Health Maintenance Organization Amendments
PL 94-460 (H.R.9019), enacted 10/08/1976

PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1945 
Public Law 94-460 
94th Congress 
An Act 
To amend title XIII of the Public Health Service Act to revise and extend 
the program for the establishment and expansion of health maintenance 
organizations. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States 
of America 
in Congress 
assembled^ 
SHORT TITLE ; REFERENCE TO ACT 
SECTION 1. (a) This Act may be cited as the "Health Maintenance 
Organization Amendments of 1976". 
(b) Whenever in title I an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Public Health Service Act. 
T I T L E I—AMENDMENTS TO T I T L E X I I I O F T H E P U B L I C 
H E A L T H S E R V I C E ACT 
Oct. 8, 1976 
[H.R. 9019] 
Health 
Maintenance 
Organization 
Amendments 
of 1976. 
42 use 300e 
note. 
42 use 201 
note. 
SUPPLEMENTAL HEALTH SERVICES 
SEC. 101. (a) Section 1301(b) (1) is amended by adding at the end 
42 USC 300e. 
the following: "'A health maintenance organization may include a 
health service, defined as a supplemental health service by section 
1302(2), in the basic health services provided its members for a basic 
health services payment described in the first sentence.". 
(b) The first sentence of section 1301(b) (2) is amended by striking 
out "the organization shall provide" and all that follows in that sen-
tence and substituting "the organization may provide to each of its 
members any of the health services which are included in supplemental 
health services (as defined in section 1302(2)).". 
42 USC 300e-l. 
(c) Section 1301 (b) (4) is amended by striking out "and supplemen-
tal health services in the case of the members who have contracted 
therefor" and substituting "and only such supplemental health serv-
ices as members have contracted for". 
STAFFING 
SEC. 102. (a) (1) The first sentence of section 1301 (b) (3) is amended 
42 USC SOOe. 
(A) by striking out "or through" and by substituting ", through", (B) 
by striking out "(or groups) or" and substituting "(or groups), 
through an", and (C) by inserting after "(or associations)" the fol-
lowing : ", through health professionals who have contracted with the 
health maintenance organization for the provision of such services, or 
through any combination of such staff, medical group (or groups), 
individual practice association (or associations), or health profes-
sionals under contract with the organization". 
(2) Section 1301(b)(3) is amended by adding after the first sen-
tence the following: "A health maintenance organization may also, 
during the thirty-six month period beginning with the month follow-
90 STAT. 1946 
PUBLIC LAW 94-460—OCT. 8, 1976 
ing the month in which the organization becomes a qualified health 
42 use 300e-9. maintenance organization (within the meaning of section 1310(d)), 
provide basic and supplemental health services through an entity 
42 use 300e-l. which but for the requirement of section 1302(4) (C) (i) would be a 
medical group for purposes of this title. After the expiration of such 
period, the organization may provide basic or supplemental health 
, 
services through such an entity only if authorized by the Secretary in 
accordance with regulations which take into consideration the unusual 
circumstances of such entity. A health maintenance organization may 
not, in any of its fiscal years, enter into contracts with health profes-
sionals or entities other than medical groups or individual practice 
' • 
associations if the amounts paid under such contracts for basic and sup-
plemental health services exceed fifteen percent of the total amount to 
be paid in such fiscal year by the health maintenance organization to 
physicians for the provision of basic and supplemental health services, 
or, if the health maintenance organization principally serves a rural 
area, thirty percent of such amount, except that this sentence does not 
apply to the entering into of contracts for the purchase of basic and 
;, 
supplemental health services through an entity which but for the 
., 
requirements of section 1302(4) (C) (i) would be a medical group for 
purposes of this title. Contracts between a health maintenance organi-
zation and health professionals for the provision of basic and supple-
mental health services shall include such provisions as the Secretary 
may require (including provisions requiring appropriate continuing 
education).". 
42 use 300e-l. 
(b) (1) Section 1302(4) (C) is amended (A) by striking out clause 
(iv), (B) by redesignating clause (v) as clause (iv), and (C) by 
inserting "and" at the end of clause (iii). 
(2) Section 1302(5) (B) is amended (A) by striking out clause (i), 
and (B) by redesignating clauses (ii) and (iii) as clauses (i) and 
(ii), respectively. 
OPEN 
ENROLLMENT 
42 use S
O
O
e
. 
SEC. 103. (a) Section 1301(c) is amended by amending paragraph 
(4) to read as follows: 
"(4) have an open enrollment period in accordance with the 
provisions of subsection (d);". 
(b) Section 1301 is amended by adding at the end thereof the 
following: 
' 
"(d) (1) (A) A health maintenance organization which— 
"(i) has for at least 5 years provided comprehensive health 
services on a prepaid basis, or 
. j . ^ ^ •::-! '••• 
"(ii) has an enrollment of at least 50,000 members, 
shall have at least once during each fiscal year next following a fiscal 
year in which it did not have a financial deficit an open enrollment 
period (determined under subparagraph (B)) during which it shall 
accept individuals for membership in the order in which they apply 
for enrollment and, except as provided in paragraph (2). without 
, 
regard to preexisting illness, medical condition, or degree of disability. 
"(B) An open enrollment period for a health maintenance organi-
zation shall be the lesser of— 
"(i) 30 days, or 
,, 
"(ii) the number of days in which the organization enrolls a 
number of individuals at least equal to 3 percent of its total net 
increase in enrollment (if any) in the fiscal year preceding the 
fiscal year in which such period is held. 
PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1947 
For the purpose of determining the total net increase in enrollment in 
a health maintenance organization, there shall not be included any 
"
^ 
individual who is enrolled in the organization through a group which 
had a contract for health care services with the health maintenance 
organization at the time that such health maintenance organization 
was determined to be a qualified health maintenance organization 
under section 1310. 
42 USC 300e-9. 
"(2) Notwithstanding the requirements of paragraph (1) a health 
maintenance organization shall not be required to enroll individuals 
who are confined to an institution because of chronic illness, perma-
nent injury, or other infirmity which would cause economic impair-
ment to the health maintenance organization if such individual were 
enrolled. 
"(3) A health maintenance organization may not be required to 
make the effective date of benefits for individuals enrolled under this 
subsection less than 90 days after the date of enrollment. 
"(4) The Secretary may waive the requirements of this subsection Waiver, 
for a health maintenance organization which demonstrates that com-
pliance with the provisions of this subsection would jeopardize its 
economic viability in its service area.". 
DEriNITlON OF SERVICES 
SEC. 104. (a) (1) Paragraph (1) (H) of section 1302 is amended to 42 USC 300e-l. 
read as follows: 
"(H) preventive health services (including (i) immunizations, 
(ii) well-child care from birth, (iii) j)eriodic health evaluations 
for adults, (iv) voluntary family planning services, (v) infertility 
services, and (vi) children's eye and ear examinations conducted 
to determine the need for vision and hearing correction).". 
(2) Paragraph (1) of section 1302 is amended by striking out "or 
podiatrist" each place it occurs and substituting "podiatrist, or other 
health care personnel". 
(b) Paragraph (2) of such section is amended— 
(1) by striking out "under paragraph (1)(A) or ( l ) ( H ) " i n 
subparagraphs (B) and (C); 
(2) by striking out "and" at the end of subparagraph (E), by 
striking out the period at the end of subparagraph (F) and sub-
stituting "; and", and by adding after subparagraph (F) the 
following: 
"(G) other health services which are not included as basic 
health services and which have been approved by the Secretary 
for delivery as supplemental health services."; 
(3) by striking out "or podiatrist" each place it occurs and 
substituting "podiatrist, or other health care personnel". 
COMMUNriY RATING 
SEC. 105. (a) (1) Section 1301(b) (1) is amended by adding at the 42 USC 300e. 
end thereof the following new sentence: "In the case of an entity which 
before it became a qualified health maintenance organization (within 
the meaning of section 1310(d)) provided comprehensive health serv-
ices on a prepaid basis, the requirement of clause (C) shall not apply to 
such entity until the expiration of the forty-eight month period begin-
ning with the month following the month in which the entity became 
such a qualified health organization.". 
90 STAT. 1948 
PUBLIC LAW 94-460—OCT. 8, 1976 
42 use 300e. 
(2) The last sentence of section 1301 (b) (2) is amended by inserting 
before the period the following: "except that, in the case of an entity 
which before it became a qualified health maintenance organization 
42 use 300e-9. 
(within the meaning of section 1310(d)) provided comprehensive 
health services on a prepaid basis, the requirement of this sentence 
shall not apply to such entity during the forty-eight month period 
' '" 
r 
beginning with the month following the month in which the entity 
became such a qualified health maintenance organization". 
42 use 300e-5. 
(3) Section 1306(b) is amended (A) by striking out "and" at the 
end of paragraph (6), (B) by redesignating paragraph (7) as para-
' 
. 
graph (8), and (C) by inserting after paragraph (6) the following 
new paragraph: 
"(7) the application contains such assurances as the Secre-
tary may require respecting the intent and the ability of the 
applicant to meet the requirements of paragraphs (1) and (2) of 
section 1301(b) respecting the fixing of basic health services pay-
' 
ments and supplemental health services payments under a com-
munity rating system; and" 
42USe300e-l. 
(b) Section 1302(8) (A) is amended by inserting "differences in 
marketing costs and" after "reflect". 
(c) Subparagraph (B) of section 1302(8) is redesignated as sub-
paragraph (C) and the following new subparagraph is inserted after 
_ . 
subparagraph (A) : 
"(B) Nominal differentials in such rates may be established to re-
flect the compositing of the rates of payment in a systematic manner 
to accommodate group purchasing practices of the various employers.". 
MEDICAL GROUP REQUIREMENTS 
42 use 300e-l. 
SEC. 106._ (a) Section 1302(4) (C) is amended by striking out "(i) 
as their principal professional activity and as a group responsibility 
engage in the coordinated practice of their profession for a health 
maintenance organization" and substituting "(i) as their principal 
professional activity engage in the coordinated practice of their pro-
fession and as a group responsibility have substantial responsibility 
for the delivery of health services to members of a health maintenance 
organization". 
(b) Section 1302(4) (C) (ii) is amended by striking out "plan" and 
substituting "similar plan unrelated to the provision of specific health 
services". 
(c) 1302 (4) (C) (as amended by section 102(b) (1)) is amended by— 
(1) striking "and" before "(iv)", and 
(2) striking the period at the end of subparagraph (C) and 
substituting "; and (v) establish an arrangement whereby a mem-
ber's enrollment status is not known to the health professional 
who provides health services to the member.". 
INCREASE IN LIMITS ON ASSISTANCE FOR FEASIBILITY SURVEYS, PLANNING, 
INITIAL DEVELOPMENT, AND INITIAL OPERATION 
42 use 300e-2. 
SEC. 107. (a) Section 1303(e) is amended by striking "$50,000" and 
substituting "$75,000". 
42 use 300e-3. 
(b) (1) Section 1304(f) (1) (A) is amended by striking "$125,000" 
and substituting "$200,000". 
(2) 
Section 1304(f)(2)(A) 
is amended by inserting 
after 
"$1,000,000" the following: "or, in the case of a project for a health 
maintenance organization which will provide services to an additional 
PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1949 
service area (as defined by the Secretary) or which will provide serv-
ices in. one or more areas which are not contiguous, $1,600,000". 
(c) Section 1305(a) is amended by striking out "first thirty-six 
months" each place it occurs and substituting "first sixty months". 
42 use 300e-4. 
LOAN GUARANTEES FOR PRIVATE ENTITIES 
SEC. 108. (a) Section 1304(a) (2) is amended to read as follows: 
"(2) guarantee to non-Federal lenders payment of the principal 
of and the interest on loans made to— 
"(A) nonprofit private entities for planning projects for 
the establishment or expansion of health maintenance 
organizations, or 
"(B) other private entities for such projects for health 
maintenance organizations which will serve medically under-
served populations.". 
(b) Section 1304(b) (1) (B) is amended to read as follows: 
"(B) guarantee to non-Federal lenders payment of the princi-
pal of and the interest on loans made to— 
"(i) nonprofit private entitie§ for projects for the initial 
development of health maintenance organizations, or 
"(ii) other private entities for such projects for health 
maintenance organizations which will serve medically under-
served populations.". 
(c) Section 1305 (a) (3) is amended to read as follows: 
"(3) guarantee to non-Federal lenders payment of the principal 
of and the interest on loans made to— 
"(A) nonprofit private health maintenance organizations 
for the amounts referred to in paragraph (1) or (2), or 
"(B) other private health maintenance organizations for 
such amounts but only if the health maintenance organiza-
tion will serve a medically underserved population.". 
(d) (1) Section 1304(d) is amended by adding at the end the fol-
lowing new sentence: "In considering applications for loan guaran-
tees under this section, the Secretary shall give special consideration 
to applications for projects for health maintenance organizations 
which will serve medically underserved populations.". 
(2) Section 1305 is amended by adding at the end thereof the fol-
lowing new subsection: 
"(f) In considering applications for loan guarantees under this 
section, the Secretary shall give special consideration to applications 
for health maintenance organizations which will serve medically 
underserved populations.". 
42 use 300e-3. 
42 use 300e-4. 
Special 
consideration. 
MISCELLANEOUS AMENDMENTS 
42 use 300e-4. 
SEC. 109. (a)(1) Section 1305(a) is amended by striking out "in 
the period of" in paragraphs (1) and (2) and substituting "during a 
period not to exceed". 
(2) The last sentence of 1305(b) (1) is amended to read as follows: Limitation. 
"In any fiscal year the amount disbursed to a health maintenance 
organization under this section (either directly by the Secretary or 
by an escrow agent under the terms of an escrow agreement or by a 
lender under a loan guaranteed under this section) may not exceed 
$1,000,000.". 
89-194 O—78—pt. 2 
31 
90 STAT. 1950 
PUBLIC LAW 94-460—OCT. 8, 1976 
42USC300e-6. 
(b) (1) Section 1307(e) is amended— 
(A) by inserting "for a private health maintenance organiza-
tion (other than a private nonprofit health maintenance organiza-
tion) " after "may be made", and 
, 
(B) by inserting "for private health maintenance organizations 
(other than private nonprofit health maintenance organizations)" 
after "guaranteed". 
42 use 300e-7. 
(2) Section 1308(c) is amended by adding after paragraph (4) the 
following new paragraph: 
"(5) Any reference in this title (other than in this subsection and 
in subsection (d)) to a loan guarantee under this title does not include 
a loan guarantee made under this subsection.". 
(c)(1) Section 1308(a)(1)(A) is amended by striking out "for 
similar loans" and substituting "for loans with similar maturities, 
terms, conditions, and security". 
(2) Section 1308(b) (2) (D) is amended by striking out "loans guar-
anteed under this title" and substituting "marketable obligations of 
the United States of comparable maturities, adjusted to provide for 
appropriate administrative charges". 
42 use 300e-2. 
(d) (1) The last sentence of section 1303(i) is amended— 
(A) by striking "the fiscal year ending Jime 30, 1974, or 
June 30, 1975," and substituting "any fiscal year"; and 
(B) by striking "for projects other than those described in 
clause (1) of such sentence" and substituting "for any project, 
with priority being given to projects described in clause (1) of 
SUCn. S6Ilt€IlCG 
42 use 300e-3. 
(2) The last sentence of section 1304 (k) (1) is amended— 
(A) by striking "the fiscal year ending June 30, 1974, or 
June 30, 1975," and substituting "any fiscal year"; and 
(B) by striking "for projects other than those described in 
clause (A) of such sentence" and substituting "for any project, 
with priority being given to projects described in clause (A) of 
such sentence". 
(3) The last sentence of section 1304(k) (2) is amended— 
(A) by striking "the fiscal year ending June 30, 1974, or in 
either of the next two fiscal years" and substituting "any fiscal 
year"; and 
(B) by striking "for projects other than those described in 
clause (A) of such sentence" and substituting "for any project, 
with priority being given to projects described in clause (A) of 
such sentence". 
(e) Section 1304(b) (2) (D) is amended by striking out "for such 
an organization" and substituting "who will engage in practice 
principally for the health maintenance organization". 
EMPLOYEE HEALTH BENEFITS PLANS 
42 use 300e-9. 
SEC. 110. (a) Section 1310 is amended— 
(1) by amending subsection (a) to read as follows: 
I. ft«» 
"SEC. 1310. (a) (1) In accordance with regulations which the 
Secretary shall prescribe— 
" (A) each employer— 
"(i) which IS now or hereafter required during any 
calendar quarter to pay its employees the minimum wage 
prescribed by section 6 of the Fair Labor Standards Act of 
29 use 206. 
1938 (or would be required to pay its employees such wage 
29 use 213. 
but for section 13 (a) of such Act), and 
PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1951 
42 use 246, 
247b, 247c, 
300a, 300m-4, 
300p-3. 
"(ii) which during such calendar quarter employed an 
average number of employees of not less than 25, 
shall include in any health benefits plan, and 
"(B) any State and each political subdivision thereof which 
during any calendar quarter employed an average number of 
employees of not less than 25, as a condition of the payment to the 
State of funds under section 314(d), 317, 318,1002,1525, or 1613, 
shall include in any health benefits plan, 
offered to such employees in the calendar year beginning after such 
calendar quarter the option of membership in qualified health mainte-
nance organizations which are engaged in the provision of basic 
health services in health maintenance organization service areas in 
which at least 25 of such employees reside. 
"(2) If any of the employees of an employer or State or political 
-
subdivision thereof described in paragraph (1) are represented by a 
collective bargaining representative or other employee representative 
designated or selected under any law, offer of membership in a qualified 
health maintenance organization required by paragraph (1) to be 
made in a health benefits plan offered to such employees (A) shall first 
be made to such collective bargaining representative or other employee 
representative, and (B) if such offer is accepted by such representa-
tive, shall then be made to each such employee."; 
(2) by amending paragraphs (1) and (2) of subsection (b) 
to read as follows: 
"(1) one or more of such organizations provides basic health 
services (A) without the use of an individual practice association 
and (B) Avithout the use of contracts (except for contracts for 
unusual or infrequently used services) with health professionals, 
and 
"(2) one or more of such organizations provides basic health 
services through (A) an individual practice association (or asso-
ciations), (B) health professionals who have contracted with the 
health maintenance organization for the provision of such serv-
ices, or (C) a combination of such association (or associations) 
or health professionals under contract with the organization,"; 
(3) by striking out the last sentence of subsection (c); and 
(4) by adding after subsection (d) the following new sub-
sections : 
"(e) (1) Any employer who knowingly does not comply with one or Civil penalty, 
more of the requirements of subsection (a) shall be subject to a civil 
penalty of not more than $10,000. If such noncompliance continues, a 
civil penalty may be assessed and collected under this subsection for 
each thirty-day period such noncompliance continues. Such penalty 
may be assessed by the Secretary and collected in a civil action brought 
by the United States in a United States district court. 
"(2) In any proceeding by the Secretary to assess a civil penalty Notice, 
under this subsection, no penalty shall be assessed until the employer 
charged shall have been given notice and an opportunity to present 
its views on such charge. In determining the amount of the penalty, 
or the amount agreed upon in compromise, the Secretary shall consider 
the gravity of the noncompliance and the demonstrated good faith of 
the employer charged in attempting to achieve rapid compliance after 
notification by the Secretary of a noncompliance. 
"(3) In any civil action brought to review the assessment of a civil 
penalty assessed under this subsection, the court shall, at the request 
of any party to such action, hold a trial de novo on the assessment 
of such civil penalty and in any civil action to collect such a civil 
90 STAT. 1952 
PUBLIC LAW 94-460—OCT. 8, 1976 
'Employer." 
26 use 501. 
Notice and 
hearing. 
42 use 246, 
247b, 247c, 
300a, 300m-4 
300p-3. 
Administration. 
42 use 300e-
11. 
"Qualified 
health 
maintenance 
carrier." 
42 use 300e-9. 
penalty, the court shall, at the request of any party to such action, 
hold a trial de novo on the assessment of such civil penalty unless in 
a prior civil action to review the assessment of such penalty the court 
held a trial de novo on such assessment. 
"(f) For purposes of this section, the term 'employer' does not 
include (1) the Government of the L'nited States, the government of 
the District of Columbia or any territory or possession of the United 
States, a State or any political subdivision thereof, or any agency or 
instrumentality 
(including the United States Postal Service and 
Postal Rate Commission) of any of the foregoing; or (2) a church, 
convention or association of churches, or any organization operated, 
supervised or controlled by a church, convention or association of 
churches which organization (A) is an organization described in sec-
tion 501(c) (3) of the Internal Revenue Code of 1954, and (B) does 
not discriminate (i) in the employment, compensation, promotion, or 
termination of employment of any personnel, or (ii) in the extension 
of staff or other privileges to any physician or other health personnel, 
because such persons seek to obtain or obtained health care, or 
participate in providing health care, through a health maintenance 
organization. 
"(g) If the Secretary, after reasonable notice and opportunity for 
hearing to a State, finds that it or any of its political subdivisions 
has failed to comply with one or more of the requirements of sub-
section (a), the Secretary shall terminate payments to such State 
under sections 314(d), 317, 318, 1002, 1525, and 1613 and notify the 
Governor of such State that further payments under such sections will 
not be made to the State until the Secretary is satisfied that there will 
no longer be any such failure to comply. 
"(h) The duties and functions of the Secretary, insofar as they 
involve making determinations as to whether an organization is a 
qualified health maintenance organization within the meaning of sub-
section (d), shall be administered through the Assistant Secretary for 
Health and in the Office of the Assistant Secretary for Health, and 
the administration of such duties and functions shall be integrated 
with the administration of section 1312(a).". 
(b) Section 8902 of title 5, United States Code, relating to Federal 
employee health insurance, is amended by adding at the end thereof 
the following new subsection: 
"(1) The Commission shall contract under this chapter for a plan 
described in section 8903(4) of this title with any qualified health 
maintenance carrier which offers such a plan. For the purpose of this 
subsection, 'qualified health maintenance carrier' means any qualified 
carrier which is a qualified health maintenance organization within 
the meaning of section 1310(d) (1) of title X I I I of the Public Health 
Service Act (42 U.S.C. 300c-9(d)).". 
42 use 300e-
11. 
Determination, 
notification. 
ENFORCEMENT 
REQUIREMENTS 
SEC. 111. (a) Section 1312(a) is amended by striking out all of the 
section following paragraph (3) and substituting the following: "the 
Secretary may take the action authorized by subsection (b)." 
(b) Section 1312(b) is amended to read as follows: 
"(b) (1) If the Secretary makes, with respect to any entity which 
provided assurances to the Secretary under section 1310(d)(1), a 
determination described in subsection (a), the Secretary shall notify 
the entity in writing of the determination. Such notice shall specify 
the manner in which the entity has not complied with such assurances 
PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1953 
and direct that the entity initiate (within 30 days of the date the notice 
is issued by the Secretary or within such longer period as the Secre-
tary determines is reasonable) such action as may be necessary to 
bring (within such period as the Secretary shall prescribe) the entity 
into compliance with the assurances. If the entity fails to initiate 
corrective action within the period prescribed by the notice or fails 
to comply with the assurances within such period as the Secretary 
prescribes (A) the entity shall not be a qualified health maintenance 
organization for purposes of section 1310 until such date as the Sec-
retary determines that it is in compliance with the assurances, and (B) 
each employer which has offered membership in the entity in com-
pliance with section 1310, each lawfully recognized collective bargain-
ing representative or other employee representative which represents 
the employees of each such employer, and the members of such entity 
shall be notified by the entity that the entity is not a qualified health 
maintenance organization for purposes of such section. The notice 
required by clause (B) of the preceding sentence shall contain, in 
readily understandable language, the reasons for the determination 
that the entity is not a qualified health maintenance orsfanization. The 
Secretary shall publish in the Federal Register each determination 
referred to in this paragraph. 
"('2) Tf the Secretary makes, with respect to an entity which has 
received a grant, contract, loan, or loan guarantee under this title, a 
determination described in subsection (a), the Secretarv mav, in addi-
tion to any other remedies available to him, bring a civil action in the 
United States district court for the district in which such entity is 
located to enforce its compliance with the assurances it furnished 
respecting the provision of basic and supplemental health services or 
its organization or operation, as the case may be, which assurances 
were made in connection with its application under this title for the 
grant, contract, loan, or loan 2fuarantee.". 
(c) Section 1312 is amended by adding at the end the following new 
subsection: 
"(c) The Secretary, acting through the Assistant Secretary for 
Health, shall administer subsections (a) and (b) in the Office of the 
Assistant Secretary for Health.". 
Notification. 
42 u s e 300e-9. 
Publication in 
Federal Register. 
42 u s e 300e-
11. 
Administration. 
HMO S AISTD FEDERAL HEALTH BENEFITS PROGRAMS 
SEC. 112. Section 1307(d) is amended by adding after and below 42 USC 300e-6. 
paragraph (2) the following new sentence: "An entity which provides 
health services to a defined population on a prepaid basis and which 
has members who are enrolled under the health benefits program 
authorized by chapter 89 of title 5, United States Code, may be con-
sidered as a health maintenance organization for purposes of receiving 
assistance under this title if with respect to its other members it pro-
vides health services in accordance with section 1301(b) and is 
organized and operated in the manner prescribed by section 1301 (c).". 
5 USC 8901 
et seq. 
42 USC SOOe. 
EXTENSIONS AND AUTHORIZATIONS 
SEC. 113. (a) Section 1304(j) is amended (1) by striking out 42 USC 300e-3. 
"September 30, 1976" and substituting "September 30, 1978", and (2) 
by striking out "September 30,1977" and substituting "September 30, 
1979". 
(b) Subsection (d) of section 1305 is amended to read as follows: 42 U
S
C 300e-4. 
"(d) No loan may be made or guaranteed under this section after 
September 30, 1980.". 
90 STAT. 1954 
PUBLIC LAW 94-460—OCT. 8, 1976 
42USC300e-8. 
(c) Section 1309(a) is amended— 
(1) by striking out "and" after "1975,", 
(2) by inserting after "1976" the following: ",$45,000,000 for 
the fiscal year ending September 30,1977, and $45,000,000 for the 
' 
fiscal 
year ending September 30, 1978", 
(3) by striking out "ending June 30, 1977" and substituting 
"ending September 30,1977", and 
, 
(4) by striking out "$85,000,000" the first time it occurs and 
substituting "$40,000,000", and by striking out "$85,000,000" the 
second time it occurs and substituting "$50,000,000". 
RESTRICTIVE STATE LAWS 
42 use 300e- 
SEC. 114. Section 1311 is amended by adding at the end the foUow-
lO- 
ing new subsection: 
'^^g®**- 
(c) The Secretary shall, within 6 months after the date of the 
enactment of this subsection, develop a digest of State laws, regula-
tions, and practices pertaining to development, establishment, and 
5 
operation of health maintenance organizations which shall be updated 
at least quarterly and relevant sections of which shall be provided to 
the Governor of each State annually. Such digest shall indicate which 
State laws, regulations, and practices appear to be inconsistent with the 
operation of this section. The Secretary shall also insure that appro-
priate legal consultative assistance is available to the States for the 
purpose of complying with the provisions of this section." 
42 use 300e-
13. 
42 use 300e-
2-300e-4. 
Report to 
eongress. 
PROGRAM EVALUATION BY THE COMPTROLLER GENERAL 
SEC. 115. So much of section 1314(a) as precedes paragraph (1) 
thereof is amended to read as follows: 
"SEC. 1314. (a) The Comptroller General shall evaluate the opera-
tions of at least ten or one-half (whichever is greater) of the health 
maintenance organizations for which assistance was provided under 
sections 1303, 1304, and 1305, and which, by December 31, 1976, have 
been designated by the Secretary under section 1310(d) as qualified 
health maintenance organizations. The Comptroller General shall 
report to the Congress the results of the evaluation by June 30, 1978. 
Such report shall contain findings—". 
ADMINISTRATION OF PROGRAMS 
SEC. 116. Title XIII is amended by adding after section 1315 the 
following new section: 
42 use 300e-
15. 
42 use 300e-9, 
300e-ll. 
'ADMINISTRATION or PROGRAM 
"SEC. 1316. The Secretary shall administer this title (other than 
sections 1310 and 1312) through a single identifiable administrative 
unit of the Department.". 
CONFORMING AMENDMENTS 
42 use 300n-l. 
42 use 300e-5. 
SEC. 117. (a) Section 1532(c) is amended by adding the following 
sentence at the end thereof: "The criteria established by any health 
systems agency or State Agency under paragraph (8) shall be con-
sistent with the standards and procedures established by the Secretary 
under section 1306(c) of this Act.". 
PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1955 
(b)(1) Paragraph (6) of section 1302 is amended to read as follows: 
"(6) The term 'health systems agency' means an entity which is 
designated in accordance with section 1515 of this Act.". 
(2) Paragraph (7) of section 1302 is amended by— 
(A) striking "section 314(a) State health planning agency 
whose section 314(a) plan" and substituting "State health plan-
ning and development agency which"; and 
(B) striking "section 314(b) areawide health planning agency 
whose section 314(b) plan", and substituting "health systems 
agency designated for a health service area which". 
(3) Paragraph (1) of section 1303(b) is amended by striking "sec-
tion 314(b) areawide health planning agency (if any) whose section 
314(b) plan" and substituting "each health systems agency designated 
for a health service area which". 
(4) Paragraph (1) of section 1304(c) is amended by striking "sec-
tion 314(b) areawide health planning agency (if any) whose section 
314(b) plan" and substituting "each health systems agency designated 
for a health service area which". 
(5) Section (b) (5) of section 1306 is amended to read as follows: 
"(5) each health systems agency designated for a health service 
area which covers (in whole or in part) the area to be served by 
the health maintenance organization for which such application 
is submitted:". 
(6) Subsection (c) of section 1306 is amended by striking "section 
314(b) areawide health planning agencies and section 314(a) State 
health planning agencies" and substituting "health systems agencies". 
42 u s e 300e-l. 
"Health systems 
agency." 
42 
use 
300/-4. 
42 
use 
300e-2. 
42 
use 
300e-3. 
42 
use 
300e-5. 
EFFECTIVE DATES 
SEC. 118. (a) Except as provided in subsection (b), the amend-
ments made by this title shall take effect on the date of the enactment 
of this Act. 
(b) (1) The amendments made by sections 101, 102, 103, 104, and 
106 shall (A) apply with respect to grants, contracts, loans, and loan 
guarantees made under sections 1303, 1304, and 1305 of the Public 
Health Service Act for fiscal years beginning after September 30, 
1976, (B) apply with respect to health benefit plans offered under 
section 1310 of such Act after such date, and (C) for purposes of sec-
tion 1312 take effect October 1,1976. 
(2) Subsection (d) of section 1301 of the Public Health Service 
Act (added by section 103(b) of this Act) shall take effect with 
respect to fiscal years of health maintenance organizations beginning 
on or after the date of the enactment of this Act. 
(3) The amendments made by section 107 shall apply with respect 
to grants, contracts, loans, and loan guarantees made under sections 
1303, 1304, and 1305 of the Public Health Service Act for fiscal years 
beginning after September 30,1976. 
(4) The amendments made by sections 109(a) (1) and 109(c) shall 
apply with respect to loan guarantees made under section 1305 of the 
Public Health Service Act after September 30,1976. 
(5) The amendment made by section 109(e) shall apply with respect 
to projects assisted under section 1304 of the Public Health Service 
Act after September 30,1976. 
(6) The amendments made by paragraphs (1) and (2) of section 
110(a) shall apply with respect to calendar quarters which begin 
after the date of the enactment of this Act. 
42 u s e 300e 
note. 
42 u s e 300e-
2-300e-4. 
42 u s e 300e-9. 
42 u s e 300e-
11. 
42 u s e 300e. 
90 STAT. 1956 
PUBLIC LAW 94-460—OCT. 8, 1976 
(7) The amendments made by paragraphs (3) and (4) of section 
110 shall apply with respect to failures of employers to comply with 
42 use 300e-9. 
section 1310 (a) of the Public Health Service Act after the date of the 
enactment of this Act. 
(8) The amendment made by section 111 shall apply with respect 
to determinations of the Secretary of Health, Education, and Welfare 
described in section 1312(a) of the Public Health Service Act and 
made after the date of the enactment of this Act. 
42 use 300e-
U. 
T I T L E I I — A M E N D M E N T S TO SOCIAL S E C U E I T Y ACT 
42 use 
1395mm. 
"Health 
maintenance 
organization.' 
42 use 1395x. 
42 use 300e. 
"Basic health 
Administration. 
MEDICARE AMENDMENTS 
SEC. 201. (a) Section 1876(b) of the Social Security Act is amended 
to read as follows: 
"(b) (1) The term 'health maintenance organization' means a legal 
entity which provides health services on a prepayment basis to indi-
viduals enrolled with such organizations and which— 
"(A) provides to its enrollees who are insured for benefits 
under parts A and B of this title or for benefits under part B 
alone, through institutions, entities, and persons meeting the 
applicable requirements of section 1861, all of the services and 
benefits covered under such parts (to the extent applicable under 
subparagraph (A) or (B) of subsection (a)(1)) which are avail-
able to individuals residing in the geographic area served by the 
organization; 
"(B) provides such services in the manner prescribed by sec-
tion 1301(b) of the Public Health Service Act, except that solely 
for the purposes of this section— 
"(i) the term 'basic health services' and references thereto 
shall be deemed to refer to the services and benefits included 
under parts A and B of this title; 
" (ii) the organization shall not be required to fix the basic 
health services payment under a community rating system; 
"(iii) the additional nominal payments authorized by sec-
tion 1301(b) (1) (D) of such Act shall not exceed the limits 
applicable under subsection (g) of this section; and 
"(iv) payment for basic health services provided by the 
organization to its enrollees under this section or for serv-
ices such enrollees receive other than through the organiza-
tion shall be made as provided for by this title; 
"(C) is organized and operated in the manner prescribed by 
section 1301(c) of the Public Health Service Act, except that 
solely for the purposes of this section— 
"(i) the term 'basic health services' and references thereto 
shall i3e deemed to refer to the services and benefits included 
under parts A and B of this title; 
"(ii) the organization shall not be reimbursed for the cost 
of reinsurance except as permitted by subsection (i) of this 
section; and 
"(iii) the organization shall have an open enrollment 
period as provided for in subsection (k) of this section. 
"(2) (A) The duties and functions of the Secretary, insofar as they 
involve making determinations as to whether an organization is a 
'health maintenance organization' within the meaning of paragraph 
(1), shall be administered through the Assistant Secretary for Health 
and in the Office of the Assistant Secretary for Health, and the admin-
PUBLIC LAW 94-460~OCT. 8, 1976 
90 STAT. 1957 
istration of such duties and functions shall be integrated with the 
administration of section 1312 (a) and (b) of the Public Health Serv-
ice Act. 
"(B) Except as provided in subparagraph (A), the Secretary shall 
administer the provisions of this section through the Commissioner 
of Social Security.". 
(b) Section 1876(h) of such Act is amended to read as follows: 
"(h) (1) Except as provided in paragraph (2), each health mainte-
nance organization with which the Secretary enters into a contract 
under this section shall have an enrolled membership at least half of 
which consists of individuals who have not attained age 65. 
"(2) The Secretary may waive the requirement imposed in para-
graph (1) for a period of not more than three years from the date a 
health maintenance organization first enters into an agreement with 
the Secretary pursuant to subsection (i), but only for so long as such 
organization demonstrates to the satisfaction of the Secretary by the 
submission of its plan for each year that it is making continuous efforts 
and progress toward compliance with the provisions of paragraph 
(1) within such three-year period.". 
(c) Section 1876(i) (6) (B) of such Act is amended by striking out 
"(other than those with respect to out-of-area services)" and inserting 
in lieu thereof "(other than costs with respect to out-of-area services 
and, in the case of an organization which has entered into a risk-
sharing contract with the Secretary pursuant to paragraph (2) (A), 
the cost of providing any member with basic health services the aggre-
gate value of which exceeds $5,000 in any year)". 
(d) Section 1876 is amended by adding at the end thereof the 
following— 
"(k) Each health maintenance organization with which the Secre-
tary enters into a contract under this section shall have an open enroll-
ment period at least every year under which it accepts up to the limits 
of its capacity and without restrictions, except as may be authorized 
in reofulations, individuals who are eligible to enroll under subsection 
(d) in the order in which they apply for enrollment (unless to do so 
would result in failure to meet the requirements of subsection (h)) 
or would result in enrollment of enrollees substantially nonrepresenta-
tive, as determined in accordance with regulations of the Secretary, 
of the population in the geographic area served by such health main-
tenance organization.". 
(e) The amendments made by this section shall be effective with 
respect to contracts entered into between the Secretary and health 
maintenance organizations under section 1876 of the Social Security 
Act on and after the first dav of the first calendar month which begins 
more than 30 days after the date of enactment of this Act. 
42 u s e 300e-
11. 
42 use 
1395mm. 
Waiver. 
Open 
enrollment 
period. 
Effective date. 
42 use 
1395mm note. 
MEDICAID AMENDMENTS 
SEC. 202. (a) Section 1903 of the Social Security Act is amended by 42 USC 1396b, 
adding at the end thereof the following new subsection: 
"(m) (1) (A) The term 'health maintenance organization' means a 
legal entity which provides health services to individuals enrolled in 
such organization and which— 
"(i) provides to its enrollees who are eligible for benefits under 
this title the services and benefits described in paragraphs (1), 
(2), (3), (4)(C), and (5) of section 1905, and, to the extent 
required by section 1902(a) (13) (A) (ii) to be provided under a 
State plan for medical assistance, the services and 
benefits 
described in paragraph (7) of section 1905(a); 
"Health 
maintenance 
organization.' 
42 use 1396d,. 
42 use 1396a. 
90 STAT. 1958 
PUBLIC LAW 94-460—OCT. 8, 1976 
"Basic health 
services." 
42 use 300e. 
42 use 1396d. 
42 use 1396a. 
Administration. 
42 use 300e-
IL 
42 use 247d, 
254c. 
"(ii) provides such services and benefits in the manner pre-
scribed in section 1301(b) of the Public Health Service Act 
(except that, solely for purposes of this paragraph, the term 'basic 
health services' and references thereto, when employed in such 
section, shall be deemed to refer to the services and benefits 
described in paragraphs (1), (2), (3), (4)(C),and (5) of section 
1905(a), and, to the extent required by section 1902(a) (13) (A) 
(ii) to be provided under a State plan for medical assistance, the 
services and benefits described in paragraph (7) of section 1905 
(a)); and 
"(iii) is organized and operated in the manner prescribed by 
section 1301(c) of the Public Health Service Act (except that 
solely for purposes of this paragraph, the term 'basic health serv-
ices' and references thereto, when employed in such section shall 
be deemed to refer to the services and benefits described in section 
1905 (a) (1), (2), (3), (4) (C),and (5), and to the extent required 
by section 1902(a) (13) (A) (ii) to be provided under a State plan 
for medical assistance, the services and benefits described in para-
graph (7) of section 1905(a)). 
"(B) The duties and functions of the Secretary, insofar as they 
involve making determinations as to whether an organization is a 
health maintenance organization within the meaning of subparagraph 
(A), shall be administered through the Assistant Secretary for Health 
and in the Office of the Assistant Secretary for Health, and the admin-
istration of such duties and functions shall be integrated with the 
administration of section 1312 (a) and (b) of the Public Health 
Service Act. 
"(2) (A) Except as provided in subparagraphs (B) and (C), no 
payment shall be made under this title to a State with respect to 
expenditures incurred by it for payment for services provided by any 
entity— 
" (i) which is responsible for the provision of— 
"(I) inpatient hospital services and any other service 
described in paragraph (2), (3), (4), (5), or (7) of section 
1905(a), or 
"(II) any three or more of the services described in such 
paragraphs, 
when payment for such services is determined under a prepaid 
capitation risk basis or under any other risk basis; 
"(ii) which the Secretary (or the State as authorized by para-
graph (3)) has not determined to be a health maintenance orga-
nization as defined in paragraph (1); and 
"(iii) more than one-half of the membership of which consists 
of individuals who are insured under parts A and B of title 
XVHI or recipients of benefits under this title. 
"(B) Subparagraph (A) does not apply with respect to payments 
under this title to a State with respect to expenditures incurred by it 
for payment for services provided by an entity which— 
"(i) (I) received a grant of at least $100,000 in the fiscal year 
ending June 30,1976, under section 319(d) (1) (A) or 330(d) (1) 
of the Public Health Service Act, and (II) for the period begin-
ning July 1, 1976, and ending on the expiration of the peroid 
for which payments are to be made under this title has been the 
recipient of a grant under either such section; and 
PUBLIC LAW 94-460—OCT. 8, 1976 
90 STAT. 1959 
"(II) provides to its enroUees, on a prepaid capitation risk 
basis or on any other risk basis, all of the services and benefits 
described in paragraphs (1), (2), (3), (4) (C), and (5) of section 
1905(a) and, to the extent required by section 1902(a) (13) (A) 
(ii) to be provided under a State plan for medical assistance, the 
services and benefits described in paragraph (7) of such section; 
or "(ii) is a nonprofit primary health care entity located in a rural 
area (as defined by the Appalachian Regional Commission)— 
" (I) which received in the fiscal year ending June 30,1976, 
at least $100,000 (by grant, subgrant, or subcontract) under 
the Appalachian Regional Development Act of 1965, and 
"(II) for the period beginning July 1,1976, and ending on 
the expiration of the period for which payments are to be 
made under this title either has been the recipient of a grant, 
subgrant, or subcontract under such Act or has provided serv-
ices under a contract (initially entered into during a year in 
which the entity was the recipient of such a ^ant, subgrant, 
or subcontract) with a State agency under this title on a pre-
paid capitation risk basis or on any other risk basis; or 
"(iii) which has contracted with the single State agency for the 
provision of services (but not including inpatient hospital serv-
ices) to persons eligible under this title on a prepaid risk basis 
prior to 1970. 
"(C) Subparagraph (A) (iii) shall not apply with respect to 
payments under this title to a State with respect to expenditures 
incurred by it for payment for services by an entity during the 
three-year period beginning on the date of enactment of this sub-
section or beginning on the date the entity enters into a contract 
with the State under this title for the provision of health services 
on a prepaid risk basis, whichever occurs later, but only if the 
entity demonstrates to the satisfaction of the Secretary by the 
submission of plans for each year of such three-year period that 
it is making continuous efforts and progress toward achieving 
compliance with subparagraph (A) (iii). 
"(3) A State may, in the case of an entity which has submitted an 
application to the Secretary for determination that it is a health main-
tenance organization within the meaning of paragraph (1) and for 
which no such determination has been made within 90 days of the sub-
mission of the application, make a provisional determination for the 
purposes of this title that such entity is such a health maintenance 
organization. Such provisional determination shall remain in force 
until such time as the Secretary makes a determination regarding the 
entity's qualification under paragraph (1).". 
(b) The amendment made by subsection (a) shall apply with 
respect to payments under title XIX of the Social Security Act to 
States for services provided— 
(1) after the date of enactment of subsection (a) under con-
tracts under such title entered into or renegotiated after such date, 
or 
(2) after the expiration of the 1-year period beginning on such 
date of enactment, 
whichever occurs first. 
42 use 1396(i. 
42 use 1396a. 
40 use app. 1. 
42 use 1396b 
note. 
42 use 1396. 
90 STAT. 1960 
PUBLIC LAW 94-460—OCT. 8, 1976 
• 
TITLE III—MISCELLANEOUS AMENDMENTS 
CENTER FOR HEALTH SERVICES POLICY ANALYSIS 
42 use 242c. 
SEC 301. Section 305(d) (1) of the Public Health Service Act is 
amended (1) by striking out "two national special emphasis centers" 
and substituting "three national special emphasis centers", (2) by 
striking out "and one" and substituting "one", and (3) by inserting 
before the last close parenthesis a semicolon and the following: "and 
one of which (to be designated as the Health Services Policy Analysis 
Center) shall focus on the development and evaluation of national 
. i 
policies with respect to health services, including the development of 
health maintenance organizations and other forms of group practice, 
with a view toward improving the efficiencies of the nealth services 
delivery system". 
HOME HEALTH EXTENSION 
42 use 1395x 
SEC. 302. (a) Section 602(a) (5) of Public Law 94-63 is amended by 
note. 
inserting ", $2,000,000 for the period July 1, 1976, through Septem-
ber 30,1976, $8,000,000 for the fiscal year ending September 30,1977" 
after "1976". 
(b) Section 602(b) (4) of Public Law 94-63 is amended by inserting 
", $1,000,000 for the period July 1, 1976, through September 30,1976, 
and $4,000,000 for the fiscal year ending September 30, 1977" after 
"1976". 
EXTENSION OF REPORTING DATE 
42 use 289k-2 
SEC. 303. Section 603(b) of Public Law 94-63 is amended by strik-
"ot®- 
ing "Within one year" and substituting "Not later than 2 years". 
TECHNICAL 
21 use 360d. 
SEC. 304. Section 514(a) of the Federal Food, Drug, and Cosmetic 
Act is amended by redesignating paragraphs (4) and (5) as para-
graphs (3) and (4),respectively. 
Approved October 8, 1976. 
LEGISLATIVE HISTORY: 
HOUSE REPORTS: No. 94-518 (eomm. on Interstate and Foreign eommerce) and 
No. 94-1513 (eomm. of eonference). 
SENATE REPORT No. 94-844 accompanying S. 1926 (eomm. on Labor and Public 
Welfare). 
eONGRESSIONAL REeORD: 
Vol. 121 (1975): Nov. 7, considered and passed House. 
Vol. 122 (1976): June 14, considered and passed Senate, amended, in lieu of 
S. 1926. 
Sept. 16, Senate agreed to conference report. 
Sept. 23, House agreed to conference report. 
WEEKLY eOMPILATION OF PRESIDENTIAL DOeUMENTS: 
Vol. 12, No. 42 (1976): Oct. 9, Presidential statement.