H.R. 3130 (104th): Health Insurance Affordability Act of 1996

104th Congress, 1995–1996. Text as of Mar 20, 1996 (Introduced).

Status & Summary | PDF | Source: GPO

HR 3130 IH

104th CONGRESS

2d Session

H. R. 3130

To assure availability and continuity of health insurance and to simplify the administration of health coverage.

IN THE HOUSE OF REPRESENTATIVES

March 20, 1996

Mr. PETERSON of Florida (for himself, Mr. MORAN, Mr. DOOLEY of California, Mr. BAESLER, Mr. BERMAN, Ms. BROWN of Florida, Mr. CLEMENT, Mr. COLEMAN, Mr. DELLUMS, Mr. DIXON, Mr. FATTAH, Mr. FAZIO of California, Mr. FRAZER, Mr. HASTINGS of Florida, Mr. HEFNER, Mr. HILLIARD, Mr. HINCHEY, Ms. KAPTUR, Mr. LAFALCE, Mrs. LINCOLN, Mr. LEWIS of Georgia, Ms. LOFGREN, Ms. MCKINNEY, Mrs. MEEK of Florida, Mr. MINGE, Mr. NADLER, Ms. NORTON, Mr. OBERSTAR, Ms. PELOSI, Mr. POSHARD, Ms. ROYBAL-ALLARD, Mr. SABO, Mr. SANDERS, Mrs. SCHROEDER, Mr. STENHOLM, Mr. STUPAK, Mr. TORRES, Ms. VELAZQUEZ, Mr. YATES, Mr. CLYBURN, Mr. JEFFERSON, Mr. PASTOR, Mr. CRAMER, Mr. ROSE, Mrs. THURMAN, Mr. PAYNE of Virginia, Ms. JACKSON-LEE of Texas, and Mr. PALLONE) introduced the following bill; which was referred to the Committee on Commerce, and in addition to the Committee on Ways and Means, the Judiciary, and Economic and Educational Opportunities, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To assure availability and continuity of health insurance and to simplify the administration of health coverage.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Health Insurance Affordability Act of 1996’.

    (b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

      Sec. 1. Short title; table of contents.

TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

Subtitle A--Guaranteed Access to Health Coverage

      Sec. 101. Guaranteed offer by carriers.

      Sec. 102. Guaranteed issue by carriers.

      Sec. 103. Guaranteed renewal.

      Sec. 104. Restricting preexisting condition exclusions.

      Sec. 105. Enrollment periods.

Subtitle B--Provision of Benefits

      Sec. 111. Standards for managed care arrangements.

      Sec. 112. Report on utilization review standards.

Subtitle C--Fair Rating Practices

      Sec. 121. Use of fair rating practices.

      Sec. 122. Establishment of risk adjustment mechanisms.

Subtitle D--Consumer Protections

      Sec. 131. Requirement for provision of information.

      Sec. 132. Prohibition of improper incentives.

      Sec. 133. Written policies and procedures respecting advance directives.

Subtitle E--Benefits

      Sec. 141. Qualified health coverage.

      Sec. 142. Standard coverage.

      Sec. 143. High-deductible coverage.

      Sec. 144. Actuarial valuation of benefits.

      Sec. 145. Limitation on offering supplemental benefits.

      Sec. 146. Family coverage option; supplemental coverage.

      Sec. 147. Level playing field for providers.

Subtitle F--Standards and Certification; Enforcement; Preemption; General Provisions

      Sec. 151. Establishment of standards.

      Sec. 152. Application of standards to carriers through States.

      Sec. 153. Application to group health plans.

      Sec. 154. Enforcement.

      Sec. 155. Limitation on self insurance for small employers.

Subtitle G--Definitions; General Provisions

      Sec. 191. General definitions.

      Sec. 192. Definitions relating to employment.

      Sec. 193. Definitions relating to health coverage, plans, and carriers.

      Sec. 194. Definitions relating to residence and immigration status.

      Sec. 195. Effective dates.

TITLE II--ADMINISTRATIVE SIMPLIFICATION

      Sec. 200. Purpose.

      Sec. 201. Definitions.

Subtitle A--Standards for Data Elements and Transactions

      Sec. 211. General requirements on Secretary.

      Sec. 212. Standards for data elements of health information.

      Sec. 213. Information transaction standards.

      Sec. 214. Health information network privacy standards.

      Sec. 215. Timetables for adoption of standards.

Subtitle B--Requirements with Respect to Certain Transactions and Information

      Sec. 221. Standard transactions and information.

      Sec. 222. Accessing health information for authorized purposes.

      Sec. 223. Ensuring availability of information.

      Sec. 224. Timetables for compliance with requirements.

Subtitle C--Miscellaneous Provisions

      Sec. 231. Standards and certification for health information network services.

      Sec. 232. Imposition of additional requirements.

      Sec. 233. Effect on State law.

TITLE III--ANTITRUST

      Sec. 301. Publication of antitrust guidelines on activities of health plans.

TITLE I--ASSURING AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

Subtitle A--Guaranteed Access to Health Coverage

SEC. 101. GUARANTEED OFFER BY CARRIERS.

    (a) IN GENERAL- Each carrier that offers health insurance coverage in the individual/small group market in a fair rating area (as defined in section 193) shall make available, to each qualifying individual (as defined in section 194(3)) or small employer (covered in such market) in such fair rating area--

      (1) qualified standard coverage consistent with section 142, and

      (2) subject to subsection (b), qualified high-deductible coverage consistent with section 143.

    (b) HIGH-DEDUCTIBLE COVERAGE-

      (1) EXCEPTION FOR HEALTH MAINTENANCE ORGANIZATIONS- The requirement of subsection (a)(2) shall not apply with respect to health insurance coverage that--

        (A) is provided by a Federally qualified health maintenance organization (as defined in section 1301(a) of the Public Health Service Act), or

        (B) is not provided by such an organization but is provided by an organization recognized under State law as a health maintenance organization or managed care organization or a similar organization regulated under State law for solvency.

      (2) LIMITATION ON OFFER OF HIGH-DEDUCTIBLE COVERAGE- Qualified high-deductible coverage may not be made available by a carrier to a qualifying individual (or to a small employer with respect to an employee) unless the carrier also makes available qualified standard coverage that has identical benefits (other than the amount of the deductible) and the individual or employee demonstrates to the carrier that the individual or employee has available assets (as defined by the Secretary) equal to at least the deductible amount established under section 144(b)(1) applicable to the high-deductible coverage. A carrier may not make available to an individual health coverage (other than coverage for supplemental benefits) the actuarial value of which is less than the actuarial value of qualified high-deductible coverage, unless the individual has available assets (as defined by the Secretary) equal to at least the deductible amount of the coverage offered.

    (c) COVERAGE OF ENTIRE RATING AREA-

      (1) IN GENERAL- With respect to each fair rating area for which a carrier offers health insurance coverage, the carrier shall provide for coverage of benefits for items and services furnished throughout the fair rating area.

      (2) SPECIAL RULE FOR CARRIERS OFFERING COVERAGE IN MULTI-STATE METROPOLITAN STATISTICAL AREAS- In the case of a carrier that offers qualified health insurance coverage in the individual/small employer market in a portion of a State that is located in an interstate metropolitan statistical area, the carrier may not provide such coverage with respect to an individual or employer in such metropolitan statistical area unless the carrier also offers such coverage in other portions of the area located in other States.

      (3) SPECIAL RULE FOR COVERAGE THROUGH MANAGED CARE ARRANGEMENT- In the case of coverage offered by a carrier or under a group health plan to the extent that it provides benefits through a managed care arrangement in a fair rating area, this subsection shall not be construed as requiring the establishment of facilities throughout the area, if the facilities are located consistent with section 102(b)(1).

    (d) FAMILY COVERAGE OPTION- The offer of coverage under this section with respect to an individual shall include the option of coverage of family members of the individual.

    (e) LIMITATION ON CARRIERS- A carrier may not require an employer under a group health plan to impose through a waiting period for health coverage under a plan or similarly require a limitation or condition on health coverage or benefits based on--

      (1) the health status of an individual,

      (2) claims experience of an individual,

      (3) receipt of health care by an individual,

      (4) medical history of an individual,

      (5) receipt of public subsidies by an individual, or

      (6) lack of evidence of insurability of an individual.

    (f) CONSTRUCTION FOR MEWAS- Nothing in this section shall be construed as requiring a multiple employer welfare arrangement that provides health coverage other than through a carrier to meet the requirements of this section.

SEC. 102. GUARANTEED ISSUE BY CARRIERS.

    (a) IN GENERAL- Subject to subsections (b) and (c) and section 103, each carrier that offers health insurance coverage in the individual/small group market in a fair rating area--

      (1) must accept every small employer in the area that applies for such coverage during an enrollment period provided under section 105; and

      (2) must accept for enrollment under such coverage every qualifying individual (and family member of such an individual) who applies for enrollment during an enrollment period provided under section 105 and may not place any restriction on the eligibility of an individual to enroll so long as such individual is a qualifying individual.

    (b) SPECIAL RULES FOR MANAGED CARE ARRANGEMENTS- In the case of coverage offered by a carrier or under a group health plan that provides benefits through a managed care arrangement in a fair rating area, the carrier or plan--

      (1) need not establish facilities for the delivery of health care services throughout the area so long as such facilities are located in a manner that does not discriminate on the basis of health status of individuals residing in proximity to such facilities, and

      (2) may deny such coverage in a fair rating area to employers or individuals if the organization demonstrates to the applicable regulatory authority that--

        (A) it will not have the capacity to deliver services adequately to enrollees of any additional groups or additional enrollees because of its obligations to existing group contract holders and enrollees, and

        (B) it is applying this paragraph uniformly to all employers and individuals without regard to the health status, claims experience, or duration of coverage of those employers and their employees.

    Coverage may be denied under paragraph (2) only if the denial is applied during a consecutive period of at least 180 days.

    (c) SPECIAL RULE FOR FINANCIAL CAPACITY LIMITS- In addition to the authority provided under subsection (b)(2), in the case of coverage offered by any carrier, the carrier may deny coverage to a small employer or individual if the carrier demonstrates to the applicable regulatory authority that--

      (1) it does not have the financial reserves necessary to underwrite additional coverage, and

      (2) it is applying this subsection uniformly to all employers and individuals without regard to the health status, claims experience, or duration of coverage of those employers and their employees.

    Coverage may be denied under this subsection only if the denial is applied during a consecutive period of at least 180 days.

    (d) TREATMENT OF CERTAIN MEWAS- Subsection (a) shall not apply to a carrier if the only coverage offered by the carrier in the individual/small group market is through one or more multiple employer welfare arrangements. In the case of coverage offered by a carrier in the individual/small group market through a multiple employer welfare arrangement and to which the previous sentence does not apply, the requirements of subsection (a) shall apply to the carrier and not to the arrangement.

SEC. 103. GUARANTEED RENEWAL.

    (a) LIMITATION ON TERMINATION BY CARRIERS- A carrier may not deny, cancel, or refuse to renew health coverage of a qualifying individual or eligible employer within a type of coverage option described in section 193(13) except--

      (1) on the basis of nonpayment of premiums,

      (2) on the basis of fraud or misrepresentation, or

      (3) subject to subsection (b), in a fair rating area because the carrier is ceasing to provide any health insurance coverage in the individual/small group market within such type of coverage option in the area.

    (b) LIMITATIONS ON MARKET EXIT BY CARRIERS-

      (1) NOTICE, ETC- Subsection (a)(3) shall not apply to a carrier ceasing to provide health insurance coverage unless--

        (A) such termination of coverage takes effect at the end of a contract year, and

        (B) the carrier provides notice of such termination to employers and individuals covered at least 30 days before the date of an annual

open enrollment period established with respect to the employer or individual under section 105.

      (2) LIMITATION ON REENTRY IN INDIVIDUAL/SMALL GROUP MARKET- If a carrier ceases to offer or provide health insurance coverage in an area with respect to the individual/small group market for a type of coverage option, the insurer may not offer health insurance coverage in the area in such market within such type of coverage option until 5 years after the date of the termination.

    (c) RULE FOR MULTIEMPLOYER PLANS AND MULTIPLE EMPLOYER HEALTH- A multiemployer plan and a multiple employer health plan may not cancel coverage or deny renewal of coverage under such a plan with respect to an employer other than--

      (1) for nonpayment of contributions,

      (2) for fraud or other misrepresentation by the employer, or

      (3) because the plan is ceasing to provide any coverage in a geographic area.

SEC. 104. RESTRICTING PREEXISTING CONDITION EXCLUSIONS.

    (a) IN GENERAL- Except as provided in this section, a carrier or group health plan providing health coverage may not exclude health coverage with respect to services related to treatment of a condition based on the fact that the condition of an individual existed before the effective date of coverage of the individual.

    (b) LIMITED 6-Month Exclusion Permitted-

      (1) IN GENERAL- Subject to paragraph (2) and subsections (c) through (e), a carrier or group health plan providing health coverage may exclude health coverage with respect to services related to treatment of a condition of an individual based on the fact that the condition existed before the effective date of coverage of the individual only if the period of the exclusion does not exceed 6 months beginning on the date of coverage.

      (2) CREDITING OF PREVIOUS COVERAGE-

        (A) IN GENERAL- A carrier or group health plan providing health coverage shall provide that if a covered individual is in a period of continuous coverage (as defined in subparagraph (C)) as of a date upon which coverage is initiated or reinitiated, any period of exclusion of coverage with respect to a preexisting condition (as defined in subparagraph (B)) for such services or type of services shall be reduced by 1 month for each month in the period of continuous coverage.

        (B) PREEXISTING CONDITION DEFINED- In this paragraph, the term ‘preexisting condition’ means, with respect to health coverage, a condition which has been diagnosed or treated during the 6-month period ending on the day before the first date of such coverage (without regard to any waiting period).

        (C) PERIOD OF CONTINUOUS COVERAGE- In this part, the term ‘period of continuous coverage’ means the period beginning on the date an individual has health coverage (or coverage under a public plan providing medical benefits) and ends on the date the individual does not have such coverage for a continuous period of more than 3 months (or 6 months in the case of an individual who loses coverage due to involuntary termination of employment, other than by reason of an employee’s gross misconduct).

    (c) EXCLUSION NOT APPLICABLE TO PREGNANCY- Any exclusion of coverage under subsection (b)(1) shall not apply if the exclusion relates to pregnancy.

    (d) EXCLUSION NOT APPLICABLE TO NEWBORNS AND ADOPTED CHILDREN-

      (1) NEWBORNS- Any exclusion of coverage under subsection (b)(1) shall not apply to a child who is covered at the time of birth and remains in a period of continuous coverage after such time.

      (2) ADOPTED CHILDREN- Any exclusion of coverage under subsection (b)(1) shall not apply (beginning on the date of adoption) to an adopted child who is covered at the time of adoption and remains in a period of continuous coverage after such time.

    (e) EXCLUSION NOT APPLICABLE TO INDIVIDUALS ENROLLED OR ENROLLING DURING CERTAIN OPEN ENROLLMENT PERIODS-

      (1) INDIVIDUALS ENROLLING DURING PERIOD- In the case of an individual who enrolls and obtains coverage during an open enrollment period described in section 105(b), any exclusion of coverage under subsection (b)(1) shall not apply so long as the individual remains in a period of continuous coverage.

      (2) INDIVIDUALS ENROLLED AT BEGINNING OF PERIOD- In the case of an individual who has health coverage as of the first day of the initial open enrollment period described in section 105(b)(1), any exclusion of coverage under subsection (b)(1) shall not apply as of such date and so long as the individual is in a period of continuous coverage.

    (f) APPLICATION OF RULES BY CERTAIN HEALTH MAINTENANCE ORGANIZATIONS- A health maintenance organization that provides health insurance coverage shall not be considered as failing to meet the requirements of section 1301 of the Public Health Service Act notwithstanding that it provides for an exclusion of the coverage based on a preexisting condition consistent with the provisions of this subtitle so long as such exclusion is applied consistent with the provisions of this part.

SEC. 105. ENROLLMENT PERIODS.

    (a) IN GENERAL- Each carrier and each group health plan providing health coverage in the individual/small group market shall permit qualifying individuals and eligible employers to obtain health coverage from the carrier or group health plan during each enrollment period provided under this section.

    (b) OPEN ENROLLMENT PERIODS FOR WHICH PREEXISTING CONDITION EXCLUSIONS WAIVED-

      (1) INITIAL PERIOD- There shall be an initial open enrollment period, with respect to individuals and employees who are residents of a State, during the 60-day period beginning on January 1, 1997.

      (2) INDIVIDUALS ELIGIBLE FOR SUBSIDIES- There shall be an individual open enrollment period with respect to an individual at the time the individual first becomes eligible for any premium assistance under part A of title XXI of the Social Security Act, during the 60-day period beginning on the first date the individual meets eligibility criteria within any 12-month period.

      (3) COURT ORDERS- If a court has ordered that coverage be provided for a spouse or child of an employee or individual under health coverage of the employee or individual, there shall be an open enrollment period during the 30-day period beginning on the date of issuance of the court order.

      (4) ENROLLMENT OF NEWBORNS AND NEWLY ADOPTED CHILDREN- There shall be an open enrollment period with respect to a newborn child and a newly adopted child during the 30-day period beginning on the date of the birth or adoption of a child, if family coverage is available as of such date.

    (c) ANNUAL OPEN ENROLLMENT PERIODS FOR WHICH PREEXISTING CONDITION EXCLUSIONS MAY APPLY-

      (1) IN GENERAL- Each carrier and each group health plan providing health coverage in the individual/small group market shall provide for at least one annual open enrollment period (of not less than 30 days) each year. Such period shall be in addition to the open enrollment periods described in subsection (b).

      (2) COORDINATION-

        (A) CARRIERS IN INDIVIDUAL/SMALL GROUP MARKET- Such annual open enrollment periods with respect to carriers in the individual/small group market are subject to coordination by States.

    (d) OTHER OPEN ENROLLMENT PERIODS FOR WHICH PREEXISTING CONDITION EXCLUSIONS MAY APPLY-

      (1) TERMINATION OF RESIDENCE AREA- For each qualifying individual, at the time the individual terminates residence in the service area of coverage provided by a carrier to the individual, there shall be an open enrollment period (of not less than 30 days) during which the individual may enroll in health coverage.

      (2) FAMILY OR EMPLOYMENT CHANGES- In the case of a qualifying individual who--

        (A) through divorce or death of a family member experiences a change in family composition, or

        (B) experiences a change in employment status (including a significant change in the terms and conditions of employment or the terms and conditions of employment of a spouse),

      there shall be an open enrollment period (of at least 30 days) in which the individual is permitted to change the individual or family basis of coverage or the health coverage in which the individual is enrolled. The circumstances under which such enrollment periods are required and the duration of such periods shall be specified by the Secretary.

      (3) ENROLLMENT DUE TO LOSS OF PREVIOUS COVERAGE- In the case of a qualifying individual who--

        (A) had health coverage at the time of an individual’s enrollment period,

        (B) stated at the time of such period that having other health coverage was the reason for declining enrollment, and

        (C) lost the other health coverage as a result of the termination of the coverage, termination or reduction of employment, or other reason, except termination at the option of the individual,

      there shall be an open enrollment period during the 30-day period beginning on the date of termination of the other coverage.

      (4) ENROLLMENT AT TIME OF MARRIAGE- There shall be an open enrollment period with respect to the spouse of an individual (including children of the spouse) during the 30-day period beginning on the date of the marriage, if family coverage is available as of such date.

      (5) NO EFFECT ON COBRA CONTINUATION BENEFITS- Nothing in this subsection shall be construed as affecting rights of individuals to continuation coverage under section 4980B of the Internal Revenue Code of 1986, part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, or title XXII of the Public Health Service Act.

    (e) PERIOD OF COVERAGE-

      (1) IN GENERAL- In the case of a qualifying individual who enrolls under health coverage during an open enrollment period under this section, coverage shall begin on such date (not later than the first day of the first month that begins at least 15 days after the date of enrollment) as the Secretary shall specify, consistent with this subsection.

      (2) COVERAGE OF FAMILY MEMBERS- In the case of an open enrollment period described in subsection (b)(3), (b)(4), or (d)(4), the Secretary shall provide for coverage of family members to begin as soon as possible on or after the date of the event that gives rise to the special enrollment period (or, in the case of birth or adoption, as of the date of birth or adoption).

Subtitle B--Provision of Benefits

SEC. 111. STANDARDS FOR MANAGED CARE ARRANGEMENTS.

    (a) APPLICATION OF REQUIREMENTS- Each group health plan, and each carrier providing health insurance coverage, that provides for health care through a managed care arrangement (as defined in section 193(10)(A)) shall comply with the applicable requirements of this section.

    (b) CONSUMER DISCLOSURE-

      (1) IN GENERAL- The group health plan, or carrier providing health insurance coverage, that provides for health care shall assure that, before an individual is enrolled with the plan or carrier, the individual is provided with information about the arrangements between the entity providing for the managed care arrangement and health care providers for the provision of covered benefits, including the following:

        (A) EMERGENCY SERVICES- Arrangements for access to emergency care services inside and outside the provider network (including designated trauma centers), including any requirements for prior authorization.

        (B) SPECIALIZED TREATMENT- Arrangements for access to specialized treatment providers (such as centers of excellence).

        (C) CHOICE OF PERSONAL PHYSICIAN- Ability of enrollees to choose (and change the selection of) a personal physician from among available participating physicians and change that selection as appropriate.

        (D) ESSENTIAL COMMUNITY PROVIDERS- Arrangements for access to essential community providers, including disproportionate share hospitals, sole community hospitals, medicare-dependent, small rural hospitals, Federally qualified health centers, rural health clinics, local health departments, and children’s hospitals.

      (2) DESIGNATION OF CENTERS OF EXCELLENCE- The Secretary shall establish a process for the designation of facilities, including children’s hospitals and other pediatric facilities, as centers of excellence for purposes of this subsection. A facility may not be designated unless the facility is determined--

        (A) to provide specialty care,

        (B) to deliver care for complex cases requiring specialized treatment and for individuals with chronic diseases, and

        (C) to meet other requirements that may be established by the Secretary relating to specialized education and training of health professionals, participation in peer-reviewed research, or treatment of patients from outside the geographic area of the facility.

    (c) PROVIDER DISCLOSURE AND DUE PROCESS RELATING TO PROVIDER NETWORKS-

      (1) DISCLOSURE- The entity providing for a managed care arrangement under which health coverage shall provide that before entering into a contract with health care providers with respect to the entity’s provider network, the provider is given information concerning the terms and conditions of the provider’s involvement with the network, including the following:

        (A) STANDARDS FOR SELECTION OF PROVIDERS FOR NETWORK- Information concerning the standards (including criteria for quality, efficiency, credentialing, and services) to be used by the entity for contracting with health care providers with respect to the entity’s provider network.

        (B) REVIEW PROCESS- Information concerning the process under which a provider may request a review of the entity’s decision to terminate or refuse to renew the provider’s participation agreement.

      (2) WRITTEN NOTICE OF DENIALS- The entity providing for the managed care arrangement shall provide written notice to the provider of any denial of an application to participate in the provider network.

      (3) TERMINATION PROCESS-

        (A) IN GENERAL- The entity may not terminate or refuse to renew a participation agreement with a provider in the entity’s provider network unless the entity provides written notification to the provider of the entity’s decision to terminate or refuse to renew the agreement. The notification shall include a statement of the reasons for the entity’s decision, consistent with any standards described in paragraph (1)(A).

        (B) TIMING OF NOTIFICATION- The entity shall provide the notification required under subparagraph (A) at least 30 days prior to the effective date of the termination or expiration of the agreement (whichever is applicable). The previous sentence shall not apply if failure to terminate the agreement prior to the deadline would adversely affect the health or safety of a covered individual.

    (d) NO REFERRAL REQUIRED FOR OBSTETRICS AND GYNECOLOGY- A carrier or group health plan may not require an individual to obtain a referral from a physician in order to obtain covered items and services from a physician who specializes in obstetrics and gynecology.

    (e) Preemption of State Law Restrictions on Managed Care Arrangements-

      (1) LIMITATION ON RESTRICTIONS ON NETWORK PLANS- Effective as of January 1, 1997--

        (A) a State may not prohibit or limit a carrier or group health plan providing health coverage from including incentives for enrollees to use the services of participating providers;

        (B) a State may not prohibit or limit such a carrier or plan from limiting coverage of services to those provided by a participating provider;

        (C) a State may not prohibit or limit the negotiation of rates and forms of payments for providers by such a carrier or plan with respect to health coverage;

        (D) a State may not prohibit or limit such a carrier or plan from limiting the number of participating providers;

        (E) a State may not prohibit or limit such a carrier or plan from requiring that services be provided (or authorized) by a practitioner selected by the enrollee from a list of available participating providers or, except as provided in subsection 111(d), from requiring enrollees to obtain referral in order to have coverage for treatment by a specialist or health institution; and

        (F) a State may not prohibit or limit the corporate practice of medicine.

      (2) DEFINITIONS- In this subsection:

        (A) MANAGED CARE COVERAGE- The term ‘manageds care coverage’ means health coverage to the extent the coverage is provided through a managed care arrangement (as defined in section 193(10)(A)) that meets the applicable requirements of this section.

        (B) PARTICIPATING PROVIDER- The term ‘participating provider’ means an entity or individual which provides, sells, or leases health care services as part of a provider network (as defined in section 193(10)(B)).

SEC. 112. REPORT ON UTILIZATION REVIEW STANDARDS.

    (a) STUDY- The Secretary shall provide for a study on the feasibility and appropriateness of--

      (1) establishing standards for utilization review programs, and

      (2) prohibiting group health plans and carriers providing health insurance coverage from denying coverage of or payment for items and services on the basis of a utilization review program unless the program meets such standards.

    (b) REPORT- Not later than 18 months after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the study under subsection (a). The Secretary shall include the report recommendations regarding the application of standards for utilization review programs to group health plans and carriers providing health insurance coverage.

    (c) PREEMPTION- For provision preempting State laws relating to utilization review, see section 6103.

Subtitle C--Fair Rating Practices

SEC. 121. USE OF FAIR RATING PRACTICES.

    (a) USE OF FAIR RATING PRACTICES- The premium rate established by a carrier for health insurance coverage in the individual/small group market (including the premium rate for coverage for a small employer through a multiple employer welfare arrangement that is fully-insured) may not vary except by the following:

      (1) AGE- By age, based on classes of age established by the Secretary, in consultation with the NAIC, consistent with subsection (b).

      (2) GEOGRAPHIC AREA- By geographic area, as identified by a State consistent with subsection (c).

      (3) FAMILY CLASS- By family class, based on the following 4 classes of family coverage: individual, individual with one or more children, married couple without a child, and married couple with one or more children.

      (4) BENEFIT DESIGN- By benefit design of coverage, including by type of coverage, such as standard coverage and high-deductible coverage, and by type of coverage option (described in section 193(13)) with respect to standard coverage.

      (5) ADMINISTRATIVE CATEGORIES- By permitted expense category, based on differences in expenses among such categories, consistent with subsection (d).

    The premiums shall be established for the different benefit designs (including standard coverage and high-deductible coverage) based on the actuarial value of the coverage for the population of the individual/small group market in the fair rating area, without regard to the distribution of such population among the types of coverage or type of coverage options.

    (b) LIMITATION ON VARIATION BY AGE-

      (1) IN GENERAL- Any variation in premium rates by age under subsection (a)(1) for age classes of individuals under 65 years of age may not result in the ratio of the highest age rate to the lowest age rate exceeding the limiting ratio described in paragraph (2).

      (2) LIMITING RATIO- For purposes of paragraph (1), the limiting ratio described in this paragraph is--

        (A) 4-to-1, for premiums for months in 1997,

        (B) 3.67-to-1, for premiums for months in 1998,

        (C) 3.33-to-1, for premiums for months in 1999, and

        (D) 3-to-1, for premiums for months in 2000 and any succeeding year.

      (3) SEPARATE AGE CLASSES FOR INDIVIDUALS 65 YEARS OF AGE OR OLDER- The Secretary shall establish one or more separate age classes for individuals 65 years of age or older.

    (c) GEOGRAPHIC AREA VARIATIONS- For purposes of subsection (a)(2), a State--

      (1) may not identify an area that divides a 3-digit zip code, a county, or all portions of a metropolitan statistical area,

      (2) shall not permit premium rates for coverage offered in a portion of an interstate metropolitan statistical area to vary based on the State in which the coverage is offered, and

      (3) may, upon agreement with one or more adjacent States, identify multi-state geographic areas consistent with paragraphs (1) and (2).

    (d) ADMINISTRATIVE VARIATIONS-

      (1) EXPENSE CATEGORIES- Expense categories shall be established under subsection (a)(5) by a carrier in a manner that only reflects differences based on marketing, commissions, and similar expenses. Such categories shall take into account health plan purchasing organizations.

      (2) LIMITATION ON VARIATIONS- The variation provided among expense categories under subsection (a)(5) may not result in a premium for the highest expense category exceeding 120 percent of the premium for the lowest expense category.

    (e) PREMIUM RATING IN GROUP HEALTH PLANS- The premium rate established under a group health plan for health insurance coverage may not vary within a benefit design except by the factors described in subsection (a) and subject to the limitation specified in subsection (b).

    (f) ACTUARIAL CERTIFICATION- Each carrier that offers health insurance coverage in a State shall file annually with the State commissioner of insurance a written statement by a member of the American Academy of Actuaries (or other individual acceptable to the commissioner) that, based upon an examination by the individual which includes a review of the appropriate records and of the actuarial assumptions of the carrier and methods used by the carrier in establishing premium rates for applicable health insurance coverage--

      (1) the carrier is in compliance with the applicable provisions of this section, and

      (2) the rating methods are actuarially sound.

    Each such carrier shall retain a copy of such statement for examination at its principal place of business.

    (g) CONSTRUCTION- The provisions of this section shall apply to premium rates established by carriers for multiple employer welfare arrangements that are fully insured or for fully-insured coverage offered with respect to individuals and small employers in the individual/small group market. Such premium rates shall apply based on the fair rating area in which the covered individual or employee resides to reflect the population in the individual/small group market.

SEC. 122. ESTABLISHMENT OF RISK ADJUSTMENT MECHANISMS.

    (a) ESTABLISHMENT OF STANDARDS-

      (1) DEVELOPMENT OF MODELS-

        (A) IN GENERAL- The Secretary shall request the NAIC to develop, within 9 months after the date of the enactment of this Act and in consultation with the American Academy of Actuaries, a model risk adjustment system composed of one or more risk adjustment mechanisms under which premiums applicable to health insurance coverage in the individual/small group market and coverage under multiple employer welfare arrangements that are fully insured (without regard to whether such an arrangement is offered through an association) would be adjusted to take into account such factors as may be appropriate to predict the future need and the efficient use of services by covered individuals in the market. Such factors may include the age, gender, geographic residence, health status, or other demographic characteristics of individuals enrolled in such plans and shall include consideration of enrollment of a disproportionate share of individuals who enroll during the initial open enrollment period under section 105(b)(1).

        (B) PROMULGATION AS PROPOSED RULE- If the NAIC develops such model within such period, the Secretary shall publish the model as a proposed rule under section 553 of

title 5, United States Code. If the NAIC has not developed such model within such period, the Secretary shall publish (not later than 60 days after the end of such period) a proposed rule that specifies a proposed model that provides for effective risk adjustment mechanisms.

      (2) RULE MAKING PROCESS- The Secretary shall provide for a period (described in section 553(c) of title 5, United States Code) of not less than 30 days for public comment on a proposed rule published under paragraph (1)(B). The Secretary shall publish a final rule, by not later than January 1, 1996, that specifies risk adjustment mechanisms that the Secretary finds are effective for purposes of carrying out this section. Such rule shall include models developed by the NAIC if the Secretary finds that such models provide for effective risk adjustment mechanisms.

      (3) MODIFICATION- The Secretary, at the request of the NAIC or otherwise, may by regulation modify the model risk adjustment system established under this subsection.

    (b) IMPLEMENTATION OF RISK ADJUSTMENT SYSTEM- Each State shall establish and maintain a risk adjustment system that conforms with the model established under this section by not later than January 1, 1997. A State may establish and maintain such a system jointly with one or more other States.

Subtitle D--Consumer Protections

SEC. 131. REQUIREMENT FOR PROVISION OF INFORMATION.

    (a) CARRIERS-

      (1) IN GENERAL- Each carrier that offers health insurance coverage to small employers (or eligible employees of small employers) or qualifying individuals must disclose to such prospective enrollees, to brokers, and to health plan purchasing organizations the information that the Secretary may specify relating to the performance of the carrier in providing such coverage and relating to differences between the coverage provided and the most similar model benefit package established under section 144(b)(2). If a carrier offers to individuals or employers coverage the actuarial value of which is more than the actuarial value for high-deductible coverage but less than such value for standard coverage, the carrier must disclose to such employers or individuals detailed information on how the coverage offered compares to any standard and high-deductible coverage offered by the carrier to such individuals and employers.

      (2) MARKETING MATERIAL- Each carrier that provides any health insurance coverage in a State shall file with the State those marketing materials relating to the offer and sale of health insurance coverage to be used for distribution before the materials are used. Such materials shall be in a uniform format specified under the standards established under section 1301.

    (b) GROUP HEALTH PLANS- Each group health plan that provides health coverage must disclose to enrollees and potential enrollees information, similar to the information described in subsection (a), relating to performance of the plan in providing such coverage and relating to differences between the coverage provided and the most similar model benefit package established under section 144(b)(2).

    (c) INFORMATION RELATING TO RISK ADJUSTMENT- Each carrier or group health plan providing coverage in the individual/small group market (including multiple employer health plans that are fully insured, without regard to whether such an arrangement or plan is offered through an association) shall provide to the State such information as the State may require in order to carry out section 122 (relating to risk adjustment mechanisms).

SEC. 132. PROHIBITION OF IMPROPER INCENTIVES.

    (a) LIMITATION ON FINANCIAL INCENTIVES- No carrier that provides health insurance coverage may vary the commission or financial or other remuneration to a person based on the claims experience or health status of individuals enrolled by or through the person.

    (b) NONDISCRIMINATION IN AGENT COMPENSATION- A carrier--

      (1) may not vary or condition the compensation provided to an agent or broker related to the sale or renewal of health insurance coverage because of the health status or claims experience of any individuals enrolled with the carrier through the agent or broker; and

      (2) may not terminate, fail to renew, or limit its contract or agreement of representation with an agent or broker for any reason related to the health status or claims experience of any individuals enrolled with the carrier through the agent or broker.

    (c) PROHIBITION OF TIE-IN ARRANGEMENTS- No carrier that offers health insurance coverage may require the purchase of any other insurance or product as a condition for the purchase of such coverage.

SEC. 133. WRITTEN POLICIES AND PROCEDURES RESPECTING ADVANCE DIRECTIVES.

    A carrier and a group health plan offering health coverage shall meet the requirements of section 1866(f) of the Social Security Act (relating to maintaining written policies and procedures respecting advance directives), insofar as such requirements would apply to the carrier or plan if the carrier or plan were an eligible organization.

Subtitle E--Benefits

SEC. 141. QUALIFIED HEALTH COVERAGE.

    In this Act, the term ‘qualified health coverage’ means health coverage that--

      (1) provides--

        (A) standard coverage consistent with section 142(a), or

        (B) high-deductible coverage consistent with section 143; and

      (2) meets other requirements of subtitles A through D applicable to the coverage and the carrier or group health plan providing the coverage.

SEC. 142. STANDARD COVERAGE.

    (a) IN GENERAL- Health insurance coverage is considered to provide standard coverage consistent with this subsection and for preventive benefits under subsection (b)(4) if--

      (1) benefits under such coverage are provided within at least each of the required categories of benefits described in paragraph (1) of subsection (b) and consistent with such subsection;

      (2) the actuarial value of the benefits meets the requirements of subsection (c), and

      (3) the benefits comply with the minimum requirements specified in subsection (d).

    (b) REQUIRED CATEGORIES OF COVERED BENEFITS-

      (1) IN GENERAL- The categories of covered benefits described in this paragraph are the types of benefits specified in each of subparagraphs (A), (B), (C), (D), (E), and (F) of paragraph (1), and subparagraphs (E) and (F) of paragraph (2), of section 8904(a) of title 5, United States Code (relating to types of benefits required to be in health insurance offered to Federal employees).

      (2) COVERAGE OF TREATMENTS IN APPROVED RESEARCH TRIALS-

        (A) IN GENERAL- Coverage of the routine medical costs (as defined in subparagraph (B)) associated with the delivery of treatments shall be considered to be medically appropriate if the treatment is part of an approved research trial (as defined in subparagraph (C)).

        (B) ROUTINE MEDICAL COSTS DEFINED- In subparagraph (A), the term ‘routine medical costs’ means the cost of health services required to provide treatment according to the design of the trial, except those costs normally paid for by other funding sources (as defined by the Secretary). Such costs do not include the cost of the investigational agent, devices or procedures themselves, the costs of any nonhealth services that might be required for a person to receive the treatment, or the costs of managing the research.

        (C) APPROVED RESEARCH TRIAL DEFINED- In subparagraph (A), the term ‘approved research trial’ means a trial--

          (i) conducted for the primary purpose of determining the safety, effectiveness, efficacy, or health outcomes of a treatment, compared with the best available alternative treatment, and

          (ii) approved by the Secretary.

        A trial is deemed to be approved under clause (ii) if it is approved by the National Institutes of Health, the Food and Drug Administration (through an investigational new drug exemption), the Department of Veterans Affairs, or by a qualified nongovernmental research entity (as identified in guidelines issued by one or more of the National Institutes of Health).

      (3) COVERAGE OF OFF-LABEL USE- An off-label use for a drug that has been found to be safe and effective under section 505 of the Federal Food, Drug, and Cosmetic Act shall be covered if the medical indication for which it is used is listed in one of the following 3 compendia: the American Hospital Formulary Service-Drug Information, the American Medical Association Drug Evaluations, and the United States Pharmacopeia-Drug Information.

      (4) PREVENTIVE BENEFITS- The following are preventive benefits that shall be covered without any deductibles, copayment, coinsurance, or other cost-sharing:

        (A) NEWBORN, WELL-BABY AND WELL-CHILD CARE- Newborn care, well-baby care, and well-child care for individuals under 19 years of age, including routine physical examinations, routine immunizations, and routine tests, as specified by the Secretary based on the

schedule recommended by the American Academy of Pediatricians.

        (B) MAMMOGRAMS- Routine screening mammograms (including their interpretation), limited to 1 mammogram for a woman who is at least 35 (but less than 40) years of age, 1 mammogram every 2 years for a woman who is at least 40 (but less than 50) years of age, and 1 mammogram every year for a woman who is at least 50 years of age.

        (C) SCREENING PAP SMEARS AND PELVIC EXAMS- Screening pap smears and pelvic exams for women over 17 years of age, limited to 1 each year.

        (D) COLORECTAL SCREENING- Colorectal screening for individuals over 18 years of age at high risk, consisting of 1 fecal occult blood screening test every year, 1 screening sigmoidoscopy every 5 years, and 1 screening colonoscopy every 4 years.

        (E) SCREENING TUBERCULIN TESTS- Screening tuberculin tests annually for individuals at risk of contracting tuberculosis.

        (F) PRENATAL CARE- Prenatal care.

        (G) ADULT IMMUNIZATIONS- Routine immunizations for an individual over 17 years of age (including booster immunizations against tetanus and diphtheria, but limited to 1 such immunization every 10 years).

        (H) PROSTATE CANCER SCREENING- Routine cancer screening for a man who is at least 40 years of age through a prostate specific antigen test, limited to 1 test each year.

    (c) STANDARD ACTUARIAL VALUE-

      (1) IN GENERAL- The actuarial value of the benefits under standard coverage in a fair rating area meets the requirements of this subsection if such value is equivalent to the standard actuarial value described in paragraph (2) for the area. The actuarial value of benefits under standard coverage shall be determined using the adjustment under paragraph (3) for a standardized population and set of standardized utilization and cost factors.

      (2) STANDARD ACTUARIAL VALUE DESCRIBED- The standard actuarial value described in this paragraph for coverage in a geographic area is the actuarial value of benchmark coverage during 1994 in such area. Such actuarial value shall be determined using the adjustment under paragraph (3) for a standardized population and set of standardized utilization and cost factors and updated annually in accordance with section 144(a).

      (3) ADJUSTMENTS FOR STANDARDIZED POPULATION, STANDARDIZED UTILIZATION AND COST FACTORS, AND GEOGRAPHIC AREA- The adjustment under this paragraph--

        (A) for a standardized population shall be made by not taking into account individuals 65 years of age or older, employees of the United States Postal Service, retirees, and annuitants; and

        (B)(i) except as provided in clause (ii), for a geographic area shall be made in a manner that reflects the ratio of the actuarial value of benchmark coverage in such geographic area (as adjusted under subparagraph (A)) to such actuarial value for such benchmark coverage for the United States as a whole, taking into account standardized actuarial utilization and cost factors, and

        (ii) in the case of a group health plan operating in more than one geographic area, the ratio described in clause (i) shall be determined in accordance with regulations promulgated by the Secretary.

      At the election of a group health plan under subparagraph (B)(ii), the ratio under such subparagraph shall be 1.

    (d) MINIMUM REQUIREMENTS WITHIN A CATEGORY- Benefits offered in any standard coverage within any category of benefits shall be not less than the narrowest scope and shortest duration of benefits within that category in any of the approved health benefits plans offered under chapter 89 of title 5, United States Code (relating to the Federal Employees Health Benefits Program) in 1994. Benefits offered in the standard plan within the category of preventive services shall not require payment of cost-sharing for covered items and services.

    (e) NO COVERAGE OF SPECIFIC TREATMENT, PROCEDURES, OR CLASSES REQUIRED- Nothing in this section (or section 143) may be construed to require the coverage of any specific procedure or treatment or class of service in health coverage under this Act or through regulation.

    (f) CONSTRUCTION- Nothing in this section (or section 143) shall be construed as requiring coverage to include benefits for items and services that are not medically necessary or appropriate.

SEC. 143. HIGH-DEDUCTIBLE COVERAGE.

    Health insurance coverage is considered to provide high-deductible coverage consistent with this section if--

      (1) benefits under such coverage comply with--

        (A) the requirements described in section 142(b) (relating to required categories of covered benefits), and

        (B) the requirements described in section 142(d) (relating to minimum requirements within a category);

      (2) the deductible amount is the amount established under section 144(b)(1);

      (3) benefits under the coverage in any year (other than preventive benefits described in section 142(b)(4)) are covered only to the extent expenses incurred for items and services included in the coverage for the year exceed the deductible amount specified in paragraph (2); and

      (4) the actuarial value of the coverage (as determined under rules consistent with section 142(c)) is equivalent to 80 percent of the actuarial value established under such section for standard coverage.

SEC. 144. ACTUARIAL VALUATION OF BENEFITS.

    (a) IN GENERAL- The Secretary, in consultation with the NAIC and the American Academy of Actuaries, shall establish (and may from time to time modify) procedures by which health insurance benefits are valued for purposes of this subtitle.

    (b) DEDUCTIBLE; MODEL BENEFIT PACKAGES- The Secretary, in consultation with the NAIC and the American Academy of Actuaries, shall establish--

      (1) the deductible amount for high-deductible coverage for the purposes of section 143(2) such that the actuarial value of high-deductible coverage described in section 143 is 20 percent less than the actuarial value of standard coverage described in section 142(a); and

      (2) model benefit packages that may be treated, for purposes of this title, as meeting the requirements for standard or high-deductible coverage under sections 142(a) and 143, respectively, and which shall include model cost sharing arrangements for fee-for-service options, managed care options, and point-of-service options.

SEC. 145. LIMITATION ON OFFERING SUPPLEMENTAL BENEFITS.

    A carrier or group health plan offering qualified health coverage may offer coverage of items and services only in addition to the qualified standard coverage offered (whether in the form of coverage of additional items and services or a reduction in cost sharing) and only if--

      (1) such supplemental coverage is offered and priced separately from the standard coverage offered and is only made available to individuals who obtain qualified standard coverage through the carrier or plan;

      (2) the purchase of the qualified health coverage is not conditioned upon the purchase of such supplemental coverage; and

      (3) in the case of supplemental coverage that consists of a reduction in the cost-sharing otherwise applicable, the premium for the supplemental coverage takes into account any expected increase in utilization of items and services included in the qualified health coverage resulting from obtaining the supplemental coverage.

SEC. 146. FAMILY COVERAGE OPTION; SUPPLEMENTAL COVERAGE.

    (a) FAMILY COVERAGE OPTION- Each carrier and group health plan that offers health insurance coverage shall provide for an option under which children under 26 years of age (without regard to whether they are full-time students or disabled) will be treated (with respect to family coverage) as family members. The carrier or plan may impose an additional premium for such option.

    (b) CONSTRUCTION- Nothing in this title shall be construed as limiting the benefits that may be offered as part of a group health plan or health insurance coverage.

SEC. 147. LEVEL PLAYING FIELD FOR PROVIDERS.

    Nothing in this subtitle may be construed to require or prohibit the use of a particular class of provider, among the providers that are legally authorized to provide such treatment.

Subtitle F--Standards and Certification; Enforcement; Preemption; General Provisions

SEC. 151. ESTABLISHMENT OF STANDARDS.

    (a) ROLE OF NAIC-

      (1) IN GENERAL- The Secretary shall request the NAIC to develop, within 9 months after the date of the enactment of this Act, model regulations that specify standards with respect to the requirements of this subtitle as applicable to carriers and health insurance coverage.

      (2) REVIEW OF STANDARDS- If the NAIC develops recommended regulations specifying such standards within such period, the Secretary shall review the standards. Such review shall be completed within 60 days after the date the regulations are developed. Unless the Secretary determines within such period that the standards do not meet the requirements, such standards shall serve as the standards under this subtitle, with such amendments as the Secretary deems necessary.

    (b) CONTINGENCY- If the NAIC does not develop such model regulations within such period or the Secretary determines that such regulations do not specify standards that meet the requirements described in subsection (a), the Secretary shall specify, within 15 months after the date of the enactment of this Act, standards to carry out those requirements.

SEC. 152. APPLICATION OF STANDARDS TO CARRIERS THROUGH STATES.

    (a) APPLICATION OF STANDARDS-

      (1) IN GENERAL- Each State shall submit to the Secretary, by the deadline specified in paragraph (2), a report on steps the State is taking to implement and enforce the standards established under section 151 with respect to carriers and health insurance coverage offered or renewed not later than such deadline.

      (2) DEADLINE FOR REPORT- The deadline under this paragraph is 1 year after the date the standards are established under section 151.

    (b) Federal Role-

      (1) NOTICE OF DEFICIENCY- If the Secretary determines that a State has failed to submit a report by the deadline specified under subsection (a)(2) or finds that the State has not implemented and provided adequate enforcement of the standards established under section 151, the Secretary shall notify the State and provide the State a period of 60 days in which to submit such report or to implement and enforce such standards.

      (2) IMPLEMENTATION OF ALTERNATIVE-

        (A) IN GENERAL- If, after such 60-day period, the Secretary finds that such a failure has not been corrected, the Secretary shall provide for such mechanism for the implementation and enforcement of such standards in the State as the Secretary determines to be appropriate.

        (B) EFFECTIVE PERIOD- Such implementation and enforcement shall take effect with respect to carriers, and health insurance coverage offered or renewed, on or after 3 months after the date of the Secretary’s finding under subparagraph (A), and until the date the Secretary finds that such a failure has been corrected.

SEC. 153. APPLICATION TO GROUP HEALTH PLANS.

    (a) IN GENERAL- Subject to subsection (b), sections 151 and 152 shall apply to group health plans providing health coverage in the same manner as they apply to carriers providing health insurance coverage.

    (b) SUBSTITUTION OF REFERENCES- For purposes of subsection (a), any reference in section 151 or 152 to--

      (1) a State or the Secretary of Health and Human Services is deemed a reference to the Secretary of Labor, and

      (2) a carrier or health insurance coverage is deemed a reference to a group health plan and health coverage, respectively.

SEC. 154. ENFORCEMENT.

    (a) ENFORCEMENT BY DEPARTMENT OF LABOR FOR EMPLOYERS AND GROUP HEALTH PLANS-

      (1) IN GENERAL- For purposes of part 5 of subtitle B of title I of the Employee Retirement Income Security Act of 1974, the provisions of this title insofar as they relate to group health plans or employers shall be deemed to be provisions of title I of such Act irrespective of exclusions under section 4(b) of such Act.

      (2) REGULATORY AUTHORITY- With respect to the regulatory authority of the Secretary of Labor under this subtitle pursuant to paragraph (1), section 505 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1135) shall apply.

    (b) ENFORCEMENT BY EXCISE TAX FOR CARRIERS-

      (1) IN GENERAL- Chapter 43 of the Internal Revenue Code of 1986 (relating to qualified pension plans, etc.) is amended by adding at the end thereof the following new section:

‘SEC. 4980C. FAILURE OF CARRIER TO COMPLY WITH HEALTH INSURANCE STANDARDS.

    ‘(a) IMPOSITION OF TAX-

      ‘(1) IN GENERAL- There is hereby imposed a tax on the failure of a carrier to comply with the requirements applicable to the carrier under parts 1 through 4 of subtitle A and subtitle B of title I of the Health Insurance Affordability Act of 1996.

      ‘(2) EXCEPTION- Paragraph (1) shall not apply to a failure by a carrier in a State if the Secretary of Health and Human Services determines that the State has in effect a regulatory enforcement mechanism that provides adequate sanctions with respect to such a failure by such a carrier.

    ‘(b) AMOUNT OF TAX-

      ‘(1) IN GENERAL- Subject to paragraph (2), the amount of the tax imposed by subsection (a) shall be $100 for each day during which such failure persists for each individual to which such failure relates. A rule similar to the rule of section 4980B(b)(3) shall apply for purposes of this section.

      ‘(2) LIMITATION- The amount of the tax imposed by subsection (a) for a carrier with respect to health insurance coverage shall not exceed 25 percent of the amounts received for such coverage during the period such failure persists.

    ‘(c) LIABILITY FOR TAX- The tax imposed by this section shall be paid by the carrier.

    ‘(d) Exceptions-

      ‘(1) CORRECTIONS WITHIN 30 DAYS- No tax shall be imposed by subsection (a) by reason of any failure if--

        ‘(A) such failure was due to reasonable cause and not to willful neglect, and

        ‘(B) such failure is corrected within the 30-day period beginning on the earliest date the carrier knew, or exercising reasonable diligence would have known, that such failure existed.

      ‘(2) WAIVER BY SECRETARY- In the case of a failure which is due to reasonable cause and not to willful neglect, the Secretary may waive part or all of the tax imposed by subsection (a) to the extent that payment of such tax would be excessive relative to the failure involved.

    ‘(e) DEFINITIONS- For purposes of this section, the terms ‘health insurance coverage’ and ‘carrier’ have the respective meanings given such terms in section 193 of the Health Insurance Affordability Act of 1996.’

      (2) CLERICAL AMENDMENT- The table of sections for chapter 43 of such Code is amended by adding at the end thereof the following new item:

‘Sec. 4980C. Failure of carrier to comply with health insurance standards.’

SEC. 155. LIMITATION ON SELF INSURANCE FOR SMALL EMPLOYERS.

    A single employer plan (as defined in section 3(40)(B) of the Employee Retirement Income Security Act of 1974) may not offer health coverage other than through a carrier unless the plan has at least 100 eligible employees.

Subtitle G--Definitions; General Provisions

SEC. 191. GENERAL DEFINITIONS.

    For purposes of this Act:

      (1) APPLICABLE REGULATORY AUTHORITY- The term ‘applicable regulatory authority’ means, with respect to a carrier operating in a State--

        (A) the State insurance commissioner, or

        (B) the Secretary, in the case described in section 152(b)(2).

      (2) FAMILY MEMBER-

        (A) IN GENERAL- Individuals are considered to be members of a family if--

          (i) they are married, or

          (ii) they have a legal parent-to-child relationship (whether by natural birth or adoption), if the child is--

            (I) under 19 years of age,

            (II) is under 25 years of age and a full-time student, or

            (III) an unmarried dependent regardless of age who is incapable of self-support because of mental or physical disability which existed before age 22.

        (B) SPECIAL RULES- Family members--

          (i) include an adopted child and a recognized natural child;

          (ii) include a stepchild or foster child with respect to an individual but only if the child lives with the individual in a regular parent-child relationship; and

          (iii) include such other children as the Secretary may specify, but shall not include an emancipated minor.

      (3) PRISONER- The term ‘prisoner’ means, as specified by the Secretary, an individual during a period of imprisonment under Federal, State, or local authority after conviction as an adult.

      (4) SECRETARY- The term ‘Secretary’ means the Secretary of Health and Human Services.

      (5) STATE- The term ‘State’ means the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

SEC. 192. DEFINITIONS RELATING TO EMPLOYMENT.

    (a) APPLICATION OF ERISA DEFINITIONS- Except as otherwise provided in this Act, terms used in this Act shall have the meanings applicable to such terms under section 3 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002).

    (b) ADDITIONAL DEFINITIONS- For purposes of this title:

      (1) COUNTABLE EMPLOYEE- The term ‘countable employee’ means, with respect to an employer for a month, any employee other than an employee whose normal work week is less than 10 hours.

      (2) LARGE EMPLOYER- The term ‘large employer’ means an employer that is not a small employer (as defined in paragraph (4)).

      (3) QUALIFYING EMPLOYEE-

        (A) IN GENERAL- The term ‘qualifying employee’ means, with respect to an employer for a month, any employee other than--

          (i) a part-time, seasonal, or temporary employee (as defined in subparagraph (B)); or

          (ii) an employee who is a child described in section 191(2)(A)(ii).

        (B) PART-TIME, SEASONAL, OR TEMPORARY EMPLOYEE DEFINED- For purposes of subparagraph (A), the term ‘part-time, seasonal, or temporary employee’ means any of the following employees with respect to a month:

          (i) CERTAIN PART-TIME EMPLOYEES- Any employee whose normal work week is reasonably expected as of the first day of such month to be less than 20 hours.

          (ii) SEASONAL OR TEMPORARY EMPLOYEES- Any employee who is not reasonably expected as of the first day of such month to be employed by the employer for a period of 120 consecutive days during any 365-day period that includes such first day.

          (iii) DELAY FOR CERTAIN PART-TIME EMPLOYEES- Any employee whose normal work week is reasonably expected as of the first day of such month to be at least 20 hours, but less than 35 hours, and the normal work week of the employee during the preceding 3 months was less than 20 hours.

      (4) SMALL EMPLOYER- The term ‘small employer’ means, with respect to a calendar year, an employer that normally employs more than 1 but less than 100 countable employees on a typical business day. For the purposes of this paragraph, the term ‘employee’ includes a self-employed individual. For purposes of determining if an employer is a small employer, rules similar to the rules of subsection (b) and (c) of section 414 of the Internal Revenue Code of 1986 shall apply.

SEC. 193. DEFINITIONS RELATING TO HEALTH COVERAGE, PLANS, AND CARRIERS.

    Except as otherwise provided, for purposes of this Act:

      (1) BENCHMARK COVERAGE- The term ‘benchmark coverage’ means the standard option of the Blue Cross-Blue Shield plan offered under the Federal Employees Health Benefits Program under chapter 89 of title 5, United States Code, as in effect during 1994.

      (2) CARRIER- The term ‘carrier’ means a licensed insurance company, an entity offering prepaid hospital or medical services, and a health maintenance organization, and includes a similar organization regulated under State law for solvency.

      (3) CLASS OF FAMILY COVERAGE- The term ‘class of family coverage’ means the 4 classes described in section 121(a)(3).

      (4) FAIR RATING AREA- The term ‘fair rating area’ means a geographic area identified by a State for purposes of section 121(a)(2).

      (5) GROUP HEALTH PLAN- The term ‘group health plan’ means an employee welfare benefit plan providing medical care (as defined in section 213(d) of the Internal Revenue Code of 1986) to participants or beneficiaries directly or through insurance, reimbursement, or otherwise, but does not include any type of coverage excluded from the definition of a health insurance coverage under paragraph (7)(B).

      (6) HEALTH COVERAGE- The term ‘health coverage’ means health insurance coverage provided by a carrier or medical care provided under a group health plan.

      (7) HEALTH INSURANCE COVERAGE-

        (A) IN GENERAL- Except as provided in subparagraph (B), the term ‘health insurance coverage’ means any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization group contract offered by a carrier.

        (B) EXCEPTION- Such term does not include any of the following (or any combination of the following):

          (i) Coverage only for accident, dental, vision, disability income, or long-term care insurance, or any combination thereof.

          (ii) Medicare supplemental health insurance.

          (iii) Coverage issued as a supplement to liability insurance.

          (iv) Liability insurance, including general liability insurance and automobile liability insurance.

          (v) Workers’ compensation or similar insurance.

          (vi) Automobile medical-payment insurance.

          (vii) Coverage for a specified disease or illness.

          (viii) A hospital or fixed indemnity policy.

          (ix) Coverage provided exclusively to individuals who are not eligible individuals.

      (8) HEALTH MAINTENANCE ORGANIZATION- The term ‘health maintenance organization’ includes, as defined in standards established under section 143, an organization that provides health insurance coverage which meets specified standards and under which health services are offered to be provided on a prepaid, at-risk basis primarily through a defined set of providers.

      (9) INDIVIDUAL/SMALL GROUP MARKET- The term ‘individual/small group market’ means the insurance market offered--

        (A) to individuals seeking health insurance coverage on behalf of themselves (and their dependents) insofar as no employer is seeking such coverage on behalf of the individual, and

        (B) to small employers seeking health insurance coverage on behalf of their employees (and their dependents),

      regardless of whether or not such coverage is made available directly or through a multiple employer welfare arrangement, association, or otherwise.

      (10) MANAGED CARE ARRANGEMENTS-

        (A) MANAGED CARE ARRANGEMENT- The term ‘managed care arrangement’ means, with respect to a group health plan or under health insurance coverage, an arrangement under such plan or coverage under which providers agree to provide items and services covered under the arrangement to individuals covered under the plan or who have such coverage.

        (B) PROVIDER NETWORK- The term ‘provider network’ means, with respect to a group health plan or health insurance coverage, providers who have entered into an agreement described in subparagraph (A).

      (11) MULTIPLE EMPLOYER WELFARE ARRANGEMENT- The term ‘multiple employer welfare arrangement’ shall have the meaning applicable under section 3(40) of the Employee Retirement Income Security Act of 1974.

      (12) NAIC- The term ‘NAIC’ means the National Association of Insurance Commissioners.

      (13) OPTIONS- Each of the following is a ‘type of coverage option’ in relation to standard coverage:

        (A) FEE-FOR-SERVICE OPTION- Standard coverage is considered to provide a ‘fee-for-service option’ if, regardless of whether covered individuals may receive benefits through a provider network, benefits with respect to the covered items and services in the coverage are made available for such items and services provided through any lawful provider of such covered items and services and payment is made to such a provider whether or not there is a contractual arrangement between the provider and the carrier or plan.

        (B) MANAGED CARE OPTION- Standard coverage is considered to provide a ‘managed care option’ if benefits with respect to the covered items and services in the coverage are made available exclusively through a provider network, except in the case of emergency services and as otherwise required under law.

        (C) POINT-OF-SERVICE OPTION- Standard coverage is considered to provide a ‘point-of-service option’ if the benefits with respect to covered items and services in the coverage are made available principally through a managed care arrangement, with the choice of the enrollee to obtain such benefits for items and services provided through any lawful provider of such covered items and services. The coverage may provide for different cost sharing schedules based on whether the items and services are provided through such an arrangement or outside such an arrangement.

      (14) QUALIFIED HEALTH COVERAGE- The term ‘qualified health coverage’ has the meaning given such term in section 141.

      (15) STANDARD COVERAGE- The term ‘standard coverage’ means coverage provided consistent with section 142(a).

      (16) STATE COMMISSIONER OF INSURANCE- The term ‘State commissioner of insurance’ includes a State superintendent of insurance.

SEC. 194. DEFINITIONS RELATING TO RESIDENCE AND IMMIGRATION STATUS.

    Except as otherwise provided, for purposes of this Act:

      (1) ALIEN PERMANENTLY RESIDING IN THE UNITED STATES UNDER COLOR OF LAW- The term ‘alien permanently residing in the United States under color of law’ means an alien lawfully admitted for permanent residence (within the meaning of section 101(a)(20) of the Immigration and Nationality Act), and includes any of the following (such status not having changed):

        (A) An alien who is admitted as a refugee under section 207 of the Immigration and Nationality Act.

        (B) An alien who is granted asylum under section 208 of such Act.

        (C) An alien whose deportation is withheld under section 243(h) of such Act.

        (D) An alien whose deportation is suspended pursuant to section 244 of such Act.

        (E) An alien who is granted conditional entry pursuant to section 203(a)(7) of such Act as in effect before April 1, 1980.

        (F) An alien who is admitted for temporary residence under section 210, 210A, or 245A of such Act.

        (G) An alien who is within a class of aliens lawfully present in the United States pursuant to any other provision of such Act, if (i) the Attorney General determines that the continued presence of such class of aliens serves a humanitarian or other compelling public interest, and (ii) the Secretary determines that such interest would be further served by treating each such alien within such class as a ‘legal permanent resident’ for purposes of this Act or who has been granted extended voluntary departure as a member of a nationality group.

        (H) An alien who is the spouse or unmarried child under 21 years of age of a citizen of the United States, or the parent of such a citizen if the citizen is over 21 years of age, and with respect to whom an application for adjustment to lawful permanent residence is pending.

        (I) An alien within such other classification of permanent resident aliens as the Secretary may establish by regulation.

      (2) LONG-TERM NONIMMIGRANT- The term ‘long-term nonimmigrant’ means a nonimmigrant described in subparagraph (E), (H), (I), (K), (L), (N), (O), (Q), or (R) of section 101(a)(15) of the Immigration and Nationality Act.

      (3) QUALIFYING INDIVIDUAL- The term ‘qualifying individual’ means, an individual who is a resident of the United States, who is not a prisoner, and is--

        (A) a citizen or national of the United States;

        (B) an alien permanently residing in the United States under color of law (as defined in paragraph (1)); or

        (C) a long-term nonimmigrant (as defined in paragraph (2)).

SEC. 195. EFFECTIVE DATES.

    The requirements of this title shall apply with respect to--

      (1) group health plans for plan years beginning on or after January 1, 1997, and

      (2) carriers (with respect to coverage other than under a group health plan) as of January 1, 1997.

TITLE II--ADMINISTRATIVE SIMPLIFICATION

SEC. 200. PURPOSE.

    It is the purpose of this title to improve the efficiency and effectiveness of the health care system, including the medicare program under title XVIII of the Social Security Act and the medicaid program under title XIX of such Act, by encouraging the development of a health information network through the adoption of standards and the establishment of requirements for the electronic transmission of certain health information.

SEC. 201. DEFINITIONS.

    For purposes of this title:

      (1) CODE SET- The term ‘code set’ means any set of codes used for encoding data elements, such as tables of terms, medical concepts, medical diagnostic codes, or medical procedure codes.

      (2) COORDINATION OF BENEFITS- The term ‘coordination of benefits’ means determining and coordinating the financial obligations of plan sponsors when health care benefits are payable by more than one such sponsor.

      (3) HEALTH INFORMATION- The term ‘health information’ means any information that relates to the past, present, or future physical or mental health or condition or functional status of an individual, the provision of health care to an individual, or payment for the provision of health care to an individual.

      (4) HEALTH INFORMATION NETWORK- The term ‘health information network’ means the health information system that is formed through the application of the requirements and standards established under this title.

      (5) HEALTH INFORMATION NETWORK SERVICE- The term ‘health information network service’--

        (A) means a private entity or an entity operated by a State that enters into contracts--

          (i) to process or facilitate the processing of nonstandard data elements of health information into standard data elements;

          (ii) to provide the means by which persons are connected to the health information network for purposes of meeting the requirements of this title, including the

holding of standard data elements of health information;

          (iii) to provide authorized access to health information through the health information network; or

          (iv) to provide specific information processing services, such as automated coordination of benefits and claims transaction routing; and

        (B) includes a health information security organization.

      (6) HEALTH INFORMATION SECURITY ORGANIZATION- The term ‘health information security organization’ means a private entity or an entity operated by a State that accesses standard data elements of health information through the health information network, processes such information into non-identifiable health information, and may store such information.

      (7) HEALTH PROVIDER- The term ‘health provider’ includes a provider of services (as defined in section 1861(u) of the Social Security Act), a provider of medical or other health services (as defined in section 1861(s) of such Act), and any other person (other than a plan sponsor) furnishing health care items or services.

      (8) INDIVIDUALLY IDENTIFIABLE HEALTH INFORMATION- The term ‘individually identifiable health information’ means health information in the health information network--

        (A) that identifies an individual who is the subject of the information; or

        (B) with respect to which there is a reasonable basis to believe that the information can be used to identify such an individual.

      (9) NONIDENTIFIABLE HEALTH INFORMATION- The term ‘nonidentifiable health information’ means health information that is not individually identifiable health information.

      (10) PLAN SPONSOR- The term ‘plan sponsor’ means--

        (A) a carrier (as defined in section 193(2)) providing health insurance coverage (as defined in section 193(7));

        (B) a group health plan;

        (C) an association or other entity which establishes or maintains a multiple employer welfare arrangement (as defined in section 193(11)) providing benefits consisting of medical care described in section 607(1) of the Employee Retirement Income Security Act of 1974; and

        (D) a State, or the Federal Government, acting in a capacity as a provider of health benefits to eligible individuals that is equivalent to that of a carrier.

      (11) STANDARD- The term ‘standard’, when used with reference to a transaction or to data elements of health information, means that the transaction or data elements meet any standard adopted by the Secretary under subtitle A that applies to the transaction or data elements.

Subtitle A--Standards for Data Elements and Transactions

SEC. 211. GENERAL REQUIREMENTS ON SECRETARY.

    (a) IN GENERAL- The Secretary shall adopt standards and modifications to standards under this subtitle that are--

      (1) consistent with the objective of reducing the costs of providing and paying for health care; and

      (2) in use and generally accepted, developed, or modified by the standard-setting organizations accredited by the American National Standard Institute.

    (b) INITIAL STANDARDS- The Secretary may develop an expedited process for the adoption of initial standards under this part.

    (c) PROTECTION OF COMMERCIAL INFORMATION- In adopting standards under this part, the Secretary may not require disclosure of trade secrets or confidential commercial information by any person.

SEC. 212. STANDARDS FOR DATA ELEMENTS OF HEALTH INFORMATION.

    (a) IN GENERAL- The Secretary shall adopt standards necessary to make uniform and compatible for electronic transmission through the health information network the data elements of any health information that the Secretary determines is appropriate for transmission in connection with a transaction described in section 221.

    (b) ADDITIONS- The Secretary may make additions to any set of data elements adopted under subsection (a) as the Secretary determines appropriate in a manner that minimizes the disruption and cost of compliance with such additions.

    (c) CERTAIN DATA ELEMENTS-

      (1) UNIQUE HEALTH IDENTIFIERS- The Secretary shall establish a system to provide for a standard unique health identifier for each individual, employer, plan sponsor, and health provider for use in the health care system.

      (2) CODE SETS-

        (A) IN GENERAL- The Secretary, in consultation with experts from the private sector and Federal agencies, shall--

          (i) select code sets for appropriate data elements from among the code sets that have been developed by private and public entities; or

          (ii) establish code sets for such data elements if no code sets for the data elements have been developed.

        (B) DISTRIBUTION- The Secretary shall establish efficient and low-cost procedures for distribution of code sets and modifications to code sets.

SEC. 213. INFORMATION TRANSACTION STANDARDS.

    (a) IN GENERAL- The Secretary shall adopt technical standards that are consistent with the health information network privacy standards adopted under section 214 relating to the method by which standard data elements of health information may be transmitted electronically, including standards with respect to the format in which such data elements may be transmitted.

    (b) SPECIAL RULE FOR COORDINATION OF BENEFITS- Any standard adopted by the Secretary under paragraph (1) that relates to coordination of benefits shall provide that a claim for reimbursement for health services furnished shall be tested, by an algorithm specified by the Secretary, against all records of enrollment and eligibility for the individual who received such services that are available to the recipient of the claim through the health information network to determine any primary and secondary obligors for payment.

    (c) ELECTRONIC SIGNATURE- The Secretary, in coordination with the Secretary of Commerce, shall promulgate regulations specifying procedures for the electronic transmission and authentication of signatures, compliance with which shall be deemed to satisfy State and Federal statutory requirements for written signatures with respect to transactions described in section 221 and written signatures on health records and prescriptions.

    (d) STANDARDS FOR CLAIMS FOR CLINICAL LABORATORY TESTS- The standards under this section shall provide that claims for clinical laboratory tests for which benefits are payable by a plan sponsor shall be submitted directly by the person or entity that performed (or supervised the performance of) the tests to the sponsor in a manner consistent with (and subject to such exceptions

as are provided under) the requirement for direct submission of such claims under the medicare program.

SEC. 214. HEALTH INFORMATION NETWORK PRIVACY STANDARDS.

    The Secretary shall adopt standards respecting the privacy of individually identifiable health information that is in the health information network. Such standards shall include standards concerning at least the following:

      (1) The rights of an individual who is the subject of such information.

      (2) The procedures to be established for the exercise of such rights.

      (3) The uses and disclosures of such information that are authorized or required.

      (4) Safeguards for the security of such information and adequate security practices.

SEC. 215. TIMETABLES FOR ADOPTION OF STANDARDS.

    (a) INITIAL STANDARDS FOR DATA ELEMENTS- The Secretary shall adopt standards relating to--

      (1) the data elements for the information described in section 212(a) not later than 9 months after the date of the enactment of this Act (except in the case of standards with respect to data elements for claims attachments, which shall be adopted not later than 24 months after the date of the enactment of this Act); and

      (2) any addition to a set of data elements, in conjunction with making such an addition.

    (b) INITIAL PRIVACY STANDARDS- The Secretary shall adopt standards relating to the privacy of individually identifiable health information in the health information network under section 214 not later than 12 months after the date of the enactment of this Act.

    (c) INITIAL STANDARDS FOR INFORMATION TRANSACTIONS- The Secretary shall adopt standards relating to information transactions under section 213 not later than 18 months after the date of the enactment of this Act (except in the case of standards for claims attachments, which shall be adopted not later than 24 months after the date of the enactment of this Act).

    (d) MODIFICATIONS TO STANDARDS-

      (1) IN GENERAL- Except as provided in paragraph (2), the Secretary shall review the standards adopted under this subtitle and shall adopt modified standards as determined appropriate, but not more frequently than once every 6 months. Any modification to standards shall be completed in a manner which minimizes the disruption to, and costs of compliance incurred by, a plan sponsor, health provider, or health plan purchasing organization that is required to comply with subtitle B.

      (2) SPECIAL RULES-

        (A) MODIFICATIONS DURING FIRST 12-MONTH PERIOD- Except with respect to additions and modifications to code sets under subparagraph (B), the Secretary may not adopt any modification to a standard adopted under this subtitle during the 12-month period beginning on the date the standard is adopted, unless the Secretary determines that the modification is necessary in order to permit a plan sponsor, a health provider, or a health plan purchasing organization to comply with subtitle B.

        (B) ADDITIONS AND MODIFICATIONS TO CODE SETS-

          (i) IN GENERAL- The Secretary shall ensure that procedures exist for the routine maintenance, testing, enhancement, and expansion of code sets.

          (ii) ADDITIONAL RULES- If a code set is modified under this subsection, the modified code set shall include instructions on how data elements that were encoded prior to the modification are to be converted or translated so as to preserve the value of the data elements. Any modification to a code set under this subsection shall be implemented in a manner that minimizes the disruption to, and costs of compliance incurred by, a plan sponsor, health provider, or health plan purchasing organization that is required to comply with subtitle B.

    (e) EVALUATION OF STANDARDS- The Secretary may establish a process to measure or verify the consistency of standards adopted or modified under this part. Such process may include demonstration projects and analyses of the cost of implementing such standards and modifications.

Subtitle B--Requirements with Respect to Certain Transactions and Information

SEC. 221. STANDARD TRANSACTIONS AND INFORMATION.

    (a) Transactions by Sponsors-

      (1) TRANSACTIONS WITH PROVIDERS- If a plan sponsor conducts any of the transactions described in paragraph (3) with a health provider--

        (A) the transaction shall be a standard transaction; and

        (B) the health information transmitted by the sponsor to the provider or by the provider to the sponsor in connection with the transaction shall be in the form of standard data elements.

      (2) TRANSACTIONS WITH SPONSORS- If a plan sponsor conducts any of the transactions described in paragraph (3) with another plan sponsor--

        (A) the transaction shall be a standard transaction; and

        (B) the health information transmitted by either sponsor in connection with the transaction shall be in the form of standard data elements.

      (3) TRANSACTIONS- The transactions referred to in paragraphs (1) and (2) are the following:

        (A) Verification of eligibility for benefits.

        (B) Coordination of benefits.

        (C) Claim submission.

        (D) Claim attachment submission.

        (E) Claim status notification.

        (F) Claim status verification.

        (G) Claim adjudication.

        (H) Payment and remittance advice.

        (I) Certification or authorization of a referral to a health provider who is not part of a provider network.

    (b) USE OF HEALTH INFORMATION NETWORK SERVICES- A plan sponsor, a health provider, or a health plan purchasing organization may comply with any provision of this section by entering into an agreement or other arrangement with a health information network service certified under section 231 pursuant to which the service undertakes the duties applicable to the sponsor, provider, or organization under the provision.

SEC. 222. ACCESSING HEALTH INFORMATION FOR AUTHORIZED PURPOSES.

    (a) PROCUREMENT RULE FOR GOVERNMENT AGENCIES-

      (1) IN GENERAL- A health information security organization that is certified under section 231 shall make available to a Federal or State agency, pursuant to a cost-type contract (as defined under the Federal Acquisition Regulation), any non-identifiable health information, including non-identifiable health information that is derived from individually identifiable health information, that--

        (A) is held by the service or may be obtained by the service under paragraph (2) or subsection (b);

        (B) consists of data elements that are subject to a standard under subtitle A; and

        (C) is requested by the agency to fulfill a requirement under this Act.

      (2) CERTAIN INFORMATION AVAILABLE AT LOW COST- If a health information security organization requires health information consisting of data elements that are subject to a standard under subtitle A from a plan sponsor or a health provider in order to comply with a request made by a Federal or State agency under paragraph (1), the sponsor or provider shall make such information available to such organization for a charge that does not exceed the reasonable cost of transmitting the information.

    (b) PROCUREMENT RULE FOR INFORMATION SECURITY ORGANIZATIONS- A health information security organization that makes non-identifiable health information available to a Federal or State agency under subsection (a) shall make such non-identifiable information available, for a charge that does not exceed the reasonable cost of transmitting the information, to any other health information security organization that--

      (A) is certified under section 231; and

      (B) requests the information.

SEC. 223. ENSURING AVAILABILITY OF INFORMATION.

    The Secretary shall establish a procedure under which a plan sponsor or health provider that does not have the ability to transmit standard data elements directly, and does not have access to a health information network service certified under section 231, may comply with the provisions of this part.

SEC. 224. TIMETABLES FOR COMPLIANCE WITH REQUIREMENTS.

    (a) INITIAL COMPLIANCE-

      (1) IN GENERAL- Not later than 12 months after the date on which standards are adopted under subtitle A with respect to a type of transaction, or data elements for a type of health information, a plan sponsor, health provider, or health plan purchasing organization shall comply with the requirements of this subtitle with respect to such transaction or information.

      (2) ADDITIONAL DATA ELEMENTS- Not later than 12 months after the date on which the Secretary adopts an addition to a set of data elements for health information under section 212, a plan sponsor, health provider, or health plan purchasing organization shall comply with the requirements of this subtitle using such data elements.

    (b) Compliance With Modified Standards-

      (1) IN GENERAL- If the Secretary adopts a modified standard under section 215(c), a plan sponsor, health provider, or health plan purchasing organization shall comply with the modified standard at such time as the Secretary determines appropriate, taking into account the time needed to comply due to the nature and extent of the modification.

      (2) SPECIAL RULE- In the case of a modification to a standard that does not occur within the 12-month period beginning on the date the standard is adopted, the time determined appropriate by the Secretary under paragraph (1) may not be--

        (A) earlier than the last day of the 90-day period beginning on the date the modified standard is adopted; or

        (B) later than the last day of the 12-month period beginning on the date the modified standard is adopted.

Subtitle C--Miscellaneous Provisions

SEC. 231. STANDARDS AND CERTIFICATION FOR HEALTH INFORMATION NETWORK SERVICES.

    (a) STANDARDS FOR OPERATION- The Secretary shall establish standards with respect to the operation of health information network services, including standards ensuring that such services--

      (1) develop, operate, and cooperate with one another to form the health information network;

      (2) meet all of the standards adopted under subtitle A that are applicable to the services;

      (3) make public information concerning their performance, as measured by uniform indicators such as accessibility, transaction responsiveness, administrative efficiency, reliability, dependability, and any other indicator determined appropriate by the Secretary; and

      (4) if they are part of a larger organization, have policies and procedures in place which isolate their activities with respect to processing information in a manner that prevents access to such information by such larger organization.

    (b) CERTIFICATION BY THE SECRETARY-

      (1) ESTABLISHMENT- Not later than 18 months after the date of the enactment of this Act, the Secretary shall establish a certification procedure for health information network services which ensures that certified services are qualified to meet the requirements of this title and the standards established by the Secretary under this section. Such certification procedure shall be implemented in a manner that minimizes the costs and delays of operations for such services.

      (2) APPLICATION- Each entity desiring to be certified as a health information network service shall apply to the Secretary for certification in a form and manner determined appropriate by the Secretary.

      (3) AUDITS AND REPORTS- The procedure established under paragraph (1) shall provide for audits by the Secretary and reports by an entity certified under this section as the Secretary determines appropriate in order to monitor such entity’s compliance with the requirements of this title and the standards established by the Secretary under this section.

      (4) RECERTIFICATION- A health information network service shall be recertified under this subsection at least every 3 years.

    (c) LOSS OF CERTIFICATION-

      (1) MANDATORY TERMINATION- Except as provided in paragraph (2), if a health information network service violates a health information network privacy standard adopted under section 214 that is applicable to the service, its certification under this section shall be terminated unless the Secretary determines that appropriate corrective action has been taken.

      (2) CONDITIONAL CERTIFICATION--The Secretary may establish a procedure under which a health information network service may remain certified on a conditional basis if the service is operating consistently with a plan intended to correct any violations described in paragraph (1). Such procedure may provide for the appointment of a trustee to continue operation of the service until the requirements for full certification are met.

    (d) CERTIFICATION BY PRIVATE ENTITIES- The Secretary may designate private entities to conduct the certification procedures established by the Secretary under this section. A health information network service certified by such an entity in accordance with such designation shall be considered to be certified by the Secretary.

    (e) INFORMATION HELD BY HEALTH INFORMATION NETWORK SERVICES- If a health information network service certified under this section loses its certified status or takes any action that would threaten the continued availability of the standard data elements of health information held by such service, such data elements shall be transferred to another health information network service certified under this section that has been designated by the Secretary.

SEC. 232. IMPOSITION OF ADDITIONAL REQUIREMENTS.

    (a) IN GENERAL- Except as provided in subsection (c), after the Secretary has established standards under section 212 that are necessary to make uniform and compatible for electronic transmission the data elements that the Secretary determines are appropriate for transmission in connection with a transaction described in subtitle B, an individual or entity may not require an individual or entity, to provide in any manner any additional data element in connection with--

      (1) the transaction; or

      (2) an inquiry with respect to the transaction.

    (b) TRANSMISSION METHOD- Except as provided in subsection (c), after the Secretary has established standards under section 213 relating to the method by which data elements that the Secretary determines are appropriate for transmission in connection with a transaction described in subtitle B may be transmitted electronically, an individual or entity may not require an individual or entity to transmit any data element in a manner inconsistent with the standards in connection with--

      (1) the transaction; or

      (2) an inquiry with respect to the transaction.

    (c) EXCEPTION- Subsections (a) and (b) do not apply if--

      (1) an individual or entity voluntarily agrees to provide the additional data element; or

      (2) a waiver is granted under subsection (d) to permit the requirement to be imposed.

    (d) CONDITIONS FOR WAIVERS-

      (1) IN GENERAL- An individual or entity may request a waiver from the Secretary in order to impose on an individual or entity a requirement otherwise prohibited under subsection (a) or (b). Subject to paragraph (2), the Secretary may grant such a waiver.

      (2) CONSIDERATION OF WAIVER REQUESTS- A waiver may not be granted under this subsection to impose an otherwise prohibited requirement unless

the Secretary determines that the value of any additional information to be provided under the requirement for research or other purposes significantly outweighs the administrative cost of the imposition of the requirement, taking into account the burden of the timing of the imposition of the requirement.

    (e) ANONYMOUS REPORTING- If an individual or entity attempts to impose on an individual or entity a requirement prohibited under subsection (a) or (b), the individual or entity on whom the requirement is being imposed may contact the Secretary. The Secretary shall develop a procedure under which an individual or entity that contacts the Secretary under the preceding sentence shall remain anonymous. The Secretary shall notify the individual or entity imposing the requirement that the requirement may not be imposed unless the other individual or entity voluntarily agrees to such requirement or a waiver is obtained under subsection (d).

SEC. 233. EFFECT ON STATE LAW.

    (a) IN GENERAL- Except as otherwise provided in this section, a provision, requirement, or standard under this title shall supersede any contrary provision of State law.

    (b) STATE ‘QUILL AND PEN’ LAWS- A State may not establish, continue in effect, or enforce any provision of State law that requires medical or health plan records (including billing information) to be maintained or transmitted in written rather than electronic form, except where the Secretary determines that the provision is necessary to prevent fraud and abuse, with respect to controlled substances, or for other purposes.

    (c) PUBLIC HEALTH REPORTING- Nothing in this title shall be construed to invalidate or limit the authority, power, or procedures established under any law providing for the reporting of disease or injury, child abuse, birth, or death, public health surveillance, or public health investigation or intervention.

    (d) PUBLIC USE FUNCTIONS- Nothing in this title shall be construed to limit the authority of a Federal or State agency to make non-identifiable health information available for public use.

    (e) PAYMENT FOR HEALTH CARE SERVICES OR PREMIUMS- Nothing in this title shall be construed to prohibit a consumer from paying for health care items or services, or plan or health insurance coverage premiums, by debit, credit, or other payment cards or numbers or other electronic payment means.

TITLE III--ANTITRUST

SEC. 301. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES OF HEALTH PLANS.

    (a) IN GENERAL- The Attorney General shall provide for the development and publication of explicit guidelines on the application of antitrust laws to the activities of health plans. The guidelines shall be designed to facilitate development and operation of plans, consistent with the antitrust laws.

    (b) REVIEW PROCESS- The Attorney General shall establish a review process under which the administrator or sponsor of a health plan (or organization that proposes to administer or sponsor a health plan) may submit a request to the Attorney General to obtain a prompt opinion (but in no event later than 90 days after the Attorney General receives the request) from the Department of Justice on the plan’s conformity with the Federal antitrust laws.

    (c) DEFINITIONS- In this section--

      (1) the term ‘antitrust laws’--

        (A) has the meaning given it in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12(a)), except that such term includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent such section applies to unfair methods of competition, and

        (B) includes any State law similar to the laws referred to in subparagraph (A); and

      (2) the term ‘health plan’ means any contract or arrangement under which an entity bears all or part of the cost of providing health care items and services, including a hospital or medical expense incurred policy or certificate, hospital or medical service plan contract, or health maintenance subscriber contract, but does not include--

        (A) coverage only for accident, dental, vision, disability, or long term care, medicare supplemental health insurance, or any combination thereof,

        (B) coverage issued as a supplement to liability insurance,

        (C) workers’ compensation or similar insurance, or

        (D) automobile medical-payment insurance.