To amend title I of the Employee Retirement Income Security Act of 1974 to provide for the establishment in the Department of Labor of a Small Employer Health Benefits Program.

Summary: Small Employer Health Benefits Program Act of 2005 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) to direct the Secretary of Labor to establish the Small Employer Health Benefits Program under which: (1) qualifying small employers are provided access to qualifying health insurance coverage for their employees; and (2) such employees may elect alternative forms of coverage offered by various health insurance issuers.

Limits such program to small employers that elect to: (1) offer health insurance coverage to each individual employed for three months or longer; and (2) pay at least half the total premium for qualifying health insurance coverage for such individual. Provides for coverage of part-time employees.

Requires the Secretary to enter into contracts with health insurance issuers for the offering of such insurance coverage.

Reduces by five percent the total premium otherwise payable by such employer if an average of fewer than 25 employees were employed during the preceding calendar year.

Requires the Secretary to provide premium subsidies (calculated according to specified formulae) to: (1) employers for coverage of employees whose individual income is at or below 200 percent of the poverty line; as well as (2) such employees.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Small Employer 
Health Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Establishment of Small Employer Health Benefits Program 
                            (SEHBP).
        ``Part 8--Small Employer Health Benefits Program (SEHBP)

        ``Sec. 801. Establishment of program.
        ``Sec. 802. Contracts with qualifying insurers.
        ``Sec. 803. Additional conditions.
        ``Sec. 804. Dissemination of information.
        ``Sec. 805. Subsidies.
        ``Sec. 806. Authorization of appropriations.

SEC. 2. ESTABLISHMENT OF SMALL EMPLOYER HEALTH BENEFITS PROGRAM 
              (SEHBP).

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding after part 7 the 
following new part:

        ``PART 8--SMALL EMPLOYER HEALTH BENEFITS PROGRAM (SEHBP)

``SEC. 801. ESTABLISHMENT OF PROGRAM.

    ``(a) In General.--The Secretary shall establish, in accordance 
with this part, a program under which--
            ``(1) qualifying small employers (as defined in subsection 
        (b)) are provided access to qualifying health insurance 
        coverage (as defined in subsection (c)) for their employees, 
        and
            ``(2) such employees may elect alternative forms of 
        coverage offered by various health insurance issuers.
    ``(b) Qualifying Small Employer Defined; Other Definitions.--For 
purposes of this part:
            ``(1) Qualifying small employer.--
                    ``(A) In general.--The term `qualifying small 
                employer' means a small employer (as defined in 
                paragraph (2)) that--
                            ``(i) elects to offer health insurance 
                        coverage provided under this part to each 
                        employee who has been employed by that employer 
                        for 3 months or longer; and
                            ``(ii) elects, with respect to an employee 
                        electing coverage under qualified health 
                        insurance coverage, to pay at least 50 percent 
                        of the total premium for qualifying health 
                        insurance coverage provided under this part.
                    ``(B) Elections.--Elections under subparagraph (A) 
                may be filed with the Secretary during the 180-day 
                period beginning with the first enrollment period 
                occurring under section 803 and during open enrollment 
                periods occurring thereafter under such section. Such 
                elections shall be filed in such form and manner as 
                shall be prescribed by the Secretary.
                    ``(C) Part-time employment.--Under regulations of 
                the Secretary, in the case of an employee serving in a 
                position in which service is customarily less than 
                1,500 hours per year, the reference in subparagraph 
                (A)(ii) to `50 percent' shall be deemed a percentage 
                reduced to a percentage that bears the same ratio to 50 
                percent as the number of hours of service per year 
                customarily in such position bears to 1,500.
            ``(2) Small employer.--The term `small employer' means, 
        with respect to a year, an employer who employed an average of 
        fewer than 100 employees on business days during the preceding 
        calendar year and who employs at least 1 employee on the first 
        day of the year.
            ``(3) SEHBP.--The term `SEHBP' means the small employer 
        health benefits program provided under this part.
    ``(c) Qualifying Health Insurance Coverage.--For purposes of this 
part, the term `qualifying health insurance coverage' means health 
insurance coverage that meets the following requirements:
            ``(1) The coverage is offered by a health insurance issuer.
            ``(2) The benefits under such coverage are equivalent to or 
        greater than the lower level of benefits provided under the 
        service benefit plan described in section 8903(1) of title 5, 
        United States Code.
            ``(3) The coverage includes, with respect to an eligible 
        individual that elects coverage, coverage of the same 
        dependents that would be covered if the coverage were offered 
        under FEHBP.
            ``(4)(A) Subject to subparagraph (B), there is no 
        underwriting, through a preexisting condition limitation, 
        differential benefits, or different premium levels, or 
        otherwise, with respect to such coverage for covered 
        individuals or their dependents.
            ``(B) The premiums charged for such coverage are community-
        rated for individuals within any State and may vary only--
                    ``(i) by individual or family enrollment, and
                    ``(ii) to the extent permitted under the laws of 
                such State relating to health insurance coverage 
                offered in the small group market, on the basis of 
                geography.
    ``(d) Other Terms.--
            ``(1) Health insurance coverage; health insurance issuer; 
        health status-related factor.--The terms `health insurance 
        coverage', `health insurance issuer', `health status-related 
        factor' have the meanings provided such terms in section 733.
            ``(2) Small group market.--The term `small group market' 
        has the meaning provided such term in section 2791(e)(5) of the 
        Public Health Service Act (42 U.S.C. 300gg-91(e)(5)).
            ``(3) FEHBP.--The term `FEHBP' means the Federal Employees 
        Health Benefits Program under chapter 89 of title 5, United 
        States Code.
    ``(e) Treatment of Partnerships and Self-Employed Individuals.--For 
purposes of this part, and for purposes of applying section 3 to this 
part and to part 5 as it applies to this part, in any case in which 
qualifying health insurance coverage is, or is to be, provided under a 
plan, fund, or program to individuals covered thereunder--
            ``(1) if such plan, fund, or program is maintained by a 
        partnership, the term `employer' (as defined in section 3(5)) 
        includes the partnership in relation to the partners, and the 
        term `employee' (as defined in section 3(6)) includes any 
        partner in relation to the partnership; and
            ``(2) if such plan, fund, or program is maintained by a 
        self-employed individual, the term `employer' (as defined in 
        section 3(5)) and the term `employee' (as defined in section 
        3(6)) shall include such individual.

``SEC. 802. CONTRACTS WITH QUALIFYING INSURERS.

    ``(a) In General.--The Secretary shall enter into contracts with 
health insurance issuers for the offering of qualifying health 
insurance coverage under this part in the States in such manner as to 
offer coverage to employees of employers that elect to offer coverage 
under this part. Nothing in this part shall be construed as requiring 
the Secretary to enter into arrangements with all such issuers seeking 
to offer qualifying health insurance coverage in a State.
    ``(b) Continued Regulation.--Nothing in this part shall be 
construed as preempting State laws applicable to health insurance 
issuers that offer coverage under this part in such State.
    ``(c) Coordination With State Insurance Commissioners.--The 
Secretary shall coordinate with the insurance commissioners for the 
various States in establishing a process for handling and resolving any 
complaints relating to health insurance coverage offered under this 
part, to the extent necessary to augment processes otherwise available 
under State law.

``SEC. 803. ADDITIONAL CONDITIONS.

    ``(a) Limitation on Enrollment Periods.--The Secretary may limit 
the periods of times during which employees may elect coverage offered 
under this part, but such election shall be consistent with the 
elections permitted for employees under FEHBP and shall provide for at 
least annual open enrollment periods and enrollment at the time of 
initial eligibility to enroll and upon appropriate changes in family 
circumstances.
    ``(b) Authorizing Use of States in Making Arrangements for 
Coverage.--In lieu of the coverage otherwise arranged by the Secretary 
under this part, the Secretary may enter an arrangement with a State 
under which a State arranges for the provision of qualifying health 
insurance coverage to qualifying small employers in such manner as the 
Secretary would otherwise arrange for such coverage.
    ``(c) Use of FEHBP Model.--The Secretary shall carry out the SEHBP 
using the model of the FEHBP to the extent practicable and consistent 
with the provisions of this part, and, in carrying out such model, the 
Secretary shall, to the maximum extent practicable, negotiate the most 
affordable and substantial coverage possible for small employers.

``SEC. 804. DISSEMINATION OF INFORMATION.

    ``The Secretary shall widely disseminate information about SEHBP 
through the media, the Internet, public service announcements, and 
other employer and employee directed communications.

``SEC. 805. SUBSIDIES.

    ``(a) Employer Subsidies.--
            ``(1) Enrollment discount.--
                    ``(A) In general.--In the case of a qualifying 
                small employer who is eligible under subparagraph (B), 
                the portion of the total premium for coverage otherwise 
                payable by such employer under this part shall be 
                reduced by 5 percent. Such reduction shall not cause an 
                increase in the portion of the total premium payable by 
                employees.
                    ``(B) Employers eligible for discounts.--A 
                qualifying small employer is eligible under this 
                subparagraph if such employer employed an average of 
                fewer than 25 employees on business days during the 
                preceding calendar year.
            ``(2) Employer premium subsidy.--
                    ``(A) In general.--The Secretary shall provide to 
                qualifying small employers who are eligible under 
                subparagraph (C) and who elect to offer health 
                insurance coverage under this part a subsidy for 
                premiums paid by the employer for coverage of employees 
                whose individual income (as determined by the 
                Secretary) is at or below 200 percent of the poverty 
                line (as defined in section 673(2) of the Community 
                Services Block Grant Act (42 U.S.C. 9902(2)), including 
                any revision required by such section) for an 
                individual.
                    ``(B) Subsidy scaled according to size of 
                employer.--The subsidy provided under subparagraph (A) 
                shall be designed so that the subsidy equals, for any 
                calendar year--
                            ``(i) 50 percent of the portion of the 
                        premium payable by the employer for the 
                        coverage, in the case of eligible qualifying 
                        small employers who employ an average of fewer 
                        than 11 employees on business days during the 
                        preceding calendar year;
                            ``(ii) 35 percent of the portion of the 
                        premium payable by the employer for the 
                        coverage, in the case of eligible qualifying 
                        small employers who employ an average of more 
                        than 10 employees but fewer than 26 employees 
                        on business days during the preceding calendar 
                        year; and
                            ``(iii) 25 percent of the portion of the 
                        premium payable by the employer for the 
                        coverage, in the case of eligible qualifying 
                        small employers who employ an average of more 
                        than 25 employees but fewer than 51 employees 
                        on business days during the preceding calendar 
                        year.
                    ``(C) Employers eligible for premium subsidy.--A 
                qualifying small employer is eligible under this 
                subparagraph if such employer employed an average of 
                fewer than 50 employees on business days during the 
                preceding calendar year.
    ``(b) Employee Subsidies.--
            ``(1) In general.--The Secretary shall provide subsidies to 
        employees whose family income (as determined by the Secretary) 
        is at or below 200 percent of the poverty line (as defined in 
        section 673(2) of the Community Services Block Grant Act (42 
        U.S.C. 9902(2)), including any revision required by such 
        section) for a family of the size involved.
            ``(2) Amount of subsidy.--Such subsidies shall be in an 
        amount equal to the excess of the portion of the total premium 
        for coverage otherwise payable by the employee under this part 
        for any period, over 5 percent of the family income (as 
        determined under paragraph (1)(A)) of the employee for such 
        period.
            ``(3) Coordination of subsidies.--Notwithstanding paragraph 
        (1), under regulations of the Secretary, an employee may be 
        entitled to subsidies under this subsection for any period only 
        if such employee is not eligible for subsidies for such period 
        under any Federal or State health insurance subsidy program 
        (including a program under title V, XIX, or XXI of the Social 
        Security Act). For purposes of this paragraph, an employee is 
        `eligible' for a subsidy under a program if such employee is 
        entitled to such subsidy or would, upon filing application 
        therefore, be entitled to such subsidy.
            ``(4) Authority to expand eligibility.--The Secretary may, 
        to the extent of available funding, provide for expansion of 
        the subsidy program under this subsection to employees whose 
        family income (as defined by the Secretary) is at or below 300 
        percent of the poverty line (as determined under paragraph 
        (1)).
    ``(c) Procedures.--The Secretary shall establish by regulation 
applications, methods, and procedures for carrying out this section, 
including measures to ascertain or confirm levels of income.

``SEC. 806. AUTHORIZATION OF APPROPRIATIONS.

    ``There are authorized to be appropriated, for the period beginning 
with fiscal year 2006 and ending with fiscal year 2015, $50,000,000,000 
to carry out this part, including the establishment of subsidies under 
section 805.''.
    (b) Report on Offering National Health Plans.--Not later than 18 
months after the date of the enactment of this Act, the Secretary of 
Labor shall report to Congress the Secretary's recommendations 
regarding the feasibility of offering national health plans under part 
8 of subtitle B of title I of the Employee Retirement Income Security 
Act of 1974, as added by subsection (a).
    (c) 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--Small Employer Health Benefits Program (SEHBP)

``801. Establishment of program.
``802. Contracts with qualifying insurers.
``803. Additional conditions.
``804. Dissemination of information.
``805. Subsidies.
``806. Authorization of appropriations.''.