Title1 — Health Hippo

title1

HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996

(Public Law 104-191 104th Congress)

TITLE I–HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

Subtitle A–Group Market Rules
Part 1–Portability, Access, and Renewability Requirements
- Sec. 101. Through the Employee
  Retirement Income Security Act of 1974.
Part 7–Group Health Plan Portability, Access, and
Renewability Requirements
- Sec. 701. Increased portability
  through limitation on preexisting condition exclusions.
- Sec. 702. Prohibiting
  discrimination against individual participants and
  beneficiaries based on health status.
- Sec. 703. Guaranteed
  renewability in multiemployer plans and multiple employer
  welfare arrangements.
- Sec. 704. Preemption; State
  flexibility; construction.
- Sec. 705. Special rules relating
  to group health plans.
- Sec. 706. Definitions.
- Sec. 707. Regulations.
- Sec. 102. Through the Public
  Health Service Act.
TITLE XXVII–ASSURING PORTABILITY, AVAILABILITY, AND
RENEWABILITY OF HEALTH INSURANCE COVERAGE
Part A–Group Market Reforms
Subpart 1–Portability, Access, and Renewability Requirements
- Sec. 2701. Increased portability
  through limitation on preexisting condition exclusions.
- Sec. 2702. Prohibiting
  discrimination against individual participants and
  beneficiaries based on health status.
Subpart 2–Provisions Applicable Only to Health Insurance
Issuers
- Sec. 2711. Guaranteed
  availability of coverage for employers in the group market.
- Sec. 2712. Guaranteed
  renewability of coverage for employers in the group market.
- Sec. 2713. Disclosure of
  information.
Subpart 3–Exclusion of Plans; Enforcement; Preemption
- Sec. 2721. Exclusion of certain
  plans.
- Sec. 2722. Enforcement.
- Sec. 2723. Preemption; State
  flexibility; construction.
Part C–Definitions; Miscellaneous Provisions
- Sec. 2791. Definitions.
- Sec. 2792. Regulations.”.
- Sec. 103. Reference to
  implementation through the Internal Revenue Code of 1986.
- Sec. 104. Assuring coordination.
Subtitle B–Individual Market Rules
- Sec. 111. Amendment to Public
  Health Service Act.
Part B–Individual Market Rules
- Sec. 2741. Guaranteed
  availability of individual health insurance coverage to certain
  individuals with prior group coverage.
- Sec. 2742. Guaranteed
  renewability of individual health insurance coverage.
- Sec. 2743. Certification of
  coverage.
- Sec. 2744. State flexibility in
  individual market reforms.
- Sec. 2745. Enforcement.
- Sec. 2746. Preemption.
- Sec. 2747. “General
  exceptions.”
Subtitle C–General and Miscellaneous Provisions
- Sec. 191. Health coverage
  availability studies.
- Sec. 192. Report on Medicare
  reimbursement of telemedicine.
- Sec. 193. Allowing
  federally-qualified HMOs to offer high deductible plans.
- Sec. 194. Volunteer services
  provided by health professionals at free clinics.
- Sec. 195. Findings;
  severability.

Subtitle A–Group Market Rules

Part 1–Portability, Access, and Renewability Requirements

SEC. 101. THROUGH THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974.

(a) In General.–Subtitle B of title I of the Employee Retirement
Income Security Act of 1974 is amended by adding at the end the
following new part:

Part 7–Group Health Plan Portability, Access, and Renewability
Requirements

SEC. 701. INCREASED <<NOTE: 29 USC
1181.>> PORTABILITY THROUGH LIMITATION ON PREEXISTING CONDITION
EXCLUSIONS.

(a) Limitation on Preexisting Condition Exclusion Period;
Crediting for Periods of Previous Coverage.–Subject to subsection
(d), a group health plan, and a health insurance issuer offering
group health insurance coverage, may, with respect to a participant
or beneficiary, impose a preexisting condition exclusion only if–
(1) such exclusion relates to a condition (whether physical or
mental), regardless of the cause of the condition, for which medical
advice, diagnosis, care, or treatment was recommended or received
within the 6-month period ending on the enrollment date; (2) such
exclusion extends for a period of not more than 12 months (or 18
months in the case of a late enrollee) after the enrollment date; and
(3) the period of any such preexisting condition exclusion is reduced
by the aggregate of the periods of creditable coverage (if any, as
defined in subsection (c)(1)) applicable to the participant or
beneficiary as of the enrollment date.

(b) Definitions.–For purposes of this part– (1) Preexisting
condition exclusion.– (A) In general.–The term `preexisting
condition exclusion’ means, with respect to coverage, a limitation or
exclusion of benefits relating to a condition based on the fact that
the condition was present before the date of enrollment for such
coverage, whether or not any medical advice, diagnosis, care, or
treatment was recommended or received before such date.

(B) Treatment of genetic information.–Genetic information shall
not be treated as a condition described in subsection (a)(1) in the
absence of a diagnosis of the condition related to such information.

(2) Enrollment date.–The term `enrollment date’ means, with
respect to an individual covered under a group health plan or health
insurance coverage, the date of enrollment of the individual in the
plan or coverage or, if earlier, the first day of the waiting period
for such enrollment.

(3) Late enrollee.–The term `late enrollee’ means, with respect
to coverage under a group health plan, a participant or beneficiary
who enrolls under the plan other than during– (A) the first period
in which the individual is eligible to enroll under the plan, or (B)
a special enrollment period under subsection (f).

(4) Waiting period.–The term `waiting period’ means, with respect
to a group health plan and an individual who is a potential
participant or beneficiary in the plan, the period that must pass
with respect to the individual before the individual is eligible to
be covered for benefits under the terms of the plan.

(c) Rules Relating to Crediting Previous Coverage.– (1)
Creditable coverage defined.–For purposes of this part, the term
`creditable coverage’ means, with respect to an individual, coverage
of the individual under any of the following: (A) A group health
plan.

(B) Health insurance coverage.

(D) Title XIX of the Social Security Act, other than coverage
consisting solely of benefits under section 1928.

(E) Chapter 55 of title 10, United States Code.

(F) A medical care program of the Indian Health Service or of a
tribal organization.

(G) A State health benefits risk pool.

(H) A health plan offered under chapter 89 of title 5, United
States Code.

(I) A public health plan (as defined in regulations).

(J) A health benefit plan under section 5(e) of the Peace Corps
Act (22 U.S.C. 2504(e)).

Such term does not include coverage consisting solely of coverage
of excepted benefits (as defined in section 706(c)).

(2) Not counting periods before significant breaks in coverage.–
(A) In general.–A period of creditable coverage shall not be
counted, with respect to enrollment of an individual under a group
health plan, if, after such period and before the enrollment date,
there was a 63- day period during all of which the individual was not
covered under any creditable coverage.

(B) Waiting period not treated as a break in coverage.–For
purposes of subparagraph (A) and subsection (d)(4), any period that
an individual is in a waiting period for any coverage under a group
health plan (or for group health insurance coverage) or is in an
affiliation period (as defined in subsection (g)(2)) shall not be
taken into account in determining the continuous period under
subparagraph (A).

(3) Method of crediting coverage.– (A) Standard method.–Except
as otherwise provided under subparagraph (B), for purposes of
applying subsection (a)(3), a group health plan, and a health
insurance issuer offering group health insurance coverage, shall
count a period of creditable coverage without regard to the specific
benefits covered during the period.

(B) Election of alternative method.–A group health plan, or a
health insurance issuer offering group health insurance coverage, may
elect to apply subsection (a)(3) based on coverage of benefits within
each of several classes or categories of benefits specified in
regulations rather than as provided under subparagraph (A). Such
election shall be made on a uniform basis for all participants and
beneficiaries. Under such election a group health plan or issuer
shall count a period of creditable coverage with respect to any class
or category of benefits if any level of benefits is covered within
such class or category.

(C) Plan notice.–In the case of an election with respect to a
group health plan under subparagraph (B) (whether or not health
insurance coverage is provided in connection with such plan), the
plan shall– (i) prominently state in any disclosure statements
concerning the plan, and state to each enrollee at the time of
enrollment under the plan, that the plan has made such election, and
(ii) include in such statements a description of the effect of this
election.

(4) Establishment of period.–Periods of creditable coverage with
respect to an individual shall be established through presentation of
certifications described in subsection (e) or in such other manner as
may be specified in regulations.

(d) Exceptions.– (1) Exclusion not applicable to certain
newborns.–Subject to paragraph (4), a group health plan, and a
health insurance issuer offering group health insurance coverage, may
not impose any preexisting condition exclusion in the case of an
individual who, as of the last day of the 30-day period beginning
with the date of birth, is covered under creditable coverage.

(2) Exclusion not applicable to certain adopted children.–Subject
to paragraph (4), a group health plan, and a health insurance issuer
offering group health insurance coverage, may not impose any
preexisting condition exclusion in the case of a child who is adopted
or placed for adoption before attaining 18 years of age and who, as
of the last day of the 30- day period beginning on the date of the
adoption or placement for adoption, is covered under creditable
coverage. The previous sentence shall not apply to coverage before
the date of such adoption or placement for adoption.

(3) Exclusion not applicable to pregnancy.–A group health plan,
and health insurance issuer offering group health insurance coverage,
may not impose any preexisting condition exclusion relating to
pregnancy as a preexisting condition.

(4) Loss if break in coverage.–Paragraphs (1) and (2) shall no
longer apply to an individual after the end of the first 63-day
period during all of which the individual was not covered under any
creditable coverage.

(e) Certifications and Disclosure of Coverage.– (1) Requirement
for certification of period of creditable coverage.– (A) In
general.–A group health plan, and a health insurance issuer offering
group health insurance coverage, shall provide the certification
described in subparagraph (B)– (i) at the time an individual ceases
to be covered under the plan or otherwise becomes covered under a
COBRA continuation provision, (ii) in the case of an individual
becoming covered under such a provision, at the time the individual
ceases to be covered under such provision, and (iii) on the request
on behalf of an individual made not later than 24 months after the
date of cessation of the coverage described in clause (i) or (ii),
whichever is later.

The certification under clause (i) may be provided, to the extent
practicable, at a time consistent with notices required under any
applicable COBRA continuation provision.

(B) Certification.–The certification described in this
subparagraph is a written certification of– (i) the period of
creditable coverage of the individual under such plan and the
coverage (if any) under such COBRA continuation provision, and (ii)
the waiting period (if any) (and affiliation period, if applicable)
imposed with respect to the individual for any coverage under such
plan.

(C) Issuer compliance.–To the extent that medical care under a
group health plan consists of group health insurance coverage, the
plan is deemed to have satisfied the certification requirement under
this paragraph if the health insurance issuer offering the coverage
provides for such certification in accordance with this paragraph.

(2) Disclosure of information on previous benefits.–In the case
of an election described in subsection (c)(3)(B) by a group health
plan or health insurance issuer, if the plan or issuer enrolls an
individual for coverage under the plan and the individual provides a
certification of coverage of the individual under paragraph (1)– (A)
upon request of such plan or issuer, the entity which issued the
certification provided by the individual shall promptly disclose to
such requesting plan or issuer information on coverage of classes and
categories of health benefits available under such entity’s plan or
coverage, and (B) such entity may charge the requesting plan or
issuer for the reasonable cost of disclosing such information.

(3) Regulations.–The Secretary shall establish rules to prevent
an entity’s failure to provide information under paragraph (1) or (2)
with respect to previous coverage of an individual from adversely
affecting any subsequent coverage of the individual under another
group health plan or health insurance coverage.

(f) Special Enrollment Periods.– (1) Individuals losing other
coverage.–A group health plan, and a health insurance issuer
offering group health insurance coverage in connection with a group
health plan, shall permit an employee who is eligible, but not
enrolled, for coverage under the terms of the plan (or a dependent of
such an employee if the dependent is eligible, but not enrolled, for
coverage under such terms) to enroll for coverage under the terms of
the plan if each of the following conditions is met: (A) The employee
or dependent was covered under a group health plan or had health
insurance coverage at the time coverage was previously offered to the
employee or dependent.

(B) The employee stated in writing at such time that coverage
under a group health plan or health insurance coverage was the reason
for declining enrollment, but only if the plan sponsor or issuer (if
applicable) required such a statement at such time and provided the
employee with notice of such requirement (and the consequences of
such requirement) at such time.

(C) The employee’s or dependent’s coverage described in
subparagraph (A)– (i) was under a COBRA continuation provision and
the coverage under such provision was exhausted; or (ii) was not
under such a provision and either the coverage was terminated as a
result of loss of eligibility for the coverage (including as a result
of legal separation, divorce, death, termination of employment, or
reduction in the number of hours of employment) or employer
contributions toward such coverage were terminated.

(D) Under the terms of the plan, the employee requests such
enrollment not later than 30 days after the date of exhaustion of
coverage described in subparagraph (C)(i) or termination of coverage
or employer contribution described in subparagraph (C)(ii).

(2) For dependent beneficiaries.– (A) In general.–If– (i) a
group health plan makes coverage available with respect to a
dependent of an individual, (ii) the individual is a participant
under the plan (or has met any waiting period applicable to becoming
a participant under the plan and is eligible to be enrolled under the
plan but for a failure to enroll during a previous enrollment
period), and (iii) a person becomes such a dependent of the
individual through marriage, birth, or adoption or placement for
adoption, the group health plan shall provide for a dependent special
enrollment period described in subparagraph (B) during which the
person (or, if not otherwise enrolled, the individual) may be
enrolled under the plan as a dependent of the individual, and in the
case of the birth or adoption of a child, the spouse of the
individual may be enrolled as a dependent of the individual if such
spouse is otherwise eligible for coverage.

(B) Dependent special enrollment period.–A dependent special
enrollment period under this subparagraph shall be a period of not
less than 30 days and shall begin on the later of– (i) the date
dependent coverage is made available, or (ii) the date of the
marriage, birth, or adoption or placement for adoption (as the case
may be) described in subparagraph (A)(iii).

(C) No waiting period.–If an individual seeks to enroll a
dependent during the first 30 days of such a dependent special
enrollment period, the coverage of the dependent shall become
effective– (i) in the case of marriage, not later than the first day
of the first month beginning after the date the completed request for
enrollment is received; (ii) in the case of a dependent’s birth, as
of the date of such birth; or (iii) in the case of a dependent’s
adoption or placement for adoption, the date of such adoption or
placement for adoption.

(g) Use of Affiliation Period by HMOs as Alternative to
Preexisting Condition Exclusion.– (1) In general.–In the case of a
group health plan that offers medical care through health insurance
coverage offered by a health maintenance organization, the plan may
provide for an affiliation period with respect to coverage through
the organization only if– (A) no preexisting condition exclusion is
imposed with respect to coverage through the organization, (B) the
period is applied uniformly without regard to any health
status-related factors, and (C) such period does not exceed 2 months
(or 3 months in the case of a late enrollee).

(2) Affiliation period.– (A) Defined.–For purposes of this part,
the term `affiliation period’ means a period which, under the terms
of the health insurance coverage offered by the health maintenance
organization, must expire before the health insurance coverage
becomes effective. The organization is not required to provide health
care services or benefits during such period and no premium shall be
charged to the participant or beneficiary for any coverage during the
period.

(B) Beginning.–Such period shall begin on the enrollment date.

(C) Runs concurrently with waiting periods.–An affiliation period
under a plan shall run concurrently with any waiting period under the
plan.

(3) Alternative methods.–A health maintenance organization
described in paragraph (1) may use alternative methods, from those
described in such paragraph, to address adverse selection as approved
by the State insurance commissioner or official or officials
designated by the State to enforce the requirements of part A of
title XXVII of the Public Health Service Act for the State involved
with respect to such issuer.

SEC. 702. PROHIBITING <<NOTE: 29
USC 1182.>> DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND
BENEFICIARIES BASED ON HEALTH STATUS.

(a) In Eligibility To Enroll.– (1) In general.–Subject to
paragraph (2), a group health plan, and a health insurance issuer
offering group health insurance coverage in connection with a group
health plan, may not establish rules for eligibility (including
continued eligibility) of any individual to enroll under the terms of
the plan based on any of the following health status-related factors
in relation to the individual or a dependent of the individual: (A)
Health status.

(B) Medical condition (including both physical and mental
illnesses).

(D) Receipt of health care.

(E) Medical history.

(F) Genetic information.

(G) Evidence of insurability (including conditions arising out of
acts of domestic violence).

(H) Disability.

(2) No application to benefits or exclusions.–To the extent
consistent with section 701, paragraph (1) shall not be construed–
(A) to require a group health plan, or group health insurance
coverage, to provide particular benefits other than those provided
under the terms of such plan or coverage, or (B) to prevent such a
plan or coverage from establishing limitations or restrictions on the
amount, level, extent, or nature of the benefits or coverage for
similarly situated individuals enrolled in the plan or coverage.

(3) Construction.–For purposes of paragraph (1), rules for
eligibility to enroll under a plan include rules defining any
applicable waiting periods for such enrollment.

(b) In Premium Contributions.– (1) In general.–A group health
plan, and a health insurance issuer offering health insurance
coverage in connection with a group health plan, may not require any
individual (as a condition of enrollment or continued enrollment
under the plan) to pay a premium or contribution which is greater
than such premium or contribution for a similarly situated individual
enrolled in the plan on the basis of any health status-related factor
in relation to the individual or to an individual enrolled under the
plan as a dependent of the individual.

(2) Construction.–Nothing in paragraph (1) shall be construed–
(A) to restrict the amount that an employer may be charged for
coverage under a group health plan; or (B) to prevent a group health
plan, and a health insurance issuer offering group health insurance
coverage, from establishing premium discounts or rebates or modifying
otherwise applicable copayments or deductibles in return for
adherence to programs of health promotion and disease prevention.

SEC. 703. GUARANTEED <<NOTE: 29
USC 1183.>> RENEWABILITY IN MULTIEMPLOYER PLANS AND MULTIPLE
EMPLOYER WELFARE ARRANGEMENTS.

A group health plan which is a multiemployer plan or which is a
multiple employer welfare arrangement may not deny an employer whose
employees are covered under such a plan continued access to the same
or different coverage under the terms of such a plan, other than–
(1) for nonpayment of contributions; (2) for fraud or other
intentional misrepresentation of material fact by the employer; (3)
for noncompliance with material plan provisions; (4) because the plan
is ceasing to offer any coverage in a geographic area; (5) in the
case of a plan that offers benefits through a network plan, there is
no longer any individual enrolled through the employer who lives,
resides, or works in the service area of the network plan and the
plan applies this paragraph uniformly without regard to the claims
experience of employers or any health status-related factor in
relation to such individuals or their dependents; and (6) for failure
to meet the terms of an applicable collective bargaining agreement,
to renew a collective bargaining or other agreement requiring or
authorizing contributions to the plan, or to employ employees covered
by such an agreement.

SEC. 704. <<NOTE: 29 USC
1184.>> PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.

(a) Continued Applicability of State Law With Respect to Health
Insurance Issuers.– (1) In General.–Subject to paragraph (2) and
except as provided in subsection (b), this part shall not be
construed to supersede any provision of State law which establishes,
implements, or continues in effect any standard or requirement solely
relating to health insurance issuers in connection with group health
insurance coverage except to the extent that such standard or
requirement prevents the application of a requirement of this part.

(2) Continued preemption with respect to group health
plans.–Nothing in this part shall be construed to affect or modify
the provisions of section 514 with respect to group health plans.

(b) Special Rules in Case of Portability Requirements.– (1) In
general.–Subject to paragraph (2), the provisions of this part
relating to health insurance coverage offered by a health insurance
issuer supersede any provision of State law which establishes,
implements, or continues in effect a standard or requirement
applicable to imposition of a preexisting condition exclusion
specifically governed by section 701 which differs from the standards
or requirements specified in such section.

(2) Exceptions.–Only in relation to health insurance coverage
offered by a health insurance issuer, the provisions of this part do
not supersede any provision of State law to the extent that such
provision– (A) substitutes for the reference to `6-month period’ in
section 701(a)(1) a reference to any shorter period of time; (B)
substitutes for the reference to `12 months’ and `18 months’ in
section 701(a)(2) a reference to any shorter period of time; (C)
substitutes for the references to `63 days’ in sections 701 (c)(2)(A)
and (d)(4)(A) a reference to any greater number of days; (D)
substitutes for the reference to `30-day period’ in sections 701
(b)(2) and (d)(1) a reference to any greater period; (E) prohibits
the imposition of any preexisting condition exclusion in cases not
described in section 701(d) or expands the exceptions described in
such section; (F) requires special enrollment periods in addition to
those required under section 701(f); or (G) reduces the maximum
period permitted in an affiliation period under section 701(g)(1)(B).

(c) Rules of Construction.–Nothing in this part shall be
construed as requiring a group health plan or health insurance
coverage to provide specific benefits under the terms of such plan or
coverage.

(d) Definitions.–For purposes of this section– (1) State
law.–The term `State law’ includes all laws, decisions, rules,
regulations, or other State action having the effect of law, of any
State. A law of the United States applicable only to the District of
Columbia shall be treated as a State law rather than a law of the
United States.

(2) State.–The term `State’ includes a State, the Northern
Mariana Islands, any political subdivisions of a State or such
Islands, or any agency or instrumentality of either.

SEC. 705. SPECIAL <<NOTE: 29 USC
1185.>> RULES RELATING TO GROUP HEALTH PLANS.

(a) General Exception for Certain Small Group Health Plans.–The
requirements of this part shall not apply to any group health plan
(and group health insurance coverage offered in connection with a
group health plan) for any plan year if, on the first day of such
plan year, such plan has less than 2 participants who are current
employees.

(b) Exception for Certain Benefits.–The requirements of this part
shall not apply to any group health plan (and group health insurance
coverage) in relation to its provision of excepted benefits described
in section 706(c)(1).

(c) Exception for Certain Benefits if Certain Conditions Met.–
(1) Limited, excepted benefits.–The requirements of this part shall
not apply to any group health plan (and group health insurance
coverage offered in connection with a group health plan) in relation
to its provision of excepted benefits described in section 706(c)(2)
if the benefits– (A) are provided under a separate policy,
certificate, or contract of insurance; or (B) are otherwise not an
integral part of the plan.

(2) Noncoordinated, excepted benefits.–The requirements of this
part shall not apply to any group health plan (and group health
insurance coverage offered in connection with a group health plan) in
relation to its provision of excepted benefits described in section
706(c)(3) if all of the following conditions are met: (A) The
benefits are provided under a separate policy, certificate, or
contract of insurance.

(B) There is no coordination between the provision of such
benefits and any exclusion of benefits under any group health plan
maintained by the same plan sponsor.

(C) Such benefits are paid with respect to an event without regard
to whether benefits are provided with respect to such an event under
any group health plan maintained by the same plan sponsor.

(3) Supplemental excepted benefits.–The requirements of this part
shall not apply to any group health plan (and group health insurance
coverage) in relation to its provision of excepted benefits described
in section 706(c)(4) if the benefits are provided under a separate
policy, certificate, or contract of insurance.

(d) Treatment of Partnerships.–For purposes of this part– (1)
Treatment as a group health plan.–Any plan, fund, or program which
would not be (but for this subsection) an employee welfare benefit
plan and which is established or maintained by a partnership, to the
extent that such plan, fund, or program provides medical care
(including items and services paid for as medical care) to present or
former partners in the partnership or to their dependents (as defined
under the terms of the plan, fund, or program), directly or through
insurance, reimbursement, or otherwise, shall be treated (subject to
paragraph (2)) as an employee welfare benefit plan which is a group
health plan.

(2) Employer.–In the case of a group health plan, the term
`employer’ also includes the partnership in relation to any partner.

(3) Participants of group health plans.–In the case of a group
health plan, the term `participant’ also includes– (A) in connection
with a group health plan maintained by a partnership, an individual
who is a partner in relation to the partnership, or (B) in connection
with a group health plan maintained by a self-employed individual
(under which one or more employees are participants), the self-
employed individual, if such individual is, or may become, eligible
to receive a benefit under the plan or such individual’s
beneficiaries may be eligible to receive any such benefit.

SEC. 706. <<NOTE: 29 USC
1186.>> DEFINITIONS.

(a) Group Health Plan.–For purposes of this part– (1) In
general.–The term `group health plan’ means an employee welfare
benefit plan to the extent that the plan provides medical care (as
defined in paragraph (2) and including items and services paid for as
medical care) to employees or their dependents (as defined under the
terms of the plan) directly or through insurance, reimbursement, or
otherwise.

(2) Medical care.–The term `medical care’ means amounts paid
for– (A) the diagnosis, cure, mitigation, treatment, or prevention
of disease, or amounts paid for the purpose of affecting any
structure or function of the body, (B) amounts paid for
transportation primarily for and essential to medical care referred
to in subparagraph (A), and (C) amounts paid for insurance covering
medical care referred to in subparagraphs (A) and (B).

(b) Definitions Relating to Health Insurance.–For purposes of
this part– (1) Health insurance coverage.–The term `health
insurance coverage’ means benefits consisting of medical care
(provided directly, through insurance or reimbursement, or otherwise
and including items and services paid for as medical care) under any
hospital or medical service policy or certificate, hospital or
medical service plan contract, or health maintenance organization
contract offered by a health insurance issuer.

(2) Health insurance issuer.–The term `health insurance issuer’
means an insurance company, insurance service, or insurance
organization (including a health maintenance organization, as defined
in paragraph (3)) which is licensed to engage in the business of
insurance in a State and which is subject to State law which
regulates insurance (within the meaning of section 514(b)(2)). Such
term does not include a group health plan.

(3) Health maintenance organization.–The term `health maintenance
organization’ means– (A) a federally qualified health maintenance
organization (as defined in section 1301(a) of the Public Health
Service Act (42 U.S.C. 300e(a))), (B) an organization recognized
under State law as a health maintenance organization, or (C) a
similar organization regulated under State law for solvency in the
same manner and to the same extent as such a health maintenance
organization.

(4) Group health insurance coverage.–The term `group health
insurance coverage’ means, in connection with a group health plan,
health insurance coverage offered in connection with such plan.

(c) Excepted Benefits.–For purposes of this part, the term
`excepted benefits’ means benefits under one or more (or any
combination thereof) of the following: (1) Benefits not subject to
requirements.– (A) Coverage only for accident, or disability income
insurance, or any combination thereof.

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

(D) Workers’ compensation or similar insurance.

(E) Automobile medical payment insurance.

(F) Credit-only insurance.

(G) Coverage for on-site medical clinics.

(H) Other similar insurance coverage, specified in regulations,
under which benefits for medical care are secondary or incidental to
other insurance benefits.

(2) Benefits not subject to requirements if offered separately.–
(A) Limited scope dental or vision benefits.

(B) Benefits for long-term care, nursing home care, home health
care, community-based care, or any combination thereof.

(3) Benefits not subject to requirements if offered as
independent, noncoordinated benefits.– (A) Coverage only for a
specified disease or illness.

(B) Hospital indemnity or other fixed indemnity insurance.

(4) Benefits not subject to requirements if offered as separate
insurance policy.–Medicare supplemental health insurance (as defined
under section 1882(g)(1) of the Social Security Act), coverage
supplemental to the coverage provided under chapter 55 of title 10,
United States Code, and similar supplemental coverage provided to
coverage under a group health plan.

(d) Other Definitions.–For purposes of this part– (1) COBRA
continuation provision.–The term `COBRA continuation provision’
means any of the following: (A) Part 6 of this subtitle.

(B) Section 4980B of the Internal Revenue Code of 1986, other than
subsection (f)(1) of such section insofar as it relates to pediatric
vaccines.

(2) Health status-related factor.–The term `health status-related
factor’ means any of the factors described in section 702(a)(1).

(3) Network plan.–The term `network plan’ means health insurance
coverage offered by a health insurance issuer under which the
financing and delivery of medical care (including items and services
paid for as medical care) are provided, in whole or in part, through
a defined set of providers under contract with the issuer.

(4) Placed for adoption.–The term `placement’, or being `placed’,
for adoption, has the meaning given such term in section
609(c)(3)(B).

SEC. 707. <<NOTE: 29 USC
1187.>> REGULATIONS.

The Secretary, consistent with section 104 of the Health Care
Portability and Accountability Act of 1996, may promulgate such
regulations as may be necessary or appropriate to carry out the
provisions of this part. The Secretary may promulgate any interim
final rules as the Secretary determines are appropriate to carry out
this part.”.

(b) Enforcement With Respect to Health Insurance Issuers.–Section
502(b) of such Act (29 U.S.C. 1132(b)) is amended by adding at the
end the following new paragraph: (3) The Secretary is not authorized
to enforce under this part any requirement of part 7 against a health
insurance issuer offering health insurance coverage in connection
with a group health plan (as defined in section 706(a)(1)). Nothing
in this paragraph shall affect the authority of the Secretary to
issue regulations to carry out such part.”.

(c) Disclosure of Information to Participants and Beneficiaries.–
(1) In general.–Section 104(b)(1) of such Act (29 U.S.C.

1024(b)(1)) is amended in the matter following subpara- graph
(B)– (A) by striking 102(a)(1),” and inserting 102(a)(1) (other
than a material reduction in covered services or benefits provided in
the case of a group health plan (as defined in section
706(a)(1))),”; and (B) by adding at the end the following new
sentences: If there is a modification or change described in section
102(a)(1) that is a material reduction in covered services or
benefits provided under a group health plan (as defined in section
706(a)(1)), a summary description of such modification or change
shall be furnished to participants and beneficiaries not later than
60 days after the date of the adoption of the modification or change.
In the alternative, the plan sponsors may provide such description at
regular intervals of not more than 90 days. The Secretary shall issue
regulations within 180 days after the date of enactment of the Health
Insurance Portability and Accountability Act of 1996, providing
alternative mechanisms to delivery by mail through which group health
plans (as so defined) may notify participants and beneficiaries of
material reductions in covered services or benefits.”.

(2) Plan description and summary.–Section 102(b) of such Act (29
U.S.C. 1022(b)) is amended– (A) by inserting in the case of a group
health plan (as defined in section 706(a)(1)), whether a health
insurance issuer (as defined in section 706(b)(2)) is responsible for
the financing or administration (including payment of claims) of the
plan and (if so) the name and address of such issuer;” after type of
administration of the plan;”; and (B) by inserting including the
office at the Department of Labor through which participants and
beneficiaries may seek assistance or information regarding their
rights under this Act and the Health Insurance Portability and
Accountability Act of 1996 with respect to health benefits that are
offered through a group health plan (as defined in section
706(a)(1))” after benefits under the plan”.

(d) Treatment of Health Insurance Issuers Offering Health
Insurance Coverage to Noncovered Plans.–Section 4(b) of such Act (29
U.S.C.

1003(b)) is amended by adding at the end (after and below
paragraph (5)) the following: The provisions of part 7 of subtitle B
shall not apply to a health insurance issuer (as defined in section
706(b)(2)) solely by reason of health insurance coverage (as defined
in section 706(b)(1)) provided by such issuer in connection with a
group health plan (as defined in section 706(a)(1)) if the provisions
of this title do not apply to such group health plan.”.

(e) Reporting and Enforcement With Respect to Certain
Arrangements.– (1) In general.–Section 101 of such Act (29 U.S.C.
1021) is amended– (A) by redesignating subsection (g) as subsection
(h), and (B) by inserting after subsection (f) the following new
subsection:

(g) Reporting by Certain Arrangements.–The Secretary may, by
regulation, require multiple employer welfare arrangements providing
benefits consisting of medical care (within the meaning of section
706(a)(2)) which are not group health plans to report, not more
frequently than annually, in such form and such manner as the
Secretary may require for the purpose of determining the extent to
which the requirements of part 7 are being carried out in connection
with such benefits.”.

(2) Enforcement.– (A) In general.–Section 502 of such Act (29
U.S.C.

1132) is amended– (i) in subsection (a)(6), by striking under
subsection (c)(2) or (i) or (l)” and inserting under paragraph (2),
(4), or (5) of subsection (c) or under subsection (i) or (l)”; and
(ii) in the last 2 sentences of subsection (c), by striking For
purposes of this paragraph” and all that follows through The
Secretary and” and inserting the following:

(5) The Secretary may assess a civil penalty against any person of
up to $1,000 a day from the date of the person’s failure or refusal
to file the information required to be filed by such person with the
Secretary under regulations prescribed pursuant to section 101(g).

(6) The Secretary and.

(B) Technical and conforming amendment.–Section 502(c)(1) of such
Act (29 U.S.C. 1132(c)(1)) is amended by adding at the end the
following sentence: For purposes of this paragraph, each violation
described in subparagraph (A) with respect to any single participant,
and each violation described in subparagraph (B) with respect to any
single participant or beneficiary, shall be treated as a separate
violation.”.

(3) Coordination.–Section 506 of such Act (29 U.S.C. 1136) is
amended by adding at the end the following new subsection:

(c) Coordination of Enforcement With States With Respect to
Certain Arrangements.–A State may enter into an agreement with the
Secretary for delegation to the State of some or all of the
Secretary’s authority under sections 502 and 504 to enforce the
requirements under part 7 in connection with multiple employer
welfare arrangements, providing medical care (within the meaning of
section 706(a)(2)), which are not group health plans.”.

(f) Conforming Amendments.– (1) Section 514(b) of such Act (29
U.S.C. 1144(b)) is amended by adding at the end the following new
paragraph:

(9) For additional provisions relating to group health plans, see
section 704.”.

(2)(A) Part 6 of subtitle B of title I of such Act (29 U.S.C. 1161
et seq.) is amended by striking the heading and inserting the
following:

Part 6–Continuation Coverage and Additional Standards for Group
Health Plans.

(B) The table of contents in section 1 of such Act is amended by
striking the item relating to the heading for part 6 of subtitle B of
title I and inserting the following:

Part 6–Continuation Coverage and Additional Standards for Group
Health Plans.

(3) The table of contents in section 1 of such Act (as amended by
the preceding provisions of this section) is amended by inserting
after the items relating to part 6 the following new items:

Part 7–Group Health Plan Portability, Access, and Renewability
Requirements

Sec. 701. Increased portability through limitation on preexisting
condition exclusions.

Sec. 702. Prohibiting discrimination against individual
participants and beneficiaries based on health status.

Sec. 703. Guaranteed renewability in multiemployer plans and
multiple employer welfare arrangements.

Sec. 704. Preemption; State flexibility; construction.

Sec. 705. Special rules relating to group health plans.

Sec. 706. Definitions.

Sec. 707. Regulations.

(g) Effective <<NOTE: 29 USC 1181 note.>> Dates.– (1)
In general.–Except as provided in this section, this section (and
the amendments made by this section) shall apply with respect to
group health plans for plan years beginning after June 30, 1997.

(2) Determination of creditable coverage.– (A) Period of
coverage.– (i) In general.–Subject to clause (ii), no period before
July 1, 1996, shall be taken into account under part 7 of subtitle B
of title I of the Employee Retirement Income Security Act of 1974 (as
added by this section) in determining creditable coverage.

(ii) Special rule for certain periods.–The Secretary of Labor,
consistent with section 104, shall provide for a process whereby
individuals who need to establish creditable coverage for periods
before July 1, 1996, and who would have such coverage credited but
for clause (i) may be given credit for creditable coverage for such
periods through the presentation of documents or other means.

(B) Certifications, etc.– (i) In general.–Subject to clauses
(ii) and (iii), subsection (e) of section 701 of the Employee
Retirement Income Security Act of 1974 (as added by this section)
shall apply to events occurring after June 30, 1996.

(ii) No certification required to be provided before june 1,
1997.–In no case is a certification required to be provided under
such subsection before June 1, 1997.

(iii) Certification only on written request for events occurring
before october 1, 1996.–In the case of an event occurring after June
30, 1996, and before October 1, 1996, a certification is not required
to be provided under such subsection unless an individual (with
respect to whom the certification is otherwise required to be made)
requests such certification in writing.

(C) Transitional rule.–In the case of an individual who seeks to
establish creditable coverage for any period for which certification
is not required because it relates to an event occurring before June
30, 1996– (i) the individual may present other credible evidence of
such coverage in order to establish the period of creditable
coverage; and (ii) a group health plan and a health insurance issuer
shall not be subject to any penalty or enforcement action with
respect to the plan’s or issuer’s crediting (or not crediting) such
coverage if the plan or issuer has sought to comply in good faith
with the applicable requirements under the amendments made by this
section.

(3) Special rule for collective bargaining agreements.– Except as
provided in paragraph (2), in the case of a group health plan
maintained pursuant to one or more collective bargaining agreements
between employee representatives and one or more employers ratified
before the date of the enactment of this Act, part 7 of subtitle B of
title I of Employee Retirement Income Security Act of 1974 (other
than section 701(e) thereof) shall not apply to plan years beginning
before the later of– (A) the date on which the last of the
collective bargaining agreements relating to the plan terminates
(determined without regard to any extension thereof agreed to after
the date of the enactment of this Act), or (B) July 1, 1997.

For purposes of subparagraph (A), any plan amendment made pursuant
to a collective bargaining agreement relating to the plan which
amends the plan solely to conform to any requirement of such part
shall not be treated as a termination of such collective bargaining
agreement.

(4) Timely regulations.–The Secretary of Labor, consistent with
section 104, shall first issue by not later than April 1, 1997, such
regulations as may be necessary to carry out the amendments made by
this section.

(5) Limitation on actions.–No enforcement action shall be taken,
pursuant to the amendments made by this section, against a group
health plan or health insurance issuer with respect to a violation of
a requirement imposed by such amendments before January 1, 1998, or,
if later, the date of issuance of regulations referred to in
paragraph (4), if the plan or issuer has sought to comply in good
faith with such requirements.

SEC. 102. THROUGH THE PUBLIC HEALTH
SERVICE ACT.

(a) In General.–The Public Health Service Act is amended by
adding at the end the following new title:

TITLE XXVII–ASSURING PORTABILITY, AVAILABILITY, AND RENEWABILITY
OF HEALTH INSURANCE COVERAGE

Part A–Group Market Reforms

Subpart 1–Portability, Access, and Renewability Requirements

SEC. 2701. INCREASED <<NOTE: 42
USC 300gg.>> PORTABILITY THROUGH LIMITATION ON PREEXISTING
CONDITION EXCLUSIONS.

(c) Rules Relating to Crediting Previous Coverage.– (1)
Creditable coverage defined.–For purposes of this title, the term
`creditable coverage’ means, with respect to an individual, coverage
of the individual under any of the following: (A) A group health
plan.

(B) Health insurance coverage.

(D) Title XIX of the Social Security Act, other than coverage
consisting solely of benefits under section 1928.

(E) Chapter 55 of title 10, United States Code.

(F) A medical care program of the Indian Health Service or of a
tribal organization.

(G) A State health benefits risk pool.

(H) A health plan offered under chapter 89 of title 5, United
States Code.

(I) A public health plan (as defined in regulations).

(J) A health benefit plan under section 5(e) of the Peace Corps
Act (22 U.S.C. 2504(e)).

Such term does not include coverage consisting solely of coverage
of excepted benefits (as defined in section 2791(c)).

(B) Election of alternative method.–A group health plan, or a
health insurance issuer offering group health insurance, may elect to
apply subsection (a)(3) based on coverage of benefits within each of
several classes or categories of benefits specified in regulations
rather than as provided under subparagraph (A). Such election shall
be made on a uniform basis for all participants and beneficiaries.
Under such election a group health plan or issuer shall count a
period of creditable coverage with respect to any class or category
of benefits if any level of benefits is covered within such class or
category.

(D) Issuer notice.–In the case of an election under subparagraph
(B) with respect to health insurance coverage offered by an issuer in
the small or large group market, the issuer– (i) shall prominently
state in any disclosure statements concerning the coverage, and to
each employer at the time of the offer or sale of the coverage, that
the issuer has made such election, and (ii) shall include in such
statements a description of the effect of such election.

The certification under clause (i) may be provided, to the extent
practicable, at a time consistent with notices required under any
applicable COBRA continuation provision.

(g) Use of Affiliation Period by HMOs as Alternative to
Preexisting Condition Exclusion.– (1) In general.–A health
maintenance organization which offers health insurance coverage in
connection with a group health plan and which does not impose any
preexisting condition exclusion allowed under subsection (a) with
respect to any particular coverage option may impose an affiliation
period for such coverage option, but only if– (A) such period is
applied uniformly without regard to any health status-related
factors; and (B) such period does not exceed 2 months (or 3 months in
the case of a late enrollee).

(2) Affiliation period.– (A) Defined.–For purposes of this
title, the term `affiliation period’ means a period which, under the
terms of the health insurance coverage offered by the health
maintenance organization, must expire before the health insurance
coverage becomes effective. The organization is not required to
provide health care services or benefits during such period and no
premium shall be charged to the participant or beneficiary for any
coverage during the period.

(B) Beginning.–Such period shall begin on the enrollment date.

(C) Runs concurrently with waiting periods.–An affiliation period
under a plan shall run concurrently with any waiting period under the
plan.

(3) Alternative methods.–A health maintenance organization
described in paragraph (1) may use alternative methods, from those
described in such paragraph, to address adverse selection as approved
by the State insurance commissioner or official or officials
designated by the State to enforce the requirements of this part for
the State involved with respect to such issuer.

SEC. 2702. PROHIBITING <<NOTE: 42
USC 300gg-1.>> DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS
AND BENEFICIARIES BASED ON HEALTH STATUS.

(B) Medical condition (including both physical and mental
illnesses).

(D) Receipt of health care.

(E) Medical history.

(F) Genetic information.

(G) Evidence of insurability (including conditions arising out of
acts of domestic violence).

(H) Disability.

(3) Construction.–For purposes of paragraph (1), rules for
eligibility to enroll under a plan include rules defining any
applicable waiting periods for such enrollment.

Subpart 2–Provisions Applicable Only to Health Insurance Issuers

SEC. 2711. GUARANTEED <<NOTE: 42
USC 300gg-11.>> AVAILABILITY OF COVERAGE FOR EMPLOYERS IN THE
GROUP MARKET.

(a) Issuance of Coverage in the Small Group Market.– (1) In
general.–Subject to subsections (c) through (f), each health
insurance issuer that offers health insurance coverage in the small
group market in a State– (A) must accept every small employer (as
defined in section 2791(e)(4)) in the State that applies for such
coverage; and (B) must accept for enrollment under such coverage
every eligible individual (as defined in paragraph (2)) who applies
for enrollment during the period in which the individual first
becomes eligible to enroll under the terms of the group health plan
and may not place any restriction which is inconsistent with section
2702 on an eligible individual being a participant or beneficiary.

(2) Eligible individual defined.–For purposes of this section,
the term `eligible individual’ means, with respect to a health
insurance issuer that offers health insurance coverage to a small
employer in connection with a group health plan in the small group
market, such an individual in relation to the employer as shall be
determined– (A) in accordance with the terms of such plan, (B) as
provided by the issuer under rules of the issuer which are uniformly
applicable in a State to small employers in the small group market,
and (C) in accordance with all applicable State laws governing such
issuer and such market.

(b) Assuring Access in the Large Group Market.– (1) Reports to
hhs.–The Secretary shall request that the chief executive officer of
each State submit to the Secretary, by not later December 31, 2000,
and every 3 years thereafter a report on– (A) the access of large
employers to health insurance coverage in the State, and (B) the
circumstances for lack of access (if any) of large employers (or one
or more classes of such employers) in the State to such coverage.

(2) Triennial reports to congress.–The Secretary, based on the
reports submitted under paragraph (1) and such other information as
the Secretary may use, shall prepare and submit to Congress, every 3
years, a report describing the extent to which large employers (and
classes of such employers) that seek health insurance coverage in the
different States are able to obtain access to such coverage. Such
report shall include such recommendations as the Secretary determines
to be appropriate.

(3) GAO report on large employer access to health insurance
coverage.–The Comptroller General shall provide for a study of the
extent to which classes of large employers in the different States
are able to obtain access to health insurance coverage and the
circumstances for lack of access (if any) to such coverage. The
Comptroller General shall submit to Congress a report on such study
not later than 18 months after the date of the enactment of this
title.

(c) Special Rules for Network Plans.– (1) In general.–In the
case of a health insurance issuer that offers health insurance
coverage in the small group market through a network plan, the issuer
may– (A) limit the employers that may apply for such coverage to
those with eligible individuals who live, work, or reside in the
service area for such network plan; and (B) within the service area
of such plan, deny such coverage to such employers if the issuer has
demonstrated, if required, to the applicable State authority that–
(i) it will not have the capacity to deliver services adequately to
enrollees of any additional groups because of its obligations to
existing group contract holders and enrollees, and (ii) it is
applying this paragraph uniformly to all employers without regard to
the claims experience of those employers and their employees (and
their dependents) or any health status- related factor relating to
such employees and dependents.

(2) 180-day suspension upon denial of coverage.–An issuer, upon
denying health insurance coverage in any service area in accordance
with paragraph (1)(B), may not offer coverage in the small group
market within such service area for a period of 180 days after the
date such coverage is denied.

(d) Application of Financial Capacity Limits.– (1) In general.–A
health insurance issuer may deny health insurance coverage in the
small group market if the issuer has demonstrated, if required, to
the applicable State authority that– (A) it does not have the
financial reserves necessary to underwrite additional coverage; and
(B) it is applying this paragraph uniformly to all employers in the
small group market in the State consistent with applicable State law
and without regard to the claims experience of those employers and
their employees (and their dependents) or any health status- related
factor relating to such employees and dependents.

(2) 180-day suspension upon denial of coverage.–A health
insurance issuer upon denying health insurance coverage in connection
with group health plans in accordance with paragraph (1) in a State
may not offer coverage in connection with group health plans in the
small group market in the State for a period of 180 days after the
date such coverage is denied or until the issuer has demonstrated to
the applicable State authority, if required under applicable State
law, that the issuer has sufficient financial reserves to underwrite
additional coverage, whichever is later. An applicable State
authority may provide for the application of this subsection on a
service-area- specific basis.

(e) Exception to Requirement for Failure To Meet Certain Minimum
Participation or Contribution Rules.– (1) In general.–Subsection
(a) shall not be construed to preclude a health insurance issuer from
establishing employer contribution rules or group participation rules
for the offering of health insurance coverage in connection with a
group health plan in the small group market, as allowed under
applicable State law.

(2) Rules defined.–For purposes of paragraph (1)– (A) the term
`employer contribution rule’ means a requirement relating to the
minimum level or amount of employer contribution toward the premium
for enrollment of participants and beneficiaries; and (B) the term
`group participation rule’ means a requirement relating to the
minimum number of participants or beneficiaries that must be enrolled
in relation to a specified percentage or number of eligible
individuals or employees of an employer.

(f) Exception for Coverage Offered Only to Bona Fide Association
Members.–Subsection (a) shall not apply to health insurance coverage
offered by a health insurance issuer if such coverage is made
available in the small group market only through one or more bona
fide associations (as defined in section 2791(d)(3)).

SEC. 2712. GUARANTEED <<NOTE: 42
USC 300gg-12.>> RENEWABILITY OF COVERAGE FOR EMPLOYERS IN THE
GROUP MARKET.

(a) In General.–Except as provided in this section, if a health
insurance issuer offers health insurance coverage in the small or
large group market in connection with a group health plan, the issuer
must renew or continue in force such coverage at the option of the
plan sponsor of the plan.

(b) General Exceptions.–A health insurance issuer may nonrenew or
discontinue health insurance coverage offered in connection with a
group health plan in the small or large group market based only on
one or more of the following: (1) Nonpayment of premiums.–The plan
sponsor has failed to pay premiums or contributions in accordance
with the terms of the health insurance coverage or the issuer has not
received timely premium payments.

(2) Fraud.–The plan sponsor has performed an act or practice that
constitutes fraud or made an intentional misrepresentation of
material fact under the terms of the coverage.

(3) Violation of participation or contribution rules.–The plan
sponsor has failed to comply with a material plan provision relating
to employer contribution or group participation rules, as permitted
under section 2711(e) in the case of the small group market or
pursuant to applicable State law in the case of the large group
market.

(4) Termination of coverage.–The issuer is ceasing to offer
coverage in such market in accordance with subsection (c) and
applicable State law.

(5) Movement outside service area.–In the case of a health
insurance issuer that offers health insurance coverage in the market
through a network plan, there is no longer any enrollee in connection
with such plan who lives, resides, or works in the service area of
the issuer (or in the area for which the issuer is authorized to do
business) and, in the case of the small group market, the issuer
would deny enrollment with respect to such plan under section
2711(c)(1)(A).

(6) Association membership ceases.–In the case of health
insurance coverage that is made available in the small or large group
market (as the case may be) only through one or more bona fide
associations, the membership of an employer in the association (on
the basis of which the coverage is provided) ceases but only if such
coverage is terminated under this paragraph uniformly without regard
to any health status-related factor relating to any covered
individual.

(c) Requirements for Uniform Termination of Coverage.– (1)
Particular type of coverage not offered.–In any case in which an
issuer decides to discontinue offering a particular type of group
health insurance coverage offered in the small or large group market,
coverage of such type may be discontinued by the issuer in accordance
with applicable State law in such market only if– (A) the issuer
provides notice to each plan sponsor provided coverage of this type
in such market (and participants and beneficiaries covered under such
coverage) of such discontinuation at least 90 days prior to the date
of the discontinuation of such coverage; (B) the issuer offers to
each plan sponsor provided coverage of this type in such market, the
option to purchase all (or, in the case of the large group market,
any) other health insurance coverage currently being offered by the
issuer to a group health plan in such market; and (C) in exercising
the option to discontinue coverage of this type and in offering the
option of coverage under subparagraph (B), the issuer acts uniformly
without regard to the claims experience of those sponsors or any
health status-related factor relating to any participants or
beneficiaries covered or new participants or beneficiaries who may
become eligible for such coverage.

(2) Discontinuance of all coverage.– (A) In general.–In any case
in which a health insurance issuer elects to discontinue offering all
health insurance coverage in the small group market or the large
group market, or both markets, in a State, health insurance coverage
may be discontinued by the issuer only in accordance with applicable
State law and if– (i) the issuer provides notice to the applicable
State authority and to each plan sponsor (and participants and
beneficiaries covered under such coverage) of such discontinuation at
least 180 days prior to the date of the discontinuation of such
coverage; and (ii) all health insurance issued or delivered for
issuance in the State in such market (or markets) are discontinued
and coverage under such health insurance coverage in such market (or
markets) is not renewed.

(B) Prohibition on market reentry.–In the case of a
discontinuation under subparagraph (A) in a market, the issuer may
not provide for the issuance of any health insurance coverage in the
market and State involved during the 5-year period beginning on the
date of the discontinuation of the last health insurance coverage not
so renewed.

(d) Exception for Uniform Modification of Coverage.–At the time
of coverage renewal, a health insurance issuer may modify the health
insurance coverage for a product offered to a group health plan– (1)
in the large group market; or (2) in the small group market if, for
coverage that is available in such market other than only through one
or more bona fide associations, such modification is consistent with
State law and effective on a uniform basis among group health plans
with that product.

(e) Application to Coverage Offered Only Through Associations.–In
applying this section in the case of health insurance coverage that
is made available by a health insurance issuer in the small or large
group market to employers only through one or more associations, a
reference to `plan sponsor’ is deemed, with respect to coverage
provided to an employer member of the association, to include a
reference to such employer.

SEC. 2713. <<NOTE: 42 USC
300gg-13.>> DISCLOSURE OF INFORMATION.

(a) Disclosure of Information by Health Plan Issuers.–In
connection with the offering of any health insurance coverage to a
small employer, a health insurance issuer– (1) shall make a
reasonable disclosure to such employer, as part of its solicitation
and sales materials, of the availability of information described in
subsection (b), and (2) upon request of such a small employer,
provide such information.

(b) Information Described.– (1) In general.–Subject to paragraph
(3), with respect to a health insurance issuer offering health
insurance coverage to a small employer, information described in this
subsection is information concerning– (A) the provisions of such
coverage concerning issuer’s right to change premium rates and the
factors that may affect changes in premium rates; (B) the provisions
of such coverage relating to renewability of coverage; (C) the
provisions of such coverage relating to any preexisting condition
exclusion; and (D) the benefits and premiums available under all
health insurance coverage for which the employer is qualified.

(2) Form of information.–Information under this subsection shall
be provided to small employers in a manner determined to be
understandable by the average small employer, and shall be sufficient
to reasonably inform small employers of their rights and obligations
under the health insurance coverage.

(3) Exception.–An issuer is not required under this section to
disclose any information that is proprietary and trade secret
information under applicable law.

Subpart 3–Exclusion of Plans; Enforcement; Preemption

SEC. 2721. <<NOTE: 42 USC
300gg-21.>> EXCLUSION OF CERTAIN PLANS.

(a) Exception for Certain Small Group Health Plans.–The
requirements of subparts 1 and 2 shall not apply to any group health
plan (and health insurance coverage offered in connection with a
group health plan) for any plan year if, on the first day of such
plan year, such plan has less than 2 participants who are current
employees.

(b) Limitation on Application of Provisions Relating to Group
Health Plans.– (1) In general.–The requirements of subparts 1 and 2
shall apply with respect to group health plans only– (A) subject to
paragraph (2), in the case of a plan that is a nonfederal
governmental plan, and (B) with respect to health insurance coverage
offered in connection with a group health plan (including such a plan
that is a church plan or a governmental plan).

(2) Treatment of nonfederal governmental plans.– (A) Election to
be excluded.–If the plan sponsor of a nonfederal governmental plan
which is a group health plan to which the provisions of subparts 1
and 2 otherwise apply makes an election under this subparagraph (in
such form and manner as the Secretary may by regulations prescribe),
then the requirements of such subparts insofar as they apply directly
to group health plans (and not merely to group health insurance
coverage) shall not apply to such governmental plans for such period
except as provided in this paragraph.

(B) Period of election.–An election under subparagraph (A) shall
apply– (i) for a single specified plan year, or (ii) in the case of
a plan provided pursuant to a collective bargaining agreement, for
the term of such agreement.

An election under clause (i) may be extended through subsequent
elections under this paragraph.

(C) Notice to enrollees.–Under such an election, the plan shall
provide for– (i) notice to enrollees (on an annual basis and at the
time of enrollment under the plan) of the fact and consequences of
such election, and (ii) certification and disclosure of creditable
coverage under the plan with respect to enrollees in accordance with
section 2701(e).

(c) Exception for Certain Benefits.–The requirements of subparts
1 and 2 shall not apply to any group health plan (or group health
insurance coverage) in relation to its provision of excepted benefits
described in section 2791(c)(1).

(d) Exception for Certain Benefits If Certain Conditions Met.–
(1) Limited, excepted benefits.–The requirements of subparts 1 and 2
shall not apply to any group health plan (and group health insurance
coverage offered in connection with a group health plan) in relation
to its provision of excepted benefits described in section 2791(c)(2)
if the benefits– (A) are provided under a separate policy,
certificate, or contract of insurance; or (B) are otherwise not an
integral part of the plan.

(2) Noncoordinated, excepted benefits.–The requirements of
subparts 1 and 2 shall not apply to any group health plan (and group
health insurance coverage offered in connection with a group health
plan) in relation to its provision of excepted benefits described in
section 2791(c)(3) if all of the following conditions are met: (A)
The benefits are provided under a separate policy, certificate, or
contract of insurance.

(B) There is no coordination between the provision of such
benefits and any exclusion of benefits under any group health plan
maintained by the same plan sponsor.

(C) Such benefits are paid with respect to an event without regard
to whether benefits are provided with respect to such an event under
any group health plan maintained by the same plan sponsor.

(3) Supplemental excepted benefits.–The requirements of this part
shall not apply to any group health plan (and group health insurance
coverage) in relation to its provision of excepted benefits described
in section 27971(c)(4) if the benefits are provided under a separate
policy, certificate, or contract of insurance.

(e) Treatment of Partnerships.–For purposes of this part– (1)
Treatment as a group health plan.–Any plan, fund, or program which
would not be (but for this subsection) an employee welfare benefit
plan and which is established or maintained by a partnership, to the
extent that such plan, fund, or program provides medical care
(including items and services paid for as medical care) to present or
former partners in the partnership or to their dependents (as defined
under the terms of the plan, fund, or program), directly or through
insurance, reimbursement, or otherwise, shall be treated (subject to
paragraph (2)) as an employee welfare benefit plan which is a group
health plan.

(2) Employer.–In the case of a group health plan, the term
`employer’ also includes the partnership in relation to any partner.

SEC. 2722. <<NOTE: 42 USC
2722.>> ENFORCEMENT.

(a) State Enforcement.– (1) State authority.–Subject to section
2723, each State may require that health insurance issuers that
issue, sell, renew, or offer health insurance coverage in the State
in the small or large group markets meet the requirements of this
part with respect to such issuers.

(2) Failure to implement provisions.–In the case of a
determination by the Secretary that a State has failed to
substantially enforce a provision (or provisions) in this part with
respect to health insurance issuers in the State, the Secretary shall
enforce such provision (or provisions) under subsection (b) insofar
as they relate to the issuance, sale, renewal, and offering of health
insurance coverage in connection with group health plans in such
State.

(b) Secretarial Enforcement Authority.– (1) Limitation.–The
provisions of this subsection shall apply to enforcement of a
provision (or provisions) of this part only– (A) as provided under
subsection (a)(2); and (B) with respect to group health plans that
are non-Federal governmental plans.

(2) Imposition of penalties.–In the cases described in paragraph
(1)– (A) In general.–Subject to the succeeding provisions of this
subsection, any non-Federal governmental plan that is a group health
plan and any health insurance issuer that fails to meet a provision
of this part applicable to such plan or issuer is subject to a civil
money penalty under this subsection.

(B) Liability for penalty.–In the case of a failure by– (i) a
health insurance issuer, the issuer is liable for such penalty, or
(ii) a group health plan that is a non- Federal governmental plan
which is– (I) sponsored by 2 or more employers, the plan is liable
for such penalty, or (II) not so sponsored, the employer is liable
for such penalty.

(C) Amount of penalty.– (i) In general.–The maximum amount of
penalty imposed under this paragraph is $100 for each day for each
individual with respect to which such a failure occurs.

(ii) Considerations in imposition.–In determining the amount of
any penalty to be assessed under this paragraph, the Secretary shall
take into account the previous record of compliance of the entity
being assessed with the applicable provisions of this part and the
gravity of the violation.

(iii) Limitations.– (I) Penalty not to apply where failure not
discovered exercising reasonable diligence.–No civil money penalty
shall be imposed under this paragraph on any failure during any
period for which it is established to the satisfaction of the
Secretary that none of the entities against whom the penalty would be
imposed knew, or exercising reasonable diligence would have known,
that such failure existed.

(II) Penalty not to apply to failures corrected within 30
days.–No civil money penalty shall be imposed under this paragraph
on any failure if such failure was due to reasonable cause and not to
willful neglect, and such failure is corrected during the 30-day
period beginning on the first day any of the entities against whom
the penalty would be imposed knew, or exercising reasonable diligence
would have known, that such failure existed.

(D) Administrative review.– (i) Opportunity for hearing.–The
entity assessed shall be afforded an opportunity for hearing by the
Secretary upon request made within 30 days after the date of the
issuance of a notice of assessment. In such hearing the decision
shall be made on the record pursuant to section 554 of title 5,
United States Code. If no hearing is requested, the assessment shall
constitute a final and unappealable order.

(ii) Hearing procedure.–If a hearing is requested, the initial
agency decision shall be made by an administrative law judge, and
such decision shall become the final order unless the Secretary
modifies or vacates the decision. Notice of intent to modify or
vacate the decision of the administrative law judge shall be issued
to the parties within 30 days after the date of the decision of the
judge. A final order which takes effect under this paragraph shall be
subject to review only as provided under subparagraph (E).

(E) Judicial review.– (i) Filing of action for review.–Any
entity against whom an order imposing a civil money penalty has been
entered after an agency hearing under this paragraph may obtain
review by the United States district court for any district in which
such entity is located or the United States District Court for the
District of Columbia by filing a notice of appeal in such court
within 30 days from the date of such order, and simultaneously
sending a copy of such notice by registered mail to the Secretary.

(ii) Certification of administrative record.–The Secretary shall
promptly certify and file in such court the record upon which the
penalty was imposed.

(iii) Standard for review.–The findings of the Secretary shall be
set aside only if found to be unsupported by substantial evidence as
provided by section 706(2)(E) of title 5, United States Code.

(iv) Appeal.–Any final decision, order, or judgment of the
district court concerning such review shall be subject to appeal as
provided in chapter 83 of title 28 of such Code.

(F) Failure to pay assessment; maintenance of action.– (i)
Failure to pay assessment.–If any entity fails to pay an assessment
after it has become a final and unappealable order, or after the
court has entered final judgment in favor of the Secretary, the
Secretary shall refer the matter to the Attorney General who shall
recover the amount assessed by action in the appropriate United
States district court.

(ii) Nonreviewability.–In such action the validity and
appropriateness of the final order imposing the penalty shall not be
subject to review.

(G) Payment of penalties.–Except as otherwise provided, penalties
collected under this paragraph shall be paid to the Secretary (or
other officer) imposing the penalty and shall be available without
appropriation and until expended for the purpose of enforcing the
provisions with respect to which the penalty was imposed.

SEC. 2723. <<NOTE: 42 USC
300gg-23.>> PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.

(a) Continued Applicability of State Law With Respect to Health
Insurance Issuers.– (1) In General.–Subject to paragraph (2) and
except as provided in subsection (b), this part and part C insofar as
it relates to this part shall not be construed to supersede any
provision of State law which establishes, implements, or continues in
effect any standard or requirement solely relating to health
insurance issuers in connection with group health insurance coverage
except to the extent that such standard or requirement prevents the
application of a requirement of this part.

(2) Continued preemption with respect to group health
plans.–Nothing in this part shall be construed to affect or modify
the provisions of section 514 of the Employee Retirement Income
Security Act of 1974 with respect to group health plans.

(2) Exceptions.–Only in relation to health insurance coverage
offered by a health insurance issuer, the provisions of this part do
not supersede any provision of State law to the extent that such
provision– (i) substitutes for the reference to `6-month period’ in
section 2701(a)(1) a reference to any shorter period of time; (ii)
substitutes for the reference to `12 months’ and `18 months’ in
section 2701(a)(2) a reference to any shorter period of time; (iii)
substitutes for the references to `63′ days in sections 2701(c)(2)(A)
and 2701(d)(4)(A) a reference to any greater number of days; (iv)
substitutes for the reference to `30-day period’ in sections
2701(b)(2) and 2701(d)(1) a reference to any greater period; (v)
prohibits the imposition of any preexisting condition exclusion in
cases not described in section 2701(d) or expands the exceptions
described in such section; (vi) requires special enrollment periods
in addition to those required under section 2701(f); or (vii) reduces
the maximum period permitted in an affiliation period under section
2701(g)(1)(B).

(2) State.–The term `State’ includes a State (including the
Northern Mariana Islands), any political subdivisions of a State or
such Islands, or any agency or instrumentality of either.

Part C–Definitions; Miscellaneous Provisions

SEC. 2791 <<NOTE: 42 USC
300gg-91.>> . DEFINITIONS.

(a) Group Health Plan.– (1) Definition.–The term `group health
plan’ means an employee welfare benefit plan (as defined in section
3(1) of the Employee Retirement Income Security Act of 1974) to the
extent that the plan provides medical care (as defined in paragraph
(2)) and including items and services paid for as medical care) to
employees or their dependents (as defined under the terms of the
plan) directly or through insurance, reimbursement, or otherwise.

(3) Treatment of certain plans as group health plan for notice
provision.–A program under which creditable coverage described in
subparagraph (C), (D), (E), or (F) of section 2701(c)(1) is provided
shall be treated as a group health plan for purposes of applying
section 2701(e).

(b) Definitions Relating to Health Insurance.– (1) Health
insurance coverage.–The term `health insurance coverage’ means
benefits consisting of medical care (provided directly, through
insurance or reimbursement, or otherwise and including items and
services paid for as medical care) under any hospital or medical
service policy or certificate, hospital or medical service plan
contract, or health maintenance organization contract offered by a
health insurance issuer.

(3) Health maintenance organization.–The term `health maintenance
organization’ means– (A) a Federally qualified health maintenance
organization (as defined in section 1301(a)), (B) an organization
recognized under State law as a health maintenance organization, or
(C) a similar organization regulated under State law for solvency in
the same manner and to the same extent as such a health maintenance
organization.

(4) Group health insurance coverage.–The term `group health
insurance coverage’ means, in connection with a group health plan,
health insurance coverage offered in connection with such plan.

(5) Individual health insurance coverage.–The term `individual
health insurance coverage’ means health insurance coverage offered to
individuals in the individual market, but does not include short-term
limited duration insurance.

(c) Excepted Benefits.–For purposes of this title, the term
`excepted benefits’ means benefits under one or more (or any
combination thereof) of the following: (1) Benefits not subject to
requirements.– (A) Coverage only for accident, or disability income
insurance, or any combination thereof.

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

(D) Workers’ compensation or similar insurance.

(E) Automobile medical payment insurance.

(F) Credit-only insurance.

(G) Coverage for on-site medical clinics.

(H) Other similar insurance coverage, specified in regulations,
under which benefits for medical care are secondary or incidental to
other insurance benefits.

(2) Benefits not subject to requirements if offered separately.–
(A) Limited scope dental or vision benefits.

(B) Benefits for long-term care, nursing home care, home health
care, community-based care, or any combination thereof.

(3) Benefits not subject to requirements if offered as
independent, noncoordinated benefits.– (A) Coverage only for a
specified disease or illness.

(B) Hospital indemnity or other fixed indemnity insurance.

(d) Other Definitions.– (1) Applicable state authority.–The term
`applicable State authority’ means, with respect to a health
insurance issuer in a State, the State insurance commissioner or
official or officials designated by the State to enforce the
requirements of this title for the State involved with respect to
such issuer.

(2) Beneficiary.–The term `beneficiary’ has the meaning given
such term under section 3(8) of the Employee Retirement Income
Security Act of 1974.

(3) Bona fide association.–The term `bona fide association’
means, with respect to health insurance coverage offered in a State,
an association which– (A) has been actively in existence for at
least 5 years; (B) has been formed and maintained in good faith for
purposes other than obtaining insurance; (C) does not condition
membership in the association on any health status-related factor
relating to an individual (including an employee of an employer or a
dependent of an employee); (D) makes health insurance coverage
offered through the association available to all members regardless
of any health status-related factor relating to such members (or
individuals eligible for coverage through a member); (E) does not
make health insurance coverage offered through the association
available other than in connection with a member of the association;
and (F) meets such additional requirements as may be imposed under
State law.

(4) COBRA continuation provision.–The term `COBRA continuation
provision’ means any of the following: (A) Section 4980B of the
Internal Revenue Code of 1986, other than subsection (f)(1) of such
section insofar as it relates to pediatric vaccines.

(B) Part 6 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974, other than section 609 of such Act.

(5) Employee.–The term `employee’ has the meaning given such term
under section 3(6) of the Employee Retirement Income Security Act of
1974.

(6) Employer.–The term `employer’ has the meaning given such term
under section 3(5) of the Employee Retirement Income Security Act of
1974, except that such term shall include only employers of two or
more employees.

(7) Church plan.–The term `church plan’ has the meaning given
such term under section 3(33) of the Employee Retirement Income
Security Act of 1974.

(8) Governmental plan.–(A) The term `governmental plan’ has the
meaning given such term under section 3(32) of the Employee
Retirement Income Security Act of 1974 and any Federal governmental
plan.

(B) Federal governmental plan.–The term `Federal governmental
plan’ means a governmental plan established or maintained for its
employees by the Government of the United States or by any agency or
instrumentality of such Government.

(C) Non-Federal governmental plan.–The term `non-Federal
governmental plan’ means a governmental plan that is not a Federal
governmental plan.

(9) Health status-related factor.–The term `health status-related
factor’ means any of the factors described in section 2702(a)(1).

(10) Network plan.–The term `network plan’ means health insurance
coverage of a health insurance issuer under which the financing and
delivery of medical care (including items and services paid for as
medical care) are provided, in whole or in part, through a defined
set of providers under contract with the issuer.

(11) Participant.–The term `participant’ has the meaning given
such term under section 3(7) of the Employee Retirement Income
Security Act of 1974.

(12) Placed for adoption defined.–The term `placement’, or being
`placed’, for adoption, in connection with any placement for adoption
of a child with any person, means the assumption and retention by
such person of a legal obligation for total or partial support of
such child in anticipation of adoption of such child. The child’s
placement with such person terminates upon the termination of such
legal obligation.

(13) Plan sponsor.–The term `plan sponsor’ has the meaning given
such term under section 3(16)(B) of the Employee Retirement Income
Security Act of 1974.

(14) State.–The term `State’ means each of the several States,
the District of Columbia, Puerto Rico, the Virgin Islands, Guam,
American Samoa, and the Northern Mariana Islands.

(e) Definitions Relating to Markets and Small Em- ployers.–For
purposes of this title: (1) Individual market.– (A) In general.–The
term `individual market’ means the market for health insurance
coverage offered to individuals other than in connection with a group
health plan.

(B) Treatment of very small groups.– (i) In general.–Subject to
clause (ii), such terms includes coverage offered in connection with
a group health plan that has fewer than two participants as current
employees on the first day of the plan year.

(ii) State exception.–Clause (i) shall not apply in the case of a
State that elects to regulate the coverage described in such clause
as coverage in the small group market.

(2) Large employer.–The term `large employer’ means, in
connection with a group health plan with respect to a calendar year
and a plan year, an employer who employed an average of at least 51
employees on business days during the preceding calendar year and who
employs at least 2 employees on the first day of the plan year.

(3) Large group market.–The term `large group market’ means the
health insurance market under which individuals obtain health
insurance coverage (directly or through any arrangement) on behalf of
themselves (and their dependents) through a group health plan
maintained by a large employer.

(4) Small employer.–The term `small employer’ means, in
connection with a group health plan with respect to a calendar year
and a plan year, an employer who employed an average of at least 2
but not more than 50 employees on business days during the preceding
calendar year and who employs at least 2 employees on the first day
of the plan year.

(5) Small group market.–The term `small group market’ means the
health insurance market under which individuals obtain health
insurance coverage (directly or through any arrangement) on behalf of
themselves (and their dependents) through a group health plan
maintained by a small employer.

(6) Application of certain rules in determination of employer
size.–For purposes of this subsection– (A) Application of
aggregation rule for employers.–all persons treated as a single
employer under subsection (b), (c), (m), or (o) of section 414 of the
Internal Revenue Code of 1986 shall be treated as 1 employer.

(B) Employers not in existence in preceding year.–In the case of
an employer which was not in existence throughout the preceding
calendar year, the determination of whether such employer is a small
or large employer shall be based on the average number of employees
that it is reasonably expected such employer will employ on business
days in the current calendar year.

(C) Predecessors.–Any reference in this subsection to an employer
shall include a reference to any predecessor of such employer.

SEC. 2792. <<NOTE: 42 USC
300gg-92.>> REGULATIONS.

The Secretary, consistent with section 104 of the Health Care
Portability and Accountability Act of 1996, may promulgate such
regulations as may be necessary or appropriate to carry out the
provisions of this title. The Secretary may promulgate any interim
final rules as the Secretary determines are appropriate to carry out
this title.”.

(b) Application of Rules by Certain Health Maintenance
Organizations.–Section 1301 of such Act (42 U.S.C. 300e) is amended
by adding at the end the following new subsection: (d) An
organization that offers health benefits coverage shall not be
considered as failing to meet the requirements of this section
notwithstanding that it provides, with respect to coverage offered in
connection with a group health plan in the small or large group
market (as defined in section 2791(e)), an affiliation period
consistent with the provisions of section 2701(g).”.

(c) Effective <<NOTE: 42 USC 300gg note.>> Date.– (1)
In general.–Except as provided in this subsection, part A of title
XXVII of the Public Health Service Act (as added by subsection (a))
shall apply with respect to group health plans, and health insurance
coverage offered in connection with group health plans, for plan
years beginning after June 30, 1997.

(2) Determination of creditable coverage.– (A) Period of
coverage.– (i) In general.–Subject to clause (ii), no period before
July 1, 1996, shall be taken into account under part A of title XXVII
of the Public Health Service Act (as added by this section) in
determining creditable coverage.

(ii) Special rule for certain periods.–The Secretary of Health
and Human Services, consistent with section 104, shall provide for a
process whereby individuals who need to establish creditable coverage
for periods before July 1, 1996, and who would have such coverage
credited but for clause (i) may be given credit for creditable
coverage for such periods through the presentation of documents or
other means.

(B) Certifications, etc.– (i) In general.–Subject to clauses
(ii) and (iii), subsection (e) of section 2701 of the Public Health
Service Act (as added by this section) shall apply to events
occurring after June 30, 1996.

(ii) No certification required to be provided before june 1,
1997.–In no case is a certification required to be provided under
such subsection before June 1, 1997.

(3) Special rule for collective bargaining agreements.– Except as
provided in paragraph (2)(B), in the case of a group health plan
maintained pursuant to 1 or more collective bargaining agreements
between employee representatives and one or more employers ratified
before the date of the enactment of this Act, part A of title XXVII
of the Public Health Service Act (other than section 2701(e) thereof)
shall not apply to plan years beginning before the later of– (A) the
date on which the last of the collective bargaining agreements
relating to the plan terminates (determined without regard to any
extension thereof agreed to after the date of the enactment of this
Act), or (B) July 1, 1997.

(4) Timely regulations.–The Secretary of Health and Human
Services, consistent with section 104, shall first issue by not later
than April 1, 1997, such regulations as may be necessary to carry out
the amendments made by this section and section 111.

(d) Miscellaneous Correction.–Section 2208(1) of the Public
Health Service Act (42 U.S.C. 300bb-8(1)) is amended by striking
section 162(i)(2)” and inserting 5000(b)”.

SEC. 103. REFERENCE TO IMPLEMENTATION
THROUGH THE INTERNAL REVENUE CODE OF 1986.

For provisions amending the Internal Revenue Code of 1986 to
provide for application and enforcement of rules for group health
plans similar to those provided under the amendments made by section
101(a), see section 401.

SEC. 104. <<NOTE: 42 USC 300gg-92
note.>> ASSURING COORDINATION.

The Secretary of the Treasury, the Secretary of Health and Human
Services, and the Secretary of Labor shall ensure, through the
execution of an interagency memorandum of understanding among such
Secretaries, that– (1) regulations, rulings, and interpretations
issued by such Secretaries relating to the same matter over which two
or more such Secretaries have responsibility under this subtitle (and
the amendments made by this subtitle and section 401) are
administered so as to have the same effect at all times; and (2)
coordination of policies relating to enforcing the same requirements
through such Secretaries in order to have a coordinated enforcement
strategy that avoids duplication of enforcement efforts and assigns
priorities in enforcement.

Subtitle B–Individual Market Rules

SEC. 111. AMENDMENT TO PUBLIC HEALTH
SERVICE ACT.

(a) In General.–Title XXVII of the Public Health Service Act, as
added by section 102(a) of this Act, is amended by inserting after
part A the following new part:

Part B–Individual Market Rules

SEC. 2741 <<NOTE: 42 USC
300gg-41.>> . GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH
INSURANCE COVERAGE TO CERTAIN INDIVIDUALS WITH PRIOR GROUP COVERAGE.

(a) Guaranteed Availability.– (1) In general.–Subject to the
succeeding subsections of this section and section 2744, each health
insurance issuer that offers health insurance coverage (as defined in
section 2791(b)(1)) in the individual market in a State may not, with
respect to an eligible individual (as defined in subsection (b))
desiring to enroll in individual health insurance coverage– (A)
decline to offer such coverage to, or deny enrollment of, such
individual; or (B) impose any preexisting condition exclusion (as
defined in section 2701(b)(1)(A)) with respect to such coverage.

(2) Substitution by state of acceptable alternative
mechanism.–The requirement of paragraph (1) shall not apply to
health insurance coverage offered in the individual market in a State
in which the State is implementing an acceptable alternative
mechanism under section 2744.

(b) Eligible Individual Defined.–In this part, the term `eligible
individual’ means an individual– (1)(A) for whom, as of the date on
which the individual seeks coverage under this section, the aggregate
of the periods of creditable coverage (as defined in section 2701(c))
is 18 or more months and (B) whose most recent prior creditable
coverage was under a group health plan, governmental plan, or church
plan (or health insurance coverage offered in connection with any
such plan); (2) who is not eligible for coverage under (A) a group
health plan, (B) part A or part B of title XVIII of the Social
Security Act, or (C) a State plan under title XIX of such Act (or any
successor program), and does not have other health insurance
coverage; (3) with respect to whom the most recent coverage within
the coverage period described in paragraph (1)(A) was not terminated
based on a factor described in paragraph (1) or (2) of section
2712(b) (relating to nonpayment of premiums or fraud); (4) if the
individual had been offered the option of continuation coverage under
a COBRA continuation provision or under a similar State program, who
elected such coverage; and (5) who, if the individual elected such
continuation coverage, has exhausted such continuation coverage under
such provision or program.

(c) Alternative Coverage Permitted Where No State Mechanism.– (1)
In general.–In the case of health insurance coverage offered in the
individual market in a State in which the State is not implementing
an acceptable alternative mechanism under section 2744, the health
insurance issuer may elect to limit the coverage offered under
subsection (a) so long as it offers at least two different policy
forms of health insurance coverage both of which– (A) are designed
for, made generally available to, and actively marketed to, and
enroll both eligible and other individuals by the issuer; and (B)
meet the requirement of paragraph (2) or (3), as elected by the
issuer.

For purposes of this subsection, policy forms which have different
cost-sharing arrangements or different riders shall be considered to
be different policy forms.

(2) Choice of most popular policy forms.–The requirement of this
paragraph is met, for health insurance coverage policy forms offered
by an issuer in the individual market, if the issuer offers the
policy forms for individual health insurance coverage with the
largest, and next to largest, premium volume of all such policy forms
offered by the issuer in the State or applicable marketing or service
area (as may be prescribed in regulation) by the issuer in the
individual market in the period involved.

(3) Choice of 2 policy forms with representative coverage.– (A)
In general.–The requirement of this paragraph is met, for health
insurance coverage policy forms offered by an issuer in the
individual market, if the issuer offers a lower-level coverage policy
form (as defined in subparagraph (B)) and a higher-level coverage
policy form (as defined in subparagraph (C)) each of which includes
benefits substantially similar to other individual health insurance
coverage offered by the issuer in that State and each of which is
covered under a method described in section 2744(c)(3)(A) (relating
to risk adjustment, risk spreading, or financial subsidization).

(B) Lower-level of coverage described.–A policy form is described
in this subparagraph if the actuarial value of the benefits under the
coverage is at least 85 percent but not greater than 100 percent of a
weighted average (described in subparagraph (D)).

(C) Higher-level of coverage described.–A policy form is
described in this subparagraph if– (i) the actuarial value of the
benefits under the coverage is at least 15 percent greater than the
actuarial value of the coverage described in subparagraph (B) offered
by the issuer in the area involved; and (ii) the actuarial value of
the benefits under the coverage is at least 100 percent but not
greater than 120 percent of a weighted average (described in
subparagraph (D)).

(D) Weighted average.–For purposes of this paragraph, the
weighted average described in this subparagraph is the average
actuarial value of the benefits provided by all the health insurance
coverage issued (as elected by the issuer) either by that issuer or
by all issuers in the State in the individual market during the
previous year (not including coverage issued under this section),
weighted by enrollment for the different coverage.

(4) Election.–The issuer elections under this subsection shall
apply uniformly to all eligible individuals in the State for that
issuer. Such an election shall be effective for policies offered
during a period of not shorter than 2 years.

(5) Assumptions.–For purposes of paragraph (3), the actuarial
value of benefits provided under individual health insurance coverage
shall be calculated based on a standardized population and a set of
standardized utilization and cost factors.

(d) Special Rules for Network Plans.– (1) In general.–In the
case of a health insurance issuer that offers health insurance
coverage in the individual market through a network plan, the issuer
may– (A) limit the individuals who may be enrolled under such
coverage to those who live, reside, or work within the service area
for such network plan; and (B) within the service area of such plan,
deny such coverage to such individuals if the issuer has
demonstrated, if required, to the applicable State authority that–
(i) it will not have the capacity to deliver services adequately to
additional individual enrollees because of its obligations to
existing group contract holders and enrollees and individual
enrollees, and (ii) it is applying this paragraph uniformly to
individuals without regard to any health status-related factor of
such individuals and without regard to whether the individuals are
eligible individuals.

(2) 180-day suspension upon denial of coverage.–An issuer, upon
denying health insurance coverage in any service area in accordance
with paragraph (1)(B), may not offer coverage in the individual
market within such service area for a period of 180 days after such
coverage is denied.

(e) Application of Financial Capacity Limits.– (1) In general.–A
health insurance issuer may deny health insurance coverage in the
individual market to an eligible individual if the issuer has
demonstrated, if required, to the applicable State authority that–
(A) it does not have the financial reserves necessary to underwrite
additional coverage; and (B) it is applying this paragraph uniformly
to all individuals in the individual market in the State consistent
with applicable State law and without regard to any health
status-related factor of such individuals and without regard to
whether the individuals are eligible individuals.

(2) 180-day suspension upon denial of coverage.–An issuer upon
denying individual health insurance coverage in any service area in
accordance with paragraph (1) may not offer such coverage in the
individual market within such service area for a period of 180 days
after the date such coverage is denied or until the issuer has
demonstrated, if required under applicable State law, to the
applicable State authority that the issuer has sufficient financial
reserves to underwrite additional coverage, whichever is later. A
State may provide for the application of this paragraph on a
service-area-specific basis.

(e) Market Requirements.– (1) In general.–The provisions of
subsection (a) shall not be construed to require that a health
insurance issuer offering health insurance coverage only in
connection with group health plans or through one or more bona fide
associations, or both, offer such health insurance coverage in the
individual market.

(2) Conversion policies.–A health insurance issuer offering
health insurance coverage in connection with group health plans under
this title shall not be deemed to be a health insurance issuer
offering individual health insurance coverage solely because such
issuer offers a conversion policy.

(f) Construction.–Nothing in this section shall be construed–
(1) to restrict the amount of the premium rates that an issuer may
charge an individual for health insurance coverage provided in the
individual market under applicable State law; or (2) to prevent a
health insurance issuer offering health insurance coverage in the
individual market from establishing premium discounts or rebates or
modifying otherwise applicable copayments or deductibles in return
for adherence to programs of health promotion and disease prevention.

SEC. 2742. GUARANTEED <<NOTE: 42
USC 300gg-42.>> RENEWABILITY OF INDIVIDUAL HEALTH INSURANCE
COVERAGE.

(a) In General.–Except as provided in this section, a health
insurance issuer that provides individual health insurance coverage
to an individual shall renew or continue in force such coverage at
the option of the individual.

(b) General Exceptions.–A health insurance issuer may nonrenew or
discontinue health insurance coverage of an individual in the
individual market based only on one or more of the following: (1)
Nonpayment of premiums.–The individual has failed to pay premiums or
contributions in accordance with the terms of the health insurance
coverage or the issuer has not received timely premium payments.

(2) Fraud.–The individual has performed an act or practice that
constitutes fraud or made an intentional misrepresentation of
material fact under the terms of the coverage.

(3) Termination of plan.–The issuer is ceasing to offer coverage
in the individual market in accordance with subsection (c) and
applicable State law.

(4) Movement outside service area.–In the case of a health
insurance issuer that offers health insurance coverage in the market
through a network plan, the individual no longer resides, lives, or
works in the service area (or in an area for which the issuer is
authorized to do business) but only if such coverage is terminated
under this paragraph uniformly without regard to any health
status-related factor of covered individuals.

(5) Association membership ceases.–In the case of health
insurance coverage that is made available in the individual market
only through one or more bona fide associations, the membership of
the individual in the association (on the basis of which the coverage
is provided) ceases but only if such coverage is terminated under
this paragraph uniformly without regard to any health status-related
factor of covered individuals.

(c) Requirements for Uniform Termination of Coverage.– (1)
Particular type of coverage not offered.–In any case in which an
issuer decides to discontinue offering a particular type of health
insurance coverage offered in the individual market, coverage of such
type may be discontinued by the issuer only if– (A) the issuer
provides notice to each covered individual provided coverage of this
type in such market of such discontinuation at least 90 days prior to
the date of the discontinuation of such coverage; (B) the issuer
offers to each individual in the individual market provided coverage
of this type, the option to purchase any other individual health
insurance coverage currently being offered by the issuer for
individuals in such market; and (C) in exercising the option to
discontinue coverage of this type and in offering the option of
coverage under subparagraph (B), the issuer acts uniformly without
regard to any health status-related factor of enrolled individuals or
individuals who may become eligible for such coverage.

(2) Discontinuance of all coverage.– (A) In general.–Subject to
subparagraph (C), in any case in which a health insurance issuer
elects to discontinue offering all health insurance coverage in the
individual market in a State, health insurance coverage may be
discontinued by the issuer only if– (i) the issuer provides notice
to the applicable State authority and to each individual of such
discontinuation at least 180 days prior to the date of the expiration
of such coverage, and (ii) all health insurance issued or delivered
for issuance in the State in such market are discontinued and
coverage under such health insurance coverage in such market is not
renewed.

(B) Prohibition on market reentry.–In the case of a
discontinuation under subparagraph (A) in the individual market, the
issuer may not provide for the issuance of any health insurance
coverage in the market and State involved during the 5-year period
beginning on the date of the discontinuation of the last health
insurance coverage not so renewed.

(d) Exception for Uniform Modification of Coverage.–At the time
of coverage renewal, a health insurance issuer may modify the health
insurance coverage for a policy form offered to individuals in the
individual market so long as such modification is consistent with
State law and effective on a uniform basis among all individuals with
that policy form.

(e) Application to Coverage Offered Only Through Associations.–In
applying this section in the case of health insurance coverage that
is made available by a health insurance issuer in the individual
market to individuals only through one or more associations, a
reference to an `individual’ is deemed to include a reference to such
an association (of which the individual is a member).

SEC. 2743. <<NOTE: 42 USC
300gg-43.>> CERTIFICATION OF COVERAGE.

The provisions of section 2701(e) shall apply to health insurance
coverage offered by a health insurance issuer in the individual
market in the same manner as it applies to health insurance coverage
offered by a health insurance issuer in connection with a group
health plan in the small or large group market.

SEC. 2744. <<NOTE: 42 USC
300gg-44.>> STATE FLEXIBILITY IN INDIVIDUAL MARKET REFORMS.

(a) Waiver of Requirements Where Implementation of Acceptable
Alternative Mechanism.– (1) In general.–The requirements of section
2741 shall not apply with respect to health insurance coverage
offered in the individual market in the State so long as a State is
found to be implementing, in accordance with this section and
consistent with section 2746(b), an alternative mechanism (in this
section referred to as an `acceptable alternative mechanism’)– (A)
under which all eligible individuals are provided a choice of health
insurance coverage; (B) under which such coverage does not impose any
preexisting condition exclusion with respect to such coverage; (C)
under which such choice of coverage includes at least one policy form
of coverage that is comparable to comprehensive health insurance
coverage offered in the individual market in such State or that is
comparable to a standard option of coverage available under the group
or individual health insurance laws of such State; and (D) in a State
which is implementing– (i) a model act described in subsection
(c)(1), (ii) a qualified high risk pool described in subsection
(c)(2), or (iii) a mechanism described in subsection (c)(3).

(2) Permissible Forms of mechanisms.–A private or public
individual health insurance mechanism (such as a health insurance
coverage pool or programs, mandatory group conversion policies,
guaranteed issue of one or more plans of individual health insurance
coverage, or open enrollment by one or more health insurance
issuers), or combination of such mechanisms, that is designed to
provide access to health benefits for individuals in the individual
market in the State in accordance with this section may constitute an
acceptable alternative mechanism.

(b) Application of Acceptable Alternative Mechanisms.– (1)
Presumption.– (A) In general.–Subject to the succeeding provisions
of this subsection, a State is presumed to be implementing an
acceptable alternative mechanism in accordance with this section as
of July 1, 1997, if, by not later than April 1, 1997, the chief
executive officer of a State– (i) notifies the Secretary that the
State has enacted or intends to enact (by not later than January 1,
1998, or July 1, 1998, in the case of a State described in
subparagraph (B)(ii)) any necessary legislation to provide for the
implementation of a mechanism reasonably designed to be an acceptable
alternative mechanism as of January 1, 1998, (or, in the case of a
State described in subparagraph (B)(ii), July 1, 1998); and (ii)
provides the Secretary with such information as the Secretary may
require to review the mechanism and its implementation (or proposed
implementation) under this subsection.

(B) Delay permitted for certain states.– (i) Effect of delay.–In
the case of a State described in clause (ii) that provides notice
under subparagraph (A)(i), for the presumption to continue on and
after July 1, 1998, the chief executive officer of the State by April
1, 1998– (I) must notify the Secretary that the State has enacted
any necessary legislation to provide for the implementation of a
mechanism reasonably designed to be an acceptable alternative
mechanism as of July 1, 1998; and (II) must provide the Secretary
with such information as the Secretary may require to review the
mechanism and its implementation (or proposed implementation) under
this subsection.

(ii) States described.–A State described in this clause is a
State that has a legislature that does not meet within the 12-month
period beginning on the date of enactment of this Act.

(C) Continued application.–In order for a mechanism to continue
to be presumed to be an acceptable alternative mechanism, the State
shall provide the Secretary every 3 years with information described
in subparagraph (A)(ii) or (B)(i)(II) (as the case may be).

(2) Notice.–If the Secretary finds, after review of information
provided under paragraph (1) and in consultation with the chief
executive officer of the State and the insurance commissioner or
chief insurance regulatory official of the State, that such a
mechanism is not an acceptable alternative mechanism or is not (or no
longer) being implemented, the Secretary– (A) shall notify the State
of– (i) such preliminary determination, and (ii) the consequences
under paragraph (3) of a failure to implement such a mechanism; and
(B) shall permit the State a reasonable opportunity in which to
modify the mechanism (or to adopt another mechanism) in a manner so
that may be an acceptable alternative mechanism or to provide for
implementation of such a mechanism.

(3) Final determination.–If, after providing notice and
opportunity under paragraph (2), the Secretary finds that the
mechanism is not an acceptable alternative mechanism or the State is
not implementing such a mechanism, the Secretary shall notify the
State that the State is no longer considered to be implementing an
acceptable alternative mechanism and that the requirements of section
2741 shall apply to health insurance coverage offered in the
individual market in the State, effective as of a date specified in
the notice.

(4) Limitation on secretarial authority.–The Secretary shall not
make a determination under paragraph (2) or (3) on any basis other
than the basis that a mechanism is not an acceptable alternative
mechanism or is not being implemented.

(5) Future adoption of mechanisms.–If a State, after January 1,
1997, submits the notice and information described in paragraph (1),
unless the Secretary makes a finding described in paragraph (3)
within the 90-day period beginning on the date of submission of the
notice and information, the mechanism shall be considered to be an
acceptable alternative mechanism for purposes of this section,
effective 90 days after the end of such period, subject to the second
sentence of paragraph (1).

(c) Provision Related to Risk.– (1) Adoption of naic models.–The
model act referred to in subsection (a)(1)(D)(i) is the Small
Employer and Individual Health Insurance Availability Model Act
(adopted by the National Association of Insurance Commissioners on
June 3, 1996) insofar as it applies to individual health insurance
coverage or the Individual Health Insurance Portability Model Act
(also adopted by such Association on such date).

(2) Qualified high risk pool.–For purposes of subsection
(a)(1)(D)(ii), a `qualified high risk pool’ described in this
paragraph is a high risk pool that– (A) provides to all eligible
individuals health insurance coverage (or comparable coverage) that
does not impose any preexisting condition exclusion with respect to
such coverage for all eligible individuals, and (B) provides for
premium rates and covered benefits for such coverage consistent with
standards included in the NAIC Model Health Plan for Uninsurable
Individuals Act (as in effect as of the date of the enactment of this
title).

(3) Other mechanisms.–For purposes of subsection (a)(1)(D)(iii),
a mechanism described in this paragraph– (A) provides for risk
adjustment, risk spreading, or a risk spreading mechanism (among
issuers or policies of an issuer) or otherwise provides for some
financial subsidization for eligible individuals, including through
assistance to participating issuers; or (B) is a mechanism under
which each eligible individual is provided a choice of all individual
health insurance coverage otherwise available.

SEC. 2745. <<NOTE: 42 USC
300gg-45.>> ENFORCEMENT.

(a) State Enforcement.– (1) State authority.–Subject to section
2746, each State may require that health insurance issuers that
issue, sell, renew, or offer health insurance coverage in the State
in the individual market meet the requirements established under this
part with respect to such issuers.

(2) Failure to implement requirements.–In the case of a State
that fails to substantially enforce the requirements set forth in
this part with respect to health insurance issuers in the State, the
Secretary shall enforce the requirements of this part under
subsection (b) insofar as they relate to the issuance, sale, renewal,
and offering of health insurance coverage in the individual market in
such State.

(b) Secretarial Enforcement Authority.–The Secretary shall have
the same authority in relation to enforcement of the provisions of
this part with respect to issuers of health insurance coverage in the
individual market in a State as the Secretary has under section
2722(b)(2) in relation to the enforcement of the provisions of part A
with respect to issuers of health insurance coverage in the small
group market in the State.

SEC. <<NOTE: 42 USC
300gg-46.>> 2746. PREEMPTION.

(a) In General.–Subject to subsection (b), nothing in this part
(or part C insofar as it applies to this part) shall be construed to
prevent a State from establishing, implementing, or continuing in
effect standards and requirements unless such standards and
requirements prevent the application of a requirement of this part.

(b) Rules of Construction.–Nothing in this part (or part C
insofar as it applies to this part) shall be construed to affect or
modify the provisions of section 514 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1144).

SEC. 2747. <<NOTE: 42 USC
300gg-47.>> GENERAL EXCEPTIONS.

(a) Exception for Certain Benefits.–The requirements of this part
shall not apply to any health insurance coverage in relation to its
provision of excepted benefits described in section 2791(c)(1).

(b) Exception for Certain Benefits If Certain Conditions Met.–The
requirements of this part shall not apply to any health insurance
coverage in relation to its provision of excepted benefits described
in paragraph (2), (3), or (4) of section 2791(c) if the benefits are
provided under a separate policy, certificate, or contract of
insurance.”.

(b) Effective <<NOTE: 42 USC 300gg-41 note.>> Date.–
(1) In general.–Except as provided in this subsection, part B of
title XXVII of the Public Health Service Act (as inserted by
subsection (a)) shall apply with respect to health insurance coverage
offered, sold, issued, renewed, in effect, or operated in the
individual market after June 30, 1997, regardless of when a period of
creditable coverage occurs.

(2) Application of certification rules.–The provisions of section
102(d)(2) of this Act shall apply to section 2743 of the Public
Health Service Act in the same manner as it applies to section
2701(e) of such Act.

Subtitle C–General and Miscellaneous Provisions

SEC. 191. <<NOTE: 42 USC 300gg
note.>> HEALTH COVERAGE AVAILABILITY STUDIES.

(a) Studies.– (1) Study on effectiveness of reforms.–The
Secretary of Health and Human Services shall provide for a study on
the effectiveness of the provisions of this title and the various
State laws, in ensuring the availability of reasonably priced health
coverage to employers purchasing group coverage and individuals
purchasing coverage on a non-group basis.

(2) Study on access and choice.–The Secretary also shall provide
for a study on– (A) the extent to which patients have direct access
to, and choice of, health care providers, including specialty
providers, within a network plan, as well as the opportunity to
utilize providers outside of the network plan, under the various
types of coverage offered under the provisions of this title; and (B)
the cost and cost-effectiveness to health insurance issuers of
providing access to out-of-network providers, and the potential
impact of providing such access on the cost and quality of health
insurance coverage offered under provisions of this title.

(3) Consultation.–The studies under this subsection shall be
conducted in consultation with the Secretary of Labor,
representatives of State officials, consumers, and other
representatives of individuals and entities that have expertise in
health insurance and employee benefits.

(b) Reports.–Not later than January 1, 2000, the Secretary shall
submit to the appropriate committees of Congress a report on each of
the studies under subsection (a).

SEC. 192. REPORT ON MEDICARE
REIMBURSEMENT OF TELEMEDICINE.

The Health Care Financing Administration shall complete its
ongoing study of Medicare reimbursement of all telemedicine services
and submit a report to Congress on Medicare reimbursement of
telemedicine services by not later than March 1, 1997. The report
shall– (1) utilize data compiled from the current demonstration
projects already under review and gather data from other ongoing
telemedicine networks; (2) include an analysis of the cost of
services provided via telemedicine; and (3) include a proposal for
Medicare reimbursement of such services.

SEC. 193. ALLOWING FEDERALLY-QUALIFIED
HMOS TO OFFER HIGH DEDUCTIBLE PLANS.

Section 1301(b) of the Public Health Service Act (42 U.S.C.
300e(b)) is amended by adding at the end the following new paragraph:
(6) A health maintenance organization that otherwise meets the
requirements of this title may offer a high-deductible health plan
(as defined in section 220(c)(2) of the Internal Revenue Code of
1986).”.

SEC. 194. VOLUNTEER SERVICES PROVIDED BY
HEALTH PROFESSIONALS AT FREE CLINICS.

Section 224 of the Public Health Service Act (42 U.S.C. 233) is
amended by adding at the end the following subsection: (o)(1) For
purposes of this section, a free clinic health professional shall in
providing a qualifying health service to an individual be deemed to
be an employee of the Public Health Service for a calendar year that
begins during a fiscal year for which a transfer was made under
paragraph (6)(D). The preceding sentence is subject to the provisions
of this subsection.

(2) In providing a health service to an individual, a health care
practitioner shall for purposes of this subsection be considered to
be a free clinic health professional if the following conditions are
met: (A) The service is provided to the individual at a free clinic,
or through offsite programs or events carried out by the free clinic.

(B) The free clinic is sponsoring the health care practitioner
pursuant to paragraph (5)(C).

(D) Neither the health care practitioner nor the free clinic
receives any compensation for the service from the individual or from
any third-party payor (including reimbursement under any insurance
policy or health plan, or under any Federal or State health benefits
program). With respect to compliance with such condition: (i) The
health care practitioner may receive repayment from the free clinic
for reasonable expenses incurred by the health care practitioner in
the provision of the service to the individual.

(ii) The free clinic may accept voluntary donations for the
provision of the service by the health care practitioner to the
individual.

(E) Before the service is provided, the health care practitioner
or the free clinic provides written notice to the individual of the
extent to which the legal liability of the health care practitioner
is limited pursuant to this subsection (or in the case of an
emergency, the written notice is provided to the individual as soon
after the emergency as is practicable). If the individual is a minor
or is otherwise legally incompetent, the condition under this
subparagraph is that the written notice be provided to a legal
guardian or other person with legal responsibility for the care of
the individual.

(F) At the time the service is provided, the health care
practitioner is licensed or certified in accordance with applicable
law regarding the provision of the service.

(3)(A) For purposes of this subsection, the term `free clinic’
means a health care facility operated by a nonprofit private entity
meeting the following requirements: (i) The entity does not, in
providing health services through the facility, accept reimbursement
from any third-party payor (including reimbursement under any
insurance policy or health plan, or under any Federal or State health
benefits program).

(ii) The entity, in providing health services through the
facility, either does not impose charges on the individuals to whom
the services are provided, or imposes a charge according to the
ability of the individual involved to pay the charge.

(iii) The entity is licensed or certified in accordance with
applicable law regarding the provision of health services.

(B) With respect to compliance with the conditions under
subparagraph (A), the entity involved may accept voluntary donations
for the provision of services.

(4) For purposes of this subsection, the term `qualifying health
service’ means any medical assistance required or authorized to be
provided in the program under title XIX of the Social Security Act,
without regard to whether the medical assistance is included in the
plan submitted under such program by the State in which the health
care practitioner involved provides the medical assistance.
References in the preceding sentence to such program shall as
applicable be considered to be references to any successor to such
program.

(5) Subsection (g) (other than paragraphs (3) through (5)) and
subsections (h), (i), and (l) apply to a health care practitioner for
purposes of this subsection to the same extent and in the same manner
as such subsections apply to an officer, governing board member,
employee, or contractor of an entity described in subsection (g)(4),
subject to paragraph (6) and subject to the following: (A) The first
sentence of paragraph (1) applies in lieu of the first sentence of
subsection (g)(1)(A).

(B) This subsection may not be construed as deeming any free
clinic to be an employee of the Public Health Service for purposes of
this section.

(C) With respect to a free clinic, a health care practitioner is
not a free clinic health professional unless the free clinic sponsors
the health care practitioner. For purposes of this subsection, the
free clinic shall be considered to be sponsoring the health care
practitioner if– (i) with respect to the health care practitioner,
the free clinic submits to the Secretary an application meeting the
requirements of subsection (g)(1)(D); and (ii) the Secretary,
pursuant to subsection (g)(1)(E), determines that the health care
practitioner is deemed to be an employee of the Public Health
Service.

(D) In the case of a health care practitioner who is determined by
the Secretary pursuant to subsection (g)(1)(E) to be a free clinic
health professional, this subsection applies to the health care
practitioner (with respect to the free clinic sponsoring the health
care practitioner pursuant to subparagraph (C)) for any cause of
action arising from an act or omission of the health care
practitioner occurring on or after the date on which the Secretary
makes such determination.

(E) Subsection (g)(1)(F) applies to a health care practitioner for
purposes of this subsection only to the extent that, in providing
health services to an individual, each of the conditions specified in
paragraph (2) is met.

(6)(A) For purposes of making payments for judgments against the
United States (together with related fees and expenses of witnesses)
pursuant to this section arising from the acts or omissions of free
clinic health professionals, there is authorized to be appropriated
$10,000,000 for each fiscal year.

(B) The Secretary shall establish a fund for purposes of this
subsection. Each fiscal year amounts appropriated under subparagraph
(A) shall be deposited in such fund.

(C) Not later <<NOTE: Reports.>> than May 1 of each
fiscal year, the Attorney General, in consultation with the
Secretary, shall submit to the Congress a report providing an
estimate of the amount of claims (together with related fees and
expenses of witnesses) that, by reason of the acts or omissions of
free clinic health professionals, will be paid pursuant to this
section during the calendar year that begins in the following fiscal
year. Subsection (k)(1)(B) applies to the estimate under the
preceding sentence regarding free clinic health professionals to the
same extent and in the same manner as such subsection applies to the
estimate under such subsection regarding officers, governing board
members, employees, and contractors of entities described in
subsection (g)(4).

(D) Not later than December 31 of each fiscal year, the Secretary
shall transfer from the fund under subparagraph (B) to the
appropriate accounts in the Treasury an amount equal to the estimate
made under subparagraph (C) for the calendar year beginning in such
fiscal year, subject to the extent of amounts in the fund.

(7)(A) This <<NOTE: Effective date.>> subsection takes
effect on the date of the enactment of the first appropriations Act
that makes an appropriation under paragraph (6)(A), except as
provided in subparagraph (B)(i).

(B)(i) Effective on the date of the enactment of the Health
Insurance Portability and Accountability Act of 1996– (I) the
Secretary may issue regulations for carrying out this subsection, and
the Secretary may accept and consider applications submitted pursuant
to paragraph (5)(C); and (II) reports under paragraph (6)(C) may be
submitted to the Congress.

(ii) For the first fiscal year for which an appropriation is made
under subparagraph (A) of paragraph (6), if an estimate under
subparagraph (C) of such paragraph has not been made for the calendar
year beginning in such fiscal year, the transfer under subparagraph
(D) of such paragraph shall be made notwithstanding the lack of the
estimate, and the transfer shall be made in an amount equal to the
amount of such appropriation.”.

SEC. 195. FINDINGS; <<NOTE: 42 USC
300gg note.>> SEVERABILITY.

(a) Findings Relating to Exercise of Commerce Clause Authority.–
Congress finds the following in relation to the provisions of this
title: (1) Provisions in group health plans and health insurance
coverage that impose certain preexisting condition exclusions impact
the ability of employees to seek employment in interstate commerce,
thereby impeding such commerce.

(2) Health insurance coverage is commercial in nature and is in
and affects interstate commerce.

(3) It is a necessary and proper exercise of Congressional
authority to impose requirements under this title on group health
plans and health insurance coverage (including coverage offered to
individuals previously covered under group health plans) in order to
promote commerce among the States.

(4) Congress, however, intends to defer to States, to the maximum
extent practicable, in carrying out such requirements with respect to
insurers and health maintenance organizations that are subject to
State regulation, consistent with the provisions of the Employee
Retirement Income Security Act of 1974.

(b) Severability.–If any provision of this title or the
application of such provision to any person or circumstance is held
to be unconstitutional, the remainder of this title and the
application of the provisions of such to any person or circumstance
shall not be affected thereby.