H.R.3103

Begun and held at the City of Washington on Wednesday, the third day of January, one thousand nine hundred and ninety-six

An Act

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.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Health Insurance Portability and Accountability 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--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

Subtitle A--Group Market Rules

Part 1--Portability, Access, and Renewability Requirements

Sec. 101. Through the Employee Retirement Income Security Act of 1974.

`Part 7--Group Health Plan Portability, Access, and Renewability Requirements

Sec. 102. Through the Public Health Service Act.

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

`Part A--Group Market Reforms

`Subpart 1--Portability, Access, and Renewability Requirements

`Subpart 2--Provisions Applicable Only to Health Insurance Issuers

`Subpart 3--Exclusion of Plans; Enforcement; Preemption

`Part C--Definitions; Miscellaneous Provisions

Sec. 103. Reference to implementation through the Internal Revenue Code of 1986.

Sec. 104. Assuring coordination.

Subtitle B--Individual Market Rules

Sec. 111. Amendment to Public Health Service Act.

`Part B--Individual Market Rules

Subtitle C--General and Miscellaneous Provisions

Sec. 191. Health coverage availability studies.

Sec. 192. Report on Medicare reimbursement of telemedicine.

Sec. 193. Allowing federally-qualified HMOs to offer high deductible plans.

Sec. 194. Volunteer services provided by health professionals at free clinics.

Sec. 195. Findings; severability.

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 antifraud 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 risk-sharing 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. 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. 261. Purpose.

Sec. 262. Administrative simplification.

`Part C--Administrative Simplification

Sec. 263. Changes in membership and duties of National Committee on Vital and Health Statistics.

Sec. 264. Recommendations with respect to privacy of certain health information.

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

Sec. 271. Duplication and coordination of Medicare-related plans.

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 indi-viduals.

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 qualified long-term care insurance contracts.

Sec. 327. 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--State Insurance Pools

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

Sec. 342. Exemption from income tax for State-sponsored workmen's compensation reinsurance organizations.

Subtitle F--Organizations Subject to Section 833

Sec. 351. Organizations subject to section 833.

Subtitle G--IRA Distributions to the Unemployed

Sec. 361. Distributions from certain plans may be used without additional tax to pay financially devastating medical expenses.

Subtitle H--Organ and Tissue Donation Information Included With Income Tax Refund Payments

Sec. 371. Organ and tissue donation information included with income tax refund payments.

TITLE IV--APPLICATION AND ENFORCEMENT OF GROUP HEALTH PLAN REQUIREMENTS

Subtitle A--Application and Enforcement of Group Health Plan Requirements

Sec. 401. Group health plan portability, access, and renewability requirements.

Sec. 402. Penalty on failure to meet certain group health plan requirements.

Subtitle B--Clarification of Certain Continuation Coverage Requirements

Sec. 421. COBRA clarifications.

TITLE V--REVENUE OFFSETS

Sec. 500. Amendment of 1986 Code.

Subtitle A--Company-Owned Life Insurance

Sec. 501. Denial of deduction for interest on loans with respect to company-owned life insurance.

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

Sec. 511. Revision of income, estate, and gift taxes on individuals who lose United States citizenship.

Sec. 512. Information on individuals losing United States citizenship.

Sec. 513. Report on tax compliance by United States citizens and residents living abroad.

Subtitle C--Repeal of Financial Institution Transition Rule to Interest Allocation Rules

Sec. 521. Repeal of financial institution transition rule to interest allocation rules.

Part 1--Portability, Access, and Renewability Requirements

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

(a) IN GENERAL- Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding at the end the following new part:

`Part 7--Group Health Plan Portability, Access, and Renewability Requirements

`SEC. 701. INCREASED PORTABILITY THROUGH LIMITATION ON PREEXISTING CONDITION EXCLUSIONS.

`(a) LIMITATION ON PREEXISTING CONDITION EXCLUSION PERIOD; CREDITING FOR PERIODS OF PREVIOUS COVERAGE- Subject to subsection (d), a group health plan, and a health insurance issuer offering group health insurance coverage, may, with respect to a participant or beneficiary, impose a preexisting condition exclusion only if--

`(1) such exclusion relates to a condition (whether physical or mental), regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the 6-month period ending on the enrollment date;

`(2) such exclusion extends for a period of not more than 12 months (or 18 months in the case of a late enrollee) after the enrollment date; and

`(3) the period of any such preexisting condition exclusion is reduced by the aggregate of the periods of creditable coverage (if any, as defined in subsection (c)(1)) applicable to the participant or beneficiary as of the enrollment date.

`(b) DEFINITIONS- For purposes of this part--

`(1) PREEXISTING CONDITION EXCLUSION-

`(A) IN GENERAL- The term `preexisting condition exclusion' means, with respect to coverage, a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the date of enrollment for such coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date.

`(B) TREATMENT OF GENETIC INFORMATION- Genetic information shall not be treated as a condition described in subsection (a)(1) in the absence of a diagnosis of the condition related to such information.

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

`(3) LATE ENROLLEE- The term `late enrollee' means, with respect to coverage under a group health plan, a participant or beneficiary who enrolls under the plan other than during--

`(A) the first period in which the individual is eligible to enroll under the plan, or

`(B) a special enrollment period under subsection (f).

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

`(c) RULES RELATING TO CREDITING PREVIOUS COVERAGE-

`(1) CREDITABLE COVERAGE DEFINED- For purposes of this part, the term `creditable coverage' means, with respect to an individual, coverage of the individual under any of the following:

`(A) A group health plan.

`(B) Health insurance coverage.

`(C) Part A or part B of title XVIII of the Social Security Act.

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

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

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

`(G) A State health benefits risk pool.

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

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

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

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

`(2) NOT COUNTING PERIODS BEFORE SIGNIFICANT BREAKS IN COVERAGE-

`(A) IN GENERAL- A period of creditable coverage shall not be counted, with respect to enrollment of an individual under a group health plan, if, after such period and before the enrollment date, there was a 63-day period during all of which the individual was not covered under any creditable coverage.

`(B) WAITING PERIOD NOT TREATED AS A BREAK IN COVERAGE- For purposes of subparagraph (A) and subsection (d)(4), any period that an individual is in a waiting period for any coverage under a group health plan (or for group health insurance coverage) or is in an affiliation period (as defined in subsection (g)(2)) shall not be taken into account in determining the continuous period under subparagraph (A).

`(3) METHOD OF CREDITING COVERAGE-

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

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

`(C) PLAN NOTICE- In the case of an election with respect to a group health plan under subparagraph (B) (whether or not health insurance coverage is provided in connection with such plan), the plan shall--

`(i) prominently state in any disclosure statements concerning the plan, and state to each enrollee at the time of enrollment under the plan, that the plan has made such election, and

`(ii) include in such statements a description of the effect of this election.

`(4) ESTABLISHMENT OF PERIOD- Periods of creditable coverage with respect to an individual shall be established through presentation of certifications described in subsection (e) or in such other manner as may be specified in regulations.

`(d) EXCEPTIONS-

`(1) EXCLUSION NOT APPLICABLE TO CERTAIN NEWBORNS- Subject to paragraph (4), a group health plan, and a health insurance issuer offering group health insurance coverage, may not impose any preexisting condition exclusion in the case of an individual who, as of the last day of the 30-day period beginning with the date of birth, is covered under creditable coverage.

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

`(3) EXCLUSION NOT APPLICABLE TO PREGNANCY- A group health plan, and health insurance issuer offering group health insurance coverage, may not impose any preexisting condition exclusion relating to pregnancy as a preexisting condition.

`(4) LOSS IF BREAK IN COVERAGE- Paragraphs (1) and (2) shall no longer apply to an individual after the end of the first 63-day period during all of which the individual was not covered under any creditable coverage.

`(e) CERTIFICATIONS AND DISCLOSURE OF COVERAGE-

`(1) REQUIREMENT FOR CERTIFICATION OF PERIOD OF CREDITABLE COVERAGE-

`(A) IN GENERAL- A group health plan, and a health insurance issuer offering group health insurance

coverage, shall provide the certification described in subparagraph (B)--

`(i) at the time an individual ceases to be covered under the plan or otherwise becomes covered under a COBRA continuation provision,

`(ii) in the case of an individual becoming covered under such a provision, at the time the individual ceases to be covered under such provision, and

`(iii) on the request on behalf of an individual made not later than 24 months after the date of cessation of the coverage described in clause (i) or (ii), whichever is later.

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

`(B) CERTIFICATION- The certification described in this subparagraph is a written certification of--

`(i) the period of creditable coverage of the individual under such plan and the coverage (if any) under such COBRA continuation provision, and

`(ii) the waiting period (if any) (and affiliation period, if applicable) imposed with respect to the individual for any coverage under such plan.

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

`(2) DISCLOSURE OF INFORMATION ON PREVIOUS BENEFITS- In the case of an election described in subsection (c)(3)(B) by a group health plan or health insurance issuer, if the plan or issuer enrolls an individual for coverage under the plan and the individual provides a certification of coverage of the individual under paragraph (1)--

`(A) upon request of such plan or issuer, the entity which issued the certification provided by the individual shall promptly disclose to such requesting plan or issuer information on coverage of classes and categories of health benefits available under such entity's plan or coverage, and

`(B) such entity may charge the requesting plan or issuer for the reasonable cost of disclosing such information.

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

`(f) SPECIAL ENROLLMENT PERIODS-

`(1) INDIVIDUALS LOSING OTHER COVERAGE- A group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, shall permit an employee who is eligible, but not enrolled, for coverage under the terms of the plan (or a dependent of such an employee if the dependent is eligible, but not enrolled, for coverage under such terms) to enroll for coverage under the terms of the plan if each of the following conditions is met:

`(A) The employee or dependent was covered under a group health plan or had health insurance coverage at the time coverage was previously offered to the employee or dependent.

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

`(C) The employee's or dependent's coverage described in subparagraph (A)--

`(i) was under a COBRA continuation provision and the coverage under such provision was exhausted; or

`(ii) was not under such a provision and either the coverage was terminated as a result of loss of eligibility for the coverage (including as a result of legal separation, divorce, death, termination of employment, or reduction in the number of hours of employment) or employer contributions toward such coverage were terminated.

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

`(2) FOR DEPENDENT BENEFICIARIES-

`(A) IN GENERAL- If--

`(i) a group health plan makes coverage available with respect to a dependent of an individual,

`(ii) the individual is a participant under the plan (or has met any waiting period applicable to becoming a participant under the plan and is eligible to be enrolled under the plan but for a failure to enroll during a previous enrollment period), and

`(iii) a person becomes such a dependent of the individual through marriage, birth, or adoption or placement for adoption,

the group health plan shall provide for a dependent special enrollment period described in subparagraph (B) during which the person (or, if not otherwise enrolled, the individual) may be enrolled under the plan as a dependent of the individual, and in the case of the birth or adoption of a child, the spouse of the individual may be enrolled as a dependent of the individual if such spouse is otherwise eligible for coverage.

`(B) DEPENDENT SPECIAL ENROLLMENT PERIOD- A dependent special enrollment period under this subparagraph shall be a period of not less than 30 days and shall begin on the later of--

`(i) the date dependent coverage is made available, or

`(ii) the date of the marriage, birth, or adoption or placement for adoption (as the case may be) described in subparagraph (A)(iii).

`(C) NO WAITING PERIOD- If an individual seeks to enroll a dependent during the first 30 days of such a dependent special enrollment period, the coverage of the dependent shall become effective--

`(i) in the case of marriage, not later than the first day of the first month beginning after the date the completed request for enrollment is received;

`(ii) in the case of a dependent's birth, as of the date of such birth; or

`(iii) in the case of a dependent's adoption or placement for adoption, the date of such adoption or placement for adoption.

`(g) USE OF AFFILIATION PERIOD BY HMOS AS ALTERNATIVE TO PREEXISTING CONDITION EXCLUSION-

`(1) IN GENERAL- In the case of a group health plan that offers medical care through health insurance coverage offered by a health maintenance organization, the plan may provide for an affiliation period with respect to coverage through the organization only if--

`(A) no preexisting condition exclusion is imposed with respect to coverage through the organization,

`(B) the period is applied uniformly without regard to any health status-related factors, and

`(C) such period does not exceed 2 months (or 3 months in the case of a late enrollee).

`(2) AFFILIATION PERIOD-

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

`(B) BEGINNING- Such period shall begin on the enrollment date.

`(C) RUNS CONCURRENTLY WITH WAITING PERIODS- An affiliation period under a plan shall run concurrently with any waiting period under the plan.

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

`SEC. 702. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS.

`(a) IN ELIGIBILITY TO ENROLL-

`(1) IN GENERAL- Subject to paragraph (2), a group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual:

`(A) Health status.

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

`(C) Claims experience.

`(D) Receipt of health care.

`(E) Medical history.

`(F) Genetic information.

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

`(H) Disability.

`(2) NO APPLICATION TO BENEFITS OR EXCLUSIONS- To the extent consistent with section 701, paragraph (1) shall not be construed--

`(A) to require a group health plan, or group health insurance coverage, to provide particular benefits other than those provided under the terms of such plan or coverage, or

`(B) to prevent such a plan or coverage from establishing limitations or restrictions on the amount, level, extent, or nature of the benefits or coverage for similarly situated individuals enrolled in the plan or coverage.

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

`(b) IN PREMIUM CONTRIBUTIONS-

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

`(2) CONSTRUCTION- Nothing in paragraph (1) shall be construed--

`(A) to restrict the amount that an employer may be charged for coverage under a group health plan; or

`(B) to prevent a group health plan, and a health insurance issuer offering group health insurance coverage, from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.

`SEC. 703. GUARANTEED RENEWABILITY IN MULTIEMPLOYER PLANS AND MULTIPLE EMPLOYER WELFARE ARRANGEMENTS.

`A group health plan which is a multiemployer plan or which is a multiple employer welfare arrangement may not deny an employer whose employees are covered under such a plan continued access to the same or different coverage under the terms of such a plan, other than--

`(1) for nonpayment of contributions;

`(2) for fraud or other intentional misrepresentation of material fact by the employer;

`(3) for noncompliance with material plan provisions;

`(4) because the plan is ceasing to offer any coverage in a geographic area;

`(5) in the case of a plan that offers benefits through a network plan, there is no longer any individual enrolled through the employer who lives, resides, or works in the service area of the network plan and the plan applies this paragraph uniformly without regard to the claims experience of employers or any health status-related factor in relation to such individuals or their dependents; and

`(6) for failure to meet the terms of an applicable collective bargaining agreement, to renew a collective bargaining or other agreement requiring or authorizing contributions to the plan, or to employ employees covered by such an agreement.

`SEC. 704. PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.

`(a) CONTINUED APPLICABILITY OF STATE LAW WITH RESPECT TO HEALTH INSURANCE ISSUERS-

`(1) IN GENERAL- Subject to paragraph (2) and except as provided in subsection (b), this part shall not be construed to supersede any provision of State law which establishes, implements, or continues in effect any standard or requirement solely relating to health insurance issuers in connection with group health insurance coverage except to the extent that such standard or requirement prevents the application of a requirement of this part.

`(2) CONTINUED PREEMPTION WITH RESPECT TO GROUP HEALTH PLANS- Nothing in this part shall be construed to affect or modify the provisions of section 514 with respect to group health plans.

`(b) SPECIAL RULES IN CASE OF PORTABILITY REQUIREMENTS-

`(1) IN GENERAL- Subject to paragraph (2), the provisions of this part relating to health insurance coverage offered by a health insurance issuer supersede any provision of State law which establishes, implements, or continues in effect a standard or requirement applicable to imposition of a preexisting condition exclusion specifically governed by section 701 which differs from the standards or requirements specified in such section.

`(2) EXCEPTIONS- Only in relation to health insurance coverage offered by a health insurance issuer, the provisions of this part do not supersede any provision of State law to the extent that such provision--

`(A) substitutes for the reference to `6-month period' in section 701(a)(1) a reference to any shorter period of time;

`(B) substitutes for the reference to `12 months' and `18 months' in section 701(a)(2) a reference to any shorter period of time;

`(C) substitutes for the references to `63 days' in sections 701 (c)(2)(A) and (d)(4)(A) a reference to any greater number of days;

`(D) substitutes for the reference to `30-day period' in sections 701 (b)(2) and (d)(1) a reference to any greater period;

`(E) prohibits the imposition of any preexisting condition exclusion in cases not described in section 701(d) or expands the exceptions described in such section;

`(F) requires special enrollment periods in addition to those required under section 701(f); or

`(G) reduces the maximum period permitted in an affiliation period under section 701(g)(1)(B).

`(c) RULES OF CONSTRUCTION- Nothing in this part shall be construed as requiring a group health plan or health insurance coverage to provide specific benefits under the terms of such plan or coverage.

`(d) DEFINITIONS- For purposes of this section--

`(1) STATE LAW- The term `State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. A law of the United States applicable only to the District of Columbia shall be treated as a State law rather than a law of the United States.

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

`SEC. 705. SPECIAL RULES RELATING TO GROUP HEALTH PLANS.

`(a) GENERAL EXCEPTION FOR CERTAIN SMALL GROUP HEALTH PLANS- The requirements of this part shall not apply to any group health plan (and group health insurance coverage offered in connection with a group health plan) for any plan year if, on the first day of such plan year, such plan has less than 2 participants who are current employees.

`(b) EXCEPTION FOR CERTAIN BENEFITS- The requirements of this part shall not apply to any group health plan (and group health insurance coverage) in relation to its provision of excepted benefits described in section 706(c)(1).

`(c) EXCEPTION FOR CERTAIN BENEFITS IF CERTAIN CONDITIONS MET-

`(1) LIMITED, EXCEPTED BENEFITS- The requirements of this part shall not apply to any group health plan (and group health insurance coverage offered in connection with a group health plan) in relation to its provision of excepted benefits described in section 706(c)(2) if the benefits--

`(A) are provided under a separate policy, certificate, or contract of insurance; or

`(B) are otherwise not an integral part of the plan.

`(2) NONCOORDINATED, EXCEPTED BENEFITS- The requirements of this part shall not apply to any group health plan (and group health insurance coverage offered in connection with a group health plan) in relation to its provision of excepted benefits described in section 706(c)(3) if all of the following conditions are met:

`(A) The benefits are provided under a separate policy, certificate, or contract of insurance.

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

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

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

`(d) TREATMENT OF PARTNERSHIPS- For purposes of this part--

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

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

`(3) PARTICIPANTS OF GROUP HEALTH PLANS- In the case of a group health plan, the term `participant' also includes--

`(A) in connection with a group health plan maintained by a partnership, an individual who is a partner in relation to the partnership, or

`(B) in connection with a group health plan maintained by a self-employed individual (under which one or more employees are participants), the self-employed individual,

if such individual is, or may become, eligible to receive a benefit under the plan or such individual's beneficiaries may be eligible to receive any such benefit.

`SEC. 706. DEFINITIONS.

`(a) GROUP HEALTH PLAN- For purposes of this part--

`(1) IN GENERAL- The term `group health plan' means an employee welfare benefit plan to the extent that the plan provides medical care (as defined in paragraph (2) and including items and services paid for as medical care) to employees or their dependents (as defined under the terms of the plan) directly or through insurance, reimbursement, or otherwise.

`(2) MEDICAL CARE- The term `medical care' means amounts paid for--

`(A) the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body,

`(B) amounts paid for transportation primarily for and essential to medical care referred to in subparagraph (A), and

`(C) amounts paid for insurance covering medical care referred to in subparagraphs (A) and (B).

`(b) DEFINITIONS RELATING TO HEALTH INSURANCE- For purposes of this part--

`(1) HEALTH INSURANCE COVERAGE- The term `health insurance coverage' means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer.

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

`(3) HEALTH MAINTENANCE ORGANIZATION- The term `health maintenance organization' means--

`(A) a federally qualified health maintenance organization (as defined in section 1301(a) of the Public Health Service Act (42 U.S.C. 300e(a))),

`(B) an organization recognized under State law as a health maintenance organization, or

`(C) a similar organization regulated under State law for solvency in the same manner and to the same extent as such a health maintenance organization.

`(4) GROUP HEALTH INSURANCE COVERAGE- The term `group health insurance coverage' means, in connection with a group health plan, health insurance coverage offered in connection with such plan.

`(c) EXCEPTED BENEFITS- For purposes of this part, the term `excepted benefits' means benefits under one or more (or any combination thereof) of the following:

`(1) BENEFITS NOT SUBJECT TO REQUIREMENTS-

`(A) Coverage only for accident, or disability income insurance, or any combination thereof.

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

`(C) Liability insurance, including general liability insurance and automobile liability insurance.

`(D) Workers' compensation or similar insurance.

`(E) Automobile medical payment insurance.

`(F) Credit-only insurance.

`(G) Coverage for on-site medical clinics.

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

`(2) BENEFITS NOT SUBJECT TO REQUIREMENTS IF OFFERED SEPARATELY-

`(A) Limited scope dental or vision benefits.

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

`(C) Such other similar, limited benefits as are specified in regulations.

`(3) BENEFITS NOT SUBJECT TO REQUIREMENTS IF OFFERED AS INDEPENDENT, NONCOORDINATED BENEFITS-

`(A) Coverage only for a specified disease or illness.

`(B) Hospital indemnity or other fixed indemnity insurance.

`(4) BENEFITS NOT SUBJECT TO REQUIREMENTS IF OFFERED AS SEPARATE INSURANCE POLICY- Medicare supplemental health insurance (as defined under section 1882(g)(1) of the Social Security Act), coverage supplemental to the coverage provided under chapter 55 of title 10, United States Code, and similar supplemental coverage provided to coverage under a group health plan.

`(d) OTHER DEFINITIONS- For purposes of this part--

`(1) COBRA CONTINUATION PROVISION- The term `COBRA continuation provision' means any of the following:

`(A) Part 6 of this subtitle.

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

`(C) Title XXII of the Public Health Service Act.

`(2) HEALTH STATUS-RELATED FACTOR- The term `health status-related factor' means any of the factors described in section 702(a)(1).

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

`(4) PLACED FOR ADOPTION- The term `placement', or being `placed', for adoption, has the meaning given such term in section 609(c)(3)(B).

`SEC. 707. REGULATIONS.

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

(b) ENFORCEMENT WITH RESPECT TO HEALTH INSURANCE ISSUERS- Section 502(b) of such Act (29 U.S.C. 1132(b)) is amended by adding at the end the following new paragraph:

`(3) The Secretary is not authorized to enforce under this part any requirement of part 7 against a health insurance issuer offering health insurance coverage in connection with a group health plan (as defined in section 706(a)(1)). Nothing in this paragraph shall affect the authority of the Secretary to issue regulations to carry out such part.'.

(c) DISCLOSURE OF INFORMATION TO PARTICIPANTS AND BENEFICIARIES-

(1) IN GENERAL- Section 104(b)(1) of such Act (29 U.S.C. 1024(b)(1)) is amended in the matter following subpara-graph (B)--

(A) by striking `102(a)(1),' and inserting `102(a)(1) (other than a material reduction in covered services or benefits provided in the case of a group health plan (as defined in section 706(a)(1))),'; and

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

(2) PLAN DESCRIPTION AND SUMMARY- Section 102(b) of such Act (29 U.S.C. 1022(b)) is amended--

(A) by inserting `in the case of a group health plan (as defined in section 706(a)(1)), whether a health insurance issuer (as defined in section 706(b)(2)) is responsible for the financing or administration (including payment of claims) of the plan and (if so) the name and address of such issuer;' after `type of administration of the plan;'; and

(B) by inserting `including the office at the Department of Labor through which participants and beneficiaries may seek assistance or information regarding their rights under this Act and the Health Insurance Portability and Accountability Act of 1996 with respect to health benefits that are offered through a group health plan (as defined in section 706(a)(1))' after `benefits under the plan'.

(d) TREATMENT OF HEALTH INSURANCE ISSUERS OFFERING HEALTH INSURANCE COVERAGE TO NONCOVERED PLANS- Section 4(b) of such Act (29 U.S.C. 1003(b)) is amended by adding at the end (after and below paragraph (5)) the following:

`The provisions of part 7 of subtitle B shall not apply to a health insurance issuer (as defined in section 706(b)(2)) solely by reason of health insurance coverage (as defined in section 706(b)(1)) provided by such issuer in connection with a group health plan (as defined in section 706(a)(1)) if the provisions of this title do not apply to such group health plan.'.

(e) REPORTING AND ENFORCEMENT WITH RESPECT TO CERTAIN ARRANGEMENTS-

(1) IN GENERAL- Section 101 of such Act (29 U.S.C. 1021) is amended--

(A) by redesignating subsection (g) as subsection (h), and

(B) by inserting after subsection (f) the following new subsection:

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

(2) ENFORCEMENT-

(A) IN GENERAL- Section 502 of such Act (29 U.S.C. 1132) is amended--

(i) in subsection (a)(6), by striking `under subsection (c)(2) or (i) or (l)' and inserting `under paragraph (2), (4), or (5) of subsection (c) or under subsection (i) or (l)'; and

(ii) in the last 2 sentences of subsection (c), by striking `For purposes of this paragraph' and all that follows through `The Secretary and' and inserting the following:

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

`(6) The Secretary and'.

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

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

`(c) COORDINATION OF ENFORCEMENT WITH STATES WITH RESPECT TO CERTAIN ARRANGEMENTS- A State may enter into an agreement with the Secretary for delegation to the State of some or all of the Secretary's authority under sections 502 and 504 to enforce the requirements under part 7 in connection with multiple employer welfare arrangements, providing medical care (within the meaning of section 706(a)(2)), which are not group health plans.'.

(f) CONFORMING AMENDMENTS-

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

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

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

`Part 6--Continuation Coverage and Additional Standards for Group Health Plans'.

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

`Part 6--Continuation Coverage and Additional Standards for Group Health Plans'.

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

`Part 7--Group Health Plan Portability, Access, and Renewability Requirements

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

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

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

`Sec. 704. Preemption; State flexibility; construction.

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

`Sec. 706. Definitions.

`Sec. 707. Regulations.'.

(g) EFFECTIVE DATES-

(1) IN GENERAL- Except as provided in this section, this section (and the amendments made by this section) shall apply with respect to group health plans for plan years beginning after June 30, 1997.

(2) DETERMINATION OF CREDITABLE COVERAGE-

(A) PERIOD OF COVERAGE-

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

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

(B) CERTIFICATIONS, ETC-

(i) IN GENERAL- Subject to clauses (ii) and (iii), subsection (e) of section 701 of the Employee Retirement Income Security Act of 1974 (as added by this section) shall apply to events occurring after June 30, 1996.

(ii) NO CERTIFICATION REQUIRED TO BE PROVIDED BEFORE JUNE 1, 1997- In no case is a certification required to be provided under such subsection before June 1, 1997.

(iii) CERTIFICATION ONLY ON WRITTEN REQUEST FOR EVENTS OCCURRING BEFORE OCTOBER 1, 1996- In the case of an event occurring after June 30, 1996, and before October 1, 1996, a certification is not required to be provided under such subsection unless an individual (with respect to whom the certification is otherwise required to be made) requests such certification in writing.

(C) TRANSITIONAL RULE- In the case of an individual who seeks to establish creditable coverage for any period for which certification is not required because it relates to an event occurring before June 30, 1996--

(i) the individual may present other credible evidence of such coverage in order to establish the period of creditable coverage; and

(ii) a group health plan and a health insurance issuer shall not be subject to any penalty or enforcement action with respect to the plan's or issuer's crediting (or not crediting) such coverage if the plan or issuer has sought to comply in good faith with the applicable requirements under the amendments made by this section.

(3) SPECIAL RULE FOR COLLECTIVE BARGAINING AGREEMENTS- Except as provided in paragraph (2), in the case of a group health plan maintained pursuant to one or more collective bargaining agreements between employee representatives and one or more employers ratified before the date of the enactment of this Act, part 7 of subtitle B of title I of Employee Retirement Income Security Act of 1974 (other than section 701(e) thereof) shall not apply to plan years beginning before the later of--

(A) the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act), or

(B) July 1, 1997.

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

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

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

SEC. 102. THROUGH THE PUBLIC HEALTH SERVICE ACT.

(a) IN GENERAL- The Public Health Service Act is amended by adding at the end the following new title:

`Part A--Group Market Reforms

`Subpart 1--Portability, Access, and Renewability Requirements

`(a) LIMITATION ON PREEXISTING CONDITION EXCLUSION PERIOD; CREDITING FOR PERIODS OF PREVIOUS COVERAGE- Subject to subsection (d), a group health plan, and a health insurance issuer offering group health insurance coverage, may, with respect to a participant or beneficiary, impose a preexisting condition exclusion only if--

`(1) such exclusion relates to a condition (whether physical or mental), regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the 6-month period ending on the enrollment date;

`(2) such exclusion extends for a period of not more than 12 months (or 18 months in the case of a late enrollee) after the enrollment date; and

`(3) the period of any such preexisting condition exclusion is reduced by the aggregate of the periods of creditable coverage (if any, as defined in subsection (c)(1)) applicable to the participant or beneficiary as of the enrollment date.

`(b) DEFINITIONS- For purposes of this part--

`(1) PREEXISTING CONDITION EXCLUSION-

`(A) IN GENERAL- The term `preexisting condition exclusion' means, with respect to coverage, a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the date of enrollment for such coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before such date.

`(B) TREATMENT OF GENETIC INFORMATION- Genetic information shall not be treated as a condition described in subsection (a)(1) in the absence of a diagnosis of the condition related to such information.

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

`(3) LATE ENROLLEE- The term `late enrollee' means, with respect to coverage under a group health plan, a participant or beneficiary who enrolls under the plan other than during--

`(A) the first period in which the individual is eligible to enroll under the plan, or

`(B) a special enrollment period under subsection (f).

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

`(c) RULES RELATING TO CREDITING PREVIOUS COVERAGE-

`(1) CREDITABLE COVERAGE DEFINED- For purposes of this title, the term `creditable coverage' means, with respect to an individual, coverage of the individual under any of the following:

`(A) A group health plan.

`(B) Health insurance coverage.

`(C) Part A or part B of title XVIII of the Social Security Act.

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

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

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

`(G) A State health benefits risk pool.

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

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

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

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

`(2) NOT COUNTING PERIODS BEFORE SIGNIFICANT BREAKS IN COVERAGE-

`(A) IN GENERAL- A period of creditable coverage shall not be counted, with respect to enrollment of an individual under a group health plan, if, after such period and before the enrollment date, there was a 63-day period during all of which the individual was not covered under any creditable coverage.

`(B) WAITING PERIOD NOT TREATED AS A BREAK IN COVERAGE- For purposes of subparagraph (A) and subsection (d)(4), any period that an individual is in a waiting period for any coverage under a group health plan (or for group health insurance coverage) or is in an affiliation period (as defined in subsection (g)(2)) shall not be taken into account in determining the continuous period under subparagraph (A).

`(3) METHOD OF CREDITING COVERAGE-

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

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

`(C) PLAN NOTICE- In the case of an election with respect to a group health plan under subparagraph (B) (whether or not health insurance coverage is provided in connection with such plan), the plan shall--

`(i) prominently state in any disclosure statements concerning the plan, and state to each enrollee at the time of enrollment under the plan, that the plan has made such election, and

`(ii) include in such statements a description of the effect of this election.

`(D) ISSUER NOTICE- In the case of an election under subparagraph (B) with respect to health insurance coverage offered by an issuer in the small or large group market, the issuer--

`(i) shall prominently state in any disclosure statements concerning the coverage, and to each employer at the time of the offer or sale of the coverage, that the issuer has made such election, and

`(ii) shall include in such statements a description of the effect of such election.

`(4) ESTABLISHMENT OF PERIOD- Periods of creditable coverage with respect to an individual shall be established through presentation of certifications described in subsection (e) or in such other manner as may be specified in regulations.

`(d) EXCEPTIONS-

`(1) EXCLUSION NOT APPLICABLE TO CERTAIN NEWBORNS- Subject to paragraph (4), a group health plan, and a health insurance issuer offering group health insurance coverage, may not impose any preexisting condition exclusion in the case of an individual who, as of the last day of the 30-day period beginning with the date of birth, is covered under creditable coverage.

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

`(3) EXCLUSION NOT APPLICABLE TO PREGNANCY- A group health plan, and health insurance issuer offering group health insurance coverage, may not impose any preexisting condition exclusion relating to pregnancy as a preexisting condition.

`(4) LOSS IF BREAK IN COVERAGE- Paragraphs (1) and (2) shall no longer apply to an individual after the end of the first 63-day period during all of which the individual was not covered under any creditable coverage.

`(e) CERTIFICATIONS AND DISCLOSURE OF COVERAGE-

`(1) REQUIREMENT FOR CERTIFICATION OF PERIOD OF CREDITABLE COVERAGE-

`(A) IN GENERAL- A group health plan, and a health insurance issuer offering group health insurance coverage, shall provide the certification described in subparagraph (B)--

`(i) at the time an individual ceases to be covered under the plan or otherwise becomes covered under a COBRA continuation provision,

`(ii) in the case of an individual becoming covered under such a provision, at the time the individual ceases to be covered under such provision, and

`(iii) on the request on behalf of an individual made not later than 24 months after the date of cessation of the coverage described in clause (i) or (ii), whichever is later.

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

`(B) CERTIFICATION- The certification described in this subparagraph is a written certification of--

`(i) the period of creditable coverage of the individual under such plan and the coverage (if any) under such COBRA continuation provision, and

`(ii) the waiting period (if any) (and affiliation period, if applicable) imposed with respect to the individual for any coverage under such plan.

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

`(2) DISCLOSURE OF INFORMATION ON PREVIOUS BENEFITS- In the case of an election described in subsection (c)(3)(B) by a group health plan or health insurance issuer, if the plan or issuer enrolls an individual for coverage under the plan and the individual provides a certification of coverage of the individual under paragraph (1)--

`(A) upon request of such plan or issuer, the entity which issued the certification provided by the individual shall promptly disclose to such requesting plan or issuer information on coverage of classes and categories of health benefits available under such entity's plan or coverage, and

`(B) such entity may charge the requesting plan or issuer for the reasonable cost of disclosing such information.

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

`(f) SPECIAL ENROLLMENT PERIODS-

`(1) INDIVIDUALS LOSING OTHER COVERAGE- A group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, shall permit an employee who is eligible, but not enrolled, for coverage under the terms of the plan (or a dependent of such an employee if the dependent is eligible, but not enrolled, for coverage under such terms) to enroll for coverage under the terms of the plan if each of the following conditions is met:

`(A) The employee or dependent was covered under a group health plan or had health insurance coverage at the time coverage was previously offered to the employee or dependent.

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

`(C) The employee's or dependent's coverage described in subparagraph (A)--

`(i) was under a COBRA continuation provision and the coverage under such provision was exhausted; or

`(ii) was not under such a provision and either the coverage was terminated as a result of loss of eligibility for the coverage (including as a result of legal separation, divorce, death, termination of employment, or reduction in the number of hours of employment) or employer contributions toward such coverage were terminated.

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

`(2) FOR DEPENDENT BENEFICIARIES-

`(A) IN GENERAL- If--

`(i) a group health plan makes coverage available with respect to a dependent of an individual,

`(ii) the individual is a participant under the plan (or has met any waiting period applicable to becoming a participant under the plan and is eligible to be enrolled under the plan but for a failure to enroll during a previous enrollment period), and

`(iii) a person becomes such a dependent of the individual through marriage, birth, or adoption or placement for adoption,

the group health plan shall provide for a dependent special enrollment period described in subparagraph (B) during which the person (or, if not otherwise enrolled, the individual) may be enrolled under the plan as a dependent of the individual, and in the case of the birth or adoption of a child, the spouse of the individual may be enrolled as a dependent of the individual if such spouse is otherwise eligible for coverage.

`(B) DEPENDENT SPECIAL ENROLLMENT PERIOD- A dependent special enrollment period under this subparagraph shall be a period of not less than 30 days and shall begin on the later of--

`(i) the date dependent coverage is made available, or

`(ii) the date of the marriage, birth, or adoption or placement for adoption (as the case may be) described in subparagraph (A)(iii).

`(C) NO WAITING PERIOD- If an individual seeks to enroll a dependent during the first 30 days of such a dependent special enrollment period, the coverage of the dependent shall become effective--

`(i) in the case of marriage, not later than the first day of the first month beginning after the date the completed request for enrollment is received;

`(ii) in the case of a dependent's birth, as of the date of such birth; or

`(iii) in the case of a dependent's adoption or placement for adoption, the date of such adoption or placement for adoption.

`(g) USE OF AFFILIATION PERIOD BY HMOS AS ALTERNATIVE TO PREEXISTING CONDITION EXCLUSION-

`(1) IN GENERAL- A health maintenance organization which offers health insurance coverage in connection with a group health plan and which does not impose any preexisting condition exclusion allowed under subsection (a) with respect to any particular coverage option may impose an affiliation period for such coverage option, but only if--

`(A) such period is applied uniformly without regard to any health status-related factors; and

`(B) such period does not exceed 2 months (or 3 months in the case of a late enrollee).

`(2) AFFILIATION PERIOD-

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

`(B) BEGINNING- Such period shall begin on the enrollment date.

`(C) RUNS CONCURRENTLY WITH WAITING PERIODS- An affiliation period under a plan shall run concurrently with any waiting period under the plan.

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

`(a) IN ELIGIBILITY TO ENROLL-

`(1) IN GENERAL- Subject to paragraph (2), a group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual:

`(A) Health status.

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

`(C) Claims experience.

`(D) Receipt of health care.

`(E) Medical history.

`(F) Genetic information.

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

`(H) Disability.

`(2) NO APPLICATION TO BENEFITS OR EXCLUSIONS- To the extent consistent with section 701, paragraph (1) shall not be construed--

`(A) to require a group health plan, or group health insurance coverage, to provide particular benefits other than those provided under the terms of such plan or coverage, or

`(B) to prevent such a plan or coverage from establishing limitations or restrictions on the amount, level, extent, or nature of the benefits or coverage for similarly situated individuals enrolled in the plan or coverage.

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

`(b) IN PREMIUM CONTRIBUTIONS-

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

`(2) CONSTRUCTION- Nothing in paragraph (1) shall be construed--

`(A) to restrict the amount that an employer may be charged for coverage under a group health plan; or

`(B) to prevent a group health plan, and a health insurance issuer offering group health insurance coverage, from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.

`Subpart 2--Provisions Applicable Only to Health Insurance Issuers

`(a) ISSUANCE OF COVERAGE IN THE SMALL GROUP MARKET-

`(1) IN GENERAL- Subject to subsections (c) through (f), each health insurance issuer that offers health insurance coverage in the small group market in a State--

`(A) must accept every small employer (as defined in section 2791(e)(4)) in the State that applies for such coverage; and

`(B) must accept for enrollment under such coverage every eligible individual (as defined in paragraph (2)) who applies for enrollment during the period in which the individual first becomes eligible to enroll under the terms of the group health plan and may not place any restriction which is inconsistent with section 2702 on an eligible individual being a participant or beneficiary.

`(2) ELIGIBLE INDIVIDUAL DEFINED- For purposes of this section, the term `eligible individual' means, with respect to a health insurance issuer that offers health insurance coverage to a small employer in connection with a group health plan in the small group market, such an individual in relation to the employer as shall be determined--

`(A) in accordance with the terms of such plan,

`(B) as provided by the issuer under rules of the issuer which are uniformly applicable in a State to small employers in the small group market, and

`(C) in accordance with all applicable State laws governing such issuer and such market.

`(b) ASSURING ACCESS IN THE LARGE GROUP MARKET-

`(1) REPORTS TO HHS- The Secretary shall request that the chief executive officer of each State submit to the Secretary, by not later December 31, 2000, and every 3 years thereafter a report on--

`(A) the access of large employers to health insurance coverage in the State, and

`(B) the circumstances for lack of access (if any) of large employers (or one or more classes of such employers) in the State to such coverage.

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

`(3) GAO REPORT ON LARGE EMPLOYER ACCESS TO HEALTH INSURANCE COVERAGE- The Comptroller General shall provide for a study of the extent to which classes of large employers in the different States are able to obtain access to health insurance coverage and the circumstances for lack of access (if any) to such coverage. The Comptroller General shall submit to Congress a report on such study not later than 18 months after the date of the enactment of this title.

`(c) SPECIAL RULES FOR NETWORK PLANS-

`(1) IN GENERAL- In the case of a health insurance issuer that offers health insurance coverage in the small group market through a network plan, the issuer may--

`(A) limit the employers that may apply for such coverage to those with eligible individuals who live, work, or reside in the service area for such network plan; and

`(B) within the service area of such plan, deny such coverage to such employers if the issuer has demonstrated, if required, to the applicable State authority that--

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

`(ii) it is applying this paragraph uniformly to all employers without regard to the claims experience of those employers and their employees (and their dependents) or any health status-related factor relating to such employees and dependents.

`(2) 180-DAY SUSPENSION UPON DENIAL OF COVERAGE- An issuer, upon denying health insurance coverage in any service area in accordance with paragraph (1)(B), may not offer coverage in the small group market within such service area for a period of 180 days after the date such coverage is denied.

`(d) APPLICATION OF FINANCIAL CAPACITY LIMITS-

`(1) IN GENERAL- A health insurance issuer may deny health insurance coverage in the small group market if the issuer has demonstrated, if required, to the applicable State authority that--

`(A) it does not have the financial reserves necessary to underwrite additional coverage; and

`(B) it is applying this paragraph uniformly to all employers in the small group market in the State consistent with applicable State law and without regard to the claims experience of those employers and their employees (and their dependents) or any health status-related factor relating to such employees and dependents.

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

`(e) EXCEPTION TO REQUIREMENT FOR FAILURE TO MEET CERTAIN MINIMUM PARTICIPATION OR CONTRIBUTION RULES-

`(1) IN GENERAL- Subsection (a) shall not be construed to preclude a health insurance issuer from establishing employer contribution rules or group participation rules for the offering of health insurance coverage in connection

with a group health plan in the small group market, as allowed under applicable State law.

`(2) RULES DEFINED- For purposes of paragraph (1)--

`(A) the term `employer contribution rule' means a requirement relating to the minimum level or amount of employer contribution toward the premium for enrollment of participants and beneficiaries; and

`(B) the term `group participation rule' means a requirement relating to the minimum number of participants or beneficiaries that must be enrolled in relation to a specified percentage or number of eligible individuals or employees of an employer.

`(f) EXCEPTION FOR COVERAGE OFFERED ONLY TO BONA FIDE ASSOCIATION MEMBERS- Subsection (a) shall not apply to health insurance coverage offered by a health insurance issuer if such coverage is made available in the small group market only through one or more bona fide associations (as defined in section 2791(d)(3)).

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

`(b) GENERAL EXCEPTIONS- A health insurance issuer may nonrenew or discontinue health insurance coverage offered in connection with a group health plan in the small or large group market based only on one or more of the following:

`(1) NONPAYMENT OF PREMIUMS- The plan sponsor has failed to pay premiums or contributions in accordance with the terms of the health insurance coverage or the issuer has not received timely premium payments.

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

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

`(4) TERMINATION OF COVERAGE- The issuer is ceasing to offer coverage in such market in accordance with subsection (c) and applicable State law.

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

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

`(c) REQUIREMENTS FOR UNIFORM TERMINATION OF COVERAGE-

`(1) PARTICULAR TYPE OF COVERAGE NOT OFFERED- In any case in which an issuer decides to discontinue offering a particular type of group health insurance coverage offered in the small or large group market, coverage of such type may be discontinued by the issuer in accordance with applicable State law in such market only if--

`(A) the issuer provides notice to each plan sponsor provided coverage of this type in such market (and participants and beneficiaries covered under such coverage) of such discontinuation at least 90 days prior to the date of the discontinuation of such coverage;

`(B) the issuer offers to each plan sponsor provided coverage of this type in such market, the option to purchase all (or, in the case of the large group market, any) other health insurance coverage currently being offered by the issuer to a group health plan in such market; and

`(C) in exercising the option to discontinue coverage of this type and in offering the option of coverage under subparagraph (B), the issuer acts uniformly without regard to the claims experience of those sponsors or any health status-related factor relating to any participants or beneficiaries covered or new participants or beneficiaries who may become eligible for such coverage.

`(2) DISCONTINUANCE OF ALL COVERAGE-

`(A) IN GENERAL- In any case in which a health insurance issuer elects to discontinue offering all health insurance coverage in the small group market or the large group market, or both markets, in a State, health insurance coverage may be discontinued by the issuer only in accordance with applicable State law and if--

`(i) the issuer provides notice to the applicable State authority and to each plan sponsor (and participants and beneficiaries covered under such coverage) of such discontinuation at least 180 days prior to the date of the discontinuation of such coverage; and

`(ii) all health insurance issued or delivered for issuance in the State in such market (or markets) are discontinued and coverage under such health insurance coverage in such market (or markets) is not renewed.

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

`(d) EXCEPTION FOR UNIFORM MODIFICATION OF COVERAGE- At the time of coverage renewal, a health insurance issuer may modify the health insurance coverage for a product offered to a group health plan--

`(1) in the large group market; or

`(2) in the small group market if, for coverage that is available in such market other than only through one or more bona fide associations, such modification is consistent with State law and effective on a uniform basis among group health plans with that product.

`(e) APPLICATION TO COVERAGE OFFERED ONLY THROUGH ASSOCIATIONS- In applying this section in the case of health insurance coverage that is made available by a health insurance issuer in the small or large group market to employers only through one or more associations, a reference to `plan sponsor' is deemed, with respect to coverage provided to an employer member of the association, to include a reference to such employer.

`SEC. 2713. DISCLOSURE OF INFORMATION.

`(a) DISCLOSURE OF INFORMATION BY HEALTH PLAN ISSUERS- In connection with the offering of any health insurance coverage to a small employer, a health insurance issuer--

`(1) shall make a reasonable disclosure to such employer, as part of its solicitation and sales materials, of the availability of information described in subsection (b), and

`(2) upon request of such a small employer, provide such information.

`(b) INFORMATION DESCRIBED-

`(1) IN GENERAL- Subject to paragraph (3), with respect to a health insurance issuer offering health insurance coverage to a small employer, information described in this subsection is information concerning--

`(A) the provisions of such coverage concerning issuer's right to change premium rates and the factors that may affect changes in premium rates;

`(B) the provisions of such coverage relating to renewability of coverage;

`(C) the provisions of such coverage relating to any preexisting condition exclusion; and

`(D) the benefits and premiums available under all health insurance coverage for which the employer is qualified.

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

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

`Subpart 3--Exclusion of Plans; Enforcement; Preemption

`SEC. 2721. EXCLUSION OF CERTAIN PLANS.

`(a) EXCEPTION FOR CERTAIN SMALL GROUP HEALTH PLANS- The requirements of subparts 1 and 2 shall not apply to any group health plan (and health insurance coverage offered in connection with a group health plan) for any plan year if, on the first day of such plan year, such plan has less than 2 participants who are current employees.

`(b) LIMITATION ON APPLICATION OF PROVISIONS RELATING TO GROUP HEALTH PLANS-

`(1) IN GENERAL- The requirements of subparts 1 and 2 shall apply with respect to group health plans only--

`(A) subject to paragraph (2), in the case of a plan that is a nonfederal governmental plan, and

`(B) with respect to health insurance coverage offered in connection with a group health plan (including such a plan that is a church plan or a governmental plan).

`(2) TREATMENT OF NONFEDERAL GOVERNMENTAL PLANS-

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

`(B) PERIOD OF ELECTION- An election under subparagraph (A) shall apply--

`(i) for a single specified plan year, or

`(ii) in the case of a plan provided pursuant to a collective bargaining agreement, for the term of such agreement.

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

`(C) NOTICE TO ENROLLEES- Under such an election, the plan shall provide for--

`(i) notice to enrollees (on an annual basis and at the time of enrollment under the plan) of the fact and consequences of such election, and

`(ii) certification and disclosure of creditable coverage under the plan with respect to enrollees in accordance with section 2701(e).

`(c) EXCEPTION FOR CERTAIN BENEFITS- The requirements of subparts 1 and 2 shall not apply to any group health plan (or group health insurance coverage) in relation to its provision of excepted benefits described in section 2791(c)(1).

`(d) EXCEPTION FOR CERTAIN BENEFITS IF CERTAIN CONDITIONS MET-

`(1) LIMITED, EXCEPTED BENEFITS- The requirements of subparts 1 and 2 shall not apply to any group health plan (and group health insurance coverage offered in connection with a group health plan) in relation to its provision of excepted benefits described in section 2791(c)(2) if the benefits--

`(A) are provided under a separate policy, certificate, or contract of insurance; or

`(B) are otherwise not an integral part of the plan.

`(2) NONCOORDINATED, EXCEPTED BENEFITS- The requirements of subparts 1 and 2 shall not apply to any group health plan (and group health insurance coverage offered in connection with a group health plan) in relation to its provision of excepted benefits described in section 2791(c)(3) if all of the following conditions are met:

`(A) The benefits are provided under a separate policy, certificate, or contract of insurance.

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

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

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

`(e) TREATMENT OF PARTNERSHIPS- For purposes of this part--

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

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

`(3) PARTICIPANTS OF GROUP HEALTH PLANS- In the case of a group health plan, the term `participant' also includes--

`(A) in connection with a group health plan maintained by a partnership, an individual who is a partner in relation to the partnership, or

`(B) in connection with a group health plan maintained by a self-employed individual (under which one or more employees are participants), the self-employed individual,

if such individual is, or may become, eligible to receive a benefit under the plan or such individual's beneficiaries may be eligible to receive any such benefit.

`SEC. 2722. ENFORCEMENT.

`(a) STATE ENFORCEMENT-

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

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

`(b) SECRETARIAL ENFORCEMENT AUTHORITY-

`(1) LIMITATION- The provisions of this subsection shall apply to enforcement of a provision (or provisions) of this part only--

`(A) as provided under subsection (a)(2); and

`(B) with respect to group health plans that are non-Federal governmental plans.

`(2) IMPOSITION OF PENALTIES- In the cases described in paragraph (1)--

`(A) IN GENERAL- Subject to the succeeding provisions of this subsection, any non-Federal governmental plan that is a group health plan and any health insurance issuer that fails to meet a provision of this part applicable to such plan or issuer is subject to a civil money penalty under this subsection.

`(B) LIABILITY FOR PENALTY- In the case of a failure by--

`(i) a health insurance issuer, the issuer is liable for such penalty, or

`(ii) a group health plan that is a non-Federal governmental plan which is--

`(I) sponsored by 2 or more employers, the plan is liable for such penalty, or

`(II) not so sponsored, the employer is liable for such penalty.

`(C) AMOUNT OF PENALTY-

`(i) IN GENERAL- The maximum amount of penalty imposed under this paragraph is $100 for each day for each individual with respect to which such a failure occurs.

`(ii) CONSIDERATIONS IN IMPOSITION- In determining the amount of any penalty to be assessed under this paragraph, the Secretary shall take into account the previous record of compliance of the entity being assessed with the applicable provisions of this part and the gravity of the violation.

`(iii) LIMITATIONS-

`(I) PENALTY NOT TO APPLY WHERE FAILURE NOT DISCOVERED EXERCISING REASONABLE DILIGENCE- No civil money penalty shall be imposed under this paragraph on any failure during any period for which it is established to the satisfaction of the Secretary that none of the entities against whom the penalty would be imposed knew, or exercising reasonable diligence would have known, that such failure existed.

`(II) PENALTY NOT TO APPLY TO FAILURES CORRECTED WITHIN 30 DAYS- No civil money penalty shall be imposed under this paragraph on any failure if such failure was due to reasonable cause and not to willful neglect, and such failure is corrected during the 30-day period beginning on the first day any of the entities against whom the penalty would be imposed knew, or exercising reasonable diligence would have known, that such failure existed.

`(D) ADMINISTRATIVE REVIEW-

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

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

`(E) JUDICIAL REVIEW-

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

`(ii) CERTIFICATION OF ADMINISTRATIVE RECORD- The Secretary shall promptly certify and file in such court the record upon which the penalty was imposed.

`(iii) STANDARD FOR REVIEW- The findings of the Secretary shall be set aside only if found to be unsupported by substantial evidence as provided by section 706(2)(E) of title 5, United States Code.

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

`(F) FAILURE TO PAY ASSESSMENT; MAINTENANCE OF ACTION-

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

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

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

`SEC. 2723. PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.

`(a) CONTINUED APPLICABILITY OF STATE LAW WITH RESPECT TO HEALTH INSURANCE ISSUERS-

`(1) IN GENERAL- Subject to paragraph (2) and except as provided in subsection (b), this part and part C insofar as it relates to this part shall not be construed to supersede any provision of State law which establishes, implements, or continues in effect any standard or requirement solely relating to health insurance issuers in connection with group health insurance coverage except to the extent that such standard or requirement prevents the application of a requirement of this part.

`(2) CONTINUED PREEMPTION WITH RESPECT TO GROUP HEALTH PLANS- Nothing in this part shall be construed to affect or modify the provisions of section 514 of the Employee Retirement Income Security Act of 1974 with respect to group health plans.

`(b) SPECIAL RULES IN CASE OF PORTABILITY REQUIREMENTS-

`(1) IN GENERAL- Subject to paragraph (2), the provisions of this part relating to health insurance coverage offered by a health insurance issuer supersede any provision of State law which establishes, implements, or continues in effect a standard or requirement applicable to imposition of a preexisting condition exclusion specifically governed by section 701 which differs from the standards or requirements specified in such section.

`(2) EXCEPTIONS- Only in relation to health insurance coverage offered by a health insurance issuer, the provisions of this part do not supersede any provision of State law to the extent that such provision--

`(i) substitutes for the reference to `6-month period' in section 2701(a)(1) a reference to any shorter period of time;

`(ii) substitutes for the reference to `12 months' and `18 months' in section 2701(a)(2) a reference to any shorter period of time;

`(iii) substitutes for the references to `63' days in sections 2701(c)(2)(A) and 2701(d)(4)(A) a reference to any greater number of days;

`(iv) substitutes for the reference to `30-day period' in sections 2701(b)(2) and 2701(d)(1) a reference to any greater period;

`(v) prohibits the imposition of any preexisting condition exclusion in cases not described in section 2701(d) or expands the exceptions described in such section;

`(vi) requires special enrollment periods in addition to those required under section 2701(f); or

`(vii) reduces the maximum period permitted in an affiliation period under section 2701(g)(1)(B).

`(c) RULES OF CONSTRUCTION- Nothing in this part shall be construed as requiring a group health plan or health insurance coverage to provide specific benefits under the terms of such plan or coverage.

`(d) DEFINITIONS- For purposes of this section--

`(1) STATE LAW- The term `State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. A law of the United States applicable only to the District of Columbia shall be treated as a State law rather than a law of the United States.

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

`Part C--Definitions; Miscellaneous Provisions

`SEC. 2791. DEFINITIONS.

`(a) GROUP HEALTH PLAN-

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

`(2) MEDICAL CARE- The term `medical care' means amounts paid for--

`(A) the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body,

`(B) amounts paid for transportation primarily for and essential to medical care referred to in subparagraph (A), and

`(C) amounts paid for insurance covering medical care referred to in subparagraphs (A) and (B).

`(3) TREATMENT OF CERTAIN PLANS AS GROUP HEALTH PLAN FOR NOTICE PROVISION- A program under which creditable coverage described in subparagraph (C), (D), (E), or (F) of section 2701(c)(1) is provided shall be treated as a group health plan for purposes of applying section 2701(e).

`(b) DEFINITIONS RELATING TO HEALTH INSURANCE-

`(1) HEALTH INSURANCE COVERAGE- The term `health insurance coverage' means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer.

`(2) HEALTH INSURANCE ISSUER- The term `health insurance issuer' means an insurance company, insurance service, or insurance organization (including a health maintenance organization, as defined in paragraph (3)) which is licensed to engage in the business of insurance in a State and which is subject to State law which regulates insurance (within the meaning of section 514(b)(2) of the Employee Retirement Income Security Act of 1974). Such term does not include a group health plan.

`(3) HEALTH MAINTENANCE ORGANIZATION- The term `health maintenance organization' means--

`(A) a Federally qualified health maintenance organization (as defined in section 1301(a)),

`(B) an organization recognized under State law as a health maintenance organization, or

`(C) a similar organization regulated under State law for solvency in the same manner and to the same extent as such a health maintenance organization.

`(4) GROUP HEALTH INSURANCE COVERAGE- The term `group health insurance coverage' means, in connection with a group health plan, health insurance coverage offered in connection with such plan.

`(5) INDIVIDUAL HEALTH INSURANCE COVERAGE- The term `individual health insurance coverage' means health insurance coverage offered to individuals in the individual market, but does not include short-term limited duration insurance.

`(c) EXCEPTED BENEFITS- For purposes of this title, the term `excepted benefits' means benefits under one or more (or any combination thereof) of the following:

`(1) BENEFITS NOT SUBJECT TO REQUIREMENTS-