H. R. 346
To amend the Public Health Service Act to provide for cooperative
governing of individual health insurance coverage offered in interstate commerce.
IN THE HOUSE OF REPRESENTATIVES
January 19, 2011
Mr. PEARCE (for himself, Mr. DANIEL E. LUNGREN of California, Mr. GARRETT,
Mr. PLATTS, Mr. SESSIONS, Mr. COFFMAN of Colorado, and Mr. GERLACH) introduced
the following bill; which was referred to the Committee on Energy and Commerce
To amend the Public Health Service Act to provide for cooperative
governing of individual health insurance coverage offered in interstate commerce.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as `Health Care Choice Act of 2011'.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The application of numerous and significant variations in State law
impacts the ability of insurers to offer, and individuals to obtain, affordable
individual health insurance coverage, thereby impeding commerce in individual
health insurance coverage.
(2) Individual health insurance coverage is increasingly offered through
the Internet, other electronic means, and by mail, all of which are inherently
part of interstate commerce.
(3) In response to these issues, it is appropriate to encourage increased
efficiency in the offering of individual health insurance coverage through
a collaborative approach by the States in regulating this coverage.
(4) The establishment of risk-retention groups has provided a successful
model for the sale of insurance across State lines, as the acts establishing
those groups allow insurance to be sold in multiple States but regulated
by a single State.
SEC. 3. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE.
(a) In General- Title XXVII of the Public Health Service Act (42 U.S.C. 300gg
et seq.) is amended by adding at the end the following new part:
`PART D--COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE
`SEC. 2795. DEFINITIONS.
`(1) PRIMARY STATE- The term `primary State' means, with respect to individual
health insurance coverage offered by a health insurance issuer, the State
designated by the issuer as the State whose covered laws shall govern the
health insurance issuer in the sale of such coverage under this part. An
issuer, with respect to a particular policy, may only designate one such
State as its primary State with respect to all such coverage it offers.
Such an issuer may not change the designated primary State with respect
to individual health insurance coverage once the policy is issued, except
that such a change may be made upon renewal of the policy. With respect
to such designated State, the issuer is deemed to be doing business in that
`(2) SECONDARY STATE- The term `secondary State' means, with respect to
individual health insurance coverage offered by a health insurance issuer,
any State that is not the primary State. In the case of a health insurance
issuer that is selling a policy in, or to a resident of, a secondary State,
the issuer is deemed to be doing business in that secondary State.
`(3) HEALTH INSURANCE ISSUER- The term `health insurance issuer' has the
meaning given such term in section 2791(b)(2), except that such an issuer
must be licensed in the primary State and be qualified to sell individual
health insurance coverage in that State.
`(4) INDIVIDUAL HEALTH INSURANCE COVERAGE- The term `individual health insurance
coverage' means health insurance coverage offered in the individual market,
as defined in section 2791(e)(1).
`(5) APPLICABLE STATE AUTHORITY- The term `applicable State authority' means,
with respect to a health insurance issuer in a State, the State insurance
commissioner or official or officials designated by the State to enforce
the requirements of this title for the State with respect to the issuer.
`(6) HAZARDOUS FINANCIAL CONDITION- The term `hazardous financial condition'
means that, based on its present or reasonably anticipated financial condition,
a health insurance issuer is unlikely to be able--
`(A) to meet obligations to policyholders with respect to known claims
and reasonably anticipated claims; or
`(B) to pay other obligations in the normal course of business.
`(A) IN GENERAL- The term `covered laws' means the laws, rules, regulations,
agreements, and orders governing the insurance business pertaining to--
`(i) individual health insurance coverage issued by a health insurance
`(ii) the offer, sale, rating (including medical underwriting), renewal,
and issuance of individual health insurance coverage to an individual;
`(iii) the provision to an individual in relation to individual health
insurance coverage of health care and insurance related services;
`(iv) the provision to an individual in relation to individual health
insurance coverage of management, operations, and investment activities
of a health insurance issuer; and
`(v) the provision to an individual in relation to individual health
insurance coverage of loss control and claims administration for a health
insurance issuer with respect to liability for which the issuer provides
`(B) EXCEPTION- Such term does not include any law, rule, regulation,
agreement, or order governing the use of care or cost management techniques,
including any requirement related to provider contracting, network access
or adequacy, health care data collection, or quality assurance.
`(8) STATE- The term `State' means the 50 States and includes the District
of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and
the Northern Mariana Islands.
`(9) UNFAIR CLAIMS SETTLEMENT PRACTICES- The term `unfair claims settlement
practices' means only the following practices:
`(A) Knowingly misrepresenting to claimants and insured individuals relevant
facts or policy provisions relating to coverage at issue.
`(B) Failing to acknowledge with reasonable promptness pertinent communications
with respect to claims arising under policies.
`(C) Failing to adopt and implement reasonable standards for the prompt
investigation and settlement of claims arising under policies.
`(D) Failing to effectuate prompt, fair, and equitable settlement of claims
submitted in which liability has become reasonably clear.
`(E) Refusing to pay claims without conducting a reasonable investigation.
`(F) Failing to affirm or deny coverage of claims within a reasonable
period of time after having completed an investigation related to those
`(G) A pattern or practice of compelling insured individuals or their
beneficiaries to institute suits to recover amounts due under its policies
by offering substantially less than the amounts ultimately recovered in
suits brought by them.
`(H) A pattern or practice of attempting to settle or settling claims
for less than the amount that a reasonable person would believe the insured
individual or his or her beneficiary was entitled by reference to written
or printed advertising material accompanying or made part of an application.
`(I) Attempting to settle or settling claims on the basis of an application
that was materially altered without notice to, or knowledge or consent
of, the insured.
`(J) Failing to provide forms necessary to present claims within 15 calendar
days of a requests with reasonable explanations regarding their use.
`(K) Attempting to cancel a policy in less time than that prescribed in
the policy or by the law of the primary State.
`(10) FRAUD AND ABUSE- The term `fraud and abuse' means an act or omission
committed by a person who, knowingly and with intent to defraud, commits,
or conceals any material information concerning, one or more of the following:
`(A) Presenting, causing to be presented or preparing with knowledge or
belief that it will be presented to or by an insurer, a reinsurer, broker
or its agent, false information as part of, in support of or concerning
a fact material to one or more of the following:
`(i) An application for the issuance or renewal of an insurance policy
or reinsurance contract.
`(ii) The rating of an insurance policy or reinsurance contract.
`(iii) A claim for payment or benefit pursuant to an insurance policy
or reinsurance contract.
`(iv) Premiums paid on an insurance policy or reinsurance contract.
`(v) Payments made in accordance with the terms of an insurance policy
or reinsurance contract.
`(vi) A document filed with the commissioner or the chief insurance
regulatory official of another jurisdiction.
`(vii) The financial condition of an insurer or reinsurer.
`(viii) The formation, acquisition, merger, reconsolidation, dissolution
or withdrawal from one or more lines of insurance or reinsurance in
all or part of a State by an insurer or reinsurer.
`(ix) The issuance of written evidence of insurance.
`(x) The reinstatement of an insurance policy.
`(B) Solicitation or acceptance of new or renewal insurance risks on behalf
of an insurer reinsurer or other person engaged in the business of insurance
by a person who knows or should know that the insurer or other person
responsible for the risk is insolvent at the time of the transaction.
`(C) Transaction of the business of insurance in violation of laws requiring
a license, certificate of authority or other legal authority for the transaction
of the business of insurance.
`(D) Attempt to commit, aiding or abetting in the commission of, or conspiracy
to commit the acts or omissions specified in this paragraph.
`SEC. 2796. APPLICATION OF LAW.
`(a) In General- The covered laws of the primary State shall apply to individual
health insurance coverage offered by a health insurance issuer in the primary
State and in any secondary State, but only if the coverage and issuer comply
with the conditions of this section with respect to the offering of coverage
in any secondary State.
`(b) Exemptions From Covered Laws in a Secondary State- Except as provided
in this section, a health insurance issuer with respect to its offer, sale,
rating (including medical underwriting), renewal, and issuance of individual
health insurance coverage in any secondary State is exempt from any covered
laws of the secondary State (and any rules, regulations, agreements, or orders
sought or issued by such State under or related to such covered laws) to the
extent that such laws would--
`(1) make unlawful, or regulate, directly or indirectly, the operation of
the health insurance issuer operating in the secondary State, except that
any secondary State may require such an issuer--
`(A) to pay, on a nondiscriminatory basis, applicable premium and other
taxes (including high risk pool assessments) which are levied on insurers
and surplus lines insurers, brokers, or policyholders under the laws of
`(B) to register with and designate the State insurance commissioner as
its agent solely for the purpose of receiving service of legal documents
`(C) to submit to an examination of its financial condition by the State
insurance commissioner in any State in which the issuer is doing business
to determine the issuer's financial condition, if--
`(i) the State insurance commissioner of the primary State has not done
an examination within the period recommended by the National Association
of Insurance Commissioners; and
`(ii) any such examination is conducted in accordance with the examiners'
handbook of the National Association of Insurance Commissioners and
is coordinated to avoid unjustified duplication and unjustified repetition;
`(D) to comply with a lawful order issued--
`(i) in a delinquency proceeding commenced by the State insurance commissioner
if there has been a finding of financial impairment under subparagraph
`(ii) in a voluntary dissolution proceeding;
`(E) to comply with an injunction issued by a court of competent jurisdiction,
upon a petition by the State insurance commissioner alleging that the
issuer is in hazardous financial condition;
`(F) to participate, on a nondiscriminatory basis, in any insurance insolvency
guaranty association or similar association to which a health insurance
issuer in the State is required to belong;
`(G) to comply with any State law regarding fraud and abuse (as defined
in section 2795(10)), except that if the State seeks an injunction regarding
the conduct described in this subparagraph, such injunction must be obtained
from a court of competent jurisdiction;
`(H) to comply with any State law regarding unfair claims settlement practices
(as defined in section 2795(9)); or
`(I) to comply with the applicable requirements for independent review
under section 2798 with respect to coverage offered in the State;
`(2) require any individual health insurance coverage issued by the issuer
to be countersigned by an insurance agent or broker residing in that Secondary
`(3) otherwise discriminate against the issuer issuing insurance in both
the primary State and in any secondary State.
`(c) Clear and Conspicuous Disclosure- A health insurance issuer shall provide
the following notice, in 12-point bold type, in any insurance coverage offered
in a secondary State under this part by such a health insurance issuer and
at renewal of the policy, with the 5 blank spaces therein being appropriately
filled with the name of the health insurance issuer, the name of primary State,
the name of the secondary State, the name of the secondary State, and the
name of the secondary State, respectively, for the coverage concerned:
`This policy is issued by XXXXXand is governed by the laws
and regulations of the State of XXXXX, and it has met all the
laws of that State as determined by that State's Department of Insurance.
This policy may be less expensive than others because it is not subject to
all of the insurance laws and regulations of the State of XXXXX,
including coverage of some services or benefits mandated by the law of the
State of XXXXX. Additionally, this policy is not subject to
all of the consumer protection laws or restrictions on rate changes of the
State of XXXXX. As with all insurance products, before purchasing
this policy, you should carefully review the policy and determine what health
care services the policy covers and what benefits it provides, including any
exclusions, limitations, or conditions for such services or benefits.'.
`(d) Prohibition on Certain Reclassifications and Premium Increases-
`(1) IN GENERAL- For purposes of this section, a health insurance issuer
that provides individual health insurance coverage to an individual under
this part in a primary or secondary State may not upon renewal--
`(A) move or reclassify the individual insured under the health insurance
coverage from the class such individual is in at the time of issue of
the contract based on the health-status related factors of the individual;
`(B) increase the premiums assessed the individual for such coverage based
on a health status-related factor or change of a health status-related
factor or the past or prospective claim experience of the insured individual.
`(2) CONSTRUCTION- Nothing in paragraph (1) shall be construed to prohibit
a health insurance issuer--
`(A) from terminating or discontinuing coverage or a class of coverage
in accordance with subsections (b) and (c) of section 2742;
`(B) from raising premium rates for all policy holders within a class
based on claims experience;
`(C) from changing premiums or offering discounted premiums to individuals
who engage in wellness activities at intervals prescribed by the issuer,
if such premium changes or incentives--
`(i) are disclosed to the consumer in the insurance contract;
`(ii) are based on specific wellness activities that are not applicable
to all individuals; and
`(iii) are not obtainable by all individuals to whom coverage is offered;
`(D) from reinstating lapsed coverage; or
`(E) from retroactively adjusting the rates charged an insured individual
if the initial rates were set based on material misrepresentation by the
individual at the time of issue.
`(e) Prior Offering of Policy in Primary State- A health insurance issuer
may not offer for sale individual health insurance coverage in a secondary
State unless that coverage is currently offered for sale in the primary State.
`(f) Licensing of Agents or Brokers for Health Insurance Issuers- Any State
may require that a person acting, or offering to act, as an agent or broker
for a health insurance issuer with respect to the offering of individual health
insurance coverage obtain a license from that State, with commissions or other
compensation subject to the provisions of the laws of that State, except that
a State may not impose any qualification or requirement which discriminates
against a nonresident agent or broker.
`(g) Documents for Submission to State Insurance Commissioner- Each health
insurance issuer issuing individual health insurance coverage in both primary
and secondary States shall submit--
`(1) to the insurance commissioner of each State in which it intends to
offer such coverage, before it may offer individual health insurance coverage
in such State--
`(A) a copy of the plan of operation or feasibility study or any similar
statement of the policy being offered and its coverage (which shall include
the name of its primary State and its principal place of business);
`(B) written notice of any change in its designation of its primary State;
`(C) written notice from the issuer of the issuer's compliance with all
the laws of the primary State; and
`(2) to the insurance commissioner of each secondary State in which it offers
individual health insurance coverage, a copy of the issuer's quarterly financial
statement submitted to the primary State, which statement shall be certified
by an independent public accountant and contain a statement of opinion on
loss and loss adjustment expense reserves made by--
`(A) a member of the American Academy of Actuaries; or
`(B) a qualified loss reserve specialist.
`(h) Power of Courts To Enjoin Conduct- Nothing in this section shall be construed
to affect the authority of any Federal or State court to enjoin--
`(1) the solicitation or sale of individual health insurance coverage by
a health insurance issuer to any person or group who is not eligible for
such insurance; or
`(2) the solicitation or sale of individual health insurance coverage that
violates the requirements of the law of a secondary State which are described
in subparagraphs (A) through (H) of subsection (b)(1).
`(i) Power of Secondary States To Take Administrative Action- Nothing in this
section shall be construed to affect the authority of any State to enjoin
conduct in violation of that State's laws described in subsection (b)(1).
`(j) State Powers To Enforce State Laws-
`(1) IN GENERAL- Subject to the provisions of subsection (b)(1)(G) (relating
to injunctions) and paragraph (2), nothing in this section shall be construed
to affect the authority of any State to make use of any of its powers to
enforce the laws of such State with respect to which a health insurance
issuer is not exempt under subsection (b).
`(2) COURTS OF COMPETENT JURISDICTION- If a State seeks an injunction regarding
the conduct described in paragraphs (1) and (2) of subsection (h), such
injunction must be obtained from a Federal or State court of competent jurisdiction.
`(k) States' Authority To Sue- Nothing in this section shall affect the authority
of any State to bring action in any Federal or State court.
`(l) Generally Applicable Laws- Nothing in this section shall be construed
to affect the applicability of State laws generally applicable to persons
`(m) Guaranteed Availability of Coverage to HIPAA Eligible Individuals- To
the extent that a health insurance issuer is offering coverage in a primary
State that does not accommodate residents of secondary States or does not
provide a working mechanism for residents of a secondary State, and the issuer
is offering coverage under this part in such secondary State which has not
adopted a qualified high risk pool as its acceptable alternative mechanism
(as defined in section 2744(c)(2)), the issuer shall, with respect to any
individual health insurance coverage offered in a secondary State under this
part, comply with the guaranteed availability requirements for eligible individuals
in section 2741.
`SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY SELL
INTO SECONDARY STATES.
`A health insurance issuer may not offer, sell, or issue individual health
insurance coverage in a secondary State if the State insurance commissioner
does not use a risk-based capital formula for the determination of capital
and surplus requirements for all health insurance issuers.
`SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES.
`(a) Right to External Appeal- A health insurance issuer may not offer, sell,
or issue individual health insurance coverage in a secondary State under the
provisions of this title unless--
`(1) both the secondary State and the primary State have legislation or
regulations in place establishing an independent review process for individuals
who are covered by individual health insurance coverage, or
`(2) in any case in which the requirements of subparagraph (A) are not met
with respect to the either of such States, the issuer provides an independent
review mechanism substantially identical (as determined by the applicable
State authority of such State) to that prescribed in the `Health Carrier
External Review Model Act' of the National Association of Insurance Commissioners
for all individuals who purchase insurance coverage under the terms of this
part, except that, under such mechanism, the review is conducted by an independent
medical reviewer, or a panel of such reviewers, with respect to whom the
requirements of subsection (b) are met.
`(b) Qualifications of Independent Medical Reviewers- In the case of any independent
review mechanism referred to in subsection (a)(2)--
`(1) IN GENERAL- In referring a denial of a claim to an independent medical
reviewer, or to any panel of such reviewers, to conduct independent medical
review, the issuer shall ensure that--
`(A) each independent medical reviewer meets the qualifications described
in paragraphs (2) and (3);
`(B) with respect to each review, each reviewer meets the requirements
of paragraph (4) and the reviewer, or at least 1 reviewer on the panel,
meets the requirements described in paragraph (5); and
`(C) compensation provided by the issuer to each reviewer is consistent
with paragraph (6).
`(2) LICENSURE AND EXPERTISE- Each independent medical reviewer shall be
a physician (allopathic or osteopathic) or health care professional who--
`(A) is appropriately credentialed or licensed in 1 or more States to
deliver health care services; and
`(B) typically treats the condition, makes the diagnosis, or provides
the type of treatment under review.
`(A) IN GENERAL- Subject to subparagraph (B), each independent medical
reviewer in a case shall--
`(i) not be a related party (as defined in paragraph (7));
`(ii) not have a material familial, financial, or professional relationship
with such a party; and
`(iii) not otherwise have a conflict of interest with such a party (as
determined under regulations).
`(B) EXCEPTION- Nothing in subparagraph (A) shall be construed to--
`(i) prohibit an individual, solely on the basis of affiliation with
the issuer, from serving as an independent medical reviewer if--
`(I) a non-affiliated individual is not reasonably available;
`(II) the affiliated individual is not involved in the provision of
items or services in the case under review;
`(III) the fact of such an affiliation is disclosed to the issuer
and the enrollee (or authorized representative) and neither party
`(IV) the affiliated individual is not an employee of the issuer and
does not provide services exclusively or primarily to or on behalf
of the issuer;
`(ii) prohibit an individual who has staff privileges at the institution
where the treatment involved takes place from serving as an independent
medical reviewer merely on the basis of such affiliation if the affiliation
is disclosed to the issuer and the enrollee (or authorized representative),
and neither party objects; or
`(iii) prohibit receipt of compensation by an independent medical reviewer
from an entity if the compensation is provided consistent with paragraph
`(4) PRACTICING HEALTH CARE PROFESSIONAL IN SAME FIELD-
`(A) IN GENERAL- In a case involving treatment, or the provision of items
`(i) by a physician, a reviewer shall be a practicing physician (allopathic
or osteopathic) of the same or similar specialty, as a physician who,
acting within the appropriate scope of practice within the State in
which the service is provided or rendered, typically treats the condition,
makes the diagnosis, or provides the type of treatment under review;
`(ii) by a non-physician health care professional, the reviewer, or
at least 1 member of the review panel, shall be a practicing non-physician
health care professional of the same or similar specialty as the non-physician
health care professional who, acting within the appropriate scope of
practice within the State in which the service is provided or rendered,
typically treats the condition, makes the diagnosis, or provides the
type of treatment under review.
`(B) PRACTICING DEFINED- For purposes of this paragraph, the term `practicing'
means, with respect to an individual who is a physician or other health
care professional, that the individual provides health care services to
individual patients on average at least 2 days per week.
`(5) PEDIATRIC EXPERTISE- In the case of an external review relating to
a child, a reviewer shall have expertise under paragraph (2) in pediatrics.
`(6) LIMITATIONS ON REVIEWER COMPENSATION- Compensation provided by the
issuer to an independent medical reviewer in connection with a review under
this section shall--
`(A) not exceed a reasonable level; and
`(B) not be contingent on the decision rendered by the reviewer.
`(7) RELATED PARTY DEFINED- For purposes of this section, the term `related
party' means, with respect to a denial of a claim under a coverage relating
to an enrollee, any of the following:
`(A) The issuer involved, or any fiduciary, officer, director, or employee
of the issuer.
`(B) The enrollee (or authorized representative).
`(C) The health care professional that provides the items or services
involved in the denial.
`(D) The institution at which the items or services (or treatment) involved
in the denial are provided.
`(E) The manufacturer of any drug or other item that is included in the
items or services involved in the denial.
`(F) Any other party determined under any regulations to have a substantial
interest in the denial involved.
`(8) DEFINITIONS- For purposes of this subsection:
`(A) ENROLLEE- The term `enrollee' means, with respect to health insurance
coverage offered by a health insurance issuer, an individual enrolled
with the issuer to receive such coverage.
`(B) HEALTH CARE PROFESSIONAL- The term `health care professional' means
an individual who is licensed, accredited, or certified under State law
to provide specified health care services and who is operating within
the scope of such licensure, accreditation, or certification.
`SEC. 2799. ENFORCEMENT.
`(a) In General- Subject to subsection (b), with respect to specific individual
health insurance coverage the primary State for such coverage has sole jurisdiction
to enforce the primary State's covered laws in the primary State and any secondary
`(b) Secondary State's Authority- Nothing in subsection (a) shall be construed
to affect the authority of a secondary State to enforce its laws as set forth
in the exception specified in section 2796(b)(1).
`(c) Court Interpretation- In reviewing action initiated by the applicable
secondary State authority, the court of competent jurisdiction shall apply
the covered laws of the primary State.
`(d) Notice of Compliance Failure- In the case of individual health insurance
coverage offered in a secondary State that fails to comply with the covered
laws of the primary State, the applicable State authority of the secondary
State may notify the applicable State authority of the primary State.'.
(b) Effective Date- The amendment made by subsection (a) shall apply to individual
health insurance coverage offered, issued, or sold after the date that is
one year after the date of the enactment of this Act.
(c) GAO Ongoing Study and Reports-
(1) STUDY- The Comptroller General of the United States shall conduct an
ongoing study concerning the effect of the amendment made by subsection
(A) the number of uninsured and under-insured;
(B) the availability and cost of health insurance policies for individuals
with pre-existing medical conditions;
(C) the availability and cost of health insurance policies generally;
(D) the elimination or reduction of different types of benefits under
health insurance policies offered in different States; and
(E) cases of fraud or abuse relating to health insurance coverage offered
under such amendment and the resolution of such cases.
(2) ANNUAL REPORTS- The Comptroller General shall submit to Congress an
annual report, after the end of each of the 5 years following the effective
date of the amendment made by subsection (a), on the ongoing study conducted
under paragraph (1).
SEC. 4. SEVERABILITY.
If any provision of the Act or the application of such provision to any person
or circumstance is held to be unconstitutional, the remainder of this Act
and the application of the provisions of such to any other person or circumstance
shall not be affected.