114 
providing benefits consisting of medical care for the 
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make 
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and 
such arrangement is licensed under the laws of one 
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 812(a)(5) of 
the Employee Retirement Income Security Act of 
1974 (as amended by this subtitle)) by the arrange-
ment of an application for certification of the ar-
rangement under part 8 of subtitle B of title I of 
such Act— 
(A) such arrangement shall be deemed to 
be a group health plan for purposes of title I 
of such Act; 
(B) the requirements of sections 801(a) 
and 803(a) of the Employee Retirement Income 
Security Act of 1974 shall be deemed met with 
respect to such arrangement; 
(C) the requirements of section 803(b) of 
such Act shall be deemed met, if the arrange-
ment is operated by a board of directors 
which— 
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115 
(i) is elected by the participating em-
ployers, with each employer having one 
vote; and 
(ii) has complete fiscal control over 
the arrangement and which is responsible 
for all operations of the arrangement; 
(D) the requirements of section 804(a) of 
such Act shall be deemed met with respect to 
such arrangement; and 
(E) the arrangement may be certified by 
any applicable authority with respect to its op-
erations in any State only if it operates in such 
State on the date of certification. 
The provisions of this subsection shall cease to apply 
with respect to any such arrangement at such time 
after the date of the enactment of this Act as the 
applicable requirements of this subsection are not 
met with respect to such arrangement. 
(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘‘group health plan’’, ‘‘medical 
care’’, and ‘‘participating employer’’ shall have the 
meanings provided in section 812 of the Employee 
Retirement Income Security Act of 1974, except 
that the reference in paragraph (7) of such section 
to an ‘‘association health plan’’ shall be deemed a 
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reference to an arrangement referred to in this sub-
section. 
TITLE II—TARGETED EFFORTS 
TO EXPAND ACCESS 
SEC. 211. EXTENDING COVERAGE OF DEPENDENTS. 
(a) EMPLOYEE RETIREMENT INCOME SECURITY ACT 
OF 1974.— 
(1) IN GENERAL.—Part 7 of subtitle B of title 
I of the Employee Retirement Income Security Act 
of 1974 is amended by inserting after section 2714 
the following new section: 
‘‘SEC. 715. EXTENDING COVERAGE OF DEPENDENTS. 
‘‘(a) IN GENERAL.—In the case of a group health 
plan, or health insurance coverage offered in connection 
with a group health plan, that treats as a beneficiary 
under the plan an individual who is a dependent child of 
a participant or beneficiary under the plan, the plan or 
coverage shall continue to treat the individual as a depend-
ent child without regard to the individual’s age through 
at least the end of the plan year in which the individual 
turns an age specified in the plan, but not less than 25 
years of age. 
‘‘(b) CONSTRUCTION.—Nothing in this section shall 
be construed as requiring a group health plan to provide 
benefits for dependent children as beneficiaries under the 
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117 
plan or to require a participant to elect coverage of de-
pendent children.’’. 
(2) CLERICAL AMENDMENT.—The table of con-
tents of such Act is amended by inserting after the 
item relating to section 714 the following new item: 
‘‘Sec. 715. Extending coverage of dependents through plan year that includes 
25th birthday.’’. 
(b) PHSA.—Title XXVII of the Public Health Serv-
ice Act is amended by inserting after section 2707 the fol-
lowing new section: 
‘‘SEC. 2708. EXTENDING COVERAGE OF DEPENDENTS. 
‘‘(a) IN GENERAL.—In the case of a group health 
plan, or health insurance coverage offered in connection 
with a group health plan, that treats as a beneficiary 
under the plan an individual who is a dependent child of 
a participant or beneficiary under the plan, the plan or 
coverage shall continue to treat the individual as a depend-
ent child without regard to the individual’s age through 
at least the end of the plan year in which the individual 
turns an age specified in the plan, but not less than 25 
years of age. 
‘‘(b) CONSTRUCTION.—Nothing in this section shall 
be construed as requiring a group health plan to provide 
benefits for dependent children as beneficiaries under the 
plan or to require a participant to elect coverage of de-
pendent children.’’. 
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118 
(c) IRC.— 
(1) IN
GENERAL.—Subchapter B of chapter 
100 of the Internal Revenue Code of 1986 is amend-
ed by adding at the end the following new section: 
‘‘SEC. 9814. EXTENDING COVERAGE OF DEPENDENTS. 
‘‘(a) IN GENERAL.—In the case of a group health 
plan that treats as a beneficiary under the plan an indi-
vidual who is a dependent child of a participant or bene-
ficiary under the plan, the plan shall continue to treat the 
individual as a dependent child without regard to the indi-
vidual’s age through at least the end of the plan year in 
which the individual turns an age specified in the plan, 
but not less than 25 years of age. 
‘‘(b) CONSTRUCTION.—Nothing in this section shall 
be construed as requiring a group health plan to provide 
coverage for dependent children as beneficiaries under the 
plan or to require a participant to elect coverage of de-
pendent children.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions in such subchapter is amended by adding at 
the end the following new item: 
‘‘Sec. 9814. Extending coverage of dependents through plan year that includes 
25th birthday.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to group health plans for each plan 
year beginning more than 3 months after the date of the 
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119 
enactment of this Act and shall apply to individuals who 
are dependent children under a group health plan, or 
health insurance coverage offered in connection with such 
a plan, on or after such date. 
SEC. 212. ALLOWING AUTO-ENROLLMENT FOR EMPLOYER 
SPONSORED COVERAGE. 
(a) IN GENERAL.—No State shall establish a law 
that prevents an employer from instituting auto-enroll-
ment for coverage of a participant or beneficiary, including 
current employees, under a group health plan, or health 
insurance coverage offered in connection with such a plan, 
so long as the participant or beneficiary has the option 
of declining such coverage. 
(b) AUTO-ENROLLMENT.— 
(1) NOTICE REQUIRED.—Employers with auto- 
enrollment under a group health plan or health in-
surance coverage shall provide annual notification, 
within a reasonable period before the beginning of 
each plan year, to each employee eligible to partici-
pate in the plan. The notice shall explain the em-
ployee contribution to such plan and the employee’s 
right to decline coverage. 
(2) TREATMENT OF NON-ACTION.—After a rea-
sonable period of time after receipt of the notice, if 
an employee fails to make an affirmative declaration 
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120 
declining coverage, then such an employee may be 
enrolled in the group health plan or health insurance 
coverage offered in connection with such a plan.’’ 
(c) CONSTRUCTION.—Nothing in this section shall be 
construed to supersede State law which establishes, imple-
ments, or continues in effect any standard or requirement 
relating to employers in connection with payroll or the 
sponsoring of employer sponsored health insurance cov-
erage except to the extent that such standard or require-
ment prevents an employer from instituting the auto-en-
rollment described in subsection (a). 
TITLE III—EXPANDING CHOICES 
BY ALLOWING AMERICANS TO 
BUY 
HEALTH 
CARE 
COV-
ERAGE ACROSS STATE LINES 
SEC. 221. INTERSTATE PURCHASING OF HEALTH INSUR-
ANCE. 
(a) IN GENERAL.—Title XXVII of the Public Health 
Service Act (42 U.S.C. 300gg et seq.) is amended by add-
ing at the end the following new part: 
‘‘PART D—COOPERATIVE GOVERNING OF 
INDIVIDUAL HEALTH INSURANCE COVERAGE 
‘‘SEC. 2795. DEFINITIONS. 
‘‘In this part: 
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121 
‘‘(1) PRIMARY
STATE.—The term ‘primary 
State’ means, with respect to individual health insur-
ance coverage offered by a health insurance issuer, 
the State designated by the issuer as the State 
whose covered laws shall govern the health insurance 
issuer in the sale of such coverage under this part. 
An issuer, with respect to a particular policy, may 
only designate one such State as its primary State 
with respect to all such coverage it offers. Such an 
issuer may not change the designated primary State 
with respect to individual health insurance coverage 
once the policy is issued, except that such a change 
may be made upon renewal of the policy. With re-
spect to such designated State, the issuer is deemed 
to be doing business in that State. 
‘‘(2) SECONDARY STATE.—The term ‘secondary 
State’ means, with respect to individual health insur-
ance coverage offered by a health insurance issuer, 
any State that is not the primary State. In the case 
of a health insurance issuer that is selling a policy 
in, or to a resident of, a secondary State, the issuer 
is deemed to be doing business in that secondary 
State. 
‘‘(3) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning given such 
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122 
term in section 2791(b)(2), except that such an 
issuer must be licensed in the primary State and be 
qualified to sell individual health insurance coverage 
in that State. 
‘‘(4) INDIVIDUAL
HEALTH
INSURANCE
COV-
ERAGE.—The term ‘individual health insurance cov-
erage’ means health insurance coverage offered in 
the individual market, as defined in section 
2791(e)(1). 
‘‘(5) APPLICABLE
STATE
AUTHORITY.—The 
term ‘applicable State authority’ means, with respect 
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of 
this title for the State with respect to the issuer. 
‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 
term ‘hazardous financial condition’ means that, 
based on its present or reasonably anticipated finan-
cial condition, a health insurance issuer is unlikely 
to be able— 
‘‘(A) to meet obligations to policyholders 
with respect to known claims and reasonably 
anticipated claims; or 
‘‘(B) to pay other obligations in the normal 
course of business. 
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123 
‘‘(7) COVERED LAWS.— 
‘‘(A) IN
GENERAL.—The term ‘covered 
laws’ means the laws, rules, regulations, agree-
ments, and orders governing the insurance busi-
ness pertaining to— 
‘‘(i) individual health insurance cov-
erage issued by a health insurance issuer; 
‘‘(ii) the offer, sale, rating (including 
medical 
underwriting), 
renewal, 
and 
issuance of individual health insurance cov-
erage to an individual; 
‘‘(iii) the provision to an individual in 
relation to individual health insurance cov-
erage of health care and insurance related 
services; 
‘‘(iv) the provision to an individual in 
relation to individual health insurance cov-
erage of management, operations, and in-
vestment activities of a health insurance 
issuer; and 
‘‘(v) the provision to an individual in 
relation to individual health insurance cov-
erage of loss control and claims adminis-
tration for a health insurance issuer with 
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124 
respect to liability for which the issuer pro-
vides insurance. 
‘‘(B) EXCEPTION.—Such term does not in-
clude any law, rule, regulation, agreement, or 
order governing the use of care or cost manage-
ment techniques, including any requirement re-
lated to provider contracting, network access or 
adequacy, health care data collection, or quality 
assurance. 
‘‘(8) STATE.—The term ‘State’ means the 50 
States and includes the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, 
and the Northern Mariana Islands. 
‘‘(9) UNFAIR
CLAIMS
SETTLEMENT
PRAC-
TICES.—The term ‘unfair claims settlement prac-
tices’ means only the following practices: 
‘‘(A) Knowingly misrepresenting to claim-
ants and insured individuals relevant facts or 
policy provisions relating to coverage at issue. 
‘‘(B) Failing to acknowledge with reason-
able promptness pertinent communications with 
respect to claims arising under policies. 
‘‘(C) Failing to adopt and implement rea-
sonable standards for the prompt investigation 
and settlement of claims arising under policies. 
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125 
‘‘(D) Failing to effectuate prompt, fair, 
and equitable settlement of claims submitted in 
which liability has become reasonably clear. 
‘‘(E) Refusing to pay claims without con-
ducting a reasonable investigation. 
‘‘(F) Failing to affirm or deny coverage of 
claims within a reasonable period of time after 
having completed an investigation related to 
those claims. 
‘‘(G) A pattern or practice of compelling 
insured individuals or their beneficiaries to in-
stitute suits to recover amounts due under its 
policies by offering substantially less than the 
amounts ultimately recovered in suits brought 
by them. 
‘‘(H) A pattern or practice of attempting 
to settle or settling claims for less than the 
amount that a reasonable person would believe 
the insured individual or his or her beneficiary 
was entitled by reference to written or printed 
advertising material accompanying or made 
part of an application. 
‘‘(I) Attempting to settle or settling claims 
on the basis of an application that was materi-
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126 
ally altered without notice to, or knowledge or 
consent of, the insured. 
‘‘(J) Failing to provide forms necessary to 
present claims within 15 calendar days of a re-
quests with reasonable explanations regarding 
their use. 
‘‘(K) Attempting to cancel a policy in less 
time than that prescribed in the policy or by the 
law of the primary State. 
‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 
and abuse’ means an act or omission committed by 
a person who, knowingly and with intent to defraud, 
commits, or conceals any material information con-
cerning, one or more of the following: 
‘‘(A) Presenting, causing to be presented 
or preparing with knowledge or belief that it 
will be presented to or by an insurer, a rein-
surer, broker or its agent, false information as 
part of, in support of or concerning a fact ma-
terial to one or more of the following: 
‘‘(i) An application for the issuance or 
renewal of an insurance policy or reinsur-
ance contract. 
‘‘(ii) The rating of an insurance policy 
or reinsurance contract. 
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127 
‘‘(iii) A claim for payment or benefit 
pursuant to an insurance policy or reinsur-
ance contract. 
‘‘(iv) Premiums paid on an insurance 
policy or reinsurance contract. 
‘‘(v) Payments made in accordance 
with the terms of an insurance policy or 
reinsurance contract. 
‘‘(vi) A document filed with the com-
missioner or the chief insurance regulatory 
official of another jurisdiction. 
‘‘(vii) The financial condition of an in-
surer or reinsurer. 
‘‘(viii) The formation, acquisition, 
merger, 
reconsolidation, 
dissolution 
or 
withdrawal from one or more lines of in-
surance or reinsurance in all or part of a 
State by an insurer or reinsurer. 
‘‘(ix) The issuance of written evidence 
of insurance. 
‘‘(x) The reinstatement of an insur-
ance policy. 
‘‘(B) Solicitation or acceptance of new or 
renewal insurance risks on behalf of an insurer 
reinsurer or other person engaged in the busi-
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128 
ness of insurance by a person who knows or 
should know that the insurer or other person 
responsible for the risk is insolvent at the time 
of the transaction. 
‘‘(C) Transaction of the business of insur-
ance in violation of laws requiring a license, cer-
tificate of authority or other legal authority for 
the transaction of the business of insurance. 
‘‘(D) Attempt to commit, aiding or abet-
ting in the commission of, or conspiracy to com-
mit the acts or omissions specified in this para-
graph. 
‘‘SEC. 2796. APPLICATION OF LAW. 
‘‘(a) IN GENERAL.—The covered laws of the primary 
State shall apply to individual health insurance coverage 
offered by a health insurance issuer in the primary State 
and in any secondary State, but only if the coverage and 
issuer comply with the conditions of this section with re-
spect to the offering of coverage in any secondary State. 
‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC-
ONDARY STATE.—Except as provided in this section, a 
health insurance issuer with respect to its offer, sale, rat-
ing (including medical underwriting), renewal, and 
issuance of individual health insurance coverage in any 
secondary State is exempt from any covered laws of the 
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129 
secondary State (and any rules, regulations, agreements, 
or orders sought or issued by such State under or related 
to such covered laws) to the extent that such laws would— 
‘‘(1) make unlawful, or regulate, directly or in-
directly, the operation of the health insurance issuer 
operating in the secondary State, except that any 
secondary State may require such an issuer— 
‘‘(A) to pay, on a nondiscriminatory basis, 
applicable premium and other taxes (including 
high risk pool assessments) which are levied on 
insurers and surplus lines insurers, brokers, or 
policyholders under the laws of the State; 
‘‘(B) to register with and designate the 
State insurance commissioner as its agent solely 
for the purpose of receiving service of legal doc-
uments or process; 
‘‘(C) to submit to an examination of its fi-
nancial condition by the State insurance com-
missioner in any State in which the issuer is 
doing business to determine the issuer’s finan-
cial condition, if— 
‘‘(i) the State insurance commissioner 
of the primary State has not done an ex-
amination within the period recommended 
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130 
by the National Association of Insurance 
Commissioners; and 
‘‘(ii) any such examination is con-
ducted in accordance with the examiners’ 
handbook of the National Association of 
Insurance Commissioners and is coordi-
nated to avoid unjustified duplication and 
unjustified repetition; 
‘‘(D) to comply with a lawful order 
issued— 
‘‘(i) in a delinquency proceeding com-
menced by the State insurance commis-
sioner if there has been a finding of finan-
cial impairment under subparagraph (C); 
or 
‘‘(ii) in a voluntary dissolution pro-
ceeding; 
‘‘(E) to comply with an injunction issued 
by a court of competent jurisdiction, upon a pe-
tition by the State insurance commissioner al-
leging that the issuer is in hazardous financial 
condition; 
‘‘(F) to participate, on a nondiscriminatory 
basis, in any insurance insolvency guaranty as-
sociation or similar association to which a 
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131 
health insurance issuer in the State is required 
to belong; 
‘‘(G) to comply with any State law regard-
ing fraud and abuse (as defined in section 
2795(10)), except that if the State seeks an in-
junction regarding the conduct described in this 
subparagraph, such injunction must be obtained 
from a court of competent jurisdiction; 
‘‘(H) to comply with any State law regard-
ing unfair claims settlement practices (as de-
fined in section 2795(9)); or 
‘‘(I) to comply with the applicable require-
ments for independent review under section 
2798 with respect to coverage offered in the 
State; 
‘‘(2) require any individual health insurance 
coverage issued by the issuer to be countersigned by 
an insurance agent or broker residing in that Sec-
ondary State; or 
‘‘(3) otherwise discriminate against the issuer 
issuing insurance in both the primary State and in 
any secondary State. 
‘‘(c) CLEAR
AND CONSPICUOUS DISCLOSURE.—A 
health insurance issuer shall provide the following notice, 
in 12-point bold type, in any insurance coverage offered 
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132 
in a secondary State under this part by such a health in-
surance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the 
name of the health insurance issuer, the name of primary 
State, the name of the secondary State, the name of the 
secondary State, and the name of the secondary State, re-
spectively, for the coverage concerned: 
THIS POLICY IS ISSUED BY lllll AND 
IS GOVERNED BY THE LAWS AND REGULA-
TIONS OF THE STATE OF lllll, AND IT 
HAS MET ALL THE LAWS OF THAT STATE 
AS DETERMINED BY THAT STATE’S DE-
PARTMENT OF INSURANCE. THIS POLICY 
MAY BE LESS EXPENSIVE THAN OTHERS 
BECAUSE IT IS NOT SUBJECT TO ALL OF 
THE INSURANCE LAWS AND REGULATIONS 
OF THE STATE OF lllll, INCLUDING 
COVERAGE OF SOME SERVICES OR BENE-
FITS MANDATED BY THE LAW OF THE 
STATE OF lllll. ADDITIONALLY, THIS 
POLICY IS NOT SUBJECT TO ALL OF THE 
CONSUMER PROTECTION LAWS OR RE-
STRICTIONS ON RATE CHANGES OF THE 
STATE OF lllll. AS WITH ALL INSUR-
ANCE PRODUCTS, BEFORE PURCHASING 
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133 
THIS POLICY, YOU SHOULD CAREFULLY 
REVIEW THE POLICY AND DETERMINE 
WHAT HEALTH CARE SERVICES THE POL-
ICY COVERS AND WHAT BENEFITS IT PRO-
VIDES, INCLUDING ANY EXCLUSIONS, LIM-
ITATIONS, OR CONDITIONS FOR SUCH 
SERVICES OR BENEFITS.’’. 
‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS 
AND PREMIUM INCREASES.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, a health insurance issuer that provides indi-
vidual health insurance coverage to an individual 
under this part in a primary or secondary State may 
not upon renewal— 
‘‘(A) move or reclassify the individual in-
sured under the health insurance coverage from 
the class such individual is in at the time of 
issue of the contract based on the health-status 
related factors of the individual; or 
‘‘(B) increase the premiums assessed the 
individual for such coverage based on a health 
status-related factor or change of a health sta-
tus-related factor or the past or prospective 
claim experience of the insured individual. 
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134 
‘‘(2) CONSTRUCTION.—Nothing in paragraph 
(1) shall be construed to prohibit a health insurance 
issuer— 
‘‘(A) from terminating or discontinuing 
coverage or a class of coverage in accordance 
with subsections (b) and (c) of section 2742; 
‘‘(B) from raising premium rates for all 
policy holders within a class based on claims ex-
perience; 
‘‘(C) from changing premiums or offering 
discounted premiums to individuals who engage 
in wellness activities at intervals prescribed by 
the issuer, if such premium changes or incen-
tives— 
‘‘(i) are disclosed to the consumer in 
the insurance contract; 
‘‘(ii) are based on specific wellness ac-
tivities that are not applicable to all indi-
viduals; and 
‘‘(iii) are not obtainable by all individ-
uals to whom coverage is offered; 
‘‘(D) from reinstating lapsed coverage; or 
‘‘(E) from retroactively adjusting the rates 
charged an insured individual if the initial rates 
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135 
were set based on material misrepresentation by 
the individual at the time of issue. 
‘‘(e) PRIOR OFFERING
OF POLICY
IN PRIMARY 
STATE.—A health insurance issuer may not offer for sale 
individual health insurance coverage in a secondary State 
unless that coverage is currently offered for sale in the 
primary State. 
‘‘(f) LICENSING
OF AGENTS
OR BROKERS
FOR 
HEALTH INSURANCE ISSUERS.—Any State may require 
that a person acting, or offering to act, as an agent or 
broker for a health insurance issuer with respect to the 
offering of individual health insurance coverage obtain a 
license from that State, with commissions or other com-
pensation subject to the provisions of the laws of that 
State, except that a State may not impose any qualifica-
tion or requirement which discriminates against a non-
resident agent or broker. 
‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN-
SURANCE COMMISSIONER.—Each health insurance issuer 
issuing individual health insurance coverage in both pri-
mary and secondary States shall submit— 
‘‘(1) to the insurance commissioner of each 
State in which it intends to offer such coverage, be-
fore it may offer individual health insurance cov-
erage in such State— 
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136 
‘‘(A) a copy of the plan of operation or fea-
sibility study or any similar statement of the 
policy being offered and its coverage (which 
shall include the name of its primary State and 
its principal place of business); 
‘‘(B) written notice of any change in its 
designation of its primary State; and 
‘‘(C) written notice from the issuer of the 
issuer’s compliance with all the laws of the pri-
mary State; and 
‘‘(2) to the insurance commissioner of each sec-
ondary State in which it offers individual health in-
surance coverage, a copy of the issuer’s quarterly fi-
nancial statement submitted to the primary State, 
which statement shall be certified by an independent 
public accountant and contain a statement of opin-
ion on loss and loss adjustment expense reserves 
made by— 
‘‘(A) a member of the American Academy 
of Actuaries; or 
‘‘(B) a qualified loss reserve specialist. 
‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 
Nothing in this section shall be construed to affect the 
authority of any Federal or State court to enjoin— 
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‘‘(1) the solicitation or sale of individual health 
insurance coverage by a health insurance issuer to 
any person or group who is not eligible for such in-
surance; or 
‘‘(2) the solicitation or sale of individual health 
insurance coverage that violates the requirements of 
the law of a secondary State which are described in 
subparagraphs 
(A) 
through 
(H) 
of 
section 
2796(b)(1). 
‘‘(i) POWER OF SECONDARY STATES TO TAKE AD-
MINISTRATIVE ACTION.—Nothing in this section shall be 
construed to affect the authority of any State to enjoin 
conduct in violation of that State’s laws described in sec-
tion 2796(b)(1). 
‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.— 
‘‘(1) IN GENERAL.—Subject to the provisions of 
subsection (b)(1)(G) (relating to injunctions) and 
paragraph (2), nothing in this section shall be con-
strued to affect the authority of any State to make 
use of any of its powers to enforce the laws of such 
State with respect to which a health insurance issuer 
is not exempt under subsection (b). 
‘‘(2) COURTS OF COMPETENT JURISDICTION.— 
If a State seeks an injunction regarding the conduct 
described in paragraphs (1) and (2) of subsection 
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138 
(h), such injunction must be obtained from a Fed-
eral or State court of competent jurisdiction. 
‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 
section shall affect the authority of any State to bring ac-
tion in any Federal or State court. 
‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in 
this section shall be construed to affect the applicability 
of State laws generally applicable to persons or corpora-
tions. 
‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO 
HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 
health insurance issuer is offering coverage in a primary 
State that does not accommodate residents of secondary 
States or does not provide a working mechanism for resi-
dents of a secondary State, and the issuer is offering cov-
erage under this part in such secondary State which has 
not adopted a qualified high risk pool as its acceptable 
alternative mechanism (as defined in section 2744(c)(2)), 
the issuer shall, with respect to any individual health in-
surance coverage offered in a secondary State under this 
part, comply with the guaranteed availability requirements 
for eligible individuals in section 2741. 
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139 
‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 
BEFORE ISSUER MAY SELL INTO SECONDARY 
STATES. 
‘‘A health insurance issuer may not offer, sell, or 
issue individual health insurance coverage in a secondary 
State if the State insurance commissioner does not use 
a risk-based capital formula for the determination of cap-
ital and surplus requirements for all health insurance 
issuers. 
‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE-
DURES. 
‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur-
ance issuer may not offer, sell, or issue individual health 
insurance coverage in a secondary State under the provi-
sions of this title unless— 
‘‘(1) both the secondary State and the primary 
State have legislation or regulations in place estab-
lishing an independent review process for individuals 
who are covered by individual health insurance cov-
erage, or 
‘‘(2) in any case in which the requirements of 
subparagraph (A) are not met with respect to the ei-
ther of such States, the issuer provides an inde-
pendent review mechanism substantially identical (as 
determined by the applicable State authority of such 
State) to that prescribed in the ‘Health Carrier Ex-
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ternal Review Model Act’ of the National Association 
of Insurance Commissioners for all individuals who 
purchase insurance coverage under the terms of this 
part, except that, under such mechanism, the review 
is conducted by an independent medical reviewer, or 
a panel of such reviewers, with respect to whom the 
requirements of subsection (b) are met. 
‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL 
REVIEWERS.—In the case of any independent review 
mechanism referred to in subsection (a)(2)— 
‘‘(1) IN GENERAL.—In referring a denial of a 
claim to an independent medical reviewer, or to any 
panel of such reviewers, to conduct independent 
medical review, the issuer shall ensure that— 
‘‘(A) each independent medical reviewer 
meets the qualifications described in paragraphs 
(2) and (3); 
‘‘(B) with respect to each review, each re-
viewer meets the requirements of paragraph (4) 
and the reviewer, or at least 1 reviewer on the 
panel, meets the requirements described in 
paragraph (5); and 
‘‘(C) compensation provided by the issuer 
to each reviewer is consistent with paragraph 
(6). 
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‘‘(2) LICENSURE AND EXPERTISE.—Each inde-
pendent medical reviewer shall be a physician 
(allopathic or osteopathic) or health care profes-
sional who— 
‘‘(A) is appropriately credentialed or li-
censed in 1 or more States to deliver health 
care services; and 
‘‘(B) typically treats the condition, makes 
the diagnosis, or provides the type of treatment 
under review. 
‘‘(3) INDEPENDENCE.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each independent medical reviewer 
in a case shall— 
‘‘(i) not be a related party (as defined 
in paragraph (7)); 
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with 
such a party; and 
‘‘(iii) not otherwise have a conflict of 
interest with such a party (as determined 
under regulations). 
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to— 
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‘‘(i) prohibit an individual, solely on 
the basis of affiliation with the issuer, 
from serving as an independent medical re-
viewer if— 
‘‘(I) a non-affiliated individual is 
not reasonably available; 
‘‘(II) the affiliated individual is 
not involved in the provision of items 
or services in the case under review; 
‘‘(III) the fact of such an affili-
ation is disclosed to the issuer and the 
enrollee (or authorized representative) 
and neither party objects; and 
‘‘(IV) the affiliated individual is 
not an employee of the issuer and 
does not provide services exclusively or 
primarily to or on behalf of the issuer; 
‘‘(ii) prohibit an individual who has 
staff privileges at the institution where the 
treatment involved takes place from serv-
ing as an independent medical reviewer 
merely on the basis of such affiliation if 
the affiliation is disclosed to the issuer and 
the enrollee (or authorized representative), 
and neither party objects; or 
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143 
‘‘(iii) prohibit receipt of compensation 
by an independent medical reviewer from 
an entity if the compensation is provided 
consistent with paragraph (6). 
‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL 
IN SAME FIELD.— 
‘‘(A) IN
GENERAL.—In a case involving 
treatment, or the provision of items or serv-
ices— 
‘‘(i) by a physician, a reviewer shall be 
a practicing physician (allopathic or osteo-
pathic) of the same or similar specialty, as 
a physician who, acting within the appro-
priate scope of practice within the State in 
which the service is provided or rendered, 
typically treats the condition, makes the 
diagnosis, or provides the type of treat-
ment under review; or 
‘‘(ii) by a non-physician health care 
professional, the reviewer, or at least 1 
member of the review panel, shall be a 
practicing non-physician health care pro-
fessional of the same or similar specialty 
as the non-physician health care profes-
sional who, acting within the appropriate 
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144 
scope of practice within the State in which 
the service is provided or rendered, typi-
cally treats the condition, makes the diag-
nosis, or provides the type of treatment 
under review. 
‘‘(B) PRACTICING
DEFINED.—For pur-
poses of this paragraph, the term ‘practicing’ 
means, with respect to an individual who is a 
physician or other health care professional, that 
the individual provides health care services to 
individual patients on average at least 2 days 
per week. 
‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 
external review relating to a child, a reviewer shall 
have expertise under paragraph (2) in pediatrics. 
‘‘(6) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by the issuer to an 
independent medical reviewer in connection with a 
review under this section shall— 
‘‘(A) not exceed a reasonable level; and 
‘‘(B) not be contingent on the decision ren-
dered by the reviewer. 
‘‘(7) RELATED PARTY DEFINED.—For purposes 
of this section, the term ‘related party’ means, with 
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respect to a denial of a claim under a coverage relat-
ing to an enrollee, any of the following: 
‘‘(A) The issuer involved, or any fiduciary, 
officer, director, or employee of the issuer. 
‘‘(B) The enrollee (or authorized represent-
ative). 
‘‘(C) The health care professional that pro-
vides the items or services involved in the de-
nial. 
‘‘(D) The institution at which the items or 
services (or treatment) involved in the denial 
are provided. 
‘‘(E) The manufacturer of any drug or 
other item that is included in the items or serv-
ices involved in the denial. 
‘‘(F) Any other party determined under 
any regulations to have a substantial interest in 
the denial involved. 
‘‘(8) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) ENROLLEE.—The term ‘enrollee’ 
means, with respect to health insurance cov-
erage offered by a health insurance issuer, an 
individual enrolled with the issuer to receive 
such coverage. 
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146 
‘‘(B) HEALTH CARE PROFESSIONAL.—The 
term ‘health care professional’ means an indi-
vidual who is licensed, accredited, or certified 
under State law to provide specified health care 
services and who is operating within the scope 
of such licensure, accreditation, or certification. 
‘‘SEC. 2799. ENFORCEMENT. 
‘‘(a) IN GENERAL.—Subject to subsection (b), with 
respect to specific individual health insurance coverage the 
primary State for such coverage has sole jurisdiction to 
enforce the primary State’s covered laws in the primary 
State and any secondary State. 
‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 
subsection (a) shall be construed to affect the authority 
of a secondary State to enforce its laws as set forth in 
the exception specified in section 2796(b)(1). 
‘‘(c) COURT INTERPRETATION.—In reviewing action 
initiated by the applicable secondary State authority, the 
court of competent jurisdiction shall apply the covered 
laws of the primary State. 
‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 
of individual health insurance coverage offered in a sec-
ondary State that fails to comply with the covered laws 
of the primary State, the applicable State authority of the 
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147 
secondary State may notify the applicable State authority 
of the primary State.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to individual health insurance 
coverage offered, issued, or sold after the date that is one 
year after the date of the enactment of this Act. 
(c) GAO ONGOING STUDY AND REPORTS.— 
(1) STUDY.—The Comptroller General of the 
United States shall conduct an ongoing study con-
cerning the effect of the amendment made by sub-
section (a) on— 
(A) the number of uninsured and under-in-
sured; 
(B) the availability and cost of health in-
surance policies for individuals with preexisting 
medical conditions; 
(C) the availability and cost of health in-
surance policies generally; 
(D) the elimination or reduction of dif-
ferent types of benefits under health insurance 
policies offered in different States; and 
(E) cases of fraud or abuse relating to 
health insurance coverage offered under such 
amendment and the resolution of such cases. 
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(2) ANNUAL REPORTS.—The Comptroller Gen-
eral shall submit to Congress an annual report, after 
the end of each of the 5 years following the effective 
date of the amendment made by subsection (a), on 
the ongoing study conducted under paragraph (1). 
TITLE IV—IMPROVING HEALTH 
SAVINGS ACCOUNTS 
SEC. 
231. 
SAVER’S 
CREDIT 
FOR 
CONTRIBUTIONS 
TO 
HEALTH SAVINGS ACCOUNTS. 
(a) ALLOWANCE OF CREDIT.—Subsection (a) of sec-
tion 25B of the Internal Revenue Code of 1986 is amend-
ed by inserting ‘‘aggregate qualified HSA contributions 
and’’ after ‘‘so much of the’’. 
(b) QUALIFIED HSA CONTRIBUTIONS.—Subsection 
(d) of section 25B of such Code is amended by redesig-
nating paragraph (2) as paragraph (3) and by inserting 
after paragraph (1) the following new paragraph: 
‘‘(2) QUALIFIED
HSA
CONTRIBUTIONS.—The 
term ‘qualified HSA contribution’ means, with re-
spect to any taxable year, a contribution of the eligi-
ble individual to a health savings account (as defined 
in section 223(d)(1)) for which a deduction is allow-
able under section 223(a) for such taxable year.’’. 
(c) CONFORMING AMENDMENT.—The first sentence 
of section 25B(d)(3)(A) of such Code (as redesignated by 
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149 
subsection (b)) is amended to read as follows: ‘‘The aggre-
gate qualified retirement savings contributions determined 
under paragraph (1) and qualified HSA contributions de-
termined under paragraph (2) shall be reduced (but not 
below zero) by the aggregate distributions received by the 
individual during the testing period from any entity of a 
type to which contributions under paragraph (1) or para-
graph (2) (as the case may be) may be made.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made after De-
cember 31, 2011. 
SEC. 232. HSA FUNDS FOR PREMIUMS FOR HIGH DEDUCT-
IBLE HEALTH PLANS. 
(a) IN GENERAL.—Subparagraph (C) of section 
223(d)(2) of the Internal Revenue Code of 1986 is amend-
ed by striking ‘‘or’’ at the end of clause (iii), by striking 
the period at the end of clause (iv) and inserting ‘‘, or’’, 
and by adding at the end the following: 
‘‘(v) a high deductible health plan if— 
‘‘(I) such plan is not offered in 
connection with a group health plan, 
‘‘(II) no portion of any premium 
(within the meaning of applicable pre-
mium under section 4980B(f)(4)) for 
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150 
such plan is excludable from gross in-
come under section 106, and 
‘‘(III) the account beneficiary 
demonstrates, 
using 
procedures 
deemed appropriate by the Secretary, 
that after payment of the premium 
for such insurance the balance in the 
health savings account is at least 
twice the minimum deductible in ef-
fect 
under 
subsection 
(c)(2)(A)(i) 
which is applicable to such plan.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to premiums for a high deduct-
ible health plan for periods beginning after December 31, 
2011. 
SEC. 233. REQUIRING GREATER COORDINATION BETWEEN 
HDHP ADMINISTRATORS AND HSA ACCOUNT 
ADMINISTRATORS SO THAT ENROLLEES CAN 
ENROLL IN BOTH AT THE SAME TIME. 
The Secretary of the Treasury, through the issuance 
of regulations or other guidance, shall encourage adminis-
trators of health plans and trustees of health savings ac-
counts to provide for simultaneous enrollment in high de-
ductible health plans and setup of health savings accounts. 
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SEC. 234. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 
INCURRED BEFORE ESTABLISHMENT OF AC-
COUNT. 
(a) IN GENERAL.—Subsection (d) of section 223 of 
the Internal Revenue Code of 1986 is amended by redesig-
nating paragraph (4) as paragraph (5) and by inserting 
after paragraph (3) the following new paragraph: 
‘‘(4) CERTAIN MEDICAL EXPENSES INCURRED 
BEFORE ESTABLISHMENT OF ACCOUNT TREATED AS 
QUALIFIED.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (2), an expense shall not fail to be treat-
ed as a qualified medical expense solely because 
such expense was incurred before the establish-
ment of the health savings account if such ex-
pense was incurred during the 60-day period 
beginning on the date on which the high de-
ductible health plan is first effective. 
‘‘(B) SPECIAL
RULES.—For purposes of 
subparagraph (A)— 
‘‘(i) an individual shall be treated as 
an eligible individual for any portion of a 
month for which the individual is described 
in subsection (c)(1), determined without 
regard to whether the individual is covered 
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152 
under a high deductible health plan on the 
1st day of such month, and 
‘‘(ii) the effective date of the health 
savings account is deemed to be the date 
on which the high deductible health plan is 
first effective after the date of the enact-
ment of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to insurance pur-
chased after the date of the enactment of this Act in tax-
able years beginning after such date. 
DIVISION C—ENACTING REAL 
MEDICAL LIABILITY REFORM 
SEC. 301. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 
The time for the commencement of a health care law-
suit shall be 3 years after the date of manifestation of 
injury or 1 year after the claimant discovers, or through 
the use of reasonable diligence should have discovered, the 
injury, whichever occurs first. In no event shall the time 
for commencement of a health care lawsuit exceed 3 years 
after the date of manifestation of injury unless tolled for 
any of the following— 
(1) upon proof of fraud; 
(2) intentional concealment; or 
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(3) the presence of a foreign body, which has no 
therapeutic or diagnostic purpose or effect, in the 
person of the injured person. 
Actions by a minor shall be commenced within 3 years 
from the date of the alleged manifestation of injury except 
that actions by a minor under the full age of 6 years shall 
be commenced within 3 years of manifestation of injury 
or prior to the minor’s 8th birthday, whichever provides 
a longer period. Such time limitation shall be tolled for 
minors for any period during which a parent or guardian 
and a health care provider or health care organization 
have committed fraud or collusion in the failure to bring 
an action on behalf of the injured minor. 
SEC. 302. COMPENSATING PATIENT INJURY. 
(a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL 
ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 
health care lawsuit, nothing in this title shall limit a claim-
ant’s recovery of the full amount of the available economic 
damages, notwithstanding the limitation in subsection (b). 
(b) ADDITIONAL NONECONOMIC DAMAGES.—In any 
health care lawsuit, the amount of noneconomic damages, 
if available, may be as much as $250,000, regardless of 
the number of parties against whom the action is brought 
or the number of separate claims or actions brought with 
respect to the same injury. 
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(c) NO DISCOUNT OF AWARD FOR NONECONOMIC 
DAMAGES.—For purposes of applying the limitation in 
subsection (b), future noneconomic damages shall not be 
discounted to present value. The jury shall not be in-
formed about the maximum award for noneconomic dam-
ages. An award for noneconomic damages in excess of 
$250,000 shall be reduced either before the entry of judg-
ment, or by amendment of the judgment after entry of 
judgment, and such reduction shall be made before ac-
counting for any other reduction in damages required by 
law. If separate awards are rendered for past and future 
noneconomic damages and the combined awards exceed 
$250,000, the future noneconomic damages shall be re-
duced first. 
(d) FAIR SHARE RULE.—In any health care lawsuit, 
each party shall be liable for that party’s several share 
of any damages only and not for the share of any other 
person. Each party shall be liable only for the amount of 
damages allocated to such party in direct proportion to 
such party’s percentage of responsibility. Whenever a 
judgment of liability is rendered as to any party, a sepa-
rate judgment shall be rendered against each such party 
for the amount allocated to such party. For purposes of 
this section, the trier of fact shall determine the propor-
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tion of responsibility of each party for the claimant’s 
harm. 
SEC. 303. MAXIMIZING PATIENT RECOVERY. 
(a) COURT SUPERVISION OF SHARE OF DAMAGES 
ACTUALLY PAID TO CLAIMANTS.—In any health care law-
suit, the court shall supervise the arrangements for pay-
ment of damages to protect against conflicts of interest 
that may have the effect of reducing the amount of dam-
ages awarded that are actually paid to claimants. In par-
ticular, in any health care lawsuit in which the attorney 
for a party claims a financial stake in the outcome by vir-
tue of a contingent fee, the court shall have the power 
to restrict the payment of a claimant’s damage recovery 
to such attorney, and to redirect such damages to the 
claimant based upon the interests of justice and principles 
of equity. In no event shall the total of all contingent fees 
for representing all claimants in a health care lawsuit ex-
ceed the following limits: 
(1) Forty percent of the first $50,000 recovered 
by the claimant(s). 
(2) Thirty-three and one-third percent of the 
next $50,000 recovered by the claimant(s). 
(3) Twenty-five percent of the next $500,000 
recovered by the claimant(s). 
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156 
(4) Fifteen percent of any amount by which the 
recovery by the claimant(s) is in excess of $600,000. 
(b) APPLICABILITY.—The limitations in this section 
shall apply whether the recovery is by judgment, settle-
ment, mediation, arbitration, or any other form of alter-
native dispute resolution. In a health care lawsuit involv-
ing a minor or incompetent person, a court retains the 
authority to authorize or approve a fee that is less than 
the maximum permitted under this section. The require-
ment for court supervision in the first two sentences of 
subsection (a) applies only in civil actions. 
SEC. 304. ADDITIONAL HEALTH BENEFITS. 
In any health care lawsuit involving injury or wrong-
ful death, any party may introduce evidence of collateral 
source benefits. If a party elects to introduce such evi-
dence, any opposing party may introduce evidence of any 
amount paid or contributed or reasonably likely to be paid 
or contributed in the future by or on behalf of the oppos-
ing party to secure the right to such collateral source bene-
fits. No provider of collateral source benefits shall recover 
any amount against the claimant or receive any lien or 
credit against the claimant’s recovery or be equitably or 
legally subrogated to the right of the claimant in a health 
care lawsuit involving injury or wrongful death. This sec-
tion shall apply to any health care lawsuit that is settled 
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as well as a health care lawsuit that is resolved by a fact 
finder. This section shall not apply to section 1862(b) (42 
U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 
1396a(a)(25)) of the Social Security Act. 
SEC. 305. PUNITIVE DAMAGES. 
(a) IN GENERAL.—Punitive damages may, if other-
wise permitted by applicable State or Federal law, be 
awarded against any person in a health care lawsuit only 
if it is proven by clear and convincing evidence that such 
person acted with malicious intent to injure the claimant, 
or that such person deliberately failed to avoid unneces-
sary injury that such person knew the claimant was sub-
stantially certain to suffer. In any health care lawsuit 
where no judgment for compensatory damages is rendered 
against such person, no punitive damages may be awarded 
with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit 
as initially filed. A court may allow a claimant to file an 
amended pleading for punitive damages only upon a mo-
tion by the claimant and after a finding by the court, upon 
review of supporting and opposing affidavits or after a 
hearing, after weighing the evidence, that the claimant has 
established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the re-
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quest of any party in a health care lawsuit, the trier of 
fact shall consider in a separate proceeding— 
(1) whether punitive damages are to be award-
ed and the amount of such award; and 
(2) the amount of punitive damages following a 
determination of punitive liability. 
If a separate proceeding is requested, evidence relevant 
only to the claim for punitive damages, as determined by 
applicable State law, shall be inadmissible in any pro-
ceeding to determine whether compensatory damages are 
to be awarded. 
(b) DETERMINING AMOUNT
OF PUNITIVE DAM-
AGES.— 
(1) FACTORS
CONSIDERED.—In determining 
the amount of punitive damages, if awarded, in a 
health care lawsuit, the trier of fact shall consider 
only the following— 
(A) the severity of the harm caused by the 
conduct of such party; 
(B) the duration of the conduct or any 
concealment of it by such party; 
(C) the profitability of the conduct to such 
party; 
(D) the number of products sold or med-
ical procedures rendered for compensation, as 
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the case may be, by such party, of the kind 
causing the harm complained of by the claim-
ant; 
(E) any criminal penalties imposed on such 
party, as a result of the conduct complained of 
by the claimant; and 
(F) the amount of any civil fines assessed 
against such party as a result of the conduct 
complained of by the claimant. 
(2) MAXIMUM AWARD.—The amount of punitive 
damages, if awarded, in a health care lawsuit may 
be as much as $250,000 or as much as two times 
the amount of economic damages awarded, which-
ever is greater. The jury shall not be informed of 
this limitation. 
SEC. 306. AUTHORIZATION OF PAYMENT OF FUTURE DAM-
AGES TO CLAIMANTS IN HEALTH CARE LAW-
SUITS. 
(a) IN GENERAL.—In any health care lawsuit, if an 
award of future damages, without reduction to present 
value, equaling or exceeding $50,000 is made against a 
party with sufficient insurance or other assets to fund a 
periodic payment of such a judgment, the court shall, at 
the request of any party, enter a judgment ordering that 
the future damages be paid by periodic payments. In any 
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health care lawsuit, the court may be guided by the Uni-
form Periodic Payment of Judgments Act promulgated by 
the National Conference of Commissioners on Uniform 
State Laws. 
(b) APPLICABILITY.—This section applies to all ac-
tions which have not been first set for trial or retrial be-
fore the effective date of this title. 
SEC. 307. DEFINITIONS. 
In this title: 
(1) ALTERNATIVE DISPUTE RESOLUTION SYS-
TEM; ADR.—The term ‘‘alternative dispute resolution 
system’’ or ‘‘ADR’’ means a system that provides 
for the resolution of health care lawsuits in a man-
ner other than through a civil action brought in a 
State or Federal court. 
(2) CLAIMANT.—The term ‘‘claimant’’ means 
any person who brings a health care lawsuit, includ-
ing a person who asserts or claims a right to legal 
or equitable contribution, indemnity, or subrogation, 
arising out of a health care liability claim or action, 
and any person on whose behalf such a claim is as-
serted or such an action is brought, whether de-
ceased, incompetent, or a minor. 
(3) COLLATERAL
SOURCE
BENEFITS.—The 
term ‘‘collateral source benefits’’ means any amount 
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paid or reasonably likely to be paid in the future to 
or on behalf of the claimant, or any service, product, 
or other benefit provided or reasonably likely to be 
provided in the future to or on behalf of the claim-
ant, as a result of the injury or wrongful death, pur-
suant to— 
(A) any State or Federal health, sickness, 
income-disability, accident, or workers’ com-
pensation law; 
(B) any health, sickness, income-disability, 
or accident insurance that provides health bene-
fits or income-disability coverage; 
(C) any contract or agreement of any 
group, organization, partnership, or corporation 
to provide, pay for, or reimburse the cost of 
medical, hospital, dental, or income-disability 
benefits; and 
(D) any other publicly or privately funded 
program. 
(4) 
COMPENSATORY
DAMAGES.—The 
term 
‘‘compensatory 
damages’’ 
means 
objectively 
verifiable monetary losses incurred as a result of the 
provision of, use of, or payment for (or failure to 
provide, use, or pay for) health care services or med-
ical products, such as past and future medical ex-
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penses, loss of past and future earnings, cost of ob-
taining domestic services, loss of employment, and 
loss of business or employment opportunities, dam-
ages for physical and emotional pain, suffering, in-
convenience, physical impairment, mental anguish, 
disfigurement, loss of enjoyment of life, loss of soci-
ety and companionship, loss of consortium (other 
than loss of domestic service), hedonic damages, in-
jury to reputation, and all other nonpecuniary losses 
of any kind or nature. The term ‘‘compensatory 
damages’’ includes economic damages and non-
economic damages, as such terms are defined in this 
section. 
(5) CONTINGENT FEE.—The term ‘‘contingent 
fee’’ includes all compensation to any person or per-
sons which is payable only if a recovery is effected 
on behalf of one or more claimants. 
(6) ECONOMIC DAMAGES.—The term ‘‘economic 
damages’’ means objectively verifiable monetary 
losses incurred as a result of the provision of, use 
of, or payment for (or failure to provide, use, or pay 
for) health care services or medical products, such as 
past and future medical expenses, loss of past and 
future earnings, cost of obtaining domestic services, 
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loss of employment, and loss of business or employ-
ment opportunities. 
(7) 
HEALTH
CARE
LAWSUIT.—The 
term 
‘‘health care lawsuit’’ means any health care liability 
claim concerning the provision of health care goods 
or services or any medical product affecting inter-
state commerce, or any health care liability action 
concerning the provision of health care goods or 
services or any medical product affecting interstate 
commerce, brought in a State or Federal court or 
pursuant to an alternative dispute resolution system, 
against a health care provider, a health care organi-
zation, or the manufacturer, distributor, supplier, 
marketer, promoter, or seller of a medical product, 
regardless of the theory of liability on which the 
claim is based, or the number of claimants, plain-
tiffs, defendants, or other parties, or the number of 
claims or causes of action, in which the claimant al-
leges a health care liability claim. Such term does 
not include a claim or action which is based on 
criminal liability; which seeks civil fines or penalties 
paid to Federal, State, or local government; or which 
is grounded in antitrust. 
(8) HEALTH
CARE
LIABILITY
ACTION.—The 
term ‘‘health care liability action’’ means a civil ac-
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164 
tion brought in a State or Federal court or pursuant 
to an alternative dispute resolution system, against 
a health care provider, a health care organization, or 
the manufacturer, distributor, supplier, marketer, 
promoter, or seller of a medical product, regardless 
of the theory of liability on which the claim is based, 
or the number of plaintiffs, defendants, or other par-
ties, or the number of causes of action, in which the 
claimant alleges a health care liability claim. 
(9) HEALTH
CARE
LIABILITY
CLAIM.—The 
term ‘‘health care liability claim’’ means a demand 
by any person, whether or not pursuant to ADR, 
against a health care provider, health care organiza-
tion, or the manufacturer, distributor, supplier, mar-
keter, promoter, or seller of a medical product, in-
cluding, but not limited to, third-party claims, cross- 
claims, counter-claims, or contribution claims, which 
are based upon the provision of, use of, or payment 
for (or the failure to provide, use, or pay for) health 
care services or medical products, regardless of the 
theory of liability on which the claim is based, or the 
number of plaintiffs, defendants, or other parties, or 
the number of causes of action. 
(10) HEALTH CARE ORGANIZATION.—The term 
‘‘health care organization’’ means any person or en-
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tity which is obligated to provide or pay for health 
benefits under any health plan, including any person 
or entity acting under a contract or arrangement 
with a health care organization to provide or admin-
ister any health benefit. 
(11) HEALTH
CARE
PROVIDER.—The term 
‘‘health care provider’’ means any person or entity 
required by State or Federal laws or regulations to 
be licensed, registered, or certified to provide health 
care services, and being either so licensed, reg-
istered, or certified, or exempted from such require-
ment by other statute or regulation. 
(12) HEALTH CARE GOODS OR SERVICES.—The 
term ‘‘health care goods or services’’ means any 
goods or services provided by a health care organiza-
tion, provider, or by any individual working under 
the supervision of a health care provider, that relates 
to the diagnosis, prevention, or treatment of any 
human disease or impairment, or the assessment or 
care of the health of human beings. 
(13) MALICIOUS
INTENT
TO
INJURE.—The 
term ‘‘malicious intent to injure’’ means inten-
tionally causing or attempting to cause physical in-
jury other than providing health care goods or serv-
ices. 
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(14) MEDICAL PRODUCT.—The term ‘‘medical 
product’’ means a drug, device, or biological product 
intended for humans, and the terms ‘‘drug’’, ‘‘de-
vice’’, and ‘‘biological product’’ have the meanings 
given such terms in sections 201(g)(1) and 201(h) 
of the Federal Food, Drug and Cosmetic Act (21 
U.S.C. 321(g)(1) and (h)) and section 351(a) of the 
Public Health Service Act (42 U.S.C. 262(a)), re-
spectively, including any component or raw material 
used therein, but excluding health care services. 
(15) 
NONECONOMIC
DAMAGES.—The 
term 
‘‘noneconomic damages’’ means damages for phys-
ical and emotional pain, suffering, inconvenience, 
physical impairment, mental anguish, disfigurement, 
loss of enjoyment of life, loss of society and compan-
ionship, loss of consortium (other than loss of do-
mestic service), hedonic damages, injury to reputa-
tion, and all other nonpecuniary losses of any kind 
or nature. 
(16) PUNITIVE DAMAGES.—The term ‘‘punitive 
damages’’ means damages awarded, for the purpose 
of punishment or deterrence, and not solely for com-
pensatory purposes, against a health care provider, 
health care organization, or a manufacturer, dis-
tributor, or supplier of a medical product. Punitive 
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damages are neither economic nor noneconomic 
damages. 
(17) RECOVERY.—The term ‘‘recovery’’ means 
the net sum recovered after deducting any disburse-
ments or costs incurred in connection with prosecu-
tion or settlement of the claim, including all costs 
paid or advanced by any person. Costs of health care 
incurred by the plaintiff and the attorneys’ office 
overhead costs or charges for legal services are not 
deductible disbursements or costs for such purpose. 
(18) STATE.—The term ‘‘State’’ means each of 
the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, 
Guam, American Samoa, the Northern Mariana Is-
lands, the Trust Territory of the Pacific Islands, and 
any other territory or possession of the United 
States, or any political subdivision thereof. 
SEC. 308. EFFECT ON OTHER LAWS. 
(a) VACCINE INJURY.— 
(1) To the extent that title XXI of the Public 
Health Service Act establishes a Federal rule of law 
applicable to a civil action brought for a vaccine-re-
lated injury or death— 
(A) this title does not affect the application 
of the rule of law to such an action; and 
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(B) any rule of law prescribed by this title 
in conflict with a rule of law of such title XXI 
shall not apply to such action. 
(2) If there is an aspect of a civil action 
brought for a vaccine-related injury or death to 
which a Federal rule of law under title XXI of the 
Public Health Service Act does not apply, then this 
title or otherwise applicable law (as determined 
under this title) will apply to such aspect of such ac-
tion. 
(b) OTHER FEDERAL LAW.—Except as provided in 
this section, nothing in this title shall be deemed to affect 
any defense available to a defendant in a health care law-
suit or action under any other provision of Federal law. 
SEC. 
309. 
STATE 
FLEXIBILITY 
AND 
PROTECTION 
OF 
STATES’ RIGHTS. 
(a) HEALTH CARE LAWSUITS.—The provisions gov-
erning health care lawsuits set forth in this title preempt, 
subject to subsections (b) and (c), State law to the extent 
that State law prevents the application of any provisions 
of law established by or under this title. The provisions 
governing health care lawsuits set forth in this title super-
sede chapter 171 of title 28, United States Code, to the 
extent that such chapter— 
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(1) provides for a greater amount of damages 
or contingent fees, a longer period in which a health 
care lawsuit may be commenced, or a reduced appli-
cability or scope of periodic payment of future dam-
ages, than provided in this title; or 
(2) prohibits the introduction of evidence re-
garding collateral source benefits, or mandates or 
permits subrogation or a lien on collateral source 
benefits. 
(b) PROTECTION OF STATES’ RIGHTS AND OTHER 
LAWS.—(1) Any issue that is not governed by any provi-
sion of law established by or under this title (including 
State standards of negligence) shall be governed by other-
wise applicable State or Federal law. 
(2) This title shall not preempt or supersede any 
State or Federal law that imposes greater procedural or 
substantive protections for health care providers and 
health care organizations from liability, loss, or damages 
than those provided by this title or create a cause of ac-
tion. 
(c) STATE FLEXIBILITY.—No provision of this title 
shall be construed to preempt— 
(1) any State law (whether effective before, on, 
or after the date of the enactment of this Act) that 
specifies a particular monetary amount of compen-
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satory or punitive damages (or the total amount of 
damages) that may be awarded in a health care law-
suit, regardless of whether such monetary amount is 
greater or lesser than is provided for under this title, 
notwithstanding section 302(a); or 
(2) any defense available to a party in a health 
care lawsuit under any other provision of State or 
Federal law. 
SEC. 310. APPLICABILITY; EFFECTIVE DATE. 
This title shall apply to any health care lawsuit 
brought in a Federal or State court, or subject to an alter-
native dispute resolution system, that is initiated on or 
after the date of the enactment of this Act, except that 
any health care lawsuit arising from an injury occurring 
prior to the date of the enactment of this Act shall be 
governed by the applicable statute of limitations provisions 
in effect at the time the injury occurred. 
DIVISION D—PROTECTING THE 
DOCTOR-PATIENT RELATION-
SHIP 
SEC. 401. RULE OF CONSTRUCTION. 
Nothing in this Act shall be construed to interfere 
with the doctor-patient relationship or the practice of med-
icine. 
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171 
SEC. 402. REPEAL OF FEDERAL COORDINATING COUNCIL 
FOR 
COMPARATIVE 
EFFECTIVENESS 
RE-
SEARCH. 
Effective on the date of the enactment of this Act, 
section 804 of the American Recovery and Reinvestment 
Act of 2009 is repealed. 
DIVISION 
E—INCENTIVIZING 
WELLNESS AND QUALITY IM-
PROVEMENTS 
SEC. 501. INCENTIVES FOR PREVENTION AND WELLNESS 
PROGRAMS. 
(a) EMPLOYEE RETIREMENT INCOME SECURITY ACT 
OF 1974 LIMITATION ON EXCEPTION FOR WELLNESS 
PROGRAMS UNDER HIPAA DISCRIMINATION RULES.— 
(1) IN
GENERAL.—Section 702(b)(2) of the 
Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1182(b)(2)) is amended by adding after 
and below subparagraph (B) the following: 
‘‘In applying subparagraph (B), a group health plan 
(or a health insurance issuer with respect to health 
insurance coverage) may vary premiums and cost- 
sharing by up to 50 percent of the value of the bene-
fits under the plan (or coverage) based on participa-
tion in a standards-based wellness program.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to plan years beginning 
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more than 1 year after the date of the enactment of 
this Act. 
(b) CONFORMING AMENDMENTS TO PHSA.— 
(1) GROUP MARKET RULES.— 
(A) IN GENERAL.—Section 2702(b)(2) of 
the Public Health Service Act (42 U.S.C. 
300gg–1(b)(2)) is amended by adding after and 
below subparagraph (B) the following: 
‘‘In applying subparagraph (B), a group health plan 
(or a health insurance issuer with respect to health 
insurance coverage) may vary premiums and cost- 
sharing by up to 50 percent of the value of the bene-
fits under the plan (or coverage) based on participa-
tion in a standards-based wellness program.’’. 
(B) EFFECTIVE
DATE.—The amendment 
made by subparagraph (A) shall apply to plan 
years beginning more than 1 year after the date 
of the enactment of this Act. 
(2) INDIVIDUAL MARKET RULES RELATING TO 
GUARANTEED AVAILABILITY.— 
(A) IN GENERAL.—Section 2741(f) of the 
Public Health Service Act (42 U.S.C. 300gg– 
1(b)(2)) is amended by adding after and below 
paragraph (1) the following: 
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‘‘In applying paragraph (2), a health insurance issuer may 
vary premiums and cost-sharing under health insurance 
coverage by up to 50 percent of the value of the benefits 
under the coverage based on participation in a standards- 
based wellness program.’’. 
(B) EFFECTIVE
DATE.—The amendment 
made by paragraph (1) shall apply to health in-
surance coverage offered or renewed on and 
after the date that is 1 year after the date of 
the enactment of this Act. 
(c) CONFORMING AMENDMENTS TO IRC.— 
(1) IN GENERAL.—Section 9802(b)(2) of the 
Internal Revenue Code of 1986 is amended by add-
ing after and below subparagraph (B) the following: 
‘‘In applying subparagraph (B), a group health plan 
(or a health insurance issuer with respect to health 
insurance coverage) may vary premiums and cost- 
sharing by up to 50 percent of the value of the bene-
fits under the plan (or coverage) based on participa-
tion in a standards-based wellness program.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply to plan years beginning 
more than 1 year after the date of the enactment of 
this Act. 
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DIVISION F—PROTECTING 
TAXPAYERS 
SEC. 601. PROVIDE FULL FUNDING TO HHS OIG AND 
HCFAC. 
(a) HCFAC FUNDING.—Section 1817(k)(3)(A) of 
the Social Security Act (42 U.S.C. 1395i(k)(3)(A)) is 
amended— 
(1) in clause (i), by amending subclause (V) to 
read as follows: 
‘‘(V) for each fiscal year after fis-
cal year 2010, $300,000,000.’’; and 
(2) in clause (ii)(X), by inserting before the pe-
riod at the end the following: ‘‘, plus the amount by 
which the amount made available under clause (i)(V) 
for fiscal year 2011 exceeds the amount made avail-
able under clause (i)(IV) for fiscal year 2010’’. 
(b) OIG FUNDING.—There are authorized to be ap-
propriated for each of fiscal years 2011 through 2020 
$100,000,000 for the Office of the Inspector General of 
the Department of Health and Human Services for fraud 
prevention activities under the Medicare and Medicaid 
programs. 
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SEC. 602. PROHIBITING TAXPAYER FUNDED ABORTIONS 
AND CONSCIENCE PROTECTIONS. 
Title 1 of the United States Code is amended by add-
ing at the end the following new chapter: 
‘‘CHAPTER 
4—PROHIBITING 
TAXPAYER 
FUNDED 
ABORTIONS 
AND 
CON-
SCIENCE PROTECTIONS 
‘‘SEC. 301. PROHIBITION ON FUNDING FOR ABORTIONS. 
‘‘No funds authorized or appropriated by Federal 
law, and none of the funds in any trust fund to which 
funds are authorized or appropriated by Federal law, shall 
be expended for any abortion. 
‘‘SEC. 302. PROHIBITION ON FUNDING FOR HEALTH BENE-
FITS PLANS THAT COVER ABORTION. 
‘‘None of the funds authorized or appropriated by 
Federal law, and none of the funds in any trust fund to 
which funds are authorized or appropriated by Federal 
law, shall be expended for a health benefits plan that in-
cludes coverage of abortion. 
‘‘SEC. 303. TREATMENT OF ABORTIONS RELATED TO RAPE, 
INCEST, OR PRESERVING THE LIFE OF THE 
MOTHER. 
‘‘The limitations established in sections 301 and 302 
shall not apply to an abortion— 
‘‘(1) if the pregnancy is the result of an act of 
rape or incest; or 
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176 
‘‘(2) in the case where a woman suffers from a 
physical disorder, physical injury, or physical illness 
that would, as certified by a physician, place the 
woman in danger of death unless an abortion is per-
formed, including a life-endangering physical condi-
tion caused by or arising from the pregnancy itself. 
‘‘SEC. 304. CONSTRUCTION RELATING TO SUPPLEMENTAL 
COVERAGE. 
‘‘Nothing in this chapter shall be construed as pro-
hibiting any individual, entity, or State or locality from 
purchasing separate supplemental abortion plan or cov-
erage that includes abortion so long as such plan or cov-
erage is paid for entirely using only funds not authorized 
or appropriated by Federal law and such plan or coverage 
shall not be purchased using matching funds required for 
a federally subsidized program, including a State’s or lo-
cality’s contribution of Medicaid matching funds. 
‘‘SEC. 305. CONSTRUCTION RELATING TO THE USE OF NON- 
FEDERAL FUNDS FOR HEALTH COVERAGE. 
‘‘Nothing in this chapter shall be construed as re-
stricting the ability of any managed care provider or other 
organization from offering abortion coverage or the ability 
of a State to contract separately with such a provider or 
organization for such coverage with funds not authorized 
or appropriated by Federal law and such plan or coverage 
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177 
shall not be purchased using matching funds required for 
a federally subsidized program, including a State’s or lo-
cality’s contribution of Medicaid matching funds. 
‘‘SEC. 306. NO GOVERNMENT DISCRIMINATION AGAINST 
CERTAIN HEALTH CARE ENTITIES. 
‘‘(a) IN GENERAL.—No funds authorized or appro-
priated by Federal law may be made available to a Federal 
agency or program, or to a State or local government, if 
such agency, program, or government subjects any institu-
tional or individual health care entity to discrimination on 
the basis that the health care entity does not provide, pay 
for, provide coverage of, or refer for abortions. 
‘‘(b) HEALTH CARE ENTITY DEFINED.—For pur-
poses of this section, the term ‘health care entity’ includes 
an individual physician or other health care professional, 
a hospital, a provider-sponsored organization, a health 
maintenance organization, a health insurance plan, or any 
other kind of health care facility, organization, or plan.’’. 
SEC. 603. IMPROVED ENFORCEMENT OF THE MEDICARE 
AND MEDICAID SECONDARY PAYER PROVI-
SIONS. 
(a) MEDICARE.— 
(1) IN GENERAL.—The Secretary, in coordina-
tion with the Inspector General of the Department 
of Health and Human Services, shall provide 
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178 
through the Coordination of Benefits Contractor for 
the identification of instances where the Medicare 
program should be, but is not, acting as a secondary 
payer to an individual’s private health benefits cov-
erage under section 1862(b) of the Social Security 
Act (42 U.S.C. 1395y(b)). 
(2) UPDATING
PROCEDURES.—The Secretary 
shall update procedures for identifying and resolving 
credit balance situations which occur under the 
Medicare program when payment under such title 
and from other health benefit plans exceed the pro-
viders’ charges or the allowed amount. 
(3) REPORT ON IMPROVED ENFORCEMENT.— 
Not later than 1 year after the date of the enact-
ment of this Act, the Secretary shall submit a report 
to Congress on progress made in improved enforce-
ment of the Medicare secondary payer provisions, in-
cluding recoupment of credit balances. 
(b) MEDICAID.—Section 1903 of the Social Security 
Act (42 U.S.C. 1396b) is amended by adding at the end 
the following new subsection: 
‘‘(aa) ENFORCEMENT OF PAYER OF LAST RESORT 
PROVISIONS.— 
‘‘(1) SUBMISSION
OF
STATE
PLAN
AMEND-
MENT.—Each State shall submit, not later than 1 
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year after the date of the enactment of this sub-
section, a State plan amendment that details how 
the State will become fully compliant with the re-
quirements of section 1902(a)(25). 
‘‘(2) BONUS FOR COMPLIANCE.—If a State sub-
mits a timely State plan amendment under para-
graph (1) that the Secretary determines provides for 
full compliance of the State with the requirements of 
section 1902(a)(25), the Secretary shall provide for 
an additional payment to the State of $1,000,000. If 
a State certifies, to the Secretary’s satisfaction, that 
it is already fully compliant with such requirements, 
such amount shall be increased to $2,000,000. 
‘‘(3) REDUCTION FOR NONCOMPLIANCE.—If a 
State does not submit such an amendment, the Sec-
retary shall reduce the Federal medical assistance 
percentage otherwise applicable under this title by 1 
percentage point until the State submits such an 
amendment. 
‘‘(4) ONGOING REDUCTION.—If at any time the 
Secretary determines that a State is not in compli-
ance with section 1902(a)(25), regardless of the sta-
tus of the State’s submission of a State plan amend-
ment under this subsection or previous determina-
tions of compliance such requirements, the Secretary 
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shall reduce the Federal medical assistance percent-
age otherwise applicable under this title for the 
State by 1 percentage point during the period of 
non-compliance as determined by the Secretary.’’. 
SEC. 604. STRENGTHEN MEDICARE PROVIDER ENROLL-
MENT STANDARDS AND SAFEGUARDS. 
(a) PROTECTING AGAINST THE FRAUDULENT USE 
OF MEDICARE PROVIDER NUMBERS.—Subject to sub-
section (c)(2)— 
(1) SCREENING NEW PROVIDERS.—As a condi-
tion of a provider of services or a supplier, including 
durable medical equipment suppliers and home 
health agencies, applying for the first time for a pro-
vider number under the Medicare program and be-
fore granting billing privileges under such title, the 
Secretary shall screen the provider or supplier for a 
criminal background or other financial or oper-
ational irregularities through fingerprinting, licen-
sure checks, site-visits, other database checks. 
(2) APPLICATION FEES.—The Secretary shall 
impose an application charge on such a provider or 
supplier in order to cover the Secretary’s costs in 
performing the screening required under paragraph 
(1) and that is revenue neutral to the Federal Gov-
ernment. 
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181 
(3) PROVISIONAL APPROVAL.—During an ini-
tial, provisional period (specified by the Secretary) 
In which such a provider or supplier has been issued 
such a number, the Secretary shall provide enhanced 
oversight of the activities of such provider or sup-
plier under the Medicare program, such as through 
prepayment review and payment limitations. 
(4) PENALTIES FOR FALSE STATEMENTS.—In 
the case of a provider or supplier that makes a false 
statement in an application for such a number, the 
Secretary may exclude the provider or supplier from 
participation under the Medicare program, or may 
impose a civil money penalty (in the amount de-
scribed in section 1128A(a)(4) of the Social Security 
Act), in the same manner as the Secretary may im-
pose such an exclusion or penalty under sections 
1128 and 1128A, respectively, of such Act in the 
case of knowing presentation of a false claim de-
scribed in section 1128A(a)(1)(A) of such Act. 
(5) DISCLOSURE
REQUIREMENTS.—With re-
spect to approval of such an application, the Sec-
retary— 
(A) shall require applicants to disclose pre-
vious affiliation with enrolled entities that have 
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(1) in subsection (a)(1)(A), by inserting ‘‘under 
this subsection or subsection (k)’’ after ‘‘biologics li-
cense’’; and 
(2) by adding at the end the following: 
‘‘(k) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO-
SIMILAR OR INTERCHANGEABLE.— 
‘‘(1) IN GENERAL.—Any person may submit an 
application for licensure of a biological product 
under this subsection. 
‘‘(2) CONTENT.— 
‘‘(A) IN GENERAL.— 
‘‘(i) REQUIRED
INFORMATION.—An 
application submitted under this subsection 
shall include information demonstrating 
that— 
‘‘(I) the biological product is bio-
similar to a reference product based 
upon data derived from— 
‘‘(aa) analytical studies that 
demonstrate that the biological 
product is highly similar to the 
reference 
product 
notwith-
standing minor differences in 
clinically inactive components; 
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