Title VII, SEC. 7601. TREATMENT OF NONPROFIT HEALTH CARE ORGANIZATIONS. (a) Treatment of Hospitals and Other Entities Providing Health Care Services. Section 501 (relating to exemption from tax on corporations, certain trusts, etc.) is amended by redesignating subsection (n) as subsection (o) and by inserting after subsection (m) the following new subsection: ``(n) Qualification of Organizations Providing Health Care Services as Charitable Organizations. For purposes of subsection (c)(3), the provision of health care services shall not be treated as an activity that accomplishes a charitable purpose unless the organization providing such services, on a periodic basis (no less frequently than annually), and with the participation of community representatives ``(1) assesses the health care needs of its community, and ``(2) develops a plan to meet those needs. In the case of a health maintenance organization, the provision of health care services shall not be treated as an activity that accomplishes a charitable purpose for purposes of subsection (c)(3) unless, in addition to meeting the requirement of the preceding sentence, such services are provided as described in subsection (m)(3)(B)(i).'' (b) Treatment of Health Maintenance Organizations. Section 501(m) is amended by adding at the end thereof the following new paragraph: ``(6) Insurance provided by health maintenance organizations. ``(A) Certain insurance not treated as commercial-type insurance. Health insurance provided by a health maintenance organization shall not be treated as commercial-type insurance if such insurance relates to care provided other than pursuant to a pre-existing arrangement with such organization. In applying the preceding sentence, care described in subparagraph (B)(iv) shall not be taken into account. ``(B) Certain insurance treated as commercial-type insurance. Health insurance provided by a health maintenance organization shall be treated as commercial-type insurance if it relates to ``(i) care provided by such organization to its members at its own facilities through health care professionals who do not provide substantial health care services other than on behalf of such organization, ``(ii) primary care provided by a health care professional to a member of such organization on a basis under which the amount paid to such professional does not vary with the amount of care provided to such member, ``(iii) services other than primary care provided pursuant to a pre-existing arrangement with such organization, or ``(iv) emergency care provided to a member of such organization at a location outside such member's area of residence.'' (c) Treatment of Parent Organizations of Health Care Providers. Section 509(a) (defining private foundation) is amended by striking ``and'' at the end of paragraph (3), by redesignating paragraph (4) as paragraph (5), and by inserting after paragraph (3) the following new paragraph: ``(4) an organization which is organized and operated for the benefit of, and which directly or indirectly controls, an organization described in section 170(b)(1)(A)(iii), and''. (d) Effective Dates. (1) In general. Except as provided in paragraph (2), the amendments made by this section shall take effect on January 1, 1995. (2) Subsections (b) and (c). The amendments made by subsections (b) and (c) shall take effect on the date of the enactment of this Act.