[Congressional Record Volume 142, Number 45 (Thursday, March 28, 1996)]
[House]
[Pages H3045-H3147]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1815
       HEALTH COVERAGE AVAILABILITY AND AFFORDABILITY ACT OF 1996

  Mr. ARCHER. Mr. Speaker, pursuant to House Resolution 392, I call up 
the bill (H.R. 3103), to amend the Internal Revenue Code of 1986 to 
improve portability and continuity of health insurance coverage in the 
group and individual markets, to combat waste, fraud, and abuse in 
health insurance and health care delivery, to promote the use of 
medical savings accounts, to improve access to long-term care services 
and coverage, to simplify the administration of health insurance, and 
for other purposes, and ask for its immediate consideration in the 
House.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Combest). Pursuant to House Resolution 
392, the amendment in the nature of a substitute consisting of the text 
of H.R. 3160 modified by the amendment specified in part 1 of House 
Report 104-501 is adopted.
  The text of H.R. 3103 consisting of the text of H.R. 3160, as 
modified, is as follows:

                               H.R. 3160

       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 
     Coverage Availability and Affordability Act of 1996''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

  TITLE I--IMPROVED AVAILABILITY AND PORTABILITY OF HEALTH INSURANCE 
                                COVERAGE

             Subtitle A--Coverage Under Group Health Plans

Sec. 101. Portability of coverage for previously covered individuals.
Sec. 102. Limitation on preexisting condition exclusions; no 
              application to certain newborns, adopted children, and 
              pregnancy.
Sec. 103. Prohibiting exclusions based on health status and providing 
              for enrollment periods.
Sec. 104. Enforcement.

Subtitle B--Certain Requirements for Insurers and HMOs in the Group and 
                           Individual Markets

        Part 1--Availability of Group Health Insurance Coverage

Sec. 131. Guaranteed availability of general coverage in the small 
              group market.
Sec. 132. Guaranteed renewability of group coverage.

[[Page H3046]]

      Part 2--Availability of Individual Health Insurance Coverage

Sec. 141. Guaranteed availability of individual health insurance 
              coverage to certain individuals with prior group 
              coverage.
Sec. 142. Guaranteed renewability of individual health insurance 
              coverage.

                          Part 3--Enforcement

Sec. 151. Incorporation of provisions for State enforcement with 
              Federal fallback authority.

 Subtitle C--Affordable and Available Health Coverage Through Multiple 
                     Employer Pooling Arrangements

Sec. 161. Clarification of duty of the Secretary of Labor to implement 
              provisions of current law providing for exemptions and 
              solvency standards for multiple employer health plans.

 ``Part 7--Rules Governing Regulation of Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Clarification of duty of the Secretary to implement 
              provisions of current law providing for exemptions and 
              solvency standards for multiple employer health plans.
``Sec. 703. Requirements relating to sponsors, boards of trustees, and 
              plan operations.
``Sec. 704. Other requirements for exemption.
``Sec. 705. Maintenance of reserves.
``Sec. 706. Notice requirements for voluntary termination.
``Sec. 707. Corrective actions and mandatory termination.
``Sec. 708. Additional rules regarding State authority.''.
Sec. 162. Affordable and available fully insured health coverage 
              through voluntary health insurance associations.
Sec. 163. State authority fully applicable to self-insured multiple 
              employer welfare arrangements providing medical care 
              which are not exempted under new part 7.
Sec. 164. Clarification of treatment of single employer arrangements.
Sec. 165. Clarification of treatment of certain collectively bargained 
              arrangements.
Sec. 166. Treatment of church plans.
Sec. 167. Enforcement provisions relating to multiple employer welfare 
              arrangements.
Sec. 168. Cooperation between Federal and State authorities.
Sec. 169. Filing and disclosure requirements for multiple employer 
              welfare arrangements offering health benefits.
Sec. 170. Single annual filing for all participating employers.
Sec. 171. Effective date; transitional rule.

              Subtitle D--Definitions; General Provisions

Sec. 191. Definitions; scope of coverage.
Sec. 192. State flexibility to provide greater protection.
Sec. 193. Effective date.
Sec. 194. Rule of construction.
Sec. 195. Findings relating to exercise of commerce clause authority.

   TITLE II--PREVENTING HEALTH CARE FRAUD AND ABUSE; ADMINISTRATIVE 
                SIMPLIFICATION; MEDICAL LIABILITY REFORM

Sec. 200. References in title.

              Subtitle A--Fraud and Abuse Control Program

Sec. 201. Fraud and abuse control program.
Sec. 202. Medicare integrity program.
Sec. 203. Beneficiary incentive programs.
Sec. 204. Application of certain health anti-fraud and abuse sanctions 
              to fraud and abuse against Federal health care programs.
Sec. 205. Guidance regarding application of health care fraud and abuse 
              sanctions.

     Subtitle B--Revisions to Current Sanctions for Fraud and Abuse

Sec. 211. Mandatory exclusion from participation in medicare and State 
              health care programs.
Sec. 212. Establishment of minimum period of exclusion for certain 
              individuals and entities subject to permissive exclusion 
              from medicare and State health care programs.
Sec. 213. Permissive exclusion of individuals with ownership or control 
              interest in sanctioned entities.
Sec. 214. Sanctions against practitioners and persons for failure to 
              comply with statutory obligations.
Sec. 215. Intermediate sanctions for medicare health maintenance 
              organizations.
Sec. 216. Additional exception to anti-kickback penalties for 
              discounting and managed care arrangements.
Sec. 217. Criminal penalty for fraudulent disposition of assets in 
              order to obtain medicaid benefits.
Sec. 218. Effective date.

                      Subtitle C--Data Collection

Sec. 221. Establishment of the health care fraud and abuse data 
              collection program.

                  Subtitle D--Civil Monetary Penalties

Sec. 231. Social security act civil monetary penalties.
Sec. 232. Clarification of level of intent required for imposition of 
              sanctions.
Sec. 233. Penalty for false certification for home health services.

                 Subtitle E--Revisions to Criminal Law

Sec. 241. Definitions relating to Federal health care offense.
Sec. 242. Health care fraud.
Sec. 243. Theft or embezzlement.
Sec. 244. False statements.
Sec. 245. Obstruction of criminal investigations of health care 
              offenses.
Sec. 246. Laundering of monetary instruments.
Sec. 247. Injunctive relief relating to health care offenses.
Sec. 248. Authorized investigative demand procedures.
Sec. 249. Forfeitures for Federal health care offenses.
Sec. 250. Relation to ERISA authority.

               Subtitle F--Administrative Simplification

Sec. 251. Purpose.
Sec. 252. Administrative simplification.

                ``Part C--Administrative Simplification

``Sec. 1171. Definitions.
``Sec. 1172. General requirements for adoption of standards.
``Sec. 1173. Standards for information transactions and data elements.
``Sec. 1174. Timetables for adoption of standards.
``Sec. 1175. Requirements.
``Sec. 1176. General penalty for failure to comply with requirements 
              and standards.
``Sec. 1177. Wrongful disclosure of individually identifiable health 
              information.
``Sec. 1178. Effect on State law.
Sec. 253. Changes in membership and duties of National Committee on 
              Vital and Health Statistics.

   Subtitle G--Duplication and Coordination of Medicare-Related Plans

Sec. 261. Duplication and coordination of medicare-related plans.

                  Subtitle H--Medical Liability Reform

                       Part 1--General Provisions

Sec. 271. Federal reform of health care liability actions.
Sec. 272. Definitions.
Sec. 273. Effective date.

      Part 2--Uniform Standards for Health Care Liability Actions

Sec. 281. Statute of limitations.
Sec. 282. Calculation and payment of damages.
Sec. 283. Alternative dispute resolution.

                TITLE III--TAX-RELATED HEALTH PROVISIONS

Sec. 300. Amendment of 1986 code.

                  Subtitle A--Medical Savings Accounts

Sec. 301. Medical savings accounts.

 Subtitle B--Increase in Deduction for Health Insurance Costs of Self-
                          Employed Individuals

Sec. 311. Increase in deduction for health insurance costs of self-
              employed individuals.

           Subtitle C--Long-Term Care Services and Contracts

                       Part I--General Provisions

Sec. 321. Treatment of long-term care insurance.
Sec. 322. Qualified long-term care services treated as medical care.
Sec. 323. Reporting requirements.

                Part II--Consumer Protection Provisions

Sec. 325. Policy requirements.
Sec. 326. Requirements for issuers of long-term care insurance 
              policies.
Sec. 327. Coordination with State requirements.
Sec. 328. Effective dates.

          Subtitle D--Treatment of Accelerated Death Benefits

Sec. 331. Treatment of accelerated death benefits by recipient.
Sec. 332. Tax treatment of companies issuing qualified accelerated 
              death benefit riders.

                      Subtitle E--High-Risk Pools

Sec. 341. Exemption from income tax for State-sponsored organizations 
              providing health coverage for high-risk individuals.

            Subtitle F--Organizations Subject to Section 833

Sec. 351. Organizations subject to section 833.

                       TITLE IV--REVENUE OFFSETS

Sec. 400. Amendment of 1986 Code.

   Subtitle A--Repeal of Bad Debt Reserve Method for Thrift Savings 
                              Associations

Sec. 401. Repeal of bad debt reserve method for thrift savings 
              associations.

             Subtitle B--Reform of the Earned Income Credit

Sec. 411. Earned income credit denied to individuals not authorized to 
              be employed in the United States.

Subtitle C--Treatment of Individuals Who Lose United States Citizenship

Sec. 421. Revision of income, estate, and gift taxes on individuals who 
              lose United States citizenship.
Sec. 422. Information on individuals losing United States citizenship.
Sec. 423. Report on tax compliance by United States citizens and 
              residents living abroad.

[[Page H3047]]

  TITLE I--IMPROVED AVAILABILITY AND PORTABILITY OF HEALTH INSURANCE 
                                COVERAGE
             Subtitle A--Coverage Under Group Health Plans

     SEC. 101. PORTABILITY OF COVERAGE FOR PREVIOUSLY COVERED 
                   INDIVIDUALS.

       (a) Crediting Periods of Previous Coverage Toward 
     Preexisting Condition Restrictions.--Subject to the 
     succeeding provisions of this section, a group health plan, 
     and an insurer or health maintenance organization offering 
     health insurance coverage in connection with a group health 
     plan, shall provide that any preexisting condition limitation 
     period (as defined in subsection (b)(2)) is reduced by the 
     length of the aggregate period of qualified prior coverage 
     (if any, as defined in subsection (b)(3)) applicable to the 
     participant or beneficiary as of the date of commencement of 
     coverage under the plan.
       (b) Definitions and Other Provisions Relating to 
     Preexisting Conditions.--
       (1) Preexisting condition.--
       (A) In general.--For purposes of this subtitle, subject to 
     subparagraph (B), the term ``preexisting condition'' means a 
     condition, regardless of the cause of the condition, for 
     which medical advice, diagnosis, care, or treatment was 
     recommended or received within the 6-month period ending on 
     the day before--
       (i) the effective date of the coverage of such participant 
     or beneficiary, or
       (ii) the earliest date upon which such coverage could have 
     been effective if there were no waiting period applicable,
     whichever is earlier.
       (B) Treatment of genetic information.--For purposes of this 
     section, genetic information shall not be considered to be a 
     preexisting condition, so long as treatment of the condition 
     to which the information is applicable has not been sought 
     during the 6-month period described in subparagraph (A).
       (2) Preexisting condition limitation period.--For purposes 
     of this subtitle, the term ``preexisting condition limitation 
     period'' means, with respect to coverage of an individual 
     under a group health plan or under health insurance coverage, 
     the period during which benefits with respect to treatment of 
     a condition of such individual are not provided based on the 
     fact that the condition is a preexisting condition.
       (3) Aggregate period of qualified prior coverage.--
       (A) In general.--For purposes of this section, the term 
     ``aggregate period of qualified prior coverage'' means, with 
     respect to commencement of coverage of an individual under a 
     group health plan or health insurance coverage offered in 
     connection with a group health plan, the aggregate of the 
     qualified coverage periods (as defined in subparagraph (B)) 
     of such individual occurring before the date of such 
     commencement. Such period shall be treated as zero if there 
     is more than a 60-day break in coverage under a group health 
     plan (or health insurance coverage offered in connection with 
     such a plan) between the date the most recent qualified 
     coverage period ends and the date of such commencement.
       (B) Qualified coverage period.--
       (i) In general.--For purposes of this paragraph, subject to 
     subsection (c), the term ``qualified coverage period'' means, 
     with respect to an individual, any period of coverage of the 
     individual under a group health plan, health insurance 
     coverage, under title XVIII or XIX of the Social Security 
     Act, coverage under the TRICARE program under chapter 55 of 
     title 10, United States Code, a program of the Indian Health 
     Service, and State health insurance coverage or risk pool, 
     and includes coverage under a health plan offered under 
     chapter 89 of title 5, United States Code.
       (ii) Disregarding periods before breaks in coverage.--Such 
     term does not include any period occurring before any 60-day 
     break in coverage described in subparagraph (A).
       (C) Waiting period not treated as a break in coverage.--For 
     purposes of subparagraphs (A) and (B), any period that is in 
     a waiting period for any coverage under a group health plan 
     (or for health insurance coverage offered in connection with 
     a group health plan) shall not be considered to be a break in 
     coverage described in subparagraph (B)(ii).
       (D) Establishment of period.--A qualified coverage period 
     with respect to an individual shall be established through 
     presentation of certifications described in subsection (c) or 
     in such other manner as may be specified in regulations to 
     carry out this title.
       (c) Certifications of Coverage; Conforming Coverage.--
       (1) In general.--The plan administrator of a group health 
     plan, or the insurer or HMO offering health insurance 
     coverage in connection with a group health plan, shall, on 
     request made on behalf of an individual covered (or 
     previously covered within the previous 18 months) under the 
     plan or coverage, provide for a certification of the period 
     of coverage of the individual under such plan or coverage and 
     of the waiting period (if any) imposed with respect to the 
     individual for any coverage under the plan.
       (2) Standard method.--Subject to paragraph (3), a group 
     health plan, or insurer or HMO offering health insurance 
     coverage in connection with a group health plan, shall 
     determine qualified coverage periods under subsection 
     (b)(3)(B) by including all periods described in such 
     subsection, without regard to the specific benefits offered 
     during such a period.
       (3) Alternative method.--Such a plan, insurer, or HMO may 
     elect to make such determination on a benefit-specific basis 
     for all participants and beneficiaries and not to include as 
     a qualified coverage period with respect to a specific 
     benefit coverage during a previous period unless such 
     previous coverage for that benefit was included at the end of 
     the most recent period of coverage. In the case of such an 
     election--
       (A) the plan, insurer, or HMO shall prominently state in 
     any disclosure statements concerning the plan or coverage and 
     to each enrollee at the time of enrollment under the plan (or 
     at the time the health insurance coverage is offered for sale 
     in the group health market) that the plan or coverage has 
     made such election and shall include a description of the 
     effect of this election; and
       (B) upon the request of the plan, insurer, or HMO, the 
     entity providing a certification under paragraph (1)--
       (i) shall promptly disclose to the requesting plan, 
     insurer, or HMO the plan statement (insofar as it relates to 
     health benefits under the plan) or other detailed benefit 
     information on the benefits available under the previous plan 
     or coverage, and
       (ii) may charge for the reasonable cost of providing such 
     information.

     SEC. 102. LIMITATION ON PREEXISTING CONDITION EXCLUSIONS; NO 
                   APPLICATION TO CERTAIN NEWBORNS, ADOPTED 
                   CHILDREN, AND PREGNANCY.

       (a) Limitation of Period.--
       (1) In general.--Subject to the succeeding provisions of 
     this section, a group health plan, and an insurer or HMO 
     offering health insurance coverage in connection with a group 
     health plan, shall provide that any preexisting condition 
     limitation period (as defined in section 101(b)(2)) does not 
     exceed 12 months, counting from the effective date of 
     coverage.
       (2) Extension of period in the case of late enrollment.--In 
     the case of a participant or beneficiary whose initial 
     coverage commences after the date the participant or 
     beneficiary first becomes eligible for coverage under the 
     group health plan, the reference in paragraph (1) to ``12 
     months'' is deemed a reference to ``18 months''.
       (b) Exclusion Not Applicable to Certain Newborns and 
     Certain Adoptions.--
       (1) In general.--Subject to paragraph (2), a group health 
     plan, and an insurer or HMO offering health insurance 
     coverage in connection with a group health plan, may not 
     provide any limitation on benefits based on the existence 
     of a preexisting condition in the case of--
       (A) an individual who within the 30-day period beginning 
     with the date of birth, or
       (B) an adopted child or a child placed for adoption 
     beginning at the time of adoption or placement if the 
     individual, within the 30-day period beginning on the date of 
     adoption or placement,

     becomes covered under a group health plan or otherwise 
     becomes covered under health insurance coverage (or covered 
     for medical assistance under title XIX of the Social Security 
     Act).
       (2) Loss if break in coverage.--Paragraph (1) shall no 
     longer apply to an individual if the individual does not have 
     any coverage described in section 101(b)(3)(B)(i) for a 
     continuous period of 60 days, not counting in such period any 
     days that are in a waiting period for any coverage under a 
     group health plan.
       (3) Placed for adoption defined.--In this subsection and 
     section 103(e), the term ``placement'', or being ``placed'', 
     for adoption, in connection with any placement for adoption 
     of a child with any person, means the assumption and 
     retention by such person of a legal obligation for total or 
     partial support of such child in anticipation of adoption of 
     such child. The child's placement with such person terminates 
     upon the termination of such legal obligation.
       (c) Exclusion Not Applicable to Pregnancy.--For purposes of 
     this section, pregnancy shall not be treated as a preexisting 
     condition.
       (d) Eligibility Period Imposed by Health Maintenance 
     Organizations as Alternative to Preexisting Condition 
     Limitation.--A health maintenance organization which offers 
     health insurance coverage in connection with a group health 
     plan and which does not use the preexisting condition 
     limitations allowed under this section and section 101 with 
     respect to any particular coverage option may impose an 
     eligibility period for such coverage option, but only if such 
     period does not exceed--
       (1) 60 days, in the case of a participant or beneficiary 
     whose initial coverage commences at the time such participant 
     or beneficiary first becomes eligible for coverage under the 
     plan, or
       (2) 90 days, in the case of a participant or beneficiary 
     whose initial coverage commences after the date on which such 
     participant or beneficiary first becomes eligible for 
     coverage.

     Such an HMO may use alternative methods, from those described 
     in the previous sentence, to address adverse selection as 
     approved by the applicable State authority. For purposes of 
     this subsection, the term ``eligibility period'' means a 
     period which, under the terms of the health insurance 
     coverage offered by the health maintenance organization, must 
     expire before the health insurance coverage becomes 
     effective. Any such eligibility period shall be treated for 
     purposes of this subtitle as a waiting period under the plan 
     and shall run concurrently

[[Page H3048]]

     with any other applicable waiting period under the plan.

     SEC. 103. PROHIBITING EXCLUSIONS BASED ON HEALTH STATUS AND 
                   PROVIDING FOR ENROLLMENT PERIODS.

       (a) Prohibition of Exclusion of Participants or 
     Beneficiaries Based on Health Status.--
       (1) In general.--A group health plan, and an insurer or HMO 
     offering health insurance coverage in connection with a group 
     health plan, may not exclude an employee or his or her 
     beneficiary from being (or continuing to be) enrolled as a 
     participant or beneficiary under the terms of such plan or 
     coverage based on health status (as defined in section 
     191(c)(6)).
       (2) Construction.--Nothing in this subsection shall be 
     construed as preventing the establishment of preexisting 
     condition limitations and restrictions to the extent 
     consistent with the provisions of this subtitle.
       (b) Prohibition of Discrimination in Premium Contributions 
     of Individual Participants or Beneficiaries Based on Health 
     Status.--
       (1) In general.--A group health plan, and an insurer or HMO 
     offering health insurance coverage in connection with a group 
     health plan, may not require a participant or beneficiary to 
     pay a premium or contribution which is greater than such 
     premium or contribution for a similarly situated participant 
     or beneficiary solely on the basis of the health status of 
     the participant or beneficiary.
       (2) Construction.--Nothing in this subsection is intended--
       (A) to effect the premium rates an insurer or HMO may 
     charge an employer for health insurance coverage provided in 
     connection a group health plan,
       (B) to prevent a group health plan (or insurer or HMO in 
     health insurance coverage offered in connection with such a 
     plan) from establishing premium discounts or modifying 
     otherwise applicable copayments or deductibles in return for 
     adherence to programs of health promotion and disease 
     prevention, or
       (C) to prevent such a plan, insurer, or HMO from varying 
     the premiums or contributions required of participants or 
     beneficiaries based on factors (such as scope of benefits, 
     geographic area of residence, or wage levels) that are not 
     directly related to health status.
       (c) Enrollment of Eligible Individuals Who Lose Other 
     Coverage.--A group health plan shall permit an uncovered 
     employee who is otherwise eligible for coverage under the 
     terms of the plan (or an uncovered dependent, as defined 
     under the terms of the plan, of such an employee, if family 
     coverage is available) to enroll for coverage under the plan 
     under at least one benefit option if each of the following 
     conditions is met:
       (1) The employee or dependent was covered under a group 
     health plan or had health insurance coverage at the time 
     coverage was previously offered to the employee or 
     individual.
       (2) The employee stated in writing at such time that 
     coverage under a group health plan or health insurance 
     coverage was the reason for declining enrollment.
       (3) The employee or dependent lost coverage under a group 
     health plan or health insurance coverage (as a result of loss 
     of eligibility for the coverage, termination of employment, 
     or reduction in the number of hours of employment).
       (4) The employee requests such enrollment within 30 days 
     after the date of termination of such coverage.
       (d) Dependent Beneficiaries.--
       (1) In general.--If a group health plan makes family 
     coverage available, the plan may not require, as a condition 
     of coverage of an individual as a dependent (as defined under 
     the terms of the plan) of a participant in the plan, a 
     waiting period applicable to the coverage of a dependent 
     who--
       (A) is a newborn,
       (B) is an adopted child or child placed for adoption 
     (within the meaning of section 102(b)(3)), at the time of 
     adoption or placement, or
       (C) is a spouse, at the time of marriage,
     if the participant has met any waiting period applicable to 
     that participant.
       (2) Timely enrollment.--
       (A) In general.--Enrollment of a participant's beneficiary 
     described in paragraph (1) shall be considered to be timely 
     if a request for enrollment is made within 30 days of the 
     date family coverage is first made available or, in the case 
     described in--
       (i) paragraph (1)(A), within 30 days of the date of the 
     birth,
       (ii) paragraph (1)(B), within 30 days of the date of the 
     adoption or placement for adoption, or
       (iii) paragraph (1)(C), within 30 days of the date of the 
     marriage with such a beneficiary who is the spouse of the 
     participant,

     if family coverage is available as of such date.
       (B) Coverage.--If available coverage includes family 
     coverage and enrollment is made under such coverage on a 
     timely basis under subparagraph (A), the coverage shall 
     become effective not later than the first day of the first 
     month beginning 15 days after the date the completed request 
     for enrollment is received.
       (e) Multiemployer Plans, Multiple Employer Health Plans, 
     and Multiple Employer Welfare Arrangements.--A group health 
     plan which is a multi-employer plan, a multiple employer 
     health plan (as defined in section 701(4) of the Employee 
     Retirement Income Security Act of 1974), or a multiple 
     employer welfare arrangement (to the extent to which benefits 
     under the arrangement consist of medical care) may not deny 
     an employer whose employees are covered under such a plan or 
     arrangement continued access to the same or different 
     coverage under the terms of such a plan or arrangement, other 
     than--
       (1) for nonpayment of contributions,
       (2) for fraud or other intentional misrepresentation of 
     material fact by the employer,
       (3) for noncompliance with material plan or arrangement 
     provisions,
       (4) because the plan or arrangement is ceasing to offer any 
     coverage in a geographic area,
       (5) for failure to meet the terms of an applicable 
     collective bargaining agreement, to renew a collective 
     bargaining or other agreement requiring or authorizing 
     contributions to the plan, or to employ employees covered by 
     such an agreement,
       (6) in the case of a plan or arrangement to which 
     subparagraph (C), (D), or (E) of section 3(40) of the 
     Employee Retirement Income Security Act of 1974 applies, to 
     the extent necessary to meet the requirements of such 
     subparagraph, or
       (7) in the case of a multiple employer health plan (as 
     defined in section 701(4) of such Act), for failure to meet 
     the requirements under part 7 of subtitle B of title I of 
     such Act for exemption under section 514(b)(6)(B) of such 
     Act.

     SEC. 104. ENFORCEMENT.

       (a) Enforcement Through COBRA Provisions in Internal 
     Revenue Code.--
       (1) Application of cobra sanctions.--Subsection (a) of 
     section 4980B of the Internal Revenue Code of 1986 is amended 
     by striking ``the requirements of'' and all that follows and 
     inserting ``the requirements of--
       ``(1) subsection (f) with respect to any qualified 
     beneficiary, or
       ``(2) subject to subsection (h)--
       ``(A) section 101 or 102 of the Health Coverage 
     Availability and Affordability Act of 1996 with respect to 
     any individual covered under the group health plan, or
       ``(B) section 103 (other than subsection (e)) of such Act 
     with respect to any individual.''.
       (2) Notice requirement.--Section 4980B(f)(6)(A) of such 
     Code is amended by inserting before the period the following: 
     ``and subtitle A of title I of the Health Coverage 
     Availability and Affordability Act of 1996''.
       (3) Special rules.--Section 4980B of such Code is amended 
     by adding at the end the following:
       ``(h) Special Rules.--For purposes of applying this section 
     in the case of requirements described in subsection (a)(2) 
     relating to section 101, section 102, or section 103 (other 
     than subsection (e)) of the Health Coverage Availability and 
     Affordability Act of 1996--
       ``(1) In general.--
       ``(A) Definition of group health plan.--The term `group 
     health plan' has the meaning given such term in section 
     191(a) of the Health Coverage Availability and Affordability 
     Act of 1996.
       ``(B) Qualified beneficiary.--Subsections (b), (c), and (e) 
     shall be applied by substituting the term `individual' for 
     the term `qualified beneficiary' each place it appears.
       ``(C) Noncompliance period.--Clause (ii) of subsection 
     (b)(2)(B) and the second sentence of subsection (b)(2) shall 
     not apply.
       ``(D) Limitation on tax.--Subparagraph (B) of subsection 
     (c)(3) shall not apply.
       ``(E)  Liability for tax.--Paragraph (2) of subsection (e) 
     shall not apply.
       ``(2) Deferral to state regulation.--No tax shall be 
     imposed by this section on any failure to meet the 
     requirements of such section by any entity which offers 
     health insurance coverage and which is an insurer or health 
     maintenance organization (as defined in section 191(c) of the 
     Health Coverage Availability and Affordability Act of 1996) 
     regulated by a State unless the Secretary of Health and Human 
     Services has made the determination described in section 
     104(c)(2) of such Act with respect to such State, section, 
     and entity.
       ``(3) Limitation for insured plans.--In the case of a group 
     health plan of a small employer (as defined in section 191 of 
     the Health Coverage Availability and Affordability Act of 
     1996) that provides health care benefits solely through a 
     contract with an insurer or health maintenance organization 
     (as defined in such section), no tax shall be imposed by this 
     section upon the employer on a failure to meet such 
     requirements if the failure is solely because of the product 
     offered by the insurer or organization under such contract.
       ``(4) Limitation on imposition of tax.--In no case shall a 
     tax be imposed by this section for a failure to meet such a 
     requirement if--
       ``(A) a civil money penalty has been imposed by the 
     Secretary of Labor under part 5 of subtitle A of title I of 
     the Employee Retirement Income Security Act of 1974 with 
     respect to such failure, or
       ``(B) a civil money penalty has been imposed by the 
     Secretary of Health and Human Services under section 104(c) 
     of the Health Coverage Availability and Affordability Act of 
     1996 with respect to such failure.''.
       (b) Enforcement Through ERISA Sanctions for Certain Group 
     Health Plans.--
       (1) In general.--Subject to the succeeding provisions of 
     this subsection, sections 101 through 103 of this subtitle 
     (and subtitle D insofar as it is applicable to such sections) 
     shall be deemed to be provisions of title I of the Employee 
     Retirement Income Security

[[Page H3049]]

     Act of 1974 for purposes of applying such title.
       (2) Federal enforcement only if no enforcement through 
     state.--The Secretary of Labor shall enforce each section 
     referred to in paragraph (1) with respect to any entity which 
     is an insurer or health maintenance organization regulated by 
     a State only if the Secretary of Labor determines that such 
     State has not provided for enforcement of State laws which 
     govern the same matters as are governed by such section and 
     which require compliance by such entity with at least the 
     same requirements as those provided under such section.
       (3) Limitations on liability.--
       (A) No application where failure not discovered exercising 
     reasonable diligence.--No liability shall be imposed under 
     this subsection on the basis of any failure during any period 
     for which it is established to the satisfaction of the 
     Secretary of Labor that none of the persons against whom the 
     liability would be imposed knew, or exercising reasonable 
     diligence would have known, that such failure existed.
       (B) No application where failure corrected within 30 
     days.--No liability shall be imposed under this subsection on 
     the basis of any failure if such failure was due to 
     reasonable cause and not to willful neglect, and such failure 
     is corrected during the 30-day period beginning on the first 
     day any of the persons against whom the liability would be 
     imposed knew, or exercising reasonable diligence would have 
     known, that such failure existed.
       (4) Avoiding duplication of certain penalties.--In no case 
     shall a civil money penalty be imposed under the authority 
     provided under paragraph (1) for a violation of this subtitle 
     for which an excise tax has been imposed under section 4980B 
     of the Internal Revenue Code of 1986 or a civil money penalty 
     imposed under subsection (c).
       (c) Enforcement Through Civil Money Penalties.--
       (1) Imposition.--
       (A) In general.--Subject to the succeeding provisions of 
     this subsection, any group health plan, insurer, or 
     organization that fails to meet a requirement of this 
     subtitle (other than section 103(e)) is subject to a civil 
     money penalty under this section.
       (B) Liability for penalty.--Rules similar to the rules 
     described in section 4980B(e) of the Internal Revenue Code of 
     1986 for liability for a tax imposed under section 4980B(a) 
     of such Code shall apply to liability for a penalty imposed 
     under subparagraph (A).
       (C) Amount of penalty.--
       (i) In general.--The maximum amount of penalty imposed 
     under this paragraph is $100 for each day for each individual 
     with respect to which such a failure occurs.
       (ii) Considerations in imposition.--In determining the 
     amount of any penalty to be assessed under this paragraph, 
     the Secretary of Health and Human Services shall take into 
     account the previous record of compliance of the person being 
     assessed with the applicable requirements of this subtitle, 
     the gravity of the violation, and the overall limitations for 
     unintentional failures provided under section 4980B(c)(4) of 
     the Internal Revenue Code of 1986.
       (iii) Limitations.--

       (I) Penalty not to apply where failure not discovered 
     exercising reasonable diligence.--No civil money penalty 
     shall be imposed under this paragraph on any failure during 
     any period for which it is established to the satisfaction of 
     the Secretary that none of the persons against whom the 
     penalty would be imposed knew, or exercising reasonable 
     diligence would have known, that such failure existed.
       (II) Penalty not to apply to failures corrected within 30 
     days.--No civil money penalty shall be imposed under this 
     paragraph on any failure if such failure was due to 
     reasonable cause and not to willful neglect, and such failure 
     is corrected during the 30-day period beginning on the first 
     day any of the persons against whom the penalty would be 
     imposed knew, or exercising reasonable diligence would have 
     known, that such failure existed.

       (D) Administrative review.--
       (i) Opportunity for hearing.--The person assessed shall be 
     afforded an opportunity for hearing by the Secretary upon 
     request made within 30 days after the date of the issuance of 
     a notice of assessment. In such hearing the decision shall be 
     made on the record pursuant to section 554 of title 5, United 
     States Code. If no hearing is requested, the assessment shall 
     constitute a final and unappealable order.
       (ii) Hearing procedure.--If a hearing is requested, the 
     initial agency decision shall be made by an administrative 
     law judge, and such decision shall become the final order 
     unless the Secretary modifies or vacates the decision. Notice 
     of intent to modify or vacate the decision of the 
     administrative law judge shall be issued to the parties 
     within 30 days after the date of the decision of the judge. A 
     final order which takes effect under this paragraph shall be 
     subject to review only as provided under subparagraph (D).
       (E) Judicial review.--
       (i) Filing of action for review.--Any person against whom 
     an order imposing a civil money penalty has been entered 
     after an agency hearing under this paragraph may obtain 
     review by the United States district court for any district 
     in which such person is located or the United States District 
     Court for the District of Columbia by filing a notice of 
     appeal in such court within 30 days from the date of such 
     order, and simultaneously sending a copy of such notice be 
     registered mail to the Secretary.
       (ii) Certification of administrative record.--The Secretary 
     shall promptly certify and file in such court the record upon 
     which the penalty was imposed.
       (iii) Standard for review.--The findings of the Secretary 
     shall be set aside only if found to be unsupported by 
     substantial evidence as provided by section 706(2)(E) of 
     title 5, United States Code.
       (iv) Appeal.--Any final decision, order, or judgment of 
     such district court concerning such review shall be subject 
     to appeal as provided in chapter 83 of title 28 of such Code.
       (F) Failure to pay assessment; maintenance of action.--
       (i) Failure to pay assessment.--If any person fails to pay 
     an assessment after it has become a final and unappealable 
     order, or after the court has entered final judgment in favor 
     of the Secretary, the Secretary shall refer the matter to the 
     Attorney General who shall recover the amount assessed by 
     action in the appropriate United States district court.
       (ii) Nonreviewability.--In such action the validity and 
     appropriateness of the final order imposing the penalty shall 
     not be subject to review.
       (G) Payment of penalties.--Except as otherwise provided, 
     penalties collected under this paragraph shall be paid to the 
     Secretary (or other officer) imposing the penalty and shall 
     be available without appropriation and until expended for the 
     purpose of enforcing the provisions with respect to which the 
     penalty was imposed.
       (2) Federal enforcement only if no enforcement through 
     state.--Paragraph (1) shall apply to enforcement of the 
     requirements of section 101, 102, or 103 (other than section 
     103(e)) with respect to any entity which offers health 
     insurance coverage and which is an insurer or HMO regulated 
     by a State only if the Secretary of Health and Human Services 
     has determined that such State has not provided for 
     enforcement of State laws which govern the same matters as 
     are governed by such section and which require compliance by 
     such entity with at least the same requirements as those 
     provided under such section.
       (3) Nonduplication of sanctions.--In no case shall a civil 
     money penalty be imposed under this subsection for a 
     violation of this subtitle for which an excise tax has been 
     imposed under section 4980B of the Internal Revenue Code of 
     1986 or for which a civil money penalty has been imposed 
     under the authority provided under subsection (b).
       (d) Coordination in Administration.--The Secretaries of the 
     Treasury, Labor, and Health and Human Services shall issue 
     regulations that are nonduplicative to carry out this 
     subtitle. Such regulations shall be issued in a manner that 
     assures coordination and nonduplication in their activities 
     under this subtitle.
Subtitle B--Certain Requirements for Insurers and HMOs in the Group and 
                           Individual Markets

        PART 1--AVAILABILITY OF GROUP HEALTH INSURANCE COVERAGE

     SEC. 131. GUARANTEED AVAILABILITY OF GENERAL COVERAGE IN THE 
                   SMALL GROUP MARKET.

       (a) Issuance of Coverage.--
       (1) In general.--Subject to the succeeding subsections of 
     this section, each insurer or HMO that offers health 
     insurance coverage in the small group market in a State--
       (A) must accept every small employer in the State that 
     applies for such coverage; and
       (B) must accept for enrollment under such coverage every 
     eligible individual (as defined in paragraph (2)) who applies 
     for enrollment during the initial period in which the 
     individual first becomes eligible for coverage under the 
     group health plan and may not place any restriction which is 
     inconsistent with section 103(a) on an individual being a 
     participant or beneficiary so long as such individual is an 
     eligible individual.
       (2) Eligible individual defined.--In this section, the term 
     ``eligible individual'' means, with respect to an insurer or 
     HMO that offers health insurance coverage to any small 
     employer in the small group market, such an individual in 
     relation to the employer as shall be determined--
       (A) in accordance with the terms of such plan,
       (B) as provided by the insurer or HMO under rules of the 
     insurer or HMO which are uniformly applicable, and
       (C) in accordance with all applicable State laws governing 
     such insurer or HMO.
       (b) Special Rules for Network Plans and HMOs.--
       (1) In general.--In the case of an insurer that offers 
     health insurance coverage in the small group market through a 
     network plan and in the case of an HMO that offers health 
     insurance coverage in connection with such a plan, the 
     insurer or HMO may--
       (A) limit the employers that may apply for such coverage to 
     those with eligible individuals whose place of employment or 
     residence is in the service area for such plan or HMO;
       (B) limit the individuals who may be enrolled under such 
     coverage to those whose place of residence or employment is 
     within the service area for such plan or HMO; and
       (C) within the service area of such plan or HMO, deny such 
     coverage to such employers if the insurer or HMO demonstrates 
     that--
       (i) it will not have the capacity to deliver services 
     adequately to enrollees of any additional groups because of 
     its obligations to

[[Page H3050]]

     existing group contract holders and enrollees, and
       (ii) it is applying this paragraph uniformly to all 
     employers without regard to the claims experience of those 
     employers and their employees (and their beneficiaries) or 
     the health status of such employees and beneficiaries.
       (2) 180-day suspension upon denial of coverage.--An insurer 
     or HMO, upon denying health insurance coverage in any service 
     area in accordance with paragraph (1)(C), may not offer 
     coverage in the small group market within such service area 
     for a period of 180 days after such coverage is denied.
       (c) Special Rule for Financial Capacity Limits.--
       (1) In general.--An insurer or HMO may deny health 
     insurance coverage in the small group market if the insurer 
     or HMO demonstrates to the applicable State authority that--
       (A) it does not have the financial reserves necessary to 
     underwrite additional coverage, and
       (B) it is applying this paragraph uniformly to all 
     employers without regard to the claims experience or duration 
     of coverage of those employers and their employees (and their 
     beneficiaries) or the health status of such employees and 
     beneficiaries.
       (2) 180-day suspension upon denial of coverage.--An insurer 
     or HMO upon denying health insurance coverage in connection 
     with group health plans in any service area in accordance 
     with paragraph (1) may not offer coverage in connection with 
     group health plans in the small group market within such 
     service area for a period of 180 days after such coverage is 
     denied.
       (d) Exception to Requirement for Issuance of Coverage by 
     Reason of Failure by Plan To Meet Certain Minimum 
     Participation or Contribution Rules.--
       (1) In general.--Subsection (a) shall not apply in the case 
     of any group health plan with respect to which--
       (A) participation rules of an insurer or HMO which are 
     described in paragraph (2) are not met, or
       (B) contribution rules of an insurer or HMO which are 
     described in paragraph (3) are not met.
       (2) Participation rules.--For purposes of paragraph (1)(A), 
     participation rules (if any) of an insurer or HMO shall be 
     treated as met with respect to a group health plan only if 
     such rules are uniformly applicable and in accordance with 
     applicable State law and the number or percentage of eligible 
     individuals who, under the plan, are participants or 
     beneficiaries equals or exceeds a level which is 
     determined in accordance with such rules.
       (3) Contribution rules.--For purposes of paragraph (1)(B), 
     contribution rules (if any) of an insurer or HMO shall be 
     treated as met with respect to a group health plan only if 
     such rules are in accordance with applicable State law.

     SEC. 132. GUARANTEED RENEWABILITY OF GROUP COVERAGE.

       (a) In General.--Except as provided in this section, if an 
     insurer or health maintenance organization offers health 
     insurance coverage in the small or large group market, the 
     insurer or organization must renew or continue in force such 
     coverage at the option of the employer.
       (b) General Exceptions.--An insurer or organization may 
     nonrenew or discontinue health insurance coverage offered an 
     employer based only on one or more of the following:
       (1) Nonpayment of premiums.--The employer has failed to pay 
     premiums or contributions in accordance with the terms of the 
     health insurance coverage or the insurer or organization has 
     not received timely premium payments.
       (2) Fraud.--The employer has performed an act or practice 
     that constitutes fraud or made an intentional 
     misrepresentation of material fact under the terms of the 
     coverage.
       (3) Violation with participation or contribution rules.--
     The employer has failed to comply with a material plan 
     provision relating to participation or contribution rules in 
     accordance with section 131(d).
       (4) Termination of plan.--Subject to subsection (c), the 
     insurer or organization is ceasing to offer coverage in the 
     small or large group market in a State (or, in the case of a 
     network plan or HMO, in a geographic area).
       (5) Movement outside service area.--The employer has 
     changed the place of employment in such manner that employees 
     and dependents reside and are employed outside the service 
     area of the insurer or organization or outside the area for 
     which the insurer or organization is authorized to do 
     business.

     Paragraph (5) shall apply to an insurer or HMO only if it is 
     applied uniformly without regard to the claims experience of 
     employers and their employees (and their beneficiaries) or 
     the health status of such employees and beneficiaries.
       (c) Exceptions for Uniform Termination of Coverage.--
       (1) Particular type of coverage not offered.--In any case 
     in which a insurer or HMO decides to discontinue offering a 
     particular type of health insurance coverage in the small or 
     large group market, coverage of such type may be discontinued 
     by the insurer or organization only if--
       (A) the insurer or organization provides notice to each 
     employer provided coverage of this type in such market (and 
     participants and beneficiaries covered under such coverage) 
     of such discontinuation at least 90 days prior to the date of 
     the discontinuation of such coverage;
       (B) the insurer or organization offers to each employer in 
     the small employer or large employer market provided coverage 
     of this type, the option to purchase any other health 
     insurance coverage currently being offered by the insurer or 
     organization for employers in such market; and
       (C) in exercising the option to discontinue coverage of 
     this type and in offering one or more replacement coverage, 
     the insurer or organization acts uniformly without regard to 
     the health status or insurability of participants or 
     beneficiaries covered or new participants or beneficiaries 
     who may become eligible for such coverage.
       (2) Discontinuance of all coverage.--
       (A) In general.--Subject to subparagraph (C), in any case 
     in which an insurer or HMO elects to discontinue offering all 
     health insurance coverage in the small group market or the 
     large group market, or both markets, in a State, health 
     insurance coverage may be discontinued by the insurer or 
     organization only if--
       (i) the insurer or organization provides notice to the 
     applicable State authority and to each employer (and 
     participants and beneficiaries covered under such coverage) 
     of such discontinuation at least 180 days prior to the date 
     of the expiration of such coverage, and
       (ii) all health insurance issued or delivered for issuance 
     in the State in such market (or markets) are discontinued and 
     coverage under such health insurance coverage in such market 
     (or markets) is not renewed.
       (B) Prohibition on market reentry.--In the case of a 
     discontinuation under subparagraph (A) in one or both 
     markets, the insurer or organization may not provide for the 
     issuance of any health insurance coverage in the market and 
     State involved during the 5-year period beginning on the date 
     of the discontinuation of the last health insurance coverage 
     not so renewed.
       (d) Exception for Uniform Modification of Coverage.--At the 
     time of coverage renewal, an insurer or HMO may modify the 
     coverage offered to a group health plan in the group health 
     market so long as such modification is effective on a uniform 
     basis among group health plans with that type of coverage.

      PART 2--AVAILABILITY OF INDIVIDUAL HEALTH INSURANCE COVERAGE

     SEC. 141. GUARANTEED AVAILABILITY OF INDIVIDUAL HEALTH 
                   INSURANCE COVERAGE TO CERTAIN INDIVIDUALS WITH 
                   PRIOR GROUP COVERAGE.

       (a) Goals.--The goals of this section are--
       (1) to guarantee that any qualifying individual (as defined 
     in subsection (b)(1)) is able to obtain qualifying coverage 
     (as defined in subsection (b)(2)); and
       (2) to assure that qualifying individuals obtaining such 
     coverage receive credit for their prior coverage toward the 
     new coverage's preexisting condition exclusion period (if 
     any) in a manner consistent with subsection (b)(3).
       (b) Qualifying Individual and Health Insurance Coverage 
     Defined.--In this section--
       (1) Qualifying individual.--The term ``qualifying 
     individual'' means an individual--
       (A)(i) for whom, as of the date on which the individual 
     seeks coverage under this section, the aggregate of the 
     qualified coverage periods (as defined in section 
     101(b)(3)(B)) is 18 or more months and (ii) whose most recent 
     prior coverage was under a group health plan, governmental 
     plan, or church plan (or health insurance coverage offered in 
     connection with any such plan);
       (B) who is not eligible for coverage under (i) a group 
     health plan, (ii) part A or part B of title XVIII of the 
     Social Security Act, or (iii) a State plan under title XIX of 
     such Act (or any successor program), and does not have 
     individual health insurance coverage;
       (C) with respect to whom the most recent coverage within 
     the coverage period described in subparagraph (A)(i) was not 
     terminated based on a factor described in paragraph (1) or 
     (2) of section 132(b);
       (D) if the individual had been offered the option of 
     continuation coverage under a COBRA continuation provision or 
     under a similar State program, who elected such coverage; and
       (E) who, if the individual elected such continuation 
     coverage, has exhausted such continuation coverage.

     In applying subparagraph (A)(i), the reference in section 
     101(b)(3)(B)(ii) to a 60-day break in coverage is deemed a 
     reference to a 60-day break in any coverage described in 
     section 101(b)(3)(B)(i).
       (2) Qualifying coverage.--
       (A) In general.--The term ``qualifying coverage'' means, 
     with respect to an insurer or HMO in relation to an 
     qualifying individual, individual health insurance coverage 
     for which the actuarial value of the benefits is not less 
     than--
       (i) the weighted average actuarial value of the benefits 
     provided by all the individual health insurance coverage 
     issued by the insurer or HMO in the State during the previous 
     year (not including coverage issued under this section), or
       (ii) the weighted average of the actuarial value of the 
     benefits provided by all the individual health insurance 
     coverage issued by all insurers and HMOs in the State during 
     the previous year (not including coverage issued under this 
     section),


[[Page H3051]]


     as elected by the plan or by the State under subsection 
     (c)(1).
       (B) Assumptions.--For purposes of subparagraph (A), the 
     actuarial value of benefits provided under individual health 
     insurance coverage shall be calculated based on a 
     standardized population and a set of standardized utilization 
     and cost factors.
       (3) Crediting for previous coverage.--Crediting is 
     consistent with this paragraph only if any preexisting 
     condition exclusion period is reduced at least to the extent 
     such a period would be reduced if the coverage under this 
     section were under a group health plan to which section 
     101(a) applies. In carrying out this subsection, provisions 
     similar to the provisions of section 101(c) shall apply.
       (c) Optional State Establishment of Mechanisms To Achieve 
     Goals of Guaranteeing Availability of Coverage.--
       (1) In general.--Any State may establish, to the extent of 
     the State's authority, public or private mechanisms 
     reasonably designed to meet the goals specified in subsection 
     (a). If a State implements such a mechanism by the deadline 
     specified in paragraph (4), the State may elect to have such 
     mechanisms apply instead of having subsection (d)(3) apply in 
     the State. An election under this paragraph shall be by 
     notice from the chief executive officer of the State to the 
     Secretary of Health and Human Services on a timely basis 
     consistent with the deadlines specified in paragraph (4). In 
     establishing what is qualifying coverage under such a 
     mechanism under this subsection, a State may exercise the 
     election described in subsection (b)(2)(A) with respect to 
     each insurer or HMO in the State (or on a collective basis 
     after exercising such election for each such insurer or HMO).
       (2) Types of mechanisms.--State mechanisms under this 
     subsection may include one or more (or a combination) of the 
     following:
       (A) Health insurance coverage pools or programs authorized 
     or established by the State.
       (B) Mandatory group conversion policies.
       (C) Guaranteed issue of one or more plans of individual 
     health insurance coverage to qualifying individuals.
       (D) Open enrollment by one or more insurers or HMOs.

     The mechanisms described in the previous sentence are not an 
     exclusive list of the mechanisms (or combinations of 
     mechanisms) that may be used under this subsection.
       (3) Safe harbor for benefits under current risk pools.--In 
     the case of a State that has a health insurance coverage pool 
     or risk pool in effect on March 12, 1996, and that implements 
     the mechanism described in paragraph (2)(A), the benefits 
     under such mechanism (or benefits the actuarial value of 
     which is not less than the actuarial value of such current 
     benefits, using the assumptions described in subsection 
     (b)(2)(B)) are deemed, for purposes of this section, to 
     constitute qualified coverage.
       (4) Deadline for state implementation.--
       (A) In general.--Subject to subparagraph (B), the deadline 
     under this paragraph is July 1, 1997.
       (B) Extension to permit legislation.--The deadline under 
     this paragraph is July 1, 1998, in the case of a State the 
     legislature of which does not have a regular legislative 
     session at any time between January 1, 1997, and June 30, 
     1997.
       (C) Construction.--Nothing in this section shall be 
     construed as preventing a State from--
       (i) implementing guaranteed availability mechanisms before 
     the deadline,
       (ii) continuing in effect mechanisms that are in effect 
     before the date of the enactment of this Act,
       (iii) offering guaranteed availability of coverage that is 
     not qualifying coverage, or
       (iv) offering guaranteed availability of coverage to 
     individuals who are not qualifying individuals.
       (d) Fallback Provisions.--
       (1) No state election.--If a State has not provided notice 
     to the Secretary of an election on a timely basis under 
     subsection (c), the Secretary shall notify the State that 
     paragraph (3) will be applied in the State.
       (2) Preliminary determination after state election.--If--
       (A) a State has provided notice of an election on a timely 
     basis under subsection (c), and
       (B) the Secretary finds, after consultation with the chief 
     executive officer of the State and the insurance commissioner 
     or chief insurance regulatory official of the State, that 
     such a mechanism (for which notice was provided) is not 
     reasonably designed to meet the goals specified in subsection 
     (a),

     the Secretary shall notify the State of such preliminary 
     determination, of the consequences under paragraph (3) of a 
     failure to implement such a mechanism, and permit the State a 
     reasonable opportunity in which to modify the mechanism (or 
     to adopt another mechanism) that is reasonably designed to 
     meet the goals specified in subsection (a). The Secretary 
     shall not make such a determination on any basis other than 
     the basis described in subparagraph (B). If, after providing 
     such notice and opportunity, the Secretary finds that the 
     State has not implemented such a mechanism, the Secretary 
     shall notify the State that paragraph (3) will be applied in 
     the State.
       (3) Description of fallback mechanism.--As provided under 
     paragraphs (1) and (2) and subject to paragraph (5), each 
     insurer or HMO in the State involved that issues individual 
     health insurance coverage--
       (A) shall offer qualifying health insurance coverage, in 
     which qualifying individuals obtaining such coverage receive 
     credit for their prior coverage toward the new coverage's 
     preexisting condition exclusion period (if any) in a manner 
     consistent with subsection (b)(3), to each qualifying 
     individual in the State, and
       (B) may not decline to issue such coverage to such an 
     individual based on health status (except as permitted under 
     paragraph (4)).
       (4) Application of network and capacity limits.--Under 
     regulations, the provisions of subsections (b) and (c) of 
     section 131 shall apply to an individual in the individual 
     health insurance market under this subsection in the same 
     manner as they apply under section 131 to an employer in the 
     small group market.
       (5) Termination of fallback mechanism.--The provisions of 
     this subsection shall cease to apply to a State if the 
     Secretary finds that a State has implemented a mechanism that 
     is reasonably designed to meet the goals specified in 
     subsection (a), and until the Secretary finds that such 
     mechanism is no longer being implemented.
       (e) Construction.--
       (1) Premiums.--Nothing in this section shall be construed 
     to affect the determination of an insurer or HMO as to the 
     amount of the premium payable under an individual health 
     insurance coverage under applicable state law.
       (2) Market requirements.--
       (A) In general.--The provisions of subsection (a) shall not 
     be construed to require that an insurer or HMO offering 
     health insurance coverage only in connection with a group 
     health plan or an association offer individual health 
     insurance coverage.
       (B) Conversion policies.--An insurer or HMO offering health 
     insurance coverage in connection with a group health plan 
     under subtitle A shall not be deemed to be an insurer or HMO 
     offering an individual health insurance coverage solely 
     because such insurer or HMO offers a conversion policy.
       (3) Disregard of association coverage.--An insurer or HMO 
     that offers health insurance coverage only in connection with 
     a group health plan or in connection with individuals based 
     on affiliation with one or more bona fide associations is not 
     considered, for purposes of this subtitle, to be offering 
     individual health insurance coverage.
       (4) Marketing of plans.--Nothing in this section shall be 
     construed to prevent a State from requiring insurer or HMOs 
     offering individual health insurance coverage to actively 
     market such coverage.

     SEC. 142. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH 
                   INSURANCE COVERAGE.

       (a) Guaranteed Renewability.--Subject to the succeeding 
     provisions of this section, an insurer or HMO that provides 
     individual health insurance coverage to an individual shall 
     renew or continue such coverage at the option of the 
     individual.
       (b) Nonrenewal Permitted in Certain Cases.--An insurer or 
     HMO may nonrenew or discontinue individual health insurance 
     coverage of an individual only based on one or more of the 
     following:
       (1) Nonpayment.--The individual fails to pay payment of 
     premiums or contributions in accordance with the terms of the 
     coverage or the insurer or organization has not failed to 
     receive timely premium payments.
       (2) Fraud.--The individual has performed an act or practice 
     that constitutes fraud or made an intentional 
     misrepresentation of material fact under the terms of the 
     coverage.
       (3) Termination of coverage.--Subject to subsection (c), 
     the insurer or HMO is ceasing to offer health insurance 
     coverage in the individual market in a State (or, in the case 
     of a network plan or HMO, in a geographic area).
       (4) Movement outside service area.--The individual has 
     changed residence and resides outside the service area of the 
     insurer or organization or outside the area for which the 
     insurer or organization is authorized to do business.

     Paragraph (4) shall apply to an insurer or HMO only if it is 
     applied uniformly without regard to the claims experience of 
     employers and their employees (and their beneficiaries) or 
     the health status of such employees and beneficiaries.
       (c) Termination of Individual Coverage.--The provisions of 
     section 132(c) shall apply to this section in the same manner 
     as they apply under section 132, except that any reference to 
     an employer or market is deemed a reference to the covered 
     individual or the individual market, respectively.
       (d) Exception for Uniform Modification of Coverage.--The 
     provisions of section 132(d) shall apply to individual health 
     insurance coverage in the individual market under this 
     section in the same manner as it applies to health insurance 
     coverage offered in connection with a group health plan in 
     the group market under such section.

                          PART 3--ENFORCEMENT

     SEC. 151. INCORPORATION OF PROVISIONS FOR STATE ENFORCEMENT 
                   WITH FEDERAL FALLBACK AUTHORITY.

       The provisions of paragraphs (1) and (2) of section 104(c) 
     shall apply to enforcement of requirements in each section in 
     part 1 or part 2 with respect to insurers and HMOs regulated 
     by a State in the same manner as such provisions apply to 
     enforcement of requirements in section 101, 102, or 103 with 
     respect to insurers and HMOs regulated by a State.

[[Page H3052]]

 Subtitle C--Affordable and Available Health Coverage Through Multiple 
                     Employer Pooling Arrangements

     SEC. 161. CLARIFICATION OF DUTY OF THE SECRETARY OF LABOR TO 
                   IMPLEMENT PROVISIONS OF CURRENT LAW PROVIDING 
                   FOR EXEMPTIONS AND SOLVENCY STANDARDS FOR 
                   MULTIPLE EMPLOYER HEALTH PLANS.

       (a) Rules Governing Regulation of Multiple Employer Health 
     Plans.--Subtitle B of title I of the Employee Retirement 
     Income Security Act of 1974 (as amended by the preceding 
     provisions of this title) is amended by inserting after part 
     6 the following new part:

 ``PART 7--RULES GOVERNING REGULATION OF MULTIPLE EMPLOYER HEALTH PLANS

     ``SEC. 701. DEFINITIONS.

       ``For purposes of this part--
       ``(1) Fully insured.--A particular benefit under a group 
     health plan or a multiple employer welfare arrangement is 
     `fully insured' if such benefit (irrespective of any recourse 
     available against other parties) is provided by an insurer or 
     a health maintenance organization in a manner so that such 
     benefit constitutes insurance regulated by the law of a State 
     (within the meaning of section 514(b)(2)(A)).
       ``(2) Insurer.--The term `insurer' means an insurance 
     company, insurance service, or insurance organization which 
     is licensed to engage in the business of insurance in a State 
     and which is subject to State law which regulates insurance 
     (within the meaning of section 514(b)(2)(A)).
       ``(3) Health maintenance organization.--The terms `health 
     maintenance organization' means--
       ``(A) a Federally qualified health maintenance organization 
     (as defined in section 1301(a) of the Public Health Service 
     Act (42 U.S.C. 300e(a))),
       ``(B) an organization recognized under State law as a 
     health maintenance organization, or
       ``(C) a similar organization regulated under State law for 
     solvency in the same manner and to the same extent as such a 
     health maintenance organization,

     if it is subject to State law which regulates insurance 
     (within the meaning of section 514(b)(2)(A)).
       ``(4) Multiple employer health plan.--The term `multiple 
     employer health plan' means a multiple employer welfare 
     arrangement which provides medical care and which is or has 
     been exempt under section 514(b)(6)(B).
       ``(5) Participating employer.--The term `participating 
     employer' means, in connection with a multiple employer 
     welfare arrangement, any employer if any of its employees, or 
     any of the individuals who are dependents (as defined under 
     the terms of the arrangement) of its employees, are or were 
     covered under such arrangement in connection with the 
     employment of the employees.
       ``(6) Sponsor.--The term `sponsor' means, in connection 
     with a multiple employer welfare arrangement, the association 
     or other entity which establishes or maintains the 
     arrangement.
       ``(7) State insurance commissioner.--The term `State 
     insurance commissioner' means the insurance commissioner (or 
     similar official) of a State.

     ``SEC. 702. CLARIFICATION OF DUTY OF THE SECRETARY TO 
                   IMPLEMENT PROVISIONS OF CURRENT LAW PROVIDING 
                   FOR EXEMPTIONS AND SOLVENCY STANDARDS FOR 
                   MULTIPLE EMPLOYER HEALTH PLANS.

       ``(a) Treatment as Employee Welfare Benefit Plan Which Is a 
     Group Health Plan.--
       ``(1) In general.--A multiple employer welfare 
     arrangement--
       ``(A) under which the benefits consist solely of medical 
     care (disregarding such incidental benefits as the Secretary 
     shall specify by regulation), and
       ``(B) under which some or all benefits are not fully 
     insured,
     shall be treated for purposes of subtitle A and the other 
     parts of this title as an employee welfare benefit plan which 
     is a group health plan if the arrangement is exempt under 
     section 514(b)(6)(B) in accordance with this part.
       ``(2) Exception.--In the case of a multiple employer 
     welfare arrangement which would be described in section 
     3(40)(A)(i) but solely for the failure to meet the 
     requirements of section 3(40)(C)(ii), paragraph (1) shall 
     apply with respect to such arrangement, but only with respect 
     to benefits provided thereunder which constitute medical 
     care.
       ``(b) Treatment Under Preemption Rules.--
       ``(1) In general.--The Secretary shall prescribe 
     regulations described in section 514(b)(6)(B)(i), applicable 
     to multiple employer welfare arrangements described in 
     subparagraphs (A) and (B) of subsection (a)(1), providing a 
     procedure for granting exemptions from section 
     514(b)(6)(A)(ii) with respect to such arrangements. Under 
     such regulations, any such arrangement treated under 
     subsection (a) as an employee welfare benefit plan shall be 
     deemed to be an arrangement described in section 
     514(b)(6)(B)(ii).
       ``(2) Standards.--Under the procedure prescribed pursuant 
     to paragraph (1), the Secretary shall grant an arrangement 
     described in subsection (a) an exemption described in 
     subsection (a) only if the Secretary finds that--
       ``(A) such exemption--
       ``(i) is administratively feasible,
       ``(ii) is not adverse to the interests of the individuals 
     covered under the arrangement, and
       ``(iii) is protective of the rights and benefits of the 
     individuals covered under the arrangement,
       ``(B) the application for the exemption meets the 
     requirements of paragraph (3), and
       ``(C) the requirements of sections 703 and 704 are met with 
     respect to the arrangement.
       ``(3) Information to be included in application for 
     exemption.--An application for an exemption described in 
     subsection (a) meets the requirements of this paragraph only 
     if it includes, in a manner and form prescribed in 
     regulations of the Secretary, at least the following 
     information:
       ``(A) Identifying information.--The names and addresses 
     of--
       ``(i) the sponsor, and
       ``(ii) the members of the board of trustees of the 
     arrangement.
       ``(B) States in which arrangement intends to do business.--
     The States in which individuals covered under the arrangement 
     are to be located and the number of such individuals expected 
     to be located in each such State.
       ``(C) Bonding requirements.--Evidence provided by the board 
     of trustees that the bonding requirements of section 412 will 
     be met as of the date of the application or (if later) 
     commencement of operations.
       ``(D) Plan documents.--A copy of the documents governing 
     the arrangement (including any bylaws and trust agreements), 
     the summary plan description, and other material describing 
     the benefits and coverage that will be provided to 
     individuals covered under the arrangement.
       ``(E) Agreements with service providers.--A copy of any 
     agreements between the arrangement and contract 
     administrators and other service providers.
       ``(F) Funding report.--A report setting forth information 
     determined as of a date within the 120-day period ending with 
     the date of the application, including the following:
       ``(i) Reserves.--A statement, certified by the board of 
     trustees of the arrangement, and a statement of actuarial 
     opinion, signed by a qualified actuary, that all applicable 
     requirements of section 705 are or will be met in accordance 
     with regulations which the Secretary shall prescribe.
       ``(ii) Adequacy of contribution rates.--A statement of 
     actuarial opinion, signed by a qualified actuary, which sets 
     forth a description of the extent to which contribution rates 
     are adequate to provide for the payment of all obligations 
     and the maintenance of required reserves under the 
     arrangement for the 12-month period beginning with such date 
     within such 120-day period, taking into account the expected 
     coverage and experience of the arrangement. If the 
     contribution rates are not fully adequate, the statement of 
     actuarial opinion shall indicate the extent to which the 
     rates are inadequate and the changes needed to ensure 
     adequacy.
       ``(iii) Current and projected value of assets and 
     liabilities.--A statement of actuarial opinion signed by a 
     qualified actuary, which sets forth the current value of the 
     assets and liabilities accumulated under the arrangement and 
     a projection of the assets, liabilities, income, and expenses 
     of the arrangement for the 12-month period referred to in 
     clause (ii). The income statement shall identify separately 
     the arrangement's administrative expenses and claims.
       ``(iv) Costs of coverage to be charged and other 
     expenses.--A statement of the costs of coverage to be 
     charged, including an itemization of amounts for 
     administration, reserves, and other expenses associated with 
     the operation of the arrangement.
       ``(v) Other information.--Any other information which may 
     be prescribed in regulations of the Secretary as necessary to 
     carry out the purposes of this part.
       ``(4) Filing fee.--Under the procedure prescribed pursuant 
     to paragraph (1), a multiple employer welfare arrangement 
     shall pay to the Secretary at the time of filing an 
     application for an exemption referred to in subsection (a) a 
     filing fee in the amount of $5,000, which shall be available, 
     to the extent provided in appropriation Acts, to the 
     Secretary for the sole purpose of administering the exemption 
     procedures applicable with respect to such arrangement.
       ``(5) Class exemption treatment for existing large 
     arrangements.--Under the procedure prescribed pursuant to 
     paragraph (1), if--
       ``(A) at the time of application for an exemption under 
     section 514(b)(6)(B) with respect to an arrangement which has 
     been in existence as of the date of the enactment of the 
     Health Coverage Availability and Affordability Act of 1996 
     for at least 3 years, either (A) the arrangement covers at 
     least 1,000 participants and beneficiaries, or (B) with 
     respect to the arrangement there are at least 2,000 employees 
     of eligible participating employers,
       ``(B) a complete application for the exemption with respect 
     to the arrangement has been filed and is pending, and
       ``(C) the application meets such requirements (if any) as 
     the Secretary may provide with respect to class exemptions 
     under this subsection,
     the exemption shall be treated as having been granted with 
     respect to the arrangement unless and until the Secretary 
     provides appropriate notice that the exemption has been 
     denied.

[[Page H3053]]

       ``(c) Filing Notice of Exemption With States.--An exemption 
     granted under section 514(b)(6)(B) to a multiple employer 
     welfare arrangement shall not be effective unless written 
     notice of such exemption is filed with the State insurance 
     commissioner of each State in which at least 5 percent of the 
     individuals covered under the arrangement are located. For 
     purposes of this subsection, an individual shall be 
     considered to be located in the State in which a known 
     address of such individual is located or in which such 
     individual is employed. The Secretary may by regulation 
     provide in specified cases for the application of the 
     preceding sentence with lesser percentages in lieu of such 5 
     percent amount.
       ``(d) Notice of Material Changes.--In the case of any 
     multiple employer welfare arrangement exempt under section 
     514(b)(6)(B), descriptions of material changes in any 
     information which was required to be submitted with the 
     application for the exemption under this part shall be filed 
     in such form and manner as shall be prescribed in regulations 
     of the Secretary. The Secretary may require by regulation 
     prior notice of material changes with respect to specified 
     matters which might serve as the basis for suspension or 
     revocation of the exemption.
       ``(e) Reporting Requirements.--Under regulations of the 
     Secretary, the requirements of sections 102, 103, and 104 
     shall apply with respect to any multiple employer welfare 
     arrangement which is or has been exempt under section 
     514(b)(6)(B) in the same manner and to the same extent as 
     such requirements apply to employee welfare benefit plans, 
     irrespective of whether such exemption continues in effect. 
     The annual report required under section 103 for any plan 
     year in the case of any such multiple employer welfare 
     arrangement shall also include information described in 
     subsection (b)(3)(F) with respect to the plan year and, 
     notwithstanding section 104(a)(1)(A), shall be filed not 
     later than 90 days after the close of the plan year.
       ``(f) Engagement of Qualified Actuary.--The board of 
     trustees of each multiple employer welfare arrangement which 
     is or has been exempt under section 514(b)(6)(B) shall 
     engage, on behalf of all covered individuals, a qualified 
     actuary who shall be responsible for the preparation of the 
     materials comprising information necessary to be submitted by 
     a qualified actuary under this part. The qualified actuary 
     shall utilize such assumptions and techniques as are 
     necessary to enable such actuary to form an opinion as to 
     whether the contents of the matters reported under this 
     part--
       ``(1) are in the aggregate reasonably related to the 
     experience of the arrangement and to reasonable expectations, 
     and
       ``(2) represent such actuary's best estimate of anticipated 
     experience under the arrangement.
     The opinion by the qualified actuary shall be made with 
     respect to, and shall be made a part of, the annual report.

     ``SEC. 703. REQUIREMENTS RELATING TO SPONSORS, BOARDS OF 
                   TRUSTEES, AND PLAN OPERATIONS.

       ``(a) In General.--A complete application for an exemption 
     under section 514(b)(6)(B) shall include information which 
     the Secretary determines to be complete and accurate and 
     sufficient to demonstrate that the following requirements are 
     met with respect to the arrangement:
       ``(1) Sponsor.--The sponsor is, and has been (together with 
     its immediate predecessor, if any) for a continuous period of 
     not less than 5 years before the date of the application, 
     organized and maintained in good faith, with a constitution 
     and bylaws specifically stating its purpose and providing for 
     periodic meetings on at least an annual basis, as a trade 
     association, an industry association, a professional 
     association, or a chamber of commerce (or similar business 
     group, including a corporation or similar organization that 
     operates on a cooperative basis (within the meaning of 
     section 1381 of the Internal Revenue Code of 1986)), for 
     substantial purposes other than that of obtaining or 
     providing medical care (within the meaning of section 
     607(1)), and the applicant demonstrates to the satisfaction 
     of the Secretary that the sponsor is established as a 
     permanent entity which receives the active support of its 
     members and collects dues or contributions from its members 
     on a periodic basis, without conditioning such dues or 
     contributions on the basis of the health status of the 
     employees of such members or the dependents of such employees 
     or on the basis of participation in a group health plan. Any 
     sponsor consisting of an association of entities meeting the 
     preceding requirements of this paragraph shall be treated as 
     meeting the requirements of this paragraph.
       ``(2) Board of trustees.--The arrangement is operated, 
     pursuant to a trust agreement, by a board of trustees which 
     has complete fiscal control over the arrangement and which is 
     responsible for all operations of the arrangement, and the 
     board of trustees has in effect rules of operation and 
     financial controls, based on a 3-year plan of operation, 
     adequate to carry out the terms of the arrangement and to 
     meet all requirements of this title applicable to the 
     arrangement. The members of the board of trustees are 
     individuals selected from individuals who are the owners, 
     officers, directors, or employees of the participating 
     employers or who are partners in the participating employers 
     and actively participate in the business. No such member is 
     an owner, officer, director, or employee of, or partner in, a 
     contract administrator or other service provider to the 
     arrangement, except that officers or employees of a sponsor 
     which is a service provider (other than a contract 
     administrator) to the arrangement may be members of the board 
     if they constitute not more than 25 percent of the membership 
     of the board and they do not provide services to 
     the arrangement other than on behalf of the sponsor. The 
     board has sole authority to approve applications for 
     participation in the arrangement and to contract with a 
     service provider to administer the day-to-day affairs of 
     the arrangement.
       ``(3) Covered persons.--The instruments governing the 
     arrangement include a written instrument which provides that, 
     effective upon becoming an arrangement exempt under section 
     514(b)(6)(B)--
       ``(A) all participating employers must be members or 
     affiliated members of the sponsor, except that, in the case 
     of a sponsor which is a professional association or other 
     individual-based association, if at least one of the 
     officers, directors, or employees of an employer, or at least 
     one of the individuals who are partners in an employer and 
     who actively participates in the business, is a member or 
     affiliated member of the sponsor, participating employers may 
     also include such employer,
       ``(B) all individuals thereafter commencing coverage under 
     the arrangement must be--
       ``(i) active or retired owners (including self-employed 
     individuals), officers, directors, or employees of, or 
     partners in, participating employers, or
       ``(ii) the beneficiaries of individuals described in clause 
     (i), and
       ``(C) no participating employer may provide health 
     insurance coverage in the individual market for any employee 
     not covered under the arrangement which is similar to the 
     coverage contemporaneously provided to employees of the 
     employer under the arrangement, if such exclusion of the 
     employee from coverage under the arrangement is based in 
     whole or in part on the health status of the employee and 
     such employee would, but for such exclusion on such basis, be 
     eligible for coverage under the arrangement.
       ``(4) Inclusion of eligible employers and employees.--No 
     employer described in paragraph (3) is excluded as a 
     participating employer (except to the extent that 
     requirements of the type referred to in section 131(d)(2) of 
     the Health Coverage Availability and Affordability Act of 
     1996 are not met) and the requirements of section 103 of such 
     Act (as referred to in section 104(b)(1) of such Act) are 
     met.
       ``(5) Restriction on variations of premium rates.--Premium 
     rates under the arrangement with respect to any particular 
     employer do not vary on the basis of the claims experience of 
     such employer alone.
       ``(b) Treatment of Franchise Networks.--In the case of a 
     multiple employer welfare arrangement which is established 
     and maintained by a franchisor for a franchise network 
     consisting of its franchisees, the requirements of subsection 
     (a)(1) shall not apply with respect to such network in any 
     case in which such requirements would be met if the 
     franchisor were deemed to be the sponsor referred to in 
     subsection (a)(1), such network were deemed to be an 
     association described in subsection (a)(1), and each 
     franchisee were deemed to be a member (of the association and 
     the sponsor) referred to in subsection (a)(1).
       ``(c) Certain Collectively Bargained Arrangements.--In the 
     case of a multiple employer welfare arrangement in existence 
     on March 6, 1996, which would be described in section 
     3(40)(A)(i) but solely for the failure to meet the 
     requirements of section 3(40)(C)(ii) or (to the extent 
     provided in regulations of the Secretary) solely for the 
     failure to meet the requirements of subparagraph (D) or (F) 
     of section 3(40)--
       ``(1) subsection (a)(1) shall not apply, and
       ``(2) the joint board of trustees shall be considered the 
     board of trustees required under subsection (a)(2).
       ``(d) Certain Arrangements Not Meeting Single Employer 
     Requirement.--
       ``(1) In general.--In any case in which the majority of the 
     employees covered under a multiple employer welfare 
     arrangement are employees of a single employer (within the 
     meaning of clauses (i) and (ii) of section 3(40)(B)), if all 
     other employees covered under the arrangement are employed by 
     employers who are related to such single employer--
       ``(A) subsection (a)(1) shall not apply if the sponsor of 
     the arrangement is the person who would be the plan sponsor 
     if the related employers were disregarded in determining 
     whether the requirements of section 3(40)(B) are met, and
       ``(B) subsection (a)(2) shall be treated as satisfied if 
     the board of trustees is the named fiduciary in connection 
     with the arrangement.
       ``(2) Related employers.--For purposes of paragraph (1), 
     employers are `related' if there is among all such employers 
     a common ownership interest or a substantial commonality of 
     business operations based on common suppliers or customers.

     ``SEC. 704. OTHER REQUIREMENTS FOR EXEMPTION.

       ``A multiple employer welfare arrangement exempt under 
     section 514(b)(6)(B) shall meet the following requirements:
       ``(1) Contents of governing instruments.--The instruments 
     governing the arrangement include a written instrument, 
     meeting the requirements of an instrument required under 
     section 402(a)(1), which--

[[Page H3054]]

       ``(A) provides that the board of trustees serves as the 
     named fiduciary required for plans under section 402(a)(1) 
     and serves in the capacity of a plan administrator (referred 
     to in section 3(16)(A)),
       ``(B) provides that the sponsor of the arrangement is to 
     serve as plan sponsor (referred to in section 3(16)(B)), and
       ``(C) incorporates the requirements of section 705.
       ``(2) Contribution rates.--The contribution rates referred 
     to in section 702(b)(3)(F)(ii) are adequate.
       ``(3) Regulatory requirements.--Such other requirements as 
     the Secretary may prescribe by regulation as necessary to 
     carry out the purposes of this part.

     ``SEC. 705. MAINTENANCE OF RESERVES.

       ``(a) In General.--Each multiple employer welfare 
     arrangement which is or has been exempt under section 
     514(b)(6)(B) and under which benefits are not fully insured 
     shall establish and maintain reserves, consisting of--
       ``(1) a reserve sufficient for unearned contributions,
       ``(2) a reserve sufficient for benefit liabilities which 
     have been incurred, which have not been satisfied, and for 
     which risk of loss has not yet been transferred, and for 
     expected administrative costs with respect to such benefit 
     liabilities, and
       ``(3) a reserve, in an amount recommended by the qualified 
     actuary, for any other obligations of the arrangement.
       ``(b) Minimum Amount for Certain Reserves.--The total of 
     the reserves described in subsection (a)(2) shall not be less 
     than an amount equal to the greater of--
       ``(1) 25 percent of expected incurred claims and expenses 
     for the plan year, or
       ``(2) $400,000.
       ``(c) Required Margin.--In determining the amounts of 
     reserves required under this section in connection with any 
     multiple employer welfare arrangement, the qualified actuary 
     shall include a margin for error and other fluctuations 
     taking into account the specific circumstances of such 
     arrangement.
       ``(d) Additional Requirements.--The Secretary may provide 
     such additional requirements relating to reserves and excess/
     stop loss coverage as the Secretary considers appropriate. 
     Such requirements may be provided, by regulation or 
     otherwise, with respect to any arrangement or any class of 
     arrangements.
       ``(e) Adjustments for Excess/Stop Loss Coverage.--The 
     Secretary may provide for adjustments to the levels of 
     reserves otherwise required under subsections (a) and (b) 
     with respect to any arrangement or class of arrangements to 
     take into account excess/stop loss coverage provided with 
     respect to such arrangement or arrangements.
       ``(f) Alternative Means of Compliance.--The Secretary may 
     permit an arrangement to substitute, for all or part of the 
     requirements of this section, such security, guarantee, hold-
     harmless arrangement, or other financial arrangement as the 
     Secretary determines to be adequate to enable the arrangement 
     to fully meet all its financial obligations on a timely 
     basis. The Secretary may take into account, for purposes of 
     this subsection, evidence provided by the arrangement or 
     sponsor which demonstrates an assumption of liability with 
     respect to the arrangement. Such evidence may be in the form 
     of a contract of indemnification, lien, bonding, insurance, 
     letter of credit, recourse under applicable terms of the 
     arrangement in the form of assessments of participating 
     employers, security, or other financial arrangement.

     ``SEC. 706. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

       ``Except as provided in section 707(b), a multiple employer 
     welfare arrangement which is or has been exempt under section 
     514(b)(6)(B) may terminate only if the board of trustees--
       ``(1) not less than 60 days before the proposed termination 
     date, provides to the participants and beneficiaries a 
     written notice of intent to terminate stating that such 
     termination is intended and the proposed termination date,
       ``(2) develops a plan for winding up the affairs of the 
     arrangement in connection with such termination in a manner 
     which will result in timely payment of all benefits for which 
     the arrangement is obligated, and
       ``(3) submits such plan in writing to the Secretary.
     Actions required under this paragraph shall be taken in such 
     form and manner as may be prescribed in regulations of the 
     Secretary.

     ``SEC. 707. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

       ``(a) Actions To Avoid Depletion of Reserves.--A multiple 
     employer welfare arrangement which is or has been exempt 
     under section 514(b)(6)(B) shall continue to meet the 
     requirements of section 705, irrespective of whether such 
     exemption continues in effect. The board of trustees of such 
     arrangement shall determine quarterly whether the 
     requirements of section 705 are met. In any case in which the 
     committee determines that there is reason to believe that 
     there is or will be a failure to meet such requirements, or 
     the Secretary makes such a determination and so notifies the 
     committee, the committee shall immediately notify the 
     qualified actuary engaged by the arrangement, and such 
     actuary shall, not later than the end of the next following 
     month, make such recommendations to the committee for 
     corrective action as the actuary determines necessary to 
     ensure compliance with section 705. Not later than 10 days 
     after receiving from the actuary recommendations for 
     corrective actions, the committee shall notify the Secretary 
     (in such form and manner as the Secretary may prescribe by 
     regulation) of such recommendations of the actuary for 
     corrective action, together with a description of the actions 
     (if any) that the committee has taken or plans to take in 
     response to such recommendations. The committee shall 
     thereafter report to the Secretary, in such form and 
     frequency as the Secretary may specify to the committee, 
     regarding corrective action taken by the committee until the 
     requirements of section 705 are met.
       ``(b) Mandatory Termination.--In any case in which--
       ``(1) the Secretary has been notified under subsection (a) 
     of a failure of a multiple employer welfare arrangement which 
     is or has been exempt under section 514(b)(6)(B) to meet the 
     requirements of section 705 and has not been notified by the 
     board of trustees of the arrangement that corrective action 
     has restored compliance with such requirements, and
       ``(2) the Secretary determines that the continuing failure 
     to meet the requirements of section 705 can be reasonably 
     expected to result in a continuing failure to pay benefits 
     for which the arrangement is obligated,
     the board of trustees of the arrangement shall, at the 
     direction of the Secretary, terminate the arrangement and, in 
     the course of the termination, take such actions as the 
     Secretary may require, including recovering for the 
     arrangement any liability under section 705(f), as necessary 
     to ensure that the affairs of the arrangement will be, to the 
     maximum extent possible, wound up in a manner which will 
     result in timely provision of all benefits for which the 
     arrangement is obligated.

     ``SEC. 708. ADDITIONAL RULES REGARDING STATE AUTHORITY.

       ``(a) Exclusion of Arrangements From the Small Group Market 
     in any State Upon State's Certification of Guaranteed Access 
     to Health Insurance Coverage in Such State.--
       ``(1) In general.--If a State certifies to the Secretary 
     that such State provides to its residents guaranteed access 
     to health insurance coverage, during the period for which 
     such certification is in effect, the law of such State may 
     regulate any health care coverage provided in the small group 
     market in such State (or prohibit the provision of such 
     coverage) by a multiple employer welfare arrangement which is 
     otherwise exempt under section 514(b)(6)(B) and whose sponsor 
     is described in section 703(a)(1), notwithstanding such 
     exemption. Any such certification shall be in effect for such 
     period, not greater than 3 years, as is designated in such 
     certification. Such certification shall apply with respect to 
     such arrangements as are identified, individually or by 
     class, in the certification.
       ``(2) Guaranteed access.--For purposes of this subsection, 
     the certification by a State that such State provides 
     `guaranteed access' to health insurance coverage to the 
     residents of such State means--
       ``(A) certification that the number of residents of such 
     State who are covered by a group health plan or otherwise 
     have health insurance coverage exceeds 90 percent of the 
     total number of the residents of such State, or
       ``(B) certification that--
       ``(i) the small group market in such State provides 
     guaranteed issue for employees with respect to at least one 
     option of health insurance coverage offered by insurers and 
     health maintenance organizations in such market, and
       ``(ii) the State has implemented rating reforms in the 
     small group market in such State which are designed to make 
     health insurance coverage more affordable.
       ``(b) Exceptions.--
       ``(1) Certain multistate associations.--Subsection (a) 
     shall not apply in the case of a multiple employer welfare 
     arrangement operating in any State which has made a 
     certification under subsection (a)(2)(B) if--
       ``(A) in the application for the exemption under section 
     514(b)(6)(B), the sponsor of such arrangement demonstrates to 
     the Secretary (in such form and manner as shall be prescribed 
     in regulations of the Secretary) that--
       ``(i) such sponsor operates in the majority of the 50 
     States and in at least 2 of the regions of the United States, 
     and
       ``(ii) the arrangement covers, or is to cover (in the case 
     of a newly established arrangement), at least 7,500 
     participants and beneficiaries, and
       ``(B) at the time of such application, the arrangement does 
     not have pending against it any enforcement action by the 
     State.
       ``(2) Existing arrangements.--Subsection (a) shall not 
     apply with respect to an arrangement operating in any State 
     if--
       ``(A) such arrangement was operating in such State as of 
     March 6, 1996, and
       ``(B) at the time of the application for the exemption 
     under section 514(b)(6), the arrangement does not have 
     pending against it any enforcement action by the State.
       ``(3) Limitations.--Paragraphs (1) and (2) shall not apply 
     in the case of any State which has made a certification under 
     subsection (a) and which, as of January 1, 1996, had enacted 
     a law that either--
       ``(A) provided guaranteed issue of individual health 
     insurance coverage offered by insurers and health maintenance 
     organizations

[[Page H3055]]

     in the individual market using pure community rating and did 
     not provide for any transition period (after the effective 
     date of the guaranteed issue requirement) in the 
     implementation of pure community rating; or
       ``(B) required insurers offering health insurance coverage 
     in connection with group health plans to reimburse insurers 
     offering individual health insurance coverage for losses 
     resulting from those insurers offering individual health 
     insurance coverage on an open enrollment basis.
     Regulations under this part may provide for an exemption from 
     the applicability of paragraph (1) in the case of certain 
     arrangements that are limited to a single industry.
       ``(c) Assessment Authority With Respect to New 
     Arrangements.--
       ``(1) In general.--Notwithstanding section 514, a State may 
     impose by law a premium tax on multiple employer welfare 
     arrangements which are otherwise exempt under section 
     514(b)(6)(B) and the sponsor of which is described in section 
     703(a)(1)--
       ``(A) in the case of an arrangement established after March 
     6, 1996, and
       ``(B) in the case of an arrangement in existence as of 
     March 6, 1996, if the arrangement commenced operations in 
     such State after March 6, 1996.
       ``(2) Premium tax.--For purposes of this subsection, the 
     term `premium tax' imposed by a State on a multiple employer 
     welfare arrangement means any tax imposed by such State if--
       ``(A) such tax is computed by applying a rate to the amount 
     of premiums or contributions received by the arrangement from 
     participating employers located in such State with respect to 
     individuals covered under the arrangement who are residents 
     of such State,
       ``(B) the rate of such tax does not exceed the rate of any 
     tax imposed by such State on premiums or contributions 
     received by insurers or health maintenance organizations for 
     health insurance coverage offered in such State in connection 
     with a group health plan,
       ``(C) such tax is otherwise nondiscriminatory, and
       ``(D) the amount of any such tax assessed on the 
     arrangement is reduced by the amount of any tax or assessment 
     imposed by the State on premiums or contributions received by 
     insurers or health maintenance organizations for health 
     insurance coverage (or other insurance related to the 
     provision of medical care under the arrangement) provided by 
     such insurers or health maintenance organizations in such 
     State to such arrangement.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Small group market.--The term `small group market' 
     means the health insurance coverage market under which 
     individuals obtain health insurance coverage (directly or 
     through any arrangement) on behalf of themselves (and their 
     dependents) on the basis of employment or other relationship 
     with respect to a small employer.
       ``(2) Small employer.--The term `small employer' means, in 
     connection with a group health plan with respect to a 
     calandar year, an employer who employs at least 2 but fewer 
     than 51 employees on a typical business day in the year. For 
     purposes of this paragraph, 2 or more trades or businesses, 
     whether or not incorporated, shall be deemed a single 
     employer if such trades or businesses are within the same 
     control group (within the meaning of section 3(40)(B)(ii)).
       ``(3) Region.--The term `region' means any of the following 
     regions:
       ``(A) The East Region, consisting of the States of Maine, 
     New Hampshire, Vermont, New York, Massachusetts, Rhode 
     Island, Connecticut, New Jersey, Pennsylvania, Delaware, 
     Maryland, West Virginia, and Ohio, and the District of 
     Columbia.
       ``(B) The Southeast Region, consisting of the States of 
     Texas, Arkansas, Louisiana, Mississippi, Alabama, Georgia, 
     Florida, South Carolina, North Carolina, Virginia, and 
     Tennessee.
       ``(C) The Midwest Region, consisting of the States of 
     Montana, South Dakota, North Dakota, Nebraska, Kansas, 
     Oklahoma, Minnesota, Iowa, Missouri, Wisconsin, Michigan, 
     Illinois, and Indiana.
       ``(D) The West Region, consisting of the States of Oregon, 
     Washington, Idaho, Nevada, California, New Mexico, Arizona, 
     Nebraska, Wyoming, Hawaii, Alaska, Colorado, and Utah.''.
       (b) Conforming Amendments to Preemption Rules.--
       (1) Section 514(b)(6)(A)(i) of such Act (29 U.S.C. 
     1144(b)(6)(A)(i)) is amended by striking ``is fully insured'' 
     and inserting ``under which all benefits are fully insured'', 
     and by inserting ``and which is not described in section 
     702(a)(1)'' after ``subparagraph (B)''.
       (2) Section 514(b)(6)(B) of such Act (29 U.S.C. 
     1144(b)(6)(B)) is amended--
       (A) by inserting ``(i)'' after ``(B)'';
       (B) by striking ``which are not fully insured'' and 
     inserting ``under which any benefit is not fully insured''; 
     and
       (C) by striking ``Any such exemption'' and inserting:
       ``(ii) Subject to part 7, any exemption under clause (i)''.
       (c) Conforming Amendment to Definition of Plan Sponsor.--
     Section 3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is 
     amended by adding at the end the following new sentence: 
     ``Such term also includes the sponsor (as defined in section 
     701(6)) of a multiple employer welfare arrangement which is 
     or has been a multiple employer health plan (as defined in 
     section 701(4)).''.
       (d) Definitions.--
       (1) Group health plan.--Section 3 of such Act (29 U.S.C. 
     1002) is amended by adding at the end the following new 
     paragraph:
       ``(42) Except as otherwise provided in this title, the term 
     `group health plan' means an employee welfare benefit plan to 
     the extent that the plan provides medical care (within the 
     meaning of section 607(1)) to employees or their dependents 
     (as defined under the terms of the plan) directly or through 
     insurance, reimbursement, or otherwise.''.
       (2) Inclusion of certain partners and self-employed 
     sponsors in definition of participant.--Section 3(7) of such 
     Act (29 U.S.C. 1002(7)) is amended--
       (A) by inserting ``(A)'' after ``(7)''; and
       (B) by adding at the end the following new paragraph:
       ``(B) In the case of a group health plan, such term 
     includes--
       ``(i) in connection with a group health plan maintained by 
     a partnership, an individual who is a partner in relation to 
     the partnership, or
       ``(ii) in connection with a group health plan maintained by 
     a self-employed individual (under which one or more employees 
     are participants), the self-employed individual,
     if such individual is or may become eligible to receive a 
     benefit under the plan or such individual's beneficiaries may 
     be eligible to receive any such benefit.''.
       (3) Health insurance coverage.--Section 3 of such Act (as 
     amended by paragraph (1)) is amended further by adding at the 
     end the following new paragraph:
       ``(43)(A) Except as provided in subparagraph (B), the term 
     `health insurance coverage' means benefits consisting of 
     medical care (provided directly, through insurance or 
     reimbursement, or otherwise) under any hospital or medical 
     service policy or certificate, hospital or medical service 
     plan contract, or health maintenance organization group 
     contract offered by an insurer or a health maintenance 
     organization.
       ``(B) Such term does not include coverage under any 
     separate policy, certificate, or contract only for one or 
     more of any of the following:
       ``(i) Coverage for accident, credit-only, vision, 
     disability income, long-term care, nursing home care, 
     community-based care dental, on-site medical clinics, or 
     employee assistance programs, or any combination thereof.
       ``(ii) Medicare supplemental health insurance (within the 
     meaning of section 1882(g)(1) of the Social Security Act (42 
     U.S.C. 1395ss(g)(1))) and similar supplemental coverage 
     provided under a group health plan.
       ``(iii) Coverage issued as a supplement to liability 
     insurance.
       ``(iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       ``(v) Workers' compensation or similar insurance.
       ``(vi) Automobile medical-payment insurance.
       ``(vii) Coverage for a specified disease or illness.
       ``(viii) Hospital or fixed indemnity insurance.
       ``(ix) Short-term limited duration insurance.
       ``(x) Such other coverage, comparable to that described in 
     previous clauses, as may be specified in regulations.''.
       (4) Medical care.--Section 607(1) of such Act (29 U.S.C. 
     1167(1)) is amended--
       (A) by striking ``The term'' and inserting the following:
       ``(A) In general.--The term'';
       (B) by striking ``(as defined'' and all that follows 
     through ``1986)''; and
       (C) by adding at the end the following new subparagraph:
       ``(B) Medical care.--For purposes of this paragraph, the 
     term `medical care' means--
       ``(i) amounts paid for, or items or services in the form 
     of, the diagnosis, cure, mitigation, treatment, or prevention 
     of disease, or amounts paid for, or items or services 
     provided for, the purpose of affecting any structure or 
     function of the body,
       ``(ii) amounts paid for, or services in the form of, 
     transportation primarily for and essential to medical care 
     referred to in clause (i), and
       ``(iii) amounts paid for insurance covering medical care 
     referred to in clauses (i) and (ii).''.
       (5) Other definitions.--Section 514 of such Act is further 
     amended by adding at the end the following new subsection:
       ``(e) For purposes of this section, the terms `fully 
     insured', `health maintenance organization', and `insurer' 
     have the meanings given such terms in section 701.''.
       (e) Clerical Amendment.--The table of contents in section 1 
     of the Employee Retirement Income Security Act of 1974 (as 
     amended by section 102(g)) is amended by inserting after the 
     item relating to section 609 the following new items:

 ``Part 7--Rules Governing Regulation of Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Clarification of duty of the Secretary to implement 
              provisions of current law provising for exemptions and 
              solvency standards for multiple employer health plans.
``Sec. 703. Requirements relating to sponsors, boards of trustees, and 
              plan operations.
``Sec. 704. Other requirements for exemption.

[[Page H3056]]

``Sec. 705. Maintenance of reserves.
``Sec. 706. Notice requirements for voluntary termination.
``Sec. 707. Corrective actions and mandatory termination.
``Sec. 708. Additional rules regarding State authority.

     SEC. 162. AFFORDABLE AND AVAILABLE FULLY INSURED HEALTH 
                   COVERAGE THROUGH VOLUNTARY HEALTH INSURANCE 
                   ASSOCIATIONS.

       Section 514 of the Employee Retirement Income Security Act 
     of 1974 is amended--
       (1) by redesignating subsections (d) as subsection (e); and
       (2) by inserting after subsection (c) the following new 
     subsection:
       ``(d)(1) The provisions of this title shall supercede any 
     and all State laws which regulate insurance insofar as they 
     may now or hereafter--
       ``(A) preclude an insurer or health maintenance 
     organization from offering health insurance coverage under 
     voluntary health insurance associations,
       ``(B) preclude an insurer or health maintenance 
     organization from setting premium rates under a voluntary 
     health insurance association based on the claims experience 
     of the voluntary health insurance association (without 
     varying the premium rates of any particular employer on the 
     basis of the claims experience of such employer alone), or
       ``(C) require--
       ``(i) health insurance coverage in connection with a 
     voluntary health insurance association to include specific 
     items or services consisting of medical care, or
       ``(ii) an insurer or health maintenance organization 
     offering health insurance coverage in connection with a 
     voluntary health insurance association to include in such 
     health insurance coverage specific items or services 
     consisting of medical care,
     except to the extent that such State laws prohibit an 
     exclusion for a specific disease in such health insurance 
     coverage.
     Subparagraph (C) shall apply only with respect to items and 
     services which shall be specified in a list which shall be 
     prescribed in regulations of the Secretary.
       ``(2)(A) If a State certifies to the Secretary that such 
     State provides to its residents guaranteed access to health 
     insurance coverage, during the period for which such 
     certification is in effect, the law of such State may 
     regulate any health insurance coverage provided in the small 
     group market in such State (or prohibit the provision of such 
     coverage) by a voluntary health insurance association. Any 
     such certification shall be in effect for such period, not 
     greater than 3 years, as is designated in such certification.
       ``(B) For purposes of this paragraph, the certification by 
     a State that such State provides `guaranteed access' to 
     health insurance coverage to the residents of such State 
     means--
       ``(i) certification that the number of residents of such 
     State who are covered by a group health plan or otherwise 
     have health insurance coverage exceeds 90 percent of the 
     total number of the residents of such State, or
       ``(ii) certification that--
       ``(I) the small group market in such State provides 
     guaranteed issue for employees with respect to at least one 
     option of health insurance coverage offered by insurers and 
     health maintenance organizations in such market, and
       ``(II) the State has implemented rating reforms in the 
     small group market in such State which are designed to make 
     health insurance coverage more affordable.
       ``(3)(A) Paragraph (2) shall not apply in the case of any 
     voluntary health insurance association with respect to any 
     State if the qualified association demonstrates to the 
     Secretary (in such form and manner as shall be prescribed in 
     regulations of the Secretary) that--
       ``(i) such qualified association operates in the majority 
     of the 50 States and in at least 2 of the regions of the 
     United States,
       ``(ii) the arrangement covers, or is to cover (in the case 
     of a newly established arrangement), at least 7,500 
     participants and beneficiaries, and
       ``(iii) under the terms of the arrangement, either--
       ``(I) the qualified association does not exclude from 
     membership any small employer in the State, or
       ``(II) the arrangement accepts every small employer in the 
     State that applies for coverage.
       ``(B)(i) Subject to clause (ii), paragraph (2) shall not 
     apply with respect to a voluntary health insurance 
     association operating in any State if such association was 
     operating in such State as of March 6, 1996.
       ``(ii) Clause (i) shall apply in the case of an arrangement 
     in connection with any State only if the qualified 
     association demonstrates to the Secretary (in such form and 
     manner as shall be prescribed in regulations of the 
     Secretary) either--
       ``(I) that the qualified association does not exclude from 
     membership any small employer in the State, or
       ``(II) that the arrangement accepts every small employer in 
     such State that applies for coverage.
       ``(C) Subparagraphs (A) and (B) shall not apply in the case 
     of any State which has made a certification under paragraph 
     (2) and which, as of January 1, 1996, had enacted a law that 
     either--
       ``(i) provided guaranteed issue of individual health 
     insurance coverage offered by insurers and health maintenance 
     organizations in the individual market using pure community 
     rating and did not provide for any transition period (after 
     the effective date of the guaranteed issue requirement) in 
     the implementation of pure community rating; or
       ``(ii) required insurers offering health insurance coverage 
     in connection with group health plans to reimburse insurers 
     offering individual health insurance coverage for losses 
     resulting from those insurers offering individual health 
     insurance coverage on an open enrollment basis.
       ``(5) For purposes of this subsection--
       ``(A) The term `voluntary health insurance association' 
     means a multiple employer welfare arrangement--
       ``(i) under which benefits include medical care (within the 
     meaning of section 607(1)),
       ``(ii) under which all benefits consisting of such medical 
     care are fully insured,
       ``(iii) which is maintained by a qualified association,
       ``(iv) under which no employer is excluded as a 
     participating employer (except to the extent that 
     requirements of the type referred to in section 131(d)(2) of 
     the Health Coverage Availability and Affordability Act of 
     1996 are not met), the requirements of section 103 of such 
     Act (as referred to in section 104(b)(1) of such Act) are 
     met, and all health insurance coverage options are 
     aggressively marketed to eligible employees and their 
     dependents, and
       ``(v) under which, with respect to the operations of the 
     arrangement in any State, the health insurance coverage is 
     provided by an insurer or health maintenance organization to 
     which the laws of such State applies.
       ``(B) The term `qualified association' means an association 
     with respect to which the following requirements are met:
       ``(i) The sponsor of the association is, and has been 
     (together with its immediate predecessor, if any) for a 
     continuous period of not less than 5 years, organized and 
     maintained in good faith, with a constitution and bylaws 
     specifically stating its purpose, as a trade association, an 
     industry association, a professional association, or a 
     chamber of commerce (or similar business group), for 
     substantial purposes other than that of obtaining or 
     providing medical care (within the meaning of section 
     607(1)).
       ``(ii) The sponsor of the association is established as a 
     permanent entity which receives the active support of its 
     members.
       ``(iii) The constitution and bylaws of the association 
     provide for periodic meetings on at least an annual basis.
       ``(iv) The association collects dues or contributions from 
     its members on a periodic basis, without conditioning such 
     dues or contributions on the basis of the health status of 
     the employees of such members or the dependents of such 
     employees or on the basis of participation in a group health 
     plan or voluntary health insurance association.
     Such term includes a group of qualified associations, as 
     defined in the preceding provisions of this clause.
       ``(C) The term `small group market' means the health 
     insurance coverage market under which individuals obtain 
     health insurance coverage (directly or through any 
     arrangement) on behalf of themselves (and their dependents) 
     on the basis of employment or other relationship with respect 
     to a small employer.
       ``(D) The term `small employer' means, in connection with a 
     group health plan with respect to a calandar year, an 
     employer who employs at least 2 but fewer than 51 employees 
     on a typical business day in the year. For purposes of this 
     paragraph, 2 or more trades or businesses, whether or not 
     incorporated, shall be deemed a single employer if such 
     trades or businesses are within the same control group 
     (within the meaning of section 3(40)(B)(ii)).
       ``(E) The term `region' means any of the following regions:
       ``(i) The East Region, consisting of the States of Maine, 
     New Hampshire, Vermont, New York, Massachusetts, Rhode 
     Island, Connecticut, New Jersey, Pennsylvania, Delaware, 
     Maryland, West Virginia, and Ohio and the District of 
     Columbia.
       ``(ii) The Southeast Region, consisting of the States of 
     Texas, Arkansas, Louisiana, Mississippi, Alabama, Georgia, 
     Florida, South Carolina, North Carolina, Virginia, and 
     Tennessee.
       ``(iii) The Midwest Region, consisting of the States of 
     Montana, South Dakota, North Dakota, Nebraska, Kansas, 
     Oklahoma, Minnesota, Iowa, Missouri, Wisconsin, Michigan, 
     Illinois, and Indiana.
       ``(iv) The West Region, consisting of the States of Oregon, 
     Washington, Idaho, Nevada, California, New Mexico, Arizona, 
     Nebraska, Wyoming, Hawaii, Alaska, Colorado, and Utah.''.

     SEC. 163. STATE AUTHORITY FULLY APPLICABLE TO SELF-INSURED 
                   MULTIPLE EMPLOYER WELFARE ARRANGEMENTS 
                   PROVIDING MEDICAL CARE WHICH ARE NOT EXEMPTED 
                   UNDER NEW PART 7.

       (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1144(b)(6)(A)(ii)) is amended by inserting before the period 
     the following: ``, except that, in any such case, if the 
     arrangement provides medical care (within the meaning of 
     section 607(1)), such a law of any State may apply without 
     limitation under this title''.
       (b) Cross-Reference.--Section 514(b)(6) of such Act (29 
     U.S.C. 1144(b)(6)) (as amended by section 301) is amended by 
     adding at the end the following new subparagraph:

[[Page H3057]]

       ``(G) For additional rules relating to exemption from 
     subparagraph (A)(ii) of multiple employer health plans, see 
     part 7.''.

     SEC. 164. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER 
                   ARRANGEMENTS.

       Section 3(40)(B) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1002(40)(B)) is amended--
       (1) in clause (i), by inserting ``for any plan year of any 
     such plan, or any fiscal year of any such other 
     arrangement,'' after ``single employer'', and by inserting 
     ``during such year or at any time during the preceding 1-year 
     period'' after ``control group'';
       (2) in clause (iii)--
       (A) by striking ``common control shall not be based on an 
     interest of less than 25 percent'' and inserting ``an 
     interest of greater than 25 percent may not be required as 
     the minimum interest necessary for common control''; and
       (B) by striking ``similar to'' and inserting ``consistent 
     and coextensive with'';
       (3) by redesignating clauses (iv) and (v) as clauses (v) 
     and (vi), respectively; and
       (4) by inserting after clause (iii) the following new 
     clause:
       ``(iv) in determining, after the application of clause (i), 
     whether benefits are provided to employees of two or more 
     employers, the arrangement shall be treated as having only 1 
     participating employer if, after the application of clause 
     (i), the number of individuals who are employees and former 
     employees of any one participating employer and who are 
     covered under the arrangement is greater than 75 percent of 
     the aggregate number of all individuals who are employees or 
     former employees of participating employers and who are 
     covered under the arrangement,''.

     SEC. 165. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY 
                   BARGAINED ARRANGEMENTS.

       (a) In General.--Section 3(40)(A)(i) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(40)(A)(i)) is amended to read as follows:
       ``(i)(I) under or pursuant to one or more collective 
     bargaining agreements which are reached pursuant to 
     collective bargaining described in section 8(d) of the 
     National Labor Relations Act (29 U.S.C. 158(d)) or paragraph 
     Fourth of section 2 of the Railway Labor Act (45 U.S.C. 152, 
     paragraph Fourth) or which are reached pursuant to labor-
     management negotiations under similar provisions of State 
     public employee relations laws, and (II) in accordance with 
     subparagraphs (C), (D), and (E),''.
       (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 
     1002(40)) is amended by adding at the end the following new 
     subparagraphs:
       ``(C) A plan or other arrangement is established or 
     maintained in accordance with this subparagraph only if the 
     following requirements are met:
       ``(i) The plan or other arrangement, and the employee 
     organization or any other entity sponsoring the plan or other 
     arrangement, do not--
       ``(I) utilize the services of any licensed insurance agent 
     or broker for soliciting or enrolling employers or 
     individuals as participating employers or covered individuals 
     under the plan or other arrangement, or
       ``(II) pay a commission or any other type of compensation 
     to a person, other than a full time employee of the employee 
     organization (or a member of the organization to the extent 
     provided in regulations of the Secretary), that is related 
     either to the volume or number of employers or individuals 
     solicited or enrolled as participating employers or covered 
     individuals under the plan or other arrangement, or to the 
     dollar amount or size of the contributions made by 
     participating employers or covered individuals to the plan or 
     other arrangement,
     except to the extent that the services used by the plan, 
     arrangement, organization, or other entity consist solely of 
     preparation of documents necessary for compliance with the 
     reporting and disclosure requirements of part 1 or 
     administrative, investment, or consulting services unrelated 
     to solicitation or enrollment of covered individuals.
       ``(ii) As of the end of the preceding plan year, the number 
     of covered individuals under the plan or other arrangement 
     who are identified to the plan or arrangement and who are 
     neither--
       ``(I) employed within a bargaining unit covered by any of 
     the collective bargaining agreements with a participating 
     employer (nor covered on the basis of an individual's 
     employment in such a bargaining unit), nor
       ``(II) present employees (or former employees who were 
     covered while employed) of the sponsoring employee 
     organization, of an employer who is or was a party to any of 
     the collective bargaining agreements, or of the plan or other 
     arrangement or a related plan or arrangement (nor covered on 
     the basis of such present or former employment),
     does not exceed 15 percent of the total number of individuals 
     who are covered under the plan or arrangement and who are 
     present or former employees who are or were covered under the 
     plan or arrangement pursuant to a collective bargaining 
     agreement with a participating employer. The requirements of 
     the preceding provisions of this clause shall be treated as 
     satisfied if, as of the end of the preceding plan year, such 
     covered individuals are comprised solely of individuals who 
     were covered individuals under the plan or other arrangement 
     as of the date of the enactment of the Health Coverage 
     Availability and Affordability Act 1996 and, as of the end of 
     the preceding plan year, the number of such covered 
     individuals does not exceed 25 percent of the total number of 
     present and former employees enrolled under the plan or other 
     arrangement.
       ``(iii) The employee organization or other entity 
     sponsoring the plan or other arrangement certifies to the 
     Secretary each year, in a form and manner which shall be 
     prescribed in regulations of the Secretary that the plan or 
     other arrangement meets the requirements of clauses (i) and 
     (ii).
       ``(D) A plan or arrangement is established or maintained in 
     accordance with this subparagraph only if--
       ``(i) all of the benefits provided under the plan or 
     arrangement are fully insured (as defined in section 701(2)), 
     or
       ``(ii)(I) the plan or arrangement is a multiemployer plan, 
     and
       ``(II) the requirements of clause (B) of the proviso to 
     clause (5) of section 302(c) of the Labor Management 
     Relations Act, 1947 (29 U.S.C. 186(c)) are met with respect 
     to such plan or other arrangement.
       ``(E) A plan or arrangement is established or maintained in 
     accordance with this subparagraph only if--
       ``(i) the plan or arrangement is in effect as of the date 
     of the enactment of the Health Coverage Availability and 
     Affordability Act of 1996, or
       ``(ii) the employee organization or other entity sponsoring 
     the plan or arrangement--
       ``(I) has been in existence for at least 3 years or is 
     affiliated with another employee organization which has been 
     in existence for at least 3 years, or
       ``(II) demonstrates to the satisfaction of the Secretary 
     that the requirements of subparagraphs (C) and (D) are met 
     with respect to the plan or other arrangement.''.
       (c) Conforming Amendments to Definitions of Participant and 
     Beneficiary.--Section 3(7) of such Act (29 U.S.C. 1002(7)) is 
     amended by adding at the end the following new sentence: 
     ``Such term includes an individual who is a covered 
     individual described in paragraph (40)(C)(ii).''.

     SEC. 166. TREATMENT OF CHURCH PLANS.

       (a) Special Rules for Church Plans.--
       (1) In general.--Part 7 of subtitle B of title I of such 
     Act (as added and amended by the preceding provisions of this 
     Act) is amended by adding at the end the following new 
     section:

     ``SEC. 709. SPECIAL RULES FOR CHURCH PLANS.

       ``(a) Election for Church Plans.--
       ``(1) In general.--Notwithstanding section 4(b)(2), if the 
     church or convention or association of churches which 
     maintains a church plan covered under this section makes an 
     election with respect to such plan under this subsection (in 
     such form and manner as the Secretary may by regulations 
     prescribe), then, subject to this section, the provisions of 
     this part (and other provisions of this title to the extent 
     that they apply to group health plans which are multiple 
     employer welfare arrangements) shall apply to such church 
     plan, with respect to benefits provided under such plan 
     consisting of medical care, as if--
       ``(A) section 4(b)(2) did not contain an exclusion for 
     church plans, and
       ``(B) such plan were an arrangement eligible to apply for 
     an exemption under this part.
       ``(2) Election irrevocable.--An election under this 
     subsection with respect to any church plan shall be binding 
     with respect to such plan, and, once made, shall be 
     irrevocable.
       ``(b) Covered Church Plans.--A church plan is covered under 
     this section if such plan provides benefits which include 
     medical care and some or all of such benefits are not fully 
     insured.
       ``(c) Sponsor and Board of Trustees.--For purposes of this 
     part, in the case of a church plan to which this part applies 
     pursuant to an election under subsection (a), in treating 
     such plan as if it were a multiple employer welfare 
     arrangement under this part--
       ``(1) the church, convention or association of churches, or 
     other organization described in section 3(33)(C)(i) which is 
     the entity maintaining the plan shall be treated as the 
     sponsor referred to in section 703(a)(1), and the 
     requirements of section 703(a)(1) shall not apply, and
       ``(2) the board of trustees, board of directors, or other 
     similar governing body of such sponsor shall be treated as 
     the board of trustees referred to in section 703(a)(2), 
     and the requirements of section 703(a)(2) shall be deemed 
     satisfied with respect to the board of trustees.
       ``(d) Deemed Satisfaction of Trust Requirements.--The 
     requirements of section 403 shall not be treated as not 
     satisfied with respect to a church plan to which this part 
     applies pursuant to an election under subsection (a) solely 
     because assets of the plan are held by an organization 
     described in section 3(33)(C)(i), if--
       ``(1) such organization is incorporated separately from the 
     church or convention or association of churches involved, and
       ``(2) such assets with respect to medical care are 
     separately accounted for.
       ``(e) Deemed Satisfaction of Exclusive Benefit 
     Requirements.--The requirements of section 404 shall not be 
     treated as not satisfied with respect to a church plan to 
     which this part applies pursuant to an election under 
     subsection (a) solely because assets of the plan which are in 
     excess of reserves required for exemption under section 
     514(b)(6)(B) are held in a fund in which such assets are 
     pooled with assets of other church plans, if the assets held 
     by such fund may not, under the terms of the plan and the

[[Page H3058]]

     terms governing such fund, be used for, or diverted to, any 
     purpose other than for the exclusive benefit of the 
     participants and beneficiaries of the church plans whose 
     assets are pooled in such fund.
       ``(f) Inapplicability of Certain Provisions.--
       ``(1) Prohibited transactions.--Section 406 shall not apply 
     to a church plan by reason of an election under subsection 
     (a).
       ``(2) Continuation coverage.--Section 601 shall not apply 
     to a church plan by reason of an election under subsection 
     (a).''.
       (b) Conforming Amendments.--
       (1) Section 4(b)(2) of such Act (29 U.S.C. 1003(b)(2)) is 
     amended by inserting before the semicolon the following: ``, 
     except with respect to provisions made applicable under any 
     election made under section 704(a) of this Act''.
       (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
       (A) in subsection (a), by inserting ``(including a church 
     plan which is not exempt under section 4(b)(2) by reason of 
     an election under section 704)'' before the period in the 
     first sentence; and
       (B) in subsection (b)(2)(B), by inserting ``and including a 
     church plan which is not exempt under section 4(b)(2) by 
     reason of an election under section 704'' after ``death 
     benefits''.
       (c) Clerical Amendment.--The table of contents in section 1 
     of such Act (as amended by the preceding provisions of this 
     title) is further amended by inserting after the item 
     relating to section 703 the following new item:

``Sec. 709. Special rules for church plans.''.

     SEC. 167. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE 
                   EMPLOYER WELFARE ARRANGEMENTS.

       (a) Enforcement of Filing Requirements.--Section 502 of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1132) (as amended by sections 102(c)) is further amended--
       (1) in subsection (a)(6), by striking ``paragraph (2) or 
     (5)'' and inserting ``paragraph (2), (5), or (6)''; and
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(6) The Secretary may assess a civil penalty against any 
     person of up to $1,000 a day from the date of such person's 
     failure or refusal to file the information required to be 
     filed with the Secretary under section 101(g).''.
       (b) Actions by States in Federal Court.--Section 502(a) of 
     such Act (29 U.S.C. 1132(a)) is amended--
       (1) in paragraph (8), by striking ``or'' at the end;
       (2) in paragraph (9), by striking the period and inserting 
     ``, or''; and
       (3) by adding at the end the following:
       ``(10) by a State official having authority under the law 
     of such State to enforce the laws of such State regulating 
     insurance, to enjoin any act or practice which violates any 
     requirement under part 7 for an exemption under section 
     514(b)(6)(B) which such State has the power to enforce 
     pursuant to section 506(c)(1).''.
       (c) Criminal Penalties for Certain Willful 
     Misrepresentations.--Section 501 of such Act (29 U.S.C. 1131) 
     is amended--
       (1) by inserting ``(a)'' after ``Sec. 501.''; and
       (2) by adding at the end the following new subsection:
       ``(b) Any person who, either willfully or with willful 
     blindness, falsely represents, to any employee, any 
     employee's beneficiary, any employer, the Secretary, or any 
     State, an arrangement established or maintained for the 
     purpose of offering or providing any benefit described in 
     section 3(1) to employees or their beneficiaries as--
       ``(1) being a multiple employer welfare arrangement to 
     which an exemption has been granted under section 
     514(b)(6)(B),
       ``(2) having been established or maintained under or 
     pursuant to one or more collective bargaining agreements 
     which are reached pursuant to collective bargaining described 
     in section 8(d) of the National Labor Relations Act (29 
     U.S.C. 158(d)) or paragraph Fourth of section 2 of the 
     Railway Labor Act (45 U.S.C. 152, paragraph Fourth) or which 
     are reached pursuant to labor-management negotiations under 
     similar provisions of State public employee relations laws, 
     or
       ``(3) being a plan or arrangement with respect to which the 
     requirements of subparagraph (C), (D), or (E) of section 
     3(40) are met,
     shall, upon conviction, be imprisoned not more than five 
     years, be fined under title 18, United States Code, or 
     both.''.
       (d) Cessation of Activities in Absence of Effective State 
     Regulation unless Standards under ERISA Exemption Are Met.--
     Section 502 of such Act (29 U.S.C. 1132) is amended by adding 
     at the end the following new subsection:
       ``(n)(1) Subject to paragraph (2), upon application by the 
     Secretary showing the operation, promotion, or marketing of a 
     multiple employer welfare arrangement providing benefits 
     consisting of medical care (within the meaning of section 
     607(1)) that--
       ``(A) is not licensed, registered, or otherwise approved 
     under the insurance laws of the States in which the 
     arrangement offers or provides benefits, and
       ``(B) if there is in effect with respect to such 
     arrangement an exemption under section 514(b)(6)(B), is not 
     operating in accordance with the requirements under part 7 
     for such an exemption,

     a district court of the United States shall enter an order 
     requiring that the arrangement cease activities.
       ``(2) Paragraph (1) shall not apply in the case of a 
     multiple employer welfare arrangement if the arrangement 
     shows that--
       ``(A) all benefits under it referred to in paragraph (1) 
     are fully insured, within the meaning of section 701(1), and
       ``(B) with respect to each State in which the arrangement 
     offers or provides benefits, the arrangement is operating in 
     accordance with applicable State insurance laws that are not 
     superseded under section 514.
       ``(3) The court may grant such additional equitable relief, 
     including any relief available under this title, as it deems 
     necessary to protect the interests of the public and of 
     persons having claims for benefits against the 
     arrangement.''.
       (e) Responsibility for Claims Procedure.--Section 503 of 
     such Act (29 U.S.C. 1133) is amended by adding at the end 
     (after and below paragraph (2)) the following new sentence: 
     ``The terms of each multiple employer health plan (within the 
     meaning of section 701(4)) shall require the board of 
     trustees or the named fiduciary (as applicable) to ensure 
     that the requirements of this section are met in connection 
     with claims filed under the plan.''.

     SEC. 168. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

       Section 506 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1136) is amended by adding at the end the 
     following new subsection:
       ``(c) State Authority With Respect to Multiple Employer 
     Welfare Arrangements.--
       ``(1) State enforcement.--
       ``(A) Agreements with states.--A State may enter into an 
     agreement with the Secretary for delegation to the State of 
     some or all of the Secretary's authority under sections 502 
     and 504 to enforce the requirements under section 514(d) or 
     the requirements under part 7 for an exemption under section 
     514(b)(6)(B). The Secretary shall enter into the agreement if 
     the Secretary determines that the delegation provided for 
     therein would not result in a lower level or quality of 
     enforcement of the provisions of this title.
       ``(B) Delegations.--Any department, agency, or 
     instrumentality of a State to which authority is delegated 
     pursuant to an agreement entered into under this paragraph 
     may, if authorized under State law and to the extent 
     consistent with such agreement, exercise the powers of the 
     Secretary under this title which relate to such authority.
       ``(C) Concurrent authority of the secretary.--If the 
     Secretary delegates authority to a State in an agreement 
     entered into under subparagraph (A), the Secretary may 
     continue to exercise such authority concurrently with the 
     State.
       ``(D) Recognition of primary domicile state.--In entering 
     into any agreement with a State under subparagraph (A), the 
     Secretary shall ensure that, as a result of such agreement 
     and all other agreements entered into under subparagraph (A), 
     only one State will be recognized, with respect to any 
     particular multiple employer welfare arrangement, as the 
     primary domicile State to which authority has been delegated 
     pursuant to such agreements.
       ``(2) Assistance to states.--The Secretary shall--
       ``(A) provide enforcement assistance to the States with 
     respect to multiple employer welfare arrangements, including, 
     but not limited to, coordinating Federal and State efforts 
     through the establishment of cooperative agreements with 
     appropriate State agencies under which the Pension and 
     Welfare Benefits Administration keeps the States informed of 
     the status of its cases and makes available to the States 
     information obtained by it,
       ``(B) provide continuing technical assistance to the States 
     with respect to issues involving multiple employer welfare 
     arrangements and this Act,
       ``(C) make readily available to the States timely and 
     complete responses to requests for advisory opinions on 
     issues described in subparagraph (B), and
       ``(D) distribute copies of all advisory opinions described 
     in subparagraph (C) to the State insurance commissioner of 
     each State.''.

     SEC. 169. FILING AND DISCLOSURE REQUIREMENTS FOR MULTIPLE 
                   EMPLOYER WELFARE ARRANGEMENTS OFFERING HEALTH 
                   BENEFITS.

       (a) In General.--Section 101 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1021) is amended--
       (1) by redesignating subsection (g) as subsection (i); and
       (2) by inserting after subsection (f) the following new 
     subsections:
       ``(g) Registration of Multiple Employer Welfare 
     Arrangements.--(1) Each multiple employer welfare arrangement 
     shall file with the Secretary a registration statement 
     described in paragraph (2) within 60 days before 
     commencing operations (in the case of an arrangement 
     commencing operations on or after January 1, 1997) and no 
     later than February 15 of each year (in the case of an 
     arrangement in operation since the beginning of such 
     year), unless, as of the date by which such filing 
     otherwise must be made, such arrangement provides no 
     benefits consisting of medical care (within the meaning of 
     section 607(1))).
       ``(2) Each registration statement--
       ``(A) shall be filed in such form, and contain such 
     information concerning the multiple employer welfare 
     arrangement and any persons involved in its operation 
     (including

[[Page H3059]]

     whether coverage under the arrangement is fully insured), as 
     shall be provided in regulations which shall be prescribed by 
     the Secretary, and
       ``(B) if any benefits under the arrangement consisting of 
     medical care (within the meaning of section 607(1)) are not 
     fully insured, shall contain a certification that copies of 
     such registration statement have been transmitted by 
     certified mail to--
       ``(i) in the case of an arrangement which is a multiple 
     employer health plan (as defined in section 701(4)), the 
     State insurance commissioner of the domicile State of such 
     arrangement, or
       ``(ii) in the case of an arrangement which is not a 
     multiple employer health plan, the State insurance 
     commissioner of each State in which the arrangement is 
     located.
       ``(3) The person or persons responsible for filing the 
     annual registration statement are--
       ``(A) the trustee or trustees so designated by the terms of 
     the instrument under which the multiple employer welfare 
     arrangement is established or maintained, or
       ``(B) in the case of a multiple employer welfare 
     arrangement for which the trustee or trustees cannot be 
     identified, or upon the failure of the trustee or trustees of 
     an arrangement to file, the person or persons actually 
     responsible for the acquisition, disposition, control, or 
     management of the cash or property of the arrangement, 
     irrespective of whether such acquisition, disposition, 
     control, or management is exercised directly by such person 
     or persons or through an agent designated by such person or 
     persons.
       ``(4) Any agreement entered into under section 506(c) with 
     a State as the primary domicile State with respect to any 
     multiple employer welfare arrangement shall provide for 
     simultaneous filings of reports required under this 
     subsection with the Secretary and with the State insurance 
     commissioner of such State.
       ``(5) For purposes of this subsection, the term `domicile 
     State' means, in connection with a multiple employer welfare 
     arrangement, the State in which, according to the application 
     for an exemption under this 514(b)(6)(B), most individuals to 
     be covered under the arrangement are located, except that, in 
     any case in which information contained in the latest annual 
     report of the arrangement filed under this part indicates 
     that most individuals covered under the arrangement are 
     located in a different State, such term means such different 
     State.
       ``(6) The Secretary may exempt from the requirements of 
     this subsection such class of multiple employer welfare 
     arrangements as the Secretary deems appropriate.
       ``(h) Filing Requirements for Multiple Employer Welfare 
     Arrangements.--
       ``(1) In general.--A multiple employer welfare arrangement 
     which provides benefits consisting of medical care (within 
     the meaning of section 607(1)) shall issue to each 
     participating employer--
       ``(A) a document equivalent to the summary plan description 
     required of plans under this part,
       ``(B) information describing the contribution rates 
     applicable to participating employers, and
       ``(C) a statement indicating--
       ``(i) that the arrangement is not a licensed insurer under 
     the laws of any State,
       ``(ii) the extent to which any benefits under the 
     arrangement are fully insured,
       ``(iii) if any benefits under the arrangement are not fully 
     insured, whether the arrangement has been granted an 
     exemption under section 514(b)(6)(B) (or whether such an 
     exemption has ceased to be effective).
       ``(2) Time for disclosure.--Such information shall be 
     issued to employers within such reasonable period of time 
     before becoming participating employers as may be prescribed 
     in regulations of the Secretary.''.
       (b) Effective Dates.--Section 101(g) of the Employee 
     Retirement Income Security Act of 1974 (added by subsection 
     (a)) shall take effect on the date of the enactment of this 
     Act. Section 101(h) of such Act (added by subsection (a)) 
     shall take effect as provided in section 171.

     SEC. 170. SINGLE ANNUAL FILING FOR ALL PARTICIPATING 
                   EMPLOYERS.

       (a) In General.--Section 110 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1030) is amended by 
     adding at the end the following new subsection:
       ``(c) The Secretary shall prescribe by regulation or 
     otherwise an alternative method providing for the filing of a 
     single annual report (as referred to in section 104(a)(1)(A)) 
     with respect to all employers who are participating employers 
     under a multiple employer welfare arrangement under which all 
     coverage consists of medical care (within the meaning of 
     section 607(1)) and is fully insured (as defined in section 
     701(1)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary of Labor shall prescribe the alternative method 
     referred to in section 110(c) of the Employee Retirement 
     Income Security Act of 1974, as added by such amendment, 
     within 90 days after the date of the enactment of this Act.

     SEC. 171. EFFECTIVE DATE; TRANSITIONAL RULE.

       (a) Effective Date.--Except as otherwise provided in 
     section 170(b), the amendments made by this subtitle shall 
     take effect January 1, 1998. The Secretary shall issue all 
     regulations necessary to carry out the amendments made by 
     this subtitle before January 1, 1998.
       (b) Transitional Rule.--
       (1) In general.--If the sponsor of a multiple employer 
     welfare arrangement which, as of the effective date specified 
     in subsection (a), provides benefits consisting of medical 
     care (within the meaning of section 607(1) of the Employee 
     Retirement Income Security Act of 1974) files with the 
     Secretary of Labor an application for an exemption under 
     section 514(b)(6)(B) of such Act within 180 days after such 
     date and the Secretary has not, as of 90 days after receipt 
     of such application, found such application to be materially 
     deficient, then section 514(b)(6)(A) of such Act (29 U.S.C. 
     1144(b)(6)(A)) shall not apply with respect to such 
     arrangement during the period following such date and ending 
     on the earlier of--
       (A) the date on which the Secretary denies the application 
     under the amendments made by this title or determines, in the 
     Secretary's sole discretion, that such exclusion from 
     coverage under the provisions of such section 514(b)(6)(A) of 
     such arrangement would be detrimental to the interests of 
     individuals covered under such arrangement, or
       (B) 18 months after such effective date.
       (2) No pending state action.--Subparagraph (A) shall apply 
     in the case of an arrangement only if, at the time of the 
     application for the exemption under section 514(b)(6)(B), the 
     arrangement does not have pending against it an enforcement 
     action by a State.
              Subtitle D--Definitions; General Provisions

     SEC. 191. DEFINITIONS; SCOPE OF COVERAGE.

       (a) Group Health Plan.--
       (1) Definition.--Subject to the succeeding provisions of 
     this subsection and subsection (d)(1), the term ``group 
     health plan'' means an employee welfare benefit plan to 
     the extent that the plan provides medical care (as defined 
     in subsection (c)(9)) to employees or their dependents (as 
     defined under the terms of the plan) directly or through 
     insurance, reimbursement, or otherwise, and includes a 
     group health plan (within the meaning of section 
     5000(b)(1) of the Internal Revenue Code of 1986).
       (2) Limitation of requirements to plans with 2 or more 
     employee participants.--The requirements of subtitle A and 
     part 1 of subtitle B shall apply in the case of a group 
     health plan for any plan year, or for health insurance 
     coverage offered in connection with a group health plan for a 
     year, only if the group health plan has two or more 
     participants as current employees on the first day of the 
     plan year.
       (3) Exclusion of plans with limited coverage.--An employee 
     welfare benefit plan shall be treated as a group health plan 
     under this title only with respect to medical care which is 
     provided under the plan and which does not consist of 
     coverage excluded from the definition of health insurance 
     coverage under subsection (c)(4)(B).
       (4) Treatment of church plans.--
       (A) Exclusion.--The requirements of this title insofar as 
     they apply to group health plans shall not apply to church 
     plans.
       (B) Optional disregard in determining period of coverage.--
     For purposes of applying section 101(b)(3)(B)(i), a group 
     health plan may elect to disregard periods of coverage of an 
     individual under a church plan that, pursuant to subparagraph 
     (A), is not subject to the requirements of this title.
       (5) Treatment of governmental plans.--
       (A) Election to be excluded.--If the plan sponsor of a 
     governmental plan which is a group health plan to which the 
     provisions of this subtitle otherwise apply makes an election 
     under this paragraph for any specified period (in such form 
     and manner as the Secretary of Health and Human Services may 
     by regulations prescribe), then the requirements of this 
     title insofar as they apply to group health plans shall not 
     apply to such governmental plans for such period.
       (B) Optional disregard in determining period of coverage if 
     election made.--For purposes of applying section 
     101(b)(3)(B)(i), a group health plan may elect to disregard 
     periods of coverage of an individual under a governmental 
     plan that, under an election under subparagraph (A), is not 
     subject to the requirements of this title.
       (6) Treatment of medicaid plan as group health plan.--A 
     State plan under title XIX of the Social Security Act shall 
     be treated as a group health plan for purposes of applying 
     section 101(c)(1), unless the State elects not to be so 
     treated.
       (7) Treatment of medicare and indian health service 
     programs as group health plan.--Title XVIII of the Social 
     Security Act and a program of the Indian Health Service shall 
     be treated as a group health plan for purposes of applying 
     section 101(c)(1).
       (b) Incorporation of Certain Definitions in Employee 
     Retirement Income Security Act of 1974.--Except as provided 
     in this section, the terms ``beneficiary'', ``church plan'', 
     ``employee'', ``employee welfare benefit plan'', 
     ``employer'', ``governmental plan'', ``multiemployer plan'', 
     ``multiple employer welfare arrangement'', ``participant'', 
     ``plan sponsor'', and ``State'' have the meanings given such 
     terms in section 3 of the Employee Retirement Income Security 
     Act of 1974.
       (c) Other Definitions.--For purposes of this title:
       (1) Applicable state authority.--The term ``applicable 
     State authority'' means, with respect to an insurer or health 
     maintenance organization in a State, the State insurance 
     commissioner or official or officials

[[Page H3060]]

     designated by the State to enforce the requirements of this 
     title for the State involved with respect to such insurer or 
     organization.
       (2) Bona fide association.--The term ``bona fide 
     association'' means an association which--
       (A) has been actively in existence for at least 5 years,
       (B) has been formed and maintained in good faith for 
     purposes other than obtaining insurance,
       (C) does not condition membership in the association on 
     health status,
       (D) makes health insurance coverage offered through the 
     association available to all members regardless of health 
     status,
       (E) does not make health insurance coverage offered through 
     the association available to any individual who is not a 
     member (or dependent of a member) of the association at the 
     time the coverage is initially issued,
       (F) does not impose preexisting condition exclusions except 
     in a manner consistent with the requirements of sections 101 
     and 102 as they relate to group health plans, and
       (G) provides for renewal and continuation of health 
     insurance coverage in a manner consistent with the 
     requirements of section 132 as they relate to the renewal and 
     continuation in force of coverage in a group market.
       (3) COBRA continuation provision.--The term ``COBRA 
     continuation provision'' means any of the following:
       (A) Section 4980B of the Internal Revenue Code of 1986, 
     other than subsection (f)(1) of such section insofar as it 
     relates to pediatric vaccines.
       (B) Part 6 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1161 et 
     seq.), other than section 609.
       (C) Title XXII of the Public Health Service Act.
       (4) Health insurance coverage.--
       (A) In general.--Except as provided in subparagraph (B), 
     the term ``health insurance coverage'' means benefits 
     consisting of medical care (provided directly, through 
     insurance or reimbursement, or otherwise) under any hospital 
     or medical service policy or certificate, hospital or medical 
     service plan contract, or health maintenance organization 
     group contract offered by an insurer or a health maintenance 
     organization.
       (B) Exception.--Such term does not include coverage under 
     any separate policy, certificate, or contract only for one or 
     more of any of the following:
       (i) Coverage for accident, credit-only, vision, disability 
     income, long-term care, nursing home care, community-based 
     care dental, on-site medical clinics, or employee assistance 
     programs, or any combination thereof.
       (ii) Medicare supplemental health insurance (within the 
     meaning of section 1882(g)(1) of the Social Security Act (42 
     U.S.C. 1395ss(g)(1))) and similar supplemental coverage 
     provided under a group health plan.
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Workers' compensation or similar insurance.
       (vi) Automobile medical-payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) Hospital or fixed indemnity insurance.
       (ix) Short-term limited duration insurance.
       (x) Such other coverage, comparable to that described in 
     previous clauses, as may be specified in regulations 
     prescribed under this title.
       (5) Health maintenance organization; hmo.--The terms 
     ``health maintenance organization'' and ``HMO'' mean--
       (A) a Federally qualified health maintenance organization 
     (as defined in section 1301(a) of the Public Health Service 
     Act (42 U.S.C. 300e(a))),
       (B) an organization recognized under State law as a health 
     maintenance organization, or
       (C) a similar organization regulated under State law for 
     solvency in the same manner and to the same extent as such a 
     health maintenance organization,

     if (other than for purposes of part 2 of subtitle B) it is 
     subject to State law which regulates insurance (within the 
     meaning of section 514(b)(2) of the Employee Retirement 
     Income Security Act of 1974).
       (6) Health status.--The term ``health status'' includes, 
     with respect to an individual, medical condition, claims 
     experience, receipt of health care, medical history, genetic 
     information, evidence of insurability (including conditions 
     arising out of acts of domestic violence), or disability.
       (7) Individual health insurance coverage.--The term 
     ``individual health insurance coverage'' means health 
     insurance coverage offered to individuals if the coverage is 
     not offered in connection with a group health plan (other 
     than such a plan that has fewer than two participants as 
     current employees on the first day of the plan year).
       (8) Insurer.--The term ``insurer'' means an insurance 
     company, insurance service, or insurance organization which 
     is licensed to engage in the business of insurance in a State 
     and which (except for purposes of part 2 of subtitle B) is 
     subject to State law which regulates insurance (within the 
     meaning of section 514(b)(2)(A) of the Employee Retirement 
     Income Security Act of 1974).
       (9) Medical care.--The term ``medical care'' means--
       (A) amounts paid for, or items or services in the form of, 
     the diagnosis, cure, mitigation, treatment, or prevention of 
     disease, or amounts paid for, or items or services provided 
     for, the purpose of affecting any structure or function of 
     the body,
       (B) amounts paid for, or services in the form of, 
     transportation primarily for and essential to medical care 
     referred to in subparagraph (A), and
       (C) amounts paid for insurance covering medical care 
     referred to in subparagraphs (A) and (B).
       (10) Network plan.--The term ``network plan'' means, with 
     respect to health insurance coverage, an arrangement of an 
     insurer or a health maintenance organization under which the 
     financing and delivery of medical care are provided, in whole 
     or in part, through a defined set of providers under contract 
     with the insurer or health maintenance organization.
       (11) Waiting period.--The term ``waiting period'' means, 
     with respect to a group health plan and an individual who is 
     a potential participant or beneficiary in the plan, the 
     minimum period that must pass with respect to the individual 
     before the individual is eligible to be covered for benefits 
     under the plan.
       (d) Treatment of Partnerships.--
       (1) Treatment as a group health plan.--Any plan, fund, or 
     program which would not be (but for this paragraph) an 
     employee welfare benefit plan and which is established or 
     maintained by a partnership, to the extent that such plan, 
     fund, or program provides medical care to present or former 
     partners in the partnership or to their dependents (as 
     defined under the terms of the plan, fund, or program), 
     directly or through insurance, reimbursement, or otherwise, 
     shall be treated (subject to paragraph (1)) as an employee 
     welfare benefit plan which is a group health plan.
       (2) Treatment of partnership and partners and employer and 
     participants.--In the case of a group health plan--
       (A) the term ``employer'' includes the partnership in 
     relation to any partner; and
       (B) the term ``participant'' includes--
       (i) in connection with a group health plan maintained by a 
     partnership, an individual who is a partner in relation to 
     the partnership, or
       (ii) in connection with a group health plan maintained by a 
     self-employed individual (under which one or more employees 
     are participants), the self-employed individual,
     if such individual is or may become eligible to receive a 
     benefit under the plan or such individual's beneficiaries may 
     be eligible to receive any such benefit.
       (e) Definitions Relating to Markets and Small Employers.--
     As used in this title:
       (1) Individual market.--The term ``individual market'' 
     means the market for health insurance coverage offered to 
     individuals and not to employers or in connection with a 
     group health plan and does not include the market for such 
     coverage issued only by an insurer or HMO that makes such 
     coverage available only on the basis of affiliation with a 
     bona fide association (as defined in subsection (c)(2)).
       (2) Large group market.--The term ``large group market'' 
     means the market for health insurance coverage offered to 
     employers (other than small employers) on behalf of their 
     employees (and their dependents) and does not include health 
     insurance coverage available solely in connection with a bona 
     fide association (as defined in subsection (c)(2)).
       (3) Small employer.--The term ``small employer'' means, in 
     connection with a group health plan with respect to a 
     calendar year, an employer who employs at least 2 but fewer 
     than 51 employees on a typical business day in the year. All 
     persons treated as a single employer under subsection (a) or 
     (b) of section 52 of the Internal Revenue Code of 1986 shall 
     be treated as a single employer for purposes of this title.
       (4) Small group market.--The term ``small group market'' 
     means the health insurance market under which individuals 
     obtain health insurance coverage (directly or through any 
     arrangement) on behalf of themselves (and their dependents) 
     on the basis of employment or other relationship with respect 
     to a small employer and does not include health insurance 
     coverage available solely in connection with a bona fide 
     association (as defined in subsection (c)(2)).

     SEC. 192. STATE FLEXIBILITY TO PROVIDE GREATER PROTECTION.

       (a) State Flexibility To Provide Greater Protection.--
     Subject to subsection (b), nothing in this subtitle or 
     subtitle A or B shall be construed to preempt State laws--
       (1) that relate to matters not specifically addressed in 
     such subtitles; or
       (2) that require insurers or HMOs--
       (A) to impose a limitation or exclusion of benefits 
     relating to the treatment of a preexisting condition for a 
     period that is shorter than the applicable period provided 
     for under such subtitles;
       (B) to allow individuals, participants, and beneficiaries 
     to be considered to be in a period of previous qualifying 
     coverage if such individual, participant, or beneficiary 
     experiences a lapse in coverage that is greater than the 60-
     day periods provided for under sections 101(b)(3)(A), 
     101(b)(3)(B)(ii), and 102(b)(2); or

[[Page H3061]]

       (C) in defining pre-existing condition, to have a look-back 
     period that is shorter than the 6-month period described in 
     section 101(b)(1)(A).
       (b) No Override of ERISA Preemption.--Except as provided 
     specifically in subtitle C, nothing in this Act shall be 
     construed to affect or modify the provisions of section 514 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1144).

     SEC. 193. EFFECTIVE DATE.

       (a) In General.--Except as otherwise provided for in this 
     title, the provisions of this title shall apply with respect 
     to--
       (1) group health plans, and health insurance coverage 
     offered in connection with group health plans, for plan years 
     beginning on or after January 1, 1998, and
       (2) individual health insurance coverage issued, renewed, 
     in effect, or operated on or after July 1, 1998.
       (b) Consideration of Previous Coverage.--The Secretaries of 
     Health and Human Services, Treasury, and Labor shall jointly 
     establish rules regarding the treatment (in determining 
     qualified coverage periods under sections 102(b) and 141(b)) 
     of coverage before the applicable effective date specified in 
     subsection (a).
       (c) Timely Issuance of Regulations.--The Secretaries of 
     Health and Human Services, the Treasury, and Labor shall 
     issue such regulations on a timely basis as may be required 
     to carry out this title.

     SEC. 194. RULE OF CONSTRUCTION.

       Nothing in this title or any amendment made thereby may be 
     construed to require (or to authorize any regulation that 
     requires) the coverage of any specific procedure, treatment, 
     or service under a group health plan or health insurance 
     coverage.

     SEC. 195. FINDINGS RELATING TO EXERCISE OF COMMERCE CLAUSE 
                   AUTHORITY.

       Congress finds the following in relation to the provisions 
     of this title:
       (1) Provisions in group health plans and health insurance 
     coverage that impose certain pre-existing conditions impact 
     the ability of employees to seek employment in interstate 
     commerce, thereby impeding such commerce.
       (2) Health insurance coverage is commercial in nature and 
     is in and affects interstate commerce.
       (3) It is a necessary and proper exercise of Congressional 
     authority to impose requirements under this title on group 
     health plans and health insurance coverage (including 
     coverage offered to individuals previously covered under 
     group health plans) in order to promote commerce among the 
     States.
       (4) Congress, however, intends to defer to States, to the 
     maximum extent practicable, in carrying out such requirements 
     with respect to insurers and health maintenance organizations 
     that are subject to State regulation, consistent with the 
     provisions of the Employee Retirement Income Security Act of 
     1974.
   TITLE II--PREVENTING HEALTH CARE FRAUD AND ABUSE; ADMINISTRATIVE 
                SIMPLIFICATION; MEDICAL LIABILITY REFORM

     SEC. 200. REFERENCES IN TITLE.

       Except as otherwise specifically provided, whenever in this 
     title an amendment is expressed in terms of an amendment to 
     or repeal of a section or other provision, the reference 
     shall be considered to be made to that section or other 
     provision of the Social Security Act.
              Subtitle A--Fraud and Abuse Control Program

     SEC. 201. FRAUD AND ABUSE CONTROL PROGRAM.

       (a) Establishment of Program.--Title XI (42 U.S.C. 1301 et 
     seq.) is amended by inserting after section 1128B the 
     following new section:


                   ``fraud and abuse control program

       ``Sec. 1128C. (a) Establishment of Program.--
       ``(1) In general.--Not later than January 1, 1997, the 
     Secretary, acting through the Office of the Inspector General 
     of the Department of Health and Human Services, and the 
     Attorney General shall establish a program--
       ``(A) to coordinate Federal, State, and local law 
     enforcement programs to control fraud and abuse with respect 
     to health plans,
       ``(B) to conduct investigations, audits, evaluations, and 
     inspections relating to the delivery of and payment for 
     health care in the United States,
       ``(C) to facilitate the enforcement of the provisions of 
     sections 1128, 1128A, and 1128B and other statutes applicable 
     to health care fraud and abuse,
       ``(D) to provide for the modification and establishment of 
     safe harbors and to issue advisory opinions and special fraud 
     alerts pursuant to section 1128D, and
       ``(E) to provide for the reporting and disclosure of 
     certain final adverse actions against health care providers, 
     suppliers, or practitioners pursuant to the data collection 
     system established under section 1128E.
       ``(2) Coordination with health plans.--In carrying out the 
     program established under paragraph (1), the Secretary and 
     the Attorney General shall consult with, and arrange for the 
     sharing of data with representatives of health plans.
       ``(3) Guidelines.--
       ``(A) In general.--The Secretary and the Attorney General 
     shall issue guidelines to carry out the program under 
     paragraph (1). The provisions of sections 553, 556, and 557 
     of title 5, United States Code, shall not apply in the 
     issuance of such guidelines.
       ``(B) Information guidelines.--
       ``(i) In general.--Such guidelines shall include guidelines 
     relating to the furnishing of information by health plans, 
     providers, and others to enable the Secretary and the 
     Attorney General to carry out the program (including 
     coordination with health plans under paragraph (2)).
       ``(ii) Confidentiality.--Such guidelines shall include 
     procedures to assure that such information is provided and 
     utilized in a manner that appropriately protects the 
     confidentiality of the information and the privacy of 
     individuals receiving health care services and items.
       ``(iii) Qualified immunity for providing information.--The 
     provisions of section 1157(a) (relating to limitation on 
     liability) shall apply to a person providing information to 
     the Secretary or the Attorney General in conjunction with 
     their performance of duties under this section.
       ``(4) Ensuring access to documentation.--The Inspector 
     General of the Department of Health and Human Services is 
     authorized to exercise such authority described in paragraphs 
     (3) through (9) of section 6 of the Inspector General Act of 
     1978 (5 U.S.C. App.) as necessary with respect to the 
     activities under the fraud and abuse control program 
     established under this subsection.
       ``(5) Authority of inspector general.--Nothing in this Act 
     shall be construed to diminish the authority of any Inspector 
     General, including such authority as provided in the 
     Inspector General Act of 1978 (5 U.S.C. App.).
       ``(b) Additional Use of Funds by Inspector General.--
       ``(1) Reimbursements for investigations.--The Inspector 
     General of the Department of Health and Human Services is 
     authorized to receive and retain for current use 
     reimbursement for the costs of conducting investigations and 
     audits and for monitoring compliance plans when such costs 
     are ordered by a court, voluntarily agreed to by the payor, 
     or otherwise.
       ``(2) Crediting.--Funds received by the Inspector General 
     under paragraph (1) as reimbursement for costs of conducting 
     investigations shall be deposited to the credit of the 
     appropriation from which initially paid, or to appropriations 
     for similar purposes currently available at the time of 
     deposit, and shall remain available for obligation for 1 year 
     from the date of the deposit of such funds.
       ``(c) Health Plan Defined.--For purposes of this section, 
     the term `health plan' means a plan or program that provides 
     health benefits, whether directly, through insurance, or 
     otherwise, and includes--
       ``(1) a policy of health insurance;
       ``(2) a contract of a service benefit organization; and
       ``(3) a membership agreement with a health maintenance 
     organization or other prepaid health plan.''.
       (b) Establishment of Health Care Fraud and Abuse Control 
     Account in Federal Hospital Insurance Trust Fund.--Section 
     1817 (42 U.S.C. 1395i) is amended by adding at the end the 
     following new subsection:
       ``(k) Health Care Fraud and Abuse Control Account.--
       ``(1) Establishment.--There is hereby established in the 
     Trust Fund an expenditure account to be known as the `Health 
     Care Fraud and Abuse Control Account' (in this subsection 
     referred to as the `Account').
       ``(2) Appropriated amounts to trust fund.--
       ``(A) In general.--There are hereby appropriated to the 
     Trust Fund--
       ``(i) such gifts and bequests as may be made as provided in 
     subparagraph (B);
       ``(ii) such amounts as may be deposited in the Trust Fund 
     as provided in sections 242(b) and 249(c) of the Health 
     Coverage Availability and Affordability Act of 1996, and 
     title XI; and
       ``(iii) such amounts as are transferred to the Trust Fund 
     under subparagraph (C).
       ``(B) Authorization to accept gifts.--The Trust Fund is 
     authorized to accept on behalf of the United States money 
     gifts and bequests made unconditionally to the Trust Fund, 
     for the benefit of the Account or any activity financed 
     through the Account.
       ``(C) Transfer of amounts.--The Managing Trustee shall 
     transfer to the Trust Fund, under rules similar to the rules 
     in section 9601 of the Internal Revenue Code of 1986, an 
     amount equal to the sum of the following:
       ``(i) Criminal fines recovered in cases involving a Federal 
     health care offense (as defined in section 982(a)(6)(B) of 
     title 18, United States Code).
       ``(ii) Civil monetary penalties and assessments imposed in 
     health care cases, including amounts recovered under titles 
     XI, XVIII, and XIX, and chapter 38 of title 31, United States 
     Code (except as otherwise provided by law).
       ``(iii) Amounts resulting from the forfeiture of property 
     by reason of a Federal health care offense.
       ``(iv) Penalties and damages obtained and otherwise 
     creditable to miscellaneous receipts of the general fund of 
     the Treasury obtained under sections 3729 through 3733 of 
     title 31, United States Code (known as the False Claims Act), 
     in cases involving claims related to the provision of health 
     care items and services (other than funds awarded to a 
     relator, for restitution or otherwise authorized by law).
       ``(3) Appropriated amounts to account for fraud and abuse 
     control program, etc.--

[[Page H3062]]

       ``(A) Departments of health and human services and 
     justice.--
       ``(i) In general.--There are hereby appropriated to the 
     Account from the Trust Fund such sums as the Secretary and 
     the Attorney General certify are necessary to carry out the 
     purposes described in subparagraph (C), to be available 
     without further appropriation, in an amount not to exceed--

       ``(I) for fiscal year 1997, $104,000,000,
       ``(II) for each of the fiscal years 1998 through 2003, the 
     limit for the preceding fiscal year, increased by 15 percent; 
     and
       ``(III) for each fiscal year after fiscal year 2003, the 
     limit for fiscal year 2003.

       ``(ii) Medicare and medicaid activities.--For each fiscal 
     year, of the amount appropriated in clause (i), the following 
     amounts shall be available only for the purposes of the 
     activities of the Office of the Inspector General of the 
     Department of Health and Human Services with respect to the 
     medicare and medicaid programs--

       ``(I) for fiscal year 1997, not less than $60,000,000 and 
     not more than $70,000,000;
       ``(II) for fiscal year 1998, not less than $80,000,000 and 
     not more than $90,000,000;
       ``(III) for fiscal year 1999, not less than $90,000,000 and 
     not more than $100,000,000;
       ``(IV) for fiscal year 2000, not less than $110,000,000 and 
     not more than $120,000,000;
       ``(V) for fiscal year 2001, not less than $120,000,000 and 
     not more than $130,000,000;
       ``(VI) for fiscal year 2002, not less than $140,000,000 and 
     not more than $150,000,000; and
       ``(VII) for each fiscal year after fiscal year 2002, not 
     less than $150,000,000 and not more than $160,000,000.

       ``(B) Federal bureau of investigation.--There are hereby 
     appropriated from the general fund of the United States 
     Treasury and hereby appropriated to the Account for transfer 
     to the Federal Bureau of Investigation to carry out the 
     purposes described in subparagraph (C), to be available 
     without further appropriation--
       ``(i) for fiscal year 1997, $47,000,000;
       ``(ii) for fiscal year 1998, $56,000,000;
       ``(iii) for fiscal year 1999, $66,000,000;
       ``(iv) for fiscal year 2000, $76,000,000;
       ``(v) for fiscal year 2001, $88,000,000;
       ``(vi) for fiscal year 2002, $101,000,000; and
       ``(vii) for each fiscal year after fiscal year 2002, 
     $114,000,000.
       ``(C) Use of funds.--The purposes described in this 
     subparagraph are to cover the costs (including equipment, 
     salaries and benefits, and travel and training) of the 
     administration and operation of the health care fraud and 
     abuse control program established under section 1128C(a), 
     including the costs of--
       ``(i) prosecuting health care matters (through criminal, 
     civil, and administrative proceedings);
       ``(ii) investigations;
       ``(iii) financial and performance audits of health care 
     programs and operations;
       ``(iv) inspections and other evaluations; and
       ``(v) provider and consumer education regarding compliance 
     with the provisions of title XI.
       ``(4) Appropriated amounts to account for medicare 
     integrity program.--
       ``(A) In general.--There are hereby appropriated to the 
     Account from the Trust Fund for each fiscal year such amounts 
     as are necessary to carry out the Medicare Integrity Program 
     under section 1893, subject to subparagraph (B) and to be 
     available without further appropriation.
       ``(B) Amounts specified.--The amount appropriated under 
     subparagraph (A) for a fiscal year is as follows:
       ``(i) For fiscal year 1997, such amount shall be not less 
     than $430,000,000 and not more than $440,000,000.
       ``(ii) For fiscal year 1998, such amount shall be not less 
     than $490,000,000 and not more than $500,000,000.
       ``(iii) For fiscal year 1999, such amount shall be not less 
     than $550,000,000 and not more than $560,000,000.
       ``(iv) For fiscal year 2000, such amount shall be not less 
     than $620,000,000 and not more than $630,000,000.
       ``(v) For fiscal year 2001, such amount shall be not less 
     than $670,000,000 and not more than $680,000,000.
       ``(vi) For fiscal year 2002, such amount shall be not less 
     than $690,000,000 and not more than $700,000,000.
       ``(vii) For each fiscal year after fiscal year 2002, such 
     amount shall be not less than $710,000,000 and not more than 
     $720,000,000.
       ``(5) Annual report.--The Secretary and the Attorney 
     General shall submit jointly an annual report to Congress on 
     the amount of revenue which is generated and disbursed, and 
     the justification for such disbursements, by the Account in 
     each fiscal year.''.

     SEC. 202. MEDICARE INTEGRITY PROGRAM.

       (a) Establishment of Medicare Integrity Program.--Title 
     XVIII is amended by adding at the end the following new 
     section:


                      ``medicare integrity program

       ``Sec. 1893. (a) Establishment of Program.--There is hereby 
     established the Medicare Integrity Program (in this section 
     referred to as the `Program') under which the Secretary shall 
     promote the integrity of the medicare program by entering 
     into contracts in accordance with this section with eligible 
     private entities to carry out the activities described in 
     subsection (b).
       ``(b) Activities Described.--The activities described in 
     this subsection are as follows:
       ``(1) Review of activities of providers of services or 
     other individuals and entities furnishing items and services 
     for which payment may be made under this title (including 
     skilled nursing facilities and home health agencies), 
     including medical and utilization review and fraud review 
     (employing similar standards, processes, and technologies 
     used by private health plans, including equipment and 
     software technologies which surpass the capability of the 
     equipment and technologies used in the review of claims under 
     this title as of the date of the enactment of this section).
       ``(2) Audit of cost reports.
       ``(3) Determinations as to whether payment should not be, 
     or should not have been, made under this title by reason of 
     section 1862(b), and recovery of payments that should not 
     have been made.
       ``(4) Education of providers of services, beneficiaries, 
     and other persons with respect to payment integrity and 
     benefit quality assurance issues.
       ``(5) Developing (and periodically updating) a list of 
     items of durable medical equipment in accordance with section 
     1834(a)(15) which are subject to prior authorization under 
     such section.
       ``(c) Eligibility of Entities.--An entity is eligible to 
     enter into a contract under the Program to carry out any of 
     the activities described in subsection (b) if--
       ``(1) the entity has demonstrated capability to carry out 
     such activities;
       ``(2) in carrying out such activities, the entity agrees to 
     cooperate with the Inspector General of the Department of 
     Health and Human Services, the Attorney General of the United 
     States, and other law enforcement agencies, as appropriate, 
     in the investigation and deterrence of fraud and abuse in 
     relation to this title and in other cases arising out of such 
     activities;
       ``(3) the entity demonstrates to the Secretary that the 
     entity's financial holdings, interests, or relationships will 
     not interfere with its ability to perform the functions to be 
     required by the contract in an effective and impartial 
     manner; and
       ``(4) the entity meets such other requirements as the 
     Secretary may impose.

     In the case of the activity described in subsection (b)(5), 
     an entity shall be deemed to be eligible to enter into a 
     contract under the Program to carry out the activity if the 
     entity is a carrier with a contract in effect under 
     section 1842.
       ``(d) Process for Entering Into Contracts.--The Secretary 
     shall enter into contracts under the Program in accordance 
     with such procedures as the Secretary shall by regulation 
     establish, except that such procedures shall include the 
     following:
       ``(1) The Secretary shall determine the appropriate number 
     of separate contracts which are necessary to carry out the 
     Program and the appropriate times at which the Secretary 
     shall enter into such contracts.
       ``(2)(A) Except as provided in subparagraph (B), the 
     provisions of section 1153(e)(1) shall apply to contracts and 
     contracting authority under this section.
       ``(B) Competitive procedures must be used when entering 
     into new contracts under this section, or at any other time 
     considered appropriate by the Secretary, except that the 
     Secretary may contract with entities that are carrying out 
     the activities described in this section pursuant to 
     agreements under section 1816 or contracts under section 1842 
     in effect on the date of the enactment of this section.
       ``(3) A contract under this section may be renewed without 
     regard to any provision of law requiring competition if the 
     contractor has met or exceeded the performance requirements 
     established in the current contract.
       ``(e) Limitation on Contractor Liability.--The Secretary 
     shall by regulation provide for the limitation of a 
     contractor's liability for actions taken to carry out a 
     contract under the Program, and such regulation shall, to the 
     extent the Secretary finds appropriate, employ the same or 
     comparable standards and other substantive and procedural 
     provisions as are contained in section 1157.''.
       (b) Elimination of FI and Carrier Responsibility for 
     Carrying Out Activities Subject to Program.--
       (1) Responsibilities of fiscal intermediaries under part 
     a.--Section 1816 (42 U.S.C. 1395h) is amended by adding at 
     the end the following new subsection:
       ``(l) No agency or organization may carry out (or receive 
     payment for carrying out) any activity pursuant to an 
     agreement under this section to the extent that the activity 
     is carried out pursuant to a contract under the Medicare 
     Integrity Program under section 1893.''.
       (2) Responsibilities of carriers under part b.--Section 
     1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end 
     the following new paragraph:
       ``(6) No carrier may carry out (or receive payment for 
     carrying out) any activity pursuant to a contract under this 
     subsection to the extent that the activity is carried out 
     pursuant to a contract under the Medicare Integrity Program 
     under section 1893. The previous sentence shall not apply 
     with respect to the activity described in section 1893(b)(5) 
     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).''.

     SEC. 203. BENEFICIARY INCENTIVE PROGRAMS.

       (a) Clarification of Requirement to Provide Explanation of 
     Medicare Benefits.--

[[Page H3063]]

     The Secretary of Health and Human Services (in this section 
     referred to as the ``Secretary'') shall provide an 
     explanation of benefits under the medicare program under 
     title XVIII of the Social Security Act with respect to each 
     item or service for which payment may be made under the 
     program which is furnished to an individual, without regard 
     to whether or not a deductible or coinsurance may be imposed 
     against the individual with respect to the item or service.
       (b) Program To Collect Information on Fraud and Abuse.--
       (1) Establishment of program.--Not later than 3 months 
     after the date of the enactment of this Act, the Secretary 
     shall establish a program under which the Secretary shall 
     encourage individuals to report to the Secretary information 
     on individuals and entities who are engaging or who have 
     engaged in acts or omissions which constitute grounds for the 
     imposition of a sanction under section 1128, section 1128A, 
     or section 1128B of the Social Security Act, or who have 
     otherwise engaged in fraud and abuse against the medicare 
     program for which there is a sanction provided under law. The 
     program shall discourage provision of, and not consider, 
     information which is frivolous or otherwise not relevant or 
     material to the imposition of such a sanction.
       (2) Payment of portion of amounts collected.--If an 
     individual reports information to the Secretary under the 
     program established under paragraph (1) which serves as the 
     basis for the collection by the Secretary or the Attorney 
     General of any amount of at least $100 (other than any amount 
     paid as a penalty under section 1128B of the Social Security 
     Act), the Secretary may pay a portion of the amount collected 
     to the individual (under procedures similar to those 
     applicable under section 7623 of the Internal Revenue Code of 
     1986 to payments to individuals providing information on 
     violations of such Code).
       (c) Program To Collect Information on Program Efficiency.--
       (1) Establishment of program.--Not later than 3 months 
     after the date of the enactment of this Act, the Secretary 
     shall establish a program under which the Secretary shall 
     encourage individuals to submit to the Secretary suggestions 
     on methods to improve the efficiency of the medicare program.
       (2) Payment of portion of program savings.--If an 
     individual submits a suggestion to the Secretary under the 
     program established under paragraph (1) which is adopted by 
     the Secretary and which results in savings to the program, 
     the Secretary may make a payment to the individual of such 
     amount as the Secretary considers appropriate.

     SEC. 204. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE 
                   SANCTIONS TO FRAUD AND ABUSE AGAINST FEDERAL 
                   HEALTH CARE PROGRAMS.

       (a) In General.--Section 1128B (42 U.S.C. 1320a-7b) is 
     amended as follows:
       (1) In the heading, by striking ``medicare or state health 
     care programs'' and inserting ``federal health care 
     programs''.
       (2) In subsection (a)(1), by striking ``a program under 
     title XVIII or a State health care program (as defined in 
     section 1128(h))'' and inserting ``a Federal health care 
     program''.
       (3) In subsection (a)(5), by striking ``a program under 
     title XVIII or a State health care program'' and inserting 
     ``a Federal health care program''.
       (4) In the second sentence of subsection (a)--
       (A) by striking ``a State plan approved under title XIX'' 
     and inserting ``a Federal health care program'', and
       (B) by striking ``the State may at its option 
     (notwithstanding any other provision of that title or of such 
     plan)'' and inserting ``the administrator of such program may 
     at its option (notwithstanding any other provision of such 
     program)''.
       (5) In subsection (b), by striking ``title XVIII or a State 
     health care program'' each place it appears and inserting ``a 
     Federal health care program''.
       (6) In subsection (c), by inserting ``(as defined in 
     section 1128(h))'' after ``a State health care program''.
       (7) By adding at the end the following new subsection:
       ``(f) For purposes of this section, the term `Federal 
     health care program' means--
       ``(1) any plan or program that provides health benefits, 
     whether directly, through insurance, or otherwise, which is 
     funded directly, in whole or in part, by the United States 
     Government (other than the health insurance program under 
     chapter 89 of title 5, United States Code); or
       ``(2) any State health care program, as defined in section 
     1128(h).''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1997.

     SEC. 205. GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD 
                   AND ABUSE SANCTIONS.

       Title XI (42 U.S.C. 1301 et seq.), as amended by section 
     201, is amended by inserting after section 1128C the 
     following new section:


    ``guidance regarding application of health care fraud and abuse 
                               sanctions

       ``Sec. 1128D. (a) Solicitation and Publication of 
     Modifications to Existing Safe Harbors and New Safe 
     Harbors.--
       ``(1) In general.--
       ``(A) Solicitation of proposals for safe harbors.--Not 
     later than January 1, 1997, and not less than annually 
     thereafter, the Secretary shall publish a notice in the 
     Federal Register soliciting proposals, which will be accepted 
     during a 60-day period, for--
       ``(i) modifications to existing safe harbors issued 
     pursuant to section 14(a) of the Medicare and Medicaid 
     Patient and Program Protection Act of 1987 (42 U.S.C. 1320a-
     7b note);
       ``(ii) additional safe harbors specifying payment practices 
     that shall not be treated as a criminal offense under section 
     1128B(b) and shall not serve as the basis for an exclusion 
     under section 1128(b)(7);
       ``(iii) advisory opinions to be issued pursuant to 
     subsection (b); and
       ``(iv) special fraud alerts to be issued pursuant to 
     subsection (c).
       ``(B) Publication of proposed modifications and proposed 
     additional safe harbors.--After considering the proposals 
     described in clauses (i) and (ii) of subparagraph (A), the 
     Secretary, in consultation with the Attorney General, shall 
     publish in the Federal Register proposed modifications to 
     existing safe harbors and proposed additional safe harbors, 
     if appropriate, with a 60-day comment period. After 
     considering any public comments received during this period, 
     the Secretary shall issue final rules modifying the existing 
     safe harbors and establishing new safe harbors, as 
     appropriate.
       ``(C) Report.--The Inspector General of the Department of 
     Health and Human Services (in this section referred to as the 
     `Inspector General') shall, in an annual report to Congress 
     or as part of the year-end semiannual report required by 
     section 5 of the Inspector General Act of 1978 (5 U.S.C. 
     App.), describe the proposals received under clauses (i) and 
     (ii) of subparagraph (A) and explain which proposals were 
     included in the publication described in subparagraph (B), 
     which proposals were not included in that publication, and 
     the reasons for the rejection of the proposals that were not 
     included.
       ``(2) Criteria for modifying and establishing safe 
     harbors.--In modifying and establishing safe harbors under 
     paragraph (1)(B), the Secretary may consider the extent to 
     which providing a safe harbor for the specified payment 
     practice may result in any of the following:
       ``(A) An increase or decrease in access to health care 
     services.
       ``(B) An increase or decrease in the quality of health care 
     services.
       ``(C) An increase or decrease in patient freedom of choice 
     among health care providers.
       ``(D) An increase or decrease in competition among health 
     care providers.
       ``(E) An increase or decrease in the ability of health care 
     facilities to provide services in medically underserved areas 
     or to medically underserved populations.
       ``(F) An increase or decrease in the cost to Federal health 
     care programs (as defined in section 1128B(f)).
       ``(G) An increase or decrease in the potential 
     overutilization of health care services.
       ``(H) The existence or nonexistence of any potential 
     financial benefit to a health care professional or provider 
     which may vary based on their decisions of--
       ``(i) whether to order a health care item or service; or
       ``(ii) whether to arrange for a referral of health care 
     items or services to a particular practitioner or provider.
       ``(I) Any other factors the Secretary deems appropriate in 
     the interest of preventing fraud and abuse in Federal health 
     care programs (as so defined).
       ``(b) Advisory Opinions.--
       ``(1) Issuance of advisory opinions.--The Secretary shall 
     issue written advisory opinions as provided in this 
     subsection.
       ``(2) Matters subject to advisory opinions.--The Secretary 
     shall issue advisory opinions as to the following matters:
       ``(A) What constitutes prohibited remuneration within the 
     meaning of section 1128B(b).
       ``(B) Whether an arrangement or proposed arrangement 
     satisfies the criteria set forth in section 1128B(b)(3) for 
     activities which do not result in prohibited remuneration.
       ``(C) Whether an arrangement or proposed arrangement 
     satisfies the criteria which the Secretary has established, 
     or shall establish by regulation for activities which do not 
     result in prohibited remuneration.
       ``(D) What constitutes an inducement to reduce or limit 
     services to individuals entitled to benefits under title 
     XVIII or title XIX or title XXI within the meaning of section 
     1128B(b).
       ``(E) Whether any activity or proposed activity constitutes 
     grounds for the imposition of a sanction under section 1128, 
     1128A, or 1128B.
       ``(3) Matters not subject to advisory opinions.--Such 
     advisory opinions shall not address the following matters:
       ``(A) Whether the fair market value shall be, or was paid 
     or received for any goods, services or property.
       ``(B) Whether an individual is a bona fide employee within 
     the requirements of section 3121(d)(2) of the Internal 
     Revenue Code of 1986.
       ``(4) Effect of advisory opinions.--
       ``(A) Binding as to secretary and parties involved.--Each 
     advisory opinion issued by the Secretary shall be binding as 
     to the Secretary and the party or parties requesting the 
     opinion.
       ``(B) Failure to seek opinion.--The failure of a party to 
     seek an advisory opinion may not be introduced into evidence 
     to prove that the party intended to violate the provisions of 
     sections 1128, 1128A, or 1128B.
       ``(5) Regulations.--

[[Page H3064]]

       ``(A) In general.--Not later than 180 days after the date 
     of the enactment of this section, the Secretary shall issue 
     regulations to carry out this section. Such regulations shall 
     provide for--
       ``(i) the procedure to be followed by a party applying for 
     an advisory opinion;
       ``(ii) the procedure to be followed by the Secretary in 
     responding to a request for an advisory opinion;
       ``(iii) the interval in which the Secretary shall respond;
       ``(iv) the reasonable fee to be charged to the party 
     requesting an advisory opinion; and
       ``(v) the manner in which advisory opinions will be made 
     available to the public.
       ``(B) Specific contents.--Under the regulations promulgated 
     pursuant to subparagraph (A)--
       ``(i) the Secretary shall be required to respond to a party 
     requesting an advisory opinion by not later than 30 days 
     after the request is received; and
       ``(ii) the fee charged to the party requesting an advisory 
     opinion shall be equal to the costs incurred by the Secretary 
     in responding to the request.
       ``(c) Special Fraud Alerts.--
       ``(1) In general.--
       ``(A) Request for special fraud alerts.--Any person may 
     present, at any time, a request to the Inspector General for 
     a notice which informs the public of practices which the 
     Inspector General considers to be suspect or of particular 
     concern under the medicare program or a State health care 
     program, as defined in section 1128(h) (in this subsection 
     referred to as a `special fraud alert').
       ``(B) Issuance and publication of special fraud alerts.--
     Upon receipt of a request described in subparagraph (A), the 
     Inspector General shall investigate the subject matter of the 
     request to determine whether a special fraud alert should be 
     issued. If appropriate, the Inspector General shall issue a 
     special fraud alert in response to the request. All special 
     fraud alerts issued pursuant to this subparagraph shall be 
     published in the Federal Register.
       ``(2) Criteria for special fraud alerts.--In determining 
     whether to issue a special fraud alert upon a request 
     described in paragraph (1), the Inspector General may 
     consider--
       ``(A) whether and to what extent the practices that would 
     be identified in the special fraud alert may result in any of 
     the consequences described in subsection (a)(2); and
       ``(B) the volume and frequency of the conduct that would be 
     identified in the special fraud alert.''.
     Subtitle B--Revisions to Current Sanctions for Fraud and Abuse

     SEC. 211. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE 
                   AND STATE HEALTH CARE PROGRAMS.

       (a) Individual Convicted of Felony Relating to Health Care 
     Fraud.--
       (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3) Felony conviction relating to health care fraud.--Any 
     individual or entity that has been convicted after the date 
     of the enactment of the Health Coverage Availability and 
     Affordability Act of 1996, under Federal or State law, in 
     connection with the delivery of a health care item or service 
     or with respect to any act or omission in a health care 
     program (other than those specifically described in paragraph 
     (1)) operated by or financed in whole or in part by any 
     Federal, State, or local government agency, of a criminal 
     offense consisting of a felony relating to fraud, theft, 
     embezzlement, breach of fiduciary responsibility, or other 
     financial misconduct.''.
       (2) Conforming amendment.--Paragraph (1) of section 1128(b) 
     (42 U.S.C. 1320a-7(b)) is amended to read as follows:
       ``(1) Conviction relating to fraud.--Any individual or 
     entity that has been convicted after the date of the 
     enactment of the Health Coverage Availability and 
     Affordability Act of 1996, under Federal or State law--
       ``(A) of a criminal offense consisting of a misdemeanor 
     relating to fraud, theft, embezzlement, breach of fiduciary 
     responsibility, or other financial misconduct--
       ``(i) in connection with the delivery of a health care item 
     or service, or
       ``(ii) with respect to any act or omission in a health care 
     program (other than those specifically described in 
     subsection (a)(1)) operated by or financed in whole or in 
     part by any Federal, State, or local government agency; or
       ``(B) of a criminal offense relating to fraud, theft, 
     embezzlement, breach of fiduciary responsibility, or other 
     financial misconduct with respect to any act or omission in a 
     program (other than a health care program) operated by or 
     financed in whole or in part by any Federal, State, or local 
     government agency.''.
       (b) Individual Convicted of Felony Relating to Controlled 
     Substance.--
       (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as 
     amended by subsection (a), is amended by adding at the end 
     the following new paragraph:
       ``(4) Felony conviction relating to controlled substance.--
     Any individual or entity that has been convicted after the 
     date of the enactment of the Health Coverage Availability and 
     Affordability Act of 1996, under Federal or State law, of a 
     criminal offense consisting of a felony relating to the 
     unlawful manufacture, distribution, prescription, or 
     dispensing of a controlled substance.''.
       (2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 
     1320a-7(b)(3)) is amended--
       (A) in the heading, by striking ``Conviction'' and 
     inserting ``Misdemeanor conviction''; and
       (B) by striking ``criminal offense'' and inserting 
     ``criminal offense consisting of a misdemeanor''.

     SEC. 212. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR 
                   CERTAIN INDIVIDUALS AND ENTITIES SUBJECT TO 
                   PERMISSIVE EXCLUSION FROM MEDICARE AND STATE 
                   HEALTH CARE PROGRAMS.

       Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended by 
     adding at the end the following new subparagraphs:
       ``(D) In the case of an exclusion of an individual or 
     entity under paragraph (1), (2), or (3) of subsection (b), 
     the period of the exclusion shall be 3 years, unless the 
     Secretary determines in accordance with published regulations 
     that a shorter period is appropriate because of mitigating 
     circumstances or that a longer period is appropriate because 
     of aggravating circumstances.
       ``(E) In the case of an exclusion of an individual or 
     entity under subsection (b)(4) or (b)(5), the period of the 
     exclusion shall not be less than the period during which the 
     individual's or entity's license to provide health care is 
     revoked, suspended, or surrendered, or the individual or the 
     entity is excluded or suspended from a Federal or State 
     health care program.
       ``(F) In the case of an exclusion of an individual or 
     entity under subsection (b)(6)(B), the period of the 
     exclusion shall be not less than 1 year.''.

     SEC. 213. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP 
                   OR CONTROL INTEREST IN SANCTIONED ENTITIES.

       Section 1128(b) (42 U.S.C. 1320a-7(b)) is amended by adding 
     at the end the following new paragraph:
       ``(15) Individuals controlling a sanctioned entity.--(A) 
     Any individual--
       ``(i) who has a direct or indirect ownership or control 
     interest in a sanctioned entity and who knows or should know 
     (as defined in section 1128A(i)(6)) of the action 
     constituting the basis for the conviction or exclusion 
     described in subparagraph (B); or
       ``(ii) who is an officer or managing employee (as defined 
     in section 1126(b)) of such an entity.
       ``(B) For purposes of subparagraph (A), the term 
     `sanctioned entity' means an entity--
       ``(i) that has been convicted of any offense described in 
     subsection (a) or in paragraph (1), (2), or (3) of this 
     subsection; or
       ``(ii) that has been excluded from participation under a 
     program under title XVIII or under a State health care 
     program.''.

     SEC. 214. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR 
                   FAILURE TO COMPLY WITH STATUTORY OBLIGATIONS.

       (a) Minimum Period of Exclusion for Practitioners and 
     Persons Failing To Meet Statutory Obligations.--
       (1) In general.--The second sentence of section 1156(b)(1) 
     (42 U.S.C. 1320c-5(b)(1)) is amended by striking ``may 
     prescribe)'' and inserting ``may prescribe, except that such 
     period may not be less than 1 year)''.
       (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 
     1320c-5(b)(2)) is amended by striking ``shall remain'' and 
     inserting ``shall (subject to the minimum period specified in 
     the second sentence of paragraph (1)) remain''.
       (b) Repeal of ``Unwilling or Unable'' Condition for 
     Imposition of Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-
     5(b)(1)) is amended--
       (1) in the second sentence, by striking ``and determines'' 
     and all that follows through ``such obligations,''; and
       (2) by striking the third sentence.

     SEC. 215. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH 
                   MAINTENANCE ORGANIZATIONS.

       (a) Application of Intermediate Sanctions for any Program 
     Violations.--
       (1) In general.--Section 1876(i)(1) (42 U.S.C. 
     1395mm(i)(1)) is amended by striking ``the Secretary may 
     terminate'' and all that follows and inserting ``in 
     accordance with procedures established under paragraph (9), 
     the Secretary may at any time terminate any such contract or 
     may impose the intermediate sanctions described in paragraph 
     (6)(B) or (6)(C) (whichever is applicable) on the eligible 
     organization if the Secretary determines that the 
     organization--
       ``(A) has failed substantially to carry out the contract;
       ``(B) is carrying out the contract in a manner 
     substantially inconsistent with the efficient and effective 
     administration of this section; or
       ``(C) no longer substantially meets the applicable 
     conditions of subsections (b), (c), (e), and (f).''.
       (2) Other intermediate sanctions for miscellaneous program 
     violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is 
     amended by adding at the end the following new subparagraph:
       ``(C) In the case of an eligible organization for which the 
     Secretary makes a determination under paragraph (1) the basis 
     of which is not described in subparagraph (A), the Secretary 
     may apply the following intermediate sanctions:

[[Page H3065]]

       ``(i) Civil money penalties of not more than $25,000 for 
     each determination under paragraph (1) if the deficiency that 
     is the basis of the determination has directly adversely 
     affected (or has the substantial likelihood of adversely 
     affecting) an individual covered under the organization's 
     contract.
       ``(ii) Civil money penalties of not more than $10,000 for 
     each week beginning after the initiation of procedures by the 
     Secretary under paragraph (9) during which the deficiency 
     that is the basis of a determination under paragraph (1) 
     exists.
       ``(iii) Suspension of enrollment of individuals under this 
     section after the date the Secretary notifies the 
     organization of a determination under paragraph (1) and until 
     the Secretary is satisfied that the deficiency that is the 
     basis for the determination has been corrected and is not 
     likely to recur.''.
       (3) Procedures for imposing sanctions.--Section 1876(i) (42 
     U.S.C. 1395mm(i)) is amended by adding at the end the 
     following new paragraph:
       ``(9) The Secretary may terminate a contract with an 
     eligible organization under this section or may impose the 
     intermediate sanctions described in paragraph (6) on the 
     organization in accordance with formal investigation and 
     compliance procedures established by the Secretary under 
     which--
       ``(A) the Secretary first provides the organization with 
     the reasonable opportunity to develop and implement a 
     corrective action plan to correct the deficiencies that were 
     the basis of the Secretary's determination under paragraph 
     (1) and the organization fails to develop or implement such a 
     plan;
       ``(B) in deciding whether to impose sanctions, the 
     Secretary considers aggravating factors such as whether an 
     organization has a history of deficiencies or has not taken 
     action to correct deficiencies the Secretary has brought to 
     the organization's attention;
       ``(C) there are no unreasonable or unnecessary delays 
     between the finding of a deficiency and the imposition of 
     sanctions; and
       ``(D) the Secretary provides the organization with 
     reasonable notice and opportunity for hearing (including the 
     right to appeal an initial decision) before imposing any 
     sanction or terminating the contract.''.
       (4) Conforming amendments.--Section 1876(i)(6)(B) (42 
     U.S.C. 1395mm(i)(6)(B)) is amended by striking the second 
     sentence.
       (b) Agreements With Peer Review Organizations.--Section 
     1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by 
     striking ``an agreement'' and inserting ``a written 
     agreement''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to contract years beginning on or 
     after January 1, 1996.

     SEC. 216. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES FOR 
                   DISCOUNTING AND MANAGED CARE ARRANGEMENTS.

       (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-
     7b(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F) any remuneration between an organization and an 
     individual or entity providing items or services, or a 
     combination thereof, pursuant to a written agreement between 
     the organization and the individual or entity if the 
     organization is an eligible organization under section 1876 
     or if the written agreement places the individual or entity 
     at substantial financial risk for the cost or utilization of 
     the items or services, or a combination thereof, which the 
     individual or entity is obligated to provide, whether through 
     a withhold, capitation, incentive pool, per diem payment, or 
     any other similar risk arrangement which places the 
     individual or entity at substantial financial risk.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to written agreements entered into on or after 
     January 1, 1997.

     SEC. 217. CRIMINAL PENALTY FOR FRAUDULENT DISPOSITION OF 
                   ASSETS IN ORDER TO OBTAIN MEDICAID BENEFITS.

       Section 1128B(a) (42 U.S.C. 1320a-7b(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (4);
       (2) by adding ``or'' at the end of paragraph (5); and
       (3) by inserting after paragraph (5) the following new 
     paragraph:
       ``(6) knowingly and willfully disposes of assets (including 
     by any transfer in trust) in order for an individual to 
     become eligible for medical assistance under a State plan 
     under title XIX, if disposing of the assets results in the 
     imposition of a period of ineligibility for such assistance 
     under section 1917(c),''.

     SEC. 218. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     subtitle shall take effect January 1, 1997.
                      Subtitle C--Data Collection

     SEC. 221. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE 
                   DATA COLLECTION PROGRAM.

       (a) In General.--Title XI (42 U.S.C. 1301 et seq.), as 
     amended by sections 201 and 205, is amended by inserting 
     after section 1128D the following new section:


         ``health care fraud and abuse data collection program

       ``Sec. 1128E. (a) General Purpose.--Not later than January 
     1, 1997, the Secretary shall establish a national health care 
     fraud and abuse data collection program for the reporting of 
     final adverse actions (not including settlements in which no 
     findings of liability have been made) against health care 
     providers, suppliers, or practitioners as required by 
     subsection (b), with access as set forth in subsection (c).
       ``(b) Reporting of Information.--
       ``(1) In general.--Each Government agency and health plan 
     shall report any final adverse action (not including 
     settlements in which no findings of liability have been made) 
     taken against a health care provider, supplier, or 
     practitioner.
       ``(2) Information to be reported.--The information to be 
     reported under paragraph (1) includes:
       ``(A) The name and TIN (as defined in section 7701(a)(41) 
     of the Internal Revenue Code of 1986) of any health care 
     provider, supplier, or practitioner who is the subject of a 
     final adverse action.
       ``(B) The name (if known) of any health care entity with 
     which a health care provider, supplier, or practitioner is 
     affiliated or associated.
       ``(C) The nature of the final adverse action and whether 
     such action is on appeal.
       ``(D) A description of the acts or omissions and injuries 
     upon which the final adverse action was based, and such other 
     information as the Secretary determines by regulation is 
     required for appropriate interpretation of information 
     reported under this section.
       ``(3) Confidentiality.--In determining what information is 
     required, the Secretary shall include procedures to assure 
     that the privacy of individuals receiving health care 
     services is appropriately protected.
       ``(4) Timing and form of reporting.--The information 
     required to be reported under this subsection shall be 
     reported regularly (but not less often than monthly) and in 
     such form and manner as the Secretary prescribes. Such 
     information shall first be required to be reported on a date 
     specified by the Secretary.
       ``(5) To whom reported.--The information required to be 
     reported under this subsection shall be reported to the 
     Secretary.
       ``(c) Disclosure and Correction of Information.--
       ``(1) Disclosure.--With respect to the information about 
     final adverse actions (not including settlements in which no 
     findings of liability have been made) reported to the 
     Secretary under this section respecting a health care 
     provider, supplier, or practitioner, the Secretary shall, by 
     regulation, provide for--
       ``(A) disclosure of the information, upon request, to the 
     health care provider, supplier, or licensed practitioner, and
       ``(B) procedures in the case of disputed accuracy of the 
     information.
       ``(2) Corrections.--Each Government agency and health plan 
     shall report corrections of information already reported 
     about any final adverse action taken against a health care 
     provider, supplier, or practitioner, in such form and manner 
     that the Secretary prescribes by regulation.
       ``(d) Access to Reported Information.--
       ``(1) Availability.--The information in this database shall 
     be available to Federal and State government agencies and 
     health plans pursuant to procedures that the Secretary shall 
     provide by regulation.
       ``(2) Fees for disclosure.--The Secretary may establish or 
     approve reasonable fees for the disclosure of information in 
     this database (other than with respect to requests by Federal 
     agencies). The amount of such a fee shall be sufficient to 
     recover the full costs of operating the database. Such fees 
     shall be available to the Secretary or, in the Secretary's 
     discretion to the agency designated under this section to 
     cover such costs.
       ``(e) Protection From Liability for Reporting.--No person 
     or entity, including the agency designated by the Secretary 
     in subsection (b)(5) shall be held liable in any civil action 
     with respect to any report made as required by this section, 
     without knowledge of the falsity of the information contained 
     in the report.
       ``(f) Definitions and Special Rules.--For purposes of this 
     section:
       ``(1) Final adverse action.--
       ``(A) In general.--The term `final adverse action' 
     includes:
       ``(i) Civil judgments against a health care provider, 
     supplier, or practitioner in Federal or State court related 
     to the delivery of a health care item or service.
       ``(ii) Federal or State criminal convictions related to the 
     delivery of a health care item or service.
       ``(iii) Actions by Federal or State agencies responsible 
     for the licensing and certification of health care providers, 
     suppliers, and licensed health care practitioners, 
     including--

       ``(I) formal or official actions, such as revocation or 
     suspension of a license (and the length of any such 
     suspension), reprimand, censure or probation,
       ``(II) any other loss of license or the right to apply for, 
     or renew, a license of the provider, supplier, or 
     practitioner, whether by operation of law, voluntary 
     surrender, non-renewability, or otherwise, or
       ``(III) any other negative action or finding by such 
     Federal or State agency that is publicly available 
     information.

       ``(iv) Exclusion from participation in Federal or State 
     health care programs.
       ``(v) Any other adjudicated actions or decisions that the 
     Secretary shall establish by regulation.

[[Page H3066]]

       ``(B) Exception.--The term does not include any action with 
     respect to a malpractice claim.
       ``(2) Practitioner.--The terms `licensed health care 
     practitioner', `licensed practitioner', and `practitioner' 
     mean, with respect to a State, an individual who is licensed 
     or otherwise authorized by the State to provide health care 
     services (or any individual who, without authority holds 
     himself or herself out to be so licensed or authorized).
       ``(3) Government agency.--The term `Government agency' 
     shall include:
       ``(A) The Department of Justice.
       ``(B) The Department of Health and Human Services.
       ``(C) Any other Federal agency that either administers or 
     provides payment for the delivery of health care services, 
     including, but not limited to the Department of Defense and 
     the Veterans' Administration.
       ``(D) State law enforcement agencies.
       ``(E) State medicaid fraud control units.
       ``(F) Federal or State agencies responsible for the 
     licensing and certification of health care providers and 
     licensed health care practitioners.
       ``(4) Health plan.--The term `health plan' has the meaning 
     given such term by section 1128C(c).
       ``(5) Determination of conviction.--For purposes of 
     paragraph (1), the existence of a conviction shall be 
     determined under paragraph (4) of section 1128(i).''.
       (b) Improved Prevention in Issuance of Medicare Provider 
     Numbers.--Section 1842(r) (42 U.S.C. 1395u(r)) is amended by 
     adding at the end the following new sentence: ``Under such 
     system, the Secretary may impose appropriate fees on such 
     physicians to cover the costs of investigation and 
     recertification activities with respect to the issuance of 
     the identifiers.''.
                  Subtitle D--Civil Monetary Penalties

     SEC. 231. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

       (a) General Civil Monetary Penalties.--Section 1128A (42 
     U.S.C. 1320a-7a) is amended as follows:
       (1) In the third sentence of subsection (a), by striking 
     ``programs under title XVIII'' and inserting ``Federal health 
     care programs (as defined in section 1128B(f)(1))''.
       (2) In subsection (f)--
       (A) by redesignating paragraph (3) as paragraph (4); and
       (B) by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) With respect to amounts recovered arising out of a 
     claim under a Federal health care program (as defined in 
     section 1128B(f)), the portion of such amounts as is 
     determined to have been paid by the program shall be repaid 
     to the program, and the portion of such amounts attributable 
     to the amounts recovered under this section by reason of the 
     amendments made by the Health Coverage Availability and 
     Affordability Act of 1996 (as estimated by the Secretary) 
     shall be deposited into the Federal Hospital Insurance Trust 
     Fund pursuant to section 1817(k)(2)(C).''.
       (3) In subsection (i)--
       (A) in paragraph (2), by striking ``title V, XVIII, XIX, or 
     XX of this Act'' and inserting ``a Federal health care 
     program (as defined in section 1128B(f))'',
       (B) in paragraph (4), by striking ``a health insurance or 
     medical services program under title XVIII or XIX of this 
     Act'' and inserting ``a Federal health care program (as so 
     defined)'', and
       (C) in paragraph (5), by striking ``title V, XVIII, XIX, or 
     XX'' and inserting ``a Federal health care program (as so 
     defined)''.
       (4) By adding at the end the following new subsection:
       ``(m)(1) For purposes of this section, with respect to a 
     Federal health care program not contained in this Act, 
     references to the Secretary in this section shall be deemed 
     to be references to the Secretary or Administrator of the 
     department or agency with jurisdiction over such program and 
     references to the Inspector General of the Department of 
     Health and Human Services in this section shall be deemed to 
     be references to the Inspector General of the applicable 
     department or agency.
       ``(2)(A) The Secretary and Administrator of the departments 
     and agencies referred to in paragraph (1) may include in any 
     action pursuant to this section, claims within the 
     jurisdiction of other Federal departments or agencies as long 
     as the following conditions are satisfied:
       ``(i) The case involves primarily claims submitted to the 
     Federal health care programs of the department or agency 
     initiating the action.
       ``(ii) The Secretary or Administrator of the department or 
     agency initiating the action gives notice and an opportunity 
     to participate in the investigation to the Inspector General 
     of the department or agency with primary jurisdiction over 
     the Federal health care programs to which the claims were 
     submitted.
       ``(B) If the conditions specified in subparagraph (A) are 
     fulfilled, the Inspector General of the department or agency 
     initiating the action is authorized to exercise all powers 
     granted under the Inspector General Act of 1978 with respect 
     to the claims submitted to the other departments or agencies 
     to the same manner and extent as provided in that Act with 
     respect to claims submitted to such departments or 
     agencies.''.
       (b) Excluded Individual Retaining Ownership or Control 
     Interest in Participating Entity.--Section 1128A(a) (42 
     U.S.C. 1320a-7a(a)) is amended--
       (1) by striking ``or'' at the end of paragraph (1)(D);
       (2) by striking ``, or'' at the end of paragraph (2) and 
     inserting a semicolon;
       (3) by striking the semicolon at the end of paragraph (3) 
     and inserting ``; or''; and
       (4) by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) in the case of a person who is not an organization, 
     agency, or other entity, is excluded from participating in a 
     program under title XVIII or a State health care program in 
     accordance with this subsection or under section 1128 and 
     who, at the time of a violation of this subsection--
       ``(A) retains a direct or indirect ownership or control 
     interest in an entity that is participating in a program 
     under title XVIII or a State health care program, and who 
     knows or should know of the action constituting the basis for 
     the exclusion; or
       ``(B) is an officer or managing employee (as defined in 
     section 1126(b)) of such an entity;''.
       (c) Modifications of Amounts of Penalties and 
     Assessments.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)), as 
     amended by subsection (b), is amended in the matter following 
     paragraph (4)--
       (1) by striking ``$2,000'' and inserting ``$10,000'';
       (2) by inserting ``; in cases under paragraph (4), $10,000 
     for each day the prohibited relationship occurs'' after 
     ``false or misleading information was given''; and
       (3) by striking ``twice the amount'' and inserting ``3 
     times the amount''.
       (d) Claim for Item or Service Based on Incorrect Coding or 
     Medically Unnecessary Services.--Section 1128A(a)(1) (42 
     U.S.C. 1320a-7a(a)(1)) is amended--
       (1) in subparagraph (A) by striking ``claimed,'' and 
     inserting ``claimed, including any person who engages in a 
     pattern or practice of presenting or causing to be presented 
     a claim for an item or service that is based on a code that 
     the person knows or should know will result in a greater 
     payment to the person than the code the person knows or 
     should know is applicable to the item or service actually 
     provided,'';
       (2) in subparagraph (C), by striking ``or'' at the end; and
       (3) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) is for a medical or other item or service that a 
     person knows or should know is not medically necessary; or''.
       (e) Sanctions Against Practitioners and Persons for Failure 
     To Comply With Statutory Obligations.--Section 1156(b)(3) (42 
     U.S.C. 1320c-5(b)(3)) is amended by striking ``the actual or 
     estimated cost'' and inserting ``up to $10,000 for each 
     instance''.
       (f) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
     1395mm(i)(6)), as amended by section 215(a)(2), is amended by 
     adding at the end the following new subparagraph:
       ``(D) The provisions of section 1128A (other than 
     subsections (a) and (b)) shall apply to a civil money penalty 
     under subparagraph (B)(i) or (C)(i) in the same manner as 
     such provisions apply to a civil money penalty or proceeding 
     under section 1128A(a).''.
       (g) Prohibition Against Offering Inducements to Individuals 
     Enrolled Under Programs or Plans.--
       (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 
     1320a-7a(a)), as amended by subsection (b), is amended--
       (A) by striking ``or'' at the end of paragraph (3);
       (B) by striking the semicolon at the end of paragraph (4) 
     and inserting ``; or''; and
       (D) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) offers to or transfers remuneration to any individual 
     eligible for benefits under title XVIII of this Act, or under 
     a State health care program (as defined in section 1128(h)) 
     that such person knows or should know is likely to influence 
     such individual to order or receive from a particular 
     provider, practitioner, or supplier any item or service for 
     which payment may be made, in whole or in part, under title 
     XVIII, or a State health care program (as so defined);''.
       (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)) is amended by adding at the end the following 
     new paragraph:
       ``(6) The term `remuneration' includes the waiver of 
     coinsurance and deductible amounts (or any part thereof), and 
     transfers of items or services for free or for other than 
     fair market value. The term `remuneration' does not include--
       ``(A) the waiver of coinsurance and deductible amounts by a 
     person, if--
       ``(i) the waiver is not offered as part of any 
     advertisement or solicitation;
       ``(ii) the person does not routinely waive coinsurance or 
     deductible amounts; and
       ``(iii) the person--

       ``(I) waives the coinsurance and deductible amounts after 
     determining in good faith that the individual is in financial 
     need;
       ``(II) fails to collect coinsurance or deductible amounts 
     after making reasonable collection efforts; or
       ``(III) provides for any permissible waiver as specified in 
     section 1128B(b)(3) or in regulations issued by the 
     Secretary;

       ``(B) differentials in coinsurance and deductible amounts 
     as part of a benefit plan design as long as the differentials 
     have been disclosed in writing to all beneficiaries, third 
     party payers, and providers, to whom claims are presented and 
     as long as the differentials meet the standards as defined in 
     regulations promulgated by the Secretary not later than

[[Page H3067]]

     180 days after the date of the enactment of the Health 
     Coverage Availability and Affordability Act of 1996; or
       ``(C) incentives given to individuals to promote the 
     delivery of preventive care as determined by the Secretary in 
     regulations so promulgated.''.
       (h) Effective Date.--The amendments made by this section 
     shall take effect January 1, 1997.

     SEC. 232. CLARIFICATION OF LEVEL OF INTENT REQUIRED FOR 
                   IMPOSITION OF SANCTIONS.

       (a) Clarification of Level of Knowledge Required for 
     Imposition of Civil Monetary Penalties.--
       (1) In general.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) 
     is amended--
       (A) in paragraphs (1) and (2), by inserting ``knowingly'' 
     before ``presents'' each place it appears; and
       (B) in paragraph (3), by striking ``gives'' and inserting 
     ``knowingly gives or causes to be given''.
       (2) Definition of standard.--Section 1128A(i) (42 U.S.C. 
     1320a-7a(i)), as amended by section 231(g)(2), is amended by 
     adding at the end the following new paragraph:
       ``(7) The term `should know' means that a person, with 
     respect to information--
       ``(A) acts in deliberate ignorance of the truth or falsity 
     of the information; or
       ``(B) acts in reckless disregard of the truth or falsity of 
     the information,
     and no proof of specific intent to defraud is required.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to acts or omissions occurring on or after 
     January 1, 1997.

     SEC. 233. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH 
                   SERVICES.

       (a) In General.--Section 1128A(b) (42 U.S.C. 1320a-7a(b)) 
     is amended by adding at the end the following new paragraph:
       ``(3)(A) Any physician who executes a document described in 
     subparagraph (B) with respect to an individual knowing that 
     all of the requirements referred to in such subparagraph are 
     not met with respect to the individual shall be subject to a 
     civil monetary penalty of not more than the greater of--
       ``(i) $5,000, or
       ``(ii) three times the amount of the payments under title 
     XVIII for home health services which are made pursuant to 
     such certification.
       ``(B) A document described in this subparagraph is any 
     document that certifies, for purposes of title XVIII, that an 
     individual meets the requirements of section 1814(a)(2)(C) or 
     1835(a)(2)(A) in the case of home health services furnished 
     to the individual.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to certifications made on or after the date of 
     the enactment of this Act.
                 Subtitle E--Revisions to Criminal Law

     SEC. 241. DEFINITIONS RELATING TO FEDERAL HEALTH CARE 
                   OFFENSE.

       (a) In General.--Chapter 1 of title 18, United States Code, 
     is amended by adding at the end the following:

     ``Sec. 24. Definitions relating to Federal health care 
       offense

       ``(a) As used in this title, the term `Federal health care 
     offense' means a violation of, or a criminal conspiracy to 
     violate--
       ``(1) section 669, 1035, 1347, or 1518 of this title; or
       ``(2) section 287, 371, 664, 666, 1001, 1027, 1341, 1343, 
     or 1954 of this title, if the violation or conspiracy relates 
     to a health care benefit program.
       ``(b) As used in this title, the term `health care benefit 
     program' means any public or private plan or contract, 
     affecting commerce, under which any medical benefit, item, or 
     service is provided to any individual, and includes any 
     individual or entity who is providing a medical benefit, 
     item, or service for which payment may be made under the plan 
     or contract.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 2 of title 18, United States Code, is 
     amended by inserting after the item relating to section 23 
     the following new item:

``24. Definitions relating to Federal health care offense.''.

     SEC. 242. HEALTH CARE FRAUD.

       (a) Offense.--
       (1) In general.--Chapter 63 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1347. Health care fraud

       ``Whoever knowingly executes, or attempts to execute, a 
     scheme or artifice--
       ``(1) to defraud any health care benefit program; or
       ``(2) to obtain, by means of false or fraudulent pretenses, 
     representations, or promises, any of the money or property 
     owned by, or under the custody or control of, any health care 
     benefit program,

     in connection with the delivery of or payment for health care 
     benefits, items, or services, shall be fined under this title 
     or imprisoned not more than 10 years, or both. If the 
     violation results in serious bodily injury (as defined in 
     section 1365 of this title), such person shall be fined under 
     this title or imprisoned not more than 20 years, or both; and 
     if the violation results in death, such person shall be fined 
     under this title, or imprisoned for any term of years or for 
     life, or both.''.
       (2) Clerical amendment.--The table of sections at the 
     beginning of chapter 63 of title 18, United States Code, is 
     amended by adding at the end the following:

``1347. Health care fraud.''.

       (b) Criminal Fines Deposited in Federal Hospital Insurance 
     Trust Fund.--The Secretary of the Treasury shall deposit into 
     the Federal Hospital Insurance Trust Fund pursuant to section 
     1817(k)(2)(C) of the Social Security Act (42 U.S.C. 1395i) an 
     amount equal to the criminal fines imposed under section 1347 
     of title 18, United States Code (relating to health care 
     fraud).

     SEC. 243. THEFT OR EMBEZZLEMENT.

       (a) In General.--Chapter 31 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 669. Theft or embezzlement in connection with health 
       care

       ``(a) Whoever embezzles, steals, or otherwise without 
     authority knowingly converts to the use of any person other 
     than the rightful owner, or intentionally misapplies any of 
     the moneys, funds, securities, premiums, credits, property, 
     or other assets of a health care benefit program, shall be 
     fined under this title or imprisoned not more than 10 years, 
     or both; but if the value of such property does not exceed 
     the sum of $100 the defendant shall be fined under this title 
     or imprisoned not more than one year, or both.
       ``(b) As used in this section, the term `health care 
     benefit program' has the meaning given such term in section 
     1347(b) of this title.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 31 of title 18, United States Code, is 
     amended by adding at the end the following:

``669. Theft or embezzlement in connection with health care.''.

     SEC. 244. FALSE STATEMENTS.

       (a) In General.--Chapter 47 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1035. False statements relating to health care matters

       ``(a) Whoever, in any matter involving a health care 
     benefit program, knowingly--
       ``(1) falsifies, conceals, or covers up by any trick, 
     scheme, or device a material fact; or
       ``(2) makes any false, fictitious, or fraudulent statements 
     or representations, or makes or uses any false writing or 
     document knowing the same to contain any false, fictitious, 
     or fraudulent statement or entry,

     in connection with the delivery of or payment for health care 
     benefits, items, or services, shall be fined under this title 
     or imprisoned not more than 5 years, or both.
       ``(b) As used in this section, the term `health care 
     benefit program' has the meaning given such term in section 
     1347(b) of this title.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 47 of title 18, United States Code, is 
     amended by adding at the end the following new item:

``1035. False statements relating to health care matters.''.

     SEC. 245. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF HEALTH 
                   CARE OFFENSES.

       (a) In General.--Chapter 73 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 1518. Obstruction of criminal investigations of health 
       care offenses

       ``(a) Whoever willfully prevents, obstructs, misleads, 
     delays or attempts to prevent, obstruct, mislead, or delay 
     the communication of information or records relating to a 
     violation of a Federal health care offense to a criminal 
     investigator shall be fined under this title or imprisoned 
     not more than 5 years, or both.
       ``(b) As used in this section the term `criminal 
     investigator' means any individual duly authorized by a 
     department, agency, or armed force of the United States to 
     conduct or engage in investigations for prosecutions for 
     violations of health care offenses.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 73 of title 18, United States Code, is 
     amended by adding at the end the following new item:

``1518. Obstruction of criminal investigations of health care 
              offenses.''.

     SEC. 246. LAUNDERING OF MONETARY INSTRUMENTS.

       Section 1956(c)(7) of title 18, United States Code, is 
     amended by adding at the end the following:
       ``(F) Any act or activity constituting an offense involving 
     a Federal health care offense.''.

     SEC. 247. INJUNCTIVE RELIEF RELATING TO HEALTH CARE OFFENSES.

       (a) In General.--Section 1345(a)(1) of title 18, United 
     States Code, is amended--
       (1) by striking ``or'' at the end of subparagraph (A);
       (2) by inserting ``or'' at the end of subparagraph (B); and
       (3) by adding at the end the following:
       ``(C) committing or about to commit a Federal health care 
     offense.''.
       (b) Freezing of Assets.--Section 1345(a)(2) of title 18, 
     United States Code, is amended by inserting ``or a Federal 
     health care offense'' after ``title)''.

     SEC. 248. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

       (a) In General.--Chapter 223 of title 18, United States 
     Code, is amended by adding after section 3485 the following:

     ``Sec. 3486. Authorized investigative demand procedures

       ``(a) Authorization.--In any investigation relating to any 
     act or activity involving a

[[Page H3068]]

     Federal health care offense, the Attorney General or the 
     Attorney General's designee may issue in writing and cause to 
     be served a subpoena requiring the production of any records 
     (including any books, papers, documents, electronic media, or 
     other objects or tangible things), which may be relevant to 
     an authorized law enforcement inquiry, that a person or legal 
     entity may possess or have care, custody, or control. A 
     subpoena shall describe the objects required to be produced 
     and prescribe a return date within a reasonable period of 
     time within which the objects can be assembled and made 
     available.
       ``(b) Service.--A subpoena issued under this section may be 
     served by any person designated in the subpoena to serve it. 
     Service upon a natural person may be made by personal 
     delivery of the subpoena to him. Service may be made upon a 
     domestic or foreign corporation or upon a partnership or 
     other unincorporated association which is subject to suit 
     under a common name, by delivering the subpoena to an 
     officer, to a managing or general agent, or to any other 
     agent authorized by appointment or by law to receive service 
     of process. The affidavit of the person serving the subpoena 
     entered on a true copy thereof by the person serving it shall 
     be proof of service.
       ``(c) Enforcement.--In the case of contumacy by or refusal 
     to obey a subpoena issued to any person, the Attorney General 
     may invoke the aid of any court of the United States within 
     the jurisdiction of which the investigation is carried on or 
     of which the subpoenaed person is an inhabitant, or in which 
     he carries on business or may be found, to compel compliance 
     with the subpoena. The court may issue an order requiring the 
     subpoenaed person to appear before the Attorney General to 
     produce records, if so ordered, or to give testimony touching 
     the matter under investigation. Any failure to obey the order 
     of the court may be punished by the court as a contempt 
     thereof. All process in any such case may be served in any 
     judicial district in which such person may be found.
       ``(d) Immunity From Civil Liability.--Notwithstanding any 
     Federal, State, or local law, any person, including officers, 
     agents, and employees, receiving a summons under this 
     section, who complies in good faith with the summons and thus 
     produces the materials sought, shall not be liable in any 
     court of any State or the United States to any customer or 
     other person for such production or for nondisclosure of that 
     production to the customer.
       ``(e) Limitation on Use.--(1) Health information about an 
     individual that is disclosed under this section may not be 
     used in, or disclosed to any person for use in, any 
     administrative, civil, or criminal action or investigation 
     directed against the individual who is the subject of the 
     information unless the action or investigation arises out of 
     and is directly related to receipt of health care or payment 
     for health care or action involving a fraudulent claim 
     related to health; or if authorized by an appropriate order 
     of a court of competent jurisdiction, granted after 
     application showing good cause therefor.
       ``(2) In assessing good cause, the court shall weigh the 
     public interest and the need for disclosure against the 
     injury to the patient, to the physician-patient relationship, 
     and to the treatment services.
       ``(3) Upon the granting of such order, the court, in 
     determining the extent to which any disclosure of all or any 
     part of any record is necessary, shall impose appropriate 
     safeguards against unauthorized disclosure.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 223 of title 18, United States Code, is 
     amended by inserting after the item relating to section 3485 
     the following new item:

``3486. Authorized investigative demand procedures.''.

       (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 
     18, United States Code, is amended by inserting ``or a 
     Department of Justice subpoena (issued under section 3486 of 
     title 18),'' after ``subpoena''.

     SEC. 249. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

       (a) In General.--Section 982(a) of title 18, United States 
     Code, is amended by adding after paragraph (5) the following 
     new paragraph:
       ``(6) The court, in imposing sentence on a person convicted 
     of a Federal health care offense, shall order the person to 
     forfeit property, real or personal, that constitutes or is 
     derived, directly or indirectly, from gross proceeds 
     traceable to the commission of the offense.''.
       (b) Conforming Amendment.--Section 982(b)(1)(A) of title 
     18, United States Code, is amended by inserting ``or (a)(6)'' 
     after ``(a)(1)''.
       (c) Property Forfeited Deposited in Federal Hospital 
     Insurance Trust Fund.--
       (1) In general.--After the payment of the costs of asset 
     forfeiture has been made, and notwithstanding any other 
     provision of law, the Secretary of the Treasury shall deposit 
     into the Federal Hospital Insurance Trust Fund pursuant to 
     section 1817(k)(2)(C) of the Social Security Act, as added by 
     section 301(b), an amount equal to the net amount realized 
     from the forfeiture of property by reason of a Federal health 
     care offense pursuant to section 982(a)(6) of title 18, 
     United States Code.
       (2) Costs of asset forfeiture.--For purposes of paragraph 
     (1), the term ``payment of the costs of asset forfeiture'' 
     means--
       (A) the payment, at the discretion of the Attorney General, 
     of any expenses necessary to seize, detain, inventory, 
     safeguard, maintain, advertise, sell, or dispose of property 
     under seizure, detention, or forfeited, or of any other 
     necessary expenses incident to the seizure, detention, 
     forfeiture, or disposal of such property, including payment 
     for--
       (i) contract services;
       (ii) the employment of outside contractors to operate and 
     manage properties or provide other specialized services 
     necessary to dispose of such properties in an effort to 
     maximize the return from such properties; and
       (iii) reimbursement of any Federal, State, or local agency 
     for any expenditures made to perform the functions described 
     in this subparagraph;
       (B) at the discretion of the Attorney General, the payment 
     of awards for information or assistance leading to a civil or 
     criminal forfeiture involving any Federal agency 
     participating in the Health Care Fraud and Abuse Control 
     Account;
       (C) the compromise and payment of valid liens and mortgages 
     against property that has been forfeited, subject to the 
     discretion of the Attorney General to determine the validity 
     of any such lien or mortgage and the amount of payment to be 
     made, and the employment of attorneys and other personnel 
     skilled in State real estate law as necessary;
       (D) payment authorized in connection with remission or 
     mitigation procedures relating to property forfeited; and
       (E) the payment of State and local property taxes on 
     forfeited real property that accrued between the date of the 
     violation giving rise to the forfeiture and the date of the 
     forfeiture order.

     SEC. 250. RELATION TO ERISA AUTHORITY.

       Nothing in this subtitle shall be construed as affecting 
     the authority of the Secretary of Labor under section 506(b) 
     of the Employee Retirement Income Security Act of 1974, 
     including the Secretary's authority with respect to 
     violations of title 18, United States Code (as amended by 
     this subtitle).
               Subtitle F--Administrative Simplification

     SEC. 251. PURPOSE.

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

     SEC. 252. ADMINISTRATIVE SIMPLIFICATION.

       (a) In General.--Title XI (42 U.S.C. 1301 et seq.) is 
     amended by adding at the end the following:

                ``Part C--Administrative Simplification


                             ``definitions

       ``Sec. 1171. For purposes of this part:
       ``(1) Clearinghouse.--The term `clearinghouse' means a 
     public or private entity that processes or facilitates the 
     processing of nonstandard data elements of health information 
     into standard data elements.
       ``(2) Code set.--The term `code set' means any set of codes 
     used for encoding data elements, such as tables of terms, 
     medical concepts, medical diagnostic codes, or medical 
     procedure codes.
       ``(3) Health care provider.--The term `health care 
     provider' includes a provider of services (as defined in 
     section 1861(u)), a provider of medical or other health 
     services (as defined in section 1861(s)), and any other 
     person furnishing health care services or supplies.
       ``(4) Health information.--The term `health information' 
     means any information, whether oral or recorded in any form 
     or medium that--
       ``(A) is created or received by a health care provider, 
     health plan, public health authority, employer, life insurer, 
     school or university, or clearinghouse; and
       ``(B) relates to the past, present, or future physical or 
     mental health or condition of an individual, the provision of 
     health care to an individual, or the past, present, or future 
     payment for the provision of health care to an individual.
       ``(5) Health plan.--The term `health plan' means a plan 
     which provides, or pays the cost of, health benefits. Such 
     term includes the following, and any combination thereof:
       ``(A) Part A or part B of the medicare program under title 
     XVIII.
       ``(B) The medicaid program under title XIX.
       ``(C) A medicare supplemental policy (as defined in section 
     1882(g)(1)).
       ``(D) A long-term care policy, including a nursing home 
     fixed indemnity policy (unless the Secretary determines that 
     such a policy does not provide sufficiently comprehensive 
     coverage of a benefit so that the policy should be treated as 
     a health plan).
       ``(E) Health benefits of an employee welfare benefit plan, 
     as defined in section 3(1) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1002(1)), but only to the 
     extent the plan is established or maintained for the purpose 
     of providing health benefits and has 50 or more participants 
     (as defined in section 3(7) of such Act).
       ``(F) An employee welfare benefit plan or any other 
     arrangement which is established or maintained for the 
     purpose of offering or providing health benefits to the 
     employees of 2 or more employers.
       ``(G) The health care program for active military personnel 
     under title 10, United States Code.

[[Page H3069]]

       ``(H) The veterans health care program under chapter 17 of 
     title 38, United States Code.
       ``(I) The Civilian Health and Medical Program of the 
     Uniformed Services (CHAMPUS), as defined in section 1073(4) 
     of title 10, United States Code.
       ``(J) The Indian health service program under the Indian 
     Health Care Improvement Act (25 U.S.C. 1601 et seq.).
       ``(K) The Federal Employees Health Benefit Plan under 
     chapter 89 of title 5, United States Code.
       ``(6) Individually identifiable health information.--The 
     term `individually identifiable health information' means any 
     information, including demographic information collected from 
     an individual, that--
       ``(A) is created or received by a health care provider, 
     health plan, employer, or clearinghouse; and
       ``(B) relates to the past, present, or future physical or 
     mental health or condition of an individual, the provision of 
     health care to an individual, or the past, present, or future 
     payment for the provision of health care to an individual, 
     and--
       ``(i) identifies the individual; or
       ``(ii) with respect to which there is a reasonable basis to 
     believe that the information can be used to identify the 
     individual.
       ``(7) Standard.--The term `standard', when used with 
     reference to a data element of health information or a 
     transaction referred to in section 1173(a)(1), means any such 
     data element or transaction that meets each of the standards 
     and implementation specifications adopted or established by 
     the Secretary with respect to the data element or transaction 
     under sections 1172 through 1174.
       ``(8) Standard setting organization.--The term `standard 
     setting organization' means a standard setting organization 
     accredited by the American National Standards Institute, 
     including the National Council for Prescription Drug 
     Programs, that develops standards for information 
     transactions, data elements, or any other standard that is 
     necessary to, or will facilitate, the implementation of this 
     part.


            ``general requirements for adoption of standards

       ``Sec. 1172. (a) Applicability.--Any standard adopted under 
     this part shall apply, in whole or in part, to the following 
     persons:
       ``(1) An health plan.
       ``(2) A clearinghouse.
       ``(3) A health care provider who transmits any health 
     information in electronic form in connection with a 
     transaction referred to in section 1173(a)(1).
       ``(b) Reduction of Costs.--Any standard adopted under this 
     part shall be consistent with the objective of reducing the 
     administrative costs of providing and paying for health care.
       ``(c) Role of Standard Setting Organizations.--
       ``(1) In general.--Except as provided in paragraph (2), any 
     standard adopted under this part shall be a standard that has 
     been developed, adopted, or modified by a standard setting 
     organization.
       ``(2) Special rules.--
       ``(A) Different standards.--The Secretary may adopt a 
     standard that is different from any standard developed, 
     adopted, or modified by a standard setting organization, if--
       ``(i) the different standard will substantially reduce 
     administrative costs to health care providers and health 
     plans compared to the alternatives; and
       ``(ii) the standard is promulgated in accordance with the 
     rulemaking procedures of subchapter III of chapter 5 of title 
     5, United States Code.
       ``(B) No standard by standard setting organization.--If no 
     standard setting organization has developed, adopted, or 
     modified any standard relating to a standard that the 
     Secretary is authorized or required to adopt under this 
     part--
       ``(i) paragraph (1) shall not apply; and
       ``(ii) subsection (f) shall apply.
       ``(d) Implementation Specifications.--The Secretary shall 
     establish specifications for implementing each of the 
     standards adopted under this part.
       ``(e) Protection of Trade Secrets.--Except as otherwise 
     required by law, a standard adopted under this part shall not 
     require disclosure of trade secrets or confidential 
     commercial information by a person required to comply with 
     this part.
       ``(f) Assistance to the Secretary.--In complying with the 
     requirements of this part, the Secretary shall rely on the 
     recommendations of the National Committee on Vital and Health 
     Statistics established under section 306(k) of the Public 
     Health Service Act (42 U.S.C. 242k(k)) and shall consult with 
     appropriate Federal and State agencies and private 
     organizations. The Secretary shall publish in the Federal 
     Register any recommendation of the National Committee on 
     Vital and Health Statistics regarding the adoption of a 
     standard under this part.
       ``(g) Application to Modifications of Standards.--This 
     section shall apply to a modification to a standard 
     (including an addition to a standard) adopted under section 
     1174(b) in the same manner as it applies to an initial 
     standard adopted under section 1174(a).


       ``standards for information transactions and data elements

       ``Sec. 1173. (a) Standards to Enable Electronic Exchange.--
       ``(1) In general.--The Secretary shall adopt standards for 
     transactions, and data elements for such transactions, to 
     enable health information to be exchanged electronically, 
     that are appropriate for--
       ``(A) the financial and administrative transactions 
     described in paragraph (2); and
       ``(B) other financial and administrative transactions 
     determined appropriate by the Secretary consistent with the 
     goals of improving the operation of the health care system 
     and reducing administrative costs.
       ``(2) Transactions.--The transactions referred to in 
     paragraph (1)(A) are the following:
       ``(A) Claims (including coordination of benefits) or 
     equivalent encounter information.
       ``(B) Claims attachments.
       ``(C) Enrollment and disenrollment.
       ``(D) Eligibility.
       ``(E) Health care payment and remittance advice.
       ``(F) Premium payments.
       ``(G) First report of injury.
       ``(H) Claims status.
       ``(I) Referral certification and authorization.
       ``(3) Accommodation of specific providers.--The standards 
     adopted by the Secretary under paragraph (1) shall 
     accommodate the needs of different types of health care 
     providers.
       ``(b) Unique Health Identifiers.--
       ``(1) In general.--The Secretary shall adopt standards 
     providing for a standard unique health identifier for each 
     individual, employer, health plan, and health care provider 
     for use in the health care system. In carrying out the 
     preceding sentence for each health plan and health care 
     provider, the Secretary shall take into account multiple uses 
     for identifiers and multiple locations and specialty 
     classifications for health care providers.
       ``(2) Use of identifiers.--The standards adopted under 
     paragraphs (1) shall specify the purposes for which a unique 
     health identifier may be used.
       ``(c) Code Sets.--
       ``(1) In general.--The Secretary shall adopt standards 
     that--
       ``(A) select code sets for appropriate data elements for 
     the transactions referred to in subsection (a)(1) from among 
     the code sets that have been developed by private and public 
     entities; or
       ``(B) establish code sets for such data elements if no code 
     sets for the data elements have been developed.
       ``(2) Distribution.--The Secretary shall establish 
     efficient and low-cost procedures for distribution (including 
     electronic distribution) of code sets and modifications made 
     to such code sets under section 1174(b).
       ``(d) Security Standards for Health Information.--
       ``(1) Security standards.--The Secretary shall adopt 
     security standards that--
       ``(A) take into account--
       ``(i) the technical capabilities of record systems used to 
     maintain health information;
       ``(ii) the costs of security measures;
       ``(iii) the need for training persons who have access to 
     health information;
       ``(iv) the value of audit trails in computerized record 
     systems; and
       ``(v) the needs and capabilities of small health care 
     providers and rural health care providers (as such providers 
     are defined by the Secretary); and
       ``(B) ensure that a clearinghouse, if it is part of a 
     larger organization, has policies and security procedures 
     which isolate the activities of the clearinghouse with 
     respect to processing information in a manner that prevents 
     unauthorized access to such information by such larger 
     organization.
       ``(2) Safeguards.--Each person described in section 1172(a) 
     who maintains or transmits health information shall maintain 
     reasonable and appropriate administrative, technical, and 
     physical safeguards--
       ``(A) to ensure the integrity and confidentiality of the 
     information;
       ``(B) to protect against any reasonably anticipated--
       ``(i) threats or hazards to the security or integrity of 
     the information; and
       ``(ii) unauthorized uses or disclosures of the information; 
     and
       ``(C) otherwise to ensure compliance with this part by the 
     officers and employees of such person.
       ``(e) Privacy Standards for Health Information.--The 
     Secretary shall adopt standards with respect to the privacy 
     of individually identifiable health information transmitted 
     in connection with the transactions referred to in subsection 
     (a)(1). Such standards shall include standards concerning at 
     least the following:
       ``(1) The rights of an individual who is a subject of such 
     information.
       ``(2) The procedures to be established for the exercise of 
     such rights.
       ``(3) The uses and disclosures of such information that are 
     authorized or required.
       ``(f) Electronic Signature.--
       ``(1) In general.--
       ``(A) Standards.--The Secretary, in coordination with the 
     Secretary of Commerce, shall adopt standards specifying 
     procedures for the electronic transmission and authentication 
     of signatures with respect to the transactions referred to in 
     subsection (a)(1).
       ``(B) Effect of compliance.--Compliance with the standards 
     adopted under subparagraph (A) shall be deemed to satisfy 
     Federal and State statutory requirements for written 
     signatures with respect to the transactions referred to in 
     subsection (a)(1).

[[Page H3070]]

       ``(2) Payments for services and premiums.--Nothing in this 
     part shall be construed to prohibit payment for health care 
     services or health plan premiums by debit, credit, payment 
     card or numbers, or other electronic means.
       ``(g) Transfer of Information Among Health Plans.--The 
     Secretary shall adopt standards for transferring among health 
     plans appropriate standard data elements needed for the 
     coordination of benefits, the sequential processing of 
     claims, and other data elements for individuals who have more 
     than one health plan.


                 ``timetables for adoption of standards

       ``Sec. 1174. (a) Initial Standards.--The Secretary shall 
     carry out section 1173 not later than 18 months after the 
     date of the enactment of the Health Coverage Availability and 
     Affordability Act of 1996, except that standards relating to 
     claims attachments shall be adopted not later than 30 months 
     after such date.
       ``(b) Additions and Modifications to Standards.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     Secretary shall review the standards adopted under section 
     1173, and shall adopt modifications to the standards 
     (including additions to the standards), as determined 
     appropriate, but not more frequently than once every 6 
     months. Any addition or modification to a standard shall be 
     completed in a manner which minimizes the disruption and cost 
     of compliance.
       ``(2) Special rules.--
       ``(A) First 12-month period.--Except with respect to 
     additions and modifications to code sets under subparagraph 
     (B), the Secretary may not adopt any modification to a 
     standard adopted under this part during the 12-month period 
     beginning on the date the standard is initially adopted, 
     unless the Secretary determines that the modification is 
     necessary in order to permit compliance with the standard.
       ``(B) Additions and modifications to code sets.--
       ``(i) In general.--The Secretary shall ensure that 
     procedures exist for the routine maintenance, testing, 
     enhancement, and expansion of code sets.
       ``(ii) Additional rules.--If a code set is modified under 
     this subsection, the modified code set shall include 
     instructions on how data elements of health information that 
     were encoded prior to the modification may be converted or 
     translated so as to preserve the informational value of the 
     data elements that existed before the modification. Any 
     modification to a code set under this subsection shall be 
     implemented in a manner that minimizes the disruption and 
     cost of complying with such modification.


                             ``requirements

       ``Sec. 1175. (a) Conduct of Transactions by Plans.--
       ``(1) In general.--If a person desires to conduct a 
     transaction referred to in section 1173(a)(1) with a health 
     plan as a standard transaction--
       ``(A) the health plan may not refuse to conduct such 
     transaction as a standard transaction;
       ``(B) the health plan may not delay such transaction, or 
     otherwise adversely affect, or attempt to adversely affect, 
     the person or the transaction on the ground that the 
     transaction is a standard transaction; and
       ``(C) the information transmitted and received in 
     connection with the transaction shall be in the form of 
     standard data elements of health information.
       ``(2) Satisfaction of requirements.--A health plan may 
     satisfy the requirements under paragraph (1) by--
       ``(A) directly transmitting and receiving standard data 
     elements of health information; or
       ``(B) submitting nonstandard data elements to a 
     clearinghouse for processing into standard data elements and 
     transmission by the clearinghouse, and receiving standard 
     data elements through the clearinghouse.
       ``(3) Timetable for compliance.--Paragraph (1) shall not be 
     construed to require a health plan to comply with any 
     standard, implementation specification, or modification to a 
     standard or specification adopted or established by the 
     Secretary under sections 1172 through 1174 at any time prior 
     to the date on which the plan is required to comply with the 
     standard or specification under subsection (b).
       ``(b) Compliance With Standards.--
       ``(1) Initial compliance.--
       ``(A) In general.--Not later than 24 months after the date 
     on which an initial standard or implementation specification 
     is adopted or established under sections 1172 and 1173, each 
     person to whom the standard or implementation specification 
     applies shall comply with the standard or specification.
       ``(B) Special rule for small health plans.--In the case of 
     a small health plan, paragraph (1) shall be applied by 
     substituting `36 months' for `24 months'. For purposes of 
     this subsection, the Secretary shall determine the plans that 
     qualify as small health plans.
       ``(2) Compliance With modified standards.--If the Secretary 
     adopts a modification to a standard or implementation 
     specification under this part, each person to whom the 
     standard or implementation specification applies shall comply 
     with the modified standard or implementation specification at 
     such time as the Secretary determines appropriate, taking 
     into account the time needed to comply due to the nature and 
     extent of the modification. The time determined appropriate 
     under the preceding sentence may not be earlier than the last 
     day of the 180-day period beginning on the date such 
     modification is adopted. The Secretary may extend the time 
     for compliance for small insurance plans, if the Secretary 
     determines that such extension is appropriate.


``general penalty for failure to comply with requirements and standards

       ``Sec. 1176. (a) General Penalty.--
       ``(1) In general.--Except as provided in subsection (b), 
     the Secretary shall impose on any person who violates a 
     provision of this part a penalty of not more than $100 for 
     each such violation, except that the total amount imposed on 
     the person for all violations of an identical requirement or 
     prohibition during a calendar year may not exceed $25,000.
       ``(2) Procedures.--The provisions of section 1128A (other 
     than subsections (a) and (b) and the second sentence of 
     subsection (f)) shall apply to the imposition of a civil 
     money penalty under this subsection in the same manner as 
     such provisions apply to the imposition of a penalty under 
     such section 1128A.
       ``(b) Limitations.--
       ``(1) Offenses otherwise punishable.--A penalty may not be 
     imposed under subsection (a) with respect to an act if the 
     act constitutes an offense punishable under section 1177.
       ``(2) Noncompliance not discovered.--A penalty may not be 
     imposed under subsection (a) with respect to a provision of 
     this part if it is established to the satisfaction of the 
     Secretary that the person liable for the penalty did not 
     know, and by exercising reasonable diligence would not have 
     known, that such person violated the provision.
       ``(3) Failures due to reasonable cause.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a penalty may not be imposed under subsection (a) if--
       ``(i) the failure to comply was due to reasonable cause and 
     not to willful neglect; and
       ``(ii) the failure to comply is corrected during the 30-day 
     period beginning on the first date the person liable for the 
     penalty knew, or by exercising reasonable diligence would 
     have known, that the failure to comply occurred.
       ``(B) Extension of period.--
       ``(i) No penalty.--The period referred to in subparagraph 
     (A)(ii) may be extended as determined appropriate by the 
     Secretary based on the nature and extent of the failure to 
     comply.
       ``(ii) Assistance.--If the Secretary determines that a 
     person failed to comply because the person was unable to 
     comply, the Secretary may provide technical assistance to the 
     person during the period described in subparagraph (A)(ii). 
     Such assistance shall be provided in any manner determined 
     appropriate by the Secretary.
       ``(4) Reduction.--In the case of a failure to comply which 
     is due to reasonable cause and not to willful neglect, any 
     penalty under subsection (a) that is not entirely waived 
     under paragraph (3) may be waived to the extent that the 
     payment of such penalty would be excessive relative to the 
     compliance failure involved.


 ``wrongful disclosure of individually identifiable health information

       ``Sec. 1177. (a) Offense.--A person who knowingly and in 
     violation of this part--
       ``(1) uses or causes to be used a unique health identifier;
       ``(2) obtains individually identifiable health information 
     relating to an individual; or
       ``(3) discloses individually identifiable health 
     information to another person,

     shall be punished as provided in subsection (b).
       ``(b) Penalties.--A person described in subsection (a) 
     shall--
       ``(1) be fined not more than $50,000, imprisoned not more 
     than 1 year, or both;
       ``(2) if the offense is committed under false pretenses, be 
     fined not more than $100,000, imprisoned not more than 5 
     years, or both; and
       ``(3) if the offense is committed with intent to sell, 
     transfer, or use individually identifiable health information 
     for commercial advantage, personal gain, or malicious harm, 
     fined not more than $250,000, imprisoned not more than 10 
     years, or both.


                         ``effect on state law

       ``Sec. 1178. (a) General Effect.--
       ``(1) General rule.--Except as provided in paragraph (2), a 
     provision or requirement under this part, or a standard or 
     implementation specification adopted or established under 
     sections 1172 through 1174, shall supersede any contrary 
     provision of State law, including a provision of State law 
     that requires medical or health plan records (including 
     billing information) to be maintained or transmitted in 
     written rather than electronic form.
       ``(2) Exceptions.--A provision or requirement under this 
     part, or a standard or implementation specification adopted 
     or established under sections 1172 through 1174, shall not 
     supersede a contrary provision of State law, if the provision 
     of State law--
       ``(A) imposes requirements, standards, or implementation 
     specifications that are more stringent than the requirements, 
     standards, or implementation specifications under this part 
     with respect to the privacy of individually identifiable 
     health information; or
       ``(B) is a provision the Secretary determines--

[[Page H3071]]

       ``(i) is necessary to prevent fraud and abuse, or for other 
     purposes; or
       ``(ii) addresses controlled substances.
       ``(b) Public Health Reporting.--Nothing in this part shall 
     be construed to invalidate or limit the authority, power, or 
     procedures established under any law providing for the 
     reporting of disease or injury, child abuse, birth, or death, 
     public health surveillance, or public health investigation or 
     intervention.''.
       (b) Conforming Amendments.--
       (1) Requirement for medicare providers.--Section 1866(a)(1) 
     (42 U.S.C. 1395cc(a)(1)) is amended--
       (A) by striking ``and'' at the end of subparagraph (P);
       (B) by striking the period at the end of subparagraph (Q) 
     and inserting ``; and''; and
       (C) by inserting immediately after subparagraph (Q) the 
     following new subparagraph:
       ``(R) to contract only with a clearinghouse (as defined in 
     section 1171) that meets each standard and implementation 
     specification adopted or established under part C of title XI 
     on or after the date on which the clearinghouse is required 
     to comply with the standard or specification.''.
       (2) Title heading.--Title XI (42 U.S.C. 1301 et seq.) is 
     amended by striking the title heading and inserting the 
     following:

    ``TITLE XI--GENERAL PROVISIONS, PEER REVIEW, AND ADMINISTRATIVE 
                           SIMPLIFICATION''.

     SEC. 253. CHANGES IN MEMBERSHIP AND DUTIES OF NATIONAL 
                   COMMITTEE ON VITAL AND HEALTH STATISTICS.

       Section 306(k) of the Public Health Service Act (42 U.S.C. 
     242k(k)) is amended--
       (1) in paragraph (1), by striking ``16'' and inserting 
     ``18'';
       (2) by amending paragraph (2) to read as follows:
       ``(2) The members of the Committee shall be appointed from 
     among persons who have distinguished themselves in the fields 
     of health statistics, electronic interchange of health care 
     information, privacy and security of electronic information, 
     population-based public health, purchasing or financing 
     health care services, integrated computerized health 
     information systems, health services research, consumer 
     interests in health information, health data standards, 
     epidemiology, and the provision of health services. Members 
     of the Committee shall be appointed for terms of 4 years.'';
       (3) by redesignating paragraphs (3) through (5) as 
     paragraphs (4) through (6), respectively, and inserting after 
     paragraph (2) the following:
       ``(3) Of the members of the Committee--
       ``(A) 1 shall be appointed, not later than 60 days after 
     the date of the enactment of the Health Coverage Availability 
     and Affordability Act of 1996, by the Speaker of the House of 
     Representatives after consultation with the minority leader 
     of the House of Representatives;
       ``(B) 1 shall be appointed, not later than 60 days after 
     the date of the enactment of the Health Coverage Availability 
     and Affordability Act of 1996, by the President pro tempore 
     of the Senate after consultation with the minority leader of 
     the Senate; and
       ``(C) 16 shall be appointed by the Secretary.'';
       (4) by amending paragraph (5) (as so redesignated) to read 
     as follows:
       ``(5) The Committee--
       ``(A) shall assist and advise the Secretary--
       ``(i) to delineate statistical problems bearing on health 
     and health services which are of national or international 
     interest;
       ``(ii) to stimulate studies of such problems by other 
     organizations and agencies whenever possible or to make 
     investigations of such problems through subcommittees;
       ``(iii) to determine, approve, and revise the terms, 
     definitions, classifications, and guidelines for assessing 
     health status and health services, their distribution and 
     costs, for use (I) within the Department of Health and Human 
     Services, (II) by all programs administered or funded by the 
     Secretary, including the Federal-State-local cooperative 
     health statistics system referred to in subsection (e), and 
     (III) to the extent possible as determined by the head of the 
     agency involved, by the Department of Veterans Affairs, the 
     Department of Defense, and other Federal agencies concerned 
     with health and health services;
       ``(iv) with respect to the design of and approval of health 
     statistical and health information systems concerned with the 
     collection, processing, and tabulation of health statistics 
     within the Department of Health and Human Services, with 
     respect to the Cooperative Health Statistics System 
     established under subsection (e), and with respect to the 
     standardized means for the collection of health information 
     and statistics to be established by the Secretary under 
     subsection (j)(1);
       ``(v) to review and comment on findings and proposals 
     developed by other organizations and agencies and to make 
     recommendations for their adoption or implementation by 
     local, State, national, or international agencies;
       ``(vi) to cooperate with national committees of other 
     countries and with the World Health Organization and other 
     national agencies in the studies of problems of mutual 
     interest;
       ``(vii) to issue an annual report on the state of the 
     Nation's health, its health services, their costs and 
     distributions, and to make proposals for improvement of the 
     Nation's health statistics and health information systems; 
     and
       ``(viii) in complying with the requirements imposed on the 
     Secretary under part C of title XI of the Social Security 
     Act;
       ``(B) shall study the issues related to the adoption of 
     uniform data standards for patient medical record information 
     and the electronic exchange of such information;
       ``(C) shall report to the Secretary not later than 4 years 
     after the date of the enactment of the Health Coverage 
     Availability and Affordability Act of 1996 recommendations 
     and legislative proposals for such standards and electronic 
     exchange; and
       ``(D) shall be responsible generally for advising the 
     Secretary and the Congress on the status of the 
     implementation of part C of title XI of the Social Security 
     Act.''; and
       (5) by adding at the end the following:
       ``(7) Not later than 1 year after the date of the enactment 
     of the Health Coverage Availability and Affordability Act of 
     1996, and annually thereafter, the Committee shall submit to 
     the Congress, and make public, a report regarding--
       ``(A) the extent to which persons required to comply with 
     part C of title XI of the Social Security Act are cooperating 
     in implementing the standards adopted under such part;
       ``(B) the extent to which such entities are meeting the 
     privacy and security standards adopted under such part and 
     the types of penalties assessed for noncompliance with such 
     standards;
       ``(C) whether the Federal and State Governments are 
     receiving information of sufficient quality to meet their 
     responsibilities under such part;
       ``(D) any problems that exist with respect to 
     implementation of such part; and
       ``(E) the extent to which timetables under such part are 
     being met.''.
   Subtitle G--Duplication and Coordination of Medicare-Related Plans

     SEC. 261. DUPLICATION AND COORDINATION OF MEDICARE-RELATED 
                   PLANS.

       (a) Treatment of Certain Health Insurance Policies as 
     Nonduplicative.--Effective as if included in the enactment of 
     section 4354 of the Omnibus Budget Reconciliation Act of 
     1990, section 1882(d)(3)(A) (42 U.S.C. 1395ss(d)(3)(A)) is 
     amended--
       (1) in clause (iii), by striking ``clause (i)'' and 
     inserting ``clause (i)(II)''; and
       (2) by adding at the end the following:
       ``(iv) For purposes of this subparagraph, a health 
     insurance policy providing for benefits which are payable to 
     or on behalf of an individual without regard to other health 
     benefit coverage of such individual is not considered to 
     `duplicate' any health benefits under this title, under title 
     XIX, or under a health insurance policy, and subclauses (I) 
     and (III) of clause (i) does not apply to such a policy.
       ``(v)(I) For purposes of this subparagraph, a health 
     insurance policy (or a rider to an insurance contract which 
     is not a health insurance policy), providing benefits for 
     long-term care, nursing home care, home health care, or 
     community-based care and that coordinates against or 
     excludes items and services available or paid for under 
     this title and (for policies sold or issued on or after 90 
     days after the date of enactment of this clause) that 
     discloses such coordination or exclusion in the policy's 
     outline of coverage, is not considered to `duplicate' 
     health benefits under this title.
       ``(II) For purposes of this subparagraph, a health 
     insurance policy (which may be a contract with a health 
     maintenance organization) that is a replacement product for 
     another health insurance policy that is being terminated by 
     the issuer, that is being provided to an individual entitled 
     to benefits under part A on the basis of section 226(b), and 
     that coordinates against or excludes items and services 
     available or paid for under this title is not considered to 
     `duplicate' health benefits under this title.
       ``(III) For purposes of this clause, the terms 
     `coordinates' and `coordination' mean, with respect to a 
     policy in relation to health benefits under this title, that 
     the policy under its terms is secondary to, or excludes from 
     payment, items and services to the extent available or paid 
     for under this title.
       ``(vi) Notwithstanding any other provision of law, no 
     criminal or civil penalty may be imposed at any time under 
     this subparagraph and no legal action may be brought or 
     continued at any time in any Federal or State court if the 
     penalty or action is based on an act or omission that 
     occurred after November 5, 1991, and before the date of the 
     enactment of this clause, and relates to the sale, issuance, 
     or renewal of any health insurance policy or rider during 
     such period, if such policy or rider meets the nonduplication 
     requirements of clause (iv) or (v).
       ``(vii) A State may not impose, in the case of the sale, 
     issuance, or renewal of a health insurance policy (other than 
     a medicare supplemental policy) or rider to an insurance 
     contract which is not a health insurance policy, that meets 
     the nonduplication requirements of this section pursuant to 
     clause (iv) or (v) to an individual entitled to benefits 
     under part A or enrolled under part B, any requirement 
     relating to any duplication (or nonduplication) of health 
     benefits under such policy or rider with health benefits to 
     which the individual is otherwise entitled to under this 
     title.''.
       (b) Conforming Amendments.--Section 1882(d)(3) (42 U.S.C. 
     1395ss(d)(3)) is amended--
       (1) in subparagraph (C)--
       (A) by striking ``with respect to (i)'' and inserting 
     ``with respect to'', and

[[Page H3072]]

       (B) by striking ``, (ii) the sale'' and all that follows up 
     to the period at the end; and
       (2) by striking subparagraph (D).
                  Subtitle H--Medical Liability Reform

                       PART 1--GENERAL PROVISIONS

     SEC. 271. FEDERAL REFORM OF HEALTH CARE LIABILITY ACTIONS.

       (a) Applicability.--This subtitle shall apply with respect 
     to any health care liability action brought in any State or 
     Federal court, except that this subtitle shall not apply to--
       (1) an action for damages arising from a vaccine-related 
     injury or death to the extent that title XXI of the Public 
     Health Service Act applies to the action, or
       (2) an action under the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1001 et seq.).
       (b) Preemption.--This subtitle shall preempt any State law 
     to the extent such law is inconsistent with the limitations 
     contained in this subtitle. This subtitle shall not preempt 
     any State law that provides for defenses or places 
     limitations on a person's liability in addition to those 
     contained in this subtitle or otherwise imposes greater 
     restrictions than those provided in this subtitle.
       (c) Effect on Sovereign Immunity and Choice of Law or 
     Venue.--Nothing in subsection (b) shall be construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any provision of law;
       (2) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (3) affect the applicability of any provision of the 
     Foreign Sovereign Immunities Act of 1976;
       (4) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation; or
       (5) affect the right of any court to transfer venue or to 
     apply the law of a foreign nation or to dismiss a claim of a 
     foreign nation or of a citizen of a foreign nation on the 
     ground of inconvenient forum.
       (d) Amount in Controversy.--In an action to which this 
     subtitle applies and which is brought under section 1332 of 
     title 28, United States Code, the amount of noneconomic 
     damages or punitive damages, and attorneys' fees or costs, 
     shall not be included in determining whether the matter in 
     controversy exceeds the sum or value of $50,000.
       (e) Federal Court Jurisdiction Not Established on Federal 
     Question Grounds.--Nothing in this subtitle shall be 
     construed to establish any jurisdiction in the district 
     courts of the United States over health care liability 
     actions on the basis of section 1331 or 1337 of title 28, 
     United States Code.

     SEC. 272. DEFINITIONS.

       As used in this subtitle:
       (1) Actual damages.--The term ``actual damages'' means 
     damages awarded to pay for economic loss.
       (2) Alternative dispute resolution system; adr.--The term 
     ``alternative dispute resolution system'' or ``ADR'' means a 
     system established under Federal or State law that provides 
     for the resolution of health care liability claims in a 
     manner other than through health care liability actions.
       (3) Claimant.--The term ``claimant'' means any person who 
     brings a health care liability action and any person on whose 
     behalf such an action is brought. If such action is brought 
     through or on behalf of an estate, the term includes the 
     claimant's decedent. If such action is brought through or on 
     behalf of a minor or incompetent, the term includes the 
     claimant's legal guardian.
       (4) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is that measure or degree of proof that 
     will produce in the mind of the trier of fact a firm belief 
     or conviction as to the truth of the allegations sought to be 
     established. Such measure or degree of proof is more than 
     that required under preponderance of the evidence but less 
     than that required for proof beyond a reasonable doubt.
       (5) Collateral source payments.--The term ``collateral 
     source payments'' means any amount paid or reasonably likely 
     to be paid in the future to or on behalf of a claimant, or 
     any service, product, or other benefit provided or reasonably 
     likely to be provided in the future to or on behalf of a 
     claimant, as a result of an injury or wrongful death, 
     pursuant to--
       (A) any State or Federal health, sickness, income-
     disability, accident or workers' compensation Act;
       (B) any health, sickness, income-disability, or accident 
     insurance that provides health benefits or income-disability 
     coverage;
       (C) any contract or agreement of any group, organization, 
     partnership, or corporation to provide, pay for, or reimburse 
     the cost of medical, hospital, dental, or income disability 
     benefits; and
       (D) any other publicly or privately funded program.
       (6) Drug.--The term ``drug'' has the meaning given such 
     term in section 201(g)(1) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 321(g)(1)).
       (7) Economic loss.--The term ``economic loss'' means any 
     pecuniary loss resulting from injury (including the loss of 
     earnings or other benefits related to employment, medical 
     expense loss, replacement services loss, loss due to death, 
     burial costs, and loss of business or employment 
     opportunities), to the extent recovery for such loss is 
     allowed under applicable State law.
       (8) Harm.--The term ``harm'' means any legally cognizable 
     wrong or injury for which punitive damages may be imposed.
       (9) Health benefit plan.--The term ``health benefit plan'' 
     means--
       (A) a hospital or medical expense incurred policy or 
     certificate,
       (B) a hospital or medical service plan contract,
       (C) a health maintenance subscriber contract,
       (D) a multiple employer welfare arrangement or employee 
     benefit plan (as defined under the Employee Retirement Income 
     Security Act of 1974), or
       (E) a MedicarePlus product (offered under part C of title 
     XVIII of the Social Security Act),
     that provides benefits with respect to health care services.
       (10) Health care liability action.--The term ``health care 
     liability action'' means a civil action brought in a State or 
     Federal court against a health care provider, an entity which 
     is obligated to provide or pay for health benefits under any 
     health benefit plan (including any person or entity acting 
     under a contract or arrangement to provide or administer any 
     health benefit), or the manufacturer, distributor, supplier, 
     marketer, promoter, or seller of a medical product, in which 
     the claimant alleges a claim (including third party claims, 
     cross claims, counter claims, or distribution claims) based 
     upon the provision of (or the failure to provide or pay for) 
     health care services or the use of a medical product, 
     regardless of the theory of liability on which the claim is 
     based or the number of plaintiffs, defendants, or causes of 
     action.
       (11) Health care liability claim.--The term ``health care 
     liability claim'' means a claim in which the claimant alleges 
     that injury was caused by the provision of (or the failure to 
     provide) health care services.
       (12) Health care provider.--The term ``health care 
     provider'' means any person that is engaged in the delivery 
     of health care services in a State and that is required by 
     the laws or regulations of the State to be licensed or 
     certified by the State to engage in the delivery of such 
     services in the State.
       (13) Health care service.--The term ``health care service'' 
     means any service for which payment may be made under a 
     health benefit plan including services related to the 
     delivery or administration of such service.
       (14) Medical device.--The term ``medical device'' has the 
     meaning given such term in section 201(h) of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)).
       (15) Noneconomic damages.--The term ``noneconomic damages'' 
     means damages paid to an individual for pain and suffering, 
     inconvenience, emotional distress, mental anguish, loss of 
     consortium, injury to reputation, humiliation, and other 
     nonpecuniary losses.
       (16) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity, including 
     any governmental entity.
       (17) Product seller.--The term ``product seller'' means a 
     person who, in the course of a business conducted for that 
     purpose, sells, distributes, rents, leases, prepares, blends, 
     packages, labels a product, is otherwise involved in placing 
     a product in the stream of commerce, or installs, repairs, or 
     maintains the harm-causing aspect of a product. The term does 
     not include--
       (A) a seller or lessor of real property;
       (B) a provider of professional services in any case in 
     which the sale or use of a product is incidental to the 
     transaction and the essence of the transaction is the 
     furnishing of judgment, skill, or services; or
       (C) any person who--
       (i) acts in only a financial capacity with respect to the 
     sale of a product; or
       (ii) leases a product under a lease arrangement in which 
     the selection, possession, maintenance, and operation of the 
     product are controlled by a person other than the lessor.
       (18) Punitive damages.--The term ``punitive damages'' means 
     damages awarded against any person not to compensate for 
     actual injury suffered, but to punish or deter such person or 
     others from engaging in similar behavior in the future.
       (19) State.--The term ``State'' means each of the several 
     States, the District of Columbia, Puerto Rico, the Virgin 
     Islands, Guam, American Samoa, the Northern Mariana Islands, 
     and any other territory or possession of the United States.

     SEC. 273. EFFECTIVE DATE.

       This subtitle will apply to any health care liability 
     action brought in a Federal or State court and to any health 
     care liability claim subject to an alternative dispute 
     resolution system, that is initiated on or after the date of 
     enactment of this subtitle, except that any health care 
     liability claim or action arising from an injury occurring 
     prior to the date of enactment of this subtitle shall be 
     governed by the applicable statute of limitations provisions 
     in effect at the time the injury occurred.

      PART 2--UNIFORM STANDARDS FOR HEALTH CARE LIABILITY ACTIONS

     SEC. 281. STATUTE OF LIMITATIONS.

       A health care liability action may not be brought after the 
     expiration of the 2-year period that begins on the date on 
     which the alleged injury that is the subject of the action 
     was discovered or should reasonably have been discovered, but 
     in no case after the expiration of the 5-year period that 
     begins on the date the alleged injury occurred.

[[Page H3073]]

     SEC. 282. CALCULATION AND PAYMENT OF DAMAGES.

       (a) Treatment of Noneconomic Damages.--
       (1) Limitation on noneconomic damages.--The total amount of 
     noneconomic damages that may be awarded to a claimant for 
     losses resulting from the injury which is the subject of a 
     health care liability action may not exceed $250,000, 
     regardless of the number of parties against whom the action 
     is brought or the number of actions brought with respect to 
     the injury.
       (2) Joint and several liability.--In any health care 
     liability action brought in State or Federal court, a 
     defendant shall be liable only for the amount of noneconomic 
     damages attributable to such defendant in direct proportion 
     to such defendant's share of fault or responsibility for the 
     claimant's actual damages, as determined by the trier of 
     fact. In all such cases, the liability of a defendant for 
     noneconomic damages shall be several and not joint.
       (b) Treatment of Punitive Damages.--
       (1) General rule.--Punitive damages may, to the extent 
     permitted by applicable State law, be awarded in any health 
     care liability action for harm in any Federal or State court 
     against a defendant if the claimant establishes by clear and 
     convincing evidence that the harm suffered was the result of 
     conduct--
       (A) specifically intended to cause harm, or
       (B) conduct manifesting a conscious, flagrant indifference 
     to the rights or safety of others.
       (2) Proportional awards.--The amount of punitive damages 
     that may be awarded in any health care liability action 
     subject to this subtitle shall not exceed 3 times the amount 
     of damages awarded to the claimant for economic loss, or 
     $250,000, whichever is greater. This paragraph shall be 
     applied by the court and shall not be disclosed to the jury.
       (3) Applicability.--This subsection shall apply to any 
     health care liability action brought in any Federal or State 
     court on any theory where punitive damages are sought. This 
     subsection does not create a cause of action for punitive 
     damages. This subsection does not preempt or supersede any 
     State or Federal law to the extent that such law would 
     further limit the award of punitive damages.
       (4) Bifurcation.--At the request of any party, the trier of 
     fact shall consider in a separate proceeding whether punitive 
     damages are to be awarded and the amount of such award. If a 
     separate proceeding is requested, evidence relevant only to 
     the claim of punitive damages, as determined by applicable 
     State law, shall be inadmissible in any proceeding to 
     determine whether actual damages are to be awarded.
       (5) Drugs and devices.--
       (A) In general.--(i) Punitive damages shall not be awarded 
     against a manufacturer or product seller of a drug or medical 
     device which caused the claimant's harm where--
       (I) such drug or device was subject to premarket approval 
     by the Food and Drug Administration with respect to the 
     safety of the formulation or performance of the aspect of 
     such drug or device which caused the claimant's harm, or the 
     adequacy of the packaging or labeling of such drug or device 
     which caused the harm, and such drug, device, packaging, or 
     labeling was approved by the Food and Drug Administration; or
       (II) the drug is generally recognized as safe and effective 
     pursuant to conditions established by the Food and Drug 
     Administration and applicable regulations, including 
     packaging and labeling regulations.
       (ii) Clause (i) shall not apply in any case in which the 
     defendant, before or after premarket approval of a drug or 
     device--
       (I) intentionally and wrongfully withheld from or 
     misrepresented to the Food and Drug Administration 
     information concerning such drug or device required to be 
     submitted under the Federal Food, Drug, and Cosmetic Act (21 
     U.S.C. 301 et seq.) or section 351 of the Public Health 
     Service Act (42 U.S.C. 262) that is material and relevant to 
     the harm suffered by the claimant, or
       (II) made an illegal payment to an official or employee of 
     the Food and Drug Administration for the purpose of securing 
     or maintaining approval of such drug or device.
       (B) Packaging.--In a health care liability action for harm 
     which is alleged to relate to the adequacy of the packaging 
     or labeling of a drug which is required to have tamper-
     resistant packaging under regulations of the Secretary of 
     Health and Human Services (including labeling regulations 
     related to such packaging), the manufacturer or product 
     seller of the drug shall not be held liable for punitive 
     damages unless such packaging or labeling is found by the 
     court by clear and convincing evidence to be substantially 
     out of compliance with such regulations.
       (c) Periodic Payments for Future Losses.--
       (1) General rule.--In any health care liability action in 
     which the damages awarded for future economic and noneconomic 
     loss exceeds $50,000, a person shall not be required to pay 
     such damages in a single, lump-sum payment, but shall be 
     permitted to make such payments periodically based on when 
     the damages are found likely to occur, as such payments are 
     determined by the court.
       (2) Finality of judgment.--The judgment of the court 
     awarding periodic payments under this subsection may not, in 
     the absence of fraud, be reopened at any time to contest, 
     amend, or modify the schedule or amount of the payments.
       (3) Lump-sum settlements.--This subsection shall not be 
     construed to preclude a settlement providing for a single, 
     lump-sum payment.
       (d) Treatment of Collateral Source Payments.--
       (1) Introduction into evidence.--In any health care 
     liability action, any defendant may introduce evidence of 
     collateral source payments. If any defendant elects to 
     introduce such evidence, the claimant may introduce evidence 
     of any amount paid or contributed or reasonably likely to be 
     paid or contributed in the future by or on behalf of the 
     claimant to secure the right to such collateral source 
     payments.
       (2) No subrogation.--No provider of collateral source 
     payments shall recover any amount against the claimant or 
     receive any lien or credit against the claimant's recovery or 
     be equitably or legally subrogated the right of the claimant 
     in a health care liability action.
       (3) Application to settlements.--This subsection shall 
     apply to an action that is settled as well as an action that 
     is resolved by a fact finder.

     SEC. 283. ALTERNATIVE DISPUTE RESOLUTION.

       Any ADR used to resolve a health care liability action or 
     claim shall contain provisions relating to statute of 
     limitations, non-economic damages, joint and several 
     liability, punitive damages, collateral source rule, and 
     periodic payments which are identical to the provisions 
     relating to such matters in this subtitle.
                TITLE III--TAX-RELATED HEALTH PROVISIONS

     SEC. 300. AMENDMENT OF 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     title an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Internal Revenue Code of 1986.
                  Subtitle A--Medical Savings Accounts

     SEC. 301. MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Part VII of subchapter B of chapter 1 
     (relating to additional itemized deductions for individuals) 
     is amended by redesignating section 220 as section 221 and by 
     inserting after section 219 the following new section:

     ``SEC. 220. MEDICAL SAVINGS ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an individual who 
     is an eligible individual for any month during the taxable 
     year, there shall be allowed as a deduction for the taxable 
     year an amount equal to the aggregate amount paid in cash 
     during such taxable year by such individual to a medical 
     savings account of such individual.
       ``(b) Limitations.--
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the amount allowable as a deduction under 
     subsection (a) to an individual for the taxable year shall 
     not exceed--
       ``(A) except as provided in subparagraph (B), the lesser 
     of--
       ``(i) $2,000, or
       ``(ii) the annual deductible limit for any individual 
     covered under the high deductible health plan, or
       ``(B) in the case of a high deductible health plan covering 
     the taxpayer and any other eligible individual who is the 
     spouse or any dependent (as defined in section 152) of the 
     taxpayer, the lesser of--
       ``(i) $4,000, or
       ``(ii) the annual limit under the plan on the aggregate 
     amount of deductibles required to be paid by all individuals.

     The preceding sentence shall not apply if the spouse of such 
     individual is covered under any other high deductible health 
     plan.
       ``(2) Special rule for married individuals.--
       ``(A) In general.--This subsection shall be applied 
     separately for each married individual.
       ``(B) Special rule.--If individuals who are married to each 
     other are covered under the same high deductible health plan, 
     then the amounts applicable under paragraph (1)(B) shall be 
     divided equally between them unless they agree on a different 
     division.
       ``(3) Coordination with exclusion for employer 
     contributions.--No deduction shall be allowed under this 
     section for any amount paid for any taxable year to a medical 
     savings account of an individual if--
       ``(A) any amount is paid to any medical savings account of 
     such individual which is excludable from gross income under 
     section 106(b) for such year, or
       ``(B) in a case described in paragraph (2)(B), any amount 
     is paid to any medical savings account of either spouse which 
     is so excludable for such year.
       ``(4) Proration of limitation.--
       ``(A) In general.--The limitation under paragraph (1) shall 
     be the sum of the monthly limitations for months during the 
     taxable year that the individual is an eligible individual 
     if--
       ``(i) such individual is not an eligible individual for all 
     months of the taxable year,
       ``(ii) the deductible under the high deductible health plan 
     covering such individual is not the same throughout such 
     taxable year, or
       ``(iii) such limitation is determined under paragraph 
     (1)(B) for some but not all months during such taxable year.
       ``(B) Monthly limitation.--The monthly limitation for any 
     month shall be an amount

[[Page H3074]]

     equal to \1/12\ of the limitation which would (but for this 
     paragraph and paragraph (3)) be determined under paragraph 
     (1) if the facts and circumstances as of the first day of 
     such month that such individual is covered under a high 
     deductible health plan were true for the entire taxable year.
       ``(5) Denial of deduction to dependents.--No deduction 
     shall be allowed under this section to any individual with 
     respect to whom a deduction under section 151 is allowable to 
     another taxpayer for a taxable year beginning in the calendar 
     year in which such individual's taxable year begins.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Eligible individual.--
       ``(A) In general.--The term `eligible individual' means, 
     with respect to any month, any individual--
       ``(i) who is covered under a high deductible health plan as 
     of the 1st day of such month, and
       ``(ii) who is not, while covered under a high deductible 
     health plan, covered under any health plan--

       ``(I) which is not a high deductible health plan, and
       ``(II) which provides coverage for any benefit which is 
     covered under the high deductible health plan.

       ``(B) Certain coverage disregarded.--Subparagraph (A)(ii) 
     shall be applied without regard to--
       ``(i) coverage for any benefit provided by permitted 
     insurance, and
       ``(ii) coverage (whether through insurance or otherwise) 
     for accidents, disability, dental care, vision care, or long-
     term care.
       ``(2) High deductible health plan.--The term `high 
     deductible health plan' means a health plan which--
       ``(A) has an annual deductible limit for each individual 
     covered by the plan which is not less than $1,500, and
       ``(B) has an annual limit on the aggregate amount of 
     deductibles required to be paid with respect to all 
     individuals covered by the plan which is not less than 
     $3,000.
     Such term does not include a health plan if substantially all 
     of its coverage is coverage described in paragraph (1)(B). A 
     plan shall not fail to be treated as a high deductible health 
     plan by reason of failing to have a deductible for preventive 
     care if the absence of a deductible for such care is required 
     by State law.
       ``(3) Permitted insurance.--The term `permitted insurance' 
     means--
       ``(A) Medicare supplemental insurance,
       ``(B) insurance if substantially all of the coverage 
     provided under such insurance relates to--
       ``(i) liabilities incurred under workers' compensation 
     laws,
       ``(ii) tort liabilities,
       ``(iii) liabilities relating to ownership or use of 
     property, or
       ``(iv) such other similar liabilities as the Secretary may 
     specify by regulations,
       ``(C) insurance for a specified disease or illness, and
       ``(D) insurance paying a fixed amount per day (or other 
     period) of hospitalization.
       ``(d) Medical Savings Account.--For purposes of this 
     section--
       ``(1) Medical savings account.--The term `medical savings 
     account' means a trust created or organized in the United 
     States exclusively for the purpose of paying the qualified 
     medical expenses of the account holder, but only if the 
     written governing instrument creating the trust meets the 
     following requirements:
       ``(A) Except in the case of a rollover contribution 
     described in subsection (f)(5), no contribution will be 
     accepted--
       ``(i) unless it is in cash, or
       ``(ii) to the extent such contribution, when added to 
     previous contributions to the trust for the calendar year, 
     exceeds $4,000.
       ``(B) The trustee is a bank (as defined in section 408(n)), 
     an insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(C) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(D) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(E) The interest of an individual in the balance in his 
     account is nonforfeitable.
       ``(2) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means, with respect to an account holder, amounts paid by 
     such holder for medical care (as defined in section 213(d)) 
     for such individual, the spouse of such individual, and any 
     dependent (as defined in section 152) of such individual, but 
     only to the extent such amounts are not compensated for by 
     insurance or otherwise.
       ``(B) Health insurance may not be purchased from account.--
       ``(i) In general.--Subparagraph (A) shall not apply to any 
     payment for insurance.
       ``(ii) Exceptions.--Clause (i) shall not apply to any 
     expense for coverage under--

       ``(I) a health plan during any period of continuation 
     coverage required under any Federal law,
       ``(II) a qualified long-term care insurance contract (as 
     defined in section 7702B(b)), or
       ``(III) a health plan during a period in which the 
     individual is receiving unemployment compensation under any 
     Federal or State law.

       ``(3) Account holder.--The term `account holder' means the 
     individual on whose behalf the medical savings account was 
     established.
       ``(4) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 219(d)(2) (relating to no deduction for 
     rollovers).
       ``(B) Section 219(f)(3) (relating to time when 
     contributions deemed made).
       ``(C) Except as provided in section 106(b), section 
     219(f)(5) (relating to employer payments).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).
       ``(e) Tax Treatment of Accounts.--
       ``(1) In general.--A medical savings account is exempt from 
     taxation under this subtitle unless such account has ceased 
     to be a medical savings account by reason of paragraph (2) or 
     (3). Notwithstanding the preceding sentence, any such account 
     is subject to the taxes imposed by section 511 (relating to 
     imposition of tax on unrelated business income of charitable, 
     etc. organizations).
       ``(2) Account terminations.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 408(e) shall apply to 
     medical savings accounts, and any amount treated as 
     distributed under such rules shall be treated as not used to 
     pay qualified medical expenses.
       ``(f) Tax Treatment of Distributions.--
       ``(1) Amounts used for qualified medical expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is used exclusively to pay 
     qualified medical expenses of any account holder (or any 
     spouse or dependent of the holder) shall not be includible in 
     gross income.
       ``(B) Treatment after death of account holder.--
       ``(i) Treatment if holder is spouse.--If, after the death 
     of the account holder, the account holder's interest is 
     payable to (or for the benefit of) the holder's spouse, the 
     medical savings account shall be treated as if the spouse 
     were the account holder.
       ``(ii) Treatment if designated holder is not spouse.--In 
     the case of an account holder's interest in a medical savings 
     account which is payable to (or for the benefit of) any 
     person other than such holder's spouse upon the death of such 
     holder--

       ``(I) such account shall cease to be a medical savings 
     account as of the date of death, and
       ``(II) an amount equal to the fair market value of the 
     assets in such account on such date shall be includible if 
     such person is not the estate of such holder, in such 
     person's gross income for the taxable year which includes 
     such date, or if such person is the estate of such holder, in 
     such holder's gross income for the last taxable year of such 
     holder.

       ``(2) Inclusion of amounts not used for qualified medical 
     expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is not used exclusively to pay 
     the qualified medical expenses of the account holder or of 
     the spouse or dependents of such holder shall be included in 
     the gross income of such holder.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) all medical savings accounts of the account holder 
     shall be treated as 1 account,
       ``(ii) all payments and distributions during any taxable 
     year shall be treated as 1 distribution, and
       ``(iii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(3) Excess contributions returned before due date of 
     return.--If the aggregate contributions (other than rollover 
     contributions) for a taxable year to the medical savings 
     accounts of an individual exceed the amount allowable as a 
     deduction under this section for such contributions, 
     paragraph (2) shall not apply to distributions from such 
     accounts (in an amount not greater than such excess) if--
       ``(A) such distribution is received by the individual on or 
     before the last day prescribed by law (including extensions 
     of time) for filing such individual's return for such taxable 
     year, and
       ``(B) such distribution is accompanied by the amount of net 
     income attributable to such excess contribution.

     Any net income described in subparagraph (B) shall be 
     included in the gross income of the individual for the 
     taxable year in which it is received.
       ``(4) Penalty for distributions not used for qualified 
     medical expenses.--
       ``(A) In general.--The tax imposed by this chapter on the 
     account holder for any taxable year in which there is a 
     payment or distribution from a medical savings account of 
     such holder which is includible in gross income under 
     paragraph (2) shall be increased by 10 percent of the amount 
     which is so includible.
       ``(B) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account holder becomes disabled within the meaning of 
     section 72(m)(7) or dies.
       ``(C) Exception for distributions after age 59\1/2\.--
     Subparagraph (A) shall not apply to any payment or 
     distribution after the date on which the account holder 
     attains age 59\1/2\.
       ``(5) Rollover contribution.--An amount is described in 
     this paragraph as a rollover contribution if it meets the 
     requirements of subparagraphs (A) and (B).

[[Page H3075]]

       ``(A) In general.--Paragraph (2) shall not apply to any 
     amount paid or distributed from a medical savings account to 
     the account holder to the extent the amount received is paid 
     into a medical savings account for the benefit of such 
     holder not later than the 60th day after the day on which 
     the holder receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a medical savings account if, at any time 
     during the 1-year period ending on the day of such receipt, 
     such individual received any other amount described in 
     subparagraph (A) from a medical savings account which was not 
     includible in the individual's gross income because of the 
     application of this paragraph.
       ``(6) Coordination with medical expense deduction.--For 
     purposes of determining the amount of the deduction under 
     section 213, any payment or distribution out of a medical 
     savings account for qualified medical expenses shall not be 
     treated as an expense paid for medical care.
       ``(7)  Transfer of account incident to divorce.--The 
     transfer of an individual's interest in a medical savings 
     account to an individual's spouse or former spouse under a 
     divorce or separation instrument described in subparagraph 
     (A) of section 71(b)(2) shall not be considered a taxable 
     transfer made by such individual notwithstanding any other 
     provision of this subtitle, and such interest shall, after 
     such transfer, be treated as a medical savings account with 
     respect to which the spouse is the account holder.
       ``(g) Cost-of-Living Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning in a calendar year after 1997, each dollar amount 
     in subsection (b)(1), (c)(2), or (d)(1)(A) shall be increased 
     by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the medical care cost adjustment for such calendar 
     year.

     If any increase under the preceding sentence is not a 
     multiple of $50, such increase shall be rounded to the 
     nearest multiple of $50.
       ``(2) Medical care cost adjustment.--For purposes of 
     paragraph (1), the medical care cost adjustment for any 
     calendar year is the percentage (if any) by which--
       ``(A) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(B) such component for August of 1996.
       ``(h) Reports.--The Secretary may require the trustee of a 
     medical savings account to make such reports regarding such 
     account to the Secretary and to the account holder with 
     respect to contributions, distributions, and such other 
     matters as the Secretary determines appropriate. The reports 
     required by this subsection shall be filed at such time and 
     in such manner and furnished to such individuals at such time 
     and in such manner as may be required by those regulations.''
       (b) Deduction Allowed Whether or Not Individual Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (15) the following new paragraph:
       ``(16) Medical savings accounts.--The deduction allowed by 
     section 220.''
       (c) Exclusions for Employer Contributions to Medical 
     Savings Accounts.--
       (1) Exclusion from income tax.--The text of section 106 
     (relating to contributions by employer to accident and health 
     plans) is amended to read as follows:
       ``(a) General Rule.--Except as otherwise provided in this 
     section, gross income of an employee does not include 
     employer-provided coverage under an accident or health plan.
       ``(b) Contributions to Medical Savings Accounts.--
       ``(1) In general.--In the case of an employee who is an 
     eligible individual, gross income does not include amounts 
     contributed by such employee's employer to any medical 
     savings account of such employee.
       ``(2) Coordination with deduction limitation.--The amount 
     excluded from the gross income of an employee under this 
     subsection for any taxable year shall not exceed the 
     limitation under section 220(b)(1) (determined without regard 
     to this subsection) which is applicable to such employee for 
     such taxable year.
       ``(3) No constructive receipt.--No amount shall be included 
     in the gross income of any employee solely because the 
     employee may choose between the contributions referred to in 
     paragraph (1) and employer contributions to another health 
     plan of the employer.
       ``(4) Special rule for deduction of employer 
     contributions.--Any employer contribution to a medical 
     savings account, if otherwise allowable as a deduction under 
     this chapter, shall be allowed only for the taxable year in 
     which paid.
       ``(5) Definitions.--For purposes of this subsection, the 
     terms `eligible individual' and `medical savings account' 
     have the respective meanings given to such terms by section 
     220.''
       (2) Exclusion from employment taxes.--
       (A) Social security taxes.--
       (i) Subsection (a) of section 3121 is amended by striking 
     ``or'' at the end of paragraph (20), by striking the period 
     at the end of paragraph (21) and inserting ``; or'', and by 
     inserting after paragraph (21) the following new paragraph:
       ``(22) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b).''
       (ii) Subsection (a) of section 209 of the Social Security 
     Act is amended by striking ``or'' at the end of paragraph 
     (17), by striking the period at the end of paragraph (18) and 
     inserting ``; or'', and by inserting after paragraph (18) the 
     following new paragraph:
       ``(19) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b) of the Internal 
     Revenue Code of 1986.''
       (B) Railroad retirement tax.--Subsection (e) of section 
     3231 is amended by adding at the end the following new 
     paragraph:
       ``(10) Medical savings account contributions.--The term 
     `compensation' shall not include any payment made to or for 
     the benefit of an employee if at the time of such payment it 
     is reasonable to believe that the employee will be able to 
     exclude such payment from income under section 106(b).''
       (C) Unemployment tax.--Subsection (b) of section 3306 is 
     amended by striking ``or'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16) and 
     inserting ``; or'', and by inserting after paragraph (16) the 
     following new paragraph:
       ``(17) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b).''
       (D) Withholding tax.--Subsection (a) of section 3401 is 
     amended by striking ``or'' at the end of paragraph (19), by 
     striking the period at the end of paragraph (20) and 
     inserting ``; or'', and by inserting after paragraph (20) the 
     following new paragraph:
       ``(21) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b).''
       (d) Medical Savings Account Contributions Not Available 
     Under Cafeteria Plans.--Subsection (f) of section 125 of such 
     Code is amended by inserting ``106(b),'' before ``117''.
       (e) Exclusion of Medical Savings Accounts From Estate 
     Tax.--Part IV of subchapter A of chapter 11 is amended by 
     adding at the end the following new section:

     ``SEC. 2057. MEDICAL SAVINGS ACCOUNTS.

       ``For purposes of the tax imposed by section 2001, the 
     value of the taxable estate shall be determined by deducting 
     from the value of the gross estate an amount equal to the 
     value of any medical savings account (as defined in section 
     220(d)) included in the gross estate.''
       (f) Tax on Excess Contributions.--Section 4973 (relating to 
     tax on excess contributions to individual retirement 
     accounts, certain section 403(b) contracts, and certain 
     individual retirement annuities) is amended--
       (1) by inserting ``MEDICAL SAVINGS ACCOUNTS,'' after 
     ``ACCOUNTS,'' in the heading of such section,
       (2) by striking ``or'' at the end of paragraph (1) of 
     subsection (a),
       (3) by redesignating paragraph (2) of subsection (a) as 
     paragraph (3) and by inserting after paragraph (1) the 
     following:
       ``(2) a medical savings account (within the meaning of 
     section 220(d)), or'', and
       (4) by adding at the end the following new subsection:
       ``(d) Excess Contributions to Medical Savings Accounts.--
     For purposes of this section, in the case of a medical 
     savings accounts (within the meaning of section 220(d)), the 
     term `excess contributions' means the sum of--
       ``(1) the amount by which the amount contributed for the 
     taxable year to the accounts (other than rollover 
     contributions described in section 220(f)(5)) exceeds the 
     amount allowable as a deduction under section 220 for such 
     contributions, and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year, reduced by the sum of distributions 
     out of the account included in gross income under section 
     220(f) (2) or (3) and the excess (if any) of the maximum 
     amount allowable as a deduction under section 220 for the 
     taxable year over the amount contributed to the accounts.

     For purposes of this subsection, any contribution which is 
     distributed out of the medical savings account in a 
     distribution to which section 220(f)(3) applies shall be 
     treated as an amount not contributed.''
       (g) Tax on Prohibited Transactions.--
       (1) Section 4975 (relating to tax on prohibited 
     transactions) is amended by adding at the end of subsection 
     (c) the following new paragraph:
       ``(4) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 220(d)) is established shall 
     be exempt from the tax imposed by this section with respect 
     to any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a medical savings 
     account by reason of the application of section 220(e)(2) to 
     such account.''
       (2) Paragraph (1) of section 4975(e) is amended to read as 
     follows:
       ``(1) Plan.--For purposes of this section, the term `plan' 
     means--
       ``(A) a trust described in section 401(a) which forms a 
     part of a plan, or a plan described in section 403(a), which 
     trust or plan is exempt from tax under section 501(a),

[[Page H3076]]

       ``(B) an individual retirement account described in section 
     408(a),
       ``(C) an individual retirement annuity described in section 
     408(b),
       ``(D) a medical savings account described in section 
     220(d), or
       ``(E) a trust, plan, account, or annuity which, at any 
     time, has been determined by the Secretary to be described in 
     any preceding subparagraph of this paragraph.''
       (h) Failure To Provide Reports on Medical Savings 
     Accounts.--
       (1) Subsection (a) of section 6693 (relating to failure to 
     provide reports on individual retirement accounts or 
     annuities) is amended to read as follows:
       ``(a) Reports.--
       ``(1) In general.--If a person required to file a report 
     under a provision referred to in paragraph (2) fails to file 
     such report at the time and in the manner required by such 
     provision, such person shall pay a penalty of $50 for each 
     failure unless it is shown that such failure is due to 
     reasonable cause.
       ``(2) Provisions.--The provisions referred to in this 
     paragraph are--
       ``(A) subsections (i) and (l) of section 408 (relating to 
     individual retirement plans), and
       ``(B) section 220(h) (relating to medical savings 
     accounts).''
       (i) Exception From Capitalization of Policy Acquisition 
     Expenses.--Subparagraph (B) of section 848(e)(1) (defining 
     specified insurance contract) is amended by striking ``and'' 
     at the end of clause (ii), by striking the period at the end 
     of clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) any contract which is a medical savings account (as 
     defined in section 220(d)).''.
       (j) Clerical Amendments.--
       (1) The table of sections for part VII of subchapter B of 
     chapter 1 is amended by striking the last item and inserting 
     the following:

``Sec. 220. Medical savings accounts.
``Sec. 221. Cross reference.''

       (2) The table of sections for part IV of subchapter A of 
     chapter 11 is amended by adding at the end the following new 
     item:

``Sec. 2057. Medical savings accounts.''

       (k) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.
 Subtitle B--Increase in Deduction for Health Insurance Costs of Self-
                          Employed Individuals

     SEC. 311. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--
       ``(A) In general.--In the case of an individual who is an 
     employee within the meaning of section 401(c)(1), there shall 
     be allowed as a deduction under this section an amount equal 
     to the applicable percentage of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined under the 
     following table:

      ``For taxable years beginning                      The applicable
        in calendar year--                              percentage is--
        1998................................................35 percent 
        1999, 2000, or 2001.................................40 percent 
        2002................................................45 percent 
        2003 or thereafter................................50 percent.''

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
           Subtitle C--Long-Term Care Services and Contracts

                       PART I--GENERAL PROVISIONS

     SEC. 321. TREATMENT OF LONG-TERM CARE INSURANCE.

       (a) General Rule.--Chapter 79 (relating to definitions) is 
     amended by inserting after section 7702A the following new 
     section:

     ``SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE 
                   INSURANCE.

       ``(a) In General.--For purposes of this title--
       ``(1) a qualified long-term care insurance contract shall 
     be treated as an accident and health insurance contract,
       ``(2) amounts (other than policyholder dividends, as 
     defined in section 808, or premium refunds) received under a 
     qualified long-term care insurance contract shall be treated 
     as amounts received for personal injuries and sickness and 
     shall be treated as reimbursement for expenses actually 
     incurred for medical care (as defined in section 213(d)),
       ``(3) any plan of an employer providing coverage under a 
     qualified long-term care insurance contract shall be treated 
     as an accident and health plan with respect to such coverage,
       ``(4) except as provided in subsection (e)(3), amounts paid 
     for a qualified long-term care insurance contract providing 
     the benefits described in subsection (b)(2)(A) shall be 
     treated as payments made for insurance for purposes of 
     section 213(d)(1)(D), and
       ``(5) a qualified long-term care insurance contract shall 
     be treated as a guaranteed renewable contract subject to the 
     rules of section 816(e).
       ``(b) Qualified Long-Term Care Insurance Contract.--For 
     purposes of this title--
       ``(1) In general.--The term `qualified long-term care 
     insurance contract' means any insurance contract if--
       ``(A) the only insurance protection provided under such 
     contract is coverage of qualified long-term care services,
       ``(B) such contract does not pay or reimburse expenses 
     incurred for services or items to the extent that such 
     expenses are reimbursable under title XVIII of the Social 
     Security Act or would be so reimbursable but for the 
     application of a deductible or coinsurance amount,
       ``(C) such contract is guaranteed renewable,
       ``(D) such contract does not provide for a cash surrender 
     value or other money that can be--
       ``(i) paid, assigned, or pledged as collateral for a loan, 
     or
       ``(ii) borrowed,

     other than as provided in subparagraph (E) or paragraph 
     (2)(C),
       ``(E) all refunds of premiums, and all policyholder 
     dividends or similar amounts, under such contract are to be 
     applied as a reduction in future premiums or to increase 
     future benefits, and
       ``(F) such contract meets the requirements of subsection 
     (f).
       ``(2) Special rules.--
       ``(A) Per diem, etc. payments permitted.--A contract shall 
     not fail to be described in subparagraph (A) or (B) of 
     paragraph (1) by reason of payments being made on a per diem 
     or other periodic basis without regard to the expenses 
     incurred during the period to which the payments relate.
       ``(B) Special rules relating to medicare.--
       ``(i) Paragraph (1)(B) shall not apply to expenses which 
     are reimbursable under title XVIII of the Social Security Act 
     only as a secondary payor.
       ``(ii) No provision of law shall be construed or applied so 
     as to prohibit the offering of a qualified long-term care 
     insurance contract on the basis that the contract coordinates 
     its benefits with those provided under such title.
       ``(C) Refunds of premiums.--Paragraph (1)(E) shall not 
     apply to any refund on the death of the insured, or on a 
     complete surrender or cancellation of the contract, which 
     cannot exceed the aggregate premiums paid under the contract. 
     Any refund on a complete surrender or cancellation of the 
     contract shall be includible in gross income to the extent 
     that any deduction or exclusion was allowable with respect to 
     the premiums.
       ``(c) Qualified Long-Term Care Services.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, preventive, 
     therapeutic, curing, treating, mitigating, and rehabilitative 
     services, and maintenance or personal care services, which--
       ``(A) are required by a chronically ill individual, and
       ``(B) are provided pursuant to a plan of care prescribed by 
     a licensed health care practitioner.
       ``(2) Chronically ill individual.--
       ``(A) In general.--The term `chronically ill individual' 
     means any individual who has been certified by a licensed 
     health care practitioner as--
       ``(i) being unable to perform (without substantial 
     assistance from another individual) at least 2 activities of 
     daily living for a period of at least 90 days due to a loss 
     of functional capacity,
       ``(ii) having a level of disability similar (as determined 
     by the Secretary in consultation with the Secretary of Health 
     and Human Services) to the level of disability described in 
     clause (i), or
       ``(iii) requiring substantial supervision to protect such 
     individual from threats to health and safety due to severe 
     cognitive impairment.

     Such term shall not include any individual otherwise meeting 
     the requirements of the preceding sentence unless within the 
     preceding 12-month period a licensed health care practitioner 
     has certified that such individual meets such requirements.
       ``(B) Activities of daily living.--For purposes of 
     subparagraph (A), each of the following is an activity of 
     daily living:
       ``(i) Eating.
       ``(ii) Toileting.
       ``(iii) Transferring.
       ``(iv) Bathing.
       ``(v) Dressing.
       ``(vi) Continence.
     Nothing in this section shall be construed to require a 
     contract to take into account all of the preceding activities 
     of daily living.
       ``(3) Maintenance or personal care services.--The term 
     `maintenance or personal care services' means any care the 
     primary purpose of which is the provision of needed 
     assistance with any of the disabilities as a result of which 
     the individual is a chronically ill individual (including the 
     protection from threats to health and safety due to severe 
     cognitive impairment).
       ``(4) Licensed health care practitioner.--The term 
     `licensed health care practitioner' means any physician (as 
     defined in section 1861(r)(1) of the Social Security Act) and 
     any registered professional nurse, licensed social worker, or 
     other individual who meets such requirements as may be 
     prescribed by the Secretary.
       ``(d) Aggregate Payments in Excess of Limits.--
       ``(1) In general.--If the aggregate amount of periodic 
     payments under all qualified long-term care insurance 
     contracts with respect to an insured for any period exceeds 
     the dollar amount in effect for such period

[[Page H3077]]

     under paragraph (3), such excess payments shall be treated as 
     made for qualified long-term care services only to the extent 
     of the costs incurred by the payee (not otherwise 
     compensated for by insurance or otherwise) for qualified 
     long-term care services provided during such period for 
     such insured.
       ``(2) Periodic payments.--For purposes of paragraph (1), 
     the term `periodic payment' means any payment (whether on a 
     periodic basis or otherwise) made without regard to the 
     extent of the costs incurred by the payee for qualified long-
     term care services.
       ``(3) Dollar amount.--The dollar amount in effect under 
     this subsection shall be $175 per day (or the equivalent 
     amount in the case of payments on another periodic basis).
       ``(4) Inflation adjustment.--In the case of a calendar year 
     after 1997, the dollar amount contained in paragraph (3) 
     shall be increased at the same time and in the same manner as 
     amounts are increased pursuant to section 213(d)(10).
       ``(e) Treatment of Coverage Provided as Part of a Life 
     Insurance Contract.--Except as otherwise provided in 
     regulations prescribed by the Secretary, in the case of any 
     long-term care insurance coverage (whether or not qualified) 
     provided by a rider on or as part of a life insurance 
     contract--
       ``(1) In general.--This section shall apply as if the 
     portion of the contract providing such coverage is a separate 
     contract.
       ``(2) Application of 7702.--Section 7702(c)(2) (relating to 
     the guideline premium limitation) shall be applied by 
     increasing the guideline premium limitation with respect to a 
     life insurance contract, as of any date--
       ``(A) by the sum of any charges (but not premium payments) 
     against the life insurance contract's cash surrender value 
     (within the meaning of section 7702(f)(2)(A)) for such 
     coverage made to that date under the contract, less
       ``(B) any such charges the imposition of which reduces the 
     premiums paid for the contract (within the meaning of section 
     7702(f)(1)).
       ``(3) Application of section 213.--No deduction shall be 
     allowed under section 213(a) for charges against the life 
     insurance contract's cash surrender value described in 
     paragraph (2), unless such charges are includible in income 
     as a result of the application of section 72(e)(10) and the 
     rider is a qualified long-term care insurance contract under 
     subsection (b).
       ``(4) Portion defined.--For purposes of this subsection, 
     the term `portion' means only the terms and benefits under a 
     life insurance contract that are in addition to the terms and 
     benefits under the contract without regard to the coverage 
     under a qualified long-term care insurance contract.''
       (b) Long-Term Care Insurance Not Permitted Under Cafeteria 
     Plans or Flexible Spending Arrangements.--
       (1) Cafeteria plans.--Section 125(f) is amended by adding 
     at the end the following new sentence: ``Such term shall not 
     include any long-term care insurance contract (as defined in 
     section 4980C).''
       (2) Flexible spending arrangements.--Section 106 (relating 
     to contributions by employer to accident and health plans), 
     as amended by section 301(c), is amended by adding at the end 
     the following new subsection:
       ``(c) Inclusion of Long-Term Care Benefits Provided Through 
     Flexible Spending Arrangements.--
       ``(1) In general.--Effective on and after January 1, 1997, 
     gross income of an employee shall include employer-provided 
     coverage for qualified long-term care services (as defined in 
     section 7702B(c)) to the extent that such coverage is 
     provided through a flexible spending or similar arrangement.
       ``(2) Flexible spending arrangement.--For purposes of this 
     subsection, a flexible spending arrangement is a benefit 
     program which provides employees with coverage under which--
       ``(A) specified incurred expenses may be reimbursed 
     (subject to reimbursement maximums and other reasonable 
     conditions), and
       ``(B) the maximum amount of reimbursement which is 
     reasonably available to a participant for such coverage is 
     less than 500 percent of the value of such coverage.

     In the case of an insured plan, the maximum amount reasonably 
     available shall be determined on the basis of the underlying 
     coverage.''
       (c) Continuation Coverage Excise Tax Not To Apply.--
     Subsection (f) of section 4980B is amended by adding at the 
     end the following new paragraph:
       ``(9) Continuation of long-term care coverage not 
     required.--A group health plan shall not be treated as 
     failing to meet the requirements of this subsection solely by 
     reason of failing to provide coverage under any qualified 
     long-term care insurance contract (as defined in section 
     7702B(b)).''
       (d) Clerical Amendment.--The table of sections for chapter 
     79 is amended by inserting after the item relating to section 
     7702A the following new item:

``Sec. 7702B. Treatment of qualified long-term care insurance.''.

       (e) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to contracts issued after December 31, 1996.
       (2) Continuation of existing policies.--In the case of any 
     contract issued before January 1, 1997, which met the long-
     term care insurance requirements of the State in which the 
     contract was sitused at the time the contract was issued--
       (A) such contract shall be treated for purposes of the 
     Internal Revenue Code of 1986 as a qualified long-term care 
     insurance contract (as defined in section 7702B(b) of such 
     Code), and
       (B) services provided under, or reimbursed by, such 
     contract shall be treated for such purposes as qualified 
     long-term care services (as defined in section 7702B(c) of 
     such Code).
       (3) Exchanges of existing policies.--If, after the date of 
     enactment of this Act and before January 1, 1998, a contract 
     providing for long-term care insurance coverage is exchanged 
     solely for a qualified long-term care insurance contract (as 
     defined in section 7702B(b) of such Code), no gain or loss 
     shall be recognized on the exchange. If, in addition to a 
     qualified long-term care insurance contract, money or other 
     property is received in the exchange, then any gain shall be 
     recognized to the extent of the sum of the money and the fair 
     market value of the other property received. For purposes of 
     this paragraph, the cancellation of a contract providing for 
     long-term care insurance coverage and reinvestment of the 
     cancellation proceeds in a qualified long-term care insurance 
     contract within 60 days thereafter shall be treated as an 
     exchange.
       (4) Issuance of certain riders permitted.--For purposes of 
     applying sections 101(f), 7702, and 7702A of the Internal 
     Revenue Code of 1986 to any contract--
       (A) the issuance of a rider which is treated as a qualified 
     long-term care insurance contract under section 7702B, and
       (B) the addition of any provision required to conform any 
     other long-term care rider to be so treated,

     shall not be treated as a modification or material change of 
     such contract.

     SEC. 322. QUALIFIED LONG-TERM CARE SERVICES TREATED AS 
                   MEDICAL CARE.

       (a) General Rule.--Paragraph (1) of section 213(d) 
     (defining medical care) is amended by striking ``or'' at the 
     end of subparagraph (B), by redesignating subparagraph (C) 
     as subparagraph (D), and by inserting after subparagraph 
     (B) the following new subparagraph:
       ``(C) for qualified long-term care services (as defined in 
     section 7702B(c)), or''.
       (b) Technical Amendments.--
       (1) Subparagraph (D) of section 213(d)(1) (as redesignated 
     by subsection (a)) is amended by inserting before the period 
     ``or for any qualified long-term care insurance contract (as 
     defined in section 7702B(b))''.
       (2)(A) Paragraph (1) of section 213(d) is amended by adding 
     at the end the following new flush sentence:
     ``In the case of a qualified long-term care insurance 
     contract (as defined in section 7702B(b)), only eligible 
     long-term care premiums (as defined in paragraph (10)) shall 
     be taken into account under subparagraph (D).''
       (B) Subsection (d) of section 213 is amended by adding at 
     the end the following new paragraphs:
       ``(10) Eligible long-term care premiums.--
       ``(A) In general.--For purposes of this section, the term 
     `eligible long-term care premiums' means the amount paid 
     during a taxable year for any qualified long-term care 
     insurance contract (as defined in section 7702B(b)) covering 
     an individual, to the extent such amount does not exceed the 
     limitation determined under the following table:

      ``In the case of an individual                                   
        with an attained age before the                  The limitation
        close of the taxable year of:                           is:    
        40 or less............................................$  200   
        More than 40 but not more than 50........................375   
        More than 50 but not more than 60........................750   
        More than 60 but not more than 70......................2,000   
        More than 70...........................................2,500.  

       ``(B) Indexing.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 1997, each dollar amount 
     contained in subparagraph (A) shall be increased by the 
     medical care cost adjustment of such amount for such calendar 
     year. If any increase determined under the preceding sentence 
     is not a multiple of $10, such increase shall be rounded to 
     the nearest multiple of $10.
       ``(ii) Medical care cost adjustment.--For purposes of 
     clause (i), the medical care cost adjustment for any calendar 
     year is the percentage (if any) by which--

       ``(I) the medical care component of the Consumer Price 
     Index (as defined in section 1(f)(5)) for August of the 
     preceding calendar year, exceeds
       ``(II) such component for August of 1996.

     The Secretary shall, in consultation with the Secretary of 
     Health and Human Services, prescribe an adjustment which the 
     Secretary determines is more appropriate for purposes of this 
     paragraph than the adjustment described in the preceding 
     sentence, and the adjustment so prescribed shall apply in 
     lieu of the adjustment described in the preceding sentence.
       ``(11) Certain payments to relatives treated as not paid 
     for medical care.--An amount paid for a qualified long-term 
     care service (as defined in section 7702B(c)) provided to an 
     individual shall be treated as not paid for medical care if 
     such service is provided--

[[Page H3078]]

       ``(A) by the spouse of the individual or by a relative 
     (directly or through a partnership, corporation, or other 
     entity) unless the service is provided by a licensed 
     professional with respect to such service, or
       ``(B) by a corporation or partnership which is related 
     (within the meaning of section 267(b) or 707(b)) to the 
     individual.

     For purposes of this paragraph, the term `relative' means an 
     individual bearing a relationship to the individual which is 
     described in any of paragraphs (1) through (8) of section 
     152(a). This paragraph shall not apply for purposes 
     of section 105(b) with respect to reimbursements through 
     insurance.''
       (3) Paragraph (6) of section 213(d) is amended--
       (A) by striking ``subparagraphs (A) and (B)'' and inserting 
     ``subparagraphs (A), (B), and (C)'', and
       (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
     and inserting ``paragraph (1)(D)''.
       (4) Paragraph (7) of section 213(d) is amended by striking 
     ``subparagraphs (A) and (B)'' and inserting ``subparagraphs 
     (A), (B), and (C)''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 1996.
       (2) Deduction for long-term care services.--Amounts paid 
     for qualified long-term care services (as defined in section 
     7702B(c) of the Internal Revenue Code of 1986, as added by 
     this Act) furnished in any taxable year beginning before 
     January 1, 1998, shall not be taken into account under 
     section 213 of the Internal Revenue Code of 1986.

     SEC. 323. REPORTING REQUIREMENTS.

       (a) In General.--Subpart B of part III of subchapter A of 
     chapter 61 is amended by adding at the end the following new 
     section:

     ``SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.

       ``(a) Requirement of Reporting.--Any person who pays long-
     term care benefits shall make a return, according to the 
     forms or regulations prescribed by the Secretary, setting 
     forth--
       ``(1) the aggregate amount of such benefits paid by such 
     person to any individual during any calendar year, and
       ``(2) the name, address, and TIN of such individual.
       ``(b) Statements To Be Furnished to Persons With Respect to 
     Whom Information Is Required.--Every person required to make 
     a return under subsection (a) shall furnish to each 
     individual whose name is required to be set forth in such 
     return a written statement showing--
       ``(1) the name of the person making the payments, and
       ``(2) the aggregate amount of long-term care benefits paid 
     to the individual which are required to be shown on such 
     return.
     The written statement required under the preceding sentence 
     shall be furnished to the individual on or before January 31 
     of the year following the calendar year for which the return 
     under subsection (a) was required to be made.
       ``(c) Long-Term Care Benefits.--For purposes of this 
     section, the term `long-term care benefit' means--
       ``(1) any amount paid under a long-term care insurance 
     policy (within the meaning of section 4980C(e)), and
       ``(2) payments which are excludable from gross income by 
     reason of section 101(g).''.
       (b) Penalties.--
       (1) Subparagraph (B) of section 6724(d)(1) is amended by 
     redesignating clauses (ix) through (xiv) as clauses (x) 
     through (xv), respectively, and by inserting after clause 
     (viii) the following new clause:
       ``(ix) section 6050Q (relating to certain long-term care 
     benefits),''.
       (2) Paragraph (2) of section 6724(d) is amended by 
     redesignating subparagraphs (Q) through (T) as subparagraphs 
     (R) through (U), respectively, and by inserting after 
     subparagraph (P) the following new subparagraph:
       ``(Q) section 6050Q(b) (relating to certain long-term care 
     benefits),''.
       (c) Clerical Amendment.--The table of sections for subpart 
     B of part III of subchapter A of chapter 61 is amended by 
     adding at the end the following new item:

``Sec. 6050Q. Certain long-term care benefits.''

       (d) Effective Date.--The amendments made by this section 
     shall apply to benefits paid after December 31, 1996.

                PART II--CONSUMER PROTECTION PROVISIONS

     SEC. 325. POLICY REQUIREMENTS.

       Section 7702B (as added by section 321) is amended by 
     adding at the end the following new subsection:
       ``(f) Consumer Protection Provisions.--
       ``(1) In general.--The requirements of this subsection are 
     met with respect to any contract if any long-term care 
     insurance policy issued under the contract meets--
       ``(A) the requirements of the model regulation and model 
     Act described in paragraph (2),
       ``(B) the disclosure requirement of paragraph (3), and
       ``(C) the requirements relating to nonforfeitability under 
     paragraph (4).
       ``(2) Requirements of model regulation and act.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to any policy if such policy meets--
       ``(i) Model regulation.--The following requirements of the 
     model regulation:

       ``(I) Section 7A (relating to guaranteed renewal or 
     noncancellability), and the requirements of section 6B of the 
     model Act relating to such section 7A.
       ``(II) Section 7B (relating to prohibitions on limitations 
     and exclusions).
       ``(III) Section 7C (relating to extension of benefits).
       ``(IV) Section 7D (relating to continuation or conversion 
     of coverage).
       ``(V) Section 7E (relating to discontinuance and 
     replacement of policies).
       ``(VI) Section 8 (relating to unintentional lapse).
       ``(VII) Section 9 (relating to disclosure), other than 
     section 9F thereof.
       ``(VIII) Section 10 (relating to prohibitions against post-
     claims underwriting).
       ``(IX) Section 11 (relating to minimum standards).
       ``(X) Section 12 (relating to requirement to offer 
     inflation protection), except that any requirement for a 
     signature on a rejection of inflation protection shall permit 
     the signature to be on an application or on a separate form.
       ``(XI) Section 23 (relating to prohibition against 
     preexisting conditions and probationary periods in 
     replacement policies or certificates).

       ``(ii) Model act.--The following requirements of the model 
     Act:

       ``(I) Section 6C (relating to preexisting conditions).
       ``(II) Section 6D (relating to prior hospitalization).

       ``(B) Definitions.--For purposes of this paragraph--
       ``(i) Model provisions.--The terms `model regulation' and 
     `model Act' mean the long-term care insurance model 
     regulation, and the long-term care insurance model Act, 
     respectively, promulgated by the National Association of 
     Insurance Commissioners (as adopted as of January 1993).
       ``(ii) Coordination.--Any provision of the model regulation 
     or model Act listed under clause (i) or (ii) of subparagraph 
     (A) shall be treated as including any other provision of such 
     regulation or Act necessary to implement the provision.
       ``(iii) Determination.--For purposes of this section and 
     section 4980C, the determination of whether any requirement 
     of a model regulation or the model Act has been met shall be 
     made by the Secretary.
       ``(3) Disclosure requirement.--The requirement of this 
     paragraph is met with respect to any policy if such policy 
     meets the requirements of section 4980C(d)(1).
       ``(4) Nonforfeiture requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to any level premium long-term care 
     insurance policy, if the issuer of such policy offers to the 
     policyholder, including any group policyholder, a 
     nonforfeiture provision meeting the requirements of 
     subparagraph (B).
       ``(B) Requirements of provision.--The nonforfeiture 
     provision required under subparagraph (A) shall meet the 
     following requirements:
       ``(i) The nonforfeiture provision shall be appropriately 
     captioned.
       ``(ii) The nonforfeiture provision shall provide for a 
     benefit available in the event of a default in the payment of 
     any premiums and the amount of the benefit may be adjusted 
     subsequent to being initially granted only as necessary to 
     reflect changes in claims, persistency, and interest as 
     reflected in changes in rates for premium paying policies 
     approved by the Secretary for the same policy form.
       ``(iii) The nonforfeiture provision shall provide at least 
     one of the following:

       ``(I) Reduced paid-up insurance.
       ``(II) Extended term insurance.
       ``(III) Shortened benefit period.
       ``(IV) Other similar offerings approved by the Secretary.

       ``(5) Long-term care insurance policy defined.--For 
     purposes of this subsection, the term `long-term care 
     insurance policy' has the meaning given such term by section 
     4980C(e).''.

     SEC. 326. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
                   INSURANCE POLICIES.

       (a) In General.--Chapter 43 is amended by adding at the end 
     the following new section:

     ``SEC. 4980C. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE 
                   INSURANCE POLICIES.

       ``(a) General Rule.--There is hereby imposed on any person 
     failing to meet the requirements of subsection (c) or (d) a 
     tax in the amount determined under subsection (b).
       ``(b) Amount.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) shall be $100 per policy for each day any 
     requirements of subsection (c) or (d) are not met with 
     respect to each long-term care insurance policy.
       ``(2) Waiver.--In the case of a failure which is due to 
     reasonable cause and not to willful neglect, the Secretary 
     may waive part or all of the tax imposed by subsection (a) to 
     the extent that payment of the tax would be excessive 
     relative to the failure involved.
       ``(c) Responsibilities.--The requirements of this 
     subsection are as follows:
       ``(1) Requirements of model provisions.--
       ``(A) Model regulation.--The following requirements of the 
     model regulation must be met:
       ``(i) Section 13 (relating to application forms and 
     replacement coverage).
       ``(ii) Section 14 (relating to reporting requirements), 
     except that the issuer shall also

[[Page H3079]]

     report at least annually the number of claims denied during 
     the reporting period for each class of business (expressed as 
     a percentage of claims denied), other than claims denied for 
     failure to meet the waiting period or because of any 
     applicable preexisting condition.
       ``(iii) Section 20 (relating to filing requirements for 
     marketing).
       ``(iv) Section 21 (relating to standards for marketing), 
     including inaccurate completion of medical histories, other 
     than sections 21C(1) and 21C(6) thereof, except that--

       ``(I) in addition to such requirements, no person shall, in 
     selling or offering to sell a long-term care insurance 
     policy, misrepresent a material fact; and
       ``(II) no such requirements shall include a requirement to 
     inquire or identify whether a prospective applicant or 
     enrollee for long-term care insurance has accident and 
     sickness insurance.

       ``(v) Section 22 (relating to appropriateness of 
     recommended purchase).
       ``(vi) Section 24 (relating to standard format outline of 
     coverage).
       ``(vii) Section 25 (relating to requirement to deliver 
     shopper's guide).
       ``(B) Model act.--The following requirements of the model 
     Act must be met:
       ``(i) Section 6F (relating to right to return), except that 
     such section shall also apply to denials of applications and 
     any refund shall be made within 30 days of the return or 
     denial.
       ``(ii) Section 6G (relating to outline of coverage).
       ``(iii) Section 6H (relating to requirements for 
     certificates under group plans).
       ``(iv) Section 6I (relating to policy summary).
       ``(v) Section 6J (relating to monthly reports on 
     accelerated death benefits).
       ``(vi) Section 7 (relating to incontestability period).
       ``(C) Definitions.--For purposes of this paragraph, the 
     terms `model regulation' and `model Act' have the meanings 
     given such terms by section 7702B(f)(2)(B).
       ``(2) Delivery of policy.--If an application for a long-
     term care insurance policy (or for a certificate under a 
     group long-term care insurance policy) is approved, the 
     issuer shall deliver to the applicant (or policyholder or 
     certificateholder) the policy (or certificate) of insurance 
     not later than 30 days after the date of the approval.
       ``(3) Information on denials of claims.--If a claim under a 
     long-term care insurance policy is denied, the issuer shall, 
     within 60 days of the date of a written request by the 
     policyholder or certificateholder (or representative)--
       ``(A) provide a written explanation of the reasons for the 
     denial, and
       ``(B) make available all information directly relating to 
     such denial.
       ``(d) Disclosure.--The requirements of this subsection are 
     met if the issuer of a long-term care insurance policy 
     discloses in such policy and in the outline of coverage 
     required under subsection (c)(1)(B)(ii) that the policy is 
     intended to be a qualified long-term care insurance contract 
     under section 7702B(b).
       ``(e) Long-Term Care Insurance Policy Defined.--For 
     purposes of this section, the term `long-term care insurance 
     policy' means any product which is advertised, marketed, or 
     offered as long-term care insurance.''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980C. Requirements for issuers of long-term care insurance 
              policies.''.

     SEC. 327. COORDINATION WITH STATE REQUIREMENTS.

       Nothing in this part shall prevent a State from 
     establishing, implementing, or continuing in effect standards 
     related to the protection of policyholders of long-term care 
     insurance policies (as defined in section 4980C(e) of the 
     Internal Revenue Code of 1986), if such standards are not in 
     conflict with or inconsistent with the standards established 
     under such Code.

     SEC. 328. EFFECTIVE DATES.

       (a) In General.--The provisions of, and amendments made by, 
     this part shall apply to contracts issued after December 31, 
     1996. The provisions of section 321(g) (relating to 
     transition rule) shall apply to such contracts.
       (b) Issuers.--The amendments made by section 326 shall 
     apply to actions taken after December 31, 1996.
          Subtitle D--Treatment of Accelerated Death Benefits

     SEC. 331. TREATMENT OF ACCELERATED DEATH BENEFITS BY 
                   RECIPIENT.

       (a) In General.--Section 101 (relating to certain death 
     benefits) is amended by adding at the end the following new 
     subsection:
       ``(g) Treatment of Certain Accelerated Death Benefits.--
       ``(1) In general.--For purposes of this section, the 
     following amounts shall be treated as an amount paid by 
     reason of the death of an insured:
       ``(A) Any amount received under a life insurance contract 
     on the life of an insured who is a terminally ill individual.
       ``(B) Any amount received under a life insurance contract 
     on the life of an insured who is a chronically ill individual 
     (as defined in section 7702B(c)(2)) but only if such amount 
     is received under a rider or other provision of such contract 
     which is treated as a qualified long-term care insurance 
     contract under section 7702B and such amount is treated under 
     section 7702B (after the application of subsection (d) 
     thereof) as a payment for qualified long-term care services 
     (as defined in such section).
       ``(2) Treatment of viatical settlements.--
       ``(A) In general.--In the case of a life insurance contract 
     on the life of an insured described in paragraph (1), if--
       ``(i) any portion of such contract is sold to any viatical 
     settlement provider, or
       ``(ii) any portion of the death benefit is assigned to such 
     a provider,

     the amount paid for such sale or assignment shall be treated 
     as an amount paid under the life insurance contract by reason 
     of the death of such insured.
       ``(B) Viatical settlement provider.--The term `viatical 
     settlement provider' means any person regularly engaged in 
     the trade or business of purchasing, or taking assignments 
     of, life insurance contracts on the lives of insureds 
     described in paragraph (1) if--
       ``(i) such person is licensed for such purposes in the 
     State in which the insured resides, or
       ``(ii) in the case of an insured who resides in a State not 
     requiring the licensing of such persons for such purposes--

       ``(I) such person meets the requirements of sections 8 and 
     9 of the Viatical Settlements Model Act of the National 
     Association of Insurance Commissioners, and
       ``(II) meets the requirements of the Model Regulations of 
     the National Association of Insurance Commissioners (relating 
     to standards for evaluation of reasonable payments) in 
     determining amounts paid by such person in connection with 
     such purchases or assignments.

       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Terminally ill individual.--The term `terminally ill 
     individual' means an individual who has been certified by a 
     physician as having an illness or physical condition which 
     can reasonably be expected to result in death in 24 months or 
     less after the date of the certification.
       ``(B) Physician.--The term `physician' has the meaning 
     given to such term by section 1861(r)(1) of the Social 
     Security Act (42 U.S.C. 1395x(r)(1)).
       ``(4) Exception for business-related policies.--This 
     subsection shall not apply in the case of any amount paid to 
     any taxpayer other than the insured if such taxpayer has an 
     insurable interest with respect to the life of the insured by 
     reason of the insured being a director, officer, or employee 
     of the taxpayer or by reason of the insured being financially 
     interested in any trade or business carried on by the 
     taxpayer.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to amounts received after December 31, 1996.

     SEC. 332. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED 
                   ACCELERATED DEATH BENEFIT RIDERS.

       (a) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--Section 818 (relating to other definitions 
     and special rules) is amended by adding at the end the 
     following new subsection:
       ``(g) Qualified Accelerated Death Benefit Riders Treated as 
     Life Insurance.--For purposes of this part--
       ``(1) In general.--Any reference to a life insurance 
     contract shall be treated as including a reference to a 
     qualified accelerated death benefit rider on such contract.
       ``(2) Qualified accelerated death benefit riders.--For 
     purposes of this subsection, the term `qualified accelerated 
     death benefit rider' means any rider on a life insurance 
     contract if the only payments under the rider are payments 
     meeting the requirements of section 101(g).
       ``(3) Exception for long-term care riders.--Paragraph (1) 
     shall not apply to any rider which is treated as a long-term 
     care insurance contract under section 7702B.''
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     take effect on January 1, 1997.
       (2) Issuance of rider not treated as material change.--For 
     purposes of applying sections 101(f), 7702, and 7702A of the 
     Internal Revenue Code of 1986 to any contract--
       (A) the issuance of a qualified accelerated death benefit 
     rider (as defined in section 818(g) of such Code (as added by 
     this Act)), and
       (B) the addition of any provision required to conform an 
     accelerated death benefit rider to the requirements of such 
     section 818(g),
     shall not be treated as a modification or material change of 
     such contract.
                      Subtitle E--High-Risk Pools

     SEC. 341. EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED 
                   ORGANIZATIONS PROVIDING HEALTH COVERAGE FOR 
                   HIGH-RISK INDIVIDUALS.

       (a) In General.--Subsection (c) of section 501 (relating to 
     list of exempt organizations) is amended by adding at the end 
     the following new paragraph:
       ``(26) Any membership organization if--
       ``(A) such organization is established by a State 
     exclusively to provide coverage for medical care (as defined 
     in section 213(d)) on a not-for-profit basis to individuals 
     described in subparagraph (B) through--
       ``(i) insurance issued by the organization, or
       ``(ii) a health maintenance organization under an 
     arrangement with the organization,

[[Page H3080]]

       ``(B) the only individuals receiving such coverage through 
     the organization are individuals--
       ``(i) who are residents of such State, and
       ``(ii) who, by reason of the existence or history of a 
     medical condition, are unable to acquire medical care 
     coverage for such condition through insurance or from a 
     health maintenance organization or are able to acquire such 
     coverage only at a rate which is substantially in excess of 
     the rate for such coverage through the membership 
     organization,
       ``(C) the composition of the membership in such 
     organization is specified by such State, and
       ``(D) no part of the net earnings of the organization 
     inures to the benefit of any private shareholder or 
     individual.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.
            Subtitle F--Organizations Subject to Section 833

     SEC. 351. ORGANIZATIONS SUBJECT TO SECTION 833.

       (a) In General.--Section 833(c) (relating to organization 
     to which section applies) is amended by adding at the end the 
     following new paragraph:
       ``(4) Treatment as existing blue cross or blue shield 
     organization.--
       ``(A) In general.--Paragraph (2) shall be applied to an 
     organization described in subparagraph (B) as if it were a 
     Blue Cross or Blue Shield organization.
       ``(B) Applicable organization.--An organization is 
     described in this subparagraph if it--
       ``(i) is organized under, and governed by, State laws which 
     are specifically and exclusively applicable to not-for-profit 
     health insurance or health service type organizations, and
       ``(ii) is not a Blue Cross or Blue Shield organization or 
     health maintenance organization.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years ending after December 31, 1996.
                       TITLE IV--REVENUE OFFSETS

     SEC. 400. AMENDMENT OF 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     title an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Internal Revenue Code of 1986.
   Subtitle A--Repeal of Bad Debt Reserve Method for Thrift Savings 
                              Associations

     SEC. 401. REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT 
                   SAVINGS ASSOCIATIONS.

       (a) In General.--Section 593 (relating to reserves for 
     losses on loans) is amended by adding at the end the 
     following new subsections:
       ``(f) Termination of Reserve Method.--Subsections (a), (b), 
     (c), and (d) shall not apply to any taxable year beginning 
     after December 31, 1995.
       ``(g) 6-Year Spread of Adjustments.--
       ``(1) In general.--In the case of any taxpayer who is 
     required by reason of subsection (f) to change its method of 
     computing reserves for bad debts--
       ``(A) such change shall be treated as a change in a method 
     of accounting,
       ``(B) such change shall be treated as initiated by the 
     taxpayer and as having been made with the consent of the 
     Secretary, and
       ``(C) the net amount of the adjustments required to be 
     taken into account by the taxpayer under section 481(a)--
       ``(i) shall be determined by taking into account only 
     applicable excess reserves, and
       ``(ii) as so determined, shall be taken into account 
     ratably over the 6-taxable year period beginning with the 
     first taxable year beginning after December 31, 1995.
       ``(2) Applicable excess reserves.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `applicable excess reserves' means the excess (if any) of--
       ``(i) the balance of the reserves described in subsection 
     (c)(1) (other than the supplemental reserve) as of the close 
     of the taxpayer's last taxable year beginning before December 
     31, 1995, over
       ``(ii) the lesser of--

       ``(I) the balance of such reserves as of the close of the 
     taxpayer's last taxable year beginning before January 1, 
     1988, or
       ``(II) the balance of the reserves described in subclause 
     (I), reduced in the same manner as under section 
     585(b)(2)(B)(ii) on the basis of the taxable years described 
     in clause (i) and this clause.

       ``(B) Special rule for thrifts which become small banks.--
     In the case of a bank (as defined in section 581) which was 
     not a large bank (as defined in section 585(c)(2)) for its 
     first taxable year beginning after December 31, 1995--
       ``(i) the balance taken into account under subparagraph 
     (A)(ii) shall not be less than the amount which would be the 
     balance of such reserves as of the close of its last taxable 
     year beginning before such date if the additions to such 
     reserves for all taxable years had been determined under 
     section 585(b)(2)(A), and
       ``(ii) the opening balance of the reserve for bad debts as 
     of the beginning of such first taxable year shall be the 
     balance taken into account under subparagraph (A)(ii) 
     (determined after the application of clause (i) of this 
     subparagraph).
     The preceding sentence shall not apply for purposes of 
     paragraphs (5) and (6) or subsection (e)(1).
       ``(3) Recapture of pre-1988 reserves where taxpayer ceases 
     to be bank.--If, during any taxable year beginning after 
     December 31, 1995, a taxpayer to which paragraph (1) applied 
     is not a bank (as defined in section 581), paragraph (1) 
     shall apply to the reserves described in paragraph (2)(A)(ii) 
     and the supplemental reserve; except that such reserves shall 
     be taken into account ratably over the 6-taxable year period 
     beginning with such taxable year.
       ``(4) Suspension of recapture if residential loan 
     requirement met.--
       ``(A) In general.--In the case of a bank which meets the 
     residential loan requirement of subparagraph (B) for the 
     first taxable year beginning after December 31, 1995, or for 
     the following taxable year--
       ``(i) no adjustment shall be taken into account under 
     paragraph (1) for such taxable year, and
       ``(ii) such taxable year shall be disregarded in 
     determining--

       ``(I) whether any other taxable year is a taxable year for 
     which an adjustment is required to be taken into account 
     under paragraph (1), and
       ``(II) the amount of such adjustment.

       ``(B) Residential loan requirement.--A taxpayer meets the 
     residential loan requirement of this subparagraph for any 
     taxable year if the principal amount of the residential loans 
     made by the taxpayer during such year is not less than the 
     base amount for such year.
       ``(C) Residential loan.--For purposes of this paragraph, 
     the term `residential loan' means any loan described in 
     clause (v) of section 7701(a)(19)(C) but only if such loan is 
     incurred in acquiring, constructing, or improving the 
     property described in such clause.
       ``(D) Base amount.--For purposes of subparagraph (B), the 
     base amount is the average of the principal amounts of the 
     residential loans made by the taxpayer during the 6 most 
     recent taxable years beginning on or before December 31, 
     1995. At the election of the taxpayer who made such loans 
     during each of such 6 taxable years, the preceding sentence 
     shall be applied without regard to the taxable year in which 
     such principal amount was the highest and the taxable year in 
     such principal amount was the lowest. Such an election may be 
     made only for the first taxable year beginning after such 
     date, and, if made for such taxable year, shall apply to the 
     succeeding taxable year unless revoked with the consent of 
     the Secretary.
       ``(E) Controlled groups.--In the case of a taxpayer which 
     is a member of any controlled group of corporations described 
     in section 1563(a)(1), subparagraph (B) shall be applied with 
     respect to such group.
       ``(5) Continued application of fresh start under section 
     585 transitional rules.--In the case of a taxpayer to which 
     paragraph (1) applied and which was not a large bank (as 
     defined in section 585(c)(2)) for its first taxable year 
     beginning after December 31, 1995:
       ``(A) In general.--For purposes of determining the net 
     amount of adjustments referred to in section 
     585(c)(3)(A)(iii), there shall be taken into account only the 
     excess (if any) of the reserve for bad debts as of the close 
     of the last taxable year before the disqualification year 
     over the balance taken into account by such taxpayer under 
     paragraph (2)(A)(ii) of this subsection.
       ``(B) Treatment under elective cut-off method.--For 
     purposes of applying section 585(c)(4)--
       ``(i) the balance of the reserve taken into account under 
     subparagraph (B) thereof shall be reduced by the balance 
     taken into account by such taxpayer under paragraph 
     (2)(A)(ii) of this subsection, and
       ``(ii) no amount shall be includible in gross income by 
     reason of such reduction.
       ``(6) Suspended reserve included as section 381(c) items.--
     The balance taken into account by a taxpayer under paragraph 
     (2)(A)(ii) of this subsection and the supplemental reserve 
     shall be treated as items described in section 381(c).
       ``(7) Conversions to credit unions.--In the case of a 
     taxpayer to which paragraph (1) applied which becomes a 
     credit union described in section 501(c) and exempt from 
     taxation under section 501(a)--
       ``(A) any amount required to be included in the gross 
     income of the credit union by reason of this subsection shall 
     be treated as derived from an unrelated trade or business (as 
     defined in section 513), and
       ``(B) for purposes of paragraph (3), the credit union shall 
     not be treated as if it were a bank.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out this subsection 
     and subsection (e), including regulations providing for the 
     application of such subsections in the case of acquisitions, 
     mergers, spin-offs, and other reorganizations.''
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 50 is amended by adding at 
     the end the following new sentence:
     ``Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) 
     referred to in paragraph (1) of this subsection shall not 
     apply to any taxable year beginning after December 31, 
     1995.''
       (2) Subsection (e) of section 52 is amended by striking 
     paragraph (1) and by redesignating paragraphs (2) and (3) as 
     paragraphs (1) and (2), respectively.
       (3) Subsection (a) of section 57 is amended by striking 
     paragraph (4).
       (4) Section 246 is amended by striking subsection (f).

[[Page H3081]]

       (5) Clause (i) of section 291(e)(1)(B) is amended by 
     striking ``or to which section 593 applies''.
       (6) Subparagraph (A) of section 585(a)(2) is amended by 
     striking ``other than an organization to which section 593 
     applies''.
       (7)(A) The material preceding subparagraph (A) of section 
     593(e)(1) is amended by striking ``by a domestic building and 
     loan association or an institution that is treated as a 
     mutual savings bank under section 591(b)'' and inserting ``by 
     a taxpayer having a balance described in subsection 
     (g)(2)(A)(ii)''.
       (B) Subparagraph (B) of section 593(e)(1) is amended to 
     read as follows:
       ``(B) then out of the balance taken into account under 
     subsection (g)(2)(A)(ii) (properly adjusted for amounts 
     charged against such reserves for taxable years beginning 
     after December 31, 1987),''.
       (C) Paragraph (1) of section 593(e) is amended by adding at 
     the end the following new sentence: ``This paragraph shall 
     not apply to any distribution of all of the stock of a bank 
     (as defined in section 581) to another corporation if, 
     immediately after the distribution, such bank and such other 
     corporation are members of the same affiliated group (as 
     defined in section 1504) and the provisions of section 5(e) 
     of the Federal Deposit Insurance Act (as in effect on 
     December 31, 1995) or similar provisions are in effect.''
       (8) Section 595 is hereby repealed.
       (9) Section 596 is hereby repealed.
       (10) Subsection (a) of section 860E is amended--
       (A) by striking ``Except as provided in paragraph (2), 
     the'' in paragraph (1) and inserting ``The'',
       (B) by striking paragraphs (2) and (4) and redesignating 
     paragraphs (3) and (5) as paragraphs (2) and (3), 
     respectively, and
       (C) by striking in paragraph (2) (as so redesignated) all 
     that follows ``subsection'' and inserting a period.
       (11) Paragraph (3) of section 992(d) is amended by striking 
     ``or 593''.
       (12) Section 1038 is amended by striking subsection (f).
       (13) Clause (ii) of section 1042(c)(4)(B) is amended by 
     striking ``or 593''.
       (14) Subsection (c) of section 1277 is amended by striking 
     ``or to which section 593 applies''.
       (15) Subparagraph (B) of section 1361(b)(2) is amended by 
     striking ``or to which section 593 applies''.
       (16) The table of sections for part II of subchapter H of 
     chapter 1 is amended by striking the items relating to 
     sections 595 and 596.
       (c) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to taxable years beginning after December 31, 1995.
       (2) Subsection (b)(7).--The amendments made by subsection 
     (b)(7) shall not apply to any distribution with respect to 
     preferred stock if--
       (A) such stock is outstanding at all times after October 
     31, 1995, and before the distribution, and
       (B) such distribution is made before the date which is 1 
     year after the date of the enactment of this Act (or, in the 
     case of stock which may be redeemed, if later, the date which 
     is 30 days after the earliest date that such stock may be 
     redeemed).
       (3) Subsection (b)(8).--The amendment made by subsection 
     (b)(8) shall apply to property acquired in taxable years 
     beginning after December 31, 1995.
       (4) Subsection (b)(10).--The amendments made by subsection 
     (b)(10) shall not apply to any residual interest held by a 
     taxpayer if such interest has been held by such taxpayer at 
     all times after October 31, 1995.
             Subtitle B--Reform of the Earned Income Credit

     SEC. 411. EARNED INCOME CREDIT DENIED TO INDIVIDUALS NOT 
                   AUTHORIZED TO BE EMPLOYED IN THE UNITED STATES.

       (a) In General.--Section 32(c)(1) (relating to individuals 
     eligible to claim the earned income credit) is amended by 
     adding at the end the following new subparagraph:
       ``(F) Identification number requirement.--The term 
     `eligible individual' does not include any individual who 
     does not include on the return of tax for the taxable year--
       ``(i) such individual's taxpayer identification number, and
       ``(ii) if the individual is married (within the meaning of 
     section 7703), the taxpayer identification number of such 
     individual's spouse.''.
       (b) Special Identification Number.--Section 32 is amended 
     by adding at the end the following new subsection:
       ``(l) Identification Numbers.--Solely for purposes of 
     subsections (c)(1)(F) and (c)(3)(D), a taxpayer 
     identification number means a social security number issued 
     to an individual by the Social Security Administration (other 
     than a social security number issued pursuant to clause (II) 
     (or that portion of clause (III) that relates to clause (II)) 
     of section 205(c)(2)(B)(i) of the Social Security Act).''.
       (c) Extension of Procedures Applicable to Mathematical or 
     Clerical Errors.--Section 6213(g)(2) (relating to the 
     definition of mathematical or clerical errors) is amended by 
     striking ``and'' at the end of subparagraph (D), by striking 
     the period at the end of subparagraph (E) and inserting a 
     comma, and by inserting after subparagraph (E) the following 
     new subparagraphs:
       ``(F) an omission of a correct taxpayer identification 
     number required under section 32 (relating to the earned 
     income credit) to be included on a return, and
       ``(G) an entry on a return claiming the credit under 
     section 32 with respect to net earnings from self-employment 
     described in section 32(c)(2)(A) to the extent the tax 
     imposed by section 1401 (relating to self-employment tax) on 
     such net earnings has not been paid.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
Subtitle C--Treatment of Individuals Who Lose United States Citizenship

     SEC. 421. REVISION OF INCOME, ESTATE, AND GIFT TAXES ON 
                   INDIVIDUALS WHO LOSE UNITED STATES CITIZENSHIP.

       (a) In General.--Subsection (a) of section 877 is amended 
     to read as follows:
       ``(a) Treatment of Expatriates.--
       ``(1) In general.--Every nonresident alien individual who, 
     within the 10-year period immediately preceding the close of 
     the taxable year, lost United States citizenship, unless such 
     loss did not have for 1 of its principal purposes the 
     avoidance of taxes under this subtitle or subtitle B, shall 
     be taxable for such taxable year in the manner provided in 
     subsection (b) if the tax imposed pursuant to such subsection 
     exceeds the tax which, without regard to this section, is 
     imposed pursuant to section 871.
       ``(2) Certain individuals treated as having tax avoidance 
     purpose.--For purposes of paragraph (1), an individual shall 
     be treated as having a principal purpose to avoid such taxes 
     if--
       ``(A) the average annual net income tax (as defined in 
     section 38(c)(1)) of such individual for the period of 5 
     taxable years ending before the date of the loss of United 
     States citizenship is greater than $100,000, or
       ``(B) the net worth of the individual as of such date is 
     $500,000 or more.
     In the case of the loss of United States citizenship in any 
     calendar year after 1996, such $100,000 and $500,000 amounts 
     shall be increased by an amount equal to such dollar amount 
     multiplied by the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting `1994' 
     for `1992' in subparagraph (B) thereof. Any increase under 
     the preceding sentence shall be rounded to the nearest 
     multiple of $1,000.''
       (b) Exceptions.--
       (1) In general.--Section 877 is amended by striking 
     subsection (d), by redesignating subsection (c) as subsection 
     (d), and by inserting after subsection (b) the following new 
     subsection:
       ``(c) Tax Avoidance Not Presumed in Certain Cases.--
       ``(1) In general.--Subsection (a)(2) shall not apply to an 
     individual if--
       ``(A) such individual is described in a subparagraph of 
     paragraph (2) of this subsection, and
       ``(B) within the 1-year period beginning on the date of the 
     loss of United States citizenship, such individual submits a 
     ruling request for the Secretary's determination as to 
     whether such loss has for 1 of its principal purposes the 
     avoidance of taxes under this subtitle or subtitle B.
       ``(2) Individuals described.--
       ``(A) Dual citizenship, etc.--An individual is described in 
     this subparagraph if--
       ``(i) the individual became at birth a citizen of the 
     United States and a citizen of another country and continues 
     to be a citizen of such other country, or
       ``(ii) the individual becomes (not later than the close of 
     a reasonable period after loss of United States citizenship) 
     a citizen of the country in which--

       ``(I) such individual was born,

       ``(II) if such individual is married, such individual's 
     spouse was born, or
       ``(III) either of such individual's parents were born.

       ``(B) Long-term foreign residents.--An individual is 
     described in this subparagraph if, for each year in the 10-
     year period ending on the date of loss of United States 
     citizenship, the individual was present in the United States 
     for 30 days or less. The rule of section 7701(b)(3)(D)(ii) 
     shall apply for purposes of this subparagraph.
       ``(C) Renunciation upon reaching age of majority.--An 
     individual is described in this subparagraph if the 
     individual's loss of United States citizenship occurs before 
     such individual attains age 18\1/2\.
       ``(D) Individuals specified in regulations.--An individual 
     is described in this subparagraph if the individual is 
     described in a category of individuals prescribed by 
     regulation by the Secretary.''
       (2) Technical amendment.--Paragraph (1) of section 877(b) 
     of such Code is amended by striking ``subsection (c)'' and 
     inserting ``subsection (d)''.
       (c) Treatment of Property Disposed of in Nonrecognition 
     Transactions; Treatment of Distributions From Certain 
     Controlled Foreign Corporations.--Subsection (d) of section 
     877, as redesignated by subsection (b), is amended to read as 
     follows:
       ``(d) Special Rules for Source, Etc.--For purposes of 
     subsection (b)--
       ``(1) Source rules.--The following items of gross income 
     shall be treated as income from sources within the United 
     States:
       ``(A) Sale of property.--Gains on the sale or exchange of 
     property (other than stock or debt obligations) located in 
     the United States.
       ``(B) Stock or debt obligations.--Gains on the sale or 
     exchange of stock issued by a domestic corporation or debt 
     obligations of

[[Page H3082]]

     United States persons or of the United States, a State or 
     political subdivision thereof, or the District of Columbia.
       ``(C) Income or gain derived from controlled foreign 
     corporation.--Any income or gain derived from stock in a 
     foreign corporation but only--
       ``(i) if the individual losing United States citizenship 
     owned (within the meaning of section 958(a)), or is 
     considered as owning (by applying the ownership rules of 
     section 958(b)), at any time during the 2-year period ending 
     on the date of the loss of United States citizenship, more 
     than 50 percent of--

       ``(I) the total combined voting power of all classes of 
     stock entitled to vote of such corporation, or
       ``(II) the total value of the stock of such corporation, 
     and

       ``(ii) to the extent such income or gain does not exceed 
     the earnings and profits attributable to such stock which 
     were earned or accumulated before the loss of citizenship and 
     during periods that the ownership requirements of clause (i) 
     are met.
       ``(2) Gain recognition on certain exchanges.--
       ``(A) In general.--In the case of any exchange of property 
     to which this paragraph applies, notwithstanding any other 
     provision of this title, such property shall be treated as 
     sold for its fair market value on the date of such exchange, 
     and any gain shall be recognized for the taxable year which 
     includes such date.
       ``(B) Exchanges to which paragraph applies.--This paragraph 
     shall apply to any exchange during the 10-year period 
     described in subsection (a) if--
       ``(i) gain would not (but for this paragraph) be recognized 
     on such exchange in whole or in part for purposes of this 
     subtitle,
       ``(ii) income derived from such property was from sources 
     within the United States (or, if no income was so derived, 
     would have been from such sources), and
       ``(iii) income derived from the property acquired in the 
     exchange would be from sources outside the United States.
       ``(C) Exception.--Subparagraph (A) shall not apply if the 
     individual enters into an agreement with the Secretary which 
     specifies that any income or gain derived from the property 
     acquired in the exchange (or any other property which has a 
     basis determined in whole or part by reference to such 
     property) during such 10-year period shall be treated as from 
     sources within the United States. If the property transferred 
     in the exchange is disposed of by the person acquiring such 
     property, such agreement shall terminate and any gain which 
     was not recognized by reason of such agreement shall be 
     recognized as of the date of such disposition.
       ``(D) Secretary may extend period.--To the extent provided 
     in regulations prescribed by the Secretary, subparagraph (B) 
     shall be applied by substituting the 15-year period beginning 
     5 years before the loss of United States citizenship for the 
     10-year period referred to therein.
       ``(E) Secretary may require recognition of gain in certain 
     cases.--To the extent provided in regulations prescribed by 
     the Secretary--
       ``(i) the removal of appreciated tangible personal property 
     from the United States, and
       ``(ii) any other occurrence which (without recognition of 
     gain) results in a change in the source of the income or gain 
     from property from sources within the United States to 
     sources outside the United States,

     shall be treated as an exchange to which this paragraph 
     applies.
       ``(3) Substantial diminishing of risks of ownership.--For 
     purposes of determining whether this section applies to any 
     gain on the sale or exchange of any property, the running of 
     the 10-year period described in subsection (a) shall be 
     suspended for any period during which the individual's risk 
     of loss with respect to the property is substantially 
     diminished by--
       ``(A) the holding of a put with respect to such property 
     (or similar property),
       ``(B) the holding by another person of a right to acquire 
     the property, or
       ``(C) a short sale or any other transaction.''
       (d) Credit for Foreign Taxes Imposed on United States 
     Source Income.--
       (1) Subsection (b) of section 877 is amended by adding at 
     the end the following new sentence: ``The tax imposed solely 
     by reason of this section shall be reduced (but not below 
     zero) by the amount of any income, war profits, and excess 
     profits taxes (within the meaning of section 903) paid to any 
     foreign country or possession of the United States on any 
     income of the taxpayer on which tax is imposed solely by 
     reason of this section.''
       (2) Subsection (a) of section 877, as amended by subsection 
     (a), is amended by inserting ``(after any reduction in such 
     tax under the last sentence of such subsection)'' after 
     ``such subsection''.
       (e) Comparable Estate and Gift Tax Treatment.--
       (1) Estate tax.--
       (A) In general.--Subsection (a) of section 2107 is amended 
     to read as follows:
       ``(a) Treatment of Expatriates.--
       ``(1) Rate of tax.--A tax computed in accordance with the 
     table contained in section 2001 is hereby imposed on the 
     transfer of the taxable estate, determined as provided in 
     section 2106, of every decedent nonresident not a citizen 
     of the United States if, within the 10-year period ending 
     with the date of death, such decedent lost United States 
     citizenship, unless such loss did not have for 1 of its 
     principal purposes the avoidance of taxes under this 
     subtitle or subtitle A.
       ``(2) Certain individuals treated as having tax avoidance 
     purpose.--
       ``(A) In general.--For purposes of paragraph (1), an 
     individual shall be treated as having a principal purpose to 
     avoid such taxes if such individual is so treated under 
     section 877(a)(2).
       ``(B) Exception.--Subparagraph (A) shall not apply to a 
     decedent meeting the requirements of section 877(c)(1).''
       (B) Credit for foreign death taxes.--Subsection (c) of 
     section 2107 is amended by redesignating paragraph (2) as 
     paragraph (3) and by inserting after paragraph (1) the 
     following new paragraph:
       ``(2) Credit for foreign death taxes.--
       ``(A) In general.--The tax imposed by subsection (a) shall 
     be credited with the amount of any estate, inheritance, 
     legacy, or succession taxes actually paid to any foreign 
     country in respect of any property which is included in the 
     gross estate solely by reason of subsection (b).
       ``(B) Limitation on credit.--The credit allowed by 
     subparagraph (A) for such taxes paid to a foreign country 
     shall not exceed the lesser of--
       ``(i) the amount which bears the same ratio to the amount 
     of such taxes actually paid to such foreign country in 
     respect of property included in the gross estate as the value 
     of the property included in the gross estate solely by reason 
     of subsection (b) bears to the value of all property 
     subjected to such taxes by such foreign country, or
       ``(ii) such property's proportionate share of the excess 
     of--

       ``(I) the tax imposed by subsection (a), over
       ``(II) the tax which would be imposed by section 2101 but 
     for this section.

       ``(C) Proportionate share.--For purposes of subparagraph 
     (B), a property's proportionate share is the percentage of 
     the value of the property which is included in the gross 
     estate solely by reason of subsection (b) bears to the total 
     value of the gross estate.''
       (C) Expansion of inclusion in gross estate of stock of 
     foreign corporations.--Paragraph (2) of section 2107(b) is 
     amended by striking ``more than 50 percent of'' and all that 
     follows and inserting ``more than 50 percent of--
       ``(A) the total combined voting power of all classes of 
     stock entitled to vote of such corporation, or
       ``(B) the total value of the stock of such corporation,''.
       (2) Gift tax.--
       (A) In general.--Paragraph (3) of section 2501(a) is 
     amended to read as follows:
       ``(3) Exception.--
       ``(A) Certain individuals.--Paragraph (2) shall not apply 
     in the case of a donor who, within the 10-year period ending 
     with the date of transfer, lost United States citizenship, 
     unless such loss did not have for 1 of its principal purposes 
     the avoidance of taxes under this subtitle or subtitle A.
       ``(B) Certain individuals treated as having tax avoidance 
     purpose.--For purposes of subparagraph (A), an individual 
     shall be treated as having a principal purpose to avoid such 
     taxes if such individual is so treated under section 
     877(a)(2).
       ``(C) Exception for certain individuals.--Subparagraph (B) 
     shall not apply to a decedent meeting the requirements of 
     section 877(c)(1).
       ``(D) Credit for foreign gift taxes.--The tax imposed by 
     this section solely by reason of this paragraph shall be 
     credited with the amount of any gift tax actually paid to any 
     foreign country in respect of any gift which is taxable under 
     this section solely by reason of this paragraph.''
       (f) Comparable Treatment of Lawful Permanent Residents Who 
     Cease To Be Taxed as Residents.--
       (1) In general.--Section 877 is amended by redesignating 
     subsection (e) as subsection (f) and by inserting after 
     subsection (d) the following new subsection:
       ``(e) Comparable Treatment of Lawful Permanent Residents 
     Who Cease To Be Taxed as Residents.--
       ``(1) In general.--Any long-term resident of the United 
     States who--
       ``(A) ceases to be a lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)), or
       ``(B) commences to be treated as a resident of a foreign 
     country under the provisions of a tax treaty between the 
     United States and the foreign country and who does not waive 
     the benefits of such treaty applicable to residents of the 
     foreign country,
     shall be treated for purposes of this section and sections 
     2107, 2501, and 6039F in the same manner as if such resident 
     were a citizen of the United States who lost United States 
     citizenship on the date of such cessation or commencement.
       ``(2) Long-term resident.--For purposes of this subsection, 
     the term `long-term resident' means any individual (other 
     than a citizen of the United States) who is a lawful 
     permanent resident of the United States in at least 8 taxable 
     years during the period of 15 taxable years ending with the 
     taxable year during which the event described in subparagraph 
     (A) or (B) of paragraph (1) occurs. For purposes of the 
     preceding sentence, an individual shall not be treated as a 
     lawful permanent resident for any taxable year if such 
     individual is treated as a resident of a foreign country for 
     the taxable year under the provisions of a tax treaty between 
     the United States and the foreign country and does not waive 
     the benefits of such treaty applicable to residents of the 
     foreign country.

[[Page H3083]]

       ``(3) Special rules.--
       ``(A) Exceptions not to apply.--Subsection (c) shall not 
     apply to an individual who is treated as provided in 
     paragraph (1).
       ``(B) Step-up in basis.--Solely for purposes of determining 
     any tax imposed by reason of this subsection, property which 
     was held by the long-term resident on the date the individual 
     first became a resident of the United States shall be treated 
     as having a basis on such date of not less than the fair 
     market value of such property on such date. The preceding 
     sentence shall not apply if the individual elects not to have 
     such sentence apply. Such an election, once made, shall be 
     irrevocable.
       ``(4) Authority to exempt individuals.--This subsection 
     shall not apply to an individual who is described in a 
     category of individuals prescribed by regulation by the 
     Secretary.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this 
     subsection, including regulations providing for the 
     application of this subsection in cases where an alien 
     individual becomes a resident of the United States during the 
     10-year period after being treated as provided in paragraph 
     (1).''
       (2) Conforming amendments.--
       (A) Section 2107 is amended by striking subsection (d), by 
     redesignating subsection (e) as subsection (d), and by 
     inserting after subsection (d) (as so redesignated) the 
     following new subsection:
       ``(e) Cross Reference.--

  ``For comparable treatment of long-term lawful permanent residents 
who ceased to be taxed as residents, see section 877(e).''

       (B) Paragraph (3) of section 2501(a) (as amended by 
     subsection (e)) is amended by adding at the end the following 
     new subparagraph:
       ``(E) Cross reference.--

  ``For comparable treatment of long-term lawful permanent residents 
who ceased to be taxed as residents, see section 877(e).''

       (g) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to--
       (A) individuals losing United States citizenship (within 
     the meaning of section 877 of the Internal Revenue Code of 
     1986) on or after February 6, 1995, and
       (B) long-term residents of the United States with respect 
     to whom an event described in subparagraph (A) or (B) of 
     section 877(e)(1) of such Code occurs on or after February 6, 
     1995.
       (2) Special rule.--
       (A) In general.--In the case of an individual who performed 
     an act of expatriation specified in paragraph (1), (2), (3), 
     or (4) of section 349(a) of the Immigration and Nationality 
     Act (8 U.S.C. 1481(a)(1)-(4)) before February 6, 1995, but 
     who did not, on or before such date, furnish to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of such act, the amendments made by this section 
     and section 11349 shall apply to such individual except 
     that--
       (i) the 10-year period described in section 877(a) of such 
     Code shall not expire before the end of the 10-year period 
     beginning on the date such statement is so furnished, and
       (ii) the 1-year period referred to in section 877(c) of 
     such Code, as amended by this section, shall not expire 
     before the date which is 1 year after the date of the 
     enactment of this Act.
       (B) Exception.--Subparagraph (A) shall not apply if the 
     individual establishes to the satisfaction of the Secretary 
     of the Treasury that such loss of United States citizenship 
     occurred before February 6, 1994.

     SEC. 422. INFORMATION ON INDIVIDUALS LOSING UNITED STATES 
                   CITIZENSHIP.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6039E the 
     following new section:

     ``SEC. 6039F. INFORMATION ON INDIVIDUALS LOSING UNITED STATES 
                   CITIZENSHIP.

       ``(a) In General.--Notwithstanding any other provision of 
     law, any individual who loses United States citizenship 
     (within the meaning of section 877(a)) shall provide a 
     statement which includes the information described in 
     subsection (b). Such statement shall be--
       ``(1) provided not later than the earliest date of any act 
     referred to in subsection (c), and
       ``(2) provided to the person or court referred to in 
     subsection (c) with respect to such act.
       ``(b) Information To Be Provided.--Information required 
     under subsection (a) shall include--
       ``(1) the taxpayer's TIN,
       ``(2) the mailing address of such individual's principal 
     foreign residence,
       ``(3) the foreign country in which such individual is 
     residing,
       ``(4) the foreign country of which such individual is a 
     citizen,
       ``(5) in the case of an individual having a net worth of at 
     least the dollar amount applicable under section 
     877(a)(2)(B), information detailing the assets and 
     liabilities of such individual, and
       ``(6) such other information as the Secretary may 
     prescribe.
       ``(c) Acts Described.--For purposes of this section, the 
     acts referred to in this subsection are--
       ``(1) the individual's renunciation of his United States 
     nationality before a diplomatic or consular officer of the 
     United States pursuant to paragraph (5) of section 349(a) of 
     the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
       ``(2) the individual's furnishing to the United States 
     Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of an act of expatriation specified in paragraph 
     (1), (2), (3), or (4) of section 349(a) of the Immigration 
     and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
       ``(3) the issuance by the United States Department of State 
     of a certificate of loss of nationality to the individual, or
       ``(4) the cancellation by a court of the United States of a 
     naturalized citizen's certificate of naturalization.
       ``(d) Penalty.--Any individual failing to provide a 
     statement required under subsection (a) shall be subject to a 
     penalty for each year (of the 10-year period beginning on the 
     date of loss of United States citizenship) during any portion 
     of which such failure continues in an amount equal to the 
     greater of--
       ``(1) 5 percent of the tax required to be paid under 
     section 877 for the taxable year ending during such year, or
       ``(2) $1,000,

     unless it is shown that such failure is due to reasonable 
     cause and not to willful neglect.
       ``(e) Information To Be Provided to Secretary.--
     Notwithstanding any other provision of law--
       ``(1) any Federal agency or court which collects (or is 
     required to collect) the statement under subsection (a) shall 
     provide to the Secretary--
       ``(A) a copy of any such statement, and
       ``(B) the name (and any other identifying information) of 
     any individual refusing to comply with the provisions of 
     subsection (a),
       ``(2) the Secretary of State shall provide to the Secretary 
     a copy of each certificate as to the loss of American 
     nationality under section 358 of the Immigration and 
     Nationality Act which is approved by the Secretary of State, 
     and
       ``(3) the Federal agency primarily responsible for 
     administering the immigration laws shall provide to the 
     Secretary the name of each lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)) 
     whose status as such has been revoked or has been 
     administratively or judicially determined to have been 
     abandoned.

     Notwithstanding any other provision of law, not later than 30 
     days after the close of each calendar quarter, the Secretary 
     shall publish in the Federal Register the name of each 
     individual losing United States citizenship (within the 
     meaning of section 877(a)) with respect to whom the Secretary 
     receives information under the preceding sentence during such 
     quarter.
       ``(f) Reporting by Long-Term Lawful Permanent Residents Who 
     Cease To Be Taxed as Residents.--In lieu of applying the last 
     sentence of subsection (a), any individual who is required to 
     provide a statement under this section by reason of section 
     877(e)(1) shall provide such statement with the return of tax 
     imposed by chapter 1 for the taxable year during which the 
     event described in such section occurs.
       ``(g) Exemption.--The Secretary may by regulations exempt 
     any class of individuals from the requirements of this 
     section if he determines that applying this section to such 
     individuals is not necessary to carry out the purposes of 
     this section.''
       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by inserting after the item relating to 
     section 6039E the following new item:

``Sec. 6039F. Information on individuals losing United States 
              citizenship.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to--
       (1) individuals losing United States citizenship (within 
     the meaning of section 877 of the Internal Revenue Code of 
     1986) on or after February 6, 1995, and
       (2) long-term residents of the United States with respect 
     to whom an event described in subparagraph (A) or (B) of 
     section 877(e)(1) of such Code occurs on or after such date.

     In no event shall any statement required by such amendments 
     be due before the 90th day after the date of the enactment of 
     this Act.

     SEC. 423. REPORT ON TAX COMPLIANCE BY UNITED STATES CITIZENS 
                   AND RESIDENTS LIVING ABROAD.

       Not later than 90 days after the date of the enactment of 
     this Act, the Secretary of the Treasury shall prepare and 
     submit to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     report--
       (1) describing the compliance with subtitle A of the 
     Internal Revenue Code of 1986 by citizens and lawful 
     permanent residents of the United States (within the meaning 
     of section 7701(b)(6) of such Code) residing outside the 
     United States, and
       (2) recommending measures to improve such compliance 
     (including improved coordination between executive branch 
     agencies).

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Texas [Mr. Archer], the gentleman from California [Mr. Stark], the 
gentleman from Virginia [Mr. Bliley], and the gentleman from Michigan 
[Mr. Dingell] will each be recognized for 22\1/2\ minutes; and the 
gentleman from Pennsylvania [Mr. Goodling] and the gentleman from 
Missouri [Mr. Clay] will each be recognized for 15 minutes.

[[Page H3084]]

  The Chair recognizes the gentleman from Texas [Mr. Archer].


                             general leave

  Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days in which to revise and extend their remarks and 
include extraneous materials on the bill, H.R. 3103.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Ohio [Mr. Hobson].
  (Mr. HOBSON asked and was given permission to revise and extend his 
remarks.)
  Mr. HOBSON. Mr. Speaker, I rise in support of the bill.
   Mr. Speaker, I want to thank the members and staff of the Commerce 
and Ways and Means Committees for including administrative 
simplification in the Health Coverage Availability and Affordability 
Act. This provision is based on legislation that Tom Sawyer, Nancy 
Johnson, and I introduced earlier in this Congress.
  We have the most advanced health care services in the world due 
mainly to our success in using technology. We can use this same 
technology to improve the way our health care system is run. Our 
provision removes the barriers that have prevented modern technology 
from replacing outdated, paper-based health information systems.
  Today, the lack of uniform standards for financial and administrative 
health information is a barrier to modernizing health information 
systems. Most health plans already transmit data electronically, but 
the data is nonstandard or incomplete, and cannot be used to coordinate 
benefits or effectively track fraud and abuse.
  Uniform standards for health information would enable the private 
sector to reduce paperwork (which adds nearly 10 cents to every health 
care dollar), expose fraud (which is difficult to do in a confusing, 
disjointed paperwork system), and provide consumers with the 
information they need to compare health plans and services.
  The Health Care Financing Administration [HCFA] is implementing a 
Medicare transaction system for handling standardized Medicare claims. 
Under current law, HCFA has the authority to adopt Government standards 
for health information, and to mandate the use of those standards by 
the private sector.
  Our administrative simplification provision, as it was included in 
this bill, limits HCFA to adopting standards that already have been 
developed by a voluntary, consensus process that has included input 
from the private and public sectors. It establishes a process for the 
standardization of health data that builds on progress in the private 
sector.
  Our provision was developed over several years in a cooperative 
effort between the private and public sectors. Political support for 
our provision is bipartisan and bicameral--it was introduced as H.R. 
1766 by Representatives Dave Hobson, Tom Sawyer, and Nancy Johnson, and 
as S. 872 by Senators Kit Bond and Joseph Lieberman.
  Also, as the original author of this provision, I want to clarify 
that our intention is that health benefits under employee welfare 
benefit plans would not include hospital or fixed indemnity, specified 
disease, accident, disability income, dental, and vision benefits.
  These provisions and the overall bill respond to the need for health 
care reform in a responsible way. I encourage Members to vote for the 
bill.
  Mr. ARCHER. Mr. Speaker, I yield 30 seconds to the gentleman from 
Ohio [Mr. Kasich], the chairman of the Committee on the Budget.
  Mr. KASICH. Mr. Speaker, I want to congratulate all of the chairmen 
on what we are producing here today, which is a fantastic improvement 
in the lives for all Americans who have been held hostage from changing 
jobs because of a lack of portability, which we guarantee in this bill, 
and to give them security in knowing that preexisting conditions that 
have denied them health insurance or have denied them the ability to be 
secure in their homes are being removed with this bill.
  This is a great day for the American people, a great day for the 
American family, and we did it without socializing the system. I thank 
my colleagues for producing this bill.
  Mr. ARCHER. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Georgia [Mr. Collins].
  (Mr. COLLINS of Georgia asked and was given permission to revise and 
extend his remarks.)
  Mr. COLLINS of Georgia. Mr. Speaker, I rise in full support of this 
legislation.
  Mr. Speaker, the health care reform legislation now under 
consideration by the Republican-controlled House of Representatives 
draws a dramatic contrast against the health care reform legislation 
considered by Congress in 1994 under a Democrat majority.
  The legislation of 1994, crafted by President Clinton and introduced 
by the Democrat leader, Mr. Richard Gephardt, would have created a new 
bureaucratic government agency with authority over most of the health 
care choices each private citizen makes.
  This year, however, under a Republican-controlled House, we are 
considering health care reform legislation that avoids the explosion of 
government bureaucracy. This legislation is a direct response to the 
views and concerns expressed by American citizens during the 1994 
health care debate when we defeated the Clinton socialistic health care 
proposal.
  This year's reform legislation will provide greater access to health 
care without increasing government bureaucracy. It will eliminate 
permanent preexisting condition limitations; ensure greater insurance 
portability so those who change jobs will have access to coverage; 
offer greater tax fairness for individuals; provide tax deductible 
contributions to medical savings accounts targeting those middle-income 
individuals and families without health care; streamline administrative 
costs and procedures; combat fraud and abuse in the health care 
industry; invoke medical malpractice reform that discourages 
unnecessary litigation currently driving up the cost of health care; 
and above all preserve the quality and freedom of choice that exists in 
our current market-based system.
  One of the most important and unique components of this health care 
reform legislation is the creation of medical savings accounts [MSA's]. 
This provision will allow individuals and families to purchase a high 
deductible health plan and make tax deductible contributions to MSA's 
for the purpose of saving money for health care expenditures. In 
addition, contributions by employers on behalf of their employees will 
be excludable from taxable income. This proposal will finally provide 
an ideal way for young individuals and young families just starting 
out, to obtain affordable, quality health care coverage.

  Estimates indicate that at least 1 million people will open medical 
savings accounts. Approximately 650,000 people who earn between $40,000 
and $75,000 per year will choose MSA's; while 120,000 people who earn 
between $30,000 and $40,000 per year will join. The vast majority of 
those benefiting from the MSA will be middle-income families who, in 
today's market, face the most difficult challenge in obtaining 
coverage.
  MSA's create more fairness for small employers and their employees by 
eliminating barriers to coverage. As a small business owner, I know 
first hand what kind of limitations small businesses face when trying 
to establish health care coverage for their employees. Often, providing 
health care becomes too complicated or too expensive for these 
employers.
  MSA's will be an ideal way for small businesses to assist employees 
in obtaining health care coverage. MSA's may very well mean the 
difference between those employees who have no insurance and those that 
have access to affordable health care.
  MSA's will provide the maximum degree of portability for employees. 
When an employee leaves, he or she will take the MSA to the next job.
  MSA's will ultimately reduce the long-term care expenditures of 
medicare and Medicaid by promoting the purchase of long-term care 
insurance. The provision will allow individuals to make a tax-free 
withdrawal for the purposes of paying long-term care insurance 
premiums. Long-term is among the largest expenditures in entitlement 
health care programs. Encouraging citizens to purchase coverage in the 
private markets means reduced costs to the taxpayers.
  MSA's will provide the maximum amount of choice for health care 
consumers. Individuals and families will have the maximum amount of 
control over the choices they make in their health care. Maximizing the 
ability of the consumer to choose means increased competition and cost 
savings for that individual or family purchasing health coverage.
  MSA's have a long history of bipartisan support. In 1994, the 
Democrat party leader, Representative Gephardt, endorsed MSA's. In 
1994, Senator Paul Simon introduced legislation to establish MSA's. In 
addition, States

[[Page H3085]]

have passed State-level legislation that exempt MSA deposits from 
State-level taxes.
  Mr. Speaker, the MSA provision is one of several very important 
health care reform components of the Health Coverage Availability and 
Affordability Act. The health care debate began during the last 
Congress (103d). Today, in the 104th Congress we are fulfilling the 
commitment to enact common sense health care reform that will provide 
greater portability and accessibility of health care for all Americans.
  Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, today the House considers the Health Coverage 
Availability and Affordability Act of 1996. This bill, Mr. Speaker, is 
truly historic. After years of talking about health reform, we are now, 
with the new Republican majority in this House, going to enact health 
reform. Most importantly, H.R. 3103 reflects what Americans want in 
health reform because it addresses the two issues that concern our 
citizens the most, availability and affordability of health insurance 
coverage and health care.
  A key to increasing the availability of health insurance is insuring 
portability of coverage if a breadwinner changes jobs. No one should 
ever say no to a new job simply because he or she fears that the new 
health insurance company will say no to them. This bill tells workers 
that they will not have to worry about preexisting conditions limiting 
their ability to get coverage if they change jobs.
  Both to increase the availability and affordability of health care 
coverage, we establish medical savings accounts. Deductions for MSA's 
with health insurance protection ought to be an option available to 
working Americans. MSA's offer Americans the ultimate in portability 
because, with an MSA, you take the money with you and retain the 
savings to spend on your health care needs regardless of a change in 
your employment or life circumstances.
  A new study by the Joint Committee on Taxation demonstrates that the 
M in MSA stands for middle income. The joint committee estimates that 
650,000 out of the 1 million people who will be covered by MSA's earn 
between $40,000 and $75,000 a year while another 120,000 people who 
will choose MSA's earn below $40,000 per year.
  The bill further insures affordability of coverage by raising the 
deductibility of health insurance for 3.2 million self-employed 
Americans. At the beginning of this Congress the deduction had expired. 
Congress increased it to 30 percent last year, and now we increase it 
to 50 percent.
  H.R. 3103 also provides important incentives for Americans to protect 
their families through the purchase of long-term care insurance, and it 
allows for accelerated death benefits for those with terminal illnesses 
such as cancer or HIV. Both of these important measures were part of 
our Contract With America.
  Our bill makes health insurance and medical care more affordable by 
attacking a key health care cost driver that runs up costs for 
everyone, and that is fraud and abuse. It is tough on health care 
crooks by creating new criminal penalties for health care fraud, 
expanding other penalties and providing the necessary funds for Federal 
investigator to route out health care crime.
  Another cost driver this bill addresses is the current quagmire of 
paperwork. The bill will make the process cheaper and easier by 
promoting a common claims form and electronic transmission of this 
information.
  Finally H.R. 3103 undermines one of the major cost drivers, and that 
is medical malpractice. It gives real reform and will promote health 
insurance pooling for small employers.
  The bill was truly a group effort by four of the House committees 
with health jurisdiction. I cannot stress enough the leadership 
provided in developing this joint initiative by the gentleman from 
Illinois [Mr. Hastert] and all the chairmen of the committees involved 
and their subcommittee. I am particularly grateful for the contribution 
of the bill's chief cosponsor, the Committee on Ways and Means' 
Subcommittee on Health chairman, the gentleman from California [Mr. 
Thomas].

  Availability and affordability, two issues important to all 
Americans; both are the prescription for real achievable private sector 
health care reform this year. I am confident my colleagues will join me 
in supporting the Health Coverage Availability and Affordability act of 
1996.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this bill is called the Health Coverage Availability and 
Affordability Act, but it ain't. Because of the medical savings 
accounts and other provisions in here, the Republicans have managed 
through some legislative legerdemain to turn a silk purse into a sow's 
ear.
  The Democratic substitute will, in fact, bring back the Roukema-
Kassebaum-Kennedy bill with some technical corrections to make sure 
that it limits preexisting conditions, and would by far be a better 
bill, a truly bipartisan bill, one that will pass in the Senate and one 
that would in fact be signed by the President.
  Now, if the Republican intention is to fill up prime time with a bill 
that they know will pass, it is to me a very sick trick to play on the 
seniors.
  First of all, this bill purports to increase the deduction for self-
employed, but really it only does it for 50 percent, and that is in 
2003. The Democratic alternative does it at 8 percent, and it does it 
right up front and pays for it. It is not flimflamming the American 
public into thinking they are getting something that they are not.
  It is also a bad bill because the insurance reforms are weaker. It 
limits individuals to just one policy and guarantees issue only to 
small firms of less than 50 people. The rest are out on the street. It 
spends over $2.5 billion of Medicare money on MSA tax breaks. We should 
save easy anti-fraud money for Medicare trust fund relief. Not only are 
the MSA's a bad policy, they are a payoff to the Golden Rule Insurance 
Company who has contributed almost $1.5 million to Speaker Gingrich's 
political operations.
  If that is not bad enough policy, I do not know what is.
  This bill actually increases costs in traditional insurance pools. 
The MSA's, the mean ones, will drive up the rates for most people.
  The GOP has mislabeled their bill, I suspect intentionally. The GOP 
anti-fraud provisions contain 3 pro-fraud loopholes: advisory opinions, 
harder proof for civil monetary penalties, and they are allowing 
kickbacks in managed care plans. The CBO, the Republican CBO, says 
their plans will cost the system a billion dollars.
  There is also a payoff to American Family Life. It takes out the 
Medigap anti-duplication laws, will return us to the days of ripping 
off seniors by unscrupulous insurance salesmen.

                              {time}  1830

  The payoff to the AMA is in the malpractice caps that reward doctors. 
I would remind Members that it was released today that there are over 
13,000 doctors convicted of sex crimes and other crimes who are still 
practicing in this country, who will go untouched if the Republicans 
remove the malpractice caps.
  Mr. Speaker, the GOP expatriate language is too weak. We should keep 
it simple. We should support the Dingell-Spratt-Bentsen substitute, and 
give the people true portability and true reform.
  Mr. Speaker, I reserve the balance of my time.
  Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
Connecticut [Mrs. Johnson], the most respected chairman of the 
Subcommittee on Oversight of the Committee on Ways and Means.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman, the 
chairman of the committee, for yielding time to me.
  Mr. Speaker, this is a great day or night for Americans. Health 
security is important to every man, woman, and child. Tonight we take a 
giant step toward guaranteeing coverage, in spite of preexisting 
conditions, protecting millions of Americans and their families.
  I introduced the first insurance reform bill, and in fact, with our 
former colleague Rod Chandler, introduced the first legislation to 
enable small businesses to group together to provide

[[Page H3086]]

lower cost insurance for businesses. Tonight we bring a lot of that 
thinking, 5 years old, to fruition, and for the first time, we are 
going to put on the President's desk a reform bill that will really 
directly affect the lives of our constituents and create for them the 
opportunity to move from job to job, developing their careers, without 
fear of losing health coverage for their spouse and children.
  Twenty-five million workers and dependents are affected by changes in 
employment every single year; 3.6 million will face job lock. That is 
3.6 million workers, but all of their dependents as well. They are the 
people whose fears will be allayed by tonight's legislation. One 
hundred and thirty-eight million workers and their dependents are 
covered by employer plans, and any one of them at any time could need 
what we do here tonight. This is, indeed, a giant step toward health 
security for all working Americans.
  Underneath that bill, included in it, is the accomplishment of other 
goals that we have long aspired to. For 5 years we have tried to spread 
long-term care insurance to protect seniors against the cost of nursing 
home care, without forcing them to spend down to poverty. This is a 
remarkable piece of legislation. It is long overdue. It represents the 
culmination of solid study over 5 years. Mr. Speaker, I urge the 
Members' support.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the distinguished 
gentlewoman from Connecticut [Mrs. Kennelly].
  Mrs. KENNELLY. Mr. Speaker, this could have been a great night in 
this Chamber. In fact, we came very close to having this a great night 
in this Chamber.
  Mr. Speaker, Senator Kassebaum and Senator Kennedy introduced a piece 
of legislation, very simple, very precise, very direct. What that 
legislation said was, ``If you lose your job or if you change your job 
and you have a preexisting health condition, you will not lose your 
health insurance.''
  What happened? Senator Kassebaum daily appealed to her colleagues to 
keep the bill direct and simple. This very afternoon, Senator Bradley 
stood next to Senator Kassebaum. He was very much interested, as many 
of us have been, that if you have a baby you should be allowed to stay 
in the hospital for 48 hours. What did he say? He said, ``I will not 
put forth my amendment because it might jeopardize Senator Kassebaum's 
bill.''
  Mr. Speaker, did that happen over in this side of the House? It 
certainly did not. The bill that we have before us tonight has 301 
additional pages of insurance changes. As I listened to people talk, 
and we have talked about this bill all day, I hear some on the majority 
side say that the additions to the bill have a very definite policy 
objective; namely, to make health insurance more affordable. How I wish 
that was true.
  However, two of the most controversial riders, tax breaks for medical 
savings accounts, and an exemption from State insurance laws for 
certain health plans, could actually make health insurance higher for 
many, many people, the cost of health insurance. Both of these 
provisions would promote risk skimming, which puts the healthiest 
Americans in a separate health care plan. For anyone who knows about 
insurance, you know when you do not have a decent risk pool, the risk 
pool does not work.
  Mr. Speaker, we have an opportunity tonight to move forward in a 
bipartisan legislative manner. Senator Kassebaum and Kennedy's bill was 
put forth here by the gentlewoman from Connecticut, Mrs. Roukema, and 
many Members of this body. We could take this bill, this simple, 
precise bill, and have portability for health insurance. That is all we 
have to do. We do not have to do everything that would just complicate 
matters. We can help millions of Americans by doing a simple, good 
bill.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from New 
York [Mr Houghton], a respected member of the Committee on Ways and 
Means.
  (Mr. HOUGHTON asked and was given permission to revise and extend his 
remarks.)
  Mr. HOUGHTON. Mr. Speaker, I would like to talk on the portability 
issue. I think it is an important one. I know that a lot of people have 
talked on it. It will not be the last discussion about this. However, I 
think it is important. I know a little bit about it, and it is really 
at the heart of this whole bill.
  Mr. Speaker, basically what it does is to free up somebody to work 
wherever he or she wants. That is not a bad concept. You work for 
company A and you want to move to company B, but company B does not 
have any health insurance program. You get a job at company C, but at a 
far less salary. You would rather take the job at company B. You cannot 
do it. You cannot help your family.
  Under this condition, you must be given an opportunity to have an 
insurance policy yourself or through the company, irrespective of where 
you are working or irrespective of the preexisting conditions. It makes 
a lot of sense, Mr. Speaker. I fully endorse this.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Maryland [Mr. Cardin].
  Mr. CARDIN. Mr. Speaker, I thank my friend, the gentleman from 
California, for yielding me this time.
  Mr. Speaker, let me say to my good friend, the chairman of the 
Committee on Ways and Means, this bill has certainly changed since it 
left the Committee on Ways and Means. That is unfortunate, because I 
know that the chairman agrees with me that we are trying to return 
power to our States. This bill moves in exactly the opposite direction. 
By preempting our States in health insurance, which has been a 
traditional role for State governments to regulate, this bill moves in 
the wrong direction. It preempts our States without providing adequate 
Federal protection.
  Mr. Speaker, let me just give one example of the impact that this 
bill will have, if it becomes law, on the State of Maryland. We enacted 
small market reform in our State. It covers employers that have 
employees, between 2 and 50 employees. It also covers the association 
plans, and now also covers our self-employed. The plan is working.
  Mr. Speaker, let me just read from a letter that I received from our 
State officials:

       The reforms went into effect July 1, 1994. . . . The small 
     business community (the Maryland Chamber, Retail Merchants 
     Association, individual businesses) and insurance agents 
     report the reforms have stabilized the market, increased 
     price competition, and increased choice of delivery systems.

  The reforms proved so successful to the general assembly that they 
expanded it to include the self-employed.
  Yet, the provisions that are included in this bill would seriously 
jeopardize our ability to continue that plan in Maryland, for, you see, 
companies would be able to come under Federal regulation and void the 
State plan, and therefore, defeat the purpose of the pooling 
arrangements in our State. That is unfortunate and it is wrong.
  Let me give a second example. My State has passed the emergency room 
care legislation, that uses the ``reasonable lay person'' definition on 
when that person should be reimbursed for care in an emergency room. We 
are not waiting for the Federal Government to act on it. The Federal 
Government has not acted on it. Do not penalize my State by allowing 
more and more insurance plans to be able to get out from under State 
regulation and be able to avoid their responsibility to cover emergency 
room care. That is what this bill will allow to happen. More and more 
companies will be able to avoid State regulation. That is wrong. It 
should not happen. We should allow the States to respond.

  Let me quote, if I might, from the National Association of Insurance 
Commissioners:

       Unfortunately, we continue to have grave concerns that 
     subtitle C of title I of H.R. 3160 would significantly erode 
     existing State level insurance reforms. The net effect of the 
     final provisions relating to MEWA's is extremely damaging to 
     States authority to govern their own insurance market.

  Mr. Speaker, I do not understand why we are moving in the wrong 
direction by taking more power, rather than giving our States the 
ability to control health insurance. The National Association of State 
legislators opposed those provisions in the bill, and for good reason. 
I regret that the only option we have is to support the Democratic 
substitute if we want to deal with preexisting conditions.

[[Page H3087]]

  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from 
California [Mr. Herger], another respected member of the Committee on 
Ways and Means.
  Mr. HERGER. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, in 1996, an estimated 3.1 million self-employed 
Americans will be unfairly denied adequate tax relief for their health 
insurance costs. Individuals that receive health coverage through their 
employers do no pay taxes on those benefits while self-employed 
individuals are only allowed to deduct 30 percent of what they spend on 
health care insurance.
  Mr. Speaker, this mere 30 percent deduction inadequate, 
discriminatory, and discourages the self-employed from obtaining proper 
medical coverage and care. While this bill doesn't completely end this 
inequitable tax treatment of the self-employed, it moves us closer to 
that goal by increasing the health care deduction for the self-employed 
to 50 percent.
  Mr. Speaker, I urge my colleagues to support the self-employed in 
this country by adopting this much-needed legislation.
  Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from 
Michigan [Mr. Levin].
  (Mr. LEVIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LEVIN. Mr. Speaker, I support Kennedy-Kassebaum. This bill before 
us now is not Kennedy-Kassebaum-plus, it is Kennedy-Kassebaum-minus. In 
a way, this bill is the story of this session so far. When the 
Republicans have a chance to do something good, they ruin it by 
overreaching. They simply cannot resist excess, and they cannot resist 
turning a bipartisan bill, which Kennedy-Kassebaum is, into a partisan 
one.
  Mr. Speaker, why is this Kennedy-Kassebaum-minus? I think it is very 
clear, when someone who is covered by group insurance leaves and must 
have individual insurance, there is going to be less protection for 
affordability under the bill we have here than Kennedy-Kassebaum, 
period. It is likely that the individual will pay more.
  Second, they have included MSA's, which are likely to draw the 
healthiest away and hurt everybody else in terms of premiums. Let me 
just say one thing about MSA's. They are really a potential tax shelter 
for wealthy people, because if you put money into them, you do not pay 
Social Security taxes. You indefinitely defer income taxes. And if you 
keep them until death, you avoid estate taxes. IRA's are structured to 
avoid that kind of sheltering. What these MSA's, as the Republicans 
here in the House, once again going to an extreme, what they have done 
is to promote tax sheltering for very wealthy families.
  One last point, and we have made it a number of times, on fraud and 
abuse. Why make it tougher for the Government to impose civil and 
monetary penalties in the case of fraud and abuse? Why do that? Why do 
you require that the proof be recklessness instead of negligence, when 
the Government relies on the providers, the tens of thousands, to 
submit accurate bills? Mr. Speaker, I do not understand what pressure 
group you are reacting to, but it is bad for the public at large.
  So for all of these reasons, I urge that we reject this bill. 
Unfortunately, once again, they have gone much too far. Nothing exceeds 
like excess, as has been said many years ago. I think we have no 
alternative but then to vote for the substitute. Let us do Kennedy-
Kassebaum, taking care of the self-employed. Let us not go backward. 
Let us not turn this into a political issue. This reform is long 
overdue.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from 
Louisiana [Mr. McCrery], a respected member of the Committee on Ways 
and Means.
  (Mr. McCRERY asked and was given permission to revise and extend his 
remarks.)
  Mr. McCRERY. Mr. Speaker, medical savings accounts will provide 
hardworking Americans the freedom to personally manage and even save a 
portion of their health care dollars. By granting consumers complete 
control, MSA's allow working men and women and their families to tailor 
health care spending to their individual needs. This element of 
personal responsibility will lead to more cost-conscious and cost-
efficient spending choices.
  MSA's are easily portable from one job to another and provide total 
freedom when choosing a family's health care provider. In the case of a 
serious illness or injury, MSA beneficiaries will continue to have 
comprehensive medical coverage through a high-deductible health plan 
which meets those costs. Furthermore, this bill helps individuals plan 
for their future long-term care needs by allowing MSA funds to be used 
to purchase long-term care insurance or services.
  In short, Mr. Speaker, MSA's provide hard-working American families 
the ultimate in health insurance: choice, flexibility, and portability.
  Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from 
Washington [Mr. McDermott].
  (Mr. McDERMOTT asked and was given permission to revise and extend 
his remarks.)
  Mr. McDERMOTT. Mr. Speaker, I wish that we were out here voting on 
the Kennedy-Kassebaum-Roukema bill, but we are not. HIAA, the Health 
Insurance Association of America, did not want that bill to come to the 
floor, and so we have this bill we have before us. This bill was 
written by, or at least for, the insurance industry.
  The first thing in it is data collection. I mentioned that under the 
rule, they collect data, they have electronic clearinghouses that can 
shift that information. There is no privacy protection in this bill 
whatsoever. This is the first time the Federal Government has gotten 
into collecting health care data, and there are no privacy protections.
  But worst about this bill is that it purports to be about 
portability. Portability means you have insurance, you lose your job, 
what happens to you? Well, how can you carry your insurance until you 
get your next job, or what do you do to cover your family? Now, this 
bill says that, if you were in a company that had 50 people or you had 
a group insurance and you go out there and you start looking for 
insurance, the insurance company or the State can decide what they are 
going to offer you.
  Mr. Speaker, we are not going to get the same policy we have now. No 
one listening to this should think that portability means what I have 
now I will have tomorrow, because it simply is not so. We give the 
insurance companies the ability to say, we will give you the average 
actuarial value policy. What does that mean? It has never been done in 
the United States. This is a pig in a poke. Anybody who thinks that the 
insurance companies when they do not have to give you insurance are 
going to give you the same thing, they are going to jack the price. And 
you are going to get less benefits, particularly if you have any kind 
of medical problem.
  They are going to medically underwrite you. If you have cancer or 
heart attack or anything, diabetes, whatever, you suddenly are going to 
find out you do not have the same benefits you had under your old group 
policy.
  Now, let us say we have a job and we lose it and move to another 
company. We may get into the next company, but the company that has 
more than 50 employees has no guarantee that they can go out and buy a 
policy. There is no guarantee of issue to an employer who has more than 
50 people.
  Mr. Speaker, all of these proposals fit the insurance company's 
ability to cherry pick and avoid the sick people and make their choices 
and find ways to make money. Anything that is in this bill could be 
done now by the insurance companies. The Republicans have put out there 
essentially what I say is a guarantee that we can buy a Cadillac in 
this country. Now, we can pass a bill and say everybody can buy a 
Cadillac. We guarantee that Cadillac dealerships must issue us the keys 
to a Cadillac.
  Mr. Speaker, why do people not have Cadillacs? They have not got the 
money to buy Cadillacs. This bill is a fraud because it says, we get 
portability. But just like a bill that says we get a Cadillac, we would 
not get one.
  Now, if that were not enough, if it were not just the issue of 
portability, the opportunities for fraud by insurance companies are 
increased in this bill. We passed a law since I came to Congress that 
said that insurance companies could not sell a policy to old

[[Page H3088]]

people for things that are covered by Medicare. We could not duplicate 
without saying to the old folks: This policy covers what is under your 
Medicare. Now, any old folk would say to that: Well, that is stupid. 
Why should I buy that policy?
  So they quit selling those policies. This bill says that an insurance 
company can go out selling something all over the place that covers 
what is covered by Medicare. It is simply an opportunity to legalize 
their fraud.
  This is a bad bill. Vote for Dingell, Spratt, and Bentsen.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from 
Minnesota [Mr. Ramstad].
  Mr. RAMSTAD. I thank the gentleman for yielding me the time.
   Mr. Speaker, last year alone, $31 billion was lost to Medicare fraud 
and abuse, Medicare and Medicaid fraud and abuse. Everyone here talks 
about doing something about waste, fraud and abuse in our health care 
system. This bill finally does something to eliminate these parasites 
on our health care system.
   Mr. Speaker, our bill establishes the Medicare integrity program, 
which increases the ability of Medicare to prevent payments for 
fraudulent, abusive or erroneous claims.
  We, for the first time, require the Health Care Finance Agency to use 
state-of-the-art computer software, the same type used by private 
insurers, and to hire private sector companies with proven track 
records to prevent fraud and abuse. This will result, according to the 
CBO, in a net savings of almost $2 billion over the next 6 years.
  The other provisions that fight health care fraud and abuse are 
listed on this chart, Mr. Speaker. I urge approval of this bill to get 
at waste, fraud, and abuse.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  It is interesting that the previous speaker spoke about parasites I 
think here to enlighten us about parasites. is the gentleman from 
Virginia [Mr. Moran], who will tell us about the Golden Rule Insurance 
Company, which gave Mr. Gingrich's political operations over $1.5 
million, which is why we are discussing these MSA's.
   Mr. Speaker, I yield 3 minutes to the gentleman from Virginia [Mr. 
Moran].
  Mr. MORAN. Mr. Speaker, as the gentleman from California [Mr. Stark] 
has explained, I think we know why MSA's are included in this 
legislation and why the Republican Party wants so much to make them 
into law. The principal beneficiary of this legislation would be Golden 
Rule Insurance Co.
  All we have to do is to track the campaign contributions to the 
Speaker and GOPAC and the Republican committee.
  Let me explain why the Democrats are not supporting Golden Rule 
Insurance Co. and their medical savings accounts. In the 1992 annual 
statement, only 54 cents out of every premium dollar was actually going 
into medical costs. Imagine. Half of the revenue went into shareholder 
profits and the like.
  Let me explain why the State of Vermont kicked these medical savings 
account of Golden Rule Insurance Co. out of the State. It is because 
half of the people in Vermont, 5,000 people have these policies, half 
of them found that in the tiny writing at the bottom that Golden Rule 
had excluded whole body parts from coverage. They excluded their arms, 
their breasts, their backs, their hips, their hands, their legs, their 
circulatory system. Imagine excluding these things from coverage.
  Let me tell my colleagues why the State of Kentucky had so much 
problem with Golden Rule Insurance Co. Golden Rule Insurance Co. does 
not want to cover newborns. They will not cover them until they prove 
that the newborn is healthy. Kentucky passed a law that says you have 
to cover newborns for the first 30 days of life. Golden Rule sued the 
State because they do not want to cover newborns for the first 30 days 
of life.
  Mr. Speaker, let me tell my colleagues about some other folks who had 
specific experience. Carol Schreul of Aurora, IL, Golden Rule rejected 
her insurance for a brain tumor, $39,000. They would not cover it. They 
said that she listed her weight as 190 pounds but that it was actually 
210 pounds.
  Let me tell my colleagues about another Golden Rule policyholder who 
suffered a stroke, $20,000 in bills. James Anderle was a Milwaukee 
barber. It turns out that they said he had a preexisting condition, 
that he had the flu, and that this was a preexisting condition. And so 
they did not want to cover it.
  Claims for $49,000 were denied Harry Baglayan, a self-employed 
repairman. He underwent bypass surgery. They said that he did not tell 
them that he had nausea 4 months earlier, and that was a preexisting 
condition.
  I will just quote from the Wall Street Journal, which, it seems to 
me, probably has a little bit of credibility around these parts. The 
Wall Street Journal says that they are a sham, that in fact they are 
most known for cherry picking. In fact, when a claim actually is 
accepted, they wind up suing the beneficiary and the State. They have 
piled up $1 billion in assets. It is a sham, Mr. Speaker. We should not 
include this in our bill.
  Mr. ARCHER. Mr. Speaker, I yield myself 15 seconds simply to say that 
the previous speaker made a very interesting emotional presentation. It 
just so happens that it has no relevancy to what we are talking about 
today.
   Mr. Speaker, I yield 1 minute to the gentleman from Texas [Mr. Sam 
Johnson].
  Mr. SAM JOHNSON of Texas. Mr. Speaker, medical savings accounts are 
for middle-income America. There is a chart that proves it. Medical 
savings accounts, therefore, must be part of any health care plan we 
pass. They are an important option for both employers and employees. 
They give enhanced portability, preserve consumer choice, allow 
retirement savings and contain costs.
  Medical savings accounts offer all Americans the opportunity to buy a 
plan that best meets their individual needs.
   Mr. Speaker, middle-income Americans are my constituents. They 
repeatedly tell me that one of the most important things that they want 
is the ability to choose their own doctor. Medical savings accounts do 
that. They will allow people to achieve control over their own health 
care dollars, make it more cost-conscious and bring down the total cost 
of medical costs for everyone.
  Medical savings accounts are good for America. Medical savings 
accounts offer Americans a freedom they deserve.
  Mr. STARK. Mr. Speaker, I reserve the balance of my time.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from Ohio 
[Mr. Portman].
  Mr. PORTMAN. Mr. Speaker, I rise today in strong support of the bill 
and I do so because I think it will provide greater security to 
millions of working Americans by eliminating some significant obstacles 
to health care.
  I think this is precisely the kind of health care reform, Mr. 
Speaker, that the American people have called for. It is targeted 
reform. It is incremental reform. It makes commonsense improvements to 
an imperfect system.
  Let me give my colleagues an example. This bill helps level the 
playing field between those who are self-employed and those who work 
for corporations. The health insurance deduction for the self-employed 
goes from 30 percent to 50 percent over a 7-year period. With this 
single step, we are making health care more affordable for 3.2 million 
Americans, many of those Americans who are now caught in the net, 
Americans who are now uninsured. That means the mon and pop grocery 
store down the street. That means that our favorite barber. That means 
that our local mechanic. All of these people may be self-employed.
  In my State of Ohio alone, this enhanced deduction will affect more 
than 50,000 farm families. It makes sense. Corporations receive a 
significant deduction, and it is only fair that the self-employed do, 
too.

                              {time}  1900

  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from 
Nevada [Mr. Ensign], a respected member of the Committee on Ways and 
Means.
  (Mr. ENSIGN asked and was given permission to revise and extend his 
remarks.)
  Mr. ENSIGN. Mr. Speaker, in southern Nevada, with the fastest-growing 
senior population in the country, I constantly hear from elderly 
constituents

[[Page H3089]]

about the exorbitant costs of long-term care. People like our parents 
and grandparents are paying about $40,000 a year for nursing home care. 
If they do not have the money, Medicaid requires that they lose 
virtually everything or legally hide everything before they can get 
help with long-term care from the government.
  Currently, there is no provision in the Tax Code that relates to 
long-term care expenses. Most people incorrectly believe that private 
insurance will pick up this tab when they need it. But this is simply 
not the case for 98 percent of long-term care recipients. This bill 
incorporates the Ensign amendment that treats long-term care expenses 
as tax-deductible medical expenses. Some of my senior Democratic Ways 
and Means Committee members have told me they have been trying to do 
this for over 10 years. Best of all, it is fully paid by making 
billionaires who renounce their U.S. citizenship for tax purposes pay 
their fair share. This should have been done years ago, and certainly 
we should all support this bill with this amendment.
  Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from 
Nebraska [Mr. Christensen], a respected member of the Committee on Ways 
and Means.
  (Mr. CHRISTENSEN asked and was given permission to revise and extend 
his remarks.)
  Mr. CHRISTENSEN. Mr. Speaker, I rise today to speak in favor of a 
provision that will help senior citizens in my home State of Nebraska, 
and throughout the country.
  What I am referring to are the provisions in this bill that 
dramatically improve the way we treat long-term care, making long-term 
care more affordable and accessible.
  This bill puts long-term care on a level playing field with other 
important forms of insurance and provides a much-needed incentive for 
individuals to take personal responsibility for their long-term care 
needs.
  First, this legislation requires that long-term care insurance be 
treated like accident and health insurance, meaning that it will 
generally be excluded from an employee's gross income for tax purposes.
  Second, thanks in large part to my colleague Mr. Ensign from Nevada, 
this bill provides that many long-term care expenses will now be 
deductible.
  We as a nation must come together in a bipartisan fashion to put an 
end to a long-term care system that pulls seniors into poverty and 
forces taxpayers to step in to bear the burden.
  This legislation does just that.
  Once again we are doing what we said we would do by ensuring a bright 
future for our senior citizens.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York [Mr. Rangel].
  (Mr. RANGEL asked and was given permission to revise and extend his 
remarks.)
  Mr. RANGEL. Mr. Speaker, I think the Republicans should be lauded for 
attempting at least to pick up the pieces of what has to be a concern 
to all Americans, and that is inadequate health care for most of our 
citizens, especially those people who are working and do not have 
access to insurance. They are not insured by the Federal Government, 
because they make too much money, and, of course, they do not have 
enough money to get their own insurance.
  But why the Republicans would come in with an insurance plan that 
allows tax exemptions for people who can afford just to put it in a 
bank account and if they make certain that it is a high deductible, 
that is that the only time that they can use it is for catastrophic 
diseases, then it just seems to me that what we are doing is allowing 
the insurance companies to cherry-pick and select those people who are 
healthy and then those people who are not insured by that can come 
right back and fall on the regular public system that is there.
  What we do need is a comprehensive insurance program that really was 
the one that was initiated before, and perhaps it was too much to 
consume at one time, but we cannot forget that there are 40 million 
people out there in the United States that have no insurance at all, 
and these are the people that are the most vulnerable and these are the 
people that cannot afford to have these type of savings accounts which 
are there to protect those who already have.
  I think that instead of just selecting those parts of the people that 
they believe would give political support, that what we have to have in 
this country is an insurance, a health insurance system where every 
American, regardless of how much money they have or whether they do not 
have any at all, can say in this great country that people will not die 
just because they lack access to health care.
  All over we see we are cutting back the public share. If we want to 
do more in the private sector, let it be fairer.
  Mr. ARCHER. Mr. Speaker, I yield myself 1 minute.
  I think the debate, Mr. Speaker, has been very curious today. On the 
one hand, the Democrats accuse us of overreaching, of having too 
comprehensive a bill. This is from the same people that gave us the 
unbelievably complex Government takeover of the entire health care 
system in 1994. It is fascinating. And then they come and say, oh, we 
are concerned about insurance companies taking a part of the money paid 
on the premiums and not spending it on health care, but they want to 
deny medical savings accounts where the individual spends his or her 
own money without regard to a third-party payer.
  There is an enormous inconsistency here, but in a sense it is 
consistent because in 1994 they wanted to deny choice to the people of 
this country and now they want to deny choice to the people of this 
country to have their own medical savings accounts.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself the balance of my time.
  I would just suggest that the Republicans would like to spend almost 
$4 billion on long-term care insurance at the same time they cut $90 
billion out of Medicaid, which pays for long-term care for the poorest. 
It is true that we had a bill that would have provided health insurance 
to all Americans, and there are 40 million Americans out there 
uninsured who obviously the Republicans do not give a hoot about. All 
they care about are the rich, who can enjoy the medical savings 
accounts.
  So if you do not have insurance and your children do not have 
insurance, the Republicans are doing nothing. If you are very rich or 
you know some rich people, they get helped by this bill.
  The Dingell-Spratt-Bentsen amendment would be the bill to support, 
which would get us the Roukema-Kennedy-Kassebaum bill, which does all 
the good things on a bipartisan basis that we need to do and does away 
with the claptrap that has been added on to this bill with the awful 
intention of killing it, which to me is cynical, and it is cynical 
because it is going to hurt the poor and the elderly while it helps the 
rich, like Ross Perot and the friends of the Republicans. And that is 
not what this country needs.
  We have 40 million people who do not, whose COBRA benefits could 
protect them; 3\1/2\ million who will expire. The Republicans voted 
against extending it.
  Support the Dingell-Spratt-Bentsen amendment.
  Mr. ARCHER. Mr. Speaker, I yield the balance of my time to the 
gentleman from California [Mr. Thomas], the highly respected, helpful 
creator of a big part of this bill, the chairman of the health 
subcommittee of the Committee on Ways and Means.
  Mr. THOMAS. Mr. Speaker, I thank the chairman, the gentleman from 
Texas [Mr. Archer], for yielding me this time. I want to compliment him 
as I want to compliment the chairmen of the other committees, the 
gentleman from Virginia [Mr. Bliley] and the gentleman from 
Pennsylvania [Mr. Goodling]. It really is exciting, and I am pleased 
that this new majority for the first time in more than 40 years has a 
work product on the floor that could not be produced by the former 
majority.
  The Democrats had more than 40 years. In fact, it has been more than 
10 years since the last health insurance bill has been on the floor. 
The Democrats owned Washington in the entire 103d Congress; the 
Democrats had a majority in the House. They had a majority in the 
Senate. They had a President. Not one product to deal with the plight 
of the American worker, so eloquently described by the Democrats

[[Page H3090]]

over and over again, on this floor ever came to the floor. We were 
never provided the opportunity to help. We had the opportunity to hear 
of the plight of the poor worker just as we did a few minutes ago. The 
gentlewoman from Connecticut talked about that poor beleaguered person, 
and I am sure he is and he has been for a long time and he was during 
the entire time the Democrats were in the majority.
  The major committees in the House, not just one committee, the major 
committees of responsibility have come together and we have produced 
H.R. 3103. It is not too much, it is not too little, it is just about 
right for responsible and reasonable health care reform. We have 
actually accomplished a modest improvement for the self-employed. We 
moved their deductibility from 30 percent to 50 percent, prospectively. 
That is really all that we thought was prudent and appropriate.
  Criticism from the minority over this? We do not do enough, fast 
enough. Who was it that left those same self-employed without any 
protection whatsoever for the entire calendar year of 1994? All of a 
sudden they want to do something for these people. When they were in 
control they did absolutely nothing. They allowed the deductibility for 
health care to lapse. When you were running the place, why were not you 
more responsible?
  H.R. 3103 reforms tort law in the area of medical malpractice. Is it 
radical? Half the States limit noneconomic damages. Is it 
controversial? Last March, with 247 votes, 44 Democrats, 23 from the 
North, 21 from the South, joining the new majority, the responsible 
Democrats and the Republicans passed medical malpractice reform. We put 
it in the product liability bill. The exact same language as passed the 
floor of the House is in this bill. We have put together increased 
penalties for fraud and abuse. Tougher rules, stiffer penalties. We 
find it, we fix it, and we make sure that we can fight it. Stiffer 
penalties, stronger rules. What is wrong with requiring the government 
to tell people when they ask the government is this OK?

  What is wrong with advisory opinions? Apparently, the gentleman from 
California [Mr. Stark] did not find anything wrong with advisory 
opinions last June, outside the context of the political responses we 
have been hearing today. In H.R. 1912, the gentleman from California 
[Mr. Stark] introduced a bill to deal with health care fraud and abuse. 
On page 41, the gentleman from California has a provision, subtitled 
(d), advisory opinions, on kickbacks, and self-referrals.
  We also have greater availability and greater affordability of health 
insurance, you have heard from many of my colleagues in the area of 
medical savings accounts. We have heard over here from the minority, 
how horrendous is this provision. Well, is it really? It is choice. It 
does not say that you must, it says you can. It does not say you shall, 
it says you may. It is a choice. It is one more choice. Possibly it is 
a product that people who now cannot find a product in the marketplace 
will use.
  Who are those people? We have heard the profile of those individuals 
characterized as the healthy and the wealthy. Take a look at, again, 
the chart that the gentleman from Texas, Mr. Sam Johnson, focused on. 
According to the Joint Tax Committee, 51 percent of the people who are 
going to find this a useful product are in the $50,000 to $74,000 
range, middle class. On the far right of the chart that is $100,000 and 
above; that is everybody who makes more than $100,000, $200,000, 
$300,000, $400,000, a million. That is out there less than 12%. That is 
that enormous group on the other end of the chart. Let us look at the 
lower end, from $40,000 to $49,000, 13 percent, from $30,000 to 
$39,000, 11 percent, the vast majority of people who will find this 
product usable are the middle and the lower middle class.

                              {time}  1915

  What is wrong with small employers being able to voluntarily pool 
their resources so they can save on their health insurance, just like 
large employers? We begin to make sure that people who more and more 
need to invest in long-term health care, their cost of the insurance, 
and the cost of the health care itself, thanks to the gentleman from 
Nevada, an amendment in the Committee on Ways and Means, will be 
allowed under the Tax Code. Long overdue, and never done by the 
Democrats when they were in the majority.
  Finally, the heart of the matter: The American worker will no longer 
have to worry about changing jobs or losing insurance.
  H.R. 3103 is a good bill support it.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Virginia [Mr. Bliley] is recognized for 22\1/2\ minutes and the 
gentleman from Michigan [Mr. Dingell] is recognized for 22\1/2\ 
minutes.
  The Chair recognizes the gentleman from Virginia [Mr. Bliley].
  Mr. BLILEY. Mr. Speaker, I yield myself such time as I may consume.
   Mr. Speaker, I rise in support of the substitute to H.R. 3103, The 
Health Coverage Availability and Affordability Act of 1996. During my 
tenure in Congress, I do not recall the House ever passing a health 
insurance market reform bill. We are about to take an historic action 
to change that.
  The legislation before you today makes real reforms, and most 
importantly, it makes health insurance coverage both available--and 
affordable--for millions of Americans.
  The substitute represents a consensus agreement that was developed as 
a result of the provisions that were reported out of the Commerce 
Committee, as well as those developed by the Committee on Ways and 
Means, the Committee on the Judiciary, and the Committee on Economic 
and Educational Opportunities. It is designed to address the 
interrelated issues of accessibility and affordability of health 
insurance coverage.
  The provisions of this bill within the jurisdiction of the Commerce 
Committee are designed to deal with the difficult problem of job lock, 
or, put more simply, an employee's reluctance to change jobs because of 
pre-existing condition exclusions in health care coverage. This bill 
will ensure that individuals who have an opportunity to move to new or 
better jobs will not have to face limitations in their coverage for 
pre-existing medical conditions that will affect them or their 
families. This bill will also assure people in group health plans that 
they cannot be excluded from coverage, or from renewing their coverage, 
based on their health status. It provides limits on the period of 
exclusion for a pre-existing condition and assures that, once covered, 
the condition will not be excluded from future coverage if the 
individual meets the requirements of the bill.
  The Commerce Committee reported provisions also provide for 
guaranteed availability of coverage to employees in the small group 
market. Each insurer that offers coverage in the small group market 
would have to accept every small employer and every eligible individual 
within the group.
  The bill would also ensure portability of health insurance for 
qualifying individuals moving from group to individual coverage. This 
is accomplished by giving States flexibility to achieve individual 
coverage through a variety of means that include risk pools, group 
conversion policies, open enrollment by one or more insurers and 
guaranteed issue.
  The bill also contains a number of other provisions which we strongly 
support. It allows small employers to take advantage of pooling so they 
can purchase affordable health insurance coverage. It reforms the 
medical malpractice system which will help contain costs and it 
provides for new health choices for those who want to purchase medical 
savings accounts.
  It also includes provisions on fraud and abuse and administrative 
simplification. The General Accounting Office has estimated that fraud 
and abuse accounts for one out of every ten dollars spent on health 
care. Regrettably, fraud and abuse not only contributes to the ever-
increasing cost of health care, it also leads to a lack of confidence 
in the health care system and its providers. Providing concrete laws 
and guidelines and stringent penalties for violations will ensure the 
continued integrity of the nation's health care system.
  The administrative simplification provisions are needed to ensure 
that there are standards for the transmission of financial and 
administrative data. Much of this information is currently transmitted 
in an electronic format. However, there is not a uniform

[[Page H3091]]

standard and there are no consistent security standards or safeguards 
regarding the use of this information.
  I urge my colleagues to join me in supporting this bill which will 
begin to help solve some very real problems for many Americans.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield myself 3 minutes.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, today we choose between the people who 
carry a lunchbox to work, and the people who carry Gucci briefcases and 
wear imported loafers.
  The people who carry lunchboxes aren't asking for special favors or 
special treatment. They're not asking for a tax loophole. What they 
want is very simple. When they change jobs, or if they fall prey to 
downsizing, or if a loved one contracts cancer or diabetes, they want 
to be able to buy health insurance. That's all.
  I am afraid that this very modest request from the people who carry 
lunchboxes is going to fall on deaf ears in this House. The majority 
has instead constructed a monument to the influence industry.
  We can pass a bill that makes health insurance portable and prohibits 
discrimination or restrictions because of pre-existing conditions. This 
simple bill would help 25 million Americans. Another provision in this 
bill on the tax deductibility of health insurance for the self-employed 
would help 3 million Americans.
  We could pass that bill, sail it through the Senate, and have it on 
the President's desk for signature tonight. Instead, we're going to be 
voting on a Christmas tree bill adorned with ornaments for various 
special interests. And like a Christmas tree, it's soon going to be put 
out on the lawn for garbage pickup.
  I know whose side I'm on. I'm voting with the people who carry 
lunchboxes. I urge my colleagues to do the same.
  Mr. Speaker, I submit the following material for the Record:

                        Health Care? You Compare


                          H.R. 3103 Base Text

       A stripped-down Roukema/Kassebaum bill: no choice of plans 
     for workers who lose their jobs; no guarantees for businesses 
     with more than 50 workers; preempts State laws that protect 
     consumers.
       Limits deductibility of health insurance premiums for the 
     self-employed to 50%.
       Controversial Medical Savings Accounts.
       Controversial medical malpractice law changes.
       Controversial repeal of protections for seniors so they 
     won't be ripped off by sale of useless, duplicative health 
     insurance policies.
       Controversial provisions overriding state insurance laws.
       Controversial provisions making it harder to find and 
     punish wrongdoers.


                         Dingell/Spratt/Bentsen

       A clean Roukema/Kassebaum bill: full portability; 
     protection against discrimination due to preexisting 
     conditions; guaranteed renewal.
       Increases deductibility of health insurance premiums for 
     the self-employed from 30% to 80%.
       No other controversial provisions to weigh down the bill, 
     slow down the conference, or provoke a Presidential veto.
       Keep it simple. Keep it clean. Give the American people 
     what they need.
       Support the substitute. Oppose H.R. 3103's base text.

  Mr. Speaker, I reserve the balance of my time.
  Mr. BLILEY. Mr. Speaker, I yield myself 30 seconds to respond to my 
good friend, the gentleman from Michigan.
  What a difference, my colleagues, 2 years makes. On this very night, 
the night before we broke for our Easter recess, 2 years ago, I sat 
over there next to my then chairman, the gentleman from Michigan, and 
said, ``Mr. Chairman, the President's bill is too heavy. It is too 
much. It is socialized medicine. We can't move it. We ought to take up 
the Rowland-Bilirakis bill, bipartisan bill, which was modest, like our 
bill, and deal with it and mark it up in committee.'' He said ``It 
can't be done. I am sorry.'' Now he is back. What a difference.
  Mr. Speaker, I yield 5 minutes to the gentleman from Florida [Mr. 
Bilirakis] the chairman of the subcommittee.
  Mr. BILIRAKIS. Mr. Speaker, I thank the gentleman for yielding me 
time.
  Mr. Speaker, I am pleased to be here today to add my voice to those 
in favor of health care reform for America's families.
  I must say that this moment is both satisfying and, at the same time, 
deeply ironic. For, now, the House finally has the opportunity to 
approve health care reforms many of us have advocated for many years. 
The irony lies in the fact we could have accomplished many of these 
reforms over 2 years ago if the former leadership had been willing to 
act and the current administration willing to compromise.
  Despite all the political attacks you may hear today--and make no 
mistake, they are political attacks--health care reform is an idea 
whose time has come--again and again. The problems we seek to fix today 
we identified long ago along with many of the solutions contained in 
this legislation.
  Many of you in this Chamber may remember that during the 103d 
Congress, Congressman Roy Rowland and I introduced consensus health 
reform legislation. The Rowland-Bilirakis bill was the only true 
bipartisan bill--but we never got our day in court. Not one vote was 
ever scheduled on our proposal despite broad support for the provisions 
contained in the bill.
  Despite the great hue and cry in 1994 for reform, my own Commerce 
Committee did not even schedule a markup on my bill--or any other 
version of health reform. Today, we have the opportunity to change all 
that.
  We finally have the opportunity to cast a historic vote on a health 
reform package which contains many of the items advocated by the 
Rowland-Bilirakis bill in the last Congress.
  Like my previous proposal, this legislation will raise deductions for 
the self-employed, enact provisions on fraud and abuse, promote 
administrative simplification, establish pooling for small employers, 
provide for medical malpractice reform, and ensure insurance 
portability.
  To be sure, not all items in this legislation are precisely as we 
proposed back in 1994. But many of the core items have been subject to 
bipartisan agreement in the past and should now be viewed in a similar 
light. I urge my colleagues, on both sides of the aisle, to set aside 
any remaining differences and pass this bill.
  Indeed, it is thus somewhat mystifying when I hear that this bill is 
somehow too loaded up. And it is a little more than ironic when the 
main criticism of the previous Rowland-Bilirakis bill was that it 
didn't do enough.
  You can't have it both ways. We have to do something to resolve 
problems in our health care system now, in this Congress. We never had 
the chance in 1994.
  Health care is too expensive. This bill will help make health care 
more affordable for millions of families. Access to health care is too 
restricted--this bill allows policies to be carried from one job to 
another. Too many people have too few choices with regard to health 
care--this bill will expand the number of opportunities we all have to 
secure an effective health care plan for our family.
  These are problems we can solve now and which will improve the lives 
of millions of working Americans. We cannot let this moment pass 
without passing this bill. I strongly urge my colleagues to support our 
efforts to improve our Nation's health care delivery system and help 
make health care in this country both more accessible and affordable.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from New Jersey [Mrs. Roukema].
  (Mrs. ROUKEMA asked and was given permission to revise and extend her 
remarks.)
  Mrs. ROUKEMA. Mr. Speaker, I am very happy to be here today. Many of 
my colleagues know that I am the House sponsor of the Kassebaum-Kennedy 
health insurance reform package. If I had my way, we would be debating 
and quickly passing a clean version of that legislation.
  The portability and the guaranteed issue that it will deliver to 30 
million Americans now.
  Kassebaum-Kennedy-Roukema is legislation that has been cosponsored in 
the House by a wide multitude of bipartisan support and in the Senate, 
Senate Committee on Labor and Resources, it was passed unanimously. It 
deserves bipartisan support.

[[Page H3092]]

  The American people want health care reform, and they need it. They 
are sick and tired of partisan bickering and political gamesmanship. 
They want results and they want them now.
  Unfortunately, I fear the Hastert omnibus bill will inevitably lead 
to more gridlock and inaction. I fear that, in the end, the American 
people will not get the common sense reforms that they deserve.
  I think it should be noted right here and now that within the last 24 
hours, two prominent Republican leaders in the Senate, Senator 
Kassebaum and Senator Bennett, have confirmed their firm opposition to 
an omnibus bill. I think we should keep that in mind today.
  I expect that if this should be blocked and it should end up in 
gridlock, I expect that the American people will hold us responsible in 
November.
  Now, do not get me wrong. Some of the reforms that are not part of 
the Kassebaum-Roukema bill, such as medical malpractice reforms, I have 
supported in the past and will continue to support. But let us 
understand and be frank about it. Whether we support them or do not 
support them, the key components, malpractice, expansion and medical 
savings account, let us understand and be frank about that, that 
medical malpractice reform, medical savings account and ERISA expansion 
are controversial components. They are controversial, they are complex, 
and they demand individual consideration as individual pieces of 
legislation.
  Mr. Speaker, I again say that we must answer to the American people 
and pass this legislation in its clean form tonight.
  Mr. Speaker, I rise this evening in support of commonsense health 
insurance reform.
  Many of my colleagues know that I am the House sponsor of the 
Kassebaum-Kennedy health insurance reform package. If I had my way, we 
would be debating and quickly passing a ``clean'' version of the 
Kassebaum-Roukema plan today and the portability and guaranteed issue 
that it presents to 30 million Americans.
  Kassebaum-Roukema is legislation that has been cosponsored by 193 
House members, and which the Senate Labor and Human Resources Committee 
approved unanimously.
  The American people want healthcare reform. They are sick and tired 
of partisan bickering and political gamesmanship. They want results and 
they want them now.
  Unfortunately, I fear the Hastert omnibus package will inevitably 
lead to more gridlock and inaction. And I fear that, in the end, the 
American people will not get the commonsense reform they deserve.
  And it should be noted that within the last 24 hours 2 prominent 
Republican leaders in the Senate have confirmed their firm opposition 
to an omnibus bill.
  Should that happen, I expect the American people to hold the 104th 
Congress accountable, as well they should.
  Now don't get me wrong. Some of the reforms in H.R. 3103 that are not 
part of the Kassebaum-Roukema plan--such as medical malpractice 
reforms--I have supported in the past, and will continue to support in 
the future.
  However, there can be no doubt that certain elements of the 
underlying bill (such as medical malpractice reform, medical savings 
accounts, and an ERISA expansion) should be fully debated by the 
Congress on a case-by-case basis--not wrapped-up into one gigantic 
package. Each one of these components are complex and controversial and 
should be properly considered independently.
  In the past, I have been a very strong advocate of medical 
malpractice reforms so that physicians can stop practicing defensive 
medicine in order to insulate themselves from frivolous lawsuits that 
only lead to over-utilization of the health care system and higher 
liability insurance premiums. I will vigorously support these reforms 
in the future as well.
  Nevertheless, I recognize that medical malpractice reform is a very 
controversial idea that faces serious obstacles in the Senate, and 
perhaps a veto by President Clinton.
  With regard to medical savings accounts, I have some very serious 
reservations about this idea.
  While the notion of empowering individuals to make their own health 
care decisions has a certain amount of merit, I am concerned that 
medical savings accounts could, in the long term, serve to ruin the 
health insurance market.
  Medical savings accounts could serve to segregate the population into 
two groups: Young, healthy people using medical savings accounts and 
older, sicker people in conventional health plans. If this kind of 
risk-segmentation happened, the health insurance premiums for older, 
sicker individuals would sky-rocket beyond imagination.
  I refuse to support health reform legislation that makes this 
scenario a reality. Medical savings accounts should be reviewed and 
debated on their own merit--not as part of some, larger package.
  Finally, I want to discuss my concerns about those provisions in the 
omnibus package that expand the ERISA pre-emption of state insurance 
laws.

  For many years, I served as the ranking minority member of the then 
House Education and Labor Subcommittee on Labor and Management 
Relations, which had jurisdiction over ERISA, the Federal law governing 
employee benefits such as health care or pensions.
  The single, most important lesson I learned about ERISA from my time 
on the subcommittee was this: the more you think you've learned about 
ERISA and how it works, the more you realize how little you truly know.
  I am increasingly of the view that while ERISA as originally devised 
served a useful purpose, we need a new ERISA for the modern context.
  As more and more employers self-insure, thereby receiving a pre-
emption from any State insurance rule, regulation or law, employees 
find themselves at the mercy of their employer's choice of health 
benefit plan.
  For example, New Jersey and other States have enacted laws that 
require at least 48 hours of hospitalization coverage for women giving 
birth. These laws are a response to the efforts of managed care 
networks to discharge women, and their newborn children, within 24 
hours of labor and delivery.
  When employers self-insure, their employees do not receive the 
benefit of any of these protections because of the ERISA preemption.
  With the expected rapid growth in managed care networks and their 
enrolles in the future, this trend will only get worse, not better.
  Consequently, rather than the significant expansion of the current 
ERISA as envisioned in H.R. 3103, I believe we need to carefully 
examine ERISA and devise a new form of this law to meet our current 
needs.
  We should not be considering any ERISA expansion as part of a larger 
package, where these kinds of issues get lost in the shuffle.
  Passing a clean version of the Kassebaum-Roukema plan avoids all of 
these problems. I hope that we don't let this golden opportunity to 
slip through our collective fingers.

                              {time}  1930

  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from Iowa 
[Mr. Ganske], a valued member of the committee.
  Mr. GANSKE. Mr. Speaker, this bill will help fix a health care system 
that has been beyond the means for many Americans.
  Now a worker who wants to pursue his career but cannot change jobs 
because of an illness in the family would be covered by a new 
employer's insurance, group-to-group portability. Now an employee who 
is laid off or between jobs and cannot get individual coverage for his 
preexisting condition would be able to get coverage, group-to-
individual portability. Now the small business employee, whose employer 
cannot afford to purchase insurance for the firm's five employees 
because one of them has a chronic illness, would be able to better 
afford health insurance.
  Mr. Speaker, this bill makes it easier for Americans to get and keep 
health insurance. It is important that this bill includes medical 
savings accounts. They will return control over health care spending to 
consumers, save money, and lower health care overutilization. I am 
pleased that this bill also increases the health insurance deduction 
for self-employed individuals from 30 percent to 50 percent by the year 
2003. While big businesses have been able to deduct all their health 
care costs, millions of self-employed individuals have been left 
without a similar benefit. That is not fair. We must give people more 
incentives and more options to carry health insurance for their 
families.
  The Health Coverage Availability and Affordability Act will also 
crack down on fraud and abuse, saving millions of dollars. This, too, 
would keep the cost of your premiums down.
  Mr. Speaker, finally, medical malpractice reform will help hold down 
the cost of defensive medicine and help keep premiums down. If health 
care is more affordable, more people will have real access to it.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the gentleman from New 
Jersey [Mr. Pallone].
  Mr. PALLONE. Mr. Speaker, I am so pleased that my colleague, the 
gentlewoman from New Jersey [Mrs. Roukema] spoke just before me, 
because basically she pointed out that what we

[[Page H3093]]

really need tonight is a clean bill, not loaded down with medical 
savings accounts and all the other things that are being suggested by 
the Republican leadership.
  Mr. Speaker, the gentlewoman was trying to address portability and 
preexisting conditions, essentially expand coverage for many people now 
who cannot get coverage, and also keep health insurance affordable, and 
she achieves that essentially by saying that if you lose your job or 
change jobs, the insurance companies still have to provide you with 
individual coverage. She also limits the situations where the insurance 
companies can refuse to cover you because of preexisting medical 
conditions.
  This is a very modest bill. We, on the Democratic side, managed to 
get 172 Members here to cosponsor her bill. In the Senate, there are 54 
current cosponsors of the Kassebaum-Kennedy bill, so we know we can 
move this legislation, and the legislation is good because it is very 
modest. It basically keeps the insurance pool intact. It does not 
encourage healthy people to opt out. It does not bring in a lot of new 
people who are unemployed or who cannot afford insurance or who are 
critically ill that would increase the costs of health insurance.
  But lo and behold, what do we get from the Republican leadership? 
They throw in the medical savings accounts, and what does that do? It 
breaks the risk pool. It breaks the insurance risk pool. Essentially 
what it does is to encourage healthy people and wealthy people to opt 
out and buy catastrophic coverage and get a tax break to put their 
money aside and leave everyone else in this risk pool so that they have 
to pay higher premiums, because it is going to cost more to insure 
them. It does the very thing, the very opposite, if you will, of what 
the gentlewoman from New Jersey, Mrs. Roukema, and Senators Kassebaum 
and Kennedy strove to do.
  Mr. Speaker, what will be the ultimate result of increasing the costs 
of health insurance who remain and do not opt for the medical savings 
accounts? there will be fewer people insured, fewer people insured.
  Mr. BLILEY. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from New Mexico [Mr. Richardson].
  (Mr. RICHARDSON asked and was given permission to revise and extend 
his remarks.)
  Mr. RICHARDSON. Mr. Speaker, the chance for basic bipartisan health 
care reform may be slipping away, because some have taken a good idea 
and loaded it up with a lot of gifts to special interests. Why do we 
not put the American people first for a change?
  Mr. Speaker, we all agree there are a few minor changes that we could 
make to our health care system that would cost the American taxpayer 
nothing, would offer security to millions of Americans in need of basic 
health care coverage. I say let us do those things that we can agree 
on. That is preexisting condition and portability.
  We have to stop the unjust practice of denying those with preexisting 
conditions insurance coverage. Many people who need insurance the most 
cannot get it because of these preexisting conditions. Another 4 
million Americans who have insurance are afraid to leave their jobs, 
fearing that they never might be insured at another job again.
  Mr. Speaker, we should ask ourselves, how many are throwing 
themselves, begging for a medical savings account? That is for the 
healthy and for the wealthy. All our constituents are definitely 
knocking down our doors, demanding us to cut important services like 
medicare and medicaid and education so that we can spend billions on 
creating medical savings account.
  There are too many controversial malpractice reforms in this bill. 
Why do we have to load it up? Why can we not do like the other body 
does and for a change let us say they have taken the right path and 
pass a bill like Roukema-Kennedy-Kassebaum. That is what we were 
elected to do. We all said we would do it. Now we have other political 
agendas that might prevent a good bipartisan health package from being 
enacted.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Georgia [Mr. Norwood].
  Mr. NORWOOD. Mr. Speaker, I rise today in support of the Health Care 
Coverage Availability and Affordability Act. In this time of economic 
insecurity and increasing pressure on America's working-class families, 
this bill is a common sense approach to health care access that also 
makes health care more affordable. In 1993, the Clinton administration 
and the liberals in Congress lined up behind the big government 
socialized medicine plan. This plan was an utter failure, not because 
the American people did not want security in their health coverage but 
because it was the wrong approach, though our Committee on Commerce in 
the 103d Congress had the right approach with the gentleman from 
Florida [Mr. Bilirakis] and Dr. Rowland of Georgia.
  H.R. 3103 takes the right approach in dealing with their anxiety, 
ensuring that people who change or lose their jobs will have access to 
health care, regardless of preexisting conditions. This is important 
and deals with the same issues as the Kassebaum bill. However, while 
this is a good starting point, it just does not go far enough. 
Providing portability is important but on its own, it fails to deal 
with the forces that drive health care costs higher.
  Mr. Speaker, it is nonsense to tell the American people that we will 
increase their access to health care without making health care more 
affordable. If we do nothing to bring down the cost of health care, we 
have the same old problem. We will be told that some provisions were 
included in this bill to kill health care reform. That is bull. 
Increasing access and reducing health care costs are two sides of the 
same coin.
  This bill attempts to remove the influence of the trial lawyers in 
medicine by reforming the medical liability system. It gives young 
people, a large portion of whom do not have coverage, more health care 
choices. We must pass H.R. 3103.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the gentleman from 
Massachusetts [Mr. Studds].
  Mr. STUDDS. Mr. Speaker, if I might have the attention of the 
distinguished chairman.
  Am I correct that his bill prohibits group health plans or insurers 
offering coverage through group health plans from requiring a 
participant to pay a premium contribution that is greater than a 
premium contribution for a similarly situated participant or 
beneficiary solely on the basis of the health status of the participant 
or beneficiary?
  Mr. BLILEY. Mr. Speaker, will the gentleman yield?
  Mr. STUDDS. I yield to the gentleman from Virginia.
  Mr. BLILEY. Mr. Speaker, the gentleman is correct.
  Mr. STUDDS. Am I further correct that the word ``solely'' in this 
provision means that there can be no discrimination at all in the 
setting of premium contribution amounts for a participant on the basis 
of health status?
  Mr. BLILEY. Mr. Speaker, if the gentleman will continue to yield, the 
gentleman is correct.
  Mr. STUDDS. Mr. Speaker, although I am somewhat underwhelmed by both 
of the propositions before us, I think this is a significant step in 
the right direction.
  Mr. BLILEY. Mr. Speaker, how much time is remaining on both sides?
  The SPEAKER pro tempore (Mr. Combest). The gentleman from Virginia 
[Mr. Bliley] has 11 minutes remaining, and the gentleman from Michigan 
[Mr. Dingell] has 12\3/4\ minutes remaining.
  Mr. BLILEY. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from Maryland [Mr. Hoyer].
  (Mr. HOYER asked and was given permission to revise and extend his 
remarks.)
  Mr. HOYER. Mr. Speaker, I rise in support of the Kassebaum-Roukema-
Kennedy legislation. I rise lamenting the fact that we will not take 
``yes'' for an answer. Very frankly, the Kennedy-Kassebaum-Roukema bill 
was bottled up in the Senate until the heat got so high recently that 
the Republican in the Senate who then publicly admitted holding up the 
bill said no, let it go forward.
  Mr. Speaker, all of us in a bipartisan way agree that we ought to 
preclude

[[Page H3094]]

preexisting conditions being an impediment to our citizens getting 
insurance. All of us believe that people ought not to be locked into 
their jobs because they do not have portability of health care security 
through their insurance. All of us believe that in a bipartisan way. 
That is what the gentlewoman from New Jersey [Mrs. Roukema] was saying. 
That is what Senator Kassebaum is saying from Kansas. But we are having 
trouble taking yes for an answer.
  Mr. Speaker, I personally believe that the medical savings account, 
although superficially appearing to provide some options, in fact will 
increase the cost for those who are less healthy and less wealthy. That 
is not just a fancy phrase. I think it is reality.
  In addition, as my colleague, the gentleman from Maryland [Mr. 
Cardin] expressed when he spoke on Ways and Means, our State is very 
concerned about precluding it from making determinations. In fact, we 
are stopping States from having the flexibility that our Republican 
colleagues say they ought to have.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida [Mr. Stearns], a distinguished member of the committee.
  (Mr. STEARNS asked and was given permission to revise and extend his 
remarks.)
  Mr. STEARNS. Mr. Speaker, I rise in support of the Archer/Bliley bill 
because I believe the issue of genetic privacy is of tremendous 
importance. I introduced H.R. 2690, the Genetic Privacy and 
Nondiscrimination Act of 1995. My bill would ban discrimination based 
on a person's genetic profile.
  I wish to acknowledge my colleague and good friend Representative Joe 
Kennedy who is helping me on the other side of the aisle. He and I are 
working together on this bill.
  With new forms of genetic testing able to reveal an individual's 
likelihood of contracting a number of diseases, the possibility arises 
that employers and health insurers could use that information to 
discriminate.
  This is a civil rights issue. People who are already at risk due to 
their genetic makeup shouldn't have to worry about the additional 
hardship of losing their job or health insurance.
  Like a companion bill introduced by Senators Mark Hatfield and Connie 
Mack, H.R. 2690 would also ban the disclosure of genetic information by 
anyone without the written authorization of the individual. This 
safeguard would protect the privacy of individuals who would rather 
their genetic information be kept private.
  I am pleased that I was able to add a portion of my bill to the 
Archer-Bliley bill.

                              {time}  1945

  Genetic testing has proved effective in certain cases, and it can be 
argued that the detection of a gene or a certain genetic characteristic 
will not necessarily result in the onset of a particular illness. So, 
we have an ambiguity here. We have an opportunity where somebody could 
have a defect which somebody would interpret different ways which would 
prevent them from having good health care insurance.
  Genetic testing is moving along, as we all know, and it raises many 
ethical and legal and social questions relating to access to genetic 
testing, insurability and employability, and we need to make this 
confidential. The purpose of the Genetic Privacy Act, which I have 
provided, is to establish some guidelines concerning disclosure and use 
of genetic information with the goal of balancing the rights of the 
individuals against the needs of society.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from New Jersey [Mr. Menendez].
  (Mr. MENENDEZ asked and was given permission to revise and extend his 
remarks.)
  Mr. MENENDEZ. Mr. Speaker, I rise in support of the substitute which 
gives us an opportunity to pass a reform we know will be signed by the 
President.
  In the last Congress we saw the demise of comprehensive health care 
reform, and those who objected to that initiative said that it was too 
much. We ended up with nothing. Hundreds of thousands of New Jerseyans 
and millions of Americans continued to languish in the insecurity of no 
health care coverage.
  Today we can address one major concern of millions of working 
Americans, the fear of moving from job to job because of the possible 
loss of comprehensive health insurance. We can eliminate the condition 
referred to as job lock and free up opportunities for working men and 
women to seek new employment.
  We also have an opportunity to provide necessary protection for those 
Americans with preexisting illnesses who are trapped in a job solely 
because of their inability to become insured if they leave their 
position. We have the opportunity to eliminate the discriminatory 
practice of denying continued health care to people with diabetes and 
other illnesses for which insurance coverage has been nearly impossible 
to obtain.
  But the committee's bill contains provisions which are unacceptable 
to the President, the Senate and which, if included, may end any hope 
of enacting even modest health care reform, and I hope this is not the 
cynical reason behind the bill.
  Twenty-five percent of my constituents have no health care insurance 
whatsoever. If we have to enact health care reform one step at a time, 
so be it. But let us take the first step today by insuring more people, 
liberating them in their choices through the adoption of the Democratic 
substitute.
  Mr. BLILEY. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from 
Pennsylvania [Mr. Fox].
  Mr. FOX of Pennsylvania. Mr. Speaker, I rise to support the Archer-
Bliley bill, which will be the antidote to the problem we have in the 
United States of making sure we have sufficient coverage for all 
Americans.
  As my colleagues know, the United States spends far more per capita 
on health care than any other major Nation in the world. But yet 
despite the rising costs of health care, millions of Americans are 
without health insurance and millions more expected to join the ranks 
of the uninsured.
  The solution to the problem, I believe, Mr. Speaker, is in fact 
contained in H.R. 3103. The reforms before us here tonight in the House 
reform current health care insurance practices to make health insurance 
more available and more affordable.
  The bill encourages insurance companies to provide coverages to the 
workers who change from one-employer provided plan to another. It gives 
the portability everybody wants. They lose their job and move to a job 
without coverage. It allows small employers to join together to 
purchase group health insurance for the first time, to do so for their 
employees, and allows self-employed individuals, Mr. Speaker, to deduct 
increasing percentages of their health insurance premiums from their 
income taxes.
  This is an idea whose time has arrived, and I would ask for my 
colleagues to support this legislation for those reasons, but still a 
few more. It allows organizations such as trade associations and 
chambers of commerce to voluntarily associate to purchase health 
insurance which would be available to all member organizations. 
Further, it provides incentives to encourage individuals and their 
employers to make tax-deductible contributions in lieu of health 
insurance premiums.
  Finally, Mr. Speaker, it increases penalties for fraud.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Ohio [Mr. Brown].
  Mr. BROWN of Ohio. Mr. Speaker, three years ago the insurance 
industry spent $100 million to kill comprehensive health care reform . 
How many of these companies are ominously silent on this Gingrich 
special interest health care bill.
  One politically active insurance company located in Indiana would 
benefit handsomely under the Gingrich plan thinks to a special interest 
giveaway larded onto the Republican bill. Medical savings accounts will 
enrich a select group of high-end catastrophic providers, skim the 
well-off and the healthy out of the insurance pool, and increase costs 
for everyone left behind.
  This Gingrich special interest plan is a bill written by the 
insurance companies, of the insurance companies, and for the insurance 
companies. Approximately 40 million Americans are without health care 
and without health insurance. A majority of these Americans are from 
working families, working hard, paying their taxes, playing by

[[Page H3095]]

the rules. They need our help in this Chamber tonight.
  Mr. Speaker, pass the Dingell substitute. Defeat the Gingrich special 
interest bill.
  Mr. BILILEY. Mr. Speaker, I yield 1 minute to the distinguished 
gentleman from Georgia [Mr. Kingston].
  Mr. KINGSTON. Mr. Speaker, I find it appalling that the Democrats 
would bring in this special interest thing. The integrity of the 
debate; is it possible to have a honest debate any more at all?
  I mean if my colleagues want to talk about special interests, read 
yesterday's Hill newspaper article. The American Trial Lawyers just 
gave $2.2 million to candidates last year, 94 percent going to 
Democrats opposed to this bill because it has tort reform. My 
colleagues want to talk special interests? Weigh on in, because my 
colleagues are the ones who are in the pocket of the American trial 
bar.
  Let us get to the real issue here. Medical savings accounts gives 
choice to Americans. It takes it away from our Washington bureaucrat 
command and control allies and puts it in the hands of the American 
public where it belongs. That is what our constituents want, and once 
they start making their own decisions on health care, they are going to 
decide a whole lot of other things, like they may need somebody else to 
represent them in Congress.
  I think it is important to also know that our colleagues are standing 
one more time against small businesses by opposing legislation that 
would allow pet stores and clothing stores and barber shops to pool 
together and buy their insurance as a group.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Vermont [Mr. Sanders].
  Mr. SANDERS. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, more women in the United States are injured and killed 
through domestic violence than by automobile accidents, muggings, and 
rapes by strangers combined. Domestic violence is a terrible plague in 
American society.
  Given that reality, it is an absolute outrage that a number of 
insurance companies deny health insurance to women who have been 
battered and who have been victims of domestic violence. These 
insurance companies argue that domestic violence is a preexisting 
condition and that it might not be profitable for them to insure these 
women. Under these conditions women are being abused twice, first by 
their batterers and, secondly, by the insurance companies who refuse to 
insure them and their families.
  Mr. Speaker, I am delighted that both the Republican and Democratic 
health care bills before us tonight include an amendment which I 
offered which would once and for all put an end to this outrage. Women 
who are battered are entitled to health insurance just like anyone 
else.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from California [Mr. Cox], chairman of the Republican Policy 
Committee.
  Mr. COX of California. Mr. Speaker, I would just like to thank my 
colleague from Vermont. My understanding of his remarks is that he is 
pleased with the bill because it includes provisions that will make 
sure that domestic violence is covered, that it is not excluded from 
our protections as a preexisting condition.
  That is my understanding. Is that correct?
  Mr. SANDERS. Mr. Speaker, will the gentleman yield?
  Mr. COX of California. I yield to the gentleman from Vermont.
  Mr. SANDERS. Included both in the Republican bill and the Dingell 
bill as well, yes.
  Mr. COX of California. I thank the gentleman for pointing out that 
additional salutary impact of this legislation.
  There is something else in this legislation that I would like to 
highlight, in addition to the fact that it will solve the problems that 
we have all agreed need to be solved on preexisting conditions and on 
portability of coverage. That is reducing costs in the way that the 
Congressional Budget Office has told us is the most effective way 
possible.
  A September 1993 Office of Technology Assessment report said that a 
ceiling on noneconomic damages in medical lawsuits is the best way that 
we can get a grip on costs. Earlier in this session we have devoted our 
attention to this issue, and this Congress has, by overwhelming 
bipartisan vote, approved this kind of health care liability reform 
that, I want to point out, is also included in this bill and provides a 
very solid reason for voting for it.
  One of the key elements is what in California we call MICRA. It is 
health care cost control that we have had in place for many, many 
years. It was passed by a Democratic legislature, signed by a 
Democratic governor. It is bipartisan in this Congress, as well. I was 
very pleased to be the Member who offered this legislation in the first 
session of Congress and to see the strong bipartisan support that it 
won.
  We do have too many frivolous lawsuits, and, as a matter of fact, we 
can through this proven technique, already a law in California, control 
them for the benefit of every single individual insured person in 
America. Driving down health care costs this way is very, very 
important.
  Mr. DINGELL. I yield 1\1/2\ minutes to the distinguished gentleman 
from Massachusetts [Mr. Olver].
  Mr. OLVER. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, among the many provisions, hundreds of pages of 
provisions which the insurance industry added to the Kennedy-Kassebaum 
bill that passed the Senate with, God forbid, bipartisan support, the 
most insidious of those provisions are those that provide for the 
medical savings accounts because they would set off a chain reaction.
  First, they encourage the healthy and particularly the wealthy who 
can afford the high deductibles of MSA's to opt out of their current 
insurance pool. That shrinks the insurance pool needed to keep premiums 
more affordable for everybody.
  Next, that is injury to hard-working middle-income people left behind 
in the pool because they are going to see their premiums go up, they 
are going to have to make up the loss of the healthiest and wealthiest.
  And, finally to add insult to injury, the same middle-income workers 
paying higher premiums will also be paying taxes to replace the tax 
breaks handed to those who can afford these accounts.
  Mr. Speaker, that is wrong, and I urge my colleagues to support the 
substitute which is a clean Kennedy-Kassebaum-Roukema bill. It is real 
reform with several clean good steps toward real health insurance 
reform. It eliminates the denials for preexisting conditions when 
someone changes jobs, it eliminates some of the job lock which keeps 
people from changing jobs due to fear of losing their insurance, and it 
reduces the burden on the self-employed by raising their health 
insurance deduction to 50 percent.
  Mr. BLILEY. Mr. Speaker, I have only one speaker left, and I reserve 
the balance of my time. I understand I have the right to close.

                              {time}  2000

  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from Connecticut [Ms. DeLauro].
  Ms. DeLAURO. Mr. Speaker, we have a real opportunity tonight to do 
something for the working families in this country. The American public 
is clamoring for health care relief. It is one of the fundamental 
concerns of the people of this country. People in this Nation are 
frightened that they will lose their jobs, that they will lose their 
health care, that they will be denied health insurance because of a 
preexisting condition that they may have or that their children may 
have.
  Mr. Speaker, the Kassebaum-Kennedy-Roukema bill takes a first step 
toward addressing these problems. It is a good bill, it is a bipartisan 
bill. It addresses the needs of the American people. Do not load up the 
bill with politically contentious issues that are designed to kill this 
bill, this opportunity for health care reform. It is wrong. It is not 
what the people of this Nation have sent us here to do. It is not what 
our jobs are about.
  Mr. Speaker, the authors of this bill have asked for a clean bill, 
not to be loaded up. Mrs. Kassebaum earlier

[[Page H3096]]

today said, ``I think there are some who, by design, would like to see 
problems.'' The Washington Times today says that ``Riders Imperil 
Health Care Reforms,'' and it says that ``House and Senate Republicans 
said they planned to add a series of controversial provisions to a 
popular health insurance reform bill, clouding chances for quick 
passage.''
  The gentleman from Virginia [Mr. Bliley] himself has said that, ``If 
you load up the wagon, it is heavier to pull.'' Do not sacrifice health 
care reform. Do not sacrifice the American public for special interests 
tonight. It is wrong to do that. We have a golden opportunity to do 
something, not for the Golden Rule Insurance Co., but for the American 
people, for the working families of this country who deserve to have 
relief from the perils of a disastrous illness. Vote against this bill, 
vote for the Democratic substitute.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from California [Mr. Fazio].
  Mr. FAZIO of California. Mr. Speaker, when President Clinton stood 
here a few months ago and announced his support for a bill that had 
been authored by Senator Kassebaum and the gentlewoman from New Jersey, 
Mrs. Roukema, to be joined by the gentlemen from Massachusetts, Senator 
Ted Kennedy, and Joseph Kennedy, the country was ecstatic. They were 
convinced for the first time we would actually do something about the 
need to make health insurance portable and to prevent prior conditions 
from making insurance either unavailable or unaffordable to many 
people.
  Tragically, we are here tonight debating a bill that goes far beyond 
that consensus, that moves us into conflict on issues like MSAs, that 
are a pure giveaway to a gentleman from Indiana named Mr. Rooney, who 
legitimate insurance salesmen in my district claim they would never 
sell policies for.
  We have watered down portability, we have limited the ability to 
prevent prior conditions from being remedied in this legislation, 
because we have taken an approach that does not really give people what 
they have been told they will get. They will pay more if there are 
fortunate enough at all to be able to continue to have health coverage. 
They are not going to be able to keep the kind of plan they have had. 
This proposal ensures they will pay more.
  Tragically, in the process of making this bill difficult to pass and 
sign, we have not done enough to help small business people who need 80 
percent, if not 100 percent, deductibility, and we have weakened 
consumer protections and gutted State law.
  Please oppose this bill and support the substitute.
  Mr. Speaker, I offer my strong support for the Democratic substitute.
  The Republican bill is loaded down with special interest amendments 
like MSA's political paybacks for the Golden Rule Insurance Co.
  These paybacks mean everyone else will have to pay more for their 
insurance.
  The Democratic substitute will help tens of millions of Americans 
keep their health insurance when they switch jobs, regardless of their 
condition.
  The Democratic substitute addresses several fundamental problems.
  If an employee who has been covered for at least 18 months switches 
or loses his or her job, that employee could buy insurance without 
exclusions for pre-existing medical conditions.
  Workers will no longer be locked into jobs or prevented from starting 
their own businesses for fear of losing their own coverage.
  The substitute also contains an increase in the deductibility of 
health insurance for the self-employed.
  Greater deductibility serves two important goals.
  First, greater deductibility increases affordability. Increasing 
deductibility will help millions of farmers, small businesses, and 
other working families afford the high cost of health care insurance.
  Second, greater deductibility ensures greater fairness in our tax 
code. Corporations have long enjoyed full deductibility for their 
health insurance costs. It is time to narrow the gap between Wall 
Street and Main Street.
  This substitute represents legislation that we can pass today and 
that the President would sign tomorrow. It has received wide bipartisan 
support, both here in the House and in the other body.
  Let us not miss this opportunity to enact health care insurance 
reform that will benefit millions of hard-working Americans.
  I urge a yes vote on this substitute.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Massachusetts [Mr. Markey] to conclude debate on this 
side.
  Mr. MARKEY. Mr. Speaker, it is with sorrow and frustration that I 
rise to oppose this bill. Reform of our health care system is long 
overdue. The fact that some 40 million Americans do not have health 
insurance is an absolute disgrace, and it is high time that we do 
something about it. Last week the Committee on Commerce unanimously 
approved legislation that would have provided at least some relief to 
millions of hardworking American families by ending job lock and 
limiting the use of preexisting condition clauses.
  It was a good first step. It was incremental, to be sure. It would 
have guaranteed that health care was affordable, but at least it would 
have been accessible. It was modest, and for that reason I had hoped 
that a large majority of Members from both sides of the aisle could 
support it.
  Mr. Speaker, my mother always says that a half a loaf is better than 
none, and I supported that bill, even though it was really only a 
couple of slices. I know the American people want the whole loaf. 
Unfortunately, the leadership has taken a couple of good, wholesome 
slices of health insurance reform and slapped a whole lot of extraneous 
junk food on top, creating a health care hoagie of medical savings 
accounts, caps on medical malpractice awards, and other unhealthy 
additives. These anchovies and olives and onions are sure to tickle the 
taste buds of a very few special interests, but cause heartburn for 
millions of consumers.
  Barry Goldwater's old words can be twisted here this evening, because 
now the Republican Party believes that extremism and the defense of 
special interests is no vice. ``The American Medical Association wants 
it, we will just toss it into this bill.''
  Barbara Tuchman wrote a very famous book back in the early 1980's, 
entitled the ``March of Folly'', basically chronicling throughout the 
ages the mistakes.
  Mr. BLILEY. Mr. Speaker, it is with pleasure that I yield the balance 
of my time to the gentleman from Illinois [Mr. Hastert], the chief 
deputy whip, a gentleman who has worked tirelessly on this legislation.
  The SPEAKER pro tempore (Mr. Combest). The gentleman from Illinois 
[Mr. Hastert] is recognized for 4\1/2\ minutes.
  Mr. HASTERT. Mr. Speaker, I thank the chairman of the Committee on 
Energy and Commerce for yielding time to me. As a matter of fact, Mr. 
Speaker, I thank all of those chairmen of the committees who have 
worked together to make this bill possible, and the subcommittee 
chairmen, and I would be remiss if I did not thank the staff of the 
combined committees, who did an excellent job in working together to 
make sure that this bill was successful.
  Mr. Speaker, I have heard a lot of outrageous statements from the 
other side of the aisle tonight, and even one from our side of the 
aisle. But it questions me, it wonders me, I guess you would say, who 
are those special interests that everybody is talking about? Is it the 
small businessman who needs to have the ability, the deductibility; 
that if he has a small business and wants to get his employees covered, 
85 percent of which are people who work today and do not have insurance 
and end up in situations with one family member that works for a small 
business, that we give them the ability to pool that and take it to the 
marketplace with the same advantages that big business gets? Is that a 
special interest?
  Is it a special interest for a family who wants to get health care 
and make choices of their own, instead of having an HMO or a doctor or 
an insurance company tell them, is that the special interest they talk 
about?
  Maybe, Mr. Speaker, there are some dinosaurs still in this Congress 
that do not want to have change, some dinosaurs that still want to have 
big Federal health care take care of everything, and take over 
everything, and if they cannot have it their way, then they are going 
to do the very minimum, the very minimum to cover the ladies and 
gentleman of this country and the families of this country.
  Mr. Speaker, we have traveled a long road in a short period of time 
with this

[[Page H3097]]

reform bill. For that, I applaud the cooperation of everybody. It must 
be noted that with this legislation, we have succeeded where previous 
Congresses have failed, and we have put together reforms in the health 
care delivery system that will help people today. Our legislature will 
lower the cost of health care insurance while making it more available 
and affordable to middle-income American families.
  Who among our critics will deny that health insurance is too 
expensive? Who among our critics will deny that American families 
should have more control over their health care spending? Who among our 
critics will deny that patients deserve more health care dollars than 
bureaucrats and trial lawyers? I have listened with intent interest, 
and the charges of some of the members of the minority party are just 
outrageous.
  They claim our bill does too much, that it goes too far, and that it 
is too ambitious for this Congress. This claim, coming from proponents 
of the President's ill-conceived centralized, federalized health care 
scheme, can only be seen as a farce. I contend that the President's 
first health care bill was far too big. The Kennedy approach now 
advocated by the President is just too small. Our health care plan is 
just right for the American family.
  Our colleagues in the other body deserve a great deal of credit for 
trying to remove the barriers created by preexisting conditions. It is 
a needed reform, and it is contained in our bill. This bill gives 
people who lose or change jobs the insurance that they can keep their 
health insurance when they need it most.
  One other misstatement of fact. The Senate has not passed the Kennedy 
bill. It has only moved out of committee. Only yesterday the letter 
comes out of the Senate that the leadership in the U.S. Senate approves 
of our bill. They ratify our bill. They commend us for doing these 
things, for doing more for the American people.

  I have to say that a letter from the small business groups in this 
country says that this is the right thing to do for the American 
working people, for those people who have to carry a lunch bucket to 
work. It gives them choice, it gives them coverage, and Mr. Speaker, 
the time has come to pass this legislation. I ask for its approval.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Pennsylvania [Mr. Goodling] will be recognized for 15 minutes, and the 
gentleman from Missouri [Mr. Clay] will be recognized for 15 minutes.
  The Chair recognizes the gentleman from Pennsylvania [Mr. Goodling].
  Mr. GOODLING. Mr. Speaker, I yield myself 4\1/2\ minutes.
  (Mr. GOODLING asked and was given permission to revise and extend his 
remarks.)
  Mr. GOODLING. Mr. Speaker, today this House of the people has a 
historic opportunity to cast their vote for landmark legislation 
designed to address the health insurance concerns expressed by the 
people.
  For nearly three decades the American people have looked to Congress 
to improve private health insurance accessibility, affordability, and 
accountability. Unfortunately, until this point, efforts to nationalize 
health care have deprived our people of the added security that would 
result from the commonsense and bipartisan elements of targeted health 
insurance reform contained in the measure we are now considering. These 
elements, such as health insurance portability, renewability, and 
pooling for small employers, have been long debated and included in 
various legislative proposals offered by the members of the Economic 
and Educational Opportunities Committee and many others.
  These needed well-targeted reforms did not advance in the last 
Congress because of the failed efforts by the President to promote his 
government-run health care plan. The American people were not fooled--
the elements of the President's plan proved too costly, too 
bureaucratic, and would have led to health care rationing. However, our 
efforts here today give evidence that we are seriously taking President 
Clinton at his word which was given in his State of the Union address 
last year, ``Let's do it step by step; let's do whatever we have to do 
to get something done'' in regard to incremental health insurance 
reform.

  That is why the legislation before us is deliberately more modest in 
scope. Rather than trying to create a new health care system, the 
Health Coverage Availability and Affordability Act seeks to build on 
those elements of the Nation's employment-based system that work well--
namely the fully insured and self-insured group health plans under 
ERISA--while at the same time making the important changes to the 
current system which are needed.
  The changes called for by the American people, like the people who 
have spoken at my town meetings in York, PA, include helping end job-
lock for employees seeking new employment by limiting preexisting 
condition restrictions under the new employer's plan and eliminating 
such restrictions for those who maintain continuous health insurance 
coverage. This proposal, like the bill reported by our Committee, does 
that and more.
  In addition, an employer would not be able to exclude new workers 
from their company health plan simply because that worker or a member 
of his or her family may have a serious health condition. Such 
individuals would have to be permitted to enroll and be able to choose 
a benefit package under the plan. If family coverage is offered under a 
group health plan, spouses who lose other coverage and newborns would 
have to be allowed to be enrolled.
  Smaller businesses have also expressed concern that insurers not be 
able to drop their coverage because of the health status of their 
employees. The legislation addresses this concern by prohibiting 
insurers and multiple employer plans from failing to renew health 
insurance coverage because of adverse claims experience or other 
reasons. Smaller employers and their employees would also have an 
expanded choice of health insurance coverage because of provisions in 
the bill allowing employers to choose their coverage from among all of 
the products offered by insurers and HMO's participating in the small 
group market.
  I believe these changes reflect the kind of important reforms the 
American public expect of us. But we must also help those who have no 
coverage at all. The problem of the uninsured is primarily one of small 
businesses that cannot afford to buy insurance for their workers.
  The many witnesses who spoke at our committee's hearings stressed 
that making health insurance more affordable was the key to making it 
more available to the American worker and his or her family. Therefore, 
the legislation contains provisions that will help achieve the goal of 
expanding coverage to the nearly 34 million individuals in working 
families who now do not have health insurance coverage. It does this by 
clarifying the ERISA law to allow employers, especially smaller 
employers, to form multiple employer plans through the associations 
that represent the Nation's trades and businesses and by allowing 
employers and employees to choose and negotiate for the type of 
coverage they need and can afford.
  In 1974, Congress enacted the Employee Retirement Income Security Act 
or, as it came to be known, ERISA. In doing so, Congress shaped and put 
into place the cornerstone of our country's employee benefits law. More 
importantly, it laid the foundation upon which employers and negotiated 
multiemployer plans have been able to successfully provide benefits to 
workers and their families, including pensions, health, and other 
benefits. As Dr. Richard Lesher, president of the U.S. Chamber of 
Commerce, has testified, ``Our membership is convinced that 
preservation of ERISA is a critical step on the road to significant 
health care reform. We support H.R. 995 [the bill reported by the 
Committee] as it builds upon ERISA by including needed insurance market 
reform.''

  This is one issue on which employers and unions agree. For example, 
Mr. Robert Georgine, chairman of the National Coordinating Committee 
for Multiemployer Plans, stated in testimony that: 
       ``Given this reality [that there will be no employer 
     mandate] the next best approach is a policy that encourages 
     an expansion of voluntary, employment-based coverage without 
     imposing additional costs on existing health plans. * * * 
     H.R. 995 [the bill reported by the Committee] takes this 
     approach. We are pleased that the bill uses ERISA as its 
     vehicle.''

  By utilizing the time-tested features contained in ERISA, the 
provision under subtitle C, like those under H.R. 995, build upon the 
successes produced by private sector innovation and market competition.

[[Page H3098]]

  Under subtitle C of the bill, multiple employer plans could self-
insure or fully insure, gaining all of the advantages this entails 
including economies-of-scale and lower costs. Small employers who now 
do not have access to coverage, or cannot afford it, would be 
automatically eligible for more affordable health coverage through the 
plans sponsored by their business and trade associations. Together with 
other provisions of the bill, such as the increase in the deduction of 
health insurance costs for the self-employed, this legislation will 
unleash small employers into a more competitive health insurance 
marketplace, thus enabling them to secure more affordable health 
coverage in the same manner as do larger employers.
  Subtitle C also brings more accountability to the health insurance 
market. The Department of Labor inspector general, Mr. Charles Masten, 
testified that this is necessary and important legislation to stop 
health insurance fraud perpetrated by bogus unions and other 
illegitimate operators. Legitimate plans will be made accountable and 
fraudulent schemes will be halted when these provisions are enacted.
  In sum, subtitle C and the other provisions of the Health Coverage 
Availabilty and Affordability Act present this Congress with perhaps 
its best opportunity since the passage of ERISA to expand access to 
affordable health insurance for many American families.
  The measure is superior to other bills in either body in regard to 
protecting the American worker and his family and offering the 
opportunity for true portability of health insurance coverage, by 
increasing the likelihood that the mobile worker's next employer will 
also be offering a health plan. The fact that small employers strongly 
support the pooling provisions in the bill is testament to the vast 
potential multiple employer plans have for expanding coverage and 
reducing the cost-shifting from the uninsured to the insured worker 
that currently takes place.
  The House bill is also more protective under its portability 
provisions. The bill would allow a 60-day lapse in coverge before 
portability protection for preexisting conditions would be interrupted 
while other bills would allow only a 30-day lapse in coverage to 
terminate an employee's portability protection. The House bill has also 
been crafted carefully to be both more protective and administrable 
with regard to the evidence employees must give to received portability 
credit for prior coverage. It is anticipated that under the House bill 
most group health plans would utilize the simpler portability rule 
which credits employees with period of prior coverage for purposes of 
reducing a new 12-month preexisting condition period without requiring 
a demonstration that the prior coverage actually covered the 
preexisting condition--a potentially lengthy and costly determination.
  The House bill has also been carefully drawn to avoid issues that 
made the Clinton plan so controversial such as provisions requiring 
group health plans to include particular forms or types of benefit.
  In sum, the provisions of the Health Coverage Availability and 
Affordability Act represent the best opportunity in decades for 
American workers and their families to gain increased access to more 
affordable and accountable health insurance coverage. I urge my 
colleagues to vote for this workable responsible targeted health 
insurance reform bill. The American people will thank you for the 
increased security they will have when you make history by passing this 
landmark health coverage legislation.

                              {time}  2015

  Mr. CLAY. Mr. Speaker, I yield myself 3 minutes.
  (Mr. CLAY asked and was given permission to revise and extend his 
remarks.)
  Mr. CLAY. Mr. Speaker, I rise in opposition to H.R. 3103. The 
Republican leadership is passing up a golden opportunity today to pass 
a realistic, bipartisan health reform bill. Instead of bringing to the 
floor the Roukema-Kassebaum-Kennedy bill, the leadership is bringing up 
for consideration H.R. 3103. This bill is so weighted down with 
complex, controversial, and special interest provisions that it could 
doom health reform for 1996.
  Members will have a chance, however, to vote for sensible, bipartisan 
health reform legislation today. The democratic substitute is the 
Roukema bill, and I urge my colleagues to support it.
  The Nation cries out for the reasonable, constructive approach of the 
Roukema bill. Democrats and Republicans should unite behind this bill. 
It has broad bipartisan support in both Houses of Congress. The 
President has said he will sign it.
  The House Republican leadership is on the verge of dashing the hopes 
of millions of people. They are on the verge of blocking the modest 
legislative objectives of a large, bipartisan group of Members in the 
House and Senate.
  Mr. SPEAKER, included in H.R. 3103 is a proposal to exempt self-
funded, multi-employer health plans, or MEWA's, from State law. This 
proposal is opposed by the National Conference of State Legislatures 
and the National Association of Insurance Commissioners.
  The large, self-funded health plans created by this bill would be 
financial disasters waiting to happen. There is a reason Congress 
delegated responsibility for regulating MEWA's to the States in 1983. 
While many legitimate, successful MEWA's exist, the MEWA business 
continues to attract unscrupulous operators and to experience an 
inordinate failure rate.
  Considering the fraud and abuse that has long been associated with 
MEWA's, it is incredible that the bill would grandfather existing 
MEWA's. The bill would immediately exempt large, existing MEWA's--the 
good, the bad, and the ugly--from State solvency and insurance laws. 
Having obtained this instant ``Good Housekeeping Seal of Approval,'' 
unscrupulous and inadequately financed operators could begin preying on 
the public--one step ahead of the Labor Department which might still be 
reviewing their application for a Federal certificate.
  The bill's solvency standards are inadequate to the task assigned to 
the Labor Department to regulate hundreds of multistate, multiemployer 
health plans enrolling up to as many as 20 million people. Consumers 
could find very little standing behind a Federal MEWA if it should get 
into financial trouble.
  This bill is an ironic example of legislative forum shopping; it 
greatly expands Federal authority over the private sector. The Federal 
Government for the first time would be in the business of chartering 
and regulating the solvency of privately run, national health plans.
  Perhaps nothing the Republicans have passed during the 104th Congress 
would increase Federal financial exposure more than this bill's MEWA 
provision. It would only be a matter of time before a large, multistate 
MEWA would go under, leaving consumers with millions of dollars in 
unpaid medical bills.
  And to whom will these angry, aggrieved consumers turn when this 
happens? Their State insurance regulator? No. Consumers will turn to 
the Labor Department and Members of Congress for relief. And, as with 
the savings and loans insolvencies of the 1980's, the urge and 
political pressure to bail out these MEWA's and protect constituents 
will be irresistible.
  Finally, considering the hostility, not to mention the appropriations 
riders and budget cuts, that has met Labor Department regulatory 
activity during this Congress, it is almost certain that the Labor 
Department will be a weak regulator.
  Do you want the Federal Government to assume responsibility for 
regulating large, multistate health plans whose insolvencies could 
expose the Federal Government to multimillion-dollar bailouts--
especially in an era of Federal Government downsizing, anti-regulating 
zeal, and diminishing budgets?
  Mr. Speaker, this bill brings market fragmentation to an even higher 
plain. It carves up the multiemployer plan market, treating large plans 
differently than small plans, old plans differently than new plans, 
single industry plans differently than multiindustry plans, plans in 
one State differently than plans in another.
  Its exemptions, its exceptions to the exemptions, and its loopholes 
to the exceptions to the exemptions--never mind the bill's 
grandfathering of scoundrels along with the saints--makes this bill 
look like swiss cheese and smell like limburger.
  Finally, the United States has an extremely fragmented health 
insurance market. This bill would make it worse. The expansion of self-
funded plans would greatly exacerbate market fragmentation.
  The bill's expansion of the ERISA preemption to self-funded 
multiemployer plans, and the cost savings associated with not having to 
comply with State solvency and insurance rules, will make being a 
Federal MEWA an extremely attractive option for existing multiemployer 
plans and trade association plans that currently offer

[[Page H3099]]

fully insured products to their members. Many of these plans would seek 
to become federally chartered self-funded MEWA's. And, many employers 
that now offer an insured product to their employees--through Blue 
Cross-Blue Shield, for example--will transfer their coverage to these 
Federal MEWA's.
  These Federal, self-funded MEWA's will siphon healthier, younger 
groups from traditional insurance markets and, as a consequence, will 
undermine those markets as well as State health reform initiatives. As 
healthier groups exit the insurance market, premiums will rise, forcing 
some individuals to drop coverage. In addition, shrinkage in the size 
of insurance markets means a shrinkage in both a State's insurance 
premium tax base and high risk pool assessment base; H.R. 3103 would 
cost States millions and millions of dollars in lost revenues--revenues 
which States use to finance high risk pools for the uninsured. This 
bill will make it more difficult for States to maintain and expand 
their efforts to expand coverage to the uninsured. That would be a 
travesty.
  I urge Members to oppose H.R. 3103 and to support the Democratic 
substitute.

                                           National Association of


                                      Insurance Commissioners,

                                   Washington, DC, March 28, 1996.
     Hon. Newt Gingrich,
     Speaker of the House, Washington, DC.
       Dear Mr. Speaker: I am writing to comment upon the ``Health 
     Coverage Availability and Affordability Act of 1996'', H.R. 
     3160, adopted by the House Rules Committee yesterday and 
     scheduled for a vote by the full House of Representatives 
     today. As you are aware, over the last few weeks, the 
     National Association of Insurance Commissioners' (NAIC) 
     Special Committee on Health Insurance (the ``NAIC 
     Committee''), together with the National Conference of State 
     Legislatures (``NCSL''), has provided comments upon H.R. 995, 
     H.R. 3063 and H.R. 3070.
       We appreciate the legislation's extension of portability 
     reforms to self-funded health care plans governed by the 
     Federal Employee Retirement Income Security Act (``ERISA''); 
     the NAIC has long called for these reforms and federal 
     intervention in this area is laudable. We also appreciate 
     certain clarification that were made to provisions in the 
     bills adopted by the committees of jurisdiction relating to 
     state flexibility and the Medicare anti-duplication 
     prohibitions. However, as detailed below, we continue to have 
     serious concerns with the bill's provisions relating to 
     multiple employer welfare arrangements (``MEWAs'').
       We commend the additional clarifications made within Title 
     1, Subtitle D, Section 192, relating to ``State Flexibility 
     to Provide Greater Protection''. The bill contains further 
     limits on the scope of its preemption than were contained in 
     H.R. 3063 and H.R. 3070. The legislative now states that it 
     does not preempt those state laws ``that related to matters 
     not specifically addressed'' in the bill. The bill also 
     specifically saves several areas of state laws. We appreciate 
     this enhanced state flexibility. We do, however, remain 
     concerned about the absence of a broader construction clause 
     explicitly saving from preemption any state laws that are not 
     inconsistent with the bill and which provide greater 
     beneficiary protection. In the absence of such a clause, the 
     bill might be construed to ``preempt the field'' of any state 
     law that touches upon any area minimally mentioned in the 
     bill, even if the bill's provisions were not intended to 
     preempt such state law. Since this a new area of federal 
     intervention, we urge caution and care in the final 
     crafting of preemption language.
       We also appreciate the significant strides made in refining 
     the range of health insurance policies which are not to be 
     considered duplicative for the purposes of the application of 
     the new Medicare anti-duplication provisions. We would 
     appreciate the opportunity to clarify the states' remaining 
     jurisdiction concerning health insurance policies governed by 
     these provisions (possibly within legislative history) and to 
     provide technical comments. We would like to commend you for 
     tightening the consumer protections in these provisions from 
     the earlier provisions adopted by amendment in committee.
       We reiterate the concerns raised in our letter of March 18, 
     1996 to Chairmen Archer and Bliley concerning the long term 
     care insurance related provisions within the legislation.
       Unfortunately, we continue to have grave concerns that 
     Subtitle C of Title 1 of H.R. 3160 would significantly erode 
     existing state-level insurance reforms. The net effect of the 
     final provisions relating to MEWAs is extremely damaging to 
     states' authority to govern their own insurance market. The 
     final language contains many layers of savings for, and 
     exemptions from, state laws. This maze clouds the picture. 
     Upon close examination of the multiple tiers of provisions, 
     the bill preempts state laws governing health insurance, 
     including those governing MEWAs, in all but a small number of 
     states.
       In sum, the changes made to Subtitle C do not represent a 
     significant improvement from those contained within H.R. 995. 
     We therefore remain opposed to most of the provisions 
     contained within Subtitle C of Title I of the bill and 
     reiterate the prior concerns expressed by the NAIC Committee 
     on this topic. (See Joint NAIC Committee/NCSL letter dated 
     March 5, 1996 to Representative William Goodling).
       In addition, the bill still preempts state rating laws 
     applicable to association plans thereby creating an unlevel 
     playing field between these plans and other insured plans. 
     Market fragmentation will thereby worsen and costs within the 
     insured market could spiral. With respect to association 
     plans, the bill also preempts state mandated benefit laws 
     which have been enacted by the states.
       The state budgetary impact of the bill is still likely to 
     be significant. The bill only allows states to apply premium 
     taxes to newly-formed or newly operating arrangements. Any 
     arrangement that can argue they were already ``operating'' in 
     a state cannot be taxed on a level playing field with state-
     regulated insurers. This provision thus promotes unfair 
     competition and could significantly diminish state premium 
     tax income.
       The bill strips states of their oversight responsibility 
     over a significant class of MEWAs. We question whether states 
     could in good conscience accept responsibility for MEWA 
     activities by asking the U.S. Department of Labor, pursuant 
     to the option in the bill, for the authority to enforce the 
     inadequate federal standards set forth in the bill. While 
     gaps and ambiguities in federal law have led to some 
     enforcement difficulties, this should be addressed by 
     clarifications in federal law, not by the sweeping preemption 
     of state regulatory authority over MEWAs proposed through 
     H.R. 3160.
       Thank you for your consideration of our comments. We look 
     forward to continuing to work together on legislation to 
     promote portability and availability of health insurance. 
     Please feel free to call Kevin Cronin, the NAIC's Acting 
     Executive Vice President and Washington Counsel at (202) 624-
     7790, with any questions you may have.
           Sincerely,

                                           Brian K. Atchinson,

                                                  President, NAIC,
     Superintendent, Maine Bureau of Insurance.
                                                                    ____

         National Conference of State Legislatures,
                                   Washington, DC, March 27, 1996.
     Hon. John Joseph Moakley,
     Ranking Member, Committee on Rules,
     U.S. House of Representatives, Washington, DC.
       Dear Representative Moakley: On behalf of the National 
     Conference of State Legislatures, I would like to share our 
     thoughts on H.R. 3160, pending health insurance reform 
     legislation. NCSL supports efforts to extend portability to 
     individuals covered by ERISA plans and to establish minimum 
     federal standards for insured plans. We are pleased that 
     Title I, Subtitles A and B, build on the foundation for 
     reform built by states over the last several years. We have 
     been assured that the intent of Subtitles A and B is to 
     continue to support state regulation and innovation in the 
     small group and individual markets. We are pleased that 
     changes have been made since the mark-up of H.R. 3070 and 
     H.R. 3103, to provide additional clarity with regard to the 
     ability of states to exceed the federal standards, 
     established in the bill. We continue to have some concerns. 
     For example, Section 103(b)(1) that states, ``. . . A group 
     health plan, and an insurer or HMO offering health insurance 
     coverage in connection with a group health plan, may not 
     require a participant or beneficiary to pay a premium or 
     contribution which is greater than such premium or 
     contribution for a similarly situated participant or 
     beneficiary solely on the basis of the health status of the 
     participant or beneficiary.'' NCSL is concerned that state 
     rating laws that prohibit or restrict the use of health 
     status in a manner different than prescribed in the bill, may 
     be preempted. For example, in cases where plans that include 
     a rating component in addition to health status, state rating 
     reforms may not apply. We hope to work with you to obtain 
     additional clarity.
       While we support the thrust of Subtitles A and B of Title 
     I, NCSL opposes Subtitle C and urges you not to include these 
     provisions in the House health insurance reform bill. 
     Subtitle C fails to recognize the traditional role of states 
     in the regulation of insurance and the important 
     contributions state legislators have made in increasing 
     accessibility and portability of health insurance and 
     addressing fraud and consumer protection issues with regard 
     to Multiple Employer Welfare Associations, by eliminating 
     state authority to oversee Multiple Employer Welfare 
     Associations (MEWAs). Instead, Subtitle C: (1) creates 
     incentives for the establishment of federally regulated 
     MEWAs, moving more individuals out of the reach of state 
     insurance regulators and the protections those regulators 
     provide; (2) permits some MEWAs to operate without receiving 
     full federal approval; and (3) expands the Department of 
     Labor's (DOL) authority over employer solvency and MEWAs, but 
     fails to authorize funds for expanding DOL staff to perform 
     these functions. NCSL opposes this preemption of state 
     authority and the deregulation of MEWAs.
       The MEWA provisions of H.R. 3160 would: (1) disrupt the 
     existing health insurance market, undermining existing state 
     efforts to improve access to health care and adversely 
     affecting insurance premiums overall, and (2) make it easier 
     for unscrupulous individuals to commit fraud under the 
     protective umbrella of this proposed federal law which fails 
     to provide adequate protections

[[Page H3100]]

     for plan participants. NCSL supports and encourages the 
     development of public and private purchasing cooperatives and 
     other innovative ventures that permit individuals and groups 
     to negotiate affordable health care coverage on the same 
     basis as large groups. We also believe that these entities 
     should and must be regulated and that consumers must be 
     protected. Work remains to be done at both the state and 
     federal government levels to strike a reasonable balance for 
     MEWAs. NCSL urges you to retain the state role in regulating 
     MEWAs.
       States have made tremendous progress in reforming the small 
     group insurance market. Since 1990 at least, 43 states have 
     enacted laws that require carriers to renew coverage 
     guaranteed renewal); 37 states have enacted laws that require 
     carriers to offer coverage to small groups regardless of the 
     health status of their employees or previous claims 
     experience (guaranteed issue); and 45 states limit pre-
     existing condition waiting periods and require carriers to 
     give individuals credit for previous coverage. In addition, 
     similar efforts are underway in a number of states with 
     respect to the individual insurance market. Since 1991 at 
     least, 16 states have enacted guaranteed renewal; 11 states 
     have enacted guaranteed issue; and 22 states have limited 
     pre-existing condition waiting periods. Twenty-four states 
     have established state high-risk health insurance pools that 
     enrolled over 100,000 individuals last year. Finally, states 
     are continuing to work with MEWAs to strike a balance between 
     reasonable state regulations, plan flexibility and consumer 
     protection.
       NCSL joins the many other groups in urging you to move 
     forward without further delay on these incremental, but 
     important steps toward health reform. NCSL looks forward to 
     working with you and your colleagues in the future as we work 
     together toward expanding health care access and 
     affordability.
           Sincerely,
                                                     Wiliam Pound,
                                               Executive Director.

  Mr. CLAY. Mr. Speaker, I reserve the balance of my time.
  Mr. GOODLING. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Indiana [Mr. Buyer].
  (Mr. BUYER asked and was given permission to revise and extend his 
remarks.)
  Mr. BUYER. Mr. Speaker, I rise in support of the bill to open access 
and make health care affordable.
  Mr. Speaker, today, with the passage of this bill, H.R. 3103, we will 
be expanding health care coverage to millions of Americans. After years 
of discussing how best to bring reform to our health care system, this 
bill brings meaningful incremental health care reform. H.R. 3103, the 
Health Care Coverage Availability and Affordability Act, addresses two 
crucial needs in our health care system--access and affordability.
  First, let's review our current situation. Eighty-five percent of the 
population has health insurance, mostly through their employer. The 
uninsured, approximately 39 million Americans, today are not poor and 
are not elderly. The poor are covered by Medicaid; the elderly are 
covered by Medicare. Of the uninsured, 47 percent were employed full 
time; 38 percent worked part-time; 16 percent were unemployed. If 
incentives can be created in the market so more employed individuals 
can get affordable coverage and those between jobs can get coverage; 
then, the number of uninsured individuals will go down. Meaning 
millions of Americans will be covered by medical insurance.
  Furthermore, many individuals cannot get coverage due to pre-existing 
conditions or because it is too expensive. Many businesses cannot get 
coverage because one of the employees or a dependent of an employee has 
a pre-existing condition. Employees are discouraged from changing jobs 
or starting their own businesses because they cannot get coverage due 
to a pre-existing condition.
  H.R. 3103 will help create incentives so more individuals receive 
affordable insurance. First, it addresses the problems of access and 
affordability. Under H.R. 3103, group health plans (large employer 
plans, insurers, health maintenance organizations) are prohibited from 
imposing a pre-existing condition exclusion that exceeds 12 months for 
conditions that were diagnosed or treated within the previous 6 months 
on individuals that move from one group plan to another group plan. 
Pre-existing conditions would not affect newborns, adopted children, or 
pregnancy. Health insurance providers must reduce previous condition 
exclusion periods for an individual who enrolls in another program by 
the amount of time the individual was covered by a group health plan, 
health insurance, and HMO or Medicaid. Health insurance providers may 
not deny coverage to individuals in group health plans because of (1) a 
medical condition, (2) claims experience, (3) receipt of treatments for 
a medical condition, (4) medical history, (5) evidence of insurability 
or (6) disability.
  H.R. 3103 also ensures portability of health insurance for those 
moving from group coverage to individual coverage, such as someone 
leaving a large employer to start a business. Many States, including 
Indiana, have addressed this issue. Under H.R. 3103, States are given 
the flexibility to address this problem such as by risk pools, or 
conversion policies, open enrollment periods, guaranteed issue, or any 
means that a State sees fit. However, for those State's that have not 
acted adequately, an insurer or HMO issuing individual health insurance 
coverage would have to offer an insurance policy equal to the average 
acturial value of the plans offered in the individual market by that 
insurer. The insurer would be prohibited to decline to issue coverage 
based on health status.

  One of the key provisions of the bill allows small employers to 
voluntarily form groups for the purpose of self-insuring or providing 
health care coverage. Associations, like the NFIB or the Farm Bureau, 
would be able to band their members together for health insurance 
purposes and be treated like large multi-state employers. The 
regulatory structure that enables General Motors or IBM or AT&T to 
offer health insurance coverage, will now exist for the local hardware 
store, the corner grocer, and the farmer to purchase affordable health 
care coverage.
  Voluntary health insurance associations are not new. In northwest 
Indiana a group of businesses have banded together to gain market clout 
to buy health care coverage for their employees. Typically, the 
employers in the alliance enjoy savings of 10 percent to 40 percent and 
can access 11 different health plans. H.R. 3103 should make their task 
easier and the bill should encourage other entities to band together to 
get access to affordable health insurance.
  These provisions address the regulatory side of health insurance. By 
themselves, they make this bill worthy of support, but H.R. 3103 does 
not stop at insurance reform. It includes noteworthy tax relief as 
well.
  First, H.R. 3103 increases the health insurance deduction for self-
employed individuals from 30 percent to 50 percent by the year 2003. In 
1995, Congress made this deduction permanent and raised it from 25 
percent to 30 percent. We need to take care of the entrepreneurial 
spirit of America which lies in small business. This bill will increase 
the deduction to 50 percent. As large employers get a complete write-
off of health insurance expenses, this bill brings an element of tax 
fairness to the system.
  The bill also extends the medical expense tax deduction to include 
long-term care services that are curing or rehabilitative in nature, or 
are maintenance and personal care required by the chronically ill. This 
should give some relief to taxpayers who need long-term care. In 
additon, benefits paid out under life insurance ``accelerated death 
benefits'' contracts would not be treated as taxable income to the 
terminally or chronically ill beneficiary.
  H.R. 3103 also includes Medical Savings Accounts. Individuals covered 
by a high deductible health insurance plan or their employer could make 
tax deductible contributions to a medical savings account. Funds could 
only be used for qualified medical expenses and disbursements for non-
medical reasons would be treated as taxable income and subject to an 
additional 10 percent penalty. MSAs are true portability. The account 
belongs to the individual and is under the individual's control. This 
is a creative solution to provide more affordable insurance coverage 
and greater choice.
  Finally, H.R. 3103 addresses fraud. Recent studies estimate that 
fraud costs consumers 5 to 10 percent of ever health care dollar spent. 
This is literally billions of dollars and leads to higher costs and 
higher premiums. It authorizes the Secretary of Health and Human 
Services and the Attorney General to jointly establish a national 
program to combat health care fraud. Under Medicare, the Secretary of 
HHS is required to establish a program to encourage individuals to 
report suspected fraud and abuse in the Medicare Program. Individuals 
who have been convicted of felonies relating to health care fraud or 
controlled substances would be excluded from Medicare and State health 
care programs for a minimum of 5 years. Criminal penalties would be 
revised and enhanced.
  H.R. 3103 is a good bill with much needed reform. It goes beyond 
simple portability and addresses access, affordability, and choice. 
Once enacted, it will mean that someone today without insurance has a 
better chance of getting it and affording it tomorrow.
  Mr. GOODLING. Mr. Speaker, I yield 4\1/2\ minutes to the gentleman 
from Illinois [Mr. Fawell], who has spent probably hundreds of hours 
putting this legislation together and guiding us in committee.
  Mr. FAWELL. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, I rise to enthusiastically support H.R. 3160. The bill 
includes key small business health insurance reform that was in H.R. 
995, reported by the Economic Opportunities

[[Page H3101]]

Committee: It gives small employers the right to form groups for the 
purpose of self-insuring or fully insuring and thereby gain access to 
affordable health care with the economies of scale that large employers 
and union plans have had for years under ERISA.
  The problem of the uninsured is predominately a problem of small 
business lacking access to affordable insurance. Eighty-five percent of 
the 40 million uninsured are in families with at least one employed 
worker, the majority of whom work in a small business. Small businesses 
face health insurance premiums 30 percent higher than larger companies 
due to higher administration costs, and an additional 30 percent more 
due to costly State mandated coverages.
  Small business people--through the National Federation of Independent 
Business--call this reform ``A remarkable advancement for small 
businesses over current law * * * a massive improvement''. Here's what 
NFIB says. I am going to be quoting from a letter from them.

       NFIB is seeking to correct a basic unfairness in our health 
     care system. Big business is allowed to buy health insurance 
     under a different set of rules than small business. Because 
     of ERISA, large self-insured businesses are exempted from 
     State law in their health plans while small business is stuck 
     with State insurance coverage mandates . . . and other forms 
     of regulation. This inequity between big business and small 
     business in large part explains why the premiums of corporate 
     America are going down, while small business premiums are 
     going up.
       H.R. 3160 would stop this unfairness by allowing small 
     firms to band together across State lines to purchase health 
     insurance with nearly the same exemption from State law that 
     big business has. Small employers will be able to cut their 
     premiums by as much as a third. The legislation give(s) small 
     firms almost every advantage they lack in purchasing health 
     insurance today,

  As I have indicated, big business has all of these advantages.
  Achieving this is NFIB's highest health reform priority. Any 
substitute that does not directly address this inequity between big and 
small business is unacceptable to the more than 600,000 members of 
NFIB.
  Of course, NFIB is but one of dozens of employer groups that support 
this approach. It is backed by the Chamber of Commerce, National 
Association of Manufacturers, National Association of Wholesalers, the 
National Restaurant Association, the National Retail Federation, the 
church groups, and many others, and I might also add, by labor unions 
that understand how valuable this type of legislation is.
  A recent editorial in the Chicago Tribune entitled ``Free the Health 
Insurance Market'' expressed it this way:
  ``Freed of the need to offer 50 different policies, an organization 
such as the National Restaurant Association could arrange with an 
insurer to offer a basic policy to all its members. Without mandating 
coverage or capping premiums--two odious features of President 
Clinton's failed reform plan--the (bill) spurs the private insurance 
market to absorb a good portion of the Nation's 41 million uninsured, 
the vast majority of whom either have jobs or have a jobholder in he 
family.''
  Unless we do something there by the way, what good is portability?
  Mr. Speaker, many of the Governors had concerns about the original 
H.R. 995 as introduced last year. I am pleased to report that we worked 
very closely with many of them over the past year, and have addressed 
their concerns. Several changes were made that are acceptable to the 
Governors and the employer community.
  Let me ask this one question, and think about it: Who benefits from 
this legislation? The people who cut your hair, serve you at 
restaurants, repair your car, clean your clothes--the millions of 
people working in small businesses all over America and who produce 
most of our new jobs.
  I urge my colleagues to vote no on the substitute and vote yes on 
final passage of H.R. 3160. Allow employees of small businesses the 
same kind of access to affordable health care as that available to 
employees of large businesses.

   Section-by-Section Analysis of Provisions Relating to ERISA Group 
 Health Plans Considered By the Committee on Economic and Educational 
Opportunities in The Health Coverage Availability and Affordability Act 
                                of 1996


    TITLE I--INCREASED AVAILABILITY AND PORTABILITY OF HEALTH PLAN 
                           INSURANCE COVERAGE

     Subtitle A--Coverage Under Group Health Plans
       Sec. 101. Portability of coverage for previously covered 
     individuals, and
       Sec. 102. Limitation on preexisting condition exclusions; 
     no application to certain newborns, adopted children, and 
     pregnancy.
       Group health plans, insurers, and health maintenance 
     organizations would be prohibited from imposing a preexisting 
     condition exclusion that exceeded 12 months for conditions 
     for which medical advice, diagnosis, or treatment was 
     received or recommended within the previous 6 months prior to 
     becoming insured. In the event that the individual was a late 
     enrollee, the preexisting condition exclusion could not 
     exceed 18 months.
       Preexisting condition exclusions or limitations could not 
     be applied to newborns and adopted children so long as these 
     individuals become insured within 30 days of birth or 
     placement for adoption. Pregnancy could not be treated as a 
     preexisting condition. In addition, genetic information could 
     not be considered a preexisting condition, so long as 
     treatment of the condition to which the information was 
     applicable had not been sought during the 6 months prior to 
     becoming covered.
       Group health plans, insurers, and health maintenance 
     organizations (HMOs) would be required to credit periods of 
     qualified previous coverage toward the fulfillment of a 
     preexisting condition exclusion period when an individual 
     moves from one source of group health coverage to another. 
     Specifically, a preexisting condition limitation period would 
     be reduced by the length of the aggregate period of any 
     qualified prior coverage. Prior coverage would not have to be 
     credited toward a preexisting condition limitation period if 
     the individual experienced a break in qualified group 
     coverage of more than 60 days. (Qualified group coverage 
     means any period of coverage of the individual under a group 
     health plan, health insurance coverage, Medicaid, Medicare, 
     military health care, the Indian Health Service, state health 
     insurance coverage or state risk pool, and coverage under the 
     Federal Employee Health Benefits Program (FEHBP).) A waiting 
     period for any coverage under a group health plan (or for 
     health insurance coverage offered in connection with a group 
     health plan) would not be considered a break in coverage.
       Presentation of a certification of prior coverage would 
     establish an individual's eligibility for credit against a 
     preexisting condition limitation period. Group health plan 
     administrators, insurers, HMOs, and state Medicaid programs 
     would be required to provide such certifications of coverage 
     upon request of the individual.
       In determining whether an individual has met qualified 
     coverage periods, a group health plan, insurer, or HMO 
     offering group coverage could elect one of two methods. Under 
     the first, it could include all periods, without regard to 
     the specific benefits offered during the period of prior 
     coverage. Under the second, it could look at periods of prior 
     coverage on a benefit-specific basis and not include as a 
     qualified coverage period a specific benefit unless coverage 
     for that benefit was included at the end of the most recent 
     period of coverage. Entities electing the second method would 
     have to state prominently in any disclosure statements 
     concerning the plan or coverage and to each enrollee at the 
     time of enrollment or sale that the plan or coverage had made 
     such an election and would have to include a description of 
     the effect of this election. Upon the request of the plan, 
     insurer, or HMO, the entity providing the certification would 
     have to promptly disclose information on benefits under its 
     plan. It could charge the reasonable cost for providing this 
     information.
       Sec. 103. Prohibiting exclusions based on health status and 
     providing for enrollment periods.
       This section provides for availability of coverage. The 
     bill would ensure that employees and their dependents could 
     not, based on health status, be excluded from enrolling in 
     their group health plan and being continually enrolled. 
     Health status is defined to include, with respect to an 
     individual, medical condition, claims experience, receipt of 
     health care, medical history, genetic information, evidence 
     of insurability (including conditions arising out of acts of 
     domestic violence), or disability.
       Group health plans would be required to provide for special 
     enrollment periods for eligible individuals who lose other 
     sources of coverage if certain conditions were met. An 
     individual would have to be allowed to enroll under at least 
     one benefit option if: (1) the employee (or dependent) had 
     been covered under another group health plan at the time 
     coverage was previously offered, (2) that this was the reason 
     for declining enrollment, (3) that the individual lost their 
     coverage as a result of certain events (loss of eligibility 
     for coverage, termination or employment, or reduction in the 
     number of hours of employment), and (4) the employee 
     requested such enrollment within 30 days of termination of 
     the coverage.
       In the event that a group health plan provided family 
     coverage, the plan could not require, as a condition of 
     coverage of a beneficiary or participant in the plan a 
     waiting period applicable to the coverage of a beneficiary 
     who is a newborn, an adopted child or child placed for 
     adoption, or a spouse, at the time of marriage, if the 
     participant has met any waiting period applicable to that 
     participant. The bill defines timely enrollment as being 
     within 30 days of the birth, adoption,

[[Page H3102]]

     or marriage if family coverage was available as of that date.
       Renewability requirements apply to certain arrangements to 
     assure continued access of employers to health coverage to 
     offer their employees. A group health plan which is a 
     multiemployer plan, a multiple employer health plan (as 
     defined in section 704 of ERISA), and a multiple employer 
     welfare arrangement (providing medical care) may not deny an 
     employer whose employees are covered under such a plan or 
     arrangement continued access to the same or other coverage 
     under the terms of such plan or arrangement other than (1) 
     for nonpayment of premiums or contributions, (2) for fraud or 
     other intentional misrepresentation of material fact by 
     the employer, (3) for noncompliance with material plan or 
     arrangement provisions, (4) because the plan or 
     arrangement is ceasing to offer any coverage in a 
     geographic area, (5) for failure to meet the terms of an 
     applicable collective bargaining agreement, to renew a 
     collective bargaining or other agreement requiring or 
     authorizing contributions to the plan, or to employ 
     employees covered by such an agreement, (6) in the case of 
     a plan or arrangement to which subparagraph (C), (D), or 
     (E) of section 3(40) of ERISA applies, to the extent 
     necessary to meet the requirement of such subparagraph, or 
     (7) in the case of a multiple employer health plan (as 
     defined in section 701(4) of such Act), for failure to 
     meet the requirements under part 7 of ERISA for exemption 
     under section 514(b)(6)(B) of such Act. It is not included 
     that anything in this section be construed to preclude any 
     such plan or arrangement from establishing employer 
     contribution requirements or group participation 
     requirements not otherwise prohibited by this Act.
       Sec. 104. Enforcement.
       The above provisions would be enforced through penalties 
     assessed through the Internal Revenue Code (IRC), Employee 
     Retirement Income Security Act (ERISA), or through civil 
     money penalties assessed by the Secretary of Health and Human 
     Services (HHS). The Secretaries of Treasury, Labor, and HHS 
     would be required to issue regulations that are 
     nonduplicative and in a manner that assures coordination and 
     nonduplication in their activities as provided for under this 
     Act.
       Enforcement through ERISA. Sections 101, 102, and 103 of 
     Subtitle A (and the definitions under Subtitle D insofar as 
     they are applicable to such sections) are deemed to be 
     provisions of Title I of the Employee Retirement Income 
     Security Act of 1974 (ERISA) for purposes of applying the 
     enforcement, fiduciary and other provisions of such title. 
     The Secretary of Labor would only apply the sanctions under 
     ERISA to an insurer or HMO that was subject to state law 
     (within the meaning of section 514(b)(2)(A)) in the event 
     that the Secretary determines that the state has not provided 
     for enforcement of the above provisions of the Act. Sanctions 
     would not apply in the event that the Secretary of Labor 
     established that none of the persons against whom the 
     liability would be imposed knew, or exercising reasonable 
     diligence, would have known that a failure existed, or if the 
     noncomplying entity acted within 30 days to correct the 
     failure. In no case would a civil money penalty be imposed 
     under ERISA for a violation for which an excise tax under the 
     COBRA enforcement provisions under the Internal Revenue Code 
     was imposed or for which a civil money penalty was imposed by 
     the Security of HHS.
       Enforcement through the IRC. IRC enforcement would be done 
     through the Consolidated Omnibus Budget Reconciliation Act 
     (COBRA) health insurance continuation provisions (section 
     4980B). In general, a noncomplying plan would be subject to 
     an excise tax of $100 per day per violation. Penalties would 
     not be assessed in the event that the failure was determined 
     to be unintentional or a correction was made within 30 days. 
     For purposes of applying the COBRA enforcement language, 
     special rules would apply: (1) no tax could be imposed by 
     this provision on a noncomplying insurer or HMO subject to 
     state insurance regulation if the Secretary of HHS 
     determined that the state had an effective enforcement 
     mechanism; (2) in the case of a group health plan of a 
     smaller employer that provided coverage solely through a 
     contract with an insurer or HMO, no tax would be imposed 
     upon the employer if the failure was solely because of the 
     product offered by the insurer or HMO; and (3) no tax 
     penalty would be assessed for a failure under this 
     provision if a sanction had been imposed under ERISA or by 
     the Secretary of HHS with respect to such failure.
       Enforcement through Civil Money Penalties. A group health 
     plan, insurer, or HMO that failed to meet the above 
     requirements would be subject to a civil money penalty. Rules 
     similar to those imposed under the COBRA penalties would 
     apply. The maximum amount of penalty would be a $100 for each 
     day for each individual with respect to which a failure 
     occurred. In determining the penalty amount, the Secretary 
     would be required to take into account the previous record of 
     compliance of the person being assessed with the applicable 
     requirements of the bill, the gravity of the violation, and 
     the overall limitations for unintentional failures provided 
     under the IRC COBRA provisions. No penalty could be assessed 
     if the failure was not intentional or if the failure was 
     corrected within 30 days. A procedure would be available for 
     administrative and judicial review of a penalty assessment.
       The authority for the Secretary of HHS to impose civil 
     money penalties would not apply to enforcement with respect 
     to any entity which offered health insurance coverage and 
     which was an insurer or HMO subject to state regulation 
     (within the meaning of section 514(b)(2)(A) of ERISA) by an 
     applicable state authority if the Secretary of HHS determined 
     that the state had established an enforcement plan. In no 
     case would a civil money penalty be imposed under this 
     provision for a violation for which an excise tax under COBRA 
     or civil money penalty under ERISA was assessed.
     Subtitle B--Certain Requirements for Insurers and HMOs in the 
         Group and Individual Markets

        Part 1. Availability of Group Health Insurance Coverage

       Sec. 131. Guaranteed availability of general coverage in 
     the small group market.
       This section provides for guaranteed availability of 
     general coverage in the small group market. Each insurer or 
     HMO that offered general coverage in the small group market 
     in a state would have to: (1) accept every small employer in 
     the state that applied for such coverage; and (2) accept for 
     enrollment every eligible individual who applied for 
     enrollment during the initial enrollment period in which the 
     individual first became eligible for coverage under the group 
     health plan. No restriction based on health status could be 
     placed on the ability of an eligible individual to enroll.
       The small group market is generally defined as employer 
     groups with more than 2 and less than 51 employees. An 
     eligible individual is one in relation to the employer as 
     determined: (1) in accordance with the terms of the plan; (2) 
     as provided by the insurer or HMO under rules which would 
     have to be applied uniformly; and (3) in accordance with 
     applicable state laws. Special rules would apply to 
     network plans and HMOs to ensure that this guaranteed 
     availability provision did not lead to capacity problems. 
     In addition, such entities would not have to enroll a 
     small group whose employees worked or lived outside the 
     entity's service area. Insurers and HMOs could deny 
     enrollment to an eligible small group in the event that 
     the group failed to meet certain minimum participation or 
     contribution requirements that were consistent with state 
     law.
       Sec. 132. Guaranteed Renewability of group coverage.
       This section provides for guaranteed renewability of group 
     coverage. If an insurer or HMO offered health insurance 
     coverage in the small or large group market, the coverage 
     would have to be renewed or continued in forced at the option 
     of the employer. (An insurer or HMO could modify the coverage 
     offered to a group health plan so long as the modification 
     was effective on a uniform basis among group health plans 
     with that type of coverage.) Exceptions to the guaranteed 
     renewability requirement would apply in the event that the 
     employer failed to pay the premiums, committed fraud, 
     violated the participation rules, or moved outside the 
     service area. In addition, guaranteed renewability would not 
     apply if: (a) the insurer or HMO ceased to offer any such 
     coverage in a state (or in the case of a network plan, in a 
     geographic area); (b) in the event that the insurer or HMO 
     uniformly terminated offering a particular type of coverage 
     and provided adequate notice and the opportunity to elect 
     other health insurance being offered in that market; and (c) 
     in the event that the entity discontinued offering all health 
     insurance coverage in the small or large group market or in 
     both markets in a state, provided for adequate notice. In the 
     last instance, such an entity could not reenter the market it 
     left for at least 5 years.
     Subtitle C--Affordable and Available Health Coverage Through 
         Multiple Employer Pooling Arrangements
       Sec. 161. Clarification of duty of the Secretary of Labor 
     to implement provisions of current law providing for 
     exemptions from State regulation of multiple employer health 
     plans.
       Sec. 161, Subsection (a). Rules governing state regulation 
     of multiple employer health plans.
       This subsection adds a new Part 7 (Rules Governing State 
     Regulation of Multiple Employer Health Plans) to Title I of 
     ERISA, as follows:
       ``Sec. 701. Definitions.
       This section defines the following terms: insurer, fully-
     insured, medical care (as under current law), multiple 
     employer health plan, participating employer, sponsor, and 
     state insurance commissioner.
       ``Sec. 702. Clarification of duty of the Secretary of Labor 
     to implement provisions of current law providing for 
     exemptions from State regulation of multiple employer health 
     plans.
       This section clarifies the conditions under which multiple 
     employer health plans (MEHPs), non-fully-insured multiple 
     employer arrangements providing medical care, may apply for 
     an exemption from certain state laws. The exemption process 
     is contained in current ERISA law, which also contains 
     restrictions on the ability of states to fully regulate such 
     entities. Specifically, existing section 514(b)(6)(A)(ii) of 
     ERISA provides that in the case of such a partly insured or 
     fully self-insured arrangement, any law of any State which 
     regulates insurance may apply only ``to the extent not 
     inconsistent with other parts of ERISA.'' However, under 
     section 514(b)(6)(B), the Department of Labor (DOL) may issue 
     an exemption from

[[Page H3103]]

     state law with respect to such self-insured arrangements.
       ``Section 702 clarifies that only certain legitimate 
     association health plans and other arrangements (described 
     below) which are not fully insured are eligible for an 
     exemption and thereby treated as ERISA employee welfare 
     benefit plans. This is accomplished by clarifying the duty of 
     the Secretary of Labor to implement the provisions of current 
     law section 514(b)(6)(B) to provide such exemptions for 
     MEHPs. Under section 514(a) of ERISA, States are preempted 
     from regulating employee welfare benefit plans, but an 
     exception is made under section 702 to allow states to 
     enforce the conditions of an exemption granted a MEHP.
       ``Section 702 further sets forth criteria which a self-
     insured arrangement must meet to qualify for an exemption and 
     thus become a MEHP. The Secretary shall grant an exemption to 
     an arrangement only if: (1) a complete application has been 
     filed, accompanied by the filing fee of $5,000; (2) the 
     application demonstrates compliance with requirements 
     established in sections 703 and 704 below; (3) the Secretary 
     finds that the exemption is administratively feasible, not 
     adverse to the interests of the individuals covered under it, 
     and protective of the rights and benefits of the individuals 
     covered under the arrangement, and (4) all other terms of the 
     exemption are met (including financial, actuarial, reporting, 
     participation, and such other requirements as may be 
     specified as a condition of the exemption).
       ``The application must include the following: (1) 
     identifying information about the arrangement and the states 
     in which it will operate; (2) evidence that ERISA's bonding 
     requirements will be met; (3) copies of all plan documents 
     and agreements with service providers; (4) a funding report 
     indicating that the reserve requirements of section 705 will 
     be met, the contribution rates will be adequate to cover 
     obligations, and that a qualified actuary (a member in good 
     standing of the American Academy of Actuaries or an actuary 
     meeting such other standards the Secretary considers 
     adequate) has issued an opinion with respect to the 
     arrangement's assets, liabilities, and projected costs; and 
     (5) any other information prescribed by the Secretary. Exempt 
     arrangements must notify the Secretary of any material 
     changes in this information at any time, must file annual 
     reports with the Secretary, and must engage a qualified 
     actuary.
       ``Section 702 also provides for a class exemption from 
     section 514(b)(6(A)(ii) of ERISA for large MEHPs that have 
     been in operation for at least five years on the date of 
     enactment. An arrangement qualified for this class exemption 
     if: (1) at the time of application for exemption, the 
     arrangement covers at least 1,000 participants and 
     beneficiaries, or has at least 2,000 employees of eligible 
     participating employers; (2) a complete application has been 
     filed and is pending; and (3) the application meets 
     requirements established by the Secretary with respect to 
     class exemptions. Class exemptions would be treated as having 
     been granted with respect to the arrangement unless the 
     Secretary provides appropriate notice that the exemption has 
     been denied. It is expected that the standards applicable to 
     entities eligible for a class exemption will be no less 
     protective than if an individual exemption were granted to 
     such an entity.
       ``Sec. 703. Requirements relating to sponsors, board of 
     trustees, and plan operations.
       This section establishes eligibility requirements for 
     MEHPs. Applications must comply with requirements established 
     by the Secretary. Applications must demonstrate that the 
     arrangement's sponsor has been in existence for a continuous 
     period of at least 5 years and is organized and maintained in 
     good faith, with a constitution and bylaws specifically 
     stating its purpose and providing for a least annual 
     meetings, as a trade association, an industry association, a 
     professional association, or a chamber of commerce (or 
     similar business group, including a corporation or similar 
     organization that operates on a cooperative basis within the 
     meaning of section 1381 of the IRC) for purposes other than 
     that of obtaining or providing medical care. Also, the 
     applicant must demonstrate that the sponsor is established as 
     a permanent entity, has the active support of its members, 
     and collects dues from its members without conditioning such 
     on the basis of the health status or claims experience of 
     plan participants or beneficiaries or on the basis of the 
     member's participation in the MEHP.
       ``Section 703 also requires that the arrangement be 
     operated, pursuant to a trust agreement, by a ``board of 
     trustees'' which has complete fiscal control and which is 
     responsible for all operations of the arrangement. The board 
     of trustees must develop rules of operation and financial 
     control based on a three-year plan of operation which is 
     adequate to carry out the terms of the arrangement and to 
     meet all applicable requirements of the exemption and Title I 
     of ERISA. The rules also require that all employers who are 
     association members be eligible for participation under the 
     terms of the plan. Eligible individuals of such participating 
     employers cannot be excluded from enrolling in the plan 
     because of health status as required under section 103 of the 
     Act (nor be excluded by purchasing an individual policy of 
     health insurance coverage for a person based on their health 
     status). The rules also stipulate that premium rates 
     established under the plan with respect to any particular 
     participating employer cannot be based on the claims 
     experience of the particular employer.
       ``In addition to the associations described above, certain 
     other entities are eligible to seek an exemption as MEHPs 
     under section 514(b)(6)(B) of ERISA. These include (1) 
     franchise networks (section 703(b)), (2) certain existing 
     collectively bargained arrangements which fail to meet the 
     statutory exemption criteria (section 703(c)), and (3) 
     certain arrangements not meeting the statutory exemption 
     criteria for single employer plans (section 703(d)). (Section 
     709 of ERISA, added by Section 166, also makes eligible 
     certain church plans electing to seek an exemption.)''
       ``Sec. 704. Other Requirements For Exemption.
       ``Section 704 requires a MEHP to meet the following 
     requirements: (1) its governing instruments must provide that 
     the board of trustees serves as the named fiduciary and plan 
     administrator, that the sponsor serves as plan sponsor, and 
     that the reserve requirements of section 705 are met; (2) the 
     contribution rates must be adequate, and (3) any other 
     requirements set out in regulations by the Secretary must be 
     met.''
       ``Sec. 705. Maintenance of Reserves.
       ``Section 705 requires MEHPs to establish and maintain 
     reserves sufficient for unearned contributions, benefit 
     liabilities incurred but not yet satisfied and for which risk 
     of loss has not been transferred, expected administrative 
     costs, and any other obligations and margin for error 
     recommended by the qualified actuary. The minimum reserves 
     must be no less than 25% of expected incurred claims and 
     expenses for the year or $400,000. The Secretary may provide 
     additional requirements relating to reserves and excess/stop 
     loss coverage and may provide adjustments to the levels of 
     reserves otherwise required to take into account excess/stop 
     loss coverage or other financial arrangements.''
       ``Sec. 706. Notice Requirements for Voluntary Termination.
       ``Section 706 provides that, except as permitted in section 
     707, a MEHP may terminate only if the board of trustees 
     provides 60 days advance written notice to participants and 
     beneficiaries and submits to the Secretary a plan providing 
     for timely payment of all benefit obligations.''
       ``Sec. 707. Corrective Actions and Mandatory Termination.
       ``Section 707 requires a MEHP to continue to meet the 
     reserve requirements even if its exemption is no longer in 
     effect. The board of trustees must quarterly determine 
     whether the reserve requirements of section 705 are being met 
     and, if they are not, must, in consultation with the 
     qualified actuary, develop a plan to ensure compliance and 
     report such information to the Secretary. In any case where a 
     MEHP notifies the Secretary that it has failed to meet the 
     reserve requirements and corrective action has not restored 
     compliance, and the Secretary determines that the failure 
     will result in a continuing failure to pay benefit 
     obligations, the Secretary may direct the board to 
     terminate the arrangement.''
       ``Sec. 708. Additional Rules Regarding State Authority.
       Under section 708(a), a state which certifies to the 
     Secretary that it provides guaranteed access to health 
     coverage may elect to opt out of the MEHP provisions outlined 
     above and deny a MEHP the right to offer coverage in the 
     small group market (or otherwise regulate such MEHP with 
     respect to such coverage), except as described below. A state 
     is considered to provide such guaranteed access, if (1) the 
     state certifies that at least 90% of all state residents are 
     covered by a group health plan or otherwise have health 
     insurance coverage, or (2) the state has, in the small group 
     market, provided for guaranteed issue of at least one 
     standard benefits package and for rating reforms designed to 
     make health insurance coverage more affordable. In states 
     without such guaranteed access, MEHPs could offer coverage in 
     the small group market in the state as long as they meet the 
     standards set forth in Part 7. For purposes of item (2) above 
     and the similar provision under section 162 of the bill, it 
     is intended that states that have achieved very high levels 
     of health insurance coverage through means such as tax-
     preferred status for entities required to provide guaranteed 
     issue, community-rated coverage be considered to meet the 
     requirement under (2) regardless of how long a state law 
     requiring such has been in effect.
       ``Section 708(b) provides a limited exception to the above 
     described state opt out for certain large, multi-state 
     arrangements. The state opt out (described in item (2) in the 
     above paragraph) does not apply to new and existing MEHPs 
     that meet the following criteria: (1) the sponsor operates in 
     a majority of the 50 states and in at least 2 of the regions 
     of the country; (2) the arrangement covers or will cover at 
     least 7,500 participants and beneficiaries; and (3) at the 
     time the application to become a MEHP is filed, the 
     arrangement does not have pending against it any enforcement 
     action by the state. In addition, the state opt out 
     (described in items (1) and (2) in the above paragraph) does 
     not apply in a state in which an arrangement meeting the MEHP 
     standards operates on March 6, 1996, to the extent a state 
     enforcement action is not pending against such an entity at 
     the time an application for an exemption is made. The above 
     two exceptions do not apply to any state which, as of January 
     1, 1996, either (1) has enacted a law providing for 
     guaranteed issue of

[[Page H3104]]

     fully community rated individual health insurance coverage 
     offered by insurers and HMOs, or (2) requires insurers 
     offering group health coverage to reimburse insurers 
     individual coverage for losses resulting from their offering 
     individual coverage on an open enrollment basis. Regulations 
     may also apply certain limitations to single industry plans.
       ``Under section 708, a state could assess new association-
     based MEHPs (former after March 6, 1996) nondiscriminatory 
     state premium taxes set at a rate no greater than that 
     applicable to any insurer or health maintenance organization 
     offering health insurance coverage in the state. MEHPs 
     existing as of March 6, 1996 would remain exempt from state 
     premium taxes; however, if they expand into a new state, 
     the state could apply the above rule.
       Section 162. Affordable and Available Fully-Insured Health 
     Coverage Through Voluntary Health Insurance Associations.
       This section adds a new subsection (d) to section 514 of 
     ERISA which provides for the establishment of Voluntary 
     Health Insurance Associations (VHIAs). Under this section, a 
     VHIA is defined as a multiple employer welfare arrangement, 
     maintained by a qualified association, under which all 
     medical benefits are fully-insured, under which no employer 
     is excluded as a participating employer (subject to minimum 
     participation requirements of an insurer), under which the 
     enrollment requirements of section 103 of the Act apply, 
     under which all health insurance coverage options are 
     aggressively marketed, and under which the health insurance 
     coverage is provided by an insurer or HMO to which the laws 
     of the state in which it operates apply.
       The term qualified association means an association in 
     which the sponsor of the association is, and has been 
     (together with its immediate predecessor, if any) for a 
     continuous period of not less than 5 years, organized and 
     maintained in good faith, with a constitution and bylaws 
     specifically stating its purpose, as a trade association, an 
     industry association, a professional association, or a 
     chamber of commerce (or similar business group), for 
     substantial purposes other than that of obtaining or 
     providing medical care (within the meaning of section 607(1) 
     of ERISA), is established as a permanent entity which 
     receives the active support of its members and meets at least 
     annually, and collects dues without conditioning such dues on 
     the basis of the health status or claims experience of plan 
     participants or beneficiaries or on the basis of 
     participation in a VHIA.
       Section 162 sets forth the preemption rules applicable to 
     VHIAs. This provision would preempt two types of state laws 
     and leave unaffected any other applicable state law not 
     otherwise preempted under current law (i.e., section 514 of 
     ERISA). The first type of law preempted is a law which might 
     otherwise preclude an insurer or HMO from setting premium 
     rates based on the claims experience of the employers 
     participating in a VHIA (without varying the premium rates of 
     a particular employer on the basis of the employer's own 
     experience). As a result of this provision, a qualified 
     association could form a VHIA and offer health insurance 
     coverage and establish and distribute plan costs in a manner 
     similar to that permitted under current law for self-insured 
     plans. This will empower employees and employers to form 
     groups to more effectively and cost-efficiently purchase 
     fully-insured health insurance coverage.
       Section 162 also preempts a second type of State law that 
     requires health insurance coverage in connection with group 
     health plans to cover specific items or services consisting 
     of medical care (but does not preempt laws prohibiting the 
     exclusion of specific diseases). This will enable employers 
     and employees to establish health insurance packages which 
     include benefits which they want and which they can afford.
       Under this section, a state which certifies to the 
     Secretary that it provides ``guaranteed access''' to health 
     coverage may deny a VHIA the right to offer coverage in the 
     small group market (or otherwise regulate such VHIA with 
     respect to such coverage), except as described below. A state 
     is considered to provide such guaranteed access if (1) the 
     state certifies that at least 90% of all state residents are 
     covered by a group health plan or otherwise have health 
     insurance coverage, or (2) the state has, in the small group 
     market, provided for guaranteed issue of at least one 
     standard benefits package and for rating reforms designed to 
     make health insurance coverage more affordable. In a state 
     without such guaranteed access, VHIAs could offer coverage in 
     the small group market in the state as long as they meet the 
     standards for such entities.
       This section also provides a limited exception to the above 
     described state opt out for certain large, multi-state 
     arrangements. The state opt out (described in item (2) in the 
     paragraph above) does not apply to VHIAs that meet the 
     following criteria: (1) the sponsor operates in a majority of 
     the 50 states and in at least 2 of the regions of the 
     country; (2) the arrangement covers or will cover at least 
     7,500 participants and beneficiaries; and (3) under the terms 
     of the arrangement, either the qualified association does not 
     exclude from membership any small employer in the state, or 
     the arrangement accepts every small employer in the state 
     that applies for coverage.
       In addition, the state opt out (described in items (1) and 
     (2) in the paragraph two paragraphs above) does not apply in 
     a state in which an arrangement operates on March 6, 1996 and 
     under the terms of the arrangement, either the qualified 
     association does not exclude from membership any small 
     employer in the state, or the arrangement accepts every small 
     employer in the state that applies for coverage.
       The above exceptions for multi-state plans and existing 
     plans do not apply to any state which, as of January 1, 1996, 
     either (1) has enacted a law providing for guaranteed issue 
     of fully community rated individual health insurance coverage 
     offered by insurers and HMOs, or (2) requires insurers 
     offering group health coverage to reimburse insurers offering 
     individual coverage for losses resulting from their offering 
     individual coverage on an open enrollment basis.
       Sec. 163. State authority fully applicable to self-insured 
     multiple employer welfare arrangements providing medical care 
     which are not exempted under new part 7.
       This section clarifies the scope of ERISA preemption to 
     make clear the authority of states to fully regulate non-
     fully-insured MEWAs which are not provided an exemption under 
     new Part 7 of ERISA.
       Sec. 164. Clarification of treatment of single employer 
     arrangements
       This section modifies the treatment of certain single 
     employer arrangements under the section of ERISA that defines 
     a MEWA (section 3(40)). The treatment of a single employer 
     plan as being excluded from the definition of MEWA (and thus 
     from state law) is clarified by defining the minimum interest 
     required for two or more entities to be in ``common 
     control'' as a percentage which cannot be required to be 
     greater than 25%. Also a plan would be considered a single 
     employer plan if less than 25% of the covered employees 
     are employed by other participating employers.
       Sec. 165. Clarification of treatment of certain 
     collectively bargained arrangements.
       This section clarifies the conditions under which 
     multiemployer and other collectively-bargained arrangements 
     are exempted from the MEWA definition, and thus exempt from 
     state law. This is intended to address the problem of ``bogus 
     unions'' and other illegitimate health insurance operators. 
     The provision amends the definition of MEWA to exclude a plan 
     or arrangement which is established or maintained under or 
     pursuant to a collective bargaining agreement (as described 
     in the National Labor Relations Act, the Railway Labor Act, 
     and similar state public employee relation laws). (Current 
     law requires the Secretary to ``find'' that a collective 
     bargaining agreement exists, but no such finding has ever 
     been issued). It then specifies additional conditions which 
     must be met for such a plan to be a statutorily excluded 
     collectively bargained arrangement and thus not a MEWA. These 
     include:
       (1) The plan cannot utilize the services of any licensed 
     insurance agent or broker to solicit or enroll employers or 
     pay a commission or other form of compensation to certain 
     persons that is related to the volume or number of employers 
     or individuals solicited or enrolled in the plan.
       (2) A maximum 15 percent rule applies to the number of 
     covered individuals in the plan who are not employees (or 
     their beneficiaries) within a bargaining unit covered by any 
     of the collective bargaining agreements with a participating 
     employer or who are not present or former employees (or their 
     beneficiaries) of sponsoring employee organizations or 
     employers who are or were a party to any of the collective 
     bargaining agreements.
       (3) The employee organization or other entity sponsoring 
     the plan or arrangement must certify annually to the 
     Secretary the plan has met the previous requirements.
       (4) If the plan or arrangement is not fully insured, it 
     must be a multiemployer plan meeting specific requirements of 
     the Labor Management Relations Act (i.e., the requirement for 
     joint labor-management trusteeship under section 
     302(c)(5)(B)).
       (5) If the plan or arrangement is not in effect as of the 
     date of enactment, the employee organization or other entity 
     sponsoring the plan or arrangement must have existed for at 
     least 3 years or have been affiliated with another employee 
     organization in existence for at least 3 years, or 
     demonstrate to the Secretary that certain of the above 
     requirements have been met.
       Sec. 166. Treatment of church plans.
       This section adds a new section 709 to ERISA permitting 
     church plans to voluntarily elect to apply to the Department 
     of Labor for an exemption under section 514(b)(6)(B) and in 
     accordance with new ERISA Part 7. An exempted church plan 
     would, with certain exceptions, have to comply with the 
     provisions of ERISA Title I in order to receive an exception 
     from state law. The election to be covered by ERISA would be 
     irrevocable. A church plan is covered under this section if 
     the plan provides benefits which include medical care and 
     some or all of the benefits are not fully insured.
       Sec. 167. Enforcement provisions relating to multiple 
     employer welfare arrangements.
       This section amends specific provisions of ERISA to 
     establish enforcement provisions relating to the multiple 
     employer elements of the bill: (1) a civil penalty applies 
     for failure of MEWAs to file registration statements under 
     section 169 of the bill; (2) the section provides for State 
     enforcement through Federal courts with respect to violations 
     by multiple employer health plans, subject to the existence 
     of enforcement agreements described in section 168 below; (3) 
     willful misrepresentation that an entity is an exempted

[[Page H3105]]

     MEWA or collectively-bargained arrangement may result in 
     criminal penalties; (4) the section provides for cease 
     activity orders for arrangements found to be neither 
     licensed, registered, or otherwise approved under State 
     insurance law, or operating in accordance with the terms of 
     an exemption granted by the Secretary under new part 7; and 
     (5) the section provides for the responsibility of the 
     fiduciary or board of trustees of a MEHP to comply with the 
     required claims procedure under ERISA.
       Sec. 168. Cooperation between Federal and State 
     authorities.
       This section amends section 506 of ERISA (relating to 
     coordination and responsibility of agencies enforcing ERISA 
     and related laws) to specify State responsibility with 
     respect to self-insured Multiple Employer Health Plans and 
     Voluntary Health Insurance Associations. A State may enter 
     into an agreement with the Secretary for delegation to the 
     State of some or all of the Secretary's authority to enforce 
     provisions of ERISA applicable to exempted MEHPs or to VHIAs. 
     The Secretary is required to enter into the agreement if the 
     Secretary determines that delegation to the State would not 
     result in a lower level or quality of enforcement. However, 
     if the Secretary delegates authority to a State, the 
     Secretary can continue to exercise such authority 
     concurrently with the State. The Secretary is required to 
     provide enforcement assistance to the States with respect to 
     MEWAs.
       Sec. 169. Filing requirements for multiple employer welfare 
     arrangements offering health benefits.
       This section amends the reporting and disclosure 
     requirements of ERISA to require MEWAs offering health 
     benefits to file with the Secretary a registration statement 
     within 60 days before beginning operations (for those 
     starting on or after January 1, 1997) and no later than 
     February 15 of each year. The section also requires MEWAs 
     providing medical care to issue to participating employers 
     certain information including summary plan descriptions, 
     contribution rates, and the status of the arrangement 
     (whether fully-insured or an exempted self-insured plan).
       Sec. 170. Single annual filing for all participating 
     employers.
       This section amends ERISA's section 110 (relating to 
     alternative methods of compliance with reporting and 
     disclosure requirements) to provide for a single annual 
     filing for all participating employers of fully insured 
     MEWAs.
       Sec. 171. Effective date; transitional rule.
       This section provides that, in general, the amendments made 
     by this title are effective January 1, 1998. In addition, the 
     Secretary is required to issue all regulations needed to 
     carry out the amendments before January 1, 1998. The section 
     provides for transition rules for self-insured MEWAs in 
     operation as of the effective date so that those applying to 
     the Secretary for an exemption from State regulation are 
     deemed to be excluded for a period not to exceed 18 months 
     unless the Secretary denies the exemption or finds the MEWAs 
     application deficient, provided that the arrangement does not 
     have pending against it an enforcement action by a state. The 
     Secretary can revoke the exemption at any time if it would be 
     detrimental to the interests of individuals covered under the 
     Act.
     Subtitle D--Definitions; General Provisions
       Sec. 191. Definitions; scope of coverage, and
       Sec. 192. State flexibility to provide greater protection.
       In addition to providing definitions of terms used in this 
     title of the Act, this subtitle provides that, subject to the 
     ERISA savings clause below, nothing in Subtitle A, B, or D 
     should be construed to preempt state laws: (1) that relate to 
     matters not specifically addressed in such subtitles, (2) 
     that require insurers or HMOs to impose a limitation or 
     exclusion of benefits relating to the treatment of a 
     preexisting condition period for a period that is shorter 
     than the applicable period provided under such subtitles; (3) 
     that allow individuals, participants, and beneficiaries to be 
     considered to be in a period of previous qualifying coverage 
     if such individual, participant, or beneficiary experiences a 
     lapse in coverage that is greater than the 60-day periods 
     provided for under sections 101 and 102, or (4) that, in 
     defining ``preexisting condition'' to have a look-back period 
     that is shorter than 6 months. The ERISA savings clause 
     states that, except as provided specifically in subtitle C, 
     nothing in this Act shall be construed to affect or modify 
     the provisions of section 514 of ERISA (relating to federal 
     preemption of state laws relating to employee benefit plans).
       Sec. 193. Effective Date.
       In general, except as otherwise provided for in this title, 
     the provisions of this title would apply with respect to: (1) 
     group health plans and health insurance coverage offered in 
     connection with group health plans, for plan years beginning 
     on or after January 1, 1998; and (2) individual insurance 
     coverage issued, renewed, in effect, or operated on or after 
     January 1, 1998.
       The Secretaries of HHS, Treasury, and Labor would be 
     required to issue regulations on a timely basis as may be 
     required to carry out this title.
       Sec. 194. Rule of Construction.
       Nothing in this title or any amendment made thereby may be 
     construed to require the coverage of any specific procedure, 
     treatment, or service as part of a group health plan or 
     health insurance coverage under this title or through 
     regulation.

  Mr. CLAY. Mr. Speaker, I yield 3 minutes to the gentleman from Texas, 
Mr. Gene Green.
  Mr. GENE GREEN of Texas. Mr. Speaker, I would like to thank my 
colleague and ranking member from Missouri for yielding me the time.
  Mr. Speaker, I rise in opposition to H.R. 3103, and a little 
background. I was honored to serve 20 years in the Texas legislature, 
Mr. Speaker, and work for many of those years with the statehouse 
members to beef up and strengthen our State health insurance regulation 
laws so that people who buy group insurance would know what they are 
purchasing. Here today I see this bill would actually abolish that 
protection, not only in the State of Texas, but State legislatures all 
over the country have worked for many years to provide and strengthen 
State oversight of these laws.
  Mr. Speaker, yesterday I asked the Committee on Rules to make in 
order my amendment striking the preemption of these multiple employer 
welfare arrangements, also known as the MEWA insurance laws, because 
what happens now is in all of our States, we regulate them. This bill 
will take away that State regulation and move it to Washington to 
definitely a universal national standard developed and implemented from 
Washington and will replace these carefully crafted local State 
insurance laws that meet the needs of our local States and not 
necessarily what is from Washington.
  Mr. Speaker, that is right. The majority of the Republicans want to 
move the regulation of these insurance laws from the States to an 
agency led by what one of my Republican colleagues said in his turn 
were Communists.
  We hear a lot of rhetoric from the other side about giving more power 
to the States, and yet in this issue the Republicans want to take away 
the States' authority to regulate these health plans and give it to the 
Federal Government. While we have heard about local control rhetoric so 
much, the House Republicans want to expand the authority of the 
Department of Labor with these regulations.
  In his own estimates, Secretary Reich will have to develop 26 new 
regulations to deal with the federalization of multiple employer 
welfare arrangements. The Federal Government got out of this business 
of regulating MEWA's in 1983 because the States were better equipped to 
deal with the high instances of fraud on the local level. But now we 
see this bill will preempt those States rights, and what will it mean 
to the average American family. State statutes requiring that certain 
benefits covered by health insurance policies may no longer apply.
  Again, let me give an example from the State of Texas. In 1973 we 
changed the law that required insurance policies in Texas have to cover 
newborn infants. Up until then, a newborn infant had to survive 14 days 
before the group insurance policy would cover them. That was a mandated 
benefit, and this bill would possibly take that away unless the 
Department of Labor somehow says, OK, we are going to have this minimum 
benefit. This protection would be no longer available, at least on the 
local level, that the States have decided need to be provided to the 
purchasers of insurance.
  Unlike block grants, States have tested and successfully regulated 
MEWA's, and there is no compelling reason or need to preempt State 
authority in this area.
  Mr. CLAY. Mr. Speaker, I yield 3 minutes to the gentleman from New 
Jersey [Mr. Andrews].
  (Mr. ANDREWS asked and was given permission to revise and extend his 
remarks.)
  Mr. ANDREWS. Mr. Speaker, I would like to thank the gentleman from 
Missouri [Mr. Clay], the ranking member, for yielding me this time.
  Mr. Speaker, there are two sets of ideas before the House tonight. 
There is a set of ideas on which there is disagreement, whether we 
should limit the amount people can recover if they are a victim of 
malpractice; whether or not people should have medical savings 
accounts; whether or not there should be pooling arrangements for small 
businesses. There is legitimate disagreement about those things.
  Then there is another set of ideas on which there is virtual 
unanimous agreement, broad consensus that we should make it illegal to 
say you cannot deny someone an insurance policy

[[Page H3106]]

because they have been sick, and that people should be able to take 
their insurance from job to job.

                              {time}  2030

  Mr. Speaker, logical people would say that we put aside the things on 
which we cannot agree and debate about them and try to refine them and 
deal with them another day and then we take the things on which we do 
agree and pass them so we can send them to the President of the United 
States and make them law.
  But we are not going to do that. What we are going to do tonight in 
the bill that is before us is take a lot of controversial provisions 
and maybe pass them out of here and send them to a conference that 
will, in likelihood, I believe they will wither on the vine and die.
  Now, this is not just another cynical example of the cynical exercise 
of how politics is practiced in our country. It is more than that. It 
has a lot to do with real people in real families and their real lives.
  Mr. Speaker, the American people understand this. A woman with breast 
cancer, a man who has had a triple bypass heart operation, a shipyard 
worker who has had asbestosis can be denied health insurance coverage 
now because the have been sick. If the substitute offered by the 
gentlewoman from New Jersey [Mrs. Roukema] does not pass tonight, they 
can still be denied that coverage. We need to make it illegal, illegal 
for an insurance company in this country to say to that woman with 
breast cancer of that man with asbestosis or that person who has had 
the triple bypass operation that, we are not going to sell you a policy 
or that we are going to charge you the Moon and the stars to buy the 
policy. A unanimous vote in a Senate committee said they agreed with 
that. Dozens of Republicans and Democrats, if not hundreds around here, 
have said they agree with that. The President of the United States has 
said he would sign that. But unless the Roukema substitute passes, we 
are not going do do that.
  Do the right thing tonight. Vote ``yes'' on the Roukema substitute 
and ``no'' on this bill.
  Mr. CLAY. Mr. Speaker, I yield 2 minutes to the gentleman from New 
York [Mr. Engel].
  Mr. ENGEL. Mr. Speaker, I thank the ranking member for yielding me 
this time.
  Mr. Speaker, this bill ought to be defeated. We should be considering 
a clean version of the Kennedy-Kassebaum-Roukema health reform bill, 
and I would say that the reason we are not considering a clean version 
of the Kennedy-Kassebaum-Roukema health reform bill is because the 
Republican leadership really does not want to see health care reform 
come into law.
  They really want to see it defeated. But, quite frankly, they do not 
have the guts to say it. So they are weighing this bill down with all 
kinds of extraneous things that do not belong in the bill, knowing full 
well that this will kill the bill.
  The Senate is going to pass a clean version. The President has said 
he will sign a clean version, and yet what we are doing today is a 
political charade. We are not passing a clean version, we are 
deliberately not passing the version the Senate is passing, and we know 
that the President will not agree.
  So it is a charade. And, again, the Republican leadership does not 
have the guts to say the truth. You know, the gentleman from Texas [Mr. 
DeLay], the Republican whip, had it right before, when he said on the 
House floor, and I quote the gentleman from Texas from his speech on 
the House floor, ``This is blatant politics and blatant hypocrisy.'' 
Except he was wrong in directing it to me and the Democrats. It seems 
to me the blatant, as the gentleman from Texas [Mr. DeLay] said, 
``blatant politics and blatant hypocrisy'' is on the part of the 
gentleman from Texas [Mr. DeLay] and the Republican leadership because 
they do not have the guts to say we are against health care reform; 
instead, they are just weighing down this bill with a bunch of 
nonsense.
  We believe that portability ought to become law. We believe that 
preexisting conditions is not a reason to deny people health care 
coverage. The Roukema bill does that. The Roukema bill will pass. The 
Roukema bill has the votes to pass, yet what they are doing is making 
it impossible for the Roukema bill to pass, and that to me is, quote, 
as the gentleman from Texas [Mr. DeLay] says, ``blatant politics and 
blatant hypocrisy.''
  Mr. GOODLING. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Kansas [Mrs. Meyers].
  (Mrs. MEYERS of Kansas asked and was given permission to revise and 
extend her remarks.)
  Mrs. MEYERS of Kansas. Mr. Speaker, I rise in strong support of H.R. 
3103 because it allows small employers to form Multiple Employer Health 
Plans [MEHPs] which can cross State lines. Small businesses operate 
closer to the bottom line than larger businesses, and are often unable 
to obtain coverage at any price. They pay higher premiums if they do 
obtain coverage, and cannot count on stable premiums.
  MEHPs can self insure, in which case they would be required to 
register and maintain substantial capital reserves--a minimum of 
$400,000 or 25 percent of the expected claims--whichever was higher.
  MEHPs would allow small employers to band together around the 
country, thereby avoiding expensive State-mandated benefits. Right now, 
small businesses pay up to 30 percent more in premiums than big 
businesses that can make use of ERISA exemptions.
  The substitute does not allow small employers to form MEHPs across 
State lines.
  I urge my colleagues to support 3103.
  Mr. GOODLING. Mr. Speaker, I yield 1 minute to the gentleman from 
North Carolina [Mr. Ballenger].
  Mr. BALLENGER. Mr. Speaker, I thank the gentleman for yielding this 
time to me.
  Mr. Speaker, I rise in strong support of H.R. 3103, and want to 
address the provisions relating to medical savings accounts for MSA's.
  During the debate over the President's health care reform package 
during the 103d Congress, we saw that Americans view choice as 
fundamental to our health care system. By allowing people the chance to 
choose a high-deductible health insurance plan and to place the premium 
savings into a personal savings account, we are providing a way for 
people to manage their health care expenses. This plan would be used to 
cover major health costs while the savings account would cover routine 
and preventive care.
  Under this bill, individuals could deposit up to $2,000 per year and 
could save, in the account, what they didn't use. Any withdrawals from 
the account for non-medical expenses would be taxable and subject to an 
early withdrawal penalty of 10 percent. Also, MSAs would allow patients 
to choose their own doctors and participate in their own care. These 
accounts belong to the individual and are portable during a job change.
  Employers are currently able to offer MSA-like plans. However, unlike 
other traditional plans, the Government does not allow these plans to 
be tax deductible. MSAs should receive equal treatment, because recent 
studies indicate that these plans reduce the health care costs for 
employers by around 12 percent compared to traditional plans. This cost 
reduction directly enables employers to maintain quality health benefit 
plans to their employees at no additional charge. As we look for 
market-oriented ways to contain the costs of health care, MSAs should 
be viewed as an attractive option.
  Mr. CLAY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Indiana [Mr. Roemer].
  (Mr. ROEMER asked and was given permission to revise and extend his 
remarks.)
  Mr. ROEMER. Mr. Speaker, I wish for once Members of Congress would 
put themselves in the shoes of hard-working Americans, whether those 
shoes are loafers or construction boots, and then Americans would work 
together to reform in a simplistic and bipartisan commonsense way our 
health care system.
  Now, we have two choices tonight: We can either support H.R. 3103, a 
convoluted measure that is highly controversial, with all kinds of 
special-interest provisions that will never become law, or we can 
support a bipartisan provision from Senator Kennedy, Senator Kassebaum, 
and the gentlewoman from New Jersey [Mrs. Roukema].
  There is a bipartisan approach, a commonsense approach to provide

[[Page H3107]]

portability, to provide health care for workers who lose their jobs. 
Let me give an example of why this is important. IBM has laid off 
40,000 people; AT&T 40,000 people. These people are hard workers. They 
have children that may have diabetes or leukemia. And now health 
insurance companies can say, ``We don't want to cover you anymore.'' If 
you vote for the Roukema Bill, the Kennedy-Kassebaum bill, you will 
allow these hard-working Americans to take their insurance with them 
and to not let the insurance companies be prejudiced against these 
people.
  Vote for our children. Vote for our hard-working people in America, 
and vote for commonsense bipartisanship.
  Mr. GOODLING. Mr. Speaker, I yield 1 minute to the gentleman from 
Michigan [Mr. Knollenberg].-
  Mr. KNOLLENBERG. Mr. Speaker, I rise in strong support of H.R. 3103 
and commend my colleague, the gentleman from Illinois [Mr. Fawell] for 
his efforts in bringing this legislation, which is badly needed, to the 
floor.
  H.R. 3103 is not about big insurance companies or some Government 
takeover, as some would suggest. It is about providing coverage for 
millions of uninsured, and it allows them to get it on an accessible 
and affordable basis.
  H.R. 3103 is about providing insurance to those millions of people 
that are currently unable to get insurance. For too long this system 
has stacked the deck against small business. Big businesses, such as 
GM, IBM, I just heard, have had the luxury of providing employees 
insurance through self-insuring, while small businesses lack the 
resources to self-insure. This bill directly addresses the inequality 
by allowing small businesses to join together to self-insure.
  Mr. Speaker, Kassebaum-Kennedy is a Cadillac coverage program, one 
size fits all, without affordability. I urge my colleagues to vote for 
H.R. 3103.
  Mr. GOODLING. Mr. Speaker, I yield 1 minute to the gentleman from 
Florida [Mr. Weldon].
  Mr. WELDON of Florida. Mr. Speaker, I thank the gentleman for 
yielding me this time.
  I rise in strong support of this bill for a variety of different 
reasons, probably chief of which is that it will allow many small 
employers to pool their resources together and purchase health care 
benefits in bulk.
  This is an advantage the has been held by large corporations for many 
years and has been denied small businesses, and, as a consequence of 
that, those small businesses have to pay a much higher premium and they 
therefore choose not to provide coverage.
  I would like to also additionally briefly address the issue of 
medical savings accounts. We have heard a lot of discussion about how 
bad these supposedly are, but I would assert that if medical savings 
accounts were available to the employees that work for Members of the 
minority, the majority of their employees would select medical savings 
accounts because medical savings accounts truly give the health care 
consumer the freedom to choose how to spend their health care dollars. 
It has been shown repeatedly that they over and over save a 
considerable amount of money. One of the biggest problems in our health 
car system is the third-party payer system.
  Mr. CLAY. Mr. Speaker, I yield the balance of my time to the 
gentleman from New York [Mr. Owens].
  (Mr. OWENS asked and was given permission to revise and extend his 
remarks.)
  Mr. OWENS. Mr. Speaker, the Dingell-Kennedy-Kassebaum substitute is a 
modest but significant step forward for health care. I rise in support 
of the substitute.
  It is good that we are here addressing problems such as portability 
or increased deductibility for small businesses and preexisting 
condition discrimination. These small steps forward are important, but 
the American people should not be misled.

                              {time}  2045

  The noble goal of universal health care, health care for all 
Americans, is not being discussed tonight. The administration bill in 
the 103d Congress was striving to help Americans join the other 
civilized, industrialized nations and provide health care for the 43 
million Americans who are not covered with any health care plan.
  This bill moves us no closer to health care for everybody. Looming 
over all of us in our present health care system is the dangerous 
threat to the Medicaid entitlement. That is not being discussed, but 
the Medicaid entitlement is America's beachhead for universal health 
care. Even if we pass the highly desirable Kennedy-Kassebaum-Dingell 
substitute, we will be taking a giant step backward if we throw away 
the Medicaid entitlement within a few weeks.
  The American people must not be swindled. Two actions are needed. 
Tonight we have to pass the substitute, and we also have to make 
certain that in the future, the next few weeks, we deny the Governors, 
the majority Republicans in this body, the opportunity to roll back the 
clock to destroy 30 years of good health care by eliminating the 
Medicaid entitlement. The Medicaid entitlement is absolutely necessary 
for the 43 million Americans who are not covered. The hope for those 43 
million lies in keeping the Medicaid entitlement and expanding it.
  This was the noble goal of the administration's bill in the 103d 
Congress. It was very difficult because they were looking to close that 
gap. It was very difficult because the 103d Congress proposal by the 
administration was attempting to have America join the other civilized 
industrialized nations for universal health care.
  Mr. GOODLING. Mr. Speaker, I yield 1 minute to the gentleman from 
Delaware [Mr. Castle].
  Mr. CASTLE. Mr. Speaker, I am proud to be an original cosponsor of 
H.R. 3103. Approximately 17 percent of our nonelderly population does 
not have health care insurance coverage in the United States of 
America. This very important piece of legislation decreases that rank 
of the uninsured, that 17 percent, by making health insurance more 
readily available and affordable. Many things we should have done many 
years ago: Guaranteeing the portability of health insurance for workers 
changing or leaving jobs, limiting the ability of insurers to use 
preexisting conditions to deny health insurance coverage, making health 
insurance more affordable by reforming malpractice laws and cracking 
down on fraud and abuse, and several other measures which are here.
  This focused reform bill compliments the efforts of States to expand 
health insurance coverage within their borders rather than superseding 
them.
  I would like to say a word or two about those who argue that this 
would kill Kassebaum-Kennedy. This bill does not kill what our 
colleagues in the Senate have accomplished. This bill builds upon the 
sound principles to expand availability contained in Kassebaum-Kennedy, 
but also addresses affordability, which is not addressed in that bill.
  Mr. Speaker, I encourage all of us to support this excellent piece of 
legislation.
  Mr. GOODLING. Mr. Speaker, I yield 30 seconds to the gentleman from 
Illinois [Mr. Fawell].
  Mr. FAWELL. Mr. Speaker, I think all one can say, I would just 
compliment the leadership on this side of the aisle. I would like to 
point out, too, that you will notice that no one, no one on this side 
of the aisle, criticized the legislation that that side is pushing. Yet 
I think it is fair to say we have had an abundance of criticism from 
that side.
  We are simply asking that small employers have the rights that mid-
sized and large employers have had for a long time, and that is to be 
able to self-insure. They preempt state law. You have heard it say 
there are 138 million people today under the ERISA law.
  Mr. DeFazio. Mr. Speaker, I rise in opposition to H.R. 3103, the so-
called ``Health Coverage Availability and Affordability Act,'' and in 
support of the Democratic substitute.
  We all agree that the American system of health care is in dire need 
of an overhaul. Health care costs are skyrocketing out of control. 
Having doubled in the last decade, they're far beyond the reach of any 
American who's uninsured and can't afford exorbitant insurance 
premiums. Four million Americans lost health insurance between 1988 and 
1994. Millions more are just a pinkslip away from losing all of their 
health care coverage.
  There are provisions in H.R. 3103 that I support. I agree that it is 
high time Congress acts to correct some of the more egregious practices 
of insurance companies. Denying insurance to individuals because of 
pre-existing conditions, genetic information, or a history of

[[Page H3108]]

domestic violence is outrageous. It is a good start to ban these 
practices.
  I've supported legislation that would correct these policies. I've 
authored legislation that would prohibit using domestic violence as a 
risk factor. I've also co-sponsored the Kennedy-Kassebaum-Roukema 
health care reform bill, which has the support of Senate Republicans 
and Democrats as well as the President.
  The Democratic substitute would replace H.R. 3103 with language from 
the Kennedy-Kassebaum-Roukema bill. This bill would expand access to 
health insurance for Americans by increasing portability and limiting 
insurance companies' ability to deny coverage because of pre-existing 
conditions. The political consensus for the Kennedy-Kassebaum-Roukema 
bill means that it could become law in a matter of weeks.
  But H.R. 3103 embraces controversial, divisive policies that doom any 
chance of insurance reform and minimal health security for the American 
people.
  As a long-time advocate of fiscal responsibility, I must oppose the 
provisions in this bill establishing generous Medical Savings Accounts 
[MSAs]. The MSAs would result in a significant loss of taxpayer dollars 
without a substantial revenue offset. Under this bill, individuals 
could deposit up to $2,000 annually and families up to $4,000 in tax-
free MSAs. The Joint Committee on Taxation has estimated that this 
provision alone would cost the U.S. taxpayers approximately $2 billion. 
This flies in the face of the deficit reduction goals to which this 
Congress purports to aspire.
  The Republican leadership counters that the bill contains budgetary 
savings to offset the revenue loss from MSAs. This assertion is 
laughable and cynical. The budgetary savings are achieved through 
``reforms'' in the Medicare program--the health plan for America's 
senior citizens. This is the same Medicare program that the Republicans 
claim is in such a dire financial crisis.

  Any savings achieved through Medicare reforms should be used to shore 
up the Medicare trust fund. Failing that, these savings should be used 
to lower deductibles and increase benefits for Medicare beneficiaries. 
It makes no sense to use this savings to offset a tax break for the 
limited number of individuals who can afford MSAs.
  Individuals who choose to open MSAs will likely be healthier, 
wealthier and younger than average. Unfortunately, the majority of the 
Medicare population is among the older and sicker and would not benefit 
from MSAs. The Republican leadership's bill would, therefore, steal 
money from Medicare recipients to pay for tax breaks for healthier 
Americans.
  Ironically, H.R. 3103 would also remove state oversight and replace 
it with Federal regulation to advantage insurance companies. This would 
be a severe blow to the States' rights movement. For the past year we 
have heard Republicans disparage the role of the Federal Government. 
Yet, under this legislation, the Republican leadership conveniently 
tosses aside this argument in favor of Federal supremacy over insurance 
coverage. This legislation preempts existing state insurance reforms 
and State regulation of self-funded multiple employer plans [MEWAs].
  In Oregon, local leaders have developed a series of health care 
initiatives with the active support of insurers, consumers and the 
business community. H.R. 3103 could seriously jeopardize these reforms, 
as well as reforms already enacted in other States.
  Every American should have lifetime access to quality, affordable 
health care. All of our major economic competitors have adopted 
comprehensive health care reforms. Surely the United States of America, 
the greatest industrial power on Earth, can adopt the minimal 
protections in the Kennedy-Kassebaum-Roukema bill.
  If you truly want to bring some relief to our constituents, I urge my 
colleagues to support the Democratic substitute which would replace the 
controversial Republican leadership's proposal with the language in the 
Kennedy-Kassebaum-Roukema bill.
  Mr. CLINGER. Mr. Speaker, I rise in strong support of the ``Health 
Coverage Availability and Affordability Act of 1996.'' This legislation 
takes very practical, needed steps to ensure working Americans that 
they will always have access to health insurance regardless of their 
health, their family's health, or their employer. H.R. 3103 will ensure 
Americans portability and renewability of their health coverage while 
eliminating the fear of losing coverage because of pre-existing 
condition limitations when changing or losing a job.
  I am particularly pleased to see provisions in the bill that set 
tough policies to combat health care fraud and abuse. Recent studies 
estimate that overcharging, double billing, and charging for services 
not rendered to patients cost consumers up to 10 percent of every 
health care dollar spent. This results in both higher health care costs 
and insurance premiums for everyone.
  Under H.R. 3103, penalties for defrauding the Government through 
Federal health care programs, such as Medicare and Medicaid, will be 
stiffened. Furthermore, the bill will require the Secretary of Health 
and Human Services and the Attorney General to jointly establish a 
national health care fraud and abuse control program to coordinate 
Federal, State and local law enforcement to combat fraud with respect 
to health plans.
  In addition, the ``Health Coverage Availability and Affordability Act 
of 1996'' will require the Secretary of Health and Human Services to 
exclude from Medicare and State health care programs for a minimum of 5 
years individuals and entities who have been convicted of felony 
offenses relating to health care fraud; require the Secretary to 
provide beneficiaries with an explanation of each item or service for 
which payment was made under Medicare; and require the Secretary to 
establish a program to encourage individuals to report suspected fraud 
and abuse in the Medicare program.
  I firmly believe that the fraud and abuse provisions in H.R. 3103 are 
long overdue and represent a serious effort to reduce fraudulent 
activity, which drives up the cost of health care for everyone. The 
Government Reform and Oversight Committee, which I chair, has held 
several hearings on this very issue, and I feel strongly that we need 
to act now to crack down on health care fraud and abuse.
  Also, as a representative of a largely rural district, I am pleased 
to see provisions in H.R. 3103 that will allow small businesses to join 
together to form purchasing cooperatives. This provision exempts small 
businesses from certain State insurance regulations--an exemption that 
big business now enjoys. This change will make health insurance 
affordable for small businesses who cannot afford it at the present 
time--a problem that is particularly noticeable in rural areas. Some 
predict that small employers will be able to cut their business 
premiums by as much as a third, even while paying State premium taxes, 
which is provided for under the bill. This provision will certainly 
increase access to quality health care to rural individuals.
  Again, I urge my colleagues to support this sensible, responsible 
approach to health care reform.
  Mr. GILMAN. Mr. Speaker, I rise in strong support of H.R. 3103, the 
Health Coverage Availability and Affordability Act and urge my 
colleagues to support this well intentioned bill.
  As one of the Republican cosponsors of the Roukema/Kassebaum/Kennedy 
portability measure, I am acutely aware of the need for Congress to 
approve a health coverage measure which will ensure working people and 
families that they will always have access to health insurance 
regardless of their health, their family's health, or their employer. 
Accordingly, I commend my colleague, Representative Roukema, for her 
efforts in the House to bring this portability measure before the House 
today.
  Similarly, I am pleased that the House will have an opportunity to 
make a good bill better. In addition to making health insurance more 
available to all Americans, H.R. 3103 makes it more affordable and 
provides more choices.
  H.R. 3103 will provide incentives to encourage individuals, and their 
employers, to make tax deductible contributions--in lieu of health 
insurance premiums--to a specialized savings account [MSA] to be used 
at a later date for health expenses; it increases penalties for fraud 
and abuse of the federally-funded health care system; and allows self 
employed individuals and small businesses to voluntarily associate to 
purchase health insurance which would be available to all member 
organizations.
  All of these provisions mentioned above will help our Nation's 
farmers, self-employed, and small business entrepreneurs to provide 
health insurance for their families and employees.
  Though H.R. 3103 may not be a perfect bill it does provide important 
health insurance reforms that will ensure broad health coverage for our 
constituents.
  Furthermore, this measure is a step in the right direction. I look 
forward to working further with my colleagues on health care reform 
measures which will protect those Americans who currently do not have 
health insurance coverage.
  I urge my colleagues to support H.R. 3103.
  Mr. STENHOLM. Mr. Speaker, in an effort to keep health insurance 
reform moving through the legislative process, I rise with some 
reservation to support H.R. 3103, the Health Coverage Availability Act 
of 1996.
  My record clearly reflects my strong support of health insurance 
reform. In addition to efforts on rural health issues and system-wide 
reform, I have worked for many years to make health insurance both 
accessible and affordable for millions of underserved Americans, many 
of whom reside in the 17th District of Texas. In one very recent 
example, I heard from a constituent who has been employed since 1954, 
working the last 10 years with her sister in a bookkeeping and 
secretarial business. At one point, she had hospitalization insurance, 
but the price of the policy continually

[[Page H3109]]

increased to the point that she finally had to drop it because she 
could no longer afford it. She now worries about the health and 
economic vulnerability of her situation.
  While this legislation does not specifically address all of her 
needs, I believe certain provisions such as portability of health 
insurance, limitation on pre-existing conditions, increased tax 
deductibility for the self-employed, and guaranteed availability of 
insurance for small employers, are definitely steps in the right 
direction.
  Because the Senate has taken the lead on a health insurance reform 
bill which the President has pledged to sign, I must express my 
concerns about the political ramifications of loading this bill down 
with some of the more controversial issues that have been included here 
today. I recall just a few years ago, during a similar health care 
debate, when my friends on the other side of the aisle were criticizing 
Democrats for ``overreaching'' on health care reform proposals. Now, I 
fear we are back to square one.
  Like many Members of this body, I would like to see additional health 
care reforms, including reforms to develop rural health networks and 
preserve rural health services. Facing political reality, however, I 
realize that this might not be the proper vehicle to achieve these 
goals.
  I am also concerned that rather than promoting the goals of greater 
health insurance access and affordability, some provisions in this bill 
may have the reverse impact in the long run because sufficient 
safeguards were not added to the provisions. For example, I have 
strongly supported small employer pooling arrangements with effective 
certification and solvency standards, as well as protections to ensure 
that the pool is large enough to manage risk. However, I am worried 
that the pooling section of this legislation fails to meet those 
concerns.
  I am especially concerned that the bill we are considering today 
includes provisions and changes which were made after the Committees of 
jurisdiction reported out their components of the bill.
  While I am not convinced that this House bill meets many of my 
concerns, I do believe that these issues can be worked out in 
conference. Therefore, in the spirit of keeping the process moving 
forward, I intend to vote yes on final passage. It is my hope that we 
not let another opportunity to achieve some type of bipartisan health 
care reform pass us by, simply because we again overreach the 
boundaries of consensus. That is why I am cautiously supporting H.R. 
3103, with the hope that the conference committee will inject 
bipartisan commonsense into the process and develop a health insurance 
reform bill that will get a Presidential signature.
  After all, without both a congressional majority and a Presidential 
signature, my constituents in the 17th district, or Americans anywhere 
else, will receive no benefit from this political exercise. In the 
final analysis, I would hope that the ultimate goal for us all is 
weighed not in political, special interest terms, but in terms of 
caring for the health needs of our un- and under-insured populations.
  Mr. HORN. Mr. Speaker, there has been a campaign of misinformation 
about this legislation. Americans have been told that this bill would 
deny them continued health insurance coverage for alternative medical 
treatments. This is untrue.
  This bill does not deal with health insurance coverage for 
alternative medical treatments. This is an issue that must be addressed 
by the States. H.R. 3103 only requires that each State implement a 
mechanism to ensure individual coverage.
  This bill does increase choices for health care delivery systems by 
providing for medical savings accounts. With these accounts, Americans 
can utilize their health care dollars for whatever treatment fits their 
needs. That is the way to ensure that alternative medical treatments 
remain available for anyone who wants them.
  Mr. FRANKS of Connecticut. Mr. Speaker, H.R. 3103, the Health Care 
Coverage Availability and Affordability Act will ensure that Americans 
have access to health care coverage. More importantly, however, the 
bill will insure that people do not lose their insurance coverage when 
they switch jobs.
  During the March 17th hearing this subcommittee held on insurance 
reform I stated that I had worked for both small businesses and for 
Fortune 500 companies. During my tenure in the business world I saw 
first hand the concern of individuals who have worked hard and suddenly 
found themselves without employment or insurance coverage. These 
individuals worry about how they will make their insurance payments to 
COBRA. COBRA benefits are supposed to cover individuals during periods 
of unemployment, but without a job how can the individual keep up his 
or her COBRA payments. They can't, so they simply slip through the 
cracks in our insurance industry. These are the individuals that we 
must be most concerned with.
  This same scenario can be applied to the self employed. Should a 
self-employed individual's company fail, what would happen during the 
period of unemployment. I have recently reintroduced legislation I 
sponsored during the 103d Congress. My bill would allow us to look at 
the situation I just described in a similar fashion to the way in which 
we look at unemployment compensation, with the exception that the 
employer will not have to contribute. While a person is employed, why 
not have that person make contributions to an uninsurance trust. The 
employee would be able to contribute money to the trust and then access 
it during periods of unemployment. We also need this kind of return.

  The bill before us today brings about much-needed reform to the 
insurance industry in this country. It addresses such important issues 
as portability and pre-existing conditions. Individuals will no longer 
have to remain in a job they do not like in order to maintain insurance 
coverage. Under this bill if an individual changes jobs his or her 
insurance coverage will follow. Also, according to this bill insurance 
companies will no longer be able to deny coverage to individuals with 
pre-existing conditions.
  H.R. 3103 addresses the problem of medical malpractice as well. The 
bill establishes uniform standards for health care liability suits 
brought in court. Malpractice lawsuit awards are capped at $250,000 for 
non-economic damages and $250,000 or three times the non-economic 
damages for punitive damages. This capping of damages will aid in 
driving down health care costs.
  This bill will allow organizations, like trade associations, to 
voluntarily associate to purchase health care insurance. This insurance 
would then be available to all member organizations. The voluntary 
association organizations for the purpose of buying health insurance 
will allow them to increase their purchasing power, thus allowing them 
to purchase insurance at a significant savings.
  The bill provides relief for self-employed individuals by allowing 
them to deduct increasing percentages of their health insurance costs 
from their income taxes. This provision, like many of the others 
contained in this bill, will make the purchasing of health insurance 
more affordable. This is especially important for self-employed 
individuals because all too often they fall through the cracks in our 
health insurance industry.
  Penalties for fraud and abuse of the federally funded health care 
system are increased under this legislation. Overcharging, double 
billing, and charging for services not rendered has become too 
prevalent. These types of fraud cost consumes 5 to 10 percent of ever 
health care dollar. This results in higher health care costs as well as 
higher in insurance premiums.
  Finally the bill allows for the establishment of medical savings 
accounts, MSA's. MSA's will bring about changes to health insurance. 
These accounts will place the consumer in charge of his or her health 
care. The consumer will have total control over his or her health care. 
This will allow the consumer to spend his or her health care dollars as 
he or she wants.
  Mr. Speaker, the legislation before us takes important steps toward 
reforming the health insurance industry in this country. I applaud this 
legislation and look forward to its passage. Thank you and I yield back 
the balance of my time.
  Mr. OXLEY. Mr. Speaker, I rise today in support of the Health 
Coverage Availability and Affordability Act of 1996. This bill includes 
provisions I have long supported on paperwork reduction.
  I am pleased to see that today, the House will have the opportunity 
to vote on these and other needed reforms. Legislation aimed at making 
health insurance more available and affordable while reducing 
administrative paperwork is long overdue. While President George Bush 
introduced similar legislation in 1992, the then Democrat-controlled 
Congress blocked its consideration. It was not until the defeat of 
President Clinton's nationalized health care system that a consensus 
coalesced around these market-based reforms.
  Currently, excessive paperwork, redtape, and duplicative 
administrative costs add nearly 10 cents to every health care dollar 
spent in the United States. In response to this concern I introduced 
legislation during the 102d Congress, along with our former colleague, 
Alex McMillan, to reduce these unnecessary costs through the 
establishment of uniform health claims and electronic billing 
standards.
  Following this first ever free-standing bill on billing 
simplification, my Ohio colleague, Dave Hobson, took up the cause, 
improving upon our efforts. Congressman Hobson's work has been integral 
in the promotion of the benefits of a uniform electronic billing 
system.
  Mr. Speaker, I support the passage of the Health Care Coverage 
Availability and Affordability Act. American working families need and 
deserve the flexibility and cost-saving measures this bill provides.
  Mr. PARKER. I want to congratulate the many Members who have been 
instrumental

[[Page H3110]]

in bringing to the floor this important health care reform legislation.
  In the 103d Congress, a number of us worked diligently on a similar, 
incremental package that would have corrected many identifiable 
problems in our health care delivery system.
  Unfortunately, we never had an opportunity to vote on such a measure.
  Today, however, I am pleased that we will finally be able to tell our 
constituents that help is on the way--changes will be made to address 
many of their health care concerns.
  The passage of this legislation will assure people that they can 
change jobs and obtain group health insurance coverage through a new 
employer, without pre-existing condition limitations.
  For those individuals who are between jobs and have been unable to 
obtain coverage due to a pre-existing condition, this bill will make it 
possible for them to do so.
  For small employers, new pooling arrangements and an increased 
deduction for health insurance premiums will make it easier for them to 
purchase insurance coverage for their employees.
  For individuals and families, medical savings accounts will now be 
available that allow them to control their own health care decisions 
and costs.
  And for the many States like my own that provide health care coverage 
for uninsured high-risk individuals, this bill will clarify the tax-
exempt status of State-established health insurance risk pools.
  Currently, such risk pools are not automatically exempt from Federal 
income taxes.
  This bill provides the necessary legislative fix to assist States in 
making much-needed medical insurance available to uninsurable 
residents.
  Of course this bill, like the proposal I worked on in the last 
Congress, also includes provisions addressing such important needs as 
administrative simplification, fraud and abuse elimination, and medical 
malpractice reform.
  In closing, we are taking the critical first steps toward a health 
care delivery system that is more accessible and affordable.
  H.R. 3103 establishes a strong foundation on which future reforms in 
our health care delivery system can be based.
  We should not let this opportunity to improve the Nation's health 
care system slip away once again.
  Mr. CONYERS. Mr. Speaker, medical malpractice is a widespread and 
serious problem in our society. Studies have established that it is the 
third leading cause of preventable death, second only to those deaths 
associated with cigarette smoking and alcohol abuse. More than 1.3 
million hospitalized Americans, or nearly 1 in 25, are estimated to be 
injured annually by medical treatment, and about 100,000 such patients, 
or 1 in 400, die each year as a direct result of such injuries.
  Unfortunately, in federalizing this state law matter, the Republican 
proposals would absolutely decimate the protections the states have 
provided for against medical malpractice and other forms of misconduct. 
A summary of these provisions follows:
  A. Statute of Limitations/Sec. 281--Prohibits victims from bringing 
any state health care liability action more than two years after an 
injury is discovered or five years after the negligent conduct that 
caused the injury first occurred. Such a proposed new federal statute 
of limitations takes no account of the fact that many injuries caused 
by medical malpractice or faulty drugs often take years to manifest 
themselves. Thus under the proposal, a patient who is negligently 
inflicted with HIV-infected blood and develops AIDs six years later 
would be forever barred from filing a medical malpractice or product 
liability claim.
  B. $250,000 Cap on Non-economic Damages/Sec. 282(a)(1)--Caps the 
award of non-economic damages in medical malpractice actions at 
$250,000. The bulk of data indicates that dollar caps do not provide 
significant savings. Using information derived from a 1992 GAO study, 
the ABA's Special Committee on Medical Professional Liability found 
that state tort reform proposals ``have not had any measurable impact 
on overall health [care] costs'' and that personal health care spending 
had doubled between 1982 and 1990, regardless of the type of 
``reforms'' adopted. A 1986 GAO study on the impact of specific tort 
changes on medical malpractice claims revealed that claims and 
insurance costs continue to rise despite state-adopted limits on victim 
compensation.
  Even the total elimination of malpractice costs would provide only 
negligible savings to the health care system. According to separate 
reviews by the U.S. Department of Health and Human Services and CBO, 
the total amount of all liability premiums paid in the United States 
represents less than 1% of the Nation's health care costs. And 
factoring in the costs of so-called ``defensive medicine'' would not 
result in any significant additional savings to the health care system, 
according to both the CBO and the Congressional Office of Technology 
Assessment.
  An additional concern with caps on non-economic damages is that they 
could unfairly penalize those victims who suffer the most severe injury 
and are most in need of financial security. Although harder to 
scientifically measure, non-economic damages compensate victims for 
real losses--such as loss of sight, disfigurement, inability to bear 
children, incontinence, inability to feed or bathe oneself, or loss of 
a limb--that are not accounted for in lost wages. And non-economic 
damage caps have been found to have a disproportionately negative 
impact on women, minorities, the poor, the young, and the unemployed; 
since they generally have less wages, a greater proportion of their 
losses is non-economic.
  C. Joint and Several Liability/Sec. 282(a)(2)--Eliminates the state 
doctrine of joint and several liability for non-economic damages. This 
will allow wrongdoers to profit at the expense of innocent victims, 
rather than forcing tortfeasors to allocate liability among themselves, 
as has traditionally been the case under state law. And since women, 
minorities, and the poor generally earn less wages, such limitations on 
non-economic damages could have a disproportionately negative impact on 
these groups.
  D. Limits on Punitive Damages/Sec. 282(b)--Caps punitive damage 
awards at the greater of $250,000 or three times economic damages; 
limit the state law standard for the award of punitive damages to 
intentional or ``consciously indifferent'' conduct; allow a bifurcated 
proceeding to determine issues relating to punitive damages; and 
completely ban punitive damages in the case of drugs or other devices 
that have been approved by the FDA or any other drug ``generally 
recognized as safe and effective'' pursuant to FDA-established 
conditions.
  These proposed limitations raise a number of concerns. Arbitrary caps 
on punitive damages may provide unjustified windfalls to the few 
tortfeasors responsible for blatant and wanton medical misconduct. (In 
fact, studies have shown that only 265 medical malpractice punitive 
awards were awarded in the United States in the 30 years between 1963 
and 1993.) By insulating grossly negligent conduct, the proposed new 
federal standard for establishing punitive damages comes close to 
criminalizing tort law. Permitting defendants to bifurcate proceedings 
concerning the award of punitive damages may well lead to far more 
costly and time-consuming proceedings, again working to the 
disadvantage of injured victims. And banning punitive damages for FDA-
approved products is likely to have a disproportionate impact on women, 
since they make up the largest class of victims of medical products.
  E. Periodic Payments/Sec. 282(c)--Grants wrongdoers the option of 
paying damage awards in excess of $50,000 on a periodic basis. This 
provision would apply not only to future economic damages realized over 
time, such as lost wages, but to non-economic losses, like the loss of 
a limb, that are realized all at once. Also, in contrast to many state 
law periodic payment provisions, the Republican proposal does not seek 
to protect the victim from the risk of nonpayment resulting from future 
insolvency by the wrongdoer or to specify that future payments should 
be increased to account for inflation or to reflect changed 
circumstances.
  F. Collateral Source and Subrogation/Sec. 282(d)--In most states 
under the collateral source rule, a victim is able to obtain 
compensation for the full amount of damages incurred, and his or her 
health insurance provider is able to seek subrogation in respect of its 
own payments to the victim. This ensures that the true cost of damages 
lies with the wrongdoer while eliminating the possibility of double 
recovery by the victim. The Republican proposal would turn this system 
on its head by allowing tortfeasors to introduce evidence of potential 
collateral payments owing from the insurer to the victim. This could 
have the effect of shifting costs from negligent doctors to the health 
insurance system in general and taxpayers in particular, resulting in 
increased health premiums paid by workers and businesses.
  Another problematic feature of Republican malpractice proposals has 
been their one-sided, anti-victim nature. For example, their proposal 
allows States to enact more restrictive caps and damage limitations, 
but not permit the states freedom to grant victims any greater legal 
rights. Their proposals also ignore a number of complex legal issues. 
For example, in the state law context, various damage caps have been 
held to violate state constitutional guarantees relating to equal 
protection, due process, and rights of trial by jury and access to the 
courts; and these very same concerns are likely to be present at the 
federal level. And by layering a system of federal rules on top of a 
two-century-old system of state common law, the Republican proposals 
will inevitably lead to confusing conflicts, not only within the 
federal and state courts, but between federal and state courts.

[[Page H3111]]

  I urge opposition to these proposals which would harm victims and 
insulate wrongdoers from liability.
  Mr. NEAL of Massachusetts. Mr. Speaker, one lesson that both 
Democrats and Republicans learned from the health care reform debate in 
the 103d Congress is that retaining access to affordable health 
insurance is an anxiety that plagues most American families.
  We exhausted the health care debate a few years ago in this Congress 
searching for ways to do it all--to make health care cheaper, better, 
and more accessible for everyone. And though we didn't pass health care 
reform legislation at that time, the fact that we are here today 
talking about limiting pre-existing condition exclusions and making 
health insurance portable--two consensus issues that Democrats and 
Republicans both support--is proof that our efforts did not fail.
  I'd like to take a moment today to applaud our President for choosing 
to act upon America's health care concerns, and for having the courage 
to bring the issue of health care reform to the forefront of our 
national agenda.
  The United States, and Massachusetts in particular, is home to the 
best quality health care in the world, and it is our job as Members of 
this House to make quality care available to Americans. The pre-
existing condition limits and portability provisions in this bill meet 
this goal.
  We also have a unique opportunity today to make health insurance more 
affordable to the self-employed by increasing the deductibility of 
health insurance premiums. Under current law, the self-employed are 
allowed a 30 percent deduction. The bill before us today gradually 
increases the deduction to 50 percent and 50 percent is not phased in 
until 2003.
  The Democratic substitute addresses this issue in a more sensible and 
equitable manner. The Democratic substitute would increase the 
deduction to 50 percent in 1997 and 80 percent in 2002. Affordability 
is the greatest barrier to expanding health coverage. Increasing the 
deduction to 50 percent in 1997 will help make insurance affordable to 
those who lack coverage. Now, the self-employed may be able to fit into 
their budget the cost of health insurance.
  Equity in the tax code should be one of our primary focuses. 
Corporations are allowed to deduct 100 percent of the cost of providing 
health insurance. Narrowing the gap between corporations and the self-
employed restores greater tax equity.
  Self-employed businesses range in spectrum from family farms to sole 
practitioners. These businesses are a vital part of our economy. We 
need to make health care affordable for them.
  I urge you to support the Democratic substitute which tackles the 
issues where there is agreement and will make a difference in the 
health care of Americans.
  Mrs. VUCANOVICH. Mr. Speaker, it took many years of debate, and 
thousands of town hall meetings, but by George, I think we've got it.
  Congress has finally stepped up to the plate to ensure that Americans 
are able to obtain health insurance. Too many Americans are shut out of 
health care insurance because of preexisting conditions, or because 
they change jobs. With one swing of the bat in the first inning of the 
game, we have successfully completed a ``Triple A''--much better than a 
triple play. The bill provides ``A''-vailability, ``A''-ffordability 
and ``A''-ccountability. It helps employees who try to obtain health 
insurance, employers who try to provide health insurance, and the bill 
tackles the high cost of health care.
  It makes good on promises by raising the health deduction for self-
employed to 50 percent by the year 2003, provides citizens the 
opportunity to contribute to Medical Savings Accounts, and allows 
individuals to deduct long-term care expenses.
  The House Committees' team has made the advancement up to third base, 
and it's up to the rest of us to take it home. I urge my colleagues and 
teammates to support this historic bill.
  Mr. CUNNINGHAM. Mr. Speaker, today I rise in support of Health 
Coverage Availability and Affordability Act, H.R. 3103, particularly 
the provisions which will provide small employers with the ability to 
reduce health insurance costs through the formation of multiple 
employer arrangements [MEWAs]. H.R. 3103 will bring affordable health 
care to millions of Americans who currently are uninsured, and will 
also provide greater assurance that those who already have health 
coverage will not lose it when they change jobs.
  Without the small employer pooling provisions, any incremental health 
reform measure only addresses the problem of security for those who 
currently have health insurance. However, by providing small business 
with the same tools that are already available to large corporations in 
obtaining health coverage, we can also help the problem of the 
uninsured.
  Eighty-five percent of the forty million uninsured are persons in 
families with at least one employed worker, and the majority of these 
workers are employed in small businesses. As small business becomes a 
larger portion of the economy, more and more people will find 
themselves employed by smaller companies. Thus, if we are ever going to 
make health coverage affordable for the uninsured, it is imperative 
that we provide small business with the same opportunities that already 
are available to large corporations for keeping health costs down.
  Small employer pooling arrangements must operate uniformly across 
state lines, just like large employer arrangements do currently. We 
must provide a market-oriented, 21st century solution to the problem of 
the uninsured.
  I urge you to vote in favor of H.R. 3103 to increase health care 
security and affordability for American workers.
  Mr. LAZIO of New York. Mr. Speaker, I rise today in proud support of 
H.R. 3103, the Health Coverage & Affordability Act of 1996, of which I 
am a cosponsor.
  This is a day which I have been looking forward to since I first took 
office over 3 years ago. Today, we are taking a long overdue step to 
provide real, substantive change to our health care system which will 
help working class families across America, and in my home district of 
Long Island.
  For far too long, many Americans have worried that losing a job or 
having a preexisting condition would jeopardize the portability of 
their health insurance.
  Because of this bill, workers will continue to have coverage if they 
change or lose their job--even with preexisting conditions. General 
Accounting Office [GAO] statistics show that 12 million workers with 
employer-based insurance leave their jobs every year, and millions more 
lose their jobs. H.R. 3103 would benefit up to 25 million Americans per 
year, including those who face job-lock, by eliminating the preexisting 
condition exclusions for persons with prior health insurance coverage.
  An important feature of H.R. 3103 will eliminate discrimination based 
on genetic information. This would allow thousands of men and women to 
undergo genetic testing needed to preserve their health without fear of 
losing their health insurance or not being able to acquire it. This 
protection is essential for the women of Long Island, where instances 
of breast cancer are among the highest in the country. With H.R. 3103 
in place, these women can be tested for BRCA-1, a gene linked to the 
disease, without fear of losing the insurance needed to meet their 
medical needs.
  As a result of our efforts today, health care will become more 
affordable. H.R. 3103 tackles the problem created by rampant fraud and 
lawsuit abuse that drives up the cost, and will increase penalties for 
those who commit fraud and abuse. Importantly, this bill also increases 
the health insurance deduction for self-employed individuals from 30 
percent to 50 percent by 2003, and allows taxpayers to make tax-
deductible contributions to a medical savings account.
  I urge my colleagues to support this bill and these reforms which 
will ease some of those worries of families who are already being 
squeezed by high taxes and falling wages by ensuring availability, 
affordability, and accountability to those who receive health care 
through their jobs. The American people deserve this and we owe it to 
them to pass it by a wide bi-partisan margin.
  Mr. KLECZKA. Mr. Speaker, Americans will today witness firsthand an 
overt effort by the Republican leadership to sink a much-needed piece 
of legislation for the sake of preserving their cozy relationship with 
special-interests. A perfectly good insurance reform bill introduced by 
Senators Kennedy and Kassebaum and Representative Roukema in the House 
has been loaded with extra, controversial provisions that will make it 
difficult, if not impossible, to pass into law.
  While modest, the original bill could help 21 million Americans by 
waiving the pre-existing condition exclusions for individuals who have 
had continuous health coverage. As many as 4 million people who are 
currently ``locked'' into their jobs for fear of losing needed health 
coverage for themselves or their family would benefit from the bill's 
national portability standards.
  Yet, despite the fact that this bill will benefit 25 million 
Americans, Republicans in the House do not support it. In the Ways and 
Means Committee, the Kennedy-Kassebaum-Roukema bill did not receive one 
Republican vote. Apparently, 25 million hard-working Americans are not 
enough to convince the GOP that we need this legislation. Evidently,

[[Page H3112]]

unless it has the blessing of the Health Insurance Association of 
America it is not worth voting for.
  Why else would these Members condition their support for insurance 
reform on adding ``sweeteners'' like medical liability provisions that 
limit the legal rights of malpractice victims? Why do we need to permit 
insurance companies to sell Medicare beneficiaries unnecessary and 
costly policies that duplicate benefits they already have?
  The Republican bill (H.R. 3103) includes other items that will likely 
meet strong opposition in the Senate, namely, controversial provisions 
that effectively limit the ability of States to enact health care 
reforms by pre-empting existing state regulations on multi-employer 
health plans. Already, a large percentage of employers are exempt from 
state reforms under the ERISA. With this provision, Congress takes even 
more health plans out of states' reach.
  This add-on is especially puzzling since it flies in the face of the 
States' rights argument we have been hearing over and over from the 
Republicans. They want to block grant Medicaid, welfare, public 
housing, senior employment programs and other Federal initiatives and 
let the states administer and regulate them. Why not health care 
reform? Their own argument that the states can do things better and 
more efficiently than the Federal Government is contradicts this new 
policy.
  As one of only four Democrats that cast their vote in favor of the 
Ways and Means insurance reform legislation, I strongly support 
providing my constituents with health coverage they can take from job 
to job. But, I differ from my Republican colleagues in one important 
respect. Not only do I support it--I also want it to pass. This final 
version of the bill bends over backwards so far to please so many 
special interests that it severs the spine that holds it together and 
paralyzes the legislative process.
  Mr. Speaker, I support the clean Democratic substitute, which is 
identical to the original Kennedy-Kassebaum-Roukema bill and I urge my 
colleagues to do likewise.
  The SPEAKER pro tempore (Mr. Combest). All time for debate has 
expired.


     Amendment in the nature of a substitute Offered by Mr. Dingell

  Mr. DINGELL. Mr. Speaker, as the designee of the minority leader, 
under the rule, and on behalf of myself and my two colleagues, the 
gentleman from South Carolina [Mr. Spratt] and the gentleman from Texas 
[Mr. Bentsen], I offer an amendment in the nature of a substitute.
  The SPEAKER pro tempore. The Clerk will designate the amendment in 
the nature of a substitute.
  The text of the amendment in the nature of a substitute is as 
follows:

       Amendment in the nature of a substitute offered by Mr. 
     Dingell:
       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Health Insurance Reform Act 
     of 1996''.

       TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

                       TABLE OF CONTENTS OF TITLE

Sec. 100. Definitions.

                     Subtitle A--Group Market Rules

Sec. 101. Guaranteed availability of health coverage.
Sec. 102. Guaranteed renewability of health coverage.
Sec. 103. Portability of health coverage and limitation on preexisting 
              condition exclusions.
Sec. 104. Special enrollment periods.
Sec. 105. Disclosure of information.

                  Subtitle B--Individual Market Rules

Sec. 110. Individual health plan portability.
Sec. 111. Guaranteed renewability of individual health coverage.
Sec. 112. State flexibility in individual market reforms.
Sec. 113. Definition.

                    Subtitle C--COBRA Clarifications

Sec. 121. Cobra clarification.

        Subtitle D--Private Health Plan Purchasing Cooperatives

Sec. 131. Private health plan purchasing cooperatives.

          Subtitle E--Application and Enforcement of Standards

Sec. 141. Applicability.
Sec. 142. Enforcement of standards.

                  Subtitle F--Miscellaneous Provisions

Sec. 191. Health coverage availability study.
Sec. 192. Effective date.
Sec. 193. Severability.

     SEC. 100. DEFINITIONS.

       As used in this title:
       (1) Beneficiary.--The term ``beneficiary'' has the meaning 
     given such term under section 3(8) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(8)).
       (2) Employee.--The term ``employee'' has the meaning given 
     such term under section 3(6) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(6)).
       (3) Employer.--The term ``employer'' has the meaning given 
     such term under section 3(5) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(5)), except that 
     such term shall include only employers of two or more 
     employees.
       (4) Employee health benefit plan.--
       (A) In general.--The term ``employee health benefit plan'' 
     means any employee welfare benefit plan, governmental plan, 
     or church plan (as defined under paragraphs (1), (32), and 
     (33) of section 3 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1002 (1), (32), and (33))) that 
     provides or pays for health benefits (such as provider and 
     hospital benefits) for participants and beneficiaries 
     whether--
       (i) directly;
       (ii) through a group health plan offered by a health plan 
     issuer as defined in paragraph (8); or
       (iii) otherwise.
       (B) Rule of construction.--An employee health benefit plan 
     shall not be construed to be a group health plan, an 
     individual health plan, or a health plan issuer.
       (C) Arrangements not included.--Such term does not include 
     the following, or any combination thereof:
       (i) Coverage only for accident, or disability income 
     insurance, or any combination thereof.
       (ii) Medicare supplemental health insurance (as defined 
     under section 1882(g)(1) of the Social Security Act).
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Workers compensation or similar insurance.
       (vi) Automobile medical payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) Hospital or fixed indemnity insurance.
       (ix) Short-term limited duration insurance.
       (x) Credit-only, dental-only, or vision-only insurance.
       (xi) A health insurance policy providing benefits only for 
     long-term care, nursing home care, home health care, 
     community-based care, or any combination thereof.
       (5) Family.--
       (A) In general.--The term ``family'' means an individual, 
     the individual's spouse, and the child of the individual (if 
     any).
       (B) Child.--For purposes of subparagraph (A), the term 
     ``child'' means any individual who is a child within the 
     meaning of section 151(c)(3) of the Internal Revenue Code of 
     1986.
       (6) Group health plan.--
       (A) In general.--The term ``group health plan'' means any 
     contract, policy, certificate or other arrangement offered by 
     a health plan issuer to a group purchaser that provides or 
     pays for health benefits (such as provider and hospital 
     benefits) in connection with an employee health benefit plan.
       (B) Arrangements not included.--Such term does not include 
     the following, or any combination thereof;
       (i) Coverage only for accident, or disability income 
     insurance, or any combination thereof.
       (ii) Medicare supplemental health insurance (as defined 
     under section 1882(g)(1) of the Social Security Act).
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Workers compensation or similar insurance.
       (vi) Automobile medical payment insurance.
       (vii) Coverage for a specified disease or illness.
       (ix) Short-term limited duration insurance.
       (x) Credit-only, dental-only, or vision-only insurance.
       (xi) A health insurance policy providing benefits only for 
     long-term care, nursing home care, home health care, 
     community-based care, or any combination thereof.
       (7) Group purchaser.--The term ``group purchaser'' means 
     any person (as defined under paragraph (9) of section 3 of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1002(9)) or entity that purchases or pays for health 
     benefits (such as provider or hospital benefits) on behalf of 
     two or more participants or beneficiaries in connection with 
     an employee health benefit plan. A health plan purchasing 
     cooperative established under section 131 shall not be 
     considered to be a group purchaser.
       (8) Health plan issuer.--The term ``health plan issuer'' 
     means any entity that is licensed (prior to or after the date 
     of enactment of this Act) by a State to offer a group health 
     plan or an individual health plan.
       (9) Health status.--The term ``health status'' includes. 
     with respect to an individual, medical condition, claims 
     experience, receipt of health care, medical history, genetic 
     information, evidence of insurability (including conditions 
     arising out of acts of domestic violence), or disability.
       (10) Participant.--The term ``participant'' has the meaning 
     given such term under section 3(7) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(7)).
       (11) Plan sponsor.--The term ``plan sponsor'' has the 
     meaning given such term under section 3(16)(B) of the 
     Employee Retirement

[[Page H3113]]

     Income Security Act of 1974 (29 U.S.C. 1002(16)(B)).
       (12) Secretary.--The term ``Secretary'', unless 
     specifically provided otherwise, means the Secretary of 
     Labor.
       (13) State.--The term ``State'' means each of the several 
     States, the District of Columbia, Puerto Rico, the United 
     States Virgin Islands, Guam, American Samoa, and the 
     Commonwealth of the Northern Mariana Islands.

                     Subtitle A--Group Market Rules

     SECTION 101. GUARANTEED AVAILABILITY OF HEALTH COVERAGE.

       In General.--
       (1) Nondiscrimination.--Except as provided in subsection 
     (b), section 102 and section 103--
       (A) a health plan issuer offering a group health plan may 
     not decline to offer whole group coverage to a group 
     purchaser desiring to purchase such coverage; and
       (B) an employee health benefit plan or a health plan issuer 
     offering a group health plan may establish eligibility, 
     continuation of eligibility, enrollment, or premium; 
     contribution requirements under the terms of such plan, 
     except that such requirements shall not be based on health 
     status (as defined in section 100(9)).
       (2) Health promotion and disease prevention.--Nothing in 
     this subsection shall prevent an employee health benefit plan 
     or a health plan issuer from establishing premium; discounts 
     or modifying otherwise applicable copayments or deductibles 
     in return for adherence to programs of health promotion and 
     disease prevention.
       (b) Application of Capacity Limits.--
       (1) In general.--Subject to paragraph (2), a health plan 
     issuer offering a group health plan may cease offering 
     coverage to group purchasers under the plan if--
       (A) the health plan issuer ceases to offer coverage to any 
     additional group purchasers; and
       (B) the health plan issuer can demonstrate to the 
     applicable certifying authority (as defined in section 
     142(d)), if required, that its financial or provider capacity 
     to serve previously covered participants and beneficiaries 
     (and additional participants and beneficiaries who will be 
     expected to enroll because of their affiliation with a group 
     purchaser or such previously covered participants or 
     beneficiaries) will be impaired if the health plan issuer is 
     required to offer coverage to additional group purchasers.

     Such health plan issuer shall be prohibited from offering 
     coverage after a cessation in offering coverage under this 
     paragraph for a 6-month period or until the health plan 
     issuer can demonstrate to the applicable certifying authority 
     (as defined in section 142(d)) that the health plan issuer 
     has adequate capacity, whichever is later.
       (2) First-come-first-served.--A health plan issuer offering 
     a group health plan is only eligible to exercise the 
     limitations provided for in paragraph (1) if the health plan 
     issuer offers coverage to group purchasers under such plan on 
     a first-come-first-served basis or other basis established by 
     a State to ensure a fair opportunity to enroll in the plan 
     and avoid risk selection.
       (e) Construction.--
       (1) Marketing of group health plans.--Nothing in this 
     section shall be construed to prevent a State from requiring 
     health plan issuers offering group health plans to actively 
     market such plans.
       (2) Involuntary offering of group health plans.--Nothing is 
     this section shall be construed to require a health plan 
     issuer to involuntarily offer group health plans in a 
     particular market. For the purposes of this paragraph, the 
     term ``market'' means either the large employer market or the 
     small employer market (as defined under applicable State law, 
     or if not so defined, an employer with not more than 50 
     employees).

     SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COVERAGE.

       (A) In General.--
       (1) Group purchaser.--Subject to subsections (b) and (c), a 
     group health plan shall be renewed or continued in force by a 
     health plan issuer at the option of the group purchaser, 
     except that the requirement of this subparagraph shall not 
     apply in the case of--
       (A) the nonpayment of premiums or contributions by the 
     group purchaser in accordance with the terms of the group 
     health plan or where the health plan issuer has not received 
     timely premium payments;
       (B) fraud or misrepresentation of material fact on the part 
     of the group purchaser;
       (C) the termination of the group health plan in accordance 
     with subsection (b); or
       (D) the failure of the group purchaser to meet contribution 
     or participation requirements in accordance with paragraph 
     (3).
       (2) Paricipant.--Subject to subsections (b) and (c), 
     coverage under an employee health benefit plan or group 
     health plan shall be renewed or continued in force, if the 
     group purchaser elects to continue to provide coverage under 
     such plan, at the option of the participant (or beneficiary 
     where such right exists under the terms of the plan or under 
     applicable law), except that the requirement of this 
     paragraph shall not apply in the case of--
       (A) the nonpayment of premiums or contributions by the 
     participant or beneficiary in accordance with the terms of 
     the employee health benefit plan or group health plan or 
     where such plan has not received timely premium payments.
       (B) fraud or misrepresentation of material fact on the part 
     of the participant or beneficiary relating to an application 
     for coverage or claim for benefits;
       (C) the termination of the employee health benefit plan or 
     group health plan;
       (D) loss of eligibility for continuation coverage as 
     described in part 6 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1161 et 
     seq.); or
       (E) failure of a participant or beneficiary to meet 
     requirements for eligibility for coverage under an employee 
     health benefit plan or group health plan that are not 
     prohibited by this title.
       (3) Rules of construction.--Nothing in this subsection, nor 
     in section 101(a), shall be construed to--
       (A) preclude a health plan issuer from establishing 
     employer contribution rules or group participation rules for 
     group health plans as allowed under applicable State law;
       (B) preclude a plan defined in section 3(37) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1102(37)) from establishing employer contribution rules or 
     group participation rules; or
       (C) permit individuals to decline coverage under an 
     employee health benefit plan if such right is not otherwise 
     available under such plan.
       (b) Termination of Group Health Plans.--
       (1) Particular type of group health plan not offered.--In 
     any case in which a health plan issuer decides to discontinue 
     offering a particular type of group health plan. A group 
     health plan of such type may be discontinued by the health 
     plan issuer only if--
       (A) the health plan issuer provides notice to each group 
     purchaser covered under a group health plan of this type (and 
     participants and beneficiaries covered under such group 
     health plan) of such discontinuation at least 90 days prior 
     to the date of the discontinuation of such plan;
       (B) the health plan issuer offers to each group purchaser 
     covered under a group health plan of this type, the option to 
     purchase any other group health plan currently being offered 
     by the health plan issuer; and
       (C) in exercising the option to discontinue a group health 
     plan of this type and in offering one or more replacement 
     plans, the health plan issuer acts uniformly without regard 
     to the health status of participants or beneficiaries covered 
     under the group health plan, or new participants or 
     beneficiaries who may become eligible for coverage under the 
     group health plan.
       (2) Discontinuance of all group health plans.--
       (A) In general.--In any case in which a health plan issuer 
     elects to discontinue offering all group health plans in a 
     State, a group health plan may be discontinued by the health 
     plan issuer only if--
       (i) the health plan issuer provides notice to the 
     applicable certifying authority (as defined in section 
     142(d)) and to each group purchaser (and participants and 
     beneficiaries covered under such group health plan) of such 
     discontinuation at least 180 days prior to the date of the 
     expiration of such plan, and
       (ii) all group health plans issued or delivered for 
     issuance in the State or discontinued and coverage under such 
     plans is not renewed.
       (B) Application of provisions.--The provisions of this 
     paragraph and paragraph (3) may be applied separately by a 
     health plan issuer--
       (i) to all group health plans offered to small employers 
     (as defined under applicable State law, or if not so defined, 
     an employer with not more than 50 employees); or
       (ii) to all other group health plans offered by the health 
     plan issuer in the State.
       (3) Prohibition on market reentry.--In the case of a 
     discontinuation under paragraph (2), the health plan issuer 
     may not provide for the issuance of any group health plan in 
     the market sector (as described in paragraph (2)(B)) in which 
     issuance of such group health plan was discontinued in the 
     State involved during the 5-year period beginning on the date 
     of the discontinuation of the last group health plan not so 
     renewed.
       Treatment of Network Plans.--
       (1) Geographic limitations.--A network plan (as defined in 
     paragraph (2)) may deny continued participation under such 
     plan to participants or beneficiaries who neither live, 
     reside, nor work in an area in which such network plan is 
     offered, but only if such denial is applied uniformly, 
     without regard to health status of particular participants or 
     beneficiaries.
       (2) Network plan.--As used in paragraph (1), the term 
     ``network plan'' means an employee health benefit plan or a 
     group health plan that arranges for the financing and 
     delivery of health care services to participants or 
     beneficiaries covered under such plan, in whole or in part, 
     through arrangements with providers.
       (d) COBRA Coverage.--Nothing in subsection (a)(2)(E) or 
     subsection (c) shall be construed to affect any right to 
     COBRA continuation coverage as described in part 6 of 
     subtitle B of title I of the employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1161 et seq.).

     SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMITATION ON 
                   PREEXISTING CONDITION EXCLUSIONS.

       (a) In General.--An employee health benefit plan or a 
     health plan issuer offering a group health plan may impose a 
     limitation or exclusion of benefits relating to treatment of 
     a preexisting condition based on the fact that the condition 
     existed prior to the coverage of the participant or 
     beneficiary under the plan only if--

[[Page H3114]]

       (1) the limitation or exclusion extends for a period of not 
     more than 12 months after the date of enrollment in the plan;
       (2) the limitation or exclusion does not apply to an 
     individual who, within 30 days of the date of birth or 
     placement for adoption (as determined under section 
     609(c)(3)(B) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1169(c)(3)(B)), was covered under the 
     plan; and
       (3) the limitation or exclusion does not apply to a 
     pregnancy.
       (b) Crediting of Previous Qualifying Coverage.--
       (1) In general.--Subject to paragraph (4), an employee 
     health benefit plan or a health plan issuer offering a group 
     health plan shall provide that if a participant or 
     beneficiary is in a period of previous qualifying coverage as 
     of the date of enrollment under such plan, any period of 
     exclusion or limitation of coverage with respect to a 
     preexisting condition shall be reduced by 1 month for each 
     month in which the participant or beneficiary was in the 
     period of previous qualifying coverage. With respect to an 
     individual described in subsection (a)(2) who maintains 
     continuous coverage, no limitation or exclusion of benefits 
     relating to treatment of a preexisting condition may be 
     applied to a child within the child's first 12 months of life 
     or within 12 months after the placement of a child for 
     adoption.
       (2) Discharge of duty.--An employee health benefit plan 
     shall provide documentation of coverage to participants and 
     beneficiaries who coverage is terminated under the plan. 
     Pursuant to regulations promulgated by the Secretary, the 
     duty of an employee health benefit plan to verify previous 
     qualifying coverage with respect to a participant or 
     beneficiary is effectively discharged when such employee 
     health benefit plan provides documentation to a participant 
     or beneficiary that includes the following information:
       (A) the dates that the participant or beneficiary was 
     covered under the plan; and
       (B) the benefits and cost-sharing arrangement available to 
     the participant or beneficiary under such plan.
     An employee health benefit plan shall retain the 
     documentation provided to a participant or beneficiary under 
     subparagraphs (A) and (B) for at least the 12-month period 
     following the date on which the participant or beneficiary 
     ceases to be covered under the plan. Upon request, an 
     employee health benefit plan shall provide a second copy of 
     such documentation or such participant or beneficiary within 
     the 12-month period following the date of such ineligibility.
       (3) Definitions.--As used in this section:
       (A) Previous qualifying coverage.--The term ``previous 
     qualifying coverage'' means the period beginning on the 
     date--
       (i) a participant or beneficiary is enrolled under an 
     employee health benefit plan or a group health plan, and 
     ending on the date the participant or beneficiary is not so 
     enrolled; or
       (ii) an individual is enrolled under an individual health 
     plan (as defined in section 113) or under a public or private 
     health plan established under Federal or State law, and 
     ending on the date the individual is not so enrolled;

     for a continuous period of more than 30 days (without regard 
     to any waiting period).
       (B) Limitation or exclusion of benefits relating to 
     treatment of a preexisting condition.--The term ``limitation 
     or exclusion of benefits relating to treatment of a 
     preexisting condition'' means a limitation or exclusion of 
     benefits imposed on an individual based on a preexisting 
     condition of such individual.
       (4) Effect of previous coverage.--An employee health 
     benefit plan or a health plan issuer offering a group health 
     plan may impose a limitation or exclusion of benefits 
     relating to the treatment of a preexisting condition, subject 
     to the limits in subsection (a)(1), only to the extent that 
     such service or benefit was not previously covered under the 
     group health plan, employee health benefit plan, or 
     individual health plan in which the participant or 
     beneficiary was enrolled immediately prior to enrollment in 
     the plan involved.
       (c) Late Enrollees.--Except as provided in section 104, 
     with respect to a participant or beneficiary enrolling in an 
     employee health benefit plan or group health plan during a 
     time that is other than the first opportunity to enroll 
     during an enrollment period of at least 30 days, coverage 
     with respect to benefits or services relating to the 
     treatment of a preexisting condition in accordance with 
     subsection (a) and (b) may be excluded except the period of 
     such exclusion may not exceed 18 months beginning on the date 
     of coverage under the plan.
       (d) Affiliation Periods.--With respect to a participant or 
     beneficiary who would otherwise be eligible to receive 
     benefits under an employee health benefit plan or a group 
     health plan but for the operation of a preexisting condition 
     limitation or exclusion, if such plan does not utilize a 
     limitation or exclusion of benefits relating to the treatment 
     of a preexisting condition, such plan may impose an 
     affiliation period on such participant or beneficiary not to 
     exceed 60 days (or in the case of a late participant or 
     beneficiary described in subsection (c), 90 days) from the 
     date on which the participant or beneficiary would otherwise 
     be eligible to receive benefits under the plan. An employee 
     health benefit plan or a health plan issuer offering a group 
     health plan may also use alternative methods to address 
     adverse section as approved by the applicable certifying 
     authority (as defined in section 142(d)). During such an 
     affiliation period, the plan may not be required to provide 
     health care services or benefits and no premium shall be 
     charged to the participant or beneficiary.
       (e) Preexisting Conditions.--For purposes of this section, 
     the term ``preexisting condition'' means a condition, 
     regardless of the cause of the condition, for which medical 
     advice, diagnosis, care, or treatment was recommended or 
     received within the 6-month period ending on the day before 
     the effective date of the coverage (without regard to any 
     waiting period).
       (f) State Flexibility.--Nothing in this section shall be 
     construed to preempt State laws that--
       (1) require health plan issuers to impose a limitation or 
     exclusion of benefits relating to the treatment of a 
     preexisting condition for periods that are shorter than those 
     provided for under this section; or
       (2) allow individuals, participants, and beneficiaries to 
     be considered to be in a period of previous qualifying 
     coverage if such individual, participant, or beneficiary 
     experiences a lapse in coverage that is greater than the 30-
     day period provided for under subsection (b)(3);

     unless such laws are preempted by section 514 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1144).

     SEC. 104. SPECIAL ENROLLMENT PERIODS.

       In the case of a participant, beneficiary or family member 
     who--
       (1) through marriage, separation, divorce, death, birth or 
     placement of a child for adoption, experiences a change in 
     family composition affecting eligibility under a group health 
     plan, individual health plan, or employee health benefit 
     plan;
       (2) experiences a change in employment status, as described 
     in section 603(2) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1163(2)), that causes the loss of 
     eligibility for coverage, other than COBRA continuation 
     coverage under a group health plan, individual health plan, 
     or employee health benefit plan; or
       (3) experiences a loss of eligibility under a group health 
     plan, individual health plan, or employee health benefit plan 
     because of a change in the employment status of a family 
     member;

     each employee health benefit plan and each group health plan 
     shall provide for a special enrollment period extending for a 
     reasonable time after such event that would permit the 
     participant to change the individual or family basis of 
     coverage or to enroll in the plan if coverage would have been 
     available to such individual, participant, or beneficiary but 
     for failure to enroll during a previous enrollment period. 
     Such a special enrollment period shall ensure that a child 
     born or placed for adoption shall be deemed to be covered 
     under the plan as of the date of such birth or placement for 
     adoption if such child is enrolled within 30 days of the date 
     of such birth or placement for adoption.

     SEC. 105. DISCLOSURE OF INFORMATION.

       (a) Disclosure of Information by Health Plan Issuer.--
       (1) In general.--In connection with the offering of any 
     group health plan to a small employer (as defined under 
     applicable State law, or if not so defined, an employer with 
     not more than 50 employees), a health plan issuer shall make 
     a reasonable disclosure to such employer, as part of its 
     solicitation and sales materials, of--
       (A) the provisions of such group health plan concerning the 
     health plan issuer's right to change premium rates and the 
     factors that may affect changes in premium rates.
       (B) the provisions of such group health plan relating to 
     renewability of coverage;
       (C) the provisions of such group health plan relating to 
     any preexisting condition provision; and
       (D) descriptive information about the benefits and premiums 
     available under all group health plans for which the employer 
     is qualified.

     Information shall be provided to small employers under this 
     paragraph in a manner determined to be understandable by the 
     average small employer, and shall be sufficiently accurate 
     and comprehensive to reasonably inform small employers, 
     participants and beneficiaries of their rights and 
     obligations under the group health plan.
       (2) Exception.--With respect to the requirement of 
     paragraph (1), any information that is proprietary and trade 
     secret information under applicable law shall not be subject 
     to the disclosure requirements of such paragraph.
       (3) Construction.--Nothing in this subsection shall be 
     construed to preempt State reporting and disclosure 
     requirements to the extent that such requirements are not 
     preempted under section 514 of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1144).
       (b) Disclosure of Information to Participants and 
     Beneficiaries.--
       (1) In general.--Section 104(b)(1) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(1)) 
     is amended in the matter following subparagraph (B)--
       (A) by striking ``102(a)(1),'' and inserting ``102(a)(1) 
     that is not a material reduction in covered services or 
     benefits provided,''; and
       (B) by adding at the end thereof the following new 
     sentences: ``If there is a modification or change described 
     in section 102(a)(1)

[[Page H3115]]

     that is a material reduction in covered services or benefits 
     provided, a summary description of such modification or 
     change shall be furnished to participants not later than 60 
     days after the date of the adoption of the modification or 
     change. In the alternative, the plan sponsors may provide 
     such description at regular intervals of not more than 90 
     days. The Secretary shall issue regulations within 180 days 
     after the date of enactment of the Health Insurance Reform 
     Act of 1996, providing alternative mechanisms to delivery by 
     mail through which employee health benefit plans may notify 
     participants of material reductions in covered services or 
     benefits.''.
       (2) Plan description and summary.--Section 102(b) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1022(b)) is amended--
       (A) by inserting ``including the office or title of the 
     individual who is responsible for approving or denying claims 
     for coverage of benefits'' after ``type of administration of 
     the plan'';
       (B) by inserting ``including the name of the organization 
     responsible for financing claims'' after ``source of 
     financing of the plan''; and
       (C) by inserting ``including the office, contact, or title 
     of the individual at the Department of Labor through which 
     participants may seek assistance or information regarding 
     their rights under this Act and title I of the Health 
     Insurance Reform Act of 1996 with respect to health benefits 
     that are not offered through a group health plan.'' after 
     ``benefits under the plan''.

                  Subtitle B--Individual Market Rules

     SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.

       (a) Limitation on Requirements.--
       (1) In general.--Except as provided in subsections (b) and 
     (c), a health plan issuer described in paragraph (3) may not, 
     with respect to an eligible individual (as defined in 
     subsection (b)) desiring to enroll in an individual health 
     plan--
       (A) decline to offer coverage to such individual, or deny 
     enrollment to such individual based on the health status of 
     the individual; or
       (B) impose a limitation or exclusion of benefits otherwise 
     covered under the plan for the individual based on a 
     preexisting condition unless such limitation or exclusion 
     could have been imposed if the individual remained covered 
     under a group health plan or employee health benefit plan 
     (including providing credit for previous coverage in the 
     manner provided under subtitle A).
       (2) Health promotion and disease prevention.--Nothing in 
     this subsection shall be construed to prevent a health plan 
     issuer offering an individual health plan from establishing 
     premium discounts or modifying otherwise applicable 
     copayments or deductibles in return for adherence to programs 
     of health promotion or disease prevention.
       (3) Health plan issuer.--A health plan issuer described in 
     this paragraph in a health plan issuer that issues or renews 
     individual health plans.
       (4) Premiums.--Nothing in this subsection shall be 
     construed to affect the determination of a health plan issuer 
     as to the amount of the premium payable under an individual 
     health plan under applicable State law.
       (b) Definition of Eligible Individual.--As used in 
     subsection (a)(1), the term ``eligible individual'' means an 
     individual who--
       (1) was a participant or beneficiary enrolled under one or 
     more group health plans, employee health benefit plans, or 
     public plans established under Federal or State law, for not 
     less than 18 months (without a lapse in coverage of more than 
     30 consecutive days) immediately prior to the date on which 
     the individual desired to enroll in the individual health 
     plan.
       (2) is not eligible for coverage under a group health plan 
     or an employee health benefit plan;
       (3) has not had coverage terminated under a group health 
     plan or employee health benefit plan for failure to make 
     required premium payments or contributions, or for fraud or 
     misrepresentation of material fact; and
       (4) has, if applicable, accepted and exhausted the maximum 
     required period of continuous coverage as described in 
     section 602(2)(A) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1162(2)(A)) or under an equivalent 
     State program.
       (c) Applicable of Capacity Limit.--
       (1) In general.--Subject to paragraph (2), a health plan 
     issuer offering coverage to individuals under an individual 
     health plan may cease enrolling individuals under the plan 
     if--
       (A) the health plan issuer ceases to enroll any new 
     individuals; and
       (B) the health plan issuer can demonstrate to the 
     applicable certifying authority (as defined in section 
     142(d)), if required, that its financial or provider capacity 
     to serve previously covered individuals will be impaired if 
     the health plan issuer is required to enroll additional 
     individuals.

     Such a health plan issuer shall be prohibited from offering 
     coverage after a cessation in offering coverage under this 
     paragraph for a 6-month period or until the health plan 
     issuer can demonstrate to the applicable certifying authority 
     (as defined in section 142(d)) that the health plan issuer 
     has adequate capacity, whichever is later.
       (2) First-come-first-served.--A health plan issuer offering 
     coverage to individuals under an individual health plan is 
     only eligible to exercise the limitations provided for in 
     paragraph (1) if the health plan issuer provides for 
     enrollment of individuals under such plan on a first-come-
     first-served basis or other basis established by a State to 
     ensure a fair opportunity to enroll in the plan and avoid 
     risk selection.
       (d) Market Requirement.--
       (1) In general.--The provisions of subsection (a) shall not 
     be construed to require that a health plan issuer offering 
     group health plans to group purchasers offer individual 
     health plans to individuals.
       (2) Conversion policies.--A health plan issuer offering 
     group health plans to group purchasers under this title shall 
     not be deemed to be a health plan issuer offering an 
     individual health plan solely because such health plan issuer 
     offers a conversion policy.
       (3) Marketing of plans.--Nothing in this section shall be 
     construed to prevent a State from requiring health plan 
     issuers offering coverage to individuals under an individual 
     health plan to actively market such plan.

     SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH 
                   COVERAGE.

       (a) In General.--Subject to subsections (b) and (c), 
     coverage for individuals under an individual health plan 
     shall be renewed or continued in force by a health plan 
     issuer at the option of the individual, except that the 
     requirement of this subsection shall not apply in the case 
     of--
       (1) the nonpayment of premiums or contributions by the 
     individual in accordance with the terms of the individual 
     health plan or where the health plan issuer has not received 
     timely premium payments;
       (2) fraud or misrepresentation of material fact on the part 
     of the individual; or
       (3) the termination of the individual health plan in 
     accordance with subsection (b).
       (b) Termination of Individual Health Plans.--
       (1) Particular type of individual health plan not 
     offered.--In any case in which a health plan issuer decides 
     to discontinue offering a particular type of individual 
     health plan to individuals, an individual health plan may be 
     discontinued by the health plan issuer only if--
       (A) the health plan issuer provides notice to each 
     individual covered under the plan of such discontinuation at 
     least 90 days prior to the date of the expiration of the 
     plan.
       (B) the health plan issuer offers to each individual 
     covered under the plan the option to purchase any other 
     individual health plan currently being offered by the health 
     plan issuer to individuals; and
       (C) in exercising the option to discontinue the individual 
     health plan and in offering one or more replacement plans, 
     the health plan issuer acts uniformly without regard to the 
     health status of particular individuals.
       (21) Discontinuance of all individual health plans.--In any 
     case in which a health plan issuer elects to discontinue all 
     individual health plans in a State, an individual health plan 
     may be discontinued by the health plan issuer only if--
       (A) the health plan issuer provides notice to the 
     applicable certifying authority (as defined in section 
     142(d)) and to each individual covered under the plan of such 
     discontinuation at least 180 days prior to the date of the 
     discontinuation of the plan; and
       (B) all individual health plans issued or delivered for 
     issuance in the State are discontinued and coverage under 
     such plans is not renewed.
       (3) Prohibition on market reentry.--In the case of a 
     discontinuation under paragraph (2), the health plan issuer 
     may not provide for the issuance of any individual health 
     plan in the State involved during the 5-year period beginning 
     on the date of the discontinuation of the last plan not so 
     renewed.
       (c) Treatment of Network Plans.--
       (1) Geographic limitations.--A health plan issuer which 
     offers a network plan (as defined in paragraph (2)) may deny 
     continued participation under the plan to individuals who 
     neither live, reside, nor work in an area in which the 
     individual health plan is offered, but only if such denial is 
     applied uniformly, without regard to health status of 
     particular individuals.
       (2) Network play.--As used in paragraph (1), the term 
     ``network plan'' means an individual health plan that 
     arranges for the financing and delivery of health care 
     services to individuals covered under such health plan, in 
     whole or in part, through arrangements with providers.

     SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET REFORMS.

       (a) In General.--With respect to any State law with respect 
     to which the Governor of the State notifies the Secretary of 
     Health and Human Services that such State law will achieve 
     the goals of sections 110 and 111, and that is in effect on, 
     or enacted after, the date of enactment of this Act (such as 
     laws providing for guaranteed issue, open enrollment by one 
     or more health plan issuers, high-risk pools, or mandatory 
     conversion policies), such State law shall apply in lieu of 
     the standards described in sections 110 and 111 unless the 
     Secretary of Health and Human Services determines, after 
     considering the criteria described in subsection (b)(1), in 
     consultation with the Governor and Insurance Commissioner or 
     chief insurance regulatory official of the State, that such 
     State law does not achieve the goals of providing access to 
     affordable health care coverage for those individuals 
     described in sections 110 and 111.
       (b) Determination.--
       (1) In general.--In making a determination under subsection 
     (a), the Secretary of Health and Human Services shall only--

[[Page H3116]]

       (A) evaluate whether the State law or program provides 
     guaranteed access to affordable coverage to individuals 
     described in sections 110 and 111;
       (B) evaluate whether the State law or program provides 
     coverage for preexisting conditions (as defined in section 
     103(e)) that were covered under the individuals' previous 
     group health plan or employee health benefit plan for 
     individuals described in sections 110 and 111.
       (C) evaluate whether the State law or program provides 
     individuals described in sections 110 and 111 with a choice 
     of health plans or a health plan providing comprehensive 
     coverage, and
       (D) evaluate whether the application of the standards 
     described in sections 110 and 111 will have an adverse impact 
     on the number of individuals in such State having access to 
     affordable coverage.
       (2) Notice of intent.--If, within 6 months after the date 
     of enactment of this Act, the Governor of a State notifies 
     the Secretary of Health and Human Services that the State 
     intends to enact a law, or modify an existing law, described 
     in subsection (a), the Secretary of Health and Human Services 
     may not make a determination under such subsection until the 
     expiration of the 12-month period beginning on the date on 
     which such notification is made, or until January 1, 1998, 
     whichever is later. With respect to a State that provides 
     notice under this paragraph and that has a legislature that 
     does not meet within the 12-month period beginning on the 
     date of enactment of this Act, the Secretary shall not make a 
     determination under subsection (a) prior to January 1, 1998.
       (3) Notice to state.--If the Secretary of Health and Human 
     Services determines that a State law or program does not 
     achieve the goals described in subsection (a), the Secretary 
     of Health and Human Services shall provide the State with 
     adequate notice and reasonable opportunity to modify such law 
     or program to achieve such goals prior to making a final 
     determination under subsection (a).
       (c) Adoption of NAIC Model.--If, not later than 9 months 
     after the date of enactment of this Act--
       (1) the National Association of Insurance Commissioners 
     (hereafter referred to as the ``NAIC''), through a process 
     which the Secretary of Health and Human Services determines 
     has included consultation with representatives of the 
     insurance industry and consumer groups, adopts a model 
     standard or standards for reform of the individual health 
     insurance market, and
       (2) the Secretary of Health and Human Services determines, 
     within 30 days of the adoption of such NAIC standard or 
     standards, that such standards comply with the goals of 
     sections 110 and 111:

     a State that elects to adopt such model standards or 
     substantially adopt such model standards shall be deemed to 
     have met the requirements of sections 110 and 111 and shall 
     be subject to a determination under subsection (a).

     SEC. 113. DEFINITION.

       (a) In General.--As used this title, the term ``individual 
     health plan'' means any contract, policy, certificate or 
     other arrangement offered to individuals by a health plan 
     issuer that provides or pays for health benefits (such as 
     provider and hospital benefits) and that is not a group 
     health plan under section 2(6).
       (b) Arrangements Not Included.--Such term does not include 
     the following, or any combination thereof:
       (1) Coverage only for accident, or disability income 
     insurance, or any combination thereof.
       (2) Medicare supplemental health insurance (as defined 
     under section 1882(g)(1) of the Social Security Act).
       (3) Coverage issued as a supplement to liability insurance.
       (4) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (5) Workers' compensation or similar insurance.
       (6) Automobile medical payment insurance.
       (7) Coverage for a specified disease or illness.
       (8) Hospital of fixed indemnity insurance.
       (9) Short-term limited duration insurance.
       (10) Credit-only, dental-only, or vision-only insurance.
       (11) A health insurance policy providing benefits only for 
     long-term care, nursing home care, home health care, 
     community-based care, or any combination thereof.

                    Subtitle C--COBRA Clarifications

     SEC. 121. COBRA CLARIFICATIONS.

       (a) Public Health Service Act.--
       (1) Period of coverage.--Section 2202(2) of the Public 
     Health Service Act (42 U.S.C. 300bb-2(2)) is amended--
       (A) in subparagraph (A)--
       (i) by transferring the sentence immediately preceding 
     clause (iv) so as to appear immediately following such clause 
     (iv); and
       (ii) in the last sentence (as so transferred)--
       (I) by inserting ``, or a beneficiary-family member of the 
     individual,'' after ``an individual''; and
       (II) by striking ``at the time of a qualifying event 
     described in section 2203(2)'' and inserting ``at any time 
     during the initial 18-month period of continuing coverage 
     under this title'';
       (B) in subparagraph (D)(i), by inserting before ``, or'' 
     the following: ``, except that the exclusion or limitation 
     contained in this clause shall not be considered to apply to 
     a plan under which a preexisting condition or exclusion does 
     not apply to an individual otherwise eligible for 
     continuation coverage under this section because of the 
     provision of the Health Insurance Reform Act of 1996'', and
       (C) in subparagraph (E), by striking ``at the time of a 
     qualifying event described in section 2203(2)'' and inserting 
     ``at any time during the initial 18-month period of 
     continuing coverage under this title'',
       (2) Election.--Section 2205(1)(C) of the Public Health 
     Service Act (42 U.S.C. 300bb-5(1)(C)) is amended--
       (A) in clause (i), by striking ``or'' at the end thereof.
       (B) in clause (ii), by striking the period and inserting 
     ``, or'', and
       (C) by adding at the end thereof the following new clause:
       ``(iii) in the case of an individual described in the last 
     sentence of section 2202(2)(A), or a beneficiary-family 
     member of the individual, the date such individual is 
     determined to have been disabled.''.
       (3) Notices.--Section 2206(3) of the Public Health Service 
     Act (42 U.S.C. 300bb-6(3)) is amended by striking ``at the 
     time of a qualifying event described in section 2203(2)'' and 
     inserting ``at any time during the initial 18-month period of 
     continuing coverage under this title''.
       (4) Birth or adoption of a child.--Section 2208(3)(A) of 
     the Public Health Service Act (42 U.S.C. 300bb-8(3)(A)) is 
     amended by adding at the end thereof the following new flush 
     sentence:

     ``Such term shall also include a child who is born to or 
     placed for adoption with the covered employee during the 
     period of continued coverage under this title.''.
       (b) Employee Retirement Income Security Act of 1974.--
       (1) Period of coverage.--Section 602(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1162(2)) is 
     amended--
       (A) in the last sentence of subparagraph (A)--
       (i) by inserting ``, or a beneficiary-family member of the 
     individual.'' after ``an individual''; and
       (ii) by striking ``at the time of a qualifying event 
     described in section 603(2)'' and inserting ``at any time 
     during the initial 18-month period of continuing coverage 
     under this part'',
       (B) in subparagraph (D)(i), by inserting before, ``, or'' 
     the following ``, except that the exclusion or limitation 
     contained in this clause shall not be considered to apply to 
     a plan under which a preexisting condition or exclusion does 
     not apply to an individual otherwise eligible for 
     continuation coverage under this section because of the 
     provision of the Health Insurance Reform Act of 1996''; and
       (C) in subparagraph (E), by striking ``at the time of a 
     qualifying event described in section 603(2)'' and inserting 
     ``at any time during the initial 18-month period of 
     continuing coverage under this part''.
       (2) Election.--Section 605(1)(C) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1165(1)(C)) is 
     amended--
       (A) in clause (i), by striking ``or'' at the end thereof;
       (B) in clause (ii), by striking the period and inserting 
     ``, or''; and
       (C) by adding at the end thereof the following new clause:
       ``(iii) in the case of an individual described in the last 
     sentence of section 602(2)(A), or a beneficiary-family member 
     of the individual, the date such individual is determined to 
     have been disabled.''.
       (3) Notices.--Section 606(3) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1166(3)) is amended by 
     striking ``at the time of a qualifying event described in 
     section 603(2)'' and inserting ``at any time during the 
     initial 18-month period of continuing coverage under this 
     part''.
       (4) Birth or adoption of a child.--Section 607(3)(A) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1167(3)) is amended by adding at the end thereof the 
     following new flush sentence:

     ``Such term shall also include a child who is born to or 
     placed for adoption with the covered employee during the 
     period of continued coverage under this part.''.
       (c) Internal Revenue Code of 1986.--
       (1) Period of coverage.--Section 4980B(f)(2)(B) of the 
     Internal Revenue Code of 1986 is amended--
       (A) in the last sentence of clause (i) by striking ``at the 
     time of a qualifying event described in paragraph (3)(B)'' 
     and inserting ``at any time during the initial 18-month 
     period of continuing coverage under this section''.
       (B) in clause (iv)(I), by inserting before ``, or'' the 
     following: ``, except that the exclusion or limitation 
     contained in this subclause shall not be considered to apply 
     to a plan under which a preexisting condition or exclusion 
     does not apply to an individual otherwise eligible for 
     continuation coverage under this subsection because of the 
     provision of the Health Insurance Reform Act of 1996''; and
       (C) in clause (v), by striking ``at the time of a 
     qualifying event described in paragraph (3)(B)'' and 
     inserting ``at any time during the initial 18-month period of 
     continuing coverage under this section''.
       (2) Election.--Section 4980B(f)(5)(A)(ii) of the Internal 
     Revenue Code of 1986 is amended--

[[Page H3117]]

       (A) in subclause (I), by striking ``or'' at the end 
     thereof;
       (B) in subclause (II), by striking the period and inserting 
     ``, or'', and
       (C) by adding at the end thereof the following new 
     subclause:
       ``(III) in the case of an qualified beneficiary described 
     in the last sentence of paragraph (2)(B)(i), the date such 
     individual is determined to have been disabled.''.
       (3) Notices.--Section 4980B(f)(6)(C) of the Internal 
     Revenue Code of 1986 is amended by striking ``at the time of 
     a qualifying event described in paragraph (3)(B)'' and 
     inserting ``at any time during the initial 18-month period of 
     continuing coverage under this section''.
       (4) Birth or adoption of a child.--Section 4980B(g)(1)(A) 
     of the Internal Revenue Code of 1986 is amended by adding at 
     the end thereof the following new flush sentence:

     ``Such term shall also include a child who is born to or 
     placed for adoption with the covered employee during the 
     period of continued coverage under this section.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to qualifying events occurring on or after the 
     date of enactment of this Act for plan years beginning after 
     December 31, 1997.
       (e) Notification of Changes.--Not later than 60 days prior 
     to the date on which this section becomes effective, each 
     group health plan (covered under title XXII of the Public 
     Health Service Act, part 6 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974, and section 
     4980B(f) of the Internal Revenue Code of 1986) shall notify 
     each qualified beneficiary who has elected continuation 
     coverage under such title, part or section of the amendments 
     made by this section.

        Subtitle D--Private Health Plan Purchasing Cooperatives

     SEC. 131. PRIVATE HEALTH PLAN PURCHASING COOPERATIVES.

       (a) Definition.--As used in this title, the term ``health 
     plan purchasing cooperative'' means a group of individuals or 
     employers that, on a voluntary basis and in accordance with 
     this section, form a cooperative for the purpose of 
     purchasing individual health plans or group health plans 
     offered by health plan issuers. A health plan issuer, agent, 
     broker or any other individual or entity engaged in the sale 
     of insurance may not underwrite a cooperative.
       (b) Certification.--
       (1) In general.--If a group described in subsection (a) 
     desires to form a health plan purchasing cooperative in 
     accordance with this section and such group appropriately 
     notifies the State and the Secretary of such desire, the 
     State, upon a determination that such group meets the 
     requirements of this section, shall certify the group as a 
     health plan purchasing cooperative. The State shall make a 
     determination of whether such group meets the requirements of 
     this section in a timely fashion. Each such cooperative shall 
     also be registered with the Secretary.
       (2) State refusal to certify.--If a State fails to 
     implement a program for certifying health plan purchasing 
     cooperatives in accordance with the standards under this 
     title, the Secretary shall certify and oversee the operations 
     of such cooperative in such State.
       (3) Interstate cooperatives.--For purposes of this section 
     a health plan purchasing cooperative operating in more than 
     one State shall be certified by the State in which the 
     cooperative is domiciled. States may enter into cooperative 
     agreements for the purpose of certifying and overseeing the 
     operation of such cooperatives. For purposes of this 
     subsection, a cooperative shall be considered to be domiciled 
     in the State in which most of the members of the cooperative 
     reside.
       (c) Board of Directors.--
       (1) In general.--Each health plan purchasing cooperative 
     shall be governed by a Board of Directors that shall be 
     responsible for ensuring the performance of the duties of the 
     cooperative under this section. The Board shall be composed 
     of a board cross-section of representatives of employers, 
     employees, and individuals participating in the cooperative. 
     A health plan issuer, agent, broker or any other individual 
     or entity engaged in the sale of individual health plans or 
     group health plans may not hold or control any right to vote 
     with respect to a cooperative.
       (2) Limitation on compensation.--A health plan purchasing 
     cooperative may not provide compensation to members of the 
     Board of Directors. The cooperative may provide 
     reimbursements to such members for the reasonable and 
     necessary expenses incurred by the members in the performance 
     of their duties as members of the Board.
       (3) Conflict of interest.--No member of the Board of 
     Directors (or family members of such members) nor any 
     management personnel of the cooperative may be employed by, 
     be a consultant of, be a member of the board of directors or, 
     be affiliated with an agent of, or otherwise be a 
     representative of any health plan issuer, health care 
     provider, or agent or broker. Nothing in the preceding 
     sentence shall limit a member of the Board from purchasing 
     coverage offered through the cooperative.
       (d) Membership and Marketing Area.--
       (1) Membership.--A health plan purchasing cooperative may 
     establish limits on the maximum size of employers who may 
     become members of the cooperative, and may determine whether 
     to permit individuals to become members. Upon the 
     establishment of such membership requirements, the 
     cooperative shall, except as provided in subparagraph (B), 
     accept all employers (or individuals) residing within the 
     area served by the cooperative who meet such requirements as 
     members on a first-come, first-served basis, or on another 
     basis established by the State to ensure equitable access to 
     the cooperative.
       (2) Marketing area.--A State may establish rules regarding 
     the geographic area that must be served by a health plan 
     purchasing cooperative. With respect to a State that has not 
     established such rules, a health plan purchasing cooperative 
     operating in the State shall define the boundaries of the 
     area to be served by the cooperative, except that such 
     boundaries may not be established on the basis of health 
     status of the populations that reside in the area.
       (e) Duties and Responsibilities.--
       (1) In general.--A health plan purchasing cooperative 
     shall--
       (A) enter into agreements with multiple, unaffiliated 
     health plan issuers, except that the requirement of this 
     subparagraph shall not apply in regions (such as remote or 
     frontier areas) in which compliance with such requirement is 
     not possible.
       (B) enter into agreements with employers and individuals 
     who become members of the cooperative;
       (C) participate in any program of risk-adjustment or 
     reinsurance, or any similar program, that is established by 
     the State.
       (D) prepare and disseminate comparative health plan 
     materials (including information about cost, quality, 
     benefits, and other information concerning group health plans 
     and individual health plans offered through the cooperative);
       (E) actively market to all eligible employers and 
     individuals residing within the service area; and
       (F) act as an ombudsman for group health plan or individual 
     health plan enrollees.
       (2) Permissible activities.--A health plan purchasing 
     cooperative may perform such other functions as necessary to 
     further the purposes of this title, including--
       (A) collecting and distributing premiums and performing 
     other administrative functions;
       (B) collecting and analyzing surveys of enrollee 
     satisfaction;
       (C) charging membership fee to enrollees (such fees may not 
     be based on health status) and charging participation fees to 
     health plan issuers;
       (D) cooperating with (or accepting as members) employers 
     who provide health benefits directly to participants and 
     beneficiaries only for the purpose of negotiating with 
     providers, and
       (E) negotiating with health care providers and health plan 
     issuers.
       (f) Limitations on Cooperative Activities.--A health plan 
     purchasing cooperative shall not--
       (1) perform any activity relating to the licensing of 
     health plan issuers.
       (2) assume financial risk directly or indirectly on behalf 
     of members of a health plan purchasing cooperative relating 
     to any group health plan or individual health plan;
       (3) establish eligibility, continuation of eligibility, 
     enrollment, or premium contribution requirements for 
     participants, beneficiaries, or individuals based on health 
     status;
       (4) operate on a for-profit or other basis where the legal 
     structure of the cooperative permits profits to be made and 
     not returned to the members of the cooperative, except that a 
     for-profit health plan purchasing cooperative may be formed 
     by a nonprofit organization--
       (A) in which membership in such organization is not based 
     on health status; and
       (B) that accepts as members all employers or individuals on 
     a first-come, first-served basis, subject to any established 
     limit on the maximum size of and employer that may become a 
     member; or
       (5) perform any other activities that conflict or are 
     inconsistent with the performance of its duties under this 
     title.
       (g) Limited Preemptions of Certain State Laws.--
       (1) In general.--With respect to a health plan purchasing 
     cooperative that meets the requirements of this section, 
     State fictitious group laws shall be preempted.
       (2) Health plan issuers.--
       (A) Rating.--With respect to a health plan issuer offering 
     a group health plan or individual health plan through a 
     health plan purchasing cooperative that meets the 
     requirements of this section. State premium rating 
     requirement laws, except to the extent provided under 
     subparagraph (B), shall be preempted unless such laws permit 
     premium rates negotiated by the cooperative to be less than 
     rates that would otherwise be permitted under State law, if 
     such rating differential is not based on differences in 
     health status or demographic factors.
       (B) Exception.--State laws referred to in subparagraph (A) 
     shall not be preempted if such laws--
       (i) prohibit the variance of premium rates among employers, 
     plan sponsors, or individuals that are members of health plan 
     purchasing cooperative in excess of the amount of such 
     variations that would be permitted under such State rating 
     laws among employers, plan sponsors, and individuals that are 
     not members of the cooperative; and
       (ii) prohibit a percentage increase in premium rates for a 
     new rating period that is in excess of that which would be 
     permitted under State rating laws.
       (C) Benefits.--Except as provided in subparagraph (D), a 
     health plan issuer offering a

[[Page H3118]]

     group health plan or individual health plan through a health 
     plan purchasing cooperative shall comply with all State 
     mandated benefit laws that require the offering of any 
     services, category or care, or services of any class or type 
     of provider.
       (D) Exception.--In those states that have enacted laws 
     authorizing the issuance of alternative benefit plans to 
     small employers, health plan issuers may offer such 
     alternative benefit plans through a health plan purchasing 
     cooperative that meets the requirements of this section.
       (h) Rules of Construction.--Nothing in this section shall 
     be construed to--
       (1) require that a State organize, operate, or otherwise 
     create health plan purchasing cooperatives;
       (2) otherwise require the establishment of health plan 
     purchasing cooperatives.
       (3) require individuals, plan sponsors, or employers to 
     purchase group health plans or individual health plans 
     through a health plan purchasing cooperative;
       (4) require that a health plan purchasing cooperative be 
     the only type of purchasing arrangement permitted to operate 
     in a State.
       (5) confer authority upon a State that the State would not 
     otherwise have to regulate health plan issuers or employee 
     health benefits plans, or
       (6) confer authority up a State (or the Federal Government) 
     that the State (or Federal Government) would not otherwise 
     have to regulate group purchasing arrangements, coalitions, 
     or other similar entities that do not desire to become a 
     health plan purchasing cooperative in accordance with this 
     section.
       (i) Application of ERISA.--For purposes of enforcement 
     only, the requirements of parts 4 and 5 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1101) shall apply to a health pan purchasing 
     cooperative as if such plan were an employee welfare benefit 
     plan.

          Subtitle E--Application and Enforcement of Standards

     SEC. 141. APPLICABILITY.

       (A) Construction.--
       (1) Enforcement.--
       (A) In general.--A requirement or standard imposed under 
     this title on a group health plan or individual health plan 
     offered by a health plan issuer shall be deemed to be a 
     requirement or standard imposed on the health plan issuer. 
     Such requirements or standards shall be enforced by the State 
     insurance commissioner for the State involved or the official 
     or officials designated by the State to enforce the 
     requirements of this title. In the case of a group health 
     plan offered by a health plan issuer in connection with an 
     employee health benefit plan, the requirements of standards 
     imposed under the title shall be enforced with respect to the 
     health plan issuer by the State insurance commissioner for 
     the State involved or the official of officials designated by 
     the State to enforce the requirements of this title.
       (B) Limitation.--Except as provided in subsection (c), the 
     Secretary shall not enforce the requirements or standards of 
     this title as they relate to health plan issuers, group 
     health plans, or individual health plans. In no case shall a 
     Sate enforce the requirements or standards of this title as 
     they relate to employee health benefit plans.
       (2) Preemption of state law.--Nothing in this title shall 
     be construed to prevent a State from establishing, 
     implementing, or continuing in effect standards and 
     requirements--
       (A) not prescribed in this title; or
       (B) related to the issuance, renewal, or portability of 
     health insurance or the establishment or operation of group 
     purchasing arrangements, that are consistent with, and are 
     not in direct conflict with, this title and provide greater 
     protection or benefit to participants, beneficiaries or 
     individuals.
       (b) Rule of Construction.--Nothing in this title shall be 
     construed to affect or modify the provisions of section 514 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1144).
       (c) Continuation.--Nothing in this title shall be construed 
     as requiring a group health plan or an employee health 
     benefit plan to provide benefits to a particular participant 
     or beneficiary in excess of those provided under the terms of 
     such plan.

     SEC. 202. ENFORCEMENT OF STANDARDS.

       (a) Health Plan Issuers.--Each State shall require that 
     each group health plan and individual health plan issued, 
     sold, renewed, offered for sale or operated in such State by 
     a health plan issuer meet the standards established under 
     this title pursuant to an enforcement plan filed by the State 
     with the Secretary. A State shall submit such information as 
     required by the Secretary demonstrating effective 
     implementation of the State enforcement law.
       (b) Employee Health Benefit Plans.--With respect to 
     employee health benefit plans, the Secretary shall enforce 
     the reform standards established under this title in the same 
     manner as provided for under sections 502, 504, 506, and 510 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1132, 1134, 1136, and 1140). The civil penalties 
     contained in paragraphs (1) and (2) of section 502(c) of such 
     Act (29 U.S.C. 1132(c) (1) and (2)) shall apply to any 
     information required by the Secretary to be disclosed and 
     reported under this section.
       (c) Failure to Implement Plan.--In the case of the failure 
     of a State to substantially enforce the standards and 
     requirements set forth in this title with respect to group 
     health plans and individual health plans as provided for 
     under the State enforcement plan filed under subsection (a), 
     the Secretary, in consultation with the Secretary of Health 
     and Human Services, shall implement an enforcement plan 
     meeting the standards of this title in such State. In the 
     case of a State that fails to substantially enforce the 
     standards and requirements set forth in this title, each 
     health plan issuer operating in such State shall be subject 
     to civil enforcement as provided for under sections 502, 504, 
     506, and 510 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1132, 1134, 1136, and 1140). The civil 
     penalties contained in paragraphs (1) and (2) of section 
     502(c) of such Act (29 U.S.C. 1132(c) (1) and (2)) shall 
     apply to any information required by the Secretary to be 
     disclosed and reported under this section.
       (d) Applicable Certifying Authority.--As used in this 
     title, the term ``applicable certifying authority''means, 
     with respect to--
       (1) health plan issuers, the State insurance commissioner 
     or official or officials designated by the State to enforce 
     the requirements of this title for the State involved; and
       (2) an employee health benefit, plan, the Secretary.
       (e) Regulations.--The Secretary may promulgate such 
     regulations as may be necessary or appropriate to carry out 
     this title.
       (f) Technical Amendment.--Section 508 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1138) is 
     amended by inserting ``and under the Health Insurance Reform 
     Act of 1996'' before the period.

                  Subtitle F--Miscellaneous Provisions

     SEC. 191. HEALTH COVERAGE AVAILABILITY STUDY.

       (a) In General.--The Secretary of Health and Human 
     Services, in consultation with the Secretary, representatives 
     of State officials, consumers, and other representatives of 
     individuals and entities that have expertise in health 
     insurance and employee benefits, shall conclude a two-part 
     study, and prepare and submit reports, in accordance with 
     this section.
       (b) Evaluation of Availability.--Not later than January 1, 
     1998, the Secretary of Health and Human Services shall 
     prepare and submit to the appropriate committees of Congress 
     a report, concerning--
       (1) an evaluation, based on the experience of States, 
     expert opinions, and such additional data as may be 
     available, of the various mechanisms used to ensure the 
     availability of reasonably priced health coverage to 
     employers purchasing group coverage and to individuals 
     purchasing coverage on a non-group basis; and
       (2) whether standards that limit the variation in premiums 
     will further the purposes of this Act.
       (c) Evaluation of Effectiveness.--Not later than January 1, 
     1999, the Secretary of Health and Human Services shall 
     prepare and submit to the appropriate committees of Congress 
     a report, concerning the effectiveness of the provisions of 
     this Act and the various State laws, in ensuring the 
     availability of reasonably priced health coverage to 
     employers purchasing group coverage and individuals 
     purchasing coverage on a nongroup basis.

     SEC. 192. EFFECTIVE DATE.

       Except as otherwise provided for in this title, the 
     provisions of this title shall apply as follows:
       (1) With respect to group health plans and individual 
     health plans, such provisions shall apply to plans offered, 
     sold, issued, renewed, in effect, or operated on or after 
     January 1, 1997, and
       (2) With respect to employee health benefit plans, on the 
     first day of the first plan year beginning on or after 
     January 1, 1997.

     SEC. 193. SEVERABILITY.

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

  TITLE II--INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                          EMPLOYED INDIVIDUALS


                       table of contents of title

  TITLE II--INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-
                          EMPLOYED INDIVIDUALS

Sec. 200. Amendment of 1986 Code.

 Subtitle A--Increase in Deduction For Health Insurance Costs of Self-
                          Employed Individuals

Sec. 201. Increase in deduction for health insurance costs of self-
              employed individuals.

                      Subtitle B--Revenue Offsets

           Chapter 1--Treatment of Individuals Who Expatriate

Sec. 211. Revision of tax rules on expatriation.
Sec. 212. Information on individuals expatriating.

                Chapter 2--Foreign Trust Tax Compliance

Sec. 221. Improved information reporting on foreign trusts.
Sec. 222. Modifications of rules relating to foreign trusts having one 
              or more United States beneficiary.
Sec. 223. Foreign persons not to be treated as owners under grantor 
              trust rules.

[[Page H3119]]

Sec. 224. Information reporting regarding foreign gifts.
Sec. 225. Modification of rules relating to foreign trusts which are 
              not grantor trusts.
Sec. 226. Residence of estates and trusts, etc.

    Chapter 3--Repeal of Bad Debt Reserve Method for Thrift Savings 
                              Associations

Sec. 231. Repeal of bad debt reserve method for thrift savings 
              associations.

     SEC. 200. AMENDMENT OF 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     title an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Internal Revenue Code of 1986.

 Subtitle A--Increase in Deduction For Health Insurance Costs of Self-
                          Employed Individuals

     SEC. 201. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--
       ``(A) In general.--In the case of an individual who is an 
     employee within the meaning of section 401(c)(1), there shall 
     be allowed as a deduction under this section an amount equal 
     to the applicable percentage of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined under the 
     following table:

The applicable percentage is--in calendar year--
50 percent.and before 2002.............................................
80 percent.''after.....................................................

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1996.

                      Subtitle B--Revenue Offsets

           CHAPTER 1--TREATMENT OF INDIVIDUALS WHO EXPATRIATE

     SEC. 211. REVISION OF TAX RULES ON EXPATRIATION.

       (a) In General.--Subpart A of part II of subchapter N of 
     chapter 1 is amended by inserting after section 877 the 
     following new section:

     ``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

       ``(a) General Rules.--For purposes of this subtitle--
       ``(1) Mark to market.--Except as provided in subsection 
     (f), all property of a covered expatriate to which this 
     section applies shall be treated as sold on the expatriation 
     date for its fair market value.
       ``(2) Recognition of gain or loss.--In the case of any sale 
     under paragraph (1)--
       ``(A) notwithstanding any other provision of this title, 
     any gain arising from such sale shall be taken into account 
     for the taxable year of the sale unless such gain is excluded 
     from gross income under part III of subchapter B, and
       ``(B) any loss arising from such sale shall be taken into 
     account for the taxable year of the sale to the extent 
     otherwise provided by this title, except that section 1091 
     shall not apply (and section 1092 shall apply) to any such 
     loss.
       ``(3) Exclusion for certain gain.--The amount which would 
     (but for this paragraph) be includible in the gross income of 
     any individual by reason of this section shall be reduced 
     (but not below zero) by $600,000. For purposes of this 
     paragraph, allocable expatriation gain taken into account 
     under subsection (f)(2) shall be treated in the same manner 
     as an amount required to be includible in gross income.
       ``(4) Election to continue to be taxed as united states 
     citizen.--
       ``(A) In general.--If an expatriate elects the application 
     of this paragraph--
       ``(i) this section (other than this paragraph) shall not 
     apply to the expatriate, but
       ``(ii) the expatriate shall be subject to tax under this 
     title, with respect to property to which this section would 
     apply but for such election, in the same manner as if the 
     individual were a United States citizen.
       ``(B) Limitation on amount of estate, gift, and generation-
     skipping transfer taxes.--The aggregate amount of taxes 
     imposed under subtitle B with respect to any transfer of 
     property by reason of an election under subparagraph (A) 
     shall not exceed the amount of income tax which would be due 
     if the property were sold for its fair market value 
     immediately before the time of the transfer or death (taking 
     into account the rules of paragraph (2)).
       ``(c) Requirements.--Subparagraph (A) shall not apply to an 
     individual unless the individual--
       ``(i) provides security for payment of tax in such form and 
     manner, and in such amount, as the Secretary may require,
       ``(ii) consents to the waiver of any right of the 
     individual under any treaty of the United States which would 
     preclude assessment or collection of any tax which may be 
     imposed by reason of this paragraph, and
       ``(iii) complies with such other requirements as the 
     Secretary may prescribe.
       ``(D) Election.--An election under subparagraph (A) shall 
     apply to all property to which this section would apply but 
     for the election and, once made, shall be irrevocable. Such 
     election shall also apply to property the basis of which is 
     determined in whole or in part by reference to the property 
     with respect to which the election was made.
       ``(b) Election to Defer Tax.--
       ``(1) In general.--If the taxpayer elects the application 
     of this subsection with respect to any property--
       ``(A) no amount shall be required to be included in gross 
     income under subsection (a)(1) with respect to the gain for 
     such property for the taxable year of the sale, but
       ``(B) the taxpayer's tax for the taxable year in which such 
     property is disposed of shall be increased by the deferred 
     tax amount with respect to the property.

     Except to the extent provided in regulations, subparagraph 
     (B) shall apply to a disposition whether or not gain or loss 
     is recognized in whole or in part on the disposition.
       ``(2) Deferred tax amount.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `deferred tax amount' means, with respect to any property, an 
     amount equal to the sum of--
       ``(i) the difference between the amount of tax paid for the 
     taxable year described in paragraph (1)(A) and the amount 
     which would have been paid for such taxable year if the 
     election under paragraph (1) had not applied to such 
     property, plus
       ``(ii) an amount of interest on the amount described in 
     clause (i) determined for the period--
       ``(I) beginning on the 91st day after the expatriation 
     date, and
       ``(II) ending on the due date for the taxable year 
     described in paragraph (1)(B),

     by using the rates and method applicable under section 6621 
     for underpayments of tax for such period.

     For purposes of clause (ii), the due date is the date 
     prescribed by law (determined without regard to extension) 
     for filing the return of the tax imposed by this chapter for 
     the taxable year.
       ``(B) Allocation of losses.--For purposes of subparagraph 
     (A), any losses described in subsection (a)(2)(B) shall be 
     allocated ratably among the gains described in subsection 
     (a)(2)(A).
       ``(3) Security.--
       ``(A) In general.--No election may be made under paragraph 
     (1) with respect to any property unless adequate security is 
     provided with respect to such property.
       ``(B) Adequate security.--For purposes of subparagraph (A), 
     security with respect to any property shall be treated as 
     adequate security if--
       ``(i) it is a bond in an amount equal to the deferred tax 
     amount under paragraph (2)(A) for the property, or
       ``(ii) the taxpayer otherwise establishes to the 
     satisfaction of the Secretary that the security is adequate.
       ``(4) Waiver of certain rights.--No election may be made 
     under paragraph (1) unless the taxpayer consents to the 
     waiver of any right under any treaty of the United States 
     which would preclude assessment or collection of any tax 
     imposed by reason of this section.
       ``(5) Dispositions.--For purposes of this subsection, a 
     taxpayer making an election under this subsection with 
     respect to any property shall be treated as having disposed 
     of such property--
       ``(A) immediately before death if such property is held at 
     such time, and
       ``(B) at any time the security provided with respect to the 
     property fails to meet the requirements of paragraph (3) and 
     the taxpayer does not correct such failure within the time 
     specified by the Secretary.
       ``(6) Elections.--An election under paragraph (1) shall 
     only apply to property described in the election and, once 
     made, is irrevocable. An election may be under paragraph (1) 
     with respect to an interest in a trust with respect to which 
     gain is required to be recognized under subsection (f)(1).
       ``(c) Covered Expatriate.--For purposes of this section--
       ``(1) In general.--The term `covered expatriate' means an 
     expatriate--
       ``(A) whose average annual net income tax (as defined in 
     section 38(c)(1)) for the period of 5 taxable years ending 
     before the expatriation date is greater than $100,000, or
       ``(B) whose net worth as of such date is $500,000 or more.

     If the expatriation date is after 1996, such $100,000 and 
     $500,000 amounts shall be increased by an amount equal to 
     such dollar amount multiplied by the cost-of-living 
     adjustment determined under section 1(f)(3) for such calendar 
     year by substituting `1995' for `1992' in subparagraph (B) 
     thereof. Any increase under the preceding sentence shall be 
     rounded to the nearest multiple of $1,000.
       ``(2) Exceptions.--An individual shall not be treated as a 
     covered expatriate if--
       ``(A) the individual--
       ``(i) became at birth a citizen of the United States and a 
     citizen of another country and, as of the expatriation date, 
     continues to be a citizen of, and is taxed as a resident of, 
     such other country, and
       ``(ii) has been a resident of the United Stats (as defined 
     in section 7701(b)(1)(A)(ii)) for not more than 8 taxable 
     years during the 15-taxable year period ending with the 
     taxable year during which the expatriation date occurs, or
       ``(B)(i) the individual's relinquishment of United States 
     citizenship occurs before such individual attains age 18\1/
     2\, and
       ``(ii) the individual has been a resident of the United 
     States (as so defined) for not more than 5 taxable years 
     before the date of relinquishment.
       ``(d) Property to Which Section Applies.--For purposes of 
     this section--

[[Page H3120]]

       ``(1) In general.--Except as otherwise provided by the 
     Secretary, this section shall apply to--
       ``(A) any interest in property held by a covered expatriate 
     on the expatriation date the gain from which would be 
     included in the gross income of the expatriate if such 
     interest had been sold for its fair market value on such data 
     in a transaction in which gain is recognized in whole or in 
     part, and
       ``(B) any other interest in a trust to which subsection (f) 
     applies.
       ``(2) Exceptions.--This section shall not apply to the 
     following property:
       ``(A) United States real property interests.--Any United 
     States real property interest (as defined in section 
     897(c)(1)), other than stock of a United States real property 
     holding corporation which does not, on the expatriation date, 
     meet the requirements of section 897(c)(2).
       ``(B) Interest in certain retirement plans.--
       ``(i) In general.--Any interest in a qualified retirement 
     plan (as defined in section 4974(c)), other than any interest 
     attributable to contributions which are in excess of any 
     limitation or which violate any condition for tax-favored 
     treatment.
       ``(ii) Foreign pension plans.--
       ``(I) In general.--Under regulations prescribed by the 
     Secretary, interests in foreign pension plans or similar 
     retirement arrangements or programs.
       ``(II) Limitation.--The value of property which is treated 
     as not sold by reason of this subparagraph shall not exceed 
     $500,000.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Expatriate.--The term `expatriate' means--
       ``(A) any United States citizen who relinquishes his 
     citizenship, or
       ``(B) any long-term resident of the United States who--
       ``(i) ceases to be a lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)), or
       ``(ii) commences to be treated as a resident of a foreign 
     country under the provisions of a tax treaty between the 
     United States and the foreign country and who does not waive 
     the benefits of such treaty applicable to residents of the 
     foreign country.
       ``(2) Expatriation date.--The term `expatriation date' 
     means--
       ``(A) the date an individual relinquishes United States 
     citizenship, or
       ``(B) in the case of a long-term resident of the United 
     States, the date of the event described in clause (i) or (ii) 
     of paragraph (1)(B).
       ``(3) Relinquishment of citizenship.--A citizen shall be 
     treated as relinquishing his United States citizenship on the 
     earliest of--
       ``(A) the date the individual renounces his United States 
     nationality before a diplomatic or consular officer of the 
     United States pursuant to paragraph (5) of section 349(a) of 
     the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)).
       ``(B) the date the individual furnishes to the United 
     States Department of State a signed statement of voluntary 
     relinquishment of United States nationality confirming the 
     performance of an act of expatriation specified in paragraph 
     (1), (2), (3), or (4) of section 349(a) of the Immigration 
     and Nationality Act (8 U.S.C. 1481(a)(1)-(4)).
       ``(C) the date the United States Department of State issues 
     to the individual a certificate of loss of nationality, or
       ``(D) the date a court of the United States cancels a 
     naturalized citizen's certificate of naturalization.

     Subparagraph (A) or (B) shall not apply to any individual 
     unless the renunciation or voluntary relinquishment is 
     subsequently approved by the issuance to the individual of a 
     certificate of loss of nationality by the United States 
     Department of State.
       ``(4) Long-term resident.--
       ``(A) In general.--The term `long-term resident' means any 
     individual (other than a citizen of the United States) who is 
     a lawful permanent resident of the United States in at least 
     8 taxable years during the period of 15 taxable years ending 
     with the taxable year during which the expatriation date 
     occurs. For purposes of the preceding sentence, an individual 
     shall not be treated as a lawful permanent resident for any 
     taxable year if such individual is treated as a resident of a 
     foreign country for the taxable year under the provisions of 
     a tax treaty between the United States and the foreign 
     country and does not waive the benefits of such treaty 
     applicable to residents of the foreign country.
       ``(B) Special rule.--For purposes of subparagraph (A), 
     there shall not be taken into account--
       ``(i) any taxable year during which any prior sale is 
     treated under subsection (a)(1) as occurring, or
       ``(ii) any taxable year prior to the taxable year referred 
     to in clause (i).
       ``(f) Special Rules Applicable to Beneficiaries' Interests 
     in Trust.--
       ``(1) In general.--Except as provided in paragraph (2), if 
     an individual is determined under paragraph (3) to hold an 
     interest in a trust--
       ``(A) the individual shall not be treated as having sold 
     such interest,
       ``(B) such interest shall be treated as a separate share in 
     the trust, and
       ``(C)(i) such separate share shall be treated as a separate 
     trust consisting of the assets allocable to such share,
       ``(ii) the separate trust shall be treated as having sold 
     its assets immediately before the expatriation date for their 
     fair market value and as having distributed all of its assets 
     to the individual as of such time, and
       ``(iii) the individual shall be treated as having 
     recontributed the assets to the separate trust.

     Subsection (a)(2) shall apply to any income, gain, or loss of 
     the individual arising from a distribution described in 
     subparagraph (C)(ii).
       ``(2) Special rules for interests in qualified trusts.--
       ``(A) In general.--If the trust interest described in 
     paragraph (1) is an interest in a qualified trust--
       ``(i) paragraph (1) and subsection (a) shall not apply, and
       ``(ii) in addition to any other tax imposed by this title, 
     there is hereby imposed on each distribution with respect to 
     such interest a tax in the amount determined under 
     subparagraph (B).
       ``(B) Amount of tax.--The amount of tax under subparagraph 
     (A)(ii) shall be equal to the lesser of--
       ``(i) the highest rate of tax imposed by section 1(e) for 
     the taxable year in which the expatriation date occurs, 
     multiplied by the amount of the distribution, or
       ``(ii) the balance in the deferred tax account immediately 
     before the distribution determined without regard to any 
     increases under subparagraph (C)(ii) after the 30th day 
     preceding the distribution.
       ``(C) Deferred tax account.--For purposes of subparagraph 
     (B)(ii)--
       ``(i) Opening balance.--The opening balance in a deferred 
     tax account with respect to any trust interest in an amount 
     equal to the tax which would have been imposed on the 
     allocable expatriation gain with respect to the trust 
     interest if such gain had been included in gross income under 
     subsection (a).
       ``(ii) Increase for interest.--The balance in the deferred 
     tax account shall be increased by the amount of interest 
     determined (on the balance in the account at the time the 
     interest accrues), for periods after the 90th day after the 
     expatriation date, by using the rates and method applicable 
     under section 6621 for underpayments of tax for such periods.
       ``(iii) Decrease for taxes previously paid.--The balance in 
     the tax deferred account shall be reduced--
       ``(I) by the amount of taxes imposed by subparagraph (A) on 
     any distribution to the person holding the trust interest, 
     and
       ``(II) in the case of a person holding a nonvested 
     interest, to the extent provided in regulations, by the 
     amount of taxes imposed by subparagraph (A) on distributions 
     from the trust with respect to nonvested interests not held 
     by such person.
       ``(D) Allocable expatriation gain.--For purposes of this 
     paragraph, the allocable expatriation gain with respect to 
     any beneficiary's interest in a trust in the amount of gain 
     which would be allocable to such beneficiary's vested and 
     nonvested interests in the trust if the beneficiary held 
     directly all assets allocable to such interests.
       ``(E) Tax deducted and withheld.--
       ``(i) In general.--The tax imposed by subparagraph (A)(ii) 
     shall be deducted and withheld by the trustees from the 
     distribution to which it relates.
       ``(ii) Exception where failure to waive treaty rights.--If 
     an amount may not be deducted and withheld under clause (i) 
     by reason of the distributee failing to waive any treaty 
     right with respect to such distribution--
       ``(I) the tax imposed by subparagraph (A)(ii) shall be 
     imposed on the trust and each trustee shall be personally 
     liable for the amount of such tax, and
       ``(II) any other beneficiary of the trust shall be entitled 
     to recover from the distributee the amount of such tax 
     imposed on the other beneficiary.
       ``(F) Disposition.--If a trust ceases to be a qualified 
     trust at any time, a covered expatriate disposes of an 
     interest in a qualified trust, or a covered expatriate 
     holding an interest in a qualified trust dies, then, in lieu 
     of the tax imposed by subparagraph (A)(ii), there is hereby 
     imposed a tax equal to the lesser of--
       ``(i) the tax determined under paragraph (1) as if the 
     expatriation date were the date of such cessation, 
     disposition, or death, whichever is applicable, or
       ``(ii) the balance in the tax deferred account immediately 
     before such date.

     Such tax shall be imposed on the trust and each trustee shall 
     be personally liable for the amount of such tax and any other 
     beneficiary of the trust shall be entitled to recover from 
     the covered expatriate or the estate the amount of such tax 
     imposed on the other beneficiary.
       ``(G) Definitions and special rule.--For purposes of this 
     paragraph--
       ``(i) Qualified trust.--The term `qualified trust' means a 
     trust--
       ``(I) which is organized under, and governed by, the laws 
     of the United States or a State, and
       ``(II) with respect to which the trust instrument requires 
     that at least 1 trustee of the trust be an individual citizen 
     of the United States or a domestic corporation.
       ``(ii) Vested interest.--The term `vested interest' means 
     any interest which, as of the expatriation date, is vested in 
     the beneficiary.
       ``(iii) Nonvested interest.--The term `nonvested interest' 
     means, with respect to any beneficiary, any interest in a 
     trust

[[Page H3121]]

     which is not a vested interest. Such interest shall be 
     determined by assuming the maximum exercise of discretion in 
     favor of the beneficiary and the occurrence of all 
     contingencies in favor of the beneficiary.
       ``(iv) Adjustments.--The Secretary may provide for such 
     adjustments to the bases of assets in a trust or a deferred 
     tax account, and the timing of such adjustments, in order to 
     ensure that gain is taxed only once.
       ``(3) Determination of beneficiaries' interest in trust.--
       ``(A) Determinations under paragraph (1)--For purposes of 
     paragraph (1), a beneficiary's interest in a trust shall be 
     based upon all relevant facts and circumstances, including 
     the terms of the trust instrument and any letter of wishes or 
     similar document, historical patterns of trust distributions, 
     and the existence of and functions performed by a trust 
     protector or any similar advisor.
       ``(B) Other determinations.--For purposes of this section--
       ``(i) Constructive ownership.--If a beneficiary of a trust 
     is a corporation, partnership, trust, or estate, the 
     shareholders, partners, or beneficiaries shall be deemed to 
     be the trust beneficiaries for purposes of this section.
       ``(ii) Taxpayer return position.--A taxpayer shall clearly 
     indicate on its income tax return--
       ``(I) the methodology used to determine that taxpayer's 
     trust interest under this section, and
       ``(II) if the taxpayer knows (or has reason to know) that 
     any other beneficiary of such trust is using a different 
     methodology to determine such beneficiary's trust interest 
     under this section.
       ``(g) Termination of Deferrals, Etc.--On the date any 
     property held by an individual is treated as sold under 
     subsection (a), notwithstanding any other provision of this 
     title--
       ``(1) any period during which recognition of income or gain 
     is deferred shall terminate, and
       ``(2) any extension of time for payment of tax shall cease 
     to apply and the unpaid portion of such tax shall be due and 
     payable at the time and in the manner prescribed by the 
     Secretary.
       ``(h) Imposition of Tentative Tax.--
       ``(1) In general.--If an individual is required to include 
     any amount in gross income under subsection (a) for any 
     taxable year, there is hereby imposed, immediately before the 
     expatriation date, a tax in an amount equal to the amount of 
     tax which would be imposed if the taxable year were a short 
     taxable year ending on the expatriation date.
       ``(2) Due date.--The due date for any tax imposed by 
     paragraph (1) shall be the 90th day after the expatriation 
     date.
       ``(3) Treatment of tax.--Any tax paid under paragraph (1) 
     shall be treated as a payment of the tax imposed by this 
     chapter for the taxable year to which subsection (a) applies.
       ``(4) Deferral of tax.--The provisions of subsection (b) 
     shall apply to the tax imposed by this subsection to the 
     extent attributable to gain includible in gross income by 
     reason of this section.
       ``(i) Coordination With Estate and Gift Taxes.--If 
     subsection (a) applies to property held by an individual for 
     any taxable year and--
       ``(1) such property is includible in the gross estate of 
     such individual solely by reason of section 2107, or
       ``(2) section 2501 applies to a transfer of such property 
     by such individual solely by reason of section 2501(a)(3).

     then there shall be allowed as a credit against the 
     additional tax imposed by section 2101 or 2501, whichever is 
     applicable, solely by reason of section 2107 or 2501(a)(3) an 
     amount equal to the increase in the tax imposed by this 
     chapter for such taxable year by reason of this section.
       ``(j) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) to prevent double taxation by ensuring that--
       ``(A) appropriate adjustments are made to basis to reflect 
     gain recognized by reason of subsection (a) and the exclusion 
     provided by subsection (a)(3), and
       ``(B) any gain by reason of a deemed sale under subsection 
     (a) of an interest in a corporation, partnership, trust, or 
     estate is reduced to reflect that portion of such gain which 
     is attributable to an interest in a trust which a 
     shareholder, partner, or beneficiary is treated as holding 
     directly under subsection (f)(3)(B)(i), and
       ``(2) which provide for the proper allocation of the 
     exclusion under subsection (a)(3) to property to which this 
     section applies.
       ``(k) Cross Reference.--

  ``For income tax treatment of individuals who terminate United States 
citizenship, see section 7701(a)(47).''.

       (b) Inclusion in Income of Gifts and Inheritances From 
     Covered Expatriates.--Section 102 (relating to gifts, etc. 
     not included in gross income) is amended by adding at the end 
     the following new subsection:
       ``(d) Gifts and Inheritances From Covered Expatriates.--
     Subsection (a) shall not exclude from gross income the value 
     of any property acquired by gift, bequest, devise, or 
     inheritance from a covered expatriate after the expatristion 
     date. For purposes of this subsection, any term used in this 
     subsection which is also used in section 877A shall have the 
     same meaning as when used in section 877A.''.
       (c) Definition of Termination of United States 
     Citizenship.--Section 7701(a) is amended by adding at the end 
     the following new paragraph:
       ``(47) Termination of united states citizenship.--An 
     individual shall not cease to be treated as a United States 
     citizen before the date on which the individual's citizenship 
     is treated as relinquished under section 877A(e)(3).''.
       (d) Conforming Amendments.--
       (1) Section 877 is amended by adding at the end the 
     following new subsection:
       ``(f) Application.--This section shall not apply to any 
     individual who relinquishes (within the meaning of section 
     877A(e)(3)) United States citizenship on or after February 6, 
     1995.''.
       (2) Section 2107(c) is amended by adding at the end the 
     following new paragraph:
       ``(3) Cross reference.--For credit against the tax imposed 
     by subsection (a) for expatriation tax, see section 
     877A(i).''.
       (3) Section 2501(a)(3) is amended by adding at the end the 
     following new flush sentence: ``For credit against the tax 
     imposed under this section by reason of this paragraph, see 
     section 877A(i).''.
       (4) Paragraph (10) of section 7701(b) is amended by adding 
     at the end the following new sentence: ``This paragraph shall 
     not apply to any long-term resident of the United States who 
     is an expatriate (as defined in section 877A(e)(1)).''.
       (e) Clerical Amendment.--The table of sections for subpart 
     A of part II of subchapter N of chapter 1 is amended by 
     inserting after the item relating to section 877 the 
     following new item:

``Sec. 877A. Tax responsibilities of expatriation.''.

       (f) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendments made by this section shall apply to expatriates 
     (within the meaning of section 877A(e) of the Internal 
     Revenue Code of 1986, as added by this section) whose 
     expatriation date (as so defined) occurs on or after February 
     6, 1995.
       (2) Gifts and bequests.--Section 102(d) of the Internal 
     Revenue Code of 1986 (as added by subsection (b)) shall apply 
     to amounts received from expatriates (as so defined) whose 
     expatriation date (as so defined) occurs on and after 
     February 6, 1995.
       (3) Special rules relating to certain acts occurring before 
     february 6, 1995.--In the case of an individual who took an 
     act of expatriation specified in paragraph (1), (2), (3), or 
     (4) of section 349(a) of the Immigration and Nationality Act 
     (8 U.S.C. 1481(a) (1)-(4)) before February 6, 1995, but whose 
     expatriation date (as so defined) occurs after February 6, 
     1995--
       (A) the amendment made by subsection (c) shall not apply,
       (B) the amendment made by subsection (d)(1) shall not apply 
     for any period prior to the expatriation date, and
       (C) the other amendments made by this section shall apply 
     as of the expatriation date.
       (4) Due date for tentative tax.--The due date under section 
     877A(h)(2) of such Code shall in no event occur before the 
     90th day after the date of the enactment of this Act.

     SEC. 212. INFORMATION ON INDIVIDUALS EXPATRIATING.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6039E the 
     following new section:

     ``SEC. 6039F. INFORMATION ON INDIVIDUALS EXPATRIATING.

       ``(a) Requirement.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, any expatriate (within the meaning of section 
     877A(e)(1)) shall provide a statement which includes the 
     information described in subsection (b).
       ``(2) Timing.--
       ``(A) Citizens.--In the case of an expatriate described in 
     section 877(e)(1)(A), such statement shall be--
       ``(i) provided not later than the expatriation date (within 
     the meaning of section 877A(e)(2)), and
       ``(ii) provided to the person or court referred to in 
     section 877A(e)(3).
       ``(B) Noncitizens.--In the case of an expatriate described 
     in section 877A(e)(1)(B), such statement shall be provided to 
     the Secretary with the return of tax imposed by chapter 1 for 
     the taxable year during which the event described in such 
     section occurs.
       ``(b) Information To Be Provided.--Information required 
     under subsection (a) shall include--
       ``(1) the taxpayer's TIN,
       ``(2) the mailing address of such individual's principal 
     foreign residence,
       ``(3) the foreign country in which such individual is 
     residing,
       ``(4) the foreign country of which such individual is a 
     citizen,
       ``(5) in the case of an individual having a net worth of at 
     lease the dollar amount applicable under section 
     877A(c)(1)(B), information detailing the assets and 
     liabilities of such individual, and
       ``(6) such other information as the Secretary may 
     prescribe.
       ``(c) Penalty.--Any individual failing to provide a 
     statement required under subsection (a) shall be subject to a 
     penalty for each year during any portion of which such 
     failure continues in an amount equal to the greater of--
       ``(1) 5 percent of the additional tax required to be paid 
     under section 877A for such year, or

[[Page H3122]]

       ``(2) $1,000, unless it is shown that such failure is due 
     to reasonable cause and not to willful neglect.
       ``(d) Information To Be Provided to Secretary.--
     Notwithstanding any other provision of law--
       ``(1) any Federal agency or court which collects (or is 
     required to collect) the statement under subsection (a) shall 
     provide to the Secretary--
       ``(A) a copy of any such statement, and
       ``(B) the name (and any other identifying information) of 
     any individual refusing to comply with the provisions of 
     subsection (a),
       ``(2) the Secretary of State shall provide to the Secretary 
     a copy of each certificate as to the loss of American 
     nationality under section 358 of the Immigration and 
     Nationality Act which is approved by the Secretary of State, 
     and
       ``(3) the Federal agency primarily responsible for 
     administering the immigration laws shall provide to the 
     Secretary the name of each lawful permanent resident of the 
     United States (within the meaning of section 7701(b)(6)) 
     whose status as such has been revoked or has been 
     administratively or judicially determined to have been 
     abandoned.

     Notwithstanding any other provision of law, not later than 30 
     days after the close of each calendar quarter, the Secretary 
     shall publish in the Federal Register the name of each 
     individual relinquishing United States citizenship (within 
     the meaning of section 877A(e)(3)) with respect to whom the 
     Secretary receives information under the preceding sentence 
     during such quarter.
       ``(e) Exemption.--The Secretary may by regulations exempt 
     any class of individuals from the requirements of this 
     section if the Secretary determines that applying this 
     section to such individuals is not necessary to carry out the 
     purposes of this section.''.
       (b) Clerical Amendment.--The table of sections for such 
     subpart A is amended by inserting after the item relating to 
     section 6039E the following new item:

``Sec. 6039F. Information on individuals expatriating.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to individuals to whom section 877A of the 
     Internal Revenue Code of 1986 applies and whose expatriation 
     date (as defined in section 877A(e)(2)) occurs on or after 
     February 6, 1995, except that no statement shall be required 
     by such amendments before the 90th day after the date of the 
     enactment of this Act.

                CHAPTER 2--FOREIGN TRUST TAX COMPLIANCE

     SEC. 221. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.

       (a) In General.--Section 6048 (relating to returns as to 
     certain foreign trusts) is amended to read as follows:

     ``SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN 
                   TRUSTS.

       ``(a) Notice of Certain Events.--
       ``(1) General rule.--On or before the 90th day (or such 
     later day as the Secretary may prescribe) after any 
     reportable event, the responsible party shall provide written 
     notice of such event to the Secretary in accordance with 
     paragraph (2).
       ``(2) Contents of notice.--The notice required by paragraph 
     (1) shall contain such information as the Secretary may 
     prescribe, including--
       ``(A) the amount of money or other property (if any) 
     transferred to the trust in connection with the reportable 
     event, and
       ``(B) the identify of the trust and of each trustee and 
     beneficiary or class of beneficiaries) of the trust.
       ``(3) Reportable event.--For purposes of this subsection--
       ``(A) In general.--The term `reportable event' means--
       ``(i) the creation of any foreign trust by a United States 
     person,
       ``(ii) the transfer of any money or property (directly or 
     indirectly) to a foreign trust by a United States person, 
     including a transfer by reason of death, and
       ``(iii) the death of a citizen or resident of the United 
     States if--
       ``(I) the decedent was treated as the owner of any portion 
     of a foreign trust under the rules of subpart E of part I of 
     subchapter J of chapter 1, or
       ``(II) any portion of a foreign trust was included in the 
     gross estate of the decedent.
       ``(B) Exceptions.--
       ``(i) Fair market value sales.--Subparagraph (A)(ii) shall 
     not apply to any transfer of property to a trust in exchange 
     for consideration of at least the fair market value of the 
     transferred property. For purposes of the preceding sentence, 
     consideration other than cash shall be taken into account at 
     its fair market value and the rules of section 679(a)(3) 
     shall apply.
       ``(ii) Deferred compensation and charitable trusts.--
     Subparagraph (A) shall not apply with respect to a trust 
     which is--
       ``(I) described in section 402(b), 404(a)(4), or 404A, or
       ``(II) determined by the Secretary to be described in 
     section 501(c)(3).
       ``(4) Responsible party.--For purposes of this subsection, 
     the term `responsible party' means--
       ``(A) the grantor in the case of the creation of an inter 
     vivos trust.
       ``(B) the transferor in the case of a reportable event 
     described in paragraph (3)(A)(ii) other than a transfer by 
     reason of death, and
       ``(C) the executor of the decedent's estate in any other 
     case.
       ``(b) United States Grantor of Foreign Trust.--
       ``(1) In general.--If, at any time during any taxable year 
     of a United States person, such person is treated as the 
     owner of any portion of a foreign trust under the rules of 
     subpart E of part I of subchapter J of chapter 1, such person 
     shall be responsible to ensure that
       ``(A) such trust makes a return for such year which sets 
     forth a full and complete accounting of all trust activities 
     and operations for the year, the name of the United States 
     agent for such trust, and such other information as the 
     Secretary may prescribe, and
       ``(B) such trust furnishes such information as the 
     Secretary may prescribe to each United States person (i) who 
     is treated as the owner of any portion of such trust or (ii) 
     who receives (directly or indirectly) any distribution from 
     the trust.
       ``(2) Trusts not having united states agent.--
       ``(A) In general.--If the rules of this paragraph apply to 
     any foreign trust, the determination of amounts required to 
     be taken into account with respect to such trust by a United 
     States person under the rules of subpart E of part I of 
     subchapter J of chapter 1 shall be determined by the 
     Secretary.
       ``(B) United States agent required.--The rules of this 
     paragraph shall apply to any foreign trust to which paragraph 
     (1) applies unless such trust agrees (in such manner, subject 
     to such conditions, and at such time as the Secretary shall 
     prescribe) to authorize a United States person to act as such 
     trust's limited agent solely for purposes of applying 
     sections 7602, 7603, and 7604 with respect to--
       ``(i) any request by the Secretary to examine records or 
     produce testimony related to the proper treatment of amounts 
     required to be taken into account under the rules referred to 
     in subparagraph (A), or
       ``(ii) any summons by the Secretary for such records or 
     testimony.

     The appearance of persons or production of records by reason 
     of a United States person being such an agent shall not 
     subject such persons or records to legal process for any 
     purpose other than determining the correct treatment under 
     this title of the amounts required to be taken into account 
     under the rules referred to in subparagraph (A). A foreign 
     trust which appoints an agent described in this subparagraph 
     shall not be considered to have an office or a permanent 
     establishment in the United States, or to be engaged in a 
     trade or business in the United States, solely because of the 
     activities of such agent pursuant to this subsection.
       ``(C) Other rules to apply.--Rules similar to the rules of 
     paragraphs (2) and (4) of section 6038A(e) shall apply for 
     purposes of this paragraph.
       ``(c) Reporting by United States Beneficiaries of Foreign 
     Trusts.--
       ``(1) In general.--If any United States person receives 
     (directly or indirectly) during any taxable year of such 
     person any distribution from a foreign trust, such person 
     shall make a return with respect to such trust for such year 
     which includes--
       ``(A) the name of such trust,
       ``(B) the aggregate amount of the distributions so received 
     from such trust during such taxable year, and
       ``(C) such other information as the Secretary may 
     prescribe.
       ``(2) Inclusion in income if records not provided.--
       ``(A) In general.--If applicable records are not provided 
     to the Secretary to determine the proper treatment of any 
     distribution from a foreign trust, such distribution shall be 
     treated as an accumulation distribution includable in the 
     gross income of the distributee under chapter 1. To the 
     extent provided in regulations, the preceeding sentence shall 
     not apply if the foreign trust elects to be subject to rules 
     similar to the rules of subsection (b)(2)(B).
       ``(B) Application of accumulation distribution rules.--For 
     purposes of applying section 668 in a case to which 
     subparagraph (A) applies, the applicable number of years for 
     purposes of section 668(a) shall be \1/2\ of the number of 
     years the trust has been in existence.
       ``(d) Special Rules.--
       ``(1) Determination of whether united states person 
     receives distribution.--For purposes of this section, in 
     determining whether a United States person receives a 
     distribution from a foreign trust, the fact that a portion of 
     such trust is treated as owned by another person under the 
     rules of subpart E of part I of subchapter J of chapter 1 
     shall be disregarded.
       ``(2) Domestic trusts with foreign activities.--To the 
     extent provided in regulations, a trust which is a United 
     States person shall be treated as a foreign trust for 
     purposes of this section and section 6677 if such trust has 
     substantial activities, or holds substantial property, 
     outside the United States.
       ``(3) Time and manner of filing information.--Any notice or 
     return required under this section shall be made at such time 
     and in such manner as the Secretary shall prescribe.
       ``(4) Modification of return requirements.--The Secretary 
     is authorized to suspend or modify any requirement of this 
     section if the Secretary determines that the United States 
     has no significant tax interest in obtaining the required 
     information.''.
       (b) Increased Penalties.--Section 6677 (relating to failure 
     to file information returns with respect to certain foreign 
     trusts) is amended to read as follows:

[[Page H3123]]

     ``SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO 
                   CERTAIN FOREIGN TRUSTS.

       ``(a) Civil Penalty.--In addition to any criminal penalty 
     provided by law, if any notice or return required to be filed 
     by section 6048--
       ``(1) is not filed on or before the time provided in such 
     section, or
       ``(2) does not include all the information required 
     pursuant to such section or includes incorrect information.

     the person required to file such notice or return shall pay a 
     penalty equal to 35 percent of the gross reportable amount. 
     If any failure described in the preceding sentence continues 
     for more than 90 days after the day on which the Secretary 
     mails notice of such failure to the person required to pay 
     such penalty, such person shall pay a penalty (in addition to 
     the amount determined under the preceding sentence) of 
     $10,000 for each 30-day period (or fraction thereof) during 
     which such failure continues after the expiration of such 90-
     day period. In no event shall the penalty under this 
     subsection with respect to any failure exceed the gross 
     reportable amount.
       ``(b) Special Rules for Returns Under Section 6048(b).--In 
     the case of a return required under section 6048(b)--
       ``(1) the United States person referred to in such section 
     shall be liable for the penalty imposed by subsection (a), 
     and
       ``(2) subsection (a) shall be applied by substituting `5 
     percent' for `35 percent'.
       ``(c) Gross Reportable Amount.--For purposes of subsection 
     (a), the term `gross reportable amount' means--
       ``(1) the gross value of the property involved in the event 
     (determined as of the date of the event) in the case of a 
     failure relating to section 6048(a),
       ``(2) the gross value of the portion of the trust's assets 
     at the close of the year treated as owned by the United 
     States person in the case of a failure relating to section 
     6048(b)(1), and
       ``(3) the gross amount of the distributions in the case of 
     a failure relating to section 6048(c).
       ``(d) Reasonable Cause Exception.--No penalty shall be 
     imposed by this section on any failure which is shown to be 
     due to reasonable cause and not due to willful neglect. The 
     fact that a foreign jurisdiction would impose a civil or 
     criminal penalty on the taxpayer (or any other person) for 
     disclosing the required information is not reasonable cause.
       ``(e) Deficiency Procedures Not To Apply.--Subchapter B of 
     chapter 63 (relating to deficiency procedures for income, 
     estate, gift, and certain excise taxes) shall not apply in 
     respect of the assessment or collection of any penalty 
     imposed by subsection (a).''.
       (c) Conforming Amendments.--
       (1) Paragraph (2) of section 6724(d), as amended by 
     sections 11004 and 11045, is amended by striking ``or'' at 
     the end of subparagraph (U), by striking the period at the 
     end of subparagraph (V) and inserting ``,or'', and by 
     inserting after subparagraph (V) the following new 
     subparagraph:
       ``(W) section 6048(b)(1)(B) (relating to foreign trust 
     reporting requirements).''.
       (2) The table of sections for subpart B of part III of 
     subchapter A of chapter 61 is amended by striking the item 
     relating to section 6048 and inserting the following new 
     item:

``Sec. 604 Information with respect to certain foreign trusts.''.

       (3) The table of sections for part I of subchapter B of 
     chapter 68 is amended by striking the item relating to 
     section 6677 and inserting the following new item:

``Sec. 6677. Failure to file information with respect to certain 
              foreign trusts''

       (d) Effective Dates.--
       (1) Reportable events.--To the extent related to subsection 
     (a) of section 6048 of the Internal Revenue Code of 1986, as 
     amended by this section, the amendments made by this section 
     shall apply to reportable events (as defined in such section 
     6048) occurring after the date of the enactment of this Act.
       (2) Grantor trust reporting.--To the extent related to 
     subsection (b) of such section 6048, the amendments made by 
     this section shall apply to taxable years of United States 
     persons beginning after the date of the enactment of this 
     Act.
       (3) Reporting by united states beneficiaries.--To the 
     extent related to subsection (c) of such section 6048, the 
     amendments made by this section shall apply to distributions 
     received after the date of the enactment of this Act.

     SEC. 222. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS 
                   HAVING ONE OR MORE UNITED STATES BENEFICIARIES.

       (a) Treatment of Trust Obligations, Etc.--
       (1) Paragraph (2) of section 679(a) is amended by striking 
     subparagraph (B) and inserting the following:
       ``(B) Transfers at fair market value.--To any transfer of 
     property to a trust in exchange for consideration of at least 
     the fair market value of the transferred property. For 
     purposes of the preceding sentence, consideration other than 
     cash shall be taken into account at its fair market value.''.
       (2) Subsection (a) of section 679 (relating to foreign 
     trusts having one or more United States beneficiaries) is 
     amended by adding at the end the following new paragraph:
       ``(3) Certain obligations not taken into account under fair 
     market value exceptions.--
       ``(A) In general.--In determining whether paragraph (2)(B) 
     applies to any transfer by a person described in clause (ii) 
     or (iii) of subparagraph (C), there shall not be taken into 
     account--
       ``(i) except as provided in regulations, any obligation of 
     a person described in subparagraph (C), and
       ``(ii) to the extent provided in regulations, any 
     obligation which is guaranteed by a person described in 
     subparagraph (C).
       ``(B) Treatment of principal payments on obligation.--
     Principal payments by the trust on any obligation referred to 
     in subparagraph (A) shall be taken into account on and after 
     the date of the payment in determining the portion of the 
     trust attributable to the property transferred.
       ``(C) Persons described.--The persons described in this 
     subparagraph are--
       ``(i) the trust,
       ``(ii) any grantor or beneficiary of the trust, and
       ``(iii) any person who is related (within the meaning of 
     section 643(i)(2)(B)) to any grantor or beneficiary of the 
     trust.''.
       (b) Exemption of Transfers to Charitable Trusts.--
     Subsection (a) of section 679 is amended by striking 
     ``section 404(a)(4) or 404A'' and inserting ``section 
     6048(a)*(3)(B)(ii)''.
       (c) Other Modifications.--Subsection (a) of section 679 is 
     amended by adding at the end the following new paragraphs:
       ``(4) Special rules applicable to foreign grantor who later 
     becomes a united states person.--
       ``(A) In general.--If a nonresident alien individual has a 
     residency starting date within 5 years after directly or 
     indirectly transferring property to a foreign trust, this 
     section and section 6048 shall be applied as if such 
     individual transferred to such trust on the residency 
     starting date an amount equal to the portion of such trust 
     attributable to the property transferred by such individual 
     to such trust in such transfer.
       ``(B) Treatment of undistributed income.--For purposes of 
     this section, undistributed net income for periods before 
     such individual's residency starting date shall be taken into 
     account in determining the portion of the trust which is 
     attributable to property transferred by such individual to 
     such trust but shall not otherwise be taken into account.
       ``(C) Residency starting date.--For purposes of this 
     paragraph, an individual's residency starting date is the 
     residency starting date determined under section 
     7701(b)(2)(A).
       ``(5) Outbound trust migrations.--If--
       ``(A) an individual who is a citizen or resident of the 
     United States transferred property to a trust which was not a 
     foreign trust, and
       ``(B) such trust becomes a foreign trust while such 
     individual is alive,

     then this section and section 6048 shall be applied as if 
     such individual transferred to such trust on the date such 
     trust becomes a foreign trust an amount equal to the portion 
     of such trust attributable to the property previously 
     transferred by such individual to such trust. A rule similar 
     to the rule of paragraph (4)(B) shall apply for purposes of 
     this paragraph.''.
       (d) Modification Relating to Whether Trust Has United 
     States Beneficiaries.--Subsection (c) of section 679 is 
     amended by adding at the end the following new paragraph:
       ``(3) Certain united states beneficiaries disregarded.--A 
     beneficiary shall not be treated as a United States person in 
     applying this section with respect to any transfer of 
     property to foreign trust if such beneficiary first became a 
     United States person more than 5 years after the date of such 
     transfer.''.
       (e) Technical Amendment.--Subparagraph (A) of section 
     679(c)(2) is amended to read as follows:
       ``(A) in the case of a foreign corporation, such 
     corporation is a controlled foreign corporation (as defined 
     in section 957(a)),''.
       (f) Regulations.--Section 679 is amended by adding at the 
     end the following new subsection:
       ``(d) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to transfers of property after February 6, 1995.

     SEC. 233. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER 
                   GRANTOR TRUST RULES.

       (a) General Rule.--
       (1) Subsection (f) of section 672 (relating to special rule 
     where grantor is foreign person) is amended to read as 
     follows:
       ``(f) Subpart Not To Result in Foreign Ownership.--
       ``(1) In general.--Notwithstanding any other provision of 
     this subpart, this subpart shall apply only to the extent 
     such application results in an amount being currently taken 
     into account (directly or through 1 or more entities) under 
     this chapter in computing the income of a citizen or resident 
     of the United States or a domestic corporation.
       ``(2) Exceptions.--
       ``(A) Certain revocable and irrevocable trusts.--Paragraph 
     (1) shall not apply to any trust if--
       ``(i) the power to revest absolutely in the grantor title 
     to the trust property is exercisable solely by the grantor 
     without the approval or consent of any other person or with

[[Page H3124]]

     the consent of a related or subordinate party who is 
     subservient to the grantor, or
       ``(ii) the only amounts distributable from such trust 
     (whether income or corpus) during the lifetime of the grantor 
     are amounts distributable to the grantor or the spouse of the 
     grantor.
       ``(B) Compensatory trusts.--Except as provided in 
     regulations, paragraph (1) shall not apply to any portion of 
     a trust distributions from which are taxable as compensation 
     for services rendered.
       ``(3) Special rules.--Except as otherwise provided in 
     regulations prescribed by the Secretary--
       ``(A) a controlled foreign corporation (as defined in 
     section 957) shall be treated as a domestic corporation for 
     purposes of paragraph (1), and
       ``(B) paragraph (1) shall not apply for purposes of 
     applying section 1296.
       ``(4) Recharacterization of purported gifts.--In the case 
     of any transfer directly or indirectly from a partnership or 
     foreign corporation which the transferee treats as a gift or 
     bequest, the Secretary may recharacterize such transfer in 
     such circumstances as the Secretary determines to be 
     appropriate to prevent the avoidance of the purposes of this 
     subsection.
       ``(5) Special rule where grantor is foreign person.--If--
       ``(A) but for this subsection, a foreign person would be 
     treated as the owner of any portion of a trust, and
       ``(B) such trust has a beneficiary who is a United States 
     person,

     such beneficiary shall be treated as the grantor of such 
     portion to the extent such beneficiary has made transfers of 
     property by gift (directly or indirectly) to such foreign 
     person. For purposes of the preceding sentence, any gift 
     shall not be taken into account to the extent such gift would 
     be excluded from taxable gifts under section 2503(b).
       ``(6) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, including regulations 
     providing that paragraph (1) shall not apply in appropriate 
     cases.''.
       (2) The last sentence of subsection (c) of section 672 of 
     such Code is amended by inserting ``subsection (f) and'' 
     before ``sections 674''.
       (b) Credit for Certain Taxes.--Paragraph (2) of section 
     665(d) is amended by adding at the end the following new 
     sentence: ``Under rules or regulations prescribed by the 
     Secretary, in the case of any foreign trust of which the 
     settlor or another person would be treated as owner of any 
     portion of the trust under subpart E but for section 672(f), 
     the term `taxes imposed on the trust' includes the allocable 
     amount of any income, war profits, and excess profits taxes 
     imposed by any foreign country or possession of the United 
     States on the settlor or such other person in respect of 
     trust gross income.''.
       (c) Distribution by Certain Foreign Trusts Through 
     Nominees.--
       (1) Section 643 is amended by adding at the end the 
     following new subsection:
       ``(h) Distribution by Certain Foreign Trusts Through 
     Nominees.--For purposes of this part, any amount paid to a 
     United States person which is derived directly or indirectly 
     from a foreign trust of which the payor is not the grantor 
     shall be deemed in the year of payment to have been directly 
     paid by the foreign trust to such United States person.''.
       (2) Section 665 is amended by striking subsection (c).
       (d) Effective Date.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall take effort on the date 
     of the enactment of this Act.
       (2) Exception for certain trusts.--The amendments made by 
     this section shall not apply to any trust--
       (A) which is treated as owned by the grantor or another 
     person under section 676 or 677 (other than subsection (a)(3) 
     thereof) of the Internal Revenue Code of 1986, and
       (B) which is in existence on September 19, 1995.

     The preceding sentence shall not apply to the portion of any 
     such trust attributable to any transfer to such trust after 
     September 19, 1995.
       (e) Transitional Rule.--If--
       (1) by reason of the amendments made by this section, any 
     person other than a United States person ceases to be treated 
     as the owner of a portion of a domestic trust, and
       (2) before January 1, 1997, such trust becomes a foreign 
     trust, or the assets of such trust are transferred to a 
     foreign trust,

     no tax shall be imposed by section 1491 of the Internal 
     Revenue Code of 1986 by reason of such trust becoming a 
     foreign trust or the assets of such trust being transferred 
     to a foreign trust.

     SEC. 224. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

       (a) In General.--Subpart A of part III of subchapter A of 
     chapter 61 is amended by inserting after section 6039F the 
     following new section:

     ``SEC. 6039G. NOTICE OF GIFTS RECEIVED FROM FOREIGN PERSONS.

       ``(a) In General.--If the value of the aggregate foreign 
     gifts received by a United States person (other than an 
     organization described in section 501(c) and exempt from tax 
     under section 501(a)) during any taxable year exceeds 
     $10,000, such United States person shall furnish (at such 
     time and in such manner as the Secretary shall prescribe) 
     such information as the Secretary may prescribe regarding 
     each foreign gift received during such year.
       ``(b) Foreign Gift.--For purposes of this section, the term 
     `foreign gift' means any amount received from a person other 
     than a United States person which the recipient treats as a 
     gift or bequest. Such term shall not include any qualified 
     transfer (within the meaning of section 2503(e)(2)).
       ``(c) Penalty for Failure To File Information.--
       ``(1) In general.--If a United States person fails to 
     furnish the information required by subsection (a) with 
     respect to any foreign gift within the time prescribed 
     therefor (including extensions)--
       ``(A) the tax consequences of the receipt of such gift 
     shall be determined by the Secretary in the Secretary's sole 
     discretion from the Secretary's own knowledge or from such 
     information as the Secretary may obtain through testimony or 
     otherwise, and
       ``(B) such United States person shall pay (upon notice and 
     demand by the Secretary and in the same manner as tax) an 
     amount equal to 5 percent of the amount of such foreign gift 
     for each month for which the failure continues (not to exceed 
     25 percent of such amount in the aggregate).
       ``(2) Reasonable cause exception.--Paragraph (1) shall not 
     apply to any failure to report a foreign gift if the United 
     States person shows that the failure is due to reasonable 
     cause and not due to willful neglect.
       ``(d) Cost-of-Living Adjustment.--In the case of any 
     taxable year beginning after December 31, 1996, the $10,000 
     amount under subsection (a) shall be increased by an amount 
     equal to the product of such amount and the cost-of-living 
     adjustment for such taxable year under section 1(f)(3), 
     except that subparagraph (B) thereof shall be applied by 
     substituting `1995' for `1992'.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''.
       ``(b) Clerical Amendment.--The table of sections for such 
     subpart is amended by inserting after the item relating to 
     section 6039F the following new item:

``Sec. 6039G. Notice of large gifts received from foreign persons.''.

       ``(c) Effective Date.--The amendments made by this section 
     shall apply to amounts received after the date of the 
     enactment of this Act in taxable years ending after such 
     date.

     SEC. 225. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS 
                   WHICH ARE NOT GRANTOR TRUSTS.

       ``(a) Modification of Interest Charge on Accumulation 
     Distributions.--Subsection (a) of section 668 (relating to 
     interest charge on accumulation distributions from foreign 
     trusts) is amended to read as follows:
       ``(a) General Rule.--For purposes of the tax determined 
     under section 667(a)--
       ``(1) Interest determined using underpayment rates.--The 
     interest charge determined under this section with respect to 
     any distribution is the amount of interest which would be 
     determined on the partial tax computed under section 667(b) 
     for the period described in paragraph (2) using the rates and 
     the method under section 6621 applicable to underpayments of 
     tax.
       ``(2) Period.--For purposes of paragraph (1), the period 
     described in this paragraph is the period which begins on the 
     date which is the applicable number of years before the date 
     of the distribution and which ends on the date of the 
     distribution.
       ``(3) Applicable number of years.--For purposes of 
     paragraph (2)--
       ``(A) In general.--The applicable number of years with 
     respect to a distribution is the number determined by 
     dividing--
       ``(i) the sum of the products described in subparagraph (B) 
     with respect to each undistributed income year, by
       ``(ii) the aggregate undistributed net income.

     The quotient determined under the preceding sentence shall be 
     rounded under procedures prescribed by the Secretary.
       ``(B) Product described.--For purposes of subparagraph (A), 
     the product described in this subparagraph with respect to 
     any undistributed income year is the product of--
       ``(i) the undistributed net income for such year, and
       ``(ii) the sum of the number of taxable years between such 
     year and the taxable year of the distribution (counting in 
     each case the undistributed income year but not counting the 
     taxable year of the distribution).
       ``(4) Undistributed income year.--For purposes of this 
     subsection, the term `undistributed income year' means any 
     prior taxable year of the trust for which there is 
     undistributed net income, other than a taxable year during 
     all of which the beneficiary receiving the distribution was 
     not a citizen or resident of the United States.
       ``(5) Determination of undistributed net income.--
     Notwithstanding section 666, for purposes of this subsection, 
     an accumulation distribution from the trust shall be treated 
     as reducing proportionately the undistributed net income for 
     undistributed income years.
       ``(6) Periods before 1996.--Interest for the portion of the 
     period described in paragraph (2) which occurs before January 
     1, 1996, shall be determined--
       ``(A) by using an interest rate of 6 percent, and
       ``(B) without compounding until January 1, 1996.''.

[[Page H3125]]

       (b) Abusive Transactions.--Section 643(a) is amended by 
     inserting after paragraph (6) the following new paragraph:
       ``(7) Abusive transactions.--The Secretary shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of this part, including regulations to 
     prevent avoidance of such purposes.''.
       (c) Treatment of Loans From Trusts.--
       (1) In general.--Section 643 (relating to definitions 
     applicable to subparts A, B, C, and D) is amended by adding 
     at the end the following new subsection:
       ``(i) Loans From Foreign Trusts.--For purposes of subparts 
     B, C, and D--
       ``(1) General rule.--Except as provided in regulations, if 
     a foreign trust makes a loan of cash or marketable securities 
     directly or indirectly to--
       ``(A) any grantor or beneficiary of such trust who is a 
     United States person, or
       ``(B) any United States person not described in 
     subparagraph (A) who is related to such grantor or 
     beneficiary,

     the amount of such loan shall be treated as a distribution by 
     such trust to such grantor or beneficiary (as the case may 
     be).
       ``(2) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Cash.--The term `cash' includes foreign currencies 
     and cash equivalents.
       ``(B) Related person.--
       ``(i) In general.--A person is related to another person if 
     the relationship between such persons would result in a 
     disallowance of losses under section 267 or 707(b). In 
     applying section 267 for purposes of the preceding sentence, 
     section 267(c)(4) shall be applied as if the family of an 
     individual includes the spouses of the members of the family.
       ``(ii) Allocation.--If any person described in paragraph 
     (1)(B) is related to more than one person, the grantor or 
     beneficiary to whom the treatment under this subsection 
     applies shall be determined under regulations prescribed by 
     the Secretary.
       ``(C) Exclusion of tax-exempts.--The term `United States 
     person' does not include any entity exempt from tax under 
     this chapter.
       ``(D) Trust not treated as simple trust.--Any trust which 
     is treated under this subsection as making a distribution 
     shall be treated as not described in section 651.
       ``(3) Subsequent transactions regarding loan principal.--If 
     any loan is taken into account under paragraph (1), any 
     subsequent transaction between the trust and the original 
     borrower regarding the principal of the loan (by way of 
     complete or partial repayment, satisfaction, cancellation, 
     discharge, or otherwise) shall be disregarded for purposes of 
     this title.''
       (2) Technical amendment.--Paragraph (8) of section 7872(f) 
     is amended by inserting ``, 643(i).'' before ``or 1274'' each 
     place it appears.
       (d) Effective Dates.--
       (1) Interest charge.--The amendment made by subsection (a) 
     shall apply to distributions after the date of the enactment 
     of this Act.
       (2) Abusive transactions.--The amendment made by subsection 
     (b) shall take effect on the date of the enactment of this 
     Act.
       (3) Loans from trusts.--The amendment made by subsection 
     (c) shall apply to loans of cash or marketable securities 
     after September 19, 1995.

     SEC. 226. RESIDENCE OF ESTATES AND TRUSTS, ETC.

       (a) Treatment as United States Person.--
       (1) In general.--Paragraph (30) of section 7701(a) is 
     amended by striking subparagraph (D) and by inserting after 
     subparagraph (C) the following:
       ``(D) any estate or trust if--
       ``(i) a court within the United States is able to exercise 
     primary supervision over the administration of the estate or 
     trust, and
       ``(ii) in the case of a trust, one or more United States 
     fiduciaries have the authority to control all substantial 
     decisions of the trust.''.
       (2) Conforming amendment.--Paragraph (31) of section 
     7701(a) is amended to read as follows:
       ``(31) Foreign estate or trust.--The term `foreign estate' 
     or `foreign trust' means any estate or trust other than an 
     estate or trust described in section 7701(a)(30)(D).''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply--
       (A) to taxable years beginning after December 31, 1996, or
       (B) at the election of the trustee of a trust, to taxable 
     years ending after the date of the enactment of this Act.

     Such an election, once made, shall be irrevocable.
       (b) Dometic Trusts Which Become Foreign Trusts.--
       (1) In general.--Section 1491 (relating to imposition of 
     tax on transfers to avoid income tax) is amended by adding at 
     the end the following new flush sentence:

     ``If a trust which is not a foreign trust becomes a foreign 
     trust, such trust shall be treated for purposes of this 
     section as having transferred, immediately before becoming a 
     foreign trust, all of its assets to a foreign trust.''.
       (2) Penalty.--Section 1494 is amended by adding at the end 
     the following new subsection:
       ``(c) Penalty.--In the case of any failure to file a return 
     required by the Secretary with respect to any transfer 
     described in section 1491 with respect to a trust, the person 
     required to file such return shall be liable for the 
     penalties provided in section 6677 in the same manner as if 
     such failure were a failure to file a return under section 
     6048(a).''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.

    CHAPTER 3--REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT SAVINGS 
                              ASSOCIATIONS

     SEC. 231. REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT 
                   SAVINGS ASSOCIATIONS.

       (a) In General.--Section 593 (relating to reserves for 
     losses on loans) is amended by adding at the end the 
     following new subsections:
       ``(f) Termination of Reserve Method.--Subsections (a), (b), 
     (c), and (d) shall not apply to any taxable year beginning 
     after December 31, 1995.
       ``(g) 6-Year Spread of Adjustments.--
       ``(1) In general.--In the case of any taxpayer who is 
     required by reason of subsection (f) to change its method of 
     computing reserves for bad debts--
       ``(A) such change shall be treated as a change in a method 
     of accounting,
       ``(B) such change shall be treated as initiated by the 
     taxpayer and as having been made with the consent of the 
     Secretary, and
       ``(C) the net amount of the adjustments required to be 
     taken into account by the taxpayer under section 481(a)--
       ``(i) shall be determined by taking into account only 
     applicable excess reserves, and
       ``(ii) as so determined, shall be taken into account 
     ratably over the 6-taxable year period beginning with the 
     first taxable year beginning after December 31, 1995.
       ``(2) Applicable excess reserves.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `applicable excess reserves' means the excess (if any) of--
       ``(i) the balance of the reserves described in subsection 
     (c)(1) (other than the supplemental reserve) as of the close 
     of the taxpayer's last taxable year beginning before December 
     31, 1995, over
       ``(ii) the lesser of--
       ``(I) the balance of such reserves as of the close of the 
     taxpayer's last taxable year beginning before January 1, 
     1988, or
       ``(II) the balance of the reserves described in subclause 
     (I), reduced in the same manner as under section 
     585(b)(2)(B)(ii) on the basis of the taxable years described 
     in clause (i) and this clause.
       ``(B) Special rule for thrifts which become small banks.--
     In the case of a bank (as defined in section 581) which was 
     not a large bank (as defined in section 585(c)(2)) for its 
     first taxable year beginning after December 31, 1995--
       ``(i) the balance taken into account under subparagraph 
     (A)(ii) shall not be less than the amount which would be the 
     balance of such reserves as of the close of its last taxable 
     year beginning before such date if the additions to such 
     reserves for all taxable years had been determined under 
     section 585(b)(2)(A), and
       ``(ii) the opening balance of the reserve for bad debts as 
     of the beginning of such first taxable year shall be the 
     balance taken into account under subparagraph (A)(ii) 
     (determined after the application of clause (i) of this 
     subparagraph).

     The preceding sentence shall not apply for purposes of 
     paragraphs (5) and (6) or subsection (e)(1).
       ``(3) Recapture of pre-1988 reserves where taxpayer ceases 
     to be bank.--If, during any taxable year beginning after 
     December 31, 1995, a taxpayer to which paragraph (1) applied 
     is not a bank (as defined in section 581), paragraph (1) 
     shall apply to the reserves described in paragraph (2)(A)(ii) 
     and the supplemental reserve: except that such reserves shall 
     be taken into account ratably over the 6-taxable year period 
     beginning with such taxable year.
       ``(4) Suspension of recapture if residential loan 
     requirement met.--
       ``(A) In general.-- In the case of a bank which meets the 
     residential loan requirement of subparagraph (B) for the 
     first taxable year beginning after December 31, 1995, or for 
     the following taxable year--
       ``(i) no adjustment shall be taken into account under 
     paragraph (1) for such taxable year, and
       ``(ii) such taxable year shall be disregarded in 
     determining--
       ``(I) whether any other taxable year is a taxable year for 
     which an adjustment is required to be taken into account 
     under paragraph (1), and
       ``(II) the amount of such adjustment.
       ``(B) Residential loan requirement.--A taxpayer meets the 
     residential loan requirement of this subparagraph for any 
     taxable year if the principal amount of the residential loans 
     made by the taxpayer during such year is not less than the 
     base amount for such year.
       ``(C) Residential loan.--For purposes of this paragraph, 
     the term `residential loan' means any loan described in 
     clause (v) of section 7701(a)(19)(C) but only if such loan is 
     incurred in acquiring, constructing, or improving the 
     property described in such clause.
       ``(D) Base amount.--For purposes of subparagraph (B), the 
     base amount is the average of the principal amounts of the 
     residential loans made by the taxpayer during the 6 most 
     recent taxable years beginning on or before December 31, 
     1995. At the election of the taxpayer who made such loans 
     during each of such 6 taxable years, the preceding sentence 
     shall be applied without regard to

[[Page H3126]]

     the taxable year in which such principal amount was the 
     highest and the taxable year in such principal amount was the 
     lowest. Such an election may be made only for the first 
     taxable year beginning after such date, and, if made for such 
     taxable year, shall apply to the succeeding taxable year 
     unless revoked with the consent of the Secretary.
       ``(E) Controlled groups.--In the case of a taxpayer which 
     is a member of any controlled group of corporations described 
     in section 1563(a)(1), subparagraph (B) shall be applied with 
     respect to such group.
       ``(5) Continued application of fresh start under section 
     585 transitional rules.--In the case of a taxpayer to which 
     paragraph (1) applied and which was not a large bank (as 
     defined in section 585(c)(2)) for its first taxable year 
     beginning after December 31, 1995.
       ``(A) In general.--For purposes of determining the net 
     amount of adjustments referred to in section 
     585(c)(3)(A)(iii), there shall be taken into account only the 
     excess (if any) of the reserve for bad debts as of the close 
     of the last taxable year before the disqualification year 
     over the balance taken into account by such taxpayer under 
     paragraph (2)(A)(ii) of this subsection.
       ``(B) Treatment under elective cutoff method.--For purposes 
     of applying section 585(c)(4)--
       ``(i) the balance of the reserve taken into account under 
     subparagraph (B) thereof shall be reduced by the balance 
     taken into account by such taxpayer under paragraph 
     (2)(A)(ii) of this subsection, and
       ``(ii) no amount shall be includable in gross income by 
     reason of such reduction.
       ``(6) Suspended reserve included as section 381(c) items.--
     The balance taken into account by a taxpayer under paragraph 
     (2)(A)(ii) of this subsection and the supplemental reserve 
     shall be treated as items described in section 381(c).
       ``(7) Conversions to credit unions.--In the case of a 
     taxpayer to which paragraph (1) applied which becomes a 
     credit union described in section 501(c) and exempt from 
     taxation under section 501(a)--
       ``(A) any amount required to be included in the gross 
     income of the credit union by reason of this subsection shall 
     be treated as derived from an unrelated trade or business (as 
     defined in section 513), and
       ``(B) for purposes of paragraph (3), the credit union shall 
     not be treated as if it were a bank.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out this subsection 
     and subsection (e), including regulations providing for the 
     application of such subsections in the case of acquisitions, 
     mergers, spinoffs, and other reorganizations.''
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 50 is amended by adding at 
     the end the following new sentence:

     ``Paragraphs (1)(A), (2)(A), and (4) of the section 46(e) 
     referred to in paragraph (1) of this subsection shall not 
     apply to any taxable year beginning after December 31, 
     1995.''
       (2) Subsection (e) of section 52 is amended by striking 
     paragraph (1) and by redesignating paragraph (2) and (3) as 
     paragraphs (1) and (2), respectively.
       (3) Subsection (a) of section 57 is amended by striking 
     paragraph (4).
       (4) Section 246 is amended by striking subsection (f).
       (5) Clause (i) of section 291(e)(1)(B) is amended by 
     striking ``or to which section 593 applies''.
       (6) Subparagraph (A) of section 585(a)(2) is amended by 
     striking ``other than an organization to which section 593 
     applies''.
       (7)(A) The material preceding subparagraph (A) of section 
     593(e)(1) is amended by striking ``by a domestic building and 
     loan association or an institution that is treated as a 
     mutual savings bank under section 591(b)'' and inserting ``by 
     a taxpayer having a balance described in subsection 
     (g)(2)(A)(ii)''.
       (B) Subparagraph (B) of section 593(e)(1) is amended to 
     read as follows:
       (B) then out of the balance taken into account under 
     subsection (g)(2)(A)(ii) (properly adjusted for amounts 
     charged against such reserves for taxable years beginning 
     after December 31, 1987).''.
       (C) Paragraph (1) of section 593(e) is amended by adding at 
     the end the following new sentence: ``This paragraph shall 
     not apply to any distribution of all of the stock of a bank 
     (as defined in section 581 to another corporation if, 
     immediately after the distribution, such bank and such other 
     corporation are members of the same affiliated group (as 
     defined in section 1504) and the provisions of section 5(e) 
     of the Federal Deposit Insurance Act (as in effect on 
     December 31, 1995) or similar provisions are in effect.''.
       (8) Section 595 is hereby repealed.
       (9) Section 596 is hereby repealed.
       (10) Subsection (a) of section 860E is amended--
       (A) by striking ``Except as provided in paragraph (2), 
     the'' in paragraph (1) and inserting ``The''.
       (B) by striking paragraphs (2) and (4) and redesignating 
     paragraphs (3) and (5) as paragraphs (2) and (3), 
     respectively, and
       (C) by striking in paragraph (2) (as so redesignated) all 
     that follows ``subsection'' and inserting a period.
       (11) Paragraph (3) of section 992(d) is amended by striking 
     ``or 593''.
       (12) Section 1038 is amended by striking subsection (f).
       (13) Clause (ii) of section 1042(c)(4)(B) is amended by 
     striking ``or 593''.
       (14) Subsection (c) of section 1277 is amended by striking 
     ``or to which section 593 applies''.
       (15) Subparagraph (B) of section 1361(b)(2) is amended by 
     striking ``or to which section 593 applies''.
       (16) The table of sections for part II of subchapter H of 
     chapter 1 is amended by striking the items relating to 
     sections 595 and 596.
       (c) Effective Dates.--
       (1) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall apply 
     to taxable years beginning after December 31, 1995.
       (2) Subsection  (b)(7).--The amendments made by subsection 
     (b)(7) shall not apply to any distribution with respect to 
     preferred stock if--
       (A) such stock is outstanding at all times after October 
     31, 1995, and before the distribution, and
       (B) such distribution is made before the date which is 1 
     year after the date of the enactment of this Act (or, in the 
     case of stock which may be redeemed, if later, the date which 
     is 30 days after the earliest date that such stock may be 
     redeemed).
       (3) Subsection   (b)(8).--The amendment made by subsection 
     (b)(8) shall apply to property acquired in taxable years 
     beginning after December 31, 1995.
       (4) Subsection  (b)(10).--The amendments made by subsection 
     (b)(10) shall not apply to any residual interest held by a 
     taxpayer if such interest has been held by such taxpayer at 
     all times after October 31, 1995.
  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Michigan [Mr. Dingell] and a Member opposed will each control 30 
minutes.
  The Chair recognizes the gentleman from Michigan [Mr. Dingell].


                         parliamentary inquiry

  Mr. DINGELL. Mr. Speaker, I have a parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state it.
  Mr. DINGELL. Mr. Speaker, I believe I will have the right to close 
under this as the author of the amendment?
  The SPEAKER pro tempore. Who seeks control in opposition?
  Mr. THOMAS. Mr. Speaker, I seek to control the time in opposition.
  The SPEAKER pro tempore. The Chair would state that because the 
gentleman from California [Mr. Thomas] is a member of the Committee on 
Ways and Means, the gentleman from California would have the right to 
close.
  Mr. DINGELL. Mr. Speaker, further parliamentary inquiry. Is it not 
the rule that the author of the amendment has the right to close?
  The SPEAKER pro tempore. The manager of the bill has the right to 
close, and the Committee on Ways and Means is the reporting committee 
on the pending bill.
  Mr. DINGELL. That is a rather extraordinary ruling.


                         parliamentary inquiry

  Mr. THOMAS. Mr. Speaker, I have a parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman will state it.
  Mr. THOMAS. Mr. Speaker, is it rather unusual for the committee that 
offers the bill on which a Member offers a substitute to the committee 
bill not to close? Is that a rather unusual ruling, or is that the 
ordinary rule around this place and has been for years?
  The SPEAKER pro tempore. The Chair indicated that the representative 
of the managing committee would have the right to close.
  The Chair recognizes the gentleman from Michigan [Mr. Dingell].
  Mr. DINGELL. Mr. Speaker, I yield 4 minutes to the distinguished 
gentleman from Texas [Mr. Bentsen], a coauthor of the amendment.
  (Mr. BENTSEN asked and was given permission to revise and extend his 
remarks.)
  Mr. BENTSEN. Mr. Speaker, I thank the gentleman from Michigan for 
yielding me time.
  Mr. Speaker, I am pleased to join with my distinguished colleagues, 
Mr. Dingell and Mr. Spratt, in offering this substitute.
  Mr. Speaker, earlier today, my wife called to tell me that our 2-
year-old daughter Meredith had gotten hold of her sister's cough 
medicine. The doctor ordered her to the hospital and my wife rushed her 
to the emergency room. As I drove to meet her, I was concerned about my 
daughter, but I didn't worry about the bill. We in Congress have health 
insurance. Fortunately, Meredith is OK, and we need not worry about how 
we pay.
  That's not the case for the young woman I recently met in my district 
who could not purchase health insurance because here daughter had a 
heart

[[Page H3127]]

condition. Her husband earns too much to be on Medicaid, nor does she 
want to receive such assistance. She only wants the right to buy health 
insurance, but her daughter's preexisting heart condition precludes 
that. The Bentsen-Spratt-Dingell substitute would prohibit 
discrimination based on such preexisting conditions and ensure that 
this family could finally provide health care for their child without 
falling into poverty.
  Today, this House has the opportunity to pass simple, straightforward 
steps that will help millions of Americans like this Channelview, TX, 
family. If we focus on reforms that have broad, bipartisan support, and 
put aside for now those proposals that divide us, as this substitute 
does, we can begin to address the health care fears that weigh ever 
heavier on the minds of families across this country.
  I urge my colleagues to keep in mind the people we are trying to 
help. Let us remember the 40 million Americans who are without health 
insurance today, including 4.6 million people in my home State of 
Texas. That is 1 million more Americans without insurance than when 
Congress last debated health care 2 years ago. Millions more face 
becoming uninsured if they lose or change jobs, and others are locked 
in jobs they do not want because they or a family member have a 
preexisting condition.
  These are the people we must remember as we debate this issue today. 
That young mother in Channelview needs our help now. She and millions 
of other Americans do not have the luxury of waiting as we spend 
months, even years, debating the controversial, untested provisions, 
such as Medical Savings Accounts, that are in the bill before us. These 
provisions may even have merit. But they should not be allowed to hold 
up or kill the commonsense, bipartisan, noncontroversial reforms in our 
substitute. The American people deserve what we in Congress have, and 
our substitute provides that.
  This substitute tracks the bipartisan Health Insurance Reform Act of 
1996 as introduced in the other body by Senators Nancy Kassebaum and 
Edward Kennedy and as filed in the House by our Republican colleague, 
Marge Roukema. I want to congratulate my colleague from New Jersey for 
her leadership on this issue and urge her and others on her side of the 
aisle to join us in supporting this substitute.
  This substitute ends insurance discrimination against people with 
preexisting health conditions. It guarantees people access to group or 
individual coverage if they change jobs, lose jobs, or get sick. It 
helps small businesses to join together and purchase more affordable 
coverage.
  Our substitute makes one major addition to the Roukema bill. It 
phases in an increase from 30 to 80 percent the amount that self-
employed individuals can deduct from their taxes for the cost of health 
insurance, affording the same treatment to the self-employed as we do 
to corporations.
  Altogether, these reforms will help 28 million Americans to buy and 
keep health insurance.
  Mr. Speaker, I want to underscore the broad consensus for these 
reforms. Most of us in this body from both sides of the aisle support 
them. The President supports them. More than 135 organizations 
representing business, workers, and health care providers support them. 
These include the American Medical Association, the American Hospital 
Association, the AFL-CIO, the Independent Insurance Agents, and the 
National Association of Manufacturers.
  We need to remember the lessons learned from Congresses past 
regarding health care reform. A comprehensive, complicated reform bill 
is too controversial and cannot be enacted in whole. Instead we should 
pass this consensus bill of incremental reforms that will bring 
immediate help to millions of Americans.

  But the addition of controversial provisions isn't the only reason we 
should pass this substitute. The Republican bill also has weaker 
portability provisions than the substitute and weakens important 
consumer protections.
  The Republican bill weakens the portability provision by limiting 
group to individual transfer to a single plan. This will ensure that 
high risk individuals are pooled together and forced to pay exorbitant 
premiums.
  The Republican plan also would limit the number of businesses that 
could benefit from this plan. The Republican plan only guarantees 
first-time issuance of insurance for businesses employing between 2 and 
50 people. All businesses with more than 51 employees would not be 
protected.
  This bill also would create a new class of insurance with lower 
capital and solvency requirements, thus increasing risk to the small 
businesses that purchase from these new plans. It would contradict the 
McCarran-Ferguson Act, creating federally regulated insurance using 
lower standards. And it provides a huge loophole for New York and New 
Jersey, but not the other 48 States.
  Finally, the Republican plan would weaken consumer protection laws by 
eliminating regulations that prohibit the sale of duplicative health 
insurance policies to senior citizens. Under the bill, insurance 
companies would be permitted to sell policies that duplicate Medicare 
benefits and then collect premiums from seniors who already are covered 
under Medicare. They would pay twice. These plans are currently 
prohibited and I am concerned that many seniors will not be aware of 
the risks associated with purchasing such plans.
  Mr. Speaker, this is a fairly easy vote. We can vote to increase the 
economic security of hundreds of millions of Americans who are 
currently covered by private insurance by passing this amendment and 
end once and for all insurance discrimination against: people with a 
preexisting medical condition; people who lose their job but still need 
health insurance; and small businesses of any size that want to buy 
safe, sound, and affordable health insurance for their employees.
  It is a market-based plan that the American people support, that 
addresses their real concerns, and that can become a reality tomorrow. 
The Republican bill fails this test and will take years to even come 
close to becoming law. My colleagues, tonight let's forget we are 
Democrats and Republicans for one shining moment of compromise. Let us 
put victory for the American people and their health security ahead of 
political victory. Let's do right by the American people and pass the 
Bentsen-Spratt-Dingell substitute.
  Mr. THOMAS. Mr. Speaker, I yield 15 minutes to the gentleman from 
Virginia [Mr. Bliley], the chairman of the Committee on Commerce, and 
ask unanimous consent that he be allowed to allocate said time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.
  Mr. THOMAS. Mr. Speaker, I yield myself 4 minutes.
  Mr. Speaker, the special rule for coordination of long-term care 
policies has been misinterpreted by some in the administration. I want 
to clarify that this rule applies to policies that provide health care 
benefits only for long-term care and similar benefits, such as 
community-based care, and would not apply to a policy that covers other 
health care benefits.
  Mr. Speaker, we have been hearing for some time that all the 
Democrats want is Kassebaum. The gentleman from New York said ``Let's 
have `pure' Kassebaum.''
  Let me tell you, what you have in front of you is not pure Kassebaum. 
As you might expect, the Democrats have changed the bill. They have 
told you they have only added things to it. They said, ``We just wanted 
to help the self-employed more than the Republicans.''
  You left the self-employed stranded for a whole year in 1994 when you 
were in the majority. Nice to have you come around and have you helping 
the self-employed.
  If this is supposed to be pure Kassebaum, why don't you include the 
items on page 105? Title III, miscellaneous provisions. ``HMO's allowed 
to offer plans with deductibles to individuals with medical savings 
accounts.''
  Kassebaum includes medical savings accounts and the ability to apply 
to an HMO to receive benefits while you have a medical savings account. 
You conveniently left that out. If you want pure Kassebaum, you would 
have MSA's in the bill.
  On page 106, Sense of the Senate. ``It is the sense of the Senate 
that the Congress should take measures to further the purposes of this 
act, including any necessary changes to the Internal Revenue Code of 
1986 to encourage groups and individuals to obtain health coverage and 
to promote access, equity, portability, affordability, and security of 
health benefits.'' That is exactly what the Committee on Ways and Means 
has done.
  The Senate committee cried out in the Kassebaum bill, ``We don't have 
jurisdiction over the Tax Code, but if we

[[Page H3128]]

did, these are the kinds of things that we would do.'' And what they 
asked for, we have included in our bill.
  Only one committee has looked at the Kassebaum bill in the Senate. It 
is not on the floor of the Senate. They did not have jurisdiction over 
the revenue code. Four committees in the House looked at our bill, and 
given our distinct and unique jurisdictions, we contributed to and 
improved to this bill. We did exactly what Senator Kassebaum asked us 
to do. We added items that provided and promoted access, equity, 
portability, affordability and security of health benefits.
  Guess what you left in the bill? Notwithstanding all of the 
protestations on the floor about the Democrats in terms of States 
rights, and, after all, the Republicans are going to usurp the States 
rights, and, after all, the Republicans are going to usurp the States 
rights, take a look at page 91 in the Kassebaum bill.
  It says under subtitle D(b), certification, number 2, State refusal 
to certify. It says, ``If a state fails to implement a program for a 
certifying health plan purchasing cooperative in accordance with the 
standards under this act, the secretary shall certify and oversee 
operations of such cooperative's Federal preemption.''
  Notwithstanding all of your crocodile tears, about ``pure'' 
Kassebaum, the Feds have a role in play in your substitution.
  I would tell my Republican colleagues, beware: This is not Kansas. 
This bill is not from Dorothy. It isn't even from Toto. It has been 
written and comes from the Land of Oz.

                              {time}  2100

  Mr. BLILEY. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
New Jersey [Mrs. Roukema].
  (Mrs. ROUKEMA asked and was given permission to revise and extend her 
remarks.)
  Mrs. ROUKEMA. Mr. Speaker, I thank the gentleman from Michigan [Mr. 
Dingell] for yielding me time to express my strong support for his 
substitute to H.R. 3103, an omnibus package of health reform proposals.
  The Dingell amendment is comprised, essentially, of two items: the 
so-called Kassebaum-Kennedy-Roukema health insurance reform package and 
a proposal to allow self-employed individuals to deduct 80 percent of 
their health insurance premiums, rather than the 30 percent current law 
allows for.
  The difference between this package and H.R. 3103 is this simple: If 
the House approves the Dingell plan it can be quickly passed by the 
Senate and signed into law by President Clinton immediately. This will 
immediately deliver insurance portability; eliminate job lock and give 
guaranteed insurance to 30 million Americans who presently do not 
qualify.
  H.R. 3103, as brought to the House floor today, cannot.
  The Republican leadership's package, which contains several very 
controversial elements, faces a guaranteed Senate filibuster, or, if it 
were to ever get that far, a certain veto at the White House.
  If you want to vote in support of health insurance reform legislation 
that will make a real difference in the daily lives of millions of 
Americans this year, support the Dingell alternative.
  Anything else won't survive the legislative process, and is simply a 
political exercise rather than an attempt to enact commonsense, 
bipartisan health reforms.
  I am very proud to be the House author of the companion bill to the 
Kassebaum-Kennedy measure, H.R. 2893--which currently has 193 
cosponsors--17 Republicans and 176 Democrats--which encompasses 
precisely the kind of incremental health reforms that the Republicans 
so strongly advocated in 1993-94 when the 103d Congress was debating 
President Clinton's massive health care reform plan.
  This modest package of insurance reforms would simply make health 
insurance plans portable for workers leaving one job for another; 
restrict the ability of insurance carriers to impose pre-existing 
condition limitations in their policies; and allow small employers to 
pool together to purchase health benefits for their workers.
  A very strong and broad coalition has endorsed the Kassebaum-Roukema 
legislation including: The National Governors Association; the American 
Medical Association; the American Hospital Association; the National 
Association of Manufacturers; the Business Roundtable, and the AFL-
CIO--on the Senate side, the U.S. Chamber of Commerce has endorsed the 
Kassebaum-Kennedy package, too; the Healthcare Leadership Council, and 
the Independent Insurance Agents Association; and the ERISA Industry 
Committee [ERIC], and the American Association of Retired Persons 
[AARP] are just a few of the more prominent supporters of the 
Kassebaum-Kennedy-Roukema legislation.
  I might add that, during his State of the Union speech 2 months ago, 
President Clinton endorsed this bill, and has repeatedly stated that he 
is prepared to sign this legislation if we can just move it through the 
Congress this year.

  Some of the reforms in H.R. 3103--such as medical malpractice 
reforms--I have supported in the past, and will continue to support in 
the future as freestanding measures.
  However, we must acknowledge that these issues raise significant 
policy questions.
  Reforms such as medical malpractice and medical savings accounts 
should be debated by the Congress on an individual, case-by-case basis, 
particularly given the level of controversy that these proposals raise 
in both parties of the House and Senate.
  In addition, it is highly unlikely that, given the limited number of 
legislative days in our session this year, that the Senate would ever 
be able to pass such a controversial and omnibus package of health 
reforms.
  In fact, prominent Republican Senators have repeatedly and publicly 
stated their opposition to such an omnibus bill, as recently as a day 
or 2 ago.
  It's time for the Congress to stop playing these games--the American 
people are sick and tired of bickering and political gamesmanship.
  We must immediately enact common-sense, incremental health insurance 
reforms.
  The General Accounting Office [GAO] has estimated that up to 30 
million American citizens would benefit from the health insurance 
reforms incorporated in the Kassebaum-Roukema plan.
  Let's not permit such a golden opportunity to help so many people 
slip through our collective fingers because of partisan politics.
  In closing, Mr. Speaker, I urge my colleagues to join me in support 
of the Dingell substitute to H.R. 3103, because it's the right thing to 
do for the American people now.
  Mr. BLILEY. Mr. Speaker, I yield myself such time as I may consume.
  (Mr. BLILEY asked and was given permission to revise and extend his 
remarks.)
  Mr. BLILEY. Mr. Speaker, first of all, with all due respect to my 
good friend and colleague from new Jersey [Mrs. Roukema], we had a 
bipartisan plan in the last Congress authored by my good friend from 
Florida, the chairman now of our Subcommittee on Health and Environment 
of the Committee on Commerce, and the gentleman from Georgia who is no 
longer with us, Dr. Roy Rowland. I sat right over there on this night 2 
years ago with then the chairman of my committee, and I said, you 
cannot move this massive socialized medicine bill of the President's. 
We have a good bipartisan bill and we ought to take it up. It was not 
enough for him.
  Mr. Speaker, but now all of a sudden, this bill, which is more modest 
than the Bilirakis-Rowland bill, is too much. I find that rather 
ironic.
  Mr. Speaker, I rise in strong opposition to the substitute. While it 
is a well-intentioned proposal, it simply falls short of the mark of 
ensuring that health insurance is both available and affordable.
  Our bill is focused on the real problems people encounter in 
obtaining health insurance in the small business market. Small 
employers who are trying to provide their employees and their families 
with adequate coverage will not be helped by this substitute. They will 
not be able to purchase affordable health insurance coverage.
  In addition, a recent letter from the National Association of 
Independent

[[Page H3129]]

Businesses points out that big business is in the position of 
purchasing health insurance under a different set of rules than small 
business. Their letter points out that the Health Coverage Availability 
and Affordability Act would stop the unfairness by allowing small firms 
to band together across State lines to purchase health insurance with 
nearly the same exemption from State law that big business has. 
Achieving this is NFIB's highest health reform priority. And I quote 
from their letter: ``Any substitute amendment that does not directly 
address this inequity between big and small business is unacceptable to 
the more than 600,000 members of NFIB.''
  Mr. Speaker, the Democratic substitute does not address this 
inequity. It is all form and no substance. Its pooling provisions 
simply allow the formation of purchasing cooperatives, which can be 
formed under current law. Thus, it falls short of the mark in 
addressing the key concerns of small business in reforming the small 
employer health insurance market.

   Mr. Speaker, I would also like to point out to my colleagues that 
National Right to Life has raised a serious concern about the 
nondiscrimination language in the substitute. The nondiscrimination 
language could be read to apply to the content of a benefits package. 
Thus, the language could be used to require the inclusion of elective 
abortions in all health insurance plans. This problem has not been 
addressed in the substitute and remains an issue for pro-life Members.
  In addition, the Democrat substitute fails to allow for medical 
savings accounts, an option that provides true portability for 
individuals, including the self-employed. It does not encourage the 
purchasing of long-term health insurance coverage, because it does not 
allow expenses for long-term care and long-term care insurance premiums 
to be tax deductible.
   Mr. Speaker, it also fails to address the question of affordability 
because it does nothing to address the increased costs our current 
malpractice laws bring to the health care system.
  Perhaps the substitute's most glaring omission is its failure to 
address the issue of fraud and abuse, which has also contributed to the 
high cost of health insurance coverage. According to the General 
Accounting Office, each year as much as 10 percent of total health care 
costs are lost to fraud and abuse. Given that annual health care costs 
in the United States are now approaching $1 trillion, fraud and abuse 
are costing taxpayers and policyholders large sums of money. Despite 
the enormity of the problem, GAO has concluded that only a small 
fraction of this fraud and abuse is detected. The failure of a health 
reform bill to address this issue is unfortunate.
  The HHS Inspector General in a letter to the ranking member of the 
Committee on Commerce points out that the provisions in the Republican 
bill will help to reduce fraud and abuse. It states:

       Generally speaking, these provisions are excellent . . . 
     The bill contains many improvements to the laws intended to 
     address health care fraud. In our judgment, enactment of the 
     provisions . . . would be very effective in reducing the 
     amount of fraud and abuse in the health care system . . .

  Finally, I feel I must address the constant refrain we have heard 
that somehow Senators Kassebaum and Kennedy's bill, is the gold 
standard and cannot be amended. It is absolutely absurd for us to say 
that a bill cannot be improved. It is also rather naive for us to say 
that a bill that come out of Committee in the Senate will not be 
amended on the floor of that body where there are no germaneness rules 
and anything can be attached to anything.

  Mr. Speaker, do not expect a clean Kassebaum-Kennedy bill to come out 
of the Senate. I assure my colleagues that whatever we do tonight, we 
will be in conference.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 3 minutes to the gentleman from 
South Carolina [Mr. Spratt].
  (Mr. SPRATT asked and was given permission to revise and extend his 
remarks.)
  Mr. SPRATT. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, I rise in strong support of Bentsen-Spratt-Dingell. 
There is a lot on our agenda about which the American people are 
undecided or divided, but clearly they want us to change the way that 
health insurance in this country is written. They want the law to say 
that if they lose their jobs or leave it, they can take their health 
insurance with them; if they have an illness or an injury, they can 
keep their insurance and not be ostracized by carriers as having 
preexisting conditions.
  Mr. Speaker, there is something else the American people want. They 
want an end to partisan bickering. Our substitute goes to both goals. 
It is not just a chance to change health insurance. It is a chance to 
do something bipartisan. We make health insurance portable. We take 
care of people with preexisting conditions, and we do it in a 
bipartisan bill, a clean bill that is unencumbered by pet provisions.
  Mr. Speaker, the differences between the base bill, H.R. 3103, and 
our substitute, which is essentially Kennedy-Kassebaum-Roukema, are 
seemingly small but the differences are potentially insidious.
  First of all, let me just cover a couple. The base bill in our 
substitute says that if you lose your job, you can convert from group 
to individual coverage once your extension under COBRA has expired. But 
in the substitute, we say that when you convert, you have the right to 
pick among the policies that an insurance company offers.
  In the base bill, people lose this flexibility. They have got a 
Hobson's choice. That is because the base bill has been amended to let 
the States restrict individuals to a single policy, and that one policy 
is bound to become the high-risk pool for all the rejects and bad 
risks. That will make the premium cost excessive, probably beyond the 
reach of most people who need it, and we are not giving health 
insurance availability unless we give health insurance affordability.
  There is another provision very deep in this base bill which differs 
from the substitute. Both of us permit small employers to band together 
to purchase insurance, and, banded together, they can broaden their 
risk pool and get better rates. So far, so good. But the base bill goes 
on to exempt multiemployer health plans from State regulations that 
govern other multiemployer health plans and places these under the 
Department of Labor. You got it. The Republicans want to give the 
Federal Government the power to regulate these insurance, self-
insurance plans, and take it away from the State government.
  Here, do not take it from me, listen to what Mr. Gradison, a very 
respected member of this body from the other side of the aisle, now 
head of the Health Insurance Association of America, says about that 
particular provision of the main bill before us. He says,

       We strongly oppose the provision contained in the House 
     leadership bill which we believe will undermine the progress 
     States have made in reforming their small employer insurance 
     markets and leave an unstable health care market in its wake.

  Mr. Speaker, we have a chance to pass a bipartisan bill, to keep this 
bill on track and I urge support for the bill.
  Mr. Speaker, there is much of our agenda about which the people are 
undecided or divided. But clearly they want us to change the way health 
insurance is written. They want the law to say that if they lose their 
job or leave it, they don't have to lose their health insurance--they 
can take it with them. And if they have an illness or injury, they can 
keep their insurance, and not be ostracized by carriers for a 
``preexisting condition.''
  There's something else people want: They want an end to partisan 
bickering.
  Our substitute goes to both goals. It is not just a chance to change 
health insurance, it's a chance to do something bipartisan. We make 
health insurance portable; we take care of people with preexisting 
conditions; and we do it in a bipartisan bill, a clean bill, 
unencumbered by pet provisions and special concessions.
  The differences between the base bill, H.R. 3103, and our substitute, 
which is the Kennedy-Kassebaum-Roukema bill, are seemingly small but 
potentially insidious.
  First of all, both the base bill and our substitute say that if you 
lose your job, you can convert from group to individual coverage once 
your 18-month extension under COBRA has expired. But in the substitute, 
we say that when you convert, you can pick among the policies a company 
offers. In the base bill, you lose this flexibility. That's because the 
base

[[Page H3130]]

bill was amended to let the States restrict individuals to a single 
policy; and that one policy is bound to become the high-risk pool for 
all the rejects and bad risks. This will make the premium cost 
excessive, probably beyond the reach of most who need it. Our 
substitute guarantees individual coverage, but it does not limit that 
guarantee to one insurance policy. The person who converts may still 
have his premium rated, adjusted upward for a preexisting condition; 
but he can also buy into an insurance pool with lots of other people 
who are ordinary, unrated risks. And while this bill gives that no one 
protection against higher premiums, our substitute leaves the States 
the power to regulate premiums, as many already have. And if you are in 
an insurance pool with ordinary risks, the States can limit the rated 
premium you have to pay for your policy, say, to 50 percent of the 
standard premium. But if you end up in a risk pool with all bad risks, 
there is no way to spread the cost and mitigate the premiums.
  Next, the base bill, as well as our substitute, permits small 
employers to band together to purchase insurance. In banding together, 
they can broaden their risk pool and get better rates. But the base 
bill exempts multiemployer health plans from the State regulations that 
govern other multiemployer plans, and places these under the Department 
of Labor. In by-passing State laws, particularly on what constitutes an 
adequately capitalized plan, the base bill, in the words of the Health 
Insurance Association of America, sets up ``a very flimsy safety net 
for employees with self-insured, federally regulated coverage.'' It 
puts the insured in peril of being in an unsound plan and not having 
coverage when it is needed. Our bill respects the competency of the 
States in this field, and leaves multiemployer insurance plans subject 
to State law.

  Next, the base bill includes Medicare fraud and abuse provisions, and 
claims savings back into Medicare to boost the solvency of the Part A 
trust fund. Instead these Medicare funds are used to offset the tax 
revenues lost by allowing MSA's. This comes from the group that for the 
past year has told seniors that deep cuts in Medicare were needed to 
keep the trust fund solvent.
  Next, the base bill raises the tax deduction allowed the self-
employed to 50 percent of the premiums they pay, but reaches that level 
only in year 2003. On this subject, our substitute departs from 
Kennedy-Kassebaum-Roukema; it too increases the tax deduction for the 
self-employed, but we go to 80 percent by the year 2002. I am not 
altogether opposed to MSA's, but I would much rather use the tax 
offsets to cover the revenue losses to pay for a higher rate of 
deductibility. More small business people, more self-employed 
Americans, will benefit from being able to deduct 80 percent of their 
health insurance premiums than will benefit from medical savings 
accounts.
  Finally, the base bill repeals current laws that we put in place to 
regulate the sale of policies that duplicate Medicare coverage. These 
protections were enacted to protect unsuspecting seniors from 
purchasing coverage that they already have under Medicare. The base 
bill opens a loophole that would allow insurers to sell Medicare 
beneficiaries a policy that is not identical to Medicare coverage, say 
offering additional homecare visits, but include a rider in the policy 
that denies payment for any service covered by Medicare.
  Mrs. Roukema tonight, and Senator Kassebaum several days ago, have 
all warned against overloading this bill with extraneous stuff, like 
medical savings accounts and malpractice reform. I am not opposed to 
all those add-ons; I've voted for malpractice reform; but what I favor 
most is moving this bill. It is a shame to bog it down with 
controversial provisions, and a shame to blow this opportunity to do 
something bipartisan for a change.
  Let's keep this bill on track; let's keep it clean and make it 
bipartisan. Vote for the Bentsen-Spratt-Dingell substitute.
  Mr. THOMAS of California. Mr. Speaker, I yield 3 minutes to the 
gentlewoman from Connecticut [Mrs. Johnson], an extremely important 
member of the Committee on Ways and Means and the chairman of the 
Subcommittee on Oversight.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the chairman.
  Mr. Speaker, I rise in strong opposition to the substitute, not 
because it is not an admirable bill. In fact, Senators Kassebaum and 
Kennedy deserve enormous credit for bringing this issue of insurance 
reform to the top of the agenda of both Houses, but our bill is 
literally better. My amendment conformed this bill in many of its 
details to the Kassebaum-Kennedy bill, working with my chairman. Our 
bill actually adds protection, not in the Kassebaum-Kennedy bill, to 
assure that genetic information about an individual cannot be used to 
exclude that person from health coverage. Our bill is far better on 
portability. It is far more generous in its determination of what is 
continuous coverage and what is a break in service because it counts, 
that is gives credit for coverage, time on Medicare, Medicaid, DOD's 
Tricare, the Indian Health Service, the Federal Employees Health 
Benefits programs and State risk pools. Furthermore, our bill gives 
protection that the Kennedy-Kassebaum bill does not give to people 
covered under individual policies to assure that they can get into a 
new policy without discrimination if they move outside the service area 
or if the insurer goes out of business.
  In many of its details, our bill is simply an improved version, a 
stronger bill than the Kennedy-Kassebaum bill. In its breadth it is 
also superior. This Chamber has had before it for 5 years, proposals to 
allow people to deduct the premiums of long-term-care insurance so that 
we can get employers providing long-term-care insurance and we can 
encourage seniors to buy long-term-care insurance so that in the 
future, seniors will not have to spend down to poverty, spend every 
cent they worked for and were able to save, to cover the costs of 
nursing home care.

                              {time}  2115

  That kind of public-private partnership is imperative to providing 
security and dignity to our seniors in their retirement years. This is 
the only bill that has ever brought those long-term-care provisions to 
the floor of the House in a form in which the President would sign the 
bill.
  Furthermore, this bill will allow deduction of long-term home care 
costs. Think for how many seniors that is terribly important. For many, 
it will probably wipe out their entire tax liability.
  So this bill is a thoughtful broadening, an inclusion of a number of 
terribly important health policy solutions that this House at other 
times has supported, that are not that controversial, that the 
President will clearly sign, and ought to be part of a health care 
reform--and part of this Congress' accomplishments.
  So do not yield to the siren song of all we can pass is Kennedy-
Kassebaum. It is simply far too little. It is too narrow a vision. It 
does not answer the needs of the American people.
  Mr. BLILEY. Mr. Speaker, I reserve the balance of my time.
  Mr. BENTSEN. Mr. Speaker, I yield 3 minutes to the gentleman from 
California [Mr. Waxman].
  (Mr. WAXMAN asked and was given permission to revise and extend his 
remarks.)
  Mr. WAXMAN. Mr. Speaker, today employees who have insurance coverage 
where they work fear that if they lose their job or change jobs they 
will not be able to get insurance. If they have a medical problem, they 
worry they will be excluded from coverage permanently or that they will 
have a long waiting period before they can be covered. They face the 
so-called ``job lock'' where they cannot move on to other or better 
jobs because they cannot risk the loss of their health insurance 
coverage, and if they lose their job, their situation is made worse by 
facing the loss of that insurance.
  The substitute before us would change that. It would guarantee them 
access to health insurance coverage. It would assure them that an 
existing health problem would not be a reason to exclude them from 
coverage.
  Now this base bill that we are seeking to amend has provisions that 
are similar to Kennedy-Kassebaum, the Dingell bill, the Roukema bill. 
There really is not a lot of difference between all these provisions. 
There are some differences, but they are minor, and they are 
differences that can be worked out if people sat down and talked them 
through. In fact, I voted for the Kennedy-Kassebaum-Roukema version of 
this legislation when it was in the Committee on Commerce. Everybody 
did. It was a unanimous vote.
  But the Republican proposal before us adds some things that I think 
will make this legislation fail ultimately to become law. They take 
medical savings accounts, which may or may not be a good idea; the 
small employer pooling, which may or may not work. A lot of people fear 
that it will lead to cherry-picking of the least risky people by 
insurance companies. They make medical malpractice changes, which are 
very controversial because some people fear that this will deprive 
injured parties of their full redress. They take

[[Page H3131]]

savings from the Medicare Program because of an antifraud provision, 
and they use those savings to fund the tax breaks for medical savings 
accounts.
  Those are controversial issues. They should not be in a bill that can 
be passed on a bipartisan basis and turned into law.
  There are things I would like us to do, because let us realize what 
we are not addressing is the problem of the 40 million uninsured in 
this country. I do not care what version of the bills we pass today, 
they are not going to be covered after all is said and done.
  I think there are important changes we need in our health care 
system, but if we do not have a consensus to accomplish them, let us do 
what we can and pass the bill that would prevent this job lock and 
assure that people will get insurance if they leave their jobs and take 
another job or want to buy a private insurance policy.
  I would urge support for the substitute. I will not go through the 
denigration of what the other people have to say. What I do say is let 
us pass what we can into law. Let us not lose this chance.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida [Mr. Bilirakis], the chairman of the Health and Environment 
Subcommittee, a pioneer in health care reform, the man who led the 
bipartisan effort in the 103d Congress.
  Mr. BILIRAKIS. I thank the gentleman for yielding the time to me.
  Mr. Speaker, I rise in opposition to this substitute, and yet without 
question I certainly support the goals of the substitute. Both bills 
address insurance portability, eliminate preexisting condition 
prohibitions, end job lock, and both bills address medical savings 
accounts.
  The Kassebaum bill amends the HMO act to allow the offering of high 
deductible MSA's, and it also provides a sense of committee resolution 
to encourage MSA's. But that is where the common elements end. The 
substitute simply falls far short of the mark on true practical health 
care reform.
  Our bill offers more options to the American people. My constituents 
are always asking me, I am sure my colleagues' are, what Congress is 
doing to address fraud and abuse. What is Congress doing to eliminate 
unnecessary paperwork? When will our medical malpractice laws be 
changed? Our bill addresses these important areas.
  In addition, it also extends the medical expenses deduction to long-
term care services which is important to our seniors. A Band-Aid 
solution like the substitute proposes would not address more systematic 
problems which drive up costs and limit access to our health care 
system.
  On health care reform, the American people deserve more than a Band-
Aid. They deserve our best efforts to fix what we can in a system which 
everyone agrees is broken.
  Mr. BENTSEN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from Pennsylvania [Mr. Klink].
  (Mr. KLINK asked and was given permission to revise and extend his 
remarks.)
  Mr. KLINK. Mr. Speaker, I just wanted to talk a little bit about the 
matter that is before us. One of the previous speakers talked about a 
bipartisan effort called Roland-Bilirakis. Mr. Speaker, While I respect 
both of the people greatly who came out with that effort, it did not 
pass this House, it did not have the necessary support, and so we are 
here today trying to figure out what steps we can take to make an 
improvement upon the trillion dollar industry that is health care in 
this Nation.
  Mr. Speaker, I would suggest that Roukema-Kassebaum-Kennedy is that 
modest step. It is that first step that is going to help tens of 
millions of Americans keep their health insurance when they switch 
their jobs, regardless of preexisting health conditions.
  The Republicans, though, in this House are proposing a health 
insurance reform that is not as strong as Roukema-Kassebaum-Kennedy. 
They are adding on what I believe to be special interest amendments and 
paybacks that are going to sabotage the first real attempt we had to be 
able to do a bipartisan step in the right direction for the working 
people of this country.
  Now, we are talking about two editions, that in one instance the CBO 
is saying that the bill's profraud loopholes are going to cost $400 
million. Less revenue coming in, and enforcement of fraud is going to 
suffer. Why should we want to do this?
  The MSA proposal is not going to fly in the Senate, it is not going 
to fly with the President. Why would the Republicans want to doom this 
package by adding these two things to it?
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida [Mr. Shaw].
  Mr. SHAW. Mr. Speaker, I thank the gentleman for yielding this time 
to me.
  Mr. Speaker, tonight I rise to deliver to my congressional colleagues 
a message from the 180,000 Medicare beneficiaries who reside in my 
south Florida district, and that message is simply:
  Stop the fraudulent and abusive practices against the Medicare 
Program, and do it now.
  This substitute ignores the issue of fraud and abuse.
  Mr. Speaker, this body has already voted for the Medicare fraud and 
abuse provisions that are included in this bill when it passed the 
Medicare Preservation Act, and, as we all remember, the Medicare 
Preservation Act was vetoed by President Clinton. Now we have another 
chance to move a step closer to saving the Medicare Program from 
bankruptcy.
  This bill is the toughest and most serious attempt that this Congress 
has made to stop fraud and abuse in the Medicare Program and health 
care generally with the new strong criminal penalties for offenses 
against the American people. I am proud to have contributed to this 
effort, and I know that when my constituents learn of their new rights 
under the Medicare Program, they will be proud of this Congress, too.
  Let us pass this bill and save Medicare millions of dollars and save 
all the American taxpayers billions of dollars in reducing fraud and 
abuse.
  Mr. BENTSEN. Mr. Speaker, I yield 1 minute to the gentlewoman from 
California [Ms. Roybal-Allard].
  Ms. ROYBAL-ALLARD. Mr. Speaker, I rise in support of the Democratic 
substitute. By correcting the most obvious deficiencies in the health 
insurance market, this legislation is a much-needed, albeit small step 
toward reforming our health care system, because it frees the American 
worker from job lock which prevents millions from taking better jobs 
for fear of losing their health care coverage.
  It protects people with preexisting conditions by limiting the 
exclusion period and prohibiting employers and insurers from denying 
coverage to these individuals. It expands availability and access by 
prohibiting insurers from denying coverage to specific employee groups, 
and it increases the deduction for the self-employed to 80 percent in 
support of America's small business.
  The Democratic substitute brings a measure of fairness and justice to 
our health insurance system without the special interest provisions in 
the House Republican bill. I urge all Members to vote in favor of the 
Democratic substitute.
  Mr. BLILEY. Mr. Speaker, I yield 2 minutes to the gentleman from 
Connecticut [Mr. Shays], a distinguished member of the Committee on the 
Budget.
  Mr. SHAYS. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, a number of years ago the President came in with major 
reform of health care. It was wide reaching, it was well beyond what 
anyone in this House wanted to do, and now we have a bill that in my 
judgment is very sensible. It is very logical. The Roland-Bilirakis 
bill never passed 2 years ago because it never had a vote. It never had 
a vote because unfortunately the other party was jealously guarding the 
jurisdictions of each committee.
  This bill here has the input of the Committee on the Judiciary, the 
Committee on Commerce, the Committee on Ways and Means, and the 
Committee on Economic and Educational Opportunities, and in it there is 
a very significant portion of this bill dealing with fraud, title II, 
preventing health care fraud and abuse; it goes for about 70 pages. I 
have a hard time understanding what is meant by a clean bill.

                              {time}  2130

  What is a clean bill that does not deal with waste, fraud, and abuse? 
We have been having hearings for decades about the waste, fraud, and 
abuse. That

[[Page H3132]]

so-called clean substitute ignores it completely. This bill here deals 
with waste, fraud, and abuse, and for the first time makes health care 
fraud a Federal offense, an all-payer system, not just for Medicare and 
Medicaid and Champus, but for all health care fraud. We are determined 
that this House is going to do something responsible.
  I will just conclude by saying I am totally convinced that this House 
is going to pass a health care bill. It may not be exactly like this 
one when we deal with our conference with the Senate, but it will be a 
meaningful bill, and it will be far better than the substitute bill 
presented. I urge my colleagues to take part in what we are doing. We 
are going after waste, fraud, and abuse for the first time in a serious 
way. It is happening under our watch. Be proud of it.
  Mr. BENTSEN. Mr. Speaker, I yield 1 minute to the gentlewoman from 
California [Ms. Woolsey].
  (Ms. WOOLSEY asked and was given permission to revise and extend her 
remarks.)
  Ms. WOOLSEY. Once again, Mr. Speaker, the Gingrich Republicans are 
standing in the way of meaningful health care reform and it's American 
families who are going to wind up paying the price. While Speaker 
Gingrich says his plan may make health insurance more available, it 
does nothing whatsoever to make it affordable.
  Thankfully, for the American people, we have another choice before us 
today. We have the Democratic substitute. The one bill that will extend 
coverage to 25 million Americans. The one bill that has bipartisan 
support in the Senate. And the one bill that will be signed into law by 
the President.
  To my colleagues on the other side of the aisle: Don't use your vote 
to scuttle significant health care reform this year. Instead, stand up 
for working families, and support the Democratic substitute.
  Mr. BENTSEN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman 
from Illinois [Mr. Durbin].
  Mr. DURBIN. Mr. Speaker, several years ago I introduced legislation 
which allowed a full 100 percent deductibility of health insurance 
premiums for self-employed people. I represent a rural district. I 
represent a lot of farm families. It is very difficult for them to buy 
health insurance, and when they do, it is expensive, and they find that 
they can only deduct now 30 percent of the cost of the premiums.
  The real unfairness is the fact that corporations can deduct 100 
percent of the cost of health insurance premiums. Self-employed people 
cannot. What we do with the Democratic substitute is to address this in 
an honest way. I hope some of my Republican colleagues will consider 
breaking ranks tonight and joining in this bipartisan approach to 
health care reform.
  Let me tell the Members what we know now. The fastest growing sector 
in the American economy are self-employed people, people who are 
starting their own businesses. If you ask them their No. 1 headache, 
you are going to find, to your surprise, it is health insurance; how to 
pay for it, how to cover your family and a few employees.
  What we do in the Democratic substitute is to allow up to 80 percent 
deductibility over a period of several years. If Members take a look at 
the alternative on the Republican side, they will find they only reach 
50 percent. This is a big difference for a small business.

  I hope that some of my colleagues will think twice and join us. I 
think it is far better for us to come together, Democrats and 
Republicans, pass real health care reform, instead of trying to score 
some political victory for the Golden Rule Life Insurance Company. Let 
us do something for the real self-employed people who need a helping 
hand.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 1 minute to the 
gentleman from Illinois [Mr. Weller], who knows full well that in the 
calendar year 1994 it was the Democrats who left the self-employed with 
no deductibility whatsoever.
  (Mr. WELLER asked and was given permission to revise and extend his 
remarks.)
  Mr. WELLER. Mr. Speaker, I rise to oppose the substitute and support 
H.R. 3103, which deserves the votes of Democrats as well as 
Republicans. Mr. Speaker, H.R. 3103 addresses a real problem faced by 
almost 40 million Americans, 85 percent of whom are small business 
people, the self-employed, farmers, and their families and workers.
  I have listened over the last several years to many families unable 
to afford health insurance. They say the prices of health insurance are 
too high if they are self-employed or work for small business. H.R. 
3103 helps the little guy, the self-employed, and small business; 
frankly, people like my mother and father, fifth generation family 
farmers who, because their rates are based on two, face very high 
rates.
  Mr. Speaker, H.R. 3103 helps make health insurance more affordable, 
the risk pools allowing small employers, perhaps through the Farm 
Bureau or the local Chamber of Commerce, to purchase in a cooperative 
fashion a bigger group policy, getting more affordable rates, also 
giving 100 percent tax deduction for long-term care, and raising the 50 
percent self-employed taxes.
  Mr. BENTSEN. Mr. Speaker, I yield 2 minutes to the gentleman from 
North Dakota [Mr. Pomeroy].
  Mr. POMEROY. Mr. Speaker, for 8 years I had the privilege of 
representing North Dakota as its State insurance commissioner. During 
that time I evaluated the health insurance crises experienced by 
families all across the State. While undoubtedly there were many facets 
to the problems I encountered, far and away the largest problem was 
affordability.
  I am astounded that the previous speaker could talk about 
affordability as a health issue addressed by the majority plan and 
deride the substitute, when in fact, deductibility of health insurance 
premium geared specifically at enhancing the affordability of coverage 
is the feature best exemplified in the substitute, as opposed to the 
majority plan. Look at the facts: Fifty percent deductibility 
immediately under the substitute, and only 30 percent under the 
majority plan, phasing up to 80 percent deductibility under the 
substitute plan, and only 50 percent in the majority plan.
  The difference between 80 percent and 50 percent deductibility is the 
difference between affordability and unaffordability of health 
insurance for farm families, for self-employed families in North Dakota 
and all across the country. The No. 1 problem for so many families with 
health insurance tonight, Mr. Speaker, is affordability. Let us make it 
more affordable by increasing the deductibility. Only the substitute, 
in my opinion, goes the limits it needs to increasing the deductibility 
for purposes of making this coverage more affordable.
  Mr. BLILEY. Mr. Speaker, I yield 3 minutes to the deputy whip, the 
gentleman from Illinois [Mr. Hastert], a gentleman who has put more 
work into this bill than anyone on the Committee on Commerce.
  Mr. HASTERT. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  I guess we just need to straighten out some things. To my friend who 
just talked over here about the deductibility, I guess plagiarism is 
one of the best compliments there is. To my friend, the gentleman from 
Illinois, who talked about the deductibility issue, it is interesting, 
it is the same folks who for years just let the deductibility for small 
businesses go to zero and left it there until we moved it to 30 
percent. We are going to move it to 50 percent. They are talking about 
something in 2002. It is a promise, folks. I would not count on that 
promise.
  Mr. Speaker, also I would say to my good friend from New Jersey, who 
says that the Senate leadership wants this Kassebaum bill, it is 
interesting, she did not read her papers, because the Senate leadership 
endorses our bill. They are going to move an add-on to the Senate to 
exactly what we have passed in this House tonight, so she might be 
apprised of that.
  Mr. Speaker, we have heard a lot of outrageous claims on the other 
side of the aisle. I think now is the time of reckoning. This 
substitute is just a whisper in the dark. It does not do anything to 
help health care. We cover group-to-group, we cover group-to-
individual, and we also make health care affordable for the American 
people.

  If Members want real change in health care, if we really want to help 
Americans from the shoestore and the barber shop and the truck drivers 
and the real people that work out there in

[[Page H3133]]

America, defeat this substitute, the farce out here that they are 
putting out as the substitute, and support the Republican bill.
  Mr. BENTSEN. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland [Mr. Cardin].
  Mr. CARDIN. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, I urge my colleagues to support this substitute, this 
alternative. It does two things, and it does them better than the 
original bill. First, it provides for portability. It does it better 
than the underlying bill, because if you lose your job and you lose 
your insurance and you try to find an individual plan, the substitute 
allows you to have some options and lets you be able to buy an 
affordable individual plan.
  The second thing this bill does is deal with the self-employed by 
allowing them to be able to deduct 80 percent of their premium, whereas 
the underlying bill is at 50 percent. It makes it better for the self-
employed. Both of these issues enjoy strong bipartisan support. This 
bill, the alternate, if it is passed, will be signed quickly by the 
President, will be approved by the Senate. It can be a reality. It is 
stronger than the underlying bill, and it can be passed and enacted 
into law.
  Mr. Speaker, I urge my colleagues to support the substitute.
  Mr. THOMAS. Mr. Speaker, it is my privilege to yield 1 minute to the 
gentleman from Oregon [Mr. Bunn], who came here to make a difference, 
and he does.
  Mr. BUNN of Oregon. Mr. Speaker, I am pleased tonight to say that the 
substitute is a good bill, but the Republican version is a better bill. 
We have a win-win tonight. I think we ought to be pleased with that.
  Mr. Speaker, I am also delighted that we had the opportunity to 
address some concerns in the Committee on Rules, and the Committee on 
Rules was willing to make the necessary changes to assure that this 
bill is a floor, not a ceiling, so that reforms like Oregon passed just 
last year will be maintained. I think we are on track to assuring that 
Americans will have good, affordable health care, and State reforms 
which will stay on track.
  Again, we have a win-win. Theirs is good, ours is great. I support 
maintaining the Republican version, which means saying no to a good 
substitute.
  Mr. Speaker, let me start by saying that I am glad that we were able 
to protect State health insurance reform efforts within this bill. As 
many people brought to my attention, including my State insurance 
commissioner, State insurance reform efforts may have been jeopardized 
by specific language not exempting them within this bill. I am proud to 
say that the language currently in this bill is very similar to that of 
the Democratic substitute, and while I support many of the reform 
efforts contained in that bill, I believe the Republican bill goes even 
further and ensures even broader coverage than that alternative. I am 
supporting the base bill and opposing the substitute. I look forward to 
reforming our national health insurance laws as soon as possible.
  Mr. BENTSEN. Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman 
from California [Ms. Waters].
  (Ms. WATERS asked and was given permission to revise and extend her 
remarks.)
  Ms. WATERS. Mr. Speaker, I am pleased to join with my colleagues in 
supporting the substitute. It is time to stop just talk about health 
care reform, and accomplish some real health care reform. This 
substitute represents a sensible approach to health care reform, and it 
may be the only chance we have to enact affordable health care for the 
American people. This bill would prohibit many of the current unfair 
insurance practices which deny and exclude individuals and families 
with significant health problems. Insurers often deny health coverage 
for preexisting conditions, the very illnesses most likely to require 
quality medical care.
  Approximately 81 million Americans have medical conditions which 
could result in the denial of coverage. We know from recent studies 
that African-American women are dying at a faster rate from heart 
disease and stroke. Minority children are dying and experiencing more 
complications from asthma and other preventable respiratory diseases. 
We are seeing an increase in the infection rate for HIV and AIDS among 
young African-American males.
  We know that low-income persons are dying because they simply cannot 
purchase the ability to live. Many of those who are fortunate enough to 
have insurance give up opportunities for new jobs because they are 
afraid of losing what little coverage they have. We must have 
portability. This substitute, while it does not address all health care 
concerns, does move in the right direction.
  Mr. BLILEY. Mr. Speaker, it gives me great pleasure to yield 2 
minutes to the distinguished gentleman from Louisiana [Mr. McCrery], a 
member of the Committee on Ways and Means.
  (Mr. McCRERY asked and was given permission to revise and extend his 
remarks.)
  Mr. McCRERY. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, I want to congratulate the gentlewoman from New Jersey, 
the gentleman from Michigan, the gentleman from South Carolina, the 
gentleman from Texas, for I think putting forth a well-intentioned 
effort to improve the lot of people in this country vis-a-vis the 
health insurance system. It is a good effort. However, in the face of 
what we should be doing in health care reform in this country, it is 
weak. It is watered down. It is half-hearted.
  Mr. Speaker, we should not be so timid in this House to bend to the 
threats of the President of the United States, who is up for reelection 
this year. We should do what we think is right for the American people 
in our health care system. If you go to a town meeting and listen to 
the people, what do they talk about? They talk about portability. That 
is a problem. We solved that in our bill. But what is the main thing 
they talk about? Cost. ``Mr. Congressman, do something about the 
escalating cost in our health care system.''
  The substitute, regrettably, does nothing for cost containment. Our 
bill, on the other hand, has medical malpractice reform, which goes to 
the heart of the escalation of costs in the health care system. We 
attack fraud and abuse, waste in the system, which goes to the heart of 
cost escalation. We introduce a new concept, make it tax-advantaged, 
medical savings accounts, which will allow a lot of little people in 
this country to get health care coverage for the first time.

                              {time}  2145

  These are all things that we should be doing if we were not so timid. 
We need to vote against the substitute and vote for the underlying 
bill.
  Mr. BENTSEN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida [Mr. Gibbons], the ranking member of the Committee on Ways and 
Means.
  Mr. GIBBONS. Mr. Speaker, I want to take just a couple of minutes to 
explain why the medical savings account is not popular on our side of 
the aisle, and why it probably is pretty popular with our colleagues 
over here, our Republicans friends.
  If we look at the average family in America, it has an average family 
income of $34,000 a year, $34,000 a year. That is what half of the 
taxpayers have as family income. Now, if we look very closely at that 
family, they are paying about an 18- or 20-percent tax level, but only 
3 or 4 percent of that tax is income tax. All the rest of it is FICA 
tax. They are only getting a medical savings account deduction out of 
income tax, not out of FICA tax.
  So half of the people in the United States that we claim as 
constituents and part of our party get absolutely nothing out of these 
medical savings accounts. But what do we do for our very well-off 
friends?
  Mr. Speaker, first of all, they can afford it. They get a large 
deduction percentage-wise in all of this as opposed to 2 or 3 percent 
for our folks. Second, do not even make them pay FICA tax on that cash 
that they get as income. So that is another tax reduction they get, and 
we have not even talked about it here.
  Third, and this is the insult of all, this allows them to exclude it 
from their estate tax. Now, how many of our constituents over here even 
have to worry about an estate tax? Obviously, many of my colleagues' 
do. My colleagues exempt them from the estate tax.
  Now, what do we have to have in the estate tax? Well, between husband 
and wife, they can have millions of dollars and not pay any estate tax. 
But when the last of the family dies, they have

[[Page H3134]]

an estate tax. They have to have $600,000 before they pay a penny's 
worth of estate tax. This thing is just designed for very wealthy 
people.
  Mr. BLILEY. Mr. Speaker, I yield 1 minute to the gentleman from Ohio 
[Mr. Hobson].
  Mr. HOBSON. Mr. Speaker, I rise in opposition to the substitute. I 
think the substitute is a laudable effort, but there are a lot of other 
things that we can do that are important to this issue. There is a 
bipartisan bill, it is called Hobson-Sawyer, and it is called Bond-
Lieberman in the Senate, and it is in our bill, it is not in this bill. 
It is the administrative simplification bill.
  It gets rid of a lot of forms that have to be transferred around, a 
multiplicity of forms. It makes it simple. Everyone agrees that that is 
good. It also gets at fraud. Everyone agrees we ought to do that, but 
it is not in my colleagues' bill, and it should be in their bill. 
Everybody agrees that it is a good bill. There is no opposition. This 
part of the bill passed out of the committee 30 to zip. It is a good 
piece of legislation, it ought to be passed. That is why I support our 
bill and do not support the substitute.
  Mr. BLILEY. Mr. Speaker, I have no further requests for time. I yield 
my remaining 1 minute back to the gentleman from California [Mr. 
Thomas].
  Mr. THOMAS. Mr. Speaker, I have 5 minutes and I have one speaker 
left. Under the rules we have the right to close.
  Mr. BENTSEN. Mr. Speaker, I yield the balance of my time to the chief 
sponsor of the amendment, the gentleman from Michigan [Mr. Dingell], 
the ranking member of the Committee on Commerce.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. My colleagues, this has been a good debate. I think we 
owe a great debt of gratitude to the distinguished gentlewoman from New 
Jersey [Mrs. Roukema] for the leadership which she has shown in this 
matter which has brought us to where we are tonight, and I would urge 
my colleague to appreciate her great effort in this matter.
  Having said that, it is very important to us to look at the situation 
we confront here. As an old friend of mine once observed, the perfect 
good is the enemy of the good. That means that, if we load this bill 
down with a vast plethora of amendments, we are liable to get no bill 
at all.
  I yield to no man in my devotion to the concept that we must change 
the medical practice in this country to afford greater opportunity in 
this country to afford greater opportunity in this country and greater 
security to all the people.
  The fact is that we had that opportunity before us in the last 
Congress and it was rejected. My Republican colleagues have made a 
great talk about what it was that we did in those days and what we are 
doing tonight. The hard fact of the matter is that neither of these 
bills solves the problem.
  But the real fact is that the bill and the substitute which is 
offered by the Democratic Members has the ability to solve the problems 
in large part of some 25 million Americans who need portability and who 
need protection against prohibitions on preexisting conditions in 
insurance policies. It also does something else. It ups the amount of 
deductibility to 80 percent for individuals and small business. That is 
extremely important in terms of making health insurance available to 
large numbers of people who would otherwise be denied that benefit.
  So I urge my colleagues to support the simpler and the cleaner bill, 
and I would urge them to recognize that the special interest amendments 
which are inserted in the Republican bill accomplish nothing but 
benefiting special interests and denying people the real opportunity to 
access to meaningful health insurance.
  Mr. Speaker, let us look a little bit at what is in the Republican 
bill. First of all, it is loaded down like a Christmas tree, and I am 
satisfied that it will wind up with the same fate of a Christmas tree, 
dumped on the lawn at the conclusion of the discussion. It affords no 
chance for workers who lose their jobs to have a choice of plans. It 
makes no guarantees of businesses with more than 50 workers. It 
preempts State laws that protect consumers. It limits the deductibility 
of insurance premiums only to 50 percent. It has the controversial 
medical savings plans which do only one thing, and that is to benefit 
the insurance companies that have spent millions of dollars lobbying 
for this particular benefit for themselves, to benefit those who are 
healthy and those who have money, not those who are ill and who have 
need.

  It has controversial medical malpractice law changes. Now I happen to 
think we need some changes in medical malpractice, but I did not think 
that we need the changes that are here. It also makes it harder to 
catch and to punish wrongdoers. Perhaps one of the worst things that it 
does is that it repeals protections that we invested in seniors some 
years ago to prevent them from being ripped off by useless, duplicative 
health insurance policies under which they pay for the same benefits 
which they are getting from Medicare, but in which they are prohibited 
from collecting benefits because of clauses in the legislation and 
because the prior liability goes to the Medicare policies.
  There are also controversial provisions in here which override State 
insurance laws.
  Mr. Speaker, the hard fact is that tonight we should be working to 
make it simple. We should be working to make this a proposal which will 
go to the President, which will pass quickly through the House and 
Senate, which will move easily through conference, and which will go to 
the President for quick and easy signature. To risk veto or to arrive 
at a situation where we do not help the some 25 million people who are 
dependent on the question of portability and who are afflicted with the 
problems of not being able to have preexisting conditions treated under 
their health insurance plans or under health insurance plans which 
would be made available under this legislation is both unwise and 
unnecessary and inconsistent with our responsibilities to the people.
  I would hope that soon we will be able to address a really meaningful 
proposal for health insurance for all the people, to see to it that we 
provide that last element of security for the American people, which 
every American finds to be troublesome in the extreme, because it is an 
essential and important part of the security net which Americans think 
that every American should have. Regrettably, that choice is not before 
us. Regrettably, the Republican Members of this body have chosen not to 
move forward on that.
  President Clinton tried to do that 2 years ago and it was rejected 
overwhelmingly on this side of the aisle. I would urge my colleagues to 
recognize that a little that we can get quickly which will really help 
people is a lot better than an illusory lot which will help no one and 
not become law and not help anybody.
  I would urge my colleagues to therefore vote for the substitute which 
the Democratic Members will be offering tonight and to do something 
which is going to benefit all of the people and which will be of 
significant benefit to some 25 million who will derive benefits under 
the portability and under the preexisting provisions.
  I urge my colleagues to vote in the interests of the country. I urge 
them to vote for the substitute. I urge them to vote for a proposal 
which will give us significant progress, rather than the assurance of 
further confusion, further controversy, and possible veto and loss of 
this legislation in the Senate or in a conference between the House and 
Senate.
  Mr. Speaker, I yield myself 3 minutes, and ask unanimous consent to 
revise and extend my remarks.
  Mr. Speaker, we are faced today with a simple choice:
  Will the House give the American people what they want--a 
straightforward, simple, and uncontroversial bill to reform health 
insurance, a bill that can go to conference with the Senate quickly and 
be enacted into law?
  Or will the House doom the chances for enacting such a bill by 
erecting a Christmas tree, decorated with all manner of controversial 
ornaments?
  I want to commend my colleague from New Jersey, Mrs. Roukema, for 
recognizing the simplicity of this equation early on, and for 
introducing in the House the companion to Senator Kassebaum's bill in 
the Senate. The Kassebaum-Roukema bill has enjoyed widespread and 
bipartisan support. It has been endorsed by 135 organizations, 
including the

[[Page H3135]]

AMA, the American Hospital Association, the Independent Insurance 
Agents, the National Association of Manufacturers, and the Healthcare 
Leadership Council.
  Many of us have tried, on a bipartisan basis, to persuade the 
leadership to keep this health insurance bill limited only to the 
Roukema-Kassebaum bill and to tax deductibility of health insurance for 
the self-employed, another uncontroversial provision with broad 
support. But in spite of the very public pleas from our side of the 
aisle, as well as from Representative Roukema, Senator Kassebaum, and 
Senator Bennett on the Republican side, we have ended up instead with a 
Christmas tree.
  The Dingell-Spratt-Bentsen substitute incorporates the Roukema bill 
as title I. The amendment is very simple. It ends discrimination 
against people with preexisting conditions so they can get health 
insurance. It guarantees that Americans who lose or change their jobs 
can get health insurance. It requires health insurance companies to 
renew people's policies. And in title II, it increases the health 
insurance tax deduction for self-employed individuals from 30 percent 
to 80 percent, a major priority for small businesses and family 
farmers.
  By voting for the substitute, my friends, you will be telling your 
constituents that you want the House to pass a bill that can be signed 
and become law. By voting against it, you will be telling them that 
they will have wait longer for health insurance reform--and how long? 
Perhaps years?--because you can't say no to the special interests who 
want to load this bill up with controversial add-ons and thereby kill 
its chances for passage.
  Now I know that many of my colleagues, on both sides of the aisle, 
don't happen to think that each and every one of these provisions added 
by the Republican leadership is bad. Medical savings accounts, 
antitrust relief, malpractice reform--there are strongly held views on 
both sides of these issues. But regardless of our personal views on any 
of them, one thing is clear: they are all controversial; they all weigh 
this bill down; and they all significantly reduce the chances of 
enacting the kind of simple health insurance reform the American people 
are demanding.
  Mr. Speaker, I urge my colleagues:
  Don't kill this chance for health insurance reform by passing a 
Christmas tree instead of a clean bill. Support a clean bill by 
supporting the substitute. Vote ``yes'' on Dingell-Spratt-Bentsen.
  Mr. THOMAS. Mr. Speaker, it is my privilege and honor to yield the 
remainder of the majority's time on this substitute to the Speaker of 
the House, the gentleman from Georgia [Mr. Gingrich].
  Mr. GINGRICH. Mr. Speaker, I thank my friend from California for 
yielding me the time to close, and I say I always rise with some slight 
trepidation after my dear friend from Michigan, who has been a leader 
in the House and is a very effective articulator of his side.
  Mr. Speaker, I would say to him, however, that to describe as a 
Christmas tree a series of things the American people want is different 
than describing as a Christmas tree things only politicians want. And I 
do plead guilty to the charge that on a bipartisan basis we tried to 
reach out and actually listen to the American people, and that some 
people are very grateful to us for that.
  Let me start, for example, with the Alzheimer's Association. The 
Alzheimer's Association wrote us and said:

       The Alzheimer's Association is writing in general support 
     of the provisions in H.R. 3160 to clarify the Tax Code so 
     that taxpayers may deduct their long-term care expenses as 
     medical expenses. We are particularly pleased to note the 
     committee's addition of specific language to assure that this 
     deduction is available to taxpayers who are incurring 
     expenses for care for persons who are cognitively impaired.

  They go on to say:

       This change in the Tax Code has had strong bipartisan 
     support for a number of years and has appeared in virtually 
     every version of health reform legislation seriously 
     considered over the last two Congresses.

  Now, maybe to some of our friends that is a Christmas tree. But if 
one has a parent with Alzheimer's, if one has a loved one with 
Alzheimer's, or if one has a child with a chronic disease, or a child 
born with a genetic defect that requires permanent long-term care, this 
provision is a good step in the right direction, and we should be proud 
that we listened to the American people.
  The American Health Care Association, largely representing folks who 
are involved in nursing homes, an area where we have a growing 
population and as more Americans live beyond 80 years of age there will 
be even more Americans, they said: ``We applaud and support your 
efforts to enact health insurance reform legislation that also 
addresses long-term care.''
  Now, that is very important. And yes, it is true we added it to the 
bill because we listened. We think that, while the start in the Senate 
was a useful start and we respect the work of the other body, we do not 
think the House is bound automatically to simply say, oh, please send 
us something that we can rubber stamp.

                              {time}  2200

  The American Farm Bureau Federation wrote, and they said:

       A provision of the Health Coverage Availability and 
     Affordability Act of 1996, one which deals with cooperative 
     insurance purchasing arrangements, is particularly important 
     to the 4.5-million-member families of the American Farm 
     Bureau Federation. Farmers are, by and large, self-employed, 
     and as such must purchase health insurance for themselves and 
     their families. Many join together in cooperative purchasing 
     arrangements in order to obtain quality health insurance 
     plans at affordable rates. The Farm Bureau applauds and 
     supports your effort on this issue and the section of the 
     legislation that would facilitate voluntary insurance 
     purchasing cooperatives so that individuals and small 
     companies can negotiate and receive the same price advantage 
     that many larger businesses presently receive.

  So, yes, it is true we listened to the Farm Bureau, and we listened 
to the rural families of America and to the small family farmers.
  The National Federation of Independent Businesses, and I am 
particularly surprised that so many of my friends who normally rail 
against the rich and declare class warfare and worry about the giant 
corporations, that they could get a letter like this from the National 
Federation of Independent Businesses and ignore it.
  Here is what the National Federation of Independent Businesses said:

       As the House prepares to take up health care reform, I am 
     writing to let you know how important the small employer 
     pooling provisions of the Health Coverage Availability and 
     Affordability Act are to the members of the National 
     Federation of Independent Businesses. NFIB is seeking to 
     correct a basic unfairness in our current health system, the 
     fact that big business is allowed to buy health insurance 
     under a different set of rules than small business. Because 
     of the Employment Retirement Income Security Act, large self-
     insured businesses are exempted from State law, in their 
     health plans, while small business is stuck with State 
     insurance coverage mandates, premium taxes, and other forms 
     of regulation. This inequity between big business and small 
     business in large part explains why the premiums of corporate 
     America are going down while small business premiums are 
     going up. State mandates alone can increase premiums for 
     small business by 30 percent. The Health Coverage 
     Availability and Affordability Act would stop this 
     unfairness by allowing small firms to band together across 
     State lines to purchase health insurance with nearly the 
     same exemption from State law that big business has. 
     Achieving this is NFIB's highest health reform priority. 
     Any substitute amendment that does not directly address 
     this inequity between big and small businesses is 
     unacceptable to the more than 600,000 members of the 
     National Federation of Independent Businesses. I hope you 
     will stand up for small business and oppose efforts to 
     remove the small employer pooling provisions of the Health 
     Coverage Availability and Affordability Act. Passage of 
     these pooling provisions will drive coverage up and 
     premiums down for small business.

  I particularly congratulate the gentleman from Illinois [Mr. Fawell], 
who has done such yeoman work in that area.
  The Chamber of Commerce said here were the returns of their poll: 
97.8 percent said they needed small employer pooling; 97.1 percent said 
they needed to allow self-employed individuals to fully deduct the cost 
of their health coverage; 96 percent said they needed administrative 
simplification; 92 percent said they wanted medical malpractice reform.
  Let me say to my good friends on the left, yes, it is true, we 
listened to the American people. We heard the American people say that 
access was a start but access was not enough, you also have to have 
affordability because the truth is if you do not keep the price down, 
you do not have access if you are too poor to pay the premium.
  So just passing some Washington law with a Washington rule for a 
Washington bureaucrat, that does not mean that a small business or a 
family farm can actually pay for it, does not get the job done. So we 
went to part 2, which was affordability. We guaranteed

[[Page H3136]]

accessibility, and we added affordability.
  And there is a third part. We had strong provisions on fraud, and I 
particularly want to congratulate the gentleman from Oklahoma [Mr. 
Coburn], who is a medical doctor, who is infuriated at the level of 
fraud that we have in the system today, and Dr. Coburn is a 
Representative from Oklahoma who has worked tirelessly in his first 
term to make sure that we have strong steps and strong penalties 
against fraud.
  When the General Accounting Office reports that fraud may account for 
10 percent of health care costs, that is $100 billion a year. We have 
anecdote after anecdote on this floor from Members who have had members 
of their family involved in situations of clear-cut fraud, when you 
watch on NBC as a woman reports that she called in to complain because 
they had charged her for her autopsy and, since she was still alive, 
she does not think she had one, and their answer was that must have 
been an EKG. She said, ``Honey, I did not have that either.''

  We had one of our colleagues who walked up to me one day and said, 
you know, his mother had called him, she heard us talking about fraud, 
and she said she got billed for two mammograms. She called the doctor's 
office. She said, ``You did not have two mammograms.'' They said, ``Oh, 
yes. We must have done two mammograms.'' She said, ``I had a mastectomy 
7 years ago. I know you did not do two mammograms.'' Their next comment 
was, ``What do you care?'' The Government will pay the bill.''
  What this bill establishes is it directs the Secretary of Health and 
Human Services to establish a system for senior citizens to turn in 
fraud and to give senior citizens the power to help us police the 
system so people engaged in ripping off you, the taxpayer, and rip off 
the consumer of Medicare is better protected and has a better incentive 
to turn in fraud.
  I would say if you want accountability, we have it. If you want 
access, we have better access. We give twice as long a period as 
Kennedy-Kassebaum between insurance without losing coverage, twice as 
long. We have a better system of access, and it is far more affordable 
under our bill than it is under the substitute.
  So I would simply say to my friends, do not be partisan about this. 
Here is an occasion where we started with a bill that was bipartisan in 
the Senate. We have improved the bill. Medical savings accounts is, in 
fact, an issue of great concern to some people. It is a brand-new idea. 
We believe it will help things.
  I want the House to know that if the President sends up a veto 
signal, we are not going to risk vetoing coverage for all Americans in 
medical savings accounts, but we want to make the case. We want to try 
to convince him that he ought to be willing to sign it.
  There are other items in here. Malpractice reform, my good friend 
admitted we need to do something, too, on malpractice reform. The trial 
lawyers should not be ripping America off.

  I talked about a week ago to the American dental association. It 
occurred to me, if dentists acted like the Bar, they would be urging 
every child to get cavities. There would be commercials to eat sugar 
and not brush your teeth. Just think about it. It is terrible. A 
patient walks into a doctor's office. They should both be on the same 
team, fighting the disease, and there is a lawyer running an ad that 
says, ``Why don't you walk in there as a potential plaintiff and see if 
you can't find a good excuse to sue?'' It is culturally sick to have 
this kind of litigation, conflict-ridden system. We take the first step 
down the road.
  If the President sends up a veto signal, maybe we would have to back 
down. But we want a chance to convince him this is wrong to favor the 
trial lawyers over the patients and the doctors.
  But all I would say to my friends is, the substitute is well-meaning, 
but it is inadequate. It is too little, it is too narrow, it is too 
small. We can do better.
  We have listened, and we are doing better. This is a better bill than 
Kennedy-Kassebaum. This is a more complete bill. This offers better 
access. It is more affordable, and it guarantees greater 
accountability, and it is worthy of your consideration.
  I will just close with this point: Five major leaders in the Senate 
yesterday announced their endorsement of this bill. And this bill will 
almost certainly be offered in the Senate as the substitute for the 
earlier well-meaning, but weaker, bill that Kennedy-Kassebaum 
introduced, and, with our help, we can send a signal to the Senate. Let 
us get the job done a lot better, and let us do it for a lot more 
people. That is why we should vote ``no'' on the substitute and ``yes'' 
on final passage.
  Mrs. MINK of Hawaii. Mr. Speaker, I rise to speak in favor of the 
Democratic substitute to H.R. 3103.
  Why are we considering H.R. 3103? H.R. 3103 was reported with only 
nine cosponsors. The Roukema bill, which the Democratic substitute is 
based on, has 193 cosponsors. Seldom do we have legislation with such 
widespread support. Instead of hearing the Roukema bill, we are 
spending time on legislation loaded with controversy and doomed to 
fail.
  We now have before us an opportunity to provide relief for 
hardworking Americans enslaved to their health care policies.
  The core of the Democratic substitute is twofold. First it will 
guarantee individuals leaving a job, where they are covered by group 
insurance, to be able to obtain group or individual insurance at their 
next job; and second, it will forbid insurance companies from denying 
coverage because of preexisting conditions. These are two very simple 
concepts with little opposition and if implemented would result in 
enormous social benefits.
  In addition, both the Republican bill and the Democratic substitute 
increase the permitted health insurance tax deduction for self-employed 
individuals. The levels allotted in the Democratic substitute, however, 
are significantly higher. Health insurance costs for the self-employed 
are often a heavy burden. Tax deductions at the levels proposed in the 
Democratic substitute would ease this burden.
  H.R. 1303 on the other hand contains many provisions which are not 
well thought out and will be harmful to the overall health care 
objectives.
  One of these proposals relates to medical malpractice. Congress 
should not set maximum monetary amounts that can be awarded for pain 
and suffering, and for punitive damages. I cannot support this anti-
consumer provisions.
  With respect to Medical Savings Accounts, I took a hard look at this 
proposal. It seemed like a good idea to give individuals the option to 
contribute to a tax deductible savings account which must be used for 
medical purposes and also require them to enroll in a catastrophic 
health care plan with relatively lower premiums and a high yearly 
deductible.
  Two questions came to mind: First, will this reform help the 
uninsured; and second, will this reform divide the pool of insured 
resulting in the systematic breakdown of the insurance system.
  Medical Savings Accounts would not be attractive for the high risk 
and the poor, those who need health care the most, because they would 
be unable to afford the high yearly deductible over a extended period 
of time. If the poor did enroll in this plan they would be unlikely to 
obtain preventive care because it would have to be paid for from their 
account or from their own pocket.
  Meanwhile, the healthy and wealthy, who do not have a problem 
obtaining health insurance, would be more likely to choose a Medical 
Savings Account because they can afford the high deductible. The 
different choices of these demographic groups will result in the 
healthy vacating the traditional insurance pool leaving only high-risk 
individuals remaining. The pool will be concentrated with high-risk 
individuals and costs will rise causing insurance to be unaffordable 
for many. Fewer people who need coverage will be insured. The 
Republican proposal for Medical Savings Accounts will divide the 
insurance pool leading to an insurance system breakdown.
  Moreover, I feel compelled to speak out against the multiple employer 
welfare arrangement [MEWA] provisions contained in this bill. I am 
concerned that the federal regulation provided will not be adequate and 
that by preempting established State systems, programs will be harmed.
  As a result of these new MEWA provisions, I am concerned that Hawaii 
may no longer be granted an ERISA exemption for the Hawaii Prepaid 
Health Care Act. Majority committee staff indicated that Hawaii's ERISA 
exemption was included in the bill reported out of the Committee on 
Economic and Education Opportunities. However, due to the extreme 
handicap of having to evaluate, debate, and vote on a bill mere hours 
after it is printed and made public, I have been unable to confirm 
whether or not Hawaii's exemption was preserved. The Federal Government 
will not be able to take on this new responsibility, liability, and 
expense. The retention of State authority is critical. Not to do so is 
a fatal flaw.
  Mr. Speaker, the Democratic substitute focuses solely on insurance 
portability and prohibiting denial of coverage due to preexisting

[[Page H3137]]

conditions. We must not load up this bill with controversial provisions 
that will incite opposition and thwart the enactment of valuable and 
the noncontroversial provisions in this bill.
  This substitute will not overhaul the health care system but will 
provide greater health security and make a positive difference in the 
lives of millions of Americans. We must not allow this opportunity to 
slip through our fingers.
  I urge a yes vote for the Democratic substitute.
  Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, I rise today as a 
member of the health profession to encourage my colleagues to support a 
comprehensive health care reform measure that would make appropriate 
health care accessible for all Americans. As we consider H.R. 3103, the 
Health Coverage Affordability and Availability Act, it is important 
that we realize that there is no clear consensus on the best means to 
attain universal coverage. Limitations on exclusions for preexisting 
conditions and guarantees for portability will help millions of 
Americans move away from job-lock and the terrifying prospect of losing 
health care coverage that comes with job loss or change brought about 
by corporate downsizing and other market forces.
  As a nurse, it is my opinion that this Congress needs to continue to 
foster high standards in the health care industry and promote the 
economic and general welfare of Americans in the workplace. All year we 
have heard that the Medicare hospital trust fund is about to go 
bankrupt and therefore we have to make massive cuts in Medicare to save 
it. Now they propose taking the easiest money in Medicare--the money 
gained from fighting fraud--and spending it to give medical savings 
account tax breaks to younger people who are likely to be in the 
highest tax brackets and the healthiest members of our society.
  Mr. Chairman, while considering health care legislation today, we as 
a Congress must keep the process simple. There is no place for adding 
on special interest amendments and pay backs that will sabotage the 
passage of good reforms. We must also remember the working poor of this 
Nation that are effectively priced-our of the health insurance market.
  Mr. Chairman, I encourage my colleagues to support the Democratic 
substitute to H.R. 3103 because the substitute does not contain any of 
the bill's highly controversial provisions--such as medical savings 
accounts--that would jeopardize any possibility of enacting health 
insurance reform this year. The Kassebaum-Kennedy-Roukema bill, which 
assures health insurance portability, enjoys broad bipartisan support 
in both Chambers, and the President has endorsed it. We should not let 
this opportunity for enacting meaningful health reform slip away by 
loading down this bill with a number of controversial provisions. The 
only way to enact health reform is to support the Kassebaum-Kennedy-
Roukema alternative which the substitute embodies.
  I yield back the balance of my time.
  Mr. VENTO. Mr. Speaker, I rise today to oppose the bill and support 
the Democratic substitute on this important issue of health insurance 
reform.
  It is clear that there are serious problems with our current health 
care system. In 1994, Congress was working to address these problems 
and implement broad health care reforms, expanding access to health 
care coverage and reining in escalating health care costs. Those 
efforts were stymied, and during the past year and a half Republicans 
have mostly concentrated on cutting back on health care, by attempting 
to slash Medicare and Medicaid. In fact half the specified savings in 
the GOP reconciliation plan were from health care, that is, Medicare 
and Medicaid cuts.
  In the absence of broader health care reforms, Americans are relying 
on us to at least enact some limited but important insurance reforms. 
There is some bipartisan support for many of the provisions before us 
today, but unfortunately, the Republican leadership is polarizing and 
threatening the enactment of these modest reforms. The GOP House 
leadership is seriously jeopardizing the bill by loading it up like a 
Christmas tree with controversial ornaments, like medical savings 
accounts and medical malpractice reform. These ornaments are a 
distraction from the issues and while they may be pretty to look at, we 
should certainly examine and consider these provisos separately, not as 
part of the basic agreed upon reforms.
  In our dysfunctional health care system, insurance companies have too 
often taken steps to shift costs and deny health care coverage to 
people in order to lower their risk and increase their profit margin 
and competitiveness. The Democratic substitute is the best alternative 
today. It prohibits insurers and employers from limiting or denying 
coverage because of a preexisting condition. It would prohibit insurers 
from denying coverage to employers and prevent health plans from 
excluding any employee on the basis of health status. Health plans 
would be required to renew coverage for groups and individuals as long 
as premiums are paid. The Democratic substitute would also guarantee 
that individuals who leave group coverage will be able to purchase 
individual health insurance policies.
  Millions of Americans would benefit from such legislation. It would 
allow people who want to change their jobs to take their health 
insurance with them, ending the phenomenon of job lock. It would end 
the unfair insurance practice of employing preexisting conditions 
clauses to avoid coverage of categories of persons. These changes 
proposed in the Democratic substitute are needed to increase health 
care security for working American families.
  However, the Republican proposal is disingenous and demonstrates 
today their policy path; solve health care problems by changing the 
topic. They have included a provision in their bill to establish 
medical savings accounts which will in essence drive health care costs 
up for most and balloon the deficit. This proposal will weaken the 
overall health system as healthier and wealthier people leave the 
traditional insurance risk pool. First of all most Americans cannot 
afford to put aside $2,000 a year into a tax-free account. People with 
existing health problems and without savings income would be left in 
the traditional insurance pool and will find it more difficult to 
afford escalating health care costs. I do not believe that this is the 
kind of change in the health care system that the American people want. 
This will further polarize and divide the concept of community rating. 
In fact, the main beneficiaries of this proposal will be the insurance 
companies.

  For months, Republicans have delayed consideration of this bill until 
they were embarrassed into bringing it to the floor by the President's 
State of the Union statement. Now the Republicans are going to burden 
the bill by overloading the vehicle so that it will sink. The 
Republican political agenda apparently takes precedent over good people 
policy. The special interests wish list that the Republican leadership 
tries to satisfy threatens the passage of the core insurance reforms 
necessary to secure health care coverage for millions of Americans. 
This is wrong and should be rejected.
  Congress must respond to the needs of the American people and enact 
responsible health insurance reform, not sidetrack the issue and leave 
the American people in the lurch. I urge my colleagues to oppose the 
controversial provisions of the bill and support the Democratic 
substitute.
  Mr. RICHARDSON. Mr. Speaker, voting for this substitute means that 
you are serious about allowing your constituents to have access to 
health insurance.
  This substitute is simple policy. If you want to tell insurance 
companies they cannot deny Americans who have beat a life-threatening 
disease or condition insurance coverage, vote for this substitute.
  If you want to allow hard working families in your district to keep 
their health care when they change jobs, vote for this substitute.
  If you want to help small businesses and entrepreneurs afford health 
care, vote for this substitute.
  This substitute is a bipartisan effort. Republicans and Democrats in 
the Senate agree on it.
  A Republican Member introduced this bill in the House and over 170 
Democrats have cosponsored it.
  Mr. Speaker, this is not about partisan politics. It is about doing 
what is right for the American people. About giving working American 
families access to insurance coverage for themselves and their 
families.
  The SPEAKER pro tempore (Mr. Combest). Pursuant to House Resolution 
392, the previous question is ordered on the bill as amended.
  The question is on the amendment in the nature of a substitute 
offered by the gentleman from Michigan [Mr. Dingell].
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.
  Mr. BENTSEN. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make a point of order a quorum is not 
present.
  The SPEAKER pro tempore. Evidently a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  The vote was taken by electronic device, and there were--yeas 192, 
nays 226, not voting 14, as follows:

                             [Roll No. 104]

                               YEAS--192

     Abercrombie
     Ackerman
     Andrews
     Baesler
     Baldacci
     Barcia
     Barrett (WI)
     Becerra
     Beilenson
     Bentsen
     Berman
     Bevill
     Bishop
     Boehlert
     Bonior
     Borski
     Boucher
     Brewster
     Browder
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Cardin
     Chapman
     Clay
     Clayton
     Clement
     Clyburn
     Collins (MI)
     Condit

[[Page H3138]]


     Conyers
     Costello
     Coyne
     Cramer
     Danner
     de la Garza
     DeFazio
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Doyle
     Duncan
     Durbin
     Edwards
     Engel
     Evans
     Farr
     Fattah
     Fazio
     Filner
     Flake
     Foglietta
     Ford
     Frank (MA)
     Franks (NJ)
     Frelinghuysen
     Frost
     Furse
     Gejdenson
     Gephardt
     Geren
     Gibbons
     Gonzalez
     Green
     Gutierrez
     Hall (OH)
     Hamilton
     Harman
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Holden
     Hoyer
     Jackson (IL)
     Jackson-Lee (TX)
     Jacobs
     Jefferson
     Johnson (SD)
     Johnson, E.B.
     Johnston
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kennelly
     Kildee
     Kleczka
     Klink
     LaFalce
     Lantos
     Levin
     Lewis (GA)
     Lincoln
     Lipinski
     Lofgren
     Lowey
     Luther
     Maloney
     Manton
     Markey
     Martinez
     Martini
     Mascara
     Matsui
     McCarthy
     McDermott
     McHale
     McKinney
     Meehan
     Meek
     Menendez
     Miller (CA)
     Minge
     Mink
     Moakley
     Mollohan
     Moran
     Murtha
     Nadler
     Oberstar
     Obey
     Olver
     Ortiz
     Orton
     Owens
     Pallone
     Pastor
     Payne (NJ)
     Payne (VA)
     Pelosi
     Peterson (FL)
     Peterson (MN)
     Pickett
     Pomeroy
     Poshard
     Quinn
     Rahall
     Rangel
     Reed
     Richardson
     Rivers
     Roberts
     Roemer
     Rose
     Roukema
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schroeder
     Schumer
     Scott
     Serrano
     Sisisky
     Skaggs
     Skelton
     Slaughter
     Spratt
     Stark
     Stenholm
     Studds
     Stupak
     Tanner
     Tejeda
     Thompson
     Thornton
     Thurman
     Torkildsen
     Torres
     Torricelli
     Towns
     Traficant
     Velazquez
     Vento
     Visclosky
     Volkmer
     Walsh
     Ward
     Waters
     Watt (NC)
     Waxman
     Wilson
     Wise
     Woolsey
     Wynn
     Yates

                               NAYS--226

     Allard
     Archer
     Armey
     Bachus
     Baker (CA)
     Baker (LA)
     Ballenger
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bilbray
     Bilirakis
     Bliley
     Blute
     Boehner
     Bonilla
     Bono
     Brownback
     Bryant (TN)
     Bunn
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Chrysler
     Clinger
     Coble
     Coburn
     Collins (GA)
     Combest
     Cooley
     Cox
     Crane
     Crapo
     Cremeans
     Cubin
     Cunningham
     Davis
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Doolittle
     Dornan
     Dreier
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Fawell
     Fields (TX)
     Flanagan
     Foley
     Forbes
     Fox
     Franks (CT)
     Frisa
     Funderburk
     Gallegly
     Ganske
     Gekas
     Gilchrest
     Gillmor
     Gilman
     Gingrich
     Goodlatte
     Goodling
     Gordon
     Goss
     Graham
     Greenwood
     Gunderson
     Gutknecht
     Hall (TX)
     Hancock
     Hansen
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Heineman
     Herger
     Hilleary
     Hobson
     Hoekstra
     Hoke
     Horn
     Hostettler
     Houghton
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kim
     King
     Kingston
     Klug
     Knollenberg
     Kolbe
     LaHood
     Largent
     Latham
     LaTourette
     Laughlin
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Lightfoot
     Linder
     Livingston
     LoBiondo
     Longley
     Lucas
     Manzullo
     McCollum
     McCrery
     McDade
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Meyers
     Mica
     Miller (FL)
     Molinari
     Montgomery
     Moorhead
     Morella
     Myers
     Myrick
     Nethercutt
     Neumann
     Ney
     Norwood
     Nussle
     Oxley
     Packard
     Parker
     Paxon
     Petri
     Pombo
     Porter
     Portman
     Pryce
     Quillen
     Radanovich
     Ramstad
     Regula
     Riggs
     Rogers
     Rohrabacher
     Roth
     Royce
     Salmon
     Sanford
     Saxton
     Scarborough
     Schaefer
     Schiff
     Seastrand
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Shuster
     Skeen
     Smith (MI)
     Smith (NJ)
     Solomon
     Souder
     Spence
     Stearns
     Stockman
     Stump
     Talent
     Tate
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Thomas
     Thornberry
     Tiahrt
     Upton
     Vucanovich
     Waldholtz
     Walker
     Wamp
     Watts (OK)
     Weldon (FL)
     Weller
     White
     Whitfield
     Wicker
     Williams
     Wolf
     Young (AK)
     Young (FL)
     Zeliff
     Zimmer

                             NOT VOTING--14

     Bryant (TX)
     Coleman
     Collins (IL)
     Dooley
     Eshoo
     Fields (LA)
     Fowler
     McNulty
     Neal
     Ros-Lehtinen
     Smith (TX)
     Smith (WA)
     Stokes
     Weldon (PA)

                              {time}  2225

  Messrs. HILLEARY, NUSSLE, and STOCKMAN changed their vote from 
``yea'' to ``nay.''
  So the amendment in the nature of a substitute was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore (Mr. Combest). The question is on the 
engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.

                              {time}  2230


               motion to recommit offered by mr. pallone

  Mr. PALLONE. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore (Mr. Combest). Is the gentleman opposed to 
the bill?
  Mr. PALLONE. Yes, Mr. Speaker, I am.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. Pallone moves to recommit the bill, H.R. 3103, to the 
     Committee on Ways and Means with instructions that the 
     Committee report the bill back to the House forthwith with 
     the following amendment:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Health Insurance Reform Act 
     of 1996''.

       TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

                       TABLE OF CONTENTS OF TITLE

Sec. 100. Definitions.

                     Subtitle A--Group Market Rules

Sec. 101. Guaranteed availability of health coverage.
Sec. 102. Guaranteed renewability of health coverage.
Sec. 103. Portability of health coverage and limitation on preexisting 
              condition exclusions.
Sec. 104. Special enrollment periods.
Sec. 105. Disclosure of information.

                  Subtitle B--Individual Market Rules

Sec. 110. Individual health plan portability.
Sec. 111. Guaranteed renewability of individual health coverage.
Sec. 112. State flexibility in individual market reforms.
Sec. 113. Definition.

                    Subtitle C--COBRA Clarifications

Sec. 121. Cobra clarification.

        Subtitle D--Private Health Plan Purchasing Cooperatives

Sec. 131. Private health plan purchasing cooperatives.

          Subtitle E--Application and Enforcement of Standards

Sec. 141. Applicability.
Sec. 142. Enforcement of standards.

                  Subtitle F--Miscellaneous Provisions

Sec. 191. Health coverage availability study.
Sec. 192. Effective date.
Sec. 193. Severability.

     SEC. 100. DEFINITIONS.

       As used in this title:
       (1) Beneficiary.--The term ``beneficiary'' has the meaning 
     given such term under section 3(8) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(8)).
       (2) Employee.--The term ``employee'' has the meaning given 
     such term under section 3(6) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(6)).
       (3) Employer.--The term ``employer'' has the meaning given 
     such term under section 3(5) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(5)), except that 
     such term shall include only employers of two or more 
     employees.
       (4) Employee health benefit plan.--
       (A) In general.--The term ``employee health benefit plan'' 
     means any employee welfare benefit plan, governmental plan, 
     or church plan (as defined under paragraphs (1), (32), and 
     (33) of section 3 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1002 (1), (32), and (33))) that 
     provides or pays for health benefits (such as provider and 
     hospital benefits) for participants and beneficiaries 
     whether--
       (i) directly;
       (ii) through a group health plan offered by a health plan 
     issuer as defined in paragraph (8); or
       (iii) otherwise.
       (B) Rule of construction.--An employee health benefit plan 
     shall not be construed to be a group health plan, an 
     individual health plan, or a health plan issuer.
       (C) Arrangements not included.--Such term does not include 
     the following, or any combination thereof:
       (i) Coverage only for accident, or disability income 
     insurance, or any combination thereof.
       (ii) Medicare supplemental health insurance (as defined 
     under section 1882(g)(1) of the Social Security Act).
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Workers compensation or similar insurance.
       (vi) Automobile medical payment insurance.
       (vii) Coverage for a specified disease or illness.
       (viii) Hospital or fixed indemnity insurance.
       (ix) Short-term limited duration insurance.

[[Page H3139]]

       (x) Credit-only, dental-only, or vision-only insurance.
       (xi) A health insurance policy providing benefits only for 
     long-term care, nursing home care, home health care, 
     community-based care, or any combination thereof.
       (5) Family.--
       (A) In general.--The term ``family'' means an individual, 
     the individual's spouse, and the child of the individual (if 
     any).
       (B) Child.--For purposes of subparagraph (A), the term 
     ``child'' means any individual who is a child within the 
     meaning of section 151(c)(3) of the Internal Revenue Code of 
     1986.
       (6) Group health plan.--
       (A) In general.--The term ``group health plan'' means any 
     contract, policy, certificate or other arrangement offered by 
     a health plan issuer to a group purchaser that provides or 
     pays for health benefits (such as provider and hospital 
     benefits) in connection with an employee health benefit plan.
       (B) Arrangements not included.--Such term does not include 
     the following, or any combination thereof;
       (i) Coverage only for accident, or disability income 
     insurance, or any combination thereof.
       (ii) Medicare supplemental health insurance (as defined 
     under section 1882(g)(1) of the Social Security Act).
       (iii) Coverage issued as a supplement to liability 
     insurance.
       (iv) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (v) Workers compensation or similar insurance.
       (vi) Automobile medical payment insurance.
       (vii) Coverage for a specified disease or illness.
       (ix) Short-term limited duration insurance.
       (x) Credit-only, dental-only, or vision-only insurance.
       (xi) A health insurance policy providing benefits only for 
     long-term care, nursing home care, home health care, 
     community-based care, or any combination thereof.
       (7) Group purchaser.--The term ``group purchaser'' means 
     any person (as defined under paragraph (9) of section 3 of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1002(9)) or entity that purchases or pays for health 
     benefits (such as provider or hospital benefits) on behalf of 
     two or more participants or beneficiaries in connection with 
     an employee health benefit plan. A health plan purchasing 
     cooperative established under section 131 shall not be 
     considered to be a group purchaser.
       (8) Health plan issuer.--The term ``health plan issuer'' 
     means any entity that is licensed (prior to or after the date 
     of enactment of this Act) by a State to offer a group health 
     plan or an individual health plan.
       (9) Health status.--The term ``health status'' includes. 
     with respect to an individual, medical condition, claims 
     experience, receipt of health care, medical history, genetic 
     information, evidence of insurability (including conditions 
     arising out of acts of domestic violence), or disability.
       (10) Participant.--The term ``participant'' has the meaning 
     given such term under section 3(7) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1002(7)).
       (11) Plan sponsor.--The term ``plan sponsor'' has the 
     meaning given such term under section 3(16)(B) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1002(16)(B)).
       (12) Secretary.--The term ``Secretary'', unless 
     specifically provided otherwise, means the Secretary of 
     Labor.
       (13) State.--The term ``State'' means each of the several 
     States, the District of Columbia, Puerto Rico, the United 
     States Virgin Islands, Guam, American Samoa, and the 
     Commonwealth of the Northern Mariana Islands.

                     Subtitle A--Group Market Rules

     SECTION 101. GUARANTEED AVAILABILITY OF HEALTH COVERAGE.

       (a) In General.--
       (1) Nondiscrimination.--Except as provided in subsection 
     (b), section 102 and section 103--
       (A) a health plan issuer offering a group health plan may 
     not decline to offer whole group coverage to a group 
     purchaser desiring to purchase such coverage; and
       (B) an employee health benefit plan or a health plan issuer 
     offering a group health plan may establish eligibility, 
     continuation of eligibility, enrollment, or premium; 
     contribution requirements under the terms of such plan, 
     except that such requirements shall not be based on health 
     status (as defined in section 100(9)).
       (2) Health promotion and disease prevention.--Nothing in 
     this subsection shall prevent an employee health benefit plan 
     or a health plan issuer from establishing premium; discounts 
     or modifying otherwise applicable copayments or deductibles 
     in return for adherence to programs of health promotion and 
     disease prevention.
       (b) Application of Capacity Limits.--
       (1) In general.--Subject to paragraph (2), a health plan 
     issuer offering a group health plan may cease offering 
     coverage to group purchasers under the plan if--
       (A) the health plan issuer ceases to offer coverage to any 
     additional group purchasers; and
       (B) the health plan issuer can demonstrate to the 
     applicable certifying authority (as defined in section 
     142(d)), if required, that its financial or provider capacity 
     to serve previously covered participants and beneficiaries 
     (and additional participants and beneficiaries who will be 
     expected to enroll because of their affiliation with a group 
     purchaser or such previously covered participants or 
     beneficiaries) will be impaired if the health plan issuer is 
     required to offer coverage to additional group purchasers.

     Such health plan issuer shall be prohibited from offering 
     coverage after a cessation in offering coverage under this 
     paragraph for a 6-month period or until the health plan 
     issuer can demonstrate to the applicable certifying authority 
     (as defined in section 142(d)) that the health plan issuer 
     has adequate capacity, whichever is later.
       (2) First-come-first-served.--A health plan issuer offering 
     a group health plan is only eligible to exercise the 
     limitations provided for in paragraph (1) if the health plan 
     issuer offers coverage to group purchasers under such plan on 
     a first-come-first-served basis or other basis established by 
     a State to ensure a fair opportunity to enroll in the plan 
     and avoid risk selection.
       (c) Construction.--
       (1) Marketing of group health plans.--Nothing in this 
     section shall be construed to prevent a State from requiring 
     health plan issuers offering group health plans to actively 
     market such plans.
       (2) Involuntary offering of group health plans.--Nothing is 
     this section shall be construed to require a health plan 
     issuer to involuntarily offer group health plans in a 
     particular market. For the purposes of this paragraph, the 
     term ``market'' means either the large employer market or the 
     small employer market (as defined under applicable State law, 
     or if not so defined, an employer with not more than 50 
     employees).

     SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COVERAGE.

       (a) In General.--
       (1) Group purchaser.--Subject to subsections (b) and (c), a 
     group health plan shall be renewed or continued in force by a 
     health plan issuer at the option of the group purchaser, 
     except that the requirement of this subparagraph shall not 
     apply in the case of--
       (A) the nonpayment of premiums or contributions by the 
     group purchaser in accordance with the terms of the group 
     health plan or where the health plan issuer has not received 
     timely premium payments;
       (B) fraud or misrepresentation of material fact on the part 
     of the group purchaser;
       (C) the termination of the group health plan in accordance 
     with subsection (b); or
       (D) the failure of the group purchaser to meet contribution 
     or participation requirements in accordance with paragraph 
     (3).
       (2) Participant.--Subject to subsections (b) and (c), 
     coverage under an employee health benefit plan or group 
     health plan shall be renewed or continued in force, if the 
     group purchaser elects to continue to provide coverage under 
     such plan, at the option of the participant (or beneficiary 
     where such right exists under the terms of the plan or under 
     applicable law), except that the requirement of this 
     paragraph shall not apply in the case of--
       (A) the nonpayment of premiums or contributions by the 
     participant or beneficiary in accordance with the terms of 
     the employee health benefit plan or group health plan or 
     where such plan has not received timely premium payments.
       (B) fraud or misrepresentation of material fact on the part 
     of the participant or beneficiary relating to an application 
     for coverage or claim for benefits;
       (C) the termination of the employee health benefit plan or 
     group health plan;
       (D) loss of eligibility for continuation coverage as 
     described in part 6 of subtitle B of title I of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1161 et 
     seq.); or
       (E) failure of a participant or beneficiary to meet 
     requirements for eligibility for coverage under an employee 
     health benefit plan or group health plan that are not 
     prohibited by this title.
       (3) Rules of construction.--Nothing in this subsection, nor 
     in section 101(a), shall be construed to--
       (A) preclude a health plan issuer from establishing 
     employer contribution rules or group participation rules for 
     group health plans as allowed under applicable State law;
       (B) preclude a plan defined in section 3(37) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1102(37)) from establishing employer contribution rules or 
     group participation rules; or
       (C) permit individuals to decline coverage under an 
     employee health benefit plan if such right is not otherwise 
     available under such plan.
       (b) Termination of Group Health Plans.--
       (1) Particular type of group health plan not offered.--In 
     any case in which a health plan issuer decides to discontinue 
     offering a particular type of group health plan. A group 
     health plan of such type may be discontinued by the health 
     plan issuer only if--
       (A) the health plan issuer provides notice to each group 
     purchaser covered under a group health plan of this type (and 
     participants and beneficiaries covered under such group 
     health plan) of such discontinuation at least 90 days prior 
     to the date of the discontinuation of such plan;
       (B) the health plan issuer offers to each group purchaser 
     covered under a group health plan of this type, the option to 
     purchase any other group health plan currently being offered 
     by the health plan issuer; and
       (C) in exercising the option to discontinue a group health 
     plan of this type and in offering one or more replacement 
     plans, the

[[Page H3140]]

     health plan issuer acts uniformly without regard to the 
     health status of participants or beneficiaries covered under 
     the group health plan, or new participants or beneficiaries 
     who may become eligible for coverage under the group health 
     plan.
       (2) Discontinuance of all group health plans.--
       (A) In general.--In any case in which a health plan issuer 
     elects to discontinue offering all group health plans in a 
     State, a group health plan may be discontinued by the health 
     plan issuer only if--
       (i) the health plan issuer provides notice to the 
     applicable certifying authority (as defined in section 
     142(d)) and to each group purchaser (and participants and 
     beneficiaries covered under such group health plan) of such 
     discontinuation at least 180 days prior to the date of the 
     expiration of such plan, and
       (ii) all group health plans issued or delivered for 
     issuance in the State or discontinued and coverage under such 
     plans is not renewed.
       (B) Application of provisions.--The provisions of this 
     paragraph and paragraph (3) may be applied separately by a 
     health plan issuer--
       (i) to all group health plans offered to small employers 
     (as defined under applicable State law, or if not so defined, 
     an employer with not more than 50 employees); or
       (ii) to all other group health plans offered by the health 
     plan issuer in the State.
       (3) Prohibition on market reentry.--In the case of a 
     discontinuation under paragraph (2), the health plan issuer 
     may not provide for the issuance of any group health plan in 
     the market sector (as described in paragraph (2)(B)) in which 
     issuance of such group health plan was discontinued in the 
     State involved during the 5-year period beginning on the date 
     of the discontinuation of the last group health plan not so 
     renewed.
       (c) Treatment of Network Plans.--
       (1) Geographic limitations.--A network plan (as defined in 
     paragraph (2)) may deny continued participation under such 
     plan to participants or beneficiaries who neither live, 
     reside, nor work in an area in which such network plan is 
     offered, but only if such denial is applied uniformly, 
     without regard to health status of particular participants or 
     beneficiaries.
       (2) Network plan.--As used in paragraph (1), the term 
     ``network plan'' means an employee health benefit plan or a 
     group health plan that arranges for the financing and 
     delivery of health care services to participants or 
     beneficiaries covered under such plan, in whole or in part, 
     through arrangements with providers.
       (d) COBRA Coverage.--Nothing in subsection (a)(2)(E) or 
     subsection (c) shall be construed to affect any right to 
     COBRA continuation coverage as described in part 6 of 
     subtitle B of title I of the employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1161 et seq.).

     SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMITATION ON 
                   PREEXISTING CONDITION EXCLUSIONS.

       (a) In General.--An employee health benefit plan or a 
     health plan issuer offering a group health plan may impose a 
     limitation or exclusion of benefits relating to treatment of 
     a preexisting condition based on the fact that the condition 
     existed prior to the coverage of the participant or 
     beneficiary under the plan only if--
       (1) the limitation or exclusion extends for a period of not 
     more than 12 months after the date of enrollment in the plan;
       (2) the limitation or exclusion does not apply to an 
     individual who, within 30 days of the date of birth or 
     placement for adoption (as determined under section 
     609(c)(3)(B) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1169(c)(3)(B)), was covered under the 
     plan; and
       (3) the limitation or exclusion does not apply to a 
     pregnancy.
       (b) Crediting of Previous Qualifying Coverage.--
       (1) In general.--Subject to paragraph (4), an employee 
     health benefit plan or a health plan issuer offering a group 
     health plan shall provide that if a participant or 
     beneficiary is in a period of previous qualifying coverage as 
     of the date of enrollment under such plan, any period of 
     exclusion or limitation of coverage with respect to a 
     preexisting condition shall be reduced by 1 month for each 
     month in which the participant or beneficiary was in the 
     period of previous qualifying coverage. With respect to an 
     individual described in subsection (a)(2) who maintains 
     continuous coverage, no limitation or exclusion of benefits 
     relating to treatment of a preexisting condition may be 
     applied to a child within the child's first 12 months of life 
     or within 12 months after the placement of a child for 
     adoption.
       (2) Discharge of duty.--An employee health benefit plan 
     shall provide documentation of coverage to participants and 
     beneficiaries who coverage is terminated under the plan. 
     Pursuant to regulations promulgated by the Secretary, the 
     duty of an employee health benefit plan to verify previous 
     qualifying coverage with respect to a participant or 
     beneficiary is effectively discharged when such employee 
     health benefit plan provides documentation to a participant 
     or beneficiary that includes the following information:
       (A) the dates that the participant or beneficiary was 
     covered under the plan; and
       (B) the benefits and cost-sharing arrangement available to 
     the participant or beneficiary under such plan.
     An employee health benefit plan shall retain the 
     documentation provided to a participant or beneficiary under 
     subparagraphs (A) and (B) for at least the 12-month period 
     following the date on which the participant or beneficiary 
     ceases to be covered under the plan. Upon request, an 
     employee health benefit plan shall provide a second copy of 
     such documentation or such participant or beneficiary within 
     the 12-month period following the date of such ineligibility.
       (3) Definitions.--As used in this section:
       (A) Previous qualifying coverage.--The term ``previous 
     qualifying coverage'' means the period beginning on the 
     date--
       (i) a participant or beneficiary is enrolled under an 
     employee health benefit plan or a group health plan, and 
     ending on the date the participant or beneficiary is not so 
     enrolled; or
       (ii) an individual is enrolled under an individual health 
     plan (as defined in section 113) or under a public or private 
     health plan established under Federal or State law, and 
     ending on the date the individual is not so enrolled;

     for a continuous period of more than 30 days (without regard 
     to any waiting period).
       (B) Limitation or exclusion of benefits relating to 
     treatment of a preexisting condition.--The term ``limitation 
     or exclusion of benefits relating to treatment of a 
     preexisting condition'' means a limitation or exclusion of 
     benefits imposed on an individual based on a preexisting 
     condition of such individual.
       (4) Effect of previous coverage.--An employee health 
     benefit plan or a health plan issuer offering a group health 
     plan may impose a limitation or exclusion of benefits 
     relating to the treatment of a preexisting condition, subject 
     to the limits in subsection (a)(1), only to the extent that 
     such service or benefit was not previously covered under the 
     group health plan, employee health benefit plan, or 
     individual health plan in which the participant or 
     beneficiary was enrolled immediately prior to enrollment in 
     the plan involved.
       (c) Late Enrollees.--Except as provided in section 104, 
     with respect to a participant or beneficiary enrolling in an 
     employee health benefit plan or group health plan during a 
     time that is other than the first opportunity to enroll 
     during an enrollment period of at least 30 days, coverage 
     with respect to benefits or services relating to the 
     treatment of a preexisting condition in accordance with 
     subsection (a) and (b) may be excluded except the period of 
     such exclusion may not exceed 18 months beginning on the date 
     of coverage under the plan.
       (d) Affiliation Periods.--With respect to a participant or 
     beneficiary who would otherwise be eligible to receive 
     benefits under an employee health benefit plan or a group 
     health plan but for the operation of a preexisting condition 
     limitation or exclusion, if such plan does not utilize a 
     limitation or exclusion of benefits relating to the treatment 
     of a preexisting condition, such plan may impose an 
     affiliation period on such participant or beneficiary not to 
     exceed 60 days (or in the case of a late participant or 
     beneficiary described in subsection (c), 90 days) from the 
     date on which the participant or beneficiary would otherwise 
     be eligible to receive benefits under the plan. An employee 
     health benefit plan or a health plan issuer offering a group 
     health plan may also use alternative methods to address 
     adverse section as approved by the applicable certifying 
     authority (as defined in section 142(d)). During such an 
     affiliation period, the plan may not be required to provide 
     health care services or benefits and no premium shall be 
     charged to the participant or beneficiary.
       (e) Preexisting Conditions.--For purposes of this section, 
     the term ``preexisting condition'' means a condition, 
     regardless of the cause of the condition, for which medical 
     advice, diagnosis, care, or treatment was recommended or 
     received within the 6-month period ending on the day before 
     the effective date of the coverage (without regard to any 
     waiting period).
       (f) State Flexibility.--Nothing in this section shall be 
     construed to preempt State laws that--
       (1) require health plan issuers to impose a limitation or 
     exclusion of benefits relating to the treatment of a 
     preexisting condition for periods that are shorter than those 
     provided for under this section; or
       (2) allow individuals, participants, and beneficiaries to 
     be considered to be in a period of previous qualifying 
     coverage if such individual, participant, or beneficiary 
     experiences a lapse in coverage that is greater than the 30-
     day period provided for under subsection (b)(3);

     unless such laws are preempted by section 514 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1144).

     SEC. 104. SPECIAL ENROLLMENT PERIODS.

       In the case of a participant, beneficiary or family member 
     who--
       (1) through marriage, separation, divorce, death, birth or 
     placement of a child for adoption, experiences a change in 
     family composition affecting eligibility under a group health 
     plan, individual health plan, or employee health benefit 
     plan;
       (2) experiences a change in employment status, as described 
     in section 603(2) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1163(2)), that causes the loss of 
     eligibility for coverage, other than COBRA continuation 
     coverage under a group health plan, individual health plan, 
     or employee health benefit plan; or

[[Page H3141]]

       (3) experiences a loss of eligibility under a group health 
     plan, individual health plan, or employee health benefit plan 
     because of a change in the employment status of a family 
     member;

     each employee health benefit plan and each group health plan 
     shall provide for a special enrollment period extending for a 
     reasonable time after such event that would permit the 
     participant to change the individual or family basis of 
     coverage or to enroll in the plan if coverage would have been 
     available to such individual, participant, or beneficiary but 
     for failure to enroll during a previous enrollment period. 
     Such a special enrollment period shall ensure that a child 
     born or placed for adoption shall be deemed to be covered 
     under the plan as of the date of such birth or placement for 
     adoption if such child is enrolled within 30 days of the date 
     of such birth or placement for adoption.

     SEC. 105. DISCLOSURE OF INFORMATION.

       (a) Disclosure of Information by Health Plan Issuer.--
       (1) In general.--In connection with the offering of any 
     group health plan to a small employer (as defined under 
     applicable State law, or if not so defined, an employer with 
     not more than 50 employees), a health plan issuer shall make 
     a reasonable disclosure to such employer, as part of its 
     solicitation and sales materials, of--
       (A) the provisions of such group health plan concerning the 
     health plan issuer's right to change premium rates and the 
     factors that may affect changes in premium rates.
       (B) the provisions of such group health plan relating to 
     renewability of coverage;
       (C) the provisions of such group health plan relating to 
     any preexisting condition provision; and
       (D) descriptive information about the benefits and premiums 
     available under all group health plans for which the employer 
     is qualified.

     Information shall be provided to small employers under this 
     paragraph in a manner determined to be understandable by the 
     average small employer, and shall be sufficiently accurate 
     and comprehensive to reasonably inform small employers, 
     participants and beneficiaries of their rights and 
     obligations under the group health plan.
       (2) Exception.--With respect to the requirement of 
     paragraph (1), any information that is proprietary and trade 
     secret information under applicable law shall not be subject 
     to the disclosure requirements of such paragraph.
       (3) Construction.--Nothing in this subsection shall be 
     construed to preempt State reporting and disclosure 
     requirements to the extent that such requirements are not 
     preempted under section 514 of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1144).
       (b) Disclosure of Information to Participants and 
     Beneficiaries.--
       (1) In general.--Section 104(b)(1) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(1)) 
     is amended in the matter following subparagraph (B)--
       (A) by striking ``102(a)(1),'' and inserting ``102(a)(1) 
     that is not a material reduction in covered services or 
     benefits provided,''; and
       (B) by adding at the end thereof the following new 
     sentences: ``If there is a modification or change described 
     in section 102(a)(1) that is a material reduction in covered 
     services or benefits provided, a summary description of such 
     modification or change shall be furnished to participants not 
     later than 60 days after the date of the adoption of the 
     modification or change. In the alternative, the plan sponsors 
     may provide such description at regular intervals of not more 
     than 90 days. The Secretary shall issue regulations within 
     180 days after the date of enactment of the Health Insurance 
     Reform Act of 1996, providing alternative mechanisms to 
     delivery by mail through which employee health benefit plans 
     may notify participants of material reductions in covered 
     services or benefits.''.
       (2) Plan description and summary.--Section 102(b) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1022(b)) is amended--
       (A) by inserting ``including the office or title of the 
     individual who is responsible for approving or denying claims 
     for coverage of benefits'' after ``type of administration of 
     the plan'';
       (B) by inserting ``including the name of the organization 
     responsible for financing claims'' after ``source of 
     financing of the plan''; and
       (C) by inserting ``including the office, contact, or title 
     of the individual at the Department of Labor through which 
     participants may seek assistance or information regarding 
     their rights under this Act and title I of the Health 
     Insurance Reform Act of 1996 with respect to health benefits 
     that are not offered through a group health plan.'' after 
     ``benefits under the plan''.

                  Subtitle B--Individual Market Rules

     SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.

       (a) Limitation on Requirements.--
       (1) In general.--Except as provided in subsections (b) and 
     (c), a health plan issuer described in paragraph (3) may not, 
     with respect to an eligible individual (as defined in 
     subsection (b)) desiring to enroll in an individual health 
     plan--
       (A) decline to offer coverage to such individual, or deny 
     enrollment to such individual based on the health status of 
     the individual; or
       (B) impose a limitation or exclusion of benefits otherwise 
     covered under the plan for the individual based on a 
     preexisting condition unless such limitation or exclusion 
     could have been imposed if the individual remained covered 
     under a group health plan or employee health benefit plan 
     (including providing credit for previous coverage in the 
     manner provided under subtitle A).
       (2) Health promotion and disease prevention.--Nothing in 
     this subsection shall be construed to prevent a health plan 
     issuer offering an individual health plan from establishing 
     premium discounts or modifying otherwise applicable 
     copayments or deductibles in return for adherence to programs 
     of health promotion or disease prevention.
       (3) Health plan issuer.--A health plan issuer described in 
     this paragraph in a health plan issuer that issues or renews 
     individual health plans.
       (4) Premiums.--Nothing in this subsection shall be 
     construed to affect the determination of a health plan issuer 
     as to the amount of the premium payable under an individual 
     health plan under applicable State law.
       (b) Definition of Eligible Individual.--As used in 
     subsection (a)(1), the term ``eligible individual'' means an 
     individual who--
       (1) was a participant or beneficiary enrolled under one or 
     more group health plans, employee health benefit plans, or 
     public plans established under Federal or State law, for not 
     less than 18 months (without a lapse in coverage of more than 
     30 consecutive days) immediately prior to the date on which 
     the individual desired to enroll in the individual health 
     plan.
       (2) is not eligible for coverage under a group health plan 
     or an employee health benefit plan;
       (3) has not had coverage terminated under a group health 
     plan or employee health benefit plan for failure to make 
     required premium payments or contributions, or for fraud or 
     misrepresentation of material fact; and
       (4) has, if applicable, accepted and exhausted the maximum 
     required period of continuous coverage as described in 
     section 602(2)(A) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1162(2)(A)) or under an equivalent 
     State program.
       (c) Applicable of Capacity Limit.--
       (1) In general.--Subject to paragraph (2), a health plan 
     issuer offering coverage to individuals under an individual 
     health plan may cease enrolling individuals under the plan 
     if--
       (A) the health plan issuer ceases to enroll any new 
     individuals; and
       (B) the health plan issuer can demonstrate to the 
     applicable certifying authority (as defined in section 
     142(d)), if required, that its financial or provider capacity 
     to serve previously covered individuals will be impaired if 
     the health plan issuer is required to enroll additional 
     individuals.

     Such a health plan issuer shall be prohibited from offering 
     coverage after a cessation in offering coverage under this 
     paragraph for a 6-month period or until the health plan 
     issuer can demonstrate to the applicable certifying authority 
     (as defined in section 142(d)) that the health plan issuer 
     has adequate capacity, whichever is later.
       (2) First-come-first-served.--A health plan issuer offering 
     coverage to individuals under an individual health plan is 
     only eligible to exercise the limitations provided for in 
     paragraph (1) if the health plan issuer provides for 
     enrollment of individuals under such plan on a first-come-
     first-served basis or other basis established by a State to 
     ensure a fair opportunity to enroll in the plan and avoid 
     risk selection.
       (d) Market Requirement.--
       (1) In general.--The provisions of subsection (a) shall not 
     be construed to require that a health plan issuer offering 
     group health plans to group purchasers offer individual 
     health plans to individuals.
       (2) Conversion policies.--A health plan issuer offering 
     group health plans to group purchasers under this title shall 
     not be deemed to be a health plan issuer offering an 
     individual health plan solely because such health plan issuer 
     offers a conversion policy.
       (3) Marketing of plans.--Nothing in this section shall be 
     construed to prevent a State from requiring health plan 
     issuers offering coverage to individuals under an individual 
     health plan to actively market such plan.

     SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH 
                   COVERAGE.

       (a) In General.--Subject to subsections (b) and (c), 
     coverage for individuals under an individual health plan 
     shall be renewed or continued in force by a health plan 
     issuer at the option of the individual, except that the 
     requirement of this subsection shall not apply in the case 
     of--
       (1) the nonpayment of premiums or contributions by the 
     individual in accordance with the terms of the individual 
     health plan or where the health plan issuer has not received 
     timely premium payments;
       (2) fraud or misrepresentation of material fact on the part 
     of the individual; or
       (3) the termination of the individual health plan in 
     accordance with subsection (b).
       (b) Termination of Individual Health Plans.--
       (1) Particular type of individual health plan not 
     offered.--In any case in which a health plan issuer decides 
     to discontinue offering a particular type of individual 
     health plan to individuals, an individual health plan may be 
     discontinued by the health plan issuer only if--

[[Page H3142]]

       (A) the health plan issuer provides notice to each 
     individual covered under the plan of such discontinuation at 
     least 90 days prior to the date of the expiration of the 
     plan.
       (B) the health plan issuer offers to each individual 
     covered under the plan the option to purchase any other 
     individual health plan currently being offered by the health 
     plan issuer to individuals; and
       (C) in exercising the option to discontinue the individual 
     health plan and in offering one or more replacement plans, 
     the health plan issuer acts uniformly without regard to the 
     health status of particular individuals.
       (21) Discontinuance of all individual health plans.--In any 
     case in which a health plan issuer elects to discontinue all 
     individual health plans in a State, an individual health plan 
     may be discontinued by the health plan issuer only if--
       (A) the health plan issuer provides notice to the 
     applicable certifying authority (as defined in section 
     142(d)) and to each individual covered under the plan of such 
     discontinuation at least 180 days prior to the date of the 
     discontinuation of the plan; and
       (B) all individual health plans issued or delivered for 
     issuance in the State are discontinued and coverage under 
     such plans is not renewed.
       (3) Prohibition on market reentry.--In the case of a 
     discontinuation under paragraph (2), the health plan issuer 
     may not provide for the issuance of any individual health 
     plan in the State involved during the 5-year period beginning 
     on the date of the discontinuation of the last plan not so 
     renewed.
       (c) Treatment of Network Plans.--
       (1) Geographic limitations.--A health plan issuer which 
     offers a network plan (as defined in paragraph (2)) may deny 
     continued participation under the plan to individuals who 
     neither live, reside, nor work in an area in which the 
     individual health plan is offered, but only if such denial is 
     applied uniformly, without regard to health status of 
     particular individuals.
       (2) Network play.--As used in paragraph (1), the term 
     ``network plan'' means an individual health plan that 
     arranges for the financing and delivery of health care 
     services to individuals covered under such health plan, in 
     whole or in part, through arrangements with providers.

     SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET REFORMS.

       (a) In General.--With respect to any State law with respect 
     to which the Governor of the State notifies the Secretary of 
     Health and Human Services that such State law will achieve 
     the goals of sections 110 and 111, and that is in effect on, 
     or enacted after, the date of enactment of this Act (such as 
     laws providing for guaranteed issue, open enrollment by one 
     or more health plan issuers, high-risk pools, or mandatory 
     conversion policies), such State law shall apply in lieu of 
     the standards described in sections 110 and 111 unless the 
     Secretary of Health and Human Services determines, after 
     considering the criteria described in subsection (b)(1), in 
     consultation with the Governor and Insurance Commissioner or 
     chief insurance regulatory official of the State, that such 
     State law does not achieve the goals of providing access to 
     affordable health care coverage for those individuals 
     described in sections 110 and 111.
       (b) Determination.--
       (1) In general.--In making a determination under subsection 
     (a), the Secretary of Health and Human Services shall only--
       (A) evaluate whether the State law or program provides 
     guaranteed access to affordable coverage to individuals 
     described in sections 110 and 111;
       (B) evaluate whether the State law or program provides 
     coverage for preexisting conditions (as defined in section 
     103(e)) that were covered under the individuals' previous 
     group health plan or employee health benefit plan for 
     individuals described in sections 110 and 111.
       (C) evaluate whether the State law or program provides 
     individuals described in sections 110 and 111 with a choice 
     of health plans or a health plan providing comprehensive 
     coverage, and
       (D) evaluate whether the application of the standards 
     described in sections 110 and 111 will have an adverse impact 
     on the number of individuals in such State having access to 
     affordable coverage.
       (2) Notice of intent.--If, within 6 months after the date 
     of enactment of this Act, the Governor of a State notifies 
     the Secretary of Health and Human Services that the State 
     intends to enact a law, or modify an existing law, described 
     in subsection (a), the Secretary of Health and Human Services 
     may not make a determination under such subsection until the 
     expiration of the 12-month period beginning on the date on 
     which such notification is made, or until January 1, 1998, 
     whichever is later. With respect to a State that provides 
     notice under this paragraph and that has a legislature that 
     does not meet within the 12-month period beginning on the 
     date of enactment of this Act, the Secretary shall not make a 
     determination under subsection (a) prior to January 1, 1998.
       (3) Notice to state.--If the Secretary of Health and Human 
     Services determines that a State law or program does not 
     achieve the goals described in subsection (a), the Secretary 
     of Health and Human Services shall provide the State with 
     adequate notice and reasonable opportunity to modify such law 
     or program to achieve such goals prior to making a final 
     determination under subsection (a).
       (c) Adoption of NAIC Model.--If, not later than 9 months 
     after the date of enactment of this Act--
       (1) the National Association of Insurance Commissioners 
     (hereafter referred to as the ``NAIC''), through a process 
     which the Secretary of Health and Human Services determines 
     has included consultation with representatives of the 
     insurance industry and consumer groups, adopts a model 
     standard or standards for reform of the individual health 
     insurance market, and
       (2) the Secretary of Health and Human Services determines, 
     within 30 days of the adoption of such NAIC standard or 
     standards, that such standards comply with the goals of 
     sections 110 and 111:

     a State that elects to adopt such model standards or 
     substantially adopt such model standards shall be deemed to 
     have met the requirements of sections 110 and 111 and shall 
     be subject to a determination under subsection (a).

     SEC. 113. DEFINITION.

       (a) In General.--As used this title, the term ``individual 
     health plan'' means any contract, policy, certificate or 
     other arrangement offered to individuals by a health plan 
     issuer that provides or pays for health benefits (such as 
     provider and hospital benefits) and that is not a group 
     health plan under section 2(6).
       (b) Arrangements Not Included.--Such term does not include 
     the following, or any combination thereof:
       (1) Coverage only for accident, or disability income 
     insurance, or any combination thereof.
       (2) Medicare supplemental health insurance (as defined 
     under section 1882(g)(1) of the Social Security Act).
       (3) Coverage issued as a supplement to liability insurance.
       (4) Liability insurance, including general liability 
     insurance and automobile liability insurance.
       (5) Workers' compensation or similar insurance.
       (6) Automobile medical payment insurance.
       (7) Coverage for a specified disease or illness.
       (8) Hospital of fixed indemnity insurance.
       (9) Short-term limited duration insurance.
       (10) Credit-only, dental-only, or vision-only insurance.
       (11) A health insurance policy providing benefits only for 
     long-term care, nursing home care, home health care, 
     community-based care, or any combination thereof.

                    Subtitle C--COBRA Clarifications

     SEC. 121. COBRA CLARIFICATIONS.

       (a) Public Health Service Act.--
       (1) Period of coverage.--Section 2202(2) of the Public 
     Health Service Act (42 U.S.C. 300bb-2(2)) is amended--
       (A) in subparagraph (A)--
       (i) by transferring the sentence immediately preceding 
     clause (iv) so as to appear immediately following such clause 
     (iv); and
       (ii) in the last sentence (as so transferred)--
       (I) by inserting ``, or a beneficiary-family member of the 
     individual,'' after ``an individual''; and
       (II) by striking ``at the time of a qualifying event 
     described in section 2203(2)'' and inserting ``at any time 
     during the initial 18-month period of continuing coverage 
     under this title'';
       (B) in subparagraph (D)(i), by inserting before ``, or'' 
     the following: ``, except that the exclusion or limitation 
     contained in this clause shall not be considered to apply to 
     a plan under which a preexisting condition or exclusion does 
     not apply to an individual otherwise eligible for 
     continuation coverage under this section because of the 
     provision of the Health Insurance Reform Act of 1996'', and
       (C) in subparagraph (E), by striking ``at the time of a 
     qualifying event described in section 2203(2)'' and inserting 
     ``at any time during the initial 18-month period of 
     continuing coverage under this title'',
       (2) Election.--Section 2205(1)(C) of the Public Health 
     Service Act (42 U.S.C. 300bb-5(1)(C)) is amended--
       (A) in clause (i), by striking ``or'' at the end thereof.
       (B) in clause (ii), by striking the period and inserting 
     ``, or'', and
       (C) by adding at the end thereof the following new clause:
       ``(iii) in the case of an individual described in the last 
     sentence of section 2202(2)(A), or a beneficiary-family 
     member of the individual, the date such individual is 
     determined to have been disabled.''.
       (3) Notices.--Section 2206(3) of the Public Health Service 
     Act (42 U.S.C. 300bb-6(3)) is amended by striking ``at the 
     time of a qualifying event described in section 2203(2)'' and 
     inserting ``at any time during the initial 18-month period of 
     continuing coverage under this title''.
       (4) Birth or adoption of a child.--Section 2208(3)(A) of 
     the Public Health Service Act (42 U.S.C. 300bb-8(3)(A)) is 
     amended by adding at the end thereof the following new flush 
     sentence:

     ``Such term shall also include a child who is born to or 
     placed for adoption with the covered employee during the 
     period of continued coverage under this title.''.
       (b) Employee Retirement Income Security Act of 1974.--
       (1) Period of coverage.--Section 602(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1162(2)) is 
     amended--
       (A) in the last sentence of subparagraph (A)--
       (i) by inserting ``, or a beneficiary-family member of the 
     individual.'' after ``an individual''; and

[[Page H3143]]

       (ii) by striking ``at the time of a qualifying event 
     described in section 603(2)'' and inserting ``at any time 
     during the initial 18-month period of continuing coverage 
     under this part'',
       (B) in subparagraph (D)(i), by inserting before, ``, or'' 
     the following ``, except that the exclusion or limitation 
     contained in this clause shall not be considered to apply to 
     a plan under which a preexisting condition or exclusion does 
     not apply to an individual otherwise eligible for 
     continuation coverage under this section because of the 
     provision of the Health Insurance Reform Act of 1996''; and
       (C) in subparagraph (E), by striking ``at the time of a 
     qualifying event described in section 603(2)'' and inserting 
     ``at any time during the initial 18-month period of 
     continuing coverage under this part''.
       (2) Election.--Section 605(1)(C) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1165(1)(C)) is 
     amended--
       (A) in clause (i), by striking ``or'' at the end thereof;
       (B) in clause (ii), by striking the period and inserting 
     ``, or''; and
       (C) by adding at the end thereof the following new clause:
       ``(iii) in the case of an individual described in the last 
     sentence of section 602(2)(A), or a beneficiary-family member 
     of the individual, the date such individual is determined to 
     have been disabled.''.
       (3) Notices.--Section 606(3) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1166(3)) is amended by 
     striking ``at the time of a qualifying event described in 
     section 603(2)'' and inserting ``at any time during the 
     initial 18-month period of continuing coverage under this 
     part''.
       (4) Birth or adoption of a child.--Section 607(3)(A) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1167(3)) is amended by adding at the end thereof the 
     following new flush sentence:

     ``Such term shall also include a child who is born to or 
     placed for adoption with the covered employee during the 
     period of continued coverage under this part.''.
       (c) Internal Revenue Code of 1986.--
       (1) Period of coverage.--Section 4980B(f)(2)(B) of the 
     Internal Revenue Code of 1986 is amended--
       (A) in the last sentence of clause (i) by striking ``at the 
     time of a qualifying event described in paragraph (3)(B)'' 
     and inserting ``at any time during the initial 18-month 
     period of continuing coverage under this section''.
       (B) in clause (iv)(I), by inserting before ``, or'' the 
     following: ``, except that the exclusion or limitation 
     contained in this subclause shall not be considered to apply 
     to a plan under which a preexisting condition or exclusion 
     does not apply to an individual otherwise eligible for 
     continuation coverage under this subsection because of the 
     provision of the Health Insurance Reform Act of 1996''; and
       (C) in clause (v), by striking ``at the time of a 
     qualifying event described in paragraph (3)(B)'' and 
     inserting ``at any time during the initial 18-month period of 
     continuing coverage under this section''.
       (2) Election.--Section 4980B(f)(5)(A)(ii) of the Internal 
     Revenue Code of 1986 is amended--
       (A) in subclause (I), by striking ``or'' at the end 
     thereof;
       (B) in subclause (II), by striking the period and inserting 
     ``, or'', and
       (C) by adding at the end thereof the following new 
     subclause:
       ``(III) in the case of an qualified beneficiary described 
     in the last sentence of paragraph (2)(B)(i), the date such 
     individual is determined to have been disabled.''.
       (3) Notices.--Section 4980B(f)(6)(C) of the Internal 
     Revenue Code of 1986 is amended by striking ``at the time of 
     a qualifying event described in paragraph (3)(B)'' and 
     inserting ``at any time during the initial 18-month period of 
     continuing coverage under this section''.
       (4) Birth or adoption of a child.--Section 4980B(g)(1)(A) 
     of the Internal Revenue Code of 1986 is amended by adding at 
     the end thereof the following new flush sentence:

     ``Such term shall also include a child who is born to or 
     placed for adoption with the covered employee during the 
     period of continued coverage under this section.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to qualifying events occurring on or after the 
     date of enactment of this Act for plan years beginning after 
     December 31, 1997.
       (e) Notification of Changes.--Not later than 60 days prior 
     to the date on which this section becomes effective, each 
     group health plan (covered under title XXII of the Public 
     Health Service Act, part 6 of subtitle B of title I of the 
     Employee Retirement Income Security Act of 1974, and section 
     4980B(f) of the Internal Revenue Code of 1986) shall notify 
     each qualified beneficiary who has elected continuation 
     coverage under such title, part or section of the amendments 
     made by this section.

        Subtitle D--Private Health Plan Purchasing Cooperatives

     SEC. 131. PRIVATE HEALTH PLAN PURCHASING COOPERATIVES.

       (a) Definition.--As used in this title, the term ``health 
     plan purchasing cooperative'' means a group of individuals or 
     employers that, on a voluntary basis and in accordance with 
     this section, form a cooperative for the purpose of 
     purchasing individual health plans or group health plans 
     offered by health plan issuers. A health plan issuer, agent, 
     broker or any other individual or entity engaged in the sale 
     of insurance may not underwrite a cooperative.
       (b) Certification.--
       (1) In general.--If a group described in subsection (a) 
     desires to form a health plan purchasing cooperative in 
     accordance with this section and such group appropriately 
     notifies the State and the Secretary of such desire, the 
     State, upon a determination that such group meets the 
     requirements of this section, shall certify the group as a 
     health plan purchasing cooperative. The State shall make a 
     determination of whether such group meets the requirements of 
     this section in a timely fashion. Each such cooperative shall 
     also be registered with the Secretary.
       (2) State refusal to certify.--If a State fails to 
     implement a program for certifying health plan purchasing 
     cooperatives in accordance with the standards under this 
     title, the Secretary shall certify and oversee the operations 
     of such cooperative in such State.
       (3) Interstate cooperatives.--For purposes of this section 
     a health plan purchasing cooperative operating in more than 
     one State shall be certified by the State in which the 
     cooperative is domiciled. States may enter into cooperative 
     agreements for the purpose of certifying and overseeing the 
     operation of such cooperatives. For purposes of this 
     subsection, a cooperative shall be considered to be domiciled 
     in the State in which most of the members of the cooperative 
     reside.
       (c) Board of Directors.--
       (1) In general.--Each health plan purchasing cooperative 
     shall be governed by a Board of Directors that shall be 
     responsible for ensuring the performance of the duties of the 
     cooperative under this section. The Board shall be composed 
     of a board cross-section of representatives of employers, 
     employees, and individuals participating in the cooperative. 
     A health plan issuer, agent, broker or any other individual 
     or entity engaged in the sale of individual health plans or 
     group health plans may not hold or control any right to vote 
     with respect to a cooperative.
       (2) Limitation on compensation.--A health plan purchasing 
     cooperative may not provide compensation to members of the 
     Board of Directors. The cooperative may provide 
     reimbursements to such members for the reasonable and 
     necessary expenses incurred by the members in the performance 
     of their duties as members of the Board.
       (3) Conflict of interest.--No member of the Board of 
     Directors (or family members of such members) nor any 
     management personnel of the cooperative may be employed by, 
     be a consultant of, be a member of the board of directors or, 
     be affiliated with an agent of, or otherwise be a 
     representative of any health plan issuer, health care 
     provider, or agent or broker. Nothing in the preceding 
     sentence shall limit a member of the Board from purchasing 
     coverage offered through the cooperative.
       (d) Membership and Marketing Area.--
       (1) Membership.--A health plan purchasing cooperative may 
     establish limits on the maximum size of employers who may 
     become members of the cooperative, and may determine whether 
     to permit individuals to become members. Upon the 
     establishment of such membership requirements, the 
     cooperative shall, except as provided in subparagraph (B), 
     accept all employers (or individuals) residing within the 
     area served by the cooperative who meet such requirements as 
     members on a first-come, first-served basis, or on another 
     basis established by the State to ensure equitable access to 
     the cooperative.
       (2) Marketing area.--A State may establish rules regarding 
     the geographic area that must be served by a health plan 
     purchasing cooperative. With respect to a State that has not 
     established such rules, a health plan purchasing cooperative 
     operating in the State shall define the boundaries of the 
     area to be served by the cooperative, except that such 
     boundaries may not be established on the basis of health 
     status of the populations that reside in the area.
       (e) Duties and Responsibilities.--
       (1) In general.--A health plan purchasing cooperative 
     shall--
       (A) enter into agreements with multiple, unaffiliated 
     health plan issuers, except that the requirement of this 
     subparagraph shall not apply in regions (such as remote or 
     frontier areas) in which compliance with such requirement is 
     not possible.
       (B) enter into agreements with employers and individuals 
     who become members of the cooperative;
       (C) participate in any program of risk-adjustment or 
     reinsurance, or any similar program, that is established by 
     the State.
       (D) prepare and disseminate comparative health plan 
     materials (including information about cost, quality, 
     benefits, and other information concerning group health plans 
     and individual health plans offered through the cooperative);
       (E) actively market to all eligible employers and 
     individuals residing within the service area; and
       (F) act as an ombudsman for group health plan or individual 
     health plan enrollees.
       (2) Permissible activities.--A health plan purchasing 
     cooperative may perform such other functions as necessary to 
     further the purposes of this title, including--
       (A) collecting and distributing premiums and performing 
     other administrative functions;
       (B) collecting and analyzing surveys of enrollee 
     satisfaction;

[[Page H3144]]

       (C) charging membership fee to enrollees (such fees may not 
     be based on health status) and charging participation fees to 
     health plan issuers;
       (D) cooperating with (or accepting as members) employers 
     who provide health benefits directly to participants and 
     beneficiaries only for the purpose of negotiating with 
     providers, and
       (E) negotiating with health care providers and health plan 
     issuers.
       (f) Limitations on Cooperative Activities.--A health plan 
     purchasing cooperative shall not--
       (1) perform any activity relating to the licensing of 
     health plan issuers.
       (2) assume financial risk directly or indirectly on behalf 
     of members of a health plan purchasing cooperative relating 
     to any group health plan or individual health plan;
       (3) establish eligibility, continuation of eligibility, 
     enrollment, or premium contribution requirements for 
     participants, beneficiaries, or individuals based on health 
     status;
       (4) operate on a for-profit or other basis where the legal 
     structure of the cooperative permits profits to be made and 
     not returned to the members of the cooperative, except that a 
     for-profit health plan purchasing cooperative may be formed 
     by a nonprofit organization--
       (A) in which membership in such organization is not based 
     on health status; and
       (B) that accepts as members all employers or individuals on 
     a first-come, first-served basis, subject to any established 
     limit on the maximum size of and employer that may become a 
     member; or
       (5) perform any other activities that conflict or are 
     inconsistent with the performance of its duties under this 
     title.
       (g) Limited Preemptions of Certain State Laws.--
       (1) In general.--With respect to a health plan purchasing 
     cooperative that meets the requirements of this section, 
     State fictitious group laws shall be preempted.
       (2) Health plan issuers.--
       (A) Rating.--With respect to a health plan issuer offering 
     a group health plan or individual health plan through a 
     health plan purchasing cooperative that meets the 
     requirements of this section. State premium rating 
     requirement laws, except to the extent provided under 
     subparagraph (B), shall be preempted unless such laws permit 
     premium rates negotiated by the cooperative to be less than 
     rates that would otherwise be permitted under State law, if 
     such rating differential is not based on differences in 
     health status or demographic factors.
       (B) Exception.--State laws referred to in subparagraph (A) 
     shall not be preempted if such laws--
       (i) prohibit the variance of premium rates among employers, 
     plan sponsors, or individuals that are members of health plan 
     purchasing cooperative in excess of the amount of such 
     variations that would be permitted under such State rating 
     laws among employers, plan sponsors, and individuals that are 
     not members of the cooperative; and
       (ii) prohibit a percentage increase in premium rates for a 
     new rating period that is in excess of that which would be 
     permitted under State rating laws.
       (C) Benefits.--Except as provided in subparagraph (D), a 
     health plan issuer offering a group health plan or individual 
     health plan through a health plan purchasing cooperative 
     shall comply with all State mandated benefit laws that 
     require the offering of any services, category or care, or 
     services of any class or type of provider.
       (D) Exception.--In those states that have enacted laws 
     authorizing the issuance of alternative benefit plans to 
     small employers, health plan issuers may offer such 
     alternative benefit plans through a health plan purchasing 
     cooperative that meets the requirements of this section.
       (h) Rules of Construction.--Nothing in this section shall 
     be construed to--
       (1) require that a State organize, operate, or otherwise 
     create health plan purchasing cooperatives;
       (2) otherwise require the establishment of health plan 
     purchasing cooperatives.
       (3) require individuals, plan sponsors, or employers to 
     purchase group health plans or individual health plans 
     through a health plan purchasing cooperative;
       (4) require that a health plan purchasing cooperative be 
     the only type of purchasing arrangement permitted to operate 
     in a State.
       (5) confer authority upon a State that the State would not 
     otherwise have to regulate health plan issuers or employee 
     health benefits plans, or
       (6) confer authority up a State (or the Federal Government) 
     that the State (or Federal Government) would not otherwise 
     have to regulate group purchasing arrangements, coalitions, 
     or other similar entities that do not desire to become a 
     health plan purchasing cooperative in accordance with this 
     section.
       (i) Application of ERISA.--For purposes of enforcement 
     only, the requirements of parts 4 and 5 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1101) shall apply to a health pan purchasing 
     cooperative as if such plan were an employee welfare benefit 
     plan.

          Subtitle E--Application and Enforcement of Standards

     SEC. 141. APPLICABILITY.

       (a) Construction.--
       (1) Enforcement.--
       (A) In general.--A requirement or standard imposed under 
     this title on a group health plan or individual health plan 
     offered by a health plan issuer shall be deemed to be a 
     requirement or standard imposed on the health plan issuer. 
     Such requirements or standards shall be enforced by the State 
     insurance commissioner for the State involved or the official 
     or officials designated by the State to enforce the 
     requirements of this title. In the case of a group health 
     plan offered by a health plan issuer in connection with an 
     employee health benefit plan, the requirements of standards 
     imposed under the title shall be enforced with respect to the 
     health plan issuer by the State insurance commissioner for 
     the State involved or the official of officials designated by 
     the State to enforce the requirements of this title.
       (B) Limitation.--Except as provided in subsection (c), the 
     Secretary shall not enforce the requirements or standards of 
     this title as they relate to health plan issuers, group 
     health plans, or individual health plans. In no case shall a 
     Sate enforce the requirements or standards of this title as 
     they relate to employee health benefit plans.
       (2) Preemption of state law.--Nothing in this title shall 
     be construed to prevent a State from establishing, 
     implementing, or continuing in effect standards and 
     requirements--
       (A) not prescribed in this title; or
       (B) related to the issuance, renewal, or portability of 
     health insurance or the establishment or operation of group 
     purchasing arrangements, that are consistent with, and are 
     not in direct conflict with, this title and provide greater 
     protection or benefit to participants, beneficiaries or 
     individuals.
       (b) Rule of Construction.--Nothing in this title shall be 
     construed to affect or modify the provisions of section 514 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1144).
       (c) Continuation.--Nothing in this title shall be construed 
     as requiring a group health plan or an employee health 
     benefit plan to provide benefits to a particular participant 
     or beneficiary in excess of those provided under the terms of 
     such plan.

     SEC. 202. ENFORCEMENT OF STANDARDS.

       (a) Health Plan Issuers.--Each State shall require that 
     each group health plan and individual health plan issued, 
     sold, renewed, offered for sale or operated in such State by 
     a health plan issuer meet the standards established under 
     this title pursuant to an enforcement plan filed by the State 
     with the Secretary. A State shall submit such information as 
     required by the Secretary demonstrating effective 
     implementation of the State enforcement law.
       (b) Employee Health Benefit Plans.--With respect to 
     employee health benefit plans, the Secretary shall enforce 
     the reform standards established under this title in the same 
     manner as provided for under sections 502, 504, 506, and 510 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1132, 1134, 1136, and 1140). The civil penalties 
     contained in paragraphs (1) and (2) of section 502(c) of such 
     Act (29 U.S.C. 1132(c) (1) and (2)) shall apply to any 
     information required by the Secretary to be disclosed and 
     reported under this section.
       (c) Failure to Implement Plan.--In the case of the failure 
     of a State to substantially enforce the standards and 
     requirements set forth in this title with respect to group 
     health plans and individual health plans as provided for 
     under the State enforcement plan filed under subsection (a), 
     the Secretary, in consultation with the Secretary of Health 
     and Human Services, shall implement an enforcement plan 
     meeting the standards of this title in such State. In the 
     case of a State that fails to substantially enforce the 
     standards and requirements set forth in this title, each 
     health plan issuer operating in such State shall be subject 
     to civil enforcement as provided for under sections 502, 504, 
     506, and 510 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1132, 1134, 1136, and 1140). The civil 
     penalties contained in paragraphs (1) and (2) of section 
     502(c) of such Act (29 U.S.C. 1132(c) (1) and (2)) shall 
     apply to any information required by the Secretary to be 
     disclosed and reported under this section.
       (d) Applicable Certifying Authority.--As used in this 
     title, the term ``applicable certifying authority''means, 
     with respect to--
       (1) health plan issuers, the State insurance commissioner 
     or official or officials designated by the State to enforce 
     the requirements of this title for the State involved; and
       (2) an employee health benefit, plan, the Secretary.
       (e) Regulations.--The Secretary may promulgate such 
     regulations as may be necessary or appropriate to carry out 
     this title.
       (f) Technical Amendment.--Section 508 of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1138) is 
     amended by inserting ``and under the Health Insurance Reform 
     Act of 1996'' before the period.

                  Subtitle F--Miscellaneous Provisions

     SEC. 191. HEALTH COVERAGE AVAILABILITY STUDY.

       (a) In General.--The Secretary of Health and Human 
     Services, in consultation with the Secretary, representatives 
     of State officials, consumers, and other representatives of 
     individuals and entities that have expertise in health 
     insurance and employee benefits, shall conclude a two-part 
     study, and prepare and submit reports, in accordance with 
     this section.
       (b) Evaluation of Availability.--Not later than January 1, 
     1998, the Secretary of

[[Page H3145]]

     Health and Human Services shall prepare and submit to the 
     appropriate committees of Congress a report, concerning--
       (1) an evaluation, based on the experience of States, 
     expert opinions, and such additional data as may be 
     available, of the various mechanisms used to ensure the 
     availability of reasonably priced health coverage to 
     employers purchasing group coverage and to individuals 
     purchasing coverage on a non-group basis; and
       (2) whether standards that limit the variation in premiums 
     will further the purposes of this Act.
       (c) Evaluation of Effectiveness.--Not later than January 1, 
     1999, the Secretary of Health and Human Services shall 
     prepare and submit to the appropriate committees of Congress 
     a report, concerning the effectiveness of the provisions of 
     this Act and the various State laws, in ensuring the 
     availability of reasonably priced health coverage to 
     employers purchasing group coverage and individuals 
     purchasing coverage on a nongroup basis.

     SEC. 192. EFFECTIVE DATE.

       Except as otherwise provided for in this title, the 
     provisions of this title shall apply as follows:
       (1) With respect to group health plans and individual 
     health plans, such provisions shall apply to plans offered, 
     sold, issued, renewed, in effect, or operated on or after 
     January 1, 1997, and
       (2) With respect to employee health benefit plans, on the 
     first day of the first plan year beginning on or after 
     January 1, 1997.

     SEC. 193. SEVERABILITY.

       If any provision of this title or the application of such 
     provision to any person or circumstance is held to be 
     unconstitutional, the remainder of this title and the 
     application of the provisions of such to any person or 
     circumstance shall not be affected thereby.
  Mr. ARCHER (during the reading). Mr. Speaker, I ask unanimous consent 
that the motion to recommit be considered as read and printed in the 
Record.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  Mr. PALLONE. Mr. Speaker, I have offered this motion to recommit with 
instructions with my colleague from Missouri [Ms. McCarthy] because I 
am concerned that we are about to go down a perilous path of ending any 
chances of health insurance reform. Our motion to recommit incorporates 
the Kennedy-Kassebaum-Roukema provisions without any additons. It would 
make it easier for workers who lose or change jobs to buy health 
coverage. It would limit the length of time that insurers could refuse 
to cover an applicant's preexisting medical problems.
  Mr. Speaker, there are two distinct choices that we can make with 
this next vote. This House can make the decision to support this motion 
and do the right thing for the American people, or the House can vote 
against this motion and tell the American people that it is more 
important to keep promises with various special interests.
  The Kennedy-Kassebaum-Roukema bill is crafted to keep premiums 
affordable, because it would not impact the insurance risk pool by 
encouraging healthy individuals to drop their coverage. It has 
bipartisan support in both the Senate and the House of Representatives. 
The President has indicated that he will support the Roukema bill. The 
motion to recommit will ensure that this legislation is enacted into 
law.
  Mr. Speaker, why does the Republican leadership insist on messing up 
this legislation with controversial poison pill amendments? One of the 
provisions that the Republican leadership insists on including is the 
medical savings accounts, which will favor the wealthy and healthy. 
MSA's will be just another tax shelter for the rich. Americans who do 
not choose to join the MSA's because of the high risks involved will 
see their health insurance premiums increase. The MSA's, among other 
extraneous provisions, will guarantee the failure of any health 
insurance reform in this Congress. We all know this, Mr. Speaker. The 
gentlewoman from New Jersey [Mrs. Roukema], who courageously took this 
floor tonight, has said as much. So has her counterpart in the other 
body, Senator Kassebaum. These women should not be vilified tonight. 
Instead, they should be thanked for doing the right thing for the 
American people.
  Mr. Speaker, let us all do the right thing tonight. I urge a ``yes'' 
vote on the motion to recommit if Members want health insurance reform 
this year.
  Mr. Speaker, I yield to the gentlewoman from Missouri [Ms. McCarthy].
  Ms. McCARTHY. Mr. Speaker, I join with the gentleman from New Jersey 
in moving to recommit this bill to committee with instruction to report 
the Roukema bill, H.R. 2893, for final passage. Kennedy-Kassebaum-
Roukema has supported from the White House, from the American public, 
from the health care industry, and bipartisan support in the Senate. It 
is legislation which can be signed into law tonight.
  To recommit puts sound public policy above special interests. To 
recommit assures American families of security by providing genuine 
health care reform. In a Congress that touts fiscal responsibility, to 
vote against this motion is fiscally irresponsible. I urge my 
colleagues to vote ``yes'' on this motion, to stand for true reform, to 
stand against special interests, to stand for the American people. Vote 
``yes'' to recommit.
  Mr. ARCHER. Mr. Speaker, I rise in opposition to the motion to 
recommit.
  I yield to the gentleman from California [Mr. Thomas], chairman of 
the Subcommittee on Health of the Committee on Ways and Means.
  Mr. THOMAS. Mr. Speaker, I really do not know who to direct my 
remarks to, because apparently this motion to recommit is Dingell minus 
the increase for the self-employed. Two of our colleagues on the other 
side, the gentleman from North Dakota and the gentleman from Illinois 
[Mr. Durbin], took the well and talked about how much better the 
Democrat substitute was because it did better for the self-employed. 
Now what we have here is Dingell lite.
  Mr. Speaker, is it not interesting and, by the way how, cynical they 
were more for the self-employed if it was honey to attract people to 
the Democratic substitute, and so I guess I am addressing my remarks to 
the 10 Republicans who went for the improvement of Kassebaum because of 
the self-employed provision. That is out. It lasted 5 minutes. Show 
your commitment, it did not draw enough, so it is gone. It is not there 
because they believe in the self-employed and want to increase the 
deductibility, it was there to attract people. Since it did not get 
anybody, they pulled it out.
  If you did not like Dingell, they will not like Dingell lite. Vote 
``no'' on the motion to recommit.
  Mr. ARCHER. Mr. Speaker, as I listen to this debate, I must say that 
I am puzzled by the reluctance of some Democrats to support a bill that 
will provide millions of Americans with increased access to health care 
insurance at a more affordable price. What a strange turnaround from 2 
years ago when my friends across the aisle stood up and fought for a 
big government takeover of our nation's health care system. Here is a 
description of that plan that they offered and that they supported 2 
years ago.
  But tonight, they claim ours is too far-reaching, it should be shaved 
back. The same people who presented this to us in 1994. It is broken, 
they said. Health care is in crisis. We must fix it. The President and 
Hillary Clinton know just how to get that done. Well, the big 
government Democrat prescription for our Nation's health care ills was 
rejected by the American people and properly so.
  Mr. Speaker, America has the best health care system in the world, no 
thanks to government, but thanks to our Nation's great private sector. 
The answer does not lie in a big-government takeover of health care. 
Rather, the way to provide the American people with health care that is 
more available and affordable is through a targeted measure that relies 
on the strength of the private sector, not the government, and that is 
what this bill does.
  It is a strong bill, a solid bill, a bill that will bring help to 
millions of needy Americans, and it does it by relying on the private 
sector, not the Government. It is exactly the right dose of medicine to 
cure our health care ills. So why do some, thankfully not all, but some 
Democrats oppose it?
  Mr. Speaker, I conclude the reason the Democrat leadership opposes 
this bill is because their big-government version of health care reform 
failed and they do not want to see the Republicans move forward with 
one that will succeed. They know that the American people support each 
and every one of the targeted reforms that we have proposed, but the 
Democrat leadership and their trial lawyer friends have rejected

[[Page H3146]]

a bipartisan approach to health care reform and instead offer only 
obstruction and opposition.
  The Democrat opposition stems from sour grapes and special interests. 
Mr. Speaker, sour grapes and special interests. The bill we have today 
before us is a landmark. It is a bill that brings me great pride and 
satisfaction, and this is a very proud day for the House and for the 
Nation. Health care reform is moving forward, and I predict it will be 
signed into law. We look forward to working with the President and the 
Senate on this bill. It will be our only chance to improve America's 
health care system. We must be careful not to let it slip away, without 
making as many changes as we can reasonably on behalf of the American 
people.
  Too much medicine is bad for the patient, but too little will not 
help the patient get better. This bill is the right does of medicine. 
Vote ``no'' on the motion to recommit and ``aye'' on the bill.
  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.


                             recorded vote

  Mr. PALLONE. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The SPEAKER pro tempore. Pursuant to the provisions of clause 5 of 
rule XV, the Chair announces that he will reduce to a minimum of 5 
minutes the period of time within which a vote by electronic device 
will be taken on the question of final passage.
  The vote was taken by electronic device, and there were--ayes 182, 
noes 236, not voting 13, as follows:

                             [Roll No. 105]

                               AYES--182

     Abercrombie
     Ackerman
     Andrews
     Baesler
     Baldacci
     Barcia
     Barrett (WI)
     Becerra
     Beilenson
     Bentsen
     Berman
     Bevill
     Bishop
     Bonior
     Borski
     Boucher
     Browder
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Cardin
     Chapman
     Clay
     Clayton
     Clement
     Clyburn
     Coleman
     Collins (MI)
     Condit
     Conyers
     Costello
     Coyne
     Cramer
     Danner
     de la Garza
     DeFazio
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Dooley
     Doyle
     Durbin
     Edwards
     Engel
     Evans
     Farr
     Fattah
     Fazio
     Filner
     Flake
     Foglietta
     Ford
     Frank (MA)
     Frost
     Furse
     Gejdenson
     Gephardt
     Gibbons
     Gonzalez
     Green
     Gutierrez
     Hall (OH)
     Hamilton
     Harman
     Hastings (FL)
     Hefner
     Hilliard
     Hinchey
     Holden
     Hoyer
     Jackson (IL)
     Jackson-Lee (TX)
     Jacobs
     Jefferson
     Johnson (SD)
     Johnson, E. B.
     Johnston
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kennelly
     Kildee
     Kleczka
     Klink
     LaFalce
     Lantos
     Levin
     Lewis (GA)
     Lincoln
     Lipinski
     Lofgren
     Lowey
     Luther
     Maloney
     Manton
     Markey
     Mascara
     Matsui
     McCarthy
     McDermott
     McHale
     McKinney
     Meehan
     Meek
     Menendez
     Miller (CA)
     Minge
     Mink
     Moakley
     Mollohan
     Moran
     Murtha
     Nadler
     Oberstar
     Obey
     Olver
     Ortiz
     Orton
     Owens
     Pallone
     Pastor
     Payne (NJ)
     Payne (VA)
     Pelosi
     Peterson (FL)
     Peterson (MN)
     Pomeroy
     Quinn
     Rahall
     Rangel
     Reed
     Richardson
     Rivers
     Roemer
     Rose
     Roukema
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schroeder
     Schumer
     Scott
     Serrano
     Sisisky
     Skaggs
     Skelton
     Slaughter
     Spratt
     Stark
     Stenholm
     Studds
     Stupak
     Tanner
     Tejeda
     Thompson
     Thornton
     Thurman
     Torres
     Torricelli
     Towns
     Traficant
     Velazquez
     Vento
     Visclosky
     Volkmer
     Walsh
     Ward
     Waters
     Watt (NC)
     Waxman
     Wilson
     Wise
     Woolsey
     Wynn
     Yates

                               NOES--236

     Allard
     Archer
     Armey
     Bachus
     Baker (CA)
     Baker (LA)
     Ballenger
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bilbray
     Bilirakis
     Bliley
     Blute
     Boehlert
     Boehner
     Bonilla
     Bono
     Brewster
     Brownback
     Bryant (TN)
     Bunn
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Chrysler
     Clinger
     Coble
     Coburn
     Collins (GA)
     Combest
     Cooley
     Cox
     Crane
     Crapo
     Cremeans
     Cubin
     Cunningham
     Davis
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Doolittle
     Dornan
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Fawell
     Fields (TX)
     Flanagan
     Foley
     Forbes
     Fox
     Franks (CT)
     Franks (NJ)
     Frelinghuysen
     Frisa
     Funderburk
     Gallegly
     Ganske
     Gekas
     Geren
     Gilchrest
     Gillmor
     Gilman
     Goodlatte
     Goodling
     Gordon
     Goss
     Graham
     Greenwood
     Gunderson
     Gutknecht
     Hall (TX)
     Hancock
     Hansen
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Heineman
     Herger
     Hilleary
     Hobson
     Hoekstra
     Hoke
     Horn
     Hostettler
     Houghton
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kim
     King
     Kingston
     Klug
     Knollenberg
     Kolbe
     LaHood
     Largent
     Latham
     LaTourette
     Laughlin
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Lightfoot
     Linder
     Livingston
     LoBiondo
     Longley
     Lucas
     Manzullo
     Martini
     McCollum
     McCrery
     McDade
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Meyers
     Mica
     Miller (FL)
     Molinari
     Montgomery
     Moorhead
     Morella
     Myers
     Myrick
     Nethercutt
     Neumann
     Ney
     Norwood
     Nussle
     Oxley
     Packard
     Parker
     Paxon
     Petri
     Pickett
     Pombo
     Porter
     Portman
     Poshard
     Pryce
     Quillen
     Radanovich
     Ramstad
     Regula
     Riggs
     Roberts
     Rogers
     Rohrabacher
     Roth
     Royce
     Salmon
     Sanford
     Saxton
     Scarborough
     Schaefer
     Schiff
     Seastrand
     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Shuster
     Skeen
     Smith (MI)
     Smith (NJ)
     Solomon
     Souder
     Spence
     Stearns
     Stockman
     Stump
     Talent
     Tate
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Thomas
     Thornberry
     Tiahrt
     Torkildsen
     Upton
     Vucanovich
     Waldholtz
     Walker
     Wamp
     Watts (OK)
     Weldon (FL)
     Weller
     White
     Whitfield
     Wicker
     Williams
     Wolf
     Young (AK)
     Young (FL)
     Zeliff
     Zimmer

                             NOT VOTING--13

     Bryant (TX)
     Collins (IL)
     Eshoo
     Fields (LA)
     Fowler
     Martinez
     McNulty
     Neal
     Ros-Lehtinen
     Smith (TX)
     Smith (WA)
     Stokes
     Weldon (PA)

                              {time}  2257

  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore (Mr. Combest). The question is on the passage 
of the bill.
  Pursuant to House Resolution 392, the yeas and nays are ordered.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. This will be a 5-minute vote.
  The vote was taken by electronic device, and there were--yeas 267, 
nays 151, not voting 14, as follows:

                             [Roll No. 106]

                               YEAS--267

     Allard
     Archer
     Armey
     Bachus
     Baesler
     Baker (CA)
     Baker (LA)
     Ballenger
     Barcia
     Barr
     Barrett (NE)
     Bartlett
     Barton
     Bass
     Bateman
     Bereuter
     Bilbray
     Bilirakis
     Bliley
     Blute
     Boehlert
     Boehner
     Bonilla
     Bono
     Brewster
     Browder
     Brownback
     Bryant (TN)
     Bunn
     Bunning
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Campbell
     Canady
     Castle
     Chabot
     Chambliss
     Chenoweth
     Christensen
     Chrysler
     Clement
     Clinger
     Coble
     Coburn
     Collins (GA)
     Combest
     Condit
     Cooley
     Cox
     Cramer
     Crane
     Crapo
     Cremeans
     Cubin
     Cunningham
     Danner
     Davis
     de la Garza
     Deal
     DeLay
     Diaz-Balart
     Dickey
     Dooley
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Ensign
     Everett
     Ewing
     Fawell
     Fields (TX)
     Flanagan
     Foley
     Forbes
     Fox
     Franks (CT)
     Franks (NJ)
     Frelinghuysen
     Frisa
     Funderburk
     Gallegly
     Ganske
     Gekas
     Geren
     Gilchrest
     Gillmor
     Gilman
     Gingrich
     Goodlatte
     Goodling
     Gordon
     Goss
     Graham
     Greenwood
     Gunderson
     Gutknecht
     Hall (OH)
     Hall (TX)
     Hamilton
     Hancock
     Hansen
     Harman
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hefner
     Heineman
     Herger
     Hilleary
     Hobson
     Hoekstra
     Hoke
     Holden
     Horn
     Hostettler
     Houghton
     Hunter
     Hutchinson
     Hyde
     Inglis
     Istook
     Jacobs
     Johnson (CT)
     Johnson, Sam
     Jones
     Kasich
     Kelly
     Kim
     King
     Kingston
     Klug
     Knollenberg
     Kolbe
     LaHood
     Largent
     Latham
     LaTourette
     Laughlin
     Lazio
     Leach
     Lewis (CA)
     Lewis (KY)
     Lightfoot
     Lincoln
     Linder
     Livingston
     LoBiondo
     Longley
     Lucas
     Manzullo
     Martini
     McCollum
     McCrery
     McDade
     McHale
     McHugh
     McInnis
     McIntosh
     McKeon
     Metcalf
     Meyers
     Mica
     Miller (FL)

[[Page H3147]]


     Minge
     Molinari
     Montgomery
     Moorhead
     Moran
     Morella
     Myers
     Myrick
     Nethercutt
     Neumann
     Ney
     Norwood
     Nussle
     Orton
     Oxley
     Packard
     Parker
     Pastor
     Paxon
     Payne (VA)
     Peterson (MN)
     Petri
     Pickett
     Pombo
     Porter
     Portman
     Poshard
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     Quinn
     Radanovich
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     Rogers
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     Roth
     Royce
     Salmon
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     Sensenbrenner
     Shadegg
     Shaw
     Shays
     Shuster
     Sisisky
     Skeen
     Smith (MI)
     Smith (NJ)
     Solomon
     Souder
     Spence
     Stearns
     Stenholm
     Stockman
     Studds
     Stump
     Talent
     Tanner
     Tate
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Thomas
     Thornberry
     Thornton
     Tiahrt
     Torkildsen
     Traficant
     Upton
     Vucanovich
     Waldholtz
     Walker
     Walsh
     Wamp
     Watts (OK)
     Weldon (FL)
     Weller
     White
     Whitfield
     Wicker
     Wolf
     Young (AK)
     Young (FL)
     Zeliff
     Zimmer

                               NAYS--151

     Abercrombie
     Ackerman
     Andrews
     Baldacci
     Barrett (WI)
     Becerra
     Beilenson
     Bentsen
     Berman
     Bevill
     Bishop
     Bonior
     Borski
     Boucher
     Brown (CA)
     Brown (FL)
     Brown (OH)
     Cardin
     Chapman
     Clay
     Clayton
     Clyburn
     Coleman
     Collins (MI)
     Conyers
     Costello
     Coyne
     DeFazio
     DeLauro
     Dellums
     Deutsch
     Dicks
     Dingell
     Dixon
     Doggett
     Doyle
     Durbin
     Edwards
     Engel
     Evans
     Farr
     Fattah
     Fazio
     Filner
     Flake
     Foglietta
     Ford
     Frank (MA)
     Frost
     Furse
     Gejdenson
     Gephardt
     Gibbons
     Gonzalez
     Green
     Gutierrez
     Hastings (FL)
     Hilliard
     Hinchey
     Hoyer
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     Johnson (SD)
     Johnson, E. B.
     Johnston
     Kanjorski
     Kaptur
     Kennedy (MA)
     Kennedy (RI)
     Kennelly
     Kildee
     Kleczka
     Klink
     LaFalce
     Lantos
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Luther
     Maloney
     Manton
     Markey
     Martinez
     Mascara
     Matsui
     McCarthy
     McDermott
     McKinney
     Meehan
     Meek
     Menendez
     Miller (CA)
     Mink
     Moakley
     Mollohan
     Murtha
     Nadler
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Payne (NJ)
     Pelosi
     Peterson (FL)
     Pomeroy
     Rahall
     Rangel
     Reed
     Richardson
     Rivers
     Roemer
     Roukema
     Roybal-Allard
     Rush
     Sabo
     Sanders
     Sawyer
     Schroeder
     Schumer
     Scott
     Serrano
     Skaggs
     Slaughter
     Spratt
     Stark
     Stupak
     Tejeda
     Thompson
     Thurman
     Torres
     Torricelli
     Towns
     Velazquez
     Vento
     Visclosky
     Volkmer
     Ward
     Waters
     Watt (NC)
     Waxman
     Williams
     Wilson
     Wise
     Woolsey
     Wynn
     Yates

                             NOT VOTING--14

     Bryant (TX)
     Collins (IL)
     Dornan
     Eshoo
     Fields (LA)
     Fowler
     McNulty
     Neal
     Ros-Lehtinen
     Skelton
     Smith (TX)
     Smith (WA)
     Stokes
     Weldon (PA)

                              {time}  2305

  Mr. KENNEDY of Massachusetts and Mr. FOGLIETTA changed their vote 
from ``yea'' to ``nay.''
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________