[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[S. 1978 Introduced in Senate (IS)]

103d CONGRESS
  2d Session
                                S. 1978

   To amend part III of title 5, United States Code, to provide for 
 participation by non-Federal employees in health benefits plans under 
 the Federal Employees Health Benefits Program, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

             March 24 (legislative day, February 22), 1994

    Mr. Roth introduced the following bill; which was read twice and 
           referred to the Committee on Governmental Affairs

_______________________________________________________________________

                                 A BILL


 
   To amend part III of title 5, United States Code, to provide for 
 participation by non-Federal employees in health benefits plans under 
 the Federal Employees Health Benefits Program, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Health Care Expansion Act of 
1994''.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) the United States spends more on health care than any 
        other nation in the world, and costs continue to increase at 
        double digit rates;
            (2) more than 35,000,000 people in the United States do not 
        have basic health care insurance;
            (3) small businesses and the self-employed find it 
        particularly difficult to obtain affordable health insurance 
        because of the small-risk pools in which they are grouped; and
            (4) the Federal Employees Health Benefits Program provides 
        quality health care coverage nationwide while providing 
        enrollees with a large degree of choice.

SEC. 3. PURPOSES.

    The purposes of this Act are to--
            (1) reduce the rising cost of health care through the use 
        of market forces;
            (2) increase access to affordable health care to millions 
        of individuals who do not have health insurance;
            (3) make available to millions of Americans the health care 
        coverage that is available to the President, Members of 
        Congress, Supreme Court Justices, members of the President's 
        Cabinet, and millions of Federal employees and retirees;
            (4) accomplish these purposes without the use of global 
        spending caps, employer mandates, or the establishment of a 
        huge Government bureaucracy; and
            (5) strengthen the Federal Employees Health Benefits 
        Program by introducing greater competition into the Federal 
        employee plan so that the Government can use its power as a 
        major purchaser of health care to drive down the costs of care 
        for Federal enrollees while maintaining high quality care and 
        service.

   TITLE I--SMALL BUSINESS PARTICIPATION IN FEDERAL EMPLOYEES HEALTH 
                             BENEFITS PLANS

SEC. 101. SMALL BUSINESS PARTICIPATION IN FEDERAL EMPLOYEES HEALTH 
              BENEFITS PLANS.

    Part III of title 5, United States Code, is amended by inserting 
after chapter 89 the following new chapter:

 ``CHAPTER 90--SMALL BUSINESS PARTICIPATION IN FEDERAL EMPLOYEE HEALTH 
                             BENEFITS PLANS

``Sec.
``9001. Definition.
``9002. Application to small business participants.
``9003. Small business participation.
``9004. Contributions.
``9005. Continued coverage.
``9006. Schedule of small business participation.
``Sec. 9001. Definition
    ``For purposes of this chapter, the term `small business' means any 
business entity which employs 100 or less employees (including 
businesses with one self-employed individual).
``Sec. 9002. Application to small business participants
    ``(a) The Office of Personnel Management shall promulgate 
regulations to apply the provisions of chapter 89, relating to health 
benefits plans, to the greatest extent practicable to small businesses 
and individuals covered under the provisions of this chapter.
    ``(b) Notwithstanding the provisions of subsection (a), carriers 
shall offer the same health benefits plans for the same premiums as are 
offered under chapter 89.
    ``(c) Notwithstanding subsection (a), the provisions of section 
8907 shall not apply to individuals covered under this chapter, except 
the Office of Personnel Management shall establish a method to 
disseminate information relating to health benefits plans (including 
information concerning periods of open enrollment and a summary of the 
information described in section 8908) to such individuals through 
small business participants and carriers.
``Sec. 9003. Small business participation
    ``Any small business which desires to participate in a health 
benefits plan under this chapter may enter into a contract with a 
carrier in accordance with this chapter. Such contract shall be for a 
term of no less than 1 year.
``Sec. 9004. Contributions
    ``(a) Subject to the provisions of subsection (b), an individual 
enrolled in a health benefits plan under this chapter shall make 
contributions equal to the amount of contributions made by--
            ``(1) a Federal enrollee in such plan under individual, or 
        self and family coverage, as the case may be, as determined 
        under section 8906; and
            ``(2) the Federal agency making Government contributions 
        determined under section 8906 for such Federal enrollee.
    ``(b)(1) A small business may by contract agree to make any amount 
of the contribution required under subsection (a) on behalf of an 
enrollee under such subsection.
    ``(2) An agency of a State government may provide any amount of the 
contribution required under subsection (a) on behalf of an enrollee 
under such subsection.
    ``(3) The Secretary of Health and Human Services (HHS) may 
subsidize any amount of the contribution required by subsection (a) or 
section 9005(a) for any qualified enrollee of any small business 
participating in a health benefits plan under this chapter. For 
purposes of the preceding sentence, the term `qualified enrollee' will 
be determined by the Secretary of HHS according to the number of 
individuals apply and the budget neutrality requirement in section 105 
of this Act.
    ``(c) A small business participating under this chapter shall--
            ``(1) collect contributions from employees by withholdings 
        from pay or by another method or schedule;
            ``(2) make payments of such contributions to the contracted 
        carrier;
            ``(3) maintain and make available such records as the 
        Office, applicable State insurance authority, or carrier may 
        require; and
            ``(4) provide any other related administrative service in 
        carrying out the provisions of this chapter.
``Sec. 9005. Continued coverage
    ``(a) Subject to subsection (b), the provisions of section 8905a 
shall be made applicable to enrollees and individuals covered by such 
enrollments under this chapter through section 9002 and the carrier 
contract entered into under section 9003, except the enrollee shall pay 
all contributions for continued coverage and the applicable amount for 
administrative expenses unless the applicable small business by 
contract agrees to pay any part of such contributions or expenses.
    ``(b) An individual may be covered under continued coverage as 
provided under subsection (a), only if such individual remains in the 
same plan during the period of continued coverage as such individual 
was enrolled in immediately before such period of continued coverage.
``Sec. 9006. Schedule of small business participation
    ``(a) Subject to the provisions of subsections (b), (c), (d), (e), 
and (f), each carrier enrolling individuals of small business 
participants under this chapter shall ensure that--
            ``(1) in the first contract year after the date of the 
        enactment of the Federal Health Care Expansion Act of 1994, the 
        number of enrollees from small businesses as provided under 
        this chapter shall be no less than 5 percent of the number of 
        Federal enrollees enrolled under chapter 89;
            ``(2) in the second such year, the number of small business 
        enrollees shall be no less than 20 percent of the number of 
        such Federal enrollees;
            ``(3) in the third such year, the number of small business 
        enrollees shall be no less than 40 percent of the number of 
        such Federal enrollees;
            ``(4) in the fourth such year, the number of small business 
        enrollees shall be no less than 60 percent of the number of 
        such Federal enrollees; and
            ``(5) in the fifth such year and in each year thereafter, 
        the number of small business enrollees shall be no less than 80 
        percent of the number of such Federal enrollees.
    ``(b) Beginning in the contract year described under subsection 
(a)(1) and in each contract year thereafter, in no event shall a 
carrier enroll enrollees from less than 1 small business.
    ``(c)(1) In the contract year described under subsection (a)(1), a 
small business may participate if such business--
            ``(A) has between 75 and 100 employees; and
            ``(B) shall ensure that at least 80 percent of such 
        employees shall enroll.
    ``(2) In the contract year described under subsection (a)(2) small 
businesses with between 50 and 74 employees may additionally 
participate.
    ``(3) In the contract year described under subsection (a)(3), small 
businesses with between 1 and 49 employees may additionally 
participate.
    ``(4) In the contract year described under subsection (a)(4) and 
each year thereafter, all small businesses may participate.
    ``(d) If during any contract year described under subsection (a) 
(1) through (5), more small businesses apply for participation than are 
required to participate under such subsection, the carrier shall--
            ``(1) subject to paragraph (2), randomly select small 
        businesses for participation from all applications; and
            ``(2) ensure that from such randomly selected small 
        businesses, at least 50 percent of such businesses are not 
        offering any type of health insurance benefits to its 
        employees.
    ``(e) In the administration of subsection (a) (2) through (5) each 
carrier enrolling individuals of small business participants shall 
ensure that no less than 50 percent of small business enrollees in each 
contract year shall be individuals who had no health insurance coverage 
in the previous year.
    ``(f) A small business may participate in a health benefits plan as 
provided under this section if such business meets all such 
requirements otherwise provided under this chapter.
    ``(g) The Office may waive the requirements under subsection (a) 
but only after making a determination that there is insufficient 
interest in small businesses within the region in participating under 
this chapter.''.

SEC. 102. EXTENSION OF CONTINUED COVERAGE.

    Section 8905a of title 5, United States Code, is amended--
            (1) in subsection (e)--
                    (A) in paragraph (1)(A) by striking out ``18 
                months'' and inserting in lieu thereof ``36 months''; 
                and
                    (B) in paragraph (2)(C) by striking out ``18-month 
                period'' and inserting in lieu thereof ``36-month 
                period''; and
            (2) in subsection (f)(3)(B) by striking out ``18-month 
        period'' and inserting in lieu thereof ``36-month period.

SEC. 103. COST EXPERIENCE COMPARISON REPORT.

    No later than January 30 following the first contract year 
implementing the amendments made by section 101 of this Act, and on 
January 30 of each 4 years thereafter, each carrier contracting under 
chapter 89 or 90 of title 5, United States Code, shall submit a report 
to the Office of Personnel Management that compares the aggregate cost 
experiences with respect to coverage between--
            (1) Federal employees and other individuals covered under 
        chapter 89 of title 5, United States Code; and
            (2) individuals covered under chapter 90 of such title.

SEC. 104. RISK ADJUSTMENT STUDY.

    No later than 2 years after the date of the enactment of this Act, 
the Office of Personnel Management shall conduct a study and submit a 
health benefits plan risk adjustment report to the Congress. Such 
report shall examine in the administration of chapters 89 and 90 of 
title 5, United States Code (as amended and added by this Act)--
            (1) the feasibility of risk adjusting premiums, by the use 
        of subsidies and surcharges to hold carriers harmless for 
        enrollment risks, based on demographic variables;
            (2) the risk adjustment factors that are correlated with 
        increased or diminished risk for consumption of the type of 
        health services included in the standardized level of benefits 
        established under such chapters;
            (3) a formula for assigning numerical risk factors for 
        lower than average risk for consumption of services, the 
        average risk for consumption of services, and higher than 
        average risk factors, and a methodology for the adjustment of 
        such factors; and
            (4) any recommendations for the enactment of legislation.

SEC. 105. ELIMINATION OF MEDICARE AND MEDICAID DISPROPORTIONATE SHARE 
              HOSPITAL PAYMENTS TO FINANCE SELF-EMPLOYED DEDUCTION AND 
              BUY-IN SUBSIDY.

    (a) Phase-Out of Disproportionate Share Hospital Payments.--The 
Secretary of Health and Human Services shall phase-out over a 5-fiscal-
year period beginning with the first fiscal year following the second 
January 1 described in section 107, the disproportionate share hospital 
payments under sections 1886(d)(5)(F) and 1902(a)(13)(A) of the Social 
Security Act (42 U.S.C. 1395ww(d)(5)(F) and 1396a(a)(13)(A)).
    (b) Budget Neutral Manner.--The phase-out described in subsection 
(a) shall be accomplished in a Federal budget neutral manner such that 
the savings for each fiscal year resulting from such phase-out are 
fully used to offset the additional costs resulting from the amendments 
made by section 301 and section 201 of this Act and such costs 
resulting from the premium subsidy program for low-income workers of 
participating small businesses described in section 9003(b)(3) of title 
5, United States Code (as added by section 101 of this Act).
    (c) Conforming Amendments.--
            (1) Clause (i) of section 1886(d)(5)(F) of the Social 
        Security Act (42 U.S.C. 1395ww(d)(5)(F)) is amended by striking 
        ``For discharges'' and inserting ``Except as provided in 
        section 105 of the Federal Health Care Expansion Act of 1994, 
        for discharges''.
            (2) Subparagraph (A) of section 1902(a)(13) of the Social 
        Security Act (42 U.S.C. 1396a(a)(13)) is amended by striking 
        ``take into account the situation of hospitals'' and inserting 
        ``take into account, except as provided in section 105 of the 
        Federal Health Care Expansion Act of 1994, the situation of 
        hospitals''.

SEC. 106. STUDY REGARDING NONWORKER AND NONCOVERED EMPLOYEE BUY-INS.

    The Secretary of Health and Human Services shall study by what 
method nonworkers and employees of employers not covered under chapter 
90 of title 5, United States Code (as added by section 101 of this 
Act), may be incorporated into the buy-in for coverage under the 
Federal Employees Health Benefits Plan. The Secretary shall report the 
results of such study and any appropriate legislative recommendations 
to the Congress not later than 2 years after the date of the enactment 
of this Act.

SEC. 107. EFFECTIVE DATE.

    (a) In General.--Except as provided under subsection (b), the 
provisions of this Act and the amendments made by this Act shall be 
effective on and after the first January 1, occurring after the date of 
the enactment of this Act.
    (b) Exception.--The provisions of chapters 89 and 90 of title 5, 
United States Code, as amended and added by this title, relating to the 
establishment of or exercise of authority (including the promulgation 
of regulations) by the Office of Personnel Management, the Secretary of 
Health and Human Services, the President, or any other applicable 
Federal officer shall take effect on the date of the enactment of this 
Act in order to establish health benefits plans and fully implement the 
provisions and amendments made by this Act no later than the first 
January 1 occurring after the date of the enactment of this Act.

           TITLE II--BETTER ACCESS TO AFFORDABLE HEALTH CARE

 Subtitle A--Improvements in Health Insurance Affordability for Small 
                               Employers

SEC. 201. GRANTS TO STATES FOR SMALL EMPLOYER HEALTH INSURANCE 
              PURCHASING PROGRAMS.

    (a) In General.--The Secretary of Health and Human Services 
(hereafter in this section referred to as the ``Secretary'') shall make 
grants to States that submit applications meeting the requirements of 
this section for the establishment and operation of small employer 
health insurance purchasing programs.
    (b) Use of Funds.--Grant funds awarded under this section to a 
State may be used to finance administrative costs associated with 
developing and operating a group purchasing program for small 
employers, such as the costs associated with--
            (1) engaging in marketing and outreach efforts to inform 
        small employers about the group purchasing program, which may 
        include the payment of sales commissions;
            (2) negotiating with insurers to provide health insurance 
        through the group purchasing program; or
            (3) providing administrative functions, such as eligibility 
        screening, claims administration, and customer service.
    (c) Application Requirements.--An application submitted by a State 
to the Secretary must describe--
            (1) whether the program will be operated directly by the 
        State or through one or more State-sponsored private 
        organizations and the details of such operation;
            (2) any participation requirements for small employers;
            (3) the extent of insurance coverage among the eligible 
        population, projections for change in the extent of such 
        coverage, and the price of insurance currently available to 
        these small employers;
            (4) program goals for reducing the price of health 
        insurance for small employers and increasing insurance coverage 
        among employees of small employers and their dependents;
            (5) the approaches proposed for enlisting participation by 
        insurers and small employers, including any plans to use State 
        funds to subsidize the cost of insurance for participating 
        employers; and
            (6) the methods proposed for evaluating the effectiveness 
        of the program in reducing the number of uninsured in the State 
        and on lowering the price of health insurance to small 
        employers in the State.
    (d) Grant Criteria.--In awarding grants, the Secretary shall 
consider the potential impact of the State's proposal on the cost of 
health insurance for small employers and on the number of uninsured, 
and the need for regional variation in the awarding of grants. To the 
extent the Secretary deems appropriate, grants shall be awarded to fund 
programs employing a variety of approaches for establishing small 
employer health insurance group purchasing programs.
    (e) Prohibition on Grants.--No grant funds shall be paid to States 
that do not meet the requirements of title XXI of the Social Security 
Act with respect to small employer health insurance plans, or to States 
with group purchasing programs involving small employer health 
insurance plans that do not meet the requirements of such title.
    (f) Annual Report by States.--States receiving grants under this 
section must report to the Secretary annually on the numbers and rates 
of participation by eligible insurers and small employers, on the 
estimated impact of the program on reducing the number of uninsured, 
and on the price of insurance available to small employers in the 
State.
    (g) Authorization of Appropriations.--There are authorized to be 
appropriated for each of fiscal years 1995, 1996, and 1997, such sums 
as may be necessary for the purposes of awarding grants under this 
section.
    (h) Secretarial Report.--The Secretary shall report to Congress by 
no later than January 1, 1997, on the number and amount of grants 
awarded under this section, and include with such report an evaluation 
of the impact of the grant program on the number of uninsured and price 
of health insurance to small employers in participating States.

    Subtitle B--Improvements in Health Insurance for Small Employers

 PART I--STANDARDS AND REQUIREMENTS OF SMALL EMPLOYER HEALTH INSURANCE 
                                 REFORM

SEC. 211. STANDARDS AND REQUIREMENTS OF SMALL EMPLOYER HEALTH 
              INSURANCE.

    The Social Security Act is amended by adding at the end the 
following new title:

    ``TITLE XXI--STANDARDS FOR SMALL EMPLOYER HEALTH INSURANCE AND 
                  CERTIFICATION OF MANAGED CARE PLANS

                ``Part A--General Standards; Definitions

 ``application of requirements to small employer health insurance plans

    ``Sec. 2101. (a) Plan Under State Regulatory Program or Certified 
by the Secretary.--An insurer offering a health insurance plan to a 
small employer in a State on or after the effective date applicable to 
the State under subsection (b) shall be treated as meeting the 
requirements of this title if--
            ``(1) the Secretary determines that the State has 
        established a regulatory program that provides for the 
        application and enforcement of standards meeting the 
        requirements under section 2102 to meet the requirements of 
        part B of this title; and
            ``(2) if the State has not established such a program or if 
        the program has been decertified by the Secretary under section 
        2102(b), the health insurance plan has been certified by the 
        Secretary (in accordance with such procedures as the Secretary 
        establishes) as meeting the requirements of part B of this 
        title.
    ``(b) Effective Dates.--
            ``(1) In general.--Except as specified in paragraph (2) and 
        provided in paragraph (3), the standards established under 
        section 2102 to meet the requirements of part B of this title 
        shall apply to health insurance plans offered, issued, or 
        renewed to a small employer in a State on or after January 1, 
        1995.
            ``(2) Exception for legislation.--In the case of a State 
        which the Secretary identifies, in consultation with the NAIC, 
        as--
                    ``(A) requiring State legislation (other than 
                legislation appropriating funds) in order for insurers 
                and health insurance plans offered to small employers 
                to meet the standards under the program established 
                under subsection (a), or
                    ``(B) having a legislature which does not meet in 
                1995 in a legislative session in which such legislation 
                may be considered,
        the date specified in this paragraph is the first day of the 
        first calendar quarter beginning after the close of the first 
        regular legislative session of the State legislature that 
        begins on or after January 1, 1996. For purposes of the 
        previous sentence, in the case of a State that has a 2-year 
        legislative session, each year of such session shall be deemed 
        to be a separate regular legislative session of the State 
        legislature.
            ``(3) Requirements applied to existing policies.--In the 
        case of a health insurance plan in effect before the applicable 
        effective date specified in paragraph (1) or (2), the 
        requirements referred to in subsections (a) and (b) of section 
        2112 shall not apply to any such plan, or any renewal of such 
        plan, before the date which is 2 years after such effective 
        date.
    ``(c) Reporting Requirements of States.--Each State shall submit to 
the Secretary, at intervals established by the Secretary, a report on 
the implementation and enforcement of the standards under the program 
established under subsection (a)(1) with respect to health insurance 
plans offered to small employers.
    ``(d) More Stringent State Standards Permitted.--Except as provided 
in subsections (b)(8) and (c)(4) of section 2113, a State may implement 
standards that are more stringent than the standards established to 
meet the requirements of part B of this title.
    ``(e) Limited Waiver of Rating Requirements.--The Secretary may 
waive requirements with respect to subsections (b) and (e) of section 
2112 in the case of a State with equally stringent but not identical 
standards in effect prior to January 1, 1994.

                      ``establishment of standards

    ``Sec. 2102. (a) Establishment of Standards.--
            ``(1) Role of the naic.--The Secretary shall request that 
        the NAIC--
                    ``(A) develop specific standards, in the form of a 
                model Act and model regulations, to implement the 
                requirements of part B of this title; and
                    ``(B) report to the Secretary on such standards,
        by not later than September 30, 1994. If the NAIC develops such 
        standards within such period and the Secretary finds that such 
        standards implement the requirements of part B of this title, 
        such standards shall be the standards applied under section 
        2101.
            ``(2) Role of the secretary.--If the NAIC fails to develop 
        and report on the standards described in paragraph (1) by the 
        date specified in such paragraph or the Secretary finds that 
        such standards do not implement the requirements under part B 
        of this title, the Secretary shall develop and publish such 
        standards, by not later than December 31, 1994. Such standards 
        shall then be the standards applied under section 2101.
            ``(3) Standards on guaranteed availability.--The standards 
        developed under paragraphs (1) and (2) shall provide 
        alternative standards for guaranteeing availability of health 
        insurance plans for all small employers in a State as provided 
        in section 2111(c).
            ``(4) Guidelines for demographic rating factors.--The 
        standards developed under paragraphs (1) and (2) shall include 
        guidelines with respect to rating factors used by insurers to 
        adjust premiums to reflect demographic characteristics of a 
        small employer group.
    ``(b) Periodic Secretarial Review of State Regulatory Program.--The 
Secretary periodically shall review State regulatory programs to 
determine if they continue to meet and enforce the standards referred 
to in subsection (a). If the Secretary initially determines that a 
State regulatory program no longer meets and enforces such standards, 
the Secretary shall provide the State an opportunity to adopt a plan of 
correction that would bring such program into compliance with such 
standards. If the Secretary makes a final determination that the State 
regulatory program fails to meet and enforce such standards and 
requirements after such an opportunity, the Secretary shall decertify 
such program and assume responsibility under section 2101(a)(2) with 
respect to plans in the State.
    ``(c) GAO Audits.--The Comptroller General of the United States 
shall conduct periodic reviews on a sample of State regulatory programs 
to determine their compliance with the standards and requirements of 
this title. The Comptroller General of the United States shall report 
to the Secretary and Congress on the findings of such reviews.

                             ``definitions

    ``Sec. 2103. (a) Health Insurance Plan.--As used in this title, the 
term `health insurance plan' means any hospital or medical service 
policy or certificate, hospital or medical service plan contract, 
health maintenance organization group contract, or a multiple employer 
welfare arrangement, but does not include--
            ``(1) a self-insured group health plan;
            ``(2) a self-insured multiemployer group health plan; or
            ``(3) any of the following offered by an insurer--
                    ``(A) accident only, dental only, vision only, 
                disability only insurance, or long-term care only 
                insurance,
                    ``(B) coverage issued as a supplement to liability 
                insurance,
                    ``(C) medicare supplemental insurance as defined in 
                section 1882(g)(1),
                    ``(D) workmen's compensation or similar insurance, 
                or
                    ``(E) automobile medical-payment insurance.
In the case of a multiple employer welfare arrangement that is fully 
insured, the requirements of this Act shall only apply to the insurer 
of the arrangement.
    ``(b) Insurer.--As used in this title the term `insurer' means any 
person that offers a health insurance plan to a small employer.
    ``(c) General Definitions.--As used in this title:
            ``(1) Applicable regulatory authority.--The term 
        `applicable regulatory authority' means--
                    ``(A) in the case of a health insurance plan 
                offered in a State with a program meeting the 
                requirements of part B of this title, the State 
                commissioner or superintendent of insurance or other 
                State authority responsible for regulation of health 
                insurance; or
                    ``(B) in the case of a health insurance plan 
                certified by the Secretary under section 2101(a)(2), 
                the Secretary.
            ``(2) Small employer.--The term `small employer' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 101 eligible employees on a 
        typical business day. For the purposes of this paragraph, the 
        term `employee' includes a self-employed individual.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 30 hours of service per 
        week for that employer.
            ``(4) NAIC.--The term `NAIC' means the National Association 
        of Insurance Commissioners.
            ``(5) State.--The term `State' means each of the several 
        States, the District of Columbia, and the Commonwealth of 
        Puerto Rico.

            ``Part B--Small Employer Health Insurance Reform

   ``general requirements for health insurance plans issued to small 
                               employers

    ``Sec. 2111. (a) Registration With Applicable Regulatory 
Authority.--Each insurer shall register with the applicable regulatory 
authority for each State in which it issues or offers a health 
insurance plan to small employers.
    ``(b) Guaranteed Eligibility.--
            ``(1) In general.--No insurer may exclude from coverage any 
        eligible employee, or the spouse or any dependent child of the 
        eligible employee, to whom coverage is made available by a 
        small employer.
            ``(2) Waiting periods.--Paragraph (1) shall not apply to 
        any period an eligible employee is excluded from coverage under 
        the health insurance plan solely by reason of a requirement 
        imposed by an employer applicable to all employees that a 
        minimum period of service with the small employer is required 
        before the employee is eligible for such coverage.
    ``(c) Guaranteed Availability.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, an insurer that offers a health insurance plan 
        to small employers located in a State must meet the standards 
        adopted by the State described in paragraph (2).
            ``(2) Standards on guaranteed availability.--
                    ``(A) In general.--In order to implement the 
                requirements of this title, the standards developed 
                under paragraphs (1) and (2) of section 2102(a) shall--
                            ``(i) require that a State adopt a 
                        mechanism for guaranteeing the availability of 
                        health insurance plans for all small employers 
                        in the State,
                            ``(ii) specify alternative mechanisms, 
                        including at least the alternative mechanisms 
                        described in subparagraph (B), that a State may 
                        adopt, and
                            ``(iii) prohibit marketing or other 
                        practices by an insurer intended to discourage 
                        or limit the issuance of a health insurance 
                        plan to a small employer on the basis of size, 
                        industry, geographic area, expected need for 
                        health services, or other risk factors.
                    ``(B) Alternative mechanisms.--The alternative 
                mechanisms described in this subparagraph are:
                            ``(i) A mechanism under which the State--
                                    ``(I) requires that any insurer 
                                offering a health insurance plan to a 
                                small employer in the State shall offer 
                                the same plan to all other small 
                                employers in the State or in the 
                                portion of the State established as the 
                                insurer's geographic service area (as 
                                approved by the State), and
                                    ``(II) requires the participation 
                                of all such insurers in a small 
                                employer reinsurance program 
                                established by the State.
                            ``(ii) A mechanism under which the State--
                                    ``(I) requires that any insurer 
                                offering a health insurance plan to a 
                                small employer in the State shall offer 
                                the same plan to all other small 
                                employers in the State or in the 
                                portion of the State established as the 
                                insurer's geographic service area (as 
                                approved by the State), and
                                    ``(II) permits any such insurer to 
                                participate in a small employer 
                                reinsurance program established by the 
                                State.
                            ``(iii) A mechanism under which the State 
                        requires that any insurer offering a health 
                        insurance plan to a small employer in the State 
                        shall participate in a program for assigning 
                        high-risk groups among all such insurers.
                            ``(iv) A mechanism under which the State 
                        requires that any insurer that--
                                    ``(I) offers a health insurance 
                                plan to a small employer in the State, 
                                and
                                    ``(II) does not agree to offer the 
                                same plan to all other small employers 
                                in the State or in the portion of the 
                                State established as the insurer's 
                                geographic service area (as approved by 
                                the State),
                        shall participate in a program for assigning 
                        high-risk groups among all such insurers.
                    ``(C) State adoption of certain standards.--A 
                regulatory program adopted by the State under section 
                2101 must provide--
                            ``(i) for the adoption of one of the 
                        mechanisms described in clauses (i) through 
                        (iv) of subparagraph (B), or
                            ``(ii) for such other program that 
                        guarantees availability of health insurance to 
                        all small employers in the State and is 
                        approved by the Secretary.
                    ``(D) Standards for noncomplying states.--The 
                Secretary, in consultation with the Secretary of the 
                Treasury, shall develop requirements with respect to 
                guaranteed availability to apply with respect to 
                insurers located in a State that has not adopted the 
                standards under section 2102 and who wish to apply for 
                certification under section 2101(a)(2).
            ``(3) Grounds for refusal to renew.--
                    ``(A) In general.--An insurer may refuse to renew, 
                or (except with respect to clause (iii)) may terminate, 
                a health insurance plan under this part only for--
                            ``(i) nonpayment of premiums,
                            ``(ii) fraud or misrepresentation,
                            ``(iii) failure to maintain minimum 
                        participation rates (consistent with 
                        subparagraph (B)), or
                            ``(iv) repeated misuse of a provider 
                        network provision.
                    ``(B) Minimum participation rates.--An insurer may 
                require, with respect to a health insurance plan issued 
                to a small employer, that a minimum percentage of 
                eligible employees who do not otherwise have health 
                insurance are enrolled in such plan if such percentage 
                is applied uniformly to all plans offered to employers 
                of comparable size.
    ``(d) Guaranteed Renewability.--
            ``(1) In general.--An insurer shall ensure that a health 
        insurance plan issued to a small employer be renewed, at the 
        option of the small employer, unless the plan is terminated for 
        a reason specified in paragraph (2) or in subsection (c)(3)(A).
            ``(2) Termination of small employer business.--An insurer 
        is not required to renew a health insurance plan with respect 
        to a small employer if the insurer--
                    ``(A) elects not to renew all of its health 
                insurance plans issued to small employers in a State; 
                and
                    ``(B) provides notice to the applicable regulatory 
                authority in the State and to each small employer 
                covered under a plan of such termination at least 180 
                days before the date of expiration of the plan.
        In the case of such a termination, the insurer may not provide 
        for issuance of any health insurance plan to a small employer 
        in the State during the 5-year period beginning on the date of 
        termination of the last plan not so renewed.
    ``(e) No Discrimination Based on Health Status for Certain 
Services.--
            ``(1) In general.--Except as provided under paragraph (2), 
        a health insurance plan offered to a small employer by an 
        insurer may not deny, limit, or condition the coverage under 
        (or benefits of) the plan based on the health status, claims 
        experience, receipt of health care, medical history, or lack of 
        evidence of insurability, of an individual.
            ``(2) Treatment of preexisting condition exclusions for all 
        services.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, a health insurance plan 
                offered to a small employer by an insurer may exclude 
                coverage with respect to services related to treatment 
                of a preexisting condition, but the period of such 
                exclusion may not exceed 6 months. The exclusion of 
                coverage shall not apply to services furnished to 
                newborns.
                    ``(B)  Crediting of previous coverage.--
                            ``(i) In general.--A health insurance plan 
                        issued to a small employer by an insurer shall 
                        provide that if an individual under such plan 
                        is in a period of continuous coverage (as 
                        defined in clause (ii)(I)) with respect to 
                        particular services as of the date of initial 
                        coverage under such plan, any period of 
                        exclusion of coverage with respect to a 
                        preexisting condition for such services or type 
                        of services shall be reduced by 1 month for 
                        each month in the period of continuous 
                        coverage.
                            ``(ii) Definitions.--As used in this 
                        subparagraph:
                                    ``(I) Period of continuous 
                                coverage.--The term `period of 
                                continuous coverage' means, with 
                                respect to particular services, the 
                                period beginning on the date an 
                                individual is enrolled under a health 
                                insurance plan, title XVIII, title XIX, 
                                or other health benefit arrangement 
                                including a self-insured plan which 
                                provides benefits with respect to such 
                                services and ends on the date the 
                                individual is not so enrolled for a 
                                continuous period of more than 3 
                                months.
                                    ``(II) Preexisting condition.--The 
                                term `preexisting condition' means, 
                                with respect to coverage under a health 
                                insurance plan issued to a small 
                                employer by an insurer, a condition 
                                which has been diagnosed or treated 
                                during the 3-month period ending on the 
                                day before the first date of such 
                                coverage (without regard to any waiting 
                                period).

       ``requirements related to restrictions on rating practices

    ``Sec. 2112. (a) Limit on Variation of Premiums Between Blocks of 
Business.--
            ``(1) In general.--The base premium rate for any block of 
        business of an insurer (as defined in section 2103(b)(1)) may 
        not exceed the base premium rate for any other block of 
        business by more than 20 percent.
            ``(2) Exceptions.--Paragraph (1) shall not apply to a block 
        of business if the applicable regulatory authority determines 
        that--
                    ``(A) the block is one for which the insurer does 
                not reject, and never has rejected, small employers 
                included within the definition of employers eligible 
                for the block of business or otherwise eligible 
                employees and dependents who enroll on a timely basis, 
                based upon their claims experience, health status, 
                industry, or occupation,
                    ``(B) the insurer does not transfer, and never has 
                transferred, a health insurance plan involuntarily into 
                or out of the block of business, and
                    ``(C) health insurance plans offered under the 
                block of business are currently available for purchase 
                by small employers at the time an exception to 
                paragraph (1) is sought by the insurer.
    ``(b) Limit on Variation in Premium Rates Within a Block of 
Business.--For a block of business of an insurer, the highest premium 
rates charged during a rating period to small employers with similar 
demographic characteristics (limited to age, sex, family size, and 
geography and not relating to claims experience, health status, 
industry, occupation, or duration of coverage since issue) for the same 
or similar coverage, or the highest rates which could be charged to 
such employers under the rating system for that block of business, 
shall not exceed an amount that is 1.5 times the base premium rate for 
the block of business for a rating period (or portion thereof) that 
occurs in the first 3 years in which this section is in effect, and 
1.35 times the base premium rate thereafter.
    ``(c) Consistent Application of Rating Factors.--In establishing 
premium rates for health insurance plans offered to small employers--
            ``(1) an insurer making adjustments with respect to age, 
        sex, family size, or geography must apply such adjustments 
        consistently across small employers (as provided in guidelines 
        developed under section 2102(a)(4)), and
            ``(2) no insurer may use a geographic area that is smaller 
        than a county or smaller than an area that includes all areas 
        in which the first three digits of the zip code are identical, 
        whichever is smaller.
    ``(d) Limit on Transfer of Employers Among Blocks of Business.--
            ``(1) In general.--An insurer may not transfer a small 
        employer from one block of business to another without the 
        consent of the employer.
            ``(2) Offers to transfer.--An insurer may not offer to 
        transfer a small employer from one block of business to another 
        unless--
                    ``(A) the offer is made without regard to age, sex, 
                geography, claims experience, health status, industry, 
                occupation or the date on which the policy was issued, 
                and
                    ``(B) the same offer is made to all other small 
                employers in the same block of business.
    ``(e) Limits on Variation in Premium Increases.--The percentage 
increase in the premium rate charged to a small employer for a new 
rating period (determined on an annual basis) may not exceed the sum of 
the percentage change in the base premium rate plus 5 percentage 
points.
    ``(f) Definitions.--In this section:
            ``(1) Base premium rate.--The term `base premium rate' 
        means, for each block of business for each rating period, the 
        lowest premium rate which could have been charged under a 
        rating system for that block of business by the insurer to 
        small employers with similar demographic or other relevant 
        characteristics (limited to age, sex, family size, and 
        geography and not relating to claims experience, health status, 
        industry, occupation or duration of coverage since issue) for 
        health insurance plans with the same or similar coverage.
            ``(2) Block of business.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `block of business' means, 
                with respect to an insurer, all of the small employers 
                with a health insurance plan issued by the insurer (as 
                shown on the records of the insurer).
                    ``(B) Distinct groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        a distinct group of small employers with health 
                        insurance plans issued by an insurer may be 
                        treated as a block of business by such insurer 
                        if all of the plans in such group--
                                    ``(I) are marketed and sold through 
                                individuals and organizations that do 
                                not participate in the marketing or 
                                sale of other distinct groups by the 
                                insurer,
                                    ``(II) have been acquired from 
                                another insurer as a distinct group, or
                                    ``(III) are provided through an 
                                association with membership of not less 
                                than 25 small employers that has been 
                                formed for purposes other than 
                                obtaining health insurance.
                            ``(ii) Limitation.--An insurer may not 
                        establish more than six distinct groups of 
                        small employers.
    ``(f) Full Disclosure of Rating Practices.--
            ``(1) In general.--At the time an insurer offers a health 
        insurance plan to a small employer, the insurer shall fully 
        disclose to the employer all of the following:
                    ``(A) Rating practices for small employer health 
                insurance plans, including rating practices for 
                different populations and benefit designs.
                    ``(B) The extent to which premium rates for the 
                small employer are established or adjusted based upon 
                the actual or expected variation in claims costs or 
                health condition of the employees of such small 
                employer and their dependents.
                    ``(C) The provisions concerning the insurer's right 
                to change premium rates, the extent to which premiums 
                can be modified, and the factors which affect changes 
                in premium rates.
            ``(2) Notice on expiration.--An insurer providing health 
        insurance plans to small employers shall provide for notice, at 
        least 60 days before the date of expiration of the health 
        insurance plan, of the terms for renewal of the plan. Such 
        notice shall include an explanation of the extent to which any 
        increase in premiums is due to actual or expected claims 
        experience of the individuals covered under the small 
        employer's health insurance plan contract.
    ``(g) Actuarial Certification.--Each insurer shall file annually 
with the applicable regulatory authority a written statement by a 
member of the American Academy of Actuaries (or other individual 
acceptable to such authority) certifying that, based upon an 
examination by the individual which includes a review of the 
appropriate records and of the actuarial assumptions of the insurer and 
methods used by the insurer in establishing premium rates for small 
employer health insurance plans--
            ``(1) the insurer is in compliance with the applicable 
        provisions of this section, and
            ``(2) the rating methods are actuarially sound.
Each insurer shall retain a copy of such statement for examination at 
its principal place of business.

  ``requirements for small employer health insurance benefit package 
                               offerings

    ``Sec. 2113. (a) Basic and Standard Benefit Packages.--
            ``(1) In general.--If an insurer offers any health 
        insurance plan to small employers in a State, the insurer shall 
        also offer a health insurance plan providing for the standard 
        benefit package defined in subsection (b) and a health 
        insurance plan providing for the basic benefit package defined 
        in subsection (c).
            ``(2) Managed care option.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if an insurer offers any health 
                insurance plan to small employers in a State and also 
                offers a managed care plan in the State or a geographic 
                area within the State to employers that are not small 
                employers, the insurer must offer a similar managed 
                care plan to small employers in the State or geographic 
                area.
                    ``(B) Size limits.--An insurer may cease enrolling 
                new small employer groups in all or a portion of the 
                insurer's service area for a managed care plan if it 
                ceases to enroll any new employer groups within the 
                service area or within a portion of a service area of 
                such plan.
    ``(b) Standard Benefit Package.--
            ``(1) In general.--
                    ``(A) Package defined.--Except as otherwise 
                provided in this section, a health insurance plan 
                providing for a standard benefit package shall be 
                limited to payment for--
                            ``(i) inpatient and outpatient hospital 
                        care, except that treatment for a mental 
                        disorder, as defined in subparagraph (B)(i), is 
                        subject to the special limitations described in 
                        clause (v)(I);
                            ``(ii) inpatient and outpatient physician 
                        services, as defined in subparagraph (B)(ii), 
                        except that psychotherapy or counseling for a 
                        mental disorder is subject to the special 
                        limitations described in clause (v)(II);
                            ``(iii) diagnostic tests;
                            ``(iv) preventive services limited to--
                                    ``(I) prenatal care and well-baby 
                                care provided to children who are 1 
                                year of age or younger;
                                    ``(II) well-child care;
                                    ``(III) Pap smears;
                                    ``(IV) mammograms; and
                                    ``(V) colorectal screening 
                                services; and
                            ``(v)(I) inpatient hospital care for a 
                        mental disorder for not less than 45 days per 
                        year, except that days of partial 
                        hospitalization or residential care may be 
                        substituted for days of inpatient care; and
                            ``(II) outpatient psychotherapy and 
                        counseling for a mental disorder for not less 
                        than 20 visits per year provided by a provider 
                        who is acting within the scope of State law and 
                        who--
                                    ``(aa) is a physician; or
                                    ``(bb) is a duly licensed or 
                                certified clinical psychologist or a 
                                duly licensed or certified clinical 
                                social worker, a duly licensed or 
                                certified equivalent mental health 
                                professional, or a clinic or center 
                                providing duly licensed or certified 
                                mental health services.
                    ``(B) Definitions.--For purposes of this paragraph:
                            ``(i) Mental disorder.--The term `mental 
                        disorder' has the same meaning given such term 
                        in the International Classification of 
                        Diseases, 9th Revision, Clinical Modification.
                            ``(ii) Physician services.--The term 
                        `physician services' means professional medical 
                        services lawfully provided by a physician under 
                        State medical practice acts, and includes 
                        professional services provided by a dentist, 
                        licensed advanced-practice nurse, physician 
                        assistant, optometrist, podiatrist, or 
                        chiropractor acting within the scope of their 
                        practices (as determined under State law) if 
                        such services would be treated as physician 
                        services if furnished by a physician.
            ``(2) Amount, scope, and duration of certain benefits.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B) and in paragraph (3), a health 
                insurance plan providing for a standard benefit package 
                shall place no limits on the amount, scope, or duration 
                of benefits described in subparagraphs (A) through (C) 
                of paragraph (1).
                    ``(B) Preventive services.--A health insurance plan 
                providing for a standard benefit package may limit the 
                amount, scope, and duration of preventive services 
                described in subparagraph (D) of paragraph (1) provided 
                that the amount, scope, and duration of such services 
                are reasonably consistent with recommendations and 
                periodicity schedules developed by appropriate medical 
                experts.
            ``(3) Exceptions.--Paragraph (1) shall not be construed as 
        requiring a plan to include payment for--
                    ``(A) items and services that are not medically 
                necessary;
                    ``(B) routine physical examinations or preventive 
                care (other than care and services described in 
                subparagraph (D) of paragraph (1)); or
                    ``(C) experimental services and procedures.
            ``(4) Limitation on premiums.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), an insurer issuing a health insurance 
                plan providing for a standard benefit package shall not 
                require an employee to pay a monthly premium which 
                exceeds 20 percent of the total monthly premium.
                    ``(B) Part-time employee excepted.--In the case of 
                a part-time employee, an insurer issuing a health 
                insurance plan providing for a standard benefit package 
                may require that such an employee pay a monthly premium 
                that does not exceed 50 percent of the total monthly 
                premium.
            ``(5) Limitation on deductibles.--
                    ``(A) In general.--Except as permitted under 
                subparagraph (B), a health insurance plan providing for 
                a standard benefit package shall not provide a 
                deductible amount for benefits provided in any plan 
                year that exceeds--
                            ``(i) with respect to benefits payable for 
                        items and services furnished to any employee 
                        with no family member enrolled under the plan, 
                        for a plan year beginning in--
                                    ``(I) a calendar year prior to 
                                1995, $400; or
                                    ``(II) for a subsequent calendar 
                                year, the limitation specified in this 
                                clause for the previous calendar year 
                                increased by the percentage increase in 
                                the consumer price index for all urban 
                                consumers (United States city average, 
                                as published by the Bureau of Labor 
                                Statistics) for the 12-month period 
                                ending on September 30 of the preceding 
                                calendar year; and
                            ``(ii) with respect to benefits payable for 
                        items and services furnished to any employee 
                        with a family member enrolled under the 
                        standard benefit package plan, for a plan year 
                        beginning in--
                                    ``(I) a calendar year prior to 
                                1995, $400 per family member and $700 
                                per family; or
                                    ``(II) for a subsequent calendar 
                                year, the limitation specified in this 
                                clause for the previous calendar year 
                                increased by the percentage increase in 
                                the consumer price index for all urban 
                                consumers (United States city average, 
                                as published by the Bureau of Labor 
                                Statistics) for the 12-month period 
                                ending on September 30 of the preceding 
                                calendar year.
                If the limitation computed under clause (i)(II) or 
                (ii)(II) is not a multiple of $10, it shall be rounded 
                to the next highest multiple of $10.
                    ``(B) Wage-related deductible.--A health insurance 
                plan may provide for any other deductible amount 
                instead of the limitations under--
                            ``(i) subparagraph (A)(i), if such amount 
                        does not exceed (on an annualized basis) 1 
                        percent of the total wages paid to the employee 
                        in the plan year; or
                            ``(ii) subparagraph (A)(ii), if such amount 
                        does not exceed (on an annualized basis) 1 
                        percent per family member or 2 percent per 
                        family of the total wages paid to the employee 
                        in the plan year.
            ``(6) Limitation on copayments and coinsurance.--
                    ``(A) In general.--Subject to subparagraphs (B) 
                through (D), a health insurance plan providing for a 
                standard health benefit package may not require the 
                payment of any copayment or coinsurance for an item or 
                service for which coverage is required under this 
                section--
                            ``(i) in an amount that exceeds 20 percent 
                        of the amount payable for the item or service 
                        under the plan; or
                            ``(ii) after an employee and family covered 
                        under the plan have incurred out-of-pocket 
                        expenses under the plan that are equal to the 
                        out-of-pocket limit (as defined in subparagraph 
                        (E)(ii)) for a plan year.
                    ``(B) Exception for managed care plans.--A health 
                insurance plan that is a managed care plan may require 
                payments in excess of the amount permitted under 
                subparagraph (A) in the case of items and services 
                furnished by nonparticipating providers.
                    ``(C) Exception for improper utilization.--A health 
                insurance plan may provide for copayment or coinsurance 
                in excess of the amount permitted under subparagraph 
                (A) for any item or service that an individual obtains 
                without complying with procedures established by a 
                managed care plan or under a utilization program to 
                ensure the efficient and appropriate utilization of 
                covered services.
                    ``(D) Exceptions for mental health care.--In the 
                case of care described in paragraph (1)(E)(ii), a 
                health insurance plan shall not require payment of any 
                copayment or coinsurance for an item or service for 
                which coverage is required by this part in an amount 
                that exceeds 50 percent of the amount payable for the 
                item or service.
            ``(7) Limit on out-of-pocket expenses.--
                    ``(A) Out-of-pocket expenses defined.--As used in 
                this section, the term `out-of-pocket expenses' means, 
                with respect to an employee in a plan year, amounts 
                payable under the plan as deductibles and coinsurance 
                with respect to items and services provided under the 
                plan and furnished in the plan year on behalf of the 
                employee and family covered under the plan.
                    ``(B) Out-of-pocket limit defined.--As used in this 
                section and except as provided in subparagraph (C), the 
                term `out-of-pocket limit' means for a plan year 
                beginning in--
                            ``(i) a calendar year prior to 1995, 
                        $3,000; or
                            ``(ii) for a subsequent calendar year, the 
                        limit specified in this subparagraph for the 
                        previous calendar year increased by the 
                        percentage increase in the consumer price index 
                        for all urban consumers (United States city 
                        average, as published by the Bureau of Labor 
                        Statistics) for the 12-month period ending on 
                        September 30 of the preceding calendar year.
                If the limit computed under clause (ii) is not a 
                multiple of $10, it shall be rounded to the next 
                highest multiple of $10.
                    ``(C) Alternative out-of-pocket limit.--A health 
                insurance plan may provide for an out-of-pocket limit 
                other than that defined in subparagraph (B) if, for a 
                plan year with respect to an employee and the family of 
                the employee, the limit does not exceed (on an 
                annualized basis) 10 percent of the total wages paid to 
                the employee in the plan year.
            ``(8) Limited preemption of state mandated benefits.--No 
        State law or regulation in effect in a State that requires 
        health insurance plans offered to small employers in the State 
        to include specified items and services other than those 
        specified by this subsection shall apply with respect to a 
        health insurance plan providing for a standard benefit package 
        offered by an insurer to a small employer. A State law or 
        regulation requiring the coverage of newborns, adopted children 
        or other specified categories of dependents shall continue to 
        apply.
    ``(c) Basic Benefits Package.--
            ``(1) In general.--A health insurance plan providing for a 
        basic benefit package shall be limited to payment for--
                    ``(A) inpatient and outpatient hospital care, 
                including emergency services;
                    ``(B) inpatient and outpatient physicians' 
                services;
                    ``(C) diagnostic tests; and
                    ``(D) preventive services (which may include one or 
                more of the following services)--
                            ``(i) prenatal care and well-baby care 
                        provided to children who are 1 year of age or 
                        younger;
                            ``(ii) well-child care;
                            ``(iii) Pap smears;
                            ``(iv) mammograms; and
                            ``(v) colorectal screening services.
        Nothing in this paragraph shall prohibit a basic health benefit 
        package from including coverage for treatment of a mental 
        disorder.
            ``(2) Cost-sharing.--Each health insurance plan providing 
        for the basic benefit package issued to a small employer by an 
        insurer may impose premiums, deductibles, copayments, or other 
        cost-sharing on enrollees of such plan.
            ``(3) Out-of-pocket limit.--Each health insurance plan 
        providing for a basic benefit package shall provide for a limit 
        on out-of-pocket expenses.
            ``(4) Limited preemption of state mandated benefits.--No 
        State law or regulation in effect in a State that requires 
        health insurance plans offered to small employers in the State 
        to include specified items and services other than those 
        described in this subsection shall apply with respect to a 
        health insurance plan providing for a basic benefit package 
        offered by an insurer to a small employer. A State law or 
        regulation requiring the coverage of newborns, adopted children 
        or other specified categories of dependents shall continue to 
        apply.''.

             PART II--TAX PENALTY ON NONCOMPLYING INSURERS

SEC. 221. EXCISE TAX ON PREMIUMS RECEIVED ON HEALTH INSURANCE POLICIES 
              WHICH DO NOT MEET CERTAIN REQUIREMENTS.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to taxes on group health plans) is amended by adding at the 
end thereof the following new section:

``SEC. 5000A. FAILURE TO SATISFY CERTAIN STANDARDS FOR HEALTH 
              INSURANCE.

    ``(a) General Rule.--In the case of any person issuing a health 
insurance plan to a small employer, there is hereby imposed a tax on 
the failure of such person to meet at any time during any taxable year 
the applicable requirements of title XXI of the Social Security Act. 
The Secretary of Health and Human Services shall determine whether any 
person meets the requirements of such title.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of tax imposed by subsection 
        (a) by reason of 1 or more failures during a taxable year shall 
        be equal to 25 percent of the gross premiums received during 
        such taxable year with respect to all health insurance plans 
        issued to a small employer by the person on whom such tax is 
        imposed.
            ``(2) Gross premiums.--For purposes of paragraph (1), gross 
        premiums shall include any consideration received with respect 
        to any accident and health insurance contract.
            ``(3) Controlled groups.--For purposes of paragraph (1)--
                    ``(A) Controlled group of corporations.--All 
                corporations which are members of the same controlled 
                group of corporations shall be treated as 1 person. For 
                purposes of the preceding sentence, the term 
                `controlled group of corporations' has the meaning 
                given to such term by section 1563(a), except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1), and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and 
                        (e)(3)(C) of section 1563.
                    ``(B) Partnerships, proprietorships, etc., which 
                are under common control.--Under regulations prescribed 
                by the Secretary, all trades or business (whether or 
                not incorporated) which are under common control shall 
                be treated as 1 person. The regulations prescribed 
                under this subparagraph shall be based on principles 
                similar to the principles which apply in the case of 
                subparagraph (A).
    ``(c) Limitation on Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) with respect to any failure for which it is 
        established to the satisfaction of the Secretary that the 
        person on whom the tax is imposed did not know, and exercising 
        reasonable diligence would not have known, that such failure 
        existed.
            ``(2) Tax not to apply where failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) with respect 
        to any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the 1st date any of the persons on 
                whom the tax is imposed knew, or exercising reasonable 
                diligence would have known, that such failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Definitions.--For purposes of this section:
            ``(1) Health insurance plan.--The term `health insurance 
        plan' means any hospital or medical service policy or 
        certificate, hospital or medical service plan contract, health 
        maintenance organization group contract, or a multiple employer 
        welfare arrangement, but does not include--
                    ``(A) a self-insured group health plan;
                    ``(B) a self-insured multiemployer group health 
                plan; or
                    ``(C) any of the following:
                            ``(i) accident only, dental only, vision 
                        only, disability only, or long-term care only 
                        insurance,
                            ``(ii) coverage issued as a supplement to 
                        liability insurance,
                            ``(iii) medicare supplemental insurance as 
                        defined in section 1882(g)(1),
                            ``(iv) workmen's compensation or similar 
                        insurance, or
                            ``(v) automobile medical-payment insurance.
        In the case of a multiple employer welfare arrangement that is 
        fully insured, this Act shall only apply to the insurer of the 
        arrangement.
            ``(2) Small employer.--The term `small employer' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 101 eligible employees on a 
        typical business day. For the purposes of this paragraph, the 
        term `employee' includes a self-employed individual.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 30 hours of service per 
        week for that employer.
            ``(4) Person.--The term `person' means any person that 
        offers a health insurance plan to a small employer, including a 
        licensed insurance company, a prepaid hospital or medical 
        service plan, a health maintenance organization, or in States 
        which have distinct insurance licensure requirements, a 
        multiple employer welfare arrangement.''.
    (b) Nondeductibility of Tax.--Paragraph (6) of section 275(a) of 
the Internal Revenue Code of 1986 (relating to nondeductibility of 
certain taxes) is amended by inserting ``47,'' after ``46,''.
    (c) Clerical Amendments.--The table of sections for such chapter 47 
of the Internal Revenue Code of 1986 is amended by adding at the end 
thereof the following new item:
                              ``Sec. 5000A. Failure to satisfy certain 
                                        standards for health 
                                        insurance.''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (c) shall take effect on the date of the enactment of this Act.
            (2) Nondeductibility of tax.--The amendment made by 
        subsection (b) shall apply to taxable years beginning after 
        December 31, 1993.

                     PART III--STUDIES AND REPORTS

SEC. 231. GAO STUDY AND REPORT ON RATING REQUIREMENTS AND BENEFIT 
              PACKAGES FOR SMALL GROUP HEALTH INSURANCE.

    (a) In General.--The Comptroller General of the United States shall 
study and report to the Congress by no later than January 1, 1996, on--
            (1) the impact of the standards for rating practices for 
        small group health insurance established under section 2112 of 
        the Social Security Act and the requirements for benefit 
        packages established under section 2113 of such Act on the 
        availability and price of insurance offered to small employers, 
        differences in available benefit packages, the number of small 
        employers choosing standard or basic packages, and the impact 
        of the standards on the number of small employers offering 
        health insurance to employees through a self-funded employer 
        welfare benefit plan; and
            (2) differences in State laws and regulations affecting the 
        availability and price of health insurance plans sold to 
        individuals and the impact of such laws and regulations, 
        including the extension of requirements for health insurance 
        plans sold to small employers in the State to individual health 
        insurance and the establishment of State risk pools for 
        individual health insurance.
    (b) Recommendations.--The Comptroller General shall include in the 
report to Congress under this section recommendations with respect to 
adjusting rating standards under section 2112 of the Social Security 
Act--
            (1) to eliminate variation in premiums charged to small 
        employers resulting from adjustments for such factors as claims 
        experience and health status, and
            (2) to eliminate variation in premiums associated with age, 
        sex, and other demographic factors.

  Subtitle C--Improvements in Portability of Private Health Insurance

SEC. 241. EXCISE TAX IMPOSED ON FAILURE TO PROVIDE FOR PREEXISTING 
              CONDITION.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to taxes on group health plans), as amended by section 221, 
is amended by adding at the end thereof the following new section:

``SEC. 5000B. FAILURE TO SATISFY PREEXISTING CONDITION REQUIREMENTS OF 
              GROUP HEALTH PLANS.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of--
            ``(1) a group health plan to meet the requirements of 
        subsection (e), or
            ``(2) any person to meet the requirements of subsection 
        (f),
with respect to any covered individual.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to a covered 
        individual shall be $100 for each day in the noncompliance 
        period with respect to such failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period--
                    ``(A) beginning on the date such failure first 
                occurs, and
                    ``(B) ending on the date such failure is corrected.
            ``(3) Correction.--A failure of a group health plan to meet 
        the requirements of subsection (e) with respect to any covered 
        individual shall be treated as corrected if--
                    ``(A) such failure is retroactively undone to the 
                extent possible, and
                    ``(B) the covered individual is placed in a 
                financial position which is as good as such individual 
                would have been in had such failure not occurred.
        For purposes of applying subparagraph (B), the covered 
        individual shall be treated as if the individual had elected 
        the most favorable coverage in light of the expenses incurred 
        since the failure first occurred.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that none of 
        the persons referred to in subsection (d) knew, or exercising 
        reasonable diligence would have known, that such failure 
        existed.
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the first date any of the persons 
                referred to in subsection (d) knew, or exercising 
                reasonable diligence would have known, that such 
                failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Liability for Tax.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the following shall be liable for the tax imposed 
        by subsection (a) on a failure:
                    ``(A) In the case of a group health plan other than 
                a self-insured group health plan, the issuer.
                    ``(B)(i) In the case of a self-insured group health 
                plan other than a multiemployer group health plan, the 
                employer.
                    ``(ii) In the case of a self-insured multiemployer 
                group health plan, the plan.
                    ``(C) Each person who is responsible (other than in 
                a capacity as an employee) for administering or 
                providing benefits under the group health plan, health 
                insurance plan, or other health benefit arrangement 
                (including a self-insured plan) and whose act or 
                failure to act caused (in whole or in part) the 
                failure.
            ``(2) Special rules for persons described in paragraph 
        (1)(c).--A person described in subparagraph (C) (and not in 
        subparagraphs (A) and (B)) of paragraph (1) shall be liable for 
        the tax imposed by subsection (a) on any failure only if such 
        person assumed (under a legally enforceable written agreement) 
        responsibility for the performance of the act to which the 
        failure relates.
    ``(e) No Discrimination Based on Health Status for Certain 
Services.--
            ``(1) In general.--Except as provided under paragraph (2), 
        group health plans may not deny, limit, or condition the 
        coverage under (or benefits of) the plan based on the health 
        status, claims experience, receipt of health care, medical 
        history, or lack of evidence of insurability, of an individual.
            ``(2) Treatment of preexisting condition exclusions for all 
        services.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, group health plans may 
                exclude coverage with respect to services related to 
                treatment of a preexisting condition, but the period of 
                such exclusion may not exceed 6 months. The exclusion 
                of coverage shall not apply to services furnished to 
                newborns.
                    ``(B)  Crediting of previous coverage.--
                            ``(i) In general.--A group health plan 
                        shall provide that if an individual under such 
                        plan is in a period of continuous coverage (as 
                        defined in clause (ii)(I)) with respect to 
                        particular services as of the date of initial 
                        coverage under such plan (determined without 
                        regard to any waiting period under such plan), 
                        any period of exclusion of coverage with 
                        respect to a preexisting condition for such 
                        services or type of services shall be reduced 
                        by 1 month for each month in the period of 
                        continuous coverage without regard to any 
                        waiting period.
                            ``(ii) Definitions.--As used in this 
                        subparagraph:
                                    ``(I) Period of continuous 
                                coverage.--The term `period of 
                                continuous coverage' means, with 
                                respect to particular services, the 
                                period beginning on the date an 
                                individual is enrolled under a health 
                                insurance plan, title XVIII or XIX of 
                                the Social Security Act, or other 
                                health benefit arrangement (including a 
                                self-insured plan) which provides 
                                benefits with respect to such services 
                                and ends on the date the individual is 
                                not so enrolled for a continuous period 
                                of more than 3 months.
                                    ``(II) Preexisting condition.--The 
                                term `preexisting condition' means, 
                                with respect to coverage under a group 
                                health plan, a condition which has been 
                                diagnosed or treated during the 3-month 
                                period ending on the day before the 
                                first date of such coverage without 
                                regard to any waiting period.
    ``(f) Disclosure of Coverage, Etc.--Any person who has provided 
coverage (other than under title XVIII or XIX of the Social Security 
Act) during a period of continuous coverage (as defined in subsection 
(e)(2)(B)(ii)(I)) with respect to a covered individual shall disclose, 
upon the request of a group health plan subject to the requirements of 
subsection (e), the coverage provided the covered individual, the 
period of such coverage, and the benefits provided under such coverage.
    ``(g) Definitions.--For purposes of this section--
            ``(1) Covered individual.--The term `covered individual' 
        means--
                    ``(A) an individual who is (or will be) provided 
                coverage under a group health plan by virtue of the 
                performance of services by the individual for 1 or more 
                persons maintaining the plan (including as an employee 
                defined in section 401(c)(1)), and
                    ``(B) the spouse or any dependent child of such 
                individual.
            ``(2) Group health plan.--The term `group health plan' has 
        the meaning given such term by section 5000(b)(1).''.
    (b) Clerical Amendment.--The table of sections for such chapter 47 
of the Internal Revenue Code of 1986 is amended by adding at the end 
thereof the following new item:
                              ``Sec. 5000B. Failure to satisfy 
                                        preexisting condition 
                                        requirements of group health 
                                        plans.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1994.

                Subtitle D--Health Care Cost Containment

SEC. 251. FEDERAL CERTIFICATION OF MANAGED CARE PLANS AND UTILIZATION 
              REVIEW PROGRAMS.

    Title XXI of the Social Security Act, as added by section 211, is 
amended by adding at the end the following part:

         ``Part C--Federal Certification of Managed Care Plans

 ``federal certification of managed care plans and utilization review 
                                programs

    ``Sec. 2114. (a)  Voluntary Certification Process.--
            ``(1) Certification.--The Secretary shall establish a 
        process for certification of managed care plans meeting the 
        requirements of subsection (b)(1) and of utilization review 
        programs meeting the requirements of subsection (b)(2).
            ``(2) Qualified managed care plan.--For purposes of this 
        title, the term `qualified managed care plan' means a managed 
        care plan that the Secretary certifies, upon application by the 
        program, as meeting the requirements of this section.
            ``(3) Qualified utilization review program.--For purposes 
        of this title, the term `qualified utilization review program' 
        means a utilization review program that the Secretary 
        certifies, upon application by the program, as meeting the 
        requirements of this section.
            ``(4) Utilization review program.--For purposes of this 
        title, the term `utilization review program' means a system of 
        reviewing the medical necessity, appropriateness, or quality of 
        health care services and supplies covered under a health 
        insurance plan or a managed care plan using specified 
        guidelines. Such a system may include preadmission 
        certification, the application of practice guidelines, 
        continued stay review, discharge planning, preauthorization of 
        ambulatory procedures, and retrospective review.
            ``(5) Managed care plan.--
                    ``(A) In general.--For purposes of this title the 
                term `managed care plan' means a plan operated by a 
                managed care entity as described in subparagraph (B), 
                that arranges for the financing and delivery of health 
                care services to persons covered under such plan 
                through--
                            ``(i) arrangements with participating 
                        providers to furnish health care services;
                            ``(ii) explicit standards for the selection 
                        of participating providers;
                            ``(iii) organizational arrangements for 
                        ongoing quality assurance and utilization 
                        review programs; and
                            ``(iv) financial incentives for persons 
                        covered under the plan to use the participating 
                        providers and procedures provided for by the 
                        plan.
                    ``(B) Managed care entity defined.--For purposes of 
                this title, a managed care entity includes a licensed 
                insurance company, hospital or medical service plan, 
                health maintenance organization, an employer, or 
                employee organization, or a managed care contractor as 
                described in subparagraph (C), that operates a managed 
                care plan.
                    ``(C) Managed care contractor defined.--For 
                purposes of this title, a managed care contractor means 
                a person that--
                            ``(i) establishes, operates or maintains a 
                        network of participating providers;
                            ``(ii) conducts or arranges for utilization 
                        review activities; and
                            ``(iii) contracts with an insurance 
                        company, a hospital or medical service plan, an 
                        employer, an employee organization, or any 
                        other entity providing coverage for health care 
                        services to operate a managed care plan.
            ``(6) Participating provider.--The term `participating 
        provider' means a physician, hospital, pharmacy, laboratory, or 
        other appropriately licensed provider of health care services 
        or supplies, that has entered into an agreement with a managed 
        care entity to provide such services or supplies to a patient 
        covered under a managed care plan.
            ``(7) Review and recertification.--The Secretary shall 
        establish procedures for the periodic review and 
        recertification of qualified managed care plans and qualified 
        utilization review programs.
            ``(8) Termination of certification.--The Secretary shall 
        terminate the certification of a qualified managed care plan or 
        a qualified utilization review program if the Secretary 
        determines that such plan or program no longer meets the 
        applicable requirements for certification. Before effecting a 
        termination, the Secretary shall provide the plan notice and 
        opportunity for a hearing on the proposed termination.
            ``(9) Certification through alternative requirements.--
                    ``(A) Certain organizations recognized.--An 
                eligible organization as defined in section 1876(b), 
                shall be deemed to meet the requirements of subsection 
                (b) for certification as a qualified managed care plan.
                    ``(B) Recognition of accreditation.--If the 
                Secretary finds that a State licensure program or a 
                national accreditation body establishes a requirement 
                or requirements for accreditation of a managed care 
                plan or utilization review program that are at least 
                equivalent to a requirement or requirements established 
                under subsection (b), the Secretary may, to the extent 
                he finds it appropriate, treat a managed care plan or a 
                utilization review program thus accredited as meeting 
                the requirement or requirements of subsection (b) with 
                respect to which he made such finding.
    ``(b) Requirements for Certification.--
            ``(1) Managed care plans.--The Secretary, in consultation 
        with the Health Care Cost Commission, shall establish Federal 
        standards for the certification of qualified managed care 
        plans, including standards related to--
                    ``(A) the qualification and selection of 
                participating providers;
                    ``(B) the number, type, and distribution of 
                participating providers necessary to assure that all 
                covered items and services are available and accessible 
                to persons covered under a managed care plan in each 
                service area;
                    ``(C) the establishment and operation of an ongoing 
                quality assurance program, which includes procedures 
                for--
                            ``(i) evaluating the quality and 
                        appropriateness of care;
                            ``(ii) using the results of quality 
                        evaluations to promote and improve quality of 
                        care; and
                            ``(iii) resolving complaints from enrollees 
                        regarding quality and appropriateness of care;
                    ``(D) the provision of benefits for covered items 
                and services not furnished by participating providers 
                if the items and services are medically necessary and 
                immediately required because of an unforeseen illness, 
                injury, or condition;
                    ``(E) the qualifications of individuals performing 
                utilization review activities;
                    ``(F) procedures and criteria for evaluating the 
                necessity and appropriateness of health care services;
                    ``(G) the timeliness with which utilization review 
                determinations are to be made;
                    ``(H) procedures for the operation of an appeals 
                process which provides a fair opportunity for 
                individuals adversely affected by a managed care review 
                determination to have such determination reviewed;
                    ``(I) procedures for ensuring that all applicable 
                Federal and State laws designed to protect the 
                confidentiality of individual medical records are 
                followed; and
                    ``(J) payment of providers for the expenses 
                associated with responding to requests for information 
                needed to conduct a utilization review.
            ``(2) Qualified utilization review programs.--The 
        Secretary, in consultation with the Health Care Cost 
        Commission, shall establish Federal standards for the 
        certification of qualified utilization review programs, 
        including standards related to--
                    ``(A) the qualifications of individuals performing 
                utilization review activities;
                    ``(B) procedures and criteria for evaluating the 
                necessity and appropriateness of health care services;
                    ``(C) the timeliness with which utilization review 
                determinations are to be made;
                    ``(D) procedures for the operation of an appeals 
                process which provides a fair opportunity for 
                individuals adversely affected by a utilization review 
                determination to have such determination reviewed;
                    ``(E) procedures for ensuring that all applicable 
                Federal and State laws designed to protect the 
                confidentiality of individual medical records are 
                followed; and
                    ``(F) payment of providers for the expenses 
                associated with responding to requests for information 
                needed to conduct a utilization review.
            ``(3) Application of standards.--
                    ``(A) In general.--Standards shall first be 
                established under this subsection by not later than 24 
                months after the date of the enactment of this section. 
                In developing standards under this subsection, the 
                Secretary shall--
                            ``(i) review standards in use by national 
                        private accreditation organizations and State 
                        licensure programs;
                            ``(ii) recognize, to the extent 
                        appropriate, differences in the organizational 
                        structure and operation of managed care plans; 
                        and
                            ``(iii) establish procedures for the timely 
                        consideration of applications for certification 
                        by managed care plans and utilization review 
                        programs.
                    ``(B) Revision of standards.--The Secretary shall 
                periodically review the standards established under 
                this subsection, taking into account recommendations by 
                the Health Care Cost Commission, and may revise the 
                standards from time to time to assure that such 
                standards continue to reflect appropriate policies and 
                practices for the cost-effective and medically 
                appropriate use of services within managed care plans 
                and utilization review programs.
    ``(c) Limitation on State Restrictions on Qualified Managed Care 
Plans and Utilization Review Programs.--
            ``(1) In general.--No requirement of any State law or 
        regulation shall--
                    ``(A) prohibit or limit a qualified managed care 
                plan from including financial incentives for covered 
                persons to use the services of participating providers;
                    ``(B) prohibit or limit a qualified managed care 
                plan from restricting coverage of services to those--
                            ``(i) provided by a participating provider; 
                        or
                            ``(ii) authorized by a designated 
                        participating provider;
                    ``(C) subject to paragraph (2)--
                            ``(i) restrict the amount of payment made 
                        by a qualified managed care plan to 
                        participating providers for items and services 
                        provided to covered persons; or
                            ``(ii) restrict the ability of a qualified 
                        managed care plan to pay participating 
                        providers for items and services provided to 
                        covered persons on a per capita basis;
                    ``(D) prohibit or limit a qualified managed care 
                plan from restricting the location, number, type, or 
                professional qualifications of participating providers;
                    ``(E) prohibit or limit a qualified managed care 
                plan from requiring that items and services be 
                authorized by a primary care physician selected by the 
                covered person from a list of available participating 
                providers;
                    ``(F) prohibit or limit the use of utilization 
                review procedures or criteria by a qualified 
                utilization review program or a qualified managed care 
                plan;
                    ``(G) require a qualified utilization review 
                program or a qualified managed care plan to make public 
                utilization review procedures or criteria;
                    ``(H) prohibit or limit a qualified utilization 
                review program or a qualified managed care plan from 
                determining the location or hours of operation of a 
                utilization review, provided that emergency services 
                furnished during the hours in which the utilization 
                review program is not open are not subject to 
                utilization review;
                    ``(I) require a qualified utilization review 
                program or a qualified managed care plan to pay 
                providers for the expenses associated with responding 
                to requests for information needed to conduct 
                utilization review, other than as provided in standards 
                for qualified managed care plans and qualified 
                utilization review programs;
                    ``(J) restrict the amount of payment made to a 
                qualified utilization review program or a qualified 
                managed care plan for the conduct of utilization 
                review;
                    ``(K) restrict access by a qualified utilization 
                review program or a qualified managed care plan to 
                medical information or personnel required to conduct 
                utilization review;
                    ``(L) define utilization review as the practice of 
                medicine or another health care profession; or
                    ``(M) require that utilization review be conducted 
                (i) by a resident of the State in which the treatment 
                is to be offered or by an individual licensed in such 
                State, or (ii) by a physician in any particular 
                specialty or with any board certified specialty of the 
                same medical specialty as the provider whose services 
                are being rendered.
            ``(2) Exceptions to certain requirements.--
                    ``(A) Subparagraph (c).--Subparagraph (C) shall not 
                apply where the amount of payments with respect to a 
                block of services or providers is established under a 
                statewide system applicable to all non-Federal payors 
                with respect to such services or providers.
                    ``(B) Subparagraphs (l) and (m).--Nothing in 
                subparagraphs (L) or (M) shall be construed as 
                prohibiting a State from (i) requiring that utilization 
                review be conducted by a licensed health care 
                professional or (ii) requiring that any appeal from 
                such a review be made by a licensed physician or by a 
                licensed physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                rendered.
            ``(3) Relationship to medicaid program.--Nothing in 
        paragraph (1) shall be construed as prohibiting a State from 
        imposing requirements on managed care plans or utilization 
        review programs that are necessary to conform with the 
        requirements of title XIX of the Social Security Act with 
        respect to services provided to, or with respect to, 
        individuals receiving medical assistance under such title.''.

          TITLE III--HEALTH INSURANCE COSTS FOR SELF-EMPLOYED

SEC. 301. HEALTH INSURANCE COSTS FOR SELF-EMPLOYED.

    (a) Permanent Extension.--Section 162(l) of the Internal Revenue 
Code of 1986 (relating to special rules for health insurance costs of 
self-employed individuals) is amended by striking paragraph (6).
    (b) Increase in Deduction.--Section 162(l)(1) of the Internal 
Revenue Code of 1986 is amended by striking ``25 percent of''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

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