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tribution of health care professionals and providers; and

“(B) covered items and services are available and accessible to each participant and beneficiary

“(i) in the service area of the plan or issuer;

“(ii) at a variety of sites of service;

“(iii) with reasonable promptness (including reasonable hours of operation and after hours services);

“(iv) with reasonable proximity to the residences or workplaces of participants and beneficiaries; and

“(v) in a manner that takes into account the diverse needs of such individuals and reasonably assures continuity of care.

“(C) MEMBERSHIP.

“(1) SIZE AND COMPOSITION.—The Panel shall be composed of 15 members. The Secretary of Health and Human Services, the Majority Leader of the Senate, and the Speaker of House of Representatives shall each appoint 1 member from representatives of private insurance organizations, consumer groups, State insurance commissioners, State medical societies, and State medical specialty societies.

“(2) TERMS OF APPOINTMENT.—The members of the Panel shall serve for the life of the Panel.

“(3) VACANCIES.--A vacancy in the Panel shall not affect the power of the remaining members to execute the duties of the Panel, but any such vacancy shall be filled in the same manner in which the original appointment was made.

“(d) PROCEDURES.

“(1) MEETINGS.-The Panel shall meet at the call of a majority of its members.

“(2) FIRST MEETING.–The Panel shall convene not later than 60 days after the date of the enactment of the Health Care Quality and Choice Act of 1999.

“(3) QUORUM.—A quorum shall consist of a majority of the members of the Panel.

“(4) HEARINGS.-For the purpose of carrying out its duties, the Panel may hold such hearings and undertake such other activities as the Panel determines to be necessary to carry out its duties.

“(e) ADMINISTRATION.

*(1) COMPENSATION.-Except as provided in paragraph (1), members of the Panel shall receive no additional pay, allowances, or benefits by reason of their service on the Panel.

“(2) TRAVEL EXPENSES AND PER DIEM.-Each member of the Panel who is not an officer or employee of the Federal Government shall receive travel expenses and per diem in lieu of subsistence in accordance with sections 5702 and 5703 of title 5, United States Code.

“(3) CONTRACT AUTHORITY.–The Panel may contract with and compensate government and private agencies or persons for items and services, without regard to section 3709 of the Revised Statutes (41 U.S.C. 5).

“(4) USE OF MAILS.—The Panel may use the United States mails in the same manner and under the same conditions as Federal agencies and shall, for purposes of the frank, be considered a commission of Congress as described in section 3215 of title 39, United States Code.

“(5) ADMINISTRATIVE SUPPORT SERVICES.Upon the request of the Panel, the Secretary of Health and Human Services shall provide to the Panel on a reimbursable basis such administrative support services as the Panel may request.

“(f) REPORT AND ESTABLISHMENT OF STANDARDS.-Not later than 2 years after the first meeting, the Panel shall submit a report to Congress and the Secretary of Health and Human Services detailing the standards devised under subsection (b) and recommendations regarding the implementation of such standards. Such standards shall take effect to the extent provided by Federal law en

acted after the date of the submission of such report.

“(g) TERMINATION.—The Panel shall terminate on the day after submitting its report to the Secretary of Health and Human Services under subsection (f). "SEC. 819. ACCESS TO EXPERIMENTAL OR INVES

TIGATIONAL PRESCRIPTION DRUGS. "No use of a prescription drug or medical device shall be considered experimental or investigational under a group health plan or under health insurance coverage provided by a health insurance issuer in connection with such a plan if such use is included in the labeling authorized by the U.S. Food and Drug Administration under section 505, 513 or 515 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) or under section 351 of the Public Health Service Act (42 U.S.C. 262), unless such use is demonstrated to be unsafe or ineffective. “SEC. 820. COVERAGE FOR INDIVIDUALS PARTICI

PATING IN APPROVED CANCER

CLINICAL TRIALS. “(a) COVERAGE.

“(1) IN GENERAL.-If a group health plan (or a health insurance issuer offering health insurance coverage in connection with such a plan) provides coverage to a qualified individual (as defined in subsection (b)), the plan or issuer

"(A) may not deny the individual participation in the clinical trial referred to in subsection (b)(2);

"(B) subject to subsections (b), (c), and (d), may not deny (or limit or impose additional conditions on) the coverage of routine patient costs for items and services furnished in connection with participation in the trial; and

“(C) may not discriminate against the individual on the basis of the individual's participation in such trial.

“(2) EXCLUSION OF CERTAIN COSTS.--For purposes of paragraph (1)(B), routine patient costs do not include the cost of the tests or measurements conducted primarily for the purpose of the clinical trial involved.

“(3) USE OF IN-NETWORK PROVIDERS.-If one or more participating providers is participating in a clinical trial, nothing in paragraph (1) shall be construed as preventing a plan or issuer from requiring that a qualified individual participate in the trial through such a participating provider if the provider will accept the individual as a participant in the trial.

“(b) QUALIFIED INDIVIDUAL DEFINED.-For purposes of subsection (a), the term 'qualified individual' means an individual who is a participant or beneficiary in a group health plan who meets the following conditions:

“(1)(A) The individual has been diagnosed with cancer.

“(B) The individual is eligible to participate in an approved clinical trial according to the trial protocol with respect to treatment of such illness.

"(C) The individual's participation in the trial offers meaningful potential for significant clinical benefit for the individual.

“(2) Either

“(A) the referring physician is a participating health care professional and has concluded that the individual's participation in such trial would be appropriate based upon the individual meeting the conditions described in paragraph (1); or

“(B) the individual provides medical and scientific information establishing that the individual's participation in such trial would be appropriate based upon the individual meeting the conditions described in paragraph (1).

"(c) PAYMENT.

“(1) IN GENERAL.-Under this section a group health plan (or health insurance issuer offering health insurance) shall provide for

payment for routine patient costs described in subsection (a)(2) but is not required to pay for costs of items and services that are reasonably expected to be paid for by the sponsors of an approved clinical trial.

“(2) ROUTINE PATIENT CARE COSTS.-For purposes of this section

(A) IN GENERAL.--The term 'routine patient care costs includes the costs associated with the provision of items and services that

“(i) would otherwise be covered under the group health plan if such items and services were not provided in connection with an approved clinical trial program; and

“(ii) are furnished according to the protocol of an approved clinical trial program.

“(B) EXCLUSION.-Such term does include the costs associated with the provision of

"(i) an investigational drug or device, unless the Secretary has authorized the manufacturer of such drug or device to charge for such drug or device; or

“(ii) any item or service supplied without charge by the sponsor of the approved clinical trial program.

“(3) PAYMENT RATE.-In the case of covered items and services provided by

"(A) a participating provider, the payment rate shall be at the agreed upon rate, or

“(B) a nonparticipating provider, the payment rate shall be at the rate the plan or issuer would normally pay for comparable items or services under subparagraph (A).

“(d) APPROVED CLINICAL TRIAL DEFINED.In this section, the term 'approved clinical trial' means a cancer clinical research study or cancer clinical investigation approved by an Institutional Review Board.

“(e) CONSTRUCTION.-Nothing in this section shall be construed to limit a plan's or issuer's coverage with respect to clinical trials.

“(f) PLAN SATISFACTION OF CERTAIN REQUIREMENTS; RESPONSIBILITIES OF FIDUCIARIES.

“(1) IN GENERAL.–For purposes of this section, insofar as a group health plan provides benefits in the form of health insurance coverage through a health insurance issuer, the plan shall be treated as meeting the requirements of this section with respect to such benefits and not be considered as failing to meet such requirements because of a failure of the issuer to meet such requirements so long as the plan sponsor or its representatives did not cause such failure by the issuer.

“(2) CONSTRUCTION.-Nothing in this section shall be construed to affect or modify the responsibilities of the fiduciaries of a group health plan under part 4 of subtitle B.

“SUBPART C-ACCESS TO INFORMATION "SEC. 821. PATIENT ACCESS TO INFORMATION.

“(a) DISCLOSURE REQUIREMENT.

“(1) GROUP HEALTH PLANS.-A group health plan shall

“(A) provide to participants and beneficiaries at the time of initial coverage under the plan (or the effective date of this section, in the case of individuals who are participants or beneficiaries as of such date), and at least annually thereafter, the information described in subsection (b);

"(B) provide to participants and beneficiaries, within a reasonable period (as specified by the Secretary) before or after the date of significant changes in the information described in subsection (b), information on such significant changes; and

“(C) upon request, make available to participants and beneficiaries, the Secretary, and prospective participants and beneficiaries, the information described in subsection (b) or (c). The plan may charge a reasonable fee for provision in printed form of any of the information described in subsection (b) or (c) more than once during any plan year.

“(2) HEALTH INSURANCE ISSUERS.—A health such provider is available to accept new pa computing the applicable premium under insurance issuer in connection with the pro tients.

section 604. vision of health insurance coverage in con "(G) Any limitations imposed on the selec “(3) FORM OF DISCLOSURE.—The informanection with a group health plan shall

tion of qualifying participating health care tion under subsection (a)(3) may be provided "(A) provide to participants and bene providers, including any limitations imposed in any reasonable form, including as part of ficiaries enrolled under such coverage at the under section 812(b)(2).

the summary plan description, a letter, or time of enrollment, and at least annually “(4) OUT-OF-AREA COVERAGE.-Out-of-area information accompanying a W-2 form. thereafter, the information described in sub coverage provided by the plan or issuer.

“(e) CONSTRUCTION.-Nothing in this secsection (b);

“(5) EMERGENCY COVERAGE.-Coverage of tion shall be construed as requiring public “(B) provide to such participants and bene emergency services, including

disclosure of individual contracts or finanficiaries, within a reasonable period (as spec “(A) the appropriate use of emergency cial arrangements between a group health ified by the Secretary) before or after the services, including use of the 911 telephone plan or health insurance issuer and any prodate of significant changes in the informa system or its local equivalent in emergency vider. tion described in subsection (b), information situations and an explanation of what con "SUBPART D-PROTECTING THE DOCTORin printed form on such significant changes; stitutes an emergency situation;

PATIENT RELATIONSHIP and

"(B) the process and procedures of the plan

“SEC. 831. PROHIBITION OF INTERFERENCE WITH “(C) upon request, make available to the or issuer for obtaining emergency services;

CERTAIN MEDICAL COMMUNICASecretary, to individuals who are prospective and

TIONS. participants and beneficiaries, and to the *(C) the locations of (i) emergency depart “(a) GENERAL RULE.—The provisions of any public the information described in sub ments, and (ii) other settings, in which plan

contract or agreement, or the operation of section (b) or (c). physicians and hospitals provide emergency

any contract or agreement, between a group “(3) EMPLOYERS.-Effective 5 years after services and post-stabilization care.

health plan or health insurance issuer in rethe date this part first becomes effective, “(6) PRIOR AUTHORIZATION RULES.-Rules

lation to health insurance coverage offered each employer (other than an employer de regarding prior authorization or other re in connection with such a plan (including scribed in paragraph (1) of subsection (d)) view requirements that could result in non any partnership, association, or other orgashall provide to each employee at least annu coverage or nonpayment.

nization that enters into or administers such ally information (consistent with such sub "(7) GRIEVANCE AND APPEALS PROCE

a contract or agreement) and a health care section) on the amount that the employer DURES.-All appeal or grievance rights and

provider (or group of health care providers) contributes on behalf of the employee (and procedures under the plan or coverage, in

shall not prohibit or otherwise restrict a any dependents of the employee) for health cluding the method for filing grievances and

health care professional from advising such a benefits coverage. the time frames and circumstances for act

participant or beneficiary who is a patient of “(b) INFORMATION PROVIDED.—The informa ing on grievances and appeals, who is the ap

the professional about the health status of tion described in this subsection with respect plicable authority with respect to the plan

the individual or medical care or treatment to a group health plan or health insurance or issuer.

for the individual's condition or disease, recoverage offered by a health insurance issuer “(8) ACCOUNTABILITY.-A description of the

gardless of whether benefits for such care or shall be provided to a participant or bene legal recourse options available for partici

treatment are provided under the plan or ficiary free of charge at least once a year and pants and beneficiaries under the plan

coverage, if the professional is acting within includes the following: including

the lawful scope of practice. “(1) SERVICE AREA.—The service area of the "(A) the preemption that applies under

“(b) NULLIFICATION.–Any contract proviplan or issuer.

section 514 to certain actions arising out of sion or agreement that restricts or prohibits “(2) BENEFITS.-Benefits offered under the the provision of health benefits; and

medical communications in violation of subplan or coverage, including

“(B) the extent to which coverage deci section (a) shall be null and void. “(A) those that are covered benefits “(all sions made by the plan are subject to inter

“SEC. 832. PROHIBITION OF DISCRIMINATION of which shall be referred to by such relevant nal review or any external review and the

AGAINST PROVIDERS BASED ON LICPT and DRG codes as are available), limits proper time frames under

CENSURE. and conditions on such benefits, and those “(9) QUALITY ASSURANCE.-Any information “(a) IN GENERAL.-A group health plan and benefits that are explicitly excluded from made public by an accrediting organization a health insurance issuer offering health incoverage (all of which shall be referred to by in the process of accreditation of the plan or

surance coverage in connection with such a such relevant CPT and DRG codes as are issuer or any additional quality indicators

plan shall not discriminate with respect to available); the plan or issuer makes available.

participation or indemnification as to any “(B) cost sharing, such as deductibles, co “(10) INFORMATION ON ISSUER.-Notice of provider who is acting within the scope of insurance, and copayment amounts, includ appropriate mailing addresses and telephone the provider's license or certification under ing any liability for balance billing, any numbers to be used by participants and bene applicable State law, solely on the basis of maximum limitations on out of pocket ex ficiaries in seeking information or author such license or certification. penses, and the maximum out of pocket ization for treatment.

“(b) CONSTRUCTION.–Subsection (a) shall costs for services that are provided by non “(11) AVAILABILITY OF INFORMATION ON RE not be construedparticipating providers or that are furnished QUEST.-Notice that the information de “(1) as requiring the coverage under a without meeting the applicable utilization

scribed in subsection (c) is available upon re group health plan or health insurance covreview requirements; quest.

erage of particular benefits or services or to “(C) the extent to which benefits may be "(c) INFORMATION MADE AVAILABLE UPON prohibit a plan or issuer from including proobtained from nonparticipating providers; REQUEST.—The information described in this viders only to the extent necessary to meet “(D) the extent to which a participant or subsection is the following:

the needs of the plan's or issuer's particibeneficiary may select from among partici “(1) UTILIZATION REVIEW ACTIVITIES.-A de pants or beneficiaries or from establishing pating providers and the types of providers scription of procedures used and require any measure designed to maintain quality participating in the plan or issuer network; ments (including circumstances, time and control costs consistent with the respon

"(E) process for determining experimental frames, and appeal rights) under any utiliza sibilities of the plan or issuer;
coverage; and
tion review program under section 801.

“(2) to override any State licensure or "(F) use of a prescription drug formulary. “(2) GRIEVANCE AND APPEALS INFORMA scope-of-practice law;

“(3) ACCESS.-A description of the fol TION.—Information on the number of griev “(3) as requiring a plan or issuer that oflowing:

ances and appeals and on the disposition in fers network coverage to include for partici“(A) The number, mix, and distribution of the aggregate of such matters.

pation every willing provider who meets the providers under the plan or coverage.

“(3) FORMULARY RESTRICTIONS.—A descrip terms and conditions of the plan or issuer; or “(B) Out-of-network coverage (if any) pro tion of the nature of any drug formula re “(4) as prohibiting a family practice physivided by the plan or coverage. strictions.

cian with appropriate expertise from pro"(C) Any point-of-service option (including “(4) PARTICIPATING PROVIDER LIST.-A list viding pediatric or obstetrical or gynecoany supplemental premium or cost-sharing of current participating health care pro logical care. for such option). viders.

“SEC. 833. PROHIBITION AGAINST IMPROPER IN“(D) The procedures for participants and “(d) EMPLOYER INFORMATION.

CENTIVE ARRANGEMENTS. beneficiaries to select, access, and change “(1) SMALL EMPLOYER EXEMPTION.-Sub “(a) IN GENERAL.-A group health plan and participating primary and specialty pro section (a)(3) shall not apply to an employer a health insurance issuer offering health inviders.

that is a small employer (as defined in sec surance coverage in connection with such a “(E) The rights and procedures for obtain tion 712(c)(1)(B)) or would be such an em plan may not operate any physician incening referrals (including standing referrals) to ployer if '100' were substituted for '50' in tive plan (as defined in subparagraph (B) of participating and nonparticipating pro such section.

section 1876(i)(8) of the Social Security Act) viders.

“(2) COMPUTATION.—The amount described unless the requirements described in clauses "(F) The name, address, and telephone in subsection (a)(3) may be computed on an (i), (ii)(I), and (iii) of subparagraph (A) of number of participating health care pro average, per employee basis, and may be such section are met with respect to such a viders and an indication of whether each based on rules similar to the rules applied in plan.

“(b) APPLICATION.-For purposes of carrying out paragraph (1), any reference in section 1876(i)(8) of the Social Security Act to the Secretary, an eligible organization, or an individual enrolled with the organization shall be treated as a reference to the applicable authority, a group health plan or health insurance issuer, respectively, and a participant or beneficiary with the plan or organization, respectively.

"(c) CONSTRUCTION.—Nothing in this section shall be construed as prohibiting all capitation and similar arrangements or all provider discount arrangements. “SEC. 834. PAYMENT OF CLEAN CLAIMS.

“A group health plan, and a health insurance issuer offering group health insurance coverage, shall provide for prompt payment of claims submitted for health care services or supplies furnished to a participant or beneficiary with respect to benefits covered by the plan or issuer,in a manner consistent with the provisions of sections 1816(c)(2) and 1842(c)(2) of the Social Security Act (42 U.S.C. 1395h(c)(2) and 42 U.S.C. 1395u(c)(2)), except that for purposes of this section, subparagraph (C) of section 1816(C)(2) of the Social Security Act shall be treated as applying to claims received from a participant or beneficiary as well as claims referred to in such subparagraph.

“SUBPART E-DEFINITIONS "SEC. 841. DEFINITIONS.

“(a) INCORPORATION OF GENERAL DEFINITIONS.-Except as otherwise provided, the provisions of section 733 shall apply for purposes of this part in the same manner as they apply for purposes of part 7.

“(b) ADDITIONAL DEFINITIONS.-For purposes of this part:

“(1) APPLICABLE AUTHORITY.—The term “applicable authority' means

“(A) in the case of a group health plan, the Secretary of Labor; and

“(B) in the case of a health insurance issuer with respect to a specific provision of this part, the applicable State authority (as defined in section 2791(d) of the Public Health Service Act), or the Secretary of Health and Human Services, if such Secretary is enforcing such provision under section 2722(a)(2) or 2761(a)(2) of the Public Health Service Act.

(2) CLINICAL PEER.—The term “clinical peer' means, with respect to a review or appeal, a practicing physician or other health care professional who holds a nonrestricted license and who is

"(A) appropriately certified by a nationally recognized, peer reviewed accrediting body in the same or similar specialty as typically manages the medical condition, procedure, or treatment under review or appeal, or

“(B) is trained and experienced in managing such condition, procedure, or treatment, and includes a pediatric specialist where appropriate; except that only a physician may be a clinical peer with respect to the review or appeal of treatment recommended or rendered by a physician.

“(3) 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.

“(4) HEALTH CARE PROVIDER.—The term 'health care provider' includes a physician or other health care professional, as well as an institutional or other facility or agency that provides health care services and that is licensed, accredited, or certified to provide health care items and services under applicable State law.

“(5) NETWORK.-The term 'network' means, with respect to a group health plan or health insurance issuer offering health insurance coverage, the participating health care professionals and providers through whom the plán or issuer provides health care items and services to participants or beneficiaries.

“(6) NONPARTICIPATING.–The term 'nonparticipating' means, with respect to a health care provider that provides health care items and services to a participant or beneficiary under group health plan or health insurance coverage, a health care provider that is not a participating health care provider with respect to such items and services.

(7) PARTICIPATING.–The term “participating' means, with respect to a health care provider that provides health care items and services to a participant or beneficiary under group health plan or health insurance coverage offered by a health insurance issuer in connection with such a plan, a health care provider that furnishes such items and services under a contract or other arrangement with the plan or issuer.

(8) PHYSICIAN.—The term physician means an allopathic or osteopathic physician.

“(9) PRACTICING PHYSICIAN.-The term 'practicing physician' means a physician who is licensed in the State in which the physician furnishes professional services and who provides professional services to individual patients on average at least two full days per week.

"(10) PRIOR AUTHORIZATION.—The term ‘prior authorization means the process of obtaining prior approval from a health insurance issuer or group health plan for the provision or coverage of medical services. "SEC. 842. RULE OF CONSTRUCTION.

"Nothing in this part or section 714 shall be construed to affect or modify the provisions of section 514. “SEC. 843. EXCLUSIONS.

"(a) No BENEFIT REQUIREMENTS.—Nothing in this part shall be construed to require a group health plan or a health insurance issuer offering health insurance coverage in connection with such a plan to provide specific benefits under the terms of such plan or coverage, other than those provided under the terms of such plan or coverage.

“(b) EXCLUSION FOR FEE-FOR-SERVICE COVERAGE.

“(1) IN GENERAL.

“(A) GROUP HEALTH PLANS.—The provisions of sections 811 through 821 shall not apply to a group health plan if the only coverage offered under the plan is fee-for-service coverage (as defined in paragraph (2)).

“(B) HEALTH INSURANCE COVERAGE.—The provisions of sections 801 through 821 shall not apply to health insurance coverage if the only coverage offered under the coverage is fee-for-service coverage (as defined in paragraph (2)).

“(2) FEE-FOR-SERVICE COVERAGE DEFINED.For purposes of this subsection, the term 'fee-for-service coverage' means coverage under a group health plan or health insurance coverage that,

“(A) reimburses hospitals, health professionals, and other providers on a fee-for-service basis without placing the provider at financial risk;

“(B) does not vary reimbursement for such a provider based on an agreement to contract terms and conditions or the utilization of health care items or services relating to such provider;

“(C) allows access to any provider that is lawfully authorized to provide the covered services and agree to accept the terms and conditions of payment established under the plan or by the issuer; and

“(D) for which the plan or issuer does not require prior authorization before providing for any health care services. "SEC. 844. COVERAGE OF LIMITED SCOPE PLANS.

“Only for purposes of applying the requirements of this part under section 714, section 733(C)(2)(A) shall be deemed not to apply. “SEC. 845. REGULATIONS.

“(a) REGULATIONS.—The Secretary of Labor shall issue such regulations as may be necessary or appropriate to carry out this part under section 714. The Secretary may promulgate such regulations in the form of interim final rules as may be necessary to carry out this part in a timely manner.”.

(b) CLERICAL AMENDMENT.—The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 734 the following new items:

“PART 8-IMPROVING MANAGED CARE

“SUBPART A-GRIEVANCE AND APPEALS “Sec. 801. Utilization review activities. "Sec. 802. Internal appeals procedures. “Sec. 803. External appeals procedures. “Sec. 804. Establishment of a grievance

process.

“SUBPART B-ACCESS TO CARE “Sec. 812. Choice of health care professional. “Sec. 813. Access to emergency care. “Sec. 814. Access to specialty care. “Sec. 815. Access to obstetrical and gyneco

logical care. “Sec. 816. Access to pediatric care. “Sec. 817. Continuity of care. "Sec. 818. Network adequacy. “Sec. 819. Access to experimental or inves

tigational prescription drugs. “Sec. 820. Coverage for individuals partici

pating in approved cancer clin

ical trials. “SUBPART C-ACCESS TO INFORMATION “Sec. 821. Patient access to information. “SUBPART D-PROTECTING THE DOCTOR

PATIENT RELATIONSHIP “Sec. 831. Prohibition of interference with

certain medical communica

tions. “Sec. 832. Prohibition of discrimination

against providers based on li

censure. “Sec. 833. Prohibition against improper in

centive arrangements. “Sec. 834. Payment of clean claims.

“SUBPART E-DEFINITIONS "Sec. 841. Definitions. "Sec. 842. Preemption; State flexibility;

construction. “Sec. 843. Exclusions. “Sec. 844. Coverage of limited scope plans. "Sec. 845. Regulations. SEC. 203. AVAILABILITY OF COURT REMEDIES.

(a) IN GENERAL.-Section 502 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is amended by adding at the end the following new subsection:

“(n) CAUSE OF ACTION RELATING TO PROVISION OF HEALTH BENEFITS.

“(1) IN GENERAL.-In any case in which

“(A) a person who is a fiduciary of a group health plan, a health insurance issuer offering health insurance coverage in connection with the plan, or an agent of the plan or plan sponsor (not including a participating physician, other than a physician who participated in making the final decision under section 802 pursuant to section 802(b)(1)(A)) and who, under the plan, has authority to make final decisions under 802—

“(i) fails to exercise ordinary care in making an incorrect determination in the case of a participant or beneficiary that an item or service is excluded from coverage under the terms of the plan based on the fact that the item or service

"(I) does not meet the requirements for medical appropriateness or necessity,

"(II) would constitute experimental treatment or technology (as defined under the plan), or

"(III) is not a covered benefit, or

“(ii) fails to exercise ordinary care to ensure that

“(I) any denial of claim for benefits (within the meaning of section 801(f)), or

“(II) any decision by the plan on a request, made by a participant or beneficiary under section 802 or 803, for a reversal of an earlier decision of the plan, is made and issued to the participant or beneficiary (in such form and manner as may be prescribed in regulations of the Secretary) before the end of the applicable period specified in section 801, 802, or 803, and

"(B) such failure is the proximate cause of substantial harm to, or wrongful death of, the participant or beneficiary, such person shall be liable to the participant or beneficiary (or the estate of such participant or beneficiary) for economic and noneconomic damages in connection with such failure and such injury or death (subject to paragraph (10). For purposes of this subsection, the term 'final decision' means, with respect to a group health plan, the sole final decision of the plan under section 802.

“(2) ORDINARY CARE.-For purposes of this subsection, the term “ordinary care' means the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent individual acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

“(3) SUBSTANTIAL HARM.—The term 'substantial harm' means loss of life, loss or significant impairment of limb or bodily function, significant disfigurement, or severe and chronic physical pain.

“(4) EXCEPTION FOR EMPLOYERS AND OTHER PLAN SPONSORS.

“(A) IN GENERAL.-Subject to subparagraph (B), paragraph (1) does not authorize

“(i) any cause of action against an employer or other plan sponsor maintaining the group health plan (or against an employee of such an employer or sponsor acting within the scope of employment),

“(ii) a right of recovery or indemnity by a person against an employer or other plan sponsor (or such an employee) for damages assessed against the person pursuant to a cause of action under paragraph (1), or

“(iii) any cause of action in connection with the provision of excepted benefits described in section 733(c), other than those described in section 733(c)(2).

“(B) SPECIAL RULE.-Subparagraph (A) shall not preclude any cause of action described in paragraph (1) commenced against an employer or other plan sponsor (or against an employee of such an employer or sponsor acting within the scope of employment), but only if

“(i) such action is based on the direct participation of the employer or other plan sponsor (or employee of the employer or plan sponsor) in the final decision of the plan with respect to a specific participant or beneficiary on a claim for benefits covered under the plan or health insurance coverage in the case at issue; and

“(ii) the decision on the claim resulted in substantial harm to, or the wrongful death of, such participant or beneficiary.

“(C) DIRECT PARTICIPATION.–For purposes of this subsection, the term 'direct participation' means, in connection with a final decision under section 802, the actual making of such final decision as a plan fiduciary or the actual exercise of final controlling authority in the approval of such final decision. In determining whether an employer or other

plan sponsor (or employee of an employer or “(A) IN GENERAL.-Paragraph (1) applies in
other plan sponsor) is engaged in direct par the case of any cause of action only if all
ticipation in the final decision of the plan on remedies under section 503 (including rem-
a claim, the employer or plan sponsor (or edies under sections 802 and 803, made appli-
employee) shall not be construed to be en cable under section 714) with respect to such
gaged in such direct participation (and to be cause of action have been exhausted.
liable for any damages whatsoever) because “(B) EXTERNAL REVIEW REQUIRED.-For pur-
of any form of decisionmaking or other con poses of subparagraph (A), administrative
duct, whether or not fiduciary in nature, remedies under section 503 shall not be
that does not involve a final decision with

deemed exhausted until available remedies respect to a specific claim for benefits by a

under section 803 have been elected and are specific participant or beneficiary, including

exhausted by issuance of a final determina(but not limited to)

tion by an external appeal entity under such "(i) any participation by the employer or

section. other plan sponsor (or employee) in the se

“(C) CONSIDERATION OF ADMINISTRATIVE DElection of the group health plan or health in

TERMINATIONS.--Any determinations made surance coverage involved or the third party

under section 802 or 803 made while an action administrator or other agent;

under this paragraph is pending shall be “(ii) any engagement by the employer or

given due consideration by the court in such other plan sponsor (or employee) in any cost

action. benefit analysis undertaken in connection

“(8) USE OF EXTERNAL APPEAL ENTITY IN ESwith the selection of, or continued mainte

TABLISHING ABSENCE OF SUBSTANTIAL HARM OR nance of, the plan or coverage involved;

CAUSATION IN LITIGATION.“(iii) any participation by the employer or

“(A) IN GENERAL.-In any action under this other plan sponsor (or employee) in the creation, continuation, modification, or termi

subsection by an individual in which damnation of the plan or of any coverage, ben

ages are sought on the basis of substantial

harm to the individual, the defendant may efit, or item or service covered by the plan;

obtain (at its own expense), under procedures “(iv) any participation by the employer or

similar to procedures applicable under secother plan sponsor (or employee) in the de

tion 803, a determination by a qualified exsign of any coverage, benefit, or item or

ternal appeal entity (as defined in section service covered by the plan, including the

803(c)(1)) that has not been involved in any amount of copayment and limits connected with such coverage, and the specification of

stage of the grievance or appeals process

which resulted in such action as to-
any protocol, procedure, or policy for deter-
mining whether any such coverage, benefit,

“(i) whether such substantial harm has

been sustained, and
or item or service is medically necessary and
appropriate or is experimental or investiga-

"(ii) whether the proximate cause of such tional;

injury was the result of the failure of the de“(v) any action by an agent of the em

fendant to exercise ordinary care, as deployer or plan sponsor in making such a final

scribed in paragraph (1)(A). decision on behalf of such employer or plan

“(B) EFFECT OF FINDING IN FAVOR OF DEsponsor;

FENDANT.-If the external appeal entity de“(vi) any decision by an employer or plan

termines that such an injury has not been sponsor (or employee) or agent acting on be

sustained or was not proximately caused by half of an employer or plan sponsor either to

such a failure, such a finding shall be an afauthorize coverage for, or to intercede or not

firmative defense, and the action shall be to intercede as an advocate for or on behalf

dismissed forthwith unless such finding is of, any specific participant or beneficiary (or

overcome upon a showing of clear and congroup of participants or beneficiaries) under vincing evidence to the contrary. Notwiththe plan;

standing subsection (g), in any case in which “(vii) the approval of, or participation in

the plaintiff fails in any attempt to make the approval of, the plan provisions defining such a showing to the contrary, the court medical necessity or of policies or proce

shall award to the defendant reasonable atdures that have a direct bearing on the out torney's fees and the costs of the action income of the final decision; or

curred in connection with such failed show“(viii) any other form of decisionmaking

ing. or other conduct performed by the employer “(9) REBUTTABLE PRESUMPTION.-In the or other plan sponsor (or employee) in con case of any action commenced pursuant to nection with the plan or coverage involved paragraph (1), there shall be a rebuttable unless it involves the making of a final deci presumption in favor of the decision of the sion of the plan consisting of a failure de external appeal entity rendered upon comscribed in clause (i) or (ii) of paragraph (1)(A) pletion of any review elected under section as to specific participants or beneficiaries 803 and such presumption may be overcome who suffer substantial harm or wrongful only upon a showing of clear and convincing death as a proximate cause of such decision. evidence to the contrary.

“(5) REQUIRED DEMONSTRATION OF DIRECT “(10) MAXIMUM NONECONOMIC DAMAGES.PARTICIPATION.—An action against an em Total liability for noneconomic loss under ployer or plan sponsor (or employee thereof) this subsection in connection with any failunder this subsection shall be immediately ure with respect to any participant or benedismissed

ficiary may not exceed the lesser of"(A) in the absence of an allegation in the (A) $500,000, or complaint of direct participation by the em “(B) 2 times the amount of economic loss. ployer or plan sponsor in the final decision of The dollar amount under subparagraph (A), the plan with respect to a specific partici shall be increased or decreased, for each calpant or beneficiary who suffers substantial endar year that ends after December 31, 2001, harm or wrongful death, or

by the same percentage as the percentage by “(B) upon a demonstration to the court which the medical care expenditure category that such employer or plan sponsor (or em of the Consumer Price Index for All Urban ployee) did not directly participate in the Consumers (United States city average), pubfinal decision of the plan.

lished by the Bureau of Labor Statistics, for “(6) TREATMENT OF THIRD-PARTY PROVIDERS September of the preceding calendar year OF NONDISCRETIONARY ADMINISTRATIVE SERV has increased or decreased from such index ICES.-Paragraph (1) does not authorize any for September 2000 action against any person providing nondis “(11) PROHIBITION OF AWARD OF PUNITIVE cretionary administrative services to em DAMAGES.ployers or other plan sponsors.

“(A) GENERAL RULE.-Except as provided in (7) REQUIREMENT OF EXHAUSTION OF ADMIN this paragraph, nothing in this subsection ISTRATIVE REMEDIES.

shall be construed as authorizing a cause of

action for punitive, exemplary, or similar damages.

“(B) EXCEPTION.-Punitive damages are authorized in any case described in paragraph (1)(A)(ii)(II) in which the plaintiff establishes by clear and convincing evidence that conduct carried out by the defendant with a conscious, flagrant indifference to the rights or safety of others was the proximate cause of the harm that is the subject of the action and that such conduct was contrary to the recommendations of an external appeal entity issued in the determination in such case rendered pursuant to section 803.

“(C) LIMITATION ON AMOUNT.

“(i) IN GENERAL.-The amount of punitive damages that may be awarded in an action described in subparagraph (B) may not exceed the greater of

“(I) 2 times the sum of the amount awarded to the claimant for economic loss; or

(II) $250,000.

"(ii) SPECIAL RULE.-Notwithstanding clause (i), in any action described in subparagraph (B) against an individual whose net worth does not exceed $500,000 or against an owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization which has fewer that 25 employees, the punitive damages shall not exceed the lesser of

“(I) 2 times the amount awarded to the claimant for economic loss; or

"(II) $250.000.
“(iii) CONTROLLED GROUPS.-

“(I) IN GENERAL.–For the purpose of determining the applicability of clause (ii) to any employer, in determining the number of employees of an employer who is a member of a controlled group, the employees of any person in such group shall be deemed to be employees of the employer.

“(II) CONTROLLED GROUP.-For purposes of subclause (I), the term "controlled group means any group treated as a single employer under subsection (b), (c), (m), or (0) of section 414 of the Internal Revenue Code of 1986.

“(D) EXCEPTION FOR INSUFFICIENT AWARD IN CASES OF EGREGIOUS CONDUCT.

“(i) DETERMINATION BY COURT.-If the court makes a determination, based on clear and convincing evidence and after considering each of the factors in subparagraph (E), that the application of subparagraph (C) would result in an award of punitive damages that is insufficient to punish the egregious conduct of the defendant against whom the punitive damages are to be awarded or to deter such conduct in the future, the court shall determine the additional amount of punitive damages (referred to in this subparagraph as the 'additional amount') in excess of the amount determined in accordance with subparagraph (C) to be awarded against the defendant in a separate proceeding in accordance with this subparagraph.

“(ii) ABSOLUTE LIMIT ON PUNITIVES.-Nothing in this subtitle shall be construed to authorize the court to award an additional amount greater than an amount equal to the maximum amount applicable under subparagraph (C).

“(iii) REQUIREMENTS FOR AWARDING ADDITIONAL AMOUNT.-If the court awards an additional amount pursuant to this subparagraph, the court shall state its reasons for setting the amount of the additional amount in findings of fact and conclusions of law.

"(E) FACTORS FOR CONSIDERATION IN CASES OF EGREGIOUS CONDUCT.-In any proceeding under subparagraph (D), the matters to be considered by the court shall include (but are not limited to

“(i) the extent to which the defendant acted with actual malice;

“(ii) the likelihood that serious harm would arise from the conduct of the defendant;

“(iii) the degree of the awareness of the defendant of that likelihood;

"(iv) the profitability of the misconduct to the defendant;

“(v) the duration of the misconduct and any concurrent or subsequent concealment of the conduct by the defendant;

“(vi) the attitude and conduct of the defendant upon the discovery of the misconduct and whether the misconduct has terminated;

“(vii) the financial condition of the defendant; and

"(viii) the cumulative deterrent effect of other losses, damages, and punishment suffered by the defendant as a result of the misconduct, reducing the amount of punitive damages on the basis of the economic impact and severity of all measures to which the defendant has been or may be subjected, including

“(I) compensatory and punitive damage awards to similarly situated claimants;

“(II) the adverse economic effect of stigma or loss of reputation;

“(III) civil fines and criminal and administrative penalties; and

“(IV) stop sale, cease and desist, and other remedial or enforcement orders.

“(F) APPLICATION BY COURT.-This paragraph shall be applied by the court and, in the case of a trial by jury, application of this paragraph shall not be disclosed to the jury.

“(G) LIMITATION ON PUNITIVE DAMAGES.-No person shall be liable for punitive, exemplary, or similar damages in an action under this subsection based on any failure described in paragraph (1) if such failure was in compliance with the recommendations of an external appeal entity issued in a determination under section 803.

“(H) BIFURCATION AT REQUEST OF ANY PARTY.

“(i) IN GENERAL.–At the request of any party the trier of fact in any action that is subject to this paragraph shall consider in a separate proceeding, held subsequent to the determination of the amount of compensatory damages, whether punitive damages are to be awarded for the harm that is the subject of the action and the amount of the award.

"(ii) INADMISSIBILITY OF EVIDENCE RELATIVE ONLY TO A CLAIM OF PUNITIVE DAMAGES IN A PROCEEDING CONCERNING COMPENSATORY DAMAGES.-If any party requests a separate proceeding under clause (i), in a proceeding to determine whether the claimant may be awarded compensatory damages, any evidence, argument, or contention that is relevant only to the claim of punitive damages, as determined by applicable State law, shall be inadmissible.

“(12) LIMITATION OF ACTION.-Paragraph (1) shall not apply in connection with any action commenced after the later of

“(A) 1 year after (i) the date of the last action which constituted a part of the failure, or (ii) in the case of an omission, the latest date on which the fiduciary could have cured the failure, or

“(B) 1 year after the earliest date on which the plaintiff first knew, or reasonably should have known, of the substantial harm resulting from the failure.

“(13) COORDINATION WITH FIDUCIARY REQUIREMENTS.—A fiduciary shall not be treated as failing to meet any requirement of part 4 solely by reason of any action taken by a fiduciary which consists of full compliance with the reversal under section 803 of a denial of claim for benefits (within the meaning of section 801(f)).

"(14) CONSTRUCTION.—Nothing in this subsection shall be construed as authorizing a cause of action for the failure to provide an item or service which is not covered under the group health plan involved.

"(15) PROTECTION OF MEDICAL MALPRACTICE AND SIMILAR ACTIONS UNDER STATE LAW.—This subsection shall not be construed to preclude any action under State law (as defined in section 514(c)(1)) not otherwise preempted under this title with respect to the duty (if any) under such State law imposed on any person to exercise a specified standard of care when making a health care treatment decision in any case in which medical services are provided by such person or in any case in which such decision affects the quality of care or treatment provided or received.

“(16) COEXISTING ACTIONS IN FEDERAL AND STATE COURTS DISALLOWED.

“(A) PRECEDENCE OF FEDERAL ACTION.-An action may be commenced under this subsection only if no action for damages has been commenced by the plaintiff under State law (as defined in section 514(c)(1)) based on the same substantial harm.

“(B) ACTIONS UNDER STATE LAW SUPERSEDED.—Upon the commencement of any action under this subsection, this subsection supersedes any action authorized under State law (as so defined) against any person based on the same substantial harm during the pendency of the action commenced under this subsection.

“(C) DOUBLE RECOVERY OF DAMAGES PRECLUDED.—This subsection supersedes any action under State law (as so defined) for damages based on any substantial harm to the extent that damages for such substantial harm have been recovered in an action under this subsection.

"(17) LIMITATION ON RELIEF WHERE DEFENDANT'S POSITION PREVIOUSLY SUPPORTED UPON EXTERNAL REVIEW.-In any case in which the court finds the defendant to be liable in an action under this subsection, to the extent that such liability is based on a finding by the court of a particular failure described in paragraph (1) and such finding is contrary to a determination by an external review entity in a decision previously rendered under section 803 with respect to such defendant, no relief shall be available under this subsection in addition to the relief otherwise available under subsection (a)(1)(B).”.

(b) CONFORMING AMENDMENT.--Section 502(a)(1)(A) of

such

Act (29 U.S.C. 1132(a)(1)(A)) is amended by inserting “or (n)" after subsection (c)".

(c) EFFECTIVE DATE.-The amendments made by this section shall apply to acts and omissions (from which a cause of action arises) occurring on or after the date of the enactment of this Act. SEC. 204. AVAILABILITY OF BINDING ARBITRA

TION. (a) IN GENERAL.-Section 503 of the Employee Retirement Income Security Act of 1974 (as amended by the preceding provisions of this Act) is amended further

(1) in subsection (a), by inserting "IN GENERAL.-” after “(a)””;

(2) in subsection (b), by striking "(b) In the case” and inserting the following:

“(b) GROUP HEALTH PLANS.-
“(1) IN GENERAL.--In the case’’; and

(3) by adding at the end of subsection (b) the following:

“(2) BINDING ARBITRATION PERMITTED AS ALTERNATIVE MEANS OF DISPUTE RESOLUTION.

“(A) IN GENERAL.-A group health plan shall not be treated as failing to meet the requirements of the preceding provisions of this section relating to review of any adverse coverage decision rendered by or under the plan, if

"(i) in lieu of the procedures otherwise provided under the plan in accordance with such provisions and in lieu of any subsequent review of the matter by a court under section 502

“(I) the aggrieved participant or beneficiary elects in the request for the review a

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