manufacturing re-
quirements and research costs;
(E) cost effectiveness relative to the cost of al-
ternative course of treatment options, including non-
pharmacological medical interventions; and
(F) improvements in quality of life offered by
the new product, including ability to return to work,
ability to perform activities of daily living, freedom
from attached medical devices, and other appro-
priate measurements of quality of life improvements.
(2) The Secretary shall review the determinations of
the Council and publish the results of such review along
with the Council’s determination (including minority opin-
ions) as a notice in the Federal Register.
(c) MEMBERSHIP.—The Council shall consist of a
chair and 12 other persons, appointed without regard to
the provisions of title 5, United States Code, governing
293
Title I, Subtitle F
appointments in the competitive service. The Council shall
include a representative from the pharmaceutical industry,
consumer organizations, physician organizations, the hos-
pital industry, and the managed care industry. Other indi-
viduals appointed by the Secretary shall be recognized ex-
perts in the fields of health care economics, pharmacology,
pharmacy, and prescription drug reimbursement. Only one
member of the Council may have direct or indirect finan-
cial ties to the pharmaceutical industry.
(d) TERM OF APPOINTMENTS.—Appointments shall
be for a term of 3 years, except that the Secretary may
provide initially for such shorter terms as will ensure that
the terms of not more than 5 members expire in any one
year.
(e) COMPENSATION.—Members of the Council shall
be entitled to receive reimbursement of expenses and per
diem in lieu of subsistence in the same manner as other
members of advisory councils appointed by the Secretary
are provided such reimbursements under the Social Secu-
rity Act.
(f) NO TERMINATION.—Notwithstanding the provi-
sions of the Federal Advisory Committee Act, the Council
shall continue in existence until otherwise specified in law.
294
Title I, Subtitle F
Subpart B—Certification of Essential Community
Providers
SEC. 1581. CERTIFICATION.
(a) IN GENERAL.—For purposes of this Act, the Sec-
retary shall certify as an ‘‘essential community provider’’
any health care provider or organization that—
(1) is within any of the categories of providers
and organizations specified in section 1582(a), or
(2) meets the standards for certification under
section 1583(a).
(b) TIMELY ESTABLISHMENT
OF PROCESS.—The
Secretary shall take such actions as may be necessary to
permit health care providers and organizations to be cer-
tified as essential community providers in a State before
the beginning of the first year for the State.
SEC. 1582. CATEGORIES OF PROVIDERS AUTOMATICALLY
CERTIFIED.
(a) IN GENERAL.—The categories of providers and
organizations specified in this subsection are as follows:
(1) MIGRANT HEALTH CENTERS.—A recipient
or subrecipient of a grant under section 329 of the
Public Health Service Act.
(2) COMMUNITY HEALTH CENTERS.—A recipi-
ent or subrecipient of a grant under section 330 of
the Public Health Service Act.
295
Title I, Subtitle F
(3) HOMELESS
PROGRAM
PROVIDERS.—A re-
cipient or subrecipient of a grant under section 340
of the Public Health Service Act.
(4) PUBLIC HOUSING PROVIDERS.—A recipient
or subrecipient of a grant under section 340A of the
Public Health Service Act.
(5) FAMILY PLANNING CLINICS.—A recipient or
subrecipient of a grant under title X of the Public
Health Service Act.
(6) INDIAN HEALTH PROGRAMS.—A service unit
of the Indian Health Service, a tribal organization,
or an urban Indian program, as defined in the In-
dian Health Care Improvement Act.
(7) AIDS PROVIDERS
UNDER
RYAN
WHITE
ACT.—A public or private nonprofit health care pro-
vider that is a recipient or subrecipient of a grant
under title XXVI of the Public Health Service Act.
(8) MATERNAL
AND
CHILD
HEALTH
PRO-
VIDERS.—A public or private nonprofit entity that
provides prenatal care, pediatric care, or ambulatory
services to children, including children with special
health care needs, and that receives funding for such
care or services under title V of the Social Security
Act.
296
Title I, Subtitle F
(9) FEDERALLY QUALIFIED HEALTH CENTER;
RURAL
HEALTH
CLINIC.—A 
Federally-qualified
health center or a rural health clinic (as such terms
are defined in section 1861(aa) of the Social Secu-
rity Act).
(10) PROVIDER
OF
SCHOOL
HEALTH
SERV-
ICES.—A provider of school health services that re-
ceives funding for such services under subtitle G of
title III.
(11) COMMUNITY
PRACTICE
NETWORK.—A
qualified community practice network receiving de-
velopment funds under subtitle E of title III.
(b) SUBRECIPIENT DEFINED.—In this subpart, the
term ‘‘subrecipient’’ means, with respect to a recipient of
a grant under a particular authority, an entity that—
(1) is receiving funding from such a grant
under a contract with the principal recipient of such
a grant, and
(2) meets the requirements established to be a
recipient of such a grant.
(c) HEALTH PROFESSIONAL DEFINED.—In this sub-
part, the term ‘‘health professional’’ means a physician,
nurse, nurse practitioner, certified nurse midwife, physi-
cian assistant, psychologist, dentist, pharmacist, and other
health care professional recognized by the Secretary.
297
Title I, Subtitle F
SEC. 1583. STANDARDS FOR ADDITIONAL PROVIDERS.
(a) STANDARDS.—The Secretary shall publish stand-
ards for the certification of additional categories of health
care providers and organizations as essential community
providers, including the categories described in subsection
(b). Such a health care provider or organization shall not
be certified unless the Secretary determines, under such
standards, that health plans operating in the area served
by the applicant would not otherwise be able to assure ade-
quate access to items and services included in the com-
prehensive benefit package if such a provider was not so
certified.
(b) CATEGORIES TO BE INCLUDED.—The categories
described in this subsection are as follows:
(1) 
HEALTH
PROFESSIONALS.—Health
professionals—
(A) located in an area designated as a
health professional shortage area (under section
332 of the Public Health Service Act), or
(B) providing a substantial amount of
health services (as determined in accordance
with standards established by the Secretary) to
a medically underserved population (as des-
ignated under section 330 of such Act).
(2) INSTITUTIONAL
PROVIDERS.—Public and
private nonprofit hospitals and other institutional
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Title I, Subtitle F
health care providers located in such an area or pro-
viding health services to such a population.
(3) OTHER PROVIDERS.—Other public and pri-
vate nonprofit agencies and organizations that—
(A) are located in such an area or pro-
viding health services to such a population, and
(B) provide health care and services essen-
tial to residents of such an area or such popu-
lations.
SEC. 1584. CERTIFICATION PROCESS; REVIEW; TERMI-
NATION OF CERTIFICATIONS.
(a) CERTIFICATION PROCESS.—
(1) PUBLICATION OF PROCEDURES.—The Sec-
retary shall publish, not later than 6 months after
the date of the enactment of this Act, the procedures
to be used by health care professionals, providers,
agencies, and organizations seeking certification
under this subpart, including the form and manner
in which an application for such certification is to be
made.
(2) TIMELY
DETERMINATION.—The Secretary
shall make a determination upon such an application
not later than 60 days (or 15 days in the case of
a certification for an entity described in section
1582) after the date the complete application has
299
Title I, Subtitle F
been submitted. The determination on an application
for certification of an entity described in section
1582 shall only involve the verification that the enti-
ty is an entity described in such section.
(b) REVIEW
OF CERTIFICATIONS.—The Secretary
shall periodically review whether professionals, providers,
agencies, and organizations certified under this subpart
continue to meet the requirements for such certification.
(c) TERMINATION OR DENIAL OF CERTIFICATION.—
(1) PRELIMINARY FINDING.—If the Secretary
preliminarily finds that an entity seeking certifi-
cation under this section does not meet the require-
ments for such certification or such an entity cer-
tified under this subpart fails to continue to meet
the requirements for such certification, the Secretary
shall notify the entity of such preliminary finding
and permit the entity an opportunity, under subtitle
C of title V, to rebut such findings.
(2) FINAL DETERMINATION.—If, after such op-
portunity, the Secretary continues to find that such
an entity continues to fail to meet such require-
ments, the Secretary shall terminate the certification
and shall notify the entity, regional alliances, and
corporate alliances of such termination and the ef-
fective date of the termination.
300
Title I, Subtitle F
SEC. 1585. NOTIFICATION OF HEALTH ALLIANCES AND PAR-
TICIPATING STATES.
(a) IN GENERAL.—Not less often than annually the
Secretary shall notify each participating State and each
health alliance of essential community providers that have
been certified under this subpart.
(b) CONTENTS.—Such notice shall include sufficient
information to permit each health alliance to notify health
plans of the identify of each entity certified as an essential
community provider, including—
(1) the location of the provider within each
plan’s service area,
(2) the health services furnished by the pro-
vider, and
(3) other information necessary for health plans
to carry out part 3 of subtitle E.
PART 3—SPECIFIC RESPONSIBILITIES OF
SECRETARY OF LABOR.
SEC. 1591. RESPONSIBILITIES OF SECRETARY OF LABOR.
(a) IN
GENERAL.—The Secretary of Labor is
responsible—
(1) under subtitle G, for the enforcement of re-
quirements applicable to employers under regional
alliances (including requirements relating to pay-
ment of premiums) and the administration of cor-
porate alliances;
301
Title I, Subtitle F
(2) under subtitle D, with respect to elections
by eligible sponsors to become corporate alliances
and the termination of such elections;
(3) under section 1395, for the temporary as-
sumption of the operation of self-insured corporate
alliance health plans that are insolvent;
(4) under section 1396, for the establishment
and administration of Corporate Alliance Health
Plan Insolvency Fund;
(5) for carrying out any other responsibilities
assigned to the Secretary under this Act; and
(6) for administering title I of the Employee
Retirement Income Security Act of 1974 as it re-
lates to group health plans maintained by corporate
alliances.
(b) AGREEMENTS WITH STATES.—The Secretary of
Labor may enter into agreements with States in order to
enforce responsibilities of employers and corporate alli-
ances, and requirements of corporate alliance health plans,
under subtitle B of title I of the Employee Retirement In-
come Security Act of 1974.
(c) CONSULTATION WITH BOARD.—In carrying out
activities under this Act with respect to corporate alli-
ances, corporate alliance health plans, and employers, the
302
Title I, Subtitle F
Secretary of Labor shall consult with the National Health
Board.
(d) EMPLOYER-RELATED REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of Labor, in
consultation with the Secretary, shall be responsible
for assuring that employers—
(A) make payments of any employer pre-
miums (and withhold and make payment of the
family share of premiums with respect to quali-
fying employees) as required under this Act, in-
cluding auditing of regional alliance collection
activities with respect to such payments,
(B) submit timely reports as required
under this Act, and
(C) otherwise comply with requirements
imposed on employers under this Act.
(2) AUDIT
AND
SIMILAR
AUTHORITIES.—The
Secretary of Labor—
(A) may carry out such audits (directly or
through contract) and such investigations of
employers and health alliances,
(B) may exercise such authorities under
section 504 of Employee Retirement Income Se-
curity Act of 1974 (in relation to activities
under this Act),
303
Title I, Subtitle G
(C) may, with the permission of the Board,
provide (through contract or otherwise) for such
collection activities (in relation to amounts owed
to regional alliances and for the benefit of such
alliances), and
(D) may impose such civil penalties under
section 1345(d)(1),
as may be necessary to carry out such Secretary’s
responsibilities under this section.
(e) AUTHORITY.—The Secretary of Labor is author-
ized to issue such regulations as may be necessary to carry
out section 1607 and responsibilities of the Secretary
under this Act (including under title XI).
Subtitle G—Employer
Responsibilities
SEC. 1601. PAYMENT REQUIREMENT.
(a) IN GENERAL.—Each employer shall provide for
payments required under section 6121 or 6131 in accord-
ance with the applicable provisions of this Act.
(b) EMPLOYERS IN SINGLE-PAYER STATES.—In the
case of an employer with respect to employees who reside
in a single-payer State, the responsibilities of such em-
ployer under such system shall supersede the obligations
of the employer under subsection (a), except as the Board
may provide.
304
Title I, Subtitle G
(c) EMPLOYERS PARTICIPATING IN REGIONAL ALLI-
ANCES THROUGH MULTIEMPLOYER PLANS.—In the case
of an employer participating in a multiemployer plan,
which plan elects to serve as a regional alliance employer
on behalf of its participating employers, the employer’s
payment obligation under section 6121 shall be deemed
satisfied if the employer pays to the multiemployer plan
at least the premium payment amount specified in section
6121(b) and the plan has assumed legal obligations of
such an employer under such section.
SEC. 1602. REQUIREMENT FOR INFORMATION REPORTING.
(a) REPORTING OF END-OF-YEAR INFORMATION TO
QUALIFYING EMPLOYEES.—
(1) IN GENERAL.—Each employer shall provide
to each individual who was a qualifying employee of
the employer during any month in the previous year
information described in paragraph (2) with respect
to the employee.
(2) INFORMATION TO BE SUPPLIED.—The in-
formation described in this paragraph, with respect
to a qualifying employee, is the following (as speci-
fied by the Secretary):
(A) REGIONAL ALLIANCE INFORMATION.—
With respect to each regional alliance through
which the individual obtained health coverage:
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Title I, Subtitle G
(i) The total number of months of
full-time equivalent employment (as deter-
mined under section 1901(b)(2)) for each
class of enrollment.
(ii) The amount of wages attributable
to qualified employment and the amount of
covered wages (as defined in paragraph
(4)).
(iii) The total amount deducted from
wages and paid for the family share of the
premium.
(iv) Such other information as the
Secretary of Labor may specify.
(B) 
CORPORATE
ALLIANCE
INFORMA-
TION.—With respect to a qualifying employee
who obtains coverage through a corporate alli-
ance health plan:
(i) The total number of months of
full-time equivalent employees (as deter-
mined under section 1901(b)(2)) for each
class of enrollment.
(ii) Such other information as the
Secretary of Labor may specify.
(3) ALLIANCE SPECIFIC INFORMATION.—In the
case of a qualifying employee with respect to whom
306
Title I, Subtitle G
an employer made employer premium payments dur-
ing the year to more than one regional alliance, the
information under this subsection shall be reported
separately with respect to each such alliance.
(4) COVERED WAGES DEFINED.—In this sec-
tion, the term ‘‘covered wages’’ means wages paid an
employee of an employer during a month in which
the employee was a qualifying employee of the em-
ployer.
(b) REPORTING OF INFORMATION FOR USE OF RE-
GIONAL ALLIANCES.—
(1) IN
GENERAL.—Each employer (including
corporate alliance employers) shall provide under
subsection (f) on behalf of each regional alliance in-
formation described in paragraph (2) on an annual
basis, information described in paragraph (3) on a
monthly basis, and information described in para-
graph (4) on a one-time basis, with respect to the
employment of qualifying employees in each year,
month, or other time, respectively.
(2) INFORMATION TO BE SUPPLIED ON AN AN-
NUAL
BASIS.—The information described in this
paragraph, with respect to an employer, is the fol-
lowing (as specified by the Secretary of Labor):
307
Title I, Subtitle G
(A) REGIONAL ALLIANCE INFORMATION.—
With respect to each regional alliance to which
employer premium payments were payable in
the year:
(i) For each qualifying employee in
the year—
(I) The total number of months
of full-time equivalent employment (as
determined under section 1901(b)(2))
for the employee for each class of en-
rollment.
(II) The total amount deducted
from wages and paid for the family
share of the premium of the quali-
fying employee.
(ii) The total employer premium pay-
ment made under section 6121 for the
year with respect to the employment of all
qualifying employees residing in the alli-
ance area and, in the case of an employer
that has obtained (or seeks to obtain) a
premium discount under section 6123, the
total employer premium payment that
would have been owed for such employ-
ment for the year but for such section.
308
Title I, Subtitle G
(iii) The number of full-time equiva-
lent employees (determined under section
1901(b)(2)) for each class of family enroll-
ment in the year (and for each month in
the year in the case of an employer that
has obtained or is seeking a premium dis-
count under section 6123).
(iv) In the case of an employer to
which section 6124 applies in a year, such
additional information as the Secretary of
Labor may require for purposes of that
section.
(v) The amounts paid (and payable)
pursuant to section 6125.
(vi) The amount of covered wages for
each qualifying employee.
(3) INFORMATION ON A MONTHLY BASIS.—
(A) IN
GENERAL.—The information de-
scribed in this paragraph for a month for an
employer is such information as the Secretary
of Labor may specify regarding—
(i) the identity of each eligible indi-
vidual who changed qualifying employee
status with respect to the employer in the
month; and
309
Title I, Subtitle G
(ii) in the case of such an individual
described in subparagraph (B)(i)—
(I) the regional alliance for the
alliance area in which the individual
resides, and
(II) the individual’s class of fam-
ily enrollment.
(B) CHANGES IN QUALIFYING EMPLOYEE
STATUS DESCRIBED.—For purposes of subpara-
graph (A), an individual is considered to have
changed qualifying employee status in a month
if the individual either (i) is a qualifying em-
ployee of the employer in the month and was
not a qualifying employee of the employer in
the previous month, or (ii) is not a qualifying
employee of the employer in the month but was
a qualifying employee of the employer in the
previous month.
(4) INITIAL INFORMATION.—Each employer, at
such time before the first year in which qualifying
employees of the employer are enrolled in regional
alliance health plans as the Board may specify, shall
provide for the reporting of such information relat-
ing to employment of eligible individuals as the
Board may specify.
310
Title I, Subtitle G
(c) RECONCILIATION OF EMPLOYER PREMIUM PAY-
MENTS.—
(1) PROVISION
OF
INFORMATION.—Each em-
ployer (whether or not the employer claimed (or
claims) an employer premium discount under section
6123 for a year) that is liable for employer premium
payments to a regional alliance for any month in a
year shall provide the alliance with such information
as the alliance may require (consistent with rules of
the Secretary of Labor) to determine the appropriate
amount of employer premium payments that should
have been made for all months in the year (taking
into account any employer premium discount under
section 6123 for the employer).
(2) DEADLINE.—Such information shall be pro-
vided not later than the beginning of February of
the following year with the payment to be made for
that month.
(3) RECONCILIATION.—
(A) CONTINUING EMPLOYERS.—Based on
such information, the employer shall adjust the
amount of employer premium payment made in
the month in which the information is provided
to reflect the amount by which the payments in
the previous year were greater or less than the
311
Title I, Subtitle G
amount of payments that should have been
made.
(B) DISCONTINUING EMPLOYERS.—In the
case of a person that ceases to be an employer
in a year, such adjustment shall be made in the
form of a payment to, or from, the alliance in-
volved.
(4) SPECIAL TREATMENT OF SELF-EMPLOYED
INDIVIDUALS.—Except as the Secretary of Labor
may provide, individuals who are employers only by
virtue of the operation of section 6126 shall have
employer premium payments attributable to such
section reconciled (in the manner previously de-
scribed in this subsection) under the process for the
collection of the family share of premiums under sec-
tion 1344 rather than under this subsection.
(d) SPECIAL RULES FOR SELF-EMPLOYED.—
(1) IN GENERAL.—In the case of an individual
who is treated as an employer under section 6126,
the individual shall provide, under subsection (f) on
behalf of each regional alliance, information de-
scribed in paragraph (2) with respect to net earn-
ings from self-employment income of the individual
in each year.
312
Title I, Subtitle G
(2) INFORMATION TO BE SUPPLIED.—The in-
formation described in this paragraph, with respect
to an individual, is such information as may be nec-
essary to compute the amount payable under section
6131 by virtue of section 6126.
(e) FORM.—Information shall be provided under this
section in such electronic or other form as the Secretary
specifies. Such specifications shall be done in a manner
that, to the maximum extent practicable, simplifies admin-
istration for small employers.
(f) INFORMATION CLEARINGHOUSE FUNCTIONS.—
(1) DESIGNATION.—The Board shall provide
for the use of the regional centers (which are part
of the electronic data network under section 5103)
to perform information clearinghouse functions
under this section with respect to employers and re-
gional and corporate alliances.
(2) FUNCTIONS.—The functions referred to in
paragraph (1) shall include—
(A) receipt of information submitted by
employers under subsection (b) on an annual
(or one-time) basis,
(B) from the information received, trans-
mittal of information required to regional alli-
ances, and
313
Title I, Subtitle G
(C) such other functions as the Board
specifies.
(g) DEADLINE.—Information required to be provided
by an employer for a year under this section—
(1) to a qualifying employee shall be provided
not later than the date the employer is required
under law to provide for statements under section
6051 of the Internal Revenue Code of 1986 for that
year, or
(2) to a health alliance (through a regional cen-
ter) shall be provided not later than the date by
which information is required to be filed with the
Secretary pursuant to agreements under section 232
of the Social Security Act for that year.
(h) NOTICE TO CERTAIN INDIVIDUALS WHO ARE
NOT EMPLOYEES.—
(1) IN GENERAL.—A person that carries on a
trade or business shall notify in writing each indi-
vidual described in paragraph (2) that the person is
not obligated to make any employer health care pre-
mium payment (under section 6121) in relation to
the services performed by the individual for the per-
son.
(2) INDIVIDUAL DESCRIBED.—An individual de-
scribed in this paragraph, with respect to a person,
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Title I, Subtitle G
is an individual who normally performs services for
the person in the person’s trade or business for more
than 40 hours per month but who is not an em-
ployee of the person (within the meaning of section
1901(a)).
(3) TIMING; EFFECTIVE
DATE.—Such notice
shall be provided within a reasonable time after the
individual begins performing services for the person,
except that in no event is such a notice required to
be provided with respect to services performed before
January 1, 1998.
(4) EXCEPTIONS.—The Secretary shall issue
regulations providing exceptions to the notice re-
quirement of paragraph (1) with respect to individ-
uals performing services on an irregular, incidental,
or casual basis.
(5) MODEL NOTICE.—The Secretary shall pub-
lish a model notice that is easily understood by the
average reader and that persons may use to satisfy
the requirements of paragraph (1).
SEC. 1603. REQUIREMENTS RELATING TO NEW EMPLOYEES.
(a) COMPLETION
OF ENROLLMENT INFORMATION
FORM.—At the time an individual is hired as a qualifying
employee of a regional alliance employer, the employer
315
Title I, Subtitle G
shall obtain from the individual the following information
(pursuant to rules established by the Secretary of Labor):
(1) The identity of the individual.
(2) The individual’s alliance area of residence
and whether the individual has moved from another
alliance area.
(3) The class of family enrollment applicable to
the individual.
(4) The health plan (and health alliance) in
which the individual is enrolled at that time.
(5) If the individual has moved from another al-
liance area, whether the individual intends to enroll
in a regional alliance health plan.
(b) TRANSMITTAL OF INFORMATION TO ALLIANCE.—
(1) IN GENERAL.—Each employer shall trans-
mit the information obtained under subsection (a) to
the regional alliance for the alliance area in which
the qualifying employee resides (or will reside at the
time of initial employment).
(2) DEADLINE.—Such information shall be
transmitted within 30 days of the date of hiring of
the employee.
(3) FORM.—Information under this section may
be forwarded in electronic form to a regional alli-
ance.
316
Title I, Subtitle G
(c) PROVISION OF ENROLLMENT FORM AND INFOR-
MATION.—In the case of an individual described in sub-
section (a)(5), the employer shall provide the individual,
at the time of hiring, with—
(1) such information regarding the choice of,
and enrollment in, regional alliance health plans,
and
(2) such enrollment form,
as the regional alliance provides to the employer.
SEC. 1604. AUDITING OF RECORDS.
Each regional alliance employer shall maintain such
records, and provide the regional alliance for the area in
which the employer maintains the principal place of em-
ployment (as specified by the Secretary of Labor) with ac-
cess to such records, as may be necessary to verify and
audit the information reported under this subtitle.
SEC. 1605. PROHIBITION OF CERTAIN EMPLOYER DISCRIMI-
NATION.
No employer may discriminate with respect to an em-
ployee on the basis of the family status of the employee
or on the basis of the class of family enrollment selected
with respect to the employee.
317
Title I, Subtitle G
SEC. 1606. PROHIBITION ON SELF-FUNDING OF COST SHAR-
ING BENEFITS BY REGIONAL ALLIANCE EM-
PLOYERS.
(a) PROHIBITION.—A regional alliance employer (and
a corporate alliance employer with respect to employees
who are regional alliance eligible individuals) may provide
benefits to employees that consist of the benefits included
in a cost sharing policy (as defined in section 1421(b)(2))
only through a contribution toward the purchase of a cost
sharing policy which is funded primarily through insur-
ance.
(b) INDIVIDUAL
AND
EMPLOYER
RESPONSIBIL-
ITIES.—In the case of an individual who resides in a sin-
gle-payer State and an employer with respect to employees
who reside in such a State, the responsibilities of such in-
dividual and employer under such system shall supersede
the obligations of the individual and employer under this
subtitle.
SEC. 1607. EQUAL VOLUNTARY CONTRIBUTION REQUIRE-
MENT.
(a) IN GENERAL.—
(1) EQUAL
VOLUNTARY
EMPLOYER
PREMIUM
PAYMENT REQUIREMENT.—
(A) 
REGIONAL
ALLIANCE
HEALTH
PLANS.—If an employer makes available a vol-
untary employer premium payment (as defined
318
Title I, Subtitle G
in subsection (d)) on behalf of a full-time em-
ployee (as defined in section 1901(b)(2)(C))
who is enrolled in a regional alliance health
plan of a regional alliance in a class of family
enrollment, the employer shall make available
such a voluntary employer premium payment in
the same dollar amount to all qualifying em-
ployees (as defined in section 1901(b)(1)) of the
employer who are enrolled in any regional alli-
ance health plan of the same alliance in the
same class of family enrollment.
(B) 
CORPORATE
ALLIANCE
HEALTH
PLANS.—If a corporate alliance employer makes
available a voluntary employer premium pay-
ment on behalf of a full-time employee who is
enrolled in a corporate alliance health plan of a
corporate alliance in a class of family enroll-
ment in a premium area (designated under sec-
tion 1384(b)), the employer shall make avail-
able such a voluntary employer premium pay-
ment in the same dollar amount to all quali-
fying employees of the employer enrolled in any
corporate alliance health plan of the same alli-
ance in the same class of family enrollment in
the same premium area.
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Title I, Subtitle G
(C) TREATMENT OF PART-TIME EMPLOY-
EES.—In applying subparagraphs (A) and (B)
in the case of a qualifying employee employed
on a part-time basis (within the meaning of sec-
tion 1901(b)(2)(A)(ii)), the dollar amount shall
be equal to the full-time employment ratio (as
defined in section 1901(b)(2)(B)) multiplied by
the dollar amount otherwise required.
(2) LIMIT ON VOLUNTARY EMPLOYER PREMIUM
PAYMENTS.—
(A) 
REGIONAL
ALLIANCE
HEALTH
PLANS.—An employer may not make available a
voluntary employer premium payment on behalf
of an employee (enrolled in a regional alliance
health plan of a regional alliance in a class of
family enrollment) in an amount that exceeds
the maximum amount that could be payable as
the family share of premium (described in sec-
tion 6101(b)(2)) for the most expensive regional
alliance health plan of the same alliance for the
same class of family enrollment.
(B) 
CORPORATE
ALLIANCE
HEALTH
PLANS.—An employer may not make available a
voluntary employer premium payment on behalf
of an employee (enrolled in a corporate alliance
320
Title I, Subtitle G
health plan of a corporate alliance in a class of
family enrollment in a premium area, des-
ignated under section 1384) in an amount that
exceeds the maximum amount that could be
payable as the family share of premium (de-
scribed in section 6101(b)(3)) for the most ex-
pensive corporate alliance health plan of the
same alliance for the same class of family en-
rollment in the same premium area.
(C) EXCLUSION OF PLANS WITHOUT MA-
TERIAL
ENROLLMENT.—Subparagraphs 
(A)
and (B) shall not take into account any health
plan that does not have material enrollment (as
determined in accordance with regulations of
the Secretary of Labor).
(3) NONDISCRIMINATION
AMONG
PLANS
SE-
LECTED.—An employer may not discriminate in the
wages or compensation paid, or other terms or con-
ditions of employment, with respect to an employee
based on the health plan (or premium of such a
plan) in which the employee is enrolled.
(b) REBATE REQUIRED IN CERTAIN CASES.—
(1) IN
GENERAL.—Subject to subsection (c),
if—
321
Title I, Subtitle G
(A) an employer makes available a vol-
untary employer premium payment on behalf of
an employee, and
(B)(i) the sum of the amount of the appli-
cable alliance credit (under section 6103) and
the voluntary employer premium payment, ex-
ceeds (ii) the premium for the plan selected,
the employer must rebate to the employee an
amount equal to the excess described in subpara-
graph (B).
(2) REBATES.—
(A) IN
GENERAL.—Any rebate provided
under paragraph (1) shall be treated, for pur-
poses of the Internal Revenue Code of 1986, as
wages described in section 3121(a) of such Act.
(B) TREATMENT OF MULTIPLE FULL-TIME
EMPLOYMENT IN A FAMILY.—In the case of—
(i) an individual who is an employee
of more than one employer, or
(ii) a couple for which both spouses
are employees,
if more than one employer provides for vol-
untary employer premium payments, the indi-
vidual or couple may elect to have paragraph
(1) applied with respect to all employment.
322
Title I, Subtitle G
(c) EXCEPTION
FOR
COLLECTIVE
BARGAINING
AGREEMENT.—Subsections (a) and (b) (other than sub-
section (a)(2)) shall not apply with respect to voluntary
employer premium payments made pursuant to a bona
fide collective bargaining agreement.
(d) VOLUNTARY EMPLOYER PREMIUM PAYMENT.—
In this section, the term ‘‘voluntary employer premium
payment’’ means any payment designed to be used exclu-
sively (or primarily) towards the cost of the family share
of premiums for a health plan. Such term does not include
any employer premiums required to be paid under part
3 of subtitle B of title VI.
SEC. 1608. EMPLOYER RETIREE OBLIGATION.
(a) IN GENERAL.—If an employer was providing, as
of October 1, 1993, a threshold payment (specified in sub-
section (c)) for a person who was a qualifying retired bene-
ficiary (as defined in subsection (b)) as of such date, the
employer shall pay, to or on behalf of that beneficiary for
each month beginning with January 1998, an amount that
is not less than the amount specified in subsection (d),
but only if and for so long as the person remains a quali-
fying retired beneficiary.
(b) QUALIFYING RETIRED BENEFICIARY.—In this
section, the term ‘‘qualifying retired beneficiary’’ means
a person who is an eligible retiree or qualified spouse or
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Title I, Subtitle G
child (as such terms are defined in subsections (b) and
(c) of section 6114).
(c) THRESHOLD PAYMENT.—The term ‘‘threshold
payment’’ means, for an employer with respect to a health
benefit plan providing coverage to a qualifying retired ben-
eficiary, a payment—
(1) for coverage of any item or service described
in section 1101, and
(2) the amount of which is at least 20 percent
of the amount of the premium (or premium equiva-
lent) for such coverage with respect to the bene-
ficiary (and dependents).
(d) AMOUNT.—The amount specified in this sub-
section is 20 percent of the weighted average premium for
the regional alliance in which the beneficiary resides and
for the applicable class of family enrollment.
(e) NATURE OF OBLIGATION.—The requirement of
this section shall be in addition to any other requirement
imposed on an employer under this Act or otherwise.
(f) PROTECTION
OF
COLLECTIVE
BARGAINING
RIGHTS.—Nothing in this Act (including this section)
shall be construed as affecting collective bargaining rights
or rights under collective bargaining agreements.
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Title I, Subtitle G
SEC. 1609. ENFORCEMENT.
In the case of a person that violates a requirement
of this subtitle, the Secretary of Labor may impose a civil
money penalty, in an amount not to exceed $10,000, for
each violation with respect to each individual.
Subtitle J—General Definitions;
Miscellaneous Provisions
PART 1—GENERAL DEFINITIONS
SEC. 1901. DEFINITIONS RELATING TO EMPLOYMENT AND
INCOME.
(a) IN GENERAL.—Except as otherwise specifically
provided, in this Act the following definitions and rules
apply:
(1) EMPLOYER, EMPLOYEE, EMPLOYMENT, AND
WAGES
DEFINED.—Except as provided in this
section—
(A) the terms ‘‘wages’’ and ‘‘employment’’
have the meanings given such terms under sec-
tion 3121 of the Internal Revenue Code of
1986,
(B) the term ‘‘employee’’ has the meaning
given such term under section 3121 of such
Code, subject to the provisions of chapter 25 of
such Code, and
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Title I, Subtitle G
(C) the term ‘‘employer’’ has the same
meaning as the term ‘‘employer’’ as used in
such section 3121.
(2) EXCEPTIONS.—For purposes of paragraph
(1)—
(A) EMPLOYMENT.—
(i) EMPLOYMENT
INCLUDED.—Para-
graphs (1), (2), (5), (7) (other than
clauses (i) through (iv) of subparagraph
(C) and clauses (i) through (v) of subpara-
graph (F)), (8), (9), (10), (11), (13), (15),
(18), and (19) of section 3121(b) of the
Internal Revenue Code of 1986 shall not
apply.
(ii) EXCLUSION OF INMATES AS EM-
PLOYEES.—Employment shall not include
services performed in a penal institution by
an inmate thereof or in a hospital or other
health care institution by a patient thereof.
(B) WAGES.—
(i) IN
GENERAL.—Paragraph (1) of
section 3121(a) of the Internal Revenue
Code of 1986 shall not apply.
(ii) TIPS NOT INCLUDED.—The term
‘‘wages’’ does not include cash tips.
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Title I, Subtitle G
(C) EXCLUSION OF EMPLOYEES OUTSIDE
THE
UNITED
STATES.—The term ‘‘employee’’
does not include an individual who does not re-
side in the United States.
(D) EXCLUSION
OF
FOREIGN
EMPLOY-
MENT.—The term ‘‘employee’’ does not include
an individual—
(i) with respect to service, if the indi-
vidual is not a citizen or resident of the
United States and the service is performed
outside the United States, or
(ii) with respect to service, if the indi-
vidual is a citizen or resident of the United
States and the service is performed outside
the United States for an employer other
than an American employer (as defined in
section 3121(h) of the Internal Revenue
Code of 1986).
(3) AGGREGATION RULES FOR EMPLOYERS.—
For purposes of this Act—
(A) all employers treated as a single em-
ployer under subsection (a) or (b) of section 52
of the Internal Revenue Code of 1986 shall be
treated as a single employer, and
327
Title I, Subtitle G
(B) under regulations of the Secretary of
Labor, all employees of organizations which are
under common control with one or more organi-
zations which are exempt from income tax
under subtitle A of the Internal Revenue Code
of 1986 shall be treated as employed by a single
employer.
The regulations prescribed under subparagraph (B)
shall be based on principles similar to the principles
which apply to taxable organizations under subpara-
graph (A).
(4) EMPLOYER PREMIUM.—The term ‘‘employer
premium’’ refers to the premium established and im-
posed under part 2 of subtitle B of title VI.
(b) QUALIFYING EMPLOYEE; FULL-TIME EMPLOY-
MENT.—
(1) QUALIFYING EMPLOYEE.—
(A) IN GENERAL.—In this Act, the term
‘‘qualifying employee’’ means, with respect to
an employer for a month, an employee (other
than a covered child, as defined in subpara-
graph (C)) who is employed by the employer for
at least 40 hours (as determined under para-
graph (3)) in the month.
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Title I, Subtitle G
(B) NO
SPECIAL
TREATMENT
OF
MEDI-
CARE
BENEFICIARIES, SSI
RECIPIENTS, AFDC
RECIPIENTS, AND OTHERS.—Subparagraph (A)
shall apply regardless of whether or not the em-
ployee is a medicare-eligible individual, an SSI
recipient, an AFDC recipient, an individual de-
scribed in section 1004(b), an eligible individual
or is authorized to be so employed.
(C) COVERED CHILD DEFINED.—In sub-
paragraph (A), the term ‘‘covered child’’ means
an eligible individual who is a child and is en-
rolled under a health plan as a family member
described in section 1011(b)(2)(B).
(2) 
FULL-TIME
EQUIVALENT
EMPLOYEES;
PART-TIME EMPLOYEES.—
(A) IN GENERAL.—For purposes of this
Act, a qualifying employee who is employed by
an employer—
(i) for at least 120 hours in a month,
is counted as 1 full-time equivalent em-
ployee for the month and shall be deemed
to be employed on a full-time basis, or
(ii) for at least 40 hours, but less
than 120 hours, in a month, is counted as
a fraction of a full-time equivalent em-
329
Title I, Subtitle G
ployee in the month equal to the full-time
employment ratio (as defined in subpara-
graph (B)) for the employee and shall be
deemed to be employed on a part-time
basis.
(B) FULL-TIME EMPLOYMENT RATIO DE-
FINED.—For purposes of this Act, the term
‘‘full-time employment ratio’’ means, with re-
spect to a qualifying employee of an employer
in a month, the lesser of 1 or the ratio of—
(i) the number of hours of employ-
ment such employee is employed by such
employer for the month (as determined
under paragraph (3)), to
(ii) 120 hours.
(C) FULL-TIME EMPLOYEE.—For purposes
of this Act, the term ‘‘full-time employee’’
means, with respect to an employer, an em-
ployee who is employed on a full-time basis (as
specified in subparagraph (A)) by the employer.
(D) CONSIDERATION OF INDUSTRY PRAC-
TICE.—As provided under rules established by
the Board, an employee who is not described in
subparagraph (C) shall be considered to be em-
ployed on a full-time basis by an employer (and
1151
Title VII, Subtitle C
used in section 6662(d)(2)(B)(i); except that such
term shall not include any private letter ruling
issued to a person other than the taxpayer.
‘‘(2) SPECIAL RULES.—
‘‘(A) SUBSEQUENT AUTHORITY.—The tax-
payer shall not be considered to meet the safe
harbor requirement of paragraph (1)(B) with
respect to any individual for any period if the
treatment of such individual as not being an
employee is inconsistent with any regulation,
Revenue Ruling, Revenue Procedure, or other
authority published by the Secretary before the
beginning of such period and after the conclu-
sion of the audit referred to in paragraph
(1)(B).
‘‘(B) TERMINATION
OF
INDUSTRY
PRAC-
TICE SAFE HARBOR.—The taxpayer shall not be
considered to meet the safe harbor requirement
of paragraph (1)(C) with respect to any indi-
vidual for—
‘‘(i) any period beginning after the
date on which the Secretary prescribes reg-
ulations pursuant to section 3510, or
‘‘(ii) any period if the treatment of
such individual as not being an employee is