[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 2570 Introduced in Senate (IS)]







108th CONGRESS
  2d Session
                                S. 2570

          Entitled the ``Health Care Assurance Act of 2004''.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                June 23 (legislative day, June 22), 2004

Mr. Specter (for himself and Mr. Harkin) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
          Entitled the ``Health Care Assurance Act of 2004''.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Care 
Assurance Act of 2004''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
       TITLE I--HEALTH CARE INSURANCE COVERAGE FOR THE UNINSURED

      Subtitle A--Small Employer and Individual Purchasing Groups

                     Chapter 1--General Provisions

Sec. 101. Amendments to the Employee Retirement Income Security Act of 
                            1974.
Sec. 102. Amendments to the Public Health Service Act relating to the 
                            group market.
Sec. 103. Amendment to the Public Health Service Act relating to the 
                            individual market.
Sec. 104. Effective date.
                       Chapter 2--Tax Provisions

Sec. 111. Enforcement with respect to health insurance issuers.
Sec. 112. Enforcement with respect to small employers.
Sec. 113. Enforcement by excise tax on qualified associations.
                  Subtitle B--COBRA Portability Reform

Sec. 121. Amendments to COBRA.
            Subtitle C--Providing Coverage for Young Adults

Sec. 131. Grants for young adults health insurance coverage.
            Subtitle D--Low Income Coverage Outreach Program

Sec. 141. Low income coverage outreach program.
 TITLE II--EXPANSION OF THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM 
                          AND FAMILY COVERAGE

Sec. 201. Increase in income eligibility.
Sec. 202. State option to expand coverage to parents and pregnant 
                            women.
            TITLE III--MEDICARE PROGRAM INTEGRITY ACTIVITIES

Sec. 301. Increased funding for the medicare integrity program.
  TITLE IV--REDUCING MEDICAL ERRORS AND INCREASING THE USE OF MEDICAL 
                               TECHNOLOGY

Sec. 401. Medical errors reduction.
Sec. 402. Enhancing investment in cost-effective methods of health 
                            care.
Sec. 403. Increasing the use of medical technology
   TITLE V--IMPROVING HEALTH CARE QUALITY, EFFICIENCY, AND CONSUMER 
                               EDUCATION

Sec. 501. Grants for demonstration projects.
            TITLE VI--PRIMARY AND PREVENTIVE CARE PROVIDERS

Sec. 601. Increased medicare reimbursement for physician assistants, 
                            nurse practitioners, and clinical nurse 
                            specialists.
Sec. 602. Requiring coverage of certain nonphysician providers under 
                            the medicaid program.
Sec. 603. Medical student tutorial program grants.
Sec. 604. General medical practice grants.

       TITLE I--HEALTH CARE INSURANCE COVERAGE FOR THE UNINSURED

      Subtitle A--Small Employer and Individual Purchasing Groups

                     CHAPTER 1--GENERAL PROVISIONS

SEC. 101. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
              1974.

    (a) In General.--Part 7 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1181 et seq.) is 
amended--
            (1) by redesignating subpart C as subpart D; and
            (2) by inserting after subpart B, the following:

            ``Subpart C--General Insurance Coverage Reforms

 ``CHAPTER 1--INCREASED AVAILABILITY AND CONTINUITY OF HEALTH COVERAGE

``SEC. 721. DEFINITION.

    ``As used in this subpart, the term `qualified group health plan' 
means a group health plan, and a health insurance issuer offering group 
health insurance coverage, that is designed to provide standard 
coverage (consistent with section 721A(b)).

``SEC. 721A. ACTUARIAL EQUIVALENCE IN BENEFITS PERMITTED.

    ``(a) Set of Rules of Actuarial Equivalence.--
            ``(1) Initial determination.--The NAIC is requested to 
        submit to the Secretary, within 6 months after the date of the 
        enactment of this subpart, a set of rules which the NAIC 
        determines is sufficient for determining, in the case of any 
        group health plan, or a health insurance issuer offering group 
        health insurance coverage, and for purposes of this section, 
        the actuarial value of the coverage offered by the plan or 
        coverage.
            ``(2) Certification.--If the Secretary determines that the 
        NAIC has submitted a set of rules that comply with the 
        requirements of paragraph (1), the Secretary shall certify such 
        set of rules for use under this subpart. If the Secretary 
        determines that such a set of rules has not been submitted or 
        does not comply with such requirements, the Secretary shall 
        promptly establish a set of rules that meets such requirements.
    ``(b) Standard Coverage.--
            ``(1) In general.--A group health plan, and a health 
        insurance issuer offering group health insurance coverage, 
        shall be considered to provide standard coverage consistent 
        with this subsection if the benefits are determined, in 
accordance with the set of actuarial equivalence rules certified under 
subsection (a), to have a value that is within 5 percentage points of 
the target actuarial value for standard coverage established under 
paragraph (2).
            ``(2) Initial determination of target actuarial value for 
        standard coverage.--
                    ``(A) Initial determination.--
                            ``(i) In general.--The NAIC is requested to 
                        submit to the Secretary, within 6 months after 
                        the date of the enactment of this subpart, a 
                        target actuarial value for standard coverage 
                        equal to the average actuarial value of the 
                        coverage described in clause (ii). No specific 
                        procedure or treatment, or classes thereof, is 
                        required to be considered in such determination 
                        by this subpart or through regulations. The 
                        determination of such value shall be based on a 
                        representative distribution of the population 
                        of eligible employees offered such coverage and 
                        a single set of standardized utilization and 
                        cost factors.
                            ``(ii) Coverage described.--The coverage 
                        described in this clause is coverage for 
                        medically necessary and appropriate services 
                        consisting of medical and surgical services, 
                        medical equipment, preventive services, and 
                        emergency transportation in frontier areas. No 
                        specific procedure or treatment, or classes 
                        thereof, is required to be covered in such a 
                        plan, by this subpart or through regulations.
                    ``(B) Certification.--If the Secretary determines 
                that the NAIC has submitted a target actuarial value 
                for standard coverage that complies with the 
                requirements of subparagraph (A), the Secretary shall 
                certify such value for use under this chapter. If the 
Secretary determines that a target actuarial value has not been 
submitted or does not comply with the requirements of subparagraph (A), 
the Secretary shall promptly determine a target actuarial value that 
meets such requirements.
    ``(c) Subsequent Revisions.--
            ``(1) NAIC.--The NAIC may submit from time to time to the 
        Secretary revisions of the set of rules of actuarial 
        equivalence and target actuarial values previously established 
        or determined under this section if the NAIC determines that 
        revisions are necessary to take into account changes in the 
        relevant types of health benefits provisions or in demographic 
        conditions which form the basis for the set of rules of 
        actuarial equivalence or the target actuarial values. The 
        provisions of subsection (a)(2) shall apply to such a revision 
        in the same manner as they apply to the initial determination 
        of the set of rules.
            ``(2) Secretary.--The Secretary may by regulation revise 
        the set of rules of actuarial equivalence and target actuarial 
        values from time to time if the Secretary determines such 
        revisions are necessary to take into account changes described 
        in paragraph (1).

``SEC. 721B. ESTABLISHMENT OF PLAN STANDARDS.

    ``(a) Establishment of General Standards.--
            ``(1) Role of naic.--The NAIC is requested to submit to the 
        Secretary, within 9 months after the date of the enactment of 
        this subpart, model regulations that specify standards for 
        making qualified group health plans available to small 
        employers. If the NAIC develops recommended regulations 
        specifying such standards within such period, the Secretary 
        shall review the standards. Such review shall be completed 
        within 60 days after the date the regulations are developed. 
        Such standards shall serve as the standards under this section, 
        with such amendments as the Secretary deems necessary. Such 
        standards shall be nonbinding (except as provided in chapter 
        4).
            ``(2) Contingency.--If the NAIC does not develop such model 
        regulations within the period described in paragraph (1), the 
        Secretary shall specify, within 15 months after the date of the 
        enactment of this subpart, model regulations that specify 
        standards for insurers with regard to making qualified group 
        health plans available to small employers. Such standards shall 
        be nonbinding (except as provided in chapter 4).
            ``(3) Effective date.--The standards specified in the model 
        regulations shall apply to group health plans and health 
        insurance issuers offering group health insurance coverage in a 
        State on or after the respective date the standards are 
        implemented in the State.
    ``(b) No Preemption of State Law.--A State may implement standards 
for group health plans available, and health insurance issuers offering 
group health insurance coverage offered, to small employers that are 
more stringent than the standards under this section, except that a 
State may not implement standards that prevent the offering of at least 
one group health plan that provides standard coverage (as described in 
section 721A(b)).

``SEC. 721C. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

    ``(a) Standard Premiums With Respect to Community-Rated Eligible 
Employees and Eligible Individuals.--
            ``(1) In general.--Each group health plan offered, and each 
        health insurance issuer offering group health insurance 
        coverage, to a small employer shall establish within each 
        community rating area in which the plan is to be offered, a 
        standard premium for enrollment of eligible employees and 
        eligible individuals for the standard coverage (as defined 
        under section 721A(b)).
            ``(2) Establishment of community rating area.--
                    ``(A) In general.--Not later than January 1, 2005, 
                each State shall, in accordance with subparagraph (B), 
                provide for the division of the State into 1 or more 
                community rating areas. The State may revise the 
                boundaries of such areas from time to time consistent 
                with this paragraph.
                    ``(B) Geographic area variations.--For purposes of 
                subparagraph (A), a State--
                            ``(i) may not identify an area that divides 
                        a 3-digit zip code, a county, or all portions 
                        of a metropolitan statistical area;
                            ``(ii) shall not permit premium rates for 
                        coverage offered in a portion of an interstate 
                        metropolitan statistical area to vary based on 
                        the State in which the coverage is offered; and
                            ``(iii) may, upon agreement with one or 
                        more adjacent States, identify multi-State 
                        geographic areas consistent with clauses (i) 
                        and (ii).
            ``(3) Eligible individuals.--For purposes of this section, 
        the term `eligible individuals' includes certain uninsured 
        individuals (as described in section 721G).
    ``(b) Uniform Premiums Within Community Rating Areas.--
            ``(1) In general.--Subject to paragraphs (2) and (3), the 
        standard premium for each group health plan to which this 
        section applies shall be the same, but shall not include the 
        costs of premium processing and enrollment that may vary 
        depending on whether the method of enrollment is through a 
        qualified small employer purchasing group, through a small 
        employer, or through a broker.
            ``(2) Application to enrollees.--
                    ``(A) In general.--The premium charged for coverage 
                in a group health plan which covers eligible employees 
                and eligible individuals shall be the product of--
                            ``(i) the standard premium (established 
                        under paragraph (1));
                            ``(ii) in the case of enrollment other than 
                        individual enrollment, the family adjustment 
                        factor specified under subparagraph (B); and
                            ``(iii) the age adjustment factor 
                        (specified under subparagraph (C)).
                    ``(B) Family adjustment factor.--
                            ``(i) In general.--The standards 
                        established under section 721B shall specify 
                        family adjustment factors that reflect the 
                        relative actuarial costs of benefit packages 
                        based on family classes of enrollment (as 
                        compared with such costs for individual 
                        enrollment).
                            ``(ii) Classes of enrollment.--For purposes 
                        of this subpart, there are 4 classes of 
                        enrollment:
                                    ``(I) Coverage only of an 
                                individual (referred to in this subpart 
                                as the `individual' enrollment or class 
                                of enrollment).
                                    ``(II) Coverage of a married couple 
                                without children (referred to in this 
                                subpart as the `couple-only' enrollment 
                                or class of enrollment).
                                    ``(III) Coverage of an individual 
                                and one or more children (referred to 
                                in this subpart as the `single parent' 
                                enrollment or class of enrollment).
                                    ``(IV) Coverage of a married couple 
                                and one or more children (referred to 
                                in this subpart as the `dual parent' 
                                enrollment or class of enrollment).
                            ``(iii) References to family and couple 
                        classes of enrollment.--In this subpart:
                                    ``(I) Family.--The terms `family 
                                enrollment' and `family class of 
                                enrollment' refer to enrollment in a 
                                class of enrollment described in any 
                                subclause of clause (ii) (other than 
                                subclause (I)).
                                    ``(II) Couple.--The term `couple 
                                class of enrollment' refers to 
                                enrollment in a class of enrollment 
                                described in subclause (II) or (IV) of 
                                clause (ii).
                            ``(iv) Spouse; married; couple.--
                                    ``(I) In general.--In this subpart, 
                                the terms `spouse' and `married' mean, 
                                with respect to an individual, another 
                                individual who is the spouse of, or is 
                                married to, the individual, as 
                                determined under applicable State law.
                                    ``(II) Couple.--The term `couple' 
                                means an individual and the 
                                individual's spouse.
                    ``(C) Age adjustment factor.--The Secretary, in 
                consultation with the NAIC, shall specify uniform age 
                categories and maximum rating increments for age 
                adjustment factors that reflect the relative actuarial 
                costs of benefit packages among enrollees. For 
                individuals who have attained age 18 but not age 65, 
                the highest age adjustment factor may not exceed 3 
                times the lowest age adjustment factor.
            ``(3) Administrative charges.--
                    ``(A) In general.--In accordance with the standards 
                established under section 721B, a group health plan 
                which covers eligible employees and eligible 
                individuals may add a separately-stated administrative 
                charge which is based on identifiable differences in 
                legitimate administrative costs and which is applied 
                uniformly for individuals enrolling through the same 
                method of enrollment. Nothing in this subparagraph may 
                be construed as preventing a qualified small employer 
                purchasing group from negotiating a unique 
                administrative charge with an insurer for a group 
                health plan.
                    ``(B) Enrollment through a qualified small employer 
                purchasing group.--In the case of an administrative 
                charge under subparagraph (A) for enrollment through a 
                qualified small employer purchasing group, such charge 
                may not exceed the lowest charge of such plan for 
                enrollment other than through a qualified small 
employer purchasing group in such area.
    ``(c) Treatment of Negotiated Rate as Community Rate.--
Notwithstanding any other provision of this section, a group health 
plan and a health insurance issuer offering health insurance coverage 
that negotiates a premium rate (exclusive of any administrative charge 
described in subsection (b)(3)) with a qualified small employer 
purchasing group in a community rating area shall charge the same 
premium rate to all eligible employees and eligible individuals.

``SEC. 721D. RATING PRACTICES AND PAYMENT OF PREMIUMS.

    ``(a) Full Disclosure of Rating Practices.--
            ``(1) In general.--A group health plan and a health 
        insurance issuer offering health insurance coverage shall fully 
        disclose rating practices for the plan to the appropriate 
        certifying authority.
            ``(2) Notice on expiration.--A group health plan and a 
        health insurance issuer offering health insurance coverage 
        shall provide for notice of the terms for renewal of a plan at 
        the time of the offering of the plan and at least 90 days 
        before the date of expiration of the plan.
            ``(3) Actuarial certification.--Each group health plan and 
        health insurance issuer offering health insurance coverage 
        shall file annually with the appropriate certifying authority a 
        written statement by a member of the American Academy of 
        Actuaries (or other individual acceptable to such authority) 
        who is not an employee of the group health plan or issuer 
        certifying that, based upon an examination by the individual 
        which includes a review of the appropriate records and of the 
        actuarial assumptions of such plan or insurer and methods used 
        by the plan or insurer in establishing premium rates and 
        administrative charges for group health plans--
                    ``(A) such plan or insurer is in compliance with 
                the applicable provisions of this subpart; and
                    ``(B) the rating methods are actuarially sound.
        Each plan and insurer shall retain a copy of such statement at 
        its principal place of business for examination by any 
        individual.
    ``(b) Payment of Premiums.--
            ``(1) In general.--With respect to a new enrollee in a 
        group health plan, the plan may require advanced payment of an 
        amount equal to the monthly applicable premium for the plan at 
        the time such individual is enrolled.
            ``(2) Notification of failure to receive premium.--If a 
        group health plan or a health insurance issuer offering health 
        insurance coverage fails to receive payment on a premium due 
        with respect to an eligible employee or eligible individual 
        covered under the plan involved, the plan or issuer shall 
        provide notice of such failure to the employee or individual 
        within the 20-day period after the date on which such premium 
        payment was due. A plan or issuer may not terminate the 
        enrollment of an eligible employee or eligible individual 
        unless such employee or individual has been notified of any 
        overdue premiums and has been provided a reasonable opportunity 
        to respond to such notice.

``SEC. 721E. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

    ``(a) Qualified Small Employer Purchasing Groups Described.--
            ``(1) In general.--A qualified small employer purchasing 
        group is an entity that--
                    ``(A) is a nonprofit entity certified under State 
                law;
                    ``(B) has a membership consisting solely of small 
                employers;
                    ``(C) is administered solely under the authority 
                and control of its member employers;
                    ``(D) with respect to each State in which its 
                members are located, consists of not fewer than the 
                number of small employers established by the State as 
                appropriate for such a group;
                    ``(E) offers a program under which qualified group 
                health plans are offered to eligible employees and 
                eligible individuals through its member employers and 
                to certain uninsured individuals in accordance with 
                section 721D; and
                    ``(F) an insurer, agent, broker, or any other 
                individual or entity engaged in the sale of insurance--
                            ``(i) does not form or underwrite; and
                            ``(ii) does not hold or control any right 
                        to vote with respect to.
            ``(2) State certification.--A qualified small employer 
        purchasing group formed under this section shall submit an 
        application to the State for certification. The State shall 
        determine whether to issue a certification and otherwise ensure 
        compliance with the requirements of this subpart.
            ``(3) Special rule.--Notwithstanding paragraph (1)(B), an 
        employer member of a small employer purchasing group that has 
        been certified by the State as meeting the requirements of 
        paragraph (1) may retain its membership in the group if the 
        number of employees of the employer increases such that the 
        employer is no longer a small employer.
    ``(b) Board of Directors.--Each qualified small employer purchasing 
group established under this section shall be governed by a board of 
directors or have active input from an advisory board consisting of 
individuals and businesses participating in the group.
    ``(c) Domiciliary State.--For purposes of this section, a qualified 
small employer purchasing group operating in more than one State shall 
be certified by the State in which the group is domiciled.
    ``(d) Membership.--
            ``(1) In general.--A qualified small employer purchasing 
        group shall accept all small employers and certain uninsured 
        individuals residing within the area served by the group as 
        members if such employers or individuals request such 
        membership.
            ``(2) Voting.--Members of a qualified small employer 
        purchasing group shall have voting rights consistent with the 
        rules established by the State.
    ``(e) Duties of Qualified Small Employer Purchasing Groups.--Each 
qualified small employer purchasing group shall--
            ``(1) enter into agreements with insurers offering 
        qualified group health plans;
            ``(2) enter into agreements with small employers under 
        section 721F;
            ``(3) enroll only eligible employees, eligible individuals, 
        and certain uninsured individuals in qualified group health 
        plans, in accordance with section 721G;
            ``(4) provide enrollee information to the State;
            ``(5) meet the marketing requirements under section 721I; 
        and
            ``(6) carry out other functions provided for under this 
        subpart.
    ``(f) Limitation on Activities.--A qualified small employer 
purchasing group shall not--
            ``(1) perform any activity involving approval or 
        enforcement of payment rates for providers;
            ``(2) perform any activity (other than the reporting of 
        noncompliance) relating to compliance of qualified group health 
        plans with the requirements of this subpart;
            ``(3) assume financial risk in relation to any such health 
        plan; or
            ``(4) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this subpart.
    ``(g) Rules of Construction.--
            ``(1) Establishment not required.--Nothing in this section 
        shall be construed as requiring--
                    ``(A) that a State organize, operate or otherwise 
                establish a qualified small employer purchasing group, 
                or otherwise require the establishment of purchasing 
                groups; and
                    ``(B) that there be only one qualified small 
                employer purchasing group established with respect to a 
                community rating area.
            ``(2) Single organization serving multiple areas and 
        states.--Nothing in this section shall be construed as 
        preventing a single entity from being a qualified small 
        employer purchasing group in more than one community rating 
        area or in more than one State.
            ``(3) Voluntary participation.--Nothing in this section 
        shall be construed as requiring any individual or small 
        employer to purchase a qualified group health plan exclusively 
        through a qualified small employer purchasing group.

``SEC. 721F. AGREEMENTS WITH SMALL EMPLOYERS.

    ``(a) In General.--A qualified small employer purchasing group 
shall offer to enter into an agreement under this section with each 
small employer that employs eligible employees in the area served by 
the group.
    ``(b) Payroll Deduction.--
            ``(1) In general.--Under an agreement under this section 
        between a small employer and a qualified small employer 
        purchasing group, the small employer shall deduct premiums from 
        an eligible employee's wages.
            ``(2) Additional premiums.--If the amount withheld under 
        paragraph (1) is not sufficient to cover the entire cost of the 
        premiums, the eligible employee shall be responsible for paying 
        directly to the qualified small employer purchasing group the 
        difference between the amount of such premiums and the amount 
        withheld.

``SEC. 721G. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE INDIVIDUALS, AND 
              CERTAIN UNINSURED INDIVIDUALS IN QUALIFIED GROUP HEALTH 
              PLANS.

    ``(a) In General.--Each qualified small employer purchasing group 
shall offer--
            ``(1) eligible employees,
            ``(2) eligible individuals, and
            ``(3) certain uninsured individuals,
the opportunity to enroll in any qualified group health plan which has 
an agreement with the qualified small employer purchasing group for the 
community rating area in which such employees and individuals reside.
    ``(b) Uninsured Individuals.--For purposes of this section, an 
individual is described in subsection (a)(3) if such individual is an 
uninsured individual who is not an eligible employee of a small 
employer that is a member of a qualified small employer purchasing 
group or a dependent of such individual.

``SEC. 721H. RECEIPT OF PREMIUMS.

    ``(a) Enrollment Charge.--The amount charged by a qualified small 
employer purchasing group for coverage under a qualified group health 
plan shall be equal to the sum of--
            ``(1) the premium rate offered by such health plan;
            ``(2) the administrative charge for such health plan; and
            ``(3) the purchasing group administrative charge for 
        enrollment of eligible employees, eligible individuals and 
        certain uninsured individuals through the group.
    ``(b) Disclosure of Premium Rates and Administrative Charges.--Each 
qualified small employer purchasing group shall, prior to the time of 
enrollment, disclose to enrollees and other interested parties the 
premium rate for a qualified group health plan, the administrative 
charge for such plan, and the administrative charge of the group, 
separately.

``SEC. 721I. MARKETING ACTIVITIES.

    ``Each qualified small employer purchasing group shall market 
qualified group health plans to members through the entire community 
rating area served by the purchasing group.

``SEC. 721J. GRANTS TO STATES AND QUALIFIED SMALL EMPLOYER PURCHASING 
              GROUPS.

    ``(a) In General.--The Secretary shall award grants to States and 
small employer purchasing groups to assist such States and groups in 
planning, developing, and operating qualified small employer purchasing 
groups.
    ``(b) Application Requirements.--To be eligible to receive a grant 
under this section, a State or small employer purchasing group shall 
prepare and submit to the Secretary an application in such form, at 
such time, and containing such information, certifications, and 
assurances as the Secretary shall reasonably require.
    ``(c) Use of Funds.--Amounts awarded under this section may be used 
to finance the costs associated with planning, developing, and 
operating a qualified small employer purchasing group. Such costs may 
include the costs associated with--
            ``(1) engaging in education and outreach efforts to inform 
        small employers, insurers, and the public about the small 
        employer purchasing group;
            ``(2) soliciting bids and negotiating with insurers to make 
        available group health plans;
            ``(3) preparing the documentation required to receive 
        certification by the Secretary as a qualified small employer 
        purchasing group; and
            ``(4) such other activities determined appropriate by the 
        Secretary.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated for awarding grants under this section such sums as may be 
necessary.

``SEC. 721K. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS ESTABLISHED BY 
              A STATE.

    ``A State may establish a system in all or part of the State under 
which qualified small employer purchasing groups are the sole mechanism 
through which health care coverage for the eligible employees of small 
employers shall be purchased or provided.

``SEC. 721L. EFFECTIVE DATES.

    ``(a) In General.--Except as provided in this chapter, the 
provisions of this chapter are effective on the date of the enactment 
of this subpart.
    ``(b) Exception.--The provisions of section 721C(b) shall apply to 
contracts which are issued, or renewed, after the date which is 18 
months after the date of the enactment of this subpart.

   ``CHAPTER 2--REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES AND 
                     DEPENDENTS OF SMALL EMPLOYERS

``SEC. 722. REQUIRING SMALL EMPLOYERS TO OFFER COVERAGE FOR ELIGIBLE 
              INDIVIDUALS.

    ``(a) Requirement To Offer.--Each small employer shall make 
available with respect to each eligible employee a group health plan 
under which--
            ``(1) coverage of each eligible individual with respect to 
        such an eligible employee may be elected on an annual basis for 
        each plan year;
            ``(2) coverage is provided for at least the standard 
        coverage specified in section 721A(b); and
            ``(3) each eligible employee electing such coverage may 
        elect to have any premiums owed by the employee collected 
        through payroll deduction.
    ``(b) No Employer Contribution Required.--An employer is not 
required under subsection (a) to make any contribution to the cost of 
coverage under a group health plan described in such subsection.
    ``(c) Special Rules.--
            ``(1) Exclusion of new employers and certain very small 
        employers.--Subsection (a) shall not apply to any small 
        employer for any plan year if, as of the beginning of such plan 
        year--
                    ``(A) such employer (including any predecessor 
                thereof) has been an employer for less than 2 years;
                    ``(B) such employer has no more than 2 eligible 
                employees; or
                    ``(C) no more than 2 eligible employees are not 
                covered under any group health plan.
            ``(2) Exclusion of family members.--Under such procedures 
        as the Secretary may prescribe, any relative of a small 
        employer may be, at the election of the employer, excluded from 
        consideration as an eligible employee for purposes of applying 
        the requirements of subsection (a). In the case of a small 
        employer that is not an individual, an employee who is a 
        relative of a key employee (as defined in section 416(i)(1) of 
        the Internal Revenue Code of 1986) of the employer may, at the 
        election of the key employee, be considered a relative 
        excludable under this paragraph.
            ``(3) Optional application of waiting period.--A group 
        health plan and a health insurance issuer offering group health 
        insurance coverage shall not be treated as failing to meet the 
        requirements of subsection (a) solely because a period of 
        service by an eligible employee of not more than 60 days is 
        required under the plan for coverage under the plan of eligible 
        individuals with respect to such employee.
    ``(d) Construction.--Nothing in this section shall be construed as 
limiting the group health plans, or types of coverage under such a 
plan, that an employer may offer to an employee.

``SEC. 722A. COMPLIANCE WITH APPLICABLE REQUIREMENTS THROUGH MULTIPLE 
              EMPLOYER HEALTH ARRANGEMENTS.

    ``(a) In General.--In any case in which an eligible employee is, 
for any plan year, a participant in a group health plan which is a 
multiemployer plan, the requirements of section 722(a) shall be deemed 
to be met with respect to such employee for such plan year if the 
employer requirements of subsection (b) are met with respect to the 
eligible employee, irrespective of whether, or to what extent, the 
employer makes employer contributions on behalf of the eligible 
employee.
    ``(b) Employer Requirements.--The employer requirements of this 
subsection are met under a group health plan with respect to an 
eligible employee if--
            ``(1) the employee is eligible under the plan to elect 
        coverage on an annual basis and is provided a reasonable 
        opportunity to make the election in such form and manner and at 
        such times as are provided by the plan;
            ``(2) coverage is provided for at least the standard 
        coverage specified in section 721A(b);
            ``(3) the employer facilitates collection of any employee 
        contributions under the plan and permits the employee to elect 
        to have employee contributions under the plan collected through 
        payroll deduction; and
            ``(4) in the case of a plan to which part 1 does not 
        otherwise apply, the employer provides to the employee a 
        summary plan description described in section 102(a)(1) in the 
        form and manner and at such times as are required under such 
        part 1 with respect to employee welfare benefit plans.

``CHAPTER 3--REQUIRED COVERAGE OPTIONS FOR INDIVIDUALS INSURED THROUGH 
                           ASSOCIATION PLANS

              ``Subchapter A--Qualified Association Plans

``SEC. 723. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

    ``(a) General Rule.--For purposes of this chapter, in the case of a 
qualified association plan--
            ``(1) except as otherwise provided in this subchapter, the 
        plan shall meet all applicable requirements of chapter 1 and 
        chapter 2 for group health plans offered to and by small 
        employers;
            ``(2) if such plan is certified as meeting such 
        requirements and the requirements of this subchapter, such plan 
        shall be treated as a plan established and maintained by a 
        small employer, and individuals enrolled in such plan shall be 
        treated as eligible employees; and
            ``(3) any individual who is a member of the association not 
        enrolling in the plan shall not be treated as an eligible 
        employee solely by reason of membership in such association.
    ``(b) Election To Be Treated as Purchasing Cooperative.--Subsection 
(a) shall not apply to a qualified association plan if--
            ``(1) the health insurance issuer makes an irrevocable 
        election to be treated as a qualified small employer purchasing 
        group for purposes of section 721D; and
            ``(2) such sponsor meets all requirements of this subpart 
        applicable to a purchasing cooperative.

``SEC. 723A. QUALIFIED ASSOCIATION PLAN DEFINED.

    ``(a) General Rule.--For purposes of this chapter, a plan is a 
qualified association plan if the plan is a multiple employer welfare 
arrangement or similar arrangement--
            ``(1) which is maintained by a qualified association;
            ``(2) which has at least 500 participants in the United 
        States;
            ``(3) under which the benefits provided consist solely of 
        medical care (as defined in section 213(d) of the Internal 
        Revenue Code of 1986);
            ``(4) which may not condition participation in the plan, or 
        terminate coverage under the plan, on the basis of the health 
        status or health claims experience of any employee or member or 
        dependent of either;
            ``(5) which provides for bonding, in accordance with 
        regulations providing rules similar to the rules under section 
        412, of all persons operating or administering the plan or 
        involved in the financial affairs of the plan; and
            ``(6) which notifies each participant or provider that it 
        is certified as meeting the requirements of this chapter 
        applicable to it.
    ``(b) Self-Insured Plans.--In the case of a plan which is not fully 
insured (within the meaning of section 514(b)(6)(D)), the plan shall be 
treated as a qualified association plan only if--
            ``(1) the plan meets minimum financial solvency and cash 
        reserve requirements for claims which are established by the 
        Secretary and which shall be in lieu of any other such 
        requirements under this chapter;
            ``(2) the plan provides an annual funding report (certified 
        by an independent actuary) and annual financial statements to 
        the Secretary and other interested parties; and
            ``(3) the plan appoints a plan sponsor who is responsible 
        for operating the plan and ensuring compliance with applicable 
        Federal and State laws.
    ``(c) Certification.--
            ``(1) In general.--A plan shall not be treated as a 
        qualified association plan for any period unless there is in 
        effect a certification by the Secretary that the plan meets the 
        requirements of this subchapter. For purposes of this chapter, 
        the Secretary shall be the appropriate certifying authority 
        with respect to the plan.
            ``(2) Fee.--The Secretary shall require a $5,000 fee for 
        the original certification under paragraph (1) and may charge a 
        reasonable annual fee to cover the costs of processing and 
        reviewing the annual statements of the plan.
            ``(3) Expedited procedures.--The Secretary may by 
        regulation provide for expedited registration, certification, 
        and comment procedures.
            ``(4) Agreements.--The Secretary of Labor may enter into 
        agreements with the States to carry out the Secretary's 
        responsibilities under this subchapter.
    ``(d) Availability.--Notwithstanding any other provision of this 
chapter, a qualified association plan may limit coverage to individuals 
who are members of the qualified association establishing or 
maintaining the plan, an employee of such member, or a dependent of 
either.
    ``(e) Special Rules for Existing Plans.--In the case of a plan in 
existence on January 1, 2005--
            ``(1) the requirements of subsection (a) (other than 
        paragraphs (4), (5), and (6) thereof) shall not apply;
            ``(2) no original certification shall be required under 
        this subchapter; and
            ``(3) no annual report or funding statement shall be 
        required before January 1, 2006, but the plan shall file with 
        the Secretary a description of the plan and the name of the 
        health insurance issuer.

``SEC. 723B. DEFINITIONS AND SPECIAL RULES.

    ``(a) Qualified Association.--For purposes of this subchapter, the 
term `qualified association' means any organization which--
            ``(1) is organized and maintained in good faith by a trade 
        association, an industry association, a professional 
        association, a chamber of commerce, a religious organization, a 
        public entity association, or other business association 
        serving a common or similar industry;
            ``(2) is organized and maintained for substantial purposes 
        other than to provide a health plan;
            ``(3) has a constitution, bylaws, or other similar 
        governing document which states its purpose; and
            ``(4) receives a substantial portion of its financial 
        support from its active, affiliated, or federation members.
    ``(b) Coordination.--The term `qualified association plan' shall 
not include a plan to which subchapter B applies.

``Subchapter B--Special Rule for Church, Multiemployer, and Cooperative 
                                 Plans

``SEC. 723F. SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND COOPERATIVE 
              PLANS.

    ``(a) General Rule.--For purposes of this chapter, in the case of a 
group health plan to which this section applies--
            ``(1) except as otherwise provided in this subchapter, the 
        plan shall be required to meet all applicable requirements of 
        chapter 1 and chapter 2 for group health plans offered to and 
        by small employers;
            ``(2) if such plan is certified as meeting such 
        requirements, such plan shall be treated as a plan established 
        and maintained by a small employer and individuals enrolled in 
such plan shall be treated as eligible employees; and
            ``(3) any individual eligible to enroll in the plan who 
        does not enroll in the plan shall not be treated as an eligible 
        employee solely by reason of being eligible to enroll in the 
        plan.
    ``(b) Modified Standards.--
            ``(1) Certifying authority.--For purposes of this chapter, 
        the Secretary shall be the appropriate certifying authority 
        with respect to a plan to which this section applies.
            ``(2) Availability.--Rules similar to the rules of 
        subsection (e) of section 723A shall apply to a plan to which 
        this section applies.
            ``(3) Access.--An employer which, pursuant to a collective 
        bargaining agreement, offers an employee the opportunity to 
        enroll in a plan described in subsection (c)(2) shall not be 
        required to make any other plan available to the employee.
            ``(4) Treatment under state laws.--A church plan described 
        in subsection (c)(1) which is certified as meeting the 
        requirements of this section shall not be deemed to be a 
        multiple employer welfare arrangement or an insurance company 
        or other insurer, or to be engaged in the business of 
        insurance, for purposes of any State law purporting to regulate 
        insurance companies or insurance contracts.
    ``(c) Plans to Which Section Applies.--This section shall apply to 
a health plan which--
            ``(1) is a church plan (as defined in section 414(e) of the 
        Internal Revenue Code of 1986) which has at least 100 
        participants in the United States;
            ``(2) is a multiemployer plan which is maintained by a 
        health plan sponsor described in section 3(16)(B)(iii) and 
        which has at least 500 participants in the United States; or
            ``(3) is a plan which is maintained by a rural electric 
        cooperative or a rural telephone cooperative association and 
        which has at least 500 participants in the United States.''.
    (b) Conforming Amendments.--Section 731(d) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1186(d)) is amended 
by adding at the end the following:
            ``(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) Eligible individual.--The term `eligible individual' 
        means, with respect to an eligible employee, such employee, and 
        any dependent of such employee.
            ``(5) NAIC.--The term `NAIC' means the National Association 
        of Insurance Commissioners.
            ``(6) Qualified group health plan.--The term `qualified 
        group health plan' shall have the meaning given the term in 
        section 721.''.

SEC. 102. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT RELATING TO THE 
              GROUP MARKET.

    (a) In General.--Subpart 2 of part A of title XXVII of the Public 
Health Service Act (42 U.S.C. 300gg-4 et seq.) is amended--
            (1) by inserting after the subpart heading the following:

               ``CHAPTER 1--MISCELLANEOUS REQUIREMENTS'';

        and
            (2) by adding at the end the following:

            ``CHAPTER 2--GENERAL INSURANCE COVERAGE REFORMS

    ``Subchapter A--Increased Availability and Continuity of Health 
                                Coverage

``SEC. 2707. DEFINITION.

    ``As used in this chapter, the term `qualified group health plan' 
means a group health plan, and a health insurance issuer offering group 
health insurance coverage, that is designed to provide standard 
coverage (consistent with section 2707A(b)).

``SEC. 2707A. ACTUARIAL EQUIVALENCE IN BENEFITS PERMITTED.

    ``(a) Set of Rules of Actuarial Equivalence.--
            ``(1) Initial determination.--The NAIC is requested to 
        submit to the Secretary, within 6 months after the date of the 
        enactment of this chapter, a set of rules which the NAIC 
        determines is sufficient for determining, in the case of any 
        group health plan, or a health insurance issuer offering group 
        health insurance coverage, and for purposes of this section, 
        the actuarial value of the coverage offered by the plan or 
        coverage.
            ``(2) Certification.--If the Secretary determines that the 
        NAIC has submitted a set of rules that comply with the 
        requirements of paragraph (1), the Secretary shall certify such 
        set of rules for use under this chapter. If the Secretary 
        determines that such a set of rules has not been submitted or 
        does not comply with such requirements, the Secretary shall 
        promptly establish a set of rules that meets such requirements.
    ``(b) Standard Coverage.--
            ``(1) In general.--A group health plan, and a health 
        insurance issuer offering group health insurance coverage, 
        shall be considered to provide standard coverage consistent 
        with this subsection if the benefits are determined, in 
        accordance with the set of actuarial equivalence rules 
        certified under subsection (a), to have a value that is within 
        5 percentage points of the target actuarial value for standard 
        coverage established under paragraph (2).
            ``(2) Initial determination of target actuarial value for 
        standard coverage.--
                    ``(A) Initial determination.--
                            ``(i) In general.--The NAIC is requested to 
                        submit to the Secretary, within 6 months after 
                        the date of the enactment of this chapter, a 
                        target actuarial value for standard coverage 
                        equal to the average actuarial value of the 
                        coverage described in clause (ii). No specific 
                        procedure or treatment, or classes thereof, is 
                        required to be considered in such determination 
                        by this chapter or through regulations. The 
                        determination of such value shall be based on a 
                        representative distribution of the population 
                        of eligible employees offered such coverage and 
                        a single set of standardized utilization and 
                        cost factors.
                            ``(ii) Coverage described.--The coverage 
                        described in this clause is coverage for 
                        medically necessary and appropriate services 
                        consisting of medical and surgical services, 
                        medical equipment, preventive services, and 
                        emergency transportation in frontier areas. No 
                        specific procedure or treatment, or classes 
                        thereof, is required to be covered in such a 
                        plan, by this chapter or through regulations.
                    ``(B) Certification.--If the Secretary determines 
                that the NAIC has submitted a target actuarial value 
                for standard coverage that complies with the 
                requirements of subparagraph (A), the Secretary shall 
                certify such value for use under this chapter. If the 
                Secretary determines that a target actuarial value has 
                not been submitted or does not comply with the 
requirements of subparagraph (A), the Secretary shall promptly 
determine a target actuarial value that meets such requirements.
    ``(c) Subsequent Revisions.--
            ``(1) NAIC.--The NAIC may submit from time to time to the 
        Secretary revisions of the set of rules of actuarial 
        equivalence and target actuarial values previously established 
        or determined under this section if the NAIC determines that 
        revisions are necessary to take into account changes in the 
        relevant types of health benefits provisions or in demographic 
        conditions which form the basis for the set of rules of 
        actuarial equivalence or the target actuarial values. The 
        provisions of subsection (a)(2) shall apply to such a revision 
        in the same manner as they apply to the initial determination 
        of the set of rules.
            ``(2) Secretary.--The Secretary may by regulation revise 
        the set of rules of actuarial equivalence and target actuarial 
        values from time to time if the Secretary determines such 
        revisions are necessary to take into account changes described 
        in paragraph (1).

``SEC. 2707B. ESTABLISHMENT OF PLAN STANDARDS.

    ``(a) Establishment of General Standards.--
            ``(1) Role of naic.--The NAIC is requested to submit to the 
        Secretary, within 9 months after the date of the enactment of 
        this chapter, model regulations that specify standards for 
        making qualified group health plans available to small 
        employers. If the NAIC develops recommended regulations 
        specifying such standards within such period, the Secretary 
        shall review the standards. Such review shall be completed 
        within 60 days after the date the regulations are developed. 
        Such standards shall serve as the standards under this section, 
        with such amendments as the Secretary deems necessary. Such 
        standards shall be nonbinding (except as provided in chapter 
        4).
            ``(2) Contingency.--If the NAIC does not develop such model 
        regulations within the period described in paragraph (1), the 
        Secretary shall specify, within 15 months after the date of the 
        enactment of this chapter, model regulations that specify 
        standards for insurers with regard to making qualified group 
        health plans available to small employers. Such standards shall 
        be nonbinding (except as provided in chapter 4).
            ``(3) Effective date.--The standards specified in the model 
        regulations shall apply to group health plans and health 
        insurance issuers offering group health insurance coverage in a 
        State on or after the respective date the standards are 
        implemented in the State.
    ``(b) No Preemption of State Law.--A State may implement standards 
for group health plans available, and health insurance issuers offering 
group health insurance coverage offered, to small employers that are 
more stringent than the standards under this section, except that a 
State may not implement standards that prevent the offering of at least 
one group health plan that provides standard coverage (as described in 
section 2707A(b)).

``SEC. 2707C. RATING LIMITATIONS FOR COMMUNITY-RATED MARKET.

    ``(a) Standard Premiums With Respect to Community-Rated Eligible 
Employees and Eligible Individuals.--
            ``(1) In general.--Each group health plan offered, and each 
        health insurance issuer offering group health insurance 
        coverage, to a small employer shall establish within each 
        community rating area in which the plan is to be offered, a 
        standard premium for enrollment of eligible employees and 
        eligible individuals for the standard coverage (as defined 
        under section 2707A(b)).
            ``(2) Establishment of community rating area.--
                    ``(A) In general.--Not later than January 1, 2005, 
                each State shall, in accordance with subparagraph (B), 
                provide for the division of the State into 1 or more 
                community rating areas. The State may revise the 
                boundaries of such areas from time to time consistent 
                with this paragraph.
                    ``(B) Geographic area variations.--For purposes of 
                subparagraph (A), a State--
                            ``(i) may not identify an area that divides 
                        a 3-digit zip code, a county, or all portions 
                        of a metropolitan statistical area;
                            ``(ii) shall not permit premium rates for 
                        coverage offered in a portion of an interstate 
                        metropolitan statistical area to vary based on 
                        the State in which the coverage is offered; and
                            ``(iii) may, upon agreement with one or 
                        more adjacent States, identify multi-State 
                        geographic areas consistent with clauses (i) 
                        and (ii).
            ``(3) Eligible individuals.--For purposes of this section, 
        the term `eligible individuals' includes certain uninsured 
        individuals (as described in section 2707G).
    ``(b) Uniform Premiums Within Community Rating Areas.--
            ``(1) In general.--Subject to paragraphs (2) and (3), the 
        standard premium for each group health plan to which this 
        section applies shall be the same, but shall not include the 
        costs of premium processing and enrollment that may vary 
        depending on whether the method of enrollment is through a 
        qualified small employer purchasing group, through a small 
        employer, or through a broker.
            ``(2) Application to enrollees.--
                    ``(A) In general.--The premium charged for coverage 
                in a group health plan which covers eligible employees 
                and eligible individuals shall be the product of--
                            ``(i) the standard premium (established 
                        under paragraph (1));
                            ``(ii) in the case of enrollment other than 
                        individual enrollment, the family adjustment 
                        factor specified under subparagraph (B); and
                            ``(iii) the age adjustment factor 
                        (specified under subparagraph (C)).
                    ``(B) Family adjustment factor.--
                            ``(i) In general.--The standards 
                        established under section 2707B shall specify 
                        family adjustment factors that reflect the 
                        relative actuarial costs of benefit packages 
                        based on family classes of enrollment (as 
                        compared with such costs for individual 
                        enrollment).
                            ``(ii) Classes of enrollment.--For purposes 
                        of this chapter, there are 4 classes of 
                        enrollment:
                                    ``(I) Coverage only of an 
                                individual (referred to in this chapter 
                                as the `individual' enrollment or class 
                                of enrollment).
                                    ``(II) Coverage of a married couple 
                                without children (referred to in this 
                                chapter as the `couple-only' enrollment 
                                or class of enrollment).
                                    ``(III) Coverage of an individual 
                                and one or more children (referred to 
                                in this chapter as the `single parent' 
                                enrollment or class of enrollment).
                                    ``(IV) Coverage of a married couple 
                                and one or more children (referred to 
                                in this chapter as the `dual parent' 
                                enrollment or class of enrollment).
                            ``(iii) References to family and couple 
                        classes of enrollment.--In this chapter:
                                    ``(I) Family.--The terms `family 
                                enrollment' and `family class of 
                                enrollment' refer to enrollment in a 
                                class of enrollment described in any 
                                subclause of clause (ii) (other than 
                                subclause (I)).
                                    ``(II) Couple.--The term `couple 
                                class of enrollment' refers to 
                                enrollment in a class of enrollment 
                                described in subclause (II) or (IV) of 
                                clause (ii).
                            ``(iv) Spouse; married; couple.--
                                    ``(I) In general.--In this chapter, 
                                the terms `spouse' and `married' mean, 
                                with respect to an individual, another 
                                individual who is the spouse of, or is 
                                married to, the individual, as 
                                determined under applicable State law.
                                    ``(II) Couple.--The term `couple' 
                                means an individual and the 
                                individual's spouse.
                    ``(C) Age adjustment factor.--The Secretary, in 
                consultation with the NAIC, shall specify uniform age 
                categories and maximum rating increments for age 
                adjustment factors that reflect the relative actuarial 
                costs of benefit packages among enrollees. For 
                individuals who have attained age 18 but not age 65, 
                the highest age adjustment factor may not exceed 3 
                times the lowest age adjustment factor.
            ``(3) Administrative charges.--
                    ``(A) In general.--In accordance with the standards 
                established under section 2707B, a group health plan 
                which covers eligible employees and eligible 
                individuals may add a separately-stated administrative 
                charge which is based on identifiable differences in 
                legitimate administrative costs and which is applied 
                uniformly for individuals enrolling through the same 
                method of enrollment. Nothing in this subparagraph may 
                be construed as preventing a qualified small employer 
                purchasing group from negotiating a unique 
                administrative charge with an insurer for a group 
                health plan.
                    ``(B) Enrollment through a qualified small employer 
                purchasing group.--In the case of an administrative 
                charge under subparagraph (A) for enrollment through a 
                qualified small employer purchasing group, such charge 
                may not exceed the lowest charge of such plan for 
                enrollment other than through a qualified small 
                employer purchasing group in such area.
    ``(c) Treatment of Negotiated Rate as Community Rate.--
Notwithstanding any other provision of this section, a group health 
plan and a health insurance issuer offering health insurance coverage 
that negotiates a premium rate (exclusive of any administrative charge 
described in subsection (b)(3)) with a qualified small employer 
purchasing group in a community rating area shall charge the same 
premium rate to all eligible employees and eligible individuals.

``SEC. 2707D. RATING PRACTICES AND PAYMENT OF PREMIUMS.

    ``(a) Full Disclosure of Rating Practices.--
            ``(1) In general.--A group health plan and a health 
        insurance issuer offering health insurance coverage shall fully 
        disclose rating practices for the plan to the appropriate 
        certifying authority.
            ``(2) Notice on expiration.--A group health plan and a 
        health insurance issuer offering health insurance coverage 
        shall provide for notice of the terms for renewal of a plan at 
        the time of the offering of the plan and at least 90 days 
        before the date of expiration of the plan.
            ``(3) Actuarial certification.--Each group health plan and 
        health insurance issuer offering health insurance coverage 
        shall file annually with the appropriate certifying authority a 
        written statement by a member of the American Academy of 
        Actuaries (or other individual acceptable to such authority) 
        who is not an employee of the group health plan or issuer 
        certifying that, based upon an examination by the individual 
        which includes a review of the appropriate records and of the 
        actuarial assumptions of such plan or insurer and methods used 
        by the plan or insurer in establishing premium rates and 
        administrative charges for group health plans--
                    ``(A) such plan or insurer is in compliance with 
                the applicable provisions of this chapter; and
                    ``(B) the rating methods are actuarially sound.
        Each plan and insurer shall retain a copy of such statement at 
        its principal place of business for examination by any 
        individual.
    ``(b) Payment of Premiums.--
            ``(1) In general.--With respect to a new enrollee in a 
        group health plan, the plan may require advanced payment of an 
        amount equal to the monthly applicable premium for the plan at 
        the time such individual is enrolled.
            ``(2) Notification of failure to receive premium.--If a 
        group health plan or a health insurance issuer offering health 
        insurance coverage fails to receive payment on a premium due 
        with respect to an eligible employee or eligible individual 
        covered under the plan involved, the plan or issuer shall 
        provide notice of such failure to the employee or individual 
        within the 20-day period after the date on which such premium 
        payment was due. A plan or issuer may not terminate the 
        enrollment of an eligible employee or eligible individual 
        unless such employee or individual has been notified of any 
        overdue premiums and has been provided a reasonable opportunity 
        to respond to such notice.

``SEC. 2707E. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS.

    ``(a) Qualified Small Employer Purchasing Groups Described.--
            ``(1) In general.--A qualified small employer purchasing 
        group is an entity that--
                    ``(A) is a nonprofit entity certified under State 
                law;
                    ``(B) has a membership consisting solely of small 
                employers;
                    ``(C) is administered solely under the authority 
                and control of its member employers;
                    ``(D) with respect to each State in which its 
                members are located, consists of not fewer than the 
                number of small employers established by the State as 
                appropriate for such a group;
                    ``(E) offers a program under which qualified group 
                health plans are offered to eligible employees and 
                eligible individuals through its member employers and 
                to certain uninsured individuals in accordance with 
                section 2707D; and
                    ``(F) an insurer, agent, broker, or any other 
                individual or entity engaged in the sale of insurance--
                            ``(i) does not form or underwrite; and
                            ``(ii) does not hold or control any right 
                        to vote with respect to.
            ``(2) State certification.--A qualified small employer 
        purchasing group formed under this section shall submit an 
        application to the State for certification. The State shall 
        determine whether to issue a certification and otherwise ensure 
        compliance with the requirements of this chapter.
            ``(3) Special rule.--Notwithstanding paragraph (1)(B), an 
        employer member of a small employer purchasing group that has 
        been certified by the State as meeting the requirements of 
        paragraph (1) may retain its membership in the group if the 
        number of employees of the employer increases such that the 
        employer is no longer a small employer.
    ``(b) Board of Directors.--Each qualified small employer purchasing 
group established under this section shall be governed by a board of 
directors or have active input from an advisory board consisting of 
individuals and businesses participating in the group.
    ``(c) Domiciliary State.--For purposes of this section, a qualified 
small employer purchasing group operating in more than one State shall 
be certified by the State in which the group is domiciled.
    ``(d) Membership.--
            ``(1) In general.--A qualified small employer purchasing 
        group shall accept all small employers and certain uninsured 
        individuals residing within the area served by the group as 
        members if such employers or individuals request such 
        membership.
            ``(2) Voting.--Members of a qualified small employer 
        purchasing group shall have voting rights consistent with the 
        rules established by the State.
    ``(e) Duties of Qualified Small Employer Purchasing Groups.--Each 
qualified small employer purchasing group shall--
            ``(1) enter into agreements with insurers offering 
        qualified group health plans;
            ``(2) enter into agreements with small employers under 
        section 2707F;
            ``(3) enroll only eligible employees, eligible individuals, 
        and certain uninsured individuals in qualified group health 
        plans, in accordance with section 2707G;
            ``(4) provide enrollee information to the State;
            ``(5) meet the marketing requirements under section 2707I; 
        and
            ``(6) carry out other functions provided for under this 
        chapter.
    ``(f) Limitation on Activities.--A qualified small employer 
purchasing group shall not--
            ``(1) perform any activity involving approval or 
        enforcement of payment rates for providers;
            ``(2) perform any activity (other than the reporting of 
        noncompliance) relating to compliance of qualified group health 
plans with the requirements of this chapter;
            ``(3) assume financial risk in relation to any such health 
        plan; or
            ``(4) perform other activities identified by the State as 
        being inconsistent with the performance of its duties under 
        this chapter.
    ``(g) Rules of Construction.--
            ``(1) Establishment not required.--Nothing in this section 
        shall be construed as requiring--
                    ``(A) that a State organize, operate or otherwise 
                establish a qualified small employer purchasing group, 
                or otherwise require the establishment of purchasing 
                groups; and
                    ``(B) that there be only one qualified small 
                employer purchasing group established with respect to a 
                community rating area.
            ``(2) Single organization serving multiple areas and 
        states.--Nothing in this section shall be construed as 
        preventing a single entity from being a qualified small 
        employer purchasing group in more than one community rating 
        area or in more than one State.
            ``(3) Voluntary participation.--Nothing in this section 
        shall be construed as requiring any individual or small 
        employer to purchase a qualified group health plan exclusively 
        through a qualified small employer purchasing group.

``SEC. 2707F. AGREEMENTS WITH SMALL EMPLOYERS.

    ``(a) In General.--A qualified small employer purchasing group 
shall offer to enter into an agreement under this section with each 
small employer that employs eligible employees in the area served by 
the group.
    ``(b) Payroll Deduction.--
            ``(1) In general.--Under an agreement under this section 
        between a small employer and a qualified small employer 
        purchasing group, the small employer shall deduct premiums from 
        an eligible employee's wages.
            ``(2) Additional premiums.--If the amount withheld under 
        paragraph (1) is not sufficient to cover the entire cost of the 
        premiums, the eligible employee shall be responsible for paying 
        directly to the qualified small employer purchasing group 
the difference between the amount of such premiums and the amount 
withheld.

``SEC. 2707G. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE INDIVIDUALS, AND 
              CERTAIN UNINSURED INDIVIDUALS IN QUALIFIED GROUP HEALTH 
              PLANS.

    ``(a) In General.--Each qualified small employer purchasing group 
shall offer--
            ``(1) eligible employees,
            ``(2) eligible individuals, and
            ``(3) certain uninsured individuals,
the opportunity to enroll in any qualified group health plan which has 
an agreement with the qualified small employer purchasing group for the 
community rating area in which such employees and individuals reside.
    ``(b) Uninsured Individuals.--For purposes of this section, an 
individual is described in subsection (a)(3) if such individual is an 
uninsured individual who is not an eligible employee of a small 
employer that is a member of a qualified small employer purchasing 
group or a dependent of such individual.

``SEC. 2707H. RECEIPT OF PREMIUMS.

    ``(a) Enrollment Charge.--The amount charged by a qualified small 
employer purchasing group for coverage under a qualified group health 
plan shall be equal to the sum of--
            ``(1) the premium rate offered by such health plan;
            ``(2) the administrative charge for such health plan; and
            ``(3) the purchasing group administrative charge for 
        enrollment of eligible employees, eligible individuals and 
        certain uninsured individuals through the group.
    ``(b) Disclosure of Premium Rates and Administrative Charges.--Each 
qualified small employer purchasing group shall, prior to the time of 
enrollment, disclose to enrollees and other interested parties the 
premium rate for a qualified group health plan, the administrative 
charge for such plan, and the administrative charge of the group, 
separately.

``SEC. 2707I. MARKETING ACTIVITIES.

    ``Each qualified small employer purchasing group shall market 
qualified group health plans to members through the entire community 
rating area served by the purchasing group.

``SEC. 2707J. GRANTS TO STATES AND QUALIFIED SMALL EMPLOYER PURCHASING 
              GROUPS.

    ``(a) In General.--The Secretary shall award grants to States and 
small employer purchasing groups to assist such States and groups in 
planning, developing, and operating qualified small employer purchasing 
groups.
    ``(b) Application Requirements.--To be eligible to receive a grant 
under this section, a State or small employer purchasing group shall 
prepare and submit to the Secretary an application in such form, at 
such time, and containing such information, certifications, and 
assurances as the Secretary shall reasonably require.
    ``(c) Use of Funds.--Amounts awarded under this section may be used 
to finance the costs associated with planning, developing, and 
operating a qualified small employer purchasing group. Such costs may 
include the costs associated with--
            ``(1) engaging in education and outreach efforts to inform 
        small employers, insurers, and the public about the small 
        employer purchasing group;
            ``(2) soliciting bids and negotiating with insurers to make 
        available group health plans;
            ``(3) preparing the documentation required to receive 
        certification by the Secretary as a qualified small employer 
        purchasing group; and
            ``(4) such other activities determined appropriate by the 
        Secretary.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated for awarding grants under this section such sums as may be 
necessary.

``SEC. 2707K. QUALIFIED SMALL EMPLOYER PURCHASING GROUPS ESTABLISHED BY 
              A STATE.

    ``A State may establish a system in all or part of the State under 
which qualified small employer purchasing groups are the sole mechanism 
through which health care coverage for the eligible employees of small 
employers shall be purchased or provided.

``SEC. 2707L. EFFECTIVE DATES.

    ``(a) In General.--Except as provided in this chapter, the 
provisions of this chapter are effective on the date of the enactment 
of this chapter.
    ``(b) Exception.--The provisions of section 2707C(b) shall apply to 
contracts which are issued, or renewed, after the date which is 18 
months after the date of the enactment of this chapter.

 ``Subchapter B--Required Coverage Options for Eligible Employees and 
                     Dependents of Small Employers

``SEC. 2708. REQUIRING SMALL EMPLOYERS TO OFFER COVERAGE FOR ELIGIBLE 
              INDIVIDUALS.

    ``(a) Requirement To Offer.--Each small employer shall make 
available with respect to each eligible employee a group health plan 
under which--
            ``(1) coverage of each eligible individual with respect to 
        such an eligible employee may be elected on an annual basis for 
        each plan year;
            ``(2) coverage is provided for at least the standard 
        coverage specified in section 2707A(b); and
            ``(3) each eligible employee electing such coverage may 
        elect to have any premiums owed by the employee collected 
        through payroll deduction.
    ``(b) No Employer Contribution Required.--An employer is not 
required under subsection (a) to make any contribution to the cost of 
coverage under a group health plan described in such subsection.
    ``(c) Special Rules.--
            ``(1) Exclusion of new employers and certain very small 
        employers.--Subsection (a) shall not apply to any small 
        employer for any plan year if, as of the beginning of such plan 
        year--
                    ``(A) such employer (including any predecessor 
                thereof) has been an employer for less than 2 years;
                    ``(B) such employer has no more than 2 eligible 
                employees; or
                    ``(C) no more than 2 eligible employees are not 
                covered under any group health plan.
            ``(2) Exclusion of family members.--Under such procedures 
        as the Secretary may prescribe, any relative of a small 
        employer may be, at the election of the employer, excluded from 
        consideration as an eligible employee for purposes of applying 
        the requirements of subsection (a). In the case of a small 
        employer that is not an individual, an employee who is a 
        relative of a key employee (as defined in section 416(i)(1) of 
        the Internal Revenue Code of 1986) of the employer may, at the 
        election of the key employee, be considered a relative 
        excludable under this paragraph.
            ``(3) Optional application of waiting period.--A group 
        health plan and a health insurance issuer offering group health 
        insurance coverage shall not be treated as failing to meet the 
        requirements of subsection (a) solely because a period of 
        service by an eligible employee of not more than 60 days is 
        required under the plan for coverage under the plan of eligible 
        individuals with respect to such employee.
    ``(d) Construction.--Nothing in this section shall be construed as 
limiting the group health plans, or types of coverage under such a 
plan, that an employer may offer to an employee.

``SEC. 2708A. COMPLIANCE WITH APPLICABLE REQUIREMENTS THROUGH MULTIPLE 
              EMPLOYER HEALTH ARRANGEMENTS.

    ``(a) In General.--In any case in which an eligible employee is, 
for any plan year, a participant in a group health plan which is a 
multiemployer plan, the requirements of section 2722(a) shall be deemed 
to be met with respect to such employee for such plan year if the 
employer requirements of subsection (b) are met with respect to the 
eligible employee, irrespective of whether, or to what extent, the 
employer makes employer contributions on behalf of the eligible 
employee.
    ``(b) Employer Requirements.--The employer requirements of this 
subsection are met under a group health plan with respect to an 
eligible employee if--
            ``(1) the employee is eligible under the plan to elect 
        coverage on an annual basis and is provided a reasonable 
        opportunity to make the election in such form and manner and at 
        such times as are provided by the plan;
            ``(2) coverage is provided for at least the standard 
        coverage specified in section 2707A(b);
            ``(3) the employer facilitates collection of any employee 
        contributions under the plan and permits the employee to elect 
        to have employee contributions under the plan collected through 
        payroll deduction; and
            ``(4) in the case of a plan to which subchapter A does not 
        otherwise apply, the employer provides to the employee a 
        summary plan description described in section 102(a)(1) of the 
        Employee Retirement Income Security Act of 1974 in the form and 
        manner and at such times as are required under such subchapter 
        A with respect to employee welfare benefit plans.

   ``Subchapter C--Required Coverage Options for Individuals Insured 
                       Through Association Plans

``SEC. 2709. TREATMENT OF QUALIFIED ASSOCIATION PLANS.

    ``(a) General Rule.--For purposes of this chapter, in the case of a 
qualified association plan--
            ``(1) except as otherwise provided in this subchapter, the 
        plan shall meet all applicable requirements of chapter 1 and 
        chapter 2 for group health plans offered to and by small 
        employers;
            ``(2) if such plan is certified as meeting such 
        requirements and the requirements of this subchapter, such plan 
        shall be treated as a plan established and maintained by a 
        small employer, and individuals enrolled in such plan shall be 
        treated as eligible employees; and
            ``(3) any individual who is a member of the association not 
        enrolling in the plan shall not be treated as an eligible 
        employee solely by reason of membership in such association.
    ``(b) Election To Be Treated as Purchasing Cooperative.--Subsection 
(a) shall not apply to a qualified association plan if--
            ``(1) the health insurance issuer makes an irrevocable 
        election to be treated as a qualified small employer purchasing 
        group for purposes of section 2707D; and
            ``(2) such sponsor meets all requirements of this chapter 
        applicable to a purchasing cooperative.

``SEC. 2709A. QUALIFIED ASSOCIATION PLAN DEFINED.

    ``(a) General Rule.--For purposes of this chapter, a plan is a 
qualified association plan if the plan is a multiple employer welfare 
arrangement or similar arrangement--
            ``(1) which is maintained by a qualified association;
            ``(2) which has at least 500 participants in the United 
        States;
            ``(3) under which the benefits provided consist solely of 
        medical care (as defined in section 213(d) of the Internal 
        Revenue Code of 1986);
            ``(4) which may not condition participation in the plan, or 
        terminate coverage under the plan, on the basis of the health 
        status or health claims experience of any employee or member or 
        dependent of either;
            ``(5) which provides for bonding, in accordance with 
        regulations providing rules similar to the rules under section 
        412, of all persons operating or administering the plan or 
        involved in the financial affairs of the plan; and
            ``(6) which notifies each participant or provider that it 
        is certified as meeting the requirements of this chapter 
        applicable to it.
    ``(b) Self-Insured Plans.--In the case of a plan which is not fully 
insured (within the meaning of section 514(b)(6)(D)), the plan shall be 
treated as a qualified association plan only if--
            ``(1) the plan meets minimum financial solvency and cash 
        reserve requirements for claims which are established by the 
        Secretary and which shall be in lieu of any other such 
        requirements under this chapter;
            ``(2) the plan provides an annual funding report (certified 
        by an independent actuary) and annual financial statements to 
        the Secretary and other interested parties; and
            ``(3) the plan appoints a plan sponsor who is responsible 
        for operating the plan and ensuring compliance with applicable 
        Federal and State laws.
    ``(c) Certification.--
            ``(1) In general.--A plan shall not be treated as a 
        qualified association plan for any period unless there is in 
        effect a certification by the Secretary that the plan meets the 
        requirements of this subchapter. For purposes of this chapter, 
        the Secretary shall be the appropriate certifying authority 
        with respect to the plan.
            ``(2) Fee.--The Secretary shall require a $5,000 fee for 
        the original certification under paragraph (1) and may charge a 
        reasonable annual fee to cover the costs of processing and 
        reviewing the annual statements of the plan.
            ``(3) Expedited procedures.--The Secretary may by 
        regulation provide for expedited registration, certification, 
        and comment procedures.
            ``(4) Agreements.--The Secretary of Labor may enter into 
        agreements with the States to carry out the Secretary's 
        responsibilities under this subchapter.
    ``(d) Availability.--Notwithstanding any other provision of this 
chapter, a qualified association plan may limit coverage to individuals 
who are members of the qualified association establishing or 
maintaining the plan, an employee of such member, or a dependent of 
either.
    ``(e) Special Rules for Existing Plans.--In the case of a plan in 
existence on January 1, 2005--
            ``(1) the requirements of subsection (a) (other than 
        paragraphs (4), (5), and (6) thereof) shall not apply;
            ``(2) no original certification shall be required under 
        this subchapter; and
            ``(3) no annual report or funding statement shall be 
        required before January 1, 2006, but the plan shall file with 
        the Secretary a description of the plan and the name of the 
        health insurance issuer.

``SEC. 2709B. DEFINITIONS AND SPECIAL RULES.

    ``(a) Qualified Association.--For purposes of this subchapter, the 
term `qualified association' means any organization which--
            ``(1) is organized and maintained in good faith by a trade 
        association, an industry association, a professional 
        association, a chamber of commerce, a religious organization, a 
        public entity association, or other business association 
        serving a common or similar industry;
            ``(2) is organized and maintained for substantial purposes 
        other than to provide a health plan;
            ``(3) has a constitution, bylaws, or other similar 
        governing document which states its purpose; and
            ``(4) receives a substantial portion of its financial 
        support from its active, affiliated, or federation members.
    ``(b) Coordination.--The term `qualified association plan' shall 
not include a plan to which subchapter B applies.

``SEC. 2709C. SPECIAL RULE FOR CHURCH, MULTIEMPLOYER, AND COOPERATIVE 
              PLANS.

    ``(a) General Rule.--For purposes of this chapter, in the case of a 
group health plan to which this section applies--
            ``(1) except as otherwise provided in this subchapter, the 
        plan shall be required to meet all applicable requirements of 
        subchapter A and subchapter B for group health plans offered to 
        and by small employers;
            ``(2) if such plan is certified as meeting such 
        requirements, such plan shall be treated as a plan established 
        and maintained by a small employer and individuals enrolled in 
        such plan shall be treated as eligible employees; and
            ``(3) any individual eligible to enroll in the plan who 
        does not enroll in the plan shall not be treated as an eligible 
        employee solely by reason of being eligible to enroll in the 
        plan.
    ``(b) Modified Standards.--
            ``(1) Certifying authority.--For purposes of this chapter, 
        the Secretary shall be the appropriate certifying authority 
        with respect to a plan to which this section applies.
            ``(2) Availability.--Rules similar to the rules of 
        subsection (e) of section 2709A shall apply to a plan to which 
        this section applies.
            ``(3) Access.--An employer which, pursuant to a collective 
        bargaining agreement, offers an employee the opportunity to 
        enroll in a plan described in subsection (c)(2) shall not be 
        required to make any other plan available to the employee.
            ``(4) Treatment under state laws.--A church plan described 
        in subsection (c)(1) which is certified as meeting the 
        requirements of this section shall not be deemed to be a 
        multiple employer welfare arrangement or an insurance company 
        or other insurer, or to be engaged in the business of 
        insurance, for purposes of any State law purporting to regulate 
        insurance companies or insurance contracts.
    ``(c) Plans to Which Section Applies.--This section shall apply to 
a health plan which--
            ``(1) is a church plan (as defined in section 414(e) of the 
        Internal Revenue Code of 1986) which has at least 100 
        participants in the United States;
            ``(2) is a multiemployer plan which is maintained by a 
        health plan sponsor described in section 3(16)(B)(iii) of the 
        Employee Retirement Income Security Act of 1974 and which has 
        at least 500 participants in the United States; or
            ``(3) is a plan which is maintained by a rural electric 
        cooperative or a rural telephone cooperative association and 
        which has at least 500 participants in the United States.''.
    (b) Conforming Amendments.--Section 2791(d) of the Public Health 
Service Act (42 U.S.C. 300gg-91(d)) is amended by adding at the end the 
following:
            ``(15) 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.
            ``(16) Eligible individual.--The term `eligible individual' 
        means, with respect to an eligible employee, such employee, and 
        any dependent of such employee.
            ``(17) NAIC.--The term `NAIC' means the National 
        Association of Insurance Commissioners.
            ``(18) Qualified group health plan.--The term `qualified 
        group health plan' shall have the meaning given the term in 
        section 2707.''.

SEC. 103. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT RELATING TO THE 
              INDIVIDUAL MARKET.

    The first subpart 3 of part B of title XXVII of the Public Health 
Service Act (42 U.S.C. 300gg-51 et seq.) is amended--
            (1) by redesignating such subpart as subpart 2; and
            (2) by adding at the end the following:

``SEC. 2753. APPLICABILITY OF GENERAL INSURANCE MARKET REFORMS.

    ``The provisions of chapter 2 of subpart 2 of part A shall apply to 
health insurance coverage offered by a health insurance issuer in the 
individual market in the same manner as they apply to health insurance 
coverage offered by a health insurance issuer in connection with a 
group health plan in the small or large group market.''.

SEC. 104. EFFECTIVE DATE.

    The amendments made by this subtitle shall apply with respect to 
health insurance coverage offered, sold, issued, renewed, in effect, or 
operated on or after January 1, 2005.

                       CHAPTER 2--TAX PROVISIONS

SEC. 111. ENFORCEMENT WITH RESPECT TO HEALTH INSURANCE ISSUERS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans) is amended by adding at 
the end the following:

``SEC. 4980H. FAILURE OF INSURER TO COMPLY WITH CERTAIN STANDARDS FOR 
              HEALTH INSURANCE COVERAGE.

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of a health insurance issuer to comply with the 
        requirements applicable to such issuer under--
                    ``(A) chapter 2 of subpart 2 of part A of title 
                XXVII of the Public Health Service Act;
                    ``(B) section 2753 of the Public Health Service 
                Act; and
                    ``(C) subpart C of part 7 of subtitle B of title I 
                of the Employee Retirement Income Security Act of 1974.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by a health insurance issuer in a State if the 
        Secretary of Health and Human Services determines that the 
        State has in effect a regulatory enforcement mechanism that 
        provides adequate sanctions with respect to such a failure by 
        such an issuer.
    ``(b) Amount of Tax.--
            ``(1)  In general.--Subject to paragraph (2), the amount of 
        the tax imposed by subsection (a) shall be $100 for each day 
        during which such failure persists for each person to which 
        such failure relates. A rule similar to the rule of section 
        4980D(b)(3) shall apply for purposes of this section.
            ``(2) Limitation.--The amount of the tax imposed by 
        subsection (a) for a health insurance issuer with respect to 
        health insurance coverage shall not exceed 25 percent of the 
        amounts received under the coverage for coverage during the 
        period such failure persists.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the health insurance issuer.
    ``(d) Limitations on Amount of Tax.--
            ``(1) 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 (or such period as the Secretary may determine 
                appropriate) beginning on the first date the health 
                insurance issuer knows, or exercising reasonable 
                diligence could have known, that such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(e) Definitions.--For purposes of this section, the terms `health 
insurance coverage' and `health insurance issuer' have the meanings 
given such terms in section 2791 of the Public Health Service Act and 
section 733 of the Employee Retirement Income Security Act of 1974.''.
    (b) Conforming Amendment.--The table of sections for such chapter 
43 is amended by adding at the end the following new item:

                              ``Sec. 4980H. Failure of insurer to 
                                        comply with certain standards 
                                        for health insurance 
                                        coverage.''.

SEC. 112. ENFORCEMENT WITH RESPECT TO SMALL EMPLOYERS.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to excise taxes on certain group health plans) is amended by 
inserting after section 5000 the following new section:

``SEC. 5000A. SMALL EMPLOYER REQUIREMENTS.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of any small employer to comply with the requirements applicable to 
such employer under--
            ``(1) subchapter C of chapter 2 of subpart 2 of part A of 
        title XXVII of the Public Health Service Act;
            ``(2) section 2753 of the Public Health Service Act; and
            ``(3) chapter 2 of subpart C of part 7 of subtitle B of 
        title I of the Employee Retirement Income Security Act of 1974.
    ``(b) Amount of Tax.--The amount of tax imposed by subsection (a) 
shall be equal to $100 for each day for each individual for which such 
a failure occurs.
    ``(c) Limitation on Tax.--
            ``(1) 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 (or such period as the Secretary may determine 
                appropriate) beginning on the 1st date any of the 
                individuals on whom the tax is imposed knew, or 
                exercising reasonable diligence would have known, that 
                such failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.''.
    (b) Conforming Amendment.--The table of sections for such chapter 
47 is amended by adding at the end the following new item:

                              ``Sec. 5000A. Small employer 
                                        requirements.''.

SEC. 113. ENFORCEMENT BY EXCISE TAX ON QUALIFIED ASSOCIATIONS.

    (a) In General.--Chapter 43 of the Internal Revenue Code of 1986 
(relating to qualified pension, etc., plans), as amended by section 
111, is amended by adding at the end the following new section:

``SEC. 4980I. FAILURE OF QUALIFIED ASSOCIATIONS, ETC., TO COMPLY WITH 
              CERTAIN STANDARDS FOR HEALTH INSURANCE COVERAGE.

    ``(a) Imposition of Tax.--
            ``(1) In general.--There is hereby imposed a tax on the 
        failure of a qualified association (as defined in section 2709A 
        of the Public Health Service Act and section 723A of the 
        Employee Retirement Income Security Act of 1974), church plan 
        (as defined in section 414(e)), multiemployer plan, or plan 
        maintained by a rural electric cooperative or a rural telephone 
        cooperative association (within the meaning of section 3(40) of 
        the Employee Retirement Income Security Act of 1974) to comply 
        with the requirements applicable to such association or plans 
        under--
                    ``(A) subchapter C of chapter 2 of subpart 2 of 
                part A of title XXVII of the Public Health Service Act;
                    ``(B) section 2753 of the Public Health Service 
                Act; and
                    ``(C) subchapters A and B of chapter 3 of subpart C 
                of part 7 of the Employee Retirement Income Security 
                Act of 1974.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        failure by a qualified association, church plan, multiemployer 
        plan, or plan maintained by a rural electric cooperative or a 
        rural telephone cooperative association in a State if the 
        Secretary of Health and Human Services determines that the 
        State has in effect a regulatory enforcement mechanism that 
        provides adequate sanctions with respect to such a failure by 
        such a qualified association or plan.
    ``(b) Amount of Tax.--The amount of the tax imposed by subsection 
(a) shall be $100 for each day during which such failure persists for 
each person to which such failure relates. A rule similar to the rule 
of section 4980D(b)(3) shall apply for purposes of this section.
    ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid by the qualified association or plan.
    ``(d) Limitations on Amount of Tax.--
            ``(1) 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 (or such period as the Secretary may determine 
                appropriate) beginning on the first date the qualified 
                association, church plan, multiemployer plan, or plan 
                maintained by a rural electric cooperative or a rural 
                telephone cooperative association knows, or exercising 
                reasonable diligence could have known, that such 
                failure existed.
            ``(2) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.''.
    (b) Conforming Amendment.--The table of sections for such chapter 
43, as amended by section 111, is amended by adding at the end the 
following new item:

                              ``Sec. 4980I. Failure of qualified 
                                        associations, etc., to comply 
                                        with certain standards for 
                                        health insurance plans.''.

                  Subtitle B--COBRA Portability Reform

SEC. 121. AMENDMENTS TO COBRA.

    (a) Amendments to Internal Revenue Code of 1986.--
            (1) Lower cost coverage options.--Subparagraph (A) of 
        section 4980B(f)(2) of the Internal Revenue Code of 1986 
        (relating to continuation coverage requirements of group health 
        plans) is amended to read as follows:
                    ``(A) Type of benefit coverage.--The coverage must 
                consist of coverage which, as of the time the coverage 
                is being provided--
                            ``(i) is identical to the coverage provided 
                        under the plan to similarly situated 
                        beneficiaries under the plan with respect to 
                        whom a qualifying event has not occurred,
                            ``(ii) is so identical, except such 
                        coverage is offered with an annual $1,000 
                        deductible, and
                            ``(iii) is so identical, except such 
                        coverage is offered with an annual $3,000 
                        deductible.
                If coverage under the plan is modified for any group of 
                similarly situated beneficiaries, the coverage shall 
                also be modified in the same manner for all individuals 
                who are qualified beneficiaries under the plan pursuant 
                to this subsection in connection with such group.''.
            (2) Termination of cobra coverage after eligible for 
        employer-based coverage for 90 days.--Clause (iv) of section 
        4980B(f)(2)(B) of the Internal Revenue Code of 1986 (relating 
        to period of coverage) is amended--
                    (A) by striking ``or'' at the end of subclause (I);
                    (B) by redesignating subclause (II) as subclause 
                (III); and
                    (C) by inserting after subclause (I) the following:
                                    ``(II) eligible for such employer-
                                based coverage for more than 90 days, 
                                or''.
            (3) Increase in period of coverage.--Clause (i) of section 
        4980B(f)(2)(B) of the Internal Revenue Code of 1986 (relating 
to period of coverage) is amended by striking ``18 months'' each place 
it appears and inserting ``24 months''.
            (4) Continuation coverage for dependent child.--Clause (i) 
        of section 4980B(f)(2)(B) of the Internal Revenue Code of 1986 
        is amended by adding at the end the following:
                                    ``(VI) Special rule for dependent 
                                child.--In the case of a qualifying 
                                event described in paragraph (3)(E), 
                                the date that is 36 months after the 
                                date on which the dependent child of 
                                the covered employee ceases to be a 
                                dependent child under the plan.''.
    (b) Amendments to Employee Retirement Income Security Act of 
1974.--
            (1) Lower cost coverage options.--Paragraph (1) of section 
        602 of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1162(1)) (relating to continuation coverage requirements 
        of group health plans) is amended to read as follows:
            ``(1) Type of benefit coverage.--The coverage must consist 
        of coverage which, as of the time the coverage is being 
        provided--
                    ``(A) is identical to the coverage provided under 
                the plan to similarly situated beneficiaries under the 
                plan with respect to whom a qualifying event has not 
                occurred,
                    ``(B) is so identical, except such coverage is 
                offered with an annual $1,000 deductible, and
                    ``(C) is so identical, except such coverage is 
                offered with an annual $3,000 deductible.
        If coverage under the plan is modified for any group of 
        similarly situated beneficiaries, the coverage shall also be 
        modified in the same manner for all individuals who are 
        qualified beneficiaries under the plan pursuant to this 
        subsection in connection with such group.''.
            (2) Termination of cobra coverage after eligible for 
        employer-based coverage for 90 days.--Subparagraph (D) of 
        section 602(2) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1162(2)(D)) (relating to period of coverage) 
        is amended--
                    (A) by striking ``or'' at the end of clause (i);
                    (B) by redesignating clause (ii) as clause (iii); 
                and
                    (C) by inserting after clause (i) the following:
                            ``(ii) eligible for such employer-based 
                        coverage for more than 90 days, or''.
            (3) Increase of period of coverage.--Subparagraph (A) of 
        section 602(2) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1162(2)(A)) (relating to period of coverage) 
        is amended by striking ``18 months'' each place it appears and 
        inserting ``24 months''.
            (4) Continuation coverage for dependent child.--
        Subparagraph (A) of section 602(2) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1162(2)(A)) is amended 
        by adding at the end the following:
                            ``(vi) Special rule for dependent child.--
                        In the case of a qualifying event described in 
                        section 603(5), the date that is 36 months 
                        after the date on which the dependent child of 
                        the covered employee ceases to be a dependent 
                        child under the plan.''.
    (c) Amendments to Public Health Service Act.--
            (1) Lower cost coverage options.--Paragraph (1) of section 
        2202 of the Public Health Service Act (42 U.S.C. 300bb-2(1)) 
        (relating to continuation coverage requirements of group health 
        plans) is amended to read as follows:
            ``(1) Type of benefit coverage.--The coverage must consist 
        of coverage which, as of the time the coverage is being 
        provided--
                    ``(A) is identical to the coverage provided under 
                the plan to similarly situated beneficiaries under the 
                plan with respect to whom a qualifying event has not 
                occurred,
                    ``(B) is so identical, except such coverage is 
                offered with an annual $1,000 deductible, and
                    ``(C) is so identical, except such coverage is 
                offered with an annual $3,000 deductible.
        If coverage under the plan is modified for any group of 
        similarly situated beneficiaries, the coverage shall also be 
        modified in the same manner for all individuals who are 
        qualified beneficiaries under the plan pursuant to this 
        subsection in connection with such group.''.
            (2) Termination of cobra coverage after eligible for 
        employer-based coverage for 90 days.--Subparagraph (D) of 
        section 2202(2) of the Public Health Service Act (42 U.S.C. 
        300bb-2(2)(D)) (relating to period of coverage) is amended--
                    (A) by striking ``or'' at the end of clause (i);
                    (B) by redesignating clause (ii) as clause (iii); 
                and
                    (C) by inserting after clause (i) the following:
                            ``(ii) eligible for such employer-based 
                        coverage for more than 90 days, or''.
            (3) Increase of period of coverage.--Subparagraph (A) of 
        section 2202(2) of the Public Health Service Act (42 U.S.C. 
        300bb-2(2)(A)) (relating to period of coverage) is amended by 
        striking ``18 months'' each place it appears and inserting ``24 
        months''.
            (4) Continuation coverage for dependent child.--
        Subparagraph (A) of section 2202(2) of the Public Health 
        Service Act (42 U.S.C. 300bb-2(2)(A)) is amended by adding at 
        the end the following:
                            ``(v) Special rule for dependent child.--In 
                        the case of a qualifying event described in 
                        section 2203(5), the date that is 36 months 
                        after the date on which the dependent child of 
                        the covered employee ceases to be a dependent 
                        child under the plan.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to qualifying events occurring after the date of the enactment of 
this Act.

            Subtitle C--Providing Coverage for Young Adults

SEC. 131. GRANTS FOR YOUNG ADULTS HEALTH INSURANCE COVERAGE.

    (a) In General.--The Secretary of Health and Human Services 
(referred to in this section as the ``Secretary'') shall award grants 
to State for the establishment and demonstration of programs to provide 
incentives to eligible young adults for the acquisition of health 
insurance coverage.
    (b) Application.--To be eligible to receive a grant under 
subsection (a) a State shall prepare and submit to the Secretary an 
application at such time, in such manner, and containing such 
information as the Secretary may require, including a description of 
the program to be carried out by the State with amounts received under 
the grant.
    (c) Use of Funds.--A State shall use amounts received under a grant 
under this section to carry out program to provide financial incentives 
to full-time or part-time college students, recent college graduates, 
and other young adults (as defined by the State program) without health 
insurance coverage to enable such individuals to purchase such 
coverage.
    (d) Requirement.--A State shall carry out a program under this 
section through an existing State program such as a State high risk 
pool.
    (e) Termination of Incentive.--A State shall ensure that under the 
program established by the State under this section, the incentive 
provided to an individual shall terminate upon the individual being 
provided with the opportunity to purchase health insurance coverage 
through an employer.
    (f) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section, $4,000,000,000 for fiscal year 
2005, and such sums as may be necessary for each fiscal year 
thereafter.

            Subtitle D--Low Income Coverage Outreach Program

SEC. 141. LOW INCOME COVERAGE OUTREACH PROGRAM.

    (a) Establishment.--The Secretary of Health and Human Services, in 
conjunction with the Secretary of Agriculture, the Administrator of the 
Social Security Administration, and other appropriate Federal 
officials, shall establish a program to provide outreach to improve the 
public's knowledge concerning--
            (1) health insurance coverage and health services available 
        through Federal programs; and
            (2) the public health benefits of health insurance 
        coverage, including the advantages of receiving preventive and 
        wellness items and services.
    (b) Target Populations.--Outreach efforts under the program under 
subsection (a) shall be targeted at populations who may be eligible for 
assistance under programs described in subsection (a), as determined by 
the Federal officials involved in administering the outreach program, 
including recent immigrants and migrant and seasonal farmworkers.
    (c) Culturally Appropriate Message.--Informational and other 
materials provided through the program established under subsection 
(a), shall be designed in a culturally appropriate manner.

 TITLE II--EXPANSION OF THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM 
                          AND FAMILY COVERAGE

SEC. 201. INCREASE IN INCOME ELIGIBILITY.

    (a) Definition of Low-Income Child.--Section 2110(c)(4) of the 
Social Security Act (42 U.S.C. 42 U.S.C. 1397jj(c)(4)) is amended by 
striking ``200'' and inserting ``235''.
    (b) Effective Date.--The amendment made by subsection (a) takes 
effect on October 1, 2004.

SEC. 202. STATE OPTION TO EXPAND COVERAGE TO PARENTS AND PREGNANT 
              WOMEN.

    (a) In General.--Title XXI of the Social Security Act (42 U.S.C. 
1397aa et seq.) is amended by adding at the end the following:

``SEC. 2111. OPTIONAL COVERAGE OF PARENTS OF TARGETED LOW-INCOME 
              CHILDREN AND PREGNANT WOMEN.

    ``(a) Optional Coverage.--Notwithstanding any other provision of 
this title, a State may provide for coverage, through an amendment to 
its State child health plan under section 2102, of parent health 
assistance for targeted low-income parents, health care assistance for 
targeted low-income pregnant women, or both, in accordance with this 
section.
    ``(b) Definitions.--For purposes of this title:
            ``(1) Parent health assistance.--The term `parent health 
        assistance' has the meaning given the term child health 
        assistance in section 2110(a) as if any reference to targeted 
        low-income children were a reference to targeted low-income 
        parents.
            ``(2) Parent.--The term `parent' has the meaning given the 
        term `caretaker relative' for purposes of carrying out section 
        1931.
            ``(3) Health care assistance for pregnant women.--The term 
        `health care assistance for pregnant women' has the meaning 
        given the term child health assistance in section 2110(a) as if 
        any reference to targeted low-income children were a reference 
        to targeted low-income pregnant women.
            ``(4) Targeted low-income parent.--The term `targeted low-
        income parent' has the meaning given the term targeted low-
        income child in section 2110(b) as if the reference to a child 
        were deemed a reference to a parent (as defined in paragraph 
        (3)) of the child; except that in applying such section--
                    ``(A) there shall be substituted for the income 
                level described in paragraph (1)(B)(ii)(I) the 
applicable income level in effect for a targeted low-income child;
                    ``(B) in paragraph (3), January 1, 2005, shall be 
                substituted for July 1, 1997; and
                    ``(C) in paragraph (4), January 1, 2005, shall be 
                substituted for March 31, 1997.
            ``(5) Targeted low-income pregnant woman.--The term 
        `targeted low-income pregnant woman' has the meaning given the 
        term targeted low-income child in section 2110(b) as if any 
        reference to a child were a reference to a woman during 
        pregnancy and through the end of the month in which the 60-day 
        period beginning on the last day of her pregnancy ends; except 
        that in applying such section--
                    ``(A) there shall be substituted for the income 
                level described in paragraph (1)(B)(ii)(I) the 
                applicable income level in effect for a targeted low-
                income child;
                    ``(B) in paragraph (3), January 1, 2005, shall be 
                substituted for July 1, 1997; and
                    ``(C) in paragraph (4), January 1, 2005, shall be 
                substituted for March 31, 1997.
    ``(c) References to Terms and Special Rules.--In the case of, and 
with respect to, a State providing for coverage of parent health 
assistance to targeted low-income parents or health care assistance to 
targeted low-income pregnant women under subsection (a), the following 
special rules apply:
            ``(1) Any reference in this title (other than in subsection 
        (b)) to a targeted low-income child is deemed to include a 
        reference to a targeted low-income parent or a targeted low-
        income pregnant woman (as applicable).
            ``(2) Any such reference to child health assistance--
                    ``(A) with respect to such parents is deemed a 
                reference to parent health assistance; and
                    ``(B) with respect to such pregnant women, is 
                deemed a reference to health care assistance for 
                pregnant women.
            ``(3) In applying section 2103(e)(3)(B) in the case of a 
        family (consisting of a parent and one or more children) 
        provided coverage under this section or a pregnant woman 
        provided coverage under this section without covering other 
        family members, the limitation on total annual aggregate cost-
        sharing shall be applied to such entire family or such pregnant 
        woman, respectively.
            ``(4) In applying section 2110(b)(4), any reference to 
        `section 1902(l)(2) or 1905(n)(2) (as selected by a State)' is 
        deemed a reference to the effective income level applicable to 
        parents under section 1931 or under a waiver approved under 
        section 1115, or, in the case of a pregnant woman, the income 
        level established under section 1902(l)(2)(A).
            ``(5) In applying section 2102(b)(3)(B), any reference to 
        children found through screening to be eligible for medical 
        assistance under the State medicaid plan under title XIX is 
        deemed a reference to parents and pregnant women.''.
    (b) Effective Date.--The amendments made by this subsection apply 
to items and services furnished on or after October 1, 2004, whether or 
not regulations implementing such amendments have been issued.

            TITLE III--MEDICARE PROGRAM INTEGRITY ACTIVITIES

SEC. 301. INCREASED FUNDING FOR THE MEDICARE INTEGRITY PROGRAM.

    Section 1817(k)(4)(B) of the Social Security Act (42 U.S.C. 
1395i(k)(4)(B)) is amended by striking clause (vii) and inserting the 
following:
                            ``(vi) For each of fiscal years 2002, 2003, 
                        and 2004, such amount shall be not less than 
                        $710,000,000 and not more than $720,000,000.
                            ``(vii) For fiscal year 2005, such amount 
                        shall be not less than $760,000,000 and not 
                        more than $770,000,000.
                            ``(viii) For fiscal year 2006, such amount 
                        shall be not less than $810,000,000 and not 
                        more than $820,000,000.
                            ``(ix) For fiscal year 2007, such amount 
                        shall be not less than $860,000,000 and not 
                        more than $870,000,000.
                            ``(x) For fiscal year 2008, such amount 
                        shall be not less than $920,000,000 and not 
                        more than $930,000,000.
                            ``(xi) For each fiscal year after fiscal 
                        year 2008, such amount shall be not less than 
                        $990,000,000 and not more than 
                        $1,000,000,000.''.
    

  TITLE IV--REDUCING MEDICAL ERRORS AND INCREASING THE USE OF MEDICAL 
                               TECHNOLOGY

SEC. 401. MEDICAL ERRORS REDUCTION.

    Title IX of the Public Health Service Act (42 U.S.C. 299 et seq.) 
is amended--
            (1) by redesignating part C as part D;
            (2) by redesignating sections 921 through 928, as sections 
        931 through 938, respectively;
            (3) in section 938(1) (as so redesignated), by striking 
        ``921'' and inserting ``931''; and
            (4) by inserting after part B the following:

                ``PART C--REDUCING ERRORS IN HEALTH CARE

``SEC. 921. DEFINITIONS.

    ``In this part:
            ``(1) Adverse event.--The term `adverse event' means an 
        injury resulting from medical management rather than the 
        underlying condition of the patient.
            ``(2) Error.--The term `error' means the failure of a 
        planned action to be completed as intended or the use of a 
        wrong plan to achieve the desired outcome.
            ``(3) Health care provider.--The term `health care 
        provider' means an individual or entity that provides medical 
        services and is a participant in a demonstration program under 
        this part.
            ``(4) Health care-related error.--The term ``health care-
        related error'' means a preventable adverse event related to a 
        health care intervention or a failure to intervene 
        appropriately.
            ``(5) Medication-related error.--The term `medication-
        related error' means a preventable adverse event related to the 
        administration of a medication.
            ``(6) Safety.--The term `safety' with respect to an 
        individual means that such individual has a right to be free 
        from preventable serious injury.
            ``(7) Sentinel event.--The term `sentinel event' means an 
        unexpected occurrence involving an individual that results in 
        death or serious physical injury that is unrelated to the 
        natural course of the individual's illness or underlying 
        condition.

``SEC. 922. ESTABLISHMENT OF STATE-BASED MEDICAL ERROR REPORTING 
              SYSTEMS.

    ``(a) In General.--The Secretary shall make grants available to 
States to enable such States to establish reporting systems designed to 
reduce medical errors and improve health care quality.
    ``(b) Requirement.--
            ``(1) In general.--To be eligible to receive a grant under 
        subsection (a), the State involved shall provide assurances to 
        the Secretary that amounts received under the grant will be 
        used to establish and implement a medical error reporting 
        system using guidelines (including guidelines relating to the 
        confidentiality of the reporting system) developed by the 
        Agency for Healthcare Research and Quality with input from 
        interested, non-governmental parties including patient, 
        consumer and health care provider groups.
            ``(2) Guidelines.--Not later than 90 days after the date of 
        enactment of this part, the Agency for Healthcare Research and 
        Quality shall develop and publish the guidelines described in 
        paragraph (1).
    ``(c) Data.--
            ``(1) Availability.--A State that receives a grant under 
        subsection (a) shall make the data provided to the medical 
        error reporting system involved available only to the Agency 
        for Healthcare Research and Quality and may not otherwise 
        disclose such information.
            ``(2) Confidentiality.--Nothing in this part shall be 
        construed to supersede any State law that is inconsistent with 
        this part.
    ``(d) Application.--To be eligible for a grant under this section, 
a State shall prepare and submit to the Secretary an application at 
such time, in such manner and containing, such information as the 
Secretary shall require.

``SEC. 923. DEMONSTRATION PROJECTS TO REDUCE MEDICAL ERRORS, IMPROVE 
              PATIENT SAFETY, AND EVALUATE REPORTING.

    ``(a) Establishment.--The Secretary, acting through the Director of 
the Agency for Healthcare Research and Quality and in conjunction with 
the Administrator of the Health Care Financing Administration, may 
establish a program under which funding will be provided for not less 
than 15 demonstration projects, to be competitively awarded, in health 
care facilities and organizations in geographically diverse locations, 
including rural and urban areas (as determined by the Secretary), to 
determine the causes of medical errors and to--
            ``(1) use technology, staff training, and other methods to 
        reduce such errors;
            ``(2) develop replicable models that minimize the frequency 
        and severity of medical errors;
            ``(3) develop mechanisms that encourage reporting, prompt 
        review, and corrective action with respect to medical errors; 
        and
            ``(4) develop methods to minimize any additional paperwork 
        burden on health care professionals.
    ``(b) Activities.--
            ``(1) In general.--A health care provider participating in 
        a demonstration project under subsection (a) shall--
                    ``(A) utilize all available and appropriate 
                technologies to reduce the probability of future 
                medical errors; and
                    ``(B) carry out other activities consistent with 
                subsection (a).
            ``(2) Reporting to patients.--In carrying out this section, 
        the Secretary shall ensure that--
                    ``(A) 5 of the demonstration projects permit the 
                voluntary reporting by participating health care 
                providers of any adverse events, sentinel events, 
                health care-related errors, or medication-related 
                errors to the Secretary;
                    ``(B) 5 of the demonstration projects require 
                participating health care providers to report any 
                adverse events, sentinel events, health care-related 
                errors, or medication-related errors to the Secretary; 
                and
                    ``(C) 5 of the demonstration projects require 
                participating health care providers to report any 
                adverse events, sentinel events, health care-related 
                errors, or medication-related errors to the Secretary 
                and to the patient involved and a family member or 
                guardian of the patient.
            ``(3) Confidentiality.--
                    ``(A) In general.--The Secretary and the 
                participating grantee organization shall ensure that 
                information reported under this section remains 
                confidential.
                    ``(B) Use.--The Secretary may use the information 
                reported under this section only for the purpose of 
                evaluating the ability to reduce errors in the delivery 
                of care. Such information shall not be used for 
                enforcement purposes.
                    ``(C) Disclosure.--The Secretary may not disclose 
                the information reported under this section.
                    ``(D) Nonadmissibility.--Information reported under 
                this section shall be privileged, confidential, shall 
                not be admissible as evidence or discoverable in any 
                civil or criminal action or proceeding or subject to 
                disclosure, and shall not be subject to the Freedom of 
                Information Act (5 U.S.C. App). This paragraph shall 
                apply to all information maintained by the reporting 
                entity and the entities who receive such reports.
    ``(c) Use of Technologies.--The Secretary shall encourage, as part 
of the demonstration projects conducted under subsection (a), the use 
of appropriate technologies to reduce medical errors, such as hand-held 
electronic prescription pads, training simulators for medical 
education, and bar-coding of prescription drugs and patient bracelets.
    ``(d) Database.--The Secretary shall provide for the establishment 
and operation of a national database of medical errors to be used as 
provided for by the Secretary. The information provided to the 
Secretary under subsection (b)(2) shall be contained in the database.
    ``(e) Evaluation.--The Secretary shall evaluate the progress of 
each demonstration project established under this section in reducing 
the incidence of medical errors and submit the results of such 
evaluations as part of the reports under section 926(b).
    ``(f) Reporting.--Prior to October 1, of the third fiscal year for 
which funds are made available under this section, the Secretary shall 
prepare and submit to the appropriate committees of Congress an interim 
report concerning the results of such demonstration projects.

``SEC. 924. PATIENT SAFETY IMPROVEMENT.

    ``(a) In General.--The Secretary shall provide information to 
educate patients and family members about their role in reducing 
medical errors. Such information shall be provided to all individuals 
who participate in Federally-funded health care programs.
    ``(b) Development of Programs.--The Secretary shall develop 
programs that encourage patients to take a more active role in their 
medical treatment, including encouraging patients to provide 
information to health care providers concerning pre-existing conditions 
and medications.

``SEC. 925. PRIVATE, NONPROFIT EFFORTS TO REDUCE MEDICAL ERRORS.

    ``(a) In General.--The Secretary shall make grants to health 
professional associations and other organizations to provide training 
in ways to reduce medical errors, including curriculum development, 
technology training, and continuing medical education.
    ``(b) Application.--To be eligible for a grant under this section, 
an entity shall prepare and submit to the Secretary an application at 
such time, in such manner and containing, such information as the 
Secretary shall require.

``SEC. 926. REPORT TO CONGRESS.

    ``(a) Initial Report.--Not later than 180 days after the date of 
enactment of this part, the Secretary shall prepare and submit to the 
appropriate committees of Congress a report concerning the costs 
associated with implementing a program that identifies factors that 
contribute to errors and which includes upgrading the health care 
computer systems and other technologies in the United States in order 
to reduce medical errors, including computerizing hospital systems for 
the coordination of prescription drugs and handling of laboratory 
specimens, and contains recommendations on ways in which to reduce 
those factors.
    ``(b) Other Reports.--Not later than 180 days after the completion 
of all demonstration projects under section 923, the Secretary shall 
prepare and submit to the appropriate committees of Congress a report 
concerning--
            ``(1) how successful each demonstration project was in 
        reducing medical errors;
            ``(2) the data submitted by States under section 922(c);
            ``(3) the best methods for reducing medical errors;
            ``(4) the costs associated with applying such best methods 
        on a nationwide basis; and
            ``(5) the manner in which other Federal agencies can share 
        information on best practices in order to reduce medical errors 
        in all Federal health care programs.

``SEC. 927. AUTHORIZATION OF APPROPRIATIONS.

    ``There is authorized to be appropriated such sums as may be 
necessary to carry out this part.''.

SEC. 402. ENHANCING INVESTMENT IN COST-EFFECTIVE METHODS OF HEALTH 
              CARE.

    (a) In General.--Subchapter A of chapter 98 of the Internal Revenue 
Code of 1986 (relating to trust fund code) is amended by adding at the 
end the following:

``SEC. 9511. TRUST FUND FOR MEDICAL TREATMENT OUTCOMES RESEARCH.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Trust Fund for 
Medical Treatment Outcomes Research' (referred to in this section as 
the `Trust Fund'), consisting of such amounts as may be appropriated or 
credited to the Trust Fund as provided in this section or section 
9602(b).
    ``(b) Transfers to Trust Fund.--There is hereby appropriated to the 
Trust Fund an amount equivalent to the taxes received in the Treasury 
under section 4491 (relating to tax on health insurance policies).
    ``(c) Distribution of Amounts in Trust Fund.--On an annual basis 
and without further appropriation the Secretary shall distribute the 
amounts in the Trust Fund to the Secretary of Health and Human Services 
for use by the Agency for Healthcare Research and Quality. Such amounts 
shall be available to pay for research activities related to medical 
treatment outcomes and shall be in addition to any other amounts 
appropriated for such purposes.''.
    (b) Conforming Amendment.--The table of sections for subchapter A 
of chapter 98 of such Code is amended by adding at the end the 
following:

                              ``Sec. 9511. Trust Fund for Medical 
                                        Treatment Outcomes Research.''.

SEC. 403. INCREASING THE USE OF MEDICAL TECHNOLOGY

    The Secretary of Health and Human Services shall--
            (1) provide grants and contracts to enhance the development 
        of information technology standards by the private sector;
            (2) carry out activities to examine how the use of 
        information technology can be encouraged; and
            (3) coordinate information technology-related activities 
        taken by the Federal Government and ensure that such activities 
        will further national health information and infrastructure.

   TITLE V--IMPROVING HEALTH CARE QUALITY, EFFICIENCY, AND CONSUMER 
                               EDUCATION

SEC. 501. GRANTS FOR DEMONSTRATION PROJECTS.

    (a) In General.--The Secretary of Health and Human Services 
(referred to in this section as the ``Secretary'') shall award grants 
to eligible entities for the establishment of demonstration projects to 
educate the public concerning their health care choices.
    (b) Eligibility.--To be eligible to receive a grant under 
subsection (a), an entity shall be a public or nonprofit private entity 
and prepare and submit to the Secretary an application at such time, in 
such manner, and containing such information as the Secretary may 
require.
    (c) Use of Funds.--An entity shall use amounts received under a 
grant under this section to conduct activities to provide educational 
materials to individuals to inform such individuals about--
            (1) health care choices;
            (2) health care costs;
            (3) health care quality control; and
            (4) other matter determined appropriate by the Secretary.
    (d) Public Service Announcements.-- the Secretary shall provide for 
the development of public service announcements to educate the public 
about their health care choices.
    (e) Advance Directives.--In carrying out this section, the 
Secretary shall develop ways to improve the effectiveness and 
portability of advance directives and living wills.
    (f) Authorization of Appropriations.--There is authorized to be 
appropriated, such sums as may be necessary to carry out this section.

            TITLE VI--PRIMARY AND PREVENTIVE CARE PROVIDERS

SEC. 601. INCREASED MEDICARE REIMBURSEMENT FOR PHYSICIAN ASSISTANTS, 
              NURSE PRACTITIONERS, AND CLINICAL NURSE SPECIALISTS.

    (a) Fee Schedule Amount.--Section 1833(a)(1)(O) of the Social 
Security Act (42 U.S.C. 1395l(a)(1)(O)) is amended by striking ``85 
percent'' and inserting ``90 percent'' each place it appears.
    (b) Technical Amendment.--Section 1833(a)(1)(O) of the Social 
Security Act (42 U.S.C. 1395l(a)(1)(O)) is amended by striking 
``clinic'' and inserting ``clinical''.
    (c) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on and after January 1, 2005.

SEC. 602. REQUIRING COVERAGE OF CERTAIN NONPHYSICIAN PROVIDERS UNDER 
              THE MEDICAID PROGRAM.

    (a) In General.--Section 1905(a) of the Social Security Act (42 
U.S.C. 1396d(a)), as amended by section 301(c)(1), is amended--
            (1) in paragraph (27), by striking ``and'' at the end;
            (2) by redesignating paragraph (28) as paragraph (29); and
            (3) by inserting after paragraph (27) the following:
            ``(28) services furnished by a physician assistant, nurse 
        practitioner, clinical nurse specialist (as defined in section 
        1861(aa)(5)), or certified registered nurse anesthetist (as 
        defined in section 1861(bb)(2)); and''.
    (b) Conforming Amendment.--Section 1902(a)(10)(C)(iv) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(C)(iv)), as amended by section 
301(c)(3), is amended by striking ``and (27)'' and inserting ``, (27), 
and (28)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to medical assistance furnished under title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) beginning with the first fiscal 
year quarter that begins after the date of enactment of this Act.

SEC. 603. MEDICAL STUDENT TUTORIAL PROGRAM GRANTS.

    Part C of title VII of the Public Health Service Act (42 U.S.C. 
293j et seq.) is amended by adding at the end the following:

``SEC. 749. MEDICAL STUDENT TUTORIAL PROGRAM GRANTS.

    ``(a) Establishment.--The Secretary shall establish a program to 
award grants to eligible schools of medicine or osteopathic medicine to 
enable such schools to provide medical students for tutorial programs 
or as participants in clinics designed to interest high school or 
college students in careers in general medical practice.
    ``(b) Application.--To be eligible to receive a grant under this 
section, a school of medicine or osteopathic medicine shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
assurances that the school will use amounts received under the grant in 
accordance with subsection (c).
    ``(c) Use of Funds.--
            ``(1) In general.--Amounts received under a grant awarded 
        under this section shall be used to--
                    ``(A) fund programs under which students of the 
                grantee are provided as tutors for high school and 
                college students in the areas of mathematics, science, 
                health promotion and prevention, first aid, nutrition 
                and prenatal care;
                    ``(B) fund programs under which students of the 
                grantee are provided as participants in clinics and 
seminars in the areas described in paragraph (1); and
                    ``(C) conduct summer institutes for high school and 
                college students to promote careers in medicine.
            ``(2) Design of programs.--The programs, institutes, and 
        other activities conducted by grantees under paragraph (1) 
        shall be designed to--
                    ``(A) give medical students desiring to practice 
                general medicine access to the local community;
                    ``(B) provide information to high school and 
                college students concerning medical school and the 
                general practice of medicine; and
                    ``(C) promote careers in general medicine.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $5,000,000 for fiscal year 
2005, and such sums as may be necessary for fiscal year 2006.''.

SEC. 604. GENERAL MEDICAL PRACTICE GRANTS.

    Part C of title VII of the Public Health Service Act (as amended by 
section 703) is further amended by adding at the end the following:

``SEC. 749A. GENERAL MEDICAL PRACTICE GRANTS.

    ``(a) Establishment.--The Secretary shall establish a program to 
award grants to eligible public or private nonprofit schools of 
medicine or osteopathic medicine, hospitals, residency programs in 
family medicine or pediatrics, or to a consortium of such entities, to 
enable such entities to develop effective strategies for recruiting 
medical students interested in the practice of general medicine and 
placing such students into general practice positions upon graduation.
    ``(b) Application.--To be eligible to receive a grant under this 
section, an entity of the type described in subsection (a) shall 
prepare and submit to the Secretary an application at such time, in 
such manner, and containing such information as the Secretary may 
require, including assurances that the entity will use amounts received 
under the grant in accordance with subsection (c).
    ``(c) Use of Funds.--Amounts received under a grant awarded under 
this section shall be used to fund programs under which effective 
strategies are developed and implemented for recruiting medical 
students interested in the practice of general medicine and placing 
such students into general practice positions upon graduation.
    ``(d) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, $25,000,000 for each of the 
fiscal years 2005 through 2007, and such sums as may be necessary for 
fiscal years thereafter.''.
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