To amend the Public Health Service Act to provide for cooperative governing of individual health insurance coverage offered in interstate commerce.

June 23, 2004

Mr. SHADEGG (for himself, Mr. BARTLETT of Maryland, Mr. CANNON, Mr. TOM DAVIS of Virginia, Mr. DEAL of Georgia, Mr. FEENEY, Mr. FLAKE, Mr. FRANKS of Arizona, Mr. GARRETT of New Jersey, Mr. GINGREY, Mr. HOEKSTRA, Mr. JONES of North Carolina, Mr. KING of Iowa, Mr. OTTER, Mr. PENCE, Mr. RYAN of Wisconsin, Mr. SENSENBRENNER, Mr. SESSIONS, Mr. SMITH of New Jersey, Mr. TOOMEY, and Mr. WILSON of South Carolina) 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'.

SEC. 2. SPECIFICATION OF CONSTITUTIONAL AUTHORITY FOR ENACTMENT OF LAW.

This Act is enacted pursuant to the power granted Congress under article I, section 8, clause 3, of the United States Constitution.

SEC. 3. 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. 4. 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.

`In this part:

`(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 its primary State. 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.

`(2) SECONDARY STATE- The term `secondary State' means, with respect to a health insurance issuer, any State (in the United States or District of Columbia) that is not the primary State.

`(3) HEALTH INSURANCE ISSUER- The term `health insurance issuer' has the meaning given such term in section 2791(b)(2).

`(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 involved 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.

`(7) COVERED LAWS- The term `covered laws' means the laws governing the issuance of an individual health insurance coverage pertaining to--

`(A) the provision of insurance related services;

`(B) management, operations, and investment activities; and

`(C) loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance.

`SEC. 2796. APPLICATION OF LAW.

`(a) IN GENERAL- The covered laws of the primary State shall apply to individual health insurance coverage offered by that health insurance issuer in the primary State and in any secondary State.

`(b) EXEMPTIONS FROM STATE LAWS, RULES, REGULATIONS, JUDGMENTS, AGREEMENTS, OR ORDERS IN A SECONDARY STATE- Except as provided in this section, a health insurance issuer with respect to its offer, sale, and issuance of individual health insurance coverage in any secondary State is exempt from any State law, rule, regulation, judgment, agreement, or order of the secondary State to the extent that such law, rule, regulation, judgment, agreement, or order 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 which are levied on insurers and surplus lines insurers, brokers, or policyholders under the laws of the State;

`(B) to register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process;

`(C) to comply with a lawful order issued in a voluntary dissolution proceeding;

`(D) 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; and

`(E) to provide the following notice, in 12-point bold type, in any insurance coverage issued by such a health insurance issuer, with the 4 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, and the name of the secondary State, respectively, for the coverage concerned:

`Notice

`This policy is issued by XXXXX and is governed by the laws and regulations of the State of XXXXX. This policy may not be 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. 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.'; or

`(F) to participate, on a nondiscriminatory basis, in any insurance insolvency guaranty association to which a health insurance issuer in the State is required to belong;

`(2) require any individual health insurance coverage issued by the issuer to be countersigned by an insurance agent or broker residing in that Secondary State; or

`(3) otherwise discriminate against the issuer issuing insurance in both primary and secondary States.

`(c) SCOPE OF EXEMPTIONS- The exemptions specified in subsection (b) apply to laws, rules, regulations, judgments, agreements, and orders governing the insurance business pertaining to--

`(1) individual health insurance coverage issued by a health insurance issuer;

`(2) the offer, sale, and issuance of individual health insurance coverage to an individual; and

`(3) the provision to an individual in relation to individual health insurance coverage of--

`(A) insurance related services;

`(B) management, operations, and investment activities; and

`(C) loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance.

`(d) 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, except that a State many not impose any qualification or requirement which discriminates against a nonresident agent or broker.

`(e) 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 plan of operation or feasability study (which shall include the name of its primary State and its principal place of business); and

`(B) written notice of any change in its designation of its 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 annual 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.

`(f) 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 by, or operation of, a health insurance issuer that is in hazardous financial condition.

`(g) STATE POWERS TO ENFORCE STATE LAWS-

`(1) IN GENERAL- Subject to the provisions of subsection (b)(1)(D) (relating to injunctions), 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 this section.

`(2) COURTS OF COMPETENT JURISDICTION- If a State seeks an injunction regarding the conduct described in paragraphs (1) and (2) of subsection (f), such injunction must be obtained from a Federal or State court of competent jurisdiction.

`(h) STATES' AUTHORITY TO SUE- Nothing in this section shall affect the authority of any State to bring action in any Federal or State court.

`(i) GENERALLY APPLICABLE LAWS- Nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.

`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 primary State does not meet the following requirements:

`(1) The State insurance commissioner must use a risk-based capital formula for the determination of capital and surplus requirements for all health insurance issuers that are not health maintenance organizations (as defined in section 1301(a)). For such health maintenance organizations the State must have legislative or regulatory capital and surplus requirements.

`(2) The State must have legislation or regulations in place establishing an independent review process for individuals who are covered by individual health insurance coverage unless the issuer provides an independent review mechanism functionally equivalent (as determined by the primary State insurance commissioner or official) 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.

`SEC. 2798. ENFORCEMENT.

`(a) IN GENERAL- Subject to subsection (c), the primary State has sole jurisdiction to enforce covered laws in primary and secondary States.

`(b) FAILURE TO COMPLY WITH PRIMARY STATE LAW- In the case of individual health insurance coverage offered in a secondary State that fails to comply with covered laws of the primary State, the applicable State authority of the secondary State shall notify, in writing, the applicable State authority of the primary State of suspected violations of the primary State's laws.

`(c) FAILURE OF A PRIMARY STATE AUTHORITY TO TAKE ACTION- The applicable State authority of the secondary State may initiate regulatory proceedings to enforce the covered laws of the primary State if the applicable State authority of the primary State--

`(1) does not initiate regulatory or legal proceedings within 30 days; or

`(2) fails to maintain an active investigation, negotiation, regulatory, or judicial proceeding for any 30-day period.

`(d) FAILURE TO RESOLVE DISPUTE- If upon initiating proceedings under subsection (c), the applicable State authority of the secondary State is unable to resolve concerns related to suspected violations of covered laws of the primary State, such applicable secondary State authority may bring action in a court of appropriate jurisdiction.

`(e) COURT INTERPRETATION- In reviewing action initiated by the applicable secondary State authority, the court of appropriate jurisdiction shall apply the covered laws 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 of the enactment of this Act.

SEC. 5. 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.

END